HAREN B. SHAH (KARTA OF HUF), MUMBAI V. ITO- 14(3)(1), MUMBAI

ITA 2716/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8278 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 12-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: HAREN B SHAH
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2716/MUM/2016 ASSESSMENT YEAR: 2011 - 12 HAREN B. SHAH (KARTA OF HUF) 5 TH FLOOR, GOPAL NIWAS, 133, PRINCESS STREET, MUMBAI - 400002 VS. ITO - 14(3)(1) 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI - 400021. PAN NO. AAAHH0650K APPELLANT RESPONDENT ASSESSEE BY : MR. HAREN B. SHAH , AR REVENUE BY : MR. SUMAN KUMAR, DR DATE OF HEARING : 1 8 /09/2017 DATE OF PRONOUNCEMENT : 24/11/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE . THE RELEVANT ASSESSMENT YEAR IS 2011 - 12 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 29 , MUMBAI AND ARISES OUT OF PENALTY IMPOSED U/S 271(1)(C) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS AGAINST THE ORDER O F THE LD. CIT(A) CONFIRMING THE PENALTY OF RS.3,39,386/ - LEVIED BY THE AO U/S 271(1)(C). 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2011 - 12 ON 28.09.2011 DECLARING TOTAL INCOME OF RS.6,61,720/ - . THE N THE ASSESSING OFFICER (AO) RECEIVED HAREN B. SHAH ITA NO. 2716/MUM/2016 2 INFORMATION FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE IS A BENEFICIARY OF HAWALA TRANSACTIONS DONE BY DEALERS. THE AO ARRIVED AT THE FOLLOWING FINDINGS: I HAVE GONE THROUGH THE SPECIFIC WORKING. I FIND THAT SO FAR AS ASSESSEES ARGUMENT OF TAXING ONLY THE NET MARGIN OF 2.5% IS CONCERNED, I AGREE ON THIS POINT. BUT, THE ASSESSEE HAS FU R THER WENT ON CLAIMING THE NORMAL BUSINESS EXPENSES OF RS.4,00,000/ - FROM RS.15,85,004/ - , [2.5% OF RS.6,34,00,168/ - ]. THIS DOESNT SEEM TO BE SOUND AND HENCE NOT ACCEPTABLE BY ME IN VIEW OF THE FACT THAT BASICALLY CARRYING OUT AN ACTIVITY OF BEING HAWALA DEALER DOESNT REQUIRE SPENDING, AS NOTHING IS REQUIRED TO BE EXPENDED ON MANPOWER, INFRASTRUCTURE, ADVERTISEMENT, SALESMANSHIP, PU BLICITY, BUSINESS PROMOTIONS ETC. AND WHATEVER EXPENDING IS REQUIRED IS MAINLY THAT ON OBTAINING PURCHASE INVOICES, WHICH IS ALREADY GIVEN CREDIT FOR, WHILE ARRIVING AT THE NET MARGIN ON 2.5%. THUS, THE REVISED WORKING IS NECESSITATED WHICH IS AS UNDER: A. S ALES RS.6,34,00,168/ - B. 4.5% OF RS.6,34,00,168/ - RS.28,53,007/ - C. LESS: 2% TO BE SHELL OUT FOR ARRANGING PURCHASES BILL RS.12,68,003/ - D. NET MARGIN LEFT AS ASSESSEES INCOME RS.15,85,004/ - THUS, A SUM OF RS.15,85,004/ - IS BEING BROUGHT TO TAX AS ASSESSEES INCOME FROM CARRYING OUT HAWALA BUSINESS UNDER THE HEAD OF INCOME, INCOME FROM OTHER SOURCES. 4. THEN THE AO LEVIED A MINIMUM PENALTY OF RS.3,39,386/ - U/S 271(1)(C) ON INCOME SOUGHT TO BE EVADED OF RS.15,85,004/ - . 5. AGGRIEVED BY THE PENALTY ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) OBSERVED THAT THE ASSESSEE ITSELF ADMITTED FOR CONCEALMENT OF INCOME AND AGREED FOR THE ADDITION. THEREFORE, THE LD. CIT(A) UPHELD THE PENALTY OF RS.3,39,386/ - LEVIED BY THE AO AND DISMISS ED THE APPEAL FILED BY THE ASSESSEE. HAREN B. SHAH ITA NO. 2716/MUM/2016 3 6. BEFORE US, THE ASSESSEE SUBMITS THAT THE AO HAS ARRIVED AT THE ADDITION OF RS.15,85,004/ - ON THE BASIS OF THE SUBMISSIONS MADE BY HIM VIDE L ETTER DATED 11.01.2014. ALSO IT IS STATED BY HIM THAT AS THE AO HAS MADE AN ESTIMATION, THERE IS NO GROUND TO IMPOSE PENALTY U/S 271(1)(C). 7. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A) CONFIRMING THE MINIMUM PENALTY OF RS.3 ,39,387/ - IMPOSED BY THE AO U/S 271(1)(C). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT THE AO HAS ARRIVED AT INCOME OF RS.15,85,004/ - AFTER ESTIMATING 4.5% OF SALES OF RS.6,34,00,168/ - AND THEN REDUCIN G 2% FOR ARRANGING PURCHASE BILLS. THE CALCULATION MADE BY THE AO ON ESTIMATION HAS BEEN EXTRACTED BY US AT PARA 3 HEREINBEFORE. WE ALSO FIND THAT THE CALCULATION FOLLOWS THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE AO VIDE LETTER DATED 11.01.2014 WHICH IS EXTRACTED AT PAGE 2 - 3 OF THE ASSESSMENT ORDER BY THE AO. AS IT IS A CASE OF ESTIMATION, PENALTY U/S 271(1)(C) IS NOT LEVIABLE CONSIDERING THE PECULIARITY OF CALCULATION. 9. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/11/2017. SD/ - SD/ - ( MAHAVIR SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 24/11/2017 RAHUL SHARMA, SR. P.S. HAREN B. SHAH ITA NO. 2716/MUM/2016 4 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI