PRABHA MULTITRADE P. LTD, MUMBAI V. DCIT CEN CIR 46, MUMBAI

ITA 326/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2817 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 20-01-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 10-01-2013
• Court: TRIBUNAL
• Department Lawyers: M DAYASAGAR
• Keywords: Business expenditure; Search and seizure; Accommodation entries
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ (AM) & SHRI SANDEEP GOSAIN (JM) I.T.A. NO. 326 /MUM/20 1 3 (ASSESSMENT YEAR 201 0 - 1 1 ) M/S. PRABHA MULTITRADE PVT. LTD. BLOCK H, SHRI SADASHIV CHS LTD. 6 TH ROAD, SANTACRUZ (E) MUMBAI - 400 055. VS. DCIT CC - 46 ROOM NO. 659 AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) .. ( RESPONDENT ) PAN NO. A AAFCP0813N ASSESSEE BY : SHRI BHUPENDRA SHAH DEPARTMENT BY : SHRI M. DAYASAGAR DATE OF HEARING : 1.2.2016 DATE OF PRO NOUNCEMENT : 17 .8 .2016 O R D E R PER SANDEEP GOSAIN, JM : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30.11.2012 PASSED BY LEARNED CIT(A) - 38, MUMBAI FOR A.Y. 2010 - 11. 2. AT THE VERY OUTSET, THE ASSESSEE HAS RAISED VARIOU S GROUNDS OF APPEAL, HOWEVER DURING THE ARGUMENTS BEFORE US, ONLY GROUND NO. 5, 9 AND 12 HAVE BEEN PRESSED. ACCORDINGLY GROUND NO. 1 TO 4, 6 TO11 & 13 ARE TREATED AS DISMISSED AS NOT PRESSED. 3. GROUND NO. 5, 9 & 12 ARE MENTIONED HEREIN BELOW : 5) THE L EARNED CIT(A) HAS ERRED IN LAW AND IN FACTS BY APPLYING 2% RATE OF INCOME INSTEAD OF 0.15% WITHOUT APPRECIATING THE FACT THAT NO EVIDENCE CORROBORATING THE RATE OF 2% HAS BEEN FOUND DURING AND AFTER THE COURSE OF SEARCH PROCEEDINGS AGAINST THE APPELLANT. 9) THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACT OF ASSESSING OFFICER OF APPLICATION OF THE RATE OF 2% INCOME ON M/S. PRABHA MULTITRADE PVT. LTD. 2 ENTIRE BANK DEPOSITS MANAGED BY AGENTS AS AGAINST 0.03% OFFERED BY THE APPELLANT. 12) THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACT OF ASSESSING OFFICER OF THE DISALLOWANCE OF BUSINESS EXPENSES AGAINST THE INCOME ESTIMATED. 3. BRIEF FACTS OF THE CASE ARE THAT SEARCH AND SEIZURE ACTION U/S. 132(1) OF THE ACT WAS CONDUCTED IN THE CASE OF M/S. M AHASAGAR SECURITIES PVT. LTD. (NOW KNOWN AS M/S. ALAG SECURITIES PVT. LTD.), M/S. MIHIR AGENCIES PVT. LTD., M/S. ALLIANCE INTERMEDIATORIES & NETWORK PVT. LTD. AND ITS OTHER GROUP COMPANIES ALONGWITH THE PREMISES OF SHRI MUKESH MANEKLAL CHOKSI, SHRI JAYESH KRISHNARAJ SAMPAT AND SHRI SITARAM MAHABALESHWAR BHAT, THE DIRECTORS AND AUDITOR OF THE MAHASAGAR GROUP OF COMPANIES ON 25.11.2009. THE CASE OF THE ASSESSEE IS ALSO COVERED IN THE SAID PROCEEDINGS. CONSEQUENT TO THE SEARCH AND SEIZURE ACTION, THE ASSESSMEN T U/S. 143(3) OF THE ACT WAS COMPLETED FOR THE A.Y. 2010 - 11. 4. AGGRIEVED BY THE ACTION OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE LEARNED CIT(A). LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. FURTHER AGGRIEVED, THE ASSE SSEE HAS FILED THE PRESENT APPEAL BEFORE US. 5 . AT THE VERY OUTSET, LEARNED AR HAS SUBMITTED THAT IN THE SIMILAR FACTS AND CIRCUMSTANCES, THE COORDINATE BENCH OF THE MUMBAI TRIBUNAL HAS ALREADY DECIDED IDENTICAL ISSUES AND IN THIS RESPECT THE ASSESSEE HAS RELIED UPON THE FOLLOWING JUDICIAL PRONOUNCEMENT : M/S. MIHIR AGENCIES PVT. LTD. VS. DCIT (ITA NO. 6435 TO 6441/MUM/2012 DATED 6.1.2016) M/S. GOLDSTAR FINVEST PVT. LTD. VS. ACIT (ITA NO. 887 /MUM/2012 & 2699/MUM/2013 DATED 30.11. 201 5 ) IT WAS SUBMITTED THAT SO FAR AS THE ISSUE RAISED VIDE GROUND NO. 5&9 ARE CONCERNED, THE SAME STAND COVERED BY CATENA OF TRIBUNAL DECISIONS IN VARIOUS CASES AND IT WAS HELD THAT THE NET PROFIT RATE OF INCOME ON THE RECEIPTS M/S. PRABHA MULTITRADE PVT. LTD. 3 APPEARING IN THE BANK STATEMENTS SHOULD BE TAKEN A T 0.15%. IN THE INSTANT CASE, THE LEARNED CIT(A) HAS CONFIRMED THE NET PROFIT @ 2%, THEREFORE TRIBUNAL SHOULD BE FOLLOWED. 6. REGARDING THE ISSUE RAISED VIDE GROUND NO. 12 ON ACCOUNT OF DISALLOWANCE OF EXPENSES, LEARNED AR SUBMITTED THAT THE TRIB UNAL A LLOWED 50% AND BALANCE 50% CONFIRMED. CONSISTENT WITH THE VIEW TAKEN, IN SUPPORTS OF THIS, HE FILED COPY OF THE TRIBUNAL DECISION IN AFOREMENTIONED CASE I.E. GOLD STAR FINVEST P. LTD. (SUPRA). 7. ON THE OTHER HAND LEARNED DEPARTMENTAL REPRESENTATIVE STRON GLY RELIED UPON THE ORDERS OF LEARNED CIT(A) AND SUBMITTED THAT THIS IS A CASE OF SEARCH AND SEIZURE ACTION, WHERE IN IT WAS FOUND THAT THE ASSESSEE ALONGWITH THE MUKESH CHOKSI GROUP WERE INVOLVED IN ACCOMMODATION ENTRIES. IN VIEW OF THE SPECIFIC MATERIAL FOUND DURING THE COURSE OF SEARCH, IT HAS BE E N ADMITTED BY THESE PARTIES THAT THEY WERE ENGAGED IN ACCOMMODATION ENTRY, H OWEVER, THE ISSUE BEFORE US FOR ADJUDICATION IS WHAT SHOULD BE THE NET RATE FROM SUCH ACCOMMODATION ENTRY . LOOKING TO THE FACT, HE SUBM ITTED THAT LEARNED CIT(A) H AS TAKEN 2% OF THE PROFIT AFTER DETAILED DISCUSSION, WHICH SHOULD BE CONFIRMED. 8. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD ALSO JUDGEMENTS RELIED UPON BY LEARNED AR. WE FIND THAT IN THE CASE OF GOLD STAR FINVEST PVT. LTD. (SUPRA), FACTS ARE SIMILAR WITH THE FACTS OF THE INSTANT CASE. IN THAT CASE, THE TRIBUNAL AF T ER REFERRING TO VARIOUS DECISIONS HAVE UPHELD THE PERCENTAGE OF COMMISSION ON NET PROFIT @ 0.15% WHICH WAS QUITE CONSISTENT WITH THE STATEMENT RECORDED A T THE TIME OF SEARCH. APART FROM THAT WE HAVE ALSO PERUSED THE ORDER PASSED IN THE CASE OF MIHIR AGENCIES PVT. LTD. (SUPRA) , IN WHICH SIMILAR ISSUE WAS RAISED AND IN THAT CASE ALSO IT HAS BEEN HELD THAT PERCENTAGE OF COMMISSION OF NET PROFIT FROM SUCH ACT IVITIES @ 0.15%. CONSIDERING THE PROPOSITION LAID BY THE COORDINATE BENCH, WHICH WAS BASED ON SEVERAL JUDICIAL PRONOUNCEMENTS, WE ALSO UPHOLD THE RATE OF COMMISSION/RATE M/S. PRABHA MULTITRADE PVT. LTD. 4 OF NET PROFIT FROM SUCH ACTIVITY AS 0.15%. ACCORDINGLY, GROUND NO. 5 & 9 AS RAISED BY THE ASSESSEE IS ALLOWED. 9. REGARDING DISALLOWANCE OF BUSINESS EXPENSES LEARNED CIT(A) HAS DIRECTED THE ASSESSING OFFICER NOT TO ALLOW ANY EXPENSES AGAINST THE NET INCOME OF 2% DETERMINED. WE FIND THAT THE TRIBUNAL IN THE CASE OF GOLD STAR FINVEST LTD. (SUPRA) AS WELL AS IN THE CASE OF MIHIR AGENCIES PVT. LTD. (SUPRA) HAS DISALLOWED ONLY 50% OF THE BUSINESS EXPENSES. ACCORDINGLY, FOLLOWING THE JUDICIAL PRECEDENCE, WHICH IS APPLICABLE MUTATIS MUTANDIS IN THE CASE OF THE ASSESSEE ALSO, WE DIRECT THE ASSES SING OFFICER TO ALLOW THE BUSINESS EXPENSES TO THE EXTENT OF 50%. ACCORDINGLY, GROUND NO. 12 IS TREATED AS PARTLY ALLOWED. 10. IN THE NET RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BEEN PRO NOUNCED IN THE OPEN COURT ON 17.8 . 2016 . SD/ - SD/ - (JASON P. BOAZ ) (SANDEEP GOSAIN ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED : 17 / 8 /20 1 6 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 PS