TaxTMI 
TaxTMI 
2026 (1) TMI 978
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....the assessment year 2013-14 are treated as a lead case, and the decision rendered therein shall apply mutatis mutandis to other appeals before us. 3. In this appeal for the assessment year 2013-14, the assessee has raised the following grounds: - "On the facts and in the circumstances of the case and in law: 1. The Learned Commissioner of Income-tax Appeals 51, Mumbai [hereinafter referred as 'CIT(A)] has erred in not holding that the notice issued by the A.O under section 148 of the Act is bad in law and time barred. 2. The CIT(A) has erred in not holding that the assessment order passed by the A.O under section 147 of the Act is bad in law. 3. The CIT(A) has erred in not holding that the addition made by the A.O in respect of purchases made by JMC Projects (India) Ltd. (which company got merged into Appellant with effect from 01 April 2022) is without jurisdiction and bad in law. 4. The CIT(A) has erred in confirming the disallowance of INR 33,81,180 being 12.5% of total alleged non genuine purchase of INR 2,70,49,440 made by JMC Projects (India) Ltd." 4. While the Revenue in its appeal for the assessment year 2013-14 has rai....
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....03.2016 passed under section 143(3) of the Act, the total income of the assessee was assessed at Rs.129,05,67,871/-. Subsequently, vide order dated 21.12.2022 passed by the Hon'ble National Company Law Tribunal, Ahmedabad, the scheme of merger of M/s. JMC Projects India Ltd. ("JMC") with the assessee was approved with effect from 01.04.2022. Pursuant to the merger, all the assets, liabilities, rights, claims, duties and obligations, etc. of JMC stood transferred and vested in the assessee on an ongoing concern basis. Accordingly, as noted in paragraph 3.1 of the assessment order, since JMC was no longer in existence and the assessee was the successor entity, in terms of a decision of the Hon'ble Supreme Court in Maruti Suzuki, the Assessing Officer ("AO") issued notice under section 148 of the Act for the year under consideration on the assessee on the basis of the findings during the search and post search proceedings carried out on Kalpataru Group of Companies on 04.08.2023, wherein the assessee, i.e, M/s. Kalpataru Projects International Ltd. (earlier known as M/s. Kalpataru Power Transmission Ltd.) was also covered. As the assessee filed its return of income on 18.10.2024, in r....
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....so highlighted the fact that two of the individuals whose statements were recorded during the search have retracted their statements. 8. The AO, vide order dated 30.03.2025, passed under section 147 read with section 144 of the Act, disagreed with the submissions of the assessee and held that despite the grant of ample time and opportunities, the assessee has failed to furnish the requisite documentary evidence in respect of purchase transactions with the afore-noted vendors. The AO also referred to the report of the Field Inspection carried out in respect of certain purchase parties, wherein it was found that most of the said vendors from whom the assessee has made purchases of goods/services were not existing at the registered addresses, there were no identification boards at most of the registered addresses and no business activity was being carried out there. The AO held that when the Field Inspection Report was confronted with the key employees, they reiterated that they did not know any of the purchase party and never came across them while working. By referring to the statement recorded during the search, the AO further noted that the key employees stated that they are no....
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....er submitted that in the search on the assessee group, various statements relied upon by the AO in support of the impugned addition were recorded during the search on the assessee group on 04.08.2023, which is after a period of 10 years from the year under consideration and thus it was submitted that the employees whose statements were recorded either did not work in the concerned unit or joined the company after the year under consideration, and therefore, these employees cannot be presumed to know the entire affairs of JMC during the year under consideration. Further, by referring to the findings of the learned CIT(A) in respect of impugned five vendors, the purchase from whom was considered as non-genuine by the AO, the learned AR submitted that the assessee furnished all the data available with it to the extent possible, and these vendors were regular suppliers of the assessee for various projects even in the subsequent years. The learned AR submitted that there is no finding of any of the lower authorities that any incriminating material was found during the search, which leads to the conclusion that the impugned purchases were non-genuine. Accordingly, the learned AR submitte....
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....ents awarded to certain vendors. Since these individuals were not aware of the transaction done by JMC with the impugned vendors, and further, no details in respect of these vendors were available with the Supply Chain Tracking of the assessee, the AO alleged that the expenditure claimed by the assessee is non-genuine. In this regard, the AO also placed reliance on the Field Inspection Report carried out in respect of certain purchase parties, wherein it was found that most of these vendors from whom JMC has made purchases of goods/services were not existing at their registered addresses and there was no identification board on most of the registered addresses and no business activity was carried out there. The AO further noted that when the key employees were confronted with the said Field Inspection Report and were asked to offer comments on the findings, they reiterated that they did not know any of the purchase parties and never came across them while they were working. Accordingly, the AO considered the purchase from the following parties as non-genuine and disallowed the expenditure amounting to Rs. 2,70,49,440/- under section 37(1) of the Act by treating the same as not havi....
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....ing documents for subsequent years, including ledgers, invoices, delivery challans and payment confirmations through verifiable banking channels were furnished by the assessee and materials/services supplied were linked to the revenue generating projects were executed by the assessee's then subsidiary, JMC, which has not been disputed and the revenue recorded in relation to these projects has been accepted by the AO. The learned CIT(A) also held that no incrementing material is available on record to hold that these transactions are accommodation entries. 15. However, we find that despite recording its detailed findings on various factual aspects of this matter, the learned CIT(A) in paragraph 6.2.8 of the impugned order observed as follows: - "6.2.8. However, it is equally noted that during the assessment proceedings, the AO has raised certain issues notably, that in some instances: * Certain employees could not confirm familiarity with the vendors; * Invoices, delivery challans, inward/outward registers, stock registers, purchase orders, goods receipt note and detailed goods movement were not produced for all vendors;" 16. Accordingly, merely to p....
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....t in respect of these five vendors, i.e., B.S. Trading Company, Gourav Sarkar, Navkar Builders Limited, Sharma Ventures and Sakshi Enterprises, the assessee also furnished the details of projects and material supplied by these entities. The learned CIT(A), vide impugned order, after perusal of these details, duly noted the fact that these entities were engaged by JMC to execute projects such as President Estate, New Delhi, Adhiraj Township, Taloja Project, Kalpatru Radiance, Jindal Thermal Power Project, Delhi Metro Project, etc. The learned CIT(A) further noted that these entities were regular suppliers of construction materials used across various project sites, and JMC had maintained a consistent business relationship with these entities even in subsequent years. However, due to the passage of time, since more than 10 years have elapsed, and due to certain operational challenges, the learned CIT(A) noted that the assessee was unable to retrieve complete records for the year under consideration, even though extensive supporting documentation was furnished for the subsequent years including ledger extracts, delivery and transport documentation and bank statement evidencing the pay....
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....d in (2025) 173 taxmann.com 571 (Bom), and submitted that in this decision the Hon'ble High Court held that part disallowance upheld by the Tribunal on account of alleged bogus purchases is not justified once the purchases were found to be non-genuine. Accordingly, the learned DR submitted that the learned CIT(A) erred in upholding a disallowance of up to 12.5% of the total purchases from the impugned five vendors. From the perusal of the aforesaid decision, at the outset, it is evident that the assessment proceedings in the case of the taxpayer were initiated on the basis of the information received from the Sales Tax Department that the taxpayer is a beneficiary of an accommodation entry transaction of bogus purchases. Further, in the facts of the case, the Revenue alleged that in the guise of a bogus purchase transaction, unaccounted cash of the assessee was utilised. It is further evident that during the assessment proceedings, it was found that some of the parties were also related to the taxpayer, a fact that was not rebutted by the taxpayer. Further, the taxpayer also failed to produce audited books of account and quantitative details before any of the lower authorities. Acc....