TaxTMI 
TaxTMI 
2017 (11) TMI 454
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....and requirement. 2. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in law and on facts for not passing separate assessment orders for each of the seven assessment years from 2001-02 to 2007-08, ignoring the statutory provisions and requirement. 3. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in law and on facts in inferring and holding that the Appellant was indulged in the business of issuance of bogus bills. 4. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of Rs. 35,46,36,038/- on account of alleged sales on protective basis, without considering the facts and circumstances of the case. 5. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in inferring and holding that the appellant earned commission @ 2% on account of services rendered by him,....
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....warrant by u/s. 132 was executed and total cash of Rs. 47.30 lacks along with some incriminating documents were found. During the course of search u/s 132, statement u/s 132(4) of the Income tax Act was recorded from the assessee and confronted the incriminating materials found like bank account, and signed cheque books and also bill books of various concerns. The assessee while recording statement u/s 132(4) admitted that he along with Atul Sanghvi were engaged in the business of commission agents in steel market arranging business between the sellers of goods and buyers of goods for which they charged commission ranging between 0.02% to 0.05%. The assessee further admitted that he and Shri Atul Sanghvi operated this business jointly, however there is no written agreement entered into between them. The assessee further submitted that he is a reputed commission agent in the market and the prospective sellers of goods approach him at his office with various offer to sell their goods. He identifies the buyer for the goods for which he takes necessary precautions to protect the business accordingly collects various information from the buyers as well as sellers in the form of ration c....
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....f search coupled with further inquiries conducted during the course of assessment proceedings, the A.O came to the conclusion that the assessee along with Shri Atul Sanghvi is involved in providing accommodation entries of bogus purchase bills to various entities. The information gathered during the course of search and assessment proceedings revealed that the assessee has issued sale bills worth Rs. 856,64,49,533/- in the name of M/s Varun Industries Ltd. 13, Sankeshwar Darshan, A.G. Pawar Cross Lane, Byculla/Mumbai. The total sale bills issued from various concerns name to M/s Varun Industries Pvt. Ltd., were seized at the time of search are marked as Annexure A1 to Annexure A19 which are reflected in the assessment order at paragraph 5.1. 5. During the course of the assessment proceedings, the A.O called upon the assessee to explain credits found in the bank account and sales bills issued to M/s Varun Industries Ltd. In response to show cause notice, the assessee submitted that he is a registered commission agent in the steel market. He along with Shri Atul Sanghvi are engaged in the business of commission agent facilitating sale and purchase between the persons manufacturing....
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.... is that Shri Atul Sanghvi and Shri Dilip Sanghvi floated various dummy concerns at the address of Shri Pradip M Jabalia. The A.O also relied upon the statement of Shri Vinod Kumar Uttamlal Shah who is the person responsible for introducing the account in the name of Shri Sandeep P. Shah in Bank of Maharashtra, Jhavery Bazar branch. Shri Vinod Kumar Shah has stated that he has seen Shri Dilip Shah only ones in his life. Shri Sandeep P. Shah came to his office with account opening form. He did not know who he was, but Shri Atul Sanghvi who was relative stated that he knows Shri Sandeep P. Shah very well and was from his village. The A.O further gathered information which revealed that the photo appearing in the account opening form of Shri Sandeep P Shah is appearing in three different accounts in the three different names and all the cheques books found in the possession Shri Atul Sanghvi and Dilip Shah. The A.O further referred to the statement recorded from Shri N. V. Neelakantan who is the person responsible for opening accounts of concerns run by Shri Atul Sanghvi and P. Shah on the National Cooperative Bank, Fort branch. In question No. 3 he has stated that the duo Shri Atul S....
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....years there are bank credits to the tune of Rs. Rs. 21,22,27,57,495/. The A.O has taken total bank credits and reduced the value of bogus sales bill issued to M/s Varun Industries Ltd. and others to the extent of Rs. 856,64,49,533/- and the balance amount of Rs. 1388.09 crores bank credits has been treated as unexplained credits for the assessment year 2001-02 to 2007-08 and made additions on protective basis. (III) The A.O also estimated commission @2% on total unexplained bank credit and added 50% in the hands of the assessee for the assessment year 2001-02 to 2007-08 and remaining 50% in the hands of the Shri Atul Sanghvi. (IV) Unexplained cash deposit in bank accounts :- The A.O made additions of Rs. 17,73,36,779/-towards unexplained cash deposits in bank accounts for the assessment year 2001-02 to 2007-08 and added 50% in the hands of the assessee and remaining in the hands of shri Dilip Shah. (V)Additions towards cash found during the course of search: During the course of search cash amounting to Rs. 47,30,000/- has been found and seized. The assessee has admitted that the amount found seized and during the course of search repres....
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....n protective basis in the respective year or years. The remaining amount that remains unexplained, would be taxed in the respective years in the hands of the assessee proportionately, on substantive basis as mentioned in the foregoing para." 9. The CIT, [Central Circle(1)] in his order u/s 263 dated 29.03.2011, directed the A.O to make additions towards sales bills raised in the name of M/s Varun Industries Ltd. on protective basis in the hands of the assessee to the extent of his share of business to safeguard the interest of the revenue and that the commission income on the said transactions should be added proportionately on substantive basis in the hands of the assessee as already done in the original assessment order. Regarding cash deposits aggregating to Rs. 1388.09 crore in the assessment years comprised in the period for which the assessee has not been able to furnish proper explanation, the same should be taxed in the hands of the assessee proportionately to the extent of his share in the business on substantive basis as his own unexplained and unaccounted income. The CIT(A) further directed the A.O to allow opportunity to the assessee to prove that the deposits are ac....
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....tective basis in the assessee's account. From the above facts, the Ld.CIT was justified in holding that the order of the AO was not only erroneous but also prejudicial to the interest of the Revenue. Hence, we do not find any infirmity in the order of the Ld.CIT while invoking provisions of section 263 of the Act and thereby revising the order of the AO. The same is therefore, upheld." 11. In the meantime, the appeal filed by the assessee against the order passed by the A.O u/s 143(3) r.w.s. 153A has been dismissed by the CIT(A). The assessee carried the matter in further appeal before the ITAT. The ITAT Mumbai 'A' Bench in ITA No. 4721 to 4726/Mum/2011 for assessment year 2001-02 to 2007-08 had dismissed the appeals filed by the assessee by observing as under:- " 3.We have heard the parties, and perused the material on record. 3.1 The primary and relevant facts, which are the same as in the case of Dilip Shah v. A 'IT (supra), with reference to which the Id. AR argues the instant case, are not in dispute. As would be apparent from the operative part of the said order, reproduced hereinabove, the tribunal decided in the manner it did on the premise that....
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....o dismiss the instant by the assessee, subject to the condition that in case the appellant, who has admittedly also challenged the section 263 orders/s before the tribunal, is successful in his challenge, so that the impugned assessment/s stands restored/revived, he shall be at liberty to pursue his appeal/s before the first appellate authority, and who shall, in that case, decide the same on merits, i.e., in accordance with law, and after affording proper opportunity of hearing to the assessee. That is, the assessee's appeals before the first appellate authority contesting its said assessments would also stand consequentially revived where the assessee intends to prosecute the same. Further, the same having been filed before the first appellate authority in the first instance in time, no question or issue with regard to the same being delayed, would, in that case, ensue or arise. Subject to the foregoing we confirm the impugned order." 12. In pursuance of the order of the CIT u/s 263 of the Act, the A.O issued notice u/s 143(2) calling for various details from the assessee. In response to show cause notice, the assessee's authorized representative appeared and submitted the....
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....ounting to Rs. 856,64,49,533/- the A.O added total amount of sales bills issued in the name of M/s Varun Industries Ltd as unexplained income of the assessee on protective basis. Further 50% of the commission income @2% of total sales bills issued in the name of M/s Varun Industries Ltd has been added in the hands of the assessee. Insofar as commission on total bank credits, the A.O has added 2% commission and total bank credits of Rs. 1388.09 crore and divided equally among the assessee and Shri Atul Sanghvi and spread it over the assessment year 2001-02 to 2007-08 on the basis of unexplained bank credits found for the respective assessment years. However, further observed that in case the assessee is to be granted relief in the appellate stages on the unexplained bank credits, the assessee would still have to be treated as bogus bill provider and income at 2% of the said bank deposits need to be treated as earned for providing and facilitating the said bills, would survive. The other additions made in the course of regular assessment remain untouched in toto and added under same heads of income. 15. Aggrieved by the assessment orders, the assessee has preferred appeals before ....
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....ccount the facts of the case has observed that there is no merit in the legal ground raised by the assessee challenging the validity of assessments, as though the A.O has passed a consolidate order, the order passed by the A.O is noticeably separate insofar as the additions / computation of total income are concerned. The CIT(A) referring to the persons of Section 292B of the Act, observed that no assessment made in pursuance of any of the provisions I.T. Act, shall be invalid or shall be deemed to be invalid merely because on any mistake, defect or omission in such assessment, if the said assessment in substance and in effect is in conformity with or according to the intent and purpose of the Income-tax Act. Admittedly, the ld A.O had issued separate notice u/s 153A for all the years and it was only for the sake of brevity and consolidation of the fact that one single order was passed, though manifestly additions for all the assessment years have been made separately and computation of income for each year has been done separately. Therefore, there is no doubt that the intent and purpose of passing of such an order is, in substance and effect, in conformity with the intent of the ....
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....ry basis of making a protective assessment is to protect the interest of revenue which even the appellant has not denied. Only if the substantive addition made in the hands of M/s. Varun Ind. Ltd. survives all possible rounds of litigation and attains a finality, would the appellant be documents relieved of its liability. It is a stated position that- documents relating to various bogus bank accounts and dummy accounts alongwith PAN cards and other documents were seized from the appellants premises suggesting that he was engaged in a scam of mammoth proportion in the steel market and therefore, 1 do not find any infirmity in the order of the Ld. A.O. in makinq a protective assessment in the hands of appellant's hands. Hence, for the purpose of deciding this appeal, addition made by the Ld. A.O. is confirmed. Nevertheless, the appellant shall be entitled to a relief if the substantive addition made in the hands of M/s.Varun Inds. Ltd. is confirmed after all rounds of litigation. 2.8.1 Ground Nos. 5 & 6 relate to addition on account of commission 2% on bogus sales made. During the course of search, it was found that the appellant was in possession of signed cheque books ....
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....te of commission would not be charged by him to the perspective bill seekers. The persons using these bills would be saving substantial amount of tax by claiming bogus deduction. They would be happy to part with at least 2%, an estimation which cannot be stated to be out of sync with the benefit earned by the bill seekers. Therefore, as far as commission of 2% estimated by the Ld. A.O. is concerned not find any fault with the same and accordingly ground Nos. 5&6 are confirmed. 2.9.1 As regards ground Nos.7 & 8 they are in respect of additions made on account of cash deposits in the bank account of the persons other than the appellant which were found from the possession of the appellant during the course of search along with signed bank cheques, sale bills, PAN cards etc. and which remained unexplained by the appellant despite giving substantial opportunities. Ld.A.0., on the basis of directions issued to him u/s.263 has framed denovo assessment and in doing so he provided adequate opportunities to the appellant for submitting proof of identity, creditworthiness of such persons and the business operations claimed to have been carried out by them alongwith genuineness of th....
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....lanation as to the nature and source" of a sum found creia ted in his books, the sum may be treated as the undisclosed income" of the assessee. The initial burden is on the assessee to explain the source" of the credit and to do so, the assessee is required to prove (a) Identity of the shareholder; (b) genuineness of transaction; and (c) credit worthiness of shareholder..." 5. Once it has been proven that the assessee is indulging in providing bogus bilk and more so he has not discharged his onus of neither proving the identity, genuineness and creditworthiness of these transactions nor disclosed the names of the beneficiaries his conduct, he is not providing the details of the persons in whose hands the transactions may be examined or added substantively. 6. Under the given circumstances, the only recourse left to this office is to proceed on making the assessment on the basis of the instructions of the Hon'ble CIT as mentioned in the order passed u/s. 263 of the I.T Act i.e. by adding the said bank deposits amounting to Ps. 1,388.09 crores substantively in the hands of the two persons to divide proportionately as per, he share of his profits in the said business....
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.... only Shri Dilip Chunhal Shah and Shri Atul Amrutlal Sanghvi who were collecting the correspondence apart from his office. Even in the cross examination of Shri Jobalia done by Shri Atul Sanghvi and his Authorized representative it was clear that none of the persons whose correspondence address was given as that of Shri Jobalias office had met Shri Jobalia and it was only Shri Atul Sanghvi who used to visit Shri Jobalia's office with Shri Dilip C.Shah for collecting the correspondence. Further, a sum of Rs. 300/- was given by Shri Atul A. Sanghvi to Shri Jobalia for each such concern. Thus, itis c1&ir from the sequence of events that Shri Atul A. Sanghvi and Shri Dilip C. Shah were master mind behind maintaining of the fictitious bank accounts for which different address were given. Similar statements were also recorded of Shri Vinodumar Uttamial Shah on 21.3.2007, and Shri N.V. Neelakantan on 26.02.2007 where it was confirmed that various accounts were operated/handled by Shri Atul A. Sanghvi and Shri Dilip C. Shah Former introduced one Shri 5andeep Poonamchand Shah at the behest ofShrlAtFAT3ngh.vi for oenIna bank account. It is important to note that the photograph appearing ....
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....ments Shri P.M. Jobalia, Shri N.V. Neelakantan, and Shri Vinod Kumar Uttamal Shah further supported the findings of the A.O that the assessee is a hawala operator issued bogus bills in the name of dummy/fictitious concerns and operated more than 100 bank accounts various names by fabricating documents like ration card, PAN card, and photograph on individual of these evidence leads to a conclusion that the assessee is a hawala operator issued bogus bills to various beneficiaries and assessment order passed by the A.O treating the total activity as a hawala operator and additions made by the A.O towards estimation of commission on total sales bills, additions towards total sales on protective basis, additions towards unexplained bank credits, additions towards 2% commission on protective basis on total bank credits and additions towards unexplained cash deposits to bank account has been confirmed. 18. The CIT(A), for the detailed reasons in his order vide paraa 2.6.1 to 2.9.4 upheld additions made by the AO and dismissed appeal filed by the assessee for all assessment years from 2001-02 to 2007-08.Aggrieved by the CIT(A) order the assessee is in appeal before us. 19. The first ....
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....e that initially a survey operation u/s 133A of the Income Tax Act, 1961 was carried out in the office premises of the assessee, wherein information about three bank lockers were found. Subsequently, the case has been converted into search by issuing warrant u/s 132 and conducted search in the premises of the assessee. During the course of search incriminating documents in the form of more than 100 bank accounts and also information about more than 130 dummy/fictitious concerns incorporated/operated by the assessee to facilitate issue of bogus bills were found. The department also seized sales bills issued to M/s Varun Industries Ltd. in the name of various concerns. Based on all these evidences, coupled with further inquiries conducted during the course of search and during assessment proceedings the AO drawn an undisputed conclusion that the assessee is a hawala operator involved in providing accommodation entries. Therefore the A.O has concluded the issue by determining the income from such activity by estimating the commission at 2% on total sales bills issued in the name of M/s Varun Industries Ltd. and added 50% of the same in the hands of the assessee and remaining 50% in th....
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....ity and his order should be upheld. 24. We have heard both the parties and perused the material available on record. It is an undisputed fact that incriminating materials found and seized during the course of search clearly indicates that the assessee is engaged in issuing bogus bills in the name of various dummy / fictitious concerns / companies and operated more than 100 bank accounts in different banks in the name of various companies / firms and this fact has not been rebutted by the assessee with any evidences. Though the assessee claims to have involved in the business of commission agent in steel market, the evidences collected during the course of search undisputedly proves the case of the revenue that it is a case of hawala entry operator and issued bogus bills in various entities' name. The AO has recorded clear fact to the effect that the assessee has issued bogus purchase bills in the name of M/s Varun Industries Ltd and this fact has been accepted by the directors of M/s Varun Industries Ltd in the statement recorded during the course of search and accordingly a substantive addition has been made in the hands of M/s Varun Industries Ltd. This fact was also further s....
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....e hands of the assessee, the AO has estimated commission @2% on total sale bills issued in the name of M/s Varun Industries Ltd and made additions in the hands of assessee and his partner, Shri Atul Sanghavi @50% each. The AO has estimated 2% commission by taking into account the fact that the assessee has earned substantial income in the form of commission which is evident from the fact that the assessee has withdrawn substantial amount of cash from the bank. Though assessee claims that commission in the steel market is ranging from 0.02% to 0.05%, but failed to justify the rate of commission with any corroborative evidence in the form of some comparable cases or in the form of written agreements between the parties for charging commission. Under these circumstances, the lower authorities came to the conclusion that it is fair and reasonable to estimate commission at 2% as assessee's income from the activity of issuing bogus bills. Before us, the assessee has not been able to rebut the facts recorded by the AO as well as the CIT(A). Though the assessee has relied upon certain decisions of co-ordinate bench, on going through the case laws relied upon by the assesse, e we came to th....
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....e. 27. The next issue that came up for our consideration is addition made on account of deposits in the bank account of the persons other than the assessee which were found from the possession of the assessee during the course of search along with signed blank cheques, sale bills, PAN cards, etc. which were remained unexplained by the assessee. The AO made additions towards credits found in the bank account for Rs. 1388,09,01,411 on the ground that the assessee has failed to explain the sources of credits found in the bank account with necessary evidence. 28. The facts which lead to the impugned addition are that the assessee along with Shri Atul Sanghvi are found in possession of various documents like blank cheques, sale bills, PAN cards, ration cards, etc. During the course of search, these documents were found and seized. When these documents were confronted to the assessee, the assessee claimed that the documents belong to the firms / companies, who manufacture goods and traded through him. The assessee further contended that the prospective sellers of the goods have kept those documents with the assessee to facilitate easy movement of sales of their goods which cannot b....
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....ounts in different banks with the help of one, Shri Pradip M Jabalia, who had categorically admitted in his statement recorded on 08-03-2007 tht correspondence with regard to bank accounts are made by Shri Dilip Shah and Shri Atul Sanghvi. Shri Jabalia, in reply to question No.2 clearly mentioned that he did not know any of the parties and it is only Shri Dilip Shah and Shri Atul Sanghvi, who were collecting the correspondence from his office. Similar statements were also recorded from Shri Vinod Kumar Shah and Shri N.V. Neelakantan on 26-02-2007 ad 21 03-2007 wherein it was confirmed that various accounts were operated / availed by the assessee. All these facts lead to an undisputed fact that the assessee is indulging in providing bogus bills and more so, operated all bank accounts. Therefore, it is on the assessee to explain the credits found in those bank accounts. Further, the assessee has filed details of confirmation filed by some parties along with their I.T. returns filed for the respective assessment years. On perusal of the details, we find that certain parties have filed their income-tax returns after the date of search and the income declared in said returns is meager. ....
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....neness of transaction and creditworthiness of the creditors. The AO has taken total cash deposits for the year and divided into 50% in the hands of the assessee and 50% in the hands of Shri Atul Sanghvi and made additions u/s 68 of the Act. The assessee claims that he has source of income to explain credits found in the bank accounts. Therefore, the AO was not correct in making additions towards cash deposit u/s 68 of the Act. 32. Having heard both the sides and considered material on record, we find force in the argument of the assessee for the reason that, the AO has made substantial additions towards commission income on total sales made and the source of income in the form of commission is available to explain cash deposits to the bank account. The AO made additions towards commission on one hand and addition towards cash deposit on the other hand without telescoping the source available in the form of estimation of income towards commission. Therefore, we are of the view that there is a merit in the claim of the assessee that telescoping has to be allowed towards cash deposits to the income estimated for the relevant assessment years. Hence, we are of the view that the issu....