ACIT, NEW DELHI vs. M/S. JAGUAR LEASING PVT. LTD., NEW DELHI

The facts in brief are that a search was conducted in the premises of the assessee on 20.10.2008. A notice under Section 153A of the Income-tax Act, 1961 (for short “the Act”) was issued on 29.03.2013 for filing return of income. In response, the assessee filed return of income on 29.04.2010 declaring income of Rs. 10,011/-. Subsequently, notice under Section 143(2) & 142(1) of the Act were issued and the assessment was completed. The Assessing Officer observed that the assessee company belongs to M/s. Thapar Home Group of cases having allegation of floating the company with dummy directors and shareholders. The Assessing Officer further observed that capital was formed in these companies in the form of reserve and surplus over the years and was invested in the stock of textile and whenever cash was required the stock were sold and the money was utilized for other purposes as per their requirement. The Assessing Officer noticed that in the year under consideration the assessee company shown purchase of textile goods of Rs. 35,84,684/- and sales of Rs. 39,41,814/- resulting into profit of Rs. 12,433.99/- The Assessing Officer further asked the assessee to prove its trading activity and produce sales tax record. In response, the assessee submitted that it dealt in tax free goods only and it was not filing any sales tax return. The assessee also failed to produce purchase and sales bills and thus, the Assessing Officer held the entire purchase of Rs. 34,84,684/- as bogus and unexplained expenditure under Section 69C of the Act. Further, the Assessing Officer also disallowed 50% out of the administrative and other expenses of Rs. 4,23,573/- which works out to Rs. 2,11,786/-. Aggrieved with the above additions, the assessee filed an appeal before the learned AY-2005-06 Commissioner of Income Tax(Appeals) who has decided the issued in paras 6.1 to 6.17 of her appellate order. The learned Commissioner of Income Tax (Appeals) directed the AO not to make any separate additions on account of purchase or expenditure but directed the Assessing Officer to work out the peak from the entries in the cash book, including bank transaction and make the addition accordingly. Aggrieved from the above finding of the learned Commissioner of Income Tax(Appeals), the Revenue is in appeal before us.

None appeared on behalf of the assessee, whereas learned CIT (DR) relied on the order of the Assessing Officer.

We have heard learned CIT (DR) and perused the material on record. We find that the learned Commissioner of Income Tax(Appeals) upheld the action of the learned Assessing Officer regarding purchase & sale and the expenses, however, she has directed only to take the peak of the entries as unexplained investment in expenditure. The relevant paras (para nos. 6.15 & 6.16) of learned Commissioner of Income Tax (Appeals) are reproduced as under: “6.15 Therefore, contrary to the claims of the appellant, what is obvious and discernible is that the appellant was one of the several entities in the whole scheme of network of companies, belonging to the Thaper-Dhingra Group which were used to infuse unaccounted money in other companies of the group, through a well orchestrated arrangement of seemingly ‘accounted’ transactions, emanating from their ‘audited’ financial statement, but where in reality, the only activity was of ‘book building’. In these circumstances, the claim of ‘audited books’ notwithstanding, the book results are required to be rejected, since the narration are artificial, sham and not reflective of the actual business/commercial transactions. 6.16 Therefore, the action of the Assessing Officer, in disregarding the ‘purchases’, the ‘sales’ and ‘expenses’, is upheld. Since the appellant company along with the other companies are all ‘in-house’ to the Thapar- Dhingra group and there is a widespread web of inter se transactions amongst them, keeping their separate juridical identity in mind, the ends of