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2025 Supreme(Online)(ITAT) 7960
INCOME TAX APPELLATE TRIBUNAL (MUMBAI BENCH)
Shri Amit Shukla, J, Shri Girish Agrawal, ACJ
Lloyds Metals And Energy Limited – Appellant
Versus
Dy. Commissioner of Income Tax, Central Circle 7(1), Mumbai – Respondent
ITA No.2640/Mum/2025 to 2646/Mum/2025 | ITA No.3075/Mum/2025 to 3080/Mum/2025 | ITA No.2855/Mum/2025 & 2856/Mum/2025 | CO No.137 to 139/Mum/2025
For the Appellants/Petitioners: Shri Vijay Mehta, Shri Tarang Mehta
For the Respondents: Shri Rajesh Kumar Yadav – CIT DR, Shri Surendra Mohan, Sr. DR
The absence of incriminating evidence prevents estimating additional income above disclosed margins in circular trade transactions, aligning with judicial precedent.
Headnote:(A) Income Tax Act, 1961 - Sections 145(3) and 153C - Assessment years 2013-14 to 2019-20 - Cross appeals concerning alleged bogus purchases and sales - Rejection of books of account sustained - Estimation of additional income limited to 0.5% of bogus sales found unjustified - Tribunal ruled that no incriminating material existed beyond normal accounting practices and found no evidence of cash transactions. (Paras 9-30)
(B) Assessment - Jurisdiction under section 153C - Requirement for incriminating material specific to the assessees not met, leading to dismissal of revenue appeals. (Paras 9, 30)
Facts of the case:
Cross appeals arose from orders relating to alleged circular trading and accommodation entries involving two companies, assessed under sections 145(3) and 153C based on a search, which indicated bogus transactions but not backed by additional evidence of unaccounted income.
Findings of Court:
Books of accounts retained some reliability; estimation methodology applied by the Assessing Officer deemed excessive; factual narrative justified some adjustments but not at margin rates as high as proposed.
Issues: Core disputes about the nature of transactions as genuine or bogus, the estimation of income, and the jurisdiction under section 153C.
Ratio Decidendi: The Tribunal emphasized that presumptions based on the circular nature of transactions without direct evidence of unaccounted income could not support additions beyond existing margins disclosed.
Result: Revenue appeals dismissed; assessees’ appeals allowed.
| Table of Content |
|---|
| 1. identification of identical issues from related cases (Para 1 , 2) |
| 2. revenue's contentions against cit(a)'s relief (Para 3 , 4) |
| 3. factual background from the search actions (Para 5 , 6 , 8) |
| 4. estimation methodology for additional income (Para 11 , 12 , 14 , 24) |
| 5. substantiation of claims regarding alleged bogus transactions (Para 15 , 18 , 20 , 22) |
| 6. final decision on appeal outcomes (Para 27 , 30) |
ORDER
PER BENCH:
These cross appeals by the assessees as well as by the Revenue arise from separate but materially similar orders passed by the learned Commissioner of Income Tax (Appeals)– 49, Mumbai, in the cases of Lloyds Metals and Energy Limited and Lloyds Enterprises Limited, for Assessment Years 2013– 14 to 2019–20. The assessments in all these years have been framed under section 143(3) read with section 153C of the Income Tax Act, 1961 , pursuant to search and seizure action in a connected group case, and the impugned orders deal with common issues concerning the nature of alleged bogus purchases and sales, rejection of books, estimation of additional income, and disallowance of indirect expenditure.
2. At the very threshold, it was fairly admitted by both sides that the issues in all these appeals, for all the years and in respect of both assessees, are identical, emanate from the same search and post search investigation, and rest on an overlapping set of findings recorded by the Assessing Officer and the learned CIT(A). It was further pointed out by the learned counsel for the assessee that the core controversy is now no longer res integra, since the same group concerns, on identically worded findings and on the basis of the same search material, have already been adjudicated upon by this Tribunal in the case of M/s Indrajit Properties Private Limited , wherein the Tribunal, by consolidated order dated 22 August 2025 in a bunch of appeals for Assessment Years 2013–14 to 2019–20, has decided the issues in favour of the assessee. In view of this, and for the sake of clarity, convenience and ready reference, we treat ITA No. 3076/Mum/2025 for Assessment Year 2013–14 in the case of Lloyds Metals and Energy Limited as the lead case and our discussion hereunder shall mutatis mutandis govern all the connected appeals and cross–objections.
3. In the appeals of the Revenue in the case of Lloyds Metals and Energy Limited for the year under consideration, the common grounds raised assail the relief granted by the learned CIT(A) and, shorn of verbiage, can be summarised but are required to be noticed in extenso, since they delineate the Revenue’s entire case. The Revenue has, in substance, contended as under:-
That, on facts and in law, the learned CIT(A) erred in allowing the assessee’s appeal and in disregarding the rejection of books of account under section 145 of the Act, even though, according to the Assessing Officer, the non genuineness of the transactions and the absence of supporting documents justified such rejection.
That the learned CIT(A) failed to appreciate that the Assessing Officer had, in the course of search and assessment proceedings, marshalled statements under oath and other corroborative evidences indicating that the assessee was allegedly engaged in providing accommodation entries, and that the transactions recorded in the books were not genuine.
That the learned CIT(A), in upholding the assessee’s contention that the books were correct and complete, overlooked the assessee’s failure to furnish basic business records such as stock registers, purchase and sales invoices, movement registers, inward and outward records, as also transport documents, which, in the Revenue’s view, fortified the Assessing Officer’s invocation of section 145(3).
That the learned CIT(A) erred in reducing the additional income from seven percent to zero point five percent of turnover, notwithstanding the Revenue’s assertion that the assessee, by engaging in alleged high risk accommodation entry activity, would reas
