TALENT INFOWAY LTD, MUMBAI V. ACIT CEN CIR 46, MUMBAI

ITA 7753/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1794 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 08-04-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 28-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Accommodation entries
• Section: 143(3); 147; 68; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH , MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND ASHWANI TANEJA , AM ITA NO . 7753 /MUM/ 2012 (A.Y: 20 03 - 04 ) TALENT INFOWAY LTD. BLOCK H.SHRI SADASHIV CHS LTD. 6 TH ROAD, SANTACTUZ - EAST, MUMBAI - 400055 PAN NO.AAACL3305J VS . DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 46 APPELLANT .. RESPONDENT ITA NO. 1095/ MUM/ 2013 (A.Y:20 03 - 04 ) DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 46 VS. TALENT INFOWAY LTD. BLOCK H.SHRI SADASHIV CHS LTD. 6 TH ROAD, SANTACTUZ - EAST, MUMBAI - 4000 55 PAN NO.AAACL3305J APPELLANT .. RESPONDENT ASSESSEE BY .. SHRI. MUKESH CHOKSI, AR REVENUE BY .. MISS. ARJU GARODIA, DR DATE OF HEARING .. 2 3 - 11 - 2016 DATE OF PRONOUNCEMENT .. 06 - 12 - 2016 O R D E R PER MAHAVIR SINGH , JM : THESE TWO CROSS APP EAL , ONE BY THE REVENUE AND OTHER BY THE ASSESSEE , ARE ARISING OUT OF THE COMMON ORDER OF CIT (A) - 37 , MUMBAI IN APPEAL NO. CIT (A) - 37/I.T. - 99/ACCC - 46/11 - 12 DATED 20 - 11 - 2012 . THE ASSESSMENT WAS FRAMED BY ACIT CENTRAL CIRCLE - 46 , MUMBAI FOR THE A . Y . 2003 - 04 V IDE HIS ORDER DATED 31 - 12 - 2010 U/S 143(3) R. W. S. 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. THE ONLY ISSUE IN THESE CROSS APPEAL OF REVENUE AND ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) RESTRICTING THE DISALLOWANCE AT 2% OF NET COMMIS SION OF ASSESSEE OUT OF A TOTAL RECEIPTS SHOWN BY THE ASSESSEE BEING SALES MADE TO SHARP PRODUCTS PRIVATE LTD. AMOUNTING TO RS.3.11 CRORE. 3. BRIEFLY STATED FACTS ARE THAT A SEARCH ACTION U/S. 132 OF THE ACT WAS CARRIED OUT ON 25/11/09 IN THE CASE OF MAHASAGA R GROUP OF COMPANIES , KNOWN AS ALAG SECURITIES , WERE ENGAGED IN FRAUDULENT BILLING ACTIVITIES IN THE BUSINESS OF PROVIDING BOGUS SPECULATION/PROFIT LOSS, SHORT TERM/LONG TERM GAIN/LOSS ITA NO. 7753 / MU M/2012 ITA NO.1095/MUM/2013 2 COMMODITIES P ROFIT/LOSS ON COMMODITY TRADING. DURING SEARCH, IT WAS NOT ICED THAT THE A SSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODAT ION ENTRIES. DURING THE COURSE OF SEARCH, CERTAIN INCRIMINATING MATERIAL PERTAINING TO THE ASSESSEE WAS FOUND AND SEIZED. ACCORDINGLY, NOTICE U/S. 153C OF THE ACT WAS ISSUED AND ASSE SSMENT U/S. 143(3) R. W. S 153C OF THE ACT WAS COMPLETED ON 24/11/08 AT TOTAL INCOME OF RS. NIL. LATER, ON THE BASIS OF SEARCH CARRIED OUT, THE AO WAS OF THE OPINION THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT AND A NOTICE U/S 148 DATED 31/03/10 WAS ISSUED AND REASONS FOR ISSUING NOTICE U/S 148 OF THE ACT WERE COMMUNICATED . 4. DURING A SSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE WAS ONE O F THE COMPANIES FLOATED BY SHRI MUKESH CHOKSI AND HIS ASSOCIATES. DURING THE SEARCH & SEIZURE PROCEEDING S IN THE OFFICE PREMISES OF SHRI MUKESH CHOKSI, EXTERNAL HARD DISC WAS FOUND AND SEIZED. P ERUSAL OF THE DATA REVEALED THAT THE ASSESSEE HAD SOLD NEWS FLASH, NEW EDITING, MPEG2 COMPRESSION SOFTWARE AMOUNTING TO RS3 .11 CR TO SHAF BROADCAST PVT. LTD. IT WAS NOTICED THAT THE ASSESSEE HAD NOT REFLECTED THESE SALE S I N THE BOOKS OF ACCOUNTS AND FAILED TO PAY THE TAXES ON THE INCOME ACCRUED FRO M THE SAID SALES . EVEN DURING ASSESSMENT PROCEEDINGS THE ASSESSEE DID NOT FURNISH THE DETAILS OF THE AMOUNT CREDITED IN BA NK ACCOUNT IN CASH AS WELL AS OTHER CREDITS. FURTHER, NO DOCUMENTARY EVIDENCE IN S UPPORT OF ITS CLAIM AS WELL AS THE DETAILS OF PERSONS TO WHOM ACCOMMODATION BILL S WERE GIVEN OR PROVIDED TO THE AO THAT IT HAD PROVIDED ACCOMMODATION BILLS. ACCORDINGLY, THE A O ADDED RS.3.11 CR TO THE TOTAL INCOME OF THE ASSESSE E A S UNDISCLOSED SALES. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 5. THE CIT(A ) RESTRICTED THE ADDITION @ 2% OF NET COMMISSION AND DELETED THE BALANCE ADDITION BY OBSERVING IN PARA 5.18 TO 5.20 A S UNDER: - 5.18. IN VIEW OF THE ABOVE, LD.AR HAS SUBMITTED THAT AS THE LD. AO HAS HIMSELF TREATED THE APPELLANT AS BELONGING TO MUKESH CHOKSI GROUP IN WHOSE CASE COMMISSION INCOME OF 0.15% HAS BEEN UPHELD BY THE HON'BLE TRIBUNAL IN VARIOUS CASES, EVEN IN THIS CASE ADDITION WHICH COULD AT BEST BE MADE IS THE COMMISSION ON THE ALLEGED UNDISCLOSED SALES OF RS.3,11,00,000/ - . THE LD. AR FURTHER STATED THAT IDENTICAL ISSUES WERE RAISED IN THE CASE OF MUKESH CHOKSI AND HIS VARIOUS CORPORATE ENTITIES IN EARLIER A SSESSMENT YEARS WHEREIN THE ENTIRE DEPOSITS IN THE BANK ACCOUNTS WERE ASSESSED TO TAX. THE SAID ISSUES ITA NO. 7753 / MU M/2012 ITA NO.1095/MUM/2013 3 WERE CHALLENGED BEFORE THE HON'BLE TRIBUNAL WHEREIN THE HON'BLE TRIBUNAL, MUMBAI TOOK A VIEW THAT SINCE THESE CONCERNS WERE INVOLVED IN PROVIDING ACCOMMO DATION ENTRIES ONLY, A PERCENTAGE OF COMMISSION SHOULD BE ASSESSED IN THEIR HANDS AND NOT THE ENTIRE DEPOSIT AMOUNT. IT HAS FURTHER BEEN STATED THAT ACCORDINGLY, THE HON'BLE MUMBAI TRIBUNAL HELD THAT ONLY 0.15% OF THE TOTAL DEPOSITS ARE TO BE TREATED AS IN COME FROM THE COMMISSION IN THE HANDS OF THE RESPECTIVE ENTITIES.LD.AR RELIED ON THE FOLLOWING ORDERS OF THE HON'BLE MUMBAI TRIBUNAL: A. GOLD STAR FINVEST P. LTD. V. ITO (ITA NO.5000/MUM/2005) B. M/S. RICHMOND SECURITIES P. LTD. VS. ITO (ITA NO.5009/MUM/20 05) C. ITO V. M/S. ALPHA CHEMIE TRADE AGENCIES P.LTD. (ITANO.4999/MUM/ 2005) D. ITO VS. MIHIR AGENCIES P. LTD. (ITA NO.4912/MUM/2005) 5.19. LD. AR HAS ALSO BROUGHT: INTO MY NOTICE THAT THE LD.AO IN HIS LATEST ORDER FOR A.Y.2010 - 11 IN APPELLANT'S CASE HAS D ETERMINED THE INCOME ON THE BASIS OF NET COMMISSION OF THE ASSESSEE OF 2% OF THE TOTAL RECEIPTS SHOWN IN THE BANK ACCOUNTS. IN THAT VIEW OF THE MATTER, IT HAS BEEN PLEADED THAT THERE WAS NO JUSTIFICATION FOR MAKING AN ADDITION OF UNDISCLOSED SOURCES OF RS.3,11,00,000/ - IN THIS YEAR. I FIND THAT THIS ADDITION IS MADE ON THE BASIS OF FRESH SET OF FACTS FOUND DURING SEARCH CARRIED OUT AT THE APPELLANT GROUP'S PREMISES ON 25111/2009.THE OPERATIVE PART OF LD. AO'S ORDER FOR A.Y. 2010 - 11 IS AS UNDER: 27 . THE H ON'BLE ITAT IN ITS ORDER DELIVERED IN THE CASES OF ASSESSEE'S GROUP AS DISCUSSED ABOVE HAS TAKEN THE RATE OF COMMISSION EARNED 0.15% AS DECLARED BY THE ASSESSEE HIMSELF, SINCE ON THOSE APPEALS THE ISSUE OF PERCENTAGE OF COMMISSION EARNED WAS NOT BEFORE TH E HON'BLE ITAT AS THE ADDITIONS WERE MADE U/S. 68 OF THE ACT. IN THE ASSESSMENT ORDER NEITHER THE REASONABILITY OF COMMISSION CHARGED NOR THE EVIDENCES RELATING TO CHARGEABILITY OF COMMISSION WERE DISCUSSED. DURING THE COURSE OF PRESENT SEARCH ACTION I.E. ON 25111109 ENOUGH EVIDENCES HAVE BEEN FOUND, WHICH ESTABLISHES THAT THE ASSESSEE GROUP IS EARNING COMMISSION 1.5%TO3. 6% ON DIFFERENT KIND OF ENTRIES PROVIDED. IT IS THEREFORE BECOME CLEAR THAT THE JUDGMENT OF THE HON'BLE TRIBUNAL, ON WHICH, THE ASSESSE E IS RELYING HEAVILY, WAS GIVEN ON DIFFERENT EVIDENCES AND ON FACTS AND THE SAME CANNOT BE FOLLOWED IN THIS CASE. 28. THE FINDING GIVEN BY THE HON'BLE ITAT IN ONE OF THE GROUP COMPANIES OF MR. MUKESH CHOKSI I.E. M/S. GOLDSTAR FINVEST PVT. LTD FOR A. Y. 200 2 - 03WITH REGARD TO THE CHARGEABILITY OF COMMISSION INCOME @ 0.15% RELATES TO THE ASSESSEES BUSINESS ACTIVITIES DURING THE PERIOD, WHEN SURVEY U/S. 133AWAS CARRIED OUT. HOWEVER, IN THE SEARCH ACTION CONCLUSIVE EVIDENCE HAS BEEN FOUND INDICATING THAT MR. MU KESH CHOKSI THROUGH VARIOUS ENTITIES DERIVING/CHARGING COMMISSION AT MUCH HIGHER RATE I.E. UP TO 3.6 %. MOREOVER , IT IS ALSO NOTEWORTHY THAT FOR THE PURPOSES OF CARRYING OUT THE ITA NO. 7753 / MU M/2012 ITA NO.1095/MUM/2013 4 ABOVE ACTIVITIES, THE ASSESSEE HAD TO INCUR SOME EXPENSES, WHICH MAY ALSO BE HI GHER THAN 0.15% OF THE COMMISSION INCOME EARNED BY THE ASSESSEE, WHICH IS EVIDENT FROM THE STATEMENTS OF HIS EMPLOYEES RECORDED DURING THE COURSE OF SEARCH ACTION AND WHICH CANNOT TAKE CARE OF EVEN THE BASIS EXPENSES TO BE INCURRED BY THE ASSESSEE. THEREFO RE, THE ASSESSEE'S CLAIM OF INCOME AT THE RATE OF NOMINAL PROFIT @ 0.15% IS NOT CORRECT BASED ON THE DOCUMENTS/EVIDENCES FOUND DURING THE COURSE OF SEARCH AND ALSO SEVERAL STATEMENTS OF RELATED PARTIES RECORDED REFERRED TO ABOVE. IN VIEW OF THE ABOVE, IT I S CLEAR THAT THE ASSESSEE HAS EARNED COMMISSION INCOME AT MUCH HIGHER RATE RANGING BETWEEN 1.5% AND 3.6% DEPENDING UPON THE VARIOUS KINDS OF ENTRIES PROVIDED TO DIFFERENT BENEFICIARIES AS IT IS NOT POSSIBLE TO SEGREGATE THE VOLUME FOR DIFFERENT KIND OF ENT ITIES. I THEREFORE, CONSIDERED IT FAIR AND REASONABLE TO APPLY THE RATE OF NET COMMISSION @ 2%. 5.20. AS THE LD. AO HAS HIMSELF TREATED THE APPELLANT AS ONE OF THE HAWALA OPERATORS OF MUKESH CHOKSI GROUP AND THEREBY ESTIMATED THE NET COMMISSION OF ASSESSEE AT 2% OF THE TOTAL RECEIPTS SHOWN IN THE BANK ACCOUNTS, THERE IS NO JUSTIFICATION TO MAKE AN ADDITION OF THE ENTIRE SALE TO M/S. SHAF BROADCAST PVT. LTD. IT IS THEREFORE, DIRECTED THAT NET COMMISSION @ OF 2% MAYBE ESTIMATED BY THE LD. AO AND THE BALANCE AD DITION MAY BE DELETED. ACCORDINGLY GROUND NOS. 5 & 6 ARE PARTLY ALLOWED. 6. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FR O M THE ORDER OF THE AO THAT THE ASSESSEE IS UNABLE TO PROVE THE AMOUNTS CREDITED I N THE BANK A/C IN CASH AS WELL AS OTHER CREDIT ENTRIES AND THE PERSONS TO WHOM ACCOMMODATION BILLS WERE PROVIDED. THE ASSESSEE COULD NOT PROVIDE THE DETAILS OF BENEFICIARIES IT MEANS THAT NO SALE HAS BEEN AFFECTED BY THE ASSESSEE. THE CIT(A) HAS TOTALLY GO NE ON WRONG PREMISE BY TREATING THE UNACCOUNTED SALE ON WHICH NET COMMISSION OF 2% IS TO BE CHARGED AS PROFIT OF THE ASSESSEE BUT ACCORDING TO US THE ASSESSEE IS UNABLE TO PROVE THE SALES AS HE IS UNABLE TO PROVE THE BENEFICIARIES. FIRST OF ALL, THE ASSESSE E HAS TO PROVE THE BENEFICIARIES TO WHOM THESE ACCOMMODATION ENTRIES ARE GIVEN AND IN CASE HE IS ABLE TO PROVIDE INFORMATION IN RELATION TO BENEFICIARIES AND BENEFICIARIES ADMIT THAT THEY HAVE PAID ONLY NET COMMISSION, ONLY THEN THE COMMISSION IS ADDED OTH ERWISE THE ENTIRE DEPOSITS TO BE ADDED IN THE HANDS OF THE ASSESSEE. BUT, BEFORE THAT THE COMPETE VERIFICATION OF FACTS ARE REQUIRED BECAUSE NONE OF THE AUTHORITIES BELOW HAVE BROUGHT ON RECORD THE FACTS OF THE CASE. EVEN OTHERWISE, THE ASSESSEE HAS TO PRO VIDE DETAILS OF BENEFICIARIES SO THAT THE AO CAN VERIFY AND FINALIZE THE ASSESSMENT AS PER THE PROVISIONS OF THE ACT. ACCORDINGLY, BOTH THE APPEALS, OF ITA NO. 7753 / MU M/2012 ITA NO.1095/MUM/2013 5 REVENUE AS WELL AS ASSESSEE, ARE ALLOWED FOR STATISTICAL PURPOSES AND MATTER IS REMANDED BACK TO THE AO. THE ORDERS OF LOWER AUTHORITIES ARE SET ASIDE. 7. IN THE RESULT, BOTH THE APPEAL S ARE ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 06 - 1 2 - 2016 . SD / - SD/ - ( ASHWANI TANEJA ) (MAHAVIR SINGH) ACCOUNTANT MEM B E R JUDICIAL MEMBER M UMBAI, DATED: 06 - 12 - 2016 SUDIP SARKAR /SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//