TaxTMI 
TaxTMI 
2023 (11) TMI 1360
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....961 [hereinafter referred to as the "Act"]. 2. Since, the issue involved in all the appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order for the sake of convenience and brevity. The grounds as well as facts narrated in ITA No. 445/SRT/2023 for AY. 2018-19 have been taken into consideration for deciding the above appeals en masse. 3. The grounds of appeal raised by the assessee in "lead" case in ITA No. 445/SRT/2023 for AY. 2018-19 are as follows: "The appellant prefers an appeal against an appeal order passed by Ld. Commissioner of Income Tax (Appeal), Surat dated 04/05/2023 on following amongst other grounds each of which are without prejudice to each other:- Additional Grounds of Appeal 1.0 On facts and circumstances of the case and in law, the assessment order passed u/s. 143(3) dated 30/03/2022 is bad in law, since had been passed beyond the limitation period prescribed u/s. 153(1) read with Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 expired on 3 0/09/2021; Other Grounds of Appeal 2.0 On facts and circumstances of the case and in ....
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....rough diamond imported by the assessee company having declared value of Rs. 64,59,14,875/- were valued by a panel of 4 members at Rs. 45,12,589/- on 11.07.2018. In the report, it was also mentioned that the average rate of Rough Diamond at the time of import into Hong Kong as per Import KPC Nos. 1611374 dated 03.10.2016 was US$ 1.2 per carat and that as per Import KPC No. HK1611107 dated 05.08.2016 was US$ 3 per carat whereas the import of rough diamond by the assessee company was ranging from US$ 424 per carat to 2367.7 per carat. On the basis of this, further inquiry was carried out to identify the parties from which, the company received funds which in turn pumped out from the country. During such investigation, it was observed that web of shell/no-means companies were opened in different layers for routing money and for camouflaging the same as accounted money. Considering this, the investigation further deepened to identify the beneficiaries at various layers. During investigation by the Assessing Officer, summonses were issued to the directors of the assessee-company and related parties who have huge turnover and showing very less income below for appearin....
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....or ascertaining the beneficiaries of the transactions were either unserved or in some cases the summons were served but none appeared in response to the said summons. During investigation, 117 companies were identified which were involved in importing overvalued diamonds and making outward remittances of Indian currency to foreign countries which, included bringing unaccounted money into banking system. The AO from page 6 to 12 of the assessment order, has reproduced the details of 117 concerns with whom the appellant has made purchases and sales and all the transactions with the said concerns are of accommodation entries. Accordingly, the AO issued show cause notice dated 07.06.2021 to the appellant wherein the investigation done in various group companies of Mr. Deepak fain, M/s Surya Diamonds Pvt. Ltd., M/s Sanmati Gems Pvt. Ltd., M/s Abhinandan Diamonds Pvt. Ltd., M/s Marudhar Diamonds Pvt. Ltd. and M/s Sidhant Gems Pvt. Ltd., which all were in the business of providing accommodation entries to show cause as to why the transactions of the appellant should not be treated as providing of accommodation entries without there being any actual transactions of purchases, sales, loan a....
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....and salary expenses of Rs. 5,80,000/-. Hence, the AO came to the conclusion that though the said 2 parties confirmed the sales / purchases shown by the appellant but on the basis of the details furnished, it could be reasonably be presumed that the said 2 concerns had no real business activities and were in the business of providing accommodation entries. Accordingly, the AO rejected the books of accounts of the appellant as provided in Section 145(3) of the Act as the books maintained did not provide any satisfaction relating to correctness and completeness of the accounts. After rejecting the books of accounts of the appellant, the AO estimated the income of the appellant @ 0.5% being entry operating commission and made the addition of Rs. 9,02,46,425/- being the profit of Rs. 9,13,57,008/- reduced by the returned income of Rs. 11,10,583/-. The AO further made an addition of Rs. 7,19,60,390/- as interest income earned on loan and advances as shown in the P&L Account. 8. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT (A) who has partly allowed the addition made by the Assessing Officer, observing ....
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....14/MUM/2018 0.05% NIL 0.75% c) Rajendra P Jain ITAT Mumbai dt. 03.05.2019 (3 appeals) ITA No. 296 to 298/MUM/2018 0.05% NIL 0.5% 7.11 Thus considering the decisions of various Benches of Hon'ble ITAT, I am of the opinion that 0.05% of the total purchase and sales turnover (the Hon'ble ITAT has held that the commission to be in the range of 0.02% to 0.05%) can be estimated as the gross commission earned by the appellant in the business of providing accommodation entries of purchase and sale. The AR of the appellant argued that the commission should be charged only on sales and not on purchases. But I am of the opinion that the entry providers get commission for providing of entries of purchases as well as sales separately from the beneficiaries and hence, the commission has to be worked out on both purchases and sales. Similarly, the commission on loans and advances has to be worked out being a percentage on loans outstanding as on the last day of the FY instead of the interest income shown in the P&L Account as taken by the AO, The interest income cannot be taken as the income of the appellant as it has been held that even the loans and advances are not actu....
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.... Counsel argued that assessee filed the return of income under section 139(1) of the Act on 24.10.2018. The notice under section 143(3) of the Act, was served on the assessee on 22.09.2019. The Ld. Counsel pointed out that time limit for completion of the assessment under section 153(1) was on 30.09.2020 (that is, within the eighteen months from end of assessment year in which the income was first assessable). The Ld. Counsel stated that as per last notification dated 25.06.2021 under taxation and other laws relaxation and Amendment Act, 2020 (TOLA). The extended time limit for completion of the assessment was upto 30.09.2021, therefore Assessing Officer must have passed the assessment order up to 30.09.2021. However, the assessment order was passed by the Assessing Officer under section 143(3) of the Act on 30.03.2022, which is outside the time limit prescribed by taxation and other laws relaxation and Amendment Act, 2020, therefore assessment order itself should be quashed. 12. On the other hand, ld. CIT-DR for the Revenue submitted that the Department made the reference to FT & TR Division, therefore one year more time is available with the Department for completion of assessme....
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....uthority enclosed for kind reference) for obtaining the transactions related information. (v) In the light of reference made to FT&TR, the period of limitation for completion of assessment was to be computed by excluding the period mentioned in explanation 1(x) of the Sect. 153 of the Act, For the sake of ready reference the relevant explanation 1(x) is reproduced below :- "Explanation 1. - For the purpose of this section, in computing the period of limitation- (i) (ii) ....... (iii) ....... (iv) ...... (x) the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or 90A and ending with the date on which the information requested is last received by the Principal Commissioner or Commissioner or a period of one year, which is less, or (xi) ...... (xii) ...... (xiii) ...... shall be excluded." (vi) It is further submitted that the response/information solicited from the FT & TR in respect, of transactions with the foreign entity executed by the assessee was received in partial in this office on 27.12.2021 (copy of ack....
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....tion to this, the ld. CIT (A) has provided the relief in respect of estimated expenditure at the rate of 25% of gross commission which comes to Rs. 38,19,853/-, therefore the order of the ld. CIT (A) is on commercial principles that the assessee was earning commission on purchase and sale and therefore the addition made by the Assessing Officer ought to be upheld. 15. On the other hand, on merit, Ld. Counsel for the assessee submitted that Assessing Officer made the estimation of income taking into account purchase and sale both which are not justifiable. The ld. CIT (A) has also considered both elements that is purchase and sale and made the estimated addition at the rate of 0.05% which is hot acceptable by applying the commercial principles. The Ld. Counsel pointed out that the profit is always linked with sales, therefore 0.05% should be estimated on sales rather than on both the segments (purchase and sale). Therefore, Ld. Counsel contended that the estimated addition may be made either on purchase or on sale, but not on aggregation of both. Therefore, finally Ld. Counsel contended that estimation should be made either on purchase on sales and if the Tribunal accepts the ....
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....re the assessing officer on 31.03.2014. When search was conducted the assessment for 2008-09 to 2012-13 were not pending and were already concluded either under section 143(3) or 143(1) and hence no income can be assessed unless there is incriminating material found during the course of search action. The A.O. merely relied on the fact that no stock of the diamonds was found at the time of search. The goods were given for approval to customers for sales. The assessing officer overlooked the entire documentary evidences. The Ld. AR for the assessee read over the written submissions filed before Ld. CIT(A). On merit the Ld. AR of the assessee submitted that the assessee was doing the real business and has shown business income while filing return of income. The ld. AR for the assessee submits that Kolkata Tribunal in Manoj Begani Vs ACIT (ITA No. 932,933,935 936/Kol/2017), which is case of beneficiary of the alleged accommodation entry from Rajendra Jain, deleted the entire additions. In other words the ld. AR for the assessee impressed that the business model of Rajinder Jain was accepted as genuine. In alternative claim the assessee claimed that he has already included the com....
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....ss premises as well as residential premises and survey on their employee it was admitted by all the person and family members and relatives that they were working for the assessee. Not a single piece of diamond was found from any of the business or residential premises of the assessee. The ld. CIT-DR for the revenue further submits that while recording statement of the assessee, he was confronted with various emails extracted from his computers. The assessee clearly admitted that he was receiving commission on value of import at the rate of 0.2% from the real importer who route the transaction through his paper concern. It was also disclosed that on entry of unsecured loan, he received commission in the range of 0.25% to 0.5%. The AO on the basis of his statement, incriminating evidence found in the form of statement of account recovered from the pen drive and on post search inquiry the assessee was served with the notice under section 153A to file his return of income for assessment year under consideration. The assessee filed return of income in response to the notice under section 153A, however, no additional income was offered by the assessee, despite recovery of huge incrimina....
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....ssessing officer further noted that the statement of Sachin Pariekh proprietor of Arihant Export, director of Karnawat Impex Pvt. Ltd & Moulimani Impex, Manish Jain (prop of Kalash Enterprises, Director of Kriya Impex Pvt. Ltd and Karnawat Impex Pvt. Ltd.) and Anoop Jain (Prop of Adi Impex) was recorded during search. The Assessing Officer (AO) on the basis of statement of Sachin Parikh, Manish Jain and Anoop Jain in wherein they admitted that all they were working on remuneration with Rajinder Kumar Jain (assessee). The AO also held that during recording statement of assessee, in Question No. 15, the assessee was asked to explain the modus operandi of his business. The AO prepared the diagram of modus operandi disclosed by the assessee. The AO on the basis of incriminating material gathered during the search action and on the basis of statement of Rajendra Jain and his associates held that all the business concerns of the assessee were merely doing paper transaction, instead of carrying any real business, those concern were doing of maintaining 'books of accounts' and do not carry any actual or physical business of diamonds. It was held by AO that the actual importers of roug....
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.... CIT (A) noted that assessee is Director in various companies/partners in various firms and also proprietor of a firm, the business of all firms and companies are controlled by the assessee. During the search no physical stock of diamonds was found, there were numerous e-mails including some e-mail found and seized during search clearly proved that the real beneficiary of importer of diamonds were different then the books, there were also e-mails which prove that the person wanting accommodation entry were approaching the assessee and his group, the correspondence of orders were found not placed by the assessee and his group to the foreign parties. Besides, books of account of various concerns was maintained by assessee, which the assessee himself said being run by him in the name of various persons, which he able to get them to his residence from Surat, during the search though Sachin Parikh, who is his accomplice. A pen drive containing accounts from various concerns including those where Rajendra Jain as per ownership had no interest was also provided by the assessee. All these facts and evidence clearly prove with the corroborative evidence recovered during the search action th....
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....oviding entry, which he himself disclosed during the search action that he learnt all this business module of providing accommodation entry from his ex-employer namely Ratanlal Jain. The said retraction is filed for the first time before AO after gap of 12 months period. The reliance in case Manoj Begani Vs ACIT (supra), passed by Kolkata Tribunal which is case of beneficiary of the alleged accommodation entry from Rajendra Jain, is not helpful to the assessee. Here in the present case, there is clear admissions of the assessee about the entire business affair carried out by him with his associate for providing bogus entry, mere obiter in case of beneficiary by the Coordinate bench, will not absolve the assessee from his own admission. The finding of Tribunal in Manoj Begani vs. ACIT(supra) is based on the facts and evidences produced by that assessee. Therefore, in view of the abovesaid discussions, we are in full agreement with the finding of ld. CIT (A) that once the books are rejected the profit is to be estimated on the basis of commission rates and net profit is to be determined. We also affirms the finding of ld. CIT (A) that that when the actual business of assessee was imp....
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....smissed with similar observation. No order as to cost." 18. As the issue is squarely covered against the assessee by the decision of the Division Bench, in the case of Shri Rajendra Sohan Lal Jain (supra) and there is no change in facts and law and the ld. Counsel is unable to produce any material to controvert the aforesaid findings of the Division Bench (supra). We find no reason to interfere in the said order of the Division Bench, therefore, respectfully following the judgment of the Division Bench, we dismiss the appeal of the assessee. 17. Therefore, we note that since the issue is squarely covered by the judgement of Co-ordinate Bench in the case of Sanjay Kumar Choudhary (HUF) & Ors. (supra), and there is no change in facts and law. 18. However, we note that in the above referred judgment of Co-ordinate Bench of ITAT, Surat in the case of Sanjay Kumar Choudhary (HUF) & Ors. (supra), this Tribunal has sustained the addition only on sales / commission and not on both the elements i.e. purchase and sales, therefore we direct the Assessing Officer to estimate the addition at the rate of 0.05% of the total sales turnover of the assessee at Rs. 904,63,00,884/- which co....