TaxTMI 
TaxTMI 
2024 (3) TMI 1549
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....m and thereby making addition of Rs.25,32,000/- as against the commission income of Rs.6,33,000/- at the rate of 0.15% offered by the assessee. The addition amounting to Rs.18,99,000/- is, therefore, unjustified and needs to be deleted. 2. The assessee craves leave to add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing." IT(SS)A No. 170/Kol/2023; Assessment Year 2011-12 :- "1. That under the facts and circumstances of the case, the Ld. CIT(A) erred in confirming the addition made by the AO by estimating the commission income earned by the assessee at the rate of 0.60% on the accommodation entry amounting to Rs.1721.77 Crore provided by him and thereby making addition of Rs.10,33,06,200/- as against the commission income of Rs.2,58,26,550/- at the rate of 0.15% offered by the assessee. The addition amounting to Rs.7,74,79,650/- is, therefore, unjustified and needs to be deleted. 2. The assessee craves leave to add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing." IT(SS)A No. 171/Kol/2023; Assessment Year 2012-13 :- "1. That under the facts and c....
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....,16,35,700/- at the rate of 0.15% offered by the assessee. The addition amounting to Rs.6,49,07,100/- is, therefore, unjustified and needs to be deleted. 2. The assessee craves leave to add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing." 3. As the issues arising in I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14, are mostly common except for variance in quantum, the same were heard together and are being disposed off by way of this common order. 4. The first common issue for our consideration is estimation of commission income on the turnover of accommodation entry business carried out by the assessee. Facts in brief are that the assessee is an individual and subjected to search u/s 132 as well as survey u/s 133A of the Act on 02/07/2013. Assessment years 2010-11 to 2013-14 which are under consideration before us were part of the search proceedings and the assessment proceedings were carried out u/s 153A/143(3) of the Act. Admittedly, the assessee is in the business of providing accommodation entry and earns commission income from providing such accommodation entries. This fact has not been dispute....
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....further submitted that the assessee has not retracted from his statement. He also submitted that the rate of commission depends on the scale of business which varies from year to year. He submitted that subsequently in another search in the year 2019, while assessing the commission income in the case of assessee for Assessment Year 2014-15, the ld. Assessing Officer has himself taken the rate of 1/3rd of 0.10%. He submitted that the commission income was earned @ 0.10% but it was shared by 3 persons since the transactions were huge and assessee along with two other entry providers completed the transaction. He further, referring to the judgement of the Hon'ble Bombay High Court in the case of Pr. Commissioner Of Income Tax-14 vs M/S Goldstar Finvest Pvt. Ltd. in INCOME TAX APPEAL NO.1729 OF 2016, judgment dt. 1st April, 2019, submitted that the Hon'ble Court confirmed the finding of Hon'ble Tribunal accepting the commission income from carrying out similar type of business @ 0.15%. He thus prayed that the estimation of commission income should be restricted to @0.15%. 6.1. On the other hand, the ld. D/R vehemently argued supporting the orders of the lower authorities and submitt....
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....th two other commission agents were involved in carrying out the accommodation entries. 7.1.1. We further notice that the Hon'ble Bombay High Court in the case of M/S Goldstar Finvest Pvt. Ltd. (supra), dealing with the similar issue of estimation of income of entry provider confirmed the view of the Tribunal estimating the rate of commission income @0.15%. The relevant finding of the Hon'ble Court is reproduced below:- "2. It is undisputed that under similar circumstances a similar question in case of another assessee in similar business came up for consideration in Income Tax Appeal No.54/17 and connected Appeals. Revenue's Appeals were dismissed on 25/03/2019 making following observations; "3. The Assessing Officer adopted the rate of commission of 2% on the total turnover, which order the CIT (A) confirmed. In further Appeal by the Assessee, the Tribunal reduced the rate of commission to 0.15%. The Tribunal referred to its own decision in case of the Assessee's sister concern and held that the appropriate rate of commission should be 0.15% which is also admitted by the Assessee during search. 4. In our opinion, the entire issue is based on ....
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....ition of Rs.7,79,88,144/- which is made in the hands of the assessee on account of closing bank balance of 11 entities allegedly controlled by the assessee. The assessee has raised this ground by way of additional grounds. 10. Facts in brief are that during the course of search conducted on 26/04/2011, in the warrant of authorization issued by DIT(Inv.), Kolkata, in respect of 11 concerns tabulated in a chart at page 18 of the assessment order, 7 of the accounts were held by Private Limited Companies where the credit bank balance was Rs.5,71,87,384/- and 4 accounts were held by sole proprietorship concerns having total bank balance of Rs.2,08,00,760/-. When the assessee was confronted with these bank statements, he accepted that all the bank accounts of the companies/proprietorship concerns are managed by him and money seized from these bank accounts are to be utilized against the present/future tax liabilities. While carrying out the assessment proceedings of the 7 out of 11 concerns which are limited companies, the assessing authorities have completed their assessments stating that declared source of income is not accepted and liabilities and assets as on 31/03/2012 are to be ....
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....r power products 9,391.47 4. VNG Plywood suppliers Pvt ltd 17,462,94 5. Ralliwolf Real estate pvt ltd 38,682,06 6. Abhiruchi minerals suppliers pvt Ltd 2,96,61,119.94 7. Crystal cloth Merchants pvt ltd 45,34,861.18 8. SRB Agricultural pvt ltd 25,02,459.68 9. Shree Laxmi traders 56,19,928.82 10. Snow white Agro trading pvt ltd 1,02, 73,396.43 11. Qwality Jewel box pvt ltd 1,01,59,222.78 TOTAL 7,79,88,142.85 These bank balances were seized . Apart from no other action was taken . Nothing was found . No statement was recorded either by assesse Anand kumar sharma or any of 11 entities . Merely because these entities are managed by Assesse, In assessment proceedings of assesse u/s 153A/143(3) for assessment proceedings of AY 12-13 bank balance of Rs 7,79,88,142 .85 was added to income u/s 69 . In this respect it is submitted that 1. There are two different searches in respect of two different sets of assesses one on 26.4.11 in respect of 11 entities and second search on 2.7.13 in respect of Anand kumar sharma who is appellant in this case. There are two different search w....
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....he assesse company as on 31.3.2012 is taken as NIL " From above it is clear that AO has himself taken liability and investment as NIL, therefore, there is no question of treating the bank balance as income that too in the hands of assesse Anand kumar sharma. Further, AO in the case of assesse Anand kumar sharma has mentioned as under : Ms evident from the assessment orders, these companies (11 entities) have been held to only paper company and entire share capital /premium and investments of these companies are merely circular transactions without any actual business. Hence r the assessment orders of these companies have been passed by treating entire asset and liabilities as nil. However, base capital is required for circulation of funds which have been introduced by Anand kumar sharma through Jamakharchi companies which is represented by bank balance of these companies and the bank balances have been seized during the course of search on these companies on 26.4.2011." Above paragraph itself shows that bank balances are base capital for accommodation entries. Therefore bank balance can not be added as income itself specially when accommodation entries ha....
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....sments of the 11 concerns have observed that assets and liabilities of these concerns are Nil and on the other hand, the bank balance have been added in the hands of the assessee. It has been further submitted before us by the ld. Counsel for the assessee that the assessee is admittedly an entry provider and for past many years is engaged in this business. While carrying out such business the only source of income is commission income which sometime has been estimated as 0.6%, sometime at 0.03% and as held by us in the preceding paras, we have estimated the commission @ 0.16%. It thus, means that the funds which are utilised for rotating in the line of business of providing accommodation entries are owned by someone else and merely bank transfers are being made through such concerns which are used as conduit. There are hardly any physical assets in such concern nor any actual business of trading and manufacturing but merely funds are rotated. The modus operandi for such accommodation entry providers are to raise capital through bogus share capital/share premium/bogus unsecured loans/bogus sales and then utilizes these funds for making investments in the equity of other concerns/loa....
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.... the Act, the ld. Assessing Officer referred to the statement of Mr. Anand Kumar Sharma accepting to having controlling and managing the affairs of this company observed that the actual amount of income has to be assessed in the hands of Mr. Anand Kumar Sharma. Further in para 4.2. of the assessment order, the ld. Assessing Officer stated that as regards the income of the assessee company it is reiterated that the alleged company is nothing but a legal fiction and it did not have any business activity. Hence, its declared the source of income is not accepted and income for Assessment Year 2011-12 is taken as Nil. As regards the capital, including share premium for investments, if any, reliance is placed on the discussion made in the relevant paragraphs of this order and on the basis of observations made therein, the share capital, share premium as well as the investment of the assessee company as on 31/03/2011 is taken as Nil. Similar is the observation of the Assessing Officer in case of all the remaining 10 concerns. Reference of the assessment order given in the case of Qwality Jewel Box Pvt Ltd., for Assessment Year 2011-12. However, even for Assessment Year 2012-13, in case of....
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....nt of concern A. Now entries in the books will be appearing as bank balance debit and share capital and share premium credit. The revenue authorities have already presumed that such business concerns which are engaged in the accommodation entry providing business do not carry out any regular business activity. So, the funds received from the share applicants from its own source have come into the bank account of the concern 'A'. Now, for adding the bank balance in the hands of a person 'B', who has accepted to have controlled the affairs of concern 'A', then along with the assets, the liabilities will also be taken over by the person 'B'. One cannot pick up the asset side and leave the liability side. If the revenue authorities have considered the assets and liabilities as Nil then the assets include bank balance also and if bank balance are treated as income then set off of the liabilities also needs to be given. The theory adopted by the revenue authorities is only one sided because they have only taken the bank balances as the basis and merely on the statement that the assessee is managing and controlling the affairs of the 11 concerns, they have presumed that the bank balances ....