TaxTMI 
TaxTMI 
2021 (12) TMI 867
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.... 09in IT(SS) A No. 294/AHD/2017 is treated as lead case. The assessee has raised following grounds of appeal. "1. The learned Commissioner of Income-Tax (Appeals) has erred in law and in facts in not appreciating that the search conducted on the appellant u/s 132 of I.T.Act 1961 (hereinafter referred to as "The Act") dated 03/10/2013 was not justified and without satisfying the ingredient of sec 132 of the Act. Therefore the Ld CIT(A) erred in upholding the assessment order passed u/s 144 r.w.s 153A of the Act in pursuance of such invalid search action. 2. The learned Commissioner of Income-Tax(Appeals) has erred in law and in facts in upholding the addition made in the impugned assessment order without appreciating the fact that only pending assessment abate and not the completed assessment, thereby no addition can be confirmed if no incriminating materials found during search action and hence the impugned assessment order is bad in law and invalid. 3. The learned Commissioner of Income-Tax (Appeals) has erred in law and in facts in upholding and confirming that the business of the appellant is accommodation bills provider merely on the basis of confessi....
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..../or delete all or any of the foregoing grounds of appeal." 2. Brief facts of the case are that assessee is proprietor of Avi exports, allegedly engaged in the business of trading, import, export and local trading of diamonds. A search action under section 132 was initiated on the assessee group on 3rd October 2007. During the search action, the statement of assessee was recorded under section 132(4). In the statement recorded under section 132(4) on 5thOctober 2013, the assessee confessed that he along with his other associate, employees and family members are operating through a number of business concern of three natures i.e. Proprietorship firm, partnership firm as well as companies in the name of various persons including his employees. For all practical purposes, he himself ensures the chain of entire business network on profit sharing basis. The assessee also provided the name of Proprietorship firm, the person who is mainly handling those proprietress of firm, partnership firm and name of companies in the following manner : Proprietorship firm Name of Proprietor a Avi Exports Rajendra S Jain(myself) b Kalash Enterprises Manish Jain c Aadi Impex Ano....
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....s. 4.02 lakhs. The case was selected for scrutiny and assessment was completed under section 143(3) on 26 March 2010, assessing total income at Rs. 9.97 lakhs. The assessing officer after serving statutory notices under section 143(2) and 142(1) and issuing was various questionnaires proceeded for assessment. The assessing officer recorded that during the search operation on this group various evidences were collected including disclosure and modus operandi of providing accommodation entries in the nature of bogus sales, purchases and unsecured loan. During the search action the statement of Rajinder Jain, Dharmi Chand Jain and Sanjay Chowdhary was recorded. The assessing officer referred relevant part of the statement of assessee and diagram of modus operandi of business operation prepared during the search action, about the modus operandi business operation followed by assessee and his group. The assessing officer further recorded that the statement of Sachin Pariekh proprietor of Arihant Export, director of Karnawat Impex Pvt Ltd & Moulimani Impex, Manish Jain (prop of Kalash Enterprises, Director of Kriya Impex Pvt Ltd and Karnawat Impex Pvt Ltd.) and Anoop Jain (Prop of Adi Im....
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....ssee are not correct and complete. The AO issued show cause notice for rejection of books of accounts vide show cause notice dated 22.12.2015. Contents of such show cause notice is extracted in para 7 of the assessment order. The assessee filed its reply dated 28.12.2015, the contents of reply filed by the assessee is extracted in the para 7.2 of the assessment order. In his reply, the assessee objected to the rejection of books of accounts, the assessee contended that he is regularly maintaining books of accounts, day to day stock register and sale register and day books of cash and banking transaction. The books of assessee were verified by Investigation Wing. The books of assessee are duly audited. The assessee objected that the AO is taking his view on the basis of statement recorded during the search action. Such statement has been retracted. The assessee has furnished detailed voluminous evidence to impress that statement recorded during search has no substance. The AO after considering the submission of assessee held that there is no merit in the submission of assessee. On the retraction of his statement, the AO held that the statement was recorded by administering oath is p....
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....eneficiary after clearance or Customs Officer. Such other Government Authorities have not physically verified as has been investigated by Income Tax Department. On the basis of aforesaid observation, the AO rejected the books of accounts. The AO on the basis of statement of assessee that he is receiving commission on various accommodation entry made addition of Rs. 24,54,136/- as a commission income. The AO granted deduction of expenses @ 25% on such addition and thereby made addition of Rs. 18,40,602/- to the income of the assessee. The AO was also making the assessment of assessee's group, which were centralized, made protective addition in the hand of assessee in respect of various concern managed and operated by assessee. The working of total income assessed by AO in the assessment order is extracted below: Sales Amount Rate of commission, Commission income Total turnover 2,43,23,94,646/- Total Import 86,88,19,534/- Total turn over (Excluding import & group turnover) 1,47,37,83,599/- @0.02% 2,94,757/- Import made 89,88,19,534/- @0.20% 17,37,639/- Loan outstanding at year end 8,43,48,08....
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....ee admitted that the imports were made on behalf of the importers. The assessee also stated that he gave his statement under mistaken belief and without understanding the consequences. The assessing officer overlooked the documentary evidence furnished by the assessee. The A.O. issued notice to the custom authorities under section 133(6), which confirmed that the assessee made export and imports of the goods. The A.O. rejected the books of account under section 145(3) without finding any defects in the accounts duly audited by Chartered Accountant. The A.O. allowed deduction with regards to the Government levies, bank Charges, commissions and brokerage only. The A.O. overlooked the exchange loss claimed in the accounts by the assessee. The assessee also challenged the validity of action 132 and that no incriminating material was found in the search and the additions made in absence of incriminating material is not sustainable. On merit the assessee submitted that he was doing the real business. In alternative claim the assessee claimed that he has already included the commission income in his business income disclosed in his audited accounts. 9. The ld CIT(A) after considering t....
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....ressed that the business model of Rajinder Jain was accepted as genuine. In alternative claim the assessee claimed that he has already included the commission income in his business income disclosed in his audited accounts. To support all his legal and factual submissions the ld AR for the assessee relied on the following case laws; • CIT Vs Singhad Technical Education Society [(84 taxmann.com 290(SC)], • CIT Vs Calcutta Knitwear ( 362 ITR 673 SC), • PCIT Vs Munisuvrat Corporation (115 taxmann.com 265 SC), • PCIT Vs Himanshu Chandulal Patel (108 CCH 0019 SC), • PCIT Vs Himanshu Chandulal Patel ( 419 ITR 132 Guj), • Anil Kumar Gopikrishan Aggarwal Vs ACIT ( 106 taxmann.com 137 Guj HC), • PCIT Vs Ananad Kumar Jain 432 ITR 384 Delhi HC, • CIT Vs Renu Construction Pvt Ltd ( 99 taxamann.com426 ( Delhi HC), • CIT Vs Harjeev Aggarwal (70 taxmann.com 95 Delhi HC),] • PCIT Vs Allied Perfumes Pvt Ltd ( 124 taxmann.com 358 Delhi HC), • PCIT Vs Meeta Gutgutia ( 82 taxmann.com 287 (Delhi HC), • PCIT Vs Saumya Construction ( 81 taxmann.com 29....
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....e was served with the notice under section 153A to file his return of income for assessment year under consideration. The assessee filed return of income in response to the notice under section 153A, however, no additional income was offered by the assessee, despite recovery of huge incriminating material. During assessment the assessee tried to impress that he has retracted his statement. The so called retraction has no evidentiary value, which is otherwise afterthought story. The alleged retraction was filed after more than one year before the AO. No complaint or protest was raised by the assessee before the investigation team. The AO made additions on the basis of statement of assessee which is corroborated with incriminating evidence found during the search action. The AO made very fair and reasonable additions of commission income in the assessment. The allegation of the assessee that no incriminating material was found in the search is unfounded and baseless. All the appeals of the assessee are liable to be dismissed. 12. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities. We have also perused all the documents....
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....rns of the assessee were merely doing paper transaction, instead of carrying any real business, those concern were doing of maintaining 'books of accounts' and do not carry any actual or physical business of diamonds. It was held by AO that the actual importers of rough diamonds approach assessee to import their diamonds through his group and on receipt of consignment, the real importer get the delivery of diamonds after clearance from CHA (clearance house agent). The books of stock of rough diamonds have been converted by assessee group to cut and polished diamonds through commission companies or through name landing concern, issues bill of rough diamonds to local purchasers and show purchase of polished diamonds from them. On receipt of sale proceed; this group makes import remittance at the request of importer. Further, the AO on the basis of discloser of assessee, evidences of e-mails and other material which was incriminating material gathered during the search held that the assessee is entry provider as stated by him in his statement recorded during the search and received commission @0.20% of bill amount of import and commission @ 0.50% on loan transactions. The AO worked ou....
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....kh, who is his accomplice. A pen drive containing accounts from various concerns including those where Rajendra Jain as per ownership had no interest was also provided by the assessee. All these facts and evidence clearly prove with the corroborative evidence recovered during the search action that assessee was indulging in providing accommodation entry. All these aforesaid evidence and corroborative facts found during the search are incriminating material. The ld CIT(A) also recorded that not a single piece of diamond found during the search action. Further, from the admission of assessee, Sachin Pareek and Surendra Jain in their statement and identification of actual beneficiary of import and delivery of diamonds by actual beneficiary and e-mail found to actual beneficiary, the ld CIT(A) concluded that assessee and his group was providing accommodation entry. The ld CIT(A) further concluded that once the business as per books is proved fictitious and bogus, the action of AO in rejecting the books is obvious. On the ground/ grievance of the assessee on additions of commission and allowance of 25% expenses the ld CIT(A) concluded that the addition made by AO is on lower side compar....
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.... are in full agreement with the finding of ld CIT(A) that once the books are rejected the profit is to be estimated on the basis of commission rates and net profit is to be determined. We also affirms the finding of ld CIT(A) that that when the actual business of assessee was importing goods for others and in the books credit in the name of exporters, thus exchange rate difference is not payable by the assessee and the assessee is not eligible for deduction of such exchange rate fluctuation. Even otherwise, no evidence is filed by the assessee on record to prove the fact that the assessee entered into hedging contract with the Banker, the evidence found in the form of e-mail and other evidences show the facts otherwise. Therefore, the submissions made by the assessee do not inspire confidence. None of the case laws relied by the ld AR for the assessee is helpful to the assessee as there was sufficient incriminating material seized during the search action on the assessee on the basis of which it is clearly proved that the assessee is in the business of entry provider. Therefore, we do not find any merit in the grounds No. 2 to 5 raised by the assessee, which we dismissed. 17. Gr....