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2015 (7) TMI 290 - ITAT MUMBAI

2015 (7) TMI 290 - ITAT MUMBAI - TMI - Bogus expenditure - commodity transactions in grey market - CIT(A) deleted the addition - Held that:- CIT(A) has rightly observed that the assessee had declared a sum of ₹ 5 crores for the year under consideration. The said disclosure was on account of various discrepancies/deficiencies that may be noted in relation to claim of additions to the fixed assets in the case of M/s. Nitin Cylinders Ltd. and also to take care of other issues. So far the cont .....

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generally is available. When there was no evidence found or detected nor there is any contention of the revenue that any evidence in this respect has been concealed by the assessee, then under such circumstances, it has not been explained by the Department as to what prompted the assessee to make such a declaration in respect of income from commodity transactions. It has also not been explained as to even why the AO had not made any enquiries in this respect during the assessment proceedings. Th .....

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sum of ₹ 1.82 Crores for covering various issues as explained by the assessee in his letter dated 22.12.2009. The assessee has also claimed that the disclosure be also considered for difference in purchase of steel in M/s Nitin Cylinders Ltd. The Ld. CIT(A) though has held that the sum totally accounted for was at ₹ 4,97,00,000/-, however he has not allowed the claim of the remaining amount towards difference in purchase of steel. He has confirmed the addition of ₹ 2,66,03,042/ .....

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venue. - ITA No.4433/M/2013 - Dated:- 30-6-2015 - Shri G.S. Pannu and Shri Sanjay Garg, JJ. For the Petitioner : Shri P. Daniel, A.R. For the Respondent: Shri S.J. Singh, D.R. ORDER Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the Revenue against the order dated 05.03.2013 of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] relevant to assessment year 2008-09. 2. The Revenue has taken following Grounds of appeal: "On the facts and c .....

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commodity trading and not as income shown as bogus expenditure of the company, as is evident form reply of the assessee to question no.10, in his statement dated 19.10.2007, recorded under section 132(4) of the I T Act. 2. The Appellant craves to leave to add, to amend and / or to alter any of the grounds of appeal; if need be. 3. The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A) -39, Mumbai may be set aside and that of the Assessing Officer restored. 3. .....

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Equipments etc.. The said company and the other group companies are controlled by the assessee, his family members and associates. A search operation was carried on 6.9.2007 under section 132 of the income tax Act in the case of Group Companies known as Nitin Group . The A.O. issued notice u/s. 153A of the I.T. Act, 1961 on 31.07.2008 on the assessee Shri Nitin M. Shah for A.Y. 2002-2003 to 2007-08. In response to notice, the assessee filed returns of income on 22.09.2009, wherein certain additi .....

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s in the case of M/S. Nitin Cylinders Ltd. Rs. 3, 13,38,798/- ii) Income earned by way uf bogus expenditure Showing purchase of steel ₹ 2,66,03,042/- iii) Valuation of perquisites Rs. 165840/- Agitating the above additions, the assessee preferred appeal before the CIT(A). 5. The Ld. CIT(A) vide impugned order deleted the addition relating to item (i) above, however confirmed the additions relating to other two items. The assessee has not preferred any appeal relating to the confirmations o .....

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irector of Nitin Cylinders was recorded, wherein he accepted that the cost of fixed assets in M/s. Nitin Cylinders Ltd. was inflated to the extent of ₹ 3,13,07,498/- . He further stated that depreciation on this amount of ₹ 3,13,07,498/- would be withdrawn. The statement recorded of Shri Rahul N. Shah was brought to the notice of Mr. Nitin Shah (assessee) and his statement was also recorded under section 132(4) on 19.10,2007 wherein he stated that the cheques pertaining to the amount .....

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hose cheques were issued and debited in the books of NCL had confirmed that those cheque payments had not been made to them. The AO, therefore required the assessee to explain as to why above stated amount of ₹ 3.15 crores should not be taxed in the hands of the assessee. The assessee in his response vide letter dated 22.12.09 submitted that the amount of ₹ 3.15 Crore capitalized in Nitin Cylinders Ltd., no depreciation had been claimed. Further the said amount had already been offer .....

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grey market or otherwise was found. Further, that during the statements recorded, to buy the peace and to cover the discrepancies in Nitin Cylinders Ltd. in purchase of materials/ commodities capitalized in Nitin Cylinders Ltd, the naming of the disclosure was given as commodity trading in grey market as was advised then. He, therefore, stated that the sum of voluntary disclosure of ₹ 5 Crores for A.Y. 2008-2009 was pursuant to the discrepancies which may arise during investigation/ asses .....

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planation of the assessee and observed that the statement of assessee at the time of search had proved that the amount of ₹ 3,13,38,798/- was not actually used for construction of the plant at Visakhapatnam of the company and that in his statement Shri Nitin M. Shah had admitted to withdraw claim for depreciation of this amount in the hands of the Company. He, therefore, disallowed the sum of ₹ 3,13,38,798/- from the Capital expenses incurred for the construction of the plant by the .....

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y the commission of ₹ 100/- per 1.00 lac paid amounting to ₹ 31,300/- was also disallowed in the hands of the assessee and added to total income of the assessee. Hence, total disallowance/addition of ₹ 3,13,38,798/- was made. Aggrieved by the above addition, the assessee preferred appeal before the Ld. CIT(A). 8. During the appellate proceedings before the CIT(A), the assessee relied upon the affidavits of Shri Balkrishna Solkar and Shri K. Mandher and their statements recorded .....

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erted by the AO.It was therefore contended that the said sum of ₹ 3,13,38,798/ - was wrongfully added in the hands of the assessee. That this was a case of double addition of the same income. Further that it was very clearly stated by the assessee in his statement that ₹ 5.00 Crorcs were declared to cover up all such discrepancies or deficiencies which could arise during the assessment of group companies. Without prejudice, the assessee submitted that even vide submissions dated 22-1 .....

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That the broad bifurcation of above referred income disclosed was as under: a. The sum ₹ 1.5 crores is the highest peak balance of all the years both bank accounts in Standard Chartered Bank (one in the name of Nitin M. Shah and another in the name of Nitin Fire Protection Ind. Ltd.) b. The sum of ₹ 5.35 crores is the aggregate of following items: i) The loan given by Buniyad Chemicals Ltd. to Logicon Building System Pvt. Ltd. ₹ 15,00,000/-. ii) The loan given by Talent Infowa .....

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orporation s letter dated 17-12- 2009 and 18-12-2009) iv) The sum of ₹ 3.15 crores being encashment of cheques/ demand drafts/pay orders issued by Nitin Cylinders Ltd. v) This is to clarify that in connection with point (iv) above, during the investigation and/or assessment proceedings, there is no record and/or material and/or evidence of any type of commodity trading in grey market or otherwise is found and/or is available. I further state that I have never entered and/or indulged any of .....

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7; 5 Crores for A. Y. 2008-2009 is pursuant to the above and/or other discrepancies which may arise during investigation/assessment in different companies/ concerns/in different companies/concerns individuals /huf assessee of Nitin Fire Groups. vi) The sum of ₹ 1.82 crores is for covering the various issues, such as 25% of ₹ 1.19 lacs amounts spent in Alert Fire Protection Ind. Ltd. (group company) towards party on IPO success of Nitin Fire Protection Ind. Ltd. and same is coincidenc .....

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ary disclosure of income is much higher than the discrepancies and the same is made as a gesture of co-operation with I.T. Department. 9. The assessee further relied upon the submission filed vide letter dated 30-12-2009 before the A.O. about which the Ld. CIT(A) observed that the same had clearly controverted the contents of the remand report dated 02-06- 2011. The relevant part of the said submissions has been reproduced in the impugned order as under: "Dear Sir, Sub : Assessment proceedi .....

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d explanation necessary for completion of assessment proceeding at the earliest. 1. It is very clear that during the search and during the declaration ₹ 5 Crores was offered in the hands of Nitin M. Shah to cover up the various issues which may arise during the assessment in the cases of Nitin Shah group and in the cases of Nitin Fire Group companies during the assessment. 2. However, during the declaration, as there was discrepancy in certain goods/commodities purchased by Nitin Cylinder .....

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that they cannot be any separate and/or double addition again on any other account. 3. Further, the assessment is high pitched and fair and proper opportunity of submission and/or cross examination not given at all. 4. We have not been given the copies of statement of other parties and the cross examination of the same does not given. We request you to grant us the same before finalization of the assessment. 5. Despite our request and our various submission, you have failed to consider our submi .....

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s and documents placed on record. I have also taken into consideration the assessment framed under s.143(3) in the case M/s. Nitin Cylinders Ltd., for the same year i.e. 2008-09. In the assessment of M/s. Nitin Cylinders Ltd. for the A.Y 2008-09, based on the findings in the course of the search conducted on the group and also based on the post search enquiries conducted, an aggregate sum of ₹ 5,81,03,042/- (Rs.3,15,00,000/- + 2,66,03,042/-) had been held as bogus capital expenditure and h .....

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is evident from the record. It can be seen from the statement recorded from Shri Nitin M. Shah, read alongwith his letter dated 22.12.2009 (reproduced in page 11 of the assessment order) that the disclosure is given "as commodity trading in grey market as advised then". From the reading of the said letter it can be observed that disclosure of ₹ 5 crores under the nomenclature of commodity trading" to cover ₹ 3.51 cores capitalized in M/s. Nitin Cylinders considered as .....

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has been stated by the appellant that a sum of ₹ 1.82 crores (out of the disclosure of ₹ 5.36 crores) is for covering various issues such as 25% of ₹ 1.19 lacs spent in the group company Alert Fire Protection Ltd., towards the party organized in connection with the IPO success and 25% of ₹ 3.21 lacs being the hotel bill of ITC partly for business promotion with foreigners on the occasion of the marriage of Mr. Kunal Singh. It is further stated that this disclosure may al .....

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come i.s ₹ 2,66,03,042/-. It therefore follows that the addition of ₹ 3,13,38,798/- stands deleted. 11. We have considered the rival contentions of the Ld. Representatives of the parties. In our view, the Ld. CIT(A) has rightly observed that the assessee had declared a sum of ₹ 5 crores for the year under consideration. The said disclosure was on account of various discrepancies/deficiencies that may be noted in relation to claim of additions to the fixed assets in the case of .....

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uring search action, that in these type of transactions, no evidence generally is available. When there was no evidence found or detected nor there is any contention of the revenue that any evidence in this respect has been concealed by the assessee, then under such circumstances, it has not been explained by the Department as to what prompted the assessee to make such a declaration in respect of income from commodity transactions. It has also not been explained as to even why the AO had not mad .....

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