TaxTMI 
TaxTMI 
2026 (2) TMI 361
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.... questionnaire was issued and served on the assessee in response to which the assessee filed the requisite details from time to time. 3. The Assessing Officer during the course of assessment proceedings asked the assessee to furnish the details of direct expenses incurred as per the questionnaire dated 18.12.2022 which is the subject matter of appeal. The assessee in response to the same filed the requisite details. The Assessing Officer noted that the assessee could not furnish the confirmations of all the sub-contractors. He noted that a search and seizure action u/s 132 of the Act was conducted in the case of Shri Bajrang Kharmate along with his close relatives and their related business concerns on 08.03.2022. The brothers of Shri Bajrang Kharmate i.e. Shri Popat Kharmate and Shri Sahebrao Kharmate are the partners in the assessee's firm. He referred to the statement recorded u/s 132(4) of the Act of partner Shri Sahebrao Kharmate wherein he has stated that the assessee firm sometimes require cash for meeting certain kind of expenses. The cash so required was generated by using sub-contractors as a conduit. He had stated that the bills for fictitious work done were raised an....
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....this account is improper, unjustified and contrary to the provisions of law and scheme of the Act and facts prevailing in the case. The disallowance so made be deleted. The Appellant be granted just and proper relief in this respect. 2. Without prejudice to the ground number 1 and on facts and circumstances prevailing in the case and as per the provisions and scheme of the Act, it be held that the addition made by the Ld. AO and upheld by the First Appellate authority is on a higher side. The same be substantially reduced. The Appellant be granted just and proper relief in this respect 3. The Appellant prays to be allowed to add, amend, modify, rectify, delete, and raise any grounds of appeal at the time of hearing. 7. The Ld. Counsel for the assessee at the outset drew the attention of the Bench to the contents of the remand report in respect of the above three sub-contractors where the Assessing Officer has mentioned as under: Sr. No. Name of parties Addition as per net effect in P & L A/c (In Rs. ) AO's Comments in the Remand Report 6 Archana Sandi Atkare 3,43,050 This office has issued notice u/s 133(6) and called for the details....
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.... account of surmises and conjectures and not based on any sound logic. He submitted that the above two sub-contractors in response to the notice issued u/s 133(6) of the Act have submitted the details. The payments have been made through proper banking channel and due TDS has been deducted, therefore, no disallowance should have been made by the Assessing Officer and sustained by the Ld. CIT(A). 11. The Ld. Counsel for the assessee drew the attention of the Bench to para 1 of the assessment order and submitted that the assessee has disclosed huge taxable income at Rs. 17,38,96,100/- and therefore, there is no need on the part of the assessee to inflate the expenditure by making payment to the above 2 sub-contractors. 12. In his alternate contention, the Ld. Counsel for the assessee relying on the following decisions submitted that the addition made by the Assessing Officer should be restricted to the gross profit element embedded in such sub-contract payments: i) PCT vs. Pravin U. Parmar (Jain) vide Income Tax Appeal No.1015 of 2018, order dated 09.01.2025 (Bombay HC) ii) PCIT vs. SVD Resins & Plastics Pvt. Ltd. vide Income Tax Appeal Nos.1662 & 1664 of 2018....
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.... of the Act and therefore, the genuineness of the said party could not have been doubted. 15. So far as the other two sub-contractors are concerned, it is his submission that those parties have responded to the notice issued u/s 133(6) of the Act confirming the work done by them and the payments have been made through banking channel and due TDS has been deducted and therefore, no disallowance should have been made on account of those two sub-contractors. It is his alternate contention that at best the profit element embedded in such payments to the sub-contractors can be added and not the entire amount. 16. We find some force in the above arguments of the Ld. Counsel for the assessee. A perusal of the questionnaire issued along with notice u/s 142(1) of the Act for assessment year 2020-21, copy of which is placed at pages 63 to 67 of the paper book shows that the assessee has made payment of Rs. 4,04,040/- to Sanjay Chandrika Shah during assessment year 2020-21. We find the Assessing Officer in the order passed u/s 147 r.w.s. 143(3) of the Act for assessment year 2020-21, copy of which is placed at pages 68 to 76 of the paper book, has not made any disallowance on account of....