DISHA D. KAPASI, MUMBAI V. ASST CIT 15(3), MUMBAI

ITA 3686/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1607 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Accommodation entries
• Section: 143(3); 133(6); 131; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3686/MUM/2014 ASSESSMENT YEAR 2009-10 DISHA DEVANG KAPASI, B-607, ARIHANT BLDG., SUDHA PARK, BEHIND GARODIA NAGAR, GHATKOPAR (E), MUMBAI 400 077 VS. ACIT, CIRCLE 15(3), 1 ST FLOOR, MATRU MANDIR, GRANT ROAD, MUMBAI 400 077 PAN NO. : ANGPK 4952 N ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING: 31.10.2016 DATE OF PRONOUNCEMENT: 28.11.2016 ORDER PER N. K. PRADHAN, A. M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2009-10. IT IS DIRECTED AGAINST THE ORDER OF COMMIS SIONER OF INCOME TAX (APPEALS)-26, MUMBAI AND ARISES OUT OF THE ORDER U/ S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE 1 ST GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER(AO) TO REASSESS THE NET COMMISSION INCOME OF THE APPELLANT @3% OF THE GROSS VALUE OF TRANSPORTATION BILLS AS AGAINST 0.5% PLUS TDS AS AD MITTED BY THE APPELLANT WITHOUT BRINGING ANY FRESH MATERIAL ON RECORD TO SU BSTANTIATE THE SAME. THE 2 ND GROUND IS THAT THE LD. CIT(A) ERRED IN DIRECTING T HE AO TO REASSESS THE NET APPELLANT BY: SHRI H ARI S. RAHEJA ,AR RESPONDENT BY: SHRI SHIVAJI G HO D E, DR ITA NO. 3686/MUM/2014 2 COMMISSION INCOME OF THE APPELLANT @2% OF THE GROSS VALUE OF BUILDING MATERIAL SUPPLY BILLS AS AGAINST 0.75% AS ADMITTED BY THE APPELLANT WITHOUT BRINGING ANY FRESH MATERIAL ON RECORD TO SUBSTANTIA TE THE SAME. THE 3 RD GROUND IS THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT APPELLANT HAD BEFORE THE AO BY LETTER AND IN HER AFFIDAVIT AND VARIOUS S UBMISSIONS MADE DURING THE COURSE OF APPELLATE PROCEEDINGS MADE A FULL DIS CLOSURE WHICH OUGHT TO BE ACCEPTED IN TOTO IN ABSENCE OF ANY CONTRARY MATE RIAL AGAINST THE APPELLANT. THE 4 TH GROUND, WITHOUT PREJUDICE TO THE ABOVE, IS THAT TH E LD. CIT(A) FAILED TO CONSIDER THE SUBMISSION MADE BY TH E APPELLANT THAT ALL THE EXPENSES CLAIMED IN RESPECT OF BUSINESS ACTIVITY CA RRIED ON BY HER WERE INCURRED FOR THE PURPOSE OF THE BUSINESS OF PROVIDI NG ACCOMMODATION ENTRIES AND THEREFORE ALLOWABLE AS DEDUCTION FROM T HE INCOME EARNED BY WAY OF COMMISSION ON PROVIDING ACCOMMODATION ENTRIE S OF TRANSPORTATION. 3. IN A NUTSHELL, THE FACT ARE THAT THE ASSESSEE FI LED HER RETURN INCOME FOR THE A.Y.2009-10 ON 14/11/2009 DECLARING INCOME OF R S. 16,16,030/-. THE ASSESSEE WAS THE PROPRIETOR OF M/S. D.K. ENTERPRISE S AND M/S. D.C. CORPORATION. APART FROM TRANSPORT BUSINESS, THE ASS ESSEE WAS ALSO CARRYING ON BUSINESS OF SUPPLY OF BUILDING CONSTRUCTION MATE RIALS IN ONE OF THE CONCERNS I.E. M/S D.C. CORPORATION. THE A.O HAD IS SUED NOTICES U/S 133(6) OF THE ACT TO VARIOUS PARTIES FROM WHOM THE ASSESSE E HAD CLAIMED TO HAVE MADE PURCHASES OR HAD MADE PAYMENTS ON ACCOUNT OF TRANSPORT CHARGES. IN RESPECT OF THE PURCHASES FROM 13 PARTIES, THE NO TICES ISSUED U/S 133(6) BY THE A.O CAME BACK UNSERVED BY THE POSTAL AUTHO RITIES WITH THE REMARK NOT KNOWN. IN 3 CASES, NOTICES WERE SERVED BUT TH ERE WAS NO COMPLIANCE FROM THE CONCERNED PARTIES. IN RESPECT OF BALANCE 3 PARTIES, THE ACKNOWLEDGEMENT OF SERVICE HAS NOT BEEN RECEIVED FR OM THE POSTAL AUTHORITIES OR THERE WAS NO COMPLIANCE FROM THE PAR TIES CONCERNED. THE AO ASKED THE ASSESSEE TO EXPLAIN WHY THE PURCHASES MAD E FROM THE ABOVE PARTIES SHALL NOT BE ADDED BACK TO THE TOTAL INCOME . THE AO HAS MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE ADMITTED BEFORE HIM THAT PURCHASES FROM 36 PARTIES ARE MERE ACCOMMODATION EN TRIES. THE AO HAS TABULATED THE GENUINE VS. NON-GENUINE TRANSACTIONS AT PAGE 7-8 OF THE ITA NO. 3686/MUM/2014 3 ASSESSMENT ORDER. THEN THE AO ESTIMATED GP IN RESPE CT OF SALE OF BUILDING MATERIALS AT 10% OF THE SALES CREDITED TO THE P&L A CCOUNT IN THE CASE OF M/S D.C. CORPORATION. HE ALSO MADE AN ADDITION U/S 40( I)(IA) OF RS. 4,29, 02,700/- WITH REGARD TO TRANSPORTATION CHARGES DEBI TED TO THE P & L ACCOUNT IN THE CASE OF M/S. D.C. CORPORATION AND RS . 4,60,38,975/- IN THE CASE OF M/S D.K. ENTERPRISES. LASTLY, THE AO ADDED RS. 60,558/- AS UNACCOUNTED RECEIPTS OF AS PER AIR DATABASE. 4. THE ASSESSEE FILED APPEAL AGAINST THE ORDER OF T HE AO BEFORE THE LD. CIT(A). CONSIDERING THE FACTS OF THE CASE AND KEEP ING IN MIND THE PREPONDERANCE OF PROBABILITY, THE LD. CIT(A) HELD T HAT THE ASSESSEE HAD EARNED NET COMMISSION INCOME @ 3% OF GROSS VALUE O F TRANSPORTATION BILL ISSUED AND @ 2% OF THE GROSS VALUE OF THE BUILDING MATERIAL SUPPLY BILL ISSUED. THE LD. CIT(A) DIRECTED THE AO TO COMPUTE THE INCOME OF THE ASSESSEE ACCORDINGLY. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF THE IMPUGNED AS SESSMENT YEAR, THE AO HAS RECORDED A STATEMENT FROM THE ASSESSEE U/S 131 OF THE ACT. THEREIN, THE ASSESSEE HAS ADMITTED THAT THE BILLS OF SALES ISSUE D TO SOME OF THE PARTIES DURING THE SAID ASSESSMENT YEAR DO NOT REPRESENT G ENUINE BUSINESS TRANSACTIONS AND ARE ONLY ACCOMMODATION ENTRIES BY WAY OF ISSUE OF BILLS GIVEN ON DEMAND TO VARIOUS PERSONS FOR WHICH COMMIS SION OF 0.5% IN RESPECT OF TRANSPORT BILLS AND 0.75% IN RESPECT OF BUILDING MATERIAL SUPPLY BILLS WAS RECEIVED. 6. THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RELEVANT MATERIAL ON RECORD. A SIMILAR ISSUE AROSE BEFORE T HE ITAT SMC BENCHES, ITA NO. 3686/MUM/2014 4 MUMBAI IN THE CASE OF SHRI DEVANG H. KAPASI HUF VS. ITO (ITA NO. 3685/MUM/2014) FOR A.Y. 2009-10. THE TRIBUNAL HELD AS UNDER:- 5. WITH REGARD TO THE RECEIPTS PERTAINING TO ACCOM MODATION BILLS, THE ASSESSEE SEEMS TO HAVE PROVED THE SAME BY SHOWING H IS BANK ACCOUNT WHEREIN THE CHEQUE RECEIVED FROM THE PARTIES HAVE B EEN IMMEDIATELY WITHDRAWN BY WAY OF CASH. THE EXPLANATION OF THE AS SESSEE WAS THAT THE CHEQUES RECEIVED FROM THE PARTIES WERE DEPOSITED IN TO THE BANK ACCOUNTS AND THE CASH WAS IMMEDIATELY WITHDRAWN THEREAFTER A ND HANDED OVER TO THE PARTIES. IF THE ASSESSEE IS ABLE TO DEMONSTRATE THA T THE VERY SAME MODALITY WAS FOLLOWED IN RESPECT OF RS.14.47 LAKHS ALSO, THE N THE ASSESSEES CLAIM FOR ESTIMATING INCOME AT 0.5% PLUS TDS AMOUNT CAN BE AD MITTED. HOWEVER, THIS FACT REQUIRES VERIFICATION AT THE END OF THE AO. AC CORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SA ME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE BANK ACCOUNTS AND OTHER EXPLANATIONS FURNISHED BY THE ASSESSEE AND TAKE APPROPRIATE DECI SION IN ACCORDANCE WITH THE LAW. 7.1 WE FIND THAT THAT THE AO HAS TABULATED THE FOLL OWING DETAILS AT PAGE 7- 8 OF THE ASSESSMENT ORDER WITH REGARD TO THE ACCOMM ODATION ENTRIES. SALES DECLARED BY M/S. D.C. CORPORATION: GENUIN E RS. 2,91,80,278/- NONE GENUINE RS 6,71,61,196/- PURCHASES OF M/S D.C. CORPORATION: GE NUINE - RS. 29,48,530/- ACCOMMODATION ENTRIES- RS. 8,95,02,552/- SALES DECLARED IN M/S D.K. ENTERPRISES: GENUINE - RS. 11,18,250/- NON GENUINE -RS. 9,24,02,695/- PURCHASES OF M/S D.K. ENTERPRISES: GENUINE- NIL ACCOMMODATION ENTRIES- RS. 4,60,38,975/- 7.2 KEEPING IN MIND THE ABOVE ORDER OF THE ITAT, TH E AO WOULD VERIFY WHETHER THE CHEQUES RECEIVED FROM THE PARTIES WERE DEPOSITED IN THE BANK ACCOUNTS AND CASH WAS WITHDRAWN IMMEDIATELY THEREAF TER AND HANDED OVER TO THE PARTIES. IF THE ASSESSEE IS ABLE TO PROVE T HE SAME BEFORE THE AO, THEN THE ASSESSEES CLAIM OF ESTIMATING NET COMMISSION I NCOME ON THE GROSS ITA NO. 3686/MUM/2014 5 VALUE OF THE TRANSPORTATION FEE AT 0.5% + TDS SHALL BE ACCEPTED . ALSO IF THE ASSESSEE IS ABLE TO PROVE THE ABOVE, THE AO WOULD A CCEPT THE NET COMMISSION INCOME FROM THE GROSS VALUE OF BUILDING MATERIAL SUPPLY BILLS @ 0.75%. 7.3 ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. C IT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO TO FOLLOW TH E DIRECTION AS GIVEN AT PARA 7.2 HERE-IN-ABOVE AND PASS A FRESH ASSESSMENT ORDER AS PER THE PROVISIONS OF THE ACT AFTER GIVING REASONABLE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. THUS GROUND NUMBER 1,2 & 3 ARE ALLOWED FO R STATISTICAL PURPOSE. 7.4 NOW WE COME TO GROUND NUMBER 4. THE HONBLE AND HRA PRADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS VS. CIT (1998) 232 ITR 776 (AP) HAS HELD: THE PATTERN OF ASSESSMENT UNDER THE ACT IS GIVEN B Y SECTION 29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION S 30 TO 43D. SECTION 40 PROVIDES FOR CERTAIN DISALLOWANCES IN CERTAIN CASES NOTWITHSTANDING THAT THOSE AMOUNTS ARE ALLOWED GENERALLY UNDER OTHER SEC TIONS. THE COMPUTATION UNDER SECTION 29 IS TO BE MADE UNDER SECTION 145 ON THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE. IF THOSE BOOK S ARE NOT CORRECT OR COMPLETE, THE ASSESSING OFFICER MAY REJECT THOSE BO OKS AND ESTIMATE THE INCOME TO THE BEST OF HIS JUDGMENT. WHEN SUCH AN ES TIMATE IS MADE IT IS IN SUBSTITUTION OF THE INCOME THAT IS TO BE COMPUTED U NDER SECTION 29. IN OTHER WORDS, ALL THE DEDUCTIONS WHICH ARE REFERRED TO UND ER SECTION 29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH A N ESTIMATE. THIS WILL ALSO MEAN THAT THE EMBARGO PLACED IN SECTION 40 IS ALSO TAKEN INTO ACCOUNT. 7 .4.1 KEEPING THE PRINCIPLE LAID DOWN IN THE ABOVE DECISION, THE CLAIM OF THE ASSESSEE TO ALLOW EXPENSES FROM THE INCOME EARN ED BY WAY OF COMMISSION ON PROVIDING ACCOMMODATION ENTRIES OF TR ANSPORTATION IS REJECTED. THUS GROUND NUMBER 4 TH IS DISMISSED. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 3686/MUM/2014 6 ORDER PRONOUNCED IN THE OPEN COURT ON 28/11/2016 SD/- SD/- (SAKTIJIT DEY) ( N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI; DATED: 28/11/2016 PRAMILA 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 OR DER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI DATE INITIALS ORIGINAL DICTATION PAD IS ENCLOSED AT THE END OF FILE