RAKESHKUMAR M. GUPTA, MUMBAI V. ITO 14(3)(2), MUMBAI

ITA 2598/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8558 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M C OMI NINGSHEN
• Keywords: Unexplained cash credit; Business expenditure; Accommodation entries
• Section: 37

Judgement Text

INCOME TAX APPELLATE TRIBUNAL,MUMBAI - H BENCH BEFORE S/SH RI . D.T. GARASIA, JUDICIAL MEMBER & ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO. 2595 TO 2600 /MUM/201 5 ASSESSMENT YEAR - 2003 04 TO 2008 09 MR RAKESHKUMAR M.GUPTA PROP. M/S MANOJ MILLS SHOP NO.4, RAM GALLI, PANKAJ MARKET CHAMPA GALLY CROSS LANE, MUMBAI 400 002 PAN NO. AAJPG9761F V. ITO 14(3) - 2 EARNEST HOUSE MUMBAI (APPELLANT ) (RESPONDENT) APPELLANT BY SHRI VIMAL PUNMIYA , CA RE SPONDENT BY SHRI M.C. OMI NINGSHEN DATE OF HEARING : 2 5 .01.2017 DATE OF PRONOUNCEMENT : 03.02 .2017 O R D E R PER BENCH : 1. ALL THE APPEALS ARE FIL ED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 22.01.2015 FOR THE ASSESSMENT YEARS 2003 - 04 TO 2008 - 09 . 2. IN ALL THESE APPEALS THE COMMON FIRST GROUND IS THAT CIT(A) IS NOT JUSTIFIED IN PERFORMING TH E PENALTY U/S.271 (1) (C) FOR ASSESS MENT YEAR S 2003 - 04 , 2004 - 05, 2005 - 06, 2006 - 07, 2007 - 08 AND 2008 - 09. 3. THE SHORT FACTS OF THE CASE ARE A S UNDER. IN ALL APPEALS PENALTY U/S. 271 (1) (C) HAS BEEN LEVIED VIDE ORDER DATED 05.03.13. THE ASSESSEE IS A TRADER IN FABRICS BUT ON SURVEY U/S.133 A IT WAS FOUND ENGAG ING ONLY IN ISSUING ACCOMMODATION SALE BILLS. THE ASSESSMENT IN ALL THESE CASES WERE COMPLETED AND INCOME WAS ASSESSED AS PER THE DETAIL AS UNDER: SR.NO A.Y. DT. OF ASST. ORDER RETURNED INCOME RS. ASSESSED INCOME RS. 1. 2002 - 03 13.11.2009 1,93,070 34,88,620 2. 2003 - 04 27.12.2010 3,52,130 53,46,820 ITA.NO. 2596 TO 2600 /MUM/15 RAKESH KUMAR M. GUPTA . 2 SR.NO A.Y. DT. OF ASST. ORDER RETURNED INCOME RS. ASSESSED INCOME RS. 3. 2004 - 05 27.12.2010 3,47,100 50,45,582 4. 2005 - 06 27.12.2010 3,22,927 5092,600 5. 2006 - 07 31.12.2010 14,89,199 2,03,91,871 6. 2007 - 08 13.11.2009 2,77,978 72,95,730 7. 2008 - 09 27.12.2010 4,52,100 55,09,230 BASIS OF ADD ITION FOR ALL THE YEARS ARE AS UNDER: - PARTICULARS A . Y 02 - 03 A . Y 03 - 04 A . Y 0 4 - 05 A . Y 05 - 06 A . Y 06 - 07 A . Y 07 - 08 A . Y 08 - 09 ESTIMATION OF COMMISSION INCOME AT 6% ON SALES 34,22,868 AT 7% ON SALES 7,399,410 AT 4% ON SALES 3,071,999 2,9 58,244 2,763,394 3,522,073 2,711,165 AT 3% ON PURCHASES 1,842,925 1 , 639 , 557 1 , 889 , 964 1 , 651 , 105 1 , 932 , 479 LESS: EXPENSES @ 5% ON ESTIMATE COMMISSION 1,71,143 ( 245,745 ) ( 229 , 890 ) ( 232 , 668 ) ( 369 , 971 ) ( 232 , 182 ) 4 , 669 , 178 4 , 367 , 911 4 , 420 , 690 5 , 173 , 17 9 7 , 029 , 440 4 , 411 , 462 UNEXPLAINED CASH LOAN - - - 14 , 000 , 000 - - TOTAL ADDITIONS 32,51,725 46 , 69 , 178 4367911 44 , 20 , 690 1 , 91 , 73 , 179 70 , 29 , 440 44 , 11 , 462 THE ASSESSING OFFICER HAS LEVIED THE PENALTY AND CIT(A) IS CONFIRMED THE SAME. 4. DURING THE COURSE OF HEARING LD.A.R. OF THE ASSESSEE HAS SUBMITTED BEFORE US THAT IN THE C A SE OF ASSESSEE FOR ASSESSMENT YEAR S 2002 03 TO 2009 10 IN ITA NO .5029 TO 5036/MUM/2014 THE TRIBUNAL HAS DECIDED THE QUANTUM APPEAL AND WHEREAS THE TRIBUNAL HAS ALLOWED THE APPEAL OF THE ASSESSEE AND THE ADDITION WHICH WAS ESTIMATED BY THE ASSESSING OFFICER AT COMMISSION AT THE RATE OF 7% ON SALES AND FURTHER 5% OF THERE WAS ALLOWED AS EXPENSES. THEREAFTER THE MATTER IS DECIDED BY THE TRIBUNAL AND TRIBUNAL HAS ESTIMATED COMMI SSI ON ON TURN OVER AT 0 . 6% . THEREFORE WHEN THE QUANTUM ADDITION IS RESTRICTED BY THE ITA.NO. 2596 TO 2600 /MUM/15 RAKESH KUMAR M. GUPTA . 3 TRIBUNAL THERE IS NO QUESTION OF IMPOSING THE PENALTY. SIMILARLY IN THE GROUP CASE IN MOHIT RAKESH KUMAR GUPTA ASSESSEE IN OTHER GROUP CASE WHEREIN THE SIMILAR PENALTY HAS BEEN LEVIED BY THE REVENUE AUTHORITIES IN THE CASE OF SMT. HEMA R. GUPTA AND SHRI NILESH RAKESH KUMAR GUPTA IN ITA.NO.2639/MUM /15 WHEREIN THE SIMILAR KIND OF PENALTY HAS BEEN DELETED. THEREFORE THIS APPEAL MAY ALSO BE ALLOWED. LD.DR RELIED UPON T HE ORDER OF T HE REVENUE AUTHORITIES. 5. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. WE FOUND THAT THE ISSUES IN CONTROVERSY REGARDING PENALTY HAS BEEN DECI DED IN THE ASSESSEE GROUP CASE IN THE CASE OF SMT. HEMA R. GUPTA AND SHRI NILESH RAKESH KUMAR GUPTA IN ITA.NO.2639/MUM /15 AND ITA NO.2638/M UM /15 WHE RE IN THE SIMILAR KIND OF PENALTY HAS BEEN DELETED BY THE TRIBUNAL. THE TRIBUNAL HS DELETED TH E PENALTY BY OBSERVING AS UNDER: - 5. WE HAVE HEARD THE RIVAL SUBMISSION AND ALSO CAREFULLY PERUSED THE MATERIAL PLACED ON RECORD INCLUDING THE CASES RELIED UPON, IN THE LIGHT OF THE RESPECTIVE CONTENTIONS OF THE PARTIES. WE NOTICE THAT IN QUANTUM APPEAL ITA NOS. 5011 AND 5018/MUM/2014 SOUGHT ASSESSMENT YEARS 2002 - 03 TO 2009 - 10, THE COORDINATE BENCH VIDE ORDER DATED 14 / 09 / 2016, FOLLOWING THE DECISION RENDERED IN THE CASE OF SANJAY KUMAR GARG VERSUS ACIT (2011) 12 TAXMANN.COM 294 (DELHI) AND THE DECISION RENDERED BY THE COORDINATE BENCH IN THE CASE OF GOLD STAR FINVEST (P) LTD VERSUS ITO (2013) 33 TAXMANN.COM 129 ( MUMBAI TRIBUNAL) HELD THAT ADDITION OF 0.6%. OF TURNOVER IS REASONABLE. THE RELEVANT PORTION OF THE ORDER READS AS UNDER: - '6.1 WE FIND THAT TRIBUNAL IN CASE OF SANJAY KUMAR VERSUS GARQ VS. ACIT (SUPRA) HELD THAT RATE OF COMMISSION CANNOT BE MORE THAN 1 % , BUT IN PRESENT CASE, THE ASSESSEE HAD ALREADY OFFERED THE SAME FOR TAXATION. PURPOSE BUT WITH RIDER OF ALLOWABILITY OF CERTAIN EXPENSES AGAINST SAME. HENCE, THE RATE OF 6% ADOPTED BY ASSESSING OFFICER WAS HIGHLY ONE. HENCE, THE COMMISSION INCOME WAS TO B E TAKEN @ O. 6% OF SALES TUMOVER. SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE JURISDICTIONAL MUMBAI TRIBUNAL IN CASE OF GOLD STAR FINVEST (P). LTD. V. ITO (2013) 33 TAXMANN.COM 129 (MUMBAI TRIB.), WHEREIN TRIBUNAL HELD AS UNDER: 12. HAVING CAREFULLY EX AMINED THE VARIOUS ORDERS IN THE CASE OF DIFFERENT ASSESSEES, IT HAS BECOME AMPLY AT THAT IN THESE TYPE OF ACTIVITIES BROKERS ARE ONLY A CONCERNED WITH THEIR COMMISSION ON THE VALUE OF THE TRANSACTIONS. NOW THE QUESTION ITA.NO. 2596 TO 2600 /MUM/15 RAKESH KUMAR M. GUPTA . 4 COMES WHAT WOULD BE THE REASONABLE PERCENTAGE OF COMMISSION ON THE TOTAL TURNOVER? THE ASSESSEE HAS ALSO MADE OUT A CASE THAT THE CUSTOMERS 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 S TATED HIS THAT AN AVERAGE PERCENTAGE OF COMMISSION THESE BETWEEN.15% TO .25%. IN THE CASE OF POLRESTIA &. CO (SUPRA) AND KIRAN & AND CO. (SUPRA), THE TRIBUNAL HAS CONSIDERED REASONABLENESS OF PERCENTAGE OF COMMISSION TO BE EARNED ON TURNOVER WAS AT .1%. TH E ASSESSEE HIMSELF HAS OFFERED THE PERCENTAGE OF COMMISSION AT 0.15%, WHICH IS MORE THAN THE PERCENTAGE OF COMMISSION CONSIDERED TO BE REASONABLE BY THE TRIBUNAL IN THE CASES OF PALRESHA & CO. (SUPRA) AND KIRAN & CO. (SUPRA), IN SIMILAR TYPE OF PROJECTIONS . THE THEORY OF THE ASSESSING OFFICER TO TREAT THE ENTIRE DEPOSIT AS UNEXPLAINED CASH CREDITS, CANNOT BE ACCEPTED 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 COMM ISSION EARNED ON PROVIDING ACCOMMODATION ENTRIES. WE, THEREFORE, OF THE VIEW THAT SINCE THE ASSESSEE ITSELF HAS DECLARED THE COMMISSION ON TURNOVER AT O. 15% WHICH IS MORE THAN THE PERCENTAGE CONSIDERED TO BE REASONABLE BY THE TRIBUNAL IN THE CASE OF PALRE SNA & CO. (SUPRA) AND KIRAN & CO. (SUPRA), THE SAME SHOULD BE ACCEPTED. WE, ACCORDINGLY, ACCEPT THE COMMISSION DECLARED BY THE ASSESSEE AND SET ASIDE THE ORDER OF THE CIT (A) IN THIS REGARD. 6.2 WE FIND THAT ITAT IN CASE OF SANJAY KUMAR GARD (SUPRA) HA S APPLIED 0.2% COMMISSION ON TURNOVER AND IN GOLD STAR FINVEST LTD. (SUPRA) APPROVED 0.15%. SO, TAKING ALL FACTORS INTO CONSIDERATION, WE HOLD THAT PERCENTAGE OF COMMISSION TO BE EARNED ON TURNOVER IS REASONABLE AT 0.6%. WE HOLD SO. 6. ADMITTEDLY, THE A O HAD LEVIED PENALTY IN QUESTION UNDER SECTION 271 (1) (C) OF THE ACT ON THE ADDITION MADE ON THE BASIS OF ESTIMATION AND THE BASIS OF ESTIMATION WAS FURTHER CHANGED SUBSTANTIALLY BY THE TRIBUNAL IN QUANTUM APPEAL. AS PER THE SETTLED LAW PENALTY PROCEEDING S ARE DIFFERENT FROM ASSESSMENT PROCEEDINGS BECAUSE THE STANDARD OF PROOF REQUIRED FOR IMPOSITION OR PENALTY IS DIFFERENT FROM THAT ON WHICH AN ADDITION COULD BE MAINTAINED. MERE ADDITION TO THE INCOME OF THE ASSESSEE DOES NOT MEAN THAT THE ASSESSEE HAS CO NCEALED IN NARESH CHAND AGANUAL VS. CIT(2013)38 TAXMANN.COM 397 HON'BLE ALLAHABAD HIGH COURT HAS HELD THAT WHEN ADDITION IS MADE ON ESTIMATE BASIS, PENALTY UNDER SECTION 271(1)(C) CANNOT BE ITA.NO. 2596 TO 2600 /MUM/15 RAKESH KUMAR M. GUPTA . 5 IMPOSED. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF HARIGO PAL SINGH VS. COMMISSIONER OF INCOME TAX REPORTED IN (2002) 125 TAXMARI 242, WHEREIN THE ESTIMATED ADDITION MADE BY THE AO WAS CONSIDERABLY REDUCED BY THE TRIBUNAL, HAS HELD THAT IN SUCH CASES, PROVISIONS OF SECTION 271 (1 )(C) OF THE ACT ARE NOT ATTRACTED . THE SAME VIEW HAVE BEEN TAKEN BY THE ITAT CHANDIGARH IN JCIT V. BHAGWAN DASS GORG (2014) 48.TAXMANN185 (CHANDIQARH - TRIB), JODHPUR TRIBUNAL 111 ITO V. GURUNANAK OIL AGENCY (2013) 35 TAXMANN 562(JODHPUR - TRIB.) AND OTHER BENCHES OF ITAT. SO, IN VIEW OF THE DECISIONS OF THE HON'BLE HIGH COURTS AND TRIBUNALS, WE ARE OF THE CONSIDERED OPINION THAT THIS IS NOT A FIT CASE WHERE PENALTY CAN BE IMPOSED UNDER SECTION 271 (1 )(C) OF THE ACT FOR CONCEALMENT OF INCOME OR FOR FURNISHING INCORRECT PARTICULARS OF INCOME. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. WE RESPECTFULLY FOLLOWING THE SAME WE DELETE THE PENALTY. 6. IN CASE OF ITA NO.2598/ MUM / 15 THE ADDITIONAL GROUND FOR LEVYING THE PENALTY WHICH READS AS UNDER: THE LEARNED COMMISSIONER OF INCOME TAX (AP PEAL) ERRED IN FACTS AND LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER AND SUSTAINING THE PENALTY LEVIED ON THE ALLEGED UNEXPLAINED LOAN OF RS.1 , 40,00,000/ - BASED ON OWN HIS SURMISES AND CONJECTURES IGN ORING THE MATERIAL EVIDENCES ON RECORD. 7. THE SHORT FACTS OF THE CASE THAT DURING THE COURSE OF ASSESSMENT PROCEE DINGS AO ADDED AMOUNT OF RS.1,40, 00 ,000 / - BEING UNEXPLAINED CASH LOAN WHICH WAS RECEIVED BY THE ASSESSEE. THE ASSESSING OFFICER FOUND THAT ASS ESSEE DURING THE COURS E OF SURVEY , ASSESSEE H A S STATED THAT HE HAS ISSUED VARIOUS CHEQUES AMOUNT TO RS.1,51,00 ,0 00 ON VARIOUS DATES AND IN REPLY TO THESE ASSESSEE SUBMITTED THAT HE HAS FINANCED RS.1,40,00 ,00 0 / - ABOUT THREE YEARS BACK. BUT IT IS NOT PAID B ACK , THOUGH HE HAS GIVEN CHEQUE S WORTH OF RS.1,29, 00, 000/ - AS SECURITY. THEREFORE HE H AS NEVER RETURNED THE LOAN IN C A S H AND ACCOUNTS FOR THE CHEQUE WHICH WAS DRAWN HAD NO SUFFICIENT BALANCES. THEREFORE ASSESSEE H A S FILED THE COMPLAINT IN THE POLICE STAT ION. THE PENALTY HAS BEEN IMPOSED BY THE AO ON THE GROUND THAT IT IS THE INCOME OF THE ASSESSEE WHICH ASSESSEE HAS CONCE DED A ND CIT(A) HAS CONFIRMED THE PENALTY. ITA.NO. 2596 TO 2600 /MUM/15 RAKESH KUMAR M. GUPTA . 6 8. DURING THE COURSE OF HEARING LD.A.R SUBMITTED THAT THE SIMILAR ISSUE HAS BEEN DEALT WITH BY THE T RIBUNAL IN ITA.NO.5029 TO 5036/MUM/14 WHEREIN THE TRIBUNAL HAS DELETED THE AMOUNT. THEREFORE NO PENALTY COULD BE LEVIED. ON THE OTHER HAND LD.D.R RELIED UPON THE ORDER OF REVENUE AUTHORITY. 9. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. WE FOUND THAT ISSUE IN CONTROVERSY IS DEALT WITH BY THE TRIBUNAL IN ASSESSEES O WN CASE IN ITA NO.5029 TO 5036/MUM /14 WHEREIN THIS RS.1,40, 00, 000/ - WAS DELETED BY THE TRIBUNAL BY OBSERVING AS UNDER : - 19. OTHER ISSUE IN ITA NO.5033/MUM/2014 FOR A.Y. 2006 - 0 7 IS WITH REGARD TO DEDUCTION OF RS.L ,40,00,000/ - ADVANCE GIVEN TO MADANLAL BEGRECHA. LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT ASSESSING OFFICER HAS DISALLOWED THE DEDUCTION ON GROUND THAT ASSESSEE HAD NOT SUBSTANTIATED THE CLAIM. BUT, ASSESSING OFFICER FAILED TO CONSIDER THAT LOANS ARE OPENING BALANCE WHICH WERE ACCEPTED IN 2005 - 06 AND FURTHER TO SUBSTANTI ATE THE CLAIM ASSESSEE VIDE SUBM ISSION DATED 06.12.2010 STATED AS UNDER (REFER PAGE NO.98 OF PAPER BOOK OF A.Y.2006 - 07): '8. I HAD TAKEN HO ME LOAN FROM STANDARD CHARTERED BANK AND G E FINANCIAL. I HAVE CLAIMED IT CORRECTLY AND BEST OF MY KNOWLEDGE. I AM SENDING THE SANCTIONED LETTER ISSUED BY THE ABOVE MENTIONED BANK WITH THIS LETTER. THE LOAN ACCOUNT NUMBER AND LOAN DETAILS ARE MENTIONED ON IT. THE BANK CERTIFICATE AND INTEREST CERTIFICATE ARE IN THE DOCUMENTS IMPOUNDED BY YOUR DEPARTMENT. I WOULD LIKE TO REQUEST YOU TO COLLECT IT FROM THERE ITSELF. THE HOUSING LOAN TAKEN IS NOT WRONGLY CLAIMED AND IS IN T HE PREVIEW OF INCOME TAX ACT, 1961, S O CANTS BE DISALLOWED.' 19.1 ASSESSEE SUBMITTED THAT ASSESSEE HAD PROVIDED ALL THE DETAILS AVAILABLE ASSESSING OFFICER. HENCE, ASSESSING OFFICER CANNOT STATE THAT ASSESSEE FAILED TO SUBSTANTIATE THE CLAIM. SO, THE DEDUCTION CLAIMED BY ASSESSEE IS REQUEST ED TO BE ALLOWED. IN FACT, THIS ISSUE IS WITH REGARD TO DEDUCTION OF RS.L ,40,00,000/ - ADVANCE GIVEN TO MADAN LAL BAGRECHA TO SUBSTANTIATE SAME. THE STAND OF ASSESSEE HAS BEEN THAT ASSESSEE HAD GIVEN CHEQUES OF RS.L,40,00,000/ - IN JULY 2006 TO MR. MADANL AL BAGRECHA FORGETTING THE CASH. MR. MADANLALA BAGRECHA DOING THE BUSINESS OF CHEQUE DISCOUNTING. THESE CASH WERE REQUIRED TO BE PAID TO ASSESSEE PURCHASE PARTIES AT BHIWANDI FOR GETTING GOODS PURCHASES. MR R. MADANALAL BAGRECHA HAD ITA.NO. 2596 TO 2600 /MUM/15 RAKESH KUMAR M. GUPTA . 7 INTENTIONALLY WITHHOLD T HIS AMOUNT FOR WHICH ASSESSEE HAD LODGED AN OFFICIAL COMPLAINT WITH CONCERN PO LICE DEPARTMENT AND FINANCIAL CRI ME DEPARTMENT. (REFER PA GE NO.SS TO 91 OF PAPER BOOK) . THUS, IT WAS A BUSINESS LOSS OF ASSESSEE WHICH REQUIRED TO BE ALLOWED TO ASSESSEE. ASSESSI NG OFFICER AND CIT(A) OBSERVED THAT ASSESSEE HAD GIVEN CASH LOAN OF RS. 1,40,00,000/ - TO SHRI MADANLAL BAGRECHA AND SOURCE OF SAME WAS UNEXPLAINED. HENCE, THEY MADE ADDITION OF RS. 1,40,00,000/ - U/S.69A OF THE ACT. THE STAND OF ASSESSEE HAS BEEN THAT IT I S A BUSINESS LOSS AND REQUIRED TO BE ALLOWED AND SAME SHOULD NOT BE ADDED BECAUSE ASSESSEE HAD GIVEN ADVANCES IN NORMAL BUSINESS PRACTICE WHICH WAS LOST. HENCE, IT WAS SUBMITTED TO THE CASE WHERE ASSESSEE SUFFERED FROM LOSS. HENCE, IT WAS A BUSINESS LOSS A ND REQUIRED TO BE ALLOWED INSTEAD OF MAKING ADDITION OF THE SAME. IN THIS REGARD, ASSESSEE PLACED RELIANCE ON THE DECISION OF VIJAYASHANTHI BUILDERS LTD. VS. JCIT [2016] 69 TAXMANN.CORN 31(CHENNAI TIRB.) WHEREIN ASSESSEE - BUILDER PAID ADVANCE MONEY TO BU Y A LAND FOR CONSTRUCTION OF RESIDENTIAL FLATS THERE UPON AND SAID MONEY WAS FORFEITED, SUCH LOSS WAS TO BE TREATE D AS REVENUE LOSS AS IT WAS INCURRED TO ACQUIRE STOCK - IN - TRADE I.E. LAND. EVEN IF, IT IS ASSUMED THAT ASSESSEE NEEDS THIS CASH FOR ACCOMMODA TION BUSINESS, THEN ALSO IT IS ALLOWABLE EXPENDITURE AS IT IS DIRECTLY. LINKED WITH THE BUSINESS ACTIVITY E VEN THOUGH THE BUSINESS ACTIVITY IS ILLEGAL. LEARNED AUTHORIZED REPRESENTATIVE ALSO RELIED ON THE DECISION OF DR. T. A. QUERESHI VS. CL T [2006] 157 TAXM AN 514 (SC), WHEREIN HEROIN FORMED PA RT OF STICK - IN - TRADE OF ASSESSEE. IN VIEW OF SAID FINDING, THE TRIBUNAL ALLOWED ASSESSEE'S CLAIM OF DEDUCTING THE LOSS OF 5 KG. OF HEROIN WHOSE VALUE WAS ASSESSED BY THE TRIBUNAL AT RS. 2 LAKHS AS A BUSINESS LOSS. THE VIEW TAKEN BY THE TRIBUNAL WAS SUSTAINED BY HON 'BLE HIGH COURT BY TAKING AN EMOTIONAL AND MORAL APPROACH RATHER THAN A LEGAL APPROACH. IN APPEAL, HON'BLE HIGH COURT OBSERVED THAT ASSESSEE WAS COMMITTING A HIGHLY IMMORAL ACT IN ILLEGALLY MANUFACTURING A ND SELLING HEROIN. HOWEVER, CASES WERE TO BE DECIDED BY THE COURT ON LEGAL PRINCIPLES AND NOT ON ONE'S OWN MORAL VIEWS. THE EXPLANATION TO SECTION 37 OF THE ACT HAS REALLY NOTHING TO DO WITH THE INSTANT CASE AS IT WAS NOT A CASE OF BUSINESS EXPENDITURE; BU T OF BUSINESS LOSS. BUSINESS LOSSES WERE ALLOWABLE ON ORDINARY COMMERCIAL PRINCIPLES IN COMPUTING PROFITS. ONCE IT WAS FOUND THAT HEROIN SEIZED FORMED PART OF STOCK IN - TRADE OF ASSESSEE, IT FOLLOWED THAT THE SEIZURE AND CONFISCATION OF SUCH STOCK - IN - TRAD E HAD TO BE ALLOWED AS A BUSINESS LOSS. L OSS OF STOCK - IN - TRADE HAS TO BE CONSIDERED AS A TRADING LOSS. CONSEQUENTLY, THE IMPUGNED DECISION OF HON'BLE HIGH COURT COULD NOT BE SUSTAINED AND WAS SET ITA.NO. 2596 TO 2600 /MUM/15 RAKESH KUMAR M. GUPTA . 8 ASIDE AND ORDER OF TRIBUNAL WAS RESTORED. FACTS BEING SIMIL AR, SO, TAKING ALL FACTS AND CIRCUMSTANCES INTO CONSIDERATION, WE HOLD THAT ADDITION OF RS.L ,40,00,000/ - IS UNJUSTIFIED. SAME SHOULD BE ALLOWED AS BUSINESS LOSS. HOWEVER, SAME WILL BE OFFERED TO TAX AS AND WHEN IT IS RECEIVED. ASSESSING OFFICER IS DIREC TED ACCORDINGLY. 10. WE RESPECTFULLY FOLLOWING THE SAME WE ARE OF THE VIEW THAT NO PENALTY CAN BE LEVIED THEREFORE WE DELETE THE SAME. 11. IN THE RESULT ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD FEBRUARY, 2017 SD/ - SD/ - ( ASHWANI TANEJA ) ( D.T. GARASIA ) ACC OUNTANT MEMBER JUDICIAL MEMBER MUMBAI , DATED 03.02 .2017 . VSSGB, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CI T 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// SD/ - (DY./ASSTT. REGISTRAR) ITAT, MUMBAI