MALAGA INFRA TECH P.LTD, MUMBAI V. ITO 8(2)(3), MUMBAI

ITA 7329/MUM/2014

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6265 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 09-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Income from undisclosed sources; TDS
• Section: 143(3); 143(1)

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE HONBLE SH. SHAMIM YAHYA, AM & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 7329 /MUM/201 4 ( / ASSESSMENT YEAR: 2010 - 11 ) M/S MALAGA INFRA TECH PVT. LTD. 301, T. V. INDUSTRIAL ESTATE, AHIRE ROAD, BEHIND GLAXO WORLI, MUMBAI - 400 030 / VS. ITO - 8(2)(3 ), AAYAKAR BHAVAN, 2 ND FLOOR, R. NO. 213, M. K. ROAD, MUMBAI - 400 020 ./ ./ PAN NO. AA ECM4595P ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI VIPUL JOSHI , AR / RESPONDENTBY : SHRI RAJAT MITTAL , DR / DATE OF HEARING : 26 .11 .2018 / DATE OF PRONOUNCEMENT : 22.01.2019 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 17, MUMBAI DATED 15.10.14 F OR AY 20 10 - 11. 2 I.T.A. NO. 7329 /MUM/201 4 M/S MALAGA INFRA TECH PVT. LTD. 2 . THE B RIEF FACTS OF THE CASE AS SET UP BY THE ASSESSEE IS THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF CIVIL CONTRACTOR. T HE RETURN OF INCOME FOR THE YEAR UN D ER CONSIDERATION WAS FILED ON 15.10.10 DECLARING TOTAL LOSS OF RS. 37,584 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING ST ATUTORY NOTICES AND SEEKING REPLY OF THE ASSESSEE, ASSESSMENT ORDER U/S 143(3) WAS PASSED ON 28.03.13 THEREBY MAKING ADDITIONS OF RS. 1,03,00,000/ - ON ACCOUNT OF INCOME FROM UNDISCLOSED SOURCES AND OTHERS. 3. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERR ED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, DISMISSED THE APPEAL OF THE ASSESSEE. 4. NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. 5 . THE SOLITARY GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 1,03,00,000/ - MADE BY AO. 3 I.T.A. NO. 7329 /MUM/201 4 M/S MALAGA INFRA TECH PVT. LTD. 6 . WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASS ED BY REVENUE AUTHORITIES. LD. AR APPEARING ON BEHALF OF THE ASSESSEE REITERATED THE SAME ARGUMENTS AS WERE RAISED BY HIM BEFORE LD. CIT(A), WHICH IS CONTAINED IN PARA NO. 1.2 OF THE ORDER OF LD. CIT(A). ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS PA SSED BY THE REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE ASSESSEE IN PARA NO. 1.1 TO 1.3 OF ITS ORDER. THE OPERATIVE PORTION IS CON TAINED IN CONTAINED IN PARA NO. 1.3 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 1.3 DECISION 1.3.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND CONTENTION OF THE LD. AR OF THE APPELLANT AND ALSO CAREFULLY GONE THROUGH THE FACTS AND EXPLANATION GIVEN BY THE LD. AR OF THE APPELLANT AS WELL AS THE LD. AO. A SHAM' TRANSACTION IS A TRANSACTION THAT IS UNLAWFUL OR ILLUSORY. ILLUSORY TRANSACTIONS THAT EXIST ON PAPER BUT HAVE NO TANGIBLE CONSEQUENCES MAY BE VOIDED IN COURT, 4 I.T.A. NO. 7329 /MUM/201 4 M/S MALAGA INFRA TECH PVT. LTD. ESPECIALLY IF USED AS A TAX SHELTER OR OTHER DECEPTIVE DEVICE. I FIND CONSIDERABLE FORCE IN THE ARGUMENTS OF THE LD.AO THAT THE SAI D TRANSACTION IS A SHAM TRANSACTION. IT HAS BEEN ABUNDANTLY MADE CLEAR ON THE BASIS OF EXISTING EVIDENCES THAT THE APPELLANT HAS NO MEANS TO CARRY OUT THE CONTRACTUAL WORK AS WAS AWARDED TO IT BY M/S GREEN PLANET ENERGY. THE WORK IN QUESTION ALSO APPEARS T O BE ONE WHICH IS LABOUR INTENSIVE THAT IS LEVELLING OF LAND AT MOGA, PUNJAB, THE APPELLANT BEING SITUATED IN MUMBAI COULD NOT HAVE CARRIED OUT THIS WORK FOR IT HAS NO ACCESS TO THE LOCAL LABOUR WHICH IS REQUIRED TO EXECUTE THE WORK. THEREFORE, THE APPELLA NT IN ORDER TO MAKE THE TRANSACTION APPEARS GENUINE SUB CONTACTED THE WORK TO M/S A.S. ENTERPRISES. THE ENTIRE TRANSACTION AS A WHOLE CAN BE SEEN AS AWARDING OF A CONTRACT BY M/S GREEN PLANET ENERGY TO THE APPELLANT AND APPELLANT IN TURN SUB CONTACT THE W ORK TO A.S ENTERPRISES. APPARENTLY THE FLOW OF MONEY AS IS APPARENT FROM RECORD IS FROM M/S GREEN PLANET ENERGY TO M/S A. S. ENTERPRISES AND THE APPELLANT COMPANY IS MERELY ACTED AS A CONDUIT TO TRANSFER THE MONEY RECEIVED BY M/S GREEN PLANET ENERGY TO A. S. ENTERPRISES. 1.3.2 THE WORK CLAIMED TO HAVE ASSIGNED TO THE APPELLANT IS 'LAND DEVELOPMENT', BUT THE AS IS EVIDENT IT HAS PRACTICALLY NO SET - UP & SKILL AVAILABLE WITH IT TO 5 I.T.A. NO. 7329 /MUM/201 4 M/S MALAGA INFRA TECH PVT. LTD. CARRY OUT SUCH WORK EVEN THOUGH IT MAY BE STATED TO BE LABOUR I NTENSIVE ONLY BUT ONE SHOULD HAVE THE ABILITY TO ARRANGE THE LABOUR ALSO. IT IS ALSO A MATTER OF RECORD THAT APPELLANT HAS NOT FURNISHED ANY EVIDENCE TO ESTABLISH THAT THE CO NTRACT HAS BEEN AWARDED TO IT BY M/S. A. S. GREEN PLANET ENERGY AN D THE SAME HAS AGAIN BEEN GIVEN ON SUB - CONTRACT TO M/S. A. S. ENTERPRISES. EVEN WITH REGARD TO EXPENSES CLAIMED TO HAVE INCURRED, THE ASSESSEE HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE SAME. MERE PAYMENT BY ACCOUNT PAYEE CHEQUE & BANKIN G CHANNELS CANNOT MAKE SHAM TRANSACTION AS GENUINE ONE, AS THESE COULD NOT CONCLUSIVELY PROVE THE GENUINENESS OF THE TRANSACTION. SIMILARLY, DEDUCTION OF TDS ALSO DOES NOT BY ITSELF MAKE A TRANSACTION A GENUINE ONE. THE APPELLANT HAS MISERABLE FAILED TO PROVE WITH EVIDENCE AND SATISFY THE ASSESSING OFFICER THAT EXPENSES WERE ACTUALLY INCURRED, SINCE DEDUCTION ON ACCOUNT OF SUCH EXPENDITURE WAS BEING CLAIMED BY IT. THUS THE ENTIRE TRANSACTION APPEARS TO BE A 'FINANCIAL ARRANGEMENT' WHEREIN M/S. GREEN PLANET ENERGY TRANSFERRED THE MONEY TO THE APPELLANT AND APPELLANT TO A PAPER CONCERN CALLED M/S. A.S. ENTERPRISES WITH A VIEW TO AVAIL UNDUE BENEFITS OF DEDUCTION ON ACCOUNT OF 'EXPENSES'. I AM IN AGREEMENT WITH TH E FINDINGS OF THE LD. AO THAT IT IS A COLOURABLE DEVICE AND MONEY SO RECEIVED SHALL BE TAXED IN THE 6 I.T.A. NO. 7329 /MUM/201 4 M/S MALAGA INFRA TECH PVT. LTD. HAND OF THE APPELLANT AS SUCH AS IT FAILED TO SUBSTANTIATE THE INCURRING OF THE EXPENSES. THE ADDITION MADE BY THE LD. AO ACCORDINGLY CONFIRMED AND APPEA L O N THIS GROUND IS DISMISSED. 7. AFTER HAVING HEARD THE COUNSELS AT LENGTH AND ALSO HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE, WE FIND THAT AS PER THE FACTS OF THE PRESENT CASE , ASSESSEE HAD CREDITED A SUM OF RS. 1,03,00,000/ - ON ACCOUNT OF CONTRACTUAL INCOME AND CLAIMED EXPENDITURE TO THE TUNE OF RS. 1,03,37,583/ - THEREBY DECLARING LOSS OF RS. 37,583/ - . IN ORDER TO PROVE THE GENUINENESS OF INCOME AND EXPENSES, THE ASSESSEE HAD NOT BROUGHT ON RECORD DOCUMENTS IN THE SHAPE OF AGREEMENTS, CON TEMPORARY CORRESPONDENCES MADE BY IT EITHER WITH THE PARTY FROM WHOM THE CONTRACT WAS OBTAINED OR WITH SUB - CONTRACT OR TO WHOM THE CONTRACT WAS GIVEN. FROM THE RECORDS, WE ALSO NOTICED THAT EVEN DURING THE PRECEDING ASSESSMENT I.E. AY 2009 - 10, THERE WAS NO INCOME FROM CIVIL CONTRACT BUSINESS AND THE RECEIPT SHOWN TO HAVE EARNED WAS ON ACCOUNT OF PROFIT ON SALE OF FL AT SHOWN UNDER HEAD CAPITAL GAIN WHICH GOES TO SHOW THAT PREVIOUSLY THE ASSESSEE HAD NO EXPERIENCE OF CONTRACTOR, THEREFORE AO HAD RIGHTLY CO NCLUDED THAT 7 I.T.A. NO. 7329 /MUM/201 4 M/S MALAGA INFRA TECH PVT. LTD. NO PRUDENT BUSINESSMAN WOULD GIVE HIS WORK ON CONTRACT TO AN INEXPERIENCE CONTRACTOR . EVEN OTHER FACTORS WHICH ARE NORMALLY REQUIRED FOR BEING A CONTRACTOR I.E. WORK EXPERIENCES, FINANCIALS OF THE CONTRACTOR, ETC WAS MISSING. NO WRITTEN CONT RACT WAS PLACED ON RECORD, WHICH ON THE FACE OF IT LOOKS OBVIOUS ESPECIALLY WHEN A CONTRACT WORTH RS. 1 CRORE IS BEING AWARDED. NO RECORDS WITH REGARD TO THE PROGRESS OF THE WORK, MONITORING OF DAY TO DAY PROGRESS ETC, WERE ALSO NOT FILED. NO DOCUMENT FOR AWARDING THE SUB - CONTRACT WAS FURNISHED, ALTHOUGH THE ASSESSEE HAD SET UP THE FACTS IN SUCH A WAY TO PROVE THAT CONTRACT OBTAINED BY THE ASSESSEE WAS AWARDED TO SUB - CONTRACTOR M/S GREEN PLANET ENERGY AND THE SAME WAS AGAIN BEEN GIVEN TO M/S A. S. ENTERPRIS ES ON SUB - CONTRACT WITHOUT SPECIFIC DETAILS. THE ASSESSEE HAD ALSO NOT FURNISHED DOCUMENTS IN SUPPORT OF EXPENSES CLAIMED TO HAVE INCURRED. IN SUCH CIRCUMSTANCES, WE ARE ALSO OF THE VIEW THAT MAKING PAYMENT THROUGH CHEQUE OR DEDUCTING TDS DO NOT ITSELF TAK E A TRANSACTION GENUINE ONE, MORE PARTICULARLY, WHEN ASSESSEE FAILS TO DISCHARGE ITS ONUS. 8. FROM THE PERUSAL OF DOCUMENTS AS WELL AS SHORT NOTES FURNISHED BY ASSESSEE, WE ALSO FOUND THAT THERE WAS PURELY A 8 I.T.A. NO. 7329 /MUM/201 4 M/S MALAGA INFRA TECH PVT. LTD. FINANCIAL ARRANGEMENT AMONG THE ASSESSEE, M/S G REEN PLANET ENERGY & M/S A. S. ENTERPRISES WITH A VIEW TO AVAIL UNDUE BENEF IT OF DEDUCTION ON ACCOUNT OF EXPENSES IN THE HANDS OF ASSESSEE AS WELL AS THAT OF SUB - CONTRACTOR. IT IS A SETTLED LAW THAT ONE MUST SEE NOT THE FORM, WHICH IT GAVE TO THE TRANSAC TION, BUT THE SUBSTANCE OF THE MATTER. 9. AFTER HAVING GONE THROUGH THE JUDGMENTS IN THE CASE OF MCDOWELL & CDO. LTD. V. CTO (1985) 22 TAXMANN ITR 148 (SC), TWINSTAR HOLDING LTD. VRS. ANAND KEDIA, DY.CIT 260 ITR 6 , SUPREME COURTS DECISION IN THE CASE OF K ARANPURA DEVELOPMENT CO. LTD VRS. CIT 44 ITR 362 , ITAT DELHI IN THE CASE OF HERSH VRS. CHADHA L/H OF LATE W. N. CHADHA VRS. DDIT (INT. TAX) 135 TTJ 513 AND CIT VRS. DURGA PRASAD MORE 82 ITD 54 , WE ARE ALSO OF THE VIEW THAT COURTS ARE NOW CONCERNED, NOT MER ELY WITH THE GENUINENESS OF A TRANSACTION , BUT WITH THE INTEND ED EFFECT OF THE TRANSACTION ON FISCAL PURPOSE. THE TAXING AUTHORITIES SHOU LD NOT IGNORE THE FACTS OF LIFE AND PUT ON BLINKERS AND SWALLOW THE STORY GIVEN BY THE ASSESSEE WITHOUT APPLYING TEST S OF HUMAN PROBABILITIES TO FIND OUT THE INCOME IN A PARTICULAR CASE. ALTHOUGH ASSESSEE HAD CLAIMED THAT HE GOT 9 I.T.A. NO. 7329 /MUM/201 4 M/S MALAGA INFRA TECH PVT. LTD. CONTRACT FROM M/S GREEN PLANET ENERGY FOR LEVELING OF LAND AT PUNJAB WHICH WAS FURTHER GIVEN ON SUB - CONTRACT TO M/S A. S. ENTERPRISES IN THE A BSENCE OF REQUIRED DOCUMENTS, THE REVENUE AUTHORITIES CORRECTLY HELD THAT A PPARENTLY THE FLOW OF MONEY AS IS APPARENT FROM RECORD IS FROM M/S GREEN PLANET ENERGY TO M/S A. S. ENTERPRISES AND THE ASSESSEE COMPANY IS MERELY ACTED AS A CONDUIT TO TRANSFER TH E MONEY RECEIVED BY M/S GREEN PLANET ENERGY TO A. S. ENTERPRISES. THE WORK CLAIMED TO HAVE ASSIGNED TO THE ASSESSEE IS 'LAND DEVELOPMENT', BUT THE AS IS EVIDENT IT HAS PRACTICALLY NO SET - UP & SKILL AVAILABLE WITH IT TO CARRY OUT SUCH WORK EVEN THOUGH IT MAY BE STATED TO BE LABOUR INTENSIVE ONLY BUT ONE SHOULD HAVE THE ABILITY TO ARRANGE THE LABOUR ALSO. IT IS ALSO A M ATTER OF RECORD THAT ASSESSEE HAS NOT FURNISHED ANY EVIDENCE TO ESTABLISH THAT THE CONTRACT HAS BEEN AWARDED TO IT BY M/S. A. S. GREEN PLANET ENERGY AND THE SAME HAS AGAIN BEEN GIVEN ON SUB - CONTRACT TO M/S. A. S. ENTERPRISES. EVEN WITH REGARD TO EXPENSES CLAIMED TO HAVE INCURRED, THE ASSESSEE HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE SAME. MER E PAYMENT BY ACCOUNT PAYEE CHEQUE & BANKING CHANNELS CANNOT MAKE SHAM TRANSACTION AS 10 I.T.A. NO. 7329 /MUM/201 4 M/S MALAGA INFRA TECH PVT. LTD. GENUINE ONE, AS THESE COULD NOT CONCLUSIVELY PROVE THE GENUINENESS OF THE TRANSACTION. SIMILARLY, DEDUCTION OF TDS ALSO DOES NOT BY ITSELF MAKE A TRANSACTION A GE NUINE ONE. THE ASSESSEE HAS MISERABLE FAILED TO PROVE WITH EVIDENCE AND SATISFY THE ASSESSING OFFICER THAT EXPENSES WERE ACTUALLY INCURRED , SINCE DEDUCTION ON ACCOUNT OF SUCH EXPENDITURE WAS BEING CLAIMED BY IT. THUS THE ENTIR E TRANSACTION APPEARS TO BE A 'FINANCIAL ARRANGEMENT' WHEREIN M/S. GREEN PLANET ENERGY T RANSFERRED THE MONEY TO THE ASSESSEE AND FROM ASSESSEE TO A PAPER CONCERN CALLED M/S. A.S. ENTERPRISES WITH A VIEW TO AVAIL UNDUE BENEFITS OF DEDUCTION ON ACCOUNT OF 'EXPENSES' . WE ARE ALSO OF THE VIEW THAT IT WAS A COLOURABLE DEVICE AND THE MONEY SO RECEIVED HAS TO BE TA XED IN THE HAND OF THE ASSESSE AS IT FAILED TO SUBSTANTIATE THE INCURRING OF THE EXPENSES. 10. MOREOVER, N O NEW FACTS O R CONTRARY JUDGMENTS HAVE B EEN BROUGHT ON RECORD I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS SO RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE 11 I.T.A. NO. 7329 /MUM/201 4 M/S MALAGA INFRA TECH PVT. LTD. FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WELL REASONED. RESULTANTLY, THIS GROUND RAISED BY THE ASSESSEE STANDS DIS MISSED . 11 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JAN, 2019 . SD/ - SD/ - ( SHAMIM YAHYA ) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED : 22 . 01 .201 9 SR.PS. DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI