M/s. AIRLIFT (INDIA) P. LTD., MUMBAI V. ACIT CENT. CIR. - 40, MUMBAI

ITSSA 106/MUM/2006

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1536 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 14-12-2015
• Assessment Year: misc
• Appeal Filed On: 29-03-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH R PRASAD
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Search and seizure; Principle of natural justice; Corroborative evidences; Block assessment; Retraction
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA(SS) NO.106/M/2006 BLOCK PERIOD: 01.04.1996 TO 12.12.2002 M/S. AIRLIFT (INDIA) PVT. LTD., 13, ADARSH INDUSTRIAL ESTATE, SAHAR ROAD, CAKALA, ANDHERI (EAST), MUMBAI 400 099 PAN: AABCA 1088J VS. ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 40, AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ITA(SS) NO.110/M/2006 BLOCK PERIOD: 01.04.1996 TO 12.12.2002 ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 40, ROOM NO.653, 6 TH FLR., AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. AIRLIFT (INDIA) PVT. LTD., 13, ADARSH INDUSTRIAL ESTATE, SAHAR ROAD, CAKALA, ANDHERI (EAST), MUMBAI 400 099 PAN: AABCA 1088J (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SANJIV M. SHAH, A.R. REVENUE BY : SHRI RAJESH R. PRASAD, D.R. DATE OF HEARING : 14.12.2015 DATE OF PRONOUNCEMENT : 22.01.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TITLED CROSS APPEALS, ONE BY THE ASSESSE E AND THE OTHER BY THE REVENUE HAVE BEEN DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A )] DATED 25.01.2006 PASSED IN RELATION TO THE BLOCK ASSESSMENT ORDER DATED 3 0.12.2004 PASSED BY THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) UNDER SECTION 158BC ITA(SS) NO.106/M/2006 & ITA(SS) NO.110/M/2006 M/S. AIRLIFT (INDIA) PVT. LTD. 2 R.W.S. 143(3) OF THE INCOME TAX ACT. SINCE THE FACT S AND ISSUE INVOLVED IN BOTH THE APPEALS ARE IDENTICAL AND INTER CONNECTED, HENCE BOTH THE ABOVE APPEALS ARE TAKEN TOGETHER FOR DISPOSAL BY THIS COM MON ORDER. 2. THE ASSESSEE IN HIS APPEAL HAS TAKEN THE FOLLOWI NG GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, LEARNED CIT(A) ERRED IN CONFIRMING THAT THE PROVISIONS OF CHAPTER XIV-B ARE APPLICABLE TO THE FACTS OF THE CASE AND ACCORDINGLY THE ASSESSMENT MADE UNDER SECT ION 158BC READ WITH SECTION 143(3) OF THE INCOME TAX ACT IS VALID. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LEARNED CIT(A) ERRED IN CONFIRMING THAT THE PRINCIPLES OF NATURAL JUSTICE W ERE ADHERED TO IN THE ASSESSMENT PROCEEDINGS AND THEREFORE THE ASSESSMENT MADE IS VALID. 3. WITHOUT PREJUDICE TO THE FOREGOING, APPELLANT PL EADS THAT LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF SUB-COMMISS ION OF RS.1,83,36,710 PAID TO M/S. AIRWINGS TRAVEL AND CARGO PVT. LTD. AND AIR TRAC AGENTS (INDIA) PVT. LTD. 4. WITHOUT PREJUDICE TO THE FOREGOING, APPELLANT PL EADS THAT LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ENTIRE SUB-COMMISSION PAID TO AIRWINGS TRAVEL AND CARGO PVT. LTD. AND AIRTRAC AGE NTS (INDIA) PVT. LTD. HAVE BEEN OFFERED FOR TAXATION IN THE EARLIER YEARS BY THE RE SPECTIVE RECIPIENTS AND THEIR STATUS WAS ACCEPTED AS SUCH IN THE PAST AND THEREFO RE THE AMOUNTS CANNOT BE BROUGHT TO TAX IN THE BLOCK PERIOD OF THE APPELLANT . 5. WITHOUT PREJUDICE TO THE FOREGOING, APPELLANT PL EADS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LEARNED CIT(A ) ERRED IN NOT APPRECIATING THE FACT THAT THE RECIPIENTS OF THE SUB-COMMISSION HAD TO INCUR EXPENDITURE IN THE YEARS DURING WHICH THE SUB-COMMISSION PAYMENTS WERE RECEIVED BY THEM. IN THE ASSESSMENT OF THE RECIPIENTS THESE WERE ACCEPTE D IN THE PAST. THEREFORE THOSE EXPENSES WILL HAVE TO BE ALLOWED AS DEDUCTION IN THE ASSESSMENT OF THE APPELLANT AND IT IS ONLY THE RESULTANT NET INCOME T HAT CAN BE BROUGHT TO TAX IN THE BLOCK ASSESSMENT. 6. WITHOUT PREJUDICE TO THE FOREGOING, APPELLANT PL EADS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LEARNED CIT(A ) ERRED IN NOT APPRECIATING THE FACT THAT IF THE PRACTICE FOLLOWED IN THE PAST IN THE ASSESSMENT HAVE TO BE DEVIATED FROM REASONS FOR THE DEVIATION ARE REQUIRE D TO BE BROUGHT ON RECORD. APPELLANT CRAVES LEAVE TO ADD FURTHER GROUNDS OR AM END OR ALTER THE EXISTING GROUNDS AT THE TIME OF HEARING. 3. THE REVENUE ON THE OTHER HAND IN ITS APPEAL HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED ITA(SS) NO.106/M/2006 & ITA(SS) NO.110/M/2006 M/S. AIRLIFT (INDIA) PVT. LTD. 3 COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DIREC TING THE ASSESSING OFFICER TO EXCLUDE THE INCOME AMOUNTING TO RS 81,87,2981- EARN ED BY M/S AIRTRACPVT LTD, SUBSIDIARY CONCERN WHICH WAS TAXED BY THE ASSESSING OFFICER II: THE CASES OF THE ASSESSEE AS UNDISCLOSED INCOME WITHOUT APPRECIATING THE FACT THAT THIS INCOME WAS RECEIVED DIRECTLY BY M/S AIRTRAC PVT. LTD OUT O F THE SAME BUSINESS CARRIED OUT BY THE ASSESSEE AND THUS IT AMOUNTS TO DIVERSIO N OF INCOME BY THE ASSESSEE TO AIRTRACPVT LTD, A DUMMY COMPANY OPERATED FROM TH E SAME PREMISES WHICH HAD NO SEPARATE INFRASTRUCTURE. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY ENGAGED IN THE BUSINESS OF FREIGHT AND FORWARDING. A SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) OF THE INCOME TAX ACT, 1961 WA S CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 12TH DECEMBER, 2002. DU RING THE PROCEEDINGS, STATEMENTS UNDER SECTION 132(4) WERE RECORDED OF MR . MINOO HANSOTIA, DIRECTOR OF THE COMPANY, SHRI. K. CHANDRAMOULEESHWA RAN, MS. FIROZEE THANEVALLA, AND MR. AJAY DHARAVAT EMPLOYEES OF THE COMPANY AND MR. S. RAVISANKAR, A DIRECTOR IN M/S. AIRTRAC AGENTS (INDI A) PVT. LTD. ASSESSING OFFICER OBSERVED FROM THE STATEMENTS RECORDED OF TH E ABOVE PERSONS THAT IT WAS PROVED BEYOND DOUBT THAT THE TWO COMPANIES WHO RECEIVED SUB COMMISSION FROM THE ASSESSEE EXISTED ONLY IN PAPER. THE DIRECTOR OF AIRTRAC IN HIS DEPOSITION COULD NOT BRING OUT WHO A CTUALLY MANAGED ITS EMPLOYEES AND WHAT WERE THE SERVICES RENDERED TO TH E ASSESSEE FOR WHICH THEY RECEIVED REMUNERATION. REGARDING THE PREMISES FROM WHERE THE TWO COMPANIES WERE SHOWN TO BE FUNCTIONING, AO GATHERED INFORMATION BY RECORDING STATEMENTS FROM THE SON OF THE BUILDER/OW NER AND IT TURNED OUT TO BE THAT IN ONE CASE THE POSSESSION OF THE PREMISES ITSELF WAS NOT GIVEN AND IN THE OTHER CASE IT WAS FOUND DURING SEARCH ACTION THAT THE PREMISE WAS USED AS GODOWN OF THE ASSESSEE COMPANY. THE AO RAIS ED DOUBTS ON THE EXISTENCE OF EMPLOYEES AND THE NATURE OF SERVICES R ENDERED BY THEM, THEIR CAPABILITY TO RENDER SUCH SERVICES, THE AVAILABILIT Y OF INFRASTRUCTURE AND MANAGERIAL CAPABILITIES OF THE SAID TWO COMPANIES, FOR WHICH THEY WERE ITA(SS) NO.106/M/2006 & ITA(SS) NO.110/M/2006 M/S. AIRLIFT (INDIA) PVT. LTD. 4 STATED TO HAVE BEEN PAID COMMISSION. AO CONCLUDED T HAT SHRI RAVISHANKAR, DIRECTOR OF AIRTRAC DID NOT COME TO THE OFFICE; THA T THE WORK OF AIRTRACWAS BEING DONE BY THE STAFF OF ASSESSEE COMPANY THAT TH ERE WAS NO AGREEMENT BETWEEN ASSESSEE COMPANY AND AIRTRAC; THAT THERE WA S NO DOCUMENTARY EVIDENCE AVAILABLE IN SUPPORT OF THE SERVICES RENDE RED BY AIRWINGS ALSO TO EARN THE COMMISSION. HE THEREFORE DISALLOWED THE CO MMISSION PAYMENT TO ABOVE STATED TWO COMPANIES FOR THE BLOCK PERIOD 01. 04.1996 TO 12.12.2002. THE ASSESSING OFFICER ALSO ADDED THE COMMISSION/INC ENTIVES RECEIVED BY THE AIRTRAC DIRECTLY FROM OTHER COMPANIES HOLDING THAT IN FACT THE SAID COMMISSION/INCENTIVE WAS RECEIVED BY THE ASSESSEE C OMPANY WHICH WAS DIVERTED AND SHOWN AS THE INCOME OF THE ABOVE STATE D PAPER COMPANY TO DECREASE THE TAX LIABILITY. THE AO ALSO ADDED THE E XPENDITURE CLAIMED BY THE ABOVE STATED COMPANIES AIRTRAC AND AIRWINGS INT O THE INCOME OF THE ASSESSEE COMPANY HOLDING THAT NO SUCH EXPENDITURE H AD BEEN INCURRED BY THEM AS THESE COMPANIES HAD NEITHER ANY REQUISITE I NFRASTRUCTURE NOR ANY EMPLOYEE. 5. IN FIRST APPEAL, THE LD. CIT(A) UPHELD THE DISAL LOWANCE OF COMMISSION TO AIRTRAC AND AIRWINGS. HE ALSO CONFIRMED THE ADDI TION IN RELATION TO THE DISALLOWANCE OF EXPENDITURE OF THE ABOVE STATED TWO COMPANIES. THE LD. CIT(A) HOWEVER, DELETED THE ADDITION BY THE AO IN R ESPECT OF COMMISSION/INCENTIVES DIRECTLY BY AIRTRAC FROM OTHE R PARTIES HOLDING THAT THE SAME DID NOT COME WITHIN THE SCOPE OF UNDISCLOS ED INCOME OF ASSESSEE FOR THE BLOCK ASSESSMENT. 6. BEFORE US, THE LD. A.R. OF THE ASSESSEE HAS SUBM ITTED THAT THE AO HAS FRAMED THE IMPUGNED ASSESSMENT ORDER U/S 15BC R.W.S . 143(3) AND HAS MADE THE IMPUGNED ADDITIONS RELYING SOLELY ON THE R ETRACTED STATEMENTS, RECORDED U/S 132(4) OF THE ACT, OF THE MANAGING DI RECTOR OF THE ASSESSEE, SOME OF THE EMPLOYEES OF THE ASSESSEE AND DIRECTORS OF M/S AIRTRAC AGENTS (INDIA) PVT. LTD. THAT THE AO HAS TOTALLY IGNORED THE RELEVANT EVIDENCES ITA(SS) NO.106/M/2006 & ITA(SS) NO.110/M/2006 M/S. AIRLIFT (INDIA) PVT. LTD. 5 AND MATERIAL FURNISHED DURING THE COURSE OF ASSESSM ENT PROCEEDINGS VIZ. THE COPY OF AGREEMENT FOR PURCHASE OF OFFICE OF AIR WINGS AT 4, SATAM IND. ESTATE DATED 22-05-1989; RECEIPTS OF PROPERTY TAX P AID TO BMC; TELEPHONE BILLS; POSTAL COMMUNICATION RECEIVED FROM CLIENTS; BANK STATEMENTS; SALARY REGISTER ; COMMUNICATION FROM CUSTOMERS TO M/S AIRW INGS TRAVEL & CARGO PVT. LTD. SHOWING ADDRESS OF 4, SATAMINDL. ESTATE; SUB- AGENCY AGREEMENT BETWEEN M/S AIRWINGS TRAVEL & CARGO PVT. LTD. & M/S M.R. CARGO PVT. LTD.; COPIES OF INCOME TAX RETURNS, CHALLAN OF PROF ESSION TAX ETC.AND FURTHER IN RELATION TO M/S AIRTRAC AGENTS (INDIA) P VT. LTD.: THE COPY OF AGREEMENT FOR PURCHASE OF OFFICE AT SAHAR ROY APPT. DATED 23-02-1996.; RECEIPTS OF SOCIETY CHARGES PAID; BANK STATEMENTS; SALARY SHEETS, TDS PAID CHALLANS; PROFESSION TAX REGISTRATION; TELEPHONE DE POSIT RECEIPT; CLIENTS LETTERS; CORRESPONDENCE WITH I.T. DEPT. ETC. THE LD. A.R. HAS FURTHER SUBMITTED THAT AFTER OBTAI NING COPIES OF STATEMENTS RECORDED U/S 132(4) FROM THE AO, SHRI M.D. HANSOTIA , M.D. OF THE ASSESSEE COMPANY, RETRACTED HIS STATEMENT. HE HAS F URTHER STATED THAT THE ASSESSEE HAD ALSO FILED AFFIDAVIT OF MR. M.D. HANSO TIA, RETRACTING THE STATEMENT GIVEN BY HIM DURING THE COURSE OF ASSESSM ENT PROCEEDINGS. FURTHER THAT THE RECIPIENTS OF THE SUB-COMMISSION H AD SUFFICIENT INFRASTRUCTURE TO RENDER THE SERVICES TO THE ASSESS EE. THAT THE AO HAS NOT DISCUSSED ABOUT THE OTHER RENTED PREMISE WHICH WERE IN THE OCCUPATION OF THOSE TWO COMPANIES, WHICH WERE ADEQUATE TO CARRY O N THE BUSINESS BY THE TWO RESPECTIVE COMPANIES. THE LD. AR HAS FURTHER SU BMITTED THAT WITH REGARD TO THE EMPLOYEES FUNCTIONING IN THESE TWO CO MPANIES, THE MUSTER ROLL, SALARY REGISTER, THE EMPLOYEES' REGISTRATION, THE TDS RETURN WHEREVER APPLICABLE AND A FEW EMPLOYEES WERE ALL PRODUCED BE FORE THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. HE THUS HAS C ONTENDED THAT THE ASSESSEE HAD DISCHARGED ITS PRIMARY ONUS AND THAT T HE AO HAD NOT BROUGHT OUT ON RECORD ANY MATERIAL EVIDENCE TO COUNTER OR N EGATE SUBMISSIONS OF ASSESSEE. ITA(SS) NO.106/M/2006 & ITA(SS) NO.110/M/2006 M/S. AIRLIFT (INDIA) PVT. LTD. 6 THE LD. AR HAS FURTHER CONTENDED THAT ASSESSMENTS O F THE ASSESSEE FOR THE ASSESSMENT YEAR 1996-97 WHICH WERE ORIGINALLY COMPL ETED WAS REOPENED UNDER SECTION 148 ON THE BASIS OF THE INFORMATION G ATHERED DURING THE SEARCH AND SEIZURE PROCEEDINGS AND THE STATEMENTS R ECORDED AS EXPLAINED ABOVE UNDER SECTION 132(4). IN THE ASSESSMENT PROC EEDINGS PURSUANT TO SECTION 143(3) READ WITH SECTION 148, THE AFORESAID RETRACTION WAS EXPLAINED IN THE FORM OF DETAILED LETTER AS ALSO TH E FACTUAL POSITION WITH REGARD TO THE FUNCTIONING OF M/S AIRTRAC AND M/S AI RWINGS. ON THAT BASIS THE AO COMPLETED THE ASSESSMENT ACCEPTING THE ASSES SEE'S STAND VIDE HIS ASSESSMENT ORDER DATED 30TH MARCH, 2004. THAT NO F ACTS WERE BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE BLOCK AS SESSMENT FOR DEVIATING FROM THE PRINCIPLES ADOPTED BY HIM IN THE RE-ASSESS MENT PROCEEDINGS FOR THE EARLIER YEAR. FURTHER, OBJECTING TO THE BLOCK ASSESSMENT, THE LD. AR HAS SUBMITTED THAT THE SCHEME OF CHAPTER OF XIV B AND THE ASSESSMENT U /S 158BC CAN ONLY APPLY TO TRANSACTIONS THAT ARE NOT ENTERED IN THE R EGULAR BOOKS OF ACCOUNT, AND THAT THE I.T. ACT MAKES IT ABUNDANTLY CLEAR THA T WITH REGARD TO THE TRANSACTIONS ALREADY RECORDED IN THE BOOKS OF ACCOU NT IN RESPECT OF WHICH RETURNS HAD BEEN FILED IN THE PAST AND ACCEPTED BY THE DEPARTMENT SCHEME OF ASSESSMENT PRESCRIBED IN CHAPTER XIV B WILL HAVE NO APPLICATION. THAT IT IS ESSENTIAL TO CORROBORATE THE STATEMENTS RECORDED WITH THE FACTS GATHERED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND OTHER EVIDENCES. THE LD. AR THEREFORE, HAS CONCLUDED THAT ADDITIONS SOLE LY ON THE BASIS OF RETRACTED STATEMENTS WITHOUT ANY INCRIMINATING MATE RIAL FOUND DURING THE SEARCH ACTION AND IN THE ABSENCE OF ANY ADVERSE EVI DENCE DURING ASSESSMENT PROCEEDINGS ARE NOT SUSTAINABLE. THE LD. AR HAS WIT HOUT PREJUDICE TO THE ABOVE, ALTERNATIVELY HAS CONTENDED THAT EVEN IF THE ENTIRE INCOME OF AIRWINGS & AIRTRAC HAS TO BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE, THEN THE RESPECTIVE EXPENDITURE OF THOSE TWO COMPAN IES SHOULD ALSO BE ALLOWED AS DEDUCTION AND IT IS ONLY THE NET INCOME OF THOSE TWO COMPANIES ITA(SS) NO.106/M/2006 & ITA(SS) NO.110/M/2006 M/S. AIRLIFT (INDIA) PVT. LTD. 7 THAT OUGHT TO HAVE BEEN BROUGHT TO TAX IN THE BLOCK ASSESSMENT OF THE ASSESSEE. THE LD AR HAS FURTHER MADE FOLLOWING WRIT TEN SUBMISSIONS IN RESPECT OF POINTS RAISED AND CASE LAWS RELIED UPON: GROUNDNO1-ITEMS OUTSIDE PURVEW OF BLOCK ASSESSMENT . 1) AT THE OUTSET, NO INCRIMINATING MATERIAL/EVIDENC E FOUND DURING COURSE OF SEARCH WITH REGARD TO DISALLOWANCE OF COMMISSION PA ID TO AIRWINGS TRAVEL AND CARGO PVT LTD RS.1,12,58,843/- AND AIRTRAC AGENTS ( INDIA) PVT LTD RS.70,77,867/- [CIT V. BHUVANENDRAN 303 ITR 235 (MAD) [PGS 5 OF JU DICIAL PRECEDENT PAPERBOOK (JPPB)]; CIT V. TEMPLETON 337 ITR 541 (BO M) [PG 10 OF JPPB]; GO6V. DCIT 346 ITR 106 (AP) [PG 16 OF JPPB]. 2) ADDITION CANNOT BE MADE IN BLOCK ASSESSMENT MERE LY ON THE BASIS OF STATEMENT RECORDED UNDER SECTION 132(4) [CIT V. BHU VANENDRAN 303 ITR 235 (MAD); DCIT V. OKASA 10 SOT 164 (MUM) [PGS 30, 31 O F JPPB]; DCIT V. PRAMUKH 115 TTJ 330 (AHM)(TM)[PGS 41, 42, 43, 52, 5 3 OF JPPB]; CIT V. CHINNASWAMY 350 ITR 694 (MAD) [PGS 63, 65 OF JPPB]; SHREE GANESH V. CIT 84 CCH 25 (JHAR) [PGS 69, 70 OF JPPB]; EDULJI V. DC IT DATED 27.12.2004 (MUM) [PG 143 OF JPPB]. 3) EXPENDITURE NOT FOUND TO BE FALSE AS A RESULT OF EVIDENCE FOUND IN SEARCH [RADAN V. DCIT 58 ITR 129 (MUM) [PGS 122 TO 126 OF JPPB]; EDULJI V. DCIT DATED 27.12.2004 (MUM) [PGS 135, 136 TO 143 OF JPPB ]; SIGMA V. JCIT 102 LTD 342 (MUM) [PG 161 OF JPPB]; MANGE V. ACIT 105 TTJ 5 94 (DEL)(SB) [HN] [PGS 165 TO 167 OF JPPB]. 4) COMMISSION PAYMENTS ARE REFLECTED IN REGULAR BOO KS OF ACCOUNTS AND ALLOWED IN REGULAR ASSESSMENTS SINCE LAST SEVERAL Y EARS AFTER DETAILED SCRUTINY, CONSIDERATION AND CONSIDERATION AS PER CHARTS SUBMI TTED AND HENCE CANNOT CONSTITUTE UNDISCLOSED INCOME [CIT V. RAMCHANDRAN D I 28.08.2012 (BOM) [PGS 78, 80, 81 OF JPPB]; CIT V. SHAMLAL 249 ITR 50 1 (BOM) [PG 89 OF JPPB]; CIT V. VIKRAM 256 ITR 129 (BOM) [PG 91 OF JPPB]; HE ATSHRINK V. ACIT 25 ITR 269 (MUM)(HN)] [PGS 92 TO 95 OF JPPB]. 5) WITHOUT PREJUDICE, RETRACTED STATEMENT CANNOT BE RELIED UPON [CIT V. KHADER 352 ITR 480 (SC) [PGS 175, 178, 181 OF JPPB] ; NARAYAN V. ACIT 339 ITR 192 (MAD) [PGS 187, 188 OF JPPB]; AC V. PANDYA DATE D 31.05.2004 (MUM) [PG 193 OF JPPB]; KAILASHBEN V. CIT 328 ITR 411 (GUJ) [ PGS 206, 207 OF JPPB]; CIT V. OMPRAKASH 322 ITR 362 (BOM) [PG 211 OF JPPB]; VI NOD V. UOI 233 ELT 157 (SC) [PGS 220, 221, 223, 224 OF JPPB]; CIT V. UTTAM CHAND 320 ITR 554 (BOM)] [PGS 230, 231 OF JPPB]. GROUND NO 2-VIOLATION OF NATURAL JUSTICE 6) MATERIALS USED BY AO AGAINST APPELLANT NOT ALLOW ED TO BE TESTED BY CROSS-EXAMINATION AND CONSEQUENTLY, CANNOT BE USED AS EVIDENCE [KISHINCHAND CHELLARM 125 ITR 713 (SC). ITA(SS) NO.106/M/2006 & ITA(SS) NO.110/M/2006 M/S. AIRLIFT (INDIA) PVT. LTD. 8 GROUND NO 3, 4 AND 6-ON MERITS. 7) THE FOREGOING COMPANIES ARE NOT SHAM BECAUSE THE SE ARE INDEPENDENT HAVING REQUISITE INFRASTRUCTURE, PARAPHERNALIA AND WHEREWITHAL TO CARRY ON BUSINESS ON THEIR OWN WHICH IS CONSISTENTLY ENDORSE D BY DEPARTMENT AS PER CHART SUBMITTED [PADINJAREKARA V. CIT 173 ITR 637 ( KER) [PG 245 OF JPPB]. 8) MERE INTRODUCTION IS ENOUGH AS A SERVICE TO EARN COMMISSION [SWASTIC V. CIT 150 ITR 155 (GUJ] [PG 256 OF J PPB]. GROUND NO 5-ON MERITS AND QUANTUM TO BE INCLUDED. 9) WITHOUT PREJUDICE AND IN ANY EVENT, WHAT CAN BE ASSESSED IN BLOCK PERIOD IS THE NET INCOME AFTER DEDUCTING EXPENSES INCURRED BY AIRWINGS AND AIRTRAC AS PER CHART SUBMITTED. 7. THE LD. DR ON THE OTHER HAND RELIED UPON THE FI NDING OF THE ASSESSING OFFICER AND HAS FURTHER CONTENDED THAT SINCE THE ST ATEMENTS WERE NOT RECORDED UNDER COERCION, HENCE THE SAME WERE RIGHTL Y RELIED BY THE AO. HE HAS ALSO OBJECTED TO THE DELETION OF ADDITION BY TH E CIT(A) IN RESPECT OF COMMISSION AND INCENTIVES RECEIVED BY AIR TRACK FRO M OTHER COMPANIES. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE RECORDS. IT IS AN ADMITTED FACT ON THE FILE THAT N O INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH ACTION. IT IS ALSO A FACT ON THE FILE THAT BOTH THE SUB AGENT COMPANIES HAVE BEEN REGULARLY ASSESSED TO INC OME TAX AT THE SAME RATE OF TAX AT WHICH THE ASSESSEE COMPANY IS TAXED. THE ASSESSEE COMPANY HAS NOT ONLY PAID COMMISSION TO THE ABOVE STATED TW O COMPANIES BUT HAS PAID COMMISSION TO VARIOUS OTHER PARTIES. THE LD. AR IN THIS RESPECT HAS INVITED OUR ATTENTION TO VARIOUS DOCUMENTS PLACED I N THE PAPER BOOK TO SHOW THAT THE ASSESSEE COMPANY HAD BEEN PAYING COMMISSIO N TO VARIOUS SUB AGENTS FOR PROCURING BUSINESS FOR THE ASSESSEE. TH E LD. A.R. HAS ALSO INVITED OUR ATTENTION TO P & L ACCOUNT OF THE AIRWI NGS AS WELL AS OF THE AIRTRAC AND THE VARIOUS ASSESSMENT ORDERS FOR DIFFE RENT ASSESSMENT YEARS WHEREIN THE SAID COMPANIES HAVE CONSISTENTLY BEEN A SSESSED TO INCOME TAX AND HAVE OFFERED THE COMMISSION/INCENTIVE INCOME RE CEIVED FROM TIME TO TIME FOR TAXATION. THE LD. A.R. HAS SUBMITTED A CH ART IN THIS RESPECT WHICH ITA(SS) NO.106/M/2006 & ITA(SS) NO.110/M/2006 M/S. AIRLIFT (INDIA) PVT. LTD. 9 FOR THE SAKE OF CONVENIENCE IS REPRODUCED AS UNDER: ASSTT YEAR AIRLIFT'S INCOME AIRWINGS INCOME AI RTRAC'S INCOME RATE OF TAX FOR ALL 3 CO.S INCOME RETURNED INCOME ASSESSED INCOME RETURNED INCOME ASSESSED INCOME RETURNED INCOME ASSESSED 1990-91 807792 826596 143(3) 115491 60 + 8% 1991-92 2585980 2700919 143(3) 294391.5 295110 143(1)(A) 50 +15% 1992-93 2368290 2387169 143(3) 565518.35 565520 143(3) 1993-94 3714380 3714380 143(1 )(A) 869045 869050 143(1)(A) 50 + 15% 1994-95 4427980 4429583 143(1)(A) 695210 695210 143(1)(A) - 163504 -79940 143(3) 50+15% 1995-96 3036664.6 3086346 143(3) 877502.3 887500 143(3) 225336.99 40+15% 1996-97 2867096.26 2862100 143(1)(A) 349051.9 349100 143(1)(A) 18910.7 18910 143(1)(A) 40 +15% 143(3) R.W.S. 148 143(3) R.W.S. 263 1997-98 43553 81460 143(3) 16563.9 16563 143(1)(A) 289937 304819.3 143(3) 40 + 7.5% 1998-99 386316.61 386320 143(3) 232686.08 232700 143(3) 116785.38 116800 143(1) 35 +0% 1999-2000 371049.88 371050 143(1 )(A) 13146 13200 143(1) 70967.64 71000 143(1 LEA) 48+0% 2000-01 1149245.7 1149250 143(1)(A) 21083 21100 143(1)(A) 157929.99 940234 143(3)(1) 2001-02 756283.44 756300 143(1)(A) 16886 16900 143(1)(A) 77882 77900 143(1 )(A) 35 +13% 2002-03 896261.14 896300 143(3) 38700 38700 143(3) 126890 803895 143(3) 35+2% 2003-04 5487553.28 3283580 143(3) 111547 111550 143(3) 69177 69180 143(3) 35 + 5% 2004-05 1207624.02 1240231 143(3) /CIT 16036 16040 143(3) - 85505.65 448000 143(3) 35 + 2.5% 2005-06 14750060 14750060 143(3) 35 + 2.5 + 2.0% 2006-07 18921310 18921310 143(1)(A) 30 + 1 0+2.0% 9. THE LD. A.R. HAS FURTHER SUBMITTED THAT THE STAT EMENTS OF THE EMPLOYEE AND DIRECTOR OF THE COMPANY WERE RECORDED UNDER PRESSURE AND UNDUE INFLUENCE WHICH WERE RETRACTED BY WAY OF FILI NG DETAILED AFFIDAVITS BEFORE THE AO. THE LD. A.R. HAS FURTHER EXPLAINED THAT THE SAID DIRECTOR AND EMPLOYEES WHOSE STATEMENTS WERE RECORDED DURING SEA RCH ACTION HAD APPLIED FOR COPIES OF THE STATEMENTS WHICH WERE PROVIDED TO THEM ONLY IN THE 2ND WEEK OF JANUARY 2004. AFTER GOING THROUGH THE STAT EMENTS, THE SAID DIRECTOR AND THE EMPLOYEES FOUND THAT THE SAME WERE NOT CORR ECT AND THEY ITA(SS) NO.106/M/2006 & ITA(SS) NO.110/M/2006 M/S. AIRLIFT (INDIA) PVT. LTD. 10 IMMEDIATELY RETRACTED THE SAME BY WAY OF FILING AFF IDAVITS IN THIS RESPECT. THE LD. A.R. HAS FURTHER EXPLAINED THAT ANY INTERNA TIONAL AIRLINE CANNOT DEAL WITH ANY NON- IATA AGENTS OR EVEN WITH EXPORTERS DI RECTLY. AS PER THE INTERNATIONAL NORMS/TRADE PRACTICES, NO SHIPPER/EXP ORTER CAN APPROACH ANY AIRLINES DIRECTLY. THE SHIPPER THEREFORE HAS TO GO THROUGH IATA RECOGNIZED AGENTS. BUSINESS IS THEREFORE MOSTLY INTRODUCED TO THE IATA AGENTS THROUGH INTERMEDIARIES, WHO ACT AS SUB AGENTS/BROKERS. THE SE SUB AGENTS OR BROKERS CANVASS AND OBTAIN BUSINESS AND PASS ON THE BUSINES S TO IATA AGENTS. AIRWINGS AND AIRTRAC WERE ALSO INTER ALIA THE SUB A GENTS AMONG SEVERAL OTHER SUB AGENTS WHO USED TO INTRODUCE TO THE ASSESSEE VA RIOUS BUSINESSES AND THEREFORE THE ASSESSEE COMPANY PAID THEM COMMISSION /BROKERAGE ON THE BUSINESS INTRODUCED BY THEM. THE ASSESSEE COMPANY BEING IATA RECOGNIZED AGENT WAS ENTITLED TO 5% COMMISSION FROM AIRLINES. OUT OF THIS, THE ASSESSEE COMPANY WAS COMPELLED TO PAY PART COMM ISSION TO SUB AGENTS VARYING FROM 2.5% TO 4.5%. IT WAS EXPLAINED THAT T HE AIRWINGS TRAVEL AND AIRTRAC WERE JUST LIKE OTHER SUB AGENTS AMONG OTHER VARIOUS SUB AGENTS TO WHOM THE ASSESSEE COMPANY HAD PAID COMMISSION FROM TIME TO TIME WHICH HAS NEVER BEEN DOUBTED BY THE ASSESSING AUTHORITIES . THE LD. A.R. HAS DULY EXPLAINED THAT SINCE THE ABOVE SUB AGENTS WERE NOT IATA RECOGNIZED AGENTS, HENCE THEY OFFER BUSINESS TO THE ASSESSEE C OMPANY. THE LD. A.R. HAS INVITED OUR ATTENTION TO VARIOUS ASSESSMENT ORD ERS OF THE ASSESSEE COMPANY IN THE PAST WHERE THE ASSESSEE COMPANY HAD ALMOST PAID COMMISSION TO VARIOUS PARTIES. HE HAS INVITED OUR ATTENTION TO PAGE 334 OF THE PAPER BOOK-1 TO SHOW THAT IN THE ASSESSMENT YEA R 1998-99 THE ASSESSEE COMPANY PAID A TOTAL COMMISSION OF RS.18962963/- TO ALMOST 40 PARTIES INCLUDING AIRTRAC AGENTS AND AIRWINGS TRAVEL. SIMI LARLY IN THE ASSESSMENT YEAR 1990-91, A TOTAL COMMISSION WAS PAID TO 55 PAR TIES TOTALING RS.12542523.14 OUT OF WHICH AN AMOUNT OF RS.958444/ - WAS PAID TO AIRWINGS TRAVEL. THE LD. A.R. HAS FURTHER INVITED OUR ATTENTION TO PAGE 53 OF PAPER BOOK-1 TO SHOW THAT FOR THE A.Y. 1991-92 T HE COMMISSION WAS PAID ITA(SS) NO.106/M/2006 & ITA(SS) NO.110/M/2006 M/S. AIRLIFT (INDIA) PVT. LTD. 11 TO 54 PARTIES TOTALING RS.17886688.71 OUT OF WHICH COMMISSION OF RS.1256782/- WAS PAID TO AIRWINGS TRAVEL. THE REVE NUE HAS NEVER DOUBTED THE PAYMENT OF COMMISSION TO ANY OF THE SUB AGENTS IN THE PAST. IT WAS ALSO EXPLAINED THAT BOTH THE ABOVE SUB AGENTS HAVE BEEN PAYING TAX AT THE SAME RATE AT WHICH THE ASSESSEE COMPANY WAS PAYING AND T HAT THERE WAS NO QUESTION OF SHIFTING BURDEN OF INCOME TAX OR EVASIO N OF ANY TAX. IT WAS ALSO EXPLAINED THAT THE ASSESSEE COMPANY HAD NO DIRECT R ELATION WITH THE ABOVE SUB AGENTS. SO FAR AS THE CONTENTION OF THE DEPARTMENT THAT THE RE WAS NO INFRASTRUCTURE OF EMPLOYEES AVAILABLE WITH THE SAID SUB AGENTS, THE LD. A.R. OF THE ASSESSEE HAS BROUGHT OUR ATTENTION TO THE LE TTERS OF THE SUB AGENTS/ABOVE STATED COMPANIES INFORMING THAT THEY O PERATED FROM THE RENTED PREMISES OF THE AIRLIFT TAKEN FROM THE ASSESSEE. T HE LD. A.R. IN THIS RESPECT HAS INVITED OUR ATTENTION TO THE RESPECTIVE RENT DE EDS BETWEEN THE PARTIES. HE HAS ALSO INVITED OUR ATTENTION TO THE ACCOUNTS O F THE RESPECTIVE COMPANIES TO SHOW THAT THE PAYMENT AND RECEIPT OF R ENT WAS REGULARLY ACCOUNTED FOR IN THE ACCOUNTS OF THE RESPECTIVE COM PANIES. HE HAS ALSO INVITED OUR ATTENTION TO AGENCY AGREEMENT BETWEEN A SSESSEE AND AIRWINGS AND ALSO BETWEEN ASSESSEE AND AIRTRAC. FURTHER CON FIRMATIONS FROM THE CLIENTS OF THE ABOVE STATED COMPANIES HAVE ALSO BEE N FILED. FURTHER, THE LD. A.R. HAS INVITED OUR ATTENTION TO THE POSTAL COMMUN ICATIONS WHEREIN THE RESPECTIVE ADDRESSES OF THE SUB AGENTS HAVE BEEN ME NTIONED. APART FROM THAT, THE LD. A.R. HAS ALSO INVITED OUR ATTENTION T O PROFESSIONAL TAX, CORRESPONDENCE, BANK STATEMENTS AND SALARY SHEET, G RATUITY PAID VIDE CHEQUES, TDS CHALLANS FOR RESPECTIVE SALARY PAID TO THE EMPLOYEES AS WELL AS COPIES OF THE ANNUAL RETURNS OF THE SAID COMPANI ES TO SHOW THAT THE SAID COMPANIES HAVE THE INFRASTRUCTURE AND EMPLOYEES TO RENDER SERVICE TO THE ASSESSEE COMPANY. THE LD. A.R. HAS ALSO INVITED OU R ATTENTION TO THE STAMP DUTY PAID AGREEMENT ALONG WITH COPIES OF SOCIETY BI LLS TO SHOW THAT M/S. AIRTRAC AGENTS WAS OPERATING FROM SAHARROY APARTMEN T. ITA(SS) NO.106/M/2006 & ITA(SS) NO.110/M/2006 M/S. AIRLIFT (INDIA) PVT. LTD. 12 THE LD. A.R. HAS INVITED OUR ATTENTION TO AFFIDAVIT OF SHRI S. RAVI SHANKAR, WHEREIN, HE HAS EXPLAINED HOW HE CAME INTO CONTACT WITH MR. MINNO HANSOTIA, DIRECTOR OF AIRLIFT AND HOW HE DEVELOPED LINKS WITH HIM AND HOW HE STARTED THE COMPANY AIRTRAC TO DO CARGO AGENCY B USINESS SOMETIMES IN THE YEAR 1992-93. IT HAS ALSO BEEN EXPLAINED IN TH E AFFIDAVIT THAT SINCE AIRTRAC WAS NOT AN IATA AGENT THE COMPANY WAS BOOKI NG CARGO THROUGH AIRLIFT INDIA LTD., WHICH WAS AN IATA CARGO AGENT. IT WAS ALSO EXPLAINED THAT THE SAID CONCERN HAD DISPOSED OFF ITS PREMISES IN 1999 AND SINCE IT WAS OFFERING BUSINESS TO THE AIRLIFT INDIA LTD., THE SA ID COMPANY (ASSESSEE) PERMITTED AIRTRAC TO FUNCTION FROM ITS PREMISES ON PAYMENT OF RENT. THE LD. A.R. HAS ALSO INVITED OUR ATTENTION TO THE RELEVANT PART OF THE ASSESSMENT ORDER WHEREIN THE AO HIMSELF HAS MENTION ED THAT THE QUESTION OF COMMISSION PAYMENT, NATURE OF SERVICES RENDERED AND LIKE MATTERS MAY NOT APPEAR EVEN FROM THE EVIDENCES FOUND AT THE TIM E OF THE SEARCH BUT IT IS A QUESTION OF INTERPRETATION OF THE EVIDENCES. THE ABOVE OBSERVATIONS OF THE AO MAKES IT CLEAR THAT EVEN THE AO WAS OF THE VIEW THAT NO DIRECT EVIDENCE WAS FOUND DURING THE SEARCH ACTION AND THAT THE ADD ITIONS WERE MADE ON THE BASIS OF INTERPRETATION OF EVIDENCE. UNDER THE CIR CUMSTANCES, IT CAN BE GATHERED THAT EVEN THE AO WAS OF THE VIEW THAT THER E WAS NO DIRECT INCRIMINATING EVIDENCE FOUND AGAINST THE ASSESSEE D URING THE SEARCH ACTION. WE FURTHER FIND THAT EVEN THE LD. CIT (A) IN THE IM PUGNED ORDER HAS DISCUSSED THAT AIRTRAC HAD DERIVED COMMISSION AND I NCENTIVES FROM OTHER AIR LINES ALSO. THE LD. CIT(A) HAS GIVEN A CATEGORI CAL FINDING THAT THE AO HAD NOT BROUGHT ANY MATERIAL ON RECORD IN SUPPORT O F HIS CONCLUSIONS THAT EITHER THESE INCOMES RELATE TO THE SAME BUSINESS IN RESPECT OF WHICH ASSESSEE PAID COMMISSION TO AIRTRAC OR TO THE EFFEC T THAT ASSESSEE HAD DIVERTED THESE INCOMES TO AIRTRAC. THE BASIS FOR CO MING TO SUCH CONCLUSION BY THE AO DOES NOT FIND MENTION IN THE ASSESSMENT O RDER. 10. MOREOVER, THE ABOVE STATED TWO COMPANIES HAVE B EEN REGULARLY FILING ITA(SS) NO.106/M/2006 & ITA(SS) NO.110/M/2006 M/S. AIRLIFT (INDIA) PVT. LTD. 13 THEIR RETURNS OF INCOME WITH INCOME TAX DEPARTMENT. THE INCOME RETURNED WAS DULY ACCEPTED IN VARIOUS ASSESSMENT PROCEEDINGS FOR DIFFERENT YEARS AS DETAILED IN THE CHART. UNDER SUCH CIRCUMSTANCES, A DDING THE SAME INCOME AT THE HANDS OF ASSESSEE WOULD AMOUNT TO DOUBLE TAXATI ON ON THE SAME INCOME. CONSIDERING THE ABOVE SUBMISSIONS AND EVIDENCES ON FILE AND IN THE ABSENCE OF ANY INCRIMINATING EVIDENCE AGAINST THE ASSESSEE, THE ADDITIONS SOLELY ON THE BASIS OF RETRACTED STATEMENTS, WHICH HAVE DULY BEEN EXPLAINED BY THE RESPECTIVE PERSONS THAT THE SAME WERE OBTAINED UNDE R DURESS AND FURTHER THAT THE SAME WERE NOT CORRECT AND THE CORRECT POSI TION BEING EXPLAINED WITH SUFFICIENT CORROBORATIVE EVIDENCES ON THE FILE, IN OUR VIEW, THE ADDITIONS SOLELY ON THE BASIS OF SUCH RETRACTED STATEMENTS WI THOUT ANY CORROBORATIVE EVIDENCE ARE NOT SUSTAINABLE IN THE EYES OF LAW ESP ECIALLY WHEN THE ASSESSEE HAS PROVED WITH SUFFICIENT EVIDENCE ON THE FILE THA T VARIOUS SUB AGENTS WERE OFFERING BUSINESS TO THE ASSESSEE FOR WHICH THE ASS ESSEE WAS PAYING THE COMMISSION TO THEM INCLUDING THE CONCERNS ABOUT WHI CH THE AO HAS DOUBTED THE TRANSACTIONS. 11. THE ANOTHER INTERESTING FACT IS THAT ASSESSMENT OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1996-97 WHICH WAS ORIGINALLY COMPLE TED WERE REOPENED UNDER SECTION 148 ON THE BASIS OF THE INFORMATION G ATHERED DURING THE SEARCH AND SEIZURE PROCEEDINGS AND THE STATEMENTS R ECORDED AS EXPLAINED ABOVE UNDER SECTION 132(4). DURING THE REOPENED AS SESSMENT PROCEEDINGS, THE AO ACCEPTED THE EXPLANATION OFFERED BY THE ASSE SSEE REGARDING THE RETRACTION AND THE FACTUAL POSITION WITH REGARD TO THE FUNCTIONING OF M/S AIRTRAC AND M/S AIRWINGS. THE AO HAD COMPLETED THE ASSESSMENT ACCEPTING THE ASSESSEE'S STAND VIDE ASSESSMENT ORDER DATED 30 TH MARCH, 2004. UNDER SUCH CIRCUMSTANCES, NO JUSTIFICATION HAS BEEN OFFER ED FOR DEVIATING FROM THE EARLIER STAND ON THE SAME SET OF FACTS AND CIRCUMST ANCES DURING THE PRESENT BLOCK ASSESSMENT. IN VIEW OF OUR DISCUSSION MADE AB OVE, WE DO NOT FIND ANY JUSTIFICATION ON THE PART OF LOWER AUTHORITIES IN MAKING THE IMPUGNED ITA(SS) NO.106/M/2006 & ITA(SS) NO.110/M/2006 M/S. AIRLIFT (INDIA) PVT. LTD. 14 ADDITIONS AND THE SAME ARE ACCORDINGLY SET ASIDE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HE REBY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.01.2016. SD/- SD/- (ASHWANI TANEJA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 22.01.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.