Aisect Ltd. , Bhopal V. ACIT Range 1(1), Bhopal

ITA 945/Ind/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1129 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-04-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 15-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Not Found
• Assessee Lawyers: S S DESH
• Keywords: Bogus purchase; Business income; Business expenditure; Principle of natural justice; Proportionate interest; Fair market value; Corroborative evidences; Commercial expediency; Retraction; Revised return; TDS; Set aside; FORM 26AS
• Section: 69C; 143(3); 142(1); 133A; 133(6); 12A; 12AA; 201; 143(2); 64; 43; 48; 73; 72; 13; 22; 131; 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE MANISH BORAD, ACCOUNTANT MEMBER AND HONBLE MADHUMITA ROY, JUDICIAL MEMBER ITA NO.945 & 946/IND/2019 ASSESSMENT YEAR 2013-14 & 2015-16 AISECT LIMITED : APPELLANT NH-2, HOSHANGABAD ROAD, BHAIRONPUR NEAR MISROD, BHOPAL PAN : AAFCA7441P V/S INCOME TAX OFFICER 1(1) BHOPAL : RESPONDENT ITA NO.952 & 953/IND/2019 ASSESSMENT YEAR 2013-14 & 2015-16 INCOME TAX OFFICER 1(1) : APPELLANT BHOPAL V/S AISECT LIMITED : RESPONDENT NH-2, HOSHANGABAD ROAD, BHAIRONPUR NEAR MISROD, BHOPAL PAN : AAFCA7441P AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 2 REVENUE BY SHRI HARSHIT BARI, SR.DR ASSESSEE BY SHRI S.S.DESHPANDE, CA DATE OF HEARING 0 6 .04 .2021 DATE OF PRONOUNCE MENT 28 . 06 . 202 1 O R D E R PER BENCH THE ABOVE CAPTIONED APPEALS CROSS APPEALS FOR ASS ESSMENT YEARS 2013-14 & 2015-16 ARE DIRECTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-I (IN SHORT LD . CIT], BHOPAL EVENLY DATED 24.09.2019 WHICH ARE ARISING OUT OF T HE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHORT THE AC T) DATED 31.03.2016 AND 29.12.2017 FRAMED BY ITO-1(1), BHOP AL. 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - ITA NO.945/IND/2019 ASSESSMENT YEAR 2013-14 1. THAT OF THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LEARNED COMMISSIONER OF INCOME TAX ( A) 1, BHOPAL WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS. 91,287.00 TOWARDS CSC EXPENSES ON ADHOC BASIS. 2. THAT OF THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LEARNED COMMISSIONER OF INCOME TAX ( A) 1, BHOPAL WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT RS. 7,76, 615.00 TOWARDS REGISTRATION EXPENSES. 3. THAT OF THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 3 LEARNED COMMISSIONER OF INCOME TAX ( A) 1, BHOPAL WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT RS. 9,12, 873.00 TOWARDS PURCHASE OF COURSE MATERIAL. 4. THAT OF THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LEARNED COMMISSIONER OF INCOME TAX ( A) 1, BHOPAL WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT RS. 40,72 ,135.00 TOWARDS TRAINING MATERIAL 5. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER AMEND OR WI THDRAW ANY GROUND OF APPEAL ON OR BEFORE THE TIME OF HEARING. 3. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL; ITA NO.952/IND/2019 ASSESSMENT YEAR 2013-14 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(APPEAL) HAS ERRED IN: 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING ADDITION OF RS. 3,60,465/-, W HEN THE ASSESSEE HAS ADVANCED INTEREST FREE LO ANS AND THEREFORE, PROPORTIONATE DISALLO WANCE OF INTEREST EXPENSES WERE MADE.' 2. ' WHETHER ON THE FAC T AN D CIRCUMST A NCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING ADDITION OF RS. 89,96,634/- O N ACCOUN T OF CSC EXPE N SES, BY RELYING ON THE JUDGMENT OF INTERNATIONAL FO REST CO. VS CIT(1975) 101 ITR 721 (J&K) AND H OLDING THA T A 0 CANNOT MAKE ARBITRARY ADDITION AND BASE HIS CONCLUSION PURELY ON GUESS WO RK AND THEREAFTER, RES TRICTING THE ADHOC DISALLOWANCE TO 4 OF EXPENSES, WHEN, THE AO HAS CLEARLY HELD THAT THE ASSESSEE WAS UNABLE TO PRODUC E ANY AGREEMENT ON ACCOUNT OF WHICH SUCH REGISTRATION EXPENSES WERE IN CURRED (BEING AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 4 EXPENSES OF CONTRACTUAL NATURE) AND ESTABLISH THE GENUINENESS OF THE TRANSACTION.' 3. ' WHET H ER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING ADDITION OF RS. 2,95,16,227/- ON ACCOUNT OF ONLINE MATERIAL EXPENSE, BY RELYING ON THE JUDGMENT INTERN ATIONAL FOREST CO. VS CIT(1975) 101 ITR 271 (J&K) AND HOLDING THAT AO CAN NOT MAKE ARBITRARY ADDITION AND BASE HIS CONCLUSION PURELY ON GUESS WO RK AND THEREAFTER, RESTRICTING THE DISALLOWANCE TO 3 OF EXPENSES, WHEN , THE AO HAS CLEARLY HELD THAT THE ASSESSEE WAS UNABLE TO ESTABLISH THE GENUINENESS OF SUCH EXPENSES INCURRED (BEING EXPENSES OF CONTRACTUAL NATURE) AS SUCH EXPENSE WERE UNDERTAKEN WITH SISTER CONCERNS AND NO AGREEME NT / 'MOU OF SUCH EXPENSES INCURRED WAS FURNISHED.' 4. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING ADDITION OF RS. 7,73,70,565/- ON ACCOUNT OF TRAINING EXPENSES, BY RELYING ON THE JUDGMENT OF INTERNATION AL FOREST CO. VS CIT(1975) 101 ITR 721 (J&K) AND HOLDING THAT AO CAN NOT MAKE ARBITRARY ADDITION AND BASE HIS CONCLUSION PURELY ON GUESS WO RK AND THEREAFTER, RESTRICTING THE ADHOC DISALLOWANCES TO 5 OF EXPENSE S INCURRED WHEN THE AO HAS CLEARLY HELD THAT THE ASSESSEE WAS UNABLE TO ES TABLISH THE GENUINENESS OF SUCH EXPENSES INCURRED (BEING EXPENS ES OF CONTRACTUAL NATURE). AS SUCH EXPENSE WERE UNDERTAKEN WITH SISTE R CONCERNS AND NO AGREEMENT / MOU OF SUCH EXPENSES INCURRED WAS FURNISHED.' THE APPELLANT RESERVES HIS RIGHT TO ADD, AMEND OR A LTER THE GROUNDS OF APPEAL ON OR BEFORE THE DATE, THE APPEAL IS FINALLY HEARD FOR DISPOSAL. 4 . ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- ITA NO.946/IND/2019 ASSESSMENT YEAR 2015-16 AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 5 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(APPEAL) HAS ERRED IN: 1. 'WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LTD. CIT(A) WAS JUSTIFIED ON DELETING ADDITION OF RS. 23,00,00,000 /- , WHEN THE ASSESSEE HIMSELF DECLARED THE EXPENSES INCURRED ON ACCOUNT O F PURCHASE OF BOOKS FROM VENDORS AT ITARSI AMOUNTING TO RS. 23 CRORES A S NON GENUINE EXPENSES AND PAID TAXES THEREON AND THE ASSESSING O FFICER IN THE ASSESSMENT ORDER HAS ESTABLISHED THE NON GENUINENES S OF SUCH PURCHASES BY HIGHLIGHTING THE ROUND TRIPPING OF FUNDS THROUGH SUCH PURCHASE TRANSACTIONS BETWEEN ASSESSEE AND ITS SISTERS, CONC ERNS, WHICH CLEARLY REFLECT THE NON GENUINE NATURE OF TRANSACTIONS UNDE R TAKEN BY THE ASSESSEE.' 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING ADDITION OF RS. 3,16,358 /- ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES, WHEN THE ASSESSEE HAD ADVANCE D INTEREST FREE LOANS AMOUNTING TO RS. 95,44,174 /- AND THEREFORE, PROPORTIONATE INTEREST @12 % ON INTEREST EXPENSES INCURRED ON BORROWED FUNDS WAS DISALLOWED.' THE APPELLANT RESERVES HIS RIGHT TO ADD, AMEND OR A LTER THE GROUNDS OF APPEAL ON OR BEFORE THE DATE, THE APPEAL IS FINALLY HEARD FOR DISPOSAL. 5. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- ITA NO.953/IND/2019 ASSESSMENT YEAR 2015-16 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE ASSESSEE THE PROCEEDINGS INTIATED AND THE ORDER PASSED ARE ILLEG AL, INVALID AND CONTRARY TO LAW. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 6 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE LEARNED AO WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.23,00 ,00,000.00 HOLDING THE PURCHASE MADE BY THE ASSESSEE AS NON GENUINE. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LEARNED AO WAS NOT JUSTIFIED IN MAKING DISALLOW ANCE OF RS.3,34,204.00 TOWARDS DISALLOWANCE OF EXPENSES UND ER VARIOUS HEADS ON ADHOC BASIS. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE OF THE ASSESSEE THE LEARNED AO WAS NOT JUSTIFIED IN MAKING DISALLOW ANCE OF RS.3,16,358.00 TOWARDS INTEREST PAID ON SECURED LOA NS. 5. THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER AMEND OR WITHDRAW ANY GROUND OF APPEAL ON OR BEFORE THE TIME OF HEARING. 6. AS THE ISSUES ARE COMMON AND PERTAINING TO THE S AME ASSESSEE THESE WERE HEARD TOGETHER ON THE REQUEST O F BOTH THE PARTIES AND BEING DISPOSED OFF BY THIS ORDER FOR SA KE OF CONVENIENCE AND BREVITY. 7. WE WILL FIRST TAKE UP THE CROSS APPEALS FOR ASSE SSMENT YEAR 2013-14. 8. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE R ECORDS ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE TR ADING OF COMPUTER HARDWARE/SOFTWARE, MANAGEMENT SERVICES, GE NERAL SUPPLIES, SELLING OF EDUCATIONAL BOOKS, INSURANCE A ND COACHING. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 7 ASSESSEE ALSO PROVIDES SERVICES TO UNIVERSITIES. TH E ASSESSEE COMPANY BELONGS THE AISECT GROUP. THIS GROUP RUNS V ARIOUS BUSINESSES. THEY ALSO RUN TWO UNIVERSITIES ONE IN M ADHYA PRADESH AND ONE UNIVERSITY IN CHHATTISGARH. THESE UNIVERSIT IES ARE REGISTERED U/S 12AA AND/OR U/S 10(23C). THE ASSESSE E HAS MORE THAN TWO THOUSAND STUDY CENTRES ESTABLISHED THROUGH OUT THE COUNTRY WHICH PROVIDE THE SERVICES TO THE STUDENTS OF THE UNIVERSITIES OF THE GROUP FOR A NOMINAL PRICE. THE ASSESSEE ALSO SUPPLIED BOOKS TO THE UNIVERSITY FOR LIBRARY AND US E BY FACULTY AND TO BE KEPT AT STUDY CENTRE FOR THE PURPOSE OF REFER ENCE BY STUDENTS. NO AGREEMENT IN WRITING HAS BEEN ENTERED FOR THIS W ORK. COURSE MATERIAL IS DEVELOPED AND SUPPLIED TO STUDENTS OF T HE UNIVERSITY THROUGH THE ASSESSEE COMPANY AT NOMINAL COST. THE M AIN WORK DONE BY THE ASSESSEE FOR THE UNIVERSITIES IS AS UND ER: 1. MANAGEMENT OF IT PORTAL OF THE UNIVERSITY, MOBILIZ ATION AND REGISTRATION OF STUDENTS FOR UNIVERSITIES. 2. MAINTAINING STUDENTS DATABASE FOR ONLINE AND DISTAN CE EDUCATION PROGRAMME FOR UNIVERSITIES. SUPPLY OF COU RSE MATERIAL AND COURSE KITS INCLUDING THE STUDENTS BAG S. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 8 PROVIDING E-CONTRACT ONLINE, ETC. 3. DATA PROCESSING SUPPORT FOR RESULT PREPARATION F OR UNIVERSITIES. 4. PROVISION FOR LEARNING SUPPORT THROUGH ITS LEARN ING CENTRES AND PROVISION OF HARDWARE AND SOFTWARE AND ARRANGEMENT OF SKILL TRAINING CENTRES. E-RETURN OF INCOME FILED ON 26.9.2013 DECLARING I NCOME AT RS.4,06,15,880/-. CASE SELECTED FOR SCRUTINY THROU GH CASS FOLLOWED BY SERVING NOTICES U/S 143(2) AND 142(1) O F THE ACT. WHEN THE ASSESSMENT PROCEEDING WAS UNDERGOING SURVEY WAS CONDUCTED U/S 133A OF THE ACT ON 9.10.2015 AND 10.10.2015. S TATEMENT OF MANAGING DIRECTOR MR. SANTOSH CHOUBEY WAS RECORDED WHERE HE VOLUNTARILY OFFERED RS.23 CRORES ON ACCOUNT OF INFL ATED PURCHASE IN THE BOOKS. THE COPY OF THE STATEMENT WAS PROVIDED TO THE ASSESSEE ON 20.10.2015. ON 10.11.2015 RETRACTION OF SURREND ER OF INCOME WAS FILED THROUGH AN AFFIDAVIT DATED 7.11.2015. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS LD. A.O CALLED VARIOUS IN FORMATION TO EXAMINE THE GENUINENESS OF PURCHASE AND OTHER EXPEN SES. SUBMISSIONS WITH DOCUMENTS WERE FILED TO EXPLAIN BU T WERE NOT AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 9 FOUND ACCEPTABLE TO SOME EXTENT BY THE LD. A.O. AD DITIONS WERE MADE TOTALLING TO RS.12,20,19,196/- ON ACCOUNT OF F OLLOWING:- 1. DISALLOWANCE OF INTEREST EXPENSES RS. 3,60,465/ - 2. 20% ADHOC DISALLOWANCE OF EXPENSES RS. 7,90,297/ - 3. DISALLOWANCE OF REGISTRATION EXPENSES RS. 89,96, 634/- 4. DISALLOWANCE OF PURCHASE RS.3,04,29,100/- 5. DISALLOWANCE OF TRAINING EXPENSES RS.8,14,42,700/- RS.12,20,19,196/- AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A) AND PARTLY SUCCEEDED. 9. NOW BOTH THE ASSESSEE AND REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL CHALLENGING THE FINDING OF LD. CIT(A) DECI DED AGAINST THEM. 10. LD. COUNSEL FOR THE ASSESSEE APART FROM RELYING ON THE FINDING OF LD. CIT(A) ON THE ISSUE DECIDED IN FAVOUR OF THE ASSESSEE VEHEMENTLY ARGUED AND REFERRING TO THE SUBMISSIONS MADE BEFOR THE LOWER AUTHORITIES. THE SUBMISSIONS MADE BEFORE THI S TRIBUNAL ARE REPRODUCED BELOW (RELEVANT EXTRACT):- 1. GROUND NO 1 DELETION OF RS.3,60,465/- U/S 36(1)(III) : THE LD. A.O. HAS DISALLOWED THE INTEREST OF RS.3,60 ,465/- ON THE GROUND THAT THE ASSESSEE HAS BORROWED FUNDS AND PAI D INTEREST OF AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 10 RS.3,60,465/-. HE FURTHER OBSERVED THAT THE ASSESSE E HAS GIVEN LOANS AND ADVANCES OF RS.32,68,227/- ON WHICH NO INTEREST WAS RECEIVED. THUS, THE ASSESSEE HAS ADVANCED THE MONEY FOR NON B USINESS PURPOSES. THE ASSESSEE HAD ADVANCES MONEY TO THE STAFF AND OT HERS. THE INTEREST OF RS.3,60,465/- HAS BEEN PAID FOR THE LOA N TAKEN FOR PURCHASE OF CAR. NO BORROWED FUNDS WERE ADVANCED AND THE INT EREST IS PAID ON THE BORROWINGS FOR THE BUSINESS PURPOSES. THE LD. CIT(A) ALLOWED THE ASSESSEES APPEAL IN PAR A 11 PG.21. IT IS SUBMITTED THAT NO BORROWED FUNDS WERE ADVANCE D AND THE INTEREST IS PAID ON BORROWINGS MADE FOR THE PURPOSE OF BUSINESS. THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION. 2. GROUND NO. 2: DELETION OF RS.82,20,019/-(OUT OF DIS ALLOWANCE OF RS.89,96,634/-) (WRONGLY MENTIONED IN THE GROUNDS A S CSC EXPENSES) FOR REGISTRATION EXPENSES AND ASSESSEE AP PEAL GROUND NO.2 FOR MAINTENANCE OF ADDITION OF RS.7,76,615/-. 1. THE ASSESSEE IS HAVING VARIOUS STUDY CENTRES THROUG HOUT THE COUNTRY THROUGH WHICH THE STUDENTS IN THE LOCAL AREA ARE PR OVIDED GUIDANCE AND COUNSELING OF THE VARIOUS COURSES AVAILABLE IN THE UNIVERSITY. IN THIS PROCESS REGISTRATION AND PROSPECTUS FEES IS CO LLECTED FROM THE STUDENTS AND FORWARDED TO THE UNIVERSITY. DURING TH IS YEAR 76931 STUDENTS WERE REGISTERED THROUGH VARIOUS CENTRES AN D THE PROSPECTUS FESS OF SUCH STUDENTS @ 250/- PER STUDENT = RS.1,92 ,32,750/-WAS COLLECTED AND REMITTED TO THE DR. C.V. RAMAN UNIVER SITY. SOME OF THE AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 11 CENTRE HAD PURCHASE EXTRA COPIES OF THE PROSPECTUS AND DUES OF THE SAME WAS ALSO REMITTED. 2. THE AFORESAID DETAILS WERE SUBMITTED TO THE AO ON 3 0.03.2016 IN WHICH IN REPLY TO A SEPARATE QUERY THE AO WAS INFO RMED THAT 41675 STUDENTS WERE REGISTERED FOR SHORT TERM COURSES. TH E AO HOWEVER ERRONEOUSLY CONCLUDED THAT TOTAL 41675 STUDENTS WER E REGISTERED AND ALLOWED THE EXPENSES FOR THESE NO. OF STUDENT AND D ISALLOWED THE BALANCE WITHOUT APPRECIATING THAT THE TOTAL PROSPEC TUS WERE ISSUED FOR 76931 STUDENTS AND ONLY 41675 STUDENTS WERE REGISTE RED FOR SHORT TERM COURSES. THE LEARNED CIT-A OBSERVED THAT THE A O HAS NOT DISPUTED THE FACT THE ASSESSEE HAS COLLECTED THE FE ES AND REMITTED IT TO THE UNIVERSITY. THE LD. CIT-A OBSERVED THAT THE ASS ESSEE HAS EXPLAINED THE COMPLETE FACTS, AND CONCLUDED THAT TH E AO HAS PICKED UP THE NUMBER OF STUDENTS FOR SHORT TERM COURSES ME NTIONED IN THE WRITTEN SUBMISSION IN SOME OTHER CONTEXT AND DISALL OWED THE EXPENSES WHICH IS NOT JUSTIFIED. CONSIDERING THE PA ST RECORD OF THE ASSESSEE THE DISALLOWANCE OF 4% OF EXPENSES RS.7,76 ,615/- WAS CONFIRMED AND RELIEF RS.82,20,019/- WAS PROVIDED. IN THIS REGARDS IT IS HUMBLY SUBMITTED THAT THE FA CT THAT THE ASSESSEE HAS COLLECTED THE SAID FEES FROM THE STUDE NTS FOR IT BEING REMITTED TO THE UNIVERSITY IS NOT IN DISPUTE AND TH E ASSESSEE HAS REMITTED SUCH COLLECTION TO THE UNIVERSITY AND HAVE SUBMITTE D THE RECEIPTS FROM THE UNIVERSITY ACKNOWLEDGING THE RECEIPTS OF SUCH F EES. THE DISALLOWANCE HAS BEEN RESTRICTED BY THE LD. CIT(A) ON THE BASIS OF THE EARLIER ASSESSMENT. THE ASSESSEE HAS COLLECTED THE FEES FRO M THE STUDENTS AND HAS REMITTED THE SAME TO THE UNIVERSITY. THUS, THER E WAS NO QUESTION OF ANY DISALLOWANCE ON THIS GROUND. IN VIEW OF THIS, T HE ADDITION MAINTAINED BY THE LD. CIT(A) DESERVES TO BE DELETED. 3. GROUND NO 3 DISALLOWANCE OF RS.2,95,16,227/- FOR PU RCHASE OF ONLINE MATERIAL AND ASSESSEES APPEAL GROUND NO.3 FOR MAIN TENANCE OF ADDITION OF RS.9,12,873/- AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 12 THE ASSESSEE IS IN THE BUSINESS OF SUPPLY OF BOOKS/ COURSE MATERIAL TO THE STUDENTS OF VARIOUS EDUCATIONAL INSTITUTIONS . ALL THESE BOOKS ARE SUPPLIED TO THE STUDENTS THROUGH POSTAL DEPARTMENT OF THE GOVERNMENT OF INDIA ON WHICH DURING THE YEAR POSTAGE EXPENSE O F RS. 46,04,738/- WERE INCURRED. DETAILS OF DISPATCH OF THE BOOKS/COU RSE MATERIAL TO STUDENTS AND EVIDENCE THEREOF WERE DULY FURNISHED B EFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE BOOKS/COURSE MATERIAL ARE SUPPLIED FREE OF COST TO THE STUDENTS AND THE SALE VALUE OF THE SAME IS RECEIVED FROM THE EDUCATIONAL INSTITUTES TO WHOM THESE STUDENTS BELONG. DURING THE YEAR THE ASSESSEE HAS RECEIVED RS.4,12,15,433/-TOWARDS SALE OF BOOKS/ FEE S FOR SUPPLY OF COURSE MATERIAL FROM AISECT BHOPAL AND RS. 10,59,50 ,349/- FROM AISECT RAIPUR WHICH HAS BEEN SHOWN AS BUSINESS RECE IPTS IN THE FINANCIAL STATEMENTS. THESE BOOKS HAVE BEEN PURCHAS ED FROM THE OTHER CONCERNS AND WERE SUPPLIED TO THE STUDENTS ON BEHAL F OF THE UNIVERSITIES. THUS, THE ASSESSEE HAS RECEIVED SALE CONSIDERATION FOR SALE OF BOOKS OF OVER RS. 14 CRORE FROM ITS ASSOCIATE CONCERNS. THE ASSESSEE HAS ALSO MADE PURCHASES FROM THESE UNIVERSITIES FOR THE BOOK S SUPPLIED FOR OTHER CONCERNS. THE ASSESSEE HAS PURCHASED BOOKS FROM THE SISTER CONCERNS OF RS. 3,04,29,100/- AND HAS SUPPLIED/SOLD THE BOOKS T O OTHERS. THUS ON NET BASIS THE ASSESSEE HAS RECEIVED AN INCOME WHICH NEGATES THE PRESUMPTION THAT THESE TRANSACTIONS WERE NON GENUIN E OR WAS UNDERTAKEN WITH AN OBJECT OF REDUCING ITS INCOME. DURING THE YEAR THE ASSESSEE HAS SHOWN COURSE MATER IAL EXPENSE OF RS. 5,14,59,665/- OUT OF WHICH PURCHASE OF RS. 3 ,04,29,100/- WERE MADE FROM ASSOCIATED CONCERNS WHICH HAVE BEEN DISAL LOWED BY THE AO HOLDING THAT THE ASSESSEE HAS FAILED TO ESTABLISH T HE GENUINENESS OF THE CLAIM OF EXPENSES. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 13 THE SAID BELIEF WAS FORMED BY THE AO ON THE FOLLOWI NG REASONS AS MENTIONED BY HIM IN THE ASSESSMENT ORDER: SR. NO REASONS MENTIONED BY THE AO IN THE ASSESSMENT ORDER SUBMISSIONS OF THE ASSESSEE 1 THE ASSESSEE HAS NOT FURNISHED COPY OF MOU WITH THESE CONCERNS FOR PURCHASE OF BOOKS. AVAILABILITY OR NON AVAILABILITY OF MOU CANNOT BY ITSELF MAKE ANY TRANSACTION GENUINE OR BOGUS. 2 NO JUSTIFICATION IS GIVEN AS TO WHY PAYMENTS ARE MADE TO AISECT BHOPAL FOR SUPPLY OF BOOKS WHO ARE THEMSELVES CONDUCTING VARIOUS COURSES THE ASSESSEE IS SUPPLYING BOOKS TO THE STUDENTS OF THE UNIVERSITIES MANAGED BY THE SOCIETIES UNDER SAME MANAGEMENT. THESE SOCIETIES, WITH AN OBJECT TO CONCENTRATE THEIR FOCUS ON THE CORE ACTIVITY OF PROVIDING EDUCATION HAVE OFF LOADED VARIOUS INCIDENTAL ACTIVITIES INCLUDING SUPPLY OF BOOKS/COURSE MATERIAL TO ITS STUDENTS TO THE ASSESSEE COMPANY. THE ASSESSEE HAS SUPPLIED BOOKS TO THE STUDENTS AND HAS RECEIVED SALE CONSIDERATION OF OVER RS. 14 CRORE FROM THE SOCIETIES. THE BOOKS REQUIRED TO BE SUPPLIED ARE PURCHASED AND/OR GOT PRINTED. THE PURCHASE ARE MADE FROM MARKET AND IN CASES THEY ARE AVAILABLE WITH THE CONCERNED UNIVERSITY ARE PROCURED FROM THAT UNIVERSITY ITSELF. 3 BILLS FOR SUPPLY OF BOOKS WITH LIST OF BOOKS WERE NOT FURNISHED THE DETAILS OF BOOKS SUPPLIED ALONG WITH LIST OF THE BOOKS SUPPLIED WERE DULY FURNISHED BEFORE THE AO. BILLS FOR PURCHASE FROM SISTER CONCERNS WERE ALSO PRODUCED FOR VERIFICATION. 4 THE ASSESSEE HAS NOT SHOWN WHY THE JOB WAS ENTRUSTED TO SISTER CONCERNS AND NOT TO OTHERS THE ASSESSEE HAS MADE TOTAL PURCHASE OF RS. 514.59 LAKH OUT OF WHICH BOOKS OF ONLY RS.304.29 WERE PROCURED FROM ASSOCIATE CONCERNS. THUS IT IS NOT CORRECT TO STATE THAT THE JOB WAS ENTRUSTED TO SISTER CONCERNS ONLY AND NOT TO OTHERS. FURTHER THESE BOOKS WERE PROCURED FROM AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 14 SOURCES WHERE THEY WERE AVAILABLE AT THE MOST ECONOMICAL RATE. 5 METHODOLOGY ADOPTED BY SISTER CONCERN TO COMPLETE THE JOB WAS NOT PROVIDED THE ASSESSEE HAD SIMPLY PURCHASED THE BOOKS/COURSE MATERIAL FROM THE CONCERNS WHICH WERE REQUIRED TO BE SUPPLIED TO THE STUDENTS FOR WHICH SALE PRICE WAS RECEIVED FROM THE SISTER CONCERNS. THUS NO SPECIFIC MODUS OPERANDI WAS REQUIRED TO COMPLETE THE JOB. IT MAY BE MENTIONED THAT THE SISTER CONCERNS OF THE ASSESSEE ARE MANAGING TWO UNIVERSITIES WHICH ARE HAVING APPROX. 118 THOUSAND STUDENTS REGISTERED WITH THEM. THESE SOCIETIES WITH AN OBJECT TO CONCENTRATE THEIR EFFORTS ON THEIR CORE ACTIVITY OF PROVIDING EDUCATION HAVE OFF LOADED VARIOUS INCIDENTAL ACTIVITIES INCLUDING SUPPLY OF BOOKS/COURSE MATERIAL TO ITS STUDENTS, TO THE ASSESSEE COMPANY. THE FEES RECEIVED BY THESE UNIVERSITIES ARE INCLUSIVE OF THE CHARGES FOR SUPPLY OF BOOKS/COURSE MATERIAL TO THE STUDENTS. THUS THE BOOKS ARE SUPPLI ED TO THE STUDENTS AT FREE OF COST BY THE UNIVERSITIES THROUGH THE ASSESS EE COMPANY. THE SAID UNIVERSITIES MAKE PAYMENT TO THE ASSESSEE COMPANY O F THE SALE PRICE OF THE BOOKS SUPPLIED TO THE STUDENTS. THESE BOOKS/COU RSE MATERIALS ARE SUPPLIED BY THE ASSESSEE TO THE STUDENTS THROUGH IT S CENTERS AND THE BOOKS ARE SENT BY USING THE SERVICES OF THE POSTAL DEPARTMENT. AS THE BOOKS PURCHASED BY THE ASSESSEE HAVE BEEN SO LD AND THE SALE PROCEEDS ARE DULY SHOWN AS INCOME, THERE WAS N O OCCASION TO TREAT THE PURCHASE OF THESE BOOKS FROM THE ASSOCIATE SOCI ETIES AS NON GENUINE. IF THE PURCHASES ARE DOUBTED THEN THERE CANNOT BE A NY SALE. THE CORRESPONDING SALE SHOULD HAVE BEEN REDUCED FROM TH E INCOME. THE LD. A.O., HOWEVER, DID NOT CONSIDER THE ARGUMEN TS OF THE ASSESSEE AND DISALLOWED THE WHOLE AMOUNT PAID TO TH E SISTER CONCERNS ON THE GROUND THAT THE ASSESSEE HAS FAILED TO ESTABLIS H THE GENUINENESS OF THE TRANSACTION. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 15 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE REMARKED THAT THE SALE OF BOOKS ARE NOT DISPUTED AN D AS SUCH THE CORRESPONDING PURCHASES CANNOT BE HELD TO BE NON-GE NUINE. HE FURTHER OBSERVED THAT THE A.O. HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT THE PURCHASES ARE MADE AT A HIGHER VALUE. HE THEREF ORE, RESTRICTED THE DISALLOWANCE @ 3% OF THE TOTAL EXPENSES BY COMPARIN G THE SAME WITH THE EARLIER YEARS. THE LD. CIT(A) ALLOWED THE RELIEF OF RS.2,95,16,227/- AND UPHELD THE ADDITION OF RS.9,12,873/-. IT IS HUMBLY SUBMITTED THAT THE ASSESSEE HAS SHOWN THE INCOME OF RS.41.75 CRORES UNDER THE HEAD FEES AND COURSE MATE RIAL RECEIPTS WHICH INCLUDES 12.83 CRORES AS THE RECEIPT FROM SALE OF B OOKS AND COURSE MATERIAL. AGAINST THESE RECEIPTS OF RS.12.83 CRORES THE ASSESSEE HAS INCURRED THE EXPENSES FOR PURCHASE OF THE BOOKS AND OTHER INCIDENTAL EXPENSES. COMPLETE DETAILS HAVE BEEN MAINTAINED AND THE DISALLOWANCE OF EVEN 3% IS UNCALLED FOR. 4. GROUND NO.4 DELETION OF RS.7,73,70,565/- ON ACCOUNT OF TRAINING EXPENSES AND ASSESSEES APPEAL GROUND NO.4 FOR MAIN TENANCE OF ADDITION OF RS.40,72,135/- THE ASSESSEE HAD INCURRED AN EXPENSE OF RS.8,20,31, 006/- UNDER THE HEAD TRAINING EXPENSE OUT OF WHICH DISALLOWAN CE OF RS. 8,14,42,700/- WAS THE PAYMENTS MADE TO ASSOCIATE CO NCERNS AS DETAILED BELOW WHICH WERE DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE: NAME OF THE SISTER CONCERN AMOUNT PAID (IN RS) AISECT BHOPAL 3,28,27,000 SECT INFO TECH LTD 1,43,15,100 SECT 1,75,94,600 AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 16 DETAILS OF THE EXPENSES ARE EXPLAINED HEREIN BELOW: I. AISECT BHOPAL: THE SAID ENTITY IS MANAGING A UNIVE RSITY IN THE NAME OF AISECT, BHOPAL HAVING A VERY LARGE INFRASTR UCTURE AND THE COURSES CONDUCTED FOR ALL THE SUBJECTS. IT MAY BE M ENTIONED THAT THE ASSESSEE HAS RECEIVED RS. 8,97,87,640/- FROM AI SECT BHOPAL FOR PROVIDING TRAINING FOR IGNOU STUDENTS & RS. 1,8 6,79,306/- TOWARDS TRAINING TO STUDENTS ON VOCATIONAL COURSES. RS. 3,28,27,200/- WAS PAID TO THE SAME CONCERN TOWARDS EXAMINATION AND CERTIFICATION OF THE STUDENTS AND BALANCE WAS U TILISED FOR PROVIDING TRAINING TO THE STUDENTS. THE PAYMENT OF RS. 8,97,87,640/- AND RS. 1,86,79,306/- BY AISECT BHOPA L TO THE ASSESSEE IS READILY VERIFIABLE FROM THE FILES OF TH E RESPECTIVE CONCERNS II. SECT INFO TECH LTD: THE SAID PERSON IS A CORPORATE ENTITY HAVING THE SAME RATE OF TAX APPLICABLE TO IT AS IS APPLICA BLE TO THE ASSESSEE COMPANY. THUS THE ALLEGATION THAT PAYMENT HAS BEEN MADE TO THAT COMPANY TO REDUCE THE INCOME IS NOT PROBABLE. IT M AY BE MENTIONED THAT THE ASSESSEE WAS HAVING 14900 STUDEN TS FOR INSURANCE AND BANKING COURSES. THE SAID NUMBER IS E ASILY VERIFIABLE FROM THE DETAILS OF STUDENTS SUBMITTED D URING THE COURSE OF ASSESSMENT PROCEEDINGS. M/S SECT INFOTECH LTD IS APPROVED BY IRDA (INSURANCE REGULATORY AND DEVELOPMENT AUTHORIT Y) FOR CONDUCTING COURSES ON INSURANCE. THE SAID COMPANY H AS BEEN RENDERING SERVICES IN INSURANCE SECTOR WHICH WILL B E OBVIOUS FROM THE FACT THAT TDS HAS BEEN DEDUCTED BY VARIOUS INSU RANCE COMPANIES ON PAYMENTS MADE BY THEM. III. SECT (SOCIETY FOR ELECTRONICS & COMPUTER TECHNOLOGY ): THE SAID SOCIETY IS RUNNING COLLEGE IN THE NAME OF SECT COLL EGE OF PROFESSIONAL EDUCATION PROVIDING COURSES LIKE BA, B .COM, BBA, SECT PVT LTD 1,67,06,000 TOTAL 8,14,42,700 AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 17 BCA AND IS AFFILIATED TO BARKATULLAH UNIVERSITY, BH OPAL. THE SAID SOCIETY HAS ITS OWN INFRASTRUCTURE AND FACULTY FOR TRAINING WHICH WAS PROVIDED TO STUDENTS BY USING THE INFRASTRUCTUR E AND FACULTY OF THE COLLEGE. IV. SIGNIFICANT ELECTRONICS & COMPUTER TECHNOLOGY P LTD (SECT P LTD): THE SAID PERSON IS A CORPORATE ENTITY HAVING THE SA ME RATE OF TAX APPLICABLE TO IT AS IS APPLICABLE TO THE ASSESSEE C OMPANY. THUS THE ALLEGATION THAT PAYMENT HAS BEEN MADE TO THAT COMPA NY TO REDUCE THE INCOME IS NOT PROBABLE. M/S SECT PVT LTD IS A PPROVED CORPORATE AGENT FOR LIC. THE SAID COMPANY HAS BEEN RENDERING SERVICES FOR INSURANCE SECTOR WHICH WILL BE OBVIOUS FROM THE FACT THAT TDS HAS BEEN DEDUCTED BY VARIOUS INSURANCE COM PANIES ON PAYMENTS MADE BY THEM. THE DISALLOWANCE WAS MADE FOR VARIOUS REASONS WHICH , AS MENTIONED IN THE ASSESSMENT ORDER ARE SUMMARISED HERE IN BELOW: PARA NO OBSERVATIONS OF THE AO SUBMISSION OF THE ASSESSEE 6.6.3(I) DETAILS OF FACULTY INVOLVED NOT FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS NO SUCH INFORMATION WAS REQUIRED BY THE AO. FURTHER THE FACULTY IS PROVIDED BY THE PAYEES. 6.6.3(II) DETAILS OF EXPERT FACULTY AVAILABLE WITH AISECT BHOPAL NOT FURNISHED. NO SUPPORTING EVIDENCE OF HAVING EXPERT FACILITY IN FIELD OF BANKING AND INSURANCE SECTOR FURNISHED. FACULTY WAS PROVIDED BY THE PAYEES. IT MAY BE MENTIONED THAT AISECT BHOPAL IS MANAGING A UNIVERSITY WHICH IS DULY APPROVED BY UGC(UNIVERSITY GRANT COMMISSION) AND IS NATURALLY HAVING ALL THE FACULTY AND AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 18 DETAILS OF STUDENTS/TRAINEES PLACED IN BANKING & INSURANCE SECTOR NOT FURNISHED INFRASTRUCTURE REQUIRED FOR THE TRAINING. M/S SECT INFOTECH LTD IS DULY APPROVED BY IRDA THE REGULATORY BODY FOR REGULATING THE INSURANCE BUSINESS FOR PROVIDING TRAINING IN INSURANCE SECTOR AND ACCORDINGLY HAVE ADEQUATE INFRASTRUCTURE AND FACULTY SUITED FOR THAT JOB THE ASSESSEE HAS ONLY PROVIDED TRAINING (COACHING). WHETHER THE TRAINEE GOT SELECTED OR NOT IS NOT WITHIN THE DOMAIN OF THE TRAINING AND HENCE NO DETAILS COULD HAVE BEEN FURNISHED. 6.6.3(III) TRAINEES BELONG TO STATE OF CG, WHEREAS TRAINING EXPENSES ARE PAID TO BHOPAL BASED ENTITIES AND IT APPEARS ILLOGICAL THAT STUDENTS OF RAIPUR WILL COME ALL THE WAY TO BHOPAL FOR TRAINING THE TRAINING WAS ARRANGED AT VARIOUS PLACES. FURTHER STUDENTS FOR IGNOU (INDIRA GANDHI NATIONAL OPEN UNIVERSITY) WERE REGISTERED ON ALL INDIA BASIS AND WERE NOT RESTRICTED TO ANY PARTICULAR AREA. 6.6.3(IV) THE STUDENTS TO WHOM TRAINING HAS BEEN GIVEN ARE NOT WORKING WITH ANY PARTICULAR ORGANISATION THE STUDENTS ARE UNDERGOING BASIC SKILL DEVELOPMENT COURSES. 6.6.3(V) DETAILS OF TRAINING GIVEN TO THE COURSE WISE DETAILS OF THE AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 19 STUDENTS IS NOT FURNI SHED STUDENTS WAS FURNISHED AND THE TRAINING GIVEN WAS AS REQUIRED BY THAT SPECIFIC JOB. 6.6.3(VI) COPY OF AGREEMENT/MOU WITH SISTER CONCERNS NOT FURNISHED AVAILABILITY OR NON AVAILABILITY OF MOU WILL NOT MAKE ANY EXPENSES GENUINE OR NON GENUINE BY ITSELF. 6.6.4 THE ASSESSEE HAS MADE THIS ARRANGEMENT OF PAYMENT OF HUGE FEE ON ACCOUNT OF TRAINING EXPENSES TO ITS SISTER CONCERNS HAVING EXEMPTION U/S 12A AND THUS ENTIRE MOTIVE APPEARS TO PART ITS FUNDS WITH THESE EXEMPTED ENTITIES. FEES OF RS. 3,10,21,100/- IS PAID TO CORPORATE ENTITIES HAVING SAME RATE OF TAX AS IS APPLICABLE TO THE ASSESSEE. AS MENTIONED IN PARA 6.6.1 CERTIFICATION WORK WAS DONE BY THE RESPECTIVE UNIVERSITY. AISECT BHOPAL IS MANAGING A UNIVERSITY IN THE NAME OF AISECT UNIVERSITY. THUS PAYMENT OF RS. 3,28,27,000/- WAS MADE FOR TRAINING/ CERTIFICATION TO STUDENTS. THUS IT WOULD BE APPRECIATED THAT FEES WERE PAID TO THE INSTITUTE WHO WERE HAVING ADEQUATE INFRASTRUCTURE AND FACULTY AVAILABLE WITH THEM. FEES WERE RECEIVED FROM THE EXEMPTED ENTITIES ITSELF FOR PROVIDING TRAINING TO STUDENTS AND PART OF THE RECEIPT WAS PA ID BACK FOR PROVIDING CERTIFICATION/TRAINING AS REQUIRED. THUS THE ALLEGA TION THAT THE ASSESSEE HAS MADE PAYMENTS TO THESE ENTITIES TO DIVERT ITS I NCOME IS ILL FOUNDED AND NOT SUBSTANTIATED. THE LD. A.O. DISALLOWED THE WHOLE PAYMENT WITHOUT C ONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 20 AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSES SEE THE LD. CIT(A) HELD THAT PART OF THE PAYMENT IS MADE TO THE COMPANIES WHICH ARE LIABLE TO THE SAME RATE OF TAX. HE FURTHER OBSERVED THAT SOME OF THOSE CONCERNS ARE APPROVED BY IRDA FOR PROVIDING TRAININ G, COMPLETE DETAILS OF THE STUDENTS WERE PROVIDED BY THE ASSESSEE. THE LD. CIT(A) COMPARED THE BOOK RESULTS AND ON THE BASIS OF EARLIER DISALLOWAN CES, HE RESTRICTED THE DISALLOWANCE @5% OF THE TOTAL EXPENDITURE AND CONFI RMED THE ADDITION OF RS. 40,72,135/-AND ALLOWED THE RELIEF OF RS.7,73,70 565/-. IT IS HUMBLY SUBMITTED THAT THE DISALLOWANCE UPHEL D BY THE LD. CIT(A) IS UNWARRANTED FOR. COMPLETE DETAILS AND VOU CHERS HAVE BEEN MAINTAINED BY THE ASSESSEE AND ALL PAYMENTS ARE VER IFIABLE. UNDER THESE CIRCUMSTANCES, NO DISALLOWANCE IS CALLED FOR. 11. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE SUPP ORTED THE ORDER OF LD. A.O AS WELL AS THE FINDING OF LD. CIT (A) GIVEN AGAINST THE ASSESSEE. LD. DR ALSO REFERRED TO THE REPORT O F THE LD. A.O ALONG WITH OTHER DOCUMENTS FILED IN THE FORM OF PAPER BOO K DATED 6.4.2021. 12. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE SUB MISSIONS MADE BY BOTH THE SIDES AND DECISIONS RELIED BY LD. COUNS EL FOR THE ASSESSEE. 13. THE FIRST ISSUE RELATES TO DISALLOWANCE OF INTE REST EXPENSE OF RS.3,60,465/-. WE NOTE THAT THE LD. A.O HAS MADE T HIS ADDITION AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 21 OBSERVING THAT THE ASSESSEE HAD PROVIDED INTEREST F REE ADVANCE TO ITS STAFF AND ON THE OTHER HAND INTEREST WAS PAID ON TH E BORROWINGS. LD. CIT(A) DELETED THIS ADDITION AGAINST WHICH THE REVENUE IS IN APPEAL. WE HOWEVER FIND THAT THE ASSESSEE HAS TAKE N LOAN FOR PURCHASE OF VEHICLE WHICH IS USED FOR BUSINESS PURP OSES AND INTEREST OF RS.3,60,465/- IS THE INTEREST PAID ON THE CAR LOAN TAKEN FROM BANK OF INDIA. LEGER ACCOUNT OF INTEREST EXPE NSES AND LEDGER ACCOUNT OF BANK LOAN ACCOUNT IS AT PAGE 53 TO 55 OF THE PAPER BOOK FILED BY THE ASSESSEE ON 21.5.2020. THUS IT REMAIN S UNDISPUTED FACT THAT THE ALLEGED AMOUNT HAS BEEN PAID FOR CAR LOAN TAKEN FROM BANK AND IS AN ELIGIBLE BUSINESS EXPENDITURE. THUS ADDITION OF DISALLOWANCE OF RS.3,60,465/- WAS RIGHTLY DELETED B Y LD. CIT(A). ACCORDINGLY WE DISMISS REVENUES GROUND NO.1 FOR TH E ASSESSMENT YEAR 2013-14. 14. NOW THE SECOND ISSUE FOR ASSESSMENT YEAR 2013- 14 RELATES TO DISALLOWANCE OF REGISTRATION EXPENSES. BRIEF FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESSEE RUNS VARIOUS STUDY CENT RES ACROSS THE COUNTRY FOR PROVIDING GUIDANCE AND COUNSELLING TO S TUDENTS FOR VARIOUS COURSES AVAILABLE IN THE UNIVERSITY. RS.25 0/- PER STUDENT AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 22 WAS COLLECTED FOR 76931 STUDENTS OF WHICH 41675 WER E FOR SHORT TERM COURSES AND REMAINING FOR LONG TERM COURSES AN D REMITTED TO DR. C.V. RAMAN UNIVERSITY. DURING THE ASSESSMENT P ROCEEDINGS LD. A.O INADVERTENTLY TOOK BASIS OF 41675 STUDENTS BEIN G ENROLLED DURING THE YEAR AND DISALLOWED REMAINING SUM OF RS. 89,96,634/- WHEN THE MATTER CAME UP BEFORE LD. CIT(A) HE WAS AG AIN PROVIDED DETAILS OF ALL THE 76931 STUDENTS ALONG WITH THE DE TAILS OF COLLECTION FOR FEES FROM THE STUDENTS AND ITS REMITTANCES TO T HE UNIVERSITIES. BASED ON THESE DOCUMENTS AND APPRECIATING THE FACTS LD. CIT(A) DELETED THE ADDITION FOR RS.82,20,019/- BUT SUSTAIN ED THE DISALLOWANCE AT RS.7,76,615/- AS AN ADHOC DISALLOWA NCE OF 4% ON THE TOTAL EXPENSES INCURRED DURING THE YEAR BASED O N DISALLOWANCE MADE IN THE PREVIOUS ASSESSMENT YEARS OF THE ASSESS EE OBSERVING AS FOLLOWS:- GROUND NO.2: DISALLOWANCE OF RS.7,76,615/- TOWARDS REGISTRATION EXPENSES 13. GROUND NO. 4:- THROUGH THIS GROUND OF APPEAL THE APPELLANT HAS CHALLENGED THE ADDITION OF RS. 89,96,634/- OUT OF REGISTRATION EXPENSES. THE APPELLANT HAS INCURRED E XPENSES OF RS. 1,94,15,384/- ON REGISTRATION, RENEWAL & DATA PROCESSING EXPENSES AND THE ENTIRE PAYMENT WAS MADE TO AISECT RAIPUR AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 23 AN ASSOCIATE CONCERN OF THE ASSESSEE. DURING THE AS SESSMENT PROCEEDINGS THE ASSESSEE HAS SUBMITTED THE COPY OF RECEIPTS IN SUPPORT OF THE PAYMENTS. THE ASSESSEE HAS HOWEVER N OT PROVIDED ANY DETAILS' OF THE EXACT NATURE OF WORK A ND HAS ALSO FAILED TO FURNISH ANY AGREEMENT/MOU WITH AISECT RAI PUR (UNIVERSITY) TO JUSTIFY THE: PAYMENTS. DURING THE A SSESSMENT PROCEEDINGS THE ASSESSEE HAS SUBMITTED THAT THE ASS ESSEE COLLECTS FEES FROM THE STUDENTS FOR REGISTRATION AN D PROSPECTUS WHICH IS FORWARDED TO THE UNIVERSITY. NUMBER OF STU DENTS AND THE RATE AT WHICH SUCH FEES WAS COLLECTED AND REMIT TED TO THE UNIVERSITY WAS ALSO SUBMITTED. THE AO HOWEVER OBSER VED THAT THE DETAILS SUBMITTED BY THE ASSESSEE IS ONLY WITH REGARDS TO 41675 STUDENTS AND NOT OF 76931 STUDENTS AS CLAIMED BY THE ASSESSEE AND ACCORDINGLY RESTRICTED THE CLAIM OF TH E ASSESSEE TO SUCH NUMBER OF STUDENTS AND DISALLOWED THE BALAN CE PAYMENT. I HAVE CONSIDERED THE FACTS OF THE CASE, CONTENTIO NS RAISED BY THE APPELLANT AND FINDINGS OF THE AO. IT IS OBSE RVED THAT THE ASSESSEE HAS CLAIMED THAT IT HAS COLLECTED FEES FRO M THE STUDENTS THROUGH ITS ASSOCIATED CENTERS AND HAS REM ITTED THE FEES TO THE CONCERNED UNIVERSITY. DURING. THE ASSES SMENT PROCEEDINGS THE APPELLANT HAS SUBMITTED THE DETAILS OF THE FEES COLLECTED OF RS. 29,55,72,936/- BY IT ON BEHALF OF THE UNIVERSITY. THE AO HAS NOT DISPUTED THE FACT THAT T HE ASSESSEE HAS COLLECTED THE FEES AND REMITTED TO THE UNIVERSI TY. THE APPELLANT HAS FURNISHED THE RECEIPTS ISSUED BY THE UNIVERSITY WHICH ALSO CONFIRMS THAT THEY HAVE RECEIVED THE MON EY UNDER CONSIDERATION. THUS THE ONLY DISPUTE REMAINS WITH R EGARDS TO THE NUMBER OF STUDENTS WHICH HAVE BEEN CLAIMED BY T HE APPELLANT TO BE 76931 STUDENTS AND ALLOWED BY THE ASSESSEE AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 24 FOR ONLY 41675 STUDENTS WHICH WAS AS PER THE STUDENT WISE DETAILS FURNISHED BY THE ASSESSEE. IT IS SEEN THAT THE DETAILS FURNISHED BY THE ASSESSEE FOR 41675 STUDENTS WAS WI TH REGARDS TO THE STUDENTS REGISTERED FOR SHORT TERM C OURSES AS HAS BEEN SPECIFICALLY MENTIONED IN THE WRITTEN SUBMISSI ONS DATED 30.03.2016 IN PARA 3 WHICH WAS WITH REFERENCE TO TH E QUERY OF THE AO WITH REGARDS TO EXPENSES SHOWN UNDER THE HEA D 'FEES PAID' AND WAS NOT WITH REFERENCE TO THE EXPENSES BO OKED UNDER THE HEAD 'REGISTRATION, RENEWAL AND DATA PROC ESSING FEES'. THE QUERY REGARDING THE EXPENSE BOOKED UNDER THE HEAD 'REGISTRATION, RENEWAL AND DATA PROCESSING FEES' WA S REPLIED IN PARA 2 OF THE SAME REPLY IN WHICH THE NUMBER OF STU DENTS IS MENTIONED AS 76931 STUDENTS. IN PARA 5 OF THE SAME REPLY THE ASSESSEE HAS MENTIONED THAT 'AS EXPLAINED EARLIER A TOTAL OF 76931(AS IN 4 ABOVE) + 41675(SHORT TERM CERTIFICATE PROGRAMME) = 1,18,606 STUDENTS JOINED VARIOUS PROGRAMS ....' T HUS IT IS SEEN THAT THE AO ' HAS PICKED UP THE NUMBER OF STUD ENTS OF SHORT TERM COURSES' MENTIONED IN THE WRITTEN SUBMIS SION IN SOME OTHER CONTEXT. THUS' THE DISALLOWANCE MADE BY THE AO TOWARDS DIFFERENCE IN THE, NUMBER OF STUDENTS WAS N OT JUSTIFIED. IT IS HOWEVER SEEN THAT AS PER THE CALCULATION PROV IDED, THE ASSESSEE WAS REQUIRED TO HAVE PAID RS. 1,92,32,750/ -(RS.250 * 76931 STUDENTS) AS AGAINST EXPENSES CLAIMED OF RS. 1,94,15,384/- AND THE DIFFERENCE IS ON ACCOUNT OF SOME EXTRA PAYMENTS MADE. IT IS FURTHER SEEN THAT THE ASSESSMENT OF VARIOUS EARLIER YEARS WAS COMPLETED U/S 263/1481143(3} IN VARIOUS YEARS IN WHICH DISALLOWANCES WERE MADE TOWARDS DATA PROCESSI NG EXPENSES AS DETAILED BELOW: AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 25 A.Y EXPENSES CLAIMED EXPENSES DISALLOWED PERCENTAGE DISALLOWANCE 2010-11 11,03,500/- 50,000/- 4.53% 2011-12 8,62,929/- NIL - 2012-13 1,03,19,288/- 2,50,000/- 2.42% TOTAL 1,22,85,717/- 3,00,000/- 2.44% THE AO HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD WHICH SUGGESTS THAT THE APPELLANT HAS INCURRED THE EXPENS ES OTHER THAN BUSINESS PURPOSE. IN THE CASE OF INTERNATIONAL FOREST CO. VS. CIT (1975) 101 ITR ,721 (J&K) IT IS HELD THAT A O CANNOT PROCEED TO MAKE AN ARBITRARY ADDITION AND BASE HIS CONCLUSION PURELY ON GUESS WORK. HE OUGHT TO HAVE RELATED HIS ESTIMATE TO SOME EVIDENCE OR MATERIAL ON THE RECORD AS IT IS NO W WELL SETTLED THAT IF THE PROFITS SHOWN BY THE APPELLANT IN HIS R ETURN ARE NOT ACCEPTED IT IS FOR THE TAXING AUTHORITIES TO PROVE THAT THE APPELLANT HAS MADE MORE PROFITS THAN RETURNED. HERE THE AO FAILED TO BRING ON RECORD ANYTHING WHICH SHOWS THAT APPELLANT HAS EARNED MORE PROFIT THAN DECLARED. THE AO HAS NO T MADE ANY ENQUIRY AND ARBITRARILY MADE THE ADDITION. CONSIDERING ALL THE ABOVE FACTS IT WOULD BE' FAIR AND REASONABLE TO RESTRICT THE DISALLOWANCE TO 4.00 OF THE EXPENSES CLAIMED BASED ON DISALLOWANCE MADE IN PAST YEARS IN THE ASSESSMENTS COMPLETED U/S 263/148/143(3). THEREFORE , THE ADDITION MADE BY THE A.O. AMOUNTING TO RS. 7,76,615 /- (RS.1,94,15,384 X 0.04) IS CONFIRMED. THE APPELLANT WILL GET THE RELIEF OF- RS. 82,20,019/-. THEREFORE, THE APPEAL O N THIS 'GROUND IS PARTLY ALLOWED. 15. SO FAR AS THE RELIEF GIVEN BY LD. CIT(A) CONCER NED, IT IS AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 26 CLEARLY A FACTUAL MATTER OF DETAILS OF STUDENTS FUR NISHED BEFORE THE LOWER AUTHORITIES AND BEFORE US SHOWING THAT THE LD. A.O INADVERTENTLY CONSIDERED THE NUMBER OF STUDENTS AS 41675 THOUGH THERE WERE 76931 STUDENTS AND THEREFORE THE APPELLANT HAS RIGHTLY INCURRED THE EX PENSES OF REGISTRATION REALISATION OF DATA PROCESSING AT RS.1,94,15,384/- . AS REGARDS THE ADHOC DISALLOWAN CE MADE BY LD. CIT(A) AT RS.7,76,615/- IS CONCERNED TH ERE IS NO EVIDENCE BROUGHT ON RECORD AND THE ADHOC DISALLOWANCE IS PURELY BASED ON THE TRACK RECORD OF ASSESSMENT OF THE ASSESSEE IN PRECEDING YEARS. ALL THE RECORDS PERTAINING TO COLLECTION OF FEES, ITS REMIT TANCES OF SUCH COLLECTION TO THE UNIVERSITY AND RECEIPTS FROM THE UNIVERSITY ACKNOWLEDGING THE RECEIPT TO THE FEES AR E ON THE RECORD AND HAVE NOT BEEN CHALLENGED OR FOUND TO BE INCORRECT AT ANY STAGE. THUS SUCH DISALLOWANCE OF RS.7,76,615/- WAS UNCALLED FOR. ACCORDINGLY WE ARE OF THE CONSIDERED VIEW THAT NO ADDITION FOR RS.89,96,634/- WAS REQUIRED TO BE MADE BY THE LD. A.O. WE ACCORDINGLY ALLOW GROUND NO.2 RAISED BY THE ASSESSEE AND DISMISS GROU ND AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 27 NO.2 RAISED BY THE REVENUE. 16. NOW WE TAKE UP THIRD ISSUE PERTAINING TO DISALLOWANCE OF PURCHASE MADE FROM SISTER CONCERNS WHEREIN LD. A.O DISALLOWED TOTAL PURCHASE OF RS.3,04,29,100/- MADE FROM SISTER/ASSOCIATE CONCERN S BUT LD. CIT(A) SUSTAINED THE DISALLOWANCE ONLY TO T HE EXTENT OF RS.9,12,873/- OUT OF 3% OF THE TOTAL PURC HASE FROM SISTER CONCERNS. THE ASSESSEE AND REVENUE ARE IN APPEAL WHEREIN ASSESSEE HAS RAISED GROUND NO.3 CHALLENGING THE DISALLOWANCE SUSTAINED AT RS.9,12,8 73/- WHEREAS REVENUE HAS RAISED GROUND NO.3 CHALLENGING THE FINDING OF LD. CIT(A) DELETING THE ADDITION OF RS.2,95,16,227/-. 17. FACTS IN BRIEF PERTAINING TO THIS ISSUE ARE THA T ASSESSEE SUPPLIED/POSTED STUDY MATERIALS TO THE STU DENTS OF VARIOUS EDUCATIONAL INSTITUTIONS. GROSS RECEIP TS FOR THE YEAR INCLUDES RS.4,12,15,433/- RECEIVED FROM AISECT , BHOPAL TOWARDS SALE OF BOOKS/FEES FOR SUPPLY OF COU RSE MATERIAL AND RS.10,59,50,349/- FROM AISECT, RAIPUR. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 28 LD. A.O HAS NOT DISPUTED THIS COURSE RECEIPTS AT AN Y STAGE WHICH INCLUDES THE RECEIPTS FROM SISTER CONCERNS. DURING THE YEAR ASSESSEE HAS PURCHASED BOOKS WORTH RS. 3,04,29,100/- FROM ITS SISTER CONCERNS. LD. A.O DISALLOWED THIS PURCHASES FOR WANT OF COPY OF MEMORANDUM OF UNDERTAKING, JUSTIFICATION OF PAYMENT , BILLS AND LIST OF BOOKS, REASON FOR ENTRUSTING THE JOB TO SISTER CONCERNS. HOWEVER LD. A.O HAS NOT GIVEN ANY ADVERSE COMMENTS QUESTIONING THE GENUINENESS OF WORKING OF SISTER CONCERNS AND THE CORRESPONDING TREATMENT OF SALES IN THEIR RESPECTIVE BOOKS. WE A LSO NOTE THAT LD. CIT(A) SUSTAINED THE DISALLOWANCE OF PURCH ASE MAKING ADHOC DISALLOWANCE @3% BASED ON THE ASSESSMENTS COMPLETED IN PAST YEARS OBSERVING AS FOLLOWS:- 14. GROUND NO. 5:- THROUGH THIS GROUND OF APPEAL THE AP PELLANT HAS CHALLENGED THE ADDITION OF RS. 3,04,23,100/-.DU RING THE YEAR THE ASSESSEE HAS INCURRED AN EXPENSE OF RS. 5,14,59,665/- ON PURCHASE OF COURSE MATERIAL OUT OF WHICH PAYMENTS OF RS. 3,04,29,100/- WAS FOUND TO HAVE BEE N MADE TO NON CORPORATE ASSOCIATE CONCERNS WHICH WAS CONSI DERED BY AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 29 THE AO AS DIVERSION OF FUNDS OF THE COMPANY TO AISE CT AND OTHER SOCIETY WHEREIN EXEMPTION U/S 12AA ARE AVAILA BLE AND WAS ACCORDINGLY DISALLOWED. THE AO ALSO OBSERVED TH AT THE ASSESSEE HAS FAILED TO PROVIDE THE INVOICES FOR SUP PLY OF BOOKS FROM SISTER CONCERN BECAUSE OF WHICH THE GENUINENES S OF THE EXPENSE IS NOT ESTABLISHED. THE ASSESSEE ALSO FAILE D TO FURNISH ANY AGREEMENT/MOU WITH THE SISTER CONCERNS FOR SUCH APPLY AND COULD ALSO NOT EXPLAIN THE REASONS FOR ENTRUSTI NG THE JOB TO SISTER CONCERNS. IT IS OBSERVED THAT THE MAIN REASON FOR DISBELIEVI NG THE GENUINENESS OF THE EXPENSE IS THE FACT THAT THE PAY MENTS ARE MADE TO SISTER CONCERNS WHICH ARE ENJOYING TAX EXEM PTION AND ACCORDINGLY THE EXERCISE IS SIMPLY DONE FOR DIVERSI ON OF FUNDS TO EXEMPTED ENTITIES. THE ASSESSEE HAS DRAWN MY ATTENT ION TO THE ASSESSMENT ORDER PASSED U/S 143(3) IN THE CASE OF AISECT SOCIETY FOR THE SAME YEAR IN WHICH THE EXEMPTION AV AILABLE TO SAID ENTITY HAS BEEN DENIED AND THE REASON FOR SUC H DENIAL AS MENTIONED IN THE ASSESSMENT ORDER IS THAT THE ASSES SEE HAS PURCHASED AS WELL AS SOLD BOOKS TO AIS~CT LTD WHICH HAVE BEEN DONE WITH THE OBJECT OF GIVING DIRECT/INDIRECT BENEFIT TO THE SAID COMPANY. THUS IN THE ASSESSMENT OF THE PAYER A S WELL AS THE PAYEE THE RESPECTIVE AO'S HAVE ALLEGED DIVERSIO N OF FUNDS TO 'THE OTHER PARTY. IT WOULD HAVE TO BE APPRECIATE D THAT BOTH THE PARTIES CANNOT PROVIDE UNDUE BENEFITS TO EACH OTHER IN THE SAME TRANSACTION. THUS THESE OBSERVATIONS/ALLEGATIO NS IN ABSENCE OF ANY SUPPORTING MATERIAL ON RECORD ARE RE QUIRED TO BE IGNORED. THE AO HAD ALSO DOUBTED THE PURCHASE AS TH E ASSESSEE HAS FAILED TO SUBMIT COPY OF' MOUI AGREEMENT; HOWEVER AVAILABILITY OR 'NON AVAILABILITY OF MOU CANNOT BE A DETERMINATIVE FACTOR OF THE GENUINENESS OF THE TRANSACTION. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 30 FURTHER IN THE CASE OF PURCHASE/SALE GENERALLY NO M OU IS PREPARED AND IN ABSENCE OF ANY SUCH MOU THE ASSESSE E COULD NOT HAVE BEEN EXPECTED TO PRODUCE IT. AS REGARDS NO T GIVING ANY JUSTIFICATION FOR PURCHASE OF BOOKS FROM THE SISTER CONCERNS IT IS NOTED THAT THE ASSESSEE HAS BEEN SUPPLYING/ SELLING BOOKS' TO THE STUDENTS OF ASSOCIATED UNIVERSITIES FOR WHICH F EES HAS BEEN RECEIVED BY IT FROM THE SAID UNIVERSITIES AND THERE WAS NOTHING UNUSUAL M PURCHASING BOOKS FROM THE UNIVERSITY FOR BEING SUPPLIED TO THE STUDENTS. THE ASSESSEE HAS EXPLAINE D THAT THE UNIVERSITY WAS CONCENTRATING ITS EFFORTS ON ITS COR E ACTIVITY OF EDUCATION AND IN THE PROCESS HAVE OFF LOADED NON CO RE ACTIVITIES INCLUDING ACTIVITY OF SUPPLYING BOOKS TO ITS STUDEN TS TO THE ASSESSEE COMPANY WAS A JUSTIFIABLE REASON. AS REGAR DS NON SUBMISSION OF THE INVOICES FOR PURCHASES IT IS SEEN THAT THE COPY OF INVOICES WERE FILED BEFORE THE AO ON SAMPLE BASI S. THE AO HAS ALSO MENTIONED IN THE ASSESSMENT ORDER ITSELF T HAT COPIES OF SOME BILLS WERE FURNISHED. IT IS FURTHER SEEN THAT THE ASSESSEE HAS SHOWN AN INCOME OF RS. 41,75,89,138/- FROM 'FEES & COURSE MATERIAL RECEIPTS' AND RS. 9,35,92,168/- FROM SALES. AS PER THE DETAIL S FURNISHED BY THE ASSESSEE BEFORE THE AO IN ITS WRITTEN SUBMIS SION THE SAID RECEIPTS INCLUDE RS.12,83,43, 743/- RECEIVED B Y THE ASSESSEE TOWARDS SALES OF BOOKS AND COURSE MATERIAL . THIS SALE HAS NOT BEEN DISPUTED BY THE AO. AS AGAINST TH IS SALE OF BOOKS AND COURSE MATERIAL THE ASSESSEE IS FOUND TO HAVE INCURRED EXPENSES ON PURCHASES OF RS.5,14,59,665/- IN VIEW OF THE FACT THAT THE SALES OF BOOKS ARE NOT DISPUTED I TS CORRESPONDING PURCHASE CANNOT BE HELD AS NON GENUIN E. IT IS ALSO OBSERVED THAT THE AO HAVE NOT BROUGHT ON RECOR D ANY MATERIAL TO SUBSTANTIATE THAT THE PURCHASE IS MADE AT A HIGHER AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 31 VALUE COMPARED .TO MARKET RATE. THUS THE DISALLOWAN CE IS MADE SOLELY ON SUSPICION WITHOUT ANY MATERIAL TO SUPPORT SUCH SUSPICION. IT IS FURTHER SEEN THAT THE ASSESSMENT FOR A.Y 201 0-11, 2011-12 & 2012-13 HAVE BEEN COMPLETED U/S 148/143(3) AND THE ASSESSED N.P RATIO IN THESE YEARS WAS 7.25, 7.1 3 & 8.55- RESPECTIVELY AS AGAINST THE RETURNED N.P RATIO OF 7 .94 FOR THE YEAR UNDER CONSIDERATION. THIS ALSO NEGATES THE 'PR ESUMPTION THAT THE FUNDS HAVE BEEN DIVERTED TO THE ASSOCIATED CONCERNS. IT IS FURTHER SEEN THAT THE ASSESSMENT OF VARIOUS EARLIER YEARS WAS COMPLETED U/ S 148/143(3) IN VARIOUS YEAR S IN WHICH DISALLOWANCES WERE MADE TOWARDS PURCHASE OF C OURSE MATERIAL AS DETAILED BELOW: A.Y EXPENSES CLAIMED EXPENSES DISALLOWED PERCENTAGE DISALLOWANCE 2010-11 2,89,92,487/- 10,00,000/- 3.45% 2011-12 2,55,32,924/- 7,50,000/- 2.94% 2012-13 11,96,66,763/- 30,00,000/- 2.51% TOTAL 17,41,92,174/- 47,50,000/- 2.72% THE AO HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD WHICH SUGGESTS THAT THE APPELLANT HAS INCURRED THE EXPENS ES OTHER THAN BUSINESS PURPOSE. IN THE CASE OF INTERNATIONAL FOREST CO. VS. CIT (1975) 101 ITR 721 (J&K) IT IS HELD THAT AO CANNOT PROCEED TO MAKE AN ARBITRARY ADDITION AND BASE HIS CONCLUSION PURELY ON GUESS WORK. HE OUGHT TO HAVE RELATED HIS ESTIMATE TO SOME EVIDENCE OR MATERIAL ON THE RECORD AS IT IS NO W WELL SETTLED THAT IF . THE PROFITS SHOWN BY THE APPELLAN T IN HIS RETURN ARE NOT ACCEPTED IT IS FOR THE TAXING AUTHORITIES T O PROVE THAT THE AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 32 APPELLANT HAS MADE MORE PROFITS THAN RETURNED. HERE THE AO FAILED TO BRING ON RECORD ANYTHING WHICH SHOWS THAT APPELLANT HAS EARNED MORE PROFIT THAN DECLARED. THE AO HAS NOT MADE ANY ENQUIRY AND. ARBITRARILY MADE THE ADDITION. CONSIDERING ALL THE ABOVE FACTS IT WOULD BE FAIR A ND REASONABLE TO RESTRICT THE DISALLOWANCE TO 3.00 OF THE EXPENSES CLAIMED BASED ON DISALLOWANCE MADE IN PAST YEARS IN THE ASSESSMENTS COMPLETED U/S 148/143(3). THEREFORE, TH E ADDITION, MADE BY THE A.O. AMOUNTING TO RS. 9,12,873/ - (RS.3,04,29, 100 X 0.03) IS CONFIRMED. THE APPELLANT WILL GET THE RELIEF OF RS. 2,95,16,227/-. THEREFORE, THE APPEAL ON THI S GROUND IS PARTLY ALLOWED. 18. THE ABOVE FINDING OF LD. CIT(A) THROWS LIGHT ON THE WORKING OF ASSESSEE AND ITS SISTER CONCERNS IN THE FIELD OF PROVIDING EDUCATION TO THE STUDENTS AND THAT PURCHA SE OF BOOKS IS A NECESSARY PART IN THE FIELD OF IMPARTING EDUCATION. ALL THE BOOKS PURCHASE HAVE BEEN POSTE D THROUGH POSTAL AUTHORITIES. REVENUE RECEIPT FROM S ISTER CONCERNS HAS NOT BEEN DOUBTED. PAYMENT FOR PURCHASE ARE MADE THROUGH BANKING CHANNEL. FURTHER WHEN THE SALES ARE NOT DOUBTED HOW CAN THE PURCHASE BE DOUBT FUL. FINANCIAL STATEMENTS ARE DULY AUDITED AND THE BOOKS RESULTS HAVE BEEN ACCEPTED BY THE LD. A.O EXCEPT FO R THE AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 33 DISALLOWANCE MADE. WE FURTHER OBSERVE THAT PAYMENT TO RELATED PARTIES NEEDS TO GO THROUGH THE SCANNER PRO VIDED UNDER THE PROVISIONS OF SECTION 40A(2)(A) OF THE AC T WHICH READS AS FOLLOWS:- (2) (A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE I N RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REF ERRED TO IN CLAUSE (B) OF THIS SUB- SECTION, AND THE ASSESSING] OFFICER IS OF OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING RE GARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHI CH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THERE FROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESS IVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION: 19. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. A.O CAME ACROSS SUCH PAYMENTS MADE TO RELATED PARTI ES OR SISTER CONCERNS. HE NEED TO FIRST EXAMINE THE INFORMATION THAT WHETHER SUCH EXPENDITURE IS EXCESS IVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VA LUE OF THE BOOKS, FOR WHICH PAYMENT IS MADE OR THE PURCHAS E ARE MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OF PROFESSION. PERUSAL OF RECORDS SHOWS THAT NO SUCH ACTIVITY HAVE BEEN UNDERTAKEN BY THE LD. A.O BEFORE CONCLUDING THAT PURCHASES FROM SISTER CONCERNS ARE NOT AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 34 GENUINE OR THEY ARE MADE AT AN INFLATED PRICE. THE REFORE MAKING DISALLOWANCE OF PURCHASE JUST BECAUSE THEY A RE FROM SISTER CONCERNS/ RELATED PARTIES, MEMORANDUM O F UNDERTAKING NOT PREPARED AND WHY THE JOB WAS ENTRUSTED TO SISTER CONCERNS MERELY SHOWS THAT THE DISALLOWANCE OF PURCHASE MADE BY THE LD. A.O WAS ON SURMISES AND CONJECTURES AND WITHOUT ANY SUPPORT OF ANY EVIDENCE. THE DISALLOWANCE SUSTAINED BY LD. CIT (A) AT RS.9,12,873/- IS MERELY BASED ON THE ADDITION MADE DURING ASSESSMENTS OF PRECEDING YEARS. HAD IT BEEN A LEGAL ISSUE THIS WOULD HAVE BEEN DIFFERENT BUT BEIN G A FACTUAL MATTER SUCH DISALLOWANCE ON ADHOC BASIS SHO ULD BE AVOIDED UNLESS AND UNTIL SUPPORTED BY EVIDENCE AND PROPER FINDING. 20. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANC ES OF THE CASE ARE OF THE CONSIDERED VIEW THAT NO DISALLO WANCE OF PURCHASE FROM THE SISTER CONCERN AT RS.3,04,29,1 00/- WAS CALLED FOR. THE FINDING OF LD. CIT(A) IS SET A SIDE TO THE EXTENT OF SUSTAINING THE DISALLOWANCE OF PURCHASE A T AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 35 RS.9,12,873/-. IN THE RESULT TOTAL DISALLOWANCE FO R RS.3,04,29,100/- IS DELETED. GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED AND THAT OF GROUND NO.3 RAISED BY THE REVENUE IS DISMISSED. 21. NOW WE TAKE UP THE FOURTH ISSUE RELATING TO TRA INING EXPENSES INCURRED BY THE ASSESSEE AT RS.8,14,42,700 /-. DURING THE YEAR FOLLOWING AMOUNT WAS PAID/DUE TO BE PAID TO THE FOLLOWING CONCERNS TOWARDS TRAINING EXP ENSES INCURRED DURING THE YEAR:- 22. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. NAME OF THE SISTER CONCERN AMOUNT PAID (IN RS) AISECT BHOPAL 3,28,27,000 SECT INFO TECH LTD 1,43,15,100 SECT 1,75,94,600 SECT PVT LTD 1,67,06,000 TOTAL 8,14,42,700 AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 36 A.O CALLED FOR THE INFORMATION TO EXAMINE THE GENUINENESS OF THE EXPENDITURE. DETAILS FILED BY T HE ASSESSEE WERE FOUND TO BE INSUFFICIENT. LD. A.O WA S OF THE VIEW THAT ASSESSEE HAS NOT FURNISHED DETAILS OF FACTUALITY INVOLVED IN THE PROCESS, DETAILS OF THE TRAINING GIVEN TO THE STUDENTS, ABSENCE OF ANY MEMORANDUM OF UNDERSTANDING AND NO JUSTIFICATION AS TO WHY THE STUDENTS OF CHHATTISGARH CAME TO PREPARING AT BHOPA L. BASED ON THESE OBSERVATION LD. A.O DISALLOWED THE T OTAL TRAINING EXPENSE OF RS.8,14,42,700/-. ASSESSEE CHALLENGED THIS BEFORE LD. CIT(A) AND ALMOST SUCCEE DED EXCEPT FOR THE ADHOC DISALLOWANCE OF 5% OF THE TOTA L EXPENDITURE AT RS.40,72,135/- SUSTAINED BASED ON PA ST ASSESSMENT. NOW BOTH THE ASSESSEE AND REVENUE ARE IN APPEAL RAISING GROUND NO.4 IN THEIR RESPECTIVE APPE ALS FOR ASSESSMENT YEAR 2013-14 CHALLENGING THE FINDING OF LD. CIT(A). 23. WE NOTE THAT THESE TRAINING EXPENSES ARE CONSIS TENTLY AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 37 INCURRED BY THE ASSESSEE AND PAID TO CONCERNS CONSISTENTLY ENGAGED IN THIS FIELD. AISECT, BHOPAL TO WHICH THE PAYMENT OF RS.3,28,27,000/- IS MADE IS A UNIVERSITY WITH LARGE INFRASTRUCTURE. DURING THE Y EAR ON ONE HAND THE ASSESSEE HAS PAID RS.3.28 CRORES TO AISECT, BHOPAL FOR TRAINING EXPENSES BUT ON THE OTH ER HAND IT RECEIVED RS.8.98 CRORES FOR TRAINING FOR IG NOU STUDENTS AND RS.1.87 CRORES TOWARDS TRAINING STUDEN TS OF VOCATIONAL COURSES. REVENUE RECEIVED FROM AISECT, BHOPAL HAS BEEN ACCEPTED BUT PAYMENT MADE HAVE NOT DISPUTED. 24. SIMILARLY SECT INFO TECH LTD TO WHICH ASSESSEE PAID RS.143,15,100/- IS A CORPORATE ENTITY AND DULY APPR OVED BY INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY F OR CONDUCTING COURSES ON INSURANCE. ON RECORD ASSESSE E HAD 14900 STUDENTS PURSUING INSURANCE AND BANKING COURSES. THE TRANSACTION THUS SEEMS TO BE GENUINE AS THE PAYMENT MADE THROUGH BANKING CHANNEL AND TAX DEDUCTED AT SOURCE. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 38 25. AS REGARDS PAYMENT MADE TO SECT FOR ELECTRONICS AND COMPUTER TECHNOLOGY AT RS.1,75,94,600/- IT IS OBSERVED THAT SECT RUNS THE COLLEGE OF PROFESSIONAL EDUCATION PROVIDING COURSES LIKE BA, B.COM, BBA, BC A HAVING ITS OWN INFRASTRUCTURE AND THE FACILITY TO T RAIN THE STUDENTS. 26. TRADING EXPENSES OF RS.1,67,06,000/- INCURRED A ND PAID TO SIGNIFICANT ELECTRONIC & COMPUTER TECHNOLOG Y PVT. LTD (SECT) WHICH IS A CORPORATE ENTITY AND THE REVENUE RECEIVED FROM THE ASSESSEE IS PART OF THE I NCOME WHICH IS TAXED AT THE SAME RATE AS THAT APPLICABLE TO THE ASSESSEE. SECT IS AN APPROVED CORPORATE AGENT FOR LIC. 27. WE ALSO OBSERVE THAT THE ABOVE STATED FACTS WER E CONSIDERED BY LD. CIT(A) WHO SCALED DOWN THE DISALLOWANCE TO RS.40,72,135/- AND THAT TOO OF ADHO C IN NATURE OBSERVING AS FOLLOWS:- 15. GROUND NO. 6:- THROUGH THIS GROUND OF APPEAL THE AP PELLANT HAS CHALLENGED THE ADDITION OF RS. 8,14,42,700/-. DURING THE YEAR THE ASSESSEE HAS INCURRED AN EXPEN SE OF AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 39 RS. 8,20,31,006/- UNDER THE HEAD 'TRAINING EXPENSES ' OUT OF WHICH PAYMENTS OF RS. 8,14,42,700/- WAS FOUND TO HA VE BEEN MADE TO ASSOCIATE CONCERNS WHICH ALSO INCLUDED PAYM ENTS MADE TO SOCIETIES ENJOYING EXEMPTION IX] S 12AA OF THE ACT. THE AO ALSO OBSERVED THAT THE ASSESSEE HAS FAILED TO PR OVIDE THE DETAILS OF THE TRAINING AND JUSTIFICATION OF THE WO RK DONE. THE ASSESSEE ALSO FAILED TO FURNISH ANY AGREEMENT/MOU W ITH THE SISTER CONCERNS. THE AO ALSO OBSERVED THAT THE ASSE SSEE FAILED TO PROVIDE DETAILS OF THE FACULTY INVOLVED IN THE P ROCESS OF IMPARTING TRAINING TO THE STUDENTS. ON VERIFICATION OF THE DETAILS OF THE STUDENTS TO WHOM TRAINING WAS PROVIDED, IT W AS NOTICED THAT MOST OF THE STUDENTS BELONG TO THE STATE OF C HATTISGARH AND IT WOULD BE IMPROBABLE FOR THESE STUDENTS TO HAVE A TTENDED THE TRAINING CLAIMED TO HAVE BEEN GIVEN BY THESE INSTIT UTIONS WHICH ARE PLACED AT BHOPAL. THE ASSESSEE COULD ALSO NOT EXPLAIN THE REASONS FO R ENTRUSTING THE JOB TO SISTER CONCERNS. THESE PAYMEN TS TO ASSOCIATED CONCERNS WERE ACCORDINGLY CONSIDERED BY THE AO AS DIVERSION OF FUNDS OF THE COMPANY TO AISECT AND OTH ER SOCIETY WHEREIN EXEMPTION IX] S 12AA IS AVAILABLE AND WAS ACCORDINGLY DISALLOWED. IT IS OBSERVED THAT THE MAIN REASON FOR DISBELIEVING. THE GENUINENESS OF THE EXPENSE IS THE FACT THAT THE PAY MENTS ARE MADE TO SISTER CONCERNS WHICH ARE ENJOYING TAX EXEM PTION AND ACCORDINGLY THE EXERCISE IS SIMPLY DONE FOR DIVERSI ON OF FUNDS TO EXEMPTED ENTITIES. THE ASSESSEE HAS DRAWN MY ATTENT ION TO THE ASSESSMENT ORDER PASSED U/S 143(3) IN THE CASE OF A ISECT SOCIETY FOR THE SAME YEAR IN WHICH THE EXEMPTION AV AILABLE TO SAID ENTITY HAS BEEN DENIED AND THE REASON FOR SUCH DENIAL AS AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 40 MENTIONED IN THE ASSESSMENT ORDER IS THAT THE ASSES SEE HAS PURCHASED AS WELL AS SOLD BOOKS TO AISECT LTD WHICH HAVE BEEN DONE WITH THE OBJECT OF GIVING DIRECT/INDIRECT BENEFIT TO THE SAID COMPANY. THUS IN THE ASSESSMENT OF THE PAYER A S WELL AS THE PAYEE THE RESPECTIVE AO'S HAVE ALLEGED DIVERSIO N OF FUNDS TO THE OTHER PARTY. IT WOULD HAVE TO BE APPRECIATED THAT BOTH THE PARTIES CANNOT PROVIDE UNDUE BENEFITS TO EACH OTHER IN THE SAME TRANSACTION. THUS THESE OBSERVATIONS/ALLEGATIONS IN ABSENCE OF ANY MATERIAL ON RECORD ARE REQUIRED TO BE IGNORED. FURTHER PAYMENTS ARE ALSO MADE TO CONCERNS WHICH ARE ASSESS ED IN THE STATUS OF 'COMPANY' AND LIABLE FOR TAX AT THE SAME RATE AS APPLICABLE TO THE ASSESSEE COMPANY AND THUS NO ALLE GATION OF DIVERSION OF FUNDS TO SUCH ENTITIES IS JUSTIFIED WI THOUT CLINCHING EVIDENCE; THE AO HAD ALSO DOUBTED THE GENUINENESS O F THE EXPENSES AS THE ASSESSEE HAS FAILED TO SUBMIT COPY OF MOU / AGREEMENT; HOWEVER AVAILABILITY OR NON AVAILABILITY OF MOU CANNOT BE A DETERMINATIVE FACTOR OF THE GENUINENESS OF THE TRANSACTION. THE CONTENTION OF THE AO THAT THE ASSE SSEE HAS FAILED TO PROVIDE THE DETAILS OF FACULTY USED IS AL SO DEVOID OF ANY MERITS AS FIRSTLY NO SUCH INFORMATION WAS CALLE D FROM THE ASSESSEE AND SECONDLY IT IS WELL ESTABLISHED THAT A ISECT BHOPAL IS OPERATING A UNIVERSITY WHICH IS' APPROVED BY THE UNIVERSITY GRANT COMMISSION WHICH ITSELF ESTABLISHE S THAT IT HAS ADEQUATE FACULTY TO PROVIDE TRAINING TO THE STU DENTS. THE ASSESSEE HAS SUBMITTED THE COPY OF FORM 26AS AND II 'R OF SECT INFOTECH P LTD AND SIGNIFICANT ELECTRONICS AND COMP UTER TECHNOLOGY P LTD WHICH ESTABLISHES THAT THESE ENTIT IES ARE- REGISTERED WITH IRDA AND LIC FOR PROVIDING TRAINING TO STUDENTS IN THE FIELD OF INSURANCE AND FOR APPOINTMENT OF AG ENTS AND THE AVAILABILITY OF FACULTY CANNOT BE QUESTIONED. AS RE GARDS SECT AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 41 SOCIETY IT IS OBSERVED THAT' THE SOCIETY IS COLLEGE S FOR VARIOUS COURSES AND IN THAT CASE ALSO AVAILABILITY OF FACUL TY IS ESTABLISHED. THE AO HAS ALSO MENTIONED THAT THE ASS ESSEE HAS FAILED TO PROVIDE THE DETAILS OF THE STUDENTS TRAIN ED WHO WERE PLACED N THE BANKING AND INSURANCE SECTOR. IN THIS REGARDS THE SUBMISSION OF THE ASSESSEE THAT IT HAS PROVIDED TRAINING TO THE STUDENTS AND WHETHER -SUBSEQUENTLY THE STUDENT GOT SELECTED OR NOT WAS OUTSIDE THEIR PURVIEW ALSO CARRIES WEIGHT. IT IS FURTHER SEEN THAT THE ASSESSEE HAS RECEIVED RS.10,84,66,946/ - FROM AISECT UNIVERSITY FOR PROVI DING TRAINING TO STUDENTS OF VARIOUS STREAMS(WHICH IS INCLUDED IN THE FEES RECEIVED BY THE ASSESSEE AND IS ALSO READILY VERIFI ABLE FROM THE ASSESSMENT ORDER OF AI SECT SOCIETY ALSO) AND THE A SSESSEE HAS INCURRED AN EXPENSE OF RS. 8,20,31,006/-IN ARRANGIN G TRAINING OF THE STUDENTS WHICH INCLUDED RS. 8,14,42,700/- PAID TO ASSOCIATED CONCERNS WHO ARE ALL ESTABLISHED . TO BE INVOLVED III EDUCATION/TRAINING. IT IS ALSO OBSERVED THAT THE AS SESSMENT OF THE ASSESSEE FOR A.Y 2010-11, 2011-12 & 2012-13 HAVE BEEN COMPLETED U/S 148/143(3) AND THE ASSESSED N.P RATIO IN THESE YEARS WAS 7.25, 7.13 & 8.55 RESPECTIVELY AS AGAINST THE RETURNED N.F RATIO OF 7.94) FOR THE YEAR UNDER CONSIDERATION. TH IS ALSO NEGATES THE 'PRESUMPTION THAT THE -FUNDS HAVE BEEN DIVERTED TO THE ASSOCIATED CONCERNS. IT IS FURTHER SEEN THAT THE ASSESSMENT OF THE ASSE SSEE FOR A.Y 2014-15 WAS ALSO COMPLETED U/S 143(3) IN WHICH THE ASSESSEE HAS BOOKED TRAINING EXPENSES OF RS. 4,55,1 8,644/- OUT OF WHICH RS. 22,75,932/-( 5 ) WERE DISALLOWED. THE AO HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD WHICH AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 42 SUGGESTS THAT THE APPELLANT HAS INCURRED THE EXPENS ES OTHER THAN BUSINESS PURPOSE. IN THE CASE OF INTERNATIONAL FORE ST CO. VS. CIT. (1975) F01 ITR 721 (J&K) IT IS HELD THAT AO CANNOT PROCEED TO MAKE AN ARBITRARY ADDITION AND BASE HIS CONCLUSION PURELY ON GUESS WORK. HE OUGHT TO HAVE RELATED HIS ESTIMATE T O SOME EVIDENCE OR MATERIAL ON THE RECORD AS IT IS NOW WEL L SETTLED THAT IF THE PROFITS SHOWN BY THE APPELLANT IN HIS RETURN AR E NOT ACCEPTED IT IS FOR THE TAXING AUTHORITIES TO PROVE THAT THE APPELLANT HAS MADE MORE PROFITS THAN RETURNED. HERE THE AO FAILED TO BRING ON RECORD ANYTHING WHICH SHOWS THAT APPELLANT HAS EARN ED MORE PROFIT THAN DECLARED. THE AO HAS NOT MADE ANY ENQUI RY AND ARBITRARILY MADE THE ADDITION. CONSIDERING ALL THE ABOVE FACTS IT WOULD BE FAIR A ND REASONABLE TO RESTRICT THE DISALLOWANCE TO 5.00 OF THE EXPENSES CLAIMED BASED ON DISALLOWANCE MADE IN SUBSEQUENT YE AR IN THE ASSESSMENTS COMPLETED U/S 148/143(3). THEREFORE, TH E ADDITION MADE BY THE A.O. AMOUNTING TO RS. 40,72,135/-(RS.8, 14,42,700 X 0.05) IS CONFIRMED. THE APPELLANT WILL GET THE RELIEF OF RS. 7,73,70,565/-. THEREFORE, THE APPEAL ON THIS GROUND IS PARTLY ALLOWED'. 28. THE ADDITION SUSTAINED BY LD. CIT(A) IS AGAIN M ADE ON THE BASIS OF PAST ASSESSMENTS BUT NO CORROBORATIVE EVID ENCE IS PLACED BEFORE US TO SHOW THAT ANY EXCESSIVE EXPENDITURE WA S BOOKED. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANCES OF T HE CASE ARE OF THE CONSIDERED VIEW THAT THE EXPENDITURE INCURRED TOWAR DS TRAINING EXPENSES AT RS.8,14,42,700/- ARE GENUINE AND HAS BE EN RIGHTLY AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 43 INCURRED IN THE INTEREST OF BUSINESS AND THUS NO DI SALLOWANCE WAS CALLED FOR. ACCORDINGLY FINDING OF LD. CIT(A) IS C ONFIRMED TO THE EXTENT OF DELETING THE ADDITION OF RS.7,73,70,565/- AND THE FINDING OF LD. CIT(A) IS SET ASIDE CONFIRMING THE DISALLOWA NCE OF RS.40,72,135/-. THUS THE ASSESSEE HAS RIGHTLY CLAI MED THE DEDUCTION FOR TRAINING EXPENSES AT RS.8,14,42,700/- . THUS GROUND NO.4 OF THE ASSESSEE APPEAL IS ALLOWED AND THAT OF GROUND NO.4 OF REVENUES APPEAL STANDS DISMISSED. 29. ACCORDINGLY ASSESSEES APPEAL FOR ASSESSMENT YE AR 2013-14 IS ALLOWED AND THAT OF REVENUE IS DISMISSED. 30. NOW WE TAKE UP THE CROSS APPEALS FOR ASSESSMENT YEAR 2015- 16. BRIEF FACTS OF THESE APPEALS ARE THAT A SURVEY OPERATION U/S 133A OF THE ACT WAS CARRIED OUT ON 9.10.2015 AT THE PREMISES OF THE ASSESSEE. DURING SURVEY SHRI SANTOSH CHOUBEY, CHA IRMAN OF THE COMPANY ACCEPTED THE DISCREPANCY IN PURCHASE OF BOO KS AND AGREED TO SURRENDER RS.23 CRORES. THIS STATEMENT WAS RETR ACTED ON 10.11.2015 CONTENDING THAT NO BOGUS PURCHASE ARE M ADE. E- RETURN OF INCOME FILED ON 29.09.2015 DECLARING INCO ME AT RS. 6,04,38,800/- WHICH WAS SUBSEQUENTLY REVISED ON 19. 01.2017 DECLARING SAME INCOME. DURING SURVEY OPERATION ON GOING THROUGH AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 44 THE VOUCHER BOOK NO.2 BI-1 TO 4 IT WAS NOTICED BY THE SURVEY TEAM THAT ASSESSEE MADE PURCHASE FROM M/S UTSAV COLLECTI ONS, VINAYAK PRAKASHAN, MAA DURGA BOOKS CENTRE, PATEL BOOKS AND SARASWATI AGENCIES OF ITARSI AND THERE WERE SOME INCONSISTENC Y. IN ORDER TO VERIFY THE PURCHASES, INFORMATION U/S 133(6) OF THE ACT WAS CALLED FROM ALL, FEW REPLIED AND FEW REMAIN UNANSWERED WHI CH PROMPTED THE LD. A.O TO EXAMINE THE ISSUE. LD. A.O ALSO NOT ED THAT REGISTRATION WITH VAT AUTHORITIES AND REGISTRATION AT NAGAR PALIKA WERE JUST TAKEN BEFORE FEW MONTHS OF DATE OF SURVEY AND THE ACCOUNTS OF THE CREDITORS WERE OPENED JUST BEFORE M AKING SALE TO THE COMPANY. BASED ON THESE OBSERVATIONS LD. A.O CONCL UDED THAT THE SUPPLY OF MATERIAL ARE BOGUS AND THEY HAVE BEEN USE D AS A CONDUIT TO INFLATE THE PURCHASES. LD. A.O ALSO OBSERVED TH AT RELATED/SISTER CONCERNS ARE INVOLVED IN THIS ROUND MANNER OF PURCH ASES IN WHICH SISTER CONCERN OF THE ASSESSEE HAS SOLD STUDY MATER IAL TO VARIOUS SELLERS FROM WHOM ASSESSEE HAS SHOWN PURCHASE AND M ONEY RECEIVED FROM SUCH SUPPLIES IS AGAIN ROUTED BACK TO SISTER CONCERN OF THE ASSESSEE. LD. A.O ACCORDINGLY CONSIDERING T HE MATERIAL AVAILABLE ON RECORD AND FINDING OF THE CASE MADE TH E ADDITION OF RS. 23 CRORES BEING THE AMOUNT SURRENDERED BY THE CHAIR MAN OF THE AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 45 COMPANY DURING THE SURVEY PROCEEDINGS. LD. A.O ALS O MADE ADHOC DISALLOWANCE OF CERTAIN EXPENSES @10% OF RS.3,34,20 4/-, DISALLOWANCE U/S 40A(1)(A) FOR NON DEDUCTION OF TDS ON COMMISSION EXPENDITURE AT RS.3,12,513/- AND DISALLO WANCE OF INTEREST EXPENSES AT RS.3,16,358/-. INCOME ASSESSE D AT RS.29,14,01,880/-. AGGRIEVED ASSESSEE PREFERRED AP PEAL BEFORE LD. CIT(A) CHALLENGING ALL THE ADDITIONS EXCEPT FOR DIS ALLOWANCE OF COMMISSION EXPENSES U/S 40A(1)(A) OF THE ACT AND PA RTLY SUCCEEDED. 31. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBU NAL CHALLENGING THE DISALLOWANCE OF EXPENSES ON ADHOC BASIS AT RS.3 ,34,224/- RAISING GROUND NO.1 AND REVENUE HAS RAISED GROUND N O.1 FOR DELETION OF ADDITION BY LD. CIT(A) AT RS.23 CRORES ON ACCOUNT OF PURCHASE OF BOOKS AND DELETION OF ADDITION OF DISAL LOWANCE OF INTEREST EXPENSES AT RS.3,16,358/- RAISING GROUND N O.2. 32. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED REFERRING TO THE WRITTEN SUBMISSIONS AND THE PAPER BOOK RUNNING FROM PAGE NO.1 TO 469. MAIN CONTENTION OF THE LD. COUNSEL FO R THE ASSESSEE WAS THAT THE SURRENDER MADE DURING THE COURSE OF SU RVEY WAS RETRACTED WITHIN A SHORT DURATION OF TWO MONTHS ON CE THE ASSESSEE WAS SATISFIED THAT ALL THE PURCHASE ARE GENUINE. SI NCE THE STATEMENT GIVEN DURING THE COURSE OF SURVEY HAS NO EVIDENTIAR Y VALUE AND AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 46 NOTHING INCRIMINATING WAS FOUND DURING THE COURSE O F SURVEY AND ALSO DURING THE ASSESSMENT PROCEEDINGS LD.A.O HAS N OT MADE THE ADDITION REFERRING TO ANY INCRIMINATING MATERIAL OR ANY OTHER EVIDENCE GATHERED DURING THE COURSE OF SURVEY AND T HE DISALLOWANCE OF PURCHASE IS PURELY BASED ON A STATEMENT GIVEN DU RING THE COURSE OF SURVEY U/S 133A OF THE ACT. WRITTEN SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE ARE REPRODUCED BELOW:- A SURVEY WAS CONDUCTED IN THE CASE OF THE ASSESSEE ON 09-10- 2015/10.10.2015. DURING THE COURSE OF SURVEY STATEMENT OF THE MR. S ANTOSH CHOUBEY, THE MANAGING DIRECTOR OF THE ASSESSEE WA S RECORDED U/S 133A ON 10.10.2015. IN THE STATEMENT QUESTION W AS RAISED BY THE SURVEY TEAM REGARDING PURCHASE OF BOOKS MADE BY THE ASSESSEE COMPANY WHICH WAS DULY RESPONDED ON BEHALF OF THE A SSESSEE COMPANY AS UNDER: Q 6. : DURING THE COURSE OF SURVEY OPERATION, VOUCH ER BOOK NOS BI-1 TO 4 HAVE BEEN FOUND FROM WHICH IT IS OBSERVED THAT YOU HAVE MADE HUGE PURCHASES OF BOOKS IN FINANCIAL YEAR 14-1 5 FROM FIRMS LIKE UTSAV COLLECTION, VINAYAK PRAKASHAN, MAA DURGA BOOK CENTRE, PATEL BOOKS, SARASWATI AGENCIES ETC BASED IN ITARSI . ALL THESE BILLS ARE SERIALLY NUMBERED AND THE INVENTORY OF BOOKS AT TACHED WITH ALL THESE BILLS IS IDENTICAL. FIELD ENQUIRIES WERE MADE AT ITARSI AND IT IS OBSERVED THAT NONE OF THESE FIRMS ARE AVAILABLE AT THE GIVEN ADDRESS. IN THESE CIRCUMSTANCES, PLEASE EXPLAIN WHY THESE EX PENSES SHOULD NOT BE TREATED AS NON GENUINE. ANS. THESE PURCHASES ARE DULY RECORDED IN THE BOOK S OF ACCOUNT AND THE PAYMENT THEREOF HAS ALSO BEEN MADE THROUGH BANKING CHANNELS. HOWEVER IT IS QUITE POSSIBLE THAT SOME OF THESE PARTIES MAY NOT BE AVAILABLE AT THE GIVEN ADDRESS A ND I MAY NOT BE ABLE TO PROVE THE GENUINENESS OF THE PURCHAS E TO THE SATISFACTION OF THE DEPARTMENT. CONSIDERING THIS FACT AND IN ORDER TO BUY PEACE WITH THE DEPARTMENT, I VOLUNTARI LY COME FORWARD TO DECLARE EXPENSES OF RS. 23.00 CRORES WHICH MAY H AVE BEEN INFLATED IN THE BOOKS OF ACCOUNTS. I OFFER ADDITION AL INCOME FOR A.Y 15-16 AND AS I HAVE ALREADY FILED THE RETURN OF INC OME FOR A.Y 15-16, I WILL FILE REVISED RETURN DECLARING THE ADDITIONAL INCOME BY AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 47 31.12.2015 AFTER PAYING FULL TAXES ON THE ADDITIONA L INCOME DECLARED. TODAY I AM PAYING TAX OF RS. 40.00 LAKS O NLINE. IT MAY BE SUBMITTED THAT THE SURVEY IN THE CASE OF THE ASSESSEE COMMENCED ON 09.10.2015 AT AROUND 10.30 A.M. AND IT CONTINUED FOR MORE THAN 24 HOURS IN THE OFFICE OF THE ASSESSE E. THERE WAS NO STOCK REQUIRED TO BE COUNTED. THE ASSESSEE WAS NOT BEING ALLOWED ANY ACCESS TO HIS COMPUTER SYSTEM AND WAS INFORMED BY THE SURVEY TEAM THAT THE SUPPLIERS OF THE ASSESSEE ARE NOT TRACEABLE AT THE ADDRESS APPEARING IN THEIR INVOICES AND THE PUR CHASES ARE BOGUS. THE ASSESSEE WAS NOT BEING PROVIDED WITH ANY TIME OR OPPORTUNITY TO VERIFY ITS BOOKS OF ACCOUNTS OR TO T RACE THE SUPPLIERS AND WAS CONTINUOUSLY BEING HAUNTED TO ACCEPT THAT T HE SUPPLIERS ARE NOT TRACEABLE AND CONSEQUENTLY THE PURCHASES AR E NOT VERIFIABLE. UNDER THESE CIRCUMSTANCES THE STATEMENT WAS GIVEN WHICH WAS UNDER DURESS AND TREMENDOUS PRESSURE CREA TED BY THE SURVEY TEAM. THE ASSESSEE WAS NOT ALLOWED ANY OPPOR TUNITY TO VERIFY THE INFORMATION BEING PROVIDED BY THE SURVEY TEAM AND ANY OPPORTUNITY TO VERIFY THE BOOKS WITH THE ALLEGED IN CRIMINATING RECORD. FURTHER THE ASSESSEE HAD NOT ACCEPTED THAT THE PURC HASES ARE INFLATED OR THE SUPPLIERS ARE NOT TRACEABLE AS WOUL D BE OBVIOUS FROM THE STATEMENT ITSELF. THE DIRECTOR STATED THAT - HOWEVER IT IS QUITE POSSIBLE THAT SOME OF THESE PAR TIES MAY NOT BE AVAILABLE AT THE GIVEN ADDRESS AND I MAY NOT BE ABLE TO PROVE THE GENUINENESS OF THE PURCHASE TO THE SATISFACTION OF THE DEPARTMENT. A. THE COPY OF THE STATEMENT OF THE DIRECTOR OF THE AS SESSEE COMPANY WAS PROVIDED TO THE COUNSEL OF THE ASSESSEE ON 20.1 0.2015 AND WAS RECEIVED BY THE ASSESSEE ON 21.10.2015. THE CON TENTS OF THE STATEMENT WERE VERIFIED WITH THE BOOKS OF ACCOUNTS AND OTHER MATERIAL AVAILABLE AND IT WAS FOUND THAT THE PURCHA SE OF BOOKS UNDER CONSIDERATION DID NOT DISCLOSE ANY INFLATED P URCHASES OR UNDERSTATEMENT OF INCOME AND ACCORDINGLY THE COUNSE L OF THE ASSESSEE APPEARED BEFORE THE AO ON 29.10.2015 AND I NFORMED THE AO THAT THE ASSESSEE HAS NOT CONCEALED ANY INCOME A ND HENCE HAS RETRACTED THE STATEMENT GIVEN U/S 133A. THE AO HOWE VER ADVISED THAT THE RETRACTION SHOULD BE FILED THROUGH AN AFFI DAVIT. IN COMPLIANCE TO THE DIRECTION OF THE AO AN AFFIDAVIT WAS PREPARED ON 07.11.2015 AND WAS FILED BEFORE THE AO ON 10.11.201 5 RETRACTING THE SURRENDER OF INCOME MADE IN THE STATEMENT DURIN G THE SURVEY. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 48 B. IT MAY FURTHER BE MENTIONED THAT AS THE DECLARATION MADE IN THE STATEMENT RECORDED U/S 133A HAS BEEN RETRACTED AND THE RETRACTION IS MADE WITHIN A REASONABLE TIME NO NEGA TIVE INFERENCE CAN BE DRAWN ON ACCOUNT OF THE SURRENDER MADE IN TH E STATEMENT. IT MAY ALSO BE MENTIONED THAT IT HAS BEEN HELD BY T HE HONBLE SUPREME COURT IN THE CASE OF CIT V S KHADER KHAN SO N (2012) 254 CTR (SC) 228 THAT SECTION 133A DOES NOT EMPOWER ANY IT AUTHORITY TO EXAMINE ANY PERSON ON OATH, HENCE, ANY SUCH STAT EMENT HAS NO EVIDENTIARY VALUE AND ANY ADMISSION MADE DURING SUC H STATEMENT CANNOT, BY ITSELF, BE MADE THE BASIS FOR ADDITION. 2. SUBSEQUENTLY, AFTER THE RETRACTION, THE ASSESSEE WA S SUMMONED U/S 131 AND A STATEMENT WAS TAKEN ON 30.11.2015 THE DETAILE D INFORMATION WAS GIVEN IN THE STATEMENT AND IT WAS SPECIFICALLY STAT ED THAT ALL PURCHASES ARE GENUINE AND ARE VERIFIABLE FROM THE BOOKS OF AC COUNTS. IT WAS FURTHER STATED THAT WHATEVER THE DETAILS ARE REQUIRED, THE SAME WOULD BE FILED. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS DETAILE D SUBMISSIONS WERE MADE BEFORE THE AO EXPLAINING THE GENUINENESS OF TH E PURCHASES & THE FOLLOWING DETAILS WERE FURNISHED BEFORE THE AO TO S UBSTANTIATE THE GENUINENESS OF THE PURCHASES MADE BY THE ASSESSEE: I. COPY OF LEDGER ACCOUNT OF PURCHASE OF BOOKS. II. COPY OF LEDGER ACCOUNT OF THE CORRESPONDING SALE OF BOOKS. III. DETAIL OF SALE MADE TO ASSOCIATE CONCERN IV. BILL WISE DETAILS OF PURCHASE OF BOOKS MADE ALONG W ITH CORRESPONDING QUANTITY OF THE BOOKS PURCHASE DULY RECONCILED WITH THE BOOKS OF ACCOUNT THE SEIZED RECORD AND GIVING REFERENCE TO T HE SEIZED DOCUMENT. V. BILL WISE DETAILS OF SALE OF BOOKS MADE ALONG WITH CORRESPONDING QUANTITY OF THE BOOKS SOLD DULY RECONCILED WITH THE BOOKS OF ACCOUNT AND GIVING REFERENCE TO THE SEIZED DOCUMENT VI. A SUMMARY OF PURCHASE AND SALE VALUE WISE AND QUANT ITY WISE TO SUBSTANTIATE THAT THE ENTIRE BOOKS PURCHASED UNDER CONSIDERATION HAS BEEN SOLD AND SUCH SALES IS DULY RECORDED IN THE BO OKS. VII. ORIGINAL INVOICES FOR PURCHASES AND CORRESPONDING SALE MADE WERE AT ALL TIMES AVAILABLE WITH THE AO BEING PART OF TH E SEIZED RECORDS. PHOTOCOPY OF SEIZED RECORD ALONG WITH BOOKS OF ACCO UNTS WERE ALSO PRODUCED FOR READY REFERENCE. VIII. COPY OF AUDITED FINANCIAL STATEMENTS, AND ITR OF UTSAV COLLECTION, VINAYAK PRAKASHAN, MAA DURGA BOOK CENTRE, PATEL BOO KS, SARASWATI AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 49 AGENCIES, WHICH ARE THE PARTIES MENTIONED IN THE STATEMENT R ECORDED U/S 133A FROM WHOM THE ALLEGED BOGUS PURCHASES WERE MADE. IX. COPY OF SALES TAX ORDERS OF THE AFORESAID ENTITIES DULY CONFIRMING THE PURCHASE/SALES MADE BY SUPPLIERS. X. COPY OF SALES TAX ORDER OF THE ASSESSEE COMPANY DUL Y CONFIRMING THE SALE OF THE ASSESSEE. XI. NAMES OF ALL THE SUPPLIERS, ADDRESS OF THE SUPPLIE RS, NAME OF THE CONTACT PERSONS, THEIR TELEPHONE NUMBER ALONG WITH DOCUMENTARY PROOF OF THE ADDRESS. XII. BANK STATEMENT OF THE ASSESSEE FROM WHERE THE PAYME NTS WERE MADE FOR THE BOOKS PURCHASED BY THE ASSESSEE. IT MA Y BE SUBMITTED THAT ALL THE PAYMENTS FOR PURCHASE WERE MADE BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUE XIII. BANK STATEMENT OF THE SUPPLIERS OF THE BOOKS WHEREI N THE PAYMENTS RECEIVED BY THEM FROM THE ASSESSEE WERE DE POSITED WAS ALSO OBTAINED FROM THE RESPECTIVE SUPPLIERS AND SUB MITTED. ( IT MAY BE MENTIONED THAT IN NONE OF THE BANK STATEMENTS ANY C ASH IS FOUND WITHDRAWN WHICH MAY RAISE A POSSIBILITY THAT THE AM OUNT PAID BY THE ASSESSEE COMPANY WAS ROUTED BACK TO IT IN A CLANDES TINE MANNER XIV. THE PARTY WISE DETAIL OF THE PURCHASE MADE FOR RS. 43.53 CRORE XV. COPY OF ITR, COMPUTATION OF INCOME, AUDITED FINANCI AL STATEMENTS AND AUDIT REPORT FOR THE RELEVANT PERIOD, COPY OF S ALES TAX ORDER AND COPY OF BANK STATEMENT WITH RESPECT TO ALL THE SUPP LIERS NAMELY. MAA DURGA CENTER VINAYAK PRAKASHAN SARSWATI AGENCIES UTSAV COLLECTION PATEL BOOKS BOOKS WORLD KADAMBRY BOOK TRADING KUSHAL TRADING DARSH ENTERPRISES PARAS PUBLISHERS AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 50 XVI. COPIES OF LEDGER ACCOUNTS OF THE SUPPLIERS WHO HAVE SUPPLIED THE BOOKS UNDER CONSIDERATION TO THE ASSESSEE DURING TH E YEAR ARE ENCLOSED. XVII. QUANTITATIVE DETAILS OF THE BOOKS PURCHASED/SOLD FR OM THE SUPPLIERS UNDER CONSIDERATION THUS, ALL POSSIBLE INFORMATION WAS FURNISHED TO SUB STANTIATE THE GENUINENESS OF THE PURCHASES MADE. INFORMATION WITH REGARDS TO CORRESPONDING SALES WAS ALSO FURNISHED. QUANTITY WI SE DETAILS OF SALES AND PURCHASE WERE ALSO FURNISHED (PG. 120-135 OF PB ). NO DEFICIENCY OR INACCURACY WAS FOUND BY THE AO IN ANY OF THE DETAIL S FURNISHED BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ISSUED NOTICE TO ALL THE 10 SUPPLIERS U/S 133(6) OUT OF WHICH 5 SUPPLIER S HAD MADE THE COMPLIANCE WHEREAS NOTICE IN THE CASE OF OTHER 5 SU PPLIERS RETURNED BACK. THE ASSESSEE APPREHENDS THAT IN ALL THE FIVE CASES WHERE THE NOTICES RETURNED UNSERVED, THE NOTICES WERE ISSUED BY THE A O AT THE INCORRECT ADDRESS. IT IS SUBMITTED THAT THE ASSESSEE HAD PROV IDED THE AO THE LATEST ADDRESS OF THESE SUPPLIERS ALONG WITH COPIES OF ADD RESS PROOF. THUS, THERE WAS NO SCOPE FOR THE NOTICES TO HAVE BEEN RETURNED BACK, HAD THEY BEEN SENT TO THE CORRECT ADDRESS. THE ASSESSEE REQUESTED THE LD. CIT(A) TO GET VERIFIED THE FACT WHETHER THE UN-SERVED NOTICES WERE ISSUED AT THE CORRECT ADDRESS AS PROVIDED TO THE AO. FURTHER ALL THE INFORMATION REQUIRED BY THE AO FROM THE SUPPLIERS IN THE NOTICES ISSUED WAS ALREADY PLACED ON RECORD. THE AS SESSEE ALSO INFORMED THE AO THAT ALL THE SUPPLIERS CAN BE PRODUCED BEFOR E THE AO IF THE AO DESIRES. 4. THE AO WAS ALSO INFORMED THAT THE BOOKS PURCHASED O F RS. 43.53 CRORE UNDER REFERENCE ARE ALREADY SOLD FOR RS. 44.51CRORE TO THE ASSOCIATE CONCERNS AND ARE INCLUDED IN THE TOTAL SALES OF BOO KS MADE BY THE ASSESSEE AT RS. 61.01 CRORE. QUANTITATIVE RECONCILI ATION OF THE BOOKS PURCHASED AND SOLD WAS FURNISHED IN THE MANNER DESI RED BY THE AO. DETAILS OF PURCHASE OF RS. 43.53 CRORE (PG. 95-107 OF PB) AND SALE OF RS. 44.51 CRORE (PG109-119 OF PB) WERE ALSO PRODUCED FO R VERIFICATION TO SUBSTANTIATE THAT THE BOOKS PURCHASE UNDER CONSIDER ATION HAS BEEN SOLD. THE SALES MADE BY THE ASSESSEE HAVE NOT BEEN DOUBTE D BY THE AO. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 51 5. SUBMISSION WERE ALSO MADE WITH REFERENCE TO VARIOUS DEFICIENCIES NOTICED BY THE AO IN THE STATEMENT RECORDED U/S 133A EXPLAI NING THE REASON WHY THEY CANNOT BE CONSIDERED AS REASON FOR HOLDING THE PURCHASE AS NON GENUINE. HOWEVER ALL THE SUBMISSIONS MADE BY THE AS SESSEE AND THE FACT THAT THE BOOKS HAVE ALSO BEEN SOLD WERE IGNORED BY THE AO AND ADDITION WERE MADE AFTER MAKING THE FOLLOWING OBSERVATIONS: A. THE ABOVE PARTIES HAVE TAKEN TIN FROM SALES TAX DEP ARTMENT OF MADHYA PRADESH AFTER MAKING SUCH SALES TO THE AS SESSEE IN THIS REGARD IT IS SUBMITTED THAT THE BOOKS WERE PROVIDED BY THE SUPPLIERS FROM TIME TO TIME ALONG WITH INVOICE AND INVENTORY DETAILS. ON SUBSEQUENT VERIFICATION OF RECORDS IT WAS OBSERV ED THAT THE INVOICE DO NOT CARRY ANY MENTION OF TIN NUMBER. THIS DEFICI ENCY WAS BROUGHT TO THE NOTICE OF THE SUPPLIERS WHO THEREAFTER OBTAI NED TIN NO AND HAVE PUT A SEAL OF THEIR TIN NO(S) ON THE INVOICES PREVIOUSLY ISSUED. THUS THERE IS NO OCCASION TO DOUBT THAT THE INVOICE S RECEIVED ARE BACK DATED. FURTHER DURING THE COURSE OF ASSESSMENT PROC EEDINGS THE ASSESSEE HAS FURNISHED THE COPY OF SALES TAX RETURN S/ASSESSMENT ORDERS OF THESE SUPPLIERS WHICH DULY ESTABLISH THE GENUINENESS OF THE PURCHASE. FURTHER OBTAINING SALES TAX NUMBER WAS A STATUTORY PROCEDURE AND EVEN IF IT IS PRESUMED THAT THE SUPPL IER FAILED TO FOLLOW THE PROCEDURE, THE FAILURE WOULD NOT MAKE ANY PURCH ASE NON GENUINE. THUS THE OBSERVATION MADE WAS DULY EXPLAINED AND WA S OTHERWISE ALSO NOT VERY RELEVANT FOR THE PURPOSE OF DETERMINA TION OF THE GENUINENESS OF THE PURCHASES. B. IN CASE OF TWO CREDITORS I.E BOOKS WORLD AND KADAMB ARY BOOK TRADING, EVEN GOMASTA CERTIFICATE FROM NAGA PALIKA WAS TAKEN ON 28.01.15 IT IS SUBMITTED THAT GOOMASTA IS A LICENSE WHICH EV ERY PERSON IS SUPPOSED TO TAKE FROM THE MUNICIPAL AUTHORITIES BEF ORE COMMENCING ANY COMMERCIAL ACTIVITY WITHIN THE MUNICIPAL LIMITS . HOWEVER IN PRACTICE THIS IS A DEFAULT WHICH IS MOST COMMONLY D ONE BY THE BUSINESSMAN. MOREOVER THE ACTIVITY OF SALE/PURCHASE OF THE SUPPLIER IS DULY ESTABLISHED AND SIMPLY FAILURE TO OBTAIN THE R EQUIRED PERMISSION FROM THE MUNICIPAL AUTHORITIES (WHICH ADMITTEDLY HA S BEEN REGULARIZED BY THE SUPPLIER IN THE YEAR ITSELF) WOULD NOT BE A FACTOR TO BE CONSIDERED IN DETERMINATION THE GENUINENESS OF THE PURCHASE. C. THE ACCOUNTS OF THE CREDITORS ARE OPENED JUST BEFOR E MAKING SALE TO THE ASSESSEE COMPANY. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 52 THE OBSERVATION OF THE AO IS NOT VERY RELEVANT AS T HE SUPPLIER WOULD BE OPENING THE ACCOUNT AS PER THEIR CONVENIENCE AND THE DATE OF OPENING OF THE BANK ACCOUNT DOES NOT HAVE ANY EFFEC T ON THE GENUINENESS OF THE PURCHASE. D. ON VERIFICATION OF THE BANK STATEMENTS OF THE CREDI TORS IT IS NOTICED THAT IN ALL CASES, AT EVERY MOMENT OF SALES , THE PAYMENT OF SALES RECEIVED FIRST FROM ASSESSEE COMPA NY AND THEREAFTER PURCHASE PAYMENTS WERE MADE TO SISTER CO NCERNS OF THE ASSESSEE COMPANY. THE ASSESSEE HAD MADE PAYMENT TO THE SUPPLIERS FOR PURCHASE OF BOOKS. THESE SUPPLIERS HAVE ALSO MADE PAYMENTS TO E NTITIES FROM WHOM THEY HAVE PROCURED THE BOOKS WHICH IN SOME CAS ES HAPPENED TO BE THE ASSOCIATED CONCERNS OF THE ASSESSEE. HOWEVER NO NEGATIVE INFERENCE CAN BE DRAWN FROM THIS FACT AS THE BOOKS PURCHASED AND SOLD BY THE ASSESSEE IS DULY ACCOUNTED AND EXPLAINE D AS DETAILED ABOVE. E. ALL THE CREDITORS SHOWN TO HAVE MADE ONLY THE REQUI SITE SALE FROM ASSESSEE COMPANY AND NOT FROM OTHERS EXCEPT NO MINAL. THIS OBSERVATION OF THE AO ONLY CONFIRMS THAT THE P URCHASE MADE BY THE ASSESSEE IS DULY CONFIRMED BY THE SUPPLIERS AND DOES NOT MAKE OUT ANY REASON TO SUSPECT THE GENUINENESS OF THE PU RCHASES. F. THE ASSESSEE SPECIFICALLY SURRENDERED INCOME OF RS. 23 CRORE. THE ASSESSEE WAS PUT UNDER TREMENDOUS PRESSURE BY THE SURVEY TEAM AND WAS MADE TO BELIEVE THAT THE SUPPLIERS WERE NOT TRACEABLE AND CONSEQUENTLY THE GENUINENESS OF THE PURCHASE IS NOT ESTABLISHED AND CONSEQUENTLY HE SHOULD MAKE A DECLARATION. NO OPPOR TUNITY WAS PROVIDED TO HIM TO VERIFY THE CORRECTNESS OF THE IN FORMATION BEING GIVEN TO HIM AND TO VERIFY HIS RECORDS. FURTHER THE SAME WAS RETRACTED WITHIN A REASONABLE TIME. MORE SO ONCE THE PURCHASES ARE ESTABLISHED TO BE GENUINE, I TS CORRESPONDING SALES ARE NOT QUESTIONED THERE CANNOT BE ANY OCCASI ON TO MAKE ANY ADDITION ON THE BASIS OF A RETRACTED STATEMENT. IT MAY ALSO BE MENTIONED THAT IT HAS BEEN HELD BY T HE HONBLE SUPREME COURT IN THE CASE OF CIT V S KHADER KHAN SO N (2012) 254 CTR (SC) 228 THAT SECTION 133A DOES NOT EMPOWER ANY IT AUTHORITY TO EXAMINE ANY PERSON ON OATH, HENCE, ANY SUCH STATEME NT HAS NO AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 53 EVIDENTIARY VALUE AND ANY ADMISSION MADE DURING SUC H STATEMENT CANNOT, BY ITSELF, BE MADE THE BASIS FOR ADDITION. G. THE ASSESSEE FILED RETRACTION ON 01.12.2015 THAT IS ALMOST TWO MONTHS AFTER THE SURVEY. THIS OBSERVATION OF THE AO IS FACTUALLY INCORRECT A S DETAILED BELOW. THE COPY OF THE STATEMENT OF THE DIRECTOR OF THE A SSESSEE COMPANY RECORDED ON 10.10.2015 WAS PROVIDED TO THE COUNSEL OF THE ASSESSEE ON 20.10.2015 AND WAS RECEIVED BY THE ASSESSEE ON 2 1.10.2015. THE CONTENTS OF THE STATEMENT WERE VERIFIED WITH THE BO OKS OF ACCOUNTS AND OTHER MATERIAL AVAILABLE AND IT WAS FOUND THAT THE PURCHASE OF BOOKS UNDER CONSIDERATION DID NOT DISCLOSE ANY INFL ATED PURCHASES OR UNDERSTATEMENT OF INCOME AND ACCORDINGLY THE COUNSE L OF THE ASSESSEE APPEARED BEFORE THE AO ON 29.10.2015 AND INFORMED T HE AO THAT THE ASSESSEE HAS NOT CONCEALED ANY INCOME AND HENCE HAS RETRACTED THE STATEMENT GIVEN U/S 133A. THE AO HOWEVER ADVISED TH AT THE RETRACTION SHOULD BE FILED THROUGH AN AFFIDAVIT (PG .62 OF PB WHICH IS AN AFFIDAVIT OF THE DIRECTOR WHICH IS NOT CONTRAVERTED ). IN COMPLIANCE TO THE ADVICE OF THE AO AN AFFIDAVIT WAS PREPARED ON 0 7.11.2015 AND WAS FILED BEFORE THE AO ON 10.11.2015 RETRACTING FROM T HE STATEMENT MADE DURING THE SURVEY. THUS THE RETRACTION WAS MADE IN LESS THAN ONE MONTH FROM THE DATE OF SURVEY AND WITHIN A WEEK OF PROVIDING THE COPY OF THE STATEMENT RECORDED. H. THE ASSESSEE WAS CONFRONTED WITH THE FACT THAT THE PARTIES FROM WHOM PURCHASES ARE MADE ARE NOT TRACEABLE. DURING THE COURSE OF SURVEY PROCEEDINGS THE STATEME NT OF THE DIRECTOR OF THE ASSESSEE COMPANY WAS BEING RECORDED U/S 131 DURING WHICH THE ASSESSEE WAS INFORMED THAT THE SUPPLIERS ARE NO T TRACEABLE AT THE STATED ADDRESS. THE ASSESSEE HAD NO REASON TO DISBE LIEVE THE INFORMATION. THUS ONCE IT WAS BROUGHT TO THE NOTICE OF THE ASSES SEE THAT THE SUPPLIERS ARE NOT AVAILABLE AT THE LAST KNOWN ADDRE SS, THERE WAS NO WAY THE ASSESSEE COULD HAVE PRESENTED THESE SUPPLIE RS BEFORE THE AO. UNDER THE CIRCUMSTANCES THE ASSESSEE HAD NO OPTION BUT TO EXPRESS ITS INABILITY TO PRODUCE THE SUPPLIERS. HOWEVER SUBSEQUENTLY THE ASSESSEE HAD MADE ENQUIRIE S AND HAS FOUND OUT THE ADDRESSES OF THE SUPPLIERS, THE DETAI LS OF WHICH WERE DULY FURNISHED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. COPIES OF PROOF OF ADDRESS LIKE AADHAR CARD, RENT A GREEMENT, BANK PASS BOOK WERE ALSO FURNISHED. THE AO WAS ALSO SPEC IFICALLY INFORMED AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 54 THAT THE SUPPLIERS CAN BE PRODUCED FOR EXAMINATION OF THE AO SHOULD HE SO DESIRE. THUS NO NEGATIVE INFERENCE REGARDING THE GENUINENES S OF PURCHASE COULD HAVE BEEN DRAWN FROM THIS OBSERVATION. I. THE ASSESSEE WAS CONFRONTED WITH THE FACT THAT THE AMOUNT PAID TO THE PARTIES FOR PURCHASES MADE ARE COMING BACK FROM SUCH PARTIES TO THE ASSESSEES OTHER CONCERN . THE ASSESSEE HAD MADE PAYMENT TO THE SUPPLIERS FOR PURCHASE OF BOOKS. THESE SUPPLIERS HAVE ALSO MADE PAYMENTS TO E NTITIES FROM WHOM THEY HAVE PROCURED THE BOOKS WHICH IN SOME CAS ES HAPPENED TO BE THE ASSOCIATED CONCERNS OF THE ASSESSEE. HOWEVER NO NEGATIVE INFERENCE CAN BE DRAWN FROM THIS FACT AS THE BOOKS PURCHASED AND SOLD BY THE ASSESSEE IS DULY ACCOUNTED AND EXPLAINE D AS DETAILED ABOVE. J. IT IS SETTLED POSITION THAT STATEMENT TAKEN ON OATH DURING SURVEY OR SEARCH WILL BE TREATED AS FINAL FOR SURRE NDER UNDISCLOSED INCOME. RELIANCE IN THIS REGARDS WAS PL ACED ON THE JUDGMENTS OF SUPREME COURT IN THE CASE OF SURJE ET SINGH CHHABRA V UOI, PUNJAB & HARYANA HIGH COURT IN THE C ASE OF RAKESH MAHAJAN VS CIT AND CHENNAI BENCH OF THE ITAT IN THE CASE OF DCIT V B.K.MURALIKRISHNA. THE OBSERVATION OF THE AO DOES NOT PORTRAY THE CORR ECT LEGAL AND FACTUAL POSITION AND THE CASH LAWS RELIED UPON BY H IM ARE NOT RELEVANT TO THE ISSUE UNDER CONSIDERATION. IT WOULD BE APPRECIATED THAT THE ASSESSEE HAD NOT A CCEPTED THAT THE PURCHASES ARE INFLATED OR THE SUPPLIERS ARE NOT TRA CEABLE. FURTHER THE FACTS OF THE CASE OF THE ASSESSEE ARE DIRECTLY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT V S KHADER KHAN SON (2012) 254 CTR (SC) 228 THAT SECTION 133A DOES NOT EMPOWER ANY IT AUTHORITY TO EXAMINE ANY PERSON ON O ATH, HENCE, ANY SUCH STATEMENT HAS NO EVIDENTIARY VALUE AND ANY ADM ISSION MADE DURING SUCH STATEMENT CANNOT, BY ITSELF, BE MADE TH E BASIS FOR ADDITION. AS REGARDS THE CASE LAWS RELIED UPON BY THE AO IT I S SUBMITTED THAT 1. SURJEET SINGH CHHABRA V UOI IN SLP (C) NO 14028/96 THIS CASE IS WITH REFERENCE TO SEIZURE OF GOLD UNDE R FERA AND CUSTOM ACT. THE ISSUE FOR CONSIDERATION BEFORE THE COURT WAS WHETHER ANY ORDER CAN BE PASSED IGNORING THE REQUES T OF THE AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 55 ACCUSED TO GRANT AN OPPORTUNITY TO CROSS EXAMINE A WITNESS IN THE CASE OF GOLD SEIZED. IN THAT CASE GOLD WAS SEIZ ED FROM THE ACCUSED WHO HAS ADMITTED TO THIS FACT AT THE TIME O F RECORDING OF HIS STATEMENTS. THE DEPARTMENT ALSO HAD A WITNES S WHO TESTIFIED THAT THE GOLD WAS SEIZED FROM THE POSSESS ION OF THE ACCUSED AND THE ACCUSED WAS NOT PROVIDED ANY OPPORT UNITY TO CROSS EXAMINE THE WITNESS, WHICH WAS CLAIMED BY THE ACCUSED TO BE VIOLATION OF NATURAL JUSTICE. HOWEVER THE COURT HELD THAT ONCE THE ACCUSED HAS ACCEPTED IN HIS STATEMENT THAT THE GOLD WAS SEIZED FROM HIM , T HIS CONFESSIONAL STATEMENT IS BINDING ON HIM AND DENIA L OF AN OPPORTUNITY TO CROSS EXAMINE THE WITNESS DOES NOT C ONSTITUTE ANY VIOLATION OF NATURAL JUSTICE. THUS, THE ACT UND ER WHICH THE JUDGMENT WAS PASSED AND THE QUESTION BEING ADDRESSE D BY THE COURT WERE DISTINCTLY DIFFERENT FROM THE CASE OF TH E ASSESSEE 2. RAKESH MAHAJAN V CIT (2008) 214 CTR 218 JUDGMENT D ATE 24.09.07. IN THIS CASE THE STATEMENT WAS GIVEN IN CONTEMPLATI ON OF DEATH AND IT WAS HELD BY THE COURT THAT A PERSON EXPECTING TO DIE WILL HAVE NO FEAR AND WILL NOT GIVE A FALSE STATEMENT. FURTHER A OPPORTUNITY WAS PROVIDED TO THE PERSON TO NEGATE THE CONTENTS WHICH HE FAILED TO NEGATE. THUS THE FACTS OF THAT CASE ARE ALSO NOT HA VING ANY RELEVANCE TO THE CASE OF THE ASSESSEE. THE LD. A.O. DID NOT ACCEPT THE CONTENTION OF THE A SSESSEE AS INDICATED ABOVE. MERELY ON THE BASIS OF DECLARATION MADE IN T HE STATEMENT RECORDED U/S 133A, HE CONCLUDED THAT RS. 23 CRORES IS AN UND ISCLOSED INCOME OF THE ASSESSEE. AFTER CONSIDERING ALL SUBMISSIONS THE LD. CIT(A) AL LOWED THE ASSESSEES APPEAL. THE LD. CIT(A) DISCUSSED ALL THE SUBMISSION S MADE BEFORE HIM AND HELD IN PARA 11 PG.29 THAT DURING THE SURVEY, NO INCRIMINATING MATERIAL OR UNDISCLOSED INCOME OR INVESTMENT WERE FOUND. IT IS STATED BY THE APPELLANT THAT UNDER THE MENTAL PRESSURE, THE AMOUNT OF 23 CR ORES WAS SURRENDERED. IT IS UNDISPUTED FACT THAT STATEMENT RECORDED U/S 1 33A HAS A EVIDENTIARY VALUE BUT IT IS A SETTLED POSITION OF LAW THAT ADDI TION CANNOT BE SUSTAINED MERELY ON THE BASIS OF STATEMENT WITHOUT ANY CORROB ORATIVE MATERIAL TO SUPPORT THE STATEMENT. THE A.O. FAILED TO BRING ANY MATERIAL OR CORRELATE THE DISCLOSURE MADE WITH ANY INCRIMINATING MATERIAL GAT HERED DURING THE SURVEY. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 56 ARGUMENT IT IS HUMBLY SUBMITTED THAT THE ADDITION HAS BEEN M ADE MERELY ON THE BASIS OF STATEMENT RECORDED. THERE IS NO MATERIAL F OUND DURING THE COURSE OF THE SURVEY THAT THE ASSESSEE HAS CONCEALED ANY I NCOME. COMPLETE DETAILS WERE FILED BEFORE THE LD. A.O. INCLUDING TH E ADDRESSES, INCOME TAX RETURNS, BALANCE SHEET, BANK STATEMENT OF THE SUPPL IERS. NO COGNIZANCE HAS BEEN TAKEN ABOUT THE QUANTITATIVE DETAILS FILE D BEFORE THE LD. A.O. IF IT IS PRESUMED THAT THE PURCHASES ARE BOGUS, I.E. NO P URCHASES ARE MADE THEN HOW CAN THERE BE ANY SALE OF THAT MATERIAL. UN DUE IMPORTANCE IS GIVEN ABOUT THE TIN NUMBER OF THE REGISTRATION UNDE R THE GUMASTA ACT. NO COGNIZANCE HAS BEEN TAKEN THAT ALL THE TRANSACTI ONS HAVE BEEN UNDERTAKEN THROUGH THE BANKING CHANNEL. EVEN THE BA NK ACCOUNTS OF THE SELLER SHOW THAT PURCHASES AND SALES HAVE BEEN AFFE CTED THROUGH BANKING CHANNEL. THE LD. A.O. DID NOT COMMENT UPON THE INCO ME TAX RETURNS AND ASSESSMENTS OF THE SELLER WHICH CLEARLY PROVES THAT THE TRANSACTION IS GENUINE. THE ADDITION HAS BEEN MADE PURELY ON THE B ASIS OF THE STATEMENT RECORDED DURING THE SURVEY. IN THIS CONNECTION, IT IS HUMBLY SUBMITTED THAT THE STATEMENT IS NOT BINDING ON THE ASSESSEE I N VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S . S. KADAR KHAN 352 ITR 480. THE ASSESSEE FURTHER RELIES ON THE FOLLOWI NG DECISIONS. K. MAHESH OHRI V/S. ACIT 154 TTJ 33 U.O. (DELHI) ADDITION ON THE BASIS OF STATEMENT DURING SURVEY IN ABSENCE OF ANY MATERIAL CONNECTED DURING THE COURSE OF SURVEY, NO ADDITION CAN BE MADE ON THE STRENGTH OF THE STATEMENT. ACIT V. KISHAN LAL JEWELS (P.) LTD. (2012) 147 TTJ 308 (DEL.) (TRIB.) THE ASSESSEE WHILE FURNISHING NECESSARY INFORMATION REGARDING THE TRANSACTIONS AND THE AFORESAID PARTIES LIKE PURCHAS E BILLS ISSUED AGAINST GOODS PURCHASED, SALES- TAX REGISTRATION NU MBERS OF THE PARTIES, PANS, THEIR CONFIRMATIONS AND BANK STATEMENTS SHOWI NG THE DEBIT OF THE AMOUNT PAID THROUGH ACCOUNT PAYEE CHEQUES TO TH EM IN THE ACCOUNT OF ASSESSEE AND CREDITED IN THE BANK ACCOUNT OF SEL LERS, HAD DISCHARGED ITS PRIMARY ONUS, THEREAFTER THE ONUS SH IFTED ON THE DEPARTMENT TO REBUT THE SAME. ADDITION UNDER SECTION 69C WAS HELD TO BE NOT JUSTI FIED. CIT V. NIKUNJ EXIMP ENTERPRISES (P.) LTD. (2013) 21 6 TAXMAN 171 (MAG.) (BOM.)(HC) AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 57 SALE TO GOVERNMENT DEPARTMENT-ALLEGED BOGUS PURCHAS ES- SALES NOT DOUBTED, MERELY BECAUSE SUPPLIERS NOT APPEARED BEFO RE THE ASSESSING OFFICER OR COMMISSIONER (APPEALS), PURCHASES CANNO T BE DISALLOWED. DCIT V SHRI. KANAKMAL SANGHAVI (2006) 6 ITJ 760(IND ORE ) EXAMINATION ON OATH- AMOUNT SURRENDERED DURING SURV EY PROCEEDINGS- LATER ON RETRACTED- MATERIAL PRODUCED TO JUSTIFY TH E CLAIM- HELD- IT IS WELL SETTLED THAT ADMISSION MAY BE RELEVANT AND IS AN IMPORTANT EVIDENCE BUT IS NOT CONCLUSIVE AND MAY BE PROVED TO BE UNTRUE OR HAVING BEEN MADE UNDER MISTAKE OF FACTS OR LAW-RETR ACTION OF DISCLOSURE IS THEREFORE VALID. GROUND NO.2DELETION OF ADDITION OF RS.3,16,358/-. THE LD. A.O. HAD DISALLOWED INTEREST OF RS.3,16,358 /- ON THE GROUND THAT THE ASSESSEE HAS ADVANCED INTEREST FREE LOAN OF RS. 95,44,174/-. THE SAID INTEREST IS PAID ON THE CAR LOAN WHICH IS FOR THE B USINESS PURPOSES. THE LD. CIT(A) HAS ALLOWED IT ON THIS GROUND. IT IS HUMBLY SUBMITTED THAT THE BORROWING HAS BEEN DONE FOR THE BUSINESS PURPOSES A ND THE INTEREST FREE LOAN HAS NOT BEEN ADVANCED FROM THE BORROWED FUNDS. IN VIEW OF THE ABOVE, IT IS HUMBLY SUBMITTED THAT T HE ADDITIONS DELETED BY THE LD. CIT(A) MAY PLEASE BE UPHELD. 33. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE APAR T FROM SUPPORTING THE FINDING OF LD. A.O ALSO REFERRED TO THE PAPER BOOK DATED 8.4.2021 RUNNING FROM PAGE 1 TO 61 AND CONTEN DED THAT THE ALLEGED PURCHASE TRANSACTIONS WITH VARIOUS CONCERNS AS MENTIONED IN THE ASSESSMENT ORDER ARE NOT GENUINE SELLERS AND THE TRANSACTIONS WITH THESE CONCERNS ARE MERELY IN THE NATURE OF ACCOMMODATION AND ROUTING OF PURCHASE AND THE CHAIR MAN OF THE COMPANY HAVING SENSED THAT THE PURCHASES ARE NOT GE NUINE HAS RIGHTLY ACCEPTED AND SURRENDERED RS.23 CRORES AND T HE STATEMENT AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 58 WAS NOT UNDER ANY STRESS OR COERCION AND THUS SHOUL D HAVE BEEN HONOURED BY THE ASSESSEE. 34. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE SUB MISSIONS AND PAPER BOOK FILED BY BOTH THE PARTIES. WE WILL FIRST TAKE UP GROUND NO.1 RAISED BY THE REVENUE CHALLENGING THE DELETION OF ADDITION OF RS.23 CRORES BY LD. CIT(A) WHICH WAS MADE BY THE LD . A.O ON ACCOUNT OF NON GENUINE EXPENSES INCURRED FOR PURCHA SE OF BOOKS. 35. WE OBSERVE THAT DURING THE COURSE OF SURVEY VOU CHER BOOK NO.BI-1 TO 4 WAS FOUND SHOWING THAT DURING FINANCIA L YEAR 2014-15 HUGE PURCHASE OF BOOKS WERE MADE FROM SOME CONCERNS PLACED AT ITARSI. BILLS WERE SERIALLY NUMBERED AND INVENTORI ES BOOK ATTACHED WITH THESE BILLS. DURING THE SURVEY CHAIRMAN OF T HE ASSESSEE COMPANY WAS CONFRONTED SO AS TO SHOW THAT THESE PUR CHASES ARE GENUINE. TO THIS IT WAS STATED IT IS QUITE POSSIBLE THAT SOME OF THESE PARTIES MAY NOT AVAILABLE AT THE GIVEN ADDRES S AND MAY NOT AVAILABLE TO PROVE THE GENUINENESS OF THE PURCHASE TO THE SATISFACTION OF THE DEPARTMENT. CONSIDERING THIS FACT AND IN ORD ER TO BUY PEACE FROM THE DEPARTMENT HAS VOLUNTARILY COME FORWARD TO DECLARE EXPENSES OF RS.23 CRORES WHICH MAY HAVE BEEN INFLAT ED IN THE BOOKS AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 59 OF ACCOUNTS. IT WAS CLAIMED BY LD. COUNSEL FOR THE ASSESSEE TH AT SURVEY COMMENCED ON 9.10.2015 AT 10.30 AM AND CONTI NUED FOR 24 HOURS AND THERE WAS NO STOCK TO BE COUNTED AND ASSE SSEE WAS NOT ALLOWED TO ACCESS TO ITS COMPUTER SYSTEM AND SURVEY TEAM MERELY INFORMED THAT SUPPLIERS OF THE ASSESSEE ARE NOT TRA CEABLE AT THE ADDRESS APPEARING IN THE INVOICES AND PURCHASES ARE BOGUS. UNDER THESE CIRCUMSTANCES, THE ASSESSEE HAS CLAIMED THAT THE STATEMENT WAS GIVEN UNDER DURESS AND TREMENDOUS PRESSURE. TH E COPY OF THE STATEMENT WAS GIVEN ON 21.10.2015. RETRACTION STAT EMENT WITH AN AFFIDAVIT WAS PREPARED WITHIN A SHORT SPAN OF 2 WEE KS ON 7.11.2015 AND FILED BEFORE THE LD. A.O ON 10.11.2015 SUBMITTI NG THAT THE SURRENDER OF RS.23 CRORES MADE DURING THE COURSE OF SURVEY IS RETRACTED AS ALL THE PURCHASES RECORDED IN THE BOOK S ARE GENUINE. 36. WE FURTHER NOTE THAT DURING THE COURSE OF ASSES SMENT PROCEEDINGS DETAILED SUBMISSIONS WERE MADE TO EXPLA IN THE GENUINENESS OF PURCHASES AND TO SUBSTANTIATE THE SA ME HAS FILED LEGER ACCOUNT OF PURCHASE OF BOOKS CORRESPONDING TO SALE, BILL WISE DETAILS OF PURCHASE ALONG WITH QUANTITY, AUDITED F INANCIAL STATEMENTS AND INCOME TAX RETURN OF THE VENDORS, CO PY OF SALES TAX ORDERS OF THESE ENTITIES FROM WHOM ASSESSEE PUR CHASED. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 60 ASSESSEE HAS ALSO PROVIDED THE DETAILS OF CONTACT PERSON AND TELEPHONE NUMBER AND BANK ACCOUNT DETAILS OF ALL TH E SUPPLIERS. THE PURCHASES MADE BY THE ASSESSEE DURING THE YEAR HAVE BEEN SOLD DURING THE YEAR. QUANTITATIVE DETAILS OF BOOK S PURCHASED AND THEIR CORRESPONDING SALE ARE AVAILABLE ON RECORD. SALES HAVE NOT BEEN DISPUTED BY THE LD. A.O. FURTHER THE ADDITION OF RS.23 CRORES IS ONLY THE FIGURE OF SURRENDER. LD. A.O HAS NOT M ADE THE ADDITION SPECIFICALLY WITH REGARD TO THE PURCHASE MADE FROM VARIOUS VENDORS WHICH ARE ALLEGED TO BE BOGUS. 37. WE FURTHER NOTE THAT LD. CIT(A) AFTER APPRECIAT ING THE FACTS AND SETTLED JUDICIAL PRECEDENTS DECIDED IN FAVOUR OF TH E ASSESSEE OBSERVING AS FOLLOWS:- 11. GROUND NO. 2:- THROUGH THIS GROUND OF APPEAL THE APPELLANT HAS CHALLENGED THE ADDITION OF RS. 23,00,00,000/-. THE APPELLANT HAD PURCHASED BOOKS OF RS. 43.53 CROR ES DURING THE YEAR UNDER CONSIDERATION. THE APPELLANT HAD SUB MITTED THE DETAILS OF THE SUPPLIERS, THEIR ADDRESS PROOF, BALA NCE SHEETS, BANK STATEMENTS, SALES TAX ORDERS RETURNS ETC TO ES TABLISH THE GENUINENESS OF THE SUPPLIERS/PURCHASES. THE AO HOWEVER NOTED THAT THE SUPPLIERS COULD NOT BE TRACED DURING THE SURVEY AND NOTICES ISSUED DURING ASSESSMENT PROCEEDINGS AL SO RETURNED UNSERVED IN SOME CASES. HE ALSO NOTICED VA RIOUS AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 61 DISCREPANCIES IN THE DETAILS SUBMITTED AND HELD THE PURCHASES TO BE NON GENUINE TO THE EXTENT OF RS. 23 CRORE. I HAVE CONSIDERED THE FACTS OF THE CASE, CONTENTIONS RAISED BY THE APPELLANT AND FINDINGS OF THE AO. THE KEY FACTORS TO BE DETERMINED ARE: A. WHETHER THE APPELLANT HAS SUBMITTED ADEQUATE DOCUMENTS TO ESTABLISH THE GENUINENESS OF THE PURCH ASES. B. WHETHER THE DEFICIENCIES NOTED BY THE AO ARE MATERIAL ENOUGH TO SUSPECT THE GENUINENESS OF THE PURCHASES. C. IF THE PURCHASES ARE NOT OTHERWISE FOUND TO BE NON GENUINE CAN ADDITION BE MADE SOLELY ON THE BASIS OF STATEMENT RECORDED U/ S 133A ESPECIALLY WHEN IT HAS BEEN RETRACTED THROUGH AN AFFIDAVIT. 1. THE APPELLANT HAD SUBMITTED VARIOUS DOCUMENTS FO R ESTABLISHING THE GENUINENESS OF THE PURCHASE : I. THE APPELLANT HAS PROVIDED THE NAME, ADDRESSES AND TELEPHONE NUMBERS OF THE SUPPLIERS ALONG WITH THEIR ADDRESS PROOF DURING THE COURSE OF ASSESSMENT PROCEEDINGS. VIDE WRITTEN SUBMISSION DATED 04.10.2017 FILED BEFORE THE AO, THE APPELLANT HAD SUBMITTED THE COMPLETE DETAILS OF THE SUPPLIERS ALONG WITH ADDRESS PROOF IN THE SHAPE OF AADHAR CARD/RENT AGREEMENT/BANK PASS BOOK ETC. II. DURING THE ASSESSMENT PROCEEDINGS THE APPELLANT HAS ALSO SUBMITTED THE COPY OF ITR, FINANCIAL STATEMENTS, BA NK STATEMENTS OF THE SUPPLIERS, COPY OF SALES TAX ORDE R/RETURNS OF AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 62 THE SUPPLIERS. IT IS EVIDENCED FROM THE BANK STATEM ENT OF THE SUPPLIERS THAT ALL THE PAYMENTS MADE BY THE APPELLA NT ARE DULY RECEIVED BY THEM. FURTHER THE SALE REPORTED BY THE SUPPLIERS IS EITHER EQUAL TO OR MORE THAN THE PURCHASES SHOWN BY THE APPELLANT FROM THE RESPECTIVE SUPPLIER. IT IS NOTED THAT IN MOST OF THE CASES THE ACCOUNTS ARE AUDITED UNDER THE INCOME TAX ACT AND ITR IS FURNISHED. NO MATERIAL IS BROUGHT ON REC ORD BY THE AO TO SUBSTANTIATE THAT THE SALE SHOWN BY THESE SUPPLI ERS IN THEIR ITR/SALES TAX RETURN HAVE BEEN QUESTIONED/DOUBTED BY ANY OF THE AUTHORITIES. NO CASH IS FOUND WITHDRAWN IN THE BANK ACCOUNTS OF ANY OF THE SUPPLIERS WHICH MAY CREATE D OUBT ABOUT THE END USE OF THE FUNDS IN THE HANDS OF THE SUPPLI ERS. THE AO HAD NOT DOUBTED THE CORRECTNESS OR GENUINENESS OF A NY OF THE DOCUMENTS SUBMITTED. III. COPY OF BANK STATEMENT OF THE APPELLANT WHEREIN ALL PAYMENTS MADE TO THE SUPPLIERS ARE FOUND TO HAVE BE EN MADE THROUGH ACCOUNT PAYEE CHEQUES. IV. INVOICE WISE DETAILS OF PURCHASE MADE OF RS. 43,53,28,040/_ AND INVOICE WISE DETAILS OF ITS SUBSEQUENT SALES OF RS. 44,51,49,705/ -ALONG WITH QUANTITATIVE DETAILS OF T HE SALES AND PURCHASE. ALL THE SALES/PURCHASES ARE DULY LINKED T O THE SEIZED MATERIAL. THUS THE ENTIRE PURCHASES MADE BY THE APP ELLANT IS ALREADY SOLD AND THAT TOO ON A HIGHER VALUE. IT IS ALSO NOTED THAT THE SALES MADE BY THE APPELLANT HAS NOT BEEN DOUBTE D BY THE AO. THUS ONCE THE SALES IS NOT DOUBTED, IT WOULD NOT BE JUSTIFIED TO DOUBT ITS CORRESPONDING PURCHASE. V. COPY OF SALES TAX ORDER OF THE APPELLANT COMPANY WHICH DULY CONFIRMS THE SALE OF THE APPELLANT. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 63 VI. COPY OF SALES ACCOUNT, PURCHASE ACCOUNT, SUPPLI ERS ACCOUNT. VII. COPIES OF INVOICES OF SALES/PURCHASE IT IS ALSO OBSERVED THAT THE AO HAD NOT DOUBTED THE SALES OF THE APPELLANT. THE DEPARTMENT DURING THE COURSE OF SURVEY AND POST SURVEY PROCEEDINGS HAVE ALSO ACCEPTED THAT THE BOOKS PURCHASED BY THE APPELLANT WERE LATER ON SOLD ALSO AND THE SALE/PURCHASE IS DULY RECORDED IN THE BOOKS OF ACCO UNT WHICH IS INFERRED FROM QUESTION 27 OF THE STATEMENT OF TH E M.D. RECORDED U/S 131 ON 30.11.2015 WHERE AFTER DISCUSSI NG THE NON GENUINE PURCHASES IN Q-22-23 OF THE STATEMENT T HE DIRECTOR WAS QUERIED ABOUT THE SALES MADE. THE QUES TION ASKED IS REPRODUCED HEREIN BELOW: Q-27: 'ON. EXAMINATION OF YOUR BOOKS OF ACCOUNTS IT IS SEEN THAT AISECT LTD HAS LATER MADE SALE TO FOLLOWING SISTER CONCERNS IN F. Y. 2014-15 ..... RS.44,51,49, 705/- THE QUESTION RAISED ITSELF ESTABLISHES THAT THE BOO KS PURCHASED UNDER CONSIDERATION OF RS. 43,53,28,040/- WERE FOUND TO BE SUBSEQUENTLY SOLD FOR RS. 44,51,49,705/ - . IT IS ALSO SEEN THAT NO UNEXPLAINED STOCK IN HAND O R CASH IN HAND WAS FOUND DURING SURVEY. THUS THE PURCHASES RECORDED ARE DULY CONFIRMED BY T HE SUPPLIERS, THE PAYMENTS ARE MADE BY ACCOUNT PAYEE C HEQUES, THE SAME ARE DULY RECEIVED BY THE SUPPLIERS, THE SU PPLIERS HAVE SHOWN THE SALES MADE BY THEM TO THE APPELLANT IN THEIR ITR/ SALES TAX RETURNS WHICH HAVE BEEN ACCEPTED BY THE INCOME TAX DEPARTMENT AND THE SALES TAX DEPARTMENT. NO CASH AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 64 IS FOUND WITHDRAWN FROM THE BANK ACCOUNTS OF ANY OF THE SUPPLIERS. THE QUANTITATIVE DETAILS OF THE SALE AND PURCHASES WERE SUBMITTED AND NO DEFICIENCY IS NOTICED BY THE AO IN THESE DETAILS. IT HAS TO BE APPRECIATED THAT NO SALES COU LD HAVE TAKEN PLACE WITHOUT CORRESPONDING PURCHASES. ALL THESE FA CTS ESTABLISH THE GENUINENESS OF THE PURCHASES BEYOND D OUBT. 2. THE A.O HAS HOWEVER RAISED DOUBT ABOUT THE GENUI NENESS OF THE PURCHASE ON THE BASIS OF VARIOUS OBSERVATION WH ICH ARE DISCUSSED HEREIN BELOW: I. THE A.O HAS STATED THAT THE NOTICES ISSUED TO THE SUPPLIERS RETURNED UN SERVED. HOWEVER IN VIEW OF TH E FACT THAT THE APPELLANT HAD CLAIMED THAT THE NOTICES WERE SEN T TO INCORRECT ADDRESS AND HAVE SUBMITTED THE ADDRESS PROOF/TELEPHONE NUMBERS AND HAVE ALSO SUBMITTED ALL THE DETAILS REQUIRED BY THE AO IN THE NOTICE ISSUED AND THE AO HAVE NOT DOUBTED THE CORRECTNESS AND GENUINENESS OF THE INFORMATION SUBMITTED. IT IS ALSO SEEN THAT THE APP ELLANT DURING THE ASSESSMENT PROCEEDINGS HAVE OFFERED THAT THE SU PPLIERS CAN BE PRODUCED BEFORE THE AO. REFERENCE IS MADE TO THE WRITTEN SUBMISSIONS DATED 5.4.2017 IN PARA L.F.A WH EREIN IT IS MENTIONED THAT 'THE APPELLANT HAS ALREADY PROVIDED THE COMPLETE DETAILS OF THE SUPPLIERS AND IS PREPARED TO PRODUCE THEM BEFORE YOU IF YOU SO DIRECT UNDER THE CIRCUMSTANCES NO ADVERSE INFERENCE WAS WA RRANTED FOR NON SERVING OF THE NOTICES. II. THE A.O WAS ALSO DOUBT FULL OF THE GENUINENESS OF THE PURCHASE AS SOME SUPPLIERS HAVE TAKEN TIN FROM SALE S TAX DEPARTMENT OF MADHYA PRADESH AFTER MAKING SALES AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 65 TO THE APPELLANT IT IS SEEN THAT IT IS NOT DISPUTED THAT THE SUPPLIE RS WERE DULY REGISTERED WITH THE SALES TAX AUTHORITIES AND ANY D ELAY IN MAKING COMPLIANCE OF ANY STATUTORY LIABILITY BY THE SUPPLIER CANNOT BE TAKEN AS A GROUND OF DOUBTING THE GENUINE NESS OF THE TRANSACTION SPECIALLY WHEN THE TRANSACTION HAS BEEN DULY REPORTED TO THE TAX AUTHORITY IN THE PERIODIC RETUR N/ ASSESSMENT ORDER. III. THE AO ALSO OBSERVED THAT IN CASE OF TWO CREDITORS I.E BOOKS WORLD AND KADAMBARY BOOK TRADING, EVEN GUMASTA FROM NAGAR PALIKA WAS TAKEN ON 28.01.15 IT IS HELD THAT TAKING OF GUMASTA OR FAILURE TO TAK E GUMASTA IS NOT RELEVANT FOR DETERMINING THE GENUINENESS OF ANY TRANSACTION. IV. THE AO ALSO OBSERVED THAT THE ACCOUNTS OF THE CREDITORS ARE OPENED JUST BEFORE MAKING SALE TO THE APPELLANT COMPANY. IT IS SEEN THAT OPENING OF A NEW BANK ACCOUNT OR CONTINUING WITH THE OLD ONE IS A DISCRET ION OF THE SUPPLIER AND THE GENUINENESS OF THE TRANSACTION CANNOT BE AFFECTED BY THE DATE ON WHICH THE BANK ACCOUNT IS OPENED. THE OBSERVATION OF THE AO IS NOT VERY RELEVANT AS T HE SUPPLIER WOULD BE OPENING THE ACCOUNT AS PER THEIR CONVENIEN CE AND THE DATE OF OPENING OF THE BANK ACCOUNT DOES NOT HAVE A NY EFFECT ON THE GENUINENESS OF THE PURCHASE. V. THE AO ON VERIFICATION OF THE BANK STATEMENTS OF THE AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 66 CREDITORS NOTICED THAT IN ALL CASES, AT EVERY MOMENT OF SALES, THE PAYMENT OF SALES RECEIVED FIRST FROM APP ELLANT COMPANY AND THEREAFTER PURCHASE PAYMENTS WERE MADE TO SISTER CONCERNS OF THE APPELLANT COMPANY. IT IS OBSERVED THAT IT IS AN ADMITTED FACT THAT THE SUPPLIERS HAVE PURCHASED THE BOOKS SOLD BY THEM FROM THE ASSOCIATE D CONCERNS ALSO AND THUS ANY PAYMENTS MADE BY THEM TO THEIR SUPPLIERS CANNOT RESULT IN ANY NEGATIVE INFERENCE B EING DRAWN AGAINST THE GENUINENESS OF THE TRANSACTION. VI. IT WAS ALSO OBSERVED BY THE AO THAT ALL THE CREDITORS SHOWN TO HAVE MADE ONLY THE REQUISITE SALE FROM APPELLANT COMPANY AND NOT FROM OTHERS EXCEPT NOMINA L. IT IS SEEN THAT THE FACT THAT SUPPLIERS HAVE SHOWN SALES MADE TO THE APPELLANT COMPANY IN THEIR ACCOUNTS AND HAVE FILED THERE ITR ALONG WITH AUDITED ACCOUNTS IS NOT DISPUTED. TH US ONCE THE PURCHASE SHOWN BY THE APPELLANT IS RECIPROCATED BY THE SUPPLIER F{~~ WHO IS A REGULAR TAX APPELLANT AND THE TRANSACTIONS ARE DONE THROUGH BANKING CHANNELS. THE INITIAL ONUS CASTED UPON THE APPELLANT TO ESTABLISH THE GEN UINENESS OF THE TRANSACTION STANDS DISCHARGED. I HAVE ALSO GONE THROUGH THE VARIOUS JUDGMENU, RELIED UPON BY THE APPELLANT. A. IN THE CASE OF ACIT V. KISHAN LAL JEWELS (P.) LTD. (2012) 147 TTJ 308 (DEL.) (TRIB.) IT WAS HELD BY THE TRIBUNAL THAT IN CASE WHERE THE APPELLANT WHILE FURNISHING NECESSARY INFORMATION REGARDING THE TRANSACTIONS AND THE AFORESAID PARTIE S LIKE PURCHASE BILLS ISSUED AGAINST GOODS PURCHASED) SALES- TAX RE GISTRATION AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 67 NUMBERS OF THE PARTIES} PANS} THEIR CONFIRMATIONS A ND BANK STATEMENTS SHOWING THE DEBIT OF THE AMOUNT PAID THRO UGH ACCOUNT PAYEE CHEQUES TO THEM IN THE ACCOUNT OF APPELLANT A ND CREDITED IN THE BANK ACCOUNT OF SELLERS} HAD DISCHARGED ITS PRIMA RY ONUS} THEREAFTER THE ONUS SHIFTED ON THE DEPARTMENT TO REB UT THE SAME. THE FACTS OF THE CASE ARE SQUARELY APPLICABLE TO TH E CASE OF THE APPELLANT AS THE APPELLANT HAS ALSO FURNISHED THE A LL THE DETAILS OF THE TRANSACTION INCLUDING THE PURCHASE BILLS, SALES TAX RETURN/ ORDER, ITR AND BANK STATEMENTS. B. IN THE CASE OF CIT V. NIKUNJ EXIMP ENTERPRISES (P.) LTD. (2013) 216 TAXMAN 171 (MAG.) IT WAS HELD BY THE BOMBAY HIGH COURT THAT IN CASE WHERE THE APPELLANT IS FOUND TO HAVE MADE SALE TO GOVERNMENT DEPARTMENT WHICH WERE NOT DOUBTED PURCHASES CANNOT BE HELD TO BE NON GENU ME MERELY BECAUSE SUPPLIERS HAVE NOT APPEARED BEFORE THE ASSES SING OFFICER OR COMMISSIONER (APPEALS) C. IN THE CASE OF RAJESH P. SONI V. ACIT (2006) 100 TT J 464 (AHD.) (TRIB.) IT WAS HELD BY THE TRIBUNAL THAT ADDITION UNDER SECTION 69 WAS NOT JUSTIFIED MERELY BECAUSE SUPPLIERS COULD NOT BE LOCATED AND WERE NOT PRODUCED FOR EXAMINATION. CONSIDERING THE FACTS OF THE CASE AND THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT IT CANN OT BE SAID THAT THE PURCHASES MADE BY THE APPELLANT WERE UNEXP LAINED OR NON GENUINE. THE AO ALSO DREW SUPPORT FROM THE FACT THAT THE APPELLANT SPECIFICALLY SURRENDERED INCOME OF RS. 23 CRORE. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 68 IN THIS REGARDS REFERENCE IS MADE TO THE STATEMENT RECORDED DURING SURVEY IN WHICH THE DECLARATION WAS MADE. IT IS SEEN THAT THE APPELLANT HAS MADE A DECLARATION OF RS. 23 CRORE. HOWEVER THE APPELLANT HAS NOT ACCEPTED THAT THE PUR CHASES ARE NON GENUINE OR THE SUPPLIERS ARE NOT TRACEABLE OR T HE PURCHASES ARE INFLATED. THE RELEVANT QUESTION RAISED AND THE ANSWER GIVEN IS REPRODUCED HEREIN BELOW: 'Q 6. :DURING THE COURSE OF SURVEY OPERATION, VOUCHER BOO K NOS BI-1 TO 4 HAVE BEEN FOUND FROM WHICH IT IS OBSERVED THAT YOU HAVE MADE HUGE PURCHASES OF BOOKS IN FINANCIAL YEAR 14-15 FROM FIRMS LIKE UTSAV COLLECTION, VINAYAK PRAKASHAN, MAA DURGA BOOK CENTRE, PATEL BOOKS, SARASWATI AGENCIES ETC BASED IN ITARSI . ALL THESE BILLS ARE SERIALLY NUMBERED AND THE INVENTORY OF BOOKS AT TACHED WITH ALL THESE BILLS IS IDENTICAL. FIELD ENQUIRIES WERE MADE AT ITARSI AND IT IS OBSERVED THAT NONE OF THESE FIRMS ARE AVAILABLE AT THE GWEN ADDRESS. IN THESE CIRCUMSTANCES, PLEASE EXPLAIN WHY THESE EXPENSES SHOULD NOT BE TREATED AS NON GENUINE. ANS. THESE PURCHASES ARE DULY RECORDED IN THE BOOKS OF ACCOUNT AND THE PAYMENT THEREOF HAS ALSO BEEN MADE THROUGH BANKING CHANNELS. HOWEVER IT IS QUITE POSSIBLE THAT SOME OF THESE PARTIES MAY NOT BE AVAILABLE AT THE GIVEN ADDRESS AND I MAY NOT BE ABLE TO PROVE THE GENUINENESS OF THE PURCHASE TO THE SATISF ACTION OF THE DEPARTMENT. CONSIDERING THIS FACT AND IN ORDER TO B UY PEACE WITH THE DEPARTMENT, I VOLUNTARILY COME FORWARD TO DECLA RE EXPENSES OF RS. 23.00 CRORES WHICH MAY HAVE BEEN INFLATED IN TH E BOOKS OF ACCOUNTS. I OFFER ADDITIONAL INCOME FOR A. Y 15-16 AND AS I HAVE ALREADY FILED THE RETURN OF INCOME FOR A. Y 15-16, I WILL FILE REVISED RETURN DECLARING THE ADDITIONAL INCOME BY 31.12.201 5 AFTER PAYING FULL TAXES ON THE ADDITIONAL INCOME DECLARED. TODAY I AM PAYING TAX AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 69 OF RS. 40.00 LAKS ONLINE. IT IS OBSERVED THAT IN THE STATEMENT RECORDED, THE APPELLANT HAD NOT ACCEPTED THAT THE PURCHASES ARE INFLATED OR THE SUPPLIERS ARE NOT TRACEABLE AS IS NOTED FROM THE STATEMENT ITSELF WHEREIN IT IS MENTIONED BY THE DIRECTOR THAT 'HOWEVER IT IS QUITE POSSIBLE THAT SOME OF THESE PA RTIES MAY NOT BE AVAILABLE AT THE GIVEN ADDRESS AND I MAY NOT BE ABLE TO PROVE THE GENUINENESS OF THE PURCHASE TO THE SATISFACTION OF THE DEPARTMENT'. ON THE FACTS IT CANNOT BE SAID THAT THE APPELLANT A CCEPTED ANY TRANSACTION AS NON GENUINE. IT IS ALSO SEEN THAT GENUINENESS OF THE PURCHASES W ERE ALSO DOUBTED AS NO TRANSPORTATION EXPENSES WERE FOUND TO HAVE BEEN INCURRED. THE APPELLANT HAS EXPLAINED THAT THE BOOK S WERE PURCHASED BY THE SUPPLIERS FROM VARIOUS CONCERNS AT THE OFFICE SITE OF THE APPELLANT AND WERE CONVERTED INTO SETS AND SUPPLIED TO THE APPELLANT AT THAT SITE AND CONSEQUENTLY NO T RANSPORTATION EXPENSES WERE REQUIRED TO BE INCURRED. ON THE FACTS OF THE CASE THE EXPLANATION OF THE APPELLANT CANNOT BE CALLED A S IMPROBABLE AND CANNOT BE GROUND TO CONSIDER THE PURCHASES AS N ON NON GENUINE. THUS IT IS SEEN THAT THE VARIOUS REASONS MENTIONED BY THE AO TO DOUBT THE GENUINENESS OF THE PURCHASES ARE NOT RELE VANT AND AS THE APPELLANT HAD SUBMITTED ALL REQUIRED RECORDS IN CLUDING QUANTITATIVE AND MONETARY DETAILS OF SALES AND PURC HASE AND THE SALES HAVING NOT BEEN DOUBTED, ITS CORRESPONDIN G PURCHASE CANNOT BE TERMED AS NON GENUINE. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 70 IT IS ALSO SEEN THAT THE AO HAS HELD THAT THE APPEL LANT HAS MADE NON GENUINE PURCHASE OF RS. 23 CRORE. NO SPECIFIC D ETAILS OF THE INVOICES WHICH ARE FOUND TO BE NON GENUINE OR ANY O THER FACT FROM WHICH THE DETAILS OF BOGUS PURCHASE COULD BE A SCERTAINED IS MENTIONED IN THE ORDER. THUS THE ONLY INFERENCE THAT CAN BE DRAWN IS THAT THE ADDITION IS MADE ON THE BASIS OF THE DECLARATION MADE U/S 133A. THE AO HAS HELD THAT ADDITION CAN BE MADE ON THE BASIS OF STATEMENT ITSELF AND HAVE R ELIED UPON DECISIONS OF THE HONBLE SUPREME COURT OF INDIA IN T HE CASE OF SURJEET SINGH CHABRA V UOI, THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF RAKESH MAHAJAN V CIT AND THAT OF THE ITAT CHENNAI IN THE CASE OF DCIT V B K MURLIKRISHNA. ALL THESE DECISIONS ARE REFERRED BY ME AND IT IS FOUND THAT N ONE OF THEM ARE APPLICABLE TO THE CASE OF THE APPELLANT. IN THE CASE OF SURJEET SINGH CHABRA GOLD WAS SEIZED UNDER THE FERA & CUSTOMS ACT FROM THE ACCUSED WHO ON STATEMENT ACCEP TED THAT THE GOLD WAS SEIZED FROM HIM. IN THE CASE O THE APP ELLANT NO SUCH SEIZURE IS MADE FROM THE APPELLANT AND THE FER A ACT HAS ALSO NO APPLICABILITY IN THE CASE OF THE APPELLANT. IN THE CASE OF RAKESH MAHAJAN THE STATEMENT WAS GIV EN IN CONTEMPLATION OF DEATH BY A PERSON EXPECTING TO DIE MAKING A DISTRIBUTION OF HIS WEALTH AMONGST HIS FAMILY. TH E COURT HELD THAT ONCE A PERSON IS EXPECTING TO DIE HE HAS NO FE AR AND HE WILL NOT MAKE ANY INCORRECT STATEMENT. THE FACTS OF THE CASE OF THE APPELLANT ARE NOT COMPARABLE. FURTHER THE DISPUTE REGARDING THE VALIDITY OF THE DECLARATION MADE IN THE STATEMENT RECORDED DURING S URVEY UJS133A OF THE ACT HAS NOW BEEN FINALLY SETTLED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V S KHADER KHAN SON (2012) 254 AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 71 CTR (SE) 228 WHEREIN IT WAS HELD BY THE COURT THAT SECTION 133A DOES NOT EMPOWER ANY IT AUTHORITY TO EXAMINE ANY PE RSON ON OATH, HENCE, ANY SUCH STATEMENT HAS NO EVIDENTIARY VALUE AND ANY ADMISSION MADE DURING SUCH STATEMENT CANNOT, BY ITS ELF, BE MADE THE BASIS FOR ADDITION. THE HON'BLE ITAT, INDORE WHILE DECIDING THE APPEALS OF SHRI SUDEEP MAHESHWARI IN ITA NO. 524/LND/2013 AND 299/LND/2017 FOR A.Y. 2010-11 AND A.Y. 2008-09 DATE D 13.02.2019 HELD AS UNDER:- 'IT IS THE CASE OF THE ASSESSEE THAT DURING THE COU RSE OF SEARCH & SEIZURE, NO INCRIMINATING MATERIAL OR UNDISCLOSED I NCOME OR INVESTMENTS WERE FOUND. IT IS STATED THAT THE ASSESSEE WAS UNDE R MENTAL PRESSURE AND TIRED. THEREFORE, TO BUY PEACE OF MIND, HE ACCEPTED AND DECLARED RS.3 CRORES IN PERSONAL NAME. IT IS ALSO STATED THAT THE CASE LAWS AS RELIED BY THE A.O. ARE NOT APPLICABLE ON THE FACTS OF THE PRE SENT CASE. THE ASSESSEE HAS RELIED ON THE DECISION OF THE HON'BLE SUPREME C OURT RENDERED IN THE CASE OF PULLANGODE RUBBER PRODUCE CO. LTD. 91 ITR 18 (SC), WHEREIN THE HON'BLE COURT HAS HELD THAT ADMISSION CANNOT BE SAI D THAT IT IS CONCLUSIVE. RETRACTION FROM ADMISSION WAS PERMISSIBLE IN LAW AN D IT WAS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT WAS I NCORRECT. HOWEVER, RELIANCE IS PLACED ON THE JUDGMENT OF THE HON'BLE G UJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. CHANDRAKUMAR JETHMA L KOCHAR (2015) 55 TAXMANN.COM 292 (GUJARAT), WHEREIN IT HAS BEEN HELD THAT MERELY ON THE BASIS OF ADMISSION THAT FEW BENAMI CONCERNS WERE BE ING RUN BY ASSESSEE, ASSESSEE COULD NOT BE BASIS FOR MAKING THE ASSESSEE LIABLE FOR TAX AND THE ASSESSEE RETRACTED FROM SUCH ADMISSION AND REVENUE COULD NOT FURNISH ANY [ITA 5241INDL2013 & ITA NO.2991IND12017J [SHRI SUDIP MAHESHWARI, BHOPAL] CORROBORATIVE EVIDENCE IN SUPPORT OF SUCH E VIDENCE. IT WAS FURTHER URGED BY THE ASSESSEE THAT ADMISSION SHOULD BE BASE D UPON CERTAIN AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 72 CORROBORATIVE EVIDENCES. IN THE ABSENCE OF CORROBOR ATIVE EVIDENCES, THE ADMISSION IS MERELY A HOLLOW STATEMENT. WE HAVE GIV EN OUR THOUGHTFUL CONSIDERATION TO THE RIVAL CONTENTIONS OF THE PARTI ES. IT IS UNDISPUTED FACT THAT THE STATEMENT RECORDED U/S 132(4) OF THE ACT H AS A BETTER EVIDENTIARY VALUE BUT IT IS ALSO A SETTLED POSITION OF LAW THAT THE ADDITION CANNOT BE SUSTAINED MERELY ON THE BASIS OF THE STATEMENT. THE RE HAS TO BE SOME MATERIAL CORROBORATING THE CONTENTS OF THE STATEMEN T. IN THE CASE IN HAND, REVENUE COULD NOT POINT OUT AS WHAT WAS THE MATERIA L BEFORE THE A. 0., WHICH SUPPORTED THE CONTENTS OF THE STATEMENT. IN T HE ABSENCE OF SUCH MATERIAL, COUPLED WITH THE FACT THAT IT IS RECORDED BY THE LD. CIT(A) THAT THE ASSESSEE HIMSELF HAD SURRENDERED A SUM OF RS. 69,59 ,000/- AND RS.75,00,000/- IN A.Y 2008-09 AND 2009-10 [ITA 5241 INDL2013 & ITA NO.299/IND/2017 (SHRI SUDIP MAHESHWARI, BHOPAL] RESPECTIVELY. THE A.O FAILED TO CO-RELA TE THE DISCLOSURES MADE IN THE STATEMENT MATERIAL GATH ERED DURING THE SEARCH. THEREFORE, NO INFERENCE IS CALLE D FOR IN THE FINDING OF THE LD.CIT(A) AND IS HEREBY AFFIRMED. GROUND RAISED BY THE REVENUE IS DISMISSED. DURING THE COURSE OF SURVEY, NO INCRIMINATING MATERIAL OR UNDISCLOSED INCOME OR INVESTMENTS WERE FOUND. IT IS STATED BY THE APPELLANT THAT HE WAS UNDER MENTAL PRESSURE. IN ORDER TO BUY THE PEACE OF THE MIND, HE MADE DECLARATION OF R S. 23,00,00,000/-. IT IS DISPUTED FACT THAT THE STATEMENT RECORDED U/S 133A WAS HAVING A EVIDENTIARY VALUE BUT IT IS A LSO A SETTLED POSITION OF LAW THAT THE ADDITION CANNOT BE SUSTAIN ED MERELY ON THE BASIS OF THE STATEMENT. THERE HAVE TO BE SOME C ORROBORATING MATERIAL TO SUPPORT THE STATEMENT. THE A.O. FAILED TO BRING ANY MATERIAL WHICH SUPPORTS THE CONTENTS OF THE STATEME NT. THE A.O. FAILED TO CORRELATE THE DISCLOSURE MADE WITH THE IN CRIMINATING MATERIAL GATHERED DURING THE SURVEY. THEREFORE, THE ADDITION MADE BY THE A.O. AMOUNTING TO RS. 23,00,00,000/- IS DELETED. AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 73 THEREFORE, THE APPEAL ON THIS GROUND IS ALLOWED. 38. THE ABOVE FINDING OF LD. CIT(A) IS WELL SUPPORT ED BY SETTLED JUDICIAL PRECEDENTS OF WHICH FEW OF THE DECISION AR E OF THIS TRIBUNAL ALSO WHEREIN IT HAS BEEN CONSISTENTLY HELD THAT IF THE LD. A.O FAILS TO CORROBORATE THE DISCLOSURES MADE IN THE STATEMENT G IVEN DURING THE COURSE OF SURVEY WITH THE INCRIMINATING MATERIAL GA THERED DURING THE COURSE OF SUCH SURVEY, ADDITIONS CANNOT BE MADE PURELY ON THE BASIS OF STATEMENT. HONBLE APEX COURT IN THE CASE OF CIT V/S S KHADER KHAN SON (SUPRA) HAS SPECIFICALLY HELD WITH REGARD TO SURVEY ACTION U/S 133A OF THE ACT THAT SECTION 133A DOES NOT EMPOWER ANY IT AUTHORITY TO EXAMINE ANY PERSON ON OATH, HEN CE, ANY SUCH STATEMENT HAS NO EVIDENTIARY VALUE AND ANY ADMISSIO N MADE DURING SUCH STATEMENT CANNOT, BY ITSELF, BE MADE THE BASIS FOR ADDITION. HONBLE DELHI HIGH COURT IN THE CASE OF MAHESH OHRI V/S ACIT 154 TTJ 33 HELD THAT ADDITION ON THE BASIS OF STATEMENT DURING SURVEY I N ABSENCE OF ANY MATERIAL CONNECTED DURING THE COURSE OF SURVEY, NO ADDITION CAN BE MADE ON THE STRENGTH OF THE STATEME NT. 39. THE STATEMENT GIVEN BY THE ASSESSEE DURING THE COURSE OF SURVEY U/S 133A OF THE ACT AND OFFERING RS.23 CRORE S TO TAX FOR INFLATED PURCHASES WAS NOT A STATEMENT ON OATH AND THUS HAS NO EVIDENTIARY VALUE. THE MATERIAL IN THIS CASE SHOUL D HAVE BEEN THE EVIDENCE GATHERED BY THE SURVEY TEAM QUESTIONING TH E GENUINENESS OF THE SUPPLIERS AND FURTHER FINDING ANY INFORMATIO N DURING THE AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 74 COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS FILED VARIOUS DETAILS OF DOCUMENTARY EVIDENCE WITH REGARD TO THE ALLEGED SUPPLIERS OF BOOKS WHICH INCLUDES COPIES OF BILLS, QUANTITY D ETAILS, BANK ACCOUNT, AUDITED FINANCIAL STATEMENT, INCOME TAX RE TURN, VAT REGISTRATION, GUMASTA CERTIFICATE AND COPY OF LEDGE R ACCOUNTS. DETAILS OF CORRESPONDING SALES OF THE ITEMS OF THE VARIOUS PURCHASES DURING THE YEAR HAVE ALSO BEEN FILED. SALES OF THE ASSESSEE HAS NOT BEEN DISPUTED AT ANY STAGE. OUT OF NOTICES SENT U/ S 133(6) OF THE ACT BY LD. A.O TO 10 SUPPLIERS, FIVE MADE DUE COMPL IANCE BUT FOR REMAINING 5 SUPPLIERS IT IS STATED BY RESPONDENT TH AT WRONG ADDRESS WAS MENTIONED AND THE LATEST ADDRESS WAS PROVIDED BUT NO FURTHER ACTION WAS TAKEN BY LD. A.O. HOWEVER, LD. CIT(A) G OT NECESSARY VERIFICATION DONE. 40. LOOKING TO THE ABOVE STATED FACTS WE ARE OF THE VIEW THAT LD. A.O WAS NOT ABLE TO PIN POINT ANY IRREGULARITY IN T HE PURCHASE MADE BY THE ASSESSEE DURING THE YEAR, PROVIDING OR LAYIN G HAND ON ANY CONTRARY MATERIAL TO THOSE FILED BY THE ASSESSEE, N O NEW INFORMATION WAS GATHERED WHICH COULD INDICATE THAT THE ALLEGED SUPPLIERS ARE NON GENUINE. EVEN WHILE MAKING ADDITION NO REFEREN CE IS GIVEN TO AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 75 THE PURCHASES MADE FROM DIFFERENT SUPPLIERS AND THE ADDITIONS IS MADE ONLY FOR THE AMOUNT OF SURRENDER MADE DURING T HE COURSE OF SURVEY WHICH IN VIEW OF THE SETTLED JUDICIAL PRECED ENTS WAS UNCALLED FOR. FURTHER LD. A.O ALSO FAILED TO TAKE NOTE OF T HE FACT THAT WHEN THE SALES HAVE BEEN ACCEPTED THEN THERE HAS TO BE C ORRESPONDING PURCHASES. HONBLE GUJARAT HIGH COURT IN THE CASE O F CIT V/S PRESIDENT INDUSTRIES 258 ITR 654 (GUJARAT) HAS HELD THAT AMOUNT OF SALES ITSELF CANNOT REPRESENT THE INCOME OF THE ASS ESSEE WHO HAS NOT DISCLOSED SALES. THE SALES ONLY REPRESENTED THE PR ICE RECEIVED BY THE SELLER OF THE GOODS FOR THE ACQUISITION OF WHICH IT HAS ALREADY INCURRED THE COST. IT IS THE REALISATION OF EXCESS OVER THE COST INCURRED THAT ONLY FORMS PART OF THE PROFIT INCLUDED IN THE CONSIDERAT ION OF SALES. 41. SO WHEN THE LD. A.O HAD ACCEPTED THE SALES THEN HE OUGHT TO HAVE GIVEN THE BENEFIT OF PURCHASE AGAINST THE SALE S. WITHOUT REJECTING THE BOOK RESULTS AND WITHOUT FINDING ANYT HING CONTRARY TO THE CLAIM OF THE ASSESSEE AND NOT REFERRING TO ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SURVEY THE ADDI TION FOR INCOME OFFERED TO TAX DURING THE COURSE OF SURVEY AT RS.23 CRORES BUT RETRACTED SOON, WAS THUS UNCALLED FOR. WE THEREFOR E IN THE GIVEN AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 76 FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULL Y FOLLOWING THE JUDGMENTS/DECISIONS STATED HEREIN ABOVE FAIL TO FIN D ANY INCONSISTENCY IN THE FINDING OF LD. CIT(A) DELETING THE ADDITION OF RS.23 CRORES MADE BY THE LD. A.O MADE PURELY ON THE BASIS OF STATEMENT GIVEN U/S 133A OF THE ACT. ACCORDINGLY G ROUND NO.1 OF REVENUE STANDS DISMISSED. 42. AS REGARDS GROUND NO.2 OF THE REVENUES APPEAL RELATING TO DELETION OF DISALLOWANCE OF INTEREST EXPENSES AT RS .3,16,358/-, PERUSAL OF RECORDS SHOWS THAT THIS AMOUNT WAS PAID ON THE CAR LOAN TAKEN FROM BANK OF INDIA AND IS PURELY BUSINESS EXP ENSES AS THE CAR IS USED FOR PURPOSE OF BUSINESS. GIVING OF INT EREST FREE LOAN/ ADVANCE TO STAFF/SISTER CONCERN NEEDS TO BE EXAMINE D ON THE FACTS OF PARTICULAR CASE AND THE COMMERCIAL EXPEDIENCY OF TH E TRANSACTION BUT IT CAN NO WAY LEAD TO DISALLOWANCE OF GENUINE B USINESS EXPENDITURE. WE THUS FIND NO INFIRMITY IN THE FIND ING OF LD. CIT(A) DELETING THE DISALLOWANCE OF RS.3,16,358/-. THUS G ROUND NO.2 OF THE REVENUE IS DISMISSED. 43. NOW WE ARE LEFT WITH THE SOLE GROUND RAISED BY THE ASSESSEE FOR ASSESSMENT YEAR 2015-16 FOR THE ADHOC DISALLOWANCE OF AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 77 RS.3,34,205/- SUSTAINED BY LD. CIT(A). WE OBSERVE THAT THIS DISALLOWANCE WAS MADE FOR WANT OF VERIFICATION OF V ARIOUS EXPENSES INCURRED UNDER THE HEAD EXHIBITION EXPENSES, REPAIR & MAINTENANCE, MEETING EXPENSES, MISCELLANEOUS EXPENS ES AND GENERAL EXPENSES. THOUGH OPPORTUNITY WAS GRANTED T O THE ASSESSEE TO GET THESE EXPENSES VERIFIED BUT DURING THE VERIF ICATION IT WAS NOTICED THAT SOME OF THE EXPENSES DEBITED UNDER THE HEAD ARE NOT VERIFIABLE, MOST OF THE VOUCHERS ARE SELF MADE AND PAYMENTS INCURRED IN CASH. WE THEREFORE LOOKING TO THE TOTAL ITY OF FACTS WE ARE OF THE VIEW THAT LD. CIT(A) HAS RIGHTLY CONFIRMED T HE DISALLOWANCE AT RS.3,34,204/-. ACCORDINGLY GROUND NO.1 RAISED BY T HE ASSESSEE IS DISMISSED. 44. THE OTHER GROUNDS ARE GENERAL IN NATURE WHICH N EEDS NO ADJUDICATION. 45. THUS APPEAL OF THE ASSESSEE AND REVENUE FOR ASS ESSMENT YEAR 2015-16 ARE DISMISSED. 46. IN THE RESULT FOR ASSESSMENT YEAR 2013-14, ASSE SSEES APPEAL ITA NO.945/IND/2019 IS ALLOWED AND THAT OF REVENUE IN ITA AISECT LTD ITA NO.945, 946, 952 & 953/IND/2019 78 NO.952/IND/2019 IS DISMISSED. FOR ASSESSMENT YEAR 2015-16 FOR BOTH ASSESSEES APPEAL ITA NO.946/IND/2019 AND THAT OF REVENUE IN ITA NO.953/IND/2019 ARE DISMISSED. THE ORDER PRONOUNCED AS PER RULE 34 OF ITAT RULES, 1963 ON 28.06.2021. SD/- SD/- (MADHUMITA ROY) (MA NISH BORAD) JUDICIAL MEMBER ACCOUNTAN T MEMBER / DATED : 28.06.2021 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE