Shri Maheshbhai Tulsibhai Patel, HUF, Surat V. The Income Tax Officer, Ward-8(3), Now New Ward-3(2)(5), Surat

CO 168/AHD/2015

• Counselvise Citation: [2018] 117 COUNSELVISE.COM (IT) 2432 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 11 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 10-09-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J K CHANDNANI
• Keywords: Income from undisclosed sources; Accommodation entries; Set aside
• Section: 145; 56

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.2284/AHD/2015/SRT & C.O NO.167/AHD/2015/SRT / ASSESSMENT YEAR: 2011-12 INCOME TAX OFFICER, WARD-3(3)(3), SURAT. VS. SHRI MAHESHBHAI TULSIBHAI PATEL, PROP. ASHA TRADERS & PROP: SHUBHAM CORPORATION, FLAT NO.13, B/2, SHANTINEKETAN APARTMENT, SUMUL DAIRY ROAD, SURAT 395004. [PAN: ADSPP 3124B] ( ' / APPELLANT) ( #$' /RESPONDENT/CROSS OBJECTOR) . / ITA NO.2285/AHD/2015/SRT & C.O NO.168/AHD/2015/SRT / ASSESSMENT YEAR: 2011-12 INCOME TAX OFFICER, WARD-3(2)(5), (NOW WARD3(2)(3)), SURAT. VS. SHRI MAHESHBHAI TULSIBHAI PATEL HUF, B-2/13, SHANTINIKETAN APARTMENT, SUMUL DAIRY ROAD, KATARGAM, SURAT. [PAN: AADHP 3618L] ( ' / APPELLANT) ( #$' /RESPONDENT/CROSS OBJECTOR) / ASSESSEE BY : SHRI KIRAN K. SHAH, C.A /REVENUE BY : SHRI J.K.CHANDNANI, SR. D.R /DATE OF FINAL HEARING : 06-09-2018 / DATE OF PRONOUNCEMENT : 07-09-2018 2 ITA NOS.2884 & 2885/AHD/2015/SRT & C.O NOS.167 & 16 8/AHD/2015/SRT (A.Y: 2011-12) SHRI MAHESHBHAI TULSIBHAI PATEL / ORDER PER C.M.GARG, JUDICIAL MEMBER: THESE TWO APPEALS HAVE BEEN FILED BY THE REVENUE A ND THE CROSS OBJECTIONS (C.OS) HAVE BEEN FILED BY THE ASSESSEE A GAINST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-3, SURAT (CIT (A) FOR SHORT) DATED 11.05.2016 & 07.05.2015 RESPECTIVELY FOR THE ASSESS MENT YEAR (A.Y) 2011-12. 2. THE GROUNDS RAISED BY THE REVENUE IN ITA NO.2284 /AHD/2015/SRT READ AS FOLLOWS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN ESTIMATING THE COMMISSION INCOM E OF THE ASSESSEE @ 2% AS AGAINST 10% MADE BY A.O. ON THE TO TAL TURNOVER OF RS.11,86,30,200/- OF M/S. ASHA TRADERS AS PER THE AUDIT REPORT U/S.44AB OF THE INCOME TAX ACT, 1961 C ERTIFIED BY THE CHARTERED ACCOUNTANT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN ESTIMATING OF INCOME OF THE ASS ESSEE @ 2% AS AGAINST 10% MADE BY A.O. ON THE AGGREGATE UNEXPL AINED CASH DEPOSITS IN THE BANK ACCOUNTS TO TUNE OF RS.22,49,4 5,749/- [BANK OF BARODA TO THE TUNE OF RS.15,63,62,398/- (IN THE NAME OF PROP, OF M/S. ASHA TRADERS) AND BANK OF INDIA TO THE TUNE OF RS.6,85,83,351/- (IN THE NAME OF PROP, OF SHUBHAM C ORPORATION)], WITHOUT APPRECIATING THE FACTS OF THE CASE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AS SESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 3. THE GROUNDS RAISED BY THE ASSESSEE IN C.O NO.167 /AHD/2015/SRT READ AS FOLLOWS: 3 ITA NOS.2884 & 2885/AHD/2015/SRT & C.O NOS.167 & 16 8/AHD/2015/SRT (A.Y: 2011-12) SHRI MAHESHBHAI TULSIBHAI PATEL 1. THE LEARNED CIT '(A) GROSSLY ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF RS. 21,77,721/- IN RESPECT OF COMMISS ION EARNED IN GIVING THE ACCOMMODATION BILLS FOR LABOUR CHARGES. 2. THE LEARNED CIT (A) GROSSLY ERRED IN MAKING ADDI TION OF RS. 42,30,327/- ON ACCOUNT OF DRAFT / CHEQUE DISCOUNTIN G AND RTGS FACILITY. 3. THE LEARNED CIT (A) GROSSLY ERRED IN NOT GIVING CREDIT OF INCOME SHOWN AGAINST ACCOMMODATION BILLS OF LABOUR CHARGES . 4. THE GROUNDS RAISED BY THE REVENUE IN ITA NO.2285 /AHD/2015/SRT READ AS FOLLOWS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT (A) HAS ERRED IN ESTIMATING COMMISSION @ 2% FOR GIVING ACCOMMODATION ENTRIES ON TOTAL TURNOVER OF RS. 12,1 8,70,000/- BY RESTRICTING THE ADDITION OF RS. 1,21,87,000/- MADE ON ACCOUNT OF GIVING ACCOMMODATION ENTRIES FOR CIVIL CONSTRUCTION WORK TO RS.24,37,400/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD CIT(A) HAS ERRED IN APPLYING THE DECISION OF THE HO N'BLE ITAT, MUMBAI IN THE CASE OF M/S. GOLD STAR FINVEST (P) LT D VS ITO (REPORTED IN 57 SOT 0409) FOR THE ESTIMATION OF COM MISSION AS THE FACTS OF INSTANT CASE ARE DIFFERENT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT (A) HAS NOT APPRECIATED THE FACTS THAT, THE AO HAS RIGHTLY JUSTIFIED HIS ESTIMATION OF COMMISSION @ 10% BY REJ ECTING BOOKS RESULT U/S. 145(3) OF THE ACT AS THE ASSESSEE FAILE D TO PRODUCE BOOKS OF ACCOUNT, BILLS, VOUCHERS AS THAT ACCOMMODA TION ENTRIES CAN BE OF DIFFERENT TYPES AND THE QUANTUM OF COMMIS SION WILL DEPEND ON THE NATURE OF ACCOMMODATION ENTRIES PROVI DED, THE BENEFIT DERIVED THEREFROM AND THE LOGISTICS / PAPER WORK ETC., INVOLVED. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. I T IS THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT (A) MAY BE SET - ASIDE AND THAT OF THE A.O. MAY BE RESTORED. 5. THE GROUNDS RAISED BY THE ASSESSEE IN C.O NO.168 /AHD/2015/SRT READ AS FOLLOWS: 4 ITA NOS.2884 & 2885/AHD/2015/SRT & C.O NOS.167 & 16 8/AHD/2015/SRT (A.Y: 2011-12) SHRI MAHESHBHAI TULSIBHAI PATEL 1. THE LEARNED CIT '(A) GROSSLY ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF RS. 24,37,400/- IN RESPECT OF COMMISS ION EARNED IN GIVING THE ACCOMMODATION BILLS FOR LABOUR CHARGES. 2. THE LEARNED CIT (A) GROSSLY ERRED IN NOT GIVING CREDIT OF INCOME SHOWN AGAINST ACCOMMODATION BILLS OF LABOUR CHARGES . ITA NO.2285/AHD/2015/SRT & C.O NO.168/AHD/2015/SRT: 6. APROPOS GROUNDS OF THE REVENUE IN THIS APPEAL AND C .O OF THE ASSESSEE, WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE TRIBUNAL. THE LD. DR SUBMITTED THAT THE AO WAS RIGHT IN MAKING AD DITION OF 10% ESTIMATED COMMISSION OF ACCOMMODATION BOOK ENTRIES AND MAKING ADDITION ACCORDINGLY. THE LD. DR FURTHER SUBMITTED THAT THE AO WAS RIGHT IN TREATING THE ESTIMATED COMMISSION INCOME EARNED BY THE ASSESSEE FROM OTHER SOURCES AS PER PROVISION OF S. 56 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) AND IN ADDING SAME TO THE INC OME OF THE ASSESSEE. THE LD. DR ALSO SUBMITTED THAT THE LD. CIT (A) HAS ERRED IN ESTIMATING COMMISSION @ 2% FOR GIVING ACCOMMODATION ENTRIES ON TOTAL TURNOVER OF RS. 12,18,70,000/- BY RESTRICTING THE ADDITION OF R S. 1,21,87,000/- MADE ON ACCOUNT OF GIVING ACCOMMODATION ENTRIES FOR CIVI L CONSTRUCTION WORK TO RS.24,37,400/-. 7. THE LD. DR FURTHER SUBMITTED THAT THE LD. CIT (A ) HAS NOT APPRECIATED THE FACTS THAT, THE AO HAS RIGHTLY JUST IFIED HIS ESTIMATION OF COMMISSION @ 10% BY REJECTING BOOKS RESULT U/S. 145 (3) OF THE ACT AS THE 5 ITA NOS.2884 & 2885/AHD/2015/SRT & C.O NOS.167 & 16 8/AHD/2015/SRT (A.Y: 2011-12) SHRI MAHESHBHAI TULSIBHAI PATEL ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUNT, BILLS, VOUCHERS AS THAT ACCOMMODATION ENTRIES CAN BE OF DIFFERENT TYPES AND THE QUANTUM OF COMMISSION WILL DEPEND ON THE NATURE OF ACCOMMODATI ON ENTRIES PROVIDED, THE BENEFIT DERIVED THEREFROM AND THE LOG ISTICS / PAPERWORK ETC., INVOLVED. THE LD. DR SUBMITTED THAT THE LD. CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE WITHOUT ANY JUSTIFIED REASON AND BASIS THEREFORE, THE IMPUGNED ORDER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE AO. 8. REPLYING TO THE ABOVE, THE LD. AR SUBMITTED THAT AFTER REJECTING BOOKS OF ACCOUNTS, THE AO ESTIMATED THE BENEFIT DER IVED FROM THE ALLEGED ACCOMMODATION ENTRIES BY M/S. ROSY ROYAL MINERALS A PPROX. 30% OF THE TOTAL AMOUNT AND ESTIMATED COMMISSION @ 10% WHICH W AS 1/3 RD OF SAID BENEFIT AND THE LD. FIRST APPELLATE AUTHORITY RIGHT LY HELD THAT SUCH ESTIMATION IS EXCESSIVE AND CANNOT BE CONSIDERED A REASONABLE ESTIMATE. THE LD. AR PRESSING INTO SERVICE C.O OF THE ASSESSEE, SUBMI TTED THAT THE LD. CIT(A) ACCEPTED CONTENTIONS OF THE ASSESSEE BUT RED UCE ESTIMATION OF INCOME TO @ 2% OF TOTAL AMOUNT OF ACCOMMODATION ENT RIES WHICH WAS ALSO NOT JUSTIFIED AND THE SAME MAY KINDLY BE REDUC ED TO EITHER 0.25% AS PER RATIO OF THE ORDER OF ITAT, SURAT DATED 23.03.2 018 IN ITA NO.2287/AHD/2015 FOR AY 2011-12 AND C.O OF THE ASSE SSEE MAY KINDLY BE ALLOWED. 6 ITA NOS.2884 & 2885/AHD/2015/SRT & C.O NOS.167 & 16 8/AHD/2015/SRT (A.Y: 2011-12) SHRI MAHESHBHAI TULSIBHAI PATEL 9. PLACING REJOINDER TO THE ABOVE, THE LD. DR SUBMI TTED THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE QUITE DIS TINCT AND DISSIMILAR TO THE FACTS OF THE CASE OF SHRI RAMESHCHANDRA RANGILD AS MEHTA ORDER DATED 23.03.2018 (SUPRA) AND THE SAME CANNOT BE APP LIED BLINDLY TO THE PRESENT CASE. 10. FIRST OF ALL, FROM THE RELEVANT PART OF THE FIR ST APPELLATE ORDER, WE OBSERVE THAT THE LD. CIT(A) HAS GRANTED RELIEF TO T HE ASSESSEE WITH FOLLOWING OBSERVATIONS AND CONCLUSION: 7.2 AT THE OUTSET, IT NEEDS TO BE MENTIONED THAT AC COMMODATION ENTRIES CAN BE OF DIFFERENT TYPES AND THE QUANTUM O F COMMISSION, WILL DEPEND ON THE NATURE OF ACCOMMODATION ENTRIES PROVIDED, THE BENEFIT DERIVED THEREFROM AND THE LOGISTICS/ PAPERW ORK, ETC INVOLVED, ACCOMMODATION ENTRIES ARE PROVIDED FOR BOGUS PROFIT IN ;THE FORM OF FICTITIOUS CAPITAL GAIN. ACCOMMODATION ENTRIES ARE ALSO PROVIDED FOR BOGUS SHARE CAPITAL, BOGUS UNSECURED LOAN, NON - EX ISTENT SALES, NON - EXISTENT PURCHASES, AND BOGUS EXPENSES. IN TH E PRESENT APPEAL, IT IS FOR BOGUS EXPENSES. THE BENEFIT DERIV ED THEREFROM IS TAX AVOIDANCE OF APPROXIMATELY 30 % OF THE AMOUNT O F ACCOMMODATION ENTRIES. THEREFORE, THE BENEFIT DERIV ED FROM ACCOMMODATION ENTRIES BY M/S ROSY ROYAL MINERAL'S I S APPROXIMATELY 30% OF RS. 12,18,70,000/-.; THE ESTIM ATION OF COMMISSION . @ 10 % BY THE ASSESSING OFFICER IS 1 / 3 RD OF THE SAID BENEFIT, WHICH IS EXCESSIVE AND CANNOT BE CONSIDERE D A REASONABLE ESTIMATE. 7.3 ON THE OTHER HAND, THE ESTIMATE BY THE APPELLAN T AT 3% TRANSLATES TO 1% OF THE BENEFIT DERIVED, WHICH IS T OO LOW TO JUSTIFY THE NATURE OF ACTIVITIES AND THE RISK UNDERTAKEN BY THE APPELLANT. CONSIDERING THE SAME, THE COMMISSION IN THE CASE OF THE APPELLANT FOR GIVING ACCOMMODATION ENTRIES IS ESTIMATED AT 2% ON RS. 12,18,70,000/-. THIS TRANSLATE TO ABOUT 6.7% OF THE BENEFIT DERIVED BY M/S ROSY ROYAL MINERALS LTD AND THEREFORE, IS A REASONABLE ESTIMATE. AS A RESULT, THE ESTIMATE MADE BY THE ASS ESSING OFFICER AT RS.1,21,87,000/- IS REDUCED TO RS. 24,37,400/- SUBJ ECT TO PARA 8 OF THIS ORDER. 7 ITA NOS.2884 & 2885/AHD/2015/SRT & C.O NOS.167 & 16 8/AHD/2015/SRT (A.Y: 2011-12) SHRI MAHESHBHAI TULSIBHAI PATEL 11. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISS IONS, AT THE VERY OUTSET, WE MAY POINT OUT THAT WE ARE IN AGREEMENT W ITH THE CONTENTION OF THE LD. DR THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE DISSIMILAR AND DIFFERENT FROM THE FACTS OF THE CASE OF SHRI RAMESHCHANDRA RANGILDAS MEHTA (SUPRA) AS IN THAT CASE THE ISSUE W AS PERTAINING TO THE INCOME FROM THE ACCOMMODATION ENTRIES FROM FICTITIO US CONTRACT RECEIPTS, WHEREAS IN THE PRESENT CASE THE ISSUE IS OF ACCOMMO DATION ENTRIES OF PAYMENT OF LABOUR THEREFORE, RATIO OF THE ORDER OF TRIBUNAL IN THE CASE OF SHRI RAMESHCHANDRA RANGILDAS MEHTA (SUPRA) CANNOT B E APPLIED IN FAVOUR OF THE ASSESSEE. SO FAR AS REJECTION OF BOOK S OF ACCOUNTS IS CONCERNED, WE ARE IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. AO IN PARA 10 OF THE ASSESSMENT ORDER, WHEREIN IT HAS BEEN OBSERVED THAT THE ASSESSEE HAS NOT PRODUCED ANY BILLS RAISED ANY SUB- CONTRACTOR AND ANY CASH VOUCHERS IN RESPECT OF ANY EXPENDITURE INCURRE D IN CASH THEREFORE, HE PROCEEDED TO REJECT BOOKS OF ACCOUNTS. BEFORE TH E LD. CIT(A), THE ASSESSEE DID NOT CHALLENGE THE REJECTION OF BOOKS O F ACCOUNTS THUS, THE FINDINGS OF THE AO IN THIS REGARD ATTAINED FINALITY AND IN THIS SITUATION, THE REVENUE AUTHORITIES HAS TO ESTIMATE INCOME ON THE A LLEGED ACCOMMODATION ENTRIES BY WAY OF CONSIDERING THE PRO FIT DECLARED BY THE ASSESSEE ITSELF IN THE PREVIOUS AND SUBSEQUENT ASSE SSMENT YEARS AND BY CONSIDERING THE COMPARABLE CASES HAVING SIMILAR LIN E OF BUSINESS IN THE 8 ITA NOS.2884 & 2885/AHD/2015/SRT & C.O NOS.167 & 16 8/AHD/2015/SRT (A.Y: 2011-12) SHRI MAHESHBHAI TULSIBHAI PATEL LIGHT OF FACTS AND CIRCUMSTANCES OF THE INSTANT CAS E AND SUCH EXERCISE HAS BEEN PROPERLY DONE BY THE FIRST APPELLATE AUTHORITY . 12. SO FAR AS CONCLUSION DRAWN BY THE LD. CIT(A) IS CONCERNED, FROM THE ASSESSMENT ORDER AS WELL AS FIRST APPELLATE ORDER, WE OBSERVE THAT THE ESTIMATE PROVIDED BY THE APPELLANT THAT FROM SUCH A LLEGED TRANSACTIONS OF ACCOMMODATION ENTRIES THE ASSESSEE RECEIVED @ .03% TO 1% BENEFIT WAS ON VERY LOWER SIDE LOOKING INTO THE ACTIVITIES AND THE RISK UNDERTAKEN BY THE ASSESSEE AND THUS, THE SAME WAS RIGHTLY DISMISS ED BY THE LD. FIRST APPELLATE AUTHORITY. SO FAR AS ESTIMATION OF COMMI SSION OF 2% OF TOTAL ACCOMMODATION ENTRIES ARE CONCERNED, THE LD. CIT(A) NOTED THAT THE PAYER M/S. ROSY ROYAL MINERALS DERIVED BENEFIT OF 6.7% OF TOTAL AMOUNT OF ALLEGED ENTRIES AND TAKING A REASONABLE ESTIMATE OF COMMISSION THEREON, THE LD. CIT(A) REDUCED AND RESTRICTED THE ADDITION TO 2% OF TOTAL AMOUNT WHICH IS QUITE REASONABLE AND JUSTIFIED. IN VIEW O F ABOVE, WE ARE IN AGREEMENT WITH THE OBSERVATION AND CONCLUSION DRAWN BY THE FIRST APPELLATE AUTHORITY AND HENCE, WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE SAME AND THUS, WE ARE INCLINED T O UPHOLD THE SAME AND WE HOLD SO. ACCORDINGLY, GROUNDS OF REVENUE AS WEL L AS CO OF THE ASSESSEE ARE DISMISSED. 9 ITA NOS.2884 & 2885/AHD/2015/SRT & C.O NOS.167 & 16 8/AHD/2015/SRT (A.Y: 2011-12) SHRI MAHESHBHAI TULSIBHAI PATEL ITA NO.2284/AHD/2015/SRT AND CO NO.167/AHD/2015/SRT : GROUND NO.1 OF REVENUE AND CO NO.1 OF THE ASSESSEE: 13. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND C AREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE T RIBUNAL. SINCE, IN THE BEGINNING OF ARGUMENTS BOTH THE SIDES WERE AGREED T HAT THE FACTS AND CIRCUMSTANCES OF THE CASE OF MAHESHBHAI T. PATEL (H UF) ITA NO.2285/AHD/2015/SRT FOR AY 2011-12 & C.O NO.168/AH D/2015/SRT ARE IDENTICAL AND SIMILAR, THEREFORE OUR CONCLUSION DRA WN FOR THESE CASES, IN THE EARLIER PART OF THIS ORDER, WOULD APPLY MUTATIS MUTANDIS TO THE GROUND NO.1 OF THE REVENUE AND CROSS OBJECTION NO.1 OF THE ASSESSEE, CONSEQUENTLY, THE SAME ARE ALSO DISMISSED IN THE LI NE OF CONCLUSION DRAWN BY US IN THE EARLIER PART OF THIS ORDER. GROUND NO.2 OF REVENUE AND CO NO.2 OF THE ASSESSEE : 14. APROPOS THESE CROSS GROUNDS, WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL P LACED ON THE RECORD OF THE TRIBUNAL INTER ALIA, FIRST APPELLATE ORDER AND ASSESSMENT ORDER. THE LD. DR SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN ESTI MATING OF INCOME OF THE ASSESSEE @ 2% AS AGAINST 10% MADE BY A.O. ON THE AG GREGATE UNEXPLAINED CASH DEPOSITS IN THE BANK ACCOUNTS TO T UNE OF RS.22,49,45,749/- BANK OF BARODA TO THE TUNE OF RS. 15,63,62,398/- (IN THE NAME OF PROP, OF M/S. ASHA TRADERS) AND BANK OF IND IA TO THE TUNE OF RS.6,85,83,351/- (IN THE NAME OF PROP, OF SHUBHAM C ORPORATION)], WITHOUT 10 ITA NOS.2884 & 2885/AHD/2015/SRT & C.O NOS.167 & 16 8/AHD/2015/SRT (A.Y: 2011-12) SHRI MAHESHBHAI TULSIBHAI PATEL APPRECIATING THE FACTS OF THE CASE. SUPPORTING THE ASSESSMENT ORDER, THE LD. DR SUBMITTED THAT THE AO IN PARA 10 REJECTED BO OKS OF ACCOUNTS OF THE ASSESSEE AND THEREAFTER ASKED THE ASSESSEE TO FURNI SH DETAILS OF CASH DEPOSITS AND EXPLANATION CONTENDING THAT FOR THE YE AR UNDER CONSIDERATION THE EARNINGS FROM DISCOUNTING OF CHEQUES WAS @ 15 P AISA PER RS. 100/- WHICH WAS NOT SUFFICE AND CORRECT AND THE SAME WAS DISMISSED BY THE AO. THE LD. DR SUBMITTED THAT THE AO RIGHTLY ESTIM ATED INCOME OF COMMISSION FROM DISCOUNTING OF CHEQUES @ 10% WHICH WAS REDUCED TO 2% BY THE LD. CIT(A) WITHOUT ANY BASIS AND COGENT R EASON THEREFORE, IMPUGNED ORDER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE AO. 15. REPLYING TO THE ABOVE AND PRESSING INTO SERVICE CROSS OBJECTION NO.2 OF THE ASSESSEE, THE LD. AR SUBMITTED THAT THE LD. CIT(A) IN PARA 9.2 NOTED THAT IN THE CASE OF MONEY TRANSFER ACTIVITY, SUCH BENEFIT IS DIFFICULT TO COMPUTE, AS IN SOME CASES, THE CLIENTS MIGHT HAVE A VAILED ONLY OF THE SERVICES OF MONEY TRANSFER, WHILE SOME CLIENTS MIGH T HAVE AVAILED THE SERVICES OF THE APPELLANT FOR THEIR UNACCOUNTED PUR CHASES AND SALES AND RATE OF COMMISSION WOULD NOT BE THE SAME IN THESE T WO CATEGORIES. THE LD. AR VEHEMENTLY POINTED OUT THAT DESPITE THESE FA CTS, THE LD. CIT(A) ESTIMATED THE COMMISSION INCOME @ 2% WHICH IS VERY EXCESSIVE THEREFORE, THE SAME MAY KINDLY BE REDUCED TO EITHER 0.15% OR 0.25% AS THE INCOME IN CHEQUE DISCOUNTING IS NOT 2% OF TOTAL DEPOSITS. THE LD. AR ALSO SUBMITTED THAT THE ASSESSEE HAS NOT EARNED 2% FROM THE CASH 11 ITA NOS.2884 & 2885/AHD/2015/SRT & C.O NOS.167 & 16 8/AHD/2015/SRT (A.Y: 2011-12) SHRI MAHESHBHAI TULSIBHAI PATEL DEPOSITS MADE FOR TRANSFER OF MONEY ON BEHALF OF CL IENTS THEREFORE, ORDER OF THE FIRST APPELLATE AUTHORITY MAY KINDLY BE MODI FIED ACCORDINGLY. 16. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISS IONS, FIRST OF ALL, WE MAY POINT OUT THAT THE LD. CIT(A) HAS ADJUDICATED T HE ISSUE IN PARAS 9 TO 9.3 OF THE FIRST APPELLATE ORDER AND OBSERVED THAT THERE ARE SELF-CASH WITHDRAWALS IN THE SAID BANK ACCOUNT, SOME DEPOSITS MAY BE REPRESENTING APPELLANTS OWN UNACCOUNTED BUSINESS TURNOVER AND W HILE IN THE PERCENTAGE OF COMMISSION FOR PURELY MONEY TRANSFER ACTIVITY MAY BE LOW, THE PROFIT ELEMENT IN RESPECT OF CASH DEPOSITS PERT AINING TO APPELLANTS OWN BUSINESS MAY BE VERY HIGH AND IN ABSENCE OF ANY ANALYSIS OF DIFFERENT TYPES OF ACTIVITIES IN ASSESSMENT ORDER T HE UNACCOUNTED INCOME IN RESPECT OF THESE DEPOSITS WAS ESTIMATED @ 2% OF AVERAGE RATE OF TOTAL DEPOSITS. THE LD. CIT(A) ALSO OBSERVED THAT BY TAK ING A HOLISTIC VIEW IN THE MATTER THE ACTUAL COMMISSION EARNED AND ACTUAL PROF IT IN RESPECT OF DIFFERENT TYPES OF DEPOSITS MAY VARY CONSIDERABLY I N RESPECT OF INDIVIDUAL TRANSACTIONS. THE LD. AR HAS PLACED COPIES OF THE ASSESSMENT ORDERS OF M/S. SHRI SAI CORPORATION FOR AY 1995-96 TO SUBMIT THAT THE EARNING FROM CHEQUES/DRAFT DISCOUNTING BUSINESS IS 0.02% TO 0.10 % AND HENCE, ESTIMATION OF INCOME @ 2% IS VERY EXCESSIVE AND THE SAME MAY BE REDUCED ACCORDINGLY TO A REASONABLE BASIS. 12 ITA NOS.2884 & 2885/AHD/2015/SRT & C.O NOS.167 & 16 8/AHD/2015/SRT (A.Y: 2011-12) SHRI MAHESHBHAI TULSIBHAI PATEL 17. IN OUR CONSIDERED OPINION, THE CONTENTIONS OF T HE ASSESSEE M/S. SHRI SAI CORPORATION BEFORE THE AO FOR AY 1995-96 CANNOT BE ACCEPTED AS BASIS FOR THE PRESENT CASE PERTAINING TO AY 2011-12 TO ESTIMATE INCOME AT VERY LOWER SIDE AS THE ASSESSEE HIMSELF STATED BEFO RE THE AO THAT INCOME FROM THIS ACTIVITY IS 0.15% OF TOTAL AMOUNT. IN T HE PRESENT CASE, THE DEPOSITS ARE NOT EXCLUSIVELY PERTAINING TO DISCOUNT ING OF CHEQUES/DD BUSINESS BUT THERE ALSO SOME ELEMENT OF DEPOSITS PE RTAINING TO THE APPELLANTS OWN BUSINESS OF UNACCOUNTED TURNOVER WH ICH CANNOT BE IGNORED. THE ASSESSEE HAS NOT SUBMITTED ANY SEGREG ATION IN THIS REGARD AND REVENUE AUTHORITIES HAVE NOT ALSO UNDERTAKEN AN Y EXERCISE TO SEGREGATE THESE TWO ELEMENTS OF THE IMPUGNED CASH D EPOSITS TO THE BANK ACCOUNTS OF THE ASSESSEE. CONSIDERING THE ENTIRE FA CTS AND CIRCUMSTANCES OF THE CASE, WE ARE AGREED WITH THE CONTENTION OF T HE LD. AR THAT THE MAXIMUM AMOUNT OF CASH DEPOSIT IS PERTAINING TO DIS COUNTING OF CHEQUES/DD BUSINESS BUT REMAINING PART OF UNACCOUNT ED BUSINESS TURNOVER OF THE ASSESSEE CANNOT BE IGNORE WHILE EST IMATING THE INCOME FROM THESE TOTAL DEPOSITS. CONSIDERING THE ENTIRE C ONTROVERSY AND CONTENTION OF THE AO AS WELL AS ASSESSEE, WE ARE OF THE VIEW THAT THE ESTIMATE ADOPTED BY THE LD. CIT(A) @ 2% OF TOTAL DE POSITS IS EXCESSIVE AND THE CONTENTION OF THE LD. AR THAT INCOME FROM T HESE DEPOSITS IS 0.15% IS ALSO ON VERY LOWER SIDE WHICH IS ALSO NOT ACCEPT ABLE. THEREFORE, TAKING A BALANCING AND REASONABLE APPROACH, WE DIRECT THE AO TO ESTIMATE THE 13 ITA NOS.2884 & 2885/AHD/2015/SRT & C.O NOS.167 & 16 8/AHD/2015/SRT (A.Y: 2011-12) SHRI MAHESHBHAI TULSIBHAI PATEL COMMISSION INCOME FROM THESE DEPOSITS WHICH ARE MAI NLY PERTAINING TO THE BUSINESS OF DISCOUNTING OF CHEQUES/DD @ 0.50% O F TOTAL DEPOSITS COVERING UP ALL THE POSSIBLE LEAKAGES OF REVENUE IN THIS REGARD. CONCLUSION DRAWN BY THE LD. CIT(A) IS MODIFIED. AC CORDINGLY, GROUND NO.2 OF REVENUE IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED AND AO IS DIRECTED TO RE-COMPUTE THE ADDITI ON AS DIRECTED ABOVE. 18. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE, CROSS OBJECTIONS OF THE ASSESSEE NO.168/AHD/2015/SRT AND CROSS OBJECTIO N NO.1 IN CO. NO.167/AHD/2015/SRT ARE DISMISSED AND CROSS OBJECTI ON NO.2 IN THE SAME IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 0 7 TH SEPTEMBER, 2018. / SURAT ; DATED : 07 TH SEPTEMBER, 2018 EDN # & / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. $ ( ) / THE CIT(A)-3, SURAT; 4. PRL. CIT, SURAT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE . / BY ORDER , // TRUE COPY// * / ASSISTANT REGISTRAR , / ITAT, SURAT SD/- SD/- ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) /JUDICIAL MEMBER