TMI Blog2023 (6) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Service Tax Department, the assessee had submitted that it is in the cheque discounting business and it has been also been accepted that the assessee is engaged in the business of cheque discounting in order to earn commission income. Therefore, in the instant set of facts, it would not be correct to bring to tax the entire cash deposits as the assessee s undisclosed income. As 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. It would be reasonable to take 0.25% of total deposits in the bank accounts owned/ operated by the assessee as commission income of the assessee for the assessment year under consideration. Assessee s claim of secret commission paid to other middlemen - As where the assessee has clearly submitted that he has no reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by disregarding the nature of business activity carried out by the Appellant, as cross-verifiable inter alia from various documentary evidences found and impounded/ seized during the course of survey/ search, from the contents of various statements recorded and from the written submissions filed from time to time. He further erred in confirming the said addition which was made by the AO by treating the aggregate deposits appearing in the bank accounts as unexplained credit deposits while ignoring the rest of the evidences, including the transactions appearing on the withdrawal side of the same banking accounts. Rs. 228,43,91,272/- (excluding interest) [Rs. 228,53,96,912/- as per the AO's computation sheet before giving effect to CIT(A)'s order, as reduced by a sum of Rs. 10,05,640/- representing tax on addition to the extent telescoped by CIT(A)] Nil, as CIT(A) directed this addition to be telescoped against the corresponding income. 2 Confirming the addition of Rs.28,30,100/- in respect of the cash of equivalent amount found and seized during the course of search, albeit after giving telescoping of the same aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the course of survey/search, from the contents of various statements recorded and from the written submissions filed from time to time. He further erred in confirming the said addition which was made by the AO by treating the aggregate deposits appearing in the bank accounts as unexplained credit deposits while ignoring the rest of the evidences, including the transactions appearing on the withdrawal side of the same banking accounts. Rs. 245,65,18,432/- (excluding interest) Total Tax Effect Rs. 245,65,18,432/- The appellant craves to add, amend, delete or alter one or more grounds of appeal. Assessment year 2014-15: The learned CIT(A)-11, Ahmedabad has erred in law and on facts in: Sl. No. Grounds of Appeal Tax Effect relating to each Ground of appeal 1 Confirming the addition of Rs. 1,125,97,09,837/- originally made by the AO by arbitrarily invoking the provisions of section 69 of the Act. He confirmed this addition by disregarding the nature of business activity carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirming the addition of Rs. 471,88,38,440/- originally made by the AO by arbitrarily invoking the provisions of section 69 of the Act. He confirmed this addition by disregarding the nature of business activity carried out by the Appellant, as cross-verifiable inter alia from various documentary evidences found and impounded/seized during the course of survey/search, from the contents of various statements recorded and from the written submissions filed from time to time. He further erred in confirming the said addition which was made by the AO by treating the aggregate deposits appearing in the bank accounts as unexplained credit deposits while ignoring the rest of the evidences, including the transactions appearing on the withdrawal side of the same banking accounts. Rs. 145,80,60,066/- (excluding interest) Total Tax Effect Rs. 145,80,60,066/- The appellant craves to add, amend, delete or alter one or more grounds of appeal. Assessment year 2011-12: The learned CIT(A)-11, Ahmedabad has erred in law and on facts in: Sl. No. Grounds of App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an affidavit before the AO stating that there were other concerns namely Navkar Corporation, Shri Padma Corporation, Samkit Corporation, Samay Corporation which are proprietary concern of Shri Sunilbhai Desai who is an employee of the assessee for a monthly salary of ₹ 14,000. The assessee stated that all these transactions made by the three concerns were actually made by him and he is responsible for all such transactions. The affidavit dated 27-12-2018 is part of the assessment order at pages 15-16. The proprietor of such concerns also submitted that they were working on behalf of the assessee and income earned on such transactions actually belongs to the assessee. To verify the beneficiary of assessee s cheque discounting business, the AO issued summons to 6 persons on test to check basis. Out of the total six parties to whom summons were issued, summons could be served only in case of two parties at the given address namely Shri Rasiklal and Company and G K Agencies. In response to the aforesaid summons, Shri Sanjay Lal Jain, proprietor of GK Agencies attended and statement was recorded on 27-12-2018, wherein he stated that he is brokered/middlemen and not the beneficiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 838440 2013-14 7950169553 2014-15 11259709837 2015-16 7950193883 2016-17 6158250749 2017-18 2935997361 2017-18 Samit traders 19632807 Total 44985810232 [Addition Rs 295,56,30,1681 4.1 For the year under consideration, the total amount deposited in the bank account is ₹ 295,56,30,168/- and hence the assessing officer made addition of the aforesaid amount in the hands of the assessee. 5. In appeal before Ld. CIT(Appeals), the assessee submitted that he is in cheque discounting business and he received only commission income on these transactions. He stated that he is registered as a commission agent with Ahmedabad Municipal Corporation and has license under Bombay Stock and Establishment Act issued by AMC declaring the assessee to be a commission agent. The assessee also stated that the Department has issued notice under section 148 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d case, the-Hon'ble High Court has held that the assesses had to make a clean breast of all the facts within his knowledge concerning the credit entries in the accounts. He has to explain with sufficient details of the source of all the deposits in his accounts and he should be able to show-that money has been transferred through banking channels from the bank accounts of appellant (including the concerns controlled by him). The assessee has to discharge the primary onus of disclosure in this regard. Failure of the assessee to explain each of the sources of deposits and corresponding destination of the payments justify the additions made by the Assessing Officer. Keeping in view of the facts stated above and binding judgment of Hon'ble Delhi High Court, the addition made by the Assessing Officer are justified and hence confirmed. The ground of appeal is dismissed. 6. Next ground of appeal is against the additions of Rs.28.30,100/- made by the AO considering cash found during the course of search as unexplained. The appellant could not explain the source of cash found, hence addition made by the A.O. are confirmed. This ground of appeal is dismissed. However, the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of beneficiaries were identified. Accordingly, it was not the case that the money so deposited in the bank account was the assessee s own undisclosed income and therefore, it would not be justified to add the entire income as its undisclosed income. The counsel for the assessee also submitted that it was also eligible for deduction of secret commission paid to other agents/middlemen who assisted the assessee in obtaining the business of cheque discounting . The counsel for the assessee relied upon the several case laws in support of the contention that in the instant facts only the real income/commission income was taxable in his hands and the total deposits could not be taxed as undisclosed income of the assessee. 7. In response, the DR relied upon the assessment order and the order passed by Ld. CIT(Appeals). He submitted that the assessee had only 2 to 3 employees and literally no expenses were incurred to earn the above income. Further so far as the payment of secret commission is concerned, the onus is on the assessee to prove what types of services were provided to the assessee and the legitimate amount which is deductible. Since the assessee has no supporting docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he commission earned, has given incomplete details of beneficiaries, the middlemen whose name the assessee has furnished are not traceable and no details to whom secret commission paid or other ancillary expenses incurred by the assessee have been maintained by the assessee. In the case of D.K. Garg [2017] 84 taxmann.com 257 (Delhi), the honourable Delhi High Court has held that where assessee, an accommodation entry provider, was unable to explain all sources of deposits and corresponding payments, he would not be entitled to benefit of peak credit. In the case of JRD Stock Brokers (P.) Ltd [2020] 113 taxmann.com 453 (Delhi), Delhi High Court held that where assessee accepted that it was providing accommodation entries to various parties for which it had opened a fictitious bank account in which amounts were deposited and later on transferred to an assessee's concern, and further, assessee could not explain or establish identity, genuineness (of credit transaction), or creditworthiness of parties, merely because these amounts were included in total turnover would not ipso facto shut out an inquiry into credits, thus, addition of peak credit under section 68 was justified. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee did not arise particularly when assessee was only concerned with commission earned on providing accommodation entries to its customers. 8.2 Now coming to the instant facts, we observe that the assessee has been running several concerns in the name of himself and in the name of other persons who are engaged in the activities of taking cheques and cash and deposited the same in their bank accounts. The assessee s contention is that he is merely acted as a commission agent and hence only the commission amount should be subject to tax in its hands. However, the Department has observed that the assessee could not produce that complete details of beneficiaries with their names, complete addresses, PAN and other details of transactions. In the instant case, there are approximately more than 7000 beneficiaries and only in the case of 116 beneficiaries, the PAN has been identified. For 2752 entries, PAN has not been identified. For balance entries, only part details are available. If the assessee is submitting that he is liable to be taxed only on the commission income so earned, then the onus is on the assessee to provide the basis as to how such commission income has been arriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in absence of basic details, that to whom secret commission was paid, in respect of which sale those amounts were paid, such expenditure could not be said to have been incurred wholly and exclusively for purposes of assessee s business and, therefore, entire expenditure claimed by assessee on account of secret commission was to be disallowed under section 37(1). In the case of Tarini Terpuline Productions [2002] 124 TAXMAN 876 (ORI.), the assessee paid secret commission to agents and claimed it as deduction but declined to disclose identities of agents or correlate payments with orders procured or sales effected. The High Court held that in view of Explanation to section 37(1), Tribunal was justified in holding that expenditure claimed by assessee was not an allowable deduction under section 37(1). In the case of VYAS CO. [1995] 52 TTJ 398 (AHD.), the ITAT held that where assessee s claim for deduction of secret commission paid by it had neither been proved nor disproved, and assessee s claim was found to be on higher side, only 50 per cent of secret commission was to be allowed. In view of the facts of the case, where the assessee has clearly submitted that he has no reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 15. Since the facts and issues for consideration are identical for all the years under consideration, in view of the discussion for assessment year 2017-18, we direct that 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 (₹ 471,88,38,440/-for assessment year 2012-13), as commission income of the assessee for the assessment year under consideration. 16. In the result, appeal of the assessee is partly allowed for assessment years 2012-13. Assessment year 2013-14: 17. Since the facts and issues for consideration are identical for all the years under consideration, in view of the discussion for assessment year 2017-18, we direct that 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 (₹ 795,01,69,553/-for assessment year 2013-14), as commission income of the assessee for the assessment year under consideration. 18. In the result, appeal of the assessee is partly allowed for assessment years 2013-14. Assessment year 2014-15: 19. Since the facts and issues ..... X X X X Extracts X X X X X X X X Extracts X X X X
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