DHEERAJ GOYAL,NEW DELHI vs. INCOME TAX OFFICER WARD 29(1), DELHI

Brief facts of the case are that the assessee is a proprietor of D.R. Associates, engaged in the business of exclusion of works –contracts. The return of income was filed declaring total income of INR 26,58,753/- which was processed u/s 143(1) of the Act. The AO received information from the Investigation Wing, Kolkata that assessee has made payment to one M/s. Simplex Infra Projects Pvt. Ltd. and during the course of survey carried out in its case, it was found that the said company was used Shri Akash Aggarwal and Shri Navin Kumar Sharma for providing accommodation entries of bogus contracts expenses. Since the assessee has made payment of INR 1.07,54,142/- to the said party therefore, the proceedings u/s 148 of the Act were initiated after recording the reasons and taking necessary approval from the Competent Authority. In response to the notice, the assessee filed its return of income, declaring same income as was declared in the return of income filed u/s 139(1) of the Act. The AO further observed that one sub-contractor M/s. Safeco Project Pvt. Ltd. to whom total payment of INR 3,29,15,879/- was made during the year have no expertise to execute works-contract and therefore, notice u/s 133(6) of the Act were issued however, they remained un-complied. Moreover, during the course of assessment proceedings, assessee has failed to make compliance to any of the notice issued and therefore, the AO held that assessee has taken the accommodation entries of INR 4,36,70,021/- of bogus sub-contract expenses from aforesaid two companies and made the addition of the same as undisclosed income u/s 68 of the Act and, total income of the assessee was assessed at INR 4,63,28,770/-.

Aggrieved by the said order, assessee preferred an appeal before ld. CIT(A) who vide impugned order dated 17.09.2025 though had confirmed the action of the AO in holding that the assessee has obtained accommodation entries of bogus sub-contract expenses however, has corrected the error committed by the AO of making addition u/s 68 of the Act as against the disallowance of the expenses claimed under the sub-contract head and accordingly, the ld. CIT(A) has confirmed the disallowance of expenses of INR 4,36,70,021/-.

Aggrieved by the order of ld. CIT(A), the assessee is in appeal before the Tribunal by taking various Grounds of appeal mentioned in the appeal memo.

Ground of appeal Nos. 3 to 3.6 are with respect to the disallowance of expenditure of INR 4,36,70,021/- claimed as sub-contractor expenses against the payments made to Two parties namely M/s. Simplex Infra Projects Pvt. Ltd. and M/s. Safeco Project Pvt. Ltd.

Heard the contentions of both the parties at length and perused the material available on record. The allegation of the AO is that M/s. Simplex Infra Projects Pvt. Ltd. was the company used for providing accommodation entries of bogus sub-contracts expenses and M/s. Safeco Project Pvt. Ltd. have no work expertise nor having employee etc. and therefore, the payments made to these parties is bogus and recorded to suppress the profits. On the other hand, claim of the assessee was that both the parties have executed the works which have been verified by the Principal before making the payments to the assessee. The assessee submits a chart according to which as against total payments of INR 4,36,70,021/- made to these parties, assessee has raised total bills of INR 4,56,24,635/- to the Principal and thus, had earned profit @ 4.48% on the work executed by these parties. The assessee further claimed that it had filed copy of the ledger accounts of both the parties, VAT returns, invoices raised and TDS certificate to support the work executed by them.

On careful consideration of the facts, it is observed that though the assessee has filed all the evidences however, the fact remained which uncontroverted that these two parties have not made any compliance in response to notices issued to them u/s 133(6) of the Act. Further, the Investigation Wing, Kolkata during the course of survey carried out had unearthed that M/s. Simplex Infra Projects Pvt. Ltd. was used as conduit to provide bogus accommodation entries of sub-contracts therefore, the genuineness of the payments made to these two parties i.e. M/s. Simplex Infra Projects Pvt. Ltd. and M/s. Safeco Project Pvt. Ltd. remained unverified. Further, it is a matter of fact that work has been executed and payment has been released by the Principal after verification of the work executed therefore it cannot be said that no work was executed against the payments claimed to have been made to these two parties i.e. M/s. Simplex Infra Projects Pvt. Ltd. and M/s. Safeco Project Pvt. Ltd. It appears that work has been executed through some other contractor to whom lessor payment was made and bogus bills were obtained from these two parties namely, M/s. Simplex Infra Projects Pvt. Ltd. and M/s. Safeco Project Pvt. Ltd. Of the higher value to suppress the profits.

Considering the entirety of the facts also keeping in mind that the work has been executed, entire expenses claimed towards the sub-contract charges paid to these two parties cannot be disallowed and only profit suppressed by the assessee be added. Accordingly, we confirmed the addition to the extent of 6% of total payment made to these Two parties of INR 4,36,70,021/- as additional income which was over and above the Gross Profit declared on the work claimed to have been executed through these two sub-contractors. Thus, Ground of appeal Nos. 3 to 3.6 raised by the assessee are partly allowed.

Since we have partly allowed Ground of appeal Nos. 3 to 3.6, the other legal Grounds of appeal are not adjudicated and became academic.

In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 13.07.2026. Sd/- Sd/-