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TMI Blog2024 (3) TMI 1199X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/s 132 of the Act was conducted upon the Konark Group on 23.01.2018 and during the course of search several incriminating documents pertaining to the assessee were found and seized. It is noted that, the Assessing Officer ('AO') had recorded the satisfaction both in the file of KIL as well as the assessee and accordingly issued notices u/s 153C of the Act upon the assessee inter alia for AYs 2013-14 to 2017-18. Prior to the issue of notice u/s 153C of the Act, the income-tax assessment for AY 2013-14 stood already completed u/s. 245D(4)/143(3) of the Act on 03.12.2014 in which the Income-tax Settlement Commission, Mumbai ('ITSC') had rejected the books of accounts and estimated the profits of the assessee JV from this water pipeline project at 8%. Following the same, the assessee is noted to have filed the returns of income u/s 153C of the Act estimating the income from this same project. The comparative details of the return of income originally filed and the return filed u/s 153C of the Act for the AYs before us are as under: - AY Date of filing of return u/s 139(1) Returned Income Date of filing of return u/s 153C Returned Income as per return filed u/s 153C Addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23.01.2018, the AO reopened the concluded assessment of assessee JV for AY 2013-14 by issue of notice u/s 153C of the Act. The AO is noted to have re-assessed the total income of the assessee JV from the water pipeline project at Rs. 19,33,27,260/-, after making addition of Rs. 7,58,96,520/- on account of bogus contractual payments made to M/s Inderdeep Construction Company ('IDCC'). 5. Assailing the action of the AO, the Ld. AR for the assessee submitted that, an assessment year that has been covered by an order of settlement cannot be disturbed or re-opened again u/s 148 / 153A / 153C of the Act. The Ld. AR pointed out that, the assessee JV had carried out one single contract during the relevant year and that the Settlement Commission had finally settled the taxable income for AY 2013-14 qua such contract undertaken for UMC and that the final assessment order pursuant thereto had been passed by the Assessing Officer. According to him therefore, no further income in relation to the same contract could be again re-assessed by the AO. The Ld. AR accordingly contended that the AO's action of reopening the settled income for AY 2013-14 by issue of notice u/s 153C of the Act and re-as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeded with and after hearing the applicant an order shall be passed permitting or rejecting the application to be proceeded with. This has to be done within a time frame. This order is to be passed under Section 245D (1). Sub-section (4) of the Section provides as under: - "(4) After examination of the records and the report of the Commissioner, if any, received under - (i) sub-section (2B) or sub-section (3), or (ii) the provisions of sub-section (1) as they stood immediately before their amendment by the Finance Act, 2007, and after giving an opportunity to the applicant and to the Commissioner to be heard, either in person or through a representative duly authorized in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner." 8. Sub-section (6) of Section 245D provides that every order passed under sub-section (4) shall stipulate the terms of settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wise provided in this Chapter be reopened in any proceeding under this Act or under any other law for the time being in force". 10. Hence, a conjoint reading of the aforesaid provisions indicates that the ITSC is a high-powered body vested with powers to settle the case of an assessee. The order of settlement is conclusive as expressly stated in Section 245-I but the argument of the Revenue is that it is conclusive only with regard to matters stated in the order of settlement and in respect of matters not stated therein, the Assessing Officer has the power to reopen the assessment. We however do not agree with this submission of the Revenue as they are overlooking the fact that the expenses/purchases in question formed part of the books of accounts, on the basis of which return of income was filed for AY 2013-14 and that the books for the relevant AY 2013-14 were rejected and total income was estimated at 8% of receipts by the ITSC. Under Section 245F(1), the ITSC, in addition to the powers conferred on it under Chapter XIX-A, shall have all the powers which are vested in an income-tax authority under the Act. By virtue of the provisions of Section 245F (2) once the application fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders of the Settlement Commission under section 245D(4) of the Act. 12. Section 245-I of the Act, which bears the heading "Order of settlement to be conclusive", postulates that every order of settlement passed under sub-section (4) of section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in that Chapter, be reopened in any proceeding under the Act or under any other law for the time being in force. An application under section 245C of the Act is akin to a return of income, wherein the assessee is required to make a full and true disclosure of his income and the order under section 245D(4) of the Act is in the nature of an assessment order. Therefore, assessment of the total income of the assessee for the assessment year in relation to which the Settlement Commission has passed the order under section 245D(4) of the Act stands concluded and in terms of section 245I of the Act, such order shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in Chapter XIX-A, be reopened in any proceeding under the Act or under any other law for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Settlement Commission would be final and conclusive subject to two qualifications, viz. fraud or misrepresentation. Moreover, when the settlement becomes void under section 245D(7) of the Act, the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission. 7.6 Section 245-I of the Act, which bears the heading "Order of settlement to be conclusive", postulates that every order of settlement passed under sub-section (4) of section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in that Chapter, be reopened in any proceeding under the Act or under any other law for the time being in force. 7.7 An application under section 245C of the Act is akin to a return of income, wherein the assessee is required to make a full and true disclosure of his income and the order under section 245D(4) of the Act is in the nature of an assessment order. Therefore, assessment of the total income of the assessee for the assessment year in relation to which the Settlement Commission has passed the order und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the Settlement Commission, the assessment for the year stands concluded and the Assessing Officer thereafter has no jurisdiction to reopen the assessment. 7.9 This court is in agreement with the view of the Bombay High Court in Mandhana Industries Ltd. (supra) and the Delhi High Court in case of Omaxe Ltd. (supra) wherein, the court held that the provisions of Chapter XIX-A of the Act make it abundantly clear that a case could either be dealt with by the concerned income tax authority or the Settlement Commission and not by both. The Act does not envisage a return of an assessee to be split into two parts, one for consideration before the Settlement Commission by way of settlement and another for normal assessment at the hands of the Assessing Officer or the appellate or revisional authority. In other words, if an application for settlement is allowed and the case is settled, the entire assessment for the assessment year in question would stand settled. The court held that the Act does not envisage parallel proceedings for the same assessment year concerning the same assessee. 7.10 The upshot of the above discussion is that once an order has been made by the Settlement Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of settlement and another for normal assessment at the hands of the Assessing Officer or the appellate or the revisional authority. In other words, if an application for settlement is allowed and the case is settled, the entire assessment for the assessment years in question would stand settled and the same cannot be reopened again. Identical view is noted to have been expressed by the Hon'ble Delhi High Court in Omaxe Ltd. v. Asstt. CIT (209 Taxman 443). 15. It is further noted that the provisions of Section 153A or 153C of the Act starts with a non-obstante clause which reads as under: - "153A(1) - Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 but on or before the 31st day of March, 2021, the Assessing Officer shall.....[Emphasis given by us] 16. From the above it is ex-facie apparent that Section 153A or 153C of the Act, is overriding only Sections 139, 147, 148, 149, 151 & 153 of the Act. As rightly pointed out b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AYs 2014-15 & 2015-16. In the course of assessment, the AO first examined the document found and seized at Page No. 18 of Loose Paper Bundle No. 3. Analyzing the same, the AO noted that the first two columns contained the name of vendor and amount of purchases and that the third column represented the percentage of commission and the fourth column indicated the resultant figure after applying the percentage of commission to the amount paid. The relevant seized document has been extracted by the AO at Page 7 of the assessment order. 20. The AO had noted that, before the Investigating authorities, the Director of KIL was unable to explain the notings on the above Page. He further observed that, bills of only nine (9) parties out of the thirty (30) vendors were found in the course of search. It was also noted that, six (6) out of these nine (9) parties belonged to one Gursahani family and upon enquiry, Shri Gursahani failed to provide the relevant details viz., invoices, contract, work performed, ledger, labour register, books of accounts etc. citing that the records were stolen from him on 15.12.2014 and for which he provided an FIR copy as well. Since these six (6) parties were una ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave passed a common appellate order for all the AYs before us. On the issue of fake purchases of Rs. 37,95,26,087/-, the Ld. CIT(A) upheld the findings of the AO to the extent that, the assessee had failed to substantiate the genuineness of these expenses. The Ld. CIT(A) however held that, the disallowance of entire value of these expenses was excessive and did not corroborate with the actual operating results of the assessee. The Ld. CIT(A) following several decisions of Hon'ble High Courts held that only profit element embedded in these bogus purchases ought to have been taxed by the AO. Taking into account the overall profitability and having regard to the order of ITSC in assessee's own case for earlier years, the Ld. CIT(A) held that net profit rate of 15% ought to have been earned from this water pipeline project. The Ld. CIT(A) accordingly restricted the quantum of addition viz., the profit element embedded in the purchases, to 15% of the contractual receipts across the years. Aggrieved by this order of the Ld. CIT(A), both assessee and Revenue are in appeal before us. 23. Supporting the order of the AO, the Ld. DR appearing for the Revenue contended that the AO had succinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid reason, the payments should not be viewed adversely. He further contended that, none of the Directors or employees of KIL had anywhere admitted that the payments made towards the purchases in question were bogus. Referring to the statement of Shri N. Jethani, relied upon by the Revenue, he pointed out that, he had nowhere admitted to any wrong doing and that he was unable to explain Page No. 18 of Loose Bundle No. 3 for the reason that he was not involved in day to day workings of the JV. The Ld. AR further submitted that, non-attendance of summons by the vendors also could not be held against the assessee JV, when the assessee JV had provided all contemporaneous evidences which it was ordinarily required to maintain to substantiate the purchases. For this, he relied upon the decision of Hon'ble Bombay High Court in the case of CIT Vs Nikunj Eximp Enterprises Pvt Ltd (372 ITR 619). 25. The Ld. AR further submitted that, to execute this magnitude of project, the assessee JV had to engage several vendors and thus it was practically not possible for assessee JV to be in regular touch with each of them and be aware of their whereabouts, even post completion of the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's own case for earlier years, the net profit rate of 8% of contractual receipts was fair and reasonable and that the assessment of total income ought to be restricted to that extent. 27. We have heard both the parties and perused the material placed before us. From the facts on record, it is noted that the assessee JV was formed between two JV partners i.e. KIL & M/s Eagle Infra India Ltd (formerly known as ECC), later on substituted by Shri U.M. Rupchandani with the intent and purpose to undertake and execute water pipeline project at Ulhasnagar. In the course of search conducted upon the premises of the JV partner, KIL, certain loose papers are noted to have been found. It is observed that, Page No. 18 of Loose Bundle No. 3 contained notings of the expenses paid to the thirty (30) vendors in question, against which certain percentage of commission was also mentioned. The amounts on this Page correlated with certain notings on other Page No. 19 of the same Loose Bundle. We further note that, the figures against each vendors mentioned on Page No. 18 fully correlated with the books of the assessee JV. According to us therefore, these loose papers cannot be said to contain dumb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extent that the assessee was unable to fully discharge the genuineness of these payments made to the thirty (30) vendors. 29. In view of our above findings, the next issue for consideration is whether the entire value of payments made to the vendors was to be disallowed or only the profit element embedded therein was to be taxed in hands of the assessee, in the facts and circumstances of this case. In case, the profit element is taxable, then what should be the quantum is also to be decided upon. On this aspect, the Ld. DR has relied upon the decision of Pratibha Pipes & Structurals Ltd. (supra) to support the AO's action disallowing the entire value of payments. In the instant case, the assessee is noted to have made purchases from several parties. It was noted that unlike other purchases, in twenty-two instances, the assessee was unable to provide any evidences, details, confirmations etc. to support the purchases. It was also noted that were no entries found in goods register towards such purchases, there were no delivery challans, evidence of transport etc. There were no corresponding details of sales available. Further, even the notices issued by the AO were not served upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. 87.2 Similar principle was followed by the Hon'ble jurisdictional High Court in the case of PCIT Central-4 vs Paramshakti Distributors Pvt Ltd (ITA No. 413 of 2017) delivered on 15th July, 2019 wherein the Hon'ble HC has held as under: "2. The first question pertains to restricting the addition of Rs. 23.16 Lakhs to Rs. 2,21,600/- by the Tribunal. The Assessing Officer had made the said addition on the ground that the assessee's purchases were found to be bogus. The entire purchase amount was therefore, added to the assessee's income. The Tribunal, however, restricted to the said sum of Rs. 2,21,600/-. The Tribunal recorded that the Assessing Officer has not rejected either the purchases or the sales made out of the said purchases. The Tribunal therefore, was of the opinion that the addition should be restricted to 10% of the total purchases. The Revenue strongly disputes this proposition. 3. Without elaboration, what the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s profit rate of the assessee showed a decreasing trend over the years. In such circumstances, CIT(A) took the view that 2% of the purchases of Rs. 65,65,30,470.00 would be a fair and reasonable profit percentage which should be added to the income of the assessee, deleting the balance amount. 16. While doing so, CIT (A) observed that only reasonable profit on the purchases made from the hawala party should be added back to the income of the assessee. Relevant portion of the order of the CIT (A) is extracted hereunder:- "2.7 From the perusal of the decisions of the Hon'ble courts on this issue, specially the decision of the Hon'ble Bombay High Court in the case of CIT v. Nikunj Eximp Enterprises (P.) Ltd. (supra), it was clearly held that the A.O. and the CIT (A) had disallowed the amount of Rs. 1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. The Hon'ble Mumbai Tribunal in the case of Saroj Anil Steel (P.) Ltd. v. ITO vide order dated 30-10- 2012 has also decided this issue that only profit margin @ 1 % is to be added back. Similar view has been taken by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration it has decreased to 3%. It is also an established fact that the gross profit of trading activity is lower than the manufacturing activity. The AR of the appellant has also offered that additional gross profit @ ½% of the turnover can be added back. But there is no reasonableness in adopting this ½% G.P. Keeping in view the principles of natural justice and the decision of the Hon'ble Courts on this issue, only the reasonable profit has to be added back on the purchases made from the hawala parties. The gross profit has been reduced from 8.77 % to 5.71% during the year under consideration which is explained as major manufacturing activity in the last year and major part of the trading activity in the year under consideration. Keeping in view of these facts and circumstances, I am of the view that 2% of the purchases made from the hawala parties amounting to Rs. 65,65,30,470/- which works out at Rs. 1,31,30,609/- is air and reasonable, hence, upheld and the balance addition made is deleted. Ground of appeal is partly allowed." 17. Before the Tribunal, Revenue expressed the grievance that CIT (A) had erred in disallowing bogus purchases at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer to make further addition of 3% on the bogus purchases and to estimate the income on such basis. 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 i.e., from Rs. 24,18,06,385.00 to Rs. 65,65,30,470.00 but having found that the purchases corresponded to sales which were reflected in the returns 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) had assessed 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 learned standing counsel and we find that facts of the present case are clearly distinguishable from the facts of those two cases to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to prove the existence of the suppliers. The suppliers were found to be engaged in providing bogus bills without actual delivery of goods. Moreover few of the suppliers are not regular parties and they were found to have supplied only during the year and there were no supply either in the earlier year or in the subsequent year from such parties. This circumstantial evidence also prove the bogus nature of the transaction. On careful analysis of the finding of Hon'ble High Court of Gujarat in the abovementioned cases, I am of the firm view that without purchase of materials it was not possible for the appellant to complete the job work of dying. As mentioned above the AO had never disputed or examined the aspect of job work receipts. Hence I am of the firm belief that the appellant had made cash purchases from other parties which were not recorded in the books. The appellant took only bills from these 8 parties as accommodation to explain the purchases. Therefore the entire purchase from these 8 parties cannot be added as bogus and what needs to be taxed is the profit element embedded in such transaction. The appellant carryout only the job work of dying the cloths on a contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided on identical lines by the Hon'ble Bombay High Court. In our view, no intervention is required in the findings of Ld. CIT(A) and, therefore, the same is confirmed. The grounds raised by the revenue are dismissed." 15. Thus, Tribunal concurred with the view taken by the CIT(A) that the Assessing Officer had erred in disallowing the entire total purchases and adding the same to the total income of the assessee. View taken by the CIT(A) that 17.5% of the purchases be added to the total income of the assessee as the profit element was a reasonable one. It was also noted that the said percentage was accepted by the assessee with a view to close the litigation. Nothing was brought on record by the Revenue to contradict the findings recorded by the CIT(A). Tribunal had also referred to the decision of this court in CIT v. Nikunj Eximp Enterprises (P.) Ltd. [2013] 35 taxmann.com 384/216 Taxman 171 (Mag.)/[2015]/384 ITR 619. Infact, this court has also held following the decision of Nikunj Eximp Enterprises Pvt. Ltd. that the revenue is required to furnish the information received from the Sales Tax Department or from the Investigation Wing of the Department to the assessee all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. Today while dealing with Income-tax Appeal No. 1330 of 2017 (Pr. CIT v. Rishabhdev Technocable Ltd.) [2020] 115 taxmann.com 333 (Bom.), we have held 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 i.e., from Rs. 24,18,06,385.00 to Rs. 65,65,30,470.00 but having found that the purchases corresponded to sales which were reflected in the returns 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) had assessed 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 learned standing counsel and we find that facts of the present case are clearly distin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the purchases efected by it, the CIT(A) by following CIT Vs. Bholanath Poly Fab Pvt. Ltd., and considering the facts and circumstances of the case, restricted the addition by estimating profit of 12.5% on the total purchases in question which works out to Rs. 59,31,849/-. It thus, granted relief to the assessee to the tune of Rs. 4,15,22,944/- (Rs.4,74,54,793/- - Rs. 59,31,849/-). 8. The order passed by learned CIT(A) was challenged by the revenue before the Income Tax Appellate Tribunal. Cross objection was also filed by the assessee in the said proceedings. By virtue of order dated 28th February, 2017, the Tribunal dismissed the appeal as also the cross objection fled by the assessee and upheld the order of learned CIT(A). 9. Learned Counsel for the appellant urged that the view expressed by the Tribunal in upholding the order of learned CIT(A), dated 09th March, 2015 was untenable in law, inasmuch as the assessee had clearly failed to prove the genuineness of purchases made during the course of execution of the works, despite having been granted opportunity to produce the twelve parties before the A.O. for purposes of verification. 10. The Tribunal upheld the findings r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 413 of 2017, dated 15-7-2010] wherein the Division Bench has observed that if the factum of sales has been accepted by the Department then even if it is established that there were bogus purchases, it is not necessary that entire amount should be added to the income of the Assessee as there cannot be a sale without purchase. The facts of the present case are identical wherein the sales have been accepted. Therefore, in light of the aforesaid decisions first question of law does not survive for consideration." 87.9 In the latest judgement of Hon'ble Bombay High Court in the case of PCIT Vs. Vishwashakti Construction (ITA No. 1016 & 1026 of 2018) dated 4th May 2023, the jurisdictional High Court has followed the decision in the case of Ram Builders (supra) and held as under: 6. An appeal was preferred before the ITAT both by the assessee as also the revenue, which was finally decided by virtue of the order impugned dated 20th January, 2017, which is impugned in the present appeal. The Tribunal upheld the view of the CIT(A) to treat the purchases from ten parties as bogus and also upheld the view expressed by the CIT(A) to sustain the addition to the extent of 12.5% of the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contract was completed by the assessee. Pursuant to the same, it is noted that the assessee had derived gross receipts of Rs. 249.39 crores across the life of the project. On these given facts, it is evident that the assessee had indeed performed the tasks allocated under the agreed contract with UMC, completed the water pipeline project and had derived revenues therefrom. Understandably therefore, the assessee could not have undertaken this huge project without incurring expenses viz., both material and labor. From the details furnished by the assessee before the lower authorities, it is noted that the assessee had claimed to have incurred labour cost of Rs. 80.92 crores which comprised of 33% of the total revenues from this project. If the Revenue's proposition is taken at its face value i.e., the entire value of purported bogus payments has to be disallowed; then it would mean that against the water pipeline project from which the assessee derived revenues of Rs. 295 crores, it had incurred labour costs of Rs. 30.35 crores to undertake tasks involving excavation, laying of pipes, execution etc. which is only 11.49% of the total revenues. In our considered view, such a proposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom this same water pipeline project at Ulhasnagar in AYs 2011-12 to 2013-14. Perusal of the order of ITSC shows that, like in the AYs before us, the Revenue had suspected bogus bills/expenses to have been debited in P&L A/c by the assessee JV. Accordingly, the assessee had approached Settlement Commission, which after examining the facts of the case and taking into consideration the issue of bogus purchases, had held that net profit rate of 8% of the gross receipts was fair and reasonable rate to estimate the overall income from this water pipeline project. This order of ITSC is noted to have attained finality and is therefore is found to carry binding value. 35. In the relevant AY 2014-15, the assessee had originally declared net profit of Rs. 4.78 crores which was 5.7% of the gross receipts in the return filed u/s 139(1) of the Act. Following the above order of ITSC and having regard to the fact that the same contract was continued in the relevant AY 2014-15, we hold that the profit of the assessee for the year is to be estimated at 8% of the contractual receipts. The Ld. AR had pointed out to us that, the assessee had offered 8% of contractual receipts in the return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Ld. CIT(A) who, after extensively analyzing the details and evidences furnished by the assessee as well as IDCC, concluded that these payments were genuine and hence deleted the same. The Revenue is now in appeal before us. 38. The Ld. DR appearing for the Revenue first invited our attention to Page Nos. 29-38 of the impugned order in which the AO had extracted the relevant seized material and his analysis, basis which the AO had inferred that the contractual payments made to IDCC, were not genuine. The Ld. DR particularly referred to Page Nos. 6 & 7 of the Loose Bundle, in which there were entries in relation to commission @ 5% to the JV Partner ECC in respect of the payments made to IDCC. This ledger, according to the Ld. DR, suggested that the payments which went to IDCC came back through ECC. He also referred to the pattern of 2% reduction in the amounts deposited by ECC and amounts paid to IDCC, which according to him showed that ECC was giving back the payments after reducing their commission. The Ld. DR further argued that IDCC did not provide proof of actual work done which further corroborated the suspicion of the AO regarding its genuineness. Overall therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found at Pages 6 & 7. Since the other JV partner i.e. KIL was not agreeable to such terms, it was never acted upon. This fact according to him was corroborated by the entries in these pages itself, which clearly showed that no corresponding receipt, either in cash or through bank, was ever recorded in the said ledger by ECC. 41. The Ld. AR has also rightly pointed out that the fact that these entries did not suggest commission for providing accommodation bills, was also corroborated by the noting found on Page Nos. 20 & 21. It is seen that, Pages Nos. 20 & 21, according to AO, represented actual state of affairs regarding the accounts of the assessee JV. If that be so, then, we agree with the submission of the Ld. AR, that corresponding cash entries i.e. the payments made to IDCC less 5% commission, ought to have been recorded therein. However, no such noting or entry was found on this page, which lends credence to the explanation given by the Ld. AR that the noting found on Page Nos. 6 & 7 were dumb in nature and that it nowhere suggested payment of commission for arranging accommodation invoices from IDCC. 42. The Ld. AR also brought to our notice that, another related entity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant. This page has been duly explained by the appellant as mentioned in para 55 of this order. The appellant has stated that the entries mentioned in seized page no. 4 are corresponding to cheques issued by the appellant to IDCC. The appellant has also informed that the difference of 2% between expenditure mentioned on page 3 and payment on page 4 is on account of TDS u/s 194C. The appellant has also given an entry-wise reconciliation of various entries on page 3 and page 4 vis-a-vis the ledger accounts of IDCC in its books of accounts. This table has already been reproduced in para 55 of this order and is not being repeated here. It has also been stated that ECC might be maintaining this ledger in order to track the payments because it was supervising the work of IDCC and was negotiating extra remuneration on this. This submission of the appellant appears to be correct firstly because the title of page 4 is "IDCC CHQ" and secondly, because the payments details to IDCC after deducting TDS (as per ledger accounts of IDCC in the books of the appellant) matches with the details mentioned on seized page no. 4. iii) The Assessing Officer has interpreted that after keeping 5% c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous evidences brought on record by the assessee as well as IDCC to substantiate the genuineness of the payments. As noted earlier, the assessee had appointed IDCC as a sub-contractor for a portion of their work in relation to the water pipeline project being executed at Ulhasnagar. Before the lower authorities as well as before us, the assessee is noted to have furnished the following evidence/documents to corroborate the genuineness of the transactions with IDCC. * Registration Certificate with PWD Department. * Work Certificate issued to IDCC. * Ledger extracts in the books of the appellant. * Copies of invoices. * Proof of payment (Extracts of bank book as well as extracts of bank statements). * Confirmation letter from IDCC. * ITRs acknowledgement of. IDCC for AY 2012-13 to 2016-17 along with computation of Income. * Copies of Tax Audit reports and Financial Statements for AY 2012-13 to 2016-17. * Copies of Assessment orders u/s 143(3) in the case of IDCC for AY * 2012-13, 2013-14 and 2014-15. * Copies of Service Tax Returns filed by IDCC for AY 2013-14 to 2016-17. * Copies of VAT Audit reports of IDCC for AY 2012-13 to 2016-17. 45. Having perused the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaking sub-contracting work. In this regard, the appellant has submitted that there was no written agreement with IDCC for undertaking the sub-contract work. It has been argued that the expenses paid to IDCC for sub-contracting work cannot be held as bogus merely because there was no written agreement especially when M/s IDCC is an established sub-contractor and has included the amount paid by the appellant in its receipts. The appellant has also harped upon the fact that M/s IDCC has turnover ranging between Rs. 15 Crores to 38 Crores and has disclosed substantial amount of taxable income for A.Y. 2012-13 to 2016-17. The appellant has further submitted that written agreements are no guarantee of making the transactions genuine because there may be cases where written agreements may be made to create evidence for showing a bogus transaction as genuine transaction. As per the appellant, while deciding the genuineness of a transaction, one has to see whole nature of documents and evidences submitted by the parties. I tend to agree with the appellant because IDCC and the appellant filed various documents in this regard and the AO has not find any fault in these documents. In my opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 023/Mum/2023 & 3060/Mum/2023 for AY 2015-16. 50. Ground Nos. 1, 2 and 4 of the Revenue's appeal and all the grounds taken by the assessee in their appeal relates to the addition of Rs. 16,18,42,702/- made by the Assessing Officer in AY 2015-16 out of bogus purchases of Rs. 37,95,26,087/- made from thirty (30) vendors. After considering the rival submissions, it is observed that the issue involved in this ground is similar to the Ground Nos. 1, 2 and 4 of the Revenue's appeal and the assessee's appeal for A.Y. 2014-15. Following our conclusion drawn supra for A.Y. 2014-15, in the overall facts and circumstance of the case, we hold that it is only the profit element embedded in these bogus payments which need to be brought to tax. As held above, on the given facts of the case, the AO is directed to assess the profits of the assessee at 8% of the contract receipts. With these directions, the AO is directed to re-compute the total assessable income for the relevant AY 2015-16, in the like manner as directed in AY 2014-15. Hence, Ground Nos. 1, 2 and 4 of Revenue's appeal stands dismissed and the grounds of appeal taken by the assessee are partly allowed. 51. Ground No. 3 of the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on account of cash investment was warranted since it was fully covered by additional income offered in earlier years. Being aggrieved by the above appellate order of the Ld. CIT(A), both the parties are in appeal before us. 54. Heard both the parties. Before adverting to the facts of the case, we first take note of the principle of telescoping which has since been judicially approved by the Hon'ble Supreme Court in the case of Anantharam Veerasinghaiah & Co. Vs CIT (123 ITR 457). In the decided case, it was held that where the assessee offers any income on ad hoc basis, then such income is commonly described as intangible addition; but it is very much a part of assessee's real income as disclosed in his account books and has the same concrete existence. The Hon'ble Court held that the secret profits or undisclosed income of an assessee earned in the same or an earlier assessment year may constitute a secret fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. The intangible additions were held to be available to the assessee as the regular book profits could be. The Apex Court thus held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vident that the JV partners had disclosed income in the hands of the assessee JV before the ITSC, Mumbai and such additional income of Rs. 9,50,56,072/- represented the intangible addition / secret profit, which applying the judicially approved principle of telescoping, could be set off against any unexplained money/investment found by the Revenue. 58. The Ld. CIT(A) is noted to have rightly observed that the AO had erred in considering the cash investment aggregating to Rs. 8,00,00,000/- to have been made in AY 2017-18 only because these pages were dated 25.08.2016. The Ld. CIT(A) had rightly analyzed the contents of the seized pages and inferred that the entries therein do not suggest that these transactions were undertaken only in FY 2016-17. Instead, the noting's as well as the surrounding circumstances relating to the water pipeline project suggests that the said investment would have been made by the JV partners earlier viz., when the project was ongoing and most likely in 2015 when the major work was completed. 59. However, irrespective whether the investment was made in 2015 or in FY 2016-17, the admitted facts show that the assessee JV had disclosed income of Rs. 9,50,56 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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