Income Tax Appellate Tribunal - Ahmedabad
Dineshkumar Chandmal Jain, Surat vs Department Of Income Tax on 29 June, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH AHMADABAD
Before Shri G.C.Gupta, Vice President and
Shri T.R. Meena, Accountant Member
ITA No. 2525 & 2526/Ahd/2009
Assessment Years : 2005-06 & 2006-07
Dineshkumar Chandmal Jain V/s. The Income Tax Of ficer,
Prop. S.M. Trading Company W ard 7(1), Surat
7/3271, 2 n d Floor, Dhobi
Sheri, Saiyedpura, Surat
PAN No. ADJPJ3400F
(Appellant) .. (Respondent)
ITA No. 2635 & 2636/Ahd/2009
Assessment Years : 2005-06 & 2006-07
The Income Tax Of ficer, V/s. Dineshkumar Chandm al Jain
W ard 7(1), Surat Prop. S.M. Trading Company
7/3271, 2 n d Floor, Dhobi
Sheri, Saiyedpura, Surat
(Appellant) .. (Respondent)
राजःव कȧ ओर से Shri D.C. Patwari, CIT. D.R.
By Revenue
आवेदक कȧ ओर से/By Assessee Shri M. K. Patel, A.R.
सुनवाई कȧ तारȣख/Date of Hearing
12.02.2013
घोषणा कȧ तारȣख/Date of Pronouncement 05.04.2013
ORDER
PER : T.R.Meena, Accountant Member
These are two cross appeals filed by the Assessee in ITA Nos. 2525 & 2526/Ahd/09 and by the Revenue in ITA Nos. 2635 & 2636/Ahd/09, which have emanated from the orders of CIT(A)-IV, Surat, dated 29.06.2009 for both A.Y. 2005-06 & 2006-07. These two cross appeals were heard together and I T A No s . 2 52 5 , 25 26, 26 3 5 & 2 6 36 / Ah d /0 9 A. Y . 2 00 5- 06 & 0 6- 07 Page 2 are being disposed of by way of this common order for the sake of convenience. The effective grounds of both cross appeals are as under:
( For A.Y. 05-06) Grounds of ITA No.2525/Ahd/2009 (Assessee's appeal)
1. On the facts and circumstances of the cases and in law, the learned CIT(Appeals), Surat has erred in uphelding reopening assessment proceeding u/s 147 by issuing notice u/s 148 of the I.T Act, 1961.
2. On the facts and circumstances of the cases and in law, the learned CIT (Appeals), Surat has erred in not granting the benefit of expenditure incurred by the Appellant for conducting the Business.
Grounds of ITA No.2635/Ahd/2009 (Revenue's appeal) "1. On the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.3,52,44,338/- made by the U/s. 40A(3) of the Act without appreciating the fact that the assessee had effected cash payments in excess of Rs.20,000/-, in contravention of the provisions of section 40A(3) of the Act and also failed to discharge the onus cast on him to prove that such transactions are less than Rs.20,000/- each as claimed by him.
2. On the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in directing the A.O. to adopt income @ 0.25% of the turnover as net profit without appreciating the fact that estimation of profit was not an issue and that the A.O. made the disallowance for violation of the provisions of section 40A(3).
I T A No s . 2 52 5 , 25 26, 26 3 5 & 2 6 36 / Ah d /0 9 A. Y . 2 00 5- 06 & 0 6- 07 Page 3
3. On the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in stating that it is an admitted fact by the AO and the assessee that the assessee has only given accommodation entries to earn income @ 0.25%, when no such fact were admitted by the assessee either in the assessment proceedings or in the grounds of appeal filed before the Ld. CIT(A).
4. On the facts and circumstances of the cases and in law without prejudice to the above ground, the Ld. CIT(A) erred in accepting fresh evidence without giving any opportunity to the AO to examine the same, as provided in Rule 46A of the I.T. Rules, 1962.
5. On the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.52,840/- made out of office expenses without appreciating the fact that the assessee failed to prove the genuineness and necessity of the expenses by providing supporting evidences.
6. On the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.91,000/- made on account of rent expenses without appreciating the fact that the assessee failed to prove the genuineness and necessity of the expenses by providing supporting evidences.
7. On the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.28,790/- made out of printing and stationery expenses without appreciating the fact that the assessee failed to prove the genuineness and necessity of the expenses by providing supporting evidences.
I T A No s . 2 52 5 , 25 26, 26 3 5 & 2 6 36 / Ah d /0 9 A. Y . 2 00 5- 06 & 0 6- 07 Page 4
8. On the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.4,05,500/- made on account of salary expenses without appreciating the fact that the assessee failed to prove the genuineness and necessity of the expenses by providing supporting evidences."
( For A.Y. 06-07) Grounds of ITA No.2526/Ahd/2009 (Assessee's appeal) "1. On the facts and circumstances of the cases and in law, the learned CIT (Appeals), Surat has erred in not granting the benefit of expenditure incurred by the Appellant for conducting the Business."
Grounds of ITA No.2636/Ahd/2009 (Revenue's appeal) "1. On the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,89,71,624/- made by the U/s. 40A(3) of the Act without appreciating the fact that the assessee had effected cash payments in excess of Rs.20,000/-, in contravention of the provisions of section 40A(3) of the Act and also failed to discharge the onus cast on him to prove that such transactions are less than Rs.20,000/- each as claimed by him.
2. On the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in directing the A.O. to adopt income @ 0.25% of the turnover as net profit without appreciating the fact that estimation of profit was not an issue and that the A.O. made the disallowance for violation of the provisions of section 40A(3).
I T A No s . 2 52 5 , 25 26, 26 3 5 & 2 6 36 / Ah d /0 9 A. Y . 2 00 5- 06 & 0 6- 07 Page 5
3. On the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in stating that it is an admitted fact by the AO and the assessee that the assessee has only given accommodation entries to earn income @ 0.25%, when no such fact were admitted by the assessee either in the assessment proceedings or in the grounds of appeal filed before the Ld. CIT(A).
4. On the facts and circumstances of the cases and in law without prejudice to the above ground, the Ld. CIT(A) erred in accepting fresh evidence without giving any opportunity to the AO to examine the same, as provided in Rule 46A of the I.T. Rules, 1962.
5. On the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,00,000/- made on account of salary expenses without appreciating the fact that the assessee failed to prove the genuineness and necessity of the expenses by providing supporting evidences.
6. On the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.3,89,356/- made U/s. 40(ia) without appreciating the fact that the assessee failed to furnish the proof in respect of the payment of TDS either with the return or during assessment proceedings."
ITA No. 2525 & 2526/Ahd/2009 (Assessee's appeals for A.Y. 05-06 & 06- 07 respectively)
2. The first ground of assessee's appeal is against challenging the reopening assessment proceeding u/s. 147 of the IT Act. The ld. A.O. I T A No s . 2 52 5 , 25 26, 26 3 5 & 2 6 36 / Ah d /0 9 A. Y . 2 00 5- 06 & 0 6- 07 Page 6 recorded the reasons and issued notice u/s. 148. The reasons to believe of the A.O. are as under:
"Reason For Reopening of the Case U/s. 148 r.w.s. 147 of the I.T. Act During the course of the survey conducted by DDIT Unit - IV(1), Mumbai on 22.09.2006 in the case of M/s. S.M. Trading Co. Prop. Mr. Dinesh Jain at 78/B, Ratandeep, Office No.3, opp. Aryan High School, J.S.S. Road, Opera House, Mumbai- 400004.
In this connection, it is found that, the assessee Shri Dinesh Jain and concerns are in to Business of issuing Bogus Bill and providing accommodation entries for diamonds, copper and textile. Shri Dinesh Jain had issued bogus bills to the extent of Rs.201.96 Crore during the financial year 2004-05 and 2005-06.
This reson is recorded under sub section 2 of Section 14(1), 147 of the IT Act, 1961. The return of income was processed u/s. hence the time available for issue notice u/s. 148 is up to 31.0 Issue notice u/s. 148 of the I.T. Act, 1961.
The ld. A.O. issued notice u/s. 142(1) of the IT Act with questionnaire on 01.08.2008. The ld. A.O. made inquiry on whether any audit had been carried out by the CA in case of appellant and various expenses debited in the p&l account had no details. After considering the assessee's reply, the ld. A.O. made following additions:
(1) Addition u/s. 40A(3) as discussed in para-6 Rs. 3,52,44,338/- (2) Out of conveyance allowance as discussed in para-7 Rs. 91,610/- (3) Out of office expenses as discussed In para-7 Rs. 52,840/- I T A No s . 2 52 5 , 25 26, 26 3 5 & 2 6 36 / Ah d /0 9 A. Y . 2 00 5- 06 & 0 6- 07 Page 7 (4) Out of office rent expenses as Discussed in para-7 Rs. 91,000/- (5) Out of printing stationery expenses as discussed in para -7 Rs. 28,970/- (6) Out of salary expenses as discussed In para-7 Rs. 4,00,500/-
Against scrutiny order u/s. 143(3) dated 29.06.2009 of the A.O., the appellant carried the matter before the CIT(A). Before him, the reopening u/s. 147 was challenged by the appellant. The ld. CIT(A) after considering the decision in case of Shivkala Co-op. Hsg. Soc. Ltd. vs. ITO (Delhi) SMC 391, had rejected the ground of appeal for challenging the reopening u/s. 147 and issued notice u/s. 148 and held that adequacy or sufficiency of reasons to believe cannot be called in question, the A.O. has bonafide reasons to believe that income chargeable to tax has escaped assessment and such belief is relevant material validity of initiation of proceedings u/s. 147 cannot be challenged. The ld. CIT(A) found the purchases and sales of the appellant is bogus and all transactions were sham. The appellant had given accommodation bills for rough and polished diamonds, garments, jewellery, copper scrap and colour stones. The ld. A.O. also had observed since beginning that the appellant is doing business of bogus diamond billing on commission basis in the name & style of M/s. S.M. Trading Co. The appellant has also admitted that he issues the bill and gets commission @ 0.25% on the amount of bills. The appellant neither purchased nor sold any goods. Thus, the ld. CIT(A) held that so called huge cash payments made for purchase are only for paper entries. The money received from the claimed purchasers through bank channel had I T A No s . 2 52 5 , 25 26, 26 3 5 & 2 6 36 / Ah d /0 9 A. Y . 2 00 5- 06 & 0 6- 07 Page 8 to be returned to them and hence the cash movements. But the cash had not been paid toward purchases, it is only claimed so. Therefore, it was merely return of money which had been received on various parties to him only the bills were issued and no goods were sold in reality. Hence, this was not an expenditure and thus, cannot be subjected to disallowance u/s. 40A(3). Thus, he deleted all the addition made by the A.O. He further directed to the A.O. to compute the income @ 0.25% on a total turn over of Rs. 1,02,57,52,103/- in the appellant's hand which was worked out Rs.25,64,380/-. The appellant would not get any benefit of expenditure claimed against this.
3. Now the assessee is before us. Ld. Counsel for the appellant contended that the reasons recorded by the A.O. for issuing bogus bills and getting commission on it. But, the A.O. had not made any addition on account of under the head 'Commission income" on which he had reopened the case u/s. 147. When there is no addition on the basis of reason to believe in assessment order by the A.O., then no addition under any other head, can be made by the A.O. He relied upon the decision of Hon'ble Gujarat High Court decision in case of CIT-II vs. Mohmed Juned Dadani in Tax Appeal No. 964 of 2011 TO Tax Appeal No. 967 of 2011, order dated 29.01.2013, wherein Hon'ble Gujarat High Court had considered the Bombay High Court decision in case of CIT v. Jet Airways (I) Limited (2011) 331 ITR 236, in which Hon'ble Bombay High Court held that the Assessing Officer does not assess the income which he had reasons to believe had escaped assessment and which forms the basis of a notice u/s. 148, it is not open to the Assessing I T A No s . 2 52 5 , 25 26, 26 3 5 & 2 6 36 / Ah d /0 9 A. Y . 2 00 5- 06 & 0 6- 07 Page 9 Officer to assess independently any other income which does not form the subject matter of the notice. Therefore, it was argued that the addition made on the basis of any other income which was not formed the subject matter of the notice is invalid. Thus, the order of the A.O. may be cancelled. At the outset, ld. CIT D.R. vehemently argued that reopening u/s. 147 is valid as no scrutiny assessment was made in this case. The notice was issued within four years from the end of the assessment year. The copy of reasons were supplied to the appellant. There was no objection filed by the appellant before the A.O. He made compliance of the notice issued by the A.O. regularly without objecting the reopening. He further relied upon the decision of Hon'ble Gujarat High Court in case of Gala Gymkhana (P.) Ltd. v. ACIT, [2012] 211 Taxman 447/27 taxmann.com 294, wherein the taxability of a particular receipt on account of sale of membership of Rs.5.56 lacs which had escaped assessment without there being any opinion expressed on it by the A.O. held valid reopening u/s.147. He further relied in case of ACIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd., (2007) 291 ITR 500 (SC), wherein it was held that u/s. 147, as substituted w.e.f. 1st April, 1989, if the A.O., for whatever reason, has reason to believe that income has escaped assessment, it confers jurisidcition to reopen the assessment where the case not covered by proviso to Section 147, intimation u/s. 143(1)(a) cannot be treated to be an order of assessment and there being no assessment u/s.
143(1)(a) of the IT Act. The question of change of opinion does not arise. He further argued that CIT(A) has co-terminus power with A.O. and he had I T A No s . 2 52 5 , 25 26, 26 3 5 & 2 6 36 / Ah d /0 9 A. Y . 2 00 5- 06 & 0 6- 07 Page 10 assessed the assessee's income under the head "Income from Commission"
on total sale which was worked out at Rs. 25,64,380/- and all other addition made by the A.O. had been deleted. Therefore, he requested to confirm the order of the CIT(A).
4. We have heard the rival contentions and perused the material on record. The ld. A.O. had jurisdiction to issue notice u/s.148 after recording the reasons. Therefore, reopening u/s. 147 is valid. However, he had not made any addition on the basis of reasons to believe but he made any addition independently under the head "Other Income" i.e. various disallowance of expenses and disallowances u/s. 40A(3) of the IT Act. But the ld. CIT(A) had assessed the assessee's income on the basis of statement recorded by the Economic Offence Wing, Crime Branch, Mumbai. A survey conducted u/s. 133A of the IT Act at the Mumbai office situated at 78/B, Ratandeep, Office No.3, opp. Aryan High School, J.S.S. Road, Opera House, Mumbai on 22.09.2006. Thus, we have considered view that reopening u/s. 147 is valid and we confirm the order of the CIT(A).
5. Ground no.2 for A.Y. 05-06 and ground no.1 of A.Y. 06-07 are against not granting the benefit of the expenditure incurred by the appellant for conducting the business. As such, there was no such ground of appeal before the ld. CIT(A). The appellant had challenged only addition made under the different heads. Ld. CIT(A) had deleted the addition made by the A.o. and allowed the expenses claimed by the appellant in the books of account, as such. Therefore, the assessee was not aggrieved by the order of the CIT(A).
I T A No s . 2 52 5 , 25 26, 26 3 5 & 2 6 36 / Ah d /0 9 A. Y . 2 00 5- 06 & 0 6- 07 Page 11 Thus, we dismiss the assessee's appeal on this ground in both assessment years.
ITA No.2635 & 2636/Ahd/2009 & (Revenue's appeal for A.Y. 05-06 & 06-07 respectively)
6. The detailed facts of the case have been discussed in preceding paras in appellant's appeal. The ld. CIT(A) had thoroughly discussed the all disallowances made by the A.O. and deleted the same by well reasoned order. Thus, we do not hesitate to confirm the order of the CIT(A) wherein all addition had been deleted by him. Thus, we confirm the order of the CIT(A) and dismiss the appeal of the Revenue.
7. Ground no.6 of the Revenue's appeal for A.Y. 06-07 is against deleting the addition of Rs.3,89,356/- made u/s. 40(ia) of the IT Act. The A.O. observed that the appellant had debited Rs.3,89,356/- as brokerage. Hence, it had shown liability in respect of TDS payable. As per A.O., the assessee was liable to deduct TDS u/s. 194H of the IT Act. The appellant had not furnished any proof of payment of TDS. Therefore, he disallowed Rs. 3,89,356/- u/s. 40(ia) of the IT Act. The ld. CIT(A) had allowed the appeal on the ground that when income of the assessee has been directed to compute @ 0.25% on total turnover of Rs. 1,08,76,86,861/-, which was worked out at Rs. 27,19,217/-. The ld. CIT(A) had allowed all the expenses claimed by the appellant by relying upon the decision in case of Bharat A Master vs. ITO in ITa No. 177/Ahd/2003 dated 29.02.2008 and Hon'ble Supreme Court decision in case of Poona Electric vs. CIT 57 ITR 521(SC). After considering the I T A No s . 2 52 5 , 25 26, 26 3 5 & 2 6 36 / Ah d /0 9 A. Y . 2 00 5- 06 & 0 6- 07 Page 12 orders of the A.O. and submission of the assessee, the ld. CIT(A) has directed to compute the income on the basis of 0.25% on total turnover and no benefit of any expenditure would be allowed. Thus, we also confirm the order of the CIT(A) on this issue. Accordingly, Revenue's appeal on this ground is dismissed.
8. In the result, the Assessee & Revenue's appeals for both assessment years are dismissed.
These Orders pronounced in open Court on 05.04.2013 Sd/- Sd/-
(G.C.Gupta) (T.R. Meena)
Vice President Accountant Member
True Copy
S.K.Sinha
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. अपीलाथȸ / Appellant
2. ू×यथȸ / Respondent
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।