TMI Blog2021 (10) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... y accordingly. It is also made clear that this profit rate is only for the impugned year for the assessee and cannot be considered as a precedent for other years or for any other assessee. The ground raised by the assessee on this issue is accordingly partly allowed. Addition u/s 68 in respect of share capital - It is an admitted fact that the share capital was invested by the Directors and this is the first year of the incorporation. Therefore, in the year of incorporation the assessee-company in our opinion cannot have income from undisclosed source towards introduction of share capital and addition, if any, could have been made in the hands of the Directors - therefore, set aside the order of the Ld. CIT(A) on this issue and direct the A.O. to delete the addition. - ITA. No. 6561/Del./2019 - - - Dated:- 30-9-2021 - SHRI R.K. PANDA, ACCOUNTANT MEMBER For the Assessee : Shri Rajiv Saxena, Advocate Ms. Sumangla Saxena, Advocate For the Revenue : Shri R.K. Gupta, Sr. D.R. ORDER This appeal filed by the Assessee is directed against the Order Dated 28.06.2019 of the Ld. CIT(A)-28, New Delhi, relating to the A.Y. 2015-2016. 2. Facts of the case, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 20,64,853/- which has not been disclosed in the income tax return. Since the assessee has already disclosed income of ₹ 2,25,633/-, the A.O. made addition of ₹ 18,39,223/- to the total income of the assessee under section 68 of the I.T. Act, 1961 being the difference. The A.O. further made addition of ₹ 1 lakh to the total income of the assessee being the share capital received treating the same as income from undisclosed sources under section 68 of the I.T. Act, 1961. Thus the A.O. determined the total income of the assessee at ₹ 21,64,860/- as against ₹ 2,25,633/- returned by the assessee. 2.2. In appeal, the Ld. CIT(A) upheld both the additions made by the A.O. So far as the addition of ₹ 18,39,223/- made by the A.O. under section 68 of the I.T. Act, the Ld. CIT(A) sustained the addition by observing as under : 4. I have considered the facts of the case, basis of additions made by AO and submissions of the appellant. So far as the 2nd and 4th grounds related to the addition of ₹ 18,39,223/- are concerned, it can be seen from the assessment order that during the assessment proceedings, appellnat failed to provide any details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant are dismissed. 2.3. Similarly, the Ld. CIT(A) sustained the addition of ₹ 1 lakh made by the A.O. under section 68 of the I.T. Act on account of share capital by observing as under : 5. The Ground No.3 pertains to the addition of ₹ 1,00,000/- made by AO u/s 68 of the Act. As it is clear from the assessment order, appellant failed to give any details/evidence in respect of share capital of ₹ 1,00,000/- introduced in the company during the year under consideration. Since no details were given by appellant explaining the nature and source of share capital, AO was justified in treating the amount of ₹ 1,00,000/- as unexplained u/s 68 of the IT Act. The ground taken by appellant fails. 3. Aggrieved with such Order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following revised grounds : 1. That the Ld. Commissioner of Income Tax (Appeals) has erred both in law as well as on facts in upholding the order of assessment passed by the AO at an assessed income of ₹ 21,64,860 as against the income returned at ₹ 2,25,633/-, thereby making additions to the tune of ₹ 19,39,223/-. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withdraw all or any grounds herein or add any further grounds as may be considered necessary either before or during the hearing of these grounds. 3.1. The Learned Counsel for the Assessee strongly challenged the order of the Ld. CIT(A) in sustaining the addition made by the A.O. He submitted that the assessee is engaged in the business of trading in cloth where no tax was leviable and so small traders were engaged from different States where most of the textile mills are situated. He submitted that after the introduction of the GST, the small traders started leaving the trade and assessee has to face difficulties in his business for making purchases from the mills who were represented by the small traders. He submitted that during the course of assessment proceedings, the assessee had produced all the sales and purchase bills which were examined by the A.O. However, despite all efforts by the A.O. as well as the assessee the traders from whom the assessee had purchased the goods could not be traced and, therefore, could not be produced. He submitted that since the A.O. was insisting the assessee to produce the parties from whom goods were purchased which the assessee could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the assessee in the instant case failed to produce the parties before the A.O. despite being specifically asked since the notices issued under section 133(6) of the I.T. Act were returned unserved. The Inspector also could not locate the parties. Referring to the assessment order, he drew the attention of the Bench to the various anomalies pointed-out by the A.O. and the modus operandi adopted by the assessee for arranging such bogus bills. He accordingly submitted that in the facts and circumstances of the case, the addition made by the A.O. and sustained by the Ld. CIT(A) is justified. So far as the addition of ₹ 1 lakh on account of share capital is concerned, the Ld. D.R. relied on the order of the A.O. and the Ld. CIT(A). 5. I have considered the rival arguments made by both the sides, perused the order of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. I have also considered various the decisions cited before me. I find the A.O. in the instant case noted that the assessee has shown to have purchased goods of ₹ 41,24,01,230/- from 12 parties, the details of which are already given in the preceding paragraph. I find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doption of net profit @ 0.5% appears to be on higher side. Considering the totality of the facts and circumstances of the case and in the interest of justice, I am of the considered opinion that adoption of net profit rate of 0.075% under the facts and circumstances of the present case will meet the ends of justice. I hold and directly accordingly. It is also made clear that this profit rate is only for the impugned year for the assessee and cannot be considered as a precedent for other years or for any other assessee. The ground raised by the assessee on this issue is accordingly partly allowed. 5.2. So far as the addition of ₹ 1 lakhs under section 68 of the I.T. Act, 1961 in respect of share capital is concerned, it is an admitted fact that the share capital was invested by the Directors and this is the first year of the incorporation. Therefore, in the year of incorporation the assessee-company in my opinion cannot have income from undisclosed source towards introduction of share capital and addition, if any, could have been made in the hands of the Directors. I, therefore, set aside the order of the Ld. CIT(A) on this issue and direct the A.O. to delete the addition. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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