TaxTMI 
TaxTMI 
2025 (10) TMI 1225
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....ut in the case of 'Himanshu Verma Group cases' and during the course of search, it was found that various companies were operated and managed by Sh. Himanshu Verma for providing accommodation entries as admitted by Sh. Himanshu Verma in his statement recorded during the search. Based on such admission, the AO recorded his satisfaction on 23.09.2019 and initiated proceedings u/s 153C of the Act in the case of the assessee. Thereafter, the notices u/s 153C were issued for various years from 2012-13 to 2018-19 and the assessment for these years were completed in u/s 153C and 143(3) of the Act wherein in AY 2016-17 to AY 2018-19, various additions were made by holding that assessee company had received commission of 4% of total amounts transacted in its bank accounts. Further addition of commission @1% of capital of the assessee was made in AY 2016-17 and additions were made for the same. In the first appeal, the Ld. CIT(A) dismissed the appeal of the assessee and, therefore, the assessee is in appeal before the Tribunal by taking the following grounds of appeal: "1. That the Ld. AO has erred in passing an order u/s 143(3) of the Income Tax Act, 1961 (herein referred as 't....
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....(A) is confirming the order of the Ld. Assessing Officer is bad in law and contrary to the facts on record. 10. The appellant craves leave to add, alter, amend or vary any of the above grounds during the pendency of the appeal." 3. The assessee has challenged the additions of Rs. 25,91,654/- made by applying of 4% rate of commission of total credit of Rs. 6,47,91,345/- in the bank accounts and further challenged the addition of Rs. 13,21,719/- being 1% commissions on the total capital of the assessee company. Before us, the Ld. AR submits that there was a transfer of management in the month of November, 2015, thereafter, the new management has taken over the control and management of the assessee company. Prior to that as submitted by Sh. Himanshu Verma, all the transactions carried out in the bank account of the assessee were controlled and managed by him for which the commission income if any is of Shri Himanshu Verma and cannot be held as the income of the assessee company. 4. Before us, the ld. AR of the assessee also submits that there was no incriminating material whatsoever was found from the possession of the assessee company. Solely on the basis of the state....
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....y separate adjudication by this Hon'ble Tribunal. Ground No. 2: That the Ld. AO has erred in taking account of an income at 4% amounting to Rs. 25,91,654/-on total credits of Rs. 6,47,91,345/-in two bank accounts in the hands of the Assessee wherein admittedly the said income was earned by Himanshu Verma in individual capacity and Ld. CIT(A) has erred in upholding the same. Issue in brief as per AO: 1. Jurisdiction and Initiation of Proceedings * Notice u/s 153C was issued to the assessee company on 24.09.2019 consequent to search and seizure action in the case of entry operator Sh. Himanshu Verma. * In response, the assessee filed return declaring meagre income of Rs. 65,070/-. Subsequent notices u/s 143(2) and 142(1) were issued, in compliance to which the Authorised Representative (AR) appeared and furnished details. 2. Assessee Company Used as a Conduit for Accommodation Entries * On the basis of material gathered during search and submissions made, it was established that the assessee company was used by Sh. Himanshu Verma (entry operator) as a conduit company to provide bogus accommodation entries to beneficia....
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....tion of Rs. 25,91,654/- @4% commission on total credits of Rs. 6,47,91,345/- was thus justified and in line with the settled judicial approach for entry operators. * The AO rejected the assessee's contention that such income should be assessed in the hands of Himanshu Verma individually, since after November 2015 the company itself was under control of new management, who admitted purchase of the company for cash and its use as a conduit for accommodation entries. Adjudication by CITIA on Ground No. 2: 1. Assessee's Submission Before CIT(A) * The assessee contended that all business operations were managed and controlled by Shri Himanshu Verma, and therefore, any income earned therefrom ought to be assessed in his hands. * It further submitted that in AY 2015-16, its assessment was completed u/s 143(3) r.w.s. 153C without any addition, on the finding that the company was merely a paper entity controlled by Shri Verma * The assessee also argued that commission income has already been taxed in the hands of Shri Verma and that the rate of 4% applied by the AO was on the higher side. 2. Findings on Commission Income....
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....ved bogus credits of Rs. 6,47,91,345/- from entry-providing entities controlled by Shri Himanshu Verma. These amounts were routed further to beneficiaries for a commission. 2.2 Following settled practice in the cases of entry operators, the AO estimated commission income at 4%, working out to Rs. 25.91,654/-, and brought the same to tax in the hands of the assessee company. 2.3 The assessee's plea that such income is taxable in the hands of Shri Himanshu Verma individually is devoid of merit. Shri Verma was taxed on commission only in years where he had direct control of the company. For the year under consideration, the company had been sold and was under new management, which admitted to the purchase and continued use of the company for the same activities. Hence, the commission rightly belongs to the assessee company 3. On Commission of Rs. 13,29,719/- (1% on Sale of Company) 3.1 The AO also brought to tax Rs. 13,29,719/- being 1% of the total capital, on the basis of the swoen statement of Shri Himanshu Verma, who categorically admitted to having sold the assessee company for a cash commission. 3.2 At the request of the assessee,....
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.... period. Hence, the income rightfully accrues to it. 6.2 The Hon'ble Courts have consistently upheld the principle that in accommodation entry cases, commission income is to be estimated and taxed in the hands of the entity operating as a conduit. The AO's action in estimating commission @4% is therefore squarely in line with such jurisprudence. 6.3 Further, additions made on the basis of corroborated statements, cross-examination, and documentary evidence carry strong evidentiary value and cannot be discarded in absence of contrary proof from the Ground No. 3: That the Ld. AO erred in taking accumulated credits of Rs. 6,47,91,345/- as base to calculate the income of the company disregarding the facts that the majority of credits were received from entities from whom amount was receivable as on 15t April 2015 and Ld. CIT(A) has erred in upholding the same. Issue in brief as per AO: 1. Receipt of Accommodation Entries: On perusal of bank statements and details furnished, it was established that the assessee-company functioned as a conduit for routing accommodation entries on behalf of entry operator Shri Himanshu Verma. T....
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....irectors in 2015-16. * The assessee's contention that such income ought to be assessed in the hands of Shri Himanshus Verma, being the entry operator, was found untenable since the impugned transactions and credits were routed through the bank accounts of the appellant company even after change of control 2. Commission on Sale of the Company * The Ld. CIT(A) noted that Shri Himanshu Verma had categorically admitted, on oath, to having sold the appellant company against a commission of 1% of its total capital. * The appellant was provided an opportunity of cross-examination of Shri Verma during the course of assessment proceedings, however, the factual finding remained uncontroverted 3. Failure to Rebut AO's Findings * Despite due opportunity, the appellant could not adduce any cogent evidence or material to rebut the specific findings of the Assessing Officer, either during the assessment stage or in the appellate proceedings. * The plea that similar commission was assessed in the hands of Shri Verma in earlier years was found irrelevant in light of the fact that the impugned year involved transactions carried o....
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....the entire credits as base turnover for estimating commission. 4. Estimation on Accumulated Credits Supported by Jurisprudence Judicial pronouncements in similar cases (e.g., N.K. Proteins Ltd. v. DCIT [2017] 292 CTR 354 (SC)) have upheld the principle that in cases of accommodation entries and sham transactions, the apparent cannot be accepted as real, and estimation based on gross credits is a reasonable method of computation. The AO's approach is consistent with this settled proposition. 5. Validity of CIT(A)'s Confirmation The Id. CIT(A) has correctly upheld the AO's action after appreciating that the assessee neither disproved the incriminating evidence nor substantiated its claim that the credits represented genuine receivables. The assessee's submissions were merely general in nature and devoid of supporting documentation. Hence, the CIT(A)'s finding is based on sound reasoning and warrants affirmation. Ground No. 4: That the Ld. AO has erred in taking the income on money lended to various parties in the past which was already received by Mr. Himanshu Verma in the year of lending and has already been assessed i....
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....manner that extinguishes its taxability in the company's hands. Self-serving assertions cannot displace the cogent findings of the AO. 5. CIT(A)'s Findings Are Well-Reasoned The ld. CIT(A) has correctly upheld the addition after duly considering the assessee's submissions and appreciating that the assessee failed to establish with corroborative evidence that the impugned sums had already suffered taxation in the hands of Shri Verma in the relevant year. The appellate authority's reasoning is legally sound and does not suffer from any infirmity warranting interference. Ground No. 5: That the Ld. AO has erred while making addition of Rs. 13,29,719/- relying on the statement of Mr. Parvinder Singh, Director of the company whereas Himanshu Verma himself has admitted in the statement stating non-receipt of any cash for sale of company and Ld. CIT(A) has erred in upholding the addition made by the Ld. AOΟ. DR's Contentions for Ground No. 5: 1. Statement of Entry Operator, Shri Himanshu Verma Shri Himanshu Verma, in his sworn statement recorded u/s 131, categorically admitted that he had sold the assessee co....
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.... to the additions on the ground of alleged absence of incriminating material is wholly untenable. The proceedings under section 153C of the Act were lawfully initiated and additions were rightly made on the basis of credible, incriminating evidence and statements recorded during search and post-search investigation. The Ld. CIT(A) has rightly upheld the same. 2. Existence of Incriminating Material * In the search conducted on Shri Himanshu Verma in 2012, voluminous documents pertaining to accommodation entry operations were seized. * Crucially, in his statement on oath recorded on 13.04.2017, Shri Himanshu Verma admitted that the assessee-company was one of the entities being operated and managed by him for the purpose of providing accommodation entries in lieu of commission. * Such a direct admission, corroborated with seized documents, constitutes incriminating material squarely relatable to the assessee-company, satisfying the statutory requirement under section 153C 3. Continuity of Bogus Transactions Post Sale of Company * The assessee-company was sold through a mediator, Shri Ganesh, Chartered Accountant, and new directors....
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....g the satisfaction note qua the Assessee herein which has to be independent from the searched person and Ld. CIT(A) has erred in upholding the same. DR's Contentions for Ground No. 7: 1. Preliminary Submission The present ground raised by the assessee challenges the validity of proceedings under section 1530 on the allegation that the Ld. AO failed to record an independent satisfaction qua the assessee. The Revenue respectfully submits that the contention is wholly untenable, being contrary to the settled law. 2. Statutory Mandate under Section 1530 * Section 153C requires the AO of the searched person to be "satisfied" that any books of account, documents or assets seized belong to or pertain to a person other than the searched person. * The requirement is substantive, but not hyper-technical. It suffices if the satisfaction is discernible from the assessment record and is based on incriminating material relatable to the assessee. * The law does not mandate multiple or mechanically distinct satisfaction notes, existence of such satisfaction, based on seized material, is sufficient to confer jurisdiction. 3....
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....eedings u/s 153C were initiated by recording satisfaction on 23.09.2021 which reads as under: Satisfaction Note for taking up the case of M/s Stercon Energy Pvt. Ltd. PAN:-AAOCS7746Q 23.09.2019. A search and seizure action w/s 132(1) of the IT Act, 1961 was conducted on 13.04.2017 in the case of Mr. Himanshu Verma, M/s Global Impex Pvt Ltd, M/s Plus Finvest Pvt Ltd, M/s Volun Imports Pvt Ltd, M/s Advance Finvest Pvt, Ltd, M/s Advance Homes & Personal Care Pvt. Ltd, M/s Advance Surfactants Pvt. Ltd at C-48, Sudarshan Park, Moti Nagar, Now Delhi. Mr. Himanshu Verma is maintaining more than 200 shell companies/concerns for providing accommodation entries in lieu of commission during the search setion on Himanshu Verma & Others group, various incriminating documents pertaining to these 200 shell companies such as bill book, tally data ete were found and seized at C-48, Sudarshan Park, Moti Nagar, New Delhi. M/s Stercon Energy Pvt. Ltd. is one of the 200 shell companies/entities which is being controfted by Himanshu Verma for providing accommodation entries in lieu of commission. This was confirmed by Mr. Himanshu Verma in his statement recorded during the course....
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....4/- made by applying 4% of the commission rate on the total transactions of Rs. 6,47,91,345/- in the bank accounts of the assessee, we find that this addition is made solely on the basis of the statement of Sh. Himanshu Verma wherein he admitted that he is controlling and managing the assessee company and providing accommodation entries to various persons by charging commission @ 4%. It is further seen that in preceding assessment years i.e. in Assessment Years 2012-13 to 2015-16 proceedings u/s 153C were initiated, however, no addition were made in the hands of the assessee company on the transactions carried by its bank account by holding the same as pertaining to Sh. Himanshu Verma. However, in the year under appeal though the share were transferred by Sh. Himanshu Verma but the facts remained that transactions in the bank account were carried were on the instructions of Shri Himanshu Verma and, therefore, the income, if any, accrued on account of commission, the same was received by Sh. Sh. Himanshu Verma and, thus, no addition could be made in the hands of the assessee company. Accordingly, we direct the AO to delete the addition of Rs. 25,91,654/- made in the hands of the ass....
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....ii] the AO has thrown upon whole basket of six months without giving reference to any concrete incriminating material of a particular Assessment Year and without taking note of commencement of activities of assessee; [iii] the act of the AO making sweeping averment in the 'satisfaction note that documents in the form of hard disks have bearing on determination of total income of Super Bazar Stores Pvt. Ltd. for AYs 2010-11 to 2015-16, is without legal foundation and without application of mind, as the AO has even failed to name the alleged documents and further failed to mention as to how it is related/pertained to a given AY covered in the 'satisfaction note'; [iv] the AO on receipt of material/documents from the AO of the searched person must necessarily apply his mind on the material received and ascertain precisely the specific year to which incriminating material relates. It is only when this determination/ascertainment is complete that the flood gates of an assessment would open qua those particular years. The issuance of notice cannot be an automated function unconnected to this exercise of analysis and ascertainment by the AO in the light of judgem....
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....r impacted by the material discovered. The Hon'ble Delhi High Court went one step further to hold that where material discovered in the course of search has the potential of constituting incriminating material for more than one AYs, even in such a situation, it will be incumbent upon the AO to duly record reasons that material is likely to be incriminating for more than one AY and thus, warranting the action under section 153C of the Act for years in addition to those to which material may be directly relatable. Thus, a nuanced application of mind and recording of reasons for drawing satisfaction as contemplated under section 153C of the Act qua different AYs is paramount. The Hon'ble Delhi High Court noticeably held that issuance of a notice under section 153C of the Act is clearly not intended to be an inevitable consequence to the receipt of material by the Jurisdictional AO and that the initiation of action under section 153C of the Act will have to be founded on a formation of opinion by the Jurisdictional AO that the material handed over and received pursuant to a search is likely to influence the determination of total income and would be relevant for the purposes of....