TaxTMI 
TaxTMI 
2026 (6) TMI 1171
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....eizure operation conducted u/s 132 of the Income Tax Act, 1961 ('Act' for short) in the case of Al-Hamd Group and Al-Dua Group on 21/03/2023. The Assessee company filed return for the years under consideration in response notice u/s 148 of the Act. Assessment Orders came to be passed for the respective years under consideration on 28/03/2025 by making various additions. Aggrieved by the assessment orders, Assessee preferred Appeals before the Ld. CIT(A). The Ld. CIT(A) partly allowed the Appeals of the Assessee. As against sustaining the additions by the Ld. CIT(A), Assessee preferred above Appeals and as against deletion of the addition by the Ld. CIT(A), the Revenue also filed the respective Appeals. For the sake of convenience Appeals filed by the Assessee and the Revenue pertaining to Assessment Year 2020-21 was taken up as lead matters and both the parties have made extensive arguments on the respective grounds of Appeal. 3. The grounds of Appeal of the parties for Assessment Year 2020-21 are reproduced as under: - ITA No. 7194/DEL/2025 (A.Y. 2020-21) (Assessee's Appeal) "1. On the facts and circumstances of the case and in law, the notice u/s 148 issued....
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....Ld. CIT (A) is right and correct in partly allowing the appeal of the assessee on the addition of Rs. 23,31,63,992/- made by the Assessing Officer applying the gross profit rate of 16%? iii. Whether on the facts and circumstances of the case and in law. the L.d. CIT (A) is right and correct in restricting the addition of Rs. 23,31,63,992/- made by the Assessing Officer on account of unaccounted sale of meat and by-products to the extent of Rs. 3,73,06,238/- by applying the gross profit estimation of 16%?". 4. The Ld. Counsel for the Assessee submitted that the Assessee wishes not to press legal contentions raised in Assessee's Ground No. 1 to 4 of the Assessee's Appeal. Accordingly, the submission made by the Assessee's Representative istaken on record and the Ground No. 1 to 4 of the Assessee are dismissed as not pressed. 5. Ground No. 5 of the Assessee is regarding addition made by the A.O. to an extent of Rs. 1,18,23,434/- i.e. 11.70% of Rs. 10,10,54,993/- on account of alleged non genuine purchases. The Ld. A.O. made the said addition by imposing GP rate at Rs. 11.7% to the income of the Assessee, in following manners:- "On the basis of enquiries con....
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.... when the purchases are duly recorded in the books along with corresponding sales which have been duly accepted by the AO and the profit in the transaction already stood declared in the books of accounts and ITR. Therefore, the Ld. Assessee's Representative submitted that the addition made by the AO and confirmed by CIT(A) is patently erroneous and the same is liable to be deleted. 7. The Ld. Assessee's Representative has also relied on order of the Co-ordinate Bench of the Mumbai Tribunal in the case of ACIT Central Circle-3(1), Vs. M/s Everest Food Products Pvt. Ltd. and submitted that non-filing of return by the supplier cannot be a ground for making addition. Thus, sought for allowing Ground No. 5. 8. Per contra, the Ld. Assessee's Representative submitted that the A.O. has rightly made addition by applying GP rate at 11.7% on the total transaction as the Assessee made purchase with the parties who are prima facie bogus, therefore, relying on the orders of the Lower Authorities, sought for dismissal of Ground No. 5 of the Assessee. 9. We have heard both the parties and perused the material available on record. The Ld. A.O. while making the addition observed....
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....ssee has substantiated its claim by sufficient documentary evidences along with the fact that it was evident from the income tax portal screenshot that out of four parties which were identified by the Ld. AO to be non-tax filers three have filed their returns of income. The Ld. AR further contended that the assessee has duly audited its financials which were also not disputed by the Ld. AO and also stated that most of the parties have also responded to the 133(6) notice and in spite of the same the Ld. AO has failed to make any independent inquiry on these alleged companies. The Ld. AR relied on the order of the Ld. CIT(A). 8. We have heard the rival submissions and perused the materials available on record. The only issue that requires adjudication is "whether the Ld. CIT(A) has erred in deleting the addition of Rs. 25,55,69,713/- made by the Ld. AO towards alleged non genuine purchases made by the assessee company with four parties?" It is observed that the Ld. AO has alleged that the assessee had entered into purchase transaction the following parties who according to the Ld. AO has not filed the ITR for the impugned year A.Y. 2021-22, the details of which are tabulated....
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....019-20 & AY 2020-21. It has also been submitted that input tax credit in respect of these purchases have already been allowed which proves that the supplier is regular in filing its GST returns. Copy of GST-R 2A showing the same has also been filed by the appellant. (ii) MR Gulmi - It has been submitted that the AO has taken incorrect purchase amount of Rs. 46,97,31,180/- as against actual purchase of Rs. 40.18,72,196/-. Further supporting documents in the form of Ledger Account, Invoice copies & Goods Receipt Notes, E-way Bills & Transportation Receipts, Quality Testing Reports, Cold Storage, Weighment Bridge Proof and Bank Statements highlighting payments have been filed. The appellant has also submitted Income Tax Portal screenshot confirming that MR Gulmi is not a "Specified Person" under Sections 206AB & 206CCA implying that the supplier has duly filed the return of income for the AY 2021-22 and hence the very pretext on which the disallowance has been made is not correct. The appellant has also submitted that the input tax credit claimed against these purchases already stand allowed proving that the supplier is regularly filing its GST returns. It has also been point....
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....eing shown by the appellant, wherein it is not correct to accept the manufacture and corresponding sale of the finished product but doubt the input raw material. The AO has proceeded to examine the tax behaviour of the persons from whom these purchases have been made and has made this addition since they have not been regular in filing of return of income. In my view, with respect to expenses debited in the profit & loss account that are routine business expenses such as purchase and otherwise satisfy the conditions laid down in Section 37(1) of the Act, the onus of the appellant is limited and does not extend to ensuring that the parties to whom the appellant is making these payments are tax compliant. It is also to be noted that none of these parties are admitted or identified accommodation entry providers. Further the appellant has demonstrated by way of income tax portal screen shot that out of the 4 parties identified by the AO as non-filer, 3 have actually filed their return of income. In view of the above reasons and also in view of the fact that the books of accounts of the appellant are duly audited and the auditor has not identified any specific case of misuse and violati....
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....evenue to justify the disallowance of 46% of the purchases by holding the same to be bogus. It is also a settled proposition of law that the Revenue while disallowing bogus purchases would necessarily have to ignore the corresponding sales recorded against the alleged parties, which has not been done so in the present case in hand. In the absence of these findings, we do not find any justification in upholding the addition/disallowance made by the Ld. AO and thereby holding that there is no infirmity in the order of the Ld. CIT(A) in deleting the addition/disallowance made in the hands of the assessee and the same warrants no interference. Hence, we dismiss the grounds of appeal raised by the Revenue on the above observation." 11. In view of the above discussion and also relying on the ratio laid down by the Co-ordinate Bench of the Mumbai Tribunal in the case of M/s Everest Food Products (supra), we delete the ad-hoc addition made by the A.O. by applying the GP rate of 11.70% which has been confirmed by the Ld. CIT(A). Accordingly, Ground No. 5 of the Assessee is allowed. 12. Ground No. 6 of the Assessee's Appeal is against confirming of addition made by the A.O. to the exte....
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....direct expenses such as salary and other expenses were in exist. The Ld. Counsel has also relied on several judicial precedents in support of his contention and sought for allowing the above Ground of Appeal of the Assessee and also sought for dismissal of Revenue's grounds of Appeal. 16. Per contra, the Ld. Departmental Representative vehemently submitted that the Ld. A.O. has rightly applied GP rate of 16% on the entire sale as it was clearly established that the Assessee was making unaccounted sales purchases and also unaccounted salary expenses, therefore, submitted that the Ld. CIT(A) committed error in deleting the addition of entire sales made by the A.O. and in applying GP rate at 16%. Thus, sought for dismissal of above Ground of Appeal of the Assessee andfor allowing the Revenue's Grounds. 17. We have heard both the parties and perused the material available on record. The A.O. based on unaccounted salefor certain period, extrapolated sales to full year and allocated such un-accounted sales to two companies including the Assessee company. The A.O. made the addition of entire amount of such sale and has not allowed the deduction of any purchase and other expenses on ....
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....s to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person' s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested." As to the nature of the presumption, the Kerala High Court, in Income Tax Officer, B-Ward, Ernakulam v. T. Abdul Majeed, [1988] 169 ITR 440, held as follows: - "It is true that section 132(4A) of the Act enables the court to presume the truth of the contents of such books. However, it is a presumption which can be rebutted. Moreover, the presumption envisaged therein is only a factual presumption. It is in the discretion of the court, depending upon other factors, to decide whether the presumption must be drawn. The expression used in the sub-section is "may be pres....
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....essarily thereby causing harassment to the person concerned. In order to see that the assessment order is framed within the time frame provided under Section 132, legislature provided for a rebuttable presumption to be raised against the person from whose possession and control the books of account, money, bullions etc. are seized so that the order can be passed within the time frame provided under Section 132. A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) "may presume", (ii) "shall presume" and (iii) "conclusive proof". "May presume" leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. "Shall presume" leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. In this sense such presumption is also rebuttable. "Conclusive proof" gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect.....
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....ave denied the benefit of any expenses which would otherwise have inured to the assessee, as an allowable deduction under Section 37 (1)." 19. In the case of Commissioner of Income Tax Vs. Balchand Ajit Kumar, 2003 (4) TMI-76 Madhya Pradesh High Court wherein it was held as under: - "We are in respectful agreement with the aforesaid opinion inasmuch as the total sale cannot be regarded as the profit of the assessee. The net profit rate has to be adopted and once a net profit rate is adopted, it cannot be said that there is perversity of approach. Whether the rate is low or high, it would depend upon the facts of each case. In the present case net profit rate of five per cent. has been applied. We do not think it appropriate that the same requires to be enhanced. We are also inclined to think that it is high. In any case, it cannot be said that there has been perversity of approach". 20. In the case of Commissioner of Income Tax Vs. President Industries 1999 (4)TMI 8-Gujarat High Court wherein it was held as under: - "3. Having perused the assessment order made by the AO, the order made by the CIT(A) and the Tribunal, we are satisfied that the Tribunal was ju....
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....herefore directed to recompute the net profit on the unaccounted sales on the basis of 1.5%." 22. In view of the above circumstances, by applying the ratio rendered in the above judicial precedents, we deem it fit to apply the NP rate of 4%, accordingly, we sustain the partial addition. Thus, Ground No. 6 of the Assessee's Appeal is partly allowed. 23. Since, we have partly allowed the Ground No. 6 of the Assessee and sustained the addition by applying NP rate of 4%, the Ground of appeal No. 1 to 3 of the Revenue has become in-fructuous. Accordingly, Ground No. 1 to 3 of the Assessee are dismissed. 24. Ground No. 7 of the Assessee is regarding confirming the addition made by the A.O. of Rs. 43,96,660/- on account of entry fees received in cash. The Ld. A.O. while making the addition on account of entry fees, held as under:- "Entry Fee-During the course of search action conducted, it was found that cast was being genermed through entry fee which was charged per vehicle at the entrance of the se company. Further, statement of Sh. Haji Zaheer, Promotor of AL. Hand Group was also recorded on outh wherein he admitted that there are various suppliers who supply naw mate....
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.... said income has been declared for taxation for the year under consideration. In response, it was submitted by the assessee that nominal amount was collected from the vehicles at the factory gate which caries the cattle and on Friday this amount was used as donation or distribution Bhandara and to the poor and needies. Accordingly, the assessee company was show caused vide this office show cause notice dated 20.03.2025 as to why amount of Rs. 48,08,205/- collected as entry fee should not be taxed as income from other sources during the year under consideration. In response, the assessee submitted that the amount was collected from the vehicles at the factory gate which carries the cattle and the amount so-collected was used as donation or distributing Bhandara, to the poor and needy people on Friday. Therefore, you are requested not to take any adverse inference in my case. Reply furnished by the assessee company on this issue was duly considered but not found force. As, it has been duly established and demonstrated with documentary evidence that the assessee collected entry fee as well as loading charges from the various customers during the year under consideration. Even....
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....nt Year 2021-22 and 2022-23 and Ground No. 4 of Assessment Year 2023-24 of the Assessee are regarding addition made by A.O. on ground of gross profit @ 11.70% applied on certain purchases. The A.O. has estimated GP on certain purchases which have been confirmed by Ld. CIT(A). 28. We have already decided the similar issue while deciding the Appeal for Assessment Year 2020-21 by relying on the ratio laid down by the Co-ordinate Bench of the Mumbai Tribunal in the case of M/s Everest Food Products (supra) and we deleted the ad-hoc addition made by the A.O. by applying the GP rate of 11.70% which has been confirmed by the Ld. CIT(A). Since, facts being identical, the decision of the Bench for the Assessment Year 2020-21 would apply mutatis mutandis to the facts of the present Appeal. Accordingly, Ground No. 5 of the Assessee for Assessment Year 2021-22 and 2022-23 and Ground No. 4 of the Assessee for Assessment Year 2023-24 are allowed. 29. Ground No. 6 of the Assessee and Ground No. 1 to 5 of the Revenue for Assessment Year 2021-22 and 2022-23 and Ground No. 5 of the Assessee's Appeal for Assessment Year 2023-24 and Ground No. 2 to 6 of the Revenue are regarding the addition mad....
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....to various embassies in respect of exports sales made by it. Ld. A.O. while making the addition observed that the expenses are not recorded in the books of account. The Ld. CIT(A) has confirmed the said addition. For the sake of ready reference, the observation of the A.O. in the assessment order are reproduced as under:- ""In the instant case, it is a matter of record/fact that the assessee company has made said expenditure in cash on account of legalization fee. Source of which was not explained by the assessee. Therefore, the said expenditure is nothing but as an unexplained expenditure within meaning of section 69C of the Act. Reliance is further placed on the judgment of Hon'ble High Court of Delhi in the case of Sushil Bansal v. Pr. CIT [2020] 115 taxmann.com 225 (Delhi) wherein it was held that With there being no credible explanation offered by the assessee for the payment made as capitation fee, the AO isjustified in adding it to the Assessee's income u/s 69C. SLP filed by the assessee was also dismissed by Hon'ble Supreme Court of India vide its order dated 06.01.2020. In the instant case as well, the assessee did not explain any source of the aforesa....
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....allowing the Ground No.8 of the Assessee in Assessment Year 2021-22, 2022-23 and Ground No. 7of the Assessee in Assessment Year 2023-24. 39. Ground No.3 of the Assessee and Ground No. 1 of the Revenue's Appeal for Assessment Year 2023-24areregarding addition made on account of alleged unexplained expenditure (purchases) u/s 69C r.w. Section 115BBE of the Act. The Ld. A.O. made the addition in following manners:- ""Unexplained expenditure, etc. 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year: Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income." 40. The above said addition made by the A.O. has been partly confirmed by the Ld.....