TMI Blog2021 (10) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange proceeds on export or foreign exchange payments in respect of the imports and other payables from exchange fluctuation loss and is thus not speculative loss but is normal business loss which is liable to be set off as per the provisions of the Income Tax Act. Since the agreement came to an end in Jan 2013 and March 2013 and agreed level could not be achieved and hence, as per the agreement the loss had crystallized on the expiry of the period of 5 years which fell in the year before us and hence the loss booked by the assessee is the loss of the year under appeal. Merely because the loss has got some connection with earlier year(s), it does not make the loss as the loss of those years. All that has to be seen the precise point of crystallization of the event leading to the loss which in our considered opinion fell in the year before us and hence the loss is the loss of the year under appeal. As CIT vs. West Chusick Coal Co. Ltd. [ 1980 (9) TMI 65 - CALCUTTA HIGH COURT] , Metal Box Co of India Ltd. vs. Their workmen [ 1968 (8) TMI 53 - SUPREME COURT] which lay down the guiding principles as to when a loss can be said to have been incurred. Thus, even on this score t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since we have deleted the entire amount of disallowance made by AO, hence even the disallowance sustained by CIT(A) to the extent of ₹ 85,656/- is also not sustainable. In the result, ground no. 14 of the assessee s appeal is allowed. - I.T.A. No.3310, 5037/DEL/2019 - - - Dated:- 24-9-2021 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND Dr. B.R.R. KUMAR, ACCOUNTANT MEMBER Appellant by: Dr. Rakesh Gupta, Adv. Respondent by: Ms. Pramita M. Biswas, CIT-D.R. ORDER PER AMIT SHUKLA, JM The Assessee and the Revenue both are in appeal against the Order of Commissioner of Income Tax (Appeals)-III, Gurgaon, dated 30.03.2019. The grounds of appeal raised by the Revenue and by the assessee, respectively are as under:- (i) Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 17,992/- made by the AO on account of bogus expenses placing reliance on the documents furnished by the assessee which failed to prove that the expenditure was incurred wholly and exclusively for the purpose of business. (ii) Whether on the facts and circumstances of the case, the Ld. CIT(A) has failed to appreciate that the onus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this judgment can be applied to say, by the same analogy, that the expenditure incurred to earn an exempt income is subject to its admissibility under the provisions of the Income Tax Act, 1961 including those of section 14A irrespective of whether there is a receipt of exempt income during the year under consideration. (ix) Whether on the facts and in the circumstances of the case and in law the Ld. CIT (A) is justified in deleting the addition made on account of section 14Aof the Act without appreciating the observations of the Hon'ble Supreme Court in Maxopp Investment Ltd. reported in (2018) 91 taxmann.com 154 (SC), that as per section 14A(1) of the Act, deduction of that expenditure is not to be allowed which has been incurred by the assessee in relation to income which does not form part of the total income under this Act . (x) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) is justified in deleting the addition made on account of section 14Aof the Act without adjudicating on the proposition of law u/s 14A of the Income Tax Act, 1961 as propounded by the CBDT Circular No. 5 of 2014 dated 11.02.2014 i.e. section 14A is trigger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd without appreciating/considering the submissions of the assessee. 7. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of ₹ 1,29,01,751/- allegedly on account of bogus expenses claimed with respect to M/s Sai Export, is bad in law and against the facts and circumstances of the case. 8. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making disallowance of ₹ 6,41,39,357/- allegedly on account of bogus expenses claimed with respect to M/s Shri Ram Exports, more so when no incriminating material has been found as a result of search and impugned addition has been made by recording incorrect facts and findings and without observing the principles of natural justice and without appreciating/considering the submissions of the assessee. 9. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making disallowance of ₹ 6,41,39,357/- allegedly on account of bogus expenses claimed with respect to M/s Shri Ram Exports, is bad in law and aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned assessment order without there being requisite approval in terms of section 153D and in any case approval if any is mechanical without application of mind and is no approval in the eyes of law. 17. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B of Income Tax Act, 1961. 18. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other. 2. The Assessee has filed paper book in 10 Volumes having Pages 1 to 3089, which were referred by Ld. Counsel for the assessee extensively during the course of hearing of the above appeals including the written submissions made before the first appellate authority which is part of the paper book. Brief synopsis has also been filed by Ld. Counsel for the assessee in both the appeals running into 11 pages, which is also held on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,93,664/- made by the A.O. on the ground that the loss claimed by the assessee did not relate / accrue for the year under consideration, whereas the departmental grounds of Appeal No. iv was against the relief of ₹ 25,58,77,724/- allowed by Commissioner of Income Tax (Appeal).Total amount involved in both the appeals in this regard aggregate to ₹ 140,86,93,664/-. Since the issue involved in both the appeals is interlinked with each other therefore, assessee s grounds of appeal No. 3, 4 and 5 and revenue grounds of Appeal No. iv in para 4 are taken up together. 8. Assessing Officer in his order at page 36-39 has dealt this issue according to which loss with Barclays Bank arising in respect of derivative foreign currency and derivative transaction is a speculative loss not being the loss of business and further that the loss did not relate to the year under appeal but it related to A.Y. 2009-10 to 2013-14. CIT(A) at page 81-90 of the appeal order has discussed this issue and have held that out of the total loss of ₹ 140,86,93,664/- loss of ₹ 25,58,77,724/- related to the year under appeal and thus is allowable and the balance was not allowable. Ld. First ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign currency transaction. Forwards/Option contracts are thus, as was submitted on behalf of the assessee, booked on a one to one basis in relation to the exposures and also on estimate basis based on previous three years performance. It was also submitted that the assessee Company has also entered into cross currency option contract in alignment with FEDAI Regulation No. 578/FECX/ SPL-37/95 dated 24th March, 1995, hedging its foreign currency receivables and payables against any permitted third currency and that the entire cross currency hedging contracts had underlying exposure. It was submitted that the cross currency contract was entered into by the Company with Barclays Bank and entailed a USD call for 7,50,000 against put of JPY and CHF based on an agreed level and further that the initial agreement entered into on 19.04.2007 was for a period of 60 months allowing the cross currency hedging contracts up to a fixed level only, with no cap on losses. The contract was to be settled only on expiry of the contract. No premature cancellation of any forward contract is there. It was also brought on record that in January 2008, the USD started weakening and after Lehman crisis w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the nature of impugned loss and its nexus with the business carried on by the assessee placed at paper book page 325 to 424.We have considered the reply of the assessee placed at page 358 to 362 of the paper book, details of profit/loss on account of currency fluctuation at page 363 of the paper book, summary of all derivative contract, foreign bill negotiated along with the export sales placed at page 364 of the paper book, details of difference in exchange-derivative contract and premium/discount on the contracts placed at page 365-376 of the paper book and copy of original and restructured agreements of derivative contracts between the assessee and M/s Barclays Bank placed at page 381 to 415 of the paper book and settlement advices for derivative contracts with above said bank placed at page 416-424 of the paper book. It is seen that the derivative contracts were entered by the assessee in the course of carrying on its business of exports of garments so that the risk of foreign exchange fluctuation losses in respect of export import transactions may be reduced. Also, there are interest liability on working capital foreign currency loans and repayment of such working capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed contract was entered into January 2008 and March 2008 according to which 60 months payout was fixed at 4,69,000 $ per month which could be refunded to the assessee if the assessee company was able to achieve the designated level of 5.99 points on any fixing date as agreed till the expiry of the agreement. Since the agreement came to an end in Jan 2013 and March 2013 and agreed level could not be achieved and hence, as per the agreement the loss had crystallized on the expiry of the period of 5 years which fell in the year before us and hence the loss booked by the assessee is the loss of the year under appeal. Merely because the loss has got some connection with earlier year(s), it does not make the loss as the loss of those years. All that has to be seen the precise point of crystallization of the event leading to the loss which in our considered opinion fell in the year before us and hence the loss is the loss of the year under appeal. We respectfully also follow the judicial decisions relied upon by the learned counsel in the written submissions placed at page 3003- 3005 of the paper book i.e. CIT vs. West Chusick Coal Co. Ltd. 129 ITR 62 (Cal), Metal Box Co of India Ltd. vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the first appellate authority and various pages referred therein. On the other hand, Ld. CIT(DR) relied upon assessment order and the order of the first appellate authority. 18. We have considered the entire material before us and it is seen that paged 5-13 of the assessment order does not refer any incriminating material found as a result of search in respect of job work of M/s Sai Export which was the proprietary concern of Sh. Mohinder Kumar Garg. Only evidence which has been referred in the assessment order was the statement of Sh. Mohiner Kumar Garg in which he stated that since April, 2014 he was working as production consultant with assessee company and earlier he was regular employee of the assessee company 01.01.1997 to 30.09.2013 and that books of accounts of M/s Sai Exports was found being maintained on a computer at D-3,Sector-59, Noida premises covered u/s 133A of the I.T. Act and it was further found that Sh. Rajiv Poddar who was working as an accountant of M/s Orient Craft Ltd. was also found to be maintaining the books of accounts of M/s Sai Exports on the direction of Seniors of M/s Orient Craft Ltd. and that during the course of survey proceedings Sh. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paper book, we deem it appropriate to deal with the disallowance on merit also. It would be appropriate to reproduce the written submission filed by the assessee before the first appellate authority on merit: 21. It was submitted that appellant in engaged in the manufacturing and export of readymade fashion garments mainly to USA and Europe. Garment production process involves several steps, which are listed at page 7-8 of the assessment order. M/s Sai Export was one of the job workers engaged by the appellant for doing various job work such as bundling, cutting, stitching, thread cutting, finishing etc., which are integral part of the garments manufacturing. It is submitted that the said job worker has performed the said job work activities on the garments manufactured by the appellant without which it was not possible to manufacture the garments and accordingly export sales could not be possible. Various documentary evidences were filed vide letter 01.12.2017, which are enclosed in the paper book at (PB 598-907) by the assessee during the course of assessment proceeding to prove the engagement of the said job worker, Job work carried out by the said job worker, quantitative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ger account of Rent for all the years under consideration PB 846-857 is the copy of Sample copy of electricity bills in the name of Landlord M/s Grandways Electronics Pvt. Ltd along with ledger account of electricity all respective years . PB 858-865 Copy of invoices raised by M/s Sai Export for the job work charges in the name of the appellant company. PB 866-892 is the Copy of complete Bank statement along with complete bank book for all respective years. PB 893-900 is the copy of ledger account of M/s Sai Exports together with copy of bank book showing that the payments were made through account payee cheques, TDS deducted. PB 901 is the copy of TDS returns showing the names of the job workers and copies of Form No. 26AS. PB 906-907 902-905 is the copy of ledger account of M/s Sai Exports in the books of assessee s company vice versa, which shows that job work activities done by the said job worker during the year under appeal. PB 879-892 is the copy of bank book of M/s Sai Export in the books of appellant to show that payment has been made through account payee cheque for fabrication charges paid to the said job worker. PB 1307-1337 is the Copy of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hy copy of books of account of M/s Sai Exports was found. 3. Ld. A.O. has mentioned that Sh. Rajiv Kumar Poddar was maintaining books at the direction of seniors and he was unable to provide details regarding the work done by M/s Sai Exports for the appellant company and he was also unable to produce any vouchers, challans, and goods sent for job work for M/s Sai Exports. In reply, it has been stated that as explained earlier books of accounts were found on the computer for the purpose of reconciliation of accounts. Mr. Poddar s statement was not supplied to the appellant nor was he produced for our cross examination and therefore any evidence collected at the back of the assessee and that too without cross examination cannot be relied upon. It is wrong that Mr. Poddar was maintaining the books of accounts on the directions of his seniors. Since Mr. Poddar was not maintaining the books of accounts as such of M/s Sai Exports obviously he could not have provided any details regarding the work done by M/s Sai Exports or could have produced vouchers etc. of M/s Sai Exports. Fact of the matter was that during the course of assessment proceedings such voluminous evidences were furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers assemble outside the factory gates for seeking employment as can be seen from the bare perusal of such scenes outside the factory gates. Therefore, the reply of Sh. Mohinder Kumar Garg in this regard was not something which was impossible or improbable. It was part of contractual arrangement of the appellant with M/s. Sai Export that plant and machinery will be supplied by the appellant company for maintaining the quality standards and avoiding the wastages. Therefore, there is nothing unusual in this regard. 25. In fact the detailed reply was filed by the assessee in response to the questions raised by Ld. A.O., which is enclosed in the paper book at PB 598-605 along with all the annexures at PB 606-907 and which has been reproduced also at page 5-13 of the assessment order. 26. It is seen from the evidences placed before us and relied upon by Ld. Counsel for the assessee that the job worker M/s Sai Export has raised invoice and payment have been made through account payee cheques and tax having beendeducted at source and documents at page 598 to 907 of the paper book establish the existence of the job worker and the job work carried out by M/s Sai Exports. We have also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary evidences filed by the assessee before the lower authorities which have been referred by CIT(A) at page 60 of his appeal order to which reference has also been made in the written submissions filed by the assessee and to which our attention was drawn clearly establish mentioned by us above that job work expense claimed by the assessee to have been paid to M/s Sai Exports are quite genuine and established. In the result, the grounds of appeal in the appeal of the assessee are allowed the addition of ₹ 1,29,01,751/- is hereby deleted. 28. Ground No. 8 and 9 of the assessee s appeal are in respect of disallowance of ₹ 6,41,39,357/- made by the A.O. and confirmed by CIT(A) and are in respect of the expenses claimed to be incurred by the assessee company on account of job work done by M/s Shri Ram Exports. Assessing Officer at page 13-15 of his order held such expense as bogus which was upheld by CIT(A) vide discussion made at page 64-69. 29. Ld. Counsel for the assessee first of all argued that there was no incriminating material found as a result of search in respect of impugned disallowance and therefore the assessment of the year under appeal was one which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Orient Craft Ltd. 31. From the findings recorded in the assessment order even if they are taken as correct, it can be said that there is no incriminating material found as a result of search in respect of job work carried out by M/s. Shri Ram Export and statements in any case cannot be regarded as incriminating material as held by Delhi High Court in the case of Principal CIT vs. Best Infrastructure India P. Ltd. in ITA No. 11-22/2017 dated 01.08.2017. Even the survey proceeding referred in the assessment order do not indicate any incriminating material and in any case anything found during the course of survey cannot be said to be any material found during the course of search. Finding of books of account of M/s Shri Ram Export at the premises of the assessee cannot be taken as the adverse material when it has been the case that M/s Shri Ram Exports was doing substantial for job work of the asssesee company only. Therefore, we agree with the argument of Ld. Counsel that the impugned disallowance could not be made in the assessment order passed u/s 153A / 143(3) as the return having been filed on 29.11.2013 has attained finality. Therefore in view of the decision of Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the course of assessment proceeding, which establish the genuineness of the Shri Ram Exports and job work carried out by the said firm for the appellant company. PB 598-605 is the copy of letter dated 01.12.2017 filed by the assessee to Ld. A.O. explaining in great details about the job work expenses incurred and paid to Shri Ram Exports. PB 180-200, 908-928 is the Copy of income tax return, computation of income, Audited Balance sheet, Profit Loss account and Tax audit report for A.Y. 2013-14 of the job worker Shri Ram Exports. PB 929-1081 is the Sample copy of the relevant documents from the Worker s personal Files such as Adhar Card, Application form, appointment letter, joining report, ESI Card, Family photos, PF Form -11,16 2 as per PF rules, ID proof, Medical test report etc. PB 1082-1141 is the Sample copy of Muster roll of all the employees employed by the firms for 2 months for all the respective years under consideration. PB 1142-1465 is the Sample copy of Salary sheet for 2 months each of all the years under consideration of payment of wages on sample basis PB 1466-1478 is the copy actuarial certificate. PB 1479-1496 is theSample copy of Bonu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee may not be expected to know the complete details about Sh. Subhash Chand Gupta. There is no legal bar that a person who runs business of selling belts cannot and would not do the other business of doing job work. Therefore the statements of the sister and brother in law of Sh. Subhash Chand Gupta do not convey any adverse against the appellant company and therefore objection of Ld. A.O. may please be rejected. Copies of such statements were not provided nor were referred at any stage in the assessment proceedings nor were they produced for cross examination for that reason also such settlement have to be excluded from consideration. 2. Ld. A.O. has mentioned at page 13-14 of the assessment order that Auditor of Sh. Subhash Chand Gupta prop. of M/s Shri Ram Export is M/s V.K. Dhingra Co. who happens to be Auditor of the appellant company also. In reply, it was submitted that this objection of Ld. A.O. also does not have substance as this is the contractual arrangement between Sh. Subhash Chand Gupta Prop. of M/s Shri Ram Export and M/s V K Dhingra Co. and also due to constant personal touch of the auditor, if that very audit firm is engaged by the business con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , appointment letter, joining report, ESI Card, Family photos, PF Form -11,16 2 as per PF rules, ID proof, Medical test report etc. and sample copy of muster roll of the all the employees, employed by the job worker for two months for all the years involved and so also we have seen salary sheet for two months on sample basis, on account of payment of wages and actuarial certificate. Similarly pages 1479 to 1496 of the paper book is the sample copy of bonus register showing actual payment proof of bonus to the employees of job workers and paper book page 1497 to 1502 is the sample copy of Leave register of the employee of the job workers. Similarly paper book page 1503 to 1518 is the copy of month wise PF and ESI deduction and deposit and sample copy of two months challan of each year along with ledger account of PF, other evidences of the paper book at pages 1503 to 1518, 1519-1531, 1532-1549, 1550- 1558 1565-1577, 1559-1564 1578-1584, 1590-1613, 1559- 1564, 1578-1584 and 1585-1589 all are the evidences of M/s Shri Ram Export clearly establish that genuineness of job work charges incurred by the assessee company through M/s Shri Ram Export and therefore the disallowance made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the decision of CIT vs. Kabul Chawla 380 ITR 573 (Delhi) and Principal CIT vs. Best Infrastructure India P. Ltd. in ITA No. 11-22/2017 dated 01.08.2017 the disallowance could not have been made. Further, it was submitted by the Ld. Counsel with the help of various evidences referred at page 2979 to 2983 of the paper book and it was argued that that appellant is into the business of garments manufacturing in which fabric is the main raw material and input. The appellant has purchased fabric from the above said firm during the year under appeal, which is evident from the chart enclosed in the paper book (PB 606-(ii)-606-(iii) ) in assessee s own case of AY 2011-12.Ld. CIT(DR) relied upon the findings contained in the assessment and first appellate order. 41. It is seen that page 16-31 of the assessment order does not refer any incriminating material found as a result of search in respect of purchase of fabric made by the appellant from M/s Jindal Fashion and M/s Akansha Fashion. Only evidence which have been referred in the assessment order was that ledger account of appellant in the books of the above said concern, i.e. M/s Jindal Fashion, M/s Akansha Fashion from whom the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d relied upon by Ld. Counsel: 44. Ld. Counsel earlier also had submitted that appellant is into the business of garments manufacturing in which fabric is the main raw material and input. The appellant has purchased fabric from the above said firm during the year under appeal, which is evident from the chart enclosed in the paper book (PB 606-(ii)-606- (iii) ) in assessee s own case of AY 2011-12. 45. Further apart from this, a detailed reply dated 06.12.2017 (PB 289-291), 08.12.2017 (PB 292-293) 12.12.2017 (PB 294- 295) was filed by the appellant during the course of assessment proceedings in response to the show cause notice 704, dated 29.08.2017, which has been reproduced by Ld. AO at pages 27-31 of the impugned assessment order and also its all the annexures already enclosed in the paper book in assessee s own case for A.Y. 2011-12 at PB 417-419, 420-469, 1044-1045, 1050-1060, 1061- 1158, 2313-3832. It is submitted, as submitted in the said reply also, that purchases have been made from the said concern and payments against the said purchases have been made by account payee cheques. PB 426-429 450-453 is the copy of ledger account in the books of M/s Jindal Fashion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on sample basis were also placed before Ld. AO apart from complete books of accounts which were produced to Ld. AO. Such sample copies of the purchase invoices are also enclosed in the paper book at PB 1328-1559 (which is already enclosed in the paper book for A.Y. 2011-12 in assessee s own case). Apart from this, a chart showing the standard input/output ratio, as prescribed by the Standard Input / Output Norms under hand book of procedure Volume-II of foreign trade policy, published by the Ministry of Commerce, was also enclosed which is enclosed herewith at Annexure A and Annexure-D reply letter 12.12.2017 PB 2315-2326 2341-2377, (which is already enclosed in the paper book for A.Y. 2011-12 in assessee s own case. PB 2321-2322 is the details of sale of pieces on sample basis along with consumption of fabric in meters and standard input / output norms, (which is already enclosed in the paper book for A.Y. 2011-12 in assessee s own case). PB 2330 is the detail of reconciliation of purchase quantity and value of opening stock of fabric, purchase, consumption, cost of fabric sold and closing stock, (which is already enclosed in the paper book for A.Y. 2011-12 in assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bills raised by the said concern to the appellant would obviously be serially numbered. We are at loss to understand as to how Ld. AO is making some adverse observation in this regard, merely for the reason that the bills were having consecutive serial numbers. Further, for meeting the contentions of Ld. AO regarding the payments being in round figures, it is submitted that to make payments to a vendor in round payment is not something which is unusual or improbable. The payments are made either bill wise or in round figures. Therefore, to make adverse observation merely for the reason that the payments were made in round figures is neither here nor there and is based just in the air it is requested that such adverse observation may please be ignored. 2. Ld. AO has mentioned at pages 17-19 of the assessment order that the bank account of the supplier revealed that it received payments and on the same day or within a short span of time, the funds were used to be transferred to other entities. In reply, it was submitted that in so far as the appellant is concerned since purchases were made by the appellant from M/s Jindal Fashion, M/s Akansha Fashion, the payments were m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the appellant company in cash, they do not operate anything against the appellant. 4. Ld. AO has mentioned several adverse things regarding the above supplier based upon some alleged enquiries made. In reply, it would suffice to say that so far as above enquiries were not confronted to the appellant. Moreover, during the course of impugned assessment proceeding also in our reply dated 06.12.2017 (PB 289-291) filed to Ld. AO we made out specifically and we furnished such details in Annexure G, which is enclosed in the paper book at PB 1032-1043, (which is already enclosed in the paper book for A.Y. 2011-12 in assessee s own case that the said supplier was selling the fabric not only to the appellant company but to various other concerns also and total supplies purchased by the assessee constitutes only a miniscule percentage of the total supplies made by him in AY 2013-14. It is so seen from the evidences placed before us and relied upon by Ld. Counsel for the assessee that the purchases of fabric made by the appellant from M/s Jindal Fashoin and M/s Aksnsha Fashion are genuine purchases, which is evident from voluminous documentary evidences filed by the assessee com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 10,18,44,865/- is deleted. 52. Grounds No.12 and 13 of the assessee s appeal are in respect of disallowance of ₹ 17,87,17,045/- made by the A.O. and confirmed by CIT(A) and on account of purchases made by the appellant from M/s Super Connection India P. Ltd. (SCIPL). Assessing Officer at page 31-36 of his order held such purchases were not genuine which was upheld by CIT(A) vide discussion made at page 76-81. 53. Ld. Counsel for the assessee first of all argued that there was no incriminating material found as a result of search in respect of impugned disallowance and therefore the assessment of the year under appeal was one which had attained finality and therefore in view of the decision of CIT vs. Kabul Chawla380 ITR 573 (Delhi)and Principal CIT vs. Best Infrastructure India P. Ltd. in ITA No. 11-22/2017 dated 01.08.2017 the disallowance could not have been made. Further, it was submitted by the Ld. Counsel with the help of various documentary evidences referred at page 2986 to 2992 of the paper book it was argued that that appellant is into the business of garments manufacturing in which fabric is the main raw material and input. The appellant has purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned in the form of statements cannot be regarded as incriminating material as held by Delhi High Court in the case of Principal CIT vs. Best Infrastructure India P. Ltd. in ITA No. 11-22/2017 dated 01.08.2017. Even the survey proceeding referred in the assessment order do not indicate any incriminating material and in any case anything found during the course of survey cannot be said to be any material found during the course of search. Therefore, we agree with the argument of Ld. Counsel that the impugned disallowance could not be made in the assessment order passed u/s 153A / 143(3) as the return having been filed on 29.11.2013 has attained finality. Therefore in view of the decision of Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla380 ITR 573 (Delhi) the impugned addition is liable to be deleted and is deleted on this ground itself. 57. But since CIT(A) has discussed the impugned disallowance on merit also and arguments were made on the basis of evidences referred at page 2986 to 2992 of the paper book, we deem it appropriate to deal with the disallowance on merit also. 58. It is seen from the evidences placed before us and relied upon by Ld. Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 936. PB 1617-1670 are the ledger accounts of M/s Super Connection India P. Ltd. in the books of appellant company. PB 1765-1820 is the ledger account of appellant company in the books of M/s Super Connection India P. Ltd. PB 1903 is the detailed chart showing the year wise purchases from M/s Super Connection India P. Ltd. PB 1904-1905 is the category-wise sheet showing total sales in pieces on sample basis and consumption of fabric along with standard input / output norms. PB 1910 is the reconciliation of purchase quantity and value of fabric in the books of appellant showing opening stock of fabric purchase, consumption, cost of fabric sold and closing stock. PB 1911-1958 is the detailed chart showing the standard input/output ratio, as prescribed by the Standard Input/Output Norms under hand book of procedure Volume II of foreign trade policy, published by the Ministry of Commerce. PB 1959 is the detail of comparison between other garment exporter and the appellant company for material consumption as a percentage of sales. 61. Therefore, it was pleaded that purchases made by the assessee from M/s SCIPL were the genuine purchases and the addition made may t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and copies of statements having not been supplied, have to be excluded from consideration. Even if these statements are taken at their face value then also it is submitted that there is nothing which establishes that sales made by SCIPL made by the assessee company is not genuine. Mr. Dhanda being an employee of a group concern cannot be read against the assessee as there is no bar froman employee of the group concern running his own company. Since major sales of M/s SCIPL are to the assessee and M/s SCIPL sought help from the appellant company to maintain its books of accounts and if in that process employee of the appellant company if helped M/s SCIPL to maintain its books of accounts at the premises of the appellant company only for the sake of mutual convenience and because of cost considerations mountain cannot be made out of the mole hills. In other words inferences drawn by Ld. A.O. from the statements of Mr. Dhanda and Mr. Nagpal do not establish that the sales made by M/s SCIPL to the assessee was not genuine, more so when such sales by M/s SCIPL and purchases by the appellant are supported by above mentioned comprehensive evidences and payments having been received / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat so far as above enquiries were not confronted to the appellant. Moreover, during the course of impugned assessment proceeding also in our reply dated 11.12.2017 (PB 1614- 1616) filed to Ld. A.O., we made out specifically and we furnished such details in Annexure G, which is enclosed in the paper book at PB 1960-2070, that the said supplier was selling the fabric to the appellant company and the material / fabric purchased from the SCIPL has been used in production garments, which have been exported by the assessee company to various parties. 63. In view of the above pleadings and evidences filed by the assessee the disallowance made in the assessment order and confirmed by CIT(A) is not sustainable even on merit. Assessee has proved that the material was purchased from the vendor involved here in various years and payment have been made through banking channel. Other evidences as referred clearly establish the purchase made by the assessee. We do not want to discuss each and every evidence and it would suffice to hold that in the light of these evidences which have not been rebutted with the help of any cogent material, purchases made by the assessee from the above said v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made in view of the decision of Delhi High Court in the case of Kabul Chawla 380 ITR 573(Del). Ld. CIT(DR) relied upon the assessment order and assailed the relief allowed by CIT(A) and relied upon the grounds of appeal preferred in revenue s appeal. 66. We have seen the orders passed by the lower authorities and gone through the synopsis filed and written submissions filed before CIT(A). We have heard the rival contentions also. 67. In so far as the absence of incriminating material is concerned, there is nothing found in search in respect of this issue as is clear from the assessment order. We have already held that this is a case of unabated assessment and hence, no disallowance or addition could be possible without there being any incriminating material found as a result of search in view of the relied upon decision quoted above. Hence, we do not have any hesitation to hold that the disallowance made by AO under section 14A could not have been made and confirmed by CIT(A) and hence it is deleted. 68. In any case, there is exempt income only to the extent of ₹ 85,656/-and for this reason also, disallowance under section 14A could not have exceeded this amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no. (v) of Revenue s appeal is in regard to a disallowance of ₹ 11,63,14,122/- made by AO by treating the product development expense as deferred revenue expense which was however deleted by CIT(A). 79. AO has discussed this issue at page 39-40 of the assessment order whereas CIT(A) has discussed this issue at page 90-92 of the appeal order. 80. Ld. CIT(DR) relied upon the findings recorded by AO whereas Ld. Counsel for the assessee has relied upon the findings recorded by CIT(A). 81. We have considered rival contentions and have gone through the orders passed by the lower authorities. It is seen that CIT(A) has allowed and deleted the addition made by the AO by ITAT s order in assessee s own case in AY 2007-08 2008-09 and Order of Hon ble Delhi High Court in case of the assessee only in ITA 566/2016 and ITA 569/2016 dated 30.9.2016. Since issued involved in the present appeal is identical to the issue involved in the above referred Tribunal s order and order passed by Hon ble High Court , supra, hence we do not find any infirmity in the order of CIT(A) and hence we dismiss ground no. (v) of the revenue s appeal before us. 82. Ground no. (vi) to (xi) of the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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