ACIT CC 46, MUMBAI V. ALAG SECURITIES P. LTD ( FORMERLY KNOWN AS MAHASAGAR SECURIEITIES P.LTD. AND RICHMOND SECURITIES P. LTD), MUMBAI

ITA 886/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1814 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-09-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 09-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Unexplained cash credit; Accommodation entries
• Section: 143(3); 68; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 886/MUM/2012 : (A.Y : 2003 - 04) DCIT, CENTRAL CIRCLE - 46, MUMBAI ( APPELLANT ) VS. M/S. ALAG SECURITIES PVT. LTD. (FORMERLY KNOWN AS MAHASAGAR SECURITIES PVT. LTD. AND RICHMOND SECURITIES PVT. LTD.) H - BLOCK, SHRI SADASHIV CHAMBERS, 6 TH ROAD, SANTA CRUZ (E), MUMBAI PAN : AABCR1593B (RESPONDENT) ASSESSEE BY : SHRI MUKESH CHOKSI REVENUE BY : SHRI A. RAMACHANDRAN DATE OF HEARING : 08/09/2016 DATE OF PRONOUNCEMENT : 18 /11/2016 O R D E R PER G.S. PANNU , AM : THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 37 , MUMBAI DATED 8.11.2011 , PERTAINING TO THE ASSESSMENT YEAR 2003 - 04 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER, MUMBAI UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL : - 2 M/S. ALAG SECURITIES PVT. LTD. ITA NO. 886/MUM/2012 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN RESTRICTING THE ADDITION OF RS. 478.94 LAKHS MADE ON ACCOUNT OF UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT TO 0.15% WITHOUT APPRECIATING THAT THE ASSESSEE HAD FAILED TO FURNISH SATISFACTORY EXPLANATION WITH REGARD TO THE IDENTITY OF THE PARTIES AND THE SOURCE AND GENUINENESS OF THE TRANSACTIONS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN RESTRICTING THE ADDITION TO THE COMMISSION INCOME @ 0.15% WITHOUT CONSIDERING THAT THE MATERIAL FOUND DURING THE COURSE OF SEARCH CLEARLY ESTABLISHED THAT THE NET COMMISSION CHARGED BY THE ASSESSEE GROUP OF COMPANIES VARIED BETWEEN 1.5% AND 3.6% AND THE FACTS OF ITAT DECISION IN THE CASE OF M/S. MIHIR AGENCIES PVT. LTD. FOR A.Y 2002 - 03 (ITA NO. 4912/M/05) AS RELIED UPON BY THE CIT(A) WERE CLEARLY DISTINGUISHABLE. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF ASSESSING O FFICER BE RESTORED. 3. AT THE TIME OF HEARING, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE DISPUTE RAISED BY THE REVENUE IN THE INSTANT APPEAL IS IDENTICAL TO THE DISPUTE RAISED BY THE REVENUE IN ITS APPEAL IN THE CASE OF M/S. GOLDS TAR FINVEST PVT. LTD. FOR ASSESSMENT YEAR 2003 - 04 , WHICH HAS SINCE BEEN DECIDED BY THE TRIBUNAL VIDE ITS ORDER IN ITA NO. 887/MUM/2012 DATED 13.10.2015. IT HAS ALSO BEEN POINTED OUT THAT THE INSTANT ASSESSEE AS WELL AS M/S. GOLDSTAR FINVEST PVT. LTD. (SUP RA) ARE PART OF THE SAME GROUP WHEREIN THE CONTROVERSY IS SIMILAR. APART FROM THE AFORESAID, RELIANCE HAS ALSO BEEN PLACED ON THE FOLLOWING DECISIONS: - I) M/S. MIHIR AGENCIES PVT. LTD., ITA NOS. 6114 - 6120/MUM/2012 DATED 6.1.2016; 3 M/S. ALAG SECURITIES PVT. LTD. ITA NO. 886/MUM/2012 II) M/S. ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD., ITA NOS. 2700, 2702 & 2701/MUM/2013 DATED 24.2.2016. WHEREIN IDENTICAL ISSUES HAVE BEEN DECIDED I N THE CASE OF SISTER CONCERNS. 4. IN ORDER TO APPRECIATE THE BACKGROUND, THE RELEVANT FACTS ARE THAT THE RESPONDENT - ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, WHICH IS A PART OF GROUP OF CONCERNS, WHOSE KINGPIN IS IDENTIFIED AS ONE MR. MUKESH CHOKSI . IN THE COURSE OF SEARCH ACTION U/S 132(1) OF THE ACT, IT WAS FOUND THAT THE ENTITIES OF THE GROUP WERE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES BY WAY OF SHARE TRADING/LOANS ETC. SINCE THE ASSESSEE - COMPANY WAS ALSO COVERED IN SUCH SEARCH OPERATION, THE IMPUGNED ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 OF THE ACT DATED 31.12.2010. NOTABLY, THIS REASSESSMENT WAS AS A RESULT OF REOPENING OF ORIGINAL ASSESSMENT COMPLETED U/S 143(3) R.W.S. 153C OF THE ACT ON 26.12.2008. IN THE IMPUGNED ASSESSMENT, THE ASSESSING OFFICER HELD THAT THERE WERE VARIOUS DEPOSITS IN CASH AS WELL AS OTHER CREDITS APPEARING IN THE BANK ACCOUNT WHICH THE ASSESSEE COULD NOT SATISFACTORILY EXPLAIN. SUCH DEPOSITS TOTALLED TO RS.4,78,94,000/ - . AS ASSESSEE COULD NOT EXPLAIN THE NATURE AND SOURCE OF SUCH CREDITS, THE AMOUNT OF RS.4,78,94,000/ - WAS ASSESSED AS UNDISCLOSED INCOME U/S 68 OF THE ACT. BEFORE THE CIT(A), ASSESSEE POINTED OUT THAT ASSESSING OFFICER WAS WRONG IN ASSESSING THE ENTIRE CREDITS IN THE BANK ACCOUNT AS UNDISC LOSED INCOME U/S 68 OF THE ACT. THE CIT(A) NOTED THAT ASSESSEE WAS A PART OF A GROUP CONTROLLED BY MR. MUKESH CHOKSI, WHICH WAS INVOLVED IN EARNING COMMISSION INCOME 4 M/S. ALAG SECURITIES PVT. LTD. ITA NO. 886/MUM/2012 FOR PROVIDING ACCOMMODATION ENTRIES TO VARIOUS PERSONS. THE CIT(A) HAS REFERRED TO THE M ODUS OPERANDI AND THE STATEMENT OF MR. MUKESH CHOKSI RECORDED AT THE TIME OF SEARCH. THE CIT(A) ALSO NOTED THAT IN THE CASE OF OTHER GROUP CONCERNS, THE AFORESAID MODUS OPERANDI HAS BEEN ACCEPTED AND THE INCOME HAS BEEN ASSESSED ONLY ON ACCOUNT OF COMMISS ION EARNED ON PROVIDING ACCOMMODATION ENTRIES AND THAT THE ENTIRE AMOUNT OF CREDITS APPEARING IN THE BANK ACCOUNT WAS NOT ASSESSED IN THE HANDS OF SUCH ENTITIES. ACCORDINGLY, THE CIT(A) HAS SET - ASIDE THE ADDITION OF RS. 4,78,94,000/ - MADE U/S 68 OF THE AC T AND INSTEAD, DIRECTED THE ASSESSING OFFICER TO RESTRICT THE ADDITION TO COMMISSION INCOME CALCULATED @ 0.15% OF THE TOTAL CREDITS REFLECTED IN THE BANK ACCOUNT. AGAINST SUCH A DECISION OF CIT(A), REVENUE IS IN APPEAL BEFORE US. 5. THE LEARNED REPRESENT ATIVE FOR THE RESPONDENT - ASSESSEE POINTED OUT THAT IN THE CASE OF OTHER GROUP CONCERNS, WHICH WERE ALSO COVERED BY THE SEARCH ACTION CARRIED OUT BY THE DEPARTMENT ON 25.11.2009, THE TRIBUNAL HAS ACCEPTED THE STAND OF THE ASSESSEE THAT COMMISSION INCOME WAS LIABLE TO BE ASSESSED IN THE HANDS OF THE ENTITIES @ 0.15% OF THE TOTAL RECEIPTS. IT HAS ALSO BEEN POINTED OUT THAT IN THE CASE OF M/S. RICHMOND SECURITIES PVT. LTD. , ITA NOS. 4624 & 5099/MUM/2005 DATED 29.8.2008, THE TRIBUNAL FOUND THAT THE PROVISIONS O F SEC. 68 OF THE ACT COULD NOT BE INVOKED IN VIEW OF THE ACCEPTED MODUS OPERANDI THAT SUCH ENTITIES WERE ONLY EARNING INCOME BY WAY OF COMMISSION FOR PROVIDING ACCOMMODATION ENTRIES. 5 M/S. ALAG SECURITIES PVT. LTD. ITA NO. 886/MUM/2012 6. AT THE TIME OF HEARING, THE LD. DR HAS NOT DISPUTED THE AFORESAID PRE CEDENTS WHICH CLEARLY SUPPORT THE FINDINGS OF CIT(A). HOWEVER, THE LD. DR POINTED OUT THAT THE ONUS WAS ON THE ASSESSEE TO ESTABLISH THE CREDITS APPEARING IN THE BANK ACCOUNT. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IT IS SEEN THAT SIMILA R ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF M/S. GOLDSTAR FINVEST PVT. LTD. (SUPRA) , M/S. MIHIR AGENCIES PVT. LTD. (SUPRA) , M/S. ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. (SUPRA) AND SHRI MUKESH CHOKSI (SUPRA), WHICH HAS BEEN RELIED UPON BY THE ASSESSEE BEFORE US. IN FACT, IN THE CASE OF M/S. GOLDSTAR FINVEST PVT. LTD. (SUPRA) THE DISPUTE PERTAINED TO ASSESSMENT YEAR 2003 - 04, WHICH IS ALSO THE ASSESSMENT YEAR BEFORE US AND, IN FACT, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE VERBATIM SI MILAR TO THE GROUNDS RAISED IN THE APPEAL BEFORE US, ALBEIT FOR THE DIFFERENCE IN FIGURES OF AMOUNT S INVOLVED. THEREFORE, THE DECISION OF TRIBUNAL IN THE CASE OF M/S. GOLDSTAR FINVEST PVT. LTD. (SUPRA) IS APPLICABLE IN THE INSTANT CASE ON ALL FOURS AND TH E FOLLOWING DISCUSSION IN THE ORDER OF TRIBUNAL IS RELEVANT : - 5. WE HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIES AND THE ORDERS OF THE CO - ORDINATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE AND OTHER ORDERS RELIED UPON BY THE ASSESSEE. IT IS NOTED BY US THAT IDENTICAL ISSUE HAD CAME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002 - 03. THE RELEVANT OBSERVATIONS FROM THE TRIBUNALS ORDER ARE REPRODUCED BELOW: '12. HAVING, CAREFULLY EXAMINED THE VARIOUS ORDERS IN THE CASE OF D IFFERENT ASSESSEES' IT HAS BECOME AMPLY CLEAR THAT IN THESE TYPES OF ACTIVITIES, BROKERS ARE ONLY CONCERNED WITH THEIR COMMISSION ON THE VALUE OF TRANSACTIONS. NOW THE QUESTION 6 M/S. ALAG SECURITIES PVT. LTD. ITA NO. 886/MUM/2012 COMES WHAT WOULD BE THE REASONABLE PERCENTAGE TO THE COMMISSION ON THE TOTAL TU RNOVER? THE ASSESSEE HAS ALSO MADE OUT A CASE THAT THE CUSTOMERS DO NOT COME DIRECTLY TO HIM AND THEY COME THROUGH A SUB - BROKER WHO ALSO CHARGES A PARTICULAR SHARE OF COMMISSION. IN ALL THE JUDGMENTS WHAT HAS BEEN STATED IS THAT AN AVERAGE PERCENTAGE OF C OMMISSION IS BETWEEN 0.15% TO 0.25%. IN THE CASE OF PALRESHA & CO. AND KIRAN & CO (SURPA), THE TRIBUNAL HAS CONSIDERED REASONABLENESS OF PERCENTAGE OF COMMISSION TO BE EARNED ON TURNOVER WAS AT 0.1%. THE ASSESSEE HIMSELF HAS OFFERED THE PERCENTAGE OF COMMI SSION AT 0.15%, WHICH IS MORE THAN THE PERCENTAGE OF COMMISSION CONSIDERED TO BE REASONABLE BY THE TRIBUNAL IN THE CASE OF PALRESHA & CO AND KIRAN & CO (SUPRA) IN SIMILAR TYPE OF TRANSACTIONS. THE THEORY OF ASSESSING OFFICER TO TREAT THE ENTIRE DEPOSIT AS UNEXPLAINED CASH CREDITS, CANNOT BE ACCEPTED IN THE LIGHT OF ASSESSMENT ORDERS IN THE CASE OF BENEFICIARIES AND ALSO IN THE LIGHT OF THE FACT THAT ASSESSEE IS ONLY CONCERNED WITH THE COMMISSION EARNED ON PROVIDING ACCOMMODATION ENTRIES. WE, THEREFORE, OF T HE VIEW THAT SINCE THE ASSESSEE ITSELF HAS DECLARED THE COMMISSION ON TURNOVER AT 0.15% WHICH IS MORE THAN THE PERCENTAGE CONSIDERED TO BE REASONABLE BY THE TRIBUNAL IN THE CASE OF PALRESHA & CO AND KIRAN& CO (SUPRA), THE SAME SHOULD BE ACCEPTED. WE, ACCOR DINGLY, ACCEPT THE COMMISSION DECLARED BY THE ASSESSEE AND SET ASIDE THE ORDER OF THE CIT (A) IN THIS REGARD.' 6. IT IS FURTHER NOTICED BY US THAT THIS STAND HAS BEEN CONSTANTLY ACCEPTED BY THE TRIBUNAL IN VARIOUS ORDERS, DETAILS OF WHICH HAVE BEEN GIVEN BY THE LD. COUNSEL, AS MENTIONED ABOVE. WE HAVE GONE THROUGH THE ORDERS AS ENCLOSED IN THE PAPER BOOK FILED BY THE ASSESSEE AND FIND THAT THE LD. AR HAS CORRECTLY STATED THAT THIS ISSUE HAS BEEN UNANIMOUSLY ACCEPTED BY THE TRIBUNAL IN VARIOUS CASES INCLUD ING THE CASE OF ASSESSEE. NOTHING HAS BEEN BROUGHT ON RECORD BY THE LD. DR TO DISTINGUISH THESE CASES. THEREFORE, RESPECTFULLY FOLLOWING THE ORDERS OF THE TRIBUNAL INCLUDING THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING YEAR, WE FIND THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. 7 M/S. ALAG SECURITIES PVT. LTD. ITA NO. 886/MUM/2012 CIT(A), THEREFORE, THE SAME IS UPHELD. GROUNDS NO.1 AND 2 TAKEN BY THE REVENUE STAND DISMISSED. 8. SINCE IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE RESPONDENT - ASSESSEE IS ALSO A PART OF GROUP OF ENTITIES CONTROLLED BY MR. MUKESH CHOKSI, IN OUR VIEW, THE AFORESAID PRECEDENTS ARE RELEVANT TO ASSESS THE INCOME OF ASSESSEE. IN THIS VIEW OF THE MATT ER, WE FIND THAT THE CIT(A) MADE NO MISTAKE IN COMING TO THE IMPUGNED DECISION, WHICH IS IN CONFORMITY WITH THE PO SITION UPHELD BY THE TRIBUNAL IN THE GROUP CONCERNS OF THE INSTANT ASSESSEE. THEREFORE, WE HEREBY AFFIRM THE ORDER OF CIT(A) AND ACCORDINGLY, REVENUE FAILS IN ITS APPEAL. 9. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 8 T H NOVEMBER, 2016. S D / - S D / - ( RAM LAL NEGI ) JUDICIAL MEMBER ( G.S. PANNU ) ACCOUNTANT MEMBER MUMBAI, DATE : 1 8 T H NOVEMBER , 2016 * SSL * COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, A BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI