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TMI Blog2024 (7) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... m it appropriate to restrict the same to 0.50%. We, therefore, sustain the addition by applying a net profit rate of 0.5% on total amount of share capital and share premium of Rs. 40 Crore as against 0.75% applied by the ld. CIT(A). Accordingly, the ground raised by the assessee in the cross-objection is partly allowed. - SHRI SANJAY GARG, HON BLE JUDICIAL MEMBER DR. MANISH BORAD, HON BLE ACCOUNTANT MEMBER For the Appellant : Shri Siddharth Agarwal, Advocate For the Respondent : Shri Arun Bhowmick, JCIT, Sr. D/R ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER: 1. The present appeal filed by the revenue is directed against the order of the Learned Commissioner of Income Tax (Appeals), Guwahati - 2, (hereinafter the ld. CIT(A) ) dt. 18/03/2019, passed u/s 250 of the Income Tax Act, 1961 ( the Act ), for Assessment Year 2008-09. The assessee has filed the cross-objection. 2. The revenue has raised the following grounds of appeal: - 1. On the facts and circumstances of the case, the Ld. CIT(A) is not justified in facts as well as in law in treating the addition of Rs. 38,40,00,000/- as ground put forward by the assessing officer for addition of above amount was not justified and direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the ROC. The ROC, Shillong, stated that the assessee company has the same address as per the master data and the company is active and no further information was provided by the ROC. An inspector was again deputed for enquiry in respect of the genuineness of the address and business activity of the assessee company, who in his report submitted that the assessee company is a bogus/benami/paper company. Finally, a showcause notice dt. 18/12/2017 was issued to explain why the investment/share premium amount received should not be considered as undisclosed income of the company and the same be not added to the assessee s income. There was no compliance to the said showcause notice. The Assessing Officer, accepted the claim of share capital of Rs. 1.60 Crore but proceeded to add the amount of Rs. 38.40 Crore received towards share premium as undisclosed income of the assessee company u/s 68 of the Act. Income assessed at Rs. 38.40 Crore. 4.1. Aggrieved the assessee carried the matter in appeal before the ld. CIT(A). The ld. CIT(A) in the impugned order concluded that the assessee company is indeed a paper/shell company and while doing so, directed the Assessing Officer to apply a net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Commissioner of Income Tax (Appeals) - 14, Kolkata, (hereinafter the Id. CIT(A)'), dt. 31/05/2017, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the 'Act'), relating to Assessment Year 2012-13. 2. The assessee is an individual. He filed his return of income on 30/09/2012 declaring income of Rs. 2,30,490/-. The Assessing Officer at para 2 page 5 of his order concluded as follows:- In view of the foregoing discussion it may be reasonable concluded that the assessee has allowed his bank accounts to utilised by the entry operators in which such operators parked undisclosed funds only to obtains payments from the assessee to give a colour of genuineness of such entries given to other corporate and non-corporate entities and for such services the assessee as charged commission . The commission income is estimated to have peen 2% of the entry deposits made into his bank account. Therefore, the income of the assessee from his business of accommodation entries is estimated at 2% of Rs. 38,88,59,998/-being for Rs. 77,77,200/-. 2.1. On appeal the Id. CIT(A) upheld the order of the Assessing Officer. He held that the assessee has not provided any evidence in support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the ends of justice. In the case of DCIT vs. Mahendra Sethia (IT(SS)A Nos.48 to 54/Kol/2016 dated 01/06/2018], it was held/averred, as follows, by Hon'ble ITAT- Kolkatta: 9. Be as it may, the Id. CIT(A) gone by the recommendations of the AO in the remand report that, commission income on such activity of providing accommodation entries varies from 0.20% to 0.35%. This remand report has not been negated or adversely commented upon by the Addl. Commissioner of Income Tax. Hence the Id. CIT(A) accepted this report of the AO and granted relief. While doing so there is no reason as to why the AO should be aggrieved with the findings of the Id. CIT(A). Be as it may, this factual finding of the Id. CIT(A) is just on the remand report of the AO could not be controverted on facts by the Id. DR. Thus we uphold the findings of the Id. CIT(A) and dismiss all the appeals of the revenue. In the case of Goldstar Finvest P Ltd. vs. DCIT [ITA NO.74/Mum/2015; dated 29/12/2016], it was held/averred, as follows, by Hon'ble ITAt - Mumbai: 7. We find that in the case of Gold Star Finvest Ltd, which is a sister concern of the assessee, on similar facts for the assessment year 2003-04 and 2004-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was 0.50%. In my humble opinion and considering the ratio of judgements referred herein earlier, it would be in the fairness of thing's, if the claim of such unsubstantiated expenses is restricted to 50% of .0.50%. This would mean that the gross rate of profit from these transactions would be 1% and the Appellant would be entitled for a claim of expenses at 0.25% and thus, the net profit rate from the above transactions can be taken to be at 0.75%. WHY THE UNDERSIGNED HAS TAKEN A VIEW DIFFERENT FROM OTHER APPEALS OF THE APPELLANT ADJUDICATED EARLIER? It is note worthy to state here that earlier appeals of the same Appellant for different assessment years were adjudicated by the undersigned. In the aforesaid appeals, while the said appeals were dismissed for non-prosecution, detailed observations as to the functioning as well as management of the Appellant were made. It is was noted that there was a systematic non- compliance by the Appellant and therefore there were reasons for dismissal of those appeals, ex-parte. As regards the impugned appeal, the order is being passed on the basis of the observations of the Hon'ble Supreme Court, wherein the name of the Appellant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er/shell company, the above observations have been made only for academic purposes and nothing else. In view of the above discussion and following the ratio of the judgments as discussed herein earlier and considering the peculiar facts and circumstances of this case, these grounds of appeal are, hereby, partly allowed and the additions made by the AO on this account are, hereby, partly confirmed. Further, the AO is directed to take all legal recourse so as to bring the purported beneficiaries of the Appellant to tax. The AO is, accordingly directed to apply a net profit rate of 0.75% percent on the total amount of Rs. 40,00,00,000/- which comprises of the share capital as well as the share premium raised by the Appellant during the year under consideration to arrive at the net profit of the Appellant. 7. The ld. D/R, though not leaving his grounds, could not factually controvert the findings of the ld. CIT(A). The ld. Counsel for the assessee contended that the assessee company is an entry operator and not engaged in any actual business. Reference was made to judgment of Hon ble Supreme Court in the case of PCIT vs. NRA Iron Steel (P.) Ltd. reported in [2019] 103 taxmann.com 48 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. at Mumbai, were found to be non-existent at the address given, and the premises was owned by some other person. b. The companies at Kolkatta did not appear before the A.O., nor did they produce their bank statements to substantiate the source of the funds from which the alleged investments were made. c. The two companies at Guwahati viz. Ispat Sheet Ltd. and Novelty Traders Ltd., were found to be non-existent at the address provided. The genuineness of the transaction was found to be completely doubtful. ii. The enquiries revealed that the investor companies had filed returns for a negligible taxable income, which would show that the investors did not have the financial capacity to invest funds ranging between Rs. 90,00,000 to Rs. 95,00,000 in the Assessment Year 2009-10, for purchase of shares at such a high premium. For example: Neha Cassetes Pvt. Ltd. - Kolkatta had disclosed a taxable income of Rs. 9,744/- for A.Y. 2009-10, but had purchased Shares worth Rs, 90,00,000 in the Assessee Company. Similarly Warner Multimedia Ltd. Kolkatta filed a NIL return, but had purchased Shares worth Rs. 95,00,000 in the Assessee Company Respondent. Another example is of Ganga Builders Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . DCIT in ITA No. 74/Mum/2015; order dt. 29/12/2016; Jaswant Singh vs. ITO in ITA No. 1775/Kol/2016; order dt. 14/09/2018 and other decisions, has prayed for reducing the net profit rate. The ld. D/R could not bring any contrary material to controvert this contention of the ld. Counsel for the assessee. We agree with the contention of the ld. Counsel for the assessee that the percentage of estimation @ 0.75% as determined by the ld. CIT(A) is on a higher side as compared to the judicial decisions referred by the ld. Counsel for the assessee. However, considering the fact that during the course of appellate proceedings before ld. CIT(A), ld. A/R of the assessee vide note sheet entry dated 13/03/2019 having conceded to the application of a net profit rate of 0.50%, we deem it appropriate to restrict the same to 0.50%. We, therefore, sustain the addition by applying a net profit rate of 0.5% on total amount of share capital and share premium of Rs. 40 Crore as against 0.75% applied by the ld. CIT(A). Accordingly, the ground raised by the assessee in the cross-objection is partly allowed. 11. In the result, appeal of the revenue is dismissed and cross- objection of the assessee is part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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