Sanjay Vyas, Hyderabad V. Income Tax Officer, Ward-7(2), Hyderabad

ITA 2056/Hyd/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8761 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 03-03-2020
• Assessment Year: 2008-2009
• Appeal Filed On: 07-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Rejection of books of accounts; Revised return; Set aside
• Section: 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO S . 2056, 2057 & 2058 /HYD/2017 ASSESSMENT YEAR S : 2008 - 09, 2009 - 10 & 2010 - 11 SANJAY VYAS, HYDERABAD. PAN AFQPV 1807 F VS. INCOME - TAX OFFICER, WARD 7(2), HYDERABAD. APPELLANT RESPONDENT ASSESSEE BY: SHRI P. MURALI MOHAN RAO REVENUE BY: SHRI SUNIL KUMAR PANDEY DATE OF HEARING: 03 /03/2020 DATE OF PRONOUNCEMENT: 24 /07/2020 O R D E R PER SHRI A. MOHAN ALANKAMONY, A.M.: ALL THESE THREE APPEALS ARE FILED BY THE ASSESSEE FOR THE AYS 2008 - 09, 2009 - 10 & 2010 - 11 AGAINST THE ORDER OF THE LD. CIT (A) IN ITA NOS. 0201, 0202 & 0203/ITO - 7(2)/HYD/CIT(A) - 3/2016 - 17 ALL DATED 12/10/2017 PASSED U/S 250(6) R.W.S143(3) & 147 OF THE ACT. SINCE ALL THE THREE APPEALS ARE WITH RESPECT TO THE SAME ASSESSEE AND ON IDENTICAL ISSUES, FOR THE SAKE OF CONVENIENCE, THEY ARE TAKEN UP TOGETHER FOR HEARING AND DISPOSED OFF BY THIS COMMON ORDER. 2 ITA NOS. 2056 TO 2058/H/2017 SANJAY VYAS, HYD. 2. THE ASSESSEE HAS RAISED SEVERAL IDENTICAL GR OUNDS IN ALL THE THREE APPEALS, HOWEVER, THE CRUXES OF THE ISSUES ARE AS FOLLOWS: - (I) THE LD. CIT (A) HAS ERRED IN UPHOLDING THE ORDER OF THE LD. AO WITH RESPECT TO THE REOPENING OF THE ASSESSMENT AND REASSESSING THE INCOME OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 147 AND 148 OF THE ACT. (II) THE LD. CIT (A) HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE LD.AO TO THE EXTENT OF RS. 8,61,708/ - , 18,30,740/ - AND RS 10,67,674/ - FOR THE AY 2008 - 09, 2009 - 10 AND 2010 - 11 RESPECTIVELY BY DISALLOWING CERTAIN CLAIM OF EXPENDITURE ON AD - HOC BASIS. (III) THE ASSESSEE HAS ALSO TAKEN AN ADDITIONAL GROUND STATING THAT THE LD . CIT (A) HAS ERRED BY HOLDING THAT THE ASSESSEE HAD AGREED FOR THE ADDITION. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL, FILED HIS RETURN OF INCOME FOR THE AYS 2008 - 09, 2009 - 10 AND 2010 - 11 ON 3/10/2008, 25/05/2009 AND 30/10/2010 DECLARING TOTAL INCOME OF RS.2,12,223/ - , RS. 3,20,990/ - AND RS. 2,55,270/ - RESPE CTIVELY. IN THE RETURN OF INCOME, THE ASSESSEE HAS STATED THAT HE IS ENGAGED IN THE BUSINESS OF TRADING IN POLY FILM UNDER THE NAME AND STYLE OF HIS PROPRIETORSHIP CONCERN M/S. TIRUMALA TRADING CO. SUBSEQUENTLY, THE INVESTIGATION WING OF THE DEPARTMENT OBSERVED THAT HUGE CASH WAS DEPOSITED IN THE BANK ACCOUNT OF M/S. TIRUMALA TRADING CO., WHICH WAS SUBSEQUENTLY TRANSFERRED THROUGH RTGS TO OTHER ACCOUNTS DURING THE RELEVANT THREE ASSESSMENT YEARS. THEREFORE, THE ASSESSMENT WAS REOPENED IN THE C ASE OF THE ASSESSEE FOR ALL THE THREE ASSESSMENT YEARS. 3 ITA NOS. 2056 TO 2058/H/2017 SANJAY VYAS, HYD. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS IT WAS REVEALED THAT THE ASSESSEE SHRI SANJAY VYAS IS ACTUALLY AN EMPLOYEE OF M/S. VENKATESHWARA FLEXO PACK PVT LTD. THE ASSESSEE HAD FURT HER SUBMITTED BEFORE THE LD. AO THAT HE WAS NOT AWARE ABOUT THE BUSINESS ACTIVITIES OF M/S. TIRUMALA TRADING CO THOUGH HE USED TO SIGN THE CHEQUES OF M/S. TIRUMALA TRADING CO., AT THE REQUEST OF HIS EMPLOYERS WHOSE CONCERNS WERE M/S. VENKATESHWARA FLEXO PA CK PVT LTD GROUP OF CONCERNS. HOWEVER, SHRI TARUN GOEL, MANAGING DIRECTOR OF M/S. VENKATESHWARA FLEXO PACK PVT LTD DENIED THE ALLEGATIONS MADE BY THE ASSESSEE IN HIS STATEMENT RECORDED BY U/S. 131 OF THE ACT. SHRI TARUN GOEL HAD FURTHER STATED IN HIS STATE MENT THAT M/S. VENKATESHWARA FLEXO PACK PVT LTD SOLD GOODS TO M/S. TIRUMALA TRADING CO., AND THE SAME WAS REFLECTED IN THE BOOKS OF ACCOUNTS OF M/S. VENKATESHWARA FLEXO PACK PVT LTD. SUBSEQUENTLY, SHRI SANJAY VYAS ALSO RETRACTED HIS STATEMENT GIVEN EARLIER AND CONFIRMED THE STATEMENT MADE BY SHRI TARUN GOEL AND EXPLAINED THAT HIS EARLIER STATEMENT WAS MADE UNDER STRESS. HE HAD FURTHER AGREED FOR CERTAIN DISALLOWANCE OF EXPENDITURE CLAIMED BY HIM OF RS. 37,60,121/ - FOR THE AY 2007 - 08 TO 2009 - 10 AND PAID TAX TO THAT EXTENT IN ORDER TO BUY PEACE WITH THE DEPARTMENT. ACCORDINGLY, HE PAID 50% OF THE TAXES AND PROMISED TO PAY THE REMAINING TAXES BY FILING REVISED RETURNS. ON FURTHER INVESTIGATION IT WAS OBSERVED BY THE LD. AO THAT M/S. VENKATESHWARA FLEXO PACK PVT LTD AND ITS GROUP CONCERNS HAD ACTUALLY ROUTED THEIR SALES THROUGH M/S. TIRUMALA TRADING CO., IN ORDER TO CLAIM EXPENDITURE IN THE DUMMY PROPRIETORSHIP CONCERN M/S. TIRUMALA TRADING CO., WHEREIN SHRI SANJAY VYAS, THEIR EMPLOYEE WAS STATED AS THE PROPRIETO R. IT WAS 4 ITA NOS. 2056 TO 2058/H/2017 SANJAY VYAS, HYD. FURTHER OBSERVED THAT M/S. TIRUMALA TRADING CO., HAD NOT MAINTAINED PROPER BILLS, VOUCHERS, BOOKS OF ACCOUNTS AND OTHER REQUISITE DOCUMENTS TO JUSTIFY THE CLAIM OF EXPENDITURE. THEREFORE, THE LD. AO REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE PROPRIETOR OF M/S. TIRUMALA TRADING CO., AND ESTIMATED THE INCOME AT 5% OF THE TURNOVER OF RS. 10,67,46,732/ - , RS. 12,64,92,450/ - AND RS. 9,89,60,125/ - WHICH WORKS OUT TO RS. 53,37,336/ - , RS. 63,24,622/ - AND RS. 49,48,006/ - FOR THE AY 2008 - 09, 2009 - 10 AND 2010 - 11 RESPECTIVELY. ON APPEAL, THE LD. CIT (A) SUSTAINED THE ADDITION MADE BY THE LD.AO TO THE EXTENT OF RS. 8,61,708/ - , RS. 18,30,740/ - AND RS. 10,67,674/ - FOR THE AY 2008 - 09, 2009 - 10 AND 2010 - 11 BASED ON THE CONSENT OF THE ASSESSEE WHO HAD AGREED FOR WITHDRAWING THE CLAIM OF EXPENDITURE FOR ARRIVING AT THE ABOVE ADMITTED ADDITION. SUBSEQUENTLY AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS I N APPEAL BEFORE US. 5. ON PERUSING THE FACTS OF THE CASE AND SUBMISSIONS OF THE LD. AR AND THE ARGUM ENTS ADVANCED BY THE LD. DR, WE FIND MERIT IN THE INVESTIGATION MADE BY THE LD. REVENUE AUTHORITIES WHEREIN THEY HAVE OBSERVED THAT THE ASSESSEE IS ONLY A CONDUIT EXPLOITED BY HIS EMPLOYER COMPANY M/S. VENKATESHWARA FLEXO PACK PVT LTD., IN ORDER TO WRITE O FF BOGUS EXPENDITURE. APPARENTLY M/S. VENKATESHWARA FLEXO PACK PVT LTD AND ITS GROUP CONCERNS HAD FORMULATED A SCHEME IN ORDER TO REDUCE THEIR TAXABLE INCOME BY INDUCING THE ASSESSEE WHO IS AN EMPLOYEE OF THE COMPANY TO TRADE THE PRODUCE OF THE COMPANY AND ITS GROUP THROUGH HIS DUMMY PROPRIETORSHIP CONCERN M/S. TIRUMALA TRADING CO.. SINCE THE TRADING ACTIVITY OF M/S. TIRUMALA TRADING CO., ARE BOGUS 5 ITA NOS. 2056 TO 2058/H/2017 SANJAY VYAS, HYD. TRANSACTIONS OBVIOUSLY PROPER BOOKS OF ACCOUNTS, BILLS, VOUCHERS ETC., COULD NOT BE MAINTAINED TO JUSTIFY THE EXPENDITURE CLAIMED. THUS, FROM THE FACTS OF THE CASE IT IS EVIDENT THAT THE ASSESSEE HAS BEEN MADE A SCAPEGOAT BY CAMOUFLAGING THE SALE TRANSACTIONS OF M/S. VENKATESHWARA FLEXO PACK PVT LTD AND ITS GROUP CONCERNS THROUGH M/S. TIRUMALA TRADING CO.. IN SUC H SITUATIONS, IT WOULD HAVE BEEN APPROPRIATE ON THE PART OF THE REVENUE TO MAKE ADDITIONS IN THE CASE OF M/S. VENKATESHWARA FLEXO PACK PVT LTD AND THEIR RELEVANT GROUP CONCERNS SUBSTANTIVELY AND ALSO IN THE CASE OF THE ASSESSEE PROTECTIVELY. HOWEVER, THE LD. REVENUE AUTHORITIES HAVE ONLY PROCEEDED TO VICTIMISE THE ASSESSEE BY MAKING SUBSTANTIVE ADDITIONS IN HIS HANDS FOR ALL THE THREE RELEVANT ASSESSMENT YEARS AND LET GO THE REAL TAX EVADERS VIZ.M/S. VENKATESHWARA FLEXO PACK PVT LTD AND ITS GROUP CONCERNS. THIS ACTION OF THE LD. REVENUE AUTHORITIES AGAINST THE ASSESSEE IS NOT JUDICIOUS AND APPEARS TO BE VINDICTIVE. TH EREFORE, IN THE INTEREST OF JUSTICE, WE HEREBY SET ASIDE THE ORDERS OF THE LD.CIT (A) AND FURTHER DIRECT THE LD.AO TO DELETE THE ADDITION MADE IN THE HANDS OF THE ASSESSEE ON THIS COUNT. WITH RESPECT TO THE GROUND RAISED BY THE ASSESSEE TOWARDS RE - OPENING OF THE ASSESSMENT WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE LD. REVENUE AUTHORITIES BECAUSE IT WAS REVEALED THAT THERE WERE HUGE CASH DEPOSITS IN THE BANK ACCOUNT OF THE ASSESSEE FOLLOWED BY RTGS TRANSFERS WHICH DOES NOT APPEAR TO CORRELATE WITH T HE INCOME EARNED/DISCLOSED BY THE ASSESSEE. 6 . BEFORE PARTING, IT IS WORTHWHILE TO MENTION THAT THIS ORDER IS PRONOUNCED AFTER 90 DAYS OF HEARING THE APPEAL, WHICH IS THOUGH 6 ITA NOS. 2056 TO 2058/H/2017 SANJAY VYAS, HYD. AGAINST THE USUAL NORMS, WE FIND IT APPROPRIATE, TAKING INTO CONSIDERATION OF T HE EXTRA - ORDINARY SITUATION IN THE LIGHT OF THE LOCK - DOWN DUE TO COVID - 19 PANDEMIC. WHILE DOING SO, WE HAVE RELIED IN THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. JSW LTD. IN ITA NO.6264/M/2018 AND 6103/M/2018 FOR AY 2013 - 14 ORDER D ATED 14TH MAY 2020. 7. IN THE RESULT, ALL THE THREE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT O N THE 24 TH JULY, 2020. SD/ - (P. MADHAVI DEVI) JUDICIAL MEMBER SD/ - ( A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER HYDERABAD, DATED 24 TH JULY, 2020. OKK COPY FORWARDED TO: 1. SANJAY VYAS, C/O P. MURALI & CO., CAS, 6 - 3 - 655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 82 2. IT O , WARD 7(2), HYDERABAD. 3. CIT(A) - 3, HYDERABAD. 4. 5. PR. CIT - 3 , HYDERABAD. THE DR, ITAT, HYDERABAD 6. GUARD FIL E 7 ITA NOS. 2056 TO 2058/H/2017 SANJAY VYAS, HYD. S.NO. DETAILS DATE 1 DRAFT DICTATED ON 2 DRAFT PLACED BEFORE AUTHOR 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER