PANCHAM JEWELLERS PRIVATE LIMITED,PATIALA vs. DCIT, CIRCLE, MANDI

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ITA 710/CHANDI/2022Status: DisposedITAT Chandigarh06 July 2026AY 2014-154 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal partly allowed the appeal by restricting the addition on bogus purchases to 10% and deleted the disallowance for cash payments. The disallowance for travelling expenses was upheld.

What were the facts?

The assessee's appeal concerned three additions: alleged bogus purchases, disallowance for cash payments exceeding Rs. 20,000, and disallowance of travelling expenses. The Assessing Officer and CIT(A) had confirmed these additions.

What were the issues?

Whether purchases from a suspect entity are entirely bogus, and whether cash payments and travelling expenses were valid business expenditures.

Which sections of the Income-tax Act were involved?

Section 40A(3),Section 37(1),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH

Before: HON’BLE SHRI LALIET KUMAR, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHANDIGARH HYBRID HEARING BEFORE HON’BLE SHRI LALIET KUMAR, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपीलसं./ ITA No.710/CHANDI/2022 (िनधा�रणवष� / Assessment Year: 2014-15) M/s Pancham Jewellers P. Limited DCIT Circle बनाम/ Vs. 22 SBS Colony, Rajpura Mandi Gobindgarh, HQ Sirhind, Patiala, Punjab – 140401 Railway Road, Punjab �ायीलेखासं./जीआइआरसं./PAN/GIR No. AADCP-5151-F (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Sh. Parikshit Aggarwal (CA) – Ld. AR ��थ�कीओरसे/Respondent by : Dr. Ranjit Kaur (Addl. CIT) - Ld. Sr. DR (Virtual) सुनवाईकीतारीख/Date of Hearing : 29-06-2026 घोषणाकीतारीख /Date of Pronouncement 06-07-2026 : आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year(AY) 2014-15 arises out of an order of learned Commissioner of Income Tax (Appeals)-5, Ludhiana [CIT(A)] dated 11.08.2022 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) of the Act on 18.11.2016. In this appeal, the assessee has assailed confirmation of three quantum additions for Rs.13,95,927/-, Rs.1,34,630/- & Rs.1,09,200/-. The Ld. AR advanced arguments on merits which has

been controverted by Ld. Sr. DR. Having heard rival submissions and upon perusal of case records, these issues are adjudicated as under. 2. Addition of alleged bogus purchases from M/s Nazar Impex Pvt. Ltd. The assessee made purchases of Rs.13,95,927/- from this entity. This entity, as per investigation proceedings, was found to be an entity which was involved in providing accommodationentries only. The Ld. AO proceeded to disallow the same. The assessee opposed the same on the ground that it made actual purchases against banking channels. The confirmation of account was also filed. It was stated that the goods purchased by the assessee were used in manufacturing activities. However, going by the investigation findings, Ld. AO disallowed these purchases. 3. Disallowance u/s 40A(3) for Rs.1,34,630/- As per Ld. AO, the assessee made cash payment for Rs.20,000/- or more to various parties as tabulated at para-5 of the order. Accordingly, the expenses were disallowed u/s 40A(3). 4. Disallowance of travelling expenses for Rs.1,09,200/- The assessee was stated to have incurred expenses for a customer meet which was disallowed y Ld. AO on the ground that there could not be customer meet with only 6 persons including the directors of the company. The same was not for business purposes and accordingly, disallowed u/s 37(1). 5. All the above three additions / disallowances stood confirmed by Ld. CIT(A) against which the assessee is in further appeal before us.

6.

So far as the purchases from M/s Nazar Impex Pvt. Ltd. is concerned, we find that the appeal of this entity for AY 2014-15 has been adjudicated by Surat bench of Tribunal vide ITA No.1365/Ahd/2017 dated 29.12.2021 wherein the bench has confirmed estimated commission income for this entity for local sales. The same would evidently further the case of Ld. AO and support the allegation of Ld. AO. However, at the same time, the assessee is in possession of relevant documents and the goods so purchased by the assessee form part of quantitative details. The assessee’s books are duly audited and the books have not been rejected. No dispute has been raised on sales turnover or on opening &closing stock. On these facts, the inevitable conclusion would be that the assessee procured actual goods from grey market whereas the supporting bills were accommodated from this entity. In the whole process, the assessee would be earning some margin which need to be brought to tax. Considering the facts of the case, we estimate addition of 10% on purchase of Rs.13,95,927/- to plug possible leakage of revenue. The Ld. AO is directed to restrict the addition to the extent of Rs.1,39,593/-. The corresponding grounds of appeal stand partly allowed. 7. So far as the disallowance u/s 40A(3) is concerned, the assessee has paid job work charges of Rs.25,000/- to Shri Manoj Soni. However, the payment is not in cash but it has been deposited directly in the bank account of the payee. Another payment for Rs.23,880/- represents payment to Airtel towards telephone charges. The remaining amount of Rs.63,750/- has been paid to M/s Gopal Sweets

Pvt. Ltd. for distribution of sweets to employees during festival. All the supporting documents have been placed on record. Therefore, the impugned payment of Rs.1,34,630/- is duly substantiated and well documented. The assessee has fully addressed the circumstances in which the payments have been made. Therefore, this disallowance stands deleted. The corresponding grounds stand allowed. 8. The disallowance or travelling expenses do not require any interference on our part. The corresponding grounds stand dismissed. No other ground has been urged in the appeal. 9. The appeal standspartly allowed. Order pronounced on 06th July, 2026

-Sd- -Sd- (LALIET KUMAR) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AS Dated: 06-07-2026 आदेश की �ितिलिप अ�ेिषत /Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

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