TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 135
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....sue raised by the assessee is against the order of ld. CIT (A) confirming the addition of Rs.1,33,61,982/- as made by the ld. AO on account of alleged commission received on account of transactions in the nature of accommodation entries being 1% of purchases/ sales and advances during the year. 3. So far as the first issue is concerned, the facts in brief are that the assessee filed the return of income on 24.03.2021, declaring loss of Rs.1,97,88,455/-. The case of the assessee was selected for scrutiny and notice u/s 143(2) of the Act was issued on 29.06.2021, which was duly served upon the assessee. There were three reasons for selection of security as per the said notice, which are as under:- i. Assessee has shown high liabilities in balance sheet as compared to low income, which required verification. ii. The case of the beneficiaries has been identified on the basis of date of high-risk billers received from CBIC, which requires verification. iii. The assessee has disclosed substantial amounts of investments and advances and loans in the balance sheet. 02. Subsequently, notice u/s 142(1) of the Act was issued on 18.11.2021, which was duly compl....
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....nsport documents which are available at page no.165 to 1074 from paper book no.2. The ld. AR submitted that the ld. AO has acknowledged the said fact at page no.25 para 2 of the assessment order that on the basis of perusal of bills and e-way bills furnished by the assessee it was noticed that goods were shipped to the third parties. The said fact was also noted by CIT (A) in the appellate order at page no.21 Para no.6.1. Thus, the ld. AR submitted that in terms of CBDT Circular 252 dated 17.03.1987, the assessee is a 'Pacca Arahitya', who had been acting as principal who is buying goods in its name as his purchases and selling to the buyers as sales or turnover and getting the books audited u/s 44AB of the Act. In other words, the assessee has duly recorded the goods purchased and shipped to the third parties as its own purchases and sales. The ld. AR submitted that so far as the commission of 1% on the loan given of Rs.70,05,140/- is concerned, the assessee has given loan of Rs.61,55,140/-, to its group entity and is shown as related party transactions in note no.14 of note to accounts at page 61 of the Paper Book. It was further submitted that balance loans of Rs.8,50,000 were g....
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....sumptions and has no substantive and objective basis. Similarly, the ld. CIT (A) without referring to any further materials decided to treat the purchases as bogus by relying on the decision of Hon'ble Bombay High Court in case of PCIT Vs. Konak Impex (India) Ltd. (2025) 172 taxmann.com 283 (Bom). The ld. AR submitted that the said decision of the Hon'ble Bombay High Court is distinguishable on facts and is not applicable to the assessee's case by referring to the facts of that case vis a vis facts of the assessee. 06. So far as the addition of 1% on purchases/ sales are concerned, the ld. AR submitted that the same is not sustainable as the ld. AO has not rejected the books of accounts and without rejection how the books could be disbelieved which were audited under the Companies Act as well as under Section 44Ab of the Act. In defense of his argument the ld. AR relied on the decision of Hon'ble Delhi High Court in case of PCIT Vs. Forum Sales Pvt. Ltd. in ITA No. 862 & 863/2019 and the decision of the co-ordinate bench of Kolkata in case of M/S Vista Tie Up Pvt Ltd. ITA 2091/KOL/2025. Therefore, the ld. counsel prayed that the addition made at the rate of 1% is wro....
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....ee as accommodation entry provider. The ld. CIT (A), without referring to any further materials or without doing any further enquiry, treated the entire purchases as income in the hands of the assessee by making the enhancement to the income as assessed by the ld. Assessing Officer. We note that while making the assessment, the ld. AO has not rejected the books of account u/s 145(3) of the Act and therefore, the estimation of income at the rate of 1% of the total of purchases/ sales and loans cannot be made unless the books are rejected and results are disbelieved as has been followed by Hon'ble Delhi High Court in case of PCIT Vs. Forum Sales Pvt. Ltd. (supra), wherein the Hon'ble court has held as under:- "29 Admittedly, the addition of income as discussed in questions (B), (C) and (D) on estimate basis has been done without rejecting the books of account. In view of the aforesaid, we find that no substantial question of law arises in the present appeals." Further, the Court in the aforesaid case also held that "any pick and choose method of rejecting certain entries from the books of account while accepting other, without an appropriate justification, i....
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....e to furnish copies ofseized material relied upon against the assessee amounts to violation of natural justice, as held by the Hon'ble Supreme Court in Kishan Chand Chellaram v. CIT [1980] 125 ITR 713 (SC),. The Hon'ble Supreme Court in the case of Kishan Chand Chellaram v. CIT [1980] 125 ITR 713 (SC), the Court held that though the proceedings under the Income are not governed by the strict rules of evidence, the department is bound to afford an opportunity to controvert and cross- examine the evidence onwhich the department places its reliance on. Therefore, the addition made by the AO and confirmed by the CIT(A) is not supported by any tangible material, is based on mere suspicion and third-party information and cannot be sustained in law. Considering the totality of facts and circumstances, and in light of judicial precedents, we hold that the AO was not justified in making an addition of Rs.61,49,041/- without rejecting the books of account under section 145(3), furnishing seized materials to the assessee and (establishing any nexus between the assessee and the alleged unaccounted purchases. Accordingly, we hold that the said addition of Rs. 61,49,041/- is unjustified and ....
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.... procured byway of E-way bill. If the Assessee had made purchases on E-way Bill the movement of goods cannot be doubted and thus the purchases to that extent cannot be treated as non genuine. Similarly, during the AY 2020-21 the assessee purchased cement worth Rs. 77,43.750/- from RK & Company & RR Associates by E-way bill which shows that the assessee procured cement from these parties and to that extent cannot be treated as non genuine. Therefore, we are of the view that wherever the assessee had procured the materials by way of Eway bill such materials cannot be treated as non genuine and the materials procured other than E-way bill for these two assessment years can he considered as unproved purchases and certain percentage of profit element should be considered for the purpose of the addition since there is no dispute that the sales were already considered for taxation. Thus, taking the totality of facts and circumstances into consideration, we direct the Assessing Officer to estimate the profit element from the purchases other than those made by way of E-way bill @6% subject to verification. In the instant case, it shall be evident that e-way bill submitted by the as....