2020 (1) TMI 476

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....sis of seized material; 3. In applying provisions of section 145(3) of the Act even though books of account were never produced before the authority and no material defects were pointed out therein; 4. In estimating undisclosed income of sum of Rs. 2,50,859/- and Rs. 3,50,710/- based figure appearing in balance sheet despite the fact that such books of account were never relied upon; 5. In treating a sum of Rs. 10,00,000/- as income without any basis, material and evidence; 6. Error in making assessment without understanding the facts of the case. All the above actions being most arbitrary, erroneous, untenable and unlawful, it is prayed that same must be quashed." Grounds of Appeal for AY 2007-08: While the other grounds are similar to the grounds taken above except the difference in the amounts, the assessee has taken up another ground at no. 5 that the Ld. CIT(A) erred in confirming the addition of Rs. 25 lakhs on account of alleged sales to M/s Reliance India Ltd. on protective basis. 3. At the outset, Ld. AR inviting our attention to the assessment order under consideration submitted that the assessee who is found mentioned....

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....g. Connaught Place, New Delhi and also from the premises of his firm namely M/s Gupta & Rakesh Associates at 231, Gulmohar Enclave, New Delhi. In the course of the search operation, it was reported by the investigation wing that a large number or companies were being operated and controlled by Shri S. K Gupta from his main office premises at H-108, Connaught Place. The list of these Companies is as under:- 1. Konichiva Builders Ltd. 2. B.T.Technet Ltd. 3. Swen Television Ltd. 4. T & G Quality management consultants Ltd. 5. Hitech Computech Pvt. Ltd. 6. Centenary software pvt. Ltd 7. Trump and Gates 8. T & G Quality Servrces 9. GTM Konichiva Builders 10. Gupta Rakesh Associates 11. Era Advertising and Marketing Coy Pvt Ltd 12. PG Travels Hindustan Com 13. Shark Communication Pvt Ltd 14. Spg Finvest Pvt Ltd. 15. Krishna Informedia 16. Bolni Exim India Ltd 17. Bharti Properties Pvt Ltd 18. Marketing Insurance Brokers Pvt Ltd 19. Cam Soft (lndia) Pvt Ltd 20. Ours Trading Pvt. Ltd 21.Pawar Es....

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.... the beneficiaries. (vi). Evidence of duplicate set of books of accounts, hand written cash books and ledger accounts, various cheque books and blank cheques signed by various authorized signatories/Directors of the appellant company and other companies were found and seized from Shri. S.K. Gupta's premises. Some of these Directors/Authorized Signatories were found to be employees, relatives or friends of Sh. S.K.Gupta. (vii) The Assessing Officer has given elaborate and adequate opportunities to the appellant company to explain their matter during the assessment proceedings and to counter the findings of the Assessing Officer.   (viii) The Assessing Officer himself has repeatedly recorded statements of Shri S.K.Gupta and has confronted him in detail about the findings." 6.2. On the basis of the above facts the AO arrived at the following conclusions. These are extracted from the assessment order:- 4. "Inferences:- i. It is proved beyond doubt on the basis of documentary evidences, confessional statement of Shri. S.K.Gupta, the main person controlling the state of affairs of the assessee. Husband of Smt. Saroj Gupta, di....

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....vestment entries. (ii) The assessee has intact indulged in accommodation enteries business and has not done any genuine business. So the income of the assessee from the accommodation entry business is computed @ 2% net rate on sale turnover and investment turnover in view of the assessee's statement coupled with prevalent market condition for such entries. No further expenses are to be allowed, as this is the net rate. 5. With these remarks, the total income is computed as under: With these remarks income of the assessee is computed as under: (i) Total income as per 153 A return Rs. 19,060/- Add:- Income earned from Accommodation entry Business   (a) On the Accommodation Sale Bills/Turnover @ 2% of Rs. 23,57,555/- Rs. 47,151/-   Rs. 66,211/- 6.3. In appeal before the First Appellate Authority the CIT(A) held as under:- 2.3.5."Taking into consideration the totality of facts and circumstances of the case as discussed hereinabove, it is held that the addition made by the AO on account of net income earned from accommodation entry business to the tune of Rs. 47,151/- is justified and is, therefore, confirmed. Sin....

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....AO, he admitted in detail, his modus operandi of providing accommodation bills through the assessee company and another companies in lieu of cheque received and cash return to the beneficiaries. There was also seizure of duplicate set of books of accounts, cheques signed by various authorised signatories / Directors of the assessee company and other companies (which were found to be employees, relatives or friends of Sh. SK Gupta) from Shri S.K. Gupta's premises. From the above, AO observed that it became abundantly clear that the assessee company, in fact, indulged in accommodation entries business and did not do any genuine business. All the sale and purchases etc. booked in these companies were found to be bogus. Proper books of accounts were not found to have been maintained. In these circumstances, the books of accounts of the assessee were rejected and additions were made on estimate basis, the same were affirmed by the Ld. CIT(A) in appeal." 8.1. The issue pertaining to books of accounts etc. was considered by the Coordinate Bench in the following manner:- 6. "The first issue pertains to rejection of books of accounts. Ld. Counsel of the assessee in this re....

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.... for allowance of expenditure incurred to earn the income. We find that when addition is being made on the basis of statement, the statement has to be relied in full . Revenue cannot choose to rely on one part of the statement and ignore the rest of the statement in the absence of any cogent material. This is supported by the common law maxim of approbate and reprobate. 11. In this case the assessee company's Director has agreed that the commission was to the tune of 1.5% to 2%. Hence, estimation of commission income @ 2% cannot be disputed. However, at the same time it has also been submitted in the same statement that the assessee has to incur the expenditure on account of salary, rent bank charges, conveyers, telephone, water and electricity. However, it is also settled that mere submission that expenditure has been incurred cannot lead to allowance of expenditure. Assessee has to prove with cogent material that the expenditure has been incurred to earn the income. In these circumstances we remit the issue to the file of the AO. The Assessing Officer shall examine the aspect of allowance of expenditure on the basis of cogent materials to be submitted by the assessee. ....