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TMI Blog2023 (5) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... .04%. We may refer to grounds of appeal, which are common in all the assessee's appeals, from AY 2016-17 which read as under :- "1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals)[CIT(A)] is bad both in the eye of law and on facts. 2. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in restricting the addition to Rs.2,37,66,799/- made by the AO on account of commission income treating the assessee as an accommodation entry provider. (ii) That the addition has been confirmed by arbitrarily applying the commission rate of 1.04% of the alleged turnover. 3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the action of AO in holding that the assessee is an accommodation entry provider. 4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the action of AO despite the fact that the addition has been made on the basis of extraneous considerations grossly indulging into surmises and conjectures. 5. On the facts and circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in deleting the protective addition of Rs.6,85,000/- made by the AO on account of unexplained cash credits without considering the fact that the assessee has failed to produce directors of the shell concern to verify the identity of the company, genuineness of the transactions and creditworthiness of the concern." ITA No.1750/Del./2019 (AY: 2011-12) "On the facts and in the circumstances of the case, the ld.CIT (A) has erred in law and on facts in deleting the protective addition of Rs.74,50,000/- made by the AO on account of unexplained cash credits without considering the fact that the assessee has failed to produce directors of the shell concern to verify the identity of the company, genuineness of the transactions and creditworthiness of the concern." ITA No.1751/Del./2019 (AY: 2012-13) "On the facts and in the circumstances of the case, the ld.CIT (A) has erred in law and on facts in deleting the protective addition of Rs.43,60,000/- made by the AO on account of unexplained cash credits without considering the fact that the assessee has failed to produce directors of the shell concern to verify the identity of the company, genuineness of the transactions and creditwort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to maintain and operate various shell companies to provide accommodation entries and charge commission in respect of the same. Extensive enquiry / investigation was carried out during the course of search, post search investigation and assessment proceedings. The search operation was conducted at various premises including the office and residence of the assessee and his brother, residence of the partners / employees of the assessee and his brother. During the course of search various documentary evidences were found and seized by the department. The evidences and material found during the course of search includes documentary evidences in the form of cheque books, financial statements, bank statements, share certificates, acknowledgements of ITR, bank account opening and closing letters, authorization letters for attending the assessment proceedings, books of accounts in Tally format, copy of ledger accounts / confirmations. Further various statements of postman, employees & partners of the appellant and his brother and beneficiaries of the accommodation entries were recorded during the search and post search investigations which lead to the conclusion that the assessee and his b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of 1.04% on the said additional credit entries as well. The. total turnover of the appellant will be as follows:- 8.15 In view of the above working the average rate of commission income of 1.04% will be charged in the hands of the appellant on the turnover of Rs.228,52,69,083/- for the year under consideration. Accordingly, the AO is directed to restrict addition at Rs.2,37,66,799/-." 8. Against the above order, assessee and Revenue are in cross appeals before us. We have heard both the parties and perused the records. 9. Ld. Counsel of the assessee submitted that on identical issue of commission on accommodation entries, this ITAT in the case of brother of the assessee, namely, Anand Kumar Jain has considered similar facts and passed an order whereby rate of commission on the accommodation entry has been determined as 0.47%. He submitted that his submissions shall be the same as in these appeals and he submitted that rate of commission adopted in that case will also be applied in the present cases as facts are similar. 10. Ld. DR for the Revenue, on the other hand, relied upon the order of AO. 11. Upon careful consideration, we note that identical issue was considered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). 14. During the appellate proceedings before the ld. CIT(A), the assessee filed written submissions pleading that, i. The working of the total turnover of the concerns by the AO is incorrect ii. The AO has taken and added both credit and debit side which is incorrect as only credit side transactions of the alleged shell concerns should be taken instead of both debit and credit. iii. Circular transactions among the concerns have not been eliminated by the AO while computing income iv. Turnover with respect to M/s Ambarnuj Finance Investment Pvt. Ltd. should be eliminated as no adverse inference can be drawn on the transactions of the entities. v. Ad-hoc rate of 2% should be rejected and average rate of commission as coming out of seized material should be applied. vi. The AO has ignored the 'short and excess account' in the Tally Data which represents the total actual commission earned by the assessee and Sh. Naresh Kumar Jain and also the correct amount of accommodation entries given by the assessee and Sh. Naresh Kumar Jain. vii. The short and excess a/c clearly depicts the consolidated commission income earned on the accommodation entries by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments Ltd. 9.7 Further on going through the replies filed before the AO during the course of assessment proceedings under section 153A, it is noticed that the company has submitted the details of loans given, repayment of the same and interest income shown on the same during the year under consideration. The AO has not drawn any adverse inference in this regard in the assessment order. From the above facts, it is evident that in year under consideration, the company was engaged in the business of financing and investment activities which are not doubted by the AO in the assessment order. Further, the returned loss of the company has been accepted and there is no adverse inference/finding of the AO that the company was involved in providing any accommodation entry. In view of these facts, I am of the view that since the business operations of M/s Ambarnuj Finance & Investments Pvt. Ltd. are not in doubt in the year under consideration, therefore, it was not justified on the part of the AO to include Rs. 4,64,29,476/- being the aggregate of debit and credit bank transactions of M/s Ambarnuj Finance & Investments Pvt. Ltd. in the working of the commission income, hence, the said fig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99,494,446 985,521,370 1,606,886,770 - 4,842,477,767 Net Turnover as per Tally Data 439,586,944 1,010,599,831 1,780,997,609 2,881,699,244 4,317,531,350 4,423,235,481 - 14,853,650,460 The above table shows that the appellant has received commission of Rs. 22,06,16,047/- and made payments of Rs. 15,13,2,004/- in short and excess a/c over the period of six years for the total turnover of the six years for the total turnover of the six years of Rs. 1485,36,50,460/- The average rate of commission received on total turnover herein above comes to 1.49% (Rs. 22,06,16,047 / 1485,36,50,460*100). Whereas the average rate of commission paid comes to 1.02% (Rs. 15,13,52,004 / 1485,36,50,460*100). Thus, the net commission rate in the tally data seized is search comes to 0.47%. The appellant in this regard, submitted that receipts net off of payment/expenses should be taxed in its hands as commission only. In this regard, the appellant has pointed out that seized record is the best evidence and when income is being considered on the basis of seized record, the expenses as recorded in the seized document also need to be reduced. It is only the net income, which is to be considered. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of circular transactions was left out to be made. The ld. CIT(A) has accepted the working of turnover furnished by the assessee after eliminating circular transactions or transactions on which income had already been offered. The ld. CIT(A) has rightly held that the turnover with respect to M/s Ambarnuj Finance Investment Pvt. Ltd. should be eliminated as the assessment proceedings of M/s Ambarnuj Finance Investment Pvt. Ltd. have been completed and no adverse inference has been drawn against the said company. The ld. CIT(A) has accepted the gross commission income as appearing in short & excess A/c in Tally Data of Jain Folder. However, what has not been accepted by the ld. CIT(A) is the expenses incurred in earning such commission income which was also duly reflected in the same short & excess A/c in the Tally Data of Jain Folder which is a part of the seized material. The ld. CIT(A) in Para 9.4 of Pg. 20 of ld. CIT(A)'s Order for AY 2010-11 has stated that, "the contention of the appellant that expenses side represent the expense incurred by the appellant in arranging accommodation entries is found to be correct. However, in the facts and circumstances of the case, it will not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,02,421 1,95,12,749 88,18,262 20. Reliance is being placed on the judgment of Hon'ble Supreme Court in the case of Reliance Industries Limited Vs. SEBI, 2022 (8) TMI 423 - dated August 5, 2022 wherein it was held that, "57. Before we part with the present appeal, another disconcerting aspect of this case that comes to the fore is SEBI's attempt to cherrypick the documents it proposes to disclose. There is a dispute about the fact that certain excerpts of the opinion of Justice (Retd.) B. N. Srikrishna, were disclosed to the appellant herein. It is the allegation of the appellant that while the parts which were disclosed, vaguely point to the culpability of the appellant, SEBI is refusing to divulge the information which exonerate it. Such cherrypicking by SEBI only derogates the commitment to a fair trial. In Nea Karteria Maritime Co Ltd v. Atlantic and Great Lakes Steamship Corporation, [1981] Com LR 138 at 139, Mustill J. held as under: "I believe that the principle underlying the rule of practice exemplified in Burnell v British Transport Commission [1956] 1 QB 187 is that where a party is deploying in court material which would otherwise be privileged, the opposite par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to rate of commission. ITA Nos.1749 to 1754/Del/2019 (AYs 2010-11 to 2015-16) 14. Apropos protective addition : Since facts are identical we are referring to the facts and figures from AY 2014-15. The ld. CIT (A) has elaborately discussed the facts and decided as under :- "The assessee has challenged the protective addition of Rs.72,15,210/- made by the AO on account of unexplained cash credit in the form of unsecured loan. The AO in the assessment order has added an amount of Rs.72,15,210/- on account of unsecured loan received from following parties :- S.No. Name of party Amount received 1 Mahadev Investments 1,15,210 2 Pragaya Multitraders Pvt. Ltd. 3,00,000 3 Gomati Consultants Pvt. Ltd. 18,00,000 4 Naresh Kumar Jain HUF 13,00,000 5 Groupone Informative Services P. Ltd. 7,00,000 6 Maha Laxmi Trading Co. 2,00,000 7 Next Generation Exim Pvt. Ltd. 5,00,000 8 Next Generation Exim Pvt. Ltd. 20,00,000 9 Pragaya Multitraders Pvt. Ltd. 3,00,000 Total : 72,15,210 10.1 The AO has added the above amount in the hands of the appellant on the ground that the he has failed to produce directors of the shell companies to verify the ident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent of Rs.4,90,35,779/- has already been confirmed in the hands of the appellant. The amount of Rs.72,15,210/- received by the appellant can at best be treated as obtained out of his undisclosed commission income which has already been brought to tax. Therefore, being the protective addition made by the AO of Rs.72,15,210/- is double addition in the hands of the appellant, the same is directed to be deleted." 15. Against the above order, the Revenue is in appeal before us. 16. We have heard the parties. We note that the Ld. CIT(A) has held that the impugned amount can at best be treated as obtained out of assessee's undisclosed commission income which has already been brought to tax. We note that on identical issue, the Tribunal in ITA No.2889/Del/2019 in the case of Sh. Anand Kumar Jain, observed that such receipt form part of accommodation entries and that the AO may verify the same. Following the aforesaid precedent, we direct the AO to verify the same as stated above. 17. Our above adjudication applies mutatis mutandis to all the additions on protective basis in all the appeals here. ITA No.1752/Del/2013 (AY 2013-14) 18. Apropos DVO Report : The AO in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale deed and intimating the DO regarding the sale of the property by him. Accordingly, no adverse inference can be drawn from the report of the DVO. The main evidence based on which addition has been made in the hands of the appellant is the report of the inspector. The copy of said report is placed at PB.Pg. no.297. On perusal of the said report, it is noticed that the inspector has mentioned to have made a visit to the property on 30/08/2018, on which he noticed that the property is a newly constructed multistory building constructed on approximate land of 110 - 150 yards. The inspector has further mentioned to have made enquiries from property dealers with respect to the value of the property who have informed him that the value of the property is around 1.25 crores. On careful perusal of the report of the inspector, it is noticed that the report is not supported by any evidence collected by the inspector on the spot verification. It is also noticed that the inspector has mentioned to have made enquiry from the local property dealer, however, he has not mentioned the name / whereabouts of the said property dealer. Also, it has not been mentioned that on what basis the property ..... X X X X Extracts X X X X X X X X Extracts X X X X
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