2017 (8) TMI 1062 - AT - Income Tax

Computation of the income arising from activities of accommodation entries - Held that - One thing is clear that it is writ large that the assessee has chosen a path of non co-operation with Revenue as no documents/details/ bank statements/ books of accounts etc were submitted by the assessee before the authorities below and thus it is clear that the assessee has not approached the Court with clean hands and it is well settled proposition of law that Courts will not help those who come to the Court with dirty hands. Matter remanded back.

Issues Involved:
1. Computation of income from accommodation entries.
2. Validity of search and seizure operations.
3. Admission of undisclosed income.
4. Assessment of commission income.
5. Non-cooperation by the assessee.
6. Estimation of income for different assessment years.
7. Allowance of expenses against income.
8. Treatment of business loss and carry forward of loss.
9. Application of principles of natural justice.

Issue-wise Detailed Analysis:

1. Computation of Income from Accommodation Entries:
The primary issue across all appeals was the computation of income arising from accommodation entries provided by the assessee. The AO observed that the assessee was engaged in providing accommodation entries and introduced bogus bills in the books of various entities. The assessee admitted to charging a commission of 0.30-0.40% on cheque discounting but failed to provide detailed information or bank statements. The AO estimated the income based on the average income of succeeding years and brought it to tax as income from undisclosed sources.

2. Validity of Search and Seizure Operations:
Search and seizure operations were conducted under Section 132(1) at the premises of M/s Orbit Corporation Limited Group, leading to the discovery of unaccounted cash/jewelry and incriminating documents. The Managing Director of the group admitted to undisclosed income arising from bogus purchases and cash transactions. These findings were used by the AO to assess the assessee's income.

3. Admission of Undisclosed Income:
The Managing Director of Orbit Corporation Limited admitted to undisclosed income of ?71,81,90,065/- based on seized material. The assessee confirmed involvement in providing accommodation entries and admitted to earning commission income without trading any goods.

4. Assessment of Commission Income:
The AO assessed the commission income at 1% of the aggregate of accommodation bills issued plus payments received, while the CIT(A) enhanced it to 2%. The assessee argued that the commission rate should be 0.30-0.40% and that expenses should be deducted from this gross income. The CIT(A) upheld the addition of commission income at 2% of the value of bills issued.

5. Non-cooperation by the Assessee:
The assessee did not cooperate with the AO by failing to provide bank statements, profit and loss accounts, and other details. This non-cooperation led the AO to proceed with an ex-parte assessment order under Section 144.

6. Estimation of Income for Different Assessment Years:
For assessment years 2004-05 and 2005-06, the AO estimated the income based on the average income of succeeding years. For assessment years 2006-07, 2007-08, and 2008-09, the AO made additions based on 1% of the aggregate of accommodation bills issued plus payments received. For assessment years 2009-10 and 2010-11, the AO estimated the income based on the average income of the last three years.

7. Allowance of Expenses Against Income:
The assessee claimed that expenses like salary, bank commission, electricity bill, telephone bill, and conveyance should be deducted from the gross commission income. However, the AO and CIT(A) did not allow these expenses due to the lack of substantiation and non-cooperation by the assessee.

8. Treatment of Business Loss and Carry Forward of Loss:
The assessee claimed a business loss for assessment year 2009-10, which was disallowed by the AO due to the lack of supporting details. The CIT(A) upheld the disallowance of the business loss and also denied the carry forward of loss for assessment year 2010-11 due to the lack of books of accounts and transaction details.

9. Application of Principles of Natural Justice:
The assessee argued that the principles of natural justice were violated due to the lack of reasonable time to produce bank statements and other details. However, the CIT(A) observed that adequate opportunities were provided during appellate and remand proceedings, thus satisfying the principles of natural justice.

Conclusion:
The tribunal set aside the orders of the authorities below and remanded the matter back to the AO for a de-novo assessment, directing the AO to conduct coordinated enquiries and investigations. The assessee was directed to cooperate and provide all necessary details, including affidavits, books of accounts, and transaction details. The AO was instructed to compute the income afresh in accordance with the law and provide the assessee with adequate opportunities to present their case. The appeals were allowed for statistical purposes.

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