DEVANG MIMATLAL KAPASI, MUMBAI V. ITO-22(1)(1), MUMBAI

ITA 828/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9109 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC-1
• Assessment Year: 2011-2012
• Appeal Filed On: 18-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Salary income; Accommodation entries; Condonation of delay; Set aside
• Section: 143(3); 133(6); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 828/Mum/2021 (Assessment Year: 2011-12) Devang Hi matlal Kapasi B-607, Arihant Building, Sudha Park, Behind Garodia Nagar , Ghatkopar (E), Mu mb ai – 400077. बनाम/ Vs. ITO-22(1)(1), Tower No.6 , Vashi Railwa y Station Co mmercial Co mp lex, Vashi, Navi Mu mbai-400703. लेख सं./ज आइआर सं./PAN/ GI R No. : AAM PK9893K ( ल /Appellant) .. ( / Respondent) ल ओर से / Appellant by : Shri Hari Raheja. AR ओर से/Respondent by : Shri Kailash Mangal. Sr.DR सुनव ई त र ख / D a t e o f H e a r i n g 10/02/2022 घोषण त र ख /D a t e o f P r o n o u n c e m e n t 21/02/2022 आदेश / O R D E R PER PAVAN KUMAR GADALE - JM: The assessee has filed the appeal against the order of the CIT(A)-24, Mumbai, passed u/s 143(3) of the Income Tax Act, 1961 (for short ‘the Act’). The assessee has raised the following grounds of appeal: Additions made in the Total Income: i) On the facts and circumstances of the case and in law, the learned Comm. of Income Tax (Appeal) erred in confirming the disallowance made by the Assessing ITA No. 828/Mum/2021-Devang Himatlal Kapasi - 2 - Officer of various expenses (other than VAT payment) as claimed by the appellant in the Profit & Loss Account filed along with the Return of Income, disregarding the - submission made by the appellant in this regard. ii) On the facts and circumstances of the case and in law, the learned Comm. Of Income Tax (Appeal) erred in rejecting the submission made by the appellant that all the expenses as claimed by him were incurred for the purposes of the business, of providing accommodation entries and therefore allowable against income earned from accommodation transactions 2. On the facts and circumstances of the case and in law, the learned Comm. of Income Tax (Appeal) erred in confirming the basis adopted by the A.O. to estimate the commission income of the appellant which has been worked out by applying specific rate on the total of all assuming the same as sale value of accommodation bills of Building Material and Transportation, disregarding the sales as reflected in the Profit & Loss Account filed along with the Return of Income. 3. The learned Comm. Of Income Tax (Appeal) failed to appreciate that the amounts credited into bank accounts of the appellant included payment received from sundry debtors pertaining to earlier years and also includes fund transferred from associates and sister concerns and therefore the same are required to be excluded from total of all credits in the bank accounts as worked by the A.O. for estimating the commission income of the appellant. 4. The appellant craves leave to add, amend, alter, modify, delete and/or change all or any above grounds on or before the date of hearing. 2. At the time of hearing, the ld. AR submitted that there is a delay in filing the appeal and the assessee has filed a petition for condonation of delay and an ITA No. 828/Mum/2021-Devang Himatlal Kapasi - 3 - affidavit. We find the facts mentioned in the petition are reasonable and the delay is not a wanton or willful act of the assesse and the Ld.DR has no objections. Accordingly, the delay is condoned and the appeal is admitted and heard. 3. The brief facts of the case are that the assessee is a proprietor of M/s Siddhi Enterprises and engaged in the business of supply of building material and providing of transport services. The assessee has filed the return of income on 30.09.2011 for AY 2011-12 with a total income of Rs. NIL. Subsequently, the case was selected for scrutiny and notice under section 143(2) of the Act was issued. In compliance to notice, the ld. AR of the assessee appeared from time to time and submitted the information. The assessee has disclosed the income from salary and income from business in the name of M/s Siddhi Enterprises. As per the financial statements, the assessee has disclosed the sale of building material and transport receipt aggregating to Rs.1,85,09,613/- and the assessee has disclosed the gross profit of Rs. 9,68,839/- and net loss of Rs. 17,85,998/-. 4..The Assessing Officer (A.O.) in order to verify the genuineness of purchases made by the assessee ITA No. 828/Mum/2021-Devang Himatlal Kapasi - 4 - has issued notice under section 133(6) of the Act but the said notices were returned un served by the postal authorities. The A.O. has issued specific letter, where the assessee has made purchases from 35 parties and the notices were returned un served and the transactions to be treated as unreal and bogus. In response to notice, the assessee has submitted a reply letter dated 03.03.2014 explaining that the assessee was providing only accommodation entries to various parties in respect of transactions and is entitled for commission @1% in case of Supply of building material and @.5% commission in case of transport bills. The AO has dealt on the information/details at Para 9 & 10 of the order and estimated commission on building material @ 2% which worked out to Rs. 12,47,140/- and transport bills @1% i.e.Rs.61,640/-and assessed the total income of Rs.12,71,240/- and passed the order under section 143(3) of the Act dated 18.03.2014. 5. Aggrieved by the order, the assessee has filed an appeal with the CIT(A), whereas the CIT(A) has dealt on the facts of commission income from building material supply and transportation charges and restricted the estimate percentage @1% in the case of building material and @.5% in transportation bills ITA No. 828/Mum/2021-Devang Himatlal Kapasi - 5 - and partly allowed the assessee’s appeal. Aggrieved by the CIT(A) order, the assessee has filed an appeal before the Honble Tribunal. 6. The ld. AR at the time of hearing submitted that, the CIT(A) has erred in confirming the disallowance of claims disregarding the submissions of the assessee. The Ld. AR submitted that the expenses incurred for the business are to be allowed as deduction. Further the method adopted by the AO is not correct and the commission income worked out overlooking the facts of sales in the financial statements. Further the Ld.AR submitted that the A.O. has wrongly considered the credits in bank account as sales without excluding amount received from sundry debtors of earlier years, the inter transfer of funds from group concerns and redemption amount. The Ld.AR supported the submissions with the paper book and prayed for allowing the assessee’s appeal. Contra, the Ld.DR supported the order of the CIT(A). 7. We have heard the rival submissions and perused the material on record. The contentions of the Ld. AR are that the assessee has incurred expenditure for the business in providing accommodation entries ITA No. 828/Mum/2021-Devang Himatlal Kapasi - 6 - and such expenses has to be allowed as deduction from income/estimated from accommodation entries transactions. The Ld.AR substantiated the submissions relying on the ITAT order in the assessee own case for the A.Y.2009-10.We find the Honble Tribunal in ITA no 2087/M/2013 has dealt and observed at para-6 as under: “6. We have considered the rival submissions as well as relevant material on record. For the assessment year under consideration the AO has proceeded on the basis of the statement of the assessee recorded during the assessment proceedings wherein the assessee has admitted that the majority of the transactions are not genuine but only accommodation entries provided by the assessee in respect of the transport services as well as supply of building material. The assessee stated before the AO that the assessee received 0.5% commission on transport charges and 1% commission on material supply bill provided as accommodation entries to various parties without being actual business activity. The assessee disclosed 12 names during the statement which represents the turnover of Rs.9,76,41,493/-. The AO accepted the income by way of commission @ 0.5% on transport bills and 1% on building material bills issued by the assessee as accommodation entries. Since the assessee has shown the total turnover which is more than the turnover in respect of 12 parties disclosed by the assessee during the statement recorded by the AO, therefore the AO has estimated the income of the assessee by adopting the GP @5% on the balance turnover of Rs.3,92,13,652/-. The Ld. A.R. of the assessee has pointed out that for the A.Y. 2010-11 the AO has not made any addition on account of GP estimate and treated the entire turnover being the accommodation bills provided by the assessee. We find that for the A.Y. 2010-11 the AO has assessed the income of the assessee by treating the entire turnover representing the accommodation entries provided by the assessee by issuing the bogus bill for transport and building material to the various parties. The assessee has given the details of the parties which were treated by the AO as bogus transactions for the A.Y. 2010-11 but treated as genuine sales for the A.Y. 2009-10 at page No.15 as under: ITA No. 828/Mum/2021-Devang Himatlal Kapasi - 7 - 7. The second table of the above details contains the six parties which are common for both the assessment years i.e. 2009-10 & 2010- 11. For the A.Y. 2010-11 the AO has treated these parties as representing the bogus sales and accordingly assessed the income of the assessee on the basis of the commission @ 0.5% on transport bills and 1% on building material bills. This aspect is required to be verified and examined to avoid the conflicting findings of the AO for these two assessment years. 8. In view of the above facts and circumstances of the case and in the interest of justice, we set aside this issue of estimation of GP on the alleged genuine turnover to the record of the AO to verify and examine the same in the light of the assessment order for the A.Y. 2010-11. 9. In the result, the appeal of the assessee is allowed for statistical purpose.” 8. Further, the Ld. AR submitted that the A.O has estimated the commission income of the assessee disregarding the sales reflected in the profit and loss ITA No. 828/Mum/2021-Devang Himatlal Kapasi - 8 - account. The Ld. AR also submitted that the A.O. has calculated the estimated income considering all the credits in the bank accounts maintained. The Ld.AR emphasized that the A.O. has wrongly estimated the income on amount received from the Sundry debtors pertaining to earlier years and further the credits in the bank account by inter group/ sister concerns was treated as sales by the A.O. The Ld.AR demonstrated the page 42 of the paper book reflecting the bank deposits and payments in the six bank accounts. On perusal of statement, we find the assessee has consolidated opening bank balance on 1-4-2010 and in one of the bank account, redemption amount from Kotak Liquid was credited and wrongly treated as sales. Apart from this transaction, the Ld.AR demonstrated the internals transfers from group/associate concerns and has to be excluded in computing the income. We find the submissions of the Ld.AR are realistic and duly supported with the material evidences.We considering the fact of claim of expenditure incurred for the business has to be considered by the revenue and while determining the actual sale, and the collections of sundry debtors, the inter group transfers and credit of redemption of liquid funds are to be excluded along with the similar credits. ITA No. 828/Mum/2021-Devang Himatlal Kapasi - 9 - Accordingly, to meet the ends of justice, we restore the disputed issues to the file of the Assessing officer to consider the claims of the asssessee and exclude the credits in the bank account which are not in the nature of the sale transactions and to estimate the income applying the percentage sustained by the CIT(A) and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information and allow the grounds of appeal for statistical purpose. 9. In the result, assessee’s appeal is treated as allowed for statistical purpose. Order pronounced in the open court on 21.02.2022. Sd/- Sd/-Sd/- Sd/- (OM PRAKASHKANT) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 21 /02/2022 SK, Sr. PS /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. " #$ % / The CIT(A) 4. %( ) / Concerned CIT ITA No. 828/Mum/2021-Devang Himatlal Kapasi - 10 - 5. #वभ ' # # #$, #$ ण, हमद " द / DR, ITAT, Mumbai 6. ' *+ , / Guard file. आदेशानुसार/ BY ORDER, # # //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Mumbai