M/S. ISHITA DYE CHEM PVT. LTD.,MUMBAI vs. DCIT CEN. CIR. - 14, MUMBAI

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ITA 3542/MUM/2003Status: DisposedITAT Mumbai30 October 2015AY 1999-20005 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the CIT(A) erred in passing an ex-parte order. It also directed the AO to recompute the income by adopting a net estimation rate of hawala turnover at 3.6%, as decided in similar cases.

What were the facts?

The assessee, Eshita Dye Chem Pvt. Ltd., was assessed as a hawala dealer based on a search action in the Khandhar group. The assessee's grievance was that the CIT(A) passed an ex-parte order without providing an opportunity to be heard.

What were the issues?

Whether the CIT(A) erred in passing an ex-parte order, and whether the estimation of hawala commission was justified.

Which sections of the Income-tax Act were involved?

Section 132(4)

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Income Tax Appellate Tribunal, MUMBAI BENCHES “J”, MUMBAI

Before: Shri G S Pannu, AM & Shri Sanjay Garg, JM

For Appellant: Shri Vipul J Shah
For Respondent: Shri Abani Kanta Nayak
Hearing: 23.07.2015Pronounced: 30.10.2015

Per Sanjay Garg, Judicial Member:

1.

The present appeal filed by the assessee is directed against the order of the CIT(A) -VI, Mumbai, dated 20.09.2002 pertaining to A.Y. 1998-99.

2. The concise grounds of appeal raised by the assessee read as under:

“1. On the facts and circumstances of the case and in law the learned Commissioner of Income Tax (appeals) [CIT(A)] erred in rejecting the request of adjournment, without assigning any reasons, on the very first date of hearing and deciding the appeal ex-parte which is an absolute violation of principle of natural justice.

ITA 3542/Mum/03 Eshita Dye Chem Pvt. Ltd

2. On the facts and circumstances of the case and in law the learned CIT(A) erred in not appreciating the fact that the PEAK Credit of these parties were already considered in the hands of S M Khandhar on substantive basis 3. On the facts and circumstances of the case and in law the learned CIT(A) erred in confirming the action of the assessing office in rejecting books of account and estimating Hawala Commission @5% without appreciating the fact that accounts of the appellant were duly audited.”

2.

The facts of the case in brief are that the assessee belongs to Khandhar group. In the past, the assessments in this case have been completed by treating the assessee as a hawala dealer. The ground of the case relates to the search action u/s. 132 in Khandhar Group of cases on 18.12.91. During the course of search action, a list of 110 bank accounts (list A-3) was seized. Shri Surendra M Khandhar, the group leader was confronted with the list. In reply to Question No.4 of his statement u/s. 132(4) dt. 20.12.91, Shri S M Khandhar stated as follows:

“That list contains bank accounts of Khandhar group and other partnership and proprietary concerns. All partners and proprietors are physically available, but their credit worthiness is not linked with the transactions in the concerns under reference and, therefore, I am offering ‘peak’ amounts as appearing in this bank statement for taxation. I, undertake to close down all bank accounts and concerns as referred in the pages under reference, i.e. Annexure A-3 except Khandhar group. In this connection, if a particular concern due to some reason is not closed, I may be allowed one month more time, within which I will positively close down.”

ITA 3542/Mum/03 Eshita Dye Chem Pvt. Ltd However, subsequently Shri S M Khandhar withdrew his statement. He did not close down any bank account and did not offer the ‘peak’ credit of any bank account for taxation. In the assessment proceedings, his statement u/s. 132(4) dt. 20.12.91, was used as evidence in his case, as well as in the case of the associate concerns. Most of the associate concerns of Khandhar group, including the present assessee, were assessed as hawala dealer.

3.

It is the grievance of the assessee that the CIT(A) had passed an exparte order without giving an opportunity of being heard. Before us, the learned counsel has stated that, on identical facts and circumstances, the issue is squarely covered by several decisions of the Tribunal. The Tribunal on identical facts and circumstances in and 878/Mum/99 dt.

03.12.2003 while relying upon another decision in the case of S M Khandhar reported in 76 ITD 121 has upheld the part conclusion of the IT Authorities that the bank accounts in question belong to SM Khandhar but has further held that only peak credit in this accounts could be added. However, in case of other assessee’s, the Tribunal relying upon the decision of ACIT vs. Raj Enterprise (ITA No.3081/Mum/97, dt. 03.01.2003) has held that since the additions have already been made in the case of S M Khandhar the same cannot be made in other cases as it would be a case of double addition.

ITA 3542/Mum/03 Eshita Dye Chem Pvt. Ltd

4.

In so far as the issue relating to assessment of the hawala commission is concerned, the same is also covered by the decision of the Tribunal in vide order dated 22.11.2002, wherein the Tribunal relying upon the other case laws has taken a consistent view in directing the AO to adopt the net estimation rate of hawala turnover @3.6% only and recompute the income accordingly. We being satisfied with the directions given by the Tribunal in identical cases, direct the AO to decide the cases on same lines as that of the Tribunal as discussed above.

5.

In the result, the appeal is partly allowed for statistical purpose.

Order pronounced in the open court on 30th October, 2015.

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