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TMI Blog2023 (5) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee submitted that they would be taking ITA No. 507/PUN/2020 for A.Y. 2003-04 as the lead year in respect of the appeals preferred by the assessee. That further, he submitted that whatever grounds are not pressed in the lead year the same grounds are also not pressed for other years also. Similarly, the effective grounds as per the lead year are also the effective grounds for all other years of appeal by the assessee. In this background, the ld. Counsel for the assessee appraising this Bench regarding grounds of appeal in the lead year for A.Y. 2003-04 submitted that ground No. 1 is not pressed. After hearing the submissions of the ld. Counsel for the assessee, ground No. 1 is therefore, dismissed as not pressed. 5. The ld. Counsel for the assessee also submitted that ground No. 4 is general and that they have also raised additional grounds No. 5 and 6 which are also general in nature. That again, the assessee has taken one more additional ground No. 4 which also they are not pressing. After hearing the submissions of the ld. Counsel, ground No. 4 is also dismissed as not pressed. The only effective grounds are grounds No. 2 & 3 in the grounds of appeal of the assessee wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axes thereon have been paid. However, in the year under consideration, no such payment was estimated nor reflected in the return of income despite the cash withdrawal of Rs. 2,92,05,000/- for F.Y. 2002-03 relevant to A.Y. 2003-04. That, in response to the summons issued u/s 131 of the Act, to the assessee seeking information regarding cash withdrawal from assessee's account with Federal Bank, Pune, the assessee vide letter dated 22-08-2006 submitted that the cash withdrawn were utilised for making payment to its suppliers for supply at a reasonable/lower rates. It was admitted by the Director of the assessee in his sworn statement recorded u/s 131 of the Act that there was only one supplier viz. M/s. Innovative Print Forms Ltd., Mumbai to whom cash payments were made and that BBIL was only the bulk purchaser of the assesse company. The assessee's sales comprised of 98% to BBIL. The A.O had completed assessment u/s 143(3) r.w.s. 147 of the Act. The re-assessment proceedings were initiated with the report of the Investigation Wing of the department and based on this inquiry further action was taken by the A.O for this year. 7. In the case of one of the suppliers of BBIL i.e. SDPL th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases at Rs. 17,27,593/- and added to the income of the assessee u/s 40A(3) of the Act on protective basis. 8. The action of the A.O therefore, comprised of the addition made of Rs. 14,75,734/- for administration charges and also adding direct expenses of Rs. 29,55,925/- (comprising of wages and factory expenses of Rs. 17,23,719 + freight expenses Rs. 12,32,206/-). Therefore the A.O has made total addition of Rs. 44,31,659/- (Rs. 17,23,719 + Rs. 12,32,206/- + Rs. 14,75,734/-) on account of bogus transactions. In addition to this, the A.O has also disallowed u/s 40A(3) of the Act on protective basis of Rs. 17,27,593/- during the year under consideration. 9. The matter travelled to the stage of first appellate authority and therein the ld. CIT(A) during the proceedings as per the reasons enshrined in his order held that the books of account of the assessee were not credible and therefore, rejecting the same u/s 145 of the Act estimated the net income of the assessee at 5% of the estimated genuine turnover of Rs. 1,62,37,163/-. Therefore, the net income was estimated at Rs. 8,11,858/- as profit on own business. Thereafter, the ld. CIT(A) also adjudicated on the addition made u/s 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate addition u/s 40A(3) of the Act can be made. The ld. Counsel also relied on the decision of Hon'ble Madhya Pradesh High court in the case of CIT Vs. Purshottamlal Tamrakar Uchehra (2004) 270 ITR 0314 wherein the Hon'ble Madhya Pradesh High Court observed that once the net profit rate is applied while determining the income of the assessee then section 40A(3) of the Act is not applicable. The ld. Counsel submitted that in the case of the assessee, the ld. CIT(A) while rejecting the books of accounts u/s 145 of the Act has determined the net income of the assessee @ 5% of the genuine turnover and this particular fact is accepted by the assessee and therefore, the ground raised before the Tribunal in respect of this issue has not been pressed by the assessee accepting such determination of income @ 5% of the genuine turnover. Having said that as per the judicial pronouncements placed on record there is no scope for any further disallowance u/s 40A(3) of the Act or for that matter no other expenses can be disallowed separately. Therefore, the ld. CIT(A) instead of reducing the disallowance made by the A.O u/s 40A(3) from 20% to 7.6% and sustaining the addition of Rs. 1,31,297/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 40A(3) of the Act making separate addition on protective basis. Whatever additions are to be made are always based on facts and circumstances involving the relevant transactions and the Act does not support any addition based on mere assumption and hypothetical belief. Coming to the order of the ld. CIT(A), he had rejected the books of accounts of the assessee u/s 145 of the Act and arrived at net income of 5% of the estimated genuine turnover. Thereafter also, regarding the addition u/s 40A(3) he has reduced such addition to 7.6% on substantive basis and retained the disallowance of Rs. 1,31,297/- during the year under consideration. Before the ld. CIT(A) also inspite of opportunities provided the assessee could not submit any evidences or documents to justify and demonstrate genuinity of transaction of purchases and corresponding sales to BBIL. Thereafter, the ld. CIT(A) proceeded to reject the books of account of the assessee as not credible and arrived at the income as per percentage of the turnover. We are of the considered view that once the books of accounts of the assessee are rejected u/s 145 of the Act and the net income is determined on the basis of percentage of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of the assessee. Ground No. 2 of assessee's appeal is allowed. 14. In ground No. 3, the assessee is aggrieved by the action of the ld. CIT(A) in considering the commission received @ 1% of the sales to BBIL. This issue of addition on receipt of commission is not emanating from the assessment order. The ld. CIT(A) in fact in his order has observed that the assessee being one of the suppliers to BBIL providing accommodation entry and showing bogus sales and purchases must be receiving some commission for the services to BBIL. Therefore, the ld. CIT(A) estimated the receipt of commission @ 1% on the bogus sales turnover and added to the income of the assessee. That, for adjudication of this issue, we take guidance from the decision of Hon'ble Jurisdictional High Court in the case of Pr. CIT Vs. Alag Securities Pvt. Ltd. in Income-tax Appeal No. 1512 of 2017, order dated 12th June 2020 on absolute similar and identical facts on the issue of accommodation entry. In this case, regarding the receipt of commission, it was observed and held by the Hon'ble Jurisdictional High Court as follows: "18. Since Tribunal had relied upon its own decision in the case of M/s. Goldstar Finvest Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal held that CIT (A) made no mistake in arriving at the impugned decision which was in conformity with the position taken by the Tribunal in all the cases pertaining to the said group of entities. Thus, order of the CIT (A) was affirmed and appeal of the Revenue was dismissed. 20. We are in agreement with the view taken by the Tribunal. In a case of this nature Section 68 of the Act would not be attracted. Section 68 would come into play when any sum is found credited in the books of the assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by the assessee is not in the opinion of the Assessing Officer satisfactory. In such a situation the sum so credited may be charged to income tax as the income of the assessee of the relevant previous year. But that 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. 18. In the result all the appeals preferred by the assessee are partly allowed. 19. Now, we shall adjudicate the cross appeals preferred by the revenue in ITA No. 301/PUN/2021 to 303/PUN/2021 for A.Y. 2004-05 to A.Y. 2006-07. 20. It is observed at the outset that all these cross appeals filed by the revenue are time-barred by 308 days. This delay is covered during the period of covid pandemic and as per the decision of the Hon'ble Supreme Court in Cognizance for Extension of Limitation, In re 438 ITR 296 (SC) read with judgment in Cognizance for Extension of Limitation, In re 432 ITR 206 (SC) dated 08-03-2021 and 421 ITR 314 the said delay is condoned and all these cross appeals are admitted for hearing and decided on merits. 21. The ld. D.R. submitted that ITA No. 301/PUN/2021 for A.Y. 2004-05 may be taken as the lead year in respect of these appeals filed by the revenue. In all these cross appeals, the revenue is aggrieved by the action of the ld. CIT(A) reducing the disallowance u/s 40A(3) of the Act. The revenue has also taken a ground that when the segregation of direct expenses of the assessee relate to genuine turnover and bogus turnover is not possible then, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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