Nishant Kumar Aggarwal vs ITO Ward -28 (5)

PER AMITABH SHUKLA, AM

This appeal filed by the Assessee is directed against the order of Ld. Commissioner of Income Tax(Appeals)/NFAC, Delhi, dated 01.12.2025 arising out of assessment order dated 27.01.2025 passed under section 147 r.w.s. 143(3) r.w.s. 144B of the Act for the Assessment Year 2019-20. The word ‘Act’ herein this order would mean Income Tax Act, 1961.

The first issue on merits of the addition, raised by the appellant in the impugned appeal is regarding an addition of Rs.40 lakh deleted by the ld. CIT(A) which was made by the ld. Assessing Officer. As per brief factual matrix of the case, the assessee had filed Return of Income of Rs.36,22,060/-. The Department was seized of the information that the assessee was one of the beneficiaries of accommodation entry provided by one Shri Sanjay Jain. The assessee reportedly was running a proprietorship firm which was working as a contractor for Delhi Police. Before the Ld. Assessing Officer, it was admitted that assessee had no business relations with Shri Sanjay Jain. The Department, however, analyzed the seized documents found from search u/s 132 conducted upon Shri Sanjay Jain and its associates. It was alleged that Shri Sanjay Jain and its associates used to bogus sales invoices to beneficiary parties and that there was in reality no actual transfer of goods. M/s Laxmi Associates was one such bogus entity operated by Shri Sanjay Jain. The ld. Assessing Officer noted that the appellant assessee had obtained a bogus accommodation entry from Laxmi Associates operated by Shri Sanjay Jain, amounting to Rs.40 Lakhs and had shown at purchases. The ld. Assessing Officer not satisfied with the submissions/explanations made by the assessee added to Rs.40 lakhs as bogus purchases made by the assessee. During the year, the assessee had shown total purchases of Rs.6,56,72,273/- and sales of services of Rs.8,48,67,605/-. The amount of Rs.40 lakhs was part of the total of Rs.6,56,72,273/-. In appeal, the ld. CIT(A) rejected the explanations put-forth by the assessee and confirmed the addition.

Heard rival parties and perused the material available on records.

Assailing the appellate order on the merits of the case, it is the case of the ld. Counsel for the assessee that the ld. CIT(A) has not fully appreciated the facts of the case and confirmed the addition on erroneous finding. It was argued that all the transactions of purchase are fully vouched and that the transactions were routed through banking channels. The appellant has argued that it has no connection with Shri Sanjay Jain and that it transacted with Laxmi Associates as a business entity. The ld. Counsel argued that its books of account have not been rejected by the ld. Assessing Officer and hence the decision of impugned addition was untenable. Alternatively, it was further argued that the ld. Assessing Officer has considered and taxed, the sales component qua the impugned purchases of Rs.40 lakhs and therefore entire purchases could not have been added back. It was argued that at best the ld. Assessing Officer ought to have added the profit element in the said purchases.

The ld. DR placed reliance upon the order of lower authorities.

We find force in the arguments of the appellant assessee that when the sales have been accepted in totality, which are inclusive of the purchases of Rs.40 Lakhs declared as bogus and also in the absence of books of accounts, the Assessing Officer ought to have added the profit element embedded in the alleged bogus purchases. We have further noted that the order of ld. Assessing Officer qua relationship between assessee and Shri Sanjay Jain is primarily based upon report of Investigation Wing. Be that as it may be, we are of the considered view that considering the overall peculiar facts of this case, ends of justice would be met, if profit component in the impugned purchases is done. We accordingly estimate a profit of Rs.4 lakhs in the said alleged bogus purchases of Rs.40 Lakhs. We, therefore, confirm the addition of Rs.4 lakhs and direct the ld. Assessing Officer to delete the balance addition of Rs.36 lakhs with a rider that the same shall not be treated as precedent. Accordingly, the appeal of the assessee is partly allowed.

The appellant has raised legal grounds of appeal challenging the legality of the assessment order on the premise of Assessing Officer allowing him time of only 30 days to file the Return of Income as well as jurisdictional insufficiency of Ld. Assessing Officer to issue notice u/s 148 of the Act. As we have decided the issue on merits of the case and have given significant relief to the assessee by exceeding to its request of only taxing the profit element of the alleged bogus purchases, the legal ground raised by the assessee have become academic in nature and hence left open.

In the result, the appeal of the assessee is partly allowed.