EMPOWER INDIA LIMITED, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2(2), MUMBAI

ITA 3646/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1031 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 27-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DEEPKANT PRASAD
• Keywords: Business income; Depreciation; Accommodation entries; Unabsorbed depreciation
• Section: 48; 13; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (V I RTUAL COURT) , E BENCH MUMBAI BEFORE SHRI C.N.PRASAD, JM & SHRI M.BALAGANESH, AM ITA NO. 3646 /MUM/ 20 19 ( ASSESSMENT YEAR : 2008 - 09 ) ITA NO. 3647 /MUM/ 2019 ( ASSESSMENT YEAR : 2009 - 10 ) ITA NO. 36 48 /MUM/ 2019 ( ASSESSMENT YEAR : 2010 - 11 ) ITA NO. 3649 /MUM/ 2019 ( ASSESSMENT YEAR : 2012 - 13 ) ITA NO. 3650 /MUM/ 2019 ( ASSESSMENT YEAR : 2013 - 14 ) & ITA NO. 3651 /MUM/ 2019 ( ASSESSMENT YEAR : 2014 - 15 ) M/S. EMPOWER INDIA LIMITED 25/25A, 2 ND FLOOR 327, NAWAB BLDG., D.N. ROAD, OPP. THOMAS COOK MUMBAI VS. DCIT, CENTRAL CIRCLE - 2(2) 8 TH FLOOR, PRATISHTHA BHAWAN M.K.ROAD, MUMBAI PAN/GIR NO. AAACH3967N (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI NEERAJ MANGLA REVENUE BY SHRI DEEPKANT PRASAD DATE OF HEARING 10 / 1 2 /2020 DATE OF PRONOUNCEMENT 18 / 12 /2020 ITA NO . 3646/MUM/2019 TO 3651/MUM/2019 M/S. EMPOWER INDIA LTD., 2 / O R D E R PER BENCH: THESE APPEALS IN ITA NO S . 3646/MUM/2019 TO 3651/MUM/2019 FOR A.Y RS . 2008 - 09, 2009 - 10, 2010 - 11, 2012 - 13, 2013 - 14 & 2014 - 15 ARISE OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 48, MUMBAI IN APPEAL NO. CIT(A) - 4 8/IT 104 TO 106 & 108 TO 110/DCCC - 2(1)/2016 - 17 DATED 29/03/2019 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) R.W.S. 153C OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 22/03/2016 BY THE LD. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). IDENTICAL ISSUES ARE INVOLVED IN ALL THESE APPEALS AND HENCE, THEY ARE TAKEN UP TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. AT THE OUTSET, T HE LD. AR SUBMITTED THAT HE WOULD BE PRESSING ONLY THE GROUND NOS. 5 & 6 RAISED FOR A.YRS.2008 - 09 TO 2013 - 14 AND GROUND NO.4 AND 5 A.Y.2014 - 15. APART FROM THIS, THE LD. AR STATED THAT HE WOULD BE PRESSING GROUND NO.7 RAISED FOR A.Y.2013 - 14 AND GROUND NO.6 RAISED FOR A.Y.2014 - 15. ALL OTHER GROUNDS RAISED BY THE ASSESSEE FOR THE RESPECTIVE ASSESSMENT YEARS WERE STATED TO BE NOT PRESSED BY THE LD. AR, WHICH IS RECKONED AS A STATEMENT MADE FROM THE BAR AND A CCORDINGLY, ALL OTHER GROUNDS ARE DISMISSED AS NOT PRE SSED FOR THE RESPECTIVE ASSESSMENT YEARS. ITA NO . 3646/MUM/2019 TO 3651/MUM/2019 M/S. EMPOWER INDIA LTD., 3 3 . THE GROUND NO. 5 & 6 RAISED BY THE ASSESSEE FOR A.Y.2008 - 09 IN ITA NO.3646/MUM/2019 IS NOW TAKEN UP FOR ADJUDICATION. THIS IS A COMMON GROUND AND THE DECISION RENDERED FOR A.Y. 2008 - 09 ON THIS ISSUE WOULD APPL Y WITH EQUAL FORCE FOR OTHER ASSESSMENT YEARS ALSO EXCEPT WITH VARIANCE IN FIGURES. THE ISSUE IN DISPUTE IN THESE GROUNDS ARE THAT WHETHER THE ASSESSEE IS ENTITLED FOR BENEFIT OF TELESCOPING THE COMMISSION INCOME WITH THE INCOME DECLARED IN THE RETURN. 4 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT A SEARCH U/S.132 OF THE ACT WAS CARRIED OUT AT THE VARIOUS PREMISES OF SHRI SHIRISH C SHAH. DURING THE COURSE OF SEARCH, VARIOUS DOCUMENTS BELONGING TO ASSESSEE COMPANY WERE ALSO SEIZED FROM COMPUTER OF SHRI SHIRISH C SHAH INDICATING TRANSACTIONS WITH ASSESSEE COMPANY. ACCORDINGLY, PROCEEDINGS U/S.153C OF THE ACT WERE INITIATED IN THE HANDS OF THE ASSESSEE COMPANY. THE ASSESSEE FILED ITS RETURN OF INCOME IN RESPO NSE TO NOTICE U/S.153C OF THE ACT ON 12/12/2015 FOR A.YRS.2008 - 09 TO 2013 - 14 DECLARING TOTAL INCOME OF RS.1,28,087 / - , RS.19,83,042/ - , RS.44,72,859/ - , RS.69,99,815/ - , RS.19,54,919/ - AND ( - ) RS.1,07,06,446/ - FOR A.YRS. 2008 - 09 TO 2013 - 14 RESPECTIVELY AND FIL ED ITS REGULAR RETURN OF INCOME ON 26/09/2014 FOR A.Y.2014 - 15 DECLARING TOTAL INCOME OF RS. NIL AFTER SET OFF OF BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION. 4 .1. THE LD. AO OBSERVED IN HIS ASSESSMENT ORDER THAT ASSESSEE HAD DEPLOYED ITS FUNDS IN TH E FORM OF SHARE CAPITAL WITH HUGE SHARE PREMIUM WITH VARIOUS COMPANIES BY PROVIDING BOGUS ACCOMMODATION ENTRIES WITH THE HELP OF SHRI SHIRISH C SHAH TO VARIOUS PARTIES AND HAD EARNED COMMISSION INCOME. THE DIRECTOR OF THE ASSESSEE COMPANY IN HIS STATEMENT HAD ADMITTED THAT IT HAD EARNED 0.30% COMMISSION FROM THE ITA NO . 3646/MUM/2019 TO 3651/MUM/2019 M/S. EMPOWER INDIA LTD., 4 ENTRIES. THE LD. AO HOWEVER, OBSERVED THAT THE COMMISSION IN SAID TRADE RANGES FROM 0.5% TO 4%. THE LD. AO CONSIDERING THE FACT THAT COMMISSION IS SHARED BY NUMBER OF BROKERS IN BETWEEN PROCEEDED TO ADD NET COMMISSION IN THE HANDS OF THE ASSESSEE @1% AND ADDED A SUM OF RS. 74,67,419/ - FOR A.Y.2008 - 09 AND COMPLETED THE ASSESSMENT, BY APPLYING 1% ON NEW INVESTMENT MADE DURING THE YEAR AND TOTAL SALES SHOWN DURING THE YEAR. SIMILAR ADDITIONS WERE MADE FOR OTHER ASSESSMENT YEARS ALSO BY THE LD. AO. 4 .2. WE FIND THAT ASSESSEE HAD PLEADED BEFORE THE LD. CIT(A) BY CONCEDING AND ACCEPTING THAT IT EARNED COMMISSION INCOME ON BOGUS ENTRIES BUT FURTHER PLEADED THAT THE SAID COMMISSION INCOME SHOULD HAVE BEEN RESTRICTED ONLY TO TRANSACTIONS WITH OUTSIDE COMPANIES AND NOT TO TRANSACTIONS WITH GROUP COMPANIES CONTROLLED BY SHRI SHIRISH C SHAH. THIS WAS ON THE LOGIC THAT NO ONE CAN EARN PROFIT FROM ONE SELF. THE LD. CIT(A) DULY APPRECIATED THIS CONTENTION OF THE A SSESSEE AND GAVE A CATEGORICAL FINDING THAT THE INTERNAL MOVEMENTS OF FUNDS WITHIN THE COMPANIES CONTROLLED BY SHRI SHIRISH C SHAH / SHRI DEWANG MASTER WOULD BE FOR WINDOW DRESSING OR LAYERING OF MOVEMENT OF FUNDS AND WOULD NOT YIELD COMMISSION INCOME. ACC ORDINGLY, HE HE LD THAT THE COMPUTATION OF COMMISSION INCOME SHOULD BE RESTRICTED ONLY TO INVESTMENTS AND SALES TO OUTSIDE COMPANIES / PARTIES. HE ALSO OBSERVED THAT ASSESSEE HAS GIVEN DETAILS OF AMOUNTS OF INVESTMENTS AND SALES TO OUTSIDE COMPANIES IN HIS WRITTEN SUBMISSIONS WHICH WAS DIRECTED TO BE VERIFIED BY THE LD. AO AND CO MPUTE COMMISSION INCOME ACCORDINGLY. THE LD. CIT(A) HOWEVER, UPHELD THE RATE OF COMMISSION AT 1% AS ADOPTED BY THE LD. AO. 4 .3. WITH REGARD TO YET ANOTHER PLEA MADE BY THE ASSESSEE SEEKING FOR BENEFIT OF TELESCOPING, THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN, ITA NO . 3646/MUM/2019 TO 3651/MUM/2019 M/S. EMPOWER INDIA LTD., 5 THE LD. CIT(A) REJECTED THE PLEA OF THE ASSESSEE ON THE GROUND THAT INCOME RECOGNISED IN THE BOOKS IS IN THE FORM OF OTHER INCOME AND CANNOT AUTOMATICALLY BE ALLOWED BE NEFIT OF TELESCOPING THE COMMISSION INCOM E WITHOUT ASSESSEE HAVING ESTABLISHED THAT THE INCOME IN THE BOOKS IS EXCLUSIVELY AND WHOLLY OUT OF THE COMMISSION INCOME AS COMPUTED BY THE LD. AO. THE LD. CIT(A) OBSERVED THAT THERE IS NO BUSINESS ACTIVITY IN REAL I TY AND PROFIT AND LOSS STATEMENT OF EACH OF THE ASSESSMENT YEAR IS SHAM AND IS ONLY A WINDOW DRESSING. THEREFORE, HAVING ADMITTED BOGUS NATURE OF ACCOUNTS, ASSESSEE CANNOT TAKE ADVANTAGE OF ANY INCOME DECLARED IN SUCH ACCOUNTS. 4.4 . AGGRIEVED BY THE REJE CTION OF BENEFIT OF TELESCOPING, THE ASSESSEE IS IN APPEAL BEFORE US. WE FIND THAT THE ISSUE IN DISPUTE HAS ALREADY BEEN THE SUBJECT MATTER OF ADJUDICATION IN ASSESSEES OWN CASE BY THE ORDER OF THIS TRIBUNAL FOR A.Y.2011 - 12 IN ITA NO.3205/MUM/2019 DATED 23/10/2019 WHEREIN THIS TRIBUNAL HAD ALLOWED THE BENEFIT OF TELESCOPING AND GRANTED RELIEF TO THE ASSESSEE. WE FIND THAT THE ASSESSEE CLAIMED TELESCOPING OF COMMISSION INCOME AGAINST THE INCOME DECLARED IN ITS BOOKS OF ACCOUNT S . THE INCOME DECLARED IN BOOK S OF ACCOUNT COMPRISED OF GROSS PROFIT ON SALES AND INTEREST INCOME ON LOANS AND ADVANCES (ASSESSED AS ACCOMMODATION ENTRIES BY LD. AO). DETAILS OF SAID INCOME IS AS UNDER: - A Y INCOME AS PER BOOKS OF ACCOUNT GP OTHER INCOME TOTAL 2008 - 09 1,16,45 ,491 - 1,16,45,491 2009 - 10 64,03,913 28,10,243 92,14,156 ITA NO . 3646/MUM/2019 TO 3651/MUM/2019 M/S. EMPOWER INDIA LTD., 6 2010 - 11 1,20,40,747 16,20,586 1,36,61,333 2012 - 13 (29,16,943) 1,94,91,446 1,65,74,503 2013 - 14 (1,96,34,632) 1,77,14,107 (19,20,525) 2014 - 15 21,82,481 52,21,900 74,04,381 4.6 . IT WAS ALSO SUBMITTED BEFORE THE LD. CIT(A) THAT SIMILAR SUBMISSION OF THE ASSESSEE HAS ALREADY BEEN ACCEPTED BY PREDECESSOR IN HER OFFICE IN THE CASE OF THE ASSESSEE COMPANY FOR A.Y. 2011 - 12. HOWEVER , THE LD. CIT(A) DIDN'T ACCEPT THE SUBMISSION OF T HE A SSESSEE AND DIDN'T ALLOW TELESCOPING OF INCOME DECLARED IN BOOKS OF ACCOUNT AGAINST THE COMMISSION INCOME ASSESSED BY LD. AO. 4.7 . WE FIND THAT THE LD. AR VEHEMENTLY PLEADED THAT THE LD. CIT(A) HAD NOT ALLOWED THE TELESCOPING OF COMMISSION INCOME AGAI NST THE INCOME AS PER BOOKS OF ACCOUNT S ON CERTAIN OBSERVATIONS AND THE LD AR BEFORE US MET EACH OF THOSE OBSERVATIONS AS UNDER: - S.NO. OBSERVATION REMARKS 1. THE ASSESSEE HAS NOT ESTABLISHED THAT THE INCOME IN THE BOOKS OF ACCOUNT IS EXCLUSIVELY AND WHOLLY OUT OF THE COMMISSION INCOME. THE INCOME DECLARED BY THE ASSESSEE COMPANY COMPRISES OF GROSS PROFIT ON SALES ON WHICH COMMISSION IS ASSESSED BY LD. AO. FURTHER, INTEREST INCOME ON LOANS AND ADVANCES GIVEN IS APPEARING AS OTHER INCOME. BOTH TURNOVE R AND LOANS AND ADVANCES GIVEN BY THE ASSESSEE COMPANY HAVE BEEN ASSESSED AS BOGUS. THUS, NO REAL INCOME CAN BE EXPECTED FROM THE SAME. THE ASSESSEE IN LIEU OF ACCEPTING COMMISSION INCOME IN CASH HAS TAKEN INCOME IN ITS BOOKS IN THE FORM OF GROSS PROFIT AN D INTEREST. ITA NO . 3646/MUM/2019 TO 3651/MUM/2019 M/S. EMPOWER INDIA LTD., 7 2. THE ASSESSEE HAS BEEN DECLARING LOSSES. THE OBSERVATION OF LD. CIT(A) IS INCORRECT AND THE DETAILS OF INCOME DECLARED BY THE ASSESSEE COMPANY IS APPEARING IN CHART ENUMERATED BY LD. CIT(A) ON PAGE 8 OF THE APPELLATE ORDER. 3. THERE IS NO BUSINESS IN REALITY AND PROFIT AND LOSS STATEMENT IS SHAM. THESE 2 OBSERVATIONS OF LD. CIT(A) ARE CONTRADICTORY. ON THE ONE HAND THE LD. CIT(A) IS HOLDING THAT THE COMMISSION INCOME IS REAL INCOME AND SHOULD BE BROUGHT TO TAX & THE PROFIT AND LOSS ACC OUNT OF ASSESSEE IS SHAM AND ON THE OTHER HAND LD. CIT(A) IS UNWILLING TO REDUCE THE UNREAL INCOME DECLARED BY ASSESSEE IN ITS BOOKS OF ACCOUNT FROM THE ASSESSED INCOME. 4. THE COMMISSION INCOME IS THE REAL INCOME AND MUST BE BROUGHT TO TAX. SINCE T HE ISSUE OF ALLOWING TELESCOPING OF COMMISSION INCOME AGAINST THE INCOME DECLARED IN BOOKS OF ACCOUNT IS COVERED ISSUE THUS, THE TELESCOPING SHALL BE ALLOWED. 4.8 . WE FIND LOT OF FORCE IN THE AFORESAID ARGUMENT OF THE LD. AR AND IN VIEW OF THE DECISION OF THIS TRIBUNAL FOR A.Y.2011 - 12 WHERE THE BENEFIT OF TELESCOPING IS GRANTED, WE DIRECT THE LD. AO TO ALLOW TELESCOPING OF COMMISSION INCOME AGAINST INCOME DECLARED IN THE BOOKS OF ACCOUNTS FOR ALL THE ASSESSMENT YEARS. 4.9 . THE LD. DR AGREED THAT THIS I SSUE ALREADY IS DECID ED IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY , VEHEMENTLY RELIED ON THE ORDER OF THE LOWER AUTHORITIES. ACCORDINGLY, THE GROUND NOS.5 & 6 FOR A.YRS 2008 - 09 TO 2013 - 14 AND GROUND NOS. 4 & 5 FOR A.Y. 2014 - 15 ARE ALLOWED. 5 . WITH REGARD TO GROUND NO.7 RAISED BY THE ASSESSEE FOR A.Y.2013 - 14 AND GROUND NO.6 RAISED BY THE ASSESSEE FOR A.Y.2014 - 15 IS CONCERNED, WE FIND THAT THE LD. AO HAD TAKEN THE AMOUNT OF INCREASE IN INVESTMENTS AS UNDER AND COMPUTED THE COMMISSION INCOME OF THE AS SESSEE AS UNDER: - ITA NO . 3646/MUM/2019 TO 3651/MUM/2019 M/S. EMPOWER INDIA LTD., 8 A.Y. AMOUNT TAKEN BY AO COMMISSION AMOUNT 2013 - 14 93,72,19,784/ - 93,72,198/ - 2014 - 15 84,80,98,420/ - 84,80,984/ - 5 .1. WE FIND THAT THE ASSESSEE COMPANY VIDE ITS WRITTEN SUBMISSIONS BEFORE THE LD. CIT(A) HAD SUBMITTED THAT AMOUNT OF IN CREASE IN INVESTMENT FOR THE AFORESAID TWO YEARS HAD BEEN WRONGLY COMPUTED BY THE LD. AO AND THERE IS NO INCREASE IN INVESTMENT AT ALL. ON THE CONTRARY, THERE IS ONLY DECREASE IN INVESTMENTS. THE ASSESSEE FILED SOME CHART BEFORE US TO DRIVE HOME THE POINT THAT THERE IS EFFECTIVELY ONLY DECREASE IN INVESTMENTS IN BOTH THE YEARS. THE CHART OF INVESTMENTS IS REPRODUCED HEREUNDER: - A.Y.2013 - 14 AMT. (AS ON 31/03/2013) AMT. (AS ON 31/03/2012) DIFFERENCE NON - CURRENT INVESTMENTS 3,28,12,14,023/ - 2,34,39,94, 239/ - 93,72,19,784 / - CURRENT INVESTMENTS 7,22,41,191/ - 1,14,53,22,108 / - ( - ) 1,07,30,80,917 / - 3,35,34,55,214/ - 3,48,93,16,347/ - ( - ) 13,58,61,133/ - A.Y. 2014 - 15 AMT (AS ON 31/03/2014) AMT. (AS ON 31/03/ 2013) DIFFERENCE NON - CURRENT INVEST MENTS 2,52,18,36,709/ - 3,28,12,14,023/ - ( - )75,93,50,314/ - CURRENT INVESTMENTS 2,70,00,000/ - 7,22,41,191/ - ( - ) 4,52,41,191/ - ITA NO . 3646/MUM/2019 TO 3651/MUM/2019 M/S. EMPOWER INDIA LTD., 9 2,54,88,63,709/ - 3,35,34,55,214/ - ( - ) 80,45,91,505/ - 5 .2. IN THE INTEREST OF JUSTICE AND FAIRPLAY, WE DEEM IT FIT A ND APPROPRIATE THAT THE AFORESAID CHART ON INVESTMENTS FILED BY THE ASSESSEE REQUIRES TO BE REVISITED BY THE LD AO AND WE DEEM IT FIT TO REMAND THIS ISSUE TO THE FILE OF LD. AO FOR DENOVO ADJUDICATION OF THIS ASPECT OF THE ISSUE IN ACCORDANCE WITH LAW. ACC ORDINGLY, THE GROUNDS RAISED IN THIS REGARD ARE ALLOWED FOR STATISTICAL PURPOSES. 6 . IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR ALL THE YEARS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 18 / 12 /2020 BY WAY OF PROPER MENTIONI NG IN THE NOTICE BOARD. SD/ - ( C.N.PRASAD ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 18 / 12 / 2020 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, 1. THE APPELLA NT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// ITA NO . 3646/MUM/2019 TO 3651/MUM/2019 M/S. EMPOWER INDIA LTD., 10 ( ASSTT. REGI STRAR) ITAT, MUMBAI