2023 (10) TMI 1025 - AT - Income Tax

Assessment u/s 153A - Income from Trading - difference between the receipts and payments as the undisclosed income of the assessee - AO has also determined the unaccounted investment - HELD THAT - AO having determined the unaccounted investment has also held that since the unaccounted receipts was the source of making above investments has already been brought to tax, no separate addition is required to be made, thus interpolating the unaccounted income with unaccounted expenditure. Income from Commission - AO held that the assessee has acted as a facilitator for providing accommodation entries and commission as per prevailing market rate @ 2% of the amount has been determined as the undisclosed income of the assessee - CIT(A has confirmed the addition made by the AO to the tune of the peak credits and deleted the addition equivalent to the amount which is the rotation of the monies - addition made of the difference between the receipts and payments was re-determined by the ld. CIT(A) resorting to the peak theory and determined the undisclosed amount to Rs. 19.86 Cr. - HELD THAT - We find that the ld. CIT(A) has made addition of expenditure incurred by the assessee reflected in the same excel sheets wherein the receipts and payments have been found out. The excel sheets reflect receipts, payments and expenditure. The expenditure as found in the excel sheets as determined by the Assessing Officer and allowed by the Assessing Officer We find that the investment in E-24 has been made in the name of Sh. Sanjay Gupta and the property has been duly registered in his name. The investment in property cannot be said to be a part of the expenditure incurred for earning of the income. Since, Sh. Sanjay Gupta is the owner of the property and all the documents are in the position of the revenue authorities, the same should have been rightly taxed in the hands of Sh. Sanjay Gupta. We make it clear that this amount of investment in E-24 cannot be considered as application of income or expenditure incurred for earning the unaccounted income. Also been informed by the ld. AR that the amounts allegedly earned by different clients has also been taxed in the hands of different assessees. Expenditure incurred at serial no. 2 3 as depicted in the table above pertains to Renovation of Flat at Common Wealth Games Village which is an asset of the assessee company and Expenses made in Mumbai Kolkata Offices are can be considered as unaccounted expenses made out of the unaccounted income earned and determined. Similarly, the payments made to Omega Securities, OFT/Option Fintech, miscellaneous office and personal, salary payments and payments made to Sh. Vinay Jain which are the part of receipts of Rs. 157,48,09,680/- and payment of Rs. 144,00,97,270/- stands interpolated in the determination of unaccounted income of Rs. 19,86,12,311/-. No separate addition on account of expenditure such as office maintenance, software expenses, salary payments made for earning of unaccounted income of Rs. 19,86,12,311/- is required to be made on account of expenditure. The order of the Assessing Officer is affirmed on this issue. All assessee arguments are found to be against the facts on record and the panchnama drawn. The panchnama drawn on the date of search clearly establish the seizure of material. This issue cannot be raised at this point in time before us. Hence, the technical grounds raised by the assessee are hereby dismissed. Commission Income earned by the assessee for facilitating normal accommodation entries - We find that these are the entries given by the assessee to various parties by utilizing the services of different broker as mentioned in the seized material on account of short term capital gains which do not form part of the receipts and payments mentioned above which have been already considered separately. Hence, we hold that the commission charged by the Assessing Officer is not on ad-hoc basis but taking into consideration the prevailing market trend in providing such accommodation entries. Keeping in view the facts, we hereby affirm the order of the ld. CIT(A).

Issues Involved:
1. Legitimacy of additions made under Section 69A and 69C of the Income Tax Act.
2. Admissibility of evidence retrieved from a personal laptop.
3. Application of peak credit theory.
4. Commission income from accommodation entries.
5. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.

Summary:

1. Legitimacy of Additions under Section 69A and 69C:
The assessee challenged the additions made by the CIT(A) under Sections 69A and 69C, arguing that the data used was not verbatim from the personal laptop but was redesigned and rearranged. The assessee also contended that the data did not qualify as evidence under Section 65B of the Indian Evidence Act, 1872. The Tribunal noted that the Assessing Officer (AO) had determined unaccounted income by examining inflows and outflows from the retrieved data, ultimately finding a difference between receipts and payments amounting to Rs. 59,23,46,638/- as the undisclosed income for the period assessed under Section 153A.

2. Admissibility of Evidence:
The assessee argued that the data retrieved from the personal laptop of Saurabh Gupta, which was found at his in-laws' premises, was corrupt and unreliable. The Tribunal dismissed these technical grounds, holding that the panchnama drawn during the search operation established the seizure of material, making the arguments against the admissibility of the evidence invalid.

3. Application of Peak Credit Theory:
The CIT(A) applied the peak credit theory, considering the entire receipts and payments to determine the undisclosed income. The Tribunal affirmed this approach, noting that the peak credit amount taxable in the hands of the assessee was Rs. 19,86,12,311/-. The Tribunal also allowed the benefit of telescoping, ensuring that the peak offered in one financial year was credited in the next financial year to avoid double or multiple additions of the same amount.

4. Commission Income from Accommodation Entries:
The AO determined that the assessee earned commission income by acting as a facilitator for providing accommodation entries, charging a commission at the prevailing market rate of 2%. The Tribunal upheld this determination, finding that the commission income was not ad-hoc but based on prevailing market trends.

5. Imposition of Penalty under Section 271(1)(c):
The penalty imposed under Section 271(1)(c) was contested by the assessee. The Tribunal, considering the allowability of expenses and the application of peak credit theory, held that the penalty initiated and levied by the CIT(A) was liable to be obliterated.

Conclusion:
The appeals by the assessee for the assessment years 2012-13 to 2018-19 were partly allowed, while the appeals by the Revenue for the assessment years 2016-17 to 2018-19 were dismissed. The penalty imposed under Section 271(1)(c) was also obliterated. The order was pronounced in the Open Court on 17/10/2023.

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