AI Drafter 
TaxTMI 
TaxTMI 
2018 (10) TMI 1970
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....e accommodation entry provider Mr. Sanjay Kumar Garg and found to have deposited huge amount of cash in his bank accounts. For AY 2004-05 and 2005-06 , Rs. 13,48,58,000/- and Rs. 29,32,85,755/- respectively are such deposits. The ld AO made the addition on protective basis in the hands of the assessee and substantive basis in the hands of Mr. Sanjay Kumar Garg. Even in the hands of Mr. sanjay Kumar Garg the addition was made of commission income @ 1 % of the accommodation amount. The ld CIT (A) deleted the addition on the ground that as the commission in the hands of Mr. Sanjaykumar Garg stood already confirmed, the addition of the amount deposited could not be taxed in the hands of the assessee. This shows that the amount of cash deposited in the bank accounts were neither taxed in the hands of the assessee and nor in the hands of Mr. Sanjay Kumar Garg but only 1% of the whole amount of accommodation entries in the form of commission is taxed in the hands of Mr. Sanjay Kumar Garg. 03. Survey u/s 133A of The Income Tax Act, 1961 was conducted on 12/7/2004 in case of business entities connected with Shri Sanjay Kumar Garg. During the course of survey, Shri Sanjay Kumar Garg was f....
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....paid to Shri Sanjay Kumar Garg who deposited with the same bank in various accounts of the fictitious concerns which were floated by him. The amounts were utilized for payment against sale of damaged good grains shown as having been made to these concerns by the food grain merchants. These bogus concerns of Shri Sanjay Kumar Garg were merely name lenders and he was compensated for providing these cross entries of showing bogus sales of damaged food grains and payment made by cheques/demand Drafts. The secret enquiries revealed that the damaged food grain was sold in the open market and the billing & payment aspect done through entry operators and accommodation entries from Shri Sanjay Kumar Garg. Accordingly, a survey u/s 133A was conducted on the business premises of Shri Sanjay Kumar Garg on 12.07.2004 which revealed that Shri Sanjay Kumar Garg was carrying on activity of providing entries to various food grain merchants on a mass scale through bogus concerns and dubious entities created by him. The modus operandi followed was that cash was received from such food grain merchants which was deposited in the bank accounts of such bogus concerns and dubious individuals agai....
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....sportation were prepared for giving entries, without the knowledge of the transporters. 9. When confronted with the statement of Shri IK. Sabberwal (Chartered accountant who has given Audited P&L A/c, balance sheet and Audit report) which was recorded before the assessee, that he does not have any of the books of account of any of the concern of the assessee or other firms of assessee, the assessee stated that he has already destroyed accounts up to FYs 2002-03 and thereafter the accounts of subsequent period have not been prepared till date. 10. He admitted having given two cheques of Rs.50 Lakhs to M/s Mahesh Agro (P) Ltd. having office in Naya Bazar on 29-06- 2004 and 01-07-2004 and one cheque of 1,00,00,000 to M/s LMJ International having office in New Delhi on 29-06-2004. It has been further admitted that these cheques have been given to these firms against the purchase bills and the same (Cheques) have been given after taking cash from them. In reality no purchases made from these parties. 11. It has admitted that cash is brought by his own man namely Shri Ram, Hira, Hari Ram. Parmed. The cheques are given to Shri Mahavir Garg of Mahesh Agro, Shri V....
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....he act were issued to the assessee from time to time and questionnaire was issued for compliance, but the same remained uncomplied with. In the questionnaire dated 6/11/2007 at para number 18, the learned assessing officer noted that that bank account number 1000028825 being operated in the name of M/S Suraj enterprises with state Bank of Bikaner and Jaipur, Karol Baug branch, Delhi , cash to the tune of Rs. 1 34858000/- has been deposited during the financial year 2003 - 04. The assessing officer extracted the date -wise chart of the deposit of the cash in the Suraj enterprises' bank account and asked the assessee to explain the nature entries of these cash deposits. None appeared on behalf of the assessee in response to such notices. Therefore, the learned assessing officer passed an assessment order Observing the reasons for the addition in para number 5 and 6 of his assessment order as under:- "5. But on the date and time of hearing, none attended nor any written submission was filed. Since no compliance has been made by the assessee, the undersigned is left with no option but to make best judgement assessment, exparte of u/s 144 of I T Act 1961, on the basis of inform....
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....d with this group of persons have also got the audit done from the same Chartered Accountant and the Income Tax returns have also been filed nearly on the same date with similar nature of income declared "By Arhat Received" iii) The profit and loss account, balance sheet and audit report in Form No 3 CB and Form No 3 CD is not reliable and is not supported with any documentary evidences. Hence the book version of the assessee assessee is liable to be rejected by- taking recourse to provisions of Section 145 (3) of IT Act, 1961." 06. Therefore, in view of the information available with the revenue in the form of statement of Mr. Sanjay Kumar Garg recorded at the time of survey u/s 133A, in his case, followed by the local enquiries and elaborate discussion by the learned assessing officer , learned assessing officer held that cash deposit of Rs. 13,48,58,000/- is treated unexplained income of the asessee as the assessee failed to adduce any evidences regarding the nature and source of cash entries in his bank account. According to him, it is required to be treated as unexplained income from undisclosed sources. The learned assessing officer further noted that in view of t....
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....mar Goel prop. M/s Mahadev Enterprises has also mentioned the same in his own assessment proceedings), of rice whereas regular broker gets commission between Rs. 3 to 5 per Qtl . In addition to the being acting as a sub broker, the assessee must have been compensated for lending name of his concern and allow to use of his bank account through blank signed cheques. 9. Looking into these facts and circumstances, the assessee has earned Income by way of providing accommodation entries. It is held that the assessee has earned at the rate of 0.5% of the total turnover declared to Sales Tax Department and the same is worked out as under Total Turnover as per Sales Tax Order : Rs. 25,89,24,9 1 67- Accommodation Charges @ 0.5% as discussed above : Rs 12,94,6257-" 08. Consequently the assessment order u/s 144 read with section 147 and 148 of The Income Tax Act was passed on 24/12/2007 determining the total income of the assessee at 13 6220 6929/- against the returned income of Rs. 74 304/-. 09. The assessee aggrieved with the order of the learned AO preferred appeal before the learned CIT (A) - 16, New Delhi who passed an order on 31/3/2015. He deleted the above additio....
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.... Hon'ble ITAT pronounced its verdict on this issue in the connected case of Sh S.K.G. mentioned supra in the following terms:- "46. Further the Assessing Officer added the amount of Rs. 67,53,90,956 deposited in the bank accounts held in the names of M/s. Yash Enterprises, GRS & Company, Pradeep Kumar Vikas Kumar, Suraj Enterprises, M/s. Baba Kishore Enterprises and M/s. Mahadev Enterprises. Before the Id. CIT (A) the assessee vehemently objected that he had no nexus whatsoever with these bank accounts which were owned and operated by independent persons. They were assessed separately and were genuine concerns. Hence, the amount deposited in the bank accounts of above concerns could not be related in any manner to the assessee. On consideration of the contention of the assessee, Id. CIT (A) observed that an un-disputed fact was that Shri Sanjay Kumar Garg was carrying the business of providing accommodation entries to the needy business persons and collecting commission from them. The requirement of those business persons were many-fold. Hence, it was not possible to help them in the name of only one entity. With this purpose, the assessee floated various concerns in t....
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.... of 1 per cent. 46.1 The Id. CIT (Appeals) thereafter worked out the total credits in the names of six dummy concerns at Rs. 1384571462/-. M/s. Yash Enterprises Rs. 1404000/- M./s. GRS & company Rs. 160453727/- M/s. Suraj Enterprises Rs. 7,78.34,977 M/s. Pradeep Kumar Vikas Kumar Rs. 60,37,67,397 M/s. Baba Kishore Enterprises Rs. 15,90,15,160 M/s. Mahadev Enterprises Rs. 38,20,96,201 He estimated the commission income of Rs. 1,38,45,714 by applying 1 per cent rate on turnover of Rs. 38,20,96,201. The contention of the assessee that 50 per cent of commission income should be allowed as deduction as paid to the sister concerns was rejected on the ground that no evidence to this extent was led by the assessee and the bank accounts of all the dummy concerns were controlled and operated by the assessee himself. The Id. CIT (A), however, held that the assessee should be given the benefit to the extent of commission income disclosed by these concerns in their return of income. 46.2 Thus in assessment year 2005-06 Ld. CIT(A) estimated commission income from direct business of entry operations carried out in the names of M/s. Ga....
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....ed in the account of dummy concerns was to be treated as total receipts on which commission was to be determined. Therefore, we are in agreement with the view of the Id. CIT (A) that only commission can be determined on the deposits made in the bank accounts of the dummy concerns. Therefore, we do not find any infirmity in the order passed by the id. CIT (A) that the amount deposited in the account of dummy concerns cannot be treated as income of the assessee. Therefore, the Id. CIT (A), in our considered opinion, is justified in treating the cash deposited in various bank accounts controlled and operated by the assessee as the turnover of the accommodation entry business and commission income has to be estimated thereon. 49. The next issue arises for estimation of commission income. In the statement the assessee at the time of survey under section I33A had stated that he charged 25p as commission for providing accommodation entries and out of that 25p he paid I Op to others in whose name bank accounts were maintained and 5p was spent on expenses incurred in relation such business and hence, net commission earned was 10p i.e. 0.10 per cent. The Id. CIT (A) had taken the co....
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....oncerns and has controlled the accounts. During the course of survey, no material was found on the basis of which it could be said that the assessee had passed on .1 per cent commission to the persons in whose names the bank accounts were maintained. In the absence of any evidence having brought on record, we are unable to agree with the assessee that the assessee had passed on commission of lOp to the persons in whose names dummy concerns were floated. However, in the business of entry provider certain expenditure has to be incurred which has been stated to be 5p during the course of survey. Therefore, credit of 5p out of 25p received as commission has to be allowed. Therefore, the Assessing Officer is directed to estimate commission income by applying 0.2 per cent net commission on turnover determined by the Ld. CIT (A) for both the assessment years as against I per cent taken by him. " Having gone through the order of the Hon'ble ITAT, the relevant portion of which is reproduced above, I am of the considered view that no case survived against the appellant. In such circumstances I strongly feel that the ends of justice would be met by following the orders of the final f....
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....ore them, one of the Collector (Appeals) and the other of the Tribunal. The High Court has, in our view', rightly criticized this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to, them in The appellate hierarchy. The impression or anxiety of the Assistant Collector that, if he accepted the assessee's contention, the department would lose revenue and would also have no remedy, to have the matter rectified is also incorrect. Section 35E confers adequate powers on the department in this regard. In the light of these amended provisions, there can be no justification for any Assistant Collector or Collector refusing to follow the order of the Appellate Collector or the Appellate Tribunal, as the case may be, even where he may have some reservations on its correctness. He has to follow the order of the higher appellate authority. This may instantly cause some prejudice to the Revenue but the remedy is also in the hands of the same officer. He has only to bring the matter to the notice of the Board or the Collector so as to enable appropriate proceedings being taken unde....
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....e Court itself in yet another case pointed out to the binding nature of the Tribunal's order'. There are also precedents in income-tax law to the same effect'. Decision of any Bench of the Tribunal will be binding on the authorities all over India in view of the fact that income-tax statute is an all-India enactment. " On a plain and simple reading of the above, it is as clear as the sky that the objection of the AO expressed before me during the hearing with him on 26/03/2015 that the order of the Hon'ble ITAT may not J6e followed is not sustainable in the eye of law. The subordinate appellate bodies are required to follow the decision of the higher bodies irrespective of the fact that their decisions are contested before any High Court. Aside from the above, it is deemed meet to add at this stage that in income tax appeal evidence on any matter that has happened up to the time of the actual hearing of the appeal may be received, provided such matter has relevancy to the assessment year to which the assessment or reassessment under appeal relates (Minister of National Revenue V Pawluk - 1955 CTC 369, Kullick Nixon & Co. Vs CIT 1967 66 1TR 714 SC) ....
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...., 671 (HL) Elson Vs Price Tailors Ltd 1963 40 TC, 671 Chd).' In the light of the aforesaid discussion of the matter, I am not at all impressed by the oblique suggestions of the AO that the appeal should be dismissed merely by reason of the fact that appeal was preferred against the findings of the Hon'ble ITAT, New Delhi by the department before the Hon'ble High Court of Delhi in the case of the substantive assessee, Mr. SKG. Not prepared to be pinned down by the dik-tat of the AO, I proceed to put the lid on the case for the time being as per the principles of judicial discipline. Relevant it is to add that a subordinate authority cannot dictate, as was mechanically done here as to how or in what manner or in whose favour I should exercise my power when certainty was available and known in the instant case in the form of concrete findings of fact of the Hon'ble Tribunal, in the appellant's substantive case. Therefore, I have no hesitation in allowing subject to the outcome of future litigations the grounds of appeal 3 & 4 of the appellant despite the reservation of the AO expressed during the hearing held with him on 26.03.2015, which is a recorded fact." 10. ....
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.... has not earned anything and has worked free for Mr. Sanjay Kumar Garg for carrying on such a huge transaction of sales. He further stated that the learned CIT - A, has not at all considered this fact, while deleting the above addition. 13. The learned authorized representative submitted that total amount of cash deposit has been considered in the hands of Mr. Sanjay Kumar Garg and the coordinate bench has estimated the commission income on such cash deposit on the accommodation entry operation of Mr. Sanjay Kumar Garg. He therefore stated that original addition has been made by the learned AO in the hands of the assessee on protective basis and in the hands of Mr. Sanjay Kumar Garg on substantive basis, and now as the coordinate bench has already decided the issue in the hands of Mr. Sanjay Kumar Garg, by charging accommodation entry commission of 0.2% in his hands, there is no scope for any addition in the hands of the assessee. He further relied on the decision of the coordinate bench in case of Mr. Prashant Agarwal wherein the coordinate bench has decided the identical issue with respect to the addition of commission as well as the penalty. He submitted a copy of the decisio....
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.... his inability to do so. Furthermore it was not found that what is the amount of gross receipts for computing commission income in the hands of Mr. Sanjay Kumar for assessment year 2004 - 05 as there is no information available in the order of the coordinate bench, Whereas in the hands of assessee the total gross receipt was shown at 13,48,58,000/-. Therefore, we set aside this issue back to the file of the learned assessing officer to verify the amount of gross receipts deposited in the bank account of the assessee , with the amount shown in the hands of Mr. Sanjay, Garg as amount deposited in Suraj enterprise. If the amount deposited is reconciled, with the amount of deposited in the hands of Mr. Sanjay Kumar Garg for the respective years then no addition is required to be made in the hands of the assessee. In case if it is found that the amount deposited in the bank account of the assessee is much more than the amount shown by Mr. Sanjay Kumar Garg as amount deposited in bank account of M/s Suraj enterprise for working out his commission income, then it is apparent that no addition is made in the hands of Mr. Sanjay Kumar Garg on that gross receipts. Therefore to that exte....
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.... for statistical purposes. 18. ITA number 3931/del/2015 and 3932/del 2015 has been filed by the assessing officer against the order of the Commissioner of income tax (appeals) - 16, New Delhi or assessment year 2004 - 05 and 2005 - 06, wherein the penalty levied by the learned assessing officer of Rs. 4,49,22,426/- and Rs. 9,89,98,390/- respectively for both the years are deleted. Therefore, the learned assessing officer being aggrieved with the order of the Commissioner appeals is filed appeal before us. 19. It is the contention of the learned departmental representative that in the present case the assessee is found to be an accommodation entry provider and has deposited huge cash in his bank account as well as issued various bills in the form of accommodation entries. The income has been taxed in the hands of the assessee based on those accommodation entries and therefore the assessee has camouflaged fictitious credits in his books of accounts as sales. He therefore submitted that the learned assessing officer has held that that assessee has concealed income of the assessee and therefore penalty has been levied. He further submitted that the learned Commissioner of income ....
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.... be chargeable to tax in whose hands. As per the decision of the coordinate bench in the case of Mr. Sanjay Kumar Garg, it has been held that the income shall be chargeable to tax on the gross receipts in the hands of Mr. Sanjay Kumar Garg at appropriate percentage of 0.2%. Therefore, apparently there is no income chargeable to tax in the hands of the assessee. Furthermore the addition is also been made in the hands of the assessee on protective basis. There cannot be any penalty of concealment where the income is charged to tax on protective basis. Though protective assessment is not specifically provided, the Supreme Court in Lalji Haridas v. ITO [1961] 43 ITR 387 had held that such assessment is not barred. This was followed in Bhatia Motor Stores v. CIT [2007] 288 ITR 31 (MP). However now the issue is whether the penalty in the case of protective addition can be levied under section 271 (1) (c) of the act or not. Identical issue has been considered by the Hon'ble Gujarat High Court in case of 49 taxmann.com 539 in case of Bhailal Manilal Patel V CIT where it has been held as under:- "5.6 Under the circumstances, unless and until the substantive assessment is made and f....