Shubh Multitrade Private Limited, Mumbai V. Income Tax Officer, Ward-11(2)(1), Mumbai

ITA 2552/MUM/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5107 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 06-08-2024
• Assessment Year: misc
• Appeal Filed On: 23-05-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RANJANA SONI
• Keywords: Search and seizure; Accommodation entries; Bogus
• Section: 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “J (SMC)” BENCH, MUMBAI BEFORE MS PADMAVATHY S, AM & SHRI SANDEEP SINGH KARHAIL, JM I.T.A. No. 2552 /Mum/2024 (Assessment Year: 2021-22) Shubh Multitrade Pvt. Ltd. 501, A, Dhruv Building, Gulmohar Road, N.S.1, J.V. P.D, Vile Parle, Mumbai-400049. PAN : AAHCS8610G Vs. ITO, Ward-11(2)(1), Aayakar Bhavan, New Marine Lines, Mumbai-400020. Appellant) : Respondent) Appellant/Assessee by : Ms. Ranjana Soni, AR Revenue/Respondent by : Shri Sridhar G. Menon, Sr. DR Date of Hearing : 07.08.2024 Date of Pronouncement : 08.08.2024 O R D E R Per Padmavathy S, AM: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre, Delhi [for short 'the CIT(A)'] dated 21.03.2024 for Assessment Year (AY) 2021-22. The assessee raised the following grounds of appeals: “1. The appellant submits that there is delay in filing the appeal by4 days. The delay in filing of the appeal of days was due to circumstances beyond the control of the appellant. The appellant makes a respectful prayer to your honour to condone the delay of 4 days in filing the appeal and decide the grounds on merits. 2 ITA No. 2552/Mum/2024 Shubh Multitrade Pvt. Ltd. 2. On the facts and circumstances of the case and in law, the Learned CIT (Appeal) erred in confirming the addition made in assessment order by Ld. AO without appreciating the facts that the appellant company did not have any connection/ transaction with Mr. Ramgopal Garodia. 2.1 On the facts and circumstances of the case and in law, the Learned CIT(Appeal) not appreciate the fact that Ld. AO has made addition merely relying on statement of Mr. RamgopalGarodia who has stated false fact that he was director in appellant company whereas it is completely incorrect. 3. On the facts and circumstances of the case and in law, the Learned CIT (Appeal) erred in confirming addition of Rs. 5,00,000/- by applying 5% commission on total accommodation entry of Rs. 1,00,00,000/- without appreciating the fact that no evidence corroborating the rate of 5% has been found during and after the search proceedings against the appellant. 3.1 On the facts and circumstances of the case and in law, the Learned CIT(Appeal) erred in confirming the addition of Rs. 10,00,000/- without considering the fact that addition @10% of Rs. 1,00,00,000/- (same accommodation entry) for AY 2020-21 has already been made by Ld. AO. 4. On the facts and circumstances of the case and in law, the Learned CIT (Appeal) has erred in confirming the disallowance of Audit Fees and General Expenses of Rs. 27.185/- without appreciating the fact that the said expenses were incurred for business purpose. 5. The appellant craves leave to add, alter, amend or modify any or all grounds till the disposal of the Appeal.” 2. The assessee is a private limited company and filed the return of income for AY 2021-22 on 14.03.2022 declaring a total income of Rs.516/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The Assessing Officer (AO) received information from DDIT (Inv.) that there was a search and seizure operation under section 132 of the Income Tax Act, 1961 (the Act) was carried out in the case of One World Group and a statement was recorded from one Mr. Ramgopal Garodia who according to the AO is a director of the assessee-company. It is alleged by the AO that in the statement recorded Mr. 3 ITA No. 2552/Mum/2024 Shubh Multitrade Pvt. Ltd. Ramgopal Garodia has accepted that the assessee company is not doing any genuine business and engaged in providing accommodation entries to various beneficiaries. Accordingly, the AO held that the assessee has entered into bogus sale/purchase transactions of Rs. 1,00,00,000/- and made addition @ 5% towards commission for providing the alleged accommodation entries. The relevant finding of the AO is extracted below: “7. Since the assessee company was engaged in providing bogus sales and purchase bills as per information available on record, and provided accommodation entries to the tune of Rs. 1,00,00,000/- (One Crore) in the form of bogus sale and purchase bills in lieu of certain commission. Therefore Rs.5,00,000/- as 5% of commission earned on providing accommodation entry of Rs.1,00,00,000/- is added to the income of the assessee. The penalty u/s 270A for under reporting of income is also initiated separately.” 3. On further appeal, the CIT(A) confirmed the addition made by the AO ex- parte since the assessee did not respond to the notices issued by the CIT(A). 4. There is a delay of four days in filing the appeal before the Tribunal. The ld. Authorized Representative (AR) filed an affidavit in this regard. Having heard both the parties and perused the material on record, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore following the Hon’ble Supreme Court decision in the case of Collector, Land Acquisition Vs. MST. Katiji & Ors., (167 ITR 471) (SC) we condone the delay of four days in filing the appeal and admit the appeal for adjudication. 5. The ld. Authorized Representative (AR) submitted that the assessee during the course of assessment proceeding submitted various details including the statement of account, auditor's report, details of loans and advances, bank 4 ITA No. 2552/Mum/2024 Shubh Multitrade Pvt. Ltd. statement, etc. which have not been considered by the AO. The ld. AR further submitted that the AO made the addition merely based on the statement recorded from Mr. Ramgopal Garodia without any other evidence to support the alleged accommodation entries. The ld. AR also submitted that Mr. Ramgopal Garodia is not a Director in the assessee company as has been held by the AO and the addition made based on his statement which has no relevance to assessee company is not sustainable. 6. The ld. Departmental Representative (DR) submitted that the information relied on by the AO has not been elaborated in the assessment order and the CIT(A) has passed ex-parte order without going into the merit. Therefore, the ld. DR prayed that the issue may be remitted back to the lower authorities for proper adjudication. 7. We heard the parties and perused the material available on record. During the course of search and seizure action under section 132 of the Act statement was recorded under section 131 from one Mr. Ramgopal Garodia who has stated that the assessee company does not carry on any genuine business and that it is engaged in providing accommodation entries. The AO based on the statement held that the assessee has entered into a bogus transaction to the tune of Rs. 1,00,00,000/- and made an addition towards commission on the impugned amount @ 5% i.e. Rs. 5,00,000/-. From the perusal of the assessment order, we notice that the AO has acknowledge the fact that the assessee has submitted certain documents such as the financial statements, auditor's report, details of loans and advances, etc. and that the AO has not recorded any adverse finding with regard to the documents submitted by the assessee. We further notice that the statement recorded from Mr. Ramgopal Garodia which is reproduced in the order of assessment is dated 5 ITA No. 2552/Mum/2024 Shubh Multitrade Pvt. Ltd. 09.12.2019 and therefore there is merit in the contention that the addition towards commission on the impugned amount could not be made in under year under consideration i.e. AY 2021-22. On perusal of the audited financial statement of the assessee we notice that the assessee has recorded Rs.53,875 as revenue from operations and Rs.32,574 as cost of materials. The ld AR also submitted that the bank statement of the assessee which was submitted before the AO, did not contain any entry pertaining to the alleged accommodation entry. During the course of hearing, it is also brought to our notice that the AO has made a similar addition on the impugned amount of Rs. 10,00,00,000/- during AY 2020-21 also by applying 10% towards commission. Considering the facts and circumstances of the cases, in our considered view that the AO is not correct in making the addition towards commission on the alleged bogus transaction for the reason that – (i) The statement was recorded on 09.12.2019 and the addition is made in different assessment year i.e. in AY 2021-22 (ii) The addition is made without bringing on record any material evidence to show that the assessee has entered into the impugned transaction during the year under consideration. (iii) The AO has not recorded any adverse findings with regard to the various documents submitted by the assessee (iv) The AO has merely relied on the statement recorded from Mr.Ram Gopal Garodia to make the addition. (v) The AO has made addition towards commission on same alleged accommodation entry of Rs.1,00,00,000/- in two different AYs i.e. AY 2020-21 & 2021-22 6 ITA No. 2552/Mum/2024 Shubh Multitrade Pvt. Ltd. 8. In view of these discussions we hold that the addition made by the AO towards commission @ 5% on the alleged accommodation entry is not sustainable and liable to be deleted. 9. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 08-08-2024. Sd/- Sd/- (SANDEEP SINGH KARHAIL) (PADMAVATHY S) Judicial Member Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai