TMI Blog2021 (8) TMI 1316X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the direction of the assessee against remuneration. Most of them, in their statement u/s 132(4), made admission of those facts. They also made admission that they assisted / abetted the assessee in the business of providing accommodation entries. Their PAN Cards, IDs, blank signed cheque books etc were found at centralized premises. They were visiting the centralized premises to sign the blank cheque books as per the directions of the assessee. All these persons had superficial knowledge about nature of business being conducted by their respective concerns. Most of these persons were residing at premises owned by the assessee group. The books of accounts of all these entities were being maintained at two premises in a centralized manner. The books were found in the same computer and audited by common Auditor. The auditor admitted to have signed the financial statements as per the directions of Shri Lunkaran Parasmal Kothari without verifying the books of accounts. This is further fortified by survey action at BKC, Mumbai wherein more than 30 firms were found to be operating from common premises. All the 70 entities were found to have common features in their respective fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ximum transactions of this nature. The rate of commission may not be constant in all the transactions. Therefore, estimating the same merely on the basis of few illustrations only may not be a correct approach. Keeping in view the notions of equity and reasonableness, we have estimated the same @1% per annum which is much more than our estimation in the case of Shri Rajendra P. Jain. The expenses allowance of 25%, in our considered opinion, would be more than enough to take care of the estimated expenses being incurred by the assessee to carry out its operations under all these concerns keeping in view the magnitude of the transactions. The assessee was maintaining all the concerns in a centralized manner. Evidently, the assessee was employing only a limited number of trusted employees only and the expenditure would remain, more or less, constant even if the number of concerns would have become more. The expenditure could not be assumed to have increased in direct proportion to the increase in turnover. Therefore, the estimation as made by Ld. CIT(A) is reasoned one and no further relief could be provided to the assessee, on this account. Having said so, no other benefit / cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r authorities and adjudication thereto by learned first appellate authority could be tabulated in the following manner: - No. Assessment Year (AY) Section under which assessment framed Date of appellate order 1. 2007-08 143(3) r.w.s 147 dated 30/03/2015 26/03/2018 2. 2008-09 143(3) r.w.s. 153A dated 21/03/2016 30/10/2017 3. 2009-10 143(3) r.w.s. 153A dated 21/03/2016 30/10/2017 4. 2010-11 143(3) r.w.s. 153A dated 21/03/2016 30/10/2017 5. 2011-12 143(3) r.w.s. 153A dated 21/03/2016 30/10/2017 6. 2012-13 143(3) r.w.s. 153A dated 21/03/2016 30/10/2017 7. 2013-14 143(3) r.w.s. 153A dated 21/03/2016 30/10/2017 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,26,23,851 4. Alleged commission income @ 0.075% on alleged bogus sales bills 1,71,91,360 Gross unaccounted commission 4,44,66,591 4. On the facts and circumstances of the case as well as in law, the learned CIT (A) has erred in enhancing the appellant income on account of alleged commission income on local purchase, without considering the facts and circumstances of the case. 5. The learned CIT (A) has erred in law and on facts in holding that the data found in the 4 GB white colour sony pen drive, allegedly seized by the Income Tax Department, belong to the appellant. 6. The learned CIT(A) has erred in law and on facts in relying on the confessional statements of various persons without granting any opportunity to the appellant to cross examine them. 7. The learned CIT(A) has erred in law and on facts in holding that the retractions made by the appellant and the other persons are merely after thought without appreciating the true facts and circumstances of the case. 8. The learned CIT(A) has erred in law and on facts by estimating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is estimated commission income. The assessee has also taken legal grounds. Proceedings before Ld. Assessing Officer 2.1 Facts as emanating from case record of AY 2008-09 are that the assessee being resident individual is stated to be engaged in the business of import, export and trading of cut polished and rough diamonds. It filed its return of income for the year under consideration at Rs.3.89 Lacs. However, the assessee group was subjected to Search Seizure Action u/s 132 on 03/10/2013. The Warrant No. 9646 covered the case of the assessee his two sons namely Shri Rajesh B. Jain and Shri Manish B. Jain. Based on the findings of search action, assessment was framed u/s 143(3) r.w.s. 153A wherein the assessee was saddled with additions of Rs.591.95 Lacs vide order dated 21/03/2016. This addition is the sole subject matter of dispute before us. 2.2 During assessment proceedings, in the background of search action, a final-show cause notice was issued by Ld. AO to the assessee on 16/02/2016 in which it was alleged that the assessee along with his son was operating and managing 70 benami concerns including benami concerns in the name of its various employees and ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.3 However, the assessee submitted that he was operating and managing only 9 entities and not the other entities as alleged in the notice. The assessee asserted that the statement given u/s 132(4) was without consent, not voluntary taken by Investigation wing by using threat and coercion. The statements were stated to be given in confused state of mind. Accordingly, retraction was filed vide affidavit dated 15/03/2014. The assessee denied having any business connection with any of the so-called employees / associates. The assessee also denied the ownership of pen-drive by submitting that the same was not found from residential premises but planted from outside. The stated fact were sought to be fortified by submitting that the seizure of the pen-drive was shown after almost 6 days i.e. on 08/10/2013 which could have been seized or inventorized on 04/10/2013 along with the inventory made for credit cards, bank account and jewellery etc. Further, the seizure of pen drive was not made the part of Panchnama annexure, officially drawn on 04/10/2013 and the admission about the same from his son Shri Rajesh Jain was recorded forcibly. In the above background, the assessee denied ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was concerned, market information as available with investigation wing, Mumbai revealed that Shri Bhanwarlal Jain and his son Shri Rajesh B. Jain managed, controlled and operated numerous concerns in the names of various persons who were shown as name-sake directors, partners and proprietors of these entities. Through these entities, the group provided accommodation entries of loans and advances and sales to various parties / beneficiaries against certain commission. The inquiry revealed common features of these concerns having similar business traits like high turnover, assets in the shape of loans advances, debtors with matching creditors and no payment of taxes. After collating the data from different agencies like customs department, Bharat Diamonds Bourses, these entities were identified and arranged in a group based on similar parameter like common address, directors etc. The various entities of Shri Bhanwarlal Jain were found to be having similar characteristics / features as noted above. The same led to search proceedings on the assessee on 03/10/2013 wherein incriminating documents like hand written sheets containing parallel accounts, identical data in various computer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all the companies was being done from these offices and the directors etc. of the concerns would come and sign the cheque books as per the direction of Shri Bhanwarlal Jain. Another significant feature noted by Ld. AO was that the books of account of all these concerns were being maintained in one register and on one computer only. The books of accounts of most of the concerns were audited by common auditor. 2.10 During the course of search, many instances were reported by the search team which indicated that there was an attempt by the assessee to destroy the parallel accounts / incriminating material. In one such instances, the search team apprehended an employee namely Rohit Birawat at CST Terminus, Mumbai when he was attempting to flee from Mumbai to Rajasthan with incriminating material. Three pen drives were found from his possession. The data in pen drive was found to be similar to data found in the pen drive found and seized from assessee s premises. 2.11 Proceeding further, modus operandi of providing accommodation entries was elaborately discussed by Ld. AO in para 4.6. The said modus operandi was duly admitted by the employee-cum-namesake directors / partners / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t recorded in the books of accounts of the benami concerns being managed and controlled by him. In response to question no. 34, Shri Bhanwarlal Jain confirmed of going through the entire excel print outs of parallel accounts maintained in the above-mentioned pen-drive. He also confirmed that the transactions recorded in the said document pertained to business activities of benami concerns managed and controlled by him. 2.15 At para 4.13 of the order, it was noted by Ld. AO that the conduct of the assessee was immensely non-cooperative and he tried to derail the process of investigation. So much so, the assessee remained absent from his residence in the first 3 days since the commencement of search on 03/10/2013 and deliberately avoided coming back to his residential premises thereby showing complete non-cooperation with the Income Tax Authorities. Even after coming back, he did not cooperate and kept evading the questions. 2.16 On the basis of aforesaid facts, following conclusions were drawn by Ld. AO in para 4.14 of the order: - Lunkaran Parasmal Kothari, Anil Khicha, Rajesh Chopra, Ritesh Sfroya, Rohit Birawat, Basant D Jain, Shreyansh L Jain, Vivek Noratmal Jain,Maha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerns and persons appearing in such sheets are managed and controlled by one person/ family. Anil Mandawat who audits 44 of these concerns has stated that the books of accounts of the said concerns are audited on the direction of Lunkaran Parasmal Kothari who is an employee of Bhanwarlal Jain. CA has admitted that he merely puts his signatures on the audit reports of these concerns without verifying their books of accounts. This further proves that the affairs of these concerns are managed and controlled by Bhanwarlal Jain. Bhanwarlal Jain has also admitted that all the concerns (totaling to 70) in the names of various persons are actually controlled and managed by him. 2.17 The affidavit of retraction as filed by the assessee on 27/05/2014 i.e., almost after 8 months of the commencement of search was held to be mere after-thought and a tutored statement. Similar retraction affidavits as filed by other associates-cum-employees were held to be nothing but planned move in tandem to thwart the process of investigation. Glaring contradictions as well as similarities were found in the retraction affidavits. The said retraction, in the light of overwhelming / clinching e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of accounts are maintained in 16 Mohan building, 3SS Road, and 210 JSS Road, Girgaum, Mumbai. Since the entire business is looked after by the assessee assisted by his son Rajesh B Jain, therefore the assessee was taken to the actual business premise where the books of account were found so that the same could be confronted to him. * That the pen drive and the loose sheet contain the parallel books of accounts of the assessee. The pen drive contains details of the concerns in which the assessee is admittedly a partner director and proprietor. * That the department has also established correlation between the parallel accounts maintained on the pen drive and the regular books of accounts of concerns managed and controlled by the assessee. * That the manner in which the accommodation entry is provided by the assessee i.e the movement of cash against cheque and vice versa. * That the department maintains that the assessee through his various concerns genuinely imports diamonds but they are issued to the real importers out of books and accommodation entries of bogus purchases and loans and advances are issued through a complex web of transactions including banks and angar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12 of the impugned order. In the said submissions, the assessee, inter-alia, denied the ownership of the pen-drive and alleged that it was brought from outside and planted at assessee s premises at the fag-end of inordinately extended search operation. The assessee also controverted the confessional statements made during the course of search proceedings. The additions made by Ld.AO were assailed from different angles. 3.2 Keeping in view the assessee s submissions, a remand report was sought from Ld. AO during the course of appellate proceedings. It was reiterated by Ld. AO that innumerable papers in the shape of estimate sheets containing hand written accounts were found and seized. A white color 4GB Sony pen drive containing the name of the beneficiaries who availed accommodation entries was found / seized from assessee s residence containing calendar year-wise name of the beneficiaries, the amount of cash, the detail of brokerage / commission etc. The pen drive was password protected which was cracked with the help of professional software programmers which enabled the department to view the contents therein. The pen drive contained complete details of Angaria Account maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuments, which are handed over to the Appellant or his key employees. Such documents / cheques are used by the Appellant for the efficient running of the entry operator's business. 7. The books of accounts and bank accounts of all such concerns are maintained on the direction of the Appellant in a centralized manner. 8. The books of accounts of the group concerns, blank signed cheques, old stamp papers etc. were found at the secret premises found during the course of search operation, which were not disclosed to any Govt. Department. 9. Shri Anil Mandawat, C.A. has audited 44 of the group concerns. He has admitted that the books of accounts of the said concerns are audited on the direction of Lunkaran Parasmal Kothari. Further, he has admitted that he merely puts his signatures on the audit reports of these concerns, without verifying their books of accounts. 10. There is a confessional statement of the Appellant that all the 70 group concerns in the name of various persons, are actually controlled and managed by him. 11. The various employees / associates / directors / partners like Shri Lunkaran Parasmal Kothari, Shri Anil Khicha, Shri Rajesh Chopra, Shri Rites ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome on imported purchases The Ld. AO has estimated this commission as 27.5 paisa per rupees 100 transaction of import. The same was as per the statement of Shri Lunkaran Parasmal Kothari who stated that the real importers pay up commission varying between 25-30 paisa per rupees 100 of the total import. However, this estimate was on the basis of statements of just few parties whereas the other parties were not examined or if examined, they had nothing to say about the percentage of commission. On the contrary, the assessee himself had admitted to be charging commission @0.02% on the transactions done in 70 concerns. Therefore, due weightage was to be given to confessional statement of the assessee over the other statements made by dummy directors / partners /proprietors. The same also stood corroborated by relevant entries made in the estimation sheets which have also been illustrated in the impugned order. Accordingly, Ld. AO was directed to apply rate of 2 paisa per rupees 100 or 0.02% on imported purchases. Accordingly, partial relief was granted to the assessee under this head. (ii) Commission income on Bogus unsecured loans The Ld. AO has estimated this commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been extracted in Para-52 of the order wherein total additions from AYs 2008-09 to 2014-15 has been estimated @ Rs.6145.86 Lacs as against estimation of Rs.9031.32 Lacs as made by Ld. AO for all the years. In nutshell, a net relief of Rs.2885.45 Lacs has been provided to the assessee. For ease of reference, the quantum additions as confirmed by Ld. CIT(A) could be tabulated in the following manner: - No. Particulars % A.Y- 2008-09 A.Y. 2009-10 A.V. 2010-11 A. Y. 2011-12 A.Y. 2012-13 A.Y. 2013-14 A.Y. 2014-15 Total 1 Commission on Loan 2.40% 22623851 33129586 40746221 56203703 89025203 119485664 81958142 443172370 2 Commission on sales 0.075% 17191360 21285148 25911567 63514274 63400243 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant (In Rs.) 25845378 25978264 29160112 75579125 66772693 43901766 21308363 288545700 3.7 All the other grounds raised by the assessee were dismissed in the appellate order and the appeal was partially allowed. The aforesaid adjudication has given rise to cross-appeals before us. Our findings and Adjudication 4. We have carefully heard the rival submissions, oral as well as written. We have duly appreciated the factual matrix as enumerated by us in the preceding paragraphs. The judicial pronouncements including our own order in Rajendra P. Jain V/s DCIT (ITA Nos.298/Mum/2018 ors.; order dated 03/05/2019), as cited before us during the course of hearing has been deliberated upon. We proceed to deal with the issues in the following manner. 5. The first and foremost argument taken before us is that the pen-drive as found during the course of search proceedings was planted from outside and the admission thereof was taken forcibly in statement of assessee u/s 132(4). The Ld. AR has impressed upon the idea that the search took place on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from Mumbai to Rajasthan with incriminating material. 7. All these facts have been admitted not only by the assessee but also by his son as well as trusted employees in various statements as recorded on oath u/s 132(4) at various points of time. The statements were recorded in the presence of independent witnesses. The contents of the statement were said to be duly explained to the assessee at the time of recording thereof. 8. In the backdrop of such clinching and overwhelming evidences, no substance could be found in the plea that the pen-drive did not belong to the assessee or the same was not found from assessee s premises particularly when the contents of the pen drive completely matched with incriminating material found during the course of search operations. The seizure of the same was duly recorded in the Panchnama which was vouched by independent Panchas. The vital link was established between the pen drive and the estimate sheets as well as the regular books of benami concerns being run by the assessee. Therefore, we do not find any substance in this plea as raised by Ld. AR before us and therefore, we reject the same. 9. So far as the other arguments are concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matrix as well as findings would lead to inescapable conclusion that all the 70 entities under consideration were being managed and controlled by the assessee group and therefore, lower authorities were quite justified in estimating commission income earned by the assessee group from all these benami concerns. 12. Accordingly, Ground Nos.1,2,5,6,7 8 of the assessee s appeal stands dismissed. Ground No.12 stand dismissed since we do not find any violation of principle of natural justice during appellate proceedings. Estimation of Quantum Additions 13. The subject matter of revenue s appeal as well as remaining ground of assessee s appeal is related to estimation of quantum additions. For ease of reference, the comparative chart of estimation made by lower authorities in assessee s case as well as rates estimated by us in the case of similarly placed assessee namely Shri Rajendra P. Jain could be tabulated in the following manner: - No. Nature of Transaction Estimation of Ld. AO Estimation of Ld. CIT(A) Our Estimation in Shri Rajendra P. Jain 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) 5. Expense Allowance 25% of Gross Commission i.e. the stand of Ld. CIT(A) is confirmed 14. The estimation of 0.02% on import purchases as made by Ld. CIT(A) is based on confessional statement of the assessee and the same is also corroborated by relevant entries made in the estimation sheets which is illustrated in the impugned order. Therefore, we confirm this estimation. The estimation of commission on local purchase is based primarily on the assumption that the assessee would have earned commission on all the transactions. However, there is no reference to any incriminating material while making this enhancement. The assessee has also not admitted to have earned such commission. Thus, the same is based on mere presumption and hence, we are inclined to delete the same. The estimation of 0.05% on accommodation entries of bogus purchases provided by assessee is based on our estimation in the case of Shri Rajendra P. Jain. Our estimation with respect to bogus unsecured Loans provided by assessee draw strength from the fact that the assessee has carried out maximum transactions of this nature. The rate of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the jewellery as declared by the assessee was higher than jewellery actually found. However, rejecting the submissions, the said amount was added to the income of the assessee. 18. During appellate proceedings, the assessee filed detailed reconciliation statement of the jewellery found during the course of search vis- -vis jewellery as declared in various wealth tax returns. In support thereof, the assessee filed copies of wealth tax returns, statement of net wealth and valuation report etc. A perusal of the reconciliation statement revealed that the declared jewellery in the books of accounts of the assessee as well as his family members was far more than jewellery actually found during the course of search action. Accordingly, the addition was deleted. Aggrieved, the revenue is in further appeal before us. 19. From the factual matrix, it is quite evident that during appellate proceedings, the assessee was able to reconcile the jewellery as found during the course of search operations vis- -vis jewellery declared in the wealth tax return. It is undisputed fact that declared jewellery was more than actual jewellery found during search operations. The findings of Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome could have been formed. The new tangible material showed possible escapement of income in the hands of the assessee. At this stage, nothing more, in our opinion, was required to reopen the case of the assessee in terms of decision of Hon ble Supreme Court in Raymond Woollen Mills Ltd V/s ITO (1999; 236 ITR 34). Further, the reopening was initiated as per due process of law and there was no violation of principle of natural justice. The plea, thus raised by Ld. AR, stands dismissed. 24. The Ld. AR has raised another legal plea that reopening provisions could not be resorted to by the revenue once search was initiated u/s 132. This would be so since the non-obstante clause of Sec.153A precludes Ld. AO from issuing notice u/s 148 of the Act. The Ld. AR impressed upon the idea that the phrase notwithstanding anything contained as used in opening line of Sec.153A as opposed to phrase notwithstanding anything to the contrary contained as used in certain other provisions would preclude the applicability of other sections of the Act whether contrary or not. It was submitted that Ld. AO could initiate proceedings u/s 153A with respect to assessment years beyond the period of 6 year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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