TaxTMI 
TaxTMI 
2016 (5) TMI 820
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....ief facts of this issue are that the assessee is a practicing chartered accountant and is the proprietor of M/s S.M.Nahata & Co. having its office at Room No. 16, 2, Clive Ghat Street, Kolkata - 700001. There was a search u/s 132 of the Act conducted on 3.3.2010 at the residential premises of the assessee. Parallely survey u/s 133A of the Act was also carried out at different office premises of the assessee as well as those of the companies allegedly managed and controlled by the assessee. During the course of such operations, certain valuable assets such as cash (Rs. 12,03,000/- in residence and Rs. 1,20,000/- in office) , Jewellery valued at Rs. 36,19,913/- as well as books of accounts and other documents were found. The search and survey action in the case of the assessee wsa initated in consequence to the search conducted against M/s Bhushan Power & Steel Ltd group of cases. The assessee gave explanation for the cash and Jewellery found during the course of search which was accepted and no addition was made on that account by the Learned AO. In the assessment order, the Learned AO noted there were 31 companies which were managed and controlled by the assessee though it was cate....
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.... you, your employee Mr. Radhakant Tiwari and your group companies. The companies whose shareholders list were found had given accommodation entry in form of share capital to above mentioned four companies of Bhushan Group. (xxxix) Page 51 of document SMN-1 seized from your residence is a ledger of M/s. Bhushan Power & Steel Pvt. Ltd. in the books of M/s.Caplin Commercial Pvt. Ltd. for the period 01-04-2008 to 31-03-2009. Finding of this ledger at your residence proves that you were not only aware of such transactions but also involved with them. (xi) Page No. 68 of document. PMCM/17 impounded from your office at 8, Canning Street, 3rd floor, Room No. 305, Kolkata-1, is a letter dated 10/02/2010 from Mr. R.K.Gupta, Vice President and Company Secretary of M/s. Bhushan Power & Steel Ltd. In this letter Mr. Gupta has written to one Mr. Alkesh Sharma of Kolkata office of his company that they were sending documents like Memorandum of sale of shares, delivery of share certificates, letter of offer for sale of shares and list of transfer deeds for getting signed from the Directors of respective companies of Mr. S.M.Nahata. A list containing names of companies whose shares were requi....
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..... Ltd. In his replies to question nos. 5 & 7 of that statement, he has stated that Mr. S.M. Nahata was key man of their group of companies and accounts of those companies were prepared at your instruction only. In replies to question nos. 10 & 12, he reiterated that only you would be able to explain the transactions entered into by the companies in which Mr. Bej was directors with companies of Bhushan Group. A copy of this statement is enclosed with this letter. (xliv) Statement of Mr. Radha Kant Tiwari was also recorded during survey U/s. 133A on 03-03-2010. In his statement, he has accepted that he was director of M/s. Ascent Vyapaar Pvt. Ltd., M/s. Briiliant Vyapaar Pvt. Ltd, M/s. Caravan Vyapaar Pvt. Ltd; M/s. Mission Vyapaar Pvt.Ltd. and M/s. Braggart Vyapaar Pvt. Ltd. In reply to question no. 3 he has accepted that accommodation entries were* provided by these companies to the companies of Bhushan Group. A copy of this statement is enclosed with this letter. (xlv) Statement of Ujjwal Das was recorded during survey U/s. 133A on 03- 03-2010 at your office 863, Marshall House, 33/1, N.S.Road. In his statement, he has stated that he was working as peon of Mr. S.M. Nahata an....
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....Mr. S.M. Nahata as admitted by him in his statement recorded. He categorically stated in his statement that S.M. Nahata is the only person who sometimes attends the office, usually once in a month, collects the letters from the letter box and goes away. 3. From the documents seized / impounded during search at your residence and survey at your business premises and statements of your employees and other persons during survey, it is established beyond doubt that you are managing and controlling affairs of 31 companies list of which were intimated to you vide this office letter dated 30-11-2011. The documents mentioned above clearly established that the companies had their offices at the premise owned by you and your family members. It is also established from these documents and statements recorded during survey that either you or your employees or both were directors of these companies. It is also crystal clear from these documents that you were actively engaged in providing accommodation entries to Bhushan Group of companies as well as to others through 31 companies as mentioned above. As prevalent in this field of activities, money originally received in cash or in the form of....
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....exed at the several allegations made by you in your impugned notice. May I say and submit that in course of search, the authorized officers and inspectors have undertaken very high-handed action and show-cause notice served by you are the bye-products of such action. My I draw your kind attention to the fact that all these activities of the Authorized Officers and Inspectors were latter on officially communicated to ADI New Delhi vide a letter dated 21.06.2010 enclosing therein the sworn affidavits of the persons whose statements are now being relied upon by you. Since the retraction made by them is a matter of record and such retractions on sworn affidavits by them has not been challenged till this date by the Department nor have you allowed me cross-examination of these persons in relations to their statements, the reliance placed by you on such statements are not correct. I deny any of the persons, whose statements have been put in your notice, are employees of the undersigned or render any service to the undersigned. Under such circumstances, it is my humble prayer, not to enter into the field of surmise and conjecture and subject me to undue tax liability which is in no way....
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.... and office premises of the assessee as also the statements taken on oath of Sri Sandep Bej, Radha Kant Tiwari, Ujjwal Das and Baldeo Singh and issued show cause to the assessee. Based on the same, additions have been made each year on account of commission alleged to have been earned by the assessee from accommodation entries. It was argued that the finding of the Learned AO was based on mere suspicion, surmises and conjectures divested of any evidence as the Learned AO has not been able to bring on record any such evidence to show that the assessee was either involved in such transaction or received any commission on such transactions as alleged. It was explained that the facts and findings recorded by the Learned AO and inference drawn thereon by him were duly contradicted by the assessee vide letter dated 22.12.2011 which is reproduced hereinabove. None of the explanations given by the assessee has been met by the Learned AO in the assessment order. It was argued that there is nothing in the assessment order which could prove that the assessee was either involved in the management of these companies except as a consultant nor there is any proof / evidence of receipt of any comm....
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....commission @ 0.55% was received for providing accommodation entries without providing the details as to which market inquiry was actually made by the Learned AO. The Learned CITA appreciating the various contentions and arguments of the assessee deleted the addition made in the hands of the assessee. Aggrieved, the revenue is in appeal before us for all the asst years. 5. The Learned DR reiterated the observations of the Learned AO and argued that none of the specific queries raised by the Learned AO regarding the transactions with M/s Bhushan Power & Steel Ltd group of cases were answered by the assessee. He further argued that the reply of the assessee to the show cause notice containing specific queries were very vague and general in nature without assailing the specific documents. He argued that the employees from whom statements were recorded by the survey team were employees of the assessee and they are name lenders and were acting at the behest of the assessee's instructions. He argued that though they had retracted their statements at a later point of time, their confession though retracted would amount to admission which would bind on the assessee. He placed reliance on t....
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....AO states that it was gathered that the prevalent market rates of commission varies from 0.25% to 0.55% of the transactions which does not in any way flow from any of the seized documents found during the search or survey. He stated that no addition could be made without any reference to any seized material. In support of this, he placed reliance on the decision of the Hon'ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation reported in (2015) 374 ITR 645 (Bom) and the decision of the co-ordinate bench of this tribunal in the case of ACIT vs Shanti Kumar Surana in IT(SS) A Nos. 12 to 16/Kol/2012 dated 22.6.2015. He also placed on record a copy of the Learned CITA order passed in one of the 24 companies listed in the assessment order by the Learned AO i.e M/s Ascent Vyapaar Pvt Ltd wherein, the Learned CITA had given a categorical finding that the said company is a genuine company in existence vide his order in Appeal No. 455/CC-VIII/CIT(A)C-I/12-13 dated 18.2.2014. It was further argued that the assessee never made any confession or admission at any stage as could be evident from the replies filed by the assessee clearly demonstrating the circumstances un....
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....ity. We find that the valuables such as cash and jewellery found in the course of search and survey have been treated as explained by the Learned AO. The details of 21 bank accounts were also found in the search and survey operations which were explained at the assessment stage that all the bank accounts were duly disclosed in the regular books of accounts of account holders which has been accepted by the Learned AO. 7.1. We find that the assessee had submitted at every stage that he was acting as consultant looking after accounts, finance, audit, income tax of all those companies and received fees from the 31 companies including that of Bhushan group of companies on a monthly basis. We find that the Learned CIT(A) had recorded that the assessee was also rendering various services to those companies in relation to investment made by them by way of share application as also in structuring / restructuring of their assets / capital base and in lieu of such services, the assessee had received his professional fees which is a matter of record. Therefore there was nothing surprising for anybody if such papers were found with the assessee or in his office. We find that certain deposition....
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....d DR on the Hon'ble Chattisgarh High Court in the case of CIT vs D.R.Bansal & Ors reported in 327 ITR 44, we find that though the presumption u/s 132(4A) of the Act is applicable to assessment proceedings, we find that the assessee had categorically replied in his letter before the Learned AO to the show cause notice that the relationship between him and the various companies were only on account of profession and not otherwise and it is not in dispute that the assessee has been rendering various professional services to those companies and receiving professional fees for the same which are matter on record. We find that the assessee had clearly demonstrated the circumstances under which the documents of those companies were found in his premises. Hence the argument of the Learned DR that no reply was filed by the assessee as to how these documents were found in his premises does not hold water as it is contrary to the evidences available on record. 7.4. We find that the Learned AR had placed on record a copy of the Learned CITA order passed in one of the 24 companies listed in the assessment order by the Learned AO i.e M/s Ascent Vyapaar Pvt Ltd wherein, the Learned CITA had give....
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....r:- Search and Seizure-New scheme of assessment in search cases-Validity of assessment framed u/s 153A-Search and seizure operation was conducted at residences, office premises and bank lockers on number of individuals and group companies within Surana Group of cases-Assessee was one of persons searched-Assessee in response to notice u/s 153A disclosed return of income at Rs. 3,05,880/- for relevant AY 2003-04-Separate search and seizure operation was conducted on residence, office and business premises of ''X'' who was CA and his statement was recorded-AO added all share application money and loans as unexplained cash credit u/s 68-Consequential disallowance of interest on loans and disallowance of expenses of exempted income by invoking provisions of section 14A, in identically worded assessments-AO noted in assessment order that statement of ''X'', was one of directors in companies which were found to be indulged in providing accommodation entries to stated person-AO, treated share application and loans as income of Assessee against unaccounted cash-CIT(A) deleted addition made by AO-CIT(A) held that those assessment years completed assessment ....
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....en by sellers, his statement could not be relied upon and deleted the said addition. The Tribunal confirmed the findings of the CIT(A). On appeal the Madras High Court held that the burden of proving actual consideration in such a transaction was that of the revenue. The AO did not conduct any independent enquiry relating to the value of the property purchased. He merely relied on the statement given by the seller. As such the deletion of the addition was justified." (vi) CIT vs Lalit Bhasin reported in 290 ITR 245 (Del) "assessee purchased a ticket of Calcutta Stock Exchange for Rs. 50,000/-. The AO took the value of ticket at Rs. 11.5 lakh on the basis of the prevailing market price and added Rs. 11 lakh as unexplained investment. The Delhi High Court deleted the addition on the ground that AO arrived at conclusion primarily on imaginative basis and conjectures rather than on the basis of any record or books of account and hence deleted the addition. " (vii) Omega Estates vs ITO reported in 106 ITD 427 (Chennai ITAT) "AO relying on some letters given by the assessee to pros....
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.... assessee from pawning business for the assessment years 1986-87 to 1996-97 by assigning the following reasons: "After considering the abovementioned submissions of learned counsel for both the parties, we are of the view that the Assessing Officer, while making the addition was not sure regarding the amount invested by the assessee in pawning business On the one hand, he calculated the amount of interest at Rs. 3,40,000 per annum and, on the other hand, the addition has been estimated at Rs. 2,00,000 per annum In other words, the entire exercise done by the Assessing Officer was merely based on conjectures and surmises However, he had no basis to estimate the interest income As regards the addition for the assessment year 1986-87 is concerned, the same is not tenable in view of our findings given in respect of grounds Nos 2 and 3 and additional ground, as we have already held that there was no partnership firm in existence in that year In that view of the matter, no addition was called for in the assessment year 1986-87 At this stage, we may also add that as regards the other years also, no addition is called for because there is no material on record for the basis on which ....
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....nd the assessee had managed and controlled their financial affairs. The Learned AO had alleged that cheques were issued in lieu of cash received. But then, there was no recovery of unaccounted cash during the search or survey operations. (iii) No evidence has been brought on record by the revenue to prove that the assessee had earned commission income @ 0.55% on these alleged accommodation entries. Moreover, the receipt of commission income of Rs. 1.66 crores for all the asst years put together as assessed by the Learned AO is not matched by recovery of undisclosed assets or documents indicating undisclosed expenditure which were found during search and survey operations. (iv) No material was found in search and survey operations which would prove that the assessee was managing or controlling the 24 companies except placing reliance on statements of certain employees of those companies which were later retracted by them. (v) No material has been brought on record by the revenue to prove that sufficient action was taken by the revenue on the employees who had retracted the statements and who had also originally offered to pay tax on the commission income derived by them. (vi) No....