Shri Rishabh Amritkumar Sanghvi, Ahmedabad V. The Income Tax Officer, Ward-3(1), ( New Circle-5(2), Ahmedabad

ITA 457/AHD/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6271 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 26-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: P D SHAH
• Keywords: Business income
• Section: 143(3); 201; 131

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT AND MS MADHUMITA ROY, JUDICIAL MEMBER ./ ITA NO. 457/AHD/2016 & / ASSTT. YEAR: 2009 - 201 0 RISHABH AMRITKUMAR SANGHVI MEHTA LODHA & CO. CHARTERED ACCOUNTANT 105, SAKAR - I, ASHRAM ROAD, AHMEDABAD - 380009. PA N: BBPPS5694R VS . INCOME TAX OFFICER, WARD - 2 , NADIAD (APPLICANT) (RESPONENT) ASSESSEE BY : SHRI P.D. SHAH , A.R REVENUE BY : SHRI S.K. DEV , SR. D . R / DATE OF HEARING : 1 6 / 01 / 201 9 / DATE OF PRONOUNCEMENT: 28 / 01 /201 9 / O R D E R PER MS MADHUMITA ROY, JUDICIAL MEMBER : THE INSTANT APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX( APPEALS) - 10, AHMEDABAD DATED 01.01. 2016 , ARISING OUT O F ORDER DATED 19/06/2014 PASSED BY THE ITO, WARD - 3(1) UNDER SECTION 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 ( IN SHORT THE THE ACT ) FOR THE ASSESSMENT YEAR 2009 - 10 . 2. THE FACT OF THE CASE IS THIS THAT ASSESSEE IS RUNNING A PROPRIETORSHIP CONCERN ENGAGED IN THE BUSINESS OF TRADING OF MATERIAL. ON THE BASIS OF ITA NO. 457/AHD/2016 A.Y. 2009 - 2010 2 INFORMATION DERIVED BY THE AO THAT THE ASSESSEE HAS INDULGED IN UNDER VALUATION OF CERT AIN COMMODITIES IMPORTED BY HIM, T HE CASE OF THE ASSESSEE WAS RE - OPENED U/S.147 OF THE ACT BY ISSUANCE OF NOTICE U/S.148 ON 18/03/2014. IN RESPONSE TO T HAT BY AND UNDER A LETTER DATED 19/04/2014 , ASSESSEE REQUESTED THE RETURN SO FILED EARLIER ELECTRONICALLY FOR THE ASS ESSMENT YEAR 2009 - 10 MAY BE TREATED AS RETURN OF INCOME FILED IN COMPLIANCE TO NOTICE U/S.148 OF THE ACT. SUBSEQUENTLY OBJECTION RELATI NG TO RE - OPENING OF ASSESSMENT AS MADE BY THE ASSESSEE WAS DISPOSED OF BY THE AO BY PA SSING A SPEAKING ORDER DATED 09.05. 2014 REJECTING THE SAME. IT WAS THE CASE OF REVENUE THAT THE ASSESSEE WAS MANIPULATING THE ACTUAL VALUE OF IMPORTED CONSIGNMENT AND DEC LARING A LOWER VALUE BEFORE THE INDIAN CUSTOM FOR ASSESSMENTS THEREBY PAYING LESSER AMOUNT OF CUSTOM DUTY AND THE DIFFERENTIAL AMOUNT WAS PAID TO THE SUPPLIER THROUGH ILLEGAL CHANNEL AND IN CASH. THE ASSESSEE WAS ASKED TO SUBM IT THE DETAILS OF THE ITEMS I MPORTED DURING THE YEAR UNDER CONSIDERATION AND ALSO INCLUDING DETAILS OF ACTION TAKEN BY THE CUSTOM AUTHORITIES. THE ASSESSEE DULY SUBMITTED THAT IT IS M/S ABS INTERNATIONAL PROPRIETARY CONCERN OF SHRI AMRITLAL SANGHVI WHERE TH E ASSESSEE WAS AUTHORIZED S IGNATORY AND WAS LOOKING AFT ER THE DAY TO DAY ACTIVITIES OF THE SAID PROPRIETARY CONCERN. TH E ASSESSEE ALSO FILED SETTLEMENT APPLICATION BEFORE THE C USTOM AUTHORITIES AND O N THE BASIS OF DOCUMENTS AND/OR EXPLANATION BEFORE THE SETTLEMENT C OMMISSION YEAR - WISE BREAK UP OF THE VALUATION OF THE GOODS IMPORTED AND DIFFERENTIAL DUTY PAYABLE WAS DETERMINED WHICH IS RECORDED BY THE AO IN HIS ORDER . A CCORDINGLY AN ADDITION ON ESTIMATION AT 5% ON THE NET PROFIT OF THE TOTAL SALES FOR THE YEAR UNDER CONSIDERATION TO TH E TUNE OF RS.49, 40,652/ - WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE BY THE AO. 3. IN APPEAL THE G.P AT THE RATE OF 4% WAS DIRECTED TO BE ADDED BY THE LD.CIT (A) RESULTING IN CONFIRMATION OF ADDITION OF RS.3952521/ - . HENCE, THE APPEAL BEFORE US. ITA NO. 457/AHD/2016 A.Y. 2009 - 2010 3 4. AT THE TIME OF HEARING OF THE INSTANT APPEAL THE LD.COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT ALL THE MATERIALS WERE PURCHASED IMPORTED/PRODUCED BY M/S TAURAS INTERNATION AL AND M/S.ABS INTERNATIONAL WHERE THE ASSESSEE IS NEITHER A PROPRI ETOR NOR A PARTNER . HE THEREFORE WAS NOT BENEFICIARY OF THE TRANSACTION OR ENJOYED THE FRUITS OF THE RESULT. THERE WAS NO TRANSACTION MADE BY THE ASSESSEE. FURTHER THAT LD.A R , PLACED RELIANCE ON THE ORDER PASSED BY THE CO - ORDINATE BENCH IN HIS OWN CASE FOR ASSESSMEN T YEAR 2008 - 09 WHEREIN THE ADDITION HAS BEEN DELETED BY THE HON BLE ITAT IN THE SIMILAR FACT SET OF FACTS THE COPY WHEREOF WAS ALSO SUBMITTED BEFORE US BY THE LD.AR. 5. THE LD.DR, HOWEVER, RELIED UPON THE ORDER PASSED BY THE AUTHORITIES BELOW . 6. WE H AVE HEARD THE RESPECTIVE PARTIES AND PERUSED THE MATERIAL S AVAILABLE ON RECORD. WE FIND THAT THE SIMILAR FAC T S AS ALREADY NARRATED ABOVE WAS DEALT WITH BY THE CO - ORDINATE BENCH IN THE ITA NO.3399/AHD/2014 FOR ASSESSMENT YEAR 2006 - 07 AND ITA NO.342 1 /AHD/20 1 4 F O R ASSESSMENT YEAR 2008 - 09 IN ASSESSEE S OWN CASE THE RELEVANT PORTION WHEREOF IS AS FOLLOWS: 11. THE ID.COUNSEL FOR THE ASSESSEE HAS RELIED UPON THIS WRITTEN SUBMISSION. ON THE OTHER HAND, THE ID.DR RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. HE CONTENDED THAT STATEMENT OF THE ASSESSEE WAS RECORDED BY THE AO UNDER SECTION 131 OF THE INCOME TAX ACT, AND IN HIS STATEMENT, HE HAS NOT DENIED HIS OBLIGATION. ITA NO. 457/AHD/2016 A.Y. 2009 - 2010 4 12. I HAVE DULY CONSIDERED RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF THE IMPUGNED ORDERS WOULD INDICATE THAT FOR THE PURPOSE OF ASSESSING ALLEGED INCOME IN THE HANDS OF THE ASSESSEE, THE ID.AO HAS BEEN HARPING UPON TWO FACTS. ACC ORDING TO HIM, STATEMENT OF THE ASSESSEE HAS BEEN RECORDED BY THE CUSTOM AUTHORITIES AND BY THE AO. IN THE STATEMENT RECORDED BY THE ID.AO, THE ASSESSEE HAS ADMITTED THAT HIS STATEMENT WAS RECORDED BY THE CUSTOM AUTHORITY WHEREIN HE HAS ADMITTED THAT CERTA IN INVOICES WERE UNDER - VALUED. THEREAFTER, AO WORKED OUT NET PROFIT INVOLVED IN THIS IMPORTED ITEMS. HE ESTIMATED 5% OF THE SALES AS A PROFIT EARNED BY THE ASSESSEE AND MADE ADDITION. ON APPEAL, THE ID.CIT(A) HAS REDUCED THIS ESTIMATION TO 4%, BECAUSE, ACC ORDING TO THE ASSESSEE HAS DISCLOSED PROFIT ELEMENT AT NEAR ABOUT 3% TO 4%. 13. ON DUE CONSIDERATION OF THE ABOVE, I AM OF OPINION THAT ID.REVENUE AUTHORITIES HAVE FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES. STATEMENT OF THE ASSESSEE BEFORE THE CUST OM AUTHORITIES COULD BE A SOURCE OF INFORMATION ABOUT INDULGENCE OF M/S.ABC INTERNATIONAL AND M/S.TAURAS INTERNATIONALS IN UNDER - INVOICING OF IMPORTED ITEMS. HOW THE LIABILITY COULD BE FASTENED UPON THE ASSESSEE ? THE CUSTOM DEPARTMENT HAS FASTENED THE LIA BILITY UPON M/S.ABS INTERNATIONAL AND M/S.TAURAS INTERNATIONALS. THE ASSESSEE HAS BEEN SPECIFICALLY PLEADING THAT HE HAS INFORMATION ABOUT THE FUNCTIONING OF ABS INTERNATIONAL, BUT NEITHER HE IS BENEFICIARY NOR PROPRIETOR OF THIS CONCERN. IF A PERSON DISCL OSES MODUS OPERANDI OF A PARTICULAR TRANSACTION OR HAPPENING OF A CIRCUMSTANCES, CAN THAT PERSON BE LEGALLY BINDING OF OUTCOME THEREFROM ? PROCEEDINGS COULD NOT HAVE BEEN INITIATED AGAINST THE ASSESSEE, BECAUSE HE WAS NEITHER PROPRIETOR NOR BENEFICIARY. TH IS SPECIFICALLY PLEADED BEFORE BOTH THE REVENUE AUTHORITIES, BUT NEITHER AO HAS RECORDED ANY FINDING NOR CIT(A). THEY HAVE SIMPLY PROCEEDED TO QUANTIFY NET PROFIT OUT OF SALES OF IMPORTED ITEMS AT HIGHER ACTUAL VALUE. IN THE ORDERS OF BOTH THE AUTHORITIES, WHETHER ASSESSEE CAN BE CONSIDERED AS AN OWNER OF THOSE ITEMS, IS TOTALLY SILENT. ITA NO. 457/AHD/2016 A.Y. 2009 - 2010 5 CONSIDERING THE STAND OF THE ASSESSEE AND SPECIFIC PLEADING BEFORE BOTH THE REVENUE AUTHORITIES, I AM OF THE VIEW THAT PROFIT FROM THE ITEMS WHOSE VALUE HAS NOT BEEN SHOWN B EFORE THE CUSTOM AUTHORITIES CANNOT BE ASSESSED IN THE HANDS OF THE ASSESSEE, BECAUSE THESE ITEMS WERE NOT IMPORTED BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY OR HIS PROPRIETORSHIP. THESE ARE IMPORTED IN THE PROPRIETORSHIP OF HIS FATHER AND A CONCERN VIZ. M/S.TAURAS INTERNATIONALS. IN VIEW OF THE ABOVE, I ALLOW BOTH APPEALS PARTLY AND DELETE ADDITIONS MADE BY THE REVENUE AUTHORITIES IN BOTH THE ASSESSMENT YEARS. 14. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED 7. RESPECTFULLY RELYING U PON THE SAME, WE FIND THAT THE ORDER PASSED BY THE AUTHORITIES BELOW HAS FAILED TO APPRECIATE THAT THE ASSESSEE WAS NEITHER A BENEFICIARY NOR A PROPRIETOR OF M/S. ABS INTERNATIONAL OR MS. TAURAS INTERNATIONALS . HAVING REGARD TO THE MODUS OPERANDI OF THE TRANSACTION SO MADE BY TWO CONCERN AS REVEALED BY THE ASSESSEE AND HAVING REGARDS TO THE ORDER PASSED BY THE CO - ORDINATE BENCH TAX CANNOT BE LEVIED UPON THE ASSESSEE . WE THEREFORE DELETE THE ADDITION MADE BY THE AUTHORITIES BELOW: 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 28 /01/2019 AT AHMEDABAD. - SD - - SD - ( PRAMOD KUMAR ) VICE PRESIDENT ( MS MADHUMITA ROY ) JUDICIAL MEMBER (TRUE COPY) AHMEDABAD; DATED 28 / 01 /201 9 MANISH ITA NO. 457/AHD/2016 A.Y. 2009 - 2010 6 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , / DR, ITAT, 6. / GUARD FILE . / BY ORDER, / ( DY./ ASSTT.REGISTRAR) , / ITAT, AHMEDABAD