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TMI Blog2025 (4) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... rprises Group of cases and the search warrant was in the name of Shri Anand Prakash. Notice u/s 153A was issued to the assessee who has filed return on 30.07.2020 declaring income of Rs. 32,23,430/- as was filed u/s 139 of the Act. The assessee is in the business of trading of iron and steel in the name and style of M/s National Steel Suppliers. During the assessment proceedings, various additions were made and certain additions were sustained by the ld.CIT(A) for which the assessee is not in appeal and certain additions were deleted for which the Revenue is in appeal. The Cross Objections have also been filed by the assessee. For convenience, the grounds are reproduced below:- 2.1 Grounds of appeal of the Assessee: "1. Whether on facts and circumstances of the case and in law, the Ld. CIT(A)-3, Noida has erred in deleting the addition of Rs. 38,50,000/- made u/s 68 of the Act on account of unsecured loan received by the assessee without considering the facts that the assessee has mismanaged his loan received and repayments made and has also failed to offer proper explanation with regard to the loans shown in his balance sheet, hence, the creditworthiness of lender and genuinene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its. (iii) That in the absence of any dispute with regard to the correctness of trading results and there being no adverse material or documents on record to dispute the genuineness of sales, purchases and stock, the rejection of books of account merely on the allegation of bogus purchase is arbitrary and wholly unjustified. 2. That even otherwise, the ld. CIT(A) was not justified in estimating gross profit @3.16% without any cogent reasoning and same is arbitrary and highly excessive. 3(i) That on the facts and circumstances of the case, the Ld. CIT(A) has grossly erred in upholding addition of Rs. 17,86,210/- u/s 69C on the alleged ground of commission @1% on the bogus purchases even though the same is purely on hypothetical basis and not sustainable. (ii) That in any case, once the books of account were rejected u/s 145 and profit was estimated, there remains no ground or basis for making separate addition u/s 69C as the same is of duplicate nature and already included in the income so estimated. 4. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in upholding the validity of the assessment order u/s 143(3)/153A even though the same was passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of cost and denying benefit of indexation by computing short term capital gain as against long term capital loss computed by the assessee in respect of sale of property. The brief background is that in the year under consideration, the assessee sold two properties and claimed exemption u/s 54 of the Act in respect of net long term capital gain. However, the assessee asserts to have inadvertently claimed short term capital loss of Rs. 16,62,658/-in respect of property at A1/1, Loha Mandi, Ghaziabad as against long term capital loss. The issue falls for consideration is regarding sale of property at A1/1, Loha Mandi, Ghaziabad. The AO while disregarding the plea of correct computation of capital gain, instead computed short term capital gain (STCG) at Rs. 38,02,980/- as against returned Short term capital loss (STCL) of Rs. 16,62,658/- by disallowing part claim of cost of acquisition. Hence, the conversion of STCL to STCG resulted in net addition of STCG of Rs. 54,65,640/- (Rs. 38,02,980 + Rs. 16,62,658). Further, the AO restricted the claim of exemption u/s 54 to Rs. 1 crore as against Rs. 2.70 crores thereby assessing net taxable capital gain at Rs. 2,18,40,380/- which consisted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d party search which ld. AR has claimed to be unsubstantiated as the assessee had filed complete details and documents in support of genuineness of purchases and its subsequent sales. Ld. AR submitted that the assessing officer without disputing the correctness of the documentary evidences and without pointing out any infirmity or deficiency in the audited books of account, rejected the same u/s 145(3) of the Act on arbitrary basis. The CIT(A) upheld the rejection of books of account u/s 145(3) of the Act which now are alleged to be general and vague finding. However, as the CIT(A) restricted the rate of gross profit @3.16% as against 4% applied by the assessing officer the revenue is also aggrieved. 7. Ld. AR has submitted that as it is a case of search and no incriminating material has been found in support of any defect in the books of account. The ledger account of assessee in the books of M/s. Panna Lal& Co. relied upon by the assessing officer has been found during third party search and only contains recorded entries and as such the same is neither incriminating nor relevant in the proceeding's u/s 153A. It is also submitted that the reliance placed on the statement of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of lack of information and not on the basis that any discrepancy was found in the books of account to show that the same were not maintained in regular course of business. The AO has primarily relied the statements recorded during search operation and certain facts as had come up during pre-search inquiry to draw the conclusion that the assessee was indulging in manipulating the books of account by making bogus purchase/sales, under-invoicing, taking bogus advances in order to reduce its profits and to introduce their undisclosed income. In para 5.11, the AO has mentioned of the fact that a reply dated 24.04.2021 was filed explaining the nature of business of the assessee and the reasons for low GP. The copy of this reply dated 12.04.2021 is made available at pages 297 to 303 of the paper book and, further, the documents attached with this reply have been made available at pages 304 to 404 of the paper book. 7.1 We find that in its reply the assessee had given an account of the reasons for low GP and NP. A copy of capital account of Aditya Kumar Garg in the account of M/s Gorja Steel Processors was filed. The list of creditors giving their names, addresses, PANs and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a short cut of rejecting the books of accounts instead of showing due indulgence to the material before them and point specific instances of misreporting income or expenses in the books. 8. Thus, we are of the considered view that at one end the AO has failed to justify the rejection of books of account and on the other hand, the CIT(A) has failed to consider the relevant pleas of the assessee and to make an ad hoc assessment. The grounds No. 4 and 5 as raised deserves to be sustained." 9. Thus the allegation of bogus purchases, rejection of books of account and consequential addition based on estimation of gross profit to the extent as also sustained by the ld. CIT(A) deserve to be deleted. The ground is sustained. 10. The Ground No. 4 of the revenue's appeal and Cross Objection No. 3 filed by the assessee are regarding addition u/s 69C on ground of notional commission @1% on alleged bogus purchases. This ground is of consequential nature and as there is no case of any bogus purchase from M/s. Panna Lal & Co., the addition of commission u/s 69C being of notional nature too deserves to be deleted. 11. The Cross Objection No. 4 and 5 were not pressed. As a consequence of afores ..... X X X X Extracts X X X X X X X X Extracts X X X X
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