SHRI MUKESH YADAV, JAIPUR V. INCOME TAX OFFICER, JAIPUR

ITA 479/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3693 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 09-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Accommodation entries

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 479/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 SHRI MUKESH YADAV C-25, VIJAY VIHAR COLONY, NAYA KHERA, AMBABARI, JAIPUR. CUKE VS. THE ITO, WARD-3(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AARPY 4343F VIHYKFKHZ@ APPELLAN T IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI RAJEEV SOGANI (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SMT. NEENA JEPH (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 29/04/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT :03/05/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A), JAIPUR DATED 19.09.2016 FOR THE ASSESSMENT YEAR 2012-13 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND S OF APPEAL:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO IN REJECTING TRADING RESULTS OF THE ASSESSEE AND MAKING ADDITION OF RS. 23,03,773/- ON THE BASIS OF ESTIMATED GROSS PRO FIT BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE IN COME TAX ACT, 1961. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJU STIFIED, ARBITRARY ITA NO. 479/JP/2018 SHRI MUKESH YADAV VS. ITO 2 AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEAS E BE GRANTED BY DELETING THE SAID ADDITION OF RS. 23,03,773/-. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD . AO, IN MAKING DISALLOWANCE OF SALARY AND WAGES AMOUNTING T O RS. 36,83,887/-. THE ACTION OF LD. CIT(A) IS ILLEGAL, U NJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE DISALLOWANCE OF RS. 36,83,8 87/-. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FILED HIS RETURN OF INCOME ON 30.09.2012 DECLARING TOTAL INCOME OF R S. 6,79,080/- WHICH WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S 143(2) BY THE ASSESSING OFFICER. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE BOOKS OF ACCOUNTS WERE CALLED FOR NECESSARY VERIFIC ATION BY THE ASSESSING OFFICER HOWEVER, THE ASSESSING OFFICER FO UND OUT THAT MOST OF THE SALES WERE MADE IN CASH AND OPENING CLOSING STO CK AS WELL AS SALES DURING THE YEAR ARE NOT SUBJECT TO VERIFICATION AND ACCORDINGLY, THE BOOKS OF ACCOUNTS WERE REJECTED INVOKING THE PROVIS IONS OF SECTION 145(3) OF THE ACT AND THE GP RATE OF 0.15% WAS APPL IED AS AGAINST 0.11% DECLARED BY THE ASSESSEE WHICH HAS RESULTED I N TRADING ADDITION OF RS. 23,03,773/-. FURTHER, SALARY EXPENSES AMOUNT ING TO RS. 36,83,887/-WERE DISALLOWED AND THE ASSESSMENT W AS COMPLETED AT AN ASSESSED INCOME OF 66,66,740/-. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS SUSTAINED THE ADDITIONS SO M ADE BY THE ASSESSING OFFICER AND NOW THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO. 479/JP/2018 SHRI MUKESH YADAV VS. ITO 3 4. DURING THE COURSE OF HEARING, THE LD. AR DRAWN O UR ATTENTION TO THE FINDINGS OF THE LD. CIT(A) WHERE AT PARA 3.1.1. (IV), THE LD. CIT(A) HAS HELD THAT ONE OF THE PROPRIETORSHIP CONCERNS OF THE ASSESSEE I.E. M/S OM SALES CORPORATION IS A PAPER CONCERN AND FUR THER, AT PARA (V), WHERE THE LD CIT(A) HAS UPHELD THE GP RATE OF 0.15 % APPLIED BY THE ASSESSING OFFICER WHO HAS IN TURNED PLACED RELIANCE ON A DECISION RELIED UPON BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDI NGS. IT WAS SUBMITTED BY THE LD. AR THAT WHEN THE ASSESSEE CONC ERN HAS BEEN HELD TO BE A PAPER CONCERN/ENTRY PROVIDER, IN THAT CASE, GP RATE AS APPLICABLE TO A PERSON WHO IS ACTUALLY INVOLVED IN A BULLION B USINESS CANNOT BE APPLIED. IT WAS SUBMITTED THAT THE AO HAS APPLIED G P RATE OF 0.15% BY COMPARING THE ASSESSEES CASE WITH THAT OF M/S MOHA N LAL MAHENDRA KUMAR JEWELLER WHO IS THE BULLION TRADER. AS AGAI NST THAT, AS PER THE FINDING OF THE LD. CIT(A) WHEREIN HE HAS HELD THAT ONE OF THE CONCERNS OF THE ASSESSEE IS A PAPER CONCERN/ENTRY PROVIDER, IN SUCH A SCENARIO, PROFIT RATE AS APPLICABLE TO AN ENTRY PROVIDER FOR BULLION BUSINESS SHOULD BE CONSIDERED. IN THIS REGARD, THE LD. AR HAS SUBM ITTED THAT IN CASE OF MAHESH KHANDELWAL WHO WAS AN ENTRY PROVIDER FOR GEM STONES BUSINESS, THE COORDINATE BENCH (IN ITA NO. 296 TO 299/JP/2007 DATED 24.10.2008) HAS APPLIED THE NP RATE OF 0.10%. IT WAS SUBMITTE D THAT THE GEMSTONES BUSINESS IS A HIGH MARGIN BUSINESS AS COMPARED TO BULLION BUSINESS AND THEREFORE, ENTRY PROVIDER IN B ULLION BUSINESS IS ACCORDINGLY REWARDED VERY LESS IN COMPARISON TO GEM STONES BUSINESS. IT WAS ACCORDINGLY SUBMITTED THAT THE NP RATE OF 0.10% APPLIED BY THE COORDINATE BENCH IN CASE OF MAHESH KHANDELWAL MAY B E APPROPRIATELY SCALED DOWN AND APPLIED IN THE CASE OF THE ASSESSEE WHO HAS BEEN HELD BY THE LD CIT(A) AS AN ENTRY PROVIDER FOR BULLION B USINESS. IT WAS FURTHER ITA NO. 479/JP/2018 SHRI MUKESH YADAV VS. ITO 4 SUBMITTED THAT THE LOWER AUTHORITIES HAVE APPLIED N P RATE OF 18 PAISE PER HUNDRED IF THE REAL BUSINESS YIELDS NP OF 18 PA ISE PER HUNDRED, DEFINITELY AN ENTRY PROVIDER CANNOT EARN 10 PAISE P ER HUNDRED JUST FOR PROVIDING ACCOMMODATION ENTRIES. IT WAS FURTHER SUB MITTED THAT THE GAINS OF DOING REAL TRADING CANNOT JUST BE INCREMEN TAL 8 PAISE PER HUNDRED AS COMPARED TO AN ENTRY PROVIDER WHO ASSUME S NO RISK NOR INVESTS ANY CAPITAL. IT WAS ACCORDINGLY SUBMITTED THAT NP 0.01% AS DECLARED BY THE ASSESSEE MAY BE UPHELD WHEN THE BUS INESS HAS HELD TO BE ONLY ACCOMMODATION ENTRY PROVIDER. 5. PER CONTRA, THE LD. DR TOOK UP THROUGH THE FIND ING OF THE ASSESSING OFFICER AS WELL AS THAT LD. CIT(A). IT WA S SUBMITTED THAT THE MAJORITY OF THE SALES MADE BY THE ASSESSEE WERE IN CASH AND IN THE ABSENCE OF PROPER VERIFICATION, THE BOOKS OF ACCOUN TS WERE REJECTED. REGARDING THE ESTIMATION OF GP RATE, IT WAS SUBMITT ED BY THE LD DR THAT THE AO HAS APPLIED THE COMPARABLE CASE OF M/S MOHAN LAL MAHENDRA KUMAR JEWELLER WHICH WERE BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER BY THE ASSESSEE HIMSELF AND THEREFORE, IN T HE PRESENT PROCEEDINGS, THE ASSESSEE CANNOT BE ALLOWED TO PLEA D THAT THE GROSS PROFIT RATE HAS BEEN WRONGLY APPLIED BY THE AO. IT WAS FURTHER SUBMITTED THAT THE LD CIT(A) WHILE UPHOLDING THE FI NDINGS OF THE AO HAS ALSO NOTICED THAT ONE OF THE CONCERNS OF THE ASSESS EE IS A PAPER CONCERN WHICH FURTHER SUBSTANTIATE THE REASONING OF THE AO IN REJECTING THE BOOKS OF ACCOUNTS AND ESTIMATING THE GROSS PROFIT R ATE. IT WAS FURTHER SUBMITTED THAT BESIDES THE TRADING ADDITION, THE AO HAS MADE SPECIFIC DISALLOWANCE OF THE SALARY EXPENSES AMOUNTING TO RS . 36,83,887/- IN RESPECT OF WHICH THE LD. AR HAS NOT ANY SPECIFIC SU BMISSION. ITA NO. 479/JP/2018 SHRI MUKESH YADAV VS. ITO 5 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE IS A PROPRIETOR O F TWO CONCERNS NAMELY M/S OM SALES CORPORATION AND M/S SS ENTERPRI SES. BOTH THESE CONCERNS ARE STATED TO BE INVOLVED IN BULLION BUSIN ESS BY THE ASSESSEE AND THE SAME HAS BEEN ACCEPTED BY THE ASSESSING OFF ICER, HOWEVER, THE BOOK RESULTS SO DECLARED HAVE BEEN REJECTED AND PRO FIT HAS BEEN ESTIMATED. DURING THE APPELLATE PROCEEDINGS, THE L D CIT(A), REFERRING TO ANOTHER CASE OF GURU KRIPA TRADE MART PVT LTD, HAS HELD THAT IN THAT CASE, MATTER RELATING TO M/S OM SALES CORPORATION H AD COME UP FOR CONSIDERATION AND THEREIN HE HAS HELD THAT THE SAID CONCERN IS A PAPER CONCERN AND ACCORDINGLY, FOLLOWING THE SAME, HE HAS HELD THAT ONE OF THE CONCERNS OF THE ASSESSEE IS A PAPER CONCERN AND HAS THUS UPHELD THE FINDINGS OF THE ASSESSING OFFICER. 7. THE CONTENTION OF THE LD AR IS THAT WHERE ONE OF ITS CONCERNS HAS BEEN HELD TO BE A PAPER CONCERN, HOW THE PROFIT CAN BE ESTIMATED RELYING ON A CASE OF A PERSON WHO IS ACTUALLY INVOL VED IN BULLION BUSINESS AS HAS BEEN DONE BY THE AO AND WHICH HAS BEEN AFFIR MED BY THE LD CIT(A) AS AGAINST THAT, THE COMPARISON SHOULD BE MA DE WITH ANOTHER PAPER CONCERN/ENTRY PROVIDER. WE AGREE WITH THE SAI D CONTENTION AS COMMISSION INCOME OF AN ENTRY PROVIDER CANNOT BE EQ UATED WITH THE TRADING RESULTS OF BUSINESSMAN WHO IS ACTUALLY CARR YING OUT BULLION BUSINESS AND THE RIGHT COMPARISON WOULD HAVE BEEN O F ANOTHER ENTRY PROVIDER INVOLVED IN BULLION BUSINESS. 8. FOR THE PURPOSES, THE LD. AR HAS SUBMITTED THAT IN CASE OF MAHESH KHANDELWAL WHO WAS AN ENTRY PROVIDER FOR GEM STONES BUSINESS, ITA NO. 479/JP/2018 SHRI MUKESH YADAV VS. ITO 6 THE COORDINATE BENCH (SUPRA) HAS UPHELD THE NP RATE OF 0.10% I.E, THE ESTIMATE OF NET INCOME @ 10 PAISA PER HUNDRED. IT WAS SUBMITTED THAT THE GEMSTONES BUSINESS IS A HIGH MARGIN BUSINESS AS COMPARED TO BULLION BUSINESS AND THEREFORE, ENTRY PROVIDER IN B ULLION BUSINESS IS ACCORDINGLY REWARDED VERY LESS IN COMPARISON TO GEM STONES BUSINESS. IT WAS ACCORDINGLY SUBMITTED THAT THE NP RATE OF 0.10% APPLIED BY THE COORDINATE BENCH IN CASE OF MAHESH KHANDELWAL MAY B E APPROPRIATELY SCALED DOWN AND APPLIED IN THE CASE OF THE ASSESSEE WHO HAS BEEN HELD BY THE LD CIT(A) AS AN ENTRY PROVIDER FOR BULLION B USINESS. FIRSTLY, WE NOTE THAT THE LD CIT(A) HAS HELD ONE OF THE ASSESSE ES CONCERN TO BE A PAPER CONCERN, HOWEVER, GOING BY THE SUBMISSION OF THE LD AR ON BEHALF OF THE ASSESSEE, WE FIND THAT HE HAS NO OBJECTION W HERE EVEN THE SECOND CONCERN IS HELD TO BE A PAPER CONCERN. THER EFORE, IN ABSENCE OF ANY OBJECTION BY THE LD AR ON BEHALF OF THE ASSESSE E, WE PROCEED WITH THE FACT THAT THE FINDINGS OF THE LD CIT(A) ARE EQU ALLY APPLICABLE TO BOTH OF THE ASSESSEES CONCERNS WHICH ARE HELD TO BE PAP ER CONCERNS WHICH ARE INVOLVED IN PROVIDING THE ACCOMMODATION ENTRIES AND ARE NOT INVOLVED IN ACTUAL BULLION BUSINESS. 9. NOW COMING TO THE COMMISSION INCOME WHICH CAN BE BROUGHT TO TAX IN HANDS OF THE ASSESSEE IN RELATION TO ITS TWO PAPER CONCERNS WHICH ARE INVOLVED IN PROVIDING THE ACCOMMODATION ENTRIES , IT MAY BE TRUE THAT THE MARGINS IN GEMSTONES BUSINESS MAY VARY WIT H THAT OF THE BULLION BUSINESS BUT THE SAME CANNOT BE A BASIS TO HOLD THAT AN ENTRY PROVIDER IN GEMSTONES AND AN ENTRY PROVIDER IN BULL ION BUSINESS IS TO BE TREATED DIFFERENTLY SO FAR AS DETERMINATION OF THEI R COMMISSION INCOME IS CONCERNED. NO EMPIRICAL DATA HAS BEEN SUBMITTED TO SUPPORT THE ITA NO. 479/JP/2018 SHRI MUKESH YADAV VS. ITO 7 AFORESAID CONTENTION AND IN ABSENCE THEREOF AND GIV EN THE FACT THAT IN BOTH BUSINESSES, THE ROLE OF THE ENTRY PROVIDER IS LARGELY SIMILAR IN TERMS OF PROVIDING ACCOMMODATION ENTRIES IN LIEU OF COMMI SSION, WE ARE UNABLE TO ACCEPT THE AFORESAID CONTENTION OF THE LD AR REGARDING SCALING DOWN OR DETERMINING THE COMMISSION INCOME DIFFERENT LY. 10. IN THE INSTANT CASE, IF WE LOOK AT THE NET INCO ME SO DETERMINED BY THE AO AFTER MAKING TRADING ADDITION AND DISALLOWAN CE OF SALARY EXPENSE, IT COMES TO RS 66,31,966 WHICH GIVES A NET PROFIT RATE OF 0.12% WHICH IS COMPARABLE TO ANOTHER CASE OF THE EN TRY PROVIDER, MAHESH KHANDELWAL WHEREIN THE CO-ORDINATE BENCH HAS UPHELD ESTIMATE OF NET PROFIT @ 0.10%. BESIDES, THERE IS OTHER INC OME OF RS 127,776 WHICH HAS TO BE BROUGHT TO TAX SEPARATELY. 11. IN LIGHT OF THE SAME, WE DONOT SEE ANY INFIRMIT Y IN THE ORDER OF THE LOWER AUTHORITIES AND THE SAME ARE HEREBY CONFI RMED AND THE GROUNDS OF APPEAL ARE ACCORDINGLY DISMISSED. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/05/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 03/05/2019. *SANTOSH ITA NO. 479/JP/2018 SHRI MUKESH YADAV VS. ITO 8 VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI MUKESH YADAV, JAIAPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-3(1), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 479/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR