MANAN TRADING CO. P.LTD, MUMBAI V. DCIT CC 1(1), MUMBAI

ITA 4508/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7139 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 30-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Accommodation entries
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3939/M/2016 ASSESSMENT YEAR: 2011-12 DCIT-CENTRAL CIRCLE-1(1), ROOM NO.903, PRATISTHA BHAVAN, 10 TH FLOOR, OLD CGO BUILDING ANNEXE, MUMBAI - 400020 VS. M/S. MANAN TRADING CO. PVT. LTD., 4A HANRAJ DAMODAR WADI, JSS ROAD, OPERA HOUSE, MUMBAI 400 004 PAN: AADCM5896J (APPELLANT) (RE SPONDENT) ITA NO.4508/M/2016 ASSESSMENT YEAR: 2011-12 M/S. MANAN TRADING CO. PVT. LTD., 325 AMRIT DIAMOND HOUSE, NEAR PANCHRATNA BLDG. OPERA HOUSE, MUMBAI 400 004 PAN: AADCM5896J VS. DCIT-CC-1(1), MUMBAI (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SHAILESH PARMAR, A.R. REVENUE BY : SHRI M.C. OMI NINGSHEN, D.R. DATE OF HEARING : 01.03.2018 DATE OF PRONOUNCEMENT : 31.05.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED CROSS APPEALS ONE BY THE REVENUE AND THE OTHER BY THE ASSESSEE HAVE BEEN PREFERRED AGAIN ST THE ORDER DATED 28.03.2016 OF THE COMMISSIONER OF INCOM E TAX ITA NO.3939/M/2016 & ITA NO.4508/M/2016 M/S. MANAN TRADING CO. PVT. LTD. 2 (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2011-12. ITA NO.3939/M/2016 (REVENUES APPEAL) 2. THE VARIOUS GROUNDS RAISED BY THE REVENUE ARE AG AINST THE ORDER OF LD. CIT(A) DELETING THE ADDITION AS MAD E BY THE AO ON ESTIMATED BASIS OF RS.48,82,407/- BY FOLLOWING THE ORDER OF TRIBUNAL IN THE OWN CASE OF ASSESSEE FOR A .Y. 2008-09 IN ITA NO.5956 & 6036/M/2011 AND LD. CIT(A) IGNORIN G THE FACTS THAT ASSESSEE HAS FAILED TO PRODUCE THE BOOKS OF ACCOUNTS BEFORE THE AO AND LD. CIT(A) EVEN HAS IGNOR ED THE FINDING OF THE AO IN THE ASSESSMENT ORDER THAT NOTI CES ISSUED UNDER SECTION 133(6) TO VARIOUS PARTIES WERE RETURN ED UNSERVED AND THEREFORE THE GENUINENESS OF THE CONFI RMATIONS PRODUCED BY THE ASSESSEE SUBSEQUENTLY WAS NOT PROVE D. THE REVENUE HAS FURTHER CHALLENGED THAT LD. CIT(A) HAS E RRED IN IGNORING THE FINDINGS OF THE AO THAT ASSESSEE FAILE D TO SUBMIT THE PROOFS OF GOODS/MERCHANDISE SOLD BY NOT FURNIS HING THE PURCHASE AND SALE INVOICES. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY WAS FOUND TO BE ENGAGED IN THE BUSINESS OF ACCOMMODATIO N ENTRIES. THE ASSESSEE COMPANY HAS TWO DIRECTORS I.E . SHRI ASHOK MAHAWAR AND SHRI DILKHUSH BABEL. SHRI ASHOK M AHAWAR IN HIS STATEMENT RECORDED ON 3103.2008 ADMITTED THA T HE AND SHRI DILKHUSH BABEL WERE MERE OFFICE ASSISTANTS WOR KING FOR SHRI PRAVEEN JAIN AND SHRI JITENDRA JAIN WHO MADE T HEM DUMMY DIRECTORS OF THE COMPANY. A SEARCH ACTION WAS CONDUCTED ON SHRI JITENDRA JAIN AND SHRI PRAVEEN JA IN BY THE ITA NO.3939/M/2016 & ITA NO.4508/M/2016 M/S. MANAN TRADING CO. PVT. LTD. 3 DEPARTMENT ON RECEIPT OF INFORMATION FROM SALES TAX AUTHORITIES OF MAHARASHTRA THAT THESE PERSONS WERE ENGAGED IN THE RACKET OF BOGUS BILLING. ACCORDING TO THE AO T HE LETTERS ISSUED UNDER SECTION 133(6) OF THE ACT TO VARIOUS P ARTIES WERE RETURNED UNSERVED AND THEREFORE THE CONFIRMATIONS F ILED BY THE ASSESSEE THEREAFTER CONTAINED SOME UNIQUE AND SUSP ICIOUS FEATURES WHICH WERE NOT ACCEPTED BY THE AO. THE AO ALSO RECORDED A FINDING THAT ASSESSEE HAS NOT PRODUCED A NY SUPPORTING DOCUMENTS/EVIDENCES SUCH AS PURCHASE BIL LS, INVOICES, PAYMENT DETAILS, BANK STATEMENT ETC. WHER EAS THE RECORD OF IMPORT OF DIAMONDS WORTH RS.2,41,28,948/- W AS FILED AND VERIFIED. ACCORDING TO THE AO, IF IMPORT PURCH ASES WERE EXCLUDED THE REMAINING PURCHASES , THEN THE SALES OF THE ASSESSEE WERE ALMOST EQUAL IN VALUE. THE AO ALSO N OTED THAT THE ASSESSEE HAS NOT FILED ANY PROOF OF MERCHANDISE BOUGHT AND SOLD BY THE ASSESSEE. FINALLY THE AO OBSERVED THAT THE COMMISSION RATES IN THE SAME TRADE RANGED BETWEEN 0 .5% AND 1.5% AND FINALLY AFTER REJECTING THE BOOKS OF ACCOU NTS OF THE ASSESSEE APPLIED A COMMISSION RATE OF 1%. 4. IN THE APPELLATE PROCEEDINGS THE LD. CIT(A) DELET ED THE ADDITION BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN A.Y. 2008-09 IN ITA NO.5956 & 6036/M/2011 DATED 11.09.2014 BY HOLDING AND OBSERVI NG AS UNDER: 5.1.1. IN APPEAL IT HAS BEEN SUBMITTED THAT THE AO HAS FOLLOWED THE ASSESSMENTS IN EARLIER YEARS IN REJECTING THE B OOKS OF ACCOUNTS AND ESTIMATING COMMISSION INCOME @ 1 0 /O. COPY OF ORDER OF THE ITAT IN THE APPELLANT'S OWN CASE FOR A.Y. 2008-09 (ITA 3 956 AND 6036/M/11 DATED 11.09.2014) WHEREIN SUCH REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF INCOME WAS DELETED, HAS B EEN FURNISHED. ITA NO.3939/M/2016 & ITA NO.4508/M/2016 M/S. MANAN TRADING CO. PVT. LTD. 4 ACCORDINGLY IT HAS BEEN ARGUED THAT AS THE THERE IS NO DISTINGUISHING FEATURE, FOLLOWING THE ORDER OF THE ITAT, THE ADDIT ION MADE BY THE AO SHOULD BE DELETED. 5.1.2 ON PERUSAL OF THE ORDER OF THE HON'BLE TRIBUNAL CIT ED SUPRA IT IS SEEN THAT THE ITAT HAS HELD AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CA REFULLY GONE THROUGH THE ORDERS OF AUTHRORITIES BELOW AND FOUND FROM REC ORD THAT SIMILAR ISSUE WAS DEALT WITH BY THE TRIBUNAL IN A NUMBER OF DECIS IONS CITED HEREINABOVE, COPY OF WHICH ARE ALSO PLACED ON RECOR D WHEREIN ADDITION SUSTAINED HAS BEEN DELETED BY THE TRIBUNAL. THE OBS ERVATIONS OF THE TRIBUNAL IN THE CASE OF M/S. RIDDHI SIDDHI MULTITRA TE P. LTD. (SUPRA.) WAS AS UNDER.- 'WE OBSERVE THAT ID CIT(A) HAS HIMSELF STATED IN PA RA 9 THAT AO HAS ESTIMATED THE INCOME WITHOUT REFERENCE TO ANY C OGENT MATERIAL AND THE ESTIMATION WAS MADE ON THE BASIS OF STATEME NT OF SHRI PRAVIN KUMAR JAIN AND AS FAR AS ASSESSEE IS CONCERN ED, NO SUCH STATEMENT WAS EVER MADE BY ANYONE ON ITS BEHALF. LD CIT(A) STATED THAT IN THE IMPUGNED ORDER THAT IT IS SEEN FROM THE RECORD THAT NO SPECIFIC DEFECT WAS POINTED OUT BY THE AO IN THE BO OKS OF ACCOUNT. FURTHER, WE OBSERVE THAT ID CIT(A) HAS SUSTAINED TH E ADDITION 0.5 % OF THE TOTAL TURNOVER BY REJECTING BOOKS OF ACCOUNT MERELY ON THE GROUND THAT THE INCOME SHOWN BY THE ASSESSEE IS MEA GER. LD CIT(A) HAS NOT BROUGHT ON RECORD ANY DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. LD CIT - (A) HAS ALSO NOT BROUGHT ON RECORD ANYTHING THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. IN VIEW OF ABOVE, WE HOLD TH AT ABOVE ADDITION SUSTAINED BY ID. CIT(A) BY REJECTING BOOKS RESULTS OF THE ASSESSEE IS NOT BASED ON COGENT MATERIAL AND ACCORD INGLY, SAME IS DELETED. HENCE, GROUNDS OF APPEAL TAKEN BY ASSESSEE IS ALLOWED.' 6. WE FIND THAT THE FACTS AND CIRCUMSTANCES OF THE CASE DURING THE YEAR UNDER CONSIDERATION ARE PARA MATERIAL, THEREFORE, R ESPECTFULLY FOLLOWING THE DECISION, OF THE TRIBUNAL IN OTHER GROUP CASES, WE DELETE THE ADDITION SUSTAINED BY ESTIMATING THE INCOME AT % OF THE TUR NOVER. WE DIRECT ACCORDINGLY.' 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE IM PUGNED ORDER. WE FIND THAT THE SIMILAR ISSUE WAS THERE IN THE A.Y. 2008-09 IN ITA NO.5956 & 6036/M/2011 WHEREIN THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS DELETED THE ADDI TION. NOW THE LD. D.R. HAS TRIED TO ARGUE BY SUBMITTING THAT TH E FACTS OF ITA NO.3939/M/2016 & ITA NO.4508/M/2016 M/S. MANAN TRADING CO. PVT. LTD. 5 THE CASE IN THE CURRENT YEAR ARE DIFFERENT FROM A.Y. 2008-09 AS IN THE PRESENT YEAR THE NOTICES ISSUED UNDER SECTIO N 133(6) WERE RETURNED UNSERVED AND ASSESSEE HAS NOT FILED A NY PROOF OF PURCHASE AND SALE OF GOODS. WHEREAS, ON THE OTHE R HAND, THE LD. A.R. ADMITTEDLY SUBMITTED THAT THE ASSESSEE W AS CARRYING ON BUSINESS OF BOGUS BILLING AND RETURNED WHATEVER IT EARNED FROM THE SAID BUSINESS. WE FIND THAT THE LD. CIT(A) HAS EXAMINED ALL THESE ISSUES AT THE TIME OF PASSIN G THE ORDER AND ONLY AFTER FOLLOWING THE CO-ORDINATE BENCH ORDE R OF THE TRIBUNAL IN ASSESSEES OWN CASE DELETED THE ADDITIO N. AFTER HAVING PERUSED THE FACTS ON RECORD AND TAKING INTO ACCOUNT THE RIVAL SUBMISSIONS, WE FIND THAT THE CASE IS FULLY CO VERED BY THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN T HE OWN CASE OF THE ASSESSEE IN THE EARLIER YEAR AND THERE IS NO SCOPE FOR ANY INTERFERENCE IN THE ORDER OF CIT(A). ACCORDING LY, WE UPHOLD THE ORDER OF LD. CIT(A) ON THIS ISSUE. 6. APPEAL OF THE REVENUE IS DISMISSED. ITA NO.4508/M/2016 (ASSESSEES APPEAL) 7. THE ISSUE RAISED IN FIRST GROUND OF APPEAL IS AG AINST THE CONFIRMATION OF ADDITION OF RS.42,109/- AS MADE BY T HE AO BY ESTIMATING INCOME FROM IMPORTED SALES AND THE ISSUE RAISED IN GROUND NO.2 IS AGAINST THE ORDER OF LD. CIT(A) NOT F OLLOWING THE DECISION OF HIS PREDECESSOR IN ASSESSEES OWN C ASE IN A.Y. 2008-09 WHEREIN THE LD. CIT(A) HAS ALREADY DELETED THE ADDITION ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION GAIN WHICH STANDS CONFIRMED BY ITAT IN ITA NO.5956 & 6036/M/201 1. THE ISSUE RAISED IN GROUND NO.3 IS AGAINST THE CONFI RMATION OF ITA NO.3939/M/2016 & ITA NO.4508/M/2016 M/S. MANAN TRADING CO. PVT. LTD. 6 ADDITION OF RS.53,46,871/- BY LD. CIT(A) AS MADE BY T HE AO FOR BRINGING TO TAX THE FOREIGN EXCHANGE FLUCTUATIO N GAIN. 8. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDIN GS FOUND THAT IMPORTS AMOUNTING TO RS.2,41,28,948/- WERE GENUINE AND ESTIMATED THE NET PROFIT ON THE SAID IM PORTED PURCHASES ON PROPORTIONATE BASIS BY TAKING THE NET PROFIT AS PER P & L ACCOUNT AT RS.9,02,281/- AND TOTAL PURCHAS ES AS PER P & L ACCOUNT RS.51,70,23,015/- AND THUS ESTIMATED TH E PROFIT ON IMPORTED PURCHASES AT RS.42,109/- AND FURTHER AD DED RS.53,46,871/- WHICH WAS CREDITED IN THE P & L ACCO UNT AS FOREIGN EXCHANGE FLUCTUATION GAIN AND THUS MADE THE TOTAL ADDITION FROM IMPORTED PURCHASES AT RS.53,88,980/- I N THE ASSESSMENT FRAMED. 8. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DISM ISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: IN THE APPEAL PROCEEDINGS, THE APPELLANT HAS NOT M ADE ANY SPECIFIC ARGUMENTS IN SUPPORT OF THESE GROUNDS. ON PERUSAL OF IMPUGNED ORDER IT IS SEEN THAT THE AO HAS INCLUDED THE AMOUNT OF EXCHANGE DIFFERENCE IN THE COMPUTATION OF PROFIT FR OM IMPORTED PURCHASES. THE APPELLANT HAS NEITHER SHOWN HOW THE ESTIMATION OF PROPORTIONAL PROFIT OF RS.42,109/- IS INCORRECT NOR EXPLAINED WHY THE EXCHANGE DIFFERENCE OF RS.53,45,871/- IS TO BE EXCL UDED IN THE COMPUTATION OF THE SAID PROFIT. THE APPELLANT HAS A LSO NOT BEEN ABLE TO DEMONSTRATE HOW AND WHERE THE EXCHANGE DIFFERENCE H AS BEEN ACCOUNTED FOR IN THE YEAR UNDER CONSIDERATION. THER EFORE IN VIEW OF THESE FACTS, THE ESTIMATION OF PROFIT OF RS.42,1 09/- AND THE INCLUSION OF THE EXCHANGE DIFFERENCE OF RS.53,46,87 1/- IS UPHELD AND THE GROUNDS RAISED BY THE APPELLANT ARE DISMISSED. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT SI MILAR ISSUE HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THE TR IBUNAL IN ITA NO.3939/M/2016 & ITA NO.4508/M/2016 M/S. MANAN TRADING CO. PVT. LTD. 7 ASSESSEES OWN CASE IN ITA NO.5956 & 6036/M/2011 FOR A.Y. 2008-09 VIDE ORDER DATED 11.09.2014 WHEREIN THE TRIBU NAL HAS HELD THAT THE FOREIGN EXCHANGE FLUCTUATION GAIN HAS TO BE CONSIDERED AS PART AND PARCEL OF THE TURNOVER AND N O SEPARATE ADDITION WAS REQUIRED TO BE MADE. THE RELEVANT FIND ING OF THE SAID ORDER IS AS UNDER: 7. WITH REGARD TO THE ADDITION OF RS.26,79,317/-, WE FIND THAT THE LD. CIT(A) DELETED THE SAME AFTER CONSIDERING THE FACT THAT FO REIGN EXCHANGE GAIN RELATING TO IMPORTS NEEDS TO BE REDUCED FROM THE COST OF IMPORT S AND AMOUNT OF FOREIGN EXCHANGE GAIN HAS TO BE CONSIDERED AS PART AND PARC EL OF THE TURNOVER. ACCORDINGLY IT WAS HELD THAT NO SEPARATE ADDITION WAS REQUIRED AND THAT THE A.O. HAS JUST PICKED UP THIS AMOUNT FROM THE P&L ACCOUNT AND MADE ADDITI ON WITHOUT ANY DISCUSSION. THE FINDINGS RECORDED BY THE LD. CIT(A) IN PAGE NO. 5 OF HIS APPELLATE ORDER HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS RECORDED BY THE LD. CIT(A) DELETING THE DISALLOWANCE OF RS.26,7 9,317/- MADE BY THE AO. 10. A PERUSAL OF THE ORDER OF CO-ORDINATE BENCH OF THE TRIBUNAL REVEALS THAT THE CASE OF THE ASSESSEE IS F ULLY COVERED BY THE SAID ORDER AND IN ORDER TO MAINTAIN CONSISTE NCY WE ARE FOLLOWING THE SAME AND CONSEQUENTLY WE SET ASIDE TH E ORDER OF LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION. 11. THE APPEAL OF THE ASSESSEE IS ALLOWED. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED AND THE APPEAL OF THE ASSESSEE IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 31.05.2018. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31.05.2018. ITA NO.3939/M/2016 & ITA NO.4508/M/2016 M/S. MANAN TRADING CO. PVT. LTD. 8 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.