TaxTMI 
TaxTMI 
2022 (2) TMI 587
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....s were impounded. During verification of such papers/documents, it was noticed that some unaccounted entries were recorded in these papers. The statement of Shri Inderjeet Mehta and Shri Amarjit Mehta, directors of the company were recorded in which they were confronted with the issues regarding payment received from PACL with respect to the work undertaken by it of the company PACL. They have stated in their statements that the work undertaken by them was for development of land at various sites of PACL. It was further submitted by them that the work was not done by their company by its own i.e., M/s Inderjeet Mehta Construction Pvt. Ltd., but, it has been executed through sub-contractors, namely, Global Infrastructure having their office at BP-43, Pitampura, New Delhi and M/s Kingston Infra Developers Pvt. Ltd., having their office at 4, Ganpat Bunglow Road, Calcutta (West Bengal). 3. The AO noted that the said sub-contractors were not shortlisted through any advertisement in newspapers. He, therefore, held that the sub-contractors are fictitious entities and appears to be paper entities. Further, during the search operation, original agreements executed between sub-contractor....
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....esence, do not possess any machinery and equipment having no capability or expertise to undertake land development work and having the persons of no means by recording the following reasons:- "(i) During proceedings, statement of Sh. Inderjeet Mehta and Sh. Amarjit Mehta, Directors of the company have been recorded in which they were confronted the issues regarding payments received from M/s PACL with reference to work undertaken by them of the company M/s PACL. In their statements, they have deposed that the work undertaken by them was of development of land at various sites of PACL and the same was not done by their own company M/s Inderjeet Mehta Construction Pvt. Ltd. but has been executed through sub-contractors namely M/s Global Infrastructure and M/s Kingston Infra Developers. Enquiries made by the Department revealed that these companies were non existent. (ii) During proceedings, it was observed that the agreement with such parties were executed on 15.04.2012 whereas in the concluding para of the last page of the agreement, the date was mentioned 10.04.2012 which shows that agreement was not written in regular way and cannot be relied upon. Further, from ....
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....plying the provisions of section 145(3), the AO adopted the profit rate at 8% of the net contract receipt of Rs. 105,83,86,049/- (i.e., Rs. 1,20,83,86,049 (-) Rs. 15,00,00,000/-) and determined the net profit at Rs. 8,46,70,884/-. So far as the receipt of Rs. 15 crores is concerned, the AO held that the assessee has not done any development work for PACL by its own or by any other person through whom it claimed to have done the work and the company has received simply the amount of Rs. 15 crore from PACL without executing any single work. He, therefore, added the entire amount of Rs. 15 crore to the total income of the assessee as 'income from other sources.' 5. In appeal, the ld.CIT(A) held that the AO is not justified in applying the flat rate of 8% on the income of Rs. 105.83 crore when he had not given any rationale/basis for taking the net profit at that rate nor has given any comparable rate in which net profit rate was disclosed. He, however, sustained the addition of Rs. 15 crores made by the AO. Revenue is not in appeal against the relief granted by CIT(A) and, therefore, we are not concerned with the same. 6. Aggrieved with such order of the CIT(A), the assessee is ....
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.... the basis of these statements can be drawn. 7.1 So far as the second objection raised by the AO at page 3, para (iii) of his order with regard to the payments having been encashed by the sub-contractors within 2-3 months from the date of execution of the agreement by the company is concerned, he submitted that the inference drawn by the AO is based totally on conjectures and surmises. He submitted that a big project was completed in a short span of time and due payments were released, how can an adverse inference be drawn against the assessee on this issue. 7.2. So far as the observation of the AO that the sub-contractors were nonexistent is concerned, he submitted that summons under section 133(6) were issued to the assessee during the investigation proceedings carried out in the case of these very sub-contractors. Referring to page 69 of the paper book, he submitted that the notice u/s 133(6) was issued on 18.11.2015 to the assessee at the time of investigation proceedings of M/s. Global Infrastructure. Referring to paper book page 70, he drew the attention of the bench to the reply filed by assessee at the time of investigation proceedings of M/s. Global Infrastructure. H....
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.... the assessee. He submitted that the amount received by the assessee has not been doubted by the authorities. The source of money is PACL which is also not in dispute. Since the amount has come from PACL it cannot be taxed otherwise than business income. He submitted that this is not a case of cash credit under section 68 of the Act, since the amount has been disclosed by the assessee itself as income in the form of its contract receipt. Referring to the decision of the jurisdictional Punjab & Haryana High Court in the case of Commissioner of Income Tax, Rohtak Versus Smt. Kamlesh& Others, ITA No. 815 to 817 of 2010 (O&M), order dated 5th February, 2013, he submitted that under similar circumstances, the Hon'ble High Court has dismissed the appeal filed by the Revenue wherein the Tribunal has returned a finding that, "if the Assessing Officer was of the view that no work has been done by any of the contractors, the amount received itself cannot be considered to be the income of the assessees but only the profit from such receipts can be brought to tax. The assessee herein being found to be name lenders could have charged only the commission for lending the name." 11. He submitte....
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....dition has been made which can be verified from the assessment orders for subsequent years i.e., AYs 2014-15 and 2015-16, copies of which are placed at pages 26-31 of the paper book. 16. Without prejudice to the above, the ld. Counsel for the assessee submitted that out of Rs. 15,00,00,000/- an amount of Rs. 5 crore has not been received during the year under consideration which is evident from the copy of ledger account placed at pages 105-107 of the paper book since the same are claimed as debtors and, therefore, the provisions of section 68 are not applicable. So far as the balance amount of Rs. 10,00,00,000/- is concerned, he submitted that the assessee has received payments from PACL on various dates for the contract and the same were paid to the sub-contractors after due deduction of TDS and as the assessee has not retained the money or utilized the money for some other activity. He accordingly submitted that the order passed by the AO and the CIT(A) be set aside and the grounds raised by the assessee be allowed. 17. The ld. DR, on the other hand, heavily relied on the orders of the AO and the CIT(A). He submitted that the ld.CIT(A) has given a categorical finding that ....
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....ted to have undertaken this kind of development work of land ever and yet it has been purportedly awarded the contract by PACL without any tendering process or due diligence. Similarly, the contract was subcontracted on the same day to entities located in Delhi and Gurgaon without any due diligence. The Directors of the appellant company have no idea of the existence of these companies or their expertise in the matter of 'land development'. No process is seen to have been undertaken to, ascertain whether the sub- contractors had the machinery or expertise to do the said work. All these facts overwhelmingly point towards the fact that only.paper transactions have taken place with no actual physical work. The AO before persuading himself as to the deceitfulness of the appellant's explanation, got enquiries conducted at Delhi and Gurgaon only to find that the purported sub-contractors were non-existent. When this fact was confronted to the appellant company, there was only cussedness in its response. At the appellate stage also, no information was forthcoming on. the location of the land and the nature of the work purported to. have been done. No explanation could be given regarding t....
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....ordingly submitted that the order of the CIT(A) be upheld and the grounds raised by the assessee be dismissed. 19. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the assessee, in the instant case, is engaged in the business of civil construction. It received a contract from M/s PACL amounting to Rs. 15 crores for development of land at various sites. This contract was further subcontracted to two entities, namely, Global Infrastructure, New Delhi and M/s Kingston Infra Developers Pvt. Ltd., Calcutta. We find, the AO held that : (a) no development work has been done by the assessee; (b) the two sub-contractors are non-existent; (c) in the statement of directors recorded at the time of survey they had expressed ignorance in this regard; and (d) payments have been encashed by the sub contractors within 2-3 months from the date of execution of the agreement by the company. The AO, accordingly rejected the book results and estimated the profit from the contract receipt @ 8% on the total contr....
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....the inference of the AO that Global Infrastructure is non-existent is incorrect. We find from page 122 of the paper book that the sub-contractor, namely, Kingston Infra Developers Pvt. Ltd., vide letter dated 7th December, 2015 had directly filed the documents in response to summons u/s 131 addressed to the Dy. Commissioner of Income-tax (Inv.) Unit 3(3), Kolkata. Therefore, we find merit in the submission of the ld. Counsel that the inference drawn by both the lower authorities that the two sub-contractors are not in existence is incorrect. 22. We find an identical issue had come up before the Hon'ble Punjab & Haryana High Court in the case of CIT vs Smt. Kamlesh & Others, vide ITA No.815-817 of 2010, order dated 5th February, 2013. In this case, the assessee filed the return of income under the head 'income from business or profession' after applying the provisions of section 44AD of the Act. During the course of assessment proceedings, it was found that assessee have not done any contract work of PACL. Since no work has been done by the assessee, therefore, the AO held that no expenses can be allowed and accordingly the entire receipts from PACL were treated as income of the ....
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.... ITA No.6011/Del/2012 has observed as under:- "7. On careful consideration of above submissions, at the very outset, we note that in the similar set of facts and circumstances in the case of ITO vs Radha Ballabh Nest Build Pvt. Ltd. (supra) dismissing the appeal of the revenue, the coordinate bench of this Tribunal has upheld the estimation of net profit @2.24% of the gross receipts from M/s PACL India Ltd. The operative part of this order of the Tribunal reads as under:- "6. Since, the issues raised in the grounds are covered by earlier decision of the Tribunal in the group case of the assessee as well as the recent order of the Tribunal for the similar assessment year 2008-09 in ITA No. 2042 and 2043/D/2011 (Supra) we do not find infirmity in the first appellate order. In that case also the Tribunal has upheld the first appellate order on identical issues. Addition made by the AO on account of TDS treating the amount claimed from PACL India Ltd. and PGF India Ltd. as real income of the assessee deleted by the Ld. CIT(A) has been upheld. The Tribunal has also upheld the action of the 1st appellate authority in restricting the addition made on account of 4% commis....
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....ntions of the ld. Counsel as the facts of the extant case are clearly distinguishable from the facts of the case of CIT vs Kamlesh etc. (supra). 10. In the case of CIT vs Subodh Gupta, the Hon'ble Jurisdictional High Court of Delhi held that the appellate authorities have not applied section 44AD of the Act but where difficulty arose as they had to estimate reasonable rate of net profit, hence in absence of any data and details, they applied net profit rate as mentioned in section 44AD of the Act. In that case, their lordships further also noted that the AO in the subsequent years accepted the figure of 8% of net profit. Ld. Counsel of the assessee submitted that in the case of Subodh Gupta (supra), no instance was quoted by the Revenue about any higher profit rate and in absence of any contrary data and details the net profit rate of 8% was approved by Hon'ble High Court but in the present case, there were number of cases wherein in the similar set of facts and circumstances, net profit rate of 2.24% was accepted by the department in several suitably comparable cases including order in the case of Radha Ballabh Nest Build Pvt. Ltd. (supra), therefore, the ratio of....
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.... merits is dismissed. 13. In the result, the appeal of the revenue is dismissed." 24. We find, the coordinate Bench of the Tribunal in the case of ITO vs. Roopa Promoters Pvt. Ltd. & Others, reported in 2012 (9) TMI 326 - ITAT Delhi while deciding an identical issue has observed as under:- "5. We have considered the above submissions in view of the orders of the authorities below and decisions relied upon. We find that the AO made addition of Rs. 19,16,357/- in case of M/s. Rupa Promoters Pvt. Ltd. applying 4% commission on debit and credit entries of Rs. 4,79,08,938/-. The AO was of the view that the assessee did not conduct land development work for M/s. PACL India Ltd. and PGF Ltd. Hence he made the above addition. The AO was of the opinion that the TDS amount claimed from M/s. PACL India Ltd. and PGF Ltd. was made actual income of the assessee company since the assessee company had not repaid the amount of TDS to M/s. PACL India Ltd. and PGF Ltd. The AO accordingly made addition of Rs. 9,35,178/- in respect of TDS amount claimed from the above companies. The Ld. CIT(A) has reduced deleted above additions. Similar additions though amounts are different, have....
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....ition made on account of commission paid for entries was restricted to 2.24% of the gross receipts shown in the profit and loss account from M/s. PACL India Ltd. and others. ITA Nos.2640,2641,2642,2643/Del/2011 6. In our view it is an established proposition of law that result of past years under similar facts is the best guidance for estimating the income. Under these circumstances the Ld. CIT(A) was justified to take assistance of the immediately previous assessment year to estimate the profit of the assessee. There is no dispute that in the assessment year 2007-08 on identical issue in the cases of M/s. Rupa Promotors Pvt. Ltd., M/s Rishikesh Buildcon Pvt. Ltd., RSM Construction Pvt. Ltd. and M/s. Rishikesh Properties Pvt. Ltd., the Ld. CIT(A) has deleted the addition made in respect of TDS amount and addition made on account of commission has been restricted to 2.24% of the gross receipt shown in the profit and loss account from M/s. PACL India Ltd. and others. The revenue has not questioned this first appellate order for the assessment year 2007-08 on an identical issue under similar facts before the Tribunal. Under these circumstances we are of the view that....