AI Insights
The case involves multiple appeals by both the assessee, Sh. Anand Kumar Jain, and the Revenue against the orders of the CIT(A)-29, New Delhi, concerning assessments made under Section 153A of the Income Tax Act following a search operation. The primary issues revolved around the legality of the search, the validity of the assessments made, and the determination of commission income from alleged accommodation entries. The Tribunal examined the procedural correctness of the assessments, the application of commission rates, and the handling of circular transactions among shell companies. The Tribunal's decision emphasized the need for a fair assessment based on accurate and complete data, rejecting arbitrary deductions and affirming the CIT(A)'s findings on various grounds.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 131600 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 year(s) 2 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-04-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
13-03-2023
Assessment Year
2016-2017
Appeal Filed On
17-02-2019
Judgement Text
THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’, NEW DELHI Before Sh. C. M. Garg, Judicial Member Dr. B. R. R. Kumar, Accountant Member ITA No. 1318/Del/2019 : Asstt. Year : 2010-11 ITA No. 1319/Del/2019 : Asstt. Year : 2011-12 ITA No. 1320/Del/2019 : Asstt. Year : 2012-13 ITA No. 1321/Del/2019 : Asstt. Year : 2013-14 ITA No. 1322/Del/2019 : Asstt. Year : 2014-15 ITA No. 1323/Del/2019 : Asstt. Year : 2015-16 ITA No. 1324/Del/2019 : Asstt. Year : 2016-17 Sh. Anand Kumar Jain, C-9/46, Sector-8, Rohini, New Delhi-110085 Vs. ACIT, Central Circle-26, New Delhi (APPELLANT) (RESPONDENT) PAN No. AAEPJ1642F ITA No. 2889/Del/2019 : Asstt. Year : 2011-12 ITA No. 2890/Del/2019 : Asstt. Year : 2012-13 ITA No. 2891/Del/2019 : Asstt. Year : 2013-14 ITA No. 2892/Del/2019 : Asstt. Year : 2014-15 ITA No. 2893/Del/2019 : Asstt. Year : 2015-16 ITA No. 2894/Del/2019 : Asstt. Year : 2016-17 ACIT, Central Circle-26, New Delhi Vs. Sh. Anand Kumar Jain, C-9/46, Sector-8, Rohini, New Delhi-110085 (APPELLANT) (RESPONDENT) PAN No. AAEPJ1642F Assessee by : Sh. Ved Jain, Adv. & Ms. Supriya Mehta, CA Revenue by : Sh. P. Praveen Sidharth, CIT DR Date of Hearing: 14.03.2023 Date of Pronouncement: 28.04.2023 ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 2 ORDER Per Bench: The present appeals have been filed by the assessee and the Revenue against the orders of ld. CIT(A)-29, New Delhi dated 10.01.2019. 2. Since, the issue involved in ITA Nos. 1318, 1322 & 1323/Del/2019 are similar, they were heard together and being adjudicated by a common order. In ITA No. 1318/Del/2019, the following grounds have been raised by the assessee: “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. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the order passed by the learned AO u/s 153A is bad and liable to be quashed as the same has been framed consequent to a search which itself was unlawful and invalid in the eyes of law. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the assessment framed under Section 153A/143(3) are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law and liable to be quashed. 4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the assessment order passed by the AO is barred by limitation having been passed beyond the statutory period prescribed in the Act. ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 3 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the AO has erred in making the assessment without proper service of statutory notices. 6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153A are bad in law in the absence of any incriminating material belonging to the assessee being found during the search. 7. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the assessment order passed by the learned AO is bad in law as the same has been passed without application of his own mind. 8(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. 12,02,355/- 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. 9. 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. 10. 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. ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 4 11. 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 by misinterpreting the statement of the assessee recorded on the oath. 12. 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 by drawing adverse inference, without taking the investigation, initiated by AO, to a logical end. 13. 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 material collected at the back of assessee without giving him an opportunity to rebut same. 14. 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 by drawing adverse inference against the assessee on the basis of statement recorded without giving assessee an opportunity to cross examine the same. 15. Without prejudice to the above and in the alternative, the rate of commission applied by Ld. CIT(A) is too high and without any basis.” 3. Since, the issue involved in ITA Nos. 1319, 1320 & 1321/Del/2019 are similar, they were heard together and being adjudicated by a common order. In ITA No. 1319/Del/2019, the following grounds have been raised by the assessee: “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. ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 5 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the order passed by the learned AO u/s 153A is bad and liable to be quashed as the same has been framed consequent to a search which itself was unlawful and invalid in the eyes of law. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the assessment framed under Section 153A/143(3) are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law and liable to be quashed. 4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the assessment order passed by the AO is barred by limitation having been passed beyond the statutory period prescribed in the Act. 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the AO has erred in making the assessment without proper service of statutory notices. 6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153A are bad in law in the absence of any incriminating material belonging to the assessee being found during the search. 7. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the assessment order passed by the learned AO is bad in law as the same has been passed without application of his own mind. ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 6 8(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. 16,65,096/- 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. 9. 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. 10. 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. 11. 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 by misinterpreting the statement of the assessee recorded on the oath. 12. 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 by drawing adverse inference, without taking the investigation, initiated by AO, to a logical end. 13. 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 material collected at the back of assessee without giving him an opportunity to rebut same. ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 7 14. 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 by drawing adverse inference against the assessee on the basis of statement recorded without giving assessee an opportunity to cross examine the same. 15. Without prejudice to the above and in the alternative, the rate of commission applied by Ld. CIT(A) is too high and without any basis. 16. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the report submitted by the DVO is beyond the statutory time period and accordingly report of the DVO as well as assessment order is barred by limitation.” 4. In ITA No. 1324/Del/2019, the following grounds have been raised by the assessee: “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.74,59,361/- 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. ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 8 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 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 by misinterpreting the statement of the assessee recorded on the oath. 6. 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 by drawing adverse inference, without taking the investigation, initiated by AO, to a logical end. 7. 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 material collected at the back of assessee without giving him an opportunity to rebut same. 8. 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 by drawing adverse inference against the assessee on the basis of statement recorded without giving assessee an opportunity to cross examine the same. 9. Without prejudice to the above and in the alternative, the rate of commission applied by Ld. CIT(A) is too high and without any basis. 10. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the addition of Rs. 3,22,950/- made by the AO on account of gift received from Uncle. ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 9 (ii) That the addition has been confirmed rejecting the submissions and explanations made by the assessee in this regard.” 5. Since, the issue involved in ITA Nos. 2888/Del/2019 to 2893/Del/2019 are similar, they were heard together and being adjudicated by a common order. In ITA No. 2889/Del/2019, the following grounds have been raised by the Revenue: “1. On the facts and in the circumstances of the case, the Id.CIT(A) has erred in restrict addition at Rs. 16,65,096/- as against the addition of Rs. 12,36,11,068/- made in the assessment order on account of commission income from the accommodation entry business by taking the rate of 1.04% for charging of commission income on the turnover of accommodation entries without considering the fact that in the assessment order the transactions among the shell concerns were already eliminated from the total turnover and the remaining transactions of commission were quantified @ 2% of total turnover. 2. On the facts and in the circumstances of the case, the Id.CIT (A) has erred in deleting the protective addition of Rs. 37,95,000/- 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. 3. On the facts and in the circumstances of the case, the Id.CIT (A) has erred in deleting the addition of addition of Rs. 3,34,57,194/- on account of difference in the value of the immovable property purchased by the assessee and the value determined by the DVO and inspector report treating the same as unaccounted investment u/s 69 of the Act without considering the fact that Inspector's report was submitted after spot visit enquiries and after ascertaining the market value of this ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 10 property through the property dealers of the area indicating the fair market value of the property.” 6. In ITA No. 2894/Del/2019, the following grounds have been raised by the Revenue: “1. On the facts and in the circumstances of the case, the Id.CIT(A) has erred in restricting addition at Rs. 74,59,361/- as against the addition of Rs. 3,60,24,113/- made in the assessment order on account of commission income from the accommodation entry business by taking the rate of 1.04% for charging of commission income on the turnover of accommodation entries without considering the fact that in the assessment order the transactions among the shell concerns were already eliminated from the total turnover and the remaining transactions of commission were quantified @ 2% of total turnover. 2. On the facts and in the circumstances of the case, the Id.CIT (A) has erred in restricting the protective addition at Rs. 2,50,000/- as against the addition of Rs. 2,62,50,000/- made by the AO on account of cash receipts u/s 68 of the Act without considering the fact that the key of car was found in the residence of the assessee and the owner of the car has stated that cash of Rs.22,50,000/- brought to give the assessee but assessee failed to explain the reason as to why he received cash from Sh. Arvind Jain. Also, the assessee has failed to explain why he has received cash of Rs.1,00,00,000/- and Rs.1,37,50,000/- plus Rs.2,50,000/- to D-Mall which refers to Sh. Anand Kumar Jain as he has office in D Mall. 3. On the facts and in the circumstances of the case, the Id.CIT (A) has erred in deleting the protective addition of Rs. 5,00,000/- 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 Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 11 7. The moot issue involved in this case pertain to determination of the commission income of the proven accommodation entry operator. 8. Brief facts of the case are that the assessee is an individual and derives income under head house property, business and profession and other sources. A search and seizure operation was carried out on business and residential premises of the Anand Jain and Naresh Jain group on 17.12.2015 and subsequently, notice u/s 153A dated 27.10.2017 was issued to the assessee. 9. The AO held that assessee manages and controls shell companies and routes money through such concerns for providing accommodation entries. The list of such alleged concerns is as under: Name of Alleged Concerns 1.Ambarnuj Finance & Investments Pvt. 2.Chandra Buildcon Pvt. Ltd 3.Garima Jain 4.Jai Maa Bhawani Overseas Pvt. Ltd. 5.JKS Impex Pvt. Ltd. 6.Kavita Buildcon Pvt. 7.KCJ Buildtech Pvt. Ltd. 8.Reena Jain 9. Shivangi Garments Pvt. Ltd. 10. Shivaji Garments Pvt. Ltd. 11. Sukumar Buildwell Pvt. Ltd. ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 12 10. During the assessment proceedings, the assessee submitted that the total turnover calculated by the AO and the rate of commission charged by the AO was not correct. 11. It was also submitted by the assessee that the inclusion of banking transactions related one concern namely M/s Ambarnuj Finance & Investments Ltd. in the working of turnover of accommodation entries is incorrect and it is evident from the fact that assessment proceedings of the said company have been completed under section 153A and 143(3) and no adverse inference had been drawn against M/s Ambarnuj Finance & Investments Ltd. It was therefore requested to exclude the transactions related to M/s Ambarnuj Finance & Investments Ltd. from the working of turnover of accommodation entries alleged to be provided by the assessee. 12. The AO, on the basis of seized material and post search investigations, held that assessee is an accommodation entry provider and therefore completed the assessment order computing the commission income @2% on the turnover of the amounts rotated/routed. 13. Aggrieved by the order of the AO, the assessee filed appeal before 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 ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 13 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 Sh. Naresh Kumar Jain and the expenditure incurred with the respect to the earning of said income. Accordingly, actual commission can be computed based on the data appearing in short and excess account and the same may at best be charged in the hands of the assessee as commission income on the turnover. ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 14 viii. The working for the consolidated net commission rate is as under: Short and excess A/c Total (in Rs.) Receipts(Credit side) 220,616,047/- Less: Expenses(Debit side) 151,352,004/- Net commission income 6,92,64,043/- ix. It was submitted that the total turnover of alleged accommodation entries of the assessee and Sh. Naresh Kumar Jain. The computation is hereunder: Particulars Total Turnover Appearing in Tally(Jain Folder) 19,696,128,227 Less: Circular transactions among the shell company 4,842,477,767 Net Turnover as per Tally Data 14,853,650,460 x. that as per the above working the net rate of commission earned by the appellant comes to 6,92,64,043/14,85,36,50,460) *100 which at best can be applied on the turnover of accommodation entries after elimination of circular transactions. xi. The assessee also submitted a detailed working of the correct year wise turnover of the accommodation entries for the assessee which is also reproduced below: Particulars AY 2010-11 AY 2011-12 AY 2012-13 AY 2013-14 AY 2014-15 AY 2015-16 AY 2016-17 Total Working of Turnover Credit entries taken by the AO 143,029,299 3088,746,297 527,895,388 942,231,774 3,507,589,328 543,865,839 826,996,284 9,580,354,209 Less: Circular transactions among the shell company/ eliminated transactions 27,418,331 2,928,640,846 413,194,791 679,514,294 3,261,972,453 283,637,659 109,750,000 7,704,128,374 Credit entries to be consider as turnover 115,610,968 160,105,451 114,700,597 262,717,480 245,616,875 260,228,180 717,246,284 1,876,225,835 ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 15 15. Thereafter, considering the detailed submission and explanation furnished by the assessee, the ld. CIT(A) restricted the rate of commission to 1.04% as against 2% computed by the AO by holding as under in AY 2010-11. A similar finding has been given for all the assessment years. For the sake of ready reference, the relevant part of the order of the ld. CIT(A) is reproduced as under: “With regard to M/s Ambarnuj Finance & Investments 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 figure of Rs. 4,64,29,476/- is reduced from the calculation of commission. ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 16 With regard to calculation of turnover/quantum of accommodating entries after eliminating the impact of circular transactions and percentage of commission 9.11 From the above instances, I find that the AO has pointed out that the “short & excess account” in the tally data means the commission received by the Jain Brothers. Further from the above quoted instance and other examples quoted by the AO in the assessment order, it is clear that the appellant and his brother use to maintain the data of providing accommodation entries including bank transfers, cash exchanged and commission charged in Jain Folder Tally data. Further the turnover analysis placed in the paper book also depicts that majority of credit entries in the bank statement of shell companies matches with the entries posted in the Jain folder tall data. Accordingly, it becomes relevant to consider the entire short and excess account in the Jain Folder tally data for the purpose of evaluation of actual amount and rate of commission earned by the appellant and his brother on the accommodation entries provided, instead of a few stray instances considered by the AO in the assessment order, when complete details are available in the seized data itself. 9.12 In the tally data the year-wise aggregate of debit and credit side of short and excess account is mentioned. It appears that the credit side represents the commission received and debit side represents the commission paid:- Short and Excess A/c AY 2010- 11 AY 2011- 12 AY 2012- 13 AY 2013- 14 AY 2014- 15 AY 2015- 16 AY 2016-17 Total Receipts(Credit side) 27,377,147 20,165,241 22,557,902 38,865,246 38,186,848 73,503,663 - 220,616,047 Expenses( Debit side) 27,336,593 19,510,546 17,996,407 22,794,455 31,921,772 31,792,231 - 151,352,004 ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 17 9.13 Further the turnover as per tally data after eliminating circular transactions or the aforesaid six years for which details are available are as under:- Particulars AY 2010- 11 AY 2011- 12 AY 2012- 13 AY 2013- 14 AY 2014- 15 AY 2015- 16 AY 2016-17 Total Turnover Appearing In Tally (Jain Folder) 523,137,544 1,463,935,931 2,694,686,090 3,681,193,690 5,303,052,720 6,030,122,251 - 19,696,128,227 Less: Circular transactions among the shell company 83,550,600 453,336,100 913,688,481 799,494,446 985,521,370 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. I have examined the seized tally data. On going through the same, the contention of the appellant that expenses side represents the expense incurred by the appellant in arranging accommodation entries is found to be correct. However, in the facts and circumstances of the case, ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 18 it will not be appropriate to allow deduction of entire expenses. Accordingly, taking a holistic view, I consider that 30% of the gross commission receipts (@1.49%) are the expenditure incurred for earning commission income. Accordingly, I find it appropriate to take rate of 1.04% (1.49% - 0.45%) for charging of commission income on the turnover of accommodation entries in the hands of the appellant.” 9.13 Since, the facts in the case of the appellant are same as that of his brother Sh. Naresh Kumar Jain, therefore, I am inclined to adopt rate of commission at 1.04% as worked in the case of bother of the appellant. The total turnover of the appellant will be as follows:- Particulars AY 2010-11 AY 2011-12 AY 2012-13 AY 2013-14 AY 2014-15 AY 2015-16 AY 2016-17 Total Working of Turnover Credit entries taken by the AO 143,029,299 3088,746,297 527,895,388 942,231,774 3,507,589,328 543,865,839 826,996,284 9,580,354,209 Less: Circular transaction s among the shell company/ eliminated transactions 27,418,331 2,928,640,846 413,194,791 679,514,294 3,261,972,453 283,637,659 109,750,000 7,704,128,374 Credit entries to be consider as turnover 115,610,968 160,105,451 114,700,597 262,717,480 245,616,875 260,228,180 717,246,284 1,876,225,835 9.14 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. 11,56,10,968/- for the year under consideration. Accordingly, the AO is directed to restrict the addition at Rs. 12,02,355/-.” 16. Aggrieved by the order of the CIT(A), the assessee and the Revenue filed an appeals before the Tribunal. 17. Heard the arguments of both the parties and perused the material available on record. ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 19 18. We find that the AO himself has given a finding that circular transactions should be eliminated while computing the turnover of accommodation entries. However, while arriving at the turnover of accommodation entries given by the assessee such elimination 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 be appropriate to allow deduction of entire expenses. Accordingly, taking a holistic view, I consider that 30% of the gross commission receipts (@1.49%) are the expenditure incurred for earning commission income. ” ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 20 19. Thereafter the ld. CIT(A) proceeded to compute commission income by applying a rate of 1.04% (i.e. gross commission receipts @1.49% less 30% of gross commission receipts i.e. 0.45%) on the turnover offered and accepted by ld. CIT(A). The ld. CIT(A) has not brought anything on record but rejected the expenses incurred on earning the commission income and allowed 30% of commission income as expenses incurred for earning such income. The decision of ld. CIT(A) to restrict the expenses is purely on ad-hoc basis. While the commission income appearing in Short & excess A/c in Tally Data of Jain Folder is accepted, rejection of expenses appearing in the same short & excess A/c in Tally Data of Jain Folder is not tenable and without any logical conclusion. A document has to be read in its whole prospective but not in such a way that the data seized is interpreted to result in two diametrically opposite derivations. A summary of turnover of accommodation entries and consequently addition of commission income computed by AO and the turnover and commission income confirmed by ld. CIT(A) vis-à-vis commission income as per the assessee is tabulated below: Assessment Turnover Turnover as Average Average Yearly Average Year calculated as per assessee & Yearly Commission Yearly per AO accepted by Commission calculated by the Commission CIT(A) charged by the AO @2% on the total turnover on ad hoc basis CIT(A) @1.04% on the total turnover(by arbitrarily restricting expenses on earning commission to 30% of gross commission income) which should have been considered @0.47% on the total turnover AY 2010-11 27,66,87,335 115,610,968 55,33,746 12,02,355 5,43,372 AY 2011-12 618,05,53,386 160,105,451 12,36,11,068 16,65,096 7,52,496 AY 2012-13 105,04,22,587 114,700,597 2,10,08,452 11,92,886 5,39,093 AY 2013-14 187,86,43,617 262,717,480 3,75,72,872 27,32,262 12,34,772 ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 21 AY 2014-15 696,49,99,924 245,616,875 13,92,99,999 25,54,416 11,54,399 AY 2015-16 109,26,08,571 260,228,180 2,18,52,171 27,06,373 12,23,072 AY 2016-17 180,12,05,658 717,246,284 3,60,24,113 74,59,361 33,71,058 Total 1924,51,21,078 187,62,25,835 38,49,02,421 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 party and the court must have an opportunity of satisfying themselves that what the party has chosen to release from privilege represents the whole of the material relevant to the issue in question. To allow an individual item to be plucked out of context would be to risk injustice through its real weight or meaning being misunderstood.” The aforesaid principle is often referred to as the ‘Cherrypicking’ principle. 58. In the case at hand, SEBI could not have claimed privilege over certain parts of the documents and at the same time, agreeing to disclose some part. Such ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 22 selective disclosure cannot be countenanced in law as it clearly amounts to cherry picking.” 21. Therefore, as per the explanation and submissions of the assessee, whole of the expenses incurred in earning commission income shall be allowed and accordingly the net rate of commission earned by the assessee i.e. 0.47% is the best which can be applied on the turnover of the accommodation entries after elimination of circular transactions. Thus the maximum addition which can be made in the hands of the assessee on account of commission earned on turnover of the accommodation entries worked out as under: Assessment Year Turnover (after elimination of circular transactions) Commission rate Commission Income AY 2010-11 115,610,968 0.47% 5,43,372/- AY 2011-12 160,105,451 0.47% 7,52,496/- AY 2012-13 114,700,597 0.47% 5,39,093/- AY 2013-14 262,717,480 0.47% 12,34,772/- AY 2014-15 245,616,875 0.47% 11,54,399/- AY 2015-16 260,228,180 0.47% 12,23,072/- AY 2016-17 717,246,284 0.47% 33,71,058/- 22. The AO is therefore directed to give effect to this order accordingly. Before parting we would like to clarify that the determination of expenses and the commission earned is based on the incriminating material specifically found and seized during the courses of search and hence the percentage of commission earned cannot be considered to be the same in other similar cases. ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 23 ITA No. 2889/Del/2019 Ground No. 2 Protective Addition of Rs.37,95,000/-: 23. The ld. CIT(A) categorically held that out of the amount of Rs.37,95,000/-, the amount of Rs.15,95,000/- from M/s Ambarnuj Finance & Investments Pvt. Ltd. and Rs.8,00,000/- from M/s Star Lifestyles Pvt. Ltd. has been received on account of repayment of advances given by him earlier. Hence, the issue calls for no interference. The ld. CIT(A) held that the remaining Rs.14,00,000/- received from VKS Properties forms part of the turnover of the accommodation entries, the AO may verify the same. ITA No. 2889, 2890 & 2891/Del/2019 Ground No. 3 DVO Report: 24. During the course of search and post search investigation, it was found that the assessee had purchased immovable property being Municipal No. C-9/46, Sector 8, Rohini, New Delhi vide the deed executed on 12.07.2010 for Rs.45,00,000/- + Rs.2,25,000/- stamp duty jointly with Smt. Tanuja Jain wife of Sh. Amit Jain. Since, it was the purchase of an immovable property, for the purpose of estimating the correct value of the property and expenses incurred thereon, the AO made a reference to the DVO on 17.11.2017. The AO provided the addresses of the assessee vide letter dated 08.12.2017. The ld. AR argued that the DVO report has been received after 6 months after the reference and hence is null and void. Since, ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 24 the assessment has been passed within the time framed allowed u/s 153(1), we hold that the receipt of the valuation report of the DVO cannot be fatal to the assessment. 25. Coming to the facts of the case, the assessee owns 50% of the property. The said property has been valued by the DVO at Rs.3,00,14,000/- on account of cost of land against the value declared by the assessee of Rs.24,10,000/-and cost of construction at Rs.98,05,300/- against the value declared of Rs.41,89,250/- (50% of the value determined by the DVO). The ld. CIT(A) deleted the addition on the grounds that the valuation cannot be more than the stamp duty valuation. Before us, the ld. DR relied on the order of the Assessing Officer. The ld. AR argued that the property of the land is as per the circle rate and the cost of construction of Rs.8,11,644/- has not been considered and there was no difference between the value in the cost of construction, the variance being less than 10% which is normal and bound to occur as no one can value the property accurately and to the point. 26. Heard the arguments of both the parties and perused the material available on record. 27. We have gone through order of the ld. CIT(A) in detail. The ld. CIT(A) concurrently considered the provisions of Section 56(2)(viib) and Section 50C, report of the DVO and the stamp duty valuation (circle rates). The ld. CIT(A) held that the value as per the stamp duty valuation authority shall be taken as full value of the consideration and since the payment made by the assessee is as per the stamp value authorities determination, ITA Nos. 1318 to 1324 /Del/2019 ITA Nos. 2888 to 2894/Del/2019 Anand Kumar Jain 25 no addition is called for. With regard to the addition made on account of cost of construction, the ld. CIT(A) held that there was no difference between the value in the cost of construction declared by the assessee and the value as considered by the AO, can be attributed owing to the variance being less than 10% of the accepted norms of variation. Having gone through the facts, we find no reason to interfere with the decision of the ld. CIT(A) who accepted the value of the land as per the circle rate and value of the construction within the acceptable range of variation. 2890/Del/2019 Protective Addition: 28. In this case, the substantive addition has already been completed in the case of Sh. Naresh Kumar Jain and hence, no protective addition can be confirmed at this juncture in the case of the assessee. 29. In the result, all the appeals of the assessee are allowed and the appeals of the Revenue are dismissed. Order Pronounced in the Open Court on 28/04/2023. Sd/- Sd/- (C. M. Garg) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 28/04/2023 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR
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