DCIT CEN CIR 23, MUMBAI vs. CENTAUR MERCANTILE P.LTD, MUMBAI

During hearing of this appeal, the ld. CIT-DR, Shri L.K.S. Dahiya, advanced arguments which are identical to the ground raised and broadly relied upon assessment order. On the other hand, the ld. counsel for the assessee, Shri Vijay Mehta, defended the conclusion arrived at in the impugned order.

2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee company is engaged in the business of real estate development and is part of Kanakia Group. A search action was carried out upon the Kanakia Group on 29/03/2011. Pursuant to search, assessment was framed u/s 143(3) of the Act. The whole addition was made by the Assessing Officer on the plea that assessee booked certain bogus purchases in its books of accounts, which were paid through cheque. The assessee passed necessary journal entries wherein, purchases were reversed and the resultant cash has been brought in to books of accounts. The ld. Assessing Officer was of the view that such back must be out of on-money, charged by the assessee and cash was generated by way of booking of bogus purchases. Totality of facts/seized papers (contained in annexure A/1), clearly indicates that cash flow depicts the receipt of cash against the payment in cheque towards purchases. The said cash flow reveals the balance available from 2007 onwards and further such cash was showed in the closing balance evidencing that the cash was available. The cash flow has 3 M/s Centaur Mercantile Pvt. Ltd, 11 & 12 of the assessment order. The statements of Directors as well as some of the employees were recorded, wherein, the factum of receipt of cash against bogus purchases has been tendered. However, accept the statement, there is no evidence on record that on-money was charged by the assessee and the seized papers, found during the search, pertaining the sister concern of the assessee, M/s Kanakia Spaces Pvt. Ltd. and the statement relied upon by the Assessing Officer was subsequently retracted. There is no evidence on record that cash generated by the assessee was out of bogus purchases and use of utilization of cash was even not discovered during seizure action. The statements were retracted by the employee on the very next day and M/s Kanakia Spaces Pvt. Ltd. approach the Hon’ble Settlement Commission, wherein, it was concluded that there is no on-money charged by the sister concern. It is also noted that the ld. Commissioner of Income Tax (Appeals) deleted the addition considering the factual matrix and found that the Assessing Officer partially accepted the seize paper accepting the fact that the assessee made bogus purchases at the same time denied the assessee the benefit of cash generated out of such bogus purchases stating that the said cash was spend elsewhere for which no evidence was brought on record. In such a situation, the assessee get supports from the decision in the case of Viren V. Savla vs ACIT (100 TTJ 1006 (Mum.), wherein, it was held that the seized material should be read and accepted as a whole and should be treated as genuine with respect to all entries therein.