ACIT CIR 15(1), MUMBAI V. ALLIANCE INTERNATIONAL TOURS AND TRAVELS, MUMBAI

ITA 8686/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4063 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 13-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P P JAYARAMAN
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI .. , ! , '# ' $ BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 8686/MUM/2010 ( & ' (' & ' (' & ' (' & ' (' / / / / ASSESSMENT YEAR: 2007-08) ASST. CIT 15(1), ROOM NO.104, MATRU MANDIR, 1 ST FLOOR, TARDEO ROAD, MUMBAI-400 007 & & & & / VS. ALLIANCE INTERNATIONAL TOURS AND TRAVELS 103, ROYAL GARDEN, DR. ANNIE BESANT ROAD, WORLI, MUMBAI-400 018 ) '# ./ * ./ PAN/GIR NO. AAIFA 3769 N ( )+ / APPELLANT ) : ( ,-)+ / RESPONDENT ) )+ . ' / APPELLANT BY : SHRI MANOJ KUMAR ,-)+ / . ' / RESPONDENT BY : SHRI P. P. JAYARAMAN & / 01# / // / DATE OF HEARING : 17.06.2013 2 ( / 01# / DATE OF PRONOUNCEMENT : 19.07.2013 '3 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-26, MUMBAI (CIT(A) FOR SH ORT) DATED 09.09.2010, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2007-08 VIDE ORDER DATED 24.12.2009. 2 ITA NO. 8686/MUM/2010 (A.Y. 2007-08) ASST. CIT VS. ALLIANCE INTERNATIONAL TOURS & TRAVEL S 2.1 THE REVENUES APPEAL RAISES TWO ISSUES, EACH OF WHICH WE SHALL TAKE UP IN SERIATIM. THE FIRST GROUND IS IN RESPECT OF DELETIO N OF AN ADDITION IN THE SUM OF RS.42,77,760/- MADE BY THE ASSESSING OFFICER (A.O.) ON ACCOUNT OF UNEXPLAINED CASH CREDITS. THE ASSESSEE-FIRM IS IN THE TRAVEL BUSINES S, I.E., AS A TRAVEL AGENT, ALSO CONDUCTING TOURS AND TRAVELS, BESIDES RENDERING CONSULTANCY SE RVICES IN RELATION TO THE TRAVEL TRADE. CASH RECEIPTS FROM SEVERAL PARTIES WERE OBSERVED BY THE A.O. IN THE CASH-BOOK, WHICH THE ASSESSEE WAS CALLED UPON TO EXPLAIN. IT WAS EXPLAIN ED BY THE ASSESSEE THAT IT IS AN IATA REGISTERED TRAVEL AGENCY, WORKING ON THE BASIS OF C OMMISSION. AS AIR TICKETS ARE REQUIRED INSTANTLY MANY A TIME BY ITS CONSTITUENTS, IT RECEI VES CASH AGAINST THE SAME, AND WHICH IS SUBSEQUENTLY DEPOSITED IN THE BANK. THE A.O., HOWEV ER, WAS NOT SATISFIED WITH THE SAID EXPLANATION AS THE ASSESSEE HAD FAILED TO EXPLAIN A S WHY WOULD THE TRAVEL AGENTS THROUGH WHOM THE TICKETS ARE SOLD - PAY IN CASH AND INCUR T HE CONSEQUENCE OF DISALLOWANCE U/S.40A(3) . THE SECOND REASON WAS THE NON-PRODUCTION OF THE CASH BOOK FOR THE PERIOD AFTER 31.05.2006 ? FURTHER, THE ASSESSEE HAD NO EVIDENCE WITH REGARD TO THE IDENTITY, CAPACITY OF THE CREDITORS OR THE GENUINENESS OF THE TRANSACTIONS. THE AMOUNT WAS, THEREFORE, ADDED INVOKING SECTION 68 OF THE ACT. 2.2 IN APPEAL, THE ASSESSEE EXPLAINED THE MODUS OPERANDI , CLAIMING THAT THE A.O. HAD FAILED TO APPRECIATE THAT URGENCY FOR THE TICKETS W AS A NORMAL INCIDENT OF ITS TRADE, AND WHICH NECESSITATED THE RECEIPT OF PAYMENT IN CASH. THE ADDITION, IN THE VIEW OF THE LD. CIT(A), HAD BEEN MADE BY THE A.O. WITHOUT MAKING PR OPER VERIFICATION, AND MERELY BY DOUBTING THE ASSESSEES EXPLANATION, WHICH COULD NO T HOLD. THE SAME WAS ACCORDINGLY DELETED. AGGRIEVED, THE REVENUE IS IN APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE CASE OF BOTH THE PARTIES BEFORE US WAS ON THE SAME LINES; EACH R ELYING ON THE ORDER OF THE AUTHORITY BELOW AS FAVOURABLE TO IT. ON AN ENQUIRY BY THE BEN CH IN RELATION TO THE EXORBITANTLY HIGH CASH BALANCES APPEARING IN THE CASH-BOOK ON DIFFERE NT DATES FALLING IN THE MONTHS OF APRIL AND MAY, 2006, AS LISTED BY THE A.O. AT PG. 3 OF TH E ASSESSMENT ORDER, IT WAS EXPLAINED BY THE LD. AR THAT IT IS SO AS THE CASH GENERATED ON T HE SALE OF TICKETS, OR FOR THE PURCHASE OF 3 ITA NO. 8686/MUM/2010 (A.Y. 2007-08) ASST. CIT VS. ALLIANCE INTERNATIONAL TOURS & TRAVEL S FRESH (OPEN) TICKETS, IS TO BE DEPOSITED WITH THE A IRLINES ONLY TWICE A MONTH, I.E., ON THE 4 TH & 26 TH OF THE MONTH, AND COULD NOT BE AT ANY TIME. THIS E XPLAINED THE HIGH CASH BALANCE WITH THE ASSESSEE. WHY THE CASH, IN THAT CA SE, STOOD NOT BE DEPOSITED WITH THE BANK? FURTHER, IT REMAINS TO BE SEEN IF THE CASH HA D IN FACT BEEN DEPOSITED WITH THE AIRLINES ON THOSE DATES AND, ACCORDINGLY, ITS BALAN CE IN BOOKS REDUCED TO A SUBSTANTIAL EXTENT. EVEN SO, THE OBSERVATION AS TO CASH BALANCE CANNOT BY ITSELF LEAD TO ANY DEFINITE CONCLUSION, AND THE MATTER, BEFORE ARRIVING AT ANY DEFINITE FINDING, WOULD REQUIRE CORROBORATION AND PROPER VERIFICATION, AND WHICH HA S NOT BEEN UNDERTAKEN BY THE ASSESSING AUTHORITY. AT THE SAME TIME, IT IS ALSO N OT CLEAR AS TO WHY THE ASSESSEE DID NOT PRODUCE THE CASH-BOOK FOR THE PERIOD AFTER 31.05.20 06 BEFORE HIM, ALSO SUBMITTING THE CONFIRMATIONS FROM THE PURCHASERS, WHO WOULD ONLY B E ITS REGULAR CUSTOMERS. RATHER, GOING BY THE ASSESSEES EXPLANATION, THE SAME ONLY IMPLIES RECEIPT OF CASH AGAINST THE SALE OF AIR TICKETS. WHY SHOULD THESE AMOUNTS, THEREFORE , NOT BE REFLECTED AS TICKET SALES, SUPPORTING THE SAME WITH THE RELEVANT DOCUMENTS, AN D PASSING THE RELEVANT ACCOUNTING ENTRIES IN THE BOOKS. WITHOUT MAKING ANY FURTHER OB SERVATIONS; THE MATTER BEING CLEARLY INDETERMINATE, WE ONLY CONSIDER IT FIT AND PROPER T HAT THE MATTER IS RESTORED BACK TO THE FILE OF THE A.O. FOR ADJUDICATION AFRESH IN ACCORDANCE W ITH THE LAW AFTER DUE VERIFICATION. NEEDLESS TO ADD, THE ASSESSEE SHALL BE PROVIDED PRO PER OPPORTUNITY TO EXPLAIN ITS CASE BEFORE HIM. WE DECIDE ACCORDINGLY. 4. THE REVENUES SECOND GROUND IS IN RESPECT OF DEL ETION OF A DISALLOWANCE IN THE SUM OF RS.50 LACS. THE A.O. OBSERVED THE CLAIM OF E XPENDITURE BY THE ASSESSEE IN RESPECT OF HANDLING CHARGES AND DISCOUNT TO BE AT NEARLY 78 % OF THE GROSS RECEIPT UNDER THE SAID ACCOUNT HEAD (OF INCOME). THE SAME WAS INCURRED IN THE FORM OF CASH, AND FOR WHICH NO EVIDENCE HAD BEEN FURNISHED. THE CASH-BOOK FOR THE PERIOD 01.06.2006 TO 31.03.2007 HAD ALSO NOT BEEN PRODUCED, WHILE THAT FOR THE PRIOR PE RIOD EXHIBITED LARGE UNEXPLAINED BALANCES, SO THAT THE POSSIBILITY OF THE CLAIM OF B OGUS EXPENSES, TO BE BOOKED LATER, COULD NOT BE EXCLUDED. CONSIDERING THE TOTAL CLAIM OF THE EXPENDITURE AT RS.320.28 LACS (AGAINST A RECEIPT OF RS.410.76 LACS), HE MADE THE DISALLOWA NCE AT RS.50 LACS. THE SAME STOOD 4 ITA NO. 8686/MUM/2010 (A.Y. 2007-08) ASST. CIT VS. ALLIANCE INTERNATIONAL TOURS & TRAVEL S DELETED IN APPEAL ON THE ASSESSEE EXPLAINING THE MA NNER OF INCURRING THE SAID EXPENDITURE, SO THAT THE A.O., BEING SOLELY MOVED BY THE NON-PRO DUCTION OF THE CASH-BOOK AND THE FACT OF A HIGHER PERCENTAGE OF EXPENDITURE IN RELATION T O THE GROSS INCOME, HAD MISLED HIMSELF. THE ASSESSEE RECEIVES THE INCOME ONLY IN THE FORM O F DISCOUNT, A PART OF WHICH IS PARTED WITH WHEN THE TICKETS ARE SOLD TO THE TRAVEL AGENTS . THERE IS NO CASH MOVEMENT INVOLVED. THE ADDITION WAS DELETED ON THAT BASIS, WHICH THE R EVENUE AGITATES PER ITS GROUND NO.2. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. AS APPARENT, THE A.O. HAS FAILED TO APPRECIATE THE ASSESSEES CASE, AS ALSO THE MANNER IN WHICH THE SAID EXPENDITURE IS BOOKED. NEITHER IS ANY CASH INVOLVED NOR IS THE EXPENDITURE HIGH WHEN CONSIDERED IN RELATION TO THE NORMAL LEVEL OF SUCH EXPENDITURE IN THE TRADE. THE ASSESSEE BEFORE US HAS ALSO PLACED A PERCENTAGE OF SAID EXPE NDITURE FOR A.YS. 2006-07 TO 2009-10, DEDUCTING WHICH ONLY WOULD YIELD THE GROSS PROFIT. THE SAID EXPENDITURE VARIES FROM AS HIGH AS 85% (IN A.Y. 2006-07) TO AS LOW AS 70% (IN A.Y. 2008-09), WITH ALL THE YEARS EXCEPT A.Y. 2008-09 BEING ASSESSED UNDER THE VERIFI CATION PROCEDURE. THE EXPENDITURE FOR THE CURRENT YEAR, AS AFORE-STATED, IS AT 78%. U NDER THE CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDING LY, THE DISALLOWANCE, WHICH IS MISCONCEIVED, STANDS RIGHTLY DELETED BY HIM. WE DEC IDE ACCORDINGLY. 6. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. 4 05 / 6/ 78'9 ' 3 :0 / 0 ;< ORDER PRONOUNCED IN THE OPEN COURT ON JULY 19, 2013 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER '# / ACCOUNTANT MEMBER MUMBAI; =& DATED : 19.07.2013 .&../ ROSHANI , SR. PS 5 ITA NO. 8686/MUM/2010 (A.Y. 2007-08) ASST. CIT VS. ALLIANCE INTERNATIONAL TOURS & TRAVEL S '3 / ,0> ?'>(0 '3 / ,0> ?'>(0 '3 / ,0> ?'>(0 '3 / ,0> ?'>(0/ COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT 3. @ ( ) / THE CIT(A) 4. @ / CIT - CONCERNED 5. >CD ,0& , , / DR, ITAT, MUMBAI 6. DE' F / GUARD FILE ' ' ' '3& 3& 3& 3& / BY ORDER, 7 77 7/ // /; ; ; ; (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI