BUNIYAD CHEMICALS LTD, MUMBAI V. DCIT 10(1), MUMBAI

ITA 2410/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0326 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 25-04-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 28-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Search and seizure; Accommodation entries
• Section: 147

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./2787/MUM/2015, / ASSESSMENT YEAR: 2006-07 ASST CIT-14(1)(2) 460, AAYAKAR BHAVAN 4TH FLOOR, M.K. MARG MUMBAI-400 055. VS. M/S. BUNIYAD CHEMICALS LTD. BLOCK-H, SHRI SADASHIV CHS, 6TH ROAD SANTCRUZ EAST,MUMBAI-400 055 PAN:AABCB 6954 G ( /APPELLANT ) ( / RESPONDENT) ./I.T.A./2410/MUM/2015, / ASSESSMENT YEAR: 2006-07 M/S. BUNIYAD CHEMICALS LTD. MUMBAI-400 055. VS. DY. CIT-10-(1)ROOM NO.455, AAYAKAR BHAVAN,MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: MS. ANUPAMA SINGLA-DR /ASSESSEE BY: SHRI MUKESH CHOKSI / DATE OF HEARING: 25/04/2017 / DATE OF PRONOUNCEMENT: 07.06.2017 PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 18.02.2015 OF THE CIT(A )-22,MUMBAI,THE ASSESSING OFFICER (AO) AND THE ASSESSEE HAVE FILED CROSS APPEALS FOR THE ABOVE MENTIONED AY.ASSESSEE - COMPANY IS ENGAGED IN PROVIDING ACCOMMODATION ENTR IES TO VARIOUS BENEFICIARIES IN CONSIDERATION OF CERTAIN PERCENTAGE OF COMMISSION O N THE TRANSACTION.IT FILED ITS RETURN OF INCOME ON 17.10. 2007,DECLARING NIL INCOME.THE ASSE SSMENT U/S.143(3) WAS COMPLETED BY THE AO ON 16.12. 2008,DETERMINING ITS INCOME AT RS .9,28,78,990/-.THE CASE WAS RE-OPENED FOR ASSESSMENT U/S. 147 OF THE ACT.THE AO COMPLETED THE ASSESSMENT U/S.143(3) R.W.S.147 OF THE ACT,ON 12/03/ 2014,DETERMINING THE INCOME OF TH E ASSESSEE AT RS.9,91,78,990/-. ITA/2410/MUM/2015. 2. DURING THE COURSE OF HEARING BEFORE US,THE ASSESSEE DID NOT PRESS SECOND AND THIRD GROUNDS OF APPEAL,HENCE,SAME STAND DISMISSED AS NOT PRESSED . 3. EFFECTIVE GROUND OF APPEAL (GOA 4-6)DEALS WITH ADDI TION MADE ON ACCOUNT OF UNEXPLAINED DEPOSITS AND DETERMINING THE PERCENTAGE OF INCOME F OR ACCOMMODATION ENTRIES. BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) OF THE ACT WAS CONDUCTED IN THE CASE OF SEVERAL COMPANIES, WHOSE KINGPIN IS IDE NTIFIED AS ONE MUKESH CHOKSI(MC).IT WAS FOUND IN THE COURSE OF SEARCH THAT SUCH ENTITIE S WERE PROVIDING ACCOMMODATION ENTRIES BY WAY OF SHARE TRADING/ LOANS, ETC.DURING THE COURSE OF SEARCH PROCEEDINGS, IT WAS NOTED THAT FOR PROVIDING ACCOMMODATION ENTRIES,THE ENTITIES LIKE T HE ASSESSEE,WHICH WERE CONTROLLED BY MC WERE EARNING COMMISSION INCOME.IN VIEW OF SUCH MODU S OPERANDI NOTED AND THE STATEMENTS 2787&2410/M/15(06-07) M/S. BUNIYAD CHEMICALS LTD. 2 OF MC,RECORDED AT THE TIME OF SEARCH, THE AO HELD T HAT THE ASSESSEE WAS EARNING COMMISSION RANGING FROM 1.5% TO 3.5%.DURING THE APPELLATE PROC EEDINGS THE FIRST APPELLATE AUTHORITY (FAA)RESTRICTED THE ADDITION @0.37% ON ACCOUNT OF C OMMISSION INCOME. 4 .BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)STATED THAT THE TRIBUNAL HAD IN THE GROUP CASES DEALT WITH THE SAME AND HAD HELD THAT COMMISSION IN COME FROM ACCOMMODATION ENTRIES SHOULD BE RESTRICTED @ OF 0.15%, AS HELD BY THE TRI BUNAL IN OTHER GROUP CONCERNS.THE DR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 5. WE FIND THAT IN THE CASE OF M/S. ALPHA CHEMIE TRAD E AGENCIES PRIVATE LIMITED.,ONE OF THE SISTER CONCERN OF THE ASSESSEE,(ITA/6558/MUM/ 2012& OTHER APPEALS-A.Y.2010-11 DTD.09/ 09/2016 AND OTHER AY.S.)THE TRIBUNAL HAS DELIBERATE D UPON AND DECIDED THE IDENTICAL ISSUE. WE ARE REPRODUCING THE RELEVANT PORTION OF THE ORDE R AND IT READS AS UNDER: THESE SEVEN APPEALS ARE FILED BY THE SAME ASSESSEE PERTAINING TO ASSESSMENT YEARS 2004-05 TO 2010-11 AND INVOLVE CERTAIN COMMON ISSUES. THERE FORE, THEY HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED F OR THE SAKE OF CONVENIENCE AND BREVITY. 4.AT THE TIME OF HEARING, IT WAS STATED BY THE LD. REPRESENTATIVE FOR THE ASSESSEE THAT THE ISSUES RAISED IN THE CAPTIONED APPEALS HAVE ALREADY BEEN DECIDED BY THE TRIBUNAL IN THE CASES OF THE SISTER CONCERNS OF ASSESSEE COMPANY AND IN T HIS CONTEXT, REFERENCE HAS BEEN MADE TO THE FOLLOWING DECISIONS:- (I)GOLDSTAR FINVEST PVT. LTD. ITA NOS.887/MUM/2012 & 2699/MUM/2013 ORDER DATED 30/11/2015. (II) M/S. MIHIR AGENCIES PVT. LTD., ITA NOS.6114-61 20/MUM/2012 ORDER DATED 6/1/2016. (III)ALLIANCE INTERMEDIATERIES AND NETWORK PVT. LTD ., ITA NOS. 2700,2702&2701/MUM/2013 ORDER DATED 24/2/2016. (IV) MR. MUKESH CHOKSI ITA NOS.833 -839/MUM/2013 OR DER DATED 04/05/2016. XXXXX 6. BEFORE US,THE LD. REPRESENTATIVE FOR THE ASSESSE E SUBMITTED THAT SIMILAR ADDITIONS WERE MADE BY THE ASSESSING OFFICER IN THE CASES OF OTHER GROUP CONCERNS ALSO, WHICH WERE COVERED BY THE SEARCH ACTION CARRIED OUT BY THE DEPARTMENT ON 25/11/2009. IT IS POINTED OUT THAT IN THE AFORESAID DECISIONS, THE TRIBUNAL HAS ACCEPTED THE STAND OF THE ASSESSEE THAT COMMISSION INCOME WAS LIABLE TO BE ASSESSED @0.15% OF THE TOTA L RECEIPTS AND ALSO THE FACT THAT THE NET INCOME WAS TO BE ASSESSED AFTER ALLOWING 50% OF THE EXPENSES CLAIMED. IT WAS, THEREFORE, CONTENDED THAT FOLLOWING THE DECISIONS OF THE CO-OR DINATE BENCHES RENDERED IN THE GROUP CONCERNS OF SHRI MUKESH CHOKSI REFERRED ABOVE UNDER SIMILAR CIRCUMSTANCES, THE ASSESSED INCOME IN THIS CASE ALSO BE DIRECTED TO BE COMPUTED ACCORDINGLY. 7.ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIV E WHILE NOT DISPUTING THE AFORESAID PRECEDENTS, SOUGHT TO POINT OUT THAT THE OTHER CASE S WERE ASSESSED ON THE BASIS OF THE SURVEYS CONDUCTED, WHEREAS THE INSTANT ASSESSEE WAS COVERED BY THE SEARCH ACTION UNDER SECTION. 132(1) OF THE ACT. 8. IN REPLY, LD. REPRESENTATIVE FOR THE ASSESSEE PO INTED OUT THAT EVEN THE GROUP CONCERN CASES, RELIED UPON BY HIM, WERE COVERED BY THE SEARCH ACTI ON AND THERE IS COMPLETE IDENTITY ON FACTS. THEREFORE, IT WAS CONTENDED THAT THE SAID ISSUE HAS ALREADY BEEN DECIDED IN THE AFORESAID DECISIONS, AND THE SAME RATIO IS APPLICABLE IN THE CAPTIONED APPEALS ALSO. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. WE HAVE ALSO PERUSED THE RESPECTIVE ORDERS OF THE AUTHORITIES BELOW AND FIND THAT SIMIL AR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASES OF GOLDSTAR FINVEST PVT. LTD.(SUPRA), M/S . MIHIR AGENCIES PVT. LTD.(SUPRA), ALLIANCE INTERMEDIATERIES AND NETWORK PVT. LTD.(SUPRA) AND M R. MUKESH CHOKSI(SUPRA), WHICH HAVE 2787&2410/M/15(06-07) M/S. BUNIYAD CHEMICALS LTD. 3 BEEN RELIED UPON BY THE ASSESSEE BEFORE US. ON PERU SAL OF THE AFORESAID DECISIONS WE FIND THAT THE TRIBUNAL HAD DIRECTED THAT THE INCOME BY WAY OF COMMISSION FROM THE BUSINESS OF ACCOMMODATION ENTRIES BEING CARRIED OUT BY MUKESH C HOKSI GROUP WAS LIABLE TO BE ASSESSED AT 0.15% INSTEAD OF 2% APPLIED BY THE ASSESSING OFF ICER. IN THIS CONTEXT, WE REPRODUCE HEREINAFTER PARAS 5 & 6 OF THE ORDER OF THE TRIBUNA L IN THE CASE OF GOLDSTAR FINVEST PVT. LTD. (SUPRA),WHEREIN EARLIER PRECEDENTS HAVE BEEN RELIED UPON AND THE ISSUE DECIDED ACCORDINGLY:- 5.WE HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORIT IES AND THE ORDERS OF THE CO- ORDINATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE A ND OTHER ORDERS RELIED UPON BY THE ASSESSEE. IT IS NOTED BY US THAT IDENTICAL ISSUE HA D CAME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 . THE RELEVANT OBSERVATIONS FROM THE TRIBUNALS ORDER ARE REPRODUCED BELOW: '12. HAVING, CAREFULLY EXAMINED THE VARIOUS ORDERS IN THE CASE OF DIFFERENT ASSESSEES' IT HAS BECOME AMPLY CLEAR THAT IN THESE TYPES OF AC TIVITIES, BROKERS ARE ONLY CONCERNED WITH THEIR COMMISSION ON THE VALUE OF TRANSACTIONS. NOW THE QUESTION COMES WHAT WOULD BE THE REASONABLE PERCENTAGE TO THE COMMISSIO N ON THE TOTAL TURNOVER? THE ASSESSEE HAS ALSO MADE OUT A CASE THAT THE CUSTOMER S DO NOT COME DIRECTLY TO HIM AND THEY COME THROUGH A SUB- BROKER WHO ALSO CHARGES A PARTICULAR SHARE OF COMMISSION. IN ALL THE JUDGMENTS WHAT HAS BEEN STATED IS THAT A N AVERAGE PERCENTAGE OF COMMISSION IS BETWEEN 0.15% TO 0.25%. IN THE CASE OF PALRESHA & CO. AND KIRAN & CO (SURPA), THE TRIBUNAL HAS CONSIDERED REASONABLENESS OF PERCE NTAGE OF COMMISSION TO BE EARNED ON TURNOVER WAS AT 0.1%. THE ASSESSEE HIMSELF HAS O FFERED THE PERCENTAGE OF COMMISSION AT 0.15%, WHICH IS MORE THAN THE PERCENT AGE OF COMMISSION CONSIDERED TO BE REASONABLE BY THE TRIBUNAL IN THE CASE OF PAL RESHA & CO AND KIRAN & CO (SUPRA) IN SIMILAR TYPE OF TRANSACTIONS. THE THEORY OF ASSE SSING OFFICER TO TREAT THE ENTIRE DEPOSIT AS UNEXPLAINED CASH CREDITS, CANNOT BE ACCE PTED IN THE LIGHT OF ASSESSMENT ORDERS IN THE CASE OF BENEFICIARIES AND ALSO IN THE LIGHT OF THE FACT THAT ASSESSEE IS ONLY CONCERNED WITH THE COMMISSION EARNED ON PROVIDING A CCOMMODATION ENTRIES. WE, THEREFORE, OF THE VIEW THAT SINCE THE ASSESSEE ITSE LF HAS DECLARED THE COMMISSION ON TURNOVER AT 0.15% WHICH IS MORE THAN THE PERCENTAGE CONSIDERED TO BE REASONABLE BY THE TRIBUNAL IN THE CASE OF PALRESHA & CO AND KIRAN & CO (SUPRA), THE SAME SHOULD BE ACCEPTED. WE, ACCORDINGLY, ACCEPT THE COMMISSION DE CLARED BY THE ASSESSEE AND SET ASIDE THE ORDER OF THE CIT (A) IN THIS REGARD.' 6. IT IS FURTHER NOTICED BY US THAT THIS STAND HAS BEEN CONSTANTLY ACCEPTED BY THE TRIBUNAL IN VARIOUS ORDERS, DETAILS OF WHICH HAVE B EEN GIVEN BY THE LD. COUNSEL, AS MENTIONED ABOVE. WE HAVE GONE THROUGH THE ORDERS AS ENCLOSED IN THE PAPER BOOK FILED BY THE ASSESSEE AND FIND THAT THE LD. AR HAS CORRECTLY STATED THAT THIS ISSUE HAS BEEN UNANIMOUSLY ACCEPTED BY THE TRIBUNAL IN VARIOU S CASES INCLUDING THE CASE OF ASSESSEE. NOTHING HAS BEEN BROUGHT ON RECORD BY THE LD. DR TO DISTINGUISH THESE CASES. THEREFORE, RESPECTFULLY FOLLOWING THE ORDERS OF THE TRIBUNAL INCLUDING THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING YEAR, WE FIND THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION, NO INT ERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A), THEREFORE, THE SAME IS UPHELD. GROUNDS NO.1 AND 2 TAKEN BY THE REVENUE STAND DISMISSED. 9.1 SINCE IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE APPELLANT COMPANY BEFORE US IS ALSO A PART OF THE ENTITIES CONTROLLED BY MR. MUKES H CHOKSI, IN OUR VIEW, THE AFORESAID DECISIONS ARE RELEVANT TO ASSESS THE INCOME OF THE ASSESSEE. IN THIS VIEW OF THE MATTER, WE, THEREFORE, SET-ASIDE THE ORDER OF THE CIT(A) AND DI RECT THE ASSESSING OFFICER TO RECOMPUTE THE COMMISSION INCOME FROM THE BUSINESS OF PROVIDING AC COMMODATION ENTRY IN CONFORMITY WITH THE AFORESAID PRECEDENTS. RESPECTFULLY FOLLOWING THE ABOVE AND CONSIDERING TH E ORDERS OF THE TRIBUNAL IN THE CASES OF GOLDSTAR FINVEST PVT.LTD.(ITA.S/6114-20/MUM/2012,DT D.01.06.2016),MIHIR AGENCIES(ITA.S/ 6435-6441/MUM/2012),ALLIANCE INTERMEDIATERIES & NET WORK PVT.LTD.(ITA.S/2700-02 / MUM/ 2013),WE DIRECT THE AO TO TAX THE COMMISSION INCOME OF THE ASSESSEE @ 0.15% OF THE 2787&2410/M/15(06-07) M/S. BUNIYAD CHEMICALS LTD. 4 TURNOVER.EFFECTIVE GROUND OF APPEAL IS ALLOWED ACCO RDINGLY. ITA/2787/MUM/2015,AY. 2006-07: WE HAVE DECIDED THE GROUND DEALING WITH RATE OF COM MISSION INOCME IN FAVOUR OF THE ASSESSEE IN THE EARLIER PART OF THE ORDER.FOLLOWING THE SAME, EFFECTIVE GROUND OF APPEAL,RAISED BY THE AO,ABOUT RESTRICTING THE COMMISSION INCOME @ 0.37,IS DISMISSED. AS A RESULT, APPEAL FILED BY THE ASSESSE IS PARTLY ALLOWED AND THE APPEAL OF THE AO IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH JUNE, 2017. 07 , 2017 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 07.06.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.