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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member)
The captioned appeal by assessee for Assessment Year [AY] 2010-11 contest the order of Ld. Commissioner of Income-Tax (Appeals)-04 [CIT(A)], Mumbai, Appeal No.CIT(A)-4/IT-93/ITO- 2(1)(1)/2013-14 dated 15/03/2016 by raising the following Grounds of Appeal: -
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.
Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated where Ld. CIT(A), inter- alia, provided partial relief to the assessee by making following observations:- 4.5 I have considered the findings of the Assessing Officer as well as rival submission of the Appellant carefully. I find that that this is the first year of the business of the Appellant. During the year, it has shown turnover as high as of Rs.57,65,56,679/- on which Appellant has shown Net Profit of Rs.1,90,224/- which is 0.03%. From the findings of the Assessing Officer, it is very evident that Appellant has provided accommodation bills and most of the transactions are paper transaction. In Para 4.16 of the assessment order, the Assessing Officer has rightly mentioned that Appellant is not genuinely engaged in business but provides only accommodation entries to the various parties. Further, I find proper reasoning in the assessment order. The Appellant has not been able to furnish documentary evidences such as transportation bills, delivery challans, weighing receipts, local levy receipts, etc. It is important to note that M/s. Aadit Metal Trade Pvt.Ltd. has shown sales of RS.328,40,42,295/- against this assessee has shown purchase from this party of Rs.338,32,86,179/- and other expenses of Rs.60,63,192/-. This clearly reveals that there is no other transactions done by M/s. Aadit Metal ITA.No.3927/Mum/2016 Achromatic Trading Private Limited Assessment Year 2010-11 Trade Pvt. Ltd. Similar is the fact in respect of M/s. Akshata Mercantile Pvt.Ltd. Similarly, Appellant has shown purchases from M/s. Loha Ispaat Limited. The Assessee has shown purchases without any demonstration of transportation bill. Similar is that fact in other case, hence, it is very evident that Assessee has done accommodation entries business. The Ld. A.O. has estimated profit @5% on total sales as commission income and has made addition of RS.2,88,27,830/-. This estimation is however, without any basis, hence, same cannot be sustained as it is. When it is found that Appellant has given accommodation entries by way of issuing sales bills to various parties after purchase on credit, hence, income has to be estimated considering the facts and circumstances of such business where accommodation entries are provided. Obviously, 5% profit is not earned in such business. Further, commission income is also not earned @5%. Since commission is only charged for providing such sales bills, the normal commission in such business is 1%. This is of common knowledge of such business. Considering the facts and circumstances of the case, it is found justifiable and appropriate to restrict commission income @1% instead of 5% estimated by the Assessing Officer. Therefore, the Assessing Officer is directed to estimate the income of RS.57,65,666/-. Therefore, addition of Rs.57,65,566/- is sustained and rest of the addition of RS.2,30,62,264/- is deleted.