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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
The above captioned appeal by the Revenue and Cross Objection by the assessee is preferred against order of the ld. Commissioner of Income Tax (Appeals) – NFAC, Delhi dated 19.03.2025 under section 250 of the Act arising from the assessment order dated 28.03.2023, passed by the Assessing Officer under Section 147 read with section 144B of the Income Tax Act, 1961 (‘the Act’) concerning Assessment Year 2018-19.
Since the underlying facts are common in the cross objections of the assessee and Revenue and pertain to same assessee, they were heard together and are disposed of by this common order for the sake of convenience and brevity.
The grounds raised by the Revenue are as under :
i.“That the CIT(A) has erred in law and on the facts and circumstances of the case in reducing the addition made by the A0 to the 10% of Rs.19,71,14,431/- i.e. Rs.9,71,14,431/-.
ii.That the CIT(A) has erred in law and on the facts and circumstances of the case in deleting the addition of Rs.15,71,19,244/- made under section 68 of the Act and treating the bogus accommodation entry of sales as unexplained cash credits.
iii.That the CIT(A) has erred in law and on the facts and circumstances of the case in deleting the addition of Rs.3,99,95,200/- on account of bogus purchases and disallowed and added back to the total income of the assessee.
iv.That the appellant craves to add, amend or modify the grounds of appeal subsequently, before the appeal is disposed of.”
Brief facts of the case are that the assessee is found to be in the business of Wholesale and Retail Trading/Manufacturing of Rice. Assessee had filed return of income under section 139(1) of the Act on 31.10.2018 for A.Y. 2018-19 declaring total income of Rs.1,35,56,960/-which was accepted under section 143(3) of the Act. On the basis of certain information with regard to bogus sale/purchases, the case of the assessee was reopened under section 148 of the Act culminating in assessment under section 147 r.w.s 144 of the Act dated 28.03.2023 addition on account of bogus purchases of Rs 3,99,95,200/- and on account of bogus sales of Rs 15,71,19,244, assessing the total income at Rs.21,10,71,404/-. In appeal, the CIT(A) restricted the addition to 10% of the total bogus transactions i.e. Rs.1,97,11,443/-.
Aggrieved by the restriction, the Revenue is before us. The assessee has also filed a Cross Objection against the additions sustained challenging the proceedings u/s 148 and addition of 10% of the bogus transaction.
We find that the CIT(A) has decided the issue as under:
“6.In this case, the AO received information regarding bogus sale and purchase undertaken by the appellant amounting to Rs.19,71,14,431 through concerns promoted by accommodation entry operator Ashok Kumar Gupta.
6.1In his statement recorded on 30.11.2018, during Survey u/s 133A, Shri Ashok Kumar Gupta S/o Late Sh. Hukam Chand Gupta, R/o C-602, SF Majlis Park, Adarsh Nagar, Delhi 110033 affirmed that he had provided accommodation entry through entities, Mahavir Prasad Suresh Kumar and Kalki Trading Company among others.
6.2During assessment, the AO issued notices u/s 133(6) Mahavir Prasad Suresh Kumar and Kalki Trading Company. However no replies were received to these notices.
6.3The argument of the appellant is that all transactions are duly recorded in the books. However the purpose of "accommodation entry" is to give bogus transactions the colour of legitimacy by routing them through bank accounts and books. In the present case, the appellant has failed to furnish any evidence to challenge the findings of the AО.
6.4Accommodation entry or bill providing is necessitated when traders have stock which is not billed and sales which is not invoiced. Through such black market transactions the traders receive a higher margin of profit. In such a situation there is no logic in treating the entire suspicious purchase/sales as income. In the present case, ends of justice will be served by assessing income at 10% (A higher margin of profit than the gross profit rate in the books which is 3.94%) of the suspicious transactions. Therefore, I sustain addition of Rs.1,97,11,443 (10% of 19,71,14,431) under the head business. Addition made u/s 68 and 69C are deleted. Reference may be to PCIT vs Surya Impex [2023] 148 taxmann.com 154 (Guj-HC); PCIT vs Sunil Mittal HUF [2024] 164 taxmann.com 709 (Guj-HC) and PCIT vs Ashwin Purushottam Bajaj [2023] 155 taxmann.com 478 (Bom). Grounds 2 to 6 are partly allowed.”
In such facts and circumstances of the case, we are of the considered view that there is no interference warranted in the decision of the CIT(A) except the percentage applied on the profit embedded in the bogus sales/purchase transactions. We are of the opinion that it would meet the end of justice if the gross profit on the transactions related to bogus sales/purchase is reduced to 5% as against 10% held by the CIT(A). The appeal is decided accordingly in these very terms. Appeal of Revenue is dismissed while that of the CO of the assessee is partly allowed.
In the result, appeal of the Revenue in ITA No. 3061/Del/2025 is dismissed while the CO No.232/Del/2025 of the assessee is partly allowed.