V.M.Matere Infrastructures (India) Pvt Ltd, Pune V. Assistant Commissioner of Income Tax, Circle-10, Pune, Pune

ITA 877/PUN/2022

AI Insights

The case involves V M Matere Infrastructures (India) Private Limited, which faced multiple appeals concerning the disallowance of sub-contract payment expenses for several assessment years. The primary legal issues revolved around the validity of the reopening of assessments and the genuineness of sub-contractual expenses claimed by the assessee. The Assessing Officer initially disallowed these expenses, which was partly affirmed by the CIT(A). Both parties presented their arguments, with the assessee challenging the reopening and the disallowance, while the Revenue supported the Assessing Officer's initial disallowance. The Tribunal's decision focused on the procedural and substantive validity of the reassessment and the evidence (or lack thereof) supporting the disallowance of the claimed expenses.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137408 (ITAT-PUNE)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 21-05-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 05-12-2022
• Other Referred Cases: GKN Driveshafts vs CIT 259 ITR 19 SC, N.K. Proteins Ltd. in SLP 769/-2017 dated 16/01/2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 147; 148; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B” : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA.Nos.877, 878, 879, 880, 881, 882 & 883 /PUN./2022 Assessment Years 2011-12, 2012-13, 2013-14, 2014-15, 2015-16, 2016-17& 2017-2018 V M Matere Infrastructures (India) Private Limited, Gat No.62, Matere House, Sector No.24, Pradhikaran, Moshi, Pune-412 105 Maharashtra. PAN AACCV5969N vs. The ACIT, Central Circle- 2(4), AyakarSadan, Bodhi Towers, Salisbury Park, Gultekadi, Pune – 411037 Maharashtra. (Appellant) (Respondent) ITA.Nos.913, 912, 911& 910/PUN./2022 Assessment Years 2011-12, 2012-13, 2013-14& 2014-2015 The ACIT, Central Circle-2(4), AyakarSadan, Bodhi Towers, Salisbury Park, Gultekadi, Pune-411037 Maharashtra. vs. V M Matere Infrastructures (India) Private Limited, Gat No.62, Matere House, Sector No.24, Pradhikaran, Moshi,Pune-412 105 Maharashtra. PAN AACCV5969N (Appellant) (Respondent) For Assessee : Shri Nikhil S Pathak For Revenue : Shri M.G. Jasnani Date of Hearing : 22.05.2023 Date of Pronouncement : 29.05.2023 2 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. ORDER PER SATBEER SINGH GODARA, J.M. The instant batch of eleven appeals pertains to a single assessee viz., V M Matere Infrastructures (India) Private Limited. All these eleven appeals i.e., four cross-appeals each filed by assessee and Revenue’s behest in ITA.Nos.877, 878, 879 & 880/PUN./2022 and ITA.Nos.913, 912, 911 & 910/PUN./2022 for Assessment Years 2011-12, 2012-13, 2013-14 & 2014-20, respectively for former as many assessment years as well as the taxpayer’s latter three appeals ITA.Nos.881, 882 & 883 /PUN./2022 for assessment years 2015-16, 2016-17 & 2017-2018, arise against the CIT(A)-12, Pune's common order dated 30.09.2022 in case No.PN/CIT(A)- 12/10479/2018-19 & 10533, 10534, 10850, 10851, 10855 & 10852/2019-20, assessment year-wise, respectively, in proceedings u/s.143(3) r.w.s. 147/143(3) of the Income Tax Act, 1961 (in short "the Act"). Heard both the parties at length. Case files perused. 2. It emerges during the course of hearing that the assessee’s seven appeals ITA.Nos.877 to 883/PUN./2022 plead its twin substantive grounds challenging validity of reopening followed by disallowance of sub-contract payment expenses amounting to Rs.4,88,33,000/-; Rs.3,41,59,000/-; 3 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. Rs.4,19,02,000/-; Rs.2,48,58,000/-; Rs.1,78,48,000/-; Rs.60,42,000/- and Rs.1,23,66,000/-; assessment year-wise, respectively, which have been partly affirmed in the CIT(A)'s common order. The Revenue’s cross-appeals ITA.Nos.877, 878, 879, 880, 881, 882 & 883 /PUN./2022 (supra) on the other hand seek to revive the Assessing Officer’s addition disallowing the assessee’s sub-contract expenses in entirety. 3. The assessee’s appeal in the “lead” assessment year 2011-12 ITA.No.877/PUN./2022 pleads the following substantive grounds : “The following grounds are taken without prejudice to each other - On facts and in law, 1. The ld. CIT(A) erred in holding that the reasst. order passed u/s. 147 was valid in law without appreciating that the original assessment was completed u/s. 143(3) and since there was no failure on the part of the appellant company to disclose fully and truly the material facts in the course of original assessment and even in the reasons recorded there was no allegation of failure on part of the appellant company to disclose fully and truly all the material facts in the course of original assessment, the reopening was not justified at all and the reassessment order passed u/s. 147 be declared null and void. 4 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 2. The Ld. CIT(A) failed to appreciate that – a. The notice issued u/s 148 was bad in law since the all aspects of sub-contracting expenses including the 9 sub-contractors were already submitted and are on record at the time of original assessment u/sl43(3) of the Act and therefore the re-assessment order u/s 147 be declared null and void. b. The re-opening u/s 148 is based on reason to suspect and not reason to believe and accordingly the same was invalid in law. c. The notice u/s. 148 was issued on borrowed satisfaction and no independent satisfaction was arrived at by the ld. A.O before issue of the said notice and hence, the notice issued u/s. 148 was invalid. 3. The learned CIT(A) failed to appreciate that the learned AO has not specifically addressed any of the objections to the re-opening raised by the appellant company, in the Order disposing the objections of the appellant company and erred in holding that the AO has duly complied with the procedure prescribed in the Hon. SC judgement of GKN Driveshafts vs CIT 259 ITR 19 SC. 5 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 4. The learned CIT (A) erred confirming the disallowance of sub-contractor expenses to the tune of Rs.55,42,995/- without appreciating that the entire expenses incurred by the assessee were genuine and hence, there was no reason to make any disallowance on account of sub- contractor expenses. 5. The ld. CIT(A) erred in confirming the disallowance of sub-contractor expenses amounting to Rs.55,42,995/- even though he himself agreed that the various reasons given by the Id. A.O. for making the disallowance were not correct and accordingly, there was no reason to confirm any disallowance on account of sub-contractor expenses. 6. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.” 4. Learned DR invited our attention to Revenue’s cross-appeal ITA.No.913/PUN./2022 for the very “lead” assessment year seeking to reverse the CIT(A)'s action under challenge as follows : 1. “On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.4,32,90,005/- made on account of bogus sub-contract expenses booked in the name of 11 sub-contractors. 6 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.4,32,90,005/- made on account of bogus sub-contract expenses even after accepting that no details and evidences of further payments by the so-called sub-contractors out of cash withdrawn from amounts transferred by the assessee in their bank accounts for execution of sub-contracts, were submitted during the assessment as well as appellate proceedings. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the findings of inflation of expenses & debit of bogus purchase by the assessee in earlier survey actions, has erred in applying project wise Gross Profit ratio of 14% for deleting disallowance of bogus sub-contract expenses of Rs.4,32,90,005/- even though the assessee has not been able to establish genuineness of sub-contract work executed by the sub-contractors. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to consider the decision of the Hon’ble Apex Court in the case of N.K. Proteins Ltd. in SLP 769/-2017 dated 16/01/2017 wherein it has been clearly held that once the expenses are bogus addition should be made of the entire expenses and not only the profit embedded in such expenses. 5. The appellant craves leave to add, amend or alter any ground/grounds, if necessary, as per the requirements of the case.” 7 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 5. Both the learned representatives took us to the CIT(A)'s elaborate discussion partly affirming the Assessing Officer’s action disallowing the assessee’s sub-contract expenses as under : 8 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 9 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 10 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 11 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 12 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 13 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 14 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 15 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 16 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 17 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 18 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 19 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 20 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 21 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 22 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 23 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 24 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 25 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 6. It is in this backdrop of facts that both parties have raise their respective pleadings wherein the assessee’s twin substantive grounds (supra) challenge validity of the reopening as well as the impugned sub-contract expenditure disallowance and the Revenue seeks to revive the Assessing Officer’s action disallowing the entire sub-contractual expenses. Mr. Pathak stated at the outset during the course of 26 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. arguments that the assessee does not wish to press for it’s former legal ground. Rejected accordingly. 7. This leaves us with the sole surviving issue of disallowance of sub-contract expenses. Mr. Pathak has placed on record the assessee’s detailed submissions as under : 27 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 28 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 29 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 30 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 31 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 32 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 8. Mr. Jasnani on the other hand has highlighted the Assessing Officer’s detailed reasoning inter alia observing that the assessee had failed to prove genuineness of its impugned sub-contractual expenses during the course of survey and thereafter in assessment proceedings. And that all these eleven recipient parties had turned-out to be the assessee’s employees only wherein they had been awarded sub-contract works in civil construction without following any due procedure. The Revenue’s further case is that not only their bank accounts had witnessed cash withdrawals immediately after cash payments but also some of these eleven parties had not been found to have even declared the corresponding income derived in their respective returns. Mr. Jasnani has taken pains to file a detailed compilation of the entire records in the instant cases during the course of survey as well as all these seven assessments. He took us to the survey statement of assessee’s Managing Director Mr. Vishnu Madhav Matere dated 05.03.2016 failing to prove the genuineness of the impugned sub-contractual expenditure claims. 33 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 9. We have given our thoughtful consideration to the foregoing vehement rival stands. We first of all observe that sec.292C of the Act envisages that any material found or seized during the course of search or a survey, as the case may be, carries presumption of correctness qua contents thereof. This is also followed by CBDT’s landmark circulars dated 10.03.2003, reiterated on 15.12.2014 that the departmental authority’s ought to collect actual evidence than admissions or confessions made by the concerned parties. The Board has clarified in very much unambiguous terms therein that any such admissions or confessions made by the parties concerned during a search or a survey hardly carries any significance in absence of the evidence collected by the departmental authorities. We keep in mind all these settled propositions and proceed to examine the combined records of all these eleven cases. We make it clear that the Assessing Officer’s identical detailed reasoning had seriously doubted these eleven parties as non-genuine sub-contractors as they turned out to be assessee’s former employees without any expertise or background in execution of such infrastructure projects and related activities. And also that their corresponding accounts had undergone immediate cash withdrawals after the assessee had made the impugned payments. All these reasonings stand already reversed in 34 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. CIT(A)'s detailed findings [paras 5.13 to 5.27 to be more specific] extracted hereinabove. The CIT(A) has made it clear that neither of these reasonings could withstand the test of judicial scrutiny in first appellate proceedings as the Assessing Officer has failed to pin-point any specific material to this effect. We wish to observe here at the cost of repetition that once the departmental survey action even could not find anything specific against the assessee or his sub-contracts despite having the benefit of sec.292C of the Act, we find no illegality in the CIT(A)'s findings rejecting the Assessing Officer’s reasoning in his identical assessments. We thus are of the view that the Assessing Officer had indeed erred in law and on facts in treating the assessee’s impugned sub- contractual payments as non-genuine in the given facts and circumstances. Faced with the situation, we find no reason in the Revenue’s arguments supporting the assessment findings in entirety. These Revenue’s four appeals ITA.Nos.913, 912, 911& 910/PUN./2022 raising the instant sole issue stand rejected therefore. 10. Next comes the assessee’s limited grievance that the CIT(A) has erred in law and on facts in directing the Assessing Officer to adopt overall G.P. @ 14% as per his detailed discussion in para 5.36 of the lower appellate discussion. He has admittedly benchmarked the assessee’s four infra-projects 35 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. i.e., Aundh Rawet Road PCMC Sec-V, IV; Bokhel Site PCMC and Indira Gandhi ROB to Nehrunagar’s profit margins @ 11.17%, 12.87%, 11.13% and 12.80%; respectively with it’s Akurdi site PCN TDA contract with G.P. margin @ 18.34%, thereby adding Rs.40,64,093/-, Rs.6,70,871/-, Rs.4,77,209/- and Rs.3,30,823/-, respectively, totaling to the amount in dispute of Rs.55,42,995/- in issue. We find no merit in the impugned additions. We wish to observe here that not only this tribunal has already assessed the assessee @ 8% in the very line of business in preceding assessment years [para 5.30 in the CIT(A)’s order] but also none of the authorities below could find any error in the books of account leading to rejection of these four projects’ book results. These CIT(A)’s findings are mutually contradictory rather wherein he accepts assessee’s all substantive arguments on the one hand and enhance it’s profit margins only in four projects in issue on the other. And that Assessing Officer without any specific evidence to this effect. Faced with this situation, we adopt judicial consistency and direct the learned Assessing Officer to assess the assessee’s G.P. @ 8% or that already declared, whichever is higher, as per law in consequential computation. Ordered accordingly. These assessee’s seven appeals ITA.Nos.877, 878, 879, 880, 881, 882 & 883 /PUN./2022 are partly allowed therefore. 36 ITA.Nos.887 to 883/PUN./2022 And ITA.Nos.910 to 913/PUN./2022 V M Matere Infrastructures (India) Private Limited, Pune. 11. No other ground or argument has been pressed before us. 12. To sum-up, these assessee’s 07 appeals ITA.Nos.877, 878, 879, 880, 881, 882 & 883 /PUN./2022 are partly allowed and Revenue’s 04 cross-appeals ITA.Nos.913, 912, 911 & 910/PUN./2022 are dismissed in above terms. A copy of this common order be placed in the respective case files. Order pronounced in the open Court on 29.05.2023. Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 29 th May, 2023 VBP/- Copy to 1. The appellant 2. The respondent 3. The Ld. CIT(A)-12, Pune. 4. The Pr. CIT (Central), Pune. 5. D.R. ITAT, Pune “B” Bench, Pune 6. Guard File. //By Order// Assistant Registrar, ITAT, Pune Benches, Pune.