THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(3), AHMEDABAD V. SADBHAV ENGINEERING LTD., AHMEDABAD

MA 74/AHD/2025

AI Insights

The case involves the Deputy Commissioner of Income Tax, Central Circle-1(3), Ahmedabad as the appellant and Sadbhav Engineering Limited as the respondent. The dispute centered on the profit rate applied to back-to-back sub-contracts awarded by Sadbhav Engineering Limited, which the Assessing Officer initially treated as accommodation entries and estimated the profit at 25%. This was later reduced to 12.5% by the Tribunal, following earlier decisions in the assessee's favor for different assessment years. The Revenue's Miscellaneous Application sought to challenge this reduction, arguing that the disclosed gross profit rates were higher than those considered by the Tribunal. However, the Tribunal upheld its earlier decision, emphasizing the net profit addition and the pending appeal's potential influence on the current case.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 774706 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 01-08-2025
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT
• Assessee Lawyers: DHINAL SHAH

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER M.A. No.74/Ahd/2025 (In ITA No.2209/Ahd/2016) Assessment Year: 2011-12 Deputy Commissioner of Income Tax, Central Circle-1(3), Ahmedabad. Vs. Sadbhav Engineering Limited, Sadbhav House, Opp. Law Garden Police Chowki, Ellisbridge, Ahmedabad – 380 006. [PAN – AADCS 0852 Q] (Appellants) (Respondents) Assessee by Shri Dhinal Shah, AR Revenue by Shri Abhijit, Sr. DR Date of Hearing 29.08.2025 Date of Pronouncement 03.09.2025 O R D E R PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER: This Miscellaneous Application has been field by the Revenue in respect of order of this Tribunal in ITA No.2209/Ahd/2016 dated 20.02.2025. 2. Shri Abhijit, Ld. Sr. DR, appearing for the Revenue, explained that the assessee Sadbhav Engineering Limited had awarded back-to-back sub-contract of Rs.22.65 Crores to Aravali Infra Power Limited (AIL) and Printed from counselvise.com M.A. No.74/Ahd/2025 (Assessment Year: 2011-12) DCIT vs. Sadbhav Engineering Limited Page 2 of 4 KNRCL, which was considered in the nature of accommodation entry and the Assessing Officer had estimated the profit at the rate of 25% in respect of these two sub-contracts. In the first appeal, the ld. CIT(A) had restricted the addition to 16% whereas the Tribunal vide order dated 20.02.2025 had reduced it further to 12.5%. The Ld. Sr. DR submitted that the assessee had disclosed GP of 12.55% in respect of transactions with Aravali Infra Power Limited whereas GP disclosed in the transactions with KNRCL was 15.49%. He submitted that in view of the higher GP as disclosed by the assessee itself in respect of these two sub-contracts, there was mistake apparent from record in the order of the Tribunal whereby the addition was restricted to 12.5% only. 3. Per contra, Shri Dhinal Shah, Ld. AR of the assessee, submitted that the Tribunal had restricted the addition at the rate of 12.5% following the decision in the assessee’s own case in the earlier years. He submitted that the Department had filed an appeal before the Hon’ble High Court in respect of the earlier orders of the Tribunal which is still pending and that the outcome of the matter in the pending appeals before the Hon’ble High Court will be applicable to this year as well. The Ld. AR further submitted that the addition confirmed by the Tribunal was in respect of net profit which was much higher than the net profit disclosed by the assessee in respect of two sub-contractors viz. Aravali Infra Power Limited and KNRCL. 4. We have considered the rival submissions. In the order dated 20.02.2025, the addition in respect of profit from sub-contract of the assessee with Aravali Infra Power Limited and KNRCL was restricted to 12.5% following the earlier decision of the Tribunal in the assessee’s own Printed from counselvise.com M.A. No.74/Ahd/2025 (Assessment Year: 2011-12) DCIT vs. Sadbhav Engineering Limited Page 3 of 4 case in A.Y. 2009-10 and in A.Ys. 2012-13 to 2018-19. The disallowance sustained at the rate of 12.5% of the sub-contract amount was on account of net profit addition and not the gross profit. Therefore, the Revenue was not correct in comparing the net profit addition upheld by the Tribunal with the gross profit disclosed by the assessee in respect of these two sub- contracts. The Revenue has been unable to bring on record any evidence to establish that the net profit of the assessee in respect of the sub- contract transactions with Aravali Infra Power Limited and KNRCL was more than 12.5%, as sustained by the Tribunal. Further, the addition @ 12.5% was confirmed following the decision of the Tribunal in assessee’s own case for the earlier years. The Revenue has filed appeal before the Hon’ble High Court in those years and the decision of the Court for those years will have an impact on the final outcome of the case for this year as well. In view of these facts, we do not find any mistake in the order of the Tribunal dated 20.02.2025. 5. In the result, the Miscellaneous Application filed by the Revenue is dismissed. Order pronounced in the open Court on this 3rd September, 2025. Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Ahmedabad, the 3rd September, 2025 PBN/* Printed from counselvise.com M.A. No.74/Ahd/2025 (Assessment Year: 2011-12) DCIT vs. Sadbhav Engineering Limited Page 4 of 4 Copies to: (1) The appellant (2) The respondent (3) The PCIT (4) The CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPYE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad Printed from counselvise.com "