OFFBEAT DEVELOPERS P.LTD, MUMBAI V. ASST CIT CEN CIR 47, MUMBAI

ITA 503/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3571 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 28-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 21-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY
• Keywords: Bogus purchase; Loose papers; Opportunity of being heard; Proportionate interest; Accommodation entries
• Section: 69C; 133A; 147; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.503/MUM/2015 (ASSESSMENT YEAR : 2007-08) M/S OFFBEAT DEVELOPERS PVT. LTD., GROUND FLOOR, SHREE LAXMI WOOLLEN MILLS ESTATE, R.R. HOISERY BLDG, DR. MOSES ROAD, MAHALAXMI, MUMBAI-400011. PAN: AAACO5140L VS. ACIT CENTRAL CIRCLE - 47, MUMBAI. (APPELLANT) .. ( RESPONDENT) I.T.A. NO.965/MUM/2015 (ASSESSMENT YEAR : 2007-08) ACIT CENTRAL CIRCLE - 8(4), 6 TH FLOOR, ROOM NO. 658, A AYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S OFFBEAT DEVELOPERS PVT. LTD., GROUND FLOOR, SHREE LAXMI WOOLLEN MILLS ESTATE, R.R. HOISERY BLDG, DR. E. MOSES ROAD, MAHALAXMI, MUMBAI-400011. PAN: AAACO5140L (APPELLANT) .. ( RESPONDENT) I.T.A. NO.504/MUM/2015 (ASSESSMENT YEAR : 2008-09) M/S OFFBEAT DEVELOPERS PVT. LTD., GROUND FLOOR, SHREE LAXMI WOOLLEN MILLS ESTATE, R.R. HOISERY BLDG, DR. MOSES ROAD, MAHALAXMI, ACIT CENTRAL CIRCLE - 47, MUMBAI. 2 ITA NOS. 503 TO 505 & 965 TO 967/M/2015 MUMBAI-400011. PAN: AAACO5140L VS. (APPELLANT) .. ( RESPONDENT) I.T.A. NO.966/MUM/2015 (ASSESSMENT YEAR : 2008-09) ACIT CENTRAL CIRCLE - 8(4), 6 TH FLOOR, ROOM NO. 658, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S OFFBEAT DEVELOPERS PVT. LTD., GROUND FLOOR, SHREE LAXMI WOOLLEN MILLS ESTATE, R.R. HOISERY BLDG, DR. E. MOSES ROAD, MAHALAXMI, MUMBAI-400011. PAN: AAACO5140L (APPELLANT) .. ( RESPONDENT) I.T.A. NO.505/MUM/2015 (ASSESSMENT YEAR : 2010-11) M/S OFFBEAT DEVELOPERS PVT. LTD., GROUND FLOOR, SHREE LAXMI WOOLLEN MILLS ESTATE, R.R. HOISERY BLDG, DR. MOSES ROAD, MAHALAXMI, MUMBAI-400011. PAN: AAACO5140L VS. ACIT CENTRAL CIRCLE - 47, MUMBAI. (APPELLANT) .. ( RESPONDENT) I.T.A. NO.967/MUM/2015 (ASSESSMENT YEAR : 2010-11) 3 ITA NOS. 503 TO 505 & 965 TO 967/M/2015 ACIT CENT RAL CIRCLE - 8(4), 6 TH FLOOR, ROOM NO. 658, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S OFFBEAT DEVELOPERS PVT. LTD., GROUND FLOOR, SHREE LAXMI WOOLLEN MILLS ESTATE, R.R. HOISERY BLDG, DR. E. MOSES ROAD, MAHALAXMI, MUMBAI-400011. PAN: AAACO5140L (APPELLANT) .. ( RESPONDENT) ASSESSEE BY SHRI VIJAY MEHTA (AR) REVENUE BY SHRI AJAY (DR) DATE OF HEARING : 28.06.2016 DATE OF PRONOUNCEMENT : 25.08.2016 O R D E R D.KARUNAKARA RAO, AM: 1. THERE ARE SIX APPEALS UNDER CONSIDERATION OF THIS O RDER INVOLVING THREE ASSESSMENT YEARS (AYS) NAMELY AY-2007-08, 200 8-09 AND 2010-11 RESPECTIVELY. THE ISSUES INVOLVED ON THIS APPEALS A RE THE SAME. CONSIDERING THE NEXUS OF THE ISSUES AND COMMONALITY OF THE ARGUMENTS OF BOTH THE PARTIES, WE CLUBBED ALL THE SIX APPEAL AND ARE BEING ADJUDICATED IN THIS COMPOSITE ORDER. FOR THE SAKE OF REFERENCE, WE EXTRACT THE GROUNDS RAISED BY THE ASSESSEE AND THE REVENUE IN THE APPEALS FOR THE AY 2007-08. THE SAME READ AS UNDER: 4 ITA NOS. 503 TO 505 & 965 TO 967/M/2015 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS OF RS. 4 9,97,154/- TOWARDS INTEREST EXPENDITURE ATTRIBUTABLE TO BOGUS PURCHASE S WITHOUT APPRECIATING THE FACT THAT INTEREST PAID ON LOANS TAKEN, WHICH I S ATTRIBUTABLE TO THESE BOGUS PURCHASES, HAS TO BE REDUCED FROM CWIP. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITIONS MA DE BY THE AO OF RS. 18,61,137/- U/S. 69C ON ACCOUNT OF COMMISSION PAID. THE APPELLANT PRAYS THAT THE SAME MAY KINDLY BE DELETED. 3. THE BACKGROUND FACTS USEFUL FOR ALL THIS GROUP OF A PPEALS INCLUDE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEV ELOPMENT OF COMMERCIAL/RETAIL AND ENTERTAINMENT COMPLEX. THERE WAS SEARCH ACTION U/S. 132 OF THE ACT IN FEBRUARY 2008 AND THEREFORE, THERE WAS SEARCH ASSESSMENTS IN THIS CASE. SUBSEQUENTLY, THERE WAS A LSO SURVEY ACTION U/S. 133A OF THE ACT ON 05/06.07.2012 ON THE ASSESSEE, M /S PHOENIX MILLS LTD. AND ITS GROUP COMPANIES. DURING THE SURVEY ACTION, THE SURVEY TEAM FOUND AND IMPOUNDED CERTAIN LOOSE PAPERS AND ON BIL LS INVOLVING UNSUBSTANTIATED/BOGUS PURCHASES. THE SURVEY TEAM CA ME TO THE CONCLUSION THAT THE ASSESSEE IS ENGAGED IN INFLATIN G THE PURCHASES AND DEFLATING THE PROFITS. THE SURVEY TEAM RECORDED THE SWORN STATEMENTS OF SHRI HARESH MORAJKAR, THE DIRECTOR OF THE ASSESSEE-C OMPANY, SHRI PRADUMNA KANODIA, DIRECTOR FINANCE OF M/S PHOENIX M ILLS LTD. AND SHRI ATUL RUIA, MD OF THE M/S PHOENIX MILLS LTD. IN THES E PROCEEDINGS, THE ASSESSEE OFFERED CERTAIN PURCHASES AS UNVERIFIABLE ONE INVOLVING AYS 5 ITA NOS. 503 TO 505 & 965 TO 967/M/2015 2007-08, 2008-09 AND 2010-11. THE QUANTUM OF SUCH B OGUS PURCHASES ARE RS. 9,30,56,867/-, RS. 20,94,07,870/- AND RS. 1 2,31,14,311/- FOR THE AYS 2007-08, 2008-09 AND 2010-11 RESPECTIVELY. IN T HE STATEMENTS, THE ASSESSEE OFFERED TO REDUCE THE CAPITAL WORK IN PROG RESS (CWIP) BY THE ABOVE AMOUNTS IN THE YEAR OF COMPLETION OF THE PROJ ECT I.E. AY 2012-13. THE ASSESSMENTS FOR ALL THESE THREE AYS WERE RE-OPE NED BY ISSUING NOTICE U/S. 147 OF THE ACT. THE REASONS WERE RECORDED BEFO RE ISSUING THE SAID NOTICES AND THE DETAILS ARE GIVEN IN THE ORDERS OF THE REVENUE. HOWEVER, DURING THE RE-ASSESSMENT PROCEEDINGS, THE AO NOTICE S THAT THE CWIP WAS NOT ADJUSTED TO THE EXTENT OF UNVERIFIABLE (BOGUS PU RCHASES). ACCORDINGLY, AFTER DUE VERIFICATION, ENQUIRIES INTO THE ACCOUNTS , THE AO HELD AS UNDER: 7.3 THE SUBMISSION OF THE ASSESSEE HAS BEEN PERUSE D. AT THE TIME OF SURVEY, THE ASSESSEE HAD SUO-MOTO WITHDRAWN PURCHAS ES, WITH SPECIFIED PARTIES AMOUNTING TO RS. 9,30,56,866/- PERTAINING T O A.Y. 2007-08, WHICH WERE NOT RECONCILED WITH THE PROPER SUPPORTING DOCU MENTS. THE ASSESSEE WAS GIVEN THE OPPORTUNITY TO PRODUCE THOSE PARTIES DURING THE ASSESSMENT PROCEEDINGS. BUT ASSESSEE COULD NOT PROD UCE THE SAME. HENCE, PURCHASES AMOUNTING TO RS. 9,30,56,866/- IS REDUCED FROM THE CWIP. 4. FURTHER ON FINDING THAT THE ASSESSEE DEBITED HUGE I NTEREST EXPENDITURE TO THE CWIP ACCOUNT AMOUNTING TO RS. 16 ,36,91,138/- ON OBSERVING THAT PART OF THIS INTEREST IS RELATABLE T O THE LOANS UTILIZED FOR THE ABOVE-SAID BOGUS/UNVERIFIABLE PURCHASES, THE AO REC OMPUTED THE DISALLOWABLE INTEREST RELATABLE TO THE SAID PURCHAS ES WITHDRAWN BY THE ASSESSEE AND DETERMINED SUCH DISALLOWANCE FOR ALL T HE THREE YEARS UNDER 6 ITA NOS. 503 TO 505 & 965 TO 967/M/2015 CONSIDERATION. THE AO PROPOSED FOR DISALLOWANCE OF RS. 49,97,154/- FOR THE AY 2007-08, RS. 1,13,23,965/- FOR THE AY 2008-0 9 AND RS. 89,87,345/- FOR AY 2010-11 RESPECTIVELY. IT IS THE FINDING OF THE AO THAT THE ABOVE DISALLOWANCE SHOULD BE REDUCED FROM THE C WIP. CONSIDERING THE FACT, THE ABOVE TWO ADDITIONS I.E. PURCHASES AN D INTEREST CLAIMS RELATES TO THE ADJUSTMENTS TO THE CWIP ACCOUNT, THE AO DID NOT MAKE ANY FORMAL ADDITION IN THE ASSESSMENTS. 5. FURTHER, THE AO INFERRED THAT THE ASSESSEE WOULD HA VE INCURRED COMMISSION EXPENDITURE @ 2% OF THE BOGUS/UNVERIFIAB LE PURCHASES FOR ALL THE THREE YEARS UNDER CONSIDERATION AND NOT SHO WN IN THE BOOKS OF ACCOUNTS. ON FINDING THAT THE SUCH COMMISSION EXPEN DITURE WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS IN ANY OF THE YEA RS UNDER CONSIDERATION, THE AO PROPOSED TO MAKE THE ADDITION BY WAY OF ESTIMATION @ 2% OF THE BOGUS PURCHASES. ON THIS ACC OUNT, THE AO MADE THE ADDITION U/S. 69C OF THE ACT AMOUNTING TO RS. 1 8,61,137/-, RS. 41,88,157/- AND RS. 24,62,286/- FOR THE AY 2007-08, 2008-09 AND 2010- 11 RESPECTIVELY. SO FAR AS, THE ADDITIONS ON ACCOUN T OF BOGUS PURCHASES, WHICH WAS ALREADY OFFERED BY THE ASSESSEE IN THE SU RVEY PROCEEDINGS, THERE IS NO DISPUTE FROM THE ASSESSEE SIDE BEFORE T HE CIT(A) OR BEFORE US. OTHERWISE, AGGRIEVED WITH THE AOS DECISION IN ADJUSTING THE CWIP ON ACCOUNT OF INTEREST EXPENDITURE AND ALSO IN CONNECT ION WITH THE ADDITION 7 ITA NOS. 503 TO 505 & 965 TO 967/M/2015 ON ACCOUNT OF COMMISSION EXPENDITURE U/S. 69C OF TH E ACT, THE ASSESSEE IS IN APPEAL FOR ALL THE THREE AYS BEFORE THE CIT(A ). 6. IN CONNECTION WITH THE ISSUE RELATING TO INTEREST D ISALLOWANCE, IT IS THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE HA S ADEQUATE INTEREST FREE FUNDS IN THE SYSTEM FOR ACCOUNTING THE INVESTM ENTS IN SUCH BOGUS PURCHASES AND RELIED HEAVILY ON THE BINDING JURISDIC TIONAL HIGH COURTS JUDGMENT IN THE CASE OF RELIANCE UTILITIES & POWER L TD. RELYING ON THE SAME, IT IS THE SUBMISSION OF THE ASSESSEE THAT ASS ESSEE HAS COMMON FUNDS FOR BOTH THE INTEREST FREE/O.D. LOANS, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS INTO SUCH BOGUS PURCHASES WO ULD BE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE COMPANY. ON CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) GRANTED THE RELIEF AS PER THE DISCUSSION GIVEN IN PARA-8.1 OF THE ORDER OF CIT(A) . 7. REGARDING THE ADDITION ON ACCOUNT OF COMMISSION EXP ENDITURE U/S. 69C OF THE ACT, ASSESSEE SUBMITTED THAT WITHOUT PRE JUDICE TO THE OFFERE IN THE 133A PROCEEDINGS, THE PURCHASES IN QUESTION ARE GENUINE AND THE OFFER FOR REDUCTION OF CWIP WAS MADE ONLY TO AVOID PROTRACTED LITIGATION AND TO BUY THE PEACE WITH THE DEPARTMENT. AS SUCH R EVENUE HAS NO EVIDENCE TO SUBSTANTIATE THAT THE COMMISSION EXPEND ITURE WAS INCURRED BY THE ASSESSEE AND THE COMMISSION PAYMENT WAS MADE @ 2% OF THE PURCHASES BILL VALUE. THE ASSESSEE ALSO WAS CRITICA L OF AOS DECISION IN 8 ITA NOS. 503 TO 505 & 965 TO 967/M/2015 INVOKING THE PROVISIONS OF SECTION 69C OF THE ACT. HE ALSO SUBMITTED THAT BY MAKING U/S 69C OF THE ACT, THE AO ENTERED INTO M AZE DOUBLE ADDITION IN RESPECT OF COMMISSION EXPENSES. 8. ON CONSIDERING THE SAID SUBMISSIONS OF THE ASSESSEE , THE CIT(A) DISMISSED THE ASSESSEES ARGUMENT THAT THE COMMISSI ON PAYMENT IS EMBEDDED IN THE VALUE MENTIONED IN THE BOGUS INVOIC ES AND CIT(A) IS OF THE OPINION THAT THE PAYMENT OF COMMISSION IS NECES SARY EVENT IN BUYING BOGUS INVOICES FROM THE SUPPLIERS OF THE BILLS WHIC H IS A PART OF BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. EVENTUALLY, THE CIT(A) DISMISSED THE RELATED GROUNDS OF THE ASSESSEE BY MENTIONING THE F OLLOWING: 11.0 THE FACTS OF THE CASE, THE GROUNDS OF APPEAL, THE STAND TAKEN BY THE AO IN THE ASSESSMENT ORDER AND THE WRITTEN SUBM ISSIONS FILED BY THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. IT IS A E STABLISHED FACT THAT THE APPELLANT OBTAINED BOGUS BILLS FROM ACCOMMODATION E NTRY PROVIDERS AND AS STATED BY THE AO SUCH SERVICES DO NOT COME FREE OF COST AND APPELLANT OUGHT TO HAVE INCURRED SOME EXPENSES FOR THE SAME A ND THEREFORE DISALLOWANCE OF 2% COMMISSION ON SUCH BOGUS PURCHAS ES IS REASONABLE. THE APPELLANT'S SUBMISSION THAT THE COMMISSION PAYM ENT IS IMBEDDED IN THE BOGUS INVOICE HAS NOT BEEN PROVED. IN FACT THE ADDITION HAS BEEN MADE U/S 69C OF THE ACT HOLDING THAT THE SOURCE OF SUCH PAYMENT IS UNEXPLAINED. 11.1 FURTHER, WITH REFERENCE TO THE APPELLANTS SUB MISSION THAT THERE IS NO EXPLANATION IN THE ASSESSMENT ORDER TO THE FACT THAT TO WHOM THE COMMISSION WAS PAID AND HOW WAS IT PAID, IT IS HERE BY CLARIFIED THAT IT IS BUT OBVIOUS THAT SUCH COMMISSION WAS PAID TO THOSE ENTRY PROVIDERS FROM WHOM THE BOGUS BILLS HAVE BEEN OBTAINED. IN THE ASS ESSMENT ORDER THESE PARTIES ARE IDENTIFIED WHICH IS ALSO REPRODUCED IN THIS ORDER VIDE PARA 6 ABOVE. THE APPELLANT ALSO ADMITTED THE NAME OF THE PARTIES AS WELL AS THE FIGURES IN THE WRITTEN SUBMISSIONS FILED. THERE FORE THE APPELLANT NOW FEIGNING IGNORANCE ABOUT THE NAMES OF THE PARTIES, TO WHOM THE 9 ITA NOS. 503 TO 505 & 965 TO 967/M/2015 COMMISSION WAS PAID, IS NOT ACCEPTABLE. MOREOVER SU CH PAYMENTS ARE ALSO MADE ONLY BY CASH, AND THEREFORE THE APPELLANT S SUBMISSION THAT IN THE ASSESSMENT ORDER THERE IS NO EXPLANATION AS TO HOW THE COMMISSION WAS PAID, IS ALSO NOT ACCEPTABLE. FURTHER THE APPEL LANT ALSO CONTENDS THAT THE ADDITION CANNOT BE MADE U/S 69C OF THE ACT. IN MY VIEW, THE ADDITION IS CORRECTLY MADE U/S 69C OF THE ACT BECAUSE THE SO URCE OF SUCH PAYMENTS HAVE NOT BEEN EXPLAINED. IN VIEW OF THE AB OVE, THE ADDITION ON ACCOUNT OF COMMISSION PAYMENT OF RS.18,61,137/- FOR AY 2007-08 AND RS. 41,88,157/- FOR AY 2008- 09 AND RS. 24,62,286/- FOR AY. 2010-11 ARE HEREBY CONFIRMED. THE QUANTUM CONFIRMED FOR THE AY. 2008-09 IS SUBJECT TO THE DISCUSSION IN PARA 14 BELOW IF THERE IS A MI STAKE IN THE FIGURES STATED. 9. AGGRIEVED WITH THE RELIEF GRANTED BY THE CIT(A) IN RESPECT OF PROPORTIONATE INTEREST DISALLOWANCE/ADJUSTMENT TO TH E CWIP ACCOUNT, THE REVENUE IS IN APPEAL WITH THE SOLITARY GROUND RAISE D IN ALL THE THREE AYS. FURTHER, AGGRIEVED WITH THE CONFIRMATION OF THE ADD ITION MADE U/S. 69C OF THE ACT IN CONNECTION WITH THE COMMISSION EXPENDITU RE IN ALL THE THREE AYS, THE ASSESSEE HAS RAISED THE SOLITARY GROUND IN THEIR THREE APPEALS FOR THE THREE AYS. 10. TO START WITH, WE SHALL NOW TAKE UP THE GROUND RAIS ED BY THE REVENUE IN THEIR APPEALS. 11. LD. DR FOR THE REVENUE NAMELY SHRI AJAY ARGUED AND R ED OUT FROM THE ORDER OF THE AO RELATING TO THE ADDITION ON ACC OUNT OF INTEREST DISALLOWANCES. HE BROUGHT OUR ATTENTION TO PARA-8.3 AND REASONED THAT WHEN THE BOGUS PURCHASES HAD TO BE REDUCED FROM THE CWIP ACCOUNT. SIMILAR ADJUSTMENT IS REQUIRED QUA THE INTEREST EXPE NDITURE ATTRIBUTABLE 10 ITA NOS. 503 T O 505 & 965 TO 967/M/2015 TO THE INVESTED ON SAID BOGUS PURCHASES/OFFERED BY THE ASSESSEE IN ALL THREE YEARS. AS SUCH, THE ASSESSEE DID NOT RESPOND TO THE SHOW-CAUSE- NOTICE ISSUED BY THE AO. AS PER THE LD. DR, MERELY RELYING ON THE JUDGMENT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA), AND WITHOUT GIVING THE DETAILS ON THE AVAILABILITY OF F UNDS AT THE RELEVANT POINT OF TIME AND DATE, THE ASSESSEE CANNOT BE GIVEN ANY RELIEF. THEREFORE, LD. DR SUBMITTED THAT THE CIT(A) HAS ERRED IN NOT PASSI NG A SPEAKING ORDER ON THIS ISSUE AND ALSO ERRED IN GIVING RELIEF MEREL Y RELYING ON THE SAID JUDGMENT. THE CONTENTS OF PARA 8.1 IS VERY CRYPTIC A ND RELIED HEAVILY ON THE CITED JUDGMENT WHICH WAS NOT DELIVERED IN THE CO NTEXT OF BOGUS PURCHASES. IT WAS THE DELIVERED IN THE CONTEXT OF L OANS. LD. CIT(DR) IS CRITICAL OF THE ANALOGY OF FACTS OF THAT CASE TO TH E ONE UNDER CONSIDERATION. LD. DR FOR REVENUE IS OF THE VIEW TH AT THE MATTER SHOULD BE REMANDED TO THE FILE OF AO WITH THE DIRECTION TO THE ASSESSEE TO SUBSTANTIATE THE AVAILABILITY OF EXCESS FUNDS ON ON E SIDE AND UTILIZATION OF THE INTEREST FREE FUNDS TOWARDS THE INVESTMENT/UTIL IZATION IN THE BOGUS PURCHASES. 12. ON THE OTHER HAND, LD. COUNSEL FOR ASSESSEE RELIED HEAVILY IN THE ORDER OF THE CIT(A), THE SUBMISSIONS MADE BEFORE TH E REVENUE AUTHORITIES AND THE BINDING JUDGMENT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA). 11 ITA NOS. 503 T O 505 & 965 TO 967/M/2015 13. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE, WE FI ND THAT THE CONTENTS OF PARA 8.1 OF THE CIT(A) LACKS DISCUSSION ON THE RELEVANT FACTS. HIS DECISION GRANTING RELIEF TO THE ASSESSEE ON THI S INTEREST ISSUE IS CENTRED AROUND THE CITED JUDGMENT. IN OUR VIEW, THE CIT(A) IS NOT JUSTIFIED IN GRANTING RELIEF. CIT(A) DID NOT APPRECI ATE THE FACT THAT THE ASSESSEE SURRENDERED ALL THE BOGUS PURCHASES FOR AL L THREE YEARS, WHICH IMPLIES THAT THE PURCHASES ARE MERE CASE OF BUYING THE ACCOMMODATION ENTRIES FOR COMMISSION PAYMENT AND POCKETING THE CA SH AFTER NECESSARY DEDUCTIONS IF ANY. IN THE CASE, WE CANNOT UNDERSTAN D HOW THE JUDGMENT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. (SUP RA) IS RELEVANT TO THE FACTS OF THE CASE. BY THIS RELIEF BY CIT(A), IN OUR OPINION, THE POCKETING OF CASH BY THE ASSESSEE FOR NON-BUSINESS ACTIVITIES IN EFFECT, IS APPROVED BY THE CIT(A). THE SAME IS NOT APPROVED BY US. ALTERNA TIVELY, THE CONFUSIONS ARE DIFFERED, IF THE ASSESSEE DEMONSTRATES THAT THE SAID CASH, INSTEAD OF POCKETING, IF IS EXPENDED IN THE PURCHASES FROM THE GRAY MARKET WITHOUT BILLS. BUT THIS IS THE CASE, THE ASSESSEE SURRENDER ED/OFFERED BEFORE THE SURVEY TEAM AND ALSO BEFORE THE AO AND THERE IS NOT CHANGE IN THAT STAND OF THE ASSESSEE TILL NOW. IT MEANS THAT THE A SSESSEE DEEMED THESE SUCH PURCHASES AS ACCOMMODATION ENTRIES-CENTRIC PUR CHASES IMPLYING THE POCKETING OF CASH PURCHASES. ASSESSEE IS TAKEN THE STAND IN FAVOUR OF CWIP ACCOUNT AT THE TIME OF ALLOCATING EXPENSES AT THE END OF COMPLETION 12 ITA NOS. 503 T O 505 & 965 TO 967/M/2015 OF PROJECT. THERE IS NO CLARITY, IF THE SAID ADJUSTM ENT IS DONE IN THE YEARS UNDER CONSIDERATION. IF THE PURCHASES UNDER CONSIDE RATION IS BOGUS AND GENERATED OUT OF ACCOMMODATION ENTRIES FOR PURPOSE OF REDUCING THE PROFITS, IN REAL SENSE, THERE IS FLOW OF FUNDS INTO THE SAID PURCHASE, THE CASH IS GENERATED. TO THAT EXTENT, PROFITS OF THE A SSESSEE IS TAKEN OUT OF THE SYSTEM. BUT THE POINT IS THAT THE CIT(A) FAILED TO PASS PROPER/SPEAKING ORDER CONSIDERING ALL THE ABOVE ANG LES RELATING TO THE ACCOMMODATION ENTRIES AS PER THE PROVISION OF SECTI ON 250(6) OF THE ACT. WE CANNOT APPROVE THE RELIEF GRANTED BY HIM AND THE MANNER MENTIONED IN PARA 8.1 OF THE ORDER OF THE CIT(A). REVENUE HAS TO DECIDE AND DELIBERATE ON THE FACTS RELATING TO THE IMPUGNED PU RCHASED, IF THEY CONSTITUTES A CASE OF BOGUS OR GENUINE OR ACCOMMODA TION ENTRIES OR POCKETING OF CASH BY THE PERSONS OF VESTED INTEREST S. IN OUR VIEW, WE NEED TO REMAND THIS ISSUE TO THE FI LE OF THE CIT(A) FOR FRESH ADJUDICATION AFTER CONSIDERING THE ISSUES/ ASPECTS DISCUSSED ABOVE. CIT(A) SHALL GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE REMAND PROCEEDINGS. ACCORDINGLY, TH E RELEVANT GROUNDS OF THE REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 14. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE A LLOWED FOR STATISTICAL PURPOSE. 13 ITA NOS. 503 T O 505 & 965 TO 967/M/2015 15. WE SHALL NOW TAKE UP THE ASSESSEES APPEAL THAT REV OLVES AROUND CONFIRMING OF ADDITION U/S 69C OF THE ACT ON ACCOUN T OF COMMISSION @ 2% PAID TO THE SUPPLIERS OF THE ACCOMMODATION ENTRI ES/BOGUS BILLS. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE UNVERIFIABLE BOGUS PURCHASES WERE ALREADY OFFERED DURING THE SUR VEY ACTION U/S. 133A OF THE ACT AND IT IS THE STAND OF THE ASSESSEE THAT THE CWIP WILL BE ADJUSTED AT THE TIME OF ALLOCATION AT THE END OF COM PLETION OF THE PROJECT. FURTHER, WITHOUT PREJUDICE TO THE ABOVE, IT IS THE S TAND OF THE ASSESSEE THAT THE SAID PURCHASES ARE GENUINE AND THEREFORE, THE PAYMENT OF COMMISSION @ 2% OF THE PURCHASE VALUE TO THE SUPPLI ERS OF THE BOGUS PURCHASE BILLS, DOES NOT ARISE. IT IS THE SUBMISSIO N OF THE ASSESSEE THAT THE SAID COMMISSION WAS NEVER INCURRED/PAID BY THE ASSESSEE AND THE REVENUE DOES NOT HAVE ANY INCRIMINATING MATERIAL TO SUBSTANTIATE THE SAID ALLEGATION THAT THE SOURCES FOR THE COMMISSION PAYMENT WAS NOT EXPLAINED. LD. COUNSEL IS ALSO OF THE VIEW THAT THE PROVISIONS OF SECTION 69C OF THE ACT ARE WRONGLY INVOKED SINCE THE TRANSA CTIONS OF PAYMENT OF COMMISSION NEVER HAD ANY ENTRY IN THE BOOKS OF ACCO UNTS OF THE ASSESSEE AND IT IS THE CREATION OF THE AO BASED ON SURMISES. CRITICIZING THE CONCLUSIONS OF THE CIT(A) DRAWN IN PARA 11 AND 11.1 OF THE ORDER OF THE CIT(A). LD. AR FOR THE ASSESSEE SUBMITTED THAT ORDE R OF CIT(A) IS DEFICIENT ON THE FACTS REGARDING THE RELEVANT ENTRIES IN THE BOOKS OF 14 ITA NOS. 503 T O 505 & 965 TO 967/M/2015 ACCOUNTS. THE CIT(A) DID NOT UNDERSTAND THE PROVISI ONS OF SECTION 69C OF THE ACT PROPERLY AND IGNORED THE FOLLOWING EXPRESSI ON, ASSESSE HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLANATI ON ABOUT THE SOURCES OF SUCH EXPENDITURE ARE PART THEREOF .. THERE IS A NEED FOR EXISTENCE OF TRANSACTION RELATING TO INCURRING OF ANY EXPENDITUR E WHICH IS NOT THERE IN THE INSTANT CASE. AO HAS NO EVIDENCE OF ANY KIND TO SUGGEST SUCH EXPENDITURE WAS EVER INCURRED AT ANY POINT OF TIME. 16. PER CONTRA, LD. DR FOR THE REVENUE EXPLAINED THAT T HE EVENTS RELATING TO PURCHASE OF BOGUS BILLS BY WAY OF ACCOM MODATION ENTRIES AND MENTIONED THAT THE BUSINESSMEN OF SUCH BUSINESS DO CHARGES AN AMOUNT BY WAY OF COMMISSION. IT IS THE SOURCE OF INCOME FO R SUCH BUSINESS PERSONS. SO LONG AS THE BOGUS PURCHASES BY WAY OF A CCOMMODATION ENTRIES IS THE FACT IN THIS CASE, THE SUPPLIER OF T HE SUCH BILLS EARN IN CASE, THE ABSENCE OF EVIDENCE DOES NOT RULE OUT THE FACT OF PAYMENT OF COMMISSION. APPLYING A WRONG SECTION 69C IN ANOTHER ISSUE, WHICH IS NOT RAISED BEFORE US. INFACT, AS PER THE DR FOR REVENUE , THE ONUS IS ON THE ASSESSEE TO DEMONSTRATE THAT SUCH COMMISSION PAYMEN T WAS NEVER MADE TO THE SUPPLIERS OF SUCH BOGUS BILLS. FURTHER, LD. DR MENTIONED THAT IT IS THE PRINCIPLE OF PROBABILITY THAT THE PAYMENT OF CO MMISSION BY THE ASSESSEE WAS REAL AND THEREFORE, ORDER OF THE CIT(A ) ON THIS ISSUE IS FAIR AND REASONABLE AND THE SAME IS REQUIRED TO BE CONFI RMED. 15 ITA NOS. 503 T O 505 & 965 TO 967/M/2015 17. WE HEARD BOTH THE PARTIES, ON HEARING BOTH THE PART IES ON THIS ISSUE OF COMMISSION PAYMENT @ 2%, WE FIND THAT THER E IS NEED FOR FINDING OF FACT ON IF THE PURCHASE BILLS/INVOICES A RE BOGUS PURCHASES OR NOT. IT IS THE CASE OF THE ASSESSEE THAT THEY ARE G ENUINE PURCHASES AND WITHOUT PREJUDICE, HE OFFERED THE SAME AS UNVERIFIAB LE PURCHASES IN ORDER TO AVOID THE PROTRACTED LITIGATION. IF THEY CONSTIT UTE GENUINE PURCHASES, AS ARGUED BY THE ASSESSEES COUNSEL, THERE IS NO NEED FOR PURCHASE OF ACCOMMODATION ENTRIES AGAINST COMMISSION PAYMENT. T HERE IS NEED FOR EXPLORING THE FACTS FROM THE MARKET, IF THE PAYMENT OF CASH FOR COMMISSION PAYMENT IS INVOLVED OVER AND ABOVE THE A MOUNT GIVEN IN THE BOGUS INVOICES. ALTERNATIVELY, I.E. IF THEY ARE BOG US PURCHASES, ASSESSEE IS UNDER COMMERCIAL NEED TO MAKE PAYMENT FOR PURCHASE OF THE SAID BOGUS BILLS FROM THE SUPPLIERS AND AGAINST THE PAYMENT OF COMMISSION. WITHOUT PREJUDICE; IT IS CASE OF THE LD. AR THAT THE SAID A MOUNT APPEARING ON THE BOGUS BILL CONSTITUTES ENTIRE AMOUNT INCLUDING THE COMMISSION PAYMENT. THEREFORE, WE ARE OF THE VIEW THAT THE AO NEEDS TO BRING ON RECORD THE FACTS GATHERED BY THE SURVEY TEAM ON THIS ISSUE AND RECORD THE QUESTIONS/ANSWERS IF ANY EXPLAINING THE ISSUE OF CO MMISSION PAYMENT MADE TO THE SUPPLIERS. AO SHALL NOTE THAT UNLESS RELEVANT FACTS ARE BROUGH T ON THE RECORDS AFTER GARNERING THE STATEMENTS OF THE PERSONS CITED ABOVE, MATERIALS 16 ITA NOS. 503 T O 505 & 965 TO 967/M/2015 GATHERED IN SURVEY ACTION TO SUGGEST THAT ASSESSEE INCURRED ANY EXPENDITURE, AS SPECIFIED IN THE PROVISION OF SECTI ON 69C VALIDLY INVOKED BY THE AO, AO IS NOT JUSTIFIED IN INVOKING THESE PRO VISIONS, THEREFORE, AO SHOULD ALSO DEAL WITH THE ARGUMENT THAT THE AMOUNT MENTIONED IN BOGUS PURCHASES/INVOICE INCLUDES THE COMMISSION PAYMENT T OO. WITH THE ABOVE, WE REMAND ALL THE APPEALS OF THE AS SESSEE TO THE FILE OF THE AO. AO SHALL RE-ADJUDICATE AFTER GRANTIN G REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 18. IN THE RESULT, ALL THE THREE APPEALS OF THE ASSESSE E ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF AUGUST, 2016. SD/- (D.KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI, DATED: 25.08.2016 SHARWAN P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR SMC BENCH BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.