2023 (12) TMI 880 - AT - Income Tax

Bogus purchases - protective addition of 5% in hands of assessee - addition on account of alleged commission/brokerage as business income - HELD THAT - Tribunal in its decision in the case of Orient Craft Ltd. 2021 (10) TMI 154 - ITAT DELHI had held that purchases made by M/s. Orient Craft Ltd. from the assessee were genuine. Hence, protective addition in the hands of the assessee in all the assessment years under consideration here is not sustainable. As a sequel, the order of the ld. CIT (A) making addition of alleged commission/brokerage as business income in the hands of the assessee for all the assessment years cannot be sustained. Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction u/s 153C and recording of 'satisfaction'.
2. Addition of Rs. 89,36,421/- on account of alleged commission/brokerage.
3. Rejection of books of accounts u/s 145(3).
4. Charging of interest u/s 234B.

Summary:

1. Jurisdiction u/s 153C and recording of 'satisfaction':

The assessee contended that the Ld. CIT(A) erred in confirming the jurisdiction assumed by the AO u/s 153C, arguing that 'satisfaction' was not recorded by the AO of the searched person and no incriminating document was found. The Tribunal did not discuss this legal ground as the case was adjudicated on merits.

2. Addition of Rs. 89,36,421/- on account of alleged commission/brokerage:

The Ld. CIT(A) made a protective addition of 5% of sales booked in the name of M/s Orient Craft Ltd. by the appellant company, estimating commission/brokerage. However, the Tribunal noted that in the case of M/s Orient Craft Ltd., the ITAT had already deleted the substantive addition by establishing the genuineness of purchases from the assessee. Consequently, the protective addition in the hands of the assessee was deemed unsustainable.

3. Rejection of books of accounts u/s 145(3):

The AO had rejected the books of accounts of the assessee, alleging it to be a paper entity used for tax evasion. The Tribunal found that the ITAT had validated the genuineness of purchases in the case of M/s Orient Craft Ltd., thus nullifying the basis for rejecting the books of accounts of the assessee.

4. Charging of interest u/s 234B:

The Tribunal did not specifically address the issue of interest charged u/s 234B, as the primary grounds for addition were resolved in favor of the assessee.

Conclusion:

The Tribunal allowed all the appeals filed by the assessee, ruling that the protective addition of alleged commission/brokerage and the rejection of books of accounts were not sustainable, given the established genuineness of purchases in the related case of M/s Orient Craft Ltd.

Order pronounced in the open court on this 18th day of December, 2023.