THE DCIT, CENTRAL CIRCLE-1(3), AHMEDABAD vs. SADBHAV INFRASTRUCTURE PROJECT LTD., AHMEDABAD

On the facts and in the circumstances of the case and in law, the ld. CIT(A) has failed to appreciate the statement recorded u/s 132(4) in the case of Shri Ramesh Prajapati, partner of M/s Siddheshwari Infrastructure solemnly affirming that his firm had received cheque from Sadbhav group, which after deducting commission @3% and 2% TDS the balance amount was paid back as cash to Sadbhav Group, which was later correlated with the impounded materials in the form of loose paper (Annexure B/8 Page No.166).

It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.”

Per contra, Shri Dhinal Shah, Ld. AR of the assessee explained that the Ld. CIT(A) had rightly held that the gross turnover cannot be subjected to tax. He submitted that the project work, pertaining to which, sub-contract was given to M/s. Siddeshwari Infrastructure, was duly completed by the assessee and, therefore, the entire sub-contract amount could not have been subjected to tax. According to the Ld. Counsel, only the profit element embedded in sub-contract amount could have been subjected to tax and accordingly the Ld. CIT(A) had rightly [DCIT vs. Sadbhav Infrastructure Project Ltd.] A.Y. 2017-18 - 4 – reduced the addition to 20% of the sub-contract expense. The Ld. AR further submitted that the addition as confirmed by the Ld. CIT(A) was in fact high considering that addition @ 12.5% only was confirmed by the Co-ordinate Bench of the ITAT in the case of the sister concern M/s. Sadbhav Engineering Ltd. in IT(SS)A Nos. 170 to 175/Ahd/2021 & dated 10.01.2025.

We have carefully considered the rival submissions. All the grounds taken by the Revenue pertain to a single issue. The AO had made addition for the entire sub-contract expense of Rs.22,83,64,319/- in respect of M/s. Siddeshwari Infrastructure, which was held as bogus. It is a trite law that the entire turnover cannot be subjected to tax but only the profit element of the transaction can be brought to tax. The fact that the project work, in respect of which the sub-contract was allowed to M/s. Siddeshwari Infrastructure, was duly completed has not been disputed by the Revenue. If so, the entire sub-contract amount could not have been considered as income of the assessee. The Ld. CIT(A) had considered the fact that the amount paid by cheque to M/s. Siddeshwari Infrastructure by the assessee was partly returned back and that the total amount received back by the assessee on different dates was to the extent of Rs.4.21 Crores, as found recorded in the impounded documents. Therefore, the sub-contract expense to the extent of Rs.4.21 Crores was treated as bogus by the Ld. CIT(A). Further, considering this fact, Ld. CIT(A) had restricted the total addition @20% of sub-contract amount of Rs.22,83,64,319/- in respect of M/s. Siddeshwari Infrastructure, which worked out to [DCIT vs. Sadbhav Infrastructure Project Ltd.] A.Y. 2017-18 - 5 – Rs.4,56,72,864/-. The contention of the assessee that identical addition in respect of sister concern of the assessee was restricted to the extent of 12.5% only, is not found apposite considering the fact that documentary evidences for return of cash of Rs.4.21 Crore was found in this case in the impounded documents.

In view of the above facts, we are of the considered opinion that the Ld. CIT(A) had correctly appreciated the facts of the case and restricted the addition to the extent of 20% of the sub- contract amount which was reasonable considering the fact that documentary evidence for a return of sub-contract amount in cash to the extent of 4.21 Crores only was found in this case. Accordingly, the order of the Ld. CIT(A) is upheld. The grounds taken by the Revenue are dismissed.

In the result, the appeal filed by the Revenue is dismissed.