Loading judgment…
Facts
The assessee's return was scrutinized, revealing contract receipts. The AO received information from Addl. CIT, Hyderabad, indicating the assessee was involved in "bogus activity" related to contract receipts from Totem Infrastructure Ltd. Despite the assessee denying the contract, the AO made an addition of Rs. 2,37,21,344/- by accepting contract receipts and estimating profit at 8%. The CIT(A) subsequently deleted this addition, which the Revenue appealed.
Held
The Tribunal found inconsistencies in the AO's basis for the contract receipts (Rs. 29.65 crores vs. Rs. 16.93 crores) and the 8% estimated profit, especially when Totem's MD indicated commission rates of 0.25% to 1%. The Tribunal concluded that the entire addition was based on surmise and conjecture without demonstrative evidence, thus upholding the CIT(A)'s decision.
Key Issues
Whether the addition made by the Assessing Officer, based on alleged bogus contract receipts and an estimated profit rate, was justified without demonstrative evidence.
Sections Cited
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘H’: NEW DELHI
Before: SHRI N.K. BILLAIYA & MS ASTHA CHANDRA
This appeal by the Revenue is preferred against the order of the CIT(A), Kanpur-4, dated 16.08.2021 pertaining to A.Y. 2011-12.
The solitary grievance of the Revenue is that the CIT(A) erred in deleting the addition made by the AO to the tune of Rs. 2,37,21,344/-. Page 1 of 4
ITA NO.- 1481/Del/2021 Rishabh Buildcon Pvt. Ltd. 3. Representatives of both the sides were heard at length. The case records were carefully perused.
Briefly stated the facts of the case are that the assessee filed its return of income electronically on 29.09.2011 declaring total income of Rs. 15,76,550/-. The return was selected for scrutiny assessment and the statutory notices were issued and served upon the assessee.
While scrutinizing the return of income, the AO found that the assessee has shown contract receipts of Rs. 2,93,44,779/- and other income of Rs. 23,61,809/-. Information was received from Addl. CIT, Range-2, Hyderabad, who has scrutinized the return of Totem Infrastructure Ltd. The Addl. CIT, Hyderabad, informed as under:
“It may be noted that M/s Totem Infrastructure Ltd(PAN AABCK70200) Indulged in turnover booking transactions of about Rs.580 crores during the A.Y.2011-12 with various entities. As per the evidence available with this office in F.Y.2010-11 as part of the bogus activity, the said company took a contract from M/s VNR Infra and in turn awarded it to M/s Rishab Buildcon (P) Ltd, Delhi on back to back basis for an amount of Rs.29,65,16,795/-. The assessee despite repeated opportunity could not justify the transactions. It is also noticed that apparently the said concern was paying commission of about 1% to unidentified brokers for arranging such transactions. The entire activity is bogus activity and you may take appropriate decision in the assessment before you.”
5.1 When this information was confronted to the assessee, it denied the allegation of receiving a contract of Rs. 29,65,16,795/-. The Addl. CIT, Page 2 of 4
ITA NO.- 1481/Del/2021 Rishabh Buildcon Pvt. Ltd. Hyderabad, informed the AO that the MD of Totem Infrastructure Ltd. in his statement has stated that they pay commission ranging from 0.25% to 1%. The AO further received the information that the contract price was Rs. 16,93,71,626/-, but he accepted the contract receipts of Rs. 29,65,16,795/- and estimated profit at 8% and made addition of Rs. 23721344/- .
After giving a thoughtful consideration to the finding of the AO, we fail to understand what was the contract receipts was it 29.65 crores or 16.93 crores? Further, when the MD of Totem Infrastructure Ltd. has stated that the commission ranges from 0.25% to 1%, then we fail to understand what is the basis for estimating the profit at 8%. In our considered view, the entire addition has been made on surmise and conjecture without there being any demonstrative evidence; therefore, the findings of the CIT(A) cannot be faulted with.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 04.03.2024