Income Tax Appellate Tribunal - Mumbai
M/S Skyway Infra Projects Private ... vs The Dy. Commissioner Of Income Tax, ... on 28 February, 2023
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "G" MUMBAI
BEFORE SHRI ABY T VARKEY (JUDICIAL MEMBER)
AND
SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER)
ITA No. 2665/MUM/2022
Assessment Year: 2013-14
&
ITA No. 2669/MUM/2022
Assessment Year: 2014-15
&
ITA No. 2676/MUM/2022
Assessment Year: 2015-16
&
ITA No. 2670/MUM/2022
Assessment Year: 2016-17
&
ITA No. 2677/MUM/2022
Assessment Year: 2017-18
&
ITA No. 2681/MUM/2022
Assessment Year: 2018-19
&
ITA No. 2671/MUM/2022
Assessment Year: 2019-20
&
ITA No. 2682/MUM/2022
Assessment Year: 2020-21
The DCIT, Central Circle-5(1), M/s Skyway Infra Projects Pvt.
Room No. 1928, 19th floor, Air Ltd.,
India Building, Vs. 301, Gitanjali Arcade, Nehru
Nariman Point, Road, Vile Parle (E),
Mumbai-400021. Mumbai-400057.
PAN No. AAMCS 3356 G
Appellant Respondent
Skyway Infra Projects Pvt. Ltd. 2
ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681,
2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
CO No. 146/MUM/2022
(Arising out of ITA No. 2665/MUM/2022)
Assessment Year: 2013-14
&
CO No. 148/MUM/2022
(Arising out of ITA No. 2669/MUM/2022)
Assessment Year: 2014-15
&
CO No. 145/MUM/2022
(Arising out of TA No. 2676/MUM/2022)
Assessment Year: 2015-16
&
CO No. 144/MUM/2022
(Arising out of ITA No. 2670/MUM/2022)
Assessment Year: 2016-17
&
CO No. 147/MUM/2022
(Arising out of ITA No. 2677/MUM/2022)
Assessment Year: 2017-18
&
CO No. 143/MUM/2022
(Arising out of ITA No. 2681/MUM/2022)
Assessment Year: 2018-19
&
CO No. 149/MUM/2022
(Arising out of ITA No. 2671/MUM/2022)
Assessment Year: 2019-20
&
CO No. 150/MUM/2022
(Arising out of ITA No. 2682/MUM/2022)
Assessment Year: 2020-21
M/s Skyway Infra Projects Pvt. The DCIT, Central Circle-5(1),
Circle
Ltd., Room No. 1928, 19th floor, Air
301, Gitanjali Arcade, Nehru Vs. India Building,
Road, Vile Parle (E), Nariman Point,
Mumbai-400057. Mumbai-400021.
Skyway Infra Projects Pvt. Ltd. 3
ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681,
2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
PAN No. AAMCS 3356 G
Appellant Respondent
Revenue by : Dr. Kishor Dhule, CIT-DR
Assessee by : Mr. Bhupendra Shah, AR
Date of Hearing : 14/02/2023
Date of pronouncement : 28/02/2023
ORDER
PER BENCH:
These appeals by the Revenue and cross cross-objections objections by the assessee are directed against a common order dated 27.07.2022 passed by the Ld. Commissioner of Income Income-tax tax (Appeals)-53, (Appeals) Mumbai [in short 'the Ld. CIT(A)'] for assessment year 2013-14 2013 to 2020-21 respectively.
ectively. The facts and the issue issues raised in grounds of appeal being common in all these appeals and cross cross-
objections,therefore, same were heard together and disposed off by way of this consolidated order for convenience and avoid repetition of facts.
2. The Ld. CIT(A) has adjudicated the appeal for assessment year 2013-14 14 and result of the same has been followed in other assessment years being common facts and circumstances. Accordingly, we also take up the appeal of the Revenue for AY 2013- 2013 Skyway Infra Projects Pvt. Ltd. 4 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 14 and cross-objection bjection of the assessee for AY 2013 2013-14.
14. The grounds raised by the Revenue in its appeal for AY 2013 2013-14 are reproduced as under:
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additionof Rs. 48,04,750/-
48,04,750/ on account of bogus purchase ignoring the fact that the assessee failed to prove the genuineness of purchases, andany expenditure in respect of which payments by account payee cheques is not enough evidence to prove the genuineness of the transaction?"
2. Whether ther on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of 2,86,53,687- 2,86,53,687 ws. 68 of the Act in respect of unsecured loans and ignoring the facts that the identity of the parties, the genuineness of the transaction, and the credit credit-worthiness worthiness of the parties have not been proved to the satisfaction of the 40, so as to discharge the primary onus?"
3. *Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowan disallowance ce of interest expenses of Rs. 1,42, 15,496/ 15,496/- on the unsecured loans when the said unsecured loans were found to be non non-genuine genuine as the assessee has not proved the genuineness of the transaction, the identity of the creditors, and credit credit-worthiness of the parties?"
arties?"
2.1 The ground raised by the assessee in its cross cross-objection objection are reproduced as under:
1. On the facts and circumstances of the case and in law, the search was conducted on November 6, 2019 and notice us 153 A can be issued for six years preceding the year of search, for notice beyond six years certain conditions has to be satisfied which is not being satisfied and hence the proceedings u/s 153 A is void and bad in law.
2. On the facts and circumstances of the case and in law, the order passed by thee AO under the provisions of section 153A r.w.s. 143(3) of the Act dated September 30, 2021 is time barred and thus, bad-
bad in-law.
Skyway Infra Projects Pvt. Ltd. 5 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
3. On the facts and circumstances of the case and in law, the AO erred in initiating proceedings and passing an order under section sec 153A of the Act without appreciating the fact that neither there was any incriminating material found during search nor was there any reference to any incriminating material by the AO in his order and thus, addition and/or disallowance cannot be made in the proceedings us 153A of the Act in absence of any incriminating material being found during search.
4. On the facts and circumstances of the case and in law, the Id AO erred in filing second appeal evenafter no adverse comment was found in the remand report u/s 46 A of the act.
5. On the facts and circumstances of the case and in law, the CIT (A) rightly deleted the addition made on the point of purchases...
6. On the facts and circumstances of the case and in law, the CIT (A) rightly deleted the addi addition tion made on the point of unsecured loan, which was repaid and therefore cannot be added u/s 68 of the act.
7. On the facts and circumstances of the case and in law, the CIT' (A) rightly deleted the addition made on the point of interest on unsecured loan, which is only consequential.
8. On the facts and circumstances of the case and in law, the CIT' (A) rightly allowed the credit for TDS.
3. Briefly stated, facts of the case are that for or the year under consideration, the assessee company executed works contracts including civil contracts for Local Authorities s like Bombay Municipal Corporation (BMC), and Municipal Corporation of Greater Mumbai ( MCGM) etc. The assessee filed its original return of income declaring total income at Rs.7 Rs.7,79,23,750/- u/s 139(1) of the tax Act, 1961 (in short 'the Act'). Subsequently, a search Income-tax and seizure action u/s 132 of the Act was carried out in the cases of the assessee Group on 06.11.2019. Consequent to the Skyway Infra Projects Pvt. Ltd. 6 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors search, assessment proceedings u/s 153A of the Act were initiated by way of issue of notice notice(s) dated 02.01.2021 for AY 2013-14 2013 to 2020-21. In response, the assessee filed return of income declaring total income of Rs.7,79,23,750/ Rs.7,79,23,750/- for AY 2013-14.The
14.The assessee also filed return of income e for other assessment years. The assessment u/s 153A r.w.s. 143(3) of the Act for AY 2013-14 was completed on 30.09.2021 assessing total income at Rs.11,13,82,190/-.
Rs.11,13,82,190/ The addition/disallowances made by the Assessing Officer included disallowance of bogus p purchase of Rs.48,04,750/- and unexplained cash credit u/s 68 of Rs.2,86,53,687/ Rs.2,86,53,687/-.. On further appeal, the Ld. CIT(A) allowed part relief to the assessee.
3.1 The addition for bogus purchases in various assessment years was made by the Assessing officer in respect of purchases made from 13 parties. Though, the Ld. CIT(A) rejected the contention of the assessee that there was no incriminating material vis-à-vis vis addition of bogus purchases, but deleted the addition in respect of four purchase parties and in re respect of balance 9 parties sustained addition @ 5% of the purchase amount.. In respect of issue of unexplained cash credit u/s 68 of the Act, the Assessing Officer made addition in respect of 29 parties for various assessment years. The he Ld. CIT(A) held that in view of no incriminating material qua the addition, same can't be sustained sustained, following the decision of Hon'ble Bombay High Court in the case of Continental warehousing corporation reported in 58 taxmann.com 78 Skyway Infra Projects Pvt. Ltd. 7 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors On merit, the he Ld. CIT(A) held that no loan entries were appearing in the books of accounts of the assessee in respect of 11 parties, parties hence addition was not sustainable in respect of those parties.
parties In respect of remaining 18 parties, the Ld. CIT(A) held that the assessee had discharged its onus u/s 68 of the Act and therefore, no addition could have been made in respect of those 18 parties. The Assessing Officer has also made addition in few assessments years in respect of bogus sub contract expenses incurred,, which has been deleted by the ld CIT(A).. The Ld CIT(A) also rejected the grounds raised by the assessee challenging the validity of assessment on the ground that same were barred by limitation and assessment year 2013-14 2013 being beyond period of six financial years excluding the financial year in which the search was carried out.
4. Aggrieved with the finding of the Ld. CIT(A), the Revenue is in appeal whereas the assessee is by way of cross cross-objection objection as reproduced above.
5. In ground No. one of the cross objections, the assessee has raised an issue that notice under section 153A of the Act could be issued for a period of six assessment years preceding the assessment year corresponding to financial year in which search was conducted, and the assessment year under consideration being beyond said period of six assessment years, therefore, therefore the assessment made u/s 153A of the Act is void void-ab-initio.
Skyway Infra Projects Pvt. Ltd. 8 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 5.1 The learned couns nsell supported the ground and submitted that the Assessing Officer was not justified in completing the assessment for the year under consideration onsideration under the provisions of the section 153A of the Act ct being beyond six assessment years provided under the section 153A of the Act.
5.2 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on rrecord.
ecord. We find that under the provisions of the section 153 153A of the Act, ct, prior to 1/04/2017 assessment could have been made only for the six assessment years but with effect from 01/04/2017, the Finance Act 2017 has amended the provisions to include further furthe relevant assessment year or years years,, which could be extended up to 10 assessment years subject to ceiling of undisclosed income.
income The word 'relevant relevant assessment year year'(s) has been defined by way of proviso and Explanation xplanation-1 to section 153A of the Act,, which, which for ready reference, is reproduced as under:
"Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless unless-
(a) the Assessing Officer has in his possession books of account or otherdocuments or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the th relevant assessment year or in aggregate in the relevant assessment years;
(b) the income referred to in clause (a) or part thereof has escaped assessassessment for such year or years; and Skyway Infra Projects Pvt. Ltd. 9 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
(c) the search under section 132 is initiated or requisition under und section 132A is made on or after the 1st day of April, 2017.
Explanation 1 -For For the purposes of this sub sub-section, section, the expression "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in whichh search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made.
made."
5.3 In view of the above provisions provisions, wherever search under section 132 of the Act ct is initiated or requisition under section 132A 132 of the Act is made after the 01/04/2017 and the escape escaped income is likely to be ₹ 50 lakh or more more,, notice under section 153A of the Act could be issued up to 10 assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. We find that in the instant case search was conducted on 06/11/2019 and income assessed for instant assessment year i.e. AY 2013-14 is more than 50 lakhs, therefore notice under section 153A of the Act ct could have been issued up to the 10 assessment year years preceding the assessment year 20-21.
21. Therefore, the Assessing Officer has validly issued notice u/s 153A of the Act in respect of the instant assessment year 2013-14. Thus, the he ground No. one of the cross objections of the assessee is accordingly dismissed.
6. In the he ground no 2 of the cross objections, the assessee has assailed the assessment or order der on the ground that order passed u/s 153A of the Act is barred by limitation.
Skyway Infra Projects Pvt. Ltd. 10 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 6.1 The Ld. Counsel of the assessee submitted that in view of powers conferred by subsection 1 of section 3 of Taxation axation and other laws (relaxation of certain provisions) ordinance, 2020, by way of notification issued, the time limit for passing the assessment order was extended up to 30/09/2021. He submitted that though the assessment order is s dated 30/09/2021, however the assessee gathered from the Income ncome-tax Departmental portal (website) that no order was passed or issued on 30/09/2021 till 12:13 AM in the night. The assessee claim claimed to have enclosed a screenshot of the portal to its submission filed before us us,, however no such screenshot has been found.
6.2 epartmental Representative (DR) submitted that The learned Departmental the case of the assessee was centralized with Central Circle, which are not on the faceless mode and orders have been passed by the Assessing Officer in physical mode mode.. Thereafter, the assessment order might have ave been uploaded on the Income-tax tax department portal after some gap of time and it might have been possible that same could not have reflect reflected on the Income-tax portal immediately after midnight of 30/09/2021. He submitted that the allegation that assessment order has been passed after limitation of expiry period are bald allegation of the assessee without any substantive evidence and therefore same are liable to be rejected.
Skyway Infra Projects Pvt. Ltd. 11 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 6.3 We have heard rival submissions on the issue in dispute. In our opinion, the requirement of the law is that assessment order should be passed prior to expiry of limitation period.
period As far as limitation period is concerned, there is no dispute and that is admitted as on 30/9/20201. The contention of the assessee is that impugned assessment order was not uploaded on income-tax income portal immediately after expiry of limitation i.e. midnight of 30/09/2021. In our opinion, merely not uploading the instant assessment order on the income tax portal by 12.13 AM on 1/10/2021, it cannot cann be established that assessment order was not passed within the period off limitation. If the assessment order is served within a reasonable period from the expiry of the limitation of passing the assessment order, it is presumed that same was passed within in the period of the limitation. The assessee has not brought on record any evidence that said assessment order was received beyond a reasonable period from the expiry of the limitation. In absence of any such documentary evidences, the allegations of the assessee are rejected. The ground No. 2 (two two) of the cross objections of the assessee is accordingly dismissed.
7. The ground 1 of the appeal of the Revenue relates to addition of Rs.48,04,750/- which was made by the Assessing Officer on account of bogus purchases. In the ground No. 3 (three) of the cross objections, the assessee has raised the issue that without aid of any incriminating material no addition could have been made in case of Skyway Infra Projects Pvt. Ltd. 12 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors completed assessment.
ment. This ground has been raised by the assessee with reference to the addition of bogus purchases also.
7.1. The facts qua the issue issue-in-dispute dispute are that the assessee has shown purchase expenses of Rs.18,12,07,840/ Rs.18,12,07,840/- during the year under consideration. D During uring the course of the search proceedings, the search team thoroughly examined the purchases of the assessee and key persons rsons of the assessee company were asked to substantiate those purchases by way of filing complete address pf supplier, PAN of supplier, purchase order, ledger account of supplier, invoice/bills, bills, delivery challans challans, lorry receipts, receipts consumption register, purchase and consumption reconciliation statement and bank statement etc. The Authorised officer of search team, from rom examination of the do documentary evidences shown by the assessee, noted certain laps lapses in claim of purchases expenses.
expenses The search team identified and short listed 13 parties,which ,which were having deficiencies viz. (i) the purchase bills were prepared using same style format / font, (ii) bills were not cont containting nting type and vehicle of the lorry use for transportation, delivery address, signature of employee or delivery (iii) invoices issued were not containing mandatory PAN (iv) no e e-way way bill, delivery challan, stock register etc. et For the period of assessment year 2013 2013-14 to 2020--21, the 13 parties were identified namely: V.H Enterprises, Vimalnath Corporation, Navkar Corporation, Mahavir Enterprises, Bhavya Enterprises, Rushabh Corporation, Rushabh Trading Co. Bharti Skyway Infra Projects Pvt. Ltd. 13 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Enterprises,, Hitesh K. Shah (HUF), Maharashtra Pile Foundation, Jay Khodiyar Enterprises, Vimalnath Associates and Diyan Corporation.
Corporation.A A chart of purchases from above parties recorded in books of account is reproduced as under:
Name of FY 2012-13 FY2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 2018 FY 2019-20 Sellers VH 20,49,491 30,32,100 16,26,193 18,30,019 15,68,280 65,56,050 80,09,332 Enterprises Vimalnath 10,07,776 32,25,653 16,57,681 22,65,013 22,09,095 64,33,341 31,00,940 Corporation Navkar 39,94,616 23,87,388 Corporation Mahavir 43,29,180 25,59,607 18,88,312 Enterprises Bhavya 34,52,173 22,06,521 Enterprises Rishabh 9,89,718 19,17,347 36,49,805 25,67,970 38,37,494 82,83,929 1,03,74,183 47,15,958 Corporation Rushabh 5,52,061 15,78,169 42,68,362 14,10,472 39,29,810 91,53,471 1,00,15,119 46,79,707 Trading Co.
Bharti 1,61,14,589 2,41,60,848 1,11,90,753 3,55,02,056 7,00,04,319 5,23,62,604 2,07,29,385
Enterprises
Hitesh K 32,62,971 32,84,910 31,88,0983 13,27,273 31,38,601 73,28,364 1,03,97,840 44,57,489
Maharashtra 21,88,490 64,68,451
Pile
Foundation
Jay Khodiyar 64,86,857 1,33,78,824 35,24,070
Enterprises
Vimalnath 36,10,050 17,62,298 19,40,968 14,13,598 58,81,762 35,81,809
Associates
Divya 31,01,660 23,04,423 22,59,068 16,87,727 65,10,522 30,24,057
Corporation
Total 48,04,750 2,81,40,783 6,34,33,887 3,64,33,887 6,20,57,929 10,15,48,783 11,80,27,822 5,41,81,058
Skyway Infra Projects Pvt. Ltd. 14
ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 7.2 During the course of search proceedings, simultaneous survey proceeding were carried out at the premises of above supplier parties and statement of proprietor /partner/director director of those th entities were recorded on oath oath,, which included (i) sh Vinod H Shah ( Karta of Vimalnath HUF Proprietor of M/s Vimalnath Corporation
(ii) Smt Khushboo Shah ( Proprietor of M/s VH Enterprises (iii) Sh Nishil Madhani , key person of Vimalnath Associates and Diyan Corporation and ( iv) sh Kantilal D jain , proprietor of M/s navkar Corporation and key person of Ma Mahavir havir Enterprises and Bhavya Enterprises. During survey at the premises of M/s Navkar Corporation, the survey team found 'WhatsApp WhatsApp messages' messages exchanged between the key persons of the assessee and sh Kantilal D jain. The individuals s whose statement were recorded rded stated that they had issued bogus bills to the assessee company without actual delivery of goods or material. The Assessing Officer has reproduced statement of the relevant persons of supplier companies from page 7 to 20 of the assessment order order. In the e assessment order, order the Assessing Officer has noted that three parties were not found at the places of their business mentioned in bills. The inspectors of the income-tax tax department, who were deputed for verifying their place of business submitted that bus business iness premises of M/s Rushabh Corporation, Rushabh Trading Company and M/s Hitesh K shah were found closed and persons in neighborhood denied of any a Skyway Infra Projects Pvt. Ltd. 15 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors business activity carried out from those places. In case of 'Kohudiyar Kohudiyar Enterprises Enterprises' also the Inspector reported that no entity or business was as found to be running from the address of that party and nearby people denied of having any knowledge of said entity.
The office of 'M/s Maharashtra pile foundation foundation' was found to be closed for a very longtime.
7.3 The statements of persons recorded during survey proceedings and evidences gathered by the Inspectors nspectors of the income-tax income departments were duly confronted to the representative of the assessee-company i.e. Director S Sh. Nirmal Madhani on 10/11/2019 (i.e. during the he course of search proceedings proceedings).
7.4 In view of observation observations made and material gathered during the search proceedings, the Assessing Officer during assessment proceedings on 15/09/2021, asked the assessee to produce those purchase parties for verificatio verification. The assessee, however,submitted however, that it had already supplied PAN of the supplier and sample invoice copies. In n absence of documentary evidence evidences in support of delivery of goods and observations recorded during search proceedings, the Assessing Officer held ld that the purchases amounting to Rs. 5,41,81,050/- in respect of th those se 13 parties for assessment year 2013-14 to 2020-21 21 as unexplained bogus purchases. In the year under consideration addition of Rs. 48, 04,750/ 04,750/- was made by the Skyway Infra Projects Pvt. Ltd. 16 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Assessing officer against bogus purchases. The relevant finding for the year under consideration is reproduced as under:
"7.9 7.9 In the instant case, there is specific information as well as independent enquiries. To summarize the above arguments, the assessee ee fails on the following grounds:
a) The assessee did not produce the parties which was asked specifically vide show cause dated 15.09.2021 The primary onus is on the assessee to establish the genuineness of the purchases claimed by it. As per section 10 101, 1, 102 and 106 of the Evidence Act, the onus lies upon the assessee to prove all the claims including purchases to the satisfaction of the AO, which was not discharged by the assessee as it failed to produce the parties from whom purchases were made. Since the primary facts are in the knowledge of the assessee, it is its duty to provide the correct address or contact modes of the alleged suppliers. This view is supported by the decision of Hon Hon'ble ble Raj High Court of India (2002) 178 CTR (Raj) 420 MP High Cou Courtrt in the case of VISP(P) vs.CIT Indore (2004) 186 CTR 218(MP) 218(MP).
b) Mere filing of copies of purchase bills without any documentary evidences in support of purchases and payment through account payee cheque cannot be conclusive in a case where genuineness of transaction is in question.
c) In the case of bogus purchase cases, the ratio laid down by the Apex Court, Jurisdictional High Court and Gujarat High Court in the following cases, need special mention considering the facts of the case.
i)) M/s. NK Protein Limited (reported at 84 taxmann.com 195 &292 CTR 354 (SC)
ii)) NikunjEximp Enterprises (in writ petition no 2860, order dt. 18.6.2014) (Bombay High Court.)
iii) CIT V/S N K Industries (in Tax Appeal No.240 of 2009 vide order dated 26.2.201 26.2.2016 6 (Gujarat High Court) subsequent decision in the case of CIT V/S Simit P. Seth356JTR 451 (Guj. H.C).
Skyway Infra Projects Pvt. Ltd. 17 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Thus, undisputed fact is that the purchases claimed to have been made from theseparties remained unverified.
7.10 10 After carefully going through the legal instances available on this issue the onus lay upon the assessee to prove the genuineness of the transaction when it claimed that the purchases are genuine. From the above case laws and the discussion on investigation, it is crystal clear that -
(1) The primary imary onus is on the assessee to establish the genuineness of the purchasesclaimed by it;
ii)) Since the primary facts are in the knowledge of the assessee it is his duty toprovide the correct address or contact modes of the alleged suppliers;
iii) If the investigation done by the Department leads to doubt regarding the genuineness of the purchases it is incumbent on the assessee to produce the parties along with necessary documents to establish the genuineness of the transaction transaction.
(iv) Payment by account pa payee cheque is not sacrosanct.
(v) No proof by way of challaa/documentary evidence for payment of VAT is filed.
(vi) Though it is true that sales cannot be affected without corresponding purchases, in the absence of stock register, books of accounts it is not possible to verify which goods were sold to the parties whose sales confirmation was submitted by the assessee. Assesseee is also unable to co co-relate the same.
7.11 In view of the above discussion, it is clearly explained that the assessee has claimed bogus purchase to inflate the expenses and to reduce the taxable income. Thus, bogus purchase expenses of Rs 48,04,750/-, claimed aimed as purchases from the bogus parties, as discussed above in FY 2012 2012-13 relevant to AY 2013-1414 is hereby disallowed and is added to the total income of the assessee in AY 2013-1414 as bogus expense Penalty U/S 271(1) © rws 274 of the Act, is initiate for concealment of Income Income."
7.5 On further appeal before the Ld. CIT(A), the assessee submitted that it had filed copy of income income-tax return, invoices along Skyway Infra Projects Pvt. Ltd. 18 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors with delivery challan and ledger account account, bank statement etc before the Assessing officer.. It was submi submitted by the assessee before the Ld CIT(A) that all those supplier parties had also separately filed their copy of Income-tax tax return return, invoice along with delivery challan, challan ledger account, sample copy along with transport bills, bills bank statement, VAT registrati registration certificate etc before the Assessing officer on 22.09.2021.
7.6 During the appellate proceedings, the assessee filed various documents as additional evidence which were sent by the Ld. CIT(A) to the Assessing Officer calling for remand report. The Ld. CIT(A) in the impugned order has as reproduced summary of the remand report during assessment proceedings proceedings, which for ready reference, is reproduced as under:
Sr. Name Remarks
No.
1 Rushabh Trading 1. Party appeared before this office anda statement
Co. (Proprietor was recorded,
Hitesh Kantilal
Shah) 2. The assessee has not submitted stock book and purchase order, and ME TAX replied in his statement that he received order from client through telephonic conversation and place order with the vendors of materialial and supply the goods to client directly at their sites. As the stock si not stored at any place by the assessee and hence, not maintained any stock.
3. Party provided its contact number & address in statement, which was verified independently by the Skyway Infra Projects Pvt. Ltd. 19 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors inspectors spectors and submitted report. As per the inspector report, party was found at the premise.
4. Copy of the statement enclosed. The Ld. CIT(A) may decide the case on merits based on the above facts.
2 Rushabh 1. Party appeared before this office hand statement Corporation was recorded (Proprietor Reema Hitesh Shah 2. The assessee has not submitted stock book and purchase order, and replied in his statement that he received order from client through telephonic conversation and place order with the vendors of material and supply the goods to client directly at their sites. As the stock si not stored at any place by the assessee and hence, not maintained any stock.
3. Party provided its contact number & address in statement, which was verified independently byb the inspectors and submitted report. As per the inspector report, party was found at the premise.
4. Copy of the statement enclosed.
The Ld.CIT(A) may decide the case on merits based on the above facts.
3. Hitesh Kantilal 1. Party appeared before fore this office and statement Shah (HUF) was recorded
2. The assessee has not submitted stock book and purchase order, and replied in his statement that he received order from client through telephonic conversation and place order with the vendors of material and supply pply the goods to client directly at their sites. As the stock si not stored at any place by the assesse and hence, not maintained any stock.
3. Party provided its contact number & address in statement, which was verified independently by the Skyway Infra Projects Pvt. Ltd. 20 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors inspectors and submitted report. As per the inspector report, party was found at the premise.
4. Copy of the statement enclosed.
The Ld.CIT(A) may decide the case on merits based on the above facts.
4 Vimalnath 1. Party has not attended the office.
Corporation
2. The e assessee has not submitted stock book.
3. Party provided its contact number & address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise.
4. The statement of the th party was recorded during the search action, the same may be considered for the present proceeding enclosed.
The Ld.CIT(A) may decide the case on merits based on the above facts.
5. Maharashtra Pile 1. Party has not attended the office.
Foundation
2. The assessee has not submitted stock book and purchase order.
3. Party provided its contact number & address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise.
4. The statement of the party was recorded during the search action, the same may be considered for the present proceeding enclosed.
The Ld.CIT(A) may decide the case on merits based Skyway Infra Projects Pvt. Ltd. 21 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors on the above facts.
6. V. H. Enterprises 1. The assessee failed to produce uce the party.
2. The party has not submitted stock book, purchase order and purchase bills.
3. Party provided its contact number & address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise.
The Ld.CIT(A) may decide the case on merits based on the above facts.
7. Jay Khodiyar 1. Party appeared before this office and statement Enterprises was recorded.
2. The assessee has not stock book and purchase order and replied plied in his statement that he received order from client through telephonic conversation and place order with the vendors of material and supply the goods to client directly at their sites. As the stock is not stored at any place by the assessee and hence not maintained any stock book.
5. Party provided its contact number & address in statement, the copy of the statement enclosed.
The Ld.CIT(A) may decide the case on merits based on the above facts.
8. Vimalnath 1. Party has not attended the office. 2. The Associates assessee has not submitted stock book.
3. Party provided its contact number & address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise.
Skyway Infra Projects Pvt. Ltd. 22 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
4. The statement of the party was recorded during the search action, the same may be considered for the present proceeding enclosed.
The Ld.CIT(A) may decide the case on merits based on the above facts.
9. Diyan Corporation 1. Party has not attended the office.
2. The assessee has not submittedstock book.
3. Party provided its contact number & address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise.
4. The statement of the party was recorded during the search action, the same may be considered for the present proceeding.
The Ld.CIT(A) may decide the case on merits based on the above facts.
10. Mahavir Enterprise 1. The assessee failed to produce the party.
2. The party has not submitted stock book.
3. Party provided its contact number & address in statement, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise.
6. The statement of the party par wasrecorded during the search action, the same may be considered for the present proceeding.
The Ld.CIT(A) may decide the caseon merits based on the above facts.
Skyway Infra Projects Pvt. Ltd. 23 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 11 Navkar Enterprises 1. Party has not attended the office.
2. The assessee has not submitted stock book and purchase order.
3. Party provided its contact number & address in statement which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise.
4. The statement of the party was recorded re during the search action, the same may be considered for the present proceeding. The Ld. CIT(A) may decide the case on merits based on the above facts.
12. Bhavya Enterprises 1. Party has not attended the office.
2. The assessee has not submitted stock book.
3. Party provided its contact number & address in statement, which was verified independently by theinspectors inspectors and submitted report. As per the inspector report, party was found at the premise.
4. The statement of the party was recorded during the search action, the same may be considered for the present proceeding.
The Ld.CIT(A) may decide the case on merits based on the above facts.
7.7 The CIT(A) has noted that out of 13 parties, 4 parties namely Rushabh Corporation, Rushabh Trading Co. Bhar Bharti ti Enterprises, Hitesh K. Shah (HUF), Jay Khodiyar Enterprises had appeared before the Assessing Officer and their statement were recorded, recorded and no adverse comment has been given by the Assessing Officer. In respect of Vimalnath Corporation, V.H. Enterpris Enterprises es and Mahavir Enterprises, though they did not attend before the Assessing Skyway Infra Projects Pvt. Ltd. 24 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Officer however they had submitted all the details details. In n respect of Maharashtra Pile Foundation, Vimalnath Associates Diyan Corporation Navkar Corporation Corporation,, the ld CIT(A) noted that the parties submitted name and address which were verified by the Inspector of the Department. Regarding one party namely Bharti Enterprises, no comments are available in remand report.
7.8 Before the Ld. CIT(A), the assessee submitted that during the period iod the assessee executed project work on behalf of the Government Agencies including MCGM. The project was duly monitored and checked by MCGM and only after satisfaction the MCGM payment was made to the assessee. The assessee further submitted that withou withoutt purchase material and payment to the labour contractor, the project could not have been completed.
7.9 It was further submitted that all necessary records regarding purchases were maintained and purchases were duly recorded in books of account and paymen paymentt for the purchase material was made by account payee cheque.
7.10 The assessee further submitted that during the course of search no incriminating material was found with respect to disallowance of purchase and therefore in absence of any incriminating material aterial disallowance of purchases made by the Assessing Officer is not justified. The assessee further submitted that disallowance was made on the basis of the third-party Skyway Infra Projects Pvt. Ltd. 25 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors information without any further scrutiny by the Assessing Officer and therefore, same e was not justified. The he assessee further submitted that no cross cross-examination of those parties was provided to the assessee and therefore, addition should be deleted on that ground also.
7.11 The Ld CIT(A) adjudicated the legal issue challenging the addition on as well as on merit. On the legal issue that addition could not have been made without the aid of incriminating material in completed assessment, the Ld CIT(A) rejected the contention of the assessee, and thus assessee is by way of ground No. 3 raised in i Cross objections.
8.0 The Ld. CIT(A) rejected the contention of the assessee that there was no incriminating material found vis vis-à-vis vis the addition of the bogus purchases. The relevant finding of the Ld. CIT(A) is reproduced as under:
"7.3.4 7.3.4 The appellant has submitted that no incriminating material with respect to bogus purchases was found during search proceedings, therefore, disallowances of purchases could not be made in the unabated assessment year. The facts of the case are that during ring the search proceedings, statement of Shri Shri Vinod H. Shah (Proprietor of Vimalnath Corporation), Smt. Khushboo V.Shah (Proprietor of V.H. Enterprises), Kantilal D. Jain (Proprietor of M/s. Navkar Corporation and Bhavya Enterprises) and Shri Nishil M. Madhani (key person of Vimalnath Associates & Divya Corporation), were recorded and they had admitted that they had provided bogus bills of purchases to the appellant company. These statements were confronted to Shri Nirmal Madhani, Director, who could not controvert the facts narrated in those statements. Thus, there was Skyway Infra Projects Pvt. Ltd. 26 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors incriminating material found during the search and the AO has disallowed purchase based on such statements. Therefore, this argument of the assessee is rejected.
rejected."
8.1 As far as the issu issue e of incriminating material is concerned the Ld. DR before us, submitted that during the course of search proceedings statement and other material of the supplier parties, Inspector report regarding their non non-existent existent at address etc. were obtained and which h were duly confronted to the assessee. In view of those information gathered, the books of accounts of the assessee were having false claim of purchase expenditure and therefore seizure of regular books of accounts indicating falsity of the transaction made, constitute incriminating material found.
found The Ld. CIT(A) also upheld existence of incriminating material in view of information gathered regarding purchase during the course of search proceedings. The contention of the assessee, however is that no incriminating minating material was found from the premises of the assessee vis-à-vis vis the purchases from those 13 parties.
8.2 We have heard rival submission of the parties on the issue-in-
issue dispute and perused the relevant material on record. In the case of Continental warehousing corporation (supra), the Hon'ble Bombay High Court held that if the assessments of any assessment year are pending as on the date of search,same same will get abated due to search action and the assessing officer can make any addition in those assessment sment year( year(s) based on the facts and circumstances of the case, not necessarily only based on incriminating material.
material Skyway Infra Projects Pvt. Ltd. 27 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors But, assessment years in relation to which, the assessments are already completed as on the date of search, those are unabated assessmentsand, and, in those cases, no addition could have been made except based on incriminating material found during the course of search. In the case of the assessee, the AY 2020-21 21 and AY 2019-20 2019 are two abated assessments and for the remaining assessment years, no addition could have been made without the aid of incriminating material.
material.Thus, the issue now for examination before us is whether there was any incriminating material qua the addition of bogus purchase in the year under consideration?
8.3 The word ' Incr Incriminating iminating Material' has not been defined in the Act but in context of the provisions of the Act incriminating material can be in the form of evidences which were not explained for the purpose of filing return of income like loose paper(s) paper or document containing aining transaction of income which were not reported for tax purpose or transaction of expense of excessive claim,the assets like cash, jewellary etc etc. acquired though unaccounted sources of income, false entries in books of account, absence of regular book books s of accounts and other records, statements admitted undisclosed income etc. In other words, any evidence whether oral or documentary found, which indicate evasion of taxable income, can be termed as 'incriminating material'. It is not necessary that all the seized material may be incriminating. In the case of Param Dairy Ltd in ITA 37/2021 & ITA 41/2021, 41/ the Skyway Infra Projects Pvt. Ltd. 28 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Hon'ble High Court of Delhi has held that regular books of account of the assessee by no stretch of imaginat imagination ion could be treated as incriminating material to form the basis of framing assessment u/s 153A of the Act. In case of B Kishore Kumar Vs DCIT (2014) 52 taxmann.com 449 (Madras), the Hon'ble Madras High Court held that when there is a clear and categoric, voluntary admission of the undisclosed income by the assessee himself, there is no necessity to scrutinize the documents and that would constitute a good piece of evidence. A SLP filed against the said decision of the Hon'ble Madras High gh Court has been dis dismissed missed by the Hon'ble Supreme Court as reported in (2015) 62 taxmann.com 215
215. In the case of CIT vs Harjeev Aggarwal in ITA 8/2004 before the Hon'ble Delhi High Court following questions of law were framed for consideration:
"1. Whether the Income Tax Appellate Tribunal was correct in law in deleting the addition of Rs.74 lacs paid by the Assessee in cash for the purchase of property bearing No.C No.C-104, Naraina Vihar, Delhi?
2. Whether the Income Tax Appellate Tribunal was correct in law in holding that the he provisions of Section 158 BB of the Income Tax Act, 1961 were not applicable to the facts of the case?
3. Whether the Income Tax Appellate Tribunal was correct in law in holding that the genuineness of the investment made for the purchase of property bearing No.C-104, 104, Naraina Vihar, Delhi was to be considered in the hands of the Assessee, Smt. Anita Aggarwal and Harjeev Aggarwal and Sons, HUF?"
8.4 The Hon'ble high court though answered the questions of law in favour of revenue but gave observation on th the e issue whether Skyway Infra Projects Pvt. Ltd. 29 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors statement on stand alone basis can be an incriminating material. The relevant observation observations are reproduced as under:
19. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded unde under Section 132 (4) of the Act would by itself be sufficient to assess the income, as disclosed by the Assessee in its statement, under the Provisions of Chapter XIV XIV-B B of the Act.
20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search" would ould not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation.
21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valvaluable uable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, Act 1987 w.e.f. 1st April, 1989, furth further er clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, ccounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence Skyway Infra Projects Pvt. Ltd. 30 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors or material discovered during the search. A statement of a person, which is not relatable to any incriminati incriminating ng document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded.
8.5 Similarly, in the decision dated 12/02/2021 in case of PCIT(Central) Vs Anand Kunar Jain (HUF) in ITA 23/2021, 23/2021 following question of law have been raised before Hon'ble Delhi High Court:
7. The Revenue is aggrieved with the aforesaid impugned order and has filed the present appeal under Section 260A of the Act, proposing the following questions of law:
a. Whether the ITAT is justified in deleting the additions made on account of bogus long term capital gain on the ground that the evidences found during search at the premises of entry provider cannot be the basis for making additions in assessment complet completed ed u/S. 153A in the case of beneficiary ignoring the vital fact that there was a common search u/s 132 conducted on the same day in both the cases of Skyway Infra Projects Pvt. Ltd. 31 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors the entry provider and the beneficiary? b. Whether ITAT was justified in holding that mere failure of cros cross s examination of entry operator is fatal when copy of statement was provided to the Assessee and Assessee failed to discharge the onus of providing the genuineness of LTCG especially in view of the apex court decision in the case of State of UP vs. Sudhir Kumar Singh [AIR 2020 SC 5215]?
8.6 The Hon'ble High Court answered that no substantial question arise for consideration and hence dismissed the appeal. The relevant observation of the Hon'ble High Court are reproduced as under:
10. Now, coming to the as aspect pect viz the invocation of section 153A on the basis of the statement recorded in search action against a third person. We ITA 23/2021 and connected matters Page 11 of 11 may note that the AO has used this statement on oath recorded in the course of search conducted in the case of a third party (i.e., search of Pradeep Kumar Jindal) for making the additions in the hands of the assessee. As per the mandate of Section 153C, if this statement was to be construed as an incriminating material belonging to or Skyway Infra Projects Pvt. Ltd. 32 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors pertaining taining to a person other than person searched (as referred to in Section 153A), then the only legal recourse available to the department was to proceed in terms of Section 153C of the Act by handing over the same to the AO who has jurisdiction over such p person.
erson. Here, the assessment has been framed under section 153A on the basis of alleged incriminating material (being the statement recorded under 132(4) of the Act). As noted above, the Assessee had no opportunity to cross-examine cross the said witness, but tha thatt apart, the mandatory procedure under section 153C has not been followed. On this count alone, we find no perversity in the view taken by the ITAT. Therefore, we do not find any substantial question of law that requires our consideration.
11. Accordingly, the present appeals, along with all pending applications, are dismissed.
8.7 In the light of above position of law, when we examine the facts of the instant case , we find that the (a) information in the form of statement of the supplier parties, (b) absence nce of evidence in support of transport/delivery of material etc etc. from the assessee during the course of search proceeding, proceeding,(c) none found at the premises of the supplier parties by the Inspector during verification etc. evidences, when seen in totality constitute material which is incriminating in nature. The entries in books of account regarding purchase are Skyway Infra Projects Pvt. Ltd. 33 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors false, which also becomes an incriminating material for the purpose of invoking provisions of section 153A of the Act.
8.8 Therefore, we uphold the finding of the Ld. CIT(A) that qua the addition of bogus purchase their existed incriminating material. The cross-objection No. 3 of the assessee with respect to qua the bogus purchases is accordingly disallowed.
9.0 On the merit of addition for bogus purchase, tthe he Ld. CIT(A) after considering submission of the assessee held that 4 parties which were duly produced before the Assessing Officer Officer, no addition could have been sustained. The relevant finding of the Ld. CIT(A) is reproduced as under:
"7.3.6 7.3.6 In the case of Rushabh Trading Co.,Rushabh Corporation and Hitesh Kantilal Shah HUF and Jay Kodivar Enterprise, during the assessment proceedings, the appellant as well as the purchase parties had submitted necessary supporting document documentss related to purchases before the AO. Further, during the remand report proceedings also, the parties attended before the AO and provided necessary documents with respect to the purchases made by the appellant from them. The statement of keypersons were re recorded.
corded. In the remand report, the AO has not made any adverse remark with respect to these 3 parties. Therefore, the disallowance of purchases made by the AO in respect of these 4 parties i.e. Rushabh Corporation, Rushabh Trading Co, Hitesh Kantilal Shah HUF H and Jay Kodiyar Enterprise cannot be sustained.
sustained."
9.1 In respect of other parties the Assessing Officer verified existence of the compan companies during remand proceeding and observed that those parties admitted the fact of accommodation entries Skyway Infra Projects Pvt. Ltd. 34 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors issued by them to the assessee. The relevant finding of the CIT(A) is reproduced as under:
"7.3.7 7.3.7 In the case of Vimalnath Associates, Vimanath Corporation, Mahavir Enterprises, Bhavya Enterprises, Diyan Enterprises, Maharashtra Pile Foundation, V. H. Ente Enterprises rprises and Navkar Corporation, the Inspector deputed by the AO had visited the premises and the parties were found existing at the given addresses. Therefore, the identity of the parties was established by the appellant. The statements of Vinod Shah (Prop (Proprietor rietor of Vimalnath Corporation), Smt. Khushboo V.Shah (Proprietor of V.H.Enterprises). Kantilal D. Jain (Proprietor of M/s.Navkar Corporation and Bhavya Enterprises) and Shri Nishil M. Madhani (kep person of Vimalnath Associates & Divya Corporation) were recorded. In their statements, they had admitted that they had provided accommodation entries of purchases to the appellant firm. These persons have not retracted from their statements. Therefore, the averment made by them in their statements cannot simply be brushed aside."
9.2 However, the Ld. CIT(A) is of the view that since the assessee has executed work for the government agencies and therefore entire amount of bogus purchases cannot be disallowed disallowed.. The relevant observation of the Ld. CIT(A) is reproduced as under:
"However, However, it is a fact that the appellant company was engaged in the business of execution of project work on behalf of government agency as well as MCGM and the project has been completed by the appellant firm. The appellant firm has received payment from the government agency on execution of project work assigned to it. The sale proceeds have been realised by the appellant firm from the government agencies. The AO has not doubted and disturbed the sales shown by the appellant as bogus or inflinflated.
ated. It is a settled principle of law that the AO cannot disallow 100% of purchases when the sales are not disturbed by the AO. Even the statements of Vinod Shah (Proprietor of Vimalnath Corporation), Smt. KhushbooV.Shah (Proprietor of V.H.Enterprises), K Kantilal antilal D. Jain (Proprietor of M/s.Navkar Corporation and Bhavya Enterprises) and Shri Nishil M. Madhani (key person of Vimalnath Associates & Divya Skyway Infra Projects Pvt. Ltd. 35 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Corporation) are taken into consideration, wherein they have admitted of having provided bogus accommodatio accommodation n entries, there is no evidence that the cash was received back by these parties from the appellant. Thus, the 100% disallowance of purchases made by the AO in respect of these 13 parties cannot be sustained and only profit element embedded in such purchas purchasee transaction only has to be disallowed. In this regard, the decisions in the following case are relevant In the case of CIT v.Bholanath Poly Fab (P.) Ltd. 20131 355 ITR 290 (Gujarat), the Hon'ble High Court of Gujarat has held that where assessee did purchase hase cloth and sell finished goods, but purchasers were not traceable, profit element embedded in purchases would be subjected to tax and not entire amount.
In this case, the Hon'ble High Court of Gujarat has held as under:
..The Tribunal committed no erro error.
r. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee di did d purchase the cloth and sell the finished goods, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. In the result, tax appeal is dismissed. [Para 6]..
In the case of Pr.. CIT v. RishabhdevTechnocable Ltd. 424 IT 338 (Bom),the Hon'ble High Court of Bombay has held that where assessee had declared certain purchases to be made during year and Assessing Officer added entire quantum of purchases to income of assessee on plea tthathat purchases were bogus purchases and Tribunal held that only reasonable profit at rate of 5 per cent on purchases should be added back to income of assessee, Tribunal was justified in its view.
The relevant paras of the decision of the Hon'ble High Court of Bombayare reproduced as under:
19. On thorough consideration of the matter, we do not find any error or infirmity in the view taken by the Tribunal. The lower appellate authorities had enhanced the quantum of purchases much beyond that of the Assessing Officer ie., from Rs. 24.18,06,385.00 to Skyway Infra Projects Pvt. Ltd. 36 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Rs. 65,65,30,470.00 but having found that the purchases corresponded to sales which were reflected in the retums of the assessee in sales tax proceedings and in addition, were also recorded in the books of accounts with payments made through account payee cheques, the purchases were accepted by the two appellate authorities and following judicial dictum decided to add the profit percentage on such purchases to the income of the assessee. While the CIT (A) hadassesse hadassessed d profit at 2% which was added to the income of the assessee, Tribunal made further addition of 3% profit, thereby protecting the interest of the Revenue. We have also considered the two decisions relied upon by leamed standing counsel and we find that fac facts ts of the present case are clearly distinguishable from the facts of those two cases to warrant application of the legal principles enunciated in the two cited decisions.
20. In BholanathPolyfeb (P.) Ltd. (supra), Gujarat High Court was also confronted with a similar issue. In that case Tribunal was of the opinion that the purchases might have been made from bogus parties but the purchases themselves were not bogus.Considering thee fact situation, Tribunal was of the opinion that not the entire amount of purchases but the profit margin embedded in such amount would be subjected to tax. Gujarat High Court upheld the finding of the Tribunal. It was held that whether the purchases were wer bogus or whether the parties from whom such purchases were allegedly made were bogus was essentially a question of fact. When the Tribunal had concluded that the assessee did make the purchase, as a natural corollary not the entire amount covered by such purchase but the profit element embedded therein would be subject to tax.
21. We are in respectful agreement with the view expressed by the Gujarat High Court.
22. Thus, we do not find any merit in this appeal. No substantial question of law arises from the order passed by the Tribunal.
Consequently, the appeal is dismissed However, there shall be no order as to cost.
In the case of Pr. CIT V. Jakharia Fabric (P. (P.)) Ltd. 429 IT 332 (Bom),the Hon'ble High Court of Bombay has also held that where information was received by Assessing Officer to effect that eight parties from whom purchases were made by assessee engaged in Skyway Infra Projects Pvt. Ltd. 37 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors job work of dying of fabrics were hawala deale dealers rs who had issued bogus bills and he treated aforesaid purchases as bogus purchases, since without purchase of materials, it was not possible for assessee to complete job work of dying and entire purchases could not be added as bogus. profit element embedd embeddeded in such transaction had to be added to total income of assessee.
9.3 The Ld. CIT(A) referred to the decision of the CIT v. Bholanath Poly Fab (P.) Ltd. [2013] 355 ITR 290 (Gujarat), decision of the Hon'ble Bombay High Court in the case of Pr. CIT v. Rishabhdev Ris Technocable Ltd. 424 ITR 338 (Bom) and decision of in the case of Pr. CIT v. Jakharia Fabric (P.) Ltd. 429 ITR 332 (Bom), Following ollowing the above decision decisions,, the Ld. CIT(A) restricted the disallowance of purchases to 5% in respect of 9 parties observing as under:
"In In the case of the appellant, the AO has accepted the sales recorded in the books of accounts, therefore, only profit element embedded into purchases could be disallowed. Accordingly, the disallowance of purchases is restricted to 5% of purchas purchases es made from 09 parties ie Vimalnath Associates, Vimalnath Corporation Mahavir Enterprises, Bhavya Enterprises, Diyan Enterprises, Maharashtra Pile Foundation, V. H. Enterprises and Navkar Corporation & Bharti Enterprises.
7.3.8 During the A.Y.2013 A.Y.2013-14, the appellant has made purchases from Hitesh Kantilal Shah HUF (i) Rushabh Corporation (il) Rushabh Trading Co. As discussed in para 7.3.6, purchases made from Rushabh Corporation, Rushabh Trading Co, and HiteshKantilal Shah HUF have been justified by the app appellant ellant during the assessment as well as remand proceedings. Therefore, purchases of Rs.48,04,750/- made from Rushabh Corporation Rushabh Trading Co. and Hitesh Kantilal Shah HUF is deleted.
deleted."
9.4 We have heard rival submission of the parties on the merit of the addition of bogus purchases. R Regarding egarding the addition of bogus Skyway Infra Projects Pvt. Ltd. 38 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors purchases, deleted by the Ld. CIT(A), we find that the Assessing Officer in the assessment proceedings made addition mainly for the reason that those parties w were ere not produced before him during assessment proceedings and parties failed to provide proof of delivery of goods.. The finding of ld CIT(A) are not acceptable due various reasons. Firstly Firstly, we e find that during the remand proceedings out of those 13 parties, 4 parties were produced, but b no proof of delivery of goods to the assessee has been produced by Secondly, out of those four parties, three parties were those parties.Secondly controlled by the same person i.e. sh Hitesh Kantilal Shah , who had provided annual payment of Rs. 40,000/- to the other suppliers like Vimalanath Corpoation, VH Enterprises for making available bank accounts s of their firms for providing accommodation entry.
entry Relevant part of statement of sh Vinod H shah reproduced by the Assessing Officer is extracted as under:
"Q.10. Please explain in how many entities you are proprietor, partner or Director.
Ans. Sir, as stated above, I am basically not working. However, my distant relative, Hitesh Shah (Contact No.9930195780) is managing and operating a HUF concern ie M/s Vimalnath Corporation, wherein I am karta. Other than this, I am not a partner or Director in any business entity. I am just a signatory in the HUF concern i.e. M/s Vimalnath Corporation, which is managed and operated by my distant relative, Hitesh Shah. I am no nott aware of the business actlivities carred out by Shri Hitesh Shah in M/s Vimalnath Corporation. You are requested to ask, Shri Hitesh Shah about the business activity of M/s Vimalnath Corporation.
Skyway Infra Projects Pvt. Ltd. 39 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Q.11 Please explain how many entities are being operated from this premises at Flat No. 1st floor, Neminath Apartment, 60 feet Road, Devchand Nagar, Bhayander West, Mumbai-401 101?
Ans. Sir, the following entities are being operated from this premises.
Sr.No Name of the Proprietor Nature of
. entity business
1 M/s V.H. Proprietor Not aware
Enterprises (Khushboo of the
Vinod nature of
Shah) business
2 M/s Vimalnath HUF Not ware
Corporation concern of the
(Karta nature of
Vinod business
Himmeth
Shah
All the above entities are controlled and managed by my distant relative, Shri Hitesh Shah. Me and my daughter are just proprietor / karta for documentation purpose and not aware of the business activity.
Q.12 Please give the office and residential address of Shri Hitesh Shah. Please also explain how you got convinc convinced ed to act as a signatory in M/s Vimalnath Corporation?
Ans. Sir, I am not aware of the exact address of Shri Hitesh Shah. However, he operates from Haridas Nagar in Borivali West. Sir, Shri Hitesh Shah is my distint relative and he offered me commission of Rs.40,000/ Rs.40,000/- annually for using our name for issue of bogus bills. He would manage the whole affairs of M/s Vimalnath Corporation and I am not aware about business transactions carried out in the said entity. The commission of Rs.40,000/- was paid to mme in cash for F.Y. 2015-16 16 to F.Y. 2017-18.
18. The commission for F.Y. 2018-19 19 is still not paid by him. The commission was sent to us through his person and Skyway Infra Projects Pvt. Ltd. 40 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors we would collect the same from a decided spot in Bhayander or outside our Society Building. Same way, documents were sent to us for signature through his person. One of his persons is Shri Knatilal (Contact No.9769722713) who would handover the cash to me or bring documents for signature purpose.
Q.13 How much money do you receive for acting as a signatory sig in M/s Vimalnath Corporation Corporation?
Ans. As stated above I have received an amount of Rs.40,000 annually as commission for acting as a signatory in M/s Vimalnath Corporation.
Q.14 Please produce the books of accounts, Cheque books, bills and Vouchers etc of M/s Vimalnath Corporation.
Corporation Ans. All the books of account, cheque book, bank book etc. are in the possession of Shri Hitesh Shah. No documents of M/s Vimalnath Corporation are lying with me.
Q.15 Pl explain who operates the Bank account of M/s Vimalnath Corporation Ans. The bank account is handled by Shri Hitesh Shah and I use to only sign the cheques, whenever he would send it across through his person.
Q.16 Pl.explain since when have you been acting as a signatory in M/s Vimalnath Corporation?
Ans Sir, I have been acting as a signatory of M/s Vimalnath Corporation from F.Y. 2015 2015-16."
9.5 Thirdly, The important issue is that whether the assessee has established consumption of those corresponding purchase with its stock or consumption register. It is the assessee who was required to establish the factum of consumption of the material with its documentary evidences but the assessee has neither shown any Skyway Infra Projects Pvt. Ltd. 41 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors such evidence before the he lower authorities nor before us, therefore, the deletion of disallowance of purchase corresponding to those parties by the Ld CIT(A) is not justified.
9.6 Fourthly, regarding, egarding, the other parties, who during remand proceedings remained firm on their earl earlier ier statements made that they were engaged in providing accommodation entries, ld CIT(A) has held them as bogus concerns but according to the ld CIT(A) only addition to the extent of profit element ( i.e. 5 % ) on those bogus purchases could be disallowed and not 100 % amount of bogus purchase. In our opinion the Ld CIT(A) has not analyzed the issue of bogus purchases in right perspective. The Hon'ble Bombay High Court in case of Mohamad haji Adam & Co.
Co.ITA ITA 1004 of 2016 dated 11/02/2019 has he held that in case of bogus purchases addition should be restricted to the extent of extra profit element but that case is of trader where sales are not held doubtful by the Assessing Officer.
9.7We are of the view that when the purchases are admittedly bogus, s, then disallowance in such cases will depend on the facts and circumstances of the case and no uniform formula can be applied across the cases.
9.7.1 For example, in case of a trader, two situations situation may be possible. Firstly,, where where, the trader is maintaining perfect record of stock inventory from which it can be seen that when the Skyway Infra Projects Pvt. Ltd. 42 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors particular item of purchase has been received by the assessee and when the same has been delivered to the buyer on sale. In such circumstances, each purchase ca can n be linked to respective sales.
Now if
(a) the sales are either exports or to the government organisation, then sales not being doubtful, the only presumption would be that the assessee has purchased those goods from grey market and obtained bills from the bogus ogus accommodation entry provider and money paid though cheques by the assessee must have been routed back to the assessee in cash. In such circumstances, circumstances the Hon'ble Courts have held that the assessee must have only benefitted by way less purchase price paid p in grey market and corresponding profit by which the assessee benefitted in entire transaction should only be added. Though, the source of investments in purchase of goods from grey market need to be examined in such cases. The Tribunal Mumbai Bench in the case of DCIT Vs Rajeev G Kalathi (2014) 51 taxmann.com 514 estimated 3 % of profit on bogus purchases. In the case of Kiran Navin Doshi Vs Income Income-tax tax officer (ITA No. 2601/Mum/2017) the Tribunal estimated profit at the rate of 12.5 % of the bogus purchases.
Skyway Infra Projects Pvt. Ltd. 43 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors
(b) When the sales are doubtful or those sales are also accommodation entry bills, in such circumstances, the only addition which could be made in the hands of an assessee is commiss commission income for issuing accommodation entry bills.
9.7.2 Secondly, situation where no stock inventory is maintained by the trader and the bogus purchases can't be linked with corresponding sale, then, it is obvious that the bogus purchase has been booked for reducing the profit and in such circumstances, the entire amount of bogus purchase is liable to be disallowed.
9.7.3 Similar, is the situation in case of Contractor or manufactures who consume the bogus purchases in th their eir business.
If the contractor is able to establish consumption of those bogus purchased goods in his business by way of evidence, it is presumed that assessee has procured goods from grey market and therefore difference of profit on such purchase from grey market can only be added. But where, an assessee is unable to establish consumption of the bogus purchased goods into its business, then entire amount of bogus purchases are liable to disallowed.
9.8 The Hon'ble Gujrat High Court in the case of NK Proteins Protein Ltd vs DCIT (2017) 84 taxmann.com 195 has reversed the finding of the Tribunal for restricting the disallowance at 25% of the purchases and held that in such cases where an assessee is unable Skyway Infra Projects Pvt. Ltd. 44 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors to establish consumption consumption, 100 % disallowance should be made. This decision of Hon'ble Gujrat High Court has been upheld by the Hon'ble Supreme Court vide SLP© No. 769 of 2017. The Tribunal Pune Bench in the case of ACIT Vs Pritam S Mahale in ITA No.183/PUN/2020 for Assessment Year : 2009-2010 0 hasupheld that in case of contractor where he is unable to establish consumption of such bogus purchases in his business, entire bogus purchases are liable to be disallowed. The relevant finding of the Tribunal is reproduced as under:
"6.
6. We have heard the rival contentions of both the parties; and subject to the provisions of rule 18 of "ITAT Rules", perused the material placed on record, case laws relied upon by the appellant as well the respondent and duly considered the facts of the case in the light of settled legal position forewarned to parties present.
7. On perusal of records, we find that, upon the receipt of information from DGIT(INV), the Ld. AO after identifying the list of entry operators with whom the assessee had alleged hawala transactions and quantification of amount of bogus purchases involved, has put the respondent assessee to notice calling evidential documents to prove the existence of parties and genuineness of transactions, and in the event of failure to showcase physical movement of goods & consumption thereof, disallowed the entire amount of bogus. Whereas, the Ld. FAA reverberating the findings of lower authority, restricted the disallowance to the GP ratio in the light of Hon'ble Jurisdictional High Court of Bombay mbay in "Mohammad Haji Adam & Co." (Supra) for the reason of acceptance of sales/revenue without dispute. Insofar as the bogus purchases are concerned, the ratio laid in "Mohammad Haji Adam & Co." (Supra) cannot squarely be applied to the present case for three factual variations, firstly the assessee before us is neither a trader nor a dealer but a Govt Civil Contractor and secondly there was complete absentia with regards to quantitative details or consumption of material purchased, and finally the sales or revenue were not exclusively with reference to Skyway Infra Projects Pvt. Ltd. 45 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors goods purchases/consumed but inclusive of work contract services. However, the Hon'ble Lordship had occasioned to considered similar facts and circumstance in the case of "PCIT Vs Pinaki D Pinani" (Bombay ITA/1543 TA/1543 of 2017), wherein the assessee being civil contractor, with evidential stock records and sales, was able to demonstrate the quantity of material consumed in execution of work contract undertaken and thereby established the nexus.
8. In the light of aforesaid discussion, we are of the considered view that, the ratio laid down by the Hon'ble Supreme Court in the case of "NK Proteins Ltd vs DCIT" (Supra) is squarely applicable to the facts of assessee case, where the Hon'ble Supreme Court C dismissed appeal of assessee and confirmed the findings of Hon'ble Gujarat High Court in respect of bogus or sham purchases, wherein the Hon'ble Lordships, after analyzing necessary facts, by para 6 of the order have held that;
"6. The Tribunal in th the e case of Vijay Proteins Ltd. (supra) has observed that it would be just and proper to direct the Assessing Officer to restrict the addition in respect of the undisclosed income relating to the purchases to 25% of the total purchases. The said decision was confirmed by this Court as well. On consideration of the matter, we find that the facts of the present case are identical to those of M/s. Indian Woollen Carpet Factory (supra) or Vijay Proteins Ltd. (supra) In the present case the Tribunal has categorically categorica observed that the assessee had shown bogus purchases amounting to Rs.2,92,93,2887 Rs.2,92,93,2887- and taxing only 25% of these bogus claim goes against the principles of Sections 68 and 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious invoices have been debited in the trading account since the transaction has been found to be bogus. The Tribunal having once come to a categorical finding that the amount of Rs.2,92,93,2887 Rs.2,92,93,2887- represented alleged purchases from bogus suppliers it was not inc incumbent umbent on it to restrict the disallowance to only Rs. 73,23,3227-."
73,23,3227
9. In the present case too, when it has been categorically established that, the amount of bogus purchases ₹64,33,495/ 64,33,495/- is debited to P&L by fictitious tax invoices and the respondent assessee essee failed to establish the consumption of such goods in the execution of civil contract by adducing sucsuch h stock movement records to the satisfaction of Ld. AO., then taxing such bogus Skyway Infra Projects Pvt. Ltd. 46 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors purchases GP rate of goes against the principles of taxation embedded in chapter VI of the Act and against the ratio laid down in "N K Proteins Ltd" and "PCIT Vs Pinaki D Pinani" (Supra), for the reason, we are of the considered view that, the Ld. AO was right in making 100% disallowance towards bogus / hawala purchases, and thus we are inclined to uphold the order of assessment and reverse the order the Ld. FAA.
FAA."
9.9 In view of above discussion and following the Tribunal in the case of Prtiam S mahale (supra) , where the decision in the case of Mohamad Haji Adam and Co. (sup (supra) ra) and N K Proteins Ltd (supra) have been analysed, the findings of ld CIT(A) on the issue of bogus purchases are set aside and the addition made by the Assessing officer is restored. The ground No. 1 of the appeal of the Revenue is accordingly allowed. The he ground no. 3 of the cross objection of the assessee is dismissed.
10. The ground No. 2 of the appeal of the Revenue relates to addition of Rs.2,86,53,687/ Rs.2,86,53,687/- in respect of unsecured loans. The ground No. 3 relates to disallowance of interest expenses of Rs.1,42,15,496/- in respect of those unsecured loan parties which have been held as unexplained by the Assessing Officer.
10.1 During the course of search proceedings total unsecured loans of Rs.1,26,67,16,092/ Rs.1,26,67,16,092/- were found recorded in the case of the assessee for assessment year 2013 2013-14 14 to assessment year 2019- 2019 2020. During the course of search and survey proceedings on the premises of the assessee company company,, the key persons of the assessee Skyway Infra Projects Pvt. Ltd. 47 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors company were asked to furnish details regarding said loans loan such as complete address of the loan giver giver,, PAN, bank statements and other documentary evidences along with confirmations letter, letter ledger account, details of repayment of loan, details of TD TDS etc. During the course of examination of documentary evidence certain lapses--were lapses identified by authorised officer and it was noted that in case of following 29 parties, the assessee produced only ledger copies and payment proof and no other evidence like PAN, address, confirmation letter, bank statement a and nd TDS etc. were produced:
produced No. Entity PAN FY 2012 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 1 Aadishwar AAICA1905B 3,03,253 30,00,000 83,22,020 Diamonds 2 Aditi Gems Pvt. AAICA6634L 2,19,000 2,19,000 1,55,400 Ltd.
3 Anshul Gems AAHCA6495 65,00,000 7,21,750 9,46,465 1,72,020 Pvt. Ltd.
4 Antique Pvt. AAJCA9015B 11,53,200 2,28,50,000 23,63,425 24,94,710 Ltd.
5 Arjay Gems Pvt. AAPCA6887A 11,53,200 2,28,50,000 28,63,425 24,94,710 Ltd.
6 Bahubali AADCB9109R 13,35,250 78,19,000 3,18,000
Diamond Pvt.
Ltd.
7 Boetal Trading AACCB8137A 9,71,198 3,00,00,000 3,78,000 3,20,160
Pvt. Ltd.
8 Burlington AABCB4362Q 8,21,250 4,80,000
Mercantiles Pvt.
Ltd.
9 Chaitanya Gems AADCC9257F 8,32,200
Pvt. Ltd.
Skyway Infra Projects Pvt. Ltd. 48
ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 10 Crescent AABCC4886B 5,80,350 45,00,000 9,34,920 Diamond Exim Pvt. Ltd.
11 Divyanshi Gems AADCD8741R 64,26,000 68,14,700 3,14,700 Pvt. Ltd.
12 Dojahan AACCD3340F 75,00,000 6,41,085 2,08,200 Trading Pvt. Ltd 13 Ensure Insure AACCB1526E 13,39,572, 41,00,000 7,88,400 7,88,400 2,12,627 Brokers Pvt. Ltd.
14 HPL Multi Trade AABCH6652D 12,50,000 40,16,975 5,21,550 Pvt. Ltd.
15 Karnawat Impex AADCK1927A 2,19,000 Pvt. Ltd.
16 Kriya Impex Pvt. AADCK1928B 8,32,200 Ltd.
17 Manohar Impex AAFCM9840G 30,00,000 44,44,564 29,27,960 Pvt. Ltd.
18 Param Gems AAFCP4945C 1,13,00,000 92,37,350 22,19,140 Pvt. Ltd.
19 Piyush Gems AAFCP9545H Pvt. Ltd.
20 Saffron Gems AANCS2828J 3,77,775 39,20,175 5,21,550 Pvt. Ltd.
21 Samkit AADCS9472L 3,04,34,400 3,36,850 15,65,850 Diamond Mfg.
Co. Pvt. Ltd.
22 Samkit Gems AAQCS8731D Pvt. Ltd.
23 Snowdrop AAMCS8992E 2,00,00,000 21,96,000 Vincom Pvt. Ltd.
24 Surya Diamond AANCS7279E 11,40,750 2,27,460 Pvt. Ltd.
25 Takshila Exim AADCT9006B 76,50,000 10,00,720 Skyway Infra Projects Pvt. Ltd. 49 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Pvt. Ltd.
26 Badam Trading AAFCB0891H 10,90,890 3,01,050 Pvt. Ltd.
27 Lalita Gems Pvt. AABCL7179H 3,29,500 2,27,700 Ltd.
28 Moxa Diamond AACCM1959H 1,69,200 15,02,000 51,64,250 1,30,88,000 Pvt. Ltd.
29 Shikha Diamond AAJCS5918B 17,48,818 25,00,000 51,64,250 51,64,250 1,80,88,000 Pvt. Ltd.
Total 1,44,38,191 10,50,69,000 9,17,46,572 9,03,45,979 1,16,53,010 6,62,810 10.2 Based on the information, profile of those unsecured loan creditors was prepared (using database of income-tax tax department) department about their turnover & net profit, taxable business income and reserve and surplus, whether return of income filed etc. was prepared,, which is reproduced by the Assessing Officer on page 37 to 41 of the assessment order. It was observed that in respect of 29 parties that firstly,, no sufficient reserve and surplus in their balance sheet, secondly parties were every year having high turnover butlow net profit ratio, thirdly,, some entities didn't file their return regularly, fourthly fourthly, the parties themselves were having outstanding creditors in their books of accounts.
Skyway Infra Projects Pvt. Ltd. 50 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 10.2.1 The search/survey teams during the course of search analyzed the income-tax tax assessment records (i.e. assessment orders passed by DCIT Central circle, Surat) of two unsecured loan creditors namelyM/s Kriya Impex Pvt. Ltd. and M/s Karnavati Impex Pvt. Ltd. and found that those were accommodation entry provider, which were managed an and d handled by Shri Rajendra Jain.
10.2.2 Further, during uring search proceedings, the search team deputed various inspectors for verification of existence of the unsecured loan creditors. The reports submitted by the Inspectors have been reproduced by the Assessing officer on page 48 to 86 of the assessment order. T The Inspector(s) have mainly reported that parties were not found in existence at their addresses.
es. The Ld. Assessing Officer has reproduced photos of the places and inquiry report of the Inspector of the Department in the impugned assessment order. All the material gathered during the course of search was confronted by the search team to the Director of the assessee company Shri Nirmal Madhani.
dhani. However, he failed to give any satisfactory reply in respect of th those 29 parties including their current address.
10.2.3 Further, urther, during the course of search proceedings on 11.11.2019,, statement of Shri Deepak Jain was recorded, wherein he stated he was managing few dummy companies which were used for providing accommodation entry bills/ credits. He admitted that he had provided ded accommodation loan entry to the assessee though Skyway Infra Projects Pvt. Ltd. 51 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors five of his dummy entities. The statement of sh Deepak jain was also confronted to the Director of the assessee company.
10.3 Based on inquiries and finding of the Department, the Assessing Officer issue issuedd show cause notice asking the assessee to explain the unsecured loan creditors and also produce those 29 parties before him.. It was contended by the assessee that loans were received through banking channels and ledger accounts, income-tax tax returns and rep repayment of the loan to said parties had already been submitted before the Assessing Officer. The Assessing Officer however was not satisfied by the reply given by the assessee. According to him the key persons of the assessee company had admitted in statement on oath that they have taken bogus accommodation entries unsecured loans loans. The he Assessing Officer was of the opinion that cas cash generated while bogus purchases was handed over to unsecured secured loan creditors. The Assessing Officer was of the view that the assessee failed to produce material evidences in support of genuineness of the loan transaction and accordingly, the assessee failed ed to discharge its onus u/s 68 of the Act to establish identity, genuineness of the transaction and creditworthiness of the parties. The Ld. Assessing Officer relying on the decision in the case of Roshan Di Hatti v. CIT [1977] 107 ITR 937 (SC) and Kale Khan han Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC) etc. held all the 29 parties as unexplained cash credit making addition of Rs. 31,47,15,562/- for AY 2013 2013-14 to AY 2018-19. The Assessing Skyway Infra Projects Pvt. Ltd. 52 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Officer also made addition u/s 68 in respect of the interest paid to those ose unsecured loan creditors during the period from AY 2013-14 2013 to 2018-19.
19. The addition for loan and interest made for various years has been summarized by the Assessing officer as under:
A.Y. Bogus unsecured loan Bogus interests paid Total amount (Rs.) receipts (Rs.) thereon (Rs.) 2013-14 1,44,38,191 1,42,15,496 2,86,53,687 2014-15 10,58,69,000 1,12,40,415 11,71,09,415 2015-16 9,17,46,572 1,66,58,522 10,84,05,094 2016-17 9,03,45,979 2,62,59,244 11,66,05,223 2017-18 1,16,53,010 68,61,233 1,85,14,243 2018-19 6,62,810 7,36,547 13,99,267 Total 31,47,15,562 7,59,71,367 39,06,86,929 10.4 In n respect of year under consideration consideration,, the addition for unsecured loan creditor is of Rs.1,44,38,191/- and for interest is of Rs.1,42,15,496/-. The relevant finding of the Assessing Officer while making addition are reproduced as under:
8.4 in response to the show cause notice assessee has submitted the documents which include ledger confirmation and ITR of the above parties. it was also submitte submittedd that the assessee has returned back loans in various parties in full. Thus, mere submission of bank statement and ledger confirmation of the parties is not sufficient to prove the genuineness and creditworthiness of the loan parties. Also, the director a and nd the key persons of company has clearly stated in their statements recorded Skyway Infra Projects Pvt. Ltd. 53 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors during the course of Search & Seizure proceedings that they have taken accommodation entries of unsecured loans. The modus operandt are that for these transactions the beneficiar beneficiaryy will give them cash and the same will be returned to the beneficiary by issue of cheques after charging their commission on such transactions.
8.5 5 The assessee further relied on the fact that, the parties are identifiable and amounts were received throug through h banking channels.
These parties are credit worthy to make such investments in the assessee company and submitted that the transactions are genuine. The assessee failed to prove genuineness of these transactions.
8.66 The assessee in response to specific s show how cause notice has not made any submissions to disprove the departments above findings. The assessee except for pointing out that its name is not mentioned in the statements given, has not commented on the entire modus operandi admitted by the parties co concerned.
ncerned. The controlling persons of unsecured loan parties have categorically admitted that they are involved in providing only bogas and accommodation entries for commission. The statements were given under oath in the Income Tax Act. The evidences gather gathered ed clearly proved that these parties have only provided accommodation entries for consideration /commission to the willing parties. These parties receive cash from the clients than through layering transfer the funds in the form loans. The assessee mainly generate cash through bogus expenses and this cash hand over to the entry operators. In present case also, assessee has generated cash through bogus purchase and taken unsecured loan entry by handing over cash to the entry operators. Hence the assessee's arguments rguments on this lack any meri meritt and deserve to be rejected.
8.7 Further, the entry providers in their statements have categorically stated that, the cheques and bills/documents were issued. There are no book entries to the real transactions either in the books of the assessee or in the books of these entry providers. Therefore, the statements on oath, solemn affirmation and the admission of the parties when confronted with the evidences found in the course of search are sufficient evidences under taxation provisions to conclude that, both the parties entered into such arrangements with connivance with each other.
Skyway Infra Projects Pvt. Ltd. 54 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 8.8 As per the provisions of section 68 of the IT. Act, the assessee is required to explain the identity, genuineness and creditworthiness of the party. In present case assessee has proved identity of unsecured loan parties, but failed to provide the nature and source of the credit appearing in its books. The explanation offered by assessee found to be unsatisfactory. The Hon'ble Supreme Court has h held eld in the case of Shreelekha Banerjee Vs CIT [49 ITR 112(SC)) that addition for unexplained cash credit is justified simply if the assessee fails to offer an explanation or the explanation offered by the assessee is found to be not satisfactory by the Assessing essing Officer.
10.5 In respect of addition by the Assessing Officer u/s 68 of the Act, before the Ld. CIT(A) the assessee provided evidences evidence related to those se 29 parties including ledger copy copy, confirmation, bank account details, ITR copy etc. which were fo forwarded rwarded by the Ld. CIT(A) to the Assessing Officer calling for the remand report. The Ld. Assessing Officer submitted that assessee did not produce those creditors before him for recording their statement on oath, hence it was not possible to verify their credentials. In n rejoinder, the assessee submitted that those se loans were taken long back and were repaid in financial year 2017-18 18, therefore, those parties were not in contact thus, cannot be produce produced before the Assessing Officer. However, whereas the evidence ence such as loan confirmation confirmation, ITR ,copy of balance sheet, bank statement in respect of those parties were already submitted during the remand proceedings. During appellate proceedings, the Ld. CIT(A) reconciled the ledger balances of 29 parties at the end of each year from assessment year 2013-14 2013 to assessment year 2020 2020-21 and found that out of 29 parties, in Skyway Infra Projects Pvt. Ltd. 55 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors respect of 9 parties no credit transactions were appearing appear during the period from AY 2013 2013-14 to 2020-21.
21. The Ld. CIT(A) accordingly deleted the addition tion u/s 68 of the Act in respect of th tho ose 9 parties observing as under:
"8.3.6 8.3.6 The AO has made reference to statement of Shri Rajendra Jain regarding providing accommodation entries of unsecured loans to various parties. The list of 29 parties include name of two parties i.e Karnawat Impex Pvt. Ltd and Kriya Impex. As discussed above, the appellant has not received any unsecured loan during F.Y. 2012- 2012 13 to F.Y. 2017-18 18 from Karnawat Impex Pvt. Ltd and Kriya Impex. Therefore, reliance of AO on the state statement ment of Shri Rajendra Jain for making addition u/s.68 inrespect of unsecured loan from Karnawat Impex Pvt. Ltd and Kriya Impex has no relevance to the facts of the case of the appellant.
The AO has also referred to Five companies managed & controlled by Shri ri Dipak Jain which had provided accommodation entries. AO has not mentioned names of Five companies controlled by Dipak Jain, however, it is gathered that only two companies i.e Sanmati Gems Pvt. Ltd. and Surya Diamond Pvt. Ltd. are mentioned in list of 29 9 parties. In the case of Sanmati Gems Pvt. Ltd, the AO has also accepted that no unsecured loan was received fr from om it by the appellant company."
10.5.1 Further in para 8.3.6, the Ld. CIT(A) has mentioned that the parties 'Karnawat Impex Pvt. Ltd' and 'Kriya Impex'' addition in respect of which made relying on the statement of Shri Rajendra Jain and since there was no loan or credit in respect of those th two parties during the period from AY 2013 2013-14 to 2020-21, therefore, therefore no addition could have been made.
10.5.2 The Ld. CIT(A) has further mentioned that two parties namely 'M/s Surya Diamond Pvt. Ltd Ltd' and 'M/s Sanmati Gems Pvt.
Skyway Infra Projects Pvt. Ltd. 56 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Ltd' were stated by the lower authorities as controlled by Sh Deepak Jain, but, those two part parties were also having no credit transactions transactio with the assessee during the period form AY 2013 2013-14 14 to 2020-21, 2020 hence no addition could have been made in respect of those two parties also. This exclusion left 18 parties for examining on the test laid down u/s 68 of the Act.
10.5.3 In respect of those remaining 18 parties, the Ld. CIT(A) held that those parties had filed the available evidences evidence and the assessee discharged its onus provided u/s 68 of the Act.
Act The relevant finding of the Ld. CIT(A) is reproduced as under:
"8.3.10The 8.3.10The AO has ignored a all ll these evidences which were provided by theappellant company to the A during the course of assessment proceedings. The onus cast upon the assessee regarding proving identity and creditworthiness of the lender companies and the genuineness of the loan tra transactions, nsactions, as provided in Section 68, was discharged by the appellant company. The AO has simply relied upon profiling done by the Department based on the details available in the ITBA System. The AO has not made any further enquiries to disprove the evide evidences nces submitted by the appellant during the assessment proceedings.
In this regard, the decision in the case of Additional CIT v. Hanuman Agarwal [1984] 151 IT 150 (Pat.), wherein it is held that ... As the confirmatory letter was issued by the creditor subsequent sub called confession, it was much more incumbent upon to the so-called the department to summon the creditor in order to verify the statements made in the confirmatory letter. This was never done. The so-called called confession was not made available and was not quoted uoted in any of the orders. The so so-called called confession was made in a third party"s case and, hence, it was no pointer to the fact that it also related to the amount in question. The assessee having been called upon to explain the nature and source of the deposit, dep Skyway Infra Projects Pvt. Ltd. 57 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors immediately filed the confirmatory letter from the creditor. The confirmatory letter contained the address of the party. It also contained the GIR number. The assessee having fumished all this, did all that it could do and these materials showed prim primaa facie not only the identity of the creditor but also the genuineness of the transaction and also the capacity of the creditor and, as such, the assessee completely discharged its initial onus under section 68. The revenue did not summon the creditor unde underr section 131. It took no steps to verify the statement of the assessee. Thus, after the assessee filed the confirmatory letter with the correct name and address of the creditor and the GIR number as well, the onus immediately shifted on the department whi whichch was not discharged by the department. Therefore, the impugned addition of the deposit to the assessee's income and the consequential disallowance of interest could not be sustained.
The assessee is not supposed to know the capacity of the money- money lender orr the cash creditor. It is within the exclusive domain or the dark trusses of the minds of the creditors to know as to whether and how their sources of income are arrived. It is for that specific purpose that section 131 has been introduced so that in case of any suspicion, the ITO or the authorities concerned may exercise the powers of a civil court under section 131 and call upon the creditor concerned to prove his capacity to pay and the genuineness of his transaction.
transaction.Once Once the ITO or the authority concerned ned is satisfied that the creditor is not telling the truth, it has been left open to the assessee to discharge his subsequent onus of proving the genuineness of the transaction and the capacity of the creditor to pay by cross cross-examining examining him. Where, therefore, re, as in the instantcase, an assessee gives the correct name, address and GIR number of the creditor, he has discharged his onus and unless a notice in due form under section 131 is issued by the revenue to test the veracity of the genuineness of the tran transaction saction or the capacity of the creditor to pay, the assessee has to succeed. Therefore, the impugned ned addition was not justified.
8.3.11 During the remand proceedings, the AO has asked the assessee to produce those parties to verify the identity, creditworthiness hiness and genuineness of transactions of unsecured loans. The parties were not produced before the AO. However, the appellant had submitted necessary documentary evidence in support of identity and Skyway Infra Projects Pvt. Ltd. 58 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors creditworthiness of lenders and genuineness of the transactions.
ctions. Instead of issuing summons us. 131 or notice us. 133(6). the AO asked the assessee to produce those parties. The assessee has no power to force the parties to appear before the AO. Further, mere non non-attendance attendance of lender parties before the AO could not be a ground to make addition us. 68 of the Act.
In number of the judgments the courts have held that merely because summons issued to some of creditors could not be served or they failed to appear before Assessing Officer, could not be ground to treat those credits as non non-genuine.
In the case of Commissioner of Income Income-taxv.Orissa taxv.Orissa Corpn, (P.) Ltd.[1986] 159 ITR 78 (SC), the Hon'ble Supreme Court of India has held as under:
In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income income-lax lax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing revenue.The notices under section 131 at the instance of the assessee, did not pursue rsue the matter further.The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit credit-worthy worthy or were such who could advance the alleged loans. There was no effort made to pursue the so--called alleged creditors.
editors. In those circumstances, the assessee could not do any further. further In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable o orr perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise.
The High Court was, therefore, right in refusing to refer the questions sought for.
The head-note note of the judgment of the Hon'ble High Court of Gujaratin the case of Skyway Infra Projects Pvt. Ltd. 59 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Deputy Commissioner of Income Income-taxv.Rohini taxv.Rohini Builders [2003] 127 Taxman 523 (Gujarat).
Section 68 of the Income Income-tax Act, 1961 - Cash Credits - Assessing Officer made addition of Rs. 12,8 12,85,000 5,000 as unexplained cash credits in respect of loans taken by assessee from 21 parties - Assessee had discharged initial onus by providing identity of all creditors by giving their complete addresses, GIR numbers/permanent account numbers and copies of as assessment sessment orders wherever readily available - Assessee had also proved capacity of creditors by showing that amounts were received by account payee cheques drawn from bank accounts of creditors - Repayment of loans and interest thereon was also made by acco account unt payee cheques by assessee and tax also had been deducted at source on interest payments and remitted - Whether assessee was not expected to prove genuineness of cash deposited in bank accounts of creditors, because under law, assessee can be asked to p prove rove source of credits in its books of account but not source of source - Held, yes - Whether merely because summons issued to some of creditors could not be served or they failed to appear before Assessing Officer, could not be ground to treat those credi credits ts as non-
non genuine • Held, yes - Whether considering totality of facts and circumstances of case, especially fact that Assessing Officer had not disallowed interest claimed/paid in relation to those credits in assessment year under consideration or even in subsequent assessment years, and tax at source had been deducted out of interest paid/credited to creditors, Tribunal was justified in deleting addition made - Held, yes - Whether as there was no substance in appeal and no substantial question of law arose,, appeal was liable to be dismissed - Held, yes"
In the case of Deputy Commissioner of Income Income-tax, tax, Mumbaiv.Acro Exports Trade (P.)Ltd. 20191 111 taxmann.com 51 (Mumbai - Trib.), the ITAT Mumbai has held that where assessee company issued shares on premium and had filed complete details to prove identity and creditworthiness of parties, and genuineness of transactions, Assessing Officer was unjustified in making additions in respect of such share capital/premium received by assessee under section 68.
In this case, the ITAT has held as under:
The provision of section 68 deals with a cases, where any sum found credited in the books of accounts of an assessee, in any Skyway Infra Projects Pvt. Ltd. 60 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors previous year, for which the assessee offered no explanation about the nature and source, thereo thereoff or the explanations offered by the assessee, in the opinion of the Assessing Officer is not satisfactory, then sum so found credited may be charged to income tax, as income of the assessee of that previous year. In order to fix any credit within the ambi ambitt of section68, the Assessing Officer has to examine three ingredients i.e., identity, genuineness of transactions and creditworthiness of the parties. In this factual and legal background, if you examine, the present case in the light of various evidences filed by the assessee, in order to prove credit found in the form of share capital and share premium, one has to see. whether the assessee has discharged its initial onus cast upon under section 68 or not. In this case, the assessee has filed various details. deta including share application form, copy of declaration, board resolution, bank statement of investor company, PAN card, acknowledgment of return of income, financial statement of investor company, form no. 2 for allotment of equity shares and bank statement ement reflecting, the amount received through banking channels.
Once, the assessee has discharged its initial onus by filing various details, then the onus shift to the Assessing Officer to carry out further verification, in the light of evidences filed by the assessee to ascertain true nature of transactions between the parties before, he come to the conclusion that the transactions between the parties are genuine or not. In this case although, the Assessing Officer has issued section 133(6) notices to the parties, no further enquiry has been conducted, including issue of summons under section 131. No doubt, none of the investors companies have responded to section 133(6) notices issued by the Assessing Officer, but fact of the matter is when, the assessee has filed complete set of documents, including name and address of the parties, it is for the Assessing Officer to carry out further investigation by exercising all possible options available to him, but non non-attendance attendance of parties in response to section 133(6) (6) cannot be attributed to the assessee, because due to time lag certain persons might have left the place and for this no responsibility can be fastened upon the assessee.
In this case, the assessee done what best it could do and filed, whatever informationion available with it, in order to satisfy the Assessing Officer. In case, the Assessing Officer is not satisfied with documents furnished by the assessee, then he is free to carry out his own investigations by exercising powers conferred under section 131 or under section 133(6).
Skyway Infra Projects Pvt. Ltd. 61 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors The Assessing Officer, except issue of section 133(6) notices nothing has been done to find out, the nature of transactions between the parties. Therefore, when, the assessee has filed complete details to prove identity, genuinene genuineness ss of transactions and creditworthiness of the parties, then there is no reason for the Assessing Officer to came to the conclusion that share capital and share premium is unexplained only forthe reason that during the survey proceedings, the director of the he company had admitted that those five companies are shell companies ignoring the fact that such admission has been retracted by filing affidavit along with letter explaining reasons for such admission during survey proceedings. Further, additions made by the Assessing Officer cannot be sustained even on basis of statement of VS because the Assessing Officer has relied upon statement of VS, the erstwhile director of those five companies to make additions towards share capital, but when KK, the present director ctor of the assessee assessee-company company asked for copies of statement of VS and also opportunity for cross examination of VS, the Assessing Officer has denied, the opportunity of cross examination and also not furnished copies of statement recorded from VS. It is a settled s position of law that once, any third party information/statements is relied upon to make additions, it is the obligation of the Assessing Officer to provide copies of such statements/information and also to provide an opportunity of cross examinatio examinationn of the person, who gave the statement, when such opportunity has been availed by the person against whom, such statements are used. When, third party information is relied upon to draw an adverse inference against the assessee, the same needs to be proviprovided ded and also opportunity of cross examination shall be given, if such opportunity is av availed ailed by 15]" (emphasis supplied externally) the assessee. (Para 15] 10.4 The Ld. CIT(A) further relied on other decisions to substantiate that the assessee discharged its onus by bringing all documentary evidences on record, hence addition is not justified. In the concluding para the Ld. CIT(A) deleted the addition observing as under:
"8.3.14In 8.3.14In view of the above facts and discussion made as above and alsorespectively fo following llowing decisions of jurisdictional ITAT, Mumbai in the case ofACIT Vs. Dhanpal B. Shah, ITO Vs Bala Skyway Infra Projects Pvt. Ltd. 62 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Suresh Agarwal and ACIT Vs. Abani Sarbeshwar Das, the addition us. 68 in respect of unsecured loans taken from 18 parties i.e Aadishwar Diamonds, Ansh Anshul Gems ms Pvt Ltd, Antique Exim Pvt.Ltd, Pv Arjay Gems Pvt. Ltd, Bahubali Diamonds Pvt. Ltd, Beetal Trading Pvt. Ltd, Crescent Diamonds Exim Pvt. Ltd, Divyanshi Gems Pvt. Ltd, Dojahan Trading Pvt. Ltd, Ensure Insure Brokers Pvt. Ltd, HPL Multi Trade Pvt. Ltd, Manhar Impex Pvt. Ltd, Param Gems Pvt. Ltd, Saffron Gems Pvt. Ltd, Samkit Diamond Mfg Co. Pvt Ltd, Takshla Exim Pvt. Ltd, Moxa Diamond Pvt. Ltd and Shikha Diamond Pvt. Ltd, cannot be sustained.
8.3.15During theA.Y. 2013 2013-14, 14, the AO has made addition of unsecuredloan oan of Rs.1.44.38.191/ Rs.1.44.38.191/- from Aadishwar Diamonds, Aditi Gems Pvt. Ltd. Antique Exim Pvt. Ltd, Arjay Gems Pvt. Ltd, Bahubali Diamonds Pvt. Ltd, Beetal Trading Pvt.Ltd, Burlington Mercantiles Pvt. Ltd., Chaitanya Gems Pvt. Ltd, Crescent Diamonds Exim Pvt. Ltd,, Ensure Insure Brokers Pvt. Ltd, Karnavat Impex Pvt. Ltd, Kriya Impex Pvt. Ltd, Saffron Gems Pvt. Ltd, Surya Diamond Pvt. Ltd, Badam Trading, Lalita Gems Pvt. Ltd, Moxa Diamond Pvt. Ltd and Shikha Diamond Pvt. Ltd.
However, from verification of records, iitt is noticed that during A.Y. 2013-14, 14, theappellant has not received fresh loans from Aadishwar Diamonds, Aditi Gems Pvt.Ltd, Antique Exim Pvt. Ltd, Arjay Gems Pvt. Ltd, Bahubali Diamonds Pvt. Ltd, Beetal Trading Pvt. Ltd, Burlington Mercantiles Put. Ltd., Chaitanya Gems Pvt. Ltd, Crescent Diamonds Exim Pvt. Ltd, Karnavat Impex Pvt Ltd, Kriya Impex Pt Ltd, Saffron Gems Put. Ltd, Surya Diamond Pvt. Ltd, Badam Trading Pvt. Ltd, Lalita Gems Put. Ltd, Moxa Diamond Pvt. Ltd, Shikha Diamond Pvt. Ltd. Therefore, a addition ddition of unsecured loan from these party is not justified and it is deleted.
The appellant has received unsecured loan of Rs.8,00,000/-
Rs.8,00,000/ from EnsureInsure Brokers Pvt. Ltd. As discussed in para 8.3.3 to 8.3.12 of this appellate order, the addition made by A u/s.68 in respect of unsecured loan received from Ensure Insure Brokers Pvt. Ltd is also not sustainable.
Therefore, addition of Rs.1,44,38,191/ Rs.1,44,38,191/- made by AO u/s.68 in respect of unsecured loans is deleted.
deleted."
Skyway Infra Projects Pvt. Ltd. 63 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 10.5 Regarding the issue of no addition could have been made without aid of the incriminating material in completed assessments, the Ld. CIT(A) held in favor of the assessee observing as under:
"8.3.9From 8.3.9From the assessment order, it is seen that there is no reference nce in the assessment order about any incriminating document found/seized during the course of search proceedings relevant to the and unsecured loans. The appellant has also provided a copy of statement of Shri Moolsingh Deora, Shri Nirmal Madhani whose statement atement was recorded us 132(4) on 08.11.2019 during the search proceedings.Even in their statement recorded us. 132(4), there is no mention about any incriminating evidences/material found or seized related to unsecured loans. Thus, it can be safely inferred inferr that during the course of search proceedings, no incriminating material/evidences in relation to the unsecured loans were found/seized.
It is a well settled law that in the unabated assessment order, no addition u/s 153A can be made unless there is some incriminating material with respect to the The Hon'ble ITAT, Special Bench, Mumbai has in the case of All Cargo Global Logistics Ltd. v. DCIT 137 ITD 287 (Mum) (SB) held that in respect of non-abated non assessments, the assessment will be made on the basis o off books of account or other documents not produced in the course of original assessment but found in the course of search and undisclosed income or undisclosed property discovered in the course of search. It has thus been held that in case of completed ass assessments, essments, the assessment u/s.153A has to be made on the basis of incriminating material only, i.e., undisclosed income/property/books of accounts/documents. In other words, where nothing incriminating is found in the course of search relating to any of the assessment years covered u/s.153A of the Act, the assessment for such A.Ys. cannot be disturbed. It has also been held that in the absence of any incriminating materials, the completed assessment has only to be reiterated.
Similar view has been taken in tthe he case of Murli Agro Products Ltd.
[2014] 49taxmann.com 172 (Bom).
The Hon'ble jurisdictional High Court in the case of Commissioner of Income-tax-ll, ll, Thane v.Continental Warehousing Corporation (Nhava Skyway Infra Projects Pvt. Ltd. 64 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Sheva) Ltd.[2015] 58 taxmann.com 78 (Bombay) has held that no addition can be made in respect of assessments which have become final, if no incriminating material is found during the search. It has been held that once the original assessment has attained finality, then the Assessing Officer while passing the independent assessment order us.153A r.w.s. 143(3) cannot disturb the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings u/s.153A establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings.
proceedings."
10.6 Before us, the Ld. Counsel of the assessee has relied on the order of Ld. CIT(A), whereas the ld. DR has relied on the order of the Assessing Officer. The DR submitted that the Ld CIT(A) is wrong in concluding that assessing officer in remand proceeding has conceded the addition in respect of unsecured loan. He also submitted that unsecured loan creditors were found in existence during the course of se search action and the director of the assessee company was duly confronted all the facts of non-existence existence of those parties,despite, the assessee failed to produce those before the assessing officer. The confirmation letters, ITR etc had been filed on behalf of the unsecured loan parties before the Assessing Officer mostly between 21/09/2021 to 23/09/2021, which can't be a coincidence but can be possible only if filed by one person on their behalf and which could be none other than the assessee, so credential of those documents was required to confirmed independently by way of producing them and then confirming their creditworthiness. The Ld CIT(A) wrongly admitted the plea of the Skyway Infra Projects Pvt. Ltd. 65 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors assessee that it had been a longtime since the loans taken and same were returned subsequently, but the Ld CIT(A) has conveniently ignored that the assessee had shown to have paid interest to them regularly, and thus can't say that those parties could not be produced before the Assessing Officer.
10.7We have heard rival submission of the parties on the issue in dispute. As far as the addition of unsecured loan creditors creditor is concerned, it has been assailed on legality of addition as well as on merit. Firstly, we examine whether the addition could have hav been possible to make addition legally. Secondly,, we have to examine the addition on merit.
10.8 We have already held that AY 2020 2020-21 21 and AY 2019-20, 2019 which were pending as on the date of search, got abated as on the date of search. It has been held by tthe he Hon'ble Bomaby High Court (jurisdictional High Court) in the case of Continental corporation (supra) that in assessments other than abated assessments, no addition could be made without the aid of incriminating material. Thus, except AY 2020 2020-21 and 2019-20, we have to examine the existence of incriminating material qua the addition of unsecured loan creditors u/s 68 of the Act.
10.9 We find that as regards to the issue of unsecured loan creditors, during the course of search, the inspectors of the department tment visited the parties but hardly any of the concerned Skyway Infra Projects Pvt. Ltd. 66 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors unsecured loan creditor was found in existence. The Inspectors collected photographs of their premises, made enquiries from neighborhood etc and all those evidences were duly confronted to the director tor of the assessee company. These photographs and other material suggesting non non-existence of the parties and consequent falsity of books of account, when seen in totality of the facts, definitely constitute the incriminating material qua the addition of unsecured nsecured loan creditor. Accordingly, we set aside the finding of the Ld CIT(A) on the issue in dispute.
10.10 As far as issue on the merit is concerned, we find that addition has been made by the Assessing Officer invoking section 68 of the Act. For discha discharging rging onus of section 68 of the Act, the assessee is required to establish 'identity' and 'creditworthiness creditworthiness' of the unsecured loan creditor and 'genuineness genuineness of the transaction' transaction of loan. In the case the Ld CIT(A) has firstly, deleted the addition in respect of 9 parties, holding that loan transactions alleged by the assessing officer were not appearing in the books of accounts of the assessee. Secondly,, addition in respect of 18 parties has been deleted on the reasoning that the he assessee has discharged its onus u/s 68 of the Act.
10.11 Firstly, we take up the issue of addition in respect of 11 parties, which the Ld. CIT(A) has deleted. The Ld CIT(A) noted that in entries of 'Piyush Piyush Gems P Ltd Ltd' and 'Sanmati Sanmati Gems Pvt Ltd' Ltd , the Skyway Infra Projects Pvt. Ltd. 67 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Assessing Officer fficer himself has recorded that no loan was received from those parties during the period from AY 2013 2013-14 14 to AY 2020- 2020
21. On verification of table of addition of unsecured loan creditor by the Assessing Officer, we concur with ld. CIT(A). but regarding re the remaining 9 parties, we find that the Assessing officer has made addition on the basis of the unsecured loan entries found in the books of the assessee during the course of search action, and credits in respect of those parties were duly appearing ing in the ledger accounts of unsecured loan creditor confronted to the director of the assessee. During assessment proceeding also no such facts was brought to the knowledge of the Assessing Officer that no credit transaction was with those 9 parties duri during ng the period from AY 2013-14 to AY 2020-21.
21. The CIT(A) accepted the contention of the assessee without providing opportunity to the assessing Officer on the evidences which were produced for the first time before him, which is evident from the following ffinding of the ld. CIT(A) :
"From From the above table, it is noticed that in case of Piyush Gems Pvt. Ltd and Sanmati Gems Pvt. Ltd, no loan has been received by the appellant and it is also evident from the details provided in the assessment order.
From the above table, it is observed that in the case of Aditi Gems Pvt. Ltd, Badam Trading Pvt. Ltd, Burlington Mercantiles Pvt. Ltd, Chaitanya Gems Pvt, Ltd, Karnawat Impex Pvt. Ltd, Kriya Impex, Lalita Gems Pvt. Ltd, Snowdrop Vincom Pvt. Ltd, Surya Diamond Diam Pvt.
Ltd, no unsecured loans were received during F.Y. 2012 2012-13 13 to F.Y. 2017-18 18 by the appellant. However, the AO has made addition in respect of these parties as bogus unsecured loans u/s.68 of the Act.
Skyway Infra Projects Pvt. Ltd. 68 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors The addition made by AO in respect of those 09 parties pa are summarized as under:
N Name of FY 2012-13 FY FY 2014-15 FY 2015- FY FY o the party 2013- 16 2016-
2016 2017 . 14 17 -18 1 Aditi Gems 2,19,000 2,19,00 1,55,400 Pvt. Ltd. 0 2 Burlingtone 8,21,250 4,80,000 Mercantiles Pvt. Ltd 3 Chaitanya 8,32,200 Gems Pvt. Ltd. 4 Karnawat 2,19,000 Impex Pvt. Ltd. 5 Kriya 8,32,200 Impex Pvt. Ltd. 6 Surya 11,40,750 2,27,460 Diamond Pvt. Ltd. 7 Badam 10,90,890 3,01,050 Trading Pvt. Ltd. 8 Lalita 3,28,500 2,27,700 Gems Pvt. Ltd. 9 Snowdrop 200,00,00 21,96,0 Gems 0 00
It is not a case of the AO that the appellant had received unsecured loans from such parties and such loans were not recorded in the books of accounts of the appellant. In fact, the AO has made addition of unsecured loans as these loans were received and reflected in the book of account of the appellant but such unsecured loans were not genuine and bogus. Also there is no mention in the assessment order that there was incriminating material found during the search and it reflected certain unsecured loans received by the appellant and they were not reflected in the books of accounts.
Thus, the addition u/s 68 made by AO in respect of unsecured loans received from above mentioned 09 parties is without any basis and factually ally wrong addition. Therefore, addition of unsecured made u/s.68 in respect of unsecured loans taken from 9 parties i.e. Aditi Gems Pvt. Ltd. Burlington Mercantiles Pvt. Ltd, Chaitanya Gems Pvt. Ltd, Karnawat Impex Pvt. Ltd, Kriya Impex Pvt. Ltd, Surya Diamond Di Skyway Infra Projects Pvt. Ltd. 69 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Pvt. Ltd, Badam Trading Pvt. Ltd, Lalita gems Pvt. Ltd and Snowdrop Gems is deleted."
10.12 This action of Ld CIT(A) is in violation of principles of natural justice and rule 46A of income income-tax tax rules, 1962. Thus, we feel appropriate to restore this issue to the file of the Ld Assessing Officer for verification of the claim of the assessee with, balance sheet of the assessee and respective parties for the period from AY 2013-14 to AY 2020-21 21 and bank statements of the assessee and respective parties to substantiate that no such loan transaction were recorded on the books of account of the assessee. The addition u/s 68 for interest amount in respect those se 11 parties is also al restored for deciding afresh after due verification of loan transaction during the period from AY 2013 2013-14 to AY 2020-21.
10.13 Now, we take up the addition in respect of 18 unsecured loan creditors,, which has been deleted by the Ld CIT(A). The Ld firstly,, that no cross examination of sh Rajendra CIT(A) has relied,firstly Jain and Deepak Jain, whose statement were relied upon by the Assessing Officer , was not provided. The relevant finding of the Ld CIT(A) is reproduced as under:
"8.3.8 8.3.8 During the appellate pro proceedings, ceedings, the appellant has submitted the copies of notices u/s 142(1) and showcause notice dated 15.09.2021 issued by the AO. From the perusal of notices u/s 142(1), it is seen that the AO had raised query about the unsecured loans. In response to that, tthe he appellant had provided necessary details with respect to unsecured loans on 21.07 2021 and subsequently on perusal of showcause notice dated 15.09.2021, it is seen that the AO has mentioned about the name Skyway Infra Projects Pvt. Ltd. 70 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors and amount of 29 parties from whom the appellant had taken unsecured loans. The AO had asked the appellant to produce those parties before him for verification. From the notices u/s 142(1) and the show cause notice issued by the AO, it is seen that the AO has not provided to the appellant the copies of statements of Shri Rajendra Jain and Shri Deepak Jain recorded during the search proceedings. Further, the AO has relied upon the profiling of 29 parties and the details gathered by the investigation wing and the outcome of the enquiry done by the investig investigation ation wing. However, the same was not provided by the AO to the appellant to rebut the finding of the investigation wing and submit the necessary evidences necessary to support the case of the appellant.
During the appellate proceedings, the appellant has submitted that the appellant was not provided the copies of the statements of Shri Rajendra Jain andShn Deepak Jain which have been relied upon by the AO to make the addition in respect of unsecured loans. It is a fact that the appellant was not made aware of the material which was being used against the appellant by the AO in the assessment order and the same material was gathered by the AO behind the back of the appellant It is a settled principle of law that no addition can be made by the AO without prov providing iding and confronting the material gathered by the AO behind the back of the assessee In the case of the appellant also, the AO has relied upon the statements of Shri Rajendra Jain and Shri Deepak Jain and also the report of the investigation wing The appe appellant llant was not provided with the relevant material which has been used by the AO in the assessment order for making addition in respect of unsecured loans. Thus, there has been clear violation of principal of natural justice Had the AO provided the copies o off statements of Rajendra Jain and Deepak Jain and also the evidences gathered by the investigation wing to the appellant, the appellant would had certainly provided to the AO all the necessary documents/evidences to rebut the statements or the evidences used ed against it. The AO has failed to provide the material gathered by him to the appellant and also has not provided the opportunity to rebut and cross examine the persons whose statements have been heavily relied upon by the AO while making addition in respect pect of unsecured loans In this regard, the following case laws are relevant Skyway Infra Projects Pvt. Ltd. 71 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors In the case of Dhakeswari Cotton Mills Ltd v CIT [1954] 26 ITR 775(SC),, theHon'ble Supreme Court of India has held as under:
under "....As As regards the second contention although ITO is not no fettered by technical rules of evidence and pleadings, and that he is entitled to act on matenal which may not be accepted as evidence in a court of law but there the agreement ends, because it is equally clear that in making the assessment under section 23(3) he is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all and there must be something more than bare suspicion to support the assessment under section 23(3) The rule of law on this subjectt has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v CIT [1944] 12
393. In the instant case the Tribunal violated certain fundamental rules of justice in reaching its conclusions Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative.
Next, it did not give any opportunity to the assessee to rebut the material furnished to it by him and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result was that the assessee had not had a fair hearing The estimate of the gross rate of profit on sales both by the ITO and the Tribunal was based on surmises, suspicions and conjectures. The Tribunal took from fr the representative of the department a statement of gross profit rates of other cotton mills but did not show that statement to the assessee did not givehim a opportunity to show that statement had no relevancy whatsoever to the case of the mill in ques question.
tion. It was not known whether the mills which had disclosed these rates were similarly situated and circumstanced. Not only did the Tribunal not show the information given by the representative of the department to the assessee, but it refused even to loo look k at books and papers which assessee's representative produced before the Accountant Member in his chamber The assessment in this case and in the connected appeal was above the figure of Rs. 55 lakhs and it was just and proper when dealing with a matter of this magnitude not to employ unnecessary haste and show impatience particularly when it was known to the department that the books of the assessee were in the Skyway Infra Projects Pvt. Ltd. 72 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors custody of the Sub Sub-Divisional Divisional Officer Thus both the ITO and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion It was thus a fit case for the exercise of power under Article 136 136. In the result, the appeal was to be allowed and the order of the Tribunal was to be set aside and th thee case was to be remanded to it with direction that in arriving at its estimate of gross profits and sales it should give full opportunity to the assessee to place any relevant material on the point that it has before the Tribunal, whether it is found in tthehe books of account or elsewhere and it should also disclose to the assessee the material on which the Tribunal is going to found its estimate and then afford him full opportunity to meet the substance of any private inquiries made by the ITO if it is intended nded to make the esti estimate mate on the foot of those enquiries..."
In the case of KishinchandChellaramv CIT [1980] 125 ITR 713 (SC), the Hon'ble Supreme Court of India has held as under
under:
"....The The letters, dated 14 14-2-1955 and 9-3-1959 1959 ENT ITR 713, 713 did not constitute any material evidence which the Tribunal could legitimately take into account for the purpose of arriving at the finding that the amount of Rs 1,07,350 was remitted by the assessee from its Madras Office, and if these two letters were eliminated from consi consideration, deration, there was no material evidence at all before the Tribunal which could support its finding What the manager of the bank wrote in his letters could not possibly be based on his personal knowledge but was based on here say The revenue authorities ought ght to have called upon the manager to produce the documents and papers on the basis of which he made the statement and confronted the assessee with those documents and papers. No explanation has been furnished by the revenue as to what happened when the m manager anager appeared in obedience to the summons and what statement he made.
It was not possible to hold in the face of the application for remittance signed in the name of T, that amount was remitted by the assessee and the finding to that effect Skyway Infra Projects Pvt. Ltd. 73 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors reached by thee Tribunal must be held to be unreasonable and perverse.
Even assuming that these letters were to be taken into account those letters would at the highest establish that T an employee remitted the amount from Madras and N, another employee, received it at Bombay From this it did not follow that the remittance was made at Madras and received at Bombay on behalf of the assessee The burden was on the department to show that the money belonged to the assessee by bringing proper evidence on record and the assessee assess could not be expected to call T and N who left the service at the time when the assessment was reopened in evidence to help the department to discharge the burden that lay upon it.
it Therefore, there was no evidence on the basis of which the Tribunal couldd come to the finding that the impugned amount was remitted by the assessee and that it represented its undisclosed income income..."
In the case of H.R. Mehta v ACIT [2016] 72 taxmann.com 110 (Bombay), the Hon'ble Supreme Court of India has held as under
"....In thee light of the fact that the money was advanced apparently by the account payee cheque and was repaid vide account payee cheque the least that the Assessing Officer should have done was to grant an opportunity to the assessee to meet the case against him b by y providing the matenal sought to be used against him in arriving before passing the order of assessment. This not having been done, the denial of such opportunity goes to root of the matter and strikes at the very foundation of the assessment and therefore, e, renders the orders passed by the Commissioner (Appeals) and the Tribunal vulnerable. The assessee was bound to be provided with the material used against him apart from being permitting him to cross examine the deponents whose statements were relied upo uponn by him. Despite the request seeking an opportunity to cross examine the deponents and furnish the assessee with copies of statements and disclose material these were denied to him.
Skyway Infra Projects Pvt. Ltd. 74 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Therefore, the addition made to the income of the assessee was not justified ied and liable to be deleted [Para 17)
17)..."
In the case of CIT v Rajesh Kumar[2008] 306 ITR 27 (Delhi) the Hon'ble High Court of Delhi has held that since material collected by revenue behind back of assessee was used against him without disclosing that material to him or giving any opportunity to him to cross-examine examine person whose statement had been used b by y revenue against his interests, principles of natural justice had been violated and therefore, addition was rightly deleted by Tribunal In this casethe Hon'ble High Court of has held as under
under:
There was no dispute that all the information asked for in the office letter dated 5 5-3-2003 2003 was supplied by the assessee.
That letter did not advert to anystatement of Mor H or P Clearty there was no way that the assessee could have known about any statements recorded of those persons. The version given by the assess assessee, ee, therefore, was correct or at least a plausible one [Para 10] The Tribunal had on those facts rightly come to the conclusion that since the revenue had relied upon the statement of M it should have been made available to the assessee with an opportunity of cross-examining examining him. That was not done by the Assessing Officer It clearly showed that the principles of natural Justice had been violated [Para 11] There was no infirmity in the view taken by the Tribunal on the facts of the case. It was quite clear that matenal collected by the revenue behind the back of theassessee was used against him without disclosing that material to him or giving any opportunity to him to cross cross-examine examine the person whose statement had been used by the revenue against the interests s of the assessee [Para 12] Hence, no substantial question of law arose for consideration of the High Court[Para 13].
In the case of CIT v Kamal Trading Company[2013] 346 ITR 60(Rajasthan) the Hon'ble High Court of Rajasthan has held that Assessing Officerr had not brought any evidence on record to disprove transaction of purchase of crops by assessee from Skyway Infra Projects Pvt. Ltd. 75 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors farmers, amount shown as payable to said farmers could not be treated as unexplained credits on basis of statement of farmers recorded behind back of ass assessee In this casethe Hon'ble ble High Court of has held as under under:
"....3.3. Deletion of addition of Rs 22 41 482 has been ordered by the Commissioner of Income Income-tax tax (Appeals), which addition was made by the Assessing Officer on account of unexplained sundry credi creditors tors Disallowance was also made on account of claim of loss of Rs 200 200 in the paddy account The Commissioner of Income Income-tax tax (Appeals) has found that certain statements of certain farmers were recorded by the Inspector of Income Income-tax, but it were recorded behind the back of the assessee The assessee was not given opportunity to cross cross-examine examine the witnesses Statements were written in Hindi whereas the farmers were illiterate or semi- semi literate Affidavits were filed by the assessee of each and every farmer, whic which h have been relied upon by the Commissioner of Income Income-tax tax (Appeals) and the said finding has been affirmed by the Income Income-tax tax Appellate Tribunal.
Tribunal
4. The Commissioner of Income Income-tax tax (Appeals) with respect to sundry creditors has given the findings that on con consideration sideration of statements of 20 farmers and the affidavits, mert has been found in the contention of the assessee that the Inspector of Income Income-tax tax was not authorized to record or collect statements and the said statements were recorded behind the back of th the assessee. It wasfurther held that to expect iterate and semi semi-literate literate farmers to recount from memory details of accounts with the assessee was asking too much. They are not expected to be familiar with concepts such as financial year and 31st March They do not understand the timing difference. Merely by the fact that the stamp papers were purchased from one stamp vendor it does not lead to the inference that the contents of the affidavits were dictated by the assessee. The Assessing Officer did not bring on record any other evidence to support such inference Each of these farmers appeared before the Assessing Officer to confirm that he sold his crops. Thus, there is no reason with the Assessing Officer to ignore their statements.
Skyway Infra Projects Pvt. Ltd. 76 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Affidavits were enough and sufficient piece of evidence so as to accept the case of the assessee Reasons in detail have been given by the Commissioner of Income Income-tax tax (Appeals) in 4- 4 5 pages The order of the Commissioner of Income-taxIncome (Appeals) has been affirmed by the Income Income-tax tax Appellate Appe Tribunal in paragraph No. 13 the IncomeIncome-tax tax Appellate Tribunal has observed thus thus:
"After hearing the rival contentions and on a perusal of the materials available on record, we noted that the Assessing Officer has examined the books of account durin during g the course of the assessment proceedings but he did not find any mistake in the books of account Even the Assessing Officer failed to prove any transaction as non non-genuine genuine The Inspector made enquires behind the back of the assessee firm and without affording ing any opportunity the Inspector furnished his report to the Assessing Officer When the Assessing Officer confronted the assessee assessee-firm firm with the report of the Inspector, the assessee-firm firm contacted all the farmers and requested the Assessing Officer to iss issue ue summons under section 131 of the Act All the farmers appeared before the Assessing Officer who examined them individually and all of them confirmed that they sold their crops to the assessee assessee-firm firm They have faith in the assessee firm as it is their perma permanent nent aratia and the full amounts are paid after certain penod The amount as stated in the accounts as on March 31 2006 was outstanding which was paid subsequently within 2/3 months. From the above facts and also keeping in view the materials available on rrecord, ecord, the Assessing Officer has not brought any evidence on record to disprove any transactions. Therefore, in such circumstances, the disallowance has been made on surmises and conjectures Hence, the learned Commissioner of Income Income-tax (Appeals) has rightlyly deleted the said addition. Thus ground No. 2 of the Revenue is dismissed."
5. For the reasons stated by the Commissioner of Income-tax Income (Appeals) and the Income Income-tax tax Appellate Tribunal, we are satisfied that a finding of fact has been recorded by the Commissioner issioner of Income Income-tax tax (Appeals) which has been affirmed by the Income Income-tax tax Appellate Tribunal, thus, no case Skyway Infra Projects Pvt. Ltd. 77 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors for interference in the appeal is made out No substantial question of law is involved with respect to the deletion of Rs. 22,41,482.
In the case of CIT v.Raja Ginning Udyog[2005] 268 ITR 383(MP), the Hon'ble High Court of Madhya Pradesh has held that:
that "...5.5. With regard to ground No (1) the Tribunal has recorded a finding that some enquiry was conducted by the Assessing Officer on his own and he had not asked the assessee to produce the farmers so as to ascertain from them the payments made to them with regard to cotton purchased by the assessee Assessee was asked to produce farmers for the first time on 4th January 1993, Le about 3 months before passing ing of the final order. Since the farmers were busy during this period they could not be produced and no further opportunity in this regard was given Thus, finding has been recorded in the enquiry that was conducted by the Assessing Officerbehind the back of the assessee This violated the principles of natural justice in the light of this finding, CIT(A) and Tnbunal both found the procedure adopted by Assessing Officer as erroneous and against law This has also now become a finding of fact which cannot be cchallenged hallenged in this appeal, as the appeal is required to be heard only on substantial question of law law.
In the case of the appellant, the AO has made addition on the basis of statements of Shri Rajendra Jain & Shri Dipak Jain, both entry providers. However, tthehe appellant was not made aware of these statement being used against it. The appellant was also not provided with the information gathered by investigation wing, which has been also relied upon by the AO. Thus, there has been clear violence of principle o off natural justice by the AO while making addition of unsecured loans loans.
10.14 In our opinion , the addition of unsecured loan creditor , where the Assessing Officer relied on statement of Sh Rajendra Jain and Deepak Jain have already been deleted by the Ld C CIT(A) IT(A) holding Skyway Infra Projects Pvt. Ltd. 78 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors that no credit entries are appearing in respect of those unsecured loan creditor during the period from AY 2013 2013-14 14 to 2020-21 2020 and so to reference of no cross examination for the purpose of deleting the unsecure loans , particularly, where the Assessing officer has not relied on statements of Rajendra jain and Deepak Jain, is unjustified. Further, during the search proceeding, the director of the assessee company sh Ni Nirmal Madani was duly informed about the statement of sh Rajendra Jain and Dee Deepak pak jain of accommodation entries provided through entities controlled by them,, but no cross examination was sought by the Director of the assessee company. Moreover, the Assessing made the addition due to failure on part of the assessee in producing those parties to substantiate their identity and creditworthiness creditworthiness.. The reliance placed by the Ld CIT(A) on the decision of Dhakeshwari Cotton Mills Ltd (supra), Kishinchand Chellaram (supra), H R Mehta (supra), Cit Vs Rajesh Kumar (supra) , CIT vs Kamal Trading Company (supra) and CIT vs Raja Ginning U Udhyog dhyog (supra) are distinguishable on facts and ratio of those decisions are not applicable over the facts of the assessee.
10.15 The second reasoning has been given by the ld CIT(A) is of no incriminating material qua the addition, which we have already dealt above while adjudicating the cross objection of the assessee.
Skyway Infra Projects Pvt. Ltd. 79 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 10.16 The next reasoning given by the Ld CIT(A) in para 8.3.10 of the impugned order is that the Assessing Officer has ignored the evidences filed by the assessee regarding identity and credit worthiness of the lender parties and genuineness of the transaction and he relied merely on profiling of the lender made based on details available in Income Income-tax Department ent database (ITBA), (ITBA without carrying out further enquiries. The Ld CIT(A) has relied on the decision Hon'ble Patna High Court in the case of Additional CIT Vs Hanuman Agrwal (supra) where the creditors confessed the loan as unexplained cash credit, but later ter on filed confirmatory letter, but the ITO rejected the claim of the assessee and made addition u/s 68 of the Act. The Hon'ble High Court held the ITO should have issued summon u/s 131 of the for taking statement of the creditor when his correct addres addresss was provided by the assessee and the onus of the assessee is discharged when correct address is provided. Further, the Ld CIT(A) held that the Assessing Officer in remand proceeding also insisted upon production of the unsecured loan creditor and did not issue summon u/s 131 or notice u/s 133(6) of the Act.. The Ld CIT(A) relied on the decision of Hon'ble Supreme Court in the case of CIT vs Orissa Corporation P Ltd (supra). In the said case, the assessee supplied correct name and address of the alleged cre creditors ditors and Revenue issued summon u/s 131 of the Act but the alleged creditors did not attend, thus ITO made the addition. The Hon'ble Supreme Court held that revenue Skyway Infra Projects Pvt. Ltd. 80 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors apart form issue notice u/s 131 did not pursue the matter and did not examine the creditwo creditworthiness of the crditors and thus Hon'ble Supreme Court approved the action of the Tribunal that the assessee discharged its onus. In the case of DCIT Vs Rohini Builders (supra ) cited by the Ld CIT(A) the Hon'ble Court held that merely because the summon issued to the creditors could not be served and the interest paid to them was not disallowed , the creditors can't be held ld as unexplained. Further, the Ld CIT(A( relied on the decision of the Tribunal in the case of DCIT vs Acro Exports Trade P ltd (supra ) where in it is held that non-attendance attendance of parties in response to section 133(6) of the Act cannot be attributed to the assessee. The Ld CIT(A) has cited number of decisions decisio but the facts of those cases are distinguishable. In the case of the assessee, during the course of search itself the Department attempted to verify but those parties were not found at the address provided by the assessee. The Assessing Officer has reproduced report of the Inspector, wherein he had made inquiry in neighborhood. The Assessing ssessing Officer has also reproduced the photo of the closed premises of those unsecured loan creditors. For ready reference , one such enquiry report is reproduced as under:
"Prateek Prateek Gehlot, Inspector O/o DDIT( Inv.) Unit-I(1), Unit Mumbai Date : 08.11.2019 Skyway Infra Projects Pvt. Ltd. 81 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors To, The Assistant Director of Income Tax (Investigation), Unit-4(2), Mumbai Sub : Inspector Report in the case of M/s Divyanshi Gems Private Limited - reg.
Respected Sir, As directed, we, the undersigned Inspectors, went for discreet inquiry to the address of M/s Divyanshi Gems Private Limited at Cabin No.A, Office No. 404, Pramukh Darshan Apartment, Near CFhaarKhanaChakla, Rampura, Surat on 08.11.2019. After reaching the premise, it was revealed that the security guard of the building Shri Gopalbhai AgarwaL was staying at the said premise for the last 6 months and he did not knew anything about the said entity. Further, enquiries were made in the nearby area about the entity but nobody knew anything about it. The image of the said premise w which hich was closed is also enclosed herewith. Submitted.
Encl : as above Yours faithfully,
Sd/- sd/-
(Suraj Singh) (Prateek Gehlot)
Inspector, o/o ADIT(Inv) Inspector, o/o ADIT(Inv)
Unit-3, Surat Unit-1(1), Mumbai"
10.17 This fact of non
non-availability
availability of creditors at their address was duly confronted to the director of the assessee company during search proceedings itself, however, he could not provide their new address or contact number of unsecured loan creditors. During assessment proceeding eeding or remand proceeding the assessee assesse did not provide their new address. The assessee also did not make any request for issuing of summon to its witness or deposit their travel expenses to the office of the Assessing Officer for ensuring their Skyway Infra Projects Pvt. Ltd. 82 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors attendance as per the procedure laid down under code ode of Civil Procedure ,1908 . The assessing officer, in view of the information gathered by the Inspectors of the department during search proceeding,, insisted for personal attendance of the parties for verification of their identity. Regarding the credit creditworthiness, worthiness, the Assessing Officer referred to their financial status from the data available in income-tax tax database and observed that they lacked the financial resources. The creditors shown to have given loan despite having outstanding credits in their ba balance lance sheets, which raises concern of genuineness of transaction also. In the case, the Assessing officer has also made addition for the interest payment to those unsecured loan parties.
10.18 The Hon'ble supreme court in the case of NRA Iron and steel ltd in Civil Appeal No of 2019 ( arising out of SLP (Civil ) No. 29855 of 2018 ) held as under:
"11.
11. The principles which emerge where sums of money are credited as Share Capital/Premium are:
i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit- credit worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus.
ii. The Assessing essing Officer is duty bound to investigate the credit-
credit worthiness of the creditor/ subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name name-lenders.
Skyway Infra Projects Pvt. Ltd. 83 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors iii. If the enquiries and iinvestigations nvestigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit credit-worthiness, worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplatedated by Section 68 of the Act.
12. In the present case, the A.O. had conducted detailed enquiry which revealed that :
i. There was no material on record to prove, or even remotely suggest, that the share a application pplication money was received from independent legal entities. The survey revealed that some of the investor companies were nonnon-existent, existent, and had no office at the address mentioned by the assessee. For example:
a. The companies Hema Trading Co. Pvt. Ltd. a and nd Eternity Multi Trade Pvt. Ltd. at Mumbai, were found to be non non-existent existent at the address given, and the premises was owned by some other person. b. The companies at Kolkatta did not appear before the A.O., nor did they produce their bank statements to sub substantiate stantiate the source of the funds from which the alleged investments were made.
c. The two companies at Guwahati viz. Ispat Sheet Ltd. and Novelty Traders Ltd., were found to be nonnon- existent at the address provided. The genuineness of the transaction was found to be completely doubtful.
ii. The enquiries revealed that the investor companies had filed returns for a negligible taxable income, which would show that the investors did not have the financial capacity to invest funds ranging between Rs. 90,00,000 to Rs. 95,00,000 in the Assessment Year 2009 2009-10, 10, for purchase of shares at such a high premium.
For example:
Neha Cassetes Pvt. Ltd. - Kolkatta had disclosed a taxable income of Rs. 9,744/- for A.Y. 2009 2009-10, 10, but had purchased Shares worth Rs, 90,00,000 in the Assessee Company.
Skyway Infra Projects Pvt. Ltd. 84 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Similarly Warner Multimedia Ltd. - Kolkatta filed a NIL return, but had purchased Shares worth Rs. 95,00,000 in the Assessee Company - Respondent. Another example is of Ganga Builders Ltd.
- Kolkatta which had filed a return for Rs. 5,850 but invested in shares to the tune of Rs. 90,00,000 in the Assessee Company - Respondent, etc. iii. There was no explanation whatsoever offered as to why the investor companies had applied for shares of the Assessee Company at a high premium of Rs. 1 190 90 per share, even though the face value of the share was Rs. 10/ 10/- per share.
iv. Furthermore, none of the so so-called called investor companies established the source of funds from which the high share premium was invested.
v. The mere mention of the income tax fi file le number of an investor was not sufficient to discharge the onus under Section 68 of the Act.
13. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enqu enquiry iry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company - Assessee had filed all the primary evidence, the onus on the Assessee stood discharged. The lower appellate authoriti authorities es failed to appreciate that the investor companies which had filed income tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the Assesse Company - Respondent. Clearly the onus to establish the credit wo worthiness rthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility. The Court/Authorities below did not even advert to the field enquiry conducted by the AO which revealed that in several cases the investor ccompanies ompanies were found to be non-existent, existent, and the onus to establish the identity of the investor companies, was not discharged by the assessee.
14. The practice of conversion of un un-accounted accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal lega obligation to prove the receipt of share capital/premium to the Skyway Infra Projects Pvt. Ltd. 85 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee."
10.19 Thus, the Hon'ble Supreme Court has held that merely filing of primary evidence by an assessee is not sufficient to discharge its onus u/s 68 of the Act when seen the finding of the Assessing officer during field enquiry and investigation and particularly the financial strength of creditor.. In the instant case also no documents other than primary evidence like PAN, ITR,ledger account etc. have been filed by the assessee. Neither, the parties were found at their address during field enquiry during search proceedings and nor have been prod produced uced by the assessee in assessment and remand proceedings. In our opinion, the decisions relied upon by the ld CIT(A) are of no assistance to the assessee. The assessee has failed to discharge its onus of establishing Identity, credit worthiness and genuin genuineness eness of transaction. We set aside the order of ld CIT(A) on the issue of addition to the extent of 18 unsecured loan creditors. Since we have upheld the credit from those unsecured loan parties as unexplained, the corresponding addition for interest is al also upheld.
10.19 The ground No. 2 and 3 of the appeal of the Revenue are accordingly partly allowed.
11. In ground no. 4 of the cross objection objection,the ,the assessee has raised the issue that despite giving no adverse comment in remand report, the Assessing Officer er is not justified in preferring the appeal before Skyway Infra Projects Pvt. Ltd. 86 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors the ITAT. We find that ld DR did not accept this contention of the Ld Counsel that assessing officer had not given adverse remark for unsecure loan creditors. We have also verified from the summary of remand and report reproduced by the Ld CIT(A) in the impugned order and find that the contention of the assessee is not correct. Hence the ground No. 4 of the cross objection is dismissed.
12. In ground No. 5 to 7 of the cross objections, the assessee has merely y supported the action of the Ld CIT(A) in making the deleting the part addition of purchases and addition of unsecured loan creditors,, which we already reversed. Thus, the ground No. 5 to 7 of cross objection raised are infructuous and accordingly dismissed.
dismiss
13. In ground No. 8, also the assessee has supported the direction of ld CIT(A) to the Assessing officer for allowing credit of TDS after verification. This ground being only in support of finding of ld CIT(A), A), which has not been disputed by the Revenue, hence dismissed as infructuous.
14. In AY 2014-15,the the assessee has raised grounds in cross objections, which are identical to grounds raised in cross objection for AY 2013-14, therefore following our finding in AY 2013-14, 2013 the grounds of cross objections are adjudicated mut mutasis sis mutandis.
mut The revenue has raised ground challenging deletion of addition of bogus purchases, deletion of addition additionof subcontract expenses,, deletion of addition unsecured loan creditors. The grounds related to bogus Skyway Infra Projects Pvt. Ltd. 87 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors purchases and unsecured loan creditors raised are identical to grounds related to bogus purchase and unsecured loan creditors in AY 2013-14, 14, therefore following our finding in AY 2013-14, 2013 thse grounds are adjudicated mutasis m mutandis.
15. The Ground related to deletion of disallowance of subcontract expenses has been raised in this assessment year and onward assessment years.. The facts qua the issue in dispute are that during search proceedings, the authorised officer asked the key persons of assessee to provide details of subcontractors along with their current addresses and documentary evidences in support of services rendered. The copy of bills of those contractors produced pr by the assessee were in same format and font, style which raised prima facie suspicion about their existence. The other documents provided by the assessee were also not found in order by the investigation team. The search team verified their credential from the income-tax tax department database and found one of the contractors was even not maintaining books of accounts. The list of contractors where deficiency of documents was observed is as under:
Number of F.Y. 2012- F.Y. 2013- F.Y. 2014--15 F.Y.2015-16 F.Y.2016-17 F.Y.2017-18 F.Y.2018- F.Y.2019-20 F.Y.2019 Total parties 13 14 19 Ashok 21,41,548 3,09,18,793 6,03,41,671 1,49,85,213 1,80,10,577 12,63,97,802 Construction Rajni 42,69,374 89,36,529 46,02,528 Developers Total 21,41,548 3,51,88,167 6,92,78,200 1,95,87,741 1,80,10,577 14,42,06,233 Skyway Infra Projects Pvt. Ltd. 88 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 15.1 The department conducted on the spot enquiry but the contractors were not foun ound in existence at their given address. The report of Inspectors of the department have reproduced on page 38- 38 39 of the Impugned assessment order. During assessment proceedings, the assessee submitted various details in support of sub-contract expense, but could not produce the parties before the Assessing Officer, therefore, not being satisfied fied with the evidences filed by the assessee regarding sub sub-contract contract expenses, he disallowed the claim of the assessee of sub sub-contract contract expenses.
15.2 Before the ld CIT(A) CIT(A),, the assessee submitted copy of confirmation letter from sub sub-contractors,, bill payment, bank statement,, ITR copy of sub sub-contractors etc. The documents submitted by the assessee were claimed to be additional evidences,hence, same were sent to the Assessing Officer for his comments. Before, the Assessing Officer in remand proceedings, the sub-contractor contractor parties were produced by the assessee. The summary of the remand report of the Assessing Officer is reproduced as under:
Sr. No. Name of the party Remarks
1. Ashok Construction 1. Party appeared before this office statement
statemen
was recorded on Oath
2. The assessee has not submitted stock book and stated that material has been utilized OM directly from the supplier on place of Skyway Infra Projects Pvt. Ltd. 89 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors construction. As the stock is not stored at any place by the assessee and hence, not maintained any stock book.
3. Party has provided its contact number and address in statement.
4. Copy of the statement enclosed.
The Ld.CIT(A) may decide the case on merits based on the above facts.
2. Rajni Developers 1. Party appeared before this office and statement was recorded on Oath
2. The assessee has not submitted stock bookand stated that material has been utilized directly from the supplier on place of construction. As the stock is not stored at any place by the assessee and hence, not maintained any stock book.
3. Party has provided its contact number and address in statement.
4. Copy of the statement enclosed.
The Ld.CIT(A) may decide the case on merits based on the above facts.
15.3 The ld CIT(A) after considering the remand report and submission of the assessee deleted the disallowance of sub-contract sub expenses observing as under:
Skyway Infra Projects Pvt. Ltd. 90 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors "22.3.3 22.3.3 The appellant company has submitted that during the assessment proceedings, the appellant company as well as parties have provided the details of ITR, ledger account, Bi Bills, lls, Bank Statement etc. However, the AO has ignored the evidences provided by the appellant company during the assessment proceedings. The AO has merely relied upon the finding of the Investigation Wing and the report of the Inspector that the premises wass found closed at the time of his visit. During the remand proceedings, both the parties have attended before the AO during the remand proceedings and their statements were recorded. Both the parties have provided necessary documentary evidences to AO.
The AO has not made any adverse remark against both the parties. In view of the above facts, the appellant company has been able to prove with documentary evidences that the payment made to M/s. Ashok Construction & M/s. Rajni Developers was genuine and justified."
15.4 Before us the Ld DR submitted that producing the parties before the AO establish the identity of the party, but the proof that what services were actually rendered by those parties, the assessee has not furnished any documentary evidence in support, including measurement book etc. duly verified by the Govt authority i.e MCGM that part of the works contract had been executed by the assessee using the services of relevant sub-
sub contractor.
15.5 The Ld. Counsel of the assessee on the other hand relied re on the finding of the Ld CIT(A) on the issue in dispute and submitted that parties were duly produced before the Assessing Officer and therefore, the Ld CIT(A) is justified in deleting the disallowance.
Skyway Infra Projects Pvt. Ltd. 91 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors 15.6 We have heard rival submission of the part parties ies on the issue in dispute and perused the relevant material on record. During the course of search proceedings, the sub sub-contractor contractor parties were not found in existence at their address and even during assessment proceedings those parties could not be produced by the assessee. The assessee also could not produce any documentary evidence in support of the services rendered by those parties to the assessee. Thus, the Assessing Officer disallowed the relevant sub sub-contractor contractor expenses.
During proceedings before the Ld CIT(A), the assessee produced parties before the Assessing Officer in remand proceeding and thus ld CIT(A) deleted the disallowance. But we find tthat hat by way of producing those parties before the Assessing Officer identity of the parties got established but the requirement of evidence in support of the services rendered by the those sub sub-contract contract parties has not been discharged by the assessee. In th the e circumstances, we feel appropriate to restore this issue to back to the file of the ld. Assessing Officer for deciding afresh after considering the submission and evidence by assessee in support of services rendered by those sub sub-contractor parties. The ground round of the Revenue is accordingly allowed for statistical purpose.
16. The ground raised by the assessee in its cross cross-objections objections for AY 2015-16 to 2020-21 21 and ground raised by the revenue in its appeal for AY 2013-14 14 to AY 2020 2020-21 21 are covered by our findings fin Skyway Infra Projects Pvt. Ltd. 92 ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors in cross objection and appeals for AY 2013 2013-14 14 and 2014-15, 2014 therefore same are adjudicated muta mutatis mutandis.
17. In the result, cross objections of the assessee are dismissed, whereas appeals of the revenue are partly allowed.
Order pronounced und under er Rule 34(4) of the ITAT Rules, 1963 on 28/02/2023.
Sd/- sd/-
(ABY
ABY T VARKEY
VARKEY) (OM
OM PRAKASH KANT)
KANT
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated: 28/02/2023
Rahul Sharma, Sr. P.S.
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
(Assistant Registrar)
ITAT, Mumbai
Skyway Infra Projects Pvt. Ltd. 93
ITA Nos. 2665, 2669, 2676, 2670, 2677, 2681, 2671, 2682/M/2022 & CO No. 146/M/2022 & Ors Date Initials Original dictation pad is enclosed at the end of file
1. Draft dictated on: 21.02.2023 Sr. PS/PS
2. Draft placed before author: 22.02.2023 Sr. PS/PS
3. Draft proposed & placed before JM/AM the second member:
4. Draft discussed/approved by JM/AM Second Member:
5. Approved Draft comes to the Sr. Sr. PS/PS PS/PS:
6. Order pronounced on: Sr. PS/PS
7. File sent to the Bench Clerk:
8. Date on which file goes to the Sr. PS/PS Head Clerk:
9. Date on which file goes to AR