DCIT CENT. CIR 1(2) , MUMBAI vs. M/S. ALPHA ASSOCIATES, MUMBAI

PER OM PRAKASH KANT, AM PER OM PRAKASH KANT, AM The captioned appeals The captioned appeals by the assessee for assessment years by the assessee for assessment years

2008-09 to 2012-13 13 have been preferred against the respective against the respective

orders passed by the learned CIT(Appeals) orders passed by the learned CIT(Appeals)-47, Mumbai [in short the umbai [in short the

Ld. CIT(A)]. The cross appeals by the Revenue have been filed for . The cross appeals by the Revenue have been filed for . The cross appeals by the Revenue have been filed for

assessment years 2008 assessment years 2008-09 and 2010-11. Identical grounds have 11. Identical grounds have

been raised by the assessee as well as by the been raised by the assessee as well as by the Revenue in their evenue in their

respective appeals and therefore, these appeals respective appeals and therefore, these appeals were were heard together

M/s Alpha Associates 3 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

and disposed off by way of this disposed off by way of this consolidated order for sake of order for sake of

convenience and avoid repetition of facts. convenience and avoid repetition of facts.

associates( i.e. a partnership firm ) ( i.e. a partnership firm ), into a private limited company , into a private limited company

namely HGP community private limited, the assesseeand namely HGP community private limited, the assesseeand namely HGP community private limited, the assesseeand Revenue

have filed revised for No. 36, which are placed on record. have filed revised for No. 36, which are placed on record. have filed revised for No. 36, which are placed on record.

regular returns of income for relevan regular returns of income for relevant assessment years from AY sessment years from AY

2008-09 to 2012-13 13 ,which were subjected to scrutiny assessments were subjected to scrutiny assessments

wherever applicable as per record wherever applicable as per records. Subsequently, a search action . Subsequently, a search action

on the premises of “ “ M/s Hiranandani Group” was carried out on was carried out on

11/03/2014 by the 11/03/2014 by the Investigation wing of Income-tax Department tax Department

Mumbai. Duringsearch search proceeding on 12/05/2014, Sh proceeding on 12/05/2014, Sh. Niranjan

Hiranandani, Managing Director of various companies of the group/ , Managing Director of various companies of the group/ , Managing Director of various companies of the group/

Partner of firms of the group, accepted booking of bogus purchases Partner of firms of the group, accepted booking of bogus purchases Partner of firms of the group, accepted booking of bogus purchases

in books of accounts of the group e in books of accounts of the group entities ntities amounting to

M/s Alpha Associates 4 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

₹57,37,26,731/-. In post search proceeding before the . In post search proceeding before the . In post search proceeding before the Investigation

wing, this amount was revised to was revised to ₹ 60,28,51,896.50/ 896.50/-. This amount

was determined by aggregating purchases from parties listed by the was determined by aggregating purchases from parties listed by the was determined by aggregating purchases from parties listed by the

Maharashtra VAT authorities as sus Maharashtra VAT authorities as suspicious dealers in the case of picious dealers in the case of

various entities of the group. In respect of 11 other entities various entities of the group. In respect of 11 other entities various entities of the group. In respect of 11 other entities of

group, petitions were preferred before the , petitions were preferred before the Settlement ettlement Commission

and amount of ₹58,47,66, 58,47,66,021/- was offered for settlement, but in was offered for settlement, but in

respect of the assessee no s respect of the assessee no settlement application was preferred. ettlement application was preferred.

3.1 In view of incriminating material belonging to the assessee In view of incriminating material belonging to the assessee In view of incriminating material belonging to the assessee

seized and found at the premises of Hiranandani Group, after seized and found at the premises of Hiranandani Group, after seized and found at the premises of Hiranandani Group, after

recording satisfaction under the provisions of the Act, a notice under recording satisfaction under the provisions of the Act, a notice under recording satisfaction under the provisions of the Act, a notice under

section 153C of the C of the Income-tax Act, 1961 (in short in short ‘the Act’) was

issued on 05/01/2015 for assessment year 2008 issued on 05/01/2015 for assessment year 2008-09 to AY 2012 09 to AY 2012-13.

Subsequently statutory notices under the Subsequently statutory notices under the Act were were issued and

assessment under section 15 assessment under section 153C read with section 143(3) of the Act 3C read with section 143(3) of the Act

were completed on were completed on 18/06/2015, wherein addition/ disallowance 18/06/2015, wherein addition/ disallowance

M/s Alpha Associates 5 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

including disallowance for bogus purchases were made. The Ld including disallowance for bogus purchases were made. The Ld including disallowance for bogus purchases were made. The Ld.

CIT(A) adjudicated the appeals CIT(A) adjudicated the appeals vide respective impugned orders ide respective impugned orders .

Aggrieved with the same with the same, the assessee and Revenue are before the the assessee and Revenue are before the

ITAT ( in short the ‘Tribunal Tribunal’) by way of raising respective grounds. by way of raising respective grounds.

09 to 2012-13 are identical except 13 are identical except change of change of amount of

disallowance of bogus purchases. A list of party disallowance of bogus purchases. A list of party-wise disallowance wise disallowance

of purchases for various assessment years is as follows: ious assessment years is as follows: ious assessment years is as follows:

4.1 As the issue in dispute of disallowance of bogus purchases in As the issue in dispute of disallowance of bogus purchases in As the issue in dispute of disallowance of bogus purchases in

the appeals of the assessee is identical ls of the assessee is identical, except name of the parties , except name of the parties

and amount thereon , therefore, case for AY 2008 and amount thereon , therefore, case for AY 2008-09 09 is taken as lead

M/s Alpha Associates 6 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

case and which would would be followed in other assessment years assessment years. The

ground raised in 2008 ground raised in 2008-09 is reproduced as under:

“1. The learned Commissioner of Income Tax (Appeals) erred in 1. The learned Commissioner of Income Tax (Appeals) erred in 1. The learned Commissioner of Income Tax (Appeals) erred in confirming action of the Assessing Officer in disallowing purch confirming action of the Assessing Officer in disallowing purch confirming action of the Assessing Officer in disallowing purchases from J D Bricks and Sand Suppliers of Rs. 2,39,139/ from J D Bricks and Sand Suppliers of Rs. 2,39,139/- stating that the stating that the same are non-genuine and reducing the same from WIP. genuine and reducing the same from WIP.

i. Work in progress may be determined as per books of accounts, Work in progress may be determined as per books of accounts, Work in progress may be determined as per books of accounts, ii. any other relief your Honours any other relief your Honours may deem fit.

assessment year 2008 assessment year 2008-09 are amounting to ₹2,39, 2,39,139/-. The Ld.

Assessing Officer has ma Assessing Officer has made the disallowance mainly due to three de the disallowance mainly due to three

reasons. Firstly, the documentation of the purchase bills in dispute reasons. Firstly, the documentation of the purchase bills in dispute reasons. Firstly, the documentation of the purchase bills in dispute

was not made according to the standard procedure followed by the was not made according to the standard procedure followed by the was not made according to the standard procedure followed by the

purchase department of the assessee group and bills have not been purchase department of the assessee group and bills have not been purchase department of the assessee group and bills have not been

passed through certain checks by the purchase Department which ertain checks by the purchase Department which ertain checks by the purchase Department which

were required in normal course. Secondly, were required in normal course. Secondly, the entries of purchases the entries of purchases

M/s Alpha Associates 7 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

made in SAP system ( i.e. books maintained electronically) in SAP system ( i.e. books maintained electronically) in SAP system ( i.e. books maintained electronically) using the

user ID CLA0016have been offered before the settlement user ID CLA0016have been offered before the settlement user ID CLA0016have been offered before the settlement

commission in case of other entities of the ‘Hiranandani ‘Hiranandani group’,

therefore the entries of the purchase bills in dispute made in the the entries of the purchase bills in dispute made in the the entries of the purchase bills in dispute made in the

SAP system using the tainted User ID: CLA0016 SAP system using the tainted User ID: CLA0016 are also bogus and are also bogus and

liable for disallowance liable for disallowance. Thirdly, these purchase parties were already . Thirdly, these purchase parties were already

in the list of ‘Hawala Hawala’ Parties of Maharashtra Sales Tax Department Sales Tax Department

i.e. a list of the parties which were engaged i.e. a list of the parties which were engaged i.e. a list of the parties which were engaged in issuing

accommodation bills accommodation bills without actual delivery of goods. Fourthly, without actual delivery of goods. Fourthly, the

‘Hiranandani group’ has offered the purchases from very same has offered the purchases from very same

parties as non-genuine before the settlement commission in case of genuine before the settlement commission in case of genuine before the settlement commission in case of

other entities of the group. other entities of the group.

purchases submitted during the course of the search w purchases submitted during the course of the search w purchases submitted during the course of the search was tentative

,which contained some of the genuine purchases entered some of the genuine purchases entered some of the genuine purchases entered in SAP

system through users s Id other thantainted user “ID: CLA0016”. The ID: CLA0016”. The

M/s Alpha Associates 8 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

assessee produced bills and vouchers of the parties listed in assessee produced bills and vouchers of the parties listed in assessee produced bills and vouchers of the parties listed in above

table along with details of payments made to th able along with details of payments made to them through cheque. em through cheque.

The assessee also relied on the decision dated 26/09/2016 of the The assessee also relied on the decision dated 26/09/2016 of the The assessee also relied on the decision dated 26/09/2016 of the

learned first appellate authority in the case of sister concern namely first appellate authority in the case of sister concern namely first appellate authority in the case of sister concern namely

M/s Sears Constructions, M/s Sears Constructions, wherein he directed to delete identical in he directed to delete identical

addition.

observing as under:

“10.4 I have considered the arguments of the assessee and do not 10.4 I have considered the arguments of the assessee and do not 10.4 I have considered the arguments of the assessee and do not agree with the same. It appears that the fact about purchase as agree with the same. It appears that the fact about purchase as agree with the same. It appears that the fact about purchase as per ID 'CLA0062', as calmed by the assessee now, were never per ID 'CLA0062', as calmed by the assessee now, were never per ID 'CLA0062', as calmed by the assessee now, were never mentloned by the assessee at the time of search and seizure by the assessee at the time of search and seizure by the assessee at the time of search and seizure action. Neither Shri Deepak Vibhute, purchase head of the action. Neither Shri Deepak Vibhute, purchase head of the action. Neither Shri Deepak Vibhute, purchase head of the company mentioned this fact nor Shri Niranjan Hiranandant company mentioned this fact nor Shri Niranjan Hiranandant company mentioned this fact nor Shri Niranjan Hiranandant director of the group stated anything in this regard. In fact it director of the group stated anything in this regard. In fact it director of the group stated anything in this regard. In fact it appears that during the c appears that during the course of assessment proceedings also, ourse of assessment proceedings also, these facts were not mentioned by the assessee. On the contrary these facts were not mentioned by the assessee. On the contrary these facts were not mentioned by the assessee. On the contrary the working of bogus purchase as per Annexure the working of bogus purchase as per Annexure-3 to the 3 to the statement of Shri Deepak Vibhute and as per Annexure statement of Shri Deepak Vibhute and as per Annexure-2 to the 2 to the statement on oath u/s 132(4) of the A statement on oath u/s 132(4) of the Act and shri Nirannjan ct and shri Nirannjan Hiranadani at the fime of search and selzure action clearly Hiranadani at the fime of search and selzure action clearly Hiranadani at the fime of search and selzure action clearly

M/s Alpha Associates 9 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

indicated the above mentioned purchases as bogus. In these indicated the above mentioned purchases as bogus. In these indicated the above mentioned purchases as bogus. In these circumstances I am not in a position to accept the contention of circumstances I am not in a position to accept the contention of circumstances I am not in a position to accept the contention of the asessee that these purchases were genuine, Tho the asessee that these purchases were genuine, Though the ugh the assessee argued that amount of such purchases were so small assessee argued that amount of such purchases were so small assessee argued that amount of such purchases were so small and therefore there is no reason at to why the assessee should and therefore there is no reason at to why the assessee should and therefore there is no reason at to why the assessee should have made such bogus purchases but the important fact is that have made such bogus purchases but the important fact is that have made such bogus purchases but the important fact is that these purchases are part of overall bogus purchases of over Rs. these purchases are part of overall bogus purchases of over Rs. these purchases are part of overall bogus purchases of over Rs. 57 crores detected during the course of search and seizure action 57 crores detected during the course of search and seizure action 57 crores detected during the course of search and seizure action and surrendered by both Shri Deepak Vibhute and Shri Niranian and surrendered by both Shri Deepak Vibhute and Shri Niranian and surrendered by both Shri Deepak Vibhute and Shri Niranian Hitanandant.Therefore this explanation of the assessee also fails. Hitanandant.Therefore this explanation of the assessee also fails. Hitanandant.Therefore this explanation of the assessee also fails.

10.5 The assessee in this regard also relled upon the order 10.5 The assessee in this regard also relled upon the order 10.5 The assessee in this regard also relled upon the order of my Ld.Predecessor in case of Sears Construction Pvt. Ltd. dated Ld.Predecessor in case of Sears Construction Pvt. Ltd. dated Ld.Predecessor in case of Sears Construction Pvt. Ltd. dated 26.09.2016, wherein he 26.09.2016, wherein he accepted the claim of the assesssee claim of the assesssee towards purchases, as per ID "CLA0062' towards purchases, as per ID "CLA0062'. However, I respectfully . However, I respectfully disagree with the findings of my Ld. Predecessor. Asfacts stand disagree with the findings of my Ld. Predecessor. Asfacts stand disagree with the findings of my Ld. Predecessor. Asfacts stand today, these purchases were surrendered both by the purchase day, these purchases were surrendered both by the purchase day, these purchases were surrendered both by the purchase head of the assessee group as also by Shri Niran an Hiranandani head of the assessee group as also by Shri Niran an Hiranandani head of the assessee group as also by Shri Niran an Hiranandani the Director and the main person of the assessee company. the Director and the main person of the assessee company. the Director and the main person of the assessee company. Further complete working of such bogus purchases were given as Further complete working of such bogus purchases were given as Further complete working of such bogus purchases were given as part of Annexure xure-3 of the statement of Shri Deepak Vibhute and 3 of the statement of Shri Deepak Vibhute and Annexure A-2 to the statement of Shri Niranjan hiranandant 2 to the statement of Shri Niranjan hiranandant 2 to the statement of Shri Niranjan hiranandant where detalls of above purchases from JD Brick & Sand Suppliers where detalls of above purchases from JD Brick & Sand Suppliers where detalls of above purchases from JD Brick & Sand Suppliers is clearly appearing. No clarifications were given by the assessee is clearly appearing. No clarifications were given by the assessee is clearly appearing. No clarifications were given by the assessee elther during t elther during the course of post search investigation or during he course of post search investigation or during the assessment proceedings in this regard, nor any statement the assessment proceedings in this regard, nor any statement the assessment proceedings in this regard, nor any statement given by the above mentioned two persons in the records of given by the above mentioned two persons in the records of given by the above mentioned two persons in the records of bogus purchases were retracted even untll today. in these bogus purchases were retracted even untll today. in these bogus purchases were retracted even untll today. in these

M/s Alpha Associates 10 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

circumstances 1 do not find a circumstances 1 do not find any reason to deviate the view taken ny reason to deviate the view taken by the AO.Therefore the ad by the AO.Therefore the addition made by the AO. is upheld.” dition made by the AO. is upheld.”

purchases in dispute were made in routine course of the business. purchases in dispute were made in routine course of the business. purchases in dispute were made in routine course of the business.

Further, the assessee ha Further, the assessee had already submitted copies of the ledger already submitted copies of the ledger

account of the parties in the books of accounts of the assessee account of the parties in the books of accounts of the assessee account of the parties in the books of accounts of the assessee ;

invoices issued by the parties invoices issued by the parties; goods receipt note internally goods receipt note internally

prepared; octroi receipt octroi receipt; bank payment vouchers bank payment vouchers; copy of bank

statement etc. demonstrati statement etc. demonstrating that purchases were made in regular ng that purchases were made in regular

course of business. Regarding business. Regarding the statements of the parties of the partiesbefore

the Sales Tax Department of providing accommodation entry bills, the Sales Tax Department of providing accommodation entry bills, the Sales Tax Department of providing accommodation entry bills,

the Ld. Counsel submitted that same the Ld. Counsel submitted that same are self-serving statements and serving statements and

the VAT amount has already been paid by the purchaser and has already been paid by the purchaser and has already been paid by the purchaser and

therefore those purchase /sale transactions are no longer therefore those purchase /sale transactions are no longer therefore those purchase /sale transactions are no longer bogus

transaction as per VAT Authorities. as per VAT Authorities. . Further, it was submitted that . Further, it was submitted that

purchases enteries in question have been made in question have been made using user ID

CLF0076 whereas the CLF0076 whereas the other purchases which have been admitted by other purchases which have been admitted by

M/s Alpha Associates 11 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

the Hiranandani Group the Hiranandani Group as bogus were entered in the save statement were entered in the save statement

from the ID No. CLA00 from the ID No. CLA0016. The Ld. Counsel before us, submitted that 6. The Ld. Counsel before us, submitted that

all the steps, which Mr. Deepak steps, which Mr. DeepakT VibhuteSenior Purchase Manager Senior Purchase Manager

admitted in statements during the course of search proceedings, atements during the course of search proceedings, atements during the course of search proceedings,

have been duly recorded have been duly recorded by the Purchase /Accounts Department by the Purchase /Accounts Department in

case of these purchases in question case of these purchases in question and therefore, there is no and therefore, there is no

irregularity in recording purchase in case of the assessee in the irregularity in recording purchase in case of the assessee in the irregularity in recording purchase in case of the assessee in the

years under consideration. The Ld. Counsel relied on the decision of consideration. The Ld. Counsel relied on the decision of consideration. The Ld. Counsel relied on the decision of

the ITAT ‘J’ Bench in the case of M/s Sears Construction Pvt. Ltd. v. the ITAT ‘J’ Bench in the case of M/s Sears Construction Pvt. Ltd. v. the ITAT ‘J’ Bench in the case of M/s Sears Construction Pvt. Ltd. v.

DCIT (ITA No. 6975/M/2016) for assessment year 2012 DCIT (ITA No. 6975/M/2016) for assessment year 2012 DCIT (ITA No. 6975/M/2016) for assessment year 2012-13,

wherein identical disallowance made by the Assessing Officer wherein identical disallowance made by the Assessing Officer wherein identical disallowance made by the Assessing Officer in

respect of the purchases from hawala parties which were f the purchases from hawala parties which were f the purchases from hawala parties which were

surrendered by the Director of the Hiranandani Group surrendered by the Director of the Hiranandani Group surrendered by the Director of the Hiranandani Group, have been

deleted.

document in support of purchases including document in support of purchases including weighment slips; weighment slips; excise

M/s Alpha Associates 12 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

gate pass etc. have not been filed by the assessee in respect of th ss etc. have not been filed by the assessee in respect of th ss etc. have not been filed by the assessee in respect of those

purchase bills before either the Assessing Officer or the Ld. CIT(A) purchase bills before either the Assessing Officer or the Ld. CIT(A) purchase bills before either the Assessing Officer or the Ld. CIT(A)

and therefore, it could not and therefore, it could not be established that those purchases were se purchases were

made in regular course of the business. He also submit made in regular course of the business. He also submit made in regular course of the business. He also submitted that as far

as the evidences justifying different steps by the account different steps by the account

department /audit of the purchase bills after receipt in the account /audit of the purchase bills after receipt in the account /audit of the purchase bills after receipt in the account

Department is concerned Department is concerned, the documents have been filed for the the documents have been filed for the

first time before the Tribunal before the Tribunal and therefore same being in the nature e being in the nature

of additional evidence of additional evidences, need to be referred to the Assessing Officer need to be referred to the Assessing Officer

for proper verification. Further, he submitted that when the for proper verification. Further, he submitted that when the for proper verification. Further, he submitted that when the other

tax payers of the Hiranandani Group tax payers of the Hiranandani Group has offered undisclosed has offered undisclosed

income before the settlement commis income before the settlement commission in case of purchases sion in case of purchases

shown from the very very same parties , then how the claim in respect of then how the claim in respect of

same parties in the case of the assessee could be treated as genuine same parties in the case of the assessee could be treated as genuine same parties in the case of the assessee could be treated as genuine

purchase without any contrary evidence. purchase without any contrary evidence.

M/s Alpha Associates 13 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

dispute and perused the relevant material on record. We find that in dispute and perused the relevant material on record. We find that in dispute and perused the relevant material on record. We find that in

the instant case, the dispute is regarding the purchases of the instant case, the dispute is regarding the purchases of the instant case, the dispute is regarding the purchases of

₹2,39,139/- from M/s J.D. from M/s J.D. Bricks,whether the same ,whether the same is genuine or

not. According to the Assessing Officer, purchase documents does not. According to the Assessing Officer, purchase documents does not. According to the Assessing Officer, purchase documents does

not meet the list of supporting other documents of supporting other documents of supporting other documents / various steps

prescribed by the Hiranandani group for passing of bills , prescribed by the Hiranandani group for passing of bills , prescribed by the Hiranandani group for passing of bills , like

weighment slip; goods receipt note oods receipt note, etc. The Ld. Assessing Off etc. The Ld. Assessing Officer

has also pointed out that the purchases in dispute have been has also pointed out that the purchases in dispute have been has also pointed out that the purchases in dispute have been

recorded in the SAP system by using same user ID which was used system by using same user ID which was used

for recording non-genuine purchases from parties genuine purchases from parties, t , the undisclosed

income in respect of which has already been declared income in respect of which has already been declared income in respect of which has already been declared before the

Settlement Commission. The Ld. AO also ommission. The Ld. AO also held that purchases from that purchases from

same parties have been admitted as non same parties have been admitted as non-genuine in case of other genuine in case of other

entities and corresponding entities and corresponding amount has been offered as undisclosed has been offered as undisclosed

income before the settlement commission. Before us, the as income before the settlement commission. Before us, the as income before the settlement commission. Before us, the assessee

M/s Alpha Associates 14 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

has filed copies of the purchase bills which has passed during has filed copies of the purchase bills which has passed during has filed copies of the purchase bills which has passed during

through the different channels of the account section through the different channels of the account section through the different channels of the account section to show that

relevant entries have been recorded on those purchase bills relevant entries have been recorded on those purchase bills relevant entries have been recorded on those purchase bills .

for purchase were found, therefore statement of Sh Deepak therefore statement of Sh Deepak

Tukaram Vibhute, Sr. project Manager purchase was recorded on Tukaram Vibhute, Sr. project Manager purchase was recorded on Tukaram Vibhute, Sr. project Manager purchase was recorded on

13/03/2014. In said statement he explained the regular practice of 13/03/2014. In said statement he explained the regular practice of 13/03/2014. In said statement he explained the regular practice of

documentation for purchase documentation for purchase records. He stated that in case of records. He stated that in case of

purchases of steel purchase documents must contained purchase purchases of steel purchase documents must contained purchase purchases of steel purchase documents must contained purchase

bill, delivery Challan, test results , excise gate pass, bill, delivery Challan, test results , excise gate pass, bill, delivery Challan, test results , excise gate pass, weighment slip

and engineer certificate. On receiving of the goods in and engineer certificate. On receiving of the goods in and engineer certificate. On receiving of the goods in-store, certain

entries were made in records including marking of security and in records including marking of security and in records including marking of security and

store entry at the backside of the challan, signature of the person store entry at the backside of the challan, signature of the person store entry at the backside of the challan, signature of the person

who received the material and mentioning of goods received who received the material and mentioning of goods received who received the material and mentioning of goods received note

No. (GRN) on the bill by the store in (GRN) on the bill by the store in-charge. In the account charge. In the account

department also six entries were made including stamp of received six entries were made including stamp of received six entries were made including stamp of received

M/s Alpha Associates 15 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

with date at the time of receiving of the bill at the account office, with date at the time of receiving of the bill at the account office, with date at the time of receiving of the bill at the account office,

junior accountant signature after checking quantity with GRN and junior accountant signature after checking quantity with GRN and junior accountant signature after checking quantity with GRN and

attaching challan received from store, entry of Bill booking and attaching challan received from store, entry of Bill booking and attaching challan received from store, entry of Bill booking and

octroi, passing of bill of bill for Rs______ by Assistant Manager and y Assistant Manager and

signature on front part of the bill, checking of all entries signature on front part of the bill, checking of all entries signature on front part of the bill, checking of all entries and

approval, after checking all entries signature by the audit team in approval, after checking all entries signature by the audit team in approval, after checking all entries signature by the audit team in

green pen and then bill goes for payment, where stamp of “Bill paid” green pen and then bill goes for payment, where stamp of “Bill paid” green pen and then bill goes for payment, where stamp of “Bill paid”

along with cheque No. and entry No. of the payment are marked. along with cheque No. and entry No. of the payment are marked. along with cheque No. and entry No. of the payment are marked.

operating procedure had not been followed in purchases from few operating procedure had not been followed in purchases from few operating procedure had not been followed in purchases from few

parties and bills from those parties were directly sent by the parties and bills from those parties were directly sent by the parties and bills from those parties were directly sent by the

management to the account department for entry and for making management to the account department for entry and for making management to the account department for entry and for making

payment. He admitted that bills of those parties were given payment. He admitted that bills of those parties were given payment. He admitted that bills of those parties were given by the

director for entry in the books of accounts maintained on computer in the books of accounts maintained on computer in the books of accounts maintained on computer

system and purchases were in the nature of ingenuine purchases. system and purchases were in the nature of ingenuine purchases. system and purchases were in the nature of ingenuine purchases.

M/s Alpha Associates 16 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

duly affirmed by the Principal Person of the Group duly affirmed by the Principal Person of the Group , , this contention

of the Ld Counsel raised before us as to of the Ld Counsel raised before us as to whether all the relevant whether all the relevant

entries have been made on th entries have been made on those purchase bills, need verification at need verification at

the end of the Assessing Officer. the end of the Assessing Officer.

admitted that entries in respect of those ingenuine purchases were admitted that entries in respect of those ingenuine purchases were admitted that entries in respect of those ingenuine purchases were

made in SAP systems ( software for maintaining business made in SAP systems ( software for maintaining business made in SAP systems ( software for maintaining business

transaction ) using the userid “CLA0016”. He confirmed that said transaction ) using the userid “CLA0016”. He confirmed that said transaction ) using the userid “CLA0016”. He confirmed that said

userid was of Sh Kishire Sawant, who expired on 20 userid was of Sh Kishire Sawant, who expired on 20 th No. 2012. The

assessee has filed before us assessee has filed before us a certificate from the system from the system

administrator that purchases in question have been entered by administrator that purchases in question have been entered by administrator that purchases in question have been entered by

another user ID CLF 0076. another user ID CLF 0076. This certificate was directed to be This certificate was directed to be

countersigned by the Managing Director of the assessee but same countersigned by the Managing Director of the assessee but same countersigned by the Managing Director of the assessee but same

has not been complied. Therefore, t been complied. Therefore, this issue also needs verification his issue also needs verification

at the end of the Assessing Officer. at the end of the Assessing Officer.

M/s Alpha Associates 17 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

Construction Pvt. Ltd. (supra) Construction Pvt. Ltd. (supra) has decided as under :

“3.2. In the light of the above recording, w 3.2. In the light of the above recording, we are reproducing e are reproducing hereunder a decision from Hon'ble jurisdictional High Court in hereunder a decision from Hon'ble jurisdictional High Court in hereunder a decision from Hon'ble jurisdictional High Court in the case CIT vs Nikunj Exim Enterprises Pvt. Ltd. (2015) 372 ITR the case CIT vs Nikunj Exim Enterprises Pvt. Ltd. (2015) 372 ITR the case CIT vs Nikunj Exim Enterprises Pvt. Ltd. (2015) 372 ITR 619 (Bom.):-

“7. We have considered the submission on behalf of the Revenue. “7. We have considered the submission on behalf of the Revenue. “7. We have considered the submission on behalf of the Revenue. However, from the order of the Tr However, from the order of the Tribunal dated April 30, 2010, we ibunal dated April 30, 2010, we find that the Tribunal has deleted the additions on account of find that the Tribunal has deleted the additions on account of find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement, i.e., bogus purchases not only on the basis of stock statement, i.e., bogus purchases not only on the basis of stock statement, i.e., reconciliation statement but also in view of the other facts. The reconciliation statement but also in view of the other facts. The reconciliation statement but also in view of the other facts. The Tribunal records that the books Tribunal records that the books of account of the respondent of account of the respondent- assessee have not been rejected. Similarly, the sales have not assessee have not been rejected. Similarly, the sales have not assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial been doubted and it is an admitted position that substantial been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department, amount of sales have been made to the Government Department, amount of sales have been made to the Government Department, i.e., Defence Research and Development La i.e., Defence Research and Development Laboratory, Hyderabad. boratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, Further, there were confirmation letters filed by the suppliers, Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank copies of invoices for purchases as well as copies of bank copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in statement all of which would indicate that the purchases were in statement all of which would indicate that the purchases were in fact made. In our view, merely because the sup fact made. In our view, merely because the suppliers have not pliers have not appeared before the Assessing Officer or the Commissioner of appeared before the Assessing Officer or the Commissioner of appeared before the Assessing Officer or the Commissioner of Income-tax (Appeals), one cannot conclude that the purchases tax (Appeals), one cannot conclude that the purchases tax (Appeals), one cannot conclude that the purchases were notmade by the respondent were notmade by the respondent-assessee. The Assessing Officer assessee. The Assessing Officer as well as the Commissioner of Income as well as the Commissioner of Income-tax (Appeals) hav tax (Appeals) have disallowed the deduction of Rs. 1.33 crores on account of disallowed the deduction of Rs. 1.33 crores on account of disallowed the deduction of Rs. 1.33 crores on account of purchases merely on the basis of suspicion because the sellers purchases merely on the basis of suspicion because the sellers purchases merely on the basis of suspicion because the sellers

M/s Alpha Associates 18 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

and the canvassing agents have not been produced before them. and the canvassing agents have not been produced before them. and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order We find that the order of the Tribunal is well a reasoned order We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the into account all the facts before concluding that the into account all the facts before concluding that the purchases of Rs. 1.33 crores was not bogus. No fault can be found purchases of Rs. 1.33 crores was not bogus. No fault can be found purchases of Rs. 1.33 crores was not bogus. No fault can be found with the order dated April 30, 2010, of the Tribunal.” with the order dated April 30, 2010, of the Tribunal.”

3.3. If the aforesaid decision is analyzed with the facts of the 3.3. If the aforesaid decision is analyzed with the facts of the 3.3. If the aforesaid decision is analyzed with the facts of the present appeal, present appeal, we note that the addition was made by the Ld. we note that the addition was made by the Ld. Assessing Officer on the basis of information available with the Assessing Officer on the basis of information available with the Assessing Officer on the basis of information available with the Maharashtra VAT authorities with respect to suspicious dealers. Maharashtra VAT authorities with respect to suspicious dealers. Maharashtra VAT authorities with respect to suspicious dealers. The amount of purchases involved in the present appeal includes The amount of purchases involved in the present appeal includes The amount of purchases involved in the present appeal includes both both genuine genuine and and non-genuine genuine purchases. purchases. There There is is uncontroverted finding in the impugned order that the purchases uncontroverted finding in the impugned order that the purchases uncontroverted finding in the impugned order that the purchases from Abhinav Buildmat Pvt. Ltd. of Rs.7,848/ from Abhinav Buildmat Pvt. Ltd. of Rs.7,848/-, H. H. Enterprises , H. H. Enterprises of Rs.98,618/- - and Krishna Structural Steel of Rs.49,20,751/ and Krishna Structural Steel of Rs.49,20,751/- which are included in the additi which are included in the addition are genuine purchases, which on are genuine purchases, which are passed by user ID CLA0076 and EO425. No adverse material are passed by user ID CLA0076 and EO425. No adverse material are passed by user ID CLA0076 and EO425. No adverse material was brought to our notice by the Revenue. So far as, remaining was brought to our notice by the Revenue. So far as, remaining was brought to our notice by the Revenue. So far as, remaining non-genuine purchases are concerned, the assessee approached genuine purchases are concerned, the assessee approached genuine purchases are concerned, the assessee approached the settlement commission and a particu the settlement commission and a particular decision, wherein, lar decision, wherein, vide application under section 245C made by the Group vide application under section 245C made by the Group vide application under section 245C made by the Group companies admitted of inflating thepurchases. Thus, for the companies admitted of inflating thepurchases. Thus, for the companies admitted of inflating thepurchases. Thus, for the remaining purchases, we find no infirmity in the conclusion remaining purchases, we find no infirmity in the conclusion remaining purchases, we find no infirmity in the conclusion drawn by the Ld. Commissioner of Income Tax (Appeal), drawn by the Ld. Commissioner of Income Tax (Appeal), drawn by the Ld. Commissioner of Income Tax (Appeal), consequently, this ground of the Revenue is dismissed. quently, this ground of the Revenue is dismissed.”

15.1 In view of the above facts and circumstances, we feel it In view of the above facts and circumstances, we feel it In view of the above facts and circumstances, we feel it

appropriate to restore the issue to the file of the Assessing Officer appropriate to restore the issue to the file of the Assessing Officer appropriate to restore the issue to the file of the Assessing Officer

M/s Alpha Associates 19 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

for deciding afresh in accordance with law in accordance with law after considering the after considering the

submission of the assessee. The ground of appeal of the assessee is ion of the assessee. The ground of appeal of the assessee is ion of the assessee. The ground of appeal of the assessee is

accordingly allowed for statistical purposes. accordingly allowed for statistical purposes.

15.2 The ground raised by the assessee raised by the assessee in other years in other years are identical ,

therefore , same are also allowed for statistical purposes. same are also allowed for statistical purposes. same are also allowed for statistical purposes.

assessment year 2008 assessment year 2008-09.

₹3,23,12,047/- which has been deleted by the Ld. CIT(A). This which has been deleted by the Ld. CIT(A). This which has been deleted by the Ld. CIT(A). This

amount consisted of material maintenance and overheads amount consisted of material maintenance and overheads amount consisted of material maintenance and overheads;

municipal taxes; interest on loan and terest on loan and brokerage.

dispute and perused the relevant material on record. dispute and perused the relevant material on record. dispute and perused the relevant material on record. During the

year, the assessee gave few flats ( i.e. gave few flats ( i.e. which were ready to use,) ready to use,) on

lease and shown lease ren lease and shown lease rental income form the same under the head tal income form the same under the head

M/s Alpha Associates 20 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

income form house property, and balance construction of the income form house property, and balance construction of the income form house property, and balance construction of the flats/

property was in progress. The assessee incurred certain expenses in property was in progress. The assessee incurred certain expenses in property was in progress. The assessee incurred certain expenses in

relation to the property, which were transferred to closing work in relation to the property, which were transferred to closing work in relation to the property, which were transferred to closing work in

progress. According to the Assessing Officer, a part of the expenses ording to the Assessing Officer, a part of the expenses ording to the Assessing Officer, a part of the expenses

transferred to Closing work transferred to Closing work-in-progress pertained to the portion of progress pertained to the portion of

the property i.e. flats i.e. flats , which was leased out and deduction for the , which was leased out and deduction for the

same stood already already allowed under the head “ income from house income from house

property” and thus, same cannot be and thus, same cannot be allowed to be to be transferred to

closing work in progress. closing work in progress. The dispute is regarding the amount of The dispute is regarding the amount of

₹3,23,12,047/- reduced by the Assessing Officer out of closing work reduced by the Assessing Officer out of closing work reduced by the Assessing Officer out of closing work-

in-progress claimed by the assessee for the year under progress claimed by the assessee for the year under progress claimed by the assessee for the year under

consideration. The detail of amount reduced by the Assessing Officer ideration. The detail of amount reduced by the Assessing Officer ideration. The detail of amount reduced by the Assessing Officer

is reproduced as under: is reproduced as under:

S. No. Head of Expenses Head of Expenses Amt. claimed u/s Amt. Amt. debited debited to Amt. of expenses to 24 P/L/WIP A/c reduced from WIP 1. Material Material & & Std. deduction @ 53,16,79,357/- 7,16,027/- Maintenance 30 per cent = overheads 97,85,173/- 35,00,000/- 2. Municipal taxes 35,00,000/- 35,00,000/ 3. Interest on loan 1,12,60,020/- 4,78,10,339/- 1,12,60,020/-

M/s Alpha Associates 21 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

that same was incurred towards development of the project and not that same was incurred towards development of the project and not that same was incurred towards development of the project and not

to the lease rental income. However, the Assessing Officer was of the to the lease rental income. However, the Assessing Officer was of the to the lease rental income. However, the Assessing Officer was of the

view that the brokerage is related to the only lease rental view that the brokerage is related to the only lease rental view that the brokerage is related to the only lease rental income

and therefore, same should be reduced from the work and therefore, same should be reduced from the work and therefore, same should be reduced from the work-in-progress.

We find that before the before the Assessing Officer, the assessee , the assessee has not

brought on record any evidence that said brokerage expenditure brought on record any evidence that said brokerage expenditure brought on record any evidence that said brokerage expenditure

was in relation to lease rental income. was in relation to lease rental income. Before the The The Ld. CIT(A) no

such evidence have been brought on recorded and the Ld CIT(A) such evidence have been brought on recorded and the Ld CIT(A) such evidence have been brought on recorded and the Ld CIT(A)

simply presumed that brokerage expenses were related to property simply presumed that brokerage expenses were related to property simply presumed that brokerage expenses were related to property

under construction or property for sale. Therefore , in the interest of under construction or property for sale. Therefore , in the interest of under construction or property for sale. Therefore , in the interest of

substantial justice we feel appropriate to substantial justice we feel appropriate to restore this issue back to restore this issue back to

the file of the Assessing officer for deciding afresh , with the the file of the Assessing officer for deciding afresh , with the the file of the Assessing officer for deciding afresh , with the

direction to the assessee to file necessary evidence in support of the direction to the assessee to file necessary evidence in support of the direction to the assessee to file necessary evidence in support of the

claim that the brokerage expenses in question were incurred in claim that the brokerage expenses in question were incurred in claim that the brokerage expenses in question were incurred in

M/s Alpha Associates 22 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

relation to property under con relation to property under construction. The assessee may file struction. The assessee may file

contract agreement with brokers and other documents including contract agreement with brokers and other documents including contract agreement with brokers and other documents including

details of brokerage income declared by them in their return of details of brokerage income declared by them in their return of details of brokerage income declared by them in their return of

income.

which according to the Assessing Officer pertains to the flats already which according to the Assessing Officer pertains to the flats already which according to the Assessing Officer pertains to the flats already

constructed and leased out and therefore, he directed to reduce the constructed and leased out and therefore, he directed to reduce the constructed and leased out and therefore, he directed to reduce the

same amount from the work same amount from the work-in-progress. We are of the opinion that progress. We are of the opinion that

interest on loan in respect of leased portion of interest on loan in respect of leased portion of the building cannot the building cannot

be allowed as work-in in-progress as same is eligible for deduction u/s progress as same is eligible for deduction u/s

24 of the Act under the head ‘income from house property’. 24 of the Act under the head ‘income from house property’. 24 of the Act under the head ‘income from house property’.

Accordingly, we direct the Assessing Officer to verify if the same has Accordingly, we direct the Assessing Officer to verify if the same has Accordingly, we direct the Assessing Officer to verify if the same has

been claimed separately u/s 24 in th been claimed separately u/s 24 in the computation of income filed e computation of income filed

by the assessee. If so, . If so, then deduction for the same cannot be allowed then deduction for the same cannot be allowed

under closing work- -in-progress. However, if no deduction for the progress. However, if no deduction for the

interest of the loan u/s 24 of the Act has been allowed to the interest of the loan u/s 24 of the Act has been allowed to the interest of the loan u/s 24 of the Act has been allowed to the

M/s Alpha Associates 23 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

assessee, then deduction for then deduction for the corresponding amount of the corresponding amount of

₹1,12,00,020/- should be allowed under the head ‘income from should be allowed under the head ‘income from should be allowed under the head ‘income from

house property’ declared by the assessee. The issue is accordingly house property’ declared by the assessee. The issue is accordingly house property’ declared by the assessee. The issue is accordingly

allowed for statistical purposes. allowed for statistical purposes.

18.2 Amount of expenditure Amount of expenditure of ₹3 lacs relates to municipal taxes relates to municipal taxes

,which has been reduced by the Assessing Officer out of work which has been reduced by the Assessing Officer out of work which has been reduced by the Assessing Officer out of work-in-

progress. According to the Assessing Officer entire amount pertains progress. According to the Assessing Officer entire amount pertains progress. According to the Assessing Officer entire amount pertains

to the leased part of the building and therefore, same is eligible for to the leased part of the building and therefore, same is eligible for to the leased part of the building and therefore, same is eligible for

deduction u/s 24 of the Act under the head ‘income f deduction u/s 24 of the Act under the head ‘income f deduction u/s 24 of the Act under the head ‘income from house

property’ and therefore cannot be allowed to be included in closing property’ and therefore cannot be allowed to be included in closing property’ and therefore cannot be allowed to be included in closing

work-in-progress. We are of the opinion that Assessing Officer must progress. We are of the opinion that Assessing Officer must progress. We are of the opinion that Assessing Officer must

verify the payment of the municipal taxes relates to which part of verify the payment of the municipal taxes relates to which part of verify the payment of the municipal taxes relates to which part of

the building. If same pertains to the lease the building. If same pertains to the leased part of the building d part of the building, then

he is directed to allow the same under the head ‘income from house he is directed to allow the same under the head ‘income from house he is directed to allow the same under the head ‘income from house

property’ and if the said municipal taxes pertains to under property’ and if the said municipal taxes pertains to under property’ and if the said municipal taxes pertains to under

construction part of the buildi construction part of the building, then same is directed allowed part then same is directed allowed part

M/s Alpha Associates 24 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

of work-in-progress. The iss progress. The issue is accordingly allowed for statistical ue is accordingly allowed for statistical

purposes.

head expenses of ₹ ₹7,16,027/- which the Assessing officer has which the Assessing officer has

reduced out of work reduced out of work-in-progress. The details of details of expesnes is as

under:

S. No. Head expenses Head expenses Total expense Disallowance @ 23.75 per cent Disallowance @ 23.75 per cent 1. House keeping charges House keeping charges 7,212 1713 2. Fire fighting work Fire fighting work 19,01,526 4,51,612/- 3. Infra Dev. Charges Infra Dev. Charges 6,63,804/- 1,57,653 4. Security expense Security expense 4,42,312/- 1,05,049/- 30,14,854 7,16,027/- 20. According to assessee, assessee, these expenses pertain to the entire these expenses pertain to the entire

building and it was not possible to bifurcate the expenses towards building and it was not possible to bifurcate the expenses towards building and it was not possible to bifurcate the expenses towards

the leased building. The contention of the assessee the leased building. The contention of the assessee is that is that primarily

these are incurred for the construction work these are incurred for the construction work-in in-progress and

whatever benefit to the leased building whatever benefit to the leased building is unintentional is unintentional and

therefore entire expenses are eligible for closing work therefore entire expenses are eligible for closing work therefore entire expenses are eligible for closing work-in-progress.

We find that the issue in dispute is what proportion of the issue in dispute is what proportion of the issue in dispute is what proportion of the expenses

M/s Alpha Associates 25 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

relate to the leased building. to the leased building. This is a matter of verification from the ification from the

bills and vouchers and other documents, although may not be with bills and vouchers and other documents, although may not be with bills and vouchers and other documents, although may not be with

precise accuracy but may be with some estimate. Therefore, this precise accuracy but may be with some estimate. Therefore, this precise accuracy but may be with some estimate. Therefore, this

issue is also restored to the file of the Assessing Officer issue is also restored to the file of the Assessing Officer issue is also restored to the file of the Assessing Officer. Thus, the

ground of the appeal of the Revenue i ground of the appeal of the Revenue is allowed for statistical s allowed for statistical

purposes.

are accordingly allowed for statistical purposes allowed for statistical purposes.

far as grounds of the appeal of the assessee for AY 2010 of the appeal of the assessee for AY 2010 of the appeal of the assessee for AY 2010-11 are

concerned same are are identical to ground decided in the case of the identical to ground decided in the case of the

assessee for AY 2008 assessee for AY 2008-09, therefore, following our finding in AY 09, therefore, following our finding in AY

2008-09 this ground of appeal is decided 09 this ground of appeal is decided mutatis mutandis mutatis mutandis. This

ground of appeal of the assessee is dismissed. peal of the assessee is dismissed.

M/s Alpha Associates 26 ITA Nos. 1851 & 1846/M/2021 ITA Nos. 1851 & 1846/M/2021

are allowed for statistical purposes allowed for statistical purposes.

Order pronounced in the open Court in ounced in the open Court in 27/10 10/2022. Sd/- sd/- (KAVITHA RAJAGOPAL KAVITHA RAJAGOPAL) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 27/10/2022 Dragon Legal / Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, BY ORDER, //True Copy// (Sr. Private Secretary) (Sr. Private Secretary) ITAT, Mumbai ITAT, Mumbai