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TMI Blog2023 (6) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Rs. 295,56,30,168/- originally made by the AO by arbitrarily invoking the provisions of section 69 of the Act. He confirmed this addition by disregarding the nature of business activity carried out by the Appellant, as cross-verifiable inter alia from various documentary evidences found and impounded/ seized during the course of survey/ search, from the contents of various statements recorded and from the written submissions filed from time to time. He further erred in confirming the said addition which was made by the AO by treating the aggregate deposits appearing in the bank accounts as unexplained credit deposits while ignoring the rest of the evidences, including the transactions appearing on the withdrawal side of the same banking accounts. Rs. 228,43,91,272/- (excluding interest) [Rs. 228,53,96,912/- as per the AO's computation sheet before giving effect to CIT(A)'s order, as reduced by a sum of Rs. 10,05,640/- representing tax on addition to the extent telescoped by CIT(A)] Nil, as CIT(A) directed this addition to be telescoped against the corresponding income. 2 Confirming the addition of Rs.28,30,100/- in respect of the cash of equivalent amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggregate deposits appearing in the bank accounts as unexplained credit deposits while ignoring the rest of the evidences, including the transactions appearing on the withdrawal side of the same banking accounts. Rs. 245,65,18,432/- (excluding interest) Total Tax Effect Rs. 245,65,18,432/- The appellant craves to add, amend, delete or alter one or more grounds of appeal." Assessment year 2014-15: "The learned CIT(A)-11, Ahmedabad has erred in law and on facts in: Sl. No. Grounds of Appeal Tax Effect relating to each Ground of appeal 1 Confirming the addition of Rs. 1,125,97,09,837/- originally made by the AO by arbitrarily invoking the provisions of section 69 of the Act. He confirmed this addition by disregarding the nature of business activity carried out by the Appellant, as cross-verifiable inter alia from various documentary evidences found and impounded/seized during the course of survey/search, from the contents of various statements recorded and from the written submissions filed from time to time. He further erred in confirming the said addition which was made by the AO by treating the aggregate deposits appearing in the bank accounts as unexplained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same banking accounts. Rs. 145,80,60,066/- (excluding interest) Total Tax Effect Rs. 145,80,60,066/- The appellant craves to add, amend, delete or alter one or more grounds of appeal." Assessment year 2011-12: "The learned CIT(A)-11, Ahmedabad has erred in law and on facts in: Sl. No. Grounds of Appeal Tax Effect relating to each Ground of appeal 1 Confirming the addition of Rs. 399,32,17,604/- originally made by the AO by arbitrarily invoking the provisions of section 69 of the Act. He confirmed this addition by disregarding the nature of business activity carried out by the Appellant, as cross- verifiable inter alia from various documentary evidences found and impounded/seized during the course of survey/search, from the contents of various statements recorded and from the written submissions filed from time to time. He further erred in confirming the said addition which was made by the AO by treating the aggregate deposits appearing in the bank accounts as unexplained credit deposits while ignoring the rest of the evidences, including the transactions appearing on the withdrawal side of the same banking accounts. Rs. 123,38,75,040/- (excluding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the aforesaid summons, Shri Sanjay Lal Jain, proprietor of GK Agencies attended and statement was recorded on 27-12-2018, wherein he stated that he is brokered/middlemen and not the beneficiary party. On this basis, the assessing officer held that in spite of giving several opportunities, the assessee did not submit all the details of beneficiaries with name, address, PAN, amount of transaction etc. to discharge the onus cast upon the assessee. As the assessee could not discharge his onus by identifying the beneficiaries with complete details, the Department could not initiate proceedings against those beneficiaries. The AO accordingly made addition of the total amount credited in the bank accounts of all these concerns as income of the assessee by relying upon the order of the honourable Delhi High Court in the case of CIT v. D K Garg 250 taxmann 104. The assessing officer mentioned details of concerns and year -wise amount deposited and withdrawn from all these bank accounts at page numbers 34 to 37 of the assessment order. The assessing Officer made summary of these deposits in chart given at paragraph 7.3 and 7.4 of the assessment order, which is reproduced below for ready r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in the activities of taking cheques & cash and deposited the same in their bank accounts. The appellant's contention that he is merely a commission agent is not acceptable for the reason that he could not identify- the beneficiaries with complete details in spite of the opportunities provided to the appellant by the A.O. Even during the course of appellate proceedings,- the appellant could not produce the complete details of beneficiaries with their names, complete address, PAN and other details of transactions. The contention of the appellant that notice u/s. 148 of the Act were issued to some of the beneficiaries is not supported by any documentary evidence, hence it is rejected. As the appellant could not produce any evidence showing the complete details of beneficiaries at the assessment stage and at appellate stage also, in such situation it cannot be considered that the appellant was a commission agent and engaged in the activities of cheque discounting. Merely having licence from AMC as commission agent can not justify his claim that all the deposits made in his account are only related to commission agent business. For carrying out business of cheque discounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd other bank accounts operated by him as its undisclosed income. The argument of the counsel for the assessee is that once the AO has himself accepted in the assessment order that the assessee is engaged in the business of "cheque discounting" and has also made a specific note of the mode and the manner in which the business was being carried out, then, only the income earned by way of commission on such "cheque discounting" business can be subject to tax in the hands of the assessee and not the entire cash deposits. He submitted that various High Court and Tribunal decision support the view that in case of "cheque discounting business" only the real income/commission income which the assessee has earned could be subject to tax in its hand and not the entire deposits. During the course of hearing, as directed, counsel for the assessee also filed an affidavit in support of the assets held by the assessee during the years under consideration. The assessee drew our attention to page 18 of the paper book-II and submitted that even before the Service Tax Authorities the assessee has submitted that he is in the business of "cheque discounting" which fact has been accepted by the Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and perused the material on record. On a perusal of the facts placed on record and various judicial precedents on the subject, we are of the considered view that in the instant set of facts, it would not be fair to treat the entire cash deposits as the undisclosed income of the assessee. We observe that AO himself, on the basis of documents unearthed during the course of search, has observed that the assessee is engaged in the business of "cheque discounting" and in the assessment order, the AO has also on sample basis given a finding as to the quantum of commission earned by the assessee on such "cheque discounting" on sample basis. While, we are not commenting upon the sanctity of such loose papers found in the search and neither are we commenting upon whether the amount so disclosed in such loose papers can be an authoritative proof of the correct amount of commission income earned by the assessee, however, such documents do indicate that the entire deposits in the assessee's bank account do not represent its undisclosed income. Further, even before the Service Tax Department, the assessee had submitted that it is in the "cheque discounting" business and it has been also been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion on providing accommodation entries to its customers, it was only said commission which could be added to assessee's taxable income and not entire amount representing value of transaction. In this case, the assessee was engaged in business of dealing in shares and securities and investment as brokers. The Assessing Officer noted that assessee received certain amount in cash from customers which was deposited in bank and, in return, cheques were issued to them. The Assessing Officer, however, treated cash deposits as well as deposit by way of transfer and clearing made into accounts with bank as income of assessee from undisclosed sources. He accordingly, made an addition of Rs. 26.59 crore. The ITAT held that since assessee was concerned with commission earned on providing accommodation entries, it was only amount of commission that could be added to assessee's taxable income and not entire amount of transaction. Therefore, impugned addition made by Assessing Officer was to be reduced accordingly. In the case of Alag Securities (P.) Ltd. [2020] 117 taxmann.com 292 (Bombay), the assessee was engaged in providing accommodation entries to its customers. It received cash a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he was operating through middlemen and does not know the name of beneficiaries in most of cases. However, most times, even the middlemen could not be contacted by the Department, since notices could not be served upon them as they were not available. Accordingly, in absence of details forthcoming from the assessee, a reasonable percentage may be arrived at, in the instant facts to arrive at the "commission" income earned by the assessee. In our view, looking into the totality of facts, it would be reasonable to take 0.25% of total deposits in the bank accounts owned/ operated by the assessee (Rs. 295,56,30,168 for assessment year 2017-18), as commission income of the assessee for the assessment year under consideration. 8.3 Another issue for consideration before us is the assessee's claim of "secret commission" paid to other middlemen. The assessee submitted that he paid certain "secret commission" to certain middlemen and agents who bring in cheque/cash of multiple beneficiaries in order to obtain cheque/cash. However, the assessee has submitted on several occasions before the Department (refer relevant pages of Department Paper-Book) that he has not maintained any records of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not explain the source of such cash found. The assessee during the course of assessment admitted the same to be his unexplained income and accordingly, the same was added to the income of the assessee. In appeal, Ld. CIT(Appeals) confirmed the addition, however accepted the contention of the assessee that the cash found may be considered as application of income and the effect of telescoping may be given. Thus, Ld. CIT(Appeals) allowed the telescoping benefit in the appellate proceedings. 11. Before us, the contention of the assessee is that while giving the benefit of telescoping, Ld. CIT(Appeals) erred in not giving a specific direction that this telescoping is required to be given against the corresponding income which was offered for taxation partly in the year under consideration and partly in the earlier years. In view of the submission of the counsel for the assessee, we are restoring this issue to the file of Ld. CIT(Appeals) for necessary verification. The DR has also not objected to this issue being restored to the file of Ld. CIT(Appeals). 12. In the result, ground number 2 of the appeal of the assessee is allowed for statistical purposes. Assessment year 2011-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for assessment year 2017-18, we direct that looking into the totality of facts, it would be reasonable to take 0.25% of total deposits in the bank accounts owned/ operated by the assessee (Rs. 795,01,93,883/-for assessment year 2015-16), as commission income of the assessee for the assessment year under consideration. 22. In the result, appeal of the assessee is partly allowed for assessment years 2015-16. Assessment year 2016-17: 23. Since the facts and issues for consideration are identical for all the years under consideration, in view of the discussion for assessment year 2017-18, we direct that looking into the totality of facts, it would be reasonable to take 0.25% of total deposits in the bank accounts owned/ operated by the assessee (Rs. 615,82,50,749/-for assessment year 2016-17), as commission income of the assessee for the assessment year under consideration. 24. In the result, appeal of the assessee is partly allowed for assessment years 2017-18. 25. In the combined result, all the appeals of the assessee for assessment years 2011-12 to 2016-17 are partly allowed and appeal for assessment year 2017-18 is partly allowed for statistical purposes. Order pronounce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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