ECONOMIC LAWS PRACTICE, MUMBAI V. ADDL CIT 11(2), MUMBAI

ITA 5524/MUM/2013

• Counselvise Citation: 552419914 RSA 2013
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 17-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 21-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Unexplained investment; Additional evidence; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.5524/M/2013 ASSESSMENT YEAR: 2009-10 M/S. ECONOMIC LAWS PRACTICE, 1502, A WING, DALAMAL TOWER, NARIMAN POINT, MUMBAI 400 021 PAN: AABFE 1263G VS. ADDL. CIT-11(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ITA NO.5729/M/2013 ASSESSMENT YEAR: 2009-10 ASSTT. COMMISSIONER OF INCOME-TAX-11(2), ROOM NO.479, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020 VS. M/S. ECONOMIC LAWS PRACTICE, 1001-1003 A, DALAMAL TOWER, NARIMAN POINT, MUMBAI 400 021 PAN: AABFE 1263G (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI MILIN DATTANI, A.R. REVENUE BY : SHRI NEIL PHILIP, D.R. DATE OF HEARING : 17.06.2015 DATE OF PRONOUNCEMENT : 01.10.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TITLED CROSS APPEALS, ONE BY THE ASSESSE E AND THE OTHER BY THE REVENUE, HAVE BEEN PREFERRED AGAINST THE ORDER DATE D 18.07.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)]. SINCE BOTH THE APPEALS RELATE TO THE SAME ASSESSEE AND IN RELATION TO THE SAME ASSESSMENT YEAR, HENCE, THE SAME ARE TAKEN TOGETHER AND ARE BEING ITA NO.5524/M/2013 & ITA NO.5729/M/2013 M/S. ECONOMIC LAWS PRACTICE 2 DISPOSED OF BY THIS COMMON ORDER. FIRST WE TAKE UP THE ASSESSEE APPEAL I.E. ITA NO.5524/M/2013. ITA NO.5524/M/2013 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM OF ADVOCATES AND THEREBY ENGAGED IN THE PROFESSION OF CONSULTATION AND PRACTICE OF ECONOMIC LAWS. ASSESSEE IS FOLLOWING CASH METHOD O F ACCOUNTING. HOWEVER, SOME OF THE CLIENTS OF THE ASSESSEE FOLLOW MERCANTI LE SYSTEM OF ACCOUNTING. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS T HE AO) FROM THE AIR INFORMATION NOTED THAT THE ASSESSEE HAD RECEIVED FE ES FROM 420 PARTIES. HE ASKED THE ASSESSEE TO RECONCILE THE SAID RECEIPTS. THE ASSESSEE SUBMITTED BEFORE THE AO THAT IT DID NOT MAINTAIN THE LEDGER A CCOUNT FOR EACH OF ITS CLIENTS BUT ONLY A BILL REGISTER. THE ASSESSEE PROVIDED TH E NECESSARY DETAILS, HOWEVER, COULD NOT RECONCILE THE ENTIRE RECEIPTS AS PER AIR INFORMATION. THE AO ISSUED NOTICES TO THE CONCERNED PARTIES. THEREAFTER, CERT AIN ENTRIES WERE RECONCILED. HOWEVER, THE ASSESSEE COULD NOT RECONCILE THE RECEI PTS IN RELATION TO 37 PARTIES. THE AO, THEREFORE, ADDED AN AMOUNT OF RS.1,80,63,66 6/- AS UNEXPLAINED INVESTMENT/INCOME OF THE ASSESSEE RELATING TO THE R ECEIPTS FROM THE ABOVE STATED 37 PARTIES AS PER AIR INFORMATION. 3. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED TH E DETAILS RELATING TO 32 PARTIES OUT OF WHICH THE LD. CIT(A) AGREED THAT THE ASSESSEE HAD BEEN ABLE TO RECONCILE THE RECEIPTS RELATING TO 30 PARTIES. HE, HOWEVER, WAS NOT IN AGREEMENT WITH THE SUBMISSIONS OF THE ASSESSEE RELA TING TO 2 PARTIES. THE LD. CIT(A), THEREFORE DELETED THE ADDITION IN RELATION TO 30 PARTIES AND UPHELD THE ADDITION IN RELATION TO 7 PARTIES WHICH THE ASSESSE E COULD NOT RECONCILE. THE ASSESSEE, THUS, HAS COME IN APPEAL BEFORE US. ITA NO.5524/M/2013 & ITA NO.5729/M/2013 M/S. ECONOMIC LAWS PRACTICE 3 4. BEFORE US, THE LD. A.R. OF THE ASSESSEE HAS SUBM ITTED THAT THE ASSESSEE IS A LAW FIRM HAVING LARGE NUMBER OF CLIENTS. THE ASS ESSEE FOLLOWS CASH SYSTEM OF ACCOUNTING AND FEES RECEIVED FROM THE CLIENTS IS CREDITED TO INCOME ACCOUNT. THE ASSESSEE DO NOT MAINTAIN PARTY WISE LEDGER ACCO UNT. DURING THE YEAR, THE ASSESSEE HAD RECEIVED FEES FROM APPROXIMATELY 700 P ARTIES. DUE TO VOLUMINOUS DATA, THE ASSESSEE COULD NOT TRACE THE T RANSACTIONS REPORTED IN AIR INFORMATION IN RELATION TO A FEW NUMBER OF PARTIES. HE HAS FURTHER SUBMITTED THAT SOMETIMES THE PAYMENT IS RECEIVED FROM AN ENTI TY WHICH IS DIFFERENT FROM THAT IN WHOSE NAME THE INVOICE HAS BEEN RAISED. IT HAS BEEN FURTHER SUBMITTED THAT THE AIR INFORMATION INCLUDED THE INFORMATION O F THE CLIENTS WHO HAVE BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING WHEREAS T HE ASSESSEE HAS BEEN FOLLOWING CASH SYSTEM OF ACCOUNTING. THE TOTAL FEE S RECEIVED BY THE ASSESSEE, DURING THE YEAR, WAS MUCH MORE THAN THE TOTAL FEES DISCLOSED IN THE AIR INFORMATION. THE ASSESSEE HAD ALREADY RECONCILED M ORE THAN 90% OF THE RECEIPTS. THE LD. A.R. HAS FURTHER BROUGHT OUR ATT ENTION TO THE APPLICATION OF THE ASSESSEE DATED 12 TH JUNE, 2015 FOR SUBMISSION OF ADDITIONAL EVIDENCE. HE HAS SUBMITTED THAT THE ASSESSEE HAS BEEN ABLE TO RE CONCILE/OBTAIN CONFIRMATIONS ETC. IN RELATION TO THREE MORE PARTIES. IT HAS BEE N FURTHER SUBMITTED THAT DUE TO A LARGE NUMBER OF CLIENTS THE SAID CONFIRMATIONS COUL D NOT BE OBTAINED EARLIER. HE HAS, THEREFORE, REQUESTED THAT THE ABOVE STATED ADDITIONAL EVIDENCE ALSO BE CONSIDERED. THE LD. D.R., ON THE OTHER HAND, HAS STATED THAT T HE ADDITIONS HAVE BEEN RIGHTLY CONFIRMED BY THE LD. CIT(A) IN RELATION TO THE SEVEN PARTIES REGARDING WHICH THE ASSESSEE COULD NOT RECONCILE THE RECEIPTS . 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. ADMIT TEDLY, THE TOTAL RECEIPTS SHOWN BY THE ASSESSEE DURING THE YEAR ARE MUCH MORE THAN THE AIR INFORMATION. THE ASSESSEE HAS BEEN ABLE TO RECONCI LE THE RECEIPTS IN RELATION TO MORE THAN 90% OF THE RECEIPTS. EVEN, OUT OF THE 37 PARTIES, IN RESPECT OF WHOM ITA NO.5524/M/2013 & ITA NO.5729/M/2013 M/S. ECONOMIC LAWS PRACTICE 4 ADDITIONS WERE MADE BY THE AO, THE ASSESSEE HAS FUR THER RECONCILED THE RECEIPTS IN RELATION TO THE 30 PARTIES. THE ASSESSEE HAS GI VEN EXPLANATION REGARDING NON SUBMISSIONS OF CONFIRMATION BEFORE THE AO IN RELATI ON TO THE REMAINING PARTIES. IT IS ALSO AN ADMITTED FACT THAT THE AO HAS SOUGHT INFORMATION IN RELATION TO MORE THAN 400 PARTIES. THE DOCUMENTS SOUGHT TO BE PRODUCED IN ADDITIONAL EVIDENCE, IN OUR VIEW, ARE VERY MUCH NECESSARY FOR THE PROPER DECISION OF THE CASE AS THE SAME GO TO THE ROOT OF THE CASE. UNDER SUCH CIRCUMSTANCES, WE ALLOW THE APPLICATION OF THE ASSESSEE FOR ADDITIONA L EVIDENCE AND RESTORE THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO GIVE OPPORTUNITY TO THE ASSESSEE TO FURNISH THE DETAILS IN RELATION TO THE REMAINING 7 PARTIES AND THEN THE AO TO EXAMINE THE SAME IN ACCORDANCE WITH LAW AND T O CONSIDER THE OTHERWISE CONTENTIONS RAISED AND JUSTIFICATIONS PUT FORTH BY THE ASSESSEE, IF ANY, FOR HIS FAILURE TO FILE CONFIRMATIONS ETC., IF ANY, IN RESP ECT OF ANY OF THE PARTIES AND DECIDE THE ISSUE RELATING TO THE ABOVE STATED 7 PAR TIES AFRESH. ITA NO.5729/M/2013 6. SO FAR AS THE APPEAL OF THE REVENUE IS CONCERNED , THE REVENUE HAS COME IN APPEAL AGAINST THE ACTION OF THE LD. CIT(A) IN D ELETING THE ADDITION OF RS.10,97,500/- IN CASE OF ONE PARTY STATING THAT TH E ASSESSEE COULD NOT PROPERLY RECONCILE THE RECEIPTS FROM THE SAID PARTY NAMELY M/S. RELIANCE HEALTH/MEDI ASSIST INDIA PVT. LTD.. THE LD. A.R. OF THE ASSES SEE HAS SUBMITTED THAT THE TAX EFFECT IN THIS APPEAL OF THE REVENUE IS LESS THAN R S.4 LAKHS. HE HAS, THEREFORE, SUBMITTED THAT THE CBDT INSTRUCTION NO.5 DATED 10.0 7.2014 FIXING THE MONETARY LIMIT OF RS.4 LAKHS FOR FILING THE APPEALS BY THE REVENUE IS ALSO APPLICABLE TO THE PENDING APPEALS. HE HAS RELIED U PON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF 'MADHUKAR INAMDAR' - 185 TAXMANN. 101 IN THIS RESPECT. HOWEVER, WE FIND THAT HONBLE SUP REME COURT, IN THE CASE OF CIT VS. SUMAN DHAMIJA CIVIL APPEAL NO.4921 4922 OF 2015 VIDE ORDER DATED 01.07.2015, HAS HELD IN RELATION T O SUCH A CIRCULAR DATED ITA NO.5524/M/2013 & ITA NO.5729/M/2013 M/S. ECONOMIC LAWS PRACTICE 5 09.02.2011 THAT THE SAME WAS NOT APPLICABLE TO THE PENDING APPEALS. IN VIEW OF THE ABOVE PROPOSITION OF LAW LAID DOWN BY THE HONB LE SUPREME COURT, THE CIRCULAR DATED 10.07.2014 OF THE CBDT IS NOT APPLIC ABLE TO THE PENDING APPEALS. HOWEVER, WHILE DECIDING THE APPEAL OF THE ASSESSEE, WE HAVE RESTORED THE MATTER TO THE AO IN RESPECT OF THE ADDITIONS CO NFIRMED BY THE LD. CIT(A) IN RESPECT OF 7 PARTIES. SINCE THE AO HAS BEEN DIRECT ED TO DECIDE THE ISSUE AFRESH IN RELATION TO THE SEVEN PARTIES, IN OUR VIEW, IT W ILL BE PROPER TO RESTORE THE ISSUE IN RELATION TO THE RECEIPTS FROM M/S. RELIANCE HEA LTH/MEDI ASSIST INDIA PVT. LTD. ALSO. THE AO IS THEREFORE DIRECTED TO DECIDE THIS ISSUE IN RELATION TO THE DELETION OF THE ADDITION IN RESPECT OF THE ABOVE SA ID PARTY ALSO ALONG WITH THE OTHER SEVEN PARTIES IN TERMS OF OUR DIRECTIONS GIVE N ABOVE WHILE DECIDING THE APPEAL OF THE ASSESSEE. 7. IN THE RESULT, BOTH THE CROSS APPEALS ARE TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 01.10.2015. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 06.10.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.