QUALITY HEIGHTCON PRIVATE LIMITED,MUMBAI vs. DY. COMMISSIONER OF INCOME TAX, CIRCLE -14(1)(2), MUMBAI, MUMBAI

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ITA 1489/MUM/2025Status: DisposedITAT Mumbai07 May 2025AY 2010-20116 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the challenge to the reopening of assessment under section 148 was not pressed by the assessee and was therefore dismissed as not pressed. Regarding the disallowance of alleged bogus purchases, the Tribunal noted that the assessee was formerly a partnership firm, Quality Construction Company, and that a Co-ordinate Bench in the same AY 2010-11 had dealt with identical facts and purchases. Following the jurisdictional Bombay High Court decision in Pr. CIT v. Suraj Infrastructures (P.) Ltd., which allowed estimation of gross profit at 12.5% on alleged bogus purchases, the Tribunal directed the AO to restrict the addition to 12.5% of the alleged bogus purchases and delete the remaining addition. The Tribunal found the decision relied upon by the revenue to be factually distinguishable. On the issue of TDS credit, the Tribunal found that it required factual verification and remitted the issue back to the AO with a direction to examine the claim based on evidence and grant credit in accordance with law, after giving the assessee a reasonable opportunity of being heard. The Tribunal noted that the AO had not rejected the books of accounts but had accepted them except for the alleged bogus purchases.

What were the facts?

The assessee, Quality Heightcon Private Limited, is in appeal against the order dated 13/02/2025 passed by the NFAC, Delhi, for Assessment Year 2010-11. The assessee's original return was processed under section 143(1). Subsequently, a notice under section 148 was issued on 27/03/2015, based on information from the investigation wing alleging bogus purchase bills. The Assessing Officer (AO) made an addition of Rs. 42,82,977/- for alleged bogus purchases after finding that the vendors did not exist at the given addresses. The assessee's appeal before the CIT(A) was unsuccessful. The assessee argued that the reopening was based on information from the DGIT(Inv.) and not the AO's own opinion, making it void ab initio. The assessee also contested the disallowance of purchases and the denial of TDS credit.

What were the issues?

1. Whether the reopening of assessment under section 148 was valid, given that it was based on information received from the DGIT(Inv.) rather than the Assessing Officer's independent opinion, and whether the CIT(A) erred in upholding it. The assessee contended that such reopening is void ab initio and illegal, disregarding Supreme Court and jurisdictional decisions and principles of natural justice. The revenue did not record any specific argument on this issue. 2. Whether the disallowance of alleged bogus purchases of Rs. 42,82,977/- was made on conjectures and surmises, and whether the assessee proved that it had not taken any hawala bills. The assessee argued that conclusive evidence was submitted and the CIT(A) erred in disregarding it. The revenue supported the AO's action, relying on the decision in Pr. CIT vs. Kanak Impex (India) Ltd. 3. Whether the disallowance of alleged bogus purchases should be restricted to the profit element (12.5%) in light of binding jurisdictional High Court and ITAT decisions. The assessee requested this restriction, citing the Bombay High Court decision in Pr. CIT v. Suraj Infrastructures (P.) Ltd. and ITAT decisions in its own case and its erstwhile firm's case. The revenue did not record any specific argument on this issue. 4. Whether the disallowance of TDS credit of Rs. 24,46,194/- was made on conjectures and surmises, despite the assessee submitting details of TDS claimed, supported by Form 26AS and TDS certificates, and in disregard of CBDT Instruction No. 05/2013. The assessee also pointed to a rectification order under section 154 granting full TDS credit. The revenue did not record any specific argument on this issue.

Which sections of the Income-tax Act were involved?

Section 148,Section 133(6),Section 143(1),Section 154

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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

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

For Appellant: Shri Gyaneshwar Kataram, A/R
For Respondent: Shri Ashok Kumar Ambastha, Sr. D/R

ORDER \nPER NARENDRA KUMAR BILLAIYA, AM:\nThis appeal by the assessee is preferred against the order dated\n13/02/2025 by NFAC, Delhi [hereinafter “the ld. CIT(A)"] pertaining to\nAY 2010-11.\n2.\nThe grievance of the assessee reads as under:-\n“1. In the circumstances and facts of our case, the Learned Commissioner of Income\nTax (Appeals), has erred in law and on facts in confirming the action of Ld. DCIT,\nMumbai in upholding the re-opening of assessment u/s 148 as valid. The Assessee\nstates that reopening of assessment u/s 148 is void ab initio and illegal since it is not\nthe opinion of the Assessing Officer to reopen the assessment but the reopening has\nbeen done on the basis of the information received from the office of DGIT(Inv.),\nMumbai of the Income Tax Department and such reopening is not sustainable in law.\nThe Learned Commissioner of Income Tax (Appeals), has erred in disregarding the\ndecisions of Supreme Court and direct binding jurisdictional decisions which is binding\nupon him and without observing the principles of natural justice and without\nappreciating the facts and circumstances of the case.\n2. In the circumstances and facts of our case, the Learned Commissioner of Income Tax\n(Appeals), has erred in law and on facts in confirming the action of Ld. DCIT, Mumbai\nin upholding the disallowance of alleged bogus purchases of Rs.42,82,977/-(100% of\ntotal alleged purchases of Rs.42,82,977/- (in respect of 15 parties out of various\npurchase parties) on conjectures and surmises and alleging that the assessee has taken\nhawala bills amounting to sum of Rs.42,82,977/- despite the fact that the Assessee\nexplained and proved that it had not taken any hawala bills. The Learned Commissioner\nof Income Tax (Appeals), has erred in law and on facts in not considering the conclusive\nevidence submitted in its written submission and supporting paper book.\n3. In the circumstances and facts of our case, the Learned Commissioner of Income Tax\n(Appeals), has erred in law and on facts in confirming the action of Ld. DCIT, Mumbai\nin upholding the disallowance of alleged bogus purchases of Rs.42,82,977/-(100% of\ntotal alleged purchases of Rs.42,82,977/-) on conjectures and surmises without\nconsidering the Assessee's reply vide letter dated 25/01/2025 submitted before the\nLearned Commissioner of Income Tax (Appeals) requesting Ld. Commissioner of\nIncome Tax (Appeals) to direct the Assessing Officer to disallow @ 12.5% of the alleged\nbogus purchases of Rs.42,82,977/- i.e. Rs.5,35,372/- in view of the binding\nJurisdictional Bombay High Court decision in the case of the Principal Commission of\nIncome Tax v. Suraj Infrastructures (P.) Ltd. [2023] 156 taxmann.com 192 (Bombay)\ndated 06/09/2023 and ITAT decisions including binding ITAT decisions in its own\ncase for Asst. Year 2011-12 and Asst. Year 2012-13 and binding ITAT decision in case\nof its erstwhile partnership firm M/s. Quality Construction Co. for the Asst. Year\n2010-11 wherein the disallowance is restricted to @ 12.5% of the alleged bogus\npurchases i.e. profit element attributable to the alleged bogus purchases from the total\n100% disallowance made by the Assessing Officer.\n4. In the circumstances and facts of our case, the Learned Commissioner of Income Tax\n(Appeals), has erred in law and on facts in confirming the action of Ld. DCIT, Mumbai\nin upholding the disallowance of TDS credit of Rs.24,46,194/- on conjectures and\nsurmises despite the fact that the Assessee had submitted the details of TDS claimed for\nRs.1,37,33,099/- in return of income which was supported with TDS of Rs.\n1,31,73,058/- reflected in Form 26AS and TDS of Rs.5,60,041/- reflected in TDS\ncertificates. The Learned Commissioner of Income Tax (Appeals), has erred in law and\non facts in disregarding the CBDT Instruction no 05/2013 dated 08/07/2013 directing\nthe Assessing Officer to grant credit if Assessee submits the TDS certificates, no matter\nthe same is not reflected in Form 26AS. Moreover, the Assessee has also submitted\nbefore the Learned Commissioner of Income Tax (Appeals), the copy of the rectification\norder u/s 154 dated 16/02/2012 against the intimation u/s 143(1) dated 17/01/2012\nwherein the predecessor Assessing Officer has given full TDS credit claimed by the\nAssessee in its return of income which includes the TDS credit of Rs.24,46,194/.\n5. The Appellant crave leave to add, delete or substantiate any grounds of appeal at the\ntime of hearing.”\n3.\nBriefly stated the facts of the case are that the assessee filed its return\nof income on 30/09/2010 declaring total income at Rs.5,36,35,210/-. The\nreturn was processed u/s 143(1) of the Act. Subsequently, notice u/s 148\nof the Act was issued on 27/03/2015, after recording the reasons for doing\nso. In response to which the assessee submitted that the original return\nfiled be treated as the return of income filed in pursuance to the notice\nu/s 148 of the Act. During the course of the scrutiny assessment\nproceedings, on the basis of the information received from the\ninvestigation wing relating to the assessee, who has indulged in the\npractice of taking bogus purchase bills and routing it through books of\naccount, the AO issued notice u/s 133(6) of the Act to the alleged parties\nissuing bogus bills.\n3.

1. On the basis of the information and report of the inspector, the AO\ncame to know that no such party/vendor existed on the given address\nand hence he could not serve the notice u/s 133(6) of the Act, treating the\nimpugned purchases as bogus and the AO made addition of Rs.\n42,82,977/-.\n4.\nAssessee carried the matter before the ld. CIT(A) without any\nsuccess.\n5.\nBefore us, the ld. Counsel for the assessee straightaway drew our\nattention to the order of this Tribunal in the case of the assessee which\nwas erstwhile a partnership firm under the name of Quality Construction\nCompany and pointed out that on identical set of facts and on identical\npurchases, the Tribunal has deleted the impugned addition.\n6.\nPer contra, supporting the assessment order, the ld. D/R placed\nstrong reliance on the decision of the Hon'ble Bombay High Court in the\ncase of Pr. CIT vs. Kanak Impex (India) Ltd. in Income Tax Appeal No. 791 of\n2021, order dated 03/03/2025.\n7.\nWe have given a thoughtful consideration to the orders of the\nauthorities below. The assessee which was erstwhile a partnership firm\nwas incorporated as a body corporate on 24/07/2009. Therefore, the\ndecision of the Co-ordinate Bench in the case of erstwhile firm for the\nsame assessment year clearly applies. The Co-ordinate Bench in ITA No.\n1403/Mum/2024; AY 2010-11, order dated 05/12/2024 has held as under:-\n“5. We heard the parties and perused the material on record. On the issue of addition\nmade towards bogus purchases, we notice that the Jurisdictional High Court in the case\nof Suraj Infrastructures Pvt. Ltd. (supra) has considered a similar issue in which the\nassessee is engaged in the same line of business and held that\n\"8. The ITAT in is impugned order had relied upon the judgments of Gujarat\nHigh Court in the case of Vijay Proteins Ltd. v. CIT [2015] 58 taxmann.com\n44 and also in the case of CIT v. Smith P. Sheth [2023]. 38 taxmann.com\n385/2019 Taxman 85 (Mag.)/356 ITR 451 and held that no uniform yardstick\ncan be applied the estimating gross profit on bogus purchases which is\ndepending upon the facts of different cases. The ITAT held that the Co-ordinate\nBeach in number of cases has taken a consistent view and directed AO to\nestimate gross profit of 12.5% on alleged bogus purchases and therefore, in the\ncase at hand also directed AO to estimate gross profit at 12.5% on the bogus\npurchases.\n9. Even on merits, the ITAT found that the approach of AO for re-opening the\nassessment was not correct.\n10. We find that the view taken by the ITAT is a reasonable and possible view\nand hence, no substantial question of law arises for our consideration.\"\n6. In view of the similarities in the facts in assessee's case respectfully following the\nabove decision of Hon'ble Bombay High Court, we direct the AO to apply 12.5% on the\nalleged bogus purchases and delete the remaining addition. On the issue of TDS credit,\nin our considered view the issue requires factual verification and therefore we are\nremitting the issue back to the AO with a direction to examine the claim of the assessee\nbased on evidences and give credit in accordance with law. Needless to say that the\nassessee be given a reasonable opportunity of being heard. It is ordered accordingly.”\n8.\nThe decision relied upon by the ld. D/R is fact specific and\ndistinguishable from the facts of the case in hand inasmuch as in that case,\nthe assessee consciously and intentionally decided not to join the\ninvestigation and did not file the details relating to purchases and failed\nto prove the genuineness of purchases because of allegation of purchase\nby accommodation entries whereas the facts of the case in hand show that\nthe assessee not only participated in the assessment proceedings and in\nthe proceedings before the ld. CIT(A) but also filed necessary details\nrelating to purchases. The allegation that the assessee did not maintain\nany stock registers does not hold good because the AO never rejected\nbooks of accounts but has accepted the book of accounts but for the\nalleged bogus purchases.\n9. As mentioned elsewhere, the Co-ordinate Bench in the assessee's\nown case has restricted the addition to 12.5% of the alleged bogus\npurchases. The same deserves to be followed and respectfully following\nthe same, we direct the AO to restrict the addition to 12.5% of the alleged\nbogus purchases. This ground is accordingly allowed.\n10. The other grievance relates to the non-granting of tax credit. We\ndirect the AO to given credit of pre-paid tax as per Form 26AS according\nto the relevant provisions of the law.\n11. The challenge to the re-opening of the assessment has not been\npressed and the same is dismissed as not pressed.\n12. In the result, appeal of the assessee is partly allowed.\nOrder pronounced in the Court on 7th May, 2025 at Mumbai.\nSd/-\n(SAKTIJIT DEY)\nVICE-PRESIDENT\nMumbai, Dated 07/05/2025\n*SC SPS\nSd/-\n(NARENDRA KUMAR BILLAIYA)\nACCOUNTANT MEMBER\nआदेश की प्रतिलिपि ग्रेषित/

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