ACIT, New Delhi V. Sh. Lalit B. Sharma,

ITA 5057/DEL/2013

• Counselvise Citation: 505720114 RSA 2013
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 01-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SAROHA
• Keywords: Unexplained cash credit; Income from undisclosed sources; Search and seizure
• Section: 148; 132

Judgement Text

ITA NO S . 5057 - 5059/ DEL/ 2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D , NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO S . 5057, 5058 & 5059/ DEL/201 3 A.Y RS . : 200 6 - 0 7 , 2007 - 08 & 2008 - 09 ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 13, ROOM NO. 332, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI VS. SH. LALIT B. SHARMA, ROOM NO. 4, MANDIR KHALIA, BEHIND HDFC BANK, AMLI, SILVASA, DADARA & NAGAR HAVELLI - 396230 (PAN: BBKPS9504H) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. A.K. SAROHA, CIT(DR) ASSESSEE BY : SH. VED JAIN, CA DATE OF HEARING : 1 1 - 0 8 - 201 5 DATE OF ORDER : 1 0 - 0 9 - 201 5 ORDER PER H.S. SIDHU, JM REVENUE HAS FILED THESE THREE APPEALS AGAINST THE RESPECTIVE O RDER S P ASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS - I ), NEW DELHI P ERTAINING TO ASSESSMENT YEAR S 200 6 - 0 7 , 2007 - 08 & 2008 - 09 RESPECTIVELY. SINCE THE ISSUES INVOLVED IN ALL THESE THREE APPEALS ARE COMMON AND IDENTICAL, HENCE, THESE APPEALS ARE BEING CONSOLIDATED BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE, BY DEALING WITH ITA NO. 5057/DEL/2013 (AY 2006 - 07). 2. TH E FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE FOR THE ASSESSMENT YEAR 2006 - 07. 1. THE ORDER OF THE LD. CIT(A) IS NOT CORRECT IN LAW AND FACTS. ITA NO S . 5057 - 5059/ DEL/ 2013 2 2. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE AD DITION OF RS. 1,86,25,606/ - MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CREDITS IN THE BANK ACCOUNT OF THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE GENUINENESS OF THE TRANSACTIONS COULD NOT BE PROVED BY THE ASSESSEE. 3. THE APPELLANT CRAVES LEAVE TO A DD, AMEND ANY / ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 3 . THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE ACTION WAS INITIATED U/S. 132 OF THE INCOME TAX ACT, 1961 IN THE SWASTIK PIPES GROUP OF CASES ON 28.8.2008. THE DEPARTMENT FOUND EVIDENCES THAT ONE M/S SWASTIK PACKAGING, NASIK, WAS HAVING HUGE BANK TRANSACTIONS WITH THE GROUP, BUT THIS ENTITY COULD NOT BE LOCATED AT THE GIVEN ADDRESS. ENQUIRY FROM THE BANK REVEALED THA THE ASSESSEE PROPRIETOR OF THIS CONCERN. THESE FACTS ARE MENTIONED IN DETAIL IN PARA 2 TO PARA 4 OF THE ASSESSMENT ORDER AND NOT REPEATED HERE FOR THE SAKE OF BREVITY. ACCORDINGLY, THE CASE OF THE ASSESSEE WAS TRANSFERRED U/S. 127 FROM NASIK TO NEW DELHI. AS NO SEARCH WAS CAR RIED OUT ON THE ASSESSEE, NOTICE U/S. 148 REOPENING THE ASSESSMENT WAS ISSUED AFTER RECORDING REASONS AND SERVED ON THE ASSESSEE ON 6.1.2011, IN RESPONSE TO WHICH HE FILED A RETURN ON 11.2.2011 DECLARING INCOME OF RS. 95,200/ - . FURTHER NOTICES U/S. 143(2 )/142(1) WERE ISSUED ON 15.2.2011, 12.7.2011 AND 16.8.2011. THESE NOTICES WERE COMPLIED AND THE CASE WAS ASSESSED AT AN INCOME OF RS. 1,87,87,157/ - AFTER MAKING ADDITION OF THE BANK DEPOSITS VIDE ORDER DATED 30.12.2011 PASSED U/S. 143(3)/147 OF THE I.T. A CT, 1961. ITA NO S . 5057 - 5059/ DEL/ 2013 3 4 . AGAINST THE AFORESAID ASSESSMENT ORDER OF THE ASSESSING OFFICER, ASSESSEE APPEALED BEFORE THE LD. FIRST APPELLATE AUTHORITY, WHO VIDE IMPUGNED ORDER 2 8 . 6 .201 3 HAS DELETED THE ADDITION IN DISPUTE AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5 . AGGRIEVED BY THE AFORESAID IMPUGNED ORDER DATED 2 8 . 6 .201 3 , REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6 . AT THE TIME OF HEARING LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE CONTENT IONS RAISED IN THE GROUNDS OF APPEAL FILED BY THE REVENUE. HE FURTHER SUBMITTED THAT FROM THE PERUSAL OF THE BANK ACCOUNTS STATEMENT, IT WAS FOUND THAT THE ASSESSEE HAS DEPOSITED HUGE AMOUNT IN THE TWO BANK ACCOUNTS FOR THE YEAR CONSIDERATION. HENCE, T HE AO RIGHTLY TREATED THE SAME AS INCOME FROM UNDISCLOSED SOURCES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6 . 1 ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE ORDER OF THE LD. CIT(A) MAY BE UPHELD. 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS ESPECIALLY THE ORDERS OF THE REVENUE AUTHORIT IES, WE FIND THAT THE A SSESSEE IS AN EMPLOYEE OF MLS NORTHERN STRIPS LTD. (NSL), A CONCERN B ELONGING TO SWASTIK GROUP. HE OPENED A BANK ACCOUNT WITH H DFC BANK IN NASIK, AND LARGE AMOUNTS OR FUNDS WERE DEPOSITED BY BANK DRAFTS / PAY ORDERS AND REMITTED T O NSL BY CHEQUES / TRANS FERS . THE TRANSACTIONS GENERATING THE FUNDS AND THEIR TRANSFERS FROM ONE ENTITY TO ANOTHER AR E PURCHASE AND SALE O F POLY FILMS / STRIPS BY NSL TO M/S SWASTIK PACKAGING (SP), O F WHICH THE APPELLANT IS PROPRIETOR, AND ITS FURTHER SALE BY THE SP TO VARIOUS PARTIES EITHER DIRECTLY OR THROUGH ONE SH. RAVINDRA YADAV (RY) OR HIS ENTITY MLS R V TRADERS (RV T). THE ULTIMATE SALES THROUGH R Y / RVT (IRE IN CASH. IN WHOSE BANK ACCOUNT ITA NO S . 5057 - 5059/ DEL/ 2013 4 THE CASH REALIZED THROUGH SALES WAS DEPOSITED, AND TRANSFERRED TO NS N EITHER DIRECTLY, OR THROUGH THE APPELLANT BY WAY OR DEMAND DRAFTS OR PAY ORDERS . THE ENTIRE PURCHASES OF POLY - FILMS/STRIPS BY N S L ARE UNDISPUT E DLY FROM ONLY ONE PARTY, M / S JINDAL POLYFIL MS LTD. (JPL). THE SALES ARE EITHER DIRECTLY TO DIFFERENT PARTIES OR THROUGH CERTAIN INTERMEDIARIES, SOME OF THE SALES OF NSL ARE THROU G H RY / RV T AND SOME ARE THROUGH SP / A SSESSEE . THERE AR E ALSO SOME TRANSACTIONS OF SALES BY NS L THROUGH RY WHEREIN THE MON EY REALISED FROM SUCH SALES HAS PASSED THROUGH THE B ANK A/ C OF SP, THUS, IN THESE TRANSACTIONS OF SALES OF NSL, SP / A SSESSEE AND RY / RVT HAVE ACTED AS A BROKERS OR COMMISSION AGENTS . THE ENTIRE SCHEME OF SALES THR OUGH THESE TWO INTERMED I ARIES WAS EXECUTE D IN FYS 2005 - 06, 2006 - 07 & 2007 - 0 8 . THE ULTIMATE SALES OF POLY - FILMS / STRIPS BY NSL ARE NOT DISPUTED AS SUCH. 7.1 THE PECULIAR FEATURE OF THIS ARRANGEMENT ADOPTED BY THE GROUP WAS TO ROUTE CASH SALES THROUGH INTERMEDIARIES IN ORDER TO KEEP ITS BOOKS OF ACCOUNT CLEAN. THERE ARE THREE TYPES OF TAX ISSUES THAT AROSE BEFORE THE REVENUE. THE FIRST ISSUE WAS TREATMENT OF CASH DEPOSITS. THE SECOND ISSUE WAS RE - CONCILIATION OF THE TRANSACTIONS OF NSL WITH JPL. THE THIRD ISSUE WAS DETERMINATION OF THE INCOM E OF THE INTERMEDIARIES. WHILE IN THE ASSESSMENTS MADE BY THE REVENUE, ENTIRE CASH DEPOSITS AND OTHER BANK DEPOSITS HAD BEEN TREATED AS INCOME OF NSL OR THE INTERMEDIARIES, IN THE APPEALS ALREADY DECIDED IN THE CASE OF NSL AND RY / RVT THE FOLLOWING STAND HAS B EEN TAKEN: - (I) UN - RECONCILED TRANSACTIONS WITH JPL HAVE BEEN TREATED AS UNEXPLAINED INCOME OF NSL. (II) THE PEAK OF THE CASH DEPOSITS IN BANK, BROKERAGE ON BA NK DRAFTS / PAY ORDERS @ 0.25 %. PROFIT FROM M/S R V TRADERS. AND NET INCREASE ITA NO S . 5057 - 5059/ DEL/ 2013 5 IN ASSETS HAVE BEEN TREATED AS UNACCOUNTED INCOME OF SH. RAVINDER YADAV. 7.2 HAVING TAKEN THE STAND AS ABOVE, THE ONLY ISSUE TO BE DECIDED IN THE PRESENT APPEALS (AYS 2006 - 07, 2007 - 08 AND 2008 - 09) IN THE CAS E OF THE A SSESSEE IS HIS INCOME FROM ACTING AS A BROKER / AGENT / INTERM EDIARY IN THE TRANSACTIONS OF SALES OF NSL. THE TRANSACTIONS OF THE ASSESSEE ARE INDICATED IN THE TABLES GIVEN BELOW: - F.Y. PURCHASES FROM NSL RECORDED IN BOOKS (PROFIT & LOSS ACCOUNTS) OF SP PAYMENT S TO NSL ON ACCOUNT OF VAT/ OTHER CHARGES TOTAL AMOUNT DUE TO NSL PAYMENTS TOTAL PAYMENT TO NSL BALANCE SALES RECORDED IN BOOKS OF SP NET PROFIT/LOSS TO NSL THROUGH HDFC BANK TO NSL DIRECTLY THROUGH CUSTOMERS 2005 - 06 26,289,638 23,841 26,313,479 23,072,551 1,235,401 24,307,952 2,005,527 26,500,277 34,431 2006 - 07 305,511,882 104,709 305,616,591 202,209,102 105,413,016 307,622,118 (2,005,527) 305,920,809 (29,015) 2007 - 08 - - - - - - - - - TOTAL 331,801,520 128,550 331,930,070 225,281,653 106,648,417 331,930,070 0 332,421,086 5,416 7.3 IN THE CASE OF SH. RAVIDER YADAV THE INCOME ON THE SALES MADE ON BEHALF OF NSL WAS TAKEN IN THE FORM OF BANK - DRAFT CHARGES @RS.250/ - PER LAKH OF RUPEES. THIS AMOUNTS TO A BROKERAGE OF 0.25% ON THE CASH SALES. APPLYING THIS RATE OF BROKERAGE TO THE TOTAL AMOUNT OF SALES EFFECTED THROUGH THE A SSESSEE , THE INCOME OF THE APPELLANT WORKS OUT TO RS.8,31,053/ - ( 0.25% OF RS.33 , 24 , 21 , 086 / - ). THIS BROKERAGE INCOME IS TO BE SPLIT INTO TWO A YS , I.E. AT R S .66 , 251/ - FOR AY 2006 - 07 AND RS.7,64,802/ - FOR A Y 2 007 - 08. IN A Y 2008 - 09, THERE WAS NO SALE ON BEHALF OF NSL BY SP AND , THEREFORE, NO INCOME IS TO B E TAKEN FOR THIS AY. THE PROFIT DISCLOSED BY THE A SSESSEE IN THE BOOKS OR ACCOUNTS CANNO T BE ACCEPTED AS SUCH BECAUSE. T HE BOOKS DO NOT REFLECT THE REAL NATUR E OF THE TRAN SAC TIONS TO THE EXTENT THAT THERE WAS NO REAL PURCHASE / SALE OF GOODS BY ENTITIES UNDER THE CONTROL OF THE A SSESSEE OR SH. RAVINDER YADAV. WHO ACTED ONLY AS INTERMEDIARIES IN THE TRANSACTIONS OF SALES BY NSL ITA NO S . 5057 - 5059/ DEL/ 2013 6 TO DIFFERENT PARTIES. TO THIS EXT ENT, THE BOOKS OF ACCOUNT OF THE A SSESSEE TO BE REJECTED U/S 145. IN THE CASE OF SH. RAVINDER YADAV , THE PEAK OF CASH DEPOSITS WAS TAKEN AS THESE AMOUNTS WERE F OUND CREDITED IN HIS BANK ACCOUNTS. THERE ARE NO CASH DEPOSITS IN THE BAN K ACCOUNTS OF THE A SS ESSEE AND, THEREFORE, THE QUESTION OF DETERMINING ANY PEAK OF TRANSACTIONS DOES NOT ARISE AND ONLY THE BROKERAGE / COMMISSION CAN BE DETERMINED AS ABOVE. WE FIND THAT THE AO WAS ACCORDINGLY RIGHTLY DIRECTED TO TREAT THE AMOUNTS OF RS.66,25 1 / - AS UNDISCLOSED INCOME OF THE A SSESSEE FOR AY 2006 - 07 AND RS.7,64 , 802/ - AS UNDISCLOSED INCOME OF THE A SSESSEE FOR AY 2007 - 0 8 . THESE GROUNDS O F APPEAL AR E DECIDED IN THESE TERMS ON MERIT. 7 . 4 WE FIND LD. CIT(A) HAS HELD THAT F OR THE TIME BEING, THERE IS NO BASIS FOR ANY ADDITION OF RS. 1,86 , 25,606/ - AND ACCORDINGLY HE RIGHTLY DELETED THE ADDITION IN DISPUTE IN RESPECT OF THE ASSESSMENT YEAR 2006 - 07. 8. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENT, WE DO NOT SEE ANY REASON TO INTERFERE WI TH THE WELL REASONED ORDER OF THE LD. CIT(A), ACCORDINGLY, WE UPHOLD THE SAME AND DECIDE THE ISSUE AGAINST THE REVENUE BY DISMISSING THIS GROUND OF APPEAL RELEVANT TO ASSESSMENT YEAR 2006 - 07. 9. AS REGARDS ITA NO. 5058/DEL/2013 (AY 2007 - 08) AND ITA NO. 5059/DEL/2013 (AY 2008 - 09) ARE CONCERNED, WE FIND THAT THE ISSUE INVOLVED IN THESE TWO APPEALS ARE SIMILAR AND IDENTICAL AND ALSO THE FACTS AND CIRCUMSTANCES OF THE CASE ARE ALSO SAME TO THAT OF ITA NO. 5057/DEL/2013 (AY 2006 - 07) AS DECIDED BY US AS AFORESAID, WHEREIN WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE. KEEPING IN VIEW OF THE ABOVE, WE UPHOLD THE ORDERS OF THE LD. CIT(A) IN RESPECT OF THE ASSESSMENT YEARS 2007 - 08 & 2008 - 09 ITA NO S . 5057 - 5059/ DEL/ 2013 7 ALSO AND DECIDE THE ISSUE AGAINST THE REVENUE BY DISMISSING THE APPEALS FILED BY THE REVENUE. 10 . IN THE RESULT, ALL THE THREE APPEAL S FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE O PEN C OURT ON 1 0 / 0 9 /20 1 5 . SD / - S D / - [ N.K. SAINI ] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE : - 1 0 / 9 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES