IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "B", MUMBAI
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
ITA Nos. 2200 & 2201/Mum/2013
Assessment Years: 2006-07 & 2009-10
M/s. Bermaco DCIT CC 47
Industries Ltd. Mumbai
D-73/1, TTC Indl Area,
Vs.
MIDC Road Turbhe Navi
Mumbai- 400 705
PAN:AAACB 2727 N
(Appellant) (Respondent)
Assessee by : Shri Vijay Mehta
Revenue by : Shri S.J. Singh
Date of hearing : 11.12.2014
Date of Order : 22.12.2014
PER AMIT SHUKLA, JM:
The aforesaid appeals have been filed by the Assessee against
separate impugned order of even date 04.01.2013, passed by the
Ld.CIT-38, Mumbai, for the quantum of assessment passed u/s 153A
read with section 143(3) for the A.Ys. 2006-07 & 2009-10.
2. We will first take up appeal for the A.Y. 2006-07, ITA No.
2200/Mum/2013, wherein following grounds have been raised:-
"1)The learned CIT(A) has erred in law and in facts in confirming
the additions made by the Assessing Officer in the assessment
order passed u/ s. 153A r.w.s. 143(3) of the Act which are illegal
and bad in law.
2) The order passed by the learned CIT(A) is in violation of
principles of natural justice and is passed without giving a
proper opportunity of hearing to the appellant.
ITA Nos. 2200 & 2201/Mum/2013
2 M/s. Bermaco Industries Ltd
Assessment Years: 2006-07 & 2009-10
3) The learned CIT(A) has erred in law and in facts in passing the
order which is illegal and bad in law. The order passed by the
learned CIT(A) purportedly on 04.01.2013 after the conclusion of
hearing on 11.12.2012, which has been served on 09.03.2013 is
illegal.
4) The learned CIT(A) has erred in law and in facts in not
holding that the assessment order was in violation of principles of
natural justice and
was passed without giving a proper opportunity of hearing to the
appellant.
5) The learned CIT(A) has erred in law and in facts
i) in confirming the disallowance of Rs. 2,50,000/- on account of
diminution in value of investment.
(ii) in not holding that the disallowance of Rs. 2,50,000/ on
account of diminution in value of the investment is bad in law as
the addition is not based on the material found during the course
of search and that it pertained to non-abated assessment year.
6) The learned CIT(A) has erred in law and in facts
i) in confirming the addition of Rs. 54,195/- by invoking the
provisions of section 14A of the Act.
(ii) in not holding that the addition of Rs. 54,195/- by invoking
the provisions of section 14A of the Act is bad in law as the
addition is not based on the material found during the course of
the search and that it pertained to non-abated assessment year.
7) The learned CIT(A) has erred in law and in facts
i) in confirming the disallowance of Rs. 1,04,462/ - on account of
personal usage element estimated at 10% of total amount of
depreciation and other expenses incurred on car.
ii) in not holding that the disallowance of Rs. 1,04,462/- on
account of personal usage element estimated at 10% of total
amount of depreciation and other expenses incurred on car is bad
in law as the addition is not based on the material found during
the course of search and that it pertained to non-abated
assessment year.
ITA Nos. 2200 & 2201/Mum/2013
3 M/s. Bermaco Industries Ltd
Assessment Years: 2006-07 & 2009-10
8) The learned CIT(A) has erred in law and in facts in not giving
the credit for taxes paid by/ deducted for the appellant while
computing the tax liability of the appellant.
9) The learned CIT(A) has erred in law and in facts in confirming
the interest levied by the Assessing Officer u/s. 234A, 234B and
234C of the
Act."
3. At the outset, the learned counsel submitted that the ground no. 1
to 4 are general in nature hence same are not pressed and therefore,
ground no. 1 to 4 are not adjudicated upon and treated as dismissed.
4. Regarding issues raised, in ground no. 5, 6 and 7, learned counsel
submitted that in this case, original return of income was filed on
27.11.2006 and the said return of income had attained finality. Search
and Seizure action u/s 132(1) was carried out on 31.10.2009 and
therefore the assessment for the A.Y. 2006-07 cannot be said to have
been abated. The disallowances which has been challenged vide ground
nos. 5 to 7, are routine disallowances for which no material whatsoever
was found during the course of search, hence such a disallowance
cannot be made in the assessment completed u/s 153A. In support of
this contention, he strongly relied upon the decision of Hon'ble
Rajasthan High Court in the case of Jai Steel (India) Vs. ACIT reported
in (2013) 259 CTR (Raj) 281, wherein it has been held that, if no
incriminating material is found during the course of search and the
assessment for the assessment year covered within six years has
attained finality and has not been abated, then no addition can be
made by the AO and the assessment made earlier have to be reiterated.
5. On the other hand, Ld. DR relied upon the decision of Karnataka
High Court in the case of M/s. Canara Housing Development Company
ITA Nos. 2200 & 2201/Mum/2013
4 M/s. Bermaco Industries Ltd
Assessment Years: 2006-07 & 2009-10
Vs. DCIT ITA No. 38 of 2014 judgment and order dated 25.07.2014
wherein the Hon'ble High Court has taken a contrary view.
6. We have heard the rival submissions and also perused the relevant
material on record and the decisions relied upon by the parties. In this
case, return of income was filed on 27.11.2006. The said return of
income had attained finality, in other words, the assessment stood
completed. A search and seizure action took place on 31.10.2009 and on
that date, the assessment for A.Y. 2006-07 did not get abated as it was
not pending. It is an undisputed fact, that no material whatsoever was
found relating to the routine disallowance as have been raised vide
ground nos. 5 to 7. In such a case, whether these disallowances can be
made or confirmed sans any incriminating material found during the
course of search. It has come to our notice that Hon'ble Jurisdictional
High Court (Nagpur Bench) in the case of CIT Vs. M/s. Murali Agro
Products Ltd. ITA No. 36 of 2009 judgment and order dated 29.10.2010
have dealt the similar issue, wherein following observation was made.
"In the present case, as contended by Shri Mani, learned counsel
for the assessee, the assessment for the assessment year 1998-
99 was finalized on 29-12-2000 and search was conducted
thereafter on 3-12-2003. Therefore, in the facts of the present
case, initiation of proceedings under section 153A would not
affect the assessment finalized on 29-12-2000.
Once it is held that the assessment finalized on 29.12.2000 has
attained finality, then the deduction allowed under section 80HHC
of the Income-tax Act as well as the loss computed under the
assessment dated 29.12.2000 would attain finality. In such a
case, the AO while passing the independent assessment order
under section 153A read with section 143(3) of the I.T. Act could
not have disturbed the assessment/ reassessment order which
has attained finality, unless the materials gathered in the course
of the proceedings under Section 153A of the Income-tax Act
establish that the reliefs granted under the finalised
ITA Nos. 2200 & 2201/Mum/2013
5 M/s. Bermaco Industries Ltd
Assessment Years: 2006-07 & 2009-10
assessment/reassessment were contrary to the facts unearthed
during the course of 153 A proceedings.
In the present case, there is nothing on record to suggest that
any material was unearthed during the search or during the 1S3A
proceeding which would show that the relief under Section
80HHC was erroneous. In such a case, the A.O. while passing the
assessment order under section 153A read with Section 143(3)
could not have disturbed the assessment order finalized on
29.12.2000 relating to Section 80 HHC deduction and
consequently the C.I.T. could not have invoked jurisdiction under
Section 263 of the Act."
Thus, Jurisdictional High Court held that the assessment which has
attained finality cannot be disturbed unless material has been discovered
during the course of search or proceedings u/s 153A, the relief granted
earlier or income which has been assessed gave to be accepted. Thus
we hold that the disallowances which has been confirmed by the
Ld.CIT(A) cannot be uphold. Thus ground no. 5 to 7 are treated as
allowed.
7. In ground no. 8 the assessee has contended that credit of taxed
paid and deducted by the assessee has not been given, while computing
the tax liability of the assessee. Accordingly, the AO is directed to
examine the issue and give credit to the taxes paid/deducted by the
assessee while computing the tax liability.
8. In ground no. 9 relates to levy of interest under various sections.
Learned counsel admitted that it is consequential and therefore, the said
ground is treated as infructuous.
9. Accordingly, appeal of the assessee is treated as partly allowed.
ITA Nos. 2200 & 2201/Mum/2013
6 M/s. Bermaco Industries Ltd
Assessment Years: 2006-07 & 2009-10
10. Now we will take up appeal for the A.Y. 2009-10, ITA No.
2201/Mum/2013 wherein following grounds have been raised:-
"1. The learned CIT(A) has erred in law and in facts in confirming
the additions made by the Assessing Officer in the assessment
order passed u/s. 153A r.w.s. 143(3) of the Act which are illegal
and bad in law.
2. The order passed by the learned CIT(A) is in violation of
principles of natural justice and is passed without giving a proper
opportunity of hearing to the appellant.
3. The learned CIT(A) has erred in law and in facts in passing the
order which is illegal and bad in law. The order passed by the
learned CIT(A) purportedly on 04.01.2013 after the conclusion of
hearing on 11.12.2012, which has been served on 09.03.2013 is
illegal.
4. The learned CIT(A) has erred in law and in facts in not holding
that the assessment order was in violation of principles of natural
justice and was passed without giving proper opportunity of
hearing to the appellant.
5. The learned CIT(A) has erred in law and in facts in upholding
the addition of Rs. 27,80,33,410/- on account of alleged bogus
bills/ purchases made for construction.
6. The learned CIT(A) has erred in law and in facts in confirming
the / disallowance of Rs. 95,807/- on account of personal usage
element estimated at 10% of total amount of depreciation and
other expenses incurred on car.
7. The learned CIT(A) has erred in law and in facts in not giving
the credit for taxes paid by/deducted for the appellant while
computing the tax liability of the appellant.
8. The learned CIT(A) has erred in law and in facts in confirming
the interest levied by the Assessing Officer u/s. 234A and 234B of
the Act."
ITA Nos. 2200 & 2201/Mum/2013
7 M/s. Bermaco Industries Ltd
Assessment Years: 2006-07 & 2009-10
11. At the outset, learned counsel submitted that ground no. 1 to 4
are not pressed and accordingly the same is dismissed as not pressed.
12. In ground no. 5 the assessee has challenged the addition of
Rs.27,80,33,410/- on account of alleged bogus bills/purchases made for
construction.
13. The brief facts qua the issue are that, during the course of the
search and seizure action carried out in the case of Bermaco Group of
cases on 31.10.2009, the Director Shri Viren Ahuja, who has a key
person of the group was confronted with the various incriminating
documents and statement was recorded on oath u/s 132(4). He was
required to explain the expenses claimed by the assessee and also the
addresses of the parties from whom purchases were made. He accepted
that purchases claimed by the assessee company from the three parties
namely, M/s. Aakruti Engineers & Contractors, M/s. Riddhi Siddhi
Marketing and M/s. Model Industries are bogus in nature. As per the
books purchases from these parties was at Rs.27,80,33,410/-. The
relevant question and answer as per the statement of Shri Viren Ahuja,
has been incorporated in the assessment order as well as in the
appellate order. The assessing officer after detail analysis of the
transaction and the date wise events, held that these transaction are
bogus. Such a finding of the AO was based on inquiry and also by
proving that entire transactions shown by the assessee was bogus. The
AO held that assessee had received advance from Core Projects on
18.05.2007 for Rs. 20 crores for sale of the property. Before that, it had
purchased and even paid the amount for the property the M/s. Patel
Punit Builders Pvt. Ltd. The AO prepared a separate P&L Account
relating to this specific transaction which has been incorporated in detail
ITA Nos. 2200 & 2201/Mum/2013
8 M/s. Bermaco Industries Ltd
Assessment Years: 2006-07 & 2009-10
in the assessment year as well as in the appellate order and held that
assessee's explanation is false. The Ld.CIT(A) has also confirmed the
said purchases after incorporating the detail finding of the AO and also
after analyzing the issue at length by himself. The relevant finding of the
Ld.CIT(A) is as under:-
"The facts of the case, the stand taken by the A.O in the
assessment order and the grounds of appeal raised by the
appellant have been carefully considered. The basic issue that
was investigated into during the search & seizure proceedings
and thereafter was whether or not the purchases/expenses
debited in the books of accounts of the appellant were genuine.
The investigation was not vague but specific with reference to
certain alleged suppliers of materials and the amounts involved
were very huge i.e. Rs.27,80,33,410/-. In all, three entities were
identified and specific issues were put to the Director of the
company Shri Viren Ahuja. It was required that the appellant
provided all the requisite information and enabled the department
to examine the alleged suppliers of the materials in case a stand
were to be taken by the appellant that the entire expenditure was
genuine and no element of bogus expenditure/purchases were
involved as regards the suppliers identified by the department.
However, the director of the appellant company Shri Viren Ahuja
in the statement recorded uls.132( 4) of the Act, unequivocally
admitted that the expenditure was not genuine. In the statement
recorded dated 01.11.2009/02.11.2009, Shri Viren Ahuja further
admitted the following:
"Q.21 I am showing the bills of Aakruti Engineers &Contractors
amounting to Rs.9,00,25,170/- and Riddhi Siddhi Marketing
amounting to Rs.10,48,30,512/- and Model Industries amounting
to Rs.1,71,77,728/-. totally amounting to Rs.21,20,33,410/-
pertaining to FY.2008-09 for Bermaco Industries Ltd. Please
produce the supporting evidences and prove the genuineness of
the purchases.
Ans. On seeing the bills, I do think, the same not to be in order
and confirm that the purchases are bogus for the F Y. 2008-09
for Bermaco Industries Ltd. The cash so generated have been
partly used for making investment in some assets and other
unaccounted payments.
ITA Nos. 2200 & 2201/Mum/2013
9 M/s. Bermaco Industries Ltd
Assessment Years: 2006-07 & 2009-10
Q.22 How do you know the above parties?
Ans. I know them through an intermediary. I have given cheque
to them against the bills given by them. Later on, I have got back
the cash from them, after paying a commission of 5.5. %.
"Q.23 What did you do with the above cash?
Ans. The cash so generated have been partly for making
investments in some assets and partly for making other
unaccounted payments.
Q.24 Did you receive any goods/services from the above 3
parties?
Ans. No, as I have already told you, no goods / services were
received from above 3 parties. We have got back the cash less
the commission. "
9.1 In the event, the appellant was in a position to establish the
genuineness of the transactions, the same ought to have been
done without such an admission and without any further delay.
The statements recorded from the director of the appellant on
various dates, as tabulated in the assessment order clearly
indicate that there was no element of coercion at all. Appellant
had admitted that the transactions were not genuine and the
expenditure were never incurred and thereby foreclosed the
requirement of any further enquiry and investigation by the
department. It was open for the appellant to produce the parties
with all the requisite evidences so that the investigation could
have been carried out immediately. No such attempt was made
either immediately after the search & seizure proceedings or
during the assessment proceedings. A specific opportunity was
also given by the AO by issue of a show cause notice during the
assessment proceedings. Further, there is no evidence of
coercion or duress that has been established to support the
retraction of the appellant."
Thereafter, he relied upon the various decision on the proposition that if
the assessee has voluntarily accepted the transaction to be not genuine
and the amount has been quantified and disclosure has been made u/s
132(4), then retraction by the assessee cannot be accepted, unless
ITA Nos. 2200 & 2201/Mum/2013
10 M/s. Bermaco Industries Ltd
Assessment Years: 2006-07 & 2009-10
there are very strong evidence in support of such retraction. Accordingly
he confirmed said addition.
14. Before us, learned counsel Shri Vijay Mehta submitted that, the
premises in question was purchased from M/s. Patel Punit Builders Pvt.
Ltd and sold to M/s. Core Project Technology Ltd. The sale consideration
was received by the assessee on 18.05.2007 and purchase consideration
was made on 19.05.2007. Even if the purchase of material for the
construction in the said property is treated to be bogus, the same
cannot be added in the hands of the assessee, because assessee was
only intermediary and the ultimate buyer was M/s. Core Project &
Technology. If any addition was called for then same should have been
made in their hands. Looking to the dates and sequence of events it
cannot be held that how assessee can carry out renovation in such a
building. In any case the profit earned by the assessee can be said to be
have spent on renovation.
15. On the other hand, Ld. DR strongly relied upon the order of the
AO as well as Ld.CIT(A).
16. After considering the rival submissions and also on the perusal of
the findings of the AO as well as Ld.CIT(A), we find that the assessing
officer has not only relied upon the admission of the Director, Mr. Viren
Ahuja at the time of statement u/s 132(4), but also has analyzed the
nature of transaction and carried out inquiry to find out that the claim of
purchases made for construction were bogus. Once the evidences and
materials are indicating the non genuineness of the expenditure, the
onus is heavily upon the assessee to prove the contrary on the basis of
concrete material or evidence. Here in this case onus has not been
discharged by the assessee at all and not only, that it has been
ITA Nos. 2200 & 2201/Mum/2013
11 M/s. Bermaco Industries Ltd
Assessment Years: 2006-07 & 2009-10
categorically admitted by the assessee when it was confronted during
the course of search that, the payments relating to purchases are bogus.
On these facts, we do not find any merits in the contention raised by the
learned counsel, accordingly the finding of the Ld.CIT(A) is upheld and
the addition of Rs.27,80,33,410/- is confirmed.
17. In ground no. 6 the assessee has challenged the disallowance of
Rs.95,807/- on account of personal user of vehicle expenses, estimated
@10%. The assessing officer has disallowed a sum of Rs.95,807/- on
account of personal user of the car out of total expenses claimed
including depreciation. The assessee could not justify the claim of the
expenditure wholly for the purpose of its business. The Ld.CIT(A) too
has confirmed the said addition.
18. After hearing both the parties, and the facts discussed by the AO
and Ld.CIT(A), we find that no substantial material has been placed
before us, to rebut the finding of the AO as well as Ld.CIT(A).
Accordingly the disallowance made by the AO and confirmed by the
Ld.CIT(A) appears to quite reasonable and upheld.
19. Ground no. 9 relates to giving of credit of taxes paid or tax
deducted while computing tax liability. The AO is directed to examine
this issue and give proper credit of such taxes paid by the assessee,
while computing tax liability.
20. In ground no. 8 the assessee has challenged the levy of interest
u/s 234A and 234B. It has been admitted by the learned counsel that it
is purely consequential. Accordingly the said ground is treated as
infructuous.
ITA Nos. 2200 & 2201/Mum/2013
12 M/s. Bermaco Industries Ltd
Assessment Years: 2006-07 & 2009-10
21. In the result, the appeals filed by the Assessee for the A.Y.
2006-07 partly allowed whereas for the A.Y. 2009-10 is
dismissed.
Order pronounced in the open court on this 22nd day
December, 2014.
Sd/- Sd/-
(N.K. BILLAIYA) (AMIT SHUKLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 22.12.2014
*Srivastava
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR "B" Bench
//True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.
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