TaxTMI 
TaxTMI 
TaxTMI 
2018 (12) TMI 1252
X X X X Extracts X X X X
X X X X Extracts X X X X
....panies. Search & seizure and survey operations under section 132/133A of the Income Tax Act, 1961 were conducted on 15.02.2014 and subsequent dates in the case of the assessee alongwith other cases of the AMQ Group at various residential & business premises. In response to notice u/s 153 A of the Act, the assessee filed the return of income of Rs. 75,88,078/- on 24.07.2015 for A. Y. 2013-14. Similarly for A. Y. 2014-15 the assessee filed return of income on 30.11.2014 disclosing total income of Rs. 66,53,882/-. On the basis of the material seized during the course of search and on the basis of the submissions made by the assessee, the Assessing Officer completed the assessment determining the total income at Rs. 74,33,6920/-for A.Y. 2013-14 and Rs. 11,11,66,320/- for A. Y.2014-15. The assessee filed appeal before the CIT(A) who gave part relief to the assessee. Aggrieved with such part relief, the assessee and the Revenue are in appeal before the Tribunal. ITA No. 3248/Del /2018 (By Revenue) 3. Ground of appeal No.1 reads as under :- "The Ld. Commissioner of Income Tax ( Appeals) has erred in law and on the facts in deleting the addition of Rs. 22,29,092/- on account of disallo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appellant has submitted that vide letter dated 21.12.2016, it submitted necessary details/explanation/ledger accounts of all the expenses. It is further submitted that all the expenses are genuine and reasonable and the AO has failed to find any defect in the claim of these expenses. However, the perusal of the letter dated 09.12.2016 of AO and its reply dated 21.12.2016 in regards to the details of aforesaid expenses, reveals that the appellant has filed the details of expenses in the form of ledger accounts and the AO also has not raised any further query to examine the genuineness of these expenses but disallowed part of the expenses on the ad-hoc basis. He failed to give any specific remarks in respect of any defect or shortcoming in the maintenance of details or bills/vouchers by the appellant. He has also failed to raise any doubt on the genuineness of the books of account which are duly audited by the auditor. In absence of any defect brought on record by AO in the books of account or supporting documents maintained by appellant, there is no justification on his part to make any disallowance on ad-hoc basis. I, therefore, delete the additions made by him in both the years a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d any show cause notice for the alleged addition made u/s 2 (22) (e) of the I. T. Act. It was argued that the maximum balance outstanding during the year in case of M/s. Juneja Marketing was Rs. 4,77,837/- whereas the Assessing Officer has made the addition of Rs. 6,43,198/-. The Assessing Officer has not properly appreciated the facts of the case and made the addition. Therefore, the same is liable to be deleted. 13. Based on the arguments advanced by the assessee, the Ld. CIT(A) held that the receipt of Rs. 6,43,198/- from M/s. Juneja Marketing Private Limited and Rs. 51,72,955/- from AMQ Agro India Private Limited cannot be treated as deemed dividend u/s 2 (22) (e) of the I. T. Act in the hands of the assessee. The relevant portion of the CIT(A) reads as under :- 16.2 "I have considered the facts of the issue, basis of additions made by AO and submissions of appellant. As can be seen from the aforesaid submissions, appellant itself has admitted that the transactions involved in both the years attract the provisions of section 2(22)(e) of I. T. Act for treating the amounts of Rs. 6,43,198/- and Rs. 51,72,955/- in A.Y. 2013-14 and 2014-15 respectively as deemed dividend in its....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pra [ 2011] 12 taxmann.com 496 (Delhi)/[2011] Taxmann 316 (Delhi)/[2-11] 242 CTR 498 (Delhi). 11. M. Amareswara Reassessment order V. Dy. CIT [157 ITD 657 / 136 DTR 153 /178 TTJ 700] 16. The Ld. Counsel for the assessee on the other hand strongly relied on the order of the CIT(A). 17. We have considered the rival arguments made by both the sides and perused the material available on record. We do not find any infirmity in the order of the CIT(A) deleting the addition from the hands of the assessee and directing the Assessing Officer to make the addition in the hands of the share holders by following the decision of the jurisdictional High Court in the case of CIT Vs. Ankitech Private Limited (supra) which has been upheld by Hon'ble Supreme Court in the case of CIT Vs. Madhur Housing Development Company. Although the Ld. DR relied on various decisions, however, these decisions in our opinion are no longer applicable in view of the latest decision of the Hon'ble Supreme Court in the case of CIT Vs. Madhur Housing (supra). The ground raised by the revenue is accordingly dismissed. 18. Ground of appeal No. 3 reads as under :- "The Ld. Commissioner of Income Tax (Appeals) has err....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ribunal confirming the disallowance was reversed on the ground of perversity. 20.1 It was is submitted that the appellant during the course of assessment proceedings vide its reply letter dated 21.12.2016 has submitted copy of ledger accounts of all the parties along with the name and address of the creditors from whom purchases are being made. From the perusal of the same the genuineness and reasonableness of the purchases made by the appellant could be ascertained but the assessing officer failed to do so before making the alleged additions, in the absence of which additions made by the assessing officer are not justified and are liable to be deleted. The assessee filed the year wise details showing purchases made during the year, sales made during the year , gross profit, % of gross profit, expenses incurred during the year and profits made during the year. 20.2 It was argued that even if it is accepted that the above referred seized documents represent earning of income by receiving accommodation purchase bill and in turn raising an accommodation sale bill on M/s Jagatjit Industries Ltd., purchases cannot be treated as bogus on estimate basis. It was argued that corresponding....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stified. As shown by appellant in its submissions that net profit of 4.96% and 3.51% has been shown in A.Y. 2013-14 and A.Y. 2014-15 respectively but after making the disallowance as per AO, these profits would reach to 37.92% and 56.69%, which is illogical and absurd. Moreover, as discussed above, the profit element in respect of these transactions have already being included while returning back the money in cash to the purchaser parties and computed separately, making addition again on these transactions is not justified. In view of this, I hold that AO has wrongly made the additions of Rs. 5,00,10,163/- and Rs. 9,30,49,922/- in A.Y. 2013-14 and A.Y. 2014-15 respectively. The grounds taken by appellant in this regard are allowed." 22. Aggrieved with such order of the CIT(A), the revenue is in appeal before the Tribunal. 23. The Ld. DR strongly objected to the order of the CIT(A) deleting the addition made by the Assessing Officer. She submitted that the Ld. CIT (A) without any valid reasons has deleted the addition which is not proper under the facts and circumstances of the case. 23.1 The Ld. counsel for the assessee on the other hand submitted that the assessment was gettin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....editors and confirmation from sundry creditors above 1 Lakh. In response to this assessee filed its reply on 21.12.2016, which contains only purchase amount, name and address of party. Not a single confirmation or any bills/ vouchers or bank accounts in respect of purchase claimed filed by the assessee company." 25. We find although the Assessing Officer was having complete address of the parties, however, he did not bother to call for any information from the said parties if he had some doubts. The entire addition by disallowing of 40% of the purchases in our opinion is not justified when the books of account are not rejected. We find the Hon'ble Gujarat High Court in the case of Yunus Haji Fazawala Vs. CIT (supra) has held that action of the Assessing Officer in disallowing 25% of purchases by doubting its genuiness without rejecting the books of account cannot be sustained. The order of the Tribunal confirming the disallowance was accordingly reversed. Since in the instant case also the books of account are not rejected, therefore, action of the CIT(A) in deleting such addition is justified. Further we find merit in the findings of the CIT (A) that if the action of the Assessin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... company failed to explain the source of the said cash. As per Assessing Officer, out of this cash, the addition of Rs. 13,50,000/- has already been made vide order u/s 143 (3) of the I.T. Act dated 31.03.2016 for A.Y. 2014-15 in the hands of Mr. Dinesh Kumar on protective basis and in the hands of Mr. Moin Akhtar Qureshi on substantive basis. He, therefore, made the addition of Rs. 1,00,000/- in the hands of assessee on protective basis and the same amount on substantive basis in the hands of Mr. Moin Akhtar Qureshi. 35. Before the CIT(A) the assessee submitted that since the substantive additions of Rs. 14,50,000/- has already been made in the hands of Mr. Moin Akhtar Qureshi in his Assessment order passed on dated 17.08.2017for the AY 2014-15 and protective addition of Rs. 13,50,000/- has already been made in the hands of Mr. Dinesh Kumar, the reason for again making protective addition of Rs. 1,00,000/- in the hands of the appellant company is not justified and hence the same deserve to deleted. It was submitted that Mr. Dinesh Kumar Gupta in his statement recorded on the date of search has already explained that the amount of Rs. 100,000/- belongs to personal savings of his w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the additions sustained of Rs. 83,85,628/- in the absence of which the net addition sustained in the hands of the appellant can not be ascertained. 3. That on the facts and circumstances of the case and in law the CIT (A) was not justified in upholding the action of AO in making an addition of Rs. 54,80,758/- by estimating profit on the purchases made by the appellant during the relevant assessment year from M/s Bajrang Traders, M/s Gurunanak Traders on the basis of seized document Annexure A-2/ party D-l page No.90, 109 & 108, which pertain to AY 2014-15 and not AY 2013-14. 3.1 That the Ld. CIT (A) erred in holding that entire purchases made from M/s Bajrang Trades & M/s Gurunanak Traders to M/s Jagatjit Industries ltd during the year was in the nature of bogus purchases & estimating profit @7.28% on such purchases without realising that estimation of profit had to be restricted to only those transactions which are reflected in seized material. 3.2 That the CIT(A) has erred in not considering the contention of the appellant company that the alleged addition of Rs. 54,80,758/- pertains to the AY 2014-15 wrongly made by the Assessing officer in AY 2013-14 thus the same des....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d cheques of Rs. 18,93,528/- from M/s. Jagjit Industries Ltd on account of sales and out of that, Rs. 18,32,722/- was transferred to M/s. Hari Mohan Enterprises on account of purchases. Since these were financial transactions without making any actual purchase of goods, M/s. Hari Mohan Enterprises, after deducting the commission @2% amounting to Rs. 36,650/-, returned back the balance amount of Rs. 17,96,072/- to the assessee. Assessee further transferred this cash amount back to M/s Jagatjit Industries Ltd. and on this transaction, it earned profit of Rs. 1,35,578/- (7.88%) and out of which, profit of Rs. 60,806/- was received in cheque which has been shown in the books of account and balance Rs. 74,772/- in cash which remained outside books of account. This process of earning commission and not disclosing the profit received in cash, is confirmed by the entries of the same page. In the lower half of the document, it is mentioned that Rs. 1,00,01,828/- was paid by assessee to M/s Hari Mohan Enterprises in the name of purchases made which was received back in cash after deducting commission @2% amounting to Rs. 2,00,000/- which comes to Rs. 98,01,828/-. However, this amount was re....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The appellant also has admitted this modus operandi in its submissions in respect of all the parties as mentioned above. The appellant has even offered the undisclosed income of Rs. 8,89,545/- on the transactions entered into with M/s Jagatjit Industries Ltd. and M/s Hari Mohan Enterprises and Rs. 5,24,012/- in respect of transactions made with M/s Jagatjit Industries Ltd. and M/s Bajrang Traders and M/s Guru Nanak Traders. However, the appellant has worked out the profit to be offered for taxation only on the basis of limited transactions reflected from the seized documents. He forgot that there are much more transactions with the same parties of the same nature which are reflected in the profit and loss account. For example, sale transactions of Rs. 18,93,528/- with M/s Jagatjit Industries Ltd. has been shown in the document seized on which profit of Rs. 1,35,578/- (7.88%) has been earned, whereas the total sales have been made at Rs. 10,71,64,580/- in A.Y. 2013-14 and Rs. 9,51,66,616/- in A.Y. 2014-15. Similarly, on the other part of document, transactions with M/s Hari Mohan Enterprises are reflected at Rs. 1,00,01,828/- on which, after reducing the commission etc., the profi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed income for entire sales made to JIL is required to be deleted. 43. He submitted that none of the lower authorities have conducted any enquiries from the party M/s Jagatjit Industries Ltd. (JIL) to whom sales have been made to the tune of Rs. 9,74,79,927/- out of total sales of Rs. 14,28,98,332/- during A.Y. 2013-14 and Rs. 9,51,66,616/- out of total sales of Rs. 18,26,67,336/- during A.Y. 2014-15 for verifying the genuineness of sales made by the appellant company to JIL. 44. He argued that no enquiries have been made by the lower authorities from the parties M/s Harimohan Enterprises (purchases Rs. 53,24,210/- ASSESSMENT YEAR 2014-15), Bajrang Traders ( purchase Rs. 1,44,80,993/- ASSESSMENT YEAR 2013-14 and Rs. 3,15,97,561/- Assessment year 2014-15), Gurunanak Traders ( purchase of 21,14,700/- ASSESSMENT YEAR 2013-14 and Rs. 4,36,87,576/- for Assessment year 2014-15) from whom purchases were made out of total purchases of Rs. 12,93,92,152/- Assessment year 2013-14 and Rs. 15,57,37,682/- Assessment year 2014-15. 45. Referring to the decision of Hyderabad Bench of the Tribunal in the case of Sree Educational Society Vs ACIT 88 Taxmann.com 363 he drew the attention of the Bench....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... M/s Jagatjit Industries Ltd., purchases cannot be treated as bogus on estimate basis. He submitted that corresponding to every purchase bill there is a sale bill. Therefore, if purchases recorded in the books is treated as bogus corresponding sales will also have to be reduced. 49. The Ld. Counsel for the assessee submitted that in case a presumption is drawn that certain transactions entered into with Jagatjit Ind. Ltd are of similar nature for which no documents were seized then an estimate will have to be made for quantifying the volume of such transactions. In the assessment order 40% of purchases have been estimated to be bogus on a different ground which stands deleted in appeal. Thus, on same analogy if it is assumed that 40% of sales made to JIL is in the nature of accommodation entries then computation of undisclosed income will have to be made in the following manner. The sales to JIL was Rs. 10,71,64,580/- in AY 2013-14 and Rs. 9,51,66,616/- in AY 2014-15. 40% of such sales comes to Rs. 4,28,65,832/- and Rs. 3,80,66,646/- for AY 2013-14 and 14-15 respectively. The bank portion on such sale is already included in the P&L account. Thus, out of the margin of 7.88% the mar....