TMI Blog2017 (8) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... or The Revenue : Sh. H N Singh, CIT-DR ORDER PER Bench These are bunch of fourteen appeals being cross appeals filed by the Revenue as well assessee for assessment years 2004-05 to 2010-11 before the Income Tax Appellate Tribunal(hereinafter after called the tribunal ), and are directed against the common appellate order dated 25th March, 2013 passed by learned Commissioner of Income Tax (Appeals)-38, Mumbai (hereinafter called the CIT(A) ), for assessment year s 2004-05 to 2010-11. 2. All the appeals raises common issue concerning computation of the income arising from activities of accommodation entries provided by the assessee to various entities and to bring it to tax within the provisions of the Income-tax Act,1961 (Hereinafter called the Act ), for assessment years 2004-05 to 2010-11. 3. First we shall take up cross appeals for assessment year 2004-05. The assessee s appeal for assessment year 2004-05 is ITA no.4913/Mum/2013 while Revenue s appeal is ITA no. 4712/Mum/2013. 4. The brief facts of the case are that search and seizure operations u/s 132(1) of the 1961 Act were carried out by Revenue at the residence and business premises of M/s Orbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of co-operation by the assessee, the AO was left with no choice but to proceed to pass an ex5 parte assessment order in accordance with provisions of Section 144 of the 1961 Act. It was observed by the AO that during the course of assessment u/s 148 of the 1961 Act, the then AO after quantifying the issue of bills/payments (based on impounded diaries/documents) recorded the statement of the assessee on oath u/s 131 on 02-12-2011. In this statement recorded on oath, the assessee explained modus operandi of its activities in response to question no 5 wherein it is stated that when any party contacts assessee for bills, he issues bills to them and collect cheques from them which is deposited in assessee s bank account which is withdrawn in cash and given back to the party after deducting his commission in the range of 0.30-0.40%. Similarly for cheque discounting, it was submitted that cash was given in lieu of cheque for which the assessee charged commission in the range of 0.30- 0.40%. It was submitted that no commission was received at the time of issuance of bills but the same was received when cheque received against bills is discounted in the bank. It was submitted that onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e did not produce any bank statement and the income was not substantiated by the assessee nor bills issued by the assessee were substantiated by the assessee. Thus, for the year under consideration, the assessee did not co-operated and did not provide any information to the AO such as bank statements, summary of bills issued by the assessee. The AO left with no option estimated the income of the year by taking average of income for the next three succeeding years from the issuance of accommodation bills, which comes to ₹ 26,16,464/- which was brought to tax by the AO as income from undisclosed sources for the impugned assessment year vide assessment order dated 30-12-2011 passed by the AO u/s 153C r.w.s. 144 of the 1961 Act. 5. Now we will take up issues for assessment year 2005-06, We have observed that similar facts were there before the AO as were there before the AO for AY 2004-05 and the AO confirmed additions to the tune of ₹ 46,62,057/- as income of the assessee for the assessment year 2005-06 based on the average income of the assessee for succeeding three years from the issuance of accommodation bills, vide assessment order dated 30-12-2011 passed by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order dated 30-12-2011 passed by the AO u/s 153C r.w.s. 143(3) of the 1961 Act for AY 2009-10( u/s 144 of the 1961 Act for AY 2010-11). 8. Aggrieved by the assessment orders dated 30-12-2011 passed by the AO for seven assessment years 2004-05 to 2010-11, the assessee filed appeals with learned CIT(A). 9. The said appeals filed by the assessee before learned CIT(A) for seven assessment years 2004-05 to 2010-11 are disposed off by learned CIT(A) vide common appellate order dated 25-03-2013. We will now discuss the findings and observations of learned CIT(A) for all the seven assessment years 2004-05 to 2010-11 which found mentioned in the common appellate order dated 25- 03-2013 passed by learned CIT(A). The assessee has raised common grounds before the learned CIT(A) that reasonable time has not been granted by the AO to produce bank statements and other details and hence principles of natural justice was violated. The assessee was given an opportunity again to file all details during appellate proceedings by learned CIT(A) as well during remand proceedings by the AO to produce all bank statements as well other supporting documents to show that the assessee was not involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived by the assessee. The learned CIT(A) directed the assessee to submit these details before the AO, and the AO was directed to submit a report in respect of any material on the basis of which such commission income was estimated in AY 2004-05, 2005-06, 2009-10 and 2010-11. The AO was asked to furnish the details of persons who have transacted business with the assessee. The assessee submitted that it is not maintaining any books of accounts except keeping and maintaining diaries/ note book where the details regarding issuance of bills is recorded on left side and cheque received are noted on the right side and the said note book/diaries were impounded by the Revenue. W.r.t. charges of discounting of cheques it was submitted that it is similar to pay order charges of bank or draft issued by the bank and in similar cases, the other businessmen have reported income to be 0.30-0.40%. The AO submitted remand report wherein contents of the assessment order were reproduced by the AO. The assessee on its part in reply to remand report in rejoinder reiterated its submissions before learned CIT(A). The learned CIT(A) issued enhancement notice to the assessee as to explain why co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) observed that perusal of bank statement of Standard Chartered Bank clearly reveals that the assessee deposits cheques which are immediately withdrawn by the assessee in cash after deposit, which is a peculiar feature of accommodation entry provider activities. The learned CIT(A) observed that the assessee was asked to give details of the persons with whom the assessee has transacted such as name, address, PAN, bank details, telephone numbers and other information to identify the parties who have transacted with assessee but the assessee did not furnish the said details. The assessee was also asked to establish the rate of commission received from the persons who have transacted with the assessee, against which the assessee has only stated that the rate is 0.30-0.40% without bringing any evidence on record. It was observed by learned CIT(A) that the assessee has taken a stand that no books of accounts and other requisite details are maintained by him. It was also observed by learned CIT(A) that even in response to enhancement notice to enhance commission to 2% of the gross receipts, the assessee has again reiterated that the commission earned was only to the extent of 0.30-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vikash Trading Engineering Co. 2006-07 1,50,96,740 2. Perfect Steel Industries 2006-07 4,06,77,735 3. Rishab Enterprises 2006-07 2,00,00,000 Sub-total(for F.Y.2006- 07) 7,57,74,670 4. Perfect Steel Industries 2007-08 14,21,09,460 5. Mittal Trading Company 2007-08 7,37,47,475 6. Rishab Enterprises 2007-08 1,20,42,472 7. New Era Enterprises 2007-08 1,31,49,006 8. Shree Yamuna Impex 2007-08 85,10,504 9. Vitrag Enterprises 2007-08 1,25,28,746 10. Om Corporation 2007-08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of the value of bills issued as the basis for arriving at the net income, detailed as hereunder: F.Y. A.Y. Bills issued (In Rs.) Net Commission @2% (In Rs.) 2005-06 2006-07 3,16,45,356 6,32,907 2006-07 2007-08 20,55,91,983 41,11,839 2007-08 2008-09 67,8568,044 1,35,71,380 AY 2004-05 and 2005-06 The learned CIT(A) observed that it is only for the AY 2006-07, 2007-08 and 2008-09, the bills have been found during the survey proceedings u/s 133A on 13-12-2007 and the same were quantified so as to arrive at the quantum of bogus bills issued by the assessee. It was observed by learned CIT(A) that such evidences were not unearthed in respect of assessment years 2004-05, 2005-06, 2009-10 and 2010-11 during the investigation proceedings. It was observed that even during assessment proceedings as well remand proceedings, specific evidences have not been brought on record. The learned CIT(A) ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 33,45,600/-. The learned CIT(A) observed that the assessee has not produced books of accounts, bank statements, transaction details and evidences as to verify genuineness of the loss. Thus, since the assessee did not discharged the onus, the said loss was not allowed by learned CIT(A). The learned CIT(A) did not allow the carried forward of loss of ₹ 30,83,557/- for AY 2010-11 as the assesee did not produced books of accounts, bank statements, transaction details and evidences so as to verify the genuineness of the said loss. Thus, since the assessee did not discharged the onus the alleged loss cannot be recognized as held by learned CIT(A). The said appeals filed by the assessee before learned CIT(A) for seven assessment years 2004-05 to 2010-11 were disposed off by learned CIT(A) vide common appellate order dated 25-03-2013 as set out above. 10. Aggrieved by the appellate order dated 25-03-2013(common order for all the seven AY) passed by learned CIT(A) for assessment years 2004-05 to 2010-11, both Revenue and assessee are aggrieved and have filed cross appeals before the tribunal. 11. Before the Bench, arguments were raised by both the rival parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Group u/s 132(1) of the 1961 Act.It is submitted that for AY 2004-05 and 2005-06, there was no bogus bills issued by the assessee as the business of providing accommodation entries started after the end of these relevant previous years.It was submitted that learned CIT(A) adopted income of commission @2% while the assessee only earned income @0.30-0.40% against bogus bills and also further benefit of relevant expenses incurred by the assessee should also be provided against said income.It was submitted that similarly no income can be brought to tax for AY 2009-10 and 2010-11 as business stood closed after Revenue conducted survey u/s 133A on 13-12-2007. It is submitted that tribunal in large number of cases have adopted rate of commission @0.15% and further allowance of expenses to the tune of 50% was allowed by the tribunal. It is prayed that the same yardsticks may be adopted in these cases also which are similar to those cases. The learned counsel for the assessee drew attention to the following orders of the tribunal: a) Goldstar Finvest Private Limited v. ACIT in ITA no. 2699/Mum/2013 for AY 2014-15 vide orders dated 30.11.2015 b) Mihir Agencies Private Limited v. DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of 0.15% was upheld while further deduction of expenses to the tune of 50% was also allowed by the tribunal. The said orders find mentioned in preceding para s of this order. It is submitted that for the AY 2009-10 income is computed based on bogus bills to the tune of ₹ 5.93 crores which was found based on search u/s 132(1) on Orbit Group on 11-02-2010. It is submitted that income for AY 2004-05, 2006-07 and 2010-11 is estimated keeping in view evidence of business conducted by assessee and keeping in view non-coperative attitude of the assessee. It is also submitted that the appeals of the Revenue be allowed and that of the assessee be dismissed. It is submitted that Revenue appeals even if tax effect is low cannot be dismissed as the appellate order of learned CIT(A) is an consolidated and common order for AY 2004-05 to 2010-11 wherein tax effect is more than ₹ 10 lacs and hence CBDT circular of December 2015 is not applicable. 13. We have considered rival contentions and perused the material on record including cited case laws by the rival parties. We have observed that the assessee is a Chartered Accountant. The assessee had admitted to be engaged in the acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as benamidar, is an organized scheme of activities undertaken by the assessee by series of accommodation transactions carried out through these web of large number of Benami concerns, entities and persons created, managed and controlled by the assessee as Benamidar with an objective to defraud Revenue, launder black money, wreck and destroy socio-economic fabric of the Indian Economy with a view to create an havoc in the Indian Economy by introduction and circulation of menace of black money in the system. These activities so claimed to be the normal business activity by the assessee which is infact laundering of black money is denounced world over and stringent laws are put in place to curb and control this menace across globe. The assessee was surveyed by Revenue u/s 133A of the 1961 Act on 13-12-2007 wherein incriminating documents were found and impounded by Revenue which contained details of the activities of accommodation entries carried on by the assessee. The statements on oath were recorded by Revenue on 13-12-2007 wherein the assessee has admitted to be engaged in issuing bogus bills in lieu of commission income. There was a search action u/s 132(1) of the 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor bank statements of these concerns, entities and persons were furnished. It is simply denied that no books of accounts were maintained by the assessee of all these benami concerns, entities and persons while only note book/diaries entries were maintained wherein on the left side of the note book/diaries is written as to the bill issued while on the right side it is written cheque realized against the said bill issued by the assessee, which note book/diaries stood impounded by Revenue on 13-12-2007 during the course of survey action u/s 133A. The AO worked out commission income @1% based on billing plus receipt as is reflected in the diaries/ note books impounded in survey proceedings u/s 133A as well information collated during search action u/s 132(1) on 11-02-2010 against Orbit Group, while the learned CIT(A) enhanced the same to 2% based on bogus bills issued by the assessee again worked out based on the said incriminating material found in survey u/s 133A against assessee on 13-12-2007 as wells search action u/s 132(1) of the 1961 Act against Orbit Group on 11-02-2010. The income of the assessee for AY 2004-05 and 2005-06 was assessed by the AO based on estimation of commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal decisions so referred to by the assessee will not be applicable more-so keeping in view factual matrix of the appeals before us. Reference is drawn to a recent decision of Hon ble Supreme Court in the case of Binoy Viswam v. UOI reported in (2017) 82 taxmann.com 211(SC), wherein Lordships have held in no uncertain terms that menace of the black money which is deep rooted in the economy need to be tackled by taking multiple actions at the same time, by holding as under : 99. Unearthing black money or checking money laundering is to be achieved to whatever extent possible. Various measures can be taken in this behalf. If one of the measures is introduction of Aadhaar into the tax regime, it cannot be denounced only because of the reason that the purpose would not be achieved fully. Such kind of menace, which is deep rooted, needs to be tackled by taking multiple actions and those actions may be initiated at the same time. It is the combined effect of these actions which may yield results and each individual action considered in isolation may not be sufficient. Therefore, rationality of a particular measure cannot be challenged on the ground that it has no nexus with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he premise underlying the concept of peak credit is the squaring up of the deposits in the account with the corresponding payments out of the account to the same person. In Bhaiyalal Shyam Bihari v. CIT (supra), the Allahabad High Court explained that benefit of peak can be given only when the assessee owns up all the cash credits in the books of accounts. It was further held: For adjudicating upon the plea of peak credit the factual foundation has to be laid by the assessee. He has to own all cash credit entries in the books of account and only thereafter can the question of peak credit be raised. 18. In that case, it was held that as the amount of cash credits stood in the names of different persons which the Assessee had all along been claiming to be genuine deposits, withdrawals/payments to different persons during the previous years, the Assessee was, therefore, not entitled to claim the benefit of peak credit. Later in CIT v. Vijay Agricultural Industries (supra), it was reiterated that: The principle of peak credit is not applicable in case where the deposits remained unexplained under Section 68 of the Act. It cannot apply in a case of different depositors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned order of ITAT is, accordingly, set aside and the order of the AO is restored to file. Reference is also drawn to the decision of Hon ble Calcutta High Court in the case of Rajmandir Estates Private Limited v Pr. CIT (2016) 386 ITR 162(Cal. HC), wherein Lordships has discussed the concept of laundering of black money as follows: In a commentary on the Prevention of Money Laundering Act, 2002 by Dr. M. C. Mehanathan published by Lexis Nexis, 2014, the steps of money laundering are described as follows:- STEPS OF MONEY-LAUNDERING Although money-laundering often involves a complex series of transactions, it generally includes the following three basic steps: 1. Placement It involves introduction of the proceeds of crime into the financial system. This is accomplished by breaking up large amounts of cash into smaller sums that are then deposited directly into a bank account, or by purchasing monetary instruments, transferring the cash overseas for deposit in banking/financial institutions, use for purchase of high value things such as gold, precious stones, art works etc. and reselling the same through cheques or bank transfers etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities below, wherein no information was provided to the Revenue and the Revenue was left to determine and compute the income based on survey conducted on the assessee u/s 133A of the 1961 Act on 13-12-2007 as well search u/s 132(1) conducted on Orbit Group on 11-02-2010. The plea raised before learned CIT(A) of non adherence to principles of natural justice by the AO while framing assessment order, was a false plea as despite being granted opportunities by learned CIT(A) and AO in remand report proceedings, no information/documents were forthcoming from the assessee. Under these factual matrix of the case which we have discussed in preceding para s of this order, we are now deciding all these appeals with following express directions/observation for compliance by the assessee as well authorities below, in exercise of the powers of wide amplitude vested with us under the provisions of the 1961 Act as being custodian of the 1961 Act to enforce implementation of the provisions and mandate of the 1961 Act, as under: a) The orders of the authorities below for AY 2004-05 to 2010-11 are directed to be set aside and all the issues in these appeals are restored back to the file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted to have entered into benami transactions of which the assessee is benamidar including explaining sources of making investments in these concerns as own capital for doing these activities which the AO shall examine on merits and thereafter bring to tax the same if sources of investments in these concerns by the assessee are not properly/satisfactorily explained. e) The claim of the assessee to have earned commission income of 0.30-0.40% is a self confessed claim and we do not find any material/evidence on record which could have substantiated this claim of the assessee. The onus and burden of proof is on the assessee to substantiate such claim. f) The assessee is directed to produce evidences to substantiate receipts which found credited in these benami bank accounts and/or its books of accounts, to establish identity and creditworthiness of the person from whom receipt originated and the genuineness of the transactions, as mandated by provisions of the 1961 Act. The assessee is also directed to co-relate and evidence the payments made out of these receipts in order to get benefit of set-off, as is available in accordance with law. g) In view of the admit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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