DCIT, CC-1(4), KOLKATA, Kolkata V. Shri Mahendra Sethia, Kolkata

ITSSA 48/KOL/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3808 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 01-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 26-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G HANGSHING
• Assessee Lawyers: MANISH TIWARI
• Keywords: Accommodation entries; Tax effect

Judgement Text

IT(SS)A.48 TO 54/KOL/2016 DCIT VS SHRI MAHENDRA SET HIA A.Y.2007-08 TO 2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A KOL KATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM & SMT. MADHUMITA ROY, JM ] IT(SS)A NOS.48 TO 54/KOL/2016 ASSESSMENT YEARS : 2007-08 TO 2013-14 D.C.I.T., CENTRAL CIRCLE-1(4) -VERSUS- SHRI M AHENDRA SETHIA KOLKATA KOLKATA (PAN: ALIPS 3797 B) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI G.HANGSHING, CIT FOR THE RESPONDENT: SHRI MANISH TIWARI, FCA DATE OF HEARING : 30.05.2018. DATE OF PRONOUNCEMENT : 01.06.2018. ORDER PER BENCH ALL THESE APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST SEPARATE AND IDENTICAL ORDERS OF THE LD. COMMISSIONER OF INCOME TAX-20, KOLKATA ALL DATED 27.06.2016 PASSED U/S 250 OF THE INCOME TAX ACT, 19 61 (ACT). 2. THE FACTS OF THE CASE ARE THAT SHRI MAHENDRA SET HIA, IS A KOLKATA BASED ENTRY OPERATOR WHO HAS BEEN ENGAGED IN THE ACTIVITY OF PR OVIDING ACCOMMODATION ENTRIES TO DIFFERENT COMPANIES AND HAS CREATED NUMEROUS DUMMY COMPANIES WHERE HE HAS APPOINTED HIMSELF, HIS FAMILY MEMBERS AND HIS CLOSE ASSOCIATES AND STAFF AS DIRECTORS. IN EXCHANGE OF PROVIDING ACCOMMODATION ENTRIES OR B Y THE ACTIVITY OF SELLING OUT OF COMPANIES IN LIEU OF COMMISSION, SHRI SETHIA HAS EA RNED HUGE AMOUNTS, PART OF WHICH HAVE BEEN BROUGHT BACK TO HIS ACCOUNTS AS INVESTMEN T IN REAL ESTATE, EQUITIES IN MUTUAL FUNDS, FIXED DEPOSITS, DEPOSITS IN PPF ETC IN OWN N AME AS WELL AS IN THE NAME OF MINOR CHILDREN. A SEARCH & SEIZURE OPERATION WAS CONDUCTE D IN THE RESIDENTIAL AND OFFICE PREMISES OF SHRI SETHIA AND HIS GROUP OF COMPANIES AT KOLKATA ON 30-11-2012 AND SUBSEQUENT DATES. 3. THE AO COMPLETED THE ASSESSMENT BY ESTIMATING TH E INCOME OF THE ASSESSEE AND 1.95% OF THE TURN OVER. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBM ITTED A NUMBER OF DOCUMENTS IT(SS)A.48 TO 54/KOL/2016 DCIT VS SHRI MAHENDRA SET HIA A.Y.2007-08 TO 2013-14 2 BEFORE THE LD. CIT(A). THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. IN THE REMAND REPORT THE AO STATED AS FOLLOWS :- HOWEVER IT WAS SEEN FROM OTHER GROUP CASES THAT C OMMISSION FOR GIVING ACCOMMODATION ENTRY VARIES FROM 0.20% TO 0.35%. B UT IN THE CASE OF THE ASSESSEE, EXACTLY WHAT RATE OF COMMISSION HE EARNE D BY GIVING ACCOMMODATION ENTRY IN RESPECT OF SHARE CAPITAL IS NOT ASCERTAINA BLE ONLY FROM THE DIARIES SEIZED. THE ADDITIONAL COMMISSIONER IN HIS DETAILED COMMENT S ON THE REMAND REPORT STATED AS FOLLOWS :- CONSIDERING THE INCOME DISCLOSED BY THE ASSESEE AN D THE TURNOVER CONNECTED TO SUCH EARNING OF INCOME, HE WAS SUPPOSED BY THE ASSE SSEE AND THE TURNOVER CONNECTED TO SUCH EARNING OF INCOME, HE WAS SUPPOSE D TO MAINTAIN PROPER BOOKS OF ACCOUNTS AND SUPPORTING PAPERS TO SUBSTANTIATE H IS INCOME. THAT THE COMMISSION OF 0.25% WAS BASED ON PRESUMPTION HAS AL SO BEEN ACCEPTED BY THE ASSESSEE FOR WHICH HIS REITERATION OF HAVING DISCLO SED 0.25% ON A NUMBER OF OCCASIONS BEFORE IT AUTHORITIES DOESNT HOLD MUCH G ROUND. THEREFORE IN VIEW OF THE FACTS THAT PROPER RECORDS WERE ADMITTEDLY NOT M AINTAINED AND PRODUCED BY THE ASSESSEE, THE AO HAD TO RELY ON THE SEIZED MATE RIALS AND PASS A REASONED AND SPEAKING ORDER. 4. CONSIDERING THE INCOME DISCLOSED BY THE ASSESSEE AND THE TURN OVER THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT AS WELL AS THE COMMENTS BY THE ADDITIONAL COMMISSIONER OF INCOME TAX ON THIS REMAND REPORT HE LD AS FOLLOWS :- IN MY OPINION, KEEPING IN VIEW THE TRUE AND CORREC T COMMENTS OF THE ADDL.CIT ON AO'S' REMAND REPORT ACCEPTANCE OF THE HIGHER E ND OF COMMISSION INCOME I.E. 0.35% SHOULD BE ACCEPTED TO ARRIVE AT A JUDICIOUS CONCLUSION. BESIDES, THE ASSESSEE HAS DISCUSSED IN HIS STATEMENT REGARDING E XPENDITURE IN ORDER TO EARN COMMISSION INCOME AND THE AO HAS ALSO ACCEPTED IT I N PARA 40 OF THE ASSESSMENT ORDER WHICH IS AS UNDER: 'REGARDING THE SUBJECT OF ALLOWING COMMISSION SPENT ON EARNING INCOME, I FIND THAT ASSESSEE IN HIS DISCLOS URE PETITION HAS STATED THAT HE EARNS COMMISSIONS IN THE RANGE OF 20P TO 35P AVERAG E OF WHICH COMES TO 27.5. HE HAS OFFERED NET COMMISSION AT 25P. THUS HE HAS C LAIMED COMMISSION PAYMENT/ EXPENDITURE FOR EARNING COMMISSION @ OF 2.5%. THIS AMOUNT IS ALLOWED AS PER CLAIM OF THE ASSESSEE AS NO CONTRADICTING OR SUPPOR TING EVIDENCE COULD BE GATHERED BY ME IN THIS REGARD'. . I THINK THIS FINDING OF THE AO OF ALLOWING 2.5P AS EXPENDITURE ON COMMISSION EARN IS VERY MUCH ACCEPTABLE. THEREFORE THE COMMISSION E ARNED BY THE ASSESSEE IS TO BE CALCULATED @ 35P - 2.5P I.E. 32.5P PER HUNDRED R UPEES OF ACCOMMODATION ENTRY GIVEN BY THE ASSESSEE. ACCORDINGLY THE AO IS DIRECTED TO CALCULATE THE COMMISSION INCOME EARNED BY THE ASSESSEE @ 0.32.5% OF RS.1500,00,00,000 / - IT(SS)A.48 TO 54/KOL/2016 DCIT VS SHRI MAHENDRA SET HIA A.Y.2007-08 TO 2013-14 3 AS BROUGHT ON RECORD BY THE AO IN PARA 41 OF 'THE A SSESSMENT ORDER. THUS, ASSESSEE'S APPEAL ON THIS GROUND IS PARTLY ALLOWED. 5. KEEPING IN VIEW OF THE COMMENTS THE ADDITIONAL C OMMISSIONER OF INCOME TAX ON AOS REMAND REPORT ACCEPTANCE OF HIGHER RATE OF COMMISSION INCOME I.E. 0.35 % SHOULD BE ACCEPTED TO ARRIVE AT AN ADVERSE CONCLUSI ON. 6. THEREAFTER CONSIDERING 2.5 PAISE AS EXPENDITURE ON COMMISSION EARNED, THE LD. CIT(A) DIRECTED THE AO TO CALCULATE THE INCOME FROM COMMISSION @ 0.32.5%. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS. ON A CAREFU L CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD AS FOLLOWS : ORIGINALLY THE REVENUE FILED THE FOLLOWING GROUNDS OF APPEAL :- SUBSTANTIAL POINT OF LAW IS NOT INVOLVED IN THIS C ASE BUT OVER ALL TAX EFFECT IS RS. 80,02,037/-WHICH IS MUCH ABOVE THE THRESHOLD LIMIT SPECIFIED IN THE CIRCULAR VIDE NO.21/2015 DATED 10.12.2015. HENCE FURTHER APPEAL I N THIS CASE SUGGESTED. WHEN THIS DEFECT WAS POINTED OUT AT THE TIME OF HEA RING, REVISED GROUNDS OF APPEAL WERE FILED BY THE REVENUE WHICH READS AS FOLLOWS :- 1. THAT THE FACT AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(APPEALS) HAS ERRED IN LAW AS WELL AS IN FACT IN ADMITTING ADDITI ONAL EVIDENCE IN VIOLATION OF PROVISIONS OF RULE 46A OF THE I,T.ACT,1961. 2. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS BY RESTRICTED THE DISALLOWANCE OF UNDISCLOSED INCOME TO RS.1,95,000/- RELYING ON T HE ASSESSEE'S SUBMISSION AND DISREGARDING THE REASONED AND DETAILED ORDER OF THE OF THE ASSESSING OFFICER AND THE COMMENTS OF THE ADDL. CIT DURING THE REMAND PR OCEEDING. 3. THAT ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A) BE VACATED AND THE ORDER-OF THE ASSESSING OF FICER BE RESTORED. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER/ O R AMEND ANY OF THE GROUNDS OF APPEAL DURING THE COURSE OF HEARING. 8. THE LD. DR ADMITTED THAT GROUNDS TAKEN REGARDING VIOLATION OF PROVISION OF RULE 46A IS WRONG, AS THE LD. CIT(A) HAS CALLED FOR A REMAND REPORT. HENCE THIS GROUND IS DISMISSED AS IT IS AGAINST THE FACTS OF T HE CASE. GROUND NO.2 TALKS ABOUT RESTRICTION OF DISALLOWANCE OF UNDISCLOSED INCOME. THIS GROUND IS ALSO TAKEN WITHOUT IT(SS)A.48 TO 54/KOL/2016 DCIT VS SHRI MAHENDRA SET HIA A.Y.2007-08 TO 2013-14 4 PROPER APPLICATION OF MIND. IT IS MISCONCEIVED. THE GRIEVANCE OF THE REVENUE IS ESTIMATION OF INCOME BY THE LD. CIT(A) @ 0.32.5% AN D A CONSEQUENTIAL RELIEF THAT THE ASSESSEE GOT. THIS GROUND DEMONSTRATES THE CALLOUSN ESS WITH WHICH THE REVENUE HAS FILED THE APPEALS. 9. BE AS IT MAY, THE LD. CIT(A) GONE BY THE RECOMME NDATIONS OF THE AO IN THE REMAND REPORT THAT, COMMISSION INCOME ON SUCH ACTIV ITY OF PROVIDING ACCOMMODATION ENTRIES VARIES FROM 0.20% TO 0.35%. THIS REMAND RE PORT HAS NOT BEEN NEGATED OR ADVERSELY COMMENTED UPON BY THE ADDL. COMMISSIONER OF INCOME TAX. HENCE THE LD. CIT(A) ACCEPTED THIS REPORT OF THE AO AND GRANTED R ELIEF. WHILE DOING SO THERE IS NO REASON AS TO WHY THE AO SHOULD BE AGGRIEVED WITH TH E FINDINGS OF THE LD. CIT(A). BE AS IT MAY, THIS FACTUAL FINDING OF THE LD. CIT(A) I S JUST ON THE REMAND REPORT OF THE AO COULD NOT BE CONTROVERTED ON FACTS BY THE LD. DR. T HUS WE UPHOLD THE FINDINGS OF THE LD. CIT(A) AND DISMISS ALL THE APPEALS OF THE REVEN UE. 10. IN THE RESULT THE APPEALS OF THE REVENUE ARE DI SMISSED. O RDER PRONOUNCED IN THE COURT ON 01.06.2018. SD/- SD/- [MADHUMITA ROY] [ J.SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 01.06.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.SHRI MAHENDRA SETHIA, 85A, SARAT BOSE ROAD, 2 ND FLOOR, KOLKATA-700026. 2. D.C.I.T., CENTRAL CIRCLE-1(4), KOLKATA. 3. CIT(A)-20, KOLKATA 4. C.I.T- CENTRAL-I, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, ITAT KOLKATA BENCHES IT(SS)A.48 TO 54/KOL/2016 DCIT VS SHRI MAHENDRA SET HIA A.Y.2007-08 TO 2013-14 5