ITO 4(1)(4), MUMBAI vs. ENRICH RD INFRAPROJECTS P,. LTD, MUMBAI

Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by revenue for Assessment Year [AY] 2010- 11 assails the order of the Ld. Commissioner of Income-Tax (Appeals)-9 [CIT(A)], Mumbai, Appeal No.CIT(A)-9/Cir.4/Tr.3/2013-14 dated 31/01/2017 by raising the following effective grounds of appeal:- 1. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the additions made by the AO. on account of rejection of books of accounts of the assesse u/s. 145(3) of the I.T.Act,1961 and estimating the net profit @ 8% of the gross receipts of Rs.9,13,80,502/- i.e.Rs.73,10,440/”

The assessment for impugned AY was framed u/s 143(3) read with Section 144 of the Income Tax Act,1961 by Ld. Income Tax Officer 7(2)(4) [AO], Mumbai on 30/03/2013. 2.1 Facts leading to the same are that the assessee being resident corporate assessee engaged as contractor was assessed for impugned AY at Rs.82.44 Lacs after certain additions / disallowances as against returned income of Rs.22.75 Lacs filed by the assessee on 15/10/2010. The assessee was engaged in execution of works contract, mainly for Indian Railway apart from trading in certain items. 2.2 During assessment proceedings, it was noted that the assessee made certain purchases from following dealers which were listed by Sales Tax Department, Maharashtra as dealers engaged in providing accommodation bills without doing any business:-

S.No. Name Amount (Rs.) 1 Shivam Trading Co. 74,913/- 2 Rupani & Co. 15,64,888/- The assessee, vide notice u/s 142(1) was asked to file documentary evidences to substantiate the purchases. Notice u/s 133(6) was issued to both the parties to confirm the transactions remained un-responded. The assessee, while defending the purchases made by him, could not ITA.No.3190/Mum/2017 Enrich RD Infraprojects Private Limited Assessment Year-2010-11 produce any documents relating to purchases on the premises that the same were in possession of one of the ex-director namely Dhasrath Redekar. The perusal of the bank statement of Rupani & Co. revealed that there were immediate cash withdrawals from the Bank Account after receipt of payment from the assessee through banking channels. The Cheque for Rs.74,913/- stated to be paid by the assessee to Shivam & Co. was not reflected in his Bank account. 2.3 The assessee reflected another purchase of Rs.21,05,688/- from another entity namely Uttam Engineering but the said entity, in response to notice issued u/s 133(6) denied having undertaken any transaction with the assessee company. 2.4 All the above facts led the Ld. AO to disbelieve the aggregate purchase transaction of Rs.37,45,489/- made by the assessee from the aforesaid three suppliers and therefore, the same were disallowed and added to the income of the assessee. 2.5 The Ld. AO also noted that the assessee reflected very low Gross profit of Rs.1,22,411/- in trading division against turnover of Rs.834.79 Lacs. To confirm these trading transactions, notices u/s 133(6) were issued to certain suppliers, customers and labor contractors as listed by Ld. AO at Page Number 16 of the quantum assessment order. However, most of them yielded no response and the assessee also could not produce supporting documentary evidences like invoices / delivery challans / transportation bills etc. to sustain the same. Finally, Ld. AO noted that the assessee reflected huge net loss of Rs. 15.15 Lacs from trading operations and in the absence of documentary evidences, the same could not be allowed to the assessee. The income computed, in ITA.No.3190/Mum/2017 Enrich RD Infraprojects Private Limited Assessment Year-2010-11 the above manner, worked out to Rs.75.36 Lacs after disallowing bogus purchase for Rs.37.45 Lac and trading division loss of Rs.15.15 Lacs. 2.6 The Ld. AO, in the alternative, observed that the assessee reflected very low net profit of less than 2% against Railway Contract Receipts as against 8% as envisaged by Section 44AD and since, the assessee could not produce the books of accounts, Ld. AO rejected the books u/s 145(3) and estimated net profit of 8% against Railway Contract Receipts which came to Rs.73.10 Lacs. After adding income from trading division for Rs.1.22 Lacs and other incomes, total income was finally computed at Rs.82.44 Lacs.