AI Drafter 
TaxTMI 
TaxTMI 
2023 (7) TMI 930
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....y order dated 10.05.2013 in appeal no. 23/13-14. Subsequently, an information was received by Ld. AO from the office of DDIT (Inv.), Unit - V(2), New Delhi giving details and findings of search and seizure action carried out on K-World group on 05.04.2012. 2.1 As per the information, the assessee company had awarded contracts during the F.Y. 2009-10 for leveling of agricultural land amounting to Rs. 5.81 crores to M/s. Dingle Buildcon Pvt. Ltd., one of the group concerns of K-World group which were further sub contracted by it to M/s. Seven Heaven Infrabuild Pvt. Ltd., M/s. Rachaita Buildcon Pvt. Ltd. , M/s. Ellora Buildcon Pvt. Ltd. and M/s. Anubhav Buildmart Pvt. Ltd. As per the information all these companies were controlled and managed by Sh. Anil Agarwal who was the entry operator who in his statement admitted that he is an entry operator and the companies being run by him. He also admitted that these companies are used for providing accommodation entries to his clients without any actual work being performed by these companies. 2.2 On the basis of material available on record, Ld. AO after recording reasons about escapement of income issued notice u/s 148 to the assesse....
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.... Ground numbers 5 and 6 relates to disallowance of Rs. 5.81 crore out of job work expenses. The main contention of the appellant before me was that the amount of Rs. 5.81 crore was not claimed as expenditure in Profit and Loss Account. While going through the audited Profit and Loss Account it has been observed that Rs. 27,55,47,550/- has been debited to Profit and Loss Account under the head 'Job Work Charges (Civil & Other)' which includes Rs. 5.81 crore. This is really astonishing to note that when expenditure is debited to Profit and Loss Account, how it can be said that the same has not been charged to the Profit and Loss Account. Anything which is debited to Profit and Loss account is a charge to revenue even if the same has been shown as "work in progress". 5.1 Nothing has been submitted by the Appellant during the appellate proceedings to substantiate his claim for Rs. 5.81 crore under the head of 'Job work' charges. During the course of assessment proceedings assessee was required to produce directors of the company to whom payment was made, however the assessee failed to produce the directors of the company before AO. Even before me no details reg....
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....d. 6. Arguments of Appellant. Ground No. 1, 2 & 3; These grounds relate to erroneous assumption of jurisdiction while re-opening. Ld. Counsel submitted that the issue of reopening was already examined in the original assessment made u/s 143(3) where Ld. AO made addition of Rs. 1,09,49,284/- which was deleted by the Ld. CIT(A) vide order dated 10.05.2013. Revenue went in appeal to Hon'ble Tribunal which too dismissed the departmental appeal. Referring to PB 66-68 the assessment order dated 28.03.2013 he submitted that one addition was made on the ground that assessee has not recognized the income in respect of receipt of Rs. 7,90,81,632/- with M/s Indu Project Limited. He referred to PB 69-73 which is the copy of appeal order from Ld. CIT(A) dated 10.05.2013 in which submission was made that for this work contract, expenses were also incurred which were shown in Work In Progress and neither expense nor revenue was recognised and such Work In Progress was carried as opening stock in next year and profit in relation to M/s Indu Project Limited was accounted for in AY 2011-12. This appeal was allowed. At PB 74-78 is the order of Hon'ble Tribunal in departmental appeal in which Ho....
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....ird person. Thus, it is humbly submitted that there was no material whatsoever with Ld. AO based upon which reasons to believe could be formed and the said reopening is merely on the basis of borrowed belief which is bad in law. He refered to PB 29- 31 which is the copy of reasons recorded. PB 34-39 is the copy of assessee's reply dated 30.10.2017 filed before Ld. AO on the above lines. PB 48-49 is the copy of assessee's reply dated 21.12.2017 filed before Ld. AO submitting that assessee has no connection or relation whatsoever with the said subcontractors, no payment has been made to them and no expenditure has been claimed in respect of the said subcontractors. (v) The case of assessee was originally assessed u/s 143(3) (PB 67-69) and the reassessment is initiated vide notice u/s 148 dated 30.03.2017 (PB 28) and therefore, in the present case, limitation period for reopening was 4 year from the end of the relevant assessment year as per the 1st proviso to section 147 unless there is failure on part of assessee to disclose all material fact fully & truly. However, in the present case there is no failure on part of assessee to disclose all material fact fully & truly and f....
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....is bad in law : * Sabh Infrastructure Ltd. vs. ACIT, (2017) 398 ITR 0198 (Del.) * Austin Engineering Co. Ltd. vs. JOT, (2009) 312 ITR 0070, (Gujarat). * Gujarat State Co-Operative Agri & Rural Development Bank Ltd. vs. DOT, (2011) 337 ITR 0447, HC Gujarat. * Sesa Goa Ltd. Vs. JCIT & Ors., (2007) 294 ITR 0101, HC Bombay. * B.J. Services Company Middle East Ltd. & Ors. vs. DDIT (International Taxation), (2011) 339 ITR 169, HC Uttarakhand. * CIT vs. ITW India Limited, (2015) 377 ITR 0195, P&;H HC. * CIT vs. Suren International Pvt Ltd., (2013) 357 ITR 0024 (Del.) * Bombay Stock Exchange Ltd. vs. DDIT(Exemption) & Ors., (2014) 361 ITR 0160 (Bom.) * Nirmal Bank Securities Pvt. Ltd. Mumbai vs. ACIT, Writ Petition No. 671 of 2022 (Bom.) 7. Ground No. 4-7: These grounds relate to the merits of addition of Rs. 5,81,00,000/- made by Ld. AO u/s 37(1) by alleging that the works contract given by assessee to one, M/s Dingle Buildcon is bogus and merely an accommodation entry. Further, a consequential addition of 17,43,000/- (3% of Rs. 5,81,00,000/-) u/s 69C on account of alleged commission expense on the said al....
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.... amount of Rs. 5,81,02,040/- is included in closing stock. Thus, it was submitted that no disallowance could be made as there is no impact on profit and in turn no impact on tax liability and since made, may please be deleted. 7.1 It is submitted by Ld. Counsel that the impugned disallowance has resulted in double disallowance as the said expenses of Rs. 5,81,02,040/- has been credited to Profit and Loss account twice, once as a part of closing stock and again on account the disallowance made by Ld. AO. Thus, same amount has been added to the income of assessee twice which is bad in law and therefore, the disallowance so made may please be deleted. 7.2 Further reliance is placed on the following judicial decisions for the proposition that no addition/disallowance could be made in respect of an amount already stands credited in Profit and loss account: * Addl. CIT vs. Gurshant Rotary Compressor Ltd. 15 DTR 429(Del'C')(TM) * Eland International (P) Ltd. vs. Dy. CIT 26 DTR 113(Del.'C') * CIT v. Vishal Exports Overseas Limited (Gujarat High Court) Tax Appeal No. 2471 of 2009 7.3 Without prejudice to the above, Ld. Counel has submitted that e....
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....against the assessee based on this observation of Ld. AO. 3. Ld. AO in para 8.1 at page 4 of the assessment order has mentioned that assessee failed to verify identity, genuineness and creditworthiness of M/s Anubhav Buildmart Pvt. Ltd., M/s Seven Heaven Infabuild Pvt. Ltd., M/s Ellora Buildtech Pvt. Ltd. and M/s Rachitra Buildcon Pvt. Ltd. and further 133(6) issued to these companies have received back un-served. Further, Ld. AO reproduced the statemet of Sh. Anil Aggarwal at page 6-12 of the assessment order. Ld. AO has also reproduced the financials of these entities at page 28-31 of the assessment order. In reply it is respectfully submitted at the cost of reputation that assessee has not undertaken any transaction whatsoever with any of the above mentioned companies and all these companies are stranger to assessee. Therefore, when no transaction has been undertaken by assessee there is no question of substantiating the identity, genuineness and creditworthiness of these entities by the assessee-company and also assessee cannot be held liable for any notice received unserved. Thus, in view of the above, this observation of Ld. AO deserves to be ignored. 4. In ....
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....ot be expected to be produced by assessee-company. 9. Ld. AO at page 33- 34 of the assessment order has relied on various judicial pronouncements. In reply, it is respectfully submitted that the fact of these pronouncement are different from the facts of the case of assessee and thus these judicial pronouncements cannot be relied upon". 7.5 Coming to addition on account of alleged commission expense of Rs. 17,43,000/, it is submitted that it is consequential addition and since no addition of Rs. 5,81,00,000/- could not be made as submitted above and thus, the said consequential addition also could not be made in any case, Ld. AO has estimated the commission at the rate of 3% which is bad in law as reasonable commission in these type of transaction at best can be taken in between 0.15% to 0.25% for which Ld. Counsel relied : * PCIT vs. Alag Securities Ltd., 425 ITR 658, High Court of Bombay. * Gold Star Finr vest (P.) Ltd., vs. ITO, 57 SOT 409, ITAT Mumbai Bench. 7.6 Ld. DR countered the aforesaid arguments by relying on the order so Ld. Tax authorities below. She submitted that the trail of transaction has been duly examined by the Tax authorities. ....
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....perator controlling the four tainted entities, Shri Jawahar Lal Kesarwani, Director of M/s. Dingle Buildcon Pvt. Ltd. and Shri Pankaj Jain, G.M. (marketing & administration) of K-World group recorded during search u/s 132 of the Act. The Statements are part of the assessment order itself and Ld. Counsel in the presence of ld. DR was able to canvass that in none of the statements no specific statement is made by these persons qua the assessee which may indicate that they were involved in showing bogus job work towards assessee. At the same time in the statement of Pankaj Jain it comes up that the Dingle Buildcon Pvt. Ltd. was part of K Group of companies which is involved in the business of construction, contract and owning the land at Ghaziabad. This statement indicates that the Dingle Buildcon Pvt. Ltd. was not run and operated by Shri Anil Aggarwal. There was no direct transaction of the assessee with the four tainted companies operated by Shri Anil Aggarwal. It can be appreciated that primarily on the basis of statements alone and no other corroborative evidence the Ld. AO has drawn the inferences without giving assessee an opportunity to cross examine the said persons, in spite....