The court determined that only the profit element from unverified purchases should be added to income, not the total amount, when sales are accepted.

ORDER

PER VIMAL KUMAR, JUDICIAL MEMBER:

The appeal filed by the appellant/assessee is against order dated 16.03.2023 passed by Learned Commissioner of Income- Tax(Appeals)/National Faceless Appeal Centre(NFAC), Delhi (hereinafter referred as ‘Ld. CIT(A)’) under Sections 250 of the Income-Tax Act, 1961 (hereinafter referred as “the Act”) arising out of assessment order dated 29.12.2017 under Section 143 (3) read with Section 147 of the Act of the Addl. Commissioner of Income Tax, Special Range-9, New Delhi (hereinafter referred as ‘Ld. A.O.’) for assessment year 2012-13.

2. Brief facts of the are that the appellant/assessee filed return declaring loss of Rs.2,43,38,377/- on 28.09.2012. The case was taken up for compulsory scrutiny and after giving proper opportunities to the assessee, the assessment was completed under Section 143 (3) of the Act at total loss of Rs.1,23,28,822/- on 27.03.2015. Later on, an information was received in case of the assessee from the Directorate of Investigation, New Delhi on 28.03.2017, regarding taking of accommodation entries amounting to Rs.1,78,25,000/- from shell companies controlled by Jain Brothers. Notice under Section 148 of the Act was issued on 30.03.2017. Further notices under Section 142(1) of the Act were issued. In response to notices, Mr. P.K. Katyal and Mr. Jai Shukla, CA/ARs of the assessee attended the proceedings and filed details. On completion of proceedings, additions of Rs.1,78,25,000/- and Rs.5,85,67,419/- vide order dated 29.12.2017 were made by the ld. AO.

3. Against the order dated 29.12.2017, the appellant/assessee preferred an appeal before Ld. CIT(A) which was partly allowed vide order dated 16.03.2023.

4. Being aggrieved, the appellant/assessee preferred present appeal with the following grounds:

“1. That the order of the Ld. Assessing Officer is bad at law and on facts of the case.

2. That the addition made by the Ld. Assessing Officer and partly confirmed by CIT(Appeal) is based on presumption, suspicion, conjecture and surmises with no specific evidence to support the findings and making the assessments on the basis of reason to suspect.

3. That even otherwise the impugned order is contrary to the facts of the case as there is always a correlation between purchase and sales when sales are not doubted the purchases can-not be rejected summarily as is the well settled principle of law and as such, the disallowance is liable to be set aside.

4. That the Ld. CIT(Appeal) has erred in ignoring that the transactions occurred long back and the purchase of goods were in furtherance of business and payments made thru proper banking transactions and accepted by VAT and Service tax department.

5. That the Ld. CIT (Appeal) has erred in confirming an amount of Rs. 22,28,125/ being profit of 12.50% on unconfirmed purchases (12.50% of Rs.1,78,25,000/-) as no specific evidence has been provided nor put for cross examination by the Ld. Assessing officer to prove the in- genuineness of the transactions.

6. That the Ld. Assessing officer has erred in holding guilty the assessee in income tax proceedings instead of findings the fault of the other party well knowing that the transaction took place long back.

7. That the Ld. Assessing Officer has erred in taxing the genuine transaction on the basis of presumptions and surmises and has not provided any of evidence having any adverse remark on the purchase shown by the assessee in the books of accounts. Once the purchases have been accepted, then the corresponding sales cannot be disturbed without giving any conclusive evidence/finding.

8. That the Ld. Assessing Officer has erred in taxing the genuine transaction as there cannot be a reason to doubt the selective sales/ transactions when there are numerous transactions/sales that have been entered into during the year under consideration which has