INCOME TAX OFFICER-1(2)(1), MUMBAI V. LUBE DISTRIBUTING COMPANY PVT. LTD , MUMBAI

ITA 3405/MUM/2024

AI Insights

The case involves the Income Tax Officer as the appellant and Lube Distributing Company Pvt. Ltd. as the respondent. The core issue was the deletion of an addition of Rs. 71,91,040 by the CIT(A), which was initially added by the AO under the suspicion of it being an accommodation entry for bogus billing. The assessee, Lube Distributing Company, argued that the transaction was genuine and supported by documentary evidence, including tax invoices and bank statements showing payment through RTGS after deduction of applicable TDS. The CIT(A) agreed with the assessee, leading to the Revenue's appeal to the Tribunal. The Tribunal's decision focused on the lack of independent investigation by the AO and the substantial evidence provided by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 112209 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM KRISHN KEDIA
• Assessee Lawyers: DEVENDRA JAIN
• Keywords: Set aside; Bogus purchase; TDS; Search and seizure; Accommodation entries; Bogus
• Section: 147; 148; 250

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.3405/MUM/2024 (Assessment Year 2015-16) Income Tax Officer-1(2)(1), Room No.536, 5th Floor, Aayakar Bhawan, M.K. Road, Mumbai - 400020 ............... Appellant v/s Lube Distributing Company Pvt. Ltd., 10, Sai Sadan Co-Operative Society, 4th Floor, 68, Jan Bhoomi Marg, Fort, Mumbai – 400001 PAN : AABCL6017A ……………… Respondent Assessee by : Shri Devendra Jain Shri Shashank Mehta Revenue by : Shri Ram Krishn Kedia, Sr.DR Date of Hearing – 19/03/2025 Date of Order - 16/04/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The Revenue has filed the present appeal against the impugned order dated 11.05.2024, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals) – National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2015-16. 2. In this appeal, the Revenue has raised the following grounds: - ITA No.3405/Mum/2024 (A.Y. 2015-16) 2 “1. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 71,91,040/-on account of accommodation entry in form of Bogus expenses without appreciating the fact that the entry providing company M/s Culminating Management Put. Ltd. is a shell/ paper/dummy company as per information received from Investigation wing.\" 2. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the AO be restored.” 3. The only issue that arises for our consideration, in the present appeal, pertains to the deletion of the addition made on account of the accommodation entry of bogus billing. 4. The brief facts of the case pertaining to this issue, as emanating from the record, are: For the year under consideration, the assessee filed its return of income on 21.10.2015, declaring a total income of Rs.31,12,080/-. Subsequently on the basis of the information received from the office of DDIT (Investigation), Unit-3(1) Kolkata regarding search and seizure/survey action under section 132/133A of the Act carried out at the residential and office premises of Shri Kamal Kumar Jain, Shri Deepak Upadhyay and Shri Ranjit Kumar Singh, wherein it was found that they have controlled over several entities which were used for providing bogus bills to beneficiaries in the form of bogus purchases, services, sales, etc. and the assessee is one such beneficiary, who has obtained accommodation entries of Rs.71,91,040/- during the year under consideration, in the form of bogus billings, proceedings under section 147 of the Act were initiated and notice under section 148 of the Act was issued on 30.03.2021. In response to the notice issued under section 148 of the Act, the assessee filed its return of income on 30.03.2021, declaring a total income of Rs.31,12,080/-. In response to the statutory notices issued during the assessment proceedings, the assessee submitted ITA No.3405/Mum/2024 (A.Y. 2015-16) 3 that it is engaged in the business as a sole distributor in the State of Maharashtra of M/s. Tide Water Oil Co. (India) Ltd., a Government of India Enterprise and a listed entity. The assessee submitted that it had various deliberations with M/s. Tide Water Oil Co. (India) Ltd. for market development and to improve its sales of core and non-core products, and thereafter, the assessee was appointed as a Market Development Partner for the State of Maharashtra. The assessee submitted that as a Market Development Partner, it was required to co-ordinate with its area in-charges, Manager–Sales, to achieve overall improvement in sales in the State of Maharashtra, and for the same, on the recommendation and advice of one Mr. V.K. Kulkarni, M/s. Culminating Managing Pvt. Ltd. was appointed for the market development of the core products of M/s. Tide Water Oil Co. (India) Ltd. The assessee further submitted that M/s. Culminating Management Pvt. Ltd. raised its tax invoice for the market development service, inclusive of service tax amounting to Rs.71,91,040/-, which was paid by the assessee through RTGS after deduction of applicable TDS. The assessee further submitted that it raised an invoice on M/s. Tide Water Oil Co. (India) Ltd., inclusive of service tax for claiming the reimbursement of market development expenses, which, after verification, was certified for reimbursement by the Deputy Manager of M/s. Tide Water Oil Co. (India) Ltd. Accordingly, the assessee submitted that the transaction with M/s. Culminating Management Pvt. Ltd. is duly supported/backed by documentary evidence, and there is no basis for treating the amount of Rs.71,91,040/- (inclusive of service tax) as an accommodation transaction of bogus billing. ITA No.3405/Mum/2024 (A.Y. 2015-16) 4 5. The Assessing Officer (“AO”), vide order dated 27.03.2022 passed under section 147 r.w. section 144B of the Act, disagreed with the submissions of the assessee and held that merely making payment through RTGS is not sacrosanct, nor can it make an ingenuine transaction as genuine. The AO further held that M/s. Culminating Management Pvt. Ltd. is a shell/paper/dummy company of Shri Kamal Kumar Jain, Shri Deepak Upadhyay and Shri Ranjit Kumar Singh, and the assessee had only obtained accommodation entry in the form of bogus billing in lieu of cash for the year under consideration. Accordingly, the sum of Rs.71,91,040/- was added to the total income of the assessee. 6. The learned CIT(A), vide impugned order, upheld the initiation of re- assessment proceedings under section 147 of the Act, however, granted relief to the assessee and deleted the addition of Rs.71,91,040/- made by the AO on account of accommodation entry in form of bogus billing on the basis that the AO solely relied upon to the report of the Investigation Unit and no inquiry or investigation was done by the AO independently. The learned CIT(A) further held that the AO has not established the allegation of taking an accommodation entry by the assessee for booking bogus expenses. Thus, on the basis that the assessee has duly discharged its onus by way of requisite evidence regarding the genuineness of the transaction, the learned CIT(A) deleted the addition made by the AO. Being aggrieved, the Revenue is in appeal before us. ITA No.3405/Mum/2024 (A.Y. 2015-16) 5 7. We have considered the submissions of both sides and perused the material on record. In the present case, there is no dispute regarding the fact that the assessee is a sole distributor in the State of Maharashtra of M/s. Tide Water Oil Co. (India) Ltd., which is a Government of India Enterprise. Further, there is also no dispute regarding the fact that the assessee was appointed as the Market Development Partner for the State of Maharashtra by M/s. Tide Water Oil Co. (India) Ltd. It is the plea of the assessee that on the recommendation and advice of one Shri V.K. Kulkarni, the assessee appointed M/s. Culminating Management Pvt. Ltd. for achieving the overall improvement in sales of the core product of M/s. Tide Water Oil Co. (India) Ltd. 8. On the basis of the information received from the Investigation Unit that M/s. Culminating Management Pvt. Ltd. is one of the entities, which was controlled by Shri Kamal Kumar Jain, Shri Deepak Upadhyay and Shri Ranjit Kumar Singh, who were engaged in providing accommodation entries to their beneficiaries in the form of bogus billing, re-assessment proceedings were initiated in the case of the assessee. In the present case, it is evident from the record that in order to prove the genuineness of the transaction, the assessee, during the re-assessment proceeding itself, placed on record the copy of the tax invoice raised by M/s. Culminating Management Pvt. Ltd., inclusive of service tax for providing market development services. Further, we find that the assessee also placed on record a copy of the extract of the bank statement to prove that the said amount was paid through RTGS after deduction of applicable TDS. In order to substantiate the genuineness of the transaction, it is further the plea of the assessee that the amount paid to M/s. ITA No.3405/Mum/2024 (A.Y. 2015-16) 6 Culminating Management Pvt. Ltd. was reimbursed by M/s. Tide Water Oil Co. (India) Ltd., upon an invoice being raised by the assessee for claiming the reimbursement of market development expenses, inclusive of service tax paid. Therefore, it is evident that the assessee furnished various evidence during the re-assessment proceedings to discharge its onus of establishing the genuineness of the payment made to M/s. Culminating Management Pvt. Ltd. However, as is evident from the perusal of the assessment order, the AO, without considering any of these evidences, made the impugned addition merely relying upon the information received from the Investigation Wing, Kolkata. Further, we find that the AO also did not make any independent investigation or inquiry in respect of the transaction entered into by the assessee with M/s. Culminating Management Pvt. Ltd. 9. From the careful perusal of the facts of the present case, it is pertinent to note that the assessee is merely acting as a Market Development Partner of M/s. Tide Water Oil Co. (India) Ltd. in the State of Maharashtra. At this stage, it is further worthwhile to note that as a Market Development Partner, the assessee has an obligation to achieve overall improvement in sales of the core product of M/s. Tide Water Oil Co. (India) Ltd., and in this regard, the assessee appointed M/s. Culminating Management Pvt. Ltd. for market development. Thus, from the afore-noted facts, it is ostensible that the assessee was merely acting as an intermediary for the market development of the core products of M/s. Tide Water Oil Co. (India) Ltd., which is a Government of India Enterprise and for rendering the market development service, M/s. Culminating Management Pvt. Ltd. raised the invoice on the ITA No.3405/Mum/2024 (A.Y. 2015-16) 7 assessee, inclusive of service tax, and the said invoice was backed by another invoice by the assessee to M/s. Tide Water Oil Co. (India) Ltd., which, after due verification by the Deputy Manager of M/s. Tide Water Oil Co. (India) Ltd. was certified for the reimbursement. Therefore, in this entire transaction, it is pertinent to note that M/s. Culminating Management Pvt. Ltd. is a service provider, while M/s. Tide Water Oil Co. (India) Ltd. is the actual service recipient. Thus, it is evident that in the peculiar facts of the present case, the assessee cannot be alleged to have availed the accommodation entry, transaction of bogus billing, since it is merely acting as an intermediary for M/s. Tide Water Oil Co. (India) Ltd. However, it is evident from the record that the AO did not examine any of these aspects of the instant case and merely because M/s. Culminating Management Pvt. Ltd. had raised the invoice on the assessee for the market development services, made the addition in the hands of the assessee on the basis that the assessee has availed accommodation entry of bogus billing without also appreciating the fact that the said invoice was reimbursed, inclusive of charging of service tax, by M/s. Tide Water Oil Co. (India) Ltd. Since no material has been brought on record by the Revenue to controvert the material placed on record by the assessee during the re- assessment proceedings to substantiate its claim of genuineness of transaction, we do not find any infirmity in the findings of the learned CIT(A) in deleting the addition of Rs.71,91,040/- made by the AO. Accordingly, the impugned order on merits is upheld, and the sole ground raised by the Revenue is dismissed. ITA No.3405/Mum/2024 (A.Y. 2015-16) 8 10. In the present appeal, the assessee also filed an application under Rule 27 of ITAT Rules, 1963, challenging the re-assessment proceedings initiated under section 147 of the Act. However, during the hearing, the learned Authorised Representative (“learned AR”) submitted that if the relief is granted to the assessee on merits, then the assessee wishes not to press its application filed under Rule 27 of the ITAT Rules. Accordingly, in view of our findings in the foregoing paragraphs and submission of the learned AR, the application under Rule 27 of the ITAT Rules, 1963, is dismissed as not pressed. 11. In the result, the appeal by the Revenue and the application by the assessee under Rule 27 of the ITAT Rules, 1963 are dismissed. Order pronounced in the open Court on 16/04/2025 Sd/- NARENDRA KUMAR BILLAIYA ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 16/04/2025 Prabhat Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "