TaxTMI 
TaxTMI 
2026 (4) TMI 632
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....een Rastogi, the Director of M/s continental Seeds & Chemicals Ltd. recorded during search which clearly established that the M/s Continental Seeds and Chemicals Ltd. was engaged in providing accommodation entries and involved in paper trading and assessee is one of the beneficiary who was benefitted by the accommodation entry from the said company viz the director of Continental Seeds and Chemicals Ltd. 2. The Order of the Ld. CIT(A)/NFAC is erroneous both in Law and on facts. 3. Any other ground that may be adduced at the time of hearing." 3. The relevant facts giving rise to this appeal are that the assessee, engaged in the business of base oil, tiles, hardware and sanitary items in the name & style of M/s Janta Sanitation, filed his Income Tax Return ('ITR') of the relevant year on 17.09.2022 declaring income of Rs. 12,34,350/-. Later, the case of the assessee was reopened on the reasoning that the assessee had taken accommodation entries aggregating to Rs. 1,01,47,216/- from M/s Continental Seeds & Chemical Ltd. Search & Seizure operations were carried out on various assessees of Praveen Rastogi Group of Cases at Sambhal, Uttar Pradesh (UP). M/s Co....
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.... paid by the assessee to the suppliers were returned back to the assessee and the purchase bills issued were only accommodation entries. If the AO doubted the genuineness of the said purchases, it was incumbent upon him to cause further enquiries in the matter in order to ascertain the genuineness or fictitiousness of the purchases. In this case, the AO made addition merely relying on the information received and without making any further enquiries. 5.4. It was further submitted that the assessee made all the payments for purchases to the suppliers through banking channel and the purchases were duly recorded in the purchase register & books of accounts. These books of account were duly audited and were neither doubted nor rejected by the AO. The assessee also furnished the statement of bank accounts highlighting the transactions of purchases. It is noted that the AO did not find any deficiency in the bank account statement, purchase register, audited books of accounts etc. and made addition of bogus purchases only on the basis of information received from the Investigation Wing. It is not in dispute that the assessee made payment of purchases to the suppliers through bank....
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....re and are applied across the board to all including the assessee. Specific evidences produced by the assessee were not controverted by the AO. The addition is made based on a general report from the brought out any part of the information in which the assessee has been investigated and/or found to be a part of any arrangement for the purpose of claiming bogus purchases. Nothing has been brought on record to show that the persons investigated, including the suppliers, have named that the assessee was in collusion with them. In absence of such findings it is not possible to link their wrong doings with the assessee. In the absence of any findings specifically against the assessee in the information received, the assessee cannot be linked to the wrong acts of the persons investigated. In this case, the AO at best could have considered the information received as a starting point of Investigation. The report only informed the AO that some persons may have claimed bogus purchases. The AO was duty bound to collect evidences that the transaction entered into by the assessee was also a collusive transaction. However, the AO has not brought on record any evidence to prove that the transact....
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....s of pure accommodation entry; hence, the documentation part of the assessee would be such that it should look like the real. However, the reality was different. 6. The Ld. Sr. DR contended that the assessee had failed to demonstrate that the statement of Shri Praveen Rastogi recorded under section 132(4) of the Act was incorrect or Shri Praveen Rastogi had retracted his statement. Thus, the presumption drawn by the Ld. AO could not be doubted unless the purchases were established to be genuine. The statement of Shri Praveen Rastogi recorded under section 132(4) of the Act could not be brushed aside. The assessee had failed to file confirmation and other documents from M/s Continental Seeds & Chemical Ltd. from whom the said purchases of Rs. 1,01,47,216/- claimed to have been done. 7. The Ld. Sr. DR, emphasizing on the impugned order, submitted that the Ld. CIT(A) had erred in holding that the purchases of Rs. 1,01,47,216/- were genuine by placing emphasis on the self-serving documents of the assessee such as (i) Assessee's purchase register, (ii) Ledger account of M/s Continental Seeds & Chemical Ltd. in Assessee's books of account, (iii) Audited books of accounts of....
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....ng regularly followed by the assessee, the word 'shall' have been specifically used to make it mandatory leaving no discretion to use any another method of accounting which is not being regularly followed. Whereas in section 145(3) of the Act, the word 'may' have been deliberately used in a discretionary/directory context because the word 'may' as used in 145(3) of the Act is intricately linked to the AO's satisfaction also about the correctness of accounts in the very same section. A critical examination of language of this section along with principles of harmonious construction would make it clear that powers of the AO to invoke 145(3) of the Act is merely declaratory/discretionary and not mandatory, where the legislature had no intention to prescribe the mandatory rejection of books of accounts in each & every case where some specific entry in accounts have been found to be bogus/inflated or unverifiable but largely the accounts maintained as per mandate of section 145(1) r/w 145(2) of the Act. That is why the word 'may' have been used at one place and 'shall' at another place in the same section of the Act. Thus, it is obvious that t....
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.... Document 1 [Investigation Report on Praveen Rastogi & Associates] [DOS: 21.12.2022] 10,00,000.00 97.29,454 00 3.11,27 891 00 3,08 57.145.00 14,00,000.00 1.12.57-345 00 1,12,00,000.00 57-345 00 30,59,429 00 31,36,774.00 $1.16.774.00 50,00.000 00 1,31,36,774.00 1,10,00.000.00 1.16.774.00 1.16,774 00 1.16,774.00 DO0402 1.16. 774 00 100 00 3.16,674.00 200. 00 3,16,474 00 1,16,474.00 40,00,000 09 41.3647400 000401 40,00 000 09 1,000 00 3,15,474.00 4,725 03 1.10,548.97 1,000.00 7,0% 21,998.00 0.97 10.00.000 09 20.81,570 97 50.83. 50 97 0.97 000404 50,00,000.00 12,000.00 8,000.00 50 97 4.316.00 53.524.92 2,00,00 000 00 2 00.53,594.97 000406 2,00,00,000.00 53.594.97 40,00.000 00 40.51,594.97 000409 40,00,000 00 13.594.97 51,594.97 50,00,000 00 50,53,594.97 50.53,594.97 29,00,000.00 29,00,000 09 10,00,000 00 80.55.594.97 29. 00,000 00 20,00.000 00 1.00.51,594.97 29,00,000.00 23.224.97 58.594.97 53.574.97 55,594.97 . ,....
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....the premise addressed Koat East, Shaniwala Phathak, Sambhal was perused. When the filter was applied in the whatsapp chats with the word namely 'Cash', following chats/messages were found: Document 3 [Investigation Report on Praveen Rastogi & Associates] [DOS: 21.12.2022] Body Hagner Cash Requirement cash withdraw Send Send letter for this branch four cash with drawi by Vivek Enterprises. Send it to Conara Bank immediate I need full detail of your branch i will subme letter to each With draud latter in my Moradabad branch Bank main cash late mileage Pis contem me in call just before giving cash. So cash is avidable .. Pia confere in your branch: 50.00.000 rupees cash please say to your cashier Vụ cash close ko re h Si pizz amount bita do kotne bị tà cash mil jaega or amount bhi Se me cash hi collect ar lunga .. ap dushyant sir se bei do .. ep mo hi le lunga mo unse cordinale arke in morning first hour today's stall not carry cash to Factory This payment i need in cash rest you hold You come here i have cash in euro ahai, Aapin payment milkar rath deni hai, charo moet registry th bi angko nikalvs kar mujhe denih yadi nokal li ho tau shane kare pl. Ca....