AI Drafter 
TaxTMI 
TaxTMI 
2017 (12) TMI 1394
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....ssessment year are almost similar except the variation of figures of additions. In both the years the assessee has challenged the validity of assessment order passed under section 143(3) r.w.s. 153A. For appreciation of facts, first we are refereeing the facts in ITA No. 4734/M/2016 for AY 2008-09. The assessee has raised the following grounds of appeal : 1.a) on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in not appreciating that:- (i) the initiation of the assessment proceedings and completion of the assessment u/s. 143(3) r.w.s. 153A by the AO is without jurisdiction and bad in law as the jurisdiction u/s. 153A is vitiated; and (ii) the additions made by the AO are beyond the scope of provisions of section 153A. 2.a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition of Rs. 1,27,63,427/- made by the AO to the income of the Appellant on account of unexplained expenditure u/s.69C treating the purchases of steel from M/ s. Karma Industries Ltd. and its associate concerns as bogus. b) The Id. CIT(A) failed to appreciate that :- i) the a....
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....961 is mandatory. The Appellant denies its liability for such interest. 5) The ld. CIT(A) erred in holding that the ground raised disputing initiation of penalty proceedings u/s.271(1)(c) of the Income Tax Act, 1961 is premature. The Appellant denies its liability for such penalty. 3. Brief facts of the case are the assessee company is engaged in the business of Road/ Civil Construction, Maintenance contracts, Wind mill power generation and trading of construction material, filed its return of income for relevant assessment year on 29 September 2008 declaring total income of Rs. 80,31,74,400/-. The assessment was completed under section 143(3) on 20.12.2010 assessee total income at Rs. 80,63,26,270/-. Subsequently, a search under section 132 was conducted on 21 July 2011 on IRB Infrastructure Developer Ltd (IRBIDL). The assessee company is one of the subsidiary company of IRBIDL accordingly the assessee premises was also covered during the search. The notice under section 153A was issued to the assessee on 9th December 2011. In response to the notice under section 153A the assessee filed return of income on 10th January 2012 declaring total income of Rs. 80,63,26,270/-.....
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....under section 153A and if it is to be under section 153C, it cannot be without recording satisfaction against the assessee. In support of his submission learned AR of the assessee relied upon the decision of Hon'ble Bombay High Court in case of CIT Vs Continental Warehousing Ltd.[2015] 58 taxman.com 78 (Bombay) and in All Cargo Global Logistic Ltd Vs DCIT 23 taxman.com 103(Mumbai)(SB). On the other hand the learned and AR for the revenue supported the order of authorities below. It was argued that during the course of such action it was revealed that the assessee had availed accommodation entries in the nature of bogus bill from KIL and its associate concern. There was simultaneous search action on 21 July 2011 at the residence of Mr. Rajesh Mehta MD of KIL. Mr. Rajesh Mehta in his statement on oath admitted that they had provided accommodation entries in the nature of bogus bills. 5. We have considered the rival submission of the parties, the material on record and the various decisions cited by learned AR of the assessee and the decision relied by ld CIT(A). The assessment under section 143(3) for the year under consideration was completed on 20 December 2010 determining total....
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....t to the said order of the CIT(A) and recomputed the income at the same figure as it was in the assessment order under section 143(3). The CIT passed an order u/s 263 stating that as the income computed by the AO in the effect order was less than 30% of the book profit, the AO ought to have computed the total income by invoking section 115JA. The ld CIT held that in the said order, the AO had incorrectly computed section 80HHC deduction. The assessee filed an appeal before the Tribunal claiming that as the computation of section 115JA book profit and section 80HHC deduction were not the subject matter of the section 153A proceedings, the CIT could not have invoked jurisdiction under section 263. The Tribunal accepted the assessee's plea. On appeal by the revenue to the Bombay High Court the order of Tribunal was confirmed. Hence, the ration of decision in Murali Agro (supra) is not applicable on the facts of the present case. 6. In our view the conclusion drawn by ld. CIT(A) is beyond the scope of section 153A, The ld. CIT(A) has not specified as to what incriminating material was discovered in the search conducted on 21.07.2011. In our considered view, the addition in the unaba....
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....ked by corresponding use of it in the fixed assets; iv) nothing has been brought on record by the ld. AO that money has exchanged the hands in lieu of payment made for these purchases by account payee cheques; and v) the AO did not provide copy of materials and statements relied upon by him nor allowed any opportunity to the Appellant to cross examine those parties who have been believed to have provided the alleged accommodation bills. c) In reaching to the conclusion and confirming such addition made by the AO, the ld. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. 3.a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition of Rs. 9,24,152/ - made by the AO to the income of the Appellant on account of alleged commission charges on the alleged accommodation entries. b) The ld. CIT(A) failed to appreciate that your Appellant has not paid any commission to M/s. Karma Industries Ltd. and its associate concerns nor any evidence was found in the course of t....
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....ssociate concerns are genuine beyond doubt and supported by sufficient materials; iii) the purchase of steel is backed by corresponding consumption in the projects undertaken by the Appellant; iv) the Appellant has successfully demonstrated that the impugned steel was used in the projects undertaken by the Appellant; v) the gross/net profit ratio shown by the Appellant is quite reasonable; vi) nothing has been brought on record by the ld. AO that money has exchanged the hands in lieu of payment made for these purchases by account payee cheques; and vii) the AO did not provide copy of materials and statements relied upon by him nor allowed any opportunity to the Appellant to cross examine those parties who have been believed to have provided the alleged accommodation bills. c) In reaching to the conclusion and confirming such addition made by the AO, the ld. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. 2.a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred....
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....purchases by account payee cheques. c) In reaching to the conclusion and confirming such addition the ld. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. 4.a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition of Rs. 19,20,799/- made by the AO to the income of the Appellant on account of bogus purchases in respect of purchases from the parties the name of whom appears in the list of suspicious dealers on the website of Sales Tax Department, Government of Maharashtra. b) The ld. CIT(A) failed to appreciate that :- i) all these purchases are genuine beyond doubt and supported by sufficient materials; ii) the purchases of steel IS backed by corresponding consumption in the projects undertaken by the Appellant; iii) your Appellant has successfully demonstrated that the impugned steel was used in the projects undertaken by the Appellant; iv) the gross/net profit ratio shown by the Appellant is quite reasonable; and v) nothing ha....
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..... During the search Rajesh Mehta Managing Director ('MD') of Karma Industries Ltd allegedly admitted that they have not supplied any material to the assessee and only provided the accommodation entry. The assessing officer also noted that the name of Karma Industries Ltd are also appearing in the list of Hawala dealers published on the official website of Sale Tax Department of Maharashtra. The assessing officer also noticed that this fact was admitted by Virendra D Mhaiskar MD of IRB Group in his statement recorded in search that purchases from Karma Industries ltd are not verifiable. It was further observed that Investigation Wing of the Department conducted inquiries against the said parties that the said parties. The assessing officer has recorded that the assessee has claimed purchases from Karma Industries Ltd and its group concern namely Shivan Giri Steel Ltd and Elpro Ind Ltd. The assessing officer further notices that during the search action on 21.07.2011, the assessee was asked to establish the genuineness of the transaction of purchases from Karma Industries Ltd. and its associate firms. The assessee during the course of search action showed their inability to provide p....
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.... Ltd. 14. The assessing officer also disallowed purchased of Rs. 7,62,206/-, from Asian Steel. While disallowing the assessing officer concluded that Asian Steel Traders shown purchase from Karma Industries ltd for onward transfer to the assessee. Hence, the purchases from Asian Traders Steel were also treated as bogus purchases. 15. The assessing officer further noticed that during the previous year the purchases of Rs. 64,83,406/- was utilized for Capital Asset on which assessee had claimed depreciation. As the assessing officer treated the purchases as non-genuine therefore the amount shown in the capital asset was also reduced to the extent of Rs. 64,83,406/-. 16. Apart from the purchases from Karma industries Ltd and Asian steel traders, the assessee has shown the purchases from Darshna Corporation for Rs. 2,449/- and the Tulsiani Trading Private Limited for Rs. 19,18,350/-. The assessing officer on the basis of his observations that the names of these two parties are appearing in the list of suspicion dealers in the website of Sale Tax Department Government of Maharashtra, who are indulged in issuing bogus bill without delivery of any goods and material. The assessee....
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....h the record of the case. The learned AR of the assessee argued that the learned Commissioner (Appeals) erred in sustaining the addition at the rate of 12.5% of purchases for Surat- Dahisar and Kolhapur project despite the fact that assessee has fully prove the genuineness of the purchases and its consumption. The addition at the rate of 12.5% was sustained the observing that addition of entire amount of purchases shown to have been made from Karma industries Ltd and its associates is not justified. It was further observed that the assessee had merely indulged in inflating the expenses by introducing the bogus purchases and it would be a fair enough to estimate the profit element embedded in such purchases. However, the learned Commissioner (Appeals) confirmed the action of assessing officer in sustaining 100% addition for the purchases of material consumed in Mumbai-Pune Expressway and Nagpur- Hyderabad Project. The ld. Commissioner (Appeals) despite sustaining the addition at the rate of 12.5% of purchases for Rs. 31,24,70,714/-, from Karma industries Ltd, for the project of Surat-Dahisar and Kolhapur project, still confirmed the addition on account of commission payment for Rs. ....
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....rushed aside the documentary evidences and made the additions. The Gross profit/ Net profit ratio shown by assessee is quite reasonable. Nothing has been brought on record by the assessing officer that money has been exchanged in the hands of the assessee for the payment made for these purchases. The purchases made from Asian Steel are also genuine beyond doubt which is supported by sufficient documentary evidence with corresponding consumption in the project of the assessee. Similarly, the addition on account of purchases from Darshna Corporation and Tulsiani Trading Private Limited was made on the basis of information of website of Sale tax Department government of Maharashtra. The learned AR of the assessee vehemently argued that in all purchases the assessee has paid VAT on purchase of steel at special rate is applicable as the assessee purchased the Steel for Infrastructure project. The assessee had paid the VAT the rate of 4% on all purchases. The lower authorities have not disputed this fact throughout in their proceedings. There was no element of revenue leakage in the purchase of assessee. The learned AR of the assessee prayed for deleting the entire additions on account o....
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....2,549/- on account of unexplained expenditure under section 69C of the Act (being 12.5% of Surat-Dahisar and Kolhapur Project i.e. Rs. 3,90,58,839/-, 100% of Mumbai- Pune Expressway i.e Rs. 2,01,85,145/- and Nagpur -Hyderabad Project i.e. Rs. 10,98,565/-). We have seen that while farming the assessment the assessing officer observed that during the financial year related to the assessment under consideration the assessee has shown the purchases of Rs. 33,37,54,424/- from Karma Industries Ltd (KIL). The assessing officer issued show cause dated 10.02.2012 to the assessee as to why the purchases from KIL and its associate should not be treated as bogus. The assessee filed its reply dated 18.02.2014. In reply the assessee contended that the material purchased during the relevant period had been consumed in different project executed by assessee namely Mumbai- Pune, Nagpur- Hyderabad, Kolhapur and Surat- Dahisar Project. The assessee also filed reconciliation of material consumed along with chart with ratio of material. The assessee also filed the working of the estimated cost for bidding purpose, certificate from his Banker/ lender's Bank, i.e STUP Consultant. Certificate from indepen....
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....vide letter dated 16.2.2011. The assessing officer relied on the statement of Rajesh Mehta. However, Rajesh Mehta in his statement disclosed that he never meet the MD of the assessee company. The transactions were made through Nitin and Sunil Mehta. The assessing officer not examined Nitin and Sunil Mehta. The assessing officer gave his finding the consumption of steel in the project was not proved beyond doubt and disallowed the entire purchases from KIL. 22. However, the ld Commissioner (Appeals) restricted the disallowance of cost of purchases of Steel for Surat-Dahisar and Kolhapur Project at 12.5% (i.e at Rs. 3,90,58,839/-), 100% of Mumbai- Pune Expressway (i.e. Rs. 2,01,85,145/-) and Nagpur-Hyderabad Project (i.e. for Rs. 10,98,565/-). Before ld Commissioner (Appeals) the assessee filed written submission. In the written submission the assessee explained that the name of Karma Industries Ltd (KIL) is not listed in the website of Sales Tax Department Government of Maharashtra. The assessee also explained the typographical mistake in the Registration number of vehicles used in transportation of the Steel, details of which are available in the paper book filed in appeal for A....
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....-tax the revenue is not entitled only the income/ profit component and not the entire transaction. We have noted that the ld CIT(A) has observed that such purchases are made to avoid 10% of the payments of Excise duty. The ld CIT(A) has not examined if, the purchases were shown to avoid the excise duty. The Assessee throughout the proceedings claimed that they have paid VAT at the rate of 4%, which is nowhere disputed by lower authority. If we consider the observation of ld CIT(A) that the purchaser and seller have shared excise duty by showing the sale and purchase of steel, even than the addition in excess of such share to the income is unreasonable. Thus, keeping in view the assessee has paid the VAT at the applicable rate on all the purchases. Hence, keeping in view of any possibility of the revenue leakage which is very thin in the present case, the disallowance of purchases of steel for Surat- Dahisar and Kolhapur project at 5% of the impugned (disputed) purchases would meet the end of justice. Similar view was taken by Hon'ble Gujarat High Court in CIT Vs Simit P Seth [2013(356 ITR 451)] and by Hon'ble Bombay High Court in Hariram Bhambani ITA No 313 of 2013. The facts of th....
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.... on search action on Asian Steel Traders, the assessing officer was asked to Asian Steel Traders to submit year wise details with its major suppliers. In response to the said notice Asian Steel Traders submitted that they have made the purchases of Rs. 7,62,206/- from Karma Industries ltd. The assessing officer disallowed purchases of Rs. 7,62,206/-, from Asian Steel Traders holding that Asian Steel Traders shown purchase from Karma Industries ltd for onward transfer to the assessee. The assessing officer disallowed 100% of the purchases. The ld. Commissioner (Appeals) confirmed the entire disallowance holding that the assessee has not furnished any supporting evidence to establish the purchases. We have noted that the assessing officer recorded that Asian Steel Traders stated the purchases are genuine. We have noted that despite confirmation of Asian Steel Traders the assessing officer disallowed Rs. 7,26,206/-, without bringing any adverse material against the assessee. The ld. Commissioner (Appeals) has not appreciated the fact that Asian Steel Traders has confirmed the transaction. Hence, keeping in view the facts that we have already sustained the disallowance of purchases fro....
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....r authority. Thus, considering the facts that the purchases form Darshna Corporation for Rs. 2,449 is very small in nature comparative to the overall purchases which is negligible and the same is deleted. So far as purchases from Tulsiani Trading Private Limited are concerned, considering our finding on the ground no.1 of the present appeal the disallowance of is also restricted at 5 % of the impugned purchases ( Rs. 19,18,350/-). In the result this ground of appeal is partly allowed. 26. Ground no.5 relates to confirming the addition of commission to the extent of Rs. 13,88,698/-. During the assessment as the assessing officer treated the purchases from Karma industries Ltd as accommodation entry by rejecting the contention of assessee. The assessing officer was of the view that the assessee has paid the commission for obtaining such accommodation entry and estimated 2% of the commission charges paid to Karma Industries Ltd. on purchases of Rs. 33,37,54,424/- and worked out disallowance of Rs. 66,75,088/-. However, the ld Commissioner ( Appeals) restricted the addition to Rs. 13,88,698/- holding that the disallowance has already been restricted to 12.5% of purchase value hence,....
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....yment of commission without which the assessee could not have managed accommodation entries represented by bogus purchases?" 30. The Ground No.1 to 3 of the appeal raised by the revenues relates restricting the disallowance of purchases of steel from Karma Industries Ld to 12.5%. We have seen all the ground of appeal raised by revenue is against partial sustaining of the disallowance for purchases of steel material. Considering the facts that we have already partly allowed the appeal grounds of appeal and restricted the disallowance at 5% of the alleged bogus/ disputed purchases. Hence, the grounds of appeal raised by revenue in its cross appeal are dismissed. 31. In the result the appeal of the revenue for AY 2010-11 is dismissed. ITA No. 4737/Mum/2016 for AY2011-12 by the assessee 32. In ITA No. 4737/Mum/2016 for AY2011-12, the assessee has raised the following grounds of appeal: 1.a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition to the extent of Rs. 3,63,32,119/ - made the AO to the income of the Appellant on account of unexplained expenditure u/s.69C treating the purchases of steel from M/ s....
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.... genuine beyond doubt and supported by sufficient materials; ii) the purchases of steel is backed by corresponding consumption in the projects undertaken by the Appellant; iii) your Appellant has successfully demonstrated that the impugned steel was used in the projects undertaken by the Appellant; iv) the gross/net profit ratio shown by the Appellant is quite reasonable; and v) nothing has been brought on record by the ld. AO that money has exchanged the hands in lieu of payment made for these purchases by account payee cheques. c) In reaching to the conclusion and confirming such addition the ld. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. 4) The ld. CIT(A) erred in holding that levy of interest u/s.234B and 234C of the Income Tax Act, 1961 is mandatory. The Appellant denies its liability for such interest. 5) The ld. CIT(A) erred in holding that the ground raised disputing initiation of penalty proceedings u/s.271(1)(c) of the Income Tax Act, 1961 is premature. The Appellant denies its liabil....
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.... premature and thus dismissed. 37. In the result the appeal of the assessee is partly allowed ITA No. 5126/Mum/2016 for AY 2011-12 by Revenue 38. The revenue in its appeal ITA No. 5126/Mum/2016 for AY 2011-12, has raised the following grounds of appeal: 1. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in estimating the profit element embedded in the amount represented by bogus purchases recorded in the books of accounts of Rs. 31,24,70,714/- in the name of M/s KIL and associate concerns at 12.5 % of the total bogus purchases without appreciating the fact that any expenditure not found to be incurred at all, least of all that the same is also not laid out or expended wholly and exclusively for the purposes of business is not admissible in terms of the provisions of section 37 of the Act?" 2. "Without prejudice to ground no. 1 above, whether the Ld. CIT(A) was justified in taking only 12.5% of the total amount of bogus purchases as income and thus allowing 87.5% of such total amount of purchases as expenditure in contravention of the provisions of section 37 of the Act?" 3. "Whether on the facts ....
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....brought any evidence that the material (steel) was not put to use in the earlier year related to this assessment year. Even otherwise the purchase of steel for earlier financial has been restricted at 5 % of the purchases only to avoid the suspected revenue leakage. As we have already noted that there is no spot verification that the steel (material) on which the depreciation is claimed in not available put to use at site. Hence, this ground of appeal is allowed in favour of assessee. The assessing officer is directed to allow depreciation as per law. 43. Ground No.2 relates to levy of interest under section 234B &234C and ground No.3 relates to initiation of penalty under section 271(1) (c). The ground no. 2 is consequential and thus needs no specific adjudication. However, ground no.3 is premature and thus dismissed 44. In the result, appeal filed by the assessee is allowed. ITA No.5128/M/2016 for AY 2012-13 by revenue. 45. The revenue it its appeal for AY 2012-13 has raised following grounds of appeal; (1) Whether on the facts and in the circumstances of the case and in law the learned Commissioner (Appeals) is justified in deleting the addition made by AO o....
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....sis of his assumption and presumption. 48. We have considered the rival submission of the parties and have gone through the orders of authorities below. During the assessment proceeding the assessing officer relied on part of the statement of Mr Madhav Hari Kale, which is referred by assessing officer para 5 of his order. The assessee was asked the assessee to explain the expenditure made in cash. The assessing officer further observed that the assessee made its submission. However, the contents of submission are not recorded by the assessing officer. The assessing officer concluded that assessee failed to offer any valid explanation regarding the source of such payment and its effect in regular books of account and added back the same in the income of assessee as unexplained expenditure. Before learned Commissioner (Appeals) the assessee contended that Madhav Hari Kale is not their employee and as such there was no occasion for making ex-gratia payment to him. There was no material before the assessing officer for making the addition of such income. The assessee explained that Madhav Hari Kale was corporate head of IRB Group. The learned Commissioner (Appeals) examined the stat....