TMI Blog2023 (2) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... e balance as shown in the seized document i.e. seized trial balance , and the audited accounts for the year ended 31.03.2005, and it is for assessee to discharge onus to rebut the presumption u/s 132(4A) and 292C by cogent evidences/explanations. The onus is squarely on the assessee to rebut the presumption. In the interest of justice, one more opportunity needs to be granted to the assessee to prove its contentions, so that correct income is brought to tax. We are restoring the matter back to AO for re-adjudication on merits. Bogus expenses - difference between the seized trial balance during search operations and the Expenses as claimed in the audited accounts filed with Return of income - HELD THAT:- There is a difference in amounts in the seized trial balance as on 31.03.2005 and the audited Profit and Loss as at 31.03.2005, of the expenses as per chart reproduced above, wherein audited accounts reflected higher expenses by Rs. 15,33,654/- vis- -vis expenses reflected in the seized trial balance. The search was conducted on 27.08.2009, and the documents pertain to year ended 31.03.2005 i.e. 4 years prior to the date of search and there are difference in the expense as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In our considered view, in the interest of justice, one more opportunity is to be given to the assessee , as well to the AO for examination and verification of these expenses as these evidences were so far not produced before the AO, for its examination on merits by the AO. We are restoring the matter back to the file of AO for re-adjudication on merits. TDS u/s 194C - Assessee has claimed to have debited Marketing expenses AND payments were made to distributors for pushing up the sales - AO observed that payments were made under contract and no income tax was deducted at source on such payments - HELD THAT:- Regarding contentions of the assessee for applicability of ratio of judgment and order of Hon ble Supreme Court in the case of Hindustan Coca Cola Beverages Private Limited. [ 2007 (8) TMI 12 - SUPREME COURT] we are remitting the matter back to the file of AO for limited purposes to apply ratio of Hon ble Supreme Court in toto, for which the onus is entirely on the assessee to prove with cogent evidence that the payee s have duly included the said respective amounts paid by the assessee in their return of income and paid due taxes to Revenue. With these directions , fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /details were not correctly taken nor considered properly hence the addition as maintainedis unwarranted. In this regard the facts discussed by the two lower authorities in their orders were not considered in appropriate manner. 4. That in any view of the matter the addition of Rs. 5,07,352.00 as maintained by the Commissioner of Income Tax (Appeals) as per Para 8.2 of his order is unjustified, incorrect and illegal in the facts and circumstances of the case. 5. That in any view of the matter the addition of Rs. 15,39,256.00 made by the assessing officer as per Para 6 of the assessment order and confirmed by the Commissioner of Income Tax (Appeals) as per Para 9.2 of his order is highly unjustified in so far as it is not correct to say that the assessee claimed bogus expenses and the allegation that the appellant failed to reconcile the differences between audited account and seized trial balance is not correct hence the addition as made and confirmed is unwarranted in the facts and circumstances of the case. 6. That in any view of the matter addition of Rs. 1,86,513.00 made as per Para 8 of the assessing officer's order and confirmed by the Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness expenditures and such expenditures are recorded in books in regular course and the books entries were accepted, expenditures are supported by vouchers, hence disallowance as maintained @5% is highly unjustified and illegal. 6. That in any view of the matter the assessee reserves his right to take any fresh ground of appeal before hearing of the appeal. 7. That in any view of the matter penal interest charged under different sections of the income Tax Act is highly unjustified in the facts and circumstances of the case. ITA no. 77/Alld/2013-Grounds of Appeal for ay:2007-08 1. That in any view of the matter assessment was framed under Section 153AB of the Act without any search material therefore the declared income is liable to be accepted in the facts and circumstances of the case and Commissioner of the Income Tax (Appeals) is unjustified in confirming the additions/disallowances. 2. That in any view of the matter action under Section 132(1) of the Income Tax Act in consequence to which the notice issued under Section 153A of the act without any incriminating material or any undisclosed income found during the course of search the block assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) is unjustified in confirming the additions/ disallowances. 2. That in any view of the matter action under Section 132(1) of the Income Tax Act in consequence to which the notice issued under Section 153A of the act without any incriminating material or any undisclosed income found during the course of search the block assessment made determining the income at Rs. 80,85,940.00 as against returns income of Rs. 18,19,136.00 is illegal, arbitrary and against the provision of the Income Tax Act. 3. That in any view of the matter while passing the order of the learned Commissioner of Income Tax (Appeal) totally failed to consider the facts of the case, paper book filed and arguments advanced and the total relief prayed for has been negatived and a very small relief has been considered to be allowed by ignoring the judicial norms which is highly unjustified and incorrect. 4. That in any view of the matter addition of Rs. 49,557/- made by assessing officer by invoking the provision of Section 68 of the Income Tax Act is highly unjustified in the facts and circumstances of the case as the appellant discharged the burden as required and action of the assessing officer and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the assessee. Statutory notices u/s 142(1) were issued by AO, from time to time. The assessee participated in assessment proceedings. The AO had observed in his assessment order, that no books of accounts were found during the course of search, but during the course of assessment proceedings books of accounts were produced by the assessee, which were perused and examined by the AO. The assessment proceedings culminated into an assessment order dated 28.12.2011 passed by AO u/s 153A(b) , wherein income of the assessee as assessed by AO was Rs. 1,48,02,960/- as against returned income of Rs. 13,51,050/-. The assessee being aggrieved filed first appeal with ld. CIT(A), which was partly allowed by ld. CIT(A) , vide appellate order dated 30.01.2013(506/JCIT/CC/Alld/11-12). Aggrieved by appellate order dated 30.01.2013 passed by ld. CIT(A), the assessee has filed an appeal with tribunal. Both the rival parties advanced their arguments before the Division Bench of ITAT, Allahabad Bench, in the proceedings conducted in Open Court hearing through physical hearing mode. Now, we propose to dispose of the appeal filed by the assessee on merits in accordance with law for ay: 2005-06, ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO observed that Sundry Creditor in the name of Bhola Foods Private Limited as on 31.03.2005 was shown at Rs. 26,28,496 in the Balance Sheet filed with Return of income, while the same is shown to be Rs. 28,30,454 as per seized trial balance . The AO , after examination of books of accounts, observed that the balance of Bhola Foods Private Limited as on 31.03.2005, ought to have been Rs. 53,518/- , worked out by AO in assessment order,as detailed hereunder: Opening Balance as on 01.04.2004 Rs. 5,46,870/- Purchases made during the year Rs. 2,47,27,380/- Payments made during the year as per Annexure B Of clause 18 of Form No. 3CD (-) Rs. 2,52,20,732/- Balance of Bhola Foods Private Limited which should Have been shown as on 31.03.2005 Rs. 53,518/- The balance shown by assessee as payable to M/s Bhola Foods Private Limited as on 31.03.2005 in the audit report was Rs. 26,28,496/- , while balance payable was Rs. 28,30,454/- as on 31.03.2005 as per seized trial balance. The AO further observed that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46,870/-, and the assesee has added Rs. 14,000/- in the opening balance without giving any supporting evidence. Secondly, ld. CIT(A) also observed that the assessee has claimed that it has made purchases to the tune of Rs. 2,52,20,732/- from Bhola Foods Private Limited as shown in Annexure-B clause 18 of Form No. 3CD which the assessee claimed is inclusive of sale tax, while the figure of sale in the books of Bhola Foods Private Limited to the tune of Rs. 2,47,27,380/- is exclusive of sales tax, but as per ld. CIT(A) this contention of the assessee is not proved, and hence the above figure of purchase in the books of the assessee was held not to be genuine,and the differential of Rs. 2,52,20,732/- - Rs. 2,47,27,380/- , amounting to Rs. 4,93,352/- was held to be addition sustained on this differential. Thus , on both the counts as aforesaid additions to the tune of Rs. 5,07,352/- (Rs. 14,000/- + Rs. 4,93,352/- ) stood confirmed/sustained by ld. CIT(A). Being aggrieved by appellate order passed by ld. CIT(A), the assessee has filed an appeal before tribunal against the additions as were sustained by ld. CIT(A). The ld. Counsel for the assessee opened arguments before the Bench and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27.08.2009 and the trial balance was found and seized during the search operations which pertained to year ended 31.03.2005 i.e. 4 years prior to search and how it can be said that the audited accounts are reliable in the teeth of seized trial balance. The ld. CIT-DR relied upon appellate order passed by ld. CIT(A) . After hearing both the parties and perusing the material on record, we are of the considered view that the matter need to be restored to the file of the AO for verification of claim of the assessee on merits that the difference is majorily due to accounting treatment meted out to purchases made by assessee from Bhola Foods Private Limited which are inclusive of sales tax/VAT, while the seller Bhola Foods Private Limited is accounting for sales made to assessee exclusive of sales tax/VAT. The seized document is recovered from the assessee during search operations carried out by Revenue u/s 132(1) on 27.08.2009. The presumption u/s 132(4A) and 292C shall apply and contents of the documents viz. seized trial balance shall be presumed to be true and correct ,and it is now for the assessee to rebut the same by cogent evidences/explanations. The presumption u/s 132(4A) and 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Freight 4,23,157 4,33,909 Insurance 9,864 14,756 Salary 6,95,843 7,97,059 Sales Promotion 10,400 2,70,110 Scheme 82,000 1,10,882 Telephone 47,662 54,072 Travelling and conveyance(sales) 6,99,348 8,20,580 Total 30,05,642 45,39,296 The AO observed from the above chart that it is clear that the assessee has claimed bogus expenses to the tune of Rs. 15,33,654/-. The AO further observed while examining of books of accounts, that some of the vouchers are not fully vouched and produced, and most of the vouchers are self made vouchers. The AO disallowed expenses of Rs. 15,33,654/- and added the same to the income of the assessee as bogus expenses. Further , the AO observed that charity and donation expenses claimed of Rs. 5,602/- are not allowable expenses and were disallowed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed accounts are reliable. It was submitted by ld. CIT-DR that at Kanpur, the assessee had administrative office at Kanpur and not BO at Kanpur. The ld. CIT-DR relied upon the appellate order passed by ld. CIT(A) and prayed for confirming the addition . After hearing both the parties and perusing the material on record, we are of the considered view , in the interest of justice, that the matter need to be restored to the file of the AO for verification of claim of the assessee that the seized trial balance reflected transaction of Kanpur B.O., while it did not included transactions of Head office situated at Sahson,Allahabad transactions, while audited accounts was prepared after consolidation of transactions of Sahson Allahabad(HO) as well Kanpur BO transactions. There is some merit in the contention of the assessee, as on perusal of the seized trial balance as reproduced in the assessment order, we have observed that there is an credit entry in the name of Head Office and credit balance of Rs.7,99,113.00(balance not completely legible) against it is reflected , which strengthen the view of the assessee that this seized trial balance reflected transactions of Kanpur B.O., but in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustomers have been entered in cash book on wrong dates, which was later rectified. The AO rejected the contentions of the assessee, and made additions to income of the assessee to the tune of Rs. 1,86,513/- towards unexplained expenditure . The assessee filed first appeal with ld. CIT(A) and reiterated the same contentions. The assessee also submitted before ld. CIT(A), without prejudice, that peak negative balance was Rs. 1,07,527/- as on 06.11.2004 on page 27 of LP-11. The contentions of the assessee stood rejected by ld. CIT(A) keeping in view provision of Section 292C and the assessee having failed to rebut the presumption by cogent evidence. The ld. CIT(A) also rejected the theory of peak negative cash balance, as the assessee failed to explain that the same was circulating. Thus, the ld. CIT(A) sustained the additions. Still aggrieved , the assessee filed second appeal with tribunal. The ld. Counsel for the assessee reiterated its submission and submitted that opening cash balance was Rs. 69,014/- as on 01.04.2004 and closing balance was Rs. 80,132.50 as on 31.03.2005, as per audited accounts. The ld. CIT-DR relied upon appellate order passed by ld. CIT(A). After hearing both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of making entries of receipts from customer on the wrong dates is merely to come out of tax liability. The onus was squarely on the assessee to rebut the presumption, which assessee fails to do so. Thus, we hold that payments of Rs. 1,86,513/- were made towards unexplained expenditure of which sources for making such payment could not be explained by the assessee, and the same is held to be made out of undisclosed income of the assessee. Thus, this ground of appeal is decided against the assessee.We order accordingly. 3e Ground No.7 is regarding chargeability of interest consequent to assessment made by the AO u/s 234A, 234B and 234C, and is merely consequential in nature and accordingly stand dismissed. Reference is drawn to judgment and order of Hon ble Supreme Court in the case of CIT v. Anjum S Ghaswala , reported in (2001) 119 Taxman 352(SC), decision of Hon ble Supreme Court in the case of CIT v. Bhagat Construction Company Limited , reported in (2016) 383 ITR 9(SC) and also to decision of Hon ble Supreme Court in the case of Kalyankumar Ray v. CIT, reported in (1991) 191 ITR 634(SC) . Thus, this ground of appeal raised by assessee stand dismissed. We order accordingly. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose to dispose of the appeal filed by the assessee on merits in accordance with law for ay: 2006-07, ground wise. 11.At the outset ld. Counsel for the assessee stated before the Bench , that the assessee does not want to peruse grounds of appeal number 1-3 and 6-7 raised by it in memo of appeal filed with tribunal, and prayers were made before the Bench by ld. Counsel for the assessee to dismiss ground number 1-3 and 6-7 raised by assessee before tribunal , as not being pressed. The Ld. CIT-DR has no objection, if Ground No. 1-3 and 6-7 are dismissed , as not being pressed. After hearing both the parties, we dismiss Ground No. 1-3 and 6-7 raised by assessee in memo of appeal filed with the tribunal as not being pressed. We order accordingly. 12. Ground No. 4 and 5 raised by assessee in memo of appeal filed with tribunal, concerns itself with disallowance of expenses to the tune of Rs.3,41,407/- made by the AO which disallowance of expenses stood reduced by ld. CIT(A) to Rs. 1,77,709/-, being additions made towards expenses claimed to be incurred by the assessee, under the head sale promotion expenses, telephone expenses, travelling expenses , freight expenses, conveyance expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade additions by estimating disallowance @10% of these expenses, which was reduced by ld. CIT(A) to 5% of these expenses . It was submitted that no disallowance of expenses is warranted on estimation basis , and no specific defects were pointed out by both AO as well ld. CIT(A). It was submitted that complete details were filed by assessee before ld. CIT(A) and our attention was drawn to page 12 of the paper book , wherein vide para V it is stated(vide handwriting additions) that vide page 31-248(copies not filed with tribunal), the details were furnished. It was submitted that the ITAT, SMC Bench, while adjudicating appeal for ay: 2004-05 has deleted the additions, in ITA No. 69/Alld/2013 vide appellate order dated 2.2.2016 , wherein some pucca bills could not be produced. The prayers were made by ld. Counsel for the assessee that the matter can go back to the file of the AO for fresh adjudication on merits. On the other hand, the ld. CIT-DR submitted that no details were furnished before the AO, while it was submitted before ld. CIT(A). It was submitted that ld. CIT(A) has given categorical finding that the payments have been claimed on self made vouchers and complete verificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest of justice, one more opportunity is to be given to the assessee , as well to the AO for examination and verification of these expenses as these evidences were so far not produced before the AO, for its examination on merits by the AO. We are restoring the matter back to the file of AO for re-adjudication on merits in accordance with law, after giving proper and adequate opportunity of being heard to the assessee. We clarify that we have not commented on the merits of the issue. We order accordingly. 13. In the result appeal filed by assessee in ITA No. 76/Alld/2013 for assessment year 2006-07 stand partly allowed for statistical purposes. We order accordingly. Appeal No. ITA No. 77/Alld/2013-Assessment Year 2007-08 14. We shall now take up appeal of the assessee for ay: 2007-08.The brief facts of the case are that the assessee company is engaged in the business of purchase and sale of spices and masala and other food items manufactured by Bhola Food Products Private Limited. In pursuance to authorization issued u/s 132 , a search and seizure operations were carried out by Revenue on 27.08.2009 in the Business and Residential premises of group cases of Kesarw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal filed with tribunal, concerns itself with disallowance of marketing expenses to the tune of Rs.12,63,138/- made by the AO which disallowance of expenses stood reduced by ld. CIT(A) to Rs. 3,98,526/- , being additions made by invoking provisions of Section 40(a)(ia) read with Section 194C of the 1961 Act. The ld. AO observed that the assessee has claimed to have debited Marketing expenses to the tune of Rs. 12,63,138/- in the Profit and Loss Account. The AO observed that the payments were made to distributors for pushing up the sales. The AO observed that payments were made under contract and no income tax was deducted at source on such payments. The AO asked assessee to explain why these expenses be not disallowed. The assessee submitted before AO that marketing expenses incurred by the assessee is towards reimbursement of payments made by the distributors appointed by the assessee as per instructions of the assessee. The assessee submitted that TDS is not applicable on such reimbursement of payments. The AO observed that the assessee has submitted the above submissions , but no evidence has been submitted to substantiate the same. The AO disallowed the expenses to the tune ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses ledger accounts in the books of the assessee is placed. It was submitted that the AO disallowed entire marketing expenses of Rs. 12,63,138/- , while ld.CIT(A) restricted disallowance of expenses to Rs. 3,98,526/- after considering requirements of Section 194C, that the payment/credit to a party in a day in aggregate should exceed Rs. 20,000/- and further in a year aggregate payments/credits to a party should exceed Rs. 50,000/- . It was submitted that the distributors were acting as agents on behalf of the assessee. The ld. Counsel for the assessee relied upon the judgment and order of Hon ble Supreme Court in the case of Hindustan Coca Cola Beverage Private Limited v. CIT , reported in (2007) 163 Taxman 355(SC). The ld. CIT-DR relied upon the appellate order passed by ld. CIT(A) and submitted that if the ratio of decision in the case of Hindustan Coca Cola Beverages Private Limited (supra) is to be applied, then the assessee will be liable to pay interest liability as upheld by Hon ble Supreme Court. After hearing both the parties and perusing the material on record, we are of the considered view that the assessee has failed to deduct income-tax at source within the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% of these expenses . We have already adjudicated this issue , while adjudicating appeal for ay: 2006-07, and facts being similar in this year, our decision for ay: 2006-07 shall apply mutatis mutandis to the issue raised by assessee in this year. The issue is restored to the file of the AO for fresh adjudication with similar directions as were given by us for ay: 2006-07. We order accordingly. 18. Ground No. 8 being general in nature, does not require separate adjudication , and hence stand dismissed. We order accordingly. 19. In the result appeal filed by assessee in ITA No. 77/Alld/2013 for assessment year 2007-08 stand partly allowed for statistical purposes. We order accordingly. ITA No. 78/Alld/2013- Assessment Year 2008-09 20. We shall now take up appeal of the assessee for ay: 2008-09.The brief facts of the case are that the assessee company is engaged in the business of purchase and sale of spices and masala and other food items manufactured by Bhola Food Products Private Limited. In pursuance to authorization issued u/s 132 , a search and seizure operations were carried out by Revenue on 27.08.2009 in the Business and Residential premises of group cases o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mo of appeal filed with tribunal, concerns itself with disallowance of Marketing expenses to the tune of Rs.15,71,921/- made by the AO which disallowance of expenses stood reduced by ld. CIT(A) to Rs. 7,48,442/- , being additions made by invoking provisions of Section 40(a)(ia) read with Section 194C of the 1961 Act. We have already adjudicated this issue , while adjudicating appeal for ay: 2007-08, and facts being similar in this year, our decision for ay: 2007-08 shall apply mutatis mutandis to the issue raised by assessee in this year. The issue is restored to the file of the AO with similar directions as were given by us for ay: 2007-08. We order accordingly. 23. Ground No. 6 raised by assessee in memo of appeal filed with tribunal, concerns itself with disallowance by AO of expenses to the tune of Rs.4,91,664/- , which disallowance of expenses stood reduced by ld. CIT(A) to Rs. 2,45,832/-, being additions made towards expenses claimed to be incurred by the assessee, under the head sales promotion expenses, telephone expenses, travelling and conveyance(sales) expenses , freight expenses , and vehicle running and maintenance expenses , being disallowance @ 5% of these expense ..... X X X X Extracts X X X X X X X X Extracts X X X X
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