TaxTMI 
TaxTMI 
2025 (12) TMI 340
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....eclaring an income of Rs. 72,45,970/-. A search and seizure operation u/s 132 of the Income-tax Act, 1961 [the Act, for short] was conducted on 26.10.2020 in the cases of Shri Sanjay Jain and Mehta Group at various residential & business premises. 4. Sanjay Jain is an entry operator found to be running several fictitious entities for providing accommodation entries. During the course of search, 2 sets of books of tally were found and seized from the office premise of Shri Sanjay Jain i.e 87, First Floor, Dharamvir Mann Marg, Sabji Market, Hari Nagar Ashram, New Delhi which were marked as Annexure A-31. The set of tally data contained the receipt and expenditure in cash. The details of commission of ledger of the intermediaries as per tally of Sanjay Jain Tally books with the name "Jain Enterprises" maintained by Shri Sanjay Jain were found during the search. 5. On the basis of these informations, the case of the assessee for the year under consideration, was opened u/s 153C of the Act, after recording the satisfaction note by the Assessing Officer. 6. The assessee has shown details of Purchases and Sales made during the AY 2019-20 and AY 2020-21 along with the GP & NP Rati....
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.... 12. Per contra the ld DR heavily relied on the orders of the AO and relied on the decision of hon'ble Gujrat High Court in the case of N.K.Protein 72 taxmann.com289(Guj) whose SLP was dismissed by the Supreme Court. 13. We have heard the rival submissions and have perused the relevant material on record. It is a case of treating purchases as bogus as they are from entities linked to Shri Sanjay Jain, an entry operator. The Assessing Officer has considered the entire purchase of Rs. 1,63,31,000/- as bogus and disallowed the same u/s 37 of the Act whereas the CIT(A) has considered 20% of the total bogus purchase as income of the assessee. 14. The assessee has challenged the assumption of jurisdiction u/s 153C before us. We find that the AO, on the basis of search on Sanjay Jain, wherein several incriminating materials/documents pertaining to the assessee was found, initiated the assessment proceedings u/s 153C. The AO recorded the satisfaction note, and validly issued notice u/s 153C. These facts were not controverted by the assessee, nor the assessee could satisfy us as to how the satisfaction note recorded by the AO is invalid. 15. The ld. CIT(A) has factually as well a....
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....uments or information unearthed during a search pertain to a third party. The Hon'ble Supreme Court in CIT vs. Calcutta Knitwears (2014) 362 ITR 673 (SC) affirmed that the jurisdiction under Section 153C is valid as long as there is a prima facie satisfaction that the seized material pertains to the third party and has a nexus to undisclosed income. The AO's decision in this case aligns with this principle, as the seized documents clearly establish such a nexus. In light of the above, the appellant's claims regarding the invalidity of Section 153C proceedings are unfounded. The search was conducted prior to April 1, 2021, making the procedural changes introduced by the Finance Act, 2021, inapplicable. Furthermore, the incriminating material seized from Mr. Sanjay Jain's premises, which directly relates to the appellant, provides a valid basis for initiating proceedings under Section 153C. Therefore, the AO's actions are in accordance with the law and must be upheld. Ground of Appeal from 1 & 3 to 8 are dismissed." 16. We find no reasons to interfere in the decision of the CIT(A) on the issue of assumption of jurisdiction u/s 153C. The grounds 1 to 6 ....
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....aised by the AO which is distinguishable facts in this case. The appellant also argued that the purchases in question, whether genuine or disputed, were eventually utilized in the execution of contracts. It was emphasized that the corresponding sales and consumption of materials have not been questioned by the AO, suggesting that the materials were indeed procured, albeit possibly through alternative channels. As per Appellant, this distinction forms the crux of the appellant's argument that only the profit element embedded in the alleged bogus purchases should be brought to tax, rather than disallowing the entire amount of purchases. 8.5 The appellant further relied on various judicial precedents to support its contention, citing that in cases involving alleged bogus purchases, it is reasonable to estimate and tax only the profit component of such transactions. The appellant also referred to the fact that all payments for the disputed purchases were made through banking channels, and the transactions were duly recorded in audited financial statements, lending some degree of credibility to the claim. 8.6 Despite these submissions, the evidence presented by the....
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....the higher GST rate and other circumstances in this case justify a slightly higher addition of 20%. 8.10 In light of the above findings, the addition made by the AO is modified. Accordingly, 20% of the disputed purchases, amounting to Rs 32,66,020/-, is sustained as taxable income. Above grounds of appeal are partly allowed." 18. After perusing the discussion and findings of the ld. CIT(A), we find that there is hardly any scope for our interference with the decision of the ld. CIT(A). In view of the fact that the incriminating materials show that the purchases are bogus but at the same time, the corresponding sales and consumption of materials have been accepted, in such a scenario, we are in complete agreement with the CIT(A) decision that it would be excessive to tax entire amount of bogus purchases and it would be appropriate to estimate and tax the profit element embedded in these transactions. We are however, of the considered view that the addition of 20% on disputed purchases be modified to 15%, which, in our view, is deemed reasonable estimation of profit element involved in the transactions. Accordingly, the appeal of the assessee is partly allowed. 19. In ....