DISHA DEVANG KAPASI, MUMBAI V. ITO WD 15(3)(1) NEW WD 27(1)(4), NAVI MUMBAI

ITA 1498/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1618 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 12-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Accommodation entries
• Section: 143(3); 133(6); 131; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1498/MUM/2015 ASSESSMENT YEAR 2010-11 DISHA DEVANG KAPASI, B-607, ARIHANT BLDG., SUDHA PARK, BEHIND GARODIA NAGAR, GHATKOPAR (E), MUMBAI 400 077 VS. THE ITO WARD 15(3)(1) NEW WARD 27 (1)-4, TOWER 6, 4 TH FLOOR, ROOM NO. 412, VASHI RLY. STATION COMPLEX, VASHI, NAVI MUMBAI- 400 703 PAN NO. : ANGPK 4952 N ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING: 31.10.2016 DATE OF PRONOUNCEMENT: 28.11.2016 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2010-11. IT IS DIRECTED AGAINST THE ORDER OF COMMIS SIONER OF INCOME TAX (APPEALS)-26, MUMBAI AND ARISES OUT OF THE ORDER U/ S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE 1 ST GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LD. CIT(A) ERRED IN ESTIMATING INCOME OF THE APPELLANT @2% OF THE VALUE OF THE SALES BILLS ISSUED BY THE APPELLANT IN RESPECT OF S UPPLY OF BUILDING MATERIALS AS AGAINST 0.75% ACTUALLY RECEIVED. THE 2 ND GROUND IS THAT THE LD. CIT(A) ERRED IN ESTIMATING INCOME OF THE APPELLANT @3% OF THE VALUE OF THE SALES APPELLANT BY: SHRI H ARI S. RAHEJA , AR RESPONDENT BY: SHRI SHIVAJI G HO D E, DR ITA NO. 1498 /MUM/2015 2 BILLS ISSUED BY THE APPELLANT IN RESPECT OF SUPPLY OF BUILDING MATERIALS AS AGAINST 0.50% ACTUALLY. THE 3 RD GROUND IS THAT LD. CIT(A)ERRED IN NOT ALLOWING THE VARIOUS EXPENSES CLAIMED BY THE APPELL ANT AND REFLECTED IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH THE RETURN O F INCOME ON THE GROUND THAT ASSESSEE HAS NOT CARRIED OUT ANY GENUINE BUSIN ESS ACTIVITY. THE 4 TH GROUND IS THAT LD. CIT(A)ERRED IN REJECTING THE RAT E OF COMMISSION EARNED BY THE APPELLANT IN RESPECT OF TRANSACTION OF ACCOMMOD ATION ENTRIES IN THE FORM OF SALES BILLS ISSUED IN HER TWO PROPRIETARY C ONCERNS TO VARIOUS PARTIES, WHICH SHE HAD ADMITTED IN THE AFFIDAVIT FILED BY HE R IN THE COURSE OF APPELLATE PROCEEDINGS. WITHOUT PREJUDICE, IT IS SUB MITTED THAT (I) LD. CIT(A) FAILED TO APPRECIATE THAT APPELLANT IN HER AFFIDAVI T AND VARIOUS SUBMISSIONS MADE DURING THE COURSE OF APPELLATE PROCEEDINGS HAD STATED THAT SHE HAS EARNED COMMISSION @ 0.5% IN RESPECT OF GROSS VALUE OF TRANSPORT BILLS, (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A)FAILED TO APPRECIATE THAT THE APPELLANT IN HER AFFIDAVIT HAS ADMITTED THE RATE OF COMMISSION EARNED IN THE CASE OF BUILDING MATERIAL SUPPLY @ 0.75% OF THE GROSS VALUE OF BILLS ISSUED TO VARIOUS PARTIES AS A GAINST RATE OF 2% AS DETERMINED BY HIM IN HIS ORDER AND (III) THE LD. CIT(A) ALSO DID NOT CONSIDER THE SUBMISSION MADE BY THE APPELLANT THAT ALL THE EXPENSES CLAIMED IN RESPECT OF BUSINESS ACTIVITY CARRIED ON BY HER WERE INCURRED FOR THE PURPOSE OF THE BUSINESS DURING THE COURSE OF PR OVIDING ACCOMMODATION ENTRIES AND THEREFORE ALLOWABLE AS DEDUCTION FROM THE INCOME EARNED BY WAY OF COMMISSION ON PROVIDING ACCOMMODATION ENTRIE S OF TRANSPORTATION. THE 5 TH GROUND IS THAT LD. CIT(A)ERRED IN HOLDING THAT AP PELLANT MIGHT BE UNDERSTATING THE COMMISSION INCOME AND THEREFORE DE CIDED THE NET COMMISSION INCOME TO BE @3% OF GROSS VALUE OF TRANS PORTATION AND 2% OF GROSS VALUE OF BUILDING MATERIAL SUPPLY BILLS FOR D ETERMINATION OF INCOME WITHOUT THERE BEING ANY EVIDENCE TO SUGGEST THAT TH E APPELLANT MIGHT BE UNDERSTATING HER COMMISSION INCOME AS ASSESSED BY T HE CIT(A), WITHOUT CONSIDERING THE FACT THAT APPELLANT HAD TO INCUR CE RTAIN EXPENSES IN CARRYING ON THIS ACTIVITY AND THEREFORE NET COMMISSION INCOM E ACTUALLY EARNED WAS SUBSTANTIALLY LOWER THAT WHAT HAS BEEN DETERMINED I N THE ASSESSMENT ORDER. THE 6 TH GROUND IS THAT THE LD. CIT(A) ERRED IN IGNORING A S ALSO NOT ADOPTING THE RATIO LAID DOWN BY THIS HONOURABLE TRIBUNAL IN SO FAR AS ALLOWABLITY EXPENSES CLAIMED BY THE APPELLANT. THE 7 TH GROUND IS THAT THE LD. CIT(A) ERRED IN IGNORING AS ALSO NOT APPLYING THE RATIO LA ID DOWN BY THIS HONOURABLE TRIBUNAL IN THE CASE OF M/S. SAROJ ANIL STEEL PVT . LTD. WHEREIN THE MANNER IN WHICH THE INCOME HAS TO BE DETERMINED HAS BEEN DECIDED IN A ITA NO. 1498 /MUM/2015 3 CASE AKIN TO THE CASE OF THE APPELLANT. THE 8 TH GROUND IS THAT THE DIRECTION OF THE LD. CIT(A) CONTAINED IN PARA 3.2:2 OF APPEAL OR DER OF THE MANNER IN WHICH THE ASSESSING OFFICER SHOULD ASSESS THE NET C OMMISSION INCOME IS BAD IN LAW BECAUSE IT LEADS TO A SITUATION ON ENHANCEME NT OF INCOME ALREADY ASSESSED AND THEREFORE IS A VIOLATION OF PRINCIPAL OF NATURAL JUSTICE, BECAUSE NO NOTICE HAS BEEN GIVEN BY CIT(A) OF HIS INTENTION OR PROPOSITION TO ENHANCE THE ASSESSED INCOME AND THUS IS A DECISION MADE ON AN EX-PARTE BASIS FOR WHICH ALSO NO NOTICE DECLARING SUCH INTEN TION OR PROPOSITION HAS BEEN ISSUED. 3. IN A NUTSHELL, THE FACTS ARE THAT THE ASSESSEE FILED HER RETURN INCOME FOR THE A.Y. 2010-11 ON 14/10/2010 DECLARING TOTAL INCOME OF RS. 9,59,010/-. THE ASSESSEE IS A PROPRIETOR OF M/S. D. K.ENTERPRISES AND M/S. D.C. CORPORATION. THE TAX AUDIT REPORT DESCRIBES TH E NATURE OF BUSINESS OF THE ASSESSEE IN BOTH THE FARMS AS DEALER IN BUILDI NG MATERIALS AND TRANSPORT CONTRACTORS. THE A.O IN ORDER TO VERIFY THE TRANSACTIONS IN BOTH THE PROPRIETARY CONCERNS ISSUED NOTICES U/S 133(6) TO VARIOUS PARTIES. IN RESPONSE TO IT, MAJORITY OF THE NOTICES ISSUED WERE RETURNED BACK BY THE POSTAL AUTHORITIES UNSERVED WITH THE REMARK NOT KN OWN. AS THE TRANSACTIONS WERE NOT VERIFIABLE , THE AO ISSUED SU MMONS U/S 131 DATED 14/12/2012 TO THE ASSESSEE TO PRODUCE BOOKS OF ACCO UNTS, PURCHASE AND SALES REGISTER, STOCK BOOK , CASH BOOK AND THE BAN K STATEMENTS. NO BOOKS OF ACCOUNTS AS CALLED FOR BY THE A.O WERE PRODUCED. IN VIEW OF THE ABOVE, THE A.O ESTIMATED INCOME FROM BUILDING MATERIALS AND T RANSPORT RECEIPT BILLS @ 2% IN RESPECT OF M/S. D.C. CORPORATION AND M/S. D.K . ENTERPRISES. THE AO ALSO ADDED THE BOGUS TDS OF RS. 5,15,519/-. 4. THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) AGAINST THE ORDER OF THE AO. THE LD. CIT(A) FOUND THAT THE FACTS IN THI S IMPUGNED ASSESSMENT YEAR ARE SIMILAR TO THE FACTS IN THE PREVIOUS ASSES SMENT YEAR 2009-10. THEREFORE HE DIRECTED THE AO TO ADD NET COMMISSION INCOME @ 3% OF GROSS ITA NO. 1498 /MUM/2015 4 VALUE OF TRANSPORTATION AND @ 2% OF THE GROSS VALUE OF MATERIAL SUPPLY BILLS ISSUED. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBM ITS THAT THE ASSESSEE IS THE PROPRIETRESS OF TWO CONCERNS NAMELY M/S D.C. CO RPORATION AND M/S. D.K. ENTERPRISES SHOWN TO BE IN THE BUSINESS OF BUI LDING MATERIAL SUPPLY AND PROVIDING OF TRANSPORT SERVICES. IT IS FURTHER STATED BY HIM THAT THE ASSESSEE HAS EARNED INCOME @ 0.75% OF THE GROSS VA LUE OF ACCOMMODATION BILLS ISSUED BY HER TOWARDS SUPPLY OF BUILDING MATE RIALS AND 0.50% OF THE GROSS VALUE IN RESPECT OF BILLS ISSUED FOR TRANSPO RTATION. THE LD. COUNSEL ALSO SUBMITS THAT AS PER THE ORDER OF THE ITAT SMC BEN CHES MUMBAI IN THE CASE OF M/S SAROJ ANIL STEEL PVT. LTD. VS. ITO (ITA NO. 5854/MUM/2012) FOR THE A.Y. 1999-2000, THE LD. CIT(A) SHOULD HAVE ALL OWED EXPENSES CLAIMED IN RESPECT OF BUSINESS ACTIVITY CARRIED ON BY THE A SSESSEE IN THE COURSE OF PROVIDING ACCOMMODATION ENTRIES. 6. THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RELEVANT MATERIAL ON RECORD. A SIMILAR ISSUE AROSE BEFORE T HE ITAT SMC BENCHES, MUMBAI IN THE CASE OF SHRI DEVANG H. KAPASI HUF VS. ITO (ITA NO. 3685/MUM/2014) FOR A.Y. 2009-10. THE TRIBUNAL HELD AS UNDER:- 5. WITH REGARD TO THE RECEIPTS PERTAINING TO ACCOMM ODATION BILLS, THE ASSESSEE SEEMS TO HAVE PROVED THE SAME BY SHOWING HIS BANK A CCOUNT WHEREIN THE CHEQUE RECEIVED FROM THE PARTIES HAVE BEEN IMMEDIAT ELY WITHDRAWN BY WAY OF CASH. THE EXPLANATION OF THE ASSESSEE WAS THAT T HE CHEQUES RECEIVED FROM THE PARTIES WERE DEPOSITED INTO THE BANK ACCOUNTS A ND THE CASH WAS IMMEDIATELY WITHDRAWN THEREAFTER AND HANDED OVER TO THE PARTIES. IF THE ASSESSEE IS ABLE TO DEMONSTRATE THAT THE VERY SAME MODALITY WAS FOLLOWED IN RESPECT OF RS.14.47 LAKHS ALSO, THEN THE ASSESSEES CLAIM FOR ESTIMATING INCOME AT 0.5% PLUS TDS AMOUNT CAN BE ADMITTED. HOW EVER, THIS FACT REQUIRES VERIFICATION AT THE END OF THE AO. ACCORDI NGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE BANK ACCOUNTS AND OTHER EX PLANATIONS FURNISHED BY THE ASSESSEE AND TAKE APPROPRIATE DECISION IN ACCOR DANCE WITH THE LAW. ITA NO. 1498 /MUM/2015 5 7.1 WE FIND THAT THE ASSESSEE IN RESPONSE TO THE NO TICE U/S 142(2) ISSUED BY THE AO ON 18/01/2013 HAS FILED A WRITTEN SUBMISS ION ON 28/01/2013 WHEREIN SHE HAS ADMITTED THE FOLLOWING: IN SO FAR AS ATTEMPT BEING MADE TO VERIFY THE GENU INENESS OF SALE, I ONCE AGAIN AFFIRM THAT MY AFFIDAVIT IN THIS REGARD SHOUL D BE RELIED UPON BECAUSE NONE OF THE PARTIES TO WHOM BILLS HAVE BEEN ISSUED WILL EVER ADMIT THAT THE TRANSACTIONS WITH THEM ARE NOT GENUINE BECAUSE IN D OING SO THEY WOULD BE HIT IN THEIR OWN TAX MATTER IN SO FAR AS THEIR INCOME A RE CONCERNED WHICH APPARENTLY ARE MANIPULATIONS. 7.2 KEEPING IN MIND THE ABOVE ORDER OF THE ITAT, TH E AO WOULD VERIFY WHETHER THE CHEQUES RECEIVED FROM THE PARTIES WERE DEPOSITED IN THE BANK ACCOUNTS AND CASH WAS WITHDRAWN IMMEDIATELY THEREA FTER AND HANDED OVER TO THE PARTIES. IF THE ASSESSEE IS ABLE TO PROVE T HE SAME BEFORE THE AO, THEN THE ASSESSEES CLAIM OF ESTIMATING NET COMMISSION I NCOME ON THE GROSS VALUE OF THE TRANSPORTATION FEE AT 0.5% + TDS SHALL BE ACCEPTED . ALSO IF THE ASSESSEE IS ABLE TO PROVE THE ABOVE, THE AO WOULD A CCEPT THE NET COMMISSION INCOME FROM THE GROSS VALUE OF BUILDING MATERIAL SUPPLY BILLS @ 0.75%. 7.3 ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. C IT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO TO FOLLOW T HE DIRECTION AS GIVEN AT PARA 7.2 HERE-IN-ABOVE AND PASS A FRESH ASSESSMENT ORDER AS PER THE PROVISIONS OF THE ACT AFTER GIVING REASONABLE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. THUS GROUND NUMBER 1,2, 4(I)(II) ,5 & 8 A RE ALLOWED FOR STATISTICAL PURPOSE. 7.4 NOW WE COME TO GROUND NUMBER 3,4(III),6 & 7. TH E HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS VS. CIT (1998) 232 ITR 776 (AP) HAS HELD: THE PATTERN OF ASSESSMENT UNDER THE ACT IS GIVEN B Y SECTION 29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION S 30 TO 43D. SECTION 40 ITA NO. 1498 /MUM/2015 6 PROVIDES FOR CERTAIN DISALLOWANCES IN CERTAIN CASES NOTWITHSTANDING THAT THOSE AMOUNTS ARE ALLOWED GENERALLY UNDER OTHER SEC TIONS. THE COMPUTATION UNDER SECTION 29 IS TO BE MADE UNDER SECTION 145 ON THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE. IF THOSE BOOK S ARE NOT CORRECT OR COMPLETE, THE ASSESSING OFFICER MAY REJECT THOSE BO OKS AND ESTIMATE THE INCOME TO THE BEST OF HIS JUDGMENT. WHEN SUCH AN ES TIMATE IS MADE IT IS IN SUBSTITUTION OF THE INCOME THAT IS TO BE COMPUTED U NDER SECTION 29. IN OTHER WORDS, ALL THE DEDUCTIONS WHICH ARE REFERRED TO UND ER SECTION 29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH A N ESTIMATE. THIS WILL ALSO MEAN THAT THE EMBARGO PLACED IN SECTION 40 IS ALSO TAKEN INTO ACCOUNT. 7 .4.1 KEEPING THE PRINCIPLE LAID DOWN IN THE ABOVE DECISION OF THE HONBLE HIGH COURT INSTEAD OF THE TRIBUNAL ORDER IN M/S SAROJ ANIL STEEL PVT. LTD(SUPRA) , THE CLAIM OF THE ASSESSEE TO ALLOW EXPENSES FROM THE INCOME EARNED BY WAY OF COMMISSION ON PROVIDING ACCOMMODAT ION ENTRIES OF TRANSPORTATION IS REJECTED. THUS GROUND NUMBER 3,4( III),6 & 7 ARE DISMISSED. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/11/2016 SD/- SD/- (SAKTIJIT DEY) (N.K. PRADH AN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 28/11/2016 PRAMILA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY OR DER, //TRUE COPY// (DY./ASSTT. REGISTRAR)