TaxTMI 
TaxTMI 
2025 (2) TMI 1027
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Facts of the case, in brief, are that the assessee is a company engaged in business of manufacturing of steel products such as MS Billets & TMT Bars. It filed its return of income on 26.12.2020 declaring total income of Rs. 19,48,06,480/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") on 24.12.2021 determining the total income of the assessee at Rs. 39,48,76,390/-. Subsequently, the case was selected for complete scrutiny and notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee, in response to which the AR of the assessee appeared before the Assessing Officer from time to time and filed the requisite details. In the meantime, a search and seizure action u/s 132 of the Act was carried out by the DDIT (Inv), Aurangabad on 23.09.2021 and the assessee was also covered in the search action. 5. During the course of assessment proceedings, the Assessing Officer noted that the DDIT (Inv) in his report has stated that as per information received from the DGGI, Zonal Unit, Pune about a person named Shri Sagar Suraj Agarwal who was proved to be a fraudster was providing accommodation entries for bogus purc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 13,80,63,994/-. 9. In appeal, the Ld. CIT(A) deleted the addition by observing as under: "7.2 I have gone through the submission of the appellant along with supporting documents submitted during the appellate proceedings as well as during the assessment proceedings before the Ld. AO. While disallowing the non genuine purchases, the Ld. AO has heavily relied on the report of GST department. DGGI had identified and declared some parties as Bogus Parties Based on the same, the DDIT (Inv) has reported that purchases made from M/s. Divya Enterprises, M/s. Khushi Traders and M/s Shri. Waheguru Global Mines Private Limited, etc amounting to Rs. 11,70,03,386/- are bogus purchases. The appellant has submitted relevant documents to substantiate that purchases made by the appellant from these parties are genuine. In support of the same, the appellant has submitted few bills, sample copies of Invoices prescribed under GST Act, lorry receipts along with RTO registration, copy of e-way bill, weighment slips, photographs of the vehicles arrived at factory gate and at weighment bridge etc. Apart from this, the appellant has also submitted the copies of various forms like GSTR 2A, fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o held that the alleged parties are not identified and are not found on given address and mere possession of purchase bills and other documents cannot be the basis for holding the purchases as genuine. In this regard, the appellant has contended that the appellant has submitted all relevant documents and supporting evidence in support of its claim that the purchases are genuine. The Ld. AO has not discussed as to what further documents and evidence are required to justify the genuineness of purchases. The AO has not been able to prove that the documents are fake or incorrect. The Ld. AO has verified the books of accounts and stock records and accepted the books of accounts and did not find any mistake or formed adverse opinion. Thus the contention of the Ld. AO is not correct. The appellant has countered all of the arguments/contentions raised by the Ld. AO with supporting documents and supporting case laws, thus the argument of the appellant is found to be correct and legally valid. 7.5 The Ld. AO has relied on the Hon'ble Supreme court's decision in the case of NK Proteins Ltd vs DCIT (2017) 292 CTR 354 SC and NR Paper and Boards Ltd. The facts of these cases are....
X X X X Extracts X X X X
X X X X Extracts X X X X
....submitted that when the GST department has found the parties to be fraudsters and the above three parties neither responded to the notices issued by the Assessing Officer u/s 133(6) of the Act nor responded to the Summons issued u/s 131 of the Act, therefore, the Ld. CIT(A) was not justified in deleting the addition made by the Assessing Officer. He submitted that the Ld. CIT(A) did not take cognizance that the CGST department has conducted search and identified the suppliers as entry providers without actual supply of material. He submitted that the suppliers of material i.e. M/s. Khusi Traders to the assessee company is a non-filer of income tax return and M/s. Shri Waheguru Global Mines Pvt. Ltd. filed its return of income only for assessment year 2020-21 and the identity of the suppliers remained to be proved beyond doubt. He accordingly submitted that the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored. 12. The Ld. Counsel for the assessee on the other hand submitted that when the GST department has conducted search on the above three alleged suppliers it is proved that their identity is not in doubt. He submitted that it is not a finding ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the case of NK Proteins Ltd. vs. DCIT (supra) and the decision in the case of NR Paper & Boards Ltd. (supra). We find the Ld. CIT(A) deleted the addition, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. DR that when the above three parties were held to be non-genuine parties and since none of them responded to the notices issued u/s 133(6) of the Act nor appeared before the Assessing Officer in response to the Summons issued u/s 131, therefore, the purchases from the said parties remained unverified and therefore, the Ld. CIT(A) should not have deleted the entire addition. It is the submission of the Ld. Counsel for the assessee that when the sales are accepted, books of account are not rejected and the assessee has filed all the possible evidences such as lorry bills, invoices, e-way bills, etc., the Ld. CIT(A) was fully justified in deleting the addition made by the Assessing Officer. 15. On a pointed query raised by the Bench at the time of hearing as to what has happened in the preceding assessment years, the Ld. DR filed the assessment orders for assessment years 2016-17 to 2019-20 where the assessment proceedi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....culars Taxable Value (Rs.) GST Input (Rs.) Invoice Value (Rs.) 1 M/s. Shri Shyam Steels, Prop. Deepak Kumar Agrawal 19,34,625 3,48,234 22,82,859 2 M/s. Laxmi Enterprises, Prop. Rekha Deepak Agarwal 1,16,71,205 21,00,817 1,37,72,022 3 M/s. Pawan Enterprises Prop. Ramswaroop Agarwal 1,82,51,360 32,85,245 2,15,36,605 4 M/s. Divya Enterprises Prop. Sagar Suraj Agrawal 9,79,32,384 1,76,27,829 11,55,60,213 5 M/s. Khushi Traders Prop. Babusha Kasbe 2,52,47,771 45,44,599 2,97,92,370 6 Raja Cement House 1,99,46,143 35,90,308 2,35,36,451 Total 17,49,83,488 3,14,97,032 20,64,80,520 19. However, we find the Assessing Officer in the impugned assessment order, has made the entire addition of bogus / untested purchases and these orders of the Assessing Officer passed u/s 143(3) / 147 were passed after the order of the Ld. CIT(A). Although the assessee in the instant case has filed various details such as lorry bills, invoices, e-way bills, etc. the fact remains that such parties neither responded to notices issued u/s 133(6) nor appeared before the Assessing Officer in respo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mited Rs.50,00,000/- 5 21 11.05.2019 HDFC Bank, Aurangabad 001775 Soham Motors Pvt. Ltd. Metarolls Ispat Private Limited Rs.50,00,000/- 22. The Assessing Officer noted from the above that the entities mentioned in Column No.7 had given hand loans/loans in cash / RTGS to the entities mentioned in Column No.6 and for security purpose the entities mentioned in Column No.6 had issued cheque in favour of entities mentioned in Column No.7. During the course of search action statement of Shri Ashish J Bhala was recorded u/s 132(4) on 24.09.2021. In his statement he had accepted that the above transactions pertain to him and his family members. He had further admitted that they had provided unsecured loans to third parties and third parties had issued postdated cheques for repayment of loan. The Assessing Officer therefore asked the assessee vide notice u/s 142(1) dated 17.09.2022 to explain as to whether the above mentioned transactions were recorded in the books of account or not and also to furnish the ledger account of the parties mentioned in Column No.6. After considering the submissions made by the assessee from time to time the Assessing Officer made a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. Accordingly, the amount of Rs. 14,00,000/- is added to the income of assessee u/s 69A of the Act. Penalty proceedings u/s 274 RWS 271AAC (1) of the Act are initiated for addition of Rs. 14,00,000/-." 23. In appeal, the Ld. CIT(A) deleted the addition by observing as under: "8.2 On perusal of the submission and relevant documents produced before me, it is seen that the AO has made addition by invoking the provisions of section 69A of the Income Tax Act. 8.3 The additions made by the Ld. AO are based on the noting made by Shri Ashish Bhala on back side of the undated cheque and Ld. AO has assumed that the said cheque belongs to the appellant since the name of the appellant was written on the cheque. In the statement recorded on oath of Shri Ashish Bhala he had stated that the impugned transaction belongs to him in his personal capacity and the cheque was wrongly issued by the party in the name....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t was correctly made added to the income of assessee by AO. Therefore, on consideration of the above facts, the decision of Ld. CIT(A) for deleting the total addition of Rs. 14,00,000/- is not acceptable." 26. The Ld. Counsel for the assessee on the other hand drew the attention of the Bench to the reply given at the time of appeal proceedings which has been reproduced by the Ld. CIT(A) at page 32 of his order and which reads as under: "Appellant's Reply: The AO is erred in making an addition u/s 69A of the Act of Rs. 14,00,000/- on the assumption basis that appellant company has provided a cash loan based on the cheque seized during the search operation from the residential premises of one of the Director Mr. Ashish Bhala. During the course of search action at the residential premises of Shri Ashish Bhala, a director of MIPL the search teams has found and seized certain loose papers, documents and some unrealized cheque which were inventoried as Annexure-A. Item No. 2 of Annexure-A is a loose paper bundle containing total Pages from 1 to 29, these xerox copies/originals cheques and promissory notes. We hereby attaching the seized papers as "Annexure 7A" ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ents were seized and in his statement recorded u/s 132(4) of the Act he has owned up the transactions, therefore, the Assessing Officer in our opinion was not justified in making the addition in the hands of the assessee company. In this view of the matter and in view of the reasoning given by the Ld. CIT(A) on this issue, we do not find any infirmity in his order. Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed. 30. In the result, the appeal filed by the Revenue is partly allowed. ITA No.933/PUN/2024 (A.Y.2021-22) 31. The grounds raised by the Revenue are as under: 1. Whether on the facts and in the circumstances of the case and in law, the Ld CIT (A) has erred in deleting the addition of Rs. 1,46,46,419/- and Rs. 3,26,945/- made on account of bogus purchase, ignoring the facts that the supplier of goods has not confirmed the sale and movement of goods delivered to assessee company in response to notice issued u/s 133(6) to these suppliers. 2. Whether on the facts and in the circumstances of the case and in law, the Ld CIT (A) has erred in not taking cognizance that CGST department had conducted search and identified t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e at 5% on such bogus / untested purchases. The grounds raised by the Revenue are accordingly partly allowed. 34. The ground of appeal No.4 by the Revenue relates to the order of the Ld. CIT(A) in deleting the addition of Rs. 17,42,770/-. 35. Facts of the case in brief are that during the course of assessment proceedings the Assessing Officer asked the assessee to explain as to why the amount received as distribution of amounts received in the form of flat against the unaccounted transaction amounting to Rs. 17,42,770/- should not be added to the total income of the assessee. The relevant para of the show cause notice reads as under: "7. Vide para No 4 of the show cause notice dated 24.12.2022 the assessee was requested that why the amount received as distribution of amounts received in the form of flat against the unaccounted transaction amounting to Rs. 17,42,770/- should not be added to the total income. The relevant para of the show cause notice is reproduced as under: Vide notice u/s 142(1) dated 21.10.2022, vide question no 35 it was asked to explain the contents of loose paper bundle no.1 seized from the premises of Shri Ramesh Gopikishan Mundra. In t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that again the supply of steel to the Kuber Laxmi has given flat and cash to the group company. It is seen that the statement of Shri Ramesh Mundara and Shri D.B. Soni was recorded during the search proceedings. The reply of Shri D B. Soni, one of the directors of the assessee company, during the post search enquiries is totally different. The seized paper is not a dumb paper and clearly shows the amount receivable against outstanding debtors. It is seen that Shri Gautam Munot was debtor of companies and individuals mentioned on the paper. It is seen that instead of paying money against steel supplier the flats and some money is being received by the persons. It is seen that the unaccounted sale is made by Metaroll Ispat Pvt. Ltd also therefore the amount is receivable to it. It is also mentioned in the seized paper that the flats are to be registered in the name of companies so as to save stamp duty. The distribution of date receivable is mentioned in detail and meticulously. Percentage of distribution is also mentioned. The claim that the amount of Rs. 17,42,770/- is being received against the capital of Rs. 61 Lakhs invested by Shri D.B. Soni in the Kuber Laxmi Properties is an ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d clearly indicate the receipt of amount in the form of flat against unaccounted transactions amounting to Rs. 17,42,770/- was found, the Ld. CIT(A) was not justified in deleting the addition. He submitted that the documents so seized clearly indicate the receipt of flat by the assessee on account of unaccounted transactions. Therefore, the Ld. CIT(A) was not justified in deleting the addition. 40. The Ld. Counsel for the assessee on the other hand drew the attention of the Bench to the following written submissions which were filed before the Ld. CIT(A): "Appellant's Reply: a. The aforesaid addition of Rs. 17,42,770/- has been made by the Learned AO on the basis of presumption and surmises. During the search action, no corroborative or incriminating documents were found which conclusively proves that the appellant has supplied the steel of Rs. 61 Lakhs (from which Rs. 17,42,770/- is the share of the appellant) which is not accounted for in the books of accounts. b. It is pertinent to mention here that no details of flat which has been alleged to be received by the appellant has been found during the course of search proceedings such as the flat number....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of both sides. We find the Assessing Officer in the instant case made addition of Rs. 17,42,000/- on the ground that the assessee has supplied steel of Rs. 17,42,000/- which is receivable and which has not been accounted in the books of account maintained by the assessee. It is an admitted fact that the assessee was indulging in bogus / untested purchases. While dealing with the issue we have already directed the Assessing Officer to adopt the profit rate of 5% on account of such bogus / untested purchases on the basis of the order for the preceding four years which were reopened u/s 147 of the Act on the very same issue. Since it is held that the entire purchases cannot be added to the total income of the assessee and only a percentage of such purchases being the profit element embedded in it should be added, therefore, following the similar corollary, the entire amount of Rs. 17,42,000/- in our opinion cannot be added and only the profit element embedded in such sale should be added to the total income of the assessee. Since we have directed the Assessing Officer to adopt the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "6.2 On perusal of the submission and relevant documents produced before me, it is seen that the AO has made addition by invoking the provisions of section 69A of the Income Tax Act. The AO has made the addition only on the basis of message in the mobile of Shri Ashish Bhala and the statement recorded u/s 132(4) of Shri Ashish Bhala. Merely on the basis of statement recorded u/s 132(4), addition cannot be made by the AO, unless and until some corroborative evidence is found in support of such addition. As the AO has not brought on record any corroborative evidence, the addition made by the AO is not sustainable. In the considered view the addition cannot be sustained as it is based on the messages without any corroborative evidences and underlined transactions related to the appellant. Considering the facts of the case, the addition made by the AO is deleted in the absence of any evidence Grounds no. 3 of the appeal is, therefore, allowed." 46. Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal. 47. The Ld. DR strongly challenged the order of the Ld. CIT(A) in deleting the addition. He submitted that the seized data contains two en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....kh on the ground that two entries containing 6kg and 7kg were found in the seized data annexed to the loose paper bundle - 1 at page 119. Since initially Shri Ashish Bhala had admitted in his statement recorded u/s 132(4) of the Act regarding the above transactions being 6 lakhs and 7 lakhs therefore, the Assessing Officer had made the addition. We find the Ld. CIT(A) deleted the addition on the ground that Shri Ashish Bhala has subsequently retracted from his statement mentioning that the code words 6kg and 7kg are Rs. 6,000/- and Rs. 7,000/- and not Rs. 6 lakh and Rs. 7 lakh. Further, he had also submitted that the transactions never materialized and no corroborative material was brought on record. It is the submission of the Ld. DR that when Shri Ashish Bhala in his initial statement recorded u/s 132(4) of the Act has categorically admitted the payment of cash of Rs. 6 lakh and Rs. 7 lakh both totaling to Rs. 13 lakh, the Ld. CIT(A) is not justified in deleting the addition merely on the basis of subsequent retraction and in absence of any corroborative material. It is the submission of the Ld. Counsel for the assessee that since the transactions never materialized, the Ld. CIT(....