ITO, Ward - 3(2), Kolkata, Kolkata V. M/s. Vikash Iron & Steel Pvt. Ltd., Kolkata

ITA 475/KOL/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4920 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 09-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2011
• Court: TRIBUNAL
• Department Lawyers: MD GHAYAS UDDIN ANSARI
• Assessee Lawyers: SHRI; R P AGARWAL SR COUN SEL
• Keywords: Accommodation entries
• Section: 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NO.475/KOL/2011 ASSESSMENT YEAR: 2007-08 INCOME-TAX OFFICER, WD-3(2), KOLKATA. VS. M/S. VI KASH IRON & STEEL PVT. LTD. (PAN: AABCB5950G) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 09.05.2016 DATE OF PRONOUNCEMENT: 13.05.2016 FOR THE APPELLANT: MD. GHAYASUDDIN ANSARI, CIT, DR FOR THE RESPONDENT: SHRI R. P. AGARWAL, SR. COUN SEL & SHRI NIRAV SHETH, ACA ORDER PER SHRI BALAGANESH, AM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-1, KOLKATA VIDE APPEAL NO. 511/CIT(A)-1/3(2)/09-10 DATED 15.12.2010. ASSES SMENT WAS FRAMED BY ITO, WD- 3(2), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 19 61 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE HIS ORDER DA TED 31.12.2009. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF ESTIMATION OF NET PROF IT FROM TRADING AT THE RATE OF 0.60% OF THE TOTAL TURNOVER ON PROTECTIVE BASIS WITHOUT CONS IDERING THE MERIT OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED IN REJECTING THE COMPUTATION OF NET COMMISSION INCOME @ 0.15% OF THE T.O. MADE BY THE AO AND RECOMPUTED THE INCOME TAKING @ 0.10% OF THE T.O. 3. BRIEF FACTS OF THIS APPEAL ARE THAT THERE WAS A SURVEY OPERATION CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 26.02.2008. DURING THE COURSE OF SURVEY PROCEEDINGS, A STATEMENT OF EXAMINATION ON OATH U/S. 131 OF THE AC T WAS TAKEN WHEREIN THE ASSESSEE ADMITTED THAT IT HAD NOT CARRIED OUT ANY ACTIVITY I N TRADING OF IRON AND STEEL AND HAD NO FACTORY OR GODOWN. THE SAID DEPOSITION WAS GIVEN B Y SHRI VIKASH AGARWAL, THE DIRECTOR OF THE COMPANY, WHEREIN HE STATED THAT ASSESSEE GAV E ONLY ACCOMMODATION ENTRIES TO INTERESTED PARTIES FOR WHICH IT RECEIVED CERTAIN CO MMISSION AND ALL PURCHASES AND SALES BILLS RAISED BY IT WERE FAKE. THE DIRECTOR OF THE COMPANY ALSO STATED IN THE STATEMENT 2 ITA NO.475/K/2011 VIKASH IRON & STEEL PVT. LTD. AY 2007-08 U/S. 131 OF THE ACT THAT THE TRANSACTIONS REFLECTED IN THE ACCOUNTS WERE MOSTLY IN THE NATURE OF PAPER TRANSACTIONS WITHOUT ACTUAL MOVEMEN T OF GOODS ON CONSIDERATION RECEIVED BY THE ASSESSEE IN THE FORM OF COMMISSION INCOME THEREON. IT WAS FURTHER STATED THAT THESE TRANSACTIONS WERE ROUTED THROUGH CENTURION BANK OF PUNJAB, KOTAK MAHINDRA BANK, IDBI BANK, ING VYSYA BANK & UTI BANK . IT WAS FURTHER STATED THAT IN THE BALANCE SHEET OF THE COMPANY ONLY THE BANK ACCO UNT OF CENTURION BANK OF PUNJAB WAS REFLECTED AND ACCORDINGLY, THE DETAILS OF OTHER BANK ACCOUNTS WERE PRODUCED VOLUNTARILY BY THE SAID DIRECTOR DURING THE COURSE OF EXAMINATION. HE FURTHER PROCEEDED TO EXPLAIN THE NATURE OF TRANSACTIONS IN THOSE BANK ACCOUNTS BY STATING THAT WHATEVER AMOUNTS WERE DEPOSITED IN THE BANK ACCOUNTS WERE WI THDRAWN WITHIN A SHORT SPAN OF A DAY OR TWO. BOTH THE DEPOSIT AND WITHDRAWAL HAD TO BE DONE SIMULTANEOUSLY TO GIVE BACK THE ACTUAL FUNDS TO THE RESPECTIVE PARTIES. H E FURTHER STATED THAT THE COMPANY HAS BEEN ENGAGED IN THIS KIND OF ACCOMMODATION TRANSACT IONS AND THE DETAILS OF THE SAME WERE NOT PROPERLY MAINTAINED IN THE BOOKS OF ACCOUN T AND DATA WERE KEPT ONLY IN THE COMPUTER SYSTEM. HE FURTHER STATED THAT THERE WAS A COMPUTER CRASH AROUND OCTOBER AND THE ENTIRE DATA FED INTO THE COMPUTER WERE LOST. T HE ASSESSEE COMPANY HAD NOT TAKEN THE HARD COPY OF THE DATA WHICH ARE ALREADY THERE IN TH E COMPUTER. ACCORDINGLY, HE EXPLAINED HIS INABILITY TO PRODUCE THE BOOKS OF ACC OUNT. HOWEVER, IN ORDER TO PROVE HIS BONA FIDE, HE PRODUCED PURCHASE BILLS, SALE BILLS, BANK STATEMENTS IN SUPPORT OF HIS CONTENTIONS. IN REPLY TO ANOTHER QUESTION ON THE Q UANTUM OF COMMISSION INCOME EARNED, HE STATED AS FOLLOWS: I USED TO GET COMMISSION ON MY SALE INVOICE WHICH RANGED BETWEEN 10 PAISE TO 15 PAISE PER RS.100. ON PURCHASE INVOICE I HAD TO INCUR EXP ENSES ON BILLS, PROCURE FROM OUTSIDE SOURCES WHICH RANGED BETWEEN 5 PAISE TO 10 PAISE PE R RS.100. 4. THE ASSESSEE STATED THAT IT HAD EARNED COMMISSIO N INCOME AMOUNTING TO RS.27,13,018/- ARRIVED AT 0.1% OF THE TOTAL TRANSAC TIONS AND AGAINST THIS, IT HAD INCURRED CERTAIN EXPENSES ON TRANSACTIONS AT 0.05% ON DEBIT ENTRIES (OTHER THAN CASH WITHDRAWALS CONTRAS) AMOUNTING TO RS.13,58,963/-. ACCORDINGLY, IT OFFERED NET PROFIT FROM COMMISSION INCOME AT RS.13,54,055/-. THE LD. AO RE LIED ON THE STATEMENT OF THE DIRECTOR SHRI VIKASH AGARWAL IN PIECEMEAL THAT ASSE SSEE HAD GIVEN ACCOMMODATION ENTRIES ONLY TO INTERESTED PARTIES AND, THEREFORE H ELD THAT THE QUESTION OF PAYING ANY COMMISSION OR INCURRING ANY EXPENDITURE THEREON DOE S NOT ARISE. IN ADDITION TO THIS, HE 3 ITA NO.475/K/2011 VIKASH IRON & STEEL PVT. LTD. AY 2007-08 ALSO INCREASED THE COMMISSION INCOME TO 0.15% OF TO TAL TRANSACTIONS AS AGAINST 0.10% OFFERED BY THE ASSESSEE. ACCORDINGLY, HE MADE AN A DDITION OF RS.40,69,527/- TOWARDS COMMISSION INCOME IN THE ASSESSMENT. 5. ADDITION OF RS.1,22,08,523/- ON PROTECTIVE BASIS THE LD. AO OBSERVED THAT HE HAD RECEIVED INFORMATI ON FROM DCIT, CC-XIII, KOLKATA THAT THE PARTIES TO WHOM THE ASSESSEE HAD A LLEGEDLY PROVIDED ACCOMMODATION ENTRIES HAD CONTESTED THE CLAIM AND THE STATEMENT O F SHRI VIVEK AGARWAL. BASED ON THIS INFORMATION, HE PROCEEDED TO TREAT THE ASSESSEE TO HAVE ENGAGED IN THE PURCHASE AND SALE OF IRON AND STEEL. ACCORDINGLY, HE MADE AN ADDITIO N ON PROTECTIVE BASIS @ 0.60% OF TOTAL TURNOVER REFLECTED IN THE BOOKS AMOUNTING TO RS.1,62,78,110/-. FROM THE SAID NET PROFIT ALLEGED TO BE DERIVED FROM TRADING IN IRON A ND STEEL BUSINESS, THE LD. AO IN ORDER TO AVOID DOUBLE ADDITION DEDUCTED THE NET COMMISSIO N INCOME ALREADY BROUGHT TO TAX IN THE SUM OF RS.40,69,527/- AND PROCEEDED TO TAX THE BALANCE SUM OF RS.1,22,08,583/- AS INCOME FROM BUSINESS ON PROTECTIVE BASIS. 6. ON FIRST APPEAL, THE ASSESSEE ARGUED THAT LD. AO HAD TRIED TO BLOW HOT AND COLD SIMULTANEOUSLY AS ON ONE HAND HE SAYS THAT ASSESSEE WAS ENGAGED ONLY IN PROVIDING ACCOMMODATION ENTRIES AND HAD TAXED THE COMMISSION INCOME THEREON. ON THE OTHER HAND, HE SIMULTANEOUSLY OBSERVES BASED ON THE INFOR MATION RECEIVED FROM DCIT, CC- XIII, KOLKATA (AOS OF PARTIES WITH WHOM ASSESSEE H AD ACCOMMODATION BUSINESS TRANSACTIONS) THAT ASSESSEE IS ALSO ENGAGED IN BUSI NESS OF TRADING IN IRON AND STEEL. THE LD. CIT(A) APPRECIATED THE VARIOUS CONTENTIONS OF T HE ASSESSEE AND DELETED THE ADDITION MADE IN THE SUM OF RS.1,22,08,583/- BY GIVING A CAT EGORICAL FINDING THAT ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF TRADING IN IRON AND STEE L. HOWEVER, WITH REGARD TO THE ADDITION MADE IN THE SUM OF RS.40,69,527/- TOWARDS COMMISSION INCOME, HE PROCEEDED TO REFLECT THE SAME AT 0.10% OF THE TOTAL TRANSACTI ONS AND GAVE RELIEF OF RS.13,56,509/-. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. AR ARGUED THAT THE AO HAD RECORDED R EASONS FOR REOPENING THE ASSESSMENT FOR AY 2005-06 AND 2006-07 ON THE GROUND THAT ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT PROPERLY AND ASSESSEE IS ALSO ENGA GED IN PROVIDING ACCOMMODATION ENTRIES. HE FURTHER ARGUED THAT THESE TWO FACTORS GOT CLEARLY ESTABLISHED IN SURVEY 4 ITA NO.475/K/2011 VIKASH IRON & STEEL PVT. LTD. AY 2007-08 PROCEEDINGS WHICH APPARENTLY TRIGGERED THE INITIAT ION OF RE-ASSESSMENT PROCEEDINGS FOR THE EARLIER YEARS WHEREIN THE LD. AO HAD DULY RECOR DED THE REASONS FOR THE SAME. THE LD. AO HAVING RECORDED HIS SATISFACTION THAT ASSESS EE IS ONLY ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES CANNOT CHANGE ITS S TAND IN THE ASSESSMENT YEAR UNDER APPEAL THAT ASSESSEE IS ALSO ENGAGED IN THE BUSINES S OF TRADING IN IRON AND STEEL. HE FURTHER BROUGHT TO OUR NOTICE THAT THE PARTIES WITH WHOM THE ASSESSEE HAD ACCOMMODATION TRANSACTIONS HAD ONLY CONTESTED THE C LAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF SUPPLYING BILLS TO THEM WERE FAKE. THE LD. AO HAD NOT BROUGHT ANY MATERIAL ON RECORD AS TO WHETHER THE ASSESSEE HAD B EEN EXAMINED BY THE AO OF THOSE PARTIES WHILE COMPLETING THE ASSESSMENT PROCEEDINGS OF THOSE PARTIES. WE FIND SIMILARLY THE AO HAD ALSO NOT EXAMINED ANY OF THOSE PARTIES WHO HAD CONTESTED THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS WERE FAKE DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS OF THE ASSESSEE IN THE YEAR UNDER APPEA L. HENCE, WE FIND THAT THE DOUBLE STAND TAKEN BY THE AO THAT ASSESSEE IS ENGAGED IN B USINESS OF TRADING OR IRON AND STEEL IS MERELY BASED ON PIECEMEAL INFORMATION RECEIVED FROM DCIT, CC-XIII, KOLKATA (AOS OF PARTIES WITH WHOM ASSESSEE HAD TRANSACTIONS) AND WITHOUT BRINGING ANY MATERIAL ON RECORD. WE HOLD THAT THE LD. AO CANNOT RESORT TO A NY ESTIMATION OF INCOME AT 0.60% ON TURNOVER FOR DETERMINING THE NET PROFIT FROM BUSINE SS WHICH IS CONTRARY TO RECORDING OF REASONS FOR REOPENING THE ASSESSMENT IN THE EARLIER YEARS. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) IN THIS REGARD. 8. APROPOS, THE ADDITION MADE TOWARDS COMMISSION IN COME, WE FIND THAT THE LD. AO HAD NOT FOUND ANY INFIRMITY IN THE COMMISSION WO RKINGS PROVIDED BY THE ASSESSEE. WE ALSO FIND THAT THE LD. CIT(A) HAD OBSERVED AS FO LLOWS: IT IS TO BE NOTED THAT ONCE A DRASTIC ACTION LIKE SURVEY HAS TAKEN PLACE ON AN ASSESSEE, THERE IS LITTLE SCOPE FUR ADDITION IN ARBITRARY MAN NER. THE STATEMENT RECODED DURING SURVEY HAS GREAT EVIDENCE VALUE UNLESS IT IS INCONSISTENT WITH THE RECORDS. IN THE FACTS OF THE CASE, I DO NOT AGREE WITH THE A.O. THAT THERE CAN BE TWO ES TIMATIONS, ONE IF TRANSACTIONS ARE ACTUAL TRADING TRANSACTIONS AND ONE IF THE TRANSACTIONS AR E PAPER TRANSACTIONS. BE IT WHAT IT IS, THE WHOLE OBJECTIVE OF THE INCOME TAX ACT IS TO TAX THE INCOME ON TRANSACTIONS. IN THE BACKGROUND OF STATEMENT RECORDED DURING SURVEY, DOC UMENTS IMPOUNDED AND SUBMISSION MADE AT THE ASSESSMENT STAGE AND THE FINDINGS OF TH E A.O., I STRAIGHTWAY COME TO ESTIMATE THE EARNINGS. IN MY OPINION, THE NET INCOME IS ESTI MATED AT 10 PAISA OF THE TURNOVER. WHILE ESTIMATING NET INCOME, I AM CONSIDERING THE SAME TO BE NET OF ALL EXPENDITURE. THUS I ESTIMATE EARNINGS AT RS.27,13,018/- AS AGAINST RS. 40,69,527/- BEING ASSESSED BY THE A.O. THUS GROUND NO. 2 & 3 AGAINST THE ADDITIONS OF RS 2 7,15,472/ IS PARTLY ALLOWED AND THE APPELLANT GETS A RELIEF OF RS. 13,56,509/-. 5 ITA NO.475/K/2011 VIKASH IRON & STEEL PVT. LTD. AY 2007-08 FROM THE AFORESAID OBSERVATION OF THE LD. CIT(A), W E FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS GROUND AND ACCORDINGLY, UPHOL D THE SAME. 9. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. 10. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13.05. 2016 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 13 TH MAY, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ITO, WARD-3(2), KOLKATA. 2 RESPONDENT M/S. VIKASH IRON & STEEL PVT. LTD., 46A , STEPHEN HOUSE, 4, B. B. D. BAG (EAST), KOLKATA-700 001. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .