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2021 (3) TMI 106 - AT - Income TaxAssessment u/s 153A - Assessee is providing accommodation entries, for which assessee might have earned commission as per the prevailing market rate of 2% to 2.25% on the total credits on the bank account of the assessee - basis of the additions which has been made in the impugned appeals are that the assessee was found to be non-existing company at the time of search and assessee-company has indulged in taking accommodation entry in lieu of cash from various paper/ shell company - HELD THAT - Assessee-company is very old company incorporated way back on 4th April, 1991 and has been duly registered as NBFC with RBI. Since then Assessee Company has been regularly filing its return with Income Tax Department, under the Income Tax Act, Returns with ROC under the Companies Act and also before RBI, being NBFC. It has been regularly filing its return of income along with audited accounts. The balance-sheet as on 31st March, 2011 reflects share capital reserve and surplus of more than ₹ 20.65 crores. It has investments of more than ₹ 18.27 crores and loans and advances given for the business purpose was at ₹ 2.43 crore and cash and bank balance of approximately ₹ 10 lakhs. The interest income has been shown at ₹ 19.65 lakhs. Same is the position in all the subsequent years balance-sheets. Thus, it cannot be held that it is non-existing company having no real business. Admittedly, during the course of search nothing incriminating or any iota of document has been found or seized from the possession of the assessee company - as per the assessment order itself nothing was found from the possession of assessee as no one was present at the premises. The entire premise has been drawn on the basis of certain information in possession with the Department from the search and seizure of group companies of Shri Sanjay Bhandari and from there it has been gathered that the assessee-company was engaged in some accommodation entry. If that is the case, then what information or material pertaining to the Assessee Company was found or unearthed which was handed over the Assessing Officer. Assessee has clarified that neither Shri Deepak Agarwal nor Shri Vishnu Agrawal are related to the assessee-company nor they were directors. Further, the document which has been referred in the assessment order has neither been found from the possession of the assessee nor it has been confronted to assessee nor any person was examined wherein the name of the assesseecompany has been implicated. This material itself cannot be held to be found from the search conducted in the case of the assessee. In case, if such a material found from the search of a different person, then the same should have been considered there in that case or satisfaction should have been recorded in terms of 153C against the assessee. In so far as this matter is concerned it cannot be reckoned as an incriminating material to make assessment under section 153A. Moreover, this paper has been recovered from a third party and is purely a blank paper without any mention of year or any amount so this cannot be basis for any inference or addition. The assessment for the Assessment Year 2011 12 to 2015 16 had attained finality. The period for the assessment year 2015-16 and 2016-17 nothing has been found from any enquiry or carried out in the case of the assessee that assessee was providing any accommodation entry and the business carry on by the assessee is sham or paper transaction, hence the addition cannot be made on the basis of any hypothesis presumption albeit it has to be based on evidences or material or enquiry conducted. The addition here in this case has purely been made on surmises and presumption that assessee might have earned 2% commission on accommodation entry. This approach is unsustainable in law and on facts. At least, there has to be a concrete finding with material that assessee was found to be carrying out shady accommodation entry transaction. Accordingly, we do not find any reason to uphold the alleged commission income in all the years. It cannot be held that assessee is paper company or was earning income was on the basis of alleged commission on accommodation entry. - Decided in favour of assessee.
Issues Involved:
1. Validity of assessment orders under section 153A. 2. Allegation of the assessee being a non-existent paper/shell company. 3. Basis for additions made by the Assessing Officer (AO) on account of commission income. 4. Incriminating material found during the search. 5. Role of the assessee in providing accommodation entries. Detailed Analysis: 1. Validity of Assessment Orders under Section 153A: The assessee challenged the validity of the assessment orders on the grounds that no valid search was conducted and no incriminating material was found. The CIT (A) held that a search warrant was issued in the name of the assessee and executed, proving the conduct of a search under section 132. The CIT (A) further noted that the appellant was found to be a shell entity engaged in providing accommodation entries, which constituted incriminating material justifying the initiation of proceedings under section 153A. 2. Allegation of the Assessee Being a Non-Existent Paper/Shell Company: The AO alleged that the assessee was a non-existent paper/shell company controlled by entry operators and involved in providing accommodation entries. The AO based this conclusion on the fact that no company was found operating at the registered address during the search. However, the assessee contended that it had been regularly filing returns and complying with statutory requirements, and the registered office address was duly disclosed in records. 3. Basis for Additions Made by the AO on Account of Commission Income: The AO made additions by estimating unaccounted commission income at 2% of total deposits in the bank accounts, presuming the assessee earned commission for providing accommodation entries. The CIT (A) confirmed these additions, stating that the assessee was a shell entity not carrying out genuine business and had provided accommodation entries to various companies. 4. Incriminating Material Found During the Search: The AO noted that blank signed receipts related to share proceeds and loan repayments were found during the search of Sanjay Bhandari and his group companies, suggesting that the assessee provided accommodation entries. The CIT (A) held that this constituted incriminating material. However, the assessee argued that no incriminating material was found from its possession, and the addition was based on presumptions and surmises. 5. Role of the Assessee in Providing Accommodation Entries: The AO alleged that the assessee provided accommodation entries to various companies of Sanjay Bhandari group and earned commission. The assessee refuted these claims, stating that no dealings were made with most of the companies listed by the AO, and the transactions with a few companies were legitimate investments. The Tribunal found that the assessee had been regularly filing returns and had substantial investments and business activities, contradicting the AO's claim of it being a non-existent paper company. Decision: The Tribunal concluded that the additions made by the AO were based on presumptions without concrete evidence. The assessee was found to be an old company with regular business activities and compliance with statutory requirements. The Tribunal noted that no incriminating material was found during the search, and the addition of notional commission income was unsustainable. Consequently, the Tribunal deleted the additions made in all the years and allowed the appeals of the assessee. Order pronounced in the Open Court on 29th January, 2021.
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