ACHROMATIC TRADING P.LTD, MUMBAI V. ITO WD 2(1)(1), MUMBAI

ITA 3927/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0403 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 09-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN LD
• Assessee Lawyers: PRAKASH JHUNJHUNWALA LD
• Keywords: Business income; Accommodation entries; Onus to prove
• Section: 133(6); 144

Judgement Text

ITA.NO.3927/MUM/2016 ACHROMATIC TRADING PRIVATE LIMITED ASSESSMENT YEAR 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 3927/MUM/2016 ( / ASSESSMENT YEAR: 2010-11) ACHROMATIC TRADING PRIVATE LIMITED BHARAT HOUSE,3 RD FLOOR 104,BOMBAY SAMACHAR MARG MUMBAI-400 023 / VS. INCOME - TAX OFFICER WARD 2(1)(1) MUMBAI ./ ./PAN/GIR NO. AAHCA-4600-J ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : PRAKASH JHUNJHUNWALA, LD. AR REVENUE BY : M.C.OMI NINGSHEN, LD. DR / DATE OF HEARING : 21/02/2018 / DATE OF PRONOUNCEMENT : 23 /02/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2010-11 CONTEST THE ORDER OF LD. COMMISSIONER OF IN COME-TAX (APPEALS)-04 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-4/IT-93/ITO- 2(1)(1)/2013-14 DATED 15/03/2016 BY RAISING THE FOLLOWING GROUNDS O F APPEAL: - 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, LD. CIT(A) ERRED IN CONFIRMING THE REJECTION OF APPELLANTS BOOKS OF AC COUNTS U/S.145(3) ON ITA.NO.3927/MUM/2016 ACHROMATIC TRADING PRIVATE LIMITED ASSESSMENT YEAR 2010-11 2 IGNORING THE FACT THAT NO FAULT HAD BEEN POINTED IN APPELLANTS BOOKS OF ACCOUNTS; 2. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, LD. CIT(A) ERRED IN CONFIRMING THE LD. AOS FINDING THAT THE APPELLANT IS NOT ENGAGED IN GENUINE BUSINESS ACTIVITY AND IS PROVIDING ONLY ACCOMMODATI ON ENTRIES; 3. THE LD. CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS.57,65,566/- ON ESTIMATING THE SUPPRESSED COMMISSION INCOME @1% ON TURNOVER RELATING TO ALLEGED ACCOMMODATION ENTRIES; 4. WITHOUT PREJUDICE, LD. CIT(A) HAVING HELD THAT T HE APPELLANT IS ENGAGED IN PROVIDING ONLY ACCOMMODATION ENTRIES OUGHT TO HAVE RESTRICTED THE ADDITION @0.10% OF TURNOVER. 5. THE LD. CIT(A) HAVING HELD THAT THE APPELLANT IS ENGAGED IN PROVIDING ONLY ACCOMMODATION ENTRIES OUGHT TO HAVE RESTRICTED THE ADDITION @0.10% OF TURNOVER; 6. THE LD. CIT(A) HAVING UPHELD THE REJECTION OF BO OKS U/S. 145(3) OUGHT TO HAVE ESTIMATED THE TOTAL INCOME @ 0.10% OF TURNOVER ON F OLLOWING THE CONCEPT OF REAL INCOME AND CONSIDERING THE COMPARABLE INSTANCE S RELIED BY THE APPELLANT. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. INCOME-TAX OFFICER-WARD 2(1)(1), MUMBAI [AO] U/S 144 READ WITH SECTION 145(3) OF THE INCOME TAX ACT,1961 ON 30/03/2013. 2.1 BRIEFLY STATED THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN TRADING & DEALING IN STEEL SHEET WAS ASSESSED FOR IMPUGNED AY ON BEST JUDGMENT BASIS U/S 144 ON 30/03/2013 WHEREIN THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED ON AN ESTIMATED BASIS AT RS.288.27 LACS AS AGAINST RS.1.80 LACS FILED BY THE ASSESSEE ON 15/10/2010. THE ASSESSEE REFLECTED TURNOVER OF RS.5 7.65 CRORES WITH MEAGER NET PROFIT RATE OF .0.329%. 2.2 A PERUSAL OF FINANCIAL STATEMENTS REVEALED THAT MAJORITY OF THE SALE AND PURCHASES WERE ON CREDIT AND THE ASSESSEE HAD S UBSTANTIAL CLOSING DEBTORS AS WELL AS CREDITORS WHICH REMAINED OUTSTAN DING FOR CONSIDERABLE PERIOD OF TIME. KEEPING IN VIEW THE NATURE OF TRANS ACTIONS CARRIED OUT BY THE ASSESSEE, THE ASSESSEE WAS ASKED TO SUBSTANTIAT E THE DELIVERY OF MATERIAL. FURTHER, TO CONFIRM THE STATED SALE / PUR CHASE NOTICES U/S 133(6) ITA.NO.3927/MUM/2016 ACHROMATIC TRADING PRIVATE LIMITED ASSESSMENT YEAR 2010-11 3 WERE SENT TO MANY PARTIES AS ENUMERATED IN THE QUAN TUM ASSESSMENT ORDER. THE ASSESSEE, WHILE UNABLE TO SUBSTANTIATE T HE DELIVERY OF MATERIAL, HOWEVER, IN SUPPORT, FILED FINANCIAL STAT EMENTS OF PARTIES FROM WHOM THE ASSESSEE HAD BOUGHT MATERIAL OR SOLD MATER IAL. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS AND DOCUMENT ARY EVIDENCES, LD. AO OPINED THAT THE ASSESSEE WAS NOT ENGAGED IN ANY GENUINE BUSINESS ACTIVITY BUT ENGAGED IN PROVIDING ONLY ACC OMMODATION ENTRIES WITHOUT CARRYING OUT ANY ACTUAL BUSINESS. CONSEQUEN TLY, WHILE REJECTING THE ASSESSEES BOOK OF ACCOUNTS U/S 145(3), LD. AO ESTIMATED THE ASSESSEES INCOME @5% OF TOTAL SALES WHICH CAME TO RS.288.27 LACS. THE LD. AO, IN THE ALTERNATIVE, SUGGESTED VARIOUS A DDITIONS ON ACCOUNT OF DISCREPANCIES IN STOCK, SALES ETC. AS GIVEN IN THE QUANTUM ASSESSMENT ORDER. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED WHERE L D. CIT(A), INTER- ALIA, PROVIDED PARTIAL RELIEF TO THE ASSESSEE BY MAKING F OLLOWING OBSERVATIONS:- 4.5 I HAVE CONSIDERED THE FINDINGS OF THE ASSESSIN G OFFICER AS WELL AS RIVAL SUBMISSION OF THE APPELLANT CAREFULLY. I FIND THAT THAT THIS IS THE FIRST YEAR OF THE BUSINESS OF THE APPELLANT. DURING THE YEAR, IT HAS SHOWN TURNOVER AS HIGH AS OF RS.57,65,56,679/- ON WHICH APPELLANT HAS SHOWN N ET PROFIT OF RS.1,90,224/- WHICH IS 0.03%. FROM THE FINDINGS OF THE ASSESSING OFFICER, IT IS VERY EVIDENT THAT APPELLANT HAS PROVIDED ACCOMMODAT ION BILLS AND MOST OF THE TRANSACTIONS ARE PAPER TRANSACTION. IN PARA 4.16 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS RIGHTLY MENTIONED THAT APPELL ANT IS NOT GENUINELY ENGAGED IN BUSINESS BUT PROVIDES ONLY ACCOMMODATION ENTRIES TO THE VARIOUS PARTIES. FURTHER, I FIND PROPER REASONING IN THE AS SESSMENT ORDER. THE APPELLANT HAS NOT BEEN ABLE TO FURNISH DOCUMENTARY EVIDENCES SUCH AS TRANSPORTATION BILLS, DELIVERY CHALLANS, WEIGHING R ECEIPTS, LOCAL LEVY RECEIPTS, ETC. IT IS IMPORTANT TO NOTE THAT M/S. AADIT METAL TRADE PVT.LTD. HAS SHOWN SALES OF RS.328,40,42,295/- AGAINST THIS ASSESSEE H AS SHOWN PURCHASE FROM THIS PARTY OF RS.338,32,86,179/- AND OTHER EXPENSES OF RS.60,63,192/-. THIS CLEARLY REVEALS THAT THERE IS NO OTHER TRANSACTIONS DONE BY M/S. AADIT METAL ITA.NO.3927/MUM/2016 ACHROMATIC TRADING PRIVATE LIMITED ASSESSMENT YEAR 2010-11 4 TRADE PVT. LTD. SIMILAR IS THE FACT IN RESPECT OF M /S. AKSHATA MERCANTILE PVT.LTD. SIMILARLY, APPELLANT HAS SHOWN PURCHASES F ROM M/S. LOHA ISPAAT LIMITED. THE ASSESSEE HAS SHOWN PURCHASES WITHOUT A NY DEMONSTRATION OF TRANSPORTATION BILL. SIMILAR IS THAT FACT IN OTHER CASE, HENCE, IT IS VERY EVIDENT THAT ASSESSEE HAS DONE ACCOMMODATION ENTRIES BUSINE SS. THE LD. A.O. HAS ESTIMATED PROFIT @5% ON TOTAL SALES AS COMMISSION I NCOME AND HAS MADE ADDITION OF RS.2,88,27,830/-. THIS ESTIMATION IS HO WEVER, WITHOUT ANY BASIS, HENCE, SAME CANNOT BE SUSTAINED AS IT IS. WHEN IT I S FOUND THAT APPELLANT HAS GIVEN ACCOMMODATION ENTRIES BY WAY OF ISSUING SALES BILLS TO VARIOUS PARTIES AFTER PURCHASE ON CREDIT, HENCE, INCOME HAS TO BE E STIMATED CONSIDERING THE FACTS AND CIRCUMSTANCES OF SUCH BUSINESS WHERE ACCO MMODATION ENTRIES ARE PROVIDED. OBVIOUSLY, 5% PROFIT IS NOT EARNED IN SUC H BUSINESS. FURTHER, COMMISSION INCOME IS ALSO NOT EARNED @5%. SINCE COM MISSION IS ONLY CHARGED FOR PROVIDING SUCH SALES BILLS, THE NORMAL COMMISSION IN SUCH BUSINESS IS 1%. THIS IS OF COMMON KNOWLEDGE OF SUCH BUSINESS. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS FOUN D JUSTIFIABLE AND APPROPRIATE TO RESTRICT COMMISSION INCOME @1% INSTEAD OF 5% EST IMATED BY THE ASSESSING OFFICER. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO ESTIMATE THE INCOME OF RS.57,65,666/-. THEREFORE, ADDITION OF RS .57,65,566/- IS SUSTAINED AND REST OF THE ADDITION OF RS.2,30,62,264/- IS DELETED. STILL AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESS EE [AR], PLEADED FOR ACCEPTANCE OF BOOK RESULTS REFLECTED BY THE ASS ESSEE AND CONTENDED THAT ESTIMATED ADDITION OF 1% WAS ON THE HIGHER SID E AND THE ASSESSEE DESERVES FURTHER RELIEF IN THE MATTER. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR] SUBMITTED THAT SUBSTANTIAL RELI EF HAS ALREADY BEEN GRANTED BY LD. FIRST APPELLATE AUTHORITY WHICH HAS BEEN ACCEPTED BY THE REVENUE AND THEREFORE, NO FURTHER RELIEF COULD BE G RANTED TO THE ASSESSEE. 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. SO FAR AS THE REJECTION OF BOOK S OF ACCOUNTS IS CONCERNED, WE FIND THAT THE ACTION OF LOWER AUTHORI TIES IN REJECTING THE SAME WAS QUITE JUSTIFIED SINCE THE COMPLETE ONUS TO PROVE THE FACTUM OF CARRYING OF ANY BUSINESS WAS ON ASSESSEE, WHICH HE HAS FAILED TO ITA.NO.3927/MUM/2016 ACHROMATIC TRADING PRIVATE LIMITED ASSESSMENT YEAR 2010-11 5 SUBSTANTIATE. A PERUSAL OF PATTERN OF FINANCIAL TRA NSACTIONS REVEALED THAT THE ASSESSEE ONLY INDULGED IN CARRYING OUT THE BUSI NESS OF PROVIDING ACCOMMODATION ENTRIES ONLY. DESPITE DEALING IN HEAV Y ITEM LIKE STEEL, THE ASSESSEE FAILED TO DEMONSTRATE THE DELIVERY OF MATE RIAL IN ANY MANNER. THEREFORE, ON FACTUAL MATRIX, THE REVENUE WAS LEFT WITH NO OPTION BUT TO REJECT THE BOOK RESULTS AND ESTIMATE THE INCOME ON SOME FAIR AND REASONABLE BASIS. THE LD. AO ESTIMATED THE SAME @5% WHICH HAS BEEN REDUCED TO 1% BY LD. CIT(A). WE FIND THAT AFORESAID ESTIMATION QUITE FAIR AND REASONABLE KEEPING IN VIEW THE NATURE OF ASSESS EES BUSINESS. THEREFORE, BY CONFIRMING THE STAND OF LD. CIT(A), W E DISMISS ASSESSEES APPEAL. 6. RESULTANTLY, THE ASSESSEES APPEAL STANDS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD FEBRUARY, 2018 SD/- SD/- (MAHAVIR SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 23. 02.2018 SR.PS:- THIRUMALESH ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. !$- , - , / DR, ITAT, MUMBAI 6. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI