JCIT Spl. Range-12, New Delhi V. Arihanta Industries, Delhi

ITA 963/DEL/2019

AI Insights

The case involves appeals by the Revenue against M/s Arihanta Industries concerning the disallowance of deductions under section 80IC and the addition of substantial amounts as unexplained income. The primary contention was the genuineness of the sales and purchases reported by the assessee, which the Revenue argued were not substantiated by credible evidence. The Tribunal examined various aspects including the nature of the transactions, the existence of the parties involved, and the financial records maintained by the assessee. The Tribunal concluded that the transactions were not genuine and upheld the Revenue's position.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131603 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-04-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 06-02-2019
• Other Referred Cases: Jotsna Suri Vs DCIT, Smt. Sumati Dayal Vs. CIT, Liberty India v. CIT, Pine Packaging Pvt. Ltd vs. CIT, Rushil Industries Ltd., Tejinder Singh HUF vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Business income; Depreciation; Income from undisclosed sources; Rule of consistency; Accommodation entries; Bogus
• Section: 131; 68; 271(1)(c); 133(6); 251; 80IC; 44AB; 80IC; 73; 72; 13; 20

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’, NEW DELHI Before Sh. Saktijit Dey, Judicial Member Dr. B. R. R. Kumar, Accountant Member ITA No. 4309/Del/2018 : Asstt. Year: 2014-15 DCIT, Circle-36(1), New Delhi Vs. M/s Arihanta Industries, 5/120, Sant Nirankari Colony, New Delhi-110009 (APPELLANT) (RESPONDENT) PAN No. AAQFA1959G ITA No. 963/Del/2019 : Asstt. Year: 2015-16 JCIT, Special Range-12, New Delhi Vs. M/s Arihanta Industries, 5/120, Sant Nirankari Colony, New Delhi-110009 (APPELLANT) (RESPONDENT) Assessee by : Sh. Sachit Jolly, Adv. Revenue by : Sh. P. Praveen Sidharth, CIT DR Date of Hearing: 17.04.2023 Date of Pronouncement: 17.07.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeals have been filed by the Revenue against the orders of ld. CIT(A)-12, New Delhi dated 01.03.2018 and 24.09.2018. 2. In ITA No. 4309/Del/2018, following grounds have been raised by the Revenue: “1. The Ld. CIT(A) has erred in not appreciating that the additional evidence was produced before him by the assessee without fulfilling the requirements of Rule 46A(1) of the IT Rules. 1962. The arguments that ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 2 certificate dated 10.04.2010 and G.M.P certificate dated 30.07.2011 were not available with him at the time of assessment and the same became available at the time of appeal does not appear to be logic as the non-production of such old documents on the pretext its non-availability in the assessment proceedings does not fulfill any of the conditions of the Rule 46A(1) of the IT Rules, 1962. 2. The Ld. CIT(A) has erred in admitting the additional evidence by holding that the same go to the very root of the matter in adjudicating the grounds of the appeal which is sharp contrast to the ratio decidendi of the Hon'ble ITAT, Delhi in the case of Jotsna Suri Vs DCIT (1997) 61 ITD 139 (Del) that the mere fact that the evidence sought to be produced does not constitute sufficient cause to allow its admission at the appellate and it is for the party seeking to adduce additional evidence to go without 4 corners of Rule 46A, which in the present case the assessee has failed to do and the Ld. CIT(A) has failed to take cognizance of assessee's such failure. 3. The Ld. CIT(A) has erred in law by not considering the facts that the ample opportunities were afforded to the assessee at the time of assessment proceedings in order to substantiate the claim and to prove the genuineness of the transactions made on account of sales but the assessee has not been able to substantiate the genuineness of the transaction. 4. The Ld. CIT(A) has erred both in law and facts of the case in deleting the disallowance made u/s 68 of the Act by the AO on account of sales to the tune of Rs.10,73,87,706/- and holding that the assessee is eligible for deduction u/s 801C of the Act. The Ld. CIT(A) has not appreciated the fact that in the concerned year, the assessee had consumed raw materials only Rs. 18,90,184/- to manufacture the goods of Rs. 10,73,87,706/- which is abysmally low and unrealistic and claimed electricity expenses of Rs. 3,31,003/- only in comparison to last year Rs. 3,13,342/- wherein total sales of last year was just Rs. 6,30,720/-. In addition to this the assessee had shown ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 3 labour expenses NIL which is also quite unrealistic as how someone manufactured huge amount of goods worth Rs. 10,73,87,706/- without any labour. Besides, as per the Audit report in form 10CCB which is required to be submitted before claiming deduction u/s 80IC of the Act at column no. 26(e) mentioned that total value of machinery or plant used in the business is Rs. 2,09,439/- which is also abysmally low for manufacturing such a huge amount of goods. Further, as per Inspectors report, the party from whom the plant and machinery was purchased were found not to be in existence. 5. The Ld. CIT(A) has erred both in law and facts of the case by not considering the fact that the parties to whom sales were made were not in existence as per Inspector report and deduction claimed u/s 801C for profits derived from manufacturing activity were found to be entirely bogus. 6. The Ld. CIT(A) erred in law by not considering the facts that the during the assessment proceedings, the AO issued summons u/s 131 of the Act to sales parties in order to get confirmations and to substantiate the genuineness of the transactions but all remain unserved and returned by postal authorities which prove that there was no transaction held by the assessee between the parties and the existence of the parties are doubtful. 7. The Ld. CIT(A) has erred in not appreciating that the scale of facts and figures stated in ground No: 4, 5 & 6 (supra) clearly falls in the domain where the principle of The ratio preponderance of probabilities never justified such skewed results. The ratio decidendi of the Hon'ble Supreme Court in the case of Smt. Sumati Dayal Vs. CIT reported in (1995) 214 ITR 801 (SC) will apply in this case.” ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 4 3. In ITA No. 963/Del/2019, following grounds have been raised by the Revenue: “1. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in granting relief by deleting the addition of Rs.5,93,99,549/- made u/s 68 of the Act as unexplained credits shown as sales without appreciating the fact that abysmally low consumption of raw material, unrealistic manufacturing expenses and ‘Nil' labour expenses, incurred in manufacturing goods worth Rs.5,93,99,549/-. 2. Whether the Ld. CIT(A) has erred in holding both in law and facts of the case by not considering the fact that the parties to whom sales were shown to have to be consequently deduction claimed u/s 80IC for profits derived from manufacturing activities were found to found were shown to have made were found to be non-genuine and consequently deduction claimed u/s 80IC for profits derived from manufacturing activities were found to be entirely bogus.” 4. Facts relevant to the adjudication of the case are as under: 5. The assessee filed return of income on 27.11.2014 claiming deduction of Rs.9,51,48,979/- u/s 80IC of the Income Tax Act, 1961. The assessee claimed 100% deduction u/s 80IC for manufacturing Ayurvedic and natural products in the units situated at SIDCUL, Haridwar, Uttarakhand. ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 5 6. The salient features of the financial of the assessee are as under: Particulars A.Y. 2013-14 A.Y. 2014-15 Total Sales 6,30,720/- 10,73,87,706/- Total cost of material consumed (Opening stock + Purchases during the year – closing stock) 1,38,637/- (Nil opening stock as the opening stock was written off during the year) 18,90,184/- Electricity Expenses 3,13,342/- 3,31,003/- Labour Charges 6,400/- Nil  Sales during the year – Rs.10,73,87,706/-  Profit over the sales – Rs.10,21,78,671/-  Percentage of profit over the turnover – 97.66%  Value of the raw material consumed – Rs.18,90,184/-  Electricity expenses claimed – Rs.3,31,003/-  Labour expense – Rs.9,82,863/- 7. As per the audit report (Column No. 26E), value of the machinery or plant used in business –Rs.2,09,439/- 8. Owing to the unrealistic financials viz., the input cost, cost of sales, sales receipt, profit earned and the exemption claimed, the Assessing Officer embarked upon in depth inquiries. With regard to the registered office: 9. The inquiries conducted at premises of M/s Arihanta Industries, 5/12, Sant Nirankari Colony, Delhi revealed that there is no such office functioning from the said premises and there was some Guruji Satsang Ashram. The local inquiries with ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 6 the shopkeepers around the said address feigned ignorance of existence of any such office. With regard to the factory of SIDCUL: 10. The inquiries revealed that there were no goods movement and no labour movement at the premises mentioned. The inquiries at the neighboring industrial establishment proved that no labour or any worker has been seen for many years. There were three people inside the premises who have been working for many years and they informed that the main office of Arihanta Industries is at Delhi. The field enquiries revealed that there were no manufacturing activities undertaken at the premises. 11. The assessee sold goods to the following parties: S. No. Name of the party with address Total sales during the year 1. Aastha Impex, 1139/10, 2 nd Floor, Naiwala, Karol Bagh, New Delhi-110005 72,90,000/- 2. Global Marketing Company, 141A, Gali No. 10, Block-A, Sourav Vihar, Badarpur, Delhi-110044 3,08,84,998/- 3. Techpro Sale & Marketing, 14/25, Gali No. 5, Vishwas Nagar, Shahadara, New Delhi-110032 60,00,000/- 4. M/s Lakshmi Ganesh Health Care Division, C-27, Greater Kailash Enclave-1, New Delhi-110048 67,08,485/- 5. M/s Krishna Enterprises, Shop No. DS-87, Sector- 9, Main Market, Ambala City-134003 2,19,21,819/- 6. M/s Shree Maheshwari Trading Co., 70 Mission Compound, 2 nd Floor, Saharanpur (U.P.) 3,36,00,000/- 12. In order to enquire the existence and correctness of the transaction, summons u/s 131 were issued to four parties namely, M/s Astha Impex, M/s Global Marketing Companies, M/s Tech Pro Sales & Marketing, M/s Laxmi Ganesh Healthcare Division, M/s Krishna Enterprises. The notices issued to M/s ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 7 Astha Impex and M/s Globe Marketing Companies were received back unserved. The fact of issuing of notice and non-compliance has been duly informed to the assessee by the Assessing Officer. 13. Shri Sandeep Arora of M/s Krishna Enterprises attended and his statement was recorded. The salient features of the statement are as under:  Shri Sandeep Arora is a Dental Surgeon  He had no prior business experience.  The bank account was opened on 19.04.2013.  Even the KYC form of the bank do not have any documents regarding the proof of business.  He took an undertaking before the bank that he will provide proof of business activities letter.  In the KYC form, the expected turnover mentioned was Rs.5 lacs to Rs.10 lacs.  Shri Sandeep Arora also admitted that at the time of his visit there were no manufacturing activities and there was no labour movement.  Shri Sandeep Arora purchased hawan samagri weighing 50 gms -100 gms at the rate of Rs.99/- to Rs.1078/-.  The total purchases were of Rs.2,19,21,819/- out of which the hawan samagri constitute an amount of Rs.75,76,800/-  The relevant statement of Shri Sandeep Arora is at page no. 6, 7, 8 of the Assessment Order.  The entire events revealed that the bank account of Shri Sandeep Arora was used to deposit cash which is in turn routed to/transferred to the account of the assessee. ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 8 14. Further, enquiries have been conducted at the premises of the alleged purchasers of the goods of the assessee M/s Laxmi Ganesh Healthcare Division, M/s Ashta Impex, M/s Global Marketing Company, M/s Tecpro Sales & Marketing revealed that there were no business activities of the said concerns at the addresses given and the concerns never existed at the addresses given. For the sake of ready reference, the detailed enquiry reports of the Inspector have been reproduced below: “INSPECTOR'S REPORT ON M/S LAKSHMI GANESH HEALTH CARE DIVISION “As per directions of ITO Ward-36(2), I went for inquiry on 14.12.2016 of M/s Lakshmi Ganesh Health Care Division i.e. C-27, Greater Kailash Enclave-1, New Delhi-110048. On reaching the premise, I found that it was a two storey building. I saw “Bhagwan Shree Lakshmi Narayan Mandir" written on the front wall of the building. When I enquired the guard of the C Block, Greater Kailash Enclave-1, he told that there was no such firm at the address C-27 or in any other address of C block. I entered the address/mandir, there was a lady sitting, doing some pooja. I asked the lady about the M/s Lakshmi Ganesh Health Care Division, she told that she did not know of any firm there, and is a bhakt coming occasionally for pooja and satsang. Then, I asked a girl sweeping the floor about the same and she told that she is working in the mandir for some months then and never heard of any such firm. I enquired one of the locals too about the M/s Lakshmi Ganesh Health Care Division, but he too confirmed of the mandir of the BABA LAKSHMI NARYAN there and dented existence of any such firm. The assessee could not be traced out and thus the summon u/s 131 of the Act, could not be served and returned back." ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 9 INSPECTOR'S REPORT ON M/S AASTHA IMPEX "As per directions of ITO Ward 36(2), I went for inquiry on 14.12.2016 of M/s Aastha impex i.e. 1139/10, 11nd Floor, Naiwala, Karol Bagh, New Delhi 110005. On reaching the premise, I found that there was no such firm or any sign board of the firm at the address. When I enquired the neighborhood they denied existence of any AASTHA IMPEX there. One of the local told that he has been working there for 10 years, and there have never been any firm of the name of Aastha Impex at the address. The assessee could not be traced out and thus the summon u/s 131 of the Act, could not be served and thus returned back." INSPECTOR'S REPORT ON M/S GLOBAL MARKETING COMPANY "As per directions of ITO Ward 36(2), I went for inquiry on 15 12/2016 of M/s Global Marketing Company Le 141A. Gali no. 10, Block A, Sourau Vihar, Badarpur, Delhi-110044. On reaching Block A, Sourav Vihar, Budarpur, Delhi-110044, 1 found that there was no Gali no. 10 in Block A of Sourav Vihar, Badarpur I enquired the kids playing cricket in Gali no. 08 about the address and M/s Global Marketing Company, but they told that there is no Gali no. 10 in Block A of the locality and they have not heard of M/s Global Marketing Company and the address, I enquired from a local shop keeper also but he too denied existence of any such firm or address there. Other locals were also enquired, but reply was all same. The assessee could not be traced out and thus the summon u/s 131 of the Act, could not he served and returned back." INSPECTOR'S REPORT ON M/S TECPRO SALE & MARKETING "As per directions of ITO Ward-36(2), I went for inquiry on 15.12.2016 of M/s Tecpro Sale & Marketing i.e. 14/25, Gali no. 5, ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 10 Vishwas Nagar, Shahdra, Delhi-110032. On reaching Gali no 5, Vishwas Nagar, Shahdra, New Delhi-110032, 1 found that there was no such address (i.e. 14/25, Gali no. 5, Vishwas Nagar) there. Then, I look for the address in all streets of Vishwas Nagar, but I was unable to locate any such address. There was a DTDC courier office in one of the streets of the Vishwas Nagar, I enquired the staff of the courier agency but they told that there was no such address in the locality and never heard of any firm by the name of M/s Techpro Sales and Marketing in that locality. Thereafter I visited office of the property dealer Mittal Associates in the locality and inquired about the address but they too denied existence of any such address in Vishwas Nagar There was a bhandara going on in the locality, I enquired the gathered locals of Vishwas Nagar about the M/s Tecpro Sale & Marketing and the address but they denied existence of any such firm of address there. I also asked one retail shop owner of the Vishwas Nagar who told that there is no such address in Vishwas Nagar, Shahdra. The assessee could not traced out and thus the summon u/s 131 of the Act. could not served and returned back.” 15. These facts prove that the alleged purchasers were not in business in reality and only channelizing the funds to the assessee. 16. The enquiries conducted at the new correct address of the sales parties provided by the assessee as mentioned at page no. 87 & 88 of the Assessment Order has also revealed that the addresses do not exist at the places mentioned by the assessee. Valuation of Closing Stock: ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 11 17. Further, the quantitative wise and value wise detail of raw material furnished by the assessee before the Assessing Officer are as under: ITA No. 4309/Del/2018 & 12 ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 13 18. The purchase of different products, purchase quantity, purchase rate, sale quantity, sale amount, closing stock are as under: S.No. Product Quantity Manufactured Rate Value Sold Sale Rate 1 Sales Amt (Rs.) 1 1 i “ Alex powder 4,903.00 13.87 67,983 2,537 494.14 12,53.641 2 BE Fresh 22,975.00 19.25 4,42,269 22,268 159.54 35,52,637 3 Diab Z Tab 5,142.00 16.23 83,446 2,615 988.40 25,84,674 4 Hawan Samagri 1,10,000.00 4,00 4,40,462 73,152 66331 4,85,22.453 5 Immune Power Tab 38,836,00 13.13 5,09,765 16,252 2,079.87 3,38,02,047 6 Livnu Tab 5,074.00 9.24 46,861 2,519 494 14 12,44,746 7 Motapa Mukti Tab 20,469.00 8.39 1,71,813 16,522 775.13 1,28,06,648 8 Nilstone Powder 5,852.00 17.58 1,02.896 2,042 492.73 10,06,151 9 NT Gas 14,962.00 14,19 2,12,237 9,692 158.26 15,32,283 19. The above statement shows clearly the value of purchase & sale and the profit made out of each items. 20. The above table reveal that the assessee has shown manufacturing of hawan samagri consisting of chandan, guggal and loban (CGL) of 110,000 packets each costing Rs.4/- and have been sold at Rs.663/- which is about the 165 times of the cost price. These details pertain to item no. 4 in the table. The total manufacturing cost of the hawan samagri was Rs.4,40,462/- whereas the sales realization was Rs.4,85,22,453/-. 21. In addition to the hawan samagri, the assessee has claimed to have manufactured and sold various ayurvedic products mentioned at serial no. 1 to 9 (except sl. No. 4) pertaining to hawan samagri. 22. The Assessing Officer has also examined the items manufactured and sold of various ayurvedic products by the assessee. After going into the details, the Assessing Officer has ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 14 tabulted the details with regard to a product called “Allerex” as under: Raw material / ingredients Weight per 30gm Total no. of items manufactured Total Weight of consumption (gm) Total weight of consumption (Kg) Abharak Bhasam 3 4903 14709 14.709 Muka shukti Bhasam 1.5 4903 7354.5 7.3545 Godanti Bhasam 3 4903 14709 14 7.09 Kapardak bhasam 1.5 4903 7354.5 7.3545 laung 3 4903 14709 14.709 Dalchini 3 49C3 14709 14.709 Shushti churan 3 4903 14709 14.709 Kaakda Singi 3 4903 14709 14.709 Madhuyeshti 3 4903 14709 14.709 Kantkari 6 4903 29418 29.418 23. Further, the AO has also tabulated details of another product namely “Diab-Z Tab”, “Be-Fresh Churana”, “Livnu Tab”, Motapa Mukti Tab”, “Nilstone Powder”, “N.T. Gas”, “Immune Powder”. The details are at page no. 18 to 32 of the Assessment Order. The total weight of the each ingredient raw material has been mentioned at page no. 33 & 34 of the Assessment Order. The list of raw material purchased as per the purchase bills has been mentioned at page no. 35 to 38 of the Assessment Order. The differences as per the raw material consumed and as per the raw material purchased has been mentioned at page no. 39 to 45 of the Assessment Order which is on record. 24. To conclude, there were less purchases in different ingredients like krishan jeera, sonapatha (tuntuk), Mandur Bhasam, Methi, Muka Shukti Bhasam, pandavas, Punranva, Macoy, Kutaj, Kasudi, Kalmejh, Kachur, Jamun Guthli, Gurmar,, Haldi, Gokhru, Chiraita, Casni, Gramay, Budhatta, Belpatra, Brinjasavas compared to the consumption shown above. Similarly some of the ingredients like Amla, Baheda, Mulethi, ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 15 Safed Musli, Saunf, Ajwaein kounch beej are shown to be purchased in excess. Also, Shusti Churan is not shown in purchase bills while they are used in making the products. Enquiries - bank accounts of the parties: 25. The AO has conducted enquiries with regard to the bank accounts of M/s Laxmi Ganesh, M/s Krishana Enterprises, M/s Maheshwari Trading Company from whom the assessee has received the amounts. The AO found cash deposits before the monies are sent to the assessee through RTGS/NEFT/fund transfer. The results of the enquiries have been informed to the assessee’s representative on various dates. 26. The AO has also gone through the different containers/plastic bottles consisting of 90 tablets and 60 tablets. He has examined the composition of various containers of page no. 52 to 55 of the Assessment Order. The AO has also mentioned in detail the ingredients used as per the packing unit of each bottle at page no. 56, 57 of the Assessment Order. These labels on the bottles gives the entire details of ingredients used and the quantum namely, Azadirachta Indica - 26 mg, Curcuma Zodoria – 15 mg, Acacia Arabica – 20 mg etc. From the quantity mentioned on the bottles, the consumption of the raw material has also been worked out by the Assessing Officer. 27. With regard to the hawan samagri manufactured, the AO determined the total quantity of raw material at 7716 kg with Chandan, Guggal and Loban in the ratio of 35:30:35. ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 16 Purchases by the Assessee: 28. The AO examined purchases from one entity namely M/s R.R. Sales Corporation, 442, Pocket-5, Mayur Vihar, Phase-1, Delhi-91 for raw materials. The AO found out a computerized invoice for the purchase of 4065 kg of raw material. The total raw material shown to have been purchased by the assessee of Rs.18,90,184/- weighing 4065 kg. On enquiry, Shri Vikash Singhal proprietor of M/s R.R. Sales Corporation filed an affidavit before the AO affirming that he has never issued any computerized bill to any customer. Thus, the veracity of the purchases of raw material by the assessee was not proved. The affidavit has been made a part of the Assessment Order at page no. 67. Electricity Consumption: 29. It is also a fact on record that in the entire year, the total electricity consumed was 23,190 units only. The bill for electricity consumption was Rs.86,461/-. The total bill along with duties, surcharge and taxes was to the tune of Rs.3,35,820/-. The electricity consumption ranged from 840 units to 3330 units with an average of 1932 units per month which is almost equal to any domestic residential consumption. The assessee has produced goods worth Rs.10,73,87,700/- with an electricity consumption of 23,190 units costing Rs.3,35,000/- Labour Expenses: 30. The AO held that the employee benefits debited was Rs.9,82,863/- inclusive of salary, bonus, allowances PF & ESI. ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 17 31. The assessee has given a list of 7 employees only. The AO alleged that for an entity having a turnover of Rs.10,73,87,700/- the absence of employees for management, sales, security, accounts, technicians, skilled labour, unskilled labour is very notable feature and the same has been confirmed by the statement of Shri Sandeep Arora to whom major sales have been effected to. Plant & Machinery: 32. The total value of the machinery was Rs.60,75,455/- excluding the depreciation. The AO has also examined and found that the assessee has purchased plant & machinery from the following parties: S. No Name and address of the Firm/Shop Bill No. and date Amount of bill 1. M/s Rahul Enterprises Bill No. 132 dated 05.01.2010 4,74,300/- 2. M/s Rahul Enterprises Bill No. 139 dated 30.01.2010 75,684/- 3. M/s Yarich International Bill Mo. 038 dated 10.01.2010 6,12,000/- 4. M / s Shri Laxmi Magnet Industries Bill No. 526 dated 29.12.2009 1,60,500/- 5. M/s Devine Packaging Industires Bill No.046 dated 28.01.2010 4,15,140/- 33. The AO has also enclosed the invoices from M/s Rahul Enterprises at page no. 72 & 73 of the Assessment Order. The AO has issued summons u/s 131 to M/s Rahul Enterprises addressed at 15/42, Old Rajendra Nagar, Delhi and found that the address is a residential house and there was no such firm or shop in the name of M/s Rahul Enterprises. It was found that one Shri C. S. Mandhwani is the owner of this house who is an architect and he completely denied existence of any firm/entity namely M/s Rahul Enterprises. The photograph of the residential building is also a part of the Assessment Order at page no. 74 & 75. ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 18 34. With regard to purchase of machinery for Rs.6,00,000/- from M/s Yarich International, E-138, Sector-63, Noida, U.P. - 201301, the enquiries revealed that there was factory of iron & aluminum scrap and Shri J. S. Pandey the owner of this scrap factory stated that he was working from this place for the past 9 years and never heard of any such firm in the name of M/s. Yarich International. 35. With regard to purchase of machinery for Rs.1,63,710/- from M/s Shri Laxmi Magnet Industries Ltd., B-35, Khanpur Extension, Devli Road, New Delhi, the enquiries revealed that the address belongs to one person namely, Shri Narendra Kushwaha and he stated that no such entity in the name of M/s Shri Laxmi Magnet Industries Ltd. ever existed at the said address and it is a residential house and no business activities have been conducted from the premises. The photograph of the premises showing a residential dwelling is at page no. 80 of the Assessment Order. Similar is the case with the other purported purchases of the machinery. Cash Flows into Arihanta Industries: 36. The assessee has received amounts from M/s Shri Maheshwar Trading Company, M/s Shri Laxmi Ganesh Health Care and M/s Krishna Enterprises. Further, the fund inflows into the assessee’s account are from M/s Tecpro Sales and Marketing, M/s Global Marketing Company and M/s Aastha Impex. The entire layering of the funds into assessee’s account has been unraveled by the Assessing Officer. The details of which are reproduced as under: Bogus Sales shown to M/s Shree MAHESHWAR Trading Co. PNB A/c No.6168002100000354 1. M/s SHREE MAHESHWAR TRADING CO. 6168002100000354) CASH DEPOSIT CASH DEPOSIT DATE 18-06-2013 20-06-2013 CASH DEPOSIT CASH DEPOSIT 22-06-2013 22-06-2013 CASH DEPOSIT CASH DEPOSIT 24-0-2023 24-06-2023 CASH UtPUSI 1 CASH DEPOSIT 27-06-2013 29-06-2013 CASH DEPOSIT CASH DEPOSIT 05-07-2013 05-07-2013 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 22-07-2013 22-07-2013 22-07-2013 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 25-07-2013 25-07-2013 25-07-2013 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 27-07-2013 30-07-2013 30-07-2013 CASH DEPOSIT CASH DEPOSIT 03-08-2013 07-08-2013 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 07-08-2013 10-08-2013 19-08-2013 CASH DEPOSIT CASH DEPOSIT 23-08-2013 27-08-2013 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 13-09-2013 13-09-2013 13-09-2013 13-09-2013 ITA No. 4309/Del/2018 & 19 Bogus Sales shown to M/s Shree MAHESHWAR Trading Co. PNB A/c No.6168002100000354 M/s SHREE MAHESHWAR TRADING CO.- PNB BANK(A/C NO. DATE 2013 2013 AMOUNT 5,00,000 7,00,000 CASH SHIFTED TO ARIHANTA IND. ON 22 RTGS - Rs. 12,00,00 2013 2013 5,00,000 7,00,000 CASH SHIFTED TO ARIHANTA IND. ON 24 RTGS - Rs. 14,00,00 2023 2023 3,00,000 5,00,000 CASH SHIFTED TO ARIHANTA IND. ON 27 RTGS - Rs. 9,00,000 2013 2013 5,00,000 6,00,000 CASH SHIFTED TO ARIHANTA IND. ON 02 RTGS - Rs. 10,90,00 2013 2013 05-07-2013 05-07-2013 CASH SHIFTED TO ARIHANTA IND. ON 05 Rs. 18,00,00C 2013 2013 2013 5,00,000 6,00,000 5,00,000 CASH SHIFTED TO ARIHANTA IND. ON 23 Rs. 16,00,00C 2013 2013 2013 5.0. 000 3.0. 000 5.0. 000 CASH SHIFTED TO ARIHANTA IND. ON 25 Rs. 14,60,00C 2013 2013 2013 5.0. 000 5.0. 000 4.0. 000 CASH SHIFTED TO ARIHANTA IND. ON 30 Rs. 15,00,000 2013 2013 5.0. 000 10.0. 000 CASH SHIFTED TO ARIHANTA IND. ON 07 Rs. 15,00,000 2013 2013 2013 5.0. 000 8.0. 000 1,00,000 CASH SHIFTED TO ARIHANTA IND. ON 19 Rs. 15,90,000 2013 2013 5.0. 000 10.0. 000 CASH SHIFTED TO ARIHANTA IND. ON 29 Rs. 15,00,000 2013 2013 2013 2013 3.0. 000 5.0. 000 6.0. 000 3,00,000 CASH SHIFTED TO ARIHANTA IND. ON 13 Rs. 20,00,000 ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries Bogus Sales shown to M/s Shree MAHESHWAR Trading Co. PNB BANK(A/C NO. ARIHANTA IND. ON 22-06-2013 - CASH SHIFTED TO ARIHANTA IND. ON 24-06-2013 - SHIFTED TO ARIHANTA IND. ON 27-06-2013 - CASH SHIFTED TO ARIHANTA IND. ON 02-07-2013 - CASH SHIFTED TO ARIHANTA IND. ON 05-07-2013 - RTGS - CASH SHIFTED TO ARIHANTA IND. ON 23-07-2013 - RTGS - CASH SHIFTED TO ARIHANTA IND. ON 25-07-2013 - RTGS - IND. ON 30-07-2013 - RTGS - CASH SHIFTED TO ARIHANTA IND. ON 07-08-2013 - RTGS - CASH SHIFTED TO ARIHANTA IND. ON 19-08-2013 - RTGS - CASH SHIFTED TO ARIHANTA IND. ON 29-08-2013 - RTGS - CASH SHIFTED TO ARIHANTA IND. ON 13-09-2013 - RTGS - ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 20 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 28-09-2013 28-09-2013 28-09-2013 1.75.0 10,00,000 3.25.000 CASH SHIFTED TO ARIHANTA IND. ON 28-09-2013 - RTGS - Rs. 15,00,000 CASH DEPOSIT CASH DEPOSIT 17-10-2013 17-10-2013 7,00,000 7,75,000 CASH SHIFTED TO ARIHANTA IND. ON 17-10-2013 - RTGS - Rs. 14,80,000 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 18-10-2013 18-10-2013 18-10-2013 18-10-2013 2.25.000 1.75.0 5,00,000 5.90.000 CASH SHIFTED TO ARIHANTA IND. ON 18-10-2013 - RTGS - Rs. 15,00,000 CASH DEPOSIT CASH DEPOSIT 29-10-2013 29-10-2013 7.0. 000 9.0. 000 CASH SHIFTED TO ARIHANTA IND. ON 29-10-2013 - RTGS - Rs. 16,00,000 CASH DEPOSIT CASH DEPOSIT 06-11-2013 06-11-2013 7.0. 000 5.0. 000 CASH SHIFTED TO ARIHANTA IND. ON 06-11-2013 - RTGS - Rs. 14,00,000 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 07-12-2013 09-12-2013 09-12-2013 10-12-2013 10-12-2013 10-12-2013 2,00,000 2,00,000 2,00,000 2,00,000 6,50,000 7,00,000 CASH SHIFTED TO ARIHANTA IND. ON 10-12-2013 - RTGS - Rs. 20,00,000 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 01-01-2014 01-01-2014 01-01-2014 01-01-2014 01-01-2014 01-01-2014 2,00,000 4.0. 000 5.0. 000 5.0. 000 5.0. 000 2.0. 000 CASH SHIFTED TO ARIHANTA IND. ON 01-01-2014 - RTGS - Rs. 25,00,000 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 01-02-2014 01-02-2014 01-02-2014 01-02-2014 3.75.000 5.0. 000 5.0. 000 4.25.000 CASH SHIFTED TO ARIHANTA IND. ON 01-02-2014 - RTGS - Rs. 19,80,000 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 07-03-2014 10-03-2014 12-03-2014 25,000 2,00,000 2,00,000 CASH SHIFTED TO ARIHANTA IND. ON 19-03-2014 - RTGS - Rs. 5,00,000 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 31-03-2014 31-03-2014 31-03-2014 31-03-2014 3.0. 000 5.0. 000 5.0. 000 1.0. 000 CASH SHIFTED TO ARIHANTA IND. ON 31-03-2014 - RTGS - Rs. 16,00,000 On perusal of the above table extracted from the Bank statement of M/s Shree MAHESHWAR Trading Co., it is seen that just a day or two before transfer of funds by this party to the assessee M/s Arihanta Industries, there were cash deposits in the bank a/c of Shree MAHESHWAR Tradic Co. Further, it is also pertinent to mention here that on various occasions on a single or two consecutive days, cash in round figures is being deposited in the Bank A/c of the said party and that too is almost 2 to 6 times in a single day, which seems quite surprising and unique. ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 21 Further, on the perusal of the party wise details of sales made by the assessee M/s Arihanta Industries, it is seen that the assessee M/s Arihanta Industries has claimed to have made sales of Hawan Samagari of Rs. 3,36,00,000/- during the year. Further, a reference was made to the return of income of M/s Shree MAHESHWAR Trading Co. A perusal of the ROI of the said party shows that it had started the business with a meagre capital of Rs. 36808. However, on the perusal of the Balance sheet and profit and loss account of M/s Shree MAHESHWAR Trading Co., it seen that the party had shown purchases of goods only Rs. 3,15,00,000/- which have been fully sold for Rs. 3,15,35,000/- at profit of Rs. 35,000/- only as no opening and closing stock had been shown by the party and resultantly, the returned income was shown just for Rs. 6,636/- only. Further, another interesting fact was noticed. The assessee M/s Arihanta Industries has shown a sale of Rs. 3,36,00,000/- to M/s Shree MAHESHWAR Trading Co. during the year. The assessee also received the whole sales amount of Rs. 3,36,00,000/-. However, the party M/s Shree MAHESHWAR has shown in its Balance sheet, the total purchases of Rs. 3,15,00,000/- only. Further, it is also pertinent to mention here that on perusal of Profit and Loss account of M/s Shree MAHESHWAR Trading Co., it has been noticed that the party had claimed only two expenses i.e. Rs. 17,000/- as freight and Rs. 11,064/- as other expenses. As per the ROI of M/s Shree MAHESHWAR Trading Co., it is seen that Proprietor Prof. Mr. Gulshan Phutela's Date of Birth is 25.02.1942. It is quite unrealistic that how a man of above 70 years of age is purchasing goods of Rs. 3,15,00,000/- as per his balance sheet (As per assessee it is Rs. 3,36,00,000/-) and also selling the whole purchases without the help of any employee, labour, conveyance expenses, power, fuel and also selling. Further, the party got his A/c audited and also ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 22 maintained the books of accounts without paying any accountant or auditor fees is also very surprising. It is also very pertinent to mention here that M/s Shree MAHESHWAR Trading Co. had purchased only Hawan Samagari of 70 gms packet at huge price of Rs. 900/- per packet as well as Rs. 700/- per packet. A man of more than 70 years of age starts a business for the first time in his life at the age of 70 and purchases a product (having market price of Rs. 4 to 5 and which is also quite easily available in open market) at such a huge prices of Rs. 900/- per packet as well as Rs. 700/- per packet and still manages to sell all the goods of worth Rs. 3,15,00,000/- only at a margin of Rs. 6,636/-. This too has been done without incurring any expenses, which is quite unrealistic. It is highly unrealistic that a person who had never before indulged in the business, would take the risk of purchasing a product at Rs. 900 and Rs. 700 per packet , which is easily available in the market at Rs. 4 to 5 i.e. more than 200 times of the cost price of the product to carn a profit of Rs. 6,636/- only. Further, it is also pertinent to mention here that the assessee was specifically asked to produce the party to whom he had shown sales during the year. However, the assessee failed to produce the party for verification and since the party was not Delhi based therefore summons u/s 131 of the Act, 1961 could not issued. thus, it is assessee, who had failed to discharge its onus to proof the identity, genuiness and creditworthiness of these parties. The above facts clearly show that no genuine transaction has taken place between the assessee and M/s Shree MAHESHWAR Trading Co. It is also very pertinent to mention here that Mr. Gulshan Phutela Prop of M/s Shree MAHESHWAR Trading Co. is Father of Mrs. Charu Phutela, who is Prop. of another entity M/s Lakshmi Ganesh Health Care Division to whom the assessee M/s Arihanta Industries had ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 23 made so called sales. M/s Shree MAHESHWAR Trading Co. has done the business for only one year and closed the business. The pattern of huge cash deposits in the accounts of the said party and thereafter their diversion to the assessee clearly shows that the M/s Shree MAHESHWAR Co. is not doing any business in actual and was only created as an shadow entity to route the undisclosed money of the assessee though its Bank account. Bogus Sales shown to M/s Lakshmi Ganesh Health Care Division An analysis of the Bank A/c M/s Lakshmi Ganesh Health Care Division showed the following facts: 2. M/s LAKSHMI GANESH HEALTH CARE DIVISION - HDFC BANK (A/c No. 03392020000593) Cash deposit Date 06/01/2023 Amount 8,00,000 CASH SHIFTED TO ARIHANTA IND. ON 04- 06-2013-RTGS-Rs. 8,00,000 Cash deposit Cash deposit Cash deposit Cash deposit Cash deposit 7/8/2013 7/20/2013 7/24/2013 8/2/2013 8/16/2013 7,50,000 4,30,000 5,00,000 3,13,000 5,00,000 CASH SHIFTED TO ARIHANTA IND. ON 17- 08-2013-RTGS-Rs. 25,00,000 Cash deposit Cash deposit Cash deposit 9/12/2023 09/20/2023 10/22/2013 5,00,000 2,00,000 5,00,000 CASH SHIFTED TO ARIHANTA IND. ON 09- 01-2014-RTGS-Rs. 12,12,435 Cash deposit Cash deposit 02/04/2014 02/07/2014 5,40,000 3,00,000 CASH SHIFTED TO ARIHANTA IND. ON 18- 03-2014-RTGS - Rs. 11,50,000 Cash deposit Cash deposit 2/26/2014 3/18/2014 8,00,000 3,50,000 CASH SHIFTED TO ARIHANTA IND. ON 24- 03-2014-RTGS-Rs. 10,71,091 On perusal of the above table extracted from the Bank statement of the M/s Lakshmi Ganesh Health care Division, it is seen that just a day or two before transfer of funds by this party to the assessee, M/s Arihanta Industries, there were cash deposits in the bank a/c of M/s Lakshmi Ganesh Health care Division. Further, summons u/s 131 of the Act, were issued to the assessee twice on 16.11.2016 and 06.12.2016 to personally attend this office and the assessee was also specifically asked to produce Ms. Charu Phutela Prop. of M/s ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 24 Lakshmi Ganesh Health Care and Division. However, neither Mrs. Charu Phutela appeared in response to summons issued by this office nor was she produced by the assessee before this office. In this regard, it is also pertinent to mention here that from the Bank statement of M/s Lakshmi Ganesh Health Care Division, it has been noticed that all the cash deposits are being made in the account of M/s Laxmi Ganesh Health and Care Divison HDFC Bank account, Roop Nagar branch which is the same branch where the assessee M/s Arihanta Industries is also having its main bank account. This is despite the fact that M/s Lakshmi Ganesh Health Care Division is having its office address at C-27 Greater Kailash -1. It is quite unusal as to why someone will take the risk of carrying such a huge amount of cash so frequently to deposit in a Bank from Greater Kailash to Roop Nagar having a distance of more than 21 km inspite of the fact that there are many banks in Greater Kailash itself. Further, as per the bank statement of M/s Lakshmi Ganesh Health care Division, it is noticed that there are many payments which have been made to a person named Mr. Kundan Lal (PAN No: AASPK7274L) A/c No. 03392000005719. Further, on perusal of the Bank statement of Sh. Mandeep Nagpal, Substantial Partner (having 90% profit sharing ratio) of M/s Arihanta Industries, it has been noticed that he has received Rs. 30,00,000/- as funds transferred on 18.12.2013 from Bank A/c of Mr. Kundan Lal having A/c No. 03392000005719. It has further been noticed that during the year, Mr. Mandeep Nagpal is transferring funds through RTGS of Rs. 45,00,000/-, Rs. 70,00,000/- and Rs. 40,00,000/- on 16.06.2013, 19,07,2013 and 40,00,000 respectively to Narayan Shakti Peeth (PAN No. is AASPK7274L), which is Prop. Concern Of Sh. Kundan Lal. And during the year, Mr. Mandeep Nagpal also received funds through RTGS from M/s Narayan Shakti Peeth of Rs. 40,00,000/- and Rs. 25,00,000/- on 31.10.2013 ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 25 and 05.02.2014 respectively. As noted above, the PAN No. of Mr. Kundan Lal and Narayan Shakti Peeth are same i.e. PAN: AASPK7274L and from the PAN based query it has been further noticed that the address of Mr. Kundan Lal is 5/120, Sant Nirnakari Colony, Delhi and this is the address of M/s Arihanta Industries also ie.e.5/120, Sant Nirnakari Colony. Further, it is also pertinent to mention here that Mrs. Charu Phutela is the Prop. Of M/s Lakshmi Ganesh Health Care Division and she is the daughter of Sh. Gulshan Phutela Prop. of M/s Shree Maheshwar Tradic Co. The above facts clearly show that there is a close connection between these parties i.e. M/s Lakshmi Ganesh Health care Division, M/s Shree MAHESHWAR Trading Co. and M/s Arihanta Industries. This shows that all the aforementioned three parties are associated with each other and are engaged in circular transactions. The above facts clearly show that no genuine transaction has taken place between these two parties and only bank account of M/s Lakshmi Ganesh Health Care Division has been used to route the income of the assessee earned from undisclosed sources. Bogus Sales shown to M/s Krishna Enterprises An analysis of the Bank A/c M/s Krishna Enterprises showed the following facts:- 3. KRISHNA ENTERPR [SES- IDBI BANK (A/C NO. 07881020000013' CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT DATE 7/26/2013 7/26/2013 7/27/2013 7/29/2013 AMOUNT 1,00,000 2.50.000 3,97,000 5,00,000 CASH SHIFTED TO ARIHANTA IND. ON 30-07-2013 - RTGS - Rs. 10,00,000 CASH DEPOSIT CASH DEPOSIT 8/2/2013 8/2/2013 5.25.000 5.75.000 CASH SHIFTED TO ARIHANTA IND. ON 03-08-2013 - RTGS - Rs. 10,00,000 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 8/6/2013 8/7/2013 8/12/2013 3,00,000 3,15,000 5,00,000 CASH SHIFTED TO ARIHANTA IND. ON 12-08-2013 - RTGS - Rs. 10,00,000 CASH DEPOSIT CASH DEPOSIT 8/12/2013 8/14/2013 5,00,000 4,00,000 CASH SHIFTED TO ARIHANTA IND. ON 20-08-2013 - RTGS - Rs. 10,00,000 CASH DEPOSIT CASH DEPOSIT 9/2/2013 9/3/2013 7,00,000 7,80,000 CASH SHIFTED TO ARIHANTA IND. ON 03-09-2013 - RTGS - Rs. 16,00,000 ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 26 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 9/6/2013 9/10/2013 9/13/2013 5,00,000 2.50.000 1.60.000 CASH SHIFTED TO ARIHANTA IND. ON 19-09-2013 - RTGS - Rs. 10,00,000 CASH DEPOSIT 10/3/2013 11,00,000 CASH SHIFTED TO ARIHANTA IND. ON 04-10-2013 - RTGS - Rs. 10,79,304 CASH DEPOSIT CASH DEPOSIT 11/1/2013 11/2/2013 10,00,000 5,00,000 CASH SHIFTED TO ARIHANTA IND. ON 04-11-2013 - RTGS - Rs. 16,00,000 CASH DEPOSIT CASH DEPOSIT 11/8/2013 11/11/2013 5,00,000 2,50,000 CASH SHIFTED TO ARIHANTA IND. ON 11-11-2013 - RTGS - Rs. 11,00,000 CASH SHIFTED TO ARIHANTA IND. ON 27-11-2013 - RTGS - Rs. 7,00,000 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 11/13/2013 11/14/2013 11/19/2013 11/27/2013 2,20,000 1,50,000 80,000 2,00,000 CASH DEPOSIT 12/12/2013 7,00,000 CASH SHIFTED TO ARIHANTA IND. ON 13-12-2013 - RTGS - Rs. 7,00,000 CASH DEPOSIT CASH DEPOSIT 1/25/2014 2/1/2014 4,00,000 5,00,000 CASH SHIFTED TO ARIHANTA IND. ON 01-02-2014 - RT6S - Rs. 7,00,000 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 2/3/2014 2/4/2014 2/5/2014 2/5/2014 2/11/2014 3,00,000 1,00,000 2,00,000 2,50,000 5,00,000 CASH SHIFTED TO ARIHANTA IND. ON 13-02-2014 - RTGS - Rs. 13,00,000 CASH DEPOSIT CASH DEPOSIT 2/18/2014 2/22/2014 6,00,000 5,00,000 CASH SHIFTED TO ARIHANTA IND. ON 26-02-2014 - RTGS - Rs. 13,00,000 CASH DEPOSIT 3/3/2014 5,50,000 CASH SHIFTED TO ARIHANTA IND. ON 04-03-2014 - RTGS - Rs. 7,00,000 CASH DEPOSIT CASH DEPOSIT 3/4/2014 3/4/2014 6,00,000 4,25,000 CASH SHIFTED TO ARIHANTA IND. ON 11-03-2014 - RTGS - Rs. 11,13,889 CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT CASH DEPOSIT 3/12/2014 3/15/2014 3/18/2014 3/18/2014 3/19/2014 1,00,000 65.000 40,000 4,50,000 40.000 CASH SHIFTED TO ARIHANTA IND. ON 19-03-2014 - RTGS - Rs. 7,00,000 CASH DEPOSIT CASH DEPOSIT 3/27/2014 3/28/2014 7,50,000 7,00,000 CASH SHIFTED TO ARIHANTA IND. ON 28-03-2014 - RTGS - Rs. 10,24,840 On perusal of the above table, extracted from the Bank statement of the M/s Krishna Enterprises, it is seen that just a day or two before transfer of funds by this party to the assessee M/s Arihanta Industries there were cash deposits in the bank a/c of M/s Krishna Enterprises. Further, the statement of Sh. Sandeep Arora Prop. Krishna Enterprises was recorded as has already been discussed in the previous part of this assessment order. In his statement Sh. Sandeep Arora, Prop. M/s Krishna Enterprises had himself admitted that he is a Dental surgeon by profession and does not have any business knowledge and during the year itself he started his business and opened this bank account. During the recording of statement, ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 27 Mr. Sandeep Arora himself admitted that at the time of his visit to the SIDCUL factory during the year under consideration itself there was no labour working and no manufacturing activity was being done there and i.e. in the year under consideration itself. Further, Mr. Sandeep Arora was asked that being a inexperienced business man and having no knowledge of this trade, how he had managed to sell such expensive medicines and Hawan Samagari of an unknown and unrecognized brand at such a huge sale price, which are otherwise easily available in the open market and thereto at a quite low price. In response, Mr. Sandeep Arora simply stated that he used to sell the products with the help of his employees by putting at sites of huge gathering at religious places such as hanuman mandir, pear baba, bhagwan shree laxmi narayan mandir dham, etc., where the people came themselves to the counter and purchased the items at their own. The story told by Mr. Sandeep Arora, is not getting fit on the test of human nature and circumstantial evidences. A professional by nature who is earning a good professional receipts of Rs. 7,40,126/- during the year (as seen from his Return of Income), suddenly got connected and agreed to do business with a firm, who itself started its business of manufacturing on a massive/huge scale for the first time (as in the previous year i.e. F.Y. 2012-13 the turnover of M/s Arihanta Industries Rs.6,30,720/- and in F.Y. 2011-12 its turnover was Rs. 12,14,275/-). Further, it sounds even more unrealistic to see that the said party has purchased goods from the assessee at an extremely high price which are otherwise available in market at a very low price. The assessee M/s Arihanta Industries started manufacturing the products for first time such as immune power and selling it @ Rs.2470/- and Hawan Samagari, as there was no opening stock of ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 28 these items). It is very surprising that the said party i.e. M/s Krishna Enterprises agreed to purchase these items such as Hawan Samagari and Immune Power tablet @ Rs. 99 and 1078/- per pouch of 70 gms from M/s Arihanta Industries which actually costed M/s Arihanta Industries at Rs. 13 per bottle and Rs. 4 per pouch respectively. Thus, the assessee is selling these items in bulk to said party at the profit margin of more than 18000% of the cost price. However, on perusal of the balance sheet of M/s Krishna Enterprises it has been seen that on the sale of goods Rs. 2,05,86,268/- the party has earned gross profit of Rs. 3,03,088/- only which is including the expenses of freight, employees salary and other expenses for sale of these products, more or so the party earned less than 1% on sale of goods above 2 crores, whereas the assesee firm without having any brand value in the market and without incurring any advertisement expenses, and without any substantial sales marketing employees is earning the profit more than 18000%. The above facts clearly show that no genuine transaction has taken place between the assessee and M/s Krishna Enterprises and only the bank account of Krishna Enterprises has been used by the assessee to route its unaccounted money. Attention is invited to the fact that All the above mentioned three parties i.e. Shree Maheshwar Trading Co., Shri Lakshmi Ganesh Health Care Division and M/s Krishna Enterprises, have started the business in the relevant assessment year. Before this year, none of the above mentioned party was enaged in the business. As already proved above, two of these parties namely M/s Shree Maheshwar Trading and M/s Lakshmi Ganesh Health Care Division are associated with each other and are engaged in circular transactions. Further, it is also pertinent to mention here that the assessee M/s Arihanat Industries has also shown substantial sales in the relevant year itself. ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 29 Further, it is also very important to note that during the year, the assessee has shown net profit of more than 95% of total sales, whereas, two of the above three parties have shown the profit below 1% and the other one has shown profit at just 2 % of the total sales made inspite of being retailers. In respect of the other three parties M/s Global Marketing Co., M/s Techpro Marketing Co. and M/s Aastha Impex to whom sales made, it has been noticed that a very unique pattern is being followed in all these cases and there are immediate credits as RTGS/Funds Transfer/NEFT in bank accounts of these three entities just prior to RTGS/Funds transfer by these parties to M/s Arihanta Industries. It is seen that the credits in A/c of these parties are first made and then payments from these A/c to the assessee M/s Arihanta Industries have been shown on the very same day on almost all the occations. The flow chart of the some entries is being produced in a table form as under: - FUND INFLOWS (RTGS/TRANSFERS) IN ARIHANTA ENTERPRISES Bogus sales shown to M/ 4. GLOBAL MARKETING CO. (TMB - A/C NO. 207150310875294) RTGS FASHION EXPRESS FT - NEW FASHION HOUSE FT - WEBTECH SALES AND TECH. PENTAL STEEL INDIA - FUNDS TRF. AKSHRA SALES- FUNDS TRF. VAANI TRADING CO.- FUNDS TRF. IMPERIAL TRADERS- FUNDS TRF. NEELKANTH ENTERPRISES - FUNDS TRF. TIP TOP GARMENTS- FUNDS TRF. DATE NUMEX FASHION EXPRESS 27-09-2013 27-09-2013 EROS SALES CORPORATION M/S PRISM INDUSTRIES 01-10-2013 01-10-2013 BUILDCON TRADERS 25-10-2013 NXT FASHION 26-10-2013 ITA No. 4309/Del/2018 & 30 Bogus sales shown to M/s Global Marketing Co 4. GLOBAL MARKETING CO. - HDFC BANK (A/c No. 16687630000469) A/C NO. 207150310875294) NEW DATE 8/1/2013 8/1/2013 8/1/2013 AMOUNT 7,00,000 22,50,000 3,00,000 CASH SHIFTED TO ARIHANTA IND. ON 01 RTGS - Rs. 36,68,000 FUNDS TRF. FUNDS TRF. 12/16/2013 12/16/2013 12/16/2013 5.50.000 13,50,000 6,00,000 CASH SHIFTED TO ARIHANTA IND. ON RTGS - Rs. 24,79,050 FUNDS TRF. 1/20/2014 1/20/2014 1/20/2014 16,25,000 1,00,000 5,00,000 CASH SHIFTED TO ARIHANTA IND. ON 18 RTGS - Rs. 22,00,000 DATE AMOUNT CASH SHIFTED TO ARIHANTA IND. ON 27 2013 2013 18,00,000 2,00,000 2013 2013 8,50,000 14,00,000 CASH SHIFTED TO ARIHANTA IND. ON 01/10/2013 2013 18,00,000 CASH SHIFTED TO ARIHANTA IND. ON 25 2013 11,00,000 CASH SHIFTED TO ARIHANTA IND. ON 26 ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries HDFC BANK (A/c No. 16687630000469) CASH SHIFTED TO ARIHANTA IND. ON 01-08-2013 - CASH SHIFTED TO ARIHANTA IND. ON 16-12-2013 - CASH SHIFTED TO ARIHANTA IND. ON 18-03-2014 - CASH SHIFTED TO ARIHANTA IND. ON 27-09-2013 - RTGS - Rs. 20,00,000 ARIHANTA IND. ON 01/10/2013 - RTGS - Rs. 20,00,000 CASH SHIFTED TO ARIHANTA IND. ON 25-10-2013 - RTGS - Rs. 18,00,000 CASH SHIFTED TO ARIHANTA IND. ON 26-10-2013 - RTGS - Rs. 10,75,600 ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 31 J S FASTENERS VRINDAVAN STEELS DIZIIMPEX FASHION EXPRESS ALEX TRADERS 02-11-2013 06-11-2013 06-11-2013 06-11-2013 06-11-2013 3,00,000 4,00,000 23,10,000 5,00,000 3,90,000 CASH SHIFTED TO ARIHANTA IND. ON 06-11-2013 - RTGS - Rs. 16,00,000 CASH SHIFTED TO ARIHANTA IND. ON 06-11-2013 - RTGS - Rs. 24,00,000 | NXT FASHION 16-12-2013 1,00,000 Fashion Express Alex Traders 16-12-2013 16-12-2013 3,00,000 5,00,000 CASH SHIFTED TO ARIHANTA IND. ON 16-12-2013 FTGS Rs. 9,50,000 Golden bell furnitures 17-02-2013 1,75,00,000 CASH SHIFTED TO ARIHANTA IND. ON 17.12.2013-RTGS-RS. 15,70,000 On the face of these banks A/c it, appears that the above are simply RTGS from third parties to the sales parties & therefore there are cash shifted to the assessee M/s Arihanta Industries but there is much more to it. The things hidden behind these entries becomes clear from the following paras: - On going through the details of KYC form obtained from the Bank, it has been noticed that Mr. Tarun Malhotra S/o Sh. Mohan Lal, Prop. M/s Global Marketing Co. is also the Prop. of M/s Alex. It is very important to mention here that as per the KYC form of M/s Global Marketing Co., it has been seen that Mr. Tarun Malhotra is the Prop. of M/s Global Marketing and he furnished a copy of his PAN Card to the Bank as identity proof. It is duly signed by him. Further, Mr. Tarun Malhotra is also the Prop. of M/s Alex Traders and for this he furnished copy of his voter ID card as identity proof, however, is quite interesting that as per the PAN card the father name of Mr. Tarun Malhotra is shown as Sh. Mohan Lal whereas as per the Voter ID card the father name of Sh. Tarun Malhotra is shown as Sh. Jagdish Kumar, even though, the photograph and the signature on both the copy of identity proof in the capacity of Prop. Global Marketing Co. and Prop. M/s Alex Traders are same i.e. both are of the same person named as Tarun Malhotra, which can further be verified from the signature on the PAN card. From these facts, it is proved beyond doubt the Mr. Tarun Malhotra S/o Sh. Mohan Lal and Mr. Tarun Kumar S/o Mr. Jagdish Kumar is one and the same person with two different ID with different father ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 32 name. The same also gets confirmed by the Bank Statement of Tamilnaldu Mercantile Bank, wherein Sh. Tarun Malhotra has been shown as Prop of Alex Traders. These facts, also make it clear that the identity of this person Mr. Tarun Malhotra is seriously doubtful. Copy of the PAN card as given as identity proof as Mr. Tarun Malhotra Prop. M/s Global Marketing Co. and copy of Voter ID card given as identity proof as Tarun Kumar Prop. Alex Traders is scanned and printed as below: = ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 33 37. Since, the sales parties were found to be bogus, therefore, a deep analysis was further made into their bank accounts. Regarding the parties who had credited funds in their bank A/c. KYC as well as the bank statements of all these parties were obtained from their banks. From the KYCs , the information regarding the nature of business and other details of these parties was gathered. 38. As already discussed in tabular chart given on the preceding pages, parties from whom M/s Global Marketing Co. had received RTGS/Funds transfers etc in his bank account just ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 34 before making RTGS to M/s Arihanta Industries for so called purchases are discussed as under: - Now, as given in tabular chart above, many of the parties from whom M/s Global Marketing Co. had received RTGS/Funds Transfer/NEFT etc in his bank account just before making RTGS to M/s Arihanta for so called purchase are discussed as under: - GLOBAL MARKETING CO. (HDFC BANK) Proprietor: TARUN MALHOTRA Address: 141 A, GALI NO. 10, BLOCK SOURABH VIHAR, BADARPUR, DELHI 110044 PAN No. AOKPM2272A Bank A/c No 16687630000469 S.No. Firm Name Proprietor Name PAN No. ADDRESS Nature of Business 1. M/s Techpro Sales and Marketing Co. Mr. Amit AIXPA3586C 14/25, Gali no 5, Vishwas Nagar 2. FASHION EXPRESS SANJAY KUMAR ASUPK0298G C-94, GALI NO. 3 JAGAT PURI NEAR RAM NAGAR MANDOLI ROAD, SHAHDHRA, DELHI TRADING OF READY MADE GARMENTS 3. PF.NTAL STEELS INDIA RAJESH MALHOTRA ALKPM8337R B-38/2, BLOCK-B, SABOLI EXTN. LONI ROAD, DELHI TRADING OF STEEL 4. AKSHRA SALES RAJESH MALHOTRA ALKPM8337R A-552, KH NO. 404/272, PLOT NO 10 NEW ASHOK NAGAR, DELHI 110096 TRADING OF FURNITURE 5. WEBTECH SALE & TECHNOLOGY SATYA PRAKASH SINGH BNFPS7021E A-177/6 G/F SHAKTI VIHAR MEETHA PUR BADARPUR, DELHI TRADING OF FABRICS 6. VAANI TRADING CO. MANOJ KUMAR CDFPK6549A 26/64, GALI NO. 11 VISHWAS NAGAR, 11 ND FLOOR, TRADING OF ELECTRICAL GOODS SHAHDHRA, DELHI 7. NEELKANTH ENTERPRISES MANOJ KUMAR CDFPK6549A SHOP NO. B-14 PLOT NO. A-27 GALI NO.2, MADHU VIHAR,DELHI 110092 ELECTRONICS AND SANITARY 8. NEW FASHION HOUSE SANJAY SINGH CMKPS1290J A-27 SHOP NO. B-14 G/F, MADHU VIHAR DELHI 110092 TRADING OF GARMENTS 9. IMPERIAL TRADERS SUSHIL KUMAR BLLPK8021J 1, TILAK COMPLEX TILAK ROAD, DEHRADUN - 248001 TRADING OF PAPER MATERIAL 10 NXT FASHION Mr. Satya Prakash Singh BNFPS7021E Y-35, Y-Block, Ph-III, Seelam Pur - III Delhi Ready Made Garments ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 35 On perusal of the above table, it can be seen that Mr. Tarun Malhotra Prop. M/s Global Marketing Co. himself is Prop, of M/s Alex Traders from whom he has received RTGS/Funds Transfers before the RTGS payment is made to M/s Arihanta Industries. Further, it can be seen that Sh. Sanjay Kumar (PAN: ASUPK0298G) is the Prop, of M/s Fashion Express which is engaged in the business of Trading of Ready made garments. Mr. Rajesh Malhotra is the Prop. M/s Pental Steels engaged in the business of trading of Steel and M/s Akshara Sales is engaged in the business of trading of Furniture. Further, Mr. Manoj Kumar (PAN No: CDFPK6549A) is the Prop. of M/s Vaani Trading engaged in the business of electric goods and Prop. of M/s Neelkanth Enterprises engaged in the business of electrical goods. Further, Sh. Satya Parkash Singh is the Prop. of M/s Webtech Sale & Technology (PAN No BNFPS7021E) is engaged in the business of trading of Fabrics. Mr. Sanjay Singh (PAN No. CMKPS1290J) is Prop. of M/s New Fashion House is engaged in the business of trading of garments. It is further to be noted here that as mentioned in the above table, address of M/s Neelkanth Enterprises and M/s New Fashion House is same i.c. A-27 Shop No. B-14 Plot No, Madhu Vihar, Delhi. Further, it is also pertinent to mention here that as per the above chart chart, all these parties have their bank account in HDFC bank itself and as per the bank statement of these entities, it has been seen that most of these entities are having transactions with each other inspite of having different nature of business/ trades. Attention is also invited to the fact that the assessee had made huge sales of Rs. 3,08,84,998/- to M/s Global Marketing Co. and there are many more credits coming in the bank a/c of this party which means this party is subjected to get its books audited u/s 44AB of the Income Tax. However, Mr. Tarun Malhotra, Prop. of M/s Global Marketing Co. and M/s Alex Traders has not filed his return of ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 36 income after the A.Y. 2010-11. This proves the fact that the transactions entered by M/s Arihanta Industries with M/s Global Marketing Co. are not genuine and M/s Global marketing Co. is engaged in the business of providing accommodation entries. This fact gets strengthened from the fact that summons u/s 131 were issued to the said Party Mr. Tarun Malhotra Prop. M/s Global Marketing Co but both the times summons returned back unserved. Inspector of this charge was also deputed to serve the summon by hand to the assessee, however, the address given by assessee was not found existing. Further, the assessee was specifically asked to produce the party, however, the assessee failed to produce the party. Thus, it is assessee, who had failed to discharge its onus to prove the identity, genuineness and creditworthiness of M/s Global Marketing Co. Further, it is also very pertinent to mention here that Mr. Tarun Malhotra Prop. of M/s Global Marketing Co. and M/s Alex Traders is not filing his return of income after the A.Y. 2010-11. Further, notice u/s 133(6) of the Act, was issued to the Value Added Tax Officer, Ward-94, New Delhi for asking the status report of the TIN No. 07080453224 which has been quoted by on the bill by the assessee. A reply was received in this from. Department of Trade & Taxes, O/o the Asstt Value Added Tax Officer (Ward-94) NO./W- 94/2016-17/431 dated 29.12.2016 wherein it has been mentioned that TIN No. 07080453224 of M/s Global Marketing Co. has been cancelled on 25.06.2014 date of cancellation w.e.f. 05.12.2012. Attention is also invited to the fact that the assessee vide his reply to the show cause notice has himself admitted that inadvertently due a clerical mistake, the address of M/s Global Marketing Co. was given as “141A,Gali No. 10, Bloek- A, Sourav Vihar, Badarpur, Delhi- 110044’ instead of correct address of “141A,Gali No. 10, Block-I, ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 37 Sourav Vihar, Badarpur, Delhi-110044”. However, a perusal of the Bilti Challans of vehicle for transportation by the following transport companies for delivery of goods of so called sales made by the assessee i.e. M/s Arihanta Industries to M/s Global Marketing Co. shows the following: Name of the Transport Company Bill No. Dated From To Address at which goods to be delivered New Janta Road Lines 178 dt 2013 H arid war to Delhi Global Marketing 141A,Gali No. 10, Block-A, Sourav Vihar, Badarpur, Delhi-110044 Pooja Tempo Toyota Transport Co. 1490 dt 10.05.2013 Haridwar to Delhi Global Marketing 141A,Gali No. 10, Block-A, Sourav Vihar, Badarpur, Delhi-110044 Pooja Tempo Toyota Transport Co. 1180 dt. 21.06.2013 Haridwar to Delhi Global Marketing 141A,Gali No. 10, Block-A, Sourav Vihar, Badarpur, Delhi-110044 Jai Baba Transport Co. 976 dt. 24.09.2013 Haridwar to Delhi Global Marketing, Delhi Pooja Tempo Toyota Transport Co. 1256 dt. 26.09.2013 Haridwar to Delhi Global Marketing Sourav Vihar, Badarpur, Delhi- 110044 Pooja Tempo Toyota Transport Co. 1259 dt. 28.09.2013 Haridwar to Delhi Global Marketing Sourav Vihar, Badarpur, Delhi- 110044 It is quite surprising that summons u/s 131 issued two times by this office got returned back unserved and the Inspector of this charge deputed to serve the summons u/s 131 two times at both the addresses given by the assessee could not find the address, however, a tempo driver from outside Delhi was able to deliver the goods at the wrong address as admitted by the assesseee in his reply dated 26.12.2016. This means no such goods were ever delivered and it was only a paper transaction and assessee issued bogus bill of sales and got a bogus bill of transportation.(Copy of scanned copy of building challan is produced under: The above facts clearly establish that no genuine transaction took place between the assessee M/s Arihanta Industries and M/s Global Markeing co. and M/s Global Marketing Co. is nothing but a paper entity and engaged in the business of providing accommodation entries. Thus, the so called sales shown by the assessee made to M/s Global Marking Co. is nothing but bogus to get accommodation entries. Bogus sales shown to M/s Techpro Sales and Marketing A perusal of the Bank statement of M/s Techpro Sales and Marketing shows the following entries/transactions ITA No. 4309/Del/2018 & 38 The above facts clearly establish that no genuine transaction took place between the assessee M/s Arihanta Industries and M/s Global Markeing co. and M/s Global Marketing Co. is nothing but a paper engaged in the business of providing accommodation entries. Thus, the so called sales shown by the assessee made to M/s Global Marking Co. is nothing but bogus to get accommodation Bogus sales shown to M/s Techpro Sales and Marketing of the Bank statement of M/s Techpro Sales and Marketing shows the following entries/transactions ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries The above facts clearly establish that no genuine transaction took place between the assessee M/s Arihanta Industries and M/s Global Markeing co. and M/s Global Marketing Co. is nothing but a paper engaged in the business of providing accommodation entries. Thus, the so called sales shown by the assessee made to M/s Global Marking Co. is nothing but bogus to get accommodation Bogus sales shown to M/s Techpro Sales and Marketing of the Bank statement of M/s Techpro Sales and Marketing ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 39 5. TECHPRO SALES AND MARKETING - ICICI BANK (A/c No.033005500271 DATE AMOUNT CASH SHIFTED TO ARIHANTA IND. ON 07-06-2013 - RTGS - Rs. 22,50,000 TRF FROM BUILDCON TRADERS TRF FROM EMM KAY ENTERPRIS TRF FROM LOTUS TRADING TRF FROM RARE SALES TRF FROM AMOLIQ SALES TRF FROM FURNITURE DESIGN 6/7/20IS 6/7/2013 6/7/2013 6/7/2013 6/7/2013 6/7/2013 800,000 600,000 450.000 200.000 150.000 100.000 TRF FROM KARTIK FURNITURE 6/25/2013 200,000 CASH SHIFTED TO ARIHANTA IND. ON 25/06/2013 - RTGS - Rs. 2,00,000 RTGS FROM NXT FASHION 6/25/2013 9,00,000 CASH SHIFTED TO ARIHANTA IND. ON 26-06-2013 - RTGS - Rs. 9,00,000 CITI BANK STALWART HOME STYLE TRANSFER FROM BUILDCON TRADERS 7/10/2013 7/11/2013 15,00,000 6,25,000 CASH SHIFTED TO ARIHANTA IND. ON 11-07-2013 - RTGS - Rs. 23,00,000 TRF FROM LOTUS TRADING 8/1/2013 4,00,000 CASH SHIFTED TO ARIHANTA IND. ON 01-08-2013 - RTGS - Rs. 4,10,000 On going through the details of KYCs of M/s Techpro Sales and Marketing obtained from the Bank, it has been noticed that Mr. Amit S/o Sh. Mohan Lai, is the Prop. M/s Techpro Sales and Marketing. Further, it is also very pertinent to mention here that Mr. Amit S/o Sh. Mohan Lai Sharma Prop, of M/s Techpro Sales and Marketing is not filing his return of income which clearly shows that the transactions entered by M/s Arihanta Industries with M/s Techpro Sales and Marketing are non genuine and M/3 Techpro Sales and Marketing worth Rs. 60,00,000/- is engaged in the business of providing accommodation entries. This fact gets strengthened from the fact that summons u/s 131 of the Act were issued to said Party M/s Techpro Sales and Marketing but no one attended the proceedings. Inspector of this charge was also deputed to serve the summon by hand to the assessee, however, the address given by assessee was not found existing (As already discussed in detail in the earlier part of this assessment order). Further, the assessee was specifically asked to produce the party but the assessee failed to produce the party and discharge its onus to prove the identity, genuineness and creditworthiness of the party. ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 40 TECHPRO SALES AND MARKETING - ICICI BANK Proprietor: Mr. Amit Pan No. AIXPA3586C Address: .e. 14/25, Gali no 5, Vishivas Nagar Bank A/c No 033005500271 Further, the KYCs of the following parties obtained from the bank shown the following details: - S.No. Firm Name Proprietor Name PAN No. ADDRESS Nature of Business 1. Global Marketing Co. Tarun Malhotra 141 A, Gali no 10, Block I, Sourau Vihar, Badarpur Trading in Machines tools and medical equipment 1. BUILDCON TRADERS Mr. Sanjay Singh CMKPS1290J Lar Band, Badarpur Border, Delhi 110044 2. EMM KAY ENTERPRISES Mr. Manoj Kumar CDFPK6549A B 248, Subash Mohalla, North Ghonda, B-Block, Tejram gali, Delhi-110053 3. LOTUS TRADING Mr. Virender Kumar CLIPK1575M H. No. 141A Gali No. 10 Saurabh Vihar Block I, Delhi 4. NXT FASHION Mr. Satya Prakash Singh BNFPS7021E Y-35, Y-Block, Ph- III, Seelam Pur - III Delhi Ready Made Garments The above shows that M/s Techpro Sales and Marketing had transactions with Mr. Satya Parkash Singh Prof of M/s NXT Fashion which is engaged in the business of readymade garments. It is important to mention here that out of all six sales parties, the assessee had made maximum sales of Rs. 60,00,000/- to M/s Techpro Sales and Marketing and there are many more credits coming in the bank a/c of this party, which means this firm is subjected to get its books audited u/s 44AB of the Income Tax. However, the firm has not even filed its return of income after A.Y. 2010-11. The above fact, clearly show that no such party exists in real and the assessee gets accommodation entries from this party. ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 41 Further, it is also very pertinent to mention here that Mr. Amit S/o Sh. Mohan Lai Sharma Prop, of M/s Techpro Sales and Marketing is not filing his return of income. Further, notice u/s 133(6) of the Act, was issued to the Value Added Tax Officer, Ward-82, New Delhi for asking the status report of the TIN No. 07930429137 quoted by the assessee M/s Arihanta Industries on his bills. A reply was received in this from, Department of Trade & Taxes, O/o the Asstt Value Added Tax Officer (Ward-82) F.NO. 741/W-82 dated 29.12.2016, wherein it has been mentioned that TIN No. 07930429137 of M/s Techpro Sales and Marketing has been cancelled on 02.09.2015 date of cancellation w.e.f. 26.07.2012. Further, is also quite pertinent to mention here that the assessee vide his reply to the show cause notice has himself admitted that due a clerical mistake the address of M/s Techpro Sales and Marketing was given as 14/25, Gali No.5, Vishwas Nagar, Shahdara, New Delhi instead of correct address of 14/25, Gali No.6, Vishwas Nagar, Shahdara, New Delhi. But on the Bilti Challan of vehicle for transportation by M/s Pooja Tempo Toyota Transport Co. Bill No. 1179 dated 21.06.2013 from Haridwar to Delhi, the name and address mentioned on the challan (which is being scanned and shown below) is M/s Techpro Sales and Markeing Co. 14/25, Gall No.5, Vishwas Nagar, Delhi-110032. It is quite surprising that Inspector of this charge deputed two times to serve summons u/s 131 at both addresses given by the assessee could not find the address. But a the tempo driver of a company based out of Delhi was able to deliver the goods at the wrong address as admitted by the assessee in his reply dated 26.12.2016. This means no such goods were delivered and it was only a paper transaction and assessee issued bogus bill of sales and got a bogus bill of transportation. Further, the flow chart showing transaction between M/s Global Marketing Co. and M/s Techpro Sales and Marketing is given below: FUND INFLOWS (RTGS/TRANSFERS) IN ARIHANTA ENTERPRISES ITA No. 4309/Del/2018 & 42 Further, the flow chart showing transaction between M/s Global Marketing Co. and M/s Techpro Sales and Marketing is given below: FUND INFLOWS (RTGS/TRANSFERS) IN ARIHANTA ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries Further, the flow chart showing transaction between M/s Global Marketing Co. and M/s Techpro Sales and Marketing is given below:- FUND INFLOWS (RTGS/TRANSFERS) IN ARIHANTA ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 43 In this regard, it is pertinent to mention here that as per the bank statement of M/s Global Marketing Co. and M/s Techpro Sales and Marketing, it has been noticed that M/s Techpro Sales and Marketing and M/s Global marketing are having transactions with each other and also these are engaged in circular transactions with other direct or indirect related parties, The Bank statements of each of these parties was examined and a chart was drawn showing parties with whom each of these parties had transactions. The chart showing circular transactions between these parties is given as below:- ITA No. 4309/Del/2018 & 44 ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries ITA No. 4309/Del/2018 & 45 ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries As evident from the above, it is clear that M/s Global Marketing Co. and M/s Techpro Sales and Marketing are having circular transactions with each other and with other directly or indirectly connected entities inspite of having different business activities which nowhere has even a distant connection with the assessee’s business of manufacturing of medicines. These facts prove beyond the doubt that all these entities are nothing but just paper entities and are not doing any actual business and are engaged providing accommodation ITA No. 4309/Del/2018 & 46 As evident from the above, it is clear that M/s Global Marketing Co. and M/s Techpro Sales and Marketing are having circular transactions with each other and with other directly or indirectly connected entities inspite of having different es which nowhere has even a distant connection with the assessee’s business of manufacturing of medicines. These facts prove beyond the doubt that all these entities are nothing but just paper entities and are not doing any actual business and are engaged in the business of providing accommodation entries. ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries As evident from the above, it is clear that M/s Global Marketing Co. and M/s Techpro Sales and Marketing are having circular transactions with each other and with other directly or indirectly connected entities inspite of having different es which nowhere has even a distant connection with the assessee’s business of manufacturing of medicines. These facts prove beyond the doubt that all these entities are nothing but just paper entities and are not doing in the business of ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 47 Bogus Sales shown to M/s Aastha Impex Light is now thrown upon M/s Aastha Impex to whom sales have been claimed to be made by the assessee. The bank statement of M/s Aastha Impex with IDBI Bank was examined, details of which have been given as below: - 6. AASTHA IMPEX- IDBI BANK (A/c No. 084205000247) DATE AMOUN T FUND SHIFTED TO ARIHANTA IND. ON 19-06-2013 RTGS - Rs. 16,00,000 RTGS-SAI UDY0G 6/18/2013 3,00,000 RTGS - PRIMA WELDSAFE PVT LTD. 6/18/2013 10,00,00 0 TRF - SHREE BALAJI ENGINEERING 6/18/2013 1,30,000 TRF- SAHARA - OBC 6/19/2013 2,40,000 TRF- 908879 6/25/2013 11,00,00 0 TRF - BHUMIKA CABLES 6/25/2013 2,16,000 FUND SHIFTED TO ARIHANTA IND. ON 25-06-2013 - RTGS - Rs. 14,00,000 TRF-AASTHA IMPEX 6/25/2013 50,000 TRF-205598 6/25/2013 1,75,000 FUND SHIFTED TO ARIHANTA IND. ON 12-07-2013 - RTGS - Rs. 15,00,000 RTGS - QUALITY HARDWARE STORE 7/11/2013 1,88,378 TRF- PARAS POLY CAB 7/11/2013 3,00,000 TRF- 084205500180 7/12/2013 50,000 TRF CHQNO. 25153 7/12/2013 7,50,000 TRF CHQNO. 227252 7/12/2013 2,00,000 FUND SHIFTED TO ARIHANTA IND. ON 25-07-2013 - RTGS - Rs. 20,00,000 TRF-082705500173 7/25/2013 1,00,000 TRF FROM CHQ NO. 908775 7/25/2013 5,90,000 RTGS - HDFCH1326977793 7/25/2013 9,00,000 TRF- 629505040143 7/25/2013 2,00,000 TRF - 082705500173 7/25/2013 90,000 TRF - NAV BHARAT 7/25/2013 1,00,000 FUND SHIFTED TO ARIHANTA IND. ON 31-07-2013 - RTGS - Rs. 7,90,000 TRF AASTHA IMPEX 7/27/2013 6,00,000 KUNTH METAL IND.-RTGS 7/30/2013 3,00,000 CASH DEPOSIT 7/31/2013 47,000 TRF - BHAGWATI TRADING 7/31/2013 1,00,000 On going through the details obtained from the Bank, it has been noticed that Mr. Rakesh Kumar S/o Subhash Chand Prop. M/s Aastha Impex. Attention is also invited to the fact that Mr. Rakesh Kumar ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 48 Prop. of M/s Aastha Impex is not filing his return of income after the A.Y. 2010-11, which clearly shows that the transactions entered by M/s Arihanta Industries with M/s Aastha Impex are non genuine and M/s Aastha Impex is engaged in the business of providing accommodation entries. This fact gets strengthened from the facts that summons u/s 131 of the Act were issued to said Party M/s Aastha Impex but both the times summons returned back unserved. Inspector of this charge was also deputed to serve the summons by hand to the party, however, on the said address no such party in the name of M/s Aastha Impex was found existing at the said address. Further, the assessee was specifically asked to produce the party, however, the assessee failed to produce the party. Therefore, the assessee completely failed to discharge its onus to prove the identity, genuiness and creditorworthiness of the said party. Further, notice u/s 133(6) of the Act, was issued to the Value Added Tax Officer, Ward-46, New Delhi for asking the status report of the TIN No. 0757367255 quoted by the assessee on the bill. A reply was received in this from, Department of Trade & Taxes, O/o the Value Added Tax Officer (Ward-46) NO./A.C.- 46/1652 dated 29.12.2016, wherein it has been mentioned that TIN No. 0757367255 of M/s Aastha Impex has been cancelled on 11.06.2014 date of cancellation w.e.f. 05.11.2009 Further, it also to mention here that out of the all six sales parties the assessee had made sales of Rs. 72,90,000/- to M/s Aastha Impex in a single day and there are many more credits in the bank a/c of this party, which means this firm is subjected to get its books of accounts audited u/s 44AB of the Income Tax. However, the firm has not even filed its return of income after A.Y. 2010-11. The above facts clearly show that no such party exists in real and the assessee got accommodation entries from this so called party. ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 49 The above facts clearly establishes that no genuine sales transactions took place between the assessee M/s Arihanta Industries and its so called sales parties. Thus, it has been proved beyond doubt that the assessee has not made any so called sales in actual but has only used these parties to get accommodation entries to convert its own undisclosed money.” 39. Reference is now made to the Partnership Deed of the assessee firm. During the relevant year, the assessee had amended his partnership deed and changed the profit sharing ratio as under: Name of the partner New profit sharing ratio (%) Old Profit sharing ration Sh. Mandeep Nagapl 90 50 Sh. S. K. Sharma 10 50 In this regard, it to say that in the partnership deed, wherein it has been stated that "whereas the party of the First Part is desirous of increasing the business of the partnership firm further in the existing lines of business and in additional fields of business WHEREAS the party of the second part has desired that it will not be in a position to devote much time to the affairs of the Partnership Firm because of various other commitment". Now reference is made to the reply of the assessee dated 26.12.2016 wherein the assessee had stated that, "the factory was setup under the supervision and guidelines of Dr. S.K. Sharma former Asstt. Drug Controller who was also President of Board of Ayurveda and Unani System of medicines Delhi. He has ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 50 been awarded 'DELHI RATNA" for his ontribution to Ayurveda and Unani System" Here it is very important to mention that in the preceding years, when Sh. S.K. Sharma was giving more time to the factory and business(when his profit sharing ratio was 50%) there were very low sales of the firm(Rs. 6,30,720/- only) whereas in the current year when Sh. S.K. Sharma himself stated that he was not in a position to devote much time to the affairs of the partnership firm because of various other commitments (as per extracts of Partnership Deed quoted above), the turnover of the firm is Rs. 10,73,87,706/-. It is very surprising that the factory suddenly started to manufacture goods at such a huge level (i.e. from turnover of Rs. 6,30,720/- in preceding year to turnover of Rs. 10,73,87,706/- in the relevant year) without even the proper devotion of time by the main person behind the setup and establishment of the firm(Shri SK Sharma), who is infact the key person in the assessee's business of manufacturing Ayurvedic medicines being the only doctor claimed by the assessee to be looking after its business activities. This fact also makes the authenticity of the business of the assessee highly doubtful. Since, in this year the assessee decided to route his own undisclosed money into his own account using the Sidcul factory as a facade, therefore, the profit sharing ratio was changed. It is also to mention here that on perusal of the Bank statement of the firm, it has been seen no payments have been made to Sh. S.K. Sharma during the year as a share of his profits of the Firm. It may be noted that it has been abundantly established by way of evidences on record that the assessee was not engaged in any manufacturing of so called ayurvedic products and the sales so declared were bogus sales to convert its unaccounted money into ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 51 legally accounted income exempt from tax. Considering the fact that the so called profits have not being "derived" from the industrial undertaking, the assessee shall not be eligible for any deduction u/s 80IC. It is quintessential that the profits & gains has to be "derived from" the business defined in section. The business as explained in sub- section (2) denotes to manufacture or production of any article or thing which does not fall in the list of article or things specified in the 13 Schedule. Thus, the profits & gains of the enterprise of the undertaking has to have a direct nexus with the manufacturing or production of any article in the specified area. The profits therefore needs to derive from the manufacturing / production activity undertaken by the assessee. In other words, any other income which does not derive from the manufacturing or production of any article or thing shall not qualify for deduction u/s 80-IC. In order for income to qualify for special deduction under section 80- IC of the Income-tax Act, 1961, the profit/income earned should be derived from business of manufacture or production of an article or thing, which is eligible for deduction. The expression "derived from" in taxation laws means something which has direct or immediate nexus with the specified activity, which means manufacture or production of article or thing. Manufacture or production of article or thing should be the direct and proximate cause of the receipt and not the indirect causation and reason for the income. Strong reliance is placed on the judgment of the Hon'ble Supreme Court in the case of Liberty India v. CIT [2009] 317 ITR 218 (SC) wherein it has been held that, "The 1961 Act broadly provides for two types of tax incentives, namely, investment linked incentives and profit linked incentives. ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 52 Chapter VI-A which provides for incentives in the form of tax deductions essentially belongs to the category of 'profit linked incentives'. Therefore, when section 80-IA/80-IB refers to profits derived from eligible business, it is not the ownership of that business which attracts the incentives; what attracts the incentives under section 80-IA/80-IB is the generation of profits (operational profits). For example, an assessee-company located in Mumbai may have a business of building housing projects or a ship in Nava Sheva. Ownership of a ship per se will not attract section 80-IB(6). It is the profit arising from the business of a ship which attracts sub-section (6). In other words, deduction under sub-section (6) at the specified rate has linkage to the profit derived from the shipping operations. This is what we mean in drawing the distinction between profit linked tax incentives and investment linked tax incentives. It is for this reason that the Parliament has confined deduction to profits derived from eligible businesses mentioned in sub-sections (3) to (11A) [as they stood at the relevant time]. One more aspect needs to be highlighted. Each of the eligible business in sub-sections (3) to (11A) constitutes a stand-alone item in the matter of computation of profits. That is the reason why the concept of segment reporting' stands introduced in the Indian Accounting Standards (IAS) by the Institute of Chartered Accountants of India (ICAI)." [Para 13]. The Delhi High Court in the case of Pine Packaging Pvt. Ltd vs. CIT (356 ITR 222) has examined the concept of "derived from" with reference to deduction u/s 80-IC. The Hon'ble Court has held that the expression "derived from" is a narrower expression than the words "attributable to" which include direct as well as indirect receipts which may not have immediate or direct nexus with the specified activity. The manufacture/production should be the causa causans. The immediate source will be the first degree source and not the second or the third degree source, which is a step removed ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 53 from the specified activity. The Hon'ble Court therefore in the cited case (supra) held that "standing charges" did not qualify for deduction under section 80-IC as the payment was not income or profit/gain derived from manufacturing or production of articles and things. The Gauhati High Court in the case of Panchratna Cement Pvt. Ltd (317 ITR 259) was of the view that if the profits and the gains of the assessee have no association or any relation whatsoever with the business of industrial undertaking or it cannot be imagined to be related or connected therewith, by no means would they qualify to be deducted from the total income u/s 80-IC of the Act. In this case also, the assessee has failed to prove that income had been derived from eligible business for deduction u/s 80IC. Therefore, based on the detailed discussion of facts made above and in view of the above case laws, I am to hold that the abnormal net profit of 95.15% amounting to Rs.9,51,48,979/- declared by the assessee and established to be bogus sales cannot qualify for deduction u/s 80IC. Accordingly, the claim of deduction of the assessee u/s 801C for Rs.9,51,48,979/- is being disallowed. Since, I am satisfied that the assessee had concealed his income and furnished inaccurate particulars of his income, therefore, penalty proceedings u/s 271(1)(c) of the Income tax Act, 1961 are being initiated separately. Strong reliance is placed on the judgment of the Gujrat High Court in the case of Rushil Industries Ltd.( (2001) 251 ITR 608 (Guj), In this case, the assessing officer had found that the assessee was engaged in bogus sales two parties on the basis of enquiry and evidence on record and accordingly additions u/s 68 was made by the AO. The ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 54 assessee in its argument furnished the copies of the sales invoice, sales tax record, bill of lading and receipt of payments from the purchaser to establish the genuineness of the sales made by him. The Hon'ble Gujrat High Court after considering all the evidences and arguments has held as under: "The modus operandi resorted to was that the two above named persons had opened bank accounts in several names and by using these bank accounts they would deposit cash receipts from ship breakers at Alang and thereafter would draw cheques against this cash in favour of ship breakers." The facts of the assessee's case is similar to the facts of the cited case(supra). In the case of the assessee, a detailed investigation and enquiries was conducted by this office wherein several incriminating evidence have been obtained with respect to: (i) Bogus purchase of plant and machinery (ii) Non-existence of plant and machinery at the factory site (iii) Consumption analysis shows huge discrepancies in the raw material purchased and finished goods produced (iv) Difference in quantity containing in products as per physical sample of products and as per details of products containing per bottle as per calculation sheet given by the assessee inadequate power consumption (v) Abnormally inflated sale invoices showing profit margin from 800% to 16500% of the cost of the product (vi) Non-existence of purchase parties ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 55 (vii) Evidence of circular transaction between the assessee and the purchasers directly and indirectly (viii) Huge equivalent deposit of cash in the accounts of the purchaser on the preceding day of issue of RTGS in favour of the assessee (ix) Few of the purchasers not filing ITR (x) Cancellation of sales tax registration of the purchasers (xi) Failing in producing sales parties inspite of given sufficient opportunities. I would also like to rely on the judgment of the Punjab and Haryana High Court in the case of Commissioner of Income-tax v. Tejinder Singh HUF ( 342 ITR 295,) upheld the addition on account of bogus sale of jewellery credited in the books of the assessee u/s 68 of the Act. The Court in its order has observed as under: "The finding recorded by the Tribunal that the addition under section 68 in respect of the alleged bogus sale of jewellery was not justified was perverse. The Tribunal had not considered the merits of the genuineness of the transaction of sale by the assessee. In the light of the finding recorded by the Assessing Officer and the Commissioner (Appeals), it was expected that the Tribunal should have gone into the question of identity of the jewellery declared under the Voluntary Disclosure of Income Scheme and the jewellery sold in the transaction in question. It was necessary to go into the question whether the assessee had not received bogus accommodation book entries as inferred in the order of the Assessing Officer and the Commissioner (Appeals). In the absence thereof, the finding of the Tribunal could not be sustained." In view of the above, there is no iota of doubt that the assessee was involved in converting its unaccounted funds into legally accounted ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 56 funds in the garb of sales made by him which were not found to be genuine. Thus the bogus sales to the tune of Rs 10,73,87,706/- is held to be unaccounted income of the assessee and is being added as income u/s 68 of the Act. Since, I am satisfied that the assessee had concealed his income and furnished inaccurate particulars of his income, therefore, penalty proceedings u/s 271(1)(c) of the Income tax Act, 1961 are being initiated separately. Since on one hand, the deduction u/s 80IC has been separately disallowed and on the other hand, the entire sales receipts of the assessee have been found to be bogus and have been added to the income of the assessee u/s 68 of the IT Act, 1961 and taxed in its hands, therefore, the amount of 9,51,48,979/-on a/c of disallowance of deduction u/s 80IC is presumed to be included in the amount of Rs. 10,73,87,706/- added to the Income of the assessee u/s 68 of the IT Act, 1961.” 40. From the above enquiries and investigation, the AO concluded that there was no production but it is a scheme of introducing the undisclosed money into the account and then claiming deduction u/s 80IC. 41. Aggrieved, the assessee filed appeal before the ld. CIT(A). 42. Before the ld. CIT(A), the assessee claimed that the deduction u/s 80IC is being claimed from the initial Assessment Year 2010-11 onwards and hence no contrary view can be taken in the fourth year of the operation. 43. The ld. CIT(A) held at para no. 6.7 determined the quantity of all the material purchased at 2572 kgs pertaining to ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 57 hawan samagri in the ratio of 35:30:35 against the 2572 kgs determined by the Assessing Officer. 44. With regard to the purchases from M/s R.R. Sales, the ld. CIT(A) held at para no. 6.10 that the invoice whether computerized or manual does not matter and the payments have been made through cheque drawn in the regular account. The ld. CIT(A) held at para no. 6.13 that the electricity consumption of 23,190 units/23,553 units can be considered as sufficient enough to produce 40.4 kg of material over 300 days. The ld. CIT(A) held at para no. 6.14 of the order that the total expenses of Rs.9,82,800/- includes labour as well as the employees and is sufficient to produce 40.4 kg of production which led to turnover of Rs.10,73,87,706/-. 45. In nutshell, the ld. CIT(A) found it credible for the assessee to have a sales turnover of Rs.10,73,87,706/- out of the production of approximately 2572 kgs (reconciled figure) with a labour cost of Rs.9,82,800/- (reconciled figure)which could lead to an exorbitant profit of Rs.9,51,48,978/-. 46. Further, the ld. CIT(A) disregarding the field enquiries conducted by the Assessing Authority held that the suppliers could have shifted their office/factory during the intervening period of the purchases and verification. The ld. CIT(A) at page no. 16 relied on the purchase bills and the transport bills of the parties. The ld. CIT(A) at page no. 17 held that the assessee is an industrial establishment and had manufacturing license, GMP certificate, central excise exemption, air pollution control and various other certificates and registration. With regard to the ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 58 production, the ld. CIT(A) at page no. 19 of the order relied on the return of income for A.Y. 2010-11 and electricity load sanction and electricity bills. The ld. CIT(A) held that while the total plant & machinery was to the tune of Rs.62,72,429/-, the value of the machinery enquired into was Rs.17,60,359/- and held that all the bills & vouchers have been submitted. With regard to the parties to whom the purported sales have been made and from whom the amounts have been received by the assessee, the ld. CIT(A) at page no. 24 of the order accepted the contention of the assessee that non-filing of Income Tax Return or operating more than one proprietary firm does not change the nature of transaction of the appellant with buyer and does not justify treating purchase of goods as bogus. The ld. CIT(A) held that the appellant sold the goods in the normal course of business. Since, the parties are registered with VAT authorities, the transaction should not be doubted. 47. With regard to M/s Maheshwar Trading Company, the ld. CIT(A) held that the assessee has discharged his onus u/s 68 of the Act by explaining nature of amount credited in the books of account, the credits being receipts from the sale of hawan samagri. With regard to receipts from M/s Laxmi Ganesh Health Care Division and M/s Aastha Impex, the ld. CIT(A) agreed with the contention of the assessee that non-filing of Income Tax Return cannot justify the Assessing Officer to treat the transactions as bogus. ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 59 48. To conclude, the ld. CIT(A) held that the business of the assessee and the profits earned thereof are genuine with the following observations: (a) The assessee firm actually purchased plant & machinery and put them to use for manufacturing of the products, (b) The activities of the firm are corroborated by necessary certificates and licences, (c) The activities of manufacturing are subjected to regular inspections by various department of Uttarakhand Government. (d) Consumption of electricity cannot be sole parameter for deciding the manufacturing activity in the case of the firm because the volume of the goods produced during whole of the Financial Year was 12,120 kg. only. (e) The ratio of consumption of three ingredients of Hawan Samagri has been explained by revealing the fact that Guggal being sticky material gets wasted in the process of milling and mixing. (f) Various documents related to the transportation and inspection thereof by the check post prove the genuineness of sales. (g) The issue of computerized bill from M/s RR Sales Corporation has been clearly explained by the Appellant that it was prepared on the tally software upon noticing the arithmetic mistake in the manual bill which did not allow to be uploaded on the system. (h) The observation of the Assessing Officer with regard to comparatively high prices was also not based on real appreciation of the facts as in the cases of proprietary ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 60 goods, the prices are generally high. In the subsequent Financial Year when the Assessee firm started making online sales, the customers have purchased same products at the same rates which were purchased by the parties. (i) The deposit of cash by the parties in their bank accounts and advancing the monies to the Assessee firm is explained on the practical aspects of the business where maximum retail sales are in cash. (j) The Assessing Officer has merely expressed his apprehensions regarding the transactions amongst some of the parties including the buyers of the Assessee's products. But these observations have not been made with authentic facts. (k) The observation of the Assessing Officer regarding the change in the profit ratio between the partners of the firm and the importance of Dr. S.K. Sharma is also not based on the real appreciation of the facts in as much as Mr. S. Kumar and Dr. S.K. Sharma were two different persons and Dr. S.K. Sharma was never a partner of the firm. 49. Before us, the ld. DR supported the order of the Assessing Officer and the ld. AR argued based on the evidences filed before the ld. CIT(A) and the paper books containing page no. 1 to 490 of Volume 1 and page no. 491 to 881 of Volume-II. 50. It is an indisputable fact that out of the total turnover of Rs.10.73 Cr., the assessee has earned profit and claimed deduction of Rs.9.51 Cr. which is more than 95% of the ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 61 turnover. The total expenses incurred including the cost of raw material to earn the profit of Rs.9.51 Cr. were to the tune of Rs.1.22 Cr. The Assessing Officer has conducted in depth enquiries to prove the entire business operations as a ploy to plough back unaccounted income in the form of business profits and then claim deduction on the said business profits. The entities to whom the assessee sold the goods have been found to be in the non-business activities and also non-existing. The proprietor of M/s Krishna Enterprises to whom the alleged sale of Rs.2.19 Cr. has been made by the assessee could not prove the genuineness of the activity when examined along with the bank statement and the cash deposits therein which have been transferred to the account of the assessee. Even, the KYC Form of the bank does not have any documents regarding the proof of business. Similarly, the enquiry reports of the Inspector pertaining to the existence of M/s Laxmi Ganesh Health Care Division from whom Rs.67 lacs sales have been made by the assessee. With regard to M/s Aastha Impex from whom the assessee received Rs.72.90 lacs, the enquiries revealed that no such address as given by the assessee was in existence. The M/s Global Marketing Company and M/s Tecpro Sale & Marketing from whom the assessee received a total amount of Rs.3.68 Cr. and also found to be non-existing at the address given and the assessee also could not prove the whereabouts of these entities before the Assessing Officer. The hawan samgri as depicted at para 17 of this order has been sold at Rs.4.85 Cr. as against the cost of Rs.4.40 lacs. Each packet costing Rs.4/- has been sold at Rs.663/- which is about 165 times of the cost price. The total consumption of various ingredients have been duly ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 62 examined in this order. Further, the enquiries conducted with regard to bank accounts of the parties namely M/s Maheshwari Trading Company from whom an amount of Rs.3.63 Cr. has been received and others proved all cash deposits before the monies have been sent to the assessee through RTGS. The purchases of approximately 4000 kg of raw material at a cost of Rs.18.9 lacs resulting in the turnover of Rs. 10.73 Cr. about 7 employees is truly mind boggling when weighed against plethora of evidences collected by the Assessing Officer gives credence to the fact that the unaccounted income has been laundered as tax free business profit. Similarly, the machinery purchase also could not be proved giving rise to the contention of the Assessing Officer that the production per se is bogus. The cash deposits in the A/c No. 6168002100000354 clearly indicates that the entire receipts by the assessee are out of the cash deposits. The same has been reproduced at page no. 19-31 of this order. The Assessing Officer has also examined the proprietors, the KYC and aptly proved that they were not in the business as what has been shown. The details of Global Marketing Company and Sh. Tarun Malhotra has been a part of this at page 36 to 39 of this order. On going through the purchases of the plant & machinery, raw material, sales non- existence of the parties, cash deposits in various accounts, it can be concluded that the entire transactions are not supported by any evidences proved with regard to the receipts of the cash by the assessee in the form of business receipts. Having gone through the entire order of the ld. CIT(A), we find that the ld. CIT(A) has mislead himself by the various theoretical proposition of inspections by the Uttarakhand Government ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 63 certificates, licenses, other documents. When weighed against the tangible evidences collected against the assessee, the reasoning of the ld. CIT(A) mentioned at page no. 59 from point (a) to (k) do not elicit any credence to the activities of the assessee. 51. Hence, keeping in view the entire facts on record, the investigation and the enquiries conducted by the Assessing Officer with regard to the purchase parties of the assessee from whom the raw material of Rs.18.90 lacs has been procured, keeping in view, the enquiries conducted with regard to the sale parties and the absence of genuineness thereof, keeping in view, the cash deposits found in the bank account of the alleged sale parties which have been subsequently routed to the accounts of the assessee, keeping in view the fact that the raw materials consumed of Rs.18.90 lacs with manufacturing expenses of less than Rs.20 lacs which led to the turnover of Rs.10.73 Cr. which in turn gave rise to Rs.10.21 Cr. cannot be treated as a genuine profit earned out of authentic business activities. We are quite awestruck at the startling profits made by the assessee. In simple terms the profits claimed to have been earned by the assessee is wholly unrealistic by any reasonable standards. Ergo, we hereby affirm the order of the Assessing Officer. 52. We have also gone through the order of the Assessing Officer for the A.Y. 2016-17 and also the office note containing the observations of the ld. CIT(A) as mentioned in this order at para 59-60. In this year, the Assessing Officer has neither examined the issue nor conducted any field enquiries as ITA No. 4309/Del/2018 & ITA No. 963/Del/2019 Arihanta Industries 64 conducted by the Assessing Officer in the year 2014-15/2015-16 but accepted the return filed by the assessee mainly based on the order of the ld. CIT(A) and cursory examination of the issue. The argument of the ld. AR that consistency should be followed cannot be accepted as the AO’s observations for A.Y. 2016-17 were mainly based on the order of the ld. CIT(A) for the A.Y. 2014-15 and A.Y. 2015-16 which is being reversed. The evidences collected by the Assessing Officer for the A.Y. 2014- 15 and A.Y. 2015-16 which have been on record have been duly considered during the hearings before us and accordingly it is hereby held that the ld. CIT(A) has fallen into error while deciding the appeals. Hence, the reliance placed by the Assessing Officer in the subsequent year on the orders of the ld. CIT(A) and by the ld. AR cannot be considered as the right way to interpret the principle of consistency. 53. In the result, both the appeals of the Revenue are allowed. Order Pronounced in the Open Court on 17/07/2023. Sd/- Sd/- (Saktijit Dey) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 17/07/2023 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR