ASSTT CIT 17(2), MUMBAI V. NIMESH S. JOSHI, MUMBAI

ITA 3922/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0521 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 09-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Peak credit; Additional evidence; Accommodation entries; Reason to believe
• Section: 133(6); 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3922 /MUM/2016 (ASSESSMENT YEAR: 2009-10) A C I T - 17(2) VS. SHRI NIMISH S. JOSHI ROOM NO. 134 AAYAKAR BHAVAN, M.K. MARG MUMBAI 400020 OFFICE NO. 134, GROUND FLOOR GARIBDAS STREET, VADGADI MUMBAI 400003 PAN AABPJ2784M APPELLANT RESPONDENT APPELLANT BY: SHRI V. JUSTIN RESPONDENT BY: NONE DATE OF HEARING: 03.08.2017 DATE OF PRONOUNCEMENT: 08.08.2017 O R D E R PER P.K. BANSAL, VICE PRESIDENT THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-28, MUMBAI DATED 03.03.2016 FOR A.Y. 2009-10 . 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO T HE ADMISSION OF ADDITIONAL EVIDENCES IN VIOLATION OF RULE 46A OF TH E INCOME RULES, 1962 AND THEREBY ALLOWING THE EARLIER YEAR PEAK WHILE CO NSIDERING THE COMPUTATION OF PEAK CREDIT IN RESPECT OF THE IMPUGN ED ASSESSMENT YEAR AMOUNTING TO ` 1,86,88,590/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE AO ON THE BASIS OF THE INFORMATION RECEIVED FROM THE OFFICE OF THE DDIT (I NV) THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES FROM CERTAIN PARTIES TO INFLATE HIS PROFIT REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SEC TION 148 OF THE INCOME TAX ACT. IT WAS ALSO STATED THAT IN THE REAS ONS RECORDED THAT AN ENQUIRY UNDER SECTION 133(6) WAS MADE BY THE INVEST IGATION WING ON 23.01.2013 IN CONNECTION WITH THE HAWALA ENTRIES OB TAINED BY THE ITA NO. 3922/MUM/2016 SHRI NIMISH S. JOSHI 2 ASSESSEE. THE PEAK CREDITS WERE WORKED BY THE DDIT (INV) AT ` 7,51,39,528/-, ` 8,51,46,118/- AND ` 7,03,53,023/- FOR ASSESSMENT YEARS 2009-10, 2010-11 & 2011-12, RESPECTIVELY. HOWEVER, INDEPENDENT ENQUIRIES INITIATED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2010-11 HAVE REVEALED THAT IN ADDITION TO THE PARTI ES MENTIONED IN THE REPORT OF THE DDIT, THE ASSESSEE HAS TAKEN ACCOMMOD ATION ENTRIES AGGREGATING TO ` 5,07,60,613/- FROM EIGHT MORE PARTIES. AS A RESULT THE PEAK CREDIT HAS BEEN WORKED OUT AT ` 7,58,23,848/-, ` 10,47,43,397/- AND ` 8,17,90,409/- FOR ASSESSMENT YEARS 2009-10, 2010-11 AND 2011-12 RESPECTIVELY. ACCORDINGLY THE INCREMENTAL PEAK CRED IT FOR A.Y. 2010-11 WAS WORKED OUT AT ` 2,89,19,549/- AND ADDED BACK UNDER SECTION 69C. THE AO, THEREFORE, ON THE BASIS OF THE MATERIAL HAD REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX AS INDICATED BY THE ACCOMM ODATION BILLS FOR PURCHASE TO THE TUNE OF ` 14,28,02,606/- FROM THE AFORESAID PARTIES HAS ESCAPED ASSESSMENT FOR A.Y. 2009-10. THE ASSESSEE I N RESPONSE TO THE NOTICE UNDER SECTION 148 REQUESTED TO TREAT THE ORI GINAL RETURN FILED ON 29.09.2009 AS THE RETURN FILED IN RESPONSE TO THE N OTICE UNDER SECTION 148. THE AO ISSUED NOTICE UNDER SECTION 133(6) TO VERIFY THE PURCHASES TO MANY OF THE PURCHASE PARTIES. THE NOTICES IN RESPECT OF THE PARTIES GIVEN PAGES 2 & 3 OF THE ASSESSMENT ORDER WERE RETURNED BACK WITH THE REMARKS NOT KNOWN, LEFT, ETC. FOR THE PURCHASES AMOUNTING TO ` 13,06,78,259/-. THE AO ASKED THE ASSESSEE TO SUBMIT THE COPIES OF THE L EDGER ACCOUNTS OF THE PARTIES FROM 01.04.2010 TO 31.03.201 FOR WORKING OU T THE PEAK CREDIT. DURING THE COURSE ASSESSMENT PROCEEDINGS THE AO HAD TAKEN THE PURCHASES FROM EIGHT PARTIES WHICH REMAINED TO BE C ONSIDERED IN THE PEAK WORKED OUT DURING THE COURSE OF THE ENQUIRY CONDUCT ED BY THE DDIT AGGREGATING TO ` 5,07,60,613/-. THE LEDGER ACCOUNTS WERE MERGED INTO A SINGLE ACCOUNT AND THE COMBINED PEAK AMOUNT OF CRED IT AFTER ADDING THE PURCHASES AND DEDUCTING THE PAYMENTS MADE WAS WORKE D OUT. ON THIS BASIS THE PEAK CREDIT IN RESPECT OF ASSESSMENT YEAR S 2009-10, 2010-11 AND 2011-12 WAS WORKED OUT AS UNDER: - ITA NO. 3922/MUM/2016 SHRI NIMISH S. JOSHI 3 FINANCIAL YEAR PEAK CREDIT AS PER DETAILS FILED DURING ASSESSMENT PROCEEDINGS INCREMENTAL CREDIT ( ` ) 2008 - 09 7,58,23,848/ - 7,58,23,848/ - 2009 - 10 10,47,43,397/ - 2,89,19,549/ - 2010 - 11 8,17,90,409/ - NIL THE AO, THEREFORE, ADDED A SUM OF ` 7,58,23,848/- IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER HEARING THE ASSESSEE AND GOING THROUGH HIS ST ATEMENTS FOUND THAT THERE WERE PURCHASES FROM THESE PARTIES DURING A.Y. 2008-09 ALSO AND THE PEAK CREDITS DURING A.Y. 2008-09 WERE TO THE EXTENT OF ` 1,86,88,590/-. HE, THEREFORE, ALLOWED THE CREDIT IN RESPECT OF PEAK CR EDIT RELATING TO A.Y. 2008- 09 BY HOLDING AS UNDER: - 5.4 THE ONLY QUESTION WHICH NEEDS TO BE DECIDED IS THE QUANTUM OF THE UNACCOUNTED CASH IN CIRCULATION IN BUSINESS. TH E AO HAS BEEN FAIR TO THE APPELLANT BY ADOPTING THE PEAK CASH IN CIRCU LATION AS THE UNACCOUNTED CAPITAL OF THE APPELLANT FOR MAKING UNA CCOUNTED CASH PURCHASES. FOR EXAMPLE, THE APPELLANT PURCHASES THE 1 ST LOT OF GOODS IN CASH FOR WHICH PAYMENT IS MADE OUT OF UNACCOUNTE D CASH. THE SALE CORRESPONDING TO THIS IS RECORDER IN THE BOOKS AND THE REALIZATION OF THE SAME IS IN CHEQUE. THE APPELLANT THEN TAKES BIL LS FROM THE BOGUS SUPPLIERS, ISSUES CHEQUES AND TAKES BACK EQUIVALENT CASH. THIS CASH IS THEN USED TO MAKE THE 2 ND UNACCOUNTED PURCHASE. THIS MODUS HAS BEEN CATEGORICALLY ACCEPTED AND STATED AS SUCH BY T HE APPELLANT HIMSELF IN HIS SWORN STATEMENT. THE RELEVANT QUESTI ON ANSWERS HAVE BEEN REPRODUCED ABOVE ALREADY. THERE BEING MULTIPLE SUCH TRANSACTIONS THROUGHOUT THE YEAR, THERE WOULD BE AN OVERLAP OF TRANSACTIONS AND THEREFORE THE ONLY FAIR WAY TO EST IMATE THE QUANTUM IS TO ADOPT THE PEAK UNACCOUNTED CASH IN CIRCULATIO N. THIS WOULD DIRECTLY CORRESPOND TO THE PEAK OF THE BOGUS BILLS TAKEN. THE AO HAS DONE EXACTLY THE SAME. IN FACT THE PEAK WORKING IS ANNEXED TO THE ASSESSMENT ORDER. I FIND THE SAME IN ORDER AND THER EFORE CONFIRM THE FINDING OF THE AO. THE APPELLANT DURING THE HEARING ON 25/02/2016 MADE AN ALTERNATE PLEA THAT WHILE CONSID ERING THE WORKING OF PEAK CREDIT, THE PEAK OF THE EARLIER YEA R I.E. A.Y. 2008-09 ALSO NEEDS TO BE GIVEN CREDIT FOR AS THE PU RCHASES ARE MADE FROM SAME HAWALA DEALERS IN EARLIER YEARS ALSO . I FIND THAT THE AO HAS NOT GIVEN CREDIT FOR THE UNACCOUNTE D CASH AT THE BEGINNING OF THE YEAR TO THE APPELLANT. I AM IN CLINED TO AGREE WITH THE ALTERNATE PLEA OF THE APPELLANT SIMP LY BECAUSE THE APPELLANT HAS UNACCOUNTED CASE PERTAINING TO TH E EARLIER YEAR IN HIS HANDS AS ON 01/04/2008 (1 ST DAY OF THIS PREVIOUS YEAR) TO MAKE UNACCOUNTED PURCHASES AT THE BEGINNIN G OF THIS ITA NO. 3922/MUM/2016 SHRI NIMISH S. JOSHI 4 YEAR. I THEREFORE REQUEST THE APPELLANT TO SUBMIT THE WOR KING OF PEAK FROM A.Y. 2008-09 TO 2011-12. THUS THE REVISED WORK ING OF PEAK CREDIT IS AS FOLLOWS: - ASSESSMENT YEAR PEAK CREDIT OF THE YEAR INCREMENTAL CREDIT 2008-09 1,86,88,590 1,86,88,590 2009-10 7,58,23,848 5,71,35,258 2010-11 8,17,90,409 NIL CONSIDERING THE ABOVE WORKING, THE INCREMENTAL CRED IT IN THE INSTANT YEAR IS WORKED OUT AT RS.5,71,35,258 INSTEAD OF RS. 7,58,23,848. THEREFORE ADDITION ON ACCOUNT OF PEAK CREDIT BEING THE PEAK UNACCOUNTED CAPITAL IN BUSINESS IS RESTRICTED TO RS .5,71,35,258. 4. EVEN THOUGH NOTICE WAS DULY SERVED NONE APPEARED ON BEHALF OF THE ASSESSEE. WE, THEREFORE, DECIDED TO DISPOSE OFF THI S APPEAL AFTER HEARING THE LEARNED D.R. AFTER HEARING THE LEARNED D.R. AND GOI NG THROUGH THE ORDER OF THE TAX AUTHORITIES BELOW WE NOTED THAT SO FAR THE SUBMISSION OF THE ADDITIONAL EVIDENCE ARE CONCERNED, THE LEARNED D.R. EVEN THOUGH REFERRED TO THE GROUND OF APPEAL COULD NOT CONVINCED AS TO H OW THE CIT(A) HAD ADMITTED THE ADDITIONAL EVIDENCE IN VIOLATION OF RU LE 46A. EVEN THE NATURE OF THE ADDITIONAL EVIDENCE WAS ALSO NOT BROUGHT TO OUR KNOWLEDGE. IN VIEW OF THIS FACT WE DISMISS THIS GROUND RELATING TO THE ADMISSION OF THE ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A. SO FA R AS GIVING OF THE PEAK CREDIT FOR THE EARLIER YEAR WHILE WORKING OUT THE P EAK CREDIT OF THE IMPUGNED ASSESSMENT YEAR IN RESPECT OF THE SAME PAR TY WE NOTED THAT THE AO WHILE WORKING OUT THE INCREMENTAL CREDIT FOR ASS ESSMENT YEARS 2010-11 AND 2011-12 IN THE AFORESAID ASSESSMENT YEAR ITSELF HAS ALLOWED THE CREDIT FOR THE PRECEDING ASSESSMENT YEAR. SINCE IN THE IMP UGNED ASSESSMENT YEAR THE AO HAS NOT CONSIDERED THE PEAK CREDIT OF A.Y. 2 008-09 AND TAKEN A.Y. 2009-10 PEAK AS FIRST YEAR, THEREFORE THE AO HAS IN OUR VIEW HAS COMMITTED A MISTAKE. THE METHOD OF COMPUTATION OF P EAK CREDIT HAD EVEN BEEN ACCEPTED BY THE AO WHILE WORKING OUT THE PEAK CREDIT FOR SUBSEQUENT ASSESSMENT YEARS WHICH IS APPARENT FROM PARA 4.1.20 OF THE ASSESSMENT ORDER. IN VIEW OF THIS FACT WE DO NOT FIND ANY ILLE GALITY OF INFIRMITY IN THE ORDER OF THE CIT(A) DIRECTING THE AO TO ALLOW THE C REDIT FOR THE PEAK OF ITA NO. 3922/MUM/2016 SHRI NIMISH S. JOSHI 5 ` 1,86,88,590/- PERTAINING TO THE EARLIER YEAR, I.E. A.Y. 2008-09. ACCORDINGLY THE ORDER OF THE CIT(A) STAND CONFIRMED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH AUGUST, 2017. SD/ - SD/ - (PAWAN SINGH) (P.K. BANSAL) JUDICIAL MEMBER VICE PRESIDENT MUMBAI, DATED: 8 TH AUGUST, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -28, MUMBAI 4. THE PR. CIT - 17, MUMBAI 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.