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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
This appeal by the Revenue is directed against order dated 27.02.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2016-17, raising following grounds: i. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in deleting addition amounting to Rs. 1,63,64,050/- made u/s 68 of the Act neglecting the fact that the assessee has not furnished complete details during the assessment proceedings regarding High Sea sales amounting to Rs. 1,63,64,050/- and thus assessee had failed to establish genuineness of these credit entries in books of account"
1444/M/2023 2 M/s Villa Mode Exports (India) Pvt. Ltd. M/s Villa Mode Exports (India) Pvt. Ltd. ii. "Whether on the facts and in the circumstances of the case and in "Whether on the facts and in the circumstances of the case and in "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in deleting disallowance amounting to law, the Ld. CIT(A) is right in deleting disallowance amounting to law, the Ld. CIT(A) is right in deleting disallowance amounting to 50% of the employee benefit expen 50% of the employee benefit expenses on ad hoc basis, neglecting ses on ad hoc basis, neglecting the fact recorded by Assessing officer that no details/ bifurcation the fact recorded by Assessing officer that no details/ bifurcation the fact recorded by Assessing officer that no details/ bifurcation were submitted by the assessee regarding employee benefit were submitted by the assessee regarding employee benefit were submitted by the assessee regarding employee benefit expenses and summarily allowing the appeal of assessee" expenses and summarily allowing the appeal of assessee" expenses and summarily allowing the appeal of assessee" iii. "Whether on the facts and in the circumsta "Whether on the facts and in the circumstances of the case and in nces of the case and in law, the Id. CIT(A) is right in deleting disallowance of purchases law, the Id. CIT(A) is right in deleting disallowance of purchases law, the Id. CIT(A) is right in deleting disallowance of purchases of Rs.50,00,000 neglecting the fact recorded by Assessing officer of Rs.50,00,000 neglecting the fact recorded by Assessing officer of Rs.50,00,000 neglecting the fact recorded by Assessing officer that necessary details were not provided and summarily allowing that necessary details were not provided and summarily allowing that necessary details were not provided and summarily allowing the appeal of assessee" the appeal of assessee" iv. "Whether on "Whether on the facts and in the circumstances of the case and in the facts and in the circumstances of the case and in law, the Id. CIT(A) is right in deleting addition/ disallowances law, the Id. CIT(A) is right in deleting addition/ disallowances law, the Id. CIT(A) is right in deleting addition/ disallowances made by the A.O. without remanding the matter to the file of A.O. made by the A.O. without remanding the matter to the file of A.O. made by the A.O. without remanding the matter to the file of A.O. in case new details were filed by the assessee which were never in case new details were filed by the assessee which were never in case new details were filed by the assessee which were never filed before the A. O. before the A. O.
2. Briefly stated, facts of the case are that the assessee filed its Briefly stated, facts of the case are that the assessee filed its Briefly stated, facts of the case are that the assessee filed its return of income on 30.11.2016 declaring loss of Rs.1,94,60,215/-. return of income on 30.11.2016 declaring loss of Rs. return of income on 30.11.2016 declaring loss of Rs. The return of income filed by the assessee was selected for scrutiny The return of income filed by the assessee was selected for scrutiny The return of income filed by the assessee was selected for scrutiny and statutory notices under the In and statutory notices under the Income-tax Act, 1961 (in short ‘the tax Act, 1961 (in short ‘the Act’) were issued from time to time. The Assessing Officer in the Act’) were issued from time to time. The Assessing Officer in the Act’) were issued from time to time. The Assessing Officer in the assessment order passed u/s 144 of the Act on 12.012.2018 has assessment order passed u/s 144 of the Act on 12.012.2018 has assessment order passed u/s 144 of the Act on 12.012.2018 has noted that initially on the first date noted that initially on the first date, the assessee had filed manual , the assessee had filed manual submission on 27.02.2018 submission on 27.02.2018. Since, the case was under scrutiny . Since, the case was under scrutiny through through electronic electronic mode mode ,therefore, therefore, the the Assessing Assessing Officer Officer subsequently issued notice subsequently issued notices through the Income-tax Department tax Department Portal (ITBP) calling for various information and explanation P) calling for various information and explanation P) calling for various information and explanation regarding the entries of purchase and regarding the entries of purchase and sales, foreign currency sales, foreign currency fluctuation loss, evidence in support of expenses etc. However, evidence in support of expenses etc. However, evidence in support of expenses etc. However, the assessee did not respond to explanation or query raised by the did not respond to explanation or query raised by the did not respond to explanation or query raised by the Assessing Officer on the various issues. The Assessing Officer after Assessing Officer on the various issues. The Assessing Officer after Assessing Officer on the various issues. The Assessing Officer after taking prior approval from high taking prior approval from higher authority issued notice in er authority issued notice in physical format also. But the relevant information sought by the physical format also. But the relevant information sought by the physical format also. But the relevant information sought by the 1444/M/2023 3 M/s Villa Mode Exports (India) Pvt. Ltd. M/s Villa Mode Exports (India) Pvt. Ltd. Assessing Officer was was not filed by the assessee. The Assessing not filed by the assessee. The Assessing Officer also issued a final show cause notice asking the assessee as Officer also issued a final show cause notice asking the assessee Officer also issued a final show cause notice asking the assessee why the assessment should not the assessment should not be completed as an ex be completed as an ex-parte within the section 144 of the Act. In absence of relevant submissions or the section 144 of the Act. In absence of relevant submissions or the section 144 of the Act. In absence of relevant submissions or explanation on the part of the assessee, the Assessing Officer made explanation on the part of the assessee, the Assessing Officer made explanation on the part of the assessee, the Assessing Officer made disallowance/addition as follows : disallowance/addition as follows : 1. Additions under section 68 Additions under section 68 a) High Sea Sale High Sea Sale 1,63,64,050 Advance from Jaykara H. K. Ltd b) Advance from Jaykara H. K. Ltd 70,30,875 2,33,94,925 2. Disallowance of Expenses Disallowance of Expenses a) Foreign exchange fluctuation loss Foreign exchange fluctuation loss 36,15,649 b) 50% of Employee benefits expenses 50% of Employee benefits expenses 48,27,000 c) Purchases on ad Purchases on ad-hoc basis 50,00,000 1,34,42,649 3,68,37,574 3. On further appeal, the assessee filed detailed submissions On further appeal, the assessee filed detailed submissions On further appeal, the assessee filed detailed submissions before the Ld. CIT(A). The Ld. CIT(A) vide impugned order deleted before the Ld. CIT(A). The Ld. CIT(A) vide impugned order deleted before the Ld. CIT(A). The Ld. CIT(A) vide impugned order deleted the the the additions/disallowance additions/disallowance additions/disallowance made by made made by by the the the Assessing Assessing Assessing Officer. Officer. Officer. Aggrieved, the Revenue is in appeal before the Tribunal raising Aggrieved, the Revenue is in appeal before the Tribunal rai Aggrieved, the Revenue is in appeal before the Tribunal rai grounds as reproduced above. grounds as reproduced above.
4. Before us, the Ld. Departmental Representative (DR) refer Before us, the Ld. Departmental Representative (DR) refer Before us, the Ld. Departmental Representative (DR) refered to ground No. (iv) of the appeal and submitted that no information of the appeal and submitted that no information of the appeal and submitted that no information were filed before the Assessing Officer. The assessee filed certain were filed before the Assessing Officer. The assessee filed certain were filed before the Assessing Officer. The assessee filed certain information in respect in respect of additions made by the Assessing of additions made by the Assessing Officer before the Ld. CIT(A), h before the Ld. CIT(A), however, the Ld. CIT(A) did not follow the owever, the Ld. CIT(A) did not follow the procedure provided under Rule 4 procedure provided under Rule 46A of the Income-tax Rules, 1962 tax Rules, 1962 (in short ‘the Rules’) and (in short ‘the Rules’) and did not send sent the matter to the sent the matter to the Assessing Officer ca calling for his remand report. He further for his remand report. He further submitted that the Ld. CIT(A) has not given submitted that the Ld. CIT(A) has not given proper proper reasoning for 1444/M/2023 4 M/s Villa Mode Exports (India) Pvt. Ltd. M/s Villa Mode Exports (India) Pvt. Ltd. deleting the addition and therefore, also the deleting the addition and therefore, also the order of the Ld. CIT(A) of the Ld. CIT(A) need to be set aside. He further submitted that need to be set aside. He further submitted that on on the issue of advance from Jaikar H.K. Ltd for addition of Rs.17,30,875/ Jaikar H.K. Ltd for addition of Rs.17,30,875/ Jaikar H.K. Ltd for addition of Rs.17,30,875/-, though the Ld. CIT(A) the Ld. CIT(A) referred to the order of the assessment and to the order of the assessment and submission of the assessee submission of the assessee, however omitted to give however omitted to give his finding on that issue.
5. On the contrary, the Ld. Counsel of the assessee submitted On the contrary, the Ld. Counsel of the assessee submitted On the contrary, the Ld. Counsel of the assessee submitted that the Ld. CIT(A) after consideration of the submission and that the Ld. CIT(A) after consideration of the submission and that the Ld. CIT(A) after consideration of the submission and explanation of the assessee has deleted the additions made by the explanation of the assessee has deleted the additions made by the explanation of the assessee has deleted the additions made by the Assessing Officer which Assessing Officer which were unjustified and excessive without unjustified and excessive without taking into account pragmative approach. The Ld. Counsel taking into account pragmative approach. The Ld. Counsel taking into account pragmative approach. The Ld. Counsel submitted that in past assessment years no addition has been d that in past assessment years no addition has been d that in past assessment years no addition has been made by the Assessing Officer. The Ld. Counsel referred to the made by the Assessing Officer. The Ld. Counsel referred to the made by the Assessing Officer. The Ld. Counsel referred to the Paper Book filed by the assessee and the information filed before Paper Book filed by the assessee and the information filed before Paper Book filed by the assessee and the information filed before the Assessing Officer. The Ld. Counsel also relied on the decision of the Assessing Officer. The Ld. Counsel also relied on the decision of the Assessing Officer. The Ld. Counsel also relied on the decision of the Hon’ble Supreme Court in the case of Excel Industries Ltd. Hon’ble Supreme Court in the case of Excel Industries Ltd. Hon’ble Supreme Court in the case of Excel Industries Ltd. [2013] 358 ITR 295 (SC) and submitted that the Assessing Officer [2013] 358 ITR 295 (SC) and submitted that the Assessing Officer [2013] 358 ITR 295 (SC) and submitted that the Assessing Officer should have taken consistent view without any change of facts. The should have taken consistent view without any change of facts. The should have taken consistent view without any change of facts. The Ld. Counsel also relied on the decision of the Hon’ble Supreme Ld. Counsel also relied on the decision of the Hon’ble Supreme Ld. Counsel also relied on the decision of the Hon’ble Supreme Court in the case of Sassoon J. David and Co. P. Ltd. v. CIT order urt in the case of Sassoon J. David and Co. P. Ltd. v. CIT order urt in the case of Sassoon J. David and Co. P. Ltd. v. CIT order dated 03.05.1979 and submitted that expenditure incurred wholly dated 03.05.1979 and submitted that expenditure incurred wholly dated 03.05.1979 and submitted that expenditure incurred wholly and exclusively for the purpose of the business is allowable under and exclusively for the purpose of the business is allowable under and exclusively for the purpose of the business is allowable under the provisions of section 37(1) of the Act. the provisions of section 37(1) of the Act.
1444/M/2023 5 M/s Villa Mode Exports (India) Pvt. Ltd. M/s Villa Mode Exports (India) Pvt. Ltd.
We have heard rival submission of the parties and perused the d rival submission of the parties and perused the d rival submission of the parties and perused the relevant material on record. We find that the Assessing Officer has relevant material on record. We find that the Assessing Offic relevant material on record. We find that the Assessing Offic allowed ample opportunities allowed ample opportunities to the assessee for furnishing to the assessee for furnishing explanation of the queries raised by him. However, the assessee did explanation of the queries raised by him. However, the assessee did explanation of the queries raised by him. However, the assessee did not file any information before the Assessing Officer except y information before the Assessing Officer except y information before the Assessing Officer except providing basic information containing profit and loss account and providing basic information containing profit and loss account and providing basic information containing profit and loss account and balance sheet etc. The Ld. Assessing Officer raised specific query in balance sheet etc. The Ld. Assessing Officer raised specific query in balance sheet etc. The Ld. Assessing Officer raised specific query in respect of additions made. The relevant part of the order of the respect of additions made. The relevant part of the order of the respect of additions made. The relevant part of the order of the Assessing Officer is reproduced as under: ssing Officer is reproduced as under:
5.High Sea Sales Rs.1.63.64,050/ 5.High Sea Sales Rs.1.63.64,050/-. On perusal of P & L A/c it is observed that assessee On perusal of P & L A/c it is observed that assessee has show high sea has show high sea sale of Rs.163,64,050/ sale of Rs.163,64,050/- However the details of High Sea Sales and However the details of High Sea Sales and corresponding details of purchase was not provided by assessee though corresponding details of purchase was not provided by assessee though corresponding details of purchase was not provided by assessee though number of opportunities were given to it. number of opportunities were given to it. Details were submitted under the heading 'party wise detai Details were submitted under the heading 'party wise detai Details were submitted under the heading 'party wise details' but actually no party wise details were submitted by assessee but only actually no party wise details were submitted by assessee but only actually no party wise details were submitted by assessee but only following details were mentioned. following details were mentioned. (Amount in Rs.) Export Sales Export Sales 1,35,70,297 High Sea Sales High Sea Sales 1,63,64,050 Wcal Sales Wcal Sales 93,91,691 Import sales Import sales 15,10,409 Total 4,08,36,447 No further details were produced by assessee. It can be observed from No further details were produced by assessee. It can be observed from No further details were produced by assessee. It can be observed from various notices issued us 142(1) mentioned above that assessee was various notices issued us 142(1) mentioned above that assessee was various notices issued us 142(1) mentioned above that assessee was given number of opportunities to produce details of High Sea Sales but no given number of opportunities to produce details of High Sea Sales but no given number of opportunities to produce details of High Sea Sales but no details were submitted. details were submitted. After providing above After providing above referred opportunities the assessee submitted only referred opportunities the assessee submitted only part details through mail on 08.12.2018. The assessee filed following part details through mail on 08.12.2018. The assessee filed following part details through mail on 08.12.2018. The assessee filed following details in respect of Import purchases and "High Sea Sales' details in respect of Import purchases and "High Sea Sales' Import Purchase Import Purchase Date Invoice No. Amount Jaykara (H.K.) Ltd. Jaykara (H.K.) Ltd 27.07.2015 JK0/2465/15 27.08.221 1444/M/2023 6 M/s Villa Mode Exports (India) Pvt. Ltd. M/s Villa Mode Exports (India) Pvt. Ltd.
5.2 Export Sales: Export Sales: Sr. Name Address Date Invoice No. Invoice No. Amount No.
M/s Laxmi Old Plot No. 5, 07.04.2015 HS-001/15 001/15-16 1,627,500 Industries New Plot No. 338, Daultabad Road Industrial Gurgaon-122006.
M/s Laxmi Old Plot No. 5, 28.04.2015 HS-002/15 002/15-16 2,047,500 Industries New Plot No. 338, Daultabad Road Industrial Gurgaon-122006.
M/s Laxmi Old Plot No. 5, 28.04.2015 HS-003/15 003/15-16 2,047,500 Industries New Plot No. 338, Daultabad Road Industrial Gurgaon-122006.
M/s Laxmi Old Plot No. 5, 04.06.2015 HS-004/15 004/15-16 2,006,550 Industries New Plot No. 338, Daultabad Road Industrial Gurgaon-122006.
Jaydip 605, Supath, 6th 30.07.2015 HS-006/15 006/15-16 1,089,000 Agencies floor, Vijay Cross Road, Navrangpura Ahmedabad.
6. M/s Laxmi Old Plot No. 5, 31.07.2015 HS-005/15 005/15-16 1,170,000 Industries New Plot No. 338, Daultabad Road Industrial Gurgaon-122006.
7. Ghandhi B2/5, Meghoot 20.08.2015 HS-007/15 007/15-16 6,376,000 Chemicals Apt. Natawala Lane, 113, S.V. Road, Borivali (W), Mumbai The assessee produced copy of purchase bill of Jaykara (H.K.) Ltd. dated The assessee produced copy of purchase bill of Jaykara (H.K.) Ltd. dated The assessee produced copy of purchase bill of Jaykara (H.K.) Ltd. dated 20.072015 for purchase of 36MT Malric Anhydride. (2X20' Container) 20.072015 for purchase of 36MT Malric Anhydride. (2X20' Container) 20.072015 for purchase of 36MT Malric Anhydride. (2X20' Container) 5.3 However as can be observed from details shown above of sales, However as can be observed from details shown above of sales, However as can be observed from details shown above of sales, several sales bills are having dates prior to the several sales bills are having dates prior to the date of purchase bill of date of purchase bill of 20.07.2015. Some of the sale bills are of dates 07.04.2015, 28.04.2015, 20.07.2015. Some of the sale bills are of dates 07.04.2015, 28.04.2015, 20.07.2015. Some of the sale bills are of dates 07.04.2015, 28.04.2015, 28.04.2015, 04.06.2015 which is prior to date of import purchase of 28.04.2015, 04.06.2015 which is prior to date of import purchase of 28.04.2015, 04.06.2015 which is prior to date of import purchase of 20.07.2015 which is not possible. 20.07.2015 which is not possible.
1444/M/2023 7 M/s Villa Mode Exports (India) Pvt. Ltd. M/s Villa Mode Exports (India) Pvt. Ltd.
5.4. Further the sales bills show sale of Skyrene Monome 5.4. Further the sales bills show sale of Skyrene Monomer which is not r which is not the item of purchase shown in purchase bill as purchase bills show the item of purchase shown in purchase bill as purchase bills show the item of purchase shown in purchase bill as purchase bills show purchase of Malric purchase of Malric Anhydride 5.5. Therefore another 142(1) notice was issued on 09.12.2018 5.5. Therefore another 142(1) notice was issued on 09.12.2018 5.5. Therefore another 142(1) notice was issued on 09.12.2018 requesting assessee to submit following details. requesting assessee to submit following details. 1) You have not fully justified Hi 1) You have not fully justified High Sea Sales though you had been given gh Sea Sales though you had been given number of opportunities. Part submission is made by you on 08.12.2018 number of opportunities. Part submission is made by you on 08.12.2018 number of opportunities. Part submission is made by you on 08.12.2018 which does not justify credits in your books under the name High Sea which does not justify credits in your books under the name High Sea which does not justify credits in your books under the name High Sea Sales. In this connection you have not produced following details to Sales. In this connection you have not produced following details to Sales. In this connection you have not produced following details to justify transaction. ransaction. i) Copy of account for A.Y. 2016 i) Copy of account for A.Y. 2016-17 and 2017-18 of person to whom High 18 of person to whom High Sea Sales is made made b) Jaydip Agencies b) Jaydip Agencies c) Ghandhi Chemicals c) Ghandhi Chemicals ii) Purchase bill of materials in respect of High Sea Sales, sold to above ii) Purchase bill of materials in respect of High Sea Sales, sold to above ii) Purchase bill of materials in respect of High Sea Sales, sold to above person along with copy of with copy of account of person from whom purchase was person from whom purchase was made and details of payments made. made and details of payments made. iii) Please explain details of actual payments received for High Sea Sales ) Please explain details of actual payments received for High Sea Sales ) Please explain details of actual payments received for High Sea Sales of Rs.1,63,64,050/ of Rs.1,63,64,050/- and corresponding payment for purchase made by and corresponding payment for purchase made by you. 2) Please produce Form No 16A of salary paym 2) Please produce Form No 16A of salary payment of Shri Rajesh Parab ent of Shri Rajesh Parab and Shri Sunil Mathew and copy of their return to justify claim of salary. Sunil Mathew and copy of their return to justify claim of salary. Sunil Mathew and copy of their return to justify claim of salary. Without above details your reply is incomplete and shall be treated as Without above details your reply is incomplete and shall be treated as Without above details your reply is incomplete and shall be treated as part compliance. part compliance. 5.6. No details are produced by assessee in response to it. The asse 5.6. No details are produced by assessee in response to it. The asse 5.6. No details are produced by assessee in response to it. The assessee was asked to produce quantity details several times but were not was asked to produce quantity details several times but were not was asked to produce quantity details several times but were not produced. 5.7. Thus the assessee has credited to its books of account amount of Rs. 5.7. Thus the assessee has credited to its books of account amount of Rs. 5.7. Thus the assessee has credited to its books of account amount of Rs. 1,63,64,050 under the head 'High Sea Sales' for which it has offered no 1,63,64,050 under the head 'High Sea Sales' for which it has offered no 1,63,64,050 under the head 'High Sea Sales' for which it has offered no explanation. 5.8. Thus the amo 5.8. Thus the amount of Rs. 1,63,64,050/- credited by assessee in its credited by assessee in its books is nothing but unexplained credits which is required to be added books is nothing but unexplained credits which is required to be added books is nothing but unexplained credits which is required to be added us 68 of the IT Act. us 68 of the IT Act. In view of the above facts Rs. 1,63,64,050/ In view of the above facts Rs. 1,63,64,050/- is added u/s 68 of the IT is added u/s 68 of the IT Act.
6. Addition of Advance from Custome 6. Addition of Advance from Customers.
1444/M/2023 8 M/s Villa Mode Exports (India) Pvt. Ltd. M/s Villa Mode Exports (India) Pvt. Ltd.
The assessee had show opening balance of advance from customers from The assessee had show opening balance of advance from customers from The assessee had show opening balance of advance from customers from Jaykara H.K. Ltd of Rs.5,68,45,483/ Jaykara H.K. Ltd of Rs.5,68,45,483/-. There was no sales to it during . There was no sales to it during the year. However addition of Rs.70,30,875/ However addition of Rs.70,30,875/- is shown as advance from is shown as advance from customers again from customers again from Jaykara H.K. Ltd. 6.2. The assessee was given several opportunities to provide details of 6.2. The assessee was given several opportunities to provide details of 6.2. The assessee was given several opportunities to provide details of addition to advances received from customers. However no details were addition to advances received from customers. However no details were addition to advances received from customers. However no details were submitted by the assessee. Therefore final show cause was given vide submitted by the assessee. Therefore final show cause was given vide submitted by the assessee. Therefore final show cause was given vide 142(1) dated 30.11.2018 that why addition u/s 142(1) dated 30.11.2018 that why addition u/s 68 of the IT Act may not 68 of the IT Act may not be made as genuineness of credit in the name of advances from be made as genuineness of credit in the name of advances from be made as genuineness of credit in the name of advances from customers was not explained. customers was not explained. 6.3. However there is no compliance by the assessee in respect to show 6.3. However there is no compliance by the assessee in respect to show 6.3. However there is no compliance by the assessee in respect to show cause. I have therefore left with no option but to believe that cred cause. I have therefore left with no option but to believe that cred cause. I have therefore left with no option but to believe that credit appearing in the name of advance from customer is nothing but appearing in the name of advance from customer is nothing but appearing in the name of advance from customer is nothing but unexplained credit introduced in books under the shelter of advances unexplained credit introduced in books under the shelter of advances unexplained credit introduced in books under the shelter of advances from customers and therefore the same is added us 68 of the IT Act. from customers and therefore the same is added us 68 of the IT Act. from customers and therefore the same is added us 68 of the IT Act. (Addition Rs.70,30,875/-) (Addition Rs.70,30,875/ 7. Disallowance of Expenses Disallowance of Expenses The assessee has claimed loss from foreign exchange fluctuation of The assessee has claimed loss from foreign exchange fluctuation of The assessee has claimed loss from foreign exchange fluctuation of Rs.51,96,012/- -. The bifurcation was given by assessee in its email reply . The bifurcation was given by assessee in its email reply given on 06.08.2018 where in it was mentioned that loss of Foreign given on 06.08.2018 where in it was mentioned that loss of Foreign given on 06.08.2018 where in it was mentioned that loss of Foreign Exchange of Rs.36,15,649/ Exchange of Rs.36,15,649/- was because of revaluation of closing tion of closing balance of Jay Kara H.K. Ltd. balance of Jay Kara H.K. Ltd. The account of Jaykara H.K. Ltd share The account of Jaykara H.K. Ltd share following balances. following balances. Opening Balance Opening Balance Rs.5,68,45,483 Addition Rs.70,30,875 Closing Balance Closing Balance Rs.6,38,76,358 The amount is shown as advances from customer however no sale is The amount is shown as advances from customer however no sale is The amount is shown as advances from customer however no sale is executed in its favor. The assessee created contingent liability by executed in its favor. The assessee created contingent liability by executed in its favor. The assessee created contingent liability by showing fluctuation loss of Rs.36,15,649/ showing fluctuation loss of Rs.36,15,649/- for the closing balance. for the closing balance. 7.2. The following specific issue was asked to assessee 7.2. The following specific issue was asked to assessee 7.2. The following specific issue was asked to assessee vide notice issued u/s 142(1) on 24.11.2018. 142(1) on 24.11.2018. Please refer to your mail wherein you have submitted that details Please refer to your mail wherein you have submitted that details Please refer to your mail wherein you have submitted that details were filed by you vide submission dated 27.02.2018 and were filed by you vide submission dated 27.02.2018 and were filed by you vide submission dated 27.02.2018 and 28.02.2018 and on mail. 28.02.2018 and on mail. Please note that your case has been selected for complete Please note that your case has been selected for complete Please note that your case has been selected for complete scrutiny and subsequent details were called for from you after y and subsequent details were called for from you after y and subsequent details were called for from you after considering above details filed by you. considering above details filed by you. You are once again requested to submit following details which You are once again requested to submit following details which You are once again requested to submit following details which are not submitted by you till date inspite of several opportunities are not submitted by you till date inspite of several opportunities are not submitted by you till date inspite of several opportunities given to you. given to you.
1444/M/2023 9 M/s Villa Mode Exports (India) Pvt. Ltd. M/s Villa Mode Exports (India) Pvt. Ltd. Please provide Please provide comolete bifurcation of advance from custome comolete bifurcation of advance from customers Name PAN Opening Sales Received Received Closing and Balance Balance Address 2) Please give detailed bifurcation of salary of Rs. 96,02,952/ 2) Please give detailed bifurcation of salary of Rs. 96,02,952/ 2) Please give detailed bifurcation of salary of Rs. 96,02,952/- person wise and explain why it has increased thought sales and wise and explain why it has increased thought sales and wise and explain why it has increased thought sales and business is reduced. 3) As per details submitted you have claimed foreign exchange losses As per details submitted you have claimed foreign exchange losses As per details submitted you have claimed foreign exchange losses mainly on account of transaction with Saidaya Enterprise and Jaykara mainly on account of transaction with Saidaya Enterprise and Jaykara mainly on account of transaction with Saidaya Enterprise and Jaykara (H K) Ltd. Please produce their copy of account of last three years and for (H K) Ltd. Please produce their copy of account of last three years and for (H K) Ltd. Please produce their copy of account of last three years and for A. Y. 2016-17 and A.Y 17 and A.Y. 2017-18 also. Please justify that transaction done 18 also. Please justify that transaction done with you was in foreign currency and not in Rupees term. Please produce with you was in foreign currency and not in Rupees term. Please produce with you was in foreign currency and not in Rupees term. Please produce evidence of inward foreign remittance and purpose of inward foreign evidence of inward foreign remittance and purpose of inward foreign evidence of inward foreign remittance and purpose of inward foreign remittance 7.3. However no details were submitted by assessee. 7.3. However no details were submitted by assessee. 7.3. However no details were submitted by assessee. I have been therefore left with no other option but to treat it as non genuine claim therefore left with no other option but to treat it as non genuine claim therefore left with no other option but to treat it as non genuine claim made by assessee as no evidences are produce by assessee to made by assessee as no evidences are produce by assessee to made by assessee as no evidences are produce by assessee to substantial its claim. substantial its claim. Foreign exchange loss of Rs.36,15,649/ Foreign exchange loss of Rs.36,15,649/- claimed by assessee is claimed by assessee is therefore disallowed. therefore disallowed. (Disallowance Rs.36,15,649/ sallowance Rs.36,15,649/-) 8. Disallowance of other Expenses 8. Disallowance of other Expenses During the year sales of assessee reduced from Rs.5.64 crore to Rs.4.08 During the year sales of assessee reduced from Rs.5.64 crore to Rs.4.08 During the year sales of assessee reduced from Rs.5.64 crore to Rs.4.08 crore however other expenses increased from Rs.70.90 lacs to 89.11 lacs crore however other expenses increased from Rs.70.90 lacs to 89.11 lacs crore however other expenses increased from Rs.70.90 lacs to 89.11 lacs and employee's benefit expense increased from Rs.54 and employee's benefit expense increased from Rs.54.61 lacs to 96.55 .61 lacs to 96.55 lacs. No justification no bifurcation of expenses were given by assessee lacs. No justification no bifurcation of expenses were given by assessee lacs. No justification no bifurcation of expenses were given by assessee though details were called for from assessee again and again. though details were called for from assessee again and again. though details were called for from assessee again and again. 8.2. There is no justification for increase in expense particularly 8.2. There is no justification for increase in expense particularly 8.2. There is no justification for increase in expense particularly employee's benefit expenses from 54 employee's benefit expenses from 54.61 lacs to 96.55 lacs. . The assessee was asked to provide details of persons to whom salary was paid. The was asked to provide details of persons to whom salary was paid. The was asked to provide details of persons to whom salary was paid. The assessee submitted it through email dated 08.12.2018. However assessee submitted it through email dated 08.12.2018. However assessee submitted it through email dated 08.12.2018. However assessee was again asked to provide Form No. 16A and proof of salary assessee was again asked to provide Form No. 16A and proof of salary assessee was again asked to provide Form No. 16A and proof of salary payment to Shri Raj payment to Shri Rajesh Parab and Shri Sunil Mathew vide notice issued esh Parab and Shri Sunil Mathew vide notice issued u/s 142(1) on 09.12.2018. u/s 142(1) on 09.12.2018. However the same was not justified. However the same was not justified. 8.3. In absence of details I am left with no other option but to disallow 8.3. In absence of details I am left with no other option but to disallow 8.3. In absence of details I am left with no other option but to disallow 50% of 96.55 lacs claimed as employee 's benefit expenses as no 96.55 lacs claimed as employee 's benefit expenses as no 96.55 lacs claimed as employee 's benefit expenses as no details/bifurcation is submitted by assessee particularly when sales is ls/bifurcation is submitted by assessee particularly when sales is ls/bifurcation is submitted by assessee particularly when sales is reduced Rs.48.27 lacs is accordingly disallowed. 8.4 Since no reduced Rs.48.27 lacs is accordingly disallowed. 8.4 Since no reduced Rs.48.27 lacs is accordingly disallowed. 8.4 Since no quantitative details and purchase details are given Rs. 50,00,000/ quantitative details and purchase details are given Rs. 50,00,000/ quantitative details and purchase details are given Rs. 50,00,000/- is disallowed from purchase also. disallowed from purchase also.
1444/M/2023 10 M/s Villa Mode Exports (India) Pvt. Ltd. M/s Villa Mode Exports (India) Pvt. Ltd. (Disallowance Rs.98,27,000/-)” (Disallowance Rs.98,27,00 6.1 We find that before the Ld. CIT(A) We find that before the Ld. CIT(A), the assessee the assessee filed information in respect of additions but the Ld. CIT(A) has information in respect of additions but the Ld. CIT(A) has information in respect of additions but the Ld. CIT(A) has adjudicated the issues adjudicated the issues in perfunctory manner. In respect of addition In respect of addition of Rs.1,63,64,050/- , the ld CIT(A) adjudicated as under: , the ld CIT(A) adjudicated as under: , the ld CIT(A) adjudicated as under:
6.1.3 Adjudication and decision: I have gone through the submissions 6.1.3 Adjudication and decision: I have gone through the submissions 6.1.3 Adjudication and decision: I have gone through the submissions on either side. The A© attempted comparison of solitary import with on either side. The A© attempted comparison of solitary import with on either side. The A© attempted comparison of solitary import with reference to High Sea Sales invoice represented by 7 separate invoices reference to High Sea Sales invoice represented by 7 separate invoices reference to High Sea Sales invoice represented by 7 separate invoices in relation to 3 parties. The reasoning given on the basis of the mistaken in relation to 3 parties. The reasoning given on the basis of the mistaken stand of the AO does not justify the addition. Besides, the A attempted stand of the AO does not justify the addition. Besides, the A attempted stand of the AO does not justify the addition. Besides, the A attempted to classify the same as an unexplained credit even though the said to classify the same as an unexplained credit even though the said to classify the same as an unexplained credit even though the said revenue already forms part of the end result in the form of loss/profit. revenue already forms part of the end result in the form of loss/profit. revenue already forms part of the end result in the form of loss/profit. The said addition is therefore directed to be deleted. The said addition 6.2 On the issue of a On the issue of advance dvance from Jaikar from Jaikar H.K. Ltd. H.K. Ltd. of Rs.70,30,875/-, though the Ld. CIT(A) has reproduced the hough the Ld. CIT(A) has reproduced the hough the Ld. CIT(A) has reproduced the submission of the assessee and the order of the Assessing Officer submission of the assessee and the order of the Assessing Officer submission of the assessee and the order of the Assessing Officer however omitted to give any finding on thi however omitted to give any finding on this issue.
6.3 On the issue of d On the issue of disallowance of foreign exchange fluctuation isallowance of foreign exchange fluctuation loss, the Ld. CIT(A) did not refer to any submission of the assessee the Ld. CIT(A) did not refer to any submission of the assessee the Ld. CIT(A) did not refer to any submission of the assessee , but given the finding as under : given the finding as under :
“6.2.3 Adjudication and decision : 6.2.3 Adjudication and decision : I have considered the submissions of the appellant. The appellant is I have considered the submissions of the appellant. The appellant is seen to be having regular transactions with the said customers. The seen to be having regular transactions with the said customers. The seen to be having regular transactions with the said customers. The advance received during the year is credited to the account and the advance received during the year is credited to the account and the advance received during the year is credited to the account and the resultant increase in liability on account of exchange fluctuation has resultant increase in liability on account of exchange fluctuation has resultant increase in liability on account of exchange fluctuation has been recorded by way of credit to the account of the party. been recorded by way of credit to the account of the party. This is as per the requirement of the ICAI accounting standards. The restatement of the requirement of the ICAI accounting standards. The restatement of the requirement of the ICAI accounting standards. The restatement of liability at the end of the year is purely notional in nature. To this extent liability at the end of the year is purely notional in nature. To this extent liability at the end of the year is purely notional in nature. To this extent disallowance of Rs.36,15,149 is justified. The addition disallowance of Rs.36,15,149 is justified. The addition would be under the normal provision of the Act. the normal provision of the Act.
1444/M/2023 11 M/s Villa Mode Exports (India) Pvt. Ltd. M/s Villa Mode Exports (India) Pvt. Ltd. The appellant produced all the necessary documentary evidences The appellant produced all the necessary documentary evidences The appellant produced all the necessary documentary evidences towards foreign inward remittance through banking channel. Hence the towards foreign inward remittance through banking channel. Hence the towards foreign inward remittance through banking channel. Hence the balance addition of Rs.34,15,226 is directed to be deleted. balance addition of Rs.34,15,226 is directed to be deleted. balance addition of Rs.34,15,226 is directed to be deleted. This ground is therefore partly allowed. therefore partly allowed.” 6.4 Regarding the disallowance of 50% of the employees benefit Regarding the disallowance of 50% of the employees benefit Regarding the disallowance of 50% of the employees benefit the Ld. CIT(A) adjudicated the issue as under: the Ld. CIT(A) adjudicated the issue as under:
6.2.3 Adjudication and decision : 6.2.3 Adjudication and decision : The appellant provided the necessary documentary evidences towards The appellant provided the necessary documentary evidences towards The appellant provided the necessary documentary evidences towards the expenses towards employees salary and staff welfare expenses. the expenses towards employees salary and staff welfare expenses. the expenses towards employees salary and staff welfare expenses. The reason given for disallowance of expenses of Rs.48,27,000 does not The reason given for disallowance of expenses of Rs.48,27,000 does not The reason given for disallowance of expenses of Rs.48,27,000 does not justify the disallowance. justify the disallowance. Hence the AO is directed to delete the disallowance. This ground is Hence the AO is directed t o delete the disallowance. This ground is allowed.
6.5 Regarding the disallowance Regarding the disallowance of purchase on ad purchase on ad-hoc basis, the Ld. CIT(A) deleted the addition observing as under: Ld. CIT(A) deleted the addition observing as under:
“6.4.3 Adjudication and Decision: 6.4.3 Adjudication and Decision: The reason given for disallowance of purchases of Rs.5 The reason given for disallowance of purchases of Rs.50,00,000 does The reason given for disallowance of purchases of Rs.5 not justify the disallowance. The AO is directed to delete the not justify the disallowance. The AO is directed to delete the not justify the disallowance. The AO is directed to delete the disallowance. This ground is allowed.” disallowance. This ground is allowed. 6.6 In view of the above finding of the Ld. CIT(A) In view of the above finding of the Ld. CIT(A) In view of the above finding of the Ld. CIT(A), we are of the opinion that the order of the Ld. CIT(A) need to be set aside on two opinion that the order of the Ld. CIT(A) need to be set aside on two opinion that the order of the Ld. CIT(A) need to be set aside on two grounds. Firstly, the Ld. CIT(A) has considered the information or the Ld. CIT(A) has considered the information or the Ld. CIT(A) has considered the information or evidences filed by the assessee before him in violation of the Rule evidences filed by the assessee before him in violation of the Rule evidences filed by the assessee before him in violation of the Rule 46A of the Rules without providing any opportunity to the Assessing 46A of the Rules without providing any opportunity to the Assessing 46A of the Rules without providing any opportunity to the Assessing Officer for his comments. Secondly, the Ld. CIT(A) has not given Officer for his comments. A) has not given proper reasoning for deleting the additions. proper reasoning for deleting the additions. Accordingly Accordingly, we set aside the order of the Ld. CIT(A) and restore the matter back for aside the order of the Ld. CIT(A) and restore the matter back for aside the order of the Ld. CIT(A) and restore the matter back for deciding afresh after following due procedure of law. The ground No. deciding afresh after following due procedure of law. The ground No. deciding afresh after following due procedure of law. The ground No. 1444/M/2023 12 M/s Villa Mode Exports (India) Pvt. Ltd. M/s Villa Mode Exports (India) Pvt. Ltd. iv of the Revenue is allowed of the Revenue is allowed . Since we have restored the appeal e have restored the appeal back to ld CIT(A), the other he other grounds of the appeal are rendered grounds of the appeal are rendered academic and not required to be adjudicated on merit. academic and not required to be adjudicated on merit. academic and not required to be adjudicated on merit.
In the result, the appeal filed by the Revenue is allowed for In the result, the appeal filed by the Revenue is allowed for In the result, the appeal filed by the Revenue is allowed for statistical purposes.