KIRAN A KASHIKAR, MUMBAI V. ACIT 12(1), MUMBAI

ITA 6731/MUM/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0973 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 07-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B V JHAVERI
• Keywords: Unexplained expenditure; Bonafide belief
• Section: 131

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI . . , . . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI B.R.BASKARAN, ACCOUNTANT MEMBER . / ITA NO. 6731/MUM/2011 / ASSESSMENT YEAR 2007-08 SHRI KIRAN A. KASHIKAR, 18, MITHA MENSION, 319, S.B.SING ROAD, OPP. FORT MARKET, MUMBAI 400 038 / VS. THE ACIT 12(1), AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 ./ ./ PAN/GIR NO. : AADPK 1494K ( / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY SHRI B.V.JHAVERI RESPONDENT BY : SHRI ASGHAR ZAIN # $ % / DATE OF HEARING : 02/07//2015 # $ % / DATE OF PRONOUNCEMENT : 02/07/2015 / O R D E R PER I.P.BANSAL, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-23, MUMBAI DATED 07/07/2011 FO R THE ASSESSMENT YEAR 2007-08. GROUNDS OF APPEAL READ AS UNDER: 1) THE CIT(APPEALS) ERRED IN CONFIRMING PENALTY OF RS.24,80,793/- U/S. 271(1)(C) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ADDITION OF RS.49,13,435/- WAS MADE BY THE A.O.(A) MERELY ON THE BASIS OF VOLUNTARY AND CONDIT IONAL OFFER OF SUCH INCOME BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS WITH AN ANXIETY TO BUY PEACE OF MIND AND TO AVOID PROTRACTED LITIGATION WITH THE DEPARTMENT, (B) WITH THE CLEAR UNDERSTANDING FOR NON LEVY OF PENALTY UNDER ANY OF THE PROVISIONS OF THE INCOME-TAX ACT, (C) WITHOUT ANY . / ITA NO. 6731/MUM/2011 / ASSESSMENT YEAR 2007-08 2 COGENT EVIDENCE IN THE POSSESSION OF THE A.O. AND ( D) WITHOUT CONDUCTING ANY INDEPENDENT ENQUIRY ABOUT THE INCOME SO OFFERED BY THE APPELLANT. 2) THE CIT(APPEALS) ERRED IN CONFIRMING THE PENALT Y WITHOUT APPRECIATING THE FACT THAT SURRENDER OF INCOME BY THE APPELLANT ON ACCOUNT OF LACK OF POSITIVE RESPONSE FROM THE CONCERNED PAYEE CANNOT LEAD TO THE INFERENCE THAT S URRENDER OF INCOME WAS NOT VOLUNTARY OR CANNOT CONVERT AN OFFER TO TAX SUCH AM OUNT AS FURNISHING OF INACCURATE PARTICULARS OF HIS INCOME. 3) THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE EXPENSES INCURRED THROUGH M/S. INDRA VARUN SALES AGENCIES PVT. LTD. FOR CLEARING THE IMP ORTED CARGOES OF THE CLIENTS WERE REIMBURSED BY THE CLIENTS AND AS SUCH THE SAID EXPE NSES INCURRED FOR AND ON BEHALF OF THE CLIENTS WERE SUPPORTED BY THE BILLS OF M/S. IND RA VARUN SALES AGENCIES PVT. LTD. 4) THE CIT(APPEALS) FAILED TO APPRECIATE THAT BY T REATING THE SAID EXPENDITURES SUPPORTED BY THE BILLS OF M/S. INDRA VARUN SALES AG ENCIES PVT. LTD. AS NON-GENUINE, THE RECEIPT IN THE FORM OF REIMBURSEMENT IS TAXED WHICH IS NOT AN INCOME IN THE HANDS OF THE APPELLANT. 5) THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE LEVY OF PENALTY CANNOT BE SUSTAINED AS NEITHER DDI(INV.) NOR A.O. HAS EVER ALLOWED THE APP ELLANT ACCESS TO THE ALLEGED MATERIAL I EVIDENCE, EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING PENALTY PROCEEDINGS, ON THE BASIS OF WHICH THE DDI (LNV.) ISSUED A NOTICE T O THE APPELLANT AND THEREBY PREVENTED THE APPELLANT FROM REBUTTING THE PRESUMPTION AND PU T FORWARD HIS CASE. 6) WITHOUT PREJUDICE TO THE AFORESAID GROUNDS AND I N THE ALTERNATIVE, THE CIT(APPEALS) FAILED TO APPRECIATE THAT LEVY OF PENALTY U/S. 271( 1)(C) @ 150% IS VERY HARSH SPECIFICALLY CONSIDERING THE CO-OPERATIVE ATTITUDE OF THE APPELL ANT UNDER THE BONAFIDE BELIEF THAT NO PENALTY WOULD BE LEVIED AS UNDERSTOOD AND AGREED TO AND HENCE DESERVES TO BE SCALED DOWN TO 100%. 2. THE ASSESSEE IS RUNNING THE BUSINESS AS A CLEA RING AND FORWARDING AGENT AS A CUSTOMER HOUSE AGENT IN CLEARING THE IMPORT CARGO. IT IS THE CASE OF THE REVENUE THAT DURING THE COURSE OF SEARCH ACTION AGAINST ANOTHER PERS ON NAMELY MR. SANDEEP SITANI, IT WAS DISCOVERED THAT M/S.KWICK CARGO TRACERS & LIFT ERS, WHICH IS A PROPRIETARY CONCERN OF THE ASSESSEE HAS MADE CERTAIN PAYMENT TO M /S. INDRA VARUN SALES AGENCIES PVT. LTD.(IN SHORT IVSAPL) WHICH WAS ONE OF THE TWENTY PAPER COMPANIES FLOATED BY MR. SANDEEP SITANI. WHEN SUCH FACT WAS CO NFRONTED TO THE ASSESSEE, IT WAS SUBMITTED THAT IVSAPL HAD RENDERED THE SERVICES FOR W HICH THE PAYMENT WAS MADE AND BILLS WERE RAISED REGULARLY AND PAYMENT MADE BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUES DRAWN OUT OF BANK ACCOUNT OF THE ASSESSEE AF TER DEDUCTION OF TAX AT SOURCE AND AFTER VERIFYING FROM THE CUSTOMERS ABOUT THE REN DERING OF THE SERVICES TO THEIR SATISFACTION. HOWEVER, WHEN THE SAID CONCERN WAS CON TACTED THE ASSESSEE COULD NOT BE ABLE TO GET THE POSITIVE RESPONSE AND IN THIS SITUATI ON, IN ORDER TO BUY PEACE AND TO . / ITA NO. 6731/MUM/2011 / ASSESSMENT YEAR 2007-08 3 AVOID PROTRACTED LITIGATION WITH THE DEPARTMENT AND SUBJECT TO NON-LEVY OF PENALTY, THE ASSESSEE HAS OFFERED PAYMENTS MADE TO IVSAPL AND SUB MITTED THAT THE OFFER MADE BY THE ASSESSEE SHOULD NOT BE CONSIDERED AS ADMISSION OF EITHER HAVING CONCEALED ANY INCOME OR HAVING FURNISHED ANY INACCURATE PARTICULA RS AND SUCH OFFER IS MADE SOLELY WITH A VIEW TO BUY PEACE OF MIND TO AVOID PROTRACTED LITIGATION WITH THE DEPARTMENT AND SUBJECT TO NON-LEVY OF PENALTY. THESE SUBMISSI ONS OF THE ASSESSEE ARE RECORDED IN THE IMPUGNED ORDER OF LD. CIT(A) IN PARA 2.1 AND SU CH SUBMISSION OF THE ASSESSEE HAS BEEN REJECTED BY THE AO ON THE FOLLOWING GROUND S: (I) IT IS ESTABLISHED BEYOND DOUBT THAT THE' PAPER COMPANIES FLOATED BY 'MR. SITANI, INCLUDING INDRAVARUN SALES AGENCY PVT.. LTD. (ISAPL ), NEITHER HAS NOR EVER WAS IN A POSITION TO PROVIDE ANY SERVICE TO ITS CLIENTS. ( II) MR. SITANI AND HIS EMPLOYEE MR. PRAJAPATI AND MR. YADAV HAS REPEATEDLY STATED THAT NO 'SERVICES HAVE BEEN PROVIDED BY THE PAPER COMPANIES. (III) IT IS INCOMP REHENSIBLE AS TO HOW THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE IS VOLUNT ARY. THE ASSESSEE OFFERED THE INCOME ONLY IN RESPONSE TO THE SUMMON U/S. 131 OF T HE ACT. (IV) EVEN IN ABSENCE OF THE SO CALLED VOLUNTARY DECLARATION OF THE ASSES SEE, IN WAKE OF THE REPORT OF THE DDIT. (LNV) , THE EXPENDITURE ON ACCOUNT OF BOGUS BILLS, RAISED BY ISAPL WAS BOUND TO BE. DISALLOWED AND ADDED TO THE TOTAL INCO ME. (V) THE ASSESSEE HAS OFFERED THE PAYMENT MADE TO ISAPL AS INCOME ONLY BE CAUSE THE ASSESSEE WAS FULLY CONVINCED THAT IT HAS NO ESCAPE AND ITS MISCH IEF HAS BEEN ESTABLISHED. 3.1 LD. CIT(A) DID NOT ACCEPT THE SUBMISSIONS OF THE A SSESSEE ON THE GROUND THAT NO CONDITIONAL DISCLOSURE CAN BE MADE UNLESS STATUT E ITSELF PROVIDES FOR A COMPOUNDING. DISCLOSURE ONLY WHEN FOUND BONA FIDE CAN BE SAID NOT TO ATTRACT PENALTY(SIC.) IN THE PRESENT CASE ASSESSEE HAS MADE OFFER ONLY WHEN THE INVESTIGATION WING ISSUED SUMMON RAISING SPECIFIC QUERIES WHICH COULD NOT BE COMPLIED BY THE ASSESSEE. THERE IS NOTHING IN THE CONDUCT OF THE REV ENUE AUTHORITIES TO INDICATE THAT THE CONDITIONAL OFFER MADE BY THE ASSESSEE WAS ACCEPT ED. IT IS IN THIS MANNER LD. CIT(A) HAS UPHELD THE LEVY OF CONCEALMENT PENALTY WHI CH IS LEVIED @ 150%. THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER OF LD. CIT(A) AND HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. 4. IT WAS SUBMITTED BY LD. AR THAT PENALTY HAS WRONGLY BEEN CONFIRMED BY LD. CIT(A). HE SUBMITTED THAT THE PAYMENT MADE TO IVSAPL WAS NEVER EXPENSES INCURRED BY THE ASSESSEE. THIS PAYMENT WA S MADE ON BEHALF OF THE OTHER PARTIES AND WERE NOT CLAIMED BY THE ASSESSEE AS AN EXPENDITURE AS THE . / ITA NO. 6731/MUM/2011 / ASSESSMENT YEAR 2007-08 4 SAME WAS REIMBURSED TO THE ASSESSEE BY THE OTHER PA RTY. TO SUPPORT SUCH CONTENTION LD.AR REFERRED TO THE WRITTEN SUBMISSION S FILED BEFORE LD. CIT(A) DATED 22/6/2011, COPY OF WHICH HAS BEEN FILED AT PA GES 49 TO 66 OF THE PAPER BOOK AND REFERENCE WAS MADE TO THE FOLLOWING SUBMIS SIONS. MADAM, IT MAY FURTHER BE PLACED ON RECORD THAT SIN CE ASSESSEE IS A PROPRIETOR AND RENDERING OF SERVICES OF GETTING DOCUMENTS RELE ASED AND SUBMISSIONS OF OTHER PAPERS TO CUSTOMS DEPARTMENT IN ITSELF IS A VERY V OLUMINOUS WORK REQUIRING PERSONAL ATTENTION AND AT THE SAME TIME HANDLING OF GOODS ALSO REQUIRES PERSONAL ATTENTION ASSESSEE FOR THE SAKE OF SMOOTH WORKING A ND GIVING PROPER SERVICES TO HIS CUSTOMERS AT THE MATERIAL TIME HAD AWARDED THE WORK OF HANDLING OF GOODS TO ONE M/S. INDRA VARUN SALES AGENCIES PVT. LTD. WHO W OULD DO THE JOB, ISSUE A BILL TO THE ASSESSEE MENTIONING THEREIN THE NAME OF THE PARTY WHOSE GOODS WERE HANDLED WITH REFERENCE OF DOCUMENT WHETHER IMPORT O R EXPORT WITH DISTINCT NO. AND CLEARLY SPECIFYING THE AMOUNT OF SERVICE CHARGE S WITH SERVICE TAX AND EDUCATION CESS CALCULATED AT THE RATE OF 12% AND 2% RESPECTIVELY. THE SAID BILL ALSO CONTAINS THE SERVICE TAX REGISTRATION NO. AND PAN OF SAID M/S. INDRA VARUN SALES AGENCIES PVT. LTD. ACCORDINGLY ASSESSEE ON RE CEIPT OF THE BILL CREDITED THE SAID AMOUNT TO THE ACCOUNT OF SAID M/S. INDRA VARUN SALES AGENCIES PVT. LTD. AND SUBSEQUENTLY WHEN THE AMOUNT WAS PAID BY PAYEES ACC OUNT CHEQUE TO SAID M/S. INDRA SALES AGENCIES PVT. LTD. IT WAS DEBITED TO IT S ACCOUNT HOWEVER, SINCE ASSESSEE WAS NEITHER EARNING ANY PROFIT NOR WAS INC URRING ANY LOSS IN THESE TRANSACTIONS NEITHER THE AMOUNT RECEIVED WAS CREDI TED AS RECEIPT NOR THE AMOUNT PAID WAS DEBITED AS PAYMENT IN THE PROFIT & LOSS A/ C. FROM THE PAYMENTS MADE TAX WAS BEING DEDUCTED AT SOURCE AND PAID TO THE GO VERNMENT ACCOUNT BY THE ASSESSEE. (EMPHASIS PROVIDED) 4.1 HE SUBMITTED THAT IN VIEW OF THE FACT THAT THE IMPUGNED AMOUNT WAS NEVER CLAIMED BY THE ASSESSEE AS AN EXPENDITURE, NO INCOME COULD BE ASSESSED IN THE HANDS OF THE ASSESSEE AS THERE WAS NO QUESTI ON OF MAKING ANY ADDITION IN THE HANDS OF THE ASSESSEE. HE SUBMITTED THAT AD DITION HAS BEEN MADE SIMPLY FOR THE REASON THAT SUCH AMOUNT WAS OFFERED BY THE ASSESSEE WHICH IN ITSELF IS NOT SUFFICIENT TO HOLD THAT ASSESSEE HAS CONCEALED PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF S UCH INCOME. LD. AR HAS ALSO REFERRED TO THE P&L ACCOUNT OF THE ASSESSEE, C OPY OF WHICH HAS FILED AT PAGE -6 OF THE PAPER BOOK TO SHOW THAT EXPENDITURE WERE NOT CLAIMED BY THE ASSESSEE IN ITS PROFIT AND LOSS AND ALSO FOLLOWING SUBMISSIONS MADE BEFORE LD. CIT(A), WHICH ARE RECORDED IN THE IMPUGNED ORDER OF LD. CIT(A) IN PARA 2.2: . / ITA NO. 6731/MUM/2011 / ASSESSMENT YEAR 2007-08 5 WITHOUT PREJUDICE TO THE ABOVE IT WAS SUBMITTED TH AT FROM THE PROFIT & LOSS A/C. IT CAN BE SEEN THAT ON THE GROSS RECEIPT OF RS. 60. 36 LACS APPELLANT HAS DECLARED A NET PROFIT ON 17.48 LACS EVEN AFTER DEDUCTING THE D EPRECIATION OF 3.72 LACS DEBITED IN THE PROFIT & LOSS A/C WHICH MEANS THAT CASH PROF IT WITH REFERENCE TO THE AGENCY FEES CREDITED AMOUNTING, TO RS. 60.36 LACS C OMES TO RS. 21.20 LACS WORKING OUT OF 35 % WHICH BY NO STANDARD IN THE BU SINESS OF CLEARING AND FORWARDING AGENCY CAN BE CONSIDERED AS LOW. IN CASE A SUM OF RS. 49.13 LACS BEING THE AMOUNT RECEIVED FROM HIS CUSTOMERS TOWARD S HANDLING OF GOODS CHARGES AND PAID TO M/S. INDRA YARUN SALES AGENCY PVT. LTD. IS ADDED TO THE AGENCY FEES OF RS. 60.36 LACS IT WOULD COME TO RS. 109.48 LACS AND IF ASSESSING OFFICER'S ASSUMPTION IS ACCEPTED THE CASH PROFIT WOULD WORK O UT TO RS. 70.33 LACS WHICH IN TERMS OF PERCENTAGE WOULD COME TO 68 % WHICH IS AN, IMPOSSIBLE RATE OF PROFIT THAT CAN BE EARNED BY ANY BUSINESSMAN. 4.2 IN VIEW OF AFOREMENTIONED SUBMISSIONS, IT WAS SUBMITTED BY LD. AR THAT PENALTY HAS WRONGLY BEEN LEVIED AND IT HAS ALSO BE EN WRONGLY CONFIRMED BY LD. CIT(A). 5. ON THE OTHER HAND LD. DR RELIED UPON THE ORDER P ASSED BY AO AND LD. CIT(A). IT WAS SUBMITTED BY LD. AR THAT MERE VOLUN TARY OFFER OF INCOME DOES NOT ABSOLVE THE ASSESSEE FROM LEVY OF CONCEALMENT P ENALTY. 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. AS PER SUBMISSIONS MADE BY THE ASSESSE E BEFORE LD. CIT(A) VIDE LETTER DATED 22/6/2011, THE RELEVANT POTION OF WHIC H HAS ALREADY BEEN REPRODUCED IN PARA-4 OF THIS ORDER, IT IS CLEAR THA T THOUGH THE PAYMENT WAS MADE BY THE ASSESSEE TO IVSAPL, WHICH IS FOUND TO B E A BOGUS CONCERN BY THE DEPARTMENT BUT THE SAME WAS NOT CLAIMED AS EXPENDIT URE BY THE ASSESSEE AND IT WAS TO BE REIMBURSED TO THE ASSESSEE BY THE PART Y ON BEHALF OF WHOM THE PAYMENT WAS MADE. TO SUPPORT SUCH CONTENTION, REFE RENCE IS ALSO MADE TO THE P&L ACCOUNT OF THE ASSESSEE IN WHICH IMPUGNED PAYME NT HAS NOT BEEN CLAIMED AND DEBITED AS EXPENDITURE. IN VIEW OF THESE FACT S AND CIRCUMSTANCES, IT HAS TO BE CONSIDERED THAT IF DEPARTMENT WAS TO MAKE THE ADDITION IN THE HANDS OF THE ASSESSEE THEN UNDER WHICH SECTION IT COULD BE MADE. FROM THE FACTS, IT IS CLEAR THAT THE PAYMENT MADE BY THE ASSESSEE TO IVSA PL IS NOT CLAIMED AS EXPENDITURE IN THE HANDS OF THE ASSESSEE, THEREFORE , IT CANNOT BE DISALLOWED AS UNEXPLAINED EXPENDITURE. MOREOVER, FROM THE FACTS OF THE CASE SUCH AMOUNT . / ITA NO. 6731/MUM/2011 / ASSESSMENT YEAR 2007-08 6 HAS GONE OUT THE COFFER OF THE ASSESSEE FROM THE BA NK ACCOUNT MAINTAINED BY THE ASSESSEE. THEREFORE, THERE IS NO QUESTION OF U NEXPLAINED CREDIT ALSO IN THE HANDS OF THE ASSESSEE WHICH CAN BE SAID TO HAVE CO ME TO THE COFFER OF THE ASSESSEE. MERE OFFERING OF INCOME BY THE ASSESSE E OF SUCH AMOUNT, FOR WHATSOEVER REASON, WOULD NOT MAKE THE OFFER BY THE ASSESSEE OF ASSESSMENT OF THE IMPUGNED ADDITION AS REAL INCOME IN THE HANDS O F THE ASSESSEE. THE INCOME HAS BEEN ASSESSED IN THE HANDS OF THE ASSESS EE SIMPLY ON THE BASIS OF OFFER MADE BY THE ASSESSEE AND IN THE FACTS AND CIR CUMSTANCES OF THE CASE, IT CANNOT BE SAID THAT EITHER THE ASSESSEE HAS CONCEAL ED THE PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF H IS INCOME WHICH IS PRIMARY REQUIREMENT FOR INVOKING SECTION 271(1)(C) OF THE ACT. IN ABSENCE OF CHARGE OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME, IN OUR OPINION, IT IS NOT JUSTIFIED TO LEVY THE PENALTY. THEREFORE, WE ARE OF THE OPINION THAT PENALTY HAS WRONGLY BEEN LEVIED IN THE PRESENT CASE AND IT HAS WRONGLY BEEN CONFIRMED BY LD. CIT(A) WI THOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. WE DELETE THE PENAL TY AND APPEAL FILED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. OR DER PRONOUNCED IN THE OPEN COURT ON 02/07/2015 # + , - 02/07/2015 # SD/- SD/- ( . . / B.R.BASKARAN ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; , DATED 02/07/2015 . / ITA NO. 6731/MUM/2011 / ASSESSMENT YEAR 2007-08 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. /$ ( ) / THE CIT(A)- 4. /$ / CIT 5. 01 $23 , % 23 , / DR, ITAT, MUMBAI 6. 4 / GUARD FILE. / BY ORDER, 0$ $ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS