RR CARWELL PVT LTD,NEW DELHI vs. DCIT CENTRAL CIRCLE-4, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “F” : NEW DELHI

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER

ITA Nos.9153, 9154, 9155, 9156, 9157 & 9158/Del./2019 Assessment Years 2012-13, 2013-14, 2014-15, 2015-16, 2016-17 & 2017-18

R R Carwell Pvt. Ltd., The DCIT, 149A, 1st Floor, Baba House, Kilokari, Opp. vs., Central Circle-4, Maharani Bagh, New Delhi – 110 014 New Delhi. PAN AAFCR1764E (Appellant) (Respondent)

For Assessee : Shri Gurjeet Singh, C.A. & Shri Shantanu Jain, C.A. For Revenue : Smt. Sushma Singh, CIT-DR Date of Hearing : 15.11.2021 Date of Pronouncement : 11.02.2022

ORDER PER R.K. PANDA, A.M.

These batch of six appeals filed by the Assessee

are directed against the common Order Dated 30.09.2019

of the Ld. CIT(A)-230, New Delhi, relating to the A.Ys. 2012-

2013 to 2017-2018 respectively. Since identical grounds

have been raised by the assessee in all these appeals,

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therefore, these were heard together and are being disposed

of by this common order.

2012-13 as the lead case.

2.1 Facts of the case, in brief, are that the assessee is

a company incorporated on 07.02.201 and is engaged in

application/job-work of Auto Additives and Car care

Products across various two wheelers and tour wheelers

authorized service centers. It filed its return of income on

25.09.2012 declaring income of Rs.58,04,170/-. The return

was duly processed under section 143(1) determining at the

returned income.

2.2. A search under section 132 of the Act was

conducted on 28.02.2017 at the business premises of the

assessee at various premises from where certain papers/

documents belonging to the assessee were found and

seized. In response to notice under section 153A of the I.T.

Act, 1961 the assessee filed its return of income on

26.07.2018 declaring income of Rs.58,04,170/-.

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2.3. During the course of assessment proceedings, the

A.O. noted that the assessee company has received an

unsecured loan of Rs 10,00,000/- from M/s White Collar

Management Service Pvt. Ltd., He asked the assessee to

furnish ITR, bank statement highlighting the transaction

and confirmed copy of ledger from White Collar Management

Service Pvt Ltd for the A.Y. 2012-13 in order to prove the

identification, genuineness and creditworthiness. He also

asked the assessee to produce the principle officer of M/s

White Collar Management Service Pvt. Ltd.

2.4. Since the assessee could not produce the

principle officer/director of M/s White Collar Management

Service Pvt. Ltd., the A.O. asked the assessee to explain as

to why the amount of Rs.10,00,000/- received from M/s

White Collar Management Service Pvt Ltd as unsecured loan

should not be treated as unaccounted/bogus and added

back to its total income for the year under consideration.

2.5. In response, the assessee submitted a reply dated

25.12.2018 which has been reproduced by the AO in the

assessment order and which reads as under :

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“As regard loan from While Collar Management services (P) Ltd. amounting Rs.10,00,000/-. In this regard, it is submitted that the detail submission has been given vide our reply dt. 07.12.2018 Point I, the unsecured loan of Rs .10,00,000/- was received from said party on dt. 01.05.2011 on interest. Confirmation from the said party along with copy of ITR, Bank statement of the assessee and that of party and Balance sheet has already been submittal vide our reply dt. 07.12.2018. The loan from said party has been repaid after 6 months on dt.13.12 2011 amounting Rs.10 Lakh vide Ch.No.049499 & paid interest through proper banking channel amounting Rs.55726/-, confirmation for repayment of loan. Bank Statement has already been submitted vide our reply dt. 07.12.2018 & form 16A for TDS deducted on interest is enclosed herewith. The said party is open for verification

Alternatively & without prejudice to above, it is humbly submitted that if any addition an this account has been made then assessee entitled to telescoping against addition made of Bogus purchases as undisclosed income of assessee. Further, submitted that if telescoping of income was not given than there will be double addition in as much as both the undisclosed income and the investment made out of such income are

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both brought to tax which was contrary to the basic principles of assessment. The Assessee requests your goodself to provide us an opportunity of being heard in case you require further clarifications.”

2.6. However, the A.O. was not satisfied with the

explanation given by the assessee. He noted that the

abovementioned loan came from the company M/s White

Collar Management Service Pvt. Ltd., which is controlled by

Shri Hiamanshu Verma, who is an identified

accommodation entry provider. Mayurika Management

Service Private Limited (Formerly known as M/s White

Collar Management Services Private Limited) is new name of

the company.

was carried out on 13.04.2017 in the case of Mr. Himanshu

Verma (Entry Operator) who is maintaining approx. 300

shell companies/concerns for providing accommodation

entries in lieu of commission. During the course of search in

the case of Mr. Himanshu Verma on 13.04.2017, statement

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on oath of Mr. Himanshu Verma was recorded under section

132(4) of Income Tax Act. 1961 and he was asked about his

modus operandi for providing accommodation entries. He

admitted that he provides bogus bills/entry of loans/capital

to the beneficiaries and after rotating the amount received

from the beneficiary in some of his bogus companies, he

ultimately transfers the amount to its beneficiary.

2.8. The A.O. also referred to the statement of Mr.

Shree Ram Yadav (dummy director) recorded under section

131(1A) wherein he admitted that he had been a dummy

director in a number of bogus companies managed by Mr.

Himanshu Verma. He further stated that he was getting

Rs.10,000/- per month for being the director in these

companies. He admitted that he had been made director by

Mr. Himanshu Verma in various companies totaling to 20 in

number.

2.9. In view of the above, the A.O. held that the

identity, genuineness and creditworthiness of the company

M/s While Collar Management Services Pvt, Ltd which

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advanced unsecured loan to the assessee company, could

not be confirmed. The assessee company could not produce

the above party which in itself is enough evidence to prove

that the unsecured loans were received by the assessee

company from bogus entity which do not carry out any

business activity. Moreover, the lender company is already

an identified bogus concern which is run by an

accommodation entry provider Shri Himanshu Verma.

Relying on the following decisions, the A.O. made addition of

Rs.10,00,000/- under section 68 of the I.T. Act, 1961.

2.10. The A.O. further noted from the ledger A/c of

M/s White Collar Management Services Pvt. Ltd that

the assessee has paid Rs.55,726/- as interest to M/s

While Collar Management Services Pvt. Ltd on the loan of

Rs.10,00,000/- received from the company. He asked the

assessee to explain as to why the interest paid on the

unsecured loan from M/s While Collar Management

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Services Pvt. Ltd not to be disallowed. Rejecting the

explanation of the assessee, the A.O. made addition of

Rs.55,726/- to the total income of the assessee.

2.11. The A.O. noted that during the course of search

proceedings, various bills of PC Jewllers were seized from

premise 17/6, Hanspal Industrial Complex. Mathura Road.

Faridabad. On perusal of bills, it was found that the

assessee company has purchased gold coins of an amount

of Rs.4,25,975/-in cash. He asked the assessee to explain

as to why such purchase of gold coin of Rs.4,25,925/-

should not be considered as unaccounted expenditure and

added back to total income of the assessee during the year.

2.12. It was explained by the assessee that the gold

coins were purchased out of cash generated out of billing

grey market purchases. Alternatively, it was requested for

giving telescoping benefit.

2.13. However, the A.O. was not satisfied with the

explanation given by the assessee. He noted that the assessee is

itself accepting that the purchases were made out of cash

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generated and unaccounted in the books of accounts of the

assessee. The assessee company failed to produce evidence

regarding genuineness of the transaction. Moreover, the mode of

transaction is cash. Further, the assessee could not tally this

transaction with its books of account. Therefore, he made an

addition of Rs.4,25,975/- as unexplained expenditure under

section 69C of the I.T. Act, 1961.

2.14. During the course of assessment proceedings, the

A.O. noted that the assessee company has shown purchases of

Rs.5,34,76,626/- from the following parties during the year

under consideration.

Party Name Amount Delite Trading Co. 18,82,671 Ganesh Enterprises 19,65,386 Hans Trading Co 52,47,430 India Sales Corporation 68,88,893 Jai Shiv Enterprises 20,07,523 Luxmi Lubricants 1,05,53,090 Narika Enterprises 63,32,048 Navyug Enterprises 27,71,646 Rama Enterprises 1,42,26,757 Shree Shyam Enterprises 16,11,182 Total Purchases 5,34,76,626

2.15. He noted that during the search proceedings

original vouchers/ bills of various concerns at premise

17/6. Hanspal Industrial Complex, Mathura Road,

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Faridabad were found and seized. Purchase parties namely

M/s Jai Shiv enterprise. Delite Trading Co, And Ganesh

Enterprises are connected with Sh Dalip Kumar, who is an

identified accommodation entry provider. Statement of Sh

Dalip Kumar was recorded on oath on 10.11,2016 and

17.12.2016 in which he admitted that he is the sole

proprietor of 18 concerns namely M/s Jai Shiv Enterprises

and others. He further admitted that no business activities

were carried out by these concerns, no sale/purchase of

goods was made by these concerns. All the bank accounts

of these concerns were used for providing bogus bills,

accommodation entries to various beneficiaries and

layering of funds. He also stated that the funds have been

routed by using the bank accounts of various

parties/concerns by some other persons like Sh. Ram

Krishan Puri (connected with Delite trading Company.

Ganesh Enterprises) and Sh. Subhash Gupta connected

with Supreme Enterprises of Sh. Ajay Kumar (Proprietor).

Thereafter statement of Sh. Ajay Kumar prop Supreme

Enterprises was recorded on oath and he also admitted

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that his concern was not doing any actual business and

bogus bill on the name of his concerns were provided by

Sh. Subhash Gupta. Sh. Dalip and Sh, Ajay Kumar both

have also admitted in their statements that they never

issued any bills from the above mentioned concerns to any

party. Moreover, the bank accounts of these concerns were

operated by various persons who obtained signed copies of

cheque books from Sh. Dalip Kumar against meager pocket

money. Similarly Concerns India Sales Corporation. M/s

Pace enterprises and M/s C.Z. International are also bogus

concerns which are involved in providing accommodation

entries. These firms are controlled by Sh Vikas Kumar.

Statement of Shri Vikas kumar was recorded on oath on

06.072015 wherein he admitted that these entities were

incorporated by Mr. Ishwar Chand Agggrawal. using his

name and documents when he was working in kirana shop

of Mr. Ishwar Chand Aggarwal. Sh. Vikas Kumar has

admitted in his statement recorded on oath dated

08.11.2016 that no business activities were carried out by

these firms, no sale/purchase of goods were made and the

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transactions occurred in the bank account of these firms

were for only bogus billing and layering of funds.

2.16. The AO issued notice u/s 133(6) to various

parties from whom the assessee has shown to have made

purchases. However, all the notices except M/s India Sales

Corporation were returned back unserved. The notice u/s

131 also could not be served by the Ward Inspector who

was deputed to serve the same. He, therefore, asked the

assessee to explain as to why the purchases made from the

above parties amounting to Rs.5,34,76,626/- should not be

treated as bogus and added to the total income of the

assessee.

2.17. It was explained by the assessee that it had

purchased the material from grey market. It has

maintained stock register which tallies quantity wise and

no discrepancy was found. Further, it had rendered

services to the third parties. Actual stock was also found

during the course of search and survey proceedings. It was

submitted that no undisclosed asset or wealth relating to

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the assessee or any of the directors or family members were

found. It was argued that the concession of Rs.18.5 cores

made by the assessee during the search operation was

wrongly treated as surrender of ingenuine purchases by the

department. Relying on various decisions, it was argued

that no addition is called for.

2.18. However, the AO was not satisfied with the

arguments advanced by the assessee. He noted that the

assessee itself has admitted that it has purchased the

material from grey market. He was of the opinion that

mere submitting the value of opening and closing stock of

various financial years without any documentary evidence

would not satisfy the claim of the assessee. He observed

that notices u/s 133(6) were sent to some of the parties

who took services of the assessee company on a test check

basis. However, none of the said parties confirmed the

exact amount of the material used by the assessee

company for providing job work. So far as the argument of

the assessee that stock was actually found during the

search operation is concerned he noted that short stock of

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Rs.78,79,785/- was found during the course of search

operation. He noted that the assessee failed to produce any

documentary evidence in support of its claim that it has

used all material as shown in its books of account for the

job work/sale. The claim of the assessee that cash

generated out of such bogus purchases is used for

providing commission/incentives is contradicting itself. As

regard the submission of the assessee that no undisclosed

assets or wealth was found is concerned, the AO noted that

incriminating document in the form of cash loan of several

crores were found during the course of search. He further

noted that Mr. Jyoti Bist, Director of M/s R.R. Carwell (P)

Ltd. in her statement recorded on oath had admitted that

after making payment through banking channel to such

bogus parties, after deducting commission, cash was

received back from these parties. Rejecting the various

explanations given by the assessee and relying on the

decision of Hon’ble Gujarat High Court in the case of Vijay

Protein Ltd. vs CIT, the AO disallowed an amount of

Rs.1,33,69,157/- being 25% of such bogus purchase and

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added the same to the total income of the assessee. The AO

noted that for getting accommodation bills, the assessee

must have incurred expenses for arranging the same. He

therefore made addition of Rs.2,94,121/- being 0.55% of

Rs.5,34,76,626/- u/s 69C of the I.T. Act. 1961. The AO

accordingly determined the total income of the assessee at

Rs.2,08,99,150/-.

2.19. Similar additions for bogus purchases and

commission were made in other years, the details of which

are as under:-

Sl. Assessment Bogus Purchases Commission No. Year 1 2013-14 1,37,29,109 3,02,040 2 2014-15 1,16,24,050 2,55,729 3 2015-16 93,33,960 2,05,347 4 2016-17 1,03,22,034 2,27,084 5 2017-18 1,05,98,837 2,33,174

challenging the addition on merit, challenged the validity of

the assessment in absence of any incriminating material.

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However, the Ld. CIT(A) was not satisfied with the

argument against the validity of the assessment and

rejected the same. So far as addition of Rs.10,00,000/-

being loan from White Collar Management Services (P.) Ltd.

is concerned, he upheld the same by observing as under:-

“6.1 Vide ground Nos. 4, 5, 6 and 7, the appellant has contested the action of the AO in terms of making the addition of Rs. 10,00,000/- u/s 68 by treating the loan of Rs.10,00,000/- received from M/s. White Collar Management Services Pvt. Ltd. (Now known as M/s. Mayurika Management Services Pvt. Ltd.) and disallowing the deduction of Rs. 55,726/- on account of interest on these loans.

6.2 The contention of the AR was that the loans were received through banking channels and were repaid. The TDS was deducted on the interest payment. The AR also stated that the AO has relied upon the statement of Sh. Himanshu Verma but Himanshu Verma only stated that he was providing bills for bogus sales and purchases. Sh. Himanshu Verma did not say that he was providing accommodation entries in form of loans. The AR also contended that the AO has relied upon statement of Shri Shree Ram Yadav as a director of M/s. White Collar Management Services Pvt. Ltd. (Now known as M/s. Mayurika Management Services Pvt. Ltd.). The

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AR produced data downloaded from Website of ROC to show that Sh. Shree Ram Yadav was never a director in case of M/s. White Collar Management Services Pvt. Ltd. (Now known as M/s. Mayurika Management Services Pvt. Ltd.). Therefore, the AR argued that Sh. Shree Ram Yadav was not a director at the time of taking this loan and hence, his statement cannot be relied upon to conclude that the loan was an accommodation entry. The AR also stated that he was not provided cross examination of the persons whose statements have been relied upon.

6.3 It is noticed that the data of directors provided by the AR did not reveal names of directors of this company after 16.08.2010. Also, it is seen that out of 7,20,000 shares of this company held in the name of M/s. G. Citylife Promoters Pvt. Ltd., 5,000 shares were transferred in name of Sh. Shree Ram Yadav, on 21.03.2016. Therefore, Sh. Shree Ram Yadav had a connection with this company. Moreover, it is a trite that onus is on the appellant to prove (by providing cogent evidence) identity and creditworthiness of the lender and genuineness of the transaction. Certainly, in the light of overwhelming evidence discussed by the AO, it is clear that the appellant was not able to discharge its onus.

6.4 Hon'ble Delhi HC in case of CIT Vs. N.R. Portfolio (P.) Ltd. [2012] 42 taxmann.com 339 (Delhi) has held,

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"30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them.''{ref. Para 30} 6.5 Hon'ble Delhi HC in case of CIT Vs. Nova Promoters & Finlease (P) Ltd. [2012] 18 taxmann.com 217 (Delhi) quoted from its earlier judgments as under,

"....there cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment as share capital must be firmly excoriated by the Revenue "{ref. Para 36}. 6.6 This is also a case of pernicious practice of conversion of unaccounted money through the masquerade or channel of obtaining (bogus) loan.

6.7 Hon’ble Delhi HC in case of CIT Vs. Navodaya Castles (P.) Ltd. [2014] 50 taxmann.com 110 (Delhi)

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has held,

" Certificate of incorporation, PAN etc., are relevant for purpose of identification, but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine investor." {ref. Para 14}.

6.8 Regarding, cross examination, the AR could not show as to when the cross examination was demanded at the assessment stage. Moreover, these statements were recorded during the official duty carried out by the Officers of the Income Tax Department who were not AO and there is no provision under their charter of official duties to allow cross examination to each and every person who can be adversely affected by any of such statements. Nor, it is practically possible for such Officers to allow cross examination to each and every person who can be adversely affected by any of such statements. It is a trite that rigors of the Evidence Act, 1872 are not applicable to Income Tax proceedings. Therefore, these statements are admissible evidence like any other official document. Of course, a cross examination of the officer who recorded any such statement can be allowed. However, the appellant never demanded such cross examination. 6.9 In view of above, it is seen that in the present case, the appellant has failed in the test of

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genuineness of the transaction as well as identity and creditworthiness of the lender. Therefore, the credit under consideration gets hit by the mischief of provision of section 68 of the I.T Act, 1961.

6.10 In view of the above, I have no hesitation in confirming the action of the AO in returning the opinion that the explanation offered by the appellant about the source and nature of the credit was not satisfactory.

6.11 In view of the above discussion, these grounds (Nos. 4, 5, 6 and 7) are dismissed.” 3.1. So far as the addition of Rs.133,69,157/- being

25% of the purchases is concerned, the ld. CIT(A) while in

principle upheld the disallowance of 25%, however, reduced

the same to 20% in case of purchases from parties, which

were found to be located at the given address by the

Income Tax Inspector by observing as under:-

“8.1. Vide ground Nos. 9, 10, 11 and

12, the appellant has contested the action of the

AO in terms of making the addition of Rs.

1,33,69,157/- by disallowing 25% of the entire

purchases (Rs. 5,34,76,626/-) from following ten

parties. It was contention of the AR that this

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addition is not maintainable on merits. The AR

has submitted combined written submission in

respect of all these grounds. Therefore, these

grounds are dealt with, together.

Party Name Amount Delite Trading Co. 18,82,671 Ganesh Enterprises 19,65,386 Hans Trading Co 52,47,430 India Sales Corporation 68,88,893 Jai Shiv Enterprises 20,07,523 Luxmi Lubricants 1,05,53,090 Narika Enterprises 63,32,048 Navyug Enterprises 27,71,646 Rama Enterprises 1,42,26,757 Shree Shyam Enterprises 16,11,182 Total Purchases 5,34,76,626

8.2. During the present appellate proceedings, the main contentions of the AR were that i) The assessment order indicated that letters were served upon certain parties. This proved their existence. ii) The books of account were audited, iii) The appellant was using the purchase material for doing job work and there was quantitative tally of purchases with the quantities of the material consumed in job work. At any point of time, the total of quantities of opening stock and purchases tallied with total of quantities of the material consumed in job work and closing

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stock. iv) Payments have been made through banking channels, v) Vide written submission 22.05.2019, the AR produced copy of stock register showing retevant entries of the items received and issued for consumption in job work. Copies of purchase bills for verification of closing stock were also produced to support the contention that there was proper accounting and item to item tally is possible to trace. vi) In none of the group cases, any addition has been made on account of discrepancy in stock found at the time of survey and as per books. The AR explained that although, during the course of survey, certain shortage in stock were noticed but the same was reconciled, later on and no addition has been made on account of issue of discrepancy in stock. vii) The GP ratio is quite high. viii) The percentage of disallowance (25%) is very high. There are various case laws where courts have decided much lower percentage. ix) In case of one party namely, Shree Shyam Enterprise, Inspector of Income Tax made inquiries and found that this party was available at the given address. Similarly, the AR stated that M/s. Gebros Petrochen, M/s.

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Delite Trading Co. and M/s. Aman Enterprise were found at the given address as per report of Inspector of Income Tax. The AR provided a copy of such report. For the sake of ready reference, the same is reproduced below:

8.4. The Hon'ble Gujarat High Court in Bholanath Polyfab Pvt. Ltd. 355 ITR 290 (Guj), held that in such cases

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where the sales cannot be discarded, the issue would boil down to finding out the element of suppressed profit embedded in purchases which the appellant would have made from some unknown or bogus entities.

8.5 Hon'ble Gujarat High Court in the case of CIT v. Simit P. Seth [356 ITR 451] held that when the total sales are accepted by the Assessing Officer then the entire purchases cannot be added to the income of the assessee.

8.6 Therefore, in view of the decision of the Hon'ble Gujarat High Court he held that only the fair profit ratio would be added back to the income of the assessee. 8.7 The ITAT Mumbai Benches in a number of cases has taken a consistent view and directed the Assessing Officer to estimate net Profit of 12.5% to 15% on total bogus purchases. The ITAT in the case of Kishore Kumar Aggarwal Vs. DCIT in ITA.No. 870 and 871/Mum/2015 dated 25.01.2017 has taken a similar view and upheld estimation of Gross Profit at 10%. The sum and substances of ratios laid down by the courts and Tribunals is that in the case of bogus purchases only profit element embedded in such purchases is to be taxed but not total bogus purchases. The relevant portion of the order of ITAT of ITAT Mumbai in case of M/s. Technotrade Impex India Pvt. Ltd. Vs. ACIT - 13(3)(2) in C.O.Nos.158 & 160/MUM/2017 [ARISING OUT OF ITA N0.5383 & 5382/MUM/2016] is reproduced as under: “6. On appeal the Ld. CIT(A) on examination of the submissions, evidences furnished before the Assessing Officer as well as before him and guided by the ratio of Hon'ble Gujarat High Court in the case of CIT v. Simit P. Seth [356 ITR 451] held that when the

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total sales are accepted by the Assessing Officer then the entire purchases cannot be added to the income of the assessee. Therefore, in view of the decision of the Hon'ble Gujarat High Court he held that only the fair profit ratio would be added back to the income of the assessee. Further Ld.CIT(A) also stated that similar basis was adopted in the case of Shri Kishore Kumar Agarwal for A.Y. 2011-12 and Shri Bimal Agarwal for A.Y. 2010-11 on identical and similar facts as that of the present case as both of them are the persons concerned or connected to the assessee's group. He also observed that similar basis was also adopted in assessee's own case for the Assessment Years 2010- 11 and 2011-12 on identical facts, wherein he computed the profit element on trading sales segments at 8% as the assessee earning Gross Profit slightly less than 8% from this segment and no addition was made in respect of Garden maintenance contract for the reason that the Gross Profit declared by the assessee was more than the estimated Gross Profit from such segment at 12.5% for the Assessment Year 2012-13. Similarly, the Ld.CIT(A) for the Assessment Year 2009-10 estimated the profit element from trading sales segment at 8% and no addition was made from Garden Maintenance contract segment for the reason that the Gross Profit declared by the assessee is more than the estimated Gross Profit at 12.5% for the Assessment Year 2009-10. 7. We find that on identical facts and circumstances where some of the parties from whom the assessee purchased material are also common, the Tribunal for the Assessment Year 2011-12 sustained the order of the Ld.CIT(A) in adopting the profit

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element at 8% on Garden Item Trading segment and 12:5% on Garden Maintenance Contract segment to determine the total addition to be sustained on alleged bogus purchases from the parties and confirmed the addition made by the Ld.CIT(A) observing as under: "11. Having heard both the sides and considered material on record we find merits in the arguments of the assessee for the reason that the Assessing Officer has not made out any case of sales outside the books of account nor pointed out any discrepancy in the books of account and stock details furnished by the assessee. The Assessing Officer is only on the point that the assessee is not able to justify the purchases in the backdrop of allegations made by the Sales Tax Department that the parties from whom the assessee purchased a goods were listed as suspicious dealers/hawala operators indulging in providing accommodation entries. On the other hand, the assessee has submitted complete details of purchases including purchase bills and payment proof. The assessee has also filed complete details of consumption of material purchases from those parties and the execution of works contract for agencies from whom it has undertaken works contract. We further notice that the Assessing Officer has not made out any case of sales outside the books of account nor pointed out any discrepancy in the Books of Accounts of the assessee. Therefore, we are of the considered view that merely on the basis of third party statement and also on the basis of notices issue u/s. 133(6), an adverse inference

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cannot be drawn about the purchases and the assessee has filed complete details of purchases. When however, the fact remains that the parties are appearing in the list prepared by the Sales Tax Department as suspicious/hawala operators indulging in providing accommodation entries has not been controverted by the assessee with necessary evidence. Though the assessee has filed purchase bills and payment proof for such purchases, in the backdrop of clear cut finding of the Sales Tax Department the purchases from the above parties cannot be considered as genuine in total. In these circumstances, one has to see what needs to be considered, whether it is the entire purchases from the above parties to be added because they are bogus in nature or only the profit element embedded in such purchases could be added. The issue is no longer res integra. The Hon'ble Gujarat High Court in the case of CIT Vs. Simit P. Sheth (supra) has considered similar case wherein the Hon'ble court held that when the total sales is accepted by the AO, then the entire purchases cannot be added to the total income of the assessee. The court further held that in the case of bogus purchases only profit element embedded in such purchases needs to be added but not total purchases made from those parties. The Hon'ble Gujarat High Court in the case of CIT vs. Vijay Proteins Ltd (2015) 58 Taxmann.com 44 (Guj) held that addition cannot be made towards total purchases and what need to be taxed in only the profit element. The

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ITAT Mumbai Benches in a number of cases has taken a consistent view and directed the Assessing Officer to estimate net Profit of 12.5% to 15% on total bogus purchases. The ITAT in the case of Kishore Kumar Aggarwal Vs. DCIT in ITA No. 870 and 871/Mum/2015 dated 25.01.2017 where the facts are identical and also part of assessee's group has taken a similar view and upheld estimation of Gross Profit at 10%. The sum and substances of ratios laid down by the courts and Tribunals is that in the case of bogus purchases only profit element embedded in such purchases is to be taxed but not total bogus purchases. In this case the CIT(A) after considering relevant facts has adopted net profit of 8% on total sales achieved by the assessee in garden items segment and 12.5% on garden maintenance contracts to determine the total addition to be sustained on alleged bogus purchases from the above parties and confirmed the addition to the extent of Rs..28,78,748/- as against addition made by the Assessing Officer of Rs.8,64,00,351/-. Therefore, we are of the considered view that the CIT(A) was right in restricting the addition to the extent of Gross Profit embedded in such bogus purchases. We do not find any error in the order of the CIT(A). Hence, we are inclined to uphold the findings of the CIT(A) and dismiss the appeal filed by the Revenue." Facts being identical, following the order of the 8. Tribunal for the Assessment Year 2011-12, we sustain the order of the Ld.CIT(A) for the Assessment Years

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2009-10 and 2012-13 in adopting the profit element at 8% on Garden Item Trading segment and 12.5% on Garden Maintenance Contract segment in estimating the profit element on the purchases made by the assessee. Thus the addition as estimated by the Ld.CIT(A) is confirmed. Grounds raised by the Revenue are rejected. As we have sustained the order of the Ld.CIT(A) 9. the contention of the assessee in the cross objections that there should not have been any addition is rejected and the grounds raised in the cross objection are dismissed.

In the result, appeals of the Revenue and cross 10. objections of the assessee are dismissed." 8.8 In the present case, letters issued u/s 133(6) were received back, un-served because the parties are not existing at given address but inquiries have confirmed that some of these parties were existing at the given addresses. Since, the books of accounts are audited and stock has been tallied which is evident from the fact that in-spite of noticing shortage in stock, at the time of survey, no addition has been made on that account. Therefore, the argument of the AR that discrepancy in stock was explained cannot be brushed aside. At the most question can be raised about the rate of purchase.

8.9 I have also observed that the AO has added 25% of bogus purchases stating as under.

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"8.20 Hon'ble Gujrat High Court in its judgment dated 09-12-2014 in the case of Vijay Protein Limited vs CIT [appeal No.243/2002] has observed that "It is a matter of fact that the goods were not received from the parties from whom it is shown to have been purchased but, such material was received from a different surce which is exclusively within the knowledge of the assessee and none else. Therefore, it is evident that the assessee had inflated the expenditure in question by showing higher amount of purchase price O/ITR/139/1996 JUDGMENT through the fictitious invoices in the name of 33 bogus suppliers. Considering the overall factual scenario, the Tribunal was justified in disallowing 25% of the. purchase price". Hon'ble Supreme Court in SLP No.8956/2015 dated 06- 04- 2015 in the above case i.e. in Vijay Protein Limited has upheld the order of Gujrat High Court and dismissed the appeal of the assessee.

8.21 The case of the assessee is squarely covered by the ratio of the decision of Hon'ble Supreme Court supra. Accordingly 25% of the purchase price at Rs.5,34,76,626/- accounted for in the books of accounts through such fictitious invoices in the name of above mentioned bogus parties is disallowed which works out to Rs.1,33,69,157/- and is added in the returned income of the assessee". 8.10 Therefore, I am of a considered opinion that the action of the AO in terms of working out an element of suppressed profit in the purchases and adding the same is justified, in principle. As such there cannot be any standard test or formula for arriving at such element of profit. It would depend on facts and circumstances of each case. It is possible to have

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different criteria and result for different assessment years in case of a particular assessee. In the present case, it is fact that the above reproduced report of Income Tax Inspector mentioned that following four parties were located at given address:

i. M/s Shree Shyam Enterprise ii. M/s. Gebros Petrochen, iii. M/s. Delite Trading Co.(reported to be existing at the given address, one year before the date when inquiry was made), and iv. M/s. Aman Enterprise

8.11 Also, the above reproduced report of Income Tax Inspector mentioned that Shri Ganesh Enterprise was found at the address of B-204, Nehru Ground, Faridabad, Haryana. However, all these concerns were found to have been used for providing accommodation entries as per the statements recorded during the search or pre-search enquiries, like the statements of S/Shri Dalip Kumar, Vikas Kumar and Ishwar Chand Agarwal etc. These concerns were also admittedly used for procuring bogus Bills, as per the statements recorded by Ms. Jyoti Bisht/Shri Vishnu Kumar Garg. 8.12 Therefore, the disallowance @ 25% is confirmed. However, in my considered opinion, ends of justice would meet if in case of purchases from any party in respect of which disallowance has been made and which were found to be located at the given address (by the Income Tax Inspector) and are not figuring adversely in any of the statements (including statements of Sh. Dalip Kumar/ Vikas Kumar /Ms. Jyoti Bisht/Vishnu Kumar Garg), the disallowance is restricted to 20% of the amount of such

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purchases.

8.13 In view of the above discussion, these grounds (Nos. 9-12) of the appeal are partly allowed.

3.2. So far as the addition of Rs.2,94,121/- u/s 69C

of the Act is concerned, the Ld. CIT(A) upheld the same by

observing as under:-

“9.1. Vide ground No. 13, the appellant has contested that the addition of Rs. 2,94,121/- was not maintainable on merits. 9.2. The action of the AO in terms of treating the purchases of Rs. 5,34,76,626/- as bogus has been confirmed above. There is material in form of statements of S/Shri Vishnu Kumar Garg, Vikas Kumar, Dalip Kumar, Ishwar Chand Agarwal and Ms. Jyoti Bisht etc. to the effect that accommodation entries were being procured by the appellant. It is logical that the entries were procured by paying commission. Therefore, the action of the AO in terms of holding that certain payments were made in cash in form of commission for procuring the accommodation entries has been upheld, in principle. In view of the above discussion, this ground (No. 13) of the appeal is dismissed.”

3.3. So far as the issue of giving telescoping benefit is

concerned, the ld. CIT(A) decided the issue partly in favour

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of the assessee by observing as under:-

10.1 Vide ground No. 14, the appellant contested that since, cash has been generated due to bogus purchases, telescopic effect should be allowed in respect of additions u/s 69C, u/s 68 and the commission expenses.

10.2 I have observed that the AO, in case of Shri Vishnu Kumar Garg, director of the appellant company in the assessment orders for AYs 2013-14 and 2014-15, calculated cash availability on particular dates, by considering transactions which were outside books but were generating/consuming cash. Such availability of cash was considered and additions which were otherwise made out, were not made upto such extent. This action of the AO is based upon a sound logic and is acceptable. The AR's argument that the cash generated due to out of books transactions of bogus purchases is to be treated at par with other out of books cash generating/consuming transactions, is in line of the same logic and hence, cannot be brushed aside. Also, the argument of the AR that such cash generation even in other cases {Smt. Lata Garg (wife of Shri Vishnu Kumar Garg), and M/s. RR Carwell Pvt. Ltd./ M/s. L. V. Rustore Applications Pvt. Ltd. where Shri Vishnu Kumar Garg is director) would be available in hands of Shri Vishnu Kumar Garg

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because he is the person controlling affairs of these entities, cannot be brushed aside as he is the main decision maker of the group, however, it may not help in other cases ( other than the case of Shri Vishnu Garg) because it cannot be said that these entities would be using unaccounted cash of other entities. Also, one has to keep in mind the aspect that if any addition is made under any section which requires separate treatment, including special rates, provisions of such section would have over- riding effect.

10.3 In view of the above discussion, this ground (No. 14) of the appeal is partly allowed.”

3.4. Aggrieved with such order of the ld. CIT(A), the

assessee is in appeal before the Tribunal by raising the

following grounds:-

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153A having returned wrong findings of fact & evidence qua the denial / retraction of the surrendered amount, which is even contested since the quantum and relatability of the amount to the impugned year is not according to the document and material.

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37 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

tallied with the books of account on the date of search.

ground of appeal no. 1, 2 and 3 for which the Ld. DR has

not objected. Accordingly, these grounds are dismissed as

not pressed.

challenged the order of the Ld. CIT(A) in confirming the

addition of Rs.10 lakhs made by the AO u/s 68 of the Act.

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the assessee has received loan and repaid the loan along

with interest through proper banking channel which was

obtained from M/s White Collar Management Services Pvt.

Ltd. He submitted that the assessee, during the course of

assessment proceedings, has filed the documents i.e.

confirmation of account, copy of bank statement for receipt

and payment of the said party, bank statement of the

assessee, PAN Nos. acknowledgment of ITR for Assessment

Year 2012-13 and audited balance sheet as on 31.03.2011

of the said party. He submitted that the assessee has

proved beyond doubt the identity and creditworthiness of

the loan creditors and genuineness of the parties. He

submitted that the Assessing Officer without conducting

any enquiry or material in their possession to show that the

documents/particulars filed by the assessee are false or

untrue has made the addition, which is not correct. He

submitted that the other party has also confirmed the

payment made. So far as the reliance of the Assessing

Officer upon the statement of Shri Himanshu Verma u/s

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132(4) of the Act dated 13.04.2017 is concerned, he

submitted that vide question no.7, Mr. Himanshu Verma

specifically mentioned that he is doing business with

various companies of fabric turnover i.e providing bogus

bills of sales and purchases of fabric. In question no.17, he

has stated that accommodation entries are given in the form

of loan/share capitalare are only the layering of the amount.

Thus, from the statement of Mr. Himanhsu Verma, it is

clear that he was providing only bogus sales and purchases

and not accommodation entries of loan to outside

companies. He submitted that in the instant case, the

assessee has received the loan through proper banking

channel which was also repaid through proper banking

channel after payment of interest and due taxes deducted

from such interest. So far as the other statement is

concerned i.e. the statement of Shri Ram Yadav, which was

relied on by the Assessing Officer, he submitted that Mr.

Ram Yadav was never a director in M/s White Collar

Management Services Pvt. Ltd. Therefore, the statement of

Mr. Ram Yadav has no evidentiary value for making the

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addition. The ld. Counsel for the assessee accordingly

submitted that the addition made by the Assessing Officer

and sustained by the Ld. CIT(A) should be deleted.

upon the order of the ld. CIT(A). He submitted that the

assessee failed to substantiate with evidence to the

satisfaction of the Assessing Officer regarding the

genuineness of the said loan of Rs.10 lakhs obtained from

M/s White Collar Management Services Pvt. Ltd. Therefore,

the Assessing Officer has rightly made the addition of Rs.10

lakhs and disallowed the interest of Rs.55,726/- and the Ld.

CIT(A) has rightly upheld the same.

both the sides, perused the orders of the Assessing Officer

and the Ld. CIT(A) and the paper book filed on behalf of the

assessee. We have also considered the various decisions

cited before us. We find the Assessing Officer in the instant

case made addition of Rs.10 lakhs being unsecured loan

obtained by the assessee from M/s White Collar

Management Services Pvt. Ltd. on the ground that the

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assessee could not produce the principal officer/director of

M/s White Collar Management Services Pvt. Ltd. Further,

shri Himanshu Verma in his statement recorded u/s 132(4)

in reply to question no.7 had mentioned that he is doing

business with various companies of fabric turnover and

providing bogus bills for sales and purchases of fabric. In

question no.17, he has stated that accommodation entries

are given in the form of loan/share capital for layering of the

amount. The Assessing Officer, therefore, inferred that the

assessee has taken accommodation entries of Rs.10 lakhs

from M/s White Collar Management Services Pvt. Ltd. He

also relied on the statement of one Shri Ram Yadav who is

dummy director in a number of bogus companies and in the

statement recorded u/s 131(1A), he had stated that he was

getting Rs.10,000/- per month for being the director in

these companies. We find the ld. CIT(A) upheld the action of

the Assessing Officer, the reasons of which have already

been reproduced in the preceding paragraph. It is the

submission of the ld. Counsel for the assessee that Mr. Ram

Yadav was never a director in M/s White Collar

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Management Services Pvt. Ltd. and therefore his statement

has no evidentiary value. So far as the statement of Mr.

Himanshu Verma is concerned, he has stated that

accommodation entries given in the form of loan/share

capital are only the layering of the amount. It is also his

submission that the amount obtained on 01.02.2011 was

repaid on 31.12.2011 with interest and after deduction of

TDS of such interest and the payments have been made

through proper banking channel. Therefore, no addition is

called for.

ld. Counsel for the assessee. A perusal of the assessment

order page 4 shows that Shri Ram Yadav was not a director

of M/s White Collar Management Services Pvt. Ltd. and

therefore his statement, in our opinion, has no evidentiary

value. The list of the companies named by Shri Ram Yadav,

which has been reproduced by the Assessing Officer at

page-4 of the assessment order, nowhere shows that he was

a director of M/s White Collar Management Services Pvt.

Ltd. We further find, the assessee during the course of

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assessment proceedings has filed confirmation from the said

party, copy of which is placed at page 192 of the paper

book. The assessee has filed copy of ITR, coy of bank

statement of the said party reflecting the receipt and

payment of loan and balance sheet as on 31.03.2011 and

Form-16 for TDS deducted on interest. Not a single

document furnished by the assessee has been proved to be

false or untrue by the lower authorities. Under these

circumstances and in view of the overwhelming evidences

filed by the assessee during the course of assessment

proceedings, which are not found to be false or untrue, we

hold that the Ld. CIT(A) is not justified in sustaining the

addition of Rs.10 lakh shown by the assessee as loan which

has been repaid in the subsequent year and much before

the date of search. Accordingly, the order of the Ld. CIT(A)

is set-aside and ground of appeal 4, 5 and 6 are allowed.

amounting to Rs.55,726/-. After hearing both the sides, we

find the Assessing Officer, in the instant case, disallowed

the interest treating the loan as bogus. Since we have

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already held that the loan is not bogus and since we have

allowed the grounds raised by the assessee on this issue,

therefore, the disallowance of interest made by the

Assessing Officer and sustained by the Ld. CIT(A) is directed

to be deleted. The ground of appeal no.7 filed by the

assessee is accordingly allowed.

Rs.4,22,975/- u/s 69C of the Act.

Assessing Officer made addition of Rs.4,22,975/- on the

ground that the assessee company purchased gold coin

amounting to Rs.4,25,975/-in cash and assessee could not

explain the source of such cash purchase. We find the ld.

CIT(A) upheld the action of the Assessing Officer. We do not

find any infirmity in the order of the Ld. CIT(A) on this issue

in sustaining the addition of Rs.4,25,975/- as unexplained

expenditure u/s 69C of the Act. However, the request of

the assessee for telescoping of above expenditure out of the

income sustained out of bogus purchases finds merit. The

Hon’ble Delhi High Court in the case of CIT vs. Sonal

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Construction reported in [2013] 359 ITR 532 (Del.) has

accepted the theory of benefit of telescoping. We, therefore,

held that the assessee is entitled to the benefit of

telescoping of the addition of unexplained expenditure of

Rs.4,22,975/- out of the additions mere on account of

bogus purchases, etc. The ground of appeal no.7 is

accordingly partly allowed.

relates to the order of the Ld. CIT(A) in sustaining addition

of Rs.1,33,69,157/- being 25% of the purchases amounting

to Rs.5,3476626/- in principle and directing the Assessing

Officer to restrict the same @ 20% in case of the parties

which are found to be in existence by the Ward Inspector.

the assessee has done twenty types of job work with

material during the year in which around 55 to 60% of

material is used to complete the job work services. This has

been verified from the clients by the Ward Inspector. He

submitted that the technical person has given certificate

that 60% material will be used for the above job work. The

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ld. Counsel for the assessee submitted that the purchasers

are bifurcated in to two parts, wherein part-I the material

purchased & bills were issued by same vendor, payment to

said parties were made through proper banking channel &

open for verification and in Part-II, the purchase are made

from the grey market vendors who have supplied the

material alongwith undertaking the responsibility for giving

the grey market material supported with bills and the

vendors have issued the bills to the assessee for purchases

by charging commission wherein the Sales Tax has been

charged separately and the said amount has been retained

by the vendor. He submitted that the list of vendors (part-I)

having the address, TIN, PAN Nos. along with Income Tax

return, audited balance sheet, etc. were already brought

before the AO. He submitted that the list of billing grey

market vendors having address for the impugned year is as

under:-

S. TIN No. Party Name Party Amount Documents No. Address attached. 1. ITRV for AY 2010- 1 06291214187 Shree Shyam Plot 1,611,182 11 to AY 2016-17 Enterprises No.2191, 2. Haryana VAT RC H.B. 3. Confirmation of Colony, Account

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Sector-7A, Faridabad

TOTAL 1,611,182

have considered that all the purchases are bogus

purchases. The ld. Counsel for the assessee submitted that

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the sales of the assessee are not doubted and therefore by

disallowing the purchases at 25%, the profit percentage will

come to an absurd figure, which is not possible for this type

of business. Referring to various decisions, he submitted

that a reasonable profit rate should be adopted on account

of such grey market purchases.

documents from purchase to utilization of material have

been submitted in the form of Purchase Bill, Stock inward-

outward entry in stock register & sales bill, Complete Stock

Register quantitative as well as qualitative wise for the

period 01.04.2011 to 31.03.2017 before the AO as well as

Ld. CIT(A) for verification. He submitted that the sales for

the impugned year/period are not in dispute. The sales

party chart showing their address, PAN, sales amount have

been filed in paper books for each year and sale parties are

authorized dealer of various Original Equipment

Manufacturer (OEM) i.e. Tata, Ford, Maruti, Honda etc. The

fact regarding usage of material in providing Job Work

Services have been verified by the inspector from said

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dealers. Service Tax Audit of sales at the premises of

assessee has been done in 2015 and no discrepancy in any

sales, purchase, stock register & service tax payment has

been found by Audit party. He submitted that both the

lower authorities below have accepted that the material has

been actually purchased by the assessee.

Court in the case of PCIT vs., Mohammad Haji Adam & Co.

[2019] 104 CCH 391 (Mum.), the Learned Counsel for the

Assessee submitted that the Hon’ble Bombay High Court in

the said decision has held that the purchases cannot be

rejected without disturbing the sales in case of a trader and

the additions are limited to the extent of bringing to G.P.

rate on purchases at the same rate of other genuine

purchases.

the Tribunal in the case of Sonal Parekh vs., ITO reported in

57 CCH 373, he submitted that the Tribunal in the said

decision has held that in the absence of any corroborative

evidence, purchases made by the assessee from Hawala

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dealers cannot be treated as bogus purchases and cannot

be added to the total income of the assessee.

upon the following decisions to the proposition that profit in

such cases have been estimated between 0.5% to 2%.

lifestyles P. Ltd vs ACIT in ITA No. 4465, 4310, 4466,

4311, 4467/2010 dated 25.11.2011.

K.P. Sanghvi& Sons LLP in ITA No. 2455/2017 dated

28.09.2018.

Associates (Promoters) Ltd. vs DCIT in ITA No.

787/2016 dated 09.07.2019.

Sonal Parekh vs ITO in ITA No. 91, 92 and 93 of 2017

dated 09.12.2019.

vsRishabhdevTachnocable Ltd. in ITA No. 1330 of

2017 dated 10.02.2020.

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Pinaki D. Panani in ITA No. 1543 of 2017 dated

08.01.2020.

PCIT vs Mohommad Haji Adam & Co. (2019) 104

CCH 0391 (Mum HC).

Odean Builders Pvt. in Review Partition (C) Diary No.

22394 of 2019 dated 21.08.2019.

Rohitkumar Kapadia in SLP(C) Diary No. 12670 of

2018 dated 04.05.2018.

profit should be estimated and not the disallowance of 20%

of the purchases as held by the Ld. CIT(A). So far as the

commission estimated by the A.O. at 0.55% on such

purchases are concerned, he submitted that the same is

also on the higher side.

the order of the Ld. CIT(A) and submitted that when the

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assessee has admittedly indulged in bogus purchases and

the Ld. CIT(A) has already restricted such disallowances to

20% in case of parties which were located at the given

address during the visit made by the Inspector and are not

figured adversely in any of the statements and upheld the

disallowance of 25% on parties who are not available in the

given address, the same is a very reasoned order and,

therefore, no further interference is called for. She

accordingly submitted that the order of the Ld. CIT(A) be

upheld.

the sides, perused the orders of the A.O. and the Ld. CIT(A)

and the paper book filed on behalf of the assessee. We have

also considered the various decisions cited before us. We

find the A.O. in the instant case made an addition of

Rs.1,33,69,157/- by disallowing 25% of the entire

purchases from 05 parties from whom the assessee had

made purchases of Rs.5,34,76,626/- on the ground that

they are all identified accommodation entry providers.

Further Mr. Dalip Kumar had admitted on oath that he is

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the sole proprietor of 18 concerns namely M/s. Jai Shiv

Enterprises and others and that no business activities were

carried out by these concerns and no sale or purchase of

goods were made by these concerns. All the bank accounts

of these concerns were used for providing bogus bills and

accommodation entries to various beneficiaries etc. Similar

statement has been given by different other persons who

were the proprietors of the concerns from whom the

assessee had made purchases. We find the Ld. CIT(A)

restricted such disallowance to 20% in case of parties who

were located at the given address during the visit made by

the Inspector and are not figuring adversely in any of the

statements including the statement of Mr. Dalip Kumar, Mr.

Vikas Kumar, Ms. Jyoti Bisht and Mr. Vishnu Garg.

However, he upheld the disallowance of 25% of such

purchases where the parties are not found to be available at

the given address. It is the submission of the Learned

Counsel for the Assessee that the letters were served upon

certain parties proves that they were in existence and this

fact is found in the assessment order. Further, the books of

54 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

account were audited, the payments were made through

banking channels, the sales have been accepted and there

was quantitative tally of purchases with the quantities of

the material used in the job work. The stock register

showing relevant entries of the items purchased and issued

for consumption in job work shows that these items were

tallied. The survey party found physical stock at the time of

search and survey. Therefore, it is his submission that

disallowance @ 25% of the purchases is highly unjustified

and some reasonable profit rate only should be adopted.

Learned Counsel for the Assessee. It is an admitted fact that

the sales declared by the assessee have not been disturbed.

The assessment order indicates that letters were served

upon certain parties which proves their existence. The

books of account were also audited and auditors have not

given any adverse remarks. All the payments have been

made through banking channels. The assessee had

produced the stock register showing relevant entries of the

items purchased and issued for consumption in job work

55 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

and the items were tallying and no discrepancy in the stock

was found at the time of survey. Under these

circumstances, we are of the considered opinion that

disallowance of 20% of the purchases appears to be on the

higher side especially when some of the parties to whom

letters were issued were served and the payments have been

made through banking channel. Considering the totality of

the peculiar facts and circumstances of the instant case, the

disallowance of 2% of the total purchases under the facts

and circumstances of the case, in our opinion, will meet the

ends of justice. We hold and direct accordingly. The A.O.

shall do the re-computation. Accordingly the order of the Ld.

CIT(A) is modified on this issue and the grounds raised by

the assessee on this issue are partly allowed.

accordingly partly allowed.

challenged the order in confirming the commission expenses

of Rs.2,94,121/- added by the AO u/s 69C of the Act.

56 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

made addition of Rs.2,94,121/- being commission @ 0.55%

on the bogus purchases of Rs.5,34,76,626/- We find the Ld.

CIT(A) sustained the addition on the ground that the entries

were procured by paying commission. Since we have held

that entire purchases cannot be considered as bogus since

the sales have not been disturbed and some of the parties to

whom letters were issued are existing in the given address

and no discrepancy was found in the stock at the time of

survey and the stock register was tallying with quantitative

details, therefore, estimation of commission for the entire

purchases, in our opinion, is not justified. At the same time,

the conduct of the assessee is not above board. Considering

the totality of the facts and circumstances of the case, we

are of the considered opinion that lump sum addition of

Rs.50,000/- on estimate basis under the facts and

circumstances of the instant case will meet the ends of

justice. We hold and direct accordingly. Ground of appeal

number 14 of the assessee is accordingly partly allowed.

57 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

telescoping of addition u/s 68, u/s 69C against additions

on account out of bogus purchases.

submission of the ld. Counsel for the assessee that if any

addition is made then the assessee should be given

telescopic benefit. He accordingly submitted that if any

addition on account of bogus purchases is made then the

commission expenses can be met out of such addition on

account of bogus purchases or for the commission for

purchase of gold coins. Referring to the decision of Hon’ble

Delhi High Court in the case of CIT vs.Sonal Construction

reported in [2013] 359 ITR 532 (Del.) has accepted the

theory of benefit of telescoping. We, therefore, hold that the

assessee is entitled to the benefit of telescoping of the

addition on account of unexplained expenditure of

Rs.4,25,975/- out of the additions made on account of

bogus purchases, etc. The ground of appeal no.15 is

accordingly allowed.

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dismissed.

Assessment Year 2012-13 is partly allowed for statistical

purpose.

ITA No.9154/Del/2019 (AY 2013-14)

Assessment Years 2013-14 are as under:-

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additionally in the alternative the quantum thereof too is being disputed.

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grounds of appeal no. 1, 2 and 3 for which the ld. DR has

no objection. Accordingly, the grounds 1, 2 and 3 raised by

the assessee are dismissed as not pressed.

relate to the order of the Ld. CIT(A) in confirming the

addition of Rs.1,37,29,109/- being 25% of the purchase

amounting to Rs.5,49,16,434/- by rejecting the book and

giving direction to the AO to restrict the same to 20% in

case of parties, which were found in existence by the Ward

Inspector.

grounds are identical to grounds no. 9 to 13 in ITA

No.9153/Del/2019, we have already decided this issue and

the grounds raised by the assessee has been partly allowed

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by directing to AO to restrict the commission of bogus

purchase at 2%. Following similar reasoning, the above

grounds by the assessee are partly allowed.

the order of the Ld. CIT(A) in sustaining the commission of

Rs.3,02,040/-.

ground is identical to ground no. 14 in ITA

No.9153/Del/2019. We have already decided this issue and

directed the AO to restrict the commission expense to

Rs.50,000/- lump sum on estimate basis. Following similar

reasoning, the above ground by the assessee is partly

allowed.

ground is identical to ground no. 15 in ITA

No.9153/Del/2019. We have already decided this issue and

allowed the benefit of telescoping. Following similar

reasoning, the above ground by the assessee is allowed.

62 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

dismissed.

ITA No.9155/Del/2019 (AY 2014-15)

Assessment Years 2014-15 are as under:-

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64 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

grounds of appeal no. 1, 2 and 3 for which the ld. DR has

no objection. Accordingly, the grounds 1, 2 and 3 raised by

the assessee are dismissed as not pressed.

order of the ld. CIT(A) in sustaining the addition of Rs.25

lakhs made by the AO.

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course of assessment proceedings, the AO noted that the

assessee company has received an unsecured loan of Rs.25

lakhs from M/s Vigilant Paper Pvt. Ltd.. The AO asked the

assessee to furnish the ITR, bank statement highlighting the

transaction and confirmation copy of ledger from M/s

Vigilant Paper Pvt. Ltd. in order to prove the identity and

creditworthiness of the loan creditor and genuineness of the

transaction. Since, the assessee did not furnish the ITR,

bank statement of the lendor company and was not able to

produce the principal officer of M/s Vigilant Paper Pvt. Ltd.,

the AO invoking the provisions of section 68 of the Act made

addition of Rs.25 lakhs to the total income of the assessee.

the AO by observing as under:-

17.1 Vide ground Nos. 4, 5 and 6, the appellant has contested addition of Rs. 25,00,000/-. As stated above, this addition has been made because the AO found that equivalent amount of credit entry in books of accounts, was shown as unsecured loan from M/s. Vigilant Papers Pvt. Ltd. The appellant could not discharge the onus of proving identity and creditworthiness of the lender and genuineness of the transaction. This company (M/s. Vigilant Papers Pvt. Ltd.) was found to be controlled by one Shri Vivek

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Kumar Jain, as one of many paper entities used (by Shri Jain) for the purposes of providing accommodation entries. This finding has been confirmed by way of assessment order u/s 143(3) dated 30.03.2016 in case of this company (M/s. Vigilant Papers Pvt. Ltd.) for AY 2013-14. 17.2 The contention of the AR was that the unsecured loans were received through banking channels and were repaid. The AR also stated that the appellant was not provided cross examination of the persons whose statements have been relied upon. Moreover, the AR stated that this addition was not based upon incriminating material which emanated from the search. 17.3 It is a trite that onus is of the appellant to provide evidence of identity and creditworthiness of the lender and genuineness of the transaction. Certainly, in the light of overwhelming evidence discussed by the. AO, it is clear that the appellant was not able to discharge its onus. 17.4 Hon'ble Delhi HC in case of CITVs. N.R. Portfolio (P.) Ltd. [2012] 42 taxmann.com SB^Delhi) has held, "30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive , Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies.

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It is the persons behind the company who take the decisions, controls and manage them. "{ref. Para 30}

17.8 Hon'ble Delhi HC in case of CIT Vs. Nova Promoters & Finlease (P) Ltd. [2012] 18 taxmann.com 217 (Delhi) quoted from its earlier judgments as under, "....there cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment as share capital must be firmly excoriated by the Revenue "{ref. Para 36}. 17.9 This is also a case of pernicious practice of conversion of unaccounted money through the masquerade or channel of obtaining (bogus) loan. 17.10 Hon’ble Delhi HC in case of CIT Vs. Navodaya Castles (P.) Ltd. [2014] 50 taxmann.com 110 (Delhi) has held, "Certificate of incorporation, PAN etc., are relevant for purpose of identification, but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine investor." {ref. Para 14}. 17.11 Regarding, cross examination, the AR could not show as to when the cross examination was demanded at the assessment stage. Moreover, these statement were recorded during the official duty carried out by the Officers of the Department who were not AO and there is no provision under their charter of official duties to allow cross examination to each and every person who can be adversely affected by such statement. Nor, it is practically possible for such Officer to allow cross examination to each and every person who can be adversely affected by such statement. It is a trite that rigors of the Evidence Act, 1872 are not applicable to Income Tax proceedings. Therefore, these statements are admissible evidence like any other official document. Of course, a cross examination of the

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officer who recorded this statement can be allowed. However, the appellant never demanded such cross examination. 17.12 In view of above, it is seen that in the present case, the appellant has failed in the test of genuineness of the transaction as well as identity and creditworthiness of the lender. Therefore, the credit entry gets hit by the mischief of provision of section 68 of the I.T Act, 1961.

17.13 In view of the above, I have no hesitation in confirming the action of the AO in returning the opinion that the explanation offered by the appellant regarding nature and source of the credit entry, was not satisfactory. 17.14 Regarding plea that the addition has not been made based upon the incriminating material emanating from the search, it is stated that first of all Hon’ble Delhi High Court has clearly ruled in case of CIT Vs. Anil Kumar Bhatia [2012] 24 taxmann.com 98 (Delhi)/[2012] 211 Taxman 453 (Deihi)/[2013] 352 ITR 493 that once the jurisdiction u/s 153A is triggered due to availability of incriminating material emanating from search, all possible additions have to be made to compute total income. The Honb’le Court did not deal with a case where no incriminating material was found during the search conducted under Section 132 of the Act. However, in other cases, where incriminating material was found as a result of search, the Hon’ble court clearly ruled that “total Income” is to be computed like normal assessment. The relevant portion of the judgment is reproduced below: "21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under

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Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or

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reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made.

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contention that no document much less incriminating material was found during the search of the assessee's premises, except one unsigned undertaking for loan. Again in Paragraph 10 of its order, while dealing with the assessee's contention against the addition of Rs. 1,50,000/- being unexplained loan given to Mohini Sharma, the Tribunal has stated that it has analyzed "the subject document carefully, recovered from search" suggesting that the document was recovered during the search from the assessee. The Tribunal has even proceeded to delete the addition of Rs. 1,50,000/- as well as the notional interest on merits, holding that the document was unsigned, that Mohini Sharma was not examined by the income tax authorities and there was no corroboration of the unsigned document. If it is not in dispute that the document was found in the course of the search of the assessee, then Section 153A is triggered. Once the Section is triggered, it appears mandatory for the Assessing Officer to issue notices under Section 153A calling upon the assessee to file returns for the six assessment years prior to the year in which the search took place. There are contradictions in the order of the Tribunal. We are unable to appreciate how the Tribunal can say in Para 9.6 that no material was found during the search and at the same time in Paragraph 10 deal with the merits of the additions based on the document recovered during the search which allegedly contain the loan transaction with Mohini Sharma. Therefore, both the reasons given by the Tribunal for holding that the assessments made under Section 153A were bad in law do not commend themselves to us. The result is that the first substantial question of law is answered in the negative, in favour of the Revenue and against the assessee.

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incriminating material was found during the search conducted under Section 132 of the Act. We, therefore, express no opinion as to whether Section 153A can be invoked even in such a situation. That question is therefore left open."

17.15 Secondly, as discussed in the assessment orders for various assessment years in this case as well as in other case of the group, overwhelming evidences were found/discovered/seized/recorded to indicate that the appellant and other group concerns as well as the persons controlling affairs of the appellant of the appellant company/other group concerns were involved in obtaining accommodation entries in form of unsecured loans and bogus purchases as well as transactions {like advancing cash loans, earning interest, paying incentive in cash, purchasing gold in, cash, paying salary in cash etc.) which were not being entered into the books of accounts. In light of the facts discovered due to search (that the appellant and the people involved in its management were engaged colouring transaction by obtaining accommodation entries in form of loans as well as bogus purchases), the material fact of taking unsecured loan from an non- group company, coupled with the fact such company was found to be paper company used for providing accomodation entries, certainly becomes incriminating material in respect of this addition and the said material(that the appellant and the people involved in its management were engaged colouring transaction by obtaining accommodation entries in form of loans as well as bogus purchases) certainly emanated from the search. Therefore, on pure facts, the addition has been found to be made based upon the material which has a live link with the Search & Seizure operation, in view of back ground facts and circumstances being emnating from Search & Seizure operation. 17.16 In view of the above discussion, these grounds (Nos. 4, 5, and 6) are dismissed.”

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assessee is in appeal before the Tribunal.

challenged the order of the Ld. CIT(A) in confirming the

addition of Rs.25 lakhs made by the AO. The ld. Counsel

for the assessee submitted that the assessee has received

an amount of Rs.25 lakhs as interest bearing loan from M/s

Vigilant Paper Pvt. Ltd. on 23.04.2013. Before the AO, the

assessee filed the copy of bank statement evidencing the

repayment of loan, balance sheet as on 31.03.2014, Form-

16, interest on TDS etc. to substantiate the identity and

creditworthiness of the party and genuineness of the

transaction. He submitted that the AO without conducting

any enquiry and in absence of any other material in her

possession to show that the document/particulars filed by

the assessee are false or untrue made the addition which is

not correct. Referring to various pages of the paper book,

he submitted that the assessee has repaid the amount along

with interest after deducting TDS much before the date of

search. He submitted that had the said loan is

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accommodation entries then in that case, the assessee

would not have repaid the loan along with interest. He

submitted that making the addition merely based on the

assessment order passed u/s 143(3) in the case of M/s

Vigilant Papers Pvt. Ltd. is not justified. Referring to

following decisions, he submitted that the addition made by

the AO and the sustained by the Ld. CIT(A) is not justified.

i. CIT Vs Gangeshwari Metal Pvt. Ltd. (2014) 361 ITR 10 (Del) ii. CIT vs Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) iii. Rohini Builders vs. DCIT (2002) 76 TTJ 521 (Ahd

Tb)

iv. CIT Vs Karaj Singh (2011) 203 Taxman 218 (P&H)

repaid the loan after 31st March, 2014 and the AO is relying

on the order of AY 2013-14 in the case of the loan creditor

which is much earlier than the date of repayment.

Therefore, the said order is not applicable to the facts of the

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case specially when the said loan creditor has confirmed

that it had given the loan and has received the payment.

order of the AO and the Ld. CIT(A). She submitted that the

Ld. CIT(A) has clearly and categorically held as to how the

assessee has accepted the accommodation entries from a

non-existing paper company. Therefore, the same should be

upheld and the grounds raised by the assessee should be

dismissed.

both the sides, perused the orders of the Assessing Officer

and the Ld. CIT(A) and paper book filed on behalf of the

assessee. We have also considered the various decisions

cited before us. We find the assessee has accepted the

unsecured loan of Rs.25 from M/s Vigilant Paper Pvt. Ltd.

which was repaid on three different dates namely

14.04.2014, 24.02.2015 and 01.03.2015, the details of

which are as under:-

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Part Name Date of Amount as Documents Date of Amount mentioned Receipt of per Reasons Repayment Documents in reasons Loan recorded of Loan recorded Vigilant 23.04.2013 25,00,000/- Received 14.04.2014 2,47,500 Repayment Paper Pvt. loan of Loan Ltd through and 24.02.2015 12,50,000 Banking interest on Channel loan 01.03.2015 14,75,802 (pg. through Interest on Banking Interest on 4,73,302/- loan due Channel, laon after Bank deducting Statement TDS is at pg.

proceedings, the assessee has filed confirmation from the

said party, copy of its PAN No., bank statement of the

assessee evidencing the receipt and the repayment of loan,

balance sheet as on 31.03.2014, Form-16 for deduction of

TDS, etc. is an admitted fact the loan has been repaid before

the date of search. The Ahmadabad Bench of the Tribunal

in the case of Rohini Builders vs DCIT, reported in (2002) 76

TTJ 521 (Ahd Tb.) has held that when loan has been

received through proper banking channel and the same has

been repaid through proper banking channel and the other

party has confirmed the receipt of the loan then no addition

could be made in the hand of the assessee u/s 68 of the

Act. We find the above decision of the Ahamdabad Bench of

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the Tribunal has been upheld by the Hon’ble Gujarat High

Court, reported in (2002) 256 ITR 360 (Guj.). Since, the

assessee has accepted and repaid the loan through banking

channel, due taxes has been deducted on the interest so

paid and the amount has been repaid prior to the date of

search and the assessee has filed relevant documents before

the AO evidencing the identity and creditworthiness of the

loan creditor and genuineness of the transaction and since

all the documents were filed before the AO and nothing has

been proved to false or untrue, therefore, we are of the

considered opinion that the ld. CIT(A) is not justified in

sustaining the addition made by the AO. Accordingly, we

set-aside the order of the Ld. CIT(A) and direct the AO to

delete the addition. Accordingly, grounds of appeal No.4, 5

and 6 are allowed.

of the Ld. CIT(A) in sustaining the disallowance of

purchases amounting to Rs.1,16,24,050/- being 25% of the

purchases amounting to Rs.4,64,96,203/- by rejecting the

books of accounts u/s 145(3) of the Act and directing the

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Assessing Officer to restrict the same to 20% of the

purchases in cases the parties are found to be in existence

by Income Tax Inspector.

above grounds are identical to grounds of appeal no.9 to 13

in ITA No.9153/Del/2019. We have already decided this

issue and the grounds raised by the assessee has been

partly allowed, wherein, we have directed the Assessing

Officer to restrict the profit on such purchases at 2% of the

total purchases. Following similar reasoning, we direct the

Assessing Officer to restrict the disallowance at 2% of the

bogus purchases. The grounds raised by the assessee are

accordingly partly allowed.

CIT(A) in confirming the addition of Rs.2,55,729/- being the

commission expenses.

identical to the ground of appeal no 14 in ITA

No.9153/Del/2019, wherein we have directed the Assessing

Officer to restrict the disallowance to Rs.50,000/- lump sum

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on estimate basis. Following similar reasoning, we direct

the Assessing Officer to restrict the addition to Rs.50,000/-.

The above grounds by the assessee is partly allowed.

telescoping.

ground is identical to ground no. 15 in ITA

No.9153/Del/2019, we have already decided this issue and

allowed the benefit of telescoping. Therefore, following

similar reasoning, the above ground by the assessee is

allowed.

dismissed.

ITA No.9156/Del/2019 (AY 2015-16)

appeal:-

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when there is no incriminating material/document found during the course of search u/s 132 of the Act for the impugned year.

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was duly submitted before AO both quantitatively as well as qualitatively and the stock physically tallied with the books of account on the date of search.

grounds of appeal no. 1, 2 and 3 for which the ld. DR has

no objection. Accordingly, the grounds 1, 2 and 3 raised by

the assessee are dismissed as not pressed.

the order of the ld. CIT(A) in sustaining the disallowance of

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Rs.93,33,960/- being 25% of purchases amounting to

Rs.3,73,35,843/-by rejecting the books of accounts u/s

145(3) of the Act and directing the Assessing Officer to

restrict the disallowance to 20% in cases the parties are

found to be in existence by Ward Inspector.

above grounds are identical to grounds of appeal no.9 to 13

in ITA No.9153/Del/2019. We have already decided this

issue and the grounds raised by the assessee has been

partly allowed, wherein, we have directed the Assessing

Officer to restrict the profit on such purchases at 2% of the

total purchases. Following similar reasoning, we direct the

Assessing Officer to restrict the disallowance at 2% of the

bogus purchases. The grounds raised by the assessee are

accordingly partly allowed.

Ld. CIT(A) in confirming the addition of Rs.2,05,347/- on

account of commission.

ground is identical to the ground of appeal no 14 in ITA

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No.9153/Del/2019, wherein, we have directed the

Assessing Officer to restrict the disallowance to Rs.50,000/-

lump sum on estimate basis. Following similar reasoning,

we direct the Assessing Officer to restrict the addition to

Rs.50,000/-. The above ground by the assessee is partly

allowed.

telescoping.

ground is identical to ground no. 15 in ITA

No.9153/Del/2019. We have already decided this issue and

the benefit of telescoping have been allowed. Therefore,

following similar reasoning, the above ground by the

assessee is allowed.

dismissed.

ITA No.9157/Del/2019 (AY 2016-17)

following grounds:-

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stock details submitted whereas per assessee stock register was duly submitted before AO both quantitatively as well as qualitatively and the stock physically tallied with the books of account on the date of search.

grounds of appeal no. 1 and2 for which the ld. DR has no

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objection. Accordingly, the grounds 1and 2 raised by the

assessee are dismissed as not pressed.

CIT(A) in confirming the disallowance of Rs.1,03,22,034/-

being 25% of the purchases amounting to Rs.4,12,88,138/-

by rejecting the books of accounts u/s 145(3) of the Act and

directing the Assessing Officer to restrict the disallowance to

20% in cases the parties are found to be in existence by

Ward Inspector.

above grounds are identical to grounds of appeal no.9 to 13

in ITA No.9153/Del/2019. We have already decided this

issue and the grounds raised by the assessee has been

partly allowed, wherein, we have directed the Assessing

Officer to restrict the profit on such bogus purchases at 2%

of the total purchases. Following similar reasoning, we

direct the Assessing Officer to restrict the disallowance to

2% of the bogus purchases. The grounds raised by the

assessee are accordingly partly allowed.

87 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

of the Ld. CIT(A) in sustaining the commission expenses of

Rs.2,27,084/-.

ground is identical to the ground of appeal no 14 in ITA

No.9153/Del/2019, wherein we have directed the Assessing

Officer to restrict the disallowance to Rs.50,000/- lump sum

on estimate basis. Following similar reasoning, we direct

the Assessing Officer to restrict the addition to Rs.50,000/-.

The above grounds by the assessee is partly allowed.

in confirming the addition of Rs.33,83,239/- on account of

incentive paid for business exigencies and commercial

expediency.

search proceedings at premises 17/6, Hanspal Industrial

Complex, Mathura Road, Faridabad, Pages 54 and 97 of

Annexure-A7 were found which contains the details of

incentives given in cash of Rs.33,83,239/-. The A.O,

therefore, asked the assessee to furnish the details of such

88 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

incentives paid and show caused as to why such amount

should not be considered as unaccounted cash and added

back to the total income of the assessee. It was explained

by the assessee that the cash generated out of billing grey

market purchases were used for incurring business

expenses i.e. incentives, etc and the amount paid to

individual persons is less than Rs.15,000/-. However, the

Assessing Officer was not satisfied with the explanation

given by the assessee and made the addition of

Rs.33,83,239/- u/s 68 of the Act on the ground that the

said transaction is not recorded in the books of accounts.

Assessing Officer.

assessee is in appeal before the Tribunal.

the sides and perused the records. It is the submission of

the ld. Counsel for the assessee that the seized documents

relate to L.V. Rustor and also relate to AY 2017-18 and

therefore no addition is called for. We, therefore, restore this

89 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

issue to the file of the AO for verification and decide the

issue afresh and in accordance with law after giving due

opportunity of being heard to the assessee. He shall also

keep in mind the benefit of telescoping in view of the

decision of the Hon’ble Delhi High Court in the case of CIT

vs. Sonal Construction reported in [2013] 359 ITR 532

(Del.). Ground no. 9 raised by the assessee is allowed for

statistical purposes.

telescoping benefit. We have already decided this issue in

preceding paragraph. Therefore, this doesn’t require

adjudication and the ground raised by the assessee is

allowed.

dismissed.

ITA No.9158/Del/2019 (AY 2017-18)

following grounds:-

90 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

amount of Rs 57,92,503/- is being challenged on facts & law.

91 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

qualitatively and the stock physically tallied with the books of account on the date of search.

92 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

grounds of appeal no. 1 and 2 for which the ld. DR has no

objection. Accordingly, the grounds 1and 2 raised by the

assessee are dismissed as not pressed.

CIT(A) in confirming the disallowance of Rs.1,05,98,837/-

being 25% of the purchases amounting to Rs.4,23,95,347/-

by rejecting the books of accounts u/s 145(3) of the Act and

directing the Assessing Officer to restrict the disallowance to

20% in cases the parties are found to be in existence by

Ward Inspector.

above grounds are identical to grounds of appeal no.9 to 13

in ITA No.9153/Del/2019. We have already decided this

issue and the grounds raised by the assessee has been

partly allowed wherein we have directed the Assessing

Officer to restrict the profit on such bogus purchases at 2%

93 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

of the total purchases. Following similar reasonings, we

direct the Assessing Officer to restrict the disallowance at

2% of the bogus purchases. The grounds raised by the

assessee are accordingly partly allowed.

of the Ld. CIT(A) in sustaining the commission expenses of

Rs.2,33,174/-.

ground is identical to the ground of appeal no 14 in ITA

No.9153/Del/2019 wherein we direct the Assessing Officer

to restrict the disallowance to Rs.50,000/- lump sum on

estimate basis. Following similar reasoning, we direct the

Assessing Officer to restrict the addition to Rs.50,000/-. The

above ground by the assessee is partly allowed.

in confirming the addition of Rs.25,46,324/- on account of

incentive paid for business exigencies and commercial

expediency.

ground is identical to the ground of appeal no 14 in ITA

94 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

No.9157/Del/2019. We have already decided this issue and

restored the issue to the file of the AO for fresh

adjudication. Following the similar reasoning, we restore

the issue to the file of the AO for fresh adjudication

including the benefit of telescoping. The ground raised by

the assessee is accordingly allowed for statistical purposes.

CIT(A) in sustaining the addition of Rs.6 lakhs made u/s

69C of the Act.

search at premise 17/6, Hanspal Industrial Complex,

Mathura Road, Faridabad, Page-99 of Annexure-A7 was

seized which contain the payment received from M/s Defy

Motors, Gurgaon. The AO asked the assessee to furnish the

details of payment. In absence of any satisfactory

explanation from the assessee and observing that during the

course search proceedings, Ms. Jyoti Bisht had admitted on

oath in her statement that the payment of Rs.6 lakhs was

received from M/s Defy Motors Guragaon as advance but

not recorded in the books of accounts of the related

95 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

concerns, the AO made addition of Rs.6 lakhs to the total

income of the assessee as unaccounted income u/s 69A of

the Act.

Assessing Officer.

appeal before the Tribunal.

the sides and perused the records. We do not find any

infirmity in the order of the Ld. CIT(A) in sustaining the

above addition. Admittedly, the addition was made on the

basis of seized document Page-99 of Annexure-A7, which

contains the payment of Rs.6 lakhs received from M/s Defy

Motors, Gurgaon and the same was not recorded in the

books of accounts. Further, there is no entry showing

reduction of Rs.85,238/- from the amount of Rs.6 lakhs.

Ms. Jyoti Bisht had also admitted on oath in her statement

that the payment of Rs.6 lakhs was received from M/s Defy

Motors Guragaon as advance. She has also stated that the

amount of Rs.85,238/- had been reduced from the advance

96 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

because work of equivalent amount was done and bill was

issued for the same. Since, neither the advance of Rs.6

Lakhs nor the bill for work of Rs.85,238/- was found

recorded in the books of accounts, we do not find any

infirmity in the order of the Ld. CIT(A) in sustaining the

addition of Rs.6 lakhs. Accordingly, the order of the Ld.

CIT(A) is upheld. Ground raised by the assessee on this

issue is dismissed.

of the ld. CIT(A) in sustaining the unexplained expenditure

of Rs.13,32,207/- u/s 69C of the Act.

addition of Rs.13,32,207/- on the basis of seized document

Annexure A12 which contains details of salary paid to

employees of the assessee. The above seized document

reflects disbursement of Rs.13,32,207/- on account of

salary in cash for the month of November, December 2016

and January, 2017. The assessee could not give any

satisfactory reply for which the AO made addition of Rs.69C

of the Act. This has been upheld by the ld. CIT(A).

97 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

infirmity in the order of the ld. CIT(A) on this issue in

absence of any satisfactory explanation given by the ld.

Counsel for the assessee even before us. However, the

contention of the ld. Counsel for the assessee for giving

telescoping benefit is accepted. We, therefore, while

sustaining the addition of Rs.13,32,207/-, direct the AO to

give benefit of telescoping to the assessee in view of the

decision of Hon’ble Delhi High Court in the case of CIT

vs.Sonal Construction reported in [2013] 359 ITR 532 (Del.).

This ground raised by the assessee is accordingly partly

allowed.

of the ld. CIT(A) in confirming the addition of Rs.9,80,410/-

u/s 69A of the Act.

course of search proceedings, certain documents were sized

from the premise 17/6, Hanspal Industrial Complex,

Faridabad. One paper containing details of cash received

and issued was seized amounting to Rs.9,80,410/-. The

98 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

AO therefore asked the assessee to explain the same. The

assessee submitted that the said papers contain cash

balance & expenses incurred on incentive and salary paid to

employees at various places. It was explained that the cash

generated out of billing grey market purchases were used

for incurring the business expenditure. However, the AO

was not satisfied with the arguments advanced by the

assessee and noted that the assessee failed to show that the

transactions are recorded in the books of accounts. He,

therefore, invoked the provisions of section 69A of the Act

and made addition of Rs.9,80,410/-.

by the AO by observing as under:-

“26.11. Sixth addition is of Rs. 9,80,410/-. This addition has been made on account of a seized papers having details of cash payments and receipts. During the search an statement of Shri Kuldeep, an employee of the appellant who was having custody of these (seized) paper was recorded. He deposed that these papers were having entries of cash receipts and payments and were handed over to him by Shri Sandeep Isher, ASM (Haryana). There is no entry of these receipts and payments in books of accounts. Before the AO the appellant could not produce any plausible explanation regarding the entries made in these seized papers. Therefore, the AO made addition u/s 69A. This addition has been contested vide ground No. 11. Even during the present appellate proceedings, the AR could not give any plausible explanation as to why this

99 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

receipt/expenditure was not recorded in books. Therefore, I find no reason to interfere in the action of AO. In view of above discussion, in principle, this ground (No. 11) is dismissed. 99. Aggrieved with such order of the ld. CIT(A), the

assessee is in appeal before the Tribunal.

infirmity in the order of the ld. CIT(A) in sustaining the

addition of Rs.9,80,410/-, the reasons of which have

already been reproduced in the preceding paragraph. The

ld. Counsel for the assessee also could not give any

satisfactory explanation as to how the order of the Ld.

CIT(A) is wrong. We, therefore, uphold the order of the ld.

CIT(A) on this issue. The ground raised by the assessee on

this issue is dismissed.

telescoping.

ground is identical to ground no. 15 in ITA

No.9153/Del/2019. We have already decided this issue and

the benefit of telescoping is allowed. Therefore, following

100 ITA.Nos.9153 to 9158/Del./2019 M/s. R R Carwell Pvt. Ltd., New Delhi.

similar reasoning, the above ground by the assessee is

allowed.

dismissed.

2012-13 to 2015-16 are partly allowed and appeals for AY

2016-17 and 2017-18 are partly allowed for statistical

purposes.

Order pronounced in the open court on 11.02.2022.

Sd/- Sd/- [Ms. SUCHITRA KAMBLE] [R.K.PANDA] JUDICIAL MEMBER ACCOUNTANT MEMBER

Delhi; Dated 11th February, 2022 f{x~{tÜ f{x~{tÜ & VBP/- f{x~{tÜ f{x~{tÜ Copy to 1. The appellant 2. The respondent 3. CIT(A) concerned 4. CIT concerned 5. D.R. ITAT ‘F’ Bench, Delhi 6. Guard File.

// By Order //

Assistant Registrar : ITAT Delhi Benches : Delhi.