TaxTMI 
TaxTMI 
2013 (10) TMI 750
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....s.3,04,930/- being income of non existence person with the direction to assessee the said income substantively in the hands of such person only. The appellant prays that the order of the CIT(A) on the above ground(s) be set aside and the order of the Assessing Officer be restored. The appellant craves leave to amend or alter any ground or add a new ground which may be found necessary." 3. Ground no. 1 is against the deletion of Rs.3,00,000. 4. The facts are that the assessee was alleged to be running a refund racket and was operating from Thane and Kalyan, wherein the assessee would solicit the refund in the cases of salaried employees with private organization in connivance with some CAs and trusts. According to the deposition made u/s 131 dated 17.01.1994, the assessee explained the modus operandi for such fraudulent refunds and as consequence of the modus operandi, as explained, it was presumed that the assessee was the man behind the entire fraud exercise. It was thus presumed that the assessee would retain substantial portion and pass on the remaining 25-30% to such fraudulent assessees and earned between 20 to 25 lacs in assessmen....
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....g of fraudulent refund. In this statement also, the assessee had not admitted to have been the real beneficiary. In any case, the addition based only on the basis of an outside information and on uncorroborated statement, cannot be sustained. In the instant case, even in the search action, nothing was found, which would prove or indicate and consequently indict the assessee in the fraud committed against the Income Tax Department. 13. We, therefore, sustain the findings of the CIT(A) and reject the ground of appeal, filed by the department. 14. Ground no. 2 is against the restriction of addition of Rs.45,000/- to Rs.9,912/-. 15. The fact is that in the statement recorded u/s 131, it was stated by the assessee that he had given loans to M/s Sanjeev Fabrics and M/s Goyal Textiles to the tune of Rs.1,10,000/- and Rs.3,06,000/- respectively, which cannot be termed as genuine. The AO, on the basis of statement recorded estimated a sum of Rs.45,000/- as income from such hawala transactions. 16. Before the CIT(A), the assessee produced his books and pointed out that he had actually earned Rs.1,650/- on Rs.1,10,000/- given to Goyal Textiles for five months and Rs.8,262/- on Rs.....
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.... has been conclusively been proved that it was the assessee who had created the 11 non existent assessee, then it was incorrect on the part of the CIT(A) to give a contrary decision. 27. The AR submitted that an appropriate view may be taken. 28. We have heard the arguments and are of an opinion that the CIT(A) has indirectly sustained the addition made by the AO and also directed the AO to collect the taxes from the assessee, if those or any of the 11 non existent persons are not to be found, because, the CIT(A) has very categorically directed the AO, "... if any, and since those non existing persons were created by the appellant himself, he would pay taxes for such non existing persons, if any, as per demand notice, in such non existing persons". The CIT(A) only meant, if out of such persons, there is any genuine person/assessee, then the assessee should not be burdened by that persons' liability. If in circumstance, the assessee(s) is non existent as in the case is quite apparent, then the liability has been cast upon the instant assessee, by the CIT(A), to meet the tax demands and make the tax payments accordingly. 29. We, endorse this finding of the CIT(A) and endorse....
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....ant crave to amend or alter any ground or add a new grounds which may be found necessary. 32. Grounds 1, 2 & 3 are additions on account of deeming provisions of section 69A and 69C, wherein, the AO has added Rs.5,50,036/- on account of jewellery found at the time of search, Rs.90,000/- as unexplained cash found and Rs.5,00,000/- on account of furniture and fixtures inventorised at the time of search. 33. The assessee was subjected to search and seizure operation u/s 132 of the Income Tax Act, 1961 on 07 & 08.01.1994 at the residential and business premises. During search operation, the following were found and seized form the assessee from his residence: Sr.No. Items Found (Rs.) Seized (Rs.) 01 Cash 90,533 50,000 02 Jewellery 6,51,834 5,50,036 03 Shares 18050 18,050 04 Furniture & fixtures (under deemed seizure) 5,00,000 5,00,000 34. As per the submissions made before the CIT(A), the assessee contended that he was not provided with the seized material and because of which, he was unable to assist the AO. The AO, on consequential non cooperation added the above items, except for shares, under section 69A and 69C. ....
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....ertained and adjudicated only after the comments were received from the AO in remand proceedings, where the AO was unable to controvert the facts which were pointed out by the assessee in his submissions before the CIT(A) and also in the remand proceedings. On these facts, we are of the opinion that the CIT(A) was correct in deleting these three additions. We, sustain the order of the CTI(A) on these three additions. 39. Grounds no. 1, 2 & 3 are therefore rejected. 40. Grounds no. 4 & 5. 41. The facts are, the assessee was a partner in M/s Aggarwal Trading Company and as per the Deed of Partnership, the assessee would receive Rs.48,000/- as salary and commission @ 2% of turnover (Rs.4,00,000/-, being 2% of Rs.2,00,00,000/- turnover). The assessee submitted before the CIT(A), that, his salary income from the said firm was only Rs.37,500/-. However, despite the fact that according to the partnership deed, the assessee would have received commission on turnover, as provided for, no such commission income was received by the appellant. Therefore, the question of estimating the commission income did not arise at all. The AO did not accept the said explanation and stated that, t....
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....3/- would be assessable in the hands of the appellant, because the business of the firm was close w.e.f. 10/01/1994, after the search and seizure action. Thus, the business of the firm was for the period from 01/04/1993 to 01/01/1994 i.e. for 9 months. These points were referred to the AO for his comments in remand proceedings, wherein the AO stated that, "the addition on account of salary and commission income assessed by the AO at Rs.4,48,000/- was not received by the assessee as verified from the seized material". In the further submission with respect to the observation in the second Remand proceedings, the appellant reiterated the same arguments, as put forth in the original submission as narrated above, and requested to assess the salary income receivable in the hands of the appellant at Rs.32,133/-, in place of Rs.48,000/- added by the A.O, and further requested that, since no commission income was received by the appellant, or paid by the firm, no presumptive addition could be made of Rs.4 lacs and the same may be deleted. 43. After hearing the arguments of the appellant and after taking into consideration the observation made by the AO in the Remand Report(s), the CIT(A....
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.... was noted by the AO that the assessee had filed 394 returns in the period covering 1989-90 to 1994-95, as per seized documents, B-2, B- 3, B-10, A/1-16, & A/1-22. On the basis of these documents, he estimated the consultation fee at an average of Rs.271/- per return, the AO computed the fee at Rs.95,000/-. In the submissions before the CIT(A), the assessee submitted that he had actually earned Rs.25,000/-. These submissions were forwarded to the AO for his comments. In conclusion of the remand proceedings, in the Remand Report dated 20/11/2002, the AO stated that, "total number of returns of income filed by the appellant Shri. Sunil Mittal on behalf of his clients as stated in the statement recorded u/s 132(4) of the IT Act, dated 17/01/1994 were 350, and amount of income estimated by the AO on account of consultancy income worked out to be Rs.271/- per return of income and, therefore, estimated the total consultancy income at Rs.95,000/-. 54. The appellant in the submission before the CIT(A) contended that the AO did not make any factual observation, while making addition of Rs.95,000/- as consultancy income. To prove his arguments, the appellant filed the chart, which was pre....
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.... income at Rs.35,000/-. 62. In the submissions made before the CIT(A), the appellant submitted that, the appellant had declared the interest and dividend income at Rs.10,269/- in the return of income. Against this, the AO estimated the same at Rs.35,000/-, observing that, the appellant did not file any evidence to substantiate the same. The assessee submitted that he could not substantiate, because all the books of accounts and documents were seized by the Department and in absence of the same, no evidence could be produced before the AO, at the time of assessment proceedings. Considering these facts, the CIT(A) called for the remand report, wherein, in the Remand Report dated 20/11/2002, the AO, in para 4 & 6 stated that, the addition on account of interest and dividend income assessed by the AO at Rs.35,000/- was not received by the assessee, as verified from the seized material. 63. The CIT(A), thus concluded, on the submissions of the assessee and the remand report that the AO had only estimated the interest and dividend income at Rs.35,000/-, whereas, the appellant had correctly declared Rs.10,269/- as income from interest and dividend in the return of income, on the bas....
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....Y. 1992-93, wherein it was held that, "an expenditure for earning such income should be allowed at 90% of such gross commission income". In view of the said judgment of the Hon'ble ITAT, the deduction @ 90% may be allowed from the alleged commission income, (copy of the judgment of Hon'ble ITAT is enclosed in the paper book). As such, out of the gross commission income of Rs.89,602/-, which was estimated in the case of M/s Sanjay Enterprises protectively, an amount of the expenditure of Rs.80,642/- being 90% should be allowed as expenses and only Rs.8,960/- may be treated as income of the appellant. 71. The issue was referred to the AO for his comments in remand proceedings. The AO in the Remand Report dated 20/11/2002 stated that, addition on account of commission out of hawala loan transactions of Rs.89,602/-, addition made in the case of M/s Sanjay Enterprises was on protective basis and substantive in the hands of the appellant. 72. The CIT(A), after considering the entire factual matrix, which included the order of the coordinate Bench of Mumbai ITAT in the case of Sanjay Enterprises, concluded to tax 10% of Rs.89,602/- being alleged commission, out of hawala loan transa....
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....ained the modus operandi applied for claiming bogus refund, in his deposition recorded u/s 131 of the I.T. Act, dated 17/01/1994. On the basis of this deposition, an amount of Rs.30,00,000/- was added in the hands of the appellant, being income from fraudulent encashment on refunds. 80. The assessee submitted before the CIT(A), that, the allegation and the additions made were without any basis and accordingly no addition was called for in the hands of the appellant. It was undisputed fact that, the appellant was a Income Tax Practitioner (ITP) and, the cases alleged by the AO, related to some employees of the private sector. It was not denied that, the returns were filed by them. Whether these returns were fraudulent or not, was the matter between the said employees anal the Income Tax Department. It was not the case of the AO that, the refunds in such cases were issued to the appellant. Further, subsequent to the search on the assessee, such returns of income were reopened under section 148 of the Income Tax Act and were taken under scrutiny. The department, by assessing those persons, not only disallowed the refunds granted to them, also initiated penalty proceedings and raise....
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.... T Act, dated 09/11/98 and 20/11/1998, respectively, it was found that, such refunds were recovered by raising the demand, and the even the appeals filed before the CIT(A), were dismissed in the appeals of such employees. Thus, it was argued by the assessee before the CIT(A) that, no income accrued to the appellant. 83. The CIT(A), after going through the facts of the case from the assessment order and after hearing the arguments of the appellant, and after perusing the seized material, particularly bundle No. 36 & 37 of the seized material, he found that the respective AOs had reopened such cases and made assessments u/s 143(3) raising the demands against such employee assessees and also levied penalty u/s 271(1)(c), for declaring inaccurate particulars of income. Thus, the entire evidence, as narrated above indicated that, Shri Sunil Mittal only acted as ITP in helping the respective employees of the private companies, to file the returns of income and claim the refunds, which were issued to them. No any evidence in the seized material pointed out towards the fact that, all these refunds claimed by the respective employees of private companies, ultimately accrued to the assess....