M/s Inderjit Mehta Construction Pvt. Ltd, Bathinda V. THE Assistant commissioner of Income Tax, Bathinda

ITA 32/ASR/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9199 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 15-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: ASHISH GOEL
• Keywords: Rejection of books of accounts; Loose papers; Question of law; Assessment record; TDS; Set aside
• Section: 131; 68; 44AD; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.32/Asr/2017 Assessment Year: 2013-14 M/s Inderjit Mehta Construction Pvt. Ltd., Bathinda. PAN: AAACI3235L Vs ACIT, Circle-1, Bathinda. (Appellant) (Respondent) Assessee by : Shri Ved Jain, Advocate & Shri Ashish Goel, CA Revenue by : Shri Surender Pal, CIT, DR Date of Hearing : 16.11.2021 Date of Pronouncement : 09.02.2022 ORDER PER R.K. PANDA, AM: This appeal filed by the assessee is directed against the order dated 23 rd December, 2016 of the CIT(A), Bathinda, relating to assessment year 2013-14. 2. Facts of the case, in brief, are that the assessee is a company and engaged in the business of civil construction. It filed its return of income on 15 th September, 2013 declaring an income of Rs.5,46,82,200/-. During the course of assessment proceedings, the AO noticed that the assessee has received Rs.15 crore from M/s ITA No.32/Asr/2017 2 PACL India Ltd. (PACL for short) during the financial year 2012-13 relevant to AY 2013-14. A search operation was conducted at the business premises of the assessee company at Delhi and Bathinda during which large number of documents and loose papers were impounded. During verification of such papers/documents, it was noticed that some unaccounted entries were recorded in these papers. The statement of Shri Inderjeet Mehta and Shri Amarjit Mehta, directors of the company were recorded in which they were confronted with the issues regarding payment received from PACL with respect to the work undertaken by it of the company PACL. They have stated in their statements that the work undertaken by them was for development of land at various sites of PACL. It was further submitted by them that the work was not done by their company by its own i.e., M/s Inderjeet Mehta Construction Pvt. Ltd., but, it has been executed through sub- contractors, namely, Global Infrastructure having their office at BP-43, Pitampura, New Delhi and M/s Kingston Infra Developers Pvt. Ltd., having their office at 4, Ganpat Bunglow Road, Calcutta (West Bengal). 3. The AO noted that the said sub-contractors were not shortlisted through any advertisement in newspapers. He, therefore, held that the sub-contractors are fictitious entities and appears to be paper entities. Further, during the search operation, original agreements executed between sub-contractors and the company M/s Inderjeet Mehta Construction Pvt. Ltd., were found and seized along with some other papers and bills raised by the sub-contractors. From the perusal of ITA No.32/Asr/2017 3 these documents, the AO noted that: (a) bills have been raised by the sub- contractors before the date of execution of the agreement with sub-contractor by the company; (b) non-awareness of directors of the assessee company of the execution of work done and the details thereof assigned by M/s PACL to M/s Inderjeet Mehta Construction Pvt. Ltd., and dubious status of the sub-contractors; and (c) payments have been claimed by the sub-contractors within 2 to 3 months from the date of execution of the agreement with sub-contractor by the company. The AO, therefore, in order to ascertain the genuineness of such transactions, issued a detailed questionnaire to the assessee and directed the assessee to furnish a) Nature of work done (b) Copy of account of PACL in the books of account. (c) To produce the Directors of the company namely M/s Global Infrastructure having their office at BP-43, Pitampura, New Delhi and M/s Kingston Infra Developers Pvt. Ltd., Calcutta from whom it was claimed that the work was done through such companies. (d) Copy of account of M/s Global Infrastructure having their office at BP-43, Pitampura, New Delhi and M/s Kingston Infra Developers Pvt. Ltd., Calcutta in the books of account and also explain as to whether any TDS was deducted on the payments given to the sub contractors and, if so, to furnish the TDS returns also. ITA No.32/Asr/2017 4 3.1. Simultaneously, the AO, in order to examine these parties with regard to their physical presence, possession of machinery and equipment, capability or expertise to undertake land development work and reliability of work undertaken by them, issued commission u/s 131(1)(d) of the Income Tax Act to the concerned ADITs, i.e., Dy. Director of Income-tax (Inv.I), Gurgaon and Dy. Director of Income-tax (Inv.) Unit-3(3), Kolkatta. The AO, after receiving the replies from the concerned DDITs, confronted the same to the assessee on the issue of non- existence of those parties. After considering the reply of the assessee, the AO held that such parties i.e., M/s Kingston Infra Developers Pvt. Ltd., Calcutta and M/s Global Infrastructure, Pitampura, Delhi, are paper entities and fictitious companies not having any physical presence, do not possess any machinery and equipment having no capability or expertise to undertake land development work and having the persons of no means by recording the following reasons:- “(i) During proceedings, statement of Sh. Inderjeet Mehta and Sh. Amarjit Mehta, Directors of the company have been recorded in which they were confronted the issues regarding payments received from M/s PACL with reference to work undertaken by them of the company M/s PACL. In their statements, they have deposed that the work undertaken by them was of development of land at various sites of PACL and the same was not done by their own company M/s Inderjeet Mehta Construction Pvt. Ltd. but has been executed through sub-contractors namely M/s Global Infrastructure and M/s Kingston Infra Developers. Enquiries made by the Department revealed that these companies were non existent. (ii) During proceedings, it was observed that the agreement with such parties were executed on 15.04.2012 whereas in the concluding para of the last page of the agreement, the date was mentioned 10.04.2012 which shows that agreement was not written in regular way and cannot be relied upon. Further, from the perusal of the bills raised by the sub contractors, it was noticed that one bill was raised on 09.04.2012 i.e., before the execution of agreement with M/s Kingston Infra Developers Pvt. Ltd. The raising of ITA No.32/Asr/2017 5 bills on 09.04.2012 is not possible at all because the agreement was executed between these parties on 15.04.2012. (iii) Further, the perusal of the work cum agreement between M/s PACL and M/s Inderjeet Mehta Construction Pvt Ltd., it was noticed that the said agreement was also executed between the both parties on 15.04,2012 and on the same day i.e., 15.04.2012 the agreement was made with the sub contractor M/s Kingston Infra Developers Pvt. Ltd. for executing the work assigned to M/s PACL to Inderjeet Mehta which is not reliable that how it was possible to assign his work to any other company without any verification, tender bid and without knowing the capability and expertise to undertake the work assigned to it. (iv) In the statement of Sh. Inderjeet Mehta, one of Directors of the company, he was asked to give the details of land on which the company had done the work along with type of work done on such land with addresses, which had been developed by the assessee company on behalf of M/s PACL. However, in his statement, he deposed that he did not remember the address and other details of the locations where such work was undertaken and also stated in his statement that he had never made any visits to the site of PACL and not assisted to the sub contractors in view of norms of agreement made with the PACL. (v) Further, during the proceedings, it was also observed that after execution of agreement with M/s Inderjeet Mehta Construction Pvt. Ltd., Rs. 4,52,18,480/- has been claimed by the sub contractors within one month from the execution of the agreement and within 3 months whole of the work has been claimed to be disposed off and claimed whole the amount. Similarly, in the case of another sub contractor in the case of M/s Global Infra structure Pvt. Ltd., Pitam pura, New Delhi, the modus operandie has been adopted on the same lines as adopted in the M/s Kingston Infra Developers Pvt. Ltd.” 4. In view of the above, the AO held that the amount in question amounting to Rs.15 crores is not part of the business or construction activities of the assessee company. He, therefore, rejected the book results as not reliable. Applying the provisions of section 145(3), the AO adopted the profit rate at 8% of the net contract receipt of Rs.105,83,86,049/- (i.e., Rs.1,20,83,86,049 (-) Rs.15,00,00,000/-) and determined the net profit at Rs.8,46,70,884/-. So far as the ITA No.32/Asr/2017 6 receipt of Rs.15 crores is concerned, the AO held that the assessee has not done any development work for PACL by its own or by any other person through whom it claimed to have done the work and the company has received simply the amount of Rs.15 crore from PACL without executing any single work. He, therefore, added the entire amount of Rs.15 crore to the total income of the assessee as ‘income from other sources.’ 5. In appeal, the ld.CIT(A) held that the AO is not justified in applying the flat rate of 8% on the income of Rs.105.83 crore when he had not given any rationale/basis for taking the net profit at that rate nor has given any comparable rate in which net profit rate was disclosed. He, however, sustained the addition of Rs.15 crores made by the AO. Revenue is not in appeal against the relief granted by CIT(A) and, therefore, we are not concerned with the same. 6. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following concise grounds of appeal:- “1. That the ld.CIT(A) Bathinda has erred in law and on facts in confirming the action of the AO in treating the contract receipt of Rs.15 crore and the payments to two sub contractors as in-genuine. 2. That the ld.CIT(A) Bathinda has erred in law and on facts in confirming the addition of Rs.15 crore made by the AO by treating the receipt of Rs.15 crore as assessee's own money introduced in the books. 3. That the ld.CIT(A) Bathinda has erred in law and on facts in treating the contract receipt of Rs.15 crore as the amount of cash credit by invoking the provisions of section 68 as against the said amount treated by the AO as "Income from Other Sources." ITA No.32/Asr/2017 7 4 That the ld.CIT(A) Bathinda has erred in directing the AO to assess the amount of Rs.15 crore as per the provisions of section 68 read with section 115BBE of the Act without giving any opportunity to the assessee. 5. That the order is bad in law and on facts. 6. That the appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off.” 7. The ld. counsel for the assessee strongly challenged the order of the CIT(A) in confirming the addition of Rs.15 crore made by the AO. He submitted that all payments were received and paid through banking channels and due taxes have been deducted by the payee as well as the assessee at the time of making the payment. Referring to pages 101-102 of the paper book he drew the attention of the Bench to the copy of Form 26AS and referring to page 152 of the paper book he drew the attention of the Bench to the copy of Form No.16A. He submitted that the AO while making the addition has basically relied on the statement of the Directors recorded at the time of search and held that they had expressed ignorance in this regard. Referring to the copy of the statements placed at pages 39-59 of the paper book, he drew the attention of the Bench to the same and submitted that nothing adverse is appearing. He submitted that one of the directors Shri Inderjeet Mehta kept on saying that the other director Shri Amarjit Mehta is aware of these facts and in the statement of Shri Amarjit Mehta, no question in this regard was asked for. He accordingly submitted that in such a scenario no adverse inference on the basis of these statements can be drawn. ITA No.32/Asr/2017 8 7.1 So far as the second objection raised by the AO at page 3, para (iii) of his order with regard to the payments having been encashed by the sub-contractors within 2-3 months from the date of execution of the agreement by the company is concerned, he submitted that the inference drawn by the AO is based totally on conjectures and surmises. He submitted that a big project was completed in a short span of time and due payments were released, how can an adverse inference be drawn against the assessee on this issue. 7.2. So far as the observation of the AO that the sub-contractors were non- existent is concerned, he submitted that summons under section 133(6) were issued to the assessee during the investigation proceedings carried out in the case of these very sub-contractors. Referring to page 69 of the paper book, he submitted that the notice u/s 133(6) was issued on 18.11.2015 to the assessee at the time of investigation proceedings of M/s. Global Infrastructure. Referring to paper book page 70, he drew the attention of the bench to the reply filed by assessee at the time of investigation proceedings of M/s. Global Infrastructure. He submitted that when the Department itself is launching investigation in case of sub-contractors now they cannot plead that the sub-contractors do not exist. Referring to pages 79- 80 of the paper book, he submitted that similar is the situation with regard to the contractor, M/s PACL. The ld. Counsel for the assessee accordingly submitted that the addition has been made merely on presumption basis which has been sustained by the CIT(A) without proper application of mind. ITA No.32/Asr/2017 9 8. So far as the allegation of the AO that on the enquiries conducted at Delhi and Gurgaon, it was found that sub-contractors are not existing is concerned, he submitted that the reports of the inspectors were never confronted to the assessee. He submitted that it is a trite law that any material collected at the back of the assessee, without giving assessee an opportunity to rebut the same, cannot be used to draw adverse inference against the assessee. Referring to the statements extracted from the Inspector’s report from Kolkata (page 5 of the assessment order), he submitted that the same talks not about the non-existence of the sub- contractor but talks about the smallness of the office, therefore, it cannot be inferred that the sub-contractor does not exist. 9. The ld. Counsel for the assessee, referring to page 122 of the paper book, drew the attention of Bench to the letter filed by M/s. Kingston Infra Developers Pvt. Ltd. directly to the A.O confirming the subcontract together with the relevant documentary evidences in the form of audited financials reflecting the transaction, copy of contract, ledger account, bank statement etc., which are placed from page 123 onwards. He submitted that since notices having been served and due replies have been received, it cannot be inferred that these entities do not exist. He submitted that since the assessee was not able to produce the parties personally the assessee was kept on requesting the AO and even before the CIT(A) to conduct independent enquiries with the PAN and other information made available to him ITA No.32/Asr/2017 10 in the form of TDS certificates, etc. However, both the lower authorities preferred not to make any such independent enquiry. 10. The ld. Counsel for the assessee submitted that the ld.CIT(A) has confirmed the addition under section 68 of the Act. However, section 68 talks about the source of the credits appearing in the books of the assessee. He submitted that the amount received by the assessee has not been doubted by the authorities. The source of money is PACL which is also not in dispute. Since the amount has come from PACL it cannot be taxed otherwise than business income. He submitted that this is not a case of cash credit under section 68 of the Act, since the amount has been disclosed by the assessee itself as income in the form of its contract receipt. Referring to the decision of the jurisdictional Punjab & Haryana High Court in the case of Commissioner of Income Tax, Rohtak Versus Smt. Kamlesh& Others, ITA No. 815 to 817 of 2010 (O&M), order dated 5 th February, 2013, he submitted that under similar circumstances, the Hon’ble High Court has dismissed the appeal filed by the Revenue wherein the Tribunal has returned a finding that, “if the Assessing Officer was of the view that no work has been done by any of the contractors, the amount received itself cannot be considered to be the income of the assessees but only the profit from such receipts can be brought to tax. The assessee herein being found to be name lenders could have charged only the commission for lending the name.” ITA No.32/Asr/2017 11 11. He submitted that in the above case, some contract received from PACL was found by the department to be not actually executed and accordingly addition was made on protective basis. Even then the Hon’ble High Court gave a finding that irrespective of the outcome of the addition made on substantive basis, only addition to the extent of profit part of the contract amount can be taxed in the hands of assessee. He drew the attention of the Bench to the following observation of the Hon’ble High Court:- “If in the proceedings against PACL India Limited, a finding is recorded that the transactions were not genuine, then the same would be liable to be added back to the income of PACL India Limited but if finding is recorded that the transaction is genuine, the order of assessment passed by the Tribunal would require no interference so far as the assessees in the present appeal are concerned. The finalization of the assessment proceedings against the assessees has, thus, no effect in respect of the assessment of PACL India Ltd.” 12. The ld. Counsel for the assessee, referring to the following decisions of the Tribunal in similar cases submitted that the Tribunal has consistently estimated the profit rate of 2.24% of gross receipt from PACL for estimation of net profit:- (i) Smt. Kamlesh & Others in ITA No.225/Del/2010 etc., order dated 31.10.2010. (ii) ITO vs. Madhav Propcon Pvt. Ltd., 1TA No. 6011/Del/2012, order dated 12 th March 2015. (iii) ITO vs. Radha Ballabh nest Build Pvt. Ltd., ITA No. 2044/Del/2011, order dated 30 th September 2014. ITA No.32/Asr/2017 12 (iv) ITO vs. Rupa Promoters Pvt. Ltd. & Ors., ITA No. 2640/Del/2011, ITA No. 2641/Del/2011, ITA No. 2642/Del/2011 and ITA No. 2643/Del/2011, order dated 31 st July 2012. (v) Arydeep Developers Pvt. Ltd. vs. ITO ITA No. 898/Ahd/2017. (vi) ITO vs. Shri Kishan Kant ITA No. 366/Del/2010. 13. He submitted that the decision in the case of Smt. Kamlesh & Others (supra) has subsequently been affirmed by the Hon’ble Punjab & Haryana High court, vide order dated 5 th February, 2013 in ITA No.815 to 817/2010 and bunch of other appeals. 14. He accordingly submitted that the issue stands squarely covered by the decision of the jurisdictional High Court as well as the coordinate Benches of the Tribunal. 15. The ld. Counsel for the assessee submitted that in subsequent years no such addition has been made which can be verified from the assessment orders for subsequent years i.e., AYs 2014-15 and 2015-16, copies of which are placed at pages 26-31 of the paper book. 16. Without prejudice to the above, the ld. Counsel for the assessee submitted that out of Rs. 15,00,00,000/- an amount of Rs.5 crore has not been received during the year under consideration which is evident from the copy of ledger account placed at pages 105-107 of the paper book since the same are claimed as debtors ITA No.32/Asr/2017 13 and, therefore, the provisions of section 68 are not applicable. So far as the balance amount of Rs. 10,00,00,000/- is concerned, he submitted that the assessee has received payments from PACL on various dates for the contract and the same were paid to the sub-contractors after due deduction of TDS and as the assessee has not retained the money or utilized the money for some other activity. He accordingly submitted that the order passed by the AO and the CIT(A) be set aside and the grounds raised by the assessee be allowed. 17. The ld. DR, on the other hand, heavily relied on the orders of the AO and the CIT(A). He submitted that the ld.CIT(A) has given a categorical finding that the assessee failed to discharge the onus of proving the bona fides of the transaction found to be suspicious by the AO. He drew the attention of the Bench to the findings of the ld.CIT(A) on this issue at paras 6 to 8 of the order of the CIT(A) which reads as under:- “6. The submissions of the appellant have been considered with reference to the assessment records and the assessment order. Before adjudicating on the grievance of the appellant as expressed in terms of the grounds of appeal, it shall be necessary to look into the surrounding circumstances which impinge on the facts of the instant case. The appellant is stated to have received a contractual payment of Rs. 15 crores from PACL for development of land at various locations in the country. PACL is one of the companies of the Pearl Group which is accused of running an unauthorised Ponzi scheme and is under investigation by the CBI for the last two years. The news of "Pearl scam” is too well-known as there has been an extensive reporting and coverage on the matter in the media. The modus operandi of this group is luring small investors to deposit money with the group by giving guarantee of land which did not allegedly exist. It is estimated that over 5 crore investors have been conned in this unauthorised pyramid scheme. The promoter of this group, Shri Nirmal Singh Bhangoo is being investigated to unravel the money trail. It is necessary to take cognizance of this situation as in the instant case, the appellant could not point out the details and location of the land purported to ITA No.32/Asr/2017 14 have been developed at the instance of PACL through the purported two sub- contractors. Such basic information with regard to the receipt of a substantial amount of money was not forthcoming before the AO either in the survey proceedings or during the assessment proceedings. Only documentation in terms of “works cum agreement contract" and "sub-contract" could be found at the appellant’s business premises, with no information on basic details like the location of land etc. It was noticed that contract with PACL was entered on 15/04/2012 and on the same day, the said contract was sub¬contracted to 2 concerns located at Delhi and Gurgaon, It, thus, becomes toe obvious to be dwelt any further to hold the entire thing as sham, not relatable to any business activity. The appellant is a civil contractor and is not stated to have undertaken this kind of development work of land ever and yet it has been purportedly awarded the contract by PACL without any tendering process or due diligence. Similarly, the contract was subcontracted on the same day to entities located in Delhi and Gurgaon without any due diligence. The Directors of the appellant company have no idea of the existence of these companies or their expertise in the matter of ‘land development’. No process is seen to have been undertaken to, ascertain whether the sub- contractors had the machinery or expertise to do the said work. All these facts overwhelmingly point towards the fact that only.paper transactions have taken place with no actual physical work. The AO before persuading himself as to the deceitfulness of the appellant’s explanation, got enquiries conducted at Delhi and Gurgaon only to find that the purported sub-contractors were non-existent. When this fact was confronted to the appellant company, there was only cussedness in its response. At the appellate stage also, no information was forthcoming on. the location of the land and the nature of the work purported to. have been done. No explanation could be given regarding the findings, of the AO in respect of the bonafides of the transactions. It was merely reiterated that the transactions of receipts and payout have been made through banking channel and the applicable TDS have been duly effected. 7. In view of the aforesaid, it is apparent that the appellant has failed to discharge its onus of proving the bonafides of the transaction found to be suspicious by the AO. Since assessment of income is a civil proceedings, rules of probability, loudly supported by surrounding circumstances, apply. In the absence of credible explanation., genuineness of the transaction of contractual receipts from PACL and payout to two sub-contractors remains unproved. From the circumstances, it becomes obvious that the appellant company has acted as hand in gloves with PACL and has made a conscious effort to introduce its secreted income in the garb of contractual receipts against which bogus and dubious expenses were debited to square off the taxable income component of such receipts. 8. In view of what has been stated above, it is a classic case of application of the provisions of section 68 of the Act in as much as the explanation offered by the appellant in respect of the amount of Rs. 15 crores ITA No.32/Asr/2017 15 credited in the books was found to be unsatisfactory as to the genuineness by the AO. In such a case, the said amount requires to be charged to tax as the income of the year under consideration. The AO is therefore directed to treat the said amount of Rs.15 crores as cash credit under the provisions of section 68 of the Act instead of treating it as an income from "other sources” as has been done by him. The Hon’ble High. Court of Punjab & Haryana in the case of Dulari Digital Photo Services Vs. CIT, Ludhiana [2013] 38 taxman.com 390, approved the treatment of sham transaction as ‘cash credit’ instead of "income from other sources”. For taxing this income, provisions as contained in section 115BBE [effective from 01/04/2013] shall apply, which additionally mandates non-deduction of any expenditure or allowance against such income. The AO is directed to assess Rs.15 crones as per the provisions of section 68 read with section 115BBE of the Act. The grounds of appeal pertaining to this issue are, thus, dismissed.” 18. He submitted that the ld.CIT(A) has given justifiable reasons while sustaining the addition of Rs.15 crore. He accordingly submitted that the order of the CIT(A) be upheld and the grounds raised by the assessee be dismissed. 19. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the assessee, in the instant case, is engaged in the business of civil construction. It received a contract from M/s PACL amounting to Rs.15 crores for development of land at various sites. This contract was further subcontracted to two entities, namely, Global Infrastructure, New Delhi and M/s Kingston Infra Developers Pvt. Ltd., Calcutta. We find, the AO held that : (a) no development work has been done by the assessee; (b) the two sub-contractors are non-existent; (c) in the statement of directors recorded at the time of survey they had expressed ignorance in this regard; and (d) payments have been encashed by the sub- ITA No.32/Asr/2017 16 contractors within 2-3 months from the date of execution of the agreement by the company. The AO, accordingly rejected the book results and estimated the profit from the contract receipt @ 8% on the total contract receipt of Rs.105,83,68,049/- (i.e., gross contract receipt of Rs.1,20,83,86,049 (-) Rs.15,00,00,000/-). He, however, made addition of Rs.15 crores to the total income of the assessee on the ground that the assessee has simply received the amount of Rs.15 crores from PACL without executing any single work. We find, in appeal, the ld.CIT(A) held that the AO was not justified in rejecting the book results and estimating the profit @ 8% for which the Revenue is not in appeal and, therefore, we are not concerned with the same. He, however, sustained the addition of Rs.15 crores made by the AO the reasons of which have already been reproduced in the preceding paragraphs. 20. It is the submission of the ld. Counsel that at the time of survey, the director Shri Inderjit Mehta was kept on saying that the other director Mr. Amarjit Mehta is aware of these facts and in the statement recorded of Amarjit Mehta no question was asked on this issue. It is also his submission that during the investigation proceedings carried out in the case of these very sub-contractors, notice u/s 133(6) were issued to the assessee and the assessee has filed reply at the time of investigation proceedings of M/s Global Infrastructure and Kingston Infra Developers Pvt. Ltd. Therefore, it cannot be said that the sub-contractors are non- existent. It is also his submission that the so called report of the inspectors which ITA No.32/Asr/2017 17 were collected at the back of the assessee and utilized against the assessee were never confronted to the assessee. It is also his submission that the two sub- contractors have directly filed letters before the AO confirming the sub-contract together with relevant documentary evidence. 21. We find some force in the above argument of the ld. Counsel. A perusal of the letter dated 18.11.2015 received by the ITO of Shri Gulab Chand, proprietor of M/s Global Infrastructure shows that the AO of Global Infrastructure had issued notice u/s 133(6) to the assessee and the assessee vide letter dated 30.11.2015 has replied to the AO, copy of which is placed at page 70 of the paper book. Similarly, we find from page 79 of the paper book that the AO of PACL had issued a letter u/s 133(6) to the assessee on 24 th August, 2016 and the assessee, vide reply dated 09.09.2016 had addressed a letter to the AO of PACL giving the reply in response to such notice u/s 133(6). Therefore, the inference of the AO that Global Infrastructure is non-existent is incorrect. We find from page 122 of the paper book that the sub-contractor, namely, Kingston Infra Developers Pvt. Ltd., vide letter dated 7 th December, 2015 had directly filed the documents in response to summons u/s 131 addressed to the Dy. Commissioner of Income-tax (Inv.) Unit 3(3), Kolkata. Therefore, we find merit in the submission of the ld. Counsel that the inference drawn by both the lower authorities that the two sub-contractors are not in existence is incorrect. ITA No.32/Asr/2017 18 22. We find an identical issue had come up before the Hon’ble Punjab & Haryana High Court in the case of CIT vs Smt. Kamlesh & Others, vide ITA No.815-817 of 2010, order dated 5 th February, 2013. In this case, the assessee filed the return of income under the head ‘income from business or profession’ after applying the provisions of section 44AD of the Act. During the course of assessment proceedings, it was found that assessee have not done any contract work of PACL. Since no work has been done by the assessee, therefore, the AO held that no expenses can be allowed and accordingly the entire receipts from PACL were treated as income of the assessee under the head ‘income from business or profession’ on protective basis. The ld. CIT(A) returned a finding that the amount of receipt appearing in the bank account are not from the contract business. The assessee has shown net profit of 8% of the receipts, therefore, the income deserves to be assessed at 8% of the receipts because the assessee must not have allowed their name to be used without any consideration. It was accordingly held that such income to be assessed is income from other sources and credit of tax deduction should be given. On further appeal by the assessee before the Tribunal, the Tribunal returned a finding that if the AO was of the view that no work has been done by any of the directors, the amount received itself cannot be considered to be income of the assessee, but only the profit from such receipts can be brought to tax. The assessee herein upon found to be name lenders can be charged only the commission for lending the name. Accordingly, the income of the assessees are only to the extent of receiving commission. Since all these persons have offered ITA No.32/Asr/2017 19 8% of their income, no further amount was held to be taxable. On appeal by the Revenue, the Hon’ble High Court held as under:- “ Having heard learned counsel for the parties, we do not find that any substantial question of law arises for consideration. On account of the finding recorded by the Tribunal, the amount disclosed by the assessees as their income has been assessed to tax as income in terms of Section 44-AD of the Act. If in the proceedings against PACL India Limited, a finding is recorded that the transactions were not genuine, then the same would be liable to be added back to the income of PACL India Limited but if finding is recorded that the transaction is genuine, the order of assessment passed by the Tribunal would require no interference so far as the assessees in the present appeal are concerned. The finalization of the assessment and other connected matters proceedings against the assessees has, thus, no effect in respect of the assessment of PACL India Ltd. In view of the above, we do not find that any substantial question of law arises for consideration by this Court in the present appeals. Consequently, the appeals are dismissed. 23. We find, the coordinate Bench of the Tribunal in the case of ITO vs. Madhav Propcon Pvt. Ltd. vide ITA No.6011/Del/2012 has observed as under:- “7. On careful consideration of above submissions, at the very outset, we note that in the similar set of facts and circumstances in the case of ITO vs Radha Ballabh Nest Build Pvt. Ltd. (supra) dismissing the appeal of the revenue, the coordinate bench of this Tribunal has upheld the estimation of net profit @2.24% of the gross receipts from M/s PACL India Ltd. The operative part of this order of the Tribunal reads as under:- "6. Since, the issues raised in the grounds are covered by earlier decision of the Tribunal in the group case of the assessee as well as the recent order of the Tribunal for the similar assessment year 2008-09 in ITA No. 2042 and 2043/D/2011 (Supra) we do not find infirmity in the first appellate order. In that case also the Tribunal has upheld the first appellate order on identical issues. Addition made by the AO on account of TDS treating the amount claimed from PACL India Ltd. and PGF India Ltd. as real income of the assessee deleted by the Ld. CIT(A) has been upheld. The Tribunal has also upheld the action of the 1st appellate authority in restricting the addition made on account of 4% commission on debit and credit entries ITA No. ITA No.32/Asr/2017 20 2044/D/2011 5 regarding providing of accommodation entries to the said companies to 2.4% of the gross receipt shown in the profit and loss account from the above companies. 7. Under the above background, we do not find reason to interfere to the first appellate order in this regard. The same is upheld. The grounds are accordingly rejected." 8. First of all, it would be just and proper to consider the applicability of the decisions relied by the ld. DR appearing for the Revenue. In the case of ITA No.6011/Del/2012 Telelink (supra), the AO estimated net profit @12% and the CIT(A) reduced the same @6%. The Tribunal, allowing the appeal by the revenue, set aside the order of the CIT(A) by restoring that of the AO affirming the net profit rate at 12%. The Hon'ble High Court held that if net profit rate is perverse and arbitrary, the findings so rendered shall be illegal and restored the matter to the file of the AO for re-determination of net profit by reference to and after due consideration of relevant factors. Hence in our humble understanding, Hon'ble High Court held that if net profit rate is perverse and arbitrary, then the findings so rendered shall be illegal and with this proposition, the matter is restored to the file of the AO for re- determination of net profit. We also respectfully note that Hon'ble High Court did not determine any net profit rate, hence, there is no guideline about suitable and appropriate percentage of profit. 9. We further note that the Hon'ble Punjab & Haryana High Court in the case of CIT vs Kamlesh & other cases (supra), their lordships in the cases of individuals held that the income disclosed by the assessee as their income has been assessed to tax as income in terms of section 44AD of the Act, then it was held to be sustainable. Ld. Counsel of the assessee submitted that the present case is related to a company having turnover of about Rs.5,00 crores, hence, the net profit rate admitted by individual assessee u/s 44AD of the Act is not applicable and the cases of CIT vs Kamlesh (supra) is related to individual assessee who do not maintain books of accounts and surrender themselves to provisions of Section 44AD of the Act. Ld. DR could not lead us to hold that facts of these cases are similar to the present case. Thus, we agree with these contentions of the ld. Counsel as the facts of the extant case are clearly distinguishable from the facts of the case of CIT vs Kamlesh etc. (supra). 10. In the case of CIT vs Subodh Gupta, the Hon'ble Jurisdictional High Court of Delhi held that the appellate authorities have not applied section 44AD of the Act but where difficulty arose as they had to estimate reasonable rate of net profit, hence in absence of any data and details, they applied net profit rate as mentioned in section 44AD of the Act. In that case, their lordships further also noted that the AO in the subsequent years accepted the figure of 8% of net profit. Ld. Counsel of the assessee submitted that in the case of Subodh ITA No.32/Asr/2017 21 Gupta (supra), no instance was quoted by the Revenue about any higher profit rate and in absence of any contrary data and details the net profit rate of 8% was approved by Hon'ble High Court but in the present case, there were number of cases wherein in the similar set of facts and circumstances, net profit rate of 2.24% was accepted by the department in several suitably comparable cases including order in the case of Radha Ballabh Nest Build Pvt. Ltd. (supra), therefore, the ratio of the decision of Subodh Gupta (supra) does not support the case of the Revenue in the present appeal. 11. On careful consideration of above contentions of both the sides, first of all, we noted that on our specific query from ld. DR, we have been informed by the ld. DR that the decisions of the Tribunal (supra) as relied by the assessee and accepted by the CIT(A) as suitable comparables have not been set aside or modified or disturbed by the Tribunal itself or by Hon'ble High Court. Hence, in absence of any other order, which may lead us to take a different view or opinion, we are of the considered opinion that the CIT(A) was quite justified in considering the suitable comparable cases for determination of net profit rate of 2.24% of gross receipts of the assessee. 12. On careful consideration of the order of the coordinate bench of this Tribunal in the case of Radha Ballabh Nest Build Pvt. Ltd.(supra), we are of the considered opinion that the issue raised by the revenue in the sole ground is covered by the decision of the Tribunal for similar AY 2008-09 passed in ITA No.2044/Del/2011 (supra). We are unable to see any ambiguity, infirmity or any other valid reason to interfere with the impugned order of the first appellate authority. In the case of ITO vs Radha Ballabh Nest Build Pvt. Ltd.(supra), the Tribunal, on identical set of facts and circumstances, has upheld the order of the CIT(A) and the addition made by the AO has been deleted by upholding the order of the CIT(A) which adopted rate of 2.24% of the gross receipts from M/s PACL India Ltd. for estimation of net profit in a peculiar situation when the conclusion of rejection of books of accounts by the AO has been upheld by the CIT(A). The Tribunal has also upheld the conclusion of the CIT(A) in this regard and we are unable to see any valid reason to take a different view on the similar issue. We also respectfully hold that the benefit of the ratio of the decisions relied by the revenue is not available for the revenue as the facts and circumstances of these cases are clearly distinguishable from the factual matrix of the present case. Therefore, we hold that the present case of the assessee is squarely covered in favour of the assessee by the order of the Tribunal in the case of Radha Ballabh Nest Build Pvt. Ltd. (supra). Accordingly, sole ground of the revenue being devoid of merits is dismissed. 13. In the result, the appeal of the revenue is dismissed.” ITA No.32/Asr/2017 22 24. We find, the coordinate Bench of the Tribunal in the case of ITO vs. Roopa Promoters Pvt. Ltd. & Others, reported in 2012 (9) TMI 326 – ITAT Delhi while deciding an identical issue has observed as under:- “5. We have considered the above submissions in view of the orders of the authorities below and decisions relied upon. We find that the AO made addition of ` 19,16,357/- in case of M/s. Rupa Promoters Pvt. Ltd. applying 4% commission on debit and credit entries of ` 4,79,08,938/-. The AO was of the view that the assessee did not conduct land development work for M/s. PACL India Ltd. and PGF Ltd. Hence he made the above addition. The AO was of the opinion that the TDS amount claimed from M/s. PACL India Ltd. and PGF Ltd. was made actual income of the assessee company since the assessee company had not repaid the amount of TDS to M/s. PACL India Ltd. and PGF Ltd. The AO accordingly made addition of ` 9,35,178/- in respect of TDS amount claimed from the above companies. The Ld. CIT(A) has reduced deleted above additions. Similar additions though amounts are different, have been made in case of assessee's group i.e. Rishikesh Properties Pvt. Ltd., M/s. RSM Construction Pvt. Ltd. and Rishikesh Buildcon Pvt. Ltd. The Ld. CIT(A) has reduced / deleted the additions in question keeping in view the past precedent. He has noted the result in the case of other group companies for the assessment year 2008- 09 and keeping in mind the comparable cases, namely M/s. Best Infracon Pvt. Ld. and M/s. Best Propmart Pvt. Ltd. wherein the AO had accepted the results shown by these assessee companies and made additions only for the vouchers not readily available. He noted further that in case of group company M/s. Rishikesh Properties Pvt. Ltd. for the earlier assessment year 2006-07 the Ld. CIT(A) had passed the order on an identical issue and the Tribunal has also dealt with the same. Similarly the issue has also been dealt with by the first Appellate Authority and the Tribunal in the cases of M/s. P.P. Buildmart (P) Ltd. for assessment year 2006-07 and in the case M/s. Jatadhari Builders Pvt. Ltd. for the assessment year 2006-07. It has been noted by the Ld. CIT(A) that on identical issue in the case of M/s. Rupa Promoters Pvt. Ltd. as well as the group companies viz. M/s. Rishikesh Properties Pvt. Ltd. and M/s. Rishikesh Buildcon Pvt. Ltd etc. in the earlier year, the additions made were deleted by the Ld. CIT(A) and the Tribunal has dismissed the appeals preferred by the revenue for that assessment year 2006- 07. The Ld. CIT(A) has noted that in the case of M/s. Rishikesh Properties PVt. Ltd. where the first Appellate Authority had reduced the addition to 0.5% of gross receipt the Tribunal has remanded the matter to the AO for considering the GP of companies carrying similar work. He has noted that in the case of M/s. Jatadhari Builders Pvt. Ltd. for assessment year 2007-08, the Ld. CIT(A) has also restricted the addition to 0.5% and in the case of M/s. P.P Buildmart Pvt. Ltd. for assessment year 2006-07 the Ld. CIT(A) has restricted the addition to 2.24%. The Ld. CIT(A) has also observed that in the ITA No.32/Asr/2017 23 assessment year 2007-08 an identical issue was raised in the case of M/s. Rupa Promoters Pvt. Ltd. as well as the group companies viz. M/s. Rishikesh Buildcon Pvt. Ltd., RSM Construction Pvt. Ltd. And M/s. Rishikesh Properties Pvt. Ltd. The addition made on account of treating the TDS claim as income was deleted by the Ld. CIT(A) and the addition made on account of commission paid for entries was restricted to 2.24% of the gross receipts shown in the profit and loss account from M/s. PACL India Ltd. and others. ITA Nos.2640,2641,2642,2643/Del/2011 6. In our view it is an established proposition of law that result of past years under similar facts is the best guidance for estimating the income. Under these circumstances the Ld. CIT(A) was justified to take assistance of the immediately previous assessment year to estimate the profit of the assessee. There is no dispute that in the assessment year 2007-08 on identical issue in the cases of M/s. Rupa Promotors Pvt. Ltd., M/s Rishikesh Buildcon Pvt. Ltd., RSM Construction Pvt. Ltd. and M/s. Rishikesh Properties Pvt. Ltd., the Ld. CIT(A) has deleted the addition made in respect of TDS amount and addition made on account of commission has been restricted to 2.24% of the gross receipt shown in the profit and loss account from M/s. PACL India Ltd. and others. The revenue has not questioned this first appellate order for the assessment year 2007-08 on an identical issue under similar facts before the Tribunal. Under these circumstances we are of the view that the Ld. CIT(A) has rightly deleted the addition made on account of TDS treating the amount claimed from M/s. PACL India Ltd. and PGF Ltd. as real income of assessee and in restricting the addition made on account of 4% commission on debit and credit entries regarding providing accommodation entries to the said companies to 2.24% of the gross receipt shown in the profit and loss account from the above companies keeping in view the precedent of last assessment year 2007-08 under similar facts which remained unquestioned by the revenue. The first appellate order is thus upheld. Grounds are accordingly rejected. 7. In the result, appeals are dismissed.” 25. Similar view has been taken by various other decisions relied on by the ld. Counsel. Since the assessee in the instant case has already declared the net profit of Rs.2.31% on the contract receipt as per the finding given by the CIT(A) himself at page 12 of his order, therefore, respectfully following the decisions cited supra, we hold that no further addition is called for on account of the contract receipt from ITA No.32/Asr/2017 24 PACL. Accordingly, the order of the CIT(A) is set aside and the grounds raised by the assessee are allowed. 26. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 09.02.2022. Sd/- Sd/- (SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 09 th February, 2022. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi