2023 (9) TMI 370 - AT - Income Tax

Estimation of income - Disallowance of purchases - Assessee failed to establish the genuineness of the transaction - assessment passed u/s 143(3) r.w.s. 153C came to the conclusion that the assessee in collaboration with Shri Shirish C Shah brought the share capital through preferential allotment and invested the amount with ultimate beneficiaries in the share capital with huge share premium - assessee has failed to establish the genuineness of the transaction reflected in the profit and loss account and the assessee was engaged in the business of providing accommodation entries to various parties HELD THAT - In the present case, the assessee apart from placing reliance upon the invoices, Ledger account of the vendors, and stock register neither could produce confirmation from the parties from whom the purchase was made nor could produce the confirmation from parties to whom the sale has been made. We find that in the case of one of the companies, i.e. M/s Empower India Ltd., which is controlled by Shri Shirish C Shah, the AO vide order dated 22/03/2016 passed under section 143(3) r.w.s. 153C of the Act, forming part of the paper book, treated 1% of the total sales as the commission earned from the provision of accommodation entry in the similar facts and circumstances. Since the assessee is also found to be involved in the process of providing accommodation entries at the behest of Shri Shirish C Shah, we direct the AO to consider 1% of the total sales declared during the year as net commission in the hands of the assessee for providing accommodation entry. Accordingly, ground no. 3 raised in assessee s appeal is partly allowed.

Summary

Issues involved:
The appeal challenging an order passed under section 250 of the Income Tax Act, 1961 for the assessment year 2009-10.

Issue 1: Validity of assessment order under section 153C of the Act
The appellant contended that the assessment order passed under section 153C of the Act was not tenable as no search was conducted or requisition made in their case. The learned AR did not press this ground during the hearing.

Issue 2: Disallowance of purchases
The main issue raised in the appeal was the disallowance of purchases worth Rs. 6,87,64,162. The AO concluded that the assessee was involved in providing accommodation entries with another party. The CIT(A) upheld this decision, stating that the purchases were inflated through bogus accommodation entries. The appellant argued that they had proper documentation for the purchases and had sold the material purchased, but failed to provide confirmations from the parties involved. The Tribunal partially allowed the appeal, directing the AO to consider 1% of total sales as net commission for providing accommodation entry.

In conclusion, the Tribunal partially allowed the appeal, specifically addressing the issue of disallowance of purchases and directing the AO to calculate net commission for providing accommodation entry.