Income Tax Appellate Tribunal - Mumbai
Aurohi Developers Ltd, Mumbai vs Ito Wd 6(1)(4), Mumbai on 26 December, 2018
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ITA No.1044/Mum/2016 A.Y. 2011-12
M/s Aurohi Developers Ltd. Vs. ITO Ward-6(1)(4)
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" Bench, Mumbai
Before Shri Shamim Yahya, Accountant Member
and Shri Ravish Sood, Judicial Member
ITA No. 1044/Mum/2016
(Assessment Year: 2011-12)
M/s Aurohi Developers Ltd. ITO Ward-6(1)(4)
(1) House No. 17, Sector C 6th Floor, Aaykar Bhavan,
Scheme No. 74, Vijay Nagar, Mumbai-400 020
Indore 452010 Vs.
(2) C/o, D-9/002, Yogi Nagar,
Borivali West,
Mumbai-400091
PAN - AACCP1915A
(Appellant) (Respondent)
Appellant by: Shri Mahesh Saboo, A.R.
Respondent by: Shri Satish Chandra Rajore, D.R
Date of Hearing: 18.12.2018
Date of Pronouncement: 26.12.2018
ORDER
PER RAVISH SOOD, JM
The present appeal filed by the assessee is directed against the order passed by the CIT(A)-12, Mumbai, dated 02.12.2015, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income Tax Act, 1961 (for short 'I.T. Act'), dated 24.03.2014. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal:
"1. On the f acts and circums tances of the case and in law, the au thorities below have erred in making an addition of a sum of Rs.1,00,94,000/ U/S 69C of the I.T. Act as deemed income and the reasons assigned by them w e r e . w h o l l y w r o n g a n d a r e v e h e m e n t l y d e n i e d w h i c h a r e n o t i n accordance with the facts of the case and against the provisions of Income Tax Act and rules made thereunder.
2. On the f acts and circums tances of the case and in law, the au thorities b e l o w h a s n o t s e t o f f t h e b r o u g h t f o r wa r d business losses of R s . 31,39,639/- and unabsorbed P a g e |2 ITA No.1044/Mum/2016 A.Y. 2011-12 M/s Aurohi Developers Ltd. Vs. ITO Ward-6(1)(4) depreciation of Rs.1,21,55,740/- of earlier years against the income assessed by them for the year. No reasons were assigned by them for doing so, despite the fact that position of B/F losses are available on the records of the f ile of the A .O and therefore appellant prays that the same be first set off against the B/F losses as aforesaid.
3. The appellant craves leave to add, alter, modify and delete all or any of the aforesaid grounds of appeals on or before the date of hearing."
2. Briefly stated, the assessee company which is stated to be engaged in the business of civil construction had e-filed its return of income for A.Y. 2011-12 on 30.09.2011, declaring total income at Rs. Nil. The return of income filed by the assessee company was processed as such under Sec.143(1) of the I.T. Act. Subsequently, the case of the assessee was taken up for scrutiny assessment 143(2).
3. During the course of the assessment proceedings it was observed by the A.O that the amount of Rs.8,75,42,300/- received by the assessee through RTGS on various dates from M/s Ketki Construction Ltd. during the period 09.07.2010 to 20.10.2010 was credited in the Current account No. 883620110000158 of the assessee company with Bank of India. It was noticed by the A.O that the aforesaid amounts were withdrawn in cash either on the date of credit, or within two days at the most. The assessee on being called upon to explain the nature of the aforesaid transactions submitted, that it had undertaken sub-contract work for road breaking and filling work in the State of Maharashtra from Ketki Contruction ltd., and the amount of Rs.8,75,42,000/- was received from the said concern in lieu of the said contract work. The assessee further submitted that the amounts withdrawn from the aforesaid bank account were utilized for incurring the expenses involved in executing the said contract work, which mainly included the labour charges that were paid on daily basis to the labour deployed by the assessee. In support of its aforesaid claim the assessee placed on record few self made vouchers/bills.
4. The A.O in the course of the assessment proceedings observed that in the course of the inquiries conducted by the Investigation wing of the P a g e |3 ITA No.1044/Mum/2016 A.Y. 2011-12 M/s Aurohi Developers Ltd. Vs. ITO Ward-6(1)(4) Income-tax department, Indore, the statement of Mr. Swapnil Rathi (son of Shri Purushottam Das Rathi, director of the assessee company) was recorded on 11.11.2011. It was observed by the A.O that Shri Swapnil Rathi on being confronted with the aforesaid bank transactions of the assessee company, had in his reply stated that amounts withdrawn from the said bank account were returned back to M/s Ketki Construction in some cases. It was further admitted by him that no actual work was done in respect of the amount which was returned in cash. Further, it was also admitted by him that bogus bills to the extent the cash was returned to M/s Ketki Construction were issued to the said concern. The A.O in order to verify the factual position directed the assessee to produce Mr. Swapnil Rathi, Shri Purushottam Das Rathi and the concerned authorized person of M/s Ketki Construction Ltd. for examination. In response, the assessee placed on record an affidavit dated 19.03.2014 of Shri Swapnil Rathi wherein it was stated that the assessee company had carried out labour contract for M/s Ketki Construction Ltd. and the amount of Rs.8.73 crores credited in its bank account was towards the contract receipts in pursuance of the work done. It was observed by the A.O that Shri Swapnil Rathi had also retracted from his confession made in his statement dated 11.11.2011 before the Investigation Wing, Indore. However, the assessee failed to comply with the directions of the A.O and did not produce either of the aforesaid persons viz. Mr. Swapnil Rathi, Shri Purushottam D. Rathi and the concerned authorized person of M/s Ketki Construction Ltd.
5. The A.O was not persuaded to subscribe to the claim of the assessee that the amounts received from M/s Ketki Construction Ltd. was in the nature of contract receipts. Rather, the A.O held a strong conviction that the assessee had not carried out any business activity and as a matter of fact was only providing accommodation bills. The A.O while concluding as hereinabove, observed as under:
Assessee has f urnished copy of ' labour work contract agreement with Ketki Construction which is having general clauses. Neither specif ic work was not defined nor specific terms of amount of contract were mentioned.
P a g e |4 ITA No.1044/Mum/2016 A.Y. 2011-12 M/s Aurohi Developers Ltd. Vs. ITO Ward-6(1)(4) Assessee has not furnished books of accounts f or verif ication. In support of expenses as sessee has f urnished sample Copies of self made vo uchers and weekly attendance register. Af ter close scrutiny of these documents it is of the v ie w th a t these docu men ts are made af te r wards . Clean liness of documen ts maintained at contract sight creates doubts about authenticity of ' documents. The weekly wage register is throughout written with one Ink and with single handwriting. Against majorities of payments signature the thumb impression were used. Against sonic signatures name of labour has been mentioned. The name of labour mentioned for two consecutive weeks are all together different.
Alter close scrutin y of transactions of Bank of Baroda summarized above it can eas ily been seen that the amount credited through RTGS is withdrawn by a s s e s s e e c o m p a n y o n s a m e d a y o r w i t h i n t wo d a y s o f c r e d i t s . I t i s n o t understandable if the payments are to be made to labour against work on daily basis then why amount was withdrawn in sin g le day in the range of 30 Lakhs to70 Lakhs in a day.
Assessee has not availed opportunity to produce Swapnil Rathi and Authorized person of M/s Ketki Construction ltd. for examination. Assessee has not able to rebu t the state men t g iven by the S wapnil Rath i bef ore inv es tig atio n wing , Indore that amount withdrawn in cash was re turned to M/s Ketk i Construc tions Ltd. and ag ainst th is bog us bills we re is s ue d.
6. The A.O on the basis of his aforesaid deliberations held a conviction that the amounts credited in the assesses bank account were utilized for the purpose of providing accommodation bills. The A.O observed that the amount of Rs.1,00,94,000/- that was received through RTGS by the assessee on 09.07.2010 from M/s Ketki Construction Ltd. was the first major transaction in the bank account of the assessee. Observing, that the aforesaid amount of Rs. 1,00,94,000/- (supra) was the 'Peak credit' in the bank account of the assessee during the year under consideration, the A.O treated the same as the undisclosed cash utilized by the assessee for the purpose of providing accommodation bills and made an addition of the said amount in the hands of the assessee under Sec. 69C of the I.T. Act.
7. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating at length on the various contentions advanced by the assessee observed, that the assessee was not taking or making the decisions itself, but was doing business on behalf of somebody. Rather, the P a g e |5 ITA No.1044/Mum/2016 A.Y. 2011-12 M/s Aurohi Developers Ltd. Vs. ITO Ward-6(1)(4) CIT(A) held a conviction that the assessee company was formed only for the purpose of facilitating reduction of tax burden of M/s Ketki Constructions Pvt. Ltd. The CIT(A) fortified his aforesaid view by taking cognizance of the fact that the authorised person of the assessee company had himself stated that the amount withdrawn from the bank was handed over to M/s Ketki Construction Pvt. Ltd. On the basis of his aforesaid observations, the CIT(A) not finding any infirmity in the order of the A.O upheld the same.
8. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short 'A.R') for the assessee submitted, that the A.O had erred in taking the amount of Rs.1,00,94,000/- on 09.07.2010 as the peak credit and added the same in the hands of the assessee under Sec. 69C of the I.T Act. It was submitted by the ld. A.R that as the closing balance in the bank account of the assessee on 09.07.2010 amounted to Rs.43,99,850/-, therefore, even if the explanation of the assessee was to be rejected, the addition in its hands was liable to be restricted to the said extent only. It was further submitted by the ld. A.R that a specific direction be issued to the A.O to allow correct set off of brought forward business losses and unabsorbed depreciation of earlier years while computing the income of the assessee that was liable to be taxed for the year under consideration. Per contra, the ld. Departmental Representative (for short 'D.R') relied on the orders of the lower authorities.
9. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. Admittedly, the amounts as stood credited in the Current account No. 88362011000015 of the assessee company with Bank of India were received on various dates falling within the period 09.07.2010 to 20.10.2010, through RTGS from M/s Ketki Construction ltd. The aforesaid amounts were withdrawn in cash either on the date of credit or within two days at the most. We find that the observations of the lower authorities that the assessee company had not carried out any business activity and was into the business of providing accommodation bills/entries stands substantially fortified from the admission of Shri Swapnil Rathi (supra) in P a g e |6 ITA No.1044/Mum/2016 A.Y. 2011-12 M/s Aurohi Developers Ltd. Vs. ITO Ward-6(1)(4) his 'Statement' that was recorded by the Investigation wing of the Income- tax Department, Indore on 11.11.2011. We find from a perusal of the orders of the lower authorities that Mr. Swapnil Rathi had in his statement affirmed that the cash withdrawn from the bank account of the assessee company was returned bank to M/s Ketki Construction in some of the cases. Further, it was admitted by him that no actual work was done in respect of the amounts which were returned in cash and rather bogus bills to the extent the amount was returned to M/s Ketki Construction Ltd. were issued to them. Admittedly, the statement of Mr. Swapnil Rathi that was recorded by the Investigation wing of the Income-tax Department, Indore on 11.11.2011, was thereafter retracted by him by way of an affidavit dated 19.03.2014 that was filed by the assessee in the course of the assessment proceedings. However, the substantial time gap between such retraction and recording of the statement, and the conduct of Mr. Swapnil Rathi who despite specific direction of the A.O failed to put up an appearance before him, does not inspire much of confidence as regards the veracity of the said so called retraction. Be that as it may, we find that the A.O had observed that the assessee had not carried out any business activity and had only issued accommodation bills. In the backdrop of the aforesaid observations so arrived at by the A.O, we are unable to comprehend that now when the A.O held a conviction that the assessee was not carrying out any business activity and was only providing accommodation bills then how and on what premise an addition under Sec.69C of Rs.1,00,94,000/- was made in the hands of the assessee. We find that to the extent the source of the amounts credited in the bank account of the assessee is concerned, the same admittedly were received through RTGS on various dates from M/s Ketki Construction ltd. during the period 09.07.2010 to 20.10.2010. We further find that the CIT(A) also after deliberating on the facts was not inspired about the genuineness of the business that was claimed by the assessee to have been carried out. Rather, the CIT(A) in his order had categorically observed that the assessee company had been formed only for reduction of the tax burden of M/s Ketki Construction Pvt. Ltd. It was further observed P a g e |7 ITA No.1044/Mum/2016 A.Y. 2011-12 M/s Aurohi Developers Ltd. Vs. ITO Ward-6(1)(4) by him that the assessee had not carried out the business itself, but had carried out the same on the directions of someone else.
10. We have given a thoughtful consideration to the facts of the case in the backdrop of the observations of the lower authorities and are unable to subscribe to the view taken by them. In our considered view, now when an observation had been arrived at by the lower authorities that the assessee had not carried out any business activity, and was only formed for the purpose of reduction of the tax burden of M/s Ketki Construction Pvt. Ltd. by providing accommodation bills to it, then the said observations could not have been lost sight of at the time of assessing the income of the assessee. We are of the considered view that both the lower authorities had failed to appreciate the facts of the case in the right perspective, and would not hesitate to observe that the view taken by the A.O in context of the aforesaid issue under consideration and upholding of the same by the first appellate authority clearly militates against their own observations recorded on the basis of the facts as had unfolded before them. We are unable to persuade ourselves to subscribe to the observations of the lower authorities and are of the considered view that in all fairness the matter requires to be revisited by the A.O. We thus set aside the case to the file of the A.O for the purpose of de novo adjudication. The A.O shall in the course of the set aside proceedings make necessary verifications as regards the nature of the transactions between the assessee and M/s Ketki Construction Pvt. Ltd., and on the said basis readjudicate the issue under consideration. Before parting, we may herein observe that the A.O in the course of the set aside proceedings shall also consider the claim of the assessee as regards allowing of correct set off of brought forward business loss and unabsorbed depreciation of the earlier years. Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee.
11. The appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 26.12.2018
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ITA No.1044/Mum/2016 A.Y. 2011-12
M/s Aurohi Developers Ltd. Vs. ITO Ward-6(1)(4)
Sd/- Sd/-
(Shamim Yahya) (Ravish Sood)
Accountant Member Judicial Member
भुंफई Mumbai; ददन ुंक 26.12.2018
Ps. Rohit
आदे श की प्रतिलऱपि अग्रेपिि/Copy of the Order forwarded to :
1. अऩीर थी / The Appellant
2. प्रत्मथी / The Respondent.
3. आमकय आमक्त(अऩीर) / The CIT(A)-
4. आमकय आमक्त / CIT
5. विब गीम प्रतततनधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai
6. ग र्ड प ईर / Guard file.
सत्म वऩत प्रतत //True Copy// आदे शानस ु ार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीऱीय अधिकरण, भुंफई / ITAT, Mumbai