The Income Tax Appellate Tribunal, Delhi Bench ‘C’, adjudicated the appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals), NFAC, for Assessment Year 2018-19 in the case of RMS Power Solutions Private Limited.

The assessee had filed its return declaring total income of ₹12,72,933/-. Based on specific information alleging bogus accommodation entries in the form of purchases from RCI Industries & Technologies Ltd., the case was reopened under Section 147 of the Income Tax Act. The assessment was completed under Section 147 read with Section 144B, wherein the Assessing Officer made an addition of ₹80,91,108/- under Section 69C on account of bogus purchases.

On appeal, the CIT(A) observed that although deficiencies were found in the purchase function of the assessee, no infirmity was pointed out in the sales recorded in the financial statements. The transactions were carried out through banking channels, and the assessee was engaged in the regular business of trading in cables. Considering the factual matrix and judicial precedents, the CIT(A) held that the purchases were supported by paper bills obtained to suppress profits and that only the profit element embedded in such purchases could be brought to tax. Accordingly, the addition was restricted to 6% of the alleged bogus purchases, amounting to ₹4,85,467/-.

The Revenue challenged this restriction, relying upon judicial precedents including Narender Kumar Gupta, N.K. Industries Ltd., Choksi Vachharaj Makanji & Co., Shoreline Hotel (P) Ltd., and the Supreme Court decision in SEBI vs. Kishore R. Ajmera. However, the Tribunal noted that the Assessing Officer had not disputed the sales and that estimation of profit was justified in the facts of the case.

The ITAT held that the order passed by the CIT(A) was just, fair, and proper and did not suffer from any infirmity. Consequently, the appeal filed by the Revenue was dismissed.

Link to download the Order

https://mytaxexpert.co.in/uploads/1766570075_176649100733EcUw1TO.pdf