TaxTMI 
TaxTMI 
2025 (6) TMI 2104
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....e case and legal aspect of the matter are identical for both the years, the appeals and the cross appeals are taken up for hearing and disposed together for the sake of convenience. Assessment Year: 2016-17/ ITA No: 292/ASR/2024: 3. The grounds of appeal taken by the department in Form 36 are as follows: "1. The Ld. CIT(A) has erred in holding notice issued u/s 148 of the Income-tax Act, 1961 as invalid and illegal by not appreciating the fact that the assessee could not produce the copy of Letter of Intent/ copy of sub-contract agreement (the most basic and vital document) in compliance to the enquiry letter issued u/s 133(6) of the Income-tax Act, 1961 at the time of the pre- reopening of assessment proceedings and as such the AO has reasons to believe that the income chargeable to tax has escaped assessment for the relevant assessment year and as such the notice issued u/s 148 of the Income-tax Act, 1961 is valid and legal. 2. The Ld. CIT(A) has erred in allowing appeal of the assessee by holding that no proper inquiry has been conducted by the AO by ignoring the fact that the AO has issued enquiry letter to the assessee but the assessee failed to furnish....
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....h an amount of Rs. 6.69 crores (Rs. 6,69,57,561/-) being the amount of sub contract receipts, from one M/s Dinesh Chandra R Aggarwal Infracon Private Limited (in short DRAIPL), Ahmedabad, is the subject matter of dispute in this appeal. 4.1 Regular return filed by the assessee u/s 139(1) of the Act has been duly processed accepting the returned income at Rs. 1,66,22,770/- u/s 143(1), and thereafter, on the basis of information received by the AO, Bhatinda, (i.e. the AO of the assessee), from ACIT - Central circle - 2(1), Ahmedabad, that a search conducted u/s 132 of the Act on DRAIPL group at Ahmedabad, revealed that payments made to various sub-contractors, by the said searched person, were dummy entities, who are either non-existent at given address, or simply existing without any infrastructure to undertake any contract work, and includes such entities who has not filed their respective returns, and consequently, acting upon such information, the AO in the instant case, proceeded to conduct inquiries u/s 133(6) of the Act 61, calling for various details, particulars and explanations from the assessee, requiring the assessee to prove the genuineness and authenticity of the act....
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....ses has already been established. It is observed that the assessee has shown to have received an amount of Rs 5,71,37,870/- from M/s Dineshchandra R Agrawal Infracon Pvt Ltd during the financial year 201,5-16. However, in view of the facts stated above, I am of the opinion that the no sub contract work was performed by the, assessee and It introduced Its own unaccounted money in the books of accounts in the garb of sub contract receipts. Hence, the amount of Rs 5,71,37,870/-, represents unexplained credits in the books of accounts of the assessee, and its deemed income u/s 68, of the Act for the assessment year 2016-17. 5. In view of the above facts, I have reasons to believe that amounts of Rs. 5,71,37,870/-, which was chargeable to tax in the case of the assessee for the assessment year 2016-17 has escaped assessment within the meaning of section 147 of the Act. To assess this income and also any other income chargeable to tax which comes to my notice subsequently in the course of assessment proceedings under this section, a notice u/s 148 Is Issued for the A.Y. 2016-17. (Arvind Bansal) Dated: 29.03.2019 Dy. Commissioner of Income Tax,....
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.... undertaken, which revealed that many of the entities to whom sub-contractor payments were shown as paid were dummy entities, which were not existing at the given addresses or did not have infrastructure to undertake such sub contract work, it was further observed that many of such entities, to whom large sub contract payments were not made, had not, filed their returns, of income, Hence, it was concluded that M/s Dineshchandra R Agrawal Infracon Pvt Ltd, a group company, was engaged in generating unaccounted money by way of, booking bogus sub-contractor expenses as well as by booking bogus purchase expenses for material. 3. In view of the facts, enquiry letter, No 1465 dated 14.03.2019 was Issued to the assessee u/s 133(6) of the Act after, obtaining necessary approval from the competent authority and the assessee was required to explain details of work done on behalf of M/s Dineshchandra R Agrawal Infracon Pvt Ltd, copies of sub contract, agreements, details of site and certified copies of account for the relevant period. The assessee stated in its reply that M/s Dineshchandra R Agrawal Infracon Pvt Ltd was allotted work of flyover at SAS Nagar and ROB at Bathinda City b....
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....19 To, The Dy. Commissioner of Income Tax, Circle-1, Bathinda Subject: Objections to the reasons recorded u/s 147 of the Act for the AY 17-18 and AY 16-17 in the case of M/s DMR Builders Pvt. Ltd - regarding PAN: AABCD3380L Sir, With reference to the copy of reasons recorded and information received from ACIT- CC2(1), Ahmedabad dated 07.02.2019 in the above noted case, it is respectfully submitted as under: 1. In the information received from ACIT, Ahmedabad, following three points have been raised, in general, for the sub-contractor of M/s Dineshchandra R Agarwal Pvt. Ltd. (DRA): 1.1 That subcontractor does not exist or do not have infrastructure to provide the services to DRA 1.2 That discrepancies in the payment made to these sub-contractors. 1.3 That some of the sub-contractors have not filed its return. 2. In regards to the above point, it is submitted as under point-wise: 2.1 That firstly, the assessee company (M/s DMR Builders) is very well in the existence since 2000 and regularly filing its return the Income Tax Department. Further, being regularly assessed with the ....
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....ot applicable of non-filing of income tax returns 3. Now coming to the reasons recorded, it has been assumed that no work has been performed based on the following three points: 3.1 Sub contract agreement has not been furnished. 3.2 No detail of work performed by the assessee furnished even specially asked for. 3.3 It is already established that DRA is involved in booking of bogus sub contracts. 4. In regards to the above points, it is respectfully submitted as under: 4.1 It was requested then also that the agreement (letter of intent copy) currently is not available with the assessee company. At that time also, request was placed with DRA to provide copy of LOI covering the required information of margins and terms and conditions. Further, no second opportunity was provided to the assessee company to furnish the same. Therefore, making such belief is not valid and against the principles of natural justices specially when all other required information ie. details of project including location and scope of work, copies of the work allocation order from the Govt department was submitted. 4.2 This is misstated facts that ....
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....behalf of the contractee. The directions are binding upon me and hence the assessee was again required to file the requisite details vide notice u/s 142(1) dated 27.12.2019 along with the information called for vide earlier notices issued u/s 142(1) of the Act from time to time. However, the assessee failed to file the requisite information/details/evidences. 5.2 However, the assessee uploaded some more bills on 29.12.2019 i.e. only two days before the time limitation expires. The bills are relating to various sites and are neither site wise nor in a chronological order and hence cannot be cross verified with the copies of purchase accounts submitted by the assessee earlier nor can be cross verified from the vendors in such a short span of time. It is observed that the assessee was requested to furnish such information as early as on 06.08.2019 but the assessee chose to furnish the bills on 29.12.2019 when the lime limitation to complete the assessment proceedings is just to expire. Further, the other information as detailed above has still not been furnished by the assessee. 5.3 In view of the above facts, the books of accounts of the assessee do not reflect true....
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....ub-contract agreement was not submitted cannot form the sole reason for reopening an assessment. Not only did the AO fail to provide another opportunity to the Appellant, he also did not exercise his authority u/s 133(6) to obtain the copy directly from DRAIPL. He also ignored all the other supporting documents provided in this respect as discussed supra. The information received from the ACIT, Central Circle-2(1). Ahmedabad itself is not that there is any escaped assessment but rather to make further inquiries in respect of Certain sub-contractors who are non-existent, not capable, not disclosed of payments received and not filing Returns of Income. The Appellant does not fall under any of these Categories and this was fully clarified by the Appellant at the enquiry stage itself. The case has been reopened merely on presumption and surmises by misstating the facts and without any material in the possession of the AO. No proper verification of facts on the file has been done by the AO. No proper inquiry has been conducted by the AO. Merely issuing 133(6) to the Appellant cannot be considered as conduct of enquiry. It is the application of mind which is more important Reason to susp....
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....s and the assessee is one such party in the list, and since the assessee could not produce the sub contract agreement or the LOI, in course of inquiry u/s 133(6) by the AO, to prove the genuineness of the work executed, the AO has rightly arrived at a reason to believe that income has escaped assessment and was fully justified in initiating proceedings vide notice u/s 148 dated 29th March, 2019. 11.3 The Ld. DR concluded his arguments praying for upholding the legal validity of the notice issued u/s 148 of the Act and for restoration of the assessment order. 11.4 Before the Tribunal, the assessee has filed written submissions along with a paper book containing 171 (One hundred seventy one) pages consisting of audited accounts, audit report, copies of ITR for both the assessment years, inquiry letters issued u/s 133(6) and assessee replies, along with documentary evidences, including bills copies, measurement details, records of work execution diary, containing signature of various Government department officials, copies of recorded reasons, notice u/s 148, assessee objections, copies of letter of intent, submissions filed before Ld. CIT(A) and various other documents connecte....
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....erefore, the allegation of discrepancy in payments is not proved. c) The assessee company is regularly filing its return of income from past many years and for the year under consideration the assessee had declared income of Rs. 1,66,22,770/- for AY 2016-17 and amount of Rs. 6,00,82,031/- in AY 2017-18 and paid taxed accordingly. Therefore, the allegation of returns not being filed by the sub-contractors are not applicable on assessee. From perusal of above, your good-self will appreciate the fact the information relied upon by the assessee is not applicable on assessee, as per facts and evidences filed, placed on record and the Ld. CIT(A) had appreciated the above said facts. Thus, allegation of accommodation entry in this case is not sustainable compared with the audited return. 6. The findings given by the Ld. CIT(A) is as under: - Issue against which findings given by Ld. CIT(A) AY 2016-17 (relevant pages AY 2017-18 (relevant pages Observation on information received from ACIT, Central circle-2(1) vide letter dated 07.02.2019 Page 24 para 3.10 below in the order of CIT(A) 24.04.2024 Page 20 para 3.10 below in the order of CI....
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....AR relied upon various decisions to submit that in the instant case there has not been any proper application of mind by the AO to materials and documentary evidences submitted by the assessee in response to notices issued u/s 133(6) of the Act, and brushing aside all relevant evidences, he proceeded to initiate proceedings u/s 148, for absence of inconsequential documents, like absence of letter of intent in favour of the assessee, when the same could have been easily obtained from the searched person and for all practical purposes the same was a part of seized documents (considering the fact that the assessee name has been incorporated in the list of sub-contractors). 13. The judgments relied upon by the Ld. AR of the assessee in support of his arguments are as follows: "i. ITO vs. Sunbarg Tradelink (P.) Ltd as reported in [2016]74 taxmann.com 16 (Gujarat HC) ii. ITO vs. KMV Collegiate Sr. Sec. School as reported in [2017] 163 ITD 653 (Asr.) iii. ITO vs. Sukhvir Singh as reported in [2024]165 taxmann.com 197 (Amritsar) iv. Smt. Monika Rani vs ITO as reported in ITA no. 582/CHD/2019 (CHD.) v. DCIT Tax vs. Fortune Metaliks Limited as ....
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....sst year 2017-18, as disclosed by the assessee in regular returns and audited financials was Rs. 51.61 crores and Rs. 113.26 crores, respectively, and the alleged figure relating to sub contract receipts from DRAIPL (DRA - Group) Ahmedabad, which is the subject matter of dispute in this case, is only a meagre amount of Rs. 6.69 crores for Asst year 2016-17 and Rs. 23.09 crores for Asst year 2017-18, when compared to the whole. The sub contract receipts from DRAIPL (DRA - Group) are included in the whole and it proves beyond doubt the capacity and capability of the assessee, of having sufficient infrastructure and finance, of carrying out large scale work. Regarding the issue of discrepancy in figures, as per intimation of AC - Central Circle, the figures for the Asst year 2016-17 was Rs. 5.71 crores (against actual figures disclosed by assessee Rs. 6.69 crores) and for Asst year 2017-18 informed figure was Rs. 17.07 crores (against disclosed figure of Rs. 23.09 crores) .As such on this count also there is non application of mind of the AO, while recording of reasons post enquiry, when the entire facts of the case and actual figures were laid bare before him by the assessee (support....
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.... has not been done by the assessee (as sub-contractor), without making any effort to disprove the elaborate documentary evidences produced by the assessee in response to notice u/s 133(6) supported by all relevant materials and documentary evidences, included financials contained in regular returns filed, in support of execution of work. The AO has not even made any attempt to verify the genuineness or authenticity of the documentary evidences submitted by the assessee, neither from the Government authorities issuing the contract nor from the principal contractor. 18.1 Moreover, the reasons recorded by the AO are also based on factually incorrect figures of Gross Receipts received on intimation vis a vis disclosure in audited accounts, returns and bank statements (already discussed in earlier paragraphs) and as such relying on the decision of the coordinate bench in the case of KMV Collegiate Senior Secondary School vs ITO [2017] 163/ ITD 653 (ASR) and also on the decision in the case of Sukhvir Singh vs ITO [2024] 165 taxmann.com197 (ASR) we hold that there has been non application of mind by the AO to the facts and materials on record and since the reopening is based on factua....