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

ITA 695/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2239 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2004-2005
• Appeal Filed On: 02-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SATHYA MOORTHYDR
• Keywords: Rejection of books of accounts; Document seized; Difference of opinion; Accommodation entries; Documents seized
• Section: 132

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./ITA/695/MUM/2015, /ASSESSMENT YEARS: 2004-05 M/S. MIHIR AGENCIES PVT. LTD. BLOCK H, SHRI SADASHIV CHS LTD., 6 TH ROAD, SANTACRUZ (E) MUMBAI-400 055. PAN:AAGFM 0809 D VS. DCIT-CC-46 ROOM NO.659, 6 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 002. ./ITA/996/MUM/2015, /ASSESSMENT YEARS: 2005-06 MR. MUKESH CHOKSI BLOCK H, SHRI SADASHIV CHS LTD., 6 TH ROAD, SANTACRUZ (E) MUMBAI-400 055. PAN:AAAPC 7767 J VS. DCIT-CC-46 ROOM NO.659, 6 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 002. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI N. SATHYA MOORTHY-DR ASSES SEE BY: SHRI MUKESH CHOKSI / DATE OF HEARING: 19& 20.07.2016 / DATE OF PRONOUNCEMENT: 27.07.2016 , 1961 254 )1( ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS DATED 14/11/2014 OF THE CIT (A)-38,MUMBAI THE ABOVE- MENTIONED ASSESSEES HAVE FILED APPEALS FOR THE AY.S 2004-05AND 2005-06 RESPECTI - VELY.THE ONLY ISSUE IN BOTH THE APPEALS IS ABOUT LE VY OF PENALTY U/S. 271(1)(C) OF THE ACT.AS BOTH THE ASSESSEES ARE FROM THE SAME GRO UP,THEREFORE,FOR SAKE OF CONVENIENCE WE ARE DECIDING THE APPEALS BY PASSING A SINGLE ORDER. ITA/695/MUM/2012,AY.2004-05,BRIEF FACTS: 2. AN ACTION U/S. 132 OF THE ACT WAS CARRIED OUT ON,25 /11/2009 IN THE CASE OF MAHASAGAR SECURITIES PRIVATE LTD.,ALONG WITH ITS GR OUP COMPANIES.THE RESIDENTIAL PREMISES OF THE DIRECTORS OF THE COMPANY AND THE AU DITOR OF THE GROUP COMPANIES WERE ALSO SEARCHED. DURING THE COURSE OF SEARCH IT WAS FOUND THAT GROUP COMPANIES 695 & 996/M/15-MIHIR & MUKESH 2 WERE MERELY PROVIDING ACCOMMODATION ENTRIES IN CASE S INVOLVING TRADING, SPECULA - TION PROFIT,SHORT-TERM AND LONG THE CAPITAL GAINS O R LOSSES, COMMODITY TRADING, DERIVATIVE PROFIT OR LOSS,SHARE APPLICATION MONEY,B OGUS INVOICES FOR PURCHASE AND SALES ETC.,THAT MUKESH CHOKSY(MC) WAS CONTROLLING A LL THESE CONCERNS. 3. DURING THE ASSESSMENT PROCEEDINGS,THE ASSESSING OFF ICER(AO)HELD THAT THE ASSESSEE IS EARNING COMMISSION IN THE RANGE OF 1.5% TO 3.5% DEPENDING ON THE NATURE OF ACCOMMODATION ENTRIES PROVIDED.WHILE COMP LETING THE ASSESSMENT, THE AO RELIED UPON THE STATEMENTS AGENTS AND EMPLOYEE O F MC AND ONE OF THE DIRECTORS OF THE GROUP COMPANIES.HE RELIED UPON THE SEIZED MA TERIAL THAT WAS TAKEN INTO POSSESSION FROM THE MAIN OFFICE OF MAHASAGAR GROUP CONCERNS.BASED ON THE STATEMENTS AS WELL AS THE SEIZED MATERIAL,THE AO HE LD THAT THE ASSESSEE COMPANIES/ INDIVIDUALS WERE IN RECEIPT OF COMMISSION IN THE RA NGE OF 1.5% TO 3.5% ON VARIOUS KINDS OF ACCOMMODATION ENTRIES PROVIDED BY THEM.HE REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE TOTAL INCOME ADOPTING NI GHT COMMISSION AT THE RATE OF 2% OF THE TOTAL RECEIPT SHOWN IN THE BANK ACCOUNTS AFTER TAKING INTO ACCOUNT THE EXPENSES THAT COULD HAVE BEEN INCURRED. THE ASSESSE E CONTESTED THE ESTIMATE OF COMMISSION BEFORE THE FIRST APPELLATE AUTHORITY (FA A).BEFORE HIM,THE ASSESSEE ARGUED THAT RATE OF COMMISSION SHOULD BE TAKEN AT 0 .15% IN VIEW OF THE ORDER OF THE TRIBUNAL.HOWEVER,THE THEN FAA CONFIRMED THE ORDER O F THE AO HOLDING THAT THE FACTS AND CIRCUMSTANCES ON THE BASIS OF WHICH THE I TAT HAD DETERMINED THE COMMISSION INCOME AT THE RATE OF 0.15% WERE NOT SIM ILAR TO THE FACTS AND CIRCUMSTANCES OF THE CASE AT HAND. IN THE MEANWHILE ,THE AO LEVIED PENALTY U/S. 271(1)(C) AFTER THE CONFIRMATION OF THE QUANTUM ADD ITION BY THE F AA. 4. CHALLENGING THE PENALTY ORDER OF THE AO THE ASSESSE E REFERRED TO THE CASES OF RELIANCE PETRO PRODUCTS LTD.(322 ITR 158), SREENIVA SA PAI (242 ITR 29) AND DURGA TIMBER WORKS(79 ITR 63) AND CONTENDED THAT IT HAD DECLARED 0.15% INCOME 695 & 996/M/15-MIHIR & MUKESH 3 FROM ITS ACTIVITIES, THAT THE THIRD PARTIES ALSO CO NFIRMED THE ASSESSEE WAS GETTING COMMISSION OF SAME PERCENT, THAT THE AO HAD APPLIED RATE OF 2%, THAT THE TRIBUNAL HAD REDUCED THE RATE TO 0.15%,WHEN INCOME WAS ASSES SED ON ESTIMATE BASIS NO CONCEALMENT PENALTY COULD BE LEVIED,THAT THERE WAS NO CONCRETE PROOF WITH THE AO ON THE BASIS OF ITS A REASONABLE ESTIMATE COULD BE APPLIED TO DETERMINE THE TAXABLE INCOME,THAT IT WAS A CASE WHERE TWO VIEWS WERE POSS IBLE,THAT THE ASSESSEE HAD DECLARED ONE RATE BASED ON STATEMENTS OF THE DIRECT ORS AND THIRD PARTIES,THAT THE AO APPLIED ANOTHER PERCENT, THAT THE APPLICATION IS DI RECTED BY THE AO HAD NO CO - RELATION TO THE INCOME, THAT IF INCOME WAS DETERMIN ED ON ESTIMATE BASIS IT WAS NOT A FIT CASE FOR LIVING PENALTY U/S.271(1)(C),THAT THE ASSESSEE HAD EXTENDED FULL COOPERA -TION,THAT MERELY BECAUSE A HIGH PERCENTAGE OF INCO ME WAS ADAPTED DIRECTION SHOULD NOT AUTOMATICALLY RESULT INTO LEVYING OF CON CEALMENT PENALTY, THAT ENTIRE PARTICULARS OF INCOME,AS CALLED FOR BY THE AO,WERE FURNISHED DURING THE ASSESSMENT PROCEEDINGS,THAT THE STATEMENT OF THE THIRD PARTIES CONFIRMED THAT COMMISSION WAS EARNED BY THE ASSESSEE AT THE RATE OF 0.15%, THAT T HE ASSESSMENT AND PENALTY PROCEEDINGS WERE SEPARATE AND DISTINCT PROCEEDINGS, THAT THE QUANTUM FINDING WERE NOT BINDING IN THE PENALTY PROCEEDINGS.AFTER CONSID ERING THE AVAILABLE MATERIAL ON RECORD,THE FAA HELD THAT THE ASSESSEE HAD BASICALLY DISPUTED THE RATE OF COMMISSION,THAT IT WAS SUBMITTED THAT NO INCRIMINAT ING DOCUMENTS WERE SEIZED DURING THE COURSE OF SEARCH,THAT STATEMENTS OF EMPL OYEES AND AGENTS OF THE ASSESSEE RECORDED.HE REFERRED TO THE SEIZED DOCUMENTS AND HE LD THAT AO WAS JUSTIFIED IN APPLYING THE RATE OF 2% FOR THE TRANSACTIONS ENTERE D INTO BY THE ASSESSEE, THAT IS PREDECESSOR HAD CONFIRMED THE ORDER OF THE AO.REFER RING TO THE ORDER OF THE TRIBUNAL IN THE CASE OF GOLD STAR FINVEST PRIVATE L TD., FOR THE AY. 2002-03 HELD THAT COMMISSION INCOME AT THE RATE OF 0.15% WAS BAS ED ON THE SURVEY CONDUCTED AT THE BUSINESS PREMISES OF THAT COMPANY, THAT THE INC RIMINATING MATERIAL SEIZED DURING THE COURSE OF SEARCH AND THE STATEMENTS RECO RD IS FROM THE PERSONS CONCERN- 695 & 996/M/15-MIHIR & MUKESH 4 ED IS REVEALED THAT THE ASSESSES OF THE GROUP INCLU DING THE ASSESSEE AND THE CONSIDERATIONS PER CHARGES COMMISSION IN THE RANGE OF 1%-3.6%, THAT THOUGH THE DETERMINATION OF COMMISSION INCOME AT THE RATE OF 2 % WAS ON ESTIMATE BUT THE ESTIMATE WAS BASED ON RELEVANT STATEMENT AND THE IN CRIMINATING SEIZED DOCUMENTS, THAT THE CONCEALMENT OF PARTICULARS INCOME WAS ESTA BLISHED, THAT THE ASSESSEE HAD FAILED TO DISCLOSE THE TRUE AND CORRECT COMMISSION INCOME IN THE ORIGINAL RETURN, THAT THE AO WERE JUSTIFIED IN INVOKING THE PROVISIO NS OF SECTION 271(1)(C). REFERRING TO JUDGMENT OF MAK DATA PRIVATE LTD.(328 ITR 593), THE FAA HELD THAT VOLUNTARY DISCLOSURE DID NOT RELEASE THE ASSESSEE F ROM MISCHIEF PENALTY PROVISIONS. FINALLY,HE UPHELD THE PENALTY LEVIED BY THE AO, U/S . 271(1)(C), AMOUNTING TO RS. 6.30 LAKHS. 5. DURING THE COURSE OF HEARING BEFORE US MUKESH CHOKS I STATED THAT THE TRIBUNAL HAD HELD THAT COMMISSION INCOME SHOULD BE TAKEN AT THE RATE OF 0.15%, THAT IT WAS A CASE OF ESTIMATION OF INCOME, THAT ASSESSEE HAD NOT CONCEALED PARTICULARS OF INCOME OR HAD FILED INACCURATE PARTICULARS OF INCOME. THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF F AA. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PRODUCE THE MATERIAL BEFORE US. WE FIND THAT CASE UNDER CONSIDERATION AN ACTION U/S.132 OF THE ACT WAS CARRIED OUT COVERING ALL THE GROUP ENTITIES INCLUDING THE ASSESSEE UNDER CONSIDERATION, THAT IT WAS FOUND GROUP CONCERNS WERE ENGAGED IN PROVIDING ACCOMMODAT ION BILLS/HAWALA ENTRIES, THAT THE ASSESSEE DID NOT DISPUTE THE SAID FACT,THA T THE AO ESTIMATED THE INCOME FROM THE ACCOMMODATION ENTRIES @ 2% OF THE TOTAL TR ANSACTIONS APPEARING IN THE BANK ACCOUNTS OF THE ASSESSEE,THAT THE THEN FAA CON FIRMED THE QUANTUM ADDITION MADE BY THE AO,THAT IN THE CASE UNDER CONSIDERATION THE TRIBUNAL HAD HELD THAT COMMISSION INCOME SHOULD BE TAKEN AT THE RATE OF 0. 15% (ITA /6435/MUM/2012 AY-2004-05 AND OTHER SIX APPEALS DT.6.1.16). 695 & 996/M/15-MIHIR & MUKESH 5 THE UNDISPUTED FACT IS THAT THERE IS DIFFERENCE OF OPINION AS TO HOW MUCH INCOME SHOULD BE ESTIMATED FOR THE HAWALA ENTRIES-THE AO E STIMATED AT A PARTICULAR PERCENTAGE, WHEREAS THE ASSESSEE HAD SHOWN THE INCO ME AT A DIFFERENT PERCENT. THE ADDITION MADE BY THE AO AND CONFIRMED BY THE FAA IN QUANTUM ADDITION MAY OR MAY NOT BE.BUT,LEVYING PENALTY ON THE BASIS OF AN E STIMATED ADDITION COULD NOT BE HELD TO BE JUSTIFIED.NO AUTHORITY IS REQUIRED TO BE CITED THAT PENALTY AND ASSESSMENT PROCEEDINGS ARE SEPARATE AND DISTINCT PROCEEDINGS A ND THE QUANTUM PROCEEDINGS SHOULD NOT RESULT IN AUTOMATIC LEVY OF CONCEALMENT PENALTY. IT IS A CASE OF ESTIMATION OF INCOME BY THE AO AND THE ASSESSEE. HERE WE WOULD LIKE TO DISCUSS TWO CASES.ONE OF THEM IS AERO TRADERS P. LTD.(322 ITR 316).IN THAT CASE THE ASSESSEE-COMPANY HAD FILED ITS RETURN OF INCOME FOR THE YEAR 1997-98 ON A NOTICE U/S.148 OF THE ACT, 1961DE CLARING A LOSS OF RS. 83, 64, 468/-.THE ASSESSEE HAD, IN THE RETURN ATTACHED A NO TE STATING THAT IT WAS IMPOSSIBLE FOR IT TO SUBSTANTIATE ITS CLAIM OF LOSS BY WAY OF ANY EVIDENCE AS THE RELEVANT RECORDS WERE SEIZED AND WERE WITH THE POLICE AUTHOR ITIES. THE AO AFTER BEING UNABLE TO OBTAIN COPIES OF THE SEIZED DOCUMENTS, BA SED HIS ASSESSMENT ORDER ON THE LIMITED DOCUMENTS PROVIDED AND REJECTED THE BOOK RE SULTS DECLARED BY THE ASSESSEE. HE ESTIMATED THE INCOME OF THE ASSESSEE AT RS.61,00 ,000/-.HE ALSO INITIATED PENALTY PROCEEDINGS SEPARATELY. THE FAA ESTIMATED THE TOTAL INCOME OF THE ASSESSEE AT RS. 1,02,980/-.THE TRIBUNAL CONFIRMED THIS ORDER. THE A O OBSERVED THAT THE PROFIT WAS ESTIMATED AFTER REJECTION OF BOOKS OF ACCOUNT DUE T O CERTAIN DISCREPANCIES AND IMPOSED A PENALTY ON THE ASSESSEE OF RS. 36,41,003/ -, ON THE GROUND THAT IT WAS A CLEAR CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE FAA DELETED THE PENALTY HOLDING THAT THE ADDITION MADE BY THE AO ON THE BASIS OF ESTIMATED PROFIT COULD NOT BE A SUBJECT-MATTER OF PENALTY FOR CONCEA LMENT OF INCOME. THE TRIBUNAL CONFIRMED THIS ORDER. ON APPEAL,THE AO DISMISSED TH E APPEAL AND HELD THAT THE 695 & 996/M/15-MIHIR & MUKESH 6 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 MIL LS(265 ITR 25)THE HONBLE CALCUTTA HIGH COURT HAS HELD AS UNDER: WHEN TWO VIEWS ARE POSSIBLE AND WHEN NO CLEAR AND D EFINITE INFERENCE CAN BE DRAWN, IN A PENALTY PROCEEDING, PENALTY CANNOT BE IMPOSED.I N QUANTUM PROCEEDINGS, A PARTICULAR PROVISION MIGHT BE ATTRACTED FOR ADDITIO N TO THE INCOME OF THE ASSESSEE. BUT WHEN IT COMES TO THE QUESTION OF IMPOSITION OF PENA LTY, THEN INDEPENDENT OF THE FINDING ARRIVED AT IN THE QUANTUM PROCEEDINGS, THE AUTHORIT Y HAS TO FIND CONCLUSIVELY THAT THE ASSESSEE OWNS THE CONCEALED AMOUNT. CONSIDERING THE FACT THAT TRIBUNAL HAS ADOPTED A PA RTICULAR RATE FOR ESTIMATING THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERA TION,WE HOLD THAT THE FAA WAS NOT JUSTIFIED IN CONFIRMING THE ORDER PASSED BY THE AO U/S. 271(1)(C) OF THE ACT. THEREFORE, REVERSING HIS ORDER, WE DECIDE THE EFFEC TIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. ITA/996/MUM/2015-AY.2005-06: 7. THE FACTS AND CIRCUMSTANCES OF THE CASE OR SIMILAR TO THE FACTS OF THE EARLIER MATTER-THE ONLY DIFFERENCE IS THE AMOUNT OF PENALTY LEVIED BY THE AO.FOLLOWING OUR ORDER, IN THE EARLIER APPEAL,WE DECIDE THE EFFECTIV E GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT APPEALS FILED BY BOTH THE ASSESSEES STA ND ALLOWED. . ORDER PRONOUNCE D IN THE OPEN COURT ON 27 TH JULY,2016. 27 , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 27.07.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 695 & 996/M/15-MIHIR & MUKESH 7 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.