AMISH ANANTRAI MODI, MUMBAI V. DY CTI-CC-2(1), MUMBAI

ITA 3060/MUM/2022

AI Insights

The case involves cross appeals by the assessee, Shri Amish Anantrai Modi, and the Revenue against the order of the Commissioner of Income Tax (Appeals) concerning the assessment year 2015-16. The appeals arose from a search operation under section 132 of the Income Tax Act, 1961, which led to the discovery of accommodation entries provided by the assessee to M/s. Navjeevan Charitable Trust. The Assessing Officer (AO) made additions to the assessee's income under section 68 of the Act, which were partly reduced by the CIT(A). Both parties challenged the CIT(A)'s order before the Tribunal. The Tribunal's decision focused on the legality of the additions made and the appropriate commission rate applicable to the transactions in question.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301082 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-04-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 04-12-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Charitable institution; Principle of natural justice; Accommodation entries; Documents seized
• Section: 131; 68; 132; 143(3); 133A; 13; 22; 153C; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “A”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No.3060/M/2022 Assessment Year: 2015-16 Shri Amish Anantrai Modi, B/1701, Shiv Parvati Tower, Vasant Complex, Near Shiv Temple, Kandivali West, Mumbai – 400 067 PAN: AFXPM2914F Vs. DCIT, Central Circle-2(1), Room No.804, 8 th Floor, Pratishtha Bhavan, Old CGO Annex, M.K. Road, Mumbai - 400020 (Appellant) (Respondent) ITA No.3243/M/2022 Assessment Year: 2015-16 Asst. Commissioner of Income Tax, Central Circle-2(1), Old CGO Building, 804, 8 th Floor, M.K. Road, Mumbai - 400020 Vs. Shri Amish Anantrai Modi, B/1701, Shiv Parvati Tower, Vasant Complex, Near Shiv Temple, Kandivali West, Mumbai – 400 067 PAN: AFXPM2914F (Appellant) (Respondent) Present for: Assessee by : Shri Ravikant Pathak, A.R. Revenue by : Smt. Shailja Rai, D.R. Date of Hearing : 20 . 04 . 2023 Date of Pronouncement : 25 . 05 . 2023 ITA No.3060/M/2022 & ITA No.3243/M/2022 Shri Amish Anantrai Modi 2 O R D E R Per : Kuldip Singh, Judicial Member: Aforesaid cross appeals filed by the appellant, Asst. Commissioner of Income Tax, Central Circle-2(1), Mumbai (hereinafter referred to as the Revenue) as well as the appellant Shri Amish Anantrai Modi (hereinafter referred to as the assessee) pertaining to A.Y. 2015-16 emanated from common impugned order dated 19.10.2022 passed by Ld. Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] are being taken up for disposal by way of composite order. 2. The Revenue and the assessee by filing aforesaid cross appeals sought to set aside the impugned order dated 19.10.2022 passed by the CIT(A)] on the grounds inter-alia that: “Grounds of Assessee’s appeal (ITA No.3060/M/2022) 1(a) On the facts and the circumstances of the appellant's case and in law the learned CIT(A) erred in holding that the A.O has legally assumed jurisdiction u/s 153C despite the fact that no money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to the appellant and no books of accounts or documents seized or requisitioned pertains or pertain to or any other information contained therein relates to the appellant. (b) On the facts and the circumstances of the appellant's case and in law the learned CIT(A) erred in not following the judgement of ITAT in appellant's own case in earlier years where all the facts are similar and order passed for the year under consideration is the part of the same order passed u/s 153C. 2. In the facts and circumstances of the appellant's case and in law, the learned CIT(A) erred in confirming the assessment passed u/s 153C of the Income tax Act, 1961 which was passed (a)in the absence of any incriminating material (b) Without having jurisdiction to the assessing officer as no opportunity of being heard u/s 127 of the act was granted to the appellant. ITA No.3060/M/2022 & ITA No.3243/M/2022 Shri Amish Anantrai Modi 3 (c) Without appreciating the fact that order was passed on the basis approval granted u/s 153D in a routine manner. (d) Without granting a copy of the statement recorded on 14.01.2015 and thereby violating natural justice. (e) Without granting a copy of satisfaction note recorded by the AO 3. (a) In the facts and circumstances of the appellant's case and in law, the learned CIT(A) erred in computing Commission of Rs.12,16,813 @ 3% of Rs. 4,20,93,787 by considering single layer for commission ignoring the fact that there are at least three layers, the Trust, the accommodating party and the agent. (b) The learned CIT(A) also erred in taking total deposits of Rs. 4,20,93,787 into bank for computing the commission ignoring the fact that bank deposits also include deposits for which income has been offered to tax and for which complete details were submitted.” Grounds of Revenue’s appeal (ITA No.3243/M/2022) “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)-48, Mumbai is right in deleting the addition amount of Rs.4,35,93,787/- made in the assessment order without appreciating the facts that the genuineness and creditworthiness of the transaction were not proved after giving ample opportunity to the assessee. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)-48, Mumbai is right in deleting the addition amount of Rs.4,35,93,787/- made in the assessment order and confirming only 3% commission at the addition amount of Rs.4,20,93,787/- without appreciating the facts that the assessee never submit explanation regarding reconciliation of the above said addition". 3. Briefly stated facts necessary for consideration and adjudication of the issues at hand are : on the basis of search operation carried out under section 132 of the Income Tax Act, 1961 (for short ‘the Act’) on 27.10.2014 in case of M/s. Navjeevan Charitable Trust the Assessing Officer (AO) noticed that the trust had accepted donation in cheque from the doners and returned back the money in cash after deducting commission @ 3% of the donation amount, which fact was admitted by one of the trustee Shri Subhash Kadam in his statement recorded under section 131 of ITA No.3060/M/2022 & ITA No.3243/M/2022 Shri Amish Anantrai Modi 4 the Act on 10.11.2014. It was also admitted that expenses claimed under various heads including purchases were accommodation entries by issuing cheques to different parties who returned cash without delivery of goods and the assessee is one such person who has provided accommodation entries to M/s. Navjeevan Charitable Trust. A survey proceeding was also conducted against the assessee wherein the assessee had got recorded statement under section 133A that he has provided accommodation entries to M/s. Navjeevan Charitable Trust without delivery of goods through Shri Rajesh Warde, Shri Rashmikant K. Jhaveri and Shri Kishor Jhaveri from their proprietary concern. The assessee opted to treat the return already filed as reply to the notice issued under section 153C of the Act by declaring income of Rs.11,56,150/- for A.Y. 2015-16. The AO completed assessment for A.Y. 2009-10 to 2015-16 under section 143(3) read with section 153C by determining the total income at Rs.6,94,19,280/- by way of making addition of Rs.45,58,677/- on account of cash credits on loss of sale (LTCL) under section 68 of the Act and Rs.5,91,45,787/- as unexplained deposits under section 68 of the Act. 4. The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the same. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) both the assessee as well as the Revenue have come up before the Tribunal by way of filing the present cross appeals. 5. We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light ITA No.3060/M/2022 & ITA No.3243/M/2022 Shri Amish Anantrai Modi 5 of the facts and circumstances of the case and law applicable thereto. Grounds No.1 & 2 of Assessee’s appeal bearing ITA No.3060/M/2022 6. During the course of argument the Ld. A.R. for the assessee has not preferred to press these grounds, hence the same are determined against the assessee. Ground No.3 of Assessee’s appeal bearing ITA No.3060/M/2022 & Grounds No.1 & 2 of Revenue’s appeal bearing ITA No.3243/M/2022 7. Undisputedly aforesaid respective grounds raised by the assessee as well as the Revenue pertain to addition of Rs.5,91,45,787/- qua the amount deposited in the bank accounts of the assessee added as unexplained deposits under section 68 of the Act by the AO. It is also not in dispute that the categoric case of the AO is that the assessee is one of the persons who had provided accommodation entries to M/s. Navjeevan Charitable Trust through various parties. It is also not in dispute that after assessment order vide which addition of Rs.5,91,45,787/- was made, rectification application was filed by the assessee on the basis of which assessment order was rectified vide order dated 02.05.2018 and the AO thereby reduced the addition made in the original assessment order by Rs.1,55,52,000/-, thus addition comes down to Rs.4,35,93,787/-. It is also not in dispute that the Ld. CIT(A) granted the relief of Rs.15,00,000/- to the assessee out of Rs.4,35,93,787/- and the balance addition comes to Rs.4,20,93,787/-. ITA No.3060/M/2022 & ITA No.3243/M/2022 Shri Amish Anantrai Modi 6 8. However, the Revenue in its appeal by raising two grounds impugned the order passed by the Ld. CIT(A) as if the Ld. CIT(A) has deleted the entire addition of Rs.4,35,93,787/- whereas the Ld. CIT(A) has deleted the amount of Rs.15,00,000/- out of Rs.4,35,93,787/- and treated the balance amount of Rs.4,20,93,787/- as accommodation entries on which confirmed the addition of 3% as commission. It appears that the Revenue has misconceived the order passed by the Ld. CIT(A) by raising ground No.1 that the Ld. CIT(A) “has erred in deleting the addition of Rs.4,35,93,787/-”. In view of the matter now the questions arise for determination before the Bench are: (1) “As to whether the Ld. CIT(A) has erred in deleting the addition of Rs.15,00,000/- out of the total addition of Rs.4,35,93,787/- made by the AO on failure of the assessee to prove the genuineness and creditworthiness of the transactions?” and (2) “As to whether the Ld. CIT(A) has erred in not confirming the entire addition of Rs.4,20,93,787/- made by the AO as per ground raised by the Revenue?” and (3) “As to whether the Ld. CIT(A) has erred in confirming the addition of 3% as commission income of the total addition of Rs.4,20,93,787/- as per ground raised by the assessee?” 9. So far as first question framed in preceding para 8 as to deleting the addition of Rs.15,00,000/- out of total addition of Rs.4,35,93,787/- by the Ld. CIT(A) is concerned, we have perused the order passed by the Ld. CIT(A) who has duly thrashed the facts while giving the relief of Rs.15,00,000/- to the assessee by returning following findings: “14.15 In this regard, on verification of the transactions made with Jammu & Kashmir Bank, it is seen that, the AO had made addition of all entries appearing at credit side of bank account for the year under consideration. During the appellate proceedings the appellant has submitted all the relevant documents on transactions made in bank account with Jammu & Kashmir Bank. The entries of Rs. 5,00,000/- and Rs. 6,00,000/- are appearing at the credit side of bank account transaction dated 24.03.2012 under heading as "Outward clg". in this ITA No.3060/M/2022 & ITA No.3243/M/2022 Shri Amish Anantrai Modi 7 regard, the relevant portion of the submission made by the appellant is reproduced as under for the sake of clarity: "Clarification regarding amount received from Mr. Yusuf Memon in the matter of appeal filed against order passed U/s 143(3) r.ws. 153C Assessment year-12-13 Please refer the discussion appellant had with your honor regarding the amount received from Mr. Yusuf Memon during the year. In this connection, appellant submits that appellant was having an office in the building known as Rock Avenue. Mr. Yusuf Memon was also having an office in the same building. Since appellant's office was small, he wanted to shift to a vigger place. Office No 30 in the same building owned by Mr. Yusuf Memon was available. Appellant, in order to purchase this office paid advance of Rs.11,00,000 to Yusuf Memon. However, deal could not be finalized and Mr. Yusuf Memon returned the advance of Rs.11,00,000/- paid to him. This can also be verified from the confirmation of Mr. Yusuf Memon submitted with appellant's submission filed with your office on 27th May, 24th May, 2021.” 14.16 In respect of these entries, the appellant has submitted confirmation of accounts dated 01.04.2013 received from Yunus Menon. It appears that this amount was received by the appellant from Yunus Menon as refund against the advance given to him. The appellant has stated that, this amount was received from Yunus Menon as refund against the advance given to him. Apart from this, the entries of Rs 3,00,000/- dated 06.07.2011 and Rs. 1,00,000/- dated 29.09.2011 are appearing in the credit side of bank account under heading as "Tr". In connection to these entries, the appellant has clarified that Rs. 3,00,000/- was transferred from current account of the appellant viz. Modi Trading to Saving Account with J&K Bank. Further, Rs. 1,00,000/- was received on account of refund of security deposit of rental premises. In my considered view, these transactions appear to be explained. 14.17 In any case, these three entries of Rs.15 lakh (Rs. 11 lakh Rs.3 lakh + Rs. 1 Lakh) remained explained, which deserved to be allowed. Therefore, addition of Rs.15 lacs is allowed, which also takes care of any rectification application pending with the AO.” 10. Perusal of the aforesaid findings returned by the Ld. CIT(A) apparently goes to prove that there was an arithmetical error on the part of the AO qua entries of Rs.5,00,000/- and Rs.6,00,000/- appearing on the credit side of the bank transaction dated 24.03.2012 under the heading “as outward clearing” qua which the assessee has made specific submissions that the assessee in order to ITA No.3060/M/2022 & ITA No.3243/M/2022 Shri Amish Anantrai Modi 8 purchase one office paid an advance of Rs.11,00,000/- to one Mr. Yusuf Memon but the deal could not be finalized and the said advance has been returned by Mr. Yusuf Memon qua which confirmation of Mr. Yusuf Memon is also there on the record. 11. Furthermore, other entry of Rs.3,00,000/- dated 06.07.2012 and Rs.1,00,000/- dated 29.09.2011 are appearing in the credit side of the bank account under the heading “as transferred”. The assessee has been able to explain that aforesaid Rs.3,00,000/- was transferred from current account of the assessee namely Modi Trading to saving account with Jammu & Kashmir Bank. Likewise Rs.1,00,000/- was received on account of refund of the security deposit of rental premises. Thus aforesaid transaction of Rs.15,00,000/- got duly explained, hence rightly deleted by the Ld. CIT(A). 12. So far as second and third questions framed in the preceding para No.8 for determination as per grounds raised by the Revenue as well as the assessee respectively are concerned, the Ld. D.R. for the Revenue contended that the entire amount of Rs.4,20,93,787/- was required to be confirmed as the assessee has failed to prove the genuineness and creditworthiness of the transactions qua the aforesaid addition. To determine this issue when we peruse the assessment order passed in this case it is categoric case of the AO that “the assessee is one of the persons who had provided accommodation entries to M/s. Navjeevan Charitable Trust through various parties and originally made addition of Rs.5,91,45,787/- which was subsequently reduced to Rs.4,35,93,787/- by way of rectification order. When the aforesaid proceeds/additions made by the AO specifically pertain to accommodation entries provided by ITA No.3060/M/2022 & ITA No.3243/M/2022 Shri Amish Anantrai Modi 9 the assessee to M/s. Navjeevan Charitable Trust, the entire amount cannot be added to the income of the assessee. Because it is settled principle of law that in such cases the addition is to be restricted to the amount of commission earned by the assessee. 13. Furthermore, it is also categoric case of the AO as recorded in para 2 of the assessment order that “during investigation it was noticed that the trust accepts donations in cheque from the donors and returned back the money in cash after deducting commission @3% of the donation amount to the donor, which fact is admitted by one of the trustees namely Shri Subhash Kadam during recording of his statement under section 131 of the Act. It was also admitted before investigating agency that “the expenses claimed under various heads including purchases were accommodation entries wherein cheques were issued to different parties who returned cash without delivery of goods and Shri Amish Modi the assessee in this case is one of the persons who provided accommodation entries to M/s. Navjeevan Charitable Trust. 14. Furthermore, aforesaid admission made by Shri Subhash Kadam, trustee of M/s. Navjeevan Charitable Trust got further corroborated from the information called by AO under section 133(6) from the Axis Bank and Jammu & Kashmir Bank where the assessee was having accounts. The assessee was duly grilled during survey proceedings to the entries/deposits made in Axis Bank and Jammu & Kashmir Bank by putting question No.5 as referred to in para 3 of the assessment order to which the assessee replied that aforesaid transactions are borrowings from different parties and some of the transactions are with regard to mortgage ITA No.3060/M/2022 & ITA No.3243/M/2022 Shri Amish Anantrai Modi 10 loans and temporary overdrafts, the detail to substantiate the same would be submitted by 22.12.2016 but did not submit the detail. 15. However, during remand proceedings the assessee explained the same and thereafter duly examined by the Ld. CIT(A) as discussed in the extracted portion in the preceding para of the impugned order passed by the Ld. CIT(A). Entire investigation made by the AO as well as investigating agency leads to the conclusion that the assessee is a facilitator of accommodation entry provider and on the basis of this finding the Ld. CIT(A) proceeded to make the addition of Rs.12,62,813/-. All these facts have been duly admitted by the assessee during recording of his statement by virtue of question No.9 to 13 available at page 20 to 22 of the paper book, which got further corroborated from copy of ledger account maintained by the Bank of Jammu & Kashmir. 16. Moreover, when we examine the entries of credit recorded in the account of the assessee there is clear round tripping of the amount deposited in his account which cannot be considered as loan by any stretch of imagination because credited amount is repaid to the other parties within days, the assessee being an accommodation entry providers. Otherwise in case of a loan the amount is ordinarily not returned to the creditor within few days. 17. Moreover, these facts got duly proved from the assessment order passed in case of Shri Rashmikant K. Jhaveri wherein he has admitted that he has paid commission @ 0.25% to the assessee. These findings have been recorded in the assessment order of Shri Rashmikant K. Jhaveri available at page 27 to 31 of the paper book and the AO has accepted this contention. ITA No.3060/M/2022 & ITA No.3243/M/2022 Shri Amish Anantrai Modi 11 18. However, we are of the considered view that when it is proved on record that as per entries recorded in the bank account of the assessee maintained with Jammu & Kashmir Bank and Axis Bank the assessee retained 3% which fact is also admitted by trustee of M/s. Navjeevan Charitable Trust there is no question of accepting the contention of the assessee that commission should be reduced to 0.25%. Moreover, the assessee failed to prove on record that it has retained only 0.25% and transferred the remaining amount to other persons. There is not an iota of this fact on record. It is nowhere case of the assessee that he has paid the balance amount in cash or otherwise to the other three persons involved in the business of providing accommodation entries. 19. In these circumstances we are unable to agree with the contentions raised by the Ld. D.R. for the Revenue that the addition @ 100% of Rs.4,20,93,787/- be made and at the same time we are also unable to agree with the contentions raised by the assessee that addition on account of commission qua accommodation entries on the amount of Rs.4,20,93,787/- be reduced from 3% to 0.25%. The Ld. CIT(A) has passed a well reasoned order based on the facts proved on record, so finding no illegality or perversity in the impugned order passed by the Ld. CIT(A) there is no reason to interfere into the impugned findings returned by the Ld. CIT(A). So ground No.3 of assessee’s appeal is hereby dismissed and at the same time grounds No.1 & 2 of Revenue’s appeal are also dismissed. 20. Resultantly the appeal filed by the assessee as well as the Revenue are hereby dismissed. Order pronounced in the open court on 25.05.2023. ITA No.3060/M/2022 & ITA No.3243/M/2022 Shri Amish Anantrai Modi 12 Sd/- Sd/- (GAGAN GOYAL) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 25.05.2023. * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench //True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai.