TaxTMI 
TaxTMI 
TaxTMI 
2022 (6) TMI 1472
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....tries of import and export of rough and finished diamonds and manufacturing of finished diamonds from rough diamonds was shown. In search assessments for the period from assessment year 2008-09 to assessment year 2014-15, commission income from providing accommodation entries has been assessed on substantive basis in the hands of Sh. Bhanwarlal Jain and protective basis in the hands of those concerns through which such entries were provided. The assessee(s) before us in these five appeals are out of those 75 concerns. In the grounds raised in these appeals, the assessee has challenged confirming of protective additions and also estimation of gross profit in trading activity and also challenged additional commission income from accommodation entries on substantive basis. 1.1 In view of above common facts and circumstances and the common issue in dispute involved in these appeals, same were heard together and disposed off by way of this common order for convenience and avoid reputation of facts. Both the assessee and the Revenue agreed to take ITA No. 359/Mum/2022 as lead case and follow the finding in other cases, accordingly, firstly, we have taken ITA No. 359/Mum/2022 for adjudic....
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....f the case and in law, the Ld. CIT(A) erred in changing protective addition to substantive addition without issuing any show cause notice or opportunity of being heard to the appellant, which is in violation of section 251(2) of the Income Tax Act, 1961 and in violation of the principles of natural justice. 8. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in confirming the addition made by ld. AO, without providing any opportunity of cross examination, without any corroborative evidence and without providing copy of statements relied upon. 9. The appellant craves to add, alter, classify, reclassify, delete or modify any of the above grounds of appeal and requests to consider each of the above grounds without prejudice to one another. 2. Briefly stated facts of the case that the assessee filed return of income for the year under consideration on 23/09/2015 declaring total income of Rs. 30, 300/-. In the return of income filed, the income was declared from business of import, export and trading of cut and polished and rough diamonds. The assessment for the year under consideration was reopened by way of issue of notice under section 148 o....
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....peal by the assessee against the search assessments, the Ld. CIT(A) observed that while quantifying the commission income, various percentile rates were applied by the Assessing Officer on the amount of imports, bogus unsecured loan, bogus purchases etc, whereas no commission was quantified in respect of sales and therefore he accordingly for the search period from AY 2008-09 to AY 2014-15, worked out unaccounted cash commission on local purchases at a percentile of 0.02% and 0.075% on sales. 5. On the basis of the above finding of the Ld. CIT(A), the Assessing Officer reopened the assessment year under consideration i.e. A.Y 2015-16 in the case of the assessee. In the reassessment completed under section 147 on 25/11/2019, the Ld. Assessing Officer, concluded that assessee concern was controlled and managed by Sh. Bhanwarlal Jain and was engaged in providing accommodation entries of loans, purchase sales etc on his behalf. The relevant finding of the Ld. Assessing Officer is reproduced as under: 10. Final Conclusion: It has already been discussed and proved in the earlier assessment year that the Bhanwarlal Jain group is engaged in providing accommodation entry for bogus pur....
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.... that the assessee is not carrying out any genuine business of trading in diamonds but is solely used for giving accommodation entries by Bhanwarlal Jain and Family and assessee is only an associate. It may be pertinent to mention here that there is no denying the fact that assessee has to incur some day to day expenses like stationery, conveyance, office expenses and rent etc for earning the above commission income. As such, it would be just and proper, if a certain percentage of commission income on estimated basis is allowed to the assessee. Accordingly 10% of the commission income is considered as reasonable towards expenses for earning the said undisclosed commission income which would meet the ends of justice. Sr No. Nature of accommodation entry Amount of commission earned discussed above 1 Accommodation of Bogus Unsecured loan (On proportionate basis on Rs 1,62,14,243/- (@2.4% p.a) Rs.3.89.141/ 2 Accommodation of Bogus Purchases (0.075% of Rs.4,83.16,174/-) Rs.36,237/ 3 Accommodation of Bogus Sales (0.075% of Rs.3,42,17,419/-) Rs.25,663/ 4 Total commission Rs.4,51,042/ 5 Less: 10% of total commission as discussed above RS.45,104/ 6 Undisclosed Commi....
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....M. Jain, my observation is as under- 9.2.1 The Hon'ble ITAT, vide the above referred order in the case of Shri Bhanwarlal M. Jain, has given part relief in page no. 30 of the order, in the following manner- No. Nature of Transaction Estimation of the Hon'ble Tribunal in the case of Shri Bhanwarlal M. Jain 1 Import transaction by Shri Bhanwarlal M. Jain on behalf of others @0.02% 2 Accommodation entries of Bogus purchases @0.05% instead of 0.075% 3 Bogus unsecured loan @1% instead of 2.40% 4 Commission of Local purchases Nil against 0.02% 5 Expenses Allowed @25% 9.2.2 As. informed, Department has not accepted the above percentage estimated by the Hon'ble ITAT and further appeal is being preferred. Therefore, the estimation is not final. Hence, with due respect to the judgment of Hon'ble Tribunal and to keep the issue alive, the undersigned confirms the estimation made by the Assessing Officer, with respect to commission income earned by the appellant on bogus unsecured loan and bogus purchases as well as 10% of commission income for day-to-day expenses as mentioned in the preceding paragraphs, on protective basis. 9.2.3 It is further observed ....
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....pen drive was not made part of Panchnama annexure, officially drawn on 04/10/2013 and the admission about the same from his son Shri Rajesh Jain was extracted forcibly. 6. Going by the factual matrix as enumerated in preceding paragraphs, we find that the attitude of the assessee during the course of assessment proceedings was totally non- cooperative. In fact, 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 accou....
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....of those facts. They also made admission that they assisted / abetted the assessee in the business of providing accommodation entries. Their PAN Cards, IDs, blank signed cheque books etc were found at centralized premises. They were visiting the centralized premises to sign the blank cheque books as per the directions of the assessee. All these persons had 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....
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....her appellate forum. The Ld CIT(A) cannot confirm an addition on protective basis. He is required to decided the issue either way and cannot proceed with keeping an addition on substantive in one case and protective in other case that too even after a finding of the higher appellate forum i.e. ITAT. We accordingly, reject this approach of the Ld CIT(A) and set aside his finding on the issue on dispute. Respectfully following the finding of the ITAT in the case of Sh. Bhanwarlal Jain (Which has been extracted above), the protective addition made in the case of the assessee in respect of commission income from accommodation entries is deleted. The relevant grounds of the Appeal are accordingly allowed. 13. Ground No.3 of the appeal relates to addition of R. 35, 31,237/- for low gross profit declared by the assessee in trading activity, which is recorded in books of accounts. The Assessing Officer has made addition at the rate of 10.32% on the sales turnover of Rs. 3,42,17,419/- to compensate the low gross profit rate of the assessee. 14. The Assessing Officer held that gross profit shown from business activity recorded in books of accounts was lower as compared to other concerns of....
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.... however upheld the gross profit rate addition made by the Assessing Officer in para 11.3 of the impugned order, observing as under: 11.3 I am in full agreement with the findings of the Assessing Officer. When other group concerns of Shri Bhanwarlal M. Jain, claimed to be in the same business of trading in diamonds, in identical circumstances, have shown much higher gross profit, there is no reason for the Appellant to show such small prof it, »in the return of income. Hence, the estimation on the basis of comparables is justified. Moreover, the appellant has not found any lacuna in the comparison of results carried out by the AO. Thus, the addition of Rs. 35,31,237/- to the total income of the appellant, is confirmed. As such, the Grounds of appeal No. 8 and 10 of the appellant are dismissed. 17. From the impugned order of the Ld. CIT(A), we find that in one para he is treating the books of accounts and other details of quantitative tally in respect of trading activity as self-serving documents, devoid of truth and genuineness and therefore cannot be relied upon. On the other hand, he is confirming the gross profit rate addition made by the Assessing Officer for the said....
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....d totally unjustified. We reject this action of Ld. CIT(A). 21. The Ld. Counsel before us submitted that Hon'ble Tribunal in the case of Bhanwar Lal Jain, has duly considered the alleged commission on sales, but in absence of any such details before us, we are not adjudicating upon said contention of the Ld. Counsel. 22. The Ld. Counsel further submitted that Ld. CIT(A) has enhanced the commission income without providing any show cause notice to the assessee, which is in violation of the section 251(2) of the Act. The relevant part of the provision is reproduced as under: 251(2). The [Commissioner (Appeals) shall not enhanced an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. 23. In the impugned order there is no mention of any opportunity provided to the assessee by way of issue show cause notice, before making the addition and therefore this addition is unsustainable on the ground of violation provision of section 251(2) of the Act also. 24. Accordingly the ground No. 6 and 7 of the appeal are also allowed. 25. As the appeal of the assessee on merit has be....