TaxTMI 
TaxTMI 
2025 (3) TMI 881
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....ansaction ? (b) Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in restricting the addition to the commission income at 0.15% without considering that the material found during the course of search clearly established that the net commission charged by the assessee group of companies varied between 1.5% and 3.5% ?" Brief Facts : 2. The petitioner is a company formed and registered under the Companies Act, 1956. 3. On 29 August 2009, return of income was filed by the respondent-assessee declaring 'NIL' income. The said return of income was selected for scrutiny assessment by issuing notice under Section 142 (1) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). 4. On 28 December 2011, an assessment order under Section 143 (3) was passed assessing the income of the respondent-assessee at Rs. 10,73,52,550/-. In the said order it is stated that the respondent had prepared profit and loss account and filed tax audit report. In the assessment order, an addition under Section 68 of the Act was made amounting to Rs. 10,73,52,553/- under the head 'Income from other sources'....
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....ppeals) has erred in law and in facts in directing to assess the gross receipts 0.37% on the condition that the appellant shall furnish the names & addresses of the beneficiaries and failed to appreciate the facts that the records including names and addresses of beneficiaries are in possession of Income Tax Department and no copy of computerized documents including the names & addresses were furnished to the appellant 5. The learned Assessing Officer has erred in law and in facts in levying interest u/s. 234B and 234C of the Act. 6. The appellant craves leave to add to, alter, amend and / or delete in all the foregoing grounds of appeal. 8. On 30 May 2017, the Tribunal disposed of the appeal. In para 11 of its order, the Tribunal reduced the rate of 0.37% to 0.15% by merely following its own order for earlier assessment years. 9. It is on the above backdrop, that the present appeal is filed by the appellant-revenue. Submissions of the appellant-revenue : 10. Mr. Suresh Kumar, learned counsel for the appellant-revenue, submitted that since the respondent-assessee did not give the details of the credits appearing in its disclosed and undisclosed bank ac....
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.... of his submissions, Mr Sharma relied upon the decision of this Court in the case of CIT (Pune) Vs Bhaichand H. Gandhi (1983) 141 ITR 67 and in the case of sister concern of the group company of the respondent-assessee in the case of PCIT Vs Alag Securities Pvt. Ltd. Income Tax Appeal No. 1512 of 2017 for the assessment year 2003-04. No other submissions have been advanced by the learned counsel for the respondent-assessee. Analysis and Conclusion : 13. We have heard learned counsel for the appellant-revenue and the respondent-assessee. 14. Section 68 of the Act as it existed for the assessment year 2009-10 reads as under: 68. Cash credits Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 15. Before we delve into the issues raised in the present appeal, it is important to reproduce the statement of the Director of the respondent-assessee on....
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....peal to the conscience of the Court. 19. Before the Assessing Officer, the respondent-assessee has not made any submissions backed by any document to show that the credits appearing in the bank account for AY 2009-10 have been assessed in the hands of the beneficiaries and, therefore, no addition should be made. If that be the case, we cannot accept the submission of the respondent-assessee that the amount added is included in the assessment of the beneficiaries and, therefore, same cannot be added once again in the hands of the respondent-assessee. There is no basis for such a submission made by the respondent-assessee, nor is it stated so before the Assessing Officer or the Appellate Authorities. Such a factual submission for the first time before this Court in a third appeal by oral argument across the bar cannot be permitted. 20. The CIT(A) has adopted a fair approach by stating that if the respondent-assessee identifies the beneficiaries, then the rate of commission adopted should 0.37% of such identified beneficiaries and if the respondent-assessee fails to identify the beneficiaries, then in that case, the sum credited in the bank accounts would stand confirmed under S....
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....nd therefore, the statement is made in that capacity. In the said question, the respondent-assessee has admitted that they are engaged in the business of providing accommodation entries by charging a commission of 0.15%. In answer to question No.7, the respondent-assessee admitted that in so far as 3321 cases are concerned, they do not have the details of the customers. Thereby, the respondent-assessee has admitted that they are not able to explain the source of credits appearing in its bank statements. It is important to note that the respondent-assessee has executed transactions of crores of rupees to accommodate various parties. Still, many of these beneficiaries' details are unknown to the respondent-assessee. This is something which this Court cannot accept. 24. In our view, such an explanation cannot be accepted more so from the respondent-assessee company who is claiming to have been engaged in the business of providing accommodation entries where crores of rupees are deposited and withdrawn. If the respondent-assessee does not have the details of the beneficiaries, then we fail to understand how the money were deposited in the bank accounts of the respondent-assessee....
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.... not the case before us. The Learned counsel for the respondent-assessee, during the hearing handed over an order giving effect to the ITAT's order for the AY 2003-04. We fail to understand how the said order giving effect for AY 2003-04 is of any assistance for considering the appeal for AY 2009-10 and more so when the same does not show that the sum added in the assessment has been assessed in the hands of the beneficiaries fot AY 2009-10 with which we are concerned. 29. Mr. Sharma, learned counsel for the respondent-assessee, thereafter relied upon the decision of the Co-ordinate Bench of this Court in the case of Bhaichand H. Gandhi (Supra) in support of his submission that bank statement would not constitute 'books of an assessee' and therefore, the provisions of Section 68 which requires the credits in the books of an assessee are not attracted in the present case and therefore, no addition is required to be made based on credits appearing in the bank statements. He submits that since the respondent-assessee is engaged in illegal business, he is not maintaining any books of account or any books for that matter and therefore, even if the provisions of some other....
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.... No. 9, he has admitted that the contra entries appearing as entries in favour of beneficiaries. These contra entries are the entries which admittedly are prepared by Mr. Choksi, director of the respondent-assessee. In answer to question No. 19, the director of the respondent-assessee has further admitted that whatever details he has, the same, are reflected in the CDs and to the same effect is answer to question No. 23. 32. On a reading of various answers given by Shri. Choksi, director of the respondent-assessee, it is admitted that books of accounts are maintained by the respondent-assessee and from those very books of accounts the revenue has extracted the data by copying the same on 2 CDs. This statement has been given on oath, and counsel for the respondent-assessee has heavily relied on this very statement in his submissions before this Court. In our view, based on above Shri. Choksi, director of respondent-assessee has admitted that the respondent-assessee has maintained the books of accounts. Therefore, in our view, the contention of the respondent-assessee that an addition cannot be made under Section 68 on the ground that the respondent-assessee has not maintained boo....
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....s prescribed limit, then the same are required to be audited under Section 44AB of the Act. In the present case in the assessment order it is stated that tax audit report is filed by the respondent-assessee. 35. In our view, the respondent-assessee cannot be heard to say that the provisions of Section 68 cannot be made applicable to its case because the respondent-assessee does not maintain the books. The person who is required to maintain the books of accounts and does not maintain books of account cannot turn around and contend that because he has not maintained books or books of accounts, provisions of Section 68 which requires credits in the books of an assessee cannot be made applicable. It is settled position that the person cannot take the benefit of its own wrong or violation. When it comes to provisions of Section 68 of the Act, such a contention which is self-defeating and which will make the provision of Section 68 otiose cannot be accepted. If the contentions of the counsel for the respondent-assesses are accepted, then it will amount to providing escape route to an assessee who is unable to explain the credits but still goes scot-free by arguing that since although ....
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....ced in respect of these transactions nor the amounts have been confirmed from those persons, who are shown to have lent them. The authorities below have therefore, rightly held that nature of the transaction has not been properly shown by the appellant. [Emphasis supplied] 37. We do not accept the submissions of the respondent-assessee that because he is engaged in the business of providing accommodation entry, revenue cannot assess the credits appearing in its bank account which are the money deposited by its customers. The respondent-assessee, to succeed in this submission, must give verifiable details of these customers; only then can the revenue verify whether the credits appearing belong to such customers. The CIT (A), therefore, gave the relief in para 4.3 by observing that an estimate of income will be made only in case of identified beneficiaries and balance credits would be assessed under Section 68 of the Act. 38. The respondent-assessee cannot contend that they will not give details of beneficiaries, but at the same time, credits cannot be assessed in its hands. We wonder how the revenue can find out to whom the credits belong to unearth unaccounted income....
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....Act, 1949. 42. In answer to question no.15, Shri Mukesh Choksi through the respondent-assessee company has admitted that the bills/vouchers and other documents given for providing accommodation entries are not genuine. This would mean that Shri Choksi has admitted that he was engaged in the offence of commission of 'fraud'. If so, and based on such fraud, it is necessary to enquire whether he has committed an offence under the Indian Penal Code/BNS, 2023. We, therefore, direct that a necessary investigation be conducted by the concerned police station against Shri Mehul Choksi to ascertain the offence, if any, committed under Indian Penal Code and the consequent action. 43. Shri Choksi, in this statement, has also admitted that he has abetted in evasion of tax by various beneficiaries. He has also admitted that he cannot give details of the beneficiaries. Mr. Choksi has also admitted that by engaging in accommodation entry, he has engaged in the laundering of money. Therefore, in our view, the authorities under the Prevention of Money Laundering Act, 2002 should also investigate Shri Choksi on these activities. 44. This Court would also like to know from the Chief ....
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....t-assessee. The revenue has not challenged the said rate of 0.37% by filing an appeal to the Tribunal. However, the respondent-assessee did challenge challenge the adoption of this rate of 0.37%. It was the contention of the respondent-assessee that the appropriate rate should be 0.15%. The Tribunal followed its earlier order and opined 0.15% to be applied as commission. 49. In our view, what rate should be adopted as commission would be a pure question of fact and therefore, insofar as the rate of commission with respect to those credits which are identified by the respondent-assessee is concerned same should be taken at 0.15%. 50. To conclude, we answer question (a) in favour of the appellant-revenue and against the respondent-assessee. Insofar as question (b) is concerned, we answer the same against the appellant-revenue and in favour of the respondent-assessee. Consequently, we reverse the Tribunal's order and restore para 4.3 of the CIT (A)'s order dated 4 October 2012 subject to retaining the rate of commission at 0.15 % as adopted by the Tribunal. 51. The appeal is allowed in the above terms. 52. Registry is directed to forward copy of this order to ; ....
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....ities Pvt. Ltd. (vii) M/s Richmond Securities Private Ltd. (now known as M/s Mahasagar Securities Pvt. Ltd.) (viii) M/s Kayee Share Broking Pvt. Ltd. Q No.3 During the course of search action under section 132 of the I.T.Act-196 in your case and also in your group cases on 25.11.2009, it was found that you were running network of bank accounts in the names o various companies. These bank accounts were used for providing accommodation entries. The data in respect of bills / entries providec has been extracted by the Investigation Wing for the F.Yrs.2002-03 t 2019-10. Please confirm the data. 113 पी. à¤à¤¸. नाईक / PIK आयकर उप आयà¥à¤•à¥à¤¤ के 46, Dy. Commissioner of ince-tax bes 16.0/2013 Document 2 Ans:19 Q No.4 Ans: Q No.5 Ans: Q No.6 Ans: Q No.7 Ans. Q No.8 Ans: Statement u/s 131 of Shri Mukesh Choksi Yes, I confirm that the data shown to me on two CDs has been extracted by the Investigation Wing from my books of accounts. Please explain how you have arrived at your income on acco....
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....cument 3 Q No.9 Statement u/s 131 of Shri Mukesh Choksi From the information extracted, it is observed that there are 409 entries which are having your addresses i.e. Block-H, Shri Sadashiv Society, 6th Road, Santacruz (E), Mumbai-400 055. Please explain why you have www.allowed to use your address for 409 accommodation entries. Ans: I have gone through the entries and clarify that these represent account created for passing contra entry in favour of beneficiaries. Suppose Mr. A want bill of profit so the corresponding contra entry will be in a dummy name. Q.No.10 I am showing you some of the beneficiaries identified from the bank account of M/s Alliance Intermediaries Network with Axis Bank, P.M.Road Branch. The names are (i) M/s Om Corporation (ii) Ms.Chandrakant Mandowara (iii) M/s Netra Enterprises (iv) Mr.Satish Mandowara (v) M/s Garnet Construction Ltd. Please explain the nature of transactions with these parties. Ans: The name of shri Satish Mandowara appearing in the list is one of our sub broker. This particular bank account was operated by him and remaining parties are beneficiaries of the accommodation entri....
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....tarted doing this activity of accommodation entry since 2000. I was surveyed in the years 2002, 2006 and searched on 25.11.2009. Q.No.15 Do you mean to say that bills/ vouchers, other documents given are not Ans: genuine? Yes, I say that bills given are not genuine because bills have been issued without any actual transaction taking place. Q.No.16 Do you also admit that these people ought to have paid tax as the documentation is false and inaccurate? Ans: I agree that the beneficiaries should have paid tax. However, I cannot comment on the extent of the tax liability of the beneficiaries of these entries. Q.No.17 As a Chartered Accountant would you admit that these parties have evaded tax and now Department can take action against them and collect taxes? Ans.: I do not know the nature of accommodation entries made in their books of accounts. It is open to the Department to make assessment in the No case of the beneficiaries. I confirm that the transaction done through me and my group companies are not true as these are fully accommodative fictitious entries. Q.No. 18 Ans.: Please show cause as to how you ....