AI Drafter 
TaxTMI 
TaxTMI 
2025 (4) TMI 325
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....essment was completed under Section 143(3) of the Act at total loss of Rs. 1,23,28,822/- on 27.03.2015. Later on, an information was received in case of the assessee from the Directorate of Investigation, New Delhi on 28.03.2017, regarding taking of accommodation entries amounting to Rs. 1,78,25,000/- from shell companies controlled by Jain Brothers. Notice under Section 148 of the Act was issued on 30.03.2017. Further notices under Section 142(1) of the Act were issued. In response to notices, Mr. P.K. Katyal and Mr. Jai Shukla, CA/ARs of the assessee attended the proceedings and filed details. On completion of proceedings, additions of Rs. 1,78,25,000/- and Rs. 5,85,67,419/- vide order dated 29.12.2017 were made by the ld. AO. 3. Against the order dated 29.12.2017, the appellant/assessee preferred an appeal before Ld. CIT(A) which was partly allowed vide order dated 16.03.2023. 4. Being aggrieved, the appellant/assessee preferred present appeal with the following grounds: "1. That the order of the Ld. Assessing Officer is bad at law and on facts of the case. 2. That the addition made by the Ld. Assessing Officer and partly confirmed by CIT(Appeal) is based....
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....nd modify all or any of the grounds of appeal at any time either before or during the course of the appellate proceedings and further an opportunity of being heard before the orders are passed in this appeal". 5. At the time of hearing, none appeared on behalf of the appellant/assessee on 16.11.2023, 25.01.2024, 13.03.2024, 15.07.2024, 29.08.2024, 01.10.2024, 08.01.2025 and today. 6. Learned Authorised Representative for the Revenue relied on orders of Ld. AO and Ld. CIT(A). 7. From examination of records, it is evident that Ld. CIT(A) in para nos. 5.5 to 5.14 and 6 has held as under: "5.5 Ground No. 2, 5, 8, 9, 10 and 15 are interrelated, challenging the addition of Rs. 1,78,25,000/- (alleged bogus purchase) made by the AO on account of purchases made from Macro IT System Pvt. Ltd. 5.6 The Ld. AO discussed the impugned addition on account of bogus purchase in paras 1, 2 and 3 as under: As per the information received from the Directorate of Investigation, New Delhi, it was seen that assessee M/s. Vayam Technologies Ltd. had taken accommodation entries from the Jain Brothers from the material evidence gathered during the search operations which i....
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....f Rs. 13.60 crores and also relying on the documents filed before the Ld. PCIT-9 the amount of Rs. 5,85,67,419/- pertaining to bank entries from September, 29 to October, 25 were treated as pertaining to F. Y. 2010-11 and as the same was not offered for taxation, was added back in the income of the assessee company for A. Y. 2011-12. Further an amount of Rs. to entries from 7th May to 28th June are treated as pertaining to F. Y. 2011-12 and from the return of income filed, it is seen that same was not offered for taxation by the assessee company hence the sum of Rs. 7,75,26,641/- was escaped assessment within the meaning of clause c (i) of Explanation 2 below 2nd proviso appended section 147 of the IT Act. 2. Subsequently, notice u/s 148 of the IT Act was issued on 30.03.2017 by the AO i.e. Addl. CIT, Special Range-9, New Delhi. Further, notices u/s 142(1) were again issued in response to the notices, Mr. P.K. Katyal and Mr. Jai Shukla, CA/ARs of the assessee attended from time to time. Details called for have been filed and the case was discussed. A copy of the reasons recorded was duly provided to the assessee in accordance with judgment of M/s GKN Driv....
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.... found during the search related either to the Jain Brothers and their shell companies, or to the concerns/persons who were the beneficiaries of the transactions passed through the shell companies. The folder named "Jain" in which the records of such entry transactions had been maintained in tally software. This data contained details of the amounts rotated in cash and through banks and was being used by the Jain Brothers to keep track of the accommodation entries rotated by them through the various companies and firms controlled by them. The names of these companies/firms henceforth referred to as the shell companies of the Jain Brothers, have been given below:- S. No. Name ADDRESS DIRECTORS/Partner PAN NO. 1 MACRO SYSTEM LTD. IT 326, LGF SANT PVT NAGAR, EAST OF KAILASH, NEW DELHI ANIL KUMAR NITIN KUMAR CHADDA RAVINDER KUMAR AAECM7259E The investigation in respect of the documents and electronic data seized from the various premises revealed a number of bank statements and signed & unsigned cheque books. All these bank documents pertained to the shell companies of the Jain Brothers. Accordingly, information was called in respect of t....
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....te of order sheet entry. Information to be furnished 08.12.2017 To prove the identity creditworthiness and genuineness of the credits with supporting evidence. To produce the party for verification. 12.12.2017 To furnish the information in respect of notice u/s 142(1) dated To furnish the i 19.09.2017 has not been filed. Furnish proof of compliance of notice u/s 148 and return filed in response to notice. 20.12.2017 To produce M/s Macro IT Systems for verification/examination Furnish any of bank account. 22.12.2017 To show cause why an addition of Rs. 1,78,25,000/- should not be made being unexplained. Information about the accommodation entry has been confronted to the assessee. 26.12.2017 As M/s Macro IT Systems does not exist at the address given. Asked to produce the party for examination. In its reply dated 22.12.2017 assessee company submitted following facts: "The reply of the assessee has been considered and is not tenable in the view of the discussions below. The bills filed by the assessee are incomplete as does not mention, the following significant facts:- Delivery Note Mode/terms of payment Suppliers ....
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....n view of the foregoing discussion that I am of the view that a sum of Rs. 1,78,25,000/- paid to M/s Macro IT System Pvt. Ltd. i.e. a Jain Brothers papers company and debited in the books of account of the assessee fails to pass the test of genuineness. Assessee company is not able to prove genuineness and identity of the above company and thus inflated total purchases. A sum of Rs. 1,78,25,000/- is therefore, added back to the income of the assessee company being unexplained. I am satisfied that the assessee has concealed/fumished inaccurate particulars of the income and accordingly penalty proceedings u/s 271(1)(c) of the I.T. Act is initiated on this issue. (Addition: Rs. 1,78,25,000/-) 5.7 I have carefully perused the Grounds of Appeal, Statement of Fact, Assessment Order, Written Submission uploaded as well judicial pronouncements relied upon by the appellant. The factual matrix of the case is summarized as under: (i) That the case of the appellant was re-opened after issuing a notice u/s 148 of the Act based on the information received from the Director of Investigation, New Delhi that the appellant has taken an accommodation entry for F.Y.....
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....located at disclosed addresses. The bank accounts of the group of Investor Company was operated and controlled by Jain Brothers. Cheque book, pass book and bank accounts of this web of investor companies were found in the control and custody of Jain Brothers and contact number of these companies to the bank was disclosed as mobile number of Jain Brothers and his employees. In view of the foregoing discussion that I am of the view that a sum of Rs. 1,78,25,000/-paid to M/s Macro IT System Pvt. Ltd. i.e. a Jain Brothers papers company and debited in the books of account of the assessee fails to pass the test of genuineness. Assessee company is not able to prove genuineness and identity of the above company and thus inflated total purchases. A sum of Rs. 1,78,25,000/- is, therefore, added back to the income of the assessee company being unexplained 5.8 The additions/reopening of assessment in this case were made by the Assessing Officer on the basis of the information received from the Investigation Wing in respect of alleged involvement of Jain Brothers in providing the accommodation entries to various entities through control of shell companies. A.O. has f....
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....owever, as it can be seen in this case, the decision of the AO regarding non-genuineness of purchase and disallowance is not solely and wholly based on statement of third-party; but on basis of the evidences, circumstantial facts unearthed during the Search in the case of Jain brothers as well as the inquiries made by the AO himself in course of Assessment proceedings. Therefore, the case laws relied upon by the appellant in the case of CIT vs. Odeon Builder Pvt. Ltd. (SC) is not applicable, which relate to scenario where the third party statement is the whole and sole basis of disallowance. In this case, there are factual, circumstantial and inquiry-based evidences and inferences. Hence, the question of third-party examination is not essential to the legality of the disallowance. Further, it is set on record that the AO has also made independent inquiries and has arrived at conclusion that the parties are non-existent/ non-genuine. A.O, has also pointed out some defects in the purchase bill submitted by the appellant l.e. delivery note, suppliers reference, buyers order, dispatch documents, term of delivery etc. Further, A.O. has also mentioned that appellant was not able to produ....
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....ded in purchases would be subjected to tax tax and a not the entire amount. The Ld. Assessing officer can tax only the margin earned (Gross profit) on corresponding sales. The rationale being no sales is possible without actual purchases. Where the sales cannot be discarded, the issue would boil down to finding out the element of suppressed profit embedded in purchases which the appellant would have made from some unknown or bogus entities. Further, Hon'ble Gujarat High Court in the case of CIT v. Simit P. Seth [356 ITR 451] held that when the total sales are accepted by the Assessing Officer then the entire purchases cannot be added to the income of the assessee. ITAT Mumbai Benches in a number of cases has taken a consistent view and directed the Assessing Officer to estimate net Profit of 12.5% to 15% on total bogus purchases. The sum and substances of ratios laid down by the courts and Tribunals is that in the case of bogus purchases only profit element embedded in such purchases is to be taxed but not total bogus purchases. Therefore, in view of the above judicial decisions of the Hon'ble Gujarat High Court as well as ITAT, only the fair profit ratio should be added ba....