TaxTMI 
TaxTMI 
2025 (12) TMI 926
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.... referred as 'original agreement') in order to take certain contracts in relation with the Common Wealth Games held in Delhi in the year 2010. The agreement dated 19.12.2009 governs the inter se relationship between the members of the consortium, inter alia. The consortium of three members had successfully bid for the overlays contract and was awarded the contract. Common Wealth Games Organizing Committee (referred further as 'CWGOC') vide its Request for Proposal invited bids for the Appointment of Overlays Providers on Turnkey Rental basis for supply, installation, testing, commissioning, operation, maintenance, de-commissioning & removal of Games Overlays for Delhi 2010 Common Wealth Games to be held in Delhi. The Consortium submitted its Bid for the aforesaid RFP for Cluster I & VI whereby the consortium represented that it had the required experience and resources. Turnkey Agreement dated 2 June 2010 was entered between the CWGOC and the M/s Pico Deepali Overlays Consortium. The consortium through PHK, drew up accounts for the contract. The audited accounts were signed by Mr. Chung Chec Keong. 2.1 The assessee M/s. Pico Deepali Overlays Consortium filed its ....
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....ioner of Income Tax, Central Circle-17 (hereinafter referred to as "Ld. AO") erred in assessing the total income at INR 55,65,28,711/- as against the returned income of INR 13,41,05,596/-, without acknowledging the bona-fide facts and circumstances of the case. 2. That on the facts and in the circumstances of the case and in law, the Ld. AO / Hon'ble DRP, erred in making a disallowance of INR 52,87,395/- on account of Cash & Jewellery seized during search proceedings, without appreciating the fact that the impugned cash/jewellery was not found at the premises not belonging to the appellant. 3. That on the facts and the circumstances of the case and in law, the Ld. AO / Hon'ble DRP erred in holding that the purchases made from Vijay Iron Works are bogus and thereby making an addition of INR 1,16,52,984/- in the returned income. 4. That on the facts and the circumstances of the case and in law, the Ld. AO / Hon'ble DRP erred in holding that the purchases made from Armstrong Wires and Engineering Pvt Ltd are bogus and thereby making an addition of INR 2,58,55,023/- in the returned income. 5. That on the facts and the circumstances of the....
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....er of the Association of Persons ("AOP") of PICO Deepali Overlays Consortium. ii. That, the AO/DRP has erred on facts and in law in not considering the detailed submissions made by DDEPL clearly demonstrating that it is not a part of the AOP as alleged by the AO/DRP. iii. That, the final order passed by the AO u/s 254/153A/143(3) r.w.s 144C of the income tax act, 1961 ("the act") treating the DDEPL as member of AOP, in view of the directions of DRP is illegal, bad in law & without jurisdiction. iv. That clause 2.1(3), (5) and (6) of the agreement dated 01.06.2010 (which is the solitary basis for the AO to conclude that DDEPL is a member of the AOP) actually supports the case of the assessee and not that of the department. Further, the AO has ignored several other clauses of the contracts dated 19.12.2009 and 01.06.2010, and other documents which clearly establishes that DDEPL is not a member of the AOP. v. Without Prejudice, the AO has erred in law and on facts in treating the DDEPL as member of AOP. 3. THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S 254/153A 143(3) R.W.S 144C OF THE ACT DATED 27.01.2022 AND THE ORDER PASSED BY THE DR....
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.... GIVING THE ASSESSEE OPPOTURNITY OF HEARING ON ALL THE ISSUES PERTAINING TO MERITS AS WELL AS JURISDICTION. 10. THE AO/TPO/DRP ERRED IN NOT FOLLOWING THE DETAILED PROCEDURE AS LAID DOWN IN CHAPTER X OF THE ACT READ WITH THE RULES, FOR DETERMINING THE MECHANISM FOR COMPUTING THE ARM'S LENGTH PRICE, AND HAS NOT ALLOWED THE APPELLANT THE BENEFIT OF VARIOUS PROVISIONS AS STATED IN THE ACT AND THE RULES. 11.THAT THE OBSERVATIONS AND ADDITION/DISALLOWANCE ADE ARE UNJUST, ILLEGAL, ARBITRARY, BAD IN LAW, HIGHLY EXCESSIVE AND BASED ON SURMISE AND CONJECTURE. 12. THAT THE EXPLANATIONS GIVEN, EVIDENCE PRODUCED AND MATERIAL PLACED AND MADE AVAILABLE ON RECORD HAVE NOT BEEN PROPERLY CONSIDERED AND JUDICIALLY INTERPRETED AND THE SAME DOES NOT JUSTIFY THE ADDITION/DISALLOWANCES MADE. CORPORATE TAX ISSUES 13. ADDITION AMOUNTING TO RS. 52,87,395/- MADE TO THE TOTAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION U/S 69A OF THE ACT IS ILLEGAL, BAD IN LAW AND LIABLE TO BE DELETED: i. That, in view of the facts and circumstances of the case, the AO/DRP erred on facts and in law in making the addition under Section 69A of the Act of Rs. ....
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....e Assessee on account of tickets for CWG. ii. That, in view of the facts and circumstances of the case, the AO/DRP erred on facts and in law in holding that the said expenditure is not connected with the business of the Assessee and therefore, was not incurred for business. 16. DISALLOWANCE OF EXPENDITURE DEBITED TO P&L ACCOUNT - THAT THE AO/DRP ERRED ON FACTS AND IN LAW IN MAKING DISALLOWANCE AMOUNTING TO RS. 29,86,27,579/-; 1. That, in view of the facts and circumstances of the case, the AO/DRP erred on facts and in law in making the disallowance of expenditure debited in the Profit & Loss Account. ii. That, in view of the facts and circumstances of the case, the AO/DRP erred on facts and in law in making the said disallowance as the same is without any basis. 17. THE TPO HAS ERRED ON FACTS AND IN LAW IN NOT CONSIDERING THE TRANSFER PRICING ISSUES AFRESH IN LIGHT OF THE DIRECTIONS GIVEN BY THE ITAT VIDE ITS ORDER DATED 11.01.2021. TPO HAS ERRED IN PASSING THE SAME ORDER AS PASSED BY IT EARLIER BY ERRONEOUSLY CONSTRUING THE ITAT ORDER SETTING ASIDE THE ASSESSMENT FOR FRESH ADJUDICATION TO BE LIMITED TO THE ADDITIONS MADE UNDER SECTION 6....
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....N LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE, IN INITIATING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 23. THAT THE ASSESSEE CRAVES LEAVE TO ADD, AMEND, ALTER AND/OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING." 6. The above referred appeals on the preliminary issue of whether Deepali Design Exhibits Pvt. Ltd. (DDEPL) is member of the AOP or not were heard. The Tribunal vide order dated 22.12.2023 held as under: "38. In the result, it is held that appellant no.1 Deepali Designs Exhibits (P) Ltd. is a member of assessee AOP, Pico Deepali Overlays Consortium for the purpose of assessment of relevant A.Y. The respective grounds taken in appeal no. ITAs No. 518/Del/2022 arising out of issue no.2 decided against the appellant no.1 stand disallowed. Further, as affected party the appellant no.1 has right to file appeal on merits of additions in its own capacity and status." 7. Learned Authorized Representative for the appellant/assessee in ITA No. 412/Del/2022 submitted that ground of appeal no.1 is general. 7.1 Regarding ground of appeal no.3, he submitted that consortium was formed by an agreement dated 19.12.2009. Commo....
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....l recovered therefrom: S. No. Name & Address. Cash Seized (Rs.) Cash Found (Rs.) Jewellery Found (Worth Rs.) Remarks 1 M/s PICO Deepali Overlays Consortium 13/8, Punjabi Bagh, New Delhi 1,45,750/- 10,47,595/ This address belongs to Mr. Vinay Mittal director of DDEPL. 2 M/s PICO Deepali Overlays Consortium 26, Feroze Shah Road, New Delhi-1 6,00,000/ 9,20,000/- This address belong to Mr. Sudhanshu Mittal, partner of Delhi Tent & Decorators. 3 M/s PICO Deepali Overlays Consortium 26, Feroze Shah Road, New Delhi-1 4,98,000/ 4,98,000/- This address belong to Mr. Sudhanshu Mittal, partner of Delhi Tent & Decorators. 4 M/s PICO Deepali Overlays Consortium A-27/15, Kahnpur Extension, Delhi. 6,00,000/ 6,50,000/- This address belong to assessee consortium. It is clarified that cash amounting to Rs. 6,50,000/- only has been found for stated premises. 5 M/s PICO Deepali Overlays Consortium G-7, Dhawan Deep Building 6 Jantar Mantar Road, New Delhi 1,55,000/ 1,55,000/- This address belong to Mr. Sudhanshu Mittal, partner of Delhi Tent Decor....
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....ence of which, we can not throw any light on it. e) Cash found and seized amounting to Rs. 1,55,000/- was found at G-7, Dhawan Deep Building, Jantar Mantar Road, New Delhi which belongs to Mr. Sudhanshu Mittal, who is owner of M/s Delhi Tent & Decorators and was assessed to tax separately. The fact that that stated property was used by him for carrying out his business activities Copy of statement of Mr. Sudhanshu Mittal is supported by his statement. f) Cash found and seized amounting to Rs. 5,79,050/- was found at R-29, Vikas Marg, Shakarpur, Delhi is Registered office address of M/s Delhi Tent & Decorators which belongs to Mr. Sudhanshu Mittal who was assessed separately. g) Cash amounting to Rs. 12,92,000/- was found at 9, Printing Press Area, Wazirpur, New Delhi which was office address of M/s Deepali design & Exhibits Pvt. Ltd. who is alleged member of PDOC. The said cash was considered in its hands while framing its assessments. Copy of letter submitted at the time of assessment proceedings along with assessment order has been submitted here with in support of above. (P No. 1053 of Volume IV and P. No. 1066-1095 of Volume IV) iv. In view o....
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.... provision is applicable in case the Assessee is 'found to be owner of such sum and the use of the term 'found' indicates that such sum has not declared as income by the Assessee himself. This is also supported by the phrase "not recorded in the books of account, if any" used in the said provision, essentially implying that this Section is meant to tax 'undisclosed income'; the source and nature of which remains unexplained to the satisfaction of the AO. For making an addition under this section, it is necessary that the listed articles are not recorded in the books of account of the Assessee, if any. vii. It is further submitted that, as elaborated in the preceding paragraphs, the Assessee is not even 'found to be the owner of the seized material and therefore, the AO has erred on facts as well as in law in making the addition u/s 69A when the said provisions are not applicable to the facts of the present case. viii. The said facts were also brought to the notice of Hon'ble DRP in the proceedings. (P. No. 564-567 of Volume II) In light of the above noted facts and circumstances of the present case and also the legal position, ....
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....REIMBURSEMENT OF EXPENSES 7. THAT THE AO/TPO/DRP ERRED IN NOT PROVIDING PROPER AND ADEQUATE OPPORTUNITY TO ASSESSEE COMPANY TO PLACE THE MATERIAL ON RECORD TO SUBSTANTIATE ITS CLAIM. We were not given relevant TPO reports and survey documents pertaining to additions of Transfer pricing on international transactions despite numerous requests at the time of remand proceedings. Since M/s DDEPL did not have access to the books of account and TPO reports of the consortium, due to which we are handicapped to contest additions on this ground on merits." 9. Learned AR for the Department submitted that AOP is artificial person. Member represents AOP. Search of AOP Member were carried out. All the material found in searched person was seized and relied. Members of AOP had to explain the documents. No efforts were made by AOP and its Members to explain the recoveries of documents, cash and jewellery etc. 9.1 The issue of whether Deepali Design Exhibits Pvt. Ltd. (DDEPL) is part of AOP or not has been discussed in detail by the AO in his order u/s 254/15A/143(3) r.w.s. 144C dated 27.01.2022. The AO in para 9 of his order(from page 8 to page 11) has relied on many docume....
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.... CWGOC Delhi 2010 to the Consortium, the works in the new contract equivalent to 20% in value minus 23% to be paid to PHK shall be awarded to Deepali only after this has been mutually agreed by the parties, having regard to the capacity and capability of the respective Members to fulfill the scope of the new contracts. The net amount after deduction of the 23% is inclusive of the 10.3% service tax but excludes any tax deducted at source. Deepali shall provide PHK on demand any tax certified reasonably required by PHK (including but ort limited to anything related to the 10.3% service tax) 9.3 From above, it is clearly seen that M/s DDEPL continues to be entitled for any new contract equivalent to 20% in value awarded by CWGOC. Thus even for speculation, if the contention of assessee is accepted that they are no longer a part of AOP then it is really baffling to understand why the consortium/AOP will award 20% of the future contracts to M/s DDEPL. This condition for getting a share in future contracts in itself proves that M/s DDEPL continues to be a part of the consortium/AOP. This shows there continues to be unified and common management for controlling the affairs of the AOP a....
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....cates reasonably required by PHK (including but not limited to anything related to the 10.3% Service Tax). Though the above condition gives a specified share of M/s DDEPL but it also makes responsible for providing tax certificates required by M/s Pico Hongkong. This condition cannot be there only to facilitate convenience in billing, as this also shows that all the money from the CWGOC is received only by consortium/AOP and then further distribution takes place and close coordination between members of AOP. The assessee does not fulfil the condition as mentioned in para 3a of the circular. Also M/s DDEPL says that they no longer remain part of AOP because they have 0% share as per clause 2.1 of addendum agreement. However clause 2.1 has to be read in conjunction with clause 2.3 & 2.4 wherein the share of profit is clearly mentioned. Further clause 2.1 talks of residual profit and as M/s Pico Hong Kong was made responsible for common representation, accordingly this residual profit clause doesn't in any way becomes the determining factor for treating DDEPL as a member of AOP or not. (v) M/s DDEPL continues to be a part of AOP and in fact the following....
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....) copies submitted during the course of hearing wherein it is clearly held that for income of the AOP, only AOP has to be taxed and merely because some member of AOP has shown the income individually and also been taxed individually, this cannot prevent the AO to tax AOP with respect to that income which is part of AOP only. It is also submitted that in the financials/ROI filed by the AOP, it has shown total receipts as well as total expenses from the contracts receipts from CWG and it also contains all expenses incurred on behalf of the AOP even by the individual members also." 10. From examination of record in light of aforesaid rival contentions, it is crystal clear that ground of appeal no. 1 of ITA No. 412/Del/2022 is general in nature. Ground of appeal no. 2 is regarding disallowance of Rs.52,87,395/- on account of cash and jewellery seized during search is without appreciating the fact that cash and jewellery were not found at premises belonging to appellant/assessee M/s Pico Deepali Overlays Consortium. Undisputedly, the consortium is not a legal entity. Consortium was responsible for the activities undertaken during Common Wealth Games held from 03.10.2010 to 14.10.2010....