ALPHA CHEMIE TRADE AGENCIES P.LTD, MUMBAI V. DCIT CC 46, MUMBAI

ITA 698/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2464 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2004-2005
• Appeal Filed On: 02-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Document seized; Difference of opinion; Accommodation entries; Documents seized
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J , MUMBAI BEFORE S HRI C.N. PRASAD, J UDICIAL MEMBER AND SHRI N.K. PRADHAN , A CCOUNTANT MEMBER ITA NO. 698 & 709 /MUM/20 1 5 ( ASSESSMENT YEAR S : 2004 - 05 & 2008 - 09 ) ALPHA CHEMIE TRADE AGENCIES P. LTD. , BLOC K - H, SHRI SADASHIV CHS LTD., 6 TH ROAD, SANTACRUZ (E), MUMBAI 400 055 PAN : AADCA 9890 L VS. DCIT, CENTRAL CIRCLE - 46, MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MUKESH CHOKSHI DEPARTMENT BY : SHRI RAJESH OJHA - DR DATE OF HEARING : 18 / 10/2016 DATE OF PRONOUNCEMENT : 21 /10/2016 O R D E R PER C.N. PRASAD , J M BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE COMMON ORDER OF THE LD. CIT(A) - 38, MUMBAI DATED 14/11/2014 FOR THE ASSESSMENT YEAR S 2004 - 05 & 2008 - 09 IN SUSTAINING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 2 . THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE QUANTUM APPEALS FOR THE ASSESSMENT YEARS 2004 - 05 & 2008 - 09 IN ITA 6559 & 6563/MUM/2012 HAVE BEEN SET ASIDE TO THE ASSES SING OFFICER FOR RE - COMPUTING THE COMMISSION INCOME AT 0.15% AS AGAINST 2% APPLIED BY THE ASSESSING OFFICER ON THE ASSESSEES ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES . HE FURTHER SUBMITTED THAT I N IDENTICAL CIRCUMSTANCES IN OTHER CASES 2 ITA NO S . 698 & 709 /MUM/201 5 WERE S IMILAR ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES CARRIED ON BY THE ASSESSEE , THE C OMMISSION WAS ESTIMATED AND THE PENALTY LEVIED ON SUCH ESTIMATE WAS DELETED BY THE I.T.A.T., MUMBAI BENCH IN VARIOUS CASES. T HEREFORE, HE PLEADED DELETION OF PENALTY IN AS SESSEE CASE ALSO . 3 . DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW . 4 . WE HAVE HEARD RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE CASE - LAWS BEFORE US. ADMITTEDLY, THE ASSESSEE PROVIDED ACCOMMODAT ION ENTRIES IN THIS CASE. THE BACKDROP OF THE DISPUTE IS THAT SEARCH AND SEIZURE UNDER SECTION 132(1) WAS CONDUCTED IN THE CASE OF SEVERAL COMPANIES , WHOSE KINGPIN IS IDENTIFIED AS ONE MR. MUKESH CHOKSI. IT WAS FOUND IN THE COURSE OF SEARCH THAT SUCH EN TITIES WERE PROVIDING ACCOMMODATION ENTRIES BY WAY OF SHARE T R ADING/LOANS ETC. AS THE ASSESSEE HEREIN ALSO WAS COVERED IN THE SEARCH, ASSESSMENT S UNDER SECTION 143(3) READ WITH SECTION 153C OF THE ACT W ERE MADE FOR ASSESSMENT YEAR S 200 4 - 05 & 2008 - 09 , WHER EIN ADDITIONS WERE MADE. SUCH ASSESSMENT OF INCOME HAS BEEN FURTHER AFFIRMED BY THE LD. CIT(A) . 5. DURING THE COURSE OF SEARCH PROCEEDINGS, THE REVENUE HAD NOTED THAT FOR PROVIDING ACCOMMODATION ENTRIES, THE ENTRIES LIKE THE ASSESSEE, WHICH WERE CONTROLL ED BY MR. MUKESH CHOKSI WERE EARNING COMMISSION INCOME. IN VIEW OF SUCH MODUS OPERANDI NOTED AND THE STATEMENTS OF MR. MUKESH CHOKSI RECORDED AT THE TIME OF SEARCH, THE ASSESSING OFFICER NOTES THAT THE GROUP WAS EARNING COMMISSION RANGING FROM 1.5% TO 3.5 % AND ACCORDINGLY HE ESTIMATED THE NET COMMISSION INCOME @ 2%. ACCORDINGLY, BASED ON THE TOTAL RECEIPTS REFLECTED IN THE BANK ACCOUNT, THE ASSESSING OFFICER ESTIMATED THE COMMISSION INCOME @ 2% . THIS ACTION OF THE ASSESSING OFFICER HAS SINCE BEEN UPHELD BY THE LD. CIT(A). 3 ITA NO S . 698 & 709 /MUM/201 5 6. THE ASSESSEE PREFERRED APPEAL BEFORE THE I.T.A.T. AND THE COORDINATE BENCH OF THIS TRIBUNAL IN QUANTUM PROCEEDINGS IN ITA NO. 6559 & 6563/MUM/2012 BY FOLLOWING VARIOUS DECISIONS IN SIMILAR FACTS, DIRECTED THE ASSESSING OFFICER TO RE - C OMPUTE THE COMMISSION INCOME AT 0.15% INSTEAD OF 2% APPLIED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER LEVIED PENALTY FOR THE ADDITION MADE ON ACCOUNT OF COMMISSION INCOME. THE MATTER WAS CARRIED OUT TO THE LD. CIT(A), WHO SUSTAINED THE PENALTY BY F OLLOWING THE CASES WHERE SIMILAR ADDITIONS WERE MADE AND IN THE CASE S OF GOLDSTAR FINVEST PVT. LTD. , M/S. KAYCEE S H ARES BROKING PVT. LTD. , M/S. MIHIR AGENCIES PVT. LTD. AND FINALLY THE ASSESSEE FOR THE ASSESSMENT YEAR 2009 - 10 & 2010 - 11. WE HAVE ALSO PERUSED THE COORDINATE BENCH DECISIONS IN THE CASE OF GOLDSTAR FINVEST PVT. LTD., M/S. KAYCEE SHARES BROKING PVT. LTD., M/S.MIHIR AGENCIES PVT. LTD., WHEREIN THE COORDINATE BENCH DELETED THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. IN AN IDENTICAL FACTS AND CIRCUMSTANCES IN THE CASE OF M/S. KAYCEE SHARES BROKING PVT. LTD., THE COORDINATE BENCH DELETED THE PENALTY BY FOLLOWING THE DECISION IN THE CASE OF M/S. MIHIR AGENCIES PVT. LTD. THE OPERATIVE PORTION OF THE ORDER IS REPRODUCED HEREIN UNDER: - 4. IN THE ABOVE BACKGROUND, LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT SIMILAR SITUATION HAS BEEN DEALT WITH BY THE TRIBUNAL IN THE CASE OF MIHIR AGENCIES PVT. LTD., & MR. MUKESH CHOKSI (SUPRA), WHEREIN THE PENALTY LEVIED UNDER SECTION 2 71(1)(C) OF THE ACT HAS BEEN DELETED. LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE TRIBUNAL HAS DULY NOTED THAT THE DIFFERENCE BETWEEN THE ASSESSEE AND THE REVENUE WAS PRIMARILY ON THE ESTIMATION OF INCOME EARNED FROM PROVIDING OF ACCOMMODATION ENTRIES AND, THEREFORE, THE SAME WOULD NOT BE EXIGIBLE FOR PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN THIS CONTEXT, HE HAS REFERRED TO THE FOLLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL DATED 27/07/2016 (SUPRA): - 6 .WE HAVE HEARD THE RIVAL SUBMIS SIONS 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 PROVI DING ACCOMMODATION BILLS/HAWALA ENTRIES, THAT THE ASSESSEE DID NOT DISPUTE THE SAID FACT, THAT THE AO ESTIMATED THE INCOME FROM THE ACCOMMODATION ENTRIES @ 2% OF THE TOTAL TRANSACTIONS APPEARING IN THE BANK ACCOUNTS OF THE ASSESSEE, THAT THE THEN FAA 4 ITA NO S . 698 & 709 /MUM/201 5 CONFI RMED 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). THE UNDISPUTED FACT IS THAT THERE IS DIFFERENCE OF OPINION AS TO HOW MUCH INCOME SHOULD BE ESTIMATED FOR THE HAWALA ENTRIES - THE AO ESTIMATED AT A PARTICULAR PERCENTAGE, WHEREAS THE ASSESSEE HAD SHOWN THE INCOME 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 ESTIMATED 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 AND 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 THE M IS AERO TRADERS P. LTD.(322 ITR 316).IN THAT CASE T HE ASSESSEE - COMPANY HAD FILED ITS RETURN OF INCOME FOR THE YEAR 1997 - 98 ON A NOTICE U/S.148 OF THE ACT, 1961DECLARING A LOSS OF RS. 83, 64, 468/ - .THE ASSESSEE HAD, IN THE RETURN ATTACHED A NOTE STATING THAT IT WAS IMPOSSIBLE FOR IT TO SUBSTANTIATE ITS CLAI M OF LOSS BY WAY OF ANY EVIDENCE AS THE RELEVANT RECORDS WERE SEIZED AN D WERE WITH THE POLICE AUTHORITIES. THE AO AFTER BEING UNABLE TO OBTAIN COPIES OF THE SEIZED DOCUMENTS, BASED HIS ASSESSMENT ORDER ON THE LIMITED DOCUMENTS PROVIDED AND REJECTED THE BO OK RESULTS 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 AO O BSERVED THAT THE PROFIT WAS ESTIMATED AFTER REJECTION OF BOOKS OF ACCOUNT DUE TO 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 CONCEALMENT OF INCOME. THE TRIBUNAL CONFIRMED THIS ORDER. ON APPEAL, THE AO DISMISSED THE APPEAL AND HELD THAT THE FI NDING ARRIVED AT BY THE TRIBUNAL DID NOT WARRANT INTERFERENCE AS IT WAS PURELY A FINDING OF FACT. IN THE CASE OF DURGA KAMAL RICE MILLS(265 ITR 25)THE HONBLE CALCUTTA HIGH COURT HAS HELD AS UNDER: WHEN TWO VIEWS ARE POSSIBLE AND WHEN NO CLEAR AND DEFIN ITE INFERENCE CAN BE DRAWN, 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, T HEN INDEPENDENT OF THE FINDING ARRIVED AT IN THE QUANTUM PROCEEDINGS, THE AUTHORITY HAS TO FIND CONCLUSIVELY THAT THE ASSESSEE OWNS THE CONCEALED AMOUNT. CONSIDERING THE FACT THAT TRIBUNAL HAS ADOPTED A PARTICULAR RATE FOR ESTIMATING THE INCOME OF THE A SSESSEE FOR THE YEAR UNDER CONSIDERATION, 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 EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. 5 ITA NO S . 698 & 709 /MUM/201 5 5. THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT DISPUTED THE FACTUAL MATRIX BROUGHT OUT BY THE LD. REPRESENTATIVE FOR THE ASSESSEE, T HOUGH HE HAS DEFENDED THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMI SSIONS. IT IS ABUNDANTLY CLEAR THAT MODUS OPERANDI AND THE NATURE OF INCOME EARNED BY THE ASSESSEE, WHICH HAS BEEN SUBJECTED TO THE PENAL PROVISIONS OF SECTION 271(1)(C) OF THE ACT IN THE INSTANT CASE, ARE SIMILAR TO THOSE CONSIDERED BY THE CO - ORDINATE BEN CH IN THE CASE OF MIHIR AGENCIES PVT. LTD., & MR. MUKESH CHOKSI (SUPRA). IT IS ALSO ABUNDANTLY CLEAR THAT IN THE PRESENT CASE ALSO THE VARIATION IN THE QUANTUM OF INCOME ASSESSABLE BETWEEN ASSESSEE AND THE REVENUE IS ON ACCOUNT OF ESTIMATION ONLY , AN IDENT ICAL SITUATION WHICH HAS BEEN CONSIDERED IN THE AFORESAID PRECEDENTS. THEREFORE, FOLLOWING THE AFORESAID PRECEDENTS, WHICH HAVE BEEN RENDERED IN SIMILAR CIRCUMSTANCES, WE HEREBY SET - ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE T HE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. THUS ON THIS ASPECT, ASSESSEE SUCCEEDS. 7. RESPECTFULLY FOLLOWING THE AFORESAID DECI S ION, WE DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) IN THESE CASES, AS THE FACTS AND CIRCUMSTANCES BEING I DENTICAL , AS THE COMMISSION INCOME ASSESSABLE IN THE HANDS OF THE ASSESSEE HAS BEEN ON ESTIMATE BASIS , NO PENALTY IS ATTRACTED ON THE ADDITIONS/DISALLOWANCE S MADE ON ESTIMATE BASIS . 8 IN THE RESULT, THE BOTH THE APPEAL S FILED BY THE ASSESSEE ARE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCTOBER, 2016 S D/ - SD/ - ( N.K. PRADHAN ) ( C.N. PRASAD ) A CCOUNTANT M EMBER J UDICIAL M EMBER MUMBAI DATED: 21 / 1 0/2016 6 ITA NO S . 698 & 709 /MUM/201 5 COPY OF THE ORDER FORWARDED T O : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI VR/ -