R.J. COMMODITIES, MUMBAI v. ASST CIT CEN CIR 46, MUMBAI

ITA 1965/MUM/2011 | 2008-2009
Pronouncement Date: 29-07-2011 | Result: Allowed

Appeal Details

RSA Number 196519914 RSA 2011
Assessee PAN AAIFR3154J
Bench Mumbai
Appeal Number ITA 1965/MUM/2011
Duration Of Justice 4 month(s) 20 day(s)
Appellant R.J. COMMODITIES, MUMBAI
Respondent ASST CIT CEN CIR 46, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 29-07-2011
Assessment Year 2008-2009
Appeal Filed On 10-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH MUMBAI. BEFORE SHRI PRAMOD KUMAR ACCOUNTANT MEMBER AND SMT ASHA VIJAYARAGHAVAN JUDICIAL MEMBER I.T.A NO.1021/ MUM/2011: ASSESSMENT YEAR: 2006-0 7 I.T.A NO.1022/ MUM/2011: ASSESSMENT YEAR: 2007-08 I.T.A NO.1965/ MUM/2011: ASSESSMENT YEAR: 2008-09 R.J. COMMODITIES .. APPELLANT 49 NAGDEVI CROSS LANE 1 ST FLOOR LAXMI BUILDING MASJID BUNDER MUMBAI-003. PA NO.AAIFR 3154J VS ASST. COMMISSIONER OF INCOME TAX . RESPONDE N T CENTRAL CIRCLE-46 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI. APPEARANCES: HARI S RAHEJA FOR THE APPELLANT JITENDRA YADAV FOR THE RESPONDENT DATE OF HEARING: 6.6.2011 DATE OF PRONOUNCEMENT: 29- 07-2011 O R D E R PER PRAMOD KUMAR: ITA NO.1021/M/2011: A.Y. 2006-07: 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30.11.2010 OF THE CIT(A)-38 MUMBAI FOR THE ASSESSMENT YEAR 2006-07. I.T.A NO.1021/ MUM/2011: ASSESSMENT YEAR: 2006-07 I.T.A NO.1022/ MUM/2011: ASSESSMENT YEAR: 2007-08 I.T.A NO.1965/ MUM/2011: ASSESSMENT YEAR: 2008-09 2 2. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICA TE IN THIS APPEAL IS WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN SUSTAINING THE P ENALTY OF ` .5 LAKHS IMPOSED ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2006-07. 3. THE ISSUE IN APPEAL LIES IN NARROW COMPASS OF MA TERIAL FACTS. THE APPELLANT BEFORE US IS A PARTNERSHIP FIRM ENGAGED IN THE BUSI NESS OF TRADING AND BROKERAGE IN COMMODITY FUTURES MARKET. THE ASSESSEE STARTED BRO KING BUSINESS SOMETIMES ON 5.9.2005. ON 19.6.2007 A SEARCH AND SEIZURE OPERA TION WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COUR SE OF SEARCH SO CONDUCTED IT WAS INTER ALIA FOUND THAT THE ASSESSEE HAD ENTERED INTO CERTAIN T RANSACTIONS IN THE NAMES OF MS SNEHLATA ANANTRAI SANGHAVI(T.M) CLIENT CODE NO.S023 AND SHRI SURESH VANECHAND SHAH (T.M) CLIENT CODE NO.S026 AND THAT A LL THESE TRANSACTIONS WERE SETTLED IN CASH. IN OTHER WORDS THE ASSESSEE WAS USING THESE TWO ACCOUNTS FOR SETTLING THE PROFIT AND LOSS ARISING ON THE TRANSAC TIONS IN SUCH A MANNER SO AS TO MINIMIZE OR TO AVOID TAX LIABILITIES THEREON. ALTH OUGH THE ASSESSEE CONTENDED THAT THE TRANSACTIONS ENTERED INTO AND RECORDED IN THIS ACCOUNTS PERTAINED TO ESSENTIALLY TO DIFFERENT CLIENTS WHO HAVE BEEN DOING BUSINESS WITH THE APPELLANT THE ASSESSEE COULD NOT PRODUCE ANY DETAILS OF IDENTITY OF THE CL IENTS OR ANY FURTHER EVIDENCE TO SUPPORT OF HIS CONTENTION. THE CONTENTION OF THE A SSESSEE WAS THAT THE CUSTOMERS WHO WANTED TO ENTER INTO TRANSACTION BUT DEAL IN CA SH WERE ENTERED THROUGH THESE ACCOUNTS AND THE CASH RECEIVED FROM SUCH CUSTOMERS WAS USED FOR OBTAINING CHEQUES THROUGH CERTAIN OPERATORS IN THE MARKET SO AS TO DEPOSIT THE SAME IN THE BANK ACCOUNT FOR THE PURPOSE OF MEETING SETTLEMENT REQUIREMENTS OF THE COMMODITY EXCHANGE. IT WAS IN THIS BACKDROP THAT TRANSACTION S ENTERED INTO THROUGH THESE ACCOUNTS WERE OFFERED AS ADDITIONAL INCOME BY THE A SSESSEE. THE DISCLOSURE SO MADE WAS DULY ACCEPTED AT THE ASSESSMENT STAGE AND IS NO T SUBJECT MATTER OF FURTHER LITIGATION. THE MATTER HOWEVER DID NOT REST WITH THE ASSESSMENT OF INCOME AND THE I.T.A NO.1021/ MUM/2011: ASSESSMENT YEAR: 2006-07 I.T.A NO.1022/ MUM/2011: ASSESSMENT YEAR: 2007-08 I.T.A NO.1965/ MUM/2011: ASSESSMENT YEAR: 2008-09 3 AO FURTHER PROCEEDED TO IMPOSE PENALTY UNDER SECTIO N 271(1)(C) IN CONNECTION WITH THE INCOME SO DISCLOSED. THE STAND TAKEN BY THE AO WAS THAT FOR THE SEARCH HAVING BEEN CARRIED OUT ON THE ASSESSEE THIS INCOME WAS N EVER HAVE BEEN DISCLOSED BY THE ASSESSEE AND THEREFORE THE ASSESSEE IS TO BE LIA BLE FOR CONCEALING THE INCOME. THE PENALTY ROUGHLY EQUIVALENT OF 200% OF TAX LEVIABLE IN RESPECT OF ADDITIONAL DISCLOSURE MADE BY THE ASSESSEE WAS IMPOSED BY THE AO. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) THE CIT(A) UPHELD THE IMPOSITION OF PENALTY IN PRINCIPLE BUT RESTRICTED THE SAME TO 100% OF TA X SOUGHT TO BE EVADED. WHILE DOING SO THE CIT(A) ALSO TOOK NOTE OF HONBLE SUPR EME COURTS JUDGMENT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P)LTD. (2010) 3 22 ITR 158 (SC) AND HELD THAT THE RATIO OF THE SAID DECISION WOULD NOT APPLY FOR THE REASON THAT CONCEALMENT OF INCOME WAS ESTABLISHED DURING THE SEARCH & SEIZURE PROCEED INGS. THE CIT(A) THEN ALSO REFERRED TO THE JUDGMENT OF HONBLE SUPREME COURT I N THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS (2008) 174 TAXMAN 5 71(SC) AND OBSERVED THAT IT IS NOT NECESSARY FOR THE AO TO ESTABLISH MEANS REA ON THE PART OF THE ASSESSEE AS A CONDITION PRECEDENT TO IMPOSE THE PENALTY. THE ACT ION OF THE AO WAS THUS UPHELD. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE U S. 4. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 5. WE FIND THAT THE RELATED QUANTUM ADDITION OF RS 11 37 197 IS MADE ON THE BASIS OF ASSESSEES COMPUTATION OF PEAK CREDIT IN R ESPECT OF THE TRANSACTIONS MADE THROUGH THE ACCOUNTS OF MS SNEHLATA ANANTRAI SANGHA VI(T.M) CLIENT CODE NO.S023 AND SHRI SURESH VANECHAND SHAH (T.M) CLIENT CODE NO .S026 BUT THEN IT IS NOT EVEN THE CASE OF THE ASSESSING OFFICER THAT THESE ACCOUN TS RELATED TO ASSESSEES UNACCOUNTED TRANSACTIONS. ON THE CONTRARY AS NOTED IN THE ASSESSMENT ORDER ITSELF THE ASSESSING OFFICER ACCEPTED THE CLAIM OF THE ASS ESSEE THE TRANSACTIONS ROUTED THROUGH THESE ACCOUNTS WERE OF ITS CLIENTS AND OBSE RVED THAT IT SEEMS THAT THE ASSESSEE HAS ACCEPTED CASH FROM THE PERSONS/CLIENTS WHO ARE NOT WILLING TO MAKE I.T.A NO.1021/ MUM/2011: ASSESSMENT YEAR: 2006-07 I.T.A NO.1022/ MUM/2011: ASSESSMENT YEAR: 2007-08 I.T.A NO.1965/ MUM/2011: ASSESSMENT YEAR: 2008-09 4 THESE TRANSACTIONS IN THEIR OWN NAME. IT IS NOT A CASE IN WHICH A CONCEALED INCOME OF THE ASSESSEE HAS BEEN BROUGHT TO TAX IT IS NOT EVEN A CASE IN WHICH EVEN ASSESSEES EXPLANATION IS REJECTED BUT YET ADDITION HAS BEEN MADE IN THE QUANTUM ASSESSMENT PROCEEDINGS BECAUSE ASSESSEE HAS NOT FURNISHED THE PARTICULARS OF THE PERSONS WHOSE TRANSACTIONS HAVE BEEN ROUTED THROUGH THESE A CCOUNTS. NO DOUBT ASSESSEE WAS CLEARLY INVOLVED IN UNETHICAL PRACTICES BY PRAC TICALLY RUNNING WHAT SEEMS TO BE A MONEY LAUNDERING RACKET AND WAS INVOLVED IN ENTER ING THE TRANSACTIONS THROUGH UNACCOUNTED FUNDS OF THE CLIENT BUT RIGHT NOW WE A RE NOT SEISIN OF WHETHER OR NOT SUCH A CONDUCT DESERVES TO BE VISITED WITH PENAL CO NSEQUENCES OUR CONCERN IS WHETHER THE INCOME DECLARED BY HIM IN RESPECT OF T HESE OPERATIONS CAN BE SAID TO ATTRACT PENALTY PROVISIONS UNDER SECTION 271(1)(C) ON THE FACTS OF THIS CASE. ON A CONSIDERATION OF ALL THE RELEVANT FACTS AND PARTIC ULARLY BEARING IN MIND THE FACT THAT THE EXPLANATION OF THE ASSESSEE TO THE EFFECT THAT THE MONEY INVOLVED IN HIS TRANSACTIONS WITH REGARD TO THE OPERATIONS THROUG H THESE ACCOUNTS DOES NOT BELONG TO HIM BUT TO HIS CLIENTS HAS BEEN ACCEPTED BY THE ASSESSING OFFICER WE DO NOT THINK IT IS A FIT CASE FOR PENALTY UNDER SECTION 271(1)(C ) OF THE ACT. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED PENALT Y. ITA NO.1022 AND 1965/M/2011: A.Y. 2007-08 AND 2008- 08 6. LEARNED REPRESENTATIVES AGREE THAT WHATEVER IS D ECIDED FOR THE ASSESSMENT YEAR 2006-07 WILL EQUALLY APPLY TO THE ASSESSMENT Y EARS 2007-08 AND 2008-09 AS WELL AS ALL THE MATERIAL FACTS ARE THE SAME AND IT IS IN RESPECT OF THE SURRENDER OF PEAK CREDITS IN TRANSACTIONS ROUTED THROUGH THE SAM E CLIENT ACCOUNTS THAT THESE PENALTIES HAVE BEEN IMPOSED. AS WE HAVE DELETED THE IMPUGNED PENALTY FOR THE ASSESSMENT YEAR 2006-07 AS ABOVE AND FOR THE REASO NS SET OUT ABOVE THE PENALTIES FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 MUST M EET THE SAME FATE. WE I.T.A NO.1021/ MUM/2011: ASSESSMENT YEAR: 2006-07 I.T.A NO.1022/ MUM/2011: ASSESSMENT YEAR: 2007-08 I.T.A NO.1965/ MUM/2011: ASSESSMENT YEAR: 2008-09 5 ACCORDINGLY DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED PENALTIES UNDER SECTION 271(1)(C) FOR THESE TWO ASSESSMENT YEARS AS WELL. 7. IN THE RESULT ALL THE APPEALS ARE ALLOWED. PRON OUNCED IN THE OPEN COURT TODAY ON 29 TH DAY OF JULY 2011. PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2011 SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI DATED 29 TH JULY 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) 38 MUMBAI 4. COMMISSIONER OF INCOME TAX C-IV MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH D MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI