TaxTMI 
TaxTMI 
2026 (7) TMI 1220
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....he Act were not provided to the appellant along with notice issued u/s. 148 of the Act for the assessment year 2014-15. Accordingly, the assessment proceedings completed u/s. 147 of the Act are void and the consequential order passed u/s. 147 of the Act is bad in law which kindly be quashed. 2. Without prejudice to the Ground no. 1, the appellant submits that the Ld CIT (A), NFAC has erred in confirming addition of Rs. 2,91,72,265/- u/s. 69A of the Income Tax Act, 1961 for the assessment year 2014-15 in respect of cash deposited into account of the appellant held with M/s Renuka Mata Multi State Urban Co-operative Credit Society Ltd without appreciating the fact that the said cash deposited into the bank account represents cash sales of the appellant which are duly disclosed in the Income Tax Return filed for the assessment year 2014-15. The appellant prays before Your Honour to kindly direct the Ld AO to delete the addition of Rs. 2,91,72,265/- made in the income of the appellant u/s. 69A. 3. Without prejudice to the Grounds no. 1 and 2 that Ld AO as well as Hon'ble CIT (A), NFAC failed to consider Peak Credit Theory while invoking provisions of sect....
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....ly the Net profit needs to be taxed. We take note of the recent decision of this Tribunal in the case of Sahebrao Godaji Bhand Vs. ITO (supra) wherein the Tribunal decided the issue held that adoption of 2% income on the deposits held with Renuka Mata Multi State Urban Cooperative Credit Society Limited will meet the ends of justice. Finding of Tribunal reads as under : "8. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case made addition of Rs. 52,62,480/- u/s. 69A r.w.s. 115BBE of the Act on the ground that the assessee failed to explain the nature and source of credit entries in the bank account maintained with Shri Renukamata Multi State Urban Co-operative Credit Society Limited. The contention of the assessee that the entries in the bank account are pertaining to his business activity and the assessee has offered the income from the same in the return filed in response to the notice issued u/s. 148 of the Act was rejected by the As....
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....ssee that the entire deposits made in the bank account maintained with M/s. Renuka Mata Multi State Urban Co-operative Society Credit Ltd. cannot be added and only a percentage of such deposits as commission of the assessee should be adopted since the assessee has never earned such huge income and had got only some commission. It is also his argument that had the assessee earned such huge income, the same would have been represented by some amount or evidence of some expenditure. However, neither the assessee has made any investment or incurred such lavish expenditure nor the department has any evidence to this effect. 13. We find some force in the above arguments of the Ld. Counsel for the assessee. We find the Ahmedabad Bench of the Tribunal in the case of Kaushik Pravinchandra Gohel vs. JAO (supra) has considered an identical issue and restricted the addition to 0.25% of the deposits / credits made in the bank account held by the assessee with M/s. Renuka Mata Multi State Urban Co-operative Society Credit Ltd. by observing as under: "9. The assessee is in appeal before us against the aforesaid additions confirmed by Ld. CIT(A) in the hands of the assessee. Befo....
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....r the assessee submitted that though apparently benami and accommodation transactions were carried out by utilizing the above referred accounts open in the name of the assessee, the assessee neither deposited any money in the said accounts and neither did the assessee withdraw any money from the said account. Accordingly, it was grossly incorrect on part of the Assessing Officer and Ld. CIT(A) to hold that the entire amount of bank deposits / credit made in the bank accounts for the impugned assessment years could be added in the hands of the assessee. This is especially in light of the fact that the assessee was not the real beneficiary of the amounts which were being deposited and later withdrawn in the bank accounts held by the assessee with Renukamata Society Bank Ltd. In support of the above arguments, the Counsel for the assessee filed before us order passed by ITAT Mumbai Bench in the case of Renukamat Multi State Cooperative Urban Credit Society Ltd. vs. ACIT (in ITA Nos. 4001 & 4002/Mum/2019), from which it is evident that Renukamata Society Bank has been regularly and for past several years engaged in the business of providing accommodation entries, by opening bank accoun....
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....port, the Department observed that during Financial Year 2012-13, Renukamata Society had made total deposits in the bank account amounting to Rs. 45,055 crores. The Department observed that on analysis of cash deposits and withdrawals, it is seen that the society is operating on the basis of typical Angadia Model, without maintaining proper documentation regarding identity of persons depositing and withdrawing the cash. The Department observed that the cash deposits made in these accounts are subsequently transferred to bank accounts of shell entities. The funds are subsequently being remitted abroad by these shell entities for prima facie bogus imports etc. Accordingly, even as per the report of the Investigation Wing, Renukamata Society had roped in various individuals of meagre means to open bank accounts in their names and thereafter, such bank accounts were operated by other persons / real beneficiaries for carrying out various activities viz. remittance of money abroad with falsified documents, payment of custom duty, purchase of bullion etc. Accordingly, even as per the report of the Investigation Wing with the Department, it is evident that the assessee is not the real bene....
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....te sector banks online/ RTGS/ NEFT, which were later transferred to other accounts or withdrawn as cash. (iii) Money so transferred were used for following purposes: (a) Remitting money abroad with improper/falsified documentation in the garb of imports. (b) Payment of customs duty. (c) Purchase of the bullion or other purchases. (d) Transfer to other parties online/ RTGS/ NEFT (e) Withdrawn by the beneficiaries. 3. On physical verification of some of these members/account holders, it was seen that many of the entities / account holders were not found on their address. Notices u/s. 133(6) and summons u/s. 131 were issued to top 200 cases, but most of the notices returned unserved. Even cases where notices were served, compliances were made in only 3 cases and they too could not prove their credit-worthiness. No one appeared to depose for recording of statements. Their credit-worthiness could not be established from the records where in some cases ITR were filed. In many cases, the accounts were operated under the knowledge of the account holders on payment of commission. By and large these credits in the accounts of the....
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.... taking any KYC details on record. The investigation carried so far shows that Demand Drafts of substantial amount have been issued by the society, after splitting the amount in such a way that each Demand Draft value is less than Rs. 50,000/-. c) From the analysis of cash deposits and withdrawals, it is seen that substantial amounts of withdrawals made are against deposits made in cash at different branches of the society without proper documentation of identity of persons depositing and withdrawing the cash. Therefore, society is working on the basis of typical Angadia model without maintaining proper documentation. d) During the post search investigation, it is seen mat cash deposits made in the accounts holders of Mumbai branch is subsequently transferred to the bank accounts of shell entities. The funds are subsequently being remitted abroad by these shell entities, for prima facie bogus imports. From the investigations done here, it is seen that the account holders, in whose account cash deposits of more than Rs. 10 Crore was made and which was subsequently transferred via RTGS/NBFT to the shell entities, are either persons of low means who simply lent their....
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.... 14. It would be further useful to reproduce the relevant extracts of the ITAT decision of Ranukamat Multi State Cooperative Urban Credit Society Ltd. in ITA Nos. 4001 & 4002/ Mum/2019, wherein the ITAT made the following impugned observations regarding the modus operandi of Renukamata Society:- "47. Be that as it may, the contents of the report shows that the Ld. DDIT(I&CI) had observed that these account holders were depositing large sums of cash on different dates in the accounts held by them with the assessee society, which was in turn being routed to different firms by way of RTGS who were the ultimate beneficiaries of these deposits and had failed to disclose the same in their respective tax returns. The Ld. DDIT(I&CI) observed that by taking advantage of the absence of reporting liabilities, these societies were being used as a conduit for money laundering. It is therefore noted that, it was not the case of the DDIT(I&CI) that these cash deposits belonged to the assessee or represented its unaccounted monies. Rather, according to the DDIT(I&CI), certain individuals were using the accounts held by members in the assessee society to route their unaccounted monies and ....
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....gh value cash deposits. To substantiate the bonafides of the assessee society, the Ld. AR showed that the assessee had suo moto written several petitions to the Financial Intelligence Unit (FIU-IND) much prior to the date of search on 09.02.2016 viz., between July 2014 to June 2016 wherein they had time and again requested them to register them with FIU-IND so that they could share the details & information of their members with the concerned Department. He showed us that, it was only vide Circular dated 08-01-2018 that the multi-state cooperative societies were brought within the purview of PMLA Act, 2002 and all multi-state cooperative societies were required to register themselves with the Department. Before us, the Revenue was unable to bring any material on record to controvert the aforesaid submissions of the assessee society. 49. On the overall conspectus of the facts, as discussed in the foregoing, we thus hold that the reasoning given by the Ld. CIT(A) viz., existence of incriminating material & statements against the assessee society, to justify the validity of the additions made in the unabated assessments framed u/s. 153A/143(3) of the Act for AY 2010-11 was un....
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....rtment. Thus, formation of belief by the Assessing Officer that the income chargeable to tax has escaped assessment, based upon material derived during inquiry/investigation, appears to be justified. Thus, the petition failed and dismissed." 17. In the case of PCIT v. Alag Securities (P.) Ltd 117 taxmann.com 292 (Bombay), the High Court held that 0.15% rate of commission offered to tax by the assessee was a reasonable rate in facts of the assessee's case. 18. In the case of Manoj Kumar Jain v. DCIT ITA No. 554/Del/2017, the Delhi ITAT held that commission of 0.5% to be reasonable considering the facts of the case. While passing the order, the ITAT observed as under: "3. The moot issue involves assessment of cash deposits found in the bank account of the assessee of Rs. 7.37 Crs. and commission earned at the rate of 3% on the said amount of Rs. 7.37 Crs. to the tune of Rs. 22.12 lacs. The assessee has been alleged to be an entry operator providing bills of purchase & sales without any actual business transactions. 4. The amount of Rs. 7.37 Crs. has been added on protective basis and information regarding the beneficiaries was passed on to the Asse....
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....he Department. The Department cannot be expected to find out the details of all beneficiaries itself and cannot accept whatever income or expenses are offered/claimed by the assessee, without the assessee providing any methodology of arriving at the same along-with supporting evidence viz. details of beneficiaries, details of middlemen, basis of arriving at commission etc. In the instant facts, the assessee has submitted that he was operating through middlemen and does not know the name of beneficiaries in most of cases. However, most times, even the middlemen could not be contacted by the Department, since notices could not be served upon them as they were not available. Accordingly, in absence of details forthcoming from the assessee, a reasonable percentage may be arrived at, in the instant facts to arrive at the "commission" income earned by the assessee. In our view, looking into the totality of facts, it would be reasonable to take 0.25% of total deposits in the bank accounts owned/ operated by the assessee (Rs. 295,56,30,168 for assessment year 2017-18), as commission income of the assessee for the assessment year under consideration." 20. In the case of Lucky Bajor....
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....ue has not found any such investment or lavish expenditure made by the assessee. We find had the assessee earned an amount of Rs. 32,25,000/- as alleged by the Revenue then the same would have been available in some form of assets or investment or lavish expenditure. However, there is no such finding by the Revenue. At the same time, the assessee is maintaining books of account and his accounts are audited and still the deposits and withdrawals in the said bank account were not disclosed. Under these circumstances, considering the totality of the facts of the case and in the interest of justice, we are of the considered opinion that adoption of 2% income on the deposit of Rs. 32,25,000/- instead of the entire deposit will meet the ends of justice. We, therefore, set aside the order of the Ld. CIT(A) / NFAC and direct the Assessing Officer to adopt 2% income on deposit of Rs. 32,25,000/-. The grounds raised by the assessee are accordingly partly allowed." 10. Since the facts of the present case are identical to the facts of the case decided by the Tribunal in the case of Jaydev Mahadev Arya vs. ITO (supra), therefore, following the same we direct the Assessing Officer to ad....