TaxTMI 
TaxTMI 
2017 (8) TMI 1062
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....'s 2004-05 to 2010-11. 2. All the appeals raises common issue concerning computation of the income arising from activities of accommodation entries provided by the assessee to various entities and to bring it to tax within the provisions of the Income-tax Act,1961 (Hereinafter called "the Act"), for assessment years 2004-05 to 2010-11. 3. First we shall take up cross appeals for assessment year 2004-05. The assessee's appeal for assessment year 2004-05 is ITA no.4913/Mum/2013 while Revenue's appeal is ITA no. 4712/Mum/2013. 4. The brief facts of the case are that search and seizure operations u/s 132(1) of the 1961 Act were carried out by Revenue at the residence and business premises of M/s Orbit Corporation Limited Group on 11.02.2010 by ADIT(Inv.), Unit -VII(4), Mumbai. During search operations, unaccounted cash/jewellery and incriminating documents were found and accordingly appropriate assets/documents were seized. Based on these seizures during search action u/s 132(1), the Managing Director of the Group concern namely the flagship company M/s Orbit Corporation Limited, Sh. Pujit Ravikiran Aggarwal offered undisclosed income to the tune of Rs. 71,81,90,065/- arising ....
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....ained modus operandi of its activities in response to question no 5 wherein it is stated that when any party contacts assessee for bills, he issues bills to them and collect cheques from them which is deposited in assessee's bank account which is withdrawn in cash and given back to the party after deducting his commission in the range of 0.30-0.40%. Similarly for cheque discounting, it was submitted that cash was given in lieu of cheque for which the assessee charged commission in the range of 0.30- 0.40%. It was submitted that no commission was received at the time of issuance of bills but the same was received when cheque received against bills is discounted in the bank. It was submitted that only sale bills which were in the nature of purchase accommodation bills for the opposite parties were issued by the assessee. The assessee reconfirmed the names of various concerns which were used for issuing bogus bills which were stated to be the same concerns which names were given by the assessee to Revenue on 13-12- 2007 at the time of survey u/s 133A conducted by Revenue against the assessee. The assessee also confirmed that bank accounts with ABN Amro Bank, Nariman Point A/c no 10932....
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....d by the AO u/s 153C r.w.s. 144 of the 1961 Act. 5. Now we will take up issues for assessment year 2005-06, We have observed that similar facts were there before the AO as were there before the AO for AY 2004-05 and the AO confirmed additions to the tune of Rs. 46,62,057/- as income of the assessee for the assessment year 2005-06 based on the average income of the assessee for succeeding three years from the issuance of accommodation bills, vide assessment order dated 30-12-2011 passed by the AO u/s 153C r.w.s. 144 of the 1961 Act. 6. Now we will take up issues for assessment year 2006-07, 2007-08 and 2008-09, The factual matrix for assessment year 2006-07, 2007-08 and 2008-09 is discussed in preceding para's of this order while discussing for AY 2004-05. We have observed that the AO made additions to the income of the assessee to the tune of 1% of aggregate of accommodation bills issued plus payments received by the assessee to the tune of Rs. 3,19,59,278/- for AY 2006-07( Rs. 28,67,74,365/- for AY 2007-08 and Rs. 107,98,83,731/- for AY 2008-09). The assessee claimed that only payment received against bills issued should be taken for computation of commission income. It was ....
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....A). The assessee has raised common grounds before the learned CIT(A) that reasonable time has not been granted by the AO to produce bank statements and other details and hence principles of natural justice was violated. The assessee was given an opportunity again to file all details during appellate proceedings by learned CIT(A) as well during remand proceedings by the AO to produce all bank statements as well other supporting documents to show that the assessee was not involved in the issuance of bogus bills during the impugned assessment year and hence it was held that the grievance of the assessee that principles of natural justice are breached stood satisfied as now adequate opportunity stood granted during appellate and remand proceedings, while adjudicating appeal by learned CIT(A) as held by learned CIT(A) in its appellate order. During appellate proceedings before learned CIT(A), it was argued by the assessee that in the discounting of cheque business, commission is paid on cheque deposited in bank and cash is given back to party after deducting commission @0.30-0.40% and therefore estimation of income @1% on the bill issued plus cheque received as was done by AO is n....
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....cheques it was submitted that it is similar to pay order charges of bank or draft issued by the bank and in similar cases, the other businessmen have reported income to be 0.30-0.40%. The AO submitted remand report wherein contents of the assessment order were reproduced by the AO. The assessee on its part in reply to remand report in rejoinder reiterated its submissions before learned CIT(A). The learned CIT(A) issued enhancement notice to the assessee as to explain why commission income be not assessed at 2% of the gross receipts. The assessee reiterated that the assessee receives cross bearer cheques which are deposited in bank and cash is withdrawn and returned to the party after deducting commission of 0.30-0.40% earned by the assessee. It was submitted that all the bank accounts are in the name of Sh. Prabhuram Purohit and the assessee has never issued any accommodation bills in its name and discounting of cheques varies from 0.30-0.40%. The AO has also submitted before learned CIT(A) in its second report dated 13-02-2013 that the assessee had a bank account with Standard Chartered Bank A/c No. 22505490249 wherein there were transactions as under, which were found : ....
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....ed CIT(A) that even in response to enhancement notice to enhance commission to 2% of the gross receipts, the assessee has again reiterated that the commission earned was only to the extent of 0.30-0.40%. It was also observed by learned CIT(A) that the evidences of providing accommodation bills by the assessee to the Orbit Group were considered and the following facts had emerged from the search and seizure proceedings conducted in the case of Orbit Group: (i) The assessee only issues accommodation bills and no material / services have ever been supplied / rendered. (ii) The assessee issued accommodation bills in name of various parties namely Perfect Steel Industries, M/s Kiran Sales Corporation, Shiv Shakti Enterprises, Rishab Enterprises, Impex Sales Corporation, Mahalaxmi Traders, Mittals Trading Co., Essar Trading Engg. Co., Vikas Trading & Engg. Co., Sagar Enterprises, Akash Tubes (India), Santosh Metal and Tubes etc controlled by the assessee. (iii) The assessee had employed Sh Prabhuram B. Purohit in whose name assessee operated an entity called M/s Perfect Steel Industries Similarly, other benami's were used in issuing accommodation sales bills....
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.... 2008-09 92,01,868 Sub-total (for F.Y.2008- 09) 5,93,39,931 18. Siddhivinayak Corporation 2009-10 86,522 Sub-total(for F. Y. 2009- 10) 86,522 Total 41,35,05,065 However, in the return of income filed in response to the notice u/s 153A of the 1961 Act, M/s Orbit Corporation Limited, M/s Orbit Buildcon & Realty Private Limited, M/s Orbit Constructions and Realtors Private Limited and M/s Orbit Shelters Private Limited, had failed to declare the additional income of Rs. 41,35,05,065/- disclosed during the course of search action u/s 132(1) by Mr Pujit Ravikiran Agarwal and hence additions to that effect were made by the AO in their hands vide assessment orders passed by the AO. It was observed by learned CIT(A), that in the case of Orbit group entities, learned CIT(A) upheld the additions on account of bogus purchases. The details of such appeals as decided by learned CIT(A) in the case of Orbit group are specified in page 12 of learned CIT(A) appellate order. The learned CIT(A) refers to similar type entities wherein addition of 2% commission was upheld by him from such illegal activi....
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....ogus bills supplied were to the tune of Rs,5,93,39,931/- by the entities controlled and managed by the assessee. It was observed by learned CIT(A) that the assessee is not cooperating and hence income is to be computed @2% of Rs. 5,93,39,391/- which worked out to be Rs. 11,86,798/-. AY 2010-11 The learned CIT(A) observed that the AO made an addition of Rs. 1,83,28,637/- by estimating income based on average of addition of last three years i.e. AY 2007-08 to AY 2009-10, but while computing income the AO added the figures of last three years and not averaged which is not reasonable. It was observed by learned CIT(A) that the assessee has contended that the business was closed in 2008 itself and the bank account with Standard Chartered Bank was also closed in 2008 itself. The learned CIT(A) restricted disallowance to Rs. 10,00,000/- keeping in view facts and circumstances of the case. The learned CIT(A) observed that the assessee has raised a ground of appeal in AY 2009-10 pertaining to denial of F & O loss of Rs. 33,45,600/-. The learned CIT(A) observed that the assessee has not produced books of accounts, bank statements, transaction details and evidences as to verify genui....
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....the assessee. It is stated before the Bench by Mr Mukesh Choksi CA that the assessee is Chartered Accountant who is the man behind all these accommodation/hawala transactions and is benamidar of the various benami entities/persons through whom transactions were routed. It is submitted that the AO made addition of income based on bogus bills issued by the assessee plus payments received against the said bogus bills which led to double additions while the learned CIT(A) has restricted addition to the income computed based on issuance of bogus bills.It was submitted that the AO applied rate of commission @1% while learned CIT(A) applied enhanced rate of commission @2%. It is submitted that income be computed based on realization of cheques after discounting with bank and not based on mere issuance of bills, as the income does not arise at the time of issuance of bogus bills but at time of receipt of cheque against bills. It was submitted that there was an independent search conducted by Revenue against Orbit Group u/s 132(1) of the 1961 Act.It is submitted that for AY 2004-05 and 2005-06, there was no bogus bills issued by the assessee as the business of providing accommodation entrie....
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....n 13-12-2007 and material seized during searches u/s 132(1) conducted on Orbit Group on 11-02-2010 and post enquiries to the aforesaid search and surveys, as the assessee did not co-operated with the authorities below. It is submitted that income for AY 2006-07 to 2008-09 were computed based on impounded material during the course of survey proceedings u/s 133A on 13-12-2007 against assessee as well search u/s 132(1) conducted on 11-02-2010 against Orbit Group. It is brought to the notice of the Bench that the AO computed income @1% which was enhanced to 2% of the bogus bills by learned CIT(A). It is brought to the notice of the Bench that the AO aggregated both bogus bills issued plus the payments received while applying rate of commission @1%, while learned CIT(A) computed commission income @2% on bogus bills issued. Our attention was drawn by learned CIT-DR to the orders passed by the authorities below, which are placed in file. Our attention was also drawn by learned CIT DR to the orders of the tribunal wherein additions to the tune of 0.15% was upheld while further deduction of expenses to the tune of 50% was also allowed by the tribunal. The said orders find mentioned in prec....
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....activities are normal business activities just like any other business in which assessee is engaged into. The assessee has also admitted and claimed that large number of web of benami concerns and entities were created the assessee which were held in the names of various benami's of the assessee of whom the assessee is benamidar, which concerns, entities and persons were managed and controlled by the assessee as the assessee is benamidar of these entities, concerns and persons and several transaction of issuing sale bills without physical delivery of goods and cheque discounting activities are carried out through these concerns, entities and persons. The details of these benami concerns, entities and/or person found mentioned in the orders of authorities below, which are admittedly controlled and managed by the assessee. Thus, in nut shell these well planned and organized activities conducted by the assessee through a web of large number of benami concerns, entities and persons admittedly created, managed and controlled by the assessee as benamidar, is an organized scheme of activities undertaken by the assessee by series of accommodation transactions carried out through these web ....
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....essee and search action u/s 132(1) on 11-02-2010 against Orbit Group. The assessee did not provide details of transactions conducted by all these benami concerns, entities and persons wherein the assessee is their benamidar nor their bank statements and other details were furnished by the assessee before the authorities below. The books of accounts and other details as sought by the authorities below connected with these benami concerns, entities and persons were not furnished by the assessee despite several opportunities granted to the assessee by authorities below. The claim of the assessee is that it is an organized business wherein benefit of all the expenses incurred in connection with the said organized business of providing bogus bills should be allowed as deduction from income as in the case of normal business which are permitted and allowed by provisions of Section 30 to 43D. The assessee did not furnish any details of transactions conducted by these concerns, entities and persons of whom the assessee is benamidar nor bank statements of these concerns, entities and persons were furnished. It is simply denied that no books of accounts were maintained by the assessee of all ....
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....d and relief of expenditure incurred for earning the said income be allowed. This declaration of commission income @0.30-0.40% of the bills issued by the assessee is a self confessed declaration of income by the assessee which is not supported by any evidence on record and also claim of expenditure to be deducted is again not based on any evidence /material on record. One thing is clear that it is writ large that the assessee has chosen a path of non co-operation with Revenue as no documents/details/ bank statements/ books of accounts etc were submitted by the assessee before the authorities below and thus it is clear that the assessee has not approached the Court with clean hands and it is well settled proposition of law that Courts will not help those who come to the Court with dirty hands. We have gone through all the tribunal orders relied upon by the assessee and we have observed that there are recent judicial developments which we are going to cite herineafter, and in midst of these judicial developments, these tribunal decisions so referred to by the assessee will not be applicable more-so keeping in view factual matrix of the appeals before us. Reference is drawn to a recen....
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....s returned to the bank accounts of the creditors. The assessee has to discharge the primary onus of disclosure in this regard. Their Lordships held as under: "15. The present case, however, is of a different nature. Here, we are dealing with an Assessee who does not deny that he is an accommodation entry provider. He, in fact, makes no bones of the fact that he either owned or floated 'paper companies' only for that purpose. He also does not dispute the fact that he has not been able to explain the source of all the deposits in his accounts or the ultimate destination of all the outgo from his accounts. 16. The Assessee's plea that he should be taxed only on a composite 'peak credit' is based entirely on principles of accountancy. He questions the logic behind allowing peak credits for some of the credit entries by way of cheques and denying it for the other entries in cash. He also questions the practice of working out separate peak credits for cheque and cash transactions. 17. The premise underlying the concept of peak credit is the squaring up of the deposits in the account with the corresponding payments out of the account to the s....
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....of disclosure in this regard. 20. While the AO in the present case did not question the working out of the peak credit by the Assessee, he, at the same time, insisted that the additions made by him to the returned income of the Assessee should be sustained. The peak credit worked out by the Assessee was on the basis that the principle of peak credit would apply, notwithstanding the failure of the Assessee to explain each of the sources of the deposits and the corresponding destination of the payment without squaring them off. That is not permissible in law as explained by the Allahabad High Court in the aforementioned decisions which, this Court concurs with. Conclusion 21. As already noted, the ITAT went merely on the basis of accountancy, overlooking the settled legal position that peak credit is not applicable where deposits remain unexplained under Section 68 of the Act. The question of law framed by this Court, is accordingly, answered in the negative i.e. in favour of the Revenue and against the Assessee. The impugned order of ITAT is, accordingly, set aside and the order of the AO is restored to file." Reference is also drawn to the decision of ....
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....s of tax haven countries and where it is repatriated in the form of transfers." The role of the revenue authorities in tackling the menace of laundering black money was commented by the learned author as follows:- "It has to be kept in view that India has a problem of black economy, which is unacounted and many a time the holders of black money also launder the black money in order to acquire legitimate assets. Legal or illegal income which evades tax and illegal income that comes within the exempted taxation slab constitute the unreported Gross Domestic Product or black economy. Laundering the black money and laundering proceeds of crime are two different issues, although there is frequent overlap between the two. While laundering black money is to be handled through taxation laws or similar laws, the laundering of proceeds of crime is to be handled through special anti-moneylaundering laws." In the instant appeal's before us for the AY 2004-05 to 2010-11, the assessee has consciously and deliberately chosen the path of non co-operation with the authorities below, wherein no information was provided to the Revenue and the Revenue was left to determine an....
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....nami transactions of providing accommodation entries were carried on by the assessee. The assessee is also directed to file affidavits before AO enumerating complete details of Benami concerns, entities and persons of whom the assessee is benamidar along with complete details of transactions entered into by these benami entities/persons/concerns, their VAT/PAN details, bank details / statements, details such as name, address, PAN etc of Benami's etc.. The assessee is directed to produce all relevant books of accounts and other material connected with the said Benami concerns, entities and persons before the AO for enabling AO to frame assessment and compute income as per provisions of the 1961 Act. In case of non-compliance of our directions, the learned CIT incharge is directed to take appropriate actions in accordance with law against assessee which follows as consequence from non compliance of tribunal orders. d) The assessee is directed to produce all books of accounts and other details/information concerning these benami concerns and persons through whom the assessee has admitted to have entered into benami transactions of which the assessee is benamidar including exp....