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Judgment
PER MANISH AGARWAL, A.M.:
The present appeal is filed by assessee against the order dated 19.12.2025 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. NFAC/2018-19/10460968 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 20.03.2025 passed u/s 147 r.w.s. 144B of the Act pertaining to Assessment Year 2019-20.
Brief facts of the case are that the assessee is a Private Limited Company, engaged in the business of trading and marketing of sanitary wares, fittings, accessories, wooden flooring, tiles and other allied items and declared total income of INR 1,25,50,310/- in the return of income filed for the year under appeal. The return was processed u/s 143(1) of the Act. The AO had information that the assessee has entered into fictious transaction of INR 4,16,44,220/- with one Mr. Aman Kumar [M/s. Standard Global Services] and accordingly, proceedings u/s 148A were initiated. Thereafter, the order was passed u/s 148A(d) of the Act wherein it was alleged that the assessee has entered into a transaction with Mr. Aman Kumar of INR 4,16,44,220/- which is on account of bogus purchases and therefore, the income to this extent has escaped assessment and accordingly, notice u/s 148 was issued. In response the assessee has filed the return of income declaring same income as was declared in the return filed u/s 139(1) of the Act. Thereafter, the AO has proceeded to complete the assessment wherein the AO has simply reproduced the order passed u/s 148A(d) of the Act and by alleging that assessee has entered into a transaction with Mr. Aman Kumar which was not the genuine transaction and made the addition of INR 24,98,653/- being commission @ 6% alleged as paid for obtaining the accommodation entry of bogus purchases from Mr. Aman Kumar. AO further observed that though in the year under appeal, no expenditure was claimed on account of alleged purchases however, in subsequent year proceedings, since this transaction is held as not genuine, the assessee is not entitled to claim the purchases and benefit of section 41(1) of the Act.
Aggrieved by the said order, assessee is in appeal before ld. CIT(A) who confirmed the addition made by the AO and rejected the appeal of the assessee.
Aggrieved by the order of Ld. CIT(A), the assessee is in appeal before the Tribunal by taking following Grounds of appeal mentioned in the appeal memo:-
1)“On the facts and in the circumstances of the case and in law, the order of Ld. Lower Authorities is bad in law & against the facts and circumstances of the case and hence is unsustainable.
2)On the facts and in the circumstances of the case the AO and the Ld. CIT (A) is erred in law and not justified in sustaining the action of the AO for re-opening the case without having any tangible and valid material on record. As such, the notice issued u/sec. 148 of the Act is bad in law and not sustainable.
3)On the facts and in the circumstances of the case the AO and the Ld. CIT (A) is erred in law and not justified in sustaining the action of the AO for addition of unaccounted commission on arbitrary basis without having any evidence, tangible and valid material on record. The additions have been made on surmises and conjectures and have no merit.
4)On the facts and circumstances of the case and in law, the CIT (A) erred in sustaining addition of Rs. 24,98,653 of unaccounted commission on business advances paid treating the same as non-genuine transaction, purely on arbitrary basis without having any evidence, tangible and valid material on record. Thus, the said addition is liable to be quashed.
5)On the facts and circumstances of the case and in law, the CIT (A) erred in sustaining addition of Rs. 24,98,653 of unaccounted commission at the rate of 6.00 percent purely on arbitrary basis without having any evidence, tangible and valid material on record. Thus, the said addition is liable to be quashed.
6)On the facts and in the circumstances of the case Ld. CIT (A) is erred in law and not justified in sustaining the action of the AO on account of unaccounted commission at the rate of 6.00 percent on arbitrary basis without having any evidence, tangible and valid material on record. The additions have been made on surmises and conjectures and have no merit. Thus, the said addition is liable to be quashed.
7)That the Ld. AO and Ld. CIT(A) erred on the facts and circumstances of the case and in law in initiating the penalty proceedings under section 270A(9)(a) r.w.s. 274 of the Income Tax Act, 1961.”
Ground of appeal No.1 raised by the assessee is general in nature hence, not adjudicated.
In respect of Ground of appeal No.2, ld.AR for the assessee submits that in the order passed u/s 148A(d), the satisfaction was recorded for escapement of income of INR 4,16,44,220/- being advance given to one Shri Aman Kumar alleged as suspicious and bogus transactions with the intention to obtain bogus purchases. Ld.AR submits that advance was given for import of tiles and due to non-cooperative attitude, the assessee has cancelled the order and asked Mr. Aman Kuamr to refund the amount of advance paid. Since the amount has been given as advance against the purchases therefore, the same was appearing in the Balance Sheet under the head ‘loans & advances against the supplies’. Ld.AR submits that no expenditure whatsoever was claimed and advance given was purely a business transaction therefore, there is no question of making addition on account of commission. Ld.AR further submits that since the satisfaction was recorded of bogus purchases of INR 4,16,44,220/- when no addition was made in respect of the advance paid as per the satisfaction of escapement of income recorded in the reason for reopening and therefore, AO has no jurisdiction to go beyond the reasons recorded and made the addition on any other issue. He therefore, prayed for the deletion of the addition so made. For this, Ld.AR for the assessee placed reliance on the judgment of Hon’ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. reported in [2011] 331 ITR 236 (Bom. HC) and judgement of the Hon’ble Jurisdictional High Court in the case of Ranbaxy Laboratory Ltd. vs CIT reported in 336 ITR 136 (Delhi).
On the other hand, ld. Sr. DR vehemently supported the orders of the lower authorities and submits that it was established that Mr. Aman Kumar was engaged in the business of providing accommodation entries and had received funds from many parties and have absconded therefore, the transactions carried out with him is dubious transaction and cannot be held as genuine business transaction. Accordingly, it was prayed that the addition had rightly been made by the AO on account of payment of commission on alleged accommodation entry which is linked with the satisfaction recorded of alleged bogus purchases and therefore, requested for the confirmation of the proceedings initiated u/s 148 of the Act.
Heard the contentions of both the parties and perused the material available on record. From the perusal of the material supplied alongwith the order passed u/s 148A(d) of the Act. The AO alleged that the assessee has entered into the dubious transaction of INR 4,16,44,220/- with Mr. Aman Kumar based on the information available at Insight Portal of the assessee company as supplied to the assessee and reproduced at page 3 of order. The analysis of the same as done by the AO is reproduced as under:-
Further in the order passed u/s 148A(d) of the Act in para 3 & 4 , the satisfaction is recorded of bogus purchases of INR 4,16,44,220/- shown in the year under appeal from M/s. Standard Global Services alleged as paper company. The relevant observations in para 4 of the said order are as under:-
4.“However, as per records, the assessee company has not responded to the said show-cause notice till the time allowed as per the notice and even not responded till the date of passing this order. In absence of any submission or explanation from the assessee M/s SBG Design Pvt Ltd, prima-facie it is presumed that it has nothing to say about the bogus purchases made from the paper company operated by Sh. Aman Kumar. Hence, the bogus purchases of Rs. 4,16,44,220/- shown during the F.Y. 2018-19 relevant to A.Y. 2019-20 from paper company, M/s. Standard Global Services remains unexplained on part of the beneficiary assessee.”
However, while framing the assessment, the AO has made the addition of INR 24,98,653/- being commission @ 6% alleged as paid to Shri Aman Kumar of M/s. Standard Global Services for obtaining accommodation entries of bogus purchases of INR 4,16,44,220/- and no addition whatsoever was made with respect to the satisfaction recorded of bogus purchases of INR 4,16,44,220/-. The Hon’ble Jurisdictional High Court in the case of Ranbaxy Laboratory Ltd. (supra) has held that “no addition could be made on any other issue when no addition was made for which satisfaction of escapement of income was recorded in the reasons for reopening.”
Further, the Hon’ble Bombay High Cort in the case of Jet Airways (supra) has expressed the same view and held that “where no addition was made on the issue for which proceedings u/s 147 were initiated, the AO has no jurisdiction to go beyond the reasons and made the addition on other issues.”
In the instant case, as observed above, in the reasons were recorded, satisfaction was reached of the escapement of income of INR 4,16,44,220/-being the amount of advance given to M/s. Standard Global Services of Shri Aman Kumar alleged as paid for obtaining accommodation entries of bogus purchases. However, no addition was made on account of any bogus purchases and the addition was made of alleged commission paid for obtaining the accommodation entries of bogus purchases. Under these circumstances, by respectfully following the aforesaid judgments of Jurisdictional High Court in the case Ranbaxy Laboratory Ltd. (supra) and Hon’ble Bombay High Court in the case of Jet Airways (I) Ltd. (supra), we are of the opinion that no addition was made on the issue of which satisfaction of escapement of income was recorded in the reasons for reopening, no addition could be made on the issue beyond the reasons so recorded. Accordingly, addition made by the AO is hereby, deleted. Ground of appeal No.2 raised by the assessee is allowed.
Since we have allowed legal Ground of appeal No.2 raised by the assessee, the other Grounds of appeal became academic and hence, not adjudicated.
In the result, appeal filed by the assessee is allowed.