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Judgment
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
This is a batch of two appeals pertaining to the same assessee, whereby the Revenue is in appeal vide ITA 2993 and the assessee has filed a cross objection – 225/Del/2026.
Both these appeals arise from order dated 26.12.2025, u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by Ld. CIT(A), Delhi-26.
In this case, based on information from DCIT, Central Circle-1(3), Mumbai, it was brought to the notice of the AO that during the course of a search and seizure action on Shri Pandhe Group in Mumbai and Solapur on 25.10.2016, there was information that the assessee had made bogus purchases, booked bogus expenses and bogus losses, etc. The amount under consideration was Rs.11,58,54,039/-. The party with whom such transactions were allegedly made was one M/s Patel Engineering Limited. There was further information that such allegedly bogus transactions were arranged by an entry operator named Shri Anil Kumar Kabra. Thereafter, a notice u/s 148 of the Act dated 29.03.2019 was issued. Thereafter, the Ld. AO, after some discussion in the body of the order, has made an addition of Rs.289,63,510/-, by disallowing 25% of the amount under consideration (Rs.11,58,54,039/-). A further addition of Rs.34,75,621/- was also made on account of commission to Shri Anil Kumar Kabra @ 3%, for arranging the bogus transaction.
The assessee approached the CIT(A) where he could succeed on both the additions, which were deleted on the basis of detailed reasoning given in the impugned order. The revenue is aggrieved with this action and has approached the ITAT with six grounds of appeal which challenge the action of Ld. CIT(A) on the ground that the assessee was not able to conclusively prove the impugned transaction and there was sufficient material available with the AO to make the necessary additions.
The assessee has also filed cross objection in support of the relief given by the Ld. CIT(A) and has also raised grounds challenging the assumption of jurisdiction, which apparently had been marginally agitated before the Ld. CIT(A).
Before us the Ld. DR took us through the findings given by the Ld. AO and stated that the three ingredients required for proving a particular transaction: Identity, creditworthiness and genuineness of the transaction, were not proved in this case. It was the submission that the entry provider Shri Anil Kumar Kabra had specifically mentioned that he was providing accommodation entries through the Pandhe Group. It was averred that the assessee could never produce the directors of M/s Patel Engineering Limited for verification of services rendered. It was argued that findings of Ld. AO in previous years could not be used in the present year under the garb of the Rule of consistency, since for this particular year there was information available through a search action on the Pandhe Group.
The Ld. AR took us through the grounds raised in the Cross Objection and stated that not only was the assessee’s case strong on merits but was also strong on jurisdictional ground since the Ld. AO had simply used the information from Central Circle without processing it any further and thereafter arriving at erroneous conclusions.
We have considered the rival submissions and have gone through the records before us, including the detailed paper book filed by the assessee in which considerable documents have been enclosed, along with previous years’ assessment orders. We find that the Ld. CIT(A) has dealt with the issue on pages 58 to 66 in great detail. In the impugned order there is considerable finding of fact regarding the genuineness of M/s Patel Engineering Limited. It has been mentioned that considerable documents have been filed by the assessee to show that the work received from M/s Lanco Infratech Limited, which was executed through M/s Patel Engineering Limited, had good documents to support the same. There is also considerable discussion regarding the bona fides of M/s Patel Engineering Limited. Regarding the estimated commission paid there is a finding that the same was not justified. At this stage, we can do no better than to extract the relevant findings on the two additions: -
“5.8Further, the appellant submitted that in the assessment order, the AO has questioned about the identity and creditworthiness of the Company M/s Patel Engineering Limited, treating it as a bogus/paper company and questioned on the genuineness of the transactions entered into with the said company (M/s Patel Engineering Limited) being bogus as it was connected with Pandhe Group/ Shri Anil Kumar Kabra. The appellant has received work from Lanco Infratech Limited and executed through M/s Patel Engineering Limited along with exact amount of revenue and expenses thereon were duly identifiable and has been earned and paid. The appellant submitted the copy contracts received and further copy of subcontract given to M/s Patel Engineering Limited. The AO did not make any adverse inference on the said revenue earned on the expenses incurred or paid. Further, M/s Patel Engineering Limited is a listed company with million turnover and profits. Management of Patel Engineering Limited and Pandhe group are entirely different. M/s Patel Engineering Limited is a leading company in India in the civil construction sector. As per the MCA site, it can be seen that the status of ‘Patel Engineering Ltd.’ is ‘active’ in ROC and it has complied with all the statutory filing requirements and annual returns on MCA Portal. As per the Annual Report of the company M/s Patel Engineering Ltd., the following business details are emerged regarding the company:
The orders in hand from the engineering and construction business as on March 31, 2013 is about 133,500 million rupees. The share in the order book stood at – power section 34%, irrigation and water 26% and transportation, urban infrastructure and others at 40%.
During financial year 2013, the Company commenced work for 450MW Shongtong – Karcham Hydroelectric project which has a project cost of 10,400 million rupees and has also tied up for specific this project for financing with Exim Bank.
During FY 2013, the Company along with other JV partners has completed the financial closure of a BOT project from Uttar Pradesh State Highways Authority (UPSHA) for construction of four-lane highway project in Varanasi – Shakti Nagar Road, an entire length of 117.65 kms with a project cost of 17,500 million rupees.
The company has global business presence in USA, Chile, Greece, Doha, Nepal, Australia, Singapore, Indonesia, etc. countries.
The revenue of the company was 32,111.84 million rupees and net profit was at 767.26 million rupees for FY 2012-13.
The company is a good tax paying entity and it has made a tax provision of 331.65 million rupees for FY 2012-13.
The company has foreign exchange earning to the tune of 156.99 million rupees during FY 2012-13.
The company has completed projects of ovedr 84 Dams, 8K Megawatt Power Generation Projects, 180KMs of tunnels, 5.5 Lakh acre of Land irrigation and 800 KM of Road Construction. The Company has successfully completed over 33 micro tunneling projects in India and the United States.
The company details of ‘Board of Directors’ and other management of the company is on record at website/annual report of the company (none of them is linked or affiliated with Pandhe Group Companies).
As a matter of ‘Corporate Social Responsibility’ the Company has three key areas: Education, Support for the Women, Elderly, and Children, and Social Inclusion. To support these causes the Company extended its support to Magic Bus, Kripa foundation and St. Catherine’s Home. Magic Bus is a non-profit organization that works towards creating equal opportunities for children and youth from vulnerable sectors of the society. Over the past 12 years, Magic Bus has used its unique “sport for development” approach to empower children and youth in making effective life choices in the areas of education, livelihood and leadership, health, and gender equality. Kripa foundation is a Non-Governmental Organization affiliated with the Union Ministry of Social Justice & Empowerment, working among people afflicted with chemical dependency & HIV Infection. St. Catherine’s Home provides a home to helpless, abandoned/relinquished babies, toddlers, orphans, children with HIV; girls are placed with the home for protection from abuse, children from abusive unsafe life situations, abused minor girls, unmarried mothers and adivasi girls. Presently there are around 400 residents. The home provides education, rehabilitation and training for young girls to be confident, qualified, responsible, value-based citizens of our country. Thus, the company also has influential presence in social work in the country.
From the above stated facts, it cannot be said that the M/s Patel Engineering Limited is a bogus concern. Furthermore, the same facts of the information were received by the same AO for AY 2012-13 (FY 2011-12) pertaining to transactions related to the same entities which are in question for the year under consideration. The AO has considered transactions with same party (M/s Patel Engineering Limited) as genuine for AY 2012-13 and non-genuine for AY 2013-14.
In view of the above facts and findings, I am of the view that the appellant had received the work from M/s Lanco Infratech Limited through contract entered between the both parties. Thereafter appellant has assigned this work to the M/s Patel Engineering Limited for this a sub-contract was entered between the both the parties (appellant and M/s Patel Engineering Limited). The work was executed through M/s Patel Engineering Limited along with exact amount of revenue and expenses thereon were duly identifiable and has been earned and paid. The AO did not make any adverse inference on the said revenue earned on the expenses incurred or paid. There is no fault at part of the appellant. Further, M/s Patel Engineering Limited is a listed company with millions of turnovers and profits. Management of M/s Patel Engineering Limited and Pandhe group are entirely different. M/s Patel Engineering Limited is a leading company in India in the civil construction sector. As per the MCA site, it can be seen that the status of ‘Patel Engineering Limited’ is ‘active’ in ROC and it has complied with all the statutory filing requirements and annual returns on MCA. The details available in respect of the M/s Patel Engineering Limited showing that company is genuine company and one of the biggest players in the field of civil construction.” -------------------
“6.1The addition made by the AO on the ground of non-genuine transaction(s) between the appellant and M/s Patel Engineering Limited. The AO held that the appellant had taken accommodation entries from M/s Patel Engineering Limited for which appellant had given commission to Shri Anil Kumar Kabra and determined commission of Rs.34,75,621/- (@3% of Rs.11,58,54,039/-). As the transaction(s) between appellant and M/s Patel Engineering were genuine and the M/s Patel Engineering Limited is not a bogus entity (as discussed in the preceding paras), therefore there is no question of commission payment is arise. Hence, the addition of Rs.34,75,621/- is hereby deleted. The ground taken by the appellant on this issue is allowed.”
Considering the finding of fact recorded in the impugned order it deserves to be held that the findings therein do not need to be disturbed at all. The same are affirmed.
Since the assessee has succeeded on merits, hence, we do not deem it fit to adjudicate on the grounds of assumption of jurisdiction.
In the result, the Revenue’s appeal (ITA 2993/Del/2026) is dismissed; even the Cross Objection filed by the assessee is also dismissed.