KAMAL KISHORE RATHI, MUMBAI V. ASST CIT CEN CIR 31 CEN RG 7, MUMBAI

ITA 167/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0276 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 12-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: HIRAL D SEJPAL
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Additional evidence; Accommodation entries; Revised return
• Section: 80C; 143(3); 133A; 131; 148; 37

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 16 7 /MUM/201 6 ASSESSMENT YEAR: 20 09 - 10 ITA NO. 4926/MUM/2015 ASSESSMENT YEAR: 2010 - 11 & ITA NO. 168/MUM/2016 ASSESSMENT YEAR : 2011 - 12 KAMAL KISHORE RATHI , 115B, SHALIMAR MIRACLE, OPP. ICICI BANK S.V. RD. GOREGAON ( W ) MUMBAI 4000 62 VS. ASST. CIT CEN CIR 31 CEN RG 7 R. NO. 451 , AAYAKAR BHAVAN, MARINE LINES, MUMBAI 400020 PAN NO. AA GPR1508N (APPELLANT) (RESPONDENT) ASSESSEE BY : M S . HIRAL D. SEJPAL , AR REVENUE BY: SHRI M.C. OMI NINGSHEN , DR DATE OF HEARING: 18 /0 4 /2017 DATE OF ORDER: 14 /06/2017 ORDER PER N.K. PRADHAN, AM THE CAPTIONED APPEALS ARE DIRECTED AGAINST THE ORDER COMMISSIONER OF INCOME TAX (APPEALS) 52 , MUMBAI AND ARISE OUT OF ORDER U/S . 143(3) R.W.S. 147 FOR THE AY 2009 - 10 , AY 2010 - 11 AND ORDER U/S. 143(3) FOR THE AY 2011 - 12 OF THE INCOME TAX ACT, 1961 (THE ACT). AS THEY INVOLVE COMMON ISSUES, WE ARE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. WE FIND THAT THE GROUNDS OF THE APPEAL FOR THE ABOVE THREE ASSESSMENT YEARS ARE SIMILAR. WE BEGIN WITH THE AY 2009 - 10 . ITA NO 167 & 168/M/2016 2 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND FURTHER AS PER EXPLANATIONS OFFERED THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE ORDER PASSED BY LEARNED A.O. WHICH IS GROSSLY UNJUST AND ERRONEOUS AND PURELY BASED ON ASSUMED FACTS AND SURMISES. 2. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE VIEWS OF L EARNED A.O. IN ASSUMING NET INCOME AS DISCLOSED IN RETURN OF INCOME FILED AS INCOME DECLARED BEFORE INVESTIGATING AUTHORITIES IN STATEMEN T GIVEN U/S. 131 OF THE INCOME TAX ACT, 1961. HE ERRED IN NOT ALLOWING LEGITIMATE EXPENSES CLAIMED BY THE ASSESSEE I N THE RETURN OF INCOME. 3 . THE LEARNED CIT(A PPEALS ) ERRED IN ACCEPTING LEARNED A.O.S VIEW TO CONSIDER ENTIRE RECEIPTS CREDITED IN PROFIT AND LOSS ACCOUNT AS INCOME DEC LARED DURING DECLARATION MADE U/S. 131 OF THE INCOME TAX ACT, 1961. IT IS NATURAL FOR ASSESSEE WHO IS ALREADY UNDER PRESSURE OF ACTION TAKEN U / S. 133A, TO ASSUME WHATEVER DECLARATION HE IS GIVING IS TOWARDS GROSS INCOME ESCAPED FROM ASSESSMENT AND HE WILL BE ENTITLED TO CLAIM ALL LEGITIMATE EXPENSES THAT HE HAS INCURRED TO EARN THE SAID INC OME. 4 . THE LEARNED CIT (A PPEALS ) OUGHT TO HAVE GIVEN DUE CONSIDERATION TO THE FACT THAT THE ASSESSEE IS ENTITLED TO CLAIM LEGITIMATE BUSINESS EXPENSES AS ALLOWED UNDER SECTION 30 TO SECTION 37 OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS. 20,52,878/ - . 5. THE LEARNED CIT (APPEALS) ERRED IN NOT ALLOWING DEDUCTION AMOUNTING TO RS. 92,924/ - AS CLAIM ED U/S. 80C OF THE INCOME TAX AC T, 1961 IN RESPECT OF VARIOUS INVESTMENTS MADE IN ELIGIBLE INSTRUMENTS AS DEFINED U/S. 80C OF THE INCOME TAX ACT, 1961. 6. WITHOUT PREJUDICE TO ABOVE REFERRED GROUNDS OF APPEAL, THE LEARNED CIT (APPEALS) ERRED GROSSLY IN ACCEPTING LEARNED A.O. S STAND IN CALLING MR. MUKESH M . CHOKSEY U/S. 131 OF THE INCOME TAX ACT, 1961 AND TAKING HIS STATEMENT ON RECORD AND MAKING IT AS BASE FOR DISALLOWANCE OF COMMISSION AMOUNT P AID TO M/S. ITA NO 167 & 168/M/2016 3 ALLIANCE INTERMEDIA RIES AND NETWORK PVT. LTD., AMOUNTING TO RS. 10,00,000/ - WITHOUT GIVING APPROPRIATE OPPORTUNITY TO THE APPELLANT FOR CROSS EXAMINATION. 7. NOTWITHSTANDING ANYTHING MENTIONED HEREINABOVE TH E ASSESSEE WAS NEVER SERVED A FINAL SHOW CAUSE NOTICE INFORMING HIM ABOUT PROPOSED DISALLOWANCE ALONG WITH REASONS AND WAS NEVER GIVEN AN OPPORTUNITY TO DEFEND HIMSELF AGAINST SUCH DISALLOWANCES. 2.1 THE ASSESSEE ALSO FILED AN ADDITIONAL GROUND SUBMITTING THAT THE RETURN FILED ON 26.03.2011, IN RESPONSE TO NOTICE U/S 148 BE TREATED AS A VALID RETURN AND THE EXPENSES AND DEDUCTION CLAIMED THEREIN BE ALLOWED UNDER THE PROVISIONS OF THE ACT. 3 . WE FIND THE ASSESSEE HAS ALSO FILED A PETITION REQUESTING FOR ADMI TTING ADDITIONAL EVIDENCE . AS PER IT, IN RESPECT OF CLAIM OF LEGITIMATE BUSINESS EXPENSES, THE ASSESSEE WOULD LIKE TO SUBMIT (I) C ONFIRMATION RECEIVED FROM M/S. ALLIANCE INTERMEDIARIES AND NETWORK PVT. LTD., (II) A COPY OF BANK STATEMENT , (III) COPY OF CONFIRMATION FROM EMPLOYEES AND THEIR RETURN OF INCOME. ALSO THE ASSESSEE PROPOSES TO FILE DOCUMENTS LIKE LIC PREMIUM RECEIPT AND COPY OF PPF PASSBOOK IN SUPPORT OF ITS CLAIM OF DEDUCTION U/S. 80C OF THE ACT. 3.1 AS THE DOCUMENTS MENTION ED AT PARA 3 HERE - IN - ABOVE ARE ESSENTIAL IN ADJUDICATING THE ISSUES RAISED IN THE GROUNDS OF APPEAL, WE ADMIT THE SAME. WE ALSO ADMIT THE ADDITIONAL GROUND OF APPEAL. 4 . BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE REVENUE CONDUCTED A SURVEY ON 26.08.2010 IN THE BUSINESS PREMISES OF THE ASSESSEE. A STATEMENT OF THE ASSESSEE WAS RECORDED. IN THE STATEMENT RECORDED, THE ASSESSEE ADMITTED THAT HE WOULD OFFER RS. 5,00,000/ - TO TAX FOR THE AY 2009 - 10, RS. 35,00,000/ - FOR THE AY 2010 - 11 AND RS. 25 ,00,000/ - FOR THE AY 2011 - 12 . ITA NO 167 & 168/M/2016 4 4.1 THE ASSESSEE HAD FILED ORIGINAL RETURN OF INCOME FOR THE AY 2009 - 10 ON 31 . 03 . 2010 DECLARING TOTAL INCOME OF RS. 2,58,670/ - . AFTER THE SURVEY ACTION U/S. 133A, THE ASSESSEE FILED A REVISED RETURN ON 26/03/2011 DISCLOSI NG THE TOTAL INCOME OF RS. 4,43,700/ - . 4.2 THE ASSESSING OFFICER (AO) FOUND FROM THE STATEMENT RECORDED THAT THE MODUS OPERANDI OF THE ASSESSEE WAS SUCH THAT HE ON RECEIPT OF CASH, PURCHASE D THE SHARES FROM THE OPEN MARKET AT THE PREVAILING MARKET PRICE BY THE GROUP COMPANIES OF MR. MUKESH M. CHOKS EY AND SAME WERE TRANSFERRED TO THE DEMAT ACCOUNT OF THE CLIENT ON THE DATE OF CREATION OF FICTITIOUS CAPITAL GAINS. THE A.O. ON EXAMINATION OF THE RETURN INCOME FOR THE AY 2009 - 10 NOTICED THAT THOUGH THE ASSESSEE HAD OFFERED RECEIPTS TO THE TUNE OF RS. 21,35,000 / - ON ACCOUNT OF BROKERAGE BY CREDITING THE SAME TO THE PROFIT AND LOSS ACCOUNT, THE INCOME IN RESPECT OF THESE RECEIPTS WAS NEUTRALIZED BY CLAIMING DEDUCTION MAINLY ON ACCOUNT OF THE FOLLOWING ITEMS: S. NO. ITEM AMOUNT OF EXPENDITURE CLAIMED ORIGINAL RETURN REVISED RETURN INCREASE IN CLAIM 1. SALARIES AND WAGES 48,000 9,48,000 9 , 0 0,000 2. SUB BROKERAGE NIL 10,00,000 1 0 , 0 0,000 3. DEPRECIATION 36,895 24,597 NIL TOTAL 84,895 19,48,000 19 ,00,000 4.3 THE A.O. OBSERVED THAT THOUGH THE ASSESSEE WAS REQUIRED TO OFFER ADDITIONAL INCOME OF RS. 5,00,000/ - AS ADMITTED IN COURSE OF SURVEY U/S. 133A, HE OFFER ED ONLY AN AMOUNT OF RS. 2,35,000/ - . HE ASKED THE ASSESSEE TO EXPLAIN THE SAME. IN RESPONSE TO IT, THE ASSESSEE FILED A REPLY VIDE LETTER DATED 11.02.2014 WHICH READS AS UNDER : DURING THE YEAR UNDER CONSIDERATION WE HAD DECLARED INCOME OF RS. 5,00,000/ - WITH THE INVESTIGATION WING. HOWEVER, ON ACTUAL WORKING IT WORKED OUT TO BE RS. 2,35,000/ - AND HENCE SAME WAS DECLARED IN OUR RETURN OF INCOME UNDER THE HEAD BROKERAGE . ITA NO 167 & 168/M/2016 5 4.4 THE A.O. WAS NOT CONVINCED TO THE ABOVE EXPLANATION OF THE ASSESSEE AS THE INCOME DISCLOSED DURING THE COURSE OF SURVEY U/S. 133A OUGHT TO BE ADDED TO THE RETURN OF INCOME ORIGINALLY FILED. THEREFORE, HE MADE AN ADDITION OF RS. 5,00,000/ - TO THE RETURN OF INCOME FILED ON 31.03.2010 SHOWIN G INCOME OF RS. 2,58,670/ - . 4.5 THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDING ISSUED SUMMONS U/S. 131 OF THE ACT ON TEST CHECK BASIS TO SOME OF THE PERSONS TO WHOM THE ASSESSEE CLAIMED TO HAVE PAID CERTAIN AMOUNTS AS SALARY & WAGES AND CLAIM ED THE SAME AS EXPENSES IN HIS P&L ACCOUNT FILED WITH THE REVISED RETURN OF INCOME. THE A.O. RECORDED THE STATEMENT ON OATH OF THREE PERSONS NAMELY (A) MS. SANDHYA S. BADEKAR, (B) SHRI JITENDRA CHANDRABHAN SINGH AND (C) SHRI INDRA PRATAP SINGH ON 25.02.2014 , 04 .03.2014 AND 05.03.2014 RESPECTIVELY. ON EXAMINATION OF THE STATEMENT RECORDED, THE A.O. NOTICED THAT IN RESPECT OF SHRI JITENDRA CHANDRABHAN SINGH & SHRI INDRA PRATAP SINGH , THERE IS A DIFFERENCE IN AMOUNT CLAIMED TO HAVE BEEN PAID BY THE ASSESSEE AS SAL ARY / WAGES AND THE AMOUNTS ACTUALLY RECEIVED BY THEM FROM THE ASSESSEE. THE DETAILS ARE AS UNDER: NAME OF THE PERSON AMT. OF SALARY CLAIMED TO HAVE PAID BY THE ASSESSEE (IN RS.) SALARY ADMITTED TO HAVE RECEIVED BY THE PERSON (IN RS.) DIFFERENCE (IN RS. ) RELEVANT CONTENT IN THE STATEMENT RECORDED ON OATH JITENDRA CHANDRABHAN SINGH 1,20,000 NIL 1,20,000 I HAD JOINED THE FIRM AFTER MARCH 2009 IMMEDIATELY AFTER GIVING MY 10+2 (INTERMEDIATE EXAMS). HENCE AY 2009 - 10 IS NOT APPLICABLE. INDRA PRATAP SINGH 3,00,000 1,80,000 1,20,000 THIS PAYMENT WAS MADE THROUGH CHEQUE PER MONTH RS. 15,000/ - (I.E. RS. 1,80,000/ - P.A.) TOTAL 4,20,000 1,80,000 2,40,000 ITA NO 167 & 168/M/2016 6 4.6 THE ASSESSEE HAS CLAIMED DEDUCTION OF RS. 10,00,000/ - ON ACCOUNT OF SUB - BROKERAGE CHARGES PAID TO M/S. ALLIANCE INTERMEDIARIES & NETWORKS PVT. LTD. THE SAID COMPANY IS ONE OF THE GROUP COMPANIES FLOATED BY MR. MUKESH M. CHOKS EY , WHO IS ACTIVELY INVOLVED IN PROVIDING ACCOMMODATION ENTRIES . TO EXAMINE THE GENUINENESS OF THE ABOVE EXPENDITURE, THE A.O. ISSUED A LETTER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER THE CASES OF MR. MUKESH M. CHOKSEY GROUP TO CLARIFY (A) AS TO WHETHER M/S. ALLIANCE INT ERMEDIARIES & NETWORK PVT. LTD. HAS O FFERED THE AFORESAID AMOUNTS TO TAX IN ITS HANDS FOR THE RELEVANT ASSESSMENT YEARS AS RECEIVED FROM SHRI KAMAL KISHORE RATHI; AND (B) AS TO WHETHER M/S. ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD., IS CLAIMING TDS CREDIT IN RESPECT OF THE AFORESAID AMOUNTS . THE ASSESSING OFFICER AFTER EXAMINING THE ISSUE WITH MR. MUKESH M. CHOKSEY FORWARDED VIDE LETTER DATED 24.02.2014 A REPLY ON THE PAYMENT OF SUB - BROKERAGE BY THE ASSESSEE. MR. MUKESH M. CHOKSEY HAS CLARIF IED THAT HE HAS NOT RECEIVED THE ABOVE AMOUNT OF BROKERAGE. THEREAFTER, THE A.O. GAVE AN OPPORTUNITY TO THE ASSESSEE VIDE LETTER DATED 03.03.2014 TO RECONCILE AND JUSTIFY THE CLAIM OF EXPENDITURE. THE ASSESSEE FILED A REP LY VIDE LETTER DATED 03.03.2014, REFERRING TO THE COPY OF ASSESSMENT ORDER OF SMT. BINDU A. PARMAR. THE A.O. WAS NOT CONVINCED WITH THE ABOVE REPLY OF THE ASSESSEE AS THE SAME DID NOT PROVE THAT THE ASSESSEE HAD MADE PAYMENT OF SUB - BROKERAGE TO MR. MUKESH M. CHOKSEY . THERE AFTER , THE A.O. HELD THE CLAIM OF EXPENSES OF RS. 19,00,000/ - ON THE HEAD SALARY AND WAGES AND SUB - BROKERAGE AS NON - GENUINE. HE MADE AN ADDITION OF RS. 5,00,000/ - TO THE INCOME OF RS. 2,58,670/ - SHOWN BY THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF THE A.O. , THE ASSESSEE F ILED AN APPEAL BEFORE THE LD. CIT (A). WE FIND THAT THE LD. CIT (A) AGREED WITH THE REASONS GIVEN BY THE A.O. AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. ITA NO 167 & 168/M/2016 7 6. BEFORE US , THE LD. COUNSEL OF THE ASSESSEE FILE S A FACTUAL PAPER BOOK CONTAINING (I) COPY OF CONFIRMATION RECEIVED FROM ALLIANCE INTERMEDIARIES AND NETWORK PVT. LTD. AND A COPY OF THE BANK STATEMENTS REFLECTING THE TRANSACTIONS; (II) COPY OF SALARY ACCOUNT LEDGER OF THE APPELLANT; (III) COPY OF INCENTIVE ACCOUNT LEDGER OF THE APPELLANT; (IV) COPY OF CONFIRMATION OF ACCOUNTS FROM INDRAPRATAP SINGH; (V) COPY OF CONFIRMATION OF ACCOUNTS FROM JITENDRA CHANDRABHAN SINGH; (VI) COPY OF CONFIR MATION OF ACCOUNTS FROM SANDHYA BADEKAR AND COPY OF ITS IT ACKNOWLEDGEMENT; (VII) COPY OF CONFIRMATION OF ACCOUNTS FROM AMIT MAHADE; (VIII) COPY OF CONFIRMATION OF ACCOUNTS FROM SANTOSH KURI ; (IX) COPY OF CONFIRMATION OF ACCOUNTS FROM MANISH RATHI; (X) COP Y OF CONFIRMATION OF ACCOUNTS FROM SWEEPER ACCOUNT; (XI) COPY OF LIC PREMIUM RECEIPT PAID FOR KAMAL RATHI DATED 14.05.2008; 04.12.2008; 04.12.2008; (XII) COPY OF THE PPF PASSBOOK THE ASSESSEE ALSO FILE S A LEGAL PAPER BOOK. 7. PER CONTRA , THE LD. DR REL IE S ON THE ORDER OF THE LD. CIT(A). HE SUBMITS THAT THE A.O. HAS GIVEN SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO EXPLAIN ITS CASE. 8. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. ONE IMPORTANT ASPECT WHICH HAS BEEN STRO NGLY PUT BY THE LD. COUNSEL OF THE ASSESSEE IS THAT THE ASSESSEE WAS NOT GIVEN AN OPPORTUNITY TO CROSS EXAMINE MR. MUKESH M. CHOKSEY . THE HON'BLE SUPREME COURT IN STATE OF KERALA VS . K.T. SHADULI GROCERY DEALER AIR 1977 SC 1627, RECOGNISED THE IMPORTANCE OF ORAL EVIDENCE BY HOLDING THAT THE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMPLETENESS OF THE RETURN NECESSARILY CARRY WITH IT THE RIGHT TO EXAMINE WITNESSES AND THAT INCLUDES EQUALLY THE RIGHT TO CROSS - EXAMI NE WITNESSES. IN ITO V S. M. PIRAI CHOODI (2012) 20 TAXMANN.COM 733 (SC), THE HON'BLE SUPREME COURT HAS HELD THAT ORDER OF ASSESSMENT PASSED WITHOUT GRANTING AN OPPORTUNITY TO ASSESSEE ITA NO 167 & 168/M/2016 8 TO CROSS - EXAMINE, SHOULD NOT HAVE BEEN SET ASIDE BY HIGH COURT; AT MOS T, HIGH COURT SHOULD HAVE DIRECTED ASSESSING OFFICER TO GRANT AN OPPORTUNITY TO ASSESSEE TO CROSS - EXAMINE CONCERNED WITNESS . IN VIEW OF THE ABOVE REASONS, THE ORDER OF THE LD. CIT(A) IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE A.O. TO MAK E A FRESH ASSESSMENT AFTER GIVING OPPORTUNITY TO THE ASSESSEE TO CROSS - EXAMINE MR. MUKESH M. CHOKS EY . NEEDLESS TO SAY THE A.O. WOULD GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE FINALIZING THE ASSESSMENT ORDER. THE ASSESSEE IS DIRECTED TO FILE NECESSARY DETAILS BEFORE THE A.O. 8.1 AS WE HAVE RESTORED THE MATTER TO THE FILE OF THE A.O., WE ARE NOT ADVERTING TO THE DECISIONS RELIED ON BY THE LEARNED COUNSEL OF THE ASSESSEE IN THE LEGAL PAPER BOOK. 9. IN THE RESULT , THE APPEAL FOR THE AY 2009 - 10 IS ALLOWED FOR STATISTICAL PURPOSES. AS WE HAVE MENTIONED EARLIER THE GROUNDS OF APPEAL FILED BY THE ASSESSEE FOR THE AY 2010 - 11 AND 2011 - 12 ARE SIMILAR TO THE GROUNDS OF APPEAL FOR THE AY 2009 - 10. T HEREFORE, OUR DECISION FOR THE AY 2009 - 10 APPLIES MUTATIS MUTANDIS TO THE APPEAL FOR THE AY 2010 - 11 AND AY 2011 - 12. 10. IN THE RESULT, THE APPEALS ARE ALLOWED ON THE ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 14/06/2017. SD/ - ( D.T. GARASIA ) SD/ - (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 14/06/2017 RAHUL DHOKE P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. ITA NO 167 & 168/M/2016 9 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI