ITO, New Delhi V. Sh Rakesh Relan, New Delhi

ITA 1899/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3530 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 06-07-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 28-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: BANITA DEVI NEROEM
• Keywords: Unexplained cash credit; Corroborative evidences; Accommodation entries; Revised return
• Section: 131; 68

Judgement Text

I.T.A. NO. 1894, 1899 /DEL/2010 1/7 IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI, BENCH F BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI A K GARODIA, ACCOUTANT MEMBER ITA NO. 1894 /DEL/2010 (ASSESSMENT YEAR2002-03) SH. RAKESH RELAN, VS. ITO, WARD 33(2), PROP. H B RELAN & CO., NEW DELHI 66/2253, SARVPRIYA GURDWARA ROAD, KAROL BAGH, NEW DELHI-110 005 I.T.A. NO. 1899/DEL/2010 (ASSESSMENT YEAR 2002-03) ITO, WARD 33(2), VS. SH. RAKESH RELAN, NEW DELHI PROP. H B RELAN & CO., 66/2253, GURUDWARA ROAD, KAROL BAGH, NEW DELHI. (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AAEPR 9201L APPELLANT BY: SHRI MAHESH KUMAR, CA SHRI RAKESH RELAN, ASSESSEE RESPONDENT BY: SMT. BANITA DEVI NEROEM, SR.DR ORDER PER A. K. GARODIA, AM: 1. THESE ARE CROSS APPEALS BY THE ASSESSEE AND THE REV ENUE, WHICH ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) XXVI, NEW DELHI DATED 15.03.2010 FOR ASSESSMENT YEAR 2002-03. FOR THE SAKE OF I.T.A. NO. 1894, 1899 /DEL/2010 2/7 CONVENIENCE, BOTH THESE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. THE BRIEF FACTS OF THE CASE AT THE ASSESSMENT STAGE ARE NARRATED BY LD. CIT(A) IN PARA 3 OF HIS ORDER, WHICH IS REPR ODUCED HEREIN BELOW: THE APPELLANT IS A STOCK BROKER AND THE MEMBER OF DELHI STOCK EXCHANGE. DURING THE ASSESSMENT PROCEEDINGS, THE LD. A.O. OBSERVED THAT THE APPELLANT HAD PROVIDED BOGUS ACCOMMODATION ENTRIES TO VARIOUS PERSONS BY GETTING CASH DEPOSITED ON VARIOUS DATES IN AN ACCOUNT NO.3374, V IJAYA BANK, ANSARI ROAD, NEW DELHI IN THE NAME OF M/S. LU CKY ENTERPRISES, (PROPRIETOR MR. MAHESH KUMAR). THIS C ASH AMOUNT WAS LATER TRANSFERRED TO THE ACCOUNT NO.3373 WHICH WAS IN THE NAME OF M/S. H B RELAN & CO. OF WHICH TH E APPELLANT WAS THE PROPRIETOR. THE APPELLANT USED T O ISSUE CHEQUES AND DRAFTS TO VARIOUS PARTIES OUT OF THIS A CCOUNT WHO REQUIRED CHEQUES/DRAFTS, ON CHARGING COMMISSION. T HE LD. A.O. OBSERVED THAT DURING THE YEAR THE APPELLANT HA D PROVIDED ACCOMMODATION ENTRIES TO THE TUNE OF RS.19,86,06,566/- TO VARIOUS PERSONS. THESE FACTS WERE CONFIRMED BY SHRI MAHESH KUMAR AND THE APPELLANT IN THE STATEMENT RECORDED BY THE A.O. THE APPELLANT GAVE DETAILED ACCOUNT OF THE MODUS OPERANDI AND INFORMED THAT IN LIEU OF HIS SERVICES, HE WAS PAID BROKERAGE @ 0.25% WHICH W AS OFFERED FOR TAXATION DURING THE ASSESSMENT PROCEEDI NGS, BY FILING A REVISED RETURN WHICH INCLUDED THE ABOVE BR OKERAGE OFRS.5 LACS. WHILE PASSING THE ASSESSMENT ORDER, T HE LD. A.O. DID NOT AGREE WITH THE RATE OF BROKERAGE ACCEP TED BY THE APPELLANT AT 0.25% AND ESTIMATED THE SAME AT 3%, TH EREBY AN ADDITION OF RS.59,79,000/- WAS MADE TO THE TOTAL IN COME OF THE APPELLANT. 3. BEING AGGRIEVED WITH THE ASSESSMENT ORDER, THE ASSE SSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE LD. CIT(A) THAT THE RATE OF BROKERAGE IN I.T.A. NO. 1894, 1899 /DEL/2010 3/7 THAT KIND OF TRADE RANGES BETWEEN 0.25% TO 0.5% BUT THE A.O. HAS ADOPTED THE BROKERAGE RATE @ 3% WITHOUT BRINGIN G ON RECORD ANY EVIDENCE IN THIS REGARD AND THERE IS NO BASIS ADOPTED BY THE A.O. FOR APPLYING 3% RATE FOR BROKERAGE. LD . CIT(A) HAS DECIDED THE ISSUE ON THE BASIS THAT THE RATE OF 0.2 5% AS PER THE ASSESSEE CANNOT BE ACCEPTED IN VIEW OF CONTUMACIOUS CONDUCT OF THE ASSESSEE SUPPORTED BY HIS STATEMENT ONLY. BUT AT THE SAME TIME, THE A.O. HAS ALSO NOT BROUGHT ON RECORD ANY E VIDENCE IN SUPPORT OF ESTIMATING THE BROKERAGE RATE @ 3%. LD. CIT(A) HAS DIRECTED THE A.O. TO ADOPT THE BROKERAGE RATE @ 0.7 5%. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US AGAINST CONFIRMATION OF BROKERAGE RATE @ 0.75% AS AGAINST 0.25% DECLARED BY THE ASSESSEE WHEREAS THE REVENUE IS IN APPEAL BEFORE US AGAINST THE DIRECTION OF THE LD. CIT(A) TO REDUCE THE BROKERAGE RATE TO 0.75% AS AGAINST 3% ADOPTED BY THE A.O. 4. THE LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS , IT IS SUBMITTED BY THE LD. A.R. THAT IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE A.O. THAT THE COMMISSION EARNED BY THE A SSESSEE IS ONLY 0.25%, WHICH HAS BEEN DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME. OUR ATTENTION WAS DRAWN TO PAGE 7 OF THE PAPER BOOK, WHICH IS A CONFIRMATION FROM SHRI MAHES H KUMAR IN WHICH HE HAS CONFIRMED THAT THE RATE OF COMMISSI ON WAS 0.25% ONLY. OUR ATTENTION WAS ALSO DRAWN TO PAGES 9-40 OF THE PAPER BOOK, WHICH CONTAINS A LETTER OF THE ASSESSEE TO THE A.O. SUBMITTING THE COMPLETE DETAILS ALONG WITH NAMES AN D ADDRESSES ETC. OF ALL THE PERSONS WITH WHOM THE TRANSACTION O F RS.1986.06 I.T.A. NO. 1894, 1899 /DEL/2010 4/7 LACS HAD TAKEN PLACE. IT IS ALSO SUBMITTED THAT IN THE LETTER DATED 17.12.2007, WRITTEN BY THE ASSESSEE TO THE A.O. AS APPEARING ON PAGE 9 OF THE PAPER BOOK, IT WAS REQUESTED THAT THE PARTIES MAY BE ISSUED SUMMONS U/S 131 TO VERIFY THE CORRECTNESS OF THE STATEMENT MADE BY THE ASSESSEE, BUT THIS WAS NOT DO NE BY THE A.O. IT IS ALSO SUBMITTED THAT THE STATEMENT OF SH RI MAHESH KUMAR IS APPEARING ON PAGES 53-57 OF THE PAPER BOOK BUT IN SUCH STATEMENT, NO QUESTION WAS ASKED FROM HIM REGA RDING THE RATE OF COMMISSION. IT IS SUBMITTED THAT NO MATERI AL HAS BEEN BROUGHT ON RECORD BY THE A.O. TO SUGGEST REGARDING THE COMMISSION RATE OF 3% ADOPTED BY HIM AND HENCE THE ADDITION MADE BY HIM SHOULD BE DELETED. HE HAS SUBMITTED A PHOTOCOPY OF THE AFFIDAVIT OF SHRI MAHESH KUMAR DATED 15.03.2 008 IN WHICH IT IS STATED BY HIM THAT THE PARTIES INVOLVED WERE PAYING COMMISSION @ 0.25% ON SUCH TRANSACTIONS. IT IS SUB MITTED BY HIM THAT THE ORIGINAL OF THIS AFFIDAVIT WAS SUBMITT ED TO THE LD. CIT(A) IN THE COURSE OF APPELLATE PROCEEDINGS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHO RITIES BELOW. WE FIND THAT IT WAS THE CLAIM OF THE ASSESS EE ALL THROUGH THAT THE ASSESSEE WAS EARNING COMMISSION @ 0.25% ON TOTAL ENTRIES OF RS.19.86 CRORES. ALTHOUGH SUCH CLAIM OF THE ASSESSEE REGARDING RATE OF COMMISSION @ 0.25% IS WITHOUT ANY SUPPORTING EVIDENCE BUT AT THE SAME TIME, THE A.O. HAS ESTIMATED THE BROKERAGE INCOME OF THE ASSESSEE BY A COMMISSION BROKERAGE RATE @ 3%, WHICH IS ALSO WITHO UT I.T.A. NO. 1894, 1899 /DEL/2010 5/7 BRINGING ANY ADVERSE MATERIAL ON RECORD. LD. CIT(A ) HAS ALSO ADOPTED 0.75% OF BROKERAGE RATE, WHICH IS ALSO ON E STIMATE BASIS ONLY WITHOUT ANY SUPPORTING MATERIAL. AS PER THE LETTER DATED 17.12.2007 SUBMITTED BY THE ASSESSEE TO THE A .O., THE ASSESSEE HAS FURNISHED COMPLETE DETAILS OF ALL THE PERSONS ALONG WITH ADDRESSES, DATES AND AMOUNTS OF TRANSACTIONS A ND REQUESTED THE A.O. TO ISSUE SUMMONS TO THESE PARTIES TO VERIF Y THE CORRECTNESS OF THE STATEMENT MADE BY THE ASSESSEE. AFTER CONSIDERING ALL THE FACTS AVAILABLE ON RECORD, WE A RE OF THE CONSIDERED OPINION THAT THE CONTENTION OF THE ASSES SEE CANNOT BE ACCEPTED BECAUSE IT IS NOT SUPPORTED BY ANY EVIDENC E. MERE CONFIRMATION OF SHRI MAHESH KUMAR AS APPEARING ON P AGE 7 OF THE PAPER BOOK AND HIS AFFIDAVIT DATED 15.03.2008 I N SUPPORT OF THIS CLAIM THAT COMMISSION RATE WAS 0.25%, CANNOT B E CONSIDERED AS AN EVIDENCE IN SUPPORT OF THIS CONTEN TION OF THE ASSESSEE THAT HE WAS EARNING COMMISSION @ 0.25% ONL Y BECAUSE A PERSON WHO IS HELPING THE ASSESSEE IN SUC H UNLAWFUL ACTIVITY OF ABATING TAX EVASION CANNOT BE TAKEN AS AN EVIDENCE. MOREOVER, WE ALSO FIND THAT THE SIGNATURES OF SHRI MAHESH KUMAR IN THE CONFIRMATION AND IN THE AFFIDAVIT ARE DIFFERENT. IN THE AFFIDAVIT, HE IS SIGNING AS M. SINGH WHEREAS IN THE CONFIRMATION, HE IS SIGNING AS MAHESH KUMAR AND, THEREFORE, NEITHER THE CONFIRMATION NOR THE AFFIDAVIT CAN BE R ELIED UPON AND ACCEPTED AS EVIDENCE IN SUPPORT OF THIS CLAIM OF TH E ASSESSEE THAT THE ASSESSEE WAS EARNING COMMISSION @ 0.25% ONLY. AT THE SAME TIME, THE ACTION OF THE A.O. IN APPLYING COMMI SSION RATE I.T.A. NO. 1894, 1899 /DEL/2010 6/7 OF 3% IS ALSO WITHOUT ANY BASIS AND SO IS THE CASE WITH ORDER OF THE CIT(A) BECAUSE HIS DIRECTION TO APPLY THE COMMI SSION RATE OF 0.75% IS ALSO ONLY A GUESS WORK WITHOUT ANY BASI S. UNDER THESE FACTS, WE FEEL THAT IN THE INTEREST OF JUSTIC E, THE MATTER SHOULD GO BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION AFTER EXAMINING THE CONCERNED PARTIES, DETAILS OF WHOM LI KE ADDRESSES ETC. ARE AVAILABLE ON PAGES 10-40 OF THE PAPER BOOK . THE A.O. SHALL EXAMINE THESE PARTIES, IF NOT ALL BUT AT LEAS T FEW OF THEM WITH WHOM THERE IS HIGH AMOUNT OF TRANSACTION AND, THEREAFTER, THE A.O. SHOULD DECIDE THIS ASPECT AFRESH. WE UNDE RSTAND THAT THESE PARTIES ARE ALSO INVOLVED IN THE WHOLE ISSUE OF ARRANGING ALLEGED BOGUS ENTRIES AND THEY MAY TAKE A STAND THA T THERE ARE GENUINE TRANSACTIONS & NO COMMISSION WAS PAID BY TH EM. STILL, THEY CAN BE EXAMINED ALONG WITH THE ASSESSEE & MR. MAHESH KUMAR IN AN ATTEMPT TO BRING OUT THE TRUTH. IF IT TRANSPIRES THAT THESE ARE NOT ACCOMMODATION ENTRIES & CASH DEPOSITE D IN THE BANK ACCOUNT OF SHRI MAHESH KUMAR IS NOT PROVIDED B Y THESE PARTIES, THEN THE ENTIRE MONEY DEPOSITED IN THE BAN K ACCOUNT OF THE ASSESSEE AS CHEQUES FROM SHRI MAHESH KUMAR, PRO P. OF M/S. LUCKY ENTERPRISES BECOMES UNEXPLAINED CASH CREDIT B ECAUSE WITH REGARD TO THESE DEPOSITS BOTH THE ASSESSEE & S HRI MAHESH KUMAR HAVE ALREADY ADMITTED THAT THESE ARE NOT GENU INE & SOURCE OF CASH DEPOSIT IN THE BANK ACCOUNT OF M/S. LUCKY ENTERPRISES IS THE CASH ALLEGED TO HAVE BEEN RECEIV ED FROM THESE PARTIES TO WHOM CHEQUES ARE GIVEN BY THE ASSESSEE. THIS HAS TO BE PROVED BY THE ASSESSEE ALONG WITH RATE OF COMMIS SION. IF THE I.T.A. NO. 1894, 1899 /DEL/2010 7/7 ASSESSEE FAILS, NO ADDITION SHOULD BE MADE ON ACCOU NT OF COMMISSION BUT THE ADDITION SHOULD BE MADE U/S 68 O N ACCOUNT OF UNEXPLAINED CASH CREDIT. BUT THE AMOUNT OF ADDI TION HAS TO BE RESTRICTED TO THE ADDITION MADE BY THE A.O. IN T HE IMPUGNED ORDER I.E. RS.59.70 LACS BECAUSE THE TRIBUNAL HAS N O POWER OF ENHANCEMENT. WE, THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE ENTIRE MATER BACK TO THE FILE OF TH E A.O. FOR A FRESH DECISION. HE SHOULD PASS NECESSARY ORDER AS PER LAW AS PER ABOVE DIRECTION AFTER PROVIDING ADEQUATE OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE AS WELL A S OF THE REVENUE STAND ALLOWED FOR STATISTICAL PURPOSES. 7. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 3 RD JULY 2010. SD./- SD./- (C. L. SETHI) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:23 RD JULY, 2010 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI