Case Number: ITA 5039/DEL/2019
Appellant: DCIT Central Circle -II, Gurgaon
Respondent: Orient Craft Ltd., New Delhi
Assessment Year: 2015-16
Result: Appeals Filed by both parties
Case Filed on: 2019-05-31
Order Type: Final Tribunal Order
Date of Order: 2021-09-24
Pronounced on: 2021-09-24
The appeals filed by the DCIT Central Circle -II, Gurgaon, and Orient Craft Ltd., New Delhi, were heard by the Income Tax Appellate Tribunal, Delhi Bench ‘E’. The main issues under dispute were the alleged bogus expenses and purchases made by the respondent for the Assessment Year 2015-16.
The Revenue, represented by DCIT Central Circle -II, Gurgaon, raised multiple grounds of appeal against the order of the Commissioner of Income Tax (Appeals)-III, Gurgaon, dated 30.03.2019. The primary contention was regarding the disallowance of Rs. 19,46,05,259/- on account of bogus expenses claimed with respect to M/s Shri Ram Exports and Rs. 27,19,08,768/- on account of bogus purchases from M/s Akansha Fashion and M/s Jindal Fashion.
Orient Craft Ltd. contested the jurisdiction assumed under section 153A and the consequent disallowance of expenses and additions made by the Assessing Officer (AO). The assessee argued that no incriminating material was found during the search, and the additions were made based on incorrect facts and without following the principles of natural justice.
The Tribunal carefully examined the evidence and submissions from both parties. It noted that the AO’s findings were primarily based on the statements of individuals and some circumstantial evidence which were not corroborated with direct evidence of wrongdoing by Orient Craft Ltd.
Regarding the job work expenses claimed by the assessee for work done by M/s Shri Ram Exports, the Tribunal found that the AO had not discovered any incriminating material during the search. The evidence provided by the assessee, including job work invoices, payment through account payee cheques, and tax deductions at source, supported the genuineness of these expenses.
For the disallowance related to purchases from M/s Akansha Fashion and M/s Jindal Fashion, the Tribunal observed that the AO did not find any direct evidence of these transactions being bogus. The purchases were supported by invoices and payment records. Additionally, the suppliers were assessed to income tax and had confirmed the transactions.
The Tribunal also addressed the additions made on account of unexplained transactions recorded in seized documents. The assessee provided comprehensive evidence, including employee records, wage payments, and PF contributions, which substantiated the genuineness of these transactions.
The Tribunal concluded that the AO’s additions were based on assumptions and surmises without concrete evidence. It held that the disallowances and additions made were not sustainable on merits and deleted them.
The Tribunal upheld the CIT(A)’s decision on the issue of interest under section 234B and the disallowance under section 14A, limiting the disallowance to the exempt income earned.
The appeals of Orient Craft Ltd. were allowed, and the additions made by the AO were deleted. The grounds of appeal raised by the Revenue were dismissed, and the order of the CIT(A) was upheld in parts where it was favorable to the assessee.
Order pronounced in the Open Court on 24th September 2021.
Signed by:
Dr. B.R.R. Kumar, Accountant Member
Amit Shukla, Judicial Member
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