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TMI Blog2017 (11) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 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 ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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. - I.T.A. No. 5739 to 5745/Mum/2012 And I.T.A. No. 5713 to 5719/Mum/2012 - - - Dated:- 25-9-2017 - D.T.GARASIA, JM AND SHRI G.MANJ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition of ₹ 70,92,721/- to the income of the Appellant, being Commission earned @ 2% on the bogus sales bills issued during the year to various parties. 7. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in holding that the cash deposits in the bank accounts of the persons other than assessee (third parties) as undisclosed income of the appellant. 8. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of ₹ 7,01,650/- to the income of the Appellant on the basis of the cash deposits in the various bank accounts of the persons other than assessee (third parties), ignoring the fact that the Appellant was merely a commission agent of those persons. 9. The appellant craves leave to add, amend alter or delete the said ground of appeal. 2. Brief facts of the case extracted from ITA No. 5739/Mum/2012 in the case of Shri Dilip C. Shah for the assessment year 2001-02 are that search and seizure u/s 132 of the Income tax Act, 1961 was carried out in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee further submitted that the documents found during the course of search was belonging to the various suppliers of goods who kept the documents in his possession to facilitate the transaction expeditiously. Therefore, these documents cannot be considered as his documents to hold that he floated dummy concerns in the name of fictitious/existing persons so as to issue bogus bills. 3. Consequent to search proceedings notice u/s. 153A of the Income tax Act 1961, was issued directing the assessee to file the return of income for the six assessment years immediately preceding the assessment years in which the search took place. In response to notice, the assessee has filed returns of income for the assessment years 2001-02 to 2007-08 on 15.02.2008. The case has been selected for scrutiny and accordingly notice u/s 143(2) and 142(1) along with detailed questionnaire were issued to the assessee. In response to the notices authorized representative for the assessee appeared from time to time and furnished various details, as called for. 4. During the course of assessment proceedings, the A.O noticed that the assessee is operating more than 100 bank accounts in various enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e further submitted that the bank account found during the course of search and sale bills found in various names do not belong to him, but the same were belonging to the entities manufacturing goods which are kept in our in custody for easy facilitation of business, therefore, the same cannot be construed as dummy entities floated by me for facilitating issue of bogus bills. 6. The A.O, after considering the submissions of the assessee and also taking into account the seized material found during the course of search, came to the conclusion that the assessee along with Shri Atul Sanghvi was engaged in the activity of providing accommodation entries of bogus purchase bills to various beneficiaries. The A.O further observed that the modus operandi of the assessee is that he opens bank accounts in various fictitious / existing persons name by fabricating address proof and PAN card, which is evident from the fact that he has opened bank account s in one persons name in different bank accounts by fixing his photograph on the fabricat d address proof and PAN No. The A.O further observed that the statement recorded during the course of search from one Mr. Yashwant Pandya who claimed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addresses where returned unserved; however the letter sent by the DRI were received and had been found in the possession of the assessee indicating that these two persons are managing the affairs of all the companies whose letterheads and bank accounts have been found from the assessee s possession. 7. From the above inquiries and evidences gathered during the search and post search enquiries, the A.O came to the conclusion that Shri Atul Sanghvi and Shri Dilip Shah where the persons, who had operated 100 bank accounts in different entities name to facilitate the issue of bogus bills to various beneficiaries. The A.O further observed that the seized documents found during the course of the search undoubtedly proved that the duo were involved in providing accommodation entries of bogus purchase bills in the name of dummy concerns. The A.O further observed that the duo have fabricated documents like PAN card, signature etc, to open bank accounts in the name of different persons who had nothing to do with those transactions. The assessee and Shri A. Sanghvi have operated bank accounts in different persons names, however the real transactions have been carried out by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an appeal before the CIT(A). When the appeals filed by the assessee were pending before the CIT(A) for adjudication, the CIT [Central Circle(1)], Mumbai had issued a show cause notice u/s 263 of the Act, and on the ground that the assessment order passed by the A.O u/s 143(3) r.w.s. 153A was erroneous insofar as it is prejudicial to the interest of the revenue, as the A.O has not considered the issue of bogus sales bills issued in the name of M/s Varun Industries Ltd. and also unexplained credits found in the bank accounts operated by the assessee. The CIT Mumbai, after considering the explanations of the assessee, set aside the order passed by the A.O u/s 153A r.w.s. 143(3) and directed the A.O to redo assessment with the following directions: 4.2.1 The total amount included in the bills raised in the name of M/s. Varun Industries Limited should be assessed protectively in the hands of the assessee to the extent of his share in the business, to safe guard the interest of the revenue. The commission income on the said transactions should be assessed proportionately on substantive basis in the hands of the assessee, as already done in the original assessment. 4.2.2 Regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts would be reduced from the aggregate amount of unexplained bank deposits and taxed on protective basis in respective year or years. 10. The assessee has challenged 263 orders passed by the CIT, for all the assessment years before the ITAT. The ITAT Mumbai A Bench in IT(SS)A No. 30/Mum/2011 for the assessment years 2001-02 to 2007-08 upheld the revision order passed by the CIT(A) and dismissed appeals filed by the assessee. The relevant portion of the order of the ITAT, is reproduced as under:- 7. We have considered the rival submissions. A perusal of the assessment order reveals that the AO had given a categorical finding that the total credit in the assessee's various bank accounts was amounting to ₹ 2122,27,57,495/out of this a sum of ₹ 856,64,49,533/- had been treated as bogus sales for which sales bills were found and were duly impounded. However, the remaining sum of ₹ 1388,09,01,411/- had remained unexplained in spite of various opportunities given to the assessee. The AO had treated the same as unexplained income of the a.ssessee and decided to bring it into tax in various assessment years. He also worked out the additions for differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... celled, would stand to be restored, while the assessee's action in appealing there against on merits would stand barred by time. We are in full agreement with the said premises, which can be said to represent the ratio decendi of the said decision. The proper course under the circumstances would be to prevent such a prejudice were such an eventuality to arise in future. However, that may not necessarily imply a requirement to decide the assessee's appeals on merits by the first appellate authority, need or occasion for which would arise only where the assessee's impugned assessment/s, since set aside, stand restored by accepting his challenge to the revision order, and which is not certain, so that it may never arise, resulting in his decision on merits becoming futile or unfructuous. Reserving the assessee's statutory right to contest its assessment/s under the appellate procedure, which is what we understand, as also aforestated, to he the also intent and purport of the tribunal's order in Di/ip Shah v. ACIT (supra), would in our view present a reasonable and equitable course under the circumstances. 3.2 The above course, besides being in conformity with that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are in fact operated and controlled by them and the bank accounts were considered in their income-tax returns filed for the respective assessment years. The assessee also filed copies of I.T. returns of few persons and claimed that those assessees have considered the bank accounts in their Income tax returns for the respective assessment years. 13. The A.O, after considering the explanation of the assessee, observed that the assessee has not discharged his onus of proving the identity, genuineness and creditworthiness of any of these transactions pertaining to sum total found credited in the bank accounts operated in various entities name of ₹ 1388.09 crores. Though the assessee has simply relied on the stand that some parties were produced during the original assessment proceedings or that certain annual account and copies of I.T. returns have been submitted in some cases, it however does not discharge the onus of proving the credits found in the bank accounts. The A.O further observed that the assessee has merely made his submissions which were made even at the time of original assessment proceedings and have been rejected there itself without any further corroborative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions and the requirement thereof. The assessee also challenged each and every additions made by the A.O. The assessee has filed written submissions and contended that the A.O was erred in treating him as hawala operator involved in providing accommodation entries ignoring all the evidences filed by him to prove that he is registered commission agent in the market involved in the business to facilitate sales and purchase of various entities by selling goods. The assessee also challenged additions made by the A.O towards total sum found credited in the bank accounts of various individuals. The assessee submitted that the bank accounts found and seized during the course of search are in fact belong to entities manufacturing goods which are kept in his custody for easy facilitations and business therefore, the same cannot be considered as his own documents used for issuing bogus bills. The assessee further submitted that insofar as estimation of commission of total sales bills in the name of M/s Varun Industries Ltd and others and also additions made towards total sales bills on protective basis, once he was treated as bogus bills provider, and commission income is estimated on to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O towards sales bills raised in the name of M/s Varun Industries Ltd. and estimation of commission on sales bills, additions towards unexplained bank credits, the CIT(A) for the detailed reasons recorded in this order dated 24-07 2012observed as under:- 2.6.1 Vide ground No.3 the appellant has raised an issue regarding an inference drawn by the Ld. A.O. that he indulged in the business of issuance of bogus bills. From the facts of the case, it is apparent that appellant was found in possession of several bank accounts and other related documents of fictitious persons and a large number of sale bills issued to various concerns including those of M/s.Varun Ind. Ltd. were found alongwith a number of cheque books and bank lips. Evidence was also found of tampering of documents such as PAN cards by substitution of names and photographs. In one of such case, same person's photo was used in three different bank accounts in three different names. Thus, it cannot be said that appellant was not indulged in the business of issuance of boqus bills. By making a mere averment that he was not involved in such activity in spite of a host of such evidence found in his possession would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of their existence as well as for carrying on of business relating to the sale bills found from the appellant's possession. As per the original assessment order framed by the Ld. AC. and which appears as an attachment to the impugned Assessment order pending adjudication before me, Ld. A.O. has pointed out that none of the parties except one had filed his/its return of income and therefore nothing turns on the fact that some of the parties were produced before him during the course of original assessment. Ld. A.O. has further pointed out that the parties had not been able to establish with any documentary evidence regarding delivery of manufactured goods to different parties and no books of accounts were produced before him for verification. According to the Ld. A.O., entries in various books of accounts remained unexplained and therefore appellant's version that the various entities/persons were carrying out genuine business activities remained unsubstantiated. 2.8.2 The same facts have been reiterated by the Ld. A.O. during the assessment framed which has been appealed against before me. 2.8.3 The Ld. A.R. in his submission has dealt with ground Nos. 5 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se accounts could not be attributed to the appellant's business or profession. He further asserted before the Ld. A.O. that the appellant worked as agents for purchases in respect of some of their seller principals and in order to facilitate the transactions for such principals, especially purchase transactions where prompt and in time payments were of utmost significance, signed cheque books duly signed by third parties were kept with the appellant in confidence. In view of the above facts, it was pleaded that the bank accounts found during the course of search at the appellant's premises were not benami accounts and the signed cheque books were kept only to facilitate smooth trade. 2.9.2 Ld. A.O. was not satisfied with the submissions made and for the following reasons he made the addition in the various assessment years pertaining to the search: 1. The assessee has not discharged his onus of proving the identity, genuineness and creditworthiness of any of these transactions pertaining to ₹ 1388. 09 crores. 1. Assessee representative has simply re//ed on the fact that some parties were produced during the original assessment proceedings or that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being commission earned for providing and facilitating the said bills would be eligible to be added in his hands proportionately as per the share of is profits in the said business. 2.9.3 I have considered the rival submissions and afler perusing the record, I am completely in agreement with the view taken by the Ld. A.O. that the appellant was engaged in issuing bogus bills and for that purpose he was maintaining benami bank accounts in the names of different persons, dummy or existing. Further, the appellant was engaged in such transactions and earned substantial commission on the same. To me it appears to be a pure case of money laundering and nothing else as the appellant despite being given a number of opportunities failed to produce all the parties in whose names the bank accounts were being maintained and the letters issued by the Ld. A.O. from time to time to these parties at the addresses mentioned were returned back unserved. Even the parties who were produced before the Ld. AG. did not file any return of income except in one solitary instance and no books of accounts or other documents were produced to substantiate the claim made by the appellant and his witnesses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number of accounts were being operated by Shri Atul A. Sanghvi and Shri bilip C. Shah in various branches including his branch and that these accounts were never operated by any person other than Shri Atul A. Sanghvi and Shri Dilip C. Shah. All the cheques in these accounts were deposited by them and the cheques for withdrawal or transfer were also submitted by them further confirmed that accounts were never operated or handled by the actual account holders. This statement was also shown to Shri Atul A. Sanghvi and Shri Dilip C. Shah who confirmed, during the course of cross examination, that the statement was correct. Ld. A.Q. had discussed at length in the original assessment the seized documents at para 11 thereof to come to the following conclusion: 1. That in fact Sh. Atul Sanghvi and Sh. Dilip 5hah were the persons who had operated the over hundred bank accounts and different entities. 2. That Shri Dilip Shah and Shri Atul Sanghvi were in fact involved in issuing mere bills in the name of different entities. 3. Shri b/lip Shah and Shri Atul Sanghvi (duo) was fabricating documents like PAN cards signatures etc. to open bank accounts in the name of different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O; hence grounds No. 1 or 2 raised by the assessee are dismissed, as not pressed. 20. Even on merits, we find that though the A.O had passed consolidated order, insofar as additions and computation of total income are concerned noticeably separate order has been passed for each assessment year which can be ascertained independently from the order of the A.O. The ld. CIT(A) after considering the fact and also provisions of Section 292B, observed that no assessment made in pursuance of any of the provisions of I.T. Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such assessment, if such assessment is in substance and effect is in conformity with the intent and purpose of the I.T. Act, 1961. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. in the hands of the assessee and his partner Shri Atul Sanghvi in the ratio of 50% each. 22. The Ld.AR for the assessee submitted that the Ld.AO was erred in estimating commission on total sale bills issued in the name of M/s Varun Industries Ltd @2% ignoring the fact that the prevailing common rate in the steel market ranging between 0.2% to 0.5% shall be having regard to the fact that the assessee is a registered broker in the market. The Ld.AR referring to the paper book filed, submitted that the assessee is a registered broker in the steel market involved in facilitating business of prospective manufacturer of steel goods to the buyers in the market for which he charges commission. The AO ignoring the fact has concluded that the assessee is a hawala operator engaged in providing accommodation entries and estimated commission income @2% without any basis. Insofar as addition made by the AO towards total sale bills issued in the name of M/s Varun Industries Ltd on protective basis, when a substantive addition made in the hands of M/s Varun Industries Ltd, making an addition on protective basis in the hands of the assessee is incorrect, more so, when the assessee is trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tul Sanghvi and Shri Dilip Shah, the bills in respect of various companies were prepared in the office of the assessee and those bills were prepared in the name of various concerns, whose blank cheques have been found with the assessee during the course of search. The statement of Shri Pradip M Jabalia recorded during the course of survey on 05-02-2007 also leads to an undisputed conclusion that Shri Pradip M Jabalia had given his address for correspondence for some of the accounts being operated by the duo, Shri Atul Sanghvi and Shri Dilip Shah. In his statement, Shri Pradip M Jabalia has confirmed that the letters from the banks were collected by Shri Atul Sanghvi and Shri Dilip Shah. Further, statement of Shri N.V. Neelakantan recorded on 26-02-2007 throws light on the modus operandi of the assessee that he fabricated various documents including address proof, PAN cards and ID proof of various individuals to open bank accounts in different names by fabricating the documents. This fact was confirmed by Shri N.V. Neelakantan, who categorically admitted that the assessee has operated number of bank accounts in the National Co-operative Bank. All these facts lead to a conclusion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 26. Coming to addition made towards total sale bills issued in the name of M/s Varun Industries Ltd on protective basis. The AO has made additions towards sale bills issued in the name of M/s Varun Industries Ltd on protective basis in the hands of the assessee to protect the interest of the revenue. Assessee claims that once substantial addition has been made in the hands of M/s Varun Industries Ltd, protective addition made in the hands of the assessee cannot survive in the eyes of law. 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credits found in the bank accounts of various persons are in fact not belonging to him as some of the parties have appeared before the AO and accepted that the bank accounts are operated by themselves and considered in their income-tax returns filed for the respective assessment years. The assessee further contended that the AO has accepted the fact in the original assessment order passed u/s 143(3) r.w.s. 153A dated 28-12-2011 wherein he has categorically accepted that certain parties have appeared before him and filed confirmation with regard to the bank account found in the possession of the assessee. 29. Having heard both the sides and considered material on record, we find that the assessee has not been able to discharge onus by filing necessary evidence to prove the credits found in the bank account. It is incumbent upon the assessee to explain each and every credit found in the bank accounts and sources of such credits. In this case, the assessee has failed to furnish any evidences to identify credits, genuineness of such credits and creditworthiness of any of the credits found in the bank account. Therefore, we are of the view that the AO was right in treating the sums f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon a plethora of judgements including the decision of Apex Court in the case of CIT vs Durgaprasad More 82 ITR 540 (SC) and Sumati Dayal vs CIT 214 ITR 801 (SC) wherein it was held that apparent must be considered real unless it is shown that there are reasons to believe that the apparent is not real and that taxing authorities are entitled to look into surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. The Hon ble Court also held that it is no doubt true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden to prove that it is not taxable because it falls within the exemption provided by the Act lies on the assessee. Further, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ources available in the form of income to the cash deposits and allow relief accordingly towards addition to cash deposits. 33. The next issue that came up for our consideration for the assessment year 2007-08 is additions towards cash found at the time of search. During the course of search cash to the extent of ₹ 47,30,000 has been found and seized. The AO made additions towards cash found at the time of search on the ground that the assessee has agreed for addition and also failed to explain source of cash found at the time of search. The 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. 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 wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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