2021 (8) TMI 1316 - AT - Income Tax

Tribunal upholds assessment order, rejects benami challenge, allows pen drive evidence

Bhanwarlal M. Jain Versus DCIT-Central Circle-1 (3), Mumbai And Vice-Versa

The Tribunal upheld the assessment order under Section 153A read with Section 143(3), dismissing the assessee's challenge based on the operation of ... Assessment u/s 153A - benami income arising out of the sales and purchases transactions of 70 entities as assessed in the hand of assessee - reliance on pen-drive as found during the course of search proceedings - HELD THAT:- As no substance could be found in the plea that the pen-drive did not belong to the assessee or the same was not found from assessee’s premises particularly when the contents of the pen drive completely matched with incriminating material found during the course of search operations. The seizure of the same was duly recorded in the Panchnama which was vouched by independent Panchas. The vital link was established between the pen drive and the estimate sheets as well as the regular books of benami concerns being run by the assessee. Therefore, we do not find any substance in this plea as raised by Ld. AR before us and therefore, we reject the same. So far as the other arguments are concerned, we find that that the assessee was running more than 70 benami concern under name-sake directors / partners /proprietors. These persons were acting as per the direction of the assessee against remuneration. Most of them, in their statement u/s 132(4), made admission of those facts. They also made admission that they assisted / abetted the assessee in the business of providing accommodation entries. Their PAN Cards, IDs, blank signed cheque books etc were found at centralized premises. They were visiting the centralized premises to sign the blank cheque books as per the directions of the assessee. All these persons had superficial knowledge about nature of business being conducted by their respective concerns. 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. 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. 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. - Decided against assessee. Estimation of Quantum Additions - The estimation of 0.02% on import purchases as made by Ld. CIT(A) is based on confessional statement of the assessee and the same is also corroborated by relevant entries made in the estimation sheets which is illustrated in the impugned order. Therefore, we confirm this estimation. The estimation of commission on local purchase is based primarily on the assumption that the assessee would have earned commission on all the transactions. However, there is no reference to any incriminating material while making this enhancement. The assessee has also not admitted to have earned such commission. Thus, the same is based on mere presumption and hence, we are inclined to delete the same. The estimation of 0.05% on accommodation entries of bogus purchases provided by assessee is based on our estimation in the case of Shri Rajendra P. Jain. Our estimation with respect to bogus unsecured Loans provided by assessee draw strength from the fact that the assessee has carried out maximum transactions of this nature. The rate of commission may not be constant in all the transactions. Therefore, estimating the same merely on the basis of few illustrations only may not be a correct approach. Keeping in view the notions of equity and reasonableness, we have estimated the same @1% per annum which is much more than our estimation in the case of Shri Rajendra P. Jain. The expenses allowance of 25%, in our considered opinion, would be more than enough to take care of the estimated expenses being incurred by the assessee to carry out its operations under all these concerns keeping in view the magnitude of the transactions. The assessee was maintaining all the concerns in a centralized manner. Evidently, the assessee was employing only a limited number of trusted employees only and the expenditure would remain, more or less, constant even if the number of concerns would have become more. The expenditure could not be assumed to have increased in direct proportion to the increase in turnover. Therefore, the estimation as made by Ld. CIT(A) is reasoned one and no further relief could be provided to the assessee, on this account. Having said so, no other benefit / credit of returned income etc. would be available to the assessee. No credit of taxed paid by various entities would be available since TDS refund has been claimed by many of these entities. The addition in the hands of the assessee would be over and above respective returned income of these concerns and also without any benefit of taxes paid by these concerns. Unexplained jewellery - As quite evident that during appellate proceedings, the assessee was able to reconcile the jewellery as found during the course of search operations vis-à-vis jewellery declared in the wealth tax return. It is undisputed fact that declared jewellery was more than actual jewellery found during search operations. The findings of Ld. CIT(A) remain undisturbed before us. Therefore, our interference in the matter is unwarranted. This ground of revenue’s appeal stands dismissed. Issues Involved:1. Legality of the assessment order under Section 153A read with Section 143(3).2. Ownership and admissibility of the pen drive seized during the search.3. Estimation of unaccounted commission income.4. Validity of reassessment proceedings under Section 147.5. Addition on account of unexplained jewellery.Detailed Analysis:1. Legality of the Assessment Order Under Section 153A Read with Section 143(3):The assessee argued that the assessment order passed by the Assessing Officer (AO) under Section 153A read with Section 143(3) was bad in law and violated principles of natural justice. The Tribunal found that the assessee was running more than 70 benami concerns under name-sake directors/partners/proprietors, who acted as per the directions of the assessee against remuneration. The books of accounts of these entities were maintained in a centralized manner, and the dummy directors had superficial knowledge about the business. The Tribunal upheld the assessment order, dismissing the assessee's ground.2. Ownership and Admissibility of the Pen Drive Seized During the Search:The assessee contended that the pen drive found during the search was planted and the admission thereof was taken forcibly. The Tribunal noted that voluminous handwritten estimation sheets were found at various premises of the assessee, which were admitted to be in the handwriting of the assessee’s son and an employee. The pen drive contained calendar year-wise names of beneficiaries, amount of cash, and details of brokerage/commission. The data on the pen drive matched with the estimation sheets and other data gathered during the search. The Tribunal found no substance in the plea that the pen drive did not belong to the assessee and rejected this ground.3. Estimation of Unaccounted Commission Income:The Tribunal examined the estimation of unaccounted commission income under various heads:- Commission on Import Transactions: The Tribunal confirmed the rate of 0.02% as estimated by the CIT(A) based on the confessional statement of the assessee and corroborated by relevant entries in the estimation sheets.- Commission on Bogus Unsecured Loans: The Tribunal reduced the rate from 2.40% per annum to 1% per annum, considering the magnitude of transactions and the factual matrix.- Commission on Accommodation Entries of Bogus Purchases: The rate was reduced from 0.075% to 0.05%.- Commission on Local Purchases: The Tribunal fully deleted this addition, finding no reference to any incriminating material.- Expense Allowance: The Tribunal confirmed the allowance of 25% of gross commission as estimated by the CIT(A).The Tribunal directed the AO to recompute the assessee’s income for all the years in terms of these estimations.4. Validity of Reassessment Proceedings Under Section 147:The Tribunal upheld the validity of reassessment proceedings, noting that the original return was processed under Section 143(1), and the AO had tangible material to form a reasonable belief of escapement of income. The Tribunal rejected the plea that the AO could not issue a notice under Section 148 once a search was initiated under Section 132, as AY 2007-08 was not covered under Section 153A provisions.5. Addition on Account of Unexplained Jewellery:The AO made an addition of Rs.14.01 Lacs for unexplained jewellery found during the search. The CIT(A) deleted this addition after the assessee provided a detailed reconciliation statement of the jewellery found vis-à-vis the jewellery declared in wealth tax returns. The Tribunal upheld the CIT(A)'s findings, noting that the declared jewellery was more than the actual jewellery found during the search.Conclusion:The Tribunal dismissed the appeals of the revenue and partly allowed the appeals of the assessee, directing the AO to recompute the assessee’s income based on the revised estimations. The reassessment proceedings for AY 2007-08 were upheld as valid, and the addition on account of unexplained jewellery was deleted. The Tribunal’s detailed analysis ensured that the estimation of unaccounted commission income was fair and reasonable, considering the factual matrix and the magnitude of transactions.