ACHROMATIC TRADING P.LTD,MUMBAI vs. ITO WD 2(1)(1), MUMBAI

Per Manoj Kumar Aggarwal (Accountant Member)

1. On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the rejection of appellant’s books of accounts u/s.145(3) on ITA.No.3927/Mum/2016 Achromatic Trading Private Limited Assessment Year 2010-11 ignoring the fact that no fault had been pointed in appellant’s books of accounts;

2. On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the Ld. AO’s finding that the appellant is not engaged in genuine business activity and is providing only accommodation entries;

3. The Ld. CIT(A) erred in sustaining the addition of Rs.57,65,566/- on estimating the suppressed commission income @1% on turnover relating to alleged accommodation entries;

4. Without prejudice, Ld. CIT(A) having held that the appellant is engaged in providing only accommodation entries ought to have restricted the addition @0.10% of turnover.

5. The Ld. CIT(A) having held that the appellant is engaged in providing only accommodation entries ought to have restricted the addition @0.10% of turnover;

6. The Ld. CIT(A) having upheld the rejection of books u/s. 145(3) ought to have estimated the total income @ 0.10% of turnover on following the concept of real income and considering the comparable instances relied by the appellant.

The assessment for impugned AY was framed by Ld. Income-tax Officer-Ward 2(1)(1), Mumbai [AO] u/s 144 read with Section 145(3) of the Income Tax Act,1961 on 30/03/2013. 2.1 Briefly stated the assessee being resident corporate assessee stated to be engaged in trading & dealing in steel sheet was assessed for impugned AY on best judgment basis u/s 144 on 30/03/2013 wherein the total income of the assessee was determined on an estimated basis at Rs.288.27 Lacs as against Rs.1.80 Lacs filed by the assessee on 15/10/2010. The assessee reflected turnover of Rs.57.65 crores with meager net profit rate of .0.329%. 2.2 A perusal of financial statements revealed that majority of the sale and purchases were on credit and the assessee had substantial closing debtors as well as creditors which remained outstanding for considerable period of time. Keeping in view the nature of transactions carried out by the assessee, the assessee was asked to substantiate the delivery of material. Further, to confirm the stated sale / purchase notices u/s 133(6)

ITA.No.3927/Mum/2016 Achromatic Trading Private Limited Assessment Year 2010-11 were sent to many parties as enumerated in the quantum assessment order. The assessee, while unable to substantiate the delivery of material, however, in support, filed financial statements of parties from whom the assessee had bought material or sold material. After considering the assessee’s submissions and documentary evidences, Ld. AO opined that the assessee was not engaged in any genuine business activity but engaged in providing only accommodation entries without carrying out any actual business. Consequently, while rejecting the assessee’s book of accounts u/s 145(3), Ld. AO estimated the assessee’s income @5% of total sales which came to Rs.288.27 Lacs. The Ld. AO, in the alternative, suggested various additions on account of discrepancies in Stock, Sales etc. as given in the quantum assessment order.