PUSH LOGISTICS & WAREHOUSING P.LTD,MUMBAI vs. DCIT 1(2)(2), MUMBAI

Whether on facts and in the circumstances of the case and in Law, the Ld.CIT(A) was correct in admitting additional evidences from the assessee and deciding the issue of genuineness of purchases in its favour, without remanding the evidences to the Assessing Officer for proper verification as mandated by Rule 46A of I. T. Rules 1962.”

Briefly stated facts are that the assessee is engaged in logistics and warehousing business. The AO during the course of assessment proceedings noticed from the accounts of the assessee that it has claimed expenses on account of purchases at Rs. 6,89,02,425/-. Hence, he requires the assessee to produce supplier Depuy Medical Pvt. Ltd. from whom the assessee has affected the purchases during the year under consideration. According to AO, the assessee is unable to produce any evidences and even the parties to whom the sales are affected did not attend before the AO despite the notice under section 133(6) of the Act. According to AO, the assessee failed to produce these parties and also failed to produce documentary evidences like copies of ledger accounts, bills raised against sale made by the assessee, details of item wise sale, details of delivery of goods i.e. transportation proof with lorry number and address of goods transporter etc. Accordingly, AO disallowed the claim of expenditure on account of purchases treating the same as unexplained. Aggrieved, assessee preferred the appeal before CIT(A) and the CIT(A) allowed the claim of the assessee by observing as under: - “a) Copy of Purchase invoices as well as Delivery challans were produced for verification vide AR's letter dt. 29-1-2015 b) Copy of ledger account of the said supplier reflecting purchases and payments thereof by account payee cheques in subsequent year. c) Copy of Bank statement reflecting each such payment to the supplier. d) Quantitative statement of all items purchased from such supplier and corresponding sales thereof and details of unsold stock and value thereof. e) Copy of computer generated statement of account of the assessee in the books of the said supplier along with reconciliation statement reconciling purchases with the sales as shown by the said supplier. f) Confirmation letter submitted before me.

Before us the learned Sr. DR, argued that the assessee has failed to produce the documentary evidences before the AO and even the party from whom the purchase is affected, has not respond to the notice issued under section 133(6) of the Act. Hence, he requested that the matter be restored back to the file of the AO for verification of unexplained purchases. On the other hand, the learned Counsel for the assessee argued and filed details, which were already filed before the AO vide letter dated 18.11.2014 and also letter dated 29.01.2015 by virtue of which the assessee has filed details of party-wise, month-wise sale and confirmations of sundry creditors and debtors and labour charges paid. The assessee also filed coy of bank account statement making payment to Depuy Medical Pvt. Ltd. and also computer generated ledger account of the assessee in the books of accounts Depuy Medical Pvt. Ltd. giving invoice entries of sale made to assessee. The assessee has also filed complete details in its paper book consisting of pages 1 to 125. The assessee has also enclosed the closing stock position as on 31.03.2012 in respect of purchase affected by assessee from Depuy Medical Pvt. Ltd. during the month of February and March 2012. The relevant details are enclosed at pages 23 to 49 of assessee’s paper book. Further vide letter dated 29.01.2015, the assessee has filed statement of account of assessee with Depuy Medical Pvt. Ltd. a group company of Jonshon & Jonshon for the period of 01.03.2012 to 31.03.2012, wherein the complete purchases are reflected. The assessee before the AO also filed copy of computer generated ledger account of the assessee in the books of accounts of the Depuy Medical Pvt. Ltd duly reconcile with the books of the assessee. The learned Counsel for the assessee stated that the entire details were placed before the AO and AO has not looked into any of the documents and the same were again repeated and filed before CIT(A), which are now being filed before the Bench.

In view of the above, the learned Counsel for the assessee stated that once, the details before the AO as well as before CIT(A) and now before Tribunal, the purchases are fully vouched, explained and genuine. The learned Counsel for the assessee stated that even the sales made out of these purchases in next year have never been doubted by the AO.

We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the above narrated facts, which are uncontroverted, that the purchases made are genuine and supported by bills and vouchers, transportation receipts, payment made by cheque and in support of the same copies of bank statements were filed. Even the sale made to other parties of the items purchased from Depuy Medical Pvt Ltd is not doubted. Once, this is the fact the purchases cannot be doubted as unexplained and hence has rightly deleted the addition and we confirm the same. This issue of Revenue’s appeal is dismissed.

The two inter-connected issues raised by assessee in its appeal is as regards to the order of CIT(A) restricting the disallowance at 10% on account of staff welfare and salary and incentive expenses and sundry labour charges amounting to Rs. 8,70,958/- and Rs. 5,92,221/- respectively. For this assessee has raised the following ground No. 1 and 2 as under:-

We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee has claimed staff welfare expenses at Rs. 1,74,683/- and salary and incentive expenses at Rs. 85,34,906/-. Similarly, the assessee has also claimed sundry labour expenses at Rs. 59,22,211/-. The AO during the course of assessment proceedings disallowed 25% of staff welfare expenses and salary incentive expenses. Similarly, the AO also disallowed 20% of sundry labour expenses. The AO disallowed the same in the absence of bills and vouchers. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) restricted the disallowance at 10% on account of staff welfare salary and incentive and also sundry labour expenses by observing in Para 4.4 and relevant portion of Para 7.3 as under : - “4.4. The AO has disallowed 25% on the Staff Welfare and Salary and incentive expenses of Rs. 87,09,589/- which works out to Rs. 21,77,397,25. Considering the facts on record and also the profits declared by the appellant, the disallowance is restricted to 10% which works out to Rs. 8,70,958/- and the balance amount of Rs. 13,06,448/- is deleted.

We find from the facts of the case that the CIT(A) has discussed in detail and restricted the disallowance on both the disallowance at 10%. We find that even CIT(A) admits that for supporting bills and vouchers the disallowance is restricted at 10%. Going by the facts and circumstances of the case, we restrict the disallowance at 5% on both the expenses and direct the AO accordingly.

In the result, the appeal of assessee is partly allowed and that of Revenue is dismissed.