BUNIYAD CHEMICALS LTD, MUMBAI V. DCIT 14(1)(2), MUMBAI

ITA 2137/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9924 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 08-06-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 13-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Keywords: Search and seizure; Document seized; Difference of opinion; Accommodation entries; Documents seized

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -GBEN CH MUMBAI , , , , , , ,, , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND SAKTIJ IT DEY,JUDICIAL MEMBER ./I.T.A./2137&2138/MUM/2015, /ASSESSMENT YEAR: 2003-04&2008-09 M/S. BUNIYAD CHEMICALS LTD. BLOCK-H, SHRI SADASHIV CHS, 6TH ROAD SANTCRUZ EAST,MUMBAI-400 055 PAN:AABCB 6954 G VS. DCIT-14(1)(2) 455, AAYAKAR BHAVAN 4TH FLOOR, M.K. MARG MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: MS. VIDISHA KALRA-(CIT-DR) /ASSESSEE BY: SHRI MUKESH CHOKSI -AR / DATE OF HEARING: 08/06/2017 / DATE OF PRONOUNCEMENT: 01.09.2017 PER RAJENDRA, AM - CHALLENGING THE ORDERS DATED 18/02/2015 OF CIT(A)-2 2,MUMBAI THE ASSESSEE HAS FILED APPEALS FOR THE ABOVE MENTIONED TWO ASSESSMENT YEARS (AY.S) .AS THE ISSUE INVOLVED IN BOTH THE APPEALS ARE COMMON,SO,WE ARE ADJUDICATING THEM TOGE THER.ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES TO VARI OUS BENEFICIARIES IN CONSIDERATION OF CERTAIN PERCENTAGE OF COMMUNICATION ON TRANSACTION. THE DETAILS OF ASSESSED INCOME ,DATES OF ASSESSMENT ORDERS,DATES OF PENALTY ORDERS AND AMOUN T OF PENALTY LEVIED CAN BE SUMMARISED AS UNDER : AY. ASSESSED INCOME ASSESSMENT ORDER DATE DATE OF PENALTY ORDER PENALTY LEVIED 2003-04 RS.19.19 CRORES 30/12/2010 31/03/2013 RS.7, 05,51,595/- 2008-09 RS.8.75 CRORES 30/12/2010 31/03/2013 RS.2,9 7,52,556/- ITA/2137/MUM/2015,AY-2003-04: 2. DURING THE ASSESSMENT PROCEEDINGS,THE AO HAD MADE A DDITION U/S.68 OF THE ACT, AMOUNTING TO RS.19.19 CRORES.IN THE APPELLATE PROCEEDINGS,THE FIRST APPELLATE AUTHORITY(FAA)HAD DIRECTED THE AO TO CONSIDER ONLY THE COMMISSION PAR T AS TAXABLE INCOME AND TO EXCLUDE RELEVANT CASH CREDITS IN THE BANK ACCOUNTS. HOWEVER , AS PER THE AO, THE ASSESSEE DID NOT FURNISH ANY DETAILS ABOUT THE BENEFICIARIES.INVOKIN G THE PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C),THE AO LEVIED PENALTY OF RS.7.05 CRORES A S STATED ABOVE.IN THE MEANWHILE THE TRIBUNAL IN THE QUANTUM APPEAL HELD THAT INCOME ARI SING OUT OF THE ACCOMMODATION ENTRIES SHOULD BE TAKEN AT A CERTAIN PERCENTAGE AS AGAINST THE PERCENTAGE ADOPTED BY THE DEPARTMENTAL AUTHORITIES. 3. AGGRIEVED BY THE ORDER OF AO THE ASSESSEE PREFERR ED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) AND MADE ELABORATE SUBMISSIONS. AFTE R CONSIDERING THE ASSESSMENT ORDER, 2137&2138/M/15(06-07) M/S. BUNIYAD CHEMICALS LTD. 2 PENALTY ORDER AND THE EXPLANATION OF THE ASSESSEE,H E HELD THAT THE ASSESSEE HAD FAILED TO PROVIDE THE DETAILS REGARDING THE BENEFICIARY,THAT THE AO HAD NO OPTION BUT TO DECIDE THE PENALTY PROCEEDINGS ACCORDINGLY,THAT IT HAD PROVID ED VAGUE INFORMATION, THAT THE ISSUE OF BOGUS ENTRIES CAME UP ON SURFACE AFTER A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT IN THE CASE OF THE ASSESSEE.REFERRING TO EXPLANATION 3 TO SECTION 271(1)(C)OF THE ACT,THE FAA HELD THAT ASSESSEE HAD DEEMED TO CONCEAL THE PARTICULAR S OF INCOME, THAT THE AO HAD RIGHTLY LEVIED THE PENALTY. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE (AR) ARGUED THAT IN THE CASES OF MIHIR AGENCIES PVT.LTD.(ITA/695/MUM/2015-AY-04-05;DT.27/7/2016) A ND MUKESH CHOKSI (996/MUM/2015 AY 05-06 DT.27/7/2016)THE TRIBUNAL HAD DELETED THE PENALTY ON SIMILAR FACTS, THAT IN OTHER GROUP CASES I.E. WAVECOM BUILDERS PVT. LTD.,MEENAKS HI CHOKSI ; KAYCEE SHARES BROKING PVT.LTD. ETC. THE TRIBUNAL HAS ALSO DELETED PENALTY LEVIED U/S. 271(1)(C) OF THE ACT CONSIDERING THE SIMILARITY OF THE FACTS.HE ALSO REFERRED TO THE ORDERS OF THE TRIBUNAL PASSED IN THE QUANTUM APPEALS AND STATED THAT IT WAS A CASE OF CALCULATIN G ESTIMATED INCOME FROM HAWALA ENTRIES AND THERE WAS DIFFERENCE OF OPINION BETWEEN THE AO AND THE ASSESSEE ABOUT THE ESTIMATED INCOME. THE DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED THE O RDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE TRIBUNAL HAD HELD THAT THE INCOME ARISING OUT OF TH E HAWALA TRANSACTION SHOULD BE TAKEN AT A CERTAIN PERCENTAGE,THAT FINALLY THE ASSESSMENT FOR THE YEAR UNDER APPEAL WAS COMPLETED FOR AN ESTIMATED INCOME,THAT ON SIMILAR FACTS AND IN SIMIL AR CIRCUMSTANCES,THE TRIBUNAL,IN THE PENALTY APPEALS OF GROUP ENTITIES,HAD ALLOWED THE A PPEALS OF THE ASSESSEES.IN THE CASE OF ONE OF THE GROUP CONCERNS,NAMELY MIHIR AGENCIES, (SUPRA )THE TRIBUNAL HAD DELETED THE PENALTY AND HAD OBSERVED AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PRODUCE THE MATERIAL BEFORE US. WE FIND THAT CASE UNDER CONSIDERATION AN ACTION U/S.132 OF THE ACT WA S CARRIED OUT COVERING ALL THE GROUP ENTITIES INCLUDING THE ASSESSEE UNDER CONSIDERATION , THAT IT WAS FOUND GROUP CONCERNS WERE ENGAGED IN PROVIDING ACCOMMODATION BILLS/HAWALA ENT RIES, THAT THE ASSESSEE DID NOT DISPUTE THE SAID FACT,THAT THE AO ESTIMATED THE INCOME FROM THE ACCOMMODATION ENTRIES @ 2% OF THE TOTAL TRANSACTIONS APPEARING IN THE BANK ACCOUNTS O F THE ASSESSEE,THAT THE THEN FAA CONFIRMED THE QUANTUM ADDITION MADE BY THE AO,THAT IN THE CAS E UNDER CONSIDERATION THE TRIBUNAL HAD HELD THAT COMMISSION INCOME SHOULD BE TAKEN AT THE RATE OF 0.15% (ITA /6435/MUM/2012 AY-2004-05 AND OTHER SIX APPEALS DT.6.1.16). THE UNDISPUTED FACT IS THAT THERE IS DIFFERENCE OF OPINION AS TO HOW MUCH INCOME SHOULD BE ESTIMATED FOR THE HAWALA ENTRIES-THE AO ESTIMATED A T A PARTICULAR PERCENTAGE, WHEREAS THE ASSESSEE HAD SHOWN THE INCOME AT A DIFFERENT PERCEN T. THE ADDITION MADE BY THE AO AND CONFIRMED BY THE FAA IN QUANTUM ADDITION MAY OR MAY NOT BE.BUT,LEVYING PENALTY ON THE BASIS OF AN ESTIMATED ADDITION COULD NOT BE HELD TO BE JUSTIFIED.NO AUTHORITY IS REQUIRED TO BE CITED THAT PENALTY AND ASSESSMENT PROCEEDINGS ARE S EPARATE AND DISTINCT PROCEEDINGS AND THE 2137&2138/M/15(06-07) M/S. BUNIYAD CHEMICALS LTD. 3 QUANTUM PROCEEDINGS SHOULD NOT RESULT IN AUTOMATIC LEVY OF CONCEALMENT PENALTY. IT IS A CASE OF ESTIMATION OF INCOME BY THE AO AND THE ASSESSEE. HERE WE WOULD LIKE TO DISCUSS TWO CASES.ONE OF THEM IS AERO TRADERS P. LTD.(322 ITR 316).IN THAT CASE THE ASSESSEE-COMPANY HAD FILED ITS RETURN OF INCOME FOR THE YEAR 1997-98 ON A NOTICE U/S.148 OF THE ACT, 1961DECLARING A LOS S OF RS. 83, 64, 468/-.THE ASSESSEE HAD, IN THE RETURN ATTACHED A NOTE STATING THAT IT WAS IMPO SSIBLE FOR IT TO SUBSTANTIATE ITS CLAIM OF LOSS BY WAY OF ANY EVIDENCE AS THE RELEVANT RECORDS WERE SEIZED AND WERE WITH THE POLICE AUTHORITIES. THE AO AFTER BEING UNABLE TO OBTAIN CO PIES OF THE SEIZED DOCUMENTS, BASED HIS ASSESSMENT ORDER ON THE LIMITED DOCUMENTS PROVIDED AND REJECTED THE BOOK RESULTS DECLARED BY THE ASSESSEE. HE ESTIMATED THE INCOME OF THE ASSESS EE AT RS.61,00,000/-.HE ALSO INITIATED PENALTY PROCEEDINGS SEPARATELY. THE FAA ESTIMATED T HE TOTAL INCOME OF THE ASSESSEE AT RS. 1,02,980/-.THE TRIBUNAL CONFIRMED THIS ORDER. THE A O OBSERVED THAT THE PROFIT WAS ESTIMATED AFTER REJECTION OF BOOKS OF ACCOUNT DUE TO CERTAIN DISCREPANCIES AND IMPOSED A PENALTY ON THE ASSESSEE OF RS. 36,41,003/-, ON THE GROUND THAT IT WAS A CLEAR CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE FAA DELETED THE PENALTY HOLDING THAT THE ADDITION MADE BY THE AO ON THE BASIS OF ESTIMATED PROFIT COULD NOT BE A SUB JECT-MATTER OF PENALTY FOR CONCEALMENT OF INCOME. THE TRIBUNAL CONFIRMED THIS ORDER. ON APPEA L,THE AO DISMISSED THE APPEAL AND HELD THAT THE FINDING ARRIVED AT BY THE TRIBUNAL DID NOT WARRANT INTERFERENCE AS IT WAS PURELY A FINDING OF FACT.IN THE CASE OF DURGA KAMAL RICE MIL LS(265 ITR 25)THE HONBLE CALCUTTA HIGH COURT HAS HELD AS UNDER: WHEN TWO VIEWS ARE POSSIBLE AND WHEN NO CLEAR AND DEFINITE INFERENCE CAN BE DRAWN, IN A PENALTY PROCEEDING, PENALTY CANNOT BE I MPOSED.IN QUANTUM PROCEEDINGS, A PARTICULAR PROVISION MIGHT BE ATTRAC TED FOR ADDITION TO THE INCOME OF THE ASSESSEE. BUT WHEN IT COMES TO THE QUESTION OF IMPOSITION OF PENALTY, THEN INDEPENDENT OF THE FINDING ARRIVED AT IN THE QUANTU M PROCEEDINGS, THE AUTHORITY HAS TO FIND CONCLUSIVELY THAT THE ASSESSEE OWNS THE CONCEA LED AMOUNT. CONSIDERING THE FACT THAT TRIBUNAL HAS ADOPTED A PA RTICULAR RATE FOR ESTIMATING THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION,WE HO LD THAT THE FAA WAS NOT JUSTIFIED IN CONFIRMING THE ORDER PASSED BY THE AO U/S. 271(1)(C ) OF THE ACT. THEREFORE, REVERSING HIS ORDER, WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBN AL,EFFECTIVE GROUND OF APPEAL IS ALLOWED IN FAVOUR OF THE ASSESSEE. ITA/2137/MUM/2015,AY-2003-04: 6. FOLLOWING OUR ORDER FOR THE AY.2004-04,WE DECIDE TH E EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEALS FILED BY THE A SSESSEE FOR BOTH THE AY.S STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST SEPTEMBER, 2017. 01 , 2017 SD/- SD/- ( / SAKTIJIT DEY) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 01 . 09 . .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 2137&2138/M/15(06-07) M/S. BUNIYAD CHEMICALS LTD. 4 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.