2021 (7) TMI 1299 - AT - Income Tax

ITAT Upholds CIT(A)'s Decision on Book Results & Total Income Recomputation (A)

DCIT, CC 7 (3), Mumbai Versus Shri Sourabh Navalkishore Garg

The ITAT upheld the CIT(A)'s decision directing the AO to accept the book results and re-compute the total income. The ITAT emphasized the lack of ... Treating the assessee as a dummy/facilitator and/or an accommodation entry provider - Estimation of income - Acceptance of book results - re-computation of the total income from the business and other heads as in the return of income - HELD THAT:- Assessee in the course of the proceedings before the lower authorities had placed on record substantial documentary evidence which proved to the hilt the genuineness of the imports, purchases and sales that were made by him during the year under consideration i.e A.Y. 2011-12. Now when the imports of the assessee had been physically cleared under the supervision of the Customs authority, therefore, there would be no justification in stamping the said transactions as bogus. Also, the fact that the majority sales of the assessee were to exporters of repute was a material fact that substantiated the genuineness of his business transactions which we find had been disregarded and brushed aside by the lower authorities. As rightly observed by the CIT(A), the fact that the assessee’s books of accounts had been audited by a Chartered accountant further substantiates the genuineness and authenticity of his business transactions for the year in question. Also, the VAT paid by the assessee to the Maharasthra Sales Tax Authority qua the sales made to the various parties during the year under consideration instills confidence as regards the claim of the assessee of having carried out genuine business transactions during the year. Standalone reason for treating the assessee as a dummy/facilitator and/or an accommodation entry provider is his statement that was recorded in the course of the post-survey proceedings i.e way back as on 23.01.2009, which had been acted upon by the A.O without placing on record any material that would otherwise support drawing of such adverse inferences in the hands of the assessee during the year under consideration before us. Arbitrariness on the part of the A.O in treating the assessee as a dummy/facilitator and/or an accommodation entry provider during the year under consideration can safely be gathered from the fact that he had vide his respective orders passed u/s 143(3) for the succeeding years i.e A.Y 2012-13, A.Y 2013-14 and A.Y 2014-15 not drawn any such adverse inferences and had accepted that the assessee was carrying on actual/genuine business of imports/exports/trading in diamonds in the ordinary course of his business activities during the said respective years. As a matter of fact, the only reasoning given by the A.O, for concluding as hereinabove, was the support that was drawn by him from the fact that in a like manner the A.O had framed the assessment in the case of the assessee for A.Y. 2010-11 and estimated his commission income qua the import/purchase/sale transactions, which had not been assailed by the assessee any further in appeal. Be that as it may, we are absolutely not at all inclined to accept the aforesaid reasoning given by the A.O for holding the assessee as a dummy/facilitator and/or an accommodation entry provider during the year under consideration. A similar estimation of income made by the A.O in the case of the “sister concerns” of the assessee, viz. M/s Sunshine Import and Export Pvt. Ltd. and M/s Shine Star Impex Pvt. Ltd[2016 (9) TMI 1504 - ITAT MUMBAI] with a direction to the A.O to accept the “book results” of the aforesaid respective assessee’s further fortifies our aforesaid observations as regards the genuineness of the business activities of the assessee. In fact, the aforesaid order of the Tribunal in the case of the aforementioned “sister concerns” of the assessee had thereafter been upheld by the Hon”ble High Court of Bombay in Pr. CIT Vs. Sunshine Import and Export Pvt. Ltd.[2020 (3) TMI 554 - BOMBAY HIGH COURT]wherein the appeal filed by the revenue was dismissed. Accordingly, in the backdrop of our aforesaid observations, finding no infirmity in the very well reasoned and balanced view taken by the CIT(A), the present appeal filed by the revenue being absolutely bereft and devoid of any merit is dismissed. Issues Involved:1. Whether the CIT(A) erred in directing the AO to accept the book results and re-compute the total income.2. Whether the CIT(A) failed to appreciate the assessee's past admission of providing accommodation entries.3. Whether the CIT(A) ought to have upheld the AO's assessment of interest receipt, other income, and exchange difference under 'Income from other sources.'Issue-wise Detailed Analysis:1. Acceptance of Book Results and Re-computation of Total Income:The revenue challenged the CIT(A)'s direction to the AO to accept the book results and re-compute the total income. The AO had rejected the books of accounts of the assessee and estimated his income based on alleged commission from bogus transactions. However, the CIT(A) observed that similar additions in the assessee's sister concerns for previous years had been deleted by the ITAT, which directed the AO to accept the book results. The CIT(A) noted that the assessee maintained regular, audited books of accounts and provided substantial documentary evidence supporting the genuineness of his business activities. The CIT(A) found no material evidence from the AO to justify rejecting the books of accounts and estimating the income on an ad hoc basis. The ITAT upheld the CIT(A)'s decision, emphasizing the lack of corroborative evidence to support the AO's adverse inferences and the reliability of the audited accounts.2. Past Admission of Providing Accommodation Entries:The revenue argued that the CIT(A) failed to consider the assessee's past admission of providing accommodation entries. The AO had based his assessment on the assessee's statement recorded during post-survey proceedings in 2009, where the assessee admitted to issuing bogus sale bills. However, the CIT(A) and ITAT found that the AO relied solely on this uncorroborated statement without any supporting material evidence. The ITAT highlighted that a statement recorded under survey proceedings without corroborative evidence has no evidentiary value. The ITAT also noted that the AO had accepted the assessee's business activities in subsequent years without drawing adverse inferences, further questioning the validity of the AO's assessment for the year under consideration.3. Assessment of Income under 'Other Sources':The revenue contended that the CIT(A) should have upheld the AO's assessment of interest receipt, other income, and exchange difference under 'Income from other sources.' The AO had assessed these incomes separately after rejecting the books of accounts. However, the CIT(A) directed the AO to delete these additions and accept the book results, leading to the deletion of the separate assessments under 'Other sources.' The ITAT supported the CIT(A)'s decision, noting that the AO's rejection of the books of accounts was unjustified and that the substantial documentary evidence provided by the assessee confirmed the genuineness of his business transactions.Conclusion:The ITAT dismissed the revenue's appeal, affirming the CIT(A)'s decision to direct the AO to accept the book results and re-compute the total income. The ITAT emphasized the lack of corroborative evidence to support the AO's adverse inferences and the reliability of the audited accounts, thereby rejecting the revenue's grounds for appeal. The ITAT's decision was consistent with previous rulings in similar cases involving the assessee's sister concerns, further validating the genuineness of the assessee's business activities.