ACOLYTE PROPERTIES LTD, MUMBAI V. DCIT 5(1), MUMBAI

ITA 3297/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9711 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 05-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 01-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B S BISHT
• Keywords: Charitable institution; Source of fund; Difference of opinion; Accommodation entries; Reason to believe; Change of opinion
• Section: 147; 68

Judgement Text

INCOME-TAX APPELLATE TRIBUNAL -FBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHAKT IJIT DEY, JUDICIAL MEMBER ./I.T.A./3297/MUM/2015, /ASSESSMENT YEAR: 2008-09 ACOLYTE PROPERTIES PRIVATE LIMITED 401, DIAMOND PLAZA, 391, DR. D. B. MARG, LAMINGTON ROAD, MUMBAI-400 002 VS. DCIT-5(1), 568, AAYKAR BHAWAN, MUMBAI-400 020 ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: B.S.BISHT. - DR ASSESSEE BY: SH.NITESH JOSHI - AR / DATE OF HEARING: 07.06.2017 / DATE OF PRONOUNCEMENT: 31.07.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 23/03/2015,OF THE CIT(A )-10,MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY, ENGAGED IN THE BUS INESS OF TRADING OF DIAMONDS,FILED ITS RETURN OF ON 25/09/2008,DECLARING INCOME OF RS. 84.87 LAKH S LAKHS. INITIALLY THE RETURN WAS PROCESSED U/S.143(1)OF THE ACT.LATER ON,THE ASSESSING OFFICER (AO)ISSUED A NOTICE U/S.148 OF THE ACT, AS HE WAS OF THE OPINION THAT TAXABLE INCOME HAD ESCAPED ASSESSMENT.HE COMPLETED THE ASSESSMENT ON 21/02/2014,U/S.143 (3) R.W.S.147 OF THE ACT,DETERMI NING ITS INCOME AT RS. 99.87 LAKHS. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT CONFIRMING THE ADDITION OF RS. 15 LAKHS.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSES SEE HAD TAKEN A LOAN FROM BASANT MARKETING PVT.LTD.(BASANT),AMOUNTING TO RS.15 LAKHS.HE DIRECT ED THE ASSESSEE TO FILE NECESSARY DOCUMENTARY EVIDENCES TO PROVE THE GENUINENESS OF T HE TRANSACTION.AS PER THE AO,THE ASSESSEE FILED CONFIRMATION LETTER OF BANSANT ALONG WITH THE COPY OF LEDGER ACCOUNTS FOR THE AY.2008-09 AND 2009-10.AFTER CONSIDERING THOSE DOCUMENTS AND T HE BANK STATEMENTS OF BASANT,HE HELD THAT JUST BEFORE LENDING LOANS TO THE ASSESSEE ON 28.01. 2008 BANSANT HAD RECEIVED CASH ON 22.01.2008 AND 28.01.2008,THAT THE ASSESSEE HAD FAILED TO EXPL AIN THE SOURCE FUND,THAT THE ASSESSEE ITSELF HAD FACILITATED THE LOAN BY WAY OF CASH DEPOSITS ROUTED THROUGH BANKING CHANNELS,THAT BASANT WAS A DUMMY ENTITY,THAT NON GENUINENESS OF BASANT WAS CON VEYED BY CBI.HE MADE AN ADDITION OF RS. 15 LAKHS TO THE INCOME OF THE ASSESSEE,INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT.HE ALSO 3297/M/15-ACOLYTE 2 OBSERVED THAT THE EXPLANATION OFFERED BY THE ASSESS EE IN RESPECT OF THE SOURCE OF FUND WAS NOT FOUND SATISFACTORY. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) AND ARGUED THAT IT HAD RECEIVED GENU INE LOAN FROM BASANT.AFTER CONSIDERING THE AVAILABLE MATERIAL,HE HELD THAT BASANT WAS FOUND IN DULGED IN PAPER TRANSACTION AND PROVIDING HAWALA ENTERIES,THAT THE ONUS WAS HEAVY ON THE ASSE SSEE AS IT HAD TAKEN LOAN FROM AN ENTITY THAT WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES,THAT THE ASSESSEE HAD NO BUSINESS DEALING WITH BASANT, THAT BASANT ADVANCED A LOAN OF RS.15 LAKHS WITHOUT CHARGING ANY INTEREST,THAT THERE APPEARED TO BE A WELL THOUGHT DESIGN BY WHICH THE A SSESSEE HAD ARRANGED THE ALLEGED LOAN TO ROUTE ITS OWN MONEY.HE REFERRED TO THE CASES OF SUM ATI DAYAL(214 ITR 801)AND P MOHANKALA((291ITR278) AND HELD THAT THE ALLEGED LOA N RECEIVED BY THE ASSESSEE FROM BANSANT WAS NOT A GENUINE TRANSACTION. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)ARGUED T HAT THE ASSESSEE HAD FILED CONFIRMATION LETTER AND COPIES OF LEDGER ACCOUNT,THAT COPY OF AS SESSMENT ORDER OF BASANT WAS ALSO FURNISHED,THAT THE TRANSACTION WAS THROUGH BANKING CHANNELS,THAT THERE WAS NO DOUBT ABOUT THE GENUIENITY OF THE TRANSACTION.THE DEPARTMENTAL REPR ESENTATIVE(DR)CONTENDED THAT BASANT WAS ENGAGED IN THE BUSINESS OF PROVIDING BOGUS ENTRIES, THAT IT HAD ADVANCED LOAN TO THE ASSESSEE WITHOUT CHARGING INTEREST AND WITHOUT OBTAINING ANY SECURITY,THAT RS 15 LAKHS WERE DEPOSITED IN CASH IN THE BANK ACCOUNT OF BASANT BEFORE IT ADVANC ED THE LOAN,THAT THE GENUINENESS OF THE TRANSACTION WAS NOT PROVED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.BEFORE PROCEEDING FURTHER,WE WOULD LIKE TO REFER TO SOME OF THE GENER AL PRINCIPLES GOVERNING THE RE-OPENING OF COMPLETED ASSESSMENTS AND SAME COULD BE PRESENTED A S UNDER: I. RE-ASSESSMENT PROVISIONS ARE NOT CHARGING PROVISION S - ESSENTIALLY THEY REPRESENT PROCEDURAL ASPECT OF ASSESSING THE ESCAPED INCOME. THESE SECTI ONS SHOULD BE INTERPRETED IN A MANNER THAT THEY PLAY A ROLE OF A HELPING HAND IN IMPLEMENTING THE SUBSTANTIVE PROVISIONS. II. SO FAR AS REASON TO BELIEVE ON THE PART OF THE AO I S CONCERNED,AT THE STAGE OF ISSUING THE NOTICE ONLY A PRIMA FACIE AND NOT A CONCLUSIVE CASE OF INC OME ESCAPING ASSESSMENT SHOULD BE ESTABLISH- ED TO TURN DOWN A CHALLENGE TO THE REOPENING NOTICE . 3297/M/15-ACOLYTE 3 III. AT THE STAGE WHEN ONLY NOTICE HAS BEEN ISSUED,THE O NLY CONSIDERATION WOULD BE WHETHER THERE WAS REASONABLE MATERIAL AVAILABLE BASED ON WHICH A PRUDENT MAN COULD FORM THE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. IV. REASON TO BELIEVE CANNOT BE TAKEN TO MEAN THAT THE AO SHOULD HAVE FORMED AN OPINION ABOUT THE NATURE OF THE FINAL ORDER THAT IS LIKELY TO BE PASSED AFTER REOPENING THE ASSESSMENT. V. SUSTAINABILITY OF THE REOPENING NOTICE HAS TO BE TE STED ONLY ON THE BASIS OF THE REASONS RECORDED AT THE TIME OF ISSUING THE NOTICE.IN OTHER WORDS,A NOTICE FOR REOPENING OF AN ASSESSMENT WOULD STAND OR FALL ON THE BASIS OF THE REASONS RECORDED AT THE TIME OF ISSUING THE NOTICE. VI. IT IS OPEN TO THE COURT TO EXAMINE WHETHER THE REAS ONS FOR THE FORMATION OF THE BELIEF HAVE A RATIONAL CONNECTION WITH OR A RELEVANT BEARING ON T HE FORMATION OF THE BELIEF AND ARE NOT EXTRANEOUS OR IRRELEVANT FOR THE PURPOSE OF THE SEC TION. TO THIS EXTENT, THE ACTION OF AN AO IN STARTING PROCEEDINGS U/S. 147 IN RESPECT OF INCOME ESCAPING ASSESSMENT IS OPEN TO CHALLENGE IN A COURT OF LAW. VII. THE REASONS RECORDED BY THE AO TO BELIEVE THAT INCO ME HAD ESCAPED ASSESSMENT SHOULD HAVE A LIVE LINK WITH AN OBJECTIVE FACT IN THE FORM OF INF ORMATION OR MATERIALS ON RECORD TO REOPEN AN ASSESSMENT. VIII. MATTERS REOPENED WITHOUT REFERRING TO TANGIBLE MATE RIAL ARE LIABLE TO BE QUASHED. 5.1. IF THE FACTS OF THE CASE UNDER CONSIDERATION ARE TE STED ON THE TOUCHSTONE OF THE ABOVE REFERRED PRINCIPLES,IT BECOMES CLEAR THAT THE AO HAD PRIMA F ACIE CASE TO BELIEVE THAT TAXABLE INCOME HAD ESCAPED ASSESSMENT.CONSIDERING THE INFORMATION RECE IVED FROM CALCUTTA ABOUT BASANT ANY PRUDENT PERSON WILL ARRIVE AT PRIMA FACIE BELIEF TH AT THE ASSESSEE HAD NOT DISCLOSED ITS TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION.THE REASONS RECORDED BY THE AO CLEARLY PROVE APPLICATION OF MIND BY HIM.NOT ONLY REASONS WERE SU PPLIED TO THE ASSESSEE,THE AO HAD ALSO DEALT WITH OBJECTIONS RAISED BY IT.THEREFORE,THERE IS NO LACUNAE IN THE PROCEDURE FOLLOWED BY THE AO.IN THIS MATTER INTIMATION WAS ISSUED U/S.143(1)OF THE ACT,SO,THERE IS NO QUESTION OF FORMATION OF ANY OPINION BY THE AO OR CHANGE OF OPINION.THE PRIMA FA CIE FACT OF INCOME ESCAPING ASSESSMENT WAS THERE,SO,IN OUR OPINION THE FAA HAS RIGHTLY UPHELD THE RE-OPENING OF THE ASSESSMENT.JURIDICTIONAL ISSUE RAISED BY THE ASSESSEE (GOA-1)IS DECIDED AGAI NST IT. 3297/M/15-ACOLYTE 4 5.2. NOW,WE WOULD LIKE TO DECIDE THE ISSUE ON MERITS.WE ARE NOT DEALING WITH TAXABILITY OF A CHARITABLE INSTITUTION-MATTER BEFORE US IS OF A BUS INESS ESTABLISHMENT.RULES OF BUSINESS GOVERN THE COMMERCIAL WORLD AND IF THERE IS ANY DEVIATION, IT HAS TO BE EXPLAINED BY THE ASSESSEE,WHO WANTS TO TAKE BENEFIT OF SUCH AN ABNORMAL PATTERN.TAX-MAT TERS ARE NOT GUIDED BY STRICT RULE OF EVIDENCE ACT-PREPONDERANCE OF PROBABILITY IS THE BASIS OF AS SESSMENT PROCEEDINGS.NECESSITY OF PROVING THE CASE TO THE HILT,AS REQUIRED IN CRIMINAL PROCEEDING S,IS NOT REQUIRED TO DETERMINE THE TAX LIABILITY OF AN ASSESSEE.AO.S ARE ENTITLED TO TAKE NOTICE OF HUM AN BEHAVIOR AND SURROUNDING CIRCUMSTANCES AND DRAW REASONABLE INFERENCES IN MATTERS WHERE THE TRANSACTIONS ENTERED IN TO BY AN ASSESSEE REVEAL THAT COURSE OF EVENTS OF SUCH A TRANSACTION IS NOT AS PER THE PREVAILING MARKET PRACTICE OR AS PER THAT PARTICULAR BUSINESS.HIGHER JUDICIAL FORUMS HAVE ENDORSED THE VIEW THAT TAX ISSUES CAN BE DECIDED CONSIDERING THE SURROUNDING CIRCUMSTANCES O F THE TRANSACTIONS AND THE PROBABILITIES OF HUMAN BEHAVIOR.IN OTHER WORDS IT IS OPEN TO THE AO/ FAA NOT MERELY TO LOOK AT THE DOCUMENTS, BUT TO CONSIDER THE SURROUNDING CIRCUMSTANCES SO AS TO CONCLUDE WHAT IS THE REAL CHARACTER OF THE TRANSACTION.IN THE CASE OF SUMATI DAYAL (214 ITR 81 ) HONBLE APEX COURT HELD AS UNDER: IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TA XED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PR OVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABL E BECAUSE IT FALLS WITHIN THE EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSEE. BUT IN VIEW OF S ECTION 68 OF THE INCOME-TAX ACT, 1961, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSES SEE FOR ANY PREVIOUS YEAR IT MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY. IN SUCH A CASE THERE IS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ., THE RECEIPT O F MONEY, AND IF HE FAILS TO REBUT THE SAID EVIDENCE, IT CAN BE USED AGAINST HIM BY HOLDING THAT IT WAS A RECEIPT OF AN INCOME NATURE. WHILE CONSIDERING TH E EXPLANATION OF THE ASSESSEE, THE DEPARTMENT CANNOT, HOWEVER, ACT UNREASONABLY. IN THE MATTER OF DURGAPRASAD MORE(82 ITR 540) THE H ONBLE SUPREME COURT HAS HELD THAT THOUGH AN APPARENT STATEMENT MUST BE CONSIDERED REAL UNTIL IT WAS SHOWN THAT THERE WERE REASONS TO BELIEVE THAT THE APPARENT WAS NOT THE REAL, IN A CA SE WHERE A PARTY RELIED ON SELF-SERVING RECITALS IN DOCUMENTS, IT WAS FOR THAT PARTY TO ESTABLISH THE T RUTH OF THOSE RECITALS.IT FURTHER HELD THAT THE TAXING AUTHORITIES WERE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY.IN THE MATTER OF L.N.DALMIA THE HONBLE C ALCUTTA HIGH COURT (207 ITR 89) HAD DECIDED THE CASE AFTER CONSIDERING SURROUNDING CIRCUMSTANC ES. 5.3. CONSIDERING THE ABOVE DISCUSSION,IT CAN SAFELY BE H ELD THAT GENERALLY,THE TAXATION AUTHORITIES CONSIDER THAT THE APPARENT IS REAL.BUT,IN CERTAIN C ASES WHEN IT IS FOUND THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT REAL THEN THEY CAN LOOK INTO THE SURROUNDING CIRCUMSTANCES TO 3297/M/15-ACOLYTE 5 FIND OUT THE REALITY.IN OTHER WORDS,THE PRINCIPLE-T HAT THE INCOME-TAX AUTHORITIES ARE ENTITLED TO DECIDE AS TO WHETHER A TRANSACTION IS ILLUSORY OR A DEVICE OR A RUSE-HAS BECOME A PART OF TAX JURIS - PRUDENCE.IT IS ALSO ACCEPTED THAT FOR THAT PURPOSE THEY CAN PENETRATE THE VEIL COVERING SUCH TRANSACTION AND ASCERTAIN THE TRUTH. 5.3.1. IT IS SAID THAT HUMAN MOTIVES ARE OBSCURE, DIFFICUL T OF ASCERTAINMENT AND SOMETIMES CONJECTU RAL.SO,THE INCOME TAX AUTHORITIES CAN DRAW SOME INFERENCES TO DECIDE THE REAL NATURE OF A TRANSACTION. THE LAW DOES NOT PRESCRIBE ANY QUANTIT ATIVE TEST TO FIND OUT WHETHER THE ONUS IN A PARTICULAR CASE HAS BEEN DISCHARGED OR NOT. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE.IN SOME CASES,THE ONUS MAY BE HEAVY, WHEREAS, IN OTHER CASES IT MAY BE NOMINAL. IN CERTAIN CIRCUMSTANCES,THE ONUS CAN SHIFT FROM TIME TO TIME. IDENTITY AND CREDITWORTHINESS OF THE LENDER AND GENUINENESS OF THE TRANSACTIONS ALL THE THREE I NGREDIENTS ARE TO PROVED CUMULATIVELY, IF AN ASSESSEE CLAIMS THAT THE PROVISIONS OF SECTION 68 O F THE ACT WOULD NOT BE APPLICABLE IN ITS CASE. IF ANY OF THESE FACTORS IS NOT PROVED BY IT, THE AO CA N INVOKE THE PROVISIONS OF THE SAID SECTION. 5.4. IN OUR OPINION,CONSIDERING THE PECULIAR FACTS OF TH E CASE-NON CHARGING OF INTEREST BY THE LENDER AND CASH DEPOSIT IN THE ACCOUNT OF THE LENDE R IMMEDIATELY BEFORE THE ADVANCING THE LOAN- THE AO HAS RIGHTLY DRAWN CERTAIN INFERENCES.WE WOUL D LIKE TO ELABORATE BOTH THE ISSUES.DEPOSIT OF CASH BEFORE ISSUING CHEQUES TO THE ASSESSEE CANN OT BE A MERE COINCIDENCE.IF THE BANK STATEMENT OF THE ASSESSEE IS SCRUTINIZED CLOSELY,IT BECOMES CLEAR THAT ON NO OTHER OCCASION HUGE CASH WAS DEPOSITED IN THE ACCOUNT OF THE LENDER BEF ORE IT ISSUED CHEQUES OF ALMOST OF SIMILAR AMOUNT.THE FAA HAS GIVEN A CATEGORICAL FINDING OF F ACT THAT RS.15 LAKHS(APPROXIMATELY)WERE DEPOSITED IN THE BANK ACCOUNT OF THE LENDER BEFORE IT ISSUED CHEQUES TO THE ASSESSEE.THIS FACT CANNOT BE BRUSHED ASIDE LIGHTLY ESPECIALLY WHEN IT IS NOT BROUGHT ON RECORD THAT AS TO A HOW A KOLKATA PARTY AGREED TO ADVANCE LOANS TO THE ASSESS EE WITHOUT HELP OF ANY BROKER.IT IS NOT THE CASE OF THE ASSESSEE THAT THE CREDITOR IS ALSO IN T HE SAME LINE OF BUSINESS OR THAT THEIR BUSINESS RELATIONSHIP IS VERY OLD.SOUNDNESS OF BALANCE SHEET OF THE LENDER ONLY PROVES CAPACITY OF THE LENDER BUT NOT THE GENUINENESS OF THE TRANSACTION.N O AUTHORITY IS REQUIRED TO HOLD THAT BANK TRANSACTION DO NOT PROVE GENUINENESS OF THE LOANS.S URPRISINGLY, NO AGREEMENT WAS PRODUCED BEFORE THE DEPARTMENTAL AUTHORITIES OR US THAT COUL D JUSTIFY NON CHARGING OF INTEREST BY THE LENDER. IN SHORT,THERE IS PRIMA FACIE EVIDENCE AGAINST THE ASSESSEE WHICH IT HAD FAILED TO REBUT AND BEING UN-REBUTTED THE DEPARTMENTAL AUTHORITIES HAVE USED THE EVIDENCES AGAINST THE ASSESSEES BY HOLDING 3297/M/15-ACOLYTE 6 THAT GENUINENESS OF THE TRANSACTION WAS NOT PROVED. IN OUR OPINION,THE ASSESSEE IS TRYING TO CONVERT NO PROOF IN TO GOOD PROOF AND HERE IS AN IN HERENT WEAKNESS IN THE EXPLANATION FILED BY THE ASSESSEE. SO,WE HOLD THAT THE EXPLANATION OFFERED B Y THE ASSESSEE IS UNCONVINCING AND DESERVES TO BE REJECTED AND THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY. CONFIRMING HIS ORDER,WE DECIDE SECOND EFFECTIVE GRO UND AGAINST THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS DI SMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 31 JULY , 2017. 31 ST , 201 7 SD/- SD/- ( / SAKTIJIT DEY ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 31 .07.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.