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2018 (5) TMI 2125
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....eal). 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 assessment years 2001-02 to 2007-08. Since, the facts are iden....
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.... (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 incriminating documents found further revealed that the assessee has operated more than 100 bank accounts in various names and als....
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....ceedings 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 the details of companies/firms operated by the assessee along with shri Atul Sanghvi and the names of persons of concerns are listed in th....
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....e 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 respect of the various companies were prepared in the office of the assessee. The bills were prepared in the name of various concerns whose blank cheques we....
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.... 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 assessee from the activity of issuing bogus bills. The A.O has concluded assessment in the following manner:- (I) Commission on bogus billing:- The A.O h....
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....ound 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 share in the business on substantive basis as his own unexplained or unaccounted income. 4.2.3 Assessee should be allowed opportunity to prove that the deposits are accounted for or/are no the assessee's own income but income of som....
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....e 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 basis A perusal of the above findings itself reveals that the order of the AO was erroneous. In the absence of any evidence, on the file-Is to source of the credits of the amount in question in the various bank accounts of the assessee, the AO had treated the said amou....
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.... 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. CIT(A) in dismissing the same as not maintainable cannot be faulted with. The exclusion of the jurisdiction of the Administrative Commissioner qua an assessment, it needs to be borne in mind, is only where the same stands modified in appeal, so that it stands merged with the appellate order, and....
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....s 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 having an obligation to discharge his onus by furnishing identity, genuineness, and creditworthiness of the transactions. Since, the assessee has failed to file any evidence to explain the credits found in the bank accounts, the AO completed the assessment by treating 50% of total unexplained bank credits of Rs.13....
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....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 towards total value of sale bills found in the name of M/s Varun industries Ltd; hence, and protective addition made in its hands, should be deleted. As regards addition made towards bank credits, the assessee submitted that the bank accounts found during the course of search are, in fact, belong to some other persons and further, th....
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....s 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 is dismissed. 2.7.1 Ground No.4 relates to making of protective assessment of Ps.35,46,36,038/- on account of sales made to M/s. Varun Inds. Ltd. The only plea which has been made by the appellant is that because a substantive addition has been made in the hands of M/s. Varun Ind. Ltd., the protective assessment in the hands of the appellant, wou....
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....e 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 %. However, there is no written agreement entered into between commission agent and the clients. Even in the grounds of appeal, the appellant has mentioned that the prevailing commission rate in the steel market ranges between 0.02% to 0.05%. Thus, there is no denying the fact that the appellant earns commission and the services rendered by him. It is also a matter of fact th....
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....emises 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 time of the original assessment proceedings and have been rejected there itself. 3. The purpose of the present proceedings is merely to make fresh assessment only with respect to the deposits in the bank accounts and it is beyond by jurisdiction to comment or delve on the other issues which have already achieved finality so far as this office is concerned. 4. The Delhi High court in the case of CTT vs. Oas....
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....ey 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 was not discharged and therefore no fault can be found with the action token by the Ld. A.O. in bringing to tax the amounts as in the assessment order. The case laws cited by Id. A.1. are distinguishable on facts as none of them deal with hawala racket. 2.9.4 Even as per the statement of Shri Pradeep M. Jobalia recorded on 8.3.2007 having office at Podar Chambers, Ground flr Parsi Bazar St., Fort, Mumbai 400001, it is apparent that his office addre....
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.... 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 concerns. 5 The duo were operating the bank accounts and cash withdrawal and other transactions were carried out by the assessee.' dismissed the appeal filed by the assessee. The sum and substance of the observations of the CIT(A), the evidences collected during the course of search, and inquiry conducted during the course of the assessment proceedings undoubtedly prove the fact that the assessee along with Shri Atul Sanghvi are involved in providing accommodation entries in the f....
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.... 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 from grounds No. 3 to 7 revolves around one common issue of activity of the assessee and computation of income from such activity. The lower authorities came to the conclusion that the assessee is a hawala operator involved in providing accommodation entries to various parties by issuing bogus purchase bills and engaged in money laundering activities, therefore concluded that the assessee is a hawala operator and income from such activities has to be computed by taking into account of total sum found credited in the bank account....
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....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 decision of ITAT, Chennai Bench in the case of Parasmal Dangi alias Parasmal Jain 100 TTJ 508. 23. The Ld.DR, on the other hand, strongly supporting the order of the CIT(A) submitted that evidences gathered during the course of search and post search investigation conducted during the course of assessment proceedings clearly establish the fact that the assessee, a hawala operator, issued bogus purchase bills in the name of various dummy / fictitious concerns and operated more than 100 bank accounts in the names of various persons ....
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....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 by fabricating documents. The assessee has not been able to rebut any of the findings recorded by the AO, though he claims that he is a registered broker in the steel market. Therefore, we are of the considered view that the lower authorities were right in concluding that the assessee is engaged in the activity of providing accommodation entries. Hence, we are inclined to uphold the findings of CIT(A) and dismiss the ground raised by the assessee. 25. Coming to the additions made by the AO towards estimation of commission @2% on total sale bill....
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....guments 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 protective assessments, in the interest of revenue, the AO can make protective additions to protect the interest of the revenue. Therefore, we are of the view that the AO was right in making protective additions towards sale bills issued in the name of M/s Varun Industries Ltd. Nevertheless, the assessee shall be entitled to relief as and when the substantive addition made in the hands of M/s Varun Industries Ltd is confirmed once all rounds of litigation ends. The CIT(A) after considering the relevant facts has rightly upheld additions made by the AO. We do not find an....
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....sessee 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 the assessee that some of the parties have appeared before the AO and filed their income-tax returns explaining bank accounts found in the possession of the assessee and hence those bank accounts, should be excluded. We do not find any merits in the argument of the assessee for the reason that the evidences gathered during the course of search and further enquiries conducted in the course of post search investigation clearly establishes the fact that the assessee has operated more than 100 bank accounts in different banks. All evidences gathered during the course of search clearly i....
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....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 accounts. Therefore, we are of the view that the CIT(A) has rightly upheld the additions made by the AO towards total credits found in the bank account amounting to Rs.1388.09 crores as unexplained credits in the hands of the assessee. We do not find any error in the order of the CIT(A). Hence, we are inclined to uphold the findings of the CIT(A) and reject the ground raised by the assessee. 31. The next issue that came up for our consideration is addition towards cash deposits to the bank accounts. The AO made additions towards total cash deposits in the bank account amounting to Rs.7,0....
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.... 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 and if it is not floated to any other assets or not expended elsewhere, then the AO is directed to allow telescoping towards income to the cash found at the time of search and allow relief accordingly. 34. The facts and circumstances narrated above are identical to all other appeals under consideration, therefore, the decision arrived at above applies mutatis mutandis to all other appeals in this consolidated order. 35. ITA Nos 5713 to 5719/Mum/2012 - Ays 2001-02 to 2007-08 The facts and circumstances narrated above are identical to all other appeals under consideration, therefore, the decision arrive....
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....)(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,- (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the 48[Principal Commissioner or] Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of whi....
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....o 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 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year. 2.4. A glance at this provision would suggest that in order to be covered under this section firstly, there has to be concealment of income by the assessee and secondly, the assessee must have furnished inaccurate particulars of his income. Present is clear cut case of furnishing of inaccurate particulars of such income and consequent concealment. This is exactly the case of the Revenue. As per Law Lexicon, the meaning of the word "particular" is a det....
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....lue 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 ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. was upset. In Union of India Vs. Dharamendra Textile Processors (cited supra), after quoting from Section 271 extensively and also considering Section 271(1)(c), the Court came to the conclusion that since Section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing Return, there was no necessity of mens rea. The Court went on to hold that the objective behind enactment of Section 271(1)(c) read with Explanations indicated with the said Sect....
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.... 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 hide something from the Department. The ratio laid down in the following the cases, supports the case of the Revenue. I. CIT vs Satish Medical Agencies 277 ITR 394 (All.) II. Jyoti Laxman Konkar vs CIT 292 ITR 163 (Bom.), III. Deepak Construction Company vs CIT 293 ITR 285(Guj.) IV. CIT vs Mahavir Prasad Bajaj 298 ITR 109(Jhar.) V. D & H Secheron Electrods Pvt. Ltd. Vs CIT 281 ITR 421 (MP.) VI. Shri Nithyakalyani Textiles Ltd. Vs DCIT 282 ITR 154 (Mad.) VII. LMP Precision Engineering Company Ltd. Vs DCIT (330 ITR 93) (Guj.) VIII. CIT vs Deep Chand 336 ITR 292 (P & H) IX. Sethy Industries Corporation vs DCIT 338 ITR 243 (P &H) X. B.Damodar V.B. Jewellers vs JCIT 353 ITR 206 (Karna.) XI. Standard Hind Compa....