TaxTMI 
TaxTMI 
2025 (12) TMI 927
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.... the entity M/s. Sharp Kind Trading Pvt. Ltd. was a bogus non- existing entity and the transaction between the assessee and the said concern were non-genuine. 3. On the facts and circumstances of the case, the ld.CIT(A), being the first fact finding authority, grossly erred in not ascertaining the fact as to whether there was any actual delivery of goods." 4. The appellant craves leave to add, amend or to delete any ground of appeal." 3. Brief facts of the case are that the assessee is a Limited company engaged in the Manufacturing, Trading and sale of Hand Tools and Forgings. Return of income for A.Y. 2017-18 filed on 09.10.2017 declaring income of Rs. 17,50,38,980. Ld. Assessing Officer (AO) based on the information received from the O/o. ITO, Ward-4(3)-4, Mumbai about the alleged bogus purchases of Rs. 87.65 crore made by the assessee from M/s. Sharp Kind Trading Pvt. Ltd. (in short 'SKTPL') which was gathered during the course of scrutiny proceedings of SKTPL wherein for effecting the sales to the assessee at 87.65 crore negligible expenditure of Rs. 9,39,457 was incurred. After serving valid notices u/s. 148, 143(2) and 142(1) of the Act, re- assessment pr....
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....rked as Annexure-C. (b) The assessee comprises 97.8% of the total sales made by the M/s Sharp king Trading Pvt Ltd, yet no transportation bills were furnished with respect to it. Even though M/s Sharp king Trading Pvt Ltd accepted under oath that it had delivery challan, lorry receipts, acknowledged delivery notes custom clearing registers, yet nothing was furnished by it. (c) M/s Sharp King has booked operating expenses worth Rs. 9,37,457/- against total turnover of Rs. 85,25,52,144/-, which is abysmally low. Also, no freight or transportation charges have been booked by it in its other expenses, even though it is claimed in 148A(d) order that seller has borne the transportation charges. The only bill furnished with respect to assessee was of meagre Rs. 300/-. (d) The physical verification of the two warehouses and two corporate offices led to the following conclusions : (1) The M/s Sharp King Trading has only 2 one room warehouses, which are currently empty and do not have the storage capacity (250 square feet) of turnover Rs. 85,25,52,144/-. (2) The leave and license agreement is very recent, so it is not established if the warehouses....
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....,80,000 Rs. 3,16,000 0.4% M/s. Accurate Metal Corporation Rs. 9,89,98,584 Rs. 10,98,357 1.1% M/s. Jasonath Bright Steel Ltd. NO DATA Rs.(-)3,35,765 NA (g) The assessment order of M/s Sharp King Trading Pvt. Ltd. has rejected the books of accounts of it and has made an addition of Rs. 2,55,76,564/-. Thus, proving that the purchases made by the assessee, M/s Taparia Tools Limited is bogus as well. Given below is screenshot of assessment order of M/s SharpKing Trading, wherein it has stated that the sales made by it are bogus. Accordingly, it is proved that the purchases made by M/s Taparia Tools from M/s Sharp King Trading is bogus. (i) The assessee have only issued Bills related to sale. It has failed to produce that it has actually received the purchased items. (ii) From the facts discussed regarding bills of loading & unloading. It is again clear that the assessee failed to prove that it has actually delivered the goods at the doorstep of debtors/buyers. 6.1 Hence, on perusal of information available, submissions made by the assessee and above discussion, it is found that the assessee company's purchases worth R....
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.... the case under hands, an addition on account of bogus purchases amounting to Rs. 87,64,74,079/-is being made u/s. 37(1) of the Act, and added to the total income of the assessee. Penalty u/s. 270A(9) of misreporting of income is being initiated. Section 37. General-(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 1 **and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head-Profits and gains of business or profession. (Addition of Rs. 87,64,74,079)" 4. Aggrieved assessee preferred appeal before ld.CIT(A) and along with the submissions which were made before the AO, reference was also made to the report of Directorate General of Goods and Service TAX (GST) Intelligence office, Nashik Zonal unit where it has been stated that materials have been supplied to the assessee by SKTPL. Ld.CIT(A) taking note of such report of GST Department and also taking note of other details submitted by the assessee held that the purchases made from SKTPL are not ....
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....judice and based on merits of our case." Based on this the existence of the above concern cannot be ruled out in the presence of report by another statutory and executive authority. (v) Moreover, the appellant continues to have business transactions with the said concern. (vi) It is also true that there was a fire accident in the premises of the appellant and therefore timely reconciliation was not possible. (vii) And the percentage of profit declared by the appellant is arm's length with other traders and manufacturers in the same line of business for the past three years and the next three years and does not demonstrate any large scale booking of bogus expenditure. (viii) If wholistically seen, the books would be very skewed as sales and stock also needs to be verified which is not done in this case. (ix) The gaps in reconciliation pointed out by the AO are found to be miniscule. (x) Further, the honoured precedents relied by the appellant are directly applicable to the instant case. Thus, I clearly find that the entity called M/s Sharp King Trading Pvt. Ltd. is existing and the transactions between the a....
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.... be quashed. It is seen that in the paper book submitted by the assessee, there are two documents- one dated 24.12.2021 (page no. 2356 of the asseesse's paper book) and other is dated 27.04.2023 (page nos 2357-2359). The document dated 24.12.2021 is Intimation regarding the closure of CGST Enquiry. It is signed by Superintendent, CGST & CX, Nashik. As per this letter, investigation was initiated against the assessee on the limited issue of mis-match of vehicles data as mentioned in 19 E- way Bills filed by M/s Sharpking Trading Co. Pvt. Ltd., Mumbai and M/s Krishna Upsana Mfg. Co. Pvt. Ltd., Mumbai with the data available on the E-way bill portal Further, in the very next para, it mentions that on the basis of explanation made by the assessee and its vendors were found that the goods have been supplied by M/s Sharpking Trading Co.Pvt. Ltd., Mumbai and M/s Krishna Upsana Mfg. Co. Pvt. Hence, the enquiry was closed by Commissioner, CGST & CX, Nashik. It is pertinent to mention here that the letter has been signed by the Superintendent, CGST & CX, Nashik. It is not signed by the Commissioner, CGST & CX, Nashik or on the behalf of Commissioner, CGST & CX, Nashik. Further, it is jus....
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....ay of speaking order assigning reasons for the decision. Reliance is placed on the decision of Hon. Allahabad High Court in Commissioner of Income-tax (Central), Kanpur v. Smt. Swapna Roy [2010] 192 Taxman 105 (Allahabad) (Annexure-2) where in the decision of Hon. Supreme Court in the case of Asstt. Commissioner, Commercial, Tax Department, Works Contract and Leasing Quota v. Shukla & Bros. 2010 (4) JT 35, has been quoted in which it was held by the Apex Court that it shall be obligatory on the part of the judicial or quasi-judicial authority to pass a reasoned order while exercising statutory jurisdiction. Reliance is also placed on the decision of Hon. Gujarat High Court in Rasiklal Ranchhodbhai Patel vs. Commissioner of Wealth-tax [1980] 121 ITR 219 (GUJ.) (Annexure-3) where in it has been held that : It is settled law that where an authority makes an order in exercise of a quasi-judicial function, it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons. The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principal of natural justice which must i....
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....tted by the respondent. He submitted that the Investigation carried out by the Verification Unit and the office premises of SKTPL, the same has been done on the address mentioned in the tax invoice for the period 2016-17. However, the AO could have very well identified the new address of SKTPL through Ministry of Corporate Affairs Website for physical verification and in absence of any such verification of the correct business place of SKTPL, the conclusion drawn by the AO is not acceptable. In support of its contention that the assessee has discharged its primary onus casted to prove the genuineness of purchases, then the AO without placing any contrary evidence/material against the assessee cannot make the addition for bogus purchases. Ld. Counsel referred and relied on the following decisions : 1. PCIT Vs.Jagdish Thakkar (2022) 145 taxmann.com 414 (Bombay HC) 2. CIT Vs. Nikunj Exim Enterprises Pvt. Ltd. (2013) taxmann.com 384 (Bombay HC) 3. Manoj Sharma Vs. ITO (2019) 103 taxmann.com 104 (Delhi Trib.) 8. Further, ld. Counsel for the assessee concluded his arguments praying for affirming the order of ld.CIT(A) stating the following: "a. In l....
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.... any evidence which could show how the goods have been transported from SKTPL to its premises nor any evidence could be placed by SKTPL demonstrating the transportation of goods from its office premises to the assessee's premises. For such non-availability of evidence proving the transportation of goods purchased by the assessee from SKTPL ld. AO has presumed that even if the sales are there then purchases would have been made from other parties/entities (other than SKTPL) and then payments to such parties would have been made from unaccounted money and therefore aspect of unexplained expenditure u/s. 69C comes into picture along with other aspects of section 40A(3). However, ld. AO has finally made addition by disallowing the purchases u/s. 37(1) of the Act. 10. We further observe that ld.CIT(A) while dealing with this issue has also referred to various details filed by the assessee and more importantly one of the specific detail is regarding the report of the GST Intelligence office dated 30.09.2021 as per which it is stated that the materials have actually been supplied to the assessee by SKTPL. Copy of this report has been placed by the assessee at page 43 of the paper book ....
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.... Request Your Honours' to kindly consider the above submissions on record and it is our humble submission that the additions made be deleted." 12. On going through the above submissions filed by ld. Counsel for the assessee it has been stated that summons have been issued by O/o. CGST and Central Excise, Nashik on 03.09.2021 to the assessee and search was indeed conducted on the appellant and due enquiries were also conducted. It is however fairly admitted that the information about such search proceedings carried out by GST Department and the closure report dated 24.12.2021 were not placed before the ld. AO and the assessee has no objection if the matter is set aside to the file of ld. Jurisdictional Assessing Officer for necessary verification. Along with the closure report dated 24.12.2021 in the enquiry conducted under the GST law assessee has furnished another letter dated 27.04.2023 issued for closure of the Investigation proceedings carried out on the assessee under GST law and the copy of the same is placed at pages 53 to 55 of the paper book. In this closure report, it is stated about verification of records for purchases from RC cancelled suppliers made during 2017....