ATUL SANGHVI, MUMBAI v. ASST CIT CEN CIR 11, MUMBAI

ITSSA 30/MUM/2011 | misc
Pronouncement Date: 16-01-2011 | Result: Dismissed

Appeal Details

RSA Number 3019916 RSA 2011
Assessee PAN NGHVI1607B
Bench Mumbai
Appeal Number ITSSA 30/MUM/2011
Appellant ATUL SANGHVI, MUMBAI
Respondent ASST CIT CEN CIR 11, MUMBAI
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 16-01-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 16-01-2015
Date Of Final Hearing 08-10-2014
Next Hearing Date 08-10-2014
Assessment Year misc
Appeal Filed On 19-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI . . ! '' # BEFORE SHRI R.C. SHARMA ACCOUNTANT MEMBER AND SHRI SANJAY GARG JUDICIAL MEMBER ( $ % &'( ) ./ IT(SS) NO.30/M/2011 ( ASSESSMENT YEAR/BLOCK PERIOD; 2001-02 TO 2007-08) SHRI ATUL SANGHVI 1607B SANKARSETT PALACE NANA CHOWK MUMBAI 400 007 PAN: AHZP52788A + + + + / VS. ASST. CIT CEN-1 MUMBAI ( - / APPELLANT) ( ./ - / RESPONDENT) ( $ % &'( ) ./ IT(SS) NO.29/M/2011 ( ASSESSMENT YEAR/BLOCK PERIOD; 2001-02 TO 2007-08) SHRI DILIP SHAH 401 SPENTA TOWERS 55/57 FORGETT STREET GOWALIA TANK MUMBAI 400 036 PAN: ACWPS4146B + + + + / VS. ASST. CIT CEN-1 MUMBAI ( - / APPELLANT) ( ./ - / RESPONDENT) ASSESSEE BY : SHRI RAKESH JOSHI REVENUE BY : MS. S. PADMAJA + 0 $1 / DATE OF HEARING : 25.11.2014 234 0 $1 / DATE OF PRONOUNCEMENT : 16 .01.2015 / O R D E R PER SANJAY GARG JUDICIAL MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY TH OUGH DIFFERENT BUT ASSOCIATED ASSESSEES. SINCE THE FACTS AS WELL AS T HE ISSUE INVOLVED ARE IDENTICAL IN NATURE HENCE BOTH THE APPEALS ARE TAKEN TOGETH ER FOR DISPOSAL BY THIS IT(SS) NO.29&30/M/2011 2 COMMON ORDER. FOR THE SAKE OF CONVENIENCE THE FAC TS HAVE BEEN TAKEN FROM ITSS NO.30/M/2011. ITSS NO. 30/M/2011 2. THE ASSESSEE IN THIS APPEAL HAS CONTESTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (HEREINAFTER REFERRED TO AS THE CIT) DATED 29.03.2011 PASSED UNDER SECTION 263 OF THE INCOME T AX ACT WHEREBY HE HAS REVISED THE ASSESSMENT ORDER PASSED BY THE ASSESSIN G OFFICER (HEREINAFTER REFERRED TO AS THE AO) UNDER SECTION 143(3) READ WI TH SECTION 153A OF THE INCOME TAX ACT. 3. THE BRIEF FACTS AS BROUGHT OUT BY THE LD. CIT IN THE IMPUGNED ORDER ARE THAT DURING THE COURSE OF SEARCH ON THE PREMISES OF THE ASSESSEE A LARGE NUMBER OF SALE BILLS ISSUED BY VARIOUS CONCER NS VIZ. RAISED ON M/S VARUN INDUSTRIES LTD WERE FOUND. NUMBER OF CHEQ UE BOOKS AND BANK SLIPS WERE FOUND REFERRING TO MORE THAN 100 BA NK ACCOUNTS. EVIDENCE WAS ALSO FOUND OF TAMPERING OF DOCUMENTS S UCH AS PAN CARD BY SUBSTITUTION OF NAME AND PHOTOGRAPH. IN ONE CASE SAME PERSONS PHOTOGRAPH WAS USED IN 3 BANK ACCOUNTS UNDER DIFFER ENT NAMES. DOCUMENTS WERE ALSO FOUND TO SHOW THAT THE ASSESSEE HAD FLOATED A LARGE NUMBER OF BOGUS CONCERNS AND WAS IN THE BUSIN ESS OF RAISING ACCOMMODATION BILLS FOR VARIOUS PARTIES. THE ASSESS EE SUBMITTED THAT THE CONCERNS WERE NOT FLOATED BY HIM AND THEY WERE GENUINE CONCERNS. THE PAN CARDS AND THE COPIES OF THE BANK PASS BOOK BELONG TO THE PERSONS WHO SUPPLIED MATERIAL AND HAD BUSINESS DEAL INGS WITH THE ASSESSEE. IT WAS EXPLAINED THAT THESE DOCUMENTS WER E KEPT WITH THE ASSESSEE FOR CONVENIENCE AS WELL AS INSURANCE TO GU ARD AGAINST FRAUD. THE PAN CARDS WERE PROOF THAT THE PARTIES WERE GENU INE. THE ASSESSEE PROVIDED CONFIRMATION FROM A NUMBER OF PERSONS WHO WERE SUPPOSEDLY RUNNING THE ABOVE CONCERNS. ENQUIRY LETTERS WERE SENT TO TH E ADDRESSES PROVIDED BY IT(SS) NO.29&30/M/2011 3 THE ASSESSEE. MOST OF THE LETTERS WERE RETURNED UNS ERVED. THE ASSESSEE WAS ASKED TO PRODUCE THE PERSONS. ONLY 9 P ERSONS WERE PRODUCED WHO WERE STATED TO BE RUNNING MULTIPLE CON CERNS WHOSE BANK ACCOUNTS WERE FOUND IN THE ASSESSEE'S PREMISES. THE PERSONS COULD NOT PRODUCE BOOKS OF ACCOUNTS. NONE EXCEPT ONE HAD FILED THE INCOME TAX RETURN. NO PROOF OF BUSINESS CARRIED ON BY THE PERS ONS COULD BE FILED. THE PERSONS ALSO COULD NOT EXPLAIN THE SOURCES OF THE D EPOSITS IN THE BANK ACCOUNTS OF THE CONCERNS. SHRI ATUL SANGHVI AND SHR I DILIP SHAH WHO WERE PARTNERS OF THE BUSINESS ALSO MADE CONTRADICTO RY STATEMENTS REGARDING THE CONDUCT OF THE BUSINESS. WHILE ONE S TATED THAT THE PARTIES APPROACHED THEM FOR BUSINESS TRANSACTIONS THE OTHER STATED THAT THEY HAD TO GO AND CONTACT THE PARTIES. IT WAS ALSO FOUND THAT MOST OF THE ADDRESSES GIVEN WHILE OPENING BANK ACCOUNTS WERE IN THE ASSESSEE'S NEIGHBORHOOD. STATEMENT OF SHRI YASHWANT PANDYA WHO WAS WORKING FOR THE ASSESSEE WAS ALSO RECORDED. HE ADMITTED THAT HE WAS PREPARING SALE BILLS IN THE NAMES OF CONCERNS ON THE ASSESSEES INSTRUCTION S. ANOTHER PERSON SHRI PRADEEP JOBALIA ADMITTED THAT HE ACCEPTED LETTERS F ROM BANKS AND CONCERNS. HE ALSO STATED THAT HIS ADDRESS WAS GIVEN WHILE OPE NING SOME OF THE ACCOUNTS. ONE SHRI S. SHAH WAS BROUGHT BY SHRI ATUL SANGHVI AND INTRODUCED AS HIS DISTANT RELATIVE. IT WAS STATED T HAT HIS PHOTO APPEARED IN ATLEAST 3 ACCOUNTS IN DIFFERENT NAMES. THERE WAS SUFFICIENT EVIDENCE FOUND IN THE ASSESSEE'S PREMISES TO CONCLUDE THAT T HEY WERE BOGUS CONCERNS WHICH WERE RUN BY THE ASSESSEE AND WERE UTILIZED FO R RAISING ACCOMMODATION BILLS FOR SEVERAL CLIENTS.. THE AO T REATED THE SALES AS BOGUS SALES FOR WHICH SALES BILLS WERE FOUND AND WERE DUL Y IMPOUNDED. HOWEVER THE REMAINING SUM OF RS.1388 09 01 411/- WHICH HAD REM AINED UNEXPLAINED IN SPITE OF VARIOUS OPPORTUNITIES GIVEN TO THE ASSESSE E HAD BEEN TREATED BY THE AO AS UNEXPLAINED INCOME OF THE ASSESSEE. HE HOWEVER MADE THE SAID ADDITIONS IT(SS) NO.29&30/M/2011 4 ON PROTECTIVE BASIS OBSERVING THAT THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH THE SOURCE OF THESE CREDITS. THE AO THEN PROCEEDED TO TAX ONLY THE COMMISSION INCOME EARNED BY THE ASSESSEE ON SUBSTAN TIVE BASIS TO THE EXTENT OF HIS SHARE IN THE BUSINESS. 4. THE LD. CIT THEREAFTER CALLED UPON AND EXAMINED THE RECORDS OF THE ASSESSEE AND SHRI DILIP SHAH AND FOUND THAT THE ASS ESSEE AND SHRI DILIP SHAH WERE ASSOCIATES IN THE BUSINESS OF ISSUING ACCOMMOD ATION BILLS THROUGH VARIOUS BOGUS CONCERNS TO A NUMBER OF PARTIES. HE NOTED THAT THE ASSESSING OFFICER WHILE ASSESSING THE AGGREGATE AMO UNT OF BANK DEPOSITS OF RS. 1388.09 CRORES SPREAD OVER VARIOUS ASSESSMENT YEARS COMPRISED IN THE BLOCK PERIOD PROTECTIVELY IN THE HANDS OF THE ASSESSEE AND HIS BUSINESS ASSOCIATE IN EQUAL SHARE (50%) HAD NOT GIVEN A FINDING WITH REGARD TO THE SPECIFIC PERSON OR PERSONS ON WHOSE HANDS THE UNEXPLAINED BANK CREDITS AMOUNTING TO RS. 1388.09 WOULD BE TAXED ON SUBSTANTIVE BASIS. HE OBSERVED T HAT IN THE ABSENCE OF SUCH FINDING THE AMOUNT WOULD IN REALIT Y NOT BE TAXED IN ANY PERSON'S HAND ON SUBSTANTIVE BASIS. HE THERE FORE INVOKED THE PROVISIONS OF SEC. 263 OF THE I.T. ACT 1961. T HE ASSESSEE WAS GIVEN AN OPPORTUNITY TO SHOW CAUSE WHY THE ASSESSME NT SHOULD NOT THEREFORE BE CANCELLED AND A FRESH- ASSESSMENT BE M ADE. IN RESPONSE TO THE ABOVE NOTICE ASSESSEE CONTENDED T HAT THE TWO LIMBS I.E THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E SHOULD COEXIST WHILE INVOKING PROVISIONS U/S. 263 OF THE ACT. THAT THE ASSESSMENT ORDER FRAMED BY THE AO WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS ALSO CONTENDED THAT THE CONCLUSION ARRIVED AT BY THE AO COULD NOT BE TERMED AS ERRONEOUS. IN A CASE WHEN ON E POSSIBLE VIEW WAS TAKEN OUT OF TWO OR MORE POSSIBLE VIEWS IT CANNOT LEAD TO THE CONCLUSION THAT THE ORDER PASSED BY THE AO WAS ERRO NEOUS AND PREJUDICIAL IT(SS) NO.29&30/M/2011 5 TO THE INTEREST OF REVENUE. 5. THE LD. CIT HOWEVER OBSERVED THAT T HE ASSESSEE HAD NOT GIVEN ANY SUBMISSION ON THE MERITS OF THE ISSUE. IN THE INSTANT CASE THE TWIN CONDITIONS OF ERRONEOUS AND PREJUDICIAL TO REVENUE CO-EXISTED. THAT THE AO HAD COMMITTED AN ERROR BY MAKING A PROT ECTIVE ADDITION WITHOUT HOWEVER STATING WHERE AND IN WHOSE HANDS THE AMOUN T SHOULD BE SUBSTANTIVELY ADDED. THE ASSESSEE IN THIS CASE HAD NOT DISCHARGED ONUS O N HIM OF EXPLAINING THE SOURCE OF THE DEPOSITS PROVI NG THE IDENTITY OF THE PERSONS TO WHOM THE BANK ACCOUNTS BELONGED IF THE A CCOUNTS DID NOT BELONG TO THE ASSESSEE PROVE THE CREDIT WORTHINESS OF THE PERSONS ETC. IN THE ABSENCE OF SUCH EXPLANATION AND PROOF AND IN VIEW OF THE EVIDENCE FOUND IN THE ASSESSEE'S PREMISES THE DEPOSITS OF I N THE BANK ACCOUNTS WOULD BE DEEMED TO BE THE INCOME OF THE ASSESSEE. THE AMO UNT OF RS. 1388.09 CRORES THEREFORE SHOULD HAVE BEEN ASSESSED IN THE HANDS OF THE ASSESSEE TO THE EXTENT OF HIS SHARE IN THE BUSINESS ON SUBSTANTIVE BASIS AND NOT ON PROTECTIVE BASIS. A PROTECTIVE ASSESSMEN T ONLY LIES IF THE ASSESSEE COULD PROVE THAT THE AMOUNT BELONGED TO OT HER PERSONS IN WHOSE HANDS IT SHOULD BE ASSESSED LIKE IN THE CASE OF VAR UN INDUSTRIES. IN THAT EVENT THE AMOUNT COULD BE ASSESSED ON PROTECTIVE B ASIS IN THE HANDS OF THE ASSESSEE TO SAFEGUARD THE INTEREST OF THE REVEN UE. HE THEREFORE FINDING THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF THE REVENUE CANCELLED THE SAME IN SO FAR AS THE ISSUE O F BANK DEPOSITS WAS CONCERNED AND DIRECTED THE ASESSING OFFICER TO MAKE FRESH ASSESSMENTS IN THE FOLLOWING MANNER. A.THE TOTAL AMOUNT INCLUDED IN THE BILLS RAISED IN THE NAME OF VARUN INDUSTRIES SHOULD BE ASSESSED PROTECTIVELY IN THE HANDS OF THE ASSESSEE TO THE EXTENT OF HIS SHARE IN THE BUSINESS TO SAFEGUARD T HE INTEREST OF THE REVENUE AS DISCUSSED ABOVE. THE COMMISSION INCOME ON THE ABOVE TRANSACTI ONS SHOULD BE ASSESSED IT(SS) NO.29&30/M/2011 6 PROPORTIONATELY ON SUBSTANTIVE BASIS IN THE HANDS O F THE ASSESSEE AS ALREADY DONE IN THE ORIGINAL ASSESSMENT. B. AS REGARDS DEPOSITS AGGREGATING TO RS. 1388.09 C RORES IN THE ASSESSMENT YEARS COMPRISED IN THE BLOCK PERIOD FOR WHICH THE ASSESSE E WAS NOT ABLE TO FURNISH PROPER EXPLANATION THIS AMOUNT SHOULD BE TAXED IN THE HAN DS OF THE ASSESSEE PROPORTIONATELY TO THE EXTENT OF HIS SHARE IN THE BUSINESS ON A SUB STANTIVE BASIS AS HIS OWN UNEXPLAINED OR UNACCOUNTED INCOME. C. THE ASSESSEE SHOULD BE ALLOWED OPPORTUNITY TO PR OVE THAT THE DEPOSITS ARE ACCOUNTED FOR OR ARE NOT THE ASSESSEE'S OWN INCOME BUT INCOME OF SOME OTHER PERSON Y SUBMITTING PROOF OF IDENTITY OF SUCH PERS ON CREDITWORTHINESS OF SUCH PERSON BUSINESS OPERATION CARRIED OUT AND THAT THE TRANSACTION IS GENUINELY CARRIED OUT BY SUCH OTHER PERSON. IN A CASE WHERE SUCH PROOF IS SUBMITTED THE AMOUNT OR AMOUNTS WOULD BE REDUCED FROM THE AGGREGATE AMOUNT OF UNEXPLAINED BANK DEPOSITS AND TAXED ONLY ON PROTECTIVE BASIS IN THE RESPECTIVE YEAR OR YEARS. THE REMAINING AMOUNT .WHICH REMAINS UNEXPLA INED WOULD BE TAXED IN THE RESPECTIVE YEARS IN THE HANDS OF THE ASSESSE E PROPORTIONATELY ON SUBSTANTIVE BASIS AS STATED IN THE FOREGOING PARA. 6. THE ASSESSEE HAS THUS COME IN APPEAL BEFORE US A GITATING THE REVISION OF THE ASSESSMENT ORDER BY THE LD. CIT UNDER SECTION 2 63 OF THE ACT. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE LD. REPRESENTATI VES OF BOTH THE PARTIES AND HAVE ALSO GONE THROUGH THE RECORDS. THE LD. A.R. O F THE ASSESSEE HAS VEHEMENTLY CONTENDED THAT THE ASSESSMENT ORDER WAS PASSED BY THE AO AFTER DUE APPLICATION OF MIND. THE AO HAD NOT ONLY APPLI ED HIS MIND DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT BUT ALSO UNDER SECTION 147 OF THE ACT IN THE REOPENED ASSESSMENT PROCEEDIN GS. HE HAS FURTHER CONTENDED THAT THE ACTION OF THE LD. CIT WAS BASED ON THE MERE CHANGE OF OPINION. NEITHER THE ASSESSMENT ORDER IN QUESTION WAS ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THERE WAS NO TANGIBLE MATERIAL BEFORE THE LD. CIT JUSTIFYING THE REVISION OF THE A SSESSMENT ORDER. HE IN THIS RESPECT HAS RELIED UPON THE DECISION OF THE HONBL E SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES COMPANY LTD. VS. CIT [2000] 243 ITR 83 (SC) AND IT(SS) NO.29&30/M/2011 7 FURTHER THE DECISION OF THE HONBLE DELHI HIGH COUR T IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. 256 ITR 1. ON THE OTHER HAND THE LD. D.R. HAS CONTENDED THA T THE ASSESSMENT ORDER UNDER CONSIDERATION WAS ERRONEOUS. THE AO HAD MADE ADDITIONS ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE WITHOUT MAKING A NY ADDITION ON SUBSTANTIVE BASIS IN THE HANDS OF ANY OTHER PERSON. HE HAS FUR THER SUBMITTED THAT THUS THE ORDER WAS PREJUDICIAL TO THE INTEREST OF THE REVENU E. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAD GIVEN A CATEGORICAL F INDING THAT THE TOTAL CREDIT IN THE ASSESSEES VARIOUS BANK ACCOUNTS WAS AMOUNTING TO RS.2122 27 57 495/- OUT OF THIS A SUM OF RS.856 64 49 533/- HAD BEEN TR EATED AS BOGUS SALES FOR WHICH SALES BILLS WERE FOUND AND WERE DULY IMPOUNDE D. HOWEVER THE REMAINING SUM OF RS.1388 09 01 411/- HAD REMAINED U NEXPLAINED IN SPITE OF VARIOUS OPPORTUNITIES GIVEN TO THE ASSESSEE. THE A O HAD TREATED THE SAME AS UNEXPLAINED INCOME OF THE ASSESSEE AND DECIDED TO B RING IT INTO TAX IN VARIOUS ASSESSMENT YEARS. HE ALSO WORKED OUT THE ADDITIONS FOR DIFFERENT ASSESSMENT YEARS. HOWEVER HE MADE THE SAID ADDITIONS ON PROT ECTIVE BASIS OBSERVING THAT THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH THE SOU RCE OF THESE CREDITS. HE HOWEVER MADE THE ADDITION OF 5% OF THE SAID AMOUNT AS COMMISSION INCOME OF THE ASSESSEE ON SUBSTANTIVE BASIS. A PERUSAL OF THE ABOVE FINDINGS ITSELF REVEALS THAT THE ORDER OF THE AO WAS ERRONEOUS. IN THE ABSENCE OF ANY EVIDENCE ON THE FILE AS TO SOURCE OF THE CREDITS OF THE AMOU NT IN QUESTION IN THE VARIOUS BANK ACCOUNTS OF THE ASSESSEE THE AO HAD TREATED T HE SAID AMOUNT AS UNEXPLAINED INCOME OF THE ASSESSEE. ONCE THE AO HA D TREATED SO THE AO WAS REQUIRED TO MAKE THE ADDITION OF THIS AMOUNT ON SUB STANTIVE BASIS. EVEN WITHOUT MAKING THE ADDITION OF THE AMOUNT IN QUESTI ON ON SUBSTANTIVE BASIS IN ANY OTHER PERSONS ACCOUNT THE AO COULD NOT HAVE M ADE THE ADDITION OF THE AMOUNT ON PROTECTIVE BASIS IN THE ASSESSEES ACCOUN T. FROM THE ABOVE FACTS THE IT(SS) NO.29&30/M/2011 8 LD. CIT WAS JUSTIFIED IN HOLDING THAT THE ORDER OF THE AO WAS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF T HE REVENUE. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT WHIL E INVOKING PROVISIONS OF SECTION 263 OF THE ACT AND THEREBY REVISING THE ORD ER OF THE AO. THE SAME IS THEREFORE UPHELD. ITSS NO.29/M/2011 8. THE ASSESSEE IN THE CASE IN HAND WAS PARTNER/ASS OCIATE IN EQUAL SHARES WITH ATUL SANGHVI I.E. THE ASSESSEE IN THE ABOVE DI SCUSSED APPEAL NO.30. THE FACTS AND ISSUES INVOLVED IN THIS CASE BEING IDENTI CAL IN NATURE TO THE ABOVE DISCUSSED APPEAL I.E. IT(SS)A NO.30/M/2011 HENCE IN VIEW OF OUR OBSERVATIONS MADE ABOVE THIS APPEAL IS ALSO DECIDE D AGAINST THE ASSESSEE. 9. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEES ARE HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.01.2015 . 0 234 5 6+7 16 .01.2015 3 0 ' SD/- SD/- ( . . / R.C.SHARMA ) ( ! '' / SANJAY GARG) / ACCOUNTANT MEMBER / JUDICIAL MEMBER /MUMBAI ; 6+ / DATED 16 .01.2015 * PATEL 0 .$: ':4$ 0 .$: ':4$ 0 .$: ':4$ 0 .$: ':4$/ COPY OF THE ORDER FORWARDED TO : 1. - / THE APPELLANT 2. ./ - / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. :&' .$+ / THE DR CONCERNED BENCH 6. '> ? / GUARD FILE. + + + + / BY ORDER /:$ .$ //TRUE COPY// @ @@ @/ // /( ! ( ! ( ! ( ! ( DY./ASSTT. REGISTRAR) / ITAT MUMBAI