QUALITY HEIGHTCON PRIVATE LIMITED,MUMBAI V. DY. COMMISSIONER OF INCOME TAX, CIRCLE -14(1)(2), MUMBAI, MUMBAI

ITA 1489/MUM/2025

AI Insights

The case involves Quality Heightcon Private Limited, which appealed against the order of the Commissioner of Income Tax (Appeals) confirming the re-opening of assessment and the disallowance of alleged bogus purchases and TDS credit. The Tribunal considered previous decisions in similar cases, particularly noting that the assessee had participated fully in the assessment proceedings and had provided necessary details regarding the purchases. The Tribunal found merit in applying a 12.5% disallowance on the alleged bogus purchases, aligning with precedents set by the Bombay High Court and previous ITAT decisions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314695 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Other Referred Cases: Principal Commission of Income Tax v. Suraj Infrastructures (P.) Ltd., Vijay Proteins Ltd. v. CIT, CIT v. Smith P. Sheth, Pr. CIT vs. Kanak Impex (India) Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK KUMAR AMBASTHA; DR
• Assessee Lawyers: GYANESHWAR KATARAM; AR
• Keywords: Opportunity of being heard; Question of law; Bogus purchase; Reopening of assessment; Principle of natural justice; TDS; Accommodation entries; Rectification of order; FORM 26AS; Bogus
• Section: 148; 133(6)

Judgement Text

"| आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 1489/Mum/2025 Assessment Year: 2010-11 Quality Heightcon Private Limited 612, Tower A Kohinoor City Mall Kohinoor City Kirol Road Kurla West Maharashtra - 400070 [PAN: AAACQ1997R] Vs Dy. Commissioner of Income Tax, Circle-14(1)(2), Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Gyaneshwar Kataram, A/R Revenue by : Shri Ashok Kumar Ambastha, Sr. D/R सुनवाई की तारीख/Date of Hearing : 01/05/2025 घोषणा की तारीख /Date of Pronouncement: 07/05/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order dated 13/02/2025 by NFAC, Delhi [hereinafter “the ld. CIT(A)”] pertaining to AY 2010-11. 2. The grievance of the assessee reads as under:- “1. In the circumstances and facts of our case, the Learned Commissioner of Income Tax (Appeals), has erred in law and on facts in confirming the action of Ld. DClT, Mumbai in upholding the re-opening of assessment u/s 148 as valid. The Assessee states that reopening of assessment u/s 148 is void ab initio and illegal since it is not the opinion of the Assessing Officer to reopen the assessment but the reopening has been done on the basis of the information received from the office of DGIT(Inv.), Mumbai of the Income Tax Department and such reopening is not sustainable in law. I.T.A. No. 1489/Mum/2025 2 The Learned Commissioner of Income Tax (Appeals), has erred in disregarding the decisions of Supreme Court and direct binding jurisdictional decisions which is binding upon him and without observing the principles of natural justice and without appreciating the facts and circumstances of the case. 2. In the circumstances and facts of our case, the Learned Commissioner of Income Tax (Appeals), has erred in law and on facts in confirming the action of Ld. DCIT, Mumbai in upholding the disallowance of alleged bogus purchases of Rs. 42,82,977/-(100% of total alleged purchases of Rs. 42,82,977/- (in respect of 15 parties out of various purchase parties) on conjectures and surmises and alleging that the assessee has taken hawala bills amounting to sum of Rs. 42,82,977/- despite the fact that the Assessee explained and proved that it had not taken any hawala bills. The Learned Commissioner of Income Tax (Appeals), has erred in law and on facts in not considering the conclusive evidence submitted in its written submission and supporting paper book. 3. In the circumstances and facts of our case, the Learned Commissioner of Income Tax (Appeals), has erred in law and on facts in confirming the action of Ld. DCIT, Mumbai in upholding the disallowance of alleged bogus purchases of Rs. 42,82,977/-(100% of total alleged purchases of Rs. 42,82,977/-) on conjectures and surmises without considering the Assessee's reply vide letter dated 25/01/2025 submitted before the Learned Commissioner of Income Tax (Appeals) requesting Ld. Commissioner of Income Tax (Appeals) to direct the Assessing Officer to disallow @ 12.5% of the alleged bogus purchases of Rs.42,82,977/- i.e. Rs.5,35,372/- in view of the binding Jurisdictional Bombay High Court decision in the case of the Principal Commission of Income Tax v. Suraj Infrastructures (P.) Ltd. [2023] 156 taxmann.com 192 (Bombay) dated 06/09/2023 and ITAT decisions including binding ITAT decisions in its own case for Asst. Year 2011-12 and Asst. Year 2012-13 and binding ITAT decision in case of its erstwhile partnership firm M/s. Quality Construction Co. for the Asst. Year 2010-11 wherein the disallowance is restricted to @ 12.5% of the alleged bogus purchases i.e. profit element attributable to the alleged bogus purchases from the total 100% disallowance made by the Assessing Officer. 4. In the circumstances and facts of our case, the Learned Commissioner of Income Tax (Appeals), has erred in law and on facts in confirming the action of Ld. DCIT, Mumbai in upholding the disallowance of TDS credit of Rs. 24,46,194/- on conjectures and surmises despite the fact that the Assessee had submitted the details of TDS claimed for Rs. 1,37,33,099/- in return of income which was supported with TDS of Rs. 1,31,73,058/- reflected in Form 26AS and TDS of Rs. 5,60,041/- reflected in TDS certificates. The Learned Commissioner of Income Tax (Appeals), has erred in law and on facts in disregarding the CBDT Instruction no 05/2013 dated 08/07/2013 directing the Assessing Officer to grant credit if Assessee submits the TDS certificates, no matter I.T.A. No. 1489/Mum/2025 3 the same is not reflected in Form 26AS. Moreover, the Assessee has also submitted before the Learned Commissioner of Income Tax (Appeals), the copy of the rectification order t/s 154 dated 16/02/2012 against the intimation u/s 143(1) dated 17/01/2012 wherein the predecessor Assessing Officer has given full TDS credit claimed by the Assessee in its return of income which includes the TDS credit of Rs. 24,46,194/. 5. The Appellant crave leave to add, delete or substantiate any grounds of appeal at the time of hearing.” 3. Briefly stated the facts of the case are that the assessee filed its return of income on 30/09/2010 declaring total income at Rs.5,36,35,210/-. The return was processed u/s 143(1) of the Act. Subsequently, notice u/s 148 of the Act was issued on 27/03/2015, after recording the reasons for doing so. In response to which the assessee submitted that the original return filed be treated as the return of income filed in pursuance to the notice u/s 148 of the Act. During the course of the scrutiny assessment proceedings, on the basis of the information received from the investigation wing relating to the assessee, who has indulged in the practice of taking bogus purchase bills and routing it through books of account, the AO issued notice u/s 133(6) of the Act to the alleged parties issuing bogus bills. 3.1. On the basis of the information and report of the inspector, the AO came to know that no such party/vendor existed on the given address and hence he could not serve the notice u/s 133(6) of the Act, treating the impugned purchases as bogus and the AO made addition of Rs. 42,82,977/-. I.T.A. No. 1489/Mum/2025 4 4. Assessee carried the matter before the ld. CIT(A) without any success. 5. Before us, the ld. Counsel for the assessee straightaway drew our attention to the order of this Tribunal in the case of the assessee which was erstwhile a partnership firm under the name of Quality Construction Company and pointed out that on identical set of facts and on identical purchases, the Tribunal has deleted the impugned addition. 6. Per contra, supporting the assessment order, the ld. D/R placed strong reliance on the decision of the Hon’ble Bombay High Court in the case of Pr. CIT vs. Kanak Impex (India) Ltd. in Income Tax Appeal No. 791 of 2021, order dated 03/03/2025. 7. We have given a thoughtful consideration to the orders of the authorities below. The assessee which was erstwhile a partnership firm was incorporated as a body corporate on 24/07/2009. Therefore, the decision of the Co-ordinate Bench in the case of erstwhile firm for the same assessment year clearly applies. The Co-ordinate Bench in ITA No. 1403/Mum/2024; AY 2010-11, order dated 05/12/2024 has held as under:- “5. We heard the parties and perused the material on record. On the issue of addition made towards bogus purchases, we notice that the Jurisdictional High Court in the case of Suraj Infrastructures Pvt. Ltd. (supra) has considered a similar issue in which the assessee is engaged in the same line of business and held that \"8. The ITAT in is impugned order had relied upon the judgments of Gujarat High Court in the case of Vijay Proteins Ltd. v. CIT [2015] 58 taxmann.com 44 and also in the case of CIT v. Smith P. Sheth [2023]. 38 taxmann.com 385/2019 Taxman 85 (Mag.)/356 ITR 451 and held that no uniform yardstick can be applied the estimating gross profit on bogus purchases which is depending upon the facts of different cases. The ITAT held that the Co-ordinate Beach in number of cases has taken a consistent view and directed AO to I.T.A. No. 1489/Mum/2025 5 estimate gross profit of 12.5% on alleged bogus purchases and therefore, in the case at hand also directed AO to estimate gross profit at 12.5% on the bogus purchases. 9. Even on merits, the ITAT found that the approach of AO for re-opening the assessment was not correct. 10. We find that the view taken by the ITAT is a reasonable and possible view and hence, no substantial question of law arises for our consideration.\" 6. In view of the similarities in the facts in assessee's case respectfully following the above decision of Hon'ble Bombay High Court, we direct the AO to apply 12.5% on the alleged bogus purchases and delete the remaining addition. On the issue of TDS credit, in our considered view the issue requires factual verification and therefore we are remitting the issue back to the AO with a direction to examine the claim of the assessee based on evidences and give credit in accordance with law. Needless to say that the assessee be given a reasonable opportunity of being heard. It is ordered accordingly.” 8. The decision relied upon by the ld. D/R is fact specific and distinguishable from the facts of the case in hand inasmuch as in that case, the assessee consciously and intentionally decided not to join the investigation and did not file the details relating to purchases and failed to prove the genuineness of purchases because of allegation of purchase by accommodation entries whereas the facts of the case in hand show that the assessee not only participated in the assessment proceedings and in the proceedings before the ld. CIT(A) but also filed necessary details relating to purchases. The allegation that the assessee did not maintain any stock registers does not hold good because the AO never rejected books of accounts but has accepted the book of accounts but for the alleged bogus purchases. 9. As mentioned elsewhere, the Co-ordinate Bench in the assessee’s own case has restricted the addition to 12.5% of the alleged bogus purchases. The same deserves to be followed and respectfully following I.T.A. No. 1489/Mum/2025 6 the same, we direct the AO to restrict the addition to 12.5% of the alleged bogus purchases. This ground is accordingly allowed. 10. The other grievance relates to the non-granting of tax credit. We direct the AO to given credit of pre-paid tax as per Form 26AS according to the relevant provisions of the law. 11. The challenge to the re-opening of the assessment has not been pressed and the same is dismissed as not pressed. 12. In the result, appeal of the assessee is partly allowed. Order pronounced in the Court on 7th May, 2025 at Mumbai. Sd/- Sd/- (SAKTIJIT DEY) (NARENDRA KUMAR BILLAIYA) VICE-PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 07/05/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs आदेश की \u0017ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीला थ\u0016 / The Appellant 2. \u0017 थ\u0016 / The Respondent 3. संबंिधत आयकर आयु! / Concerned Pr. CIT 4. आयकर आयु! ) अपील ( / The CIT(A)- 5. िवभा गीय \u0017ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड' फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai "