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ACIT, Central Circle-10, New Delhi Versus Rakesh Gupta and Vica-Versa

2016 (6) TMI 519 - ITAT DELHI

Rate of commission on accommodation entries - Held that:- Assessee buys bogus purchase bills and also sales bogus purchase bills. As already stated by the assessee that he is earning commission from bogus entries of issuing sales bills and then he is also buying purchase bills from one Sh. Vaivab Jain therefore he may also be incurring some cost out of that. Further the assessee is also doing this business through many brokers as per para no 3.1 of the assessment order and there might be some co .....

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k. Accordingly to the VAT laws it was submitted by the assessee that he has to calculate input VAT and output VAT and pay the differential VAT. The difference between the cheque amount and net amount should also take care of all these nitty gritty of the accommodation transactions.

In view of above facts we are of the view that ld CIT(A) has applied correct estimate of rate of commission income @2% which is reasonable and appropriate looking to the facts and circumstances of the case. .....

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enditure. For the same reasons we dismiss the cross objection filed by assessee for all the years. - Decided against assessee. - ITA No.1219, 1220, 1221/Del/2014, ITA No.381 to 383/Del/2014 - Dated:- 28-4-2016 - SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Revenue : Sh.Nandita Kanchan, CIT DR For The Assessee : None ORDER PER BENCH 1. These are the cross appeals filed by the Department and the assessee are directed against the order dated 11.12.2013 of l .....

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facts for AY 2007-08 in this order. 4. A search and seizure operation u/s 132 of the Act was conducted by the investigation wing of the department on 26.04.2010 on Shri Vishesh Gupta and Shri Rakesh Gupta. Based on the search notice u/s 153A of the Income Tax Act was issued to the assessee on 11.04.2011. In response to that assessee submitted a letter dated 30.05.2012 stating that return filed u/s 139 showing income of ₹ 66081/- may be treated as return filed in response to notice u/s 153A .....

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try providers of the group. Statement on 26.04.2010 of the appellant was recorded wherein he has stated that he is charging 25 paisa to 75 paisa for per Rs. hundred as commission for providing accommodation entries. In answer to Question No. 13 of that statement assessee further submitted that other persons are also charging commission at ₹ 0.25 to ₹ 0.75 per hundred and therefore his charges are also ranging accordingly. Statement of the assessee was further recorded on 04.08.2010 w .....

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facts the LD Assessing Officer recorded statement of other persons too on similar lines. Based on documents provided it was found that transactions were made in various bank accounts of 11 firms and amount of ₹ 73,38,76,883/- was shown as accommodation entries for various years. The total credit entries shown in the bank accounts on the credit side were treated by ld Assessing Officer as accommodation entry and based on that assessee was asked to show the reason that why these entries shou .....

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ission. It was the contention of the assessee that in case of bills of purchases the assessee is also required to adjust the amount of VAT and CST charged on those bills. Assessee submitted that no credit for the same is granted and therefore assessee contended that commission of the assessee earned from these accommodation entries is ranging 0.25 % to 0.5% only. Ld Assessing Officer rejected the contention of the assessee and prepared a chart according to which he worked out the amount of chequ .....

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nst this addition assessee preferred before ld CIT(A). Before the ld CIT(A) assessee submitted that the commission is ranging between 0.25% to 0.75% only. Assessee reiterated the same submission which were raised before the ld. AO that while determining the commission he did not include the effect of VAT and CST. It was also contended that the assessee has purchased the goods on the fictitious bills when sale bill is issued as accommodation entries. It was submitted that the assessee has never i .....

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d that that commission income is 0.5 % to 0.35% in case of accommodation entries. For this assessee relied on the decision of Manoj Agarwal Vs. DCIT 113 ITD 377 (SB)(Del). On the basis of above submission ld CIT(A) has held that rate of 2% of the commission is very reasonable and directed the AO to adopt this percentage and further grant deduction of 0.5% on the same to calculate the net amount of commission. In view of this decision of CIT(A) revenue is in appeal before us contesting that ld CI .....

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icer @5.67% which is based on seized material and it is backed by the evidence. The ld CIT(A) has also wrongly held that the commission income of the assessee is to be estimated @ 2% of the accommodation entries. Ld DR took us to the order of Ld. AO wherein ld AO has prepared a table which is backed by the annexures seized during the course of search and showing date wise entry including the name of the parties. She further submitted that on the same pages against the cheque amount, amount retur .....

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the contention of the ld DR and material available on record. Undisputedly assessee is an entry provider and explained his modus operandi stating that it is engaged in providing bogus purchase bills from various proprietary concerns of the family members of the assessee. From this proprietary concern the assessee used to issue fictitious sales bills without goods to the end users through many brokers. He opened various bank accounts of those proprietary firms. On issue of the bogus bills, chequ .....

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en the bogus purchase bills. From the cash withdrawn the commission amount is deducted. During the course of search on Sh. Vishesh Gupta and Sh. Rakesh Gupta (assessee) were found to be controlling 11 such entities. In their statement they submitted that they have earned the commission @ 0.25% to 0.75%. in their statement dated 26.04.2010 of Sh. Rakesh Gupta in answer to Q. NO.13 it is mentioned that other parties are also charging the commission on accommodation entries @0.25% to 0.75%. and the .....

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average rate of 5.67% being income of the assessee. Ld CIT(A) has dealt with this issue as under:- 8. I have considered the-facts of the case and the written submissions of the appellant. I have also perused the case laws relied upon by the appellant. During the course of the search & seizure operation, the appellant admitted that he was engaged in the business/activity of providing accommodation entries by way of purchase and sale bills to the needy parties by routing the entries through b .....

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of providing accommodation entries, differed with regard to the receipt of rate of percentage of commission. In the former statement it was stated that the gross commission earned was 25 paise to 75 paise whereas in the latter statement, the same was stated to be at 25 paise to 50 paise. In the course of assessment proceedings also, vide submissions dated 4.03.2013, the appellant reiterated his stand that the gross margin of commission earned by him from the activities of accommodation entries .....

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re applying the percentage of commission at the rate of 5.67% on the total transactions of accommodation entries provided by the appellant, the Assessing Officer issued a showcause notice dated 12.03.2013. In response to the same, the letter dated 18.03.2013 filed by the appellant was not accepted by the Assessing Officer. On perusal of the said reply dated 18.03.2013, I find that the appellant did not furnish any documentary evidence to substantiate that the rate of commission charged by him at .....

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l people who are engaged in the activity of providing accommodation entries, and would normally charge 2% as commission on the amount that is transacted in providing such accommodation entries. The Assessing Officer assessed the commission by applying 5.67% which according to me is on a higher side. Considering the facts and circumstances of the case and also the instances of rate of commission cited by the Assessing Officer in the chart incorporated in the order, in my view, a rate of 2% commis .....

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stated by him during the course of search. b. Vide submission 04.07.2013 the appellant further reiterated his stand that the gross margin of commission earned by the assessee varies from 0.25% to 0.50%. c. The letter dated 18.03.2013 the assessee has submitted various contentions, which were not accepted by the LD AO. Vide this letter assessee submitted as under:- "Further as regards details of commission charged on these transactions by the assessee a detailed explanation along with a numb .....

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case of Rakesh Gupta A.Y 2010-11 which is duly stated to be applicable in all cases (i.e Rakesh Gupta, Vishesh Gupta & Shashank Mittal from A.Y 2006-07 to A.Y 2011-12. Further as per working of the department given in annexure given by your honour with show cause dated 12.03.2013 stating commission charged ranging to 2% -18% provided to the assessee and seeking explanation, it is humbly submitted that the assessee has gone through the seized material and all books of accounts and the other .....

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nce payment of the same bill was duly returned to party in full without any deduction from them, which were ignored by passed by the department. Further the department has also ignored to consider facts that out of VAT/CST retained from sales invoices, assesssee has paid full/ almost all amount of VAT/CST on purchase bills so as to retained gross margin comes 0.25 to 0.50 per 100 because for giving the output of VAT to client who had taken the sale bills input of VAT must required le. through Pu .....

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we - are attaching more annexures to justify our claim. Workings of such several cases are resubmitted to your honour herewith for kind consideration in support of our above & earlier submission (A copy of the above said documents, as submitted to the learned A.O., is enclosed in " paper book on page no. from ___to __) Further the supporting documents of above said submission i.e. copies of relevant purchase/sale bills, extract of ledger accounts, extracts of stock ledger and relevant .....

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cases were duly explained to the learned A.O. during the course of assessment It is to be noted that the learned A.O. has not objected authenticity and genuineness of any transaction of the submission of the assessee, based upon seized material/bank statements already available to the learned A.O. and/ or Purchase/Sale bills, whose copies submitted to learned A.O. Hence, the contention of the assessee was rejected by the learned A.O. without any reasonable basis, only based upon his own presump .....

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;s statement, @ 0.50% and further reduced by learned CIT (Appeals) @ 0.35% (by giving deduction of 0,15% expenses of mediator/ broker /broker) was fair assessment (iv) It is further submitted that evidences relied upon should be in toto i.e. in full and not in part Hence as seized documents contains payment of purchase made and amount retained as commission on such purchases by the issuing party. The same fact should not be ignored by working out commission income earned on such transactions. He .....

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sion in accommodation entries and such rates are varying based on the practices and the need. 10. Firstly we do not find any infirmity in the order of ld CIT(A) in estimating the commission income of the assessee @ 2% and our reasons are enumerated hereinafter. While working out the commission rate by the ld Assessing Officer it was submitted that the difference in the amount of accommodation entry cheque and the net amount written against that is the commission income of the assessee. This stat .....

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of the assessment order. Therefore it is apparent that assessee buys bogus purchase bills and also sales bogus purchase bills. As already stated by the assessee that he is earning commission from bogus entries of issuing sales bills and then he is also buying purchase bills from one Sh. Vaivab Jain therefore he may also be incurring some cost out of that. Further the assessee is also doing this business through many brokers as per para no 3.1 of the assessment order and there might be some cost .....

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Accordingly to the VAT laws it was submitted by the assessee that he has to calculate input VAT and output VAT and pay the differential VAT. The difference between the cheque amount and net amount should also take care of all these nitty gritty of the accommodation transactions. Further in the case of Manjo Aggarwal Vs DCIT 113 ITD 377, Delhi SB it has been held in case of accommodation entry provider as under:- 13. We have carefully considered the facts and the rival contentions. In our view, .....

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