DISHA DEVANG KAPASI (DISHA NISEET RUPANI), MUMBAI V. ACIT 15(3), NAVI MUMBAI

ITA 5349/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1640 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 31-10-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 17-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Accommodation entries
• Section: 143(3); 133(6); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5349/MUM/2015 ASSESSMENT YEAR 2011-12 DISHA DEVANG KAPASI, (DISHA NISEET RUPANI) B-607, ARIHANT BLDG., SUDHA PARK, BEHIND GARODIA NAGAR, GHATKOPAR (E), MUMBAI 400 077 VS. ACIT, 15(3) /PRESENT JURISDICTION- ITO 27(1)-4, TOWER 6, 4 TH FLOOR, ROOM NO. 412, VASHI RLY. STATION COMPLEX, VASHI, NAVI MUMBAI- 400 703. P AN NO. : ANGPK 4952 N ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING: 31.10.2016 DATE OF PRONOUNCEMENT: 28.11 .2016 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2011-12. IT IS DIRECTED AGAINST THE ORDER OF COMMIS SIONER OF INCOME TAX (APPEALS)-25, MUMBAI AND ARISES OUT OF THE ORDER U/ S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE 1 ST GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LD. CIT(A) ERRED IN ESTIMATING THE INCOME OF THE APPELL ANT AT 2% OF THE VALUE OF THE SALES BILLS ISSUED BY THE APPELLANT IN RESPECT OF SUPPLY OF BUILDING MATERIALS AS AGAINST 0.75% ACTUALLY RECEIVED. THE 2 ND GROUND RAISED IS THAT APPELLANT BY: SHRI H ARI S. RAHEJA ,AR RESPONDENT BY: SHRI SHIVAJI G HO D E, DR ITA NO. 5349/MUM/2015 2 THE LD. CIT(A)ERRED IN HOLDING THAT APPELLANT WAS E ARNING NET COMMISSION INCOME @ 2% OF GROSS VALUE OF BUILDING MATERIAL SUP PLY BILLS FOR DETERMINATION OF INCOME WITHOUT THERE BEING ANY EVI DENCE TO SUGGEST THAT THE APPELLANT MIGHT BE UNDERSTATING HER COMMISSION INCOME AS ASSESSED BY THE CIT(A) AND WITHOUT CONSIDERING THE FACT THAT AP PELLANT HAD TO INCUR CERTAIN EXPENSES IN CARRYING ON THIS ACTIVITY AND T HEREFORE NET COMMISSION INCOME ACTUALLY EARNED WAS SUBSTANTIALLY LOWER THAN WHAT HAS BEEN DETERMINED IN THE ASSESSMENT ORDER. THE 3 RD GROUND IS THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT APPELLANT IN HER AFFIDAVI T HAS ADMITTED THE RATE OF COMMISSION EARNED IN CASE OF BUILDING MATERIAL SUPP LY AT 0.75% OF THE GROSS VALUE OF THE BILLS ISSUED TO VARIOUS PARTIES AS AGAINST RATE OF 2% AS DETERMINED BY HIM IN HIS ORDER. THE 4 TH GROUND IS THAT THE LD. CIT(A) ERRED IN NOT ALLOWING THE VARIOUS EXPENSES CLAIMED BY THE APPELLANT AND CLAIMED IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH THE R ETURN OF INCOME ON THE GROUND THAT ASSESSEE HAS NOT CARRIED OUT ANY GENUIN E BUSINESS ACTIVITY. THE LD. CIT(A)ALSO DID NOT CONSIDER THE SUBMISSION MADE BY THE APPELLANT THAT ALL THE EXPENSES CLAIMED IN RESPECT OF BUSINESS ACT IVITY CARRIED ON BY HER WERE INCURRED FOR THE PURPOSE AND IN THE COURSE OF THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AND THEREFORE ALLOW ABLE AS DEDUCTION FROM THE INCOME EARNED BY WAY OF COMMISSION ON PROV IDING ACCOMMODATION ENTRIES OF TRANSPORTATION. THE 5 TH GROUND IS THAT THE LD. CIT(A) ERRED IN IGNORING AS ALSO NOT ADOPTING THE R ATIO LAID DOWN BY THIS HONOURABLE TRIBUNAL IN SO FAR AS ALLOWABLITY OF EXP ENSES CLAIMED BY THE APPELLANT. THE 6 TH GROUND IS THAT THE LD. CIT(A) ERRED IN IGNORING A S ALSO NOT APPLYING THE RATIO LAID DOWN BY THIS HONOURABLE TRI BUNAL IN THE CASE OF M/S SAROJ ANIL STEEL PVT. LTD. WHEREIN THE MANNER IN WHICH THE INCOME HAS TO BE DETERMINED HAS BEEN DECIDED IN A CASE AKIN TO THE C ASE OF THE APPELLANT. 3. IN A NUTSHELL, THE FACTS ARE THAT THE ASSESSEE F ILED HER RETURN OF INCOME FOR THE A.Y. 2011-12 ON 29/09/2011 DECLARING TOTAL INCOME OF RS. 1,53,030/-. THE ASSESSEE IS A PROPRIETOR OF M/S. D. K.ENTERPRISES AND M/S. D.C. CORPORATION .SINCE THE SUNDRY CREDITORS WERE E XCEEDING THE PURCHASES IN BOTH THE PROPRIETARY CONCERNS OF THE ASSESSEE, T HE AO ISSUED A DETAILED QUESTIONNAIRE DATED 01/11/2013 TO THE ASSESSEE ASKI NG TO FURNISH DETAILS OF PURCHASES, SALES AND CREDITORS IN RESPECT OF BOTH T HE CONCERNS. THE ASSESSEE VIDE LETTER DATED 06/01/2014 FURNISHED THE LIST CON TAINING THE NAMES AND ITA NO. 5349/MUM/2015 3 ADDRESSES OF ALL THE PURCHASES, SALES AND CREDITORS AND THE EXPENSES INCURRED IN CASH. THE AO ISSUED NOTICES U/S 133(6) TO VARIOUS PARTIES TO VERIFY THE TRANSACTIONS OF BOTH THE PROPRIETARY CON CERNS. THE NOTICES SENT BY THE AO WERE RETURNED BACK BY THE POSTAL AUTHORIT IES UNSERVED WITH THE REMARK NOT KNOWN LEFT ETC. IN RESPONSE TO THE N OTICE U/S 142(2) DATED 28/01/2014 ISSUED BY THE AO, THE ASSESSEE FILED A W RITTEN SUBMISSIONS DATED 04/02/2014 STATING THE FOLLOWING:- AT THIS STAGE OF ASSESSMENT PROCEEDINGS I WOULD RE ITERATE THAT ALL THE TRANSACTIONS OF SALES ARE NOT GENUINE AND ARE ACCOM MODATIVE TRANSACTIONS ON WHICH I HAVE EARNED HALF PERCENT IN TRANSPORT BILL S AND 0.75% IN CASE OF BUILDING MATERIAL BILLS ISSUED BY ME THROUGH MY TWO PROPRIETARY CONCERNS. THIS CONTENTION IS SUBSTANTIATED BY BANKING TRANSAC TIONS OF THE TWO PROPRIETARY CONCERNS WHERE IN IT CAN BE SEEN THAT CASH HAS BEEN WITHDRAWN BY ISSUING BEARER CHEQUES SOON AFTER CHEQUES RECEIV ED FROM VARIOUS PERSONS TO WHOM BILLS HAVE BEEN ISSUED HAS BEEN ENCASHED IN THE BANK. I AM SUBMITTING HEREWITH BANK STATEMENTS CONFIRMING WITH DRAWALS OF CASH IN SUPPORT OF THE FACT THAT THE CASH HAS BEEN WITHDRA WN. THE AO THEN ESTIMATED INCOME OF THE ASSESSEE OUT OF ACCOMMODATION BILLS @ 2%. THE AO HAS ALSO MADE AN ADDITION OF RS. 2081/- OF BOGUS TDS. 4. THE ASSESSEE FILED APPEAL AGAINST ORDER OF THE A O BEFORE THE LD. CIT(A). THE LD. CIT(A) HELD THAT THE INCOME ASSESS ED BY THE AO @ 2% OF THE GROSS VALUE OF THE BUILDING MATERIAL IS CORRECT. T HE LD. CIT(A)DIRECTED THE AO TO ESTIMATE 0.5% OF THE TRANSPORTATION BILLS AS THE INCOME OF THE ASSESSEE AS THERE WAS NO TDS. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TS THAT THE ASSESSEE IS THE PROPRIETRESS OF TWO CONCERNS NAMELY M/S D.C. CO RPORATION AND M/S. D.K. ENTERPRISES SHOWN TO BE IN THE BUSINESS OF BUI LDING MATERIAL SUPPLY AND PROVIDING OF TRANSPORT SERVICES. IT IS FURTHER STATED BY HIM THAT THE ASSESSEE HAS EARNED ONLY 0.75% OF THE GROSS VALUE O F ACCOMMODATION BILLS ISSUED BY HER TOWARDS SUPPLY OF BUILDING MATERIALS AND 0.50% OF THE GROSS VALUE IN RESPECT OF BILLS ISSUED FOR TRANSPORTATIO N. THE LD. COUNSEL ALSO ITA NO. 5349/MUM/2015 4 SUBMITS THAT AS PER THE ORDER OF THE ITAT SMC BEN CHES MUMBAI IN THE CASE OF M/S SAROJ ANIL STEEL PVT. LTD. VS. ITO (ITA NO. 5854/MUM/2012) FOR THE A.Y. 1999-2000, THE LD. CIT(A) SHOULD HAVE ALLO WED EXPENSES CLAIMED IN RESPECT OF BUSINESS ACTIVITY CARRIED ON BY THE ASSE SSEE IN THE COURSE OF PROVIDING ACCOMMODATION ENTRIES. 6. THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RELEVANT MATERIAL ON RECORD. A SIMILAR ISSUE AROSE BEFORE T HE ITAT SMC BENCHES, MUMBAI IN THE CASE OF SHRI DEVANG H. KAPASI HUF VS. ITO (ITA NO. 3685/MUM/2014) FOR A.Y. 2009-10. THE TRIBUNAL HELD AS UNDER:- 5. WITH REGARD TO THE RECEIPTS PERTAINING TO ACCOM MODATION BILLS, THE ASSESSEE SEEMS TO HAVE PROVED THE SAME BY SHOWING H IS BANK ACCOUNT WHEREIN THE CHEQUE RECEIVED FROM THE PARTIES HAVE B EEN IMMEDIATELY WITHDRAWN BY WAY OF CASH. THE EXPLANATION OF THE AS SESSEE WAS THAT THE CHEQUES RECEIVED FROM THE PARTIES WERE DEPOSITED IN TO THE BANK ACCOUNTS AND THE CASH WAS IMMEDIATELY WITHDRAWN THEREAFTER AND H ANDED OVER TO THE PARTIES. IF THE ASSESSEE IS ABLE TO DEMONSTRATE THA T THE VERY SAME MODALITY WAS FOLLOWED IN RESPECT OF RS.14.47 LAKHS ALSO, THE N THE ASSESSEES CLAIM FOR ESTIMATING INCOME AT 0.5% PLUS TDS AMOUNT CAN BE AD MITTED. HOWEVER, THIS FACT REQUIRES VERIFICATION AT THE END OF THE AO. AC CORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SA ME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE BANK ACCOUNTS AND OTHER EXPLANATIONS FURNISHED BY THE ASSESSEE AND TAKE APPROPRIATE DECI SION IN ACCORDANCE WITH THE LAW. 7.1 KEEPING IN MIND THE ABOVE ORDER OF THE ITAT, TH E AO WOULD VERIFY WHETHER THE CHEQUES RECEIVED FROM THE PARTIES WERE DEPOSITED IN THE BANK ACCOUNTS AND CASH WAS WITHDRAWN IMMEDIATELY THEREAF TER AND HANDED OVER TO THE PARTIES. IF THE ASSESSEE IS ABLE TO PROVE T HE SAME BEFORE THE AO, THEN THE ASSESSEES CLAIM OF ESTIMATING NET COMMISSION I NCOME ON THE GROSS VALUE OF THE TRANSPORTATION FEE AT 0.5% + TDS SHALL BE ACCEPTED . ALSO IF THE ASSESSEE IS ABLE TO PROVE THE ABOVE, THE AO WOULD A CCEPT THE NET ITA NO. 5349/MUM/2015 5 COMMISSION INCOME FROM THE GROSS VALUE OF BUILDING MATERIAL SUPPLY BILLS @ 0.75%. 7.2 ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. C IT(A) ON THIS ISSUE AND RESTORE TO THE SAME TO THE FILE OF THE A.O TO FOLLO W THE DIRECTION AS GIVEN AT PARA 7.1 HERE-IN-ABOVE AND PASS A FRESH ASSESSMENT ORDER AS PER THE PROVISIONS OF THE ACT AFTER GIVING REASONABLE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. THUS GROUND NUMBER 1,2 &3 ARE ALLOWED FOR STATISTICAL PURPOSE. 7.3 NOW WE COME TO GROUND NUMBER 4,5 & 6. THE HONB LE ANDHRA PRADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS VS. CIT (1998) 232 ITR 776 (AP) HAS HELD: THE PATTERN OF ASSESSMENT UNDER THE ACT IS GIVEN B Y SECTION 29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION S 30 TO 43D. SECTION 40 PROVIDES FOR CERTAIN DISALLOWANCES IN CERTAIN CASES NOTWITHSTANDING THAT THOSE AMOUNTS ARE ALLOWED GENERALLY UNDER OTHER SEC TIONS. THE COMPUTATION UNDER SECTION 29 IS TO BE MADE UNDER SECTION 145 ON THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE. IF THOSE BOOK S ARE NOT CORRECT OR COMPLETE, THE ASSESSING OFFICER MAY REJECT THOSE BO OKS AND ESTIMATE THE INCOME TO THE BEST OF HIS JUDGMENT. WHEN SUCH AN ES TIMATE IS MADE IT IS IN SUBSTITUTION OF THE INCOME THAT IS TO BE COMPUTED U NDER SECTION 29. IN OTHER WORDS, ALL THE DEDUCTIONS WHICH ARE REFERRED TO UND ER SECTION 29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH A N ESTIMATE. THIS WILL ALSO MEAN THAT THE EMBARGO PLACED IN SECTION 40 IS ALSO TAKEN INTO ACCOUNT. 7 .3.1 KEEPING THE PRINCIPLE LAID DOWN IN THE ABOVE DECISION OF THE HONBLE HIGH COURT INSTEAD OF THE TRIBUNAL DECISION IN M/S SAROJ ANIL STEEL PVT. LTD(SUPRA) , THE CLAIM OF THE ASSESSEE TO ALLOW EXPENSES FROM THE INCOME EARNED BY WAY OF COMMISSION ON PROVIDING ACCOMMODAT ION ENTRIES OF TRANSPORTATION IS REJECTED. THUS GROUND NUMBER 4,5 & 6 ARE DISMISSED. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 5349/MUM/2015 6 ORDER PRONOUNCED IN THE OPEN COURT ON 28/11/2016 SD/- SD/ - (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI; DATED: 28/11/2016 PRAMILA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY OR DER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI