TaxTMI 
TaxTMI 
2022 (6) TMI 1472
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..... In books of accounts of those concerns entries 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, w....
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....AT in the case of Shri Bhanwarlal Jain. 7. On the facts and in the circumstances of 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. Th....
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....rotective basis for the search period from assessment year 2008-09 to assessment year 2014-15. On further appeal 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 pro....
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....commission income is reproduced as under: 12. Working of Commission on various accommodation entries:- As it has been proved beyond doubt 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....
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....r: 9.2 On the issue whether the Assessing Officer has correctly made the addition of commission income in the hands of the Appellant "on protective basis", while substantive addition was made in the hands of Shri Bhanwarlal 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 A....
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.... idea that the search took place on 03/10/2013 whereas the said pen drive was not inventorized for 6 days. It has been submitted that the same could have been seized or inventorized on 04/10/2013 along with the inventory made for credit cards, bank account and jewellery etc. Further, the seizure of the 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 ....
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.... 9. So far as the other arguments are concerned, we find that that the assessee was running more than 70 benami concern under name-sake directors / partners /proprietors. These persons were acting as per the direction of the assessee against remuneration. Most of them, in their statement u/s 132(4), made admission 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. Th....
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....case of Sh. Bhanwarlal Jain, and further appeal has been preferred. The Ld. CIT(A) has ignored that he, being a appellate authority, is required to follow the decision of the higher appellate forum irrespective whether the department has preferred appeal again the same, unless the decision of that appellate forum has been stayed by the higher 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 r....
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....hat the present Appellant is one of the 70 entities. Hence, the claim of the Appellant that the appellant is a trader and the quantity tally of goods, submitted in the Tax Audit Report u/s 44AB of the Act completely tallies, has no meaning. These are all self - serving documents devoid of truth and genuineness and cannot be relied upon. 16. The Ld. CIT(A), 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 imp....
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....fter the finding of the Tribunal in the case of Sh. Bhanwarlal Jian, no addition can be made on protective basis in the case of the assessee, there is no question of further enhancement of said commission income from accommodation entry and that too on substantive basis. The enhancing of such commission income from accommodation entries of bogus sales is without any reasoning and 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. ....