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2018 (10) TMI 1970 - AT - Income TaxUnexplained cash deposited in the bank accounts - survey u/s 133A - A ccommodation transactions - HELD THAT - As there is no infirmity in the order of the learned Commissioner appeals in holding that assessee is part of that group and no income shall be chargeable to tax in the hands of the assessee on account of accommodation entries. However it is important to note that whatever gross turnover as determined in the case of the assessee is also to be verified whether the identical amount has been considered in the hands of Mr. Sanjay Kumar Garg or not for determining commission income in his hands. There is a vast difference in the deposits shown by the assessee deposited in his account as well as gross receipts on which commission is taxed in the hands of Sanjaykuar Garg. Furthermore it was not found that what is the amount of gross receipts for computing commission income in the hands of Mr. Sanjay Kumar for assessment year 2004 05 as there is no information available in the order of the coordinate bench Whereas in the hands of assessee the total gross receipt was shown at 13, 48, 58, 000/-. Therefore we set aside this issue back to the file of the learned assessing officer to verify the amount of gross receipts deposited in the bank account of the assessee with the amount shown in the hands of Mr. Sanjay Garg as amount deposited in Suraj enterprise. If the amount deposited is reconciled with the amount of deposited in the hands of Mr. Sanjay Kumar Garg for the respective years then no addition is required to be made in the hands of the assessee. In case if it is found that the amount deposited in the bank account of the assessee is much more than the amount shown by Mr. Sanjay Kumar Garg as amount deposited in bank account of M/s Suraj enterprise for working out his commission income then it is apparent that no addition is made in the hands of Mr. Sanjay Kumar Garg on that gross receipts. Therefore to that extent the learned assessing officer is directed to make an addition in the hands of the assessee on substantive basis. However at the time of making the addition the learned AO will only take the amount of commission at the rate of 0.2% net commission as held in the case of Mr. Sanjay Kumar Garg by the coordinate bench. Accordingly the issue with respect to deposit of cash in the bank account of M/s Suraj enterprises of the proprietor concern of the assessee is decided accordingly. Assessee has shown the sales as evidence from the sales tax order - Commissioner appeals relying on the order of the coordinate bench in case of Sanjay Kumar Garg 2011 (1) TMI 689 - ITAT DELHI has held that nothing is chargeable to tax in the hands of the assessee as coordinate bench has held that the amount of commission on the turnover which is a fictitious turnover shown by the assessee is chargeable to tax in the hands of Mr. Sanjay Kumar and not assessee. On reading of the order of the coordinate bench we do not find any infirmity in the order of the learned Commissioner appeals in holding so. However it is important to note that that the amount of gross turnover shown in the hands of the assessee should have been included while working out the commission income in the hands of Mr. Sanjay garg. As These facts has not been verified by the learned Commissioner appeals while deciding the issue Therefore we also set aside this issue back to the file of the learned assessing officer to determine if the gross turnover shown by the assessee has already been taken in the hands of Mr. Sanjay Kumar Garg for working out the commission income in his hands than no addition in the hands of the assessee is required to be made. If that is not the case then the addition may be made in the hands of the assessee at the rate of 0.2% on the balance sum as held in the case of Mr. Sanjay Kumar Garg as commission income. Penalty u/s 271 (1) (C) - Penalty u/s 271(1)(c) Of the act cannot be levied so far of the addition remains on protective basis in the hands of the assessee. Further more as the issue with respect to the addition has been set aside to the file of the learned assessing officer for verification of whether the amount which has been considered in the hands of the assessee as deposited in various bank accounts or shown as sales has been considered in the hands of Mr. Sanjay for working out commission income in his hands we also set aside the issue of the penalty to the file of the learned assessing officer with a direction that if he finds that any amount which has been credited in the bank account of the assessee or shown as sales income of the assessee but has not been considered in the hands of Mr. Sanjaykumar Garg the then on that sum the amount of profit at the rate of 0.2% shall be determined as income of the assessee and to that extent the penalty under section 271 (1) (c) of the act shall be levied by the learned assessing officer after granting assessee proper opportunity of hearing.
Issues Involved:
1. Deletion of quantum addition. 2. Deletion of penalty under Section 271(1)(c) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Deletion of Quantum Addition: The appeals concern the deletion of quantum additions for AY 2004-05 and 2005-06 by the CIT(A), New Delhi. The facts reveal that the assessee, engaged in trading and commission of food grains, was linked to Mr. Sanjay Kumar Garg, an accommodation entry provider. The AO made protective additions of ?13,48,58,000/- and ?29,32,85,755/- for AY 2004-05 and 2005-06, respectively, in the hands of the assessee, while substantive additions were made in the hands of Mr. Sanjay Kumar Garg. The CIT(A) deleted the additions in the assessee's case, citing that the income was already taxed in Mr. Garg's hands. A survey under Section 133A revealed Mr. Garg's operation of providing accommodation entries through various bogus concerns. The AO, relying on Mr. Garg's statement, assessed the cash deposits in the assessee's bank accounts as unexplained income. However, the CIT(A) referred to the ITAT's decision in Mr. Garg's case, which treated the deposits as turnover for determining commission income, leading to the deletion of the additions in the assessee's case. The ITAT upheld the CIT(A)'s decision, noting that the cash deposits were already considered in Mr. Garg's hands for computing commission income. However, the ITAT directed the AO to verify if the gross receipts in the assessee's bank accounts matched those considered in Mr. Garg's case. If discrepancies were found, the AO was instructed to make additions in the assessee's hands at 0.2% net commission. 2. Deletion of Penalty under Section 271(1)(c): The appeals also addressed the deletion of penalties for AY 2004-05 and 2005-06. The AO had levied penalties for concealment of income based on the protective additions. The CIT(A) deleted the penalties, referencing the ITAT's decision in Mr. Garg's case and noting the protective nature of the additions. The ITAT concurred with the CIT(A), emphasizing that penalties cannot be levied on protective assessments. The ITAT cited legal precedents supporting the view that penalty proceedings are not permissible on protective assessments. The ITAT also noted that the issue of quantum additions was remanded to the AO for verification, and accordingly, the penalty issue was also remanded for reconsideration based on the final determination of the quantum additions. Conclusion: The ITAT upheld the deletion of quantum additions and penalties by the CIT(A), subject to verification of the gross receipts in the assessee's bank accounts against those considered in Mr. Garg's case. The appeals were allowed partly for statistical purposes, with directions for further verification by the AO.
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