TaxTMI 
TaxTMI 
2022 (1) TMI 1503
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....ng disposed of by a common order. 3. We shall take up the Revenue's appeal in IT(SS)A No. 409/Ahd/2019 concerning AY 2011-12 as a lead case for adjudication. IT(SS)A No. 409/Ahd/2019 - AY - 2011-12 4. Grounds of appeal raised by the Revenue read as under: 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 9,77,86,306/- made to the business income of the assessee by rejecting the book results and applying the net profit rate of 8% on self executed contracts on net profit of 5.5% to contracts further awarded by the assessee. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that any addition during the assessment u/s.153A has to be confined to the incriminating material found during the course of search u/s. 132(1) of the Act, even though, there is no such stipulation in sec. 153A of the Act. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assess....
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....ained properly by the assessee (para 11.3 (iv), notings of various unaccounted and unallowable expenses (Para 14.3) etc. which revealed in manipulation account and undisclosed income while holding that no incriminating material was found in the case of the assessee. 8. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the additions on the basis of net profit rate even in respect of assessment years for which the assessee had himself accepted undisclosed income on the basis of findings during the search and survey operations, on the ground that no incriminating material was found, without appreciating that it was only because of the incriminating material found during the search and connected survey operations and inquiries made thereupon that the undisclosed income was surrendered by the assessee. 9. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that the search was conducted to detect income which would not have been disclosed if no search has been conducted, and the findings during the search, prior to the search and after the search has lead to the concl....
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....ial in regard to different assessment years including AY 2011-12 the year under consideration. As a corollary to search, a notice under section 153A of the Act was issued on 7.3.2017 for various assessment years to the assessee in response whereof return of income under S. 153A of the Act. It is the plea of the assessee that no income was surrendered on account of undisclosed income per se in the return filed under S. 153A of the Act. It was submitted that income was offered on some specific issues in the ROI but not on the basis of documents found or seized during the course of search. Subsequently, notice under section 143(2) dated 13.7.2017 followed by notice dated 31.10.2018 under section 142(1) was served upon the assessee with a direction to furnish certain details and/or documents and to produce books of accounts and further to explain the findings of the search. The assessee duly provided the requisite details/documents to the ld. AO as claimed. 7. It is relevant to mention that the assessee is engaged in construction business claimed to have been started from 1972 and the same is spread all over India from North-East to South region. The assessee hires both skilled and ....
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....calculated after rejecting the books of accounts under section 145(3) of the Act upon holding the percentage of profit enjoyed by the assessee on the contracts executed by itself would be on higher side than those given on sub-contracts on back-to- back basis. The Ld. AO adopted net profit rate of 8% on the contracts executed by the assessee itself and net profit rate of 5.5% on the contracts awarded by the assessee to the sub-contractors on back-to-back basis. Apart from that an addition of Rs. 2,93,419/- on account of disallowance under section 14A of the Act to the income of the assessee declared in the original return under section 139(1) of the Act was made. In the first appeal against the additions so made, the Ld. CIT(A) deleted the above additions in the appeal preferred by the assessee. Hence, the instant appeal before us. 10. We have heard the rival submissions made by the representative of both the parties and we have also perused the relevant materials available on record. 11. Before going into details of the matter, it is required to give brief status of the entire group of matters commencing from assessment years 2011-12 to 2015-16 being unabated years/proceedin....
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....eted assessment. . 3. Under the facts and circumstances of the case the Assessing Officer has erred in giving the findings that the assessee has made voluntarily .disclosure of 43.93 Crores in the-statement recorded u/s 132(4) of the Income Tax Act 1961. 1. The Appellant is making the following submissions in respect of the assessment order: (i) The Assessing Officer has rejected the books of accounts of the Appellant under Section 145(3) of the Act for the following reasons: a) The Assessing Officer has alleged that even though substantial payment has been made by the Appellant to certain sub-contractors, the said sub-contractors have not filed any return or have shown meagre income. The Assessing Officer named 3 firms viz. M/s. Honeymint Resources, M/S Crimson Infra-tech and M/S Signature Dynamics where allegedly there is a difference between the payment made to them by the Appellant and the turnover showed by them in the returns filed. In respect of the said firms, it is submitted that the Appellant has already made voluntary disclosure to the tune of Rs. 11,87,02,925/- and the said disclosure pertains to A.Y. 2013-14 and not to the current as....
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....the Appellant in order to reject them. However, the Assessing Officer has made a general statement in respect of the other 88 sub-contractors without disclosing as to how these sub-contractors are suspicious. It is pertinent to mention here that a considerable number of subcontractors and suppliers have been verified by the Assessing Officer on the basis of the details/documents submitted by the Appellant vide its letters dated 19.12.2018, 20.12.2018, 21.12.2018 and 24.12.2018. (c) In para nos. 10, 10.1, and 10.2, the Assessing Officer has given charts which reflect the following details: A. In para 10, as per chart given therein, the Appellant has paid Rs. 37,55,59,221/- in the relevant assessment year to subcontractors having PAN and to sub-contractors not having PAN who had done work of more than Rs. 10 lakhs, while Rs. 33,01,63,061/- had been paid to suppliers PAN and Rs. 28,58,34,911/- to suppliers without PAN from whom supplies of more than Rs. 10 lakhs had been purchased ;. B. In para 10.1, the Assessing Officer has made. analysis of suppliers and subcontractors who have replied to the notice u/s 133(6) of the Act. The break-up given in the said pa....
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....at the Assessing Officer could not have re-opened the assessment of A.Y. 2011-12 and rejected the books of accounts of the Appellant as the regular assessment in respect of A.Y. 2011-12 was completed and, therefore, its assessment could not have been re-opened under Section 153A until and unless some incriminating material was found during the search pertaining to the Appellant. It is an established fact that no incriminating document has been found during the search pertaining to A.Y. 2011-12. It is settled law that addition of income can only be done in respect of a particular assessment year if some incriminating document has been found pertaining to the assessment year. In this regard, reliance is placed on the following judgements: a) Commissioner of Income-tax-I v. Jayaben Ratilal Sorathia [2014] 222 Taxman 64 (Gujarat)(MAG) - The Hon'ble Gujarat High Court held that evidence found in respect of the assessment years 2006-07 and 2007-08 cannot be a valid basis for the assessing officer to make additions in respect of the assessment year 2005-06 without there being any incriminating document or corroborating material. b) Principal Commissioner of Income-ta....
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....ct of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the Appellant filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs.11,05,51,000/- on the basis of the material which, was not found during the course of search but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the Appellant under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating mate....
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....irmed by the Supreme Court in Principal Commissioner of Income-Tax v. Meeta Gutgutia [2018] 257 Taxman 441 (SC) e) In addition thereto, the Hon'ble Supreme Court in the ease of CIT v. Singhad technical Education Society [201 7] 397 ITR 344 (SC) has reiterated this position of law, "where loose papers found and seized from residence of President of Appellant, an educational institution, indicating capitation fees received by various institutions run by the Appellant did not establish co-relation document-wise with assessment years in question notice issued under section 153C had rightly been quashed and set-aside." f) The same position of law was earlier expounded by the Hon'ble Delhi High Court in the case of CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi.) g) The Appellant also seeks to place reliance on the following judgments with regard to above-mentioned proposition: A. Suncity Alloys (P.) Ltd. v. ACIT 12009] 124 TTJ 674(JD); B. DCIT v. Royal Marwar Tobacco Product (P.) Ltd. [2009] 29 SOT 53(AHD)(URO); C. CIT v. Anil Kumar Bhatia [2012] 24 Taxmann.com 98 (Del.) D. In Kusum Gupta v. DCIT (ITA Nos. 4873/Del/20....
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.... unless a specific defect is pointed out by the Assessing Officer. Further, the Assessing Officer could not have rejected the books of accounts of the Appellant for the following reasons: A. The Appellant is engaged in the construction business since the year 1972. The business of the Appellant is spread all over India between north-east and south region. In this nature of business the Appellant has to hire skilled as well as unskilled labour from local areas who are generally illiterate and the areas have no banking facilities. At given, point of time, there are 80-90 working sites. Further, purchase of cement, steel and bitumen is 100% verifiable since cement, steel and bitumen industries are organized and the supplies are made by PSUs and corporates. In case of sand, soil, bricks, water and small consumable items, supply is by local suppliers which is done on the basis of self-made vouchers and not pakka vouchers and payment is not made through banking channels. 20% of the contract cost is towards the aforesaid items. Thereby meaning that 20% of the expenditure is very difficult to verify because of the nature of this business and not due to any infirmity in the books o....
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....liers/sub- contractors who could not be contacted because their addresses were not supplied by the Appellant, it is submitted that information about these suppliers/sub-contractors has been sought after a time-period of 7-8 years, and the Appellant cannot be expected to maintain and preserve the addresses of such suppliers/sub- contractors who are spread in a number of sites, in various geographical regions. Sometimes contact is lost with them since other suppliers/sub-contractors are engaged. This does not mean that they are not genuine, or the payment made to them is not genuine. Also, the Appellant has no power to force such people to appeal before Income-Tax Authorities. On the other hand, the Assessing Officer has been given wide powers under the Income-Tax Act to summon such persons. Details of these sub- contractors/suppliers are available in the books of the Appellant, including their ledger account, the bills raised by them giving their addresses, the work done by them etc. The books of account are audited, hence, they are complete as far as the paperwork is concerned. If the Assessing Officer had any doubts about the identity of such persons or the veracity/genuineness of....
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....again that the Appellant can supply the address he has on record, and do no more. It is for the Assessing Officer to use his statutory powers to enforce attendance, and subject them to questions. However, the Assessing Officer has acted on surmises, suspicions and conjectures without giving proper opportunity to the Appellant to verify and confirm the subcontractors and the suppliers thereby violating fundamental rules of justice. In this regard, reliance is placed on the judgment of the Hon'ble Supreme Court in Dhakeshwari Cotton Mills Ltd. v. Commissioner of Income-tax [1954] 26 ITR 775 (SC), wherein the Hon'ble Court held: "In this case we are of the opinion that the Tribunal violated certain fundamental rules of Justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing. The estimate of the gross rate....
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....It is further submitted that in regard to the NP rate, the Appellant gave NP rate of other firms engaged in similar business and the Appellant also stated that the NP rate declared by it is more than the NP rate of those other firms. However, the Assessing Officer, withoutmaking due enquiries, summarily rejected the contention of the Appellant and applied the NP rate at 8% which is wholly incorrect, arbitrary and baseless. The Appellant relies on the following case laws: 1. S. Sarabhiah Setty& Sons v. CIT [1967] 64 ITR 175 (AP); 2. Yaggina Veeraraghavelu & Mavuleti Sanaraju & co. v. CTT [1966] 62 ITR 528(AP); 3. Seth Nathuram Munnalal v.C1T 25 ITR 216 (Nag.); 4. Mysore Fertilizer Co. v. CIT, 59 ITR 268 (Mad.) 5. CIT v. Margadarsi Chit Funds Pvt. Ltd. [1985] 155 ITR 442 (AP) 6. Marnilal Kher Ambalat& co. v. 1TO [1989] 176 ITR 253 (Bom.) It has been held in the above-mentioned cases that where the accounts are consistently maintained on a basis that has been accepted in the past and there is no material to indicate how it was defective, the Assessing Officer cannot reject the method of accounting merely because, in his vi....
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....i) - The Hon'ble Delhi High Court held that for the sake of consistency, the same view should continue to prevail unless there some material change in facts. The Hon'ble Court has held as under: "5. Having heard Mrs. PremLata Bansal, the learned counsel for the revenue and Mr. Salil Aggarwal, the learned counsel, for the. respondent, we are of the view that no fault can be found with the order of the Tribunal declining to make reference on the proposed question. It is true that each assessment year being independent of each other, the doctrine of res judicata does not strictly apply to the income-tax proceedings, but where an issue has been considered and decided consistently in a number of earlier assessment years in a particular manner, for the sake of consistency, the same view should continue to prevail in the subsequent years unless there is some material change in facts. In the present case, the teamed counsel for the revenue has not been able to point out even a single distinguishing feature in respect of the assessment year in question which could have prompted the Assessing Officer to take a view different from the earlier assessment years in which the sam....
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....he fact that Shri Agarwal could not explain the difference in his statement recorded u/s 132(4) of the Act It is submitted that no normal person can explain such differences while the search is going on since it entails deep examination and verification of the books, and figures in various accounts. Subsequently, during post-search inquiries and proceedings detailed submissions were made which are reproduced at page 54 of the assessment order. It was submitted that there is no difference in the cash-in-hand since the cash available at various sites where work was going on was not considered. Detailed site-wise cash-in-hand was submitted which clearly showed that there was no difference between cash-in-hand shown in the books and as found during search, or as reflected in the trial balance and balance-sheet. The Assessing Officer has not been able to controvert the evidence so produced except to say that supporting evidence has not been produced. Nothing stopped the Assessing Officer from calling for the accounts maintained at various sites which were more than 80-90 in number, and verifying the claim of the Appellant. It is submitted that there was no discrepancy in the ca....
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....fording an opportunity to the assessee to verify and confirm the sub-contractors, thereby violating fundamental principle of natural justice. Such contentions made by the assessee were further supported by various judgments pronounced by the different judicial forums. 14. The assessee has further raised the following contentions before the first appellate authority and before us as well by way of written submissions: "4. The learned AO has referred various discrepancies in the assessment order for invoking the provisions of section 145(3) of the IT Act 1961. The learned AO has mainly referred in various tables the incomplete digital data regarding accounting of the assessee firm. These data are incomplete data which were prepared during the process of preparation of final accounts when all the data are clubbing for making final balance sheets of the various years. These data were not deleted but final data were prepared and were saved in the system. In this process the incomplete data were saved by the employees and were not deleted after preparation of final accounts. The learned AO has not mentioned that final tally data were also found and they were matched and talli....
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....f the learned AO was not satisfied with the explanation of the assessee then he would have made addition on this account. The above documents which includes annexures annexure A-9 and page no. 27 of annexure A15 and A-I, A-2 and A-7 are not related to assessment year 2011-12, 2012-13, 2013-14 and 2014-15. These are related to only assessment year 2015-16 and 2016-17. Some of the documents are related to projected expenses for different projects and were accounted for in different heads. If the learned AO has found that these expenses are unaccounted expenses he would have made addition u/s 69C of the Income Tax Act 1961 which has not been made by him. These papers relate to Assessment Year 2015-16 and 2016-17 and not to Assessment Year 2012-13 to 2014-15. Secondly these papers relate to very small amount of cash payments and the Learned Assessing Officer has not established that these relate either to the business of the assessee or these expenses are unaccounted cash expenditure. Lastly even if additions were warranted on account of these papers the same should have been restricted to the amount mentioned in these papers for Assessment Year 2015-16 and Assessment Year 2016-17. In ....
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....ubmissions of the assessee were well supported. 18. Having regard to the position taken by the Assessee towards total absence of any incriminating material per se, as detected in the course of search, a letter being CIT(A)-12/DRAIPL/Report/2019-20 dated 06.05.2019 was issued by the first appellate authority, addressing the Ld. AO seeking few inputs, contentions whereof are as follows: "In view of the appellant's assertion that the additions made by the AO in the assessment orders were made without there being specific & materially relevant incriminating material found . during the course of search, a letter vide no. CIT(A)-12/DRAIPL/Report/2019-20 dtd. May 06, 2019 was written to the AO seeking few inputs. The contents of the said letter is reproduced below. The Appellant, M/S. Dineshchandra R. Agrawal Infracon Pvt. Ltd. (DRAIPL in short) has filed appeals against various assessment orders made u/s 153A r.w.s. 143(3) wherein additions have been made on account of an estimated NP (after rejection of books of accounts u/ s 145(3)) and on account of disallowance u/s 14A. During the appeal proceedings, it has been contended by the appellant that during the cour....
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....onnection with the above subject, point wise report as called for is submitted hereunder: (i) The reference page numbers and annexure of seized/impounded documents during the search/survey for each of the assessment year relied upon/which led the AO to make the additions m the case of DRAIPL in respective assessment years. In this connection it is submitted that Search & seizure action u/s 132 of the IT Act was conducted in the DRA/SRA Group arid its associates on 21.10.2016. Various premises were also covered u/s 133A of the IT Act. During the course of search proceedings various incriminating documents/loose papers were found and seized/impounded. During the course of assessment proceedings the seized/impounded materials/books of account were duly verified. In the assessment order these documents have been discussed in detailed. Some of the in eliminating documents discussed in the assessment order are as under :- (a) During the course of survey proceedings carried out u/s 133A of the IT Act at the office premises of assessee situated at 407, Atlantic Heights, Opp. Gawalia Sweets, Baroda some loose papers were found and impounded. In these loose papers ....
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.... (g) During the course of search proceedings certain sub contractors were found bogus and it was admitted by Shri Dineshchandra R Agarwal M D of the M/s DRAIPL that payment made to them was bogus. During the course of post search investigation various sub contractors/ suppliers were found to be bogus/suspicious. Detailed analysis of these bogus /suspicious sub contractors and suppliers are discussed in detail in the assessment order. Considering the aforesaid so many defects, the books of accounts of the assessee was not four reliable and net profit was estimated which is discussed in detail in the assessment order. From, the above, it is clear that the assessments have been, made mainly on the basis of the seized/impounded incriminating documents. (ii) The reference of pages seized/impounded which made the various persons of the searched group to make the voluntary disclosure of Rs.43.93 Crones. In this regard, person-wise and assessment year-wise break-up of the disclosure and the reference of seized/impounded materials may be furnished. In this regard it is mentioned that n Para No .. 2.1 of the assessment order total voluntary disclosure of Rs.....
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....t Resources :- Rs. 4,12,89,816/- (b) M/s Crimson Infratech :- Rs. 4,00,70,036/- (c) M/s Signature Dynamic :- Rs. 3,73,43,073/- During the course of search proceedings Shri Dineshchandra Agarwal, Managing Director of the M/s DRAIPL while recording his statement u/s 132(4) on 23.10.2016 was unable to produce any details regarding these sub contractors. Subsequently, while on asking page wise explanation of the seized/impounded material by the assessee he has admitted that these payments are booked bogus in the books of accounts of the DRAIPL. ● During the course of assessment proceedings, assessee was asked to furnish detail of total disclosure made during the course of search & post search proceedings. Thereafter Rs.6,06,10,649/- was disclosed in the revised return of income filled by the assessee as the assessee have not disclosed true and full disclosure in the return of Income against notice u/s 153A of the IT Act. (iv) Whether there was any reference/comparable instance(s) for adoption of NP rate of 3% and 5.5% in the case of the appellant for the purpose of these assessments. ● In this connection, it is submitted....
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....ere well supported. (iii) However now in the remand report the Learned Assessing Officer has stated that during the course of search page no. 10 on annexure A-9 and page no. 27 of annexure A-15 were found and have been discussed in the assessment order in para 6 page no. 69 and 70 of the assessment order. Similarly the Learned Assessing Officer has further stated that some diaries were found and impounded as per annexure A-l, A-2 and A-7. The Learned Assessing Officer has also reported that annexure LF-1 was also found. The Learned Assessing Officer has stated that these seized papers relate to unaccounted cash expenditure. The assessee furnished explanation during the assessment proceedings and the explanation was accepted, therefore the learned AO has not made any addition on this account. If the learned AO was not satisfied with the explanation of the assessee then he would have made addition on this account. The above documents which includes annexures annexure A-9 and page no, 27 of annexure A-15 and A-l, A-2 and A-7 are not related to assessment year 2011-12, 2012-13, 2013-14 and 2014-15. These are related to only assessment year 2015-16 and 2016-17. Some of the docu....
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.... any addition by way of NP rate. There is nothing on record which suggests that the assessee has booked bogus expenditure. No material, no documents were found during the course of search. It is only the assessee who surrendered the amount of bogus expenditure which has been utilized for construction of house and other investment. Therefore the provisions of section 153A are not applicable for making extra addition on this account without bringing any material on record. (vi) That the Laxmi Construction Group has nowhere business connection with the assessee group. The assessee group is engaged in the construction of roads, highways, airports and other infrastructure facility whereas the Laxmi Construction Group is engaged in construction of water supply system, drainage and other water related projects and not. engaged in construction of highways and other infrastructure facilities. Therefore the case of the assessee is not comparable with Laxmi Construction or SRA Group. The GP and NP rate is also not comparable with the assessee group as the business of the both groups are different. (vii) As far as the surrender is concerned the assessee group has made surrend....
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....was issued in the case. The Learned Assessing Officer completed the assessment by making addition by applying NP rate of 8% on Contracts executed by the assessee and 5.5% on sub-contract receipts. (ii) It is submitted that the Learned Assessing Officer while applying NP rate of 8% and 5.5% on contract works executed by the assessee and on sub contract got executed by different persons respectively has not made out a case that there was any incriminating material found and seized during the course of search which required enquiries in respect of the contract work. This is not the case of the Learned Assessing Officer that any of the seized material found and seized during the course of search indicated any bogus claim of expenditure relating to the contract work. The exercise undertaken by the Learned Assessing Officer by subjecting the expenditure of contract work to re-scrutiny was without jurisdiction as the same stood decided in the assessment completed originally u/s 143(3).In view of this the entire additions on account of rate applications are without jurisdiction. This is supported by well establish position of law in support of which decisions stand quoted in the e....
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.... material and applying higher NP rate. The addition therefore deserves to be knocked down. 3. Unlawful disallowance u/s 14A_being not based with reference to search mat The issue of disallowance u/s 14A also stood decided in the original assessment proceedings. There was no case for reviewing the same as absolutely no incriminating material was found justifying any action in this regard by the Learned Assessing Officer. Therefore the disallowance made is without jurisdiction. The earlier submission made in this regard have remained uncontreverted by the Learned Assessing Officer. Therefore the addition deserves to be deleted. Therefore you are requested to decide the issue in favor of the assessee and oblige." 21. Apart from that, the assessee explained the following in regard to the net profit rate by way of written submissions dated 24.05.2019 before the Ld. CIT(A) with the following contentions. "With reference to above and for application of NP rate in case of back to back contract or where contract awarded to the assessee has been sublated to the other person after retaining 2 to 2.5% margin. The maximum margins retained by the assessee w....
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.... Dynamics of Rs. 3,73,43,073/-. 2. M/s. Homeymint Resources of Rs. 4,12,89,816/-. 3. M/s. Crimson Infratech of Rs. 4,00,70,036/-. 9.3 The AO noted that, the admission of amount of Rs. l1,87,02,925/- for A.Y. 2013- 14 was not the final figure of bogus sub-contractor's expenses booked by the appellant. Accordingly, during the post search investigation, details of financial year-wise payments to various sub-contractors by the appellant in F.Y. 2010 11 to F.Y. 2016-17 were called for from the appellant. The appellant provided details of 698 sub- contractors out of which, the parties having transaction of Rs.10.00 lacs and above were picked up for verification. 217 sub-contractors with PAN and 47 sub-contractors without PAN were picked up for further investigation. Summons u/s.131(1A) were issued to 158 parties out of which, 105 parties were found to be suspicious on the basis of enquiries/verifications conducted by issuing summons and also on the basis of analysis of their returns of income. Various sub-contractors - Balram Ram, Hansaji Ramji Rajput, Jitenderkumar Dahyalal Parmar, M/s. Silveriine Dynamics, M/s. Sterling Enterprises, M/s. Choudhary Contrac....
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....#39;/'not known'/ 'door locked'/ 'address cannot be located' etc. on them. In the said show cause, it was mentioned that the appellant had not been able to get verified genuineness of Rs.445.09 crores of sub- contractors' expenses and Rs.430.42 crores of suppliers expenses and it was proposed to reject the books of accounts u/s. 145(3) of the Act and to apply a rate of 8% on the gross receipt so as to assess the total income. 9.6 In this regard, the appellant had submitted that it was in the given line of business since 1972 and various NP rates of 5.37% (A.Y. 2011-12), 3.91% (A.Y. 2012- 13) and 3.87% (A.Y. 2013-14) were accepted by the Department in the assessments u/s. 143(3), that the NP rate was rising from F.Y. 2013-2014 onwards from 3.8% in F.Y. 2013-14 to 6.28% in F.Y. 2016-17. The appellant also submitted N.P. ratio of other parties Like M/s. Rithwik Projects Pvt. Ltd. (-8.35%), M/s. Soma Enterprises Ltd. (- 8.06% to 0.43%) and M/s. Sadbav Engineering Ltd. (5.03% to 5.66%). The appellant also made a case of different net profit in the case of contract executed by itself (that never reached 8%) and contract executed through sub-contract w....
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....a and seized digital data. They are dealt at page No.59 to 67 of the assessment order for A.Y. 2016-17. 10. Reference by the AO is also made to page No. 10 of Annexure-A/9 (scanned image at page No.69 of the assessment order for A.Y. 2016-17 which shows payments in cheque as well as in cash), to page No. 27 of Annexure-A/15 (scanned image at page No. 70 of the assessment order for A.Y. 2016-17 which shows payment of Rs. 12,00,000/- and Rs. 4,00,000/- in cash for A.Y. 2015-1 and A.Y. 2016-17). 10.1 Reference by the AO has also been made to documents impounded (vide Annexure-A/1, A/2 and A/7 - the diaries maintained by Shri Bharatbhai Omprakash Agarwal, Director of the appellant company who handles the Baroda Branch of the appellant and the projects undertaken by the said Branch) during the course of survey u/s.133A at the Branch Office of the appellant at Baroda. The pages of these annexure show illegal expenses incurred by the appellant in cash for various payments to various officials. They are dealt at page No.80 to 81 of the assessment order for A.Y.2016-17. It is the case of the AO that expenses totaling to Rs.39,77,000/- are not entered in the books of accoun....
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....2-13 14,26,41,610 27,55,67,139 27,55,67,130 2013-14 33,59,86,450 61,14,71,881 54.13,89,410 2014-15 19,49,60,610 44,91,28,229 38,47,48,161 2015-16 35,46,52,120 72,85,28,321 62,97,23,030 2016-17 46,96,49,320 74,44,75,625 74,44,75,630 2017-18 72,40,21,724 89,45,61,311 39,45,61,310 10.4 The assessment orders for all the years are almost identical, discussions of issues are common except that the references page numbers vary in each of the assessment order. Thus, for the sake of adjudication, the assessment years in appeal can be divided in three groups as under :- 1) A.Y. 2011-12, 2014-15 and 2015-16 which are unabated and no additional income has been surrendered by the appellant in the return in response to notice u/s. 153A. 2) A.Y. 2012-13 and 2013-14 which are unabated assessment years, but additional income has been offered by the appellant, in the returns in response to notice u/s. 153A. 3) A.Y. 2016-17 which is an abated assessment year and A.Y. 2017-18 which is related to Financial Year in which the search was conducted where the Assessing Officer is not constrained by the H....
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....ment years falling u/s.153A(2) including the assessment years which have abated under 2"ª proviso to sub-section-1 of section 153A, the AO is not restricted to be confined to the incriminating material found during the course of search for the purpose of making additions and that the AO can traverse beyond the materials found and conduct enquiries and investigations and make the addition based on the findings therefrom. With respect to the date of search in the case of the appellant being 21.10.2016, the A.Y. 2016-17 is an abated assessment year (i.e. the time limit for issue of notice u/s. 143(2) has not elapsed) and the A.Y. 2017-18 pertaining to the previous year in which search was conducted for which, the appellant is not protected by the case laws relied upon for challenging the jurisdiction of the AO and his competency to make additions without there being relevant incriminating materials found during the course of search. 11.2 As the Assessment Years - 2011-12 to 2015-16 are unabated and therefore, in principle, the appellant is protected by the relied upon decisions that no addition could have been made by the AO without the basis of incriminating material re....
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.... Income Tax Department. 11.5 In this regard, it has been submitted by the appellant that pursuant to the. search action u/s 132 carried out in the DRA Group of cases on 21.10.2016 and in response to notices u/s 153A dated 07.03.2017 returns have been filed surrendering the following income - Assessment Year Amount surrendered (in Rs.) Amount disclosed in the return of income (in Rs.) 2012-13 686426 686426 2013-14 118702925 118702925 2017-18 60610649 60610649 Total 180000000 In support of the above, copies of return along with computation of income for the A.Yrs. 2012-13, 2013-14 and 2017-18 have been enclosed and it has been asserted that the additional incomes offered were suo moto by the appellant and they were not based on incriminating material(s) found during the course of search let alone there being any such material identified by the Department. 12. On careful and analytical reading of the provisions of the Income Tax Act and the case laws relied upon by the appellant, I am of the view that the additions made by the AO for the unabated assessment years - A.Y. 2012-13 and A.Y. 2013-14 cannot be ma....
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....pugned assessment order for A.Y. 2011-12 has been perused and the appellant's submissions have been considered. From the perusal of assessment order, it is seen that the return of income u/s. 153A was filed on 22.03.2017 declaring total income of Rs. 1,17,69,410/- as against income shown of Rs. 2,49,610/- in the return u/s.139 filed on 31.07.2011. (There appears to be typographical error in the amount in the assessment order as in the computation of total income itself the returned income u/s.153A adopted is Rs. 16,77,63,050/-, and the returned income u/s 139 as per the appellant was Rs. 16,73,31,640/-). The assessment u/s. 143(3) r.w.s. 153A was completed determining total income at Rs. 26,58,42,775/- with addition of Rs.9,77,86,306/- as per para 16.1 of the assessment order (i.e. on rejection of the books of accounts u/s. 145(3) and adoption of net profit @ 5.5% in contracts assigned back- to-back to other sub-contractors arid @ 8% in contracts executed by the appellant itself) and of Rs.2,93,419/- as per para 18.4 of the assessment order which is by way of disallowance u/s. 14A. 13.1 The A.Y. 2011-12 is an unabated assessment year where assessment u/s. 143(3) was co....
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....n be that if additional income has been offered, the amount shall be capable of absorbing/explaining incriminating materials, if any and this further weaken the case for addition to the total income during the assessment. 13.4 It is further worth noting from para-2.3 of the assessment order for A.Y.2011- 12 (page 4) that the basis of the enquiry related to sub-contractors and suppliers was that "Civil construction sector is a unique sector with regards to the modus of tax. evasion and generation of unaccounted income as much as that in almost all the cases of the assessee engaged in the civil construction work cannot fudge its receipts as in most of such cases contract allotment has been found to be done by the Government of Semi-Government Agencies give the project work to such contractors on. contract basis under agreed terms and conditions which are binding on. both the parties. Therefore, the only way of generating unaccounted income/black money in the case of civil contractors remains, is showing lower overall profit from such receipts. There, are mainly two ways of lowering the eventual net profit in the case of a civil contractor: i) By way of booking bogus....
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....ked in the books of accounts. In this regard, without going into the merits of such assertion of the AO, the facts remain that there is no suo moto/voluntary offer of any additional income for A.Y. 2011-12 and therefore, even if the argument of the AO is conceded, it is not applicable to the A.Y. 2011-12 under consideration, it would be pertinent to reiterate here itself that there is no dispute that the addition to the total income cannot be made without there being incriminating materials in possession of the Department as a result of the search. The restriction on the AO is for addition without the relevant basis of the incriminating material found during the search and in fact any additional income offered in the return of income will be capable of explaining the incriminating materials weakening the case for addition to the total income during the assessment. 13.7 For the purpose of addition based on rejection of books of accounts and adoption of net profit ratio, it is seen from par-14 and 14.1 of the assessment order for A.Y. 2011-12 that the AO held that there were huge discrepancies of incriminating nature found in the books of accounts of the appellant in the sei....
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....d bogus expenditure. Apart from that the Ld. AO alleged incorrectness of the books of accounts of the assessee and thus rejected the books of accounts and proceeded to finalise the assessment adopting net profit of the assessment year in question. While doing so the assessing officer relied upon the case of M/s. Laxmi Construction known as SRA group, engaged in infrastructure development activities where a survey action was carried out under section 133A on 21.01.2016 and before the Income Tax Settlement Commission, Mumbai the said assessee offered net profit @ 8% of the contract work executed by itself and @ 4% on contract work given on back-to-back basis to various subcontractors. Relying upon the rate applied by the Settlement Commission in the said case, the Ld. AO herein adopted the rate of 8% on the net profit on the contract work executed by the assessee before us and net profit @ 5.5% to the contracts further awarded by the assessee. Relevant to mention that the assessee has been able to point out that the work contract executed by the said Laxmi construction group is completely different from that of the assessee before us. Therefore, taking into consideration of the entir....
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....mand report dated 20.05.2019 which claimed to have been found during course of search, and allegedly incriminating in nature. But CIT(A) observed a main lacunae on the part of the Ld. AO in no showing any document which could be identified as incriminating materials in relation to the rejection of the books, which goes to the root of the matter. It was further observed by the Ld. CIT(A) that there is no specific mention of any such incriminating material found during the course of search proceedings by the Ld. AO which might have led him to draw adverse inference and to conduct any inquiry/investigation in relation thereto. Since the AO has failed to point out any specific incriminating material found during the search, which could have led him to reject the books of accounts for the year under consideration and to estimate the income by adopting an net profit ratio, the additions made by the AO were found to be without any basis and thus applying the ratio laid down by different judicial forum as discussed hereinabove, the Ld. CIT (A) deleted the impugned addition which according to us is without any ambiguity so as to warrant interference. The CIT(A) in our view, has dealt with t....