Balak Capital Pvt.Ltd., Amritsar V. The Income tax Officer,Ward-1(1), Surat

ITA 1268/AHD/2012

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3717 (ITAT-SURAT)
• Duration Of Justice: 11 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 21-02-2024
• Assessment Year: 2005-2006
• Appeal Filed On: 10-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Condonation of delay; Set aside
• Section: 271(1)(c); 143(3); 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA Nos. 2255, 2256, 2257, 2258, 1267 & 1268/Ahd/2012 (Assessment Years 2001-02, 2004-05 & 2005-06) (Physical hearing) Balak Capital Pvt. Ltd., (Present Address of Surat:- 753, Ajanta Shopping Centre, Ring Road Surat. (Amritsar Address:- C/o-Kalia & Co., 237 Basant Avenue, Maqbool Road, Amritsar, Punjab. PAN No. AAACB 9620 N Vs. I.T.O., Ward 1(1), Surat. Appellant/ Assessee Respondent/ Revenue Assessee represented by Shri Ashwini Kalia, C.A. Department represented by Shri Vinod Kumar, Sr.DR Date of hearing 22/02/2024 Date of pronouncement 22/02/2024 Order under Section 254(1) of Income Tax Act PER: BENCH 1. This set of six appeals by the assessee are directed against the separate orders of the learned Commissioner of Income Tax (Appeals)-1, Surat [in short, the ld. CIT(A)] dated 19/07/2012, 23/07/2012 and 08/09/2008 and for the Assessment Years (AY) 2001-02, 2004-05 and 2005-06 respectively. All these appeals out of which three appeals in quantum assessment for A.Y. 2001-2, 2004-05 and 2005-06 and three appeals against the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 (in short, the Act) in all respective assessment years. Facts in all these three yeas are ITA No. 2255/Ahd/2012 Balak Capital P Ltd. Vs ITO & 5 Ors. appeals 2 similar except variation of figures of additions on ad hoc basis on account of commission income earned by assessee, therefore, with the consent of parties, all the appeals were clubbed, heard together and are decided by common order. For appreciation of facts, the appeal for A.Y. 2001-02 being ITA No. 2255/Ahd/2012 is treated as a lead case. In this appeal, the assessee has raised following grounds of appeal: “1. That on the facts and circumstances of the case as well as law on the subject, the ld. CIT(A)-I, Surat has erred in confirming the addition of Rs. 40074 made by A.O. 2. That the observations made by ld. CIT(A) vide para 9 & 9.1 of assessment order are absolutely unwarranted and beyond his jurisdiction. 3. That the order is bad in law and on facts. 4. That the appellant craves leave to add or amend he ground of appeal before the appeal is heard and disposed off.” 2. Brief facts of the case are that the assessee claimed to have collected cash from various persons and used to issue cheque in the name of person desired by them after collecting its commission. The assessee filed return of income for A.Y. 2001-02 declaring income of Rs. 1,68,226/- on 31/10/2001. The case was selected for scrutiny. The assessment was completed under Section 143(3) of the Act on 10/10/2004 determining total income of Rs. 1.90 crore. In the assessment order, the Assessing Officer made addition on account of suppression of commission of Rs. 21,36,131/- besides other additions. The assessee filed appeal before the ld. CIT(A) wherein the addition was upheld vide order dated 30/03/2005 in appeal No. CAS-1/42/2004-05. Further aggrieved, the assessee filed appeal before the Tribunal vide ITA No. 1486/Ahd/2005. The appeal was ITA No. 2255/Ahd/2012 Balak Capital P Ltd. Vs ITO & 5 Ors. appeals 3 transferred to Amritsar Bench of Tribunal and was adjudicated vide order dated 29/05/2009. In the order dated 29/05/2009, the issue related to suppression of commission income was set aside/restored to the file of Assessing Officer with direction to consider the bank charges on account of issuance of draft by private bank i.e. unscheduled bank and not by nationalized bank or scheduled bank for estimating the commission income. The Assessing Officer in setting aside order, passed fresh assessment order on 31/03/2008. The Assessing Officer while passing the assessment order, estimated the commission @ Rs. 20/- per Rs. 10,000/- thereby made addition of Rs. 40074/- in the following manner; 3. The assessing officer while passing assessing order initiated penalty Section 271(1)(c) of the Act. 4. On further appeal before the ld. CIT(A), the action of Assessing Officer was upheld. Further aggrieved, the assessee has filed present appeal before this Tribunal. 5. So far as A.Y. 2004-05 and 2005-06 are concerned, the Assessing Officer while passing the assessment order, estimated the commission income @ ITA No. 2255/Ahd/2012 Balak Capital P Ltd. Vs ITO & 5 Ors. appeals 4 Rs. 50 per Rs. 10,000/- thereby making addition of Rs. 24,27,884/- in the following manner in AY 2004-05: For A.Y. 2005-06, the Assessing Officer made similar addition on account of suppression of income by estimating the commission income at Rs. 50 per Rs. 10,000/- and made addition of Rs. 14,31,012/- in the following manner: ITA No. 2255/Ahd/2012 Balak Capital P Ltd. Vs ITO & 5 Ors. appeals 5 6. Aggrieved by the addition in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee besides making other submission on objecting the addition on account of commission income, submitted that first year of their business was F.Y. 1997-98. The assessment for A.Y. 1998-99 was made after scrutiny and nature of business of assessee was accepted and the rate of commission earned by assessee was accepted. In two subsequent years i.e. A.Y. 1999- 2000 and 2000-01, similar commission income was accepted. In A.Y. 2001- 02, a survey was conducted by the Investigation Wing at Amritsar. No incriminating evidence/document was found with respect to the higher rate of commission or with regard to business transaction of assessee. A special auditor was appointed by I.T.O., Ward 3(1)1, Surat to make depth investigation and giving information. The said auditor gave his report that parties in Surat and Mumbai purchased cheques of Surat and Mumbai ITA No. 2255/Ahd/2012 Balak Capital P Ltd. Vs ITO & 5 Ors. appeals 6 banks from assessee against cash payment on commission @ Rs. 2.00/- per Rs. 1000/-. It was also reported that the assessee’s business was genuine and within the framework of law. The assessee also stated that they were not maintaining address of parties to whom such cheques were sold in earlier years. The contention of assessee was not accepted and the Assessing Officer made addition by estimating commission at 0.50% against 0.20% shown by the assessee in both the assessment years i.e. 2004-05 and 2005-06. The assessee also stated that return for A.Y. 2002- 03 and 2003-04 were accepted by the department without any variation. The assessee reported that they were collecting/receiving commission @ 0.15% to 0.2% whereas the Assessing Officer estimated commission @ 0.5% without bringing any material on record to prove that the assessee in fact earned more commission income. 7. The ld. CIT(A) after considering the submission of assessee, upheld the addition made by Assessing Officer by taking a view that the assessee was not consciously keeping any record in respect of cash receipt. So far as estimation of commission income is concerned, it is correct that there is no material on record to show that the assessee was receiving higher commission. The ld. CIT(A) held that keeping in mind that the assessee was helping hawala transaction of cash and the commission would be much more than the rate charged by the bank. In case of transaction through bank, the customers can be caught and required to explain their cash but ITA No. 2255/Ahd/2012 Balak Capital P Ltd. Vs ITO & 5 Ors. appeals 7 in case of assessee, its customers are scot free. The assessee is not maintaining identity of the buyer or the payee, therefore, estimation of commission income was justified and upheld. Similar order was made in both these years. In both these years, the assesse has also filed appeal on almost identical grounds of appeal. 8. We have heard the submissions of learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the revenue and have gone through the orders of lower authorities carefully. The ld. AR of the assessee submits that there is delay of 1291 days in filing appeal for A.Y. 2004-05 and 2005-06. The ld. AR of the assessee submits that he has already filed application for condonation of delay which is supported by the affidavit of Vikash Khanna, Director of assessee company. The ld. AR of the assessee submits that the assessee was having its office in Surat as well as in Amritsar. On receipt of order of ld. CIT(A) for both the years, the assessee prepared appeal and sent it through courier to ITAT, Ahmedabad mentioning the address at Neptune House. The official of assessee was not aware about the change of address of Ahmedabad bench of Tribunal. On enquiry when appeal could not be traced, a duplicate copy of appeal was filed before the Tribunal alongwith application for condonation of delay. The appeal was filed afresh on 11/06/2012, thus there was a delay of 1291 days. The ld. AR of the assessee submits that the delay in filing appeal is neither intentional nor ITA No. 2255/Ahd/2012 Balak Capital P Ltd. Vs ITO & 5 Ors. appeals 8 deliberate. The assessee was not going to be benefitted by filing appeal belatedly rather there is likelihood of adverse order against the assessee. The ld. AR of the assessee submits that the assessee has good case on merit and there are number of decisions of Tribunals, Hon'ble High Courts and Hon'ble Supreme Court that as far as possible, the appeal/matter may be adjudicated on merit instead of on technical issues. The ld. AR of the assessee submits that there was no intentional or deliberate delay but due to the fact that the appeal was sent at the old address of Ahmedabad office of Tribunal. 9. On merit, the ld. AR of the assessee submits that the assessee company was engaged in the business of Aangadiya and commission agent. The head office of assessee company was at Surat and branch office at Amritsar. There are various traders in Amritsar who bought grey cloths from Surat and Bombay. They were small traders having no credibility of supplier. The assessee was facilitating them as an Aangadiya firm and on commission basis, used to issue cheque. The assessee was charging very nominal commission from such customers. Commission was received in cash alongwith value of cheque issued by assessee. The assessee was showing real and actual income in its books of account. A survey was carried out during A.Y. 2001-02 on 08/12/2000 by DDIT (Inv) Amritsar at Amritsar office. During the course of survey action, not a single incriminating evidence was found. Nature of business was explained to the ITA No. 2255/Ahd/2012 Balak Capital P Ltd. Vs ITO & 5 Ors. appeals 9 survey party that the assessee is earning commission of 15 to 20 paise per thousand, which was believed by investigation team. In the assessment order for AY 2001-02, the Assessing Officer made various additions by adding the transaction as well as commission income. However, on appeal before the ld. CIT(A), the addition was upheld but on further appeal before the Tribunal, the matter was restored back to the file of Assessing Officer with specification direction to considering the bank rate for issuing cheque or draft which is followed by the private bank. The Assessing Officer accordingly estimated Rs. 20/- for every per Rs. 10,000/- as commission and thereby made addition of Rs. 40074/- and levied penalty under Section 271(1)(c) of the Act. 10. For other years, the assessee has shown commission income which has been earned by assessee, however, the Assessing Officer in A.Y. 2002-03 and 2003-04 accepted the similar commission income. However, in A.Y. 2004-05 and 2005-06, the Assessing Officer estimated similar cash income @ of Rs. 50 per Rs. 10,000/-. The ld. AR of the assessee submits that though the assessee has shown real income its books of account, however, to avoid the long drawn litigation and buy peace and keeping in view the fact that there is no business with the assessee company, the estimation of commission income may be restricted to Rs. 20/- per Rs. 10,000/-. The ld. AR of the assessee submits that he is conscious of the fact that in A.Y. 2001-02, the addition of commission income was made @ Rs. 20 per Rs. ITA No. 2255/Ahd/2012 Balak Capital P Ltd. Vs ITO & 5 Ors. appeals 10 10,000/- yet to buy peace the similar rate of commission income may be allowed. 11. On the issue raised in penalty appeal in all three years, the ld. AR of the assessee submits that the penalty in all three years is levied on addition on made on ad hoc/estimation basis. It is settled law that no penalty is leviable on ad hoc/estimated addition, therefore, penalty order is not sustainable. 12. On the other hand, the ld. Sr. DR for the revenue on the issue of condonation of delay submits that the assessee has not explained the delay in a proper manner. The assessee has taken a lame excuse about the delay. The delay is not short but is of 1291 days, therefore, it should not be condoned and appeal may be dismissed on this ground alone. To support his view, the ld. Sr. DR for the revenue relied on the decision of Hon’ble Apex Court Civil Appeal No.7696 of 2021 in the case of Majji Sannemma @ Sanyasirao Vs Reddy Sridevi & Ors. 13. On merit of the addition, the ld. Sr. DR for the revenue submits that he supports the order of Assessing officer as well as ld. CIT(A). The ld. CIT(A) in his order has categorically held that the assessee was helping Hawala transaction. Admittedly the assessee was not maintaining any record of such transaction. The assessee is earning much more commission income than the income shown in the books of account. The banks either nationalized or private are working on the guidelines of Reserve Bank of India and are keeping all records of KYC (Know Your Customer) of their ITA No. 2255/Ahd/2012 Balak Capital P Ltd. Vs ITO & 5 Ors. appeals 11 customers and all their transactions can easily be traced. So the commission income earned by assessee cannot be treated at bar with the commission charged by bank. The assessing officer has reasonably estimated the commission income @ Rs. 50/- per ten thousand. 14. In alternative submission, the ld. Sr. DR for the revenue submits that the commission should not be estimated less than Rs. 40/- per Rs. 10000/- as the assessee has not produced any evidence to substantiate their contention. On the submission against the penalty, the ld. SR.DR for the revenue submits that he supports the orders of lower authorities. The Assessing Officer in all fairness, has levied penalty only on the addition made on income added in assessment order. 15. We have considered the submissions of both the parties and have gone through the orders of the lower authorities carefully. We find that there is a delay of 1291 days in filing appeal for A.Y. 2004-05 and 2005-06. We further find that the assessee has filed application for condonation of delay which is supported by affidavit of Director of assessee company. In the affidavit as well as in the application of condonation of delay, the assessee has specifically contended that the appeal was sent to the registry of Ahmedabad Tribunal through courier. Copy of courier receipt is placed on record. The ld. AR of the assessee vehemently argued that there was no intentional or deliberate delay in filing appeal before the Tribunal and the assessee is not going to be benefitted by filing appeal belatedly. We further ITA No. 2255/Ahd/2012 Balak Capital P Ltd. Vs ITO & 5 Ors. appeals 12 find that alongwith application and affidavit for condonation of delay, the assessee has filed receipt of courier as well as challan of Rs. 10,000/- for filing appeal before the Tribunal bearing date 20/11/2008, courier receipt contained the date of 21/11/2008. Thus, we find merit in the submission of ld. AR of the assessee that the assessee has sent appeal through courier at the wrong address/old address of Tribunal. Considering the well- established principle that when technical consideration are pitted against cause of substantial justice, the cause of substantial justice may be preferred. Thus, considering the contents of application, submission of ld. AR of the assessee and the evidence placed on record, the delay of 1291 days in filing appeals for A.Y. 2004-05 and 2005-06 are condoned. Now adverting to the merit of the case for adjudication. 16. We find that in A.Y. 2001-02, the Assessing Officer estimation addition on account of commission income @ of Rs. 20/- per Rs. 10000/-. Such addition was made on the basis of order of Tribunal in assessee’s own case in ITA No. 1486/Ahd/2005 dated19/05/2009. So far as A.Y. 2004-05 and 2005-06 are concerned, the Assessing Officer estimated commission income @ of Rs. 50 per Rs. 10000/-, we find that while increasing the rate of commission from Rs. 20 to Rs. 50 per Rs. 10000/-, no specific evidence or comparable instance is brought on record. We find that the ld. AR of the assessee while making his submission vehemently argued that similar commission income offered @ of Rs. 20 per Rs. 10000/- was accepted by the Revenue in A.Y. ITA No. 2255/Ahd/2012 Balak Capital P Ltd. Vs ITO & 5 Ors. appeals 13 2002-03 and 2003-04. Similar fact was pleaded before the ld. CIT(A) in both the appeals. We find that in A.Y. 2001-02, the Assessing officer added/estimated commission income @ of Rs. 20 per Rs. 10000/-, however, in A.Y. 2004-05 and 2005-06, estimated similar at Rs. 50 per Rs. 10000. The ld. AR of the assessee while making his submission, submitted that the commission income may be adopted at Rs. 20 per Rs. 10000/- in all three years. Considering the fact that in A.Y. 2001-02, the Assessing Officer estimated the commission income @ of Rs. 20 per Rs. 10000/-, therefore, the assessing officer is directed to allow similar treatment is for A.Y. 2004-05 and 2005-06 in estimating income for these two years as well. Resultantly, the appeal for A.Y. 2001-02 is dismissed and appeal for A.Y. 2004-05 and 2005-06 are partly allowed. 17. So far as grounds of appeal in penalty levied under Section 271(1)(c) of the Act are concerned, admittedly in all three years, the Assessing Officer has levied penalty on additions made on estimation basis. It is settled law so far as levy of penalty under Section 271(1)(c) of the Act is concerned that no penalty is leviable on addition on estimation basis, therefore penalty in all three assessment years are deleted. Moreover, we have already reduced the estimation of commission income in A.Y. 2004-05 and 2005- 06. Therefore, in our considered view these are not the fit cases for levy of penalty under section 271(1)(c). hence, the assessing officer is directed to delete penalty in all three years. ITA No. 2255/Ahd/2012 Balak Capital P Ltd. Vs ITO & 5 Ors. appeals 14 18. In the result appeal in quantum assessment for AY 2001-02 in ITA No. 2255/Ahd/2012 is dismissed. Appeal in quantum assessment in AY 2004- 05 and 2005-06 in ITA No. 1267 & 1268/Ahd/ 2012 are partly allowed. And Appeal in 2256, 2257 & 2258/Ahd/ 2012 which are against the penalty levied under section 271(1)(c) in AY 2001-02, 2004-05 & 2005-06 are allowed. Order announced in open court on 22 nd February, 2024. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 22/02/2024 *Ranjan Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR By order 5. Guard File Sr. Private Secretary, ITAT, Surat