ITO 32(1)(5), MUMBAI vs. HITESH R. SHAH, MUMBAI

आदेश / O R D E R Per Joginder Singh(Judicial Member) These two appeals are by the Revenue against the impugned orders dated 04/02/2015 and 20/02/2015 of the Ld. First Appellate Authority, Mumbai. The common ground raised pertains to restricting the profit margin to Rs.7,57,135/- i.e. at the rate of 0.1% (Assessment Year 2005- 06), instead of Rs.75,71,357/- and Rs.5,34,852/- instead of Rs.53,48,521/- i.e. at the rate of 1% calculated by the Assessing Officer, without appreciating the facts that the assessee himself accepted that he indulged in providing accommodation entries and charging commission and further overlooking the statement tendered by the parties as is explicit from the investigation carried out by the Sales Tax Department.

2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that for Assessment Year 2005-06, the assessee declared income of Rs.5,66,524/-. The Assessing Officer received information from Income Tax Officer-24(1)(3), Mumbai, regarding bogus entries of purchase and sales by the assessee (proprietor M/s Jainam Trading Company), therefore, the Ld. Assessing Officer recorded the reasons as mentioned in the assessment order. The case of the assessee was reopened u/s 148 of the Income Tax Act, 1961 (hereinafter the Act) and thereafter notices u/s 143(2) and 142(1) of the Act along with questionnaire were issued on 10/10/2012. The assessee attended the proceedings and filed objections as has been mentioned in the assessment order. Summons u/s 131 of the Act were issued upon the assessee and the statement under oath was recorded on 18/12/2009, which has been reproduced in the assessment order. In reply to question no.2, with respect to nature of business of M/s Jainam Trading Co., it was replied that it is dealing in trading iron and steel. In reply question no. 3, it was tendered as under:-

“M/s Jainam Trading Company is indulged in the business of trading in iron and steel. However, due to deep financial crunch, I have indulged in the business of billing to certain portions. However, I am not able to ascertain the portion of billing at this juncture. I will provide the same on 21/12/2009.”

2.3. In reply to question no.5, it was explained by the assessee Saving Bank Account no.79553 was not part of regular books of accounts and some portion of the transaction in these bank accounts are made for accommodation purposes. In para-8 of the assessment order, there is a mention of letter dated 24/12/2009, the assessee has stated that the earlier statement was factually incorrect and denied accommodation bills or any business. The Bench during hearing, raised questions with respect to the business of the assessee, it was fairly agreed that the assessee is partially indulged in providing accommodation entries but the books of accounts claimed to be lost. The Bench asked the assessee as to how much could be the profit margin. The ld. Counsel fairly agreed to increase the profit margin at the rate of 0.25% as against 0.1% restricted by the Ld. Commissioner of Income Tax (Appeal) and 1% added by the Assessing Officer. Considering the totality of facts admission during recording the statement, thereafter, retracting the same and the material facts available on record, we are of the view that it will meet the end of justice to increase the profit margin at the rate of 0.25% (as agreed by the ld. counsel from both sides) as against 0.1% adopted by the Ld. Commissioner of Income Tax (Appeal). Thus, both the appeals of the Revenue are partly allowed. This order was orally pronounced in the open court at the conclusion of hearing.

Finally, both the appeals of the Revenue are partly allowed.

Order was pronounced in the open court on 26/05/2017.