SURESHKUMAR GHEWARCHAND hUNDIA, MUMBAI V. ACIT CC-14, MUMBAI

ITA 2426/MUM/2009

• Counselvise Citation: 242619914 RSA 2009
• Duration Of Justice: 2 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 01-02-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 16-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJIV DUTT
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Gift; Business income; Corroborative evidences; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIB UNAL MUMBAI BENCHES I, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI N.V.VASUDEVAN, JM ITA NO.2525/MUM/2009 : ASST. YEAR 2004-2005 THE ASSTT.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 14 MUMBAI. SHRI SURESHKUMAR G.HUNDIA (PROP. OF HUNDIA EXPORTS) 14-A, BHARAT NAGAR OPP : SHALIMAR CINEMA, GRANT ROAD MUMBAI 400 007. PAN : AAQPH7289E. (APPELLANT) VS. (RESPONDENT) ITA NO.2426/MUM/2009 : ASST. YEAR 2004-2005 SHRI SURESHKUMAR G.HUNDIA 14-A, BHARAT NAGAR OPP : SHALIMAR CINEMA, GRANT ROAD MUMBAI 400 007. THE ASSTT.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 14 MUMBAI. (APPELLANT) VS. (RESPONDENT) ASSESSEE BY : SHRI M.SUBRAMANIAN REVENUE BY : SHRI SANJIV DUTT DATE OF HEARING : 01.02.2012 DATE OF PRONOUNCEMENT : 08.02.2012 O R D E R PER R.S.SYAL, AM : THESE TWO CROSS APPEALS ONE BY THE REVENUE AND TH E OTHER BY THE ASSESSEE - ARISE OUT OF THE ORDER PASSED BY THE COM MISSIONER OF INCOME-TAX (APPEALS) ON 13.02.2009, IN RELATION TO THE ASSESSM ENT YEAR 2004-2005. 2. THE ONLY GROUND RAISED IN THE ASSESSEES APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF ` 83,28,644 WRONGLY TAKEN BY THE AUTHORITIES BELOW AT ` 85,32,964. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE PAID TOTAL COMMISSION OF ` 85.32 LAKH INCLUSIVE OF ` 83,28,644 TO M/S.HIMNEEL BREWERIES LIMITED. ON BEING CALLED UPON TO JUSTIFY THE PAYMEN T OF COMMISSION, THE ASSESSEE STATED THAT M/S.HIMNEEL BREWERIES LIMITED HAD CONNECTION WITH ICICI BANK LIMITED AND ALSO M/S. JERAD METAL, A CHINESE F IRM AND IN ORDER TO FACILITATE THE PURCHASE OF THE BULLION, THE ASSESSE E EMPLOYED THE SERVICES OF ITA NOS.2525 & 2426/MUM/2009 SHRI SURESH G.HUNDIA. 2 M/S.HIMNEEL BREWERIES LIMITED AND PAID COMMISSION A T THE RATE OF 0.5%. THE A.O. OBSERVED THAT M/S.HIMNEEL BREWERIES LIMITED WA S NOT A CONCERN OF COMMISSION AGENT AS ITS BUSINESS WAS THAT OF BREWER IES. IT WAS ALSO OBSERVED THAT ICICI BANK LIMITED IS A GOVERNMENT AUTHORIZED IMPORTER AT AHMEDABAD WHERE THE ASSESSEE HAS GOT ITS OWN BRANCH. IN HIS O PINION THERE WAS NO CASE FOR THE ASSESSEE TO PURCHASE THE IMPORTED BULLION FROM AUTHORIZED DEALERS THROUGH THE ASSISTANCE OF AN OUTSIDE PARTY. HE, THEREFORE, MADE DISALLOWANCE OF COMMISSION AT ` 85.32 LAKH. THE LEARNED CIT(A) UPHELD THE ADDITION. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT THE ASSESSEE CARRIED ON THE BUSINESS AS IMPORTER / EXPORTER OF BULLION IN THE PROPRIETORSHI P CONCERN NAME AND STYLED AS M/S. HUNDIA EXPORTS WITH HEAD OFFICE AT MUMBAI AND BRANCH OFFICE AT AHMEDABAD. IT PAID TOTAL COMMISSION OF ` 85.32 LAKH INCLUDING ` 83.28 LAKH TO M/S.HIMNEEL BREWERIES LIMITED. THE CASE HAS BEEN MA DE BY THE ASSESSEE THAT THE SERVICES OF SHRI LAXMAN KHEMKA, DIRECTOR OF M/S .HIMNEEL BREWERIES LIMITED WERE UTILIZED IN PURCHASING THE BULLION. TH ERE IS NO DISPUTE THAT IF THE SERVICES OF A THIRD PERSON ARE, IN FACT, GENUINELY UTILIZED THEN THE COMMISSION HAS TO BE ALLOWED AND VICE VERSA . ON A PERTINENT INQUIRY FROM THE BENCH, IT WAS STATED ON BEHALF OF THE ASSESSEE THAT NO SUCH COMMI SSION WAS PAID BY THE ASSESSEE IN AN EARLIER OR LATER YEAR. ON A FURTHER INQUIRY, IT WAS STATED THAT THE ASSESSEE COULD HAVE VERY WELL MADE PURCHASE OF BULL ION WITHOUT THE ASSISTANCE OF ANY MEDIATOR. IN ORDER TO EXAMINE AS TO WHETHER, IN FACT, ANY SERVICES WERE RENDERED BY M/S.HIMNEEL BREWERIES LIMITED OR NOT, T HE AUTHORITIES BELOW REQUIRED THE ASSESSEE TO PRODUCE SHRI LAXMAN KHEMKA , DIRECTOR OF M/S. HIMNEEL BREWERIES LIMITED. THE SAID PERSON WAS NEVE R PRODUCED ON THE PRETEXT THAT HE WAS NOT CO-OPERATING. FURTHER THE ASSESSEE FAILED TO PRODUCE EVEN THE CONFIRMATION LETTER FROM M/S.HIMNEEL BREWERIES LIMI TED IN THIS REGARD. THERE IS NO SUPPORTING EVIDENCE TO DIVULGE THAT SILVER WA S IMPORTED BY THE ASSESSEE AT ITA NOS.2525 & 2426/MUM/2009 SHRI SURESH G.HUNDIA. 3 A LESSER PRICE FROM M/S.JERAD METAL WHICH BECAME PO SSIBLE ONLY BECAUSE OF THE CONTACTS OF SHRI LAXMAN KHEMKA WITH SHRI UDAY SINGH , MANAGER OF M/S.JERAD METAL AND SHRI AMAR SINGH, THE THEN MANAGER OF ICIC I BANK LIMITED. IT IS FURTHER RELEVANT TO NOTE THAT IF AT ALL SOME SERVIC ES WERE RENDERED BY SHRI LAXMAN KHEMKA, THEN THE COMMISSION SHOULD HAVE BEEN PAID IN THE PERSONAL CAPACITY OF THAT PERSON INSTEAD OF PAYING IT TO THE COMPANY IN WHICH HE IS A DIRECTOR. THIS FACT ASSUMES SIGNIFICANCE BECAUSE FR OM THE ACKNOWLEDGEMENT OF RETURN OF M/S.HIMNEEL BREWERIES LIMITED, IT CAN BE NOTICED THAT IT HAD SHOWN HUGE LOSS OF ` 2.69 CRORE IN THE PROFIT AND LOSS ACCOUNT FOR THE Y EAR IN QUESTION. IT IS BEYOND OUR COMPREHENSION AS TO HOW COMMISSION OF ` 83.28 COULD HAVE BEEN GENUINELY PAID FOR INTRODUCING THE MANAGER OF M/S.J ERAD METAL AND ICICI BANK LIMITED TO THE ASSESSEE AND THAT TOO ONLY IN RESPEC T OF TRANSACTIONS FOR THIS YEAR NOT A YEAR BEFORE AND NOT A YEAR LATER. IT IS FURTH ER RELEVANT TO NOTE THAT M/S.HIMNEEL BREWERIES LIMITED WAS NOT IN THE BUSINE SS OF COMMISSION EARNING AND DID NOT HAVE ANY SET UP AT AHMEDABAD. ON THE CO NTRARY IT WAS ENGAGED IN THE BUSINESS OF BREWERIES. THERE IS NO EVIDENCE ON RECORD TO INDICATE THAT WITH THE HELP OF PAYMENT OF COMMISSION, THE ASSESSEE MA NAGED TO MAKE PURCHASES AT A LOWER RATE. IN OUR CONSIDERED OPINION, THE ASS ESSEE HAS FAILED TO DISCHARGE THE ONUS CAST UPON HIM IN PROVING THE GENUINENESS O F THE COMMISSION ALLEGEDLY PAID TO M/S.HIMNEEL BREWERIES LIMITED AT ` 83.28 LAKH. 4. FROM THE ASSESSMENT ORDER IT IS NOTICED THAT THE ASSESSEE CLAIMED DEDUCTION OF ` 85.32 LAKH TOWARDS COMMISSION. PAGE NUMBER 76 OF T HE PAPER BOOK IS COPY OF ACCOUNT OF M/S.HIMNEEL BREWERIES LI MITED IN THE BOOKS OF ASSESSEE WHICH INDICATES THAT TOTAL COMMISSION ALLE GEDLY PAID TO THIS PARTY AT ` 83.28 LAKH. THE LEARNED COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE REMAINING AMOUNT OF ` 2.04 LAKH WAS PAID TO OTHER PARTIES. THIS CONTENTIO N RAISED BEFORE THE LD. FIRST APPELLATE AUTHORITY HAD ALSO REMAINED TO BE DISPOSED. THERE IS NO DISCUSSION ABOUT THE GENUINENESS OR OTHERWISE OF TH E REMAINING COMMISSION IN ITA NOS.2525 & 2426/MUM/2009 SHRI SURESH G.HUNDIA. 4 THE ASSESSMENT ORDER. AS SUCH WE HOLD THAT THERE CA N BE NO DISALLOWANCE TO THAT EXTENT. WE, THEREFORE, UPHOLD THE ADDITION OF ` 83.28 LAKH BEING THE AMOUNT ALLEGEDLY PAID AS COMMISSION TO M/S.HIMNEEL BREWERI ES LIMITED. THE REMAINING ADDITION OF ` 2.04 LAKH IS HEREBY DIRECTED TO BE DELETED. 5. THE REVENUE IS AGGRIEVED AGAINST THE DELETION OF ADDITION OF ` 1.57 CRORE BEING THE AMOUNT OF GIFT RECEIVED BY THE ASSESSEE. THE FACTS OF THIS GROUND ARE THAT IN THE ORIGINAL RETURN FILED BY THE ASSESSEE A N ADVANCE OF ` 1.57 CRORE WAS SHOWN TO HAVE BEEN RECEIVED FROM M/S.VINAY EXPORTS TOWARDS GOODS / ORDER. THEREAFTER THE RETURN WAS REVISED BY INCLUDING SUCH AMOUNT IN THE CAPITAL ACCOUNT OF THE ASSESSEE BY CLAIMING IT TO BE GIFT R ECEIVED FROM SHRI PRAVINKUMAR B. JAIN, PROPRIETOR OF M/S.VINAY EXPORTS. ON BEING CALLED UPON TO EXPLAIN AS TO WHY THE AMOUNT WAS ORIGINALLY SHOWN AS BUSINESS ADV ANCE AND LATER ON CREDITED TO THE CAPITAL ACCOUNT OF SHRI SURESHKUMAR G.HUNDIA , WHO IS PROPRIETOR OF THE CONCERN, THE ASSESSEE STATED THAT BY MISTAKE INITIA LLY THIS AMOUNT WAS SHOWN AS ADVANCE WHEREAS IT WAS IN FACT A GIFT FROM SHRI PRA VINKUMAR B.JAIN. COPY OF GIFT DEED FROM DONOR AND THE OTHER DETAILS AS CALLE D FOR BY THE A.O. WERE SUBMITTED. THE ASSESSING OFFICER MADE ADDITION OF ` 1.57 CRORE ON THE PREMISE THAT : THE ASSESSEE HAS NOT EXPLAINED THAT WHEN A DECLARAT ION OF GIFT WAS MADE ON 6/9/2003, AS SEEN FROM THE COPY OF GIFT DECLARAT ION FURNISHED BY THE ASSESSEE, WHY THE SAME HAS BEEN SHOWN AS ADVANCE AGAINST GOOD S / ORDER IN THE ORIGINAL RETURN OF INCOME FILED ON 1/11/2004 . WHEN THE MATTER CAME UP BEFORE THE LEARNED CIT(A), HE AFTER CONSIDERING THE REMAND REP ORT FROM THE A.O., DELETED THE ADDITION. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSEE INITIALLY SHOWED A SUM OF ` 1.57 CRORE AS ADVANCE RECEIVED FROM SHRI PRAVINKUMAR B.JAIN, PROP RIETOR OF M/S.VINAY EXPORTS, BUT IN THE REVISED RETURN THIS AMOUNT WAS INCLUDED IN THE CAPITAL ACCOUNT AS GIFT. SHRI PRAVINKUMAR JAIN IS BROTHER-I N-LAW OF THE ASSESSEE. THE ITA NOS.2525 & 2426/MUM/2009 SHRI SURESH G.HUNDIA. 5 ASSESSEE FURNISHED GIFT DEED FROM THE DONOR AND ALS O OTHER DETAILS AS CALLED FOR BY THE ASSESSING OFFICER ALONG WITH PERMANENT ACCOU NT NUMBER AND ADDRESS ETC. THE ONLY REASON TAKEN BY THE ASSESSING OFFICER FOR MAKING THE SAID ADDITION IS THAT THE AMOUNT IN QUESTION WAS ORIGINALLY SHOWN AS ADVANCE AGAINST GOODS. FURTHER IT CAN BE NOTICED THAT THE A.O. HAS HELD TH AT IN VIEW OF THE ABOVE, THE AMOUNT OF ` 1.57 CRORE IS TREATED AS BUSINESS RECEIPT AND BROUG HT TO TAX ACCORDINGLY . DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS THE ASSESSEE FILED COPY OF RETURN OF INCOME OF SHRI PRAVINKUMAR JAIN A ND ALSO COPY OF BANK STATEMENT SHOWING PAYMENT OF ` 1.57 CRORE TO M/S.HUNDIA EXPORTS, BEING THE PROPRIETORSHIP CONCERN OF THE ASSESSEE. FROM THE BA NK ACCOUNT OF SH. PRAVIN KUMAR, IT WAS OBSERVED THAT A SUM OF ` 1.57 CRORE WAS RECEIVED BY HIM ON THE SAME DAY FROM M/S.CENZER INDUSTRIES LIMITED AND THE RE WERE CONTINUOUS TRANSACTIONS BETWEEN THE TWO. IT WAS FURTHER REPORT ED THAT THE PAYMENT OF ` 1.57 CRORE WAS RECEIVED BY M/S.CENZER INDUSTRIES LIMITED FROM M/S.SONIC WATCHES LIMITED. THE LEARNED CIT(A) FURTHER DIRECTED THE A. O. TO CARRY OUT INQUIRY WITH M/S.SONIC WATCHES LIMITED WITH REGARD TO THE PAYMEN T OF ` 1.57 CRORE. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS PLACED ON R ECORD A COPY OF THE REPORT OF THE A.O. DATED 08.09.2008 IN WHICH IT HAS BEEN M ENTIONED BY THE A.O. THAT M/S.SONIC WATCHES LIMITED IS A DEFUNCT / CLOSED COM PANY, WHOSE DIRECTORS COULD NOT BE TRACED. FURTHER THERE IS A REFERENCE I N THIS REPORT OF A LETTER DATED 07.01.2008 OF M/S.SONIC WATCHES LIMITED WAS ON THE RECORD OF THE ACIT INDICATING THAT M/S.SONIC WATCHES LIMITED HAS INFORMED THAT THE AMO UNT PAID TO M/S.CENZER INDUSTRIES WAS SUPPOSEDLY FROM SALE P ROCEEDS . THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS POINTED OUT THAT TH E LEARNED CIT(A) HAS RECORDED ON PAGE 3 PARA 3 THE COMMENTS OF THE A.O. WHICH DID NOT ACTUALLY MATCH WITH THE REMAND REPORT FILED BY THE A.O. IT I S FROM THE COPY OF THE REMAND REPORT DATED 08.09.2008 PLACED ON RECORD BY THE LEARNED D.R. THAT WE HAVE PERUSED AND NOTED THAT M/S.SONIC WATCHES LIMIT ED PAID THE AMOUNT TO M/S.CENZER INDUSTRIES. FROM THE ABOVE FACTS IT CAN BE EASILY NOTICED THAT THERE IS ITA NOS.2525 & 2426/MUM/2009 SHRI SURESH G.HUNDIA. 6 NO DISPUTE ABOUT THE ASSESSEE GENUINELY RECEIVING T HE SUM OF ` 1.57 CRORE FROM HIS BROTHER-IN-LAW THROUGH BANKING CHANNEL. SHRI PR AVINKUMAR JAIN DISCLOSED THE SOURCE OF THE AMOUNT IN HIS BANK ACCOUNT BEING THE RECEIPT FROM M/S.CENZER INDUSTRIES. FURTHER M/S.CENZER INDUSTRIES INFORMED ABOUT THE SOURCE OF SUCH AMOUNT AS HAVING BEEN RECEIVED FROM M/S.SONIC WATCH ES LIMITED AND M/S.SONIC WATCHES LIMITED HAS ACCEPTED THAT IT HAD PAID THE AMOUNT TO M/S.CENZER INDUSTRIES. NOT ONLY THE SOURCE OF THE D ONOR BUT THE SOURCE OF THE SOURCE HAS ALSO BEEN PROVED BY THE ASSESSEE IN THE INSTANT CASE. THE IDENTITY OF THE DONOR IS NOT IN DISPUTE AS HE HAD HIS PERMANENT ACCOUNT NUMBER ETC. AND HIS BANK ACCOUNT FROM WHICH THE AMOUNT WAS GIFTED TO TH E ASSESSEE. THE CAPACITY OF THE DONOR ALSO STANDS PROVED BY WAY OF ACTUAL RECEI PT OF THE SAID SUM FROM M/S.CENZER INDUSTRIES. WE ARE UNABLE TO DISPUTE THE GENUINENESS OF THE TRANSACTION FOR THE REASON THAT IT IS NOT NECESSARY , AS ARGUED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, THAT THERE MUST BE OCC ASION FOR MAKING A GIFT FROM ONE PERSON TO ANOTHER. HERE IT IS IMPORTANT TO NOTE THAT BOTH THE DONOR AND DONEE IN THE PRESENT CASE ARE RELATIVES AND THERE C ANNOT BE ANY SUCH REQUIREMENT OF OCCASION FOR THE MAKING OF GIFT. IN OUR CONSIDER ED OPINION, ALL THE NECESSARY INGREDIENTS TO PROVE THE GENUINENESS OF THE GIFT HA VE BEEN DULY ESTABLISHED. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER ON THIS ISSUE. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED AND THAT OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 08 TH DAY OF FEBRUARY, 2012. SD/- SD/- (N.V.VASUDEVAN) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 08 TH FEBRUARY, 2012. DEVDAS* ITA NOS.2525 & 2426/MUM/2009 SHRI SURESH G.HUNDIA. 7 COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) CENTRAL-III, MUMBAI 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.