Case Number: ITA 161/DEL/2019
Appellant: DCIT, Circle-21(1), New Delhi
Respondent: Rapipay Finvest P. Ltd, New Delhi
Assessment Year: 2013-14
Case Filed on: 2019-01-10
Order Type: Final Tribunal Order
Date of Order: 2022-12-28
Date of Pronouncement: 2022-12-28
PER N.K. CHOUDHRY, J. M.:
These appeals have been preferred by the Revenue Department against the orders dated 05.10.2018 passed by the Ld. Commissioner of Income Tax-9, New Delhi (in short “Ld. Commissioner”) for Assessment Years 2013-14 and 2014-15.
First, we will decide ITA No. 161/Del/2019 (Assessment Year 2013-14) by grounds wise.
In this case, the Revenue Department raised the following grounds of appeal:
1. “On the facts and under the circumstances of the case, the Ld. CIT(A) has erred in allowing the Assessee’s appeal, while the assessing officer held expenses amounting to Rs. 2,76,75,720/-, for the alleged purchase of printing books to be a bogus transaction based on facts of the case and material on record.
2. Notwithstanding the above ground of appeal, on the facts and under the circumstances of the case, the Ld. CIT(A) has erred in law and facts in deleting the Disallowance on account of Purchase Shown of Rs. 2,76,75,720/- as the nature of the work done by the supplier for the Assessee does not fall under the exception clause of section 194C and liable for disallowance u/s 40(a)(ia).
3. On the facts and under the circumstances of the case, the Ld. CIT(A) has erred in law and facts in deleting the Disallowance on account of Purchase Shown of Rs. 2,76,75,720/- especially when Assessee failed to substantiate before the AO as well as before the Ld. CIT(A) whether some modification to the product supplied were made to meet the ‘Requirement or Specification’ of the Assessee being a condition precedent for exception clause of section 194C of the Act to be operative.
4. On the facts and under the circumstances of the case, the Ld. CIT(A) has erred in law and facts in deleting the Disallowance on account of data processing charges of Rs. 1,81,25,931/-. As the DOEACC Society (NIELIT) itself confirmed that no work could be outsourced, so there is no question of transaction having taken place during the year.
5. The appellant craves to be allowed to add any fresh ground of appeal and/or delete or amend any of the grounds of appeal.”
By raising GROUNDS no 1 and 2, the Revenue/department claimed that Ld. Commissioner was not right in deleting the addition of Rs. 2,76,75,720/- as the said transaction was held as a bogus transaction based on the facts of the case and material on record by the AO.
The Assessee, engaged in the business of general finance and investment, filed its return of income on 31.11.2013 declaring an income of Rs. “Nil” and paid taxes on book profit of Rs. 3,11,038/- u/s 115JB of the Act.
The case was selected for scrutiny through CASS, resulting in the issuance of notice u/s 143(2) of the Act. In response, the Assessee attended and filed necessary details as requested by the AO.
The AO, after examining the details filed, observed that the Assessee company, incorporated on 06.01.2009, engaged in IT-enabled services and BPO services, had shown the purchase and sale of “printed books of voter list” from M/s. Vakrangee Software Ltd and M/s. Mindtree Export Pvt. Ltd amounting to Rs. 2,76,75,720/- and Rs. 2,84,57,520/- respectively. To verify the identity and creditworthiness of the parties and confirm the genuineness of the transaction, notices u/s 133(6) were issued to the said companies.
Consequently, the Assessee was asked to furnish bills and vouchers of expenses claimed in the profit and loss account indicating the mode of payment along with books of accounts. The Assessee did not file books of account and bills/vouchers but preferred to file a reply dated 31.03.2016, claiming that it had received a purchase order for the supply of printed voter lists from Mindtree Export Pvt. Ltd and therefore purchased printed voter lists in book form from M/s. Vakrangee Software Ltd and supplied them to M/s. Mindtree Export Pvt Ltd.
To verify the transaction of Rs. 2,84,57,520/-, the AO issued notice u/s 133(6) to M/s. Mindtree Exports Pvt. Ltd, but the notice was returned with a postal remark “left.” The Assessee provided another address for M/s. Mindtree Export Pvt. Ltd, but the confirmation from the above party was received only on 29.02.2013, i.e., after the date fixed on 15.02.2016. Therefore, the AO doubted the confirmation.
The AO observed discrepancies in the bills issued by M/s. Vakrangee Software Ltd related to printing supplementary voter list books of 9 Assembly Constituencies of Rajasthan. The AO also issued notice u/s 133(6) to the Election Commission on 04.03.2016. The Election Commission, in its reply dated 16.03.2016, mentioned that the commission had not permitted any private person/agency to compile and publish printed electoral rolls in book form for sale and no such contract/tender had been issued to any company by the “ECI” for providing printed books of the voter list.
The AO further observed that the Assessee had not claimed any transportation charges regarding the purchase and sale of printed books of the voter list, making it impossible to believe that no transportation cost was incurred if the books were purchased from M/s. Vakrangee Software Ltd in Jaipur, Rajasthan, and sold to M/s. Mindtree Export Pvt. Ltd in Mumbai.
The AO noted that the consideration mentioned in the purchase and sale transaction of printed books of the voter list did not match the bank accounts’ copy submitted by the Assessee. The purchase amounting to Rs. 2,76,75,720/- was made from M/s. Vakrangee Software Ltd during the year and shown as credit. Thus, the creditworthiness of M/s. Vakrangee Software Ltd was doubtful, especially when the amount received by it to the tune of Rs. 2,76,75,720/- was not confirmed.
The AO opined that the primary onus is on the Assessee company to prove the identity, creditworthiness, and genuineness of the transactions. The Assessee failed to discharge its onus. The bank statement of A/c. No. 5020 0007 5284 34 maintained with HDFC Bank revealed that payments were made to M/s. Vakrangee Software Ltd on various dates.
Based on the above, the AO concluded that the purchases shown by the Assessee company from M/s. Vakrangee Software Ltd were bogus. Hence, the amount of Rs. 2,76,75,720/- was added back to the taxable income of the Assessee Company as bogus purchase.
The Assessee, being aggrieved, preferred a first appeal before the Ld. Commissioner. During the appellate proceedings, the Commissioner asked the Assessee to explain:
The Assessee replied that the company was a subsidiary of M/s Virgo Softech Limited, which had expertise in data entry, generation, printing, distribution, and database management of electoral rolls desired by several agencies. The Assessee received the contract due to this expertise. The printed electoral rolls were used for various purposes, including local administrative officers, survey agencies, and preparation of Form 6, 7 & 8.
The contract was sub-contracted to M/s. Vakrangee Limited because they had installed new machinery for printing electoral rolls, which was not available elsewhere in the market.
The Ld. Commissioner made an independent verification of M/s. Vakrangee Ltd (formerly known as Vakrangee Software Ltd) and confirmed the transaction. The Commissioner deleted the addition of Rs. 2,76,75,720/- made by the AO on account of disallowance of purchase.
The Tribunal heard the parties and perused the material on record. It observed that the AO disallowed the expenses of printing voter lists mainly because notices sent to Mind Tree Exports Pvt. Ltd and M/s. Vakrangee Softwares Ltd were returned and later confirmed after the date fixed for hearing. The AO also noted discrepancies and lack of transportation charges in the transactions.
The Ld. Commissioner thoroughly examined the case, verified the suppliers, and confirmed the transactions. The Commissioner observed that the payment for the purchase was made in the subsequent year and substantiated by the Assessee. The Commissioner also noted that the Assessing Officer had accepted the sales made to M/s. Mind Tree Exports Pvt. Ltd, establishing the genuineness of the business.
The Tribunal concurred with the findings of the Ld. Commissioner, stating that if the purchase is doubted, then the sale should also be reduced from the assessed income. The Commissioner verified the non-deduction of TDS and confirmed that the transaction was covered by the Explanation (iv) to section 194C of the Act.
The Tribunal upheld the decision of the Ld. Commissioner and dismissed the grounds of appeal raised by the Revenue Department.
In the result, both the appeals filed by the Revenue Department were dismissed.
Order pronounced in the open court on 28/12/2022.
Signed by:
ANIL CHATURVEDI (ACCOUNTANT MEMBER)
N.K. CHOUDHRY (JUDICIAL MEMBER)
Dated: 28/12/2022
Assistant Registrar, ITAT, New Delhi
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