SHRI NIRMAL K PARMAR, MUMBAI v. THE CIT CEN CIR-3, THANE

ITSSA 157/MUM/2007 | misc
Pronouncement Date: 25-01-2010 | Result: Allowed

Appeal Details

RSA Number 15719916 RSA 2007
Assessee PAN AAFPP4633B
Bench Mumbai
Appeal Number ITSSA 157/MUM/2007
Duration Of Justice 2 year(s) 1 month(s) 7 day(s)
Appellant SHRI NIRMAL K PARMAR, MUMBAI
Respondent THE CIT CEN CIR-3, THANE
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 25-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 25-01-2010
Date Of Final Hearing 07-01-2010
Next Hearing Date 07-01-2010
Assessment Year misc
Appeal Filed On 18-12-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI. BEFORE SHRI SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMB ER AND SHRI V.D. RAO JUDICIAL MEMBER. IT(SS)A.NO. 1 57/MUM/2007 BLOCK PERIOD : 01-04-96 TO 17-10-02 SHRI NIRMAL K. PARMAR DY. COMMISSIONER OF 45 SECOND FLOOR DAHANKUR BLDG. VS. INCOME TAX 480 KALBADEVI ROAD CENTRAL CIR.-3 MUMBAI-400002. THANE. PAN : AAFPP4633B APPELLANT. RESPOSNDENT. IT(SS)A.NO. 08/ MUM/2008 BLOCK PERIOD : 01-04-96 TO 17-10-02. DY. COMMISSIONER OF INCOME-TAX VS. SHRI NIRMAL K. PARMAR. CENTRAL CIRCLE-3 THANE. MUMBAI. APPELLANT RESPONDENT ASSESSEE BY : SHRI K. GOPAL. RESPONDENT BY : SHRI AJ AY KUMAR SRIVASTAVA. O R D E R PER J. SUDHAKAR REDDY A.M. THESE ARE CROSS APPEALS AND ARE DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-I THANE DATED 29-10-2007 FOR THE BLOCK PERIOD 01- 041996 TO 17-10-2002. 2. FACTS IN BRIEF: THE ASSESSEE IS A PRACTISING CHARTERED ACCOUNTANT . HE HELD A POWER OF ATTORNEY FROM TWO PARTNERSHIP FIRMS M/S RA THOD EXPORTS AND 2 M/S ALOUKIK EXPORTS WHICH CARRIED ON THE BUSINESS O F EXPORT OF DIAMONDS. HE EARNED A COMMISSION FOR ACTING AS A PO WER OF ATTORNEY HOLDER. IT WAS CLAIMED THAT THE BUSINESS OF EXPORT OF DIAMONDS WAS CARRIED OUT THROUGH BROKERS FOR COMMISSION AGENTS. SEARCH ACTION U/S 132 OF THE ACT WAS TAKEN IN THE CASE OF M/S FULCHAND GU LABCHAND RAJAWAT JEWELLERS THANE ON 17-10-2002. THE AO STATES THAT CERTAIN DOCUMENTS/PAPERS WERE SEIZED WHICH PERTAIN TO THE A SSESSEE. NOTICE U/S 158BD WAS ISSUED TO THE ASSESSEE ON 04-02-2005 WHIC H WAS SERVED ON THE ASSESSEE ON THE SAME DATE. THE ASSESSEE FILED A RETURN IN FORM NO. 2B DECLARING NIL INCOME ON 22-03-2005. THE AO IN THE A SSESSMENT ORDER OBSERVED THAT PAGE NO. 4 AND 5 OF THE SEIZED MATERI AL BUNDLE NO. 20 CONTAINS CERTAIN NOTINGS OF TRANSACTION IN RESPECT OF M/S AULOUKIK EXPORTS. IN THESE PAPERS THERE WERE NOTINGS OF PAYM ENT OF RS.25 12 000/- TO THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT AT P AGE NO. 36 OF BUNDLE NO. 18 OF THE SEIZED MATERIAL NOTINGS IN RESPECT OF DI AMOND BUSINESS CARRIED OUT IN THE NAME OF M/S RATHOD EXPORTS WAS FOUND. IN THESE NOTINGS PAYMENTS MADE TO THE ASSESSEE WERE SHOWN AT RS.24 2 2 680. THE AO THUS CONCLUDED THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.49 34 680/-. THE ASSESSEE WHEN QUESTIONED REPLIED AS FOLLOWS : THE ASSESSEE WAS ASKED TO EXPLAIN THE TRANSACTION S AS FOUND RECORDED IN THE SEIZED PAPERS VIDE THIS OFFICE LETT ER DATED 20.6.2006. THE GIST OF THE ASSESSEES EXPLANATION IS AS UNDER AS OFFERED BY HIM VIDE LETTER DATED 7.11.2006 : 1) HE WAS HOLDING A POWER OF ATTORNEY ISSUED IN HIS FA VOUR FOR THE BUSINESS OF DIAMOND EXPORT CARRIED ON BY M/S RA THOD EXPORTS AND M/S AULOKIK EXPORTS. 2) HE WAS MERELY A CO-ORDINATOR. 3) FOR CARRYING OUT THE ACTIVITIES OF EXPORTS ON BEHAL F OF THE AFORESAID FIRMS HE ENGAGED THE SERVICES OF BROKERS WHO ASSISTED BOTH M/S RATHOD EXPORTS AND M/S AULOKIK FR OM THE STAGE OF PROCUREMENT OF DIAMONDS TO THE STAGE OF EX PORT. 3 4) THE BROKERS WHO HAVE RENDERED SERVICES WERE INTRODU CED TO HIM BY SHRI HARMESH B. SHAH. IN SUPPORT AN AFFIDAV IT HAS ALSO BEEN FILED. 5) THE NAMES AND ADDRESSES OF THE BROKERS HAVE ALSO BE EN FILED. THE ASSESSEE FURTHER STATED THAT HE CARRIED ON THE BUSINESS ON COMMISSION BASIS FOR THESE TWO CONCERNS. NATURALLY HE HAD TO PAY FURTHER COMMISSION TO OTHER BROKERS THROUGH WHOM H E TRANSACTED BUSINESS. HE STATED THAT HE HAD PAID TO THE FOLLOWI NG BROKERS :- SR.NO. NAME OF THE PERSON AMOUNT PAID (RS.) 1 SHRI MUKUND BALGUDE 775 360 2 SHRI VIJAY TAWARE 628 515 3 SHRI GANESH TAWARE 402 825 4 SHRI UTTAM PAWAR 1 451 712 5 SHRI ASHISH P. SHAH 677 384 6 SHRI NITIN A. GHARAT 524 986 2.1 THE AO VERIFIED THE CLAIMS OF THE ASSESSEE FOR PAYMENTS OF COMMISSION AND FOUND THAT THEY ARE TRUE AND ALL THE SE BROKERS HAVE BEEN REGULARLY ASSESSED TO INCOME-TAX. OUT OF THE TOTAL AMOUNT OF RS.49 34 680/- RECEIVED BY THE ASSESSEE EXPENDITUR E TO THE TUNE OF RS.44 60 781/- WAS PRODUCED AND HENCE THE AO MADE A N ADDITION OF RS.4 73 899/- AS INCOME OF THE ASSESSEE FOR THE BLO CK PERIOD. HE ALSO DISALLOWED 20% OF THE PAYMENTS MADE TO VARIOUS BROK ERS IN CASH BY INVOKING SECTION 40A(3). AGGRIEVED THE ASSESSEE CA RRIED THE MATTER IN APPEAL. 2.2 THE CIT(APPEALS) GRANTED PART RELIEF. HE CONFI RMED THE ADDITION OF RS.4 73 899/- BY REJECTING THE CONTENTI ON OF THE ASSESSEE THAT THE ASSESSEE HAS RECEIVED THE AMOUNT OF RS.49 34 68 0/- ON BEHALF OF THE PRINCIPALS I.E. M/S RATHOD EXPORT TO MAKE PAYMENTS ON THEIR BEHALF TO OTHER PARTIES WHO HAD CARRIED OUT THE SALE OF DIAMO NDS AND THAT BOTH M/S 4 RATHOD EXPORTS AND M/S ALOUKIK EXPORTS HAVE OFFERED THIS AMOUNT U/S 69C OF THE ACT AS THEY COULD EXPLAIN THE SOURCE OF EXPENDITURE. 2.3 ON THE ISSUE OF DISALLOWANCE U/S 40A(3) THE C IT(APPEALS) DELETED THE DISALLOWANCE. 2.4 ON THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE ON THE INVOKING OF SECTION 158BD OF THE ACT THE FIRST APP ELLATE AUTHORITY REJECTED THE CONTENTION THAT THE INITIATION OF PROC EEDINGS U/S 158BD WERE BAD IN LAW AND ALSO THE CONTENTION THAT THE AO PASS ED AN ORDER U/S 158BC READ WITH SECTION 143(3) BEYOND THE STIPULATED TIME U/S 158BE. 3. AGGRIEVED THE ASSESSEE HAS FILED THIS APPEAL O N THE ISSUE THAT THE VERY INVOCATION OF SECTION 158BD ON THE FACTS AND CIRCUMSTANCES OF THE CASE IS BAD IN LAW. HE ALSO CONTENDS THAT THE C ONDITIONS PRECEDENT FOR INVOKING THE PROVISIONS OF SECTION 158BD WERE NOT SATISFIED AND THE AO HAS NOT RECORDED PROPER SATISFACTION PRIOR TO INVOK ING SECTION 158BD. ON MERITS HE DISPUTED THE UPHOLDING OF AN ADDITION ON ACCOUNT OF UNDISCLOSED INCOME OF RS.4 73 899/- BY THE CIT(APPE ALS). ON 40A(3) ISSUE THE ASSESSEE RAISED A GROUND THAT HE NEVER C LAIMED A DEDUCTION OF THE EXPENDITURE AS THE SAME BELONG TO THE PRINCIPA LS AND ON THOSE FACTS 40A(3) IS NOT APPLICABLE. 3.1 THE REVENUE IN ITS APPEAL DISPUTES THE RELIEF GRANTED BY THE FIRST APPELLATE AUTHORITY BY HOLDING THAT THE PAYME NTS IN THIS CASE WERE GENUINE AND HENCE THE AO SHOULD NOT HAVE INVOKED 4 0A(3) AS THESE PAYMENTS ARE COVERED UNDER THE PROVISIONS OF RULE 6 DD OF THE INCOME TAX RULES. 5 4. WE HAVE HEARD MR. K. GOPAL THE LEARNED COUNSE L FOR THE ASSESSEE AND MR.AJAY KUMAR SRIVASTAVA LEARNED CIT- DR ON BEHALF OF THE REVENUE. 5. ON A CAREFUL CONSIDERATIONS OF THE FACTS AND CI RCUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITED W E FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT HE IS MERELY AN AG ENT OF M/S RATHOD EXPORTS AND M/S ALOUKIK EXPORTS AND THAT THE EXPEND ITURE IN QUESTION WAS INCURRED BY THE ASSESSEE ONLY ON BEHALF OF HIS PRINCIPALS AND IT WAS NEVER HIS EXPENDITURE. THIS SUBMISSION IS TO BE UPH ELD FOR THE REASON THAT IN THE HANDS OF M/S RATHOD EXPORTS AND M/S AULOKIK EXPORTS THE REVENUE HAS MADE AN ADDITION U/S 69C OF THE ACT OF THE SAME AMOUNT ON THE GROUND THAT THIS IS UNEXPLAINED EXPENDITURE. ON CE THE AO HAS TAKEN A VIEW THAT THOSE CONCERNS HAD INCURRED A PARTICULAR EXPENDITURE AND HAD NOT OFFERED AN EXPLANATION ABOUT THE SOURCE AND THA T SUCH EXPENDITURE IS TO BE DEEMED AS INCOME OF THOSE ASSESSEES BY INVOKI NG SECTION 69C THE SAME AMOUNT CANNOT BE CONSIDERED ONCE AGAIN AS EXPE NDITURE IN THE HANDS OF ANOTHER PERSON WHO IS A POWER OF ATTORNEY HOLDER. THE ASSESSEE IN THIS CASE HAS NEVER CLAIMED THIS AMOUNT AS EXPEN DITURE AND ONCE NO CLAIM IS MADE AS A BUSINESS EXPENDITURE U/S 30 TO 3 7 THE QUESTION OF EITHER ADDING U/S 69C OR MAKING A DISALLOWANCE BY I NVOKING SECTION 40A(3) DOES NOT ARISE. AS AN ADDITION OF THIS AMOUN T HAS ALREADY BEEN MADE IN THE HANDS OF M/S RATHOD EXPORTS AND M/S ALO UKIK EXPORTS IN OUR HUMBLE OPINION NO FURTHER ADDITION CAN BE MADE IN THE ASSESSEES HANDS. THUS WE DELETE THE ADDITION ON MERITS. 6 6. AS WE HAVE GRANTED RELIEF ON MERITS WE DO NOT DEEM IT NECESSARY TO CONSIDER THE OTHER LEGAL ARGUMENTS OF THE ASSESSEE ON THE VALIDITY OF THE INITIATION OF PROCEEDINGS U/S 158BD ETC. AS IT WOULD AN ACADEMIC EXERCISE. 7. BOTH PARTIES AGREED THAT ONCE THIS ISSUE HAS BE EN DECIDED ON MERITS BY ACCEPTING THE CLAIM OF THE ASSESSEE IN TH E ASSESSEES APPEAL THE REVENUES APPEAL HAS TO BE DISMISSED IN VIEW OF THE DECISION IN THE ASSESSEES APPEAL. 8. THUS WE ALLOW THE APPEAL OF THE ASSESSEE AND D ISMISS THE APPEAL OF THE REVENUE. ORDER PRONOUNCED ON THIS 25 TH DAY OF JANUARY 2010. SD/- SD/- (V.D. RAO) (J. SUDHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI DATED : 25 TH JANUARY 2010. WAKODE COPY FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR I-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT MUMBAI BENCHES 7 DATE INITIAL 1. DRAFT DICTATED ON 12-01-2010 2. DRAFT PLACED BEFORE AUTHOR 15-01-2010 4. DRAFT DISCUSSED / APPROVED BY THE SECOND MEMBER ___________ 5. APPROVED DRAFT CAME TO PS ___________ 6. KEPT FOR PRONOUNCEMENT ON ___________ 7. FILE SENT TO THE BENCH CLERK ________ ___ 8. FILE SENT TO THE HEAD CLERK ___________ 9. DATE OF DESPATCH OF ORDER ___________