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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 16/02/2016 passed by the Ld. Commissioner of Income- tax(Appeals)-4, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2010-11, raising following grounds:
The Ld. Commissioner of Income Tax (A) has erred in confirming the action of the Assessing Officer assessing the Income of the assessee at Rs.
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1,20,85,400/ 1,20,85,400/-/- instead of instead of Rs. 34,80,498/- as Rs. 34,80,498/ declared by the appellant in his return ed by the appellant in his return of income. of income. 2. The Ld. Commissioner of Income Tax (A) has erred in The Ld. Commissioner of Income Tax (A) has erred in The Ld. Commissioner of Income Tax (A) has erred in facts and in law in adding Rs. 81,07,050/ facts and in law in adding Rs. 81,07,050/- as sales of as sales of the Appellant even though it was explained that the Appellant even though it was explained that the Appellant even though it was explained that Appellant had nothing to sale and entry were inflated Appellant had nothing to sale and entry were inflated Appellant had nothing to sale and entry were inflated to apply for more credit facilities from the bank. to apply for more credit facilities from the bank. to apply for more credit facilities from the bank. 3. The order of Ld. Commissioner is wrong factually as The order of Ld. Commissioner is wrong factually as The order of Ld. Commissioner is wrong factually as well as legally and cannot be sustained. well as legally and cannot be sustained. 2. At the outset, the the outset, the Ld. counsel of the assessee referre counsel of the assessee referred to application for condonation of the delay in submitting the appeal. application for condonation of the delay in submitting the appeal. application for condonation of the delay in submitting the appeal. He submitted that order of the Ld. CIT(A) dated 16/02/2016 was He submitted that order of the Ld. CIT(A) dated 16/02/2016 was He submitted that order of the Ld. CIT(A) dated 16/02/2016 was received by the assessee company on 05/04/2016 and therefore received by the assessee company on 05/04/2016 and therefore received by the assessee company on 05/04/2016 and therefore appeal was to be filed before the ITAT latest by 03/06/2016. appeal was to be filed before the ITAT latest by 03/06/2016. appeal was to be filed before the ITAT latest by 03/06/2016. However due to health probl However due to health problems of the director Sh SS Hamid ems of the director Sh SS Hamid, he resumed office in the month of May 2016, and thereafter only the resumed office in the month of May 2016, and thereafter only the resumed office in the month of May 2016, and thereafter only the appeal could be filed on 21/06/2016. He referred to the affidavit appeal could be filed on 21/06/2016. He referred to the affidavit appeal could be filed on 21/06/2016. He referred to the affidavit filed by the Director of the assessee company. The Ld. counsel filed by the Director of the assessee company. The filed by the Director of the assessee company. The submitted that there is a reasonable and sufficient cause for delay submitted that there is a reasonable and sufficient cause for delay submitted that there is a reasonable and sufficient cause for delay in filing the appeal and it was not an intentional as the assessee is in filing the appeal and it was not an intentional as the assessee is in filing the appeal and it was not an intentional as the assessee is not benefiting in any manner by delay in filing appeal. The learned not benefiting in any manner by delay in filing appeal. The learne not benefiting in any manner by delay in filing appeal. The learne DR however objected for condoning the delay. DR however objected for condoning the delay.
We have heard rival submission of the parties on the issue of We have heard rival submission of the parties on the issue of We have heard rival submission of the parties on the issue of condoning the delay in filing the appeal. In our opinion, due to condoning the delay in filing the appeal. In our opinion, due to condoning the delay in filing the appeal. In our opinion, due to medical reasons stated in the affidavit by the director of the medical reasons stated in the affidavit by the director of the medical reasons stated in the affidavit by the director of the assessee company, the assessee was prevented by sufficient cause assessee company, the assessee was prevented by sufficient cause assessee company, the assessee was prevented by sufficient cause
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and could not file the appeal on time. In the circumstances, we the appeal on time. In the circumstances, we the appeal on time. In the circumstances, we admit the appeal for adjudication. admit the appeal for adjudication.
Briefly stated facts of the case are that duri stated facts of the case are that during the year under ng the year under consideration, the assessee was engaged in providing facilities of , the assessee was engaged in providing facilities of , the assessee was engaged in providing facilities of studio for production o studio for production of television serial and commercial film. The f television serial and commercial film. The assessee filed return of income on 24/09/2010 declaring total assessee filed return of income on 24/09/2010 declaring total assessee filed return of income on 24/09/2010 declaring total income of ₹34,80,500/ 500/-for the year under consideration. The return for the year under consideration. The return of income filed by the assessee was selected for scrutiny and of income filed by the assessee was selected for scrutiny and of income filed by the assessee was selected for scrutiny and statutory notices under the Income nder the Income-tax Act, 1961 ( tax Act, 1961 (in short ‘the Act’), were issued and complied with. ), were issued and complied with.
4.1 During assessment proceedings, the Assessing Officer noticed During assessment proceedings, the Assessing Officer noticed During assessment proceedings, the Assessing Officer noticed that a survey action under section 133A of the Act was conducted that a survey action under section 133A of the Act was conducted that a survey action under section 133A of the Act was conducted in the case of the assessee on 04/03/2010. in the case of the assessee on 04/03/2010. The survey team mainly The survey team mainly observed two discrepancies. Firstly, cash balance in the books of observed two discrepancies. , cash balance in the books of accounts maintained in the computer was of accounts maintained in the computer was of ₹5,77, 77,411/-, whereas actual cash of ₹80, 80,500/- was found and therefore there was was found and therefore there was difference of cash of rupees 4,96,911/-Secondly ndly, net profit of difference of cash of rupees 4,96,911/ ₹1,57,05,468/-was shown in the profit and loss account generated was shown in the profit and loss account generated was shown in the profit and loss account generated at the time of the survey, but when being questioned as why the at the time of the survey, but when being questioned as why the at the time of the survey, but when being questioned as why the advance tax was not paid on the said profit earned , the director Sh advance tax was not paid on the said profit earned , the director Sh advance tax was not paid on the said profit earned , the director Sh Sahir Siraj Hamid in his statement dat Sahir Siraj Hamid in his statement dated 04/03/2010 stated that ed 04/03/2010 stated that actual profit must had been less due to certain expenses like actual profit must had been less due to certain expenses like actual profit must had been less due to certain expenses like
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depreciation, interest et depreciation, interest etc. not debited to the profit loss account, but not debited to the profit loss account, but agreed to pay an amount of agreed to pay an amount of ₹ 25 lakhs towards the tax liability. 25 lakhs towards the tax liability.
4.2 After 11 days of the surve After 11 days of the survey proceedings, when again the y proceedings, when again the statement of the assessee was recorded on 15/03/2010, Shri Sahir statement of the assessee was recorded on 15/03/2010, Shri Sahir statement of the assessee was recorded on 15/03/2010, Shri Sahir Siraj Hamid stated that profit was on the higher side due to one Siraj Hamid stated that profit was on the higher side due to one Siraj Hamid stated that profit was on the higher side due to one sales entry in the name of XYZ was made at the end of the every sales entry in the name of XYZ was made at the end of the every sales entry in the name of XYZ was made at the end of the every month from April, 2009 to Januar month from April, 2009 to January 2010 having total amount of y 2010 having total amount of ₹81,07,050/-. He further submitted that XYZ was a fictitious, non . He further submitted that XYZ was a fictitious, non . He further submitted that XYZ was a fictitious, non- existent entity and said entries existent entity and said entries were made for the purpose of made for the purpose of showing increase in turnover for presenting to the bank for the turnover for presenting to the bank for the purpose of availing loan for expan purpose of availing loan for expansion of the studio. sion of the studio.
4.3 The Ld. Assessing Officer rejected the contention of the Assessing Officer rejected the contention of the Assessing Officer rejected the contention of the assessee as an afterthought for evading tax and held that same assessee as an afterthought for evading tax and held that same assessee as an afterthought for evading tax and held that same were actual sales which were intended to keep out of books. which were intended to keep out of books. which were intended to keep out of books.
Before the Ld. CIT(A), the assessee claimed tha Before the Ld. CIT(A), the assessee claimed tha Before the Ld. CIT(A), the assessee claimed that there was no evidence of receipt of evidence of receipt of ₹81,750/-by the assessee from the alleged by the assessee from the alleged XYZ Private Limited either in the form of the cash, cheque or XYZ Private Limited either in the form of the cash, cheque or XYZ Private Limited either in the form of the cash, cheque or demand draft. It was submitted by the assessee that burden was on demand draft. It was submitted by the assessee that burden was on demand draft. It was submitted by the assessee that burden was on the revenue authorities to prove that income sou the revenue authorities to prove that income sought to be taxed was ght to be taxed was in fact an income of the assessee. The assessee also explained that in fact an income of the assessee. The assessee also explained that in fact an income of the assessee. The assessee also explained that no such company in the name of XYZ private limited existed in the no such company in the name of XYZ private limited existed in the no such company in the name of XYZ private limited existed in the
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register of registrar of companies er of registrar of companies. However, the Ld. CIT(A) rejected he Ld. CIT(A) rejected the contentions of the assessee observing as under: of the assessee observing as under:
3.3. I have considered the outcome of survey conducted 3.3. I have considered the outcome of survey conducted 3.3. I have considered the outcome of survey conducted u/s. 133A of the Income u/s. 133A of the Income-tax Act, 1961 on 04.03.2010, tax Act, 1961 on 04.03.2010, the findings of the Assessing Officer in assessment order, the findings of the Assessing Officer in assessment order, the findings of the Assessing Officer in assessment order, rival submission of the appellant and evidences on rival submission of the appellant and evidences on rival submission of the appellant and evidences on record, carefully. During the course of survey proceeding, ecord, carefully. During the course of survey proceeding, ecord, carefully. During the course of survey proceeding, it was found by the survey party that as per the profit & it was found by the survey party that as per the profit & it was found by the survey party that as per the profit & loss account as on 05.03.2010 generated from the loss account as on 05.03.2010 generated from the loss account as on 05.03.2010 generated from the computerized books of accounts, Net Profit was of Rs. computerized books of accounts, Net Profit was of Rs. computerized books of accounts, Net Profit was of Rs. 1,57,05,468/ 1,57,05,468/-, nevertheless Appellant had not paid any had not paid any Advance-tax. When this information was extracted from tax. When this information was extracted from tax. When this information was extracted from the evidences created by the Appellant, Appellant was the evidences created by the Appellant, Appellant was the evidences created by the Appellant, Appellant was confronted with these facts. However, no convincing confronted with these facts. However, no convincing confronted with these facts. However, no convincing explanation was given by the Appellant at the time of explanation was given by the Appellant at the time of explanation was given by the Appellant at the time of survey. Mr. Sahir Siraj survey. Mr. Sahir Siraj Hamid, the Director was Hamid, the Director was examined and his statement on oath was recorded on examined and his statement on oath was recorded on examined and his statement on oath was recorded on 05.03.2010.When he was confronted with the evidences 05.03.2010.When he was confronted with the evidences 05.03.2010.When he was confronted with the evidences in possession that as per the profit & loss account in possession that as per the profit & loss account in possession that as per the profit & loss account generated from the computer, there was a Net Profit of generated from the computer, there was a Net Profit of generated from the computer, there was a Net Profit of Rs.1,57,05,468/ Rs.1,57,05,468/- , but no Advance-tax was paid, the tax was paid, the Director of the Company was not able to explain and had Director of the Company was not able to explain and had Director of the Company was not able to explain and had shifted his responsibility upon the Accountant on the shifted his responsibility upon the Accountant on the shifted his responsibility upon the Accountant on the ground that his Accountant had gone to his native place ground that his Accountant had gone to his native place ground that his Accountant had gone to his native place and all the necessary evidences would be given after his and all the necessary evidences would be given after his and all the necessary evidences would be given after his return. When initial explanatior. was that this much profit turn. When initial explanatior. was that this much profit turn. When initial explanatior. was that this much profit could could could not not not be be be there there there the the the business business business receipts receipts receipts was was was considerably less during the year and further it was considerably less during the year and further it was considerably less during the year and further it was clarified that such profit of Rs. 1,57,05,468/ clarified that such profit of Rs. 1,57,05,468/- would be would be reduced reduced reduced after after after claiming claiming claiming depreciation depreciation depreciation and and and other oth oth expenditure which were yet to be entered. However, expenditure which were yet to be entered. However, expenditure which were yet to be entered. However, during the course of survey proceedings, the Director of during the course of survey proceedings, the Director of during the course of survey proceedings, the Director of the Company has admitted as under : the Company has admitted as under :- ...to buy peace of mind and in order to avoid ...to buy peace of mind and in order to avoid ...to buy peace of mind and in order to avoid inconvenience, I am prepared to pay an amount of Rs.25 inconvenience, I am prepared to pay an amount of Rs.25 inconvenience, I am prepared to pay an amount of Rs.25 lacs towards the tax liability" wards the tax liability" 3.4. Subsequently on 15.03.2010, the Director has stated 3.4. Subsequently on 15.03.2010, the Director has stated 3.4. Subsequently on 15.03.2010, the Director has stated that he had discussed the matter that his Accountant that he had discussed the matter that his Accountant that he had discussed the matter that his Accountant
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who has stated that profit was on higher side due to sale who has stated that profit was on higher side due to sale who has stated that profit was on higher side due to sale entry made in the name of M/s. XYZ at the end of every entry made in the name of M/s. XYZ at the end of every entry made in the name of M/s. XYZ at the end of every month from April, 2009 to January, 2010. Mis. XYZ is not om April, 2009 to January, 2010. Mis. XYZ is not om April, 2009 to January, 2010. Mis. XYZ is not an existing party as there is a difference in Si.Nos. of an existing party as there is a difference in Si.Nos. of an existing party as there is a difference in Si.Nos. of Sales Bills of regular customers and Sale Bills shown in Sales Bills of regular customers and Sale Bills shown in Sales Bills of regular customers and Sale Bills shown in the name of Ms.XYZ. The contention that due to fictitious the name of Ms.XYZ. The contention that due to fictitious the name of Ms.XYZ. The contention that due to fictitious sale, profit has been inflated by R sale, profit has been inflated by Rs.81,07,050/-, in this , in this regard, it is pertinent to mention that clarification of the regard, it is pertinent to mention that clarification of the regard, it is pertinent to mention that clarification of the Appellant is not at all convincing one, rather found to be Appellant is not at all convincing one, rather found to be Appellant is not at all convincing one, rather found to be meaningless. When genuineness of books of accounts are meaningless. When genuineness of books of accounts are meaningless. When genuineness of books of accounts are claimed by the Appellant and it has never been admitted claimed by the Appellant and it has never been admitted claimed by the Appellant and it has never been admitted that Appellant maintains false Accounts, such outcome of at Appellant maintains false Accounts, such outcome of at Appellant maintains false Accounts, such outcome of profit & loss accounts that upto the date of survey i.e. profit & loss accounts that upto the date of survey i.e. profit & loss accounts that upto the date of survey i.e. 05.03.2010, there was a profit of Rs.1,57,05,468/ 05.03.2010, there was a profit of Rs.1,57,05,468/ 05.03.2010, there was a profit of Rs.1,57,05,468/-. The claim that sales were inflated in the name of non claim that sales were inflated in the name of non- -existing person, is of no avail becaus person, is of no avail because if sales has been inflated e if sales has been inflated in the month of April, 2009, definitely cash might be in the month of April, 2009, definitely cash might be in the month of April, 2009, definitely cash might be generated or unaccounted income would have been generated or unaccounted income would have been generated or unaccounted income would have been channelized. The Appellant has failed to explain the cash channelized. The Appellant has failed to explain the cash channelized. The Appellant has failed to explain the cash balance appearing at the end of every month, therefore, balance appearing at the end of every month, therefore, balance appearing at the end of every month, therefore, the sales shown in any name cannot be ignored on the hown in any name cannot be ignored on the hown in any name cannot be ignored on the basis of such retraction. It is very evident from the basis of such retraction. It is very evident from the basis of such retraction. It is very evident from the evidences on record that Appellant has earned good evidences on record that Appellant has earned good evidences on record that Appellant has earned good profit but with a view to suppress the same, he has tried profit but with a view to suppress the same, he has tried profit but with a view to suppress the same, he has tried to advance "cooked to advance "cooked-up story" after 05.03.2010. It c up story" after 05.03.2010. It can be seen from the reply to Question No. 13 of the statement seen from the reply to Question No. 13 of the statement seen from the reply to Question No. 13 of the statement dated 05.03.2010 that Appellant was explaining that this dated 05.03.2010 that Appellant was explaining that this dated 05.03.2010 that Appellant was explaining that this Net Profit of Rs. 1,57,05,468/ Net Profit of Rs. 1,57,05,468/- would be reduced after would be reduced after claiming depreciation and other expenses which were yet claiming depreciation and other expenses which were yet claiming depreciation and other expenses which were yet to to be be entered. entered. It It means means so some me expenditure expenditure and and depreciation was to be reduced whereas subsequently, depreciation was to be reduced whereas subsequently, depreciation was to be reduced whereas subsequently, Appellant has changed the stand and had tried to make Appellant has changed the stand and had tried to make Appellant has changed the stand and had tried to make believe that sales was inflated by Rs.81,07.050/ believe that sales was inflated by Rs.81,07.050/- - 3.5. Further, it is pertinent to mention that in response to 3.5. Further, it is pertinent to mention that in response to 3.5. Further, it is pertinent to mention that in response to the notice us. 142( the notice us. 142(1) of the Income-tax Act, 1961 dated tax Act, 1961 dated 20.11.2012 appellant has submitted explanation dated 20.11.2012 appellant has submitted explanation dated 20.11.2012 appellant has submitted explanation dated 11.12.2012 stating "As per the survey dated 04.03.2010, 11.12.2012 stating "As per the survey dated 04.03.2010, 11.12.2012 stating "As per the survey dated 04.03.2010, the income-tax officer on his visit to our Studio realized tax officer on his visit to our Studio realized tax officer on his visit to our Studio realized that on this day my accountant was on leave, and du that on this day my accountant was on leave, and du that on this day my accountant was on leave, and due to that reasons the profit & loss account was shown at that reasons the profit & loss account was shown at that reasons the profit & loss account was shown at Rs.1.44 Crores. And after a couple of days hence when Rs.1.44 Crores. And after a couple of days hence when Rs.1.44 Crores. And after a couple of days hence when
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our Accountants joined back we once again went through our Accountants joined back we once again went through our Accountants joined back we once again went through our Books of Accounts and realized that the profit shown our Books of Accounts and realized that the profit shown our Books of Accounts and realized that the profit shown is actually not the real profit s is actually not the real profit since many entries were not ince many entries were not taken into account for e.g.like depreciation, provisions taken into account for e.g.like depreciation, provisions taken into account for e.g.like depreciation, provisions entry, interest and other payment entry because the entry, interest and other payment entry because the entry, interest and other payment entry because the accounting year was not completed. And we never had accounting year was not completed. And we never had accounting year was not completed. And we never had profits of Rs.80 lakhs". profits of Rs.80 lakhs". 3.6. Thus, it is very evident that against 3.6. Thus, it is very evident that against the income the income inflated in profit & loss account as on 05.03.2010 inflated in profit & loss account as on 05.03.2010 inflated in profit & loss account as on 05.03.2010 expenditure like depreciation, provision entry, interest expenditure like depreciation, provision entry, interest expenditure like depreciation, provision entry, interest and other expenditure was to be claimed. It means profit and other expenditure was to be claimed. It means profit and other expenditure was to be claimed. It means profit shown was correct and only routine expenditure was to shown was correct and only routine expenditure was to shown was correct and only routine expenditure was to be claimed which Appellant be claimed which Appellant had claimed. Subsequently. had claimed. Subsequently. therefore, therefore, therefore, the the the profit profit profit unearthed unearthed unearthed to to to the the the extent extent extent of of of Rs.1,57,05,468/ Rs.1,57,05,468/- cannot be substituted. As regard various arguments, it is pertinent to mention As regard various arguments, it is pertinent to mention As regard various arguments, it is pertinent to mention that none of the arguments is tenable. In written that none of the arguments is tenable. In written that none of the arguments is tenable. In written submission, the Appellant has sh submission, the Appellant has shown name of alleged own name of alleged party as "XYZ Pvt. Ltd." whereas throughout the party as "XYZ Pvt. Ltd." whereas throughout the party as "XYZ Pvt. Ltd." whereas throughout the proceedings and in his statement the Director has proceedings and in his statement the Director has proceedings and in his statement the Director has referred to only "MIs. XYZ" and not "MIs. XYZ Put.Ltd.". referred to only "MIs. XYZ" and not "MIs. XYZ Put.Ltd.". referred to only "MIs. XYZ" and not "MIs. XYZ Put.Ltd.". Therefore, there is a twisting of fact. Therefore, there is a twisting of fact. 3.7. It is meaningless to argue that name 3.7. It is meaningless to argue that name of this party of this party was not appearing in the register of ROC. Further, I find was not appearing in the register of ROC. Further, I find was not appearing in the register of ROC. Further, I find no merit in the argument that the Assessing Officer has no merit in the argument that the Assessing Officer has no merit in the argument that the Assessing Officer has not considered the explanation of the Appellant. It is not not considered the explanation of the Appellant. It is not not considered the explanation of the Appellant. It is not necessary for the Assessing Officer to accept the necessary for the Assessing Officer to accept the necessary for the Assessing Officer to accept the explanation which explanation which is not acceptable at all. The Ld. is not acceptable at all. The Ld. Assessing Officer has rightly rejected the cooked Assessing Officer has rightly rejected the cooked-up story up story claimed to be explanation.Further, it is important to point claimed to be explanation.Further, it is important to point claimed to be explanation.Further, it is important to point out that the addition has not been made u/s.68 or 69 of out that the addition has not been made u/s.68 or 69 of out that the addition has not been made u/s.68 or 69 of the Income-tax Act, 1961 but addition has been tax Act, 1961 but addition has been made on made on account of suppression of income unearthed during the account of suppression of income unearthed during the account of suppression of income unearthed during the course of survey proceeding. Further, explanation that course of survey proceeding. Further, explanation that course of survey proceeding. Further, explanation that profit has been increased with a view to obtain credit profit has been increased with a view to obtain credit profit has been increased with a view to obtain credit facilities from the Bank, is not tenable because when facilities from the Bank, is not tenable because when facilities from the Bank, is not tenable because when subsequently, application was subsequently, application was not moved to the Bank not moved to the Bank and when no further intention was there to obtain Bank and when no further intention was there to obtain Bank and when no further intention was there to obtain Bank loan, such entry if at all was fictitious, could be removed, loan, such entry if at all was fictitious, could be removed, loan, such entry if at all was fictitious, could be removed,
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but it is very evident that right from April onwards Sales but it is very evident that right from April onwards Sales but it is very evident that right from April onwards Sales has been shown and cash has been generated or black has been shown and cash has been generated or black has been shown and cash has been generated or black money has been introduced in the name of sale. Such as been introduced in the name of sale. Such as been introduced in the name of sale. Such argument of the Appellant contradicts it's stand. argument of the Appellant contradicts it's stand. argument of the Appellant contradicts it's stand. Therefore, from this angle also, addition so made Therefore, from this angle also, addition so made Therefore, from this angle also, addition so made deserves approval. deserves approval. 3.8. Further, it is important to mention that when 3.8. Further, it is important to mention that when 3.8. Further, it is important to mention that when addition has not been made us.68 or 69 of addition has not been made us.68 or 69 of the Income the Income- tax Act, 1961, there was no occasion to rely upon the tax Act, 1961, there was no occasion to rely upon the tax Act, 1961, there was no occasion to rely upon the cases decided in the context of additional cash credit. cases decided in the context of additional cash credit. cases decided in the context of additional cash credit. None of the case laws relied upon by the Ld. A.R. is None of the case laws relied upon by the Ld. A.R. is None of the case laws relied upon by the Ld. A.R. is applicable to the facts of the case. applicable to the facts of the case. Therefore, in the background of above discus Therefore, in the background of above discussion of the sion of the fact and various references of the evidences, I also reach fact and various references of the evidences, I also reach fact and various references of the evidences, I also reach to the conclusion that additions so made by the to the conclusion that additions so made by the to the conclusion that additions so made by the Assessing Assessing Assessing Officer Officer Officer is is is correct, correct, correct, hence hence hence additions additions additions of of of Rs.81,07,050/ Rs.81,07,050/- is sustained.” 6. Before us, Ld. counsel of the assessee filed a paper bo counsel of the assessee filed a paper book containing page 1 to 246 and also filed copy of bills which were containing page 1 to 246 and also filed copy of bills which were containing page 1 to 246 and also filed copy of bills which were impounded during the course of survey proceedings. impounded during the course of survey proceedings. impounded during the course of survey proceedings.
Both the grounds of the appeal of Both the grounds of the appeal of the assessee relate to the he assessee relate to the addition of ₹81,07,050/ 07,050/-. The Ld. counsel of the assessee reiterated counsel of the assessee reiterated the submission made before the Ld. CIT(A) and further submitted the submission made before the Ld. CIT(A) and further submitted the submission made before the Ld. CIT(A) and further submitted that during the course of the survey even no bills or invoices in the that during the course of the survey even no bills or invoices in the that during the course of the survey even no bills or invoices in the name of XYZ Private Limited were found or impounded, which name of XYZ Private Limited were found or impounded, which name of XYZ Private Limited were found or impounded, which shows that only fictitious shows that only fictitious entries of the sales were made for entries of the sales were made for increasing the turnover increasing the turnover for the year under consideration. To the year under consideration. To support this contention, he also referred to the bills impounded, support this contention, he also referred to the bills impounded, support this contention, he also referred to the bills impounded, copy of which was obtained from the Assessing Officer through RTI copy of which was obtained from the Assessing Officer through RTI copy of which was obtained from the Assessing Officer through RTI
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application. The Ld. Ld. counsel also submitted that the effect that also submitted that the effect that company XYZ Private Limited is a fictitious and non-existent entity, company XYZ Private Limited is a fictitious and non company XYZ Private Limited is a fictitious and non is evident from the record of the is evident from the record of the Registrar of Companies ompanies (ROC) that no such entity existed ed in their record.
The Ld. Departmental Representative Departmental Representative (DR) on the other hand, R) on the other hand, relying on the order of the l relying on the order of the lower authorities submitted that during authorities submitted that during the course of the survey the course of the survey, the assessee did not submit the fact of the assessee did not submit the fact of fictitious bills but only after 11 days of the survey, the assessee for fictitious bills but only after 11 days of the survey, the assessee for fictitious bills but only after 11 days of the survey, the assessee for the first time came out with the first time came out with this explanation which is an this explanation which is an afterthought only. He submitted that filing copy of bills impounded afterthought only. He submitted that filing copy of bills impounded afterthought only. He submitted that filing copy of bills impounded during survey by the during survey by the Ld. counsel of the assessee is of no assistance counsel of the assessee is of no assistance and the difference amount has been correctly assessed by the and the difference amount has been correctly assessed by the and the difference amount has been correctly assessed by the learned AO as undisclosed in s undisclosed income of the assessee.
We have heard rival submission of the part We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. Onthe issue in dispute and perused the relevant material on record. dispute and perused the relevant material on record. dispute, the assessee the assessee has contended that sales of that sales of ₹81,07,050/- which was recorded in the books mainta which was recorded in the books maintained on computer as sales ined on computer as sales to XYZ, was a fictitious entry for the purpose of availing bank loan was a fictitious entry for the purpose of availing bank loan was a fictitious entry for the purpose of availing bank loan and there being no real sale, the addition made by the Assessing and there being no real sale, the addition made by the Assessing and there being no real sale, the addition made by the Assessing Officer for the same is not justified. On the contrary, the Assessing Officer for the same is not justified. On the contrary, the Assessing Officer for the same is not justified. On the contrary, the Assessing Officer is of the view tha Officer is of the view that same are actually sales made in cash by sales made in cash by the assessee, whereas whereas recorded in the name of XYZ recorded in the name of XYZ only ,therefore the claim of the assessee for removing the amount of ₹81,07,050/- the claim of the assessee for removing the amount of the claim of the assessee for removing the amount of
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from the sales cannot be accepted. We find that survey was from the sales cannot be accepted. We find that survey was from the sales cannot be accepted. We find that survey was conducted at the premises of the assessee on 04/03/2010, wherein conducted at the premises of the assessee on 04/03/2010, wherein conducted at the premises of the assessee on 04/03/2010, wherein books of accounts were found to be maintained on the computer books of accounts were found to be maintained on the computer books of accounts were found to be maintained on the computer and a profit and loss account based on the books of accounts was and a profit and loss account based on the books of accounts was and a profit and loss account based on the books of accounts was prepared for the period up to 04/03/2010, which was worked out red for the period up to 04/03/2010, which was worked out red for the period up to 04/03/2010, which was worked out to ₹1,57,05,468/-. When the director of the assessee company, Sh . When the director of the assessee company, Sh . When the director of the assessee company, Sh Sahid Siraj Hamid was asked to pay advance tax on said profit, he Sahid Siraj Hamid was asked to pay advance tax on said profit, he Sahid Siraj Hamid was asked to pay advance tax on said profit, he submitted that this profit figure was on higher side as depreciation, submitted that this profit figure was on higher side as depreciatio submitted that this profit figure was on higher side as depreciatio interest etc. expenses were not debited to the profit and loss expenses were not debited to the profit and loss expenses were not debited to the profit and loss account. When he was summoned before the Assessing Officer, he hen he was summoned before the Assessing Officer, he hen he was summoned before the Assessing Officer, he submitted that in case of regular sales Bill/ invoice number started submitted that in case of regular sales Bill/ invoice submitted that in case of regular sales Bill/ invoice from 1501 as on 01/04/2009, whereas Bill No. in the name of M/s from 1501 as on 01/04/2009, whereas Bill No. in the name o from 1501 as on 01/04/2009, whereas Bill No. in the name o XYZ were shown having serial No. from 1 to 10 for a sum of ₹81,07, XYZ were shown having serial No. from 1 to 10 for a sum of XYZ were shown having serial No. from 1 to 10 for a sum of 050/-. According to him, t . According to him, these were not actual sale not actual sales and was entered only a fictitious entry for the purpose of showing higher entered only a fictitious entry for the purpose of showing higher entered only a fictitious entry for the purpose of showing higher turnover for availing loan from banks. turnover for availing loan from banks.
9.1 Further during the assessment proceedings, the assessee ng the assessment proceedings, the assessee ng the assessment proceedings, the assessee submitted that turnover of the assessee for the year under submitted that turnover of the assessee for the year submitted that turnover of the assessee for the year consideration was less ( consideration was less (Rs. 2.51 crores) as compared to immediately Rs. 2.51 crores) as compared to immediately preceding year (Rs. 4.43 Crores) due to the reasons of recession in preceding year (Rs. 4.43 Crores) due to the reasons of recession in preceding year (Rs. 4.43 Crores) due to the reasons of recession in the market, fall in sales of ready to shoot studios, all India strike in sales of ready to shoot studios, all India strike in sales of ready to shoot studios, all India strike by TV serial production Guild, strike by film Federation against by TV serial production Guild, strike by film Federation against by TV serial production Guild, strike by film Federation against
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theatre owners, major customers of the assessee did not shoot at theatre owners, major customers of the assessee did not shoot at theatre owners, major customers of the assessee did not shoot at the studio of the assessee in the year under consideration. the studio of the assessee in the year under consideration. the studio of the assessee in the year under consideration.
9.2 During the assessment proceeding, the assessee submitted the During the assessment proceeding, the assessee submitted the During the assessment proceeding, the assessee submitted the name of the said fictitious party was XYZ Private Limited. It was name of the said fictitious party was XYZ Private Limited. It was name of the said fictitious party was XYZ Private Limited. It was further submitted that there is no such company in the name of further submitted that there is no such company in the name of further submitted that there is no such company in the name of record of registrar of companies and therefore it supports the record of registrar of companies and therefore it supports the record of registrar of companies and therefore it supports the contention of the assessee of XYZ Private Limited being a fictitious tention of the assessee of XYZ Private Limited being a fictitious tention of the assessee of XYZ Private Limited being a fictitious entry.
9.3 In background of above facts, we find that firstly, the assessee In background of above facts, we find that firstly, the assessee In background of above facts, we find that firstly, the assessee during the course of the survey, brought to the notice of the income during the course of the survey, brought to the notice of the income during the course of the survey, brought to the notice of the income tax authorities, the figures of the profit w tax authorities, the figures of the profit worked out were on higher orked out were on higher side. During the course of the survey proceedings, the accountant side. During the course of the survey proceedings, the accountant side. During the course of the survey proceedings, the accountant of the assessee was not available, and the director of the company of the assessee was not available, and the director of the company of the assessee was not available, and the director of the company cannot be expected to explain each and every entry of sales to the cannot be expected to explain each and every entry of sales to the cannot be expected to explain each and every entry of sales to the Income tax authorities, without ncome tax authorities, without specifically pointed out specifically pointed out to him, particularly, about the monthly sales recorded in the name of XYZ. about the monthly sales recorded in the name of XYZ. about the monthly sales recorded in the name of XYZ. Secondly, the series of bills recorded in respect of the XYZ is Secondly, the series of bills recorded in respect of the XYZ is Secondly, the series of bills recorded in respect of the XYZ is different from the series in respect of the undisputed sales, which different from the series in respect of the undisputed sales, which different from the series in respect of the undisputed sales, which also indicate that thos also indicate that those are not part of regular sales. Thirdly, when e are not part of regular sales. Thirdly, when the assessee himself is submitting that those sales are fictitious the assessee himself is submitting that those sales are fictitious the assessee himself is submitting that those sales are fictitious sales, then onus is on the Assessing Officer to establish whether sales, then onus is on the Assessing Officer to establish whether sales, then onus is on the Assessing Officer to establish whether those are cash sales. The income tax authorities have carried out those are cash sales. The income tax authorities have carried out those are cash sales. The income tax authorities have carried out survey at the premises of the assessee and no evidence suggesting the premises of the assessee and no evidence suggesting the premises of the assessee and no evidence suggesting
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cash sales by the assessee has been found. The assessee cannot cash sales by the assessee has been found. The assessee cannot cash sales by the assessee has been found. The assessee cannot substantiate more than that that no such party in the name of XYZ substantiate more than that that no such party in the name of XYZ substantiate more than that that no such party in the name of XYZ Private Limited exist in the registrar of companies. As far as the Private Limited exist in the registrar of companies. As far as the Private Limited exist in the registrar of companies. As far as the contention of the Assessing Officer that during statement recorded ention of the Assessing Officer that during statement recorded ention of the Assessing Officer that during statement recorded on 15/03/2010, the director stated only XYZ whereas in on 15/03/2010, the director stated only XYZ whereas in on 15/03/2010, the director stated only XYZ whereas in submission during assessment proceeding, the submission during assessment proceeding, the party’s party’s name was mentioned as XYZ Private Limited, we are of the opinion that name mentioned as XYZ Private Limited, we are of the opinion that name mentioned as XYZ Private Limited, we are of the opinion that name of the said fictitious party was entered in the books of account of d fictitious party was entered in the books of account of d fictitious party was entered in the books of account of the assessee, and the income tax authorities must have impounded the assessee, and the income tax authorities must have impounded the assessee, and the income tax authorities must have impounded soft copy of the same. The soft copy of the same. The Ld. DR was asked to produce sales ledger DR was asked to produce sales ledger of ₹81,07,050/- appearing in the books of accounts found during appearing in the books of accounts found during appearing in the books of accounts found during the course of the survey, but despite specifically being asked no he course of the survey, but despite specifically being asked no he course of the survey, but despite specifically being asked no such information was provided or brought on record. In the such information was provided or brought on record. In the such information was provided or brought on record. In the circumstances, the allegation of the revenue, that nonexistence of circumstances, the allegation of the revenue, that nonexistence of circumstances, the allegation of the revenue, that nonexistence of XYZ Private Limited in the ROC does not support the case of the XYZ Private Limited in the ROC does not support the case of the XYZ Private Limited in the ROC does not support the case of the assessee, are rejected. We find that in the preceding assessment ssessee, are rejected. We find that in the preceding assessment ssessee, are rejected. We find that in the preceding assessment year the turnover of the assessee was of year the turnover of the assessee was of Rs.4.43 crore, and in the 4.43 crore, and in the year under consideration turnover was only of ₹2.5 Crores, year under consideration turnover was only of year under consideration turnover was only of therefore any such attempt for increasing the turnover for the therefore any such attempt for increasing the turnover for the therefore any such attempt for increasing the turnover for the purpose of availing bank loan by pose of availing bank loan by an accountant or other person or other person cannot be ruled out, though it is an illegal act cannot be ruled out, though it is an illegal act and Bank Authorities and Bank Authorities should take note of this. should take note of this. In the circumstances, we are of the In the circumstances, we are of the opinion that it is the Assessing Officer is the Assessing Officer, who was required to who was required to establish whether those were the cash sales as claimed by him and establish whether those were the cash sales as claimed by him and establish whether those were the cash sales as claimed by him and
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not the fictitious sales as claimed by the fictitious sales as claimed by the assessee assessee. In absence of any such evidence of the cash sales, the addition confirmed by the any such evidence of the cash sales, the addition confirmed by the any such evidence of the cash sales, the addition confirmed by the Ld. CIT(A) is not justified and Ld. CIT(A) is not justified and accordingly, we set aside the finding set aside the finding of the Ld. CIT(A) on the issue in dispute. The grounds of the appeal of the Ld. CIT(A) on the issue in dispute. The grounds of the appeal of the Ld. CIT(A) on the issue in dispute. The grounds of the appeal of the assessee accordingly allowed. of the assessee accordingly allowed.
In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed.
Order pronounced Order pronounced under Rule 34(4) of the ITAT Rules, the ITAT Rules, 1963 on 13/02/2023. 02/2023. Sd/- Sd/- (SANDEEP SINGH KARHAIL SANDEEP SINGH KARHAIL) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 13/02/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai