M/S. ATLAS TOURS & TRAVELS, MUMBAI V. ACIT CENTRAL CIRCLE 45, MUMBAI

ITA 6356/MUM/2008

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7597 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-12-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 29-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS USHA NAIR
• Keywords: Search and seizure; Opportunity of being heard; Deemed dividend; Retraction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI. D.K. AGARWAL (JM) AND SHRI. N.K. BILLA IYA (AM) ITA NO.6355 & 6356/MUM/2008 ASSESSMENT YEAR: 2000-01 & 2001-02 M/S. ATLAS TOURS & TRAVELS 53, HAJI MAHAL, MOHAMMED ALI RD, MUMBAI-400 003 PAN NO: AAAFA 2152 R VS. ACIT CENTRAL CIRCLE 45 MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEEPAK TRALSHAWALA RESPONDENT BY : MRS. USHA NAIR DATE OF HEARING : 20.03.2012 DATE OF PRONOUNCEMENT : 28.03.2012 O R D E R PER N.K. BILLAIYA, A.M: BOTH THESE APPEALS ARE PREFERRED BY THE ASSESSEE AG AINST THE ORDER OF CIT(A)-CENTRAL III, MUMBAI DATED 22.08.2008. BOTH THESE APPEALS INVOLVE COMMON GROUNDS, THEREFORE, FOR THE SAKE OF CONVENIE NCE BOTH THESE APPEALS ARE DISPOSED OFF TOGETHER. ITA NO.6355/MUM/2008 (A.Y. 2000-01) 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT S EARCH AND SEIZURE OPERATIONS WERE CONDUCTED ON 21.03.2006 IN M/S. ATL AS TOURS & TRAVELS, WHICH IS A GROUP COMPANY AND INDIVIDUALS. IN RESPO NSE TO THE NOTICE U/S.153C OF THE INCOME TAX ACT, THE ASSESSEE FILED ITS RETURN OF INCOME ON 26.10.2000, DECLARING TOTAL INCOME OF `. 8,86,004/- ALONG WITH THE COMPUTATION OF TOTAL INCOME AND AUDIT REPORT. NOTI CE U/S.143(2) ALONG WITH THE NOTICE U/S.142(1) WERE ISSUED AND SERVED UPON T HE ASSESSEE. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS SPECIFICALLY ASKED TO SUBSTANTIATE ITS CLAIM FOR AD DITIONAL COMMISSION TO ITA NO. 6355 & 6356/MUM/2080 M/S. ATLAS TOURS & TRAVELS 2 WALK-IN-CUSTOMERS TO THE TUNE OF `. 31,03,092/- IN LIGHT OF THE SPECIFIC QUESTION NO.96 WHICH WAS PUT TO MR. AFZAL PATEL BY THE INVESTIGATING OFFICER. IN RESPONSE TO THIS SPECIFIC QUERY, THE ASSESSEE FI LED A DETAILED REPLY IN WHICH HE POINTED OUT THAT UNDER PRESSURE ONE OF THE PARTNER INADVERTENTLY MADE A DISCLOSURE OF `. 31,03,092/- WHICH PERTAINS TO THE ASSESSMENT YEAR 2000-01 AND `. 31,77,190/- PERTAINING TO THE ASSESSMENT YEAR 2001- 02 ON ACCOUNT OF COMMISSION PAID TO THE WALK-IN-CUSTOMERS . HOWEVER, IMMEDIATELY AFTER THIS ADMISSION, HE REALISED THAT THE COMMISSION PAID TO THE WALK-IN-CUSTOMERS IS A LEGITIMATE EXPENSES AND CANNOT BE OR FORM PART OF THE INCOME OF THE FIRM. ACCORDINGLY MR. AFZAL P ATEL, ONE OF THE PARTNERS OF THE ERSTWHILE FIRM OF M/S.ATLAS TOURS & TRAVELS HAS MADE A DECLARATION UNDER AN AFFIDAVIT DATED 17.05.2006, WHEREIN HE STA TED THAT THIS COMMISSION PAID TO WALK-IN-CUSTOMER IS NOT THE INCO ME OF THE FIRM , IN OTHER WORDS HE RETRACTED FROM HIS EARLIER STATEMENT . 3.1 THIS SUBMISSION OF THE ASSESSEE DID NOT FIND AN Y FAVOUR BY THE LEARNED ASSESSING OFFICER, WHO WAS OF THE OPINION THAT COMM ISSION PAYMENT TO WALK- IN-CUSTOMERS ARE BOGUS, WITHOUT ANY BASIS AND TO RE DUCE THE TAXABILE PROFIT AND THE CLAIM OF EXTRA COMMISSION SHOWN TO BE PAID TO THE WALK-IN- CUSTOMERS WAS DISALLOWED ON THE FOLLOWING GROUNDS : - I. ASSESSEE COMPANY THROUGH THE DIRECTOR MR. AFZAL PAT EL SURRENDERED THE COMMISSION PAYMENT TO WALK-IN-CUSTO MERS IN HIS STATEMENT RECORDED BEFORE THE DDIT ON 16.05.200 6. II. THEY NEVER FILED ANY RETRATCTION LETTER TO THE INVE STIGATION WING OR BEFORE THE UNDERSIGNED. III. THEY NEVER BROUGHT THE FACTS THAT CONFESSION WAS NO T VOLUNTARY OR ANY COERCION WAS THERE TO OFFER THIS C OMMISSION AS INCOME. IV. AS THE WORD WALK-IN-CUSTOMERS SUGGEST ANY COMMISS ION PAYMENT FOR SUCH. CUSTOMERS, IS ABSOLUTELY ON PAPER AND FICTITIONS. V. ASSESSEE NEVER PRODUCED SUCH PERSONS TO WHOM COMMIS SION PAID DURING POST SEARCH AND ASSESSMENT PROCEEDINGS. VI. THE STATEMENT OF MR. REHMATULLA PATEL, WHO LOOKS AF TER THE FINANCE AND ADMINISTRATION OF THE COMPANY, WAS RECO RDED WHEREIN IN RESPONSE TO QUESTION NO.19, HE HAD STATE D THAT THEY DO NOT PASS ANY DISCOUNT TO PASSENGER. THIS F URTHER CLARIFIES THAT NO COMMISSION IS GIVEN TO WALK-IN-CU STOMERS. ITA NO. 6355 & 6356/MUM/2080 M/S. ATLAS TOURS & TRAVELS 3 AND WENT ON IN MAKING THE ADDITION OF `. 31,03,092/-. 3.2 THE ASSESSEE WAS FURTHER ASKED BY THE ASSESSING OFFICER AS TO WHY THE PROVISIONS OF SECTION 2(22)(E) SHOULD NOT BE APPLIE D FOR TREATING THE DEEMED DIVIDEND TO THE TUNE OF `. 4,53,000/-. THE ASSESSEE FILED A DETAILED REPLY WHICH IS EXHIBITED AT PARA 3.1.0 OF THE ASSESSMENT ORDER. HOWEVER, THE CONTENTION OF THE ASSESSEE DID NOT FIND ANY FAVOUR FROM THE ASSESSING OFFICER WHO WENT ON TO MAKE AN ADDITION OF `. 4,53,000/- AS DEEMED DIVIDEND U/S.2(22)(E). THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A PPEALS). 4. BEFORE THE CIT(APPEALS) THE ASSESSEE REITERATED THAT THE ONLY GROUND ON WHICH THE ASSESSING OFFICER HAS MADE THE ADDITIO N AND DISALLOWED THE CLAIM OF ADDITIONAL COMMISSION OF `. 31,03,092/- WAS THAT THE ASSESSEE HAS OFFERED TO ACCEPT THE ADDITION IN THE STATEMENT DUR ING THE COURSE OF SEARCH PROCEEDINGS, BUT IGNORED THE AFFIDAVIT FILED BY THE ASSESSEE BY WHICH THE ASSESSEE HAS STATED THAT THE STATEMENT TREATING THE COMMISSION PAID AS ADDITIONAL INCOME WAS COERCIVELY RECORDED. IT IS A LSO FURTHER STATED IN THE SAID AFFIDAVIT THAT THE COMMISSION PAID TO WALK-IN- CUSTOMERS CANNOT BE CONSIDERED AS INCOME OF THE FIRM. 4.1 HOWEVER, THIS CONTENTION OF THE ASSESSEE WAS RE JECTED BY THE CIT(APPEALS) WHO AT PARA 3.6 AND 3.7 OF THE APPELLA TE ORDER HELD AS UNDER :- 3.6 IN BACKGROUND OF ABOVE FACTS, THE RETRACTION M ADE BY THE PARTNER THROUGH AFFIDAVIT DATED 17.05.2006 WAS SIMP LY AN AFTERTHOUGHT TO WEAKEN THE CONFESSION/SURRENDER ALR EADY MADE BY HIM THROUGH HIS STATEMENT BEFORE THE DDIT. NO E VIDENCE HAS BEEN FILED BEFORE THE UNDERSIGNED TO PROVE THAT THE RE WAS ANY MENTAL TORTURE OR ANY COERCION EXERCISED BY THE DDI T WHILE RECORDING THE STATEMENT OF THE PARTNER. THERE IS D OCUMENTARY EVIDENCE IN THE FORM OF SEIZED MATERIAL TO PROVE TH AT SOME OF THE INCOME OF THE FIRM WAS NOT TRULY DISCLOSED, WHICH W AS PARTLY CONFIRMED BY MR. RAHEMTULLAH PATEL, WHO ADMITTED TH AT THE CASH PAYMENTS OF `. 10,95,387/- WERE UNACCOUNTED PAYMENTS HAVING SOURCE FROM THE UNDISCLOSED INCOME OF M/S. ATLAS TO URS & TRAVELS. 3.7 IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCE S, I DO NOT FIND ANY MERIT IN THE CONTENTIONS OF THE AR THAT TH E CLAIM OF ITA NO. 6355 & 6356/MUM/2080 M/S. ATLAS TOURS & TRAVELS 4 APPELLANT WITH REGARD TO THE PAYMENTS OF ADDITIONAL COMMISSION AT `. 31,03,092/- AND `. 31,77,190/- DESERVE TO BE ALLOWED. ACCORDINGLY, THE ACTION OF THE AO IN DISALLOWING TH E ABOVE CLAIM AT `. 31,03,092/- AND `. 31,77,190/- PARTICULARLY WHEN THE SAME WAS OFFERED AS ADDITIONAL INCOME BY MR. PATEL HIMSE LF IS HEREBY UPHELD FOR THE A.YS. 2000-01 AND 2001-02 RESPECTIVE LY. THE GROUND OF APPEAL ON THIS POINT IS DISMISSED FOR BOT H THE ASSESSMENT YEARS. 4.2 SO FAR AS THE OTHER GROUND OF APPEAL WHICH WAS RAISED BEFORE THE LEARNED CIT(A) RELATING TO THE ADDITION MADE BY THE ASSESSING OFFICER TO THE TUNE OF `. 4,53,000/- AS DEEMED DIVIDEND U/S.2(22)(E), THE LEA RNED CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 5. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED AR SUBMITTED THAT DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS, NO SEIZURE WAS ACTUALLY MADE. THE LEARNED AR FURTHER SUBMITTED THAT THE BOOKS OF ACCOUNTS/ BILLS/ VOUCHE RS FOR THE PAST YEARS WERE DESTROYED BY THE ASSESSEE BECAUSE IN THIS LINE OF TRADE, THE BILLS AND VOUCHERS ARE GENERATED IN VOLUMES WHICH OCCUPY SPAC E AND, THEREFORE, ON COMMERCIAL REASONS THESE BOOKS / BILLS / VOUCHERS W ERE DESTROYED. HOWEVER, BASIC ACCOUNTS ARE AVAILABLE. THE LEARNED AR DREW OUR ATTENTION TO PAGE NO. 21 OF THE PAPER BOOK, WHICH IS THE COPY OF AFFIDAVIT DATED 17.05.2006 AND POINTED OUT THAT AT CLAUSE (IV), THE DEPONENT MR. AFZAL SALAHMOHAMED PATEL HAS SPECIFICALLY STATED THAT WHE N THIS DISCLOSURE OF `. 31,03,092/- FOR THE YEAR UNDER CONSIDERATION WAS MA DE, THE ONLY NEED THAT WAS ON THE MIND OF THE DEPONENT WAS TO GET REL IEF FROM THE MENTAL TORTURE. HOWEVER, AFTER REALIZING THAT THE COMMISS ION PAID TO WALK-IN- CUSTOMERS IS IN FACT LEGITIMATE EXPENSES, THE DEPON ENT CLAIMED THAT THE SAME CANNOT BE CONSIDERED AS INCOME OF THE FIRM. A T THIS POINT, THE LEARNED AR POINTED OUT THAT THE STATEMENT RECORDED AT THE T IME OF SEARCH IS DATED 16.05.2006 AND REALIZING THE MISTAKE, ON THE VERY N EXT DAY I.E.17.05.2006, MR. AFZAL SALAHMOHAMED PATEL RECORDED HIS STATEMENT IN THE FORM OF AFFIDAVIT. THE LEARNED AR FURTHER SUBMITTED THAT T HIS AFFIDAVIT WAS BEFORE ITA NO. 6355 & 6356/MUM/2080 M/S. ATLAS TOURS & TRAVELS 5 THE LOWER AUTHORITIES AND NONE OF THE AUTHORITIES B ELOW HAS EXAMINED THE STATEMENT MADE BY THIS AFFIDAVIT. 7. THE LEARNED AR PRAYED THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR THE EXAMINATION O F THE CONTENTS OF THE AFFIDAVIT. THE LEARNED DR, ON HIS TURN, STRONGLY R ELIED ON THE ORDER OF THE LEARNED CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE LOWER AUTHORITIES. ADMITTEDLY, ONE OF THE PARTNER, DURIN G THE COURSE OF THE SEARCH AND SEIZURE PROCEEDINGS HAS OFFERED AN AMOUNT OF AD DITION IN COMMISSION TO THE TUNE OF `. 31,03,092/-, BUT AT THE SAME TIME, IT IS SEEN THAT THE AFFIDAVIT DATED 17.05.2006 WAS ALSO BEFORE THE LOWER AUTHORIT IES. IT IS ALSO SEEN THAT BOTH THE ASSESSING OFFICER AND THE LEARNED CIT(A) H AVE RUBBISHED THE AFFIDAVIT AS AFTERTHOUGHT, WITHOUT EXAMINING THE CONTENTS OF THE AFFIDAVIT. AFTER CONSIDERING THE FACTS IN TOTALITY, WE FIND TH AT SINCE THE ASSESSEE HAS FILED AN AFFIDAVIT, THE CONTENTS OF THE AFFIDAVIT C ANNOT BE BRUSHED ASIDE LIGHTLY KEEPING IN MIND THE PRINCIPLE LAID DOWN BY THE HONORABLE SUPREME COURT IN THE CASE OF MEHTA PARIKH & CO., V/S CIT [ 1956]30 ITR 181 , THAT CONTENTS OF AN AFFIDAVIT HAS TO BE EXAMINED BEFORE ACCEPTING OR DISCARDING THE SAME , THEREFORE, WE DEEM IT FIT TO RESTORE THI S ISSUE BACK TO THE FILES OF THE ASSESSING OFFICER WITH A DIRECTION THAT THE ASS ESSMENT SHOULD BE MADE AFRESH AFTER CONSIDERING THE CONTENTS OF THE AFFIDA VIT AND AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 8.1 AS FOR THE ISSUE RELATING TO THE DEEMED DIVIDEN D U/S.2(22)(E),BOTH THE PARTIES POINTED OUT THAT THIS ALSO REQUIRES FURTHER VERIFICATION AT THE ASSESSING OFFICERS STAGE TO KNOW THE REAL NATURE O F THE TRANSACTIONS AND WHETHER THE RECIPIENTS OF THE LOANS / ADVANCES ARE ACTUALLY THE SHAREHOLDERS OR NOT , THERE FORE , WE DEEM IT FIT TO RESTORE THI S MATTER ALSO BACK TO THE FILES OF THE AO WHO SHALL EXAMINE THE REAL NATURE OF THE TRANSACTIONS IN THE LIGHT OF SEC 2[22][E] OF THE INCOME TAX ACT , 1961 ITA NO. 6355 & 6356/MUM/2080 M/S. ATLAS TOURS & TRAVELS 6 9. IN THE RESULT, ITA NO.6355/MUM/2008 IS ALLOWED F OR STATISTICAL PURPOSES. ITA NO. 6356/MUM/2008 (A.Y. 2001-02) 10. THE FACTS AND THE GROUNDS BEING IDENTICAL AS IN ITA NO.6355/MUM/2008, THOUGH QUANTUM MAY DIFFER , WE A CCORDINGLY RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICE R FOR THE ASSESSMENT YEAR 2001-02 ALSO WITH SIMILAR DIRECTIONS. 11. IN THE RESULT, ITA NO.6356/MUM/2008 IS ALSO ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF MARCH, 2012. SD/- SD/- (D.K. AGARWAL) (N.K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 28.03.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, A - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI