Hemal Chandrakant Jhaveri, Surat V. The Income Tax Officer, Ward-5(2), Surat

ITA 285/AHD/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1235 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 09-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Business income; Business expenditure; Income from undisclosed sources; Reason to believe
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER HEMAL CHANDRAKANT JHAVERI, D/5, GIRICHHAYA APPT, MOTI POLE, SHUBHASH CHOWK, GOPIPURA, SURAT PAN: ADMPJ9003H (APPELLANT) VS ITO, WARD - 5(2), SURAT (RESPONDENT) REVENUE BY : S H RI JAMES KURIAN , SR. D . R. ASSESSEE BY: S H RI SAPNESH SHETH , A.R. DATE OF HEARING : 07 - 09 - 2 015 DATE OF PRONOUNCEMENT : 23 - 11 - 2 015 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 20 08 - 09 , AR ISES FROM ORDER OF THE CIT(A) - 1, SURAT DATED 07 - 01 - 2015 IN APPEAL NO. CAS - I/258/2013 - 14 , IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 285 / A HD/20 15 A SSESSMENT YEAR 200 8 - 09 I.T.A NO. 285 /AHD/20 15 A.Y. 2008 - 09 PAGE NO HEMAL C HANDRAKANT JHAVERI VS. ITO 2 2. THE INSTANT APPEAL RAISES TW O SUBSTANTIVE GROUNDS CHALLENGING VALIDITY OF THE IMPUGNED REOPENING TAKEN RECOURSE TO BY THE ASSESSING OFFICER AS UPHELD IN THE LOWER APPELLATE PROCEEDINGS. THE SECOND GROUND PLEADS THAT BOTH THE LOWER A UTHORITIES HAVE ERRED IN MAKING ADDITION OF RS. 1,9 4,571/ - AS UNACCOUNTED INCOME. THE FORMER GROUND IS NOT PRESSED IN THE COURSE OF HEARING. WE PROCEED TO DEAL WITH THE CASE ON MERITS ACCORDINGLY. 3. THE ASSESSEE/INDIVIDUAL CARRIES OUT JOB WORKS IN EMBROIDERY. THE RELEVANT AIR DATA GENERATED FROM ITD APPLICATION REVEALED THAT THE ASSESSEE TO HAVE RECEIVED JOB WORK CHARGES OF RS. 1,94,571/ - FROM SHRI RASHIK LAL JAIN PROPRIETOR OF M/S TUSHAR EMBROIDERY. THERE IS NO DISPUTE THAT ASSESSEE S BOOKS OF ACCOUNT DID NOT REFLECT THE SAID PAYMENTS . HE ADMITTED TO HAVE RECEIVED THE ABOVE STATED AMOUNT. HIS CASE WAS THAT THE SAME RECEIVED THROUGH BANKING CHANNEL WAS GIVEN TO MR. ERIC SHROFF PROPRIETOR OF SHROFF CORPORATION THROUGH THE VERY CHANNEL BY WAY OF AN ACCOMMODATION ENTRY IN ORDER TO HELP HIM IN BUSINESS. THIS PERSON FILED AN AFFIDAVIT SUPPORTING ASSESSEE S CASE THAT HE WAS A BEGINNER IN JOB WORK BUSINESS. THE ASSESSEE EXPLAINED THAT THIS CHANNEL OF PAYMENT AND MR. SHROFF S AFFIDAVIT DULY PROVED THAT THE AMOUNT WAS IN QUESTION WAS RIGHTLY NOT INCLUDED IN THE BOOKS OF ACCOUNT AS WHATEVER RECEIPT WAS FORWARDED TO SHRI SHROFF. HE HIGHLIGHTED THE FACT THAT THE TDS IN QUESTION DEDUCTED ON THESE PAYMENTS HAD ALSO NOT BEEN CLAIMED. WE FIND THAT ALL THESE PLEAS FAILED TO I MPRESS THE ASSESSING AUTHORIT Y . IT O BSERVED THAT THE ASSESSEE HAD NOT SHOWN THE RECEIPT IN QUESTION BUT I.T.A NO. 285 /AHD/20 15 A.Y. 2008 - 09 PAGE NO HEMAL C HANDRAKANT JHAVERI VS. ITO 3 TREATED THE SAME AS SUNDRY DEBTOR IN MR. SHROFF S ACCOUNT. HE NEGA T ED THE PLEA THAT THE ASSESSEE S LINE OF ACTION IN MAKING ACCOMMODATION ENTRY IN QUESTION WAS TOTALLY UNCALLED FOR SINCE THE SAME HAD NOT BEEN TAKEN IN THE PROFIT AND LOSS ACCOUNT. AVERMENTS IN MR. SHROFF S AFFIDAVIT ALSO STOOD REJECTED AS BEING AFTERTHOUGHT. ALL THIS LED TO ADDITION OF THE IMPUGNED RECEIPT AMOUNT OF RS. 1,94,571/ - AS U NACCOUNTED INCOME IN ORDER DATED 30 T H SEP, 2013. 4. THE CIT(A) UPHOLDS ASSESSING OFFICER S ACTION AS FOLLOWS: - 6.1 THE SUBMISSION MADE BY THE ASSESSEE IS DULY CONSIDERED IN THE CONTEXT OF THE FACTS OF THE CASE AND THE SAME HAVE NOT BEEN FOUND ACCEPTABLE FOR THE FOLLOWING REASONS: - (A ) THE CLAIM OF THE ASSESSEE THAT THE AMOUNT OF RS. 1,94,571/ - REPRESENTS 'ACCOMMODATION TRANSACTION' AND NOT REAL ONE IS NOT BASED ON ANY COGENT MATERIAL/EVIDENCE. IN LAW, NO PRESUMPTION CAN BE DRAWN FOR SOMEBODY DOING SOME UNETHICAL ACT. AS A MATTER OF FA CT, THE ASSESSEE RECEIVED AN AMOUNT OF RS.1,94,571/ - FROM TUSHAR EMBROIDERY ON WHICH TDS WAS ALSO MADE AS PER LAW AS SAID THE AMOUNT BEING 'JOB WORK CHARGES'. THERE IS NO WHISPER ON THE PART OF THE ASSESSEE EXCEPT THE THEORY OF 'ACCOMMODATION TRANSACTION' THAT THIS AMOUNT WAS NOT JOB WORK CHARGES RECEIPT. SO, WHAT IS APPARENT FROM THE FACTS THAT THIS WAS A BUSINESS RECEIPT FOR THE ASSESSEE AND THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL TO CONTROVERT THIS FINDINGS. THE APEX COURT IN 57 ITR 349 (SC) HAS HELD T HAT ONUS IS ONE THE PERSON 'WHO CLAIMS THAT THE 'APPARENT IS NOT REAL'. LIKEWISE THE HON'BLE APEX COURT IN THE CASE OF CIT VS. D URGE PD MORE (1971) 82 ITR 540 (SC) HELD THAT IT IS TRUE THAT AN APPARENT STATEMENT MUST BE CONSIDERED REAL UNTIL IT WAS SHOWN T HAT THERE WAS REASON TO BELIEVE THAT THE APPARENT WAS NOT REAL. SCIENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TEST THE RELIABILITY OF EVIDENCE PLACED BEFORE A COURT OR TRIBUNAL. THEREFORE, COURTS AND TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY THE TEST OF HUMAN PROBABILITIES. I.T.A NO. 285 /AHD/20 15 A.Y. 2008 - 09 PAGE NO HEMAL C HANDRAKANT JHAVERI VS. ITO 4 IT IS A MATTER OF COMMON WISDOM THAT BUSINESS IS DONE WITH PROFIT MOTIVE AND NOT TO FULFILL ANY SOCIAL COMMITMENTS. THE ASSESSEE HAS NOT SHOWN ANY INCOME BY WAY OF COMMISSION OR PROFIT FROM THIS TRANSACTION. THUS, THE APPELLA NT HAS MANY HOLES IN HIS COOKED - UP STORY. HAD THIS TRANSA CTION A GENUINE TRANSACTION, THE ASSESSEE WOULD HAVE SHOWN THE AMOUNT ON BOTH SIDES OF P & L A/C I.E. INCOME AND EXPENDITURE. THE ASSESSEE PURPOSEFULLY HAS SHOWN THE RECEIPT FROM TUSHAR EMBROIDERY UN DER THE HEAD 'DEBTORS'. THUS, WHAT WAS APPARENT AND REAL WAS THAT THIS AMOUNT REPRESENTS THE INCOME OF THE ASSESSEE. (B) THE ASSESSEE INSTEAD OF PROVIDING EVIDENCE TO ESTABLISH THE THEORY OF ACCOMMODATION TRANSACTION MERELY RELIED UPON THE STATEMENT MADE IN AFFIDAVIT OF MR. ERIC SHROFF WHICH IS MERELY A SELF - SERVING EVIDENCE. AS RIGHTLY OBSERVED BY THE AO THAT AFFIDAVIT IS SILENT ABOUT THE FACT AS TO WHETHER MR. ERIC SHROFF HAS SHOWN THIS AMOUNT (RECEIVED FROM ASSESSEE) AS HIS INCOME. AFFIDAVIT CANNOT BE T AKEN ON ITS FACE VALUE UNTIL AND UNLESS CORROBORATED BY COGENT EVIDENCE. THE ASSESSEE HAS ALSO NOT BROUGHT ANY EVIDENCE ON RECORD TO ESTABLISH THAT THE JOB WORK WAS ACTUALLY DONE BY SHRI ERIC SHROFF AND NOT BY THE A SSESSEE AND MR. ERIC SHR OFF WAS HAVING NE CESSARY WHEREWITHAL TO CARRY O UT SUCH JOB WORK. ON THE OTHER SIDE, THE ASS ESSEE IS ALREADY ENGAGED IN THE BUSINESS OF DOING EMBROIDERY WORK ON JOB WORK BASIS AND HAVING REGULAR BUSINESS DEALINGS WITH SHRI RASIKLAL JALAN OF TUSHAR EMBROIDERY. IF THE ASSESSE E WANTS TO PROVE ITS FABLE STORY OF 'ACCOMMODATION TRANSACTION 'THEN ONUS IS ON HIM TO ESTABLISH THIS STORY BY PROVIDING NECESSARY EVIDENCE. (C) THE ARGUMENT OF RECEIPT/PAYMENT BY ACCOUNT PAYEE CHEQUE SHOULD HAVE NO MATERIAL EFFECT IN CONVERTING A IN - GENU INE TRANSACTION INTO A GENUINE ONE. BY THE WAY, ANY TRANSACTION MADE THROUGH BANKING CHANNEL WILL NOT MAKE IT SACROSANCT. THE ASSESSEE SHOULD HAVE PROVIDED THE NECESSARY EVIDENCE TO ESTABLISH AS TO HOW THE GOODS FOR JOB WORK RECEIVED, WHAT BILLS WERE RAISE D, WHAT WAS THE BASIS OF CHARGING JOB WORK CHARGES, WHAT STAFF, MACHINERY, BUILDING WERE USED BY MR. ERIC SHROFF TO CARRY OUT SUCH JOB WORK FOR TUSHAR EMBROIDERY. (D) THE CONTENTION OF THE ASSE SSEE THAT NO TDS CREDIT WAS CLAIMED BY HIM IN THE RETURN IS OF NO HELP TO HIM. IT IS BUT NATURAL IF THE ASSESSEE WANTS TO HIDE THE ENT IRE AMOUNT OF RECEIPT, THEN HE HAD TO I.T.A NO. 285 /AHD/20 15 A.Y. 2008 - 09 PAGE NO HEMAL C HANDRAKANT JHAVERI VS. ITO 5 FORGO THE BENEFIT OF CREDIT OF SMALL AMOUNT OF TDS. THIS WAS PURPOSEFULLY DONE TO AVOID THE PAYMENT OF TAX ON THE GROSS INCOME OF RS. 1,94,571/ - . NATURALLY INCIDENCE OF TAX ON THE AMOUNT OF RS.1,94,571/ - WOULD BE MORE THAN THE AMOUNT OF TDS (NORMALLY MADE @ 2%). (E) ALTERNATIVELY, THE ASSESSEE MADE A PLEA THAT IF THE RECEIPT IS TAXED AS INCOME THEN PAYMENTS SHOULD BE ALLOWED AS EXPENSE. THE ASSESSE E HAS FORGOTTEN THE CARDINAL PRINCIPLE OF TAXATION THAT IF ASSESSEE WANTS TO CLAIM DEDUCTION FOR EXPENSE THEN HE SHOULD HAVE PLACED THE EVIDENCE BEFORE AO TO ESTABLISH THAT AMOUNT WAS WHOLLY, SOLELY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. HAV ING FAILED TO DO SO, THIS CONTENTION IS NOT TENABLE. MERE PAYMENTS BY ACCOUNT PAYEE CHEQUE WILL NOT IPSO FACTO PROVE THAT T HE SAME WAS ALLOWABLE BUSINESS EXPENDITURE. HENCE, THIS CONTENTION IS REJECTED. (F) THE APPELLANT ALSO RAISED A CONTENTION THAT ONL Y G.P./COMMISSION/BROKERAGE SHOULD BE BROUGHT TO TAX NOT THE WHOLE AMOUNT. THIS CONTENTION IS NOT TENABLE AS THE ASSESSEE FAILED TO PROVIDE NECESSARY EVIDENCE REGARDING THE EXPENSES RELATABLE TO SUCH INCOME. IN ABSENCE OF THIS, NO DEDUCTION FOR EXPENSE CAN BE ALLOWED SO AS TO TAX ONLY THE G.P./COMMISSION. THUS, TH IS CONTENTION IS ALSO REJECTED. 5. WE HAVE HEARD BOTH THE PARTIES. CASE FILE PERUSED. THERE IS NO DISPUTE ABOUT THE ABOVE NARRATED FACTUAL POSITION THAT ASSESSEE RECEIVED THE IMPU GN ED JOB WORK RECEIPTS AMOUNTING TO RS. 1,94,571/ - FROM M/S. TUSHAR EMBROIDERY, DID NOT TREAT THE SAME AS PART OF THE PROFIT AND LOSS ACCOUNT AND PASSED ON THE VERY SUMS TO SHRI SHROFF WHO CLAIMS TO BE A BEGINNER IN EMBROIDERY JOB WORK. THE PAYER IN QUESTION DEDUC ED TD S ON THESE PAYMENTS. THE SAME HAS GONE UNCLAIMED. THE ASSESSEE S CASE THROUGHOUT IS THAT THESE RECEIPTS ARE NOT HIS INCOME OR IN THE ALTERNATIVE, CORRESPONDING ENTRIES IN FAVOUR OF SHRI SHROFF SHOULD BE ALLOWED AS DEDUCTION OR GP ONLY IS TO BE ADDED QU A THE SAME. THE REVENUE STRONGLY SUPPORTS LOWER I.T.A NO. 285 /AHD/20 15 A.Y. 2008 - 09 PAGE NO HEMAL C HANDRAKANT JHAVERI VS. ITO 6 AUTHORITIES ACTIONS IN ADDING THE ENTIRE SUM. WE OBSERVE IN THESE FACTS THAT NEITHER THE ASSESSEE HAS MADE THE ABOVE SAID RECEIPT AS PART OF PROFIT AND LOSS ACCOUNT NOR MR. SHROFF HAS FILED ANY EVIDENCE TO PROVE THAT HE IS ENGAGED IN JOB WORK BUSINESS. THIS RESULTS IN REJECTION IN ASSESSEE S FIRST CLAIM OF HAVING FACILITATED THE TRANSACTION IN QUESTION AS AN ACCOMMODATION ENTRY. THIS ALSO TAKES CARE OF SECOND ARGUMENT CLAIMING DEDUCTION OF EXPENDITURE QUA THE CORRESPONDING ENTRY IN FAVOUR OF SHRI SHROFF. NOW , WE COME TO THE THIRD ARGUMENT ON GP ISSUE. IT IS AN ADMITTED FACT THAT THE ASSESSEE IS ALREADY ENGAGED IN JOB WORK BUSINESS IN EMBROIDERY. THEREFORE, WE ARE OF THE VIEW THAT THIS IS HIS BUSINESS IN COME. WE ARE OF THE FURTHER OPINION THAT AN ADHOC ADDITION OF RS. 40,000/ - INSTEAD OF THAT INVOLVING THE ENTIRE RECEIPT AMOUNT OF RS. 1,94,571/ - WOULD BE JUST AND PROPER IN PECULIAR FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. WE ACCORDINGLY GRANT PART RELIEF TO THE ASSESSEE. THE ASSESSING OFFICER SHALL PASS A CONSEQUENTIAL ORDER. 6. THIS ASSESSEE S APPEAL IS PARTLY ALLOWED ORDER PR ONOUNCED IN THE OPEN C OURT ON 23 - 11 - 2015 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 23 /11 /2015 AK / COPY OF ORDER FORWARDED TO: - I.T.A NO. 285 /AHD/20 15 A.Y. 2008 - 09 PAGE NO HEMAL C HANDRAKANT JHAVERI VS. ITO 7 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,