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TMI Blog2025 (3) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... of the counsel before them but it was their duty to examine the issue in proper perspective since Tribunal is a final fact finding authority under the Act. We say so because of the admission made by the respondent-assessee in the statement of its director recorded under Section 131 of the Act on which heavy reliance is placed by the counsel for the respondent-assessee was not even considered by the Tribunal. Reliance on statement of director of assessee - Explanation cannot be accepted more so from the respondent-assessee company who is claiming to have been engaged in the business of providing accommodation entries where crores of rupees are deposited and withdrawn. If the respondent-assessee does not have the details of the beneficiaries, then we fail to understand how the money were deposited in the bank accounts of the respondent-assessee and withdrawn from such bank accounts without respondent assessee knowing the details of these beneficiaries. The only person who can operate these bank account would be the respondent-assessee, who, at least at the time of withdrawing, would know to whom the amount withdrawn is given. In the absence of any details of such beneficiaries, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question (a) in favour of the appellant-revenue and against the respondent-assessee. Insofar as question (b) is concerned, we answer the same against the appellant-revenue and in favour of the respondent-assessee. Consequently, we reverse the Tribunal's order and restore CIT (A)'s order subject to retaining the rate of commission at 0.15 % as adopted by the Tribunal. X X X X Extracts X X X X X X X X Extracts X X X X ..... O. would adopt the rate of commission @ 0.37% for A.Y. 2009-10 as it is in the earlier assessment year. In case the appellant fails to identify the beneficiaries in that case the amounts credited in the bank account of the appellant would stand confirmed as unexplained cash credit u/s.68 of the I. T. Act. In the result, this ground of appeal is partly allowed. [emphasis supplied] 7. Aggrieved by the CIT(A)'s order, the respondent-assessee filed an appeal to the Tribunal being Appeal No. 7447/M/2012. The relevant grounds raised before the Tribunal in form No. 36 reads as follows: 1. On the facts and circumstances of the case the learned Commissioner of Income Tax (Appeals) has erred in law and in facts in passing the order u/s. 250 of the Act. 2. The learned Commissioner of Income Tax (Appeals) has erred in law and in facts in passing the order without complying with the principles of natural justice. 3. On the facts and circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) has erred in confirming the additions at 0.37% on the gross deposits as against 0.15% offered by the appellant 4. The learned Commissioner of Income Tax (Appeals) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "a racket of illegal business of providing accommodation entries" and, therefore, queried the Court "How could such illegal transactions be recorded by maintaining any books of accounts?" He further submitted that the amounts credited in the bank account do not belong to the respondent-assessee but belong to its customers. He further submitted that only the commission amount deposited in the bank accounts can be added as his income, which they have already offered for tax. He further submitted that provisions of Section 68 are not applicable since credits in the bank account do not constitute credits in the assessee's books. 12. Mr. Aditya Sharma heavily relied upon a statement recorded on 16 January 2013 of Mr. Mukesh Choksi, Director of the respondent-assessee company under Section 131 of the Act. He stated that although the respondent-assessee and director are engaged in the racket of providing accommodation entries, the credits in the bank account, which are not explained, cannot be taxed in the hands of the respondent-assessee. He orally also submitted that these amounts are already taxed in the hands of the beneficiaries. In support of his submissions, Mr Sharma relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omer of the respondent-assessee. Merely because the respondent-assessee states that he is only an accommodation entry provider and therefore the credits in the respondent-assessee's bank accounts belong to the customers to whom the accommodation entries were given cannot absolve the respondent-assessee from its obligation to provide the details. It is one thing to boldly and even proudly admit that a racket for providing accommodation entries was being operated but quite another to evade statutory liability or taxes based upon such assertion. 18. In our view, even in the absence of provisions of Section 68 (the said section being only enabling provision), credits appearing in the bank accounts of an assessee could be added as unexplained income of such an assessee if such assessee fails to explain the details of the source from where such deposits are made. The submission of the respondent-assessee that in case of many deposits, he does not know the customer who has deposited money in its bank account is a submission which has to be rejected at the outset. Any law does not support such a contention and cannot appeal to the conscience of the Court. 19. Before the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same cannot be mixed to contend that only commission income should be taxed, not unexplained cash credits. 22. The Tribunal has not given any reasons as to if the respondent-assessee does not explain the beneficiary's identity, then why the whole amount should not be added under Section 68, but only 0.15% of the said deposit. In our view, therefore, the Tribunal has adopted a very casual approach to such a serious matter of rampant tax evasion by merely saying issue is covered. In our view, in such cases Tribunal should not go by the concession of the counsel before them but it was their duty to examine the issue in proper perspective since Tribunal is a final fact finding authority under the Act. We say so because of the admission made by the respondent-assessee in the statement of its director recorded under Section 131 of the Act on which heavy reliance is placed by the counsel for the respondent-assessee was not even considered by the Tribunal. We now propose to deal with that statement. 23. In question No.2, Shri. Mukesh Choksi has admitted that he is the director of the respondent-assessee, and therefore, the statement is made in that capacity. In the said question, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in its case has been added in the assessment order of various beneficiaries. On the contrary, the respondent-assessee has failed to even identify the beneficiaries in the present case. Therefore, this decision cannot assist the respondent-assessee since the said is distinguishable on facts. 27. In fact, the CIT (A) in para 4.3 has given an express finding that, if the respondent-assessee identifies the beneficiaries, then same would not be added as income of the respondent-assessee but if the respondent fails to identify the beneficiaries, then same would be confirmed as unexplained cash credit. In the instant case before us, the respondent-assessee has not pleaded anywhere before the Assessing Officer and appellate authorities, nor any evidence has been laid to that effect that amount to Rs. 10,73,52,550/- is added in the assessment of the beneficiaries. Therefore, this decision could not come to the rescue of the respondent-assessee. 28. The decision in the case of Alag Securities Pvt. Ltd. (Supra) was where the Co-ordinate Bench refused to admit the appeal on this factual finding, which is not the case before us. The Learned counsel for the respondent-assessee, during the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts are maintained for the assessment year under consideration i.e. AY 2009-10. Therefore, the submissions made by the learned counsel for the respondent-assessee have to be rejected that no books or books of accounts are maintained. 31. Section 68 of the Act was inserted in the 1961 Act and there was no corresponding provision in 1922 Act. The phrase 'books of an assessee' appearing in Section 68 has to be interpreted by adopting updated construction in accordance with the changes in technology. Legislature is presumed to anticipate the developments and to intend the Act to be applied to such future developments. After the advent of computers, the businessmen records its transaction in computers and not in the 'books' as traditionally understood. In the statement recorded of Mr. Choksi, director of the respondent-assessee, he has stated in answer to question No. 3 that the data appearing in 2 CDs are extracted by the investigating wing from books of account. In answer to question No. 7, once more, it is reiterated that the data is extracted from the CDs. In answer to question No. 9, he has admitted that the contra entries appearing as entries in favour of beneficiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent-assessee in which these transactions are recorded would constitute 'books of an assessee' for the purpose of Section 68 of the Act. Our views on what constitutes 'books' are supported by decision of the Co-ordinate Bench of this Court in the case of Sheraton Apparels Vs CIT (2002) 256 ITR 20 Therefore, Section 68 should be interpreted to mean books of an assessee to include the computer in which the business transactions are recorded and from which data was extracted on CD's. 34. We now test the submissions of the learned counsel for the respondent-assessee on the premise that assuming the respondent-assessee maintains no books, whether addition can be made under Section 68 of the Act. The respondent-assessee is a company formed under the Companies Act, 1956. As per Section 209 of the Companies Act 1956, books of accounts are required to be kept by the company. Corresponding Section of 2013 Act is Section 128. Section 44-AA of the Income-tax Act also requires a person carrying on business to maintain books of accounts and if the gross receipt or turnover exceeds prescribed limit, then the same are required to be audited under Section 44AB of the Act. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplained he cannot claim or have deduction of the said amount from the Income-tax. Section 68 of the Income-tax Act provides that where the assessee offers no explanation about the nature and source of the credits in the books of account, all the amounts so credited or where the explanation offered by the assessee is not satisfactory in relation to the same then such credits may be charged to tax as income of the assessee for that particular previous year. It is to be noted here in this case that huge amounts have been credited in the account of the appellant and he has not explained the nature of the same. The source of the said amount has been discovered by the Assessing Officer from the bank pass book. It is to be noted that when the source and nature has been held to have been explained, the said amount has been deleted by the appellate forums. Now the dispute has remained in respect of an amount of Rs. 9,00,000 from M/s. Pooja Corporation Rs. 7,00,000 from M/s. Pooja Enterprises Rs. 24,00,000 from Shri. Ashok Mehta Rs. 18,00,000 from Mr. Ajay Shah. No document was produced in respect of these transactions nor the amounts have been confirmed from those persons, who are shown to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommodation entry provider, Mr. Mukesh Choksi through his web of shell companies and various admissions made by the counsel for the respondent-assessee. It is also important to note that Mr Mukesh Choksi, director of the respondent-assessee in his answer to question No.14 of the statement has admitted that he was a practicing Chartered Accountant but has surrendered the Certificate of Practice (COP) in 1993 and thereafter is only engaged in the business of providing accommodation entries. He has also stated that search action has been taken against him/his companies more than once. 41. We are rather surprised that a Chartered Accountant who may not be holding a COP but, if involved in illegal activities, as to whether any action is or can be taken by the Institute of the Chartered Accountants of India against such a person. Suppose no action is taken against such a person. In that case, we hereby direct the Institute of Chartered Accountants of India to inquire whether such a person is liable for any professional misconduct as per the Chartered Accountant's Act, 1949. 42. In answer to question no.15, Shri Mukesh Choksi through the respondent-assessee company has admitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t agencies. 46. By ignoring the material on record, we would be failing in our duty and our oath if the activities of such persons are not directed to be investigated into and taken to their logical conclusion. Inaction only encourage more persons to engage in illegal activities as admitted by the counsel for the respondent-assessee during hearing. As a Court of law, we cannot permit such a thing to happen in the future or at least this Court should ensure that action against persons involved in such activities should be a deterrent for other persons to think on such line. Therefore, we have given the above directions for investigation. 47. This is a case where the low deterrent effect of the law has worked on a professional talent to become a habitual economic and financial offender, and this should be stopped in the larger interest of our country. 48. Insofar as question (b) is concerned, the CIT (A) in its order in paragraph 4.3 directed the AO to adopt the rate of commission at 0.37% if the beneficiaries are identified by the respondent-assessee. The revenue has not challenged the said rate of 0.37% by filing an appeal to the Tribunal. However, the respondent-assessee did ch ..... 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