ASSISTANT COMMISSIONER OF INCOME TAX, CC-30, NEW DELHI, NEW DELHI vs. JPS BUILDTECH PRIVATE LIMITED, NEW DELHI

On the basis of these informations, the case of the assessee for the year under consideration, was opened u/s 153C of the Act, after recording the satisfaction note by the Assessing Officer.

SN Particulars of Suppliers - A.Y. 2019-20 Amount 1 Jain Cement Udyog 28,12,500 2 Shri Lakshmi Associates 1,35,13,306 Total Purchases disputed by A.O. for 1,63,25,806 A.Y. 2019-20 SN Particulars of Suppliers - A.Y. 2020-21 Amount 1 Jain Cement Udyog 2,32,34,500 2 Shri Lakshmi Associates 1,2,59,500 3 Forever Exim India Private Limited 1,23,43,750 4 RK and Co. 7,81,250 5 RR Associates 11,71,875 Total Purchases disputed by A.O. for 4,98,90,875 A.Y. 2020-21

Page 3 of 14 and 1930/DEL/2025 and 2947/DEL/2025 [A.Ys 2019-20 & 2020-21] JPS Buildtech P Ltd 9. Accordingly, the AO considered the purchases made from the above entities as bogus and made addition of Rs. 1,63,25,806/- for AY 2019-20 and Rs 4,98,90,875 for A.Y 2020-21 as bogus purchase u/s 37 of the Act. On appeal, the CIT(A) reduced the addition to 32,65,161/- for AY 2019-20 and Rs. 99,78,175/- for A.Y 2020-21 being 20% of the gross profit embedded in the bogus purchase.

The Assessing Officer has considered the entire purchase of Rs. 1,63,31,000/- as bogus and disallowed the same u/s 37 of the Act whereas the CIT(A) has considered 20% of the total bogus purchase as income of the assessee.

The AO recorded the satisfaction note, and validly issued notice u/s 153C. These facts were not controverted by the assessee, nor the assessee could satisfy us as to how the satisfaction note recorded by the AO is invalid.

Page 5 of 14 and 1930/DEL/2025 and 2947/DEL/2025 [A.Ys 2019-20 & 2020-21] JPS Buildtech P Ltd 16. The ld. CIT(A) has factually as well as judicially met the assessee’s objections that no incriminating materials were found at Para 7.1 of his order which reads as under:

“7.1 However, both these claims of appellant are untenable when evaluated in light of the facts and circumstances of the case. **** 2. Incriminating Material Found Relating to the Appellant The appellant has also argued that no incriminating material pertaining to their business or financial transactions was found during the search operations, thereby contesting the jurisdiction of the AO under Section 153C. However, this claim does not withstand scrutiny. The search conducted at the premises of Mr. Sanjay Jain unearthed documents and tally records that contained references to the entities from which appellant took entries and it implicated them in unaccounted transactions. These documents, though recovered from a third party, clearly pertain to the appellant and provide a sufficient basis for invoking jurisdiction under Section 153C. The provisions of Section 153C explicitly allow for proceedings to be initiated against a person other than the searched person when documents or assets seized during the search pertain to such other person. In the present case, the incriminating material seized, including ledger entries and transaction details, directly points to the appellant's involvement in financial dealings that were not disclosed in their regular books of accounts. The fact that these documents were recovered from a third party's premises does not Page 6 of 14 and 1930/DEL/2025 and 2947/DEL/2025 [A.Ys 2019-20 & 2020-21] JPS Buildtech P Ltd diminish their relevance or the AO's jurisdiction, as long as they pertain to the appellant. The argument that the mere mention of the appellant's name in the seized documents does not establish ownership or relevance is also unsustainable. The nature and content of the seized material, corroborated with other facts, clearly indicate their pertinence to the appellant. For example, the tally records reference specific transactions and amounts, which have been cross-verified with the appellant's known activities. Such evidence qualifies as "incriminating material" under the law, as it has a bearing on the appellant's undisclosed income.

17. We find no reasons to interfere in the decision of the CIT(A) on the issue of assumption of jurisdiction u/s 153C. The grounds 1 to 6 is accordingly dismissed.

18. On merits, the ld. CIT(A) has decided the issues at Paras 8.3 to 8.10 of his order which read as under:

“8.1 Whereas, the AO concluded that the purchases amounting to ₹1,63,30,100/- were bogus, based on the statement of Sanjay Jain and associates and incriminating materials seized from their premise. Sanjay Jain admitted in his statement that his controlled entities were involved in providing accommodation entries for bogus purchases without actual delivery of goods. Nikhil Sachar, prime associate of Sanjay Jain, corroborated this by confirming the modus operandi of issuing invoices without corresponding movement of goods. AO also relied on the Tally data records seized from the searched entities which demonstrated dubious nature of purchase. The entries reflected financial adjustments for generating invoices to legitimize expenses. 8.2 The appellant contended that all purchases were supported by invoices, e-way bills, payment was made through banking channels, and the transactions were recorded in audited books of accounts. Tranport details are verified through e-vahan portal. The appellant emphasized that the purchases, whether genuine or not, were ultimately used in the execution of contracts. Thus, the sales and consumption of materials remain undisputed. Citing judicial precedents, the appellant argued that in cases of bogus purchases,

Page 8 of 14 and 1930/DEL/2025 and 2947/DEL/2025 [A.Ys 2019-20 & 2020-21] JPS Buildtech P Ltd only the profit embedded in such transactions should be taxed, rather than disallowing the entire expenditure. 8.3 Upon careful perusal of records and evidences produced by appellant after enquiry of undersigned it can be seen that the appellant could counter few of AO' s allegation in Assessment order. One of the key issues raised by the AO was that the transport details related to the purchases could not be verified through the e-Vahan portal. However, during appellate proceedings, the appellant managed to verify the transport details and submitted the evidence before me after being enquired. Additionally, the appellant produced purchase invoices and Goods Receipt Notes (GRNs) to substantiate its claim that materials were procured. For sake of completeness, few of the sample bills and verifications on e-vahan portal is scanned here as under:

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8.4 These efforts demonstrate the proactive stance in addressing some of the allegations raised by the AO which is distinguishable facts in this case. The appellant also argued that the purchases in question, whether genuine or disputed, were eventually utilized in the execution of contracts. It was emphasized that the corresponding sales and consumption of materials have not been questioned by the AO, suggesting that the materials were indeed procured, albeit possibly through alternative channels. As per Appellant, this distinction forms the crux of the appellant's argument that only the profit element embedded in the alleged bogus purchases should be brought to tax, rather than disallowing the entire amount of purchases. 8.5 The appellant further relied on various judicial precedents to support its contention, citing that in cases involving alleged bogus purchases, it is reasonable to estimate and tax only the profit component of such transactions. The appellant also referred to the fact that all payments for the disputed purchases were made through banking channels, and the transactions were duly recorded Page 9 of 14 and 1930/DEL/2025 and 2947/DEL/2025 [A.Ys 2019-20 & 2020-21] JPS Buildtech P Ltd in audited financial statements, lending some degree of credibility to the claim. 8.6 Despite these submissions, the evidence presented by the AO, including statements from Sanjay Jain and Nikhil Sachar, cannot be disregarded. Sanjay Jain, in his statement, admitted that his entities were involved in providing accommodation entries without the actual delivery of goods. This was corroborated by Nikhil Sachar, who confirmed the modus operandi of issuing invoices solely for the purpose of inflating expenses. Additionally, the seized tally records from the searched entities revealed that no physical delivery of cement was made to the appellant. Instead, the transactions appeared to be financial adjustments aimed at generating invoices to legitimize expenses. The chronology of events are explained by the Assessing Officer in the assessment order **** 8.7 In evaluating the evidence and submissions, it is clear that while the appellant has successfully addressed some of the AO's allegations, certain critical aspects remain unresolved. The verification of transport details and the submission of purchase invoices and GRNs lend partial credibility to the appellant's claim. However, the absence of stock reconciliation records coupled with corroborative evidence from the statements of Sanjay Jain and Nikhil Sachar, establishes that the purchases in question were not entirely genuine.

8.8 It is also important to acknowledge that the corresponding sales and consumption of materials have not been disputed, indicating that the materials were procured through back-channel operations. In such situations, taxing the entire amount of alleged bogus purchases would be excessive and inconsistent with judicial precedents. Instead, it is more appropriate to estimate and tax the profit element embedded in these transactions, taking into account the nature of the industry and the specific facts of the case.

Page 10 of 14 and 1930/DEL/2025 and 2947/DEL/2025 [A.Ys 2019-20 & 2020-21] JPS Buildtech P Ltd 8.9 GST rate of 28%, inherently involves significant costs and margins when routed through accommodation entry operators. Given the high GST rate of 28% on cement and the inherent costs associated with back-channel operations (such as commissions and logistics), addition of 20% on the disputed purchases is deemed reasonable. This estimation adequately reflects the profit element involved in the transactions and aligns with the principle that additions must be based on fair and reasonable estimates. Although the Gujarat High Court in CIT vs. Simit P. Sheth upheld a GP addition of 12.5%, the higher GST rate and other circumstances in this case justify a slightly higher addition of 20%. 8.10 In light of the above findings, the addition made by the AO is modified. Accordingly, 20% of the disputed purchases, amounting to Rs 32,66,020/-, is sustained as taxable income. Above grounds of appeal are partly allowed.”

19. After perusing the discussion and findings of the ld. CIT(A), we find that there is hardly any scope for our interference with the decision of the ld. CIT(A). In view of the fact that the incriminating materials show that the purchases are bogus but at the same time, the corresponding sales and consumption of materials have been accepted, in such a scenario, we are in complete agreement with the CIT(A) decision that it would be excessive to tax entire amount of bogus purchases and it would be appropriate to estimate and tax the profit element embedded in these transactions. We are however, of the considered view that the addition of 20% on disputed purchases be modified to 15%, which, in our

Page 11 of 14 and 1930/DEL/2025 and 2947/DEL/2025 [A.Ys 2019-20 & 2020-21] JPS Buildtech P Ltd view, is deemed reasonable estimation of profit element involved in the transactions. Accordingly, the appeal of the assessee is partly allowed.

ITA No. 2946/DEL/2025 [A.Y 2019-20]

Page 12 of 14 and 1930/DEL/2025 and 2947/DEL/2025 [A.Ys 2019-20 & 2020-21] JPS Buildtech P Ltd reasonable estimation of profit element involved in the transactions.

Accordingly, the appeal of the Revenue is dismissed.

[A.Y 2019-20] - Partly Allowed [A.Y 2020-21] - Partly Allowed

Order pronounced in open court on 12.11.2025.