ABANS ENTERPRISES LTD.,MUMBAI vs. ACIT, CENTRAL CIRCLE-4(3), MUMBAI

The Assessee, being aggrieved with the impugned order, challenged the said affirmation of the addition by filing this appeal and at the outset has submitted that the Hon’ble Co-ordinate Bench of the Tribunal in the Assessee’s sister concern cases, has also dealt with the identical issue/addition and vide order dated 30.09.2024 passed in & ors., ultimately deleted the identical addition by observing and holding as under:

Before us, ld. Counsel submitted that the assessee had given detailed explanation for each and every entity which has been though incorporated in the order of ld. CIT(A) but has not been dealt with. In a summarized manner, the assessee has given its rebuttal on the various allegations made by the ld. AO which are as under:- Sr. Allegations made Assessee’s Rebuttal/ Submissions No by the AO & M/s. Abans Enterprises Ltd. A. Common Allegations for all six entities 1. Source of funds / The assessing officer has compared Capital is less turnover with share capital as the only compared to the source of funds. However trading does turnover not require only large own capital. Based on the information received from the supplier, the source of funds can be traced to inter corporate loans taken from various business associates purely for working capital requirements. Further, in trading businesses, there is no requirement of high source of funds. In any event, the profit is commensurate to the funds invested.

The shareholders The shareholders have regularly filed are not men of their returns of income. There returns of means income are sufficient to make the investment in share capital. In any event, this by itself does not render the transactions as non-genuine.

No response Summons were issued on 09.09.2020, received to the i.e., during peak COVID-19 lockdown. summons issued The Directors had actually responded to the Directors stating inability to attend due to & M/s. Abans Enterprises Ltd. lockdown, however, the same is completely ignored. The assessing officer has merely reproduced the investigation report prepared during COVID, but failed to verify and conduct any investigation during assessment proceedings. It is noteworthy, that all the directors were available at the premises verified and that the assessing officer had the powers to compel attendance and duty to verify the same in assessment proceedings, but failed to do so 6. Books of The assessing officer did not provide the accounts were evidence in support of this allegation. He found in data did not even provide the details of recovered from content of data, the period to which it premises pertained, the location where was found. Further, there is no indication of compliance with the requirements of Section 65B of the Indian Evidence Act. B. Specific Allegations for Mavaiya 1. The company Based on the information provided by does not have the supplier, there was considerable any employees or amount of employee benefit expenses negligible such as Rs. 23.79 lakhs for AY 2015- number of 16, Rs. 66 lakhs for AY 2016-17, Rs. 66 employees. lakhs for AY 2018-19. C. Specific Allegations for Manmish 1. Summons were Based on the information provided by issued to Mr. the supplier, there was no such director Vinod in the company, thus, the information is Mansukhlal factually incorrect. Also based on the Vadhaiya information received from company the directors. actual director of the company, Mr. Hardik Gandhi, attended the summons proceedings, thus the information is factually incorrect. This fact is not commented upon by investigation wing. The assessing officer did not carry out any investigation or reverification. D. Specific Allegations for Yogdarshan 1. Inquiry was Based on the information provided by conducted in this the supplier, the inquiry was conducted case at the during peak Covid period at Mumbai address of the premise, whereas the transactions are registered office. done from premises situated in Gujarat. The Inspector Interestingly, the Inspectors report in all reported that cases is identical. It says that the office & ITA No.3519/M/2024 M/s. Abans Enterprises Ltd. there was no is small, is dilapidated and is closed. It business activity further says it is unused for a long time. happening at this It further refers to enquiries from staff of premises. another premise, but fails to even mention the name of such office or any staff. This clearly shows it to be a prejudiced report.

Books of The assessing officer did not provide the accounts were evidence in support of this allegation. He found in data did not even provide the details of recovered from content of data, the location where was premises found. It is alleged that some data of some earlier years, not current, was found. In the absence of specific details and sharing of actual data, it cannot be commented upon. Further, there is no indication of compliance with the requirements of Section 65B of the Indian Evidence Act. E. Alleged allegations for Aavim 1. Office was closed The inspectors report mentions the office and no was closed. Yet, he states that the office operations were is very small and is not used for long carried out. time, when he could not have seen that. This indicates biased reporting.

IP address The extract of the statement reproduced 112,196.138.237 in the assessment order in Answer to for filing return of Q22 does not mention this IP address. It income is at is learnt that the IP address was Abans Group 112.196.129.164. This shows that offices as per allegations made in the investigation Q22 of statement report is false and the assessing officer of Shiv Shankar failed to verify and draw correct Singh inferences.

All these submissions which were given before the ld. AO and ld. CIT (A) has not been considered at all. Most of these inferences have been drawn from the Investigation report and did not even verify the various allegations made in the report while assessee brought on record all the details and evidences. Ld. counsel further submitted that investigations were carried out & M/s. Abans Enterprises Ltd. during the peak Covid period and verifications were made in Mumbai when the operations were in Gujarat, thus, there was basic fallacy in the investigation and this fact was duly highlighted before the ld. AO and ld. CIT (A). He further submitted that there is neither evidence nor any allegation that these entities are involved in bogus sales/purchase or accommodation entry. All the transactions are supported by GST returns of the parties. Further Abans entities came up for examination by CGST Mumbai and Gujarat, but no adverse inference was drawn in relation to sales and purchase transaction with said entities. It has been informed that CGST Gujarat conducted audit in case of Yogdarshan and transaction of sales and purchase were found to be in order CGST Mumbai conducted audit in the cases of Abans Broking Services Private Limited and Abans Securities Private Limited which had transactions with these very companies alleged to be nongenuine in the assessment order, but did not draw any adverse inference. There is no evidence of any underlying flow of cash was found even during the 55 extensive survey operations under section 133A carried out in December 2019. No evidence for considering rate of 0.25% as alleged commission.

Ld. Counsel further submitted that sales for the year under consideration have not been disputed and making any such kind of adhoc addition of 0.25% on such sales is uncalled for.

On the other hand, ld. DR relying upon the various facts brought on record by the ld. AO pointed out that detailed enquiry was carried out by the Investigation wing and it was found that either these parties were not existing at their address and these entities did not have any infrastructure for supplying such goods nor any credence. Accordingly, he strongly relied upon the findings and observations of the ld. AO and ld. CIT (A).

We have heard the rival submissions and also perused the materials placed on record. It is seen that the ld. AO had treated the purchases from 6 entities as non-genuine and has applied profit rate of commission on such purchases @0.25%. He has accepted that these purchases are duly recorded in the books of accounts, and has not disturbed the purchases. However, according to him as per market practice there is commission rate of obtaining such entry at @ 0.25% which needs to be added. First of all in so far as the transactions of purchases from these parties are concerned, the same had not been doubted for the reason that ultimately the ld. AO’s allegation is that assessee might have earned commission on such purchases as these are non genuine parties with no credentials and on inquiry by the investigation wing various facts have emerged about their credibility. If the purchases are from the books and source of & M/s. Abans Enterprises Ltd. purchases are not in doubt and assessee has produced all the evidences to prove the purchases then how can on such purchases adhoc addition on account of commission can be made. Before the AO assessee has submitted following details to prove the purchases: (i) Purchase invoices; (ii) Warehouse receipts showing physical receipt of the goods in the warehouse; (iii) Delivery Orders; (iv) Bank statements demonstrating payment towards the purchases; (v) GST returns showing receipt of the goods and availment of input tax credit on such purchases. If these documents have not been doubted then where is the question of making adhoc addition of commission on such purchases.

Coming to the various allegations made by the AO and the rebuttal given by the assessee before the AO as well as before the CIT(A), it is seen that one of the allegations of the AO was that the source of funds in capital of these entities are less compared to the turn over. What was required to be seen is whether there was actual trading or not as trading does not require large own capital but what are the source of funds in their balance sheet. Another allegation regarding e-mail was only by the Abans group. There was nothing which has been brought on record by the ld. AO that e-mail was actually being handled by the Abans group nor he has mentioned who was operating the said e-mail. Assessee had already countered that e-mail and ITR of the company was not operated from the office of the Abans group and had given detailed explanation before the ld. CIT(A) also which was not even being committed upon. In so far as ITR filed from the premises of Abans group from a particular IP address, assessee has categorically denied that it is incorrect and no such ITR has been filed from the IP mentioned in the order but from some other IP address which was provided before the ld. CIT (A). This has not been rebutted by the department when assessee brought on record that the IP address which has been mentioned by the ld. AO were different. In so far as the shareholders were not men of means, already it has been brought on record that they were filing their regular income tax returns and have shown investment of share capital from their own sources. In any case, this cannot be the ground for treating the transaction as non-genuine. 25.1 Now, coming to the summons issued to the Directors, it has been stated that the summons were issued during & M/s. Abans Enterprises Ltd. the peak Covid 19 lockdown period and directors had actually responded their inability to attend due to lockdown which has been ignored. If the ld. AO has simply relying upon the comments of the investigation wing and he did not ask the assessee during the course of assessment proceedings to file their confirmations and he could have independently verified once the assessee had stated that all the Directors were available at the premises and ld. AO can ask for their attendance which ld. AO had failed to do so. In so far as books of accounts found in the audit report from the premises, the assessee’s contention was that neither, the Investigation Wing nor the ld. AO had provided the evidence in support of such allegation nor any details of content of date and period to which it pertain was provided or found. Thus, such ground cannot be adversely viewed. Similarly, with regard to every allegation, counter submissions as noted above has not been dealt by the ld. CIT (A) specifically when they were duly explained through various documents and facts. Once these facts were brought on record, ld. AO should have at least himself carried out any enquiry or verification rather than blindly apply and relying upon the investigation report. Thus, in view of the aforesaid submissions given by the assessee and rebuttal given against various allegations of the AO are liable to be accepted. In any case, the case of & ITA No.3519/M/2024 M/s. Abans Enterprises Ltd. the ld. AO is that assessee might have earned commission from such purchases of 0.25% which cannot be sustained as ld. AO has applied commission of 2% and reduced to 0.25% by CIT (A) are on mere conjecture. It is not a case where the entire purchases have been added, albeit ld. AO has presumed that assessee might have earned commission on such purchases made from non-genuine parties. Accordingly, such adhoc application of commission of 0.25% is deleted.

Similar issue of application of commission of 0.25% has been applied for the A.Y.2016-17, 2018-19 and 2020-21, therefore, in view of the finding given hereinabove, such addition on account of adhoc commission are deleted. Accordingly, appeal for A.Y.2015-16, 2016-17, 2018-19 and 2020-21 are allowed.”

As the identical issue/addition as involved in the instant case has already been dealt with by the Hon’ble Co-ordinate Bench of the Tribunal in the cases referred to above, wherein the Hon’ble Co- ordinate Bench of the Tribunal on elaborate discussion/analyzations ultimately deleted the addition and/or decided the issue in favour of those Assessees. Even otherwise there is nothing on record available to refute the findings of the Hon’ble Co-ordinate Bench of the Tribunal in Assessee’s sister’s concerns cases. Therefore, respectfully following the judgment referred to above, this Court is inclined to delete the addition under consideration. Thus, the addition under consideration is deleted. Resultantly the Assessee’s appeal i.e. is allowed.