TaxTMI 
TaxTMI 
2021 (8) TMI 1316
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....e assessment for AYs 2008-09 to 2013-14 have been framed u/s 153A r.w.s. 143(3) vide separate orders, all dated 21/03/2016. The assessment for AY 2014-15 has been framed u/s 143(3) vide order dated 21/03/2016. However, the appellate order is common order for AYs 2008-09 to AY 2004-15 and the same has been passed on 30/10/2017. The appellate order for AY 2007-08 has been passed on 26/03/2018. The date of search on assessee's group is 03/10/2013. For ease of reference, the details of assessment framed by lower authorities and adjudication thereto by learned first appellate authority could be tabulated in the following manner: - No. Assessment Year (AY) Section under which assessment framed Date of appellate order 1. 2007-08 143(3) r.w.s 147 dated 30/03/2015 26/03/2018 2. 2008-09 143(3) r.w.s. 153A dated 21/03/2016 30/10/2017 3. 2009-10 143(3) r.w.s. 153A dated 21/03/2016 30/10/2017 4. 2010-11 143(3) r.w.s. 153A dated 21/03/2016 30/10/2017 5. 2011-12 143(3) r.w.s. 153A dated 21/03/2016 30/10/2017 6. 2012-13 143(3) r.w.s. 153A dated 21/03/2016 30/10/2017 7. 2013-14 143(3) r.w.s. 153A dated 21/0....
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....the facts and circumstances of the case as well as in law, the learned CIT (A) has erred in enhancing the appellant income on account of alleged commission income on local purchase, without considering the facts and circumstances of the case. 5. The learned CIT (A) has erred in law and on facts in holding that the data found in the 4 GB white colour sony pen drive, allegedly seized by the Income Tax Department, belong to the appellant. 6. The learned CIT(A) has erred in law and on facts in relying on the confessional statements of various persons without granting any opportunity to the appellant to cross examine them. 7. The learned CIT(A) has erred in law and on facts in holding that the retractions made by the appellant and the other persons are merely "after thought" without appreciating the true facts and circumstances of the case. 8. The learned CIT(A) has erred in law and on facts by estimating the income of the appellant without rejecting the books of accounts maintained by the appellant. 9. The learned CIT(A) has erred in law and on facts in allowing deduction meagerly @ 25% towards expenses against gross unaccounted commission i....
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....ng resident individual is stated to be engaged in the business of import, export and trading of cut & polished and rough diamonds. It filed its return of income for the year under consideration at Rs.3.89 Lacs. However, the assessee group was subjected to Search & Seizure Action u/s 132 on 03/10/2013. The Warrant No. 9646 covered the case of the assessee & his two sons namely Shri Rajesh B. Jain and Shri Manish B. Jain. Based on the findings of search action, assessment was framed u/s 143(3) r.w.s. 153A wherein the assessee was saddled with additions of Rs.591.95 Lacs vide order dated 21/03/2016. This addition is the sole subject matter of dispute before us. 2.2 During assessment proceedings, in the background of search action, a final-show cause notice was issued by Ld. AO to the assessee on 16/02/2016 in which it was alleged that the assessee along with his son was operating and managing 70 benami concerns including benami concerns in the name of its various employees and associates. Through these entities, the assessee group imported diamond on behalf of others and provided accommodation entries of unsecured loans, bogus purchase to various beneficiaries. The attention was dr....
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....without consent, not voluntary & taken by Investigation wing by using threat and coercion. The statements were stated to be given in confused state of mind. Accordingly, retraction was filed vide affidavit dated 15/03/2014. The assessee denied having any business connection with any of the so-called employees / associates. The assessee also denied the ownership of pen-drive by submitting that the same was not found from residential premises but planted from outside. The stated fact were sought to be fortified by submitting that the seizure of the pen-drive was shown after almost 6 days i.e. on 08/10/2013 which could have been seized or inventorized on 04/10/2013 along with the inventory made for credit cards, bank account and jewellery etc. Further, the seizure of pen drive was not made the part of Panchnama annexure, officially drawn on 04/10/2013 and the admission about the same from his son Shri Rajesh Jain was recorded forcibly. In the above background, the assessee denied indulging in the activity of providing any accommodation bills, loans entries to other parties and opposed the proposed additions. 2.4 However, each and every objection as well as allegations leveled by th....
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....names of various persons who were shown as name-sake directors, partners and proprietors of these entities. Through these entities, the group provided accommodation entries of loans and advances and sales to various parties / beneficiaries against certain commission. The inquiry revealed common features of these concerns having similar business traits like high turnover, assets in the shape of loans & advances, debtors with matching creditors and no payment of taxes. After collating the data from different agencies like customs department, Bharat Diamonds Bourses, these entities were identified and arranged in a group based on similar parameter like common address, directors etc. The various entities of Shri Bhanwarlal Jain were found to be having similar characteristics / features as noted above. The same led to search proceedings on the assessee on 03/10/2013 wherein incriminating documents like hand written sheets containing parallel accounts, identical data in various computer systems at undisclosed offices of the assessee with similar data on pen drives of the employees who were caught and apprehended by the investigating team and a white color pen-drive containing calendar ye....
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....noted by Ld. AO was that the books of account of all these concerns were being maintained in one register and on one computer only. The books of accounts of most of the concerns were audited by common auditor. 2.10 During the course of search, many instances were reported by the search team which indicated that there was an attempt by the assessee to destroy the parallel accounts / incriminating material. In one such instances, the search team apprehended an employee namely Rohit Birawat at CST Terminus, Mumbai when he was attempting to flee from Mumbai to Rajasthan with incriminating material. Three pen drives were found from his possession. The data in pen drive was found to be similar to data found in the pen drive found and seized from assessee's premises. 2.11 Proceeding further, modus operandi of providing accommodation entries was elaborately discussed by Ld. AO in para 4.6. The said modus operandi was duly admitted by the employee-cum-namesake directors / partners / proprietors of Shri Bhanwarlal Jain Group in their respective statements. The relevant extract of the same has already been reproduced as well as noted by Ld.AO in the assessment order. All these persons m....
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....f parallel accounts maintained in the above-mentioned pen-drive. He also confirmed that the transactions recorded in the said document pertained to business activities of benami concerns managed and controlled by him. 2.15 At para 4.13 of the order, it was noted by Ld. AO that the conduct of the assessee was immensely non-cooperative and he tried to derail the process of investigation. So much so, the assessee remained absent from his residence in the first 3 days since the commencement of search on 03/10/2013 and deliberately avoided coming back to his residential premises thereby showing complete non-cooperation with the Income Tax Authorities. Even after coming back, he did not cooperate and kept evading the questions. 2.16 On the basis of aforesaid facts, following conclusions were drawn by Ld. AO in para 4.14 of the order: - * Lunkaran Parasmal Kothari, Anil Khicha, Rajesh Chopra, Ritesh Sfroya, Rohit Birawat, Basant D Jain, Shreyansh L Jain, Vivek Noratmal Jain,Mahavir Mangalchand Jain, Ramniwas Choyal, Gautam Kumot, Rajesh Chopraf Atul Laddha are dummy directors, partners and proprietors. * They have been made name sake director, partner and proprieto....
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....concerns has stated that the books of accounts of the said concerns are audited on the direction of Lunkaran Parasmal Kothari who is an employee of Bhanwarlal Jain. CA has admitted that he merely puts his signatures on the audit reports of these concerns without verifying their books of accounts. This further proves that the affairs of these concerns are managed and controlled by Bhanwarlal Jain. * Bhanwarlal Jain has also admitted that all the concerns (totaling to 70) in the names of various persons are actually controlled and managed by him. 2.17 The affidavit of retraction as filed by the assessee on 27/05/2014 i.e., almost after 8 months of the commencement of search was held to be mere after-thought and a tutored statement. Similar retraction affidavits as filed by other associates-cum-employees were held to be nothing but planned move in tandem to thwart the process of investigation. Glaring contradictions as well as similarities were found in the retraction affidavits. The said retraction, in the light of overwhelming / clinching evidences as found during the course of search action as well as in the light of various judicial precedents, was rejected since the s....
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....siness is looked after by the assessee assisted by his son Rajesh B Jain, therefore the assessee was taken to the actual business premise where the books of account were found so that the same could be confronted to him. * That the pen drive and the loose sheet contain the parallel books of accounts of the assessee. The pen drive contains details of the concerns in which the assessee is admittedly a partner director and proprietor. * That the department has also established correlation between the parallel accounts maintained on the pen drive and the regular books of accounts of concerns managed and controlled by the assessee. * That the manner in which the accommodation entry is provided by the assessee i.e the movement of cash against cheque and vice versa. * That the department maintains that the assessee through his various concerns genuinely imports diamonds but they are issued to the real importers out of books and accommodation entries of bogus purchases and loans and advances are issued through a complex web of transactions including banks and angarias against this bogus stock standing in the books of the concerns managed and controlled b....
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.... controverted the confessional statements made during the course of search proceedings. The additions made by Ld.AO were assailed from different angles. 3.2 Keeping in view the assessee's submissions, a remand report was sought from Ld. AO during the course of appellate proceedings. It was reiterated by Ld. AO that innumerable papers in the shape of estimate sheets containing hand written accounts were found and seized. A white color 4GB Sony pen drive containing the name of the beneficiaries who availed accommodation entries was found / seized from assessee's residence containing calendar year-wise name of the beneficiaries, the amount of cash, the detail of brokerage / commission etc. The pen drive was password protected which was cracked with the help of professional software programmers which enabled the department to view the contents therein. The pen drive contained complete details of Angaria Account maintained by the assessee and his family since 2004 in electronic form. The print-outs of the cash account were also submitted along with the remand report. After correlating the print out with hand written sheets, it was found that the data was identical. These sheets were ....
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....s of all such concerns are maintained on the direction of the Appellant in a centralized manner. 8. The books of accounts of the group concerns, blank signed cheques, old stamp papers etc. were found at the secret premises found during the course of search operation, which were not disclosed to any Govt. Department. 9. Shri Anil Mandawat, C.A. has audited 44 of the group concerns. He has admitted that the books of accounts of the said concerns are audited on the direction of Lunkaran Parasmal Kothari. Further, he has admitted that he merely puts his signatures on the audit reports of these concerns, without verifying their books of accounts. 10. There is a confessional statement of the Appellant that all the 70 group concerns in the name of various persons, are actually controlled and managed by him. 11. The various employees / associates / directors / partners like Shri Lunkaran Parasmal Kothari, Shri Anil Khicha, Shri Rajesh Chopra, Shri Ritesh Siroya, Shri Rohit Birawat, Shri Basant D Jain, Shri Shreyansh L Jain, Shri Vivek Noratmal Jain, Shri Mahavir Mangalchand Jain, Shri Ramniwas Choyal, Shri Gautam Kumot, Shri Rajesh Chopra, Shri Atul Ladd....
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....Lunkaran Parasmal Kothari who stated that the real importers pay up commission varying between 25-30 paisa per rupees 100 of the total import. However, this estimate was on the basis of statements of just few parties whereas the other parties were not examined or if examined, they had nothing to say about the percentage of commission. On the contrary, the assessee himself had admitted to be charging commission @0.02% on the transactions done in 70 concerns. Therefore, due weightage was to be given to confessional statement of the assessee over the other statements made by dummy directors / partners /proprietors. The same also stood corroborated by relevant entries made in the estimation sheets which have also been illustrated in the impugned order. Accordingly, Ld. AO was directed to apply rate of 2 paisa per rupees 100 or 0.02% on imported purchases. Accordingly, partial relief was granted to the assessee under this head. (ii) Commission income on Bogus unsecured loans The Ld. AO has estimated this commission as 2.4% per annum. The computations made from the data extracted from pen drive corroborated the same and accordingly, this estimation made by Ld. AO was held to be jus....
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....e by Ld. AO for all the years. In nutshell, a net relief of Rs.2885.45 Lacs has been provided to the assessee. For ease of reference, the quantum additions as confirmed by Ld. CIT(A) could be tabulated in the following manner: - No. Particulars % A.Y- 2008-09 A.Y. 2009-10 A.V. 2010-11 A. Y. 2011-12 A.Y. 2012-13 A.Y. 2013-14 A.Y. 2014-15 Total 1 Commission on Loan 2.40% 22623851 33129586 40746221 56203703 89025203 119485664 81958142 443172370 2 Commission on sales 0.075% 17191360 21285148 25911567 63514274 63400243 69864476 32927532 294094600 3 Commission on Import 0.02% 1887809 1773845 1962158 5678628 4596293 2353696 1106610 19359039 4 Commission of local purchase 0.02% 2763572 3739859 4864857 11190156 12697381 15848884 11718444 62823153 5 Gross Unaccounted Commission 44466591 59928438 73484803 136586761 169719120 207552720 127710729 819449162 6 Less : 25% expenses 11116648 14982110 18371201 34146690 42429780 51888180 31927682 204862291 7....
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....act, the assessee remained absent during search proceedings for 3 days. The summons were not complied with and no explanation was furnished on incriminating material. Pertinently, voluminous hand written estimation sheets have been found at various premises of the assessee. The sheets have been admitted to be in the hand writing of assessee's son as well as an employee of the assessee. These sheets contain parallel cash accounts. The entries in the estimated sheets were in the nature of square-off transaction wherein cash received from one party was paid back to another party through Angadiya Account. The pen drive contained calendar year-wise names of beneficiaries, the amount of cash, details of brokerage and commission etc. It also contained complete details of Angadiya Account since 2004 in electronic form. The parallel account maintained on the pen-drive pertained to various concerns, 70 to be precise, being managed and controlled by assessee group. The password of the pen drive was cracked with the help of software programmers. After decrypting the data, print outs were taken and matched with the estimation sheets as well as other data gathered during the course of search act....
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.... superficial knowledge about nature of business being conducted by their respective concerns. Further, most of these persons were residing at premises owned by the assessee group. The books of accounts of all these entities were being maintained at two premises in a centralized manner. The books were found in the same computer and audited by common Auditor. The auditor admitted to have signed the financial statements as per the directions of Shri Lunkaran Parasmal Kothari without verifying the books of accounts. This is further fortified by survey action at BKC, Mumbai wherein more than 30 firms were found to be operating from common premises. All the 70 entities were found to have common features in their respective financial statements. All these factors strongly prove the allegations of the department that all the concerns were being run by the group in a combined manner with a view to provide accommodation entries to various beneficiaries against commission. 10. So far as the retraction of the statement made by the assessee is concerned, we find that the retraction was made after more than 8 months and the same was devoid of any material evidence. The statements were made on....
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.... estimation on similar lines keeping in view the factual matrix of the case, incriminating material on record & admission made by the assessee. Considering the peculiar facts of the case and keeping in view the magnitude of transactions carried out by the assessee vis-à-vis the factual matrix in Shri Rajendra P. Jain, we are inclined to estimate the assessee's income in the following manner: - No. Nature of Transaction Our Estimation in the present case 1. Import transactions by assessee on behalf of others We confirm the stand of Ld. CIT(A) i.e. the estimation would be @2 paisa per rupees 100 or 0.02% 2. Accommodation entries of bogus purchases provided by assessee 5 paisa per rupees 100 or 0.05% instead of 7.5 paisa per rupees 100 or 0.075% as estimated by Ld. AO and confirmed by Ld. CIT(A) 3. Bogus Unsecured Loans provided by assessee 1% per annum instead of 2.40% per annum as estimated by Ld. AO and confirmed by Ld. CIT(A) 4. Commission on Local Purchases made by the assessee Fully deleted as against 2 paisa per rupees 100 or 0.02% as enhanced by Ld. CIT(A) 5. Expense Allowance 25% of Gross Commission i.e. the stand o....
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....entities. In other words, the addition in the hands of the assessee would be over and above respective returned income of these concerns and also without any benefit of taxes paid by these concerns. 15. Ground Nos.3 of assessee's appeal stand partly allowed. Ground No.4 stand allowed. Ground No.9 to 11 stands dismissed. The revenue's appeal stands dismissed. 16. Our adjudication as well as estimation as made in this year would equally apply to all the other years also. All the similar grounds in AYs 2009-10 to 2014-15 stand disposed-off accordingly. The learned AO is directed to recompute assessee's income for all the years in terms of our estimation. Issue of unexplained jewellery in Assessment Year 2014-15 17. While framing assessment for this year, Ld. AO has made an addition of Rs.14.01 Lacs on account of unexplained jewellery. The facts of the same are that during search action, unexplained gold jewellery, diamond jewellery and silver utensils were found. The assessee failed to reconcile jewellery of Rs.14.01 Lacs but submitted that the jewellery as declared by the assessee was higher than jewellery actually found. However, rejecting the submissions, the said am....
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....ertake reassessment proceedings. There was new tangible material on record. At the time of reopening, the only question was whether there was relevant material on which a reasonable person could have formed the requisite belief of escapement of income as held by Hon'ble Supreme Court in ITO V/s Selected Dalurband Coal Co. Pvt. Ltd. (1996 217 ITR 597) as well as in Raymond Woollen Mills Ltd V/s ITO (1999 236 ITR 34). Accordingly, the reopening was held to be valid. 22. On merits, Ld. CIT (A) granted partial relief to the assessee as granted in common order dated 30/10/2017 which reduced the impugned additions to Rs.215.83 Lacs. Aggrieved, the assessee as well as revenue is in further appeal before us with similar grounds of appeal. 23. So far as the legal ground of validity of reassessment proceedings is concerned, we concur with the view taken by Ld. CIT(A). The original return of income filed by the assessee was processed u/s 143(1). It could be noted that the Ld. AO was clinched with tangible material upon which a reasonable belief of escapement of income could have been formed. The new tangible material showed possible escapement of income in the hands of the assessee. At ....