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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLE
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NOs. 4150 & 4162/MUM/2018 (A.Ys. 2013-14 & 2014-15) Income Tax Officer – 2(2)(2) v. M/s. More Marketing Pvt. Ltd., Room No. 542, 5th Floor 3rd Floor, Rustom Building Aayakar Bhavan, M.K. Road 29, Veer Nariman Road Mumbai - 400020 Fort, Mumbai – 400023 PAN: AACCM0991R (Appellant) (Respondent) Assessee by : Shri Shailesh Shah Department by : Shri Ram Krishna Kedia
Date of Hearing : 02.06.2022 Date of Pronouncement : 15.07.2022
O R D E R PER S. RIFAUR RAHMAN (AM)
These appeals are filed by the Revenue against different orders of Learned Commissioner of Income Tax (Appeals)-5, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 28.03.2018 for the A.Y. 2013-14 & 2014-15.
2 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., 2. Since the issues raised in both these appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in ITA.No. 4150/MUM/2018 for Assessment Year 2013-14 as a lead appeal.
Brief facts of the case are, assessee has filed its return of income on 29.09.2013 declaring total income of ₹.17,11,770/-. The same was processed u/s. 143(1) of Income-tax Act, 1961 (in short “Act”). subsequently case was selected for scrutiny under CASS and notice u/s.143(2) and 142(1) of the Act were issued and served on the assessee along with the questionnaire. In response AR of the assessee attended and submitted the information as called for.
Assessee is engaged in the business of importers/traders of rubber, bearing and steel hardware and also providing operations and maintenance services. During assessment proceedings, Assessing Officer observed that assessee has borrowed unsecured loans of ₹.3,89,04,334/-. Since assessee has not filed confirmations in some of the cases, the assessee was asked to submit the details of the parties i.e., name, address, confirmations, loan amount, interest rate etc.,. Assessing Officer issued notice u/s. 133(6) of the Act to the loan creditors calling for
3 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., confirmation with copy of ITR, bank statement etc., to the following parties: - Borrowed / Name of the party unsecured loans (₹.) a) Trident Mercantile 7,23,000 b) Sunil More 43,75,000 c) Chinmai More 66,75,000 d) Anil More 25,00,000 e) Nirmiti Construction 40,00,000 Total 1,83,73,000
Since none of the parties confirmed the transactions nor submitted any documentary evidences, therefore Assessing Officer disallowed the unsecured loans u/s. 68 of the Act.
Further, he observed that assessee has debited the interest expenses of ₹.34,99,885/-. No confirmations are filed in some of the cases and since none of the unsecured loan parties responded to the notices issued u/s. 133(6) of the Act he has disallowed interest paid to those parties as under: Name of the party Interest amount (₹.) a) Trident Mercantile 33,286 b) Sunil More 1,98,805 c) Chinmai More 6,28,656 d) Anil More 82,293 e) Nirmiti Construction (@15.60 6,24,000 approxm.) Total 15,67,040
4 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., 7. Further, during the assessment proceedings, Assessing Officer observed that assessee has purchases with the J.J. Enterprises, Phifer India Pvt. Ltd., and Jay Engg. Works to the extent of ₹.149.87 lakhs. In order to verify the same, Assessing Officer issued notices u/s.133(6) of the Act to all the parties to submit the details of purchases along with ITR, bank statement, invoices etc., since no response from these parties Assessing Officer proceeded to make the disallowance of total purchases recorded by the assessee.
Aggrieved assessee preferred an appeal before the Ld.CIT(A) and assessee has filed grounds of appeal with objection to the additions made by the Assessing Officer relating to unsecured loans, interest and bogus purchases. After considering the same, he has deleted the addition made by the Assessing Officer, aggrieved revenue is in appeal before us.
Revenue has raised following grounds in its appeal: - “1. "Whether on the facts and circumstance of the case and in law the Ld. CIT(A) deleting was right in the addition made by the Assessing Officer on account unexplained cash credit of ₹.1,82,73,000/- as borrowed unsecured loan without appreciating the fact that the assessee failed to prove the creditworthiness of loan creditors with support of authentic documentary evidence to establish genuineness of loan taken?" 2. "Whether on the facts and circumstance of the case and in law, the Ld. CIT(A) was right in deleting the disallowance made by the Assessing officer on account of interest expenses on borrowed
5 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., unsecured loan without appreciating the fact that the assessee failed to establish the genuineness of unsecured loans taken on which interest expenses has been claimed?" 3. "Whether on the facts and circumstance of the case and in law, the Ld. CIT(A) was right deleting the disallowance made by the Assessing Officer on account of bogus purchases from parties without appreciating the fact that the assessee failed to produce any evidence regarding the genuineness of purchase of goods such as delivery of goods/purchase orders/consumption details, stock register alongwith transportations details?"
We shall deal the above issues ground wise.
With regard to Ground No. 1 relating to deletion of unsecured loans by Ld.CIT(A), assessee has filed detailed submissions before the Ld.CIT(A) in which it is submitted that assessee has furnished all the details required by the Assessing Officer in relation to borrowing including confirmation of the parties whose loan amounts was considered as unsecured loans. It was submitted these loans include loans from shareholders of the company and also had opening balances. It was submitted that Assessing Officer has issued notice u/s. 133(6) of the Act and however, Assessing Officer did not give any show cause notice and information about non-compliance from these parties to the assessee. However, assessee has filed following additional evidences before the Ld.CIT(A). a. Copies of acknowledgement of ITR filed by the lenders. b. Bank statement highlighting loan received/repayment.
6 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., c. Bank statement of the assessee company. d. Bank statement of the lenders.
Ld.CIT(A) remitted the above information to the Assessing Officer and Assessing Officer submitted the remand report dated 10.10.2017 and the same was forwarded to the assessee for the compliance.
Assessee has filed its reply vide letter dated 25.01.2018, for the sake of clarity it is reproduced below: - “Reg. Ground of Appeal No. 182 Addition under section 68 of Rs. 1,82,73,000/ on account of loans taken and Disallowance of interest expense of Rs.9,43,040 a) The Ld. AO has stated that the Balance sheet and the Capital account of the said 5 parties are not submitted by the appellant. The bank statements of Anil More, Sunil More and Chinmai More are showing credits (deposits) from unknown sources just prior to the amount being advanced to assessee and further alleged that the said 3 parties are not giving amount to appellant company from their own source but they themselves are receiving amount from other sources prior to amount been given to the appellant company which is unexplainable. In this regard we have to state that the appellant company has submitted loan confirmations of the parties during the assessment proceedings and has submitted the following details as additional evidences vide letter dated 13.06.2017. i) The copy of acknowledgements of the return of income filed by the lenders, ii) Ledger account of the lenders in the books of appellant company, iii) Relevant extract of the bank statements of the appellant company highlighting the loan receipts/repayments from/to the lenders,
7 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., iv) Relevant extract of the bank statements of the lenders highlighting the loan given/received back to/from the appellant company. It is submitted that the PAN quoted and the acknowledgements of the returns filed by the lenders evidence their identity. As already submitted majority of these individuals are shareholders of the company. Further, the total income offered to tax in the return of income and their bank statements prove their creditworthiness to provide the loans to the appellant company and the bank statements of the appellant company highlighting the loans transactions between them during the captioned year evidences the genuineness of the transactions. Thus, it will be appreciated that the three main ingredients of section 68 i.c. identity of the lenders, genuineness of the transactions and creditworthiness of the lenders is proved and accordingly the nature and source of the loans is explained by the above mentioned documents. The source of the loans received by the appellant is already proved by the relevant extract of the bank statements and the above mentioned documents of the said lenders and there is no requirement for explaining the source of the source for the purpose of section 68 of the Act. Further, the comment in remand report that 3 parties are not giving the amount to appellant company from their own sources but they themselves are receiving amount from other sources, is totally baseless without any such material and without application of mind or further enquiry. b) As regards the comment in the remand report that the confirmation of M/s. Trident Mercantile Pvt Ltd is not stamped and in fact it is signed by Anil More, we have to state that the loan confirmation of M/s. Trident Mercantile Pvt Ltd was already submitted to the ld. AO during the assessment proceedings by the AR of the appellant vide its letter dated 28.03.2016. The said confirmation was duly stamped and signed. What is given in the additional evidence is the copy of ledger account of M/s. Trident Mercantile Pvt Ltd duly. confirmed by Mr. Anil More (Director of M/s. Trident Mercantile Pvt Ltd) which is submitted as additional evidence vide our letter dated 13.06.2017 which is erroneously considered by the ld. AO as a confirmation given by M/s. Trident Mercantile Pvt Ltd not stamped. Thus, it is submitted that the confirmation of M/s.Trident Mercantile Pvt Ltd duly stamped and signed is already available in the records of the ld. AO, which is not an additional evidence. c) The confirmation of Nirmitee Constructions Pvt Ltd for AY 2013-14 is not stamped and signed.
8 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., In this regard we have to state that the loan confirmation of M/s. Nirmitee Constructions Pvt Ltd was already submitted to the ld. AO during the assessment proceedings by the AR of the appellant vide its letter dated 28.03.2016. The said confirmation was duly stamped and signed. The, ledger account of M/s. Nirmitee Constructions Pvt Ltd in books of the appellant company was submitted as additional evidence vide our letter dated 13.06.2017 which is erroneously considered by the ld. AO as a confirmation given by M/s. Nirmitee Constructions Pvt Ltd, as not stamped and signed. Thus, it is submitted that the ld. AO has wrongly stated that the confirmation of M/s Nirmitee Constructions Pvt Ltd is not duly stamped and signed. d) The confirmation of Sunil More, Chinmay More and Anil More does not contain PAN. In this regard we have to state that the confirmation of the above mentioned 3 lenders were submitted to the ld. AO during the assessment proceedings itself by the AR of the appellant vide letter dated 28.03.2016 and it is not the part of the additional evidences. Further, in the Tax Audit report under the clause 24(a), i.e. details of Loans/Deposits accepted u/s 269SS of the Act; the name, PAN and the loan transactions of the said parties are mentioned. Thus, it will be appreciated that the PAN of the above mentioned parties was available with the ld. AO during the assessment proceedings. Thus, in light of the above it will be appreciated that the appellant has submitted sufficient evidences before your good self to prove that the loan transactions of the appellant with the said parties are genuine.”
Along with the above replies, assessee has given the date wise details of notices issued by the Assessing Officer asking for details of the replies/details submitted by the assessee during the assessment proceedings together with the copies of notices and covering letters of the replies made.
9 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., 15. After considering all those details Ld.CIT(A) deleted the additions made by the Assessing Officer with the following observations: - “On examining these Copies of the notices, it is seen that all the notices issued by the AO were replied to and details asked in the notices were furnished by the appellant. With regard to the loans taken during the year, it is seen that the AO had asked the details of interest paid vide notice dated 27.10.2015 and time was fixed for Compliance on 25.01.2016. In response to this, the appellant vide letter dated 28th January, 2016 (Paper book page 49), had submitted the said details of interest paid. There was no requirement of loan confirmations in the notices dated 04.09.2014 or 31.07.2015 or 27.10.2015. The AO in remand report has not mentioned as to on which date the loan confirmations or other evidences were asked from the appellant. Considering this, the additional evidences produced by the appellant have been admitted. As regards the merits of the documents submitted as additional evidences, the AO in remand report has stated that the bank statements of Mr. Anil More, Sunil More and Chinmai More are showing credits (deposits) from unknown sources prior to the amount being advanced and further stated that they are not giving the amount to appellant company from their own source. The appellant has submitted the copies of acknowledgements of the return of income filed by these 3 shareholders, relevant bank a/c statements of the appellant and corresponding bank statements of the lenders, the Ledger account, etc. It is submitted that the total income offered to tax in the return of income and their bank statements prove their creditworthiness to provide loans to appellant Company of which they are shareholders. It is further submitted that three main ingredients of Section 68 ie. identity of the lenders, creditworthiness of the lenders and genuineness of the transaction is evident from these documents. The source of loan received by appellant is clearly proved and section 68 cannot be invoked in respect of these transactions. As regards the comment of AO in the remand report that the Confirmation of M/s Trident Mercantile Pvt Ltd is not stamped, it is submitted that what is given as additional evidence is the copy of ledger account. The Confirmation duly signed and confirmed by Director of M/s Trident Mercantile Pvt ltd was already submitted during assessment proceedings vide letter dated 28.03.2016, which is already available in the records of the AO. Similarly, it was submitted that the ledger account of M/s Nirmitee Constructions Pvt ltd has been erroneously considered by AO as confirmation letter,
10 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., which was already submitted during assessment. proceedings. The partywise comments are made as under: 1. Loan form Trident Mercantile P. Ltd.: From the confirmation of the ledger account (Page 56 of paper book) it is seen that there was an opening balance of Rs. 10,687/- as on 01.04.2012. This opening balance of Rs. 10,687/- was repaid by cheque on 31.05.2012. The appellant Company had given loans on 10.05.2012 of and on 29.05.2012 of Rs.50,000/ the said party, This amount of Rs.3,00,000/- was received back on 13.06.2012. Thereafter, between 23.06.2012 and 07.11.2017, there are 7 credit entries i.e. receipt of loans. aggregating Rs.7,20,000/- which was repaid on 23.11.2012 together with net interest of Rs.29,957/- (Gross interest paid Rs.33,288/- less TDS of Rs.3,329/-).Thus, the balance as on 23.11.2012 was NIL and no further transactions took place thereafter. The maximum outstanding credit balance was Rs.7,20,000/- which was reported in Tax Audit Report (whereas Rs. 7,23,000/- has been added by the AO u/s.68 in the assessment order). All the receipts and payments are by cheque transfers as can be seen in the relevant bank statements of the appellant (Page Nos.112 to 120 of paper book) and the corresponding bank statements of Trident Mercantile Pvt. Ltd. (Page Nos. 122 to 133 of paper book). As per ITR V, acknowledgement of the return of income of Trident Mercantile P. Ltd., PAN: AAACT3330K for AY 2013-14 (Page 110 of the Paper book) it has declared total income of Rs. 11,23,040/- for AY 2013-14. The AO has not made any comment on these documents or genuineness of the transactions but has stated that the assessee did not submit the balance sheet and capital account of the lenders. The above details explain the credit and thus, in my opinion the same is in order and therefore the explanation of the assessee is accepted. 2. Loan from Sunil More : It is seen from the ledger account, confirmed by Mr. Sunil More (Page) 59 of paper book) that there are various transactions for loans taken, then partly repaid and again taken during the year. There are 14 credit entries (receipt transactions) and 7 debit entries (repayments). The closing balance as on 31.03.2013 was Rs.22,78,924/-. Thus, there was net addition of Rs. 22,78,924/- during the year. The maximum outstanding credit balance during the year was Rs.43,75,000/- which was reported in Tax Audit Report (which has been added by the AO u/s.68 of the Act). The appellant
11 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., has credited interest for the year of Rs. 1,78,924/- (Gross Rs. 1,98,805/-less TDS of Rs. 19,881/-) on 31.03.2013 to the account of Mr. Sunil More. All these transactions are by cheque transfers / RTGS as seen from the bank statements of the appellant (Page Nos.137 to 149 of paper book) and the corresponding entries in the bank statements of Sunil More (Page Nos. 150 to 156 of the Paper book). From the copy of acknowledgement of return of income filed by Sunil More for AY 2013-14, (page No. 134 of paper book) it is seen that he has declared gross total income of Rs.22,83,870/- and taxable total income of Rs.21,62,780/- for the year. The AO has in the remand report stated that the balance sheet and capital account of lenders are not submitted by the assessee. It has been submitted by the appellant that he, being an Individual and not having business income, is not required to and has not filed any balance sheet or capital account with the return of income. The above explanation is accepted on facts and therefore the addition u/s 68 is deleted. 2. Loan from Chinmai More : It is seen from the ledger account (Page No.57 of paper book) that there was an opening balance credit of Rs.34,22,064/- as on 01.04.2012 and there were 6 credit entries for receipt of loans and 3 debit entries for repayment of loans on different dates. The closing balance as on 31.01.2013 was Rs 32,40,790/-. Thus, there was net Repayment of Rs. 1,81,274/ out of the opening balance of loan. The maximum credit balance during the year was Rs. 66,75,000/- which was reported in Tax Audit Report (which has been added by the AO u/s 68). The appellant has credited interest for the year of Rs. 5,65,790/- (Gross Rs. 6,28,656/- less TDS of Rs.62,866/-) on 31.03.2013 to the account of Chinmai More. All the receipts and repayments of loans are by chrques as is seen from the bank statements of the appellant (Page Nos 159 to 164 of the paper book) and corresponding entries in the bank pass book of Chinmai More (Page Nos 165 to 169 of the paper book). From the Copy of the acknowledgement of return of income filed by her for AY 2013-14 (Page No. 157 of paper book), it is seen that the gross total income declared by her is Rs. 10,21,970/- and taxable total income is Rs.9,14,620/- for the said year. She also, as explained, being an Individual and not having business income, is not required to and has not filed balance sheet and capital account with return of income. The above explanation is accepted and therefore the addition u/s 68 is deleted.
12 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., 3. Loan from Anil More : From confirmation of the ledger account, it is seen that there was an opening credit balance as on 01.04.2012 of Rs. 4,06,628/-. There was a credit for receipt of loan on 10.12.2012 of Rs. 25,00,000/- and there were 4 debits for repayment on various dates upto 17.12.2012 aggregating Rs. 29,06,628/-. Thus as on 17.12.2012, the balance in the account was NIL. Thereafter, again from 07.01.2013 to 27.02.2013, there were 4 credit for receipt of loan aggregating Rs. 13,25,000/-. Further, there is a credit on 31.03.2013 for interest for the year of Rs.74,064/- (Gross Rs.82,293/- less TDS Rs.8,229/-). And the closing balance as on 31.03.2013 was Rs. 13,99,064/-. The difference between opening and closing balances, i.e. net addition during the year amounted Rs.9,92,436/- only. The maximum outstanding balance during the year was Rs.25,00,000/- which was reported in Tax Audit Report (which has been added by the AO u/s.68. of the Act). All the receipts and repayments are by cheques / RTGS as can be seen from the relevant bank statements of appellant company (Page Nos.172 to 179 of the paper book) and corresponding bank statements of Anil kumar More (Page Nos. 180 to 188 of paper book). From the copy of acknowledgement of return of income filed by Anil More for AY 2013-14 (Page No. 170 of paper book), it is seen that the gross total income declared by him is Rs. 10,98,102/- and the taxable income of Rs.9,73,100/- for the said year. He also being an individual, not having business income, is not required to and has not filed balance sheet and capital account with his return of income. The above explanation is accepted on facts and therefore the addition u/s 68 is deleted. 5 Loan from M/s Nirmitee Constructions and Designs Pvt ltd: It is seen from the ledger account of the said party that there is an opening balance of Rs. 40,00,000/- as on 01.04.2012 and the same amount is closing balance as on 31.03.2013. Thus, there is no new loan received or credit during the year. The maximum outstanding balance during the year is thus Rs.40,00,000/- which has been reported in the Tax Audit Report, (which has been added by the AO u/s 68 even though no new loan hast been received during the year). From the copy of the acknowledgement of return of income - ITRV for AY 2013-14 (Page No. 190 of the paper book) it is seen that the said party has declared total income of Rs. 19,51,518/- for the said year.
13 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., The appellant has stated that the loans from all these parties in AY 2012-13 have been held genuine and no addition was made in the scrutiny assessment order u/s 143(3) of the Act dated 23.03.2015 passed by the same AO. (page nos. 52 to 54 of the paper book). In the remand report also the AO has not commented or raised doubt on the genuineness of these documents. As the outstanding balances are added which is not proper, therefore the same is deleted. Thus, it is noticed that there are several mistakes in considering the amounts of loans taken by appellant and actually added by the AO in the assessment order, which have been pointed out by the appellant in its submissions. In case of M/s Trident Mercantile Pvt ltd, Sunil More, Chinmai More and Anil More the amounts added by the AO are not the amounts borrowed during the year. In case of Nirmitee construction, there is no transaction during the year, there is opening balance of Rs. 40,00,000/ which is carried forward as closing balance as on year end i.e. 31st March, 2013. It appears that the AO has simply picked up the figures shown in the column of maximum amount outstanding during the year as shown in the Tax Audit Report treating it as the amount received during the year. The appellant has also placed reliance on various decisions including CIT V M/s. Usha Stud and Agricultural Farms ltd. 301 ITR 384 (Del.) to the effect that if there is no fresh credit entry during the year, no addition can be made u/s 68 of the Act. The AO has made additions on the ground that notices u/s. 133(6) were not replied by the lenders and the suppliers. The AR has relied on the judgment of Hon'ble Supreme Court in the case of CIT v. Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC) has held that if the AO has issued summons or notices u/s. 133(6), it is his duty to bring the process to a logical conclusion and non-response by such person cannot be held against the assessee. The judgments are applicable to the present case. In the present case the appellant has obtained from these parties the supporting evidences and submitted as additional evidences to prove that genuineness of the transactions. Considering the above facts and the submissions, the addition of Rs.1,82,73,000/- made by the AO on account of loans u/s 68 of the Act is not warranted and therefore the same is deleted and this ground of appeal is allowed.”
Aggrieved Revenue is in appeal before us and at the time of hearing Ld. DR submitted that assessee has taken loan from three individuals and
14 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., two entities to the extent of ₹.1.82 crores. He submitted that assessee has not submitted creditworthiness of these parties. Even in remand report the Assessing Officer has highlighted the insufficiency of the funds and Assessing Officer has brought to the notice of the Ld.CIT(A) the issue of creditworthiness of those parties and these parties has not filed any financial statement, Ld. DR objected to the deletion of the additions by the Ld.CIT(A).
On the other hand, Ld. AR submitted that all these unsecured loans are nothing but temporary loans taken from Directors and Shareholders and all these loans are taken through banking channels, Assessing Officer has added outstanding balances. Further, he brought to our notice in A.Y. 2012-13 which was assessed u/s. 143(3) of the Act in that assessment year similar loans were outstanding no addition was made u/s. 68 of the Act. He brought to our notice that the same loans were outstanding to the extent of ₹.3,17,82,778/- as unsecured loan from Shareholders, Directors and Corporate Bodies.
Considered the rival submissions and material placed on record, we observe that assessee has taken unsecured loans from Directors / Shareholders and also from sister concerns. All these loans were taken
15 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., only through banking channels and Ld.DR argued that assessee has not proved the creditworthiness of these parties. It is fact on record the parties Sunil More, Chinmai More and Anil More, are Shareholders cum Directors of the company and all these people have filed their return of income and declared gross total income of ₹.22,83,870/-, ₹.10,21,970/- and ₹.10,98,102/- respectively. We observe that Ld.CIT(A) has deleted the addition with the observation that all these transactions are only routed through banking and Assessing Officer has observed in remand report that these people have not filed balance sheet and capital account. However, he observed that these parties are individuals and not having any business income, therefore, there is no need to file any financial statements. By accepting the same he has deleted the additions. After considering the reasons for deletion, we are in agreement that since these are related parties and they are not required to file any financial statements. However, they have filed ITR and bank statement to prove the genuinety and for creditworthiness. It is argued by Ld. DR that there is no sufficient earning declared by them. In our view, to prove creditworthiness, it is enough to show that they have resources to pay loan and not necessary that it should only earned by the parties. If they can demonstrate that they have source and means to arrange funds and
16 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., obviously through genuine source. We do not find any reason to disturb the findings of the Ld.CIT(A).
With regard to loan from M/s. Trident Mercantile Pvt. Ltd., the Assessing Officer has made the addition based on the report in Tax Audit Report that maximum outstanding credit was ₹.7,20,000/-. However, Ld.CIT(A) observed that all these payments were received from banking channels and they have also filed corresponding bank statement along with ITR-V filed by them in which they have declared the income of ₹.11,23,040/- for this assessment year since Assessing Officer has not made any doubt of these documents in remand report the Ld.CIT(A) found it to be proper and accordingly, he deleted the same. We are inclined to accept the same and we do not find any reason to disturb the same finding of the Ld.CIT(A).
With regard to loan from M/s. Nirmitee Constructions and Designs Pvt. Ltd., Ld.CIT(A) observed that the opening balance outstanding is ₹.40,00,000/- as on 01.04.2012 and the same was continued as closing balance. There is no new loan taken by the assessee during this year, accordingly, Ld.CIT(A) deleted the same. Since the opening balance and no new loan received by the assessee, we do not find any reason to
17 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., interfere with the finding of the Ld.CIT(A). Accordingly, the ground raised by the revenue in this regard is dismissed.
With regard to disallowance of interest expenses the Assessing Officer has disallowed the same considering the fact that he has disallowed the unsecured loans received by the assessee. Aggrieved assessee has filed detailed submissions before the Ld.CIT(A) in the appeal, for the sake of clarity, it is reproduced below: - "Ground of Appeal No. 2. Disallowance of interest expense of Rs. 9,43,040/-. 2.1 The appellant company has paid interest of Rs. 33,286/-, Rs. 1,98,805/-, Rs. 6,28,656/- and Rs.82,293/- to Trident Mercantile P. Ltd, Sunil More, Chinmai More and Anil More, respectively, after deducting the tax under section 194A of the Act during the relevant financial year in respect of loans taken from them. No interest was paid to Nirmitee Constructions & Design Pvt. Ltd. 2.2 During the assessment proceedings, the Ld. A.O. asked the appellant company to furnish the details of interest paid i.e. name, address, confirmations, rate of interest paid & interest amount. The AR of the appellant company vide his letter dated 28.01.2016 furnished the details of interest paid and TDS deducted before the Ld. A.O. The confirmation letters of all these parties were also filed vide letter dated 28.03.2016. The Ld. A.O. has wrongly mentioned in the assessment order that no confirmations are filed in some of the cases. 2.3 As mentioned in para 1.2 hereinabove, the Ld. A.O. has made additions of the loans u/s.68 and also has disallowed the interest paid to the said parties, on the reasoning that they did not comply with the notices issued u/s 133(6) of the Act. Hence, the said addition of interest expense is consequential to the above addition of unsecured loans u/s 68. 2.4 Further the Ld. A.O. has wrongly added the interest expense of Rs. 6,24,000/- on adhoc basis (ie. aprrox. 15.60% on Rs.
18 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., 40,00,000/- being o/s loan from Nirmitee constructions & Design Pvt. Ltd.) even though no interest has been paid to the said party or claimed by the appellant which is evident from the ledger account confirmation of Nirmitee constructions & Design Pvt. Ltd. The Ld. A.O. cannot add a particular amount which is neither debited in the profit and loss account nor claimed as deduction by the appellant company. 2.5 In view of the above, it is submitted that the disallowance of interest is without considering the documents available on records and without giving any show cause notice to the appellant of the intention to disallow the same. It is therefore requested that the said addition of Rs. 15,67,040/- be deleted. 2.6 As no further details were asked from the appellant or no show cause notice was given for his intention to disallow the claim of interest, no opportunity was given by the learned A.O. during assessment proceedings. We submit the copy of TDS certificates issued by the appellant to the lenders for the captioned assessment year as additional evidence at Sr. No.2(a) of the paper book (Index- II). In view of the above the appellant prays that the disallowance of interest of Rs.9,43,040/- made by the learned A.O. be deleted."
After considering the submissions of the assessee, Ld.CIT(A) deleted the same since he has already allowed the unsecured loans received by the assessee as genuine.
Aggrieved revenue is in appeal and before us, Ld. DR objected to the deletion of interest payment and Ld. AR relied on the findings of the Ld.CIT(A).
Considered the rival submissions and material placed on record, we observe that Assessing Officer has made the addition of unsecured loans
19 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., based on his finding that assessee has not filed any document in support of the above unsecured loans. However, we observe that Ld.CIT(A) has deleted additions with the finding that assessee has filed all the relevant information and gave the finding that loans are from the Shareholders / Directors and related concerns. Therefore, the relevant interest payment on the above said loans are considered to be genuine as well. Therefore, we do not find any reason to interfere with the findings of the Ld.CIT(A).
With regard to disallowance of purchases made by the assessee of ₹.149.87 Lacs which was treated by the Assessing Officer as bogus purchases after verifying the same. Assessing Officer in order to verify the genuineness of the purchases issued notice u/s. 133(6) of the Act to those parties and since none has submitted any documents, he disallowed the same. On the other hand, assessee preferred an appeal before the Ld.CIT(A) and before the Ld.CIT(A) assessee has filed detailed submissions along with additional evidences, as under: - "Ground of Appeal No.3- Disallowance of purchases of Rs. 1,49,87,000/- by treating it as bogus purchases. 3.1 Appellant has during the year purchased material and paid labour charges amounting to Rs. 3,12,32,263. The Ld. AO had during the assessment proceedings asked for details of purchases made during the year. The AR of the appellant vide letter dated 08.02.2016 submitted the details of purchases, including labour charges, for the F.Y. 2012-13 alongwith the names and addresses of the parties. Ledger account of labour charges was also submitted to the Ld. AO.
20 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., The Ld. AO has apparently, as mentioned in the assessment order, issued notices u/s 133(6) of the Act to all the parties from whom purchases were made and labour charges were paid. According to the Ld. A.O. no compliance was received from 3 parties till the date of his passing the order as under: Sr. No. Name of the Party Amount of purchase / labour charges(Rs.) a) J. J. Enterprises 43.86 lakhs b) Phifer India P. Ltd. 66.15 lakhs c) Jay Engg. Works 39.86 lakhs Total 149.87 lakhs The ld. A.O. treated the entire amount of purchases and labour charges of above three parties as non genuine purchases and added to the total income, without asking the appellant any further details or without giving any show cause notice of his intention to make such additions. 3.2 It is submitted that the ld. AO neither informed the appellant regarding the issuance of notice u/s 133(6) nor intimated regarding non receipt of response from said parties. He did not give any opportunity to the appellant to represent his case by issuing show cause notice for his intention to make such huge addition to total income. These parties are regular suppliers/service providers of the appellant company in earlier and subsequent years also. All the invoices issued by these parties are available. All the payments have been made by It is submitted that the appellant is inter alia, the distributor of Phifer in Western region of India and it sells the fabrics purchased from Phifer. In the above table, the sales of Fabrics amounting to Rs. 2,05,57,914 includes sales made by the appellant of the fabrics purchased from Phifer. Further the appellant also receives commission income from Phifer if the orders are executed by the company directly in the western region. In the FY 2012-13 appellant had received such commission income of Rs. 1,78,747 and the same is reflected in the profit/loss account. The appellant has sent letter dated 17.06.2016 to Phifer India Put. ltd., Chennai to confirm whether they have received any notice u/s. 133(6) form the office of the Ld.AO 2(2)(3), Mumbai to confirm the transactions between them and the appellant company for the F.Y. 2012-13 and if yes to provide a copy of the replies filed(if any) by them in response to said notices. The said letter is enclosed as additional evidence at Sr. No. 3(a)(i) of the paper book.
21 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., In response to the same, Phifer replied to the appellant that they received a notice 133(6) of the Act issued by the Income Tax Officer- 2(2)(3), Mumbai and in response the same they had submitted reply to the Ld. AO together with a copy of ledger extract of the appellant in their books for the F.Y. 2012-13 alongwith the copies of the sample invoices. The copy of the said reply filed by Phifer to the Ld. AO alongwith the supporting documents as received by the appellant in reply to their request are enclosed as additional evidences at Sr. No. 3(a)(ii) of the paper book (Index-II). Hence the Ld. AO's contention that these parties have not confirmed or responded to the notices issued by him u/s 133(6) is wrong. We also enclose the sample copies of sales invoices at Sr. No.3(a)(u) of the paper book (Index-II) reflecting sales of fabrics purchased from Phifer, the copies of bank statement showing payments made to Phifer at Sr. No. 3(a)(iv) of the Paper book (Index-II). Sample copies of credit notes for commission earned by the appellant on sales directly executed by Phifer in the western region are enclosed as Additional evidence at Sr. No. 3(a)(v) of the paper book (Index- II). It will be appreciated that no sales (which has not been doubted by the Ld. AO) could have been, made by the appellant without the corresponding purchases made from Phifer and hence the said purchases from Phifer cannot be treated as bogus purchase. On perusal of the ledger account of the appellant in the books of Phifer, sample invoices issued/sent by Phifer and relevant extract of the bank statements of the appellant company highlighting the payments made to Phifer it is evident that purchases made by the appellant from Phifer is genuine. Thus, in view of the above facts, the addition made in respect of purchases from Phifer amounting to Rs. 66.15 lakhs by treating it as bogus for the reason that the said party has not responded to the notices issued by him u/s 133(6) is baseless, wrong, devoid of merits and therefore needs to be deleted. Further, the appellant company provides labour manpower to Airport Authority of India to carry out repairs and maintenance at various airport sites Further the appellant also provides the manpower to various parties namely M/s. Godrej Eface Automation Robotics P. Ltd, M/s. vanderland Industries Put. Ltd., M/s. Glidepath Ltd., etc. to carry out repairs and maintenance services at various sites. For the said business activity appellant procures labour services from Jay Engineering works (Rs. 39,86,000 during the year) and J.J. Enterprises (Rs. 43,86,000 during the year) and provided the same to the various parties mentioned above as required by them at particular sites. During the year appellant company has earned labour charges income amounting to Rs. 2,12,50,599 for providing the said manpower to carry out repairs and maintenance at various sites and as per the above table the same is reported as Revenue
22 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., from operations/Sales in the profit/loss account of the year. The said sales is not doubted by the Ld. AO. Further we enclose herewith sample invoices of labour (purchase) by the appellant from both the above mentioned parties (enclosed as additional evidence at Sr. No. 3(b)(ii) of the paper book (index-II)) and the sales invoices raised by the appellant for the manpower provided to the various parties(enclosed as additional evidence at Sr. no. 3(b)(iv) of the paper book findex-II). On perusal of the said invoices, it will be appreciated that bills were raised by the parties as per the labour provided for particular sites. Further the appellant raised the sales invoices as per the manpower provided at different airports/sites. Thus, the appellant procured the labour from the two parties ie. Jay Engineering Works and J.J. Enterprises and provided the same to the vendors as and when required. In view of the above it will be appreciated that no labour services could have been provided by the appellant to the customers without procuring the labour services from Jay Engineering Works and J.J. Enterprises and hence the said purchase/ labour charges cannot be treated as bogus. No adverse material has been brought on record by the Ld. AO to treat these purchases and labour charges as bogus other than the statement that these parties did not reply to his notices under section 133(6) of the Act. 3.7 Appellant had submitted during the assessment proceedings whatever details asked by the AO in connection with said purchases and labour charges. AO did not ask for any further details. If he had asked for said details, appellant could have provided the same as said details were readily available with the appellant. Further, appellant could have asked or followed up with the said parties to send response to the notice u/s 133(6). AO passed the order without giving any opportunity to the appellant or issuing show cause notice of his intention to make additions and without considering the details and submissions made by the appellant. 3.8 We enclose herewith the ledger accounts of these two parties duly confirmed by them as additional evidence at Sr. No. 3(b)(i) of the paper book (Index-II). Further relevant extracts of the bank statements of the appellant highlighting the payments made to J.J. Enterprises and Jay Engineering Works for labour services provided by them, sample copies of invoices issued to the appellant by the parties and the copies of TDS certificates issued by the appellant company to both the parties for the captioned assessment year are enclosed as additional evidence at Sr. No. 3(b)(ii) to 3(b)(v) of the paper book (index- II). On perusal of the ledger confirmations provided by the parties, relevant bank statements and the inovices it is evident that the labour services purchased by the appellant are
23 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., genuine. Hence, it cannot be held that the said labour purchases are bogus purchases. 3.9 Otherwise also, if the Ld AO had doubt about the genuineness of the purchase transactions then the onus was on him to disprove the genuineness of the transactions. It is submitted that the name and address of the parties were available on record of the Ld. AO and he could have further examine whether the said purchases were genuine. However, the Ld AO apart from issuing notices under section 133(6) did not pursue the matter further which is wrong and bad in law. In this regard attention is invited to the decision in the case of Commissioner of Income Tax v. Orissa Corp. Pvt. Ltd. [1986] 25 TAXMAN 80F (SC), wherein it was held that, "In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the fde of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. The High Court was, therefore, right in refusing to refer the questions sought for." 3.10 In view of the above facts and the evidences, the appellant company prays that the addition of purchases including labour charges of Rs. 1,49,87,000/- by treating it as bogus purchases be deleted."
After considering the detailed submissions and additional evidences Ld.CIT(A) remitted the same to the Assessing Officer and Assessing Officer has submitted the remand report dated 10.10.2012 and in reply assessee has submitted as under: - “Reg. Ground of Appeal No. 3 - Disallowance of purchases/labour charges paid of Rs. 1,49,87,000/
24 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., The Ld. AO in the remand report made various comments such as: a) That the appellant company did not submit the invoices during the assessment proceedings. - In this regard we have to state that ld. AO vide his notice dated 27.10.2015 issued u/s 142(1) of the Act called for the details of purchase and sales during the year and fixing the date of hearing on 25.01.2016. In response to the same, AR of the appellant company on 28.01.2016 submitted the basic details of purchases. Further, the AR of the appellant company vide letter dated 08.02.2016 submitted the partywise details of purchases including labour charges, alongwith addresses of the parties for the F.Y. 2012-13. It is submitted that thereafter the ld. AO never asked for any other requirements with regards to the purchases made from the said parties during the assessment proceedings. If the ld. AO would have asked for the purchase invoices of the said purchase parties during the assessment proceedings, the same would have been submitted by the appellant company. Further we have to state that the appellant was under bona fide belief that Ld. AO was satisfied with the details already submitted by the appellant otherwise AO would have asked for the further details. It is submitted that the said parties are the regular suppliers to the appellant and there were no additions made in preceding or subsequent years with regards to purchases made form the said parties. Thus, in absence of any specific/further requirement by the ld. AO for the invoices from the said purchase parties, it is wrongly alleged by ld. AO that the invoices were not submitted during the assessment. b) Neither PAN is evident on the confirmation of Jay Engineering works and J.J. Enterprise nor ITR and profit and loss account of said parties for AY 2013-14 is evident. Assessee is contending to allow of purchases merely on payment entries without establishing the genuinety and existence of purchase parties. In this regard we have to state that the appellant company vide its letter dated 13.06.2017, submitted the following details as additional evidence: (i) Ledger account of both the parties duly confirmed for the FY 2012-13,
25 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., (ii) Sample of purchase invoices issued by both the parties in respect of labour services provided by them during the FY 2012-13, (iii) Sales invoices in respect of labour services provided by the appellant company corresponding to the said purchases, (iv) Copy of relevant bank statements of the appellant highlighting the payment made to the said parties. (v) TDS certificates issued by the appellant company to the parties for the AY 2013-14. It is submitted that the PAN of both the parties are mentioned on the copies of their invoices submitted to your goodself as additional evidence. Further, it submitted that tax can be deducted at source only when the party has a PAN. The appellant has deducted TDS from the payment to labour. charges to both M/s. Jay Engg. Works and J.J. Enterprises. Thus, it will be appreciated that the said parties are genuine and were in existence. On perusal of the ledger confirmations provided by the parties, relevant bank statements and the invoices it is evident that the labour services purchased by the appellant are genuine. Hence, it cannot be held that the said labour purchases are bogus purchases. It is never alleged in the assessment order that these parties are found to be bogus by anybody. Further, it will be appreciated that no services at airports could have been provided by the appellant to the customers without procuring the labour services from Jay Engineering Works and J.J. Enterprises and hence the said purchase/ labour charges cannot be treated as bogus. This is not the case that parties are not available or they are not ready to confirm their supplies. It is submitted that the confirmation on the ledger account by them submitted as additional evidences would not have been available if the parties were bogus. Further, the appellant has deducted TDS from the payments made to them and the copies of Form 16A have also been submitted as additional evidences. c) That the appellant company has not furnished any proof of delivery in form of transportation invoices to show the movement of goods from purchase parties to the appellant company. That the assessee has to establish the link leading to purchases right form placing order with the suppliers till the receipt of good to it location which will appear in its stock register and after the sale of the same / consumption of the same shall stand reduced.
26 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., The above comments of the AO in remand report is totally misplaced and without any context. It was never the requirement of the AO to give any such evidence by the Assessee which assessee could not produce. In this regard we have to state as under: 1) Reg.: Jay engineering works and JJ Enterprises: The appellant company provides labour manpower to Airport Authority of India to carry out repairs and maintenance at various airport sites. Further the appellant also provides the manpower to various parties namely M/s. Godrej Eface Automation Robotics P. Ltd, M/s. vanderlande Industries Pvt. Ltd., M/s. Glidepath Ltd., etc. to carry out repairs and maintenance services at various sites. For the said business activity appellant procures labour services from Jay Engineering works and J.J. Enterprises and provides the same to the various parties mentioned above as required by them at particular sites. Thus in view of the above, it will be appreciated that the nature of business of the appellant is to provide labour manpower services to carry out repairs and maintenance at various sites by procuring the labour services from the said 2 parties and hence the question of delivery proof of transportation to show the movement of goods does not arise. Further, it is submitted that during the relevant assessment year, the appellant company has earned labour charges income amounting to Rs.2,12,50,599/- for providing the said manpower to carry out repairs and maintenance at various sites. The same is reported as Revenue from operations/Sales in the profit/loss account of the year. The said sales is not doubted by the ld. AO. Also, on perusal of the additional evidences submitted to your goodself as described briefly in point 2.2(b) above, it will be appreciated that bills were raised by the parties as per the labour provided for particular sites. Further the appellant raised the sales invoices as per the manpower provided at different airports/sites. Thus it will be appreciated that the purchases of labour from the said 2 parties and its corresponding sales are already linked which is evident from the profit and loss account itself. In view of the above it will be appreciated that no labour services could have been provided by the appellant to the customers without procuring the labour services from Jay Engineering Works and J.J.
27 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., Enterprises who have duly confirmed and hence the said purchase/ labour charges cannot be treated as bogus. II) Reg.: Phifer India P Ltd: M/s Phifer Ltd. is a 100% subsidiary of US based multinational company. During the financial year the appellant company had made purchases of Rs. 66,15,000/- from Phifer India P. Ltd. The id AO has treated this party also as non genuine party by alleging that the said party has not replied the notice issued u/s 133(6) of the Act. However, as explained in point 1.6 above, Phifer India P. Ltd had already replied to the notice issued u/s 133(6) of the Act and hence the basis of making the addition of purchase made form Phifer India P Ltd by treating it as non-genuine for the reason of non-compliance to notice issued u/s 133(6) of the Act, does not survive. Further, we have also submitted the following additional evidences to prove the genuineness of the purchase transactions: (i) Letter written by Phifer India P. Ltd to the AO in response to notice u/s. 133(6) alongwith sample invoices provided by them to the appellant. (ii) Ledger account of M/s. Phifer India Pvt. Ltd in the books of appellant company for the F.Y. 2012-13, (iii) Relevant extract of the bank statements of the appellant company highlighting the payments made to Phifer India Pvt. Ltd. for the purchases made by the appellant company from them during the financial year 2012-13, (iv) Sample copies of sales invoices raised by the appellant company in respect of sales made of fabrics of Phifer India P. Ltd and credit notes for commission issued by Phifer India P. Ltd to appellant company. It will be appreciated that no sales(which has not been doubted by the ld. AO) could have been made by the appellant without the corresponding purchases made from Phifer and hence the said purchases from Phifer cannot be treated as bogus purchase. On perusal of the ledger account of the appellant in the books of Phifer, sample invoices issued/sent by Phifer, sample copies of credit notes for commission earned by the appellant on sales directly executed by Phifer in the western region and relevant extract of the bank statements of the appellant company highlighting the payments
28 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., made to Phifer it is evident that purchases made by the appellant from Phifer is genuine. The ld. AO has made additions merely on the reasoning that notices u/s. 133(6) were not replied by the lenders. Reliance is placed on Hon'ble Supreme Court's judgement in the case of CIT V. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC) for the proposition that if the AO has issued summons or notices u/s. 133(6) it is his duty to bring the process to a logical conclusion and non-response by such person cannot be held against the assessee. The judgement is squarely applicable to the case of this assessee. Conservently the assessee has again produced the supporting evidences. Reliance is also placed on the decision in the case of Continental Carbon India Ltd. V.ITO (Delhi Tribunal (ITA No. 5269, 5270 & 5271/Del/2010). It is submitted that the additional evidences provided to your goodself is evident enough to prove the genuineness of transactions and the details of linking of purchases right from placing the order from the supplier, receipt of goods to its location, appearance of the same in the stock register and reduction of the same in the stock register after its sale, as pointed by the ld. AO in its remand report, will only be the additional documentary evidence which will corroborate the facts on record. Thus in light of the above facts, the ld. AO has wrongly contended that the appellant has not provided sufficient evidence to prove the genuineness of the purchases made by the appellant from Phifer India P Ltd. In view of the above, we request your goodself to kindly admit the additional evidences filed by the appellant and consider them and provide appropriate relief to the appellant.”
After considering the remand report and submissions of the assessee Ld.CIT(A) decided the issue in favour of the assessee by observing that Assessing Officer has made the addition as non-genuine purchases on the sole ground that in response to notice u/s. 133(6) of the Act he has not received any replies from all the three parties. When the Assessing Officer was asked the party wise details of purchases made during the year assessee vide letter dated 08.02.2016 submitted the
29 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., details of purchases and labour charges, giving names and addresses of each parties. Accordingly, Assessing Officer issued notices u/s. 133(6) of the Act to all the three parties since he has not received any response from these parties Assessing Officer treated the same as non-genuine. However, assessee has claimed that these parties are regular supplier’s/service providers of the assessee company in earlier and also in subsequent years. All the purchases are supported with invoices and payments are made by account payee cheques /RTGS only. No such disallowance was ever made in any of the earlier years or subsequent years. The Ld.CIT(A) Further, observed as under: - “M/s Phifer India Pvt ltd, based in chennai is a 100% subsidiary of US based multinational company and is a regular supplier of material to the appellant who acts as its distributor in western region of India. M/s Jay Engg. Works and J.J. Enterprises have provided labour personnel for the maintainence contracts undertaken at the Airport etc. by the appellant and have charged Service Tax in their bills. The appellant has duly deducted TDS from the labour charges paid. With regard to the addition, the AO in his remand report stated that notices sent to M/s. J. J. Enterprises and M/s. Jay Engg. Works were returned back whereas the Notice sent to M/s. Phifer India Pvt. Ltd. remained unreplied. AO in remand report has stated that till the conclusion of proceedings, the assessee did not submit any evidence. The Appellant has stated that the AO had vide notice dated 27.10.2015 only asked the appellant to submit the details of purchases and sales which were duly submitted on 28.01.2016. Further, the appellant vide letter dated 08.02.2016 submitted party wise details of purchases including labour charges alongwith addresses of all the parties. Thereafter, the A.O. has never asked for any other requirements with regard to purchases made during the year, thus, in the absence of any further requirements, the AO has wrongly alleged that the assessee did not submit any evidence.
30 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., The AO in the remand report has stated that neither PAN is evident on the confirmation of Jay Engineering Works and J. J. Enterprises nor ITR and Profit and Loss Account is evident and that the assessee is contending to allow purchases merely on payment entries without establishing the genuineity and existence of purchases. In the appellant's rejoinder to the remand report, it has submitted that PAN of both the parties are mentioned on the invoices as well as in TDS certificates which have been submitted as additional evidences. Further, it is submitted that tax has been deducted at source from the payment of labour charges to both the parties and copies of TDS Certificates have been submitted. I have examined the evidences submitted being confirmation on the ledger accounts, relevant bank statements, the invoices and the TDS Certificates. Further, it is submitted that it was never alleged in the assessment order that these parties are found to be bogus by any authority or anybody else. Further, as explained by the appellant, it could not have provided maintenance services at air ports and services to other customers without procuring the labour services from these two parties. The appellant states that the parties continue to be at the given address even now. Their confirmations have been obtained and provided by the appellant as additional evidences. It is seen that the appellant has earned income from labour charges of Rs.2,12,50,599/- during the year which is reported as Revenue from operations/sales in the profit and loss account. This revenue is not doubted by the AO. On examination of the bills, it is seen that the bills raised by these parties are for particular sites and the appellant has raised invoices as per the man power and maintenance services provided at different sites. Thus, the purchase of labour from these two parties and its corresponding sales/revenue are linked. Thus, the above evidence proves that the expenses are genuine. On examination of the ledger account of the appellant in the books of Phifer, the sample invoices issued by Phifer, sample copies of credit notes for commission earned by appellant on sales directly executed by Phifer in the Western region, relevant bank statements of appellant highlighting the payments made to Phifer, it is evident that the purchases made by the appellant from Phifer are genuine. Thus, it appears the AO has made additions merely on the reasoning that notices u/s. 133(6) were not replied by the lenders and the suppliers. The Appellant has relied on the decision of Hon'ble Supreme Court in the case of CIT v. Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC) has held that if the AO has issued summons or notices u/s. 133(6), it is his duty to bring the process to a logical conclusion and non-response by such person cannot be held against the assessee. The AR also relied on the decision of Hon'ble Bombay High
31 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., Court in the case of Nikunj Eximp. 35 Taxman.com 384 wherein it is held that merely because the purchases did not appear before the AO, it could not be concluded that purchases were not done by the appellant. These judgement squarely applies to the present case. In the present case, the appellant has obtained supporting evidences from these parties and submitted as additional evidences to prove the genuineness of the transactions. In view of the above, the disallowance of purchases from Phifer India Pvt. Ltd. and Labour charges to M/s. Jay Engineering Works and J.J. Enterprises aggregating Rs.1,49,87,000/- is deleted and this ground of appeal is allowed.
Aggrieved revenue is in appeal before us and Ld.DR submitted that all these purchases/expenses are bogus and assessee has not proved anything before the Assessing Officer and he relied on the findings of the Assessing Officer in this regard.
On the other hand, Ld. AR submitted that all these parties are regular suppliers and they are multinational companies, Assessing Officer has issued notice u/s. 133(6) of the Act to them and has not informed the same to the assessee. Since they were not responded Assessing Officer cannot proceed with disallowance of the same. In this regard he relied on the findings of the Ld.CIT(A).
Considered the rival submissions and material placed on record, we observe that Ld.CIT(A) has deleted the additions with the finding that
32 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., these parties are regular parties, regularly supplying and servicing the assessee in the past as well as in the subsequent Assessment Years. The same parties were supplying the material as well as providing services to the assessee in earlier Assessment Years, none of the Assessing Officer disallowed or found any discrepancies in these parties. Therefore, we are inclined to accept the findings of the Ld.CIT(A) and we do not find any reason to disturb the findings of the Ld.CIT(A).
Coming to the appeals relating to A.Y. 2014-15, since facts in this appeal are mutatis mutandis, therefore the decision taken in A.Y.2013-14 is applicable to this Assessment Year also. Accordingly, this appeal is dismissed.
In the result, appeals of the revenue are dismissed.
Order pronounced in the open court on 15th July, 2022.
Sd/- Sd/- (ABY T. VARKEY) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 15.07.2022 Giridhar, Sr.PS
33 ITA NOs. 4150 & 4162/MUM/2018 (A.Y. 2013-14) M/s. More Marketing Pvt. Ltd., Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file.
//True Copy// BY ORDER
(Asstt. Registrar) ITAT, Mum