DUSHYANT SINGH, MUMBAI V. DCIT CEN CIR 6, MUMBAI

ITA 1868/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0230 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 28-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT PATANKAR
• Assessee Lawyers: B N RAO
• Keywords: Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H, BENCH MUMBAI BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA NO.1868/MUM/2016 & 1869/MUM/2016 (ASSESSMENT YEAR 2011 - 12 & 2012 - 13) SHRI DUSHYANT SINGH A/403, MATUSHRI CHS LTD., M.G. ROAD GOREGAON (W), MUMBAI - 400 014 VS. DCIT CEN CIR 6, MUMBAI PAN/GIR NO.AWZPS2908L APPELLANT ) .. RESPONDENT ) ITA NO.1870/MUM/2016 TO 1875/MUM/2016 (ASSESSMENT YEAR 2006 - 07 TO 2011 - 12) SHRI SURESH KOMAL SINGH, R.NO.123 - 979, MOTILAL NAGAR NO.1 GOREGAON (W) MUMBAI 400 104 VS. DCIT CEN CIR 6, MUMBAI PAN/GIR NO.A PMPS5397D APPELLANT ) .. RESPONDENT ) ITA NO.187 6 /MUM/2016 TO 18 81 /MUM/2016 (ASSESSMENT YEAR 200 7 - 0 8 TO 201 2 - 1 3 ) SHRI PRAMOD KUMAR SINGH (PROP. OF M/S. SIDDHIVINAYAK STEEL) R.NO.123 - 979, MOTILAL NAGAR NO.1 GOREGAON (W) MUMBAI 400 104 VS. DCIT CEN CIR 6, MUMBAI PAN/GIR NO. AGVPS7889Q APPELLANT ) .. RESPONDENT ) ITA NO.1868/MUM/2016 AND OTHER 13 APPEALS SHRI SURESH KAMAL SINGH SHRI DUSHYANT SINGH SHRI PRAMOD KUMAR SINGH 2 ASSESSEE BY SHRI B.N. RAO REVENUE BY SHRI ABHIJIT PATANKAR DATE OF HEARING 10 / 08 /2017 DATE OF PRONOUNCEMENT 1 8 / 0 8 /2017 O R D E R PER BENCH: THESE ARE APPEALS BY THREE SEPARATE ASSESSEES AGAINST RESPECTIVE ORDERS OF LEARNED CIT - A FOR THE CONCERNED ASSESSMENT YEARS. SINCE THE APPEALS WERE HEARD TOGETHER AND ISSUES ARE COMMON, THESE ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. THE COMMON GROUNDS OF APPEAL READ AS UNDER: - 1. THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) ERRED IN UPHOLDING THE ADDITION TO THE EXTENT OF 85% BY GIVING RELIEF ONLY TO THE EXTENT OF 0.15% FROM THE ASSESSED 1% COMMISSION ON THE BOGUS BILLS PROVIDED BY THE APPELLANT. 3. SINCE FACTS ARE IDENTICAL, WE ARE REFERRING TO FACTS AND FIGU RES FROM THE APPEAL OF DUSHYANT SINGH. 4. BRIEF FACTS RELEVANT THROUGH ALL THE YEARS UNDER APPEAL ARE THAT A SEARCH WAS CONDUCTED ON 29.04.2011 IN THE CASE OF M/S ARYA GROUP OF COMPANIES AND M/S TIRUPATI GROUP OF COMPANIES. DURING THE SEARCH IT WAS FOUND THAT THE ITA NO.1868/MUM/2016 AND OTHER 13 APPEALS SHRI SURESH KAMAL SINGH SHRI DUSHYANT SINGH SHRI PRAMOD KUMAR SINGH 3 ASSESSEE WAS INVOLVED IN GIVING ACCOMMODATION ENTRIES/BOGUS BILLING TO SEVERAL BUSINESS C ONCERNS INCLUDING ENTITIES BELONGING TO THE ARYA GROUP AND TIRUPATI GROUP OF COMPANIES. NOTICES U/S 153C WERE ISSUED TO THE ASSESSEE CONSEQUENT TO THE SEARCH ACTION AND IN RESPONSE FOR THE A.Y.2006 - 07, THE ASSESSEE FILED HIS RETURN DECLAR ING TOTAL INCOME O F RS.3,55,307/ - . IN THE IMPUGNED ORDER, THE AO NOTED THAT THE SEARCH & SEIZURE OPERATION ON THE ARYA GROUP OF COMPANIES & TIRUPATI GROUP OF COMPANIES HAD REVEALED THAT SHRI PRAMOD KUMAR SINGH ALONGWITH OTHERS INCLUDING THE ASSESSEE HAVE CARRIED OUT THE BUS INESS OF BOGUS BILLING THROUGH CHANCHAL TUBE CORPORATION, ASIAN STEEL AND SIDDHIVINAYAK STEEL. THE ASSESSEE IN PARTICULAR, IS THE PROPRIETOR OF M/S. ASIAN STEEL. THE DETAILED MODUS OPERAND I AND MANNER OF FUNCTIONING OF THE BUSINESS BOGUS BILLING OPERATION CARRIED OUT BY THE ASSESSEE , SHRI PRAMOD KUMAR SINGH, SHRI SURESH KOMAL SINGH, SHIVANAND KOMAL SINGH WAS ELABORATED IN DETAIL IN THE STATEMENT REPRODUCED BY THE AO FROM PAGES 3 TO 9 OF THE IMPUGNED ORDER. IN VIEW OF THE AVERMENTS MADE IN THE SAID STATEMENT S THE AO OBSERVED THAT THE ASSESSEE HAD NOT CARRIED OUT ANY GENUINE BUSINESS BUT HAD ONLY CARRIED OUT PAPER TRANSACTIONS PROVIDING BOGUS BILLS / ACCOMMODATION ENTRIES TO INTERESTED PARTIES. THE AO CONSIDERED THE FACTS AND ASKED THE ASSESSEE AS TO WHY THE B OOKS OF ACCOUNT SHOULD NOT BE REJECTED AS THE ASSESSEE HAD NEVER DONE ANY ACTUAL BUSINESS AND HAD INCORRECTLY CLAIMED EXPENSES? THE ASSESSEE 'S MAIN RESPONSE WAS THAT HE HAD FILED RETURN OF INCOME FOR A.Y.2006 - 07 WITH AUDIT REPORT IN FORM 3CD AND THAT THE S AID ITA NO.1868/MUM/2016 AND OTHER 13 APPEALS SHRI SURESH KAMAL SINGH SHRI DUSHYANT SINGH SHRI PRAMOD KUMAR SINGH 4 BOOKS WERE SUBSEQUENTLY SEIZED BY THE SALES TAX DEPARTMENT. ACCORDINGLY, THE BOOKS OF ACCOUNTS SHOULD NOT BE REJECTED. THE ASSESSEE ALSO RELIED ON THE DECISION OF ITAT MUMBAI IN THE CASE OF ACIT V ITD CEMENTATION (36 TAXMANN.COM 74). THE AO HOWEVER F OUND THE EXPLANATION UNCONVINCING AND OBSERVED THAT AS PER PREVAILING MARKET PRACTICES, COMMISSION FOR PROVIDING BOGUS BILLS RANGED FROM 0.5% TO 2% OF THE TRANSACTION VALUE. THE AO ACCORDINGLY ESTIMATED COMMISSION INCOME @ 1% ON THE TURNOVER OF RS.25,55,39 ,020/ - AND ADDED BACK THIS AMOUNT TO THE RETURNED INCOME OF THE ASSESSEE . 5. UPON ASSESSEES APPEAL LEARNED CIT - A GRANTED 15% DEDUCTION AND ALSO FOLLOWED A TRIBUNAL DECISION AS UNDER: - 4.1.3 THE ISSUE RELATED TO DETERMINATION OF RATE OF COMMISSION IN THE CASE OF A HAWALA BILL OPERATOR IN IRON AND STEEL WAS ADJUDICATED UPON IN THE CASE OF M/S. SAROJ ANIL STEEL P. LTD. VS ITO (ITA NOS. MUM/8932&8933 OF 2010 AND ITA/MUM/5853 OF 2010 ORDER DATED 04.04.2014) BY THE HON'BLE TRIBUNAL AS UNDER : '6. IN THE SECOND APPEAL, THE TRIBUNAL, VIDE ORDER DATED 31ST MARCH 2005, DIRECTED THE ASSESSING OFFICER TO ESTIMATE THE INCOME @ 1% OF THE TOTAL TURNOVER AND ALSO DIRECTED TO ALLOW CERTAIN ADMINISTRATIVE EXPENSES THEREFROM. THE RELEVANT OBSERVATIONS AND THE FINDINGS OF THE TRIBUNAL IN THE FIRST ROUND AS GIVEN IN PAGE - 150 AND 151, ARE AS UNDER: - '6. LEARNED REPRESENTATIVES HAVE VERY FAIRLY AGREED THAT THERE ARE NO PRECEDENTS ON THE ISSUE AS TO WHAT SHOULD CONSTITUTE REASONABLE PROFIT FROM THE ACTIVITY OF ISSUING HAWAL A BI LLS FOR SALE OF IRON AND STEEL. SHRI BHUJLE TRIED TO RELY UPON THE TRIBUNAL DECISION IN RESPECT OF BILL DISCOUNTING CASES, BUT WHEN IT WAS POINTED OUT TO HIM THAT BILL DISCOUNTING BUSINESS AND H AWALA BUSINESS ARE NOT COMPARABLE, HE FAIRLY DID NOT PRESS THE POINT FURTHER. HE, HOWEVER, SUBMITTED THAT NOT MORE THAN 2% NET PROFIT CAN BE JUSTIFIED IN SUCH A L INE OF ACTIVITY. ON THE OTHER HAND, SHRI REDDY SUBMITTED THAT EVEN HAWALA COMMISSION IS TAKEN AT 1% NOT MORE THAN 1% TO 15% EXPENSES CAN BE JUSTIFIED. I T WAS THUS CONTENDED THAT 85% NET PROFIT IS THE LEAST POSSIBLE NET PROFIT FROM THIS L INE OF ACTIVITY. RESPECTIVE STANDS WERE ALSO REITERATED BEFORE US. WE ARE OF THE VIEW THAT ALL THAT IS REQUIRED FOR US IS TO ESTIMATE A REASONABLE BASIS ON WHICH INCOME FROM THIS ACTIVITY CAN BE COMPUTED. THE GUIDANCE IS AVAILABLE FROM THE ORDER OF THE ASSESSING OFFICER HIMSELF. THE ASSESSING OFFICER HAS OBSERVED THAT THE NORMAL RATE OF HAWALA COMMISSION RANGES FROM 1% TO 2 % . THAT MEANS, 1% HAWALA COMMISSION ITA NO.1868/MUM/2016 AND OTHER 13 APPEALS SHRI SURESH KAMAL SINGH SHRI DUSHYANT SINGH SHRI PRAMOD KUMAR SINGH 5 RATE CANNOT B E SAID TO BE AN UNREALISTI C RATE (EMPHASIS SUPPLIED). THE NEXT QUESTION THEN IS AS TO WHAT SHOULD BE THE EXPENSES DEDUCTIBLE FROM THIS TO ARRIVE AT NET PROFIT RATE. THE ASSESSEE BEFORE US IS AN ARTIFICIAL JURIDICAL PERSON AND THE ASSESSEE HAS TO INCUR SOME EXPENSES TO HAVE ITS CONTINUED LEGAL EXISTENCE, AND TO MEET THE COSTS OF RUNNING THE OFFICE ETC. THESE EXPENSES SHOULD BE ALLOWED AS A DEDUCTION. THE ASSESSEE HAS ALSO CONTENDED THAT A DEDUCTION SHOULD ALSO BE ALLOWED IN RESPECT OF COMMISSION THAT THE ASS ESSEE HAS TO PAY TO THOSE WHO GET HIM THE BUSINESS OF HAWALA ENTRIES. SINCE WE HAVE ALREADY ADOPTED A MINIMUM COMMISSION RATE OF 1 %,, WE DO NOT CONSIDER IT NECESSARY TO ALLOW FURTHER DEDUCTION IN RESPECT OF SUCH A COMMISSION. THIS CLAIM MUST BE DECLINED. IN EFFECT, THE NET INCOME FROM THIS BUSINESS IS TO BE ARRIVED AT BY REDUCING FROM 1% OF TOTAL TURNOVER, THE OFFICE EXPENSES AND THE EXPENSES INCURRED FROM CONTINUED LEGAL EXISTENCE OF THE COMPANY (SUCH AS FILING FEES, ROC FEES, AUDIT FEES AND EXPENSES ON S TATUTORY COMPLIANCES) AND ALSO THE DIRECTORS REMUNERATION IN CASE THE ASSESSEE HAS CLAIMED THE SAME. THE NET PROFIT IS TO BE COMPUTED ACCORDINGLY.' THUS, THE TRIBUNAL HAS UPHELD THE RATE OF COMMISSION OF 1% IN THE AREA OF BOGUS BILLING FOR IRON AND STEEL. IN THE ABOVE CITED CASE THE TRIBUNAL ALSO CONSIDERED FIT TO ALLOW FOR GENERAL OFFICE EXPENSES AND EXPENSES FOR STATUTORY COMPLIANCES AS REQUIRED BY A CORPORATE ENTITY. IN THE INSTANT CASE, THE APPELLANT BEING AN INDIVIDUAL WOULD NOT BE INCURRING EXPENDITU RE FOR CONTINUED LEGAL EXISTENCE BUT WOULD BE INCURRING EXPENSES IN THE NATURE OF BANK CHARGES, OFFICE EXPENSES, ETC. KEEPING IN VIEW THE ABOVE DECISION AND THE FACTS OF THE INSTANT CASE, THE AO IS DIRECTED TO ALLOW THE APPELLANT 15% DEDUCTION FOR EXPENSES FROM GROSS COMMISSION AND ASSESS NET COMMISSION ACCORDINGLY FOR EACH OF THE A.YRS. THE ADDITION MADE BY THE AO IS THUS PARTLY UPHELD AND THE GROUND RAISED BY THE APPELLANT IS PARTLY - ALLOWED FOR EACH YEAR. 6. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT ASSESSEE WAS ONLY PROVIDING CHEQUE ENCASHMENT FACILITY IN THE GUISE OF PROVIDING BILLS. THAT ASSESSEE IN THE AFFIDAVIT BEFORE SALES TAX DEP ARTMENT HAS SUBMITTED THAT COMMISSION DIFFERS FROM .05% TO 2.15%. THAT THE ASSESSING OFFICER HAS GOT NO EVIDENCE FROM THE ASSETS OR PROPERTIES HELD BY THE ASSESSEE SUBSTANTIATE THE INCOME. THAT ASSESSING OFFICER HAS NOTED THAT GENERALLY MARKET PRACTICE OF CHANGING COMMISSION IS RANGING FROM .5% TO 2% AND ITA NO.1868/MUM/2016 AND OTHER 13 APPEALS SHRI SURESH KAMAL SINGH SHRI DUSHYANT SINGH SHRI PRAMOD KUMAR SINGH 6 HENCE I ADOPT 1%. THAT THIS IS ON SURMISE WITHOUT ANY COGENT MATERIAL. LEARNED COUNSEL FOR THE ASSESSEE FURTHER PLACED RELIANCE UPON THE DECISION OF HONOURABLE APEX COURT IN THE CASE OF COMMISSIONER OF IN COME TAX VS. S. KADERKHAN 352 ITR 480. 8. PER CONTRA, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY THE TRIBUNAL DECISION AS ABOVE. HE FURTHER SUBMITTED THAT LEARNED CIT - A HAS GRANTED FURTHER R ELIEF APART FROM FOLLOWING THE ABOVE SAID TRIBUNAL ORDER. HENCE, HE SUBMITTED THAT THERE IS NO REASON FOR THE ORDER OF THE LEARNED CIT - A TO BE NOT UPHELD. 9. UPON CAREFUL CONSIDERATION WE FIND THAT IT IS NOT IN DISPUTE THAT ASSESSEE WAS ENGAGED IN THE BUSI NESS OF PROVIDING BOGUS ACCOMMODATION BILLS. THIS MAKES IT CLEAR THAT ASSESSEE WAS AIDING AND ADMITTING MONEY - LAUNDERING. WE NOTE THAT ANTI - MONEY - LAUNDERING PROVISIONS ARE NOT INVOKED IN THIS CASE. HOWEVER, WE FIND THAT THE ASSESSING OFFICER HAS MADE AN ES TIMATE OF 1% INCOME ON ACCOUNT OF THE ACTIVITIES OF THE ASSESSEE. THE AFORESAID ESTIMATE ALSO FINDS SUPPORT FROM THE TRIBUNAL DECISION AS ABOVE. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THERE IS NO INFIRMITY IN THE ORDER OF LEARNED CIT - A. ONCE IT IS UNDISPUTED THAT A MOUNT HA S BEEN RECEIVED BY THE ASSESSEE, IT IS FOR THE ASSESSEE TO PROVE THAT THE AMOUNT RECEIVED IS NOT TAXABLE AS HIS INCOME. ITA NO.1868/MUM/2016 AND OTHER 13 APPEALS SHRI SURESH KAMAL SINGH SHRI DUSHYANT SINGH SHRI PRAMOD KUMAR SINGH 7 IN THE CASE OF KALE KHAN MOHAMMED HANIF VS. CIT 50 ITR 1, HONBLE APEX COURT HAS EXPOUNDED THAT IT IS WELL ESTABLISHED THAT THE ONUS OF PROVING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY THE ASSESSEE IS ON HIM. IF HE DISPUTES LIABILITY FOR TAX, IT IS FOR HIM TO SHOW EITHER THAT THE RECEIPT WAS NOT INCOME OR IT I S EXEMPT . IN THE PRESENT CASE, A SSESSEE HAS NOT DISPUTED THIS ONUS . THE AUTHORITIES BELOW HAVE BROUGHT TO TAX ONLY 1% OF THE AMOUNT RECEIVED BY THE ASSESSEE. HENCE NO INTERFERENCE IN THE SAME IS REQUIRED. 10. THE DECISION OF HONOURABLE APEX COURT IN THE CASE OF S. KADERKHAN (SUPRA) RELIED UPON BY THE LEARNED COUNSEL OF THE ASSESSEE IS NOT AT ALL APPLICABLE ON THE FACTS OF THE CASE. THE SAID DECISION WAS IN THE CONTEXT OF ADDITION MADE ON THE BASIS O F A STATEMENT OF SURVEY, DEHORSE ANY CORROBORATED MATERIAL. IN THIS CASE, WE NOTE THAT THE ANTI - MONEY - LAUNDERING PROVISIONS HAVE NOT BEEN INVOKED. THE ASSESSEE HAS ESCAPED WITH THE COMPUTATION OF 1% INCOME. WE FIND THAT IT IS NOT APPROPRIATE FOR THE ITAT TO TAKE AWAY THE BENEFIT ALREADY GRANTED BY THE ASSESSING OFFICER IN AN APPEAL BY THE ASSESSEE. 11. HENCE, IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT - A. HENCE WE UPHOLD THE SAME. ITA NO.1868/MUM/2016 AND OTHER 13 APPEALS SHRI SURESH KAMAL SINGH SHRI DUSHYANT SINGH SHRI PRAMOD KUMAR SINGH 8 12. IN THE RESULT, THESE APPEALS BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 8 .08 .2017 S D / - S D / - SANDEEP GOSAIN SHAMIM YAHYA JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 1 8 .0 8 .2017 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE. BY ORDER KARUNA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI