TaxTMI 
TaxTMI 
2024 (5) TMI 214
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.... the Ld. Assessing Officer is bad in law as the conditions laid down under the Act for initiating reassessment proceeding us 147 of the Act have not been fulfilled. 2. On the fact and circumstances of the case and in law the Ld. CIT(A) erred in confirming the addition of alleged commission income arising out of alleged bogus unsecured loans, bogus purchases and bogus sales amounting to Rs. 5,73,082/- on protective basis without appreciating the fact that the same amount has been substantively added in the case of Shri Bhanwarlal Jain, thereby making the same addition in the hands of two assessees leading to double taxation. 3. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming addition of Rs. 63,40,432/- (being 8.05% of Rs. 7,87,63,131/-), on estimation basis, by treating genuine turnover of the appellant as bogus sales. 4. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming the addition of Rs. 34,22,589/- being the difference of preceding years Trade Payables and the current years Trade Payables, without appreciating the fact that the appellant had disclosed all the information re....
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....m the Investigation Wing, Mumbai that during the course of search carried out on 11.10.2013 u/s 132(4) of the Income-tax Act, 1961 (in short 'the Act'), at the premises of "Shri Bhanwarlal Jain" group , it revealed that he was engaged in issuing accommodation entries to others for bogus loans/sales/imports through entities controlled by him , including the assessee. Thus, in view of the information the assessee being one of the entity of Sh Bhanwar Lal Jain, the Assessing Officer recorded reasons to believe that income escaped assessment and reopened the assessment u/s 147 of the Act by way of issue of notice u/s 148 of the Act on 05.09.2018. In the assessment completed u/s 147 of the Act, the Assessing Officer treated the assessee as engaged in issuing accommodation entry bills and accordingly assessed the commission income on bogus unsecured loans/bogus purchase/sales etc. But along with the commission income, the Assessing Officer also assessed not only assessed the trading results appearing in the books of account but also enhanced the profit from such trading activity. Though the commission on loans/sale/purchase appearing in the books of the assessee was assessed in substanti....
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....antive basis in the case of Shri Bhanwarlal Jain and therefore, the Assessing Officer added part of the commission related to the assessee on protective basis. However, the Ld. CIT(A) was of the view that this estimation of the commission income was sub-judice and challenged by the Department before the higher appellate forum and therefore, to keep the issue alive , he sustained the disallowance made by the Assessing Officer. The relevant finding of the Ld. CIT(A) is reproduced as under: "10.2 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- 10.2.1 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....
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....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 that Commission income earned on Bogus sales does not form part of the Appellate Order of Hon'ble Tribunal. Hence, the estimation of Rs. 25,663/- @ 0.075% on the sales of Rs. 3,42,17,419/- is hereby confirmed on substantive basis. Thus, Ground of Appeal Nos. 3, 4, 5, 7 and 9 of the present ....
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....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 account maintained on the pen-drive pertained to various concerns, 70 to be precise, being managed and controlled by assessee group. The password of the pen drive was cracked with the help of software programmers. After decrypting the data, print outs were ....
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....isiting 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 being run by the group in a combined manner with a view to provide accommodation entries to various beneficiaries against commission. 10. So far as the retraction of the statement made by the assessee is concerned, we find t....
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....ective 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." 7.3 In above case, the Tribunal (supra) has held that ld CIT(A) being appellate authority is required to follow the precedent , which in operation at relevant point of time. Since, the issue in dispute in present case being identical, following the finding of the Tribunal in the case of Rare Diamonds Pvt. Ltd.(supra), the addition made on protective by the AO and sustained by the Ld. CIT(A) is deleted. The ground No. 2 of the appeal of the assessee is accordingly allowed. 8. The ground No. 3 of the appeal of the assessee relate to confirming the addition of Rs. 63,40,432/- being 8.05% of turnover of Rs. 7,87,62,131/-. Regarding the addition of Rs. 63,40,432/- the Ld. CIT(A) though ha....
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.... Since, the Appellant had declared a GP of 3.45%, the difference in GP percentage of 8.05 % (11.5 - 3.45) is added as income of the assessee for AY 2015-16. Accordingly, an amount of Rs. 63,40,432/- (8.05 % of Rs. 7,87,63,131), is added to the total income of the Appellant. 12.3 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 profit, 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. 63,40,432/- to the total income of the Appellant, is confirmed. As such, the Grounds of Appeal No. 8 and 10 of the appellant are dismissed." 8.1 We have heard rival submission of the parties and perused the relevant material on record. We find that the Ld. CIT(A) on one hand as held that the entity has been utilized by Shri Bhanwarlal Jain for issuing bogus accommodation entry bil....
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....te addition for the trade payables in terms of section 68 is not justified as held by us while adjudicating the ground No. 3 of the appeal. Accordingly the ground No. 4 of the appeal of the assessee is allowed. 10. The ground Nos. 5 and 6 of the appeal relate to the addition of the commission income and addition of the gross profit on estimation basis which we have already deleted and therefore, the ground Nos. 5 and 6 of the appeal are rendered merely academic and therefore, we are not required to adjudicate upon. 11. The ground No. 7 and 8 of the appeal relate to enhancement of the commission income. We find that the identical addition made in the case of Rare Diamonds (supra) has been deleted. The relevant finding of the Tribunal (supra) is reproduced as under: "20. We are of the opinion that when the Tribunal in the case of Sh. Bhanwar Lal Jain (supra) has considered the commission from accommodation entry on substantive basis, any addition if not considered in respect of such commission entry, same can only be made in the hand of Sh. Bhanwarlal Jain. When it is evident that after the finding of the Tribunal in the case of Sh. Bhanwarlal Jian, no addition can be ....