AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1433
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....olidated order. 3. At the outset, the ld. AR has submitted that the matter in ITA No. 978/JP/2025 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in the amount disputed. The ld. DR did not raise any specific objection against taking that said appeal as a lead case. Therefore, for the purpose of the present discussions, the case of the assessee in ITA No. 978/JP/2025 is taken as a lead case. 4. Before moving towards the facts of the case we would like to mention that the assessee has assailed the appeal for assessment year 2017-18 in ITA No. 978/JP/2025 on the following grounds; "1. On the facts, in the circumstances of the case and in law, the Ld. CIT (A) erred in not annulling the assessment order more so when the assessment proceeding completed u/s 153A r.w.s. 143(3) of the Act was bad in law, void-ab- initio, and deserves to be annulled for the reasons that (i) The show cause notice was not issued for the year under consideration and common show cause notice was issued for all the years....
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....r the case was assigned to Central Circle 2, Jaipur by the Pr. Commissioner of Income Tax, Jaipur-II, Jaipur by means of an order u/s 127 of the Act dated 25.04.2019. Notice under section 153A of the Act dated 16-07-2019 was issued through ITBA and served upon the assessee speed post on 19-07- 2019 requiring his to file a true and correct return of income as prescribed under Rule 12 of the Income Tax Rules, 1962 within 30 days of the service of the said notice. In response to the said notice(s), a return declaring an income of Rs. 3,84,870/- was filed by the assessee on 13-08-2019. In the return of income originally filed by the assessee u/s 139(1) of the Act on 14-07-2017 an income of Rs. 3,84,870/- was declared. However, in the return of income filed in response to notice u/s 153A of the Act no undisclosed income pertaining to the relevant year has been declared by the assessee. As claimed the assessee primarily derives his income from Business and Other sources. The proceedings of assessment of income were commenced by issue of notice u/s 143(2) of the Act on 23-10-2019. Subsequently notice u/s 142(1) dated 23-10-2019 was also issued to the assessee and information and detail....
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....unds contact him and then assessee contacts the persons, who are willing to provide funds and further that the assessee does such transactions both in cash and cheques. Based on these records, a statement showing month wise funds received and provided was prepared as under; S. No. Month Funds received from Parties Funds provided paid to Parties Financial Year 1 Jul-15 17800000 21930000 2015-16 2 Aug-15 18600000 13500000 2015-16 3 Sep-15 14300000 12400000 2015-16 4 Oct-15 13000000 9600000 2015-16 5 Nov-15 13900000 12450000 2015-16 6 Dec-15 13800000 12204000 2015-16 7 Jan-16 13900000 9300000 2015-16 8 Feb-16 14700000 10850000 2015-16 9 Mar-16 13650000 10650000 2015-16 TOTAL 133650000 112884000 2015-16 10 Apr-16 13400000 11880000 2016-17 11 May-16 15400000 10450000 2016-17 12 Jun-16 . 14500000 9400000 2016-17 13 Aug-16 14100000 10900000 2016-17 14 Nov-16 11800000 11600000 2016-17 15 Jan-17 12600000 12700000 2016-17 16 Feb....
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....aterial and that of the submission of the assessee noted that assessee involved in the business of finance brokerage and thereby routing accounted / unaccounted cash in lieu of commission. As claimed the transaction carried out through assessee has been found from three places; 1. Cash book seized from office of M/s. Uttam Chand Deshraj. Ld. AO noted that M/s Uttam Chand Deshraj has rotated its undisclosed cash through finance brokers in the market, assessee is one of the finance brokers. During various years the assessee has rotated funds of M/s Uttam Chand Desraj for the sake of commission. The details of funds rotated by him belonging to M/s. Uttam Chand Desraj for various years are as under: FY Amount of transaction made through assessee (Higher of wither receipt or payment) Brokerage Rs. Lacs (per month) @ 100 per Total Brokerage received during the year under consideration 2013-14 88,92,320 8,892 Rs. 1,06,704 2014-15 2,62,47,000 26,247 Rs.3,14,964 2015-16 4,73,77,000 47,377 Rs.5,68,524 2016-17 5,74,69,500 1 57,470 Rs.6,89,640 2017-18 2,23,74,144 22,374 Rs.2,68,488 2018-19 29,02,570 ....
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....to prove nexus to substantiate the same. Therefore, the brokerage earned by the assessee on the transactions carried out at (2) for the year under consideration has escaped taxation for an amount of Rs. 3,42,000/- and thereby the same was added to the total income of the assessee. (3) The assessee is involved in the business of finance brokerage. He rotates the funds of clients in lieu of the commission. In the assessment proceedings the assessee was requested to furnish the complete details of such transactions carried out by the him and was also requested to furnish the details of brokerage earned by him. The assessee was further requested to provide the details of parties whose funds have been routed by the assessee in lieu of brokerage. But the assessee made a complete denial to provide list of such parties. Therefore, the assessee has voluntarily chosen to be an accomplice in the tax evasion. Though the assessee has taken a plea that he has been involved in the business of finance brokerage only and his income is in the form of brokerage only. Therefore, the said brokerage only required to be taxed, and he should not be held liable for the funds of other parties which....
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....d during the search, the submission made by the assessee and made a considered conclusion thereafter, that the assessee charged brokerage/commission on the money lent of M/s Uttam Chand Deshraj and others to borrowers at the rate of Rs. 100/- on Rs. 1,00,000/- and during the course of search proceedings the transactions carried out by the assessee of this nature were found from three places and each of this transaction was discussed separately. I have gone through the statement recorded during search proceedings of the assessee wherein he has categorically stated that he earns a brokerage of Rs. 100/- per Rs. One lakhs of financing transaction. On this basis, the Id. Assessing Officer has worked out a chart from the seized documents and material available on record and has calculated the brokerage earned on these transactions by the assessee. The assessee has merely challenged the addition done by the AO and has not given any working from his side to correct any anomalies in the calculation, if any. I have considered the working of the AO to calculate the brokerage earned by the assessee and in the light of the above discussion and facts of the case, I do not find that it needs any....
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....submissions of the appellant are being discussed and decided as under :- This is consequential in nature, since the grounds of the other additions made have been adjudicated, this ground of appeal is not required to be adjudicated separately. Ground No. 8 9.1 The appellant has not added and altered any of the above mentioned ground of appeal. Accordingly, such mention by the appellant in its ground is treated as general in nature, not needing any specific adjudication and is accordingly treated as disposed off. 7. Feeling dissatisfied with the finding so recorded in the order of the ld. CIT(A), the assessee preferred the present appeal before this tribunal. To support the various grounds raised by the assessee, ld. AR of the assessee filed a detailed written submission which reads as under : Facts of the case: - 1.1 The assessee is an Individual and during the years under consideration he earned the brokerage income from finance business and other sources. In the years under consideration the assessee was carrying the business of finance broker in which the assessee's role was limited to as middleman in lending the funds of one pa....
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....he assessee along with date on which the funds were lent. (II) From the possession of Assessee :- Exhibit-AS-1 found & seized from the residence of the assessee at 3-Cha-4, Jawahar Nagar, Jaipur (for A.Y. 2017-18 to A.Y. 2019-20), which comprise the month wise summary of amount of cash loans, names of both the parties i.e. lender and borrower and dates etc. 3. Appeal of A.Y. 2014-15 to A.Y. 2019-20 (ITA No. 975 to 980/JPR/2025) submission on grounds of appeal. The assessee has raised three grounds in Form No 36 filed before Hon'ble Tribunal. In Ground No 1 legality of assessment has challenged and in Ground No 2 and 3 additions sustained on account of brokerage is challenged on merit. We are first giving our submission in respect of Ground No 2 and 3 of the appeal and since the issue is common in all appeals, therefore the common submission for all the years is being submitted. For reference base year is taken AY 2017-18. 3.1 Findings of AO: - Page 49 to 59 of order (AY 2017-18) 3.2 Findings of CIT(A): - Page 40 of his order (AY 2017-18) 3.3 Submission of Assessee: - 3.3.1 Chart showing addition ma....
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....ld AO on the basis of material seized from third parties i.e. M/s Uttam Chand Desh Raj and such material cannot be considered for making additions under section 153A of the Income Tax Act, as the provision requires incriminating material from the search conducted on the assessee. It is contended that no such addition could be made under section 153A based on documents seized from third parties. Reliance is placed on the following decision :- Trilok Chand Chaudhary Vs. ACIT ITA No.5870/Del/2017 ITAT, Delhi Bench G, New Delhi Date of order : 20/09/2019 Para 5.4 of the order. (ii) The department seized a cash books from the office of M/s Uttam Chand Desh Raj, which contain the entries of cash payment to assessee and entries of cash received from assessee on various dates. The Ld. AO tabulated these entries at Page 2-22 of assessment order. From the perusal of these entries, it is crystal clear that entries are relating to payment of cash to assessee and cash received from assessee. It does not have any narration or other particulars to show that these entries pertain to the loans given through the assessee. It is like a current account maintained by M/s Uttam Chand D....
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....swal Group situated at Flat no-404, Karan Upasana Residency, Peelwa Garden, Moti Doongri Road, Jaipur against which the Ld. AO tabulated the chart at his page no. 22 to 25 of his order and also calculated brokerage at page no. 51 of assessment order. The copy of the seized documents Annexure AS Exhibit 8 page No 8-9 seized from residential flat of Oswal Group is enclosed herewith. According to that seized page the total of loans advance is Rs. 4,45,00,000/ -. Whereas, as per cash book total payments to assessee by M/s Uttam Chand Desh Raj from A.Y. 2014-15 to A.Y. 2019-20 come to Rs 13,74,06,700/- and total receipts come to Rs 9,98,89,049/- meaning thereby, outstanding balance of Rs 3,75,70,651/ -. The total outstanding as per seized Annexure AS Exhibit 8 page No 8-9 is Rs 4,45,00,000/ -. The reason for difference is that one entry in the said seized paper is dated 12-05- 2010 of Rs 10,00,000/ -. Further, the seized cash book is from 13-09-2013 and entries from 01-04-2013 to 12-09-2013 are not in the seized cash book. However, the figure of Rs 3.75 crores very close to 4.35 crore which establishes that part of the funds given to the assessee by M/s Uttam Chand Desh Raj was utilized....
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....d on month to month basis. No any reason was given by the ld AO for this different treatment. Without prejudice to the above submission, it is submitted that even if the brokerage is calculated on month to month basis on the entries of cash book, the Brokerage amount would be as under :- A.Y. Brokerage estimated by Ld. A.O. Brokerage as per working submitted by assessee to CIT (A) Working available at PB Page 2014-15 1,06,704 10,193 197 2015-16 3,14,964 28,570 227 2016-17 5,68,524 61,146 293 2017-18 6,89,640 71,119 327-328 2018-19 2,68,488 25,111 360-361 2019-20 31,236 2,902 403 Total 19,79,556 1,99,041 3.3.4 Addition based on entries in seized documents Annexure AS Exhibit 8 page No 8-9 seized from residential flat of Oswal Group: - (i) It is admitted fact that the brokerage was calculated by ld AO on the basis of material seized from third parties i.e. AS Exhibit 8 page No 8-9 seized from residential flat of Oswal Group situated at Moti Doongri Road, Jaipur and such material cannot be considered for making additions under section 153A o....
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....hat. A.Y. Brokerage estimated by Ld. A.O. Brokerage as per working submitted by assessee to CIT (A) Working available at PB Page 2016-17 2,04,000 59,170 296 2017-18 3,42,000 3,05,585 330-331 2018-19 5,34,000 4,99,350 363-364 2019-20 5,34,000 2,22,500 406 Total 16,14,000 10,86,605 Thus, in worst case if any brokerage is estimated on the above-mentioned transactions, then the same should be estimated Rs. 10,86,605/- only as against to Rs. 16,14,000/- estimated by ld. A.O. in arbitrary manner. 3.3.5 The entire brokerage income was taxed without allowing the benefit of expenses etc. 1. Without prejudice to the submission given in forgoing paras and alternatively it is submitted that the Ld. A.O. taxed the entire brokerage receipts without allowing the due deduction on account of expenses incurred for earning such brokerage by ignoring the established and accepted position of law that each business receipts are subject to incurring of certain expenses, therefore the entire receipt cannot be taxed as income and due deduction of account of expenses should be allowed. The brokerage inc....
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....siderting the above submission the reworking of net income from unaccounted Brokerage is calculated as under :- AY On the basis of Documents seized from Oswal Group Uttam Chand Desh Raj 238, Purohit Pada, Brahampuri, Jaipur Documents seized from Oswal Group from Flat No.- 404, Karan Upasana Residency, Peelwa Garden, Moti Doongri Road, Jaipur Documents seized from the assessee at his residence Total Gross Brokerage estimated Estimated Expenses Net Undisclosed Income after set off of expenses Net Income after applying 8% of brokerage receipts 1 2 3 4 5 6 7 2014-15 0 12000 0 12000 288000 Loss 960 2015-16 0 16800 0 16800 316800 Loss 1344 2016-17 0 59170 0 59170 667680 Loss 4733.6 2017-18 0 305385 87430 392815 733440 Loss 31425.2 2018-19 0 4,99,350 146785 646135 828000 Loss 51690.8 2019-20 0 2,22,500 65535 288035 910800 Loss 23042.8 Total 0 1115205 299750 1414955 113196.4 (i) If setoff of estimated expenses is allowed against the estimated brokerage, then....
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....ring and rebutting the submission of the assessee and also without bringing out the conclusive evidence to prove the allegations to be correct. The Ld. Addl/Jt CIT also approved the assessment order in mechanical manner, without application of mind and without examining the above vital facts. The approval was granted u/s 153D of the Act was granted without any consideration of factual and legal position in proposed additions and without contents of incriminating material collected in search etc. has looked into. This approach of the Add./Jt CIT has ipso facto rendered the impugned approval to be a mere ritual or an empty formality to meet the statutory requirement and cannot thus be countenanced in law. Thus, the approval given in a mechanical manner cannot be considered as a valid approval and thus the assessment order passed in consonance to that in also bad in law and invalid. Now settled proposition of law is that prior approval of competent authority under section 153D of the Act is mandatory and same is required to pass rigor of the law, to show that the approval was granted after due consideration of the assessment record and it was not a mechanical approval. Grant ....
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....n'ble High Court had quashed the Assessment Order on the ground of inadequacy in procedure adopted for issuing approval u/s 153D of the Act by expressing discordant note on such mechanical exercise of responsibility placed on designated authority under section 153D of the Act. In view of above it is humbly submitted that because the assessment order is arbitrary, whimsical, capricious, perverse and against the provisions of law, facts of the case, based on surmises and conjectures, therefore the same deserves to be quashed. 5. Prayer of Assessee: - The humble assessee prays your honour kindly to delete the addition made by Ld. A.O and sustained by Ld. CIT(A) and allow the appeal of assessee. Pray Justice (CA Dr. Vijay K Goyal) FCA/AR Encl :- 1) Copy of Seized documents Annexure AS Exhibit 8 page No 8-9 seized from residential flat of Oswal Group 2) Trilok Chand Chaudhary Vs. ACIT ITA No.5870/Del/2017 ITAT, Delhi Bench G, New Delhi Date of order : 20/09/2019 3) Copy of Order of ITAT Jaipur in case of Gulam Farooq Ansari vs ACIT ITA No 776/JP/2015 Jaipur ITAT 4) Copy of order of ITAT Jaipur ....
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....erage on the amount of loan given in earlier years on account of collection of interest 1*12*0.01%) Brokerage on the amount disbursed during the year on account of loan disbursed during the year (3*0.1%) Subsequent brokerage on the loan amount which disbursed during the year on account of collection of interest (3*4 *. 01%) Total Brokerage of the year (5+6+7) Month in which loan given Amount No of subsequent months of the year during which the loan remained O/s after disbursement. 1 2 3 4 5 6 7 8 10,00,000 - - - 1,200 - - 1,200 10,00,000 Total Loan 0.00 Total of brokerage 1,200 - - 1,200 2.2 A.Y. 2015-16: - Amount of loan given in earlier years Amount of loan given during the year Brokerage on the amount of loan given in earlier years on account of collection of interest 1*12*0.01%) Brokerage on the amount disbursed during the year on account of loan disbursed during the year (3*0.1%) Subsequent brokerage on the loan amount which disbursed during the year on account of collection of interest (3*4 *. 01%) Total Brokerage of the year (5+6+7) Month in which loan give....
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.... August-16 10,00,000 7 - 1,000 700 1,700 September- 6 500 300 16 5,00,000 - 800 1,70,00,000 Total Loan 1,15,00,000 Total of brokerage 20,400 11,500 10,950 42,850 2.5 A.Y. 2018-19: - Amount of loan given in earlier years Amount of loan given during the year Brokerage on the amount of loan given in earlier years on account of collection of interest 1*12*0.01%) Brokerage on the amount disbursed during the year on account of loan disbursed during the year (3*0.1%) Subsequent brokerage on the loan amount which disbursed during the year on account of collection of interest (3*4 *. 01%) Total Brokerage of the year (5+6+7) Month in which loan given Amount No of subsequent months of the year during which the loan remained O/s after disbursement. 1 2 3 4 5 6 7 8 2,85,00,000 May-2017 1,10,00,000 10 34,200 11,000 11,000 56,200 June-2017 50,00,000 9 5,000 4,500 9,500 2,85,00,000 Total Loan 1,60,00,000 Total of broker....
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...., Ratna Sagar, MSB Ka Rasta, Johari Bazar, Jaipur 1 to 15 AO and CIT(A) 2. Copy of statement of Shri Sharad Kumar Choradia recorded during the course of search. 16 to 37 AO and CIT(A) 3. Copies of notices issued u/s 153A of the Act for A.Y. 2014-15 to A.Y. 2018-19 38 to 42 AO and CIT(A) 4 Copies of ITR and Computation of total income filed in response to notice issued u/s 153A of the Act of: - AO and CIT(A) i. A.Y. 2014-15 43 to 47 ii. A.Y. 2015-16 48 to 50 iii. A.Y. 2016-17 51 to 55 iv. A.Y. 2017-18 56 to 61 V. A.Y. 2018-19 62 to 66 5. Copies of ITR and Computation of total income filed u/s AO and CIT(A) 139(1) of the Act of: - i. A.Y. 2014-15 67 to 70 ii. A.Y. 2015-16 71 to 73 iii. A.Y. 2016-17 74 to 76 iv. A.Y. 2017-18 77 to 80 v. A.Y. 2018-19 81 to 84 vi. A.Y. 2019-20 85 to 88 6. Copies of P&L a/c, Capital a/c and Balance Sheet of assessee of: - AO and CIT(A) i. F.Y. 2013-14 (relevant A.Y. 2014-15) 89....
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....evenue relies on the documents which are found from third party and thereby the addition cannot be made in the 153A proceeding but the same is required to made as per provision of section 153C of the Act. Ld. AR of the assessee also submitted that in this case the approval of the case was given by the higher official in Mechanical way therefore, even on that aspect of the matter the order is required to be quashed. He also submitted that it is fact that no unrecorded assets or that of the jewellery were found. Even the cash found were considered as explained. Alternatively he submitted that the fair income is required to be computed in hands of the assessee looking to the fact that he has already incurred loss on account loan given through him became unrecoverable. 11. The ld DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). He submitted that it is a matter of fact that the assessee has not disclosed any income in the return filed in response to notice u/s. 153A of the Act. The ld. AO has done the assessment based on the documents seized and the explanation of the asses....
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....the jotting based on the current account found from M/s. Uttam Chand Deshraj and thereby in that process he chooses to pick up the higher amount out of payment and receipt while arriving the figure of brokerage income to be taxed. As is evident from the record that the current account shows the money given for deployment of the same for earning interest and received back either receipt of the loan amount back or that the same being not deployed. Record also reveals that the transaction recorded in the current account were also reflected in the papers found and seized from the residential premises of Monica Jain and others at Flat no. 404 Karan Upasana Residency which shows the transaction done by assessee on behalf of M/s. Uttam Chand Deshraj. While dissecting that information the ld. AO prepared a table where in the details of year wise loan given is tabulated which reads as under : FY in which loan was given Amount of Joan lacs Brokerage @ Rs. 100 per (per month) Total Brokerage Earned during year TAX DE Brokerage earned for the year under consideration 2010-11 1000000 1000 12000 12000 (Rs. 12000 per year and estimated for average 7 y....
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....round no. 2 raised by the assessee is partly allowed. So far as ground no. 3 is concerned, the ld. AR of the assessee did not dispute the figure of income estimated for an amount of Rs. 87,430/- and for that of the matter we reproduce the following table of income placed on record by the ld. AR of the assessee; but he submitted that the against the commission income he used to have employed person for collecting the money from the parties and thereby delivery of the same is ensured. He also have to send the persons for collecting the interest and also ensure delivery of the same. All these aspects of the mater has not been considered by the ld. AO and thereby the required amount of expenditure deduction to be allowed against the following income to be charged based on the finding recorded here in above. 3. In the light of arguments put forth before the bench and according the above working in worst case the gross brokerage of the assessee on the basis of documents seized from the premises of Oswal Group as well as assessee, should be as under and the appropriate deduction on account of expenses should be allowed therefrom: - A.Y. Based on documents seized from Osw....