TMI Blog2023 (5) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be considered as an International Transaction - TPO made TPA @ 1.50% of the Guarantee amount given by the assessee - HELD THAT:- We notice that Tribunal has examined an identical issue in the assessee s own case in AY 2010-11 as restricted the rate of commission at 0.50% of the value of loan actually availed by the Associated Enterprises. Tribunal has followed the decision of Everest Canto Cylinders Ltd [ 2015 (5) TMI 395 - BOMBAY HIGH COURT ] Since the decision rendered by Ld CIT(A) on this issue is covered by the decision rendered by the jurisdictional High Court and the Tribunal, we do not find any reason to interfere with the decision so taken by Ld CIT(A) on this issue. Accordingly we uphold the same. Disallowance u/s 37 - assessee has paid salary/professional fees to three persons related to the CFO of the assessee company - HELD THAT:- If the payments made to both Ms Ramita Jain and Mrs Sangitha Jain were considered as part of salary payment to Shri Raman Kumar Jain, then such payments should be considered as having been incurred for the purposes of business only, i.e., all the payments, if clubbed with the salary payable to Shri Raman Kumar Jain, is allowable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... national, M/s SPA Heights P Ltd, M/s Godwin Metal Trade P Ltd, M/s Saj Trading Company, M/s Rashmi Steels, M/s Kshemkari Steel and M/s Manohar Manak Alloys P Ltd. The revenue carried out enquiries from these parties either u/s 131 of the Act or by taking survey and search operations u/s 133A/132 of the Act. From the result of these investigations, the revenue came to the conclusion that these entities have provided only accommodation bills without actually supplying materials. In this regard, the AO placed reliance on the statements given by some of the suppliers and also statement given by the employees of the assessee concern. Accordingly, the AO disallowed entire purchases made from these parties. The details of disallowances made by the AO in various years are given below:- ASST. YEAR PURCHASE AMOUNT 2014-15 74,48,00,895 2015-16 36,85,43,350 5.2 In the appellate proceedings, the Ld CIT(A) restricted the addition to 6% of the value of above said purchases and hence both the parties are in appeal before us on this issue. While the revenue is objecting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has furnished all the details to prove the genuineness of purchases. He further submitted that the statement given by the employee was general in nature and not with regard to any specific bills and his statement has been denied by the CMD Shri Neeraj Raja Kochhar. He further submitted that the AO has also relied upon a statement given by a person named Shri Chandra Shekar Nair, which has later been retracted by him. Hence his statement cannot be relied upon. In any case, the above said person was not director in any of the suppliers concerns when he made the statement. He further submitted that the search team could not find any material to show that the cheque payments made towards alleged bogus purchases have been flowed back to the assessee in the form of cash. He further submitted that the Excise department, which examines the production details of the assessee, did not find fault with the books of accounts of the assessee. Accordingly, the Ld A.R contended that the entire disallowance made by the AO should have been deleted by the Ld CIT(A). 5.6 In the alternative, the Ld A.R submitted that the AO himself has observed that the assessee has received materials from one so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the purchase quantity. However, in the case of manufacturing of goods and when the raw materials is converted into other type of finished goods, the receipt of material can be judged on comparing the manufacturing loss. The gross profit rate declared by the assessee vis- -vis other comparable companies is another measure to judge the genuineness of purchases. If an assessee has introduced bogus bills without actually receiving the materials, then the natural tendency is to show higher manufacturing loss in order to adjust the quantity details and the same would result in showing lower gross profit rate. 5.10 The submissions made by the assessee with regard to the observations made by the AO are summarized below:- a. The assessee has submitted the entire documentary evidences such invoices, purchase order, Goods receipt note, stock register showing receipt, bank statement, etc. to establish the genuineness of the purchases and no doubt raised by the AO. b. The acceptance of employee of Mr. P Nandkumar is general in nature without any reference to any material found during the search and the same was duly denied by the CMD Mr. Neeraj Raja Kocchar. c. Reliance on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. This is more-so when the AO has himself stated that the material has been received by the assessee from open market in para 17 of the assessment order. l. Further it is also submitted that the majority of the suppliers have appears before the Id, AO and confirmed that they have supplied the material to the appellant. m. Further, we also rely on the findings of the DGCEI in the assessee's own case wherein after extensive search, they have concluded that the material has been duly received by the assessee. Kindly refer to conclusion of the DGCEI at page 136 of the C1T (A) order. n. Thus, it is submitted that assessee has duly purchased material from the suppliers. It is possible that the suppliers have themselves procured the material from open market and the same has been supplied to assessee. However, the said fact cannot lead to a conclusion that the purchases are bogus. 5.11 We notice that the AO himself has observed at paragraph 17 of the assessment order that the purchases have been made from open market against the bills obtained from entry providers. We also notice that the assessee has furnished all the relevant documents to prove the purchases, which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the High Court that in a case where the parties from whom such purchases allegedly made were bogus but the purchases in themselves were not bogus, only a gross profit ratio could be added to the income of an assessee. We notice that the Ld CIT(A) has estimated the said incremental profit @ 6% of the value of purchases, but did not give any basis for arriving at the above said rate of 6%. 5.14 It is the contention of the assessee that, in the facts and circumstances of the case, no disallowance of purchases is warranted, since the manufacturing loss and the gross profit rate declared by the assessee compares well with industry standards. The assessee itself, in the alternative, has submitted that the addition towards incremental gross profit may be restricted to 2% of the value of purchases. In support of this contention, the Ld A.R also relied upon certain case laws (referred supra). 5.15 We find merit in the said contentions under the facts of the present case. We noticed earlier that the manufacturing loss declared by the assessee was less than the SION standards prescribed by DGFT. The gross profit rate declared by the assessee was more than the industry average. Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the guarantee commission should be retained @ 1.50%. 6.3 We have heard rival contentions on this issue and perused the record. We notice that the co-ordinate bench of Tribunal has examined an identical issue in the assessee s own case in AY 2010-11 and the Tribunal has restricted the rate of commission at 0.50% of the value of loan actually availed by the Associated Enterprises. In this regard, the Tribunal has followed the decision rendered by the jurisdictional Hon ble Bombay High Court in the case of Everest Canto Cylinders Ltd (supra). Since the decision rendered by Ld CIT(A) on this issue is covered by the decision rendered by the jurisdictional High Court and the Tribunal, we do not find any reason to interfere with the decision so taken by Ld CIT(A) on this issue. Accordingly we uphold the same. 7. The next common issue urged by the assessee relates to the disallowance made u/s 37 of the Act. 7.1 The AO noticed that the assessee has paid salary/professional fees to three persons related to the CFO of the assessee company, viz., Shri Raman Kumar Jain, i.e., the payments have been made to Ms. Ramita Jain (daughter); Mrs. Sangitha Jain (wife) during these two years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that Shri Raman Kumar has affirmed that these two persons have provided services to the assessee company. He further submitted that the search officials or AO did not verify their contentions made in the retraction affidavits by making enquiries with other employees. Accordingly, the Ld A.R contended that the AO could not have placed reliance on the retracted statements for making the above said additions. 7.4 The Ld D.R, however, supported the orders passed by the AO and submitted that these two persons have admitted that they have no connection with the assessee company. 7.5 We have heard rival contentions on this issue and perused the record. We noticed that the above said two persons have given statements u/s 132(4) of the Act during the course of search and in the statements, they have stated that they do not have connection with the assessee herein. However, both of them have retracted statements by filing affidavits in November, 2019, i.e., after two years from the date of search. We also notice that the retraction is not based on any evidence. It is well settled proposition that the retraction of the statement, if alleged to have been taken forcibly, should be made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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