ACIT CENTRAL CIRCLE 7 (1), MUMBAI vs. ELECMEC ENGINEERING & PROJECTS PRIVATE LIMITED, MUMBAI

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ITA 3055/MUM/2025Status: DisposedITAT Mumbai08 October 2025AY 2016-17Bench: SHRI SAKTIJIT DEY, HON'BLE VICE PRESIDENT\n&\nSHRI NARENDRA KUMAR BILLAIYA, HON'BLE ACCOUNTANT MEMBER\nI.T.A. Nos.3055, 3057 & 3056/Mum/2025\nAssessment Year: 2016-17, 2017-18 & 2018-19\nAssistant Commissioner of\nIncome Tax, Central Circle – 7(1) Vs\nMumbai\nElecmec Engineering &\nProjects Private Limited\n208, Ashirwad Building\nAhmedabad Street\nCarnac Bunder, Chinchbunder\nMumbai - 400009\n[PAN: AADCE9111C]\nअपीलार्थी/\n(Appellant)\nप्रत्यर्थी /\n(Respondent)\nC.O. Nos.194, 195 & 196/Mu11 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal, following a coordinate bench's decision in a similar case involving a group entity (Duli Trade & Commodities Pvt. Ltd.), upheld the CIT(A)'s findings. The Tribunal noted that the CIT(A) had correctly identified the transactions as circular trading, not for suppressing income but for increasing turnover and availing bank credit. Crucially, the CIT(A) found that the assessee had duly reflected the profits earned from these circular transactions in its books. The Tribunal agreed with the CIT(A)'s reasoning that since profit is estimated on sales, and there were no bogus sales, no addition was warranted. Furthermore, the Tribunal upheld the deletion of indirect expenses, agreeing that expenses incurred to earn disclosed income are allowable. The Tribunal also found that the AO's addition was based on conjecture without concrete evidence of cash receipts, and that the payer of the alleged excess consideration was not identified. The Tribunal concluded that the profit disclosed by the assessee in its audited books of accounts already included the commission income earned, and no further addition was warranted, especially in the absence of evidence of cash payments. The grounds of appeal raised by the revenue were dismissed.

What were the facts?

A search and seizure operation was conducted on the Jatia Group and related entities on April 17, 2018. The assessee, Elecmec Engineering & Projects Private Limited, a company within the Lloyd Group, was found to be covered under Section 153C of the Income Tax Act. The Assessing Officer (AO) alleged that the assessee was involved in bogus transactions, including inflated purchases and sales through paper entities, and misused banking credit facilities. The AO rejected the assessee's books of accounts, made an addition of Rs. 7,55,00,747/- on account of alleged bogus purchases amounting to Rs. 1,51,00,14,956/- out of a total turnover of Rs. 1,54,76,35,288/-, and disallowed administrative expenses of Rs. 4,91,355/-. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)].

What were the issues?

1. Whether the addition of Rs. 7,55,00,747/- made by the AO on account of alleged bogus purchases is sustainable, considering the CIT(A)'s finding that the transactions were circular trading aimed at increasing turnover and availing bank credit, and that the profit from such transactions was disclosed by the assessee. Assessee's contention: The assessee argued that it had no income other than what was recorded in its books and no evidence showed income from alleged back-to-back transactions. The CIT(A) correctly noted that profit estimation should be on sales figures, and since there were no bogus sales, no addition was warranted. The CIT(A) also deleted the disallowance of indirect expenses, stating that expenditure incurred to earn disclosed income should be allowed. Revenue's contention: The Revenue strongly supported the findings of the AO.

Which sections of the Income-tax Act were involved?

Section 153C

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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY, HONBLE & SHRI NARENDRA KUMAR BILLAIYA, HONBLE

For Appellant: Shri Vijay Mehta, A/R
For Respondent: Shri Ritesh Misra, CIT, D/R
Hearing: 30/09/2025Pronounced: 08/10/2025

आदेशानुसार/ BY ORDER TRUE COPY

1.

Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai , 3057 & 3056/Mum/2025 C.O. Nos. 194, 195 & 196/Mum/2025 11

Initial Date 1. Draft dictated on 30/09/2025 Sr.PS

2.

Draft placed before author 06/10/2025 Sr.PS 3. Draft proposed & placed JM/AM before the second member 4. Draft discussed/approved JM/AM by Second Member. 5. Approved Draft comes to /10/2025 Sr.PS/PS the Sr.PS/PS 6. File pronounced on /10/2025 Sr.PS 7. File sent to the Bench Clerk /10/2025 Sr.PS 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order. 11. Dictation Pad is enclosed Yes

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