DCIT CEN CIR 8(1), MUMBAI V. CHAITALI SALES AGENCY P.LTD, THANE

ITA 4908/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0737 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 25-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N P SINGH
• Assessee Lawyers: AJAY R SINGH
• Keywords: Unexplained cash credit; Accommodation entries

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -BBENCH MUMBAI , . . , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./I.T.A./4908/MUM/2016 , /ASSESSMENT YEAR:2009-10 ./I.T.A./4910/MUM/2016 , /ASSESSMENT YEAR:2011-12 DCIT,CC-8(1) ROOM NO.656, 6TH FLOOR AAYAKAR BHAVAN,M K ROAD, MUMBAI-400 020 VS. M/S. CHAITALI SALES AGENCY PVT. LTD. B-1, 34, MAHAVIR NAGAR, MANPADA ROAD, DOMBIVALI (E),THANE PAN:AACCC 7679 N ( /APPELLANT) ( / RESPONDENT) / REVENUE BY: SHRI N.P. SINGH-CIT-DR /ASSESSEE BY: SHRI AJAY R. SINGH / DATE OF HEARING: 17/05/2017 / DATE OF PRONOUNCEMENT: 17/05/2017 , / PER RAJENDRA A.M. - CHALLENGING THE ORDER DATED 31.03.2016 OF THE CIT( A)-50,MUMBAI,THE ASSESSEE HAS FILED APPEALS FOR THE ABOVE-MENTIONED ASSESSMENT YEARS(AY .S).THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF CRYSTA L AND HANDMADE ARTISTIC GLASSES.AS THE ISSUE INVOLVED IN BOTH THE AY.S IS COMMON,SO,WE ARE ADJUDICATING THE APPEALS TOGETHER. EFFECTIVE GROUND OF APPEAL IS REDUCING THE ESTIMATE D ADDITION FROM 4% TO 0.15%. BRIEF FACTS: 2. AT THE TIME OF SEARCH M/S. JIK INDUSTRIES LTD. (JIL ) AN ACTION U/S.132 WAS ALSO CARRIED OUT AT THE PREMISES OF DILIP JAYANTILAL SHAH(DJS) AND R AJENDRA JAYANTILAL SHAH(RJS). IN HIS STATEMENT, DATED 04.02.2011 DJS ADMITTED THAT HE WA S AUTHORIZED SIGNATORY OF M/S. CHAITALI SALES AGENCY PVT.LTD. I.E.,THE ASSESSEE ,THAT THE C OMPANY USED TO ISSUE ACCOMMODATION ENTRIES ONLY. HE FURTHER ADMITTED TO HAVE ISSUED AC COMMODATION BILLS TO JIL, AND TWO OTHER COMPANIES. HE ALSO ADMITTED HAVING RECEIVED COMMISS ION FOR FACILITATING THE BOGUS SALE BILLS @ 0.02% TO 0.01%. CONSIDERING THE AVAILABLE MATERIAL, THE AO HELD THA T THE BENEFICIARIES WOULD BE READY TO PAY ABOUT 5% OF THE VALUE OF THE BILL AMOUNT, THAT THE CONCERNED ISSUING BOGUS BILL WILL GET ABOUT 4% OF THE VALUE OF THE BILLS AND THE BALANCE 1% WOU LD GO TO INTERMEDIARIES. DURING THE ASSESSMENT PROCEEDINGS,HE OBTAINED BANK STATEMENTS OF THE ASSESSEE-COMPANY FROM AXIS BANK, KANDIVALI (W) BRANCH.THE BANK STATEMENTS REVE ALED LARGE NUMBER OF CREDIT ENTRIES PROVIDED BY THE ASSESSEE TO DIFFERENT PERSONS.DURI NG THE ASSESSMENT PROCEEEDINGS THE ASSESSEE DID NOT COMPLY WITH THE NOTICES ISSUED BY THE AO. THEREFORE, THE ENTIRE CREDIT MADE 4908&10/M/16-CHAITALI 2 IN THE ABOVE STATED BANK ACCOUNT WERE TREATED AS RE CEIPTS AGAINST BOGUS BILLS ISSUED BY THE ASSESSEE.ACCORDINGLY, THE AO ASSESSED THE INCOME OF THE ASSESSEE FOR THE AY 2009-10, 2010-11 AND 2011-12 AT RS.23.04 LAKHS, RS.1.57 CROR ES AND RS.43.92 LAKHS RESPECTIVELY. 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERR ED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM, IT WAS CLAIMED THAT DJS WAS NOT AUTHORIZED BY THE ASSESSEE TO CARRY OUT ANY TRANSACTION OR OPERATE ANY BANK ACCOU NT ON ITS BEHALF.THE FAA CALLED FOR DETAILS FROM THE BANK AND HELD THAT AS PER THE DOCUMENTS PR OVIDED BY THE BANK THE CMD HAD INTRODUCED DJS AS ONE OF THE DIRECTORS OF THE COMPA NY,THAT THE COMPANY HAD PASSED A RESOLUTION AUTHORIZING DJS TO OPERATE A BANK ACCOUN T, THAT THE SUBMISSION OF THE ASSESSEE MADE IN THAT REGARD WERE FACTUALLY INCORRECT, THAT THE BANK ACCOUNT BELONGED TO THE ASSESSEE . LATER ON,THE ASSESSEE SUBMITTED THAT ESTIMATE OF 4% OF DEPOSITS ON COMMISSIONS WAS FAR AWAY FROM REALITY.IT REFERRED TO THE CASE OF GOLD STAR F INVEST CO., DELIVERED BY THE ITAT, MUMBAI IN ITS SUPPORT. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE A ND CASE OF GOLD STAR FINVEST ,THE FAA ESTIMATED THE INCOME OF THE ASSESSEE AT 0.15% OF T HE AGGREGATE OF THE VALUE OF ACCOMMO - DATION ENTRIES PROVIDED BY IT.ACCORDINGLY, HE ESTIM ATED THE INCOME OF THE ASSESSEE FOR THE AY 2009-10 TO 2011-12 AT RS.86,419,5.92 LAKHS AND RS.1.64 LAKHS RESPECTIVELY. 4. DURING THE COURSE OF HEARING BEFORE US, THE DEPARTM ENTAL REPRESENTATIVE (DR) RELIED UPON THE ORDER OF THE AO .THE AUTHORISED REPRESENTATIVE (AR) REFERRED TO THE CASE OF GOLD STAR FINVEST PVT. LTD.(33TAXMANN.COM 129) AND ROHIT PRAV EEN PANWALA (ITA/(SS)/ 608 TO 612/ AHD/ 2010 DT.31.5.2011. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD NOT CO-OPERATED WITH AO DURING THE AS SESSMENT PROCEEDINGS, THAT IT WAS PROVIDING ACCOMODATION ENTRIES, THAT THE AO ESTIMA TED COMMISSION INCOME OF THE ASSESSEE AT 4% OF THE TOTAL DEPOSITS, THAT THE FAA REDUCED T HE COMMISSION INCOME AND ESTIMATED THE SAME AT 0.15% OF THE AGGREGATE OF VALUE OF ACCOMMOD ATION ENTRIES.IN OUR OPINION, THE ESTIMATE MADE BY AO WAS ON HIGHER SIDE AND HAD NO B ASIS. WE WOULD LIKE TO REFER TO THE CASE OF GOLD STAR INVEST P. LTD. (SUPRA), WHEREIN UNDER IDENTICAL CIRCUMSTANCES THE TRIBUNAL HAD ESTIMATED THE COMMISSION INCOME OF THE ASSESSEE @ 0 .15 % OF THE AGGREGATE VALUE OF THE BOGUS BILLS/ACCOMMODATION ENTRIES. 4908&10/M/16-CHAITALI 3 WE ARE REPRODUCING PARA 12 OF THE ORDER OF THE TRIB UNAL IN THE CASE OF GOLD STAR FINVEST PVT. LTD.AND IT READS AS UNDER:- '12. HAVING, CAREFULLY EXAMINED THE VARIOUS O RDERS IN THE CASE OF DIFFERENT ASSESSEES' IT H AS BECOME AMPLY CLEAR THAT IN THESE TYPES OF ACTIVIT IES, BROKERS ARE ONLY CONCERNED WITH THEIR C OMMISSION ON THE VALUE OF TRANSACTIONS. NOW THE QU ESTION COMES WHAT WOULD BE THE REASONABLE PERCENTAGE TO THE COMMISSION ON THE TOTA L TURNOVER ? THE ASSESSEE HAS ALSO MADE OUT A CASE THAT THE CUSTOMER S DO NOT COME DIRECTLY TO HIM AND THE Y COME THROUGH A SUB- BROKER WHO ALSO CHARGES A PARTICULAR SHARE OF COMMISSION. IN ALL TH E JUDGMENTS WHAT HAS BEEN STATED IS THAT AN AVERAGE PERCENTAGE OF CO MMISSION IS BETWEEN 0 .15% TO 0.25%. IN THE CASE OF PALRESHA & C O. AND KIRAN & CO (SURPA), THE TRIBUNAL HAS CONS IDERED REASONABLEN ESS OF PERCENTAGE OF COMMISSION TO BE EARNED ON TURNOVER W AS AT 0.1%. THE ASSESSEE HIMSELF HAS OFFERED THE PERCENTAGE OF COMMISSION AT 0.15%, WHICH IS MORE THAN T HE PERCENTAGE OF COMMISS ION CONSIDERED TO BE REASONABLE BY THE TRIBUNAL IN THE CASE OF PALRESHA & CO AND KIRAN & CO (SUPRA) IN SIMILAR TYPE OF TRAN SACTIONS. THE THEORY OF ASSESSING OFFICER TO TREAT THE ENTIRE DEP OSIT AS UNEXPLAINED CASH CREDITS, CANNOT BE ACCEPTED IN THE LIGHT OF AS SESSMENT ORDERS IN THE CASE OF BENEFICIARIES AND ALSO IN THE LIGHT OF THE FACT THAT ASSESSEE IS ONLY CONCERNED WITH THE COMMISSION EARN ED ON PROVIDING ACCOMMODATION ENTRIES. WE, THEREFORE, OF THE VIEW T HAT SINCE THE ASSESSEE ITSELF HAS DECLARED THE COMMISSION ON TURN OVER AT 0.15% WHIC H IS MORE THAN THE PERCENTAGE CONSIDERED TO BE REASONABLE BY THE TRIBUNAL IN THE CASE OF PALRESHA & CO AND KIRAN & CO (SUPRA), THE SAME SHOULD BE ACCEPTED. WE, ACCORDINGLY, ACCEP T THE COMMISSION DECLARED BY THE ASSESSEE AND SET ASIDE T HE ORDER OF THE CIT (A) IN THIS REGARD.' RESPECTFULLY FOLLOWING THE ABOVE WE ARE OF THE OPIN ION THAT ORDER PASSED BY FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY, THEREFO RE, CONFIRMING THE SAME WE DECIDE THE EFFECTIVE GROUND OF APPEAL,RAISED BY THE ASSESSEE , AGAINST THE AO. ITA /4910/MUM/2016 (AY 11-13) : FOLLOWING OUT ORDER FOR EARLIER YEAR WE DISMISS THE GROUND RAISED BY THE AO FOR THE YEAR UNDER CONSIDERATION ALSO. ORDER OF THE FAA IS UPHEL D AS FACTS OF BOTH THE CASES ARE SAME. AS A RESULT APPEALS FILED BY THE AO FOR BOTH THE AY .S STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MAY , 2017. 2017 SD/- SD/- ( . . / C.N.PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 17/05/2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.