The ACIT, Central Circle-1(2), Ahmedabad V. Swetaben Ghanshyambhai Patel, Ahmedabad

ITA 155/AHD/2021

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(Appeals), which had allowed the appeal of the assessee, Swetaben Ghanshyambhai Patel, in respect of additions made by the AO. The AO had treated certain purchases as bogus and added them as unaccounted income based on information received about the misuse of the NMCE platform. The CIT(Appeals) found that the transactions were speculative in nature, profits were declared, and there was no evidence of accommodation entries or unaccounted commission payments. The Tribunal agreed with the CIT(Appeals) and dismissed the Department's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131413 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-12-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 03-06-2021
• Other Referred Cases: CIT Vs. Umang H. Thakkar, Andaman Timber Works vs. CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of cross examination; Accommodation entries; Speculative transactions; Set aside
• Section: 132; 69C; 139; 143(3); 153A; 43(5)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e ACIT, Central Circle-1(2), Ah medabad (Appellant) Vs Swetaben Ghanshya mbh ai Patel, 901, Suryaketu Tower, Nr. Sambh av Pres s, Satellite, Ah med abad PAN: AB APP7593 G (Resp ondent) Asses see b y : Shri Biren Shah, A. R. Revenue by : Shri Ravindra, Sr. D. R. Date of hearing : 14-12 -2022 Date of pronouncement : 20-01 -2023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-11, Ahmedabad in Appeal no. CIT(A)-11/C.C-1(2)/Ahd/10204/2018-19, in proceeding u/s. 143(3) r.w.s. 147 vide order dated 17/03/2021 passed for the assessment year 2011-12. ITA No. 155/Ahd/2021 Assessment Year 2011-12 I.T.A No. 155/Ahd/2021 A.Y. 2011-12 Page No. ACIT vs. Swetaben Ghanshyambhai Patel 2 2. The Department has taken the following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the comprehensive analysis made in the assessment order establishing the link between the assessee and the Mumbai based entry provider Shri Shirish Chandrakant Shah and Shri Pradeep Birewar for obtaining accommodation entry through NMCE plateform, while deleting the addition of Rs.2,26,97,399/- and unaccounted commission expenses of Rs,226,693/-. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the statement of Shri Pradeep Birewar, through whom the accommodation entry was availed by the assessee, even though he had accepted to have facilitated accommodation entries in his statement u/s 132 & 131 before the DDIT(lnv)-1(3), Ahmedabad. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 4. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” 3. The brief facts of the case are that the assessee is engaged in the business of building and financing. The assessee filed the return of income under section 139 of the Act on 27-09-2011 and under section 153A on 22- 08-2015 declaring total income of 15,45,620/ -. The case of the assessee was assessed under section 153A rws 143(3) of the Act at a total income of 3,56,97,630/- on 27-12-2016 after making various additions on the basis of incriminating documents found and seized during search. Subsequent to search assessment, information was received from DGIT (Investigation), Kolkota regarding tax evasion done by misuse of National Multi- Commodities Exchange (NMCE) platform. The assessee was one such a beneficiary of misuse of NMCE platform. In the assessment, the AO made addition of 2,2 6,97,399/- by treating the purchases made by the assessee as bogus purchases through NMCE platform in respect of two scrips. The I.T.A No. 155/Ahd/2021 A.Y. 2011-12 Page No. ACIT vs. Swetaben Ghanshyambhai Patel 3 AO held that the purchases made by the assessee were not genuine and are not allowable expenditure as per the provisions of the Act and the same were only accommodation entries. The AO further held that the sale receipts of 2,33,37,544/- by the assessee in the above NMCE platform were accommodation entries received by the assessee against payment of cash. Besides the above, the AO also held that since the assessee has introduced accommodation entries, hence commission of 2,26,693/- (@1%) was also paid to receive the accommodation entries. Accordingly, the AO added a sum of 2,26,693/- being unaccounted expenses to obtain accommodation entry under section 69C of the Act. 4. In appeal, Ld. CIT(Appeals) allowed the assessee’s appeal in respect of both the additions. In respect of the addition of 2,26,97,399/ -, Ld. CIT(Appeals) held that as per the ledger account copy submitted by the assessee, the assessee entered into speculative transactions as defined under section 43(5) of the Act and therefore only difference at the end of the day of sale and purchase has been considered as speculative profits and in this way the assessee has derived speculative profits of 6,53,643/- which has been offered in the profit and loss account for the year under consideration and in the computation of income filed along with the return of income. While allowing the assessee’s appeal, Ld. CIT(Appeals) made the following observations: “It is verifiable from the above, that the appellant has made the transactions with the total debits and credits of Rs.6,86,452/- and Rs. 6,37,452 respectively with Darshan R. Sheth which included the payment of Rs.50,000/- only on 14.09.2010 through cheque of Central Bank of India as initial investment. Further the credits of the profits have been received through banking channel as found credited in I.T.A No. 155/Ahd/2021 A.Y. 2011-12 Page No. ACIT vs. Swetaben Ghanshyambhai Patel 4 the appellant's bank account. Similarly through Bhagwati Commodities the appellant has received the payments of the speculative profits through banking channels which were deposited in her bank account. 7.5 On going through the facts it is noticed that there is no cash transactions made by the appellant with the aforesaid two parties. The speculative profits being the difference of the purchase and sale consideration of the day have been received through the banking channels which were credited in the bank account. There are no details and evidences to the allegation that the appellant has received the cheques by making the cash payments being in the nature of accommodation entry. The transactions of purchase and sale are supported with the contract notes filed by the appellant before the AO in the assessment proceedings also which have not been doubted otherwise also. 7.6 The appellant has made the speculative transactions which have been settled on the same day without physical delivery of the shares therefore neither the payments towards the total purchases amount has been made nor the payments towards sale proceeds have been received by the appellant. In fact no delivery of the shares either have been taken or given by the appellant. So there is no basis to treat the payments towards purchase consideration as unaccounted payments or accommodation entries when factually there is no evidence on record to say that such payments have either been made by cheque or cash not recorded in the books of accounts. 7.7 The appellant has further submitted that during the course of reassessment proceedings she had asked the DCIT Central Circle 1(2), Ahmedabad to give cross examination of Shri Hemant Sarawagi [AMVPS8048K] C/o. R.K. Agrawal & Floor, Atindra Mukherjee Lane, Shibpur, Howrah and M/s. Proficient Commodities Pvt. Ltd [AADCP7843A] 4 th Floor, BNCCI House, 23, RN Mukherjee Road, Kolkata-1 but the AO has failed to give opportunity of cross examination and has violated the principle of natural justice therefore entire assessment is bad. 7.8 In view of the above, there is no basis of making the aforesaid additions when no cross examination of the two parties with whom the appellant has carried out the aforesaid transactions have been provided by the AO. Thus there is violation of the principle of natural justice and as per the various judgments of Hon'ble Courts including the judgment of Hon'ble Gujarat High Court in the case of CIT Vs. Umang H. Thakkar in tax appeal No.1971 of 2009 dated 18.10.2011 and Hon'ble Apex Court in the case of Andaman Timber Works 281 CTR 241 no addition could be made on the basis of the statement of third parties without granting of opportunity of cross examination. So there was almost absence on the part of the AO in this regard to afford the legal requirement of providing the opportunity of cross examination of the alleged parties. So on this legal ground also the addition made by the AO is not tenable. I.T.A No. 155/Ahd/2021 A.Y. 2011-12 Page No. ACIT vs. Swetaben Ghanshyambhai Patel 5 In view of the above the question of making the commission charges @ 1% on the purchase consideration is also not justified as there was no such full payment of the entire purchase consideration and no evidence to this effect was found and brought on record so as to justify the unexplained cash payments for obtaining the accommodation entry. 7.9 In view of the above, the addition of Rs. 2,26,97,399/- as well as the commission @ 1% of the purchase price at Rs.2,26,973/- are found not correct and hence both the additions are deleted. 8. Ground of appeal No.7 & 8 are general in nature and does not call for any adjudication as there is no specific submission to the above and hence these grounds of appeal are dismissed. 9. In the result, appeal is partly allowed.” 5. The Department is in appeal before us against the aforesaid additions deleted by Ld. CIT(Appeals). Before us, the DR filed written submission dated 14-12-2022. In response, the Ld. Counsel for the assessee submitted that as correctly noted by Ld. CIT(Appeals), the assessee entered into speculative transactions under section 43(5) of the Act without taking actual delivery and the profits from such transactions were offered by the assessee in the return of income. The counsel for the assessee further submitted that all transactions were carried out through banking channels and there is nothing on record to state that any cash transactions have been made by the assessee. These facts have been dealt in great detail by Ld. CIT(Appeals) while passing the order and accordingly, in view of the above facts, there is no reason to come to the conclusion that assessee has taken accommodation entries or paid any commission to any person receiving the same. 6. We have heard the rival contentions and perused the material on record. In our considered view, we find no infirmity in the order of Ld. I.T.A No. 155/Ahd/2021 A.Y. 2011-12 Page No. ACIT vs. Swetaben Ghanshyambhai Patel 6 CIT(Appeals). The assessee during the year under consideration had entered into speculative transactions under section 43(5) of the Act without taking actual delivery and the profits from such transactions were offered by the assessee in the return of income. Further, from the facts it is observed that the assessee has only made capital “gains” and has not incurred any losses so as to come to the inference that the assessee has taken advantage of capital “loss” incurred in respect of purchase and sale of shares. Even otherwise, there is no basis to treat the payments toward purchase consideration since as correctly noted by Ld. CIT(Appeals), there is no basis to treat the payments towards purchase consideration as unaccounted payments or accommodation entries when factually there is no evidence on record to say that such payments have either been made by cheque or cash not recorded in the books of accounts. In the instant facts, all payments have been made through banking channels and have been duly recorded in the books of accounts by the assessee. The transactions of purchase and sale are supported by contract notes filed by the assessee before the Revenue authorities. Besides the above, Ld. CIT(A) has also observed that no opportunity of cross examination of the Third parties on the basis of whose statements the additions were made was afforded to the assessee despite a specific request by the assessee. In view of the above, in the instant facts, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee has not engaged in obtaining accommodation entries through NMCE platform and also that there is no evidence to prove that the assessee paid any unaccounted commission expenses amounting to 2,26,693/-. I.T.A No. 155/Ahd/2021 A.Y. 2011-12 Page No. ACIT vs. Swetaben Ghanshyambhai Patel 7 7. In the result, the appeal of the Department is dismissed. Order pronounced in the open court on 20-01-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 20/01/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद