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TMI Blog2018 (12) TMI 1252X X X X Extracts X X X X X X X X Extracts X X X X ..... irmity in the order of the CIT(A) deleting the addition from the hands of the assessee and directing the Assessing Officer to make the addition in the hands of the share holders by following the decision of CIT Vs. Ankitech Private Limited (2011 (5) TMI 325 - DELHI HIGH COURT) which has been upheld by Hon’ble Supreme Court in the case of CIT Vs. Madhur Housing Development Company [2017 (10) TMI 1279 - SUPREME COURT OF INDIA] - decided against revenue. Addition on account of inflated purchases - Held that:- The entire addition by disallowing of 40% of the purchases in our opinion is not justified when the books of account are not rejected. We find the Hon’ble Gujarat High Court in the case of Yunus Haji Fazawala Vs. CIT [2016 (2) TMI 1204 - GUJARAT HIGH COURT] has held that action of the Assessing Officer in disallowing 25% of purchases by doubting its genuiness without rejecting the books of account cannot be sustained. The order of the Tribunal confirming the disallowance was accordingly reversed. Since in the instant case also the books of account are not rejected, therefore, action of the CIT(A) in deleting such addition is justified. Further we find merit in the findings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals, therefore, these were heard together and are being disposed of by this common order. 2. The facts of the case, in brief are that the assessee M/s. Forum Sales (P) Ltd. is engaged in providing corporate gifting solutions to various companies. Search & seizure and survey operations under section 132/133A of the Income Tax Act, 1961 were conducted on 15.02.2014 and subsequent dates in the case of the assessee alongwith other cases of the AMQ Group at various residential & business premises. In response to notice u/s 153 A of the Act, the assessee filed the return of income of ₹ 75,88,078/- on 24.07.2015 for A. Y. 2013-14. Similarly for A. Y. 2014-15 the assessee filed return of income on 30.11.2014 disclosing total income of ₹ 66,53,882/-. On the basis of the material seized during the course of search and on the basis of the submissions made by the assessee, the Assessing Officer completed the assessment determining the total income at ₹ 74,33,6920/-for A.Y. 2013-14 and ₹ 11,11,66,320/- for A. Y.2014-15. The assessee filed appeal before the CIT(A) who gave part relief to the assessee. Aggrieved with such part relief, the assessee and the Revenue are in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the facts of the issue and found that the AO has made the disallowances only on the basis that only copy of ledger accounts were provided by appellant to him but failed to provide bills/vouchers and books of account for these expenses. On the other hand, the appellant has submitted that vide letter dated 21.12.2016, it submitted necessary details/explanation/ledger accounts of all the expenses. It is further submitted that all the expenses are genuine and reasonable and the AO has failed to find any defect in the claim of these expenses. However, the perusal of the letter dated 09.12.2016 of AO and its reply dated 21.12.2016 in regards to the details of aforesaid expenses, reveals that the appellant has filed the details of expenses in the form of ledger accounts and the AO also has not raised any further query to examine the genuineness of these expenses but disallowed part of the expenses on the ad-hoc basis. He failed to give any specific remarks in respect of any defect or shortcoming in the maintenance of details or bills/vouchers by the appellant. He has also failed to raise any doubt on the genuineness of the books of account which are duly audited by the auditor. In abse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the assessee, the Assessing Officer made addition of ₹ 6,43,198/- to the total income of the assessee u/s 2 (22) (e) of the I. T. Act, 1961. 12. Before CIT(A) it was argued that the Assessing Officer during the course of assessment proceedings has not issued any show cause notice for the alleged addition made u/s 2 (22) (e) of the I. T. Act. It was argued that the maximum balance outstanding during the year in case of M/s. Juneja Marketing was ₹ 4,77,837/- whereas the Assessing Officer has made the addition of ₹ 6,43,198/-. The Assessing Officer has not properly appreciated the facts of the case and made the addition. Therefore, the same is liable to be deleted. 13. Based on the arguments advanced by the assessee, the Ld. CIT(A) held that the receipt of ₹ 6,43,198/- from M/s. Juneja Marketing Private Limited and ₹ 51,72,955/- from AMQ Agro India Private Limited cannot be treated as deemed dividend u/s 2 (22) (e) of the I. T. Act in the hands of the assessee. The relevant portion of the CIT(A) reads as under :- 16.2 "I have considered the facts of the issue, basis of additions made by AO and submissions of appellant. As can be seen from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2015] 63 taxmann.com 97 (Madras) / [2015] 235 Taxman 279 (Madras) 8. Shashi Pal Agarwal Vs. CIT [2015] 54 taxmann.com 289 (Allahabad)/[2015] 229 Taxman 307 (Allahabad) / [2015] 370 ITR 720 (Allahabad) 9. Star Chemical (P.) Ltd. Vs CIT [72 Taxman 279, 203 ITR 11, 114 CTR 185] 10. CIT Vs. Sunil Chopra [ 2011] 12 taxmann.com 496 (Delhi)/[2011] Taxmann 316 (Delhi)/[2-11] 242 CTR 498 (Delhi). 11. M. Amareswara Reassessment order V. Dy. CIT [157 ITD 657 / 136 DTR 153 /178 TTJ 700] 16. The Ld. Counsel for the assessee on the other hand strongly relied on the order of the CIT(A). 17. We have considered the rival arguments made by both the sides and perused the material available on record. We do not find any infirmity in the order of the CIT(A) deleting the addition from the hands of the assessee and directing the Assessing Officer to make the addition in the hands of the share holders by following the decision of the jurisdictional High Court in the case of CIT Vs. Ankitech Private Limited (supra) which has been upheld by Hon'ble Supreme Court in the case of CIT Vs. Madhur Housing Development Company. Although the Ld. DR relied on various decisions, however, these decisions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the case of Gujarat High Court in the case of Yunus Haji Ibrahim Fazawala Vs. CIT 70 taxmann.com 93 (Guj.). was relied upon where it was held that the action of the assessing officer in disallowing 25% of purchases by doubting its genuineness without rejecting books of accounts cannot be sustained. The order of the Tribunal confirming the disallowance was reversed on the ground of perversity. 20.1 It was is submitted that the appellant during the course of assessment proceedings vide its reply letter dated 21.12.2016 has submitted copy of ledger accounts of all the parties along with the name and address of the creditors from whom purchases are being made. From the perusal of the same the genuineness and reasonableness of the purchases made by the appellant could be ascertained but the assessing officer failed to do so before making the alleged additions, in the absence of which additions made by the assessing officer are not justified and are liable to be deleted. The assessee filed the year wise details showing purchases made during the year, sales made during the year , gross profit, % of gross profit, expenses incurred during the year and profits made during the year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus even if all the purchases are treated on the same pattern, the source of these purchases are explained, being received from the purchaser party. Moreover, the appellant has failed to find any defect in the audited books of account of appellant and without rejecting the books of account, such disallowance of purchases is not justified. As shown by appellant in its submissions that net profit of 4.96% and 3.51% has been shown in A.Y. 2013-14 and A.Y. 2014-15 respectively but after making the disallowance as per AO, these profits would reach to 37.92% and 56.69%, which is illogical and absurd. Moreover, as discussed above, the profit element in respect of these transactions have already being included while returning back the money in cash to the purchaser parties and computed separately, making addition again on these transactions is not justified. In view of this, I hold that AO has wrongly made the additions of ₹ 5,00,10,163/- and ₹ 9,30,49,922/- in A.Y. 2013-14 and A.Y. 2014-15 respectively. The grounds taken by appellant in this regard are allowed." 22. Aggrieved with such order of the CIT(A), the revenue is in appeal before the Tribunal. 23. The Ld. DR strongl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above ₹ 2,00,000/- has been made during the AY2008-09 to 2014-15. In this regard copy of ledger account of parties from purchase above ₹ 2,00,000/- has been made during the AY 2008-09 to AY 2014-15 is enclosed ' Assessee was also asked through notice u/s 142(1) of the IT Act, 1961 dated 09.12.2006 to furnish name and address of sundry creditors and confirmation from sundry creditors above 1 Lakh. In response to this assessee filed its reply on 21.12.2016, which contains only purchase amount, name and address of party. Not a single confirmation or any bills/ vouchers or bank accounts in respect of purchase claimed filed by the assessee company." 25. We find although the Assessing Officer was having complete address of the parties, however, he did not bother to call for any information from the said parties if he had some doubts. The entire addition by disallowing of 40% of the purchases in our opinion is not justified when the books of account are not rejected. We find the Hon'ble Gujarat High Court in the case of Yunus Haji Fazawala Vs. CIT (supra) has held that action of the Assessing Officer in disallowing 25% of purchases by doubting its genuiness without reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "The Ld. Commissioner of Income Tax (Appeals) has erred in law and on the facts in deleting the protective addition of ₹ 1,00,000/- on account of cash and seized." 34. The facts of the case, in brief, are that during the assessment proceedings the Assessing Officer observed that during the search proceedings, cash of ₹ 14,50,000/- was found to which the assessee company failed to explain the source of the said cash. As per Assessing Officer, out of this cash, the addition of ₹ 13,50,000/- has already been made vide order u/s 143 (3) of the I.T. Act dated 31.03.2016 for A.Y. 2014-15 in the hands of Mr. Dinesh Kumar on protective basis and in the hands of Mr. Moin Akhtar Qureshi on substantive basis. He, therefore, made the addition of ₹ 1,00,000/- in the hands of assessee on protective basis and the same amount on substantive basis in the hands of Mr. Moin Akhtar Qureshi. 35. Before the CIT(A) the assessee submitted that since the substantive additions of ₹ 14,50,000/- has already been made in the hands of Mr. Moin Akhtar Qureshi in his Assessment order passed on dated 17.08.2017for the AY 2014-15 and protective addition of ₹ 13,50,000/- has alr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f alleged seized document, the addition should be made by calculating estimated profit on the transaction reflected in the seized material above and not on the entire sales made to M/s Jagatjit Industires ltd during the assessment year under appeal. 2.3 That the CIT (A) has erred in not adjucating the issue of reducing the element of percentage of profits already disclosed in the regular books of account out of the additions sustained of ₹ 83,85,628/- in the absence of which the net addition sustained in the hands of the appellant can not be ascertained. 3. That on the facts and circumstances of the case and in law the CIT (A) was not justified in upholding the action of AO in making an addition of ₹ 54,80,758/- by estimating profit on the purchases made by the appellant during the relevant assessment year from M/s Bajrang Traders, M/s Gurunanak Traders on the basis of seized document Annexure A-2/ party D-l page No.90, 109 & 108, which pertain to AY 2014-15 and not AY 2013-14. 3.1 That the Ld. CIT (A) erred in holding that entire purchases made from M/s Bajrang Trades & M/s Gurunanak Traders to M/s Jagatjit Industries ltd during the year was in the nature of bogu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hearing. 38. In ITA No. 2471/Del/2018, the ground No. 1 and 4 being general in nature are dismissed. Similarly in ITA No. 2471/Del/2018 ground No. 1 and 3 being general in nature, therefore dismissed. 39. So far as the other grounds are concerned, the facts of the case, in brief, are that the Assessing Officer on the basis of the documents found and seized during the search proceedings observed that the assessee has received cheques of ₹ 18,93,528/- from M/s. Jagjit Industries Ltd on account of sales and out of that, ₹ 18,32,722/- was transferred to M/s. Hari Mohan Enterprises on account of purchases. Since these were financial transactions without making any actual purchase of goods, M/s. Hari Mohan Enterprises, after deducting the commission @2% amounting to ₹ 36,650/-, returned back the balance amount of ₹ 17,96,072/- to the assessee. Assessee further transferred this cash amount back to M/s Jagatjit Industries Ltd. and on this transaction, it earned profit of ₹ 1,35,578/- (7.88%) and out of which, profit of ₹ 60,806/- was received in cheque which has been shown in the books of account and balance ₹ 74,772/- in cash which remained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, basis of additions made by AO and submissions of appellant. As can be seen from the transactions entered into as per the documents seized during the search proceedings, there is a certain pattern of receiving the cheque amounts from one party in the name of sales, transferring it to other party in the name of purchases and receiving it back after deduction of commission @2% or 2.5% and returning back the cash to the first party which had issued cheques, after deducting own commission in the form of profit. The appellant also has admitted this modus operandi in its submissions in respect of all the parties as mentioned above. The appellant has even offered the undisclosed income of ₹ 8,89,545/- on the transactions entered into with M/s Jagatjit Industries Ltd. and M/s Hari Mohan Enterprises and ₹ 5,24,012/- in respect of transactions made with M/s Jagatjit Industries Ltd. and M/s Bajrang Traders and M/s Guru Nanak Traders. However, the appellant has worked out the profit to be offered for taxation only on the basis of limited transactions reflected from the seized documents. He forgot that there are much more transactions with the same parties of the same nature which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The Assessing Officer cannot estimate the unaccounted receipts for all transactions with JIL in one assessment year for other assessment years based on isolated instance of 3 seized documents reflecting transactions of meagre value without any cogent material available for the other transactions with the same party for same and different assessment years and without any statement/deposition of any of the office bearers of the assessee company that it had entered into similar transactions. In the absence of such findings, additions made based on the estimation of undisclosed income for entire sales made to JIL is required to be deleted. 43. He submitted that none of the lower authorities have conducted any enquiries from the party M/s Jagatjit Industries Ltd. (JIL) to whom sales have been made to the tune of ₹ 9,74,79,927/- out of total sales of ₹ 14,28,98,332/- during A.Y. 2013-14 and ₹ 9,51,66,616/- out of total sales of ₹ 18,26,67,336/- during A.Y. 2014-15 for verifying the genuineness of sales made by the appellant company to JIL. 44. He argued that no enquiries have been made by the lower authorities from the parties M/s Harimohan Enterprises (purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed in these transactions before estimating the unaccounted profit on these transactions. Although the Ld. CIT(A) considered the fact that there is an element of disclosed profit, however the percentage of profit/ amount of profit has not been ascertained. In the absence of the same the net addition to be sustained on the basis of method of computation adopted in the assessment order cannot be ascertained. 48. He submitted that even if it is accepted that the above referred seized documents represent earning of income by receiving accommodation purchase bill and in turn raising an accommodation sale bill on M/s Jagatjit Industries Ltd., purchases cannot be treated as bogus on estimate basis. He submitted that corresponding to every purchase bill there is a sale bill. Therefore, if purchases recorded in the books is treated as bogus corresponding sales will also have to be reduced. 49. The Ld. Counsel for the assessee submitted that in case a presumption is drawn that certain transactions entered into with Jagatjit Ind. Ltd are of similar nature for which no documents were seized then an estimate will have to be made for quantifying the volume of such transactions. In the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of sales made to M/s. Jagjit Industries. It is the submission of the Ld. Counsel for the assessee that the seized documents pertain to A.Y. 2014-15 and therefore, no addition could have been made on account those seized documents in A. Y. 2013-14 in absence of any incriminating material. So far as assessment year 2014-15 is concerned, he submitted that the addition has to be restricted to seized the document only and no extrapolation is called for especially when no further enquiry was conducted by the Assessing Officer from the parties mentioned in the seized documents. We find some force in the arguments advanced by the Ld. Counsel for the assessee. When the assessee was making regular transaction with M/s. Jajit Industries, and making purchases from M/s. Hari Mohan Enterprises, M/s. Bajrang Traders and M/s Gurunanak Traders. The Assessing Officer should have called for details from the said parties and should have verified the transactions, if any, over and above the figures mentioned in the seized documents. In our opinion the Assessing Officer cannot estimate the unaccounted purchase and sale for assessment year 2013- 14 based on the material found in the search proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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