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TMI Blog2016 (5) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... ating undisclosed expenditure which were found during search and survey operations. No material was found in search and survey operations which would prove that the assessee was managing or controlling the 24 companies except placing reliance on statements of certain employees of those companies which were later retracted by them. No material has been brought on record by the revenue to prove that sufficient action was taken by the revenue on the employees who had retracted the statements and who had also originally offered to pay tax on the commission income derived by them. No examination was carried out by the revenue with Mr.R.K.Gupta , Vice President and Company Secretary of M/s Bhushan Power & Steel Ltd who had addressed a letter dated 10.2.2010 stating that documents like memorandum of sale of shares, delivery of share certificates etc are being sent for getting signature from directors of respective companies of Mr.S.M.Nahata. This letter was admittedly addressed by Mr.R.K.Gupta to one of the employee of those companies which were found in the office premises of the assessee. The assessee had already demonstrated the circumstances under which the papers of those co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation entries could be taxed in the hands of the assessee in the facts and circumstances of the case. 3. The brief facts of this issue are that the assessee is a practicing chartered accountant and is the proprietor of M/s S.M.Nahata Co. having its office at Room No. 16, 2, Clive Ghat Street, Kolkata 700001. There was a search u/s 132 of the Act conducted on 3.3.2010 at the residential premises of the assessee. Parallely survey u/s 133A of the Act was also carried out at different office premises of the assessee as well as those of the companies allegedly managed and controlled by the assessee. During the course of such operations, certain valuable assets such as cash (Rs. 12,03,000/- in residence and ₹ 1,20,000/- in office) , Jewellery valued at ₹ 36,19,913/- as well as books of accounts and other documents were found. The search and survey action in the case of the assessee wsa initated in consequence to the search conducted against M/s Bhushan Power Steel Ltd group of cases. The assessee gave explanation for the cash and Jewellery found during the course of search which was accepted and no addition was made on that account by the Learned AO. In the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxviii) Pages 12 to 19 of document SMN-1 seized from your residence have list of shareholders of different companies. The shareholders includes you, your employee Mr. Radhakant Tiwari and your group companies. The companies whose shareholders list were found had given accommodation entry in form of share capital to above mentioned four companies of Bhushan Group. (xxxix) Page 51 of document SMN-1 seized from your residence is a ledger of M/s. Bhushan Power Steel Pvt. Ltd. in the books of M/s.Caplin Commercial Pvt. Ltd. for the period 01-04-2008 to 31-03-2009. Finding of this ledger at your residence proves that you were not only aware of such transactions but also involved with them. (xi) Page No. 68 of document. PMCM/17 impounded from your office at 8, Canning Street, 3rd floor, Room No. 305, Kolkata-1, is a letter dated 10/02/2010 from Mr. R.K.Gupta, Vice President and Company Secretary of M/s. Bhushan Power Steel Ltd. In this letter Mr. Gupta has written to one Mr. Alkesh Sharma of Kolkata office of his company that they were sending documents like Memorandum of sale of shares, delivery of share certificates, letter of offer for sale of shares and list of transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was director of M/s.Castle Commodities Pvt. Ltd., M/s. Mani Marketing Holding Pvt. Ltd.; M/s. Multiplier Enterprise Pvt. Ltd. and M/s. Piyush Mercantile Pvt. Ltd. In his replies to question nos. 5 7 of that statement, he has stated that Mr. S.M. Nahata was key man of their group of companies and accounts of those companies were prepared at your instruction only. In replies to question nos. 10 12, he reiterated that only you would be able to explain the transactions entered into by the companies in which Mr. Bej was directors with companies of Bhushan Group. A copy of this statement is enclosed with this letter. (xliv) Statement of Mr. Radha Kant Tiwari was also recorded during survey U/s. 133A on 03-03-2010. In his statement, he has accepted that he was director of M/s. Ascent Vyapaar Pvt. Ltd., M/s. Briiliant Vyapaar Pvt. Ltd, M/s. Caravan Vyapaar Pvt. Ltd; M/s. Mission Vyapaar Pvt.Ltd. and M/s. Braggart Vyapaar Pvt. Ltd. In reply to question no. 3 he has accepted that accommodation entries were provided by these companies to the companies of Bhushan Group. A copy of this statement is enclosed with this letter. (xlv) Statement of Ujjwal Das was recorded duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir office at that address. The survey team found that premise closed. On enquiry, it was found that Mr. Manish Sharma was owner of that premise and he has lat out the premise to Mr. S.M. Nahata as admitted by him in his statement recorded. He categorically stated in his statement that S.M. Nahata is the only person who sometimes attends the office, usually once in a month, collects the letters from the letter box and goes away. 3. From the documents seized / impounded during search at your residence and survey at your business premises and statements of your employees and other persons during survey, it is established beyond doubt that you are managing and controlling affairs of 31 companies list of which were intimated to you vide this office letter dated 30-11-2011. The documents mentioned above clearly established that the companies had their offices at the premise owned by you and your family members. It is also established from these documents and statements recorded during survey that either you or your employees or both were directors of these companies. It is also crystal clear from these documents that you were actively engaged in providing accommodation entries to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... base. Such services in no way hings upon any activity which may amount to Jama Kharchi / accommodation entries as alleged by you in your impugned notice. Undersigned therefore is totally perplexed at the several allegations made by you in your impugned notice. May I say and submit that in course of search, the authorized officers and inspectors have undertaken very high-handed action and show-cause notice served by you are the bye-products of such action. My I draw your kind attention to the fact that all these activities of the Authorized Officers and Inspectors were latter on officially communicated to ADI New Delhi vide a letter dated 21.06.2010 enclosing therein the sworn affidavits of the persons whose statements are now being relied upon by you. Since the retraction made by them is a matter of record and such retractions on sworn affidavits by them has not been challenged till this date by the Department nor have you allowed me cross-examination of these persons in relations to their statements, the reliance placed by you on such statements are not correct. I deny any of the persons, whose statements have been put in your notice, are employees of the undersigned or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- 4,95,440/- 3. 2007-08 50,81,47,724/- 27,94,812/- 4. 2008-09 96,76,11,164/- 53,21,861/- 5. 2009-10 95,82,08,500/- 52,70,147/- 6. 2010-11 27,90,97,545/- 15,35,036/- Total 3,02,92,04,518/- 1,66,60,624/- 4. On first appeal, the assessee argued that the Learned AO had referred to various pages of the documents and papers seized from the residence and office premises of the assessee as also the statements taken on oath of Sri Sandep Bej, Radha Kant Tiwari, Ujjwal Das and Baldeo Singh and issued show cause to the assessee. Based on the same, additions have been made each year on account of commission alleged to have been earned by the assessee from accommodation entries. It was argued that the finding of the Learned AO was based on mere suspicion, surmises and conjectures divested of any evidence as the Learned AO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trol of the companies and the earning of commission income by the assessee on the accommodation entries allegedly provided by such companies which the Learned AO had failed to bridge through any credible material or evidence. It was further argued that it had to be established that accommodation entries were actually provided by the companies ; that commission income was received on such accommodation entries ; and that the commission income so received was not earned by the companies responsible for providing the accommodation entries but by the assessee and consequently taxable in the hands of the assessee. It was further argued that the Learned AO had only referred to prevalent market practice to conclude that commission @ 0.55% was received for providing accommodation entries without providing the details as to which market inquiry was actually made by the Learned AO. The Learned CITA appreciating the various contentions and arguments of the assessee deleted the addition made in the hands of the assessee. Aggrieved, the revenue is in appeal before us for all the asst years. 5. The Learned DR reiterated the observations of the Learned AO and argued that none of the specific q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower Steel Ltd vide document PMCM/17 impounded during survey. Based on this, it was argued that how does a person by name Mr.R.K.Gupta , who is stationed in Delhi, is aware of the fact that the said companies belong to Mr.S.M.Nahata (assessee herein). 6. In response to this , the Learned AR argued that the assessee had clearly replied to the show cause notice that he has been rendering various services as a chartered accountant to those companies and accordingly their papers were found in his premises which is not unusual. It was argued that ROC site does not contain any data to prove that the transactions are merely accommodation entries which was heavily relied upon by the Learned AO. It was argued that the Learned AO states that it was gathered that the prevalent market rates of commission varies from 0.25% to 0.55% of the transactions which does not in any way flow from any of the seized documents found during the search or survey. He stated that no addition could be made without any reference to any seized material. In support of this, he placed reliance on the decision of the Hon ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the case of DCIT vs M/s Glamour Vanijya Pvt Ltd in ITA Nos. 308-309 /Kol of 2011 dated 7.3.2012. c) Decision of Co-ordinate Bench of Delhi tribunal in the case of DCIT vs Winsome Finance Pvt Ltd in ITA Nos. 6457 6458/Del/2013 dated 30.9.2015. d) Decision of Co-ordinate Bench of Delhi tribunal in the case of Supreme Polypropolene P Ltd vs ITO in ITA No. 4622/Del/2009 dated 28.2.2010. e) Decision of Hon ble Punjab Haryana High Court in the case of CIT vs Faqir Chand Chaman Lal reported in (2003) 262 ITR 295 (P H). 7. We have heard the rival submissions and perused the materials available on record. The primary facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. We find that the valuables such as cash and jewellery found in the course of search and survey have been treated as explained by the Learned AO. The details of 21 bank accounts were also found in the search and survey operations which were explained at the assessment stage that all the bank accounts were duly disclosed in the regular books of accounts of account holders which has been accepted by the Learned AO. 7.1. We find that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by parties. The Learned AO had only verified the balance sheets together with the list of shareholders and directors as available in the ROC website. These details would not in any way lead to a conclusion that would be tenable in law that the transactions are merely accommodation entries. In any case, the details available in ROC website does not constitute any search materials. We hold that no evidence has been brought on record by the Learned AO by way of documentary proof to show that assessee was in any way involved with these companies financially except acting as a consultant for the companies in consideration of which , professional fees were received by the assessee. 7.3. With regard to the decision relied upon by the Learned DR on the Hon ble Chattisgarh High Court in the case of CIT vs D.R.Bansal Ors reported in 327 ITR 44, we find that though the presumption u/s 132(4A) of the Act is applicable to assessment proceedings, we find that the assessee had categorically replied in his letter before the Learned AO to the show cause notice that the relationship between him and the various companies were only on account of profession and not otherwise and it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material collected and statement recorded during the survey u/s 133A are not conclusive piece of evidences by itself. The aforesaid decision was affirmed by the Honourable Supreme Court in CIT , Salem vs S.Khader Khan in Civil Appeal No. 13224 of 2008 6747 of 2012 dated 20.9.2012, wherein their Lordships of Supreme Court held as under:- Heard Counsel on both the sides. Leave granted. The civil appeal filed by the department pertains to Assessment Year 2001-02. In view of the concurrent findings of fact, this civil appeal is dismissed. (iv) ACIT vs Shanti Kumar Surana reported in (2015) 44 CCH 0241 KolTrib in IT(SS) A Nos. 12 to 16/Kol/2012 , 140 141/Kol/2011 , 17 to 19/Kol/2012 dated 22.6.2015, wherein the Head Notes are reproduced hereunder:- Search and Seizure-New scheme of assessment in search cases-Validity of assessment framed u/s 153A-Search and seizure operation was conducted at residences, office premises and bank lockers on number of individuals and group companies within Surana Group of cases-Assessee was one of persons searched-Assessee in response to notice u/s 153A disclosed return of income at ₹ 3,05,880/- for releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were already completed for those assessment years originally, assessments framed u/s. 153A of the Act was in valid and quashed-Revenue's Appeal dismissed. (v) CIT vs P.V.Kalyanasundaram reported in (2006) 282 ITR 259 (Mad) the assessee had purchased land on Oct.26 1988 registered for ₹ 4.10 Lakh from one Rduring the course of search some notings had been found indicating a higher consideration. Mr. R's Statement was also taken. In a sworn statement on 8th December, 1998 he admitted that he received ₹ 34.85 Lakhs. In another sworn statement on 11th Dec, 1998, R stated that he received ₹ 34.85 Lakhs. Subsequently in an affidavit given. on 8th Jan, 1999 he mentioned the sale consideration at ₹ 4.10 lakh. The CIT noted that due to conflicting nature of statements given by sellers, his statement could not be relied upon and deleted the said addition. The Tribunal confirmed the findings of the CIT(A). On appeal the Madras High Court held that the burden of proving actual consideration in such a transaction was that of the revenue. The AO did not conduct any independent enquiry relating to the value of the property purchased. He merely relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge figure over and above the figure booked in the records and accounts changed hands between the parties and thus no addition could be made. The above case clearly establish that merely on account of suspicion and conjectures without any evidence or proof that the assessee actually and or even notionally received any commission on account of alleged accommodation entries, no addition can be made. Hence the addition made on account of commission received in any of the year is without any basis and should be deleted. (ix) CIT vs Faqir Chand Chaman Lal reported in (2003) 262 ITR 295 (P H). The Tribunal also ordered deletion of the addition of ₹ 21,00,000 made on account of interest allegedly earned by the assessee from pawning business for the assessment years 1986-87 to 1996-97 by assigning the following reasons: After considering the abovementioned submissions of learned counsel for both the parties, we are of the view that the Assessing Officer, while making the addition was not sure regarding the amount invested by the assessee in pawning business On the one hand, he calculated the amount of interest at ₹ 3,40,000 per annum and, on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, none of the questions, of which determination has been sought by the Revenue, can be treated as a substantial question of law Hence, the appeal is dismissed. The other decisions relied upon by the Learned AR does not require any reference as the same are otherwise covered in the aforesaid cases relied herein. 7.6. To sum up , we find that (i) No evidence has been brought on record by the revenue to prove that the transactions of 24 companies with Bhushan group of companies are accommodation entries. No material has been brought on record to prove that the said companies were actually engaged in providing accommodation entries. (ii) No material has been found in search or survey to conclusively establish that all the 24 companies are dummy and the assessee had managed and controlled their financial affairs. The Learned AO had alleged that cheques were issued in lieu of cash received. But then, there was no recovery of unaccounted cash during the search or survey operations. (iii) No evidence has been brought on record by the revenue to prove that the assessee had earned commission income @ 0.55% on these alleged accommodation entries. Moreover, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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