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

ITA 7563/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3293 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 18-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Keywords: Gift; Search and seizure; Document seized; Accommodation entries; Documents seized
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAMLAL NEGI, JUDICIAL MEMBER ITA NO. 7563/MUM/2014 (ASSESSMENT YEAR : 2009-10) M/S. ALPHA CHEMIE TRADE AGENCIES PRIVATE LIMITED, BLOCK H, SHRI SADASHIV CHS LTD. 6 TH ROAD, SANTACRUZ (E), MUMBAI 400 055. PAN:AADCA 9890L ...... APPELLANT VS. THE DCIT, CEN. CIR.46, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 .... RESPONDENT APPELLANT BY : SHRI MUKESH CHOKSI RESPONDENT BY : SHRI R.P.MEENA DATE OF HEARING : 07/09/2016 DATE OF PRONOUNCEMENT : 09/09/2016 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAI NING TO ASSESSMENT YEAR 2009-10 IS DIRECTED AGAINST AN ORD ER PASSED BY CIT(A)- 38 MUMBAI DATED 31/10/2014 WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 271(1 )(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 02/05/2013 . 2 ITA NO. 7563/MUM/2014 (ASSESSMENT YEAR : 2009-10) 2. IN THIS APPEAL, THE ONLY ISSUE RAISED IS WITH RE GARD TO THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT AMOUNTIN G TO RS.13,88,000/- 3. AT THE TIME OF HEARING THE LD. REPRESENTATIVE FO R THE ASSESSEE SUBMITTED THAT UNDER IDENTICAL CIRCUMSTANCES PENALT Y UNDER SECTION 271(1)(C) OF THE ACT HAS BEEN DELETED BY THE TRIBUN AL IN THE CASES OF M/S. MIHIR AGENCIES PVT. LTD., IN ITA NO.695/MUM/2 015 AND MR. MUKESH CHOKSI, IN ITA NO.996/MUM/2015 ORDER DATED 27/07/2016, WHO ARE ENTITIES OF THE SAME GROUP 3.1 THE RELEVANT FACTS ARE THAT THE ASSESSMENT UNDE R SECTION 143(3) R.W.S. 153C OF THE ACT WAS COMPLETED IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2009-10 ON 8/12/2011, WHEREIN INTER -ALIA, AN ADDITION WAS MADE TO THE RETURNED INCOME ON ACCOUNT OF COMMI SSION EARNED FROM THE ACTIVITY OF PROVIDING ACCOMMODATION ENTRIE S AMOUNTING TO RS.81,29,164/-. THIS ADDITION WAS MADE BY ESTIMATIN G THE NET COMMISSION INCOME @2% ON THE TOTAL RECEIPTS AS REFL ECTED IN THE BANK ACCOUNTS. NOTABLY, WHILE MAKING SUCH ADDITION, THE ASSESSING OFFICER BROUGHT OUT THAT SEARCH AND SEIZURE ACTION UNDER SE CTION 132(1) OF THE ACT WAS CARRIED OUT ON 25/11/2009 IN THE CASES OF M AHASAGAR SECURITIES PVT. LTD. (NOW KNOWN AS M/S. ALAG SECURITIES PVT. L TD.), MIHIR AGENCIES PVT. LTD., M/S. ALLIANCE INTERMEDIATERIES AND NETWO RK PVT. LTD., AND OTHER COMPANIES BELONGING TO THE SAME GROUP AND MR. MUKESH CHOKSI. THE PRESENT ASSESSEE WAS ALSO COVERED UNDER SUCH SE ARCH AND SEIZURE ACTION UNDER SECTION 132(1) OF THE ACT. DURING THE COURSE OF SEARCH A MODUS OPERANDI WAS DETECTED, WHEREBY THE ENTITIES M ANAGED AND CONTROLLED BY MR.MUKESH CHOKSI WERE ENGAGED IN PROV IDING ACCOMMODATION ENTRIES BY WAY OF SHARE TRADING, CAPI TAL GAINS, 3 ITA NO. 7563/MUM/2014 (ASSESSMENT YEAR : 2009-10) SPECULATION PROFIT ENTRIES, GIFTS, ETC. BASED ON T HE FINDINGS IN THE COURSE OF SEARCH INCLUDING THE STATEMENT OF MR. MUKESH CHO KSI, THE ASSESSING OFFICER DEDUCED THAT ASSESSEE HAD EARNED COMMISSION FROM THE ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES, WHICH WAS ESTIM ATED @2%. THE AFORESAID ESTIMATION OF COMMISSION INCOME TRAVELLED TO THE TRIBUNAL AND VIDE OUR ORDER OF EVEN DATE THE SAME HAS BEEN S CALED DOWN FOLLOWING THE DECISIONS OF THE TRIBUNAL IN THE OTHE R CONCERNS OF THE GROUP. 4. IN THE ABOVE BACKGROUND, LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT SIMILAR SITUATION HAS BEEN DEALT W ITH BY THE TRIBUNAL IN THE CASE OF MIHIR AGENCIES PVT. LTD., & MR. MUKESH CHOKSI (SUPRA), WHEREIN THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT HAS BEEN DELETED. LD. REPRESENTATIVE FOR THE ASSESSEE POINT ED OUT THAT THE TRIBUNAL HAS DULY NOTED THAT THE DIFFERENCE BETWEE N THE ASSESSEE AND THE REVENUE WAS PRIMARILY ON THE ESTIMATION OF INCO ME 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 DISCUSSIO N IN THE ORDER OF THE TRIBUNAL DATED 27/07/2016 (SUPRA):- 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 INCLUDI NG THE ASSESSEE UNDER CONSIDERATION, THAT IT WAS FOUND GROUP CONCERNS WER E ENGAGED IN PROVIDING ACCOMMODATION BILLS/HAWALA ENTRIES, THAT THE ASSESS EE DID NOT DISPUTE THE SAID FACT, THAT THE AO ESTIMATED THE INCOME FROM TH E ACCOMMODATION ENTRIES @ 2% OF THE TOTAL TRANSACTIONS APPEARING IN THE BAN K ACCOUNTS OF THE ASSESSEE, THAT THE THEN FAA CONFIRMED THE QUANTUM A DDITION MADE BY THE AO, THAT IN THE CASE UNDER CONSIDERATION THE TRIBUN AL 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 D T.6.1.16). THE 4 ITA NO. 7563/MUM/2014 (ASSESSMENT YEAR : 2009-10) UNDISPUTED FACT IS THAT THERE IS DIFFERENCE OF OPIN ION 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 ESTIMATED ADDITION COULD NOT BE HELD TO BE JUSTIFIE D. NO AUTHORITY IS REQUIRED TO BE CITED THAT PENALTY AND ASSESSMENT PROCEEDINGS ARE SEPARATE AND DISTINCT PROCEEDINGS AND THE QUANTUM PROCEEDINGS SH OULD 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 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 NOTE STATING THAT IT WAS IMPOSSIBLE FOR IT TO SUBSTANTIA TE ITS CLAIM 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 CO PIES OF THE SEIZED DOCUMENTS, BASED HIS ASSESSMENT ORDER ON THE LIMITE D DOCUMENTS PROVIDED AND REJECTED THE BOOK RESULTS DECLARED BY THE ASSES SEE. HE ESTIMATED THE INCOME OF THE ASSESSEE AT RS.61,00,000/-.HE ALSO IN ITIATED PENALTY PROCEEDINGS SEPARATELY. THE FAA ESTIMATED THE TOTAL INCOME OF THE ASSESSEE AT RS.1,02,980/-.THE TRIBUNAL CONFIRMED THIS ORDER. THE AO OBSERVED THAT THE PROFIT WAS ESTIMATED AFTER REJECTION OF BOOKS OF AC COUNT 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 I NACCURATE 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 PENALTY FOR CONCEALMENT OF INCOME. THE TRIBUNAL CONFIRMED T HIS ORDER. ON APPEAL,THE AO DISMISSED THE APPEAL AND HELD THAT THE FINDING ARRIVED AT BY THE TRIBUNAL DID NOT WARRANT INTERFERENCE AS IT WAS PURELY A FIN DING OF FACT. IN THE CASE OF DURGA KAMAL RICE MILLS(265 ITR 25)THE HONBLE CALCU TTA HIGH COURT HAS HELD AS UNDER: WHEN TWO VIEWS ARE POSSIBLE AND WHEN NO CLEAR AND DEFINITE INFERENCE CAN BE DRAWN, IN A PENALTY PROCEEDING, PE NALTY CANNOT BE IMPOSED.IN QUANTUM PROCEEDINGS, A PARTICULAR PROV ISION MIGHT BE ATTRACTED FOR ADDITION TO THE INCOME OF THE ASSESSE E. BUT WHEN IT COMES TO THE QUESTION OF IMPOSITION OF PENALTY, THE N INDEPENDENT OF THE FINDING ARRIVED AT IN THE QUANTUM PROCEEDINGS, THE AUTHORITY HAS TO FIND CONCLUSIVELY THAT THE ASSESSEE OWNS THE CON CEALED 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 THAT THE FAA WAS NOT JUSTIFIED IN CONFIRMING T HE 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 ASSESSE E. 5 ITA NO. 7563/MUM/2014 (ASSESSMENT YEAR : 2009-10) 5. THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT DIS PUTED THE FACTUAL MATRIX BROUGHT OUT BY THE LD. REPRESENTATIV E FOR THE ASSESSEE, THOUGH HE HAS DEFENDED THE LEVY OF PENALTY UNDER SE CTION 271(1)(C) OF THE ACT. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. IT IS ABUNDANTLY CLEAR THAT MODUS OPERANDI AND THE NATURE OF INCOME EARNED BY THE ASSESSEE, WHICH HAS BEEN SUBJECTED TO THE P ENAL PROVISIONS OF SECTION 271(1)(C) OF THE ACT IN THE INSTANT CASE, A RE SIMILAR TO THOSE CONSIDERED BY THE CO-ORDINATE BENCH IN THE CASE OF MIHIR AGENCIES PVT. LTD., & MR. MUKESH CHOKSI (SUPRA). IT IS ALSO AB UNDANTLY 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 IDENTICAL SITUATION WHICH HAS BEEN CONSIDERED IN THE AFORESAID PRECEDENTS. THEREFORE, FOLLOWING THE AFORESAID PREC EDENTS, WHICH HAVE BEEN RENDERED IN SIMILAR CIRCUMSTANCES, WE HEREBY S ET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO D ELETE THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. THUS ON THIS ASPECT, ASSESSEE SUCCEEDS. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED , AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 09/09/2016 SD/- SD/- (RAMLAL NEGI) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 09/09/2016 VM , SR. PS 6 ITA NO. 7563/MUM/2014 (ASSESSMENT YEAR : 2009-10) 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. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI