ITO WD 4(1)(4), MUMBAI V. COLUMBUS TRADES LTD, MUMBAI

ITA 6373/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4845 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2011-2012
• Appeal Filed On: 28-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AWUNGSHI GIMSON
• Keywords: Rejection of books of accounts; Unexplained expenditure; Business expenditure; Additional evidence; Non-deduction of tax; Accommodation entries; Non compliance; TDS
• Section: 131; 69C; 40A(3); 142(1); 40(a)(ia); 133(6); 194C

Judgement Text

1 ITA 6373/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) ITA NO. 6373/MUM/2016 (ASSESSMENT YEAR : 2011-12) ITO, WD-4(1)(4), MUMBAI VS M/S COLUMBUS TRADERS LT D 12 TH FLOOR, ENGINEERING MANSION 4 TH CAVEL CROSS LANE, KALBADEVI ROAD MUMBAI 400 020 PAN : AAACC4380Q APPELLANT RESPONDEDNT APPELLANT BY SHRI AWUNGSHI GIMSON RESPONDENT BY SHRI NISHIT GANDHI DATE OF HEARING 15-11-2018 DATE OF PRONOUNCEMENT 13-02-2019 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE CIT(A)-2, MUMBAI DATED 25-07-2016 AND IT PERTAINS TO Y 2011-1 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- I 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.11,17,69,752/-MADE U /S.69S/40A(3)/40A(3A)/40(AJ(IA)OF THE IT ACT WITHOUT APPRECIATING THE FACT THAT ASSESSEE ITSELF IS A HAWALA DEALER AND FAILED TO ACCOUNT FOR ALL THE MATERIAL FACTS RELATED TO ITS B USINESS DEALINGS. THE AO RIGHTLY REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) OF THE IT. ACT & D ISALLOWED THE CLAIM OF THE ASSESSEE FOR PURCHASES/EXPENSES AMOUNTING TO RS. 11,17,69,752/- BEING UPROVED & UNEXPLAINED EXPENDITURE WITHIN THE MEANING OF THE PROVISION OF SECTION 69C OF THE IT. ACT.' 2 ITA 6373/MUM/2016 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY HAS FILED ITS RETURN OF INCOME FOR AY 2011-12 ON 30-09-2011 DECLA RING TOTAL INCOME AT RS.15,06,099. THE CASE WAS SELECTED FOR SCRUTINY A ND NOTICES U/S 143(2) AND 142(1) OF THE ACT, WERE ISSUED. THE ASSESSEE NEITH ER APPEARED BEFORE THE AO NOR FURNISHED ANY DETAILS INSPITE OF VARIOUS NOTICE S ISSUED CALLING FOR CERTAIN DETAILS. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE AO OBSERVED THAT THE ASSESSEE IS A DORMANT COMPANY AND NO RECORDS WE RE AVAILABLE REGARDING FILING OF BALANCE-SHEET, PROFIT & LOSS ACCOUNT, ANN UAL REPORT, ETC. IN VIEW OF THE NON COMPLIANCE TO NOTICE ISSUED U/S 142(1), SUMMON S U/S 131 OF THE ACT, WERE ISSUED TO SHRI PRAVIN TARACHAND AGARWAL, DIRECTOR O F THE COMPANY. EVEN IN RESPONSE TO SUMMONS, THE ASSESSEE NEITHER APPEARED NOR FILED ANY DETAILS. THE AO FURTHER OBSERVED THAT AS PER AIR DETAILS, IT WAS SEEN THAT THE ASSESSEE COMPANY HAS RECEIVED INCOME OF RS.11,39,70,954 FROM M/S ARSHIYA INTERNATIONAL LTD ON WHICH TDS WAS DEDUCTED U/S 194 C OF THE INCOME-TAX ACT, 1961. THEREAFTER, NOTICES U/S 133(6) WERE ISSUED T O M/S ARSHIYA INTERNATIONAL LTD ASKING THEM TO PRODUCE CERTIFIED COPY OF DETAIL ED DATEWISE TRANSACTION LEDGER FOR THE PERIOD 01-04-2010 TO UPTO THE DATE O F ASSESSMENT. IN RESPONSE TO NOTICE, M/S ARSHIYA INTERNATIONAL LTD HAS SUBMIT TED ONLY LEDGER ACCOUNT FOR THE PERIOD 01-04-2010 TO 31-03-2011, COPIES OF BANK STATEMENT AND 3 ITA 6373/MUM/2016 ACKNOWLEDGEMENT COPY OF RETURN FILED FOR AY 2011-12 . HOWEVER, OTHER DETAILS CALLED FOR INCLUDING THE INVOICES / BILLS WAS NOT F URNISHED. THE AO FURTHER OBSERVED THAT ON VERIFICATION OF INFORMATION RECEIV ED U/S 133(6) OF THE ACT FROM M/S ARSHIYA INTERNATIONAL LTD IT WAS SEEN FROM THE BANK STATEMENT OF AXIS BANK LTD THAT THERE WERE PAYMENTS MADE TO THE ASSES SEE BY M/S ARSHIYA INTERNATIONAL LTD. IN ORDER TO VERIFY THE DETAILS OF TRANSACTIONS, NOTICE U/S 133(6) WAS ISSUED TO AXIS BANK LTD, FOR WHICH THE B ANK HAS FILED COMPLETE DETAILS OF TRANSACTIONS. THE AO ALSO ISSUED NOTICE S TO YES BANK LTD CALLING FOR VARIOUS DETAILS FOR WHICH YES BANK LTD HAS FURNISHE D NECESSARY DETAILS. FROM THE INFORMATION COLLECTED FROM BANKS, THE AO NOTICE D THAT FUND HAS BEEN TRANSFERRED FROM M/S ARSHIYA INTERNATIONAL LTDS BA NK ACCOUNT TO ASSESSEES BANK ACCOUNTS FROM WHERE CHEQUES WERE ISSAUED TO VA RIOUS COMPANIES. THE AO FURTHER OBSERVED THAT THE ASSESSEE COMPANYS NAM E WAS APPEARING IN THE WEBSITE OF SALES-TAX DEPARTMENT IN THE LIST OF SUSP ICIOUS DEALERS, WHO ISSUED BOGUS BILLS WITHOUT DELIVERY OF GOODS. HENCE, NOTI CE U/S 133(6) WAS SERVED ON THE SALES-TAX AUTHORITIES. IN RESPONSE TO NOTICES, THE SALES-TAX AUTHORITIES HAVE FILED NECESSARY DETAILS SOUGHT BY THE AO INCLUDING COPIES OF DEPOSITION STATEMENT DATED 27-02-2008 BY SHRI PRAVIN TARACHAND AGARWAL. ON THE BASIS OF INFORMATION RECEIVED FROM VARIOUS PARTIES, THE A O CAME TO THE CONCLUSION THAT THE ASSESSEE WAS INDULGING IN PROVIDING ACCOMM ODATION ENTRIES TO M/S 4 ITA 6373/MUM/2016 ARSHIYA INTERNATIONAL LTD WITHOUT ANY ACTUAL BUSINE SS ACTIVITY. THE AO FURTHER OBSERVED THAT SINCE THE ASSESSEE FAILED TO FILE NEC ESSARY DETAILS ABOUT THOSE BUSINESS TRANSACTIONS, CAME TO THE CONCLUSION THAT THE PURCHASES CLAIM TO HAVE MADE FROM VARIOUS PARTIES AGAINST BILLS ISSUED TO M /S ARSHIYA INTERNATIONAL LTD IS UNEXPLAINED EXPENDITURE U/S 69C AND ACCORDINGLY MADE DISALLOWANCE OF TOTAL PURCHASES AMOUNTING TO RS.11,17,69,752 U/S 69C OF THE ACT AND ALSO U/S 40(A)(3) AND 40(A)(3A) OF THE INCOME-TAX ACT, 1961. THE AO ALSO DISALLOWED THE SAID AMOUNT U/S 40(A)(IA) OF THE INCOME-TAX ACT , 1961 FOR FAILURE TO DEDUCT TAX U/S 194C OF THE ACT. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE HAS FILED CERTAIN ADDITIONAL EVIDENCES TO JUSTIFY ITS BUSINESS TRANSACTIONS. IN ORDER TO GIVE AN OPPORTUNITY TO THE AO, THE WRITTEN SUBMISSIONS ALONGWITH ADDITI ONAL EVIDENCE FILED BY THE ASSESSEE HAS BEEN FORWARDED TO THE AO, FOR HIS REMA ND REPORT. THE AO, IN HIS REMAND REPORT, OPPOSED ADMISSION OF ADDITIONAL EVID ENCE ON THE GROUND THAT SUFFICIENT OPPORTUNITY HAS BEEN PROVIDED TO THE ASS ESSEE TO FURNISH NECESSARY DETAILS, BUT THE ASSESSEE NEITHER UTILISED THE OPPO RTUNITY PROVIDED TO JUSTIFY ITS CASE NOR FILED ANY DETAILS. THEREFORE, THERE IS NO REASON TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE AND ACCORDINGLY REQUEST ED THE APPELLATE AUTHORITY TO DECIDE THE APPEAL ON MERIT. THE LD. CIT(A), AFT ER CONSIDERING RELEVANT 5 ITA 6373/MUM/2016 SUBMISSIONS OF THE ASSESSEE AND ALSO CONSIDERING TH E STATEMENT RECORDED FROM THE DIRECTOR OF THE COMPANY, CAME TO THE CONCLUSION THAT THE ASSESSEE WAS INDULGING IN PROVIDING ACCOMMODATION ENTRIES TO VAR IOUS PERSONS ON WHICH IT HAS CHARGED COMMISSION RANGING FROM 1 TO 1.5% AND T HIS FACT HAS BEEN CONFIRMED BY THE AO IN HIS ASSESSMENT ORDER, WHERE HE STATED THAT THE ASSESSEE WAS PROVIDING ACCOMMODATION ENTRIES AND NO T ACTUALLY DELIVERING GOODS. THE LD.CIT(A) FURTHER OBSERVED THAT IN THE WRITTEN SUBMISSION, THE ASSESSEE COMPANY HAS ADMITTED THAT APART FROM M/S A RSHIYA INTERNATIONAL LTD, IT HAS ISSUED BOGUS BILLS AGAINST CHEQUE DISCOUNTIN G TO 47 OTHER COMPANIES. THEREFORE, THE LD.CIT(A) CAME TO THE CONCLUSION THA T ONCE THE ASSESSEE HAS PROVED ITSELF TO BE ACCOMMODATION ENTRY PROVIDER, T HERE IS NO REASON TO MAKE ADDITION TOWARDS TOTAL PURCHASES U/S 69C / 40A(3) O F THE ACT. ACCORDINGLY, THE AO WAS DIRECTED TO DELETE ADDITION MADE TOWARDS TOT AL PURCHASES. HOWEVER, THE LD.CIT(A) FURTHER OBSERVED THAT SINCE THE ASSES SEE ITSELF HAS ADMITTED THAT IT IS INVOLVED IN PROVIDING CHEQUE DISCOUNTING BUSI NESS WITH 47 COMPANIES ALONGWITH M/S ARSHIYA INTERNATIONAL LTD, DIRECTED T HE AO TO VERIFY WHETHER ANY SUCH COMMISSION IS OFFERED BY THE ASSESSEE FROM OTH ER 47 COMPANIES. INSOFAR AS DISALLOWANCE OF EXPENDITURE, THE LD.CIT(A) OBSER VED THAT THE ASSESSEE HAS CLAIMED TOTAL EXPENDITURE OF RS.6,95,103, BUT THE AO HAS DISALLOWED TOTAL EXPENDITURE. IT IS AN ADMITTED FACT THAT WITHOUT E XPENDITURE, NO BUSINESS COULD 6 ITA 6373/MUM/2016 BE CARRIED OUT. THEREFORE, CONSIDERING THE NATURE OF INCOME, THE LD.CIT(A) ALLOWED 25% OF GROSS COMMISSION INCOME EARNED BY TH E ASSESSEE AS EXPENDITURE INCURRED IN RELATION TO SUCH COMMISSION INCOME AND THE BALANCE DISALLOWANCE MADE BY THE AO HAS BEEN UPHELD. AGGRI EVED BY THE ORDER OF LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD.DR SUBMITTED THAT THE LD.CIT(A) WAS ERRED IN DELETING ADDITION MADE BY THE AO TOWARDS UNEXPLAINED EXPENDITURE TOWA RDS PURCHASES U/S 69C OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE E NQUIRIES CONDUCTED DURING THE COURSE OF ASSESSMENT CLEARLY PROVES THE FACT TH AT THE ASSESSEE IS INDULGING IN PROVIDING ACCOMMODATION ENTRIES TO M/S ARSHIYA I NTERNATIONAL LTD AND THE FUNDS RECEIVED FROM THE SAID BENEFICIARY HAS BEEN T RANSFERRED TO VARIOUS COMPANIES. THE LD.AO FURTHER SUBMITTED THAT ALTHOU GH THE AO HAS BROUGHT OUT VARIOUS FACTS TO COME TO THE CONCLUSION THAT TH E ASSESSEE HAS FAILED TO EXPLAIN PURCHASES WITH NECESSARY MATERIALS, THE LD. CIT(A) HAS DELETED ADDITION WITHOUT DISCUSSING THE ISSUES ON MERITS FOR THE SIM PLE REASON THAT THE ASSESSEE HAS ADMITTED ITSELF THAT IT IS INVOLVED IN PROVIDIN G ACCOMMODATION ENTRIES FOR EARNING COMMISSION INCOME. THE LD.DR FURTHER SUBMI TTED THAT WHEN THE ASSESSEE HAS FAILED TO FILE ANY KIND OF EVIDENCE TO PROVE EXPENDITURE, THERE IS NO REASON TO ALLOW EXPENDITURE ON ADHOC BASIS. 7 ITA 6373/MUM/2016 5. THE LD.AR, ON THE OTHER HAND, STRONGLY SUPPORTIN G THE ORDER OF THE LD.CIT(A) SUBMITTED THAT IT IS AN ADMITTED FACT THA T THE ASSESSEE IS AN ACCOMMODATION ENTRY PROVIDER INVOLVED IN PROVIDING ENTRIES TO VARIOUS ENTITIES AGAINST COMMISSION INCOME WHICH VARIES FROM 1 TO 1. 5%. THIS FACT HAS BEEN CONFIRMED FROM THE STATEMENT RECORDED DURING SALES- TAX INVESTIGATION WHERE THE ASSESSEE HAS CATEGORICALLY ADMITTED THAT IT WAS CHARGING COMMISSION RANGING FROM 1 TO 1.5%. THE ASSESSEE HAS DECLARED COMMISSION INCOME EARNED FROM THE TRANSACTIONS WHICH IS MORE OR LESS EQUIVAL ENT TO THE COMMISSION CHARGED ON BOGUS ENTRIES PROVIDED TO VARIOUS PARTIE S. FURTHER, THE ASSESSEE HAS CLAIMED VARIOUS ROUTINE BUSINESS EXPENDITURE WH ICH ARE VERY MUCH NECESSARY TO CARRY OUT DAY TO DAY OPERATIONS. THE LD.CIT(A), AFTER CONSIDERING TOTAL FACTS HAS COME TO THE CONCLUSION THAT THERE I S NO MERIT IN THE FINDING OF THE AO FOR MAKING ADDITION TOWARDS TOTAL PURCHASES AND ALSO NOT ALLOWING EXPENDITURE. ACCORDINGLY, HE HAS DELETED ADDITION MADE BY THE AO TOWARDS UNEXPLAINED EXPENDITURE AND ALLOWED ADHOC EXPENDITU RE OF 25% ON TOTAL COMMISSION INCOME. THEREFORE, THE ORDER OF THE LD. CIT(A) SHOULD BE UPHELD. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS AN ADMITTED FACT THAT THE ASSESSEE NEVER APPEARED BEFORE THE AO DESPITE V ARIOUS NOTICES ISSUED CALLING FOR NECESSARY DETAILS. IT IS ALSO AN ADMIT TED FACT THAT THE AO HAS 8 ITA 6373/MUM/2016 GATHERED VARIOUS INFORMATION FROM ALL THE CORNERS I NCLUDING BANKS AND THE BENEFICIARIES OF ACCOMMODATION ENTRIES ISSUED BY TH E ASSESSEE, IN ORDER TO ASCERTAIN TRUE CHARACTER OF TRANSACTIONS RECORDED I N ASSESSEES BOOKS OF ACCOUNT. THE INVESTIGATION CARRIED OUT DURING THE COURSE OF ASSESSMENT PROCEEDINGS COUPLED WITH INFORMATION AVAILABLE IN S ALES-TAX WEBSITE CATEGORICALLY PROVES THAT THE ASSESSEE IS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES FOR A COMMISSION RANGING FROM 1 TO 1.5%. T HE AO HAS MADE ADDITION TOWARDS TOTAL PURCHASES WHEN THE ASSESSEE HAS NOT P RODUCED DETAILS INCLUDING PRIMARY EVIDENCES LIKE PURCHASE BILLS TO JUSTIFY PU RCHASES. THE AO HAS MADE ADDITION TOWARDS WHOLE PURCHASES AS UNEXPLAINED EXP ENDITURE U/S 69C OF THE ACT. WHEN THE MATTER TRANVELLED TO FIRST APPELLATE AUTHORITY, THE ASSESSEE HAS ADMITTED THAT IT IS INVOLVED IN PROVIDING ACCOMMODA TION ENTRIES TO VARIOUS PARTIES INCLUDING M/S ARSHIYA INTERNATIONAL LTD. A LTHOUGH THE LD.CIT(A) HAS TAKEN NOTE OF THE FACT THAT THE ASSESSEE WAS INVOLV ED IN PROVIDING ACCOMMODATION ENTRIES TO 47 PARTIES, BUT WHILE ARRI VING AT FINAL CONCLUSION TO DELETE ADDITION MADE BY THE AO TOWARDS DISALLOWANCE OF TOTAL PURCHASES, DIRECTED THE AO TO DELETE ADDITION WITHOUT RECORDIN G ANY REASONS AS TO HOW THE PROFIT DECLARED BY THE ASSESSEE IS MATCHED WITH THE COMMISSION CHARGED ON ACCOMMODATION ENTRIES. WE FURTHER NOTICE THAT T HE ASSESSEE, BEFORE THE AO, NEVER FILED ANY DOCUMENTS. THE LD.CIT(A), WITH OUT APPRECIATING THIS FACT, 9 ITA 6373/MUM/2016 HAS ACCEPTED THE ARGUMENTS OF THE ASSESSEE THAT IT EARNS ONLY 1 TO 1.5% COMMISSION ON BOGUS BILLS, WITHOUT FURTHER VERIFYIN G THE FACTS GATHERED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN T HE LIGHT OF ASSESSEES WRITTEN SUBMISSION THAT IT HAS PROVIDED SIMILAR ACC OMMODATION ENTRIES TO ANOTHER 47 ENTITIES. SIMILARLY, INSOFAR AS DISALLO WANCE OF EXPENDITURE, THE LD.CIT(A) HAS ALLOWED 25% ADHOC DEDUCTION TOWARDS E XPENSES ON GROSS COMMISSION INCOME WITHOUT NARRATING HOW THE ASSESSE E HAS PROVED EXPENDITURE DEBITED TO THE P&L ACCOUNT WITH NECESSA RY EVIDENCES. ALTHOUGH THERE IS MERIT IN THE FINDINGS OF THE LD. CIT(A) TH AT NO INCOME COULD BE EARNED WITHOUT EXPENDITURE, BUT IT IS FOR THE ASSESSEE TO PROVE EXPENDITURE DEBITED TO THE P&L ACCOUNT WITH NECESSARY EVIDENCE AND ALSO TO PROVE THAT SUCH EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS. WE, THEREFORE, ARE OF THE OPINION THAT THE FINDINGS OF THE LD.CIT(A) ARE NOT SUPPORTED BY ANY EVIDENCE AND ARE CONTRARY TO ASSESSEES OWN ADMISSION. 7. INSOFAR AS CASE LAWS RELIED UPON BY THE ASSESSEE IS CONCERNED, THOSE CASE LAWS ARE RENDERED UNDER DIFFERENT SET OF FACTS AND HENCE, CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY, CASE L AWS RELIED UPON BY THE ASSESSEE ARE NOT CONSIDERED. 10 ITA 6373/MUM/2016 8. IN THIS VIEW OF THE MATTER AND CONSIDERING THE T OTALITY OF FACTS AND CIRCUMSTANCES OF THIS CASE, WE ARE OF THE CONSIDERE D VIEW THAT THE ISSUE NEEDS TO GO BACK TO THE AO FOR FURTHER VERIFICATION IN TH E LIGHT OF THE FACT THAT THE ASSESSEE IS INVOLVED IN PROVIDING SIMILAR ACCOMMODA TION ENTRIES TO ANOTHER 47 ENTITIES FOR THE PURPOSE OF ASCERTAINING THE TRUE A ND CORRECT NATURE OF TRANSACTIONS CARRIED OUT BY THE ASSESSEE. HENCE, W E SET ASIDE THE ISSUE TO THE FILE OF THE AO AND DIRECT HIM TO REDO THE ASSESSMEN T AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS TR EATED AS ALLOWED, FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 13-02-2019. SD/- SD/- (C.N. PRASAD) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 13 TH FEBRUARY, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI