TMI Blog2023 (4) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was utilized against the purchases from M/s Biotor Industries Ltd. There cannot be any addition under section 68 of the Act in the given facts and circumstances for the bogus purchases shown by the assessee. What best can be added in the given facts and circumstances is the real income which has been earned by the assessee. To determine the real income, there is no standard formula prescribed under the provisions of law. We direct the AO to delete the addition made by him. Hence, the ground of appeal of the revenue is hereby dismissed. - ITA Nos. 2463/AHD/2018 ITA No. 2464/AHD/2018 - - - Dated:- 22-3-2023 - SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER For the Revenue : Shri A.P.Singh, CIT, D.R For the Assessee : Shri Deepak R. Shah, A.R ORDER PER WASEEM AHMED , ACCOUNTANT MEMBER : The captioned two appeals have been filed at the instance of the Revenue against the separate orders of the Learned Commissioner of Income Tax (Appeals)-2, Ahmedabad, of even dated 31/10/2018 arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shown by it in the financial statements. Thus, the AO proposed to make the amount of sale shown by the assessee to M/s KGN Industries Ltd amounting to Rs. 52,02,48,035/- as unexplained cash credit under section 68 of the Act. 4.2 However, the assessee during the assessment proceedings admitted that it is engaged in providing accommodation entries by carrying out circular transactions. As such the assessee against the sales as discussed above has claimed to have shown purchases from the company namely M/s Biotor Industries Ltd. for an amount of Rs. 51,93,23,847/-. The fact that the assessee is engaged in circular transaction, was admitted by the VAT department in the course of survey conducted in the case of M/s Biotor Industries Ltd. Accordingly, the assessee contended that whatever amount was received by it was transferred to M/s Biotor Industries Ltd. against the purchases. As such the assessee was not the beneficiary of the fund received by it against the sale of goods to KGN Industries Ltd. The assessee in support of its contention has also filed the order of the VAT department wherein it was held that the assessee is engaged in the circular transactions. 5. However, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned CIT-A. 7. The assessee before the learned CIT-A, while reiterating the submissions made before the AO further contended that all the ledger accounts, sales register, purchase registers etc. were filed which were not considered by the AO at the time of framing the assessment. As the assessee was engaged in the activity of circular transaction, the amount of bogus purchases of ₹ 51,93,23,847/- cannot be treated as unexplained cash credit under section 68 of the Act. 7.1 The assessee without prejudice to the above further submitted that the assessee has earned an income by engaging in the accommodation entries at the rate of 0.20% of the sales amount recorded in the books of accounts. Therefore, the addition should be restricted to ₹ 10,40,496/- being 0.2% of ₹52,02,48,035/- which can be added after adjusting the income already declared by the assessee being ₹ 1,16,308/- to the total income of the assessee. 8. The learned CIT-A after considering the submission of the assessee and the assessment order allowed the appeal of the assessee in part by observing as under: 3.4. The appellant during the year has shown purchase of Rs.51,93,23,847/- from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KGN Industries Ltd. 4,00,00,000/- --- 27/07/2009 Biotor Industries Ltd. --- 4,00,00,050/- 28/07/2009 KGN Industries Ltd. 4,00,00,000/- --- 28/07/2009 Biotor Industries Ltd. -- 4,00,00,050/- 29/07/2009 KGB Industries Ltd. 4,00,00,000/- --- 29/07/2009 Biotor Industries Ltd. --- 4,00,00,050/- 30/07/2009 KGN Industries Ltd. 4,00,00,000/- --- 30/07/2009 Biotor Industries Ltd. --- ₹ 4,00,00,050/- 31/07/2009 KGN Industries Ltd. 4,00,00,000/- --- 31/07/2009 Biotar Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Birla Gwalior Pvt. Ltd. [89 ITR 266] and C1T, Bombay City 1 Vs. Shoor]i Vallabhdas Co. in 46 ITR 144 has laid down that if is the real income which is taxable under the Income Tax Act. in view of the above, only real income as reflected in the books of account and. bank statement is to be taxed. Accordingly, The disallowance of bogus purchases of Rs.51,93,23,847/- made u/s. 68 of the Act is not sustainable. 3.7. The appellant in the process of being middle man has only earned income of Rs.9,24,188/- being difference of sale and purchase. The appellant in the return of income has shown loss of Rs.1 ,25,878/- by claiming operating and general expenses of Rs.10,59,757/-. As the appellant has not done any real business, the above expenses are not allowable. In view of the above, the addition made by AO to the extent of Rs.14,59,757/- is being confirmed. The ground of appeal is accordingly partly allowed. 9. Being aggrieved by the order of the learned CIT-A, the revenue is in appeal before us. 10. The learned DR before us repeated the findings of the AO contained in the assessment order and the grounds of appeal raised by the Revenue. 11. On the contrary, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not the position here. It has been the consistent stand of the assessee which has been accepted by the First Appellate Authority and affirmed by the Tribunal that the business of the assessee centered around customers/beneficiaries making deposits in cash amounts and in lieu thereof taking cheques from the assessee for amounts slightly lesser than the quantum of deposits, the difference representing the commission realized by the assessee. The cash amounts deposited by the customers i.e., the beneficiaries had been accounted for in the assessment orders of these beneficiaries. Therefore, question of adding such cash credits to the income of the assessee, more so when the assessee was only concerned with the commission earned on providing accommodation entries does not arise. 12.2 It is also important to note that the assessee being engaged in the circular transactions/ one of conduit in accommodation entries can be made subject to tax based on real income theory. It is for the reason that the assessee was not the beneficiary of the amount received by it on the sales made to the KGN Industries Ltd. As such the amount of sales received by the assessee was utilized against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NK Industries (supra). The assessee being NK Indusries Ltd was not engaged in circular transaction by way of providing accommodation entries for commission. In that case, the assessee was one of the beneficiary of the accommodations entries which were provided by the other parties whereas in the case on hand the assessee is middleman and engaged in the circular transaction. Thus, in our humble understanding we are of the view that the principles laid down by the Hon ble Gujarat High Court in the case of NK Industries (supra) cannot be applied in the given facts and circumstances. 12.6 In view of the above and after considering the facts in totality, we do not find any reason to interfere in the finding of the learned CIT-A. At the time of hearing the ld. DR has not brought anything on record contrary to the finding of the ld. CIT-A. Accordingly, we uphold the same and direct the AO to delete the addition made by him. Hence, the ground of appeal of the revenue is hereby dismissed. 12.7 In the result, the appeal filed by the revenue is dismissed. Coming to ITA No. 2464/Ahd/2018, an appeal by Revenue in the case of KFC Exports Pvt. Ltd. 13. The revenue has raised foll ..... X X X X Extracts X X X X X X X X Extracts X X X X
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