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2017 (11) TMI 454 - AT - Income TaxValidity of consolidated order - Held that - In this case, admittedly, the A.O had issued separate notice u/s 153A for all the years and it was only for the sake of brevity and consolidation of the fact that one single order was passed though manifestly additions for all the assessment years have been made separately and computation of income of each year in the block period has been done separately. There is no error in the order of the CIT(A). Therefore, we are inclined to uphold the findings of the CIT(A) and dismiss the grounds raised by the assessee. Assessment of income - assessee is a hawala operator involved in providing accommodation entries - issue of activity of the assessee and computation of income from such activity - Held that - The assessee has floated various dummy companies / firms to facilitate issuing of bogus purchase bills and operated bank accounts by fabricating documents. The assessee has not been able to rebut any of the findings recorded by the AO, though he claims that he is a registered broker in the steel market. Therefore, we are of the considered view that the lower authorities were right in concluding that the assessee is engaged in the activity of providing accommodation entries. Hence, we are inclined to uphold the findings of CIT(A) and dismiss the ground raised by the assessee. Additions made towards estimation of commission @2% on total sale bills - Held that - AO was right in estimating commission @2% on total sale bills issued in the name of M/s Varun Industries Ltd. The CIT(A) after considering the facts has rightly upheld the order of the AO. We do not find any infirmity in the order of the CIT(A). Hence, we are inclined to uphold the order of the CIT(A) and dismiss the ground raised by the assessee. Addition made towards total sale bills issued in the name of M/s Varun Industries Ltd on protective basis - Held that - We do not find any merits in the arguments of the assessee for the reason that though substantial addition has been made in the hands of M/s Varun Industries Ltd, the outcome of addition made by the revenue authorities will only be clear once it has been decided in appellate forums. The assessee has not been able to furnish any evidences with regard to additions made in the hands of M/s Varun Industries Ltd except furnishing an assessment order copy. The fact with regard to nature of dispute and the stages of outcome in appellate forums is not ascertainable at present. Therefore, we are of the considered view that though the Act, does not provide for protective assessments, in the interest of revenue, the AO can make protective additions to protect the interest of the revenue. Therefore, we are of the view that the AO was right in making protective additions Addition made on account of deposits in the bank account of the persons other than the assessee - Held that - the provisions of section 68 of the Act, is clear inasmuch that where any sum is found credited in the books of account of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the AO, is not satisfactory. The assessee could not prove credits found in the bank accounts. Therefore, we are of the view that the CIT(A) has rightly upheld the additions made by the AO towards total credits found in the bank account amounting to ₹ 1388.09 crores as unexplained credits in the hands of the assessee. We do not find any error in the order of the CIT(A). Hence, we are inclined to uphold the findings of the CIT(A) and reject the ground raised by the assessee. Addition towards cash deposits to the bank accounts - Held that - AO made additions towards commission on one hand and addition towards cash deposit on the other hand without telescoping the source available in the form of estimation of income towards commission. Therefore, we are of the view that there is a merit in the claim of the assessee that telescoping has to be allowed towards cash deposits to the income estimated for the relevant assessment years. Hence, we are of the view that the issue needs to be examined by the AO in the light of the explanation of the assessee and hence, we set aside the issue to the file of the AO for the limited purpose of examining whether the income estimated for the year is in excess of cash deposits found in the bank accounts. If the income is more than the cash deposit, then the AO is directed to telescope the sources available in the form of income to the cash deposits and allow relief accordingly towards addition to cash deposits. Additions towards cash found at the time of search - assessee claims that the AO has made addition towards income on estimation basis and also made addition towards cash found without allowing telescoping the sources available in the form of income - Held that - We find force in the arguments of the assessee for the reason that if the source available in the form of income, the AO is bound to telescope the sources with cash found at the time of search. Therefore, we are of the view that the issue needs to be examined by the AO in the light of the claim of the assessee and hence, we set aside the issue for the limited purpose of verification of sources available in the form of estimation of income with cash found at the time of search. If the source is in excess of cash found during the course of search and if it is not floated to any other assets or not expended elsewhere, then the AO is directed to allow telescoping towards income to the cash found at the time of search and allow relief accordingly.
Issues Involved:
1. Legality of consolidated order for multiple assessment years. 2. Estimation of commission income from bogus bills. 3. Addition towards total sale bills issued on protective basis. 4. Addition on account of deposits in bank accounts. 5. Addition towards cash deposits in bank accounts. 6. Addition towards cash found during search. Issue-wise Detailed Analysis: 1. Legality of Consolidated Order for Multiple Assessment Years: The assessee challenged the validity of a consolidated order passed by the Assessing Officer (AO) for seven assessment years (2001-02 to 2007-08). The CIT(A) and ITAT upheld the consolidated order, noting that though the order was consolidated for brevity, the additions and computations were made separately for each year. The provisions of Section 292B of the Income Tax Act were invoked, stating that no assessment shall be invalid due to any mistake, defect, or omission if it is in substance and effect in conformity with the Act's intent. 2. Estimation of Commission Income from Bogus Bills: The AO concluded that the assessee was involved in providing accommodation entries by issuing bogus purchase bills and estimated the commission income at 2% on total sales bills issued in the name of M/s Varun Industries Ltd. The assessee contended that the prevailing commission rate in the steel market ranged between 0.02% to 0.05%. However, the AO and CIT(A) upheld the 2% estimation, noting the substantial income earned and the lack of corroborative evidence from the assessee to justify a lower rate. 3. Addition Towards Total Sale Bills Issued on Protective Basis: The AO made protective additions towards the total sale bills issued in the name of M/s Varun Industries Ltd. The assessee argued that once substantive additions were made in the hands of M/s Varun Industries Ltd, protective additions in his hands should not survive. The CIT(A) and ITAT upheld the protective additions, stating that the outcome of the substantive additions in appellate forums was not yet clear. Protective additions were deemed necessary to safeguard the revenue's interest. 4. Addition on Account of Deposits in Bank Accounts: The AO added credits found in various bank accounts, totaling ?1388.09 crores, as unexplained income. The assessee claimed that the bank accounts belonged to other entities and provided some confirmations and income tax returns of those entities. However, the AO and CIT(A) found that the assessee failed to discharge the onus of proving the identity, genuineness, and creditworthiness of the transactions. The ITAT upheld the additions, noting the extensive evidence of the assessee operating numerous bank accounts with fabricated documents. 5. Addition Towards Cash Deposits in Bank Accounts: The AO made additions towards cash deposits in bank accounts, totaling ?7,01,650, attributing 50% to the assessee. The assessee argued for telescoping the cash deposits with the estimated commission income. The ITAT found merit in the assessee's argument and directed the AO to examine whether the estimated income exceeded the cash deposits and to allow telescoping accordingly. 6. Addition Towards Cash Found During Search: During the search, ?47,30,000 in cash was found and seized. The AO added this amount as unexplained income. The assessee argued that the source of cash should be telescoped with the estimated commission income. The ITAT agreed and remanded the issue to the AO for verification, directing that if the estimated income exceeded the cash found, telescoping should be allowed. Conclusion: The ITAT upheld most of the AO's and CIT(A)'s findings, confirming the assessee's involvement in providing accommodation entries and issuing bogus bills. However, it allowed the assessee's plea for telescoping cash deposits and cash found during the search with the estimated commission income, remanding these issues to the AO for further verification. The appeals were partly allowed for statistical purposes.
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