ITO 24(2)(1), MUMBAI V. PARASKUMAR N SHAH, MUMBAI

ITA 1046/MUM/2011

• Counselvise Citation: 104619914 RSA 2011
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 19-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 04-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Keywords: Rejection of books of accounts; Source of fund; Speculation loss; Corroborative evidences
• Section: 133(6); 144

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI , BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI R.C. SHARMA , ACCOUNTANT MEMBER ITA NO. : 1046 /MUM/20 1 1 (ASSESSMENT YEAR: 200 7 - 0 8 ) ITO 24(2)(1), ROOM NO. 606, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA - KURLA COMPLEX, BANDRA (EAST), MUMBAI - 400 051 VS MR. PARASKUMAR N SHAH, 2 - 246, DAMODAR SMRUTI CHS DAFTARY ROAD, MALAD (EAST), MUMBAI - 40 0 097 PAN: AVQPS 3162 E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PREMANAND J RESPONDENT BY : SHRI HITESH SHAH /DATE OF HEARING : 09 - 12 - 2014 DATE OF PRONOUNCEMENT : 12 - 01 - 201 5 O R D E R , PER R.C. SHARMA , A .M. : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 2 4 . 1 1 .201 0 FOR THE ASSESSMENT YEAR 200 7 - 0 8 , WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE: 1. ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,85,29,329/ - MADE BY THE AO AFTER REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3), WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAIL ED TO SHOW BEFORE THE AO THAT VARIOUS TURNOVERS AND PROFITS SHOWN BY HIM IN THE PROFIT AND LOSS ACCOUNT ARE CORRECT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 40,75,965/ - MAD E ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS AND DEBTORS, IGNORING THE FACT THAT THERE WAS DIFFERENCE I N THE CREDITORS AND DEBTORS AS PER THE RETURN AND AS PER THE AUDIT REPORT. MOREOVER, THE ASSESSEE ALSO FAILED TO FILE THE CONFIRMATION OF CREDITORS BEFOR E THE AO. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUND BE SET ASIDE AND MATTER MAY BE DECIDED ACCORDING TO LAW. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD NEW GROUND WHICH MAY BE NECESSARY. MR. PARASKUMAR N SHAH ITA 1046 / MUM/20 1 1 2 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS MAINLY ENGAGED IN THE BUSINESS OF SHARE TRADING. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO OBSERVED THAT THE ASSESSEE COULD NOT ESTABLISH SALES AND PURCHASE, DEPOSITS AND WI THDRAWALS IN BANK ACCOUNTS, THEREFORE BOOK RESULTS DIS CLOSED BY THE ASSESSEE WERE REJECTED BY INVOKING SECTION 145(3), ACCORDINGLY A SSESSMENT WAS FINALIZED U/S 144 OF THE ACT, MAKING AN ADDITION OF RS. 2,85,29,329/ - BY ESTIMATING INCOME AT 3% OF BUSINESS T URNOVER. 3. BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE ADDITION AFTER OBSERVING THAT IT IS NOT A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 145(3). 4. AGAINST THE ABOVE ORDER OF THE CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT CIT(A) HAS DELETED THE ADDITION OF RS.2,85,29,329/ - AFTER HAVING FOLLOWING OBSERVATION: 8.3 I HAVE GONE THROUGH THE CONTENTS OF THE IMPUGNED ASSESSM ENT ORDER AS WELL AS ARGUMENTS & SUBMISSIONS OF THE LD. AR OF THE APPELLANT ALONG WITH MATERIAL AVAILABLE ON RECORD. I FIND THAT THE ASSESSING OFFICER HAS DEALT WITH THIS ISSUE IN PARA 5 & 5.1 OF THE IMPUGNED ASSESSMENT ORDER WHEREIN HE HAS TRIED TO MAKE O UT A CASE OF REJECTION OF THE BOOKS OF ACCOUNTS. HE ALSO OPINED THAT THE FIGURES OF TURNOVER TO THE TUNE OF RS. 79,12,93,588/ - ARE NOTHING BUT GROSS MARGINS EARNED BY THE APPELLANT DURING THE YEAR IN DERIVATIVE SECTOR. HE FURTHER OPINED THAT DELIVERY BASED SALES AND NOT DELIVERY BASED SALES ON PURCHASES ARE ALSO NOT DISCLOSED IN THE RETURN OF INCOME FILED. HE FURTHER OPINED THAT APPELLANT DID NOT FURNISH ANY SUPPORTING EVIDENCE WITH REGARD TO SOURCE OF FUND FOR SUCH HUGE TRANSACTIONS WHEREAS THE APPELLANT F ILE ALL THE DOCUMENTS INCLUDING P & L ACCOUNT, BALANCE - SHEET AND COPY OF GLOBAL REPORT OF THE TRANSACTIONS. THUS, I FIND THAT THE ASSESSING OFFICER HAS FORMED HIS OPINION ON PRESUMPTIONS AND ASSUMPTIONS ONLY AND NOT ON THE BASIS OF SOME MATERIAL IN HIS POS SESSION OR ON RECORD. THE P & L ACCOUNT PLACED ON PAGE NO. 7 OF THE PAPER BOOK CLEARLY DISCLOSES THE PURCHASES WITH DELIVERY TO BE RS. 4,17,14,864/ - WHEREAS SALES WITH DELIVERY ARE SHOWN AT RS. 4,76,68,939/ - . THUS, IT IS FACTUALLY WRONG TO SAY THAT NO PROF IT IS DISCLOSED ON DELIVERY BASED TRANSACTIONS. SIMILARLY, IN P & L ACCOUNT, THE LOSS FROM SPECULATION AS WELL AS F & O HAS ALSO BEEN DISCLOSED. THERE IS NO ADVERSE MATERIAL IN POSSESSION OF THE ASSESSING OFFICER TO SUGGEST THAT THE IMPUGNED LOSS FROM SPEC ULATION OR FUTURE & OPTIONS DISCLOSED IN THE P & L ACCOUNT IS INCORRECT OR BOGUS. THUS, IN SUCH SITUATION WHEREIN THE FIGURES OF TRANSACTIONS ARE REFLECTED IN THE P & L ACCOUNT AND FORM PART OF THE FINAL ACCOUNTS, IT WILL BE DIFFICULT TO CONCUR WITH THE VI EWS OF THE ASSESSING OFFICER THAT APPELLANT MUST HAVE THE ELEMENT OF PROFIT ON ALL TYPES OF TRANSACTIONS. ACCORDINGLY, I FIND IN VIEW OF THE ABOVE DISCUSSIONS THAT THERE IS NO CASE OF INVOKING THE PROVISIONS OF SEC. 145(3) AS APPELLANT HAD NOT CHANGED HIS METHOD OF ACCOUNTING AND FOLLOWED REGULARLY THE SAME APART FROM THE FACT THAT THERE ARE NO COGENT REASONS FOR WHICH THE ASSESSING OFFICER COULD HAVE SATISFIED HIMSELF ABOUT THE INCORRECTNESS OR INCOMPLETENESS OF THE ACCOUNTS OF THE APPELLANT. ACCORDINGLY, THE MR. PARASKUMAR N SHAH ITA 1046 / MUM/20 1 1 3 ACTION OF LD. ASSESSING OFFICER OF ESTIMATING INCOME @ 3% IS NOT UPHELD. THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE TOTAL INCOME WITH REFERENCE TO THE P & L ACCOUNT OF THE APPELLANT TREATING IT TO REFLECT THE CORRECT AFFAIRS OF THE APPELLANT RE GARDING ITS PROFIT. 6. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 7 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT DURING THE COURS E OF SCRUTINY ASSESSMENT, THE AO FOUND THAT THE ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE SHOWS PROFIT FROM BUSINESS - RS. 75,641/ - AND SPECULATION BUSINESS NIL, STOCK - NIL, CREDITORS - NIL, DEBTORS - NIL AND BANK/CASH ON HAND RS. 1,17,905/ - . HOWEVER, AS P E R AUDITED BALANCE SHEET, PROFIT & LOSS ACCOUNT FILED SUBSEQUENTLY DURING THE ASSESSMENT PROCEEDINGS SHOWS : - (A) LOSS FROM SHARE TRADING - RS . 1,15,933/- (INCLUDING THE SPECULATION LOSS OF RS.1 0 ,32,009/ - ) (B) CREDITORS - RS .40 ,46,412/ - (E) DEBTORS - ( - ) RS. 29,556/ - (D) CASH / BANK BALANCE - RS. 2,68,523/ - (E) STOCK - RS.45,72,657/ - 8. AFTER OBSERVING ABOVE DISCREPANCIES, T HE AO FURTHER OBSERVED THAT T HE ASSESSEE HAS NOT DISCLOSED THE BANK ACCOUNT MAINTAINED WITH R.S. CO - OP . BANK LTD., WHEREIN HUGE CASH DEPOSITS WERE MADE, HUGE WITHDRAWAL WERE ALSO MADE AND THE SOURCES OF WHICH ARE NOT EXPLAINED. 9. THE AO FURTHER OBSERVED THAT I N THE P&L ACCOUNT ASSESSEE HAS DEBITED LOSS RECOVERED FROM CLIENTS OF RS.17,60, 000/ - , SPECULATI ON LOSS OF RS.1 0 ,32,009/ - , RECOVERY OF INTRADAY LOSSES / SPECULATION LOSSES FROM VARIOUS CONSTITUENTS AND CLIENTS TO THE EXTENT OF RS.21,90, 000/ - , OPENING STOCK OF RS.68,63,081/ - , STOCK ACQUIRED OF RS.45,72,657 / - . AS PER AO, D URING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE COULD NOT JUSTIFY SUCH CLAIMS WITH ANY DOCUMENTARY SUPPORTING EVIDENCES. THE SAID R ECOVERIES ARC STATED TO BE M ADE IN CASH AND ASSESSEE ADMITTEDLY DID NOT MAINTAINED MR. PARASKUMAR N SHAH ITA 1046 / MUM/20 1 1 4 ANY RECORD O F S UCH CLIENTS FROM WHOM THE ALLEGED AMOUNTS WERE RECEI VED OR TO WHOM SUCH AMOUNTS WERE PAID. 10. THE AO ALSO ISSUED NOTICE U/S. 133(6) OF THE ACT TO M/S. ALLIANCE INTERMEDIARIES LTD. AND M/ S. INVENTURE GROWTH & SECURITIES LTD., FOR WHOM ASSESSEE ALLEGEDLY ACTED AS A SUB BROKER BUT THE SAME WERE NOT COMPLIED WITH BY THE CONCERNED PARTIES. THE ASSESSEE ALSO DESPITE GIVEN AN OPPORTUNITY TO PRODUCE THEM FOR VERIFICATION OF THE TRANSACTIONS , COULD NOT PRODUCE THEM. THUS THE AL LEGED TRANSACTIONS WITH THEM REMAINED UNPROVED AND UNVERIFIABLE. 11. THE AO ALSO RECORD ED A FINDING TO THE EFFECT THAT THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS FILED COPY OF CERTIFICATES OF STT PAID IN FORM NO: 10 DB FOR RS. 1 ,33,652/ - (BSE) AND RS. 1 ,27,075 / - (NSE) FOR THE FINA N CIAL YEAR 2006 - 07. IT WAS GATHERED FROM THE SAID CERTIFICA TES THAT THE ASSESSEE HAS DONE/ ACHIEVED THE FOLLOWING TURNOVER DURING THE YEAR: SL.NO NAME OF THE BROKER ISSUING FORM 10DB PURCHAES OF EQUITY SHARES ON WHICH STT COLLECTED AS PER FORM10DB SALE OF EQUITY SHARES ON WHICH STT COLLECTED AS PER FORM 10DB SAL E OF EQUITY SHARES - NON - DELIVERY BASED ON WHICH STT COLLECTED AS PER FORM 10DB DERIVATIVE TRANSACTIONS ON WHICH STT COLLECTED AS PER FORM 10DB 1. INVENTURE GROWTH SERVICES PVT. LTD.(NSE) 1184583 1306588 4111514 791293588 2. INVENTURE GROWTH SERVICES PVT. LTD. 399935281 46362351 121653477 - TOTAL 41119864 47668939 125764991 791293588 12. IT COULD BE SEEN FROM THE ABOVE TABLE T H AT THE ASSESSEE HAS EFFECTED SALE OF SHARES IN BS E AND NSE TOTALING TO RS.17,34 ,33,930/ - WHICH INCLUDES BOTH DELIVERY BASED AND NON - DELIVERY B ASED TRANSACTIONS. SIMILARLY, THE NET TURNOVER OF DERIVATIVES ON WHICH STT HAS BEEN PAID ARE STATED AT RS.79,12,93,588 / - . THE ABOVE FIGURES OF TURNOVER IN DERIVATIVES SECTOR IS NOTHING BUT GROSS MARGINS EARNED BY ASSESSEE DURING THE YEAR. SI MILARL Y, ON DELIVERY BASED AND NON - DE LIVERY BASED SALES AND MR. PARASKUMAR N SHAH ITA 1046 / MUM/20 1 1 5 PURCHASES ALSO THERE IS PROFIT ELEMENT WHICH WAS NOT DISCLOSED IN THE RETURN OF INCOME FILED. 13. THE AO FURTHER OBSERVED THAT T HE ASSESSEE HAS NOT RECONCILED ABOVE TRANSACTIONS WITH THE DOCUMEN TS , P&L AND BALANCE SHEET FILED WITH THE RETURN OF INCOME. IN FACT ASSESSEE EXCEPT 'FOR A COPY OF GLOBAL REPORT OF THE TRANSACTIONS, HAS NOT FURNISHED ANY SUPPORTING EVIDENCES WITH REGARD TO SOURCES OF FUNDS FOR SUCH HUGE T RANSACTIONS. 14. IN VIEW OF THE ABOVE OBSERVATIONS AND SHORTCOMINGS , THE AO HAS REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE PROFIT AT 3% OF BUSINESS TRANSACTION. HOWEVER, WITHOUT CONTROVERTING ALL THESE FINDINGS, THE CIT(A) HAS DELETED THE ADDITION OF RS. 2,85,29,329/ - MADE BY THE AO. NO REASONS MUCH LESS A COGENT REASON HAS BEEN RECORDED BY THE CIT(A) AS TO WHY HE HAS DISREGARDED THE SERIOUS OBSERVATION OF THE AO AS STATED ABOVE. ON THE CONTRARY, THE CIT(A) OBSERVED THAT IT IS NOT A FIT CASE FOR REJECTION OF BOOKS OF ACCOUNTS U/S.145( 3) OF THE ACT. W E DO NOT FIND ANY MERIT IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION OF RS. 2,85,29,329/ - MADE BY THE AO. WE ALSO FOUND THAT THE CIT(A) HAS NOT DEALT WITH THE ADDITION OF RS. 98,66,641/ - MADE BY THE AO U/S.68 OF THE ACT. ACCORDINGLY, THE ORDER OF CIT(A) ON THIS ISSUE IS SET ASIDE TO ITS FILE FOR DECIDING AFRESH AFTER RECORDING COGENT REASON FOR THE SAME. NEEDLESS TO SAY THAT ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY BEFORE DECIDING THE APPEAL. 15 . WITH REGARD TO THE DELETION OF ADDITION MA DE ON ACCOUNT OF SUNDRY CREDITORS & DEBTORS, WE FOUND THAT THESE WERE THE OLD CREDITS. ACCORDINGLY, THE CIT(A) HAS DIRECTED THE AO TO VERIFY FROM RECORD AND IF HE FINDS THAT SUM OF RS. 40,75,965/ - HAS NOT BEEN CREDITED IN THE CURRENT YEAR , HE WILL DELETE T HE IMPUGNED ADDITION. 1 6 . WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN SO FAR AS HE HAS NOT OUTRIGHTLY DELETED THE ADDITION, BUT HAS DIRECTED THE AO TO VERIFY THE YEAR OF CREDITS IN THE BOOKS OF THE ASSESSEE. IF THE CREDITS PERTAI N TO EARL IER YEAR, NO ADDITION IS WARRANTED DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THERE IS NO INFIRMITY IN TH IS DIRECTION OF THE CIT(A). MR. PARASKUMAR N SHAH ITA 1046 / MUM/20 1 1 6 1 7 . IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JANUARY, 2015 . ( ) SD/ - SD/ - ( H.L. KARWA ) ( R.C. SHARMA ) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATE: 12 TH JANUARY, 2015 COPY TO: - 1) THE APPLICANT . 2) THE RESPONDENT. 3) THE CIT (A) - 3 4 , MUMBAI. 4) 2 4 , MUMBAI THE CIT - 2 4 , MUMBAI. 5) C , THE D.R. C BENCH, MUMBAI. 6) COPY TO GUARD FILE. / BY ORDER [ , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI CHAVAN, SR. PS /PKM,PS