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TMI Blog2024 (4) TMI 1133X X X X Extracts X X X X X X X X Extracts X X X X ..... e considered view that there is no infirmity in the order of CIT(A) while holding that it is a fit case for reopening the assessment of the assessee u/s 147 / 148 looking into the assessee s set of facts. Unaccounted cash deposits / credits in his bank account with Renukamata Society - On going through the above report by the Investigation Wing and the order passed in the case of Renukamat Multi State Cooperative Union Credit Society Ltd. [ 2023 (3) TMI 86 - ITAT MUMBAI] we are of the considered view that the assessee was not the real beneficiary of substantial cash deposits / credits which were made in his bank account held with Renukamata Society. From the above facts placed on record, it is observed that these bank accounts were being operated in the name of the assessee by the real beneficiaries / depositors, in collusion with Renukamata Society and the assessee, cannot be saddled with the ownership of the entire income deposited / credited in his bank account with Renukamata Society. Reasonable amount which could be held to be taxable in the hands of the assessee, for allowing the Renukamata Society / real beneficiaries to operate the bank accounts, held in the name of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts in dismissing the appeal exparte, which is, after having regard to the relevant facts of the case, clearly violative of the principles of natural justice, thus unconstitutional in nature, apart also from being contrary to the provisions of the Act, as interpreted by judiciaries at various levels. 2. The learned CIT(A) erred in law and on facts in confirming the action of the AO in invoking the provisions of section 147 of the Act. 3. The learned CIT(A) erred in law as well as on facts in confirming the action of the AO in not complying with the ratio of various binding judgments in their true letter and spirit, thus clearly violating even the constitutional provisions. 4. The learned CIT(A) erred in law and on facts in confirming the action of the AO in making addition of Rs.28,67,73,656/- (consisting of a sum of Rs.6,86,57,800/- as unexplained cash credit and the balance sum of Rs.21,81,15,856/- as unexplained investment, as originally mentioned in the body of the reassessment order) to the returned income by invoking the provisions of section 69 / 69A read with section 115BBE of the Act." We shall take A.Y. 2015-16 as the lead assessment year and our observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l steps for initiating proceedings under Sections 147 / 148 of the Act were duly taken by the Assessing Officer prior to initiation of reassessment proceedings. Secondly, on facts which are on record before us, the assessee had not filed it's return of income for the impugned assessment year. However, from the information available on record, the Assessing Officer came to know that there were cash deposits / other credits in the bank account held by the assessee with Renuka Mata amounting to Rs. 28.70 crores approximately during the impugned year under consideration. However, despite such substantial deposits / credits in the bank account of the assessee, the assessee had not filed any return of income for the impugned assessment year. Accordingly, looking into the instant facts, we are of the considered view that there is no infirmity in the order of Ld. CIT(A) while holding that it is a fit case for reopening the assessment of the assessee under Sections 147 / 148 of the Act, looking into the assessee's set of facts. 6. In the result, Ground Nos. 2 & 3 of the assessee's appeal is dismissed. Ground No.4:- CIT(A) erred in confirming additions of Rs. 28,67,73,656/- 7. The brief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o approach the legal authorities and file an official compliant of fraud against the so-called persons who misused his account. Not even an FIR seems to have been filed by the assessee in this regard. The assessee is also making an argument that the transactions in his account clearly left behind verifiable trails for facilitating the identities of the real beneficiaries and the AO ought to have identified the beneficiaries. The conception of assessee appears to be misplaced in the sense that the onus is on the assessee to furnish acceptable explanation for the credits in his account and not on the AO to prove otherwise. 7.10 Having considered entire facts of the case, and the case laws cited above, it is apparent that the appellant has completely failed to offer any explanation either before the AO during assessment proceedings or before me during appellate proceedings, despite affording sufficient number of opportunities and hence, I find no infirmity in the order of AO. Accordingly, the addition made of Rs. 28,70,54,51 6/- is confirmed. Accordingly, this ground of appeal is dismissed." 9. The assessee is in appeal before us against the aforesaid additions confirmed by Ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s directed. Accordingly, the Counsel for the assessee submitted that though apparently benami and accommodation transactions were carried out by utilizing the above referred accounts open in the name of the assessee, the assessee neither deposited any money in the said accounts and neither did the assessee withdraw any money from the said account. Accordingly, it was grossly incorrect on part of the Assessing Officer and Ld. CIT(A) to hold that the entire amount of bank deposits / credit made in the bank accounts for the impugned assessment years could be added in the hands of the assessee. This is especially in light of the fact that the assessee was not the real beneficiary of the amounts which were being deposited and later withdrawn in the bank accounts held by the assessee with Renukamata Society Bank Ltd. In support of the above arguments, the Counsel for the assessee filed before us order passed by ITAT Mumbai Bench in the case of Renukamat Multi State Cooperative Urban Credit Society Ltd. vs. ACIT (in ITA Nos. 4001 & 4002/Mum/2019), from which it is evident that Renukamata Society Bank has been regularly and for past several years engaged in the business of providing accomm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as per the report, the Department observed that during Financial Year 2012-13, Renukamata Society had made total deposits in the bank account amounting to Rs.45,055 crores. The Department observed that on analysis of cash deposits and withdrawals, it is seen that the society is operating on the basis of typical Angadia Model, without maintaining proper documentation regarding identity of persons depositing and withdrawing the cash. The Department observed that the cash deposits made in these accounts are subsequently transferred to bank accounts of shell entities. The funds are subsequently being remitted abroad by these shell entities for prima facie bogus imports etc. Accordingly, even as per the report of the Investigation Wing, Renukamata Society had roped in various individuals of meagre means to open bank accounts in their names and thereafter, such bank accounts were operated by other persons / real beneficiaries for carrying out various activities viz. remittance of money abroad with falsified documents, payment of custom duty, purchase of bullion etc. Accordingly, even as per the report of the Investigation Wing with the Department, it is evident that the assessee is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts or withdrawn as cash. (iii) Money so transferred were used for following purposes: (a) Remitting money abroad with improper/falsified documentation in the garb of imports. (b) Payment of customs duty. (c) Purchase of the bullion or other purchases. (d) Transfer to other parties online/ RTGS/ NEFT (e) Withdrawn by the beneficiaries. 3. On physical verification of some of these members/account holders, it was seen that many of the entities / account holders were not found on their address. Notices u/s 133(6) and summons u/s 131 were issued to top 200 cases, but most of the notices returned unserved. Even cases where notices were served, compliances were made in only 3 ca.ses and they too could not prove their credit-worthiness. No one appeared to depose for recording of statements. Their credit-worthiness could not be established from the records where in some cases ITR were filed. In many cases, the accounts were operated under the knowledge of the account holders on payment of commission. By and large these credits in the accounts of the account-holders were unexplained within the meaning of the section 68/ 69 of the IT Act, 1961.In many cases, the depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a way that each Demand Draft value is less than Rs.50,000/-. c) From the analysis of cash deposits and withdrawals, it is seen that substantial amounts of withdrawals made are against deposits made in cash at different branches of the society without proper documentation of identity of persons depositing and withdrawing the cash. Therefore, society is working on the basis of typical Angadia model without maintaining proper documentation. d) During the post search investigation, it is seen mat cash deposits made in the accounts holders of Mumbai branch is subsequently transferred to the bank accounts of shell entities. The funds are subsequently being remitted abroad by these shell entities, for prima facie bogus imports. From the investigations done here, it is seen that the account holders, in whose account cash deposits of more than Rs. 10 Crore was made and which was subsequently transferred via RTGS/NBFT to the shell entities, are either persons of low means who simply lent their identity details (id proof, signature) to unknown persons or are not traceable. The investigations with respect to shell entities revealed that proprietors of these entities have also lent their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding the modus operandi of Renukamata Society:- "47. Be that as it may, the contents of the report shows that the Ld. DDIT(I&CI) had observed that these account holders were depositing large sums of cash on different dates in the accounts held by them with the assessee society, which was in turn being routed to different firms by way of RTGS who were the ultimate beneficiaries of these deposits and had failed to disclose the same in their respective tax returns. The Ld. DDIT(I&CI) observed that by taking advantage of the absence of reporting liabilities, these societies were being used as a conduit for money laundering. It is therefore noted that, it was not the case of the DDIT(I&CI) that these cash deposits belonged to the assessee or represented its unaccounted monies. Rather, according to the DDIT(I&CI), certain individuals were using the accounts held by members in the assessee society to route their unaccounted monies and the beneficiaries in relation thereto is also noted to have been identified by the DDIT(I&CI). In fact, one of the ten persons viz., Mr. R.A. Shah from whom enquiries were made had admitted that he had not disclosed his account in his tax return and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... July 2014 to June 2016 wherein they had time and again requested them to register them with FIU-IND so that they could share the details & information of their members with the concerned Department. He showed us that, it was only vide Circular dated 08-01-2018 that the multi-state cooperative societies were brought within the purview of PMLA Act, 2002 and all multi-state cooperative societies were required to register themselves with the Department. Before us, the Revenue was unable to bring any material on record to controvert the aforesaid submissions of the assessee society. 49. On the overall conspectus of the facts, as discussed in the foregoing, we thus hold that the reasoning given by the Ld. CIT(A) viz., existence of incriminating material & statements against the assessee society, to justify the validity of the additions made in the unabated assessments framed u/s 153A/143(3) of the Act for AY 2010-11 was untenable both on facts and in law." 15. Accordingly, on going through the above report by the Investigation Wing and the order passed by ITAT, Mumbai Bench in the case of Renukamat Multi State Cooperative Union Credit Society Ltd. (supra), we are of the considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.) Ltd 117 taxmann.com 292 (Bombay), the High Court held that 0.15% rate of commission offered to tax by the assessee was a reasonable rate in facts of the assessee's case. 18. In the case of Manoj Kumar Jain v. DCIT ITA No. 554/Del/2017, the Delhi ITAT held that commission of 0.5% to be reasonable considering the facts of the case. While passing the order, the ITAT observed as under: "3. The moot issue involves assessment of cash deposits found in the bank account of the assessee of Rs.7.37 Crs. and commission earned at the rate of 3% on the said amount of Rs.7.37 Crs. to the tune of Rs.22.12 lacs. The assessee has been alleged to be an entry operator providing bills of purchase & sales without any actual business transactions. 4. The amount of Rs.7.37 Crs. has been added on protective basis and information regarding the beneficiaries was passed on to the Assessing Officer having jurisdiction over the beneficiaries for substantive assessment. The commission of Rs.22.12 lacs has been added on substantive basis. 5. The Co-ordinate Bench of ITAT in ITA No.3561/Del/2015 vide order dated 22.05.2020 has adjudicated on both the issues. The addition being protective in nature ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission etc. In the instant facts, the assessee has submitted that he was operating through middlemen and does not know the name of beneficiaries in most of cases. However, most times, even the middlemen could not be contacted by the Department, since notices could not be served upon them as they were not available. Accordingly, in absence of details forthcoming from the assessee, a reasonable percentage may be arrived at, in the instant facts to arrive at the "commission" income earned by the assessee. In our view, looking into the totality of facts, it would be reasonable to take 0.25% of total deposits in the bank accounts owned/ operated by the assessee (₹ 295,56,30,168 for assessment year 2017-18), as commission income of the assessee for the assessment year under consideration." 20. In the case of Lucky Bajoria v. ITO in ITA No. 345 /Ahd/2021, the ITAT Ahmedabad while holding that rate of 0.25% would be a reasonable rate, made the following observations: "7.4 Now coming to the instant facts, we observe that the assessee has submitted that it has earned commission income, however, no details regarding the commission income earned by the assessee was furnished to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l amount of income for the impugned years under consideration. The assessee is illiterate and is not aware about the intricacies of law. The assessee was approached by Manager of Bhavnagar Branch of Renukamata Society, with an offer to open bank account in the name of the assessee, which would be operated by third parties. The Counsel for the assessee submitted that the Branch Manager had told the assessee that he was not required to make any deposits in such bank accounts and opening of such bank account would also entitle the assessee to avail financial assistance in the form of loan for bank as well. Accordingly, the assessee allowed the Renukamata Society to open and operate bank accounts in it's name i.e. in the name of the assessee and the assessee used to regularly sign blank forms, cheques, other documents, papers etc. which were produced before him from time to time. Subsequently, the assessee received notices from the Tax Department and he approached the person concerned of Renukamata Society and the tax professional suggested by him. The said tax professional assured the assessee that it is only a routine matter, which would be taken care of by him. The assessee was also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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