ACIT, CIRCLE 19(1), DELHI, DELHI vs. PARAS RICE PRODUCTS PVT LTD, DELHI

Brief facts of the case are that assessee company is engaged in the business of wholesale and retail trading of rice. The return of income for the year under appeal was filed on 19.02.2019, declaring total income of INR 1,39,98,023/-. The case of the assessee company was selected for scrutiny on the issue of examination of expenditure of personal nature and order u/s 143(3) of the Act was passed on 27.01.2021, accepting the return of income. Thereafter, based on the information available on Insight Portal that the assessee has made purchases from certain companies managed and operated by Shri Ashok Kumar Gupta, engaged in the business of providing accommodation entries of bogus purchases and sales to provide ITC from dummy companies and the assessee has also made total purchases of INR 3,16,67,694/- from three such companies therefore, the re-assessment proceedings were initiated by passing the order u/s 148A(d) of the Act on 31.03.2022. Thereafter, notice u/s 148 was issued on 31.03.2022, in response to which assessee has filed return of income on 16.04.2022, declaring the same income as was declared in the return of income filed u/s 139(1) of the Act. Thereafter, the AO proceeded to complete the assessment wherein it is alleged that the assessee has made purchases from 03 companies managed and operated by Shri Ashok Kumar Gupta, namely Shri M/s Mahavir Prasad Suresh Kumar of INR 1,02,93,591/-; M/s Kalki Trading Co. of INR 1,11,06,138/- and M/s Swastik Traders of INR 1,02,67,965/- and made the addition of the same as unexplained expenditure u/s 69C of the Act and further invoked the provision of section 117BBE of the Act for charging the special tax of rate.

Aggrieved by the said order, the assessee filed an appeal before ld. CIT(A) before who assessee has filed additional evidences in the shape of copy of VAT registration, copy of bank certificates issued, confirmations of suppliers which are held as unverifiable and their ledger accounts. Ld. CIT(A) after obtaining the Remand Report has deleted the addition made by the AO.

Aggrieved by the order of ld. CIT(A), the Revenue is in appeal before the Tribunal by taking various Grounds of appeal as per the appeal memo.

All the Grounds of appeal are with respect to the deletion of the addition made u/s 69C r.w.s. 115BBE of the Act of INR 3,16,67,694/- thus, they are taken together for consideration.

Before us, ld. Sr. DR for the Revenue submits that information was available on the Insight Portal that assessee has purchased good from the companies / firms operated and managed by Shri Ashok Kumar Gupta and his brothers and such information was also shared by DDIT, Investigation as a result of survey proceedings. Once it is admitted by Shri Ashok Kumar Gupta that he has managed and controlled these companies thus even though the assessee has filed details such as bills, stock registers etc., it cannot be held that purchases made from these firms as genuine. Ld. Sr. DR submits that ld. CIT(A) has failed to appreciate these facts and incorrectly deleted the additions. Accordingly, it was prayed that addition made by AO u/s 69C of INR 3,16,67,694/- be restored.

On the other hand, ld.AR for the assessee vehemently supported the order of ld. CIT(A) and submits that assessee by filing every plausible detail has discharged the burden of proving the purchases as genuine. He further submits that once the AO has accepted the sales made, the corresponding purchases cannot be doubted more particularly when the provisions of section 145(3) were not invoked. He further submits that no opportunity of cross-examination of Shri Ashok Kumar Gupta whose statements were relied upon was provided. Ld.AR submits that AO has not established the fact that purchases made from 03 companies were managed and controlled by Shri Ashok Kumar Gupta whereas the assessee has filed all the relevant details to establish that these firms are independently carrying out their business and has no relationship with Shri Ashok Kumar Gupta. He therefore, prayed for the confirmation of ld. CIT(A).

Heard the contentions of both the parties at length and perused the material available on record. It is an admitted fact that assessee has made purchases of INR 3,16,67,694/- from 03 parties which were found as managed and controlled by Shri Ashok Kumar Gupta and his brothers to provide accommodation entries to bogus purchases and sales as a result of survey carried out at their business premises. In such type of transaction of purchases which are in the nature of accommodation entries, evidences such as bills, stock inventory etc. are found in order however, the admission made by Shri Ashok Kumar Gupta was not controverted. Considering the entirety of the facts and circumstances of the case, we are of the view that assessee had reduced its profits by introducing such types of purchases in the books of accounts accordingly, we hereby, uphold the net profit rate of 1% in excess of the gross profit rate declared by the assessee on such unverifiable purchases of INR 3,16,67,694/- which comes to INR 3,16,676/- and same is hereby confirmed. The remaining addition is hereby deleted. Accordingly, all the Grounds of appeal raised by the Revenue are partly allowed.

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