HOMA ENGINEERING WORKS,MUMBAI vs. DCIT 13(1), MUMBAI

ITA.Nos.1533 & 1534/Mum/2017 Homa Engineering Works Assessment Year-2009-10 & 2011-12 The assessment for impugned AY was framed by Ld. Deputy Commissioner of Income Tax, Range-13(1), Mumbai [AO] u/s 143(3) read with section 147 vide order dated 26/03/2014. 2.1 During impugned AY, the assessee being resident firm was stated to be engaged as Engineers, Ship repairers, Marine contractors. The income of the assessee has been determined at Rs.117.49 Lacs after additions of alleged bogus purchases for Rs.65.99 Lacs as against returned income of Rs.51.49 Lacs e-filed by the assessee on 30/09/2009 which was assessed u/s 143(3) on 30/11/2011 at Rs.65.77 Lacs. 2.2 The reassessment proceedings were initiated vide notice u/s 148 dated 13/03/2013 pursuant to receipt of certain information from the Sales Tax Department, Maharashtra wherein it was found that the assessee stood benefitted of alleged bogus purchases aggregating to Rs.65.99 Lacs from ten parties, the details of which have already been extracted at para-4.1 of the quantum assessment order. The partner of the assessee firm, vide summons dated 07/03/2013 u/s 131, was asked to produce the purchase register, purchase bills, transportation documents and manner of utilization of material. The statement of the partner was also recorded on oath u/s 131 on 14/03/2013 before the lower authorities. However, the assessee conclusively failed to substantiate the purchase transactions and expressed inability to produce any of the parties for confirmation of transactions. No transportation or quantitative details were filed. The assessee defended the purchase transactions vide reply dated 28/03/2014. However, not convinced Ld. AO, for multiple reasons as stated at para-4.7, disallowed the purchases and added the same to the income of the assessee.

The Ld. Authorized Representative [AR] for the assessee, Shri Kishore Patel, drawing our attention to the documents placed in the paper book, agitated the additions as confirmed by Ld. first appellate authority. The Ld. AR also drew our attention to the order of Ld. first appellate authority for AY 2010-11 to submit that additions, under similar circumstances, have been restricted to Gross Profit rate declared by the assessee. No serious arguments have been adduced to assail the reassessment proceedings and therefore, the grounds raised

This appeal by assessee contests confirmation of following additions:- No. Nature of Addition Amount (Rs.) 1. Commission Expenditure 5,84,331/- 2. Disallowance u/s 28(iv) 23,29,801/- Total 29,14,132/- 7.1 Brief facts qua the addition of commission expenditure of Rs.5.84 Lacs are that the assessee claimed the aforesaid expenditure as commission payment to an entity namely Corporate Alliances. It was stated that the services of said entity was availed to liaise with the authorities at regular interval and was akin to professional fees. However, relying upon orders for AY 2009-10 & 2010-11, Ld. AO opined that there was no possibility of any commission payments keeping in view the fact that the assessee was dealing only with the Government authorities and therefore, the expenditure was not allowable to the ITA.Nos.1533 & 1534/Mum/2017 Homa Engineering Works Assessment Year-2009-10 & 2011-12 assessee. The same, upon confirmation by Ld. CIT(A), is under appeal before us. 7.2 The second addition stem from the fact that to confirm the closing balances reflected by the assessee against four Sundry Creditors, notices u/s 133(6) were sent. However, in response to the same, all the parties denied having any business activity with the assessee. The relevant details of these parties and result of notice u/s 133(6) and the assessee’s submissions against the same has already been extracted at para-4 of the quantum assessment order. The Ld. AO, applying the provisions of Section 28(iv), added the same to the income of the assessee. The same, upon confirmation by Ld. CIT(A), are under appeal before us. 8. The Ld. AR has agitated both the additions which has been controverted by Ld. DR. 9. We have carefully heard the same and gone through the documents. So far as the commission expenditure is concerned, Ld. AR has submitted that the commission has been paid against independent professional services rendered by the said entity to the assessee and the same was not merely in the nature of liasioning services. Our attention has been drawn to the profile of the said entity to submit that it was independent professional entity and was not merely acting as an agent of the assessee. The supporting documents in the shape of invoices, agreement, engagement letter etc. have been placed on record. It is also noted that similar additions made by Ld. AO in AY 2009-10 has been deleted by Ld. first appellate authority, finding substance in assessee’s claim. Therefore finding strength in the arguments of Ld. AR, the issue