M/S Bhate & Raja Construction Co. Pvt Ltd, Pune V. Deputy Commissioner of Income Tax, Circle-1(1), Pune, Pune

ITA 1392/PUN/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7646 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 21-04-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 17-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE “A” BENCH : PUNE [THROUGH VIRTUAL HEARING] BEFORE SHRI RAMA KANTA PANDA, VICE PRESIDENT AND SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER I.T.A.Nos.1390, 1391, 1392 & 1393 /PUN./2023 Assessment Years 2011-2012, 2012-2013, 2014-2015 & 2015-2016 M/s. Bhate & Raje Construction Co. Pvt. Ltd., 58-B, CDSA Campus, Pune- Paud Road, Bavdhan, PUNE PIN – 411 021. Maharashtra PAN AABCB7417Q vs. The DCIT, Circle-1(1), PMT Bldg., Shankarshet Road, Swargate, PUNE-411 037. Maharashtra. (Appellant) (Respondent) For Assessee : Shri Nikhil S Pathak For Revenue : Shri Keyur Patel, CIT-DR And Shri Ramnath P. Murkunde Date of Hearing : 22.04.2024 Date of Pronouncement : 26.04.2024 ORDER PER SATBEER SINGH GODARA, J.M. : These assessee’s four appeals I.T.A.Nos.1390, 1391, 1392 & 1393 /PUN./2023, arise against the CIT(A), Pune-11, Pune's common Din/Order Nos.ITBA/APL/S/250/2023-24/ 1057253781(1), 1057254983(1), 1057254672(1), 1057254433(1), dated 20.10.2023, involving proceedings u/s. 143(3) r.w.s.147 [A.Y.2011-2012]; sec.144 [A.Y.2012-2013]; sec.144 [A.Y.2014- 2015] and 143(3) [A.Y.2015-2016] of the Income Tax Act, 1961 (in short “the Act”), assessment year-wise, respectively. Heard both the parties at length. Case files perused. 2 ITA.No.1390 to 1393/PUN./2023 2. It emerges at the outset with the able assistance coming from both the parties that the assessee’s first and foremost substantive ground; rather the sole ground in assessment years 2011-12 and 2012-13 and it’s former grievance in latter twin appeals; is that the learned lower authorities have erred in law and on facts in disallowing the corresponding sub-contractual expenditure payments of Rs.11,19,50,550/; Rs.12,15,39,950/-; Rs.7,67,94,800/- and Rs.4,85,52,293/-, assessment year-wise, respectively. It is in this factual backdrop that we proceed to decide the instant first and foremost substantive issue herein together for the sake of convenience and brevity. A few relevant facts may be noticed as under. 2.1. This assessee is admittedly a company engaged in civil construction business. There is hardly any dispute that it had claimed to have incurred sub-contractual payments aggregating to Rs.45,92,26,593/- involving varying sums in all these assessment years. There is further no quarrel that all these payments had been made by the assessee to it’s 28 payees/alleged sub-contractors by way of banking channel only. 2.2. We proceed further and note that the departmental authorities had carried-out sec.133A survey exercise in assessee’s case on 22.03.2018. It came across various alleged 3 ITA.No.1390 to 1393/PUN./2023 incriminating material inter alia, indicating that the bank account(s) of the foregoing 28 payees/sub-contractors had witnessed immediate cash withdrawals upon receipt of the impugned payments. This; along with other incriminating material, made the learned departmental authorities to receive survey statement(s) of the assessee’s director Shri Jaideep Prasannakumar Raje as well as other authorised persons viz., S/Shri Pravin Divekar and Shishikant Naik etc. All of them failed to rebut the clinching facts emerging from the foregoing incriminating material indicating the assessee to have indulged in availing bogus entries of sub-contract expenditure in it’s regular business activity of civil construction. Faced with the situation, the assessee through it’s authorised person(s) agreed to surrender additional income(s) representing bogus expenditure of Rs.1 crore, Rs.2 crore, Rs.4 crore and Rs.3 crore, totaling to Rs.10 crores; assessment year-wise, respectively. 2.3. There is again no issue between the parties that the assessee thereafter filed it’s returns as per the foregoing declaration of Rs.10 crores in all these four assessment years. The Assessing Officer took up scrutiny. He concluded in light of the above survey developments in assessee’s case as well as the facts emerging from the incriminating material found in course thereof and in light of survey statements that the 4 ITA.No.1390 to 1393/PUN./2023 remaining sub-contractual expenditure in all these 28 payees’ cases deserve to be disallowed in toto i.e., Rs.45,92,26,593/- reduced by Rs.10 crore declaration = Rs.35,88,37,593/- coming to Rs.11,19,50,550/-; Rs.12,15,39,950/-; Rs.7,67,94,800/- and Rs.4,85,52,293/- assessment year-wise, respectively. 3. The assessee preferred it’s separate as many appeals. The CIT(A)’s common impugned order has upheld the Assessing Officer’s impugned action as follows : 5 ITA.No.1390 to 1393/PUN./2023 6 ITA.No.1390 to 1393/PUN./2023 7 ITA.No.1390 to 1393/PUN./2023 8 ITA.No.1390 to 1393/PUN./2023 9 ITA.No.1390 to 1393/PUN./2023 This leaves assessee aggrieved to the extent indicated hereinabove in all these four assessment years. 4. We have given our thoughtful consideration to the vehement rival submissions against and in support of the learned lower authorities action disallowing the assessee’s sub-contractual payments. Ld. CIT-DR Shri Patel vehemently argued that both the lower authorities have rightly made the impugned sub-contract payments disallowance(s) going by the contents of the seized material carrying presumption of correctness u/sec.292C of the Act. He reiterated that the assessee had been duly found to have prepared bogus sub- contract expenditure vouchers as per the said material. He further sought to highlight the fact that it is the bounden duty of the assessee only to plead and prove the impugned 10 ITA.No.1390 to 1393/PUN./2023 expenditure by filing the necessary explanation supported by cogent evidence which has been given a complete amiss at it’s behest. He thus prayed for upholding of identical disallowance(s) in all these assessment years in entirety. 5. Learned counsel representing the assessee on the other hand is fair enough in not disputing the foregoing facts emerging from the incriminating material as well as the survey statements regarding the impugned sub-contract expenses amounts deposited in the payee’s accounts followed by the cash withdrawals; which has been utilized in regular business activities. He further drew our attention to the relevant impugned material in pages 388 onwards in the paper book to this effect. 6. Next comes the equally important question of quantification of the impugned disallowance(s) in all these four assessment years. A perusal of the assessee’s comparative chart of it’s admitted corresponding book results at page-386 of the paper book for assessment years 2011-2012 and 2019- 2020 inter alia, indicates that it’s net profit rates stood at less than 10% i.e., 6%; 4.63%; 5.9%; 6.59%; 4.98%; 3.15%; 5.87%; 4.43%; and 4.75%; respectively as increased to 6.96%; 6.78%; 9.01% and 7.31% in these four assessment years after the survey declarations of Rs.10 crores (supra). The same have admittedly rose to 17.69%; 19.86%; 13.65% and 11.08%; 11 ITA.No.1390 to 1393/PUN./2023 respectively in these four assessment years post facto the impugned additions. 7. We wish to make it clear at this stage that there is no dispute between the parties about the assessee having carried-out the very nature of civil construction activity in all these assessment years. And also that the learned departmental authorities have admitted it’s net profit rate in assessment year 2013-2014; forming part of the CIT(A)'s common detailed adjudication herein. This is indeed coupled with the fact that the assessee’s detailed paper book running into 520 pages; and more particularly, from pages 388 to 503 [containing the incriminating material] further indicates that it had incurred some actual expenditure as well along with under various personal heads; as the case may be; which carry presumption of correctness u/sec.292C of the Act. It is thus an instance wherein the assessee’s book results deserve to be rejected once they have not been properly maintained. The fact also remains that once the assessee’s “Net Profit” [“NP”] margins have uniformly remained in the same ratio [approx.], the only inference which could be drawn is that there is indeed a possibility of the taxpayer having utilized cash withdrawals to meet day-to-day business requirements. 8. Mr. Patel at this stage vehemently submitted that we ought not to dismiss the learned lower authorities’ findings 12 ITA.No.1390 to 1393/PUN./2023 either in light of sec.44AD or as per the incriminating material proving only part of expenditure. 9. We have considered the Revenue’s foregoing vehement objections regarding quantification of the impugned sub-contract expenditure disallowance(s). We find that case law settles the issue that sec.44AD could indeed form a broader guiding factor to apply the foregoing presumptive scheme in peculiar facts of a case even of it involves more than the eligible turnover therein. 1. CIT vs. Subodh Gupta [2015] 54 taxmann.com 343 (Del.) 2. Pr.CIT vs. Vishwashakti Construction, Mumbai – Judgment of Hon’ble Bombay High Court in ITA.No.1016 of 2018 dated 04 th May, 2023. 3. Pr. CIT vs. Ram Builders, Mumbai - Judgment of Hon’ble Bombay High Court in ITA.No.398 of 2018 dated 18 th May, 2023. 4. CIT vs. Kailash Kacchawaha [2007] 293 ITR 449 (RAJ.) 5. V M Matere Infrastructures (India) Private Limited, Pune vs. ACIT – Order of ITAT, Pune Bench, Pune dated 29.05.2023. 6. Hari Chainrai Kataria, Pune vs. ACIT – order of ITAT Pune Bench, Pune dated 28.02.2013. 7. Nishikant T. Patne vs. ACIT [2013] 36 taxmann.com 540 [Pune-Tribu.]. 8. G. Raja Gopala Rao vs. DCIT [2017] 78 taxmann.com 61 [Visakhapatnam-Tribu.]. 13 ITA.No.1390 to 1393/PUN./2023 9.1. Faced with this factual position, we are of the considered opinion that in light of the foregoing judicial precedents that the estimation of profit @ 8% of the assessee’s corresponding revenue operation or that declared in the assessee’s book results whichever is higher will meet the ends of justice. We order accordingly and direct the Assessing Officer to re-compute the profit in the above terms. This is indeed subject to the rider that our impugned estimation shall not be treated as a precedent. The assessee’s instant first and foremost identical sole substantive ground(s) in all these cases is partly accepted in above terms. 10. Learned Counsel next take us to the twin latter assessment years 2014-2015 and 2015-2016 allegedly involving some “reversal” entries regarding the assessee’s sub- contracting parties. We are of the considered opinion that once the learned Assessing Officer has been directed to restrict the impugned disallowance(s) in foregoing terms after rejecting the assessee’s book results; such a course of action of dealing with the impugned reversal entries hardly deserves an independent adjudication anymore going by Indwell Construction vs. CIT [1998] 232 ITR 76 (A.P.). Rejected accordingly. No other ground or argument has been pressed before us. 14 ITA.No.1390 to 1393/PUN./2023 11. To sum-up, these assessee’s four appeals I.T.A.Nos. 1390, 1391, 1392 & 1393/PUN./2023 are partly allowed in above terms. A copy of this common order be placed in the respective case files. Order pronounced in the open Court on 26.04.2024. Sd/- Sd/- [RAMA KANTA PANDA] [SATBEER SINGH GODARA] VICE PRESIDENT JUDICIAL MEMBER Pune, Dated 26 th April, 2024 VBP/- Copy to 1. The appellant 2. The respondent 3. The CIT(A), Pune-11, Pune. 4. The Pr. CIT, Pune concerned 5. D.R. ITAT, “A” Bench, Pune. 6. Guard File. //By Order// //True Copy // Sr. Private Secretary, ITAT, Pune Benches, Pune.