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TMI Blog2025 (2) TMI 1027X X X X Extracts X X X X X X X X Extracts X X X X ..... m the premises of Director of the assessee company during the course of search action at his residential premises. In his statement recorded u/s 132(4) of the Act, he has owned up the transactions as belonging to him in his personal capacity and the cheque was wrongly issued by the party in the name of Metarolls Ispat Pvt. Ltd. Therefore, once the person from whose residence the documents were seized and in his statement recorded u/s 132(4) of the Act he has owned up the transactions, therefore, the AO in our opinion was not justified in making the addition in the hands of the assessee company. Amount received as distribution of amounts received in the form of flat against the unaccounted transaction - HELD THAT:- Since we have directed the AO to adopt the profit rate of 5% on account of such bogus / untested purchases, therefore, we are of the considered opinion that adoption of the same percentage of profit i.e. 5% on such unaccounted sale of Rs. 17,42,000/- should be added to the total income of the assessee which in the instant case comes to Rs. 87,100/-. When the documents found containing certain transactions, the Ld. CIT(A) was not justified in deleting the addition statin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) in deleting the addition of Rs. 11,70,03,386/- made by the Assessing Officer on account of bogus purchases. 4. Facts of the case, in brief, are that the assessee is a company engaged in business of manufacturing of steel products such as MS Billets & TMT Bars. It filed its return of income on 26.12.2020 declaring total income of Rs. 19,48,06,480/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") on 24.12.2021 determining the total income of the assessee at Rs. 39,48,76,390/-. Subsequently, the case was selected for complete scrutiny and notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee, in response to which the AR of the assessee appeared before the Assessing Officer from time to time and filed the requisite details. In the meantime, a search and seizure action u/s 132 of the Act was carried out by the DDIT (Inv), Aurangabad on 23.09.2021 and the assessee was also covered in the search action. 5. During the course of assessment proceedings, the Assessing Officer noted that the DDIT (Inv) in his report has stated that as per information received from the DGGI, Zonal Unit, Pune about a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of Rs. 2,10,60,608/- from the total purchases of Rs. 13,80,63,994/-. 9. In appeal, the Ld. CIT(A) deleted the addition by observing as under: "7.2 I have gone through the submission of the appellant along with supporting documents submitted during the appellate proceedings as well as during the assessment proceedings before the Ld. AO. While disallowing the non genuine purchases, the Ld. AO has heavily relied on the report of GST department. DGGI had identified and declared some parties as Bogus Parties Based on the same, the DDIT (Inv) has reported that purchases made from M/s. Divya Enterprises, M/s. Khushi Traders and M/s Shri. Waheguru Global Mines Private Limited, etc amounting to Rs. 11,70,03,386/- are bogus purchases. The appellant has submitted relevant documents to substantiate that purchases made by the appellant from these parties are genuine. In support of the same, the appellant has submitted few bills, sample copies of Invoices prescribed under GST Act, lorry receipts along with RTO registration, copy of e-way bill, weighment slips, photographs of the vehicles arrived at factory gate and at weighment bridge etc. Apart from this, the appellant has also submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable. 7.4 The Ld. AO has also held that the alleged parties are not identified and are not found on given address and mere possession of purchase bills and other documents cannot be the basis for holding the purchases as genuine. In this regard, the appellant has contended that the appellant has submitted all relevant documents and supporting evidence in support of its claim that the purchases are genuine. The Ld. AO has not discussed as to what further documents and evidence are required to justify the genuineness of purchases. The AO has not been able to prove that the documents are fake or incorrect. The Ld. AO has verified the books of accounts and stock records and accepted the books of accounts and did not find any mistake or formed adverse opinion. Thus the contention of the Ld. AO is not correct. The appellant has countered all of the arguments/contentions raised by the Ld. AO with supporting documents and supporting case laws, thus the argument of the appellant is found to be correct and legally valid. 7.5 The Ld. AO has relied on the Hon'ble Supreme court's decision in the case of NK Proteins Ltd vs DCIT (2017) 292 CTR 354 SC and NR Paper and Boards Ltd. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition. He submitted that when the GST department has found the parties to be fraudsters and the above three parties neither responded to the notices issued by the Assessing Officer u/s 133(6) of the Act nor responded to the Summons issued u/s 131 of the Act, therefore, the Ld. CIT(A) was not justified in deleting the addition made by the Assessing Officer. He submitted that the Ld. CIT(A) did not take cognizance that the CGST department has conducted search and identified the suppliers as entry providers without actual supply of material. He submitted that the suppliers of material i.e. M/s. Khusi Traders to the assessee company is a non-filer of income tax return and M/s. Shri Waheguru Global Mines Pvt. Ltd. filed its return of income only for assessment year 2020-21 and the identity of the suppliers remained to be proved beyond doubt. He accordingly submitted that the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored. 12. The Ld. Counsel for the assessee on the other hand submitted that when the GST department has conducted search on the above three alleged suppliers it is proved that their identity is not in doubt. He submitted that it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of NK Proteins Ltd. vs. DCIT (supra) and the decision in the case of NR Paper & Boards Ltd. (supra). We find the Ld. CIT(A) deleted the addition, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. DR that when the above three parties were held to be non-genuine parties and since none of them responded to the notices issued u/s 133(6) of the Act nor appeared before the Assessing Officer in response to the Summons issued u/s 131, therefore, the purchases from the said parties remained unverified and therefore, the Ld. CIT(A) should not have deleted the entire addition. It is the submission of the Ld. Counsel for the assessee that when the sales are accepted, books of account are not rejected and the assessee has filed all the possible evidences such as lorry bills, invoices, e-way bills, etc., the Ld. CIT(A) was fully justified in deleting the addition made by the Assessing Officer. 15. On a pointed query raised by the Bench at the time of hearing as to what has happened in the preceding assessment years, the Ld. DR filed the assessment orders for assessment years 2016-17 to 2019-20 where the assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Agrawal 19,34,625 3,48,234 22,82,859 2 M/s. Laxmi Enterprises, Prop. Rekha Deepak Agarwal 1,16,71,205 21,00,817 1,37,72,022 3 M/s. Pawan Enterprises Prop. Ramswaroop Agarwal 1,82,51,360 32,85,245 2,15,36,605 4 M/s. Divya Enterprises Prop. Sagar Suraj Agrawal 9,79,32,384 1,76,27,829 11,55,60,213 5 M/s. Khushi Traders Prop. Babusha Kasbe 2,52,47,771 45,44,599 2,97,92,370 6 Raja Cement House 1,99,46,143 35,90,308 2,35,36,451 Total 17,49,83,488 3,14,97,032 20,64,80,520 19. However, we find the Assessing Officer in the impugned assessment order, has made the entire addition of bogus / untested purchases and these orders of the Assessing Officer passed u/s 143(3) / 147 were passed after the order of the Ld. CIT(A). Although the assessee in the instant case has filed various details such as lorry bills, invoices, e-way bills, etc. the fact remains that such parties neither responded to notices issued u/s 133(6) nor appeared before the Assessing Officer in response to the Summons issued u/s 131 of the Act. At the same time, it is also an admitted fact that the sales of the assessee have not been disputed and the books of account have also not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the entities mentioned in Column No.6 and for security purpose the entities mentioned in Column No.6 had issued cheque in favour of entities mentioned in Column No.7. During the course of search action statement of Shri Ashish J Bhala was recorded u/s 132(4) on 24.09.2021. In his statement he had accepted that the above transactions pertain to him and his family members. He had further admitted that they had provided unsecured loans to third parties and third parties had issued postdated cheques for repayment of loan. The Assessing Officer therefore asked the assessee vide notice u/s 142(1) dated 17.09.2022 to explain as to whether the above mentioned transactions were recorded in the books of account or not and also to furnish the ledger account of the parties mentioned in Column No.6. After considering the submissions made by the assessee from time to time the Assessing Officer made addition of Rs. 14 lakh to the total income of the assessee by recording as under: "7.4. The assessee along with its submission furnished the copies of affidavits & agreements in respect of M/s Akshay Cotex & M/s Soham Motors Private Limited regarding cheques seized during the search action and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the income of assessee u/s 69A of the Act. Penalty proceedings u/s 274 RWS 271AAC (1) of the Act are initiated for addition of Rs. 14,00,000/-." 23. In appeal, the Ld. CIT(A) deleted the addition by observing as under: "8.2 On perusal of the submission and relevant documents produced before me, it is seen that the AO has made addition by invoking the provisions of section 69A of the Income Tax Act. 8.3 The additions made by the Ld. AO are based on the noting made by Shri Ashish Bhala on back side of the undated cheque and Ld. AO has assumed that the said cheque belongs to the appellant since the name of the appellant was written on the cheque. In the statement recorded on oath of Shri Ashish Bhala he had stated that the impugned transaction belongs to him in his personal capacity and the cheque was wrongly issued by the party in the name of the appellant. Thus, the impugned addition is deleted. This Ground of appeal raised by the appellant is hereby allowed." 24. Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal. 25. The Ld. DR strongly challenged the order of the Ld. CIT(A) in deleting the addition made by the Assessing Officer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en reproduced by the Ld. CIT(A) at page 32 of his order and which reads as under: "Appellant's Reply: The AO is erred in making an addition u/s 69A of the Act of Rs. 14,00,000/- on the assumption basis that appellant company has provided a cash loan based on the cheque seized during the search operation from the residential premises of one of the Director Mr. Ashish Bhala. During the course of search action at the residential premises of Shri Ashish Bhala, a director of MIPL the search teams has found and seized certain loose papers, documents and some unrealized cheque which were inventoried as Annexure-A. Item No. 2 of Annexure-A is a loose paper bundle containing total Pages from 1 to 29, these xerox copies/originals cheques and promissory notes. We hereby attaching the seized papers as "Annexure 7A" The appellant company has explained that said transaction belongs in the individual capacity of the director of the company Mr. Ashish Bhala. Also the cheque found during the search is undated cheque and used as rough paper. It is just paper jottings which is assumed by AO as cash loan provided by the appellant company to M/s Ujjwala Refinery Private Limited. Also it can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the grounds raised by the Revenue are dismissed. 30. In the result, the appeal filed by the Revenue is partly allowed. ITA No.933/PUN/2024 (A.Y.2021-22) 31. The grounds raised by the Revenue are as under: 1. Whether on the facts and in the circumstances of the case and in law, the Ld CIT (A) has erred in deleting the addition of Rs. 1,46,46,419/- and Rs. 3,26,945/- made on account of bogus purchase, ignoring the facts that the supplier of goods has not confirmed the sale and movement of goods delivered to assessee company in response to notice issued u/s 133(6) to these suppliers. 2. Whether on the facts and in the circumstances of the case and in law, the Ld CIT (A) has erred in not taking cognizance that CGST department had conducted search and identified the suppliers as entry providers without actual supply of material. 3. Whether on the facts and in the circumstances of the case and in law, the Ld CIT (A) while deleting the addition of Rs. 1,46,46,419/- and Rs. 3,26,945/ has erred in ignoring the fact that the DDIT (Inv.), Unit-IV(1), Thane in response to commission issued u/s 131(d) of the IT Act has conducted enquiry and reported that the suppliers of material i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t against the unaccounted transaction amounting to Rs. 17,42,770/- should not be added to the total income of the assessee. The relevant para of the show cause notice reads as under: "7. Vide para No 4 of the show cause notice dated 24.12.2022 the assessee was requested that why the amount received as distribution of amounts received in the form of flat against the unaccounted transaction amounting to Rs. 17,42,770/- should not be added to the total income. The relevant para of the show cause notice is reproduced as under: Vide notice u/s 142(1) dated 21.10.2022, vide question no 35 it was asked to explain the contents of loose paper bundle no.1 seized from the premises of Shri Ramesh Gopikishan Mundra. In the reply dated 21.11.2022 it was requested to provide relevant seized documents. The relevant seized documents are already handed over to your authorized representative. For the conveyance again the copy of these paper is enclosed herewith. From this transaction it is seen that the account of Shri Gautam munots is settled for Rs. 61,00,000/-. In this paper amount of Rs. 61,00,000/- is distributed to Rajuri Group 19.1662, Icon Group 17.4277, Meta Group, 17.4277, SSM 5.5754 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies and individuals mentioned on the paper. It is seen that instead of paying money against steel supplier the flats and some money is being received by the persons. It is seen that the unaccounted sale is made by Metaroll Ispat Pvt. Ltd also therefore the amount is receivable to it. It is also mentioned in the seized paper that the flats are to be registered in the name of companies so as to save stamp duty. The distribution of date receivable is mentioned in detail and meticulously. Percentage of distribution is also mentioned. The claim that the amount of Rs. 17,42,770/- is being received against the capital of Rs. 61 Lakhs invested by Shri D.B. Soni in the Kuber Laxmi Properties is an after thought. No person will relinquish the share capital of 61 Lakhs against the sum of Rs. 17.42 Lakhs. Moreover it is seen that the firm has huge land having substantial value. Thus the claim that paper relates to the relinquishment of share of firm is not backed by any evidence and will be rejected herewith. Moreover the account of Gautam Munot is settled also. Thus it is seen that the assessee has supplied steel of Rs. 17.42 Lakhs. During the assessment year under consideration the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en submissions which were filed before the Ld. CIT(A): "Appellant's Reply: a. The aforesaid addition of Rs. 17,42,770/- has been made by the Learned AO on the basis of presumption and surmises. During the search action, no corroborative or incriminating documents were found which conclusively proves that the appellant has supplied the steel of Rs. 61 Lakhs (from which Rs. 17,42,770/- is the share of the appellant) which is not accounted for in the books of accounts. b. It is pertinent to mention here that no details of flat which has been alleged to be received by the appellant has been found during the course of search proceedings such as the flat number, the address of the flat, copy of the registered deed/agreement or the date on which deed/agreement is registered. c. The AO contended that the steel has been supplied to the Kuberlaxmi properties and same has not been recorded in the books of accounts of the appellant. It is pertinent to mention that no evidence has been found during the search action regarding the sale of steel by appellant. Hence this contention of AO is baseless. d. The Ld. AO relied on the reply to Q.10 of the oath statement of Mr. Dwarkaprasad Soni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of such bogus / untested purchases on the basis of the order for the preceding four years which were reopened u/s 147 of the Act on the very same issue. Since it is held that the entire purchases cannot be added to the total income of the assessee and only a percentage of such purchases being the profit element embedded in it should be added, therefore, following the similar corollary, the entire amount of Rs. 17,42,000/- in our opinion cannot be added and only the profit element embedded in such sale should be added to the total income of the assessee. Since we have directed the Assessing Officer to adopt the profit rate of 5% on account of such bogus / untested purchases, therefore, we are of the considered opinion that adoption of the same percentage of profit i.e. 5% on such unaccounted sale of Rs. 17,42,000/- should be added to the total income of the assessee which in the instant case comes to Rs. 87,100/-. When the documents found containing certain transactions, the Ld. CIT(A) was not justified in deleting the addition stating that due to lack of evidence and in absence of any corroborative evidence addition is not sustainable. In this view of the matter, we set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the AO is not sustainable. In the considered view the addition cannot be sustained as it is based on the messages without any corroborative evidences and underlined transactions related to the appellant. Considering the facts of the case, the addition made by the AO is deleted in the absence of any evidence Grounds no. 3 of the appeal is, therefore, allowed." 46. Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal. 47. The Ld. DR strongly challenged the order of the Ld. CIT(A) in deleting the addition. He submitted that the seized data contains two entries i.e. 6kg and 7kg being cash paid to one Vikas Industries. The Assessing Officer while making the addition has given justifiable reasons for making such addition, therefore, the Ld. CIT(A) was not justified in deleting the addition. 48. The Ld. Counsel for the assessee on the other hand drew the attention of the Bench to the assessee's reply which reads as under: "Appellants Reply: During the course of search proceedings statement of one of the Directors of the Company Shri Ashish Bhala was recorded under section 132(4) of the Income-tax Act, 1961 on dated 24th and 25th of Septe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the transactions never materialized and no corroborative material was brought on record. It is the submission of the Ld. DR that when Shri Ashish Bhala in his initial statement recorded u/s 132(4) of the Act has categorically admitted the payment of cash of Rs. 6 lakh and Rs. 7 lakh both totaling to Rs. 13 lakh, the Ld. CIT(A) is not justified in deleting the addition merely on the basis of subsequent retraction and in absence of any corroborative material. It is the submission of the Ld. Counsel for the assessee that since the transactions never materialized, the Ld. CIT(A) was justified in deleting the addition in absence of corroborative material and the subsequent retraction of Shri Ashish Bhala by filing the affidavit before the DDIT(Inv) immediately after the search. 51. A perusal of the seized documents shows that two entries were found where it is mentioned as 6kg and 7kg. Although the Assessing Officer has taken such entries as Rs. 6 lakh and Rs. 7 lakh, the assessee in its clarification has mentioned the same to be of Rs. 6,000/- and Rs. 7,000/- respectively. It is also not understood as to why the same should not be read as Rs. 60,000/- and Rs. 70,000/- or Rs. 6 lakh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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