THE DCIT, CENTRAL CIRCLE-1(3), AHMEDABAD V. SADBHAV INFRASTRUCTURE PROJECT LTD., AHMEDABAD

ITA 9/AHD/2021

AI Insights

The case involves the Deputy Commissioner of Income Tax Central Circle-1(3), Ahmedabad as the appellant and Sadbhav Infrastructure Project Ltd. as the respondent. The dispute arose from the assessment year 2017-18, where the assessee declared a nil income after setting off a brought forward loss. The Assessing Officer (AO) made an addition of Rs.22,83,64,319 as bogus expenses under the name of M/s. Siddeshwari Infrastructure. The CIT(A) reduced this addition to 20%, leading to the Revenue's appeal to the Tribunal. The Tribunal's decision focused on the nature of the subcontract work and the evidence of returned payments, affirming the CIT(A)'s reduction of the addition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474032 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Other Referred Cases: M/s. Sadbhav Engineering Ltd. in IT(SS)A Nos. 170 to 175/Ahd/2021 & ITA No. 235/Ahd/2021 dated 10.01.2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RITESH PARMAR
• Assessee Lawyers: DHINAL SHAH
• Keywords: TDS; Bogus
• Section: 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 9/Ahd/2021 (Ǔनधा[रण वष[ / Assessment Year : 2017-18) Deputy Commissioner of Income Tax Central Circle-1(3), Ahmedabad बनाम/ Vs. Sadbhav Infrastructure Project Ltd. Sadbhav House, Opp. Law Garden Police Chowki, Ellisbridge, Ahmedabad– 380006, Gujarat èथायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAKCS5538G (Appellant) .. (Respondent) अपीलाथȸ ओर से /Appellant by : Shri Ritesh Parmar, CIT.DR & Shri B. P. Srivastava, Sr. DR Ĥ×यथȸ कȧ ओर से/Respondent by : Shri Dhinal Shah, AR Date of Hearing 17/02/2025 Date of Pronouncement 20/02/2025 O R D E R PER SHRI NARENDRA PRASAD SINHA, AM: This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-11, Ahmedabad, (in short ‘the CIT(A)’), dated 12.11.2020 for the Assessment Year 2017-18. 2. The brief facts of the case are that the assessee had filed its return of income for A.Y. 2017-18 on 31.10.2017 declaring total income at Rs. Nil after set off of brought forward loss of Rs.51.12 Crores. The assessment was completed under Section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) on 17.12.2019 at ITA No. 9/Ahd/2021 [DCIT vs. Sadbhav Infrastructure Project Ltd.] A.Y. 2017-18 - 2 – total income of Rs.6,06,40,460/-. In the course of assessment, an addition of Rs.22,83,64,319/- was made on account of bogus expense debited in the name of M/s. Siddeshwari Infrastructure. 3. Aggrieved with the order of the AO, the assessee had filed an appeal before the Ld. CIT(A), who had confirmed the addition @ 20% of the bogus expense, to the extent of Rs.4,56,72,864/- only. 4. Aggrieved with the order of the Ld. CIT(A), Revenue is in appeal before us. The following grounds have been taken in this appeal: “1. On the facts and in the circumstances of the case and in law, the id. CIT(A) has erred in giving relief to the assessee for an amount of Rs.18,26,91,455/- out of total disallowance of Rs 22,63,64,310/- on account of bogus sub-contract expenses. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has failed to appreciate the statement recorded u/s 132(4) in the case of Shri Ramesh Prajapati, partner of M/s Siddheshwari Infrastructure, solemnly affirming that his firm has not done any work on any of the road projects of Sadbhav Group except for Rs.20 lakh in Bhavnagar Talaja Road Project. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has failed to appreciate the statement recorded u/s 132(4) in the case of Shri Ramesh Prajapati, partner of M/s Siddheshwari Infrastructure solemnly affirming that his firm had received cheque from Sadbhav group, which after deducting commission @3% and 2% TDS the balance amount was paid back as cash to Sadbhav Group, which was later correlated with the impounded materials in the form of loose paper (Annexure B/8 Page No.166). 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” ITA No. 9/Ahd/2021 [DCIT vs. Sadbhav Infrastructure Project Ltd.] A.Y. 2017-18 - 3 – 5. Shri Ritesh Parmar, Ld. CIT.DR submitted that the assessee is engaged in contractual work of infrastructure projects. The assessee had claimed expense of Rs.23,30,24,815/- in respect of sub-contract work claimed to have been carried out by M/s. Siddeshwari Infrastructure. In the course of search/survey proceeding at the premises of M/s. Siddeshwari Infrastructure, it transpired that the sub-contract amount as given by the assessee to M/s. Siddeshwari Infrastructure was bogus. As per the statement of Shri Rameshbhai Prajapati, partner of M/s. Siddeshwari Infrastructure, recorded during survey, it transpired that M/s. Siddeshwari Infrastructure had issued fake bills to the assessee and had received commission of 3% to 4% on such bogus bills. The Ld. CIT.DR emphasized that the sub-contract bill raised by the assessee was accommodation entry and accordingly, the AO had rightly disallowed the entire sub-contract expense of Rs.22,83,64,319/-. He submitted that ld. CIT(A) was not correct in restricting the disallowance to the extent of 20% only. He, therefore, requested that addition as made by the AO may please be restored. 6. Per contra, Shri Dhinal Shah, Ld. AR of the assessee explained that the Ld. CIT(A) had rightly held that the gross turnover cannot be subjected to tax. He submitted that the project work, pertaining to which, sub-contract was given to M/s. Siddeshwari Infrastructure, was duly completed by the assessee and, therefore, the entire sub-contract amount could not have been subjected to tax. According to the Ld. Counsel, only the profit element embedded in sub-contract amount could have been subjected to tax and accordingly the Ld. CIT(A) had rightly ITA No. 9/Ahd/2021 [DCIT vs. Sadbhav Infrastructure Project Ltd.] A.Y. 2017-18 - 4 – reduced the addition to 20% of the sub-contract expense. The Ld. AR further submitted that the addition as confirmed by the Ld. CIT(A) was in fact high considering that addition @ 12.5% only was confirmed by the Co-ordinate Bench of the ITAT in the case of the sister concern M/s. Sadbhav Engineering Ltd. in IT(SS)A Nos. 170 to 175/Ahd/2021 & ITA No. 235/Ahd/2021 dated 10.01.2025. 7. We have carefully considered the rival submissions. All the grounds taken by the Revenue pertain to a single issue. The AO had made addition for the entire sub-contract expense of Rs.22,83,64,319/- in respect of M/s. Siddeshwari Infrastructure, which was held as bogus. It is a trite law that the entire turnover cannot be subjected to tax but only the profit element of the transaction can be brought to tax. The fact that the project work, in respect of which the sub-contract was allowed to M/s. Siddeshwari Infrastructure, was duly completed has not been disputed by the Revenue. If so, the entire sub-contract amount could not have been considered as income of the assessee. The Ld. CIT(A) had considered the fact that the amount paid by cheque to M/s. Siddeshwari Infrastructure by the assessee was partly returned back and that the total amount received back by the assessee on different dates was to the extent of Rs.4.21 Crores, as found recorded in the impounded documents. Therefore, the sub-contract expense to the extent of Rs.4.21 Crores was treated as bogus by the Ld. CIT(A). Further, considering this fact, Ld. CIT(A) had restricted the total addition @20% of sub-contract amount of Rs.22,83,64,319/- in respect of M/s. Siddeshwari Infrastructure, which worked out to ITA No. 9/Ahd/2021 [DCIT vs. Sadbhav Infrastructure Project Ltd.] A.Y. 2017-18 - 5 – Rs.4,56,72,864/-. The contention of the assessee that identical addition in respect of sister concern of the assessee was restricted to the extent of 12.5% only, is not found apposite considering the fact that documentary evidences for return of cash of Rs.4.21 Crore was found in this case in the impounded documents. 8. In view of the above facts, we are of the considered opinion that the Ld. CIT(A) had correctly appreciated the facts of the case and restricted the addition to the extent of 20% of the sub- contract amount which was reasonable considering the fact that documentary evidence for a return of sub-contract amount in cash to the extent of 4.21 Crores only was found in this case. Accordingly, the order of the Ld. CIT(A) is upheld. The grounds taken by the Revenue are dismissed. 9. In the result, the appeal filed by the Revenue is dismissed. This Order pronounced on 20/02/2025 Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 20/02/2025 S. K. SINHA True Copy आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंͬधत आयकर आयुÈत / Concerned CIT 4. आयकर आयुÈत(अपील) / The CIT(A)- 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड[ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलȣय अͬधकरण, अहमदाबाद / ITAT, Ahmedabad "