TaxTMI 
TaxTMI 
2024 (9) TMI 1894
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....led, assessments, re-assessment and appeal(s) before CIT(A) are tabulated below for the sake of convenience: Particulars A.Y. 2016-17 A.Y. 2017-18 Return Filing Date (Original) 10.10.2016 29.10.2017 Declared Income Rs. 1,45,23,680 Rs. 1,38,87,790 Original Assessment u/s 143(3) 12.12.2018 (Income assessed at Rs. 1,99,93,611) Not applicable Income After CIT(A)'s Order (Original Assessment) Rs. 1,45,23,680 (Post- CIT(A) order dated 05.03.2019) Not applicable Search & Seizure Action Conducted under Section 132 (Sadbhav Group) on 06.04.2017 Conducted under Section 132 (Sadbhav Group) on 06.04.2017 Notice for Reassessment u/s 148 Issued 17.02.2020 17.02.2020 Section of Reassessment Order Section 143(3) read with Section 147 Section 143(3) read with Section 147 Date of Reassessment Order 29.09.2021 29.09.2021 Key Additions by AO - Rs. 1,38,65,603 (Unexplained transactions) - Rs. 2,10,62,866 (Unexplained transactions) - Rs. 3,85,82,434 (Estimated profit @ 20% of bogus sales on Rs. 23,19,02,495) - Rs. 36,50,754 (Excess depreciation on heavy machinery) - Rs. 2,06,99,817 (Estimated....
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....cavation; however, the AO found no documentary evidence to support this claim. 4. During the course of hearing before us, the Departmental Representative relied on the order of AO and preferred not to argue on points and issues, where CIT(A) has erred. No one appeared on behalf of the assessee even after 12 adjournments, therefore the case was heard. Now we deal with each common grounds of the appeals. On the grounds related to Unexplained transactions: 5. A search operation was conducted on the Sadbhav Group on 06.04.2017. During this operation, incriminating documents and books of account were seized, which revealed significant unaccounted transactions involving several group entities, including the assessee. These transactions were found to be unrecorded in the regular books of the assessee. The seized documents included details of cash transactions, bogus sales, subcontractor agreements, and other financial dealings with the Sadbhav Group. The AO observed that the records contained evidence of transactions that were neither disclosed nor accounted for in the financial statements filed with the ITR. These transactions were also corroborated by statements made during the....
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..... Before CIT(A), the assessee contended that these transactions were already included in the turnover disclosed in its ITR and, therefore, the addition made by the AO would result in double taxation. The assessee also argued that the books of accounts were audited, and the income declared was higher than the estimated income based on the documents seized during the search. CIT(A) observed that the transactions identified by the AO as unexplained were not clearly identifiable as part of the disclosed turnover in the ITR. 6.1. The CIT(A), for the A.Y. 2016-17, found that the assessee had indeed disclosed Rs. 1,12,64,715/- as income in the return. However, upon perusal of the statement by Shri Ramesh Prajapati and the seized documents, it was evident that the total net income for the year amounted to Rs. 1,38,65,603/-. The CIT(A) rejected the assessee's claim that the difference in income was due to depreciation and partner remuneration, as Shri Ramesh Prajapati had admitted to earning a specific percentage of profit from the accommodation entries provided to the Sadbhav Group. The CIT(A) upheld the addition of Rs. 1,38,65,603 made by the AO but allowed the assessee to adjust t....
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.... 6.4. Considering the discussions above, we uphold the decision of CIT(A) and dismiss these grounds of the revenue. Ground relating to Estimation of Net Profit: 7. In both A.Y. 2016-17 and A.Y. 2017-18, the AO made significant additions based on the estimation of net profit. These additions were primarily driven by the AO's observation that certain transactions, particularly related to bogus sales and accommodation entries, were not disclosed in the books of accounts and that the declared profit margins were artificially reduced. The AO concluded that the declared profit margins were not reflective of the true profits earned by the assessee based on seized documents and statements. The AO further observed that subcontractor payments and purchase invoices were found to be bogus or inflated, indicating that expenses had been overstated to reduce the taxable profit. 7.1. During the assessment relating to A.Y. 2016-17, the AO rejected the net profit disclosed by the assessee, which was 3.36% of the total turnover (Rs. 1,12,64,714 on Rs. 33,49,95,279). Citing that 30% of the total turnover comprised bogus sales (i.e. Rs. 10,30,92,784), the AO estimated a net profit of 20% ....
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....axation, as a substantial portion of the income had already been declared by the assessee. The CIT(A) deleted the additions for both AY 2016-17 and AY 2017-18, emphasizing that profit estimations without rejecting the books and without substantial evidence were unsustainable. 7.4. We note that the CIT(A) correctly deleted the addition of Rs. 3,85,82,434/- (AY 2016-17) and Rs. 2,06,99,817/- (AY 2017-18) based on a 20% net profit estimation made by the AO. The CIT(A) found that the AO had not rejected the books of accounts and there was no material defect found in the audited accounts of the assessee. Therefore, the arbitrary estimation of profit at 20% without rejecting the books of accounts was unsustainable. The Revenue's contention that the transactions related to the Sadhbhav Group were not disclosed in the ITR lacks evidence, as the turnover and profits were already accounted for in the regular books maintained by the assessee, duly audited and accepted. 7.5. Considering the discussions above, we uphold the decision of CIT(A) and dismiss these grounds of the revenue. On the ground relating to Higher Depreciation Disallowance of Rs. 36,50,754/- in A.Y. 2017-18: 8....