AI Insights
The case involves Kishore Kumar Panjwani, the proprietor of Radhashyam Rice Mill, who appealed against the order of the CIT(Appeals) which upheld the additions made by the Assessing Officer (A.O.) under Section 143(3) of the Income-tax Act, 1961. The A.O. had treated certain purchases amounting to Rs.94,02,500 as bogus based on findings from a survey operation and subsequent investigations, leading to an addition of Rs.23,50,625 to the assessee's income. The CIT(Appeals) upheld this addition, along with other ad-hoc disallowances on various expenses. The Tribunal, while agreeing that the purchases were bogus, directed a re-evaluation of the profit addition by aligning the G.P. rate of these purchases with that of genuine ones, and sustained the addition of 10% which the assessee had already admitted.
Appeal Details
Counselvise Citation
[2024] 140 COUNSELVISE.COM (IT) 35270 (ITAT-RAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
08-10-2024
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC
Next Hearing Date
01-10-2024
Assessment Year
2014-2015
Appeal Filed On
13-08-2024
Judgement Text
"pआयकर अपीलȣय अͬधकरण Ûयायपीठ “एक-सदèय” मामला रायपुर मɅ IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH “SMC”, RAIPUR Įी रवीश सूद, ÛयाǓयक सदèय क े सम¢ BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER आयकर अपील सं. / ITA No. 378/RPR/2024 Ǔनधा[रण वष[ / Assessment Year : 2014-15 Kishore Kumar Panjwani Prop. of Radhashyam Rice Mill, Vill : Tulsi, P.O. Tilda, Neora, Raipur (C.G.)-493 114 PAN : AFBPP5593F .......अपीलाथȸ / Appellant बनाम / V/s. The Income Tax Officer-1(2), Raipur (C.G.) ……Ĥ×यथȸ / Respondent Assessee by : Shri Sunil Kumar Agrawal, CA Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई कȧ तारȣख / Date of Hearing : 01.10.2024 घोषणा कȧ तारȣख / Date of Pronouncement : 08.10.2024 2 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the ADDL/JCIT(A)-3, Delhi, dated 02.07.2024 which in turn arises from the order passed by the A.O under Sec.143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 24.12.2016 for the assessment year 2014-15. The assessee has assailed the impugned order on the following grounds of appeal: “1. On the facts and circumstances of the case and in law, addition sustained by CIT(A) of Rs.23,50,625 i.e., adhoc disallowance of 25% on alleged bogus purchase of Rs.94,02,500 is unjustified; books of account has been rejected by applying sec145(3); after rejecting books of account, profit was to be estimated by applying flat rate of profit on total turnover of Rs.10,49,83,356; AO cannot rely on rejected books of account for making addition on one selected item (i.e., purchase) of such rejected books of account; addition is liable to be deleted; relied on KY Pilliah & Sons (1967) (SC); ISMT Ltd (2022) (Pune-Trib); Malpani House of Stones (2017) (Raj); Indwell Constructions (1998) (AP); Gian Chand Labour Contractors (2008) (P&H). 2. On the facts and circumstances of the case and in law, addition sustained by CIT(A) of Rs.25,00,625 i.e., adhoc disallowance on purchase of material/expenses is unjustified; books of account has been rejected by applying sec145(3); assessee declared better results than the preceding year, i.e., GP of 6.22% in AY14-15 on turnover of Rs.10,49,83,356 as compared to GP of 5.81% in AY13- 14 on turnover of Rs.9,18,01,337; even if sec145(3) is invoked, no addition can be made on such count; addition is liable to be deleted; relied on Gotan Lime Khaniz Udhyog (2001) (Raj); Inani Marbles (P) Ltd (2008) (Raj); Jaimal Ram Kasturi (2013) (Raj); Gupta KN Construction Co (2015) (Raj); Mohan Sukumaran (2020) (Rai-Trib); Vishnu Prasad Maharwal (2014) (Jai-Trib); Pooranchand Agarwal (2021) (Rai-Trib). 3. On the facts & circumstances of the case and in law, addition sustained by CIT(A) of Rs.23,50,625 is unjustified; CIT(A) has 3 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 upheld rejection of books of account; upheld application of sec145(3); assessment made u/s143(3); without making assessment u/s144 i.e., best judgment assessment, any estimation of income is not permissible in the eyes of law; any kind of estimation of income in assessment made u/s143(3) would be invalid, is liable to be deleted; relied on Forum Sales (P) Ltd (2024) (Del HC); Marg Ltd (2017) (Mad HC); Anil Kumar & Co (2016) (Kar HC) Subhendu Kumar Subudhi (2022) (Ori HC). 4. On the facts & circumstances of the case and in law, addition sustained by CIT(A) of Rs.23,50,625 i.e., adhoc disallowance of 25% on bogus purchase of broken rice of Rs.94,02,500 from 4 parties, is unjustified; assessee is only a `trader'; there cannot be `bogus purchase' in case of a 'trader' wherein 'corresponding sales quantity' of such `trading items' is not disputed by the revenue; without giving any valid basis for such arbitrary estimation; addition of Rs.23,50,625 is unjustified; is liable to be deleted. 5. On the facts and circumstances of the case and in law, addition sustained by CIT(A) of Rs.1,00,000 i.e., adhoc disallowance of freight & hamali exp. claimed at Rs.22,34,207 is unjustified; books of account has been rejected by applying sec145(3); after rejecting books of account, profit was to be estimated by applying flat rate of profit on total turnover of Rs.10,49,83,356; AO cannot rely on rejected books of account for making addition on one selected item (i.e., freight & hamali exp.) of such rejected books of account; addition is liable to be deleted; relied on KY Pilliah & Sons (1967) (SC); ISMT Ltd (2022) (Pune-Trib); Malpani House of Stones (2017) (Raj); Indwell Constructions (1998) (AP); Gian Chand Labour Contractors (2008) (P&H). 6. On the facts and circumstances of the case and in law, addition sustained by CIT(A) of Rs.50,000 i.e., adhoc disallowance of wages exp. claimed at Rs.7,42,505 is unjustified; books of account has been rejected by applying sec145(3); after rejecting books of account, profit was to be estimated by applying flat rate of profit on total turnover of Rs.10,49,83,356; AO cannot rely on rejected books of account for making addition on one selected item (i.e., wages exp.) of such rejected books of account; addition is liable to be deleted; relied on KY Pilliah & Sons (1967) (SC); ISMT Ltd (2022) (Pune-Trib); Malpani House of Stones (2017) (Raj); Indwell Constructions (1998) (AP); Gian Chand Labour Contractors (2008) (P&H). 7. The appellant craves leave, to add, urge, alter, modify or withdraw any grounds before or at the time of hearing.” 4 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 2. Succinctly stated, the assessee who is engaged in the business of rice milling and ware housing had e-filed his return of income for A.Y.2014-15 on 13.02.2015, declaring an income of Rs.5,32,270/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act. 3. During the course of the assessment proceedings, it was observed by the A.O that the assessee had claimed to have purchased paddy/broken rice aggregating to an amount of Rs.94,02,500/- from the following four parties : S. No. Name of the party Total purchase 1. M/s. Agrawal Agro, Raipur 12,15,000/- 2. M/s. Shri Tulsi Agro, Raipur 47,12,500/- 3. M/s. Shri Sakshi Gopal Corporation, Raipur 18,62,500/- 4. M/s. Shri Shayamji Rice Agrotech, Raipur 16,12,500/- Total 94,02,500/- A survey operation u/s.133A of the Act was conducted at the business premises of Shri Sanjay Sharma, Hanuman market, Raipur and Shri Kamlesh Kesharwani, commission Agent, Ramsagarpara, Raipur on 15.03.2016, which revealed that certain rice millers would procure bogus bills from brokers/entry operators without any actual purchase of goods. It 5 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 was observed by the A.O that substantial incriminating material evidencing the aforesaid facts were found in the course of the survey proceedings. The A.O also noticed that survey action was carried out in the case of Nagarik Sahakari Bank, Raipur where some of the brokers/entry operators maintained their bank accounts. It was further observed by the A.O that brokers/entry operators had in their respective statements recorded on oath u/s.131 of the Act admitted of having provided bogus bills to rice traders and millers without any actual supply of goods. Also, it was noticed by the A.O that certain rice millers had in their statements that were recorded on oath admitted of being involved in the nefarious activities of providing bogus bills without any corresponding sale of goods. After deliberating at length on the modus-operandi that was adopted by the brokers/entry operators and certain rice millers who had admitted of their involvement in providing/facilitating bogus bills in lieu of commission, and referring to their statements which were recorded u/s.131 of the Act a/w. those recorded in the course of their cross- examination by rice millers who were alleged by them as beneficiary, it was observed by the A.O that brokers namely, Shri Sanjay Sharma, Shri Aditya Sharma, Shri Kamelsh Kesharwani, Shri Ghanshuam Rijwani and Shri Narad Sahu had stated on oath that they had provided bogus entries or bogus bills to various rice millers. It was also observed by the A.O that the assessee had failed to substantiate the genuineness of the purchases claimed to have been made from the 6 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 aforementioned parties on the basis of supporting documentary evidences, viz. delivery challans. 4. The A.O considering the fact that the 4 parties from whom the assessee had claimed to have made purchases of Rs. 94,02,500/- were in the course of investigation found to be bogus concerns, called upon him to substantiate the authenticity of the impugned purchase transactions on the basis of supporting documentary evidence. In reply, the assessee in his attempt to substantiate the authenticity of the subject purchase transactions produced before the A.O bilties and submitted that the purchases from the abovementioned parties were genuine and recorded in his books of accounts. However, the A.O was of the view that the assesseee, as in a case where bogus purchase bills were procured, had failed to support his claim of having made genuine purchases from the aforementioned 4 parties by producing delivery challans and also the mode of inward transport, Mandi passage and Anugya etc., therefore, his claim of having made genuine purchases did not merit acceptance. At this stage, it would be pertinent to point out that the assessee on being confronted with the bogus/unverified purchases of Rs.94,02,500/- made from the aforementioned four parties, had accepted the addition to the extent of 10% of the aforementioned amount i.e. Rs.9,40,250/-. However, the A.O taking cognizance of the fact that the assessee had failed to substantiate the 7 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 authenticity of the purchases claimed to have been made from the aforementioned four parties, therefore, held the same as bogus purchases. 5. The A.O after treating the impugned purchases in question as bogus, rejected the books of accounts of the assessee u/s.145(3) of the Act. The A.O by relying on the order of the ITAT, Ahmadabad in the case of Vijay Proteins Vs. ACIT, (1996) 58 ITD 428 (Ahd.), and impliedly being of the view that the assessee had purchased the goods in question not from the aforementioned tainted parties from whom only bills were procured for routing the same through his books of account, but had procured the said goods at a discounted value from the open/grey market, disallowed 25% of the value of bogus purchases and made a consequential addition of Rs.23,50,625/- to the assessee’s returned income. 6. Also, the A.O made an ad-hoc disallowances of Rs.1,00,000/- towards freight expenses and hamali expenses as against that claimed by the assessee of Rs.5,05,341/- and Rs.17,28,866/-, respectively. Also, the A.O made an ad hoc disallowance of Rs.50,000/- towards wages expenses as against that claimed by the assessee to Rs.7,42,505/-. The A.O on the basis of his aforesaid deliberations vide his order passed u/s.143(3), dated 24.12.2016 after, inter alia, making the aforesaid additions determined the income of the assessee at Rs.30,32,900/-. 8 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 7. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without success. As regards the disallowance of 25% of the bogus purchases of Rs.94,02,500/- i.e. Rs.23,50,625/- made by the A.O, the CIT(Appeals) upheld the same by observing as under: “6. Discussion & Decision — The appellant did not submit any reply in the appeal proceedings. Every time he was seeking adjournment for few days but no submissions were made. Even against last notice dated 20.06.2024 no response was submitted. The assessment order was passed in December, 2016 the appellant filed appeal in January, 2017. Substantial time was available with the appellant to prepare his defence and submit the supporting documents. However, in response to the various notices as mentioned in para 3 above no submissions in support of grounds of appeal filed. Therefore, the case is decided on the basis of material available on record. Ground no. 1 & 2 : The grounds are interlinked and contesting the addition of Rs. 23,50,625/- made by AO on account of bogus purchases. The AO in his order stated that a survey operation u/s 133A was conducted in the premises of brokers/entry providers relating to rice milling and rice trading business. The appellant is engaged in the business. Survey u/s 133A was conducted in the business premises Shri Snajay Sharma, Hanuman Market, Raipur and Kamlesh Kesarwani canvassing agent Raipur. During the course of survey incremating material were found. It was found that the persons were providing bogus bills. The bogus firms operator had admitted on oath that they never owned an operated any mills, godown and never owned any stock to carry out business. There only work was to provide bogus bills to rice traders and millers in leu of that they received commission. The extract of statements of such individual recorded u/s 131 was made part of assessment order by AO. The AO found that the assessee obtained total bogus bills for purchase from 4 parties amounting Rs. 94,02,500/-. The facts were confronted to appellant by AO during assessment proceedings. The appellant offered the 10% of the bogus purchase for taxation. However, the AO held that the transaction is sham, fictitious and artificial transaction. The appellant is not able to establish the genuineness of purchase and failed to discharge the burden of proof, for which the onus was upon him. The AO discussed the case of Vijay Proteins Ltd. decided by ITAT Ahmedabad wherein 9 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 the similar facts the tribunal upheld action of AO in adding 25% of bogus transactions. The AO therefore, disallowed 25% of bogus purchase of Rs. 94,02,500/-i.e. Rs. 23,50,625/-. The order of AO is well reasoned and speaking. The appellant also in a way admitted the transaction being bogus by offering 10% of same for taxation. During the course appeal proceedings, no further evidence was produced by appellant. Considering the facts in totality the addition of Rs. 23,50,625/- is confirmed. Ground nos. 1 & 2 are rejected.” As regards the ad-hod disallowance of Rs.1,00,000/- towards “freight expenses” and “hamali expenses” and Rs. 50,000/- towards wages made by the A.O, the CIT(Appeals) upheld the same by observing as under: “Ground nos. 3 & 4: The grounds are against the order of AO disallowing amount of Rs. 1,00,000/- and 50,000/- out of freight and hamali expenses and labour charges. It is discussed that freight expenses of 5,05,341/-, hamali expenses of 17,28,866/- are claimed. However, AO found that the supporting register are not maintained. The vouchers are self made therefore, disallowed amount of Rs. 1,00,000/- out of the expenses. Similarly, wages/labour charges of 7,42,505/- was claimed but supporting evidences were mostly self vouchers without support of other evidences in the form of labour register etc. The AO disallowed 50,000/- out of expenses on estimated basis. The appellant did not submit any evidence during appeal proceeding. Considering the facts that the AO disallowed on the small percentage of total expenses for the want of supporting evidences, the additions are confirmed. Ground nos. 3 & 4 are rejected.” 8. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before the tribunal. 10 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 9. Shri Sunil Kumar Agrawal, Ld. Authorized Representative ( for short ‘AR’) for the assessee at the very outset had assailed the treating of the aforesaid purchases claimed by the assessee to have been made from aforementioned 4 parties as bogus by the lower authorities. It was the claim of the Ld. AR that as the assessee had supported his claim of having made genuine purchases from the aforementioned parties on the basis of documentary evidences, therefore, there was no justification on the part of the A.O in drawing any adverse inferences as regards the same. Apart from that, it was the claim of the Ld. AR that as the purchases made by the assessee during the year under consideration were in no way inflated as in comparison to those made in the preceding year, therefore, the genuineness of such purchases on the said count itself was proved to the hilt. On a specific query by the Bench as to whether the copies of delivery challans as regards the purchases claimed by the assessee to have been made from the above-mentioned parties were made available either before the A.O or before the CIT(Appeals), the Ld. AR answered in the negative. 10. Apropos the ad-hoc disallowance of expenses of Rs.1,00,000/- towards freight expenses and hamali expenses and Rs.50,000/- towards wages expenses, the Ld.AR submitted that there was no whisper in the body of the assessment order about any specific instance of expenditure which was either not found to be verifiable or was not in order. The Ld. AR 11 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 submitted that as the expenses claimed by the assessee as a deduction were incurred wholly and exclusively for the purpose of his business, therefore, the same could not have been summarily disallowed on an ad-hoc basis by the A.O. 11. Per contra, the Ld. Sr. Departmental Representative (for short ‘DR’) relied on the orders of the lower authorities. 12. I have heard the Ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by him to drive home his contentions. 13. I have given a thoughtful consideration to the issue in hand, i.e., dubbing of the impugned purchases as bogus by the lower authorities, as well as quantification of the profit which the assessee would have made by procuring the same at a discounted value from the open/grey market. As the assessee had failed to place on record copies of delivery challans pertaining to the impugned purchase transactions in question, therefore, it can safely be held that no infirmity emerges from the orders of the lower authorities that no genuine purchases were made by the assessee from the aforementioned parties. Apart from that, I may also observe that the mode of inward transport, Mandi passage and Anugya etc. qua the purchases in 12 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 question were not produced by the assessee in the course of proceedings before the lower authorities. On a careful perusal of the assessment order, I am of the considered view that as observed by the A.O and, rightly so, the assessee had failed to substantiate the veracity of its claim of having made genuine purchases from the aforementioned parties in question. 14. As the assessee had failed to discharge the onus that was cast upon him as regards proving the authenticity of his claim of having made genuine purchases from the aforementioned 4 parties, therefore, it can safely be concluded that he had the procured goods in question not from the said parties but from the open/grey market. Considering the aforesaid facts, I am principally in agreement with the lower authorities that the asseseee would have procured the goods from the open/grey market at a discounted value as against that booked by him on the basis of bogus bills in his books of accounts. 15. As I have upheld the view taken by the lower authorities that the assessee had not made any genuine purchases from the aforementioned 4 parties in question, therefore, I shall now deal with the quantification of the profit which it would have made by procuring the goods under consideration at a discounted value from the open/grey market i.e. as against the inflated value at which the same had been booked on the basis of bogus bills in his books of account. 13 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 16. On a careful perusal of the order of the A.O, I find that he had not given any cogent reason for working out the disallowance @25% of the value of the impugned bogus/unsubstantiated purchases. In fact, the only reason which can be gathered from a perusal of the assessment order is the reliance placed by the A.O on the order of the ITAT, Ahmedabad in the case of Vijay Proteins Ltd. (1996) 58 ITD 428 (Ahd.). Also, I am not impressed with the manner in which the CIT(Appeals) had sustained the addition. As the very basis adopted by the lower authorities in making/sustaining the addition in the hands of the assessee is not supported by any material or basis, therefore, I am unable to persuade myself to concur with the same. 17. Ostensibly, the assessee had purchased the goods in question not from the aforementioned four parties but at a discounted value from the parties operating in the open/grey market. My indulgence in the present appeal wherein I have upheld the dubbing of the impugned purchases as bogus, thus, boils down to the quantification of the profit which the assessee would have made by procuring the goods in question at a discounted value from the open/grey market. 18. Admittedly the addition in the hands of the assessee is liable to be restricted only to the extent of the profit which he would have made by procuring the goods at a discounted value from the open/grey market as against the inflated value at which the same were booked on the basis of 14 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 bogus bills in his books of account. In so far the issue of quantification of profit which the assessee would have made by procuring the goods in question from the open/grey market is concerned, I find that the Hon’ble High Court of Bombay in the case of Pr. Commissioner of Income Tax- 17 Vs. M/s. Mohhomad Haji Adam & Company, (2019) 103 Taxmann.com 459 (Bom) while upholding the order of the Tribunal, had observed, that the addition in the hands of the assessee as regards the bogus/unproved purchases was to be made to the extent of bringing the G.P rate of such purchases at the same rate of other genuine purchases. The Hon’ble High Court while concluding as hereinabove had observed as under: “8. In the present case, as noted above, the assessee was a trader of brics. The A.O found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sale declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trade. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under- \"So far as the question regarding addition of Rs.3,70,78,125/- as gross profit on sales of Rs.37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which 15 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 profit comes to 5.66% Therefore, considering 5.66 % of Rs.3,70,78,125/- which comes to Rs.20,98,62 1.88 we think it fit to direct the revenue to add Rs.20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue.\" 9. In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. No order at costs.\" It was, thus, observed by the Hon’ble High Court that the addition in respect of the purchases which were found to be bogus in the case of the assessee before them, who was a trader, was to be worked out by bringing the G.P. rate of such bogus purchases at the same rate as that of other genuine purchases. On the basis of the aforesaid observations of the Hon’ble High Court, I am of the considered view that on the same lines the profit made by the assessee in the case before me by procuring the goods at a discounted value from the open/grey market can safely be determined by bringing the G.P rate of such bogus/unverified purchases at the same rate as that of the other genuine purchases. 19. I, thus, in terms of my aforesaid observations restore the matter to the file of the A.O, with a direction to him to restrict the addition in the hands of the assessee qua the impugned bogus/unverified purchases by bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases. At the same time, as the assessee had admitted addition of 10% of the impugned bogus/unverified purchases, therefore, the addition the addition to the said extent shall be sustained by the A.O in the course 16 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 of the set-aside proceedings. Thus, the Grounds of appeal No. 1 to 4 raised by the assessee are allowed for statistical purposes in terms of the aforesaid observations. 20. I shall now deal with the sustainability of the ad-hoc lump sum disallowance of the assessee’s claim of deduction of various expenses viz. (i) freight expenses and hamali expenses: Rs.1,00,000/-; and (ii) Wages expenses: Rs.50,000/-. As is discernible from the assessment order, the A.O had made the aforesaid disallowances for the reason that the assessee had claimed deduction of the same baed on self-made vouchers and had not maintained any register. I find that though the A.O had given a generalized reason for justifying the aforesaid ad-hoc disallowance but had not referred to a single instance of expenditure which as per him was either not verifiable; or was not found to be in order; or was not found to have been incurred wholly and exclusively for the purpose of business. In my considered view the aforesaid ad-hoc disallowance of Rs.1,00,000/- and Rs.50,000/- made by the A.O is merely haunted by his general observations and not on the basis of any concrete material or any specific instance of an expenditure which as per him was for any cogent reasons liable to disallowed. In the backdrop of the aforesaid facts, I find substantial force in the claim of the ld. A.R that in absence of pointing out of any specific infirmity qua the assesse’s claim for deduction of the aforesaid expenditure by the lower authorities, the disallowance of any part of the same on an ad-hoc basis can 17 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 by no means be held to be justified. My aforesaid view is fortified by the order of the ITAT, Kolkata in the case of Animesh Sadhu Vs. ACIT, Circle- 1, Hoogly, ITA No. 11/Kol/2013, dated 12.11.2014 and that of the ITAT, Delhi in the case of ACIT, New Delhi Vs. M/s Modi Rubber Ltd. ITA No. 1952/Del/2014, dated 15.05.2018. Also, my aforesaid view that an assessee’s claim for deduction of an expenditure u/s. 37 of the Act cannot be arbitrarily disallowed by the A.O on an ad-hoc basis is supported by the order of the ITAT, Raipur in the case of M/s. Sunita Finlease Limited Vs. Income Tax Officer, ITA No.244/RPR/2017 dated 30.03.2022. As the A.O had failed to place on record any material which would prove to the hilt that the assessee had either raised a bogus claim of expenditure; or that the said expenditure was not incurred wholly and exclusively for the purpose of business; or that the expenditure so claimed as a deduction did not fall within the four parameters of Section 37 of the Act, therefore, I am unable to persuade myself to subscribe to the disallowance made by him. I, thus, in terms of my aforesaid observations vacate the disallowance of Rs.1,00,000/- and Rs.50,000/- made by the A.O. Thus, the Grounds of appeal No.5 & 6 raised by the assessee is allowed in terms of the aforesaid observations. 21. In the result, appeal of the assessee is allowed for statistical purposes in terms of the aforesaid observations. 18 Kishore Kumar Panjwani Vs. ITO-1(2), Raipur ITA No. 378/RPR/2024 Order pronounced in open court on 08th day of October, 2024. Sd/- (रवीश सूद /RAVISH SOOD) ÛयाǓयक सदèय/JUDICIAL MEMBER रायपुर/ RAIPUR ; Ǒदनांक / Dated : 08th October, 2024. **SB, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The Pr. CIT-1, Raipur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायपुर बɅच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur. "
Other Referred Cases
KY Pilliah & Sons (1967) (SC), ISMT Ltd (2022) (Pune-Trib), Malpani House of Stones (2017) (Raj), Indwell Constructions (1998) (AP), Gian Chand Labour Contractors (2008) (P&H), Gotan Lime Khaniz Udhyog (2001) (Raj), Inani Marbles (P) Ltd (2008) (Raj), Jaimal Ram Kasturi (2013) (Raj), Gupta KN Construction Co (2015) (Raj), Mohan Sukumaran (2020) (Rai-Trib), Vishnu Prasad Maharwal (2014) (Jai-Trib), Pooranchand Agarwal (2021) (Rai-Trib), Vijay Proteins Vs. ACIT (1996) 58 ITD 428 (Ahd.), Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company (2019) 103 Taxmann.com 459 (Bom), Animesh Sadhu Vs. ACIT, Circle-1, Hoogly, ITA No. 11/Kol/2013, ACIT, New Delhi Vs. M/s Modi Rubber Ltd. ITA No. 1952/Del/2014, M/s. Sunita Finlease Limited Vs. Income Tax Officer, ITA No.244/RPR/2017
Laws Referred To
Income-tax Act, 1961
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