TMI Blog2023 (7) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... of Commission on Corporate Guarantee given to the Associated Enterprises by the assessee -TPO made adjustment @ 1.50% of the Guarantee amount given by the assessee - HELD THAT:- 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 in the case 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. Addition made towards cash component paid in purchase of agricultural land - AO made the addition on the basis of a draft agreement found in the laptop of Shri Shalin Thaker - HELD THAT:- Discrepancies noticed in the draft agreement and also the fact that the AO did not conduct proper enquiries to find the veracity of the draft agreement would drive us to conclude that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 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 purchase amount of Rs. 15,30,36,741/- made from these parties. 5.2 In the appellate proceedings, the Ld CIT(A) restricted the addition to 6% of the value of above said purchases. The assessee is aggrieved with the decision of Ld CIT(A) in restricting the addition to 6% of value of alleged bogus purchases. 5.3 The Ld A.R submitted that the AO has disallowed the purchases presuming that they are bogus. In this regard, he has placed reliance on the statements given by some of the suppliers, financial profiles of suppliers, use of outstation vehicles for transportation of goods, survey findings of two parties. He also relied upon the statement given by an employee named Shri P Nandakumar, who has stated that the various suppliers have given only bills to the assessee. However, the AO did not give credence to the enquiry c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eque 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 source and obtained bills from others. In this kind of situation, as observed by Ld CIT(A), only incremental profit should be added. He submitted that the incremental profit rate of 6% estimated by Ld CIT(A) is very much on the higher side. He submitted that the assessee has shown gross profit rate of 17% during these years and the said profit rate has been accepted by the Transfer pricing officer under Transactional Net Margin Method, since the said profit rate is at par with the rate of profit declared by the comparable companies. He submitted that, in the following cases, the Tribunal has restricted the addition to 2% of the value of purchases:- (a) Suman G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 statement of one Mr. Chandra Shekhar Nair who allegedly was carrying out business of certain suppliers is incorrect since he was not a director in any of the said suppliers at the time of search and he has duly retracted the same before AO. Similarly, other suppliers have nowhere given clear statement that they are engaged in providing accommodation entry. d. No evidence of any cash payments/receipts were found at the premises of the suppliers as well as assessee. e. Allegation of use of outside state vehicle may be violation of Motor Vehicle Rules; however, same has no bearing on income tax, f. Further, the suppliers were called for cross examination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 narrated in point (a) in the preceding paragraph. As observed earlier, the manufacturing loss declared by the assessee is a relevant factor to determine whether the assessee has received materials or not. We notice that the Ld CIT(A) has given a finding that the manufacturing loss declared by the assessee was within the prescribed limit of SION published by DGFT, Government of India. We also notice that the DGCEI has also conducted search in order to find out whether the assessee has actually received material against the alleged accommodation bills and he has given his opinion that the materials have been received. 5.12 We notice that the assessee has f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Hence, in the normal circumstances, no disallowance of purchases is called for. However, since some of the suppliers have stated that they have not supplied the materials and since the AO DGCEI has opined that the assessee might have procured materials from others, it is possible that the assessee could have made some profit in such an exercise. Hence, in order to take care of revenue leakages, if any, some addition is called for. We notice that the addition has been restricted to 2% in the following cases:- (a) Suman Gupta vs. ACIT (ITA No.4774/Mum/2014 dated 23.8.2017). In this case, this assessee was engaged in Steel business. (b) Geolife Organis (ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh 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 issue urged by the assessee relates to the addition made towards cash component paid in purchase of agricultural land amounting to Rs. 1,23,19,000/-. 7.1 The facts relating to this issue are stated in brief. During the course of search proceedings, soft copy of draft sale agreement was found in the laptop of Shri Shilan Thaker. The said agreement showed that a piece of land was proposed to be purchased at Rs. 11,14,44,000/- from Shri Rahul J Sankhe. In the above said agreement, it is stated that the above said consideration was proposed to be paid by way of cheque amounting to Rs. 8,14,44,000/- and by way of cash amounting to Rs. 3,00,00,000/-. The ledger accounts obtained from the seller disclosed that the assessee has paid a sum of Rs. 5,11,66,500/- by way of cheques to the seller. It was noticed that the assessee has not accounted for any cash payment in the books of accounts. Hence the AO asked the assessee about the cash component of Rs. 3.00 crores. 7.2 The assessee submitted that the above said agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement was found during the course of search. The soft copy was also unsigned one. (b) The name of purchaser was not mentioned in the draft agreement. (c) There was difference in the sale consideration mentioned in the sale agreement and the Sale deed. The consideration mentioned in the draft agreement was Rs. 11.14 crores and in the Sale deed was Rs. 9.91 crores. As per the draft agreement, the cheque amount was mentioned as Rs. 8.14 crores, whereas the assessee has actually paid cheque amount to the tune of Rs. 9.91 crores. Though the cash component was mentioned as Rs. 3.00 crores in the draft agreement, the AO could make addition to the extent of Rs. 1.23 crores only. The said difference in the alleged cash consideration itself supports the case of the assessee that the draft agreement was prepared, when the negotiations were going on. (d) In the draft agreement, the date of agreement is mentioned as --- day of September, 2015 at one place and as ----April, 2015 in another place. (e) The actual purchase value was far higher than the Stamp duty value. (f) The AO has only obtained ledger account copies from the seller and no specific enquiry about the cash c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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