TaxTMI 
TaxTMI 
2025 (10) TMI 1367
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....the underlying facts in the issues are identical, we heard the representatives on the facts of AY 2016-17 in ITA No. 3055/Mum/2025. 4. Briefly stated the facts of the case are that search and seizure operation was conducted in the case of Jatia Group and other related parties at their business premises and residential premises of Directors on 17/04/2018. 4.1. Consequent the search proceedings, post-search proceedings and assessment proceedings, in the case of searched entities, it was found that the assessee company is covered u/s 153C of the Act. Accordingly statutory notices were issued and served upon the assessee. 5. During the course of search and seizure action it transpired that searched entities and the related entities were involved in bogus transactions indulging in large scale booking of bogus entries running into crores by way of bogus sales & purchases through various paper entities. The AO found that assessee misused banking credit facilities. During the year under consideration various paper/shell entities. One Mr. Vinod Jatia, Director of the searched entities has made arrangements with the Directors and promoters of Topworth, Uttam Galva and Lloyds Group o....
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.... D/R strongly supported the findings of the AO and read the operative part. Per contra, the ld. Counsel for the assessee supported the findings of the ld. CIT(A). We find that on identical set of facts and circumstances in one of the group entities, namely, Duli Trade & Commodities Pvt. Ltd., formerly known as Indrajit Properties Pvt. Ltd., the Co-ordinate Bench in a bunch of appeals in ITA No. 2139/Mum/2025 & Ors., interalia held as under:- "4. However on merits of the additions, the Ld. CIT(A) framed two issues to be answered for the purpose of adjudication of the appeal. The relevant discussion is being reproduced herein below: "7.2.8. I have considered the discussion made in the assessment order and the submission of the appellant. In the context of the allegations against the appellant, usually, it is seen that the bogus transactions are booked by the assesses to suppress the taxable income. For the suppression of income, the preferred modus is to inflate the purchases or expenses by taking accommodation entries. In the present case, the allegation is that the appellant has booked back-to-back bogus sales and bogus purchases. Considering that both sales an....
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....ion, I proceed to examine r whether the income from the transactions have been disclosed by the appellant. 7.2.12. From the chart above, it is seen that the purchases made by the concerns are backed by the letter of credit facility of buyers bank and bill discounting of sellers bank, which means that two Banks are involved in the transaction. These transactions are duly accounted for in the books of respective concerns. The resultant income is accounted for in the books. In reply to Q no. 13, Shri Narsingh Dhavale has stated that, "immediate sales transactions have been made after the receipt of purchase bills with small additions as per agreed amount with promoters of the group, therefore back-to-back transaction of sales and purchase are there and very less profits have been shown". From the chart given above, it can be seen that the final sale value as per the invoice comprises of the Purchase price + 2% to 4%/- Rs. 100 to 150+ LC charges, which means that profit has been booked on the final sale. Thus, the back-to-back sale and purchase transactions and the resultant income from the transaction is disclosed in the books." 16. As regards the second question is ....
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....a sale bill on the company of the Jatia group. After the sale bill is raised, the payment is received from the bank of the buyer, through letter of credit. The money received from the banks is used by the appellant group for its own business or for circulating amongst within the group entities or to other nongroup entities. The money remains with it for a period of around 180 days. The circle gets completed in the final step, when the entity of Jatia group raises the sale bill against entity of the appellant group and receives back the amount with some commission and LC charges. Since, the fund used for circular trading has been received in the hands of appellant through inflated sales, the value of such inflated sales should be adopted for purpose of estimation of income earned on the funds so received. As discussed in the paras above, the regular income arising out of the sale and purchase transactions gets automatically accounted for in the books. However, it is unlikely that the any assessee would undertake such activity on such a massive scale, unless there is some more added benefit in store for it. It is evident that the appellant group and the Jatia group have mutually got ....
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....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 statements recorded of various individuals at the time of search indicate that the assessee has earned commission as its profits for providing the service of generating alleged non-genuine invoices. In this regard out attention was drawn to the statement of Shri Narsingh Vijay Dhawale, accountant of Mr. Vinod Jatia which is at paper book page No. 56 & 57, (Q. No. 13 and 14). Further, statement of Shri Riyaz Shaikh,....
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....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 776) (PBP 144), wherein, it was held that although, the AO is not restricted by the strict and technical rules of the evidence and pleadings, he cannot proceed to make an addition purely on a guess work without any reference to material or tangible evidence. 22. After evaluating the entire records, we also found that the payer of the alleged amount has not been identified throughout the assessment proceedings. It is strange that the AO has alleged that the receipt of excess consideration to the extent of 5% of the turnover, which aggregates ....