HAFEEZ S. CONTRACTOR, MUMBAI V. ACIT CEN CIR 44, MUMBAI

ITA 6222/MUM/2013

• Counselvise Citation: 622219914 RSA 2013
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 13-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 24-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Search and seizure; Initiation of penalty proceedings; Accommodation entries

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE HONBLE S/SHRI JOGINDER SINGH ( JM ) , AND B.R.BASKARAN (AM) , . . , ./ I.T.A. NO. 6222 AND 6223 /MUM/ 2 01 3 ( / ASSESSMENT YEAR : 2007 - 08 & 2008 - 09 ) SHRI HAFEEZ S CONTRACTOR, 29, BANK STREET, SONAWAL BUILDING, MUMBAI - 400023 / VS. ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 44, AAYAKAR BHAVAN, M K R OAD, MUMBAI - 400020 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN : AADPC1634R / APPELLANT BY SHRI NEELKANTH KHANDELWAL / RSPONDENT BY SHRI JITENDRA KUMAR / DATE OF HEARING : 7 .7. 201 5 / DATE OF PRONOUNCEMENT: 2.9 . 201 5 / O R D E R PER B.R. BASKARAN (AM) BOTH THE APPEALS FILED BY T HE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER DATED 29.8 .2013 PASSED BY LD CIT(A) - 38, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEAR S 2007 - 08 AND 2008 - 09. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD.CIT(A) IN CONFIRMING THE PENALTY LEVIED IN BOTH THE YEARS U/S 271(1)(C) OF THE ACT. 3. THE FACTS RELATI NG TO THE ISSUE ARE STATE D IN BRIEF. THE REVENUE CARRIED OUT THE SEARCH AND SEIZURE OPERATION UNDER SECTION 132(1) OF THE ACT IN THE HANDS OF THE ASSESSEE ON 22.01.2009. DURING THE COURSE OF SEARCH PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAS CLAIM ED I.T.A. NO . 6222 AND 6223/ 201 3 2 EXPENDITURE IN RESPECT OF COMMISSION PAID TO TWO PARTIES NAMELY (A) M/S NISCHAL CORPORATE SERVICES PRIVATE LIMITED AND (B) M/S TWINKLE VANIJYA PVT.LTD. THE FIRST PARTY WAS PAID A SUM OF RS.2 CRORES IN THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2007 - 08 AN D THE SECOND PARTY WAS PAID A SUM OF RS.1.5 CRORES IN THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2008 - 09. THE ASSESSEE HAD PAID THE COMMISSI ON BY WAY OF CHEQUES AND ALSO HAD DEDUCTED TAX AT SOURCE. THE RECIPIENTS HAD ALSO COLLECTED SERVICE TAX FROM THE ASS ESSEE. IN THE STATEMENT TAKEN FROM THE ASSESSEE UNDER SECTION 132(4) OF THE A CT, THE ASSESSEE SUBMITT ED THAT THE ABOVE SAID COMMISSION PAYMENTS WERE MADE TO PERSONS WHO GAVE THE LEAD FOR THE CONTRACT WORKS OBTAINED BY THE ASSESSEE AND SUCH KIND OF COMMIS SION PAYMENT S ARE NO RMAL . HE SUBMITTED THAT HE GOT THE WORK OF ICICI, INDIA BULLS AND CLOUD NINE, WHICH WAS TO THE TUNE OF ABOUT RS.100 CRORES, THROUGH M/S NISCHAL CORPORATE SERVICES PRIVATE LIMITED HE FURTHER SUBMITTED THAT HE GOT THE WORK OF CHENNAI A ND BANGALORE PROJECTS OF M/S CARMEN BUILDERS & CONSTRUCTIONS PVT LTD, WORTH ABOUT RS.24 CRORES, THROUGH M/S TWINKLE VANIJYA PVT LTD, KOLKATTA. 4. THE SEARCH OFFICIALS POINTED OUT TO THE ASSESSEE T H AT M/S NISC HAL CORPORATE SERVICES PVT LTD H AS ADMITT ED THAT IT WAS PROVIDING ONLY ACCOMMODATION ENTRIES . WITH REGARD TO THE PAYMENT MADE TO M/S TWINKLE VANIJYA PVT LTD ALSO, THE SEARCH OFFICIALS POINTED OUT THAT THE COMMISSION PAYMENT IS MADE TO A KOLKATTA BASED COMPANY FOR THE WORK OBTAINED IN CHENNAI AND BANGALORE AND THE ENQUIRY MADE THROUGH AN INSPECTOR LOCATED KOLKATTA REVEALED THAT THE OFFICE OF THE ABOVE SAID COMPANY GENERALLY REMAINS CLOSED. IN REPLY, THE ASSESSEE SUBMITTED THAT HE HAD GIVEN THE CHEQUE IN THE NAME OF THE CONCERN S AS SOUGHT BY THE CON CERNED PERSON , WHO BROUGHT THE WORK . THE ASSESSEE FURTHER SUBMITTED THAT HE DOES NOT NORMALLY VERIFY THE BONAFIDES OF THE COMPANY, SINCE HUGE CONTRACT WORK WAS BROUGHT BY THEM . HE FURTHER SUBMITTED THAT HE HAD I.T.A. NO . 6222 AND 6223/ 201 3 3 NOT RECEIVED CASH AGAINST THE CHEQUE SO GIVE N AND ACCORDINGLY CONTENDED THAT THE COMMISSION PAYMENTS WERE GENUINE. THE AS SESSEE WAS ASKED TO PRODUCE THE PERSONS WHO BROUGHT THE WORK AND THE ASSESSEE ALSO INITIALLY AGREED TO PRODUCE THEM. HOWEVER, AT THE TIME OF CONCLUSION OF THE SWORN STATEMENT, HE EXPRESSED HIS INABILITY TO PRODUCE THOSE PARTIES AND A CCORDINGLY AGREED TO OFFER THE ABOVE SAID COMMISSION PAYMENT S AS HIS INCOME , IN ORDER TO BU Y PEACE OF MIND. THE ASSESSEE ALSO FILED RETURN S OF INCOME FOR BOTH THE YEARS DECLARING THE ABOVE SAID AMOUNT AS HIS INCOME AND THE SAME WAS ALSO ACCEPTED BY THE AO . 5 . T HE AO INITIATED PENALTY PROCEEDINGS IN BOTH THE YEARS UNDER CONSIDERATION AND ACCORDINGLY LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT ON THE COMMISSION EXPENSE SURRENDERED BY THE ASSESSEE, WITH THE REASONING THAT THE ASSESSEE WOULD NOT HAVE OFFERED THESE AMOUNTS , HAD THERE BEEN NO SEARCH AND THE SAME PROVES THE MALAFIDE INTENTION ON THE PART OF THE ASSESSEE TO CONCEAL TRUE AND CORRECT INCOME. 6. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) A LSO CONFIRMED THE PENALTY LEVIED BY THE AO FO R BOTH T H E YEARS . AGGRIEVED, THE ASSESSEE HAS FILED THESE APPEALS BEFORE THE TRIBUNAL. 7. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE FEEL IT PERTINENT TO EXTRACT THE REPLY GIVEN BY THE ASSESSEE, WHE REIN HE HAD SURRENDERED THE ABOVE SAID AMOUNT OF RS.2.00 CRORES AND RS.1.50 CRORES RESPECTIVELY FOR ASSESSMENT YEARS 2007 - 08 AND 2008 - 09: I HAVE BEEN REPEATEDLY ASKED TO PROVE THE GENUINENESS AND BONAFIDE OF TWO PARTIES I.E. M/S.TWINKLE VANIJYA PVT.LTD. A ND M/S.NISHCHAL CORPORATE SERVICES PVT. LTD. TO WHOM WE HAD MADE PAYMENTS. I HAVE ALSO BEEN TOLD BY YOU ABOUT CERTAIN FACTS ABOUT GENUINENESS OF PAYMENTS. I HAVE MADE PAYMENTS TO THESE COMPANIES AS PER REQUEST OF PERSONS WHO HAS GOT ME THE WORK. IT IS MY INABILITY AS OF NOW TO PRODUCE THESE PARTIES TO SUPPORT MY CONTENTION THAT THE PAYMENTS ARE FOR GENUINE BUSINESS I.T.A. NO . 6222 AND 6223/ 201 3 4 PURPOSE. HOWEVER, I AM ONCE AGAIN SAYING THAT I HAVE NOT RECEIVED CASH FROM ANYONE, ELSE YOU WOULD HAVE FOUND UNACCOUNTED INVESTMENTS, CASH OR EXPENSES DURING THE COURSE OF SEARCH. MY INVESTMENTS AND EXPENSES ARE PROPERLY ACOUNTED FOR. WHEN I AM PAYING SO MUCH TAX HONESTLY FOR SO MANY - YEARS, I HAVE NO INTENTION TO BOOK THESE EXPENSES TO SAVE OR EVADE TAXES. THESE ARE TECHNICAL MATTERS FORWHICH I HAVE NO ANSWER AT PRESENT AND NOW THEY ARE ADVERSELY AFFECTING MY MENTAL STATE AND PROFESSIONAL WORK. I HAVE NO TIME TO SPEND ON THESE MATTERS AS MY PROFESSIONAL ASSIGNMENTS REQUIRE MORE ATTENTION FROM ME. THEREFORE, TO BUY MY PEACE OF MIND AND ON THE COND ITION THAT THERE WILL NOT BE ANY ADVERSE CONSEQUENCES INCLUDING PENALTY AND/OR PROSECUTION I OFFER A SUM OF RS.4 CRORES AS INCOME WHICH WILL TAKE CARE OF THE ALLEGED BOGUS PAYMENTS, THE EXCESS AND POSSIBLE ANY OTHER DISCREPANCIES IN ANY PAYMENT AND/OR JEWE LLERY THE YEAR WISE BREAKUP OF THE ADDITIONAL INCOME BEING OFFERED IS AS UNDER: FINANCIAL YEAR ASSTT.YEAR AMOUNT (RS.IN LAKHS) 2006 - 07 2007 - 08 200 2007 - 08 2008 - 09 150 2008 - 09 2009 - 10 50 SINCE I HAVE CO - OPERATED WITH THE DEPARTMENT, I REQUEST YOU T HAT LENIENT VIEW BE TAKEN AND NO PENALTY AND PROSECUTION SHOULD BE IMPOSED ON ME. I SHALL PAY THE TAXES SHORTLY. 8. IN THE REPLY TO THE PENALTY NOTICE ISSUED U/S 271(1)(C) OF THE ACT, THE ASSESSEE HAS STATED THAT HE HAD SURRENDERED THE AMOUNT AS PE R THE STATEMENT WITHOUT RETRACTING FROM THE SAME. IT WAS FURTHER STATED THAT, IF ANY ADVERSE VIEW IS SOUGHT TO BE TAKEN OF THE CONDITIONAL OFFER INCLUDING IN INITIATING PENALTY PROCEEDINGS, THE ASSESSEE SHOULD BE PROVIDED WITH ALL THE MATERIAL ON THE BASI S OF SUCH ADVERSE INFERENCE IS SOUGHT TO BE MADE, INCLUDING - BUT NOT LIMITING - THE FOLLOWING: - (A) COPY OF STATEMENT TAKEN OF THE MR. SANDEEP SITLANI OF M/S NISHCHAL CORPORATE SERVICES PVT LTD. (B) COPY OF THE REPORT OF INSPECTOR OF ADDL. DDI, KOLKATTA (C) ANY OTHER MATERIAL RELIED UPON BY THE AO. I.T.A. NO . 6222 AND 6223/ 201 3 5 9. THUS, WE NOTICE THAT THE CASE OF THE ASSESSEE IS THAT THE IMPUGNED COMMISSION PAYMENTS WERE GENUINE. FURTHER THEY HAVE BEEN PAID ALONG WITH SERVICE TAX BY WAY OF CHEQUE AND THE ASSESSEE HAD ALSO DE DUCTED TAX AT SOURCE. THE ASSESSEE HAS ALSO SPECIFIED THE PROJECTS FOR WHICH THE COMMISSION PAYMENTS HAVE BEEN MADE. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE DID NOT GET THE PROJECTS FOR WHICH THE IMPUGNED COMMISSION PAYMENTS WERE MA DE. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER THAT SUCH KIND OF COMMISSION PAYMENTS ARE NOT THE TRADE PRACTICE. THE PROFESSIONAL INCOME DECLARED BY THE ASSESSEE FOR AY 2007 - 08 WAS RS.47.30 CRORES AND FOR AY 2008 - 09 WAS RS.69.56 CRORES. THIS SHOWS THE LEVEL OF OPERATION OF THE ASSESSEE. WE NOTICE THAT THE ASSESSEE HAS BEEN REPEATEDLY CLAIMING BEFORE THE SEARCH OFFICIALS THAT THE COMMISSION PAYMENTS WERE GENUINE AND FURTHER, IF HAD BEEN ACCOMMODATION BILLS, HE SHOULD HAVE RECEIVED CORRESPONDING AMOU NT BY WAY OF CASH. HE HAS REPEATEDLY SUBMITTED THAT HE DID NOT RECEIVE ANY CASH AND THE SAID SUBMISSION IS ALSO CORROBORATED BY THE FACT THAT THE REVENUE DID NOT UNEARTH HUGE AMOUNT OF CASH DURING THE COURSE OF SEARCH. 10. FURTHER, WE NOTICE THAT THE ASSESSEE HAD SURRENDERED THE COMMISSION EXPENSES AT THE CONCLUSION OF THE SWORN STATEMENT AND HE HAS CLEARLY STATED THEREIN THAT HE IS SURRENDERING IN VIEW OF HIS INABILITY TO PRODUCE THE CONCERNED PERSONS AT THAT STAGE . AT THE TIME OF PENALTY PROCEEDINGS , THE ASSESSEE HAS SOUGHT THE COPY OF STATEMENT GIVEN BY THE DIRECTOR OF M/S NISHCHAL CORPORATE SERVICES PVT LTD AND ALSO THE COPY OF THE REPORT OF THE INSPECTOR WHO INSPECTED THE OFFICE OF M/S TWINKLE VANIJYA PVT LTD. THE ASSESSEE HAS ALSO SOUGHT ANY OTH ER MATERIALS ON THE BASIS OF WHICH ADVERSE INFERENCE WAS DRAWN BY THE AO. HOWEVER, WE NOTICE THAT THE ASSESSEE WAS NOT PROVIDED WITH ALL THE ABOVE SAID DOCUMENTS. ACCORDINGLY, WE ARE OF THE VIEW THAT THE SURRENDER OF COMMISSION I.T.A. NO . 6222 AND 6223/ 201 3 6 EXPENDITURE WOULD NOT AUT OMATICALLY LEAD TO THE MALAFIDES OF THE ASSESSEE AS PRESUMED BY THE ASSESSING OFFICER , SINCE THE ASSESSING OFF ICER HAS NOT AFFORDED AN OPPORTUNITY TO THE ASSESSEE TO CONTRADICT THE DOCUMENTS THAT WERE RELIED UPON BY THE AO. ACCORDINGLY, WE ARE OF THE VIEW THAT ASSESSMENT OF COMMISSION INCOME DOES NOT RESULT IN CONCEALMENT OF PARTICULARS OF INCOME, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 11. IF WE EXAMINE THE EXPLANATIONS FURNISHED BY THE ASSESSEE IN TERMS OF EXPLANATION 1 TO SEC. 271 OF THE ACT, WE NOTICE THAT THE ASSESSEE HAS OFFERED AN EXPLANATION AND THE SAME HAS NOT BEEN FOUND TO BE FALSE. IT IS PERTINENT TO NOTE THAT THE REVENUE WAS HAVING ONLY SUSPICION ABOUT THE GENUINENESS OF THE PAYMENTS AT THE TIME OF SEARCH PROCEEDINGS ON THE BASIS OF EN QUIRIES CONDUCTED BY THEM. HOWEVER, THE ASSESSEE HAS ALL THROUGH MAINTAINED THAT THE PAYMENTS WERE GENUINE. IN SUPPORT OF THE SAME, THE ASSESSEE HAS STATED THAT THE PAYMENTS WERE MADE BY WAY OF CHEQUE, TDS WERE DEDUCTED AND THE SERVICE TAX WAS ALSO PAID. HENCE, IN OUR VIEW, IT CANNOT BE SAID THAT THE EXPLANATION OF THE ASSESSEE WAS FOUND TO BE FALSE. THOUGH THE AO HAS EXPRESSED THE VIEW THAT THE ADMISSION OF THE ASSESSEE PROVES MALAFIDES, WE ARE OF THE VIEW THAT THE EXPLANATION OF THE ASSESSEE WAS NOT P ROVED TO BE NOT BONAFIDE ONE. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS FAILED TO FURNISH ALL FACTS AND MATERIAL RELATING TO COMPUTATION OF INCOME. ACCORDINGLY, WE ARE OF THE VIEW THE DEEMING PROVISIONS OF EXPLANATION - 1 SHALL ALSO NOT APPLY TO THE ASSESSEE. 12. THE LD A.R INVITED OUR ATTENTION TO THE COPY OF NOTICES ISSUED BY THE AO U/S 274 READ WITH SECTION 271 OF THE ACT AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS. HE SUBMITTED THAT THE ABOVE SAID NOTICE ISSUED FOR CON CEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT I.T.A. NO . 6222 AND 6223/ 201 3 7 SPECIFIED THAT AS TO WHICH LIMB THE NOTICE WAS ISSUED , I.E., WHETHER IT IS ISSUED FOR CONCEALMENT OF PARTICULARS OF INCOM E OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE LD A.R CONTENDED THAT THE ASSESSING OFFICER SHOULD BE CLEAR ABOUT THE CHARGE AT THE TIME OF ISSUING THE NOTICE AND THE ASSESSEE SHOULD BE MADE AWARE OF THE CHARGE. HE SUBMITTED THAT THE PENALTY ORD ER IS LIABLE TO BE QUASHED, IF THE AO HAS NOT CORRECTLY SPECIFIED THE CHARGE. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION DATED 11.10.2013 PASSED BY THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF SHRI SAMSON PERINCHERY IN ITA NO.4625 TO 4630/M/20 13, WHEREIN THE TRIBUNAL FOLLOWED THE DECISION RENDERED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (2013)(35 TAXMANN.COM 250)(KAR DATED 13.12.2012) AND HELD AS UNDER: - 13. FROM THE ABOVE, IT IS CLEAR TH AT THE PENALTY SHOULD BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR HERE THE PENALTY IS NOT SUSTAINABLE. THEREFORE, CONSIDERING THE SAME, WE ARE OF THE OPINION THAT THE GROUND RAISED BY THE ASSESSEE SHOULD BE ALLOWED ON TE CHNICAL GROUNDS. ACCORDINGLY, ADJUDICATION OF THE PENALTIES ON MERITS BECOME AN ACADEMIC EXERCISE. THEREFORE, THE GROUNDS RAISED IN ALL THE SIX ASSESSMENT YEARS ARE ALLOWED. IN THE CASE CONSIDERED BY THE CO - ORDINATE BENCH ALSO, THE ASSESSING OFFICER ISS UED THE PENALTY NOTICE WITHOUT SPECIFYING THE CHARGE UNDER WHICH THE NOTICE WAS ISSUED. BEFORE US, THE LD D.R COULD NOT DISTINGUISH THE ABOVE SAID DECISION. HENCE, ON THIS LEGAL GROUND ALSO, THE ASSESSEES APPEAL IS REQUIRED TO BE ALLOWED. 13. IN VIEW OF THE FOREGOING DISCUSSIONS, WE SET ASIDE THE ORDERS PASSED BY LD CIT(A) FOR BOTH THE YEARS UNDER CONSIDERATION AND DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT IN BOTH THE YEARS. I.T.A. NO . 6222 AND 6223/ 201 3 8 14 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE ASSESSEE ARE ALLOWED. PRONOUNCED ACCORDINGLY ON 2 ND SEPT , 2015. 2 ND SEPT , 2015 S D SD ( / JOGINDER SINGH ) ( . . , / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 2 ND SEPT , 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY O RDER, T RUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI