TMI Blog2023 (5) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... rty purchased by assessee and his wife during the year under consideration - immovable property purchased by the appellant was referred for valuation to the DVO - HELD THAT:- As CIT(A) has given a finding transaction was not below the circle rate. We note that the ld. CIT(A) has passed a well reasoned order, which does not need interference. - ITA No.1325/Del./2019, ITA No.1326/Del./2019, ITA No.1327/Del./2019, ITA No.1328/Del./2019, ITA No.1329/Del./2019, ITA No.1330/Del./2019, ITA No.1331/Del./2019 - - - Dated:- 24-5-2023 - ITA No.1749/Del./2019, ITA No.1750/Del./2019, ITA No.1751/Del./2019, ITA No.1752/Del./2019, ITA No.1753/Del./2019 And ITA No.1754/Del./2019 Shri Shamim Yahya, Accountant Member And Shri Anubhav Sharma, Judicial Member For the Assessee : Shri Ved Jain, Advocate, Ms. Supriya Mehta, CA And Shri Aman Garg, Advocate For the Revenue : Shri T. Kipgen, CIT DR ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : These are cross appeals by the assessee and Revenue arising out of the respective orders of ld. CIT (Appeals) for the concerned assessment year. 2. Since the issues are common and connected and appeals were heard together, these ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawing adverse inference against the assessee on the basis of statement recorded without giving assessee an opportunity to cross examine the same. 9. Without prejudice to the above and in the alternative, the rate of commission applied by Ld. CIT(A) is too high and without any basis. 4. In Revenue s appeals, one common issue relates to the challenge of ld. CIT (A) s reducing the commission income to 1.04% against the AO s determination @ 2%. We may refer grounds of appeal, which are common in all the Revenue s appeals, from AY 2014-15 which read as under :- On the facts and in the circumstances of the case, the ld.CIT(A) has erred in law and on facts in restrict addition at Rs.4,90,35,779/- as against the addition of Rs.23,10,02,265/- made in the assessment order on account of commission income from the accommodation entry business by taking the rate of l.04% for charging of commission income on the turnover of accommodation entries without considering the fact that in the assessment order the transactions among the shell concerns were already eliminated from the total turnover and the remaining transactions of commission were quantified @ 2% of total turnover. 5. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty through the property dealers of the area indicating the fair market value of the property. ITA No.1753/Del./2019 (AY : 2014-15) On the facts and in the circumstances of the case, the ld.CIT (A) has erred in law and on facts in deleting the protective addition of Rs.72,15,210/- made by the AO on account of unexplained cash credits without considering the fact that the assessee has failed to produce directors of the shell concern to verify the identity of the company, genuineness of the transactions and creditworthiness of the concern. ITA No.1754/Del./2019 (AY : 2015-16) On the facts and in the circumstances of the case, the ld.CIT (A) has erred in law and on facts in deleting the protective addition of Rs.24,00,000/- made by the AO on account of unexplained cash credits without considering the fact that the assessee has failed to produce directors of the shell concern to verify the identity of the company, genuineness of the transactions and creditworthiness of the concern. 6. Apropos rate of commission : Since facts are identical we are referring to the facts and figures from AY 2016-17. The facts of the case are that a search and seizure operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e average rate of commission paid comes to 1.02% (Rs.15,13,52,004 / 1485,36,50,460*100). Thus, the net commission rate in the tally data seized is search comes to 0.47%. The appellant in this regard, submitted that receipts net off of payment/expenses should be taxed in its hands as commission only. In this regard, the appellant has pointed out that seized record is the best evidence and when income is being considered on the basis of seized record, the expenses as recorded in the seized document also need to be deducted. It is only the net income, which is to be considered. I have examined the seized tally data. On going through the same, the contention of the appellant that expenses side represents the expense incurred by the appellant in arranging accommodation entries is found to be correct. However, in the facts and circumstances of the case, it will not be appropriate to allow deduction of entire expenses. Accordingly, taking a holistic view, I consider that 30% of the gross commission receipts (@1.49%) are the expenditure incurred for earning commission income. Accordingly, I find it appropriate to take rate of 1.04% (1.49%- 0.45%) for charging of commission income on the tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged concerns is as under: Name of Alleged Concerns 1.Ambarnuj Finance Investments Pvt. Ltd. 2.Chandra Buildcon Pvt. Ltd 3.Garima Jain 4.Jai Maa Bhawani Overseas Pvt. Ltd. 5.JKS Impex Pvt. 6.Kavita Buildcon 7.KCJ Buildtech 8.Reena Jain 9. Shivangi Garments Pvt. Ltd. 10. Shivaji Garments Pvt. Ltd. 11. Sukumar Buildwell Pvt. Ltd. 10. During the assessment proceedings, the assessee submitted that the total turnover calculated by the AO and the rate of commission charged by the AO was not correct. 11. It was also submitted by the assessee that the inclusion of banking transactions related one concern namely M/s Ambarnuj Finance Investments Ltd. in the working of turnover of accommodation entries is incorrect and it is evident from the fact that assessment proceedings of the said company have been completed under section 153A and 143(3) and no adverse inference had been drawn against M/s Amb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Net commission income 6,92,64,043/- ix. It was submitted that the total turnover of alleged accommodation entries of the assessee and Sh. Naresh Kumar Jain. The computation is hereunder: Particulars Total Turnover Appearing in Tally(Jain Folder) 19,696,128,227 Less: Circular transactions among the shell company 4,842,477,767 Net Turnover as per Tally Data 14,853,650,460 x. that as per the above working the net rate of commission earned by the appellant comes to 6,92,64,043/14,85,36,50,460) *100 which at best can be applied on the turnover of accommodation entries after elimination of circular transactions. xi. The assessee also submitted a detailed working of the correct year wise turnover of the accommodation entries for the assessee which is also reproduced below: Particulars AY 2010-11 AY 2011-12 AY 2012-13 AY 2013-14 AY 2014-15 AY 2015-16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations of M/s Ambarnuj Finance Investments Pvt. Ltd. are not in doubt in the year under consideration, therefore, it was not justified on the part of the AO to include Rs. 4,64,29,476/- being the aggregate of debit and credit bank transactions of M/s Ambarnuj Finance Investments Pvt. Ltd. in the working of the commission income, hence, the said figure of Rs. 4,64,29,476/- is reduced from the calculation of commission. With regard to calculation of turnover/quantum of accommodating entries after eliminating the impact of circular transactions and percentage of commission 9.11 From the above instances, I find that the AO has pointed out that the short excess account in the tally data means the commission received by the Jain Brothers. Further from the above quoted instance and other examples quoted by the AO in the assessment order, it is clear that the appellant and his brother use to maintain the data of providing accommodation entries including bank transfers, cash exchanged and commission charged in Jain Folder Tally data. Further the turnover analysis placed in the paper book also depicts that majority of credit entries in the bank statement of shell companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 985,521,370 1,606,886,770 - 4,842,477,767 Net Turnover as per Tally Data 439,586,944 1,010,599,831 1,780,997,609 2,881,699,244 4,317,531,350 4,423,235,481 - 14,853,650,460 The above table shows that the appellant has received commission of Rs. 22,06,16,047/- and made payments of Rs. 15,13,2,004/- in short and excess a/c over the period of six years for the total turnover of the six years for the total turnover of the six years of Rs. 1485,36,50,460/- The average rate of commission received on total turnover herein above comes to 1.49% (Rs. 22,06,16,047 / 1485,36,50,460*100). Whereas the average rate of commission paid comes to 1.02% (Rs. 15,13,52,004 / 1485,36,50,460*100). Thus, the net commission rate in the tally data seized is search comes to 0.47%. The appellant in this regard, submitted that receipts net off of payment/expenses should be taxed in its hands as commission only. In this regard, the appellant has pointed out that seized record is the best evidence and when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 262,717,480 245,616,875 260,228,180 717,246,284 1,876,225,835 9.14 In view of the above working the average rate of commission income of 1.04% will be charged in the hands of the appellant on the turnover of Rs. 11,56,10,968/- for the year under consideration. Accordingly, the AO is directed to restrict the addition at Rs. 12,02,355/. 16. Aggrieved by the order of the CIT(A), the assessee and the Revenue filed an appeals before the Tribunal. 17. Heard the arguments of both the parties and perused the material available on record. 18. We find that the AO himself has given a finding that circular transactions should be eliminated while computing the turnover of accommodation entries. However, while arriving at the turnover of accommodation entries given by the assessee such elimination of circular transactions was left out to be made. The ld. CIT(A) has accepted the working of turnover furnished by the assessee after eliminating circular transactions or transactions on which income had already been offered. The ld. CIT(A) has rightly held that the turnover with respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as per assessee accepted by CIT(A) Average Yearly Commission charged by the AO @2% on the total turnover on ad hoc basis Average Yearly Commission calculated by the CIT(A) @1.04% on the total turnover (by arbitrarily restricting expenses on earning commission to 30% of gross commission income) Average Yearly Commission which should have been considered @0.47% on the total turnover AY 2010-11 27,66,87,335 115,610,968 55,33,746 12,02,355 5,43,372 AY 2011-12 618,05,53,386 160,105,451 12,36,11,068 16,65,096 7,52,496 AY 2012-13 105,04,22,587 114,700,597 2,10,08,452 11,92,886 5,39,093 AY 2013-14 187,86,43,617 262,717,480 3,75,72,872 27,32,262 12,34,772 AY 2014-15 696,49,99,924 245,616,875 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y amounts to cherry picking. 21. Therefore, as per the explanation and submissions of the assessee, whole of the expenses incurred in earning commission income shall be allowed and accordingly the net rate of commission earned by the assessee i.e. 0.47% is the best which can be applied on the turnover of the accommodation entries after elimination of circular transactions. Thus the maximum addition which can be made in the hands of the assessee on account of commission earned on turnover of the accommodation entries worked out as under: Assessment Year Turnover (after elimination of circular transactions) Commission rate Commission Income AY 2010-11 115,610,968 0.47% 5,43,372/- AY 2011-12 160,105,451 0.47% 7,52,496/- AY 2012-13 114,700,597 0.47% 5,39,093/- AY 2013-14 262,717,480 0.47% 12,34,772/- AY 2014-15 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 8 Next Generation Exim Pvt. Ltd. 20,00,000 9 Pragaya Multitraders Pvt. Ltd. 3,00,000 Total : 72,15,210 10.1 The AO has added the above amount in the hands of the appellant on the ground that the he has failed to produce directors of the shell companies to verify the identity of the company, genuineness of the transactions and creditworthiness of the company. In this regard, the AD has also alleged that the directors of the above companies are dummy directors and the companies are shell companies which are being managed and controlled by Sh. Anand Kumar Jain and Sh. Naresh Kumar Jain. The AO has acknowledged the filing of documentary evidences by the appellant in the form of confirmation, bank statement and acknowledgement of ITR with respect to the above companies. However, not satisfied with the explanation and the documentary evidences submitted by the appellant, he has added the amount of Rs.72,15,210/- as unexplained cash credit on protective basis in the hands of the appellant. The AO has also men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal in ITA No.2889/Del/2019 in the case of Sh. Anand Kumar Jain, observed that such receipt form part of accommodation entries and that the AO may verify the same. Following the aforesaid precedent, we direct the AO to verify the same as stated above. 17. Our above adjudication applies mutatis mutandis to all the additions on protective basis in all the appeals here. ITA No.1752/Del/2013 (AY 2013-14) 18. Apropos DVO Report : The AO in the assessment order has added Rs. 24,60,451/- on account of difference in the value of property purchased by him and his wife during the year under consideration. The AO in the assessment order has mentioned that the immovable property purchased by the appellant was referred for valuation to the DVO. The DVO has submitted his valuation report dated 21/08/2018 wherein it has been intimated that due to non cooperation of the appellant, no proper inspection / visit could be made and accordingly he had to close the case. The AO has mentioned to have conducted spot enquiries through his inspector to ascertain the market value of the property. The Inspector in his report has stated that he conducted local enquiries from the property dealers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the value of the property is around 1.25 crores. On careful perusal of the report of the inspector, it is noticed that the report is not supported by any evidence collected by the inspector on the spot verification. It is also noticed that the inspector has mentioned to have made enquiry from the local property dealer, however, he has not mentioned the name / whereabouts of the said property dealer. Also, it has not been mentioned that on what basis the property dealer has intimated him the rate of the property at Rs.1.25 crores. Further there is no reference of any comparable sale deed of any other property in the same locality or any other documentary evidence which could form basis to ascertain higher value of property in the hands of the appellant. Accordingly, it can be concluded that the report of the inspector for the purpose of evaluation of value of the property cannot be relied upon since the same is not corroborated with any documentary evidence. Further, it is also matter of the fact that the sale consideration paid by the appellant is at the circle rate / stamp valuation rate prescribed by the stamp valuation authority. The said rate has not been doubted by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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