MIHIR AGENCIES P.LTD, MUMBAI V. DCIT CEN CIR 46, MUMBAI

ITA 7534/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9114 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 17-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR RAIDR
• Assessee Lawyers: MUKESH CHOKSIAR
• Keywords: Rejection of books of accounts; Document seized; Difference of opinion; Accommodation entries; Documents seized
• Section: 27; 132

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -BBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./7534/MUM/2014, / ASSESSMENT YEAR: 2006-07 ./I.T.A./7536/MUM/2014, / ASSESSMENT YEAR: 2008-09 ./I.T.A./7537/MUM/2014, / ASSESSMENT YEAR: 2009-10 M/S. MIHIR AGENCIES PVT. LTD. BLOCK H, SHRI SADASHIV CHS LTD. 6 TH ROAD, SANTACRUZ (E) MUMBAI-400 055. PAN:AABCH 7898 H VS. DCIT, CENTRAL CIRCLE-46 ROOM NO.659, 6 TH FLOOR AAYAKAR BHAWAN, M.K. ROAD MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI SAURABH KUMAR RAI-DR /ASSESSEE BY: SHRI MUKESH CHOKSI-AR / DATE OF HEARING: 30/11/2016 / DATE OF PRONOUNCEMENT:06/01/2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA A.M. - CHALLENGING THE ORDERS DATED 31/10/2014 OF THE CIT( A)-38,MUMBAI THE ASSESSEE HAS FILED APPEALS FOR THE ABOVE MENTIONED THREE AY.S.THE ONLY ISSUE IN ALL THE APPEALS IS ABOUT LEVY OF PENALTY U/S.271(1)(C) OF THE ACT.AS THE APPEALS DEA L WITH THE SAME ISSUE,THEREFORE,FOR SAKE OF CONVENIENCE SAME ARE BEING DECIDED BY A SINGLE COMM ON ORDER. ITA/7534/MUM/2014 (AY.2006-07) 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 GROUP COMPAN IES.THE RESIDENTIAL PREMISES OF THE DIRECTORS OF THE COMPANY AND THE AUDITOR OF THE GRO UP COMPANIES WERE ALSO SEARCHED. DURING THE COURSE OF SEARCH IT WAS FOUND THAT THE ASSESSEE WAS MERELY PROVIDING ACCOMMODATION ENTRIES IN CASES INVOLVING TRADING, SPECULATION PRO FIT,SHORT-TERM AND LONG THE CAPITAL GAINS OR LOSSES, COMMODITY TRADING, DERIVATIVE PROFIT OR LOS S, SHARE APPLICATION MONEY,BOGUS INVOICES FOR PURCHASE AND SALES ETC.,THAT MUKESH CHOKSI (MC) WAS CONTROLLING ALL 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% DEP ENDING ON THE NATURE OF ACCOMMODATION 7534/14; 7536/14&7537/14 -MIHIR 2 ENTRIES PROVIDED.WHILE COMPLETING THE ASSESSMENT, T HE AO RELIED UPON THE STATEMENTS AGENTS AND EMPLOYEE OF MC AND ONE OF THE DIRECTORS OF THE GROUP COMPANIES.HE RELIED UPON THE SEIZED MATERIAL THAT WAS TAKEN INTO POSSESSION FROM THE MAIN OFFICE OF MAHASAGAR GROUP CONCERNS.BASED ON THE STATEMENTS AS WELL AS THE SEI ZED MATERIAL,THE AO HELD THAT THE ASSESSEE COMPANIES/INDIVIDUALS WERE IN RECEIPT OF COMMISSION IN THE RANGE 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 NIGHT COMMISSION AT THE RATE OF 2% OF THE TOTAL RECEIPT SHOWN IN THE BANK ACCOUNTS AFTER TAKING INTO ACCOUNT THE EXPENSES THA T COULD HAVE BEEN INCURRED. THE ASSESSEE CONTESTED THE ESTIMATE OF COMMISSION BEFORE THE FIR ST APPELLATE AUTHORITY (FAA).BEFORE HIM,THE ASSESSEE ARGUED THAT RATE OF COMMISSION SHO ULD BE TAKEN AT 0.15% IN VIEW OF THE ORDER OF THE TRIBUNAL.HOWEVER,THE THEN FAA CONFIRME D THE ORDER OF 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 SIMILAR TO THE FACTS AND CIRCUMSTANCES OF THE CASE AT HAND.IN THE MEANWHILE,THE AO LEVIED PENALTY U/S. 27 1(1)(C) AFTER THE CONFIRMATION OF THE QUANTUM ADDITION BY THE FAA. 4. CHALLENGING THE PENALTY ORDER OF THE AO THE ASSESSE E REFERRED TO THE CASES OF RELIANCE PETRO PRODUCTS LTD.(322 ITR 158), SREENIVASA PAI (242 ITR 29) AND DURGA TIMBER WORKS(79 ITR 63)AND CONTENDED THAT IT HAD DECLARED 0.15% INCOME FROM ITS ACTIVITIES, THAT THE THIRD PARTIES ALSO CONFIRMED THE ASSESSEE WAS GETTING COMMISSION OF SAME PERCENT, THAT THE AO HAD APPLIED RATE OF 2%,THAT THE TRIBUNAL HAD REDUCED THE RATE T O 0.15%,WHEN INCOME WAS ASSESSED ON ESTIMATE BASIS NO CONCEALMENT PENALTY COULD BE LEVI ED,THAT THERE WAS NO CONCRETE PROOF WITH THE AO ON THE BASIS OF IT A REASONABLE ESTIMATE COU LD 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 DIRECTORS AND THIRD PARTIES,THAT THE AO APPLIED ANOTHER PERCENT, THAT THE APPLICATION IS DIRECTED BY THE AO HAD NO C O-RELATION TO THE INCOME, THAT IF INCOME WAS DETERMINED ON ESTIMATE BASIS IT WAS NOT A FIT CASE FOR LIVING PENALTY U/S.271(1)(C),THAT THE ASSESSEE HAD EXTENDED FULL CO-OPERATION,THAT MERELY BECAUSE A HIGH PERCENTAGE OF INCOME WAS ADAPTED DIRECTION SHOULD NOT AUTOMATICALLY RESULT I NTO LEVYING OF CONCEALMENT PENALTY, THAT ENTIRE PARTICULARS OF INCOME,AS CALLED FOR BY THE A O,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 THE ASSESSM ENT AND PENALTY PROCEEDINGS WERE SEPARATE AND DISTINCT PROCEEDINGS, THAT THE QUANTUM FINDING WERE NOT BINDING IN THE PENALTY PROCEED - INGS.AFTER CONSIDERING THE AVAILABLE MATERIAL ON RE CORD,THE FAA HELD THAT THE ASSESSEE HAD 7534/14; 7536/14&7537/14 -MIHIR 3 BASICALLY DISPUTED THE RATE OF COMMISSION,THAT IT W AS SUBMITTED THAT NO INCRIMINATING DOCUMENTS WERE SEIZED DURING THE COURSE OF SEARCH,T HAT STATEMENTS OF EMPLOYEES AND AGENTS OF THE ASSESSEE RECORDED.HE REFERRED TO THE SEIZED DOCUMENTS AND HELD THAT AO WAS JUSTIFIED IN APPLYING THE RATE OF 2% FOR THE TRANSACTIONS ENT ERED INTO BY THE ASSESSEE, THAT HIS PREDECESSOR HAD CONFIRMED THE ORDER OF THE AO.REFER RING TO THE ORDER OF THE TRIBUNAL IN THE CASE OF GOLD STAR FINVEST PRIVATE LTD., FOR THE AY. 2002-03 HE HELD THAT COMMISSION INCOME AT THE RATE OF 0.15% WAS BASED ON THE SURVEY CONDUC TED AT THE BUSINESS PREMISES OF THAT COMPANY, THAT THE INCRIMINATING MATERIAL SEIZED DUR ING THE COURSE OF SEARCH AND THE STATEMENTS RECORDED IS FROM THE PERSONS CONCERNED R EVEALED THAT THE ASSESSES OF THE GROUP INCLUDING THE ASSESSEE WERE INDULGED IN ISSUING BOG US BILLS AND WOULD CHARGE 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 RELEV ANT STATEMENT AND THE INCRIMINATING MATERIAL SEIZED DOCUMENTS, THAT THE CONCEALMENT OF PARTICULARS INCOME WAS ESTABLISHED, THAT THE ASSESSEE HAD FAILED TO DISCLOSE THE TRUE AND CO RRECT COMMISSION INCOME IN THE ORIGINAL RETURN, THAT THE AO WAS JUSTIFIED IN INVOKING THE P ROVISIONS 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 FROM MISCHIEF PENALTY PROVISIONS. FINALLY,HE UPHELD THE PENALTY LEVIED BY THE AO, U/S. 271(1)(C), AMOUNTING TO RS.2 9.80 LAKHS. 5. DURING THE COURSE OF HEARING BEFORE US, MUKESH CHOK SI STATED THAT THE TRIBUNAL HAD DELETED THE PENALTY IN ASSESSEES OWN CASE AS WELL IN THE I NDIVIDUAL CASE,WHILE DECIDING THE APPEAL FOR THE EARLIER AND SUBSEQUENT YEARS.HE REFERRED TO ITA NO.S.6335-6441/MUM/2012 DT.06.01. 2016 AND ITA NO.695/ MUM/ 2015,DT.27/07/2016. THE DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 6. WE FIND THAT WHILE DECIDING THE APPEAL NO.695/MUM/2 015,THE TRIBUNAL HAS DECIDED THE ISSUE AS UNDER :- 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 WA S CARRIED OUT COVERING ALL THE GROUP ENTITIES INCLUDING THE ASSESSEE UNDER CONSIDERATION, THAT IT WAS FOUND GROUP CONCERNS WERE ENGAGED IN PROVIDING 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 CONFIRMED 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 /6 435/MUM/2012 AY-2004-05 AND OTHER SIX APPEALS DT.6.1.16). THE UNDISPUTED FACT IS THAT THE RE IS DIFFERENCE OF OPINION AS TO HOW MUCH INCOME SHOULD BE ESTIMATED FOR THE HAWALA ENTRIES-T HE AO ESTIMATED AT A PARTICULAR PERCENTAGE, 7534/14; 7536/14&7537/14 -MIHIR 4 WHEREAS THE ASSESSEE HAD SHOWN THE INCOME AT A DIFF ERENT 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 JU STIFIED.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 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, 1961DECLARING 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 EVIDEN CE AS THE RELEVANT RECORDS WERE SEIZED AND WERE WITH THE POLICE AUTHORITIES. THE AO AFTER BEING UNA BLE 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 THE INCOME O F THE ASSESSEE AT RS.61,00,000/-.HE ALSO INITIATED PENALTY PROCEEDINGS SEPARATELY. THE FAA E STIMATED 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 TO CERTAIN DISCRE PANCIES AND IMPOSED A PENALTY ON THE ASSESSEE OF RS. 36,41,003/-, ON THE GROUND THAT IT WAS A CLE AR CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE FAA DELETED THE PENALTY HOLDING THAT TH E ADDITION MADE BY THE AO ON THE BASIS OF ESTIMATED PROFIT COULD NOT BE A SUBJECT-MATTER OF P ENALTY FOR CONCEALMENT OF INCOME. THE TRIBUNAL CONFIRMED THIS ORDER. ON APPEAL,THE AO DISMISSED TH E APPEAL AND HELD THAT 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 MILLS(265 ITR 25)THE HONBLE CALCUTTA HI GH COURT HAS HELD AS UNDER: WHEN TWO VIEWS ARE POSSIBLE AND WHEN NO CLEAR AND DEFINITE 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 IN COME OF THE ASSESSEE. BUT WHEN IT COMES TO THE QUESTION OF IMPOSITION OF PENALTY, THEN INDEPEN DENT 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 PA RTICULAR RATE FOR ESTIMATING THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION,WE HOLD T HAT THE FAA WAS NOT JUSTIFIED IN CONFIRMING THE ORDER PASSED BY THE AO U/S. 271(1)(C) OF THE ACT. T HEREFORE, REVERSING HIS ORDER, WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSE E. RESPECTFULLY FOLLOWING THE ABOVE,EFFECTIVE GROUND O F APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. ITAS NO.7536 & 7537/MUM/2014,AY.S. 2008-09 & 09-10: 7. THE FACTS OF BOTH THE CASES ARE IDENTICAL TO THE FA CTS OF THE APPEAL OF AY.2006-07.SO, FOLLOWING THAT ORDER EFFECTIVE GROUNDS OF APPEAL AR E DECIDED IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEALS FILED BY THE ASSESSEE FOR ALL T HE THREE AY.S. STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH JANUARY, 2017. , 2017 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 06.01.2017. JV.SR.PS. 7534/14; 7536/14&7537/14 -MIHIR 5 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR B BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.