TaxTMI 
TaxTMI 
2019 (5) TMI 1604
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....sment year 2007-2008 in ITA No.7374/Mum/2017. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal :- "1. The authorities below have erred in initiating and completing assessment/ upholding such initiation and completion; under Section 153C in the absence of any incriminating material found or seized, without any factual or legal basis, without mentioning or establishing any relationship between the searched person and the appellant and without making due enquiries. 2. The authorities below have erred in passing the assessment order / upholding the order on the basis of information gathered from Sales Tax Department in respect of parties whose details are included in para 4(3)(v) and list B of the assessment order but without communicating anything to the appellant in this regard. 3. The authorities below have erred in assessing the income/ upholding the assessment without specifying the section or head of the Income Tax Act, 1961 under which it is taxable. 4. The authorities below have erred in taxing the short term capital gain/upholding the same at normal rates instead of the prescribed rate of 10....
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.....596 at M/s Gold Sukh Safety Vaults Ltd., 65, Vithalwadi, Mumbai-400020 (Warrant No.8473). 6. In the course of search proceedings, cash amounting to Rs. 11,00,000/- and silver weighing 11.2 Kg. valuing Rs. 7,23,060/-, alongwith certain incriminating documents viz. 'loose paper files' containing the income-tax and sales tax related documents of third parties, were found and seized from the aforementioned locker No.596 and inventorised as Annexure A/1 to A/4 of Panchanama, dated 20.11.2012. As was discernible from the records of M/s Gold Sukh Safety Vaults Ltd., the authorization in respect of locker was though issued in the name of M/s Patel Ashokkumar Mohanlal Ni Co., however, the locker was found to be allotted in the name of the assessee. In the backdrop of the aforesaid facts the statement of the assessee was recorded u/s. 132(4) of the I-T Act on 20.11.2012. Initially, the assessee in his statement distanced himself from the aforementioned concern viz. M/s Patel Ashokkumar Mohanlal Ni Co. and claimed that he was not aware of any such entity. However, at the same time, the assessee stated that the cash of Rs. 11,00,000/- and silver valued at Rs. 7,23,060/- that was found and ....
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....Sales Tax Department, Mumbai, as under:- 9. On the basis of aforesaid details made available by the Sales Tax Department, Government of Maharashtra, it was observed by the A.O that the names of a number of concerns mentioned in the aforesaid list figured in the list of the accommodation entry providers which was provided by the department. In reply to the query raised by the A.O as to why the commission income on the bogus turnover of the aforementioned hawala entries may not be brought to tax in his hands, the assessee, vide his letter dated 09.03.2015 once again tried to distance himself from the documents which were found and seized from his locker during the course of the above stated search and seizure proceedings. In sum and substance, the assessee on account of multiple grounds had tried to impress upon he A.O that no adverse inferences on the basis of the documents which were found and seized from locker No.596 during the course of the search proceedings were liable to be drawn in his hands. The assessee in the course of the assessment proceedings tried to persuade the A.O that no estimation of commission income in his hands could be made on the basis of the aforesaid....
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....ion in respect of each page of the respective Annexures viz. A/1 to A/4 would thereafter be provided by him. As such, the A.O declined to accept the claim of the assessee that he was in no way connected with the documents which were found and seized from his locker No.596 in the course of search proceedings. As regards, the contention of the assessee that the revenue as per the information gathered on the basis of enquiries carried out u/s. 133(6) had failed to establish any nexus between him and the aforementioned parties, it was observed by the A.O that as 90% (approx) of the letters issued to the said parties were returned unserved by the postal authorities, thus, there was no occasion for confronting any such information to the assessee. It was also observed by the A.O that all the efforts to locate the aforementioned parties had also gone in vain. On the basis of his aforesaid deliberations, the A.O was of the view that the claim of the assessee that as he was not the proprietor/partner or director in either of the aforementioned concerns, therefore, no adverse inferences as regards the documents pertaining to the said parties was liable to be drawn in his hands did not merit ....
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....eld the view taken by the A.O that the assessee was engaged in the business of providing bogus accommodation entries to 3rd parties, however, he held a conviction that the assessee was merely a facilitator and not the owner of the said bogus concerns. As such, the CIT(A) backed by his aforesaid conviction restricted the addition in the hands of the assessee by adopting the rate of commission @ 0.05% of the aggregate of the turnovers of the aforesaid parties during the respective years. 12. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorised Representative (for short "A.R") of the assessee, at the very outset of the hearing of the appeal assailed the validity of the jurisdiction assumed by the A.O for framing the assessment u/s.153C of the I-T Act. It was submitted by the ld. A.R, that as per the mandate of Sec. 153C the assessments/reassessments for six assessment years in the case of the assessee was to be reckoned from the date of handing over of assets/documents by the A.O of the searched person to the A.O of the assessee i.e the person other than the searched person. Apart there from, it was averred by him ....
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....devoid and bereft of any force of law, thus, could not be sustained and was liable to be vacated on the said count itself. 13. The Ld. A.R further adverting to the merits of the case, submitted, that the A.O/CIT(A) had whimsically stamped the assessee as an accommodation entry provider. It was submitted by the ld. A.R that as neither any conclusive evidence had surfaced in the course of the search and seizure proceedings which would irrefutably prove that the assessee was engaged in providing accommodation entries, nor the same could be established in the course of assessment proceedings, therefore, the adverse inferences which were drawn by the lower authorities on the basis of assumptions, presumptions, surmises and conjectures, could not be sustained and were liable to be vacated. In order to buttress his aforesaid contention, it was contended by the ld. A.R that the lower authorities had lost sight of the fact that the locker No.596 could be operated not only by the assessee, but also by three other persons. Apart there from, it was submitted by him that the key of the locker was also not found from the assessee but was recovered from Shri Ashokkumar Mohanbhai Patel. As rega....
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....hus most arbitrarily concluded that the assessee was providing his services as a facilitator in the accommodation entry providing business carried out by the aforementioned concerns. 14. In order to verify the correct factual position, the ld. AR in the course of hearing of the appeal was directed to substantiate his claim that all the 53 parties under consideration were not involved in the business of providing accommodation entries by placing on record the list of nongenuine dealers/parties as were blacklisted by the Sales Tax Department, Govt. of Maharashtra and support the same by way of an "affidavit" under Rule 10 of the Appellate Tribunal Rules, 1963. In compliance, the assessee had subsequently filed copies of two such lists of hawala dealers/non-genuine dealers comprising of 1552 parties and 2393 parties, respectively. Further, the assessee along with an "affidavit" had in reference to 37 parties forming part of the list "A" that was prepared by the AO, therein claimed that names of 13 parties in the said list did not figure in the list of suspicious dealers which were blacklisted by the Sales Tax Department, Govt. of Maharashtra in the month of March, 2013. Apart there....
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....he assessee on being confronted with the 'documents' which were found and seized from his locker No.596 viz. Annexure-A/1 to A/4, had asked for some further time to explain each and every paper of the said seized documents, however, at no stage he had ever claimed that the same did not belong to him. It was submitted by the ld. D.R, that the subsequent 'statement' of the assessee which was recorded u/s.131 on 02.02.2013 was a clearly tutored retraction on his part. It was further submitted by him that now when the aforesaid incriminating documents pertaining to third parties were found lying in the locker of the assessee, therefore, a very heavy onus was cast upon him to explain as to what was the purpose of keeping the said documents with him. The Ld. D.R in order to buttress his aforesaid contention, took us through the relevant extract of the orders of the lower authorities. Further, it was submitted by the ld. D.R that the CIT(A) had most whimsically without giving any reasoning reduced the commission rate of 3% as adopted by the A.O for estimating the income of the assessee, to an arbitrary rate of 0.05%. It was submitted by ld D.R that the order passed by the CIT(A) may be 's....
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.... other person. We find that the aforesaid contention averred by the ld. A.R is also supported by the fact that the legislature in all its wisdom, had vide the Finance Act, 2017 w.e.f. 01.04.2017 came up with an amendment in Section 153C, to the effect that the block period for the person in respect of whom search was conducted, as well as the "other person" would be the same six assessment years immediately preceding the year of search. In our considered view, as the said amendment is prospective in nature, hence, the same would not be applicable to the case of the assessee i.e. for the A.Y 2007-2008. Our aforesaid view is also fortified by the judgment of the Hon'ble High Court of Delhi in the case of CIT Vs. RRJ Securities Pvt. Ltd., (2016) 380 ITR 612 (Delhi). Apart there from, we find that the aforesaid view was once again affirmed by the Hon'ble High Court in the case of PCIT Vs. Sarwar Agency (P.) Ltd. [2017] 397 ITR 400 (Delhi), wherein it was observed as under: 5. In terms of Section 153 A(1) (b) of the Act, the AO shall assess or reassess the total income of six AYs immediately preceding the AY relevant to the previous year in which the search was conducted. The s....
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.... been transferred to the AO of such other person, the proceedings for assessment/reassessment of income of the other person has to proceed in accordance with provisions of Section 153A of the Act. Section 153A requires that where a search has been initiated under Section 132 of the Act, the AO is required to issue notice requiring the noticee to furnish returns of income in respect of six assessment years relevant to the six previous years preceding the previous year in which the search is conducted. As discussed hereinbefore, by virtue of second proviso to Section 153A, the assessment/reassessment pending on the date of initiation of search abate. In the context of proceedings under Section 153C of the Act, the reference to the date of initiation of the search in the second proviso to Section 153A has to be construed as the date on which the AO receives the documents or assets from the AO of the searched person. Thus, by virtue of second proviso to Section 153A of the Act as it applies to proceedings under Section 153C of the Act, the assessment/reassessment pending on the date on which the assets/documents are received by the AO would abate. In respect of such assessments which h....
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....ecent amendment to Section 153 C(1) of the Act states for the first time that for both the searched person and the other person the period of reassessment would be six AYs preceding the year of search. The said amendment is prospective. 12. Consequently, no substantial question of law arises from the impugned order of the ITAT. The appeal is, accordingly, dismissed." 17. We shall now in the backdrop of the aforesaid settled position of law, deliberate on the facts before us. As stated by the ld. A.R, the 'satisfaction' of the A.O of the assessee i.e the person other than the searched person was recorded on 15.01.2014. As such, the period of six years was to be reckoned from the date of recording of such 'satisfaction', which would thus take within its sweep the period relevant to Assessment Years: 2008-2009 to 2013-2014. Accordingly, as per the ld. A.R, the case of the assessee for the year under consideration i.e. A.Y.2007-2008 would not fall within the scope and gamut of the period for which assessment proceedings u/s153C could be framed. As per the facts stated by the ld. A.R before us, we find substantial force in his contention that the year under consideration viz....
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....quired by him in the course of his business to get orders from the customers to prove the genuinenity of the supplier parties. The fact that the assessee had categorically admitted that the aforesaid seized documents viz Annexure-A/1 to A/4 belonged to him can safely be gathered from his 'statement' which was recorded during the course of the search proceedings u/s.132(4) of the Act on 20.11.2012, the relevant extract of which is reproduced as under :- "Q.50. . I am showing you the loose papers found and seized from your locker No. 596 maintained with Gold Sukh Safety Vaults Ltd., Kalbadevi, Mumbai containing written pages 1 to 145. The same is marked as loose paper folder Annexure. A-1 in the List / Inventory of A/c. Books etc., found /seized dt.20-11-2012. Please confirm that the same have been found and seized from your locker. Please explain the contents thereof of each page. Ans. I confirm that the above referred pages 1 to 145 have been found from my locker No: 596 maintained with Gold Sukh Safety Vaults Ltd. Kalbadevi. Mumbai. To the best of my knowledge, page number 1 to 145 are photocopies of Income Tax and Sales Tax Return and related documents of tho....
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....the List / Inventory of A/c. Books etc., found /seized dt. 20-11-2012. Please confirm that the same have been found arid seized from your locker. Please explain the contents thereof of each page. Ans. I confirm that the above referred pages 1 to 154 have been found from my locker No. 596 maintained with Gold Sukh Safety Vaults .Ltd., Kalbadevi Mumbai. To the best of my knowledge, the pages are copies of VAT challans and PAN card photocopies. I am not in a position to give the detailed explanation of each page at this point in time. However I shall give the same as and when required. Q.54 In response to Q.No. 52 and Q. No. 53 you have stated that these are photocopies of VAT challans and PAN card copies. You are asked as to why the photocopy of VAT Challans and PAN card copies of other firms/entities are kept in your locker. Ans. These documents are generally required to get orders from customers to prove the genuinenity of the supplier and purchase party." 20. On a perusal of the aforesaid specific replies to the queries as regards the seized documents viz Annexure-A/1 to A/4, it can safely or rather inescapably be concluded that the said docu....
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....e order of the A.O, he had justified the adoption of commission rate of 3% on the ground that the same was the rate which was prevailing in the market in such type of transactions. However, the said view so taken by the A.O is shorn of any basis which could have persuaded us to subscribe to the same. 23. On appeal, the CIT(A) though principally agreed with the A.O that the assessee was involved in the business of providing accommodation entries, but in the totality of the facts he confined the activities of the assessee only to that of a facilitator, and not as the owner of the aforesaid concerns. As observed hereinabove, the CIT(A) after so concluding restricted the income of the assessee to 0.05% of the total turnover of the aforesaid concerns in the aforementioned respective years. 24. We have given a thoughtful consideration to the issue before us in the backdrop of the observations of the lower authorities, and are persuaded to subscribe to the view taken by them, that in the totality of the facts, it can safely be concluded that the assessee was involved in the business of providing/arranging accommodation entries for third parties. In our considered view, the very f....
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.... commission of 0.05% on such transactions was being earned by him. We find that the CIT(A) after concluding that the assessee in the absence of substantial infrastructure could not be held to be a bogus entry provider himself, but was facilitating the business of such bogus entry provider concerns, had restricted the commission income to 0.05% instead of 3% that was adopted by the AO. Again, we find that no basis for adopting the commission rate of 0.05% has been given by the CIT(A). 25. Apart there from, we are of the considered view, that no serious efforts had been put up by the lower authorities for concluding on the basis of any supporting evidence that all the 53 concerns, details/documents of whom were found and seized from the locker No.596 of the assessee during the course of the search & seizure proceedings, were in fact involved in the business of providing accommodation entries. Admittedly, though the entire state of affairs and the documents relating to the aforementioned parties found lying in the locker No.596 of the assessee raises serious doubts as regards the purpose for which the same were retained by him, however, the same on the said standalone basis coul....
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.... of any irrefutable documentary evidence that all the 53 parties on whose turnovers for the respective years the commission income of the assessee as a facilitator/bogus entry provider had been worked out were involved in the business of providing accommodation entries. Thus, the very basis for working out the brokerage income in the hands of the assessee cannot be accepted on the very face of it. Further, as observed by us hereinabove, as the basis for working the commission @3%/0.05% by the AO/CIT(A), is also not backed by any supporting material, therefore, the same does not inspire much of confidence as regards the estimation of the commission income of the assessee, and thus cannot be summarily accepted on the very face of it. In our considered view, the matter has not been appreciated by the lower authorities in the right perspective. Admittedly, we though are in agreement with the observations of the lower authorities that the assessee was engaged in the business of facilitating/providing of accommodation entries, however, the very basis for quantifying the estimation of such commission income does not find favour with us. Be that as it may, in our considered view, the matte....
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....nder rule 10 of the Appellate Tribunal Rules, 1963. In our considered view, the aforesaid claim of the assessee requires verification and cannot be accepted on the very face of it. We, thus, in terms of our aforesaid observations, direct the AO to consider the material filed by the assessee before us in the course of the set aside proceedings. Accordingly, the commission income of the assessee as regards the turnover of the parties which on the basis of verifications carried out by the A.O in the course of the 'set aside' proceedings are found to be engaged in the business of providing accommodation entries or a part of such network, shall be worked out on an estimate basis, along with a logical reasoning justifying such estimation. 28. We may herein observe, that in case the facts averred by the ld. A.R as regards the date of handing over of the documents or books of accounts or assets by the A.O of the searched person to the A.O of the assessee; or the recording of the 'satisfaction' by the A.O of the assessee in case the A.O of the searched person and the assessee are the same, is found to be in order, then the assessment shall stand quashed and our observations as regards....
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....(AY : 2013-2014) : 32. Insofar the grounds of appeal No.1 to 3 raised by the assessee in the present appeal as regards the merits of the case are concerned, the same, we find are similar to those which were raised by him in his appeal for the assessment 2007-08 in ITA No.7374/Mum/2017. As such, our observations and findings given in the aforesaid appeal for A.Y 2007-08 on merits shall also apply mutatis mutandis to the present appeal. 33. The assessee has also assailed before us the addition of Rs. 18,23,060/- made by the A.O on account of undisclosed silver weighing 11.2 Kgs (Rs. 7,23,060/-) and cash (Rs. 11,00,000/- ), without appreciating that the source of such seized cash and silver would stand explained by the additions made by the A.O towards the undisclosed income of the assessee for the previous six assessment years. Apart there from, the assessee had also assailed the upholding by the CIT(A) of the value of seized silver at Rs. 7,23,060/-, without giving any basis for arriving at such valuation. 34. We have deliberated at length on the issue under consideration and find substantial force in the aforesaid contentions of the ld A.R. As a matter of fact, the ld. A.R....
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....verment by the assessee in his statement during the course of action u/s. 132(4) of the Income Tax Act, 1961." ii. "On the facts and circumstances of the case and in law, the Ld. ClT(A), has erred in restricting the commission/brokerage income earned by the assessee from 3% to 0.05% of the total turnover, without appreciating the fact that the assessee has not maintained any books of account and commission/brokerage income of 3% of the total turnover, was fixed on the prevailing market rate of the commission/brokerage business." iii. On the facts and circumstances of the case and in law, the Ld. ClT (A), has erred in restricting the commission/brokerage income earned by the assessee from 3% to 0.05% of the of the total turnover, relying upon the seized scribbling which were unsigned and rough papers, without correlating such commission/brokerage income with the prevailing market rates in absence of any authentic and audited books of accounts." 2. The Appellant craves leave to add, to amend and I or to alter any of the grounds of appeal, if need be. 3. The Appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-48, Mu....
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....il TRADING CO 9 SAVITA Nil Nil 407036 Nil Nil Nit Nil INTERNATIONAL 10 NIDHI SALES Nil Nil Nil Nil NW Nil CORPORATION 11 TISHA NW 22 Nil Nil Nil 3836326 Nil Nil Nil ENTERPRISES 12 DONNIES NW Nil Nil Nil 64925942 NII Nil TRADING PVT.LTD 13 BHAVIKH STEELS PVT LTD Nil 245491821 390411529 1485751 NI NW M NI 14 BALI STEELS PVT LTD NW 35832602 48007265 166924827 232706081 Ni Ni 15 15 DHANDEEP Ni Nil 6945007 Nil Nil NO Nil TRADING P LTD 16 TULSIANI Nil Nil 5344991 115018462 48256686 WV NIT Nil RADING PLTD 17 SHREE Nil 138609475 141184372 120464834 Nil NO Nil TRADERS 18 SHRADHA 38332752 97596901 22657601 Nil Ni Nif Nil SABURI MERCHANTS LTD 19 BHAGWATI Nil 71531676 202470633 458397773 187716900 60311390 Nil TRADING CO 20 MURPHY N 243063799 360685359 1269650 Nil Nil Nil METALS PVT LTD 21 RAJESHWARI 10905149 11872152 4243677 13680134 47641 NI W ....