TMI Blog2022 (5) TMI 1328X X X X Extracts X X X X X X X X Extracts X X X X ..... , rebutted. This is particularly so as the AO categorically states (at para 1 of his order) that notice u/s. 148 was issued on 30/03/2016 after taking approval from the appropriate authority . No wonder that the assessee s claim before the ld. CIT(A) is ambivalent, stating that the proceedings had been initiated without obtaining of Approval or the Approval is not in accordance with law, clearly indicating of the assessee being not aware of or, in the least, not sure of the actual facts of the case. Rather, the assessee s request dated 11/11/2016 to the AO cannot be regarded as a valid request in law as the assessee had till then admittedly not furnished any return in response to the notice u/s. 148(1), which was filed only on 18/11/2016. There is no claim and nothing on record to exhibit that a request was made after the filing of the return. We are unable to appreciate the assessee s case. True, the ld. CIT(A) has failed to consider the assessee s plea and issue a finding thereon, so that the assessee s grievance in the matter is understandable. However, the fact of the matter is that there is nothing on record to exhibit that the assessee did indeed request the AO to prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hibit both, the extent of commission as well as prove the transaction to be a financial accommodation transaction. No such attempt has been made by the assessee at any stage, whose case remains, thus, wholly unsubstantiated, accepted by the ld. CIT(A) without any evidence whatsoever; rather, claiming that the AO had accepted the assessee s claim as to cheque issue business , as well as income therefrom. As question that still survives is if the assessment as made can be upheld? In our clear view, the answer is No . The reason is simple. The starting point of the investigation process is the search on 21/03/2016 on three individuals who had admitted running a racket of providing financial accommodation entries at a commission @ 0.15% to 0.2%. The assessee is a part of this racket. If that be true, how can the sum deposited in the bank accounts be regarded as that of the account holders, i.e., the persons doing the said business? Yes, we are conscious that the investigation report clearly states of this being done through layering . But, then, there has been no further investigation by the Revenue in the matter. Sure, we say so only on the basis of the material on record, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, which itself involves high risk) scaling up the risk factor inordinately, while, as simple economic theory and plain common sense advocate, there is a positive correlation between the risk return. Further, it also doesn t explain cash deposit of Rs. 6 lacs in Bank Account # 2, against which there are, as afore-stated, no corresponding debits, i.e., on the basis of the material on record, including the explanation furnished. The peak balance of the two bank accounts for the relevant year is not on record. Also, we are conscious that it may be that there are business transactions subsequent to the date of the peak balance/s, so that the income attributable to those transactions, though not manifesting in the form of bank balance/s (or, more aptly, a higher bank balance/s), would warrant being assessed as income, i.e., in addition to the peak balance/s. We are also, in view of the unsatisfactory factual determination (for which it is the assessee, being in the know of his financial affairs and obliged by law to explain the same, who, having failed to, is principally responsible), and the long period that has since lapsed, disinclined to restore the matter back, and consider it pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value transactions, including cash deposits, details of which for the relevant year (f.y. 2008-09) are as follows: (page 3 of the assessment order) a) cash deposit of Rs. 1,52,19,400/- in bank A/c No. xxxx1088. b) cash deposit of Rs. 600,000/- in bank A/c No. xxxx3970. c) regular credits debits in A/c No. xxxx1088. d) total credits in the Bank A/c No. xxxx1088 at Rs. 14,31,96,700/-. e) total debits in the Bank A/c No. xxxx1088 at Rs. 14,31,51,500/-. 2.2 The assessee, in assessment proceedings initiated by the issue of notice u/s. 148(1) on 30/03/2016, followed by notice u/s. 142(1) on 15/06/2016, explained the credits in his two bank accounts aforesaid as received cash (or cheque) from his customers towards issue of cheque (or outstation cheque) and for which commission is charged @ Rs. 150 200 per lakh, i.e., at an average of Rs. 175 per lakh, and which also explained the admitted income of Rs. 1,51,000, i.e., after deducting expenditure on gross income of Rs. 2,51,662 (on a total cheque issue of Rs. 1438.067 lacs). This, however, was found not acceptable by the Assessing Officer (AO) in the absence of any substantiation of his claim/s by the assessee, who a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12/2016 is bad in law. The same was argued before us in terms of non-obtaining of approval by the AO from the Pr. CIT-1, Jabalpur, or of it being not in accordance with law, which was so inferred in view of non-supply thereof despite the AO being requested for a copy thereof vide the assessee s letter dated 11/01/2016. The ld. CIT(A), rather than calling for the said Approval, i.e., as requested, chose to ignore the said plea in his order. We were accordingly urged by Shri Ghai, the ld. counsel for the assessee, to call for the assessment record, or otherwise direct the AO to produce the approval u/s. 151. 3.2 We are unable to appreciate the assessee s case. True, the ld. CIT(A) has failed to consider the assessee s plea and issue a finding thereon, so that the assessee s grievance in the matter is understandable. However, the fact of the matter is that there is nothing on record to exhibit that the assessee did indeed request the AO to provide a copy of the said approval. Then, again, what, one wonders, prevented the assessee to seek an inspection of his assessment record (either directly or even under the RTI Act) to ascertain if the same had indeed been obtained, or, as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions reflected in the assessee s two bank accounts aforesaid (not on record). The additions by the AO are on the premise that the assessee has abysmally failed to substantiate his claim of being engaged in the cheque issuing business, i.e., on receipt of cash or local cheque, issuing outstation cheque in the case of the latter. The first is clearly laundering of money, a criminal offence under law. The second would also require a licence from the Reserve Bank of India (RBI), or at least being registered with it as a non-banking financial institution, so that the same is, again, illegal. Our purview in the instant proceedings, however, is to determine factually the income arising from these transactions, i.e., as per the provisions of the Act, as it is only the real income, subject to the provisions of the Act, that is liable to be assessed as income (Poona Electric Supply Co. Ltd. v. CIT [1965] 57 ITR 521 (SC)). The first question that therefore emerges is if the assessee is indeed engaged in the said two business or, put differently, the two limbs of the same business, broadly described as and claimed to be cheque issue business , even if illegal or constituting an offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outstation cheque). Even if the party depositing the cheque, and the outstation party to whom the corresponding cheque is issued, are, as would appear, different, as it is only that which would provide a basis or a rationale to the transaction, both the parties are known and, thus, available for confirmation. A one-to-one correlation between the debits and credits, with the two parties having trade relations, would at once establish that the assessee is not the beneficiary of the sums deposited in his bank accounts. The same would also exhibit if the commission stands paid in his bank accounts, or outside it. For example, a cash deposit of Rs. 1,00,200, as against a remittance of Rs. 1,00,000, would clearly exhibit both, the extent of commission as well as prove the transaction to be a financial accommodation transaction. No such attempt has been made by the assessee at any stage, whose case remains, thus, wholly unsubstantiated, accepted by the ld. CIT(A) without any evidence whatsoever; rather, claiming that the AO had accepted the assessee s claim as to cheque issue business , as well as income therefrom. He has, in fact, clubbed two separate additions of Rs. 152.19 lacs and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al framework, as suggested by the explanation furnished and the material found and analysed by the Revenue (through the Investigation Wing), and which remain unaddressed. Neither the assessee has stated the truth nor has the Revenue made any further investigation in the matter. Following the money trail would have surely led to a better clarity on facts. However, the very fact of it being a part of such racket implies it to be an organized business. As such, it caters to some persons, even if unidentified, outside the assessee. A business implies an exchange. The two facts, i.e., the money laundering and financial accommodation business, on one hand, and the money in his bank account/s belonging entirely to the assessee, on the other, are inconsistent with each other, so that the latter, an inferential fact, which is under dispute, cannot hold. Even if therefore the assessee is unable to establish the source of the moneys deposited in his bank accounts, given the fact of such business being undertaken, only the peak balance in his bank accounts could be added as unexplained money u/s. 69/69A. The second aspect of the matter would be the income earned through such business, which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4/2016, carrying on any other business or vocation during the year. 3.6 The decision by the Tribunal in Raaga Finvest Ltd. (for AYs. 2007-08 to 2011-12) stands relied upon by the ld. CIT(A) (at para 7.2.3 of his order) without as much as mentioning, leave alone discussing, its facts, or showing as to how the same are applicable in the facts and circumstances of the instant case, so that the said reliance is to no moment. An unverified copy of the said order (in ITA Nos. 256-259/Jab/2013 218/Jab/2015, dated 31/8/2016) stands submitted after hearing without being asked to by the Bench, with the Registry of the Tribunal. This is wholly unwarranted, in complete disregard of the process of hearing, and the rights of the opposing side. The same being not on record could not be relied upon and, consequently, responded to by the other side. We thoroughly discountenance, and express our extreme displeasure in the surreptitious manner in which material is sought to be placed on record by the assessee. The said Order was, nevertheless, read, to find it as wholly inapplicable. The same is a case of a NBFC, duly maintaining books of account disclosing commission income, charged separate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts being the same. The argument is thus de hors anything on record. How can, one wonders, the same be relied upon, as we are urged to. How, again, one wonders, the AO s order (in case of Rakesh Yadav) be binding on the ld. CIT(A) in his case, much less in the assessee s case. We are, therefore, constrained to regard the argument as without basis, and is in fact referred to only due to the specific insistence of Shri Ghai during hearing to take the same on record. We may though, for the sake of completeness of our order, clarify that the principle of res judicata is not applicable to the proceedings under the Act (viz. New Jehangir Vakil Mills Co. Ltd. v. CIT [1963] 49 ITR 137 (SC); M.M. Ipoh v. CIT [1968] 67 ITR 106 (SC)). The AO is, therefore, at liberty to adopt a different view even in an assessee s own case, stating though the reasons therefor. Judicial propriety would also demand of him to make a mention of the earlier assessment and state the reasons for taking a different view. One additional fact could make a world of difference, as explained in Padamasundra Rao v. State of Tamil Nadu [2002] 255 ITR 147 (SC). Then, there could be some development in law, or a dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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