M/s Krishna Trading Co., Surat V. The Addl.CIT.,Range-2, Surat

ITA 2238/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50990 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMIR TEKRIWAL SRDR
• Keywords: Business income; Accommodation entries

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .., !'# $ $ $ $ %% % &, ' ( # BEFORE SHRI G.D.AGARWAL, VICE-PRESIDENT AND SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER $./ I.T.A. NO.2238/AHD/2009 ( * * * * / / / / ASSESSMENT YEAR : 2005-06) M/S.KRISHNA TRADING CO. 604, CENTRE POINT RING ROAD SURAT / VS. THE ADDL.CIT RANGE-2 SURAT '+ (, $./- $./ PAN/GIR NO. : AADFK4399P ( +. / // / APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ( / APPELLANT BY : WRITTEN SUBMISSION /0+. 2 1 ( / RESPONDENT BY : SHRI SAMIR TEKRIWAL, SR.D.R. % 3 2 &, / / / / DATE OF HEARING :28/11/2011 45* 2 &, / DATE OF PRONOUNCEMENT :30-11-2011 (6 / O R D E R PER BENCH : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-II, SURAT DATED 23/03/2009 PASSED FOR A.Y. 2005-06. 2. GROUND NO.1 READS AS FOLLOWS:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.12,34,655 /- ALLEGING COMMISSION @ 2% AS AGAINST THE ACTUAL COMMISSION EA RNED BY THE APPELLANT @ 0.77%, PURELY ON THE BASIS OF GUESSWORK AND ESTIMATION, WITHOUT ANY EVIDENCES WHATSOEVER AND HE NCE THE SAID ITA NO. 2238/AHD/2009 M/S.KRISHNA TRADING CO. SURAT VS. ADDL. CIT ASST.YEAR 2005-06 - 2 - ADDITIONS IS ABSOLUTELY INCORRECT AND BAD-IN-LAW, A ND NEEDS TO BE DELETED. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 31/1 2/2007 WERE THAT THE ASSESSEE-FIRM DURING THE YEAR WAS ENGAGED IN THE BU SINESS OF TRADING AND MANUFACTURING OF ART SILK CLOTH AND YARN. 2.1. IN THIS CASE, A SURVEY WAS CONDUCTED U/S.133 A OF THE I.T.ACT ON 14/03/2007. A STATEMENT OF ONE SHRI TARACHAND SHAR MA, FATHER OF ONE OF THE PARTNER WAS RECORDED. IN HIS STATEMENT, HE HAS ADMITTED OF PROVIDING ACCOMMODATION BILLS. IN COMPLIANCE OF CERTAIN ENQU IRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED THAT THE COMMISSION WAS RECEIVED @ 1%, WHILE THE COMMISSION WAS PAID @ 0.5% TO THE PARTIES. THE ASSESSING OFFICER HAS REJECTED THE BO OKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I. T.ACT. ON THE BASIS OF THE DETAILS OF THE ACCOMMODATION ENTRIES GIVEN AND THE ENTRIES RECEIVED BY THE ASSESSEE, IT WAS NOTED THAT TOTAL SALES WERE RS.10,08,36,649/- AND THE PURCHASE WERE RS.10,00,54,571/-. THE ASSESSEE HAD SHOWN PROFIT OF RS.7,82,078/-. AS PER ASSESSING OFFICER, THE PERCE NTAGE OF PROFIT SHOWN ON THE COMMISSION CHARGED FOR ACCOMMODATION BILLS W AS ONLY 0.77% DISCLOSED BY THE ASSESSEE, THOUGH THE COMMON MARKET PRACTICE IS THAT FOR PROVIDING ACCOMMODATION ENTRIES 2% COMMISSION IS CH ARGED. THE ASSESSING OFFICER HAS THEREFORE WORKED OUT THE EARN ING OF THE ASSESSEE BY APPLYING 2% RATE AND PROFIT WAS WORKED OUT AT RS.20 ,16,733/-. THE SUPPRESSION OF PROFIT WAS ACCORDINGLY CALCULATED AT RS.12,34,655/- (RS.20,16,733 RS.07,82,078). BEING AGGRIEVED, TH E MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. ITA NO. 2238/AHD/2009 M/S.KRISHNA TRADING CO. SURAT VS. ADDL. CIT ASST.YEAR 2005-06 - 3 - 3. BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS ARG UED THAT EVEN AFTER THE SURVEY PROCEEDINGS NO SINGLE INSTANCE WAS FOUND ON THE BASIS OF WHICH IT COULD BE ASCERTAINED THAT THE ASSESSEE HAD IN FACT CHARGED THE COMMISSION @ 2%. IT WAS ALSO ARGUED THAT THE STATE MENT RECORDED U/S.133A OF THE I.T.ACT WAS OF THE FATHER AND NOT T HE PARTNER. IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE THE ADDITION WAS WRONGLY MADE. IN DEFENCE, A DECISION OF CHANDER MOHAN MEHTA VS. A CIT (INVESTIGATION) REPORTED AT [1999] 65 TTJ 327 (PUNE) WAS CITED. IT WAS ALSO ARGUED THAT ALL THE TRANSACTIONS WERE THROUGH BANKING CHANNEL, HENCE NO ADDITION SHOULD HAVE BEEN MADE AND FOR THIS PROPOSITION, REL IANCE WAS PLACED ON CIT VS. TIRATH SINGH PRAKASH SINGH [2008] 296 ITR 1 91 (P&H). THE LEARNED CIT(APPEALS) WAS NOT CONVINCED AND AFFIRMED THE ACTION OF THE ASSESSING OFFICER BY ASSIGNING FOLLOWING REASONS. 3.4. I HAVE CAREFULLY CONSIDERED BOTH THE POSITION S. IT IS NOT ENTIRELY CORRECT THAT THE AO BASED THE ASSESSMENT TOTALLY ON THE STATEMENT OF SHRI TARACHAND SHARMA RECORDED IN COUR SE OF THE SURVEY. THE SURVEY AS WELL AS THE STATEMENT ONLY P ROVIDED A CLUE OR A LEAD TO THE BUSINESS PRACTICES OF THE ASSESSEE . IT WAS ON THE BASIS OF THE FINDINGS DURING THE SURVEY THAT THE AO QUESTIONED THE ASSESSEE IN ASSESSMENT PROCEEDINGS. SINCE, THE ASS ESSEES REPRESENTATIVE HAD ALREADY MADE A CONFESSION AT THE TIME OF SURVEY, IT HAD PERHAPS NO OTHER OPTION BUT TO COMPL Y. IN THE PROCESS, THE ASSESSEE FURNISHED FULL DETAILS OF THE BOGUS ACCOMMODATION BILLS PROVIDED BY IT, AS ALSO THE ACC OMMODATION BILLS TAKEN IN THE FORM OF BOGUS BILLS OF PURCHASES . NOW COMES THE QUESTION OF THE RATE OF COMMISSION. SINCE, PROVIDI NG ACCOMMODATION BILLS IS RAMPANT IN SURAT, ESPECIALLY IN THE TEXTILE AND CONSTRUCTION BUSINESS, THE RATE OF COMMISSION I S COMMON KNOWLEDGE. INQUIRIES FROM VARIOUS SOURCES HAVE REV EALED THAT THE STATEMENT MADE BY THE TARACHAND SHARMA WAS FACTUALL Y INCORRECT. ITA NO. 2238/AHD/2009 M/S.KRISHNA TRADING CO. SURAT VS. ADDL. CIT ASST.YEAR 2005-06 - 4 - THE MINIMUM RATE IS 2.5% TO THE MAXIMUM OF 3.6%. S HRI TARACHAND SHARMA HAD STATED THAT THE ASSESSEE CHARG ED 1% AND PAID 0.5% SO THAT ITS PROFIT WAS ONLY 0.5%. THE AO ENHANCED THE PROFIT TO 2% WHICH WAS NOT REALLY UNJUSTIFIED. THO UGH, IT IS TRUE THAT THE AO DID NOT BRING ON RECORD ANY EVIDENCE Y ET, IT IS ALSO TRUE THAT NO EVIDENCE COULD BE AVAILABLE WITH REGAR D TO SUCH ILLEGAL TRANSACTIONS. ON THE OTHER HAND, THE AR DOES NOT HAVE ANY EVIDENCE EITHER TO REBUT OR COUNTER THE ACTION TAKE N BY THE AO. THEREFORE, WHAT IS TO BE DECIDED IS WHAT IS MOST RE ASONABLE. AS OBSERVED, THE AO ONLY ENHANCED THE PROFIT MARGIN O F THE ASSESSEE FROM SUCH ILLEGAL TRANSACTIONS BY ONLY 1.5%, WHICH ACCORDING TO ME, WAS ABSOLUTELY REASONABLE AND TOTALLY JUSTIFIED . THE ADDITION OF THE SUM OF RS.12,34,655 IS THEREFORE, CONFIRMED. 4. ON THE DATE OF HEARING, A WRITTEN SUBMISSION FRO M THE SIDE OF THE APPELLANT IS PLACED ON RECORD. FROM THE SIDE OF TH E REVENUE, DR MR.SAMIR TEKRIWAL APPEARED AND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE HAS ALSO ARGUED THAT THE BUSINESS OF PRO VIDING ACCOMMODATION BILL WAS AN ILLEGAL TRANSACTION THEREFORE SUCH ACT IVITY SHOULD BE DISCOURAGED BY AFFIRMING THE ADDITION SO MADE. 5. FACTS OF THE CASE HAVE REVEALED THAT STATEMENT O F A FATHER OF ONE OF THE PARTNER WAS RECORDED U/S.133A OF THE I.T.ACT. IN THAT STATEMENT, IT WAS STATED THAT DUE TO FINANCIAL DIFFICULTIES THE ASSESSEE HAD INDULGED IN ISSUING ACCOMMODATION BILL TO CERTAIN PARTIES. IT WAS STATED THAT THE COMMISSION IN THE RANGE OF 0.50% TO 1% WAS EARNED. THOUGH UNDISPUTEDLY, THE TRANSACTION RECORDED WAS NOTHING BUT ACCOMMODATION BILLS BUT THE VEHEMENT CONTENTION OF THE ASSESSEE B EFORE THE AUTHORITIES BELOW WAS THAT ALL THOSE TRANSACTIONS WERE MADE THR OUGH BANK ACCOUNTS ONLY. ALL THE SALES AND PURCHASE BILLS WERE AVAILA BLE FOR VERIFICATION. ON THE BASIS OF THOSE EVIDENCES, THE VEHEMENT CONTENTI ON OF THE ASSESSEE WAS ITA NO. 2238/AHD/2009 M/S.KRISHNA TRADING CO. SURAT VS. ADDL. CIT ASST.YEAR 2005-06 - 5 - THAT THERE WAS NO CORROBORATIVE EVIDENCE FOUND DURI NG THE COURSE OF SURVEY THROUGH WHICH IT COULD BE UNEARTHED THAT THE ASSESSEE IN FACT HAD EARNED COMMISSION @ 2%. IN THE ABSENCE OF ANY DIRE CT EVIDENCE THE VEHEMENT CONTENTION OF THE ASSESSEE BEFORE THE FIRS T APPELLATE AUTHORITY WAS THAT MERELY ON ESTIMATION, THE ASSESSING OFFICE R HAD ADOPTED THE PERCENTAGE OF PROFIT AS COMMISSION @ 2%. IT HAS AL SO BEEN ARGUED THAT THE ASSESSING OFFICER HAD NOT DOUBTED THE WORKING O F THE ASSESSEE AND THE EXPENSES INCURRED. CONSIDERING THE TOTALITY OF THE CIRCUMSTANCE OF THE CASE AND THE MANNER IN WHICH A STATEMENT OF A PE3RS ON IS RECORDED THOUGH HE WAS NOT THE PARTNER, AS WELL AS IN THE ABSENCE O F ANY DIRECT EVIDENCE IN POSSESSION OF THE REVENUE AUTHORITIES THAT IN ALL S UCH TRANSACTIONS THE ASSESSEE HAS UNIFORMLY EARNED 2% COMMISSION AND THA T TO RUN THE BUSINESS, THOUGH THE BUSINESS OF PROVIDING ACCOMMOD ATION BILL IS AGAINST THE LAW, BUT THE EXPENDITURE INCURRED IN THIS REGAR D HAS TO BE TAKEN INTO ACCOUNT TO SOME EXTENT. SINCE THE AUTHORITIES HAVE ADOPTED THE PERCENTAGE OF PROFIT OF COMMISSION AT 2% ON AN ESTIMATE BASIS AND MADE THE ADDITION OF RS.12,34,655/-, WE HEREBY DEEM IT PROPER TO GIVE A NOMINAL RELIEF PERTAINING TO EXPENSES WHICH COULD HAVE BEEN INCURR ED AS ALLEGED BEFORE THE AUTHORITIES BELOW AND DIRECT TO ASSESS THE UNAC COUNTED INCOME AT RS.10 LACS. IN THE RESULT, A PART RELIEF OF RS.2,3 4,655/- IS HEREBY GRANTED. GROUND IS PARTLY ALLOWED. 6. GROUND NO.2 READS AS FOLLOWS:- 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.23,24 3/- @ 20% OUT OF TELEPHONE EXPENSES ALLEGING PERSONAL ELEMENT PUR ELY ON THE BASIS OF GUESSWORK AND ESTIMATION, WITHOUT ANY EVID ENCES WHATSOEVER AND HENCE THE SAID DISALLOWANCE IS ABSOL UTELY INCORRECT AND BAD-IN-LAW, AND NEEDS TO BE DELETED. ITA NO. 2238/AHD/2009 M/S.KRISHNA TRADING CO. SURAT VS. ADDL. CIT ASST.YEAR 2005-06 - 6 - 6.1. IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS DEBITED TELEPHONE EXPENSES OF RS.1,16,220/- AND CONVEYANCE EXPENSES OF RS.55,548/-. THE ASSESSING OFFICER HAD DISALLOWED 20% OF THOSE EXPENSES AND AN ADDITION OF RS.34,353/- WAS MADE. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, EXPEN SES TOWARDS TELEPHONE WERE CONFIRMED TO THE EXTENT OF RS.23,243/-. ON PE RUSAL OF THE WRITTEN SUBMISSIONS AND THE ARGUMENTS OF LD.DR, WE ARE OF T HE VIEW THAT MERELY ON AN ESTIMATION THE IMPUGNED ADDITION WAS MADE, HO WEVER, CONSIDERING THE ENTIRETY OF THE CIRCUMSTANCES, THE SAME IS HERE BY ESTIMATED AT 10% AND IN THIS MANNER A PART RELIEF IS GRANTED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . SD/- SD/- ( G.D. AGARWAL ) ( MUKUL KR. SHRAWAT ) VICE PRESIDENT JUDICI AL MEMBER AHMEDABAD; DATED 30/ 11 /2011 7.. , . ../ T.C. NAIR, SR. PS (6 2 /&8 (8*& (6 2 /&8 (8*& (6 2 /&8 (8*& (6 2 /&8 (8*&/ COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. $$ & %9 / CONCERNED CIT 4. %9() / THE CIT(A)-II, SURAT 5. 8<= /& , , / DR, ITAT, AHMEDABAD 6. = >3 / GUARD FILE. (6 % (6 % (6 % (6 % / BY ORDER, 08& /& //TRUE COPY// ! !! !/ // / $ $ $ $ ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD