M/S. OFFBEAT DEVELOPERS P. LTD.,MUMBAI vs. DY CIT, CC-8(4), MUMBAI

Appellant M/s. Offbeat Developers Pvt. Ltd. (hereinafter referred to as the assessee) by filing aforesaid appeals sought to set aside the impugned order even dated 23.03.2021 by Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)], qua the assessment years 2008-09, 2007-08 & 2010-11 on identically worded grounds except the difference in figures inter alia that: “On the facts and in the circumstances of the case and in law, the learned C1T(A) erred in confirming the additions made by the Ld. AO of Rs.41,88,160/- u/s. 69C on account of commission paid. The appellant prays that the same may kindly be deleted. The Appellant craves leave to add, alter, amend or withdraw any of the Grounds of Appeal herein above and to submit such further arguments, statements, documents and papers as may be considered necessary either at or before the hearing of the appeal.”

Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the same.

Then the matter travelled to the Tribunal which has remitted the case back to the AO for fresh decision vide order dated 25.08.2016. Then the AO passed assessment order dated 22.06.2017 under section 143(3) read with section 254 of the Act. Again in the second round of litigation appeal was filed before the Ld. CIT(A) who has confirmed the addition made by the AO on account of addition of commission @ 2% by dismissing the appeals. Again feeling aggrieved assessee has come up before the Tribunal by way of filing present appeals.

We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto. , 867 & 872/M/2021 4 M/s. Offbeat Developers Pvt. Ltd.

Undisputedly, co-ordinate Bench of the Tribunal vide order dated 25.08.2016 set aside a specific issue raised by the assessee to the AO to decide afresh as to making/confirming the addition of commission @ 2% of the bogus purchases qua the purchases withdrawn by the assessee with certain parties by returning following findings: “17. We heard both the parties, on hearing both the parties on this issue of Commission Payment @ 2%, we find that there is need for finding of fact on if the purchase bills/invoices are bogus purchases or not. It is the case of the assessee that they are genuine purchases and without prejudice, he offered the same as unverifiable purchases in order to avoid the protracted litigation. If they constitute genuine purchases, as argued by the assessee’s counsel, there is no need for purchase of accommodation entries against Commission Payment. There is need for exploring the facts from the market, if the payment of cash for Commission Payment is involved over and above the amount given in the bogus invoices. Alternatively, i.e. if they are bogus purchases, assessee is under commercial need to make payment for purchase of the said bogus bills from the suppliers and against the Payment of Commission. Without prejudice; it is case of the Ld. AR that the said amount appearing on the bogus bill constitutes entire amount including the Commission Payment. Therefore, we are of the view that the AO needs to bring on record the facts gathered by the survey team on this issue and record the questions/answers if any explaining the issue of Commission Payment made to the suppliers. AO shall note that unless relevant facts are brought on the records after garnering the statements of the persons cited above, materials gathered in survey action to suggest that assessee incurred any expenditure, as specified in the provision of section 69C validly invoked by the AO, AO is not justified in invoking these provisions, Therefore, AO should also deal with the argument that the amount mentioned in bogus purchases/invoice includes the Commission Payment too. With the above, we remand all the appeals of the assessee to the file of the AO. AO shall re-adjudicate after granting reasonable opportunity of being heard to the assessee.”

In the second round of litigation Ld. Lower Revenue Authorities have reached the conclusion that it is proved fact that , 867 & 872/M/2021 5 M/s. Offbeat Developers Pvt. Ltd.

AO as well as Ld. CIT(A) proceeded on the premise that when factum of taking bogus purchases by the assessee has been proved on record and by virtue of the natural corollary assessee must have paid the commission to buy the bogus bills/invoices for purchases.

Co-ordinate Bench of the Tribunal keeping in view the contention raised by the assessee that “they are genuine purchases and without prejudice the assessee offered the same as unverifiable purchases in order to avoid the protracted litigation” and as such there was no need for purchase of accommodation entries against the commission payment and further argued that without prejudice the said amount appearing on bogus bills constitute entire amount including the commission payment, remitted the case back to the AO to readjudicate the issue by bringing on record necessary facts after recording the statements of the persons from whom assessee alleged to have made the genuine purchases.

AO in the second round of litigation provided adequate opportunity of being heard to the assessee to produce the parties from whom the alleged genuine purchases were made. But the , 867 & 872/M/2021 6 M/s. Offbeat Developers Pvt. Ltd.

The Ld. CIT(A) also upheld the findings returned by the AO by returning the following findings: “6.4.2 From the above finding of the Hon'ble Tribunal, it can be seen that while setting aside the matter of addition of commission @2% to the file of the Ld. AO, they had observed that they are of the view that there is need for finding of fact on if the purchase bills/invoices are bogus purchases or not. It is the case of the assessee that they are genuine purchases and without prejudice, he offered the same as unverifiable purchases in order to avoid the protracted litigation and if they constitute genuine purchases, as argued by the assessee's counsel, there is no need for purchase of accommodation entries against Commission Payment. From the facts available on records it is evident that the appellant themselves have withdrawn the said purchases on the ground that they are not in a position to substantiate the same. In the impugned order u/s 143(3) rws 254 of the Act, the Ld. AO has given a factual finding that there is no denial of the fact on the part of the appellant, that there are no supporting evidence available with the assessee for the bogus Bills identified by the Department. The Ld. AO has further held that the appellant has not produced the parties under consideration before him for verification. It is also observed that the Hon'ble Tribunal vide its above referred order dated 25.08.2016, while adjudicating the issue of disallowance of interest from CWIP has observed that "In our view, the CIT(A) is not justified in granting relief. CIT(A) did not appreciate the fact that the assessee surrendered all the bogus purchases for all three years, which implies that the purchases are mere case of buying the accommodation entries for commission payment and pocketing the cash after necessary deductions, if any." From the said observation of the Hon'ble ITAT it is evident that they have given a factual finding that the appellant had surrendered the bogus purchases and the same implies that the purchases are mere case of buying the accommodation entries for commission payment. The said finding of the Hon'ble ITAT that accommodation entries were taken for payment of commission has not been negated by the appellant. Further, the reliance placed by the appellant on the , 867 & 872/M/2021 7 M/s. Offbeat Developers Pvt. Ltd.

We are of the considered view that when assessee has himself opted to prove the fact that he had actually made genuine purchases but withdrawn the said purchases without prejudice that the said purchases if assumed to be taken as bogus the amount of bogus purchases is inclusive of commission payment only, but failed to produce any of the parties before the AO to prove this fact. So when the assessee himself has withdrawn the bogus purchases for all the three assessment years it goes to prove that it is a simple case of purchasing accommodation entries on commission payment.

So in these circumstances, when the assessee has failed to produce any of the parties for verification to prove its contention raised before the co-ordinate Bench of the Tribunal, assessee has no case to putforth as accommodation entries in the markets are sold only on the commission basis. AO has rightly estimated the commission on the bogus purchase entries made by the assessee @ 2%. Reliance placed by the Ld. A.R. on the order passed by the co- , 867 & 872/M/2021 8 M/s. Offbeat Developers Pvt. Ltd.