ITO 11(1)(2), MUMBAI V. REALSTONE EXPORTS LTD, THANE

ITA 2991/MUM/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9661 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 26-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTHILAKSHMI NAYAK
• Keywords: Search and seizure; Opportunity of being heard; Accommodation entries; Condonation of delay; Set aside
• Section: 143(1); 201; 13; 145(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN , ACCOUNTANT MEMBER ITA NO. 2991 AND 2992 / MUM . /201 7 ( ASSESSMENT YEAR : 2006 07 AND 20 0 7 08 ) INCOME TAX OFFICER WARD 11(1)(2), MUMBAI . APPELLANT V/S REALSTONE EXPORTS LTD. C 204, 2 ND FLOOR, VISHAL APARTMENT TAKI ROAD, TULIJ, NALASOPARA (EAST) DISTRICT THANE 401 209 PAN AACCR8504K . RESPONDENT C.O. NO.177 , 178, 179 /MUM./2019 ( ARISING OUT OF ITA NO. 2991 , 2992 AND 2993 /MUM. /201 9 ) ( ASSESSMENT YEAR : 20 06 07 , 2007 08 AND 2012 13 ) REALSTONE EXPORTS LTD. C 204, 2 ND FLOOR, VISHAL APARTMENT TAKI ROAD, TULIJ, NALASOPARA (EAST) DISTRICT THANE 401 209 PAN AACCR8504K . CROSS OBJECTOR (ORIGINAL RESPONDENT) V/S INCOME TAX OFFICER WARD 11(1)(2), MUMBAI . RESPONDENT (ORIGINAL APPELLANT) REVENUE BY : S MT. JYOTHILAKSHMI NAYAK ASSESSEE BY : SHRI . POOJAN MEHTA DATE OF HEARING 05 .0 3 .2020 DATE OF ORDER 02.06.2020 2 REALSTONE EXPORTS LTD. O R D E R PER SAKTIJIT DEY. J.M. T HE AFORESAID APPEAL S FILED BY THE REVENUE AND CROSS OBJECTIONS BY THE ASSESSEE ARISE OUT OF SEPARATE ORDER S PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 18 , MUMBAI, FOR THE ASSESSMENT YEAR 200 6 07, 2007 0 8 AND 2011 12 . ITA NO.2991/MUM./2017 A.Y. 2006 07 ITA NO.2992/MUM./2017 A.Y. 2007 08 REVENUES APPEAL 2. THE GROUNDS RAIDED BY THE REVENUE IN BOTH THE ASSESSMENT YEARS UNDER APPEAL ARE ONLY ON THE COMMON ISSUE OF PARTIAL RELIEF GRANTED BY THE LEARNED COMMISSIONER (APPEALS) WITH REGARD TO ESTI MATION OF COMMISSION INCOME ON ACCOMMODATION ENTRIES. 3. BRIEF FACTS ARE, THE ASSESSEE COMPANY IS STATED TO BE ENGAGED IN TRADING IN MERCHANDISE GOODS. THE RETURNS OF INCOME FILED FOR THE ASSESSMENT YEAR S UNDER CONSIDERATION WERE INITIALLY PROCESSED UNDER SE CTION 143(1) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED INDICATING THAT INCOME CHARGEABLE TO TAX IN THE AFORESAID ASSESSMENT YEAR S HAVE ESCAPED ASSESSMENT , THE ASSESSING OFFICER RE OPENED THE ASSES SMENT UNDER SECTION 147 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT AS PER THE INFORMATION RECEIVED FROM THE 3 REALSTONE EXPORTS LTD. SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA, ONE OF THE DIRECTORS OF UTKANTHA TRADING CO., SHRI ABHISHEKH M URARKA, WHICH IS ONE OF THE GROUP CONCERN , HAS CLEARLY AND CATEGORICALLY STATED THAT NEITHER THE ASSESSEE NOR THE OTHER GROUP CONCERNS ARE ACTUALLY CARRYING ON ANY PURCHASE OR SALE TRANSACTION IN MERCHANDISE OR SHARES, BUT ARE ONLY PROVIDING ACCOMMODATION ENTRIES / BILLS ON RECEIPT OF COMMISSION. ON THE BASIS OF SUCH STATEMENT AVAI LABLE , WHICH WAS ALSO CONFRONTED TO THE ASSESSEE, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY BOOKS OF ACCOUNT BEING UNRELIABLE SHOULD NOT BE REJECTED AND THE TRANSACTIONS RELA TING TO SALE OF GOODS / SHARES SH OULD NOT BE TREATED AS NON GENUINE AND COMMISSION INCOME SHOULD NOT BE ESTIMATED ON THE PURCHASE AND SALE TURNOVER SHOWN IN THE ACCOUNTS. THOUGH, THE ASSESSEE FURNISHED ITS EXPLANATION CLAIMING THAT THE TRANSACTIONS ARE GENUINE, HOWEVER, NOT BEING SATISFIED WITH THE CORRECTNESS OF ASSESSEES EXPLANATION AND IN THE ABSENCE OF ANY CREDIBLE EVIDENCE, AS ALLEGED BY THE ASSESSING OFFICER, HE TREATED THE ENTIRE TRANSACTION AS NON GENUINE. AFTER REJECTING THE B OOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT, THE ASSESSING OFFICER PROCEEDED TO ESTIMATE THE COMMISSION INCOME @ 1% OF BOTH PURCHASE AND SALE TURNOVER SHOWN BY THE ASSESSEE IN ALL THE ASSESSMENT YEARS UNDER APPEAL. BEING AGGRIEV ED WITH THE ASSESSMENT ORDER S SO PASSED, THE ASSESSEE PREFERRED APPEAL S BEFORE THE FIRST APPELLATE AUTHORITY. 4 REALSTONE EXPORTS LTD. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND OTHER MATERIAL ON RECORD, THOUGH , LEARNED COMMISSIONER (APPEALS) AGREED WITH THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT CARRIED OUT ANY GENUINE PURCHASE AND SALE TRANSACTION AND IS ONLY AN ENTR Y PROVIDER, HOWEVER, HE RESTRICTED THE RATE OF COMMISSION TO 0.15% , THAT TOO , EITHER ON PURCHASE OR ON SALES TURNOVER. BEING AGGRIEVED WI TH THE AFORE SAID DECISION OF LEARNED COMMISSIONER (APPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. THE LEARNED DEPARTMENTAL REPRESE NTATIVE, SMT. JYOTHILAXMI NAYAK SUBMITTED , WHEN IT IS PROVED ON RECORD THAT THE ASSESSEE IS MERELY AN ENTRY PROVIDER AND HAS NOT CARRIED OUT ANY GENUINE TRANSACTION, THE ESTIMATION OF COMMISSION @ 1% OF THE TOTAL TURNOVER IS FAIR AND REASONABLE AND THE ASSESSEE DOES NOT DESERVE ANY LENIENCY CONSID ERING THE NATURE OF ACTIVITY CARRIED ON BY IT. FURTHER, SHE SUBMITTED , THE TRIBUNAL IN ASSESSEES OWN CASE WHILE CONSIDERING IDENTICAL NATURE OF DISPUTE IN ASSESSMENT YEAR 2010 11, VIDE ITA NO. 3444/MUM./2014, DATED 3 RD OCTOBER 2017, HAS UPHELD THE DECISIO N OF THE DEPARTMENTAL AUTHORITIES IN ESTIMATING THE COMMISSION INCOME @ 1% OF THE TOTAL TURNOVER. SHE ALSO FURNISHED A COPY OF THE ORDER PASSED BY THE TRIBUNAL. 5 REALSTONE EXPORTS LTD. 6. THE LEARNED AUTHORISED REPRESENTATIVE STRONGLY RELIED UPON THE OBSERVATIONS OF THE LEARNED COM MISSIONER (APPEALS). FURTHER, THOUGH , HE SUBMITTED THAT SUBMISSIONS WOULD BE FILED IN WRITTEN FORM, BUT TILL DATE NO SUCH SUBMISSION HAS BEEN FILED. AS COULD BE SEEN FROM THE FACTS ON RECORD AS WELL AS THE DISCUSSIONS MADE BY THE ASSESSING OFFICER AND LEAR NED COMMISSIONER (APPEALS) IN THEIR RESPECTIVE ORDERS, THE FACT THAT THE ASSESSEE IS AN ENTRY PROVIDER IS CLEARLY ESTABLISHED. THEREFORE, THE SO CALLED PURCHASE AND SALE TRANSACTIONS IN FABRIC / SHARES CANNOT BE A CCEPTED AS GENUINE. IN FACT, LEARNED COMMIS SIONER (APPEALS) HAS ALSO ACCEPTED THE AFORESAID FACTUAL POSITION WHILE INTERFERING ONLY WITH REGARD TO RATE OF COMMISSION. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT IT IS CARRYING ON GENUINE PURCHASE AND SALE TRANSACTION IS UNACCEPTABLE. THUS, IN THE SE CIRCUMSTANCES, THE ASSESSEE BEING ENGAGED IN PROVIDING ACCOMMODATION BILLS / ENTRIES, ESTIMATION OF COMMISSION INCOME ON THE BASIS OF ITS TURNOVER IS JUST AND PROPER. THEREFORE, THE ONLY ISSUE WHICH NEEDS TO BE DECIDED IS WHAT IS THE REASONABLE RATE OF COMMISSION WHICH CAN BE ESTIMATED ON SUCH ACCOMMODATION TRANSACTION AND WHETHER SUCH COMMISSION CAN BE CHARGED ON BOTH PURCHASE AND SALE TURNOVER SHOWN BY THE ASSESSEE. IT IS EVIDENT, WHILE THE ASSESSING OFFICER HAS CHARGED COMMISSION @ 1% ON BOTH PURCHASE AND SALE TURNOVER, LEARNED CO MMISSIONER (APPEALS) HAS REDUCED THE RA TE OF COMMISSION TO 0.15% AND THAT TOO ONLY ON ONE OF THE TRANSACTIONS I.E., EITHER PURCHASE OR SALE. NOTABLY, WHILE 6 REALSTONE EXPORTS LTD. DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 201 0 11, THE TRIBUNAL , IN THE ORDER REFERRED TO ABOVE , HAS UPHELD ESTIMATION OF COMMISSION INCOME @ 1% OF THE TOTAL TURNOVER. HOWEVER, TO BE FAIR TO THE ASSESSEE, THE AFORESAID DECISION OF THE TRIBU NAL WAS NOT AVAILABLE BEFORE LEARNED COMMISSIONER (APPEALS) W HILE DECIDING THE APPEALS FOR THE IMPUGNED ASSESSMENT YEARS. CONSIDERING THE ABOVE, WE SET ASIDE THE IMPUGNED ORDERS OF LEARNED COMMISSIONER (APPEALS) AND RESTORE THE ISSUE BACK TO HIS FILE FOR FRESH ADJUDICATION KEEPING IN VIEW THE ORDER PASSED BY THE TRI BUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010 11 , AS REFERRED TO ABOVE. THE ASSESSEE MUST BE PROVIDED A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE DECIDING THE ISSUES. GROUNDS RAISED ARE ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. C.O. NO.177 /MUM./201 9 C.O. NO.178 /MUM./201 9 C.O. NO.179 /MUM./201 9 BY ASSESSEE 8. BEFORE WE PROCEED TO DECIDE THE CROSS OBJECTION S BY THE ASSESSEE, IT IS NECESSARY TO PUT ON RECORD THAT ALL THESE CROSS O BJECTIONS HAVE BEEN FILED WITH DELAY OF 307 DAYS. THE ASSESSEE HAS FILED A PETITION SEEKING CONDONATION OF DELAY WHICH IS COMMON FOR ALL THE YEARS. IT IS STATED BY THE ASSESSEE THAT BEFORE LEARNED COMMISSIONER (APPEALS) THE CASE WAS REPRESENTED BY A DIFFER ENT 7 REALSTONE EXPORTS LTD. COUNSEL AND PURPORTEDLY ON HIS ADVICE TO FILE THE CROSS OBJECTIONS AFTER OBTAINING SECOND OPINION FROM AN OTHER COUNSE L , THE ASSESSEE KEPT QUITE AS HE WAS OF THE IMPRESSION THAT THE EARLIER COUNSEL WOULD B E OBTAINING SECOND OPINION FROM SOME OTHER COUNS EL. WHEREAS, IT IS STATED THAT THE EARLIER COUNSEL WAS CARRYING AN IMPRESSION THAT THE ASSESSEE WOULD BE OBTAINING A SECOND OPINION AND THEREAFTER THE CROSS OBJECTION WOULD BE FILED. IT IS STATED THAT IN VIEW OF THE CONFUSION ARISING OUT OF OBTAINING OF SE COND OPINION, THE FILING OF CROSS OBJECTION S GOT DELAYED . THUS, IT IS REQUESTED THAT THE DELAY BEING DUE TO A REASONABLE CA U SE SHOULD BE CONDONED. 9. HAVING CAREFULLY CONSIDERED THE CAUSE OF DELAY SHOWN BY THE ASSESSEE, WE ARE OF THE VIEW THAT IT IS NOT AT A LL ACCEPTABLE AND IS ONLY A COO KED UP STORY TO TIDE OVER THE DELAY IN FILING THE CROSS OBJECTIONS. FIRSTLY, THOUGH , IT HAS BEEN STATED THAT THE EARLIER COUNSEL AND TH E ASSESSEE WERE CARRYING IMPRESSION THAT THE SECOND OPINION WOULD BE OBTAINED BY EITHER TH E EARLIER COUNSEL OR THE ASSESSEE, HOWEVER, TO SUBSTANTIATE SUCH CLAIM, NO AFFIDAVIT OF THE EARLIER COUNSEL OR THE ASSESSEE HAVE BEEN FILED. MOREOVER, EVEN ACCEPTING THAT THERE WAS SUCH CONFUSION, IT CANNOT LEAD TO SU CH INORDINATE DELAY OF 307 DAYS. T HEREF ORE, IN OUR CONSIDERED OPINION, THE CAUSE FOR DELAY SHOWN BY THE ASSESSEE IS NEITHER CONVINCING NOR THE EXPLANATION OF THE ASSESSEE IS SATISFACTORY. FURTHER, IT IS RELEVANT TO OBSERVE , PERUSAL OF THE CROSS 8 REALSTONE EXPORTS LTD. OBJECTION S FILE D BY THE ASSESSEE WOULD REVEAL THAT THE GROUNDS RAISED THEREIN ARE PURELY TECHNICAL IN NATURE CHALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT AS WELL AS REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) OF TH E ACT. IT IS EVIDENT, BEFORE LEARNED COMMIS SIONER (APPEALS), THE ASSESSEE HAD NOT RAISED ANY GROUNDS CHALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT . ON A QUERY FROM THE BENCH, LEARNED COUNSE L APPEARING FOR THE ASSESSEE CONCEDED THIS FACT. THUS, THE AFORESAID FACTU AL POSITION CLEARLY ESTABLISHES THAT THE CROSS OBJECTIONS HAVE BEEN FILED BY THE ASSESS EE RAISING SUCH TECHNICAL ISSUE CHALLENGING THE VALIDITY OF RE OPENING OF ASSESSMENT AFTER INORDINATE DELAY OF 307 DAYS IS ONLY AS AN AFTER THOUGHT WITHOUT HAVING ANY RE ASONABLE CAUSE. IN VIEW OF THE AFORESAID, WE DECLINE TO CONDONE THE DELAY IN FILING THE CROSS OBJECTIONS. 10. IN THE RESULT, CROSS OBJECTIONS ARE DISMISSED IN LIMINE. 11. TO SUM UP, REVENUES APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES AND CROSS OBJECTIONS ARE DISMISSED. ORDER PRONOUNCED THROUGH CIRCULATION IN THE NOTICE BOARD UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 ON 02.06.2020. SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER 9 REALSTONE EXPORTS LTD. MUMBAI, DATED: 02.06.2020 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI