Manu Stock Broking Private Limited Vs ACIT (ITAT Mumbai)
Introduction: The case of Manu Stock Broking Pvt Ltd Vs ACIT, adjudicated by the Mumbai Income Tax Appellate Tribunal (ITAT), delves into the impact of additional issues on proceedings under sections 147 and 148 of the Income Tax Act. Let’s delve into a detailed analysis of the ruling.
Detailed Analysis: The appeal was filed by the Assessee against the order passed by the Commissioner of Income-tax (Appeals)-47, Mumbai, pertaining to the Assessment Year 2013-14. The Assessee declared its total income at Rs. 6,01,110/- and was subsequently assessed under section 143(3) of the Act, resulting in a computed total income of Rs. 12,555,970/-.
The Assessing Officer (AO) received information regarding alleged bogus accommodation entries received by the Assessee. Despite no additions being made based on these reasons, the AO proceeded to make additional disallowances concerning trading losses and cash expenses on commission.
The Tribunal observed that additions unrelated to the reasons for reopening the assessment are unsustainable without a fresh notice under section 148 of the Act. Citing legal precedents, including the case of Commissioner of Income-tax-5, Mumbai vs. Jet Airways (I) Ltd and Ranbaxy Laboratories Ltd. vs CIT, the Tribunal ruled that such additions render the assessment void ab initio.
The Tribunal allowed the Assessee’s appeal, emphasizing the need for adherence to procedural requirements and quashed the assessment order.
Conclusion: The ruling in Manu Stock Broking Pvt Ltd Vs ACIT underscores the significance of adherence to procedural norms in income tax assessments. Additional issues introduced without proper notice under relevant sections can invalidate assessment orders. This case highlights the importance of legal precedent in safeguarding taxpayers’ rights and ensuring fair assessment practices.
FULL TEXT OF THE ORDER OF ITAT MUM-BAI
This appeal has been preferred by the Assessee, against the order dated 20/07/2023 impugned herein passed by the Commissioner of Income-tax (Appeals)-47, Mumbai (in short ‘Ld. Commissioner’) under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for the A.Y. 2013-14.
2. In the instant case, the Assessee had declared its total income at Rs.6,01,110/-by filing its return of income on 23/09/2013 which was assessed under section 143(3) of the Act vide order dated 16th March, 2016, whereby the total income of the Assessee was computed at Rs.12,555,970/-.
3. As per assessment order, subsequently, the information was received vide emails dated 22/03/2020 and 24/03/2020, which reads as under:
“That the Assessee company has received bogus accommodation entries amounting to Rs.68,15,357/-. Credible information was received that 31 non-individual current accounts were opened during November 2012 and March 2013 at Sarat Bose Road Branch, Kolkata, West Bengal [Sol Id 1172]. These parties are mainly dealing in Wholesale Garment, Metal and Non-food items trading. Since opening of these accounts within span of six months, high value transactions mainly in the form of cash, RTGS/NEFT and internal transfers happened. High value cash deposited within the CC limit of Rs.10,00,000/- and subsequently transferred to other non-individual entities of the same branch. Internal transfers are received from other non-individual entities of the same branch. Most of these accounts are repeatedly violating multiple rules in AML software as per the PMLA act. Most of the accounts are newly opened since November 2012. There is crossing of transaction threshold limit in most of the accounts as per the customer profile. High Value cash deposited in non-individual account and the same funds are subsequently transferred to other non-individual accounts of the same branch. Receiving funds in non-individual accounts through internal transfers are subsequently transferred to other non-individual accounts of the same branch or to third parties through RTGS/NEFT. Since opening of these 31 accounts within a span of six months, a total credit turnover is Rs. 194,77,39,375/- and total debit turnover is Rs. 194,76,56,116/-.
3. It is seen that the total cash turnover [deposits] is Rs.81,76,25,000/- and total cash turnover [withdrawals] is Rs.90,63,000/-. High value transactions are routed through these accounts to other non-individual entities of the same branch or other branches. On the basis of modus opted in the transactions suspicion is raised. On perusal of bank statement of these entities, it is observed that the entire funds credited through cash deposit were transferred to M/s. Gagandeep Mercantile Pvt. Ltd. from where transferred to the bank accounts of different entities.
3.1 Further, it is seen that M/s. Gagandeep Mercantile Pvt. Ltd. had shown a turnover of Rs.94 Lakhs only, whereas as per account statement of the company it is seen that a total of Rs.76.67 crore credit into the account. Further, it is also observed from the shell company database available with Investigation Wing Kolkata that the company is among the shell company which is owned, controlled and managed by well known entry operator named Shri Mahendra Kr. Agarwal of Kolkata. The current account of the entities were purposely opened only to deposit cash into the account and was closed after that, which implies unaccounted cash from different locations were deposited to pretend genuineness of cash and subsequent transfer of deposited cash were channelized to accommodate unaccounted cash of the beneficiaries through different companies.
3.2 Further, it is observed that the substantial cash has been deposited in the current accounts of 31 entities. The cash fund deposited into those accounts was further routed through various shell entities and finally to the ultimate beneficiaries who brought back their unaccounted money. On perusal of report, following movement of money is noted which is eventually been credited to the Assessee-company:
