TMI Blog2019 (5) TMI 1604X X X X Extracts X X X X X X X X Extracts X X X X ..... riod for which assessment u/s 153C could be framed. Accordingly, we direct the A.O to verify the factual position as regards the date on which the books of accounts or documents or assets seized during the course of search proceedings were delivered by the A.O of the searched person to the A.O of the assessee i.e the person other than the searched person. Apart there from, in case the A.O of the searched person and that of the assessee is the same person, then the date of recording of satisfaction by the A.O in the file of the assessee i.e the person other than the searched person, shall be taken as the relevant date for reckoning the period of six assessment years for which assessments could have been framed u/s 153C. In case, the claim of the assessee that the year under consideration vis. A.Y.2007-2008 falls beyond the scope of six assessment years from the aforementioned date of recording of satisfaction or receiving of documents or assets seized or books of accounts by the A.O of the assessee, as the case may be, then the assessment framed by the A.O shall stand vacated. The Additional Ground of appeal raised by the assessee is allowed in terms of our aforesaid observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viding of accommodation entries, however, the very basis for quantifying the estimation of such commission income does not find favour with us. Be that as it may, in our considered view, the matter requires to be restored to the file of the A.O with certain specific directions. Undisclosed silver weighing 11.2 Kgs and cash - undisclosed income of the assessee for the previous six assessment years - HELD THAT:- As we have restored the issue as regards the quantification of the undisclosed income of the assessee to the file of A.O for fresh adjudication for the year under consideration and the preceding years, therefore, in all fairness the said issue is also restored to his file for adjudicating the same afresh. In case, the assessee is able to substantiate in the course of set aside proceedings that he had sufficient funds available with to explain the investment made towards the value of 11.2 kg of silver jewellery and the cash of ₹ 11,00,000/- found from his locker no. 596 during the course of the search proceedings, then the addition to the said extent towards unexplained investment shall stand deleted. We do not find favour with the claim of the ld. A.R that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s whose details are included in para 4(3)(v) and list B of the assessment order but without communicating anything to the appellant in this regard. 3. The authorities below have erred in assessing the income/ upholding the assessment without specifying the section or head of the Income Tax Act, 1961 under which it is taxable. 4. The authorities below have erred in taxing the short term capital gain/upholding the same at normal rates instead of the prescribed rate of 10%. 2. Further, the assessee has also raised an additional ground of appeal for the year under consideration viz. A.Y 2007-08, which reads as under :- The above appeal was slated to be heard on 01.04.2019 and after part hearing it was adjourned to 04.04.2019. Now it is to be heard on 10.05.2019. The appellant requests the Hon. Bench to admit the enclosed additional ground of appeal. 3. As the assessee by raising the aforementioned additional ground of appeal has assailed the validity of the jurisdiction assumed by the A.O u/s.153C of the Income-tax act, 1961 (for short I-T Act ), therefore, the same being purely a legal issue, is adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of locker was though issued in the name of M/s Patel Ashokkumar Mohanlal Ni Co., however, the locker was found to be allotted in the name of the assessee. In the backdrop of the aforesaid facts the statement of the assessee was recorded u/s. 132(4) of the I-T Act on 20.11.2012. Initially, the assessee in his statement distanced himself from the aforementioned concern viz. M/s Patel Ashokkumar Mohanlal Ni Co. and claimed that he was not aware of any such entity. However, at the same time, the assessee stated that the cash of ₹ 11,00,000/- and silver valued at ₹ 7,23,060/- that was found and seized from the aforesaid locker No. 596 belonged to him. On the basis of the incriminating material and the valuables found and seized from the locker, proceedings u/s.153C of the I.T Act were initiated in the case of the assessee. In compliance to the notice issued to the assessee u/s.153C r.w.s.153A of the Act, the assessee filed a copy of his Original return of income for the year under consideration viz. A.Y.2007-2008, that was earlier filed by him u/s 139(1) on 31.07.2007. 7. During the course of assessment proceedings, it was observed by the A.O tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, vide his letter dated 09.03.2015 once again tried to distance himself from the documents which were found and seized from his locker during the course of the above stated search and seizure proceedings. In sum and substance, the assessee on account of multiple grounds had tried to impress upon he A.O that no adverse inferences on the basis of the documents which were found and seized from locker No.596 during the course of the search proceedings were liable to be drawn in his hands. The assessee in the course of the assessment proceedings tried to persuade the A.O that no estimation of commission income in his hands could be made on the basis of the aforesaid documents for certain reasons viz (i) that, it could not be substantiated that the assessee had any connection with the parties whose documents were seized from his locker No.596; (ii) that, no reference as regards the fate of the notices issued u/s.133(6) of the I-T Act to the aforementioned parties by the department was conveyed to him; (iii) that, as the papers found in the locker No.596 were the photocopies of returns, challans etc., hence, no adverse inferences on the basis of the same could vali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forementioned parties, it was observed by the A.O that as 90% (approx) of the letters issued to the said parties were returned unserved by the postal authorities, thus, there was no occasion for confronting any such information to the assessee. It was also observed by the A.O that all the efforts to locate the aforementioned parties had also gone in vain. On the basis of his aforesaid deliberations, the A.O was of the view that the claim of the assessee that as he was not the proprietor/partner or director in either of the aforementioned concerns, therefore, no adverse inferences as regards the documents pertaining to the said parties was liable to be drawn in his hands did not merit acceptance. 10. The A.O in the course of assessment proceedings, called for the requisite details from the Economic Intelligence Unit, Sales Tax Department, Maharashtra as regards 45 parties whose documents were found and seized from the locker No. 596 of the assessee during the course of the search proceedings. In reply, the Sales Tax Department furnished the details as regards 37 parties, which were tabulated by the A.O as List A . Insofar the remaining 8 parties were concerned, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the respective years. 12. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorised Representative (for short A.R ) of the assessee, at the very outset of the hearing of the appeal assailed the validity of the jurisdiction assumed by the A.O for framing the assessment u/s.153C of the I-T Act. It was submitted by the ld. A.R, that as per the mandate of Sec. 153C the assessments/reassessments for six assessment years in the case of the assessee was to be reckoned from the date of handing over of assets/documents by the A.O of the searched person to the A.O of the assessee i.e the person other than the searched person. Apart there from, it was averred by him that in case where the A.O of the person in respect of whom search was conducted, as well as that of the other person is one and the same, then the date on which satisfaction of the A.O of the assessee is recorded, would be the date on which the A.O is to be assumed to have taken possession of seized assets/documents in his capacity as that of the A.O of the person other than the one in respect of whom search has been conducted. In sum and substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irrefutably prove that the assessee was engaged in providing accommodation entries, nor the same could be established in the course of assessment proceedings, therefore, the adverse inferences which were drawn by the lower authorities on the basis of assumptions, presumptions, surmises and conjectures, could not be sustained and were liable to be vacated. In order to buttress his aforesaid contention, it was contended by the ld. A.R that the lower authorities had lost sight of the fact that the locker No.596 could be operated not only by the assessee, but also by three other persons. Apart there from, it was submitted by him that the key of the locker was also not found from the assessee but was recovered from Shri Ashokkumar Mohanbhai Patel. As regards the statement of the assessee which was recorded u/s 132(4) during the course of search operation on 20.11.2012, wherein he had owned the contents of the locker, it was submitted by the ld. A.R that the said statement was thereafter retracted by the assessee on 02.02.2013. The Ld. A.R in order to drive home his contention that no adverse inferences on the basis of the documents found and seized from locker No.596 could validly b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion entries by placing on record the list of nongenuine dealers/parties as were blacklisted by the Sales Tax Department, Govt. of Maharashtra and support the same by way of an affidavit under Rule 10 of the Appellate Tribunal Rules, 1963. In compliance, the assessee had subsequently filed copies of two such lists of hawala dealers/non-genuine dealers comprising of 1552 parties and 2393 parties, respectively. Further, the assessee along with an affidavit had in reference to 37 parties forming part of the list A that was prepared by the AO, therein claimed that names of 13 parties in the said list did not figure in the list of suspicious dealers which were blacklisted by the Sales Tax Department, Govt. of Maharashtra in the month of March, 2013. Apart therefrom, the assessee had also given details as regard the respective turnovers of the said parties. As such, it is the claim of the assessee that as against the aggregate turnover of ₹ 1029,22,10,910/- of the aforementioned 37 parties spread over the period A.Y.2007-2008 to A.Y.2013-2014 turnover of ₹ 216,31,83,843/- pertained to the aforementioned 13 parties whose names did not figure in the aforementioned list of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 on 02.02.2013 was a clearly tutored retraction on his part. It was further submitted by him that now when the aforesaid incriminating documents pertaining to third parties were found lying in the locker of the assessee, therefore, a very heavy onus was cast upon him to explain as to what was the purpose of keeping the said documents with him. The Ld. D.R in order to buttress his aforesaid contention, took us through the relevant extract of the orders of the lower authorities. Further, it was submitted by the ld. D.R that the CIT(A) had most whimsically without giving any reasoning reduced the commission rate of 3% as adopted by the A.O for estimating the income of the assessee, to an arbitrary rate of 0.05%. It was submitted by ld D.R that the order passed by the CIT(A) may be set aside and that of the A.O be restored. 16. We have heard the authorized representatives of both the parties, perused the orders of the lower authorities, material available on record and the judicial pronouncements relied upon by them. We shall first advert to the contention of ld. A.R wherein he has assailed the validity of jurisdiction assumed by the A.O for framing the assessment u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment years immediately preceding the year of search. In our considered view, as the said amendment is prospective in nature, hence, the same would not be applicable to the case of the assessee i.e. for the A.Y 2007-2008. Our aforesaid view is also fortified by the judgment of the Hon ble High Court of Delhi in the case of CIT Vs. RRJ Securities Pvt. Ltd., (2016) 380 ITR 612 (Delhi). Apart there from, we find that the aforesaid view was once again affirmed by the Hon ble High Court in the case of PCIT Vs. Sarwar Agency (P.) Ltd. [2017] 397 ITR 400 (Delhi), wherein it was observed as under: 5. In terms of Section 153 A(1) (b) of the Act, the AO shall assess or reassess the total income of six AYs immediately preceding the AY relevant to the previous year in which the search was conducted. The second proviso to sub-section (1) of Section 153 A of the Act, states that assessment or reassessment relating to any AY falling within the period of six AYs referred to in the said sub-section pending on the date of initiation of the search under Section 132, would abate. 6. The case of the Revenue is that the first proviso to Section 153 C refers only to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnish returns of income in respect of six assessment years relevant to the six previous years preceding the previous year in which the search is conducted. As discussed hereinbefore, by virtue of second proviso to Section 153A, the assessment/reassessment pending on the date of initiation of search abate. In the context of proceedings under Section 153C of the Act, the reference to the date of initiation of the search in the second proviso to Section 153A has to be construed as the date on which the AO receives the documents or assets from the AO of the searched person. Thus, by virtue of second proviso to Section 153A of the Act as it applies to proceedings under Section 153C of the Act, the assessment/reassessment pending on the date on which the assets/documents are received by the AO would abate. In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisdiction to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may have remained undisclosed in the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the impugned order of the ITAT. The appeal is, accordingly, dismissed. 17. We shall now in the backdrop of the aforesaid settled position of law, deliberate on the facts before us. As stated by the ld. A.R, the satisfaction of the A.O of the assessee i.e the person other than the searched person was recorded on 15.01.2014. As such, the period of six years was to be reckoned from the date of recording of such satisfaction , which would thus take within its sweep the period relevant to Assessment Years: 2008-2009 to 2013-2014. Accordingly, as per the ld. A.R, the case of the assessee for the year under consideration i.e. A.Y.2007-2008 would not fall within the scope and gamut of the period for which assessment proceedings u/s153C could be framed. As per the facts stated by the ld. A.R before us, we find substantial force in his contention that the year under consideration viz. A.Y 2007-08 does not fall within the period for which assessment u/s 153C could be framed. Accordingly, we direct the A.O to verify the factual position as regards the date on which the books of accounts or documents or assets seized during the course of search proceedings were delivered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belonged to him can safely be gathered from his statement which was recorded during the course of the search proceedings u/s.132(4) of the Act on 20.11.2012, the relevant extract of which is reproduced as under :- Q.50. . I am showing you the loose papers found and seized from your locker No. 596 maintained with Gold Sukh Safety Vaults Ltd., Kalbadevi, Mumbai containing written pages 1 to 145. The same is marked as loose paper folder Annexure. A-1 in the List / Inventory of A/c. Books etc., found /seized dt.20-11-2012. Please confirm that the same have been found and seized from your locker. Please explain the contents thereof of each page. Ans. I confirm that the above referred pages 1 to 145 have been found from my locker No: 596 maintained with Gold Sukh Safety Vaults Ltd. Kalbadevi. Mumbai. To the best of my knowledge, page number 1 to 145 are photocopies of Income Tax and Sales Tax Return and related documents of those parties for which I have became brokerage, These documents are generally required to get orders from customers to prove the genuinity of the supplier party. I am not in a position to give the detailed explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contents thereof of each page. Ans. I confirm that the above referred pages 1 to 154 have been found from my locker No. 596 maintained with Gold Sukh Safety Vaults .Ltd., Kalbadevi Mumbai. To the best of my knowledge, the pages are copies of VAT challans and PAN card photocopies. I am not in a position to give the detailed explanation of each page at this point in time. However I shall give the same as and when required. Q.54 In response to Q.No. 52 and Q. No. 53 you have stated that these are photocopies of VAT challans and PAN card copies. You are asked as to why the photocopy of VAT Challans and PAN card copies of other firms/entities are kept in your locker. Ans. These documents are generally required to get orders from customers to prove the genuinenity of the supplier and purchase party. 20. On a perusal of the aforesaid specific replies to the queries as regards the seized documents viz Annexure-A/1 to A/4, it can safely or rather inescapably be concluded that the said documents belonged to the assessee. As such, we are not inclined to accept the contention of the ld.A.R that the assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same was the rate which was prevailing in the market in such type of transactions. However, the said view so taken by the A.O is shorn of any basis which could have persuaded us to subscribe to the same. 23. On appeal, the CIT(A) though principally agreed with the A.O that the assessee was involved in the business of providing accommodation entries, but in the totality of the facts he confined the activities of the assessee only to that of a facilitator, and not as the owner of the aforesaid concerns. As observed hereinabove, the CIT(A) after so concluding restricted the income of the assessee to 0.05% of the total turnover of the aforesaid concerns in the aforementioned respective years. 24. We have given a thoughtful consideration to the issue before us in the backdrop of the observations of the lower authorities, and are persuaded to subscribe to the view taken by them, that in the totality of the facts, it can safely be concluded that the assessee was involved in the business of providing/arranging accommodation entries for third parties. In our considered view, the very fact that PAN Nos, VAT details, Aadhaar cards etc of certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y him. We find that the CIT(A) after concluding that the assessee in the absence of substantial infrastructure could not be held to be a bogus entry provider himself, but was facilitating the business of such bogus entry provider concerns, had restricted the commission income to 0.05% instead of 3% that was adopted by the AO. Again, we find that no basis for adopting the commission rate of 0.05% has been given by the CIT(A). 25. Apart there from, we are of the considered view, that no serious efforts had been put up by the lower authorities for concluding on the basis of any supporting evidence that all the 53 concerns, details/documents of whom were found and seized from the locker No.596 of the assessee during the course of the search seizure proceedings, were in fact involved in the business of providing accommodation entries. Admittedly, though the entire state of affairs and the documents relating to the aforementioned parties found lying in the locker No.596 of the assessee raises serious doubts as regards the purpose for which the same were retained by him, however, the same on the said standalone basis could not have justified drawing of an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentary evidence that all the 53 parties on whose turnovers for the respective years the commission income of the assessee as a facilitator/bogus entry provider had been worked out were involved in the business of providing accommodation entries. Thus, the very basis for working out the brokerage income in the hands of the assessee cannot be accepted on the very face of it. Further, as observed by us hereinabove, as the basis for working the commission @3%/0.05% by the AO/CIT(A), is also not backed by any supporting material, therefore, the same does not inspire much of confidence as regards the estimation of the commission income of the assessee, and thus cannot be summarily accepted on the very face of it. In our considered view, the matter has not been appreciated by the lower authorities in the right perspective. Admittedly, we though are in agreement with the observations of the lower authorities that the assessee was engaged in the business of facilitating/providing of accommodation entries, however, the very basis for quantifying the estimation of such commission income does not find favour with us. Be that as it may, in our considered view, the matter requires to be restore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an affidavit under rule 10 of the Appellate Tribunal Rules, 1963. In our considered view, the aforesaid claim of the assessee requires verification and cannot be accepted on the very face of it. We, thus, in terms of our aforesaid observations, direct the AO to consider the material filed by the assessee before us in the course of the set aside proceedings. Accordingly, the commission income of the assessee as regards the turnover of the parties which on the basis of verifications carried out by the A.O in the course of the set aside proceedings are found to be engaged in the business of providing accommodation entries or a part of such network, shall be worked out on an estimate basis, along with a logical reasoning justifying such estimation. 28. We may herein observe, that in case the facts averred by the ld. A.R as regards the date of handing over of the documents or books of accounts or assets by the A.O of the searched person to the A.O of the assessee; or the recording of the satisfaction by the A.O of the assessee in case the A.O of the searched person and the assessee are the same, is found to be in order, then the assessment shall stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee viz. ITA No.7379/Mum/2017 for the assessment year 2012-2013 is partly allowed for statistical purposes. ITA No.7380/Mum/2017 (AY : 2013-2014) : 32. Insofar the grounds of appeal No.1 to 3 raised by the assessee in the present appeal as regards the merits of the case are concerned, the same, we find are similar to those which were raised by him in his appeal for the assessment 2007-08 in ITA No.7374/Mum/2017. As such, our observations and findings given in the aforesaid appeal for A.Y 2007-08 on merits shall also apply mutatis mutandis to the present appeal. 33. The assessee has also assailed before us the addition of ₹ 18,23,060/- made by the A.O on account of undisclosed silver weighing 11.2 Kgs (₹ 7,23,060/-) and cash (₹ 11,00,000/- ), without appreciating that the source of such seized cash and silver would stand explained by the additions made by the A.O towards the undisclosed income of the assessee for the previous six assessment years. Apart there from, the assessee had also assailed the upholding by the CIT(A) of the value of seized silver at ₹ 7,23,060/-, without giving a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration, as under :- i. On the facts and circumstances of the case and in law, the Ld. ClT(A), has erred in directing the Assessing Officer to adopt 0.05% of the total turnover as unaccounted commission, as against 3% adopted by the Assessing Officer, which is based on the admission and averment by the assessee in his statement during the course of action u/s. 132(4) of the Income Tax Act, 1961. ii. On the facts and circumstances of the case and in law, the Ld. ClT(A), has erred in restricting the commission/brokerage income earned by the assessee from 3% to 0.05% of the total turnover, without appreciating the fact that the assessee has not maintained any books of account and commission/brokerage income of 3% of the total turnover, was fixed on the prevailing market rate of the commission/brokerage business. iii. On the facts and circumstances of the case and in law, the Ld. ClT (A), has erred in restricting the commission/brokerage income earned by the assessee from 3% to 0.05% of the of the total turnover, relying upon the seized scribbling which were unsigned and rough papers, without correlating such commission/brokerage i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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