Shri Rakesh S.Shah, Baroda V. The Income tax Officer,Ward-5(3), Baroda

ITA 887/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0580 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 05-09-2016
• Assessment Year: 2000-2001
• Appeal Filed On: 01-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Peak credit
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 887/AHD/2013 (ASSESSMENT YEAR: 2000-01) RAKESH S. SHAH BLOCK NO. 3, TAKSHASHILA SOCIETY, NEAR CHITRAKUT MAHADEV TEMPLE, BARODA V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-5, BARODA (APPELLANT) (RESPONDENT) PAN: AJFPS4625P APPELLANT BY : SMT. URVASHI SHODHAN, AR RESPONDENT BY : SHRI KAMLESH MAKWANA, SR. D. R. ( )/ ORDER DATE OF HEARING : 05 -09-20 16 DATE OF PRONOUNCEMENT : 07-09-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. WITH THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT(A)-V, BARODA DATED 07.12.2012 PERTAINING TO A.Y. 2000-01. ITA NO. 887/ AHD/2013 . A.Y. 2000- 01 2 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY LEVIED BY THE A.O. U/S. 271( 1)(C) OF THE ACT. 3. THE APPEAL IS BARRED BY LIMITATION BY 3 DAYS. CONSI DERING THE SMALLNESS OF THE DELAY, THE DELAY IS CONDONED. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSMENT MADE U/S. 143(3) OF THE ACT WAS REOPENED U/S. 147 OF THE ACT AND THE ASSESSMENT WAS COMPLETED BY MAKING FOLLOWING ADDITI ONS TO THE RETURNED INCOME: (I) INITIAL INVESTMENT MADE UP TO 03.04.1999 RS. 8, 23,378/- (II) PEAK CREDIT ON 30.10.1999 RS. 29,01,118/- (III) NET PROFIT @ 5% ON THE ENTIRE TRANSACTION RS . 86,48,992/- 5. ASSESSEE AGITATED THE ASSESSMENT BEFORE THE LD. CIT (A) WHO DELETED THE ADDITIONS MADE BY THE A.O. HOWEVER, DIRECTED TH E A.O. TO TREAT THE COMMISSION INCOME @ 5% ON THE AMOUNT OF THE DRAFTS/ PAY ORDER TRANSACTIONS AT RS. 86,48,992/-. ASSESSEE FURTHER CARRIED THE MATTER BEFORE THE TRIBUNAL AND THE CO-ORDINATE BENCH VIDE ORDER DATED 02.11.2012 IN ITA NOS. 300 TO 303/AHD/2010 RESTRICT ED THE ADDITION ON ACCOUNT OF COMMISSION AT 1%. 6. FOLLOWING THE ORDER OF THE FIRST APPELLATE AUTHORIT Y, THE A.O. LEVIED PENALTY OF RS. 28,48,350/- AND WHEN THE PENALTY WAS CHALLENGED BEFORE THE LD. CIT(A), FOLLOWING THE ORDER OF THE T RIBUNAL, THE LD. CIT(A) RESTRICTED THE PENALTY AT RS. 5,69,670/-. 7. ASSESSEE IS BEFORE US AGAINST THIS LEVY OF PENALTY. ITA NO. 887/ AHD/2013 . A.Y. 2000- 01 3 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STRONGL Y STATED THAT THE ADDITION WAS MADE ON A DIFFERENT ACCOUNT WHEREAS TH E SAME WAS CONFIRMED AT THE TRIBUNAL STAGE ON A DIFFERENT ACCO UNT. IT IS SAY OF THE LD. COUNSEL THAT THE REVENUE AUTHORITIES HAVE NOT G IVEN ANY CONCRETE FINDINGS ON WHICH ACCOUNT THE ASSESSEE HAS CONCEALE D THE INCOME OR HAS FILED INACCURATE PARTICULARS OF INCOME. THEREFO RE, ON ESTIMATION OF PROFIT, NO PENALTY SHOULD BE LEVIED. PER CONTRA, TH E LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE LD. CIT(A). 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CAREFULLY PERUSED T HE ORDERS RELATING TO THE QUANTUM ASSESSMENT PROCEEDINGS. 10. THE TRIBUNAL WHILE RESTRICTING THE ESTIMATED ADDITI ON ON ACCOUNT OF COMMISSION AT 1% HAS HELD AS UNDER:- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THIS ISSUE IN DISPUTE WAS DECIDED BY LD. CIT(A) AS PER PARA 6.5 A ND 6.5.1 OF HIS ORDER AND FOR THE SAKE OF READY REFERENCE, THE SAME ARE REPRODUCE D BELOW: 'I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE ORDERS OF THE A.O. FOR THE YEARS UNDER REFERENCE AND ALSO THE A.Y. 2000-01 AND THE REMAND REPORT DATED 28/03/2008 AND 04/11/2009. THE OVERWHELMING ISSUE IN THE PRESENT CASE IS REGARDING PURCHASE OF DRAFTS OR CHEQUES, PAY ORDERS ETC., FROM M/S DURGA FINANCE FAVOURING INDIAN OIL CORPORATION OR GAS AUTHORITY OF INDIA LTD ON BEHALF OF CERTAIN PARTIES, AS SPELT OUT BY THE AO IN THE BODY OF THE ASSESSMENT ORDER. THE AO HAS TREATED SUCH PURCHASE OF THESE DEMAND DRAFTS AS THOSE OF THE APPELLANT. E VEN THOUGH, THERE IS A CLEAR INDICATION THAT THE APPELLANT IS A PERSON INS TRUMENTAL IN FACILITATING ITA NO. 887/ AHD/2013 . A.Y. 2000- 01 4 THE CASH DEPOSITED AND ISSUE OF INSTRUMENTS, THE AL LEGATION THE AO THAT THE APPELLANT WAS THE REAL PURCHASER HAS BEEN DENIED BY THE APPELLANT IN THE FIRST PLACE. IN THE SECOND PLACE, IT MAY BE NOTED H ERE THAT THE TRANSACTIONS SAID TO HAVE BEEN CONDUCTED THROUGH PARTIES LIKE LI LADHAR PETROLEUM, VEER SHAHEED PETROLEUM, SHRI RANG PETROLEUM INDUSTR IES ETC WERE RECORDED IN THEIR BOOKS, WHICH WAS NOT DISPROVED BY THE AO BY COGENT REASONS. INITIALLY, M/S DURGA FINANCE, REPRESENTED BY ITS MANAGER SHRI HARIN, K. THAKKAR STATED THAT THE DRAFTS ETC., WERE PURCHASED BY THE APPELLANT, BASED ON WHICH THE AO HAS COME TO THE CO NCLUSION THAT THESE WERE THE UNACCOUNTED PURCHASES OF THE APPELLANT. HO WEVER, SHRI HARIN. K. THAKKAR HAS DENIED LATER ON THROUGH, AN AFFIDAVIT T HAT THE TRANSACTIONS WERE NOT THOSE OF THE APPELLANT, BUT THOSE OF THE P ARTIES CONCERNED, REFERRED THROUGH THE APPELLANT. SIMILAR IS TRUE WIT H SHRI SAMANTSINH MAHIDA PROPRIETOR OF M/S. LILADHAR PETROLEUEM, WHO HAS ALSO FILED THE AFFIDAVIT TO DENY THAT THE APPELLANT WAS NOT THE PE RSON INDULGING IN PURCHASES BUT ONLY A FACILITATOR. THE AO HAS BRUSHE D THEM ASIDE BRANDING THEM TO BE AN AFTER THOUGHT. THE DENIAL OF THE APPE LLANT THAT HE IS NOT THE ACTUAL PURCHASER, BUT ONLY A FACILITATOR HAS NOT BE EN DENIED OR DISPROVED BY THE AO. IN THE CIRCUMSTANCES, IT IS VERY DIFFICU LT TO TREAT THE APPELLANT AS PURCHASER. 6.5.1. IT MAY BE NOTED HERE THAT THAT THE NEXT IMME DIATE QUESTION IS, WHETHER HE IS A COMMISSION AGENT? THE ANSWER APPEAR S TO BE YES. IT IS AN ADMITTED FACT THAT M/S. DURGA FINANCE HAS ISSUED VO LUMINOUS NUMBER OF DEMAND DRAFTS AT THE INSTANCE OF THE APPELLANT AND THE FACT WAS ALSO RECORDED IN VARIOUS SLIPS. THE AMOUNTS OF TRANSACTI ON HAS NOT BEEN DENIED WHICH IS BASED ON THE RECORDS. THE REFERENCE OF THE APPELLANT IN SUCH LARGE NUMBER OF TRANSACTIONS FOR VARIOUS YEARS SIGNALS TH AT APPELLANT WAS INDIRECTLY ASSOCIATED WITH SUCH FINANCING ACTIVITIE S AND HAD FINANCIAL GAINS FROM SUCH CONTINUOUS AND HUGE NUMBER OF TRANSACTION S. EVEN THOUGH THE APPELLANT APPEARS TO BE EARNING COMMISSION ON THE C HEQUES, DRAFTS, PAY ORDERS ETC ISSUED TO INDIAN OIL CORPORATION AND GAS AUTHORITY OF INDIA ITA NO. 887/ AHD/2013 . A.Y. 2000- 01 5 LTD, THE COMMISSION RECEIVED BY HIM WAS NOT RECORDE D IN THE BOOKS MAINTAINED BY HIM. THE FACT THAT HE IS NOT RECORDIN G THE COMMISSION IN HIS BOOKS CANNOT EXONERATE HIM IN LIGHT OF THE MATERIAL FOUND BY THE AO, WHERE IN THE FINANCE COMPANIES CONCERNED RECORDED HIS NAME AS FACILITATOR FOR ISSUANCE OF CHEQUES, DRAFTS, PAY OR DERS ETC. NO BODY INDULGES IN SUCH A VOLUMINOUS TRANSACTION FOR CHARI TY. THE COMMISSION CHARGED OR RECEIVED FROM THE PARTIES CONCERNED HAS NOT BEEN RECORDED FOR THE OBVIOUS REASONS THAT SUCH TRANSACTIONS WERE HI CASH. IT MAY ALSO BE NOTED HERE THAT PURCHASE OF DRAFTS, CHEQUES, PAY OR DERS ETC., WERE AGAINST PAYMENT OF CASH. IN VIEW OF THE FACTS, CIRCUMSTANCE S AND PREPONDERANCE OF PROBABILITIES, I AM IN AGREEMENT WITH THE VIEW OF T HE AO FOR A.Y. 2000-01 THAT THE NET COMMISSION INCOME BE TREATED AS 5% OF THE AMOUNT OF THE DRAFTS/PAY ORDER TRANSACTIONS CONDUCTED AT THE BEHE ST OF THE APPELLANT AND THE FOLLOWING ADDITIONS ARE CONFIRMED: A.Y. AMONT OF DEMAND DRAFT/PAY ORDERS (RS.) COMMISSION INCOME @ 5% 1999-2000 5,93,58,050 2967902 2000-01 172979849 8648992 2003-04 5394662 269733 2004-05 17844555 892228 9. FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN BY LD. CIT(A) THAT THE ASSESSEE IS A PERSON I NSTRUMENTAL IN FACILITATING THE CASH DEPOSITS AND ISSUE OF THE INSTRUMENTS AND HENC E, THIS ARGUMENT OF THE ASSESSEE HAS NO MERIT THAT THE ASSESSEE HAS NO CONN ECTION WITH THESE DEMAND DRAFTS/PAY ORDERS AND NO INCOME IS ASSESSABLE IN TH E HANDS OF THE ASSESSEE ON THIS COUNT. NOW, THE ONLY ISSUE TO BE DECIDED BY US IS W HETHER THE DECISION OF LD. CIT(A) IN DIRECTING THE A.O. TO TEAT 5% OF THE AMOU NT OF DEMAND DRAFT/PAY ORDERS AS COMMISSION INCOME OF THE ASSESSEE IS REASONABLE OR NOT. IN OUR CONSIDERED ITA NO. 887/ AHD/2013 . A.Y. 2000- 01 6 OPINION, 5% COMMISSION IN THIS TYPE OF ACTIVITY IS VERY MUCH ON HIGHER SIDE AND WE ARE OF THE CONSIDERED OPINION THAT % COMMISSION INCOME WILL MEET THE ENDS OF JUSTICE AND ACCORDINGLY, WE DIRECT THE A.O. TO REST RICT THE ADDITION IN THE HANDS OF THE ASSESSEE TO THE EXTENT OF 1% OF THE AMOUNT OF D EMAND DRAFTS/PAY ORDERS IN EACH OF THE FOUR YEARS AS AGAINST 5% COMMISSION AS DIRECTED BY LD. CIT(A). THIS GROUND IS PARTLY ALLOWED IN ALL THE FOUR YEARS. 11. A PERUSAL OF THE PENALTY ORDER IN THE LIGHT OF THE AFOREMENTIONED FINDINGS OF THE TRIBUNAL SHOWS THAT THE A.O. HIMSEL F AT PARA 3.2 OF HIS PENALTY ORDER HAS OBSERVED AS UNDER:- 3.2 THEREFORE, THOUGH THE CHARACTER OF THE ADDITION MAY HAVE CHANGED BUT THE SUBSTANCE OF THE ADDITION REMAINS THE SAME. THE A.O . IN THE ASSESSMENT ORDER WAS DONE INDEPTH ANALYSIS AND VERIFIED THE ISSUED THROU GH DISCREET ENQUIRIES AS WELL AS THROUGH THE STATEMENT RECORD OF VARIOUS PERSONS BEI NG PARTY TO THE RELEVANT CASE. 12. IT IS AN UNDISPUTED FACT THAT IN NONE OF THE STATEM ENTS REFERRED TO BY THE A.O, THE PARTIES HAVE ACCEPTED OF HAVING GIVEN COMMISSION TO THE ASSESSEE. BE THAT AS IT MAY, IN OUR CONSIDER ED OPINION, THERE BEING NO CONCRETE EVIDENCE FOUND AT THE STAGE OF AS SESSMENT PROCEEDINGS NOR DURING THE PENAL PROCEEDINGS WHICH COULD SHOW THAT THE ASSESSEE HAS ACTUALLY EARNED COMMISSION ON BEIN G A FACILITATOR IN ARRANGING THE DRAFTS/PAY ORDER. THE ADDITION HAS BE EN CONFIRMED ONLY ON THE GUESS WORK AND ESTIMATION OF PROFIT. 13. IN OUR UNDERSTANDING OF THE FACTS, NO PENALTY CAN B E LEVIED ON SUCH ADDITION. WE, THEREFORE, SET ASIDE THE FINDING S OF THE LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE PENALTY OF RS. 5, 69,670/-. ITA NO. 887/ AHD/2013 . A.Y. 2000- 01 7 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 07 - 09- 2016 . SD- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD