D.C.I.T., CC-XXI, KOLKATA, Kolkata V. M/S. SAFECO PROJECTS (P) LTD., Kolkata

ITA 1948/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1197 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 20-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S ALLONG YADEN CIT LD
• Assessee Lawyers: A K UPADHYAY LD
• Keywords: Unexplained cash credit; Accommodation entries
• Section: 143(3); 142(1); 68

Judgement Text

1 ITA NO.1948/KOL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA BEFORE: SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A NO. 1948/KOL/2014 A.Y: 2010-11 D.C.I.T., C.C-XXI, KOLKATA VS. M/S. SAFECO PROJEC TS P.LTD. PAN: AAJCS 4155N [APPELLANT] [RESPONDEN T] FOR THE APPELLANT : SHRI SALLONG YADEN, ADDL.C IT, LD.SR.DR FOR THE RESPONDENT : SHRI A.K. UPADHYAY, ADVOCAT E, LD.AR DATE OF HEARING : 29-08-2017 DATE OF PRONOUNCEMENT : 03-11-2017 ORDER SHRI S.S.VISWANETHRA RAVI, JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), VI, KOLKATA DT. 16-07-2014 FOR THE A.Y 2010-11. 2. THE ONLY ISSUE IS TO BE DECIDED AS TO WHETHER TH E CIT-A JUSTIFIED IN DELETING THE IMPUGNED ADDITION MADE ON ACCOUNT O F UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT IN THE FACTS AND CIR CUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND DEALING WITH SHARE TRADING AND CONTRACT ORS. THE ASSESSEE FILED ITS RETURN OF INCOME SHOWING TOTAL I NCOME OF RS. 97,36,280/-. NOTICES U/S. 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO SAID NOTICES, THE ASSESSEE APPEARED AND FILED DETAILS. PRIOR TO FILING OF THIS RETURN A SEARCH AND SEIZUR E OPERATION WAS CONDUCTED ON 10-10-2009 IN BADALIA GROUP OF CASES, WHEREIN HUGE AMOUNT OF MONEY WAS FOUND. NUMBER OF BANK ACCOUNTS BELONGING TO SRI M.M. DAGA, WHO IS CONCERNED PERSON OF THE ASSES SEE WERE FOUND. IN THE 131 PROCEEDINGS SRI M.M.DAGA ADMITTED THAT T HE SAID BANK 2 ITA NO.1948/KOL/2014 ACCOUNTS WERE MAINTAINED BY HIM, BUT HE COULD NOT E XPLAIN THE COMMISSION TOTALING TO RS.3.05 CRORES FOR THE A.YS . 2007-08 TO 2010- 11. IN VIEW OF THE SAME, THE AO SHOW CAUSED THE ASS ESSEE AS TO WHY THE SAID AMOUNT SHOULD NOT BE ADDED AS CASH CREDIT U/S. 68 OF THE ACT. THE ASSESSEE IN REPLY STATED THAT IT INVOLVED IN TRADING IN MISCELLANEOUS CLOTH ITEMS SUCH AS SAREES, HOSIERY G ARMENTS AND ALLIED ITEMS. BUT, HOWEVER, THE AO DISBELIEVED THE SAME AS THE ASSESSEE FAILED TO ESTABLISH THE EXISTENCE OF ACTUAL BUSINES S OF CLOTH BEING CARRIED OUT BY IT AND TREATING THE SOURCE OF CASH D EPOSIT AS CASH CREDIT U/S. 68 OF THE ACT ADDED THE SAME TO THE TOTAL INCO ME OF THE ASSESSEE. 4. IN CHALLENGE BEFORE THE CIT-A THE ASSESSEE CONTE NDED THAT FOR A.Y 2011-12 THE ASSESSEE OFFERED PROFIT @ 0.26% AND THE SAME WAS ACCEPTED VIDE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT BY ORDER DT. 27-03-2014. FOLLOWING THE SAME, TH E CIT-A DIRECTED THE AO TO REDUCE THE ADDITION TO RS.5,67,964/- @ 0. 25%. RELEVANT PORTION OF THE CIT-A ORDER IS REPRODUCED HEREIN BE LOW FOR BETTER UNDERSTANDING:- 3. 5. HOWEVER, IT IS NOTED THAT IN THE REMAND PROCEEDI NGS, THE ASSESSING OFFICER HAS RECORDED STATEMENT OF SHRI ADITYA CHIRIMAR, ERSTWHI LE DIRECTOR OF THE APPELLANT COMPANY, UNDER SECTION 131 OF THE ACT. IN THIS, HE HAS ACCEP TED THAT THE CASH DEPOSITED IN THE HDFC BANK ACCOUNT OF THE APPELLANT WAS OUT OF CASH, WHICH THE APPELLANT COMPANY HAD RECEIVED FROM THE BENEFICIARIES. IT HAS BEEN STATED BY HIM IN REPLY TO QUESTION NO.25, THAT THE TRANSACTIONS OF CLOTH TRADING WERE TO ACCO MMODATE THE ENTITIES FROM WHOM PURCHASES WERE SHOWN AND COMMISSION WAS EARNED ON T HE SAME, WHICH WAS SHOWN UNDER THE HEAD 'PROVISION FOR EXPENSES'. THUS, IT T RANSPIRES, THAT THE APPELLANT COMPANY USED TO RECEIVE CASH FROM BENEFICIARIES AND AFTER D EPOSITING OF CASH IN BANK, ACCOUNT PAYEE CHEQUES WERE ISSUED AS IF IT WAS PAYMENT AGAI NST PURCHASE OF CLOTH. THOUGH THE ASSESSING OFFICER HAS OBSERVED THAT THIS WAS MERELY A CLAIM BY SHRI CHIRIMAR, THE SAME IS FOUND TO IN CONFORMITY WITH THE FACTS AND SURROUNDI NG CIRCUMSTANCES AS DISCUSSED EARLIER. AS MENTIONED EARLIER, THE ASSESSING OFFICER HAS NOT FOUND ANY GENUINE CLOTH BUSINESS AND THE BANK ACCOUNT OF THE APPELLANT WAS DETECTED AT T HE TIME OF SURVEY ACTION AT THE PREMISES OF SHRI M.M.DAGA, WHO HAD ALSO STATED AN O ATH THAT THE BANK ACCOUNT WAS BEING USED FOR TAKING CASH FROM BENEFICIARIES TO BE DEPOSITED IN THE SAID ACCOUNTS AND THEREAFTER FOR ISSUE OF CHEQUES IN THE NAME OF THE CONCERNS MENTIONED BY THEM. THUS, ALL THE FINDINGS, INCLUDING ADMISSION BY THE THEN DIREC TOR OF THE APPELLANT COMPANY, CLEARLY INDICATE THAT DEPOSITS IN THE BANK ACCOUNT OF THE A PPELLANT ARE ESSENTIALLY OUT OF CASH TAKEN FROM BENEFICIARIES WHICH WAS DEPOSITED IN THE ACCOUNTS AND CHEQUES WERE ISSUED. IN SUCH A SITUATION, INCOME OF THE ACCOUNT HOLDER W OULD NORMALLY BE SOME PERCENTAGE OF THE AMOUNT FOR WHICH CASH WAS RECEIVED. THE STATEME NT OF SHRI CHIRIMAR IS SILENT ON THE POINT OF EXACT RATE CHARGED FOR GIVING ENTRIES. HOW EVER, IT HAS BEEN STATED BY THE APPELLANT THAT IN THE BOOKS OF ACCOUNTS ENTRIES FOR PURPORTED CLOTH TRADING WERE MADE WHICH RESULTED IN PROFIT OF RS.5,67,964/- WHICH WAS , HOWEVER, NOT OFFERED FOR TAXATION IN THE RETURN. ACCORDING TO THE APPELLANT, THIS REPRES ENTS NET INCOME OF THE APPELLANT FROM THE ABOVE TRANSACTION AND COMES TO ABOUT 2.5% WHICH IS A REASONABLE RATE IN SUCH A SITUATION. IN COURSE OF APPELLATE PROCEEDINGS, IT W AS INFORMED BY THE APPELLANT THAT THE DEPARTMENT HAS ACCEPTED IN SEVERAL CASES THAT NET I NCOME FROM ACCOMMODATION ENTRIES IS A SMALL PART OF AMOUNT OF ENTRY GIVEN. IN THE AS SESSMENT ORDER DATED 27.12.2011 3 ITA NO.1948/KOL/2014 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 IN TH E CASE OF M/S. ASHIYANA MERCANTILE (P) LTD. A.Y.2010-11, WHICH WAS ALSO RELATED TO BAD ALIA GROUP OF CASES, IT WAS HELD THAT RATE OF COMMISSION FOR ACCOMMODATION ENTRIES WAS RS . 250/- PER LAKH OF RUPEES DEPOSITED WHICH COMES TO 0.25%. THE ASSESSMENT IN I THE APPELLANT'S OWN CASE FOR THE SUBSEQUENT YEAR, I.E. A.Y. 2011-12 HAD ALSO BEEN CO MPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 27.03.2014. IN THIS ALSO INCOME OF FERED AT 0.26% HAD BEEN ACCEPTED IN RESPECT OF ACCOMMODATION ENTRIES. 3.6. CONSIDERING ALL THE ABOVE MENTIONED FACTS, I A M OF THE VIEW THAT IT IS NOT JUSTIFIED TO CONSIDER THE ENTIRE CASH DEPOSITS IN THE BANK ACCOU NT, WHICH WERE CLAIMED TO BE OUT OF CLOTH TRADING, AS INCOME OF THE APPELLANT. ALL THE FACTS AND SURROUNDING CIRCUMSTANCES EARLY INDICATE THAT THESE 'REPRESENT ACCOMMODATION ENTRIES, OUT OF WHICH THE APPELLANT EARNED A SMALL PERCENTAGE AS COMMISSION. THE PROFIT OF RS. RS.5,67,964/- HAS BEEN ADMITTED (THOUGH NOT OFFERED FOR TAXATION) BY THE A PPELLANT (ON SO CALLED CLOTH TRADING) ITSELF. IN THE ORDER DATED 27.03.2014 PASSED U/S 14 3(3) IN THE APPELLANT'S CASE FOR A.Y.2011-12, THE ASSESSING OFFICER HAS HIMSELF ACCE PTED PROFIT RATE OF 0.26% ON ACCOMMODATION ENTRIES. THE RATE OF PROFIT ACCEPTED BY THE APPELLANT ON THE SO CALLED CLOTH TRADE IS AT A MUCH HIGHER RATE OF ABOUT 2.5%. THE ASSESSING OFFICER IS THEREFORE DIRECTED TO REDUCE THE ADDITION TO RS.5,67,964/-. 5. THE LD.AR REITERATED HIS SAME SUBMISSIONS AS MAD E BEFORE THE CIT-A. ON THE OTHER HAND, THE LD.DR RELIED ON THE O RDER OF THE AO. 6. HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE REVENUE HAS ACCEPTED THE SUBMISSION OF ASSESSEE IN THE CASE OF M/S. MERCANTILE PVT. LTD IN AN IDENTICAL SITUATION THAT THE COMMISSION OF ACCOMMODATION ENTRIES WAS RS. 250 PER LAKH RUPEE S AND DETERMINED THE TAX @ 0.25%. WHEREAS IN THE PRESENT CASE THE ASSESSEE ITSELF OFFERED PROFIT RATE AT 0.26%, ACCEP TED BY THE REVENUE FOR THE A.Y 2011-12 AND WHICH IS MORE THAN IN THE C ASE OF M/S. MERCANTILE PVT. LTD , WHICH WAS ALSO RELATED TO BAD ALIA GROUP OF CASES. IN VIEW OF THE SAME, WE FIND THAT THE CIT-A WAS COR RECT IN DIRECTING THE AO TO REDUCE THE ADDITION TO RS.5,67,964/-. WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE CIT-A AND IS IT IS JUS TIFIED. THEREFORE, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03-11 -2017 SD/- SD/- P.M. JAGTAP S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 03-11-2017 4 ITA NO.1948/KOL/2014 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT/DEPARTMENT: DCIT, CC-XXI, KOLKATA, AAYKAR BHAWAN POORVA, 5 TH FLOOR, 110 SHANTI PALLY, KOLKATA-107. 2 RESPONDENT /ASSESSEE:M/S. SAFECO PROJECTS (P) LTD 7 , LYONS RANGE, DALHOUSE, 2 ND FLOOR, ROOM NO. 5B, KOLKATA-1. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, SR.PS/H.O.O,ITAT,KOL