RIDDHI SIDDHI MULTITRADE P.LTD, MUMBAI V. DCIT CC -1, MUMBAI

ITA 6039/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8415 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 30-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHASARTHY
• Keywords: Business income; Accommodation entries
• Section: 133A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D BENCH BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND SHRI P.M.JAGTAP (ACCOUNTANT MEMBER) ITA NO.6039/MUM/2011 ASSESSMENT YEAR: 2008-09 RIDDHI SIDDHI MULTITRADE P. LTD., 626, PANCHRATNA BUILDING, OPERA HOUSE, MUMBAI PA NO.AADCR 5831 L DCIT, CC-1, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SRI RAJEEV KHANDELWAL & SH KOMAL MEHTA RESPONDENT BY: SHRI PARTHASARTHY DATE OF HEARING: 6.11.2012 DATE OF PRONOUNCEMENT: 9 . 11.2012 ORDER PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT Y EAR 2008-09 AGAINST ORDER DATED 10.6.2011 OF LD CIT(A) ON FOLLOWING GROUNDS 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLAN TS CASE AND IN LAW, THE LD CIT(A) ERRED IN NOT ADJUDICATING GROUND NUMB ERS 1 & 2 AND THUS CONFIRMED THE AOS ACTION OF REJECTING THE BOOK RES ULTS U/S.145(3) HOLDING THAT THE APPELLANT WAS ENGAGED IN PROVIDING ACCOMMO DATION BILLS/ ENTRIES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT S CASE AND IN LAW, LD CIT(A) ERRED IN ESTIMATING THE BUSINESS INCOME TO T HE EXTENT OF 0.5% OF THE TOTAL TURNOVER. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY REGIST ERED UNDER THE COMPANIES ACT AND IS ENGAGED IN THE BUSINESS OF TRADING OF GOODS. A SURVEY/SEARCH OPERATION U/S 132(1) AND 133A OF THE INCOME TAX ACT, 1961 (THE AC T) WERE CONDUCTED IN THE CASES OF SHRI PRAVIN KUMAR JAIN GROUP AND PERSONS/ENTITIES C ONNECTED WITH HIM ON 31-03-2008. ASSESSEE COMPANY IS AN ASSOCIATE CONCERN OF SHRI PR AVIN KUMAR JAIN GROUP. THE ITA NO.6039/MUM/2011 ASSESSMENT YEAR: 2008-09 2 DIRECTORS OF THIS COMPANY ARE SHRI PANKAJ H JAIN AN D SMT JYOTI P JAIN, BROTHER AND WIFE OF SHRI PRAVIN KUMAR JAIN. 3. CONSEQUENT TO ABOVE, ASSESSEE FILED E-RETURN O F INCOME ON 28.9.2008 DECLARING TOTAL INCOME OF RS. 3790. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS, INTER ALIA, OBSERVED BY THE AO THAT DURING THE COURSE OF SEARCH/SURVEY PROCEEDI NGS CONDUCTED AT RESIDENTIAL AND BUSINESS PREMISES OF SHRI PRAVIN K JAIN, CHEQUE BOO KS OF MANY CONCERNS, BANK LETTER HEADS, SIGNED AND UNSIGNED CHEQUES AND BANK STATEME NTS OF VARIOUS CONCERNS ETC. WERE FOUND. IT IS STATED THAT DURING THE SEARCH PROCEEDI NGS, STATEMENT OF SHRI PRAVIN KUMAR JAIN WAS RECORDED U/S 132(4) OF THE ACT ON 31-3-200 8. IN HIS STATEMENT SHRI PRAVIN KUMAR JAIN WAS SPECIFICALLY ASKED ABOUT HIS RELATIO NSHIP WITH THE CONCERNS IN WHOSE NAMES BLANK LETTER HEADS WERE FOUND. THE RELEVANT PORTION OF HIS STATEMENT IS REPRODUCED BELOW:- Q.9. I AM SHOWING YOU THE FOLLOWING BUSINESS CONCE RNS EMPTY LETTER HEAD PAPERS WHICH ARE FOUND DURING THE COURSE OF SEARCH ACTION U/S. 132 AT YOUR PREMISES NO. 512, C-WING, OSTWAL ONYZ BLDG., BHAYAN DER. PLEASE EXPLAIN THE SAME. 1) SHAH INDUSTRIES 2) H. VINAY & CO. 3) NEW PLANET TRADING CO. PVT. LTD. 4) DIAMOND STAR 5) KANAK GEMS 6) P.P. IMPEX 7) N.R. CORPORATION ANS. IN THE ABOVE COMPANY NAMES I HAVE BEEN GIVING ACCOMMODATION BILLS IN THE YEARS 2003,2004 AND 2005 TO VARIOUS PARTIES LIKE AR IHANT CORPORATION, ANTRIX DIAMOND, JAYPEE TEXTILE, TIRUPATI SYNTHETICS ETC. G OSALIA DIAMOND, MUMBAI. ALL THIS TRANSACTION WERE MADE THROUGH FOLLOWING BA NKS: 1) A.P. MAHESH CO.OP. BANK BHULESHWAR, MUMBAI 2) ABN AMRO BANK-FORT, MUMBAI 3) UNION BANK OF INDIA, KALBADEVI, MUMBAI THE A/C NOS ARE NOT IN MY MEMORY RIGHT NOW, I WILL FURNISH IN TWO DAYS TIME. ITA NO.6039/MUM/2011 ASSESSMENT YEAR: 2008-09 3 AGAIN ON 17.5.2008, SHRI PRAVIN JAIN WAS CONFRONTED ON THE EVIDENCES SEIZED AND STATEMENT U/S. 132(4) RECORDED EARLIER. Q.9. FROM YOUR STATEMENT RECORDED ON THE DATE OF SEARCH AT YOUR RESIDENT I.E. ON 31.3.2008, I AM REPRODUCING THE QUESTION NO. 9 A ND ITS ANSWER AS BELOW: Q.9. I AM SHOWING YOU THE FOLLOWING BUSINESS CONCER NS EMPTY LETTER HEAD PAPERS WHICH ARE FOUND DURING THE COURSE OF SEARCH ACTION U/S. 132 AT YOUR PREMISES NO. 512, C-WING, OSTWAL ONYZ BLDG., BHAYANDER. PLEASE E XPLAIN THE SAME. 8) SHAH INDUSTRIES 9) H. VINAY & CO. 10) NEW PLANET TRADING CO. PVT. LTD. 11) DIAMOND STAR 12) KANAK GEMS `13) P.P. IMPEX 14) N.R. CORPORATION ANS. IN THE ABOVE COMPANY NAMES I HAVE BEEN GIVING ACCOMMODATION BILLS IN THE YEARS 2003,2004 AND 2005 TO VARIOUS PARTIES LIKE AR IHANT CORPORATION, ANTRIX DIAMOND, JAYPEE TEXTILE, TIRUPATI SYNTHETICS ETC. G OSALIA DIAMOND, MUMBAI. ALL THIS TRANSACTION WERE MADE THROUGH FOLLOWING BA NKS: 4) A.P. MAHESH CO.OP. BANK BHULESHWAR, MUMBAI 5) ABN AMRO BANK-FORT, MUMBAI 6) UNION BANK OF INDIA, KALBADEVI, MUMBAI THE A/C NOS ARE NOT IN MY MEMORY RIGHT NOW, I WILL FURNISH IN TWO DAYS TIME. FROM YOUR ABOVE STATEMENT AND FROM THIS STATEMENT I T IS CLEAR THAT YOU ARE NOT DOING ANY BUSINESS EXCEPT PROVIDING ACCOMMODATION B ILLS TO THE PARTIES. PLEASE OFFER YOUR COMMENT. THERE IS NO ANSWER FROM SHRI PRQAVIN KUMAR JAIN FO R 10 MINUTES. Q. NO.10. I AM ASKING THE SAME QUESTION AS ASKED I N Q. NO.9. PLEASE OFFER YOUR COMMENT. ANS. NO COMMENTS. 5. THE A.O. ALSO AT PAGES 4 TO 6 OF THE ASSESSMENT ORDER STATED THE INVENTORIES OF CHEQUE BOOKS FOUND AND SEIZED IN THE LOCKER NO. 210 5 AT NAYAN SAFE DEPOSIT VAULT AT PRASAD CHAMBER COMPOUND, OPERA HOUSE, MUMBAI -4 ST ANDING IN THE NAMES OF SHRI PANKAJ H. JAIN AND OTHERS AND THE NAME OF ASSOCIATE CONCERN OF SHRI PRAVIN KUMAR JAIN AND SHRI PANKAJ KUMAR. AO HAS OBSERVED THAT SHRI PR AVIN KUMAR JAIN AND ASSOCIATED PERSONS/CONCERNS ARE ENGAGED IN THE BUSINESS OF PRO VIDING ACCOMMODATION/BILL ENTRIES ITA NO.6039/MUM/2011 ASSESSMENT YEAR: 2008-09 4 TO THE PARTIES BY USING THE LETTER HEADS, CHEQUE BO OKS OF VARIOUS PERSONS/CONCERNS. THE A.O. ALSO NOTED THAT THE ASSESSEE HAS SHOWN PURCHAS ES FROM FIVE CONCERNS AND SOLD TO EIGHT PARTIES. FROM THE ABOVE EVIDENCES AND TRANSA CTIONS, THE A.O. FURTHER OBSERVED THAT IT IS ESTABLISHED THAT THE ASSESSEE COMPANY IS ALSO ENGAGED IN THE ACTIVITIES OF PROVIDING ACCOMMODATION BILLS. THE ASSESSEE WAS AS KED TO FILE THE EXPLANATION AS TO WHY THE ENTIRE BUSINESS CONDUCTED SHOULD NOT BE CON SIDERED AS PROVIDING ACCOMMODATION BILLS/CIRCULAR TRANSACTIONS AND WHY T HE COMMISSION EARNED ON THE SAID ACTIVITIES SHOULD NOT BE TAXED IN ASSESSEES HANDS. IN REPLY, IT WAS STATED BY THE ASSESSEE THAT IT IS NOT ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION BILLS AND, HENCE, THE QUESTION OF MAKING ANY ADDITION ON ACCOU NT OF COMMISSION ON THE ALLEGED BUSINESS OF PROVIDING ACCOMMODATION BILLS DOES NOT ARISE. HOWEVER, THE A.O. DID NOT ACCEPT THE ASSESSEES EXPLANATION AND HELD THAT THE STATE OF AFFAIRS IS NOTHING BUT THE ACTIVITIES OF PROVIDING ACCOMMODATION BILLS/ENTRIES AND ACCORDINGLY THE A.O. AFTER REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE A CT ESTIMATED THE INCOME FROM COMMISSION/BROKERAGE/CONSIDERATION AT RS. 7,63,277 BEING 1% (NET OF EXPENSES) ON THE TOTAL TURNOVER OF RS. 7,63,27,266/- AND ASSESSED TH E SAME AS BUSINESS INCOME. 6. ON APPEAL, THE LD. CIT(A) WHILE OBSERVING THAT T HE ADDITION HAS BEEN MADE ON ESTIMATED BASIS WITHOUT POINTING OUT ANY SPECIFIC D EFECT IN THE BOOKS OF ACCOUNTS, REDUCED THE PROFIT RATE TO 0.5% AS AGAINST 1% APPLI ED BY THE A.O. AND ACCORDINGLY REDUCED THE INCOME BY RS. 3,81,638 VIDE PARA 9 OF T HE IMPUGNED ORDER. HENCE, ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE, MADE HIS SUBMISSIONS ON THE LINES OF SUBMISSIONS MADE BEFORE THE FIRST APPE LLATE AUTHORITY THAT THE AUTHORITIES BELOW CONSIDERED THAT ASSESSEE WAS DOING BUSINESS O F ACCOMMODATION/BILL ENTRIES MERELY ON THE STATEMENT OF SHRI PRAVIN K JAIN WITHO UT ANY COGENT MATERIAL. HE FURTHER REFERRED PAGES 4 TO 6 OF ASSESSMENT ORDER AND SUBMI TTED THAT IN THE INVENTORIES OF CHEQUE BOOKS FOUND AND SEIZED, THE NAME OF THE ASSE SSEE IS NOT APPEARING IN ANY OF THE SAID STATEMENT. HE SUBMITTED THAT NO LETTER HEAD R ELATING TO ASSESSEE WAS FOUND DURING THE COURSE OF SEARCH. HE SUBMITTED THAT SIMILAR IS SUE ON IDENTICAL FACTS WERE CONSIDERED BY THE TRIBUNAL IN OTHER GROUP CONCERNS OF SHRI PRA VIN K JAIN IN I.T.A. NO.6035/M/2011 ITA NO.6039/MUM/2011 ASSESSMENT YEAR: 2008-09 5 IN THE CASE OF M/S EASY MERCANTILE PVT. LTD. VS. DC IT AND I.T.A. NO.6038/M/2011 IN THE CASE OF M/S SBJ TRADING (I) PVT. LTD. VS. DCIT VID E ORDER DTD. 27-7-2012 AND ADDITION SUSTAINED BY LD CIT(A) WAS DELETED. HE FURTHER SUB MITTED THAT THE TRIBUNAL AGAIN CONSIDERED ON SIMILAR FACTS THE IDENTICAL ISSUE IN THE CASE OF M/S. CAPETOWN MERCANTILE CO. PVT.LTD VS. DCIT IN I.T.A. NO.6037/M/2011 VIDE ORDER DATED 19.10.2012 AND DELETED THE ADDITION SUSTAINED BY LD CIT(A). HE FURNISHED COPY OF THE SAID ORDER TO SUBSTANTIATE HIS SUBMISSION. 8. WE HAVE CAREFULLY CONSIDERED ORDERS OF AUTHORI TIES BELOW AND SUBMISSIONS OF LD REPRESENTATIVES OF PARTIES. 9. WE OBSERVE THAT LD CIT(A) HAS HIMSELF STATED IN PARA 9 THAT AO HAS ESTIMATED THE INCOME WITHOUT REFERENCE TO ANY COGENT MATERIAL AND THE ESTIMATION WAS MADE ON THE BASIS OF STATEMENT OF SHRI PRAVIN KUMAR JAIN A ND AS FAR AS ASSESSEE IS CONCERNED, NO SUCH STATEMENT WAS EVER MADE BY ANYONE ON ITS BE HALF. LD CIT(A) STATED THAT IN THE IMPUGNED ORDER THAT IT IS SEEN FROM THE RECORD THAT NO SPECIFIC DEFECT WAS POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNT. FURTHER, WE OBS ERVE THAT LD CIT(A) HAS SUSTAINED THE ADDITION @ 0.5% OF THE TOTAL TURNOVER BY REJECT ING BOOKS OF ACCOUNT MERELY ON THE GROUND THAT THE INCOME SHOWN BY THE ASSESSEE IS MEA GER. LD CIT(A) HAS NOT BROUGHT ON RECORD ANY DEFECTS IN THE BOOKS OF ACCOUNT OF TH E ASSESSEE. LD CIT(A) HAS ALSO NOT BROUGHT ON RECORD ANYTHING THAT ASSESSEE WAS ENGAGE D IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. IN VIEW OF ABOVE, WE HOLD T HAT ABOVE ADDITION SUSTAINED BY LD CIT(A) BY REJECTING BOOK RESULTS OF THE ASSESSEE IS NOT BASED ON COGENT MATERIAL AND ACCORDINGLY, SAME IS DELETED. HENCE, GROUNDS OF AP PEAL TAKEN BY ASSESSEE IS ALLOWED. 10. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 9 TH NOVEMBER, 2012. SD/- (P.M.JAGTAP) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI, DATED 9 TH NOVEMBER, 2012 ITA NO.6039/MUM/2011 ASSESSMENT YEAR: 2008-09 6 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),36, MUMBAI 4. COMMISSIONER OF INCOME TAX,C-1 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH D MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI