Income Tax Appellate Tribunal - Mumbai
Kamal Kishore Rathi, Mumbai vs Asst Cit Cen Cir 31 Cen Rg 7, Mumbai on 14 June, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "H" MUMBAI
BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND
SHRI N.K. PRADHAN (ACCOUNTANT MEMBER)
ITA No. 167/MUM/2016
Assessment Year: 2009-10
ITA No. 4926/MUM/2015
Assessment Year: 2010-11
&
ITA No. 168/MUM/2016
Assessment Year : 2011-12
Kamal Kishore Rathi, Asst. CIT CEN CIR 31 CEN RG 7
115B, Shalimar Miracle, Opp. ICICI R. No. 451, Aayakar Bhavan,
Vs.
Bank S.V. Rd. Goregaon (W) Marine Lines,
Mumbai - 400062 Mumbai - 400020
PAN No. AAGPR1508N
(Appellant) (Respondent)
Assessee by : Ms. Hiral D. Sejpal, AR
Revenue by: Shri M.C. Omi Ningshen, DR
Date of Hearing: 18/04/2017
Date of Order: 14/06/2017
ORDER
PER N.K. PRADHAN, AM
The captioned appeals are directed against the order Commissioner of Income Tax (Appeals) - 52, Mumbai and arise out of order u/s. 143(3) r.w.s. 147 for the AY 2009-10, AY 2010-11 and order u/s. 143(3) for the AY 2011-12 of the Income Tax Act, 1961 (the 'Act'). As they involve common issues, we are proceeding to dispose them off by this consolidated order for the sake of convenience. We find that the grounds of the appeal for the above three assessment years are similar. We begin with the AY 2009-10.
ITA No 167 & 168/M/2016 22. The grounds of appeal filed by the assessee read as under:
1. Based on the facts and circumstances of the case and further as per explanations offered the Learned CIT (Appeals) erred in confirming the Order passed by Learned A.O. which is grossly unjust and erroneous and purely based on assumed facts and surmises.
2. Based on the facts and circumstances of the case the Learned CIT (Appeals) erred in confirming the views of Learned A.O. in assuming "net income" as disclosed in Return of Income filed as income declared before Investigating Authorities in statement given u/s. 131 of the Income Tax Act, 1961. He erred in not allowing legitimate expenses claimed by the assessee in the Return of Income.
3. The learned CIT(Appeals) erred in accepting Learned A.O.'s view to consider entire Receipts credited in Profit and Loss Account as Income declared during declaration made u/s. 131 of the Income Tax Act, 1961. It is natural for assessee who is already under pressure of action taken u/s. 133A, to assume whatever declaration he is giving is towards gross Income escaped from assessment and he will be entitled to claim all legitimate expenses that he has incurred to earn the said income.
4. The learned CIT (Appeals) ought to have given due consideration to the fact that the assessee is entitled to claim legitimate business expenses as allowed under section 30 to section 37 of The Income Tax Act, 1961 amounting to Rs.
20,52,878/-.
5. The Learned CIT (Appeals) erred in not allowing deduction amounting to Rs. 92,924/- as claimed u/s. 80C of the Income Tax Act, 1961 in respect of various investments made in eligible instruments as defined u/s. 80C of the Income Tax Act, 1961.
6. Without prejudice to above referred Grounds of Appeal, the Learned CIT (Appeals) erred grossly in accepting Learned A.O.'s stand in calling Mr. Mukesh M. Choksey u/s. 131 of the Income Tax Act, 1961 and taking his statement on record and making it as base for disallowance of commission amount paid to M/s.
ITA No 167 & 168/M/2016 3Alliance Intermediaries and Network Pvt. Ltd., amounting to Rs. 10,00,000/- without giving appropriate opportunity to the appellant for cross examination.
7. Notwithstanding anything mentioned hereinabove the assessee was never served a final show cause notice informing him about proposed disallowance along with reasons and was never given an opportunity to defend himself against such disallowances.
2.1 The assessee also filed an additional ground submitting that the return filed on 26.03.2011, in response to notice u/s 148 be treated as a valid return and the expenses and deduction claimed therein be allowed under the provisions of the Act.
3. We find the assessee has also filed a petition requesting for admitting additional evidence. As per it, in respect of claim of legitimate business expenses, the assessee would like to submit (i) Confirmation received from M/s. Alliance Intermediaries and Network Pvt. Ltd., (ii) A copy of bank statement, (iii) Copy of confirmation from employees and their return of income. Also the assessee proposes to file documents like LIC premium receipt and copy of PPF passbook in support of its claim of deduction u/s. 80C of the Act.
3.1 As the documents mentioned at Para 3 here-in-above are essential in adjudicating the issues raised in the grounds of appeal, we admit the same. We also admit the additional ground of appeal.
4. Briefly stated the facts of the case are that the Revenue conducted a survey on 26.08.2010 in the business premises of the assessee. A statement of the assessee was recorded. In the statement recorded, the assessee admitted that he would offer Rs. 5,00,000/- to tax for the AY 2009-10, Rs. 35,00,000/- for the AY 2010-11 and Rs. 25,00,000/- for the AY 2011-12.
ITA No 167 & 168/M/2016 44.1 The assessee had filed original return of income for the AY 2009-10 on 31.03.2010 declaring total income of Rs. 2,58,670/-. After the survey action u/s. 133A, the assessee filed a revised return on 26/03/2011 disclosing the total income of Rs. 4,43,700/-.
4.2 The Assessing Officer (AO) found from the statement recorded that the modus operandi of the assessee was such that he on receipt of cash, purchased the shares from the open market at the prevailing market price by the group companies of Mr. Mukesh M. Choksey and same were transferred to the demat account of the client on the date of creation of fictitious capital gains.
The A.O. on examination of the return income for the AY 2009-10 noticed that though the assessee had offered receipts to the tune of Rs. 21,35,000/- on account of brokerage by crediting the same to the profit and loss account, the income in respect of these receipts was neutralized by claiming deduction mainly on account of the following items:
S. No. Item Amount of expenditure claimed
Original Return Revised Return Increase in Claim
1. Salaries and Wages 48,000 9,48,000 9,00,000
2. Sub Brokerage NIL 10,00,000 10,00,000
3. Depreciation 36,895 24,597 NIL
Total 84,895 19,48,000 19,00,000
4.3 The A.O. observed that though the assessee was required to offer
additional income of Rs. 5,00,000/- as admitted in course of survey u/s. 133A, he offered only an amount of Rs. 2,35,000/-. He asked the assessee to explain the same. In response to it, the assessee filed a reply vide letter dated 11.02.2014 which reads as under:
"During the year under consideration we had declared income of Rs. 5,00,000/- with the Investigation Wing. However, on actual working it worked out to be Rs. 2,35,000/- and hence same was declared in our Return of Income under the head 'Brokerage'".ITA No 167 & 168/M/2016 5
4.4 The A.O. was not convinced to the above explanation of the assessee as the income disclosed during the course of survey u/s. 133A ought to be added to the return of income originally filed. Therefore, he made an addition of Rs. 5,00,000/- to the return of income filed on 31.03.2010 showing income of Rs. 2,58,670/-.
4.5 The A.O. during the course of assessment proceeding issued summons u/s. 131 of the Act on test check basis to some of the persons to whom the assessee claimed to have paid certain amounts as 'salary & wages' and claimed the same as expenses in his P&L account filed with the revised return of income. The A.O. recorded the statement on oath of three persons namely (a) Ms. Sandhya S. Badekar, (b) Shri Jitendra Chandrabhan Singh and (c) Shri Indra Pratap Singh on 25.02.2014, 04.03.2014 and 05.03.2014 respectively. On examination of the statement recorded, the A.O. noticed that in respect of Shri Jitendra Chandrabhan Singh & Shri Indra Pratap Singh, there is a difference in amount claimed to have been paid by the assessee as salary / wages and the amounts actually received by them from the assessee. The details are as under:
Name of the Amt. of salary Salary admitted Difference Relevant content in the Person claimed to have to have received (in Rs.) statement recorded on paid by the by the person oath Assessee (in Rs.) (in Rs.) Jitendra 1,20,000 NIL 1,20,000 I had joined the firm after Chandrabhan March 2009 immediately Singh after giving my 10+2 (Intermediate exams).
Hence AY 2009-10 is not applicable.
Indra Pratap 3,00,000 1,80,000 1,20,000 This payment was made
Singh through cheque per month
Rs. 15,000/- (i.e. Rs.
1,80,000/- p.a.)
Total 4,20,000 1,80,000 2,40,000
ITA No 167 & 168/M/2016 6
4.6 The assessee has claimed deduction of Rs. 10,00,000/- on account of sub-brokerage charges paid to M/s. Alliance Intermediaries & Networks Pvt. Ltd. The said company is one of the group companies floated by Mr. Mukesh M. Choksey, who is actively involved in providing accommodation entries. To examine the genuineness of the above expenditure, the A.O. issued a letter to the Assessing Officer having jurisdiction over the cases of Mr. Mukesh M. Choksey Group to clarify (a) as to whether M/s. Alliance Intermediaries & Network Pvt. Ltd. has offered the aforesaid amounts to tax in its hands for the relevant assessment years as received from Shri Kamal Kishore Rathi; and (b) as to whether M/s. Alliance Intermediaries & Network Pvt. Ltd., is claiming TDS credit in respect of the aforesaid amounts. The Assessing Officer after examining the issue with Mr. Mukesh M. Choksey forwarded vide letter dated 24.02.2014 a reply on the payment of sub-brokerage by the assessee. Mr. Mukesh M. Choksey has clarified that he has not received the above amount of brokerage. Thereafter, the A.O. gave an opportunity to the assessee vide letter dated 03.03.2014 to reconcile and justify the claim of expenditure. The assessee filed a reply vide letter dated 03.03.2014, referring to the copy of assessment order of Smt. Bindu A. Parmar. The A.O. was not convinced with the above reply of the assessee as the same did not prove that the assessee had made payment of sub-brokerage to Mr. Mukesh M. Choksey. Thereafter, the A.O. held the claim of expenses of Rs. 19,00,000/- on the head 'salary and wages' and 'sub-brokerage' as non-genuine. He made an addition of Rs. 5,00,000/- to the income of Rs. 2,58,670/- shown by the assessee.
5. Aggrieved by the order of the A.O., the assessee filed an appeal before the Ld. CIT (A). We find that the Ld. CIT (A) agreed with the reasons given by the A.O. and dismissed the appeal filed by the assessee.
ITA No 167 & 168/M/2016 7
6. Before us, the Ld. Counsel of the assessee files a factual paper book containing (i) Copy of confirmation received from Alliance Intermediaries and Network Pvt. Ltd. and a copy of the bank statements reflecting the transactions; (ii) Copy of salary account ledger of the Appellant; (iii) Copy of incentive account ledger of the Appellant; (iv) Copy of confirmation of accounts from Indrapratap Singh; (v) Copy of confirmation of accounts from Jitendra Chandrabhan Singh; (vi) Copy of confirmation of accounts from Sandhya Badekar and copy of its IT Acknowledgement; (vii) Copy of confirmation of accounts from Amit Mahade; (viii) Copy of confirmation of accounts from Santosh Kuri; (ix) Copy of confirmation of accounts from Manish Rathi; (x) Copy of confirmation of accounts from Sweeper Account;
(xi) Copy of LIC premium receipt paid for Kamal Rathi dated 14.05.2008;
04.12.2008; 04.12.2008; (xii) Copy of the PPF passbook The assessee also files a legal paper book.
7. Per contra, the Ld. DR relies on the order of the Ld. CIT(A). He submits that the A.O. has given sufficient opportunity to the assessee to explain its case.
8. We have heard the rival submission and perused the relevant material on record. One important aspect which has been strongly put by the Ld. Counsel of the assessee is that the assessee was not given an opportunity to cross examine Mr. Mukesh M. Choksey. The Hon'ble Supreme Court in State of Kerala vs. K.T. Shaduli Grocery Dealer AIR 1977 SC 1627, recognised the importance of oral evidence by holding that the opportunity to prove the correctness or completeness of the return necessarily carry with it the right to examine witnesses and that includes equally the right to cross-examine witnesses. In ITO vs. M. Pirai Choodi (2012) 20 taxmann.com 733 (SC), the Hon'ble Supreme Court has held that "Order of assessment passed without granting an opportunity to assessee ITA No 167 & 168/M/2016 8 to cross-examine, should not have been set aside by High Court; at most, High Court should have directed Assessing Officer to grant an opportunity to assessee to cross-examine concerned witness."
In view of the above reasons, the order of the Ld. CIT(A) is set aside and the matter is restored to the file of the A.O. to make a fresh assessment after giving opportunity to the assessee to cross-examine Mr. Mukesh M. Choksey. Needless to say the A.O. would give reasonable opportunity of being heard to the assessee before finalizing the assessment order. The assessee is directed to file necessary details before the A.O. 8.1 As we have restored the matter to the file of the A.O., we are not adverting to the decisions relied on by the learned Counsel of the assessee in the legal paper book.
9. In the result, the appeal for the AY 2009-10 is allowed for statistical purposes. As we have mentioned earlier the grounds of appeal filed by the assessee for the AY 2010-11 and 2011-12 are similar to the grounds of appeal for the AY 2009-10. Therefore, our decision for the AY 2009-10 applies mutatis mutandis to the appeal for the AY 2010-11 and AY 2011-12.
10. In the result, the appeals are allowed on the above terms.
Order pronounced in the open court on 14/06/2017.
Sd/- Sd/-
(D.T. GARASIA) (N.K. PRADHAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated: 14/06/2017
Rahul Dhoke P.S.
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
ITA No 167 & 168/M/2016 9
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
(Dy./Asstt. Registrar)
ITAT, Mumbai