TaxTMI 
TaxTMI 
2026 (8) TMI 1249
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....s preferred by the Assessee arising out of the separate orders passed by the Learned Commissioner of Income Tax (Appeals) [hereinafter referred to as "the Ld. CIT(A)"] under section 250 of the Income-tax Act, 1961 ("the Act"), pertaining to Assessment Years ("A.Ys.") 2015-16, 2016-17, 2017-18 and 2018-19. The impugned orders arise from reassessment orders passed by the Assessing Officer ("AO") under section 147 read with section 143(3) of the Act. 2. Since common issues are involved and the facts are substantially interconnected, all these appeals were heard together and are being disposed of by this consolidated order for the sake of convenience and brevity. 3. Briefly stated, the facts are that the Assessee is a private limited comp....
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....,229 82,10,87,125 21,15,66,624 Total Turnover 163,23,45,312 161,35,04,935 154,25,55,308 139,75,66,816 Particulars A.Y. 2015-16 (Rs.) A.Y. 2016-17 (Rs.) A.Y. 2017-18 (Rs.) A.Y. 2018-19 (Rs.) Purchases 5,27,90,105 25,84,15,281 82,06,02,581 21,03,59,871 Profit declared in ROI 5,27,913 21,00,948 4,84,544 12,06,753 In the reassessment proceedings, the AO classified the impugned transactions into the following two categories: (i) Entity A Transactions: Transactions wherein purchases were made from entities controlled by Shri Gopal Bhattar and corresponding sales were effected to other entities also controlled by Shri Gopal Bhattar, such as M/s SVG Style & Text....
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.... average Gross Profit of the Assessee for four years, on the sales turnover of Rs. 11,23,23,237/- for A.Y. 2016-17 and Rs. 5,18,05,445/- for A.Y. 2017-18, after allowing credit for the profit already disclosed by the Assessee. 8. The Learned Departmental Representative ("Ld. DR") strongly relied upon the assessment orders as well as the written submissions filed before us. It was submitted that once the transactions are found to be bogus, the AO was justified in estimating the profit embedded therein. Reliance was placed upon the decisions in N.K. Industries Ltd. v. DCIT, Kachwala Gems v. JCIT, CIT v. La Medica, CIT v. Sanjay Oilcake Industries and CIT v. Simit P. Sheth to contend that the benefit or profit embedded in such transactions ....
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.... quantitative basis. 12. It is further evident from the record that the Assessee has already disclosed the profit arising from these transactions in its books of account and offered the same to tax in the returns of income. Once both the purchase and sale transactions have been accepted to be accommodation entries and the resultant profit disclosed by the Assessee has already been subjected to tax, we find no justification for estimating any further Gross Profit merely on the purchase side. 13. We also find merit in the submission of the Assessee that the AO has not rejected the books of account under section 145(3) of the Act. In the absence of rejection of books and without pointing out any discrepancy in the quantitative records ma....
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....Ys. 2016-17 and 2017-18, has challenged the action of the Ld. CIT(A) in sustaining additions by applying a Gross Profit rate of 7.94% in respect of Entity B transactions. 18. We have considered the rival submissions. We find that the Gross Profit rate of 7.94% adopted by the Ld. CIT(A) represents the average Gross Profit of the Assessee's manufacturing business. The impugned transactions, however, admittedly relate to trading/accommodation transactions. Manufacturing activities involve value addition through processing, labour and manufacturing overheads, whereas trading transactions ordinarily operate at substantially lower margins. Therefore, application of the manufacturing Gross Profit rate to trading transactions is not justifie....