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Income Tax Appellate Tribunal, MUMBAI BENCHES “D” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES “D” MUMBAI
BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER)
ITA No. 3686/MUM/2014 Assessment Year 2009-10 Disha Devang Kapasi, ACIT, Circle – 15(3), 1st B-607, Arihant Bldg., Floor, Matru Mandir, Vs. Sudha Park, Grant Road, Behind Garodia Nagar, Mumbai 400 077 Ghatkopar (E), Mumbai 400 077
PAN No. : ANGPK 4952 N (Appellant) .. ( Respondent)
Appellant by: Shri Hari S. Raheja,AR Respondent by: Shri Shivaji Ghode, DR
Date of Hearing: 31.10.2016 Date of Pronouncement: 28.11.2016 ORDER Per N. K. Pradhan, A. M. This is an appeal filed by the assessee. The relevant assessment year is 2009-10. It is directed against the order of Commissioner of Income Tax (Appeals)-26, Mumbai and arises out of the order u/s. 143(3) of the Income Tax Act, 1961 (‘the Act’).
The 1st ground raised by the assessee in this appeal is that the ld. CIT(A) erred in directing the Assessing Officer(AO) to reassess the net commission income of the appellant @3% of the gross value of transportation bills as against 0.5% plus TDS as admitted by the appellant without bringing any fresh material on record to substantiate the same. The 2nd ground is that the ld. CIT(A) erred in directing the AO to reassess the net
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commission income of the appellant @2% of the gross value of building material supply bills as against 0.75% as admitted by the appellant without bringing any fresh material on record to substantiate the same. The 3rd ground is that the ld. CIT(A) failed to appreciate that appellant had before the AO by letter and in her affidavit and various submissions made during the course of appellate proceedings made a full disclosure which ought to be accepted in toto in absence of any contrary material against the appellant. The 4th ground, without prejudice to the above, is that the ld. CIT(A) failed to consider the submission made by the appellant that all the expenses claimed in respect of business activity carried on by her were incurred for the purpose of the business of providing accommodation entries and therefore allowable as deduction from the income earned by way of commission on providing accommodation entries of transportation. 3. In a nutshell, the fact are that the assessee filed her return income for the A.Y.2009-10 on 14/11/2009 declaring income of Rs. 16,16,030/-. The assessee was the proprietor of M/s. D.K. Enterprises and M/s. D.C. Corporation. Apart from transport business, the assessee was also carrying on business of supply of building construction materials in one of the concerns i.e. M/s D.C. Corporation. The A.O had issued notices u/s 133(6) of the Act to various parties from whom the assessee had claimed to have made purchases or had made payments on account of transport charges. In respect of the purchases from 13 parties, the notices issued u/s 133(6) by the A.O came back unserved by the postal authorities with the remark ‘not known’. In 3 cases, notices were served but there was no compliance from the concerned parties. In respect of balance 3 parties, the acknowledgement of service has not been received from the postal authorities or there was no compliance from the parties concerned. The AO asked the assessee to explain why the purchases made from the above parties shall not be added back to the total income . The AO has mentioned in the assessment order that the assessee admitted before him that purchases from 36 parties are mere accommodation entries. The AO has tabulated the genuine vs. non-genuine transactions at page 7-8 of the
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assessment order. Then the AO estimated GP in respect of sale of building materials at 10% of the sales credited to the P&L account in the case of M/s D.C. Corporation. He also made an addition u/s 40(i)(ia) of Rs. 4,29, 02,700/- with regard to transportation charges debited to the P & L Account in the case of M/s. D.C. Corporation and Rs. 4,60,38,975/- in the case of M/s D.K. Enterprises. Lastly, the AO added Rs. 60,558/- as unaccounted receipts of as per AIR database.
The assessee filed appeal against the order of the AO before the ld. CIT(A). Considering the facts of the case and keeping in mind the preponderance of probability, the ld. CIT(A) held that the assessee had earned net commission income @ 3% of gross value of transportation bill issued and @ 2% of the gross value of the building material supply bill issued. The ld. CIT(A) directed the AO to compute the income of the assessee accordingly.
Before us, the ld. counsel of the assessee submits that during the course of assessment proceedings of the impugned assessment year, the AO has recorded a statement from the assessee u/s 131 of the Act. Therein, the assessee has admitted that the bills of sales issued to some of the parties during the said assessment year do not represent genuine business transactions and are only accommodation entries by way of issue of bills given on demand to various persons for which commission of 0.5% in respect of transport bills and 0.75% in respect of building material supply bills was received.
The ld. DR supports the order passed by the ld. CIT(A).
We have considered the rival submissions and perused the relevant material on record. A similar issue arose before the ITAT “SMC” Benches,
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Mumbai in the case of Shri Devang H. Kapasi HUF vs. ITO (ITA No. 3685/Mum/2014) for A.Y. 2009-10. The Tribunal held as under:-
“5. With regard to the receipts pertaining to accommodation bills, the assessee seems to have proved the same by showing his bank account wherein the cheque received from the parties have been immediately withdrawn by way of cash. The explanation of the assessee was that the cheques received from the parties were deposited into the bank accounts and the cash was immediately withdrawn thereafter and handed over to the parties. If the assessee is able to demonstrate that the very same modality was followed in respect of Rs.14.47 lakhs also, then the assessee’s claim for estimating income at 0.5% plus TDS amount can be admitted. However, this fact requires verification at the end of the AO. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine the bank accounts and other explanations furnished by the assessee and take appropriate decision in accordance with the law.” 7.1 We find that that the AO has tabulated the following details at page 7- 8 of the assessment order with regard to the accommodation entries.
Sales declared by M/s. D.C. Corporation: Genuine –Rs. 2,91,80,278/- None genuine –Rs 6,71,61,196/- Purchases of M/s D.C. Corporation: Genuine - Rs. 29,48,530/- Accommodation Entries- Rs. 8,95,02,552/- Sales declared in M/s D.K. Enterprises: Genuine- Rs. 11,18,250/- Non Genuine -Rs. 9,24,02,695/- Purchases of M/s D.K. Enterprises: Genuine- Nil Accommodation Entries- Rs. 4,60,38,975/- 7.2 Keeping in mind the above order of the ITAT, The AO would verify whether the cheques received from the parties were deposited in the bank accounts and cash was withdrawn immediately thereafter and handed over to the parties. If the assessee is able to prove the same before the AO, then the assessee’s claim of estimating net commission income on the gross
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value of the transportation fee at 0.5% + TDS shall be accepted . Also if the assessee is able to prove the above, the AO would accept the net commission income from the gross value of building material supply bills @ 0.75%.
7.3 Accordingly we set aside the order of the ld. CIT(A) on this issue and restore the same to the file of the AO to follow the direction as given at para 7.2 here-in-above and pass a fresh assessment order as per the provisions of the Act after giving reasonable opportunity of being heard to the assessee. Thus ground number 1,2 & 3 are allowed for statistical purpose.
7.4 Now we come to ground number 4. The Hon’ble Andhra Pradesh High Court in the case of Indwell Constructions vs. CIT (1998) 232 ITR 776 (AP) has held:
“The pattern of assessment under the Act is given by section 29 which states that the income from profits and gains of business shall be computed in accordance with the provisions contained in sections 30 to 43D. Section 40 provides for certain disallowances in certain cases notwithstanding that those amounts are allowed generally under other sections. The computation under section 29 is to be made under section 145 on the basis of the books regularly maintained by the assessee. If those books are not correct or complete, the Assessing Officer may reject those books and estimate the income to the best of his judgment. When such an estimate is made it is in substitution of the income that is to be computed under section 29. In other words, all the deductions which are referred to under section 29 are deemed to have been taken into account while making such an estimate. This will also mean that the embargo placed in section 40 is also taken into account.” 7.4.1 Keeping the principle laid down in the above decision, the claim of the assessee to allow expenses from the income earned by way of commission on providing accommodation entries of transportation is rejected. Thus ground number 4th is dismissed.
In the result the appeal filed by the assessee is partly allowed.
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Order pronounced in the open court on 28/11/2016
Sd/- Sd/-
(SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 28/11/2016 Pramila 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, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai
Date Initials Original dictation pad is enclosed at the end of file