ASST CIT 11(3)(2), MUMBAI V. VINATI ORGANICS LTD, MUMBAI

ITA 7776/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3030 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 31-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: WRITTEN SUBMISSIONS DT
• Keywords: Business income; Principle of natural justice; Additional evidence
• Section: 133A; 131; 27

Judgement Text

HARIRAM BHAMBHANI ITA S 7768 & 7770 /MUM/201 2 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H , MUMBAI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI R AMIT KOCHAR , ACCOUNTANT MEMBER ITA NO S . : 7768 AND 7770 /MUM/20 1 2 ( ASSESSMENT YEAR: 2006 - 07 & 20 0 7 - 0 8 ) HARIRAM BHAMBHANI , 205 - 206 MEERA HARI NIWAS SVP NAGAR, NEAR VARSOVA TELEPHONE EXCH., ANDHERI (WEST), MUMBAI - 400 0 5 3 .: PAN: AA BPB 0908 P VS JC IT (ODS) RG. 8(1) , AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : WRITTEN SUBMISSIONS DT.17.8.2015 RESPONDENT BY : SHRI VIJAY SHANKAR /DATE OF HEARING : 2 0 - 0 8 - 201 5 / DATE OF PRONOUNCEMENT : 26 - 08 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE A FORESAID APPEAL S HA VE BEEN FILED BY THE ASSESSEE AGAINST SEPARATE IMPUGNED ORDER OF EVEN DATE VIZ. 19 .10.2012 PASSED BY THE CIT(A) - 16, MUMBAI IN RELATIO N TO THE PENALTY PROCEEDINGS U/S 27 1(1)(C) FOR THE ASSESSMENT YEAR 2006 - 07 AND 2007 - 08. IN AY 2006 - 07, THE ASSESSEE IS AGGRIEVED BY LEVY OF PENALTY OF RS. 1,14,444/ - ON ACCOUNT OF DISALLOWANCE OF EXPENSES RELATING TO SPEED MONEY PAID BY THE ASSESSEE AMOUNTING TO RS. 2 LAKHS AND PROFIT ON UN ACCOUNTED SALES AMOUNTING TO RS 1,40,000/ - AND LEVY OF PENALTY OF RS. 1,61,568/ - FOR THE ASSESSMENT YEAR 2007 - 08 FOR THE SAME NATURE OF ADDITION S I.E. 1 LAKH ON ACCOUNT OF SPEED MONEY AND RS. 1,40,000/ - ON ACCOUNT OF PROFIT ON UNACCOUNTED SALES. 2. BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHIP CHANDLERS IN ITS PROPRIETARY CONCERN ROYAL MARINE COMPANY. A SURVEY U/S 133A WERE CARRIED OUT AT THE BUSINESS HARIRAM BHAMBHANI ITA S 7768 & 7770 /MUM/201 2 2 PREMISES OF THE ASSESSEE ON 21 .01.2006. DURING THE COURSE OF SURVEY PROCEEDINGS, CERTAIN ROUGH TRIAL BALANCE AND PROFIT & LOSS ACCOUNT WAS FOUND FROM WHICH IT WAS NOTICED THAT THERE IS SOME DIFFERENCE IN THE SALE MENTIONED IN THE ROUGH TRIAL BALANCE AND TOTAL SALES AS PER SALE INVOICES. IN RESPONSE TO A QUESTION, THE ASSESSEE OFFERED 3 5 LAKH RUPEES , TOWARDS SALE OVER AND ABOVE . THE RELEVANT QUESTION RAISED BY THE AUTHORIZED OFFICER AND ANSWER GIVEN BY THE ASSESSEE READS AS UNDER : - Q. NO.11. ON GOING THROUGH THE BOOKS OF ACCOUNTS AND DOCUMENTS AVAILABLE IT IS SEEN THAT A WHOLE BUNCH O F CHALLANS ON ACCOUNT OF SUPPLIES TO M. V. POOJA AND M. V. STEPHINE HAVE NOT BEEN REFLECTED IN THE SALES ACCOUNT. PLEASE EXPLAIN? ANS. M V STEPHI E N IS A VESSEL OWNED BY OUR SISTER CONCERN IN DUBAI. IT HAS BEEN EMP LOYED IN INDIAN WATER IN THE YEAR 2005 - 06. SIMILARLY MV POOJA ALSO BELONGS TO THE SAME CONCERN AND THIS VESSEL TOO IS BEING HANDLED BY M E FOR SHIP SUPPLIES SINCE LAST YEAR, I AGREE TO THE FACT THAT WE HAVE SUPPLIED PROVISIONS FOR CREW MEMBERS ON BOTH THE SHIPS WHICH WERE AROUND 10 MEMBERS IN EACH SHIP. BOTH THE VESSELS ARE SUPPLY BOATS FOR DOMESTIC SEA FARING. BESIDES THE PROVISIONS FOR CREW MEMBERS WE HAVE ALSO SUPPLIED SPARES AND OTHER CONSUMABLE AS REFLECTED IN THE CHALLANS. SINCE BOTH THESE JOBS HAVE BEGUN IN THE F Y 2005 - 06 THE SALES ON ACCOUN T OF THIS SUPPLY WERE YET TO BE INCLUDED IN THE SALES REGISTER FOR REASONS LIKE RATE TO BE CHARGED, PARTY TO WHOM THE BILLS SHOULD BE RAISED UPON ETC. HOWEVER THE ISSUE IS NOW SORTED OUT AND THE MANNING AGENCY HAS CLARIFIED THAT THE BI LL S ARE TO BE RAISED ON THE OWNERS. BEING SISTER CONCERNS WE HAVE NOT KEPT A , F UL L FLEDGED RECORDS OF THE SUPPLY BUT GOING BY THE CURRENT RATE OF ABOUT UD 4.5 PER CREW PER DAY THE TOTAL AMOUNT OF PROVISION OF SUPPLIES FOR THE YEAR COMES TO 20 X 4.5. X 365 = HARIRAM BHAMBHANI ITA S 7768 & 7770 /MUM/201 2 3 32850 USD. THEREFO RE A SUM OF RS.15,11,100/ - SAY RS. 15 LAKHS WILL BE OFFERED TO TAX ON ACCOUNT OF THESE SALE FOR FY 2005 06 BESIDES THE PROVISION, WE HAVE ALSO SUPPLIED SPARE PARTS AND STORES, HARDWARE ITEMS, ETC FOR THESE TWO, BOATS. BASED ON THE DOCUMENTS AVAILABLE AND M Y PERSONAL EXPERIENCE A SUM OF RS 20 LAKHS ON ACCOUNT OF SALE OF STORES, SPARE AND SUPPLIES, ETC. WILL BE SUFFICIENT TO COVER THESE SALES. THEREFORE A FURTHER AMOUNT OF RS. 20 LAKHS ON ACCOUNT OF SALE OF STORES AND SUPPLIES ETC. WILL BE OFFERED TO TAX FOR FY 2005 - 06. THE TOTAL SUM OF UNDER SALES TO THE TWO VESSELS FOR FY 2005 - 06 AS DISCUSSED ABOVE AND OFFERED TO TAX COMES TO RS. 35 LAKHS . 3. SIMILAR AMOUNT WAS DISCLOSED FOR THE ASSESSMENT YEAR 2007 - 08. HOWEVER, AT THE TIME OF FILING OF RETURN U/S 139(1) FOR THE ASSESSMENT YEAR 2006 - 07, FILED ON 31.10.2006 AND FOR THE AY 2007 - 08 WAS FILED ON 15.11.2007 , T HE ASSESSEE DID NOT OFFER TH IS ADDITIONAL AMOUNT OF INCOME TO THE PROFIT AND LOSS ACCOUNT BY INCLUDING THE SUM OF RS.35 LAKHS, WHICH WAS AGREED DURING TH E COURSE OF SURVEY OPERATION. BEFORE THE ASSESSING OFFICER, ASSESSEE EXPLAINED THAT THE SALE AMOUNTING TO RS. 14,97,970/ - ON ACCOUNT OF SUPPLY OF PROVISIONS FROM TIME TO TIME WAS RAISED IN THE MONTH OF MARCH AND THE SAME WAS INCLUDED IN THE TOTAL SALES OF THE PROPRIETARY CONCERN. THE SALE WAS THUS INCREASED TO RS. 3,4 2 ,24,390/ - AFTER ACCOUNTS WERE DULY AUDITED AS AGAINST THE ORIGINAL SALES OF RS. 3 , 2 7, 2 7,698/ - DISCLOSED AS PER ROUGH TRIAL BALANCE. THE BILL OF RS. 14,97,970/ - WAS ALSO PRODUCED BEFORE THE ASS ESSING OFFICER. AS REGARDS THE AMOUNT OF RS. 20 LAKHS WITH REFERENCE TO THE SUPPLY OF SPARE PARTS, STORES, HARDWARE ITEMS ETC. IT WAS SUBMITTED THAT IT ACTUALLY PERTAINS TO THE SUPPLY MADE BY THE GLOBAL (INDIA) HOSPITALITY SERVICES PVT LTD, A SISTER CONCER N OF THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER HELD THAT ASSESSEE SHOULD HAVE INCLUDED AMOUNT OF RS. 35 LAKHS AS INCOME FROM UNDISCLOSED SALES AS ADMITTED DURING THE COURSE OF SURVEY. HARIRAM BHAMBHANI ITA S 7768 & 7770 /MUM/201 2 4 FURTHER, DURING THE COURSE OF SURVEY, IT WAS FOUND THAT CERTAIN CAS H EXPENSES INCURRED BY THE ASSESSEE WERE NOT PROPERLY ACCOUNTED FOR AS ALL THE VOUCHERS WERE NOT SUPPORTED BY P ROPER BILLS. THE ASSESSEE IN RESPONSE TO SUCH A QUESTION, HELD THAT EXPENSES LIKE SPEED MONEY WERE TO THE TUNE OF RS. 20/ - TO RS. 200/ - AND IT WAS NOT POSSIBLE TO HAVE AN INDEPENDENT BILL FOR SUCH PETTY SUMS . THE TOTAL EXPENSES ON ACCOUNT OF SPEED MONEY WA S ALSO NOT VERY HIGH AS AGAINST THE HUGE CASH WITHDRAWAL S IN THE BOOK . HOWEVER, THE ASSESSEE SAID THAT RS. 2 LAKHS WILL BE OFFERED TO TAX FOR A Y 2006 - 07 AND RS. 1 LAKH FOR AY 2007 - 08 . BEFORE THE ASSESSING OFFICER, AT THE TIME OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THAT SUCH A N OFFER WAS MADE ONLY TO BU Y PEACE AS THESE ADDITIONS WERE OFFERED ONLY ON ESTIMATE BASIS. HOWEVER THE LD. ASSES SING OFFICER ADDED THE AMOUNT WHICH WAS OFFERED BY THE ASSESSEE IN THE COURSE OF SURVEY. 4. IN THE QUANTUM PROCEEDINGS THE CIT(A) REDUCED THE SAID ADDITION AFTER OBSERVING AND HOLDING AS UNDER : - I HAVE CONSIDERED ALL THE DECISIONS OF THE HONBLE COURTS CITED ABOVE AND NOTICED THAT IT IS TRUE THAT ON THE DATE OF SURVEY UNACCOUNTED SALES WERE AMOUNTED TO RS. 35,00,000/ - . HOWEVER, IN THE FINAL ACCOUNTS ALL THE SALES WERE ENTERED AND AUDITED AND NO UNACCOUNTED SALES / INVOICES WERE IMPOUNDED DURING THE COUR SE OF SURVEY. THEREFORE, ONLY STATEMENT RECODED WITHOUT ANY COGENT EVIDENCE CAN NOT BE RELIED UPON. SECONDLY, ALL THE SALES CAN NOT BE TREATED AS INCOME AS HELD BY THE BOMBAY TRIBUNAL IN THE CASE OF SHAHDILAL SONS V ACIT (SUPRA). KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE AND PRINCIPLE OF THE NATURAL JUSTICE, IT IS HELD THAT 4% OF NET PROFIT SHOWN BY THE APPEL L ANT IS TAKEN AS INCOME OF THE APPELLANT AND ADDITION IS SUSTAINED TO RS. 1,40,000/ - AND BALANCE ADDITION OF RS. 33,60,000/ - IS DELETED. THIS GROUND OF APPEAL IS PARTLY ALLOWED. HARIRAM BHAMBHANI ITA S 7768 & 7770 /MUM/201 2 5 THIS FINDING OF CIT(A) HAS ATTAINED FINALITY. 5 . AS REGARD S ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENSES OF SPEED MONEY AND OTHER EXPENSES , THE LD. CIT(A) CONFIRMED THE SAID ADDITION ON THE GROUND THAT DU RING THE COURSE OF SURVEY SOME CASH VOUCHERS WERE CONFRONTED FOR WHICH NO SUPPORTING BILLS COULD BE FURNISHED. THE RELEVANT OBSERVATION FOR CONFIRMING THE SAID ADDITION IS AS UNDER : - I HAVE CONSIDERED THE ISSUE. THE STATEMENT RECORDED U/S 131 OF THE ACT HAS OFFERED AN AMOUNT OF RS. 3 LAKHS AS UNEXPLAINED EXPENSES INCLUDING SP E ED MONEY OF RS. 2 LAKH S . HOWEVER THE ADDITIONAL AMOUNT OFFERED FOR TAXATION AS ADDITIONAL INCOME WAS NOT OFFERED TO TAX IN THE RETURN OF INCOME FILED BY THE APPELLANT IN A.Y. 2006 - 0 7 NOR GIVEN ANY EXPLANATION. DURING THE COURSE OF SURVEY, SOME CASH VOUCHERS WERE CONFRONTED TO THE APPELLANT, WHICH WERE ALSO IMPOUNDED. THE SCRUTINY OF THESE PAPERS PROVED THAT THESE VOUCHERS ARE NOT SUPPORTED BY THE BILLS AND THE APPEL LANT HAD ALSO AGRE ED THAT THESE EXPENSES ARE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THEREFORE, IT IS NOT ONLY A CASE OF STATEMENT BUT ALSO CORROBORATED WITH DOCUMENTARY EVIDENCES. HENCE THE ACTION OF THE AO IS CONFIRMED. THIS GROUND OF APPEAL IS D ISMISSED. NOW , T HE PENALTY HAS BEEN LEVIED ON THESE TWO ADDITIONS, WHICH HAVE BEEN CONFIRMED BY THE CIT(A) , THOUGH AFTER DETAILED DISCUSSION AND REASONING, WHICH ARE MORE ON THEORY AND WITHOUT ANY PROPER ANALYSIS OF THE FACTS. 6 . AFTER CONSIDERING THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS, WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND THE ARGUMENTS OF THE LD. DR , WE FIND THAT SO FAR AS THE ADDITION MADE ON ACCOUNT OF PROFIT ON UNACCOUNTED SALES, THE LD. CIT(A) IN THE QUANTUM PROCEEDINGS HA S GI VEN A VERY CATEGORICAL FINDING OF A FACT THAT IN THE FINAL ACCOUNTS PREPARED BY THE ASSESSEE ALL THE SALES HARIRAM BHAMBHANI ITA S 7768 & 7770 /MUM/201 2 6 WERE ENTERED AND RECONCILED IN THE BOOKS OF ACCOUNT , WHICH WERE DULY AUDITED . N O UNACCOUNTED SALES/INVOICES WERE ACTUALLY F OUND OR IMPOUNDED DURING T HE COURSE OF SURVEY . THIS FINDING OF FACT BY THE CIT(A) HAS ATTAINED FINALITY. HERE T HE ENTIRE ADDITION IS BASED ON THE STATEMENT OF THE ASSESSEE RECORDED AT THE TIME OF SURVEY SANS ANY COGENT MATERIAL OR EVIDENCES FOUND , THEREFORE, THE ALLEGED UNACCOUNTED SALES CANNOT BE TREATED AS INCOME WHEN FINALLY IT STOOD RECONCILED AND RECORDED IN THE BOOKS . HOWEVER, THE LD. CIT(A) AS A MATTER OF ESTIMATING THE INCOME ELEMENT ON SUCH SALES, HAS CONFIRMED NET P R OFIT RATE OF 4% . SUCH AN ESTIMATE IS PURELY AD - HOC, WIT HOUT ANY FINDING OF FACT THAT THERE IS EITHER DEFECT IN AUDITED BOOKS OF ACCOUNT OR ANY UNACCOUNTED SALES HAS BEEN MADE OUTSIDE THE BOOKS OF ACCOUNT. NOW ON THESE FACTS S UCH AN ADDITION DOES NOT WARRANT ANY LEVY OF PENALTY U/S 271(1)(C) EITHER FOR CONCEALM ENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS , F IRSTLY, THE ASSESSEES EXPLANATION THA T THERE W A S NO UNACCOUNTED SALES IN THE FINAL ACCOUNTS OR OUTSIDE THE BOOKS OF ACCOUNT , HAS NEITHER BEEN FOUND TO BE FALSE NOR ANY M ATERIAL OR EVIDENCE HAS BEEN B ROUGHT ON RECORD TO REBUT THE SAME; AND SECONDLY, THERE IS NO BASIS TO HOLD THAT THERE IS ACTUAL SUPPRESSION OF PROFIT ON ACCOUNT OF UNACCOUNTED SALES. THE FACTS ARE SAME FOR AY 2007 - 08. THEREFORE, PENALTY LEVIED ON SUCH ADDITION FOR BOTH THE ASSESSMENT YE ARS STANDS DELETED. 7 . AS REGARD THE ADDITION ON ACCOUNT OF SPEED MONEY AND OTHER EXPENSES, AGAIN THE SAME IS MADE ON THE BASIS OF STATEMENT RECORDED U/S 131 THAT THESE ARE UNEXPLAINED EXPENSES. AGAIN SUCH AN ADDITION IS WITHOUT ANY SUPPORTING MATERIAL FOUND AT THE TIME OF SURVEY THAT ASSESSEE HAS ACTUALLY CLAIMED BOGUS EXPENSES. ASSESSEES CLAIM WAS BASED ON VOUCHERS FOR WHICH ASSESSEE COULD NOT CORROBORATE WITH THIRD PARTY BILLS. FINALLY THE AO HAS MADE THE ADDITION ON ESTIMATE BASIS IN THE QUANTUM PRO CEEDINGS . T HOUGH SUCH AN A DDITION HA S BEEN CONFIRMED IN THE QUANTUM PROCEEDINGS, HOWEVER, THERE IS NO MATERIAL OR EVIDENCE TO SUPPORT THAT SUCH AN ADDITION HAS NOT BEEN INCURRED BY THE ASSESSEE. IT IS NOW QUITE A HARIRAM BHAMBHANI ITA S 7768 & 7770 /MUM/201 2 7 SETTLED LAW THAT THE CONSIDERATIONS THAT ARISE IN PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT FROM THE QUANTUM PROCEEDINGS , IN AS MUCH AS ASSESSEE IN THE PENALTY PROCEEDINGS CAN TAKE A FRESH PLEA FROM SAME MATERIAL AND FACTS OR ADDUCE SOME ADDITIONAL EVIDENCE TO SHOW THAT HE IS NOT GUILTY OF C ONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS . EXPLANATION1 RAISES A REBUTTABLE PRESUMPTION WHICH CAN BE REBUTTED BY POINTING OUT THE FACTORS IN FAVOUR THAT CLAIM MADE BY THE ASSESSEE WAS BASED ON BONA FIDE CONSIDERATIONS. HERE THE ASSESSEE HAS MADE A CLAIM OF CERTAIN EXPENSES WHICH WERE SUPPORTED BY VOUCHERS BUT COULD NOT BE CORROBORATED BY INDEPENDENT BILLS AT THAT TIME. HOWEVER IT IS EQUALLY A ADMITTED FACT THAT NO EVIDENCE WAS FOUND EITHER AT THE TIME OF SURVEY OR AT THE ASSESSMENT STAGE THAT SUCH A CLAIM OF EXPENSES ARE FALSE OR NOT COMMENSURATE WITH ASSESSEES BUSINESS. HENCE NO PENALTY IS WARRANTED FOR CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS ON SUCH ADHOC ESTIMATE OF DISALLOWANCE OF EXPENSES WHEN T HE SE EXPENSES DEBITED IN TH E BOOKS OF ACCOUNT ARE DULY SUPPORTED BY VOUCHERS AND VERIFIED BY THE AUDITORS . THUS, WE ARE UNABLE TO SUSTAIN THE PENALTY ON SUCH DISALLOWANCES. ACCORDINGLY, PENALTY LEVIED ON THIS SCORE ALSO STANDS DELETED . IT HAS BEEN ADMITTED BY THE PARTIES THAT THE FA CTS FOR AY 2007 - 08 ON THIS SCORE IS ALSO SIMILAR, THEREFORE, FINDING FOR DELETION OF PENALTY GIVEN FOR AY 2006 - 07 WILL APPLY MUTATIS MUTANDIS IN THIS YEAR ALSO. ACCORDINGLY, PENALTY LEVIED FOR AY 2007 - 08 IS ALSO DELETED . 8 . IN THE RESULT, BOTH THE APPEAL S OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST , 2015. SD/ - SD/ - ( R AMIT KOCHAR ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 26 TH AUGUST , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. HARIRAM BHAMBHANI ITA S 7768 & 7770 /MUM/201 2 8 3) THE CIT (A) - 16 , MUMBAI. 4 ) THE CIT 8 , MUMBAI. 5 ) , , / THE D.R. H BENCH, MUMBAI . 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS