MODERN ROAD MAKERS P. LTD, MUMBAI V. ACIT CEN CIR 36, MUMBAI

ITA 4734/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8838 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 14-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Assessee Lawyers: MITESH N SHAH
• Keywords: Bogus purchase; Unexplained expenditure; Capital asset; Revision of order; Depreciation; Search and seizure; Initiation of penalty proceedings; Validity of assessment; Accommodation entries
• Section: 69C; 143(3); 80HHC; 153A; 234B; 69; 263; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C, MUM BAI BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.4734/MUM/2016 (ASSESSMENT YEAR- 2008-09) M/S MODERN ROAD MAKERS PVT. LTD. 3 RD FLOOR, IRB COMPLEX, CHANDIVALI FARM, CHANDIVALI VILLAGE, ANDHERI (EAST), MUMBAI-400072 PAN: AAACM3816F VS. ACIT, CENTRAL CIRCLE-5(3 ), AIR INDIA BUILDING, 19 TH FLOOR, NARIMAN POINT, MUMBAI-400021 (FORMERLY ASSESSED WITH ACIT CC-36, MUMBAI.) (APPELLANT) (RESPONDENT) ITA NO.4735/MUM/2016 (ASSESSMENT YEAR- 2009-10) M/S MODERN ROAD MAKERS PVT. LTD. 3 RD FLOOR, IRB COMPLEX, CHANDIVALI FARM, CHANDIVALI VILLAGE, ANDHERI (EAST), MUMBAI-400072 PAN: AAACM3816F VS. ACIT, CENTRAL CIRCLE-5(3 ), AIR INDIA BUILDING, 19 TH FLOOR, NARIMAN POINT, MUMBAI-400021 ( FORMERLY ASSESSED WITH ACIT CC-36, MUMBAI.) (APPELLANT) (RESPONDENT) ITA NO.4736/MUM/2016 (ASSESSMENT YEAR- 2010-11) M/S MODERN ROAD MAKERS PVT. LTD. 3 RD FLOOR, IRB COMPLEX, CHANDIVALI FARM, CHANDIVALI VILLAGE, ANDHERI (EAST), MUMBAI-400072 PAN: AAACM3816F VS. ACIT, CENTRAL CIRCLE-5(3 ), AIR INDIA BUILDING, 19 TH FLOOR, NARIMAN POINT, MUMBAI-400021 ( FORMERLY ASSESSED WITH ACIT CC-36, MUMBAI.) (APPELLANT) (RESPONDENT) ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 2 ITA NO.5126/MUM/2016 (ASSESSMENT YEAR- 2010-11) ACIT, CENTRAL CIRCLE-5(3 ), AIR INDIA BUILDING, 19 TH FLOOR, NARIMAN POINT, MUMBAI- 400021 ( FORMERLY ASSESSED WITH ACIT CC-36, MUMBAI.) VS. M/S MODERN ROAD MAKERS PVT. LTD. 3 RD FLOOR, IRB COMPLEX, CHANDIVALI FARM, CHANDIVALI VILLAGE, ANDHERI (EAST), MUMBAI-400072 PAN: AAACM3816F (APPELLANT) (RESPONDENT) ITA NO.4737/MUM/2016 (ASSESSMENT YEAR- 2011-12) M/S MODERN ROAD MAKERS PVT. LTD. 3 RD FLOOR, IRB COMPLEX, CHANDIVALI FARM, CHANDIVALI VILLAGE, ANDHERI (EAST), MUMBAI-400072 PAN: AAACM3816F VS. ACIT, CENTRAL CIRCLE-5(3 ), AIR INDIA BUILDING, 19 TH FLOOR, NARIMAN POINT, MUMBAI-400021 ( FORMERLY ASSESSED WITH ACIT CC-36, MUMBAI.) (APPELLANT) (RESPONDENT) ITA NO.5127/MUM/2016 (ASSESSMENT YEAR- 2011-12) ACIT, CENTRAL CIRCLE-5(3 ), AIR INDIA BUILDING, 19 TH FLOOR, NARIMAN POINT, MUMBAI- 400021 ( FORMERLY ASSESSED WITH ACIT CC-36, MUMBAI.) VS. M/S MODERN ROAD MAKERS PVT. LTD. 3 RD FLOOR, IRB COMPLEX, CHANDIVALI FARM, CHANDIVALI VILLAGE, ANDHERI (EAST), MUMBAI-400072 PAN: AAACM3816F (APPELLANT) (RESPONDENT) ITA NO.4738/MUM/2016 (ASSESSMENT YEAR- 2012-13) M/S MODERN ROAD MAKERS PVT. LTD. 3 RD FLOOR, IRB COMPLEX, VS. ACIT, CENTRAL CIRCLE-5(3 ), AIR INDIA BUILDING, 19 TH FLOOR, ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 3 CHANDIVALI FARM, CHANDIVALI VILLAGE, ANDHERI (EAST), MUMBAI-400072 PAN: AAACM3816F NARIMAN POINT, MUMBAI-400021 ( FORMERLY ASSESSED WITH ACIT CC-36, MUMBAI.) (APPELLANT) (RESPONDENT) ITA NO.5128/MUM/2016 (ASSESSMENT YEAR- 2012-13) ACIT, CENTRAL CIRCLE-5(3 ), AIR INDIA BUILDING, 19 TH FLOOR, NARIMAN POINT, MUMBAI- 400021 ( FORMERLY ASSESSED WITH ACIT CC-36, MUMBAI.) VS. M/S MODERN ROAD MAKERS PVT. LTD. 3 RD FLOOR, IRB COMPLEX, CHANDIVALI FARM, CHANDIVALI VILLAGE, ANDHERI (EAST), MUMBAI-400072 PAN: AAACM3816F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MITESH N. SHAH (AR) REVENUE BY : SHRI H.N. SINGH (CIT- DR) DATE OF HEARING : 29.08.2017 DATE OF PRONOUNCEMENT : 24.10.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS GROUP OF EIGHT APPEALS, FIVE BY ASSESSEE I.E . ITA 4734 TO 4738/M/2016 FOR ASSESSMENT YEAR (AY) 2008-09, 2009-10, 2010-11, 2011-12 & 2012-13 AND THREE BY REVENUE FOR AY 2010-11, 2011-12 & 201 2-13 ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF LD. CIT(A)-53, MUMB AI DATED 31.03.2016. SINCE THE COMMON ISSUES ARE INVOLVE IN THESE APPEAL S, SO ALL THE APPEALS WERE CLUBBED TOGETHER AND ARE DECIDED BY A CONSOLID ATED ORDER. ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 4 2. FIRST WE ARE TAKING APPEAL FOR AY 2008-09 & 2009-10 AS THE FACTS OF THESE ASSESSMENT YEAR ARE ALMOST SIMILAR EXCEPT THE VARIA TION OF FIGURES OF ADDITIONS. IN BOTH THE YEARS THE ASSESSEE HAS CHALL ENGED THE VALIDITY OF ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 153A. FOR APPRECIATION OF FACTS, FIRST WE ARE REFEREEING THE FACTS IN ITA NO. 4734/M/2016 FOR AY 2008-09. THE ASSESSEE HAS RAISED THE FOLLOWING GROU NDS OF APPEAL : 1.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT:- (I) THE INITIATION OF THE ASSESSMENT PROCEEDINGS AN D COMPLETION OF THE ASSESSMENT U/S. 143(3) R.W.S. 153A BY THE AO IS WITHOUT JURISD ICTION AND BAD IN LAW AS THE JURISDICTION U/S. 153A IS VITIATED; AND (II) THE ADDITIONS MADE BY THE AO ARE BEYOND THE SC OPE OF PROVISIONS OF SECTION 153A. 2.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 1,27,63,427 /- MADE BY THE AO TO THE INCOME OF THE APPELLANT ON ACCOUNT OF UNEXPLAINED E XPENDITURE U/S.69C TREATING THE PURCHASES OF STEEL FROM M/ S. KARMA INDUSTRIES LTD. AND ITS ASSOCIATE CONCERNS AS BOGUS. B) THE ID. CIT(A) FAILED TO APPRECIATE THAT :- I) THE ANSWERS GIVEN BY SHRI V.D. MHAISKAR IN RECOR DING HIS STATEMENT U/S.132(4) WERE SUBJECT TO VERIFICATION OF THE RECORDS, DOCUME NTS, ETC.; II) ALL THE PURCHASES FROM M/S. KARMA INDUSTRIES LT D. AND ITS ASSOCIATE CONCERNS ARE GENUINE BEYOND DOUBT AND SUPPORTED BY SUFFICIEN T MATERIALS; III) THE PURCHASE OF STEEL IS BACKED BY CORRESPONDI NG CONSUMPTION IN THE PROJECTS UNDERTAKEN BY THE APPELLANT; IV) THE APPELLANT HAS SUCCESSFULLY DEMONSTRATED THA T THE IMPUGNED STEEL WAS USED IN THE PROJECTS UNDERTAKEN BY THE APPELLANT; V) THE GROSS/NET PROFIT RATIO SHOWN BY THE APPELLAN T IS QUITE REASONABLE; ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 5 VI) NOTHING HAS BEEN BROUGHT ON RECORD BY THE LD. A O THAT MONEY HAS EXCHANGED THE HANDS IN LIEU OF PAYMENT MADE FOR THESE PURCHAS ES BY ACCOUNT PAYEE CHEQUES; AND VII) THE AO DID NOT PROVIDE COPY OF MATERIALS AND S TATEMENTS RELIED UPON BY HIM NOR ALLOWED ANY OPPORTUNITY TO THE APPELLANT TO CRO SS EXAMINE THOSE PARTIES WHO HAVE BEEN BELIEVED TO HAVE PROVIDED THE ALLEGED ACC OMMODATION BILLS. VII) THE AO DID NOT PROVIDE COPY OF MATERIALS AND S TATEMENTS RELIED UPON BY HIM NOR ALLOWED ANY OPPORTUNITY TO THE APPELLANT TO CRO SS EXAMINE THOSE PARTIES WHO HAVE BEEN BELIEVED TO HAVE PROVIDED THE ALLEGED ACC OMMODATION BILLS. C) IN REACHING TO THE CONCLUSION AND CONFIRMING SUC H ADDITION MADE BY THE AO, THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS , CONSIDERATIONS, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. 3.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 2,55,269/ - MADE BY THE AO TO THE INCOME OF THE APPELLANT ON ACCOUNT OF ALLEGED COMMISSION C HARGES ON THE ALLEGED ACCOMMODATION ENTRIES. B) THE LD. CIT(A) FAILED TO APPRECIATE THAT YOUR AP PELLANT HAS NOT PAID ANY COMMISSION TO M/S. KARMA INDUSTRIES LTD. AND ITS AS SOCIATE CONCERNS NOR ANY EVIDENCE WAS FOUND IN THE COURSE OF THE SEARCH. C) IN REACHING TO THE CONCLUSION AND CONFIRMING SUC H ADDITION MADE BY THE AO, THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS , CONSIDERATIONS, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. 4. THE ID. CIT(A) ERRED IN HOLDING THAT LEVY OF INT EREST U/S.234B AND 234C OF THE INCOME TAX ACT, 1961 IS MANDATORY. THE APPELLANT DE NIES ITS LIABILITY FOR SUCH INTEREST. 5) THE LD. CIT(A) ERRED IN HOLDING THAT THE GROUND RAISED DISPUTING INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 IS PREMATURE. THE APPELLANT DENIES ITS LIABILITY FOR SUCH PENALTY . 3. BRIEF FACTS OF THE CASE ARE THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF ROAD/ CIVIL CONSTRUCTION, MAINTENANCE CONTRACTS, WIND MILL POWER ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 6 GENERATION AND TRADING OF CONSTRUCTION MATERIAL, FI LED ITS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 29 SEPTEMBER 2008 DECLA RING TOTAL INCOME OF RS. 80,31,74,400/-. THE ASSESSMENT WAS COMPLETED UN DER SECTION 143(3) ON 20.12.2010 ASSESSEE TOTAL INCOME AT RS. 80,63,26,27 0/-. SUBSEQUENTLY, A SEARCH UNDER SECTION 132 WAS CONDUCTED ON 21 JULY 2 011 ON IRB INFRASTRUCTURE DEVELOPER LTD (IRBIDL). THE ASSESSEE COMPANY IS ONE OF THE SUBSIDIARY COMPANY OF IRBIDL ACCORDINGLY THE ASSESS EE PREMISES WAS ALSO COVERED DURING THE SEARCH. THE NOTICE UNDER SECTION 153A WAS ISSUED TO THE ASSESSEE ON 9 TH DECEMBER 2011. IN RESPONSE TO THE NOTICE UNDER SEC TION 153A THE ASSESSEE FILED RETURN OF INCOME ON 10 TH JANUARY 2012 DECLARING TOTAL INCOME OF RS. 80,63,26,270/-. A SURVEY SEIZURE AND SEARCH ACTION WAS ALSO CONDUCT ED ON 21 JULY 2011 AT THE RESIDENCE AND OFFICE OF MR. RAJESH MEHTA, MANAG ING DIRECTOR OF M/S KARMA INDUSTRIES LTD (KIL). KIL IS ENGAGED IN TRADI NG OF STEEL AND EQUIPMENT OF CONSTRUCTION. DURING THIS COURSE OF S EARCH ACTION, THE STATEMENT OF SHRI RAJESH MEHTA WAS RECORDED, WHEREI N HE HAD STATED THAT KIL HAD NOT SUPPLIED ANY MATERIAL TO THE ASSESSEE A ND ONLY PROVIDED ACCOMMODATION ENTRIES IN THE NATURE OF BOGUS BILLS. THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER UNDER SECTION 143(3) RW S 153A ON 28 MARCH 2014 DETERMINING THE TOTAL INCOME OF ASSESSEE AT RS .81,93,44,962/-. THE ASSESSING OFFICER WHILE FRAMING ASSESSMENT MADE THE ADDITION OF ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 7 RS.1,27,63,427/- UNDER SECTION 69C ON ACCOUNT OF BO GUS PURCHASES AND ADDITION OF RS.2,55,269/-ON ACCOUNT OF COMMISSION E XPENSES ON THE SAID BOGUS PURCHASES. ON APPEAL BEFORE COMMISSIONER (APP EALS) THE VALIDITY OF THE ASSESSMENT ORDER UNDER SECTION 143(3) READ WITH SECTION 153A AS WELL AS ADDITIONS UNDER SECTION 69C AND COMMISSION THEREON WAS UPHELD. THUS, FURTHER AGGRIEVED BY THE ORDER OF COMMISSIONER (APP EALS) THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE RAISING THE GROUNDS OF APPEAL AS STATED ABOVE. 4. WE HAVE HEARD LD. AR OF THE ASSESSEE AND LD DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LEARNED AR OF THE ASSESSEE ARGUED THAT THE ASSESSMENT ORDER UNDER SECTION 143(3) READ WITH SECTION 153A IS INVALID AS NO INCRIMINATING MATERIAL RELATED FOR THE ASSESS MENT YEAR UNDER CONSIDERATION OR OTHER YEARS WAS FOUND AND SEIZED D URING THE SEARCH CONDUCTED AT THE PREMISES OF ASSESSEE ON 21 JULY 20 11. THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2008-09 WAS COMPLETED UNDER SECTION 143(3) ON 20 DECEMBER 2010. THUS, IN ABSENCE OF ANY INCRIMINATIN G MATERIAL DURING THE SEARCH ACTION NO ADDITION CAN BE MADE IN THE UNABAT ED ASSESSMENT. IT WAS FURTHER ARGUED THAT THE COMPLETED ASSESSMENT (UNABA TED) CAN ONLY BE DISTURBED, ON THE BASIS OF INCRIMINATING EVIDENCE R EGARDING UNDISCLOSED INCOME IS SEIZED IN THE SEARCH. THE ASSESSING OFFIC ER HAS NO POWER TO RE- EXAMINE THE ISSUE WHICH HAVE ALREADY BEEN EXAMINED IN THE REGULAR ASSESSMENT COMPLETED UNDER SECTION 143(3). IN ALTER NATIVE IT WAS ARGUED THAT ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 8 A SEARCH ACTION WAS ALSO CARRIED AT THE RESIDENCE A ND OFFICE PREMISES OF SHRI RAJESH MEHTA, DIRECTOR OF KIL, AND FURTHER NO ASSES SMENT CAN BE MADE AGAINST THE ASSESSEE UNDER SECTION 153A AND IF IT I S TO BE UNDER SECTION 153C, IT CANNOT BE WITHOUT RECORDING SATISFACTION AGAINST THE ASSESSEE. IN SUPPORT OF HIS SUBMISSION LEARNED AR OF THE ASSESSEE RELIED U PON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS CONTIN ENTAL WAREHOUSING LTD.[2015] 58 TAXMAN.COM 78 (BOMBAY) AND IN ALL CAR GO GLOBAL LOGISTIC LTD VS DCIT 23 TAXMAN.COM 103(MUMBAI)(SB). ON THE O THER HAND THE LEARNED AND AR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. IT WAS ARGUED THAT DURING THE COURSE OF SUCH ACTION IT WAS REVEALED THAT THE ASSESSEE HAD AVAILED ACCOMMODATION ENTRIES IN THE N ATURE OF BOGUS BILL FROM KIL AND ITS ASSOCIATE CONCERN. THERE WAS SIMULTANEO US SEARCH ACTION ON 21 JULY 2011 AT THE RESIDENCE OF MR. RAJESH MEHTA MD O F KIL. MR. RAJESH MEHTA IN HIS STATEMENT ON OATH ADMITTED THAT THEY H AD PROVIDED ACCOMMODATION ENTRIES IN THE NATURE OF BOGUS BILLS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES, THE MATERIAL ON RECORD AND THE VARIOUS DECISIONS CITED BY LEARNED A R OF THE ASSESSEE AND THE DECISION RELIED BY LD CIT(A). THE ASSESSMENT UNDER SECTION 143(3) FOR THE YEAR UNDER CONSIDERATION WAS COMPLETED ON 20 DECEMB ER 2010 DETERMINING TOTAL INCOME OF ASSESSEE AT RS. 80,63,26,270/-. A S EARCH ACTION WAS CONDUCTED ON 21 JULY 2011. THUS, THE ASSESSMENT FOR THE RELEVANT ASSESSMENT ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 9 YEAR REMAINS UNABATED. IT IS SETTLED LAW THAT THE A SSESSING OFFICER HAS POWER TO MAKE THE ADDITION IN THE UNABATED ASSESSMENT ONL Y ON THE BASIS OF INCRIMINATING MATERIAL FOUND AND SEIZED DURING THE SEARCH ACTION CARRIED UNDER SECTION 132. THE ASSESSING OFFICER NOWHERE HA S THE SPECIFIED IN THE ASSESSMENT ORDER THAT ANY INCRIMINATING MATERIAL WA S FOUND AT THE PREMISES OF ASSESSEE DURING THE SEARCH ON 21 JULY 2011, FOR THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER REL IED UPON THE STATEMENT OF MR RAJESH MEHTA, MD OF KIL. ADMITTEDLY, THE ASSESSI NG OFFICER PROCEEDED TO MAKE THE ASSESSMENT UNDER SECTION 153A READ WITH SECTION 143(3). NO NOTICE UNDER SECTION 153C WAS ISSUED TO THE ASSESSE E. THE ASSESSING OFFICER WAS RELYING UPON THE STATEMENT OF THIRD-PARTY RECOR DED DURING THE SEARCH ACTION ON THE THIRD-PARTY. IN OUR VIEW WHILE MAKING THE ASSESSMENT ON THE BASIS OF A STATEMENT OF THIRD-PARTY THE ASSESSING O FFICER SHOULD HAVE RECORDED THE SATISFACTION BEFORE ISSUANCE OF NOTICE UNDER SE CTION 153C COVERING THE CASE OF ASSESSEE. THE ASSESSING OFFICER HAS NO WHER E RECORDED SUCH SATISFACTION UNDER SECTION 153C.THE HONBLE BOMBAY HIGH COURT IN CIT VS CONTINENTAL WAREHOUSING CORPORATION (SUPRA) HAS HEL D THAT NO ADDITION CAN BE MADE IN RESPECT OF ASSESSMENTS WHICH HAVE BECOME FINAL, IF NO INCRIMINATING MATERIAL IS FOUND DURING SEARCH. THE LD. CIT(A) TRIED TO DIFFERENTIATE THE FACTS FOR AY UNDER CONSIDERATION WITH THE HELP OF DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF M/S MURALI AGRO PRODUCTS LTD. ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 10 (ITA NO. 36 OF 2009) THAT A FINALIZED ASSESSMENT CA N BE DISTURB, IF IN THE COURSE OF PROCEEDING U/S 153A OF THE ACT, IT IS DIS COVERED THAT THE RELIEF EARLIER GRANTED ARE CONTRARY TO THE FACTS. THE LD. CIT(A) HAS GONE ON THE WRONG PREMISES. IN MURALI AGRO PRODUCT PVT LTD (SUP RA) THE ASSESSMENT ORDER UNDER SECTION 143(3) FOR AY 1998-99 WAS PASSE D ON 29.12.2000. THEREAFTER, ON 3.12.2003, THERE WAS A SEARCH ACTION UNDER SECTION 132 WHEREIN INCRIMINATING DOCUMENTS/ ARTICLES WERE SEIZ ED. PURSUANT TO THE SEARCH, THE AO PASSED AN ORDER U/S 153A DETERMINING THE CONCEALED INCOME AT RS.89 LAKHS. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO DELETED THE ADDITIONS OF CONCEALED INCOME COMPUTED BY THE A O. THE AO GAVE EFFECT TO THE SAID ORDER OF THE CIT(A) AND RECOMPUTED THE INCOME AT THE SAME FIGURE AS IT WAS IN THE ASSESSMENT ORDER UNDER SECT ION 143(3). THE CIT PASSED AN ORDER U/S 263 STATING THAT AS THE INCOME COMPUTED BY THE AO IN THE EFFECT ORDER WAS LESS THAN 30% OF THE BOOK PROF IT, THE AO OUGHT TO HAVE COMPUTED THE TOTAL INCOME BY INVOKING SECTION 115JA . THE LD CIT HELD THAT IN THE SAID ORDER, THE AO HAD INCORRECTLY COMPUTED SECTION 80HHC DEDUCTION. THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL CLAIMING THAT AS THE COMPUTATION OF SECTION 115JA BOOK PROFIT AND SE CTION 80HHC DEDUCTION WERE NOT THE SUBJECT MATTER OF THE SECTION 153A PRO CEEDINGS, THE CIT COULD NOT HAVE INVOKED JURISDICTION UNDER SECTION 263. TH E TRIBUNAL ACCEPTED THE ASSESSEES PLEA. ON APPEAL BY THE REVENUE TO THE BO MBAY HIGH COURT THE ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 11 ORDER OF TRIBUNAL WAS CONFIRMED. HENCE, THE RATION OF DECISION IN MURALI AGRO (SUPRA) IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. 6. IN OUR VIEW THE CONCLUSION DRAWN BY LD. CIT(A) IS B EYOND THE SCOPE OF SECTION 153A, THE LD. CIT(A) HAS NOT SPECIFIED AS T O WHAT INCRIMINATING MATERIAL WAS DISCOVERED IN THE SEARCH CONDUCTED ON 21.07.2011. IN OUR CONSIDERED VIEW, THE ADDITION IN THE UNABATED ASSES SMENT CAN ONLY BE MADE ONLY ON THE BASIS OF INCRIMINATING MATERIAL FOR A P ARTICULAR YEAR. THE HONBLE SUPREME COURT IN A RECENT DECISION IN CIT VS SINGHA D TECHNICAL EDUCATION SOCIETY IN CIVIL APPEAL NO. 11080 OF 2015 DATED 29 AUGUST 2017 HELD THAT ADDITION IN UNABATED ASSESSMENT CAN ONLY BE MADE ON THE BASIS OF INCRIMINATING MATERIAL FOR THAT PARTICULAR YEAR. SI NCE NO INCRIMINATING MATERIAL WAS SEIZED DURING THE SEARCH FOR THE YEAR UNDER CONSIDERATION, THUS, NO ADDITION IN THE UNABATED ASSESSMENT CAN BE MADE. HENCE, THE ASSESSMENT ORDER PASSED BY AO BY MAKING ADDITION ON ACCOUNT OF DISALLOWANCE U/S 69C OF THE ACT IN THE ASSESSMENT ORDER PASSED UNDER SEC TION 143(3) RWS 153A IS INVALID. IN THE RESULT, THE GROUND NO.1 OF APPEAL R AISED BY ASSESSEE IS ALLOWED. 7. AS WE HAVE ALLOWED THE GROUND NO.1 OF THE APPEAL HO LDING THAT THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 153A OF T HE ACT DATED 28.03.2014 IS INVALID, IN OUR VIEW THE FURTHER THE DISCUSSION ON OTHER GROUNDS OF APPEAL BECAME ACADEMIC. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 12 ITA NO. 4735/MUM/2016 FOR AY 2009-10 BY ASSESSEE 9. IN ITA NO. 4735/MUM/2016 FOR AY 2009-10, THE ASSESS EE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT:- (I) THE INITIATION OF THE ASSESSMENT PROCEEDINGS AN D COMPLETION OF THE ASSESSMENT U/S. 143(3) R.W.S. 153A BY THE AO IS WITHOUT JURISD ICTION AND BAD IN LAW AS THE JURISDICTION U/S. 153A IS VITIATED; AND (II) THE ADDITIONS MADE BY THE AO ARE BEYOND THE SC OPE OF PROVISIONS OF SECTION 153A. 2.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 29,84,867/- MADE BY THE AO TO THE INCOME OF THE APPELLANT ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S.69C TREATING THE PURCHASES OF STEEL FROM M/ S. KARMA INDUSTRIES LTD. AND ITS ASSOCIATE CONCERNS AS BOGUS. B) THE ID. CIT(A) FAILED TO APPRECIATE THAT :- I) THE ANSWERS GIVEN BY SHRI V.D. MHAISKAR IN RECOR DING HIS STATEMENT U/S.132(4) WERE SUBJECT TO VERIFICATION OF THE RECORDS, DOCUME NTS, ETC.; II) ALL THE PURCHASES FROM M/S. KARMA INDUSTRIES LT D. AND ITS ASSOCIATE CONCERNS ARE GENUINE BEYOND DOUBT AND SUPPORTED BY SUFFICIENT MA TERIALS; III) THE PURCHASE OF STEEL IS BACKED BY CORRESPONDI NG USE OF IT IN THE FIXED ASSETS; IV) NOTHING HAS BEEN BROUGHT ON RECORD BY THE LD. A O THAT MONEY HAS EXCHANGED THE HANDS IN LIEU OF PAYMENT MADE FOR THESE PURCHASES B Y ACCOUNT PAYEE CHEQUES; AND V) THE AO DID NOT PROVIDE COPY OF MATERIALS AND STA TEMENTS RELIED UPON BY HIM NOR ALLOWED ANY OPPORTUNITY TO THE APPELLANT TO CROSS E XAMINE THOSE PARTIES WHO HAVE BEEN BELIEVED TO HAVE PROVIDED THE ALLEGED ACCOMMOD ATION BILLS. C) IN REACHING TO THE CONCLUSION AND CONFIRMING SUC H ADDITION MADE BY THE AO, THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CO NSIDERATIONS, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 13 3.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 9,24,152/ - MADE BY THE AO TO THE INCOME OF THE APPELLANT ON ACCOUNT OF ALLEGED COMMISSION CHAR GES ON THE ALLEGED ACCOMMODATION ENTRIES. B) THE LD. CIT(A) FAILED TO APPRECIATE THAT YOUR AP PELLANT HAS NOT PAID ANY COMMISSION TO M/S. KARMA INDUSTRIES LTD. AND ITS AS SOCIATE CONCERNS NOR ANY EVIDENCE WAS FOUND IN THE COURSE OF THE SEARCH. C) IN REACHING TO THE CONCLUSION AND CONFIRMING SUC H ADDITION MADE BY THE AO, THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CO NSIDERATIONS, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. 4. THE LD. CIT(A) ERRED IN HOLDING THAT THE GROUND RAISED DISPUTING INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 IS PREMATURE. THE APPELLANT DENIES ITS LIABILITY FOR SUCH PENALTY. 10. THE GROUND NO.1 OF THE APPEAL IS IDENTICAL TO THE G ROUND NO.1 OF ITA NO. 4736/MUM/2016 FOR AY 2008-09, WHICH WE HAVE ALREADY ALLOWED. THE FACTS OF THE APPEAL FOR THE YEAR UNDER CONSIDERATION ARE SIMILAR AS NO INCRIMINATING MATERIAL WAS SEIZED IN THE SEARCH UNDER SECTION 132 CARRIED ON 21.07.2011 FOR THE YEAR UNDER CONSIDERATION. THE ASSESSMENT U/ S 143(3) WAS ALREADY COMPLETED ON 28.04.2011, WHICH REMAINED UNABATED. C ONSIDERING THE SIMILARITY OF THE FACT WITH THE APPEAL FOR AY 2008- 9, WHICH WE HAVE ALREADY HELD AS INVALID AND THE FACTS FOR THE YEAR UNDER CO NSIDERATION ARE NOT AT VARIANCE, THE APPEAL FOR THE YEAR UNDER CONSIDERATI ON IS ALSO ALLOWED WITH SIMILAR OBSERVATIONS. ITA NO. 4736/MUM/2016 FOR AY 2010-11 BY ASSESSEE. ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 14 11. IN ITA NO. 4736/MUM/2016 FOR AY 2010-11, THE ASSESS EE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION TO THE EXTE NT OF RS. 6,03,42,549/- MADE BY THE AO TO THE INCOME OF THE APPELLANT ON AC COUNT OF UNEXPLAINED EXPENDITURE U/S. 69C TREATING THE PURCHASES OF STEE L FROM M/S. KARMA INDUSTRIES LTD. AND ITS ASSOCIATE CONCERNS AS BOGUS IN RESPECT OF (I) SURAT-DAHISAR AND KOLHAPUR PROJECTS BEI NG PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES OF RS. 25,22,08,974/- AND RS. 6,02,6 1,740/- RESPECTIVELY @ 12.5% OF THE PURCHASE VALUE OF RS. 31,24,70,714/- RS. 3,90,58,839/- ( II ) MUMBAI-PUNE EXPRESSWAY AND NAGPUR-HYDRABAD PROJECTS OF RS. 2,01,85,145/- AND RS.10,98, 565 RESPECTIVELY. RS. 2,12,83,710 /- TOTAL RS. 6,03,42,549/- B) THE LD. CIT(A) FAILED TO APPRECIATE THAT :- I) THE ANSWERS GIVEN BY SHRI V.D. MHAISKAR IN RECORDING HIS STATEMENT U/S.132(4) WERE SUBJECT TO VERIFICATION OF THE RECO RDS, DOCUMENTS, ETC.; II) ALL THE PURCHASES FROM M/S. KARMA INDUSTRIES LTD. AND ITS ASSOCIATE CONCERNS ARE GENUINE BEYOND DOUBT AND SUPPORTED BY SUFFICIENT MATERIALS; III) THE PURCHASE OF STEEL IS BACKED BY C ORRESPONDING CONSUMPTION IN THE PROJECTS UNDERTAKEN BY THE APPELLANT; IV) THE APPELLANT HAS SUCCESSFULLY DEMONST RATED THAT THE IMPUGNED STEEL WAS USED IN THE PROJECTS UNDERTAKEN BY THE APPELLANT; V) THE GROSS/NET PROFIT RATIO SHOWN BY THE APPELLANT IS QUITE REASONABLE; VI) NOTHING HAS BEEN BROUGHT ON RECORD BY T HE LD. AO THAT MONEY HAS EXCHANGED THE HANDS IN LIEU OF PAYMENT MADE FOR THE SE PURCHASES BY ACCOUNT PAYEE CHEQUES; AND VII) THE AO DID NOT PROVIDE COPY OF MATERIA LS AND STATEMENTS RELIED UPON BY HIM NOR ALLOWED ANY OPPORTUNITY TO THE APPELLANT TO CROSS EXAMINE THOSE PARTIES WHO HAVE BEEN BELIEVED TO HAVE PROVIDED THE ALLEGED ACCOMMODATION BILLS. ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 15 C) IN REACHING TO THE CONCLUSION AND CONFI RMING SUCH ADDITION MADE BY THE AO, THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FAC TORS, CONSIDERATIONS, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS . 2.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 64,8 3,2406/ - MADE BY THE AO TO THE INCOME OF THE APPELLANT BY WAY OF DISALLOWIN G DEPRECIATION ON CERTAIN MATERIALS (STEEL) USED IN FIXED ASSETS ON THE PLEA THAT THE PURCHASES FROM M/S KARMA INDUSTRIES LTD. AND ITS ASSOCIATE CONCERNS AR E BOGUS. B) THE LD. CIT(A) FAILED TO APPRECIATE T HAT:- I) THE ANSWERS GIVEN BY SHRI V.D. MHAISKAR IN RECORDING HIS STATEMENT U/S.132(4) WERE SUBJECT TO VERIFICATION OF THE RECO RDS, DOCUMENTS, ETC.; II) ALL THE PURCHASES FROM M/S. KARMA INDU STRIES LTD. AND ITS ASSOCIATE CONCERNS ARE GENUINE BEYOND DOUBT AND SUPPORTED BY SUFFICIENT MATERIALS; III) THE PURCHASE OF STEEL IS BACKED BY COR RESPONDING USE IN THE FIXED ASSETS; IV) NOTHING HAS BEEN BROUGHT ON RECORD BY THE LD. AO THAT MONEY HAS EXCHANGED THE HANDS IN LIEU OF PAYMENT MADE FOR THE SE PURCHASES BY ACCOUNT PAYEE CHEQUES; AND V) THE AO DID NOT PROVIDE COPY OF MATERIALS AND STATEMENTS RELIED UPON BY HIM NOR ALLOWED ANY OPPORTUNITY TO THE APPELLANT TO CRO SS EXAMINE THOSE PARTIES WHO HAVE BEEN BELIEVED TO HAVE PROVIDED THE ALLEGED ACCOMMODATION BILLS. D) IN REACHING TO THE CONCLUSION AND CONFI RMING SUCH ADDITION THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSIDERATION S, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. 3.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 7,62 ,206/ - MADE BY THE AO TO THE INCOME OF THE APPELLANT ON ACCOUNT OF BOGUS PUR CHASES IN RESPECT OF PURCHASES FROM M/S. ASIAN STEEL WHO IN TURN PURCHAS ED THESE GOODS FROM M/S. KARMA INDUSTRIES LTD. AND ITS ASSOCIATE CONCERNS. B) THE LD. CIT(A) FAILED TO APPRECIATE THA T :- I) ALL THE PURCHASES FROM M/ S. ASIAN STEE L ARE GENUINE BEYOND DOUBT AND SUPPORTED BY SUFFICIENT MATERIALS; ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 16 II) THE PURCHASES OF STEEL IS BACKED BY CO RRESPONDING CONSUMPTION IN THE PROJECTS UNDERTAKEN BY THE APPELLANT; III) YOUR APPELLANT HAS SUCCESSFULLY DEMON STRATED THAT THE IMPUGNED WAS USED IN THE PROJECTS UNDERTAKEN BY THE APPELLANT; IV) THE GROSS/NETS PROFIT RATIO SHOWN BY TH E APPELLANT IS QUITE REASONABLE; AND V) NOTHING HAS BEEN BROUGHT ON RECORD BY THE LD. AO THAT MONEY HAS EXCHANGED THE HANDS IN LIEU OF PAYMENT MADE FOR THESE PURCHAS ES BY ACCOUNT PAYEE CHEQUES. C) IN REACHING TO THE CONCLUSION AND CONFI RMING SUCH ADDITION THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSIDERATION S, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. 4.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.19,20 ,799/- MADE BY THE AO TO THE INCOME OF THE APPELLANT ON ACCOUNT OF BOGUS PUR CHASES IN RESPECT OF PURCHASES FROM THE PARTIES THE NAME OF WHOM APPEARS IN THE LIST OF SUSPICIOUS DEALERS ON THE WEBSITE OF SALES TAX DEPARTMENT, GOV ERNMENT OF MAHARASHTRA. B) THE LD. CIT(A) FAILED TO APPRECIATE THAT :- I) ALL THESE PURCHASES ARE GENUINE BEYOND D OUBT AND SUPPORTED BY SUFFICIENT MATERIALS; II) THE PURCHASES OF STEEL IS BACKED BY CORR ESPONDING CONSUMPTION IN THE PROJECTS UNDERTAKEN BY THE APPELLANT; III) YOUR APPELLANT HAS SUCCESSFULLY DEMONS TRATED THAT THE IMPUGNED STEEL WAS USED IN THE PROJECTS UNDERTAKEN BY THE APPELLANT; IV) THE GROSS/NET PROFIT RATIO SHOWN BY TH E APPELLANT IS QUITE REASONABLE; AND V) NOTHING HAS BEEN BROUGHT ON RECORD BY TH E LD. AO THAT MONEY HAS EXCHANGED THE HANDS IN LIEU OF PAYMENT MADE FOR THE SE PURCHASES BY ACCOUNT PAYEE CHEQUES. C) IN REACHING TO THE CONCLUSION AND CONFIR MING SUCH ADDITION THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSIDERATION S, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 17 5.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION TO THE EXTE NT OF RS. 13,88,698/- MADE BY THE AO TO THE INCOME OF THE APPELLANT ON ACCOUNT OF ALLEGED COMMISSION CHARGES ON ALLEGED ACCOMMODATION ENTRIES. B) THE LD. AO FAILED TO APPRECIATE THAT YOU R APPELLANT HAS NOT PAID ANY COMMISSION TO M/S. KARMA INDUSTRIES LTD. AND ITS AS SOCIATE CONCERNS NOR ANY EVIDENCE WAS FOUND IN THE COURSE OF THE SEARCH. C) IN REACHING TO THE CONCLUSION AND CONFIR MING SUCH ADDITION MADE BY THE AO THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS , CONSIDERATIONS, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. 6) THE ID. CIT(A) ERRED IN HOLDING THAT LEV Y OF INTEREST U/S.234B AND 234C OF THE INCOME TAX ACT, 1961 IS MANDATORY. THE APPELLAN T DENIES ITS LIABILITY FOR SUCH INTEREST. 7) THE LD. CIT(A) ERRED IN HOLDING THAT TH E GROUND RAISED DISPUTING INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 IS PREMATURE. THE APPELLANT DENIES ITS LIABILITY FOR S UCH PENALTY. 12. BRIEF FACTS OF THE CASE FOR THE YEAR UNDER CONSIDE RATION ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.09.2010 D ECLARING TOTAL INCOME OF RS.91,75,60,390/-. AS REFERRED ABOVE A SEARCH ACTIO N WAS CONDUCTED ON THE GROUP COMPANIES OF THE ASSESSEE ON 21.07.2011. CONS EQUENT UPON THE SEARCH NOTICE UNDER SECTION 153A DATED 09.12.2011 W AS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE NOTICE UNDER SECTION 1 53A THE ASSESSEE FILED RETURN OF INCOME ON 10.01.2012 DECLARING TOTAL INCO ME OF RS.91,75,60,390/-. DURING THE FINANCIAL YEAR RELATE D TO THE ASSESSMENT UNDER CONSIDERATION THE ASSESSEE HAS SHOWN THE PURC HASES OF RS.33,37,54,424/- FROM KARMA INDUSTRIES LTD (KIL). THE ASSESSING OFFICER ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 18 DURING THE ASSESSMENT NOTICED THAT A SEARCH AND SEA RCH ACTION WAS ALSO CARRIED OUT AT THE PREMISES OF M/S KARMA INDUSTRIES LTD ON 21.07.2011. DURING THE SEARCH RAJESH MEHTA MANAGING DIRECTOR ( MD) OF KARMA INDUSTRIES LTD ALLEGEDLY ADMITTED THAT THEY HAVE NO T SUPPLIED ANY MATERIAL TO THE ASSESSEE AND ONLY PROVIDED THE ACCOMMODATION ENTRY. THE ASSESSING OFFICER ALSO NOTED THAT THE NAME OF KARMA INDUSTRIE S LTD ARE ALSO APPEARING IN THE LIST OF HAWALA DEALERS PUBLISHED ON THE OFFI CIAL WEBSITE OF SALE TAX DEPARTMENT OF MAHARASHTRA. THE ASSESSING OFFICER AL SO NOTICED THAT THIS FACT WAS ADMITTED BY VIRENDRA D MHAISKAR MD OF IRB GROUP IN HIS STATEMENT RECORDED IN SEARCH THAT PURCHASES FROM KA RMA INDUSTRIES LTD ARE NOT VERIFIABLE. IT WAS FURTHER OBSERVED THAT INVEST IGATION WING OF THE DEPARTMENT CONDUCTED INQUIRIES AGAINST THE SAID PAR TIES THAT THE SAID PARTIES. THE ASSESSING OFFICER HAS RECORDED THAT T HE ASSESSEE HAS CLAIMED PURCHASES FROM KARMA INDUSTRIES LTD AND ITS GROUP C ONCERN NAMELY SHIVAN GIRI STEEL LTD AND ELPRO IND LTD. THE ASSESSING OF FICER FURTHER NOTICES THAT DURING THE SEARCH ACTION ON 21.07.2011, THE ASSESSE E WAS ASKED TO ESTABLISH THE GENUINENESS OF THE TRANSACTION OF PURCHASES FRO M KARMA INDUSTRIES LTD. AND ITS ASSOCIATE FIRMS. THE ASSESSEE DURING THE CO URSE OF SEARCH ACTION SHOWED THEIR INABILITY TO PROVIDE PROOF FOR GENUINE NESS OF PURCHASE. 13. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE DATE D 10.02.2012 TO THE ASSESSEE AS TO WHY THE PURCHASES FROM KIL AND ITS A SSOCIATE SHOULD NOT BE ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 19 TREATED AS BOGUS. THE ASSESSEE FILED ITS REPLY DATE D 18.02.2014 AND CONTENDED THAT THE MATERIAL PURCHASED DURING THE RE LEVANT PERIOD HAD BEEN CONSUMED IN DIFFERENT PROJECT EXECUTED BY ASSESSEE NAMELY MUMBAI- PUNE, NAGPUR- HYDERABAD, KOLHAPUR AND SURAT- DAHISAR PROJ ECT. THE ASSESSEE FURTHER SUBMITTED RECONCILIATION ALONG WITH CHART W ITH RATIO OF MATERIAL. THE ASSESSEE ALSO FURNISHED THE WORKING OF THE ESTIMATE D COST FOR BIDDING PURPOSE, CERTIFICATE FORM LENDERS BANK, I.E STUP C ONSULTANT, CERTIFICATE FROM INDEPENDENT ENGINEER APPOINTED BY NATIONAL HIG H WAY AUTHORITY (NHAI) I.E. INTERCONTINENTAL CONSULTANT AND TECHNOC RATS PVT LTD. ALL THE PURCHASES WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFI CER ON THE GROUNDS THAT THE ASSESSEE CLAIMED THAT THE TRANSPORTING CHARGES WERE BORN BY DEALERS. THE SUBMISSION OF THE ASSESSEE IS CONTRARY WITH THE FACTS GATHERED DURING THE ASSESSMENT PRECEDING THAT MAJORITY OF DELIVERY CHALLANS SHOWS THAT LORRY NUMBER MENTIONED THEREON BELONGS TO THE ASSES SEE. FURTHER ENQUIRIES FROM THE RTO OFFICE REVEALS THAT THE MAJORITY OF VE HICLES ALLEGEDLY USED FOR TRANSPORTATION ARE OWNED BY THE ASSESSEE ITSELF. IF THE ASSESSEE WAS USING ITS OWN VEHICLE WHILE IT WAS CLAIMING THAT TRANSPORT CH ARGES BORN BY THE DEALER. MOREOVER, NO DELIVERY CHALLANS WERE FOUND D URING A SEARCH AND SEIZURE PROCEEDING. FURTHER THE VEHICLE OTHER THAN THE VEHICLE OWNED BY THE ASSESSEE WERE NOT UTILIZED FOR TRANSPORTATION OF MA TERIAL, REASON BEING SOME ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 20 VEHICLES NUMBER BELONGS TO THE GOVERNMENT AUTHORITI ES AND SOME TO THE PRIVATE PARTIES WHO HAVE DENIED TO HAVE RENDERED AN Y SERVICES TO THE ASSESSEE OR TO THE DEALER. ONE OF THE VEHICLES WAS TANKER AND ONE TIPPER. FURTHER, IT IS GENERAL PRACTICE IN THE TRADING BUSI NESS THAT GOODS TO BE TRADED ARE WEIGHTED TWICE, FIRST AT THE PLACE OF ORIGIN AN D SECOND AT THE TIME OF DELIVERY. THE ASSESSEE COULD NOT PROVIDE THE SLIP OF WEIGHT AT THE TIME OF DELIVERY. ON THE BASIS OF ABOVE OBSERVATION THE ASS ESSING OFFICER CONCLUDED THAT ASSESSEE FAILED TO PROVE THE DELIVERY OF MATER IAL BEYOND DOUBT. THE ASSESSING OFFICER DISALLOWED THE ENTIRE PURCHASES O F RS.33,37,54,424/- FROM KARMA INDUSTRIES LTD. 14. THE ASSESSING OFFICER ALSO DISALLOWED PURCHASED OF RS. 7,62,206/-, FROM ASIAN STEEL. WHILE DISALLOWING THE ASSESSING OFFICE R CONCLUDED THAT ASIAN STEEL TRADERS SHOWN PURCHASE FROM KARMA INDUSTRIES LTD FOR ONWARD TRANSFER TO THE ASSESSEE. HENCE, THE PURCHASES FROM ASIAN TRADERS STEEL WERE ALSO TREATED AS BOGUS PURCHASES. 15. THE ASSESSING OFFICER FURTHER NOTICED THAT DURING T HE PREVIOUS YEAR THE PURCHASES OF RS. 64,83,406/- WAS UTILIZED FOR CAPIT AL ASSET ON WHICH ASSESSEE HAD CLAIMED DEPRECIATION. AS THE ASSESSING OFFICER TREATED THE PURCHASES AS NON-GENUINE THEREFORE THE AMOUNT SHOWN IN THE CAPITAL ASSET WAS ALSO REDUCED TO THE EXTENT OF RS. 64,83,406/-. ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 21 16. APART FROM THE PURCHASES FROM KARMA INDUSTRIES LTD AND ASIAN STEEL TRADERS, THE ASSESSEE HAS SHOWN THE PURCHASES FROM DARSHNA C ORPORATION FOR RS.2,449/- AND THE TULSIANI TRADING PRIVATE LIMITED FOR RS. 19,18,350/-. THE ASSESSING OFFICER ON THE BASIS OF HIS OBSERVATIONS THAT THE NAMES OF THESE TWO PARTIES ARE APPEARING IN THE LIST OF SUSPICION DEAL ERS IN THE WEBSITE OF SALE TAX DEPARTMENT GOVERNMENT OF MAHARASHTRA, WHO ARE I NDULGED IN ISSUING BOGUS BILL WITHOUT DELIVERY OF ANY GOODS AND MATERI AL. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE PURCHASES FROM TH ESE PARTIES SHOULD NOT BE TREATED AS UNEXPLAINED EXPENDITURE. IN RESPONSE TO THE NOTICE THE ASSESSEE SUBMITTED THAT PURCHASES MADE FROM THESE PARTIES AR E GENUINE ASSESSEE HAS ALSO SUBMITTED THE BILLS, VOUCHERS FOR THESE PARTIE S AND STATED THAT ALL PAYMENTS WERE MADE TO THESE PARTIES BY CHEQUES. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER HOLDING THAT PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT A FULL-FLEDGED PROOF FO R THE CLAIM OF PURCHASES. THE ASSESSING OFFICER CONCLUDED THAT ASSESSEE COULD NOT PRODUCE THE DELIVERY CHALLANS, LORRY RECEIPTS, MODE OF TRANSPORTATION AN D EVIDENCE OF OCTROI. THE ASSESSING OFFICER ON THE BASIS OF HIS OBSERVATION A ND ON THE BASIS OF REPORT OF SALE TAX DEPARTMENT DISALLOWED THE AGGREGATE OF THE TOTAL PURCHASES OF RS.19,20,799/- UNDER SECTION 69C. 17. THE ASSESSING OFFICER BY TREATING THE PURCHASES FRO M KARMA INDUSTRIES LTD AS ACCOMMODATION ENTRY BY REJECTING THE CONTENTION OF ASSESSEE CONCLUDED THAT ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 22 THE ASSESSEE HAS PAID THE COMMISSION FOR OBTAINING SUCH ACCOMMODATION ENTRY AND ESTIMATED 2% OF THE COMMISSION CHARGES P AID TO KARMA INDUSTRIES LTD. ON PURCHASES OF RS 33,37,54,424/- AND WORKED O UT DISALLOWANCE OF RS.66,75,088/-. 18. ON APPEAL BEFORE COMMISSIONER (APPEALS), THE LD. CO MMISSIONER (APPEALS) REQUIRED THE BIFURCATION OF THE PURCHASES UTILIZED IN DIFFERENT PROJECT. ON THE BASIS OF BIFURCATION OF COST OF THE PURCHASED UTILI ZED IN VARIOUS PROJECT I.E. IN SURAT- DAHISAR FOR RS. 25,22,08,974/-, FOR KOLHAPUR PROJECT RS.6,02,61,740/- (TOTAL RS. 31,24,70,714/-) RESTRICTED THE DISALLOW ANCE @12.5%. HOWEVER, FOR THE PURCHASES FOR PROJECT OF MUMBAI- PUNE EXPRE SSWAY (RS.2,01,85,145/-) AND NAGPUR- HYDERABAD PROJECT (R S.10,98,565/-) ENTIRE ADDITION WAS SUSTAINED UNDER SECTION 37(1). FURTHER , THE DISALLOWANCE OF DEPRECIATION OF RS.64,83,406/-, THE DISALLOWANCE OF PURCHASES FROM ASIAN STEEL TRADERS FOR RS.7,62,206/-, PURCHASES FROM DAR SHNA CORPORATION AND TULSIANI TRADING PVT LTD FOR RS.19,20,799/- AND ADD ITION ON ACCOUNT OF COMMISSION OF RS.66,75,088/- WAS SUSTAINED. THUS, FURTHER AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEALS) THE BOTH THE PARTIE S HAVE FILED THEIR CROSS APPEAL RAISING THEIR RESPECTIVE GROUNDS OF APPEAL A S REFEREED ABOVE. 19. WE HAVE HEARD THE LEARNED AR FOR THE ASSESSEE AND T HE LD. CIT-DR FOR REVENUE AND CAREFULLY GONE THROUGH THE RECORD OF TH E CASE. THE LEARNED AR OF THE ASSESSEE ARGUED THAT THE LEARNED COMMISSIONE R (APPEALS) ERRED IN ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 23 SUSTAINING THE ADDITION AT THE RATE OF 12.5% OF PUR CHASES FOR SURAT- DAHISAR AND KOLHAPUR PROJECT DESPITE THE FACT THAT ASSESSEE HAS FULLY PROVE THE GENUINENESS OF THE PURCHASES AND ITS CONSUMPTION. T HE ADDITION AT THE RATE OF 12.5% WAS SUSTAINED THE OBSERVING THAT ADDITION OF ENTIRE AMOUNT OF PURCHASES SHOWN TO HAVE BEEN MADE FROM KARMA INDUST RIES LTD AND ITS ASSOCIATES IS NOT JUSTIFIED. IT WAS FURTHER OBSERVE D THAT THE ASSESSEE HAD MERELY INDULGED IN INFLATING THE EXPENSES BY INTROD UCING THE BOGUS PURCHASES AND IT WOULD BE A FAIR ENOUGH TO ESTIMATE THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. HOWEVER, THE LEARNED CO MMISSIONER (APPEALS) CONFIRMED THE ACTION OF ASSESSING OFFICER IN SUSTAI NING 100% ADDITION FOR THE PURCHASES OF MATERIAL CONSUMED IN MUMBAI-PUNE EXPRE SSWAY AND NAGPUR- HYDERABAD PROJECT. THE LD. COMMISSIONER (APPEALS) D ESPITE SUSTAINING THE ADDITION AT THE RATE OF 12.5% OF PURCHASES FOR RS. 31,24,70,714/-, FROM KARMA INDUSTRIES LTD, FOR THE PROJECT OF SURAT-DAHI SAR AND KOLHAPUR PROJECT, STILL CONFIRMED THE ADDITION ON ACCOUNT OF COMMISSI ON PAYMENT FOR RS.66,75,088/-. IT WAS FURTHER ARGUED THAT NO DISAL LOWANCE ON ACCOUNT OF DEPRECIATION WAS WARRANTED AS THE ASSESSEE HAS FULL Y PROVED THE GENUINENESS OF PURCHASES THE ASSETS BY DOCUMENTARY EVIDENCES. T HE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD. THE ASSESSING O FFICER MERELY RELIED UPON THE THIRD-PARTY INFORMATION WITHOUT GIVING ANY OPPO RTUNITY FOR CROSS- EXAMINING THOSE PARTIES, ON THE BASIS OF THOSE STAT EMENTS THE ADDITIONS ON ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 24 ACCOUNT OF BOGUS PURCHASES WAS MADE. DURING THE SEA RCH ACTION WHEN THE STATEMENT OF VD MHAISKER MANAGING DIRECTOR OF ASSES SEE WAS RECORDED, IT WAS CATEGORICALLY STATED THE STATEMENT WAS SUBJECT TO VERIFICATION OF RECORD. THE MANAGING DIRECTOR NEVER ADMITTED ABOUT THE AVAI LING OF ACCOMMODATION ENTRY FROM KARMA INDUSTRIES LTD. EVEN OTHERWISE THE STATEMENT WAS RETRACTED VIDE LETTER DATED 16 DECEMB ER 2011. THE ASSESSING OFFICER WAS DULY INFORMED THAT THE BUSINESS OF ASSE SSEE COMPANY IS SPREAD OVER THREE STATES THAT ARE GUJARAT, MAHARASHTRA AND ANDHRA PRADESH. THE ASSESSEE FURNISHED ALL THE NECESSARY EVIDENCES AFTE R COLLECTING THEM FROM THEIR SITE OFFICES, TO PROVE THE GENUINENITY OF PUR CHASES. THE ENTIRE RECORD COULD NOT BE FILED DURING SEARCH DUE TO THE SHORTAG E OF THE TIME. THE STATEMENT OF MANAGING DIRECTOR OF KARMA INDUSTRIES LTD HAS NO RELEVANCE AS THE ASSESSMENT IN CASE OF THE ASSESSEE IS COMPLETED UNDER SECTION 153A READ WITH SECTION 143(3). THE ASSESSING OFFICER MADE THE ADDITION EVEN IN THE UNABATED ASSESSMENT FOR ASSESSMENT YEAR 2008-09 AND IN 2009-10 DESPITE THE FACT THAT NO INCRIMINATING MATERIAL WAS FOUND O R SEIZED DURING THE SEARCH ACTION. EVEN NO INCRIMINATING MATERIAL WAS SEIZED B Y THE REVENUE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IN THE SEARCH A CTION BY THE INVESTIGATING TEAM. IT WAS FURTHER ARGUED THAT THE ASSESSEE IS EN GAGED IN THE EXECUTION OF PROJECT AWARDED BY VARIOUS GOVERNMENT AGENCIES. BEF ORE AWARDING THE CONTRACT THE COMPETENT AUTHORITIES PREPARES THE EST IMATED COST, CONSUMPTION ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 25 OF THE MATERIAL AND MEASURED THE CONSUMPTION OF THE MATERIAL TIME TO TIME CONSUMED IN EXECUTION OF WORK. THE ASSESSEE HAS ALR EADY FURNISHED NECESSARY CERTIFICATE FROM THE AGENCIES, WHICH AWAR DED THE WORK TO THE ASSESSEE. BESIDES THAT THE ASSESSEE FURNISHED THE C ERTIFICATES OF TECHNICALLY QUALIFIED ENGINEERS ABOUT THE CONSUMPTION OF STEEL IN VARIOUS PROJECTS. THE ASSESSING OFFICER INSTEAD OF MAKING ANY INDEPENDENT ENQUIRY BRUSHED ASIDE THE DOCUMENTARY EVIDENCES AND MADE THE ADDITIONS. T HE GROSS PROFIT/ NET PROFIT RATIO SHOWN BY ASSESSEE IS QUITE REASONABLE. NOTHING HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER THAT MONEY HAS B EEN EXCHANGED IN THE HANDS OF THE ASSESSEE FOR THE PAYMENT MADE FOR THES E PURCHASES. THE PURCHASES MADE FROM ASIAN STEEL ARE ALSO GENUINE BE YOND DOUBT WHICH IS SUPPORTED BY SUFFICIENT DOCUMENTARY EVIDENCE WITH C ORRESPONDING CONSUMPTION IN THE PROJECT OF THE ASSESSEE. SIMILAR LY, THE ADDITION ON ACCOUNT OF PURCHASES FROM DARSHNA CORPORATION AND T ULSIANI TRADING PRIVATE LIMITED WAS MADE ON THE BASIS OF INFORMATIO N OF WEBSITE OF SALE TAX DEPARTMENT GOVERNMENT OF MAHARASHTRA. THE LEARNED A R OF THE ASSESSEE VEHEMENTLY ARGUED THAT IN ALL PURCHASES THE ASSESSE E HAS PAID VAT ON PURCHASE OF STEEL AT SPECIAL RATE IS APPLICABLE AS THE ASSESSEE PURCHASED THE STEEL FOR INFRASTRUCTURE PROJECT. THE ASSESSEE HAD PAID THE VAT THE RATE OF 4% ON ALL PURCHASES. THE LOWER AUTHORITIES HAVE NOT DISPUTED THIS FACT THROUGHOUT IN THEIR PROCEEDINGS. THERE WAS NO ELEME NT OF REVENUE LEAKAGE IN ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 26 THE PURCHASE OF ASSESSEE. THE LEARNED AR OF THE ASS ESSEE PRAYED FOR DELETING THE ENTIRE ADDITIONS ON ACCOUNT OF BOGUS PURCHASES, DISALLOWANCE OF DEPRECIATION AS WELL AS ADDITION ON ACCOUNT OF ALLE GED COMMISSION PAYMENT. IN SUPPORT OF HIS SUBMISSION THE LEARNED AR OF THE ASSESSEE RELIED UPON VARIOUS FOLLOWING DECISION OF MUMBAI TRIBUNAL; (I) MANIBANDRA METALS AND TUBES VS ITO (ITA 4359/M/201 6 ), (II) ITO VS MITHAILAL D MUTHA ( ITA 558/M/2016) (III) ITO VS TAKHTMAL BHURALAL (ITA 4526 TO 4528/M/2014) (IV) ITO VS HIREN SHANTILAL (ITA 715 TO717/M/2015) (V) ACIT VS VISHAL P MEHTA ( ITA 5313/M/2013) (VI) ITO VS ASHOK TALREJA (HUF) ( ITA 4629/M/2014,3393,6 663 TO 6664,/M/2013), (VII) KAMAL P AGGARWAL VS ITO ( ITA 3537, 3538& 3540/M/20 16) (VIII) TELCO MARKETING VS ITO ( ITA 3394, 3395/M/2014) (IX) DCIT VS RAJIV KALATHIL ( ITA NO. 6727/M/2012) (X) ITO VS PARESH ARVIND GANDHI( ITA 5706/M/2013) AND (XI) ITO VS SAJAY V DHRUV (ITA 5089/M/2014) 20. ON THE OTHER HAND THE LD DR FOR THE REVENUE SUPPORT ED THE ORDER OF THE AUTHORITIES BELOW. IT WAS ARGUED THAT THE BILLS WIT HOUT DELIVERY OF RECEIPT OF MATERIAL TO THE ASSESSEE WERE FOUND AT THE PREMISES OF KARMA INDUSTRIES LTD IN THE SEARCH. THE CONSUMPTIONS CERTIFICATE CLAIMED BY THE ASSESSEE WERE NOT ISSUED BY THE NATIONAL HIGHWAY AUTHORITY OF INDIA ( NHAI). THE CERTIFICATE RELIED BY THE ASSESSEE WERE ISSUED AT THE INSTANCE OF THE ASSESSEE. THE LD. DR FOR THE REVENUE FURTHER ARGUED THAT THE INVESTIG ATION WING OF THE INCOME-TAX DEPARTMENT MADE FULL-FLEDGED ENQUIRY. TH E PARTIES FROM WHOM THE ASSESSEE HAS SHOWN THE PURCHASES ARE BOGUS HAWA LA DEALERS. THE HAWALA ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 27 DEALERS ARE INDULGED IN ISSUING BOGUS BILLS WITHOUT DELIVERY OF ANY MATERIAL OR GOODS. THE ASSESSEE OBTAINED ACCOMMODATION BILLS ONLY IN ORDER TO INFLATE THE EXPENSES AND TO BRING DOWN THE PROFITABILITY IN ORDER TO AVOID THE TAX. IN SUPPORT OF HIS SUBMISSIONS LD. DR FOR THE REVENUE R ELIED ON THE DECISION OF HONBLE GUJARAT HIGH IN N. K. PROTEIN VS DCIT (2004 83 TTJ AHD 904). THE LD. DR FOR THE REVENUE PRAYED FOR DISMISSAL OF THE APPEAL FILED BY THE ASSESSEE AND TO SUSTAIN THE ADDITIONS AND THE DISAL LOWANCE MADE BY ASSESSEE OFFICER. 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW AND THE VARI OUS DECISIONS RELIED BY THE LD REPRESENTATIVES OF THE PARTIES. GROUND NO. 1 RELATES TO THE CONFIRMING THE ADDITION OF RS.6,03,42,549/- ON ACCOUNT OF UNEX PLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT ( BEING 12.5% OF SURAT-DAHISAR AND KOLHAPUR PROJECT I.E. RS. 3,90,58,839/-, 100% OF MUMBAI- PU NE EXPRESSWAY I.E RS. 2,01,85,145/- AND NAGPUR HYDERABAD PROJECT I.E. RS .10,98,565 /-). WE HAVE SEEN THAT WHILE FARMING THE ASSESSMENT THE ASS ESSING OFFICER OBSERVED THAT DURING THE FINANCIAL YEAR RELATED TO THE ASSES SMENT UNDER CONSIDERATION THE ASSESSEE HAS SHOWN THE PURCHASES OF RS.33,37,54 ,424/- FROM KARMA INDUSTRIES LTD (KIL). THE ASSESSING OFFICER ISSUED SHOW CAUSE DATED 10.02.2012 TO THE ASSESSEE AS TO WHY THE PURCHASES FROM KIL AND ITS ASSOCIATE SHOULD NOT BE TREATED AS BOGUS. THE ASSES SEE FILED ITS REPLY DATED ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 28 18.02.2014. IN REPLY THE ASSESSEE CONTENDED THAT TH E MATERIAL PURCHASED DURING THE RELEVANT PERIOD HAD BEEN CONSUMED IN DIF FERENT PROJECT EXECUTED BY ASSESSEE NAMELY MUMBAI- PUNE, NAGPUR- HYDERABAD, KOLHAPUR AND SURAT- DAHISAR PROJECT. THE ASSESSEE ALSO FILED REC ONCILIATION OF MATERIAL CONSUMED ALONG WITH CHART WITH RATIO OF MATERIAL. T HE ASSESSEE ALSO FILED THE WORKING OF THE ESTIMATED COST FOR BIDDING PURPO SE, CERTIFICATE FROM HIS BANKER/ LENDERS BANK, I.E STUP CONSULTANT. CERTIF ICATE FROM INDEPENDENT ENGINEER APPOINTED BY NATIONAL HIGH WAY AUTHORITY ( NHAI) I.E. INTERCONTINENTAL CONSULTANT AND TECHNOCRATS PVT LTD . ALL THE PURCHASES WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. THE ASSES SING OFFICER WAS NOT ACCEPTED BY THE CONTENTION AND THE EVIDENCES OF ASS ESSEE, ON THE GROUNDS THAT THE ASSESSEE CLAIMED THAT THE TRANSPORTING CHA RGES WERE BORN BY DEALERS. THE ASSESSING OFFICER RECORDED THAT FROM T HE ENQUIRIES FROM THE RTO OFFICE, IT WAS REVEALED THAT THE MAJORITY OF VE HICLES ALLEGEDLY USED FOR TRANSPORTATION ARE OWNED BY THE ASSESSEE ITSELF. IF THE ASSESSEE WAS USING ITS OWN VEHICLE WHILE IT WAS CLAIMING THAT TRANSPORT CH ARGES BORN BY THE DEALER. THE ASSESSING OFFICER FURTHER CONCLUDED TH AT NO DELIVERY CHALLANS WERE FOUND DURING A SEARCH AND SEIZURE PROCEEDING. FURTHER THE VEHICLES OTHER THAN THE VEHICLE OWNED BY THE ASSESSEE WERE N OT UTILIZED FOR TRANSPORTATION OF MATERIAL OR THAT SOME VEHICLES NU MBER PROVIDED BY ASSESSEE BELONGS TO THE GOVERNMENT AUTHORITIES AND SOME TO THE PRIVATE ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 29 PARTIES. THE PRIVATE PARTIES HAVE DENIED TO HAVE RE NDERED ANY SERVICES TO THE ASSESSEE OR TO THE DEALER. ONE OF THE VEHICLES WAS TANKER AND ONE TIPPER. THE ASSESSEE COULD NOT PROVIDE THE SLIP OF WEIGHT A T THE TIME OF DELIVERY. THE ASSESSING OFFICER DISALLOWED THE ENTIRE PURCHAS ES OF RS.33,37,54,424/- FROM KARMA INDUSTRIES LTD. THE ASSESSING OFFICER RE JECTED THE DOCUMENTARY EVIDENCES FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER DISBELIEVED THE CERTIFICATE OF CONSUMPTION ISSUED BY ENGINEER APPOI NTED BY NHAI. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON R ECORDER TO DISCARD THE EVIDENCES FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER EXAMINED TWO ENGINEERS WITH REGARD TO THE CERTIFICATE ISSUED BY THEM. THE ASSESSING OFFICER HAS NOT GIVEN ANY ADVERSE FINDING NOR POINT ED OUT ANY INFIRMITY IN THEIR REPORT ABOUT THE CONSUMPTION OF THE MATERIAL. NO OTHER VERIFICATION OF SITE OR THE PROJECTS WERE CARRIED BY THE ASSESSING OFFICER. THE ESTIMATED CONSUMPTION OF THE MATERIAL IN THE PROJECT BEING EX ECUTED BY ASSESSEE WAS NOT EXAMINED. RATHER CONCLUDED THAT THE ESTIMATED C OST OF SUCH PROJECTS ARE ALWAYS ON HIGHER SIDE. WE HAVE SEEN THE STATEMENT O F MD OF THE ASSESSEE COMPANY, THERE IS NO SUCH ADMISSION ABOUT THE BOGUS TRANSACTIONS. RATHER, IN HIS STATEMENT CATEGORICALLY STATED THAT THE PURC HASES ARE NOT VERIFIABLE IN ABSENCE OF RECORD AT THAT TIME. THE STATEMENT WAS R ETRACTED VIDE LETTER DATED 16.2.2011. THE ASSESSING OFFICER RELIED ON THE STA TEMENT OF RAJESH MEHTA. HOWEVER, RAJESH MEHTA IN HIS STATEMENT DISCLOSED TH AT HE NEVER MEET THE ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 30 MD OF THE ASSESSEE COMPANY. THE TRANSACTIONS WERE M ADE THROUGH NITIN AND SUNIL MEHTA. THE ASSESSING OFFICER NOT EXAMINED NITIN AND SUNIL MEHTA. THE ASSESSING OFFICER GAVE HIS FINDING THE C ONSUMPTION OF STEEL IN THE PROJECT WAS NOT PROVED BEYOND DOUBT AND DISALLO WED THE ENTIRE PURCHASES FROM KIL. 22. HOWEVER, THE LD COMMISSIONER (APPEALS) RESTRICTED T HE DISALLOWANCE OF COST OF PURCHASES OF STEEL FOR SURAT-DAHISAR AND KO LHAPUR PROJECT AT 12.5% (I.E AT RS. 3,90,58,839/-), 100% OF MUMBAI- PUNE EX PRESSWAY (I.E. RS.2,01,85,145/-) AND NAGPURHYDERABAD PROJECT (I.E . FOR RS.10,98,565/-). BEFORE LD COMMISSIONER (APPEALS) THE ASSESSEE FILED WRITTEN SUBMISSION. IN THE WRITTEN SUBMISSION THE ASSESSEE EXPLAINED TH AT THE NAME OF KARMA INDUSTRIES LTD (KIL) IS NOT LISTED IN THE WEBSITE OF SALES TAX DEPARTMENT GOVERNMENT OF MAHARASHTRA. THE ASSESSEE ALSO EXPLAI NED THE TYPOGRAPHICAL MISTAKE IN THE REGISTRATION NUMBER OF VEHICLES USED IN TRANSPORTATION OF THE STEEL, DETAILS OF WHICH ARE AVAILABLE IN THE PAPER BOOK FILED IN APPEAL FOR AY 2008-09. THE PERUSAL OF THE DETAILS OF REGISTRAT ION NUMBER OF VEHICLES REVEALS THAT THE MISTAKE IN WRITING IS VERY MINOR W HICH MAY OCCUR DUE TO HUMAN ERROR. THE ASSESSEE FURNISHED THE CERTIFIED C OPIES OF THE REGISTRATION CERTIFICATE (RC) AND PHOTOGRAPHS OF THE VEHICLES AN D THE EVIDENCE HOW THE TIPPER WAS USED FOR TRANSPORTATION. THE ASSESSEE A LSO FURNISHED EXPLANATION OF THE DISCREPANCIES RECORDED BY ASSESS ING OFFICER. ON THE ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 31 WRITTEN SUBMISSION OF ASSESSEE, THE LD. COMMISSIONE R (APPEALS) SOUGHT THE COMMENTS OF ASSESSING OFFICER. THE ASSESSING OFFICE R FILED HIS COMMENT / REMAND REPORT DATED 25.10.2016. IN THE REMAND REPO RT THE ASSESSING OFFICER DISPUTED THE CONTENTION OF THE ASSESSEE AND RELIED ON HIS FINDINGS. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE MATERIAL ON RECORD THE LD. COMMISSIONER (APPEALS) CONCLUDED THAT THERE ARE GOOD AND SUFFICIENT REASONS TO HOLD THAT SO FAR AS PROJECT OF SURAT- DA HISAR AND KOLHAPUR ARE CONCERNED, THE PURCHASE OF STEEL CANNOT BE TREATED AS BOGUS. (PARA 6.3.8OF LD CIT(A) ORDER) HOWEVER, THE LD COMMISSIONER (APPE ALS) CONCLUDED THAT SUCH PURCHASES ARE MADE FROM THE PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNTS AND THE PROFIT ELEMENT EMBEDDED T HEREIN NEEDS TO BE BROUGHT TO TAX. THE LD. COMMISSIONER (APPEALS) FURT HER CONCLUDED THAT SUCH PURCHASES ARE MADE ONLY TO SAVE 10% EXCISE DUT Y AND CESS LEVIED THEREON AT 2% AND SUSTAINED THE DISALLOWANCE AT 12. 5% OF THE PURCHASES SHOWN FOR SURAT- DAHISAR AND KOLHAPUR. THE LD AR FO R THE ASSESSEE WHILE MAKING HIS SUBMISSION BEFORE ARGUED THAT THE ASSES SEE IS ENGAGED IN EXECUTION OF INFRASTRUCTURE PROJECT AND THE RATE OF VAT FOR STEEL APPLICABLE FOR SUCH PURCHASED IS 4% AND THAT THE ASSESSEE HA S ALREADY PAID THE SAME ON ALL PURCHASES. THIS FACT WAS NOT DISPUTED BY LD. DR FOR THE REVENUE. IN OUR VIEW, THE DISALLOWANCE OF PURCHASES OF STEEL AT 12.5% IS ON HIGHER SIDE, WHEN THE LD. COMMISSIONER (APPEALS) HAS CONCLUDED T HAT THE PURCHASES OF ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 32 STEEL FOR SURAT- DAHISAR AND KOLHAPUR CANNOT BE TRE ATED BOGUS. FURTHER, WHEN THE LD. COMMISSIONER (APPEALS) ALSO NOTED THAT THE CONSUMPTION CERTIFICATE OF ENGINEER IS MARGINAL AND WITHIN REAS ONABLE LIMIT THE DISALLOWANCE AT 12.5% IS ON HIGHER SIDE. IN OUR VIE W EVEN IN CASE THE TRANSACTIONS ARE NOT VERIFIABLE DUE TO CERTAIN REAS ONS, THE DISALLOWANCE MUST BE MADE ON REASONABLE SIDE, KEEPING IN VIEW THE FAC TS OF EACH CASES. UNDER INCOME-TAX THE REVENUE IS NOT ENTITLED ONLY THE INC OME/ PROFIT COMPONENT AND NOT THE ENTIRE TRANSACTION. WE HAVE NOTED THAT THE LD CIT(A) HAS OBSERVED THAT SUCH PURCHASES ARE MADE TO AVOID 10% OF THE PAYMENTS OF EXCISE DUTY. THE LD CIT(A) HAS NOT EXAMINED IF , TH E PURCHASES WERE SHOWN TO AVOID THE EXCISE DUTY. THE ASSESSEE THROUG HOUT THE PROCEEDINGS CLAIMED THAT THEY HAVE PAID VAT AT THE RATE OF 4%, WHICH IS NOWHERE DISPUTED BY LOWER AUTHORITY. IF WE CONSIDER THE OBS ERVATION OF LD CIT(A) THAT THE PURCHASER AND SELLER HAVE SHARED EXCISE DU TY BY SHOWING THE SALE AND PURCHASE OF STEEL, EVEN THAN THE ADDITION IN EX CESS OF SUCH SHARE TO THE INCOME IS UNREASONABLE. THUS, KEEPING IN VIEW THE ASSESSEE HAS PAID THE VAT AT THE APPLICABLE RATE ON ALL THE PURCHASES. HE NCE, KEEPING IN VIEW OF ANY POSSIBILITY OF THE REVENUE LEAKAGE WHICH IS VER Y THIN IN THE PRESENT CASE, THE DISALLOWANCE OF PURCHASES OF STEEL FOR SU RAT- DAHISAR AND KOLHAPUR PROJECT AT 5% OF THE IMPUGNED (DISPUTED) P URCHASES WOULD MEET THE END OF JUSTICE. SIMILAR VIEW WAS TAKEN BY HONB LE GUJARAT HIGH COURT ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 33 IN CIT VS SIMIT P SETH [2013(356 ITR 451)] AND BY H ONBLE BOMBAY HIGH COURT IN HARIRAM BHAMBANI ITA NO 313 OF 2013. THE FACTS OF THE DECISION IN N. K. PROTEINS (SUPRA) RELIED BY LD. DR FOR THE REVENUE ARE AT VARIANCE. IN THE SAID CASE THE ASSESSEE WAS TRADER. DURING THE SEARCH ACTION IN THAT CASE BLANK SIGNED CHEQUES BOOKS AND NUMBERS OF VOUCHERS WERE FOUND ON THE BASIS OF WHICH THE TRANSACTION WAS TRE ATED BOGUS. HOWEVER, IN THE PRESENT CASE THE ASSESSEE HAS GIVEN SUFFICIENT EVIDENCES TO SUBSTANTIATE ITS PURCHASES. MOREOVER, NO INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH AT THE PREMISES OF THE ASSESSEE. THE ADDITIO N OF ALLEGED BOGUS PURCHASED ARE BASED ON THIRD PARTY INFORMATION. NO YARDSTICK FORMULA CAN BE APPLIED WHILE ASSESSING THE AMOUNT OF REVENUE LE AKAGE. MOREOVER, THE REVENUE HAS NOT DISPUTED THE CONSUMPTION OF STEEL. THUS, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN CIT VS SIMIT P SETH SUPRA AND BY HONBLE BOMBAY HIGH COURT IN HARIRAM BHAMBA NI SUPRA, THE DISALLOWANCE OF COST OF PURCHASES OF STE EL IS RESTRICTED TO 5% OF THE IMPUGNED PURCHASES ONLY. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. IN THE RESULT THE GROUND NO.1 OF THE A PPEAL IS PARTLY ALLOWED. 23. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF DEPRECI ATION OF RS.64,83,406/- ON CERTAIN STEEL MATERIAL. THE ASSESSING OFFICER D ISALLOWED THE DEPRECIATION OF RS.64,83,406/- HOLDING THAT THE PURCHASES OF STE EL FOR EARLIER ASSESSMENT YEAR I.E 2009-10 WAS NOT GENUINE, THUS, THE CORRESP ONDING DEPRECATION WAS ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 34 DISALLOWED. THE LD. COMMISSIONER (APPEALS) CONFIRME D THE DISALLOWANCE ON THE BASIS OF DISALLOWANCE SUSTAINED IN EARLIER A SSESSMENT YEAR. WE HAVE NOTED THAT WE HAVE ALREADY HELD THAT THE ASSESSMENT ORDER FOR AY 2008-09 AND 2009-10 PASSED UNDER SECTION 143(3) READ WITH S ECTION 153A AS INVALID, THUS ANY CONSEQUENCE ARISE THEREON HAS ALS O BECOME INVALID. EVEN OTHERWISE THERE IS NO MATERIAL ON RECORD THAT THE I NFORMATION ON RECORD THAT SAID MACHINE OR EQUIPMENT FOR WHICH DEPRECIATION WA S CLAIMED IS NOT PUT TO USE. THE DISALLOWANCE OF DEPRECIATION ON STEEL M ATERIAL UNDER CONSIDERATION IS BASED ON THE ADDITION ON ACCOUNT O F SAID ALLEGED BOGUS PURCHASE, WHICH WE HAVE ALREADY DELETED. HENCE, THE DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.64,83,406/- IS ALSO DE LETED. IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED. 24. GROUND NO.3 RELATES TO THE ADDITION OF RS. 7,62,206 /-. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN PURCHASE S OF RS. 4,88,72,638/- FROM ASIAN STEEL TRADERS. FURTHER, ON SEARCH ACTION ON ASIAN STEEL TRADERS, THE ASSESSING OFFICER WAS ASKED TO ASIAN STEEL TRAD ERS TO SUBMIT YEAR WISE DETAILS WITH ITS MAJOR SUPPLIERS. IN RESPONSE TO TH E SAID NOTICE ASIAN STEEL TRADERS SUBMITTED THAT THEY HAVE MADE THE PURCHASES OF RS. 7,62,206/- FROM KARMA INDUSTRIES LTD. THE ASSESSING OFFICER D ISALLOWED PURCHASES OF RS. 7,62,206/-, FROM ASIAN STEEL TRADERS HOLDING T HAT ASIAN STEEL TRADERS SHOWN PURCHASE FROM KARMA INDUSTRIES LTD FOR ONWARD TRANSFER TO THE ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 35 ASSESSEE. THE ASSESSING OFFICER DISALLOWED 100% OF THE PURCHASES. THE LD. COMMISSIONER (APPEALS) CONFIRMED THE ENTIRE DISALLO WANCE HOLDING THAT THE ASSESSEE HAS NOT FURNISHED ANY SUPPORTING EVIDE NCE TO ESTABLISH THE PURCHASES. WE HAVE NOTED THAT THE ASSESSING OFFICER RECORDED THAT ASIAN STEEL TRADERS STATED THE PURCHASES ARE GENUINE. WE HAVE NOTED THAT DESPITE CONFIRMATION OF ASIAN STEEL TRADERS THE ASSESSING OFFICER DISALLOWED RS.7,26,206/-, WITHOUT BRINGING ANY ADVERSE MATERIA L AGAINST THE ASSESSEE. THE LD. COMMISSIONER (APPEALS) HAS NOT APPRECIATED THE FACT THAT ASIAN STEEL TRADERS HAS CONFIRMED THE TRANSACTION. HENCE, KEEPING IN VIEW THE FACTS THAT WE HAVE ALREADY SUSTAINED THE DISALLOWAN CE OF PURCHASES FROM KARMA INDUSTRIES LTD STEEL AT 5% OF THE PURCHASES. THUS, FURTHER KEEPING IN VIEW THE SIMILAR MATERIAL WAS SHOWN TO HAVE PURC HASES FROM ASIAN STEEL TRADERS, HENCE, THE DISALLOWANCE ON STEEL FROM ASIA N STEEL TRADERS IS ALSO RESTRICTED AT 5% OF THE PURCHASES (OF RS.7,62,206). IN THE RESULT THE GROUND OF APPEAL IS PARTLY ALLOWED. 25. GROUND NO. 4 RELATES TO THE SUSTAINING THE ADDITI ON OF RS.19,20,799/-. DURING THE ASSESSMENT THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN THE PURCHASES FROM DARSHNA CORPORATION FOR RS .2,449/- AND THE TULSIANI TRADING PRIVATE LIMITED FOR RS. 19,18,350/ -. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE PURCHASES FROM TH ESE PARTIES SHOULD NOT BE TREATED AS UNEXPLAINED EXPENDITURE AS, THE NAM ES OF THESE TWO PARTIES ARE ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 36 APPEARING IN THE LIST OF SUSPICION DEALERS IN THE WEBSITE OF SALE TAX DEPARTMENT GOVERNMENT OF MAHARASHTRA, WHO ARE INDUL GED IN ISSUING BOGUS BILL WITHOUT DELIVERY OF ANY GOODS AND MATERIAL. T HE ASSESSEE FILED ITS REPLY. IN THE REPLY THE ASSESSEE CONTENDED THAT PURCHASES MADE FROM THESE PARTIES ARE GENUINE. THE ASSESSEE SUBMITTED THE COPIES OF B ILLS, VOUCHERS FOR THESE PARTIES AND STATED THAT ALL PAYMENTS WERE MADE TO T HESE PARTIES BY CHEQUES. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER HOLDING THAT PAYMENT BY ACCOUNT PAYEE CHEQUES IS NO T A FULL-FLEDGED PROOF FOR THE CLAIM OF PURCHASES. THE ASSESSING OFFICER C ONCLUDED THAT ASSESSEE COULD NOT PRODUCE THE DELIVERY CHALLANS, LORRY RECE IPTS, MODE OF TRANSPORTATION AND EVIDENCE OF OCTROI. THE ASSESSI NG OFFICER ON THE BASIS OF HIS OBSERVATION AND ON THE BASIS OF REPORT OF SALE TAX DEPARTMENT DISALLOWED THE AGGREGATE OF THE TOTAL PURCHASES OF BOTH THE PA RTIES FOR RS.19,20,799/- UNDER SECTION 69C. THE LD. COMMISSIONER (APPEALS) C ONFIRMED THE DISALLOWANCE ALMOST ON THE SIMILAR LINES. WE HAVE SEEN THAT THE ACTION OF THE LOWER AUTHORITY IS BASED ON THE THIRD PARTY INF ORMATION. THE ASSESSING OFFICER HAS NOT BROUGHT ANY INDEPENDENT MATERIAL ON RECORD BEFORE MAKING DISALLOWANCE. AS WE HAVE ALREADY NOTICED THAT THE A SSESSEE HAS BROUGHT SUFFICIENT MATERIAL TO SHOW THE CONSUMPTION. THE AS SESSEE WAS EXECUTING MAJOR INFRASTRUCTURE PROJECT IN THREE STATES AND SH OWN THE CONSUMPTION AND UTILIZATION OF THE MATERIAL IN SUCH PROJECT. THE RE PORT OF INDEPENDENT ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 37 ENGINEERS FOR THE CONSUMPTION FURNISHED BY THE ASSE SSEE WAS NOT DISCARDED BY THE LOWER AUTHORITY. THUS, CONSIDERING THE FACTS THAT THE PURCHASES FORM DARSHNA CORPORATION FOR RS.2,449 IS VERY SMALL IN N ATURE COMPARATIVE TO THE OVERALL PURCHASES WHICH IS NEGLIGIBLE AND THE SAME IS DELETED. SO FAR AS PURCHASES FROM TULSIANI TRADING PRIVATE LIMITED ARE CONCERNED, CONSIDERING OUR FINDING ON THE GROUND NO.1 OF THE PRESENT APPE AL THE DISALLOWANCE OF IS ALSO RESTRICTED AT 5 % OF THE IMPUGNED PURCHASES ( RS. 19,18,350/-). IN THE RESULT THIS GROUND OF APPEAL IS PARTLY ALLOWED. 26. GROUND NO.5 RELATES TO CONFIRMING THE ADDITION OF C OMMISSION TO THE EXTENT OF RS.13,88,698/-. DURING THE ASSESSMENT AS THE AS SESSING OFFICER TREATED THE PURCHASES FROM KARMA INDUSTRIES LTD AS ACCOMMODATIO N ENTRY BY REJECTING THE CONTENTION OF ASSESSEE. THE ASSESSING OFFICER W AS OF THE VIEW THAT THE ASSESSEE HAS PAID THE COMMISSION FOR OBTAINING SUCH ACCOMMODATION ENTRY AND ESTIMATED 2% OF THE COMMISSION CHARGES PAID TO KARMA INDUSTRIES LTD. ON PURCHASES OF RS 33,37,54,424/- AND WORKED OUT DI SALLOWANCE OF RS.66,75,088/-. HOWEVER, THE LD COMMISSIONER ( APP EALS) RESTRICTED THE ADDITION TO RS. 13,88,698/- HOLDING THAT THE DISALL OWANCE HAS ALREADY BEEN RESTRICTED TO 12.5% OF PURCHASE VALUE HENCE, THE C OMMISSION PAYMENT WAS RESTRICTED ACCORDINGLY. WE MAY NOTE THAT WE HAVE AL READY RESTRICTED THE DISALLOWANCE ON THE ALLEGED BOGUS PURCHASES AT 5% O F THE IMPUGNED PURCHASES. THE DISALLOWANCE IS RESTRICTED ONLY TO A VOID THE POSSIBILITY OF THE ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 38 REVENUE LEAKAGE. AS WE HAVE ALREADY CONCLUDED THAT THE LOWER AUTHORITY FAILED TO BRING ANY ADVERSE, COGENT INCRIMINATING M ATERIAL TO SHOW THE FACTS THAT THE ASSESSEE INDULGED IN AVAILING ACCOMMODATIO N ENTRY BY MAKING PAYMENT OF COMMISSION. THERE IS NO MATERIAL ON RECO RD TO SUBSTANTIATE THE FINDING OF THE ASSESSING OFFICER. HENCE, THE ORDER OF LD COMMISSIONER (APPEALS) FOR PARTIAL SUSTENANCE OF THE ADDITION ON ACCOUNT OF ALLEGED COMMISSION OF RS.13,88,698/- IS ALSO DELETED. IN TH E RESULT THIS GROUND OF APPEAL IS ALLOWED. 27. GROUND NO. 6 RELATES TO INTEREST UNDER SECTION 234B AND 234C AND GROUND NO.7 RELATES TO INITIATION OF PENALTY UNDER SECTION 271(1) (C). THE GROUND NO. 6 IS CONSEQUENTIAL AND THUS NEEDS NO SPECIFIC A DJUDICATION. HOWEVER, GROUND NO.7 IS PREMATURE AND THUS DISMISSED. 28. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.5126/M/2016 BY REVENUE FOR AY 2010-11 29. FURTHER THE REVENUE IN ITS CROSS APPEAL IN ITA NO.5 126/M/2016 FOR AY 2010-11 HAS RAISED FOLLOWING GROUNDS OF APPEAL ; 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN ESTIMATING THE PROFIT EL EMENT EMBEDDED IN THE AMOUNT REPRESENTED BY BOGUS PURCHASES RECORDED IN T HE BOOKS OF ACCOUNTS OF RS.31,24,70,714/- IN THE NAME OF M/S KIL AND ASS OCIATE CONCERNS AT 12.5 % OF THE TOTAL BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THAT ANY EXPENDITURE NOT FOUND TO BE INCURRED AT ALL, LEAST OF ALL THAT THE SAME IS ALSO NOT LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS IS NOT ADMISSIBLE IN TERMS OF THE PROVISIONS OF SEC TION 37 OF THE ACT?' ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 39 2. 'WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, WHETHER T HE LD. CIT(A) WAS JUSTIFIED IN TAKING ONLY 12.5% OF THE TOTAL AMOUNT OF BOGUS PURCHASES AS INCOME AND THUS ALLOWING 87.5% OF SUCH TOTAL AMOUNT OF PURCHASES AS EXPENDITURE IN CONTRAVENTION OF THE PROVISIONS OF S ECTION 37 OF THE ACT?' 3. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN REDUCING THE PROPORTIONATE A MOUNT OF ADDITION WHEREAS, THE AO HAD ADDED THE AMOUNT ATTRIBUTABLE T O PAYMENT OF COMMISSION WITHOUT WHICH THE ASSESSEE COULD NOT HAV E MANAGED ACCOMMODATION ENTRIES REPRESENTED BY BOGUS PURCHASE S?' 30. THE GROUND NO.1 TO 3 OF THE APPEAL RAISED BY THE RE VENUES RELATES RESTRICTING THE DISALLOWANCE OF PURCHASES OF STEEL FROM KARMA INDUSTRIES LD TO 12.5%. WE HAVE SEEN ALL THE GROUND OF APPEAL RAI SED BY REVENUE IS AGAINST PARTIAL SUSTAINING OF THE DISALLOWANCE FOR PURCHASES OF STEEL MATERIAL. CONSIDERING THE FACTS THAT WE HAVE ALREAD Y PARTLY ALLOWED THE APPEAL GROUNDS OF APPEAL AND RESTRICTED THE DISALLO WANCE AT 5% OF THE ALLEGED BOGUS/ DISPUTED PURCHASES. HENCE, THE GROUN DS OF APPEAL RAISED BY REVENUE IN ITS CROSS APPEAL ARE DISMISSED. 31. IN THE RESULT THE APPEAL OF THE REVENUE FOR AY 2010 -11 IS DISMISSED. ITA NO. 4737/MUM/2016 FOR AY2011-12 BY THE ASSESSEE 32. IN ITA NO. 4737/MUM/2016 FOR AY2011-12, THE ASSESSE E HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF R S. 3,63,32,119/ - MADE THE AO TO THE INCOME OF THE APPELLANT ON ACCOUNT OF UNEXPLAIN ED EXPENDITURE U/S.69C TREATING ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 40 THE PURCHASES OF STEEL FROM M/ S. KARMA INDUSTRIES LTD. AND ITS ASSOCIATE CONCERNS AS BOGUS IN RESPECT OF SURAT-DAHISAR PROJECT BEING PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES OF RS. 29,06,56,949/- @ 12.5% OF THE PURC HASE VALUE. B) THE LD. CIT(A) FAILED TO APPRECIATE THAT :- I) THE ANSWERS GIVEN BY SHRI V.D. MHAISKAR IN RECOR DING HIS STATEMENT U/S.132(4) WERE SUBJECT TO VERIFICATION OF RECORDS, DOCUMENTS, ETC.; II) ALL THE PURCHASES FROM M/ S. KARMA INDUSTRIES L TD. AND ITS ASSOCIATE CONCERNS ARE GENUINE BEYOND DOUBT AND SUPPORTED BY SUFFICIEN T MATERIALS; III) THE PURCHASE OF STEEL IS BACKED BY CORRESPONDI NG CONSUMPTION IN THE PROJECTS UNDERTAKEN BY THE APPELLANT; IV) YOUR APPELLANT HAS SUCCESSFULLY DEMONSTRATED TH AT THE IMPUGNED STEEL WAS USED IN THE PROJECTS UNDERTAKEN BY THE APPELLANT; V) THE GROSS/NET PROFIT RATIO SHOWN BY THE APPELLAN T IS QUITE REASONABLE; VI) NOTHING HAS BEEN BROUGHT ON RECORD BY THE LD. A O THAT MONEY HAS EXCHANGED THE HANDS IN LIEU OF PAYMENT MADE FOR THESE PURCHASES B Y ACCOUNT PAYEE CHEQUES; AND VII) THE AO DID NOT PROVIDE COPY OF MATERIALS AND S TATEMENTS RELIED UPON BY HIM NOR ALLOWED ANY OPPORTUNITY TO THE APPELLANT TO CROSS E XAMINE THOSE PARTIES WHO HAVE BEEN BELIEVED TO HAVE PROVIDED THE ALLEGED ACCOMMOD ATION BILLS. C0 IN REACHING TO THE CONCLUSION AND CONFIRMING SUC H ADDITION THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSIDERATION S, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY I RRELEVANT CONSIDERATIONS AND FACTORS. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 55,10,896/ - MADE BY THE AO TO THE INCOME OF THE APPELLANT BY WAY OF DISALLOWING DEPRECIATION ON CER TAIN MATERIALS (STEEL) USED IN FIXED ASSETS ON THE PLEA THAT THE PURCHASES FROM M/ S. KARMA INDUSTRIES LTD. AND ITS ASSOCIATE CONCERNS ARE BOGUS. 3.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT A) ERRED IN CONFIRMING THE ADDITION OF RS.1,31,57,347/ - MADE BY THE AO TO THE INCOME OF THE APPELLANT ON ACCOUNT OF BOGUS PURCHASES IN R ESPECT OF PURCHASES FROM M/S. ASIAN STEEL WHO IN TURN PURCHASED THESE GOODS FROM M/S. KARMA INDUSTRIES LTD. AND ITS ASSOCIATE CONCERNS. B) THE ID. CIT(A) FAILED TO APPRECIATE THAT :- ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 41 I) ALL THE PURCHASES FROM M/S. ASIAN STEEL ARE GENU INE BEYOND DOUBT AND SUPPORTED BY SUFFICIENT MATERIALS; II) THE PURCHASES OF STEEL IS BACKED BY CORRESPONDI NG CONSUMPTION IN THE PROJECTS UNDERTAKEN BY THE APPELLANT; III) YOUR APPELLANT HAS SUCCESSFULLY DEMONSTRATED T HAT THE IMPUGNED STEEL WAS USED IN THE PROJECTS UNDERTAKEN BY THE APPELLANT; IV) THE GROSS/NET PROFIT RATIO SHOWN BY THE APPELLA NT IS QUITE REASONABLE; AND V) NOTHING HAS BEEN BROUGHT ON RECORD BY THE LD. AO THAT MONEY HAS EXCHANGED THE HANDS IN LIEU OF PAYMENT MADE FOR THESE PURCHASES B Y ACCOUNT PAYEE CHEQUES. C) IN REACHING TO THE CONCLUSION AND CONFIRMING SUC H ADDITION THE LD. CIT(A) OMITTED TO CONSIDER RELEVANT FACTORS, CONSIDERATION S, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INFLUENCED AND PREJUDICED BY IR RELEVANT CONSIDERATIONS AND FACTORS. 4) THE LD. CIT(A) ERRED IN HOLDING THAT LEVY OF INT EREST U/S.234B AND 234C OF THE INCOME TAX ACT, 1961 IS MANDATORY. THE APPELLANT DE NIES ITS LIABILITY FOR SUCH INTEREST. 5) THE LD. CIT(A) ERRED IN HOLDING THAT THE GROUND RAISED DISPUTING INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 IS PREMATURE. THE APPELLANT DENIES ITS LIABILITY FOR SUCH PENALTY. 33. GROUND NO. 1 OF THE APPEAL RELATES TO RESTRICTING T HE DISALLOWANCE OF PURCHASES AT 12.5%. WE HAVE SEEN THAT GROUND NO.1 OF THE APPEAL IS SIMILAR AS RAISED IN APPEAL FOR AY 2010-11. CONSIDERING THE FACTS THAT WE HAVE ALREADY RESTRICTED THE DISALLOWANCE ON ACCOUNT OF A LLEGED BOGUS PURCHASES AT 5% OF SUCH PURCHASES. CONSIDERING THE SIMILARITY OF THE FACTS FOR THE UNDER CONSIDERATION THE DISALLOWANCE FOR THIS YEAR IS ALS O RESTRICTED AT 5% OF THE IMPUGNED PURCHASES (I.E. 5% OF RS.29,06,56,049/-) W ITH SIMILAR OBSERVATION. IN THE RESULT THIS GROUND OF APPEAL IS PARTLY ALLOW ED. ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 42 34. GROUND NO.2 RELATES TO CONFIRMING THE DISALLOWANCE OF DEPRECIATION ON CERTAIN MATERIAL (STEEL). WE HAVE SEEN THAT THIS GR OUND OF APPEAL IS IDENTICAL TO THE GROUND NO. 2 OF APPEAL FOR AY 2010-11. CONSI DERING THE FACTS THAT WE HAVE ALREADY ALLOWED THE SIMILAR GROUND OF APPEAL I N FAVOUR OF ASSESSEE HOLDING THAT ALL ADDITION ON ACCOUNT OF BOGUS PURCH ASES WERE DELETED AS THE ASSESSMENT ORDER FOR AY 2009-10 WAS HELD INVALID. FOR THE APPEAL UNDER CONSIDERATION WE MAY ALSO NOT THAT THE ASSESSING OF FICER HAS NOT BROUGHT ANY EVIDENCE THAT THE MATERIAL (STEEL) WAS NOT PUT TO U SE IN THE EARLIER YEAR RELATED TO THIS ASSESSMENT YEAR. EVEN OTHERWISE THE PURCHAS E OF STEEL FOR EARLIER FINANCIAL HAS BEEN RESTRICTED AT 5 % OF THE PURCHAS ES ONLY TO AVOID THE SUSPECTED REVENUE LEAKAGE. AS WE HAVE ALREADY NOTED THAT THERE IS NO SPOT VERIFICATION THAT THE STEEL (MATERIAL) ON WHICH THE DEPRECIATION IS CLAIMED IN NOT AVAILABLE AT SITE. HENCE, THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF ASSESSEE. 35. GROUND NO. 3 RELATES TO CONFIRMING THE ADDITION OF RS.1,31,57,347/-. THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO. 3 O F APPEAL FOR AY 2010-11. CONSIDERING THE FACTS THAT WE HAVE ALREADY RESTRICT ED THE DISALLOWANCE ON ACCOUNT OF ALLEGED BOGUS PURCHASES FROM ASIAN STEEL AT 5%. CONSIDERING THE SIMILARITY OF THE FACTS FOR THE UNDER CONSIDERATION THE DISALLOWANCE FOR THIS YEAR IS ALSO RESTRICTED AT 5% OF THE IMPUGNED PURCH ASES (I.E. 5% OF ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 43 RS.1,31,57,347/-) WITH SIMILAR OBSERVATION. IN THE RESULT THIS GROUND OF APPEAL IS PARTLY ALLOWED. 36. GROUND NO.4 RELATES TO LEVY OF INTEREST UNDER SECTI ON 234B &234C AND GROUND NO.5 RELATES TO INITIATION OF PENALTY UNDER SECTION 271(1) (C). THE GROUND NO. 4 IS CONSEQUENTIAL AND THUS NEEDS NO SPE CIFIC ADJUDICATION. HOWEVER, GROUND NO.5 IS PREMATURE AND THUS DISMISSE D. 37. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED ITA NO. 5126/MUM/2016 FOR AY 2011-12 BY REVENUE 38. THE REVENUE IN ITS APPEAL ITA NO. 5126/MUM/2016 FOR AY 2011-12 , HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN ESTIMATING THE PROFIT ELEMEN T EMBEDDED IN THE AMOUNT REPRESENTED BY BOGUS PURCHASES RECORDED IN THE BOOK S OF ACCOUNTS OF RS. 31,24,70,714/- IN THE NAME OF M/S KIL AND ASSOCIATE CONCERNS AT 1 2.5 % OF THE TOTAL BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THAT ANY EXPENDITURE NOT FOUND TO BE INCURRED AT ALL, LEAST OF ALL THAT THE SAME IS ALSO NOT LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS IS NOT ADM ISSIBLE IN TERMS OF THE PROVISIONS OF SECTION 37 OF THE ACT?' 2. 'WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, WHETHE R THE LD. CIT(A) WAS JUSTIFIED IN TAKING ONLY 12.5% OF THE TOTAL AMOUNT OF BOGUS P URCHASES AS INCOME AND THUS ALLOWING 87.5% OF SUCH TOTAL AMOUNT OF PURCHASES AS EXPENDITURE IN CONTRAVENTION OF THE PROVISIONS OF SECTION 37 OF THE ACT?' 3. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN REDUCING THE PROPORTIONATE A MOUNT OF ADDITION WHEREAS, THE AO HAD ADDED THE AMOUNT ATTRIBUTABLE TO PAYMENT OF COMMISSION WITHOUT WHICH THE ASSESSEE COULD NOT HAVE MANAGED ACCOMMODATION ENTRI ES REPRESENTED BY BOGUS PURCHASES?' ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 44 39. THE GROUND NO.1 TO 3 OF THE APPEAL RAISED BY THE RE VENUES RELATES RESTRICTING THE DISALLOWANCE OF PURCHASES OF STEEL FROM KARMA INDUSTRIES LD AND ITS ALLEGED ASSOCIATE CONCERNS TO 12.5%. WE HAV E SEEN ALL THE GROUND OF APPEAL RAISED BY REVENUE IS AGAINST PARTIAL SUST AINING OF THE DISALLOWANCE FOR PURCHASES OF STEEL MATERIAL. CONSIDERING THE FA CTS THAT WE HAVE ALREADY PARTLY ALLOWED THE APPEAL GROUNDS OF APPEAL AND RES TRICTED THE DISALLOWANCE AT 5% OF THE ALLEGED BOGUS/ DISPUTED PURCHASES. HEN CE, THE GROUNDS OF APPEAL RAISED BY REVENUE IN ITS CROSS APPEAL ARE DI SMISSED. 40. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DI SMISSED. ITA NO.4738/M/2016 FOR AY 2012-13 BY ASSESSEE 41. THE ASSESSEE IN IT APPEAL FOR AY 2012-13 HAS RAISE D FOLLOWING GROUNDS OF APPEALS; (1). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 46,84,261/ - MADE BY THE AO TO THE INCOME OF THE APPELLANT BY WAY OF DISALLOWING DEPRECIATION ON CERTAIN MATERIALS (STEEL) USED IN FIXED ASSETS ON THE PLEA THAT THE PURCHASES FROM M/S. KARMA INDUSTRIES LTD. AND ITS ASSOCIATE CONCERNS ARE BOGUS. (2) THE LD. CIT(A) ERRED IN HOLDING THAT LEVY OF IN TEREST U/S.234B AND 234C OF THE INCOME TAX ACT, 1961 IS MANDATORY. THE APPELLANT DE NIES ITS LIABILITY FOR SUCH INTEREST. (3) THE LD. CIT(A) ERRED IN HOLDING THAT THE GROUND RAISED DISPUTING INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 IS PREMATURE. THE APPELLANT DENIES ITS LIABILITY FOR SUCH PENALTY. ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 45 42. GROUND NO.1 RELATES TO THE CONFIRMING THE DISALLOWA NCE OF DEPRECIATION OF CERTAIN MATERIAL (STEEL). WE HAVE SEEN THAT THIS G ROUND OF APPEAL IS IDENTICAL TO THE GROUND NO. 2 OF APPEAL FOR AY 2010-11 AND 11 -12. CONSIDERING THE FACTS THAT WE HAVE ALREADY ALLOWED THE SIMILAR GROU ND OF APPEAL IN FAVOUR OF ASSESSEE HOLDING THAT ALL ADDITION ON ACCOUNT OF BO GUS PURCHASES WERE DELETED AS THE ASSESSMENT ORDER FOR AY 2009-10 WAS HELD INVALID. FOR THE APPEAL UNDER CONSIDERATION WE MAY ALSO NOT THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE THAT THE MATERIAL (STEEL) WAS NOT PUT TO USE IN THE EARLIER YEAR RELATED TO THIS ASSESSMENT YEAR. EVEN OTHERWISE THE PURCHASE OF STEEL FOR EARLIER FINANCIAL HAS BEEN RESTRICTED AT 5 % OF THE PURCHASES ONLY TO AVOID THE SUSPECTED REVENUE LEAKAGE. AS WE HAVE ALR EADY NOTED THAT THERE IS NO SPOT VERIFICATION THAT THE STEEL (MATERIAL) ON W HICH THE DEPRECIATION IS CLAIMED IN NOT AVAILABLE PUT TO USE AT SITE. HENCE, THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF ASSESSEE. THE ASSESSING OFFICE R IS DIRECTED TO ALLOW DEPRECIATION AS PER LAW. 43. GROUND NO.2 RELATES TO LEVY OF INTEREST UNDER SECTI ON 234B &234C AND GROUND NO.3 RELATES TO INITIATION OF PENALTY UNDER SECTION 271(1) (C). THE GROUND NO. 2 IS CONSEQUENTIAL AND THUS NEEDS NO SPE CIFIC ADJUDICATION. HOWEVER, GROUND NO.3 IS PREMATURE AND THUS DISMISSE D 44. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ITA NO.5128/M/2016 FOR AY 2012-13 BY REVENUE . ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 46 45. THE REVENUE IT ITS APPEAL FOR AY 2012-13 HAS RAISED FOLLOWING GROUNDS OF APPEAL; (1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LEARNED COMMISSIONER (APPEALS) IS JUSTIFIED IN DELE TING THE ADDITION MADE BY AO OF RS. 32,00,000 / ON EX-GRATIA PAYMENT MADE T O MR MADHAV HARI KALE IN CASH WITHOUT TAKING INTO CONSIDERATION THE FACT THAT THE FACT OF PAYMENT MADE BY ASSESSEE TO MR MADHAV HARI KALE HAS NOT BEEN DIS PUTED OR DENIED BY THE ASSESSEE ?. (2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LEARNED COMMISSIONER (APPEALS) IS JUSTIFIED IN DELE TING THE ADDITION WITHOUT APPRECIATING THE FACT THAT MR MADHAV HARI KALE, IN HIS RECORDED THE STATEMENT HAD HIMSELF ACCEPTED THAT APART FROM REGULAR SELBY HE HAD RECEIVED EXPLORATION OF RS. 32,00,000/- IN CASH, WHICH FELL UNDER UNEXPLAINED EXPENDITURE UNDER SECTION 69C IN THE CASE OF ASSESS EE ? . 46. THE BRIEF FACTS RELATED TO THE GROUNDS OF APPEAL RA ISED BY THE VENUE ARE THAT WHILE FRAMING ASSESSMENT THE ASSESSING OFFICER NOTI CED THAT DURING THE COURSE OF SUCH ACTION IN THE GROUP OF ASSESSEE, MR MADHAV HARI KALE IN A STATEMENT RECORDED UNDER SECTION 132(4) ADMITTED TH AT APART FROM THE REGULAR SELBY HE HAD RECEIVED ASPASIA OF RS. 32 LAKHS IN CA SH. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE PAYMENT MADE IN C ASH SHOULD NOT BE TREATED AS UNEXPLAINED EXPENDITURE. THE ASSESSEE FU RNISHED ITS EXPLANATION, WHICH WAS NOT ACCEPTED BY THE ASSESSING OFFICER. TH E ASSESSING OFFICER CONCLUDED THAT ASSESSEE FAILED TO OFFER ANY VALID E XPLANATION REGARDING THE SOURCE OF PAYMENT AND ITS EFFECT IN THE REGULAR BOO KS OF ACCOUNT, THE PAYMENT OF SUCH EX- GRATIA PAYMENT WAS ADDED BACK T O THE TOTAL INCOME OF ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 47 THE ASSESSEE. ON APPEAL BEFORE COMMISSIONER (APPEAL S) THE ADDITION WAS DELETED. HENCE, AGGRIEVED BY THE ORDER OF COMMISSIO NER (APPEALS) THE REVENUE HAS FILED PRESENT APPEAL BEFORE US. 47. WE HAVE HEARD LEARNED DR FOR THE REVENUE AND LD. AR FOR THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LEARN ED DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER AND ARGUED THAT ASSESSEE HAS NOT SUBSTANTIATED ABOUT THE PAYMENTS OF SUCH HUGE AMOUN T TO EMPLOYEE MR MADHAV HARI KALE. ON THE OTHER HAND THE LEARNED AR OF THE ASSESSEE SUPPORTED THE ORDER OF COMMISSIONER (APPEALS) AND A RGUED THAT MR MADHAV HARI KALE WAS NOT AN EMPLOYEE OF ASSESSEE AND AS SU CH THERE WAS NO OCCASION FOR EX-GRATIA PAYMENT TO HIM IN CASH. IT WAS ARGUED THAT BEFORE MAKING DISALLOWANCE UNDER SECTION 69 C THE CONDITION PRECEDENT ATTACHED TO THE SECTION SHOULD BE PROVED. THE ASSESSING OFFICER MADE THE ADDITION MERELY ON THE BASIS OF HIS ASSUMPTION AND PRESUMPTI ON. 48. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSMENT PROCEEDING THE ASSESSING OFFICER RELIED ON PART OF THE STATEM ENT OF MR MADHAV HARI KALE, WHICH IS REFERRED BY ASSESSING OFFICER PARA 5 OF HI S ORDER. THE ASSESSEE WAS ASKED THE ASSESSEE TO EXPLAIN THE EXPENDITURE MADE IN CASH. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE MADE ITS SUBMISSION. HOWEVER, THE CONTENTS OF SUBMISSION ARE NOT RECORDED BY THE ASSE SSING OFFICER. THE ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 48 ASSESSING OFFICER CONCLUDED THAT ASSESSEE FAILED TO OFFER ANY VALID EXPLANATION REGARDING THE SOURCE OF SUCH PAYMENT AN D ITS EFFECT IN REGULAR BOOKS OF ACCOUNT AND ADDED BACK THE SAME IN THE INC OME OF ASSESSEE AS UNEXPLAINED EXPENDITURE. BEFORE LEARNED COMMISSIONE R (APPEALS) THE ASSESSEE CONTENDED THAT MADHAV HARI KALE IS NOT THEIR EMPLOYEE AND AS SUCH THERE WAS NO OCCASION FOR MAKING EX-GRATIA PAYMENT TO HIM. THERE WAS NO MATERIAL BEFORE THE ASSESSING OFFICER FOR MAKING TH E ADDITION OF SUCH INCOME. THE ASSESSEE EXPLAINED THAT MADHAV HARI KALE WAS CORPORATE HEAD OF IRB GROUP. THE LEARNED COMMISSIONER (APPEALS) EXAMINED THE STATEMENT OF MADHAV HARI KALE RECORDED DURING THE SEARCH ACTION. THE LEARNED COMMISSIONER (APPEALS) OBSERVED THAT MADHAV HARI KA LE DID NOT NAME THE ASSESSEE AS HIS EMPLOYER BUT ONLY DISCLOSED THE AMO UNT OF RS.32 LAKHS AS PER E-MAIL ANNEXED AT PAGE 34 OF ANNEXURE -1 FOR TAXATI ON. THE LEARNED COMMISSIONER (APPEALS) FURTHER OBSERVED THAT ASSESS ING OFFICER HAS NOT BROUGHT ANYTHING ON RECORD TO SHOWS THAT HE WAS IN THE EMPLOYMENT OF ASSESSEE AND WAS PAID SUCH AMOUNT BY WAY OF EX- GRA TIA PAYMENT IN CASH DURING THE RELEVANT PERIOD. THE LEARNED COMMISSION ER(APPEALS) ALSO RECORDED IN HIS OBSERVATION THAT ASSESSING OFFICER HAS NOT DISCUSSED THE EXPLANATION FURNISHED BY THE ASSESSEE BEFORE HIM, W HETHER THE ASSESSEE IN ITS SUBMISSION MADE BEFORE ASSESSING OFFICER DURING ASS ESSMENT HAS ADMITTED OR DENIED THE FACT OF EMPLOYMENT OF MADHAV HARI KALE. AND IN CASE MADHAV ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 49 HARI KALE IS NOT IN THE EMPLOYMENT OF THE ASSESSEE, THE QUESTION OF MAKING PAYMENT OF EX-GRATIA BY CHEQUES OR CASH WOULD NOT A RISE AT ALL. ON THE BASIS OF HIS OBSERVATION THE LEARNED COMMISSIONER (APPEAL S) CONCLUDED THAT THERE WAS NO VALID REASON FOR MAKING AFORESAID ADDITION O F RS. 32 LAKHS IN THE HANDS OF ASSESSEE AND DELETED THE ADDITION. WE HAVE SEEN THAT DESPITE EXPLAINING THE FACT THAT MR. MADHAV H KALE WAS NOT IN THEIR EMPLOYMENT, THE ASSESSING OFFICER HAS NOT BRING ANY MATERIAL ON RECORD THE FACTS TO PROVE IT OTHERWISE. EVEN BEFORE US NO CONTRARY MATERIAL I S PLACED BEFORE US OR ANY CONTRARY LAW IS BROUGHT IN OUR NOTICE. WE HAVE SEEN THAT THE LEARNED COMMISSIONER (APPEALS) GRANTED RELIEF TO THE ASSESS EE AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE AND THE MATERIAL PLACED BEFORE HIM. IN OUR VIEW THE FINDING OF LEARNED COMMISSIONER (APPEALS) IS BA SED ON RECORD, REASONED ONE AND DOES NOT REQUIRE ANY FURTHER INTERFERENCE A T OUR END. IN THE RESULT THE GROUND OF APPEAL RAISED BY REVENUE IS DISMISSED 49. IN THE RESULT APPEAL FILED BY THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH DAY OF OCTOBER 2017. SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) VICE-PRESIDENT JUDICIAL MEMBER MUMBAI; DATED 24/10/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI ITA NO.4734 TO 4738 & 5126 TO 5128/M/2016 M/S MODERN ROAD MAKERS PVT. LTD. 50 BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/