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TMI Blog2025 (4) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act at total loss of Rs. 1,23,28,822/- on 27.03.2015. Later on, an information was received in case of the assessee from the Directorate of Investigation, New Delhi on 28.03.2017, regarding taking of accommodation entries amounting to Rs. 1,78,25,000/- from shell companies controlled by Jain Brothers. Notice under Section 148 of the Act was issued on 30.03.2017. Further notices under Section 142(1) of the Act were issued. In response to notices, Mr. P.K. Katyal and Mr. Jai Shukla, CA/ARs of the assessee attended the proceedings and filed details. On completion of proceedings, additions of Rs. 1,78,25,000/- and Rs. 5,85,67,419/- vide order dated 29.12.2017 were made by the ld. AO. 3. Against the order dated 29.12.2017, the appellant/assessee preferred an appeal before Ld. CIT(A) which was partly allowed vide order dated 16.03.2023. 4. Being aggrieved, the appellant/assessee preferred present appeal with the following grounds: "1. That the order of the Ld. Assessing Officer is bad at law and on facts of the case. 2. That the addition made by the Ld. Assessing Officer and partly confirmed by CIT(Appeal) is based on presumption, suspicion, conjecture and surmises with no sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs and further an opportunity of being heard before the orders are passed in this appeal". 5. At the time of hearing, none appeared on behalf of the appellant/assessee on 16.11.2023, 25.01.2024, 13.03.2024, 15.07.2024, 29.08.2024, 01.10.2024, 08.01.2025 and today. 6. Learned Authorised Representative for the Revenue relied on orders of Ld. AO and Ld. CIT(A). 7. From examination of records, it is evident that Ld. CIT(A) in para nos. 5.5 to 5.14 and 6 has held as under: "5.5 Ground No. 2, 5, 8, 9, 10 and 15 are interrelated, challenging the addition of Rs. 1,78,25,000/- (alleged bogus purchase) made by the AO on account of purchases made from Macro IT System Pvt. Ltd. 5.6 The Ld. AO discussed the impugned addition on account of bogus purchase in paras 1, 2 and 3 as under: As per the information received from the Directorate of Investigation, New Delhi, it was seen that assessee M/s. Vayam Technologies Ltd. had taken accommodation entries from the Jain Brothers from the material evidence gathered during the search operations which is as follows: S.No. Name F. Y. 2011-12 1. M/s Vayam Technologies Ltd. Rs.1,78,25,000/- From the above, it is seen that during the financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was not offered for taxation, was added back in the income of the assessee company for A. Y. 2011-12. Further an amount of Rs. to entries from 7th May to 28th June are treated as pertaining to F. Y. 2011-12 and from the return of income filed, it is seen that same was not offered for taxation by the assessee company hence the sum of Rs. 7,75,26,641/- was escaped assessment within the meaning of clause c (i) of Explanation 2 below 2nd proviso appended section 147 of the IT Act. 2. Subsequently, notice u/s 148 of the IT Act was issued on 30.03.2017 by the AO i.e. Addl. CIT, Special Range-9, New Delhi. Further, notices u/s 142(1) were again issued in response to the notices, Mr. P.K. Katyal and Mr. Jai Shukla, CA/ARs of the assessee attended from time to time. Details called for have been filed and the case was discussed. A copy of the reasons recorded was duly provided to the assessee in accordance with judgment of M/s GKN Drive Shaft Ltd. 259 ITR (SC). 3. As per information received, a Search & Seizure operation under section 132 of the Income Tax Act 1961 was conducted on 17.12.2015, in the case of Sh. Anand Kumar Jain and Sh. Naresh Kumar Jain (the Jain Brothers) who are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tally software. This data contained details of the amounts rotated in cash and through banks and was being used by the Jain Brothers to keep track of the accommodation entries rotated by them through the various companies and firms controlled by them. The names of these companies/firms henceforth referred to as the shell companies of the Jain Brothers, have been given below:- S. No. Name ADDRESS DIRECTORS/Partner PAN NO. 1 MACRO SYSTEM LTD. IT 326, LGF SANT PVT NAGAR, EAST OF KAILASH, NEW DELHI ANIL KUMAR NITIN KUMAR CHADDA RAVINDER KUMAR AAECM7259E The investigation in respect of the documents and electronic data seized from the various premises revealed a number of bank statements and signed & unsigned cheque books. All these bank documents pertained to the shell companies of the Jain Brothers. Accordingly, information was called in respect of the bank accounts from various banks and branches which were identified form the seized materials. From the perusal of the details collected from the banks, it was found that most of these accounts were managed and controlled by Shri Anand kumar jain or Shri Naresh Kumar Jain. The complete details collected in this regard are en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... response to notice. 20.12.2017 To produce M/s Macro IT Systems for verification/examination Furnish any of bank account. 22.12.2017 To show cause why an addition of Rs. 1,78,25,000/- should not be made being unexplained. Information about the accommodation entry has been confronted to the assessee. 26.12.2017 As M/s Macro IT Systems does not exist at the address given. Asked to produce the party for examination. In its reply dated 22.12.2017 assessee company submitted following facts: "The reply of the assessee has been considered and is not tenable in the view of the discussions below. The bills filed by the assessee are incomplete as does not mention, the following significant facts:- Delivery Note Mode/terms of payment Suppliers Ref Other references (s) Buyer's order no. Dated Dispatch Document no. Dated Dispatched through Destination Terms of Delivery Despite repeated opportunity the assessee has been unable to produce the party for examination and other corroborative evidence to prove the genuineness of the transaction. It was clearly mentioned that M/s Marco Systems (P) Ltd. is controlled by Shri Naresh Kumar Jain, who was involved in prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars of the income and accordingly penalty proceedings u/s 271(1)(c) of the I.T. Act is initiated on this issue. (Addition: Rs. 1,78,25,000/-) 5.7 I have carefully perused the Grounds of Appeal, Statement of Fact, Assessment Order, Written Submission uploaded as well judicial pronouncements relied upon by the appellant. The factual matrix of the case is summarized as under: (i) That the case of the appellant was re-opened after issuing a notice u/s 148 of the Act based on the information received from the Director of Investigation, New Delhi that the appellant has taken an accommodation entry for F.Y. 2011-12 amounting to Rs. 1,78,25,000/- from M/s. Macro IT Systems Pvt. Ltd. as under. F Y Date Party Receipt 2011-12 03.03.2012 Macro IT Systems Pvt. Ltd. 26,25,000/- 2011-12 27.03.2012 Macro IT Systems Pvt. Ltd. 37,00,000/- 2011-12 28.03.2012 Macro IT Systems Pvt. Ltd. 1,15,00,000/- Total 1,78,25,000/- (ii) The above information was result of a search and seizure operation u/s 132 of the Act conducted in the premises of Sh. Anand Kumar Jain and Sh. Naresh Kumar Jain (the Jain brothers). (iii) It is the case of the A.O. that Jain Brothers were engaged in pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve company and thus inflated total purchases. A sum of Rs. 1,78,25,000/- is, therefore, added back to the income of the assessee company being unexplained 5.8 The additions/reopening of assessment in this case were made by the Assessing Officer on the basis of the information received from the Investigation Wing in respect of alleged involvement of Jain Brothers in providing the accommodation entries to various entities through control of shell companies. A.O. has further pointed out that the appellant received fund from the company M/s Macro IT Systems Pvt. Ltd. on various dates as tabulated above during the F.Y. 2011-12, which do not have any independent existence but was paper company being operated, controlled and used by Jain Brothers. But, on perusal of record it reflects that, in fact impugned addition of Rs. 1,78,25,000/- is not related to the fund received by the appellant but actually paid to M/s. Macro IT Systems Pvt. Ltd. during the year under consideration debited in the books of account of the appellant and found to be bogus purchase by the A.O. as appellant allegedly not able to prove the genuineness and identity of the above company. Appellant on the other hand re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egality of the disallowance. Further, it is set on record that the AO has also made independent inquiries and has arrived at conclusion that the parties are non-existent/ non-genuine. A.O, has also pointed out some defects in the purchase bill submitted by the appellant l.e. delivery note, suppliers reference, buyers order, dispatch documents, term of delivery etc. Further, A.O. has also mentioned that appellant was not able to produce the above party/seller for examination and that M/s Macro IT Systems Pvt. Ltd. is controlled by Shri Naresh Kumar Jain involved in providing the accommodation entries. The same have been confronted to the appellant too. In response, the appellant has failed to produce the parties for examination. Hence, the onus remained un-discharged on part of the appellant. Hence, there is no failure on part of the AO in terms of adherence to the principles of natural justice. 5.11 Appellant has given papers and documents like bank statement, VAT/ST challans etc. However, the shell companies are paper-based companies and all documents/papers are generated. Also it is trite law that transactions through banking channel are not sacrosanct. Hence, the arguments of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 12.5% to 15% on total bogus purchases. The sum and substances of ratios laid down by the courts and Tribunals is that in the case of bogus purchases only profit element embedded in such purchases is to be taxed but not total bogus purchases. Therefore, in view of the above judicial decisions of the Hon'ble Gujarat High Court as well as ITAT, only the fair profit ratio should be added back to the income of the appellant. 5.14 Considering the totality of the peculiar facts and circumstances of the instant case and respectfully following the above judicial pronouncements, a fair estimation of the disallowance of 12.5% of unverified alleged bogus purchase of Rs. 1,78,25,000/- from M/s Macro IT Systems Pvt. Ltd. as mentioned above under the facts and circumstances of the case, in my opinion, will meet the ends of justice. Therefore, the disallowance in respect of alleged bogus purchase of Rs. 1,78,25,000/- from M/s Macro IT Systems Pvt. Ltd. as discussed in preceding paras is restricted to 12.5% i.e. Rs. 22,28,125/-. Thus, ground no. 2, 5, 8, 9, 10 and 15 raised by the appellant challenging the addition of Rs. 1,78,25,000/- (alleged unexplained bogus purchase) is partly allowed. ..... 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