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TMI Blog2021 (12) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on the basis of commission rates and net profit is to be determined. On the grievance of assessee of exchange rate difference, CIT(A) held that when the actual business is importing for others and in the books credit in the name of exporters (other beneficiary), the exchange rate difference is not payable by the assessee and rejected the ground raised by the assessee. Assessee basically made two fold submissions that no incriminating material/ evidence was recovered during the course of search and that the assessee retracted from his statement recorded by the search party and the assessee was doing real business and not engaged in providing accommodation entry. We find that during the search action more than sufficient incriminating evidence was found, which is also supported with the corroborative evidence found in the form of e-mails and other evidence in the form of books of account recovered from the pen drive, which itself is incriminating evidence against the assessee. Assessee in his retraction statement has not explained the material evidence found in the form of e-mail, from his e-mail account, his background history as to how he entered in the this particular business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, which we have already affirmed. If for the sake of assuming it is considered that the assessee was doing genuine business, thus, keeping in view of volume of transactions in his bank account, the income of assessee would be estimated many fold comparative to the commission income added by the AO. Thus, the alternative ground of appeal is also rejected. X X X X Extracts X X X X X X X X Extracts X X X X ..... out prejudice to Ground No.3,4 and 5, The learned Commissioner of Income Tax (appeal) has erred in law and in facts not accepting the claim of the appellant that statement recorded u/s 132(4) in search action ought to be read in totality in respect of income from alleged commission that has already been included in sales transaction disclosed in audited accounts as admitted by the appellant, hence no further addition ought to be confirmed on account of alleged commission in the impugned assessment order. 7. The learned Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming the rejection of books of accounts of the appellant without appreciating the fact and law in proper perspective and without finding any defects in the books of account and overlooking the evidences furnished in the assessment as well appellant proceeding. 8. The learned Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming the disallowance of expenses including foreign exchange fluctuation loss on account of import/export business of the appellant as claimed in the return of income. 9. The appellant craves leave of Your Honour to add, alter, amend and/or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amond who takes the actual delivery of diamonds. The assessee also provided details of various bank accounts of different firms and companies managed by them. During recording the statement of assessee, he was confronted with various e-mails extracted from his computer network. The assessee admitted that he gets the commission on value of import at the rate of 0.2% from the real importer who route the transaction through his paper concern. Besides this, whenever any entry of unsecured loan is provided, the assessee received commission in the range of 0.25% to 0.5%. On the basis of aforesaid incriminating evidence and material the assessee was served with the notice under section 153A dated 17thOctober 2014 to file his return of income for assessment year under consideration. The assessee filed his return of income on 14thNovember 2014 declaring income of ₹ 4.02 lakhs. No additional income was offered by the assessee while filing return of income in response to notice under section 153A. 4. Initially the assessee filed his return of income under section 139(1) for subject assessment year on 29th August 2008 declaring income of ₹ 4.02 lakhs. The case was selected for scr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern to import their diamonds through this group and on receipt of consignment, the real importer get the delivery of diamonds after clearance from CHA. The books of stock of rough diamonds have been converted by this group to cut and polished diamonds through commission companies or through name landing concern issues bill of rough diamonds to local purchasers and show purchase of polished diamonds from them. And on receipt of such cut and polished diamonds they issue bills to various parties on their demand of actual import. The actual importer arranges the sale proceed from the parties to whom sales bills are issued. On receipt of sale proceed; this group makes import remittance at the request of importer. 7. The AO on the basis of discloser of assessee, evidences of e-mails and other material held that the assessee is receiving commission @0.20% of bill amount of import and on loan amounts and loan transactions he is receiving commission @0.50%. The AO took his view that assessee is not doing actual business, which is proved by the evidence and the statement of assessee; accordingly, the books of accounts maintained by the assessee are not correct and complete. The AO issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployee all they have admitted that they were working for the assessee. Not a single piece of diamond was found from any of the business or residential premises of the assessee. On confronting such fact that the assessee and his employee, they stated that they do not do any real purchase, sale of diamonds and explained the modus-operandi of their business. The AO noted that in the submission, the assessee claimed that due to safety reasons, staff was not kept at business premises, was not accepted as such no explanation was offered during the statement recorded by search party. On the stand of genuineness business, the AO noted that during the search and survey proceedings, the assessee could not produce any verifiable evidence to prove that business was actually conducted. The assessee created evidence only in the form of bank entry; books of accounts to claim that business have been conducted. The explanation of assessee that business activities are accepted by other Government Agencies like Customs Department, Sales Tax Department was also not considered as reliable as assessee himself admitted that diamonds were handed over to real beneficiary after clearance or Customs Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extracted by ld.CIT(A) in para 6 of his order from page no.4 to 33 of the impugned order. Before the ld.CIT(A), the assessee in sum and substance stated that a search action was carried on the premises of the assessee. The search action started at 7.05 AM on 03rd October 2013 and continued till 11.30.PM of 06/10/2013. Based on the search action notice under section 153A was issued to the assessee. In response to the said notice the assessee filed his return of income and furnished all details required by the assessing officer from time to time. The assessing office completed the assessment under section 144 rws 153A. The assessing officer rejected the books of account and made additions on account of commission income as well as additions on protective basis of various concerns. The assessing officer made additions merely on the basis of statement of the assessee recorded during the search action. The statement of the assessee was recorded under section 132(4) under force in which the assessee admitted that the imports were made on behalf of the importers. The assessee also stated that he gave his statement under mistaken belief and without understanding the consequences. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When search was conducted the assessment for 2008-09 to 2012-13 were not pending and were already concluded either under section 143(3) or 143(1) and hence no income can be assessed unless there is incriminating material found during the course of search action. The A.O. merely relied on the fact that no stock of the diamonds was found at the time of search. The goods were given for approval to customers for sales. The assessing officer overlooked the entire documentary evidences. The Ld. AR for the assessee read over the written submissions filed before Ld. CIT(A). On merit the Ld. AR of the assessee submitted that the assessee was doing the real business and has shown business income while filing return of income. The ld AR for the assessee submits that Kolkata Tribunal in Manoj Begani Vs ACIT ( ITA No. 932,933,935 936/Kol/2017), which is case of beneficiary of the alleged accommodation entry from Rajendra Jain, deleted the entire additions. In other words the ld AR for the assessee impressed that the business model of Rajinder Jain was accepted as genuine. In alternative claim the assessee claimed that he has already included the commission income in his business income disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves that they were working for the assessee. Not a single piece of diamond was found from any of the business or residential premises of the assessee. The ld CIT-DR for the revenue further submits that while recording statement of the assessee, he was confronted with various emails extracted from his computers. The assessee clearly admitted that he was receiving commission on value of import at the rate of 0.2% from the real importer who route the transaction through his paper concern. It was also disclosed that on entry of unsecured loan, he received commission in the range of 0.25% to 0.5%. The AO on the basis of his statement, incriminating evidence found in the form of statement of account recovered from the pen drive and on post search inquiry the assessee was served with the notice under section 153A to file his return of income for assessment year under consideration. The assessee filed return of income in response to the notice under section 153A, however, no additional income was offered by the assessee, despite recovery of huge incriminating material. During assessment the assessee tried to impress that he has retracted his statement. The so called retraction has no evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Jain (prop of Kalash Enterprises, Director of Kriya Impex Pvt Ltd and Karnawat Impex Pvt Ltd.) and Anoop Jain (Prop of Adi Impex) was recorded during search. The Assessing Officer (AO) on the basis of statement of Sachin Parikh, Manish Jain and Anoop Jain in wherein they admitted that all they were working on remuneration with Rajinder Kumar Jain (assessee). The AO also held that during recording statement of assessee, in Question No. 15, the assessee was asked to explain the modus operandi of his business. The AO prepared the diagram of modus operandi disclosed by the assessee. The AO on the basis of incriminating material gathered during the search action and on the basis of statement of Rajendra Jain and his associates held that all the business concerns of the assessee were merely doing paper transaction, instead of carrying any real business, those concern were doing of maintaining 'books of accounts' and do not carry any actual or physical business of diamonds. It was held by AO that the actual importers of rough diamonds approach assessee to import their diamonds through his group and on receipt of consignment, the real importer get the delivery of diamonds after clearance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f diamonds was found, there were numerous e-mails including some e-mail found and seized during search clearly proved that the real beneficiary of importer of diamonds were different then the books, there were also e-mails which prove that the person wanting accommodation entry were approaching the assessee and his group, the correspondence of orders were found not placed by the assessee and his group to the foreign parties. Besides, books of account of various concerns was maintained by assessee, which the assessee himself said being run by him in the name of various persons, which he able to get them to his residence from Surat, during the search though Sachin Parikh, who is his accomplice. A pen drive containing accounts from various concerns including those where Rajendra Jain as per ownership had no interest was also provided by the assessee. All these facts and evidence clearly prove with the corroborative evidence recovered during the search action that assessee was indulging in providing accommodation entry. All these aforesaid evidence and corroborative facts found during the search are incriminating material. The ld CIT(A) also recorded that not a single piece of diamond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter gap of 12 months period. The reliance in case Manoj Begani Vs ACIT (supra), passed by Kolkata Tribunal which is case of beneficiary of the alleged accommodation entry from Rajendra Jain, is not helpful to the assessee. Here in the present case, there is clear admissions of the assessee about the entire business affair carried out by him with his associate for providing bogus entry, mere obitor in case of beneficiary by the Coordinate bench, will not absolve the assessee from his own admission. The finding of Tribunal in Manoj Begani vs. ACIT(supra) is based on the facts and evidences produced by that assessee. Therefore, in view of the abovesaid discussions, we are in full agreement with the finding of ld CIT(A) that once the books are rejected the profit is to be estimated on the basis of commission rates and net profit is to be determined. We also affirms the finding of ld CIT(A) that that when the actual business of assessee was importing goods for others and in the books credit in the name of exporters, thus exchange rate difference is not payable by the assessee and the assessee is not eligible for deduction of such exchange rate fluctuation. Even otherwise, no evidence is ..... 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