Sri. NARESH B. VORA, MUMBAI V. DCIT CENT. CIR. - 18 & 19, MUMBAI

ITA 2978/MUM/2007

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1685 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 11-09-2012
• Assessment Year: 1999-2000
• Appeal Filed On: 17-04-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A L SHARMA
• Keywords: Unexplained cash credit; Opportunity of being heard; Additional evidence; Accommodation entries
• Section: 133A; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER I.T.A. NO.2978/M/2007 (AY:1999-2000) I.T.A. NO.1947/M/2007 (AY:2000-2001) SHRI NARESH B. VORA, 16/2, PARAS, GULMOHAR CROSS ROAD, NO.4, J.V.P.D. SCHEME, VILE PARLE (W), MUMBAI 400 049. PAN: AABPV 0742K VS. THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE: 18 & 19, AAYAKAR BHAVAN, 4 TH FLOOR, QUEENS ROAD, MUMBAI 400 020. (APPELLANT) (RESPONDENT) I.T.A. NO.2427/M/2007 (AY: 1999 2000) THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE: 18 & 19, AAYAKAR BHAVAN, 4 TH FLOOR, QUEENS ROAD, MUMBAI 400 020. VS. SHRI NARESH B. VORA, 16/2, PARAS, GULMOHAR CROSS ROAD, NO.4, J.V.P.D. SCHEME, VILE PARLE (W), MUMBAI 400 049. PAN: AABPV 0742K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.L. SHARMA, AR REVENUE BY : SHRI SANJAY AGARWAL, DR DATE OF HEARING: 13.2.2013 DA TE OF ORDER: 8.3.2013 O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE THREE APPEALS UNDER CONSIDERATION. OUT OF THEM, I.T.A. NO.2978/M/2007 AND I.T.A. NO.2427/M/2007 ARE CROSS A PPEALS AND THEY ARE FILED AGAINST THE ORDER OF CIT (A)-CENTRAL VIII, MUMBAI DAT ED 19.1.2007 FOR THE AY 1999- 2000. THE APPEAL I.T.A. NO.1947/M/2007 IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT (A)-CENTRAL VIII, MUMBAI DATED 8.12.2006 FOR THE ASSESSMENT YEAR 2000- 2001. FOR THE SAKE OF CONVENIENCE, WE ARE ADJUDICA TING ALL THE APPEALS IN THIS CONSOLIDATED ORDER. APPEAL WISE AND GROUND WISE ADJ UDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS. FIRSTLY, WE SHALL TAKE UP AS SESSEES APPEAL IN I.T.A. NO.2978/M/2007 (AY:1999-2000). 2 I.T.A. NO.2978/M/2007 (AY:1999-2000) 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD CIT (A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN TAXING COMMISSION EARNED ON PROVIDING VARIOUS HAWALA ENTRIES OF RS. 41,55,926/- @ 4% OF RS. 10,39,48,162/- INSTEAD OF @ 1.25% CLAIMED BY THE AP PELLANT. 2. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT (A) ERRED IN CONFIRMING ACTION OF THE ASSESSING OFF ICER IN TAXING RS. 5,64,406/- AS UNACCOUNTED SALES. (B) THE LOWER AUTHORITIES FAILED TO APPRECIATE THE SUBMISSIONS MADE BY THE APPELLANT THAT THE TRANSACTIONS ARE DULY ACC OUNTED FOR IN BOOKS OF ACCOUNTS. 3. THE LD CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 2,44,000/- ON ACCOUNT OF CASH CREDIT U/S 68 OF IT ACT, BEING THE LOAN TAKEN FROM MINALSHREE CHEMICALS PRIVATE LIMITED. 3. DURING THE PROCEEDINGS BEFORE US AND AT THE OUTS ET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT GROUND NOS. 2 AND 3 ARE REQUIRED TO BE SET ASIDE TO THE FILES OF THE AO FOR EXAMINING THE ISSUES AFRESH AFTER ADMITTING THE ADDITIONAL EVIDENCES , ORIGINALLY REJECTED BY THE CIT (A) ESPECIALLY WIT H REGARD TO THE LOANS TAKEN FROM M/S. MINALSHREE CHEMICALS PRIVATE LIMITE D. EARLIER, THE CIT (A) DID NOT ADMIT SAID ADDITIONAL EVIDENCES CONSIDERING THE FAC T LAPSE OF TIME AND OPPORTUNITIES UNAVAILED BY THE ASSESSEE DURING THE PROCEEDINGS BE FORE HIM. IN OUR OPINION, SUCH REJECTION OF APPEAL WILL NOT HELP, IN ANY WAY, IN R ENDERING OF THE QUALITY JUSTICE; THEREFORE, WE ARE OF THE OPINION THAT THE SAID CONF IRMATION LETTERS AND RECONCILIATIONS, IF ANY, FILED BY THE ASSESSEE MUST BE ADMITTED IN THE INTEREST OF JUSTICE. ACCORDINGLY, WE DIRECT THE AO TO ADMIT TH E SAME AND ADJUDICATE BOTH THE ISSUES AFRESH AFTER GRANTING ADEQUATE OPPORTUNITY O F BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO.2 AND 3 ARE SET ASIDE . 4. GROUND NO.1 RELATES TO DETERMINATION OF REASONABLE PERCENTAGE OF COMMISSION EARNED BY THE ASSESSEE ON VARIOUS HAWALA ENTRIES/ACCOMMODATION ENTRIES TRADED BY THE ASSESSEE. IT IS AN ADMITTED F ACT THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF GIVING THE ACCOMMODATION ENTRIES BY ISSUING BOGUS BILLS RELATING TO PETRO CHEMICAL PRODUCTS SCAM. THE TOTAL TURNOVER OF SUCH THE ACCOMMODATION ENTRIES RENDERED BY THE ASSESSEE WORKS OUT TO RS. 10,39,98, 162/- ABOUT WHICH THERE IS NO 3 DISPUTE. THE ONLY DISPUTE THAT IS PLACED BEFORE FO R ADJUDICATION RELATES TO THE EXTENT OF INCOME/PERCENTAGE OF COMMISSION EARNED BY THE AS SESSEE FOR THE SERVICES RENDERED BY HIM FROM THE CLIENTS. AS PER THE ASSESS EE, 1.25% IS THE COMMISSION EARNED BY HIM AND THE SAME WAS NOT ACCEPTED BY THE AO FOR THE REASONS (I) THE PAPERS IMPOUNDED BOUT THE INVESTIGATION WING SUGGES T HIGHER COMMISSION % IE @ 2% TO 5% OF ACCOMMODATION BILL VALUE; AND (II) THE ASSESSEE GAVE A STATEMENT U/S 131 OFFERING THE COMMISSION @ 5%, WHICH WAS SUBSEQU ENTLY RETRACTED AFTER THE LAPSE OF 17 MONTHS PERIOD. AFTER CONSIDERING ABOVE , THE ASSESSING OFFICER KEEPING IN TUNE WITH HIS ORDER FOR AY 1998-1999, HE WAS OF THE OPINION THAT THE COMMISSION @ 4% OF THE TOTAL CASH RECEIPTS WOULD BE REASONABLE. HE ACCORDINGLY ESTIMATED THE COMMISSION EARNED BY THE ASSESSEE @ 4% AND MADE ADD ITION. 5. DURING THE FIRST APPELLATE PROCEEDINGS, THIS ISS UE WAS DEBATED AT LENGTH. IN THE IMPUGNED ORDER, CIT (A) SUMMARISED THE CONTENTS OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 1998-1999 AND ALSO DISCUSSED TH E STATEMENTS GIVEN AND RETRACTED BY THE ASSESSEE, WHERE ASSESSEE ADMITTED ON EARNING OF COMMISSION @ 3% AND MAKING A STATEMENT IN SUPPORT OF MAKING COMM ISSION 5% IN PLACE OF 1.25% AND THE DETAILS OF THE RETRACTED STATEMENTS AFTER G AP OF 17 MONTHS ETC. CIT (A) EXTRACTED RELEVANT SUBMISSIONS DATED 16.1.2006 WHER EIN, ASSESSEE WENT ON RECORD IN STATING THAT THE DETAILS OF EARNING OF COMMISSION F ROM 3 TO 4% OF THE BILL AMOUNT / CASH DEPOSITED IN THE BANK ACCOUNT. PARA 3.1.2 OF THE IMPUGNED ORDER IS RELEVANT IN THIS REGARD. PARA 3.1.2 ALSO REFERS TO THE ASSESSE ES RELIANCE ON THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF SHRI SUMERMAL R. JAIN IN ITA NO.1595/MUM/1995, WHEREIN THE ITAT CONFIRMED THE COMMISSION @ 0.5% AS PROPER AGAINST THE AOS FINDING @ 1% TO 1.25% OF THE GROSS AMOUNT RECEIVED. THE CIT (A) CONSIDERED THE ABOVE AND PARTLY IGNORED THE STATEMENT GIVEN BY THE ASSESSEE DURING SURVEY OPERATION AND ALSO CONSIDERING THE AFFIDAVIT OF THE ASSESSEE DATED 20.4.2000, WHEREIN AO OFFERED COMMISSION INCOME @ 1.25% AND RE LYING ON THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 1998-1999, WHERE 4% W AS CONFIRMED THE BY THE CIT (A) AS A COMMISSION EARNED. THE CIT (A) ALSO CONFI RMED 4% ADOPTED BY THE AO IN HIS ORDER IN THIS YEAR TOO. FINALLY, HE SUSTAINED T HE MARGINALLY ENHANCED ADDITION OF RS. 41,55,926/- . AGGRIEVED WITH THE SAME, ASSESSEE IS IN APPEAL B EFORE US. 4 6. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL NAR RATED THE FACTS OF THE CASE AND MENTIONED THAT THE EARNING OF COMMISSION IN THI S LINE OF BUSINESS @ 4% IS NEVER THERE AND THE SAME IS ALWAYS ON LOWER SIDE OF 4%. IN THIS REGARD, LD COUNSEL REFERRED TO THE ASSESSMENT ORDER FOR THE AY 1998-19 99 AND REFERRED TO ANNEXURE-3, IE IMPOUNDED BOOK NO.1 AND MENTIONED THAT THE SAID RATE OF COMMISSION REC EIVED BY THE ASSESSEE CONSTITUTES GROSS COMMISSION AND TH E COMMISSION RATE VARIES FROM 2.20% TO 3.05% AND 3.05% TO 4.15% ETC AND THE GROSS COMMISSION EARNED BY THE ASSESSEE NEVER EXCEEDED 4.13% AS EVIDENT FROM THE I MPOUNDED BOOK NO.1, ANNEXED TO THE ASSESSMENT ORDER 1998-1999 AS ANNEXURE-3. H E ALSO MENTIONED THAT AFTER EXCLUSION OF THE EXPENDITURE INCURRED FOR EARNING O F SUCH COMMISSION INCOME, THE PERCENTAGE OF NET COMMISSION EARNED BY THE ASSESSEE IS SOMEWHERE AROUND 1.25% ONLY AND THE GROSS COMMISSION WAS NEVER 4% AS HELD BY THE AO / CIT (A). HE ALSO MENTIONED THAT THE CIT (A) /AO RIGHTLY CONSIDERED T HE SAME AND DID NOT MAKE ANY ADDITION APPLYING THE RATE OF 5% AS ORIGINALLY STAT ED BY THE ASSESSEE DURING THE SURVEY OPERATION. FURTHER, REFERRING TO THE PROCEE DINGS, PENDING WITH REGARD TO THE ASSESSMENT YEAR 1998-1999, LD COUNSEL MENTIONED THA T THE TRIBUNAL HAS SET ASIDE THE APPEAL FOR THE ASSESSMENT YEAR 1998-1999 AND T HE SET ASIDE PROCEEDINGS WERE ALSO COMPLETED AND THE AO IN THAT YEAR REPEATED THE SAME ADDITIONS ADOPTING THE SAME 4% AS REASONABLE COMMISSION RATE FOR TAXING OF THE INCOME FPR THAT YEAR. LD COUNSEL MENTIONED THAT THE SAID APPEA LS ARE NOW PENDING BEFORE THE CIT (A), THEREFORE, THE TRIBUNAL CAN TAKE AN INDEPE NDENT DECISION IN THIS REGARD FOR THE AY 1999-2000 WITHOUT AWAITING THE OUTCOME OF TH E ORDER OF THE CIT (A) FOR THE AY 1998-1999. LD COUNSEL ALSO MENTIONED THAT THE TR IBUNAL MAY INCREASE THE COMMISSION RATE MARGINALLY FROM 1.25% OFFERED BY TH E ASSESSEE IN THE RETURN AND ASSESEES COUNSEL OFFERED THIS CONCESSION CONSIDERI NG THE HIDDEN EXPENSES AND ALSO TO BRING END TO THE PROTRACTED LITIGATION IN THE MA TTER. THUS, HE SUMMED UP BY STATING THAT THE ESTIMATION OF THE NET TAXABLE INCO ME BY APPLYING COMMISSION RATE OF 4% IS NOT FAIR AND REASONABLE AS THE ASSESSEE IS EN TITLED FOR DEDUCTION TOWARDS THE HIDDEN EXPENDITURE OUT OF THE GROSS COMMISSION EARNED BY THE ASSESSEE . 5 7. ON THE OTHER HAND, LD DR DUTIFULLY RELIED ON TH E ORDER OF THE AO / CIT (A). HE IS ALSO OF THE OPINION THAT LD COUNSEL DOES NOT HAVE ANY REPLY WHEN ANNEXURE-3 WAS BROUGHT TO HIS ATTENTION ESPECIALLY WITH REGARD TO THE COMMISSION RATES LESSER THAN 4% ARE POINTED OUT TO HIM. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE ORDE RS OF THE REVENUE AND THE PAPER BOOK FILED BEFORE US. WE HAVE ALSO GONE THRO UGH THE DECISIONS OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1998-1999 VIDE ITA NOS. 4042/M/02 (1997-98); 7958/M/04 (1998-99); 4584/M/06 (1994-95); 4585/M/06 (1996-97); 4043/M/02 (1997-98); 4954/M/03 (1996-97) AND 4955/M/03 (1998-99) DATED 29.11.2007 WHICH ESSENTIALLY CONTAINS A DIREC TION OF REMANDING THE APPEALS TO THE FILES OF THE AO. LD COUNSEL HAS MADE A STATEME NT AT BAR MENTIONING THAT, WHILE GIVING EFFECT TO THE ABOVE SAID ORDER OF THE TRIBUN AL DATED 29.11.2007, AO REPEATED THE SAME ADDITION AND APPLIED THE COMMISSION RATE O F 4% WHICH IS PRESENTLY THE SUBJECT MATTER OF APPEAL BEFORE THE CIT (A). FURTH ER, WE EXAMINED ANOTHER DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CAS E OF SHRI SUMERMAL R. JAIN VS. ACIT, ITA NO.1595/MUM/1999 AND OTHERS DATED 23.6.20 05. WE HAVE ALSO EXAMINED THE RELEVANT PARA 7 & 8 OF THE SAID ORDER AND FIND THAT THE CIT (A) ADOPTED THE FIGURE 1% OF THE RECEIPTS AS COMMISSION INCOME OF T HE ASSESSEE AND THE TRIBUNAL, FOR THE REASONS GIVEN IN PARA 8 OF THE SAID ORDER, CAME TO REASONABLE ESTIMATION OF 0.5% AND THE RELEVANT PARA 8 IS REPRODUCED HERE UND ER: FROM THE FACTS NARRATED ABOVE, WE FEEL THAT THE VAR IOUS TRIBUNALS DECISIONS WHEREIN COMMISSION RATE OF 0.1% WAS APPROVED ARE NO T APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE ASSESSEE HAS NOT MA INTAINED ANY BOOKS OF ACCOUNT OR ANY OTHER RECORD OF THE HAWALA BUSINESS CARRIED ON BY HIM. THERE IS GLARING CONTRADICTION IN THE STATEMENTS GIVEN BY THE ASSESSEE AT DIFFERENT POINTS OF TIME. IN SOME OF THE STATEMENTS, HE HAD ADMITTED TO COMMISSION RATE OF ONLY 0.1% WHEREAS IN SOME OTHER STATEMENT, THE RATE OF COMMISSION HAS BEEN STATED TO BE 0.5% OR EVEN 1%. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES AS ALSO THE VARIOUS ITAT DECISIONS WH ICH HAVE BEEN CITED BEFORE US, IN OUR VIEW, IT WOULD BE FAIR AND REASON ABLE TO ESTIMATE THE NET INCOME AFTER TAKING INTO ACCOUNT ANY EXPENDITURE WH ICH MAY HAVE EN INCURRED BY THE ASSESSEE, AT THE RATE OF 0.5% ON THE TOTAL C UMULATIVE CREDITS. ON THIS BASIS, THE NET INCOME FROM THE ASSESSEES HAWALA BU SINESS IS DETERMINED AT RS. 29,39,944/- AS AGAINST RS. 59,19,888/- ESTIMATE D BY THE REVENUE AUTHORITIES. THE AO IS DIRECTED TO ALLOW CONSEQUEN TIAL RELIEF. 6 9. FURTHER, LD COUNSEL ALSO BROUGHT TO OUR NOTICE ANOTHER DECISION OF THE TRIBUNAL IN THE CASE OF M/S. GOLD STAR FINVEST P. L TD. VS. ITO VIDE ITA NO.4625/MUM/ 2005, DATED 28.3.2008 FOR ANOTHER PROPOSITION THAT THE COMMISSION OR THE TURNOVER SHOULD BE @ 0.5% ONLY. PARA 12 IS RELEVANT IN THIS REGARD WHICH IS REPRODUCED HERE: 12. HAVING, CAREFULLY EXAMINED THE VARIOUS ORDERS I N THE CASE OF DIFFERENT ASSESSEES IT HAS BECOME AMPLY CLEAR THAT IN THESE TYPE OF ACTIVITIES BROKERS ARE ONLY CONCERNED WITH THEIR COMMISSION ON THE VAL UE OF TRANSACTIONS. NOW THE QUESTION COMES WHAT WOULD BE THE REASONABLE PER CENTAGE TO THE 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 COMMI SSION. IN ALL THE JUDGMENTS WHAT HAS BEEN STATED IS THAT AN AVERAGE P ERCENTAGE OF COMMISSION IS BETWEEN 0.15% TO 0.25%. IN THE CASE OF PALRESHA & CO. AND KIRAN & CO (SURPA), THE TRIBUNAL HAS CONSIDERED REASONABLENESS OF PERCENTAGE OF COMMISSION TO BE EARNED ON TURNOVER WAS AT 0.1%. T HE ASSESSEE HIMSELF HAS OFFERED THE PERCENTAGE OF COMMISSION AT 0.15%, WHIC H IS MORE THAN THE PERCENTAGE OF COMMISSION CONSIDERED TO BE REASONABL E BY THE TRIBUNAL IN THE CASE OF PALRESHA & CO AND KIRAN & CO (SUPRA) IN SIM ILAR TYPE OF TRANSACTIONS. THE THEORY OF ASSESSING OFFICER TO TREAT THE ENTIRE DEPOSIT AS UNEXPLAINED CASH CREDITS, CANNOT BE ACCEPTED IN THE LIGHT OF ASSESSM ENT ORDERS IN THE CASE OF BENEFICIARIES AND ALSO IN THE LIGHT OF THE FACT THA T ASSESSEE IS ONLY CONCERNED WITH THE COMMISSION EARNED ON PROVIDING ACCOMMODATI ON ENTRIES. WE, THEREFORE, OF THE VIEW THAT SINCE THE ASSESSEE ITSE LF HAS DECLARED THE COMMISSION ON TURNOVER AT 0.15% WHICH IS MORE THAN THE PERCENTAGE CONSIDERED TO BE REASONABLE BY THE TRIBUNAL IN THE CASE OF PALRESHA & CO AND KIRAN & CO (SUPRA), THE SAME SHOULD BE ACCEPTED. W E, ACCORDINGLY, ACCEPT THE COMMISSION DECLARED BY THE ASSESSEE AND SET ASI DE THE ORDER OF THE CIT (A) IN THIS REGARD. 9.1. LD COUNSEL ALSO BROUGHT TO OUR ATTENTION YET A NOTHER DECISION OF THE TRIBUNAL, WHERE THE 0.1% IS ACCEPTED AS COMMISSION RATE IN TH E CASE OF ITO VS. PALRESHA & CO., ITA NO.1640/BOM/82 AND KIRAN & CO. VS. ITO VID E ITA NO.3604/BOM/83. 10. FROM THE ABOVE, IT IS EVIDENT THAT THE TRIBUNAL HAS ACCEPTED THE PERCENTAGE OF COMMISSION ON VARIOUS FIGURES AND THE SAME VARIES F ROM CASE TO CASE. THEREFORE, NO PRECEDENCE CAN BE RELIED UPON FOR DECIDING THE PERC ENTAGE OF THIS INSTANT CASE. FURTHER, WE HAVE EXAMINED ANNEXURE-3 TO ASSESSMENT ORDER FOR THE AY 1998- 1999WHICH DIRECTLY BELONGS TO THE ASSESSEE AND IS I MPOUNDED BY THE REVENUE AND IN VIEW OF THIS IMPORTANCE, THE SAID ANNEXURE-3 IS INS ERTED IN THIS ORDER. 7 8 11. FROM THE ABOVE, IT IS EVIDENT THAT THE DATA AS GIVEN IN THE BOOK NO.1, PERTAINING TO DIRECTLY THE ASSESSEE, WHICH IS DULY IMPOUNDED BY THE REVENUE AS PER THE PROVISIONS OF SECTION 131 R.W.S 133A OF THE ACT AND IT IS RELEVANT FOR THE AY 1998- 1999. NO EQUIVALENT WORKING WAS SHOWN BY THE AO FOR THE AY 1999-2000 OR LATER ONES AS IT IS NOT AVAILABLE. AO HAS RELIED ON THE A BOVE MENTIONED DATA ALSO FOR THE CURRENT ASSESSMENT YEAR. ABOVE DATA IS UNDISPUTEDL Y GROSS COMMISSION EARNED BY THE ASSESSEE AND THE PERCENTAGE ADOPTED IS NOT A FI XED. IT IS VARYING FROM PARTY TO PARTY AND THE MINIMUM AND MAXIMUM RATE OBSERVED FRO M THE ABOVE LIST IS 2.02% AND 4.13% RESPECTIVELY. THE AVERAGE RATE WORKS OUT TO 3.07%. IN PRINCIPLE, THE DATA RELEVANT FOR THE AY 1998-99 CANNOT BE EXTRAPOL ATED BEYOND THAT YEAR. THEREFORE, WE REJECT THE 4% BASED ESTIMATION FOR TH E CURRENT YEARS. NEVERTHELESS, THE SAID MINIMUM AND MAXIMUM % EMANATING FROM THE S AID BOOK CONVEYS SOME WHISPERS ABOUT THE ASSESSEE BUSINESS AFFAIRS AND IN THE COMMISSIONS PERCENTAGES. THEREFORE, USING THE SAID DATA WITH NECESSARY MODIF ICATION, WE PROCEED TO ESTIMATE THE PROFITS OF THE ASSESSEE. 3.07% BEING THE AVERAG E COMMISSION OF THE MIN AND MIX PERCENTAGES, WE PROCEED TO ADOPT THE SAME AS GROSS COMMISSION FOR THIS YEARS UNDER CONSIDERATION AND WE APPLY TO THE UNDISPUTED TURNOVER OF RS.10,39,98,162/- FOR AY 1999-00 ACCORDINGLY. OUT OF THE SAME, IN OU R OPINION, ASSESSEE SHOULD BE ENTITLED TO SOME EXPENDITURE TOWARDS RUNNING OF THE BUSINESS AND OTHER HIDDEN EXPENSES, IF ANY. THIS KIND OF ESTIMATION, IN OUR O PINION, CONSTITUTES REASONABLE AND THEREFORE, AO IS DIRECTED TO ADOPT THE ABOVE WORKIN G FOR DETERMINATION OF THE TAXABLE INCOME. IN OUR OPINION, THE DEDUCTION OUT O F THE ABOVE TOWARDS THE UNACCOUNTED AND HIDDEN EXPENSES @ 0.5% AND THE NET COMMISSION INCOME EARNED ON THE ABOVE TURNOVER SHOULD BE CALCULATED APPLYING THE NET COMMISSION RATE OF (3.07% - 0.5%) 3.02%. AO IS DIRECTED TO GIVE EFFECT AS PER THE ABOVE. ACCORDINGLY, GROUND NO.1 RAISED IN THE APPEALS IS ALLOWED . 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9 I.T.A. NO.2427/M/2007 (AY: 1999 2000) (BY REVENUE) 13. THIS CROSS APPEAL FILED BY THE REVENUE ON 27.3.2007 IS AGAINST THE ORDER OF CIT (A), CENTRAL VIII, MUMBAI DATED 19.1.2007 FOR THE ASSESSMENT YEAR 1999-2000. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION OF RS. 15,32,800 /- ON ACCOUNT OF UNEXPLAINED CASH CREDIT ON THE BASIS OF SCRUTINY OF ROUGH CASH BOOK MAINTAINED BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE CASH WITHDRAWALS OF RS. 1 3,57,427/- MADE BY FAMILY MEMBERS, WITHOUT APPRECIATING THE FACT THAT NO SATI SFACTORY EXPLANATION FOR THE ABOVE WITHDRAWALS WERE GIVEN BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 14. GROUND NO.1 RELATES TO THE ADDITION OF RS 15,32 ,800/-. IN THIS REGARD LD COUNSEL MENTIONED THAT THE ASSESSEE HAS WITHDRAWN T HE SAID AMOUNT FROM THE ACCOUNT OF OTHER PERSONS. THIS SAID WITHDRAWAL OF M ONEY AS PER ROUGH CASH BOOK IS TREATED AS INCOME BY THE ASSESSING OFFICER WHICH IS RECEIVED FROM VARIOUS NAPTHA DEALERS FOR PROVIDING THE HAWALA ENTRIES. HE FURTHER MENTIONED THAT THE DESPITE TH E FACT THAT THE ORIGIN OF CASH WITHDRAWAL IS PROPERLY EXPLAINED, AO ERRONEOUSLY MADE ADDITION IN THIS REGARD. LD COUNSEL ALSO SUBMITTED THAT THE ADDITION MADE BY THE AO WAS DELETED BY THE CIT (A) BY HOLDING THAT WHEN THE ORIGIN OF THE CASH IS PROPERLY EXPLAINED BY THE ASSESSEE, THE AO IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. PARA 5.2 OF THE CIT (A)S O RDER IS RELEVANT IN THIS REGARD AND THE SAME READS AS UNDER: 5.2. I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT. THE ORIGINAL CASH WITHDRAWAL IS THE CASH RECEIVED BY THE APPELLANT FO R PROVIDING HAWALA ENTRIES TO NAPHTA DEALERS. WHEN THE ORIGIN OF THE CASH IS EXP LAINED, ASSESSING OFFICER IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 68 OF THE IT ACT. THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT CAN BE INVOKED ONLY IN THOSE CASES WHERE SOURCE OF CASH IS NOT EXPLAINABLE. THE RE IS NOTHING SO DISBELIEVE THE EXPLANATION OFFERED BY THE APPELLANT. IT IS SE EN THAT ON SIMILAR ISSUE IN THE CASE OF THE APPELLANT IN AY 1998-1999, ADDITION MAD E ON THIS GROUND WAS DELETED. IN VIEW OF THESE FACTS, NO FURTHER ADDITI ON ON THIS ACCOUNT IS CALLED FOR. ADDITION MADE IS DELETED. 10 15. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE AO. 16. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THE MATERIAL PLACED BEFORE US. IN O UR OPINION, THE ASSESSEE WAS PROPERLY EXPLAINED THE REASONS REGARDING THE ORIGIN OF THE WITHDRAWAL AMOUNT INDICATED IN THE ROUGH CASH BOOK AS THE SAME WAS RE CEIVED FROM VARIOUS NAPTHA DEALERS FOR PROVIDING HAWALA ENTRIES AND CIT (A) HA S RIGHTLY DELETED THE ADDITION MADE BY THE AO IN THIS REGARD. THEREFORE, THE ORDE R OF THE CIT (A) ON THIS ISSUE DOES NOT CALL FOR INTERFERENCE AND WE CONFIRM THE S AME. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED . 17. GROUND NO.2 RELATES TO THE ADDITION OF RS. 13,5 7,427/-. IN THIS REGARD, LD COUNSEL RELIED ON THE ORDER OF THE CIT (A) AND SUBM ITTED THAT THE CASH WITHDRAWALS DONE BY THE FAMILY MEMBERS OF THE ASSESSEE ARE FROM THE CASH RECEIVED BY THE ASSESSEE, FROM VARIOUS PARTIES FOR PROVIDING HAWALA ENTRIES TO NAPTHA DEALERS. EVEN AFTER PROPER EXPLANATION IN THIS REGARD, ASSESSING OFFICER ERRONEOUSLY INVOKED THE PROVISIONS OF SECTION 68 OF THE ACT. ON APPEAL, CI T (A) DELETED THE ADDITION VIDE PARA 4.2 OF HIS ORDER WHICH READS AS UNDER: 4.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. THE ORIGIN CASH WITHDRAWAL BY FAMILY MEMBERS OF THE APPELLANT IS TH E CASH RECEIVED BY THE APPELLANT FROM VARIOUS PARTIES FOR PROVIDING HAWALA ENTRIES TO NAPTHA DEALERS. WHEN THE ORIGIN OF THE CASH IE EXPLAINED, ASSESSING OFFICER IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT. THE PROVISIONS OF 68 OF THE INCOME TAX ACT CAN BE INVOKED ONLY IN THO SE CASES WHERE SOURCE F CASH IS NOT EXPLAINABLE. THERE IS NOTHING TO DISBEL IEVE THE EXPLANATION OFFERED BY THE APPELLANT. IT IS SEEN THAT ON SIMILAR ISSUE INVOLVED IN THE CASE OF THE APPELLANT IN THE AY 1998-1999, ADDITION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ON THIS GROUND WAS DELETED BY THE CIT (A). THE SOURCES OF WITHDRAWAL BY THE FAMILY MEMBERS OF THE APPELLANT A RE THE RECEIPT OF CASH FROM DIFFERENT PARTIES FOR PROVIDING HAWALA ENTRIES. TH E APPELLANT HAS TRANSFERRED THIS AMOUNT TO DIFFERENT BANK ACCOUNT FOR ROUTING T HE CASH RECEIVED FOR PROVIDING HAWALA ENTRIES. IN VIEW OF THESE FACTS, NO FURTHER ADDITION ON ACCOUNT OF WITHDRAWAL BY THE FAMILY MEMBERS, IS CAL LED FOR. ADDITION MADE IS DELETED. 18. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE AO. 11 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES IN THIS REGARD. WE FIND THAT THE CIT ( A) IS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO AND THE SAME DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT (A) ON THIS ISSUE AND THE GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED . 20. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. I.T.A. NO.1947/M/2007 (AY:2000-2001) (BY ASSESSEE) 21. THIS APPEAL FILED BY THE ASSESSEE ON 6.3.2007 I S AGAINST THE ORDER OF THE CIT (A) CENTRAL-VIII, MUMBAI DATED 8.12.2006 FOR THE AY 2 000-2001. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUND WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING 1 /3 INTEREST ON CAR LOAN AMOUNTING TO RS. 23,447/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING 1 /4 TH TELEPHONE EXPENSES AMOUNTING TO RS. 54,275/-. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN TAXING COMMISSION INCOME @ 4% AMOUNTING TO RS. 15,81,002/-. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN TAXING RS. 14 ,25,725/- CASH CREDIT U/S 68 OF THE ACT. 22. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENT IONED THAT GROUND NO.1 & 2 ARE NOT PRESSED. THEREFORE, THE SAME ARE DISMISSED AS NOT PRESSED. 23. GROUND NO.3 RELATES TO REASONABLE COMMISSION RA TE FOR ESTIMATION OF TAXABLE INCOME FOR THE AY 2000-2001 ON THE BUSINESS TURNOVE R RELATING TO PROVIDING OF ACCOMMODATION BILLS. THE LOWER AUTHORITIES INITIAL LY RELIED ON THE OUTCOME OF THE ASSESSMENT FOR THE AY 1998-1999 AND THE DATA IN ANN EXURE-3, EXTRACTED ABOVE. THE ARGUMENTS AND COUNTER ARGUMENTS OF THE PARTIES ON T HIS ISSUE ARE IDENTICAL TO THE GROUNDS ADJUDICATED IN CONNECTION WITH THE APPEAL F OR AY 1999-00. CONSIDERING THE 12 BUSINESS ANALOGY AND THE ISSUES RAISED BEFORE, AND WITH THE BACKGROUND OF COMMON ARGUMENTS AND COUNTER ARGUEMNTS, WE ARE OF THE OPIN ION THAT THE DECISION TAKEN IN CONNECTION WITH THE IDENTICAL ISSUE FOR THE AY 1999 -00 SHOULD APPLY MUTATIS MUTANDIS . ACCORDINGLY, GROUND NO.3 IS ALLOWED PARTLY . 24. REGARDING GROUND NO.4, LD COUNSEL MENTIONED THA T AN OPPORTUNITY MAY BE GIVEN TO THE ASSESSEE WITH REGARD TO THIS GROUND, W HICH RELATES TO CASH CREDIT, ADDITION OF RS. 14,25,725/- U/S 68 OF THE ACT. 24.1. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONE D THAT GROUND NO. 4 IS REQUIRED TO BE SET ASIDE TO THE FILES OF THE AO FOR EXAMINING THE ISSUE AFRESH AFTER ADMITTING THE ADDITIONAL EVIDENCES, INITIALLY REJEC TED BY THE CIT (A) ESPECIALLY WITH REGARD TO THE LOANS TAKEN FROM M/S. MINALSHREE CHEM ICALS PRIVATE LIMITED. EARLIER, THE CIT (A) DID NOT ADMIT SAID ADDITIONAL EVIDENCES CONSIDERING THE FACT OF LAPSE OF TIME IMPROPERLY UTILIZED BY THE ASSESSEE DURING THE ASSESSMENT AND FIRST APPELLATE PROCEEDINGS, WHERE ADEQUATE OPPORTUNITIES WAS GRANT ED TO THE ASSESSEE. IN OUR OPINION, SUCH REJECTION OF APPEAL WILL NOT HELP, IN ANY WAY, IN RENDERING OF QUALITY JUSTICE. THEREFORE, WE ARE OF THE OPINION THAT THE SAID CONFIRMATION LETTERS AND RECONCILIATIONS, IF ANY, MUST BE ADMITTED IN THE IN TEREST OF JUSTICE. ACCORDINGLY, WE DIRECT THE AO TO ADMIT THE SAME AND ADJUDICATE THE ISSUE AFRESH AFTER GRANTING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . ACCORDINGLY, GROUND NO.4 IS SET ASIDE. 25. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF MARCH, 2013. SD/- SD/- (DR. S.T.M. PAVALAN) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACC OUNTANT MEMBER DATE : 8.03.2013 AT :MUMBAI OKK COPY TO : 13 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR I, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI