JAIPUR SECURITIES PRIVATE LIMITED, MUMBAI V. DCIT, CENTRAL CIRCLE-5(1), MUMBAI

ITA 2566/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3824 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 25-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A MOHAN
• Keywords: Unexplained expenditure; Search and seizure; Principle of natural justice; Earning of tax free income; Accommodation entries; Onus to prove; Rule 8D
• Section: 143(3); 142(1); 153A; 14A; 68; 11

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI C. N. PRASAD, JM & SHRI S . RIFAUR RAHMAN, AM ./ I.T.A. NO . 2566/MUM/2018 ( / ASSESSMENT YEAR: 2010 - 11 ) JAIPUR SECURITIES PVT. LTD. EXPRESS ZONE, A WING, 8 TH FLOOR, WESTERN EXPRESS HIGHWAY GOREGAON EAST, MUMBAI - 400 063 / VS. DCIT CC - 5(1) 19 TH FLOOR, AIR INDIA BLDG, NARIMAN POINT, MUMBAI - 400 020 ./ ./ PAN NO. A A AC J1456E ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MS. RITU KAMAL KISHOR, AR / RESPONDENTBY : SHRI A. MOHAN, DR / DATE OF HEARING : 20.10 .20 20 / DATE OF PRONOUNCEMENT : 04.11.2020 / O R D E R PER S. RIF AU R RAHMAN (ACCOUNTANT MEMBER) : THE PRESENT A PPEAL HA S BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISS IONER OF INCOME TAX (APPEALS) - 53 , 2 I.T.A. NO. 2566/MUM/2018 JAIPUR SECURITIES PVT. LTD. MUMBA I I N SHORT LD. CIT(A) DATED 07.03.2018 FOR AY 2010 - 11 . 2. THE BRIEF FACTS OF THE CASE ARE , THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BROKERS & TRADERS IN FOREX, SHARES/SECURITIES AND COMMODITIES. A SEARCH AND SEIZURE ACTION U/S 132(1) OF THE ACT WAS CONDUCTED IN THE ANAND RATHI GROUP ALONGWITH THE OTHER GROUP CONCERNS ON 24.09.13. CONSEQUENT TO THE SEARCH OPERATION, THE CASE OF THE ASSESSEE WAS CENTRALIZED U/S 127 VIDE ORDER DATED 09.09.14 FOR COORDINATED INVESTIGATION. MEANWHILE, NOTICE U/S 153(A) OF THE ACT WAS ISSUED ON 02.02.15 AND SERVED UPON THE ASSESSEE. IN RESPONSE, ASSESSEE FILED ITS RETURN OF INCOME DECLARING TO TAL INCOME OF RS. 10,70,828/ - ON 11.04.15. THE RETURN OF INCOME WAS ACCOMPANIED WITH COMPUTATION OF INCOME, BALANCE SHEET, PROFIT & LOSS ACCOUNT ALONGWITH THE SCHEDULES. THEREAFTER, NOTICE S U/S.143(2) AND 142(1) OF THE I.T. ACT, 1961 WERE ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE, ASSESSEE FILED RELEVANT INFORMATION AS CALLED FOR A ND AFTER CONSIDERING THE DETAILED SUBMISSION OF ASSESSEE, AO REJECTED THE CONTENTION OF ASSESSEE AND MADE ASSESSMENT ORDER U/S 143(3) R.W.S. 153A BY OBSERVING THAT ASSESSEE HAS ISSUED SHARE CAPITAL WITH SHARE 3 I.T.A. NO. 2566/MUM/2018 JAIPUR SECURITIES PVT. LTD. PREMIUM TO THE EXTENT OF RS. 75,00,000/ - . IN ORDER TO VERIFY THE GENUINENESS OF THE SHARE ALLOTMENT, HE ISSUED SUMMONS TO M/S NIHAL MERCANTILE PVT. LTD AND M/S BRILLIAN COMMONSALES PVT. LTD. NOT SATISFIED WITH THE SUBMI SSION OF THE ASSESSEE AND N ONE OF THE PARTIES APPEARED FOR CONFIRMATION, HE MADE THE ADDITION U/S 68 OF THE ACT. SINCE, AO TREATED THE ABOVE TRANSACTION AS BOGUS AND ACCOMMODATION ENTRIES, HE MADE FURTHER ADDITION OF COMMISSION PAYMENT WHICH WAS WORKED OUT @ 0.75%. ACCORDINGLY, HE MADE THE ADDITION OF RS. 56,250/ - . FURTHER, HE MADE DISALLOWANCE U/S 14A TO THE EXTENT OF RS. 2,44,573/ - . 3 . AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND MADE THE DETAIL ED SUBMISSION BEFORE LD. CIT(A) WITH RESPECT TO ADDITION /DISALLOWANCE MADE BY THE AO , AND LD. CIT(A) CONSIDERING THE SUBMISSION S OF ASSESSEE, DISMISSED THE APPEAL OF ASSESSEE. 4 . AGGRIEVE D WITH THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLO WING GROUNDS: - 1. THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITIONS MADE BY THE ASSESSING 4 I.T.A. NO. 2566/MUM/2018 JAIPUR SECURITIES PVT. LTD. OFFICER U/S. 143(3) R.W.S. 153A OF THE INCOME - TAX ACT, 1961 WHICH IS INVALID AND BAD IN LAW. 2. THE LEARNED CIT(A) HAS ERRED IN UPH OLDING THE ADDITION OF RS.75,00,000/ - MADE BY THE ASSESSING OFFICER U/S.68 OF THE ACT. 3. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.56,250/ - MADE BY THE ASSESSING OFFICER, BEING ALLEGED UNEXPLAINED EXPENDITURE @ 0.75% ON AFORESAID AL LEGED CAPITAL INTRODUCED OF RS.75,00,000/ - . 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S. 14A OF THE ACT READ WITH RULE 8D OF IT. RULES, 1962. 5. THE ORDER PASSED BY THE LEARNED CIT(A) IS IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND BAD IN LAW. 6. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND, ALTER OR DELETE ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL. 5 . AT THE OUTSET, LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBMITT ED THAT ALL THE GROUNDS RAISED IN THIS APPEAL ARE SQUARELY COVERED BY THE CONSOLIDATED ORDER OF COORDINATE BENCH OF HONBLE ITAT IN ITA 2569 TO 2573 /MUM/20 18 AND 2563 & 5 I.T.A. NO. 2566/MUM/2018 JAIPUR SECURITIES PVT. LTD. 2564/MUM/2018 FOR AY 2010 - 11 & 2011 - 12 IN THE CASE OF AQUA PROOF WALL PLAST PVT. LTD. VERS. DCIT AND OTHERS , WHEREIN THE HONBLE ITAT HAS DECIDED THE ISSUE S IN FAVOUR OF ASSESSEE. THE GROUNDS AND CIRCUMSTANCES ARE EXACTLY SIMILAR TO THE CASE OF AQUA PROOF WALL PLAST PVT. LTD, THEREFORE HE SUBMITTED THAT HONBLE ITAT MAY CONSIDER THE SIMILAR FACTS IN THE PRESENT APPEAL. 6 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS PASSED BY THE REVENUE AUTHORITIES, HOWEVER HE CONCEDED THAT THE SIMILAR GROUNDS RAISED BY THE ASSESSEE ARE DECIDED BY THE COORDINATE BENCH OF ITAT. 7 . CONSIDERED THE RIVAL SU BMISSIONS AND MATERIAL PLACED ON RECORD. WE NOTICE FROM THE RECORD THAT THE IDENTICAL GROUND S RAISED IN THE PRESENT APPEAL HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ITA ITA 2569 TO 2573/MUM/2018 AND 2563 & 2564/MUM/2018 FOR AY 2010 - 11 & 2011 - 12 IN THE CASE OF AQUA PROOF WALL PLAST PVT. LTD. VERS. DCIT AND OTHERS ON MERITS. FOR THE SAKE OF CLARITY, IT IS REPRODUCED BELOW: - 6 I.T.A. NO. 2566/MUM/2018 JAIPUR SECURITIES PVT. LTD. 18. IN THIS VIEW OF THE MATTER AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO TAKING INTO CONSIDER ATION VARIOUS CASE LAWS AS DISCUSSED HEREINABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS DISCHARGED ITS INITIAL ONUS TO PROVE IDENTITY, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES BY FILING VARIOUS DOCUMENTS. THE AO, WITHOU T CARRYING OUT FURTHER INQUIRIES IN ORDER TO ASCERTAIN THE CLAIM OF THE ASSESSEE, JUMPED INTO CONCLUSION ON THE BASIS OF FINANCIAL STATEMENTS OF THE SUBSCRIBERS THAT NONE OF THEM HAD ENOUGH SOURCE OF INCOME TO ESTABLISH CREDITWORTHINESS. THEREFORE, WE ARE OF THE VIEW THAT THE AO WAS ERRED IN MAKING ADDITIONS TOWARDS SHARE CAPITAL U/S 68 OF THE INCOME TAX ACT, 1961. THE LEARNED CIT(A) WITHOUT APPRECIATING RELEVANT FACTS HAS CONFIRMED ADDITIONS MADE BY THE AO TOWARDS SHARE CAPITAL U/S 68 OF THE INCOME TAX ACT , 1961. HENCE, WE REVERSE FINDINGS OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITIONS MADE TOWARDS SHARE CAPITAL U/S. 68 OF THE INCOME TAX ACT, 1961 . 19. INSOFAR AS, ADDITIONS TOWARDS PROBABLE COMMISSION PAYMENT TO ENTRY PROVIDES, WE FIND THAT SINCE, WE HAVE DELETED ADDITIONS MADE BY THE AO TOWARDS SHARE CAPITAL, CONSEQUENT ADDITIONS MADE TOWARDS PROBABLE COMMISSION @ 0.75%, ON TOTAL 7 I.T.A. NO. 2566/MUM/2018 JAIPUR SECURITIES PVT. LTD. TRANSACTIONS IS ALSO IN CORRECT AND ACCORDINGLY, DIRECT THE AO TO DELETE ADDITIONS MADE TOWARDS COMMISSION ESTIMATION. 20. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION FROM GROUND NO.4 OF ASSESSEE'S APPEAL IS ADDITIONS TOWARDS DISALLOWANCES OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME. WE FIND THAT THE AO HAS MADE ADDITIONS TOWARDS DISALLOWANCES OF EXPENDITURE IN THE ASSESSMENT FRAMED U/S 143(3) R.W.S. 153A OF THE I.T.ACT, 1961, WITHOUT R EFERENCE TO ANY INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH. IT IS SETTLED POSITION OF LAW THAT IN ORDER TO MAKE ANY ADDITIONS IN THE ASSESSMENTS, WHICH ARE FRAMED U/S 153A, THE ADDITIONS QUA INCRIMINAT ING MATERIAL IS A MUST. UNLESS, THE AO HAS INCR IMINATING MATERIAL IN HIS POSSESSION TO PROVE THAT ANY ITEM OF ADDITION IS SUPPORTED BY INCRIMINATING MATERIAL FOUND, AS A RESULT OF SEARCH, NO ADDITIONS COULD BE MADE IN THE ASSESSMENTS FRAMED U/S - 153A, IF SUCH ASSESSMENT HAS BEEN COMPLETED /UNABATED AS O N THE DATE OF SEARCH. IN THIS CASE, THE FACT S WITH REGARD TO NO REFERENCE TO INCRIMINATING MATERIAL, IN RESPECT OF ADDITIONS TOWARDS DISALLOWANCES OF EXPENDITURE U/S 14A R.W.RULE 8D IS NOT DISPUTED BY THE REVENUE. WHEN, THE BENCH HAS SPECIFICALLY ASKED THE LD. DR ABOUT INCRIMINATING MATERIAL, THE LD. DR FAILED 8 I.T.A. NO. 2566/MUM/2018 JAIPUR SECURITIES PVT. LTD. TO PROVE THAT THE ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCES OF EXPENDITURE IS SUPPORTED BY ANY INCRIMINATING MATERIAL. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT IN ABSENCE OF ANY INCRIMINATIN G MATERIAL FOUND AS A RESULT OF SEARCH, NO ADDITIONS COULD BE MADE IN THE ASSESSMENT FRAMED U/S 153A OF THE I.T. ACT, 1961. THIS LEGAL PROPOSITION IS SUPPORTED BY THE DECISION OF HON'BLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF CIT VS CONTINENTAL WA REHOUSING CORPORATION (NHAVA SHEVA LTD. (2015) 374 ITR 645, WHERE THE HON'BLE HIGH COURT CLEARLY HELD THAT IN ABSENCE OF INCRIMINATING MATERIAL NO ADDITIONS COULD BE MADE, IN RESPECT OF ASSESSMENT WHICH BECOME FINAL AND NO PROCEEDINGS IS PENDING, AS ON THE DATE OF SEARCH. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS ERRED IN MAKING ADDITIONS TOWARDS DISALLOWANCES OF EXPENDITURE, IN RELATION TO EXEMPT INCOME U/S 14A R.W. RULE 8D(2), IN ABSENCE O F SEIZED MATERIALS. THE LD. CIT( A) WITHOUT APPRECIAT ING THE FACTS SIMPLY UPHELD THE ADDITIONS MADE BY THE AO. THEREFORE, WE REVERSE THE FINDINGS OF LD. CIT(A) AND DELETE ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF EXPENDITURE INCU RRED IN RELATION TO EXEMPT INCOME U/S 14A OF THE I.T.ACT, 1961. 21. IN THE RESULT, APPEAL FILED BY THE ASSESEE IS ALLOWED. 9 I.T.A. NO. 2566/MUM/2018 JAIPUR SECURITIES PVT. LTD. 8. T HEREFORE , RESPECTFULLY FOLLOWING THE ABOVE DECISION OF COORDINATE BENCH OF ITAT WHICH IS APPLICABLE MUTATIS MUTANDIS IN THE PRESENT CASE. CONSIDERING THE SIMILAR FACTS ON RECORD, WE ARE INCLINED TO ACCEPT THE SUBMISSION OF LD. AR. ACCORDINGLY, THE GROUND S RAI SED BY THE ASSESSEE STANDS ALLOWED . 9 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 04.11. 2020 . SD/ - SD/ - (C. N. PRASAD ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 04.11 . 2020 SR.PS. DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI