AVANTI RESOURCES P.LTD, MUMBAI V. ITO 5(1)(1), MUMBAI

ITA 5449/MUM/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6880 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 27-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMLATHA
• Keywords: Opportunity of being heard; Opportunity of cross examination; Initiation of penalty proceedings; Accommodation entries
• Section: 234B; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI M ANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO. 5449 / MUM/2015 ( ASSESSMENT YEAR : 20 10 11 ) AVANTI RESOURCES PVT. LTD. 413, AUTUMN GURVE LOKHANDWALA COMPLEX OPP. LOKHANDWALA FOUNDATION SCHOOL AKURLI ROAD, KANDIVALI (EAST) MUMBAI 400 101 PAN AACCA9146E . APPELLANT V/S INCOME TAX OFFICER WARD 5 (1)( 1 ), MUMBAI . RESPONDENT ASSESSEE BY : SHRI BHUPENDRA SHAH REVENUE BY : MS. N. HEMLATHA DATE OF HEARING 2 4 .0 5 .2018 DATE OF ORDER 20.06.2018 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL BY THE ASSESSEE IS AGAINST ORDER DATED 21 ST AUGUST 2015 , PASSED BY THE L EARNED COMMISSIONER (APPEALS) 10 , MUMBAI , FOR THE ASSESSMENT YEAR 2 010 11 . 2 . IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED ADDITION OF ` 1,63,29,680 TOWARDS COMMISSION RECEIVED. 2 AVANTI RESOURCES PVT. LTD. 3 . BRIEF FACTS ARE, THE ASSESSEE COMPANY IS ENGAGED IN BUSINESS OF TRADING IN FOOD GRAIN AND PULSES. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 14 TH OCTOBER 2010 , DECLARING TOTAL INCOME OF ` 63,080. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON VERIFYING THE DETAILS AVAILABLE BEFORE HIM FOUND THAT THE ASSESSEE HAD A PAID UP CAPITAL OF ` 1,00,000. W HEREAS , IN THE RELEVANT PREVIOUS YEAR IT HAS SHOWN PURCHASES OF ` 81.64 CRORE AND SALES OF ` 81.65 CRORE. HE FOUND THAT THERE ARE NEITHER ANY SUNDRY DEBTORS / CREDITORS NOR ANY TRADE ADVANCES RECEIVED. THE TOTAL EXPENSES CLAIMED WERE ` 22,5 86. FROM THE PARTY WISE DETAILS OF PURCHASES AND SALES FURNISHED BY THE ASSESSEE HE FOUND THAT THE ASSESSEE HAS EFFECTED PURCHASES FROM SEVEN PARTIES AND HAVE ALSO EFFECTED SALES TO THE VERY SAME PARTIES. TO FURTHER VERIFY THE GENUINENESS OF PURCHASE AND S ALE TRANSACTIONS THE ASSESSING OFFICER ISSUED NOTICES UNDER SECTION 133(6 ) OF THE ACT TO ALL THE PARTIES WHO ENTERED INTO SUCH TRANSACTIONS WITH THE ASSESSEE. HOWEVER, T HE NOTICE ISSUED UNDER SECTION 133(6) TO IRON GLOBAL LTD. RETURNED UNSERVED. F ROM THE R EPLY FILED IN RESPONSE TO THE NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT THE ASSESSING OFFICER FOUND THAT THE BILLS / INVOICE PROVIDED BY THE PARTIES WERE NOT GENUINE AND APPEARED TO BE SELF MADE INVOICES WITHOUT PROPER DETAILS. IN CASE OF RUCHI ACRONI INDUSTRIES LTD, THE CORRECT DETAILS WERE NOT PROVIDED. HE 3 AVANTI RESOURCES PVT. LTD. FOUND THAT TWO PARTIES VIZ. PUSHKAR ECONOMIC SERVICES AND RUCHI ECONOMIC SERVICES, WERE HAVING SAME PAN DETAILS. SOME OTHER DISCREPANCIES WERE ALSO FOUND IN RESPECT OF THE OTHER PARTIES. ON THE BAS IS OF THE AFORESAID INFORMATION, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO JUSTIFY THE TURNOVER SHOWN BY IT. FURTHER, ON VERIFYING THE BANK STATEMENT OF THE ASSESSEE, HE FOUND CERTAIN DISCREPANCIES IN THE FUND FLOW AND ACCORDINGLY, ISSUED A SHOW CA USE NOTICE TO THE ASSESSEE TO EXPLAIN THE DISCREPANCIES. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ON THE BASIS OF FACTS AND MATERIAL ON RECORD, THE ASSESSING OFFICER ULTIMATELY CONCLUDED THAT THE ASSESSEE HAS INDULGED IN THE ACTIVITY OF TAKING BEN EFIT OF ACCOMMODATION ENTRIES FROM THE SEVEN PARTIES WITH WHOM THE ASSESSEE ENTERED INTO THE ALLEGED PURCHASE AND SALE TRANSACTION BY SHOWING A HUGE TURNOVER OF ` 81.65 CRORE. THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINE SS ACTIVITY AND HAS ONLY EARNED COMMISSION INCOME THROUGH ACCOMMODATION ENTRIES. ACCORDINGLY, HE PROCEEDED TO ESTIMATE COMMISSION RECEIVED @ 1% ON THE TOTAL PURCHASE AND SALE TURNOVER SHOWN BY THE ASSESSEE WHICH WORKED OUT TO ` 1,63,29,680. BEING AGGRIEVED WITH THE AFORESAID ADDITION, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND PERUSING THE MATERIAL ON RECORD, 4 AVANTI RESOURCES PVT. LTD. HOWEVER, WAS NOT CO NVINCED WITH THE CLAIM OF THE ASSESSEE THAT IT HAS ACTUALLY ENTERED INTO PURCHASE AND SALE TRANSACTIONS WITH THE CONCERNED PARTIES AND ULTIMATELY SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER. 5 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT TH E DEPARTMENTAL AUTHORITIES WITHOUT PROPERLY CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAVE ARBITRARILY MADE THE ADDITION. THE LEARNED AUTHORISED REPRESENTATIVE DRAWING OUR ATTENTION TO THE AUDIT REPORT SUBMITTED THAT THE NATURE OF BUSINESS OF THE ASSESSE E HAS BEEN CLEARLY SPECIFIED TO BE PURCHASE AND SALE OF GRAINS. HE SUBMITTED , IN COL. 28(A) OF THE AUDIT REPORT, THE DETAILS OF FOOD GRAINS PURCHASED HAVE BEEN CLEARLY MENTIONED. HE SUBMITTED , DU RING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FURNISHED AL L DETAILS OF THE SELLERS AND PURCHASERS OF GOODS . HE SUBMITTED , IN RESPONSE TO THE NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT THE CONCERNED PARTIES HAVE ALSO COMPLIED AND CONFIRMED THE TRANSACTION S WITH THE ASSESSEE. HE SUBMITTED , WITHOUT CONDUCTING AN Y FURTHER ENQUIRY TO VERIFY ASSESSEES CLAIM, THE ASSESSING OFFICER HAS CONCLUDED THAT THE ASSESSEE HAS ONLY AVAILED/PROVIDED ACCOMMODATION ENTRIES AND ESTIMATED THE COMMISSION INCOME PURELY ON PRESUMPTION AND SURMISES. HE SUBMITTED , BEFORE THE LEARNED COM MISSIONER (APPEALS), THOUGH, THE ASSESSEE HAS MADE ELABORATE SUBMISSION S COUNTERING EACH OF THE 5 AVANTI RESOURCES PVT. LTD. ALLEGATIONS MADE BY THE ASSESSING OFFICER, HOWEVER, LEARNED COMMISSIONER (APPEALS) HAS NOT AT ALL CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE. HE SUBMITTED , THOUGH , THE STATEMENT OF THIRD PARTIES WERE RELIED UPON FOR MAKING THE ADDITION OF COMMISSION INCOME , NO OPPORTUNITY OF CROSS EXAMINATION WAS ALLOWED TO THE ASSESSEE. HE SUBMITTED , EVEN THE ASSESSING OFFICER HAS NOT PROVIDED ANY BASIS FOR ESTIMATING THE C OMMISSION INCOME. THUS, IT WAS SUBMITTED , THE ADDITION MADE SHOULD BE DELETED. 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELYING UPON THE OBSERVATIONS OF THE DEPARTMENTAL AUTHORITIES SUBMITTED THAT THE BUSINESS OF ASSESSEE IS DOUBTFUL AS THE PURCHASERS AND SELLERS ARE NOT ONLY THE SAME PARTIES BUT ARE ALSO RELATED PARTIES. HE SUBMITTED , THE ASSESSEE HAS ALSO FAILED TO PROVE THAT IT HAS ACTUALLY CARRIED OUT ACTUAL SALE AND PURCHASE TRANSACTION. THUS, HE SUBMITTED , THE ADDITION MADE IS JUSTIFIED. 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS COULD BE S EEN FROM THE FACTS ON RECORD, THOUGH, THE ASSESSEE HAD SHOWN HUGE PURCHASE AND SALES TURNOVER TO THE TUNE OF ` 81.64 CRORE AND ` 81.65 CRORE RESPECTIVELY, H OWEVER, THERE ARE NO SUNDRY CREDITORS OR SUNDRY DEBTORS OR EVEN TRADE ADVANCES. EVEN , THE EXPENDITUR E CLAIMED IS A MEAGER AMOUNT OF ` 22,586, COMPARED TO THE 6 AVANTI RESOURCES PVT. LTD. HUGE TURNOVER SHOWN BY THE ASSESSEE. FROM THE DETAILS FURNISHED, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE ENTERED I N TO PURCHAS E AND SALE TRANSACTION WITH SEVEN PARTIES. IT IS ALSO VERY SURPRISI NG AND UNIQUE THAT THE ASSESSEE HAS SOLD THE GOODS TO THE VERY SAME PARTIES FROM WHOM IT HAS PURCHASED THEM. THIS , IN OUR V IEW , IS A VERY UNUSUAL HAPPENING AND OUTSIDE NORMAL HUMAN BEHAVIOR AND CO N DUCT. IT IS NOT UNDERSTOOD , IF A PARTY IS SELLING GOODS TO THE ASSESSEE , WHAT IS THE NECESSITY FOR HIM TO AGAIN PURCHASE THE SAME GOODS FROM THE ASSESSEE ? THEREFORE, THE GENUINENESS OF ACTIVITY CARRIED ON BY THE ASSESSEE CERT AINLY RAISES A REASONABLE DOUBT. H OWEVER, THE DOUBT CREATED SHOULD HAVE BEEN FOLLOWED UP WITH PROPER AND EFFECTIVE ENQUIRY WITH THE CONCERNED PARTIES AND OTHER ENTITIES INCLUDING THE BANKS TO FIND OUT THE FLOW OF FUNDS . AS COULD BE SEEN FROM THE FACTS ON RECORD , BEFORE TH E LEARNED COMMISSIONER (APPEALS) THE ASSESSEE HAS STATED THAT THE PURCHAS ES AND SALES WERE EFFE C TED ON SPOT DELIVERY BASIS. HOWEVER, THE ASSESSEE COULD NOT PROVE THE MOVEMENT OF GOODS TO THE SELLER OR BUYER NOR COULD PRODUCE ANY DELIVERY CHALLAN OR TRANSPORT CHARGES . T HE ASSESSEE HAS NOT MAINTAINED EVEN A STOCK REGISTER. IN COU RSE OF REMAND ALSO THE ASSESSEE WAS UNABLE TO PRO DUCE ANY FURTHER EVIDENCE. HOWEV ER, IN OUR VIEW , BEFORE MAKING ANY ADDITION O F COMMISSION INCOME ON THE GROUND THAT THE ASSESSEE IS MERELY PROVIDING ACCOMMODATION ENTRIES , IT IS NECESSARY TO MAKE 7 AVANTI RESOURCES PVT. LTD. DE E PER PROB E AND ENQUIRY TO ASCERTAIN THE TRUE NATURE OF TRANSACTIONS BETWEEN THE ASSESSEE AND CONCERNED PARTIES . THE ASSESSEES GRIEVANCE THAT IT WAS NOT GIVEN OPPORTUNITY TO CROSS EXAM IN E THE THIRD PART IES WHOSE STATEMENTS WERE RELIED UPON ALSO NEEDS TO BE DEALT WI TH IN ACCORDANCE WITH LAW . IN VIEW OF THE ABOVE, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8 . IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF RENT EXPENSES OF ` 6,000. 9 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, WHILE VERIFYING ASSESSEES CLAIM OF DEDUCTION ON ACCOUNT OF EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FAILED TO FURNISH ANY PROOF WITH REGA RD TO RENT PAYMENT OF ` 6,000. ACCORDINGLY, HE DISALLOWED THE SAID AMOUNT. THOUGH, THE ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY, HE ALSO SUSTAINED THE SAME. 10 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON REC ORD. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT GIVEN AN OPPORTUNITY THE ASSESSEE WILL PROVE THE EXPENDITURE THROUGH PROPER EVIDENCE. IN VIEW OF THE ABOVE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR DE 8 AVANTI RESOURCES PVT. LTD. NOVO ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11 . IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED THE ADDITION OF ` 3,846, ON ACCOUNT OF DIFFERENCE IN TOTAL INCOME AS PER THE E RETURN AND AS PER COMPUTATION OF INCOME. 12 . DURING THE ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NOTICED THAT AS PER THE E RETURN FILED BY THE ASSESSEE THE INCOME SHOWN WAS ` 63,080, WHEREAS, AS PER THE COMPUTATION OF INCOME, THE INCOME SHOWN WAS ` 66,926. THEREFORE, HE ADDED THE DIFFERENCE OF ` 3,846, WHICH WAS ALSO UPHELD BY THE LEARNED COMMISSIONER (APPEALS). 13 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED FOR AN OPPORTUNITY TO BE GIVEN TO THE ASSESSEE TO RECONCILE THE DIFFERENCE. CONSIDERING THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE WE ARE INCLINED TO RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE TO RECONCILE THE DIFFERENCE. GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 14 . IN GROUND NO.4, THE ASSESSEE HAS CHALLENGED LEVY OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT AND ALSO INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. 9 AVANTI RESOURCES PVT. LTD. 15 . LEVY OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT BEING CONSEQUENTIAL IN NATURE AND INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT BEING PRE MATURE AT THIS STAGE , WE DECLINE TO ENTERTAIN THIS GROUND. 16 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTI CAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20.06.2018 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, D ATED: 20.06.0218 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI