M/s Maruti Infrastructure Ltd., Ahmedabad V. ACIT, Circle 2(1) (2), Ahmedabad

ITA 1735/AHD/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9045 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-04-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 14-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DILIEEPKUMAR
• Keywords: Bogus purchase; Rejection of books of accounts; TDS
• Section: 271(1)(c); 44AD; 133A; 145(3); 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD [THROUGH VIRTUAL COURT] BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA.NO.1735/AHD/2017 / ASSTT.YEAR : 2013-14 M/S.MARUTI INFRASTRUCTURE LTD. 802, SURMOUNT BUILDING OPP: ISCON MEGAL MALL S.G.HIGHWAY AHMEDABAD 380 015. PAN: AAACM 7976 L VS. ACIT, CIR.2(1)(2) AHMEDABAD. ITA.NO.1995/AHD/2017 / ASSTT.YEAR : 2013-14 ACIT, CIR.2(1)(2) AHMEDABAD. VS. M/S.MARUTI INFRASTRUCTURE LTD. 802, SURMOUNT BUILDING OPP: ISCON MEGAL MALL S.G.HIGHWAY AHMEDABAD 380 015. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI TUSHAR HEMANI, AR REVENUE BY : SHRI DILIEEPKUMAR, SR.DR / DATE OF HEARING : 31/07/2020 / DATE OF PRONOUNCEMENT: 05/08/2020 !'/ O R D E R PER RAJPAL YADAV, VICE-PRESIDENT ITA NO.1735 AND 1995/AHD/2017 2 THESE ARE TWO CROSS APPEALS AT THE INSTANCE OF THE ASSESSEE AND THE REVENUE AGAINST ORDER OF THE LD.CIT(A)-2, AHMEDABAD DATED 13.6.2017 FOR THE ASSESSMENT YEAR 2013-14. ACCORDINGLY, BOTH THES E APPEALS ARE DISPOSED OF BY THIS COMMON ORDER. 2. WE HAVE GONE THROUGH THE GROUNDS OF APPEALS FILE D BY BOTH THE PARTIES. WE FIND THAT MAIN ISSUE INVOLVED IN THESE TWO APPEA LS ARE THAT THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.2,63,44,508/- ON ACCOUNT OF BOGUS PURCHASES BY ESTIMATING NET PROFIT AT 40%, WHICH IN FIRST APPEAL RESTRICTED BY THE LD.CIT(A) AT RS.13,19,651/- BY TAKING AVERAGE E STIMATED NET PROFIT AT 7%. ASSESSEE IS AGAINST PARTLY CONFIRMING THE ADDITION TO THE EXTENT OF RS.13,19,651/- BY ESTIMATING NET PROFIT @7%; AND RE VENUE IS AGAINST DELETION OF ADDITION OF RS.2,63,44,508/- BY REJECTING ESTIMA TION OF NET PROFIT MADE BY THE AO AT 40%. THE ASSESSEE HAS ALSO CHALLENGED RE JECTION OF BOOKS OF ACCOUNTS OF THE ASSESSEE BY BOTH THE AUTHORITIES. 3. WE SHALL FIRST DEAL WITH APPEAL OF THE ASSESSEE. 4. BRIEF FACTS AS EMERGING FROM ORDERS OF THE REVEN UE AUTHORITIES ARE THAT THE ASSESSEE IS A BUILDER AND CIVIL CONTRACTORS. I T FILED ITS RETURN OF INCOME ON 21.9.2013 DECLARING TOTAL INCOME AT RS.39,46,540/-. AFTER PROCESSING THE RETURN UNDER SECTION 143(1), THE CASE OF THE ASSESS EE WAS SELECTED FOR SCRUTINY ASSESSMENT BY ISSUANCE OF NOTICE UNDER SECTION 143( 2) OF THE ACT ON 4.9.2014. ON VERIFICATION OF THE RECORD, IT WAS NOTICED BY TH E AO THAT THE ASSESSEE HAS DEBITED A SUM OF RS.6,45,25,179 BEING SUB-CONTRACT CHARGES PAID TO M/S.LIMESTONE PROPERTIES P. LTD., KOLKATA (LPPL F OR SHORT) FOR THE WORK OF EXCAVATION OF TUNNEL ON BEHALF OF THE ASSESSEE, WHI CH ASSESSEE HAS RECEIVED FROM ONGC PETRO. THE LD.AO VIDE SHOW CAUSE NOTICE 18.12.2015 SOUGHT FOR DETAILS AND EXPLANATION FROM THE ASSESSEE AND THE S AID LPPL. IN RESPONSE TO ITA NO.1735 AND 1995/AHD/2017 3 THAT NOTICE, THE ASSESSEE COMPANY SUBMITTED COPY OF ITR ACKNOWLEDGMENT AND BANK STATEMENT COPY OF LPPL. ON VERIFICATION O F THE DETAILS, THE LD.AO OBSERVED THAT THE MEAGER RETURN OF INCOME OF RS.4,9 1,609/- SHOWN BY THE LPPL IN ITS RETURN DID NOT VALIDATE HUGE CONTRACT A MOUNT IT ENTERED INTO. THE LD.AO ALSO NOTICED DEPOSITS AND IMMEDIATE WITHDRAWA L OF THE AMOUNT AND DOUBTED GENUINENESS OF THE TRANSACTION. THE LD.AO FURTHER REFERRED TO THE COMMISSION REPORT SUBMITTED BY THE DY.DIRECTOR OF I T(INV.) DATED 12.1.2016 IN WHICH IT WAS STATED THAT AS PER STATEMENT OF ONE SHRI PRAVEEN KUMAR AGARWAL RECORDED UNDER SECTION 133A OF THE ACT ON 1 1.2.2015 THE SAID LPPL IS A COVERED COMPANY AND FORMED FOR PROVIDIN G ACCOMMODATION ENTRY ETC. TO DIFFERENT BENEFICIARIES, WHICH ALLEGA TION THE ASSESSEE COMPANY HAS COMPLETELY DENIED BY STATING THAT THE SAID SHRI PRAVEENNKUMAR HAS NO CONNECTION OF THE SAID LPPL, AND THEREFORE, THE S TATEMENT MADE BY HIM IS WITHOUT ANY AUTHORITY, HENCE FALSE AND INCORRECT. ASSESSEE FURTHER EXPLAINED THAT ALL THE TRANSACTIONS WERE CARRIED OUT THROUGH ACCOUNT PAYEE CHEQUES AND THE ASSESSEE HAS ALSO EFFECTED TDS WHILE PAYING THE INVOICE AMOUNTS TO THE LPPL, WHICH DEMONSTRATED THAT CONTRACTED WORK HAS BEEN DONE BY THE SAID PARTY AND INVOICE HAS BEEN RAISED AND PAID FOR, AND THEREFORE, EXPENDITURE COULD NOT BE DISALLOWED. THE ASSESSEE HAS ALSO SUB MITTED THAT COPY OF LEDGER ACCOUNT IN THE BOOKS OF LPPL, COPY OF ITR ACKNOWL EDGEMENT OF LPPL FOR A.Y.2013-14, COPY OF BANK STATEMENT OF LPPL C ONFIRMING THE RECEIPT OF PAYMENT ETC. HOWEVER, THE LD.AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE. HE REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT TRANSACTION ENTERED WITH THE SAID LPPL IS BOGUS, AND THE SAID COMPANY DID NOT EXIT; THAT STATEMENT OF SHRI PRAVEENKUMAR AGARWAL SUPPORTS THI S ASPECT; THAT THE ASSESSEE HAS SUPPRESSED THE INCOME BY GETTING BOGUS CONTRACT, WHICH WAS UTILIZED FOR BLACK MONEY GENERATION. HE ACCORDINGL Y REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS THE SAME ARE NOT RELIAB LE AND DID NOT REFLECT TRUE ITA NO.1735 AND 1995/AHD/2017 4 AND FAIR PICTURE OF ASSESSEES BUSINESS. HE ESTIMA TED THE NET PROFIT @40%. HE ACCORDINGLY WORKED OUT ADDITION OF RS.2,63,44,50 8/- AND ADDED TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF BOGUS PURCHASE S AND SUPPRESSING PROFIT. AGAINST THIS ACTION OF THE AO, ASSESSEE WENT IN APP EAL BEFORE THE LD.FIRST APPELLATE AUTHORITY. THE LD.CIT(A) HAS DISCUSSED T HE ISSUE ELABORATELY AND GONE THROUGH THE FINDINGS OF THE LD.AO. BEFORE THE LD.CIT(A) ASSESSEE SUBMITTED THAT REJECTION OF BOOKS OF ACCOUNTS BY TR EATING SUBCONTRACTING CHARGE OF RS.6,45,25,179/- AS NON-GENUINE WAS SOLEL Y ON THE BASIS OF STATEMENT OF THIRD PARTY, AND IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE AGAINST THE ASSESSEE, SUCH STATEMENT COULD NOT BE U SED. FOR REJECTING BOOKS OF ACCOUNTS UNDER SECTION 145 OF THE ACT, THE LD.AO HA S NOT POINTED OUT ANY MATERIAL ERROR IN THE RECORDS MAINTAINED BY THE ASS ESSEE. THE ASSESSEE HAS NOT BEEN PROVIDED WITH COPY OF COMMISSION REPORT OF DDI T (INV.) NOR GIVEN AN OPPORTUNITY TO CROSS-EXAMINE THE SAID SHRI PRAVEENK UMAR AGRAWAL FOR HIS ALLEGED STATEMENT. IT WAS SUBMITTED THAT ANY MATERI AL NOT CONFRONTED TO THE ASSESSEE WOULD NOT CONSTITUTE AS ADMISSIBLE EVIDENC E, AND CONSEQUENT ACTION RELYING ON SUCH MATERIAL WAS LEGALLY INVALID AND VO ID. ASSESSEE FURTHER SUBMITTED THAT IT HAS FURNISHED NECESSARY DOCUMENTS VIZ. WORK ORDER GIVEN TO LPPL, INVOICE RAISED BY LPPL, LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF LPPL AND RELEVANT EXTRACT OF BANK STATEM ENT OF LPPL SHOWING THE RECEIPT FROM THE ASSESSEE. IT WAS FURTHER SUBM ITTED THAT PAYMENTS MADE TO LPPL WERE THROUGH ACCOUNT PAYEE CHEQUE AND REQUIS ITE TDS HAS ALSO BEEN DEDUCTED ON SUCH PAYMENTS; THAT THE ADDITION MADE B Y THE ASSESSEE MERELY ON THE BASIS OF PRESUMPTION AND SURMISES. FURTHER, PR OVISIONS OF SECTION 145 DID NOT APPLY TO THE ASSESSEE, AS THE AO HAS NOT POINTE D OUT ANY MATERIAL ERROR IN THE MAINTENANCE OF BOOKS OF ACCOUNTS OF THE ASSESSE E, AND REJECTION OF THE BOOKS OF ACCOUNTS WAS BAD IN THE EYES OF LAW AND TH US CONSEQUENTIAL ADDITION MADE ON SUCH REJECTION WAS LIABLE TO BE DELETED. H OWEVER, IT WAS ITA NO.1735 AND 1995/AHD/2017 5 ALTERNATIVELY PLEADED BY THE ASSESSEE BEFORE THE LD .CIT(A) THAT ASSESSEE HAS BEEN REGULARLY FILING ITS RETURN OF INCOME AND HAS BEEN ACCEPTED BY THE DEPARTMENT. THE AVERAGE RATE OF NET PROFIT DECLAR ED BY THE ASSESSEE IN THE PRESENT YEAR AND THE SUBSEQUENT YEARS COMES TO 5.95 %, WHICH WAS CLOSE O 5.26% DECLARED BY THE ASSESSEE FOR THE YEAR UNDER C ONSIDERATION, THEREFORE, ESTIMATION OF NET PROFIT @40% BY THE AO HAS NO LOGI CAL STAND, AND AT THE MOST THE LD.AO SHOULD HAVE ADOPTED AVERAGE NET PROFIT AT 5.95%; THAT EVEN SPECIAL PROVISION UNDER SECTION 44AD PRESCRIBES A RATE OF 8 % OF THE TOTAL TURNOVER SHOULD BE DEEMED TO BE THE PROFITS AND GAINS OF THE BUSINESS CHARGEABLE TO TAX, AND THEREFORE, THE ADDITION AT THE MOST SHOULD BE R ESTRICTED TO THAT EXTENT. BEFORE THE LD.CIT(A) HAS ALSO FURNISHED COPIES OF L EDGER ACCOUNT OF OTHER CONTRACT INCOME ALONG WITH WORK ORDERS AND OTHER B ANK ACCOUNT STATEMENT. AFTER GOING THROUGH ALL THE MATERIALS FURNISHED DUR ING THE COURSE OF ASSESSMENT AS WELL AS DURING THE APPELLATE PROCEEDI NGS, AND ALSO SUBMISSIONS OF THE ASSESSEE, THE LD.CIT(A) HAS OBSERVED THAT TH E AO THOUGHT IT WAS FIT TO MAKE AN ADDITION ON BASIS OF STATEMENT OF SHRI PRAV EENKUMAR AGRAWAL. HOWEVER, HE DID NOT SUBSCRIBE TO SUCH VIEW OF THE L D.AO IN BLINDLY RELYING UPON ON THE STATEMENT OF THE SHRI PRAVEEN KUMAR AGR AWAL, BECAUSE SUCH STATEMENT WAS NOT CORROBORATED WITH ANY DOCUMENTARY EVIDENCE. ON THE OTHER HAND, THE ASSESSEE CATEGORICALLY DENIED ROLE OF SHR I PRAVEENKUMAR AGRAWAL IN THE LPPL AND THE IMPUGNED TRANSACTION, AND THEREF ORE, THE AO WAS NOT FULLY JUSTIFIED AS BASIS FOR ADDITION. HE OBSERVE D THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN NET PROFIT RA TE OF 5.26% AS AGAINST THE NET PROFIT RATE OF 2.61% IN THE ASSTT.YEAR 2012-13; 6.53% IN THE ASSTT.YEAR 2011-12 AND 8.62% IN THE ASSTT.YEAR 2010-11. THE E STIMATION OF NET PROFIT AT 40% WAS WITHOUT ANY BASIS AND WITHOUT CONSIDERING T HE ABOVE HISTORICAL ACCOUNTING RESULTS, AND HELD SUCH HIGH RATE OF NET PROFIT TO BE UNEXPECTED AND UNREASONABLE. THE LD.CIT(A) ACCORDINGLY WORKED OUT NET PROFIT AT THE RATE OF ITA NO.1735 AND 1995/AHD/2017 6 7% OF THE TOTAL A TURNOVER OF RS.7,58,32,901/- AND ESTIMATED SUPPRESSION OF THE NET PROFIT TO THE EXTENT OF RS.13,19,651/-. AGGRIEVED BY THE RELIEF GRANTED BY THE LD.CIT(A) TO THE ASSESSEE BY RESTRIC TING ADDITION TO THE EXTENT OF 7% OF THE TOTAL TURNOVER THE REVENUE IS APPEAL B EFORE THE TRIBUNAL, WHILE THE ASSESSEE IS IN APPEAL FOR NOT GIVING FULL RELIE F. 5. BEFORE US, BOTH THE PARTIES ADVANCED THEIR ARGUM ENTS MORE OR LESS ON THE SAME LINE AS WERE BEFORE THE LOWER AUTHORITIES. THE LD.COUNSEL FOR THE ASSESSEE FURTHER EMPHASIZED THAT BASIS FOR ADDITION AND REJECTION OF BOOKS OF ACCOUNTS BY THE AO IS MERELY ON THE BASIS OF THE ST ATEMENT OF SHRI PRAVEENKUAMR AGARWAL; THAT THE LD.AO HAS NOT POINTE D OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE NOR THE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE; THAT THE CONDITIONS PRECEDENT FOR REJECTION OF BOOKS OF ACCOUNTS, AS ENVISAGED UN DER SECTION 145(3) OF THE ACT ARE NOT FULFILLED. AS FAR AS ADDITION RESTRICT ED BY THE LD.CIT(A), IT IS SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE THAT T HE AVERAGE NET PROFIT RATE FOR THE LAST FOUR YEARS IS 5.15% AND PRESENT YEAR I.E. A.Y.2013-14 AT 5.26% SHOWN BY THE ASSESSEE IS ON HIGHER SIDE, THEREFORE, LD.CI T(A) WAS NOT JUSTIFIED IN ADOPTING NET PROFIT @7%, AND THEREFORE, A REASONABL E RATE OF PROFIT MAY BE ADOPTED. ON THE OTHER HAND, THE LD.DR SUPPORTED T HE ORDER OF LD.AO. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND GONE TH ROUGH THE RECORD CAREFULLY. SO FAR AS REJECTION OF BOOKS OF ACCOUNT S IS CONCERNED, WE DO NOT FIND ANY ILLEGALITY IN THEIR FINDING. HOWEVER, WHA T WE ARE CONCERNED IS THAT THE BASIS OF ESTIMATION OF NET PROFIT BY THE ASSESS ING OFFICER AT 40% AND BRING DOWN THE SAME TO 7% BY THE LD.CIT(A). IT IS NOT I N DISPUTE THAT ONGC PETRO HAVE GIVEN A CONTRACT FOR EXCAVATION OF CANAL TO A PARTY NAMED SHAILI PARADIGUM INFRATECH P.LTD., WHICH IN TURN SUB-CONTR ACTED THE SAME TO THE ASSESSEE-COMPANY. ASSESSEE AGAIN SUB-CONTRACTED TH E WORK TO LPPL, AND ITA NO.1735 AND 1995/AHD/2017 7 ACCORDINGLY FULFILLED THE CONTRACTUAL OBLIGATION. THE ONLY LAPSE IN THE WHOLE TRANSACTION IS THAT THE ASSESSEE MIGHT HAVE GOT THE WORK COMPLETED THROUGH SOME THIRD PARTY INSTEAD OF LPPL. THE LPPL WO ULD HAVE ONLY FACILITATED THE ASSESSEE FOR PROVIDING BILL, THOUGH THIS FACTOR COULD NOT BE PROVED WITH POSITIVE EVIDENCE BY THE REVENUE, BUT REVENUE WAS U NABLE TO COLLECT INFORMATION ABOUT THE ANTECEDENCE OF LPPL. THE LPPL IS THE ASSESSEES SUB-CONTRACTEE AND THE ASSESSEE FAILED TO PRODUCE A NY PERSON FROM LPPL FOR CONFIRMING THAT SUB-CONTRACTOR HAS CARRIED OUT THE WORK. THE ASSESSEE HAS ONLY PRODUCED DOCUMENTS I.E. LEDGER OF THE ASSESSEE IN THE BOOKS OF LPPL (PAGE NO.18 OF THE PAPER BOOK), ACKNOWLEDGEMENT OF ITR FILED BY THE LPPL, BANK STATEMENT OF LPPL AND COPY OF WORK O RDER. IN OTHER WORDS, IN TERMS OF DOCUMENTATION, ASSESSEE MIGHT HAVE FULL FILLED ALL NECESSARY INGREDIENTS, BUT STILL IT FAILED TO BRING ANY EVIDE NCE APART FROM THESE PERIPHERAL DOCUMENTS TO DEMONSTRATE ACTUAL WORK DONE BY THE L PPL OR CAPACITY OF LPPL TO CARRY OUT SUCH WORK. THOUGH WE COULD HAV E RECOMMENDED FOR CARRYING OUT A FRESH INVESTIGATION IN ORDER TO PROV E WHETHER THE ASSESSEE GOT THIS WORK DONE ACTUALLY FROM THE SUB-CONTRACTOR OR FROM SOME THIRD PERSON, BUT CONSIDERING THE FACT THAT THE ACTUAL CONTRACT H AS BEEN COMPLETED TO THE SATISFACTION OF THE CONTRACTEE I.E. ONGC IN THE PRE SENT TRANSACTION ROUTED THROUGH LPPL ASSESSEE MIGHT HAVE EARNED A LITTLE MORE PROFIT THAN ACTUALLY SHOWN BY IT IN ITS BOOKS OF ACCOUNTS IN EARLIER YEA RS OR THIS YEAR. THEREFORE, WE DO NOT FIND ANY ERROR IN THE FINDING OF THE LD.C IT(A) FOR REJECTION OF THE BOOKS OF ACCOUNTS AS WELL AS ESTIMATION OF PROFIT A T 7% ON THE TOTAL TURNOVER. THERE IS NO JUSTIFICATION AT THE END OF THE AO TO E STIMATE PROFIT AT 40% OF THE TURNOVER, WHICH IS MERELY BASED ON SOME ILLOGICAL C ONSIDERATION OF FACTS AND FIGURES. THE AO HAS NOT PROVIDED ANY MATERIAL FOR ESTIMATION THAT PROFIT MUST HAVE BEEN EARNED AT 40%. THEREFORE, CONSIDERING TH E ABOVE FACTS AND ITA NO.1735 AND 1995/AHD/2017 8 CIRCUMSTANCES, WE DO NOT FIND ANY MERIT IN BOTH THE APPEALS OF THE PARTIES. BOTH ARE REJECTED. 7. SO FAR AS PERIPHERAL ISSUES LIKE CHARGING OF INT EREST UNDER SECTION 243A/B/C/D AND INITIATION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT RAISED BY THE ASSESSEE IN ITS APPEALS ARE CONCERNED , THE SAME DO NOT REQUIRE A SEPARATE ADJUDICATION, AS THEY ARE EITHER CONSEQUEN TIAL OR PREMATURE AT THIS STAGE. 8. IN THE RESULT, BOTH THE APPEALS I.E. OF THE ASSE SSEE AND OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 5 TH AUGUST, 2020 AT AHMEDABAD. SD/- SD/- ( WASEEM AHMED ) ACCOUNTANT MEMBER (RAJPAL YADAV) VICE-PRESIDENT