Manoj Vasudeo Pardasany (HUF) vs DCIT

Per Manish Agarwal, Accountant Member:

The present appeals have been filed by the assessee and the Revenue against the order dated 22.04.2025 passed by ld. CIT(A)-27, New Delhiin DIN & or der No . IT BA/AP L/M/250/2025-26/1075769115(1)passed u/s 250 of the Income Tax Act, 1961 (“the Act”) arising from the Assessment Order dated 31.03.2023 passed u/s 153C r.w.s. 143(3) of the Act pertaining to assessment year 2020-21.

Brief facts of the case are that the search and seizure action u/s 132 of the Act was carried out in case of DNC group wherein various documents pertaining to the assessee were found and seized. According ly, the proceedings u/s 153C of the Act were initiated in the case of the assessee HUF. The assessee is proprietor of M/s MVP Consults and as per the AO, assessee mainly working for Shapoorji Pallo nji Group for booking bogus expenses and siphoning of funds and generating of cash. During the course of search, statement of vario us persons were recorded u/s 132(4) of the Act. The AO thus recorded the satisfaction thatthe assessee had provided accommodation entries in the shape of b ogus bills of consultancy and job work charges. Statements of assessee are recorded u/s 132 (4) on01.11.2019 and 05 .11.2019 where in it is admitted he had arranged bogus contracts and work orders for siphoning funds by Shapoorji Pallo nji and M/s Afcon Infrastructure Ltd. and L&T who generate cash. Thereafter, the assessee has retracted fro m the state ments recorded by stating that they were given under pressure and threat w hich was no t accepted by the AO . The AO thereafter referred certain statements o f the employees of the assessee and the auditors wherein it is observed that no docume nts were provided for actual services. Thereafter , during the course of assessment proceedings, the AO issued various notices u/s 142(1) of the Actwhich were replied by the assessee.

After Considering the facts and the statements recorded of various persons and the bills based on job well charges and other consultancy services issue d by the assessee to vario us companies, the AO co ncluded that the assessee has provided accommodation entries to various entitiesand take the average profit o f 12% based on the profit show n in preceding 5 years and applying the same to the gross receip ts declared by the assessee resulting into the addition of Rs.4,84,20 ,531/-for the year under appeal.

The ld. CIT(A) in terms of the order dated 22.04.2025 has confirmed the initiation of proceedings u/s 153C of the Act. However, has reduced the estimation of income by reducing the GP rate at 6% as against GP rate 12 % applied by AO and according ly the addition is reduced from Rs.4,84,20,531/- to Rs.1 ,47,98,514/- after reducing the profits of Rs. 1,88,23,686/-declared by the assessee.

Against the said order, both the parties are in appeal before the Tr ibunal. In assessee’ sground of appeal number 1 , the assessee has challenged theinitiation of proceedings u/s 153C of the Act. Before us, ld. AR for the assessee submits that AO of the person sear ched has recorded his satisfaction on 06.12.2021 by the DCIT, Central Circle-31, Delhi and the case of the assessee was centralized with the same Assessing officer who issued the notice u/s 153C of the Act. Ld. AR submits that the satisfactio n note recorded has no t specifically stated that docume nt pertain to the assessee and no year wise bifurcation of income w as there. He therefor e submits that without proper satisfaction note, the proceedings initiated u/s 153C deserves to be hold bad in law.

On the other hand, ld . C IT-DR vehemently supported the order of the AO and ld. CIT(A) and sub mits that the satisfaction was properly recorded and the ld. CIT(A) has d iscussed this issue in length in para 5 of its order and requested for the confirmatio n of the same.

Heard the parties and perused the material availab le on record. It is observed that fro m the perusal of the satisfaction note available in the papers filed, the Assessing Officer has referred the documents found andseized during the course of search on DNC group and after considering the entr ies contained therein, had recorded the satisfaction that these docume nts per tained to the assessee and has a bearing on the determinatio n of the total income of the assessee. Accordingly, we find no error in initiation of proceedings u/s 15 3C of the Act in the case of the assessee. The ground of appaela No. 1 of the assessee is thus dismissed.

The grounds of appeal Nos. 2 to 4 of the assessee's appeal and ground number 1 to 3 of the Revenue are with respect to the estimation of income . The AO has applied 12% profit rate on the gross receipts declared by the assessee and the assessee has challenged the actio n of the ld. CIT( A) in reducing the same to 6% arbitrarily.

Before us, ld. AR submits a detailed written submission wherein it is stated that the rejectio n of books of accounts is unwarranted and further submits thatthe commission @ 12 % is very high as well as 6% uphold b y ld. CIT(A) is also very high. Ld. AR submits that nowhere in the se ized material loose papers and documents, it is noted that assessee has received any commission. He further submits that whe n all the bills and vouchers referred as incriminating material wer e recorded in the books of accounts and profit thereof wascompleted form the same which has already been d isclosed in the return o f income filed, no further additio n is required to be made. He thus prayed for the deletio n of t he addition.

On the other hand, ld . CIT-DR submits that, the assesseehimself in the statements recordedduring course of search had ad mitted that he had provided accommodation entries in the shape of bills to Shapoorji Pallonji and other groups. Though the said state ments were retracted later, however, it constitutesthe material and accordingly based on which the AO had taken the view that assessee was engaged in providing accommodation entries. Ld. CIT-DR further submits that theld. C IT(A)was fair e nough in allowing relie f to the assessee by reducing the rate of profit from 12 % to 6%.and further reduce the declared income o ut of the income estimated, thus requested for the confirmation of the additions upho ld by the ld. CIT(A).

Heard the parties and perused the material availab le on record. Though, the case of the assessee is that no document whatsoever was found which could be held as incriminating material for making the additions in the order passed u/s 153C of the Act. However, it is observed that the bills and the corresponding entries in the books of accounts referred by the assessee has been accepted as bogus accommodation entry by the assessee himself in the statements recorded during the cour se of search. It is further observed that at the later stage, tho se statements were retracted. However, assessee has failed to explain the cir cumstances under which those stateme nts were retracted. Therefore, the documents so fo undand coupled with the preliminary state ments of the assessee cannot be brushed aside. Further, the statements of third party i.e. the accountant and the auditor, w herein they have accep ted that no actual transactio ns were carr ied out and the books were prepared on the basis of the bills provided by the assessee. We find no error in the order of ld. CIT(A) in invoking the provision section 145(3) of the Act. Now coming to the estimatio n of income, it is observed thatin preceding assessment years, the gross sale s of the assessee w as r anging fro m Rs.6 2,00,000/- to Rs.19,00,00 ,000/- whereas in the year under appeal the tur nover was of Rs.56 crores which was achieved after inclusion of the bogus accommodation entr ies. It is further observed that the average GP rate o f these years comes to 12.55 % as against which AO had applied 12% profit rate whereas ld. CIT( A) has reduced it to 6%. Claim of the assessee is that in case these sales have been treated as accommodation entries, only the commission for providing the accommodation e ntries could be added and it is a common knowle dge that commission could not be of such a high rate . After considering the overall facts and circumstances of the case, in our considered opinion, the estimation done by the AO @12% seems to be on very higher side. Further, the ld. CIT(A) has reduced 12% to 6% wherein the ld. CIT( A) has referred the submission of the assessee that business profits ranging fro m 3 to 6%. Thus, considering overall circumstances, we further reduced the profit rate to 5%. Accordingly , the AO is directed to recompute the income of the assessee by applying the pr ofit rate of 5% on the gross receipts and reduced the inco me already declared by the assessee, thus the income computed as stated above is sustained and remaining addition is deleted. Grounds of appeal Nos. 2 to 4 of the assessee are partly allowed and ground s of appeal Nos. 1 to 3 of the revenue are dismissed.

In the result, the appeal of the assessee is partly allowed and the appeal o f the Revenueis d ismissed.