M/s. Mahabira Exporters vs ACIT

PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :

These two captioned appeals have been filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals)-NFAC, Delhi [‘CIT(A)’ in short] dated 09.12.2015 arising from the assessment order of the Assessing Officer under section 147 of the Income tax Act, 1961 (hereinafter referred as ‘the Act’) dated 19.05.2023, for the Assessment Years 2016-17 & 2017-18.

Since the above captioned appeals were heard together and the facts in issues are identical, all these appeals are being disposed of by this common order for the sake of convenience and brevity.

The grounds raised by the assessee are as under :

Brief facts of the case are that assessee is a firm engaged in the business of precious and semi-precious jewellery, gold jewellery, diamond jewellery, silver, silver jewellery and allied products. During the year under consideration, assessee filed its return of income on 17.10.2016 declaring total income of Rs.9,870/- for A.Y. 2016-17. No regular assessment was ever made in this case for the assessment year 2016-17. The AO had certain information in his possession procured from the ITBA and Insight Portal that the assessee had taken bogus accommodation entries from entities controlled by Rajeev Singh Kushwaha. These entities do not carry out any real business and the assessee has indulged to get bogus sales/purchases of Rs. 1,68,54,918/- from Himalaya International and Rs. 66,47,953/-Magnum Tradex Pvt. Ltd. as per their books of account for F.Y. 2015-

The AO, subsequently, passed an order under section 144 r.w.s. 147 r.w.s. 144B of the Act at a total income of Rs. 1,68,63,990/- for the assessment year 2016-17 on account of unexplained Cash Credit u/s. 68 r.w.s. 115BBE of the Act. Aggrieved, assessee was in appeal before CIT(A), the learned CIT(A) upheld the addition of Rs. 1,68,54,119/- u/s 68 r.w.s. 115BBE of the Act. Aggrieved, assessee is before us.

At the outset, learned Counsel for the assessee stated that addition of Rs.1,68,54,119/- made by the AO u/s 69C of the Act by treating the purchases made from M/s. Magnum Tradex Pvt. Ltd. as bogus, is wrong. The ld AR submitted that the purchases made from M/s. Magnum Tradex Pvt. Ltd. are genuine and as evidence the assessee had furnished the tax invoice, GST returns, Bank Statement and yearly and monthly stock summary.

Per contra, the ld DR relied on the orders of the CIT(A).

We have heard both the parties and perused the material available on record. In the instant case, we find that the assessee has attempted to prove the entire purchase from M/s Magnum Tradex Pvt Ltd as genuine. Although the assessee, prima facie, appears to have discharged its onus of explaining the purchase, it’s contentions to prove the purchase, hardly deserves to be accepted in entirety especially when the assessee could not prove the physical movement of goods. On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that M/s Magnum Tradex Pvt Ltd is genuine, cannot be fully justified. In this factual matrix, there is some element of failure to explain some of the purchase, cannot be ruled out. Be that as it may, it is deemed appropriate, in larger interest of justice, that a lump-sum addition of 5% of the purchase of Rs.1,68,54,119/-amounting to Rs 8.50 lakh only would be just and proper with a rider that the same shall not be treated as a precedent, so as to cover all loopholes. The ground of appeal is partly allowed.

The facts in the instant case are identical to the facts of the case decided above, except for the name of the seller and amount involved. The decision therefore in the case of ITA 8721/Del/2025 will apply mutatis mutandis to the facts of the instant case. Further, the application of taxation under 115BBE is not permitted in view of the decision of the Madras High Court in the Writ petition in the case of S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) wherein it was held that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only.

In the result, the both the appeals of the assessee in ITA Nos. 8721 & 8722/Del/2025 are partly allowed.