TaxTMI 
TaxTMI 
2024 (7) TMI 949
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....e Assessing Officer in making the impugned addition of Rs. 56,04,344, being alleged bogus sub-contract charges inasmuch as he has not correctly appreciated the facts of the case in its entirety and hence, the impugned addition of Rs. 56,04,344 is bad in law and needs to be deleted. The appellants further, contend that on the facts and in the circumstances of the case and in law, the Assessing Officer and the CIT(A) have not brought anything on record to dispute the work carried out by the appellants and hence, the disallowance made by the Assessing Officer and upheld by the CIT(A) is bad in law and needs to be deleted. Without prejudice, the appellants contend that on the facts and in the circumstances of the case and in law, since the Assessing Officer and the CIT(A) have not disputed the quantum of work carried out by the appellants, the disallowance made by the Assessing Officer and upheld by the CIT(A) is on a higher side, not commensurate with the facts of the case and the business of the appellants. 2. The CIT(A) erred in upholding the action of the Assessing Officer in making a disallowance of a sum of Rs. 1,16,82,953, being interest paid on unsecu....
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....ar issue has been discussed in the order passed for assessment year 2012-13 to 2017-2018 in the cases of the assessee after considering the incriminating documents seized during the course of search, detail filed by the assessee, statement of the assessee and other persons the following conclusion were drawn. "i. That the Measurement Book is maneuvered so as to ostensibly provide virtual reality to the bogus sub-contract charges. ii. That the Measurement Book is prepared only for record in the case of bogus sub-contractors with the main purpose to ensure that the staff in general in the company [JMMIPL] does not know of the bogus accommodation entries carried out by company [IMMIPL] it its books iii. That the normal procedure in the case of genuine sub-contractor is followed in maintaining the Measurement Book in the case of bogus sub- contractor. iv. That in the case of genuine sub-contractors Measurement Book is prepared on the basis of actual work completed, whereas in the case of non-genuine sub- contractor, Measurement Book is prepared as per convenience as required v. That in the case of bogus contracts there is no work order issue....
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.... all the sub-contractors have denied to have carried out any contractual work for the assessee company They have also admitted that only the amount was credited in their bank account, which was subsequently withdrawn in cash by the employees of the assesse company after obtaining blank signed cheques from them." 3. From the aforesaid conclusions the AO stated that assessee has recorded the bogus expenditure in the form of sub-contract charges so as to inflate the expenditure with ultimate motive to reduce the profits and evade taxes there on. Therefore, the assessing officer concluded that the entire expenditure booked by the assessee in respect of sub- contractor was purely bogus. The assessing officer found that in assessment year 2018-19 assessee has claimed following expenses in case of the sub-contractor: Sr. No. Name of the sub-contractor Amount involved [in Rs.] 1. Abhishekh Nadgeri 21,49,637 2. Subhash Chavan 6,34,113 3. Usha S. Jadhav 15,09,849 4. Pramod S. Patil 2,66,666 5. Sachin C. Chaudhari 2,09,916 6. Santosh C. Chavhan 6,79,103 7. Sarita Rohidas Thakur 1,55,060 Total 56,04,344 ....
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....mpany who was looking after the payment of the subcontractors was handling the cash generated from such adjustment of sub-contract charges; secondly, the statement on oath of Shri Gagan Koli, wherein he has admitted and explained the modus of booking of bogus sub-contractor charges. Thirdly, statement on oath of J.M. Mhatre, MD of the assessee company who too have admitted to book bogus sub-contract charges for inflating expenses. Lastly, statement on oath of various subcontractors and other persons who also corroborated the same fact coupled with other enquiries. Thus, on these facts it stands concluded that assessee did debited few of subcontract charges to generate cash. However, most of the subcontract charges has been found to be genuine for which no addition has been made. 30. However, the case of the assessee has been that, assessee is working on a huge projects for construction of roads on contract awarded by government and various projects for various Government agencies, for which it requires huge manpower and many sub-contractors to execute the work. The contract work awarded has all the clause of material and labour and rates and work to be executed and labours....
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....the payment to the labourers in cash. 31. This explanation from the records and circumstances seem to be plausible and we accept that sub-contract charges were booked to generate cash to make payments to labourers. The submission of the assessee cannot be brushed aside completely because looking to the nature of business and the manner of conducting business specially when huge construction activities are carried out in remote areas and it is unskilled labour intensive work which is highly disorganized. It is a well known fact that labourers demand the wages in cash on daily basis or short periodic basis. It is also a matter of fact that in the case of the assessee, in earlier years, the payment of labour charges in cash was huge which was done by withdrawing from the bank account and making self- made voucher payments and due to payment made in cash and getting it verified fully to the satisfaction of the ld. AO / Income Tax department was difficult resulting into estimation of profit and rejection of books of account. Assessee introduced this mode where few subcontractors are appointed on papers, and they shall be given the amount in cheques and after withdrawing the cas....
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....ars this sub-contract charges are added, the net profit rate in various years will go very high and the gross profit itself will increase multifold. First of all he pointed out that as per the books the net profit on all the contract receipts and other receipts is ranging from 5.43% to 7.32 % in AYS. 2012-13 to 2017-18. But if a sub-contact charges which has been added by the AO is included then net profit goes to 8.68 % to 14.65% in these years. Already assessee in its return of income filed u/s 153A, assessee has shown 8% net profit and has declared much higher income than original return of income. If on this further addition is made the net profit rate will go even higher. For instance: A.Y. 2012-13- 11.52% A.Y. 2013-14- 12.67% A.Y. 2014-15- 8.78% A.Y. 2015-16- 17.55% A.Y. 2016-17- 14.69% A.Y. 2017-18- 13.19% Ld. Counsel has also submitted a chart, wherein he has given the details of various receipts, direct expenses, gross profit ratio as per the books, indirect expenses, net profit shown in the books of accounts and if these sub-contractor charges are added, the resultant gross profit as well as net profit would b....
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....fit shown in the books of accounts. Thus we hold that estimate of 9% as held above is far reasonable to factor in the sub-contract charges added by the AO. Accordingly, assessee gets part relief and now instead of net profit on direct contract receipts declared at 8% in the return filed u/s 153A, it will be 9% and separate addition as held will get subsumed. 36. In so far as appeals for A.Y.2012-13, 2013-14 & 2014-15 is concerned, there is no addition are tinkering with the accounts of the sub-contract charge by the ld. AO and therefore, in these years this is not the issue at all. 37. Now coming to the issue of bogus sub-contract charges for A.Y.2015-16, 2016-17 and 2017-18, the facts leading to the additions made by the ld. AO are exactly same. In these years also we are applying net profit rate net profit rate of 9% on the direct contract receipts. In these years also assessee in the return of income filed u/s. 153A has disclosed the net profit @ 8%. Here also, finding given above will apply mutatis mutandis that these sub-contract charges were in fact directly related to carrying out the contract work undertaken by the assessee and again there is no finding th....
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.... 10. Alka Commodities Ltd. 5,44,097 11. Alka Commodities Ltd. 20,09,445 12. Alka Commodities Ltd. 3,97,259 13. Aidos Trade Ltd. 15,51,543 14. Aidos Trade Ltd. 1,08,779 15. Alka Commodities Ltd. 5,44,097 16. Alka Commodities Ltd. 20,09,445 17. Alka Commodities Ltd. 3,97,259 Total 1,62,94,076 The assessing officer stated that during the search action conducted in the case of the assessee company it was found that balance in respect of sundry creditors were transferred to Alka Security Ltd, Alka Commodity Ltd., AIDOS Trade Limited and Mahesh Kothari Share & Stock Broker Pvt. Ltd. which was shown under the head 'unsecured loan'. Further the assessing officer found that following sundry creditors were appearing in the books as arrangement without having done any contractual work for the assessee: Sr. No. Name of the company [sundry creditor) 1. Takeshi Marketing P. Ltd. 2. FND Logistics P. Ltd. 3. Aster Merchantile P.Ltd. 4. Ashwin Trading P. Ltd. 5. JMDE packaging & Realities Ld. 6. Saloni Express P.Ltd. 7. Tanvi Express Logistics Solutions P. Ltd. ....
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.... Merchantile P.Ltd. 4. Ashwin Trading P. Ltd. 5. JMDE packaging & Realities Ld. 6. Saloni Express P.Ltd. 7. Tanvi Express Logistics Solutions P. Ltd. 8. Adios Trade Limited 9. Pushpanjali Enterprises 10. Radhaswami Infracon & Engineers 11. Shubham Steel Traders 12. M.N. Enterprises Thereafter the outstanding amount payable to aforesaid sub-contractor were transferred to the accounts of M/s Alka Securities Ltd., AIDOS Trades Ltd., Mahesh Kothari Share & Stock Broker Pvt. Ltd. and M/s Alka Commodities Ltd. as unsecured loan. The assessing officer stated that these sub-contractors have not carried out any work for the assessee company and the whole amount booked in the name of these entities were bogus. Since, assessing officer treated the bogus sub- contract amount transferred in the name of 4 other entities as referred above in the form of unsecured loan was arrangement and not considered as genuine. 14.1. In this regard, we have perused the ledger account of these four M/s Alka Securities Ltd., AIDOS Trades Ltd., Mahesh Kothari Share & Stock Broker Pvt. Ltd. and M/s Alka Commodities Ltd. placed in the paper book showing th....