ITO 15 (2)(2), MUMBAI V. HOTEL CRYSTAL (MUMBAI) CONDUCTORS, MUMBAI

ITA 2601/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48650 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 12-04-2011
• Assessment Year: 1997-1998
• Appeal Filed On: 05-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAVA
• Assessee Lawyers: A K GHOSH
• Keywords: Loose papers; Retraction
• Section: 133A; 131

Judgement Text

IN THE INCOME TAX APPELLTE TRIBUNAL MUMBAI BENCHES H : MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER ITA. NO. 2601/MUM/2010 ASSESSMENT YEAR 1997-1998 ITA. NO. 2602/MUM/2010 - ASSESSMENT YEAR 1998-1999 ITO 15 (2) (2) MUMBAI VS. HOTEL CRYSTAL (MUMBAI) CONDUCTORS, MUMBAI 400 008 PAN AACFH3207-L (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI R.S. SRIVASTAVA FOR RESPONDENT : SHRI A.K. GHOSH ORDER PER V.D.RAO, J.M. 1. THE ABOVE APPEALS ARE FILED BY THE REVENUE AGAI NST A COMMON ORDER OF THE CIT(A)-26, MUMBAI DATED 29-01-2 010 FOR THE ASSESSMENT YEARS 1997-1998 AND 1998-1999. SINCE COM MON ISSUES ARE INVOLVED IN BOTH THE APPEALS, THEY WERE HEARD T OGETHER AND, THEREFORE, THEY ARE BEING DISPOSED OF BY A CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FACTS IN BRIEF ARE THAT THERE WAS A SEARCH COND UCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 23-9-1998 AND CERTAIN INCRIMINATING DOCUMENTS WERE FOUND. STATEMENT OF TH E PARTNER OF THE ASSESSEE-FIRM SHRI RAFIQUE CHAROLIA WAS RECORDE D ON 24/09/1998 U/S 131 OF THE ACT DURING THE COURSE OF SURVEY PROCEEDINGS U/S 133A OF THE ACT. ON THE BASIS OF TH E STATEMENT GIVEN BY SHRI RAFIQUE CHAROLIA, AN ADDITION WAS MAD E TO THE TUNE OF RS. 15 LAKHS FOR ASSESSMENT YEAR 1997-98 AND RS. 20 LAKHS FOR THE ASSESSMENT YEAR 1998-99. SUBSEQUENTLY, THE SAID STATEMENT WAS CONFIRMED BY THE PARTNER ON 7-2-2000. ON 9-2-20 01 SHRI RAFIQUE CHAROLIA VIDE LETTER DATED 8 TH FEBRUARY, 2001 HAD RETRACTED THE STATEMENT GIVEN BY HIM ON 24-9-1998 AT THE TIME OF THE SURVEY CONDUCTED UNDER SECTION 133A OF THE ACT. HOWEVER, T HE ASSESSING OFFICER IGNORING THE RETRACTION MADE BY THE PARTNER OF THE FIRM, MADE ADDITION ON THE BASIS OF STATEMENT GIVEN BY H IM TO THE TUNE ITA NOS 2601 & 2602/MUM/2010 HOTEL CRYSTAL (MUMBAI) CONDUCTORS 2 OF RS.15 LAKHS FOR THE ASSESSMENT YEAR 1997-98 AND RS. 20 LAKHS FOR THE ASSESSMENT YEAR 1998-99. 3. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) FOR BOTH THE ASSESSMENT YEARS. IN THE FIRST STAGE OF THE APP EAL, THE LEARNED CIT(A) DISMISSED THE APPEALS EX-PARTE. THEREAFTER, THE ASSESSEE FILED AN APPEAL BEFORE THE ITAT. THE TRIBUNAL RESTO RED THE MATTER BACK TO THE FILE OF THE CIT(A) TO ADJUDICATE THE IS SUE. THEREAFTER, THE LEARNED CIT(A) DISMISSED THE APPEAL BY CONFIRMING T HE ADDITION MADE BY THE ASSESSING OFFICER. AGAIN, ASSESSEE FILE D AN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ORDER DATED 14-6-2006 DISPOSED OF THE APPEAL FILED BY THE ASSESSEE BY OBS ERVING THAT ADDITIONS SO SUSTAINED ARE AS PER THE STATEMENT RE CORDED DURING THE COURSE OF SURVEY WHICH CANNOT BE USED AS A SOLE MAT ERIAL AGAINST THE ASSESSEE, WE ALSO THINK IT FIT AND PROPER TO RE MIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION DE NOVO AND DECIDING THE MATTER AFRESH IN THE LIGHT OF HIS FIND INGS AND UNINFLUENCED BY THE DECLARATION MADE BY THE ASSESSE E THROUGH THE PARTNER. THEREAFTER, THE ASSESSING OFFICER HAS PASSED A SIM ILAR ASSESSMENT ORDER ON 26-1-2007 BY MAKING ADDITIONS O F RS. 15 LAKHS AND RS. 20 LAKHS FOR THE ASSESSMENT YEARS 199 7-98 AND 1998-99 RESPECTIVELY WHICH HE WAS MADE EARLIER. 4. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE RESTRICTED THE ADDITION TO THE EXTENT OF 8%. THE RE LEVANT PORTION OF THE ORDER OF THE CIT(A) EXTRACTED AS UNDER : 3. I HAVE CONSIDERED THE RIVAL SUBMISSION OF THE APPELLANT AND PERUSED THE ASSESSMENT ORDERS, APPELLATE ORDERS AND REMAND REPORT OF THE AO DATED 23.05 .2008. THE MAIN CONTENTION OF THE APPELLANT BEFORE THE AO IS T HAT THERE IS NO EVIDENCE ON RECORD TO SUPPORT THE ADDIT ION MADE BY THE AO IN THE ORIGINAL ASSESSMENT ORDER EXC EPT THE STATEMENTS OF THE PARTNER SHRI. RAFIQUE CHAROLI A. THE APPELLANT SUBMITTED BEFORE THE AO THAT THE FOUR PAG ES REFERRED TO IN THE ORIGINAL ASSESSMENT ORDER AND CIT(A)S ORDER ARE RELATED TO PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1999-2000. THE AO COULD NOT CONTROVERT THE APPELLANTS CONTENTION AND HAS MADE ADDITION SIMPLY BASED ON THE BASIS OF STATEMENT OF ITA NOS 2601 & 2602/MUM/2010 HOTEL CRYSTAL (MUMBAI) CONDUCTORS 3 THE PARTNER SHRI. RAFIQUE CHAROLIA, WHICH WAS RETRACTED BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3.1 BEFORE MY PREDECESSOR, THE APPELLANT MADE SIMI LAR SUBMISSIONS AND FILED PAPER BOOK INCLUDING COPY OF LETTER DATED 24.12.2007 FILED BY THE APPELLANT BEFO RE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND SUBMITTED THAT THE AO HAS MADE THE ADDITIONS ONLY O N THE BASIS OF THE STATEMENTS OF SHRI RAFIQUE CHAROLI A AND THE STATEMENT WAS SUBSEQUENTLY RETRACTED BY HIM VID E LETTER DATED 08.02.2001, WHICH WAS FILED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS ON 09.02.2001. IT WAS ARGUED BY THE AR THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITIONS ONLY ON THE B ASIS OF THE STATEMENTS RECORDED DURING THE COURSE OF SURVEY CONDUCTED U/S 133A DISRESPECTING THE DIRECTION GIVE N BY THE HONBLE TRIBUNAL. EVIDENTLY, THE LOOSE PAPERS! INCRIMINATING DOCUMENTS REFERRED TO IN THE ORIGINAL ASSESSMENT ORDER, CIT(A)S ORDER AND TRIBUNALS ORD ER ARE RELATED TO ASSESSMENT YEAR 1999-2000 AND NOT RELATED TO ASSESSMENT YEARS 1997-98 AND 1998-99 AND THEREFORE THE AOS ADDITIONS ARE NOT SUSTAINABLE. M Y PREDECESSOR HAD FORWARDED THE PAPER BOOK INCLUDING LETTER DATED 24.12.2007 FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO THE AO VIDE LETTER DATED 11.03.2008 AND THE AU WAS ASKED TO SUBMIT SPECIFIC REMAND REPORT BUT THE AO VIDE HIS LETTER DATED 23.05.2008 HAD GIVEN HIS COMMENTS AND HAS AGAIN REFERRED TO THE STATEMENT GIVEN BY THE PARTNER SHRI . RAFIQUE CHAROLIA AND ALSO REFERRED TO THE FOUR PAGE S RELATED TO ASSESSMENT YEAR 1999-2000. TH AU HOWEVE R, IT IS SEEN FROM THE PROCEEDING, HAS NOT REFERRED TO APPELLANTS LETTER DATED 24.12.2007 FILED DURING TH E COURSE OF ASSESSMENT PROCEEDINGS ITSELF. IN THE CONCLUDING PARAGRAPH THE AO HAS STATED THAT IT IS N OT CORRECT TO SAY THAT THE ASSESSMENT IS FINALIZED MER ELY ON THE BASIS OF STATEMENT RECORDED DURING THE COURSE O F SURVEY. THE AU FURTHER STATED THAT DURING THE COURS E OF SURVEY IT WAS ESTABLISHED THAT ALL THE RECEIPTS ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS, BUT LD. AO, HOWE VER, FAILED TO POINT OUT WHAT ARE THE RECEIPTS NOT RECOR DED IN THE BOOKS OF ACCOUNTS AND WHETHER THERE WAS ANY EVIDENCE OF SUPPRESSION OF RECEIPTS. IT IS RELEVANT TO MENTION THAT THE REMAND REPORT OF THE AU DATED 23.05.2008 WAS FORWARDED TO THE APPELLANT ALONG WIT H THENOTICE OF HEARING DATED 17.06.2008. THE AR OF TH E APPELLANT VIDE LETTER DATED 10.08.2009 FILED HIS CO MMENT ON AUS REMAND REPORT AND SUBMITTED THAT THE AOS OBSERVATION THAT THE AR OF THE APPELLANT COULD NOT FILE ANY FRESH SUBMISSION IS NOT CORRECT IN VIEW OF THE FACT THAT THE APPELLANT HAD FILED DETAILED SUBMISSION CONTAINING ELEVEN PAGES VIDE LETTER DATED 24.12.200 7 ITA NOS 2601 & 2602/MUM/2010 HOTEL CRYSTAL (MUMBAI) CONDUCTORS 4 ALONG WITH COPIES OF DECISION RELIED UPON. IT IS VE RY OBVIOUS THAT NEITHER IN THE IMPUGNED ORDERS NOR IN THE REMAND REPORT DATED 23.05.2008, THE LD. AU WAS ABLE TO REBUT THE CONTENTION RAISED IN THE SUBMISSIONS DATE D 24.12.2007 FILED DURING THE ASSESSMENT PROCEEDINGS. IN FACT AU HAS MADE ADDITION ON THE STATEMENT ONLY DISRESPECTING THE ORDER OF THE HONBLE ITAT AND ITA T HAS MADE THE ADDITIONS OF RS.15,00,000/- AND RS.20,00,000/- FOR THE ASSESSMENT YEARS 1997-98 AND 1998-99 RESPECTIVELY UNDER THE HEAD UNACCOUTED INCOME DECLARED AS ADDITIONAL INCOME DURING THE COURSE OF SURVEY ACTION WHICH MEANS VIRTUALLY AO HAS CONFINED HIMSELF TO THE STATEMENT OF THE PARTNE R OF THE APPELLANT AND HAS NOT BROUGHT ON RECORD ANYTHIN G NEW OR OTHER FACTS FOR FRESH CONSIDERATION. THUS, I T IS FOUND BEYOND DOUBT THAT LD. AO HAS NOT RESPECTED TH E DIRECTIONS OF THE HONBLE ITAT BECAUSE IN DIRECTION IT HAS BEEN CLEARLY MENTIONED THAT THE ADDITION MADE ON ACCOUNT OF STATEMENT OF THE PARTNER CANNOT BE SUSTA INED AS IT CANNOT BE USED AS MATERIAL AGAINST THE APPELL ANT, THEREFORE, HONBLE ITAT HAS SET-ASIDE THE ASSESSMEN T MADE ONLY ON THE BASIS OF THE STATEMENT OF THE PART NER FOR FRESH ADJUDICATION. WHILE SETTING ASIDE THE ASSESSMENT ORDER IT WAS, DIRECTED BY ITAT THAT IF APPELLANT FAILS TO SUBSTANTIATE ITS RETURN OF INCOM E, ASSESSING OFFICER HAS TO ESTIMATE THE INCOME OF THE ASSESSEE ON THE FAIR AND REASONABLE BASIS AFTER GIVING A REASONABLE OPPORTUNITY TO THE APPELLANT . IT IS HOWEVER, FOUND FROM THE ASSESSMENT ORDER THAT IT HAS BEEN MADE IN HASTE WITHOUT GOING INTO DEEP OF IMPOUNDED MATERIAL OR GIVING ANY VERIFIABLE REASONI NG OR GENUINE FINDING FOR ASSESSMENT OF THE INCOME OF THE APPELLANT. AS SUCH, IT IS VERY OBVIOUS THAT AO HAS IGNORED THE DIRECTIONS OF HONBLE ITAT AS CITED (SU PRA). THEREFORE, ON ACCOUNT OF ITAT DECISION SUCH ORDER O F THE ASSESSING OFFICER CANNOT BE SUSTAINED. FURTHER, IN THE LIGHT OF DIRECTIONS OF THE HONBLE ITAT THAT ENTIRE RECEIPTS FROM THE CUSTOMERS HAVE NOT BEEN DISCLOSED WHICH IN THAT SITUATION ASSESSING OFFICER HAS TO MAKE HIS ESTIMATION OF THE INCOME BASED ON THE MATERIAL SO RECOVERED DURING THE COURSE OF SURVEY AND AFTER CONFRONTING THE SAME WITH THE APPELLANT FOR THE PUR POSE OF ASCERTAINING AS TO WHAT IS THE CORRECT INCOME, A O WAS TO ESTIMATE THE INCOME IF ANY, IN THAT LINE OF FIND ING IN THE MATTER. THOUGH AO HAS FAILED TO DO SO, NEVERTHE LESS IT IS IN THE INTEREST OF JUSTICE AND REVENUE ALSO T O ESTIMATE THE INCOME MORE THAN RETURNED BY THE APPELLANT. SINCE THERE IS A POINT FOR CONSIDERATION FOR INCREASE OF INCOME BASED ON INCREASED TURNOVER IN T HE BACKGROUND OF ADMISSION BY THE PARTNER, IT WOULD BE REASONABLY CORRECT TO INCREASE THE TAXABLE INCOME B Y ESTIMATION. HERE IT IS SEEN THAT APPELLANT HAS SHOW N NET PROFIT IN BOTH THE ASSESSMENT YEARS IS VERY LESS AN D THERE IS CORROBORATIVE CIRCUMSTANCES REVEAL THE LAC K OF ITA NOS 2601 & 2602/MUM/2010 HOTEL CRYSTAL (MUMBAI) CONDUCTORS 5 PROPER ACCOUNTING OF RECEIPTS THEREFORE, IT WOULD B E JUSTIFIABLE AND REASONABLE TO ESTIMATE THE INCOME O F THE APPELLANT @ 8% OF BOTH YEARS AS NET TAXABLE INCOME WHICH TAKE CARE OF POSSIBLE PILFERAGE OF REVENUE. D URING THE A.Y. 1997-98 APPELLANT HAS SHOWN GROSS RECEIPTS OF RS.30,43,602/- ON WHICH NET PROFIT @ 8% COMES TO RS.2,43,488!- AND IN A.Y. 1998-99 THERE IS A GROSS OF RS.36,40,459/- ON WHICH NET PROFIT @ 8% SHALL BE OF RS.2,91,237/-. CONSIDERING THE FAILURE ON THE PART OF THE ASSESSING OFFICER TO POINT OUT THE ACTUAL AMOUNT OF SUPPRESSION OF NET RECEIPTS AND THE DATE OF LOOSE P APERS CONSIDERED BY CIT(A) AS 5798 AND 2598 PERTAINING TO F.Y. 1998-99 RELEVANT TO A.Y. 1999-2000, NOT RELEVA NT TO THIS ASSESSMENT YEAR AND CONSIDERING THE DIRECTIONS OF HONBLE ITAT, IT IS FOUND THEREFORE, APPROPRIATE AN D REASONABLE TO ESTIMATE THE TAXABLE INCOME OF THE APPELLANT AT RS.2,43,488/- AGAINST THE NET PROFIT S HOWN BY THE APPELLANT OF RS.28,107/- OF ASSESSMENT YEAR 1997-98 AND RS.2,91,237/- AGAINST THE NET PROFIT OF RS.41,265/- SHOWN AS RETURNED INCOME OF A.Y. 1998-9 9. ACCORDINGLY AO IS DIRECTED TO RESTRICT THE ADDITION TO THIS EXTENT AS ESTIMATED @ 8% OF GROSS RECEIPTS AND ASSE SS THE INCOME OF THESE TWO A.YRS., AND DELETE THE REST OF THE ADDITION. 5. AGAINST THE ORDER OF THE CIT(A), REVENUE CARRIE D THE MATTER IN APPEAL BEFORE THE TRIBUNAL. LEARNED DR HA S SUBMITTED THAT ONE OF THE PARTNER MR. RAFIQUE CHAROLIA ACCEPT ED THE ADDITIONS DURING THE COURSE OF SURVEY AND SUBSEQUENTLY RETRAC TED AFTER A LONG GAP. THEREFORE, THE RETRACTION MADE BY THE PARTNER CANNOT BE CONSIDERED AND HE SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 6. ON THE OTHER HAND, LEARNED COUNSEL, APPEARING O N BEHALF OF THE ASSESSEE, HAS SUBMITTED THAT EXCEPT T HE STATEMENT MADE BY THE PARTNER THERE IS NOTHING ON RECORD TO S UBSTANTIATE THE ADDITIONS MADE BY THE ASSESSING OFFICER. 7. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE RE CORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. 8. THE ONLY ISSUE IN THIS APPEAL IS, WHETHER THERE IS ANY EVIDENCE TO SUPPORT THE ADDITION MADE BY THE ASSESS ING OFFICER EXCEPT STATEMENT OF THE PARTNER OF SHRI RAFIQUE CHA ROLIA. WE FIND THAT THE ASSESSING OFFICER IN HIS ORDER HAS NOT MEN TIONED ANYTHING ITA NOS 2601 & 2602/MUM/2010 HOTEL CRYSTAL (MUMBAI) CONDUCTORS 6 OTHER THAN THE STATEMENT OF THE PARTNER AND SUSTAIN ED THE ADDITION BASED ON THE STATEMENT. IN FACT, THE TRIBUNAL IN TH E FIRST ROUND OF LITIGATION DATED 14-6-2006 SPECIFICALLY OBSERVED TH AT STATEMENT OF THE PARTNER CANNOT BE A SOLE GROUND TO SUSTAIN ADDI TIONS. IN SPITE OF THE SPECIFIC OBSERVATION BY THE TRIBUNAL, ASSESS ING OFFICER HAS AGAIN MADE ADDITIONS ON THE BASIS OF STATEMENT OF T HE PARTNER. IN APPEAL, THE LEARNED CIT (A) HAS CONSIDERED IN DETAI L ALL THE FACTUAL MATRIX OF THE CASE AND GAVE A CATEGORICAL FINDING T HAT THE ASSESSMENT ORDER HAS BEEN MADE IN A HASTY MANNER WI THOUT EXAMINING THE DETAILS THAT IF THERE ARE IMPUGNED MA TERIAL OR GIVING ANY VERIFIABLE REASONING OR GENUINE FINDING FOR ASS ESSMENT OF INCOME OF THE APPELLANT, AS SUCH, IT IS VERY OBVIOU S THAT ASSESSING OFFICER HAS IGNORED THE DIRECTION OF THE ITAT. THER EFORE, ON ACCOUNT OF ITAT DECISION, SUCH ORDER OF THE ASSESSING OFFIC ER CANNOT BE SUSTAINED. WE FIND THAT THE ASSESSING OFFICER WITHO UT CONSIDERING THE ORDER OF THE ITAT, SIMPLY MADE SOME ADDITION WI THOUT ANY BASIS. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE CIT (A) AND CONFIRM THE ORDER OF THE CIT (A) DISMIS SING THE APPEALS FILED BY THE REVENUE. 9. IN THE RESULT, APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT, ON THIS 27 TH DAY OF APRIL, 2011. SD/- SD/- (R.S.SYAL) (V.D.RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE 27 TH APRIL, 2011 VBP/- ITA NOS 2601 & 2602/MUM/2010 HOTEL CRYSTAL (MUMBAI) CONDUCTORS 7 COPY TO 1. ITO 15 (2) (2), MUMBAI 2. HOTEL CRYSTAL (MUMBAI) CONDUCTORS, 9, GLIDER LAN E, LAMINGTON ROAD, NAVJIVAN SOCIETY, MUMBAI 400 008 PAN AA CFH3207-L 3. CIT(A)-26, MUMBAI 4. CIT, CITY-15, MUMBAI 5. DR H BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI.