Monoharlal Hanumanbagas Sarda, Sangli V. Assistant Commissioner of Income-tax, Circle - 2, Sangli

CO 16/PUN/2022

AI Insights

The case involves an appeal by the Assistant Commissioner of Income Tax (ACIT) against the order of the Commissioner of Income Tax (Appeals) which had deleted the disallowance of a loss claimed by Shri Manohar Hanumanbagas Sarda for the assessment year 2010-2011. The Revenue contended that the transactions through SLA Commodities and Derivatives Pvt. Ltd were not genuine and involved accommodation entries. The Tribunal examined the validity of the reopening of the assessment under sections 143(3) r.w.s. 147 of the Income Tax Act, 1961, and the genuineness of the transactions claimed by the assessee. The Tribunal upheld the Assessing Officer's decision, finding that the losses were indeed bogus and derived from an entry provider.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137345 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-01-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-10-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 29-03-2022
• Other Referred Cases: S.S. Landmarks vs. ITO [2020] 117 taxmann.com 825 (Bom.), Prashant S. Joshi vs. ITO CWP No.2287 of 2009 (Bom), PCIT vs. Shodiman Investment Pvt. Ltd., CWP.No.1297 of 2015 dated 16.04.2018, ITO vs. Lakhwani Mewal Das [1976] 103 ITR 437 (SC), Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC), CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC), PCIT vs. NRA Iron & Steel Pvt. Ltd. [2019] 412 ITR 461 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Tangible material; Accommodation entries
• Section: 148; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B” : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA.No.1822/PUN./2018 Assessment Year 2010-2011 ACIT, Circle-2, Aayakar Bhavan, Opposite Birnale College, Sangli – 416 416 Maharashtra vs. Shri Manohar Hanumanbagas Sarda, Plot No.112, R.S. Sarda & Company, Market Yard, Sangli – 416 416. Maharashtra PAN ADWPS1495A (Appellant) (Respondent) Cross Objection No.16/PUN./2022 Arising out of ITA.No.1822/PUN./2018 - Assessment Year 2010-2011 Shri Manohar Hanumanbagas Sarda, Plot No.112, R.S. Sarda & Company, Market Yard, Sangli – 416 416. Maharashtra PAN ADWPS1495A vs. ACIT, Circle-2, Aayakar Bhavan, Opposite Birnale College, Sangli – 416 416 Maharashtra (Appellant) (Respondent) For Revenue : Shri M.G. Jasnani For Assessee : Shri Tejender Singh Date of Hearing : 13.10.2022 Date of Pronouncement : 10.01.2023 ORDER PER SATBEER SINGH GODARA, J.M. This Revenue’s appeal ITA.No.1822/PUN./2018 and the assessee’s cross objection C.O.No.16/PUN./2022 for assessment year 2010-2011, arise against the CIT(A)-1, Kolhapur's order dated 21.09.2018 passed in case No. CIT(A)- 2 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 1/10238/2017-18, involving proceedings under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short “the Act”). 2. Heard both the parties. Case files perused. 3. The Revenue raises the following twin substantive grounds in its instant appeal ITA.No.1822/PUN./2018 : 1. “On the facts and in the circumstances of the case, and in law, the CIT(A) is not justified in deleting the disallowance of loss of Rs.1,97,17,049 /- claimed by the assessee ignoring the investigation report that the transaction through SLA Commodities and Derivatives Pvt. Ltd were not genuine as the later was found to an entry provider. 2. On the facts and in the circumstances of the case, and in law, the CIT(A) has erred in deleting the addition of Rs.3,12,460/- made u/s.68 of the Act without considering the fact that the same arises from bogus speculation profit generated through SLA Commodities and Derivatives Pvt. Ltd which was engaged in giving accommodation entries. 3. The appellant prays that the order of the CIT(A) be vacated and that of the Assessing Officer be restored. 4. The appellant craves leave to add, alter, amend, modify any of the grounds or raise any other ground at the time of proceedings before the Hon'ble Tribunal which may please be granted.” 3 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 4. The assessee’s cross objection No.16/PUN./2022 pleads the following revised grounds : 1. “The CIT (Appeals) has erred in law and on facts, confirming the action of the Assessing Officer in issuing the notice u/s 148 of the Income Tax Act,1961 (Act) as conditions precedent for the exercise of jurisdiction u/s 147 of the Act were absent in the recorded reasons. 2. The CIT (Appeals) has erred in confirming the action of the AO in framing the assessment u/s 147 /143(3) of the Act by merely paraphrasing the incorrect 'reasons to believe' recorded by the AO without any tangible information having any nexus with the escapement of income and which were tried to be improved later on but still remained no 'reasons to believe' in the eyes of law as envisaged u/s 147 of the Act. 3. On the facts and circumstances of the case and in law, the AO has erred in passing the assessmen order without following the binding decision of jurisdictional Bombay High Court in Asian Paints Ltd. vs. Dy. CIT 296 ITR 90.” 5. We proceed to deal with the assessee’s legal grounds first since going to the root of the matter. Learned authorised representative submitted at the outset that the assessee does not wish to press for the foregoing third substantive ground 4 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. after vehemently arguing it for some time. Rejected accordingly. 6. We now come to assessee’s former twin substantive grounds challenging validity of the impugned reopening inter alia by pleading that the Assessing Officer had nowhere formed any reasons to believe, a settled pre-condition, before initiating sec.148/147 mechanism in motion herein. Mr. Tejinder Singh submitted that this is an instance of a pure non-application of mind by the assessing authority since the assessee had duly proved the sales/purchases involving the loss in issue of Rs.1,97,17,049/- as genuine transactions, there was no tangible material leading to formation of the impugned belief that the taxpayer’s taxable income having escaped assessment, no reasonable person would treat the impugned loss as bogus, no live nexus exist between the information received and the impugned disallowance, the assessing authority had not done any independent enquiries after receiving information from DDIT (Inv.) and that his client had filed all the relevant information before the Assessing Officer as per page-5 tabulation in assessment order in support of the genuineness of the transaction in issue. 6.1. Learned counsel further quoted S.S. Landmarks vs. ITO [2020] 117 taxmann.com 825 (Bom.), Prashant S. Joshi vs. ITO CWP No.2287 of 2009 (Bom), PCIT vs. Shodiman 5 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. Investment Pvt. Ltd., CWP.No.1297 of 2015 dated 16.04.2018 and ITO vs. Lakhwani Mewal Das [1976] 103 ITR 437 (SC), in support of assessee’s foregoing legal arguments. 7. The Revenue has placed strong reliance on both the learned lower authorities action initiating sec.148/147 proceedings against the assessee. 8. We have given our thoughtful consideration to the foregoing rival stands and see no merit in the assessee’s arguments. It emerges during the course of hearing that the assessment year is A.Y. 2010-11. The Assessing Officer had recorded his reasons to believe that assessee’s taxable income having escaped assessment and issued sec.148 notice dated 27.03.2017. The assessee had filed his return on 14.08.2017 reiterating the earlier one filed way back on 14.10.2010. He also sought for the Assessing Officer’s reopening reasons which stood duly furnished to him on 18.08.2017 as it is evident from page-2 in the case file. A perusal of the said reopening reasons suggests that the Assessing Officer had indeed proceeded to record his independent reopening reasons that the assessee had in fact derived bogus loss, which in turn, had been sought to be set-off from the profits of the other business(es). The assessee thereafter filed its petition dated 28.11.2017 objecting to the Assessing Officer’s reopening reasons. The same stood disposed of on 26.12.2017 6 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. thereby upholding the reopening action. There is further no dispute that all this followed the Assessing Officer’s re- assessment in issue dated 30.12.2017 treating the assessee’s loss as bogus in the nature of accommodation entries. We note that the Assessing Officer had duly considered the DDIT (Inv.) report that the said entries had come from an accommodation entry provider Shri Hemant Sarawagi. Faced with the situation, we reject assessee’s former twin substantive grounds raised in his C.O.No.16/PUN./2022. 9. So far as Learned counsel’s reliance on a catena of judicial precedents (supra) is concerned, we find that the same are not applicable in the case of the instant case since the assessing authority(ies) therein had failed to pinpoint to any specific tangible material leaving to formation of belief of the concerned assessee’s taxable income having escaped assessment. We further wish to reiterate that contrary to the said facts, this assessee has indeed been found to have availed accommodation entries from Kolkata based entry provider(s) which had lead the learned lower authorities to initiate sec.148/147 proceedings against him. The assessee fails in his Cross Objection No.16/PUN./2022 therefore. 7 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 10. We now proceed to deal with Revenue’s substantive grounds in its appeal ITA.No.1822/PUN./2018 wherein the CIT(A) has reversed the assessment findings treating the assessee’s loss of Rs.1,97,17,049/- as bogus reading as under: 8 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 9 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 10 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 11 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 12 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 13 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 14 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 15 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 16 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 17 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 18 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 19 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 20 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 10.1. Both the learned representatives reiterated their respective stands against and in support of the correctness of the CIT(A)'s foregoing detailed discussion reversing the assessment findings treating the assessee’s loss of Rs.1,97,17,049/- as bogus. Mr. Tejinder Singh more particularly drew strong support from the above extracted lower appellate discussion that the assessee had indeed transacted through banking channel only. And also that he had carried out his transactions through a registered broker 21 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. namely M/s. SLA Commodities & Derivatives Pvt. Ltd., and, therefore, the CIT(A) has rightly deleted the impugned disallowance going by the overwhelming documentary evidence to this effect on record. 10.2. All these assessee’s submissions hardly deserve to be accepted. It is evident from a perusal of the CIT(A)'s detailed discussion that he has mainly gone by the assessee’s documentary evidence and banking channel adopted for the purpose of deriving the impugned loss(es) than clearly dealing with the clinching assessment findings that the same had come from a Kolkata based entry provider Mr. Hemant Sarawagi via M/s. SLA Commodities & Derivatives Pvt. Ltd., A perusal of the Assessing Officer’s discussion in para 4.6 page- 6 suggests that the assessee had sold and purchased his commodity(ies) concerned from Mr. Hemant Sarawagi on 10.08.2010 between 4.41 pm to 4.43pm and the same trend followed on 11.08.2010 between 4.26pm to 4.28 pm as well. This is indeed coupled with the fact that the DDIT (Inv.) has already found the said party i.e., Shri Hemant Sarawagi as an entry provider only. All these facts put a heavy burden on the assessee to prove genuineness of his loss figures in commodity and derivatives, as the case may be which is yet to be discharged. We sought to know during the course of hearing as to whether the assessee has filed the relevant contract 22 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. notes on record or not. The reply received from his side is in negative only. We take note of these overwhelming suspicious circumstances and the assessee lack of genuineness of his loss claim which compels us to conclude that the impugned losses derived from Mr. Hemant Sarogi through M/s. SLA Commodities & Derivates Pvt. Ltd., have been rightly treated as accommodation entries by the Assessing Officer and wrongly reversed in the CIT(A)'s detailed discussion. Hon’ble apex court’s landmark decisions Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC), CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC) and PCIT vs. NRA Iron & Steel Pvt. Ltd. [2019] 412 ITR 461 (SC), inter alia, hold that any evidence tendered in income tax proceedings has to be considered in the light of human probabilities, after removing all blinkers, and that mere filing of documentary evidence does not discharge the assessee’s burden to prove genuineness of a particular explanation. Whilst holding so, we are very well conscious of the fact that the last judicial precedent hereinabove dealt with an instant of share premium but nonetheless the same principle follows therefrom whilst examining the genuineness of a particular explanation. We thus accept the Revenue’s instant twin substantive grounds 1 and 2 hereinabove. So is the outcome of the instant appeal ITA.No.1822/PUN./2018. Ordered accordingly. 23 ITA.No.1822/PUN./2018 & C.O.No.16/PUN./2022 Shri Manohar Hanumanbagas Sarda, Sangli. 11. No other ground or argument has been pressed before us. 12. This Revenue’s appeal ITA.No.1822/PUN./2018 is allowed and assessee’s cross-objection No.16/PUN./2022 is dismissed in above terms. A copy of this common order be placed in the respective case files. Order pronounced in the open Court on 10.01.2023. Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 10 th January, 2023 VBP/- Copy to 1. The appellant 2. The respondent 3. The Ld. CIT(A) concerned. 4. The CIT concerned 5. D.R. ITAT, Pune “B” Bench, Pune 6. Guard File. //By Order// Assistant Registrar, ITAT, Pune Benches Pune.