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TMI Blog2024 (2) TMI 841X X X X Extracts X X X X X X X X Extracts X X X X ..... nk accounts, there was prima facie evidence against the assessee i.e. receipt of money. Assessee explained it that cash were given by those to whom cheques of equal amount were issued. He furnished complete details of cheques issued and the cash deposits. The assessee was held to be sub-broker of the principal broker engaged in providing accommodation entries. On these facts the assessing officer himself has treated the activity of the respondent/assessee as accommodation entry provider on brokerage/ commission basis and, accordingly, determined the income of the respondent/assessee @ 2% as brokerage on entire cash deposits of Rs. 166.59 crores. AO has not inferred that the sum credited in the books of the assessee constituted income of the previous year and instead held that the income of the respondent/assessee is 2% of the cash deposits, as brokerage. This leads to an irresistible conclusion that cash deposits was not receipt of income of the assessee and instead his income was brokerage/commission @ 2% of cash deposits as accommodation entry provider. Thus addition in the hands of the respondent/assessee u/s 68 was correctly set aside by the ITAT. As initial onus is on the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed? iv) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in substituting the income of Rs. 4,07,17,055 as peak credit, on the basis of its order in case of Sri Praveen Kumar Agarwal, in place of additions on account of commission and cash credits without appreciating the difference in the facts of the two cases? Facts 4. Briefly stated facts of the present case are that search and seizure operation under Section 132 of the Income Tax Act, 1961 (hereafter referred to as the Act of 1961 ) was conducted in the business and residential premises of one Sri Praveen Kumar Agarwal on 27.7.2019. An order in the case of Praveen Kumar Agarwal was passed by the DCIT, Circle 3, Kolkata under Section 158DC of the Act, 1961 for the block period 1.4.1990 to 27.7.1999 and determining income by way of commission @2% for accommodation entries provided by him for Rs. 166.59 crores. Additionally, the tribunal applied the peak balance and added the peak balance amount in the hands of Praveen Kumar Agarwal. 5. During investigation by the Directorate of Income Tax (Investigation) Kolkata it was found that the respondent/assessee is the sub-broker of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and further committed manifest error of law to apply the principle of peak credit. He submits that the cash deposit of Rs. 166.59 corers remained totally unexplained by the respondent/assessee s income and, as such, the entire amount was correctly added by the assessing officer and upheld by the CIT(A) in the respondent/assessee invoking Section 68 of the Act, 1961. He referred to provisions of Section 68 of the Act, 1961 and relied upon the judgment of Hon ble Supreme Court in Principal Commissioner of Income Tax (Central-1) Vs. NRA Iron And Steel Private Limited (2019) 15 SCC 529 (paragraphs 9.2 and 9.3) and Division Bench judgment of Allahabad High Court in Commissioner of Income Tax Vs. Vijay Agricultural Industries (2007) 294 ITR 610 (Alla). Discussion and Finding 8. We have carefully considered the submissions of the learned counsel for the appellant and perused the paper book. 9. The entire submission of learned counsel for the appellant is with regard to the applicability of Section 68 of the Act 1961 on facts of the present case. Therefore, before proceeding to consider the submission, it would be appropriate to reproduce Section 68 of the Act 1961, as then existed, as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he commission income in the assessment order will be treated as the income accruing to the appellant from making the funds credited to the appellant s account available for accommodation entries. Consequently, the appeal is dismissed. 13. Since the assessment of the respondent/assessee was based on materials found in the matter of aforesaid Sri Praveen Kumar Agarwal and addition made in the hands of said Sri Praveen Kumar Agarwal who and the Department contested the matter upto ITAT, therefore, the Tribunal followed its order in the case of Sri Praveen Kumar Agarwal, after due discussion of the fact of the respondent/assessee. The Tribunal noted that on being enquired about the nature of transaction with the Mumbai based companies, the assessee submitted on oath on 15.12.2008 before the DDIT (Inv), Kolkata that he has got cash amount from the companies and against the same cheques of equivalent amount were issued. The assessee also gave a detailed list of cheques issued to various Mumbai based companies of the Ketan Parekh Group, the bank account numbers etc. against which cash was received by him. In the case of the principal broker i.e., Sri Praveen Kumar Agarwal, the ITAT has he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essees offer no explanation means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. It is true the opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion. 16. In Sumati Dayal vs. Commissioner of Income Tax, Bangalore [1995 Supp. (2) SCC 453] this Court held: In all cases in which a receipt is sought to be taxed 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 of proving that it is not taxable because it falls within the exemption provided by the Act lies upon the assessee. But, in view of Section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year the same may be charged to income tax as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the assessing officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. In the present set of facts, we find that the assessee has disclosed complete details of bank accounts, cheques issued and the cash received from those to whom accommodation entries were given, which fact has not been disputed by the appellant/department and, instead, brokerage/commission on the aforesaid cash deposit of Rs. 166.59 crores was determined as income of the assessee for giving accommodation entries. 17. Thus, once the source of cash deposit was disclosed and in respect of such cash deposit the respondent/assessee was treated as accommodation entry provider and accordingly brokerage/commission on aforesaid cash deposit was determined as income of the assessee for providing service in the form of accommodation entry, then Section 68 of the Act, 1961 becomes uninvokable on facts of the present case. 18. In the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accommodation entries by receiving cash and issuing cheques and accordingly he determined the income of the respondent/assessee from brokerage @ 2% on the cash deposits. Under the circumstances, the addition made by the assessing officer under Section 68 of the Act, 1961 was unsustainable. 21. In the case of Praveen Kumar Agarwal (principal broker), the ITAT held that either 2% of the commission or the peak credits during the block period, whichever is higher, has to be taken as income. Therefore, the assessee submitted daily summary of cash for the period from 01.03.2004 to 30.09.2005 for all the eight bank accounts before the ITAT which established the peak credit on 7th June 2004 to be Rs. 4,07,17,055/-. Brokerage/commission @ 2% on cash deposits was Rs. 3,33,18,027/-. Therefore, the ITAT applied the ratio of its decision of the case of the principal broker to the case of the respondent/assessee (sub-broker) and accordingly determined the aforesaid sum of Rs. 4,07,17,055/- as income of the respondent/assessee as against the declared income of Rs. 25,00,000/-. It has neither been argued nor shown to us that the decision of the ITAT in the case of Praveen Kumar Agarwal (principal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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