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2023 (5) TMI 105 - AT - Income TaxEstimation of income - bogus purchases - HELD THAT - We find that since the sales made out of disputed purchases have been accepted as such by the ld. AO, it would be just and fair to bring to tax only the profit element embedded in the value of such disputed purchases in view of the fact that assessee could have made purchases from the grey market in order to have some savings in the form of cash discount and indirect taxes. We find that this Tribunal in the case of assessees engaged in the trading of iron and steel had been consistently estimating the profit element to be at 5%. Hence, we direct the ld. AO to estimate the profit element at 5% of disputed purchases, which in our considered opinion, would meet the ends of justice in the peculiar facts and circumstances of the instant case. Accordingly, the ground No.2 raised by the assessee is partly allowed and ground raised by the Revenue is dismissed. Unexplained cash credit u/s.68 - AO concluded that assessee company had failed to prove the identity and creditworthiness of the investors - HELD THAT - As in the hands of M/s. BIEL, the substantive addition made thereon, was not deleted on merits. It was deleted only on a technical ground of assessment being framed on a non-existent entity. We hold that since substantive addition has not been deleted by this Tribunal on merits, the addition made on protective basis in the hands of the assessee company had to be examined. But the excruciating fact that remains uncontroverted in the instant case is that both the ld. AO as well as the ld. CIT(A) agree that the transactions between BIEL and assessee company are genuine. Further all the documentary evidences submitted by the assessee vis-a-vis M/s. BIEL with regard to receipt of share capital and OCPS had not been rejected by the ld. AO and no deficiencies were found thereon. Hence, it could be safely concluded that assessee company had duly discharged its complete onus with regard to Section 68 of the Act. Hence, there could not be any addition u/s.68 of the Act even on merits on protective basis or on substantive basis. Hence, we hold that the ld. CIT(A) had rightly deleted the addition made u/s.68 of the Act in the hands of the assessee company on merits also. Accordingly, the ground raised by the Revenue is dismissed.
Issues Involved:
1. Validity of search assessment framed under Section 153A of the Income Tax Act. 2. Addition made on account of bogus purchases. 3. Addition made on account of unexplained cash credit under Section 68 of the Income Tax Act. Detailed Analysis: 1. Validity of Search Assessment under Section 153A: The first issue raised by the assessee for A.Y. 2013-14 challenged the validity of the search assessment framed under Section 153A of the Income Tax Act. However, since no arguments were advanced by the assessee's representative during the hearing, this ground was treated as not pressed and subsequently dismissed. 2. Addition on Account of Bogus Purchases: The second issue pertains to the addition made on account of bogus purchases for A.Y. 2013-14. The assessee is engaged in the business of project development of solar energy and trading goods required for solar power projects. During a search and seizure action, incriminating materials were found indicating bogus purchases from six parties. The assessee argued that the purchases were genuine, supported by invoices and quantitative details, and payments were made via account payee cheques. However, the Assessing Officer (AO) treated the entire purchases as ingenuine based on the incriminating materials and statements from various parties. The Commissioner of Income Tax (Appeals) [CIT(A)] restricted the gross profit addition to 6%, considering it as the profit embedded in the value of disputed purchases. The tribunal found that the corresponding sales made out of disputed purchases were not doubted by the Revenue. It directed the AO to estimate the profit element at 5% of disputed purchases, considering it fair and just in the given circumstances. Thus, the ground raised by the assessee was partly allowed, and the ground raised by the Revenue was dismissed. 3. Addition on Account of Unexplained Cash Credit under Section 68: The third issue involves the addition made on account of unexplained cash credit under Section 68 for A.Y. 2013-14 and A.Y. 2014-15. The assessee received investments from Bhadrawati Ispat & Energy Ltd. (BIEL), which were treated as unexplained cash credits by the AO. The AO argued that BIEL was a shell company controlled by the Vineet Mittal group and that the funds invested in the assessee company were unaccounted income routed through a maze of shell companies. The assessee provided extensive documentation to prove the genuineness of the transactions, including the identity and creditworthiness of BIEL. The CIT(A) observed that the AO had accepted that it was the unaccounted income of Vineet Mittal that flowed into BIEL and subsequently into the assessee company. The CIT(A) held that once it is accepted that the funds belong to Vineet Mittal, the addition could not be made in the hands of the assessee company. The CIT(A) found that the assessee had discharged its onus under Section 68 by providing all necessary documents, and the transactions between BIEL and the assessee company were genuine. The tribunal upheld the CIT(A)'s decision, noting that the substantive addition made in the hands of BIEL was deleted by the tribunal on a technical ground (assessment framed on a non-existent entity) and not on merits. Therefore, the protective addition in the hands of the assessee company was not warranted. The tribunal dismissed the Revenue's ground for both A.Y. 2013-14 and A.Y. 2014-15. Conclusion: - The assessee's appeal for A.Y. 2013-14 was partly allowed. - The Revenue's appeals for A.Y. 2013-14 and A.Y. 2014-15 were dismissed. The tribunal pronounced the order on 24/01/2023 by proper mentioning in the notice board.
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