ITAT reduces disallowance of bogus purchases to 2%

Case Law Details

Case Name : R R Carwell Pvt. Ltd. Vs DCIT (ITAT Delhi)

Appeal Number : ITA Nos.9153, 9154, 9155, 9156, 9157 & 9158/Del./2019

Date of Judgement/Order : 11/02/2022

Related Assessment Year : 2012-13, 2013-14, 2014-15, 2015-16, 2016-17 & 2017-18

R R Carwell Pvt. Ltd. Vs DCIT (ITAT Delhi)

Disallowance of bogus purchases reduced to 2% when existence of some parties proved and payments were routed through bank

Facts- The assessee is engaged in the application/job-work of Auto Additives and Car care Products across various two-wheelers and four-wheelers authorized service centers. It filed its ROI on 25.09.2012 declaring income of Rs.58,04,170/-. The return was duly processed under section 143(1) determining the returned income.

During assessment proceedings, the assessee could not produce the principle officer/director of M/s White Collar Management Service Pvt. Ltd., the A.O. asked the assessee to explain as to why the amount of Rs.10,00,000/- received from M/s White Collar Management Service Pvt Ltd as an unsecured loan should not be treated as unaccounted/bogus and added back to its total income for the year under consideration.

The assessee has challenged the order of the CIT(A) confirming disallowance of Rs.1,05,98,837/- being 25% of the purchases amounting to Rs. 4,23,95,347/- by rejecting the books of accounts u/s 145(3) of the Act and directing the AO to restrict the disallowance to 20% in cases the parties are found to be in existence by Ward Inspector.

Conclusion- It is an admitted fact that the sales declared by the assessee have not been disturbed. The assessment order indicates that letters were served upon certain parties which proves their existence. The books of account were also audited and auditors have not given any adverse remarks. All the payments have been made through banking channels. The assessee had produced the stock register showing relevant entries of the items purchased and issued for consumption in job work and the items were tallying and no discrepancy in the stock was found at the time of survey. Under these circumstances, we are of the considered opinion that disallowance of 20% of the purchases appears to be on the higher side especially when some of the parties to whom letters were issued were served and the payments have been made through banking channel. Considering the totality of the peculiar facts and circumstances of the instant case, the disallowance of 2% of the total purchases under the facts and circumstances of the case, in our opinion, will meet the ends of justice. We hold and direct accordingly. The A.O. shall do the re-computation.

FULL TEXT OF THE ORDER OF ITAT DELHI

These batch of six appeals filed by the Assessee are directed against the common Order Dated 30.09.2019 of the Ld. CIT(A)-230, New Delhi, relating to the A.Ys. 20122013 to 2017-2018 respectively. Since identical grounds have been raised by the assessee in all these appeals, therefore, these were heard together and are being disposed of by this common order.

2. First, we take up ITA No.9153/Del/2019 for AY 2012-13 as the lead case.

2.1 Facts of the case, in brief, are that the assessee is a company incorporated on 07.02.201 and is engaged in application/job-work of Auto Additives and Car care Products across various two wheelers and tour wheelers authorized service centers. It filed its return of income on 25.09.2012 declaring income of Rs.58,04,170/-. The return was duly processed under section 143(1) determining at the returned income.

2.2. A search under section 132 of the Act was conducted on 28.02.2017 at the business premises of the assessee at various premises from where certain papers/ documents belonging to the assessee were found and seized. In response to notice under section 153A of the I.T. Act, 1961 the assessee filed its return of income on 26.07.2018 declaring income of Rs.58,04,170/-.

2.3. During the course of assessment proceedings, the A.O. noted that the assessee company has received an unsecured loan of Rs 10,00,000/- from M/s White Collar Management Service Pvt. Ltd., He asked the assessee to furnish ITR, bank statement highlighting the transaction and confirmed copy of ledger from White Collar Management Service Pvt Ltd for the A.Y. 2012-13 in order to prove the identification, genuineness and creditworthiness. He also asked the assessee to produce the principle officer of M/s White Collar Management Service Pvt. Ltd.

2.4. Since the assessee could not produce the principle officer/director of M/s White Collar Management Service Pvt. Ltd., the A.O. asked the assessee to explain as to why the amount of Rs.10,00,000/- received from M/s White Collar Management Service Pvt Ltd as unsecured loan should not be treated as unaccounted/bogus and added back to its total income for the year under consideration.

2.5. In response, the assessee submitted a reply dated 25.12.2018 which has been reproduced by the AO in the assessment order and which reads as under :

“As regard loan from While Collar Management services (P) Ltd. amounting Rs.10,00,000/-. In this regard, it is submitted that the detail submission has been given vide our reply dt. 07.12.2018 Point I, the unsecured loan of Rs .10,00,000/- was received from said party on dt. 01.05.2011 on interest. Confirmation from the said party along with copy of ITR, Bank statement of the assessee and that of party and Balance sheet has already been submittal vide our reply dt. 07.12.2018. The loan from said party has been repaid after 6 months on dt.13.12 2011 amounting Rs.10 Lakh vide Ch.No.049499 & paid interest through proper banking channel amounting Rs.55726/-, confirmation for repayment of loan. Bank Statement has already been submitted vide our reply dt. 07.12.2018 & form 16A for TDS deducted on interest is enclosed herewith. The said party is open for verification

Alternatively & without prejudice to above, it is humbly submitted that if any addition an this account has been made then assessee entitled to telescoping against addition made of Bogus purchases as undisclosed income of assessee. Further, submitted that if telescoping of income was not given than there will be double addition in as much as both the undisclosed income and the investment made out of such income are both brought to tax which was contrary to the basic principles of assessment.

The Assessee requests your goodself to provide us an opportunity of being heard in case you require further clarifications.”

2.6. However, the A.O. was not satisfied with the explanation given by the assessee. He noted that the abovementioned loan came from the company M/s White Collar Management Service Pvt. Ltd., which is controlled by Shri Hiamanshu Verma, who is an identified accommodation entry provider. Mayurika Management Service Private Limited (Formerly known as M/s White Collar Management Services Private Limited) is new name of the company.

27. He further noted that a search and seizure action was carried out on 13.04.2017 in the case of Mr. Himanshu Verma (Entry Operator) who is maintaining approx. 300 shell companies/concerns for providing accommodation entries in lieu of commission. During the course of search in the case of Mr. Himanshu Verma on 13.04.2017, statement on oath of Mr. Himanshu Verma was recorded under section 132(4) of Income Tax Act. 1961 and he was asked about his modus operandi for providing accommodation entries. He admitted that he provides bogus bills/entry of loans/capital to the beneficiaries and after rotating the amount received from the beneficiary in some of his bogus companies, he ultimately transfers the amount to its beneficiary.

2.8. The A.O. also referred to the statement of Mr. Shree Ram Yadav (dummy director) recorded under section 131(1A) wherein he admitted that he had been a dummy director in a number of bogus companies managed by Mr. Himanshu Verma. He further stated that he was getting Rs.10,000/- per month for being the director in these companies. He admitted that he had been made director by Mr. Himanshu Verma in various companies totaling to 20 in number.

2.9. In view of the above, the A.O. held that the identity, genuineness and creditworthiness of the company M/s While Collar Management Services Pvt, Ltd which advanced unsecured loan to the assessee company, could not be confirmed. The assessee company could not produce the above party which in itself is enough evidence to prove that the unsecured loans were received by the assessee company from bogus entity which do not carry out any business activity. Moreover, the lender company is already an identified bogus concern which is run by an accommodation entry provider Shri Himanshu Verma. Relying on the following decisions, the A.O. made addition of Rs.10,00,000/- under section 68 of the I.T. Act, 1961.

1. CIT vs., Nipun Builders & Developers (P ) Ltd.,

2. Nova Promoters & Finlease (P) Ltd.,

3. CIT vs., N R Portfolio Pvt. Ltd.,

2.10. The A.O. further noted from the ledger A/c of M/s White Collar Management Services Pvt. Ltd that the assessee has paid Rs.55,726/- as interest to M/s While Collar Management Services Pvt. Ltd on the loan of Rs.10,00,000/- received from the company. He asked the assessee to explain as to why the interest paid on the unsecured loan from M/s While Collar Management Services Pvt. Ltd not to be disallowed. Rejecting the explanation of the assessee, the A.O. made addition of Rs.55,726/- to the total income of the assessee.

2.11. The A.O. noted that during the course of search proceedings, various bills of PC Jewllers were seized from premise 17/6, Hanspal Industrial Complex. Mathura Road. Faridabad. On perusal of bills, it was found that the assessee company has purchased gold coins of an amount of Rs.4,25,975/-in cash. He asked the assessee to explain as to why such purchase of gold coin of Rs.4,25,925/-should not be considered as unaccounted expenditure and added back to total income of the assessee during the year.

2.12. It was explained by the assessee that the gold coins were purchased out of cash generated out of billing grey market purchases. Alternatively, it was requested for giving telescoping benefit.

2.13. However, the A.O. was not satisfied with the explanation given by the assessee. He noted that the assessee is itself accepting that the purchases were made out of cash generated and unaccounted in the books of accounts of the assessee. The assessee company failed to produce evidence regarding genuineness of the transaction. Moreover, the mode of transaction is cash. Further, the assessee could not tally this transaction with its books of account. Therefore, he made an addition of Rs.4,25,975/- as unexplained expenditure under section 69C of the I.T. Act, 1961.

2.14. During the course of assessment proceedings, the A.O. noted that the assessee company has shown purchases of Rs.5,34,76,626/- from the following parties during the year under consideration.

Party Name	Amount
Delite Trading Co.	18,82,671
Ganesh Enterprises	19,65,386
Hans Trading Co	52,47,430
India Sales Corporation	68,88,893
Jai Shiv Enterprises	20,07,523
Luxmi Lubricants	1,05,53,090
Narika Enterprises	63,32,048
Navyug Enterprises	27,71,646
Rama Enterprises	1,42,26,757
Shree Shyam Enterprises	16,11,182
Total Purchases	5,34,76,626

2.15. He noted that during the search proceedings original vouchers/ bills of various concerns at premise 17/6. Hanspal Industrial Complex, Mathura Road, Faridabad were found and seized. Purchase parties namely M/s Jai Shiv enterprise. Delite Trading Co, And Ganesh Enterprises are connected with Sh Dalip Kumar, who is an identified accommodation entry provider. Statement of Sh Dalip Kumar was recorded on oath on 10.11,2016 and 17.12.2016 in which he admitted that he is the sole proprietor of 18 concerns namely M/s Jai Shiv Enterprises and others. He further admitted that no business activities were carried out by these concerns, no sale/purchase of goods was made by these concerns. All the bank accounts of these concerns were used for providing bogus bills, accommodation entries to various beneficiaries and layering of funds. He also stated that the funds have been routed by using the bank accounts of various parties/concerns by some other persons like Sh. Ram Krishan Puri (connected with Delite trading Company. Ganesh Enterprises) and Sh. Subhash Gupta connected with Supreme Enterprises of Sh. Ajay Kumar (Proprietor). Thereafter statement of Sh. Ajay Kumar prop Supreme Enterprises was recorded on oath and he also admitted that his concern was not doing any actual business and bogus bill on the name of his concerns were provided by Sh. Subhash Gupta. Sh. Dalip and Sh, Ajay Kumar both have also admitted in their statements that they never issued any bills from the above mentioned concerns to any party. Moreover, the bank accounts of these concerns were operated by various persons who obtained signed copies of cheque books from Sh. Dalip Kumar against meager pocket money. Similarly Concerns India Sales Corporation. M/s Pace enterprises and M/s C.Z. International are also bogus concerns which are involved in providing accommodation entries. These firms are controlled by Sh Vikas Kumar. Statement of Shri Vikas kumar was recorded on oath on 06.072015 wherein he admitted that these entities were incorporated by Mr. Ishwar Chand Agggrawal. using his name and documents when he was working in kirana shop of Mr. Ishwar Chand Aggarwal. Sh. Vikas Kumar has admitted in his statement recorded on oath dated 08.11.2016 that no business activities were carried out by these firms, no sale/purchase of goods were made and the transactions occurred in the bank account of these firms were for only bogus billing and layering of funds.

2.16. The AO issued notice u/s 133(6) to various parties from whom the assessee has shown to have made purchases. However, all the notices except M/s India Sales Corporation were returned back unserved. The notice u/s 131 also could not be served by the Ward Inspector who was deputed to serve the same. He, therefore, asked the assessee to explain as to why the purchases made from the above parties amounting to Rs.5,34,76,626/- should not be treated as bogus and added to the total income of the assessee.

2.17. It was explained by the assessee that it had purchased the material from grey market. It has maintained stock register which tallies quantity wise and no discrepancy was found. Further, it had rendered services to the third parties. Actual stock was also found during the course of search and survey proceedings. It was submitted that no undisclosed asset or wealth relating to the assessee or any of the directors or family members were found. It was argued that the concession of Rs.18.5 cores made by the assessee during the search operation was wrongly treated as surrender of ingenuine purchases by the department. Relying on various decisions, it was argued that no addition is called for.

2.18. However, the AO was not satisfied with the arguments advanced by the assessee. He noted that the assessee itself has admitted that it has purchased the material from grey market. He was of the opinion that mere submitting the value of opening and closing stock of various financial years without any documentary evidence would not satisfy the claim of the assessee. He observed that notices u/s 133(6) were sent to some of the parties who took services of the assessee company on a test check basis. However, none of the said parties confirmed the exact amount of the material used by the assessee company for providing job work. So far as the argument of the assessee that stock was actually found during the search operation is concerned he noted that short stock of Rs.78,79,785/- was found during the course of search operation. He noted that the assessee failed to produce any documentary evidence in support of its claim that it has used all material as shown in its books of account for the job work/sale. The claim of the assessee that cash generated out of such bogus purchases is used for providing commission/ incentives is contradicting itself. As regard the submission of the assessee that no undisclosed assets or wealth was found is concerned, the AO noted that incriminating document in the form of cash loan of several crores were found during the course of search. He further noted that Mr. Jyoti Bist, Director of M/s R.R. Carwell (P) Ltd. in her statement recorded on oath had admitted that after making payment through banking channel to such bogus parties, after deducting commission, cash was received back from these parties. Rejecting the various explanations given by the assessee and relying on the decision of Hon’ble Gujarat High Court in the case of Vijay Protein Ltd. vs CIT, the AO disallowed an amount of Rs.1,33,69,157/- being 25% of such bogus purchase and added the same to the total income of the assessee. The AO noted that for getting accommodation bills, the assessee must have incurred expenses for arranging the same. He therefore made addition of Rs.2,94,121/- being 0.55% of Rs.5,34,76,626/- u/s 69C of the I.T. Act. 1961. The AO accordingly determined the total income of the assessee at Rs.2,08,99,150/-.

2.19. Similar additions for bogus purchases and commission were made in other years, the details of which are as under:-

Sl. No.	Assessment Year	Bogus Purchases	Commission
1	2013-14	1,37,29,109	3,02,040
2	2014-15	1,16,24,050	2,55,729
3	2015-16	93,33,960	2,05,347
4	2016-17	1,03,22,034	2,27,084
5	2017-18	1,05,98,837	2,33,174

3. Before the Ld. CIT(A), the assessee apart from challenging the addition on merit, challenged the validity of the assessment in absence of any incriminating material.

However, the Ld. CIT(A) was not satisfied with the argument against the validity of the assessment and rejected the same. So far as addition of Rs.10,00,000/-being loan from White Collar Management Services (P.) Ltd. is concerned, he upheld the same by observing as under:-

“6.1 Vide ground Nos. 4, 5, 6 and 7, the appellant has contested the action of the AO in terms of making the addition of Rs. 10,00,000/- u/s 68 by treating the loan of Rs.10,00,000/- received from M/s. White Collar Management Services Pvt. Ltd. (Now known as M/s. Mayurika Management Services Pvt. Ltd.) and disallowing the deduction of Rs. 55,726/- on account of interest on these loans.

6.2 The contention of the AR was that the loans were received through banking channels and were repaid. The TDS was deducted on the interest payment. The AR also stated that the AO has relied upon the statement of Sh. Himanshu Verma but Himanshu Verma only stated that he was providing bills for bogus sales and purchases. Sh. Himanshu Verma did not say that he was providing accommodation entries in form of loans. The AR also contended that the AO has relied upon statement of Shri Shree Ram Yadav as a director of M/s. White Collar Management Services Pvt. Ltd. (Now known as M/s. Mayurika Management Services Pvt. Ltd.). The AR produced data downloaded from Website of ROC to show that Sh. Shree Ram Yadav was never a director in case of M/s. White Collar Management Services Pvt. Ltd. (Now known as M/s. Mayurika Management Services Pvt. Ltd.). Therefore, the AR argued that Sh. Shree Ram Yadav was not a director at the time of taking this loan and hence, his statement cannot be relied upon to conclude that the loan was an accommodation entry. The AR also stated that he was not provided cross examination of the persons whose statements have been relied upon.

6.3 It is noticed that the data of directors provided by the AR did not reveal names of directors of this company after 16.08.2010. Also, it is seen that out of 7,20,000 shares of this company held in the name of M/s. G. Citylife Promoters Pvt. Ltd., 5,000 shares were transferred in name of Sh. Shree Ram Yadav, on 21.03.2016. Therefore, Sh. Shree Ram Yadav had a connection with this company. Moreover, it is a trite that onus is on the appellant to prove (by providing cogent evidence) identity and creditworthiness of the lender and genuineness of the transaction. Certainly, in the light of overwhelming evidence discussed by the AO, it is clear that the appellant was not able to discharge its onus.

6.4 Hon’ble Delhi HC in case of CIT Vs. N.R. Portfolio (P.) Ltd. [2012] 42 taxmann.com 339 (Delhi) has held,

“30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee’s knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them.”{ref. Para 30}

6.6 Hon’ble Delhi HC in case of CIT Vs. Nova Promoters & Finlease (P) Ltd. [2012] 18 taxmann.com 217 (Delhi) quoted from its earlier judgments as under,

“….there cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment as share capital must be firmly excoriated by the Revenue “{ref. Para 36}. This is also a case of pernicious practice of conversion of unaccounted money through the masquerade or channel of obtaining (bogus) loan.

Hon’ble Delhi HC in case of CIT Vs. Navodaya Castles (P.) Ltd. [2014] 50 taxmann.com 110 (Delhi) has held,

” Certificate of incorporation, PAN etc., are relevant for purpose of identification, but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine investor.” {ref. Para 14}.

6.8 Regarding, cross examination, the AR could not show as to when the cross examination was demanded at the assessment stage. Moreover, these statements were recorded during the official duty carried out by the Officers of the Income Tax Department who were not AO and there is no provision under their charter of official duties to allow cross examination to each and every person who can be adversely affected by any of such statements. Nor, it is practically possible for such Officers to allow cross examination to each and every person who can be adversely affected by any of such statements. It is a trite that rigors of the Evidence Act, 1872 are not applicable to Income Tax proceedings. Therefore, these statements are admissible evidence like any other official document. Of course, a cross examination of the officer who recorded any such statement can be allowed. However, the appellant never demanded such cross examination.

In view of above, it is seen that in the present case, the appellant has failed in the test of genuineness of the transaction as well as identity and creditworthiness of the lender. Therefore, the credit under consideration gets hit by the mischief of provision of section 68 of the I.T Act, 1961.

In view of the above, I have no hesitation in confirming the action of the AO in returning the opinion that the explanation offered by the appellant about the source and nature of the credit was not satisfactory.

In view of the above discussion, these grounds (Nos. 4, 5, 6 and 7) are dismissed.”

3.1. So far as the addition of Rs.133,69,157/- being 25% of the purchases is concerned, the ld. CIT(A) while in principle upheld the disallowance of 25%, however, reduced the same to 20% in case of purchases from parties, which were found to be located at the given address by the Income Tax Inspector by observing as under:-

“8.1. Vide ground Nos. 9, 10, 11 and 12, the appellant has contested the action of the AO in terms of making the addition of Rs. 1,33,69,157/- by disallowing 25% of the entire purchases (Rs. 5,34,76,626/-) from following ten parties. It was contention of the AR that this addition is not maintainable on merits. The AR has submitted combined written submission in respect of all these grounds. Therefore, these grounds are dealt with, together.

Party Name	Amount
Delite Trading Co.	18,82,671
Ganesh Enterprises	19,65,386
Hans Trading Co	52,47,430
India Sales Corporation	68,88,893
Jai Shiv Enterprises	20,07,523
Luxmi Lubricants	1,05,53,090
Narika Enterprises	63,32,048
Navyug Enterprises	27,71,646
Rama Enterprises	1,42,26,757
Shree Shyam Enterprises	16,11,182
Total Purchases	5,34,76,626

8.2. During the present appellate proceedings, the main contentions of the AR were that

i) The assessment order indicated that letters were served upon certain parties. This proved their existence.

ii) The books of account were audited,

iii) The appellant was using the purchase material for doing job work and there was quantitative tally of purchases with the quantities of the material consumed in job work. At any point of time, the total of quantities of opening stock and purchases tallied with total of quantities of the material consumed in job work and closing stock.

iv) Payments have been made through banking channels,

v) Vide written submission 22.05.2019, the AR produced copy of stock register showing retevant entries of the items received and issued for consumption in job work. Copies of purchase bills for verification of closing stock were also produced to support the contention that there was proper accounting and item to item tally is possible to trace.

vi) In none of the group cases, any addition has been made on account of discrepancy in stock found at the time of survey and as per books. The AR explained that although, during the course of survey, certain shortage in stock were noticed but the same was reconciled, later on and no addition has been made on account of issue of discrepancy in stock.

vii) The GP ratio is quite high.

viii) The percentage of disallowance (25%) is very high. There are various case laws where courts have decided much lower percentage.

ix) In case of one party namely, Shree Shyam

Enterprise, Inspector of Income Tax made inquiries and found that this party was available at the given address. Similarly, the AR stated that M/s. Gebros Petrochen, M/s. Delite Trading Co. and M/s. Aman Enterprise were found at the given address as per report of Inspector of Income Tax. The AR provided a copy of such report. For the sake of ready reference, the same is reproduced below:

Inspector of Income Tax

8.4. The Hon’ble Gujarat High Court in Bholanath Polyfab Pvt. Ltd. 355 ITR 290 (Guj), held that in such cases where the sales cannot be discarded, the issue would boil down to finding out the element of suppressed profit embedded in purchases which the appellant would have made from some unknown or bogus entities.

8.5 Hon’ble Gujarat High Court in the case of CIT v. Simit P. Seth [356 ITR 451] held that when the total sales are accepted by the Assessing Officer then the entire purchases cannot be added to the income of the assessee.

8.6 Therefore, in view of the decision of the Hon’ble Gujarat High Court he held that only the fair profit ratio would be added back to the income of the assessee.

8.7 The ITAT Mumbai Benches in a number of cases has taken a consistent view and directed the Assessing Officer to estimate net Profit of 12.5% to 15% on total bogus purchases. The ITAT in the case of Kishore Kumar Aggarwal Vs. DCIT in ITA.No. 870 and 871/Mum/2015 dated 25.01.2017 has taken a similar view and upheld estimation of Gross Profit at 10%. 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. The relevant portion of the order of ITAT of ITAT Mumbai in case of M/s. Technotrade Impex India Pvt. Ltd. Vs. ACIT – 13(3)(2) in C.O.Nos.158 & 160/MUM/2017 [ARISING OUT OF ITA N0.5383 & 5382/MUM/2016] is reproduced as under:

“6. On appeal the Ld. CIT(A) on examination of the submissions, evidences furnished before the Assessing Officer as well as before him and guided by the ratio of Hon’ble Gujarat High Court in the case of CIT v. Simit P. Seth [356 ITR 451] held that when the total sales are accepted by the Assessing Officer then the entire purchases cannot be added to the income of the assessee. Therefore, in view of the decision of the Hon’ble Gujarat High Court he held that only the fair profit ratio would be added back to the income of the assessee. Further Ld.CIT(A) also stated that similar basis was adopted in the case of Shri Kishore Kumar Agarwal for A.Y. 2011-12 and Shri Bimal Agarwal for A.Y. 2010-11 on identical and similar facts as that of the present case as both of them are the persons concerned or connected to the assessee’s group. He also observed that similar basis was also adopted in assessee’s own case for the Assessment Years 201011 and 2011-12 on identical facts, wherein he computed the profit element on trading sales segments at 8% as the assessee earning Gross Profit slightly less than 8% from this segment and no addition was made in respect of Garden maintenance contract for the reason that the Gross Profit declared by the assessee was more than the estimated Gross Profit from such segment at 12.5% for the Assessment Year 2012-13. Similarly, the Ld.CIT(A) for the Assessment Year 2009-10 estimated the profit element from trading sales segment at 8% and no addition was made from Garden Maintenance contract segment for the reason that the Gross Profit declared by the assessee is more than the estimated Gross Profit at 12.5% for the Assessment Year 2009-10.

7. We find that on identical facts and circumstances where some of the parties from whom the assessee purchased material are also common, the Tribunal for the Assessment Year 2011-12 sustained the order of the Ld.CIT(A) in adopting the profit element at 8% on Garden Item Trading segment and 12:5% on Garden Maintenance Contract segment to determine the total addition to be sustained on alleged bogus purchases from the parties and confirmed the addition made by the Ld.CIT(A) observing as under:

“11. Having heard both the sides and considered material on record we find merits in the arguments of the assessee for the reason that the Assessing Officer has not made out any case of sales outside the books of account nor pointed out any discrepancy in the books of account and stock details furnished by the assessee. The Assessing Officer is only on the point that the assessee is not able to justify the purchases in the backdrop of allegations made by the Sales Tax Department that the parties from whom the assessee purchased a goods were listed as suspicious dealers/hawala operators indulging in providing accommodation entries. On the other hand, the assessee has submitted complete details of purchases including purchase bills and payment proof. The assessee has also filed complete details of consumption of material purchases from those parties and the execution of works contract for agencies from whom it has undertaken works contract. We further notice that the Assessing Officer has not made out any case of sales outside the books of account nor pointed out any discrepancy in the Books of Accounts of the assessee. Therefore, we are of the considered view that merely on the basis of third party statement and also on the basis of notices issue u/s. 133(6), an adverse inference cannot be drawn about the purchases and the assessee has filed complete details of purchases. When however, the fact remains that the parties are appearing in the list prepared by the Sales Tax Department as suspicious/hawala operators indulging in providing accommodation entries has not been controverted by the assessee with necessary evidence. Though the assessee has filed purchase bills and payment proof for such purchases, in the backdrop of clear cut finding of the Sales Tax Department the purchases from the above parties cannot be considered as genuine in total. In these circumstances, one has to see what needs to be considered, whether it is the entire purchases from the above parties to be added because they are bogus in nature or only the profit element embedded in such purchases could be added. The issue is no longer res integra. The Hon’ble Gujarat High Court in the case of CIT Vs. Simit P. Sheth (supra) has considered similar case wherein the Hon’ble court held that when the total sales is accepted by the AO, then the entire purchases cannot be added to the total income of the assessee. The court further held that in the case of bogus purchases only profit element embedded in such purchases needs to be added but not total purchases made from those parties. The Hon’ble Gujarat High Court in the case of CIT vs. Vijay Proteins Ltd (2015) 58 Taxmann.com 44 (Guj) held that addition cannot be made towards total purchases and what need to be taxed in only the profit element. The ITAT Mumbai Benches in a number of cases has taken a consistent view and directed the Assessing Officer to estimate net Profit of 12.5% to 15% on total bogus purchases. The ITAT in the case of Kishore Kumar Aggarwal Vs. DCIT in ITA No. 870 and 871/Mum/2015 dated 25.01.2017 where the facts are identical and also part of assessee’s group has taken a similar view and upheld estimation of Gross Profit at 10%. 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. In this case the CIT(A) after considering relevant facts has adopted net profit of 8% on total sales achieved by the assessee in garden items segment and 12.5% on garden maintenance contracts to determine the total addition to be sustained on alleged bogus purchases from the above parties and confirmed the addition to the extent of Rs..28,78,748/- as against addition made by the Assessing Officer of Rs.8,64,00,351/-. Therefore, we are of the considered view that the CIT(A) was right in restricting the addition to the extent of Gross Profit embedded in such bogus purchases. We do not find any error in the order of the CIT(A). Hence, we are inclined to uphold the findings of the CIT(A) and dismiss the appeal filed by the Revenue.”

8. Facts being identical, following the order of the Tribunal for the Assessment Year 2011-12, we sustain the order of the Ld.CIT(A) for the Assessment Years 2009-10 and 2012-13 in adopting the profit element at 8% on Garden Item Trading segment and 12.5% on Garden Maintenance Contract segment in estimating the profit element on the purchases made by the assessee. Thus the addition as estimated by the Ld.CIT(A) is confirmed. Grounds raised by the Revenue are rejected.

9. As we have sustained the order of the Ld.CIT(A) the contention of the assessee in the cross objections that there should not have been any addition is rejected and the grounds raised in the cross objection are dismissed.

10. In the result, appeals of the Revenue and cross objections of the assessee are dismissed.”

8.8 In the present case, letters issued u/s 133(6) were received back, un-served because the parties are not existing at given address but inquiries have confirmed that some of these parties were existing at the given addresses. Since, the books of accounts are audited and stock has been tallied which is evident from the fact that in-spite of noticing shortage in stock, at the time of survey, no addition has been made on that account. Therefore, the argument of the AR that discrepancy in stock was explained cannot be brushed aside. At the most question can be raised about the rate of purchase.

8.9 I have also observed that the AO has added 25% of bogus purchases stating as under.

“8.20 Hon’ble Gujrat High Court in its judgment dated 09-12-2014 in the case of Vijay Protein Limited vs CIT [appeal No.243/2002] has observed that “It is a matter of fact that the goods were not received from the parties from whom it is shown to have been purchased but, such material was received from a different surce which is exclusively within the knowledge of the assessee and none else. Therefore, it is evident that the assessee had inflated the expenditure in question by showing higher amount of purchase price O/ITR/139/1996 JUDGMENT through the fictitious invoices in the name of 33 bogus suppliers. Considering the overall factual scenario, the Tribunal was justified in disallowing 25% of the. purchase price”. Hon’ble Supreme Court in SLP No.8956/2015 dated 0604- 2015 in the above case i.e. in Vijay Protein Limited has upheld the order of Gujrat High Court and dismissed the appeal of the assessee.

8.21 The case of the assessee is squarely covered by the ratio of the decision of Hon’ble Supreme Court supra. Accordingly 25% of the purchase price at Rs.5,34,76,626/- accounted for in the books of accounts through such fictitious invoices in the name of above mentioned bogus parties is disallowed which works out to Rs.1,33,69,157/-and is added in the returned income of the assessee”.

8.10 Therefore, I am of a considered opinion that the action of the AO in terms of working out an element of suppressed profit in the purchases and adding the same is justified, in principle. As such there cannot be any standard test or formula for arriving at such element of profit. It would depend on facts and circumstances of each case. It is possible to have different criteria and result for different assessment years in case of a particular assessee. In the present case, it is fact that the above reproduced report of Income Tax Inspector mentioned that following four parties were located at given address:

i. M/s Shree Shyam Enterprise

ii. M/s. Gebros Petrochen,

iii. M/s. Delite Trading Co.(reported to be existing at the given address, one year before the date when inquiry was made), and

iv. M/s. Aman Enterprise

8.11 Also, the above reproduced report of Income Tax Inspector mentioned that Shri Ganesh Enterprise was found at the address of B-204, Nehru Ground, Faridabad, Haryana. However, all these concerns were found to have been used for providing accommodation entries as per the statements recorded during the search or pre-search enquiries, like the statements of S/Shri Dalip Kumar, Vikas Kumar and Ishwar Chand Agarwal etc. These concerns were also admittedly used for procuring bogus Bills, as per the statements recorded by Ms. Jyoti Bisht/Shri Vishnu Kumar Garg.

8.12 Therefore, the disallowance @ 25% is confirmed. However, in my considered opinion, ends of justice would meet if in case of purchases from any party in respect of which disallowance has been made and which were found to be located at the given address (by the Income Tax Inspector) and are not figuring adversely in any of the statements (including statements of Sh. Dalip Kumar/ Vikas Kumar /Ms. Jyoti Bisht/Vishnu Kumar Garg), the disallowance is restricted to 20% of the amount of such purchases.

8.13 In view of the above discussion, these grounds (Nos. 9-12) of the appeal are partly allowed.

3.2. So far as the addition of Rs.2,94,121/- u/s 69C of the Act is concerned, the Ld. CIT(A) upheld the same by observing as under:-

“9.1. Vide ground No. 13, the appellant has contested that the addition of Rs. 2,94,121/- was not maintainable on merits.

9.2. The action of the AO in terms of treating the purchases of Rs. 5,34,76,626/- as bogus has been confirmed above. There is material in form of statements of S/Shri Vishnu Kumar Garg, Vikas Kumar, Dalip Kumar, Ishwar Chand Agarwal and Ms. Jyoti Bisht etc. to the effect that accommodation entries were being procured by the appellant. It is logical that the entries were procured by paying commission. Therefore, the action of the AO in terms of holding that certain payments were made in cash in form of commission for procuring the accommodation entries has been upheld, in principle. In view of the above discussion, this ground (No. 13) of the appeal is dismissed.”

3.3. So far as the issue of giving telescoping benefit is concerned, the ld. CIT(A) decided the issue partly in favour of the assessee by observing as under:-

10.1 Vide ground No. 14, the appellant contested that since, cash has been generated due to bogus purchases, telescopic effect should be allowed in respect of additions u/s 69C, u/s 68 and the commission expenses.

10.2 I have observed that the AO, in case of Shri Vishnu Kumar Garg, director of the appellant company in the assessment orders for AYs 2013-14 and 2014-15, calculated cash availability on particular dates, by considering transactions which were outside books but were generating/consuming cash. Such availability of cash was considered and additions which were otherwise made out, were not made upto such extent. This action of the AO is based upon a sound logic and is acceptable. The AR’s argument that the cash generated due to out of books transactions of bogus purchases is to be treated at par with other out of books cash generating/consuming transactions, is in line of the same logic and hence, cannot be brushed aside. Also, the argument of the AR that such cash generation even in other cases {Smt. Lata Garg (wife of Shri Vishnu Kumar Garg), and M/s. RR Carwell Pvt. Ltd./ M/s. L. V. Rustore Applications Pvt. Ltd. where Shri Vishnu Kumar Garg is director) would be available in hands of Shri Vishnu Kumar Garg because he is the person controlling affairs of these entities, cannot be brushed aside as he is the main decision maker of the group, however, it may not help in other cases ( other than the case of Shri Vishnu Garg) because it cannot be said that these entities would be using unaccounted cash of other entities. Also, one has to keep in mind the aspect that if any addition is made under any section which requires separate treatment, including special rates, provisions of such section would have overriding effect.

10.3 In view of the above discussion, this ground (No. 14) of the appeal is partly allowed.”

3.4. Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:-

1. Because the action for initiation/ continuation and conclusion of assessment proceedings u/s 153A at an amount of Rs 2/08,99,150/- is being challenged on facts & law.

2. Because the action is being challenged on facts & law for making additions in assessment proceedings u/s 153A when there is no incriminating material/document found during the course of search u/s 132 of the Act for the impugned year.

3. Because the action is being challenged on facts & law for completing the assessment u/s 153A having returned wrong findings of fact & evidence qua the denial / retraction of the surrendered amount, which is even contested since the quantum and relatability of the amount to the impugned year is not according to the document and material.

4. Because the action for addition u/s 68 amounting Rs 10,00,000/- is being challenged on facts and law while all parameters for the provision of law required by assessee fulfilled as revealed in findings from acquiescence by silence.

5. Because the action is being challenged since the addition of Rs 10,00,000/- has been made without making proper investigation from the other party whereby assessee has discharged the onus by providing all relevant documents.

6. Because the action is being challenged since the addition of Rs 10,00,000/- has been made without having provided the cross examination of the person on whose statement or information the addition has been made which is in violation of the settled principle of law. Further, the statements of persons relied upon by lower authorities, said persons are not connected to company at the time of providing loan.

7. Because the action is being challenged on facts and law for making disallowance of interest amounting Rs. 55,726/- wherein per assessee TDS has been deducted on said interest and paid to party through proper banking channel.

8. Because the action is being challenged on facts and law for making addition on account of unexplained expenditure u/s 69C amounting Rs. 4,22,975/- whereby per assessee the said payment has been made from disclosed sources and additionally in the alternative the quantum thereof too is being disputed.

9. Because the action is being challenged on facts & law for making an disallowance of purchases amounting Rs. 1,33,69,157/- @ 25% of Purchases amounting Rs. 5,34,76,626/- by rejecting books of accounts u/s 145(2), hence the basis of addition is against the commercial expediency, business exigency and accepted modus operandi of the business and business operations and additionally in the alternative the quantum, thereof too is being disputed.

10. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,33,69,157/- on estimation basis (25% of purchases Rs.5,34,76,626/-) overlooking and ignoring the Pleadings, Facts, Evidences, Provisions of Act, Principles of law advanced hence unsustainable addition and additionally in the alternative the quantum thereof too is being disputed.

11. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,33,69,157/- (25% of purchases Rs. 5,34,76,626/-) on the basis of Honble supreme court in the case of Vijay Protein Ltd. whereas per assessee the facts of said case law is distinguishable and additionally in the alternative the quantum thereof too is being disputed.

12. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,33,69,157/- on the basis that no stock details submitted whereas per assessee stock register was duly submitted before AO both quantitatively as well as qualitatively and the stock physically tallied with the books of account on the date of search.

13. Because the action is being challenged on facts and law for making addition of Rs. 1,33,69,157/-on account of disallowance of purchases considering whole purchases amounting Rs. 5,34,76,626/- as bogus purchases whereas per assessee documents in support of genuine purchases has been duly submitted and AO has verified the said parties too and additionally in the alternative the quantum thereof too is being disputed.

14. Because the action is being challenged on facts and law for making addition on account of commission expenses amounting Rs. 2,94,121/-.

15. Alternatively and without prejudice to above, the action for not allowing telescoping of addition on account of u/s 68, u/s 69C & commission expenses against addition on account of bogus purchases is challenged on facts and law as both additions cannot be made simultaneously.”

4. The Ld. Counsel for the assessee did not press ground of appeal no. 1, 2 and 3 for which the Ld. DR has not objected. Accordingly, these grounds are dismissed as not pressed.

5. In ground of appeal Nos. 4 to 6, the assessee has challenged the order of the Ld. CIT(A) in confirming the addition of Rs.10 lakhs made by the AO u/s 68 of the Act.

6. The ld. Counsel for the assessee submitted that the assessee has received loan and repaid the loan along with interest through proper banking channel which was obtained from M/s White Collar Management Services Pvt. Ltd. He submitted that the assessee, during the course of assessment proceedings, has filed the documents i.e. confirmation of account, copy of bank statement for receipt and payment of the said party, bank statement of the assessee, PAN Nos. acknowledgment of ITR for Assessment Year 2012-13 and audited balance sheet as on 31.03.2011 of the said party. He submitted that the assessee has proved beyond doubt the identity and creditworthiness of the loan creditors and genuineness of the parties. He submitted that the Assessing Officer without conducting any enquiry or material in their possession to show that the documents/particulars filed by the assessee are false or untrue has made the addition, which is not correct. He submitted that the other party has also confirmed the payment made. So far as the reliance of the Assessing Officer upon the statement of Shri Himanshu Verma u/s 132(4) of the Act dated 13.04.2017 is concerned, he submitted that vide question no.7, Mr. Himanshu Verma specifically mentioned that he is doing business with various companies of fabric turnover i.e providing bogus bills of sales and purchases of fabric. In question no.17, he has stated that accommodation entries are given in the form of loan/share capitalare are only the layering of the amount. Thus, from the statement of Mr. Himanhsu Verma, it is clear that he was providing only bogus sales and purchases and not accommodation entries of loan to outside companies. He submitted that in the instant case, the assessee has received the loan through proper banking channel which was also repaid through proper banking channel after payment of interest and due taxes deducted from such interest. So far as the other statement is concerned i.e. the statement of Shri Ram Yadav, which was relied on by the Assessing Officer, he submitted that Mr. Ram Yadav was never a director in M/s White Collar Management Services Pvt. Ltd. Therefore, the statement of Mr. Ram Yadav has no evidentiary value for making the addition. The ld. Counsel for the assessee accordingly submitted that the addition made by the Assessing Officer and sustained by the Ld. CIT(A) should be deleted.

7. The ld. DR, on the other hand, heavily relied upon the order of the ld. CIT(A). He submitted that the assessee failed to substantiate with evidence to the satisfaction of the Assessing Officer regarding the genuineness of the said loan of Rs.10 lakhs obtained from M/s White Collar Management Services Pvt. Ltd. Therefore, the Assessing Officer has rightly made the addition of Rs.10 lakhs and disallowed the interest of Rs.55,726/- and the Ld. CIT(A) has rightly upheld the same.

8. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case made addition of Rs.10 lakhs being unsecured loan obtained by the assessee from M/s White Collar Management Services Pvt. Ltd. on the ground that the assessee could not produce the principal officer/director of M/s White Collar Management Services Pvt. Ltd. Further, shri Himanshu Verma in his statement recorded u/s 132(4) in reply to question no.7 had mentioned that he is doing business with various companies of fabric turnover and providing bogus bills for sales and purchases of fabric. In question no.17, he has stated that accommodation entries are given in the form of loan/share capital for layering of the amount. The Assessing Officer, therefore, inferred that the assessee has taken accommodation entries of Rs.10 lakhs from M/s White Collar Management Services Pvt. Ltd. He also relied on the statement of one Shri Ram Yadav who is dummy director in a number of bogus companies and in the statement recorded u/s 131(1A), he had stated that he was getting Rs.10,000/- per month for being the director in these companies. We find the ld. CIT(A) upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the ld. Counsel for the assessee that Mr. Ram Yadav was never a director in M/s White Collar Management Services Pvt. Ltd. and therefore his statement has no evidentiary value. So far as the statement of Mr. Himanshu Verma is concerned, he has stated that accommodation entries given in the form of loan/share capital are only the layering of the amount. It is also his submission that the amount obtained on 01.02.2011 was repaid on 31.12.2011 with interest and after deduction of TDS of such interest and the payments have been made through proper banking channel. Therefore, no addition is called for.

ITAT reduces disallowance of bogus purchases to 2%

9. We find some force in the above arguments of the ld. Counsel for the assessee. A perusal of the assessment order page 4 shows that Shri Ram Yadav was not a director of M/s White Collar Management Services Pvt. Ltd. and therefore his statement, in our opinion, has no evidentiary value. The list of the companies named by Shri Ram Yadav, which has been reproduced by the Assessing Officer at page-4 of the assessment order, nowhere shows that he was a director of M/s White Collar Management Services Pvt. Ltd. We further find, the assessee during the course of assessment proceedings has filed confirmation from the said party, copy of which is placed at page 192 of the paper book. The assessee has filed copy of ITR, coy of bank statement of the said party reflecting the receipt and payment of loan and balance sheet as on 31.03.2011 and Form-16 for TDS deducted on interest. Not a single document furnished by the assessee has been proved to be false or untrue by the lower authorities. Under these circumstances and in view of the overwhelming evidences filed by the assessee during the course of assessment proceedings, which are not found to be false or untrue, we hold that the Ld. CIT(A) is not justified in sustaining the addition of Rs.10 lakh shown by the assessee as loan which has been repaid in the subsequent year and much before the date of search. Accordingly, the order of the Ld. CIT(A) is set-aside and ground of appeal 4, 5 and 6 are allowed.

10. Ground no.7 relates to disallowance of interest amounting to Rs.55,726/-. After hearing both the sides, we find the Assessing Officer, in the instant case, disallowed the interest treating the loan as bogus. Since we have already held that the loan is not bogus and since we have allowed the grounds raised by the assessee on this issue, therefore, the disallowance of interest made by the Assessing Officer and sustained by the Ld. CIT(A) is directed to be deleted. The ground of appeal no.7 filed by the assessee is accordingly allowed.

11. Ground no.8 by the assessee relates to addition of Rs.4,22,975/- u/s 69C of the Act.

12. After hearing both the sides, we find the Assessing Officer made addition of Rs.4,22,975/- on the ground that the assessee company purchased gold coin amounting to Rs.4,25,975/-in cash and assessee could not explain the source of such cash purchase. We find the ld. CIT(A) upheld the action of the Assessing Officer. We do not find any infirmity in the order of the Ld. CIT(A) on this issue in sustaining the addition of Rs.4,25,975/- as unexplained expenditure u/s 69C of the Act. However, the request of the assessee for telescoping of above expenditure out of the income sustained out of bogus purchases finds merit. The Hon’ble Delhi High Court in the case of CIT vs. Sonal Construction reported in [2013] 359 ITR 532 (Del.) has accepted the theory of benefit of telescoping. We, therefore, held that the assessee is entitled to the benefit of telescoping of the addition of unexplained expenditure of Rs.4,22,975/- out of the additions mere on account of bogus purchases, etc. The ground of appeal no.7 is accordingly partly allowed.

13. Ground of appeal no.9 to 13 filed by the assessee relates to the order of the Ld. CIT(A) in sustaining addition of Rs.1,33,69,157/- being 25% of the purchases amounting to Rs.5,3476626/- in principle and directing the Assessing Officer to restrict the same @ 20% in case of the parties which are found to be in existence by the Ward Inspector.

14. The ld. Counsel for the assessee submitted that the assessee has done twenty types of job work with material during the year in which around 55 to 60% of material is used to complete the job work services. This has been verified from the clients by the Ward Inspector. He submitted that the technical person has given certificate that 60% material will be used for the above job work. The ld. Counsel for the assessee submitted that the purchasers are bifurcated in to two parts, wherein part-I the material purchased & bills were issued by same vendor, payment to said parties were made through proper banking channel & open for verification and in Part-II, the purchase are made from the grey market vendors who have supplied the material alongwith undertaking the responsibility for giving the grey market material supported with bills and the vendors have issued the bills to the assessee for purchases by charging commission wherein the Sales Tax has been charged separately and the said amount has been retained by the vendor. He submitted that the list of vendors (part-I) having the address, TIN, PAN Nos. along with Income Tax return, audited balance sheet, etc. were already brought before the AO. He submitted that the list of billing grey market vendors having address for the impugned year is as under:-

S. No.

TIN No.

Party Name

Party Address

Amount

Documents
attached.

06291214187

Shree Shyam Enterprises

Plot No.2191, H.B. Colony, Sector-7A,
Faridabad

1,611,182

1. ITRV for AY 2010-11 to AY 2016-17

2. Haryana VAT RC

3. Confirmation of Account

15. He submitted that the AO and the Ld. CIT(A) both have considered that all the purchases are bogus purchases. The ld. Counsel for the assessee submitted that the sales of the assessee are not doubted and therefore by disallowing the purchases at 25%, the profit percentage will come to an absurd figure, which is not possible for this type of business. Referring to various decisions, he submitted that a reasonable profit rate should be adopted on account of such grey market purchases.

16. The ld. Counsel for the assessee submitted that documents from purchase to utilization of material have been submitted in the form of Purchase Bill, Stock inward-outward entry in stock register & sales bill, Complete Stock Register quantitative as well as qualitative wise for the period 01.04.2011 to 31.03.2017 before the AO as well as Ld. CIT(A) for verification. He submitted that the sales for the impugned year/period are not in dispute. The sales party chart showing their address, PAN, sales amount have been filed in paper books for each year and sale parties are authorized dealer of various Original Equipment Manufacturer (OEM) i.e. Tata, Ford, Maruti, Honda etc. The fact regarding usage of material in providing Job Work Services have been verified by the inspector from said dealers. Service Tax Audit of sales at the premises of assessee has been done in 2015 and no discrepancy in any sales, purchase, stock register & service tax payment has been found by Audit party. He submitted that both the lower authorities below have accepted that the material has been actually purchased by the assessee.

17. Referring to the decision of Hon’ble Bombay High Court in the case of PCIT vs., Mohammad Haji Adam & Co. [2019] 104 CCH 391 (Mum.), the Learned Counsel for the Assessee submitted that the Hon’ble Bombay High Court in the said decision has held that the purchases cannot be rejected without disturbing the sales in case of a trader and the additions are limited to the extent of bringing to G.P. rate on purchases at the same rate of other genuine purchases.

18. Referring to the decision of Ahmedabad Bench of the Tribunal in the case of Sonal Parekh vs., ITO reported in 57 CCH 373, he submitted that the Tribunal in the said decision has held that in the absence of any corroborative evidence, purchases made by the assessee from Hawala dealers cannot be treated as bogus purchases and cannot be added to the total income of the assessee.

19. The Learned Counsel for the Assessee also relied upon the following decisions to the proposition that profit in such cases have been estimated between 0.5% to 2%.

1. Hon’ble IT AT, Mumbai Bench-G in the case of Sai lifestyles P. Ltd vs ACIT in ITA No. 4465, 4310, 4466, 4311, 4467/2010 dated 25.11.2011.

2. Hon’ble ITAT Mumbai Bench-H in the case of ACIT vs K.P. Sanghvi& Sons LLP in ITA No. 2455/2017 dated 28.09.2018.

3. Hon’ble ITAT Delhi Bench-G in the case of Aggarwal Associates (Promoters) Ltd. vs DCIT in ITA No. 787/2016 dated 09.07.2019.

4. Hon’ble ITAT Ahmedabad Bench-C in the case of Sonal Parekh vs ITO in ITA No. 91, 92 and 93 of 2017 dated 09.12.2019.

5. Hon’ble Bombay High Court in the case of PCIT vsRishabhdevTachnocable Ltd. in ITA No. 1330 of 2017 dated 10.02.2020.

6. Hon’ble Bombay High Court in the case of PCIT vs Pinaki D. Panani in ITA No. 1543 of 2017 dated 08.01.2020.

7. Hon’ble Bombay High Court Judgment in the case of PCIT vs Mohommad Haji Adam & Co. (2019) 104 CCH 0391 (Mum HC).

8. Hon’ble Supreme Court in the case of CIT vs M/s Odean Builders Pvt. in Review Partition (C) Diary No. 22394 of 2019 dated 21.08.2019.

9. Hon’ble Supreme Court in the case of PCIT vs Tejua Rohitkumar Kapadia in SLP(C) Diary No. 12670 of 2018 dated 04.05.2018.

20. He accordingly submitted that some reasonable profit should be estimated and not the disallowance of 20% of the purchases as held by the Ld. CIT(A). So far as the commission estimated by the A.O. at 0.55% on such purchases are concerned, he submitted that the same is also on the higher side.

21. The Ld. D.R. on the other hand, heavily relied on the order of the Ld. CIT(A) and submitted that when the assessee has admittedly indulged in bogus purchases and the Ld. CIT(A) has already restricted such disallowances to 20% in case of parties which were located at the given address during the visit made by the Inspector and are not figured adversely in any of the statements and upheld the disallowance of 25% on parties who are not available in the given address, the same is a very reasoned order and, therefore, no further interference is called for. She accordingly submitted that the order of the Ld. CIT(A) be upheld.

22. We have heard the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the A.O. in the instant case made an addition of Rs.1,33,69,157/- by disallowing 25% of the entire purchases from 05 parties from whom the assessee had made purchases of Rs.5,34,76,626/- on the ground that they are all identified accommodation entry providers. Further Mr. Dalip Kumar had admitted on oath that he is the sole proprietor of 18 concerns namely M/s. Jai Shiv Enterprises and others and that no business activities were carried out by these concerns and no sale or purchase of goods were made by these concerns. All the bank accounts of these concerns were used for providing bogus bills and accommodation entries to various beneficiaries etc. Similar statement has been given by different other persons who were the proprietors of the concerns from whom the assessee had made purchases. We find the Ld. CIT(A) restricted such disallowance to 20% in case of parties who were located at the given address during the visit made by the Inspector and are not figuring adversely in any of the statements including the statement of Mr. Dalip Kumar, Mr. Vikas Kumar, Ms. Jyoti Bisht and Mr. Vishnu Garg. However, he upheld the disallowance of 25% of such purchases where the parties are not found to be available at the given address. It is the submission of the Learned Counsel for the Assessee that the letters were served upon certain parties proves that they were in existence and this fact is found in the assessment order. Further, the books of account were audited, the payments were made through banking channels, the sales have been accepted and there was quantitative tally of purchases with the quantities of the material used in the job work. The stock register showing relevant entries of the items purchased and issued for consumption in job work shows that these items were tallied. The survey party found physical stock at the time of search and survey. Therefore, it is his submission that disallowance @ 25% of the purchases is highly unjustified and some reasonable profit rate only should be adopted.

23. We find some force in the above arguments of the Learned Counsel for the Assessee. It is an admitted fact that the sales declared by the assessee have not been disturbed. The assessment order indicates that letters were served upon certain parties which proves their existence. The books of account were also audited and auditors have not given any adverse remarks. All the payments have been made through banking channels. The assessee had produced the stock register showing relevant entries of the items purchased and issued for consumption in job work and the items were tallying and no discrepancy in the stock was found at the time of survey. Under these circumstances, we are of the considered opinion that disallowance of 20% of the purchases appears to be on the higher side especially when some of the parties to whom letters were issued were served and the payments have been made through banking channel. Considering the totality of the peculiar facts and circumstances of the instant case, the disallowance of 2% of the total purchases under the facts and circumstances of the case, in our opinion, will meet the ends of justice. We hold and direct accordingly. The A.O. shall do the re-computation. Accordingly the order of the Ld. CIT(A) is modified on this issue and the grounds raised by the assessee on this issue are partly allowed.

24. Grounds of appeal no. 9 to 13 by the assessee are accordingly partly allowed.

25. In ground nos. 14 and 15, the assessee has challenged the order in confirming the commission expenses of Rs.2,94,121/- added by the AO u/s 69C of the Act.

26. After hearing both the sides we find the A.O. made addition of Rs.2,94,121/- being commission @ 0.55% on the bogus purchases of Rs.5,34,76,626/- We find the Ld. CIT(A) sustained the addition on the ground that the entries were procured by paying commission. Since we have held that entire purchases cannot be considered as bogus since the sales have not been disturbed and some of the parties to whom letters were issued are existing in the given address and no discrepancy was found in the stock at the time of survey and the stock register was tallying with quantitative details, therefore, estimation of commission for the entire purchases, in our opinion, is not justified. At the same time, the conduct of the assessee is not above board. Considering the totality of the facts and circumstances of the case, we are of the considered opinion that lump sum addition of Rs.50,000/- on estimate basis under the facts and circumstances of the instant case will meet the ends of justice. We hold and direct accordingly. Ground of appeal number 14 of the assessee is accordingly partly allowed.

27. Ground of appeal no.15 relates to the benefit of telescoping of addition u/s 68, u/s 69C against additions on account out of bogus purchases.

28. After hearing both the sides, we find that it is the submission of the ld. Counsel for the assessee that if any addition is made then the assessee should be given telescopic benefit. He accordingly submitted that if any addition on account of bogus purchases is made then the commission expenses can be met out of such addition on account of bogus purchases or for the commission for purchase of gold coins. Referring to the decision of Hon’ble Delhi High Court in the case of CIT vs.Sonal Construction reported in [2013] 359 ITR 532 (Del.) has accepted the theory of benefit of telescoping. We, therefore, hold that the assessee is entitled to the benefit of telescoping of the addition on account of unexplained expenditure of Rs.4,25,975/- out of the additions made on account of bogus purchases, etc. The ground of appeal no.15 is accordingly allowed.

29. Ground of appeal no.16 being general in nature is dismissed.

30. In the result, the appeal filed by the assessee for Assessment Year 2012-13 is partly allowed for statistical purpose.

ITA No.9154/Del/2019 (AY 2013-14)

31. Grounds of Appeal raised by the assessee for Assessment Years 2013-14 are as under:-

1. Because the action for initiation, continuation and conclusion of assessment proceedings u/s 153A at an amount of Rs 1,96,33,239/- is being challenged on facts & law.

4. Because the action is being challenged on facts & law for making an disallowance of purchases amounting Rs. 1,37,29,109/- @ 25% of Purchases amounting Rs. 5,49,16,434/- by rejecting books of accounts u/s 145(2), hence the basis of addition is against the commercial expediency, business exigency and accepted modus operandi of the business and business operations and additionally in the alternative the quantum thereof too is being disputed.

5. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,37,29/109/- on estimation basis (25% of purchases Rs. 5,49,16,434/-) overlooking and ignoring the Pleadings, Facts, Evidences, Provisions of Act, Principles of law advanced hence unsustainable addition and additionally in the alternative the quantum thereof too is being disputed.

6. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,37,29,109/- (25% of purchases Rs. 5,49,16,434/-) on the basis of Honble supreme court in the case of Vijay Protein Ltd. whereas per assessee the facts of said case law is distinguishable and additionally in the alternative the quantum thereof too is being disputed.

7. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,37,29,109/- on the basis that no stock details submitted whereas per assessee stock register was duly submitted before AO both quantitatively as well as qualitatively and the stock physically tallied with the books of account on the date of search.

8. Because the action is being challenged on facts and law for making addition of Rs. 1,37,29,109/- on account of disallowance of purchases considering whole purchases amounting Rs. 5,49,16,434/- as bogus purchases whereas per assessee documents in support of genuine purchases has been duly submitted and AO has verified the said parties too and additionally in the alternative the quantum thereof too is being disputed.

9. Because the action is being challenged on facts and law for making addition on account of commission expenses amounting Rs. 3,02,040/-.

10. Alternatively and without prejudice to above, the action for not allowing telescoping of addition on account of commission expenses against addition on account of bogus purchases is challenged on facts and law as both additions cannot be made simultaneously.

11. For any consequential relief and/or legal claim arising out of this appeal and for any addition, deletion, amendment and modification in the grounds of appeal before the disposal of the same in the interest of substantial justice to the assessee.

32. The ld. Counsel for the assessee did not press grounds of appeal no. 1, 2 and 3 for which the ld. DR has no objection. Accordingly, the grounds 1, 2 and 3 raised by the assessee are dismissed as not pressed.

33. Grounds of appeal No.4 to 8 by the assessee relate to the order of the Ld. CIT(A) in confirming the addition of Rs.1,37,29,109/- being 25% of the purchase amounting to Rs.5,49,16,434/- by rejecting the book and giving direction to the AO to restrict the same to 20% in case of parties, which were found in existence by the Ward Inspector.

34. After hearing both the sides, we find the above grounds are identical to grounds no. 9 to 13 in ITA No.9153/Del/2019, we have already decided this issue and the grounds raised by the assessee has been partly allowed by directing to AO to restrict the commission of bogus purchase at 2%. Following similar reasoning, the above grounds by the assessee are partly allowed.

35. Grounds of appeal no.9 by the assessee relates to the order of the Ld. CIT(A) in sustaining the commission of Rs.3,02,040/-.

36. After hearing both the sides we find the above ground is identical to ground no. 14 in ITA No.9153/Del/2019. We have already decided this issue and directed the AO to restrict the commission expense to Rs.50,000/- lump sum on estimate basis. Following similar reasoning, the above ground by the assessee is partly allowed.

37. Ground no.10 relates to the benefit of telescoping.

38. After hearing both the sides we find the above ground is identical to ground no. 15 in ITA No.9153/Del/2019. We have already decided this issue and allowed the benefit of telescoping. Following similar reasoning, the above ground by the assessee is allowed.

39. Ground No.11 being general in nature is dismissed.

ITA No.9155/Del/2019 (AY 2014-15)

40. Grounds of Appeal raised by the assessee for Assessment Years 2014-15 are as under:-

1. Because the action for initiation, continuation and conclusion of assessment proceedings u/s 153A at an amount of Rs 1,90,83,070/- is being challenged on facts & law.

2. Because the action is being challenged on facts & law for making additions in assessment proceedings u/s 153 A when there is no incriminating material/document found during the course of search u/s 132 of the Act for the impugned year.

3. Because the: action is being challenged on facts & law for completing the assessment u/s 153A haying returned wrong findings of fact & evidence qua the denial /’ retraction of the surrendered amount, which is even contested since the quantum and relatability of the amount to the impugned year is not according to the document and material.

4. Because the action for addition u/s 68 amounting Rs 25,00,000/- is being challenged on facts and law while all parameters for the provision of law required by assessee fulfilled as revealed in findings from acquiescence by silence.

5. Because the action is being challenged since the addition of Rs 25,00,000/ – has been made without making proper investigation from the other party whereby assessee has discharged the onus by providing all relevant documents.

6. Because the action is being challenged since the addition of Rs 25,00,000/- has been made without having provided the cross examination of the person on whose statement or information the addition has been made which is in violation of the settled principle of law.

7. Because the action is being challenged on facts & law for making an disallowance of purchases amounting Rs. 1,16,24,050/- @ 25% of Purchases amounting Rs. 4,64,96,203/- by rejecting books of accounts u/s 145(2), hence the basis of addition is against the commercial expediency, business exigency and accepted modus operandi of the business and business operations and additionally in the alternative the quantum thereof too is being disputed.

8. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,16,24,050/- on estimation basis (25% of purchases Rs. 4,64,96,203/-) overlooking and ignoring the Pleadings, Facts, Evidences, Provisions of Act, Principles of law advanced hence unsustainable addition and additionally in the alternative the quantum thereof too is being disputed.

9. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,16,24,050/- (25% of purchases Rs. 4,64,96,203/-) on the basis of Honble supreme court in the case of Vijay Protein Ltd. whereas per assessee the facts of said case law is distinguishable and additionally in the alternative the quantum thereof too is being disputed.

10. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,16,24,050/- on the basis that no stock details submitted whereas per assessee stock register was duly submitted before AO both quantitatively as well as qualitatively and the stock physically tallied with the books of account on the date of search.

11. Because the action is being challenged on facts and law for making addition of Rs. 1,16,24,050/- on account of disallowance of purchases considering whole purchases amounting Rs. 4,64,96,203/- as bogus purchases whereas per assessee documents in support of genuine purchases has been duly submitted and AO has verified the said parties too and additionally in the alternative the quantum thereof too is being disputed.

12. Because the action is being challenged on facts and law for making addition on account of commission expenses amounting Rs. 2,55,729/-.

13. Alternatively and without prejudice to above, the action for not allowing telescoping of addition on account of section 68 & commission expenses against addition on account of bogus purchases is challenged on facts and law as both additions cannot be made simultaneously.

14. For any consequential relief and/or legal claim arising out of this appeal and for any addition, deletion, amendment and modification in the grounds of appeal before the disposal of the same in the interest of substantial justice to the assessee.

41. The ld. Counsel for the assessee did not press grounds of appeal no. 1, 2 and 3 for which the ld. DR has no objection. Accordingly, the grounds 1, 2 and 3 raised by the assessee are dismissed as not pressed.

42. Ground No.4, 5 and 6 of this appeal relates to the order of the ld. CIT(A) in sustaining the addition of Rs.25 lakhs made by the AO.

43. Facts of the case, in brief, are that during the course of assessment proceedings, the AO noted that the assessee company has received an unsecured loan of Rs.25 lakhs from M/s Vigilant Paper Pvt. Ltd.. The AO asked the assessee to furnish the ITR, bank statement highlighting the transaction and confirmation copy of ledger from M/s Vigilant Paper Pvt. Ltd. in order to prove the identity and creditworthiness of the loan creditor and genuineness of the transaction. Since, the assessee did not furnish the ITR, bank statement of the lendor company and was not able to produce the principal officer of M/s Vigilant Paper Pvt. Ltd., the AO invoking the provisions of section 68 of the Act made addition of Rs.25 lakhs to the total income of the assessee.

44. In appeal, the ld. CIT(A) confirmed the action of the AO by observing as under:-

17.1 Vide ground Nos. 4, 5 and 6, the appellant has contested addition of Rs. 25,00,000/-. As stated above, this addition has been made because the AO found that equivalent amount of credit entry in books of accounts, was shown as unsecured loan from M/s. Vigilant Papers Pvt. Ltd. The appellant could not discharge the onus of proving identity and creditworthiness of the lender and genuineness of the transaction. This company (M/s. Vigilant Papers Pvt. Ltd.) was found to be controlled by one Shri Vivek Kumar Jain, as one of many paper entities used (by Shri Jain) for the purposes of providing accommodation entries. This finding has been confirmed by way of assessment order u/s 143(3) dated 30.03.2016 in case of this company (M/s. Vigilant Papers Pvt. Ltd.) for AY 2013-14.

17.2 The contention of the AR was that the unsecured loans were received through banking channels and were repaid. The AR also stated that the appellant was not provided cross examination of the persons whose statements have been relied upon. Moreover, the AR stated that this addition was not based upon incriminating material which emanated from the search.

17.3 It is a trite that onus is of the appellant to provide evidence of identity and creditworthiness of the lender and genuineness of the transaction. Certainly, in the light of overwhelming evidence discussed by the. AO, it is clear that the appellant was not able to discharge its onus.

17.4 Hon’ble Delhi HC in case of CITVs. N.R. Portfolio (P.) Ltd. [2012] 42 taxmann.com SB^Delhi) has held,

“30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee’s knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive, Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies.

It is the persons behind the company who take the decisions, controls and manage them. “{ref. Para 30}

17.8 Hon’ble Delhi HC in case of CIT Vs. Nova Promoters & Finlease (P) Ltd. [2012] 18 taxmann.com 217 (Delhi) quoted from its earlier judgments as under,

17.9 This is also a case of pernicious practice of conversion of unaccounted money through the masquerade or channel of obtaining (bogus) loan.

17.10 Hon’ble Delhi HC in case of CIT Vs. Navodaya Castles (P.) Ltd. [2014] 50 taxmann.com 110 (Delhi) has held,

“Certificate of incorporation, PAN etc., are relevant for purpose of identification, but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine investor.” {ref. Para 14}.

17.11 Regarding, cross examination, the AR could not show as to when the cross examination was demanded at the assessment stage. Moreover, these statement were recorded during the official duty carried out by the Officers of the Department who were not AO and there is no provision under their charter of official duties to allow cross examination to each and every person who can be adversely affected by such statement. Nor, it is practically possible for such Officer to allow cross examination to each and every person who can be adversely affected by such statement. It is a trite that rigors of the Evidence Act, 1872 are not applicable to Income Tax proceedings. Therefore, these statements are admissible evidence like any other official document. Of course, a cross examination of the officer who recorded this statement can be allowed. However, the appellant never demanded such cross examination.

17.12 In view of above, it is seen that in the present case, the appellant has failed in the test of genuineness of the transaction as well as identity and creditworthiness of the lender. Therefore, the credit entry gets hit by the mischief of provision of section 68 of the I.T Act, 1961.

17.13 In view of the above, I have no hesitation in confirming the action of the AO in returning the opinion that the explanation offered by the appellant regarding nature and source of the credit entry, was not satisfactory.

17.14 Regarding plea that the addition has not been made based upon the incriminating material emanating from the search, it is stated that first of all Hon’ble Delhi High Court has clearly ruled in case of CIT Vs. Anil Kumar Bhatia [2012] 24 taxmann.com 98 (Delhi)/[2012] 211 Taxman 453 (Deihi)/[2013] 352 ITR 493 that once the jurisdiction u/s 153A is triggered due to availability of incriminating material emanating from search, all possible additions have to be made to compute total income. The Honb’le Court did not deal with a case where no incriminating material was found during the search conducted under Section 132 of the Act. However, in other cases, where incriminating material was found as a result of search, the Hon’ble court clearly ruled that “total Income” is to be computed like normal assessment. The relevant portion of the judgment is reproduced below:

“21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings “shall abate”. The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the ‘total income’ of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition “shall abate”. Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee’s total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made.

22. In the light of our discussion, we find it difficult to uphold the view of the Tribunal expressed in Para 9.6 of its order that since the returns of income filed by the assessee for all the six years under consideration before the search took place were processed under Section 143(l)(a) of the Act, the provisions of Section 153A cannot be invoked. The Assessing Officer has the power under Section 153A to make assessment for all the six years and compute the total income of the assessee, including the undisclosed income, notwithstanding that the assessee filed returns before the date of search which stood processed under Section 143(l)(a). The other reason given by the Tribunal in the same paragraph of its order that no material was found during the search is factually unsustainable since the entire case and arguments before the departmental authorities as well as the Tribunal had proceeded on the basis that the document embodying the transaction with Mohini Sharma was recovered from the assessee. While summarizing the contentions of the assessee in Paragraph 5 of its order, the Tribunal itself has referred to the contention that no document much less incriminating material was found during the search of the assessee’s premises, except one unsigned undertaking for loan. Again in Paragraph 10 of its order, while dealing with the assessee’s contention against the addition of Rs. 1,50,000/- being unexplained loan given to Mohini Sharma, the Tribunal has stated that it has analyzed “the subject document carefully, recovered from search” suggesting that the document was recovered during the search from the assessee. The Tribunal has even proceeded to delete the addition of Rs. 1,50,000/- as well as the notional interest on merits, holding that the document was unsigned, that Mohini Sharma was not examined by the income tax authorities and there was no corroboration of the unsigned document. If it is not in dispute that the document was found in the course of the search of the assessee, then Section 153A is triggered. Once the Section is triggered, it appears mandatory for the Assessing Officer to issue notices under Section 153A calling upon the assessee to file returns for the six assessment years prior to the year in which the search took place. There are contradictions in the order of the Tribunal. We are unable to appreciate how the Tribunal can say in Para 9.6 that no material was found during the search and at the same time in Paragraph 10 deal with the merits of the additions based on the document recovered during the search which allegedly contain the loan transaction with Mohini Sharma. Therefore, both the reasons given by the Tribunal for holding that the assessments made under Section 153A were bad in law do not commend themselves to us. The result is that the first substantial question of law is answered in the negative, in favour of the Revenue and against the assessee.

23. We are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We, therefore, express no opinion as to whether Section 153A can be invoked even in such a situation. That question is therefore left open.”

17.15 Secondly, as discussed in the assessment orders for various assessment years in this case as well as in other case of the group, overwhelming evidences were found/discovered/ seized/recorded to indicate that the appellant and other group concerns as well as the persons controlling affairs of the appellant of the appellant company/other group concerns were involved in obtaining accommodation entries in form of unsecured loans and bogus purchases as well as transactions {like advancing cash loans, earning interest, paying incentive in cash, purchasing gold in, cash, paying salary in cash etc.) which were not being entered into the books of accounts. In light of the facts discovered due to search (that the appellant and the people involved in its management were engaged colouring transaction by obtaining accommodation entries in form of loans as well as bogus purchases), the material fact of taking unsecured loan from an non-group company, coupled with the fact such company was found to be paper company used for providing accomodation entries, certainly becomes incriminating material in respect of this addition and the said material(that the appellant and the people involved in its management were engaged colouring transaction by obtaining accommodation entries in form of loans as well as bogus purchases) certainly emanated from the search. Therefore, on pure facts, the addition has been found to be made based upon the material which has a live link with the Search & Seizure operation, in view of back ground facts and circumstances being emnating from Search & Seizure operation.

17.16 In view of the above discussion, these grounds (Nos. 4, 5, and 6) are dismissed.”

45. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.

46. The ld. Counsel for the assessee strongly challenged the order of the Ld. CIT(A) in confirming the addition of Rs.25 lakhs made by the AO. The ld. Counsel for the assessee submitted that the assessee has received an amount of Rs.25 lakhs as interest bearing loan from M/s Vigilant Paper Pvt. Ltd. on 23.04.2013. Before the AO, the assessee filed the copy of bank statement evidencing the repayment of loan, balance sheet as on 31.03.2014, Form-16, interest on TDS etc. to substantiate the identity and creditworthiness of the party and genuineness of the transaction. He submitted that the AO without conducting any enquiry and in absence of any other material in her possession to show that the document/particulars filed by the assessee are false or untrue made the addition which is not correct. Referring to various pages of the paper book, he submitted that the assessee has repaid the amount along with interest after deducting TDS much before the date of search. He submitted that had the said loan is accommodation entries then in that case, the assessee would not have repaid the loan along with interest. He submitted that making the addition merely based on the assessment order passed u/s 143(3) in the case of M/s Vigilant Papers Pvt. Ltd. is not justified. Referring to following decisions, he submitted that the addition made by the AO and the sustained by the Ld. CIT(A) is not justified.

i. CIT Vs Gangeshwari Metal Pvt. Ltd. (2014) 361 ITR 10 (Del)

ii. CIT vs Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC)

iii. Rohini Builders vs. DCIT (2002) 76 TTJ 521 (Ahd Tb)

iv. CIT Vs Karaj Singh (2011) 203 Taxman 218 (P&H)

47. He further submitted that the assessee has repaid the loan after 31st March, 2014 and the AO is relying on the order of AY 2013-14 in the case of the loan creditor which is much earlier than the date of repayment. Therefore, the said order is not applicable to the facts of the case specially when the said loan creditor has confirmed that it had given the loan and has received the payment.

48. The ld. DR on the other hand heavily relied on the order of the AO and the Ld. CIT(A). She submitted that the Ld. CIT(A) has clearly and categorically held as to how the assessee has accepted the accommodation entries from a non-existing paper company. Therefore, the same should be upheld and the grounds raised by the assessee should be dismissed.

49. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) and paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee has accepted the unsecured loan of Rs.25 from M/s Vigilant Paper Pvt. Ltd. which was repaid on three different dates namely 14.04.2014, 24.02.2015 and 01.03.2015, the details of which are as under:-

Part Name ment-ioned in reasons recorded

Date of Receipt of Loan

Amount as per Reasons recorded

Documents

Date of Repa-yment of Loan

Amount

Documents

Vigilant Paper Pvt. Ltd. Interest on laon

23.04.2013

25,00,000/-

4,73,302/-

Received loan through Banking Channel
(pg. Interest on loan due after deducting TDS

14.04.2014

24.02.2015

01.03.2015

2,47,500

12,50,000

14,75,802

Repayment of Loan and interest on loan
through Banking Channel, Bank Statement is at pg.

50. We find during the course of assessment proceedings, the assessee has filed confirmation from the said party, copy of its PAN No., bank statement of the assessee evidencing the receipt and the repayment of loan, balance sheet as on 31.03.2014, Form-16 for deduction of TDS, etc. is an admitted fact the loan has been repaid before the date of search. The Ahmadabad Bench of the Tribunal in the case of Rohini Builders vs DCIT, reported in (2002) 76 TTJ 521 (Ahd Tb.) has held that when loan has been received through proper banking channel and the same has been repaid through proper banking channel and the other party has confirmed the receipt of the loan then no addition could be made in the hand of the assessee u/s 68 of the Act. We find the above decision of the Ahamdabad Bench of the Tribunal has been upheld by the Hon’ble Gujarat High Court, reported in (2002) 256 ITR 360 (Guj.). Since, the assessee has accepted and repaid the loan through banking channel, due taxes has been deducted on the interest so paid and the amount has been repaid prior to the date of search and the assessee has filed relevant documents before the AO evidencing the identity and creditworthiness of the loan creditor and genuineness of the transaction and since all the documents were filed before the AO and nothing has been proved to false or untrue, therefore, we are of the considered opinion that the ld. CIT(A) is not justified in sustaining the addition made by the AO. Accordingly, we set-aside the order of the Ld. CIT(A) and direct the AO to delete the addition. Accordingly, grounds of appeal No.4, 5 and 6 are allowed.

51. Grounds of appeal no. 7 to 11 relate to the order of the Ld. CIT(A) in sustaining the disallowance of purchases amounting to Rs.1,16,24,050/- being 25% of the purchases amounting to Rs.4,64,96,203/- by rejecting the books of accounts u/s 145(3) of the Act and directing the Assessing Officer to restrict the same to 20% of the purchases in cases the parties are found to be in existence by Income Tax Inspector.

52. After hearing the both the sides, we find the above grounds are identical to grounds of appeal no.9 to 13 in ITA No.9153/Del/2019.
We have already decided this issue and the grounds raised by the assessee has been partly allowed, wherein, we have directed the Assessing Officer to restrict the profit on such purchases at 2% of the total purchases. Following similar reasoning, we direct the Assessing Officer to restrict the disallowance at 2% of the bogus purchases. The grounds raised by the assessee are accordingly partly allowed.

53. Ground no. 12 relates to the order of the Ld. CIT(A) in confirming the addition of Rs.2,55,729/- being the commission expenses.

54. After hearing both the sides, the above ground is identical to the ground of appeal no 14 in ITA No.9153/Del/2019, wherein we have directed the Assessing Officer to restrict the disallowance to Rs.50,000/- lump sum on estimate basis. Following similar reasoning, we direct the Assessing Officer to restrict the addition to Rs.50,000/-. The above grounds by the assessee is partly allowed.

55. Ground of appeal no.13 relates to the benefit of telescoping.

56. After hearing both the sides we find the above ground is identical to ground no. 15 in ITA No.9153/Del/2019, we have already decided this issue and allowed the benefit of telescoping. Therefore, following similar reasoning, the above ground by the assessee is allowed.

57. Ground of appeal no.14 being general in nature is dismissed.

ITA No.9156/Del/2019 (AY 2015-16)

58. The assessee has raised following grounds of appeal:-

1. Because the action for initiation, continuation and conclusion of assessment proceedings u/s 153A at an amount of Rs 1,36,41,377/- is being challenged on facts & law.

2. Because the action is being challenged on facts & law for making additions in assessment proceedings u/s 153 A when there is no incriminating material/document found during the course of search u/s 132 of the Act for the impugned year.

4. Because the action is being challenged on facts & law for making an disallowance of purchases amounting Rs. 93,33,960/- @ 25% of Purchases amounting Rs. 3,73,35,843/- by rejecting books of accounts u/s 145(2), hence the basis of addition is against the commercial expediency, business exigency and accepted modus operandi of the business and business operations and additionally in the alternative the quantum thereof too is being disputed.

5. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 93,33,960/- on estimation basis (25% of purchases Rs. 3,73,35,843/-)overlooking and ignoring the Pleadings, Facts, Evidences, Provisions of Act, Principles of law advanced hence unsustainable addition and additionally in the alternative the quantum thereof too is being disputed.

6. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 93,33,960/- (25% of purchases Rs. 3,73,35,843/-) on the basis of Honble supreme court in the case of Vijay Protein Ltd. whereas per assessee the facts of said case law is distinguishable and additionally in the alternative the quantum thereof too is being disputed.

7. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 93,33,960/- on the basis that no stock details submitted whereas per assessee stock register was duly submitted before AO both quantitatively as well as qualitatively and the stock physically tallied with the books of account on the date of search.

8. Because the action is being challenged on facts and law for making addition of Rs. 93,33„960/- on account of disallowance of purchases considering whole purchases amounting Rs. 3,73,35,843/- as bogus purchases whereas per assessee documents in support of genuine purchases has been duly submitted and AO has verified the said parties too and additionally in the alternative the quantum thereof too is being disputed.

9. Because the action is being challenged on facts and law for making addition on account of commission expenses amounting Rs. 2,05347/-.

59. The ld. Counsel for the assessee did not press grounds of appeal no. 1, 2 and 3 for which the ld. DR has no objection. Accordingly, the grounds 1, 2 and 3 raised by the assessee are dismissed as not pressed.

60. Ground No.4, 5, 6,7and 8 of this appeal relates to the order of the ld. CIT(A) in sustaining the disallowance of Rs.93,33,960/- being 25% of purchases amounting to Rs.3,73,35,843/-by rejecting the books of accounts u/s 145(3) of the Act and directing the Assessing Officer to restrict the disallowance to 20% in cases the parties are found to be in existence by Ward Inspector.

61. After hearing the both the sides, we find the above grounds are identical to grounds of appeal no.9 to 13 in ITA No.9153/Del/2019. We have already decided this issue and the grounds raised by the assessee has been partly allowed, wherein, we have directed the Assessing Officer to restrict the profit on such purchases at 2% of the total purchases. Following similar reasoning, we direct the Assessing Officer to restrict the disallowance at 2% of the bogus purchases. The grounds raised by the assessee are accordingly partly allowed.

62. Grounds of appeal no.9 relates to the order of the Ld. CIT(A) in confirming the addition of Rs.2,05,347/- on account of commission.

63. After hearing both the sides, we find the above ground is identical to the ground of appeal no 14 in ITA No.9153/Del/2019, wherein, we have directed the Assessing Officer to restrict the disallowance to Rs.50,000/-lump sum on estimate basis. Following similar reasoning, we direct the Assessing Officer to restrict the addition to Rs.50,000/-. The above ground by the assessee is partly allowed.

64. Ground of appeal no.10 relates to the benefit of telescoping.

65. After hearing both the sides we find the above ground is identical to ground no. 15 in ITA No.9153/Del/2019. We have already decided this issue and the benefit of telescoping have been allowed. Therefore, following similar reasoning, the above ground by the assessee is allowed.

66. Ground of appeal no.11 being general in nature is dismissed.

ITA No.9157/Del/2019 (AY 2016-17)

67. The ld. Counsel for the assessee has raised following grounds:-

1. Because the action for initiation, continuation and conclusion of assessment proceedings u/s 153A at an amount of Rs 1,79,20,407/- is being challenged on facts & law.

2. Because the action is being challenged on facts & law for completing the assessment u/s 153A having returned wrong findings of fact & evidence qua the denial / retraction of the surrendered amount, which is even contested since the quantum and relatability of the amount to the impugned year is not according to the document and material.

3. Because the action is being challenged on facts & law for making disallowance of purchases amounting Rs.1,03,22,034/- @ 25% of Purchases amounting Rs.4,12,88,138/- by rejecting books of accounts u/s 145(2), hence the basis of addition is against the commercial expediency, business exigency and accepted modus operandi of the business and business operations and additionally in the alternative the quantum thereof too is being disputed.

4. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,03,22,034/- on estimation basis (25% of purchases Rs.4,12,88,138/-overlooking and ignoring the Pleadings, Facts, Evidences, Provisions of Act, Principles of law advanced hence unsustainable addition and additionally in the alternative the quantum thereof too is being disputed.

5. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,03,22,034/- (25% of purchases Rs. 4,12,88,138/-) on the basis of Honble supreme court in the case of Vijay Protein Ltd. whereas per assessee the facts of said case law is distinguishable and additionally in the alternative the quantum thereof too is being disputed.

6. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,03,22,034/- on the basis that no stock details submitted whereas per assessee stock register was duly submitted before AO both quantitatively as well as qualitatively and the stock physically tallied with the books of account on the date of search.

7. Because the action is being challenged on facts and law for making addition of Rs. 1,03,22,034/- on account of disallowance of purchases considering whole purchases amounting Rs. 4,12,88,138/- as bogus purchases whereas per assessee documents in support of genuine purchases has been duly submitted and AO has verified the said parties too and additionally in the alternative the quantum thereof too is being disputed.

8. Because the action is being challenged on facts and law for making addition on account of commission expenses amounting Rs. 2,27,084/-.

9. Because the action is being challenged on facts and law for making addition of Rs. 33,83,239/- on account of incentive paid for business exigencies and commercial expediency and additionally in the alternative the quantum thereof too is being disputed.

10. Alternatively and without prejudice to above, the action for not allowing II telescoping of addition on account of commission expenses & incentives paid If against addition on account of bogus purchases is challenged on facts and I law as both additions cannot be made simultaneously.

68. The ld. Counsel for the assessee did not press grounds of appeal no. 1 and2 for which the ld. DR has no objection. Accordingly, the grounds 1and 2 raised by the assessee are dismissed as not pressed.

69. Ground no.3 to 7 relates to the order of the ld. CIT(A) in confirming the disallowance of Rs.1,03,22,034/-being 25% of the purchases amounting to Rs.4,12,88,138/-by rejecting the books of accounts u/s 145(3) of the Act and directing the Assessing Officer to restrict the disallowance to 20% in cases the parties are found to be in existence by Ward Inspector.

70. After hearing the both the sides, we find the above grounds are identical to grounds of appeal no.9 to 13 in ITA No.9153/Del/2019. We have already decided this issue and the grounds raised by the assessee has been partly allowed, wherein, we have directed the Assessing Officer to restrict the profit on such bogus purchases at 2% of the total purchases. Following similar reasoning, we direct the Assessing Officer to restrict the disallowance to 2% of the bogus purchases. The grounds raised by the assessee are accordingly partly allowed.

71. Ground no.8 by the assessee relates to the order of the Ld. CIT(A) in sustaining the commission expenses of Rs.2,27,084/-.

72. After hearing both the sides, we find the above ground is identical to the ground of appeal no 14 in ITA No.9153/Del/2019, wherein we have directed the Assessing Officer to restrict the disallowance to Rs.50,000/- lump sum on estimate basis. Following similar reasoning, we direct the Assessing Officer to restrict the addition to Rs.50,000/-. The above grounds by the assessee is partly allowed.

73. Ground no.9 relates to the order of the Ld. CIT(A) in confirming the addition of Rs.33,83,239/- on account of incentive paid for business exigencies and commercial expediency.

74. Facts of the case, in brief, are that during the search proceedings at premises 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, Pages 54 and 97 of Annexure-A7 were found which contains the details of incentives given in cash of Rs.33,83,239/-. The A.O, therefore, asked the assessee to furnish the details of such incentives paid and show caused as to why such amount should not be considered as unaccounted cash and added back to the total income of the assessee. It was explained by the assessee that the cash generated out of billing grey market purchases were used for incurring business expenses i.e. incentives, etc and the amount paid to individual persons is less than Rs.15,000/-. However, the Assessing Officer was not satisfied with the explanation given by the assessee and made the addition of Rs.33,83,239/- u/s 68 of the Act on the ground that the said transaction is not recorded in the books of accounts.

75. In appeal, the ld. CIT(A) upheld the action of the Assessing Officer.

76. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.

77. We have heard the rival arguments made by both the sides and perused the records. It is the submission of the ld. Counsel for the assessee that the seized documents relate to L.V. Rustor and also relate to AY 2017-18 and therefore no addition is called for. We, therefore, restore this issue to the file of the AO for verification and decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. He shall also keep in mind the benefit of telescoping in view of the decision of the Hon’ble Delhi High Court in the case of CIT vs. Sonal Construction reported in [2013] 359 ITR 532 (Del.). Ground no. 9 raised by the assessee is allowed for statistical purposes.

78. Ground no.10 by the assessee relates to telescoping benefit. We have already decided this issue in preceding paragraph. Therefore, this doesn’t require adjudication and the ground raised by the assessee is allowed.

79. Ground no.11 being general in nature is dismissed.

ITA No.9158/Del/2019 (AY 2017-18)

80. The ld. Counsel for the assessee has raised following grounds:-

1. Because the action for initiation, continuation and conclusion of assessment proceedings u/s 153A at an amount of Rs 57,92,503/- is being challenged on facts & law.

3. Because the action is being challenged on facts & law for making an disallowance of purchases amounting Rs. 1,05,98,837/- @ 25% of Purchases amounting FIs. 4,23,95,347/- by rejecting books of accounts u/s 145(2), hence the basis of addition is against the commercial expediency, business exigency and accepted modus operandi of the business and business operations and additionally in the alternative the quantum thereof too is being disputed.

4. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,05,98,837/- on estimation basis (25% of purchases Rs. 4,23,95,347/-)overlooking and ignoring the Pleadings, Facts, Evidences, Provisions of Act, Principles of law advanced hence unsustainable addition and additionally in the alternative the quantum thereof too is being disputed.

5. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,05,98,837/- (25% of purchases Rs. 4,23,95,347/-) on the basis of Hon’ble supreme court in the case of Vijay Protein Ltd. whereas per assessee the facts of said case law is distinguishable and additionally in the alternative the quantum thereof too is being disputed.

6. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 1,05,98,837/- on the basis that no stock details submitted whereas per assessee stock register was duly submitted before AO both quantitatively as well as qualitatively and the stock physically tallied with the books of account on the date of search.

7. Because the action is being challenged on facts and law for making addition of Rs. 1,05,98,837/- on account of disallowance of purchases considering whole purchases amounting Rs. 4,23,95,347/- as bogus purchases whereas per assessee documents in support of genuine purchases has been duly submitted and AO has verified the said parties too and additionally in the alternative the quantum thereof too is being disputed.

8. Because the action is being challenged on facts and law for making addition on account of commission expenses amounting Rs. 2,33/174/-.

9. Because the action is being challenged on facts and law for making addition of Rs. 25,46,324/- u/s 69C r.w.s 115BBE on account of incentive paid for business exigencies and commercial expediency and additionally in the alternative the quantum thereof too is being disputed.

10. Because the action is being challenged on facts and law for making addition of Rs. 6,00,000/- U/S 69A r.w.s 115BBE on account of unaccounted income overlooking the submissions and books of account of assessee company.

11. Because the action is being challenged on facts and law for making addition of Rs. 13,32,207/- U/S 69C r.w.s 115BBE on account of unexplained expenditure overlooking the submissions and books of account of assessee company.

12. Because the action is being challenged on facts and law for making addition of Rs. 9,80,410/- U/S 69A r.w.s 115BBE on account of unexplained income overlooking the submissions of assessee company.

13. Alternatively and without prejudice to above, the action for not allowing telescoping of addition on account of u/s 69A, 69C & commission expenses against addition on account of bogus purchases is challenged on facts and law as both additions cannot be made simultaneously.

81. The ld. Counsel for the assessee did not press grounds of appeal no. 1 and 2 for which the ld. DR has no objection. Accordingly, the grounds 1and 2 raised by the assessee are dismissed as not pressed.

82. Ground no.3 to 7 relates to the order of the ld. CIT(A) in confirming the disallowance of Rs.1,05,98,837/-being 25% of the purchases amounting to Rs.4,23,95,347/-by rejecting the books of accounts u/s 145(3) of the Act and directing the Assessing Officer to restrict the disallowance to 20% in cases the parties are found to be in existence by Ward Inspector.

83. After hearing the both the sides, we find the above grounds are identical to grounds of appeal no.9 to 13 in ITA No.9153/Del/2019. We have already decided this issue and the grounds raised by the assessee has been partly allowed wherein we have directed the Assessing Officer to restrict the profit on such bogus purchases at 2% of the total purchases. Following similar reasonings, we direct the Assessing Officer to restrict the disallowance at 2% of the bogus purchases. The grounds raised by the assessee are accordingly partly allowed.

84. Ground no.8 by the assessee relates to the order of the Ld. CIT(A) in sustaining the commission expenses of Rs.2,33,174/-.

85. After hearing both the sides, we find the above ground is identical to the ground of appeal no 14 in ITA No.9153/Del/2019 wherein we direct the Assessing Officer to restrict the disallowance to Rs.50,000/- lump sum on estimate basis. Following similar reasoning, we direct the Assessing Officer to restrict the addition to Rs.50,000/-. The above ground by the assessee is partly allowed.

86. Ground no.9 relates to the order of the Ld. CIT(A) in confirming the addition of Rs.25,46,324/- on account of incentive paid for business exigencies and commercial expediency.

87. After hearing both the sides, we find the above ground is identical to the ground of appeal no 14 in ITA No.9157/Del/2019. We have already decided this issue and restored the issue to the file of the AO for fresh adjudication. Following the similar reasoning, we restore the issue to the file of the AO for fresh adjudication including the benefit of telescoping. The ground raised by the assessee is accordingly allowed for statistical purposes.

88. Ground No.10 relates to the order of the Ld. CIT(A) in sustaining the addition of Rs.6 lakhs made u/s 69C of the Act.

89. After hearing both the sides, we find during the search at premise 17/6, Hanspal Industrial Complex, Mathura Road, Faridabad, Page-99 of Annexure-A7 was seized which contain the payment received from M/s Defy Motors, Gurgaon. The AO asked the assessee to furnish the details of payment. In absence of any satisfactory explanation from the assessee and observing that during the course search proceedings, Ms. Jyoti Bisht had admitted on oath in her statement that the payment of Rs.6 lakhs was received from M/s Defy Motors Guragaon as advance but not recorded in the books of accounts of the related concerns, the AO made addition of Rs.6 lakhs to the total income of the assessee as unaccounted income u/s 69A of the Act.

90. In appeal, the ld. CIT(A) upheld the action of the Assessing Officer.

91. Aggrieved with such order, the assessee is in appeal before the Tribunal.

92. We have heard the rival arguments made by both the sides and perused the records. We do not find any infirmity in the order of the Ld. CIT(A) in sustaining the above addition. Admittedly, the addition was made on the basis of seized document Page-99 of Annexure-A7, which contains the payment of Rs.6 lakhs received from M/s Defy Motors, Gurgaon and the same was not recorded in the books of accounts. Further, there is no entry showing reduction of Rs.85,238/- from the amount of Rs.6 lakhs. Ms. Jyoti Bisht had also admitted on oath in her statement that the payment of Rs.6 lakhs was received from M/s Defy Motors Guragaon as advance. She has also stated that the amount of Rs.85,238/- had been reduced from the advance because work of equivalent amount was done and bill was issued for the same. Since, neither the advance of Rs.6 Lakhs nor the bill for work of Rs.85,238/- was found recorded in the books of accounts, we do not find any infirmity in the order of the Ld. CIT(A) in sustaining the addition of Rs.6 lakhs. Accordingly, the order of the Ld. CIT(A) is upheld. Ground raised by the assessee on this issue is dismissed.

93. Ground no.11 by the assessee relates to the order of the ld. CIT(A) in sustaining the unexplained expenditure of Rs.13,32,207/- u/s 69C of the Act.

94. After hearing both the sides, we find the AO made addition of Rs.13,32,207/- on the basis of seized document Annexure A12 which contains details of salary paid to employees of the assessee. The above seized document reflects disbursement of Rs.13,32,207/- on account of salary in cash for the month of November, December 2016 and January, 2017. The assessee could not give any satisfactory reply for which the AO made addition of Rs.69C of the Act. This has been upheld by the ld. CIT(A).

95. After hearing both the sides, we do not find any infirmity in the order of the ld. CIT(A) on this issue in absence of any satisfactory explanation given by the ld. Counsel for the assessee even before us. However, the contention of the ld. Counsel for the assessee for giving telescoping benefit is accepted. We, therefore, while sustaining the addition of Rs.13,32,207/-, direct the AO to give benefit of telescoping to the assessee in view of the decision of Hon’ble Delhi High Court in the case of CIT vs.Sonal Construction reported in [2013] 359 ITR 532 (Del.). This ground raised by the assessee is accordingly partly allowed.

96. Ground no.12 by the assessee relates to the order of the ld. CIT(A) in confirming the addition of Rs.9,80,410/-u/s 69A of the Act.

97. Facts of the case in brief are that during the course of search proceedings, certain documents were sized from the premise 17/6, Hanspal Industrial Complex, Faridabad. One paper containing details of cash received and issued was seized amounting to Rs.9,80,410/-. The AO therefore asked the assessee to explain the same. The assessee submitted that the said papers contain cash balance & expenses incurred on incentive and salary paid to employees at various places. It was explained that the cash generated out of billing grey market purchases were used for incurring the business expenditure. However, the AO was not satisfied with the arguments advanced by the assessee and noted that the assessee failed to show that the transactions are recorded in the books of accounts. He, therefore, invoked the provisions of section 69A of the Act and made addition of Rs.9,80,410/-.

98. In appeal, the ld. CIT(A) upheld the addition made by the AO by observing as under:-

“26.11. Sixth addition is of Rs. 9,80,410/-. This addition has been made on account of a seized papers having details of cash payments and receipts. During the search an statement of Shri Kuldeep, an employee of the appellant who was having custody of these (seized) paper was recorded. He deposed that these papers were having entries of cash receipts and payments and were handed over to him by Shri Sandeep Isher, ASM (Haryana). There is no entry of these receipts and payments in books of accounts. Before the AO the appellant could not produce any plausible explanation regarding the entries made in these seized papers. Therefore, the AO made addition u/s 69A. This addition has been contested vide ground No. 11. Even during the present appellate proceedings, the AR could not give any plausible explanation as to why this receipt/expenditure was not recorded in books. Therefore, I find no reason to interfere in the action of AO. In view of above discussion, in principle, this ground (No. 11) is dismissed.

99. Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal.

100. After hearing both the sides, we do not find any infirmity in the order of the ld. CIT(A) in sustaining the addition of Rs.9,80,410/-, the reasons of which have already been reproduced in the preceding paragraph. The ld. Counsel for the assessee also could not give any satisfactory explanation as to how the order of the Ld. CIT(A) is wrong. We, therefore, uphold the order of the ld. CIT(A) on this issue. The ground raised by the assessee on this issue is dismissed.

101. Ground no.13 by the assessee relates to telescoping.

102. After hearing both the sides we find the above ground is identical to ground no. 15 in ITA No.9153/Del/2019. We have already decided this issue and the benefit of telescoping is allowed. Therefore, following similar reasoning, the above ground by the assessee is allowed.

103. Ground No.14 being general in nature is dismissed.

104. In the result, appeals filed by the assessee for AY 2012-13 to 2015-16 are partly allowed and appeals for AY 2016-17 and 2017-18 are partly allowed for statistical purposes.

Order pronounced in the open court on 11.02.2022.

Tags: Bogus purchases