MIHIR AGENCIES P.LTD, MUMBAI V. DCIT CC 46, MUMBAI

ITA 694/MUM/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9739 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2003-2004
• Appeal Filed On: 02-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Search and seizure; Document seized; Principle of natural justice; Difference of opinion; Accommodation entries; Documents seized
• Section: 143(3); 142(1); 147; 68; 132

Judgement Text

ITA NO. 694/MUM/2015 A.Y 2003 - 04 M/S MIHIR AGENCIES VS DCIT 1 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, M UMBAI BEFORE SHRI RAVISH SOOD , J M AND SHRI N.K PRADHAN , A M ITA NO. 694 /MUM/201 5 ( / ASSESSMENT YEAR:20 03 - 04 ) M/S MIHIR AGENCIES PVT. LTD. BLOCK H, SHRI SADASHIV CHS LTD., 6 TH ROAD, SANTACRUZ (E), MUMBAI 400 055. / VS. DCIT , C.C 46, R.NO. 659, 6 TH FLOOR, AAYKAR BHAWAN, M.K ROAD, MUMBAI 400 020 ./ ./ PAN NO. AABCH7898H ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : M R . MUKESH CHOKSI , A.R. / RESPONDENT BY : SHRI V. JUSTIN , D.R. / DATE OF HEARING : 21 . 02 .201 8 / DATE OF PRONOUNCEMENT : 21 . 03 .201 8 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 38 , MUMBAI, DATED 14 . 11 .2014, WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 271(1)(C) OF THE INCOME - TAX ACT, 1961 (FOR SHORT ACT), DATED 02.05.2013 . THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US TH E FOLLOWING GROUNDS OF APPEAL: - ITA NO. 694/MUM/2015 A.Y 2003 - 04 M/S MIHIR AGENCIES VS DCIT 2 1. THE LEARNED APPELLATE COMMISSIONER HAS ERRED IN LAW AND IN FACTS IN PASSING THE ORDER U/S 271(1)(C) OF THE ACT. 2. THE LEARNED APPELLATE COMMISSIONER HAS ERRED IN LAW AND IN FACTS IN PASSING THE ORDER WITHOUT COMPLYING WITH THE PRINCIPLES OF NATURAL JUSTICE. 3. THE LEARNED APPELLATE COMMISSIONER HAS ERRED IN LAW AND IN FACTS IN LEVYING PENALTY U/S 271(10(C) OF THE ACT AT RS. 12,000/ - . 4. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER AMEND AND/OR DELETE IN ALL THE FOREGO ING GROUNDS OF APPEAL. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSMENT IN THE CASE OF THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES WAS EARLIER FRAMED UNDER SEC. 143(3) R.W.S 153C, VIDE ORDER DATED 24.11.2008 , AND ITS INCOME WAS ASSESSED AT RS. 11,614/ - AS AGAINST THE RETURNED INCOME OF RS. NIL . THAT AS CERTAIN INCRIMINATING MATERIAL PERTAINING TO THE A SSESSEE WERE FOUND AND SEIZED DURING THE COURSE OF THE SEARCH AND SEIZURE P ROCEEDINGS CONDUCTED IN THE CASE OF MAHASAGAR GROUP OF COMPANIES (NOW KNOWN AS ALAG SECURITIES) ON 25.11.2009 , THEREFORE, THE ASSESSMENT EARLIER FRAMED UNDER SEC. 143(3) R.W.S 153C WAS REOPENED UNDER SEC. 14 7 OF THE AC T. THE ASSESSEE IN COMPLIANCE TO THE N OTICE RECEIVED UNDER SEC. 148, REQUESTED VIDE A LETTER DATED 28.04.2010 THAT ITS RETURN OF INCOME FILED ON 17.04.2008 MAY BE TREATED AS THE RETURN FILED IN COMPLIANCE TO THE NOTICE ISSUED UNDER SEC. 148. SUBSEQUENTLY, NOTICE S UND E R SEC. 143(2) AND 142(1) W ERE ISSUED TO THE ASSESSEE. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE ON BEING CALLED UPON BY THE A.O TO EXPLAIN THE NATURE AND SOURCE OF THE AMOUNTS CREDITED IN ITS BANK ACCOUNTS, SUBMITTED THAT IT WAS INVOLVED IN THE BUSINESS OF FAC ILITATING AND PROVIDING ACCOMMODATION ENTRIES AND AS PROVED DURING THE COURSE OF THE SEARCH AND SEIZURE ACTION CONDUCTED ON 25.11.2009 THE AFORESAID AMOUNTS BELONGED TO ITA NO. 694/MUM/2015 A.Y 2003 - 04 M/S MIHIR AGENCIES VS DCIT 3 THE BENEFICI ARIES TO WHOM ACCOMMODATION ENTRIES WERE PROVIDED BY IT . THE ASSESSEE THOUGH INITIALLY SUBMITTED BEFORE THE A.O THAT AS THE MARGIN OF PROFIT PERTAINING TO THE TRANSACTIONS ROUTED THROUGH ITS BANK ACCOUNTS TO FACILITATE PROVIDING OF ACCOMMODATION ENTRIES WAS VERY NEGLIGIBLE, THEREFORE, THE SAME WAS NOT CONSIDERE D , BUT HOWEVER, FINALLY OFFERED THE COMMISSION INCOME TO THE TUNE OF 0.15% OF THE TOTAL DEPOSITS IN ITS BANK ACCOUNTS AS ITS INCOME . THE A.O OBSERVING THAT AS THE ASSESSEE HAD FAILED TO CONCLUSIVELY ESTABLISH THE SOURCE, NATURE, GENUINENESS AND CREDITWORTH INESS IN RESPECT OF THE TOTAL DEPOSITS OF RS. 1734 LACS IN ITS BANK ACCOUNTS ON THE BASIS OF DOCUMENTARY EVIDENCE, THEREFORE, TREATING THE SAME AS UNEXPLAINED INCOME OF THE ASSESSEE EARNED FROM UNDISCLOSED SOURCES, ADDED THE SAME TO THE INCOME OF THE ASSES SEE UNDER SEC. 68 AND ASSESSED ITS INCOME AT RS. 17,34,11,610/ - , VIDE HIS ORDER DATED 31.12.2010 . THE A.O WHILE CULMINATING THE ASSESSMENT ALSO ISSUED A SHOW CAUSE NOTICE (FOR SHORT SCN) UNDER SEC. 271(1)(C) ON 31.12.2010, CALLING UPON THE ASSESSEE T O EXPLAIN AS TO WHY PENALTY FOR FILING OF INACCURATE PARTICULARS MAY NOT BE IMPOSED ON IT UNDER THE AFORESAID STATUTORY PROVISION. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THAT AS PER THE RECORDS, THE CIT(A) VIDE HIS ORDER DA TED 09.11.2011 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND THE ASSESSED INCOME OF THE ASSESSEE WAS REVISED TO RS.2,31,710/ - . 4. THE A.O AFTER THE ORDER PASSED BY THE CIT(A) IN THE QUANTUM APPEAL OF THE ASSESSEE ISSUED ANOTHER SHOW CAUSE NOTICE, DATED 2 2.01.2013. THE EXPLANATION FURNISHED BY THE ASSESSEE THAT NO PENALTY UNDER SEC. 271(1)(C) WAS CALLED FOR IN ITS CASE, HOWEVER, DID NOT FIND FAVOUR WITH THE A.O , WHO HOLDING A CONVICTION THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME WITHI N THE MEANING OF SEC. 271(1)(C) AND THAT THE ASSESSEE WAS A HABITUAL DEFAULTER, IMPOSED A PENALTY OF RS. 12,000/ - UNDER SEC. 271(1)(C). ITA NO. 694/MUM/2015 A.Y 2003 - 04 M/S MIHIR AGENCIES VS DCIT 4 5. AGGRIEVED, THE ASSESSEE ASSAILED THE ORDER OF THE A.O IMPOSING PENALTY UNDER SEC. 271(1)( C) IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE FACTS OF THE CASE BY A CONSOLIDATE ORDER DATED. 14.11.2014 PASSED IN 31 APPEALS IN THE CASE OF THE ASSESSEE AND ITS GROUP CONCERNS/ENTITIES, DISMISSED THE APPEAL OF THE ASSESSEE. 6. THE A SSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) UPHOLDING THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. A.R AT THE VERY OUTSET TAKING US THROUGH THE FACTS OF CASE, SUBMITTED THAT THE ASSESSEE W AS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. IT WAS SUBMITTED BY THE LD. A.R THAT A COORDINATE BENCH OF THE TRIBUNAL, VIZ. ITAT, MUMBAI BE NCH B WHILE DISPOSING OFF THE QUANTUM APPEALS OF THE ASSESSEE, VIZ. M/S MIHIR AGENCIES PVT. LTD. F OR A.YS 2004 - 05 TO 2010 - 11, HAD CONCLUDED THAT THE NET PROFIT RATE/COMMISSION INCOME FROM THE TOTAL TURNOVER OF THE ASSESSEE WAS TO BE TAKEN @0.15% AND THE EXPENSES WERE TO BE ALLOWED TO THE EXTENT OF 50% (COPY PLACED ON RECORD) . THE LD. A.R FURTHER SUBMIT TED THAT THE APPEALS OF THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) UPHOLDING THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C) HAD BEEN ALLOWED IN THE ASSESSES OWN CASE FOR A.Y. 2004 - 05 BY THE TRIBUNAL, VIZ. ITAT E IN M/S MI HIR AGENCIES PVT. LTD. VS. DCIT CC 46, MUMBAI; ITA/695/MUM/2015, DATED 27.07.2016 , AND FOR A.YS 2005 - 06 AND 2007 - 08 BY A SMC BENCH OF THE TRIBUNAL, IN M/S MIHIR AGENCIES PVT. LTD . VS. DEPUTY COMMISSIONER OF INCOME - TAX, MUMBAI; ITA/7553 & 7535/MUM/2015, DATED 30.06.2016 (COPIES PLACED ON RECORD). THE LD. A.R TAKING SUPPORT OF THE AFORESAID FACTS SUBMITTED THAT AS THE FACTS AND THE ISSUE INVOLVED IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, VIZ. A.Y 2003 - 04 REMAINED THE SAME AS WERE INVOLVED IN ITS CASE FOR THE A FOREMENTIONED YEARS, VIZ. A.Y S . 2004 - 05, 2005 - 06 AND 2007 - 08, THEREFORE, THE CASE WAS SQUARELY COVERED. IT WAS ITA NO. 694/MUM/2015 A.Y 2003 - 04 M/S MIHIR AGENCIES VS DCIT 5 THUS SUBMITTED BY THE LD. A.R THAT THE ORDER OF THE CIT(A) UPHOLDING THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C) WAS LIABLE TO BE VACATED . PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE HAVE PERUSED THE ORDERS OF THE COORDINATE BENCH AND SMC OF THE TRIBUNAL PASSED IN THE CASE OF THE ASSESSEE FOR A.Y. 2004 - 05 AND A.YS 2005 - 06 AND 2007 - 08, RESPECTIVELY. WE FIND THAT THE FACTS AND THE ISSUE INVOLVED IN THE CASE OF THE ASSESS E E FOR THE YEAR UNDER CONSIDERATION REMAINS THE SAME AS WERE INVOLVED IN THE AFOREMENTIONED YEARS. WE MAY HEREIN OBSERVE THAT THE SIMILARITY IN THE FACTS AND THE ISSUE IN VOLVED IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, VIZ. A.Y 2003 - 04 AND THAT OF A.Y 2004 - 05 CAN SAFELY BE GATHERED FROM THE VERY FACT THAT THE CIT(A) HAD VIDE HIS CONSOLIDATE ORDER , DATED 14.11.2014 FOR BOTH OF THE SAID TWO YEARS, VIZ. A.YS 2003 - 04 AND 2004 - 05 , DISMISSED BOTH THE APPEALS OF THE ASSESSEE AGAINST THE RESPECT IVE ORDERS PASSED UNDER SEC. 271(1)(C) FOR THE SAID YEARS . WE FIND THAT THE COORDINATE BENCH OF THE TRIBUNAL, VIZ. ITAT E IN M/S MIHIR AGENCIES PVT. LTD. VS. DCIT CC 46, MUMBAI; ITA/695 /MUM/2015, DATED 27.07.2016 , FOR A.Y 2004 - 05 HAD DELETED THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C), OBSERVING AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBM ISSI ONS AND PRODUCE THE MATERIAL BEFORE US. WE FIND THAT CASE UNDER CONSIDERATION AN ACT ION U/S. 132 OF THE ACT WAS CARRIED OUT COVERING ALL THE GROUP ENTITIES INCLUDING THE ASSESSEE UNDER CONSIDERATION, THAT IT WAS FUND GROUP CONCERNS WERE ENGAGED IN PROVIDING ACCOMMODA TION BILLS/HAWALA ENTRIES THAT THE ASSESSEE DID NOT DISPUTE THE SAID F ACT, THAT THE AO ESTI M A TED THE INCOME FROM THE ACCOM MODATION ENTRIES @ 2% OF THE TOTAL TRANSACTIONS APPEARING THE BANK ACCOUNTS OF THE ASSESSEE , THAT THE THEN FAA CONFIRME D THE QUANTUM ADDITION MADE BY THE AO, T HAT IN THE CASE UNDER CONSIDERATION THE TRIBUNA L HAD HELD THA T ITA NO. 694/MUM/2015 A.Y 2003 - 04 M/S MIHIR AGENCIES VS DCIT 6 COMMISSION INCOME SHOULD BE TA KEN AT THE RATE OF 0.15% (ITA 643 5/MUM/2 012 - AY - 2004 - 05 AND OTHER SIX APPEALS ( DT. 6. 1 .16). THE UNDISPUTED FACT IS THAT THERE IS DIFFERENCE OF OPINION AS TO HOW MUCH INCOME SHOULD BE E STIMATED FOR THE HAWALA ENTRIES THE AO ESTIMATED AT A PAR T I CULAR PERCENTAGE, WHEREAS THE ASSESSEE HAD SHOWN THE INCOME AT A DIFFERENT PERCEN T . THE A DDITION MADE BY THE A . O AND CONFI RMED BY THE FAA IN QUANTUM ADDITION MAY OR MAY NOT BE. BUT, LEVYING PENAL TY ON THE BASIS OF AN ESTIMATED ADDITION COULD NOT BE HELD TO BE JUSTIF I ED. NO AUTHORI TY IS REQUIRED TO B E CITED THAT PENAL TY AND ASSESSMENT PROCEEDINGS ARE SEPARATE AND DISTINCT PR OCEEDINGS AND THE QUANTUM PROCEE DIN G S SHOULD NOT RESULT IN AUTOMATIC LEVY OF CONCEALMENT PENALTY. IT IS A C A SE OF ESTIMATION OF I NCOME BY THE A . O AND THE A SSESSEE . HERE WE WOULD LIKE TO DISCUSS TWO CAS ES O NE OF THEM IS AERO TRADERS P. LT D.(322 ITR 3 16) I N THAT CASE THE ASSESSEE COMPANY HAD FILED ITS R E TURN OF INCOME FOR THE YEAR 1997 - 98 ON A NOTICE U/ S.148 OF THE ACT, L96L DECLARING A LOSS OF RS . 8 3,64, 468/ - .THE ASSESSEE HAD, IN THE RETURN ATTACHED A NOTE STATING THAT IT WAS IMPOSSIBLE FOR IT TO SUBSTANTIATE ITS CLAIM OF LOSS BY WAY OF A NY EVIDENCE AS THE RELEVANT RECORDS WERE SEIZED AND WERE WIT H THE POLICE AUTHORITIES. THE A.O AFTER BEING UNABLE TO OBTAIN COPIES OF' THE SEIZED DOCUMENTS, BASED HIS ASSESSMENT ORDER ON THE LIMITED DOCUMENTS PROVIDED AND REJECTED THE BOOK RESULTS DECLARED BY THE ASSESSEE. HE ESTIMATED T HE INCOME OF THE ASSESSEE AT RS.61 ,00,000/ - . HE ALSO INITIATED PENALTY PROCEEDINGS SEPARATELY. THE FAA ESTIMATED THE TOTAL INCOME OF THE AS SESSEE AT RS. 1,02,98 0/ . THE TRIBUNAL CONFIRMED THIS ORDER. THE AO OBSERVED THAT THE PROFIT WAS ESTIMATED AFTER REJECTION OF BOOKS OF ACCOUNT DUE TO CERTAIN DISCREPANCIES AND IMPOSED A PENAL TY ON THE ASSESSEE OF' RS. 36,41,003/ - . ON THE GROUND THAT I T WAS A CLEAR CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE FAA DELETED THE PENALTY HOLDING T HAT THE ADDITION MADE BY THE AO ON THE BASIS OF' ESTIMATED PROFI T COULD NOT B E A SUBJECT - MATTER OF' PENALTY FOR CONCEALMENT OF INCOME. THE TRIBUNAL CONFIRMED THIS ORDER. ON APPEAL THE A.O D ISMISSED THE APPEAL AND HELD THA T THE FINDING ARRIVED AT BY THE TRIBUNAL DID NOT WARRANT INTERFERENCE AS IT WAS PURELY A FINDING OF FACT. IN THE CASE OF DURGA KAMAL RICE MILL S (265 ITR 25) THE HONBLE CALCUTTA HIGH COURT HAS HELD AS UNDER: WHEN TWO VIEWS ARE POSSIBLE AND WHEN NO CLEAR AND DEFINITE INFERENCE CAN BE DAWN, IN A PENALTY PROCEEDING PENALTY CANNOT BE IMPOSED . IN QUANTUM PROCEEDINGS, A PARTICULAR PROVISION MIGHT BE ATTRACTED FOR ADDITION TO THE INCOME OF THE ASSESSEE. BUT WHEN IT COMES TO THE QUESTION OF IMPOSITION OF PENALTY, THEN INDEPENDENTLY OF THE FINDING ARRIVED AT IN THE QUANTUM PROCEEDINGS, THE AUTHORITY HAS TO FIN D CONC LUSIVELY THAT THE ASSESSEE OWNS THE CONCEALED AMOUN . CONSIDERING THE FACT THAT TRIBUNAL HAS ADOPTED A PARTICULAR RATE FOR ESTIMATING THE INCOME OF THE ASSESSEE FOR THE YE AR UNDER CONSIDERATION , WE HOLD THA T THE FAA WAS NOT JUSTIFIED IN CONFIRMIN G THE ORDER PASSED BY THE A.O 27 1(1 )(C) OF THE ACT. THEREFORE, REVERSING HIS ORDER, WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE . ITA NO. 694/MUM/2015 A.Y 2003 - 04 M/S MIHIR AGENCIES VS DCIT 7 WE THUS ARE OF THE CONSIDERED VIEW THAT AS OBSERVED BY US HEREINABOVE, AS THE FACTS AND THE ISSUE INVOLVED IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, VIZ. A.Y. 2003 - 04 REMAIN S THE SAME AS AGAINST THOSE INVOLVED IN ITS CASE FOR A.Y 2004 - 05, THEREFORE, FINDING OURSELVES PERSUADED TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE TRIBUNAL W HILE DISPOSING OFF THE APPEAL O F THE ASSESSEE FOR A.Y 2004 - 05, SUBSCRIBE TO THE SAME AND DELETE THE PENALTY OF RS. 12,000/ - IMPOSED ON THE ASSESSEE UNDER SEC. 271(1)(C). THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE ORDER OF THE CIT(A) SUSTAINING THE PENALTY OF RS. 12,000/ - IMPOSED BY THE A.O UNDER SEC. 271(1)(C) IS SET ASIDE. 7 . THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRO NOUNCED IN THE OPEN COURT ON 21 / 03 /201 8. SD/ - SD/ - ( N.K PRADHAN ) ( R AVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 21 . 03 .201 8 PS. ROHIT KUMAR ITA NO. 694/MUM/2015 A.Y 2003 - 04 M/S MIHIR AGENCIES VS DCIT 8 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI