DCIT(CC)-8(3), MUMBAI vs. SHAPOORJI PALLONJI AND COMPANY PRIVATE LIMITED, MUMBAI
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: JUSTICE (RETD.) C V BHADANG & MS PADMAVATHY S, AM
Per Padmavathy S, AM:
This appeal by the revenue and the Cross Objections (CO) of the assessee are against the order of the Commissioner of Income Tax (Appeals)-50, Mumbai
[In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 28.01.2025 for Assessment Years (AY) 2012-13. The grounds raised in the appeal of the revenue and in the CO of the assessee are as under:
Revenue’s Grounds
1. “Whether, on the facts and in the circumstances of the case and in law, the Ed. CIT(A) erred in deleting the disallowance of 22,18,98,416 in respect of the transaction with Smt Mayaben V. Parmar, without properly examining and appreciating the facts and findings recorded by the Assessing Officer in the assessment order?"
2 "Whether, on the facts and in the circumstances of the case and in law, the Ed. CIT(A) erred in not appreciating that the Assessing Officer rightly disallowed 22,18,98,416/- on account of unexplained and non-genuine expenditure towards payments made by the assessee company to Sent
Mayaben V. Parmar for manpower services?"
"Whether, on the facts and in the circumstances of the case and in law, the Ld. CIF(A) erred in failing to properly consider the findings recorded in Para 7.5 of the assessment order, wherein the assessee failed to substantiate the transaction by adducing evidence to establish the genuineness of manpower services provided to the assessee company?"
Grounds of C.O
On the facts and in the circumstances of the case, the learned AO has:
General Objection to Department's Appeal
erred in objecting the order of Ld. CIT(A) deleting addition in respect of unexplained and non-genuine labour charges of INR 2,18,98,416 made in the order under section 147 of the Act without appreciating the facts of the case,
Validity of Reopening proceedings under section 147 of the Act:
3 ITA No. 2242 & C.O. 124/Mum/2025
Shapoorji Pallonji and Company Pvt. Ltd.
General Ground:
2 erred in passing order under section 147 of the Act by reopening of original assessment order without appreciating that condition for reopening of assessment are not satisfied in the present case;
No failure on part of the Assessee to disclose truly and fully all material facts:
erred in reopening the assessment under section 147 of the Act beyond four years from the end of the relevant assessment year without recording its satisfaction in the reasons for reopening about failure of assessee to disclose facts truly and fully during the course of assessment proceedings hence the entire reopening is bad in law:
Reopening assessment on the basis of borrowed satisfaction:
erred in reopening the assessment proceedings and passing order under section 147 of the Act solely on the basis of the investigation report of the Deputy Director of Income Tax (Inv.), Ahmadabad and not on the basis of any independent opinion formed by AO and therefore the assessment is reopened on borrowed satisfaction leading to entire reassessment proceedings being bad in law;
No approval obtained from PCIT for reopening assessment:
erred in re-opening the assessment proceedings after seeking sanction of Income- Tax Officer (Tech)-3 of the Principal Commissioner of Income Tax-3, instead of the Principal Commissioner of Income Tax-3 himself as reassessment proceedings were initiated after 4 years and thereby violating the provisions of Section 151 of the Act and thus, leading to entire reassessment proceedings bad in law;
The assessee is a company engaged in the business of civil construction, real estate, trading of construction materials and other constructions related services. The assessee filed the return of income for AY 2012-13 on 29.11.2012 declaring a total loss of Rs. 130,64,21,515/- under normal provisions of the Act and the book profit of Rs. 54,35,88,945/- under section 115JB of the Act. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The assessment under section 143(3) r.w.s. 144C(3) was completed on 20.04.2016 determining the total loss at Rs. 97,94,04,731/- and book profit under section 4 ITA No. 2242 & C.O. 124/Mum/2025 Shapoorji Pallonji and Company Pvt. Ltd. 115JB at Rs. 60,20,41,406/-. Aggrieved the assessee filed further appeal before the CIT(A) and vide order dated 23.12.2024 the CIT(A) gave substantial relief to the assessee. The appeal filed by the Department against the order of the CIT(A) is currently pending before the Tribunal. In the mean time the assessee's case was reopened by issue of notice under section 148 dated 29.03.2019 for the reason that payments made by the assessee to one of the contractors i.e. Smt. Mayaben Vijay Parmar for manpower / labour services are unexplained and non-genuine. In response to the said notice the assessee filed the return of income and also filed the objection for reopening. The AO disposed of the objections vide order dated 01.10.2019. The assessee subsequently filed various details such as ledger copy of Smt. Mayaben Vijay Parmar's account in assessee's books containing details of the projects for which the payments are made along with copies of invoices, bank statements, TDS Certificate, etc. After considering the details submitted by the assessee, the AO proceeded to treat the payments made to Smt. Mayaben Vijay Parmar as unexplained by holding that “7.5 The submission of the assessee has been considered the same is found to be not acceptable. For the year under consideration, the assessee had made payments to Smt. Mayaben V. Parmar to the tune of Rs. 71,99,052/- and Rs. 1,46,99,364/- as mentioned in the aforesaid table. In view of this, the assessee company in the course of the assessment proceedings has been asked to show- cause as to why the bogus payments to Sme Mayaben V. Parmar to the tune of Rs. 2.18.98.416/- should not be disallowed as being unexplained expenditure and added back to the total income for the year under consideration. In compliance, the assessee company made its submission vide letter dated 27.11.2019 wherein the assessee company has mainly relied on its submission made before the Investigation Wing of Ahmedabad during the enquiry proceedings, These facts and submission of the assessee company were already distinguished by the Investigation Wing. Ahmedabad during the enquiry proceedings and after detailed enquiry of the facts, the transaction of the assessee company with Smt. Mayaben V. Parmar was held as unexplained expenditure of the assessee company. In the ongoing scrutiny proceedings, the assessee could not produce any new facts with respect to the transaction or any adducing evidence to substantiate the claim of expenditure as genuine. It is pertinent mention that all the contention/facts of the assessee before the 5 ITA No. 2242 & C.O. 124/Mum/2025 Shapoorji Pallonji and Company Pvt. Ltd. Investigation Wing were countered before Snit. Mayaben V. Parmar. The assessee was asked to submit the receipts or any other evidences for the labour payments but it failed to submit any details/documentary evidence in this regard. Further, similar details were also asked from Smt. Mayaben V. Parmar who also failed to file such details. During the re-assessment proceedings also, the assessee could not produce such details till the date of passing of this order. As per the assessee company, it had entered into works contract with the parties and deducted TDS on such payments. However, the parties had failed to file such details/explanation/evidences regarding such receipts. Therefore, even though the assessee has claimed to have received services from Smt. Mayaben V. Parmar Shri Vijay G. Parmar (HUF) for which the payments were made to them as per the table mentioned above and made entries in this regards into its Book of Accounts. However, the parties have failed provide any details whatsoever to prove that the services have actually been rendered to the assessee for which they have been paid by the assessee company as per their claim through banking channel. It is also pertinent to mention here that the cash withdrawn by the parties immediately after funds are received from the assessee company. Further, the parties have also failed to substantiate transaction with adducing evidences to establish the transaction to provide manpower services to the assessee company.
6 In view of these facts of the case, it is construed that the transaction of the assessee company with Sent. Mayaben V. Parmar and Shri Vijay G. Parmar (HUF) is non-genuine expenditure. For the year under consideration, the assessee has claimed to have made payment to Smt. Mayaben V. Parmar to the tune of Rs.2,18,98,416/- which is not substantiated and therefore, the same is treated as non-genuine expenditure. Therefore, the same is hereby added back to the total income of the assessee for the year under consideration.”
Aggrieved the assessee filed further appeal before the CIT(A). The CIT(A) gave relief to the assessee on merits on the ground that the payments towards labour charges are paid by the assessee through proper banking channel after deduction TDS and that the investigation report itself mentions that Smt. Mayaben Vijay Parmar has rendered services to the assessee. The CIT(A) also held that the impugned payments cannot be held as unexplained merely for the reason that the payee has subsequently withdrawn cash. The CIT(A) however dismissed the legal contention of the assessee regarding the validity of the reopening.
6 ITA No. 2242 & C.O. 124/Mum/2025
Shapoorji Pallonji and Company Pvt. Ltd.
4. The ld. AR at the outset argued that the details pertaining to the impugned additions were submitted and examined during the course of assessment proceeding under section 143(3) of the Act (page 110 to 113 of paper book). In this regard the ld. AR drew our attention to the various details submitted in connection with the payment made to contractors which included the payment made to Smt. Mayaben Vijay Parmar before the AO during proceedings under section 143(3) of the Act. (page 113 to 132 of PB). The ld. AR further submitted that the assessee in response to the notice under section 131(1A) has furnished the details pertaining to the payment made to Smt. Mayaben Vijay Parmar and her husband before the DDIT (Inv.) (page no. 315 to 326 of PB). The ld. AR also drew our attention to the information sent by the DDIT (Inv.) to submit that in the report there is no adverse finding with respect to the services rendered by Smt. Mayaben
Vijay Parmar to the assessee. The ld AR also submitted that only adverse finding is with respect to assessee not being able to provide evidence that Smt. Mayaben
Vijay Parmar withdrew the cash to make labour payments. The ld AR accordingly argued that it is the only reason based on which the AO has treated the payments made by the assessee as unexplained which fact is substantiated by what is stated as the reason to believe which a replica of investigation report. The ld AR also took the bench through the details of payments made through banking channel to Smt. Mayaben Vijay Parmar (page 177 to 203 of paper book) and the sample payment voucher to submit that assessee has discharged the onus of substantiating the payments and that the same cannot be held as unexplained. The ld. AR further argued that in assessee's own case for AY 2013-14 the faceless AO reopened the assessment for the same reason to verify the payments made to Smt. Mayaben
Vijay Parmar and the AO has accepted the submissions and documentary evidences furnished by the assessee to conclude accepting the same (page 588A of the Act). The ld. AR drew our attention to the various details furnished before the 7 ITA No. 2242 & C.O. 124/Mum/2025
Shapoorji Pallonji and Company Pvt. Ltd.
CIT(A) and argued that there is no infirmity in the order of the CIT(A) who was examined the issue on merits while allowing the appeal. The ld. AR placed reliance on the decision of the Hon'ble Bombay High Court in assessee's own case wherein an identical issue regarding alleged unexplained payments by the assessee and held that “19. We are in agreement with the views expressed by the Tribunal. Merely on suspicion based on information received from another authority, the assessing officer ought not to have made the additions without carrying out independent enquiry and without affording due opportunity to the respondent assessee to controvert the statements made by the sellers before the other authority. Accordingly, we do not find any good ground to entertain this question for consideration as well.”
The ld. DR on the other hand argued that there was information received from DDIT(Inv.) regarding the cash withdrawals by Smt. Mayaben Vijay Parmar immediately after the receipt of payments from the assessee and therefore the AO had a reason to belief that the payment made are not genuine. The ld. DR further argued that the assessee has not been able to substantiate that the subsequent cash withdrawals by Smt. Mayaben Vijay Parmar are for labour payments and accordingly the AO is rightly treated the payments as non-genuine.
We heard the parties and perused the material on record. The reason for reopening the assessment in the present case is that as per information received from investigation wing, the payments made by the assessee to Smt. Mayaben Vijay Parmar were not substantiated and that Smt. Mayaben Vijay Parmar withdrew cash immediately after the receipt of payments from the assessee (reasons recorded in page 145 of paper book). In the reasons recorded it is also alleged that the transactions of manpower supply are not genuine and that the expenses have been booked to inflate the expenses. It is relevant to take note of the fact that the assessee has made payments towards manpower supply to 1045
8 ITA No. 2242 & C.O. 124/Mum/2025
Shapoorji Pallonji and Company Pvt. Ltd.
parties during the year under consideration for several crores of rupees and out that the Smt. Mayaben Vijay Parmar is one of the parties to whom the amount paid is Rs.71,99,052 which is alleged as inflated non-genuine expense. We further notice that the AO has stated that the payments made towards man power supply is not supported by evidences and for that reason the impugned expenses are held to be non-genuine. In this regard it is relevant to consider the following observations as contained in report of the investigation wing which is sent to assessee's AO –
“6. Therefore, summons dated 02/01/2019 was also issued to the assessee for furnishing details vide note sheet entry dated 18/12/2018. However no submission was received on the due date. On 24/01/2019, Shri Jayrajsinh Parmar had appeared and intimated that Vijay G. Parmar has met with an accident due to which submission could not be filed. Submission is ready for furnishing. He was requested to file details as early as possible. Further, summons dated 24/01/2019 was issued to the M/s Shapoorji Pallonji and Co. Ltd for furnishing contract agreement, mode of payment and nature of work allotted and TDS details, to Smt. Mayaben V. Parmar &
Vijay G. Parmar. Company had filed an adjournment letter dated 29/01/2019 and requested to adjourn hearing till 28th February 2019. Company was requested to furnish the basic details regarding business activities & agreement to be provided by 30/01/2019 and the remaining details to be submitted by 05/02/2019. On 30/01/2019 company and stated that the company involved in construction activities i.e. commercial & residential. During the construction activities companies has required skilled & unskilled manpower, hire machinery, construction material and services. Mayaben V. Parmar and Vijay G. parmar were working with the company and providing manpower services in its different projects.
Company has submitted the sub-contract work order details with the Mayaben V.
Parmar and Vijay G. Parmar which were verified and kept on record. On 04/02/2019 company has submitted details of ledger copies, payment details and TDS certificates which were verified.”
From the perusal of the order of the CIT(A), we notice that the CIT(A) has considered the above observations to hold that rendering of services by Smt. Mayaben Vijay Parmar and that the payments are properly evidenced are not doubted by Investigation wing. We also notice that in Para 7 of the investigation
9 ITA No. 2242 & C.O. 124/Mum/2025
Shapoorji Pallonji and Company Pvt. Ltd.
report it is stated that the assessee failed to provide evidence that Smt. Mayaben
Vijay Parmar has withdrawn the amount paid by the assessee to make labour payments. It is an undisputed fact that the assessee has discharged the onus of proving that the payments are made towards manpower supply by necessary documentary evidences. During the course of hearing, the ld AR took us through the various documentary evidences submitted before the lower authorities evidencing the fact that the payments towards manpower supply are made through banking channel after deducting TDS. Given this in our view it would not be correct to treat the said payments as unexplained in assessee's hands for the reason that the purpose of subsequent withdrawals by the payee which is beyond assessee's control is not properly explained. We also notice that Hon'ble Bombay
High Court in assessee's own case has given a finding that the AO should not have made addition merely on suspicion based on information received from another authority without independent enquiry. In the given case, we notice that the AO has fully relied on the report of the investigation wing without recording any independent finding and therefore in our considered view, the ratio laid down by the Hon'ble High Court would apply to the impugned issue also. We also notice that the FAO for AY 2013-14 has raised queries regarding the payments made to the same party towards manpower charges and after considering the details submitted has not made any addition on that count (page 586 of paper book). In view of these discussions, we are convinced that there is no reason to interfere with the decision of the CIT(A) who has deleted the addition made by the AO after considering the impugned issue on merits and after examining the various evidences filed by the assessee.
10 ITA No. 2242 & C.O. 124/Mum/2025
Shapoorji Pallonji and Company Pvt. Ltd.
9. During the course of hearing, the ld. AR submitted that if the appeal of the revenue is dismissed on merits the various legal contentions in the C.O. will not be pressed. Accordingly the C.O. is dismissed as not pressed.
In result, the appeal of the revenue is dismissed and the C.O of the assessee is also dismissed as not pressed.
Order pronounced in the open court on 19-09-2025. (JUSTICE (RETD.) C.V. BHADANG) (PADMAVATHY S)
President Accountant Member
*SK, Sr. PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. DR, ITAT, Mumbai
4. 5. Guard File
CIT
BY ORDER,
(Dy./Asstt.