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2017 (11) TMI 367 - AT - Income TaxBogus purchase and sales - assessee is engaging into bogus entry operations - rejection of books of accounts - Held that - Assessing Officer has given a copy of the statement to the assessee and asked for the response. The Assessing Officer found no cogency in the submission of the assessee. The Assessing officer has also issued a notice u/s 133(6) to various parties from whom the assessee has claimed to have made sales / purchases. None of the party has confirmed that any sales / purchase transaction has been carried out by the assessee-company nor submitted any transport receipt, warehouse receipt and delivery challans as sought for. No quantitative detail of sales and purchase has been provided by the assessee. These facts make it amply clear that the assessee is engaging into bogus activities. In these circumstances, Assessing Officer has rejected the books of account and considered 1% commission on purchase / sales made with outside parties as assessee s income. The facts enumerated above clearly indicate that assessee is entry operator and showing fictitious purchase and sales. In the absence of any response from the assessee s so called purchasers and sellers and in the absence of any quantitative details, we are of the considered opinion that there is no infirmity in the rejection of books.
Issues Involved:
1. Determination of total income. 2. Completion of assessment and rejection of books of account. 3. Allowability of business expenses. 4. Charging of interest under Section 234B. 5. Estimation of profit percentage. Issue-wise Detailed Analysis: 1. Determination of Total Income: The assessee contested that the Assessing Officer (A.O.) erred in determining the total income as ?3,21,38,490/- instead of ?13,35,940/-. The A.O. had received information from the Sales Tax authorities indicating that the assessee was involved in bogus purchase and sale transactions. The A.O. found that despite showing significant turnover, the assessee reported minimal profits, indicating sham transactions. Consequently, the A.O. rejected the books of account under Section 145(3) and estimated the net commission income at 1% of the total bogus transactions, resulting in an addition of ?2,79,76,166/- to the taxable income. 2. Completion of Assessment and Rejection of Books of Account: The assessee argued that the A.O. completed the assessment after due inquiry and wrongly rejected the books of account under Section 145(3). The A.O. had issued notices under Section 133(6) to various parties, but none confirmed any genuine transactions with the assessee. The A.O. noted the lack of transport receipts, warehouse receipts, and delivery challans, and concluded that the transactions were merely book entries. The CIT(A) upheld the A.O.'s decision, citing the absence of quantitative details and supporting documents, and relied on various judicial precedents to justify the rejection of the books. 3. Allowability of Business Expenses: The assessee claimed administrative expenses of ?46,96,195/- as legitimate business expenses. The A.O. disallowed these expenses, reasoning that since the transactions were bogus, the expenses were also not genuine. The CIT(A) upheld this disallowance, emphasizing that the onus was on the assessee to prove the genuineness of the expenses, which the assessee failed to do. Consequently, the expenses were deemed bogus and disallowed. 4. Charging of Interest under Section 234B: The assessee contended that the A.O. wrongly charged interest under Section 234B. However, this issue was not elaborately discussed in the judgment, as the primary focus was on the genuineness of the transactions and the resultant income estimation. 5. Estimation of Profit Percentage: The assessee moved an additional ground, arguing that the A.O. erred in estimating the profit at 1% without considering the director's statement that the commission charged was 0.1%. The CIT(A) and the ITAT found that the assessee failed to provide documentary evidence to substantiate the 0.1% commission claim. The ITAT noted that the Revenue authorities were fair in estimating the income at 1%, given the bogus nature of the transactions. Citing the Delhi High Court's decision in a similar case, the ITAT upheld the 1% estimation, emphasizing that the assessee's appeal did not warrant reducing the already granted relief. Conclusion: The ITAT dismissed the assessee's appeal, affirming the CIT(A)'s decision to uphold the A.O.'s rejection of the books of account, the estimation of 1% commission on bogus transactions, and the disallowance of claimed expenses. The judgment emphasized the lack of documentary evidence and the assessee's engagement in fictitious transactions, justifying the Revenue authorities' actions.
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