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Judgment
PER RENU JAUHRI :
The above captioned two appeals are preferred by the Revenue against the order dated 31.12.2024, passed by Ld. CIT(A), Delhi u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as, “Act”).
At the threshold, it is noted that the Appeals are time-barred by 7 days. Applications for condonation of delay along with an affidavit has been filed by the Revenue.
The appeals relate to the assessment made u/s 147 r.w.s 143(3) and to the same A.Y. Therefore, these are being disposed of vide a common order. Although the grounds raised in both the appeals are different.
Revenue in ITA No. 2281/DEL/2025 has raised grounds of appeal are reproduced as below:
“1.Whether on the facts and circumstances of the case, Ld. CIT (A) has erred in not appreciating the findings of search and post search proceedings?
2.Whether Ld. CIT (A) has erred in overlooking the facts that during the course of the search action Sh. Manish Gupta had accepted on oath u/s 132(4) of the Income Tax Act, 1961 that entity namely M/s MK Traders (PAN: AGCPC7151N) was managed and controlled by Sh. Manish Gupta and the said entity was bogus and involved in providing accommodation entries?
3.Whether on the facts and circumstances of the case, Ld. CIT (A) has erred in not appreciating the findings of the search wherein statement of Sh. Manish Gupta was recorded on oath u/s 132(4) of the Act on 01.11.2018 and he had accepted that he had charged commission ranging 0.5 to 1% percent on facilitating RTGS and cash transactions to his beneficiaries?
4.Whether in the facts and circumstances of the case Ld. CIT (A) has erred in upholding that the assessee had purchased fabric from M/s MK Traders, however, Sh. Manish Gupta had accepted on oath u/s 132(4) of the Act that he was involved in trading of rice and other grains and apart from this he was also involved in providing accommodation entries? 5. Whether on the facts and circumstances of the case, Ld. CIT (A) has erred in not appreciating the findings of the search as well as assessment proceedings wherein it was established that entities M/s SM Traders and M/s Vee Kay Enterprises were bogus?
6.Whether on the facts and circumstances of the case, Ld. CIT (A) has erred in upholding that there is no abnormal change in the purchase expenses of Gift & Novelties over the years and these purchases were accepted by the department in the earlier years, however, the assessee had booked expenses against M/s SM Traders and M/s Vee Key Enterprises in the month of Feb & March 2019 only and no such expenses were booked before 01.04.2018 and after 31.03.2019 from these parties?
7.The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
Revenue in ITA No. 2282/DEL/2025 has raised following grounds of appeal.
“1.Whether on the facts and circumstances of the case, Ld. CIT (A) has erred in not appreciating the findings of search and post search proceedings?
2.Whether Ld. CIT (A) has erred in overlooking the facts that during the course of the search action Sh. Manish Gupta had accepted on oath u/s 132(4) of the Income Tax Act, 1961 that entity namely M/s MK Traders (PAN: AGCPC7151N) was managed and controlled by Sh. Manish Gupta and the said entity was bogus and involved in providing accommodation entries?
3.Whether on the facts and circumstances of the case, Ld. CIT (A) has erred in not appreciating the findings of the search wherein statement of Sh. Manish Gupta was recorded on oath u/s 132(4) of the Act on 01.11.2018 and he had accepted that he had charged commission ranging 0.5 to 1% percent on facilitating RTGS and cash transactions to his beneficiaries? 4. Whether in the facts and circumstances of the case Ld. CIT (A) has erred in upholding that the assessee had purchased fabric from M/s MK Traders, however, Sh. Manish Gupta had accepted on oath u/s 132(4) of the Act that he was involved in trading of rice and other grains and apart from this he was also involved in providing accommodation entries?
5.Whether on the facts and circumstances of the case, Ld. CIT (A) has erred in not appreciating the findings of the search as well as assessment proceedings wherein it was established that entity namely M/s Krishna Traders was managed and controlled by Sh. Kanhaiya Lal, and the said entity was bogus and involved in providing accommodation entries?
6.The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.
In ITA No. 2281/DEL/2025
Brief facts of this case are that a search action u/s 132 of the Act was carried out in the case of the assessee along with Kent RO Group on 02.12.2021. Pursuant to centralization of the case, a notice u/s 148 was issued on 19.10.2022 in response to which the assessee filed return for A.Y. 2019-20 on 16.11.2022, declaring total income of Rs. 4,64,70,940/-. Assessment was completed u/s 147 r.w.s 143(3) at an income of Rs. 6,03,32,862/- after making the following additions:
Disallowance of bogus business promotion expenses: Rs. 33,47,210/-
Disallowance of bogus purchases claimed by taking accommodation entries: Rs. 1,05,14,712/-
Aggrieved, the assessee preferred an appeal before Ld. CIT(A).
Appeal of the assessee was partly allowed by the Ld. CIT(A) after restricting the addition of Rs. 1,05,14,712/- to Rs. 7,36,030/- and of Rs. 33,47,210/- to Rs. 2,34,305/- after estimating the suppression of profit @ 7% in respect of impugned transactions.
Aggrieved with the order of Ld. CIT(A), revenue has filed an appeal before the Tribunal.
Before us, Ld. DR has submitted that the impugned transactions had been shown to be bogus on the basis of information /evidences gathered during the course of search as well as during post search enquiries conducted by the Ld. AO. He has taken us through the detailed reasons stated in the assessment order for making the impugned order and argued that the entire amount of bogus transactions deserves to be upheld.
On the other hand, Ld. AR has argued that the Ld. CIT(A) has rightly allowed part relief to the assessee after applying profit rate @ 7% which in line with the prevailing market trend in this line of business. Moreover, he pointed out that for A.Y. 2020-21, on similar facts and circumstances, the identical rate applied by the Ld. CIT(A) in respect of purchase of gift items has been accepted by the department and no further appeal has been filed against it. A copy of the order has also been placed before us.
We have heard the rival submissions and considered the material available on record. We note that Ld. CIT(A) has estimated the profit @ 7% in the impugned transaction after considering the following factual matrix:
The purchases, sales, opening and closing stock declared by the assessee have not been distributed in the assessment order. Books of accounts have also not been rejected.
ii) Similar expenses have been incurred by the assessee over the years since A.Y. 2016-17 and these have been accepted by the Department.
iii) Nothing was found during search to show that the impugned purchases were bogus.
In view of the above facts, Ld. CIT(A) concluded that at best it could be said that the assessee had purchased the material from gray market and received bills from agents to suppress profits. He, therefore, held that the suppressed profit computed @ 7% only should be taxed and not the entire purchases of Rs. 1,64,51,765/-. Similarly, with regard to purchase of gifts and novelties, Ld. CIT(A) has observed that such expenditure has been accepted by the department in all the earlier years. Ld. AO has not disputed the fact that the gifts and novelties have been distributed. No fault has been found with the books of accounts and relevant documents filed by the assessee.
Accordingly, Ld. CIT(A) estimated the suppression of profits in respect of the bills for purchase of gift items totaling Rs. 33,47,210/- also @ 7%.
In view of the reasoned order passed by the Ld. CIT(A), we find no reason to interfere with the same and, therefore, revenue’s appeal is, hereby, dismissed.
In ITA No. 2282/DEL/2025
In view of identical facts and circumstances in this case which is a sister concern of M/s Alliance Advertising and Marketing Law, the decision taken in ITA No. 2281/Del/2025 shall apply mutatis mutandis to this case also. Hence, the appeal preferred by the revenue for A.Y. 2019-20, is also hereby dismissed.
In the result, both the appeals of the revenue are dismissed.