9911796707
TMI Blog2022 (6) TMI 1472X X X X Extracts X X X X X X X X Extracts X X X X ..... ition on substantive in one case and protective in other case that too even after a finding of the higher appellate forum i.e. ITAT. We accordingly, reject this approach of the Ld CIT(A) and set aside his finding on the issue on dispute. Respectfully following the finding of the ITAT in the case of Sh. Bhanwarlal Jain the protective addition made in the case of the assessee in respect of commission income from accommodation entries is deleted. Decided in favour of assessee. Addition for low gross profit declared in trading activity - AO has made addition at the rate of 10.32% on the sales turnover to compensate the low gross profit rate of the assessee - CIT(A) upheld the gross profit rate addition made by AO - HELD THAT:- We find that tribunal in the case of Sh. Bhawarlal Jain ( 2021 (8) TMI 1316 - ITAT MUMBAI ) has given a specific finding that 70 associate concerns of Sh. Bhanwarlal Jain were engaged in providing only accommodation entry and no real business was carried, which was recorded in their books of accounts. The assessee also being one of the concern out of those 70 concerns, the Ld. CIT(A) has correctly rejected the claim of the assessee that it was engaged in any trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n substantive basis in the hands of Sh. Bhanwarlal Jain and protective basis in the hands of those concerns through which such entries were provided. The assessee(s) before us in these five appeals are out of those 75 concerns. In the grounds raised in these appeals, the assessee has challenged confirming of protective additions and also estimation of gross profit in trading activity and also challenged additional commission income from accommodation entries on substantive basis. 1.1 In view of above common facts and circumstances and the common issue in dispute involved in these appeals, same were heard together and disposed off by way of this common order for convenience and avoid reputation of facts. Both the assessee and the Revenue agreed to take ITA No. 359/Mum/2022 as lead case and follow the finding in other cases, accordingly, firstly, we have taken ITA No. 359/Mum/2022 for adjudication. ITA No. 359/Mum/2022 for AY 2015-16 1.2 The grounds raised by the assessee in the appeal are reproduced as under: 1. On the facts and in the circumstances of the case and in law the Ld. CIT (A) erred in not considering that the assumption of jurisdiction by the Ld. Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral justice. 8. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in confirming the addition made by ld. AO, without providing any opportunity of cross examination, without any corroborative evidence and without providing copy of statements relied upon. 9. The appellant craves to add, alter, classify, reclassify, delete or modify any of the above grounds of appeal and requests to consider each of the above grounds without prejudice to one another. 2. Briefly stated facts of the case that the assessee filed return of income for the year under consideration on 23/09/2015 declaring total income of Rs. 30, 300/-. In the return of income filed, the income was declared from business of import, export and trading of cut and polished and rough diamonds. The assessment for the year under consideration was reopened by way of issue of notice under section 148 of the Act and reassessment was completed after making addition on 'protective basis' for commission income treating that the assessee was engaged in providing of accommodation entries and also made addition to cover low gross profit rate declared in trading activity recorded in books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of sales and therefore he accordingly for the search period from AY 2008-09 to AY 2014-15, worked out unaccounted cash commission on local purchases at a percentile of 0.02% and 0.075% on sales. 5. On the basis of the above finding of the Ld. CIT(A), the Assessing Officer reopened the assessment year under consideration i.e. A.Y 2015-16 in the case of the assessee. In the reassessment completed under section 147 on 25/11/2019, the Ld. Assessing Officer, concluded that assessee concern was controlled and managed by Sh. Bhanwarlal Jain and was engaged in providing accommodation entries of loans, purchase sales etc on his behalf. The relevant finding of the Ld. Assessing Officer is reproduced as under: 10. Final Conclusion: It has already been discussed and proved in the earlier assessment year that the Bhanwarlal Jain group is engaged in providing accommodation entry for bogus purchases bogus loans and advances and importing for real importer to various beneficiaries whose names are appearing as respective parties for the said alleged entry in the regular books of accounts of the benami concerns of Bhanwarlal Jain and Rajesh Jain operated, managed and controlled by them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some day to day expenses like stationery, conveyance, office expenses and rent etc for earning the above commission income. As such, it would be just and proper, if a certain percentage of commission income on estimated basis is allowed to the assessee. Accordingly 10% of the commission income is considered as reasonable towards expenses for earning the said undisclosed commission income which would meet the ends of justice. Sr No. Nature of accommodation entry Amount of commission earned discussed above 1 Accommodation of Bogus Unsecured loan (On proportionate basis on Rs 1,62,14,243/- (@2.4% p.a) Rs.3.89.141/ 2 Accommodation of Bogus Purchases (0.075% of Rs.4,83.16,174/-) Rs.36,237/ 3 Accommodation of Bogus Sales (0.075% of Rs.3,42,17,419/-) Rs.25,663/ 4 Total commission Rs.4,51,042/ 5 Less: 10% of total commission as discussed above RS.45,104/ 6 Undisclosed Commission income Rs.4,05,938/ In the instant case, the total undisclosed commission which is required to be added is Rs.4,05,938/-. However, it is observed that the undisclosed commission of Rs.4,05,938/-is added on substantive basis in the case of Shri Bhanwarlal Jain for AY 2015-16. Hence, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Shri Bhanwarlal M. Jain 1 Import transaction by Shri Bhanwarlal M. Jain on behalf of others @0.02% 2 Accommodation entries of Bogus purchases @0.05% instead of 0.075% 3 Bogus unsecured loan @1% instead of 2.40% 4 Commission of Local purchases Nil against 0.02% 5 Expenses Allowed @25% 9.2.2 As. informed, Department has not accepted the above percentage estimated by the Hon'ble ITAT and further appeal is being preferred. Therefore, the estimation is not final. Hence, with due respect to the judgment of Hon'ble Tribunal and to keep the issue alive, the undersigned confirms the estimation made by the Assessing Officer, with respect to commission income earned by the appellant on bogus unsecured loan and bogus purchases as well as 10% of commission income for day-to-day expenses as mentioned in the preceding paragraphs, on protective basis. 9.2.3 It is further observed that Commission income earned on Bogus sales does not form part of the Appellate Order of Hon'ble Tribunal. Hence, the estimation of Rs. 25,663/- @ 0.075% on the sales of Rs. 3,42,17,419/- is hereby confirmed on substantive basis. Thus, Ground of Appeal Nos. 3, 4, 5, 7 and 9 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of assessment proceedings was totally non- cooperative. In fact, the assessee remained absent during search proceedings for 3 days. The summons were not complied with and no explanation was furnished on incriminating material. Pertinently, voluminous hand written estimation sheets have been found at various premises of the assessee. The sheets have been admitted to be in the hand writing of assessee's son as well as an employee of the assessee. These sheets contain parallel cash accounts. The entries in the estimated sheets were in the nature of square-off transaction wherein cash received from one party was paid back to another party through Angadiya Account. The pen drive contained calendar year-wise names of beneficiaries, the amount of cash, details of brokerage and commission etc. It also contained complete details of Angadiya Account since 2004 in electronic form. The parallel account maintained on the pen-drive pertained to various concerns, 70 to be precise, being managed and controlled by assessee group. The password of the pen drive was cracked with the help of software programmers. After decrypting the data, print outs were taken and matched with the estimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heque books as per the directions of the assessee. All these persons had superficial knowledge about nature of business being conducted by their respective concerns. Further, most of these persons were residing at premises owned by the assessee group. The books of accounts of all these entities were being maintained at two premises in a centralized manner. The books were found in the same computer and audited by common Auditor. The auditor admitted to have signed the financial statements as per the directions of Shri Lunkaran Parasmal Kothari without verifying the books of accounts. This is further fortified by survey action at BKC, Mumbai wherein more than 30 firms were found to be operating from common premises. All the 70 entities were found to have common features in their respective financial statements. All these factors strongly prove the allegations of the department that all the concerns were being run by the group in a combined manner with a view to provide accommodation entries to various beneficiaries against commission. 10. So far as the retraction of the statement made by the assessee is concerned, we find that the retraction was made after more than 8 months and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rum i.e. ITAT. We accordingly, reject this approach of the Ld CIT(A) and set aside his finding on the issue on dispute. Respectfully following the finding of the ITAT in the case of Sh. Bhanwarlal Jain (Which has been extracted above), the protective addition made in the case of the assessee in respect of commission income from accommodation entries is deleted. The relevant grounds of the Appeal are accordingly allowed. 13. Ground No.3 of the appeal relates to addition of R. 35, 31,237/- for low gross profit declared by the assessee in trading activity, which is recorded in books of accounts. The Assessing Officer has made addition at the rate of 10.32% on the sales turnover of Rs. 3,42,17,419/- to compensate the low gross profit rate of the assessee. 14. The Assessing Officer held that gross profit shown from business activity recorded in books of accounts was lower as compared to other concerns of the group and therefore, he made addition to the gross profit of the assessee observing as under: 13.3 As mentioned above, the assessee has shown a huge turnover of Rs.3,42,17,419/- However, the assessee has failed to submit the transaction wise details as called for vide notice us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of trading in diamonds, in identical circumstances, have shown much higher gross profit, there is no reason for the Appellant to show such small prof it, »in the return of income. Hence, the estimation on the basis of comparables is justified. Moreover, the appellant has not found any lacuna in the comparison of results carried out by the AO. Thus, the addition of Rs. 35,31,237/- to the total income of the appellant, is confirmed. As such, the Grounds of appeal No. 8 and 10 of the appellant are dismissed. 17. From the impugned order of the Ld. CIT(A), we find that in one para he is treating the books of accounts and other details of quantitative tally in respect of trading activity as self-serving documents, devoid of truth and genuineness and therefore cannot be relied upon. On the other hand, he is confirming the gross profit rate addition made by the Assessing Officer for the said trading activity. The Ld. CIT(A) cannot give both the finding that assessee was engaged in providing accommodation entry and being simultaneously was engaged in trading activity. We find that tribunal in the case of Sh. Bhawarlal Jain (supra) has given a specific finding that 70 assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id contention of the Ld. Counsel. 22. The Ld. Counsel further submitted that Ld. CIT(A) has enhanced the commission income without providing any show cause notice to the assessee, which is in violation of the section 251(2) of the Act. The relevant part of the provision is reproduced as under: 251(2). The [Commissioner (Appeals) shall not enhanced an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. 23. In the impugned order there is no mention of any opportunity provided to the assessee by way of issue show cause notice, before making the addition and therefore this addition is unsustainable on the ground of violation provision of section 251(2) of the Act also. 24. Accordingly the ground No. 6 and 7 of the appeal are also allowed. 25. As the appeal of the assessee on merit has been allowed, the grounds challenging the validity of the reassessment and ground No. 8 for not providing opportunity of cross examination, are merely rendered academic and therefore we are not adjudicating upon same. The ground No. 9 of the appeal is only general in nature. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
