TaxTMI 
TaxTMI 
2018 (5) TMI 2125
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....r of the Ld. Commissioner of Income Tax (Appeal). It was pleaded that at least the penalty to the extent of figures of sales may be confirmed. It was pleaded that the assessee was indulged in Hawala activities. Reliance was placed upon the decision in 327 ITR 510 (Del.). On the other hand, the Ld. Counsel for the assessee, Shri Gaurav Kabra, contended that no penalty can be upheld where protective addition has been made, for which reliance was placed upon the decision from Hon'ble Gujarat High Court (2014) Bhailal Manilal Patel vs CIT 49 taxman.com 539(Guj.). It was pleaded that in the case of Varun Industries, the Department has accepted that the transaction is genuine. 2.1. We have considered the rival submissions and perused the material available on record. Before adverting further and in view of the submissions from both sides, it is our bounded duty to examine the order of the Tribunal on quantum addition (ITA No.5739 to 5745/Mum/2012) for Assessment Years 2001-02 to 2007-08, order dated 25/09/2017. "These bunch of appeals filed by two different assessee's are directed against two common orders passed by the CIT(A) 37, Mumbai dated 24.07.2012 for the assessmen....
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....sing Officer in holding that the cash deposits in the bank accounts of the persons other than assessee (third parties) as undisclosed income of the appellant. 8. 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.7,01,650/- to the income of the Appellant on the basis of the cash deposits in the various bank accounts of the persons other than assessee (third parties), ignoring the fact that the Appellant was merely a commission agent of those persons. 9. The appellant craves leave to add, amend alter or delete the said ground of appeal. 2. Brief facts of the case extracted from ITA No. 5739/Mum/2012 in the case of Shri Dilip C. Shah for the assessment year 2001-02 are that search and seizure u/s 132 of the Income tax Act, 1961 was carried out in the case of Shri Dilip C. Shah and Shri Atul Sanghvi on 05.02.2007. During the course of search and seizure operation incriminating materials were found which revealed that the assessee along with Shri Atul Shanghvi involved in providing accommodation entries to various beneficiaries. The incrimi....
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....floated dummy concerns in the name of fictitious/existing persons so as to issue bogus bills. 3. Consequent to search proceedings notice u/s. 153A of the Income tax Act 1961, was issued directing the assessee to file the return of income for the six assessment years immediately preceding the assessment years in which the search took place. In response to notice, the assessee has filed returns of income for the assessment years 2001-02 to 2007-08 on 15.02.2008. The case has been selected for scrutiny and accordingly notice u/s 143(2) and 142(1) along with detailed questionnaire were issued to the assessee. In response to the notices authorized representative for the assessee appeared from time to time and furnished various details, as called for. 4. During the course of assessment proceedings, the A.O noticed that the assessee is operating more than 100 bank accounts in various entities name in different bank accounts and the total sum found credited in these bank accounts was worked out at Rs.21,22,27,57,495/-. The A.O further observed that the assessee had issued sales bills in the name of 51 entities for an amount of Rs.8,59,99,06,373/-. The A.O has summarised t....
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.... construed as dummy entities floated by me for facilitating issue of bogus bills. 6. The A.O, after considering the submissions of the assessee and also taking into account the seized material found during the course of search, came to the conclusion that the assessee along with Shri Atul Sanghvi was engaged in the activity of providing accommodation entries of bogus purchase bills to various beneficiaries. The A.O further observed that the modus operandi of the assessee is that he opens bank accounts in various fictitious / existing persons name by fabricating address proof and PAN card, which is evident from the fact that he has opened bank account's in one persons name in different bank accounts by fixing his photograph on the fabricatéd address proof and PAN No. The A.O further observed that the statement recorded during the course of search from one Mr. Yashwant Pandya who claimed to be the accountant of the assessee indicates that the assessee is issuing sales bills in various names. Shri Yashwant Pandya accountant of the assessee who has clearly stated in his statement that he had under instruction from Shri Atul Sanghvi and Shri Dilip C. Shah, bills in respe....
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....see's possession. 7. From the above inquiries and evidences gathered during the search and post search enquiries, the A.O came to the conclusion that Shri Atul Sanghvi and Shri Dilip Shah where the persons, who had operated 100 bank accounts in different entities name to facilitate the issue of bogus bills to various beneficiaries. The A.O further observed that the seized documents found during the course of the search undoubtedly proved that the duo were involved in providing accommodation entries of bogus purchase bills in the name of dummy concerns. The A.O further observed that the duo have fabricated documents like PAN card, signature etc, to open bank accounts in the name of different persons who had nothing to do with those transactions. The assessee and Shri A. Sanghvi have operated bank accounts in different persons' names, however the real transactions have been carried out by the assessee along with Shri Atul Sanghvi. All these sequence of events and evidences clearly indicates that the assessee is engaged in the activity of providing accommodation entries therefore, he opined that the total sum found credited in these bank accounts is the gross turnover of the ....
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....w.s. 153A was erroneous insofar as it is prejudicial to the interest of the revenue, as the A.O has not considered the issue of bogus sales bills issued in the name of M/s Varun Industries Ltd. and also unexplained credits found in the bank accounts operated by the assessee. The CIT Mumbai, after considering the explanations of the assessee, set aside the order passed by the A.O u/s 153A r.w.s. 143(3) and directed the A.O to redo assessment with the following directions: "4.2.1 The total amount included in the bills raised in the name of M/s. Varun Industries Limited should be assessed protectively in the hands of the assessee to the extent of his share in the business, to safe guard the interest of the revenue. The commission income on the said transactions should be assessed proportionately on substantive basis in the hands of the assessee, as already done in the original assessment. 4.2.2 Regarding the deposits aggregating to Rs.1.388.09 crores in the assessment years comprised in the block period for which the assessee has not been able to furnish proper explanation, this amount should be taxed in the hands of the assessee proportionately to the extent of his ....
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....i 'A' Bench in IT(SS)A No. 30/Mum/2011 for the assessment years 2001-02 to 2007-08 upheld the revision order passed by the CIT(A) and dismissed appeals filed by the assessee. The relevant portion of the order of the ITAT, is reproduced as under:- "7. We have considered the rival submissions. A perusal of the assessment order reveals that the AO had given a categorical finding that the total credit in the assessee's various bank accounts was amounting to Rs.2122,27,57,495/out of this a sum of Rs.856,64,49,533/- had been treated as bogus sales for which sales bills were found and were duly impounded. However, the remaining sum of Rs.1388,09,01,411/- had remained unexplained in spite of various opportunities given to the assessee. The AO had treated the same as unexplained income of the a.ssessee and decided to bring it into tax in various assessment years. He also worked out the additions for different assessment years. However, he made the said additions on protective basis observing that the assessee had not been able to establish the source of these credits. He, however, made the addition of 2% of the said amount as commission income of the assessee on substantive bas....
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.... course under the circumstances would be to prevent such a prejudice were such an eventuality to arise in future. However, that may not necessarily imply a requirement to decide the assessee's appeals on merits by the first appellate authority, need or occasion for which would arise only where the assessee's impugned assessment/s, since set aside, stand restored by accepting his challenge to the revision order, and which is not certain, so that it may never arise, resulting in his decision on merits becoming futile or unfructuous. Reserving the assessee's statutory right to contest its assessment/s under the appellate procedure, which is what we understand, as also afore-stated, to he the also intent and purport of the tribunal's order in Di/ip Shah v. ACIT (supra), would in our view present a reasonable and equitable course under the circumstances. 3.2 The above course, besides being in conformity with that by the tribunal in the cited case, i.e., in principle, would also be in consonance with law inasmuch as the assessments impugned in the instant appeals stand since set aside by the revision order, which holds as on date, so that the action of the Id. CI....
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....es have considered the bank accounts in their Income tax returns for the respective assessment years. 13. The A.O, after considering the explanation of the assessee, observed that the assessee has not discharged his onus of proving the identity, genuineness and creditworthiness of any of these transactions pertaining to sum total found credited in the bank accounts operated in various entities name of Rs.1388.09 crores. Though the assessee has simply relied on the stand that some parties were produced during the original assessment proceedings or that certain annual account and copies of I.T. returns have been submitted in some cases, it however does not discharge the onus of proving the credits found in the bank accounts. The A.O further observed that the assessee has merely made his submissions which were made even at the time of original assessment proceedings and have been rejected there itself without any further corroborative evidence to explain the credits found in the bank accounts. The A.O further observed that the purpose of the present proceedings is merely to make fresh assessment only with respect to the deposit in the bank accounts and hence, the assessee is ....
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....accommodation entries ignoring all the evidences filed by him to prove that he is registered commission agent in the market involved in the business to facilitate sales and purchase of various entities by selling goods. The assessee also challenged additions made by the A.O towards total sum found credited in the bank accounts of various individuals. The assessee submitted that the bank accounts found and seized during the course of search are in fact belong to entities manufacturing goods which are kept in his custody for easy facilitations and business therefore, the same cannot be considered as his own documents used for issuing bogus bills. The assessee further submitted that insofar as estimation of commission of total sales bills in the name of M/s Varun Industries Ltd and others and also additions made towards total sales bills on protective basis, once he was treated as bogus bills provider, and commission income is estimated on total sales, additions cannot be made towards total sales bills on protective basis when substantial additions has been made in the hands of persons receiving the bills. The assessee further submitted that a substantial addition has been made toward....
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....12observed as under:- 2.6.1 Vide ground No. 3 the appellant has raised an issue regarding an inference drawn by the Ld. A.O. that he indulged in the business of issuance of bogus bills. From the facts of the case, it is apparent that appellant was found in possession of several bank accounts and other related documents of fictitious persons and a large number of sale bills issued to various concerns including those of M/s.Varun Ind. Ltd. were found alongwith a number of cheque books and bank lips. Evidence was also found of tampering of documents such as PAN cards by substitution of names and photographs. In one of such case, same person's photo was used in three different bank accounts in three different names. Thus, it cannot be said that appellant was not indulged in the business of issuance of boqus bills. By making a mere averment that he was not involved in such activity in spite of a host of such evidence found in his possession would not cut much ice and cannot lead to an inference which the appellant wants the revenue authorities to hold. In view of the above facts there is not even of iota of truth in the pleadings made by the appellant and hence ground No 3 ....
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....ment to the impugned Assessment order pending adjudication before me, Ld. A.O. has pointed out that none of the parties except one had filed his/its return of income and therefore nothing turns on the fact that some of the parties were produced before him during the course of original assessment. Ld. A.O. has further pointed out that the parties had not been able to establish with any documentary evidence regarding delivery of manufactured goods to different parties and no books of accounts were produced before him for verification. According to the Ld. A.O., entries in various books of accounts remained unexplained and therefore appellant's version that the various entities/persons were carrying out genuine business activities remained unsubstantiated. 2.8.2 The same facts have been reiterated by the Ld. A.O. during the assessment framed which has been appealed against before me. 2.8.3 The Ld. A.R. in his submission has dealt with ground Nos. 5 to 8 together, as according to him, the some are interlinked. According to him, the appellant is .a commission agent in the metal market where the rate of commission is not fixed and varies between 0.02% to 0.05 ....
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....ipals and in order to facilitate the transactions for such principals, especially purchase transactions where prompt and in time payments were of utmost significance, signed cheque books duly signed by third parties were kept with the appellant in confidence. In view of the above facts, it was pleaded that the bank accounts found during the course of search at the appellant's premises were not benami accounts and the signed cheque books were kept only to facilitate smooth trade. 2.9.2 Ld. A.O. was not satisfied with the submissions made and for the following reasons he made the addition in the various assessment years pertaining to the search: "1. The assessee has not discharged his onus of proving the identity, genuineness and creditworthiness of any of these transactions pertaining to Rs.1388. 09 crores. 1. Assessee representative has simply re//ed on the fact that some parties were produced during the original assessment proceedings or that certain audited annual accounts and cop/es of IT returns have been submitted in some cases. This too however, does not discharge his onus. 2. has merely made his submissions which were made even at the ....
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.....9.3 I have considered the rival submissions an d afler perusing the record, I am completely in agreement with the view taken by the Ld. A.O. that the appellant was engaged in issuing bogus bills and for that purpose he was maintaining benami bank accounts in the names of different persons, dummy or existing. Further, the appellant was engaged in such transactions and earned substantial commission on the same. To me it appears to be a pure case of money laundering and nothing else as the appellant despite being given a number of opportunities failed to produce all the parties in whose names the bank accounts were being maintained and the letters issued by the Ld. A.O. from time to time to these parties at the addresses mentioned were returned back unserved. Even the parties who were produced before the Ld. AG. did not file any return of income except in one solitary instance and no books of accounts or other documents were produced to substantiate the claim made by the appellant and his witnesses that they carried out independent identifiable genuine business. That being the case, it can be safely presumed that the onus which was cast on the appellant to substantiate the claim made....
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.... than Shri Atul A. Sanghvi and Shri Dilip C. Shah. All the cheques in these accounts were deposited by them and the cheques for withdrawal or transfer were also submitted by them further confirmed that accounts were never operated or handled by the actual account holders. This statement was also shown to Shri Atul A. Sanghvi and Shri Dilip C. Shah who confirmed, during the course of cross examination, that the statement was correct. Ld. A.Q. had discussed at length in the original assessment the seized documents at para 11 thereof to come to the following conclusion: "1. That in fact Sh. Atul Sanghvi and Sh. Dilip 5hah were the persons who had operated the over hundred bank accounts and different entities. 2. That Shri Dilip Shah and Shri Atul Sanghvi were in fact involved in issuing mere bills in the name of different entities. 3. Shri b/lip Shah and Shri Atul Sanghvi (duo) was fabricating documents like PAN cards signatures etc. to open bank accounts in the name of different persons, who had nothing to do with those transactions, in fact they were mere name lenders or dummies. 4. The duo were handling all the correspondence of the different con....
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....consolidated order, insofar as additions and computation of total income are concerned noticeably separate order has been passed for each assessment year which can be ascertained independently from the order of the A.O. The ld. CIT(A) after considering the fact and also provisions of Section 292B, observed that no assessment made in pursuance of any of the provisions of I.T. Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such assessment, if such assessment is in substance and effect is in conformity with the intent and purpose of the I.T. Act, 1961. In this case, admittedly, the 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 of each year in the block period has been done separately. There is no error in the order of the CIT(A). Therefore, we are inclined to uphold the findings of the CIT(A) and dismiss the grounds raised by the assessee. 21. The next issue that came up for our consideration fr....
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....t the Ld.AO was erred in estimating commission on total sale bills issued in the name of M/s Varun Industries Ltd @2% ignoring the fact that the prevailing common rate in the steel market ranging between 0.2% to 0.5% shall be having regard to the fact that the assessee is a registered broker in the market. The Ld.AR referring to the paper book filed, submitted that the assessee is a registered broker in the steel market involved in facilitating business of prospective manufacturer of steel goods to the buyers in the market for which he charges commission. The AO ignoring the fact has concluded that the assessee is a hawala operator engaged in providing accommodation entries and estimated commission income @2% without any basis. Insofar as addition made by the AO towards total sale bills issued in the name of M/s Varun Industries Ltd on protective basis, when a substantive addition made in the hands of M/s Varun Industries Ltd, making an addition on protective basis in the hands of the assessee is incorrect, more so, when the assessee is treated as an hawala operator and income from such activity has been estimated at 2% on total sale bills issued. In this regard, he relied upon the....
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....lls were prepared in the name of various concerns, whose blank cheques have been found with the assessee during the course of search. The statement of Shri Pradip M Jabalia recorded during the course of survey on 05-02-2007 also leads to an undisputed conclusion that Shri Pradip M Jabalia had given his address for correspondence for some of the accounts being operated by the duo, Shri Atul Sanghvi and Shri Dilip Shah. In his statement, Shri Pradip M Jabalia has confirmed that the letters from the banks were collected by Shri Atul Sanghvi and Shri Dilip Shah. Further, statement of Shri N.V. Neelakantan recorded on 26-02-2007 throws light on the modus operandi of the assessee that he fabricated various documents including address proof, PAN cards and ID proof of various individuals to open bank accounts in different names by fabricating the documents. This fact was confirmed by Shri N.V. Neelakantan, who categorically admitted that the assessee has operated number of bank accounts in the National Co-operative Bank. All these facts lead to a conclusion that the assessee has floated various dummy companies / firms to facilitate issuing of bogus purchase bills and operated bank accounts....
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....ound raised by the assessee. 26. Coming to addition made towards total sale bills issued in the name of M/s Varun Industries Ltd on protective basis. The AO has made additions towards sale bills issued in the name of M/s Varun Industries Ltd on protective basis in the hands of the assessee to protect the interest of the revenue. Assessee claims that once substantial addition has been made in the hands of M/s Varun Industries Ltd, protective addition made in the hands of the assessee cannot survive in the eyes of law. We do not find any merits in the arguments of the assessee for the reason that though substantial addition has been made in the hands of M/s Varun Industries Ltd, the outcome of addition made by the revenue authorities will only be clear once it has been decided in appellate forums. The assessee has not been able to furnish any evidences with regard to additions made in the hands of M/s Varun Industries Ltd except furnishing an assessment order copy. The fact with regard to nature of dispute and the stages of outcome in appellate forums is not ascertainable at present. Therefore, we are of the considered view that though the Act, does not provide for protectiv....
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....ared before the AO and accepted that the bank accounts are operated by themselves and considered in their income-tax returns filed for the respective assessment years. The assessee further contended that the AO has accepted the fact in the original assessment order passed u/s 143(3) r.w.s. 153A dated 28-12-2011 wherein he has categorically accepted that certain parties have appeared before him and filed confirmation with regard to the bank account found in the possession of the assessee. 29. Having heard both the sides and considered material on record, we find that the assessee has not been able to discharge onus by filing necessary evidence to prove the credits found in the bank account. It is incumbent upon the assessee to explain each and every credit found in the bank accounts and sources of such credits. In this case, the assessee has failed to furnish any evidences to identify credits, genuineness of such credits and creditworthiness of any of the credits found in the bank account. Therefore, we are of the view that the AO was right in treating the sums found credited in the bank accounts as unexplained credits in the hands of the assessee. As regards the claim of t....
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....82 ITR 540 (SC) and Sumati Dayal vs CIT 214 ITR 801 (SC) wherein it was held that apparent must be considered real unless it is shown that there are reasons to believe that the apparent is not real and that taxing authorities are entitled to look into surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. The Hon'ble Court also held that it is no doubt true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden to prove that it is not taxable because it falls within the exemption provided by the Act lies on the assessee. Further, the provisions of section 68 of the Act, is clear inasmuch that where any sum is found credited in the books of account of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the AO, is not satisfactory. The assessee could not prove credits found in the bank a....
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.... to cash deposits. 33. The next issue that came up for our consideration for the assessment year 2007-08 is additions towards cash found at the time of search. During the course of search cash to the extent of Rs.47,30,000 has been found and seized. The AO made additions towards cash found at the time of search on the ground that the assessee has agreed for addition and also failed to explain source of cash found at the time of search. The assessee claims that the AO has made addition towards income on estimation basis and also made addition towards cash found without allowing telescoping the sources available in the form of income. We find force in the arguments of the assessee for the reason that if the source available in the form of income, the AO is bound to telescope the sources with cash found at the time of search. Therefore, we are of the view that the issue needs to be examined by the AO in the light of the claim of the assessee and hence, we set aside the issue for the limited purpose of verification of sources available in the form of estimation of income with cash found at the time of search. If the source is in excess of cash found during the course of search....
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....g address proof, PAN and ID proof of various individual to open bank account in different names by fabricating various documents. There is further finding in the quantum order passed by the Tribunal that the factual finding recorded by the Assessing Officer were never reverted by the assessee. It was concluded that the assessee was providing accommodation entries, therefore, the addition was sustained. 2.3. In view of this order, now we shall deal with the penalty so imposed by the Ld. Assessing Officer and confirmed by the Ld. Commissioner of Income Tax (Appeal). Before adverting further, it is our bounded duty to analyze section 271(1)(c) of the Act, which is reproduced hereunder:- 271. (1) If the Assessing Officer or the Commissioner (Appeals) or the [Principal Commissioner or] Commissioner in the course of any proceedings under this Act, is satisfied that any person- xxxxxxxxxxxxxxxxxxxxx (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or xxxxxxxxxxxxxxxxxxxxxxxxxx Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act,- ....
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....arlier assessment years. Explanation 3.-Where any person fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish undersection 139 in respect of any assessment year commencing on or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of subsection (1) of section 142 or section 148 and the Assessing Officer or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148. xxxxxxxxxxxxxxxxxxx (5) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1989 shall apply to and in relation to any assessment for the assessment year commencing on the ....
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..... The Court went on to hold therein that in order to attract the penalty under Section 271(1)(c), mens rea was necessary, as according to the Court, the word "inaccurate" signifies a deliberate act or omission on behalf of the assessee. It went on to hold that Clause (iii) of Section 271(1) provided for a discretionary jurisdiction upon the Assessing Authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The Court ultim....
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....according to truth; erroneous; as an inaccurate statement, copy or transcript". We have already seen the meaning of the word "particulars" in the earlier part of this order. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in these cases, there is finding that the details filed by the assessee are incorrect and the assessee knowingly furnished inaccurate particulars of income and was very much aware that he was involved in Hawala entries. In these appeals, the penalty was levied/confirmed on the basis of involvement of the assessee as discussed in the earlier paras of this order. Thus, there is clear cut case of concealment of income/furnishing of inaccurate particular of such income, that being the case, we find no infirmity in imposing/confirming the penalty. 2.6. Considering the provision of the Act and the foregoing discussion, order of the Tribunal on quantum addition, material facts available on record, and the ratio laid down in following cases, it can be concluded that it was a conscious act of the assessee to hid....