TMI Blog2021 (8) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases for computing the additional gross profit that should have been earned by the assessee. The assessee has produced the copies of the paper book, which are placed before the learned CIT A wherein he has verified the details of the material sold, quantity sold with respect to the various bills placed in those paper books and found that the comparison of the gross profit made by the learned assessing officer is not comparable. Another argument of the learned departmental representative is that the subsequent year s acceptance of the book results by the learned assessing officer cannot help the case of the assessee in deleting the addition in those years, which are in appeal. We find that the subsequent years assessments are also completed u/s 143 (3) of the act and no addition has been made by the learned assessing officer. Admittedly in subsequent years there was no seized material available and the learned assessing officer has not extrapolated the gross profit in subsequent years, which he did for the impugned years in the appeal, however the acceptance of the subsequent years gross profit shows that the books of accounts prepared by the assessee are acceptable. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has erred in law and on facts in wrongly interpretating the judgment of Hon ble Delhi High Court which allowed only the assessment proceedings to go on and not any subsequent appellant proceedings and the Ld. CIT(A) has wrongly decided the appeal on the assessment order, which was still sub-judice before the Hon ble High Court. 5. That the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in holding that the AO was not justified to make the addition of GP as no incriminating material was found during search without appreciating that the AO has made addition based on seized/incriminating documents in respect of cash transfers/bogus purchases. 6. That the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in deleting the addition of ₹ 1,58,08,552/- made by AO by enhancing gross profit rate 24.38% as against 9.53% declared by the assessee without appreciating the fact that the addition made by AO was duly based on documents found during the search which reflected bogus purchases/cash transactions. 7. That the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in holding that there was no justification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application u/s 245C before the settlement commission on 15/2/2012, which was found by order dated 17/4/2013 as not valid. Therefore, the learned assessing officer preceded with the assessment proceedings. The assessee filed a writ petition before the honourable Delhi High Court for stopping the assessment proceedings, which was later on withdrawn, therefore assessment proceedings continued. 8. During the course of search, it was found that assessee is engaged in inflating its purchases through bogus purchase bills taken from the accommodation entry providers. During the financial year 2006 07 and 2007 08 assessee has shown purchases of scrap from the various firms owned and controlled by Mr. Rakesh Gupta, and three others [accommodation entry providers]. The AO noted that there are seven firms from which the assessee has obtained bogus purchase bills. During the course of search and seizure operation u/s 132 in the case of Mr. Rakesh Gupta and three others, it was found that these persons are engaged in the business of providing accommodation entries through bogus purchase bill from firms owned and controlled by them. They have admitted in the statements recorded u/s 132 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs were produced for verification. Therefore, he rejected books of accounts of the assessee applying the provisions of Section 144 of the income tax act. He further noted the gross profit ratio of the assessee for the respective years. He noted that instances of purchases and sales is found recorded in the tally software and documents seized during search shows much higher gross profit rate compared to the gross profit rate shown by assessee. He noted that gross profit ratio shown from instances of sales and purchases is between 11% 37% whereas the assessee is showing gross profit rate of 9.53% during the assessment year 2005 06 as per its books of accounts. He further looked at the account of Mr. Sanjay Gupta wherein the cash transactions are recorded. Based on the above findings he found that the purchase from M/s SS traders of ₹ 52,103,871 and ₹ 68,485,845 respectively during financial year 2009 10 and financial year 2008 09 and from Shriram enterprises is of ₹ 162,785,970/ during the financial year 2009 10 are bogus purchases and these are merely accommodation entry in the form of bogus purchases. He noted that assessee has also failed to furnish de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of the suppressed gross profit comes to ₹ 1 58,08,552. Accordingly, this addition was made in the hands of the assessee for AY 2005-06. He also made an addition u/s 14 A of the act of ₹ 23,419. Accordingly, the return of income filed by the assessee of ₹ 1,244,410 was assessed at ₹ 1 70,76,300/ by order passed u/s 153A read with Section 143 (3) read with Section 144 of the Act on 21st of June 2013. 10. The assessee aggrieved with this order preferred an appeal before the learned CIT A. The assessee challenge before the learned CIT A that during the search no incriminating material was found which was rejected by the learned CIT A holding that once the search has been conducted u/s 132 of the income tax act 1961, AO is mandatorily required to issue notice u/s 153A of the act for the specified 6 years. Therefore, this ground of appeal was dismissed. Assessee also challenged that the assessee has not been issued valid notice u/s 143 (2) of the act, this ground was also dismissed. The assessee also challenged the assessment arguing that the same is barred by limitation. This argument was also rejected. The assessee also contested that the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted that all the information, details and documents required by him were furnished by the assessee x. In the subsequent assessment made u/s 143 (3) for assessment year 2012 13 and 2013 14 the gross profit rate of 11.82% and 9.42% have been accepted. Accordingly, he deleted the addition of ₹ 1,58,08,552 made by the assessing officer. 12. With respect to the disallowance u/s 14A of the income tax act made by the learned assessing officer of ₹ 23,419/ , the CIT A observed that the assessee has earned tax-free dividend income of only ₹ 23,419. He noted that in the original assessment proceedings the AO has accepted the suo motu disallowance made by assessee of ₹ 1587 and during the course of search no incriminating document was found, therefore, following the decision of the honourable High Court in CIT versus Kabul Chawla (61 taxmann.com 412) he deleted the disallowance. 13. Therefore, the LD learned assessing officer is aggrieved with the order of the learned CIT A has preferred this appeal as per the grounds of appeal. 14. The learned CIT DR for explained the facts of the case stating that the search in case of the assessee took p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee during this year otherwise the assessee would not have gone to the settlement commission for settlement of the dispute by offering additional income. He further referred to the paper book stating that at t page number 8 in paragraph number 12 of the paper book it is clearly shown that entries are given for the period in 2005 also. He also referred to the various questions and answers given by the accommodation entry providers in their statements. He further stated that simultaneously searches were conducted at the premises of the assessee and accommodation entry provider. Therefore the decision relied upon by the learned CIT A for holding that there is no incriminating material found during the course of the search relying on the decision of the honourable Delhi High Court is not applicable to the facts of the present case he therefore submitted that there are incriminating material is in the statement given by the accommodation entry providers and therefore it is improper for the learned CIT A to hold that there is no incriminating material found during the course of search. He relied on the decision of the honourable Delhi High Court in case of Anil Bhatia, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urable Delhi High Court in case of CIT versus Kabul Chawla 61 taxmann.com 412. He also pressed into service the decision of the honourable Delhi High Court in case of Principal Commissioner of Income Tax Versus Mita Gutgutia 82 taxmann.com 287 as well as Principal Commissioner Of Income Tax Versus Best Infrastructure India Private Limited 84 taxmann.com 287. He further relied upon the decision of the honourable Supreme Court in case of CIT versus Sinhgad technical education society 84 taxmann.com 290. He further referred to the decision of the coordinate bench in case of Dharampal Premchand Ltd versus DCIT 2016 (2) TMI 197 also on the same principle. Therefore he submitted that so far as the assessment years 2005 06 to assessment year 2008 09 are concerned they are being beyond the scope of the jurisdiction of Section 153A and therefore the addition of gross profit made by the learned assessing officer is deserves to be deleted. He further referred to the several judicial precedents of the coordinate benches for this proposition. He further relied upon the decision of the coordinate bench in 219 TMI 1393 SMC power generation. With respect to the statement, he referred to the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer or before the learned CIT (A) and there is no merit in the argument of the assessee with respect to the declared gross profit. He submitted that comparative details are compared by the AO as alleged by the learned CIT A is devoid of any merit as the learned CIT A did not have any information before him. He further submitted that the learned assessing officer has taken for the working out of the gross profit nearby dates. With respect to the argument of the learned authorised representative that in subsequent years the learned assessing officer has accepted the gross profit of the assessee, he submitted that subsequent years are not search years and therefore it does not make any difference that in those years the learned assessing officer has accepted the book results of the assessee. He submitted each assessment year is separate. He submitted that there is no evidence against the assessee of obtaining accommodation entries by bogus purchases in those years and therefore AO has not disturbed those results. 21. We have carefully considered the rival contention and perused the orders of the lower authorities as well as the paper book furnished by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/12/2007 2 2006 07 13/11/2006 30/9/2007 No assessment is made u/s 143 (3) 3 2007 08 30/10/2007 30/9/2008 4 2008 09 29/9/2008 30/9/2009 25. Based on the above information, it is apparent that for all these above years, if there is an addition required to be made by the learned assessing officer, that should be based on the incriminating material found during the course of search, pertaining to the impugned assessment year, otherwise, any addition made in the above four years deserves to be deleted as those assessment years do not abate. 26. We have also carefully perused the assessment order and find that the learned assessing officer has not referred to in the seized material for the assessment years 2005 06 to assessment year 2008 09, which are found during the course of search. 27. Ld AO has merely relied upon the documents seized during the course of search for financial y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified in making the addition of gross profit as has been made by him. 31. Before us, no incriminating material was shown by revenue. Of the accommodation entry providers who have stated in the statement that the assessee has been provided accommodation entries during the financial year 2005 06 also. We have carefully considered this aspect and find that the learned assessing officer has recorded the statement of Mr. Vishesh Gupta on 26th of April 2010. The question number five was asked to the gentleman that whether during the last six years he has also provided accommodation sale/purchase bills to parties and if yes to provide complete details of such transactions. In response to this, he answered that the various entities and proprietorship concerns are providing accommodation entries in the form of sale/purchase bills to various parties since the year 2005 in particular he mentioned the name of three parties, which included the name of the assessee also. Based on this the revenue contends that the statement itself is an incriminating material. However, no corroborative material with respect to the statement of Mr. Vishesh Gupta was shown. Therefore, now the only issue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted the addition where the searches have been carried out on the same date i.e. on 26/4/2010. These two decisions of the coordinate benches bind us. 35. Thus, it is apparent that there is no incriminating material based on which the income of the assessee can be disturbed or enhanced for these assessment years found during the course of search. Accordingly, the orders of the learned CIT A deleting the addition is on account of suppressed gross profit for all these years are upheld. 36. Coming to the merits of the addition, of suppressed gross profit the learned CIT A has deleted the addition for all these years from assessment year 2005 06 to assessment year 2009 10 holding as Under:- 11.1 Even otherwise on merit, I find no justification in the methodology of assessing officer in applying the G.P. Rate of 24.38%. The sales and purchases being compared by the A.O. are not comparable. The A.O. has compared the purchases of scrap (Desi Lead) with sale of finished good (Refined). The appellant is dealing in different items and there is no justification in applying uniform G.P. Rate to all products. In my opinion, the A.O. s action of applying uniform G.P. Rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % and assessment year 2009 10 at the rate of 6.66%. These gross profit rates are excluding the additional income offered by the assessee. The facts also placed before us shows that for assessment year 2011 12 onwards the gross profit rate of the company is better than earlier years. The learned assessing officer has enhanced the gross profit rate for all these years to 24.38% and made the addition. The allegations of the learned assessing officer is that as per the seized documents the gross profit rate of the assessee is much higher than what has been disclosed by the assessee. The seized materials pertain to assessment year 2010 11. The learned assessing officer has recorded the instances of purchase and sales are found in the tally software and documents seized during the search. The learned assessing officer computed the average of the gross profit rate of the several instances which are also stated in the chart reproduced by the learned CIT A in his order. The learned AO computed the gross profit rate at 24.38%, which is derived on the basis of two gross profit rates of 11% and 37.76%, calculated by the AO on the basis of instances of sales and worked out an average of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has produced the copies of the paper book, which are placed before the learned CIT A wherein he has verified the details of the material sold, quantity sold with respect to the various bills placed in those paper books and found that the comparison of the gross profit made by the learned assessing officer is not comparable. 39. Another argument of the learned departmental representative is that the subsequent year s acceptance of the book results by the learned assessing officer cannot help the case of the assessee in deleting the addition in those years, which are in appeal. We find that the subsequent years assessments are also completed u/s 143 (3) of the act and no addition has been made by the learned assessing officer. Admittedly in subsequent years there was no seized material available and the learned assessing officer has not extrapolated the gross profit in subsequent years, which he did for the impugned years in the appeal, however the acceptance of the subsequent years gross profit shows that the books of accounts prepared by the assessee are acceptable. The gross profit ratio of the subsequent years is also not of much difference compared to the years i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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