ANIL D AGRAWAL, MUMBAI V. ITO CIR 17(1)(1), MUMBAI

ITA 1809/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0238 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 15-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Keywords: Bogus purchase; Accommodation entries
• Section: 142(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO. 1809/MUM/2017 (ASSESSMENT YEAR: 2010-11) SHRI ANIL D. AGRAWAL A-13, OMNITECH HOUSE KONDIVITA, MAROL MIDC ANDHERI (E), MUMBAI 400059 VS. INCOME TAX OFFICER - 17(1)(1) ROOM NO. 115, 1ST FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN AERPA1868D APPELLANT RESPONDENT APPELLANT BY: SHRI JAYANT R. BHATT RESPONDENT BY: SHRI V. VIDHYADHAR DATE OF HEARING: 06.02.2018 DATE OF PRONOUNCEMENT: 21.02.2018 O R D E R PER G. MANJUNATHA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-28, MUMBAI DATED 02.01.2017 AND IT PERTAINS TO A.Y. 2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: - 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.5 6,63,987/- BY CONFIRMING AN ESTIMATION OF PROFIT ON ACCOMMODATION TURNOVER @ 3% AS AGAINST 0.57% DECLARED BY THE ASSESSEE 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT WHILE E STIMATING 3% OF T/O AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE, MATE RIAL OR COMPARABLE CASE TO JUSTIFY SUCH ADDITION OR WITHOUT FINDING ANY FAULT IN ACTUAL INCOME OFFERED BY THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED HIS RETURN OF INCOME FOR A.Y. 2010-11 ON 18.09.2010 DECLARING TOT AL INCOME OF ` 12,96,335/- AND THE SAME WAS DULY PROCESSED UNDER S ECTION 143(1) OF ITA NO. 1809/MUM/2017 SHRI ANIL D. AGRAWAL 2 THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). S UBSEQUENTLY ON RECEIPT OF INFORMATION FROM DGIT (INVESTIGATION), MUMBAI T HE CASE HAS BEEN REOPENED UNDER SECTION 147 OF THE ACT FOR THE REASO N THAT INCOME CHARGEABLE TO TAX HAS BEEN ESCAPED ASSESSMENT ON AC COUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE FROM SUSPICIOUS/HAWA LA PARTIES. NOTICE UNDER SECTION 148 OF THE ACT DATED 01.04.2013 WAS I SSUED CALLING FOR RETURN OF INCOME WITHIN 30 DAYS. HOWEVER, THERE WAS NO COMPLIANCE FROM THE ASSESSEE. THEREAFTER NOTICES UNDER SECTION 143( 2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO THE NOTICES AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED D ETAILS AS CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT IN THE COURSE OF SURVEY PROCEEDINGS CONDUCTED IN THE GROUP CASES OF SRM GROUP OF COMPANIES, THEY HAVE ADMITTED THAT THEY HAVE OBT AINED ACCOMMODATION ENTRIES FROM CERTAIN PARTIES AND ALSO ACCEPTED THEI R TAX LIABILITY BEFORE THE INTELLIGENCE WING AND PAID APPLICABLE TAX ON THE WH OLE HAWALA PURCHASES. BASED ON THE INFORMATION, THE AO CALLED UPON THE AS SESSEE TO FURNISH NECESSARY EVIDENCES TO JUSTIFY THE PURCHASES FROM T HE PARTIES. IN RESPONSE TO THE NOTICE, THE ASSESSEE HAS FILED PURCHASE BILL S. HOWEVER, HE FAILED TO FURNISH FURTHER EVIDENCES IN THE BACKDROP OF CLEAR FINDINGS BY THE INVESTIGATION WING THAT THESE PARTIES ARE SUSPICIOU S DEALERS INDULGED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ANY DELIVER Y OF ACTUAL MATERIAL. THEREFORE, IN VIEW OF THE SURVEY FINDINGS, THE AO O PINED THAT THE ASSESSEE HAS CONSCIOUSLY ENTERED INTO SEVERAL CIRCULAR TRANS ACTIONS IN ORDER OF PROVIDE BENEFIT OF FICTITIOUS/BOGUS ENTRIES TO THE ULTIMATE BENEFICIARIES I.E. M/S. SHREE RAM URBAN INFRASTRUCTURE LTD. AND M/S. R AGHUVEER CONSTRUCTION COMPANY PVT. LTD., EVEN THOUGH THERE I S NO MENTION OF CASH COMMISSION IN THE SURVEY REPORT. THE AO FURTHER OBS ERVED THAT IN THESE KIND OF MODUS OPERANDI IT IS QUITE CLEAR THAT THE A SSESSEE HAS WORKED WITH AN INTENT TO DERIVE SOME BENEFIT BY PROVIDING ACCOM MODATION ENTRIES AS PER BENEFICIARIES REQUIREMENTS. THEREFORE, HE ESTIMATE D 3% COMMISSION ON TOTAL ACCOMMODATION ENTRIES OF ` 18,87,99,551/- PROVIDED DURING A.Y. 2010-11 AND ADDED BACK ` 56,63,987/- TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO. 1809/MUM/2017 SHRI ANIL D. AGRAWAL 3 4. AGGRIEVED BY THE ASSESSMENT ORDER THE ASSESSEE PREF ERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) THE ASSESSEE H AS REITERATED THE SUBMISSIONS MADE BEFORE THE AO THAT THE COMMISSION ESTIMATED BY THE AO AT 3% OF THE TOTAL CIRCULAR ENTRIES PROVIDED IS VER Y MUCH ON THE HIGHER SIDE WHEN COMPARED TO THE NATURE OF THE BUSINESS AND ALS O THE GROSS PROFIT DECLARED BY THE ASSESSEE IN HIS BUSINESS WHEREIN HE HAS DERIVED GROSS PROFIT OF LESS THAN 1%. THEREFORE, HE REQUESTED TO REDUCE THE GROSS PROFIT BY 1% OF THE TOTAL ACCOMMODATION ENTRIES. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO RELYING UPON T HE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF COIMBATORE SPINNING & WEAVING CO. LTD. VS. CIT (1974) 95 ITR 375, OBSERVED THAT T HE ASPECT OF SUBSTANDARD MORALITY SO OPENLY PROFESSES AND ADMITT ED IS ASTONISHING AND SHOCKING TO SAY THE LEAST. THEREAFTER TO PLEAD THAT THE PROFIT RATE ON THE ALLEGED PRACTICE WHICH IS UNETHICAL AND ILLEGAL SHO ULD BE REDUCED TO A PARTICULAR PERCENTAGE IS TAKING THINGS A BIT TOO FA R. THE CIT(A) FURTHER OBSERVED THAT ALREADY REASONABLE PERCENTAGE HAS BEE N APPLIED ON THE ACCOMMODATION ENTRIES WHICH THE ASSESSEE HAS FACILI TATED. THERE CAN BE NO STRAIGHTJACKET FORMULA FOR THIS BUT UNDER THE CIRCU MSTANCES I FIND THAT 3% IS REASONABLE RATE, ESPECIALLY IN VIEW OF THE ADMIS SION OF THE ILLEGALITY WHICH HAS BEEN COMMITTED. WITH THESE OBSERVATIONS HE SUST AINED THE ADDITION MADE BY THE AO TOWARDS ESTIMATION OF 3% COMMISSION ON TOTAL ALLEGED ACCOMMODATION ENTRIES. AGGRIEVED BY THE ORDER OF TH E CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT T HE LEARNED AO WAS ERRED IN ESTIMATING 3% COMMISSION ON TOTAL ACCO MMODATION ENTRIES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS DERIVED GROSS PROFIT OF LESS THAN 1% IN HIS BUSINESS. THE LEARNED A.R. REFE RRING TO THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF READYMADE STEEL IND IA P. LTD. IN ITA NO. 7426/MUM/2014, SUBMITTED THAT UNDER SIMILAR IDENTIC AL FACTS THE ITAT HAS ESTIMATED 1% COMMISSION ON ACCOMMODATION ENTRIE S. HE, THEREFORE, REQUESTED TO SCALE DOWN THE ESTIMATION MADE BY THE AO FROM 3% TO 1% OF THE TOTAL ACCOMMODATION ENTRIES. ITA NO. 1809/MUM/2017 SHRI ANIL D. AGRAWAL 4 6. THE LEARNED D.R., ON THE OTHER HAND, STRONGLY SUPPO RTED THE ORDER OF THE LEARNED CIT(A). 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. IT IS AN ADMITTED FACT THAT THE ASSESSEE IS INDULGE D IN PROVIDING CIRCULAR ACCOMMODATION ENTRIES TO CERTAIN BENEFICIARIES AND THIS FACT HAS BEEN ADMITTED BEFORE THE INVESTIGATION WING IN THE STATE MENT RECORDED IN THE COURSE OF SURVEY PROCEEDINGS. THE AO HAS ESTIMATED A COMMISSION OF 3% ON TOTAL CIRCULAR TRANSACTIONS. IT IS THE CONTENTIO N OF THE ASSESSEE THAT COMMISSION ESTIMATION BY THE AO IS ON THE HIGHER SI DE WHEN COMPARE TO THE NATURE OF BUSINESS AND ALSO HIS GROSS PROFIT AD MITTED IN THE EARLIER YEARS WHEREIN HE HAS DERIVED THE GP OF LESS THAN 1% . THE ASSESSEE FURTHER CONTENDED THAT UNDER SIMILAR SET OF FACTS THE ITAT MUMBAI D BENCH HAS DIRECTED THE AO TO ESTIMATE THE COMMISSION AT 1% ON THE TOTAL ACCOMMODATION ENTRIES. HAVING HEARD BOTH THE SIDES AND CONSIDERING THE MATERIAL ON RECORD, WE DO NOT FIND ANY MERIT IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HIMSELF H AS ADMITTED BEFORE THE INVESTIGATION WING THAT HE IS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS BENEFICIARIES. THOUGH THERE IS NO MENTIO N OF CASH COMPONENT OF COMMISSION IN THE SURVEY REPORT, IT IS AN ADMITTED FACT THAT IN THIS KIND OF TRANSACTIONS THE ENTRY PROVIDER WILL DERIVE CERTAIN BENEFITS FOR ISSUING ACCOMMODATION ENTRIES. CONSIDERING THIS FACT THE AO HAS ESTIMATED REASONABLE PERCENTAGE OF COMMISSION ON TOTAL ACCOMM ODATION ENTRIES PROVIDED BY THE ASSESSEE. THOUGH THE ASSESSEE CLAIM S THAT THE COMMISSION ESTIMATED BY THE AO IS ON HIGHER SIDE HE FAILED TO JUSTIFY THE GROSS PROFIT DECLARED IN HIS BUSINESS IN THE EARLIER YEARS WITH ANY OTHER COMPARABLE CASE. THEREFORE, WE ARE OF THE VIEW THAT THE AO WAS RIGHT IN ESTIMATING 3% COMMISSION ON TOTAL ACCOMMODATION ENTRIES. THE CIT( A), AFTER CONSIDERING THE FACTS, HAS RIGHTLY AFFIRMED THE ADDITION MADE B Y THE AO. WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE ORDER OF THE CIT(A). HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE CIT(A). THUS, THE GROUND RAISED BY THE ASSESSEE IS REJECTED. ITA NO. 1809/MUM/2017 SHRI ANIL D. AGRAWAL 5 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST FEBRUARY, 2018. SD/ - SD/ - (JOGINDER SINGH) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 21 ST FEBRUARY, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -28, MUMBAI 4. THE PR. CIT - 17, MUMBAI 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.