TaxTMI 
TaxTMI 
2025 (10) TMI 1369
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....for AY 2013-14 to AY 2018-19 and for AY 2019-20, order passed under section 143(3) of the Act, date of order 19/07/2021. 2. All the appeals have same nature of facts and have common issue. Therefore, all the appeals were taken together, heard together and are disposed of by a common order. ITA No.2748/Mum/2025 (assessee's appeal) and ITA No. 3047/Mum/2025 (revenue's appeal) for A.Y. 2017-18 are taken as lead case. 3. The assessee is engaged in business of wholesale trading of metals and metal ores. The assessee filed the original return of income during the impugned assessment year. Subsequently, a search and seizure action u/s 132 of the Act was conducted in the case of "Jatiya group" and other related groups at their business premises & residential premises of directors on 17/04/2018. The "Jatiya group" is primarily involved in the business of real estate and steel trading. The search was concluded on 21/04/2018. Following the search action, proceedings u/s 153A was initiated against the assessee group. During the assessment proceedings, the Ld.AO found that the assessee has taken loan from bank and the assessee is running the business which is not genuine. The Ld.AO found ....
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....ch are reproduced below:- "6. During the course of Search and Seizure action u/s. 132 of the I. T. Act 1961, the books accounts of the assessee company in tally software has been seized. The detail analysis of the seized material is discussed in this order. The assessee company has been found to be not conducting any business activity. There was no iota of evidence to indicate transactions that involved actual movement of material. All the documents merely pointed out to invoices backed by no material movement. Specifically, the director of the company with whom assessee has been trading admitted to being dummy and acting on instructions. Further no documents vis-à-vis a. Material movement b. Sales/Marketing c. Inventory Management d. CRM/SCM could be found during the intrusive action and the assessee could neither produce any documents suggesting material movement during post search investigation nor during assessment proceedings. Further, the documents retrieved, and books of account seized during the course of intrusive action clearly pointed to the manufacture of make-believe invoices to avail L/C fr....
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....ned by the appellant should be estimated at a higher rate than the rate adopted for group concerns. Considering the discussion above, I feel that the rate of 0.5% adopted in the case of Mis Duli Trade Commodities Pvt ltd is reasonable and realistic and can be applied in the case of the appellant. The reduction of rate from 7% to 0.5% would also address the claim of the appellant that not all transactions were with the entities of Topworth/Llyod/Uttam group, thereby implying that not all transactions were circular in nature. Considering the overall discussion as made above, the additional income is calculated at the rate of 0.5% of the total sales. This additional income shall primarily include the commission income earned from the group concerns and also cover any other unaccounted incomes like bill discounting income, interest received, discount income on account of suppression of GP etc. 9.11. For the year under consideration, the AO has estimated the income at the rate of 7% of total sales of Rs 5,06,41,61,572/-. As discussed in the paras above, the additional income is estimated at 0.5% of the sales of Rs 5,06,41,61,572/- which comes to Rs 2,53,20,807/-. It is clarifie....
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.... balance sheet. They have also shown loan given to the assessee in their audited accounts. Similarly, in the case of Duli Trading and Commodities Pvt. Ltd. reserves and surplus were more than Rs.28.31 Crores and also reflected huge funds available in the balance sheet and also duly shown the loan in their balance sheet. Similarly, Elecmec Engineering and Projects Pvt. Ltd. it had shown reserves and surplus of Rs.14.10 Crores and Lloyds Steel Industry had shown more than Rs. 25.26 Crores as reserves and surplus and had shown huge operations from revenue. In all these cases it is seen that these companies have filed their bank statements which huge flow of funds. Source of these funds have not been doubted by the AO. 14. To prove the genuineness, assessee had filed a copy of their bank statements wherein the amounts have been transferred through clearing and it is not the case that some unknown clearing has come from where they have given loan to the assessee. It appears that they had huge funds available in the form of credit balance and there has been regular transaction of business from where these parties had given loans to the assessee. Another important fact is that th....
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....funds from one company to other and overdrawing the money from the banks through Letter of Credit without any credentials at the time of Bill Discounting or for any other purpose, but nowhere there is any finding of investigation wing or any material found or statement during the search, that some unaccounted money has been given by the assessee company to accommodate any loan entry or there is any cash trail. Neither there is involvement of any kind of entry operator nor were these companies found to providing accommodation entry of loan by taking some temporary cash. Without such information or material, there cannot be any presumption that these companies had provided bogus entry of loan or the transaction is not genuine. Thus, the finding of the Ld. CIT(A) cannot be tinkered with. Accordingly, the additions made u/s.68 is deleted and the order of the Id. CIT (A) is confirmed and the grounds raised by the Revenue are dismissed." 7. He further relied on the order of Indrajit Properties Pvt Ltd vs DCIT 2139/Mum/2025, date of pronouncement 22/08/2025. The relevant paragraphs are extracted below:- "21. Furthermore, neither the AO nor the Ld. CIT(A) has referred to or rel....
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....) that the assessee must have earned 0.5% commission is contrary to commercial logic. No prudent businessman would pay such a high commission to a mere entry provider, especially when the commission exceeds or equals the profit margins earned in legitimate trading activity. Hence, the commission earned by the assessee has to be much lower than the industry's average net profit margin. 24. Even otherwise, the profit margin disclosed by the assessee on alleged circular transactions comes to 0.27% for the year under consideration (chart showing profit margin for the all the years is enclosed in the file). Therefore, in our view, considering the thin margin in this line of business, it is held that the profits disclosed by the assessee in its audited books of account includes commission income earned, therefore, in our considered opinion, no further addition is warranted on this account. Reliance 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 ....