SHANKAR LAL,NEW DELHI vs. INCOME TAX OFFICER, WARD-34(1), DELHI, NEW DELHI

The appeals were heard together as they involved common question of law and facts and it was ground No. 8 which was primarily argued and contested before us and for convenience the ground No. 8 for AY: 2018-19 is reproduced below:

On hearing both sides we find that assesse is admittedly a kachhaaadti/commission agent and the addition was made of Rs.14,86,489/- in AY 2018-19, on the basis that the sales made to M/s Mahavir Prasad Suresh Kumar were bogus. Ld. Counsel has relied the books of account of the assesse and submitted that the sales have been doubted merely on assumptions and assesse was maintaining all regular books of accounts and quantified stock records and audited accounts were never doubted. It was submitted that even otherwise when the corresponding sales have not been doubted or disallowed admitting the genuine nature of trading activity the entire sales amount cannot be treated as unexplained income. In this context, ld. DR has however, relied the impugned orders.

We have considered the rival contentions and perused the material on record. Now, with regard to the contention of ld. AR we find substance that the return of income, balance sheet, trading account and Form 3CB, stock registers, sales bills and ledger account reflecting all quantitative details were there with the AO and same have not been doubted. The bank statement of the assesse was also there and the same reflected the corresponding receipts. It was pointed out that the assesse has a turnover of over 9 crores and very small part of it has been doubted. We also find substance in the contentions of ld. Counsel that the impugned order of ld. AO does not reflect that assesse was given any opportunity to cross examine the vital witnesses whose statements became subject of drawing conclusions. The assessment order reflects that merely the findings of investigation wing have been relied to concluded that M/s Mamta Trading Co. proprietorship concern of Smt. Sudha Jain was dummy concern. Ld. CIT(A) has sustained the order observing that assesse had failed to establish genuineness of transaction by providing third party evidences such as transportation document weighment slips or confirmation from the alleged suppliers. However, with regard to the evidences of assesse no conclusion were drawn to show that the evidences of assesse were not considerable.

In the aforesaid circumstance we are of the considered view that when assesse pleads thatif at all, its sales are to be considered to be bogus it is only the commission income which could have been added as otherwise the financials of the assesse with regard to sales etc. have not been doubted. Thus, it is only the profit embedded in unsubstantiated purchases, corresponding to such sales, which can be subject to taxation. Reliance is placed on decision of Hon'ble Bombay High Court in the case of Pr. CIT v. S.V. Jiwani[2022] 145 taxmann.com 230/[2023] 290 Taxman 178, Hon'ble Bombay High Court in the case of Pr. CIT v. S.V. Jiwani[2022] 145 taxmann.com 230/[2023] 290 Taxman 178 and decision of Hon’ble Delhi High Court in PCIT Versus Jotinder Steels and Tubes Ltd ITA 504/2-25 order dated 23/07/2026.

Accordingly we are inclined to sustain the ground No. 8. The appeal of the assesse for both the years is sustained. The impugned additions are modified with a direction to the ld.