TaxTMI 
TaxTMI 
2024 (2) TMI 744
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....gainst the appellant and the assessment framed under Section 153C/143(3) are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law and liable to be quashed. 3. On the facts and circumstances of the case, the proceedings initiated under Section 153C are bad in law in the absence of any incriminating material belonging to the assessee being found during the course of the search. 4. On the facts and circumstances of the case, Id. CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153C and the assessment framed under Section 153C is bad and liable to be quashed in the absence of a proper satisfaction being recorded by the AO of the searched person that the incriminating material belonging to the assessee was found during the course of the search. 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts & in law in confirming the action of the A.O. in holding that the purchases made by the assessee from certain entities are bogus. 6. On the facts and circumstances of the c....
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....- as against the addition of Rs. 8,58,92,200/- made in the assessment order on account of bogus purchase without considering the fact that these documents were intended for the purpose of reconciliation of the figures of accommodation entries only as there were no documents for supporting the transactions mentioned in tally documents. The manual resister also did not support the documents maintained in tally. 2. On the facts and in the circumstances of the case, the Id.CIT (A) has erred in law and on facts in restricting the addition to the tune of 25% without considering the fact that the purchase amounts are nothing but bogus purchase entries taken by the appellant from the Jain Brothers. These are taken through the intermediary Suni Kumar jain, CA and which are passed on to them through the shell companies of the Jain Brothers. 4. Facts taken from the order of the ld. CIT(A) and the record are as under: 5. During the course of search operation carried out at the residential premises of Sh. Kaushal Kumar, employee of Sh. Anand Kumar Jain and Sh. Naresh Kumar Jain (Jain Brothers), H. No. 151, Pocket-13, Sector-20, Rohini, Delhi, a document annexurized as Party No. Alpha-6A, ....
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.... by Jain Brothers holding the same to be bogus accommodation entries in lieu of cash. Further, an addition of Rs. 17,17,844/- was also made on account of unaccounted commission paid in cash in relation to said entries. 9. Aggrieved with the addition, the assessee filed appeal before the ld. CIT(A). 10. The gist of the appellant's arguments in respect of these purchases is that while casting doubt on the purchases, no doubt has been casted on the sales shown by the appellant. The appellant has submitted purchase bills and also a detailed explanation with regard to the freight expenses. Details of expenses like packing material, testing charges, air sea freight, washing and pressing, postage, courier, telephone, establishment, repair, maintenance, wages, printing, stationery, insurance, cartage, dyeing, printing, consumable stores, fabrication charges etc., which are all incidental to purchase were filed and no inaccuracy was pointed out by the A.O. Date wise chart of stock of items produced and sold by the appellant during the year under consideration was also produced. Copies of invoices, confirmation of the parties together with the bank statement witnessing the outflo....
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....chases, in the following cases:- * CIT, Jaipur (Raj) Vs M/S Carpet Mahal in ITA No. 170 / 2009 dated May 10, 2017 * CIT, Jaipur (Raj.) Vs Gems Paradise in ITA No. 201/2010 dated November 2, 2016 * M/s Stromag Engineers Ltd. Vs. DCIT in ITA No. 5333/Mum/2017 dated 16.01.2019 * ACIT vs. Shri Akshay Rajesh Samdariya and Vice Versa in ITA no. 2076/PUN/2016, C.O. No. 58/PUN/2018 dated 31.12.2018 * Shri Moolchand H. Seth Vs ITO in ITA No. 2320/Mum/2018 dated 20.12.2018 * ACIT, Vs Karam Chand Rubber Industries (P) Ltd. in ITA No.6599/Del/2014 dated 12.12.2018 * Dharmesh P. Bhatt Vs ACIT-32 (1), Mumbai in ITA No.2182/Mum/2017, ITA No.2841/Mum/2018, S.A. No.494/Mum/2018, S.A. No.495/Mum/2018 dated 11.12.2018 * M/s. Morakhia Metal And Alloys P. Ltd. Vs DCIT (OSD) -1, Cir. 4, Ahmedabad in No. ITA No.667/Ahd/2016 dated 11.12.2018 * PCIT Vs M/s Mangalam Infra Development Pvt. Ltd. in ITA No.751 Of 2016 dated 10.12.2018 * M/s Amar Timber & Plywood Vs ITO, Ward No. 27 (1) (1), in ITA No. 1113/Mum/2018 dated 7.12.2018 * DCIT, Mumbai Vs Toshvin Analytical Private Limited in I.T.A. No.4253/Mum/2017 And I.T.A. No.4222/Mum/2017 dated 16.11.201 The H....
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....ther argued that since the sales have not been questioned, the assessee was involved in 100% export of the goods manufactured out of the purchases made and argued that had there not been any purchases there could not have been any sales. The ld. AR reiterated that if the purchases are disallowed, the profit would have gone to 35% which is a sky rocketing figure against the normal profits earned by the assessee of 7.15% to 8.73% over a period of 4 years. 17. The ld. DR argued eloquently at length. The arguments of the ld. DR are as under: "Profit rate earlier yours, accepted or scrutinized cannot be accepted, since material as enumerated vide AO - pages 5-23, exists that impeaches the disclosure made earlier and exports the falsity of particulars field in earlier yours by the assessee. 3 Material with the AO (a) In this connection, as already recorded in satisfaction note, it is reiterated that during the course of search in the case of Sh. Anand Jain, Sh. Naresh Jain and their shell companies and at residential premise of the Accountant of Sh. Anand Jain and Sh. Naresh Jain at 151, Pocket No. 13, Sector-20, Rohini, Delhi, Annexure -13 which is a Tally Data (Hard Disk) ledg....
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....mputer systems, representing most of the online transactions carried out by the different shell companies/concerns, which were used to effectuate these transactions, were similar to the I.P. Addresses of the computers used by the Jain Brothers during analogous date and time frames. (i) The documents such as correspondence relating to statutory compliances, bank statements, balance sheets etc., of the following companies were found at 914 D Mall, Netaji Subhash Place, Pitampura, Delhi-34, the main office of the Jain Brothers. (j) However, the payments made did not match with the figures shown for purchases. No corresponding documents (such as journals, correspondences, bility, challans, transportation evidences etc.) relating to the purchase or payments were produced by your during survey proceedings. (k) Assessee's paper book - 414 - 432 all the banks accounts of XIII companies .. provided -.. of M/s Ceram Sales Pvt. Ltd., to Zen Index Pvt. Ltd. - No Corresponding link to any specific purchase invoice. - Credits precede immediate debits. - Matching debits and credits. - The Amounts of debits and credits in Millions have no possible correlation to purchase i....
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....of gross profit has been added. Both of the first two said judgments have been relied by the revenue in the matter of Pr. Commissioner of Income Tax-13 Vs. Rishabhdev Tachnocable Ltd., however the Hon'ble Bombay High Court while relying on the judgment in the case of Bholanath Polyfab Limited, has upheld the decision of the Tribunal in making addition to the extent of 5% of the purchases. Allahabad High Court in Kaveri Rice Mills (157 Taxman 376) held that the addition has to be made to the extent of purchases found to be fictitious. However, this decision of Allahabad High Court was considered by the Hon'ble Bombay High Court in the case of Pr. Commissioner of Income Tax-13, Mumbai Versus Rishabhdev Tachnocable Ltd., [2020] 424 ITR 338 (Bom), dated 10.02.2020, wherein, it has been held as under: "19. On thorough consideration of the matter, we do not find any error or infirmity in the view taken by the Tribunal. The lower appellate authorities had enhanced the quantum of purchases much beyond that of the Assessing Officer i.e., from Rs.24,18,06,385.00 to Rs.65,65,30,470.00 but having found that the purchases corresponded to sales which were reflected in the returns of the as....
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....e, it was evident that they were corresponding purchases. Having noted the above, Tribunal examined the books of accounts of the assessee wherefrom it was found that the assessee had made payments on account of the purchases through account payee cheques and the purchases were entered in its books of account. Thus, assessee was able to prove that the purchases were made only in the alternative way. If that be so, then Revenue was only required to estimate the profit at a particular rate. Referring to the figure of 2% arrived by the CIT(A), Tribunal observed that assessee's gross profit varied from 5% to 8.77%. Since the purchases were made from the grey market, the corresponding profit element would be little higher. Therefore, Tribunal directed the Assessing Officer to make further addition of 3% on the bogus purchases and to estimate the income on such basis. ...................................... 20. In Bholanath Polyfab Limited (supra), Gujarat High Court was also confronted with a similar issue. In that case Tribunal was of the opinion that the purchases might have been made from bogus parties but the purchases themselves were not bogus. Considering the fact situatio....
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....s.3935673/- is deleted. In the result ground No. 4 to 7 are partly allowed." 3. Point B Your Honour, how the extract reproduced is aiding Id. CIT DR. is out assessee's understanding. As the extract mentions about the facts of the case only and not the decision. In the stated judgment, the issue involved is that of sales which has been made to the government agencies but there were some kachcha bills taken in respect of purchases to suppress the profit earned on sales. It has been held that 3% of the bogus purchases shall be added in the income of the assessee. 4. In point D certain parameters have been given, however is not explained in what regard. The cash credits for peak, to no extent are a matter before us and thus the parameters found no grounding as per our analysis. 5. Point E COT Vs. Vijay Agricultural Industries, 294 ITR 610 (2007): The said judgment as relied by the Department do not relate to the issue under consideration. It is infact in relation to cash deposits and the usage of peak Credit theory which has nothing common with that of the assessee's circumstances. Further the theory to prove that the credits that emanated from a creditor have been returned to....
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....the ld. CIT(A) and we are in agreement with the ratio laid down by the ld. CIT(A). With regard to the determination of the embedded profit element we rely on the following judgments in addition to the judgments quoted by the ld. CIT(A): 1. ITA vide 509 & 510/KOL/2017 OM FORGING & ENGG (P) LTD. AYs 2010-11 and 2011-12, the assessee made sales to govt. originations and other reputed organizations and perhaps did not get a chance to suppress sales. As a result, there was necessity for the assessee to introduce purchases its bills to manage its profit to a desired and consistent ratio. The attempt of the assessee failed due to detection of the concerned sales tax authority and communication in the regard by the DGIT(Inv). However, in consequence of the findings of the sales-tax department it may easily be inferred that the assessee made purchases at a limit rate than the rate claimed by it.... As such, the assessee to made a higher profit. Given the nature of goods,.........They could be purchased in kachha bills. 2. Kishan Lal Jwels (p) Ltd ITA 229/DEL/2011 and co 43/ DEL/2011 Para 11: "Entire non genuine purchases can be disallowed and sales can be subjected to Tax depending up....