TaxTMI 
TaxTMI 
2026 (1) TMI 607
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..../20 24- 25/1073984212(1) 04.03.20 25 Asst. Commissioner of Income-Tax, Central Cirle-7(1), Mumbai 23.07.2021 153A r.w.s. 143(3) 2015-16 Assessee 3. 2908/Mum /2025 ITBA/APL/S/250/20 24- 25/1073983388(1) 04.03.20 25 Asst. Commissioner of Income-Tax, Central Cirle-7(1), Mumbai 23.07.2021 153A r.w.s. 143(3) 2013-14 Assessee 4. 2909/Mum /2025 ITBA/APL/S/250/20 24- 25/1073983571(1) 04.03.20 25 Asst. Commissioner of Income-Tax, Central Cirle-7(1), Mumbai 23.07.2021 153A r.w.s. 143(3) 2014-15 Assessee 5. 2910/Mum /2025 ITBA/APL/S/250/20 24- 25/1073984539(1) 04.03.20 25 Asst. Commissioner of Income-Tax, Central Cirle-7(1), Mumbai 23.07.2021 153A r.w.s. 143(3) 2016-17 Assessee 6. 3966/Mum /2025 ITBA/APL/S/250/20 24- 25/1073984212(1) 04.03.20 25 Asst. Commissioner of Income-Tax, Central Cirle-7(1), Mumbai 23.07.2021 153A r.w.s. 143(3) 2013-14 Department 7. 3967/Mum /2025 ITBA/APL/S/250/20 24- 25/1073984212(1) 04.03.20 25 Asst. Commissioner of Income-Tax, Central Cirle-7(1), Mumbai 23.07.2021 153A r.w.s. 143(3) 2016-17 Department 8. 3968....
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....d promoters of Topworth Group, Lloyds Group and Uttam Galva Group without having any evidence whatsoever claimed to have been gathered during pre and post search investigation and even during the course of assessment proceedings as well. 4. The Learned DDIT(Inv.). Unit-1(2), Mumbai and The Learned Assessing Officer erred in alleging the appellant of framing Vinod Jatia Group of Companies by literally sending and addressing Notices to all suppliers and Customers of Vinod Jatia Group of Companies and thereby damaging his reputation and goodwill. 5. The Learned Assessing Officer erred in issuing notice u/s 153A of the Income Tax Act, 1961 without appreciating the fact that there are no incriminating documents in seized material suggesting that any income has escaped assessment. Hence, the notice issued u/s 153A of the Act is clearly Bad in Law, illegal and ultra-vires the provision of the Act. 6. The Learned CIT (A)-49 Mumbai has erred in estimating additional Income at the rate of 0.5% of sales of Rs. 105,51,20,243/- which come to Rs. 52,75,601/- without appreciating the facts of the case in the right perspective. 7. The ground of appeal is without....
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.... the judicial precedents in the case of CIT vs. State Trading Corporation of India Ltd. (2010) 328 ITR 257 (Delhi), WHARE it was held that the AO's estimation of income was valid in cases of rejection of books of accounts. 7.On facts and circumstances of the case and in law. The Ld. CIT(A) erred in holding that the expenses claimed by the assessee, including indirect expenses and depreciation, should be allowed as deductions, despite the clear evidence that the assessee was involved in bogus transactions and illegal activities. 8.On facts and circumstances of the case and in law. The Ld. CIT(A) failed to consider the fact that the assessee's business activities were based on false and fabricated transactions and therefore, any expenses claimed by the assessee in relation to these activities cannot be allowed as a deduction under Section 37 of the Income Tax Act, 1961. 9. On facts and circumstances of the case and in law. The Ld. CIT(A) erred in allowing the depreciation claim without properly considering the fact that the assessee had not carried out any genuine business activity, and as per established legal principles, depreciation can only be a....
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....; 5,10,42,63,533 2.04% 10,54,53,554 2.2. Details of addition made by the ld. Assessing Officer by applying GP ratio of 7% is tabulated below: Sr. No Assessment Year Sales GP% GP Addition 1 2013-14 1,05,51,20,243 7% 7,38,58,417 2 2014-15 1,00,39,75,595 7% 7,02,78,292 3 2015-16 1,07,72,86,503 7% 7,54,10,055 4 2016-17 1,06,17,57,099 7% 7,43,22,997 5 2017-18 90,61,24,093 7% 6,34,28,687 5,10,42,63,533 35,72,98,447 2.3. Ld. CIT(A) granted relief by restricting the addition to 0.50% instead of 7%, details of which is tabulated below: Sr. No Assessment Year Sales Additional GP Addition 1 2013-14 1,05,51,20,243 0.50% 52,75,601 2 2014-15 1,00,39,75,595 0.50% 50,19,878 3 2015-16 1,07,72,86,503 0.50% 53,86,433 4 2016-17 1,06,17,57,099 0.50% 53,08,785 5 2017-18 90,61,24,093 0.50% 45,30,620 5,10,42,63,533 2,55,21,318 3. Brief facts of the case are that assessee is engaged in the business of wholesale trading of metals and metal or....
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....who in turn passed on this funding to their group companies, the risk was borne by the Vinod Jatia group. 3.3. After considering the overall facts and circumstances as well as submissions made by the assessee, ld. Assessing Officer computed additional income @ 7% on the total sale turnover. He noted that assessee has reported bogus sales turnover of Rs. 1,05,51,20,243/-. By applying 7% rate, income on this turnover was arrived at Rs. 7,38,58,417/-. However, he gave credit for the income already offered by the assessee @ 2.49% amounting to Rs. 2,62,42,107l-. Thus, the difference of Rs. 4,76,16,310/- (Rs.7,38,58,417/- less Rs. 2,62,42,107/-) was added to the total income of the assessee. 3.4. Aggrieved by the said order, assessee filed the first appeal. After considering the overall facts of the case, ld. CIT(A) while partly allowing the appeal, estimated the additional income at 0.5% of the sales as against 7% adopted by the ld. Assessing Officer. 3.5. Aggrieved by the order of ld. CIT(A), both the assessee as well as revenue filed their respective appeals contesting for their grievances. All the grounds raised by the revenue are interrelated and interconnected for challeng....
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....s considered, then no one was able to provide any details or explanation or evidence on manufacturer of goods, place where goods are stored, godown details, entire supply chain of the transaction, ultimate customers, manner in which order was placed, which shows there were no underlying goods involved in the entire transaction and it was mere paper entries entered within shell / paper entities. c) It is seen from the money mapping that the payment received from one party is immediately transferred to other parties on same day. All the vendors and customers were potentially related amongst themselves on the basis of Common Key managerial person / common signatories /Common address. No credit guarantee / security obtained was from Topworth group of Companies and Uttam Galva Group of Companies. Entire purchases are backed by LC payment to vendors. d) The address of the party to whom the material had to be delivered is not available and in the absence of lorry receipts the actual movement of the goods could not be ascertained. e) There is no evidence to substantiate whether any communication in the form of e-mails, facsimile or letters sent through courier or....
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....gned addition made by the ld. Assessing Officer. The three issues listed by the ld. CIT(A) as are as under: a) What is the nature of transactions entered by the assessee? b) Whether the regular income generated from the transactions is disclosed? c) Whether any other income is earned by the assessee from these back-to-back transactions? 5.1. On the first issue, the modus operandi of the transactions given in the assessment order is explained by way of an illustration, which is as under: a. First of all, company "A" (Uttam Group, Topworth Group & Llyod Group, etc.) creates a dummy company in the name of say "B" b. Now company B raises sales invoices to the company of Jatia Group (say company X) c. Company "X" made payment to company "B" through LC issued by the Bank d. Company "B" got money without selling any goods but only for generating invoices e. On the same day, Company "X" raises sale invoices (Purchase price + 2% to 4%/Rs. 100 to 150 + LC charges) to company "A" (i.e. main company Uttam Group or Topworth Group) f. Against this invoice, Company "A" makes payment to company "X" through cheque/R....
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....ceedings before the NCLT and the claim of Rs 41,98,50, 127/- of the appellant against them stands admitted by the NCLT. In view of the discussion above, it can be said that the regular income from the purchase and sale transactions has been accounted for by the appellant." [emphasis supplied by us by bold and underline] 5.4. Since ld. CIT(A) concluded that profits are estimated on sales, figures of sales should be adopted and hence negated the stance of ld. AO who adopted higher of sales and purchase values for the purpose of estimation. In this respect, assessee submitted that it had offered much higher gross profit ratio in its trading activity as is evident from other comparable cases of genuine traders forming part of the written submission before the learned CIT(A). The working in this respect is tabulated below: GROSS PROFIT OFFERED BY VINOD JATIA GROUP, TOPWORTH GROUP, LLOYDS GROUP AND UTTAM GALVA GROUP FINANCIAL YEAR IN RESPECTIVE YEARS 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 NAME OF COMPANIES VINOD JATIA GROUP OF COMPANIES ....
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.... 1.68% 1.34% 0.98% 1.44% 1.26% Lloyds Steel Industries Ltd 1.28% 1.68% 1.34% 0.98% 1.44% 1.26% Maruti Strip's Fero AlloysPvt. Ltd 1.28% 1.68% 1.34% 0.98% 1.44% 1.26% Shree Global Tradefin Ltd 1.28% 1.68% 1.34% 0.98% 1.44% 1.26% Brahmcharini VyapaarPvt. Ltd 1.28% 1.68% 1.34% 0.98% 1.44% 1.26% Mano jvaya Vintrade Pvt Ltd 1.28% 1.68% 1.34% 0.98% 1.44% 1.26% Omicron Steel Traders Put. Ltd 1.28% 1.68% 1.34% 0.98% 1.44% 1.26% Ballalesh war Pipes & TubesPvt. Ltd. 1.28% 1.68% 1.34% 0.98% 1.44% 1.26% Poscho Steels Pvt. Ltd. 1.28% 1.68% 1.34% 0.98% 1.44% 1.26% TOTAL [B] 11.52% 15.12% 12.06% 8.82% 12.96% 11.34% TOTAL GP RATIO ALREDY OFFERED BY ALL GROUPS AS PERAUDITED BOOKS OF ACCOUNTS TOTAL [A] +[B] 30.65% 13.66% 34.79% 25.50% 37.389% 31.51% 5.5. Assessee thus, asserted that the profit margin disclosed by it on alleged circular transactions ....
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....as rightly made the addition of such other income earned by the appellant on the circular transactions. However, I do not agree with the rate of 7% adopted by the AO. It is seen that the rate of 7% has been applied in all assessment orders passed from AY 2013-14 to AY 2017-18, resulting in the total addition of Rs. 25,18,44,894/-, which in my view is unreasonable and excessive. It is much more than the profit shown by the appellant or its group and non- group concerns. Thus, the rate of 7% adopted by the AO is on the higher side. In the appellate order for Ms Duli Trade Commodities pvt. ltd, the additional income is estimated at the rate of 0.5% of total sales turnover. The addition in the said case comprises/covers the additional income earned by the appellant by reinvesting the funds in the same business, the commission on accommodation entries of purchases and sales made/passed on to further the entries obtained from searched entities and any other unaccounted incomes like bill discounting income, interest received, discount income on account of suppression of GP etc." "10.10 While the appellant has got the funds from the bank through the letter of credit facility, the ....
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....ions. In this regard, it was submitted that the assessee had not entered into any bogus/circular transactions as held by the AO. As per Ld. AR the assessee is engaged in the business of wholesale trading of metals and metal ores having a turnover of more than Rs. 2,000 crores. Considering the nature of the goods traded, which are heavy and bulky in size, there is typically no physical movement of such goods at the time of sale. Instead, the goods are stored at designated warehouses, and symbolic delivery is effected by way of transfer of title documents or delivery orders, which is an accepted and recognized commercial practice in the line of business. Such operational model is standard across the industry and does not, in any manner, indicate the presence of sham transactions. Thus the transactions are genuine. 18. Alternatively, it was also submitted that even if it is to be assumed that the assessee has entered into circular transaction, there is no evidence nor any findings arising out from the search proceedings to suggest that the assessee has earned extra cash which is in excess of amounts/profits already reflected in the books of accounts. On the contrary, the stat....
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....ceedings of Mr. Vinod Jatia and his companies, the Coordinate Bench of the Tribunal held that there is no involvement of any cash transaction nor there is any cash trail found in the search proceedings. 21. Furthermore, neither the AO nor the Ld. CIT(A) has referred to or relied upon any specific finding or tangible evidence to demonstrate that the assessee had actually received any cash. In our view, at the time of making the addition, the AO has merely proceeded on a presumptive basis by stating that the assessee might have received cash, without bringing any concrete, corroborative or even circumstantial evidence on record to substantiate such an assumption. Such reasoning of the revenue authorities is based purely on conjectures was also accepted by the Ld. CIT(A). In our considered view, such conjectural reasoning cannot form the basis for a sustainable addition under the Act. On this proposition, reliance is being placed up on the decision of the Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v. CIT (26 ITR 775) (PBP 144), wherein, it was held that although, the AO is not restricted by the strict and technical rules of the evidence and pleadin....
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....ce is being placed on the decision of the Rajkot Bench of the Hon'ble Tribunal in the case of Kamlesh Deoraj Jain v. ITO (PBP 154), Chandigarh Bench of the Hon'ble Tribunal in the case of Seo Lehenga House v. DCIT (PBP 173) and Nagpur Bench of the Hon'ble Tribunal in the case of ACIT v. Solaries Holdings Put Ltd. (PBP 197), wherein it has been held that in case of a circular transaction, the profit declared in the books of accounts covers the commission portion and that no further addition is warranted especially in absence of any evidence of cash payments. 25. Therefore, considering the totality of the facts and circumstances of the present case and also considering the decisions of the Coordinate Benches of the Tribunal as discussed by us above, we allow the grounds of appeal raised by the assessee and direct the AO to delete the additions. 26. Since, we have deleted the additions by considering the merits, therefore there is no need to adjudicate the other grounds raised by the assessee as the same become academic in view of our above detailed findings." 6. The very basis adopted by ld. CIT(A) of resorting to the estimation of additional income b....