AAKAF STEEL PRIVATE LIMITED,AHMEDABAD vs. THE ACIT, CIRCLE-1(1)(1), AHMEDABAD

The assessee has raised the following grounds of appeal:

The effective issue raised by the assessee in its grounds of appeal is that the learned CIT-A erred in confirming the addition made by the AO to the extent of Rs. 3,36,137 instead of deleting the same in entirety.

The facts in brief are that the assessee in the year under consideration has made a sale to a company namely Benefit Trade Links Ltd, belonging to the Benefit Group, amounting to ₹ 36,61,368 only. However, the AO during the

Aggrieved assessee preferred an appeal to the learned CIT-A wherein it was contended that the sales made by it to the benefit trade link Ltd. has been duly recorded and disclosed in the books of accounts. Therefore, the same cannot be treated as unexplained cash credits under section 68 of the Act. 7. However, the ld. CIT-A allowed the relief to the assessee in part by observing as under: 7.9 In view of the various discrepancies noted, there are sufficient reasons for rejecting the gross profit shown by the appellant in its return of income for the relevant AY. The AO has held that the entire sales to the shell concern M/s Benefit Tradelinks are cash credit which is not justified on the basis of the facts of the case. However, on account of unreliability of book results arising out of the unimpeachable and uncontroverted evidence of appellant seeking bogus sale bills, I am inclined to enhance the total profits shown by the appellant. The quantum of such enhancement is decided as 10% of the total purported sale made to M/s Benefit Tradelink during the FY, i. e. 10% of Rs 36,61,368/- or Rs 3,66,137/-. Such enhancement to income shall include any commission paid by the appellant to the bogus entry provider. Hence the AO is directed to delete Rs 32,95,231/- out of the total addition made by it during assessment proceedings. Balance amount of Rs 3,66,137/- is sustained for the reasons stated above. Ground of appeal 4 is partly allowed. 8. Being aggrieved by the order of the ld. CIT-A, the assessee is in appeal before us.

The learned AR before us contended that the revenue has not brought anything on record evidencing that the assessee has made bogus sales to the benefit trade link. The sole basis of treating the sale as bogus was discovery of the information during the search proceedings at the premises of benefit group and Mahender Shantilal Patel that the transactions between them are nothing but

On the other hand, the learned DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on records. In the present case, the sales made by the assessee to the benefit trade link has been treated as bogus by the AO and therefore the amount of sales of Rs. 36,61,368.00 has been viewed as unexplained cash credit under section 68 of the Act. However, the ld. CIT-A has deleted the addition made under section 68 of the Act but treated the amount of ₹ 3,66,137.00 being 10% of the sales as income out of such bogus sales. Now the controversy before us is limited to the extent whether the addition made by ld. CIT-A at the rate of 10% of such alleged bogus sales is sustainable in the given facts and circumstances. Admittedly, the assessee has shown sale in its accounts which is in dispute but the same has been alleged bogus by the revenue. Since, it is the allegation of the revenue that the impugned amount of sale is bogus in nature, thus the onus lies upon the revenue to establish the same based on the documentary evidence. However, from the preceding discussion, we found that there was nowhere supplied the materials to the assessee based on which the allegation was framed by the Revenue. Likewise, nothing is forthcoming whether the opportunity of cross-examination was afforded to the assessee. Furthermore, what is transpired after reading the order of the authorities below is that there are certain transactions between benefit group and Mahender Shantilal Patel which were bogus in nature. But there was no evidence brought on record by the revenue suggesting the transactions between the assessee and the benefit trade link are also bogus in nature. In such a situation, to the best of our mind, it is not advisable to draw any adverse inference against the assessee based on the

Coming to the additional grounds of appeal raised by the assessee, we note that the grievance of the assessee is that the AO has treated the entire amount of sale as unexplained cash credit under section 68 of the Act whereas the ld. CIT-A has treated such transaction as sales only but bogus in nature. Therefore, the ld. CIT-A determined the income from such bogus transaction based on 10% of the value of the sales. As per the assessee the ld. CIT-A has made the addition on source of income which is not permissible under the provisions of section 251 of the Act. As per the assessee, the issue was limited before the ld. CIT-A whether the sales in dispute represents the unexplained cash credit under section 68 of the Act not. If such sale does not represent the unexplained cash credit under section 68 of the Act, the same was liable to be deleted by the ld. CIT-A instead of taxing the same transaction from a different perspective for which the ld. CIT-A had no power under the provisions of section 251 of the Act. The ld. AR in support of his contentions has relied on the judgement of Hon’ble Delhi High Court in the case of CIT versus Sardari Lal & company reported in 120 Taxman. 595

On the contrary, the ld. DR contended that the ld. CIT-A has power to tax new source of income and relied on the judgement of Hon’ble Allahabad High Court in the case of Smt. Sneh Lata Vs. CIT reported in 61 ITR 139. The ld. DR further submitted that in the present case the issue was involving the sales made to the benefit trade link which has been taxed by the learned CIT-A from a different perspective. But such a perspective does not give rise to the new source of income as alleged by the ld. counsel for the assessee. The ld. DR vehemently supported the order of the authorities below.

After hearing both the parties and perusing the materials available on record, we note that the issue was limited to the sales made by the assessee to the benefit trade links which was held bogus by both the concurrent authorities. What was the change is the basis of change for determining the income out of such bogus transactions between the concurrent authorities. As such, we find that the ld. CIT-A did not travel from the dispute alleged by the revenue authorities which can be termed as new source. Accordingly, we are not convinced by the argument of the ld. counsel for the assessee. Hence, the additional ground of appeal raised by the assessee is dismissed.

In the result, the appeal filed by the assessee is partly allowed.

The effective issue raised by the assessee in its grounds of appeal is that the learned CIT-A erred in confirming the addition made by the AO to the extent of Rs. 8,91,455 instead of deleting the same in entirety. 17. At the outset, we note that the issue raised by the assessee in the captioned appeal for the AY 2015-16 is identical to the issue raised by the assesee in IT(SS)A No. 09/Ahd/2022 for the assessment year 2014-15. Therefore, the findings given in IT(SS)A No. 09/Ahd/2022 shall also be applicable for year under consideration i.e. assessment year 2015-16. The issue raised by the assessee for AY 2014-15 has been decided by us vide paragraph No. 11 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2014-15 shall also be applied for year under consideration i.e. the assessment year 2015-16. Hence, the ground of appeal filed by the assesee is hereby allowed. 17.1 In the result, the appeal of the assessee is hereby allowed.

In the combined result, both the appeals filed by the assessee are partly allowed.