ASST. COMMISSIONER OF INCOME TAX, PANVEL CIRCLE PANVEL V. OUTABOX MEDIA SOLUTIONS LLP, GHATKOPAR MUMBAI

ITA 177/PUN/2024

AI Insights

The case involves Outabox Media Solutions LLP, which is engaged in providing advertisement services and had claimed substantial expenses for contract work. The Assessing Officer disallowed a significant portion of these expenses, labeling them as 'bogus', due to insufficient verification details provided by the assessee. The CIT(A) / NFAC initially deleted this addition, but the Revenue appealed to the Tribunal. The Tribunal acknowledged the issues in the documentation provided by the assessee but also noted the reasonable profit margin declared by the assessee. Ultimately, the Tribunal decided to reduce the disallowance amount rather than uphold the full disallowance made by the Assessing Officer.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 471217 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2024
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-09-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 29-01-2024
• Other Referred Cases: Vijay Proteins Ltd. vs. DCIT, Kalinga Institute of Industrial Technology vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAMNATH P MURKUNDE
• Assessee Lawyers: GUNJAN H KAKKAD
• Keywords: Set aside; Bogus purchase; TDS; Bogus
• Section: 148; 144; 142(1); 143(2); 153; 132; 153A; 43; 139; 153C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND MS ASTHA CHANDRA, JUDICIAL MEMBER ITA No.177/PUN/2024 Assessment Year : 2017-18 ACIT, Panvel Circle, Panvel Vs. Outabox Media Solutions LLP 710, 7th Floor, Bhaveshwar Arcade Annexe, LBS Marg, Ghatkopar, Mumbai – 400086 PAN: AAEFO2800L (Appellant) (Respondent) Assessee by : Shri Gunjan H Kakkad Department by : Shri Ramnath P Murkunde Date of hearing : 18-09-2024 Date of pronouncement : 07-11-2024 O R D E R PER R.K. PANDA, VP : This appeal filed by the Revenue is directed against the order dated 24.11.2023 of the CIT(A) / NFAC, Delhi relating to assessment year 2017-18. 2. Facts of the case in brief, are that the assessee is a Limited Liability Partnership (LLP) engaged in the business of providing advertisement services through Wall Painting, Print Media and Social Media marketing. It filed its return of income on 07.11.2017 declaring total income of Rs.99,88,360/-. The case was selected for scrutiny through CASS to verify the “Contract Expenses”. Accordingly, statutory notice u/s 143(2) of the Income Tax Act, 1961 (hereinafter referred to as “the Act‟) was issued to the assessee by the Income Tax Officer, Ward-2, Panvel on 21.09.2019. The said notice was duly served on the assessee 2 ITA No.177/PUN/2024 through RPAD as well as on e-mail. The assessee was also specifically asked to respond through e-proceedings only. In response, the assessee submitted its response vide letter dated 28.08.2018 through RPAD along with list of Contract Expenses incurred along with the copies of bills. Subsequently, the case was transferred to the ACIT, Circle-1, Panvel since the jurisdiction over the case vests with him. Due to change in the incumbent and in order to complete the proceedings, a notice u/s 142(1) of the Act was issued to the assessee on 07.11.2019. 3. During the course of assessment proceedings the Assessing Officer noted that the assessee has shown gross receipts of Rs.10,97,01,606/- from its contract work on which profit of Rs.99,88,362/- was declared. The assessee has claimed expenses of Rs.8,45,92,754/- on account of labour charges and material expenses which is almost 78% of the gross receipts. Since the case was selected to verify the contract expenses, the Assessing Officer asked for the details. The assessee submitted the list of payments made for wall painting charges of Rs.6,35,81,436/- and payments made for labour charges amounting to Rs.1,84,25,720/- along with the copies of bills in respect of wall painting charges. The Assessing Officer thereafter asked the assessee to furnish the following details in respect of painting charges: 1. Complete Postal address, contact nos. PAN and email ids of the vendors who executed the wall painting jobs. 2. Details of the TDS made with supporting documents. 3. Description of the work done with supporting documents. 3 ITA No.177/PUN/2024 4. Photographs of the wall painting done with serial nos. as required for Wall Painting along with size, date and wall No. 5. Rent if any paid to the owners of wall. 6. Work completion certificate from the authorized person of the concern for whom Digital Wall Painting was done. You are further requested to provide the copy of work agreement in this regard. 4. So far as the labour charges of Rs.1,84,25,720/- is concerned, the Assessing Officer asked the assessee to furnish the following details: 1. Complete Postal Address, Contact nos. PAN and email ids of the vendors to whom payments were made towards labour charges 2. Details of the TDS made with supporting documents. 3. Description of the work done with supporting documents. 4. Copy of the labour contract, if any made. 5. In response to the above, the assessee submitted the Excel sheet with name of person, PAN, contact number, address and TDS details, PPTs with PDFs of work done with pictures attached and TDS challan. From the various details furnished by the assessee, the Assessing Officer noted that these were not sufficient to verify its genuineness. The assessee has not provided the complete addresses of the parties to carry out the third party verification. He observed that the different vendors of the assessee have same PAN and he reproduced some of the instances in the assessment order at pages 12 to 14. He further noted that some of the vendors (Wall painting & labour contract) have not filed their returns of income for the year under consideration i.e. assessment year 2017-18. He further noted that the photographs of paint works provided by the assessee are unsubstantiated in absence of any confirmation from the parties for whom the work was carried out. In view of the above discrepancies, the Assessing Officer asked 4 ITA No.177/PUN/2024 the assessee to explain as to why the wall painting charges of Rs.6,35,81,436/- and labour charges of Rs.1,86,00,720/- debited to the Profit and Loss Account should not be termed as „bogus expenses‟ and the same should not be disallowed. Rejecting the various explanations given by the assessee and following the decision of the Hon‟ble Apex Court in the case of Vijay Proteins Ltd., the Assessing Officer made addition of Rs.2,05,45,539/- being 25% of the expenses of Rs.8,21,82,156/- as bogus expenses. The Assessing Officer accordingly determined the total income of the assessee at Rs.3,05,33,900/-. 6. Before the CIT(A) / NFAC, the assessee made elaborate submissions. It was submitted that the contract expenses incurred by the assessee are in the nature of sub-contract expenses for wall painting and incidental labour charges. Since the jobs undertaken by the assessee are in remote locations across the country, the parties / sub-contractors hired by the assessee are local labourers who did not submit proper bills and vouchers for the work done. The assessee filed the works undertaken by it in the states of Maharashtra, Madhya Pradesh, Uttar Pradesh, Odisha, Bihar, Tamil Nadu, West Bengal, Karnataka, Andhra Pradesh, etc. It was submitted that the payments were made in the normal course of business through proper banking channel either by account payee cheque or RTGS. Relying on various decisions, it was argued that the Assessing Officer was not justified in making addition of 25% of the contract expenses and the labour charges as bogus expenses. 5 ITA No.177/PUN/2024 7. Based on the arguments advanced by the assessee, the Ld. CIT(A) / NFAC deleted the addition by observing as under: “8.0 The submissions of the appellant have duly been considered. On the issue of disallowance of expenses, it is important to discuss the findings of the A.O in the assessment order passed. 8.1 In the asst order passed, the relevant issue is discussed at para 2 to 7. The A.O in these paras has stated that the details provided by the assessee were not sufficient to verify the genuineness of expenses claimed, the assessee has not provided complete address of the parties to carry out the third party verification, different vendors of the assessee have same PAN, various vendors have not filed their return of income, photographs of paint work remained unsubstantiated in absence of any confirmation from the parties for whom the work is carried out, the bills have been issued in the same format, details of the party are not complete, the signature in the bills appears to be done by other person in the name of party. Based on these findings, the A.O concluded that the bills are purported and prepared by the assessee itself and expenses claimed remained unsubstantiated. The A.O placed reliance on the Judgement of Hon'ble Apex Court in the case of Vijay Proteins Ltd and disallowed 25% of total expenses claimed. 8.2 The contentions raised by the AR are considered. The appellant has declared net profit of Rs. 99,88,362/- on a gross turnover of Rs. 10,97,01,606/-, which works out to approximately 9% of the receipts and is a reasonable profit declared. The A.O in these paras has no where stated that the profit declared by the appellant is on lower side or not in accordance with the profit declared by the other business entities in the same trade. The A.O has estimated the disallowance of expenses, without pointing out any defect in the books of accounts maintained by the assessee and rejecting the same. The case law relied by the A.O is misplaced as the said judgement refers to bogus purchases and hawala transactions. On the other hand, the appellant has duly clarified the issue at hand. The appellant submitted various documents including bills raised by various parties. The Contract Expenses incurred by the Appellant are the basic expenses which are required to be incurred for the Appellant to run its business. The nature of work undertaken by the Appellant involves procuring advertising contracts which require the Appellant to undertake wall painting jobs at various locations across the country. Thus, the basic nature of business is contractual in nature. The contract expenses incurred have been duly reflected in the books of accounts of the Appellant. Moreover, all the payments for the said purchases have been made through normal banking channels ie either by way of account payee cheques or through Real Time Gross Settlement RTGS. Thus, the genuineness of the purchases has been proved by corroborated by way of invoices and bank payments. The case laws relied by the appellant are found to be applicable to the facts of the case in hand and supports the appellants case. 6 ITA No.177/PUN/2024 8.3 Considering the fact that, the A.O has not brought on record any defect in the books of accounts maintained by the appellant, the books of accounts have not been rejected before estimating the disallowances, the payments in respect of expenses disallowed are made through banking channels, nothing is brought on record to illustrate and no such finding is made that the payments made through banking channels are not legitimate or self-withdrawals have been made by the appellant after making such payments, which is routed back to the appellant, the net profit declared is around 9%, which is quite reasonable in the line of appellants business, the appellant has submitted invoices and the non- filing of return of income by the vendors cannot be a case of disallowance in the appellants case, I am of the considerate view that the appellant has discharged his onus of substantiating the expenses claimed. The disallowances made are unwarranted and liable to be deleted. 9.0 Considering above, the grounds of appeal no. 2, as raised by the appellant are allowed.” 8. Aggrieved with such order of CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds: 1. i. On the facts and in the circumstances of the case. and in law, the Ld. CIT(A) erred in allowing the expenses of Rs 2.05 crs as against disallowance of 25% of said claim made, without appreciating that. the assessee in the assessment proceeding submitted incomplete details of expenses wherefrom third party verification was not possible and hence the onus of assessee to prove the genuinety of expenses was not discharged. ii. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in allowing the expenses of Rs 2.05 crs as against disallowance of 25% of said claim made, without appreciating that the AO in the Order specifically pointed out the defects in claim made by assessee by unearthing the parties in claim having common PAN which itself shows that claim was bogus. 2 iii. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in allowing the expenses of Rs 2.05 crs as against disallowance of 25% of said claim made, by merely relying on payments made to parties through banking channels without even considering the fact that payments through banking channel are not conclusive to prove the genuinety of expenses claimed. iv. The order of the CIT(A) may be vacated and that of the Assessing Officer may be restored v. The appellant craves leave to add, amend, alter or delete any ground of appeal. 7 ITA No.177/PUN/2024 9. The Ld. Counsel for the assessee filed the following legal ground under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 (hereinafter referred to as „the Rules‟): “On the facts and circumstances of the case and in law, the assessment order dated 16 December 2019 is invalid since the Assistant Commissioner of Income- tax Circle Panvel being the Jurisdictional Assessing Officer has not issued the notice under section 143(2) of the Act.” 10. Referring to the above ground, Ld. Counsel for the assessee submitted that the assessee is a respondent in the matter against the appeal filed by the Revenue. He submitted that the assessment order dated 16.12.2019 passed by the ACIT, Panvel Circle was the subject matter of challenge before the CIT(A) / NFAC. The CIT(A) / NFAC had allowed the appeal filed by the assessee wherein the disallowance made by the Assessing Officer was deleted. He submitted that the assessee through this legal ground filed as per rule 27 of the Income Tax (Appellate Tribunal) Rules would like to submit that the assessment order passed by the Assessing Officer is not valid since the notice u/s 143(2) of the Act was issued by the ITO, Ward-2, Panvel whereas the said notice u/s 143(2) of the Act should have been issued by the Assessing Officer who has the jurisdiction over the assessee. Since the Assessing Officer having jurisdiction over the assessee has not issued the notice u/s 143(2) of the Act, therefore, such order passed by the ACIT, Panvel Circle becomes a nullity. For the above proposition, the Ld. Counsel for the assessee relied on the following decisions: i) Ashok Devichand Jain vs. Union of India [2023] 452 ITR 43 (Bombay) 8 ITA No.177/PUN/2024 ii) ITO vs. Watermark Systems (I) P Ltd [ITA No. 4836/4827/ 4828/4833/4834/4830/4831/4832/Mum/2016] (Mumbai Tribunal order dated 27.02.2023) iii) ACIT vs. Rajdhani Jewellers and Gems (P) Ltd [2024] 163 taxmann.com 444 (Raipur - Trib.) iv) ACIT vs. Aananda Devcon (P) Ltd [2024] 163 taxmann.com 372 (Raipur - Trib.) v) Monarch & Qureshi Builders vs. ACIT [2024] 161 taxmann.com 356 (Mumbai - Trib.) vi) S. K. Industries vs. ACIT [WP (C) No. 664 of 2015] (Delhi High Court) vii) S. K. Industries vs. ACIT [2022] 141 taxmann.com 568 (Delhi High Court) affirmed by the Hon'ble Supreme Court in ACIT vs. S. K. Industries [2022] 288 Taxman 651 (SC) viii) PCIT vs. Nopany & Sons [2022] 286 Taxman 388 (Calcutta) 11. So far as the merit of the case is concerned, he submitted that the assessee is in the business of providing advertisement services by way of wall painting to carry out the wall painting across the country from various companies and organizations. The assessee undertakes wall painting work as per the numbers and requirements of the clients. Maximum wall painting jobs are executed in remote locations in various parts of the country. During the course of assessment proceedings the assessee provided all the details such as invoices, description of job work performed, photographs of the works carried out on sample basis etc. All the payments have been made by account payee cheque or through RTGS. Further, the profit rate disclosed by the assessee is commensurate with the other business concerns engaged in similar line of business. It was argued that the Assessing Officer has not pointed out any defect in the books of account. 9 ITA No.177/PUN/2024 12. So far as the allegation of the Assessing Officer that some of the parties are having same PAN is concerned, he submitted that in some cases the individuals are the proprietor of the concern and therefore, when the PAN is same, it is in the name of a particular person or in the name of the proprietorship concern. He however, admitted that in fact, in one or two cases due to mistake on the part of the assessee such thing has happened. 13. So far as the allegation of the Assessing Officer that some of the parties to whom payments have been made, have not filed their returns of income is concerned, the Ld. Counsel for the assessee submitted that the assessee has made the payments through proper banking channel, deducted TDS from the said payments and those persons have done the work as per the specifications of the assessee. The assessee has no control over those to whom the payments have been made regarding filing of their tax returns. He submitted that since the CIT(A) / NFAC has passed a detailed order giving the reasons while deleting the disallowance made by the Assessing Officer, the same should be upheld and the grounds raised by the Revenue should be dismissed. 14. The Ld. DR on the other hand strongly challenged the order of the CIT(A) / NFAC as well as the ground raised by the assessee as per Rule 27 of the Rules. He submitted that the assessee filed return with ITO, Ward 2, Panvel though the jurisdiction as per first letter of the assessee‟s name i.e. „O‟ was with another officer i.e. ITO, Ward -5, Panvel. As per the monetary limit of income returned, 10 ITA No.177/PUN/2024 the jurisdiction was with the ACIT, Circle Panvel. Since the ITO, Ward 2, Panvel had issued the notice u/s 143(2) of the Act as the PAN and the return of income was with the said charge, however, on noticing the monetary limit, he transferred the file to the ACIT, Panvel Circle and subsequently, the ACIT, Panvel Circle passed the order after issuing the notice u/s 142(1). He submitted that the jurisdiction of the ITO, Ward 2, Panvel or the ACIT, Panvel Circle was never challenged before the Assessing Officer during the course of assessment proceedings or before the CIT(A) / NFAC and the assessee for the first time is challenging this issue before the Tribunal. He submitted that the assessee knowingly has filed its return of income for assessment years 2016-17 and 2017-18 and even for assessment year 2018-19 with ITO, Ward (2), Panvel even though the said ITO did not have jurisdiction over the assessee. Only for the assessment year 2019-20 the assessee filed the return of income with the ACIT, Panvel Circle. This otherwise shows that the assessee deliberately and knowingly filed the return in the wrong jurisdiction and did not file before the concerned Assessing Officer. 15. Referring to the provisions of sub-section (3) of section 124 of the Act, he submitted that as per the said provision, no person shall be entitled to question about the jurisdiction of the Assessing Officer where he has made a return under sub-section (1) of section 139 of the Act after the expiry of one month from the date on which he was served with the notice under sub-section (1) of section 142 of the Act or sub-section (2) of section 143 or after completion of the assessment, whichever is earlier. He submitted that since the assessee in the instant case has 11 ITA No.177/PUN/2024 never challenged the jurisdiction of the Assessing Officer as per the provisions of section 124(3)(a) of the Act, therefore, the assessee now cannot raise a ground challenging the jurisdiction of the Assessing Officer. 16. Referring to the decision of the Hon'ble Supreme Court in the case of DCIT vs. Kalinga Institute of Industrial Technology (2023) 151 taxmann.com 434 (SC), he submitted that the Hon'ble Supreme Court in the said decision has held that when the assessee had participated in the assessment proceedings pursuant to the notice issued u/s 142(1) of the Act and had not questioned the jurisdiction of the Assessing Officer, therefore, provisions of section 124(3)(a) precludes the assessee from questioning the jurisdiction of the Assessing Officer if he does not do so within 30 days of receipt of notice u/s 142(1). He submitted that in that case also the jurisdiction had changed after the returns were filed but the assessee had participated in the assessment proceedings pursuant to the notice issued u/s 142(1) and not questioned the jurisdiction of the Assessing Officer. Accordingly the Hon‟ble Apex Court reversed the view of the High Court and held that the assessee cannot challenge the jurisdiction of the Assessing Officer since he had participated in the assessment proceedings after receipt of notice u/s 142(1) and had not challenged the jurisdiction of the Assessing Officer within 30 days as per the provisions of sub-section (3) of section 124. He submitted that the ratio of the decision of the Hon'ble Supreme Court in the case of DCIT vs. Kalinga Institute of Industrial Technology (supra) squarely applies to the facts of the present case especially when the assessee had participated in the assessment proceedings 12 ITA No.177/PUN/2024 pursuant to the notice u/s 142(1) of the Act by the ACIT, Panvel Circle and has never questioned the jurisdiction of the Assessing Officer either before the Assessing Officer or the CIT(A) / NFAC. He also relied on the following decisions: a) Abhishek Jain vs. ITO 405 ITR 1 (Del) b) Arun Kumar Muchhala vs. CIT 399 ITR 256 (Bom) c) Shivaaditya Jems and Jewellery (P) Ltd. vs. ITO (2022) 143 taxmann.com 64 d) Adarsh Developers vs. DCIT (2024) 158 taxmann.com 81 (Kar) e) Tarasafe International (P) Ltd. vs. DCIT (2023) 153 taxmann.com 282 (Kolkata-Trib) 17. So far as the merit of the case is concerned, he submitted that merely because the payments have been made by account payee cheque and TDS has been deducted that cannot validate an otherwise suspicious business transaction. He submitted that the assessee in his written submission has clearly admitted that it was a mistake on its part to mention wrong PAN numbers. Once such instances were there before the CIT(A) / NFAC, he should not have deleted the entire addition merely on the ground that the Assessing Officer has not pointed out any defect or that the payments have been made through proper banking channel and TDS has been deducted. He accordingly submitted that the order of the CIT(A) / NFAC being contrary to the facts, should be set aside and the order of the Assessing Officer be restored. 13 ITA No.177/PUN/2024 18. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed by both the sides. We have also considered the various decisions cited before us by both sides. Before dealing with the merit of the case, first, we would like to decide the legal ground raised by the assessee as per Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 according to which, the ACIT, Panvel Circle being the jurisdictional Assessing Officer has not issued the notice u/s 143(2) of the Act and therefore, the assessment order is invalid. It is an admitted fact that the assessee had filed its return of income before the ITO, Ward-2, Panvel who had issued notice u/s 143(2). Subsequently due to monetary limits of the income returned, the ITO Ward-2, Panvel transferred the file to the ACIT, Panvel Circle who issued notice u/s 142(1) of the Act. The relevant operative portion of the assessment order reads as under: “1. The return of income for A.Y.2017-18 was electronically filed by the assessee on 07.11.2017 declaring total income of Rs. 99,88,360/-. The case was selected for scrutiny through 'CASS' to verify limited issue of \"Contract Expenses\". Accordingly, notice u/s. 143(2) of Income-tax Act, 1961 [hereinafter referred to as 'the Act'] was issued to the assessee by the Income Tax Officer, Ward-2, Panvel on 21.09.2019. The said notice was duly served on the assessee through speed post as well as through email. The assessee was specifically asked to respond through e- proceeding only. In response, the assessee submitted its response vide letter dated 28.08.2018 through RPAD (received on 04.10.2018) along with list of Contract Expenses incurred along with the copies of bills. The details submitted were duly examined and taken on record. Later on, the case was received on transferred to this charge as the jurisdiction over the case vests with this charge. Accordingly, due to change in incumbent and in order to complete the proceedings, a notice u/s 142(1) of the Act was issued to the assessee on 07.11.2019.” 19. It is also an admitted fact that the assessee never challenged the jurisdiction of the ACIT, Panvel Circle for not issuing notice u/s 143(2) either before him or 14 ITA No.177/PUN/2024 before the CIT(A) / NFAC and has participated in such assessment proceedings. The provisions of section 124(3)(a) and 124(4) of the Act read as under: “124(1)….. …….. (3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer— (a) where he has made a return under sub-section (1) of section 115WD or under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 115WE or sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier; (b) where he has made no such return, after the expiry of the time allowed by the notice under sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier; (c) where an action has been taken under section 132 or section 132A, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 153A or sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier. (4) Subject to the provisions of sub-section (3), where an assessee calls in question the jurisdiction of an Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (2) before the assessment is made.” 20. We find an identical issue had come up before the Hon'ble Supreme Court in the case of DCIT vs. Kalinga Institute of Industrial Technology (supra). In that case, the Hon‟ble High Court of Orissha has quashed the assessment order on the ground that the jurisdiction to issue notice u/s 143(2) of the Act in case of assessee laid with JCIT (OSD) (Exemption), Bhubaneswar, whereas the notice u/s 143(2) of the Act was issued by the ACIT, Corporate Circle 1(2), Bhubaneswar, who has no jurisdiction. When the Revenue challenged the above order of the Hon‟ble High Court, the Hon'ble Supreme Court set aside the order of the Hon‟ble High Court 15 ITA No.177/PUN/2024 and allowed the appeal filed by the Revenue on the ground that the records revealed that the assessee had participated pursuant to the notice issued u/s 142(1) of the Act and had not questioned the jurisdiction of the Assessing Officer and therefore, in such case, the order of the Hon‟ble High Court could not be sustained. The relevant order of the Hon'ble Supreme Court reads as under: “1. The impugned order set asides the assessment for AY 2014-2015 on the ground that the jurisdictional officer had not adjudicated upon the returns. The jurisdiction had been changed after the returns were filed. However, the records also reveals that the assessee had participated pursuant to the notice issued under Section 142 (1) and had not questioned the jurisdiction of the assessing officer. Section 124(3)(a) of the Income Tax Act precludes the assessee from questioning the jurisdiction of the assessing officer, if he does not do so within 30 days of receipt of notice under Section 142 (1). 2. In the present case, the facts did not warrant the order made by the High Court. At the same time, this Court notices that the High Court had granted liberty to the concerned authority to issue appropriate notice. 3. It is clarified, therefore, that the assessing officer is free to complete the assessment (in case the assessment order has not been issued) within the next 60 days. In such event, the question of limitation shall not be raised by the assessee. 4. The special leave petition is allowed in the above terms. 5. Pending application, if any, are disposed of.” 21. Since the assessee in the instant case had participated in the assessment proceedings and had never challenged the jurisdiction of the ACIT, Panvel Circle who had issued the notice u/s 142(1) of the Act, therefore, respectfully following the decision of the Hon'ble Supreme Court in the case of DCIT vs. Kalinga Institute of Industrial Technology (supra), we hold that the assessment order dated 16.12.2019 passed by the ACIT, Panvel Circle is valid. So far as the various decisions relied on by the Ld. Counsel for the assessee are concerned, these are distinguishable and not applicable to the facts of the present case especially in view 16 ITA No.177/PUN/2024 of the decision of Hon'ble Supreme Court cited (supra). In view of the above discussion and following the decision of the Hon'ble Supreme Court in the case of DCIT vs. Kalinga Institute of Industrial Technology (supra), we hold that the assessment order dated 16.12.2019 passed by the ACIT, Panvel Circle is valid. The legal ground raised by the assessee under rule 27 of the Rules is accordingly dismissed. 22. So far as the merit of the case is concerned, we find the Assessing Officer in the instant case disallowed 25% of the expenses of Rs.8,21,82,156/- as bogus expenses on the ground that the details provided by the assessee are not sufficient to verify the genuineness of the expenses claimed, the assessee has not provided the complete addresses of the parties to carry out third party verification, different vendors of the assessee have same PAN, various vendors have not filed their returns of income, photographs of paint work remained unsubstantiated in absence of any confirmation from the parties for whom the work is carried out, the bills have been issued in the same format, details of the party are not complete, the signature in the bills appears to be done by other person in the name of the party etc. While doing so, the Assessing Officer had followed the order of the Hon'ble Supreme Court in the case of Vijay Proteins Ltd. We find the CIT(A) / NFAC deleted the addition made by the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. According to the CIT(A) / NFAC, the assessee has submitted the various documents including the bills raised by the various parties, such contract expenses are the basic expenses required to be 17 ITA No.177/PUN/2024 incurred by the assessee to run its business, the assessee has undertaken wall painting jobs at different locations across the country, contract expenses incurred have been duly reflected in the books of accounts of the assessee, all the payments have been made through normal banking channels, genuineness of the purchases have been corroborated by way of invoices and bank payments, net profit declared by the assessee at 9% is quite reasonable in line of the assessee‟s business and that there are no self-withdrawals made by the assessee after making such payments which is routed back to the assessee, etc. Although we agree with the order of the CIT(A) / NFAC to some extent that the payments have been made through normal banking channel and the other parties have raised bills and the Assessing Officer has not pointed out any defect in the books of account, however, at the same time, it is also a fact that the assessee had not given the complete details i.e. complete addresses of the parties to whom the payments have been made and there are same PAN numbers for different parties. Para 23 of the written submission filed by the assessee before the Tribunal reads as under: “23. From a perusal of the above table, the Appellant did not apply his mind to the information provided. In case of some of the parties, it is absolutely clear that it is a mere mention of the same person twice. The Assessee submits that the Appellant is wrong in stating that different persons have same PAN. Further, in respect of (i) COLOR POINT ADVERTISING and ASHISH KUMAR (ii) Rafiq Sunshine Arts d Sunshine Art and Advertising iii) Santosh Pal and SANTOSH KUMAR iv) R K Gupta and UMANG ARTS the name of the person and his trade name has been mentioned. Effectively, they are same person and therefore there does not arise any question of different person having the same PAN.” 23. A perusal of the above shows that the assessee himself has given wrong information to the Assessing Officer as well as the CIT(A) / NFAC in respect of some of the parties. Despite the above, the Ld. CIT(A) / NFAC closed his eyes 18 ITA No.177/PUN/2024 and allowed the appeal filed by the assessee which in our opinion, cannot be accepted. In our opinion, the estimation of profit @ 25% is uncalled for especially when the assessee has declared reasonable profit rate @ 9% of the total contract receipts and the decision relied on by the Assessing Officer in the case of Vijay Protein (supra) is distinguishable and not applicable to the facts of the present case. At the same time, it cannot be said that there is no leakage of revenue in the instant case especially when the assessee could not give the complete addresses of the parties to whom the payments have been made and that there are similar PAN numbers for different vendors which the assessee itself has admitted in the written submissions. Considering the totality of the facts of the case, we are of the opinion that lump sum of disallowance of Rs.20 lakhs will meet the ends of justice. We hold and direct accordingly. The order of the CIT(A) / NFAC is accordingly modified and the Assessing Officer is directed to restrict the disallowance to Rs.20 lakhs as against Rs.2,05,45,539/- disallowed by him. The grounds raised by the Revenue are accordingly partly allowed. 24. In the result, the appeal filed by the Revenue is partly allowed. Order pronounced in the open Court on 7th November, 2024. Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 7th November, 2024 GCVSR 19 ITA No.177/PUN/2024 आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. 5. The concerned Pr.CIT DR, ITAT, „A‟ Bench, Pune गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune S.No. Details Date Initials Designation 1 Draft dictated on 29.10.2024 Sr. PS/PS 2 Draft placed before author 05.11.2024 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order "