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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, VP & SHRI S. RIFAUR RAHMAN, AM
O R D E R भहावीय ससिंह, उऩाध्मऺ के द्वाया / PER MAHAVIR SINGH, VP: These appeals of the assessee are arising out of orders of the Commissioner of Income Tax (Appeals)]-48, Mumbai [in short CIT(A)], in Appeal Nos. CIT(A)-48/I.T-116, 135 &136 &/DCCC- 2(1)/2017-18 vide dated 15.10.2018 & 31.10.2018. The Assessments were framed by the Dy. Commissioner of Income Tax, CC 2(1),
The first issue in these three appeals of assessee is against the order of CIT(A) confirming the addition of commission made by Assessing Officer on notional basis by treating the purchase from M/s Sarvesh Mercantile Pvt. Ltd and sales made to M/s Ecoscapes International Pvt. Ltd. For this, assessee has raised identical worded grounds in all the three years but for the sake of brevity, we are reproducing the grounds from Assessment Year 2012-13 in and will decide the issue. The learned CIT DR, Ms. Leena Srivastava also agreed that on the issue of commission on purchases added on notional basis by treating the purchases as bogus is common in all the three years, hence, ground Nos. 1 & 2 read as under:-
“1. The Hon’ble CIT(Appeals) erred in confirming the addition of commission made by Ld. D.C.I.T. of Rs.3,20,000/- on notional basis by treating genuine purchase from M/s Sarvesh Mercantile Pvt. Ltd. by Appellant as bogus and without any corroborating evidence to prove the receipt/ payment of commission in cash.
2. The Hon’ble CIT(Appeals) erred in confirming the addition of commission made by Ld. D.C.I.T. of Rs.15,32,728/- on notional basis by treating genuine sales made by Appellant to M/s Ecoscapes International Pvt. Ltd.
We have heard the rival contentions and gone through the facts and circumstances of the case. Briefly sated facts are that the assessee company is engaged in the business of trading in cloth/ textile/ fabrics/ furniture/ gift articles and allied items. The assessee is also engaged in the business of generating and distributing power through wind energy. A search under section 132 of the Act was carried out in the case of the assessee and its group companies on 15.03.2015. Consequently, notice under section 153A was issued and assessee filed its return of income. The Assessing Officer noted that the assessee in the course of business made net purchase of Rs.1,59,99,998/- from Sarvesh Mercantile Pvt. Ltd. and net sale of Rs. 7,66,36,383/- to Ecoscapes International Pvt. Ltd. The assessee has also made net sales of Rs.3,11,135/- i.e. gross sales of Rs.3,50,021/- less vat of Rs.38,892/- to M/s Rate Earth Div of Ecoscapes International Pvt. Ltd. The Assessing Officer during the course of assessment proceedings called for the details of purchases made from Ecoscapes International Pvt. Ltd. and Rare Earth-A Div of Ecoscapes International Pvt. Ltd. to prove the genuineness of the transactions and sales made to Sarvesh Mercantile Pvt. Ltd. and Ecoscapes International Pvt. Ltd. He asked why the same should not be treated as unproved purchases and brought to tax. The assessee vide reply dated 24.10.2017 submitted the copies of ledger account of Sarvesh Mercantile Pvt. Ltd and Ecoscapes International Pvt. Ltd. to the Assessing Officer. It was also stated that during the year under consideration there is no sales/ purchase transaction was entered in “1. Copy of Ledger A/c of company in the books of M/s Ecoscapes international Pvt. Ltd. and M/s Rare Earth – Adiv of M/s Ecoscapes International Pvt. Ltd. alongwith bank statement of M/s Ecoscapes international Pvt. Ltd. with duly highlighting the transaction with us is enclosed herewith as “Annexure-1”.
3. Copies of Purchase invoice, delivery challan in relation to purchase made from M/s Ecoscapes international Pvt. Ltd. during the year under consideration along with Courier receipts are enclosed herewith as “Annexure-3”.
4. Copies of service Tax returns and VAT/CST Return of company (Mirah Dekor Pvt. Ltd.) along with VAT/CST paid challans and VAT audit report are enclosed herewith as “Annexure-4.”
5. During the year, M/s Ecoscapes International Pvt. Ltd. has not made any payment to government authority on behalf of the company.?”
The Assessing Officer has not believed in the submissions of the assessee and treated the sales and purchases as bogus and recorded in the books of account and added the commission at the rate of 2% on purchases made from Sarvesh Mercantile Pvt. Ltd amounting to Rs.3.20 lakhs and on sale transaction made to Ecoscapes International Pvt. Ltd. amounting to Rs.15,32,728/-, thereby making addition of Rs.18,52,728/-. The CIT(A) confirmed the action of the Assessing Officer by stating as under:- “Onus on assessee:- In the light of above facts of the case, onus was wholly on assessee to produce some
Case laws relied are irrelevant in view of facts of the assessee The various case laws relied upon by assessee are irrelevant as they are on different facts. In view of facts of assessee’s case that apart from self serving ledger account or bank transaction, no other documentary evidence to substantiate the genuineness movement and purchase/ sale of goods, reliance on these case laws is dismissed.
5.1.7 In view of the above facts of the case and total failure on part of the assessee to prove the genuiness of the purchase/ sales made, I is held that there is no anomaly in the order of the AO. In fact, order of AO is very reasonable and fair as commission of only 2% is added back regarding there two parties.”
Aggrieved, now assessee is in appeal before Tribunal on both the grounds.
At the outset, the learned Counsel for the assessee stated that this issue is fully covered by Tribunal’s order in assessee’s own case in & 5319/Mum/2018 for Assessment Years 2010-11 & 11-12 vide order dated 01.12.2020, wherein Tribunal exactly on these two parties has considered the issue and deleted the commission by observing as under:-
The learned counsel of the assessee has raised various other grounds that in the submission above that observation of A.O. that M/s. Ecoscapes International Pvt. Ltd. is company controlled by Shri Kirti Kumar Tarachand Doshi is factually incorrect, that no evidence has been brought on record to show that assessee has paid any commission at 2% on the sales made to M/s. Ecospace International Pvt. Ltd.
Furthermore assessee’s counsel has challenged that pursuant to search and seizure addition under section 153A is not permissible dehorse any incriminating material found during search. In this connection he referred to several
Upon careful consideration we find that we have already held that when the sales have been accepted and taken into account in determining the income of the assessee there cannot be at the same time a notional 2% disallowance for commission on bogus sales, resulting in a double prejudice unsustainable in law. As noted above the sales cannot be correct and bogus at the same time. This follows the common law maxim of approbate and reprobate. We further note that when the addition has already been deleted by us on merits, in our considered opinion the challenge to addition on other aspects are now only of academic interest. Hence we are not engaging in to the same.
As the facts and circumstances of the case are exactly identical in these years also, respectfully, following the Tribunal’s order in assessee’s own case, as nothing was controverted by learned Sr. DR, we are deleting the addition of commission made by Assessing Officer on notional basis by treating the genuineness of purchases from Sarvesh Mercantile Pvt. Ltd and assessee as bogus and subsequent sales made by assessee to Ecoscapes International Pvt. Ltd as bogus
Similar is the ground in Assessment Year 2013-14 in i.e. ground No.1 regarding sales made by assessee to Ecoscapes International Pvt. Ltd. i.e. ground No. 1 which read as under:-
“1. The Hon’ble CIT(A) erred in confirming the addition of commission made by Ld. D.C.I.T of ₹5,85,280/- on notional basis by treating genuine sales made by Appellant to M/s Ecoscapes International Pvt. Ltd. as bogus and without any corroborating evidence to prove receipt/ payment of commission in cash.”
Similar, is the grounds in Assessment Year 2014-15 in wherein purchases made from Sarvesh Mercantile Pvt. Ltd by assessee was added by Assessing Officer and confirmed by CIT(A) i.e. commission on the above purchases. Similarly, confirming the addition of commission on sales made by assessee to Ecoscapes International Pvt. Ltd on notional basis.
Since, the facts and circumstances are exactly identical in these years also, respectfully following our finding in Para 6 of this order, we delete the addition of commission in these years also.
The next common issue in all these three appeals of assessee is against the order of CIT(A) confirming the action of the Assessing Officer in disallowing expenses relatable to exempt income by
At the outset, we have noticed that assessee in Assessment Year 2012-13 has received exempt income to the tune of Rs.91,096/- in Assessment Year 2013-14 at Rs.18,250/- and in Assessment Year 2014-15 at Rs.19,697/-. In all these years, these are the quantum of dividend, which was received and claimed as exempt. On this, the learned Counsel for the assessee as well as learned CIT DR agreed that this issue is covered by the decision of Hon’ble Supreme court in the case of Maxopp Investment Ltd. vs. CIT [2018] 402 ITR 640 (SC), wherein it is held that disallowance of section 14A read with Rule 8D of the Rules cannot exceed the exempt income claimed by assessee. Hence, we direct the Assessing Officer to restrict the disallowance to the extent of exempt income only. Hence, this common ground of the assessee in all the three appeals is partly allowed.
The only issue remains in Assessment Year 2013-14 i.e. in is as regards to the addition of unexplained expenditure under section 69 of the Act in respect of paper found from Vijay Mishra and deduction claimed as per reconciliation statement. For this, assessee has raised the following ground No.7:-
(however the correct figure in dispute is ₹ 68,52,034/-)
At the outset, the learned Counsel for the assessee took us through the assessment order and it drew our attention to the computation made in regard to addition of Rs.6,20,19,554/- and the relevant Para read ad under:-
The submission of the assessee has been perused and the same is acceptable. In view of the same the total expenditure as per Annexure A-1 & Annexure A-2 seized from Shri Vijay Mishra is produced here below;
Particulars AY 2013-14 AY 2015-16 Total (Rs) Declaration as per para 3 6,06,16,554 2,12,21,550 8,18,38,204 (iii) of the assessee Less:- deductions (A) 13710 137100 Add:- Additions (B) 15,40,000 88,000 16,28,000 Revised declaration 6,20,19,554 2,13,09,500 8,33,29,054 14. The learned counsel for the assessee stated that the Assessing Officer has allowed deduction in column A of Rs.1,37,100/- whereas, the actual deduction should have been on account of statement of reconciliation to explain certain overlapping and other items which effected the correct calculation of amount of declaration at Rs.69,89,134/-. He referred to page 89 of asessee’s paper book and the relevant read as under:-
15. These particulars were prepared on the basis of ceased documents which are enclosed at assessee’s paper book pages 99-123 as explained by assessee. According to Assessing