Income Tax Appellate Tribunal - Mumbai
Dcit Cent. Cir. - 2(4), Mumbai vs Vishal Kalantri, Mumbai on 15 December, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
"F" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER
AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER
ITA No.6086/Mum/2016 to 6092/Mum/2016
(Assessment Year :2007-08 to 2013-14)
M/s.DCIT CENT CIR - 2(4)
Room no.802, 8th Floor,
Old CGO Building ................ Appellant
(Annex), M.K.Road
Mumbai - 400 020
v/s
Shri Vishal Kalantri
Flat no.40,Jal Kiran
Cuffe Parade ................ Respondent
Mumbai - 400 005
PAN :AHSPK6550A
Appellant by :Ms.S. Padmaja
Respondent by : None
Date of Hearing - 13/11/2017 Date of Order - 15.12.2017
ORDER
PER BENCH Above said appeals are filed by the department against a common order dated 29/07/2016 of learned Commissioner of Income Tax Appeals (Mumbai)-48 pertaining to Assessment Years 2007-08, 2008-09, 2009-10, 2010-11, 2011-12, 2012-13 & 2013-14. 2
ITA no.6086/Mum/2016 to 6092/Mum/2016 Shri Vishal Kalantri
2. All these appeals have been filed on the following common grounds:
1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) erred in deleting the addition of undisclosed income amounting to Rs.47,15,000/- as estimated on hawala business of transporting cash from one place to another as per modus operandi as admitted by the assessee' without appreciating the fact that the assessing officer has rightly extrapolated the income of the assessee for the years A.Y. 2007-08 to A.Y. 2013-14 under consideration based on the cash amounting to Rs.68,00,000/- found during the course of search at office premise and the locker of the assessee maintained with M/s. Gold Sukh Safety Vaults Ltd., which was admitted being his undisclosed commission income on hawala transaction for the period 1.4.2012 till the date of search (9.11.2012) of the assessee?"
2. "On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeal) erred in ignoring the principal of extrapolation of income as laid down by the Hon'ble Supreme Court in the case of Eusafali 90 ITR 271?"
3. Briefly the facts relating to the issue in disputeare,theassessee an individual, is the Managing Director of M/s. Indrapuri Express Courier Pvt. Ltd. A search and seizure operation under section.132 of the Income Tax Act,1961was carried out in case of M/s. Gold Sukh Safety Vaults Ltd.,Vithalvadi, Mumbai, during which it was found that the said company was providing lockers on rent without verification of 'Know Your Customer' (KYC) details. Since, it was found that the 3 ITA no.6086/Mum/2016 to 6092/Mum/2016 Shri Vishal Kalantri assessee has taken on rent a locker from M/s. Gold Sukh Safety Vaults Ltd., asearch and seizure operation under section.132 of the Act was also conducted in case of the assessee on 8/11/2012. During the search and seizure operation, cash amounting to Rs.14,22,200/- was found from the business premises of M/s. Indrapuri Express Courier Pvt. Ltd. Further, from the locker No.575 taken on rent by the assessee from M/s. Gold Sukh Safety Vaults Ltd., cash amounting to Rs.68,00,000/- was found.In addition to the cash found, a small diary containing two pages was seized from the office premises of M/s. Indrapuri Express Courier Pvt. Ltd., which indicated assessee's involvement in transferring cash of others through hawala. In the statement recorded under section.132(4) of the Act, the assessee owned up the cash found of Rs.14,22,200/- from office premises and Rs.68,00,000/- from locker no.575/- as his undisclosed income for the F.Y.2012-13. He further submitted that the aforesaid undisclosed income was earned from Angadia business.In response to the notice issued under section.153C of the Act. the assessee filed its return of incomeoffering the total cash seized of Rs.82,22,200/- as his undisclosed income for the A.Y.2013-14. In this context, it is relevant to observe, during the search operation a statement under 4 ITA no.6086/Mum/2016 to 6092/Mum/2016 Shri Vishal Kalantri section.132(4) was also recorded from one Daudayal Sharma, stated to be the employee of the assessee.On confrontation of the seized document, the concerned employee stated that M/s. Indrapuri Express Courier Pvt. Ltd., was involved in cash transfer on commission basis through hawala. In this context, the concerned employee also explained the mode and manner of the cash transfer. He further stated that no books were maintained and the details were entered in a small diary. As recorded by the Assessing Officer, the concerned employee also stated that on an average Rs.40,00,000/- of cash was transferred every day and commission of 1 to 1.5 % is charged for Rs.1000/- of cash transfer. Further, the concerned employee explained in detail the entries written in code word. On the basis of the entries made in the seized diary, a statement was also recorded under section 132(4) of the Act from the assessee.
4. From the statement recorded as well as entries made in the seized diary, the Assessing Officer formed an opinion that the assessee was carrying on the cash transfer on regular basis by keeping the cash in the locker taken on rent from M/s. Gold Sukh Safety Vaults Ltd., which is evident from frequent operation of locker in the relevant period. Relying upon the statement of assessee's employee and the entries made in the seized document, the Assessing Officer concluded that 5 ITA no.6086/Mum/2016 to 6092/Mum/2016 Shri Vishal Kalantri when the assessee had admitted of earning undisclosed income of Rs.82,22,200/- till the date of search on 08/11/2012, he must have earned similar amount for the remaining five months of the Assessment Year and accordingly, proceeded to compute the income for the A.Y.2013-14 on pro-rata basis which was quantified at Rs.1,40,95,000/-. Since,the assessee had already offered income of Rs.82,22,200/-,he made addition of Rs.58,72,800/-.Further, assuming that assessee's business must have grown @20% per year,the Assessing Officer computed income adopting similar methodology forAssessment Year 2007-08 to 2012-13. Theaddition made by the Assessing Officer in different Assessment years are as under:-
A.Y. Undisclosed Commission Addition made
income computed Income offered in
return
2013-14 1,40,95,000/- 82,22,200/- 58,72,800/-
2012-13 1,17,46,000/- 0 1,17,46,000/-
2011-12 97,88,000/- 0 97,88,000/-
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ITA no.6086/Mum/2016 to 6092/Mum/2016
Shri Vishal Kalantri
2010-11 81,50,000/- 0 81,50,000/-
2009-10 67,90,000/- 0 67,90,000/-
2008-09 56,58,000/- 0 56,58,000/-
2007-08 47,15,000/- 0 47,15,000/-
5. Being aggrieved of the additions made by the Assessing Officer, assessee went in appeal before the First Appellate Authority.
6. Before the First Appellate Authority, the assessee made detailed submissions contesting the addition made by the Assessing Officer. It was submitted by the assessee, when the search and seizure operation was conducted in a particular Financial Year and the cash seized during such search and seizure operation was owned up and declared as undisclosed income by the assessee in that year, no further addition can be made on estimation either in the Assessment Year, wherein, such search and seizure operation was conducted nor any addition can be made on extrapolation in any preceding Assessment years. It was submitted, except the cash seized and a small diary containing two pages no other incriminating material was found. Therefore, in absence of any material/evidence it cannot be said that the assessee has earned undisclosed income in the precedingassessment years. It 7 ITA no.6086/Mum/2016 to 6092/Mum/2016 Shri Vishal Kalantri was submitted, the seized diary is also undated, hence, the authenticity of the entries made therein cannot be established nor it can be considered to be representing assessee's transaction for a particular assessment year. In support of his contention, the assessee relied upon various case laws.
After considering the submissions of the assessee and in thelight of the decisions relied upon as well as the facts available on record, the learned Commissioner (Appeals) found that the only documentary evidence available before the Assessing Officer is an undated small diary containing two pages and indicating transaction of Rs.40,00,000/-. He found that from the seized document, the Assessing Officer was able to establish a nexus between the entries made therein and the business of the assessee. Therefore, he held that the seized diary is a valid record to conclude that the assessee has actually carried out hawala transactions on behalf of his various clients. Therefore, the diary containing two pages cannot be termed as 'dumb document' though, he observed that the Assessing Officercould have got the address of the parties from the mobile numbers available in the diary. On examining the seized document, learned Commissioner (Appeals) found that, though, it is undated, however, it contained 19 entries totaling to Rs.40,00,000/- on which the assessee 8 ITA no.6086/Mum/2016 to 6092/Mum/2016 Shri Vishal Kalantri would have earned commission @0.15% per Rs.1,00,000/- and fortransaction value of Rs.40,00,000/- it will amount to Rs.6,000/- per day. The First Appellate Authority also noted that in course of hearing, the authorised representative of the assessee also submitted a working as per which the assessee would have earned commission income of around Rs.6,00,000/- based on 100 days working which might have escaped assessment.Therefore, he accepted addition of Rs.6,00,000/- as additional income as found from the seized document. Thus, on the basis of the aforesaid submissions of the assessee, learned Commissioner (Appeals) concluded that out of the addition made of Rs.58,72,600/- by the Assessing Officer for A.Y.2013-14, the income which could have escaped assessment for the post search period of Assessment Year 2013-14 can be estimated at Rs.6,00,000/-. As far as the income determined for the preceding assessment years i.e., A.Y.2007-08 to 2012-13, learned Commissioner (Appeals) observed, the Assessing Officer has not brought any material or documentary evidence on record to establish that the assessee had earned similar undisclosed income in those assessment years. He also observed that the Assessing Officer did not 9 ITA no.6086/Mum/2016 to 6092/Mum/2016 Shri Vishal Kalantri provide the assessee any contrary evidence available with him inspite of specific request by the assessee. Thus, he concluded that no addition on estimate basis in absence of any evidence can be made in A.Y.2007-08 to A.Y. 2012-13 and accordingly deleted the additions made by the Assessing Officer in these assessment years.
7. When the appeals were called for hearing, no one was present for the assessee. It is seen from record, as per letter dated 16/09/2017, Shri Ajay R Singh, Advocate who was appointed to argue the case on behalf of the assessee has withdrawn his power on the instruction of the assessee. It is also relevant to note, inspite of issuance of notice of hearing through RPAD neither the assessee has appeared before us nor has engaged a new Counsel to represent him. In view of the aforesaid, we proceed to dispose off the appeals ex-parte qua the assessee, after hearing learned Departmental Representative and on the basis of materials available on record.
8. The ld. Departmental representative relying upon the observations of the Assessing Officer submitted that in course of search and seizure operation apart from cash found from the locker and the business premises amounting to Rs.82,20,000/-, a diary was also seized which indicated cash transactions of Rs.40,00,000/- in a day. She submitted, in a statement recorded under section.132 (4), the assessee had also 10 ITA no.6086/Mum/2016 to 6092/Mum/2016 Shri Vishal Kalantri owned up the cash seized as his undisclosed income from Angadia business and offered it as income in the A.Y.2013-14. She submitted,in a statement recorded under section.132(4),assessee'semployee while explaining the modus operandi of cash transfer through hawala has also stated that in a day Rs.40,00,000/- worth of cash was transferred through M/s. Indrapuri Express Courier Pvt. Ltd.,
9. The learned Departmental Representative submitted, the very fact that the assessee has opened the locker with of M/s. Gold Sukh Safety Vaults Ltd., in December 2010 and frequent operations of the locker clearly indicate the involvement of the assessee in hawala transactions. The learned Departmental Representative submitted, on the basis of material available before him including the seized material, the Assessing Officer was entitled to estimate the income of the assessee on a reasonable basis which he has done by considering the volume of transaction noted in the seized document. The learned Departmental Representative submitted, such estimation having been made by the Assessing Officer to the best of his judgment and on a reasonable basis, cannot be disturbed by the First Appellate Authority. In support of such contention, she relied upon the decision of the 11 ITA no.6086/Mum/2016 to 6092/Mum/2016 Shri Vishal Kalantri Hon'ble Supreme Court in case of Eusafali90 ITR 271. She also relied upon the following decisions.
1.Income Tax Appeal no.498 of 2013 and others dated 16/03/2015 in case of Prakash K Kankaria v/s. CIT.
2.Institute of Chartered Accounts of India v/s. Vivek Kapoor and others Civil Reference no. 5 of 2012(O & M) Judgment dated 18/03/2016.
10. We have heard learned Departmental Representative and perused the materials on record. We have also applied our mind to the decisions relied upon. As far as the factual aspect of the issue is concerned, it is evident from record that on 08/11/2012, a search and seizure operation under section.132 of the Actwas carried out on the assessee.In course of search and seizure operation, cash amounting to Rs.14,22,200/- was found in the office premises of M/s. indrapuri express courier Pvt. Ltd., and further amount of Rs.68,00,000/- was found from locker no. 575 with M/s. Gold Sukh Safety Vaults Ltd. Undisputedly, in the statement recorded under section.132(4) of the Act, in course of the search and seizure operation when the assessee was called upon to explain the source of the cash found as well as the contents of the seized diary, the assessee owned up the cash found from his office premises as well as the locker to be his undisclosed / unaccounted income from Angadia business and also has offered it as income in the return of income filed in response to notice issued under 12 ITA no.6086/Mum/2016 to 6092/Mum/2016 Shri Vishal Kalantri section.153C of the Act for the A.Y.2013-14. However, the Assessing Officer on the basis of the seized diary has concluded that the assessee must have earned similar income not only in the preceding assessment year but for the post search period and accordingly has made addition on the basis of extrapolation of the entries found in the seized document. As recorded by the Assessing Officer, the seized document is a small diary containing two pages. As observed by the learned First Appellate Authority and also perusal of the seized document which is reproduced by the Assessing Officer in the assessment order reveals that seized document is undated, however, it reveals transactions for a particular day. Though, in absence of any date mentioned in the seized paper, it cannot be related to a particular assessment year,however, the assessee has owned up the cash found and seized asthe undisclosed income for the A.Y.2013-14 and he has also stated that he has stopped angadia activity post search. Thus,it can be assumed that the seized document relates to F.Y.2012-13 relevant to the A.Y.2013-14. Therefore, the issue before us is, whether on the basis of such incriminating material / evidence, addition can be made on estimate basis. As far as A.Y.2007- 08 to 2012-13 are concerned, unquestionably, the Assessing Officer did not have in his possession any incriminating material found either as a result of the search or otherwise indicating undisclosed income earned by the assessee through hawala transaction. Infact, except the opening of locker no.575 by the assessee 13 ITA no.6086/Mum/2016 to 6092/Mum/2016 Shri Vishal Kalantri with M/s. Gold SukhSefety Vaults Ltd., on 15/12/2010 which was surrendered on January 2013 as per assessing officer's own admission, there was no other material before the Assessing Officer to even remotely link the assessee with hawala transaction or earning of any undisclosed income.Though, it may be a fact that the assessee has frequently operated the locker but certainly it will not lead to the conclusion that the assessee was using the locker for keeping cash used in hawala transaction, as there is no evidence on record to demonstrate such fact. In any case of the matter, even the locker no. 575 was opened only on 15/12/2010. Therefore, the addition on estimate basis on mere presumption and surmises, that too, in a search assessment cannot be upheld. As correctly observed by the learned First Appellate Authority, neither during the search and seizure operation any incriminating material was found to indicate that the assessee was involved in hawala transaction to justify addition in these assessment years nor the Assessing Officer has brought any material or documentary evidence even during the post search proceedings to justify such estimation.Therefore, the addition made for A.Y.2007-08 to A.Y.2012-13 on estimate basis by extrapolating the entrie/ figures found in the seized material pertaining to A.Y.2013-14 is legally unsustainable. As far as A.Y.2013-14 is concerned, we find from the material on record that the assessee furnished a working as per which 14 ITA no.6086/Mum/2016 to 6092/Mum/2016 Shri Vishal Kalantri the addition which can be made considering the total working days even as per the rate of commission adopted by the Assessing officer at 0.30% per Rs.1 lakh would be Rs.12,00,000/- and Rs.6,00,000/- if commission rate of 0.15% per lakh as adopted by the assessee is considered. Learned CIT(A) accepting assessee's claim has estimated the commission income for post search period at Rs.6,00,000/- and sustained the addition to that extent. We find the aforesaid conclusion of the First Appellate Authority to be on a reasonable basis hence, do not see any reason to interfere with the same. Grounds raised are dismissed.
10. In the result, all the appeals of the department are dismissed. Order pronounced in the open Court on 15.12.2017 Sd/- Sd/-
Sd/- Sd/-
RAJESH KUMAR SAKTIJIT DEY
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 15.12.2017
Copy of the order forwarded to:
(1) The Assessee;
(2) The Revenue;
(3) The CIT(A);
(4) The CIT, Mumbai City concerned;
(5) The DR, ITAT, Mumbai;
(6) Guard file.
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ITA no.6086/Mum/2016 to 6092/Mum/2016
Shri Vishal Kalantri
True Copy
By Order
Karuna
Sr. Private Secretary
(Dy./Asstt.Registrar)
ITAT, Mumbai
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ITA no.6086/Mum/2016 to 6092/Mum/2016
Shri Vishal Kalantri