ACIT 15(1), MUMBAI V. VIKRAM VIJAY MEHTA, MUMBAI

ITA 4391/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93217 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 12-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 31-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Document seized; Corroborative evidences; Documents seized
• Section: 69C; 143(3); 153A; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . . , , , BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO . 4391 & 4392/MUM/2013 ( / ASSESSMENT YEAR : 2007 - 08 & 2008 - 09 THE ACIT - 15(1) MATRU MANDIR, 1 ST FLOOR, TARDEO ROAD, MUMBAI - 400 007 / VS. SHRI VIKRAM VIJAY MEHTA, 32A, GEETA SMRUTI BLDG., PANDITA RAMABAI ROAD, GAMDEVI, MUMBAI - 400 007 ./ ./ PAN/GIR NO. : AGSPM 2802N ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI G.M. DOSS / RESPONDENT BY : SHRI VIJAY MEHTA / DATE OF HEARING : 09 . 0 7 .2015 / DATE OF PRONOUNCEMENT : 17 .0 7 .2015 / O R D E R PER N.K. BILLAIYA, AM: T H ESE TWO APPEALS OF THE REVENUE ARE PREFERRED AGAINST TWO SEPARATE ORDERS OF THE LD. CIT(A) - 2 6 , MUMBAI DT. 2 5 .3.2013 PERTAINING TO ASSESSMENT YEAR 2007 - 08 & 2008 - 09 . BOTH THESE APPEALS HAVE COMMON GROUNDS THOUGH QUANTUM MAY DEFER, THEREFORE, THEY WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA. NO. 4391 & 4392/M/2013 2 2. IN BOTH THESE APPEALS, THE REVENUE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) ON TWO COUNTS. FIRST GROUND IS IN RELATION TO THE DELETION OF THE ADDITION MADE BY THE AO U/S. 69C OF THE ACT AND THE SECOND GRIEVANCES RELATES TO THE DELETION OF THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF FREIGHT EXPENSES. 2.1. FIRST WE TAKE UP THE APPEAL FOR A.Y. 2007 - 08 IN ITA NO. 4391/M/2013. THE FACTS OF THE CASE ARE THAT A SEARCH & SEIZURE ACTION U/S 132 OF THE INCOME TAX ACT, 1961 WAS CARRIED OUT ON 05.10.2007 IN THE CASE OF M/S. MEHTA TRANSPORT SERVICES(I) LTD. AND ASSESSMENT PROCEEDINGS U/S.153C WERE COMPLETED BY DY.C.I.T., CENTRAL CIRDE - 31, MUMBAI IN THE CASE OF SHRI VIJAY J MEHTA. DURING THE C OURSE OF THIS PROCEEDINGS , AN INTIMATION HAS BEEN RECEIVED FROM DY. C.I.T., CENTRAL CIRDE - 31, MUMBAI VIDE LETTER NO. DCIT/C - 31/S &S 2009 - 10 DTD.12.01.2010 ON 25.01.2010 ALONG WITH COPY OF SEIZED DOCUMENTS RELATING TO SHRI VIKRAM V MEHTA, A SON OF SHRI VIJA Y J MEHTA, WHICH WERE INCRIMINATING IN NATURE. SINCE THE PROVISIONS U/S 153C ARE ATTRACTED, PROCEEDINGS U/S 153C WERE INITIATED FOR A.Y.2002 - 03 TO A.Y.2008 - 09 BY ISSUE OF NOTICE U/S 153C OF THE I.T. ACT, 1961 ON 19.03.2010. 2.2. THE ASSESSEE IS A PROPRIETOR OF M/S. VIKRAM TRANSPORT SERVICES WHICH IS ENGAGED IN THE BUSINESS OF TRANSPORT. DURING THE COURSE OF SEARCH PROCEEDINGS, A STATEMENT ON OATH WAS RECORDED OF SHRI VIJAY J. MEHTA WHEREIN HE HAS SURRENDERED THE AMOUNT OF RS. 10 LAKHS IN THE HANDS OF SHRI VIKRAM V. MEHTA WHICH IS THE ASSESSEE OF THE PRESENT APPEALS TOWARDS UNVERIFIABLE EXPENSES AND/OR ANY DISCREPANCY FOUND AS PER THE MATERIAL SEIZED. ITA. NO. 4391 & 4392/M/2013 3 2.3. DURING THE COURSE OF SEARCH PROCEEDINGS, VARIOUS DOCUMENTS WERE FOUND AND SEIZED. IN THE CASE OF THE ASSESSEE, FOLLOWING MATERIALS WERE SEIZED. SR. NO. DOCUMENT PANCHNAMA SEIZED FROM 1. A - 1 (PAGE NO.1 TO 69) POCKET DIARY 05.10.2007 RESIDENCE GOITA BLDG., FLAT NO.32, 8 TH FLOOR, GAMDEVI ROAD, MUMBAI. 2 A - 2 (PAGE NO.1 TO 62) POCKET DIARY 05.10.2007 - DO - 3. A - 3 (PAGE NO.1 TO 83) 05.10.2007 - DO - 2.4. ON ANALYZING THE DOCUMENTS SEIZED WITH THE REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT VARIOUS TRANSACTIONS MENTIONED IN THE SEIZED DOCUMENTS WERE NOT FOUND RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. THE AO HAS EXHIBITED THE DETAILS OF SUCH TRANSACTION ON PAGE - 4 OF HIS ASSESSMENT ORDER AND ON PAGE - 5, HE HAS MADE THE YEAR - WISE ANALYSES AND THEREBY MADE THE ADDIT IONS OF RS. 16,76,295/ - IN A.Y. 2007 - 08 AND RS. 68,78,239/ - IN A.Y. 2008 - 09 U/S. 69C OF THE ACT. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). BEFORE THE APPELLATE AUTHORITY, IT WAS STATED THAT THE ENTIRE ASSESSMENT IS ERRONEOUS ON FACTUAL E RRORS. THE DETAILED SUBMISSIONS OF THE ASSESSEE WERE TRANSMITTED TO THE AO FOR HIS REMAND REPORT. THE AO FURNISHED THE REMAND REPORT VIDE LETTER DT. 8.2.2013. IN HIS REMAND REPORT, THE AO STATED THAT INSPITE OF SEVERAL OPPORTUNITIES GIVEN TO THE ASSESS EE, THE ASSESSEE DID NOT SUBMIT ANY CONCRETE AND SATISFACTORY EXPLANATION NOR HE HAS FURNISHED ANY EVIDENCE FOR VERIFICATION AS REQUIRED. ITA. NO. 4391 & 4392/M/2013 4 3.1. WHEN THIS REMAND REPORT OF THE AO WAS CONFRONTED TO THE ASSESSEE, THE ASSESSEE STRONGLY SUBMITTED THAT THE AO H AS SENT HIS REPLY WITHOUT DOING ANY KIND OF ENQUIRIES AND VERIFICATIONS FROM THE APPELLANT. THEREAFTER THE ASSESSEE FURNISHED A NOTE ON ADDITIONS MADE U/S. 69C OF THE ACT RELATING TO VARIOUS NOTINGS IN POCKET DIARY MARKED A 1, A 2 AND A3. 3.2. AFTER CONS IDERING THE FACTS AND THE SUBMISSIONS AND THE DETAILED ENTRY - WISE EXPLANATION FURNISHED BY THE ASSESSEE, THE LD. CIT(A) OBSERVED THAT THE AO HAS MECHANICALLY ADDED ALL THE FIGURES NOTED IN THE POCKET DIARY AS UNEXPLAINED EXPENDITURE OF THE ASSESSEE. THE L D. CIT(A) FURTHER OBSERVED THAT THE AO HAS SUMMARILY REJECTED THE EXPLANATION OF INDIVIDUAL ENTRIES GIVEN BY THE ASSESSEE. THE LD. CIT(A) WAS CONVINCED THAT ALL THE FIGURES NOTED IN THE POCKET DIARY CANNOT BE TREATED AS UNEXPLAINED EXPENDITURE, PARTICUL ARLY WHEN THE ASSESSEE HAS GIVEN CONVINCING EXPLANATION IN RESPECT OF MAJOR ENTRIES IN THE POCKET DIARY. THE LD. CIT(A) FURTHER OBSERVED THAT THE AO HAS TREATED EVEN THE ENTRIES OF CASH DEPOSITS IN THE BANK ACCOUNT, RECEIPTS ALREADY RECORDED IN BANK ACC OUNTS AND WITHDRAWALS RECORDED IN CAPITAL ACCOUNT AS UNEXPLAINED EXPENDITURE. THE LD. CIT(A), HOWEVER, OBSERVED THAT THERE ARE SOME DIFFERENCE REGARDING THE AMOUNT OF EXPENDITURE AS NOTED IN THE POCKET DIARY AND HAS RECORDED IN THE BOOKS OF ACCOUNT. THOUGH THE LD. CIT(A) WAS OF THE OPINION THAT SUCH ENTRIES ARE LESS THAN RS. 5 LAKHS THEREFORE IN THE INTEREST OF JUSTICE, IT WILL BE REASONABLE TO TREAT RS. 5 LAKHS AS UNEXPLAINED EXPENDITURE. ACCORDINGLY, THE ADDITION MADE BY THE AO FOR UNEXPLAINED ENTR IES IN THE SEIZED DIARY WAS RESTRICTED TO RS. 5 LAKHS ONLY. 4. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 5. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ASSESSMENT ORDER RELYING UPON EACH AND EVERY FINDINGS OF THE AO. ITA. NO. 4391 & 4392/M/2013 5 6. PER CONTRA, T HE LD. COUNSEL COULD NOT ADVANCE ANYTHING NEW OTHER THAN WHAT HAS BEEN ADVANCED BEFORE THE FIRST APPELLATE AUTHORITY. 7. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FINDINGS OF THE AO AND THE FINDINGS OF THE LD. CIT(A) QUA ADDITIONS. WITH THE ASSIST ANCE OF THE LD. COUNSEL, WE HAVE ALSO GONE THROUGH THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD BEFORE US IN THE FORM OF A PAPER BOOK. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS FILED EXPLANATION TO EACH AND EVERY ENTRY RECORDED IN THE ALLEGED POCKET DIARY. THE ADDITIONS MADE BY THE AO ARE MECHANICAL FOR EXAMPLE ON PAGE - 10 OF THE SEIZED DIARY MARKED AS A - 1, THERE IS NO TRANSACTION OF RS. 52,000/ - ON 3.8.2006 OR OTHERWISE. THUS THE ADDITION MADE BY THE AO IS WITHOUT ANY SUBSTANCE. FURTHER, THE ALLEGATION OF THE AO THAT THE PAYMENTS ARE WITHOUT ANY SUPPORTING EVIDENCE IS ALSO NOT CORRECT, FOR EXAMPLE PAYMENT OF RS. 28,000/ - MADE TO SHREE KRUPA ROADLINES IS SUPPORTED BY FAPS , WHICH IS PART OF THE PAPER BOOK FILED BEFORE THE REVENUE AUTHORITIES . WE HAVE ALSO GONE THROUGH THE REMAND REPORT OF THE AO DT. 8.2.2013 WHICH IS EXHIBITED AT PAGES 153 AND 154 OF THE PAPER BOOK. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL THAT THE AO HAS SUBMITTED THE REMAND REPORT WITHOUT ANY VERIFICATION. C ONSIDERING ALL THESE FACTS IN TOTALITY AND ALSO CONSIDERING THE FACT THAT AT THE TIME OF SEARCH, RS. 10 LAKHS WERE SURRENDERED IN THE NAME OF THE ASSESSEE WHICH HAS BEEN ACCEPTED BY THE REVENUE. RESTRICTION OF THE IMPUGNED ADDITION TO RS. 5 LAKHS IS JUSTI FIED AND THEREFORE WE DECLINE TO INTERFERE. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 8. GROUND NO. 2 RELATES TO THE DISALLOWANCE OUT OF FREIGHT EXPENSES. WHILE SCRUTINIZING THE RETURN, THE AO NOTICED THAT THE ASSESSEE IS SHOWING COMMISSION INCOME AND RECEIPTS ON ACCOUNT OF FREIGHT CHARGES. AGAINST ITA. NO. 4391 & 4392/M/2013 6 THESE RECEIPTS, THE ASSESSEE HAS CLAIMED VARIOUS EXPENSES. THE MAJOR EXPENSES WERE CLAIMED UNDER THE HEAD FREIGHT EXPENSES, BANK INTEREST. THE ASSESSEE WAS SPECIFICALLY ASKED TO PRODUCE THE NECESSARY BILLS AND VOUCHERS IN SUPPORT OF EXPENSES CLAIMED. THE AO OBSERVED THAT THE ASSESSEE HAS NOT PRODUCED SATISFACTORY EVIDENCES AS MOST OF THE EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT TOWARDS FREIGHT CHARGES WERE INCURRED IN CASH. THE AO FOUND THAT THE RATIO O F CASH PAYMENTS AND CHEQUE PAYMENTS IS 80:20. AS PROPER BILLS AND VOUCHERS WERE NOT PRODUCED, THE AO DISALLOWED 10% OF THE EXPENSES CLAIMED AND MADE AN ADDITION OF RS. 15,49,773/ - IN ASSESSMENT YEAR 2007 - 08 AND RS. 24,60,075/ - IN A.Y 2008 - 09. 9. THE A SSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). IT WAS CONTENDED BY THE ASSESSEE THAT ON THE FREIGHT CHARGES, THE ASSESSEE HAS SHOWN NET PROFIT OF 6% WHICH IS A NORMAL PROFIT IN THE TRANSPORT BUSINESS. IT WAS POINTED OUT TO THE LD. CIT(A) THAT THE ADHO C DISALLOWANCE MADE BY THE AO IS WITHOUT POINTING OUT ANY SPECIFIC INSTANCE OF ANY BOGUS OR ALLOWABLE BUSINESS. IT WAS FURTHER NOTICE D TO THE LD. CIT(A) THAT IF SUCH DISALLOWANCES ARE SUSTAINED, THEN THE NET PROFIT OF THE ASSESSEE WOULD BE AROUND 16% WHI CH IS UNREALISTIC. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) OBSERVED THAT THE AO HAS NOT MADE ANY ENQUIRY FROM ANY OF THE PARTIES TO WHOM FREIGHT CHARGES WERE PAID. THE LD. CIT(A) FURTHER OBSERVED THAT THE AO HAS NOT POINTED OUT AN Y ABNORMAL INCREASE IN THE FREIGHT EXPENSES AS COMPARED TO EARLIER OR SUBSEQUENT YEARS. THE LD. CIT(A) WAS CONVINCED THAT SUCH HUGE DISALLOWANCE, THE PROFIT WILL MAKE THE PROFIT OF THE ASSESSEE ABNORMALLY HIGH. THE LD. CIT(A) DELETED THE ADDITION. 10. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. ITA. NO. 4391 & 4392/M/2013 7 11. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE FINDINGS OF THE AO. 12. THE LD. COUNSEL FOR THE ASSESSEE ADVANCED THE SAME ARGUMENT AS MADE BEFORE THE FIRST APPELLATE AUTHORITY. 13. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS IN ISSUE. IT IS NOT IN DISPUTE THAT THE DISALLOWANCES MADE BY THE AO ARE ON ADHOC BASIS. IT WOULD BE BETTER TO CONSIDER THE FOLLOWING RATIO ANALYSIS IN RESPECT OF FREIGHT INCOME VIS - - VIS FREIGHT CHAR GES. S.NO. PARTICULARS A.Y 2007 - 08 A.Y. 2008 - 09 A.Y.2009 - 10 A.Y. 2010 - 11 A.Y.2011 - 12 1. FREIGHT INCOME 20,712,635 29,330,221 29537,417 1 1,293,579 15,662,200 2. FREIGHT CHARGES PAID 15,497,726 24,600,744 23,066,752 8,437,206 13,451,652 % 74.8% 83.9% 78.1% 74.7% 85.9% 3. NET PROFIT 1,242,682 1,395,952 1,578,400 386,790 751,869 % 6.0% 4.8% 5.3% 3.4% 4.8% ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S. 153A 143(3) R.W.S. 153A 143(3) 143(3) 143(3) 13.1. A PERUSAL OF THE AFOREMENTIONED CHART CLEARLY SHOWS THAT THE FREIGHT CHARGES CLAIMED BY THE ASSESSEE ARE REASONABLE. WE, THEREFORE DECLINE TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 2 IS ACCORDINGLY DISMISSED. ITA NO. 4392/M/2013 A. Y. 2008 - 09 14. THE GRIEVANCE OF THE REVENUE IS IDENTICAL IN ITA NO. 4391/M/13 THOUGH THE QUANTUM MAY DEFER. FOR SIMILAR REASONS APPEAL FOR A.Y. 2008 - 09 IN ITA NO. 4392 IS ALSO DISMISSED. ITA. NO. 4391 & 4392/M/2013 8 15. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. OR DER PRONOUNCED IN THE OPEN COURT ON 17 TH JU LY , 2015 SD/ - SD/ - ( A.D. JAIN ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 17 TH JU LY , 2015 . . ./ RJ , SR. PS / 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 ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI