SUSHIL KUMAR,DELHI vs. ACIT, CIRCLE - 22(2), DELHI

On the facts and circumstances of the case and in law, the assessing officer erred in invoking provisions of section 145(3)

Brief facts of the case are that, the Assessee filed return of income declaring total income of Rs. 95,42,440/-. The return of the Assessee was processed u/s 143(3) of the Income Tax Act, 1961 ('Act' for short). Subsequently, the case was selected for scrutiny through CASS on the reasons that ‘High liabilities as compared to low income/receipt andAssessee has made substantial purchases from suppliers who are non-filer(s)’. An Assessment order came to be passed u/s 144 r.w. Section 144B of the Act by making addition of Rs. 12,50,99,530/- by establishing the profit @ 10% on the turnover. Aggrieved by the assessment order dated 28/03/2024, the Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 10/07/2024, dismissed the Appeal filed by the Assessee. Aggrieved by the order of the Ld. CIT(A) dated 10/07/2024, the Assessee preferred the present 4.Ground No. 1 to 3 are relate to addition of Rs. 12,50,99,530/- made by the A.O. which has been upheld by the Ld. CIT(A). The Ld. Counsel for the Assessee vehemently submitted that the Ld. A.O. committed gross error in rejecting the books of account on frivolous reason and without any basis, the Ld. A.O. estimated the profit @ 10% on the sales of Rs. 1,33,64,19,742/- ignoring the fact that the accounts of the Assessee were duly audited. Further, submitted that, without pointing out any specific defect in the books of account of the Assessee,the Ld. A.O. rejecting the books of accounts and made addition. The Ld Counsel further submitted that the Assessee has produced the details of purchase, sales and stock, Item wise stock register (Qty wise and amount wise),Copy of all sales bills and e-way invoices, Copy of all purchase bills and e-way invoices, Copy of complete bank statement of all banks, Details of expenses as sought by the assessing officer, Copy of All GST returns, Details of party wise purchase and also the Details of party wise sales before the A.O. Further submitted explanation with documentary evidences in respect of each and every purchase and sale party in respect of which explanation was sought by the assessing officer were also submitted. However, the A.O. has not appreciated considered the those documents and the submission of the Assessee and made the addition which has been erroneously sustained by the Ld.

Per contra, the Ld. Departmental Representative submitted that after verification of the documents produced by the Assessee, A.O. found that the third parties/firm from which the Assessee claimed to have made the purchases were not active. In some cases, GST Number was cancelled/suspended, therefore, the purchase details submitted by the Assessee cannot be acceptable. The Ld. Department's Representative further submitted that some of the third parties/suppliers have not filed their Income Tax Return and GST Returns for the year under consideration, therefore, the documents produced by the Assessee were not believed by the Lower Authorities and rightly made the addition, which requires no interference at the hands of the Tribunal. The Ld. 6. We have heard both the parties and perused the material available on record. During the assessment proceedings, a show cause notice has been issued to the Assessee on 25/02/2024 by proposing the following additions:-

In response to the above show cause notice, the Assessee submitted reply on 01/03/2024 to the A.O. The said reply and the acknowledgement for the reply are produced before us in Page No. 7 to 10 of the Paper Book. After going through the reply filed by the Assessee, A.O. found that the explanation given by the Assessee is satisfactory and accordingly, not made any addition which has been proposed in the show cause notice dated 25/02/2024. 8. Further, the Ld. A.O. issued one more notice on 13/03/2024 proposing to make entirely different additions to that of proposed in the first Show Cause Notice dated 25/02/2024. The details of the proposed addition mentioned in the second show cause notice dated 13/03/2024 are as under:-

The A.O. issued one more show cause notice on 20/03/2024, wherein the Ld. A.O. proposed to reject the books of account of the Assessee and to compute the income by estimating the profit at Rs.

The Hon'ble juri iction Delhi High Court in the case of CIT vs. Poonam Rani (2010) 5 Taxmann.com 76 held that in the absence of any material pointing towards falsehood of accounts books, addition of gross profit and rejection of books of accounts cannot be made.

The Hon'ble juri ictional Delhi High court in the case of CIT v Paradise Holidays(2010) 325 ITR 13 (Delhi) held as under:-

In the case of Sard Metal Engineers Vs. Addl. CIT vide ITA No. 435/Del/2003,it was held that in the absence of any specific finding, rejecting the books of accounts or invoking the provisions of sec. 145 of the Act, the trading addition made by applying a higher GP rate is not 9 Sushil Kumar Vs. ACIT justified as has been held by the Hon'ble Patna High Court in the case of CIT vs. Mohd. Umer reported in 101 ITR 525. 15. It is seen from the record that the stock register was duly submitted by the Assessee on 05/11/2024 itself which has been acknowledgment by the A.O. in Page No. 4 of the Assessment Order.Further it is also found that at no point of time A.O. asked for copy of any purchase or sale bills. However, the Assessee vide reply dated 10/03/2024, even submitted the copy of invoices, copy of e-way bills etc. to the A.O. in respect of the purchase parties for which additions were proposed by the A.O. in his show cause notice dated 25/02/2024. The said fact can be corroborated with Page No. 9 & 10 of the Paper Book. Though the A.O. never asked for copy of purchase and sales bills, the Assessee vide its reply dated 21/03/2024, submitted the copy of all purchase and sales bills which is evident from Page 63 of the paper book. The purchase and sales bills submitted by the Assessee including e-way bills which are also proof of transportation have been once again produced before us right from Page No. 165 to 4135 of the paper book.

The A.O. in its assessment order observed that the trade debtors are shown as Sundry Creditors and sales have been reflected as purchase and the sales figure are not matching with the ledger copy

The Ld. A.O. has assigned one more reason for making the addition that some of the purchase parties were inactive on the GST Portal and not filed Income Tax Return. In our considered opinion, merely because some of the purchase parties are not having active GST Portal and some of them have not filed the Income Tax Return, that cannot be ground for making the addition in the hands of the Assessee. There is no legal

Even during the first appellate proceedings, the Ld. CIT(A) mentioned that the Assessee has furnished e-way bills and invoices, however, observed that the Assessee has not furnished the bank accounts. The said observation of the Ld. CIT(A) is found to be 12 Sushil Kumar Vs. ACIT erroneous as the Assessee has submitted copy of all bank statements during the assessment proceedings itself, which has been mentioned by the A.O. in Para 4.2.1 of the Assessment Order. Apart from the same, the A.O. never given any reason of non-furnishing of the bank statement while making the addition. On the other hand, Ld. A.O. made the addition on the ground that sales bills were not furnished and transportation of purchase and sales were not furnished. Even the said reasoning is also factually incorrect and contradictory as the A.O. in Para 2.4.1, mentioned that copy of all purchase and sales bills were duly submitted by the Assessee. The Ld. CIT(A) has also mentioned that e- way bills and invoices were duly submitted by the Assessee.

The Ld. A.O. while applying rate of 10% profit, not given any comparables and by making vague remarks, without assigning any reason applied the percentage. It is worthwhile to observe that the GP rate of the assessee for the year under consideration (A.Y. 2022-23) is better than GP rate of immediately preceding year. The GP Rate for the year under consideration is 1.91%, whereas it was 1.78% during immediately preceding year i.e., A.Y. 2021-22.The case of the assessee for A.Y 2021-22 was also completed u/s 143(3) of the Act vide assessment order dated 29/12/2022 in which similar business and 13 Sushil Kumar Vs. ACIT books of accounts were accepted by the assessing officer. The assessing officer made a specific addition of Rs. 98,40,545/- in respect of one party which has been deleted by the Co-ordinate Bench of the Tribunal in ITA No. 4697/DEL/2024. Thus, the GP declared of 1.78% in last year i.e. A.Y. 2021-22 stands accepted. Thus, as observed earlier, the GP Rate for the year under consideration i.e., A.Y. 2022-23 is 1.91% which is better than last year.Therefore, there is no cogent reason for the authorities to apply the rate of profit by calculating @ 10% on the turnover for the year under consideration.

In the present case, the Assessee has submitted all the details and documentary evidence including the party wise details of purchase and sales, complete stock register, copy of all purchase and sales bills including e-way bills, ledger accounts and explanations in respect of each and every party for which doubt was raised by the A.O. which can be corroborated from the plethora of documents produced by the Assessee in the Paper Book. The A.O. has not pointed out any discrepancy in the documents submitted by the Assessee. The A.O. has not rebutted the explanation submitted by the Assessee.However, without their being any basis,the Ld. A.O. made the estimation of profit @10% on the sale of Rs. 1,33,64,19,742/-. Further, the account of the 14 Date: 04.06.2025 R.N, Sr.P.S*