DHAR & COMPANY PVT. LTD.,HOWRAH vs. I.T.O., WARD - 3(3), KOLKATA, KOLKATA

At the outset, we note that there is delay of 234 days in filing the appeal by the assessee, for which condonation petition along with affidavit was filed. It was stated in the condonation petition that there was change of management in the assessee company during the F.Y. 2018 and new directors took over and old directors resigned. It was further stated that as per the terms agreed upon between the director’s, the old management of the company would be liable for the liabilities arising prior to the change of management and therefore,

The ld. DR on the other hand strongly opposed the arguments of the ld. AR by submitting that the delay has not been explained by the counsel of the assessee and therefore the appeal may be dismissed in limine by not condoning the delay.

After hearing the rival contentions and perusing condonation petition, we find that the delay has occurred due to reasons which were beyond the control of the appellant and therefore, the assessee cannot be penalized by not condoning the delay. In our opinion, the delay is for genuine and bonafide reasons and the same is condoned.

The facts in brief are that the assessee filed the return of income on 30.09.2011, declaring total income of ₹9,78,204/-, which was processed u/s 143(1) of the Act. Subsequently, a search action u/s 132(1) of the Act was conducted on Shri Sanjiw Kumar Singh, who was an entry operator and his related entities. During the course of search, Mr. Singh admitted that he was engaged in providing accommodation entries in the form of bogus purchases on commission basis. The information received by the ld. AO that M/s Dhar & Company Pvt. Ltd., the assessee being beneficiary of the accommodation entry provided by Shri Sanjiw Kumar Singh to the tune of ₹42,24,191/-. Accordingly, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 147 of the Act on 22.03.2018, which was complied with vide letter dated 28.04.2018, requesting to treat the return filed on 19.04.2018, in compliance to notice u/s 148 of the Act. Thereafter, the ld. AO issued statutory notices u/s 142 along with questionnaire which were duly complied with by the assessee by filing necessary evidences/ documents. The ld. AO also issued notice u/s 133(6) of the Act to seven sellers/ suppliers, which were returned unserved. Finally, the ld. AO treated the purchases made by the assessee as bogus purchase and added the same to the income of the assessee u/s 69 of the Act as unexplained expenditure.

After hearing the rival contentions and perusing the materials available on record, we find that the case of the assessee was reopened u/s 147 of the Act read with section 148 of the Act after the ld. AO received information to the effect that the assessee was a beneficiary of bogus purchases through accommodation entry to the tune of ₹42,24,191/- from seven parties, belonging to Shri Sanjiw Kumar Singh, who was an entry operator. It was further noticed that the said information was accepted in statement recorded during the course of search of Shri Sanjiw Kumar Singh and his associated concerns. The assessee complied with the said notices and produced the evidences /details such as bills and vouchers and stock registers etc. The accounts of the assessee were also duly audited and the auditor has not drawn any adverse inference in respect of the said purchases. Moreover, the ld. AO has not disbelieved the sales made by the assessee out of the said purchases. We note that during the year the gross profit declared by the assessee was 20.09%, whereas the net profit was 2.71%. In such above scenario the only presumption is that the purchases were made from the grey market whereas the bills were procured from hawala entry operators. Since, the assessee has already declared its purchase in the books of accounts and made sales out of those purchases and declared profit thereon, therefore, we are of the view that the view taken by the ld. CIT (A) confirming the addition of the entire purchases would lead to unrealistic and hypothetical results. therefore, we are not in agreement with the view taken by the ld. CIT (A) on this issue and accordingly, we set aside the order of ld. CIT (A). However, we are of the view that some additional rate of gross profit should be levied on

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