ITO 29(3)(5), MUMBAI V. VINOD B SINGH, MUMBAI

ITA 3223/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0637 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2005-2006
• Appeal Filed On: 06-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AARJU GARODIA
• Section: 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH J, MU MBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3223/MUM/2016 (ASSESSMENT YEAR- 2005-06) ITO 29(3)(5), ROOM NO. 211, 2 ND FLOOR, C-10, BLDG., PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI-400051. VS. SHRI VINOD B. SINGH, 203, CASABLANCA BLDG., SKYLINE OASIS, VIDYAVIHAR (WEST), MUMBAI-400086. PAN: AMKPS2385Q (APPELLANT) (RESPONDENT) REVENUE BY : SHRI AARJU GARODIA (DR) ASSESSEE BY : SHRI MEHUL SHAH (AR ) DATE OF HEARING : 10.01.2018 DATE OF PRONOUNCEMENT : 09.02.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF INCOME TAX ACT IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-40, [CIT(A)] MUMBAI DATED 04.02.2016 FOR ASSESSMENT YEA R 2005-06. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 33,00,000/- O N ACCOUNT OF UNACCOUNTED CAPITAL INTRODUCED IN THE BUSINESS' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 50,03,133/- O N ACCOUNT OF NET PROFIT ESTIMATED AT 8% OF GROSS RECEIPTS OF RS. 6.66 CRORE S' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS WITHOUT APPRECIATIN G THE FACT THAT OUT OF 996 BORROWERS, THE ASSESSEE HAS FURNISHED EVIDENCE ONLY IN THE CASE OF S PARTIES' 2 ITA NO.3223/M/2016 SHRI VINOD B. SINGH 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT EVEN DURING REMAND PROCEEDINGS, THE ASSESSEE MERELY FURNISHED THAT THE BORROWERS HAVE R EPAID THE LOANS AND HENCE THEIR ACCOUNTS HAVE BEEN CLOSED' 5. 'THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, AL TER, SUBSTITUTE OR MODIFY ANY OF THE ABOVE GROUND OR ADD A FRESH GROUND AS AND WH EN FOUND NECESSARY EITHER BEFORE OR AT THE TIME OF HEARING'. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN IND IVIDUAL, FILED RETURN OF INCOME FOR RELEVANT AY ON 30.03.2006 DECLARING TOTA L INCOME AT RS. 2,17,940/-. ON THE BASIS OF INFORMATION RECEIVED FR OM AIR THAT A CASH OF RS. 1,30,09,965/- WAS DEPOSITED IN THE BANK ACCOUN T OF ASSESSEE ON 23.06.2004, THE ASSESSMENT WAS REOPENED. A NOTICE U NDER SECTION 148 WAS SENT TO THE ASSESSEE AS PER THE ADDRESS MENTIONED I N THE AIR INFORMATION. THE ASSESSEE WAS NOT ALLEGEDLY AVAILABLE ON THE SAI D ADDRESS. THEREFORE, A NOTICE UNDER SECTION 148 WAS SERVED BY AFFIXATION. (NO DATE IS MENTIONED IN ASSESSMENT ORDER OR IN FIRST APPELLANT ORDER WHEN S UCH NOTICE WAS SERVED ). THE ASSESSEE WAS ALLEGEDLY SERVED A NOTICE UNDER SE CTION 142(1), WHEN HE WAS TRACED. THE ASSESSEE PARTICIPATED IN THE RE-ASS ESSMENT PROCEEDING AND FURNISHED NECESSARY DETAILS ABOUT HIS BUSINESS ACTI VITIES AS REQUIRED BY AO. THE AO DURING RE-ASSESSMENT PROCEEDING NOTED THAT D URING THE RELEVANT PERIOD, THERE WAS CASH RECEIPT/DEPOSIT OF RS. 6.66 CRORE IN THE BANK ACCOUNTS OF ASSESSEE. THE ASSESSEE WAS ASKED TO EXP LAIN THE CREDIT ENTRY, PARTY WISE DETAILS OF DEPOSIT. THE ASSESSEE MADE HI S SUBMISSION AND CONTENDED THAT ASSESSEE IS RUNNING A BROKERAGE AND COMMISSION BUSINESS IN THE NAME OF JAIN BHOLENATH AUTO GAS AND THE ASSESSE E HAS SMALL TRADING 3 ITA NO.3223/M/2016 SHRI VINOD B. SINGH BUSINESS OF SALE OF CNG KITS. THE ASSESSEE ALSO CON TENDED THAT HE PROVIDED SERVICES AS FINANCE ARRANGER FOR ARRANGING LOAN FRO M BANK, TO THE BORROWER, WHO ARE AUTO RICKSHAW TO OWNERS OR BUYERS . THE AMOUNT CREDITED IN HIS ACCOUNT AS PER AGREEMENT WITH THE S HRAMIK SAHAKARI BANK. THE ASSESSEE FURTHER CONTENDED THAT HE HAS RECEIVED ONLY LOAN PROCESSING FEES OF RS. 9.22 LAKHS AGAINST THE TOTAL RECEIPT/CR EDIT IN HIS BANK ACCOUNT OF AROUND RS. 6.66 CRORE. THE CONTENTION OF THE ASSESS EE WAS NOT ACCEPTED BY AO. THE AO ESTIMATE THE PROFIT @ 5% OF TOTAL TURNOV ER (CREDIT IN THE BANK ACCOUNT) AS UNACCOUNTED CAPITAL INTRODUCED BY ASSES SEE AND THUS WORKED OUT RS. 33 LAKHS AS INCOME OF THE ASSESSEE AND ADDE D THE SAME UNDER SECTION 68 OF THE ACT. THE AO ALSO TOOK HIS VIEW TH AT ASSESSEE HAS SHOWN THE SALES OF RS. 5,12,500/- AND LOAN PROCESSING FEE S OF RS. 9,21,952/- TOTAL OF RS. 14,34,452/- WHEREAS THE ACTUAL SALE IS OF RS . 6.66 CRORE. THEREFORE, THE AO ESTIMATED THE NET PROFIT @ 8% OF RS. 6.50 CR OER (RS. 6.66 CRORE 14,34,452/-) AND WORKED OUT PROFIT OF RS. 52,13,24 3/-. SINCE THE ASSESSEE HAS SHOWN NET PROFIT OF RS. 2,10,110/-. HENCE, DIFF ERENCE OF RS. 50,03,133/- WAS ADDED. ON APPEAL BEFORE THE LD. CIT (A), BOTH THE ADDITION WAS DELETED. THUS, AGGRIEVED BY THE ORDER OF LD. CI T(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL SUBMISSION OF THE PARTIES A ND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE REVENUE SUP PORTED THE ORDER OF AO. THE LD. DR FOR THE REVENUE SUBMITS THAT THE ASSESSE E HAS HUGE CREDIT IN HIS 4 ITA NO.3223/M/2016 SHRI VINOD B. SINGH BANK ACCOUNTS. THE ASSESSEE HIMSELF HAS SHOWN INCOM E FROM PROCESSING CHARGES AS WELL AS IN THE BUSINESS OF SALE OF CNG K ITS. THE LD. CIT(A) TOTALLY IGNORED THE FACT AND DELETED THE ENTIRE ADD ITION. ON THE CONTRARY, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. C IT(A). THE LD. AR OF THE ASSESSEE SUBMITS THAT ASSESSEE ENTERED INTO A TRIPA RTITE AGREEMENT WITH THE BANK AND THE BORROWERS. THE ASSESSEE INTRODUCED ALL THE BORROWERS FOR FINANCING OF THEIR AUTO RICKSHAW OR FOR FITTING OF CNG KITS. THE ASSESSEE HAS CHARGED LOAN PROCESSING FEES VARYING FROM .75% TO 1.2% OF THE SANCTIONED LOAN. THE AO HAS NOT APPRECIATED THE FAC T PROPERLY AND MADE THE ADDITION ON THE BASIS OF HIS ASSUMPTION AND PRE SUMPTION. THE LD. CIT(A) CONSIDERED THE MATERIAL PLACED ON RECORD INC LUDING THE COPY OF AGREEMENT BETWEEN THE BANK ASSESSEE AND THE BORROWE RS AND GRANTED APPROPRIATE RELIEF. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSM ENT, THE AO NOTED THAT THERE WAS CREDIT ENTRY OF RS. 6.66 CRORE IN THE BAN K ACCOUNTS OF THE ASSESSEE. THE ASSESSEE HAS SHOWN THE SALES OF RS. 5 .2 LAKH ONLY AND LOAN PROCESSING FEES OF RS. 9.22 LAKHS. THE ASSESSEE WAS ASKED TO FURNISH PARTYWISE DETAILS OF LOAN PROCESSING FEES. THE ASSE SSEE VIDE HIS REPLY DATED 28.03.2013 CONTENDED THAT THE ASSESSEE IS A COMMISS ION AGENT/BROKER, THE INCOME IS EARNED IN THE FORM OF COMMISSION AND NOT THE ENTIRE SALE PROCEEDS. THE ENTIRE SALE CAN NEVER BE TREATED AS I NCOME, THERE IS ALWAYS A 5 ITA NO.3223/M/2016 SHRI VINOD B. SINGH CORRESPONDING PURCHASE AND ONLY G.P. CAN BE TAXED. THE ASSESSEES INCOME CONSISTENT ONLY ON LOAN PROCESSING CHARGES OR IN OT HER WAY THE COMMISSION INCOME EARNED BY ASSESSEE. THE AMOUNT OF LOAN BORRO WED DOES NOT BELOW TO HIM. THE AMOUNT WAS TEMPORARILY ROUTED THROUGH H IS BANK AS PER AGREEMENT WITH THE BANK. THE REPLY OF ASSESSEE WAS NOT ACCEPTED BY AO. THE AO TREATED THE AMOUNT OF RS. 6.66 CRORE AS UNDI SCLOSED CAPITAL. THE AO ESTIMATED THE INCOME OF ASSESSEE @ 5% OF TOTAL C REDIT OF RS. 6.66 CRORE AND WORKED OUT RS. 33 LAKHS AS INCOME OF THE ASSESSEE AND ADDED UNDER SECTION 68 OF THE ACT. THE AO FURTHER TOOK HI S VIEW THAT ASSESSEE HAS SHOWN SALE OF RS. 5,12,500/- AND LOAN PROCESSING FE ES OF RS. 9,21,952/- TOTAL OF RS. 14,34,452/- WHEREAS THE ACTUAL SALE IS OF RS. 6.66 CRORE. HENCE, THE AMOUNT CREDITED IN THE BANK ACCOUNT WAS TREATED AS TOTAL SALE. THE AO WORKED THE SUPPRESSED SALE FOR RS. 6,51,65,548/- (R S. 6,66,00,000/- - RS. 14,34,452/-). THEREFORE, INCOME ON GROSS RECEIPT OF RS. 6,66,00,000/-, @ NET PROFIT OF 8% OF GROSS RECEIPT, WHICH WAS WORKED TO RS. 52,13,243/-WAS ESTIMATED AS PROFIT. HENCE, A DIFFERENCE OF RS. 50, 03,133/- (RS.52,23,243 - RS. 2,10,110) WAS TAKEN AS PROFIT NOT DISCLOSED AND MADE ADDITION ACCORDINGLY. 5. THE LD. CIT(A) DELETED BOTH THE ADDITIONS. WHILE DE LETING THE ADDITION THE LD. CIT(A) OBSERVED THAT THE ENTIRE CONFUSION HAS A RISEN BECAUSE THE BANK HAS ROUTED THE MONEY THROUGH ASSESSEES BANK ACCOUN T. AS PER CLAUSE-4 OF THE AGREEMENT BETWEEN THE ASSESSEE, BANK AND THE BO RROWER, FIRST THE 6 ITA NO.3223/M/2016 SHRI VINOD B. SINGH AMOUNT WAS TO BE DISBURSED TO THE BORROWERS. THE LD . CIT(A) FURTHER OBSERVED THAT THE BANK VIDE ITS LETTER DATED 30.03. 2013 AND 11.10.2014 HAS ALSO CONFIRMED THIS ARRANGEMENT. THE BANK HAS CLEAR LY MENTIONED IN ITS REPLY THAT THE MONEY WAS GIVEN TO THE ASSESSEE AND LETTER DISBURSED TO THE BORROWERS. IN OUR VIEW, THE OBSERVATION OF LD. CIT( A) IS NOT CORRECT. WE HAVE NOTED THAT THE LOAN DISBURSED TO THE INDIVIDUA L BORROWERS SAVING ACCOUNT BY THE BANK AND THE SAME WAS TRANSFERRED BY WAY OF BANK ADVICE OR CASH DEPOSIT IN THE SAVING/CURRENT ACCOUNT OF TH E ASSESSEE. THE LD. CIT(A) ON HIS OBSERVATION THAT ASSESSEE WAS A FINAN CE BROKER AND EARNED COMMISSION INCOME AND DELETED BOTH THE ADDITION MAD E BY AO. 6. WE HAVE NOTED THAT THE LD. CIT(A) HAVE IGNORED THE FACT THAT ASSESSEE HAS SHOWN COMMISSION INCOME OF RS. 9,21,952/-. THE ASSE SSEE FURTHER HIMSELF ADMITTED THAT LOAN PROCESSING CHARGE USED TO VARY F ROM .75% TO 1.25% OF THE SANCTIONED LOAN. ON THE CONTRARY, THE LD. CIT(A ) INSTEAD OF SUSTAINING A REASONABLE PERCENTAGE OF COMMISSION INCOME DELETED THE ENTIRE ADDITION. IN OUR VIEW, THE ASSESSEE WAS WORKING AS FINANCE ARRAN GER/FACILITATOR AND ARRANGED FINANCE FOR 996 BORROWERS. WE HAVE NOTED T HAT THE ASSESSEE HAS NOT FULLY DISCHARGED HIS OWNS TO EXPLAIN AS TO HOW MUCH AMOUNT WAS ULTIMATELY DISBURSED TO THE BORROWER, NO CASH FLOW STATEMENT IS PLACED ON RECORD. KEEPING IN VIEW, THE FACTS AND CIRCUMSTANCE S OF THE CASE, WE DEEM IT APPROPRIATE TO MAKE A LUMP-SUM ADDITION OF RS. 1 0,00,000/- ON ACCOUNT OF COMMISSION INCOME FOR ARRANGING LOAN AS A BUSINE SS INCOME WHICH 7 ITA NO.3223/M/2016 SHRI VINOD B. SINGH WOULD MEET THE POSSIBILITY OF REVENUE LEAKAGE AND S HALL MEET THE END OF JUSTICE. WE ORDER ACCORDINGLY. 7. IN THE RESULT, APPEAL FILED BY REVENUE IS PARTLY AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF FEBRUARY, 2018. SD/- SD/- (R.C. SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 09/02/2018 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/