OTAML V. PUROHIT, MUMBAI V. ITO 14(3)(4), MUMBAI

ITA 7766/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8825 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 31-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Keywords: Accommodation entries
• Section: 142(1); 147; 148; 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , BEFORE SHRI AMIT SHUKLA , JM AND SHRI RAJESH KUMAR , AM ./ I.T.A. NO. 7766 /MUM / 201 4 ( / ASSESSMENT YEAR : 20 0 9 - 10 ) MR. OTAML V PUROHIT, 401, SALASAR, JOTH BAGESHWARI PARK, BHYANDER (W), MUMBAI - 400101 / VS. INCOME TAX OFFICER 1 4 ( 2 )( 4 ), MUMBAI . ./ PAN : AQEPP0999H ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI PRAKASH JHUNJHUNWALA / RESPONDENT BY : SHRI R K SAHU / DATE OF HEARING : 1 7.10. 2016 / DATE OF PRONOUNCEMENT : 16. 1. 201 7 / O R D E R PER RAJESH KUMAR , AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 13.11.2014 OF COMMISSIONER OF INCOME TAX (APPEALS) - 25 , MUMBAI { ( H EREINAFTER CALLED AS THE CIT (A) } FOR ASSESSMENT YEAR 200 9 - 10 . 2. AT THE OUTSET, THE LD.AR SUBMITTED BEFORE US THAT GROUND NO.1,4 AND 5 ARE NOT PRESSED. THEREFORE, THE SAME ARE DISMISSED AS NOT PRESSED. 3. THE REMAINING EFFECTIVE GROUNDS OF APP EAL ARE GROUND NO.2 AND 3 WHICH ARE AGAINST THE ENHANCEMENT OF THE INCOME AT THE RATE OF 1.5 0 % ON TOTAL ITA NO. 7766 / MUM/20 1 4 2 CASH CREDIT IN THE BANKS BY THE LD. CIT(A) AS AGAINST THE 1.00% APPLIED BY THE AO. 4. FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 14.10.2009 DECLARING TO TAL INCOME OF RS.1,09,080/ - . THE AO RECEIVED INFORMATION FROM ITO - WARD 8(4), SURAT, GUJARAT VIDE LETTER DATED 5.1.2012 THAT THE ASSESSEE PROPRIETOR OF M/S DARSHAN TRADING CO., M/S RATAN ENTERPRISES AND M/S JAYESH CORPORATION HAS ENTERED INTO BOGUS AND H AWALA TRANSACTION S WITH SHRI SAURABH JAIN WHO HAS BEEN INTO THE BUSINESS OF PROVIDING HAWALA / ACCOMMODATION ENTRIES WITHOUT DOING ANY ACTUAL B USINESS. THEREAFTER THE AO REOPENED THE ASSESSMENT BY ISSU ING NOTICE UNDER SECTION 148 ON 19.1.2012 AND SER VICE WAS EFFECTED THROUGH AFFIXTURE AT THE ASSESSEES PREMISES . THEREAFTER THE NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ALSO ISSUED AND SERVED THROUGH AFFIXTURES AT THE ASSESSEES PREMISES. ON THE DATE OF HEARING NEITHER THE ASSESSEE NOR HIS AUTHORIZ ED REPRESENTATIVE APPEARED BEFORE THE AO TO ATTEND THE HEARING AND FINALLY, THE AO HAD TO FRAME THE ASSESSMENT EX - PARTEE U/S 144 R.W.S. 147 OF THE ACT ASSESSING HE INCOME OF THE ASSESSEE AT RS.1,83,74,770/ - BY MAKING AN ADDITIONS OF RS. 1,82,65,691/ - BEIN G 1% OF TOTAL CASH CREDIT IN THE ALL THE BANK ACCOUNTS OF THE ASSESSEE AND HIS PROPRIETARY CONCERNS M/S DARSHAN TRADING CO., M/S RATAN ENTERPRISES AND M /S JAYESH CORPORATION WHICH WERE RS.1,82,65,69,168/ - REPRESENT ING TOTAL ACCOMMODATION ENTRIES ISSUED BY THE ASSESSEE BY RELYING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF P C MUNDRA V/S ACIT (80 TTJ(JP) 945) . ITA NO. 7766 / MUM/20 1 4 3 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHO ENHANCED THE ASSESSMENT BY ESTI MATING THE INCOME OF THE ASSESSEE AT THE RATE OF 1.5 0 % OF THE TOTAL CASH CREDIT OF RS. RS.1,82,65,69,168/ - AS CALCULATED BY THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE FILED DURING THE COURSE OF APPELLATE PROCEEDINGS BY OBSERVING AND HOLDIN G AS UNDER : IN VIEW OF THE ABOVE, I FIND THAT THE AO DID NOT GIVE ANY LOGICAL CONCLUSION IN ARRIVING AT 1% INSTEAD OF 1.5% AS DECIDED IN THE CASE LAW RELIED UPON BY HIM. IF AO RELIED ON THIS PARTICULAR DECISION, HE SHOULD F OLLOW AND ADOPT THE NET PRO FIT @ 1.5% INSTEAD OF 1% ONLY. IN THIS CO NNECTION, A SHOW CAUSE NOTICE U / S 251 (1 )(A) DATED 31.10.2014 WAS ISSUED TO THE APP ELLANT AS TO WHY THE DIFFERENCE OF 0.5% .I.E. RS.91 , 34,654/ - OF THE TOTAL INCOME SHOULD NOT BE ENHANC ED AS NET INCOME OF THE APPEL LANT. THE AR OF THE APPELLANT APPEARED IN RESPONSE TO THE SHOW CAUSE NOTICE ON 10.11.2014 AND OBJECTED TO THE PROPOSED ENHANCEMENT. BUT THE VERBAL OBJECTION WITHO UT ANY DOCUMENTARY EVIDENCE/CASE LAWS TO SUPPORT HIS OBJECTIONS NOT ACCEPTABLE. I HAVE CONS IDERED THE C ASE L AW RELIED UPON BY THE AO, AND OBSERVED THAT THE ESTIMATE MADE BY THE AO IS NOT ON THE HIGHE R SIDE AND ARBITRARY AS CHALLENGED AND OBJECTED BY THE APPELLANT. IND EED I FIND THE ESTIMATE OF THE AO IS TO BE ENHANCED TO ANOTHER 0.5% SO AS TO COMMENSURATE THE RATE OF 1.5% AS ADOPTED BY THE HON'BLE ITAT IN THE CASE OF P.C. MUNDRA VS ACIT(SUPRA). THE IT A T HAS HELD THAT NET PROFIT @1.5% IS REASONABLE IN THE CASE OF BILLING BUSINESS. THE AO HAS NOT GIVEN ANY VALID REASON TO DEVIATE FROM THE RATE ADOPTED BY THE HON,BLE ITAT WHICH CASE WAS RELIED UPON BY HIM. THE AO HIMSELF HAS CONCLUDED THAT THE RATE AT PREVAILING MARKET PRACTICE AS IN MOST OF THE CASES OF HAWALA OPERATORS, THE CHARGING OF COMMISSION ON THE SUM OF TRAN SACTIONS BETWEEN @ 0.5% TO 2.5 % ONLY. IN VIEW OF THE DECISION FOLLOWED BY THE AO AND THE HUGE CREDITS IN THE VARIOUS BANKS OF THE APPELLANT FOR WHICH NO PROPER EXPLANATION WAS OFFERED B Y THE APPELLANT REGARDING THE SOURCES OF THOSE TRANSACTIONS, THE RATE OF NET PROFIT ADOPTED BY THE AO HAS TO BE ENHANCED ACCORDINGLY. MOREOVER, THE TOTAL CASH CREDITS AND THE BANK ACCOUNTS WERE AL SO NOT DISCLOSED TO THE ITA NO. 7766 / MUM/20 1 4 4 DEPARTMENT. THERE IS NO AN IOTA OF EVIDENCE OR MATERIAL P RODUCED/ FURNISHED B Y THE APPELLANT DURING THE APPELLATE PROCEEDINGS TO SHOW AND JUSTIFY THAT THE APPELLANT HAS BILL DISCOUNT ING BUSINESS AND THE RATE OF COMMISSION IS LESS THAN 1 %. AFTER CONSIDERING THE TOTALITY OF THE CASE , I AM OF THE CONSIDERED OPINION THAT THE ESTIMATE MADE BY THE AO ADOPTING @ 1 % OF THE TOTAL CASH CREDIT NEED S BE ENHANCED BY @0.5% WHICH WILL COME TO @1.5% AT PARITY IN THE CASE OF P.C MUNDRA V/S ACIT . THE NET PROFIT @ 1.5% IS CONSIDERED TO BE VERY REASONABLE AND NOT ARBITRARY. THEREFO RE NET INCOME COMES TO RS.2,73,98,537/ - I.E., AN ENHANCEMENT OF RS.91,32,846/ - I.E.,( 182,65,691/ - + RS.91,32,846). THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 6 . THE LD. AR SUBMITTED BEFORE THE BENCH THAT THE LD. CIT( A) HAS ENHANCED THE ASSESSMENT BY ESTIMATING THE INCOME AT 1.5% OF THE TOTAL CASH CREDIT ENTRIES IN THE BOOK P ASS BOOKS /STATEMENTS OF THE ASSESSEE A N D HIS PROPRIETARY CONCERN S . THE LD. AR SUBMITTED THAT TOTAL CASH CREDIT ENTRIES AS CALCULATED BY THE AO AT RS. 1,82,65,69,168/ - WAS NOT CORRECT AS THE AO ALSO INCLUDED THE VARIOUS CHEQUES/ RTGS RETURNED UNPAID AND IN TER - BANK TRANSFERS IN THE VARIOUS BANK ACCOUNT S OF THE ASSESSEE AND HIS PROPRIETARY CONCERNS WHICH WAS SUBSTANTIATED AND PROVED BY FILING THE BANK STATEMENTS OF VARIOUS BANKS AND PRAYED THAT THE INCOME BE ESTIMATED BY TAKING GP RATE 0. 2 5 ON THE TOTAL CASH CREDIT ENTRIES AFTER EXCLUDING CHEQUES/RTGS RETURNED UNPAID AND INTERBANK TRANSFERS IN THE BANK ACCOUNT S OF THE ASSESSEE. IN DEFENCE OF HIS ARGUMENTS , THE LD.AR REFERRED AND RELIED ON THE DECISION OF CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF RAMESH KUMAR JAIN V/S ACIT I ITA NO.3512 AND 3513/MUM/2013 (AY - 2004 - 05 AND 2005 - 06) DATED 22.4.2015 WHEREIN THE NET COMMISSION INCOME HAS BEEN ESTIMATED AT 0.10%. ITA NO. 7766 / MUM/20 1 4 5 7 . ON THE CONTRARY, THE LD. DR RELIED HEAVILY ON THE ORDER OF AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE WAS NOT CO - OPERATIVE THROUGHOUT THE ASSESSMENT PROCEEDINGS AND THE AO HAS TO REL Y ON THE DOCUMENTS AND MATERIAL AVAILABLE WITH HIM AND ESTIMATED THE INCOME AT THE RATE OF 1% WHICH WAS ENHANCED BY THE FAA TO 1.5% BY THE LD.C IT(A) AND THE DECISION RELIED UPON BY THE AO IN THE CASE OF P.C MUNDRA (SUPRA) WAS NOT APPLIED CORRECTLY WHICH WAS CORRECTLY APPLIED BY ENHANCING THE ASSESSMENT AND IN VIEW OF THESE FACTS REQUESTED THAT THE DECISION TAKEN BY THE FAA SHOULD BE UPHELD A ND CONFIRMED. 8 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW AND CASE LAW RELIED UPON BY THE PARTIE S. WE FIND THAT THE ASSESSEE WAS NON - COOPERATIVE THROUGHOUT THE ASSESSMENT P ROCEEDINGS BY NOT ATTENDING/APPEARING BEFORE THE AO ON THE DATE OF HEARING NO R DID HE FURNISH THE DOCUMENTARY EVIDENCES /DETAILS AS REQUIRED BY THE AO . T HEREFORE THE AO HAS NO OPTION BUT TO PROCEED EX - PARE AND FRAME THE ASSESSMENT ON T HE BA SIS OF INFORMATION AVAILABLE ON RECORD ACCORDINGLY FRAM ING ASSESSMENT BY ESTIMATING THE INCOME OF THE ASSESSEE AT !% OF TOTAL CREDIT APPEARING IN THE BANKS OF THE ASSESSEE WHICH WAS FURTHER ENHANCED BY THE FAA IN THE APPELLATE PROCEEDINGS TO 1.5% . DURING THE COURSE OF HEARING T HE LD.AR TOOK US THROUGH THE BANK STATEMENT S OF THE ASSESSEE AND HIS PROPRIETARY CONCERNS OF RAJKOT NAGRIK SAHAKARI BANK, AXI S BANK ETC OF AND POINTED OUT VARIOUS ANOMALIES AND MISTAKES IN THE ARRIVING AT TOTAL ITA NO. 7766 / MUM/20 1 4 6 CREDITS IN THE VARIOUS BANKS ON THE BASIS OF WHICH THE INCOME OF THE ASSESSEE WAS ESTIMATED . WE FIND THAT THERE ARE SEVERAL CHE QUE /RTGS ENTRIES OF RETURNED CHEQUES/RTGS AND INTERBANK TRANSFERS IN THE ASSESSEES BANK ACCOUNTS WHICH WERE ALSO INCLUDED IN THE TOTAL CRED ITS WH ICH ACCORDING TO US IS NOT CORRECT AND NEED TO BE EXCLUDED FOR THE REASONS THAT THERE CAN NOT BE ANY INCOME ON UNPAID OR RETURNED CHEQUES/RTGS/INTER BANK TRANSFERS IN ASSESSEES BANK S . IN OUR VIEW THE INCOME OF THE ASSESSEE HAS TO BE CALCULATED ON THE BASIS OF CORRECT AMOUNT OF CREDITS APPEARING IN THE BANK ACCOUNTS WHICH REQUIRED TO BE VERIFIED AND ASCERTAINED AT THE LEVEL OF AO. W E WOULD LIKE TO MENTION THAT ALL THIS HAS HAPPENED DUE NON COOPERATION BY THE ASSESSEE DURING THE ASSESSMENT PROCEED INGS. W E THEREFORE CONSIDER IT FIT AND PROPER TO RESTORE THE ISSUE BACK TO THE FILE OF THE AO TO MAKE THE ASSESSMENT AFRESH AS PER LAW AND FACTS AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE TO PRESENT HIS CASE . THE ASSESSSEE IS AL SO TO COOPERATE IN THE ASSESSMENT PROCEEDINGS AND TO FILE ALL THE DOCUMENTS AND INFORMATION MAY BE REQUIRED BY THE AO TO DETERMINE THE INCOME OF THE ASSESSEE. 9 . IN RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE S . ORDER PRONOUNC ED IN THE OPEN COURT ON 16TH JAN, 2017 , 2016 . S D SD ( /AMIT SHUKLA) ( /RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT M EMBER MUMBAI ; DATED 16/ 1/2017 . . ./ SRL , SR. PS ITA NO. 7766 / MUM/20 1 4 7 / 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, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI