2021 (12) TMI 1414 - AT - Income Tax

Tax Appeals Dismissed for Lack of Evidence

Sanjay Kumar Choudhary (HUF), (Prop. M/s. Mayank Impex), M/s. Nazar Impex Pvt. Ltd., Moulimani Impex Pvt. Ltd., Anoop Yogendra Jain, Manish S. Jain, M/s. Sun Diam, Sachin R. Parekh Versus The ACIT, DCIT, Central Circle-4, Surat

The Tribunal dismissed the appeals, upholding the lower authorities' findings that the appellant provided accommodation entries, not traded diamonds. The ... Assessment u/s 153C - sufficient incriminating material seized during the search action - During the search, various evidences were collected, which explained inter alia, the modus operandi of the 'business of providing accommodation entries in the nature of bogus sales and unsecured loans' - HELD THAT:- Admission was given when corroborative evidence was unearthed during the course of search. All these clinching and corroborative evidences along with the statements given during the search constitute incriminating evidence against the appellant. Even the appellant, Shri Anoop Y. Jain (part of statement reproduced by AO in para 5 of the assessment order), Shri Manish S Jain and Shri Sachin Pareek had accepted the entire modus operandi during the course of search in statement recorded u/s. 131 of the Act. In this case, therefore, there are ample incriminating evidences/documents recovered during the course of search. Even otherwise, the Hon'ble Delhi High Court in the case of M/s. Nau Nidh Overseas Pvt. Ltd. [2017 (3) TMI 108 - DELHI HIGH COURT] has held that statement of a third party recorded during course of search proceedings u/s 132(4), constitutes 'material on record' for purposes of section 153C of the Act. This way, ld DR reiterated the findings of ld CIT(A). We note that issue under consideration is squarely covered against the assessee by the judgment of Division Bench in 1, in the case of Shri Rajendra Sohan Lal Jain [2021 (12) TMI 867 - ITAT SURAT] whereby the issue relating to Commission @ 0.02%, Commission on import @0.20% and Commission on loan @ 0.50% were adjudicated by upholding the order of ld CIT(A) as held no evidence is filed by the assessee on record to prove the fact that the assessee entered into hedging contract with the Banker, the evidence found in the form of e-mail and other evidences show the facts otherwise. Therefore, the submissions made by the assessee do not inspire confidence. None of the case laws relied by the ld AR for the assessee is helpful to the assessee as there was sufficient incriminating material seized during the search action on the assessee on the basis of which it is clearly proved that the assessee is in the business of entry provider. Thus we dismiss the appeal of the assessee. Issues Involved:1. Validity of Notice under Section 153C of the Income Tax Act, 1961.2. Confirmation of initiation of proceedings under Section 153C.3. Assessment based on statements under Section 132(4).4. Addition based on non-incriminating materials found during search.5. Business of the appellant as an accommodation bills provider.6. Rejection of retraction statements.7. Assessment of alleged commission income.8. Non-acceptance of the claim that commission income was included in sales transactions.9. Rejection of books of account.10. Disallowance of expenses including foreign exchange fluctuation loss.Detailed Analysis:1. Validity of Notice under Section 153C:The appellant argued that the notice under Section 153C was invalid as the seized materials (backup of computer, mobile, and pen drives) did not belong to the appellant but were brought by a third party, and no incriminating materials were found. The Tribunal found that the satisfaction note did not establish a clear correlation between the seized documents and the assessment years in question, and the materials were regular audited books of accounts, not incriminating in nature.2. Confirmation of Initiation of Proceedings under Section 153C:The Tribunal observed that the proceedings under Section 153C were based on the statement of Rajendra Jain and Surendra Jain and the backup of computer data. However, the Tribunal noted that the satisfaction note did not mention any incriminating material that had a bearing on the total income of the appellant, which is a requirement post the amendment effective from 01.10.2014.3. Assessment Based on Statements under Section 132(4):The Tribunal held that the statement recorded under Section 132(4) alone cannot be the basis for block assessment under Section 153C unless it is corroborated with incriminating evidence of undisclosed income unearthed during the search. The Tribunal cited various case laws to support this view, including CIT vs. Singhad Technical Education Society and CIT vs. Calcutta Knitwears.4. Addition Based on Non-Incriminating Materials Found During Search:It was argued that the addition made by the Assessing Officer was not based on any incriminating documents but solely on the statement of Rajendra Jain. The Tribunal upheld that in the absence of incriminating material, no addition can be made in case of unabated assessment, citing judgments like PCIT vs. Saumya Construction and CIT vs. Kabul Chawla.5. Business of the Appellant as an Accommodation Bills Provider:The Tribunal noted that the appellant's business was concluded to be merely providing accommodation entries based on the statements of Rajendra Jain and others, and no physical stock of diamonds was found during the search. The Tribunal upheld the Assessing Officer's findings that the appellant was engaged in paper transactions and not in actual trading of diamonds.6. Rejection of Retraction Statements:The Tribunal observed that the retraction of the statement recorded under Section 132(4) was filed after a considerable time and was not supported by any evidence of coercion or duress. The Tribunal upheld the view that the initial statement recorded under oath carries more weight and the burden of proving it incorrect lies on the deponent.7. Assessment of Alleged Commission Income:The Tribunal upheld the addition of commission income based on the statement of Rajendra Jain, which disclosed the modus operandi and the rate of commission earned. The Tribunal found that the Assessing Officer's estimation of commission income was reasonable and supported by corroborative evidence.8. Non-Acceptance of the Claim that Commission Income was Included in Sales Transactions:The Tribunal rejected the appellant's claim that the commission income was already included in the sales transactions disclosed in the audited accounts. The Tribunal noted that the appellant failed to provide any verifiable evidence to support this claim.9. Rejection of Books of Account:The Tribunal upheld the rejection of the books of account under Section 145(3), noting that the books were not reliable as they did not reflect the true nature of the transactions. The Tribunal found that the Assessing Officer was justified in rejecting the books and making a best judgment assessment.10. Disallowance of Expenses Including Foreign Exchange Fluctuation Loss:The Tribunal upheld the disallowance of expenses claimed by the appellant, including foreign exchange fluctuation loss, on the grounds that the appellant was not engaged in actual business activities and the expenses were not substantiated with verifiable evidence.Conclusion:The Tribunal dismissed the appeals filed by the appellant, upholding the findings of the lower authorities that the appellant was engaged in providing accommodation entries and not in actual trading of diamonds. The Tribunal found the assessment and additions made by the Assessing Officer to be justified and supported by sufficient evidence.