TaxTMI 
TaxTMI 
2024 (3) TMI 1199
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....omoter of M/s Eagle Infra India Ltd. Search action u/s 132 of the Act was conducted upon the Konark Group on 23.01.2018 and during the course of search several incriminating documents pertaining to the assessee were found and seized. It is noted that, the Assessing Officer ('AO') had recorded the satisfaction both in the file of KIL as well as the assessee and accordingly issued notices u/s 153C of the Act upon the assessee inter alia for AYs 2013-14 to 2017-18. Prior to the issue of notice u/s 153C of the Act, the income-tax assessment for AY 2013-14 stood already completed u/s. 245D(4)/143(3) of the Act on 03.12.2014 in which the Income-tax Settlement Commission, Mumbai ('ITSC') had rejected the books of accounts and estimated the profits of the assessee JV from this water pipeline project at 8%. Following the same, the assessee is noted to have filed the returns of income u/s 153C of the Act estimating the income from this same project. The comparative details of the return of income originally filed and the return filed u/s 153C of the Act for the AYs before us are as under: - AY Date of filing of return u/s 139(1) Returned Income Date of filing of return u/s 153C ....
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....tal income at Rs. 11,74,30,736/- for AY 2013-14. The said order of settlement had since attained finality. Pursuant to the search action conducted on 23.01.2018, the AO reopened the concluded assessment of assessee JV for AY 2013-14 by issue of notice u/s 153C of the Act. The AO is noted to have re-assessed the total income of the assessee JV from the water pipeline project at Rs. 19,33,27,260/-, after making addition of Rs. 7,58,96,520/- on account of bogus contractual payments made to M/s Inderdeep Construction Company ('IDCC'). 5. Assailing the action of the AO, the Ld. AR for the assessee submitted that, an assessment year that has been covered by an order of settlement cannot be disturbed or re-opened again u/s 148 / 153A / 153C of the Act. The Ld. AR pointed out that, the assessee JV had carried out one single contract during the relevant year and that the Settlement Commission had finally settled the taxable income for AY 2013-14 qua such contract undertaken for UMC and that the final assessment order pursuant thereto had been passed by the Assessing Officer. According to him therefore, no further income in relation to the same contract could be again re-assessed by the A....
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.... 245C is made". On receipt of application, the ITSC has to issue a notice to the applicant requiring him to explain why the application be allowed to be proceeded with and after hearing the applicant an order shall be passed permitting or rejecting the application to be proceeded with. This has to be done within a time frame. This order is to be passed under Section 245D (1). Sub-section (4) of the Section provides as under: - "(4) After examination of the records and the report of the Commissioner, if any, received under - (i) sub-section (2B) or sub-section (3), or (ii) the provisions of sub-section (1) as they stood immediately before their amendment by the Finance Act, 2007, and after giving an opportunity to the applicant and to the Commissioner to be heard, either in person or through a representative duly authorized in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application....
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....tlement. It says that every order of settlement passed under Section 245D (4) "shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter be reopened in any proceeding under this Act or under any other law for the time being in force". 10. Hence, a conjoint reading of the aforesaid provisions indicates that the ITSC is a high-powered body vested with powers to settle the case of an assessee. The order of settlement is conclusive as expressly stated in Section 245-I but the argument of the Revenue is that it is conclusive only with regard to matters stated in the order of settlement and in respect of matters not stated therein, the Assessing Officer has the power to reopen the assessment. We however do not agree with this submission of the Revenue as they are overlooking the fact that the expenses/purchases in question formed part of the books of accounts, on the basis of which return of income was filed for AY 2013-14 and that the books for the relevant AY 2013-14 were rejected and total income was estimated at 8% of receipts by the ITSC. Under Section 245F(1), the ITSC, in addition to the powers con....
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....bility determined with respect to undisclosed income only by the process of settlement/arbitration. Thus, the nature of the orders under sections 143(1), 143(3) and 144 is different from the orders of the Settlement Commission under section 245D(4) of the Act. 12. Section 245-I of the Act, which bears the heading "Order of settlement to be conclusive", postulates that every order of settlement passed under sub-section (4) of section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in that Chapter, be reopened in any proceeding under the Act or under any other law for the time being in force. An application under section 245C of the Act is akin to a return of income, wherein the assessee is required to make a full and true disclosure of his income and the order under section 245D(4) of the Act is in the nature of an assessment order. Therefore, assessment of the total income of the assessee for the assessment year in relation to which the Settlement Commission has passed the order under section 245D(4) of the Act stands concluded and in terms of section 245I of the Act, such order shall be conclusive a....
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....als with total income, all matters falling within the ambit of total income would stand concluded once the Settlement Commission settles a case and passes an order under section 245D(4) of the Act. The order of the Settlement Commission would be final and conclusive subject to two qualifications, viz. fraud or misrepresentation. Moreover, when the settlement becomes void under section 245D(7) of the Act, the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission. 7.6 Section 245-I of the Act, which bears the heading "Order of settlement to be conclusive", postulates that every order of settlement passed under sub-section (4) of section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in that Chapter, be reopened in any proceeding under the Act or under any other law for the time being in force. 7.7 An application under section 245C of the Act is akin to a return of income, wherein the assessee is required to make a full and true disclosure of his income and the order und....
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....f it is subsequently found by the Settlement Commission that the order under section 245D(4) of the Act had been obtained by fraud or misrepresentation of facts. Therefore, once an order has been passed under section 245D of the Act by the Settlement Commission, the assessment for the year stands concluded and the Assessing Officer thereafter has no jurisdiction to reopen the assessment. 7.9 This court is in agreement with the view of the Bombay High Court in Mandhana Industries Ltd. (supra) and the Delhi High Court in case of Omaxe Ltd. (supra) wherein, the court held that the provisions of Chapter XIX-A of the Act make it abundantly clear that a case could either be dealt with by the concerned income tax authority or the Settlement Commission and not by both. The Act does not envisage a return of an assessee to be split into two parts, one for consideration before the Settlement Commission by way of settlement and another for normal assessment at the hands of the Assessing Officer or the appellate or revisional authority. In other words, if an application for settlement is allowed and the case is settled, the entire assessment for the assessment year in question would st....
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....tional Bombay High Court in Madhana Industries Ltd. v. Pr. CIT (103 taxmann.com 301) wherein the Court has held that the Act does not envisage a return of an assessee to be split into two parts; one for consideration before the Settlement Commission by way of settlement and another for normal assessment at the hands of the Assessing Officer or the appellate or the revisional authority. In other words, if an application for settlement is allowed and the case is settled, the entire assessment for the assessment years in question would stand settled and the same cannot be reopened again. Identical view is noted to have been expressed by the Hon'ble Delhi High Court in Omaxe Ltd. v. Asstt. CIT (209 Taxman 443). 15. It is further noted that the provisions of Section 153A or 153C of the Act starts with a non-obstante clause which reads as under: - "153A(1) - Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 but on or befo....
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....g authorities in the course of search had found and seized Page Nos. 18, 19, 20, 21 & 22 of Loose Paper Bundle No. 3, which according to them, suggested that the assessee JV had made bogus purchase payments to thirty (30) vendors aggregating to Rs. 37,95,26,087/- across AYs 2014-15 & 2015-16. In the course of assessment, the AO first examined the document found and seized at Page No. 18 of Loose Paper Bundle No. 3. Analyzing the same, the AO noted that the first two columns contained the name of vendor and amount of purchases and that the third column represented the percentage of commission and the fourth column indicated the resultant figure after applying the percentage of commission to the amount paid. The relevant seized document has been extracted by the AO at Page 7 of the assessment order. 20. The AO had noted that, before the Investigating authorities, the Director of KIL was unable to explain the notings on the above Page. He further observed that, bills of only nine (9) parties out of the thirty (30) vendors were found in the course of search. It was also noted that, six (6) out of these nine (9) parties belonged to one Gursahani family and upon enquiry, Shri Gursahan....
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....-16. 22. On appeal, the Ld. CIT(A) is noted to have called for two separate remand reports from the AO. After analyzing the submissions & rejoinders of the assessee in light of the above findings of the AO and his comments in the remand reports, the Ld. CIT(A) is noted to have passed a common appellate order for all the AYs before us. On the issue of fake purchases of Rs. 37,95,26,087/-, the Ld. CIT(A) upheld the findings of the AO to the extent that, the assessee had failed to substantiate the genuineness of these expenses. The Ld. CIT(A) however held that, the disallowance of entire value of these expenses was excessive and did not corroborate with the actual operating results of the assessee. The Ld. CIT(A) following several decisions of Hon'ble High Courts held that only profit element embedded in these bogus purchases ought to have been taxed by the AO. Taking into account the overall profitability and having regard to the order of ITSC in assessee's own case for earlier years, the Ld. CIT(A) held that net profit rate of 15% ought to have been earned from this water pipeline project. The Ld. CIT(A) accordingly restricted the quantum of addition viz., the profit element embe....
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....lready completed and the concerned personnel hired for this project had discontinued the job, it was practically difficult for KIL, the JV partner to trace the relevant work orders, labor registers, correspondences etc. in support of the work performed by these vendors. Hence for the aforesaid reason, the payments should not be viewed adversely. He further contended that, none of the Directors or employees of KIL had anywhere admitted that the payments made towards the purchases in question were bogus. Referring to the statement of Shri N. Jethani, relied upon by the Revenue, he pointed out that, he had nowhere admitted to any wrong doing and that he was unable to explain Page No. 18 of Loose Bundle No. 3 for the reason that he was not involved in day to day workings of the JV. The Ld. AR further submitted that, non-attendance of summons by the vendors also could not be held against the assessee JV, when the assessee JV had provided all contemporaneous evidences which it was ordinarily required to maintain to substantiate the purchases. For this, he relied upon the decision of Hon'ble Bombay High Court in the case of CIT Vs Nikunj Eximp Enterprises Pvt Ltd (372 ITR 619). 25. The....
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....ooks of accounts, then the correct course was to reject the same and estimate the overall profits of the assessee JV from this water pipeline project. According to him, having regard to the presumptive provisions contained in Section 44AD of the Act and also the order of ITSC in assessee's own case for earlier years, the net profit rate of 8% of contractual receipts was fair and reasonable and that the assessment of total income ought to be restricted to that extent. 27. We have heard both the parties and perused the material placed before us. From the facts on record, it is noted that the assessee JV was formed between two JV partners i.e. KIL & M/s Eagle Infra India Ltd (formerly known as ECC), later on substituted by Shri U.M. Rupchandani with the intent and purpose to undertake and execute water pipeline project at Ulhasnagar. In the course of search conducted upon the premises of the JV partner, KIL, certain loose papers are noted to have been found. It is observed that, Page No. 18 of Loose Bundle No. 3 contained notings of the expenses paid to the thirty (30) vendors in question, against which certain percentage of commission was also mentioned. The amounts on this Page c....
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....was unable to provide any of the details as sought by the AO and the reason given by him was theft, for which copy of FIR was provided. The fact however remains that, independent enquiries from the vendors could not be made. Overall therefore, we are in agreement with the Ld. CIT(A) to the extent that the assessee was unable to fully discharge the genuineness of these payments made to the thirty (30) vendors. 29. In view of our above findings, the next issue for consideration is whether the entire value of payments made to the vendors was to be disallowed or only the profit element embedded therein was to be taxed in hands of the assessee, in the facts and circumstances of this case. In case, the profit element is taxable, then what should be the quantum is also to be decided upon. On this aspect, the Ld. DR has relied upon the decision of Pratibha Pipes & Structurals Ltd. (supra) to support the AO's action disallowing the entire value of payments. In the instant case, the assessee is noted to have made purchases from several parties. It was noted that unlike other purchases, in twenty-two instances, the assessee was unable to provide any evidences, details, confirmations etc. t....
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....d. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. 87.2 Similar principle was followed by the Hon'ble jurisdictional High Court in the case of PCIT Central-4 vs Paramshakti Distributors Pvt Ltd (ITA No. 413 of 2017) delivered on 15th July, 2019 wherein the Hon'ble HC has held as under: "2. The first question pertains to restricting the addition of Rs. 23.16 Lakhs to Rs. 2,21,600/- by the Tribunal. The Assessing Officer had made the said addition on the ground that the assessee's purchases were found to be bogus. The entire purchase amount was therefore, added to the assessee's income. The Tribunal, however, restricted to the said sum of Rs. 2,21,600/-. The Tribunal rec....
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....d. Referring to a decision of the Gujarat High Court in the case of CIT v. Bholanath Polyfeb (P.) Ltd . [2013] 40 taxmann.com 494/[2014] 220 Taxman 82/(Mag.)/[2013] 355 ITR 290 (Guj.) CIT(A) held that only the profit element embedded in purchases would be subjected to tax and not the entire amount. Having said so, CIT(A) noted that the gross profit rate of the assessee showed a decreasing trend over the years. In such circumstances, CIT(A) took the view that 2% of the purchases of Rs. 65,65,30,470.00 would be a fair and reasonable profit percentage which should be added to the income of the assessee, deleting the balance amount. 16. While doing so, CIT (A) observed that only reasonable profit on the purchases made from the hawala party should be added back to the income of the assessee. Relevant portion of the order of the CIT (A) is extracted hereunder:- "2.7 From the perusal of the decisions of the Hon'ble courts on this issue, specially the decision of the Hon'ble Bombay High Court in the case of CIT v. Nikunj Eximp Enterprises (P.) Ltd. (supra), it was clearly held that the A.O. and the CIT (A) had disallowed the amount of Rs. 1.33 crores on account of....
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....ceding year. From the perusal of the submissions made by the AR of the appellant, it is noticed that the contention of the appellant was correct that in the earlier years the main business of the assessee was manufacturing and in the year under consideration the major activity is of trading. The gross profit rate was also decreasing every year and in the year under consideration it has decreased to 3%. It is also an established fact that the gross profit of trading activity is lower than the manufacturing activity. The AR of the appellant has also offered that additional gross profit @ ½% of the turnover can be added back. But there is no reasonableness in adopting this ½% G.P. Keeping in view the principles of natural justice and the decision of the Hon'ble Courts on this issue, only the reasonable profit has to be added back on the purchases made from the hawala parties. The gross profit has been reduced from 8.77 % to 5.71% during the year under consideration which is explained as major manufacturing activity in the last year and major part of the trading activity in the year under consideration. Keeping in view of these facts and circumstances, I am of the vie....
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.... alternative way. If that be so, then Revenue was only required to estimate the profit at a particular rate. Referring to the figure of 2% arrived by the CIT(A), Tribunal observed that assessee's gross profit varied from 5% to 8.77%. Since the purchases were made from the grey market, the corresponding profit element would be little higher. Therefore, Tribunal directed the Assessing Officer to make further addition of 3% on the bogus purchases and to estimate the income on such basis. 19. On thorough consideration of the matter, we do not find any error or infirmity in the view taken by the Tribunal. The lower appellate authorities had enhanced the quantum of purchases much beyond that of the Assessing Officer i.e., from Rs. 24,18,06,385.00 to Rs. 65,65,30,470.00 but having found that the purchases corresponded to sales which were reflected in the returns of the assessee in sales tax proceedings and in addition, were also recorded in the books of accounts with payments made through account payee cheques, the purchases were accepted by the two appellate authorities and following judicial dictum decided to add the profit percentage on such purchases to the income of the ....
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....nformation from the Sales Tax Department, Government of Maharashtra. The information was to the effect that the eight parties from whom the purchases were allegedly made were alleged hawala dealers who had issued bogus bills totalling Rs. 1,14,92,970.00. 12. In the appellate proceedings before the first appellate authority, it was held as under :- "2.15 The facts in the present case shows that the appellant was not in a position to prove the existence of the suppliers. The suppliers were found to be engaged in providing bogus bills without actual delivery of goods. Moreover few of the suppliers are not regular parties and they were found to have supplied only during the year and there were no supply either in the earlier year or in the subsequent year from such parties. This circumstantial evidence also prove the bogus nature of the transaction. On careful analysis of the finding of Hon'ble High Court of Gujarat in the abovementioned cases, I am of the firm view that without purchase of materials it was not possible for the appellant to complete the job work of dying. As mentioned above the AO had never disputed or examined the aspect of job work receipts. Hen....
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....purchases made by the assessee. The disallowance sustained by the Ld. CIT(A) @ 17.5% of the purchases have been accepted by the assessee with a view to bury the litigation. Nothing has been brought before us by the Ld. DR to contradict the findings recorded by the Ld.CIT(A). The assessee's counsel has also placed reliance upon the judgment of Hon'ble Bombay High Court in the case of Nikunj Eximp Enterprises Pvt. Ltd. (supra) wherein similar issue has been decided on identical lines by the Hon'ble Bombay High Court. In our view, no intervention is required in the findings of Ld. CIT(A) and, therefore, the same is confirmed. The grounds raised by the revenue are dismissed." 15. Thus, Tribunal concurred with the view taken by the CIT(A) that the Assessing Officer had erred in disallowing the entire total purchases and adding the same to the total income of the assessee. View taken by the CIT(A) that 17.5% of the purchases be added to the total income of the assessee as the profit element was a reasonable one. It was also noted that the said percentage was accepted by the assessee with a view to close the litigation. Nothing was brought on record by the Revenue to ....
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.... appellate authorities. 19. This Court in the case of Commissioner of Income-tax -1, Mumbai v. Nikunj Eximp Enterprises(P.) Ltd. 372 ITR 619; wherein an identical fact situation arose did not interfere with the order passed by the Tribunal and held that no substantial question of law arose from such order. It was held that merely because the suppliers had not appeared before the Assessing Officer, no conclusion could be arrived at that the purchases were not made by the assessee." 16. Today while dealing with Income-tax Appeal No. 1330 of 2017 (Pr. CIT v. Rishabhdev Technocable Ltd.) [2020] 115 taxmann.com 333 (Bom.), we have held as under: "19. On thorough consideration of the matter, we do not find any error or infirmity in the view taken by the Tribunal. The lower appellate authorities had enhanced the quantum of purchases much beyond that of the Assessing Officer i.e., from Rs. 24,18,06,385.00 to Rs. 65,65,30,470.00 but having found that the purchases corresponded to sales which were reflected in the returns of the assessee in sales tax proceedings and in addition, were also recorded in the books of accounts with payments made through account payee ch....
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....non-payment of tax and others at the expenses of the exchequer. In the circumstances, CIT(A) is justified in deleting 100% disallowance of purchases by AO and limiting disallowance to 12.5% out of the bogus purchases." 87.7 The Hon'ble Bombay High Court in the case of PCIT-25 vs Ram Builders (ITA No. 398 of 2018) (Bombay HC) dated 18/07/2022, while upholding the disallowance to the extent of 12.5% of bogus purchases has observed as under: "7. Accepting the statement of the assessee that the addition be restricted to only proft element on the purchases efected by it, the CIT(A) by following CIT Vs. Bholanath Poly Fab Pvt. Ltd., and considering the facts and circumstances of the case, restricted the addition by estimating profit of 12.5% on the total purchases in question which works out to Rs. 59,31,849/-. It thus, granted relief to the assessee to the tune of Rs. 4,15,22,944/- (Rs.4,74,54,793/- - Rs. 59,31,849/-). 8. The order passed by learned CIT(A) was challenged by the revenue before the Income Tax Appellate Tribunal. Cross objection was also filed by the assessee in the said proceedings. By virtue of order dated 28th February, 2017, the Tribunal dism....
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.... question, the Tribunal has upheld the finding and conclusion of the Commissioner of Income-tax (Appeals) whereby the Commissioner (Appeals) directed the Assessing Officer to disallow 12.5% bogus purchases and to add 12.5% of the amount of purchases as income of the Appellant. The argument advanced is that the bogus purchases ought to have been disallowed in totality. The learned counsel for the parties have placed before us the decisions of the Division Bench in the cases of Pr. CIT v. Mohommad Haji Adam & Co. [2019] 103 taxmann.com 459 (Bom.) and Pr.CIT v. Paramshakti Distributors (P.) Ltd. [IT Appeal No. 413 of 2017, dated 15-7-2010] wherein the Division Bench has observed that if the factum of sales has been accepted by the Department then even if it is established that there were bogus purchases, it is not necessary that entire amount should be added to the income of the Assessee as there cannot be a sale without purchase. The facts of the present case are identical wherein the sales have been accepted. Therefore, in light of the aforesaid decisions first question of law does not survive for consideration." 87.9 In the latest judgement of Hon'ble Bombay High Court in ....
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....ed that the assessee had undertaken one single contract to construct water pipeline project in Ulhasnagar for which the agreed contract value was Rs. 249.39 crores. It is gathered from the order of the Ld. CIT(A) that, the appellant had successfully completed the project as certified by UMC vide certificate dated 17.06.2022 and that the successful completion of the same was also certified by M/s TUSPL, an independent project management consultant appointed by UMC vide certificate dated 18.04.2023. Both these certificates were forwarded by the Ld. CIT(A) to the AO and it is noted that the AO has also confirmed in his remand report that, indeed the contract was completed by the assessee. Pursuant to the same, it is noted that the assessee had derived gross receipts of Rs. 249.39 crores across the life of the project. On these given facts, it is evident that the assessee had indeed performed the tasks allocated under the agreed contract with UMC, completed the water pipeline project and had derived revenues therefrom. Understandably therefore, the assessee could not have undertaken this huge project without incurring expenses viz., both material and labor. From the details furnished b....
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.... assessed to tax and that on the given facts, the disallowance of entire value of purchases was unwarranted. 34. Now we come to the issue of estimating the profits of the assessee JV. The Ld. CIT(A) is noted to have estimated the profit at 15% of the contractual receipts. We however note that no rational basis or logic has been provided by the Ld. CIT(A) for arriving at such a rate. On the other hand, the Ld. AR brought to our notice that, in earlier years, the ITSC had estimated the profit of the assessee JV at 8%. Having gone through the facts, it is noted that, the assessee had filed an application before the ITSC, Mumbai to assess its income from this same water pipeline project at Ulhasnagar in AYs 2011-12 to 2013-14. Perusal of the order of ITSC shows that, like in the AYs before us, the Revenue had suspected bogus bills/expenses to have been debited in P&L A/c by the assessee JV. Accordingly, the assessee had approached Settlement Commission, which after examining the facts of the case and taking into consideration the issue of bogus purchases, had held that net profit rate of 8% of the gross receipts was fair and reasonable rate to estimate the overall income from this w....
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....claimed by ECC in the JV and nothing more than that. Although the AO acknowledged explicitly that IDCC is an established contractor and that it had done substantive work for the assessee but he inferred that IDCC had assisted the assessee in obtaining fake expenses entries to the tune of Rs. 29,99,72,505/-. The AO held that, the money paid by the assessee to IDCC would come back through ECC in IDCC cheque account. The AO thus concluded that the payments made to IDCC were bogus and accordingly disallowed and added back aggregate sum of Rs. 29,99,72,505/- across AYs 2012-13 to 2015-16. 37. Being aggrieved by the above order, the assessee preferred appeal before the Ld. CIT(A) who, after extensively analyzing the details and evidences furnished by the assessee as well as IDCC, concluded that these payments were genuine and hence deleted the same. The Revenue is now in appeal before us. 38. The Ld. DR appearing for the Revenue first invited our attention to Page Nos. 29-38 of the impugned order in which the AO had extracted the relevant seized material and his analysis, basis which the AO had inferred that the contractual payments made to IDCC, were not genuine. The Ld. DR partic....
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....shed and renowned contractor and that it was doing substantial business with one of the JV partners, ECC. On the other hand, the business of KIL, which was the majority JV partner in the assessee JV, was minimal with ECC. The Ld. AR accordingly explained that it was ECC, who had bought IDCC onboard and to whom certain tasks were sub-contracted. Since ECC was over all supervising and managing the tasks sub-contracted to IDCC, it was seeking separate commission @ 5% of the invoices billed/payments made to IDCC from the assessee JV, over and above the share of profit. Accordingly, ECC was tracking the payments made by the assessee JV and maintaining the said ledger found at Pages 6 & 7. Since the other JV partner i.e. KIL was not agreeable to such terms, it was never acted upon. This fact according to him was corroborated by the entries in these pages itself, which clearly showed that no corresponding receipt, either in cash or through bank, was ever recorded in the said ledger by ECC. 41. The Ld. AR has also rightly pointed out that the fact that these entries did not suggest commission for providing accommodation bills, was also corroborated by the noting found on Page Nos. 20 & ....
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....ing from the seized documents. In his analysis of these seized documents, the Assessing officer has not pinpointed any noting/entry substantiating that the amount of Rs. 29,99,72,505/- paid to IDCC through cheque has been received back in cash by the appellant. Neither, the AO has brought any other evidence on record (other than his interpretation of seized papers) to substantiate his interpretation that the amount was actually received back by the appellant in cash. ії) The Assessing Officer has interpreted that the amount mentioned in page no. 4 is 2% less than the amount mentioned in page no. 3 and this page no. 4 corresponds to amount paid back by ECC to the appellant. This page has been duly explained by the appellant as mentioned in para 55 of this order. The appellant has stated that the entries mentioned in seized page no. 4 are corresponding to cheques issued by the appellant to IDCC. The appellant has also informed that the difference of 2% between expenditure mentioned on page 3 and payment on page 4 is on account of TDS u/s 194C. The appellant has also given an entry-wise reconciliation of various entries on page 3 and page 4 vis-a-vis the ledger ac....
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....no. 4). Had the interpretation of the AO been correct, these pages (20 & 21) should have contained either of these two entries. Thus, even if, it is presumed that the interpretation of AO regarding page 20 & 21 that these are actual accounts of members of appellant JV, is correct, in that case also, there is no conclusive evidence that the amount paid to IDCC has come back to the appellant JV in cash through ECC." 44. We thus agree with the Ld.CIT(A) that the contents of the seized pages, relied upon by the AO, does not support his interpretation that the sub-contract expenses paid to IDCC had come back to the assessee through ECC in cash. Our findings is noted to be also supported by the contemporaneous evidences brought on record by the assessee as well as IDCC to substantiate the genuineness of the payments. As noted earlier, the assessee had appointed IDCC as a sub-contractor for a portion of their work in relation to the water pipeline project being executed at Ulhasnagar. Before the lower authorities as well as before us, the assessee is noted to have furnished the following evidence/documents to corroborate the genuineness of the transactions with IDCC. * Registr....
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....that the AO was unable to find any defect in any of these documents. Even before us, the Revenue was unable to point out any specific infirmity in these evidences furnished by the assessee and IDCC, which demonstrated the genuineness of the payments made towards sub-contract charges. 46. We now come to the last contention of the Ld. DR which was that, IDCC was unable to provide the details of work performed and the details of specific expenses incurred for such work carried out for the assesse. In this regard, we find that the Ld. CIT(A) had rightly dealt with the same at Paras 79.9 and 79.10 of the appellate order, which is being extracted below: "79.9 In the remand report, the Assessing Officer has raised issues that IDCC did not file the copy of agreement with the appellant for undertaking sub-contracting work. In this regard, the appellant has submitted that there was no written agreement with IDCC for undertaking the sub-contract work. It has been argued that the expenses paid to IDCC for sub-contracting work cannot be held as bogus merely because there was no written agreement especially when M/s IDCC is an established sub-contractor and has included the amount pa....
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.... IDCC for AY 2012-13, 2013-14 and 2014-15 wherein the books of accounts of IDCC were accepted by its Assessing Officer. Therefore, in my opinion, there is no reason to doubt the books of accounts of IDCC." 47. Before us, the Ld. DR was unable to dislodge the above findings and therefore this contention is also held to be unsustainable. Hence, considering the totality of the facts as discussed in the foregoing, we hold that the payments made to IDCC was genuine and the AO is held to be unjustified for disallowing the same. Hence, this ground of the Revenue is dismissed. 48. In the result, the appeal of the assessee in ITA No.3022/Mum/2023 is partly allowed and the appeal of the Revenue in ITA No.3061/Mum/2023 stands dismissed. 49. We now take up the appeals of the assessee and the Revenue in ITA Nos. 3023/Mum/2023 & 3060/Mum/2023 for AY 2015-16. 50. Ground Nos. 1, 2 and 4 of the Revenue's appeal and all the grounds taken by the assessee in their appeal relates to the addition of Rs. 16,18,42,702/- made by the Assessing Officer in AY 2015-16 out of bogus purchases of Rs. 37,95,26,087/- made from thirty (30) vendors. After considering the rival submissions, it is observed ....
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....explained cash credit in AY 2017-18. 53. Aggrieved by this action of the AO, the assessee preferred an appeal before the Ld. CIT(A). Having regard to the cumulative facts of the case, the Ld. CIT(A) noted that, the assessee JV had already declared additional income of Rs. 9.50 crores viz., Rs. 5 crores in relation to ECC and Rs. 4.50 crores in relation to KIL in AYs 2011-12 to 2013-14. The Ld. CIT(A) further noted that additional sum of Rs. 3,36,55,357/- had also been offered by way of additional income across AYs 2014-15 to 2016-17. Applying the principle of telescoping, the Ld. CIT(A) held that such additional income assessed in earlier years could be telescoped against the cash investment of Rs. 8 crores unearthed in Page Nos. 20 & 21 relating to AY 2017-18. The Ld. CIT(A) accordingly held that, no separate addition on account of cash investment was warranted since it was fully covered by additional income offered in earlier years. Being aggrieved by the above appellate order of the Ld. CIT(A), both the parties are in appeal before us. 54. Heard both the parties. Before adverting to the facts of the case, we first take note of the principle of telescoping which has since b....
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.... time of application for routing back into the business. The said principle would equally apply where the cash generated by business concerns are routed through partners/directors. Having regard to this settled legal position, we now come back to the facts of the case. It is not in dispute that the assessee had declared additional income of Rs. 9,50,56,072/- before the ITSC, Mumbai in AY 2013-14. It is noted that the assessee had also filed a letter dated 28.10.2014 before the ITSC wherein it was specifically clarified that this income was utilized by way of investment in the on-going work of water pipeline project at Ulhasnagar. The details of utilization inter alia comprised of sum of Rs. 4,50,56,072/- and Rs. 5,00,00,000/- by KIL and Eagle Infra Limited, represented by Shri U.M. Rupchandani, respectively. It is therefore evident that the JV partners had disclosed income in the hands of the assessee JV before the ITSC, Mumbai and such additional income of Rs. 9,50,56,072/- represented the intangible addition / secret profit, which applying the judicially approved principle of telescoping, could be set off against any unexplained money/investment found by the Revenue. 58. The L....