TMI Blog2021 (7) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... THAT:- AO inadvertently considered the number of students as 41675 though there were 76931 students and therefore the appellant has rightly incurred the expenses of registration realisation of data processing. As regards the adhoc disallowance made by Ld. CIT(A) is concerned there is no evidence brought on record and the adhoc disallowance is purely based on the track record of assessment of the assessee in preceding years. All the records pertaining to collection of fees, its remittances of such collection to the university and receipts from the university acknowledging the receipt to the fees are on the record and have not been challenged or found to be incorrect at any stage. Thus such disallowance was uncalled for. Accordingly we are of the considered view that no addition was required to be made by the Ld. A.O. Disallowance of purchase made from sister concerns - HELD THAT:- A.O came across such payments made to related parties or sister concerns. He need to first examine the information that whether such expenditure is excessive or unreasonable having regard to the fair market value of the books, for which payment is made or the purchase are made or the legitimate nee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of sales itself cannot represent the income of the assessee who has not disclosed sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales . So when the Ld. A.O had accepted the sales then he ought to have given the benefit of purchase against the sales. Without rejecting the book results and without finding anything contrary to the claim of the assessee and not referring to any incriminating material found during the course of survey the addition for income offered to tax during the course of survey at ₹ 23 crores but retracted soon, was thus uncalled for. We therefore in the given facts and circumstances of the case and respectfully following the judgments/decisions stated herein above fail to find any inconsistency in the finding of Ld. CIT(A) deleting the addition made by the Ld. A.O made purely on the basis of statement given u/s 133A of the Act. Accordingly Ground No.1 of revenue stands dismissed. Disallowance of interest expenses - HELD THAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not justified in confirming the disallowance to the extent ₹ 7,76,615.00 towards registration expenses. 3.That of the facts and in the circumstances of the case of the assessee the Learned Commissioner of Income Tax (A) 1, Bhopal was not justified in confirming the disallowance to the extent ₹ 9,12,873.00 towards purchase of course material. 4.That of the facts and in the circumstances of the case of the assessee the Learned Commissioner of Income Tax (A) 1, Bhopal was not justified in confirming the disallowance to the extent ₹ 40,72,135.00 towards training material 5.The assessee craves leave to add, alter amend or withdraw any ground of appeal on or before the time of hearing. 3. Revenue has raised following grounds of appeal; ITA No.952/Ind/2019 Assessment Year 2013-14 On the facts and in the circumstances of the case, the CIT(Appeal) has erred in: 1. Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in deleting addition of ₹ 3,60,465/-, when the assessee has advanced interest free loans and therefore, proportionate disallowance of interest expenses were made. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances of the case, the Ltd. CIT(A) was justified on deleting addition of ₹ 23,00,00,000/-, when the assessee himself declared the expenses incurred on account of purchase of books from vendors at Itarsi amounting to ₹ 23 Crores as non genuine expenses and paid taxes thereon and the Assessing Officer in the assessment order has established the non genuineness of such purchases by highlighting the round tripping of funds through such purchase transactions between assessee and its sisters, concerns, which clearly reflect the non genuine nature of transactions under taken by the assessee. 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in deleting addition of ₹ 3,16,358/- on account of disallowance of interest expenses, when the assessee had advanced interest free loans amounting to ₹ 95,44,174/- and therefore, proportionate interest @12% on interest expenses incurred on borrowed funds was disallowed. The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date, the appeal is finally heard for disposal. 5. Revenue has raised following grounds of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Management of IT portal of the University, mobilization and registration of students for Universities. 2. Maintaining students database for online and distance education programme for Universities. Supply of course material and course kits including the students bags. Providing e-contract online, etc. 3. Data processing support for result preparation for universities. 4. Provision for learning support through its learning centres and provision of hardware and software and arrangement of skill training centres. E-Return of income filed on 26.9.2013 declaring income at ₹ 4,06,15,880/-. Case selected for scrutiny through CASS followed by serving notices u/s 143(2) and 142(1) of the Act. When the assessment proceeding was undergoing survey was conducted u/s 133A of the Act on 9.10.2015 and 10.10.2015. Statement of Managing Director Mr. Santosh Choubey was recorded where he voluntarily offered ₹ 23 crores on account of inflated purchase in the books. The copy of the statement was provided to the assessee on 20.10.2015. On 10.11.2015 retraction of surrender of income was filed through an affidavit dated 7.11.2015. During the course of assessment proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight in deleting the addition. 2. Ground No. 2: Deletion of ₹ 82,20,019/-(out of disallowance of ₹ 89,96,634/-) (wrongly mentioned in the grounds as CSC expenses) for Registration Expenses and assessee appeal Ground No.2 for maintenance of addition of ₹ 7,76,615/-. 1. The Assessee is having various study centres throughout the country through which the students in the local area are provided guidance and counseling of the various courses available in the University. In this process Registration and prospectus fees is collected from the students and forwarded to the University. During this year 76931 students were registered through various centres and the prospectus fess of such students @ 250/- per student = ₹ 1,92,32,750/-was collected and remitted to the Dr. C.V. Raman University. Some of the centre had purchase extra copies of the prospectus and dues of the same was also remitted. 2. The aforesaid details were submitted to the AO on 30.03.2016 in which in reply to a separate query the AO was informed that 41675 students were registered for short term courses. The AO however erroneously concluded that total 41675 students were registered an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AISECT Bhopal and ₹ 10,59,50,349/- from AISECT Raipur which has been shown as business receipts in the financial statements. These books have been purchased from the other concerns and were supplied to the students on behalf of the Universities. Thus, the assessee has received sale consideration for sale of books of over ₹ 14 crore from its associate concerns. The assessee has also made purchases from these Universities for the books supplied for other concerns. The assessee has purchased books from the sister concerns of ₹ 3,04,29,100/- and has supplied/sold the books to others. Thus on net basis the assessee has received an income which negates the presumption that these transactions were non genuine or was undertaken with an object of reducing its income. During the year the assessee has shown course material expense of ₹ 5,14,59,665/- out of which purchase of ₹ 3,04,29,100/- were made from associated concerns which have been disallowed by the AO holding that the assessee has failed to establish the genuineness of the claim of expenses. The said belief was formed by the AO on the following reasons as mentioned by him in the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the sister concerns. Thus no specific modus operandi was required to complete the job. It may be mentioned that the sister concerns of the assessee are managing two Universities which are having approx. 118 thousand students registered with them. These societies with an object to concentrate their efforts on their core activity of providing education have off loaded various incidental activities including supply of books/course material to its students, to the assessee company. The fees received by these Universities are inclusive of the charges for supply of books/course material to the students. Thus the books are supplied to the students at free of cost by the Universities through the assessee company. The said Universities make payment to the assessee company of the sale price of the books supplied to the students. These books/course materials are supplied by the assessee to the students through its centers and the books are sent by using the services of the postal department. As the books purchased by the assessee have been sold and the sale proceeds are duly shown as income, there was no occasion to treat the purchase of these books from the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f AISECT, Bhopal having a very large infrastructure and the courses conducted for all the subjects. It may be mentioned that the assessee has received ₹ 8,97,87,640/- from AISECT Bhopal for providing training for IGNOU students ₹ 1,86,79,306/- towards training to students on vocational courses. ₹ 3,28,27,200/- was paid to the same concern towards examination and certification of the students and balance was utilised for providing training to the students. The payment of ₹ 8,97,87,640/- and ₹ 1,86,79,306/- by AISECT Bhopal to the assessee is readily verifiable from the files of the respective concerns ii. SECT Info Tech Ltd: The said person is a corporate entity having the same rate of tax applicable to it as is applicable to the assessee company. Thus the allegation that payment has been made to that company to reduce the income is not probable. It may be mentioned that the assessee was having 14900 students for Insurance and Banking courses. The said number is easily verifiable from the details of students submitted during the course of assessment proceedings. M/s SECT Infotech Ltd is approved by IRDA (Insurance regulatory and development autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly have adequate infrastructure and faculty suited for that job The assessee has only provided training (coaching). Whether the trainee got selected or not is not within the domain of the training and hence no details could have been furnished. 6.6.3(iii) Trainees belong to state of CG, whereas training expenses are paid to Bhopal based entities and it appears illogical that students of Raipur will come all the way to Bhopal for training The training was arranged at various places. Further students for IGNOU (Indira Gandhi National Open University) were registered on all India basis and were not restricted to any particular area. 6.6.3(iv) The students to whom training has been given are not working with any particular organization The students are undergoing basic skill development courses. 6.6.3(v) Details of training given to students is not furnished The course wise details of the students was furnished and the training given was as required by that specific job. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Ld. DR also referred to the report of the Ld. A.O along with other documents filed in the form of paper book dated 6.4.2021. 12. We have heard rival contentions and perused the records placed before us and carefully gone through the submissions made by both the sides and decisions relied by Ld. Counsel for the assessee. 13. The first issue relates to disallowance of interest expense of ₹ 3,60,465/-. We note that the Ld. A.O has made this addition observing that the assessee had provided interest free advance to its staff and on the other hand interest was paid on the borrowings. Ld. CIT(A) deleted this addition against which the revenue is in appeal. We however find that the assessee has taken loan for purchase of vehicle which is used for business purposes and interest of ₹ 3,60,465/- is the interest paid on the car loan taken from Bank of India. Leger account of interest expenses and ledger account of bank loan account is at page 53 to 55 of the paper book filed by the assessee on 21.5.2020. Thus it remains undisputed fact that the alleged amount has been paid for car loan taken from bank and is an eligible business expenditure. Thus addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The AO however observed that the details submitted by the assessee is only with regards to 41675 students and not of 76931 students as claimed by the assessee and accordingly restricted the claim of the assessee to such number of students and disallowed the balance payment. I have considered the facts of the case, contentions raised by the appellant and findings of the AO. It is observed that the assessee has claimed that it has collected fees from the students through its associated centers and has remitted the fees to the concerned University. During. the assessment proceedings the appellant has submitted the details of the fees collected of ₹ 29,55,72,936/- by it on behalf of the University. The AO has not disputed the fact that the assessee has collected the fees and remitted to the University. The appellant has furnished the receipts issued by the University which also confirms that they have received the money under consideration. Thus the only dispute remains with regards to the number of students which have been claimed by the appellant to be 76931 students and allowed by the assessee for only 41675 students which was as per the student wise details furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose. In the case of International Forest Co. vs. CIT (1975) 101 ITR ,721 (J K) it is held that AO cannot proceed to make an arbitrary addition and base his conclusion purely on guess work. He ought to have related his estimate to some evidence or material on the record as it is now well settled that if the profits shown by the appellant in his return are not accepted it is for the taxing authorities to prove that the appellant has made more profits than returned. Here the AO failed to bring on record anything which shows that appellant has earned more profit than declared. The AO has not made any enquiry and arbitrarily made the addition. Considering all the above facts it would be' fair and reasonable to restrict the disallowance to 4.00 of the expenses claimed based on disallowance made in past years in the assessments completed u/s 263/148/143(3). Therefore, the addition made by the A.O. amounting to ₹ 7,76,615/- (₹ 1,94,15,384 x 0.04) is confirmed. The appellant will get the relief of- ₹ 82,20,019/-. Therefore, the appeal on this 'ground is partly allowed. 15. So far as the relief given by Ld. CIT(A) concerned, it is clearly a factual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and list of books, reason for entrusting the job to sister concerns. However Ld. A.O has not given any adverse comments questioning the genuineness of working of sister concerns and the corresponding treatment of sales in their respective books. We also note that Ld. CIT(A) sustained the disallowance of purchase making adhoc disallowance @3% based on the assessments completed in past years observing as follows:- 14.Ground No. 5:- Through this ground of appeal the appellant has challenged the addition of ₹ 3,04,23,100/-.During the year the assessee has incurred an expense of ₹ 5,14,59,665/- on purchase of course material out of which payments of ₹ 3,04,29,100/- was found to have been made to non corporate associate concerns which was considered by the AO as diversion of funds of the company to AISECT and other society wherein exemption u/s 12AA are available and was accordingly disallowed. The AO also observed that the assessee has failed to provide the invoices for supply of books from sister concern because of which the genuineness of the expense is not established. The assessee also failed to furnish any agreement/MOU with the sister concerns for such app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were furnished. It is further seen that the assessee has shown an income of ₹ 41,75,89,138/- from fees Course material receipts and ₹ 9,35,92,168/- from sales. As per the details furnished by the assessee before the AO in its written submission the said receipts include ₹ 12,83,43, 743/- received by the assessee towards sales of books and course material. This sale has not been disputed by the AO. As against this sale of books and course material the assessee is found to have incurred expenses on purchases of ₹ 5,14,59,665/- In view of the fact that the sales of books are not disputed its corresponding purchase cannot be held as non genuine. It is also observed that the AO have not brought on record any material to substantiate that the purchase is made at a higher value compared .to market rate. Thus the disallowance is made solely on suspicion without any material to support such suspicion. It is further seen that the assessment for A.Y 2010-11, 2011-12 2012-13 have been completed u/s 148/143(3) and the assessed N.P ratio in these years was 7.25, 7.13 8.55- respectively as against the returned N.P ratio of 7.94 for the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase of books is a necessary part in the field of imparting education. All the books purchase have been posted through postal authorities. Revenue receipt from sister concerns has not been doubted. Payment for purchase are made through banking channel. Further when the sales are not doubted how can the purchase be doubtful. Financial statements are duly audited and the books results have been accepted by the Ld. A.O except for the disallowance made. We further observe that payment to related parties needs to go through the scanner provided under the provisions of Section 40A(2)(a) of the Act which reads as follows:- (2) (a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub- section, and the Assessing] Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him there from, so much of the expenditure as is so considered by him to be excessive or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,67,06,000 Total 8,14,42,700 22. During the course of assessment proceedings Ld. A.O called for the information to examine the genuineness of the expenditure. Details filed by the assessee were found to be insufficient. Ld. A.O was of the view that assessee has not furnished details of factuality involved in the process, details of the training given to the students, absence of any Memorandum of Understanding and no justification as to why the students of Chhattisgarh came to preparing at Bhopal. Based on these observation Ld. A.O disallowed the total training expense of ₹ 8,14,42,700/-. Assessee challenged this before Ld. CIT(A) and almost succeeded except for the adhoc disallowance of 5% of the total expenditure at ₹ 40,72,135/- sustained based on past assessment. Now both the assessee and Revenue are in appeal raising Ground No.4 in their respective appeals for Assessment Year 2013-14 challenging the finding of Ld. CIT(A). 23. We note that these training expenses are consistently incurred by the assessee and paid to concerns consistently engaged in this field. AISECT, Bhopal to which the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of imparting training to the students. On verification of the details of the students to whom training was provided, it was noticed that most Kof the students belong to the State of Chattisgarh and it would be improbable for these students to have attended the training claimed to have been given by these institutions which are placed at Bhopal. The assessee could also not explain the reasons for entrusting the job to sister concerns. These payments to associated concerns were accordingly considered by the AO as diversion of funds of the company to AISECT and other society wherein exemption ix] s 12AA is available and was accordingly disallowed. It is observed that the main reason for disbelieving. the genuineness of the expense is the fact that the payments are made to sister concerns which are enjoying tax exemption and accordingly the exercise is simply done for diversion of funds to exempted entities. The assessee has drawn my attention to the assessment order passed u/s 143(3) in the case of AISECT society for the same year in which the exemption available to said entity has been denied and the reason for such denial as mentioned in the assessment order is that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding training to students of various streams(which is included in the fees received by the assessee and is also readily verifiable from the assessment order of AI SECT Society also) and the assessee has incurred an expense of ₹ 8,20,31,006/-in arranging training of the students which included ₹ 8,14,42,700/- paid to associated concerns who are all established . to be involved III education/training. It is also observed that the assessment of the assessee for A.Y 2010-11, 2011-12 2012-13 have been completed u/s 148/143(3) and the assessed N.P ratio in these years was 7.25, 7.13 8.55 respectively as against the returned N.F ratio of 7.94) for the year under consideration. This also negates the presumption that the -funds have been diverted to the associated concerns. It is further seen that the assessment of the assessee for A.Y 2014-15 was also completed u/s 143(3) in which the assessee has booked training expenses of ₹ 4,55,18,644/- out of which ₹ 22,75,932/-( 5 ) were disallowed. The AO has not brought out any material on record which suggests that the appellant has incurred the expenses other than business purpose. In the case of Intern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks and agreed to surrender ₹ 23 crores. This statement was retracted on 10.11.2015 contending that no bogus purchase are made. Ereturn of income filed on 29.09.2015 declaring income at ₹ 6,04,38,800/- which was subsequently revised on 19.01.2017 declaring same income. During survey operation on going through the Voucher Book No.2 BI-1 to 4 it was noticed by the survey team that assessee made purchase from M/s Utsav Collections, Vinayak Prakashan, Maa Durga Books Centre, Patel Books and Saraswati Agencies of Itarsi and there were some inconsistency. In order to verify the purchases, information u/s 133(6) of the Act was called from all, few replied and few remain unanswered which prompted the Ld. A.O to examine the issue. Ld. A.O also noted that registration with VAT authorities and Registration at Nagar Palika were just taken before few months of date of survey and the accounts of the creditors were opened just before making sale to the company. Based on these observations Ld. A.O concluded that the supply of material are bogus and they have been used as a conduit to inflate the purchases. Ld. A.O also observed that related/sister concerns are involved in this round m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 133A on 10.10.2015. In the statement question was raised by the survey team regarding purchase of books made by the assessee company which was duly responded on behalf of the assessee company as under: Q 6. : During the course of survey operation, voucher book nos BI-1 to 4 have been found from which it is observed that you have made huge purchases of books in financial year 14-15 from firms like Utsav Collection, Vinayak Prakashan, Maa Durga Book Centre, Patel books, Saraswati Agencies etc based in Itarsi. All these bills are serially numbered and the inventory of books attached with all these bills is identical. Field enquiries were made at Itarsi and it is observed that none of these firms are available at the given address. In these circumstances, please explain why these expenses should not be treated as non genuine. Ans. These purchases are duly recorded in the books of account and the payment thereof has also been made through banking channels. However it is quite possible that some of these parties may not be available at the given address and I may not be able to prove the genuineness of the purchase to the satisfaction of the department. Consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO that the assessee has not concealed any income and hence has retracted the statement given u/s 133A. The AO however advised that the retraction should be filed through an affidavit. In compliance to the direction of the AO an affidavit was prepared on 07.11.2015 and was filed before the AO on 10.11.2015 retracting the surrender of income made in the statement during the survey. b. It may further be mentioned that as the declaration made in the statement recorded u/s 133A has been retracted and the retraction is made within a reasonable time no negative inference can be drawn on account of the surrender made in the statement. It may also be mentioned that it has been held by the Hon ble Supreme Court in the case of CIT v S Khader Khan Son (2012) 254 CTR (SC) 228 that Section 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition. 2. Subsequently, after the retraction, the assessee was summoned u/s 131 and a statement was taken on 30.11.2015 the detailed information was given in the statement and it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments received by them from the assessee were deposited was also obtained from the respective suppliers and submitted. (It may be mentioned that in none of the bank statements any cash is found withdrawn which may raise a possibility that the amount paid by the assessee company was routed back to it in a clandestine manner xiv. The party wise detail of the purchase made for ₹ 43.53 crore xv. Copy of ITR, Computation of income, Audited financial statements and audit report for the relevant period, copy of sales tax order and copy of bank statement with respect to all the suppliers namely. MAA DURGA CENTER VINAYAK PRAKASHAN SARSWATI AGENCIES UTSAV COLLECTION PATEL BOOKS Books world Kadambry Book Trading Kushal Trading Darsh enterprises Paras publishers xvi. Copies of ledger accounts of the suppliers who have supplied the books under consideration to the assessee during the year are enclosed. xvii. Quantitative details of the books purchased/sold from the suppliers under consideration Thus, all possible information was furnished to substantiate the genuineness of the purchases made. Information wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to the assessee In this regard it is submitted that the books were provided by the suppliers from time to time along with invoice and inventory details. On subsequent verification of records it was observed that the invoice do not carry any mention of TIN Number. This deficiency was brought to the notice of the suppliers who thereafter obtained TIN NO and have put a seal of their TIN No(s) on the invoices previously issued. Thus there is no occasion to doubt that the invoices received are back dated. Further during the course of assessment proceedings the assessee has furnished the copy of sales tax returns/assessment orders of these suppliers which duly establish the genuineness of the purchase. Further obtaining sales tax number was a statutory procedure and even if it is presumed that the supplier failed to follow the procedure, the failure would not make any purchase non genuine. Thus the observation made was duly explained and was otherwise also not very relevant for the purpose of determination of the genuineness of the purchases. b. In case of two creditors i.e Books World and Kadambary Book Trading, even gomasta certificate from Naga Palika w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further the same was retracted within a reasonable time. More so once the purchases are established to be genuine, its corresponding sales are not questioned there cannot be any occasion to make any addition on the basis of a retracted statement. It may also be mentioned that it has been held by the Hon ble Supreme Court in the case of CIT v S Khader Khan Son (2012) 254 CTR (SC) 228 that Section 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition. g. The assessee filed retraction on 01.12.2015 that is almost two months after the survey. This observation of the AO is factually incorrect as detailed below. The copy of the statement of the director of the assessee company recorded on 10.10.2015 was provided to the counsel of the assessee on 20.10.2015 and was received by the assessee on 21.10.2015. The contents of the statement were verified with the books of accounts and other material available and it was found that the purchase of books under consideration did not disclose any inflated purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inference can be drawn from this fact as the books purchased and sold by the assessee is duly accounted and explained as detailed above. j. It is settled position that statement taken on oath during survey or search will be treated as final for surrender undisclosed income. Reliance in this regards was placed on the judgments of Supreme Court in the case of Surjeet Singh Chhabra v UOI, Punjab Haryana High Court in the case of Rakesh Mahajan vs CIT and Chennai bench of the ITAT in the case of DCIT v B.K.Muralikrishna. The observation of the AO does not portray the correct legal and factual position and the cash laws relied upon by him are not relevant to the issue under consideration. It would be appreciated that the assessee had not accepted that the purchases are inflated or the suppliers are not traceable. Further the facts of the case of the assessee are directly covered by the decision of the Hon ble Supreme Court in the case of CIT v S Khader Khan Son (2012) 254 CTR (SC) 228 that Section 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during such statement ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is a settled position of law that addition cannot be sustained merely on the basis of statement without any corroborative material to support the statement. The A.O. failed to bring any material or correlate the disclosure made with any incriminating material gathered during the survey. ARGUMENT It is humbly submitted that the addition has been made merely on the basis of statement recorded. There is no material found during the course of the survey that the assessee has concealed any income. Complete details were filed before the Ld. A.O. including the addresses, income tax returns, balance sheet, bank statement of the suppliers. No cognizance has been taken about the quantitative details filed before the ld. A.O. If it is presumed that the purchases are bogus, i.e. no purchases are made then how can there be any sale of that material. Undue importance is given about the TIN number of the registration under the Gumasta Act. No cognizance has been taken that all the transactions have been undertaken through the banking channel. Even the bank accounts of the seller show that purchases and sales have been affected through banking channel. The Ld. A.O. did not comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the borrowing has been done for the business purposes and the interest free loan has not been advanced from the borrowed funds. In view of the above, it is humbly submitted that the additions deleted by the ld. CIT(A) may please be upheld. 33. Per contra Ld. Departmental Representative apart from supporting the finding of Ld. A.O also referred to the paper book dated 8.4.2021 running from page 1 to 61 and contended that the alleged purchase transactions with various concerns as mentioned in the assessment order are not genuine sellers and the transactions with these concerns are merely in the nature of accommodation and routing of purchase and the Chairman of the company having sensed that the purchases are not genuine has rightly accepted and surrendered ₹ 23 crores and the statement was not under any stress or coercion and thus should have been honoured by the assessee. 34. We have heard rival contentions and perused the records placed before us and carefully gone through the submissions and paper book filed by both the parties. We will first take up Ground No.1 raised by the revenue challenging the deletion of addition of ₹ 23 crores by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils of books purchased and their corresponding sale are available on record. Sales have not been disputed by the Ld. A.O. Further the addition of ₹ 23 crores is only the figure of surrender. Ld. A.O has not made the addition specifically with regard to the purchase made from various vendors which are alleged to be bogus. 37. We further note that Ld. CIT(A) after appreciating the facts and settled judicial precedents decided in favour of the assessee observing as follows:- 11.Ground No. 2:- Through this ground of appeal the appellant has challenged the addition of ₹ 23,00,00,000/-. The appellant had purchased books of ₹ 43.53 crores during the year under consideration. The appellant had submitted the details of the suppliers, their address proof, balance sheets, bank statements, sales tax orders returns etc to establish the genuineness of the suppliers/purchases. The AO however noted that the suppliers could not be traced during the survey and notices issued during assessment proceedings also returned unserved in some cases. He also noticed various discrepancies in the details submitted and held the purchases to be non genuine to the extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,705/ -along with quantitative details of the sales and purchase. All the sales/purchases are duly linked to the seized material. Thus the entire purchases made by the appellant is already sold and that too on a higher value. It is also noted that the sales made by the appellant has not been doubted by the AO. Thus once the sales is not doubted, it would not be justified to doubt its corresponding purchase. v. Copy of sales tax order of the appellant company which duly confirms the sale of the appellant. vi. Copy of sales account, purchase account, suppliers account. vii. Copies of invoices of sales/purchase It is also observed that the AO had not doubted the sales of the appellant. The Department during the course of survey and post survey proceedings have also accepted that the books purchased by the appellant were later on sold also and the sale/purchase is duly recorded in the books of account which is inferred from Question 27 of the statement of the M.D. recorded u/s 131 on 30.11.2015 where after discussing the non genuine purchases in Q-22-23 of the statement the Director was queried about the sales made. The question asked is reproduced herein be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt It is seen that it is not disputed that the suppliers were duly registered with the sales tax authorities and any delay in making compliance of any statutory liability by the supplier cannot be taken as a ground of doubting the genuineness of the transaction specially when the transaction has been duly reported to the tax authority in the periodic return/ assessment order. iii. The AO also observed that In case of two creditors i.e Books World and Kadambary Book Trading, even gumasta from Nagar Palika was taken on 28.01.15 It is held that taking of Gumasta or failure to take Gumasta is not relevant for determining the genuineness of any transaction. iv. The AO also observed that the accounts of the creditors are opened just before making sale to the appellant company. It is seen that opening of a new bank account or continuing with the old one is a discretion of the supplier and the genuineness of the transaction cannot be affected by the date on which the bank account is opened. The observation of the AO is not very relevant as the supplier would be opening the account as per their convenience and the date of opening of the bank account does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade Sale to government department which were not doubted purchases cannot be held to be non genu me merely because suppliers have not appeared before the Assessing Officer or Commissioner (Appeals) C. In the case of Rajesh P. Soni v. ACIT (2006) 100 TTJ 464 (Ahd.) (Trib.) it was held by the Tribunal that Addition under section 69 was not justified merely because suppliers could not be located and were not produced for examination. Considering the facts of the case and the judicial pronouncements relied upon by the appellant it cannot be said that the purchases made by the appellant were unexplained or non genuine. The AO also drew support from the fact that the appellant specifically surrendered income of ₹ 23 crore. In this regards reference is made to the statement recorded during survey in which the declaration was made. It is seen that the appellant has made a declaration of ₹ 23 crore. However the appellant has not accepted that the purchases are non genuine or the suppliers are not traceable or the purchases are inflated. The relevant question raised and the answer given is reproduced herein below: Q 6. :During the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the case the explanation of the appellant cannot be called as improbable and cannot be ground to consider the purchases as non non genuine. Thus it is seen that the various reasons mentioned by the AO to doubt the genuineness of the purchases are not relevant and as the appellant had submitted all required records including quantitative and monetary details of sales and purchase and the sales having not been doubted, its corresponding purchase cannot be termed as non genuine. It is also seen that the AO has held that the appellant has made non genuine purchase of ₹ 23 Crore. No specific details of the invoices which are found to be non genuine or any other fact from which the details of bogus purchase could be ascertained is mentioned in the order. Thus the only inference that can be drawn is that the addition is made on the basis of the declaration made u/s 133A. The AO has held that addition can be made on the basis of statement itself and have relied upon decisions of the Honble Supreme Court of India in the case of Surjeet Singh Chabra v UOI, the Punjab Haryana High Court in the case of Rakesh Mahajan V CIT and that of the ITAT Chennai in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt rendered in the case of CIT Vs. Chandrakumar Jethmal Kochar (2015) 55 Taxmann.com 292 (Gujarat), wherein it has been held that merely on the basis of admission that few benami concerns were being run by assessee, assessee could not be basis for making the assessee liable for tax and the assessee retracted from such admission and revenue could not furnish any [ITA 5241Indl2013 ITA No.2991Ind12017j [Shri Sudip Maheshwari, Bhopal] corroborative evidence in support of such evidence. It was further urged by the assessee that admission should be based upon certain corroborative evidences. In the absence of corroborative evidences, the admission is merely a hollow statement. We have given our thoughtful consideration to the rival contentions of the parties. It is undisputed fact that the statement recorded u/s 132(4) of the Act has a better evidentiary value but it is also a settled position of law that the addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the contents of the statement. In the case in hand, revenue could not point out as what was the material before the A.0., which supported the contents of the statement. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of survey, no addition can be made on the strength of the statement. 39. The statement given by the assessee during the course of survey u/s 133A of the Act and offering ₹ 23 crores to tax for inflated purchases was not a statement on oath and thus has no evidentiary value. The material in this case should have been the evidence gathered by the survey team questioning the genuineness of the suppliers and further finding any information during the course of assessment proceedings. The assessee has filed various details of documentary evidence with regard to the alleged suppliers of books which includes copies of bills, quantity details, bank account, audited financial statement, Income Tax Return, VAT registration, Gumasta certificate and copy of ledger accounts. Details of corresponding sales of the items of the various purchases during the year have also been filed. Sales of the assessee has not been disputed at any stage. Out of notices sent u/s 133(6) of the Act by Ld. A.O to 10 suppliers, five made due compliance but for remaining 5 suppliers it is stated by respondent that wrong address was mentioned and the latest address was provided but no further a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business. Giving of interest free loan/ advance to staff/sister concern needs to be examined on the facts of particular case and the commercial expediency of the transaction but it can no way lead to disallowance of genuine business expenditure. We thus find no infirmity in the finding of Ld. CIT(A) deleting the disallowance of ₹ 3,16,358/-. Thus Ground No.2 of the Revenue is dismissed. 43. Now we are left with the sole ground raised by the assessee for Assessment Year 2015-16 for the adhoc disallowance of ₹ 3,34,205/- sustained by Ld. CIT(A). We observe that this disallowance was made for want of verification of various expenses incurred under the head Exhibition expenses, Repair Maintenance, Meeting expenses, Miscellaneous expenses and General expenses. Though opportunity was granted to the assessee to get these expenses verified but during the verification it was noticed that some of the expenses debited under the head are not verifiable, most of the vouchers are self made and payments incurred in cash. We therefore looking to the totality of facts we are of the view that Ld. CIT(A) has rightly confirmed the disallowance at ₹ 3,34,204/-. Accordingly G ..... X X X X Extracts X X X X X X X X Extracts X X X X
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