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TMI Blog2024 (5) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Ld. CIT(A) is deleted. The ground No. 2 of the appeal of the assessee is accordingly allowed. Addition being 8.05% of turnover - assessee was engaged in issuing bogus accommodation entry bills and therefore, claim of the assessee that it is a trader and quantity tally of the goods submitted in the tax audit report had no meaning and those were devoid of truth and genuineness and not reliable - HELD THAT:- We find that the Ld. CIT(A) on one hand as held that the entity has been utilized by Shri Bhanwarlal Jain for issuing bogus accommodation entry bills however on other side he has upheld the profit from said business activity in addition to commission income sustained on bogus accommodation entries. The Tribunal in the case of Rare Diamond Pvt. Ltd. (supra) in similar circumstances has deleted the addition made in respect of trading activity. Addition for the trading payables - difference of preceding years trade payables and the current year trade payables - HELD THAT:- We are of the opinion that once the Assessing Officer is of the view that the assessee has been used or misused for providing accommodation entry bills of unsecured loans and bogus purchase and sale entrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), on estimation basis, by treating genuine turnover of the appellant as bogus sales. 4. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming the addition of Rs. 34,22,589/- being the difference of preceding years Trade Payables and the current years Trade Payables, without appreciating the fact that the appellant had disclosed all the information regarding Current Liabilities submitted in the Audited Financial Statements for the relevant year and the said increase in Trade Payables is on account of change in the exchange rate at the year end. 5. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming the addition of alleged commission income arising out of alleged bogus unsecured loans, bogus sales and bogus purchases and also confirming the addition of gross profit, on estimation basis. of a percentage of the total turnover, without appreciating the fact that both such additions cannot coexist together. 6. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming addition of alleged commission income arising out of alleged bogus unsecured loans, bogus sales and bogus purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus unsecured loans/bogus purchase/sales etc. But along with the commission income, the Assessing Officer also assessed not only assessed the trading results appearing in the books of account but also enhanced the profit from such trading activity. Though the commission on loans/sale/purchase appearing in the books of the assessee was assessed in substantive capacity in the case of Shri Bhanwarlal Jain for AY 2015-16, but same was assessed on protective basis in the case of assessee. The computation of said commission income of Rs. 5,73,082/- in the case of assessee is reproduced as under: Sr. No. Nature of Accommodation entry Amount of commission earned 1. Accommodation of Bogus unsecured loan (On Proportionate basis on Rs. 1,96,79,659/- @2.4%) Rs. 4,72,311/- 2. Accommodation of Bogus Purchases (0.075% of Rs, 14,04,99,815/-) Rs. 1,05,374/- 3. Accommodation of Bogus sales (0.075% of Rs. 7 87,63,131/-) Rs. 59,072/- 4. Total Commission Rs. 6,36,757/- 5. Less: 10% of total commission as discussed above Rs. 63,675/- 6. Undisclosed commission income Rs. 5,73,082/- 3.1 Further, the Assessing Officer computed business income of Rs. 63,40,432/- at the rate of 8.05% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge no. 30 of the order, in the following manner- No. Nature of Transaction Estimation of the Hon'ble Tribunal in the 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% 10.2.2 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 earnedby 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. 10.2.3 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. 59,072/- @ 0.07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 present appeal are dismissed. 9. In our opinion, the reasoning given by the Ld. CIT(A) is against the principle of judicial discipline. The Ld. CIT(A) being a appellate authority is required to follow the judicial precedent available on the issue in dispute. The Ld. CIT(A) has duly mentioned the order of the Tribunal in the case of Sh. Bhanwarlal Jain where the commission income from accommodation entries has been held to be assessed on substantive basis treating the various concern through which accommodation entries were provided as his 'benami' concerns. 11. For ready reference, said findings of the Tribunal is reproduced as under: 8.2 It will not be out of place to mention here that Hon'ble ITAT, B Bench, Mumbai, in the combined order dated 06.08.2021 (ITA No. 98-104, 108-114,2669, 3509/M/2018) in the case of Bhanwarlal M. Jain, has extensively examined the modus operandi of Bhanwarlal M. Jain and 70 odd associates. The Appellant is one of the 70 associates, as mentioned in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 estimation sheets as well as other data gathered during the course of search action from various premises, disclosed as well as secret. The data was found to be identical. The complete correlation was established between the parallel books of accounts found on the pen drive with books of 70 concerns being managed and controlled by the assessee. It transpired that the daily accounts were first written manually on estimation sheets and thereafter entered into pendrive electronically. So much so, identical pen drive was found from the possession of Shri Rohit Birawat at CST Terminus who was apprehended by the search team while attempting to flee from Mumbai to Rajasthan with incriminating material. 7. All these facts have been admitted not only by the assessee but also by his son as well as trusted employees in various statements as recorded on oath u/s 132(4) at various points of time. The statements were recorded in the presence of independent witnesses. The contents of the statement were said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 the same was devoid of any material evidence. The statements were made on oath u/s 132(4) and heavy onus was on assessee to rebut the same with cogent material while retracting the same. However, nothing of that sort as done by the assessee, has been shown before us. Glaring contradictions as well as similarities has been found in the retraction affidavits. As rightly held by lower authorities, the retraction was nothing but mere after-thought and tutored statement to thwart the process of investigation. The retraction was bereft of any material evidence and therefore, the same was to be completely ignored. 11. The aforesaid factual matrix as well as findings would lead to inescapable conclusion that all the 70 entities under consideration were being managed and controlled by the assessee group and therefore, lower authorities were quite justified in estimating commission income earned by the assessee group from all these benami concerns. 12. Accordingly, Ground Nos.1,2,5,6,7 & 8 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/- being 8.05% of turnover of Rs. 7,87,62,131/-. Regarding the addition of Rs. 63,40,432/- the Ld. CIT(A) though has clearly mentioned that assessee was engaged in issuing bogus accommodation entry bills and therefore, claim of the assessee that it is a trader and quantity tally of the goods submitted in the tax audit report had no meaning and those were devoid of truth and genuineness and not reliable. Despite the above observation, the Ld. CIT(A) computed the net profit on this business activity at Rs. 63,40,432/- observing as under: "12.2 While making the impugned addition, the Assessing Officer has noted that (i) The Appellant has shown a turnover of Rs. 7,87,63,131/-. (i) The Appellant has failed to submit the transaction wise details as called for vide notice u/s 142(1) of the I T Act dated 03/11/2019. No information regarding the purchases, corresponding payments made for purchases, the effect of such purchases in the stock maintained, sales made, receipt of sales proceeds and the corresponding effect in the stock register, were provided. No detail in respect of the items of its account including expenses debited were supplied to the AO. (iii) Accordingly, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however on other side he has upheld the profit from said business activity in addition to commission income sustained on bogus accommodation entries. The Tribunal in the case of Rare Diamond Pvt. Ltd. (supra) in similar circumstances has deleted the addition made in respect of trading activity. The relevant finding of the Tribunal is reproduced as under: "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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of the assessee, there is no question of further enhancement of said commission income from accommodation entry and that too on substantive basis. The enhancing of such commission income from accommodation entries of bogus sales is without any reasoning and totally unjustified. We reject this action of Ld. CIT(A). 21. The Ld. Counsel before us submitted that Hon'ble Tribunal in the case of Bhanwar Lal Jain, has duly considered the alleged commission on sales, but in absence of any such details before us, we are not adjudicating upon said 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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