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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The above titled cross appeals one by the Revenue and the other by the assessee have been preferred against the order dated 28.03.2016 of the Commissioner of Income Tax ITA No.3939/M/2016 (Revenue’s appeal) 2. The various grounds raised by the Revenue are against the order of Ld. CIT(A) deleting the addition as made by the AO on estimated basis of Rs.48,82,407/- by following the order of Tribunal in the own case of assessee for A.Y. 2008-09 in & 6036/M/2011 and Ld. CIT(A) ignoring the facts that assessee has failed to produce the books of accounts before the AO and Ld. CIT(A) even has ignored the finding of the AO in the assessment order that notices issued under section 133(6) to various parties were returned unserved and therefore the genuineness of the confirmations produced by the assessee subsequently was not proved. The Revenue has further challenged that Ld. CIT(A) has erred in ignoring the findings of the AO that assessee failed to submit the proofs of goods/merchandise sold by not furnishing the purchase and sale invoices.
The facts in brief are that the assessee company was found to be engaged in the business of accommodation entries. The assessee company has two directors i.e. Shri Ashok Mahawar and Shri Dilkhush Babel. Shri Ashok Mahawar in his statement recorded on 3103.2008 admitted that he and Shri Dilkhush Babel were mere office assistants working for Shri Praveen Jain and Shri Jitendra Jain who made them dummy directors of the company. A search action was conducted on Shri Jitendra Jain and Shri Praveen Jain by the 3 & ITA No.4508/M/2016 M/s. Manan Trading Co. Pvt. Ltd. Department on receipt of information from Sales Tax Authorities of Maharashtra that these persons were engaged in the racket of bogus billing. According to the AO the letters issued under section 133(6) of the Act to various parties were returned unserved and therefore the confirmations filed by the assessee thereafter contained some unique and suspicious features which were not accepted by the AO. The AO also recorded a finding that assessee has not produced any supporting documents/evidences such as purchase bills, invoices, payment details, bank statement etc. Whereas the record of import of diamonds worth Rs.2,41,28,948/- was filed and verified. According to the AO, if import purchases were excluded the remaining purchases , then the sales of the assessee were almost equal in value. The AO also noted that the assessee has not filed any proof of merchandise bought and sold by the assessee. Finally the AO observed that the commission rates in the same trade ranged between 0.5% and 1.5% and finally after rejecting the books of accounts of the assessee applied a commission rate of 1%.
In the appellate proceedings the Ld. CIT(A) deleted the addition by following the order of the Tribunal in the own case of the assessee in A.Y. 2008-09 in & 6036/M/2011 dated 11.09.2014 by holding and observing as under: “5.1.1. In appeal it has been submitted that the AO has followed the assessments in earlier years in rejecting the books of accounts and estimating commission income @ 1 0/o. Copy of order of the ITAT in the appellant's own case for A.Y. 2008-09 (ITA 3956 and 6036/M/11 dated 11.09.2014) wherein such rejection of books of account and estimation of income was deleted, has been furnished.
4 & ITA No.4508/M/2016 M/s. Manan Trading Co. Pvt. Ltd. Accordingly it has been argued that as the there is no distinguishing feature, following the order of the ITAT, the addition made by the AO should be deleted. 5.1.2 On perusal of the order of the Hon'ble Tribunal cited supra it is seen that the ITAT has held as under:
“5. We have considered the rival contentions and carefully gone through the orders of authrorities below and found from record that similar issue was dealt with by the Tribunal in a number of decisions cited hereinabove, copy of which are also placed on record wherein addition sustained has been deleted by the Tribunal. The observations of the Tribunal in the case of M/s. Riddhi Siddhi Multitrate P. Ltd. (supra.) was as under.-
"We observe that Id CIT(A) has himself stated in para 9 that AO has estimated the income without reference to any cogent material and the estimation was made on the basis of statement of Shri Pravin Kumar Jain and as far as assessee is concerned, no such statement was ever made by anyone on its behalf. Ld CIT(A) stated that in the impugned order that it is seen from the record that no specific defect was pointed out by the AO in the books of account. Further, we observe that Id CIT(A) has sustained the addition 0.5 % of the total turnover by rejecting books of account merely on the ground that the income shown by the assessee is meager. Ld CIT(A) has not brought on record any defects in the books of account of the assessee. Ld CIT-(A) has also not brought on record anything that assessee was engaged in the business of providing accommodation entries. In view of above, we hold that above addition sustained by Id. CIT(A) by rejecting books results of the assessee is not based on cogent material and accordingly, same is deleted. Hence, grounds of appeal taken by assessee is allowed."
6. We find that the facts and circumstances of the case during the year under consideration are para material, therefore, respectfully following the decision, of the Tribunal in other group cases, we delete the addition sustained by estimating the income at ½% of the turnover. We direct accordingly."
We have heard the rival submissions of both the parties and perused the material on record including the impugned order. We find that the similar issue was there in the A.Y. 2008-09 in & 6036/M/2011 wherein the co- ordinate bench of the Tribunal has deleted the addition. Now the Ld. D.R. has tried to argue by submitting that the facts of 5 & ITA No.4508/M/2016 M/s. Manan Trading Co. Pvt. Ltd. the case in the current year are different from A.Y. 2008-09 as in the present year the notices issued under section 133(6) were returned unserved and assessee has not filed any proof of purchase and sale of goods. Whereas, on the other hand, the Ld. A.R. admittedly submitted that the assessee was carrying on business of bogus billing and returned whatever it earned from the said business. We find that the Ld. CIT(A) has examined all these issues at the time of passing the order and only after following the co-ordinate bench order of the Tribunal in assessee’s own case deleted the addition. After having perused the facts on record and taking into account the rival submissions, we find that the case is fully covered by the order of the co-ordinate bench of the Tribunal in the own case of the assessee in the earlier year and there is no scope for any interference in the order of CIT(A). Accordingly, we uphold the order of Ld. CIT(A) on this issue.
Appeal of the Revenue is dismissed.
ITA No.4508/M/2016 (Assessee’s appeal) 7. The issue raised in first ground of appeal is against the confirmation of addition of Rs.42,109/- as made by the AO by estimating income from imported sales and the issue raised in ground No.2 is against the order of Ld. CIT(A) not following the decision of his predecessor in assessee’s own case in A.Y. 2008-09 wherein the Ld. CIT(A) has already deleted the addition on account of foreign exchange fluctuation gain which stands confirmed by ITAT in & 6036/M/2011. The issue raised in ground No.3 is against the confirmation of
8. The AO during the course of assessment proceedings found that imports amounting to Rs.2,41,28,948/- were genuine and estimated the net profit on the said imported purchases on proportionate basis by taking the net profit as per P & L account at Rs.9,02,281/- and total purchases as per P & L account Rs.51,70,23,015/- and thus estimated the profit on imported purchases at Rs.42,109/- and further added Rs.53,46,871/- which was credited in the P & L account as foreign exchange fluctuation gain and thus made the total addition from imported purchases at Rs.53,88,980/- in the assessment framed.
8. In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee by observing and holding as under:
“In the appeal proceedings, the appellant has not made any specific arguments in support of these grounds. On perusal of impugned order it is seen that the AO has included the amount of exchange difference in the computation of profit from imported purchases. The appellant has neither shown how the estimation of proportional profit of Rs.42,109/- is incorrect nor explained why the exchange difference of Rs.53,45,871/- is to be excluded in the computation of the said profit. The appellant has also not been able to demonstrate how and where the exchange difference has been accounted for in the year under consideration. Therefore in view of these facts, the estimation of profit of Rs.42,109/- and the inclusion of the exchange difference of Rs.53,46,871/- is upheld and the grounds raised by the appellant are dismissed.”
We have heard the rival submissions of both the parties and perused the material on record. We find that similar issue has been decided by the co-ordinate bench of the Tribunal in 7 & ITA No.4508/M/2016 M/s. Manan Trading Co. Pvt. Ltd. assessee’s own case in ITA No.5956 & 6036/M/2011 for A.Y. 2008-09 vide order dated 11.09.2014 wherein the Tribunal has held that the foreign exchange fluctuation gain has to be considered as part and parcel of the turnover and no separate addition was required to be made. The relevant finding of the said order is as under: “7. With regard to the addition of Rs.26,79,317/-, we find that the ld. CIT(A) deleted the same after considering the fact that foreign exchange gain relating to imports needs to be reduced from the cost of imports and amount of foreign exchange gain has to be considered as part and parcel of the turnover. Accordingly it was held that no separate addition was required and that the A.O. has just picked up this amount from the P&L account and made addition without any discussion. The findings recorded by the ld. CIT(A) in page No.5 of his appellate order has not been controverted by the department by bringing any positive material on record. Accordingly we do not find any reason to interfere with the findings recorded by the ld. CIT(A) deleting the disallowance of Rs.26,79,317/- made by the AO.”
A perusal of the order of co-ordinate bench of the Tribunal reveals that the case of the assessee is fully covered by the said order and in order to maintain consistency we are following the same and consequently we set aside the order of Ld. CIT(A) on this issue and direct the AO to delete the addition.
The appeal of the assessee is allowed.
In the result, appeal of the Revenue is dismissed and the appeal of the assessee is allowed
Order pronounced in the open court on 31.05.2018.