Appeal details
Counselvise Citation
[2022] 106 COUNSELVISE.COM (IT) 9093 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 9 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
07-08-2022
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
D
Assessment Year
2015-2016
Appeal Filed On
24-10-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NO. 6680/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed Room No. 467, Khan Manzil NSS Road Hill No.2 Hill No.2, Ghatkopar (W) Mumbai – 400086 PAN: ACTPA9100A v. Income Tax Officer – 27(2)(2) 4 th Floor, Tower No. 6 Vashi Railway Station Complex Vashi, Navi Mumbai - 400703 (Appellant) (Respondent) ITA NO. 6681/MUM/2019 (A.Y. 2015-16) Masroor Hussain Masood Ahmed Shaikh Room No. 46, Khan Manzil NSS Road Hill No.2, Mumbai – 400086 PAN: ACDPH0227P v. Income Tax Officer – 27(2)(2) 4 th Floor, Tower No. 6 Vashi Railway Station Complex Vashi, Navi Mumbai - 400703 (Appellant) (Respondent) Assessee by : None Department by : Shri T. Sankar Date of Hearing : 12.07.2022 Date of Pronouncement : 08.08.2022 2 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other O R D E R PER S. RIFAUR RAHMAN (AM) 1. These appeals are filed by different assessees against separate order of Learned Commissioner of Income Tax (Appeals)-25, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 06.03.2019 for the A.Y.2015-16. 2. Since the issues raised in both the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in ITA.No. 6680/MUM/2019 for A.Y. 2015-16 as a lead appeal for the purpose of adjudication. 3. Brief facts of the case are, assessee is a proprietor of M/s. SMA International. The return of income was furnished on 01.10.2015 declaring a total income of ₹.3,21,420/-. The return was processed u/s.143(1) of Income-tax Act, 1961 (in short “Act”). The case was selected for limited scrutiny under CASS to verify the following details: - (i). Mismatch in sales turnover reported in Audit Report and ITR (ii). Purchases shown in the ITR is less than the invoice value of imports shown in the Export Import Data (CBEC tab of ITS) (iii). Custom Duty paid as shown in the ITR is less than the Duty paid as per Export Import Data (CBEC tab of ITS) 3 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other 4. The assessee's case was converted by the Assessing Officer from limited to complete scrutiny with the approval of the PCIT-27, Mumbai vide letter dated 04.12.2017 to examine the source of credit appearing in the Bank account of the assessee with Union Bank of India having account no. 317701010029569. Accordingly, Assessing Officer issued and served notices u/s. 143(2) and 142(1) of the Act. In response to the notice, Ld.AR of the assessee attended and submitted the relevant information as called for. 5. During the course of assessment proceedings, it was observed by the Assessing Officer from the Profit and loss account of the assessee that the assessee had disclosed the sale of ₹.1,36,48,528/-, purchases of ₹.97,35,439/-, Custom Duty paid of ₹.14,22,200/-, Clearing and forwarding charges of ₹.1,51.360/- and carriage inward of ₹.1,50,520/-. The assessee had disclosed the net profit at ₹.4,25,109/-. It was further noticed by the Assessing Officer from the ITS in respect of Export Import Summary Data CBEC that the invoice value of import purchases was ₹.1,64,71,708/- and custom duty paid was ₹.32,10,196/- The Assessing Officer asked the assessee to furnish the reconciliation of sales turnover, party wise details of purchases, proof of payments made to the purchaser, 4 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other custom duty and closing balance as on 31.03.2015. However, the assessee failed to produce the aforesaid details under the pretext that he had misplaced the documents while shifting. During the course of assessment proceedings, in order to ascertain the actual sales/purchases made by the assessee, the Assessing Officer conducted independent inquiries by issuing notice u/s. 133(6) of the Act to the following party: (i). Union Bank of India, Kurla Branch, Mumbai to furnish the details of Bank statement from 01/04/2013 to 31/03/2014 of the assessee. (ii). The Import commissioner of Custom, Mumbai with a request to furnish the details of import made by the assessee along with description of goods, copies of bills and custom duty paid. He was also requested to furnish the name of the CHA Agents through whom the assessee had cleared the goods. (iii). The various clearing and forwarding Agents from whom the assessee had carried out the clearance of imported goods amongst which M/s Vikas Shipping Agency had cleared the majority of goods imported by the assessee. 6. In response to the aforesaid notice u/s. 133(6), the Dy.Commissioner of Customs vide letter dated 22/09/2017 forwarded the data available in ICES 1.5 systems regarding import/Export done by M/s. SMA international for the F.Y. 2014 15. Further, clearing and forwarding agent M/s Vikas Shipping Agencies had also furnished the details. 5 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other 7. The Assessing Officer stated that since the data received from the Commissioner of Custom, Export-1, Mumbai was in part therefore, a reference was also made to Director of Revenue intelligence, Zonal Unit, Mumbai, vide letter dated 03/11/2017 and also to Dy. Commissioner of Customs, EDI, Nhava Sheva, Mumbai vide letter dated 20/11/2017 with a request to furnish the details of import made by the assessee as reported in the Export/Import summary data. 8. Further, the Assessing Officer issued a notice u/s. 142(1) dated 04.09.2017 to the assessee and asked to furnish the details regarding export/import data. However, the assessee failed to furnish the same. Thereafter, an opportunity was given to the assessee vide notice dated 15/11/2017. In response to the aforesaid notice dated 15.11.2017, the AR of the assessee submitted that the assessee was doing import from various countries and the payments were made through Bank only and the bank statement has already been furnished. The AR further submitted that the assessee had made purchases of ₹.97,35,439/- and paid Custom Duty of ₹.14,22,200/-. The AR also submitted that there were no local purchases and all the sales were made in cash. He also submitted that the assessee had closed his business since last one and half years as the 6 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other profit margin was negligible and goods imported were damaged while they were in transit. He requested the Assessing Officer that the quantum of purchases and custom duty intimated in the notice alongwith the direct expenses relating to the import should not be assessed to tax as unexplained expenditure u/s 69C of the Act as corresponding sale was shown for the same and also the question of suppression of profit does not arrive as the goods sold were deteriorated in the transit. 9. On perusal of the details received and the details gathered from other agencies and through internet, the Assessing Officer observed that the assessee had made import purchases during the year amounting to ₹.1,70,38,457/-, custom duty paid of ₹.46,16,417/-, Agency commission of ₹.1,00,012/- and other charges as per CHA Bills of ₹.54,37,000/-. Since the import purchases were at ₹.1,70,38,457/- and the assessee had debited to the profit and loss account only ₹.97,35,439/- on account of purchases and there was also variation in Custom duty and CHA charges, a notice u/s 142(1) dated 15/12/2017 was issued by the Assessing Officer and the assessee was required to explain as to why the difference between the import purchases and direct expenses and other direct expenses relating to import and the purchases and custom duty and other 7 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other expenses debited to the profit and loss account of ₹.1,57,32,366/- should not be assessed to tax as unexplained expenditure u/s 69 C of the Act. 10. In response to the aforesaid notice dated 15.12.2017, the AR of the assessee vide letter dated 18/12/2017 submitted that the difference in credit side of the Bank account was due to the fact that some contra entries in the banks where payment for import was debited but due to failure of payment for whatsoever reason the said payment was credited. The assessee further submitted that he was holding only one bank account and import shown in the return of income was correct and he was trying to trace out the record which was misplaced. 11. In the meantime, the Deputy Commissioner/Alternate System Manager, JNCH Nhava Sheva vide E mail dated 23/12/2017 furnished the details of import data as per the data available with the CBEC. On perusal of the details, it was observed by the Assessing Officer that the assessed value of the imported goods were ₹.1,93,90,066/-, Custom duty was ₹.46,16,417/-, Agency Commission was ₹.1,00,012/- and other import related charges were ₹.54,37,000/-. Accordingly, the Assessing Officer observed that the data received from the Deputy Commissioner JNCH, 8 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other Nhava Sheva was considered while determining the turnover of the assessee and revised data was prepared where in certain error in the earlier annexure was corrected. 12. Assessing Officer rejected the submissions of the assessee and proceeded to make the addition by observing as under: - "1) The assessee had not made any attempt to reconcile the credit appearing in his bank account with the gross receipts as per his profit and loss account and balance sheet. 2) The assessee had failed to discharge the onus to prove that all the credit entries appearing in the bank account have been accounted properly in his books of accounts with supporting documents. 3) The assessee has not reconciled the import purchases inspite of furnishing data obtained from the various agencies. It is pertinent to mention here that the assessee was given an opportunity to inspect the details of documents obtained from other agency. 4) The assessee has failed to provide the proof of payments. The assessee himself confirmed that the entire goods imported as shown in the books of accounts have been sold in cash." 13. Assessing Officer worked out the difference of ₹.1,80,83,976/- being the difference between the expenses incurred as per data obtained from various agencies and expenses declared by the assessee in the Profit and Loss Account and the same was added to the income of the assessee as unexplained expenditure u/s. 69C of the Act. 9 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other 14. Further, Assessing Officer observed that assessee has suppressed the profit and accordingly, Assessing Officer observed that assessee had disclosed gross profit of ₹.18,01,059/ on total sale of ₹.1,36,48,528/- which worked out to 13.20%. It was further observed by the Assessing Officer that the assessee had disclosed the purchases at ₹.97,35,439/- and closing stock at ₹.5,78,010/-. In view of the above, the Assessing Officer held that the purchases of ₹.73,03,018/ were not disclosed and sold outside the books as the assessee had not mentioned the same in the books of account. Accordingly, the Assessing Officer added an amount of ₹.14,68,217/- ((96,54,627/86.8*100)-9654627) u/s. 28 of the Act, on account of suppression of profit and added it to the total income of the assessee. 15. With regard to unexplained cash credit Assessing Officer observed from Profit and Loss Account that the assessee had shown total receipts of ₹.1,37,13,958/-. To verify the genuineness of the same, the Assessing Officer conducted independent inquiry by issuing notice u/s. 133(6) of the Act dated 09.10.2017 to the Union Bank of the India to furnish the copy of bank statement of all the accounts held by the assessee. In response to the above notice, the Union Bank of India submitted bank statement 10 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other of the assessee for the period 01.04.2014 to 31.03.2015. On perusal of the same, it was observed by the Assessing Officer that the total credits appearing in the bank account of the assessee was ₹.2,08,54,001/. Since the credit appearing in the assessee's bank account of ₹.2,08,54,001/- was more than the receipts as per books of account of ₹.1,37,13,958/-, the Assessing Officer issued notice u/s. 142(1) dated 15.12.2017 and asked the assessee to showcause as to why the difference of ₹.1,37,13,958/- between the credit appearing in the bank statement and receipt as per P&L. Account and balance sheet should not be disallowed. 16. In response to the aforesaid notice, the assessee vide letter dated 18.12.2017 submitted that the difference in credit side of the bank account was due to the fact that some contra entries in the banks where payment for import was debited but due to failure of payment for whatsoever reason the said payment was credited. The Assessing Officer did not accept the contention of the assessee as the assessee had not reconciled the receipts as per books of accounts with the credit appearing in assessee's bank account. Accordingly, the Assessing Officer disallowed the difference of ₹.71,40,043/- between the receipts as per books of 11 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other accounts and bank account of the assessee as unexplained cash credit u/s. 68 of the act and added it to the returned income of the assessee. 17. Aggrieved assessee preferred an appeal before the CIT(A)-25, Mumbai. After considering the submissions of the assessee, Ld.CIT(A) sustained all the additions made by the Assessing Officer by observing that assessee has failed to substantiate the same before the Assessing Officer with documentary evidences. 18. Aggrieved assessee is in appeal before us raising following grounds in its appeal: - “1. Learned CIT(A) allowed the addition by the ITO 27(2)(2) without enquiring about the fact that the said addition was made on the basis of the data which does not belong to my client. 2. My Client has always co-operated with all the Government Authorities for any matter whatsoever. 3. The tax Liability shown is amounting to ₹. 1,20,79,990, while my client is earning mere ₹.25000/- per month 4. Unrealistic addition based on wrong information should not be done 5. The Learned CIT dismissed the appeal without referring any matter to the bank from which the transaction is done. 6. By straightaway disallowing the appeal the CIT has wasted the time of your office. 12 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other 7. The onus to prove that my client has imported articles and not shown in the books of accounts lies in the hands of department. Further also to reaffirm from which bank account has imported and who was the signatory etc. 8. Due to the ongoing proceedings the health of my client has been drastically impacted. RELIEF CLAIMED Direct the CIT to set aside the order and grant relief to my client towards income addition, tax liability and penalty proceedings” 19. Inspite of issue of notice none appeared on behalf of the assessee nor any adjournment was sought by the assessee. Therefore, we proceed to dispose off these appeals with the assistance of Ld. DR on merits. 20. At the time of hearing, Ld. DR brought to our notice findings of the lower authorities and submitted that assessee is not cooperative with the Authorities even though several opportunities were given to him. He also relied on the findings of the Ld.CIT(A) that Assessing Officer has made independent enquiry with various agencies and accordingly he relied on Assessment Order and prayed that the addition may be sustained as per the findings of the lower authorities. 21. Considered the submissions of the Ld. DR and material placed on record, we observe that Assessing Officer has observed from the financial 13 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other statements submitted by the assessee that assessee has declared sale of ₹.1,36,48,528/-, and at the same time declared the import purchases of ₹.97,35,439/- and paid Custom Duty of ₹.14,22,200/- and declared other expenditure of Clearing and forwarding and carriage inward charges of about ₹.3,01,880/- and declared profit at ₹.4,25,109/-. Assessing Officer observed from the ITS in respect of Export Import Summary Data CBEC that the invoice value of import purchases was ₹.1,64,71,708/- and custom duty paid was ₹.32,10,196/- When the assessee was asked to substantiate the above differences in the value declared by the assessee in its financial statements, the assessee could not substantiate the same before the Assessing Officer. Accordingly, the assessment was converted into complete scrutiny and Assessing Officer made the independent enquiry with Union Bank of India, Kurla Branch, Mumbai and with various clearing and forwarding Agents. Accordingly, he collected the information as per annexure attached to Assessment Order that assessee has imported from twelve (12) parties and total assessed value as per bill of entry was ₹.1,70,38,456/- and custom duty as per CHA bill was ₹.46,16,417/ and other charges of ₹.54,37,000 and agency commission ₹.100012/-. With that above information Assessing Officer came to the 14 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other conclusion that assessee has suppressed the expenditure u/s. 69C of the Act. 22. The Assessing Officer further observed that, assessee has not reconciled the credit entries in the books and bank account, also failed to discharge the onus on him and assessee failed to provide the proof of payments and assessee himself confirmed that entire goods imported has shown in the books were sold in cash. We observe from the Assessment Order that Assessing Officer further, made addition on suppressed profit by taking the Gross Profit declared by the assessee in the Books of Accounts and also made the addition based on the credit in the bank account and receipts declared by the assessee in the books of account as the unexplained cash credits. We observe from the above Assessment Order that Assessing Officer has made high-pitch assessment without making proper or incomplete investigation. 23. We observe from the record that Assessing Officer considered the value of import based on the value declared in Bill of Entry. The value declared in Bill of Entry in most of the cases are notional value by adopting standard exchange rate for the specific period and the custom duties are 15 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other calculated based on the above said notional value. The value declared in the Bill of Entry cannot be taken as actual value of import for the purpose of determining turnover of the business and profit. Further, we observe that Assessing Officer himself noted that assessee has sold all the imports for cash and Assessing Officer has not brought on record to substantiate that assessee has held more than one bank account, therefore it means he agreed with the fact that assessee is having only one bank account. It is fact on record that all the payments for import and custom duty can be made only through bank account and it is also fact on record that assessee has sold all the goods only by cash. Assessing Officer has not made any investigation how assessee has brought so much cash into bank account and also made the payments for import and custom duty through bank. It clearly shows that Assessing Officer has made improper and incomplete investigation. Therefore, the conclusion reached by the Assessing Officer is patently wrong and illogical. 24. With regard to suppression of profit he has adopted Gross Profit from the record submitted by the assessee at the same time assessee has declared net profit of ₹.4,25,109/- and earned net profit of 3.11%. Even for the sake of determining the profit earned by the assessee with the 16 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other sales determined by the Assessing Officer, assessee would not have earned profit more than 3 to 4%. 25. Further, we observe that Assessing Officer made the addition of unexplained cash credits by taking the total credit in the bank account and the receipt declared by the assessee as the basis for making the addition. He has not made any effort to determine what is the actual business receipt credited in the bank account. We are aware that banks make certain entries like reversal of credit etc., in the bank account and since assessee has not filed any reconciliation statement for the above purpose, Assessing Officer blindly proceeded to make the addition. Therefore, we are not inclined to accept the findings of the Assessing Officer in this regard as well. Therefore, in our considered view the Assessing Officer need to make proper assessment. Therefore, we direct the Assessing Officer to do the assessment denovo. It is needless to say that the assessee may be given proper opportunity of being heard and Assessing Officer is directed to make proper investigation before completing the assessment. Accordingly, ground raised by the assessee is allowed for statistical purpose. 17 ITA NO. 6680 & 6681/MUM/2019 (A.Y. 2015-16) Masood Khalil Ahmed & Other 26. Coming to the appeal in the case of Masroor Hussain M. Ahmed in ITA.No. 6681/Mum/2019 for the A.Y. 2015-16, since facts in this appeal are mutatis mutandis to the case of M/s. Masood Khalil Ahmed for the A.Y. 2015-16, therefore the decision taken in M/s. Masood Khalil Ahmed for the A.Y. 2015-16 is applicable mutatis mutandis to this appeal also. Accordingly, the appeal filed by the assessee is allowed for statistical purpose. 27. In the result, appeals filed by the assessee are allowed for statistical purpose. Order pronounced in the open court on 08 th August, 2022. Sd/- Sd/- (AMIT SHUKLA) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 08.08.2022 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum
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