Appeal Details
Counselvise Citation
[2022] 106 COUNSELVISE.COM (IT) 2711 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-06-2022
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC-1
Assessment Year
2015-2016
Appeal Filed On
16-02-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER & SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER Sr N o I T A N o . A. Y Ap pe l la nt R e s p on de n t 1 31 3/ Mu m/ 20 22 20 1 5- 16 R ar e Di a mo n ds P vt Ltd ., 21 0 A , Pan ch a r at n a, Op er a H o u s e , Mu m b a i – 40 0 00 4. PA N- A D CR 4 20 0 K AC I T ,C C - 1( 3) Pr a ti s t ha B ha v a n Mu m b a i 2 35 0/ Mu m/ 20 22 Lo ok A t Me R e ta il Pv t L td , 10 5 , Pa nc h a r a t na , Op er a H o u s e , Mu m b a i – 40 0 00 4. PA N- A A BC L 4 2 24 B 3 35 5/ Mu m/ 20 22 Pu s h p a k G e ms 40 7 , D e vr a t na A p pt R a m p ur a Mai n R o ad , S ur a t – 39 5 0 03 PA N- A A DF P 26 7 3 D 4 35 9/ Mu m/ 20 22 Wh ite S to n e 20 4 , Sa pn a Ap tt ., Ja d d a K ha di , Ma h i dha r p ur a , Su r a t – 3 9 5 00 3. PA N- A A AF W7 5 99 J 5. 38 5/ Mu m/ 20 22 Mi lan & C o . 3- M, A mb ika Da r sh an , Mo ti Ka di ya Sh er i, Su r a t , - 39 5 0 03 PA N. A A R F M 99 59 R / Appellant by : Shri Suchek Anchaliaya /Respondent by : Shri. Kiran P. Unavekar ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 2 - / D a t e o f H e a r i n g 01.06.2022 /D a t e o f P r o n o u n c e m e n t 27.06.2022 आ द श / O R D E R PER SHRI OM PRAKASH KANT, AM: The captioned appeals by the respective assessee(s) are directed against separate orders passed by the Ld. Commissioner of Income-tax (Appeals)-47, Mumbai [in short the Ld. CIT(A)] for assessment year 2015-16 arising from respective assessment orders passed by the Ld. Assessing Officer(AO). In the assessment orders, it is held that during the course of the search action under section 132 of the Income Tax Act, 1961 (in short ‘the Act’) at the premises of ‘Sri Bhanwarlal’ Jain group, he was found to be engaged in providing accommodation entries of loans etc through 75 concerns, which were controlled and managed by him. In books of accounts of those concerns entries of import and export of rough and finished diamonds and manufacturing of finished diamonds from rough diamonds was shown. In search assessments for the period from assessment year 2008-09 to assessment year 2014-15, ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 3 - commission income from providing accommodation entries has been assessed on substantive basis in the hands of Sh. Bhanwarlal Jain and protective basis in the hands of those concerns through which such entries were provided. The assessee(s) before us in these five appeals are out of those 75 concerns. In the grounds raised in these appeals, the assessee has challenged confirming of protective additions and also estimation of gross profit in trading activity and also challenged additional commission income from accommodation entries on substantive basis. 1.1 In view of above common facts and circumstances and the common issue in dispute involved in these appeals, same were heard together and disposed off by way of this common order for convenience and avoid reputation of facts. Both the assessee and the Revenue agreed to take ITA No. 359/Mum/2022 as lead case and follow the finding in other cases, accordingly, firstly, we have taken ITA No. 359/Mum/2022 for adjudication. ITA No. 359/Mum/2022 for AY 2015-16 ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 4 - 1.2 The grounds raised by the assessee in the appeal are reproduced as under: 1. On the facts and in the circumstances of the case and in law the Ld. CIT (A) erred in not considering that the assumption of jurisdiction by the Ld. Assessing Officer is bad in law as the conditions laid down under the Act for initiating reassessment proceeding us 147 of the Act have not been fulfilled. 2. On the fact and circumstances of the case and in law the Ld. CIT (A) erred in confirming the addition of alleged commission income arising out of alleged bogus unsecured loans, bogus purchases and bogus sales amounting to Rs. 4,05,938/- on protective basis without appreciating the fact that the same amount has been substantively added in the case of Shri Bhanwarlal Jain, thereby making the same addition in the hands of two assesses leading to double taxation. 3. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming addition of Rs. 35,31,237/- (being 10.32% of Rs. 3,42,17,419/-), on estimation basis, by treating genuine turnover of the appellant as bogus sales. 4. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming the addition of alleged commission income arising out of alleged bogus unsecured loans, bogus sales and bogus purchases and also confirming the addition of gross profit, on estimation basis, of a percentage of the total turnover, without appreciating the fact that both such additions cannot co- exist together. 5. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming addition of alleged ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 5 - commission income arising out of alleged bogus unsecured loans, bogus sales and bogus purchases, without appreciating the fact that for the very same assessee for previous assessment years, being A.Y. 2008- 09 to A.Y. 2014-15, the Ld. CIT(A) has deleted the protective addition of alleged commission income, thereby not following the principal of consistency. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in changing protective addition of commission income on alleged bogus sales to substantive addition on the incorrect presumption that the same was not considered in the order of the Hon'ble ITAT in the case of Shri Bhanwarlal Jain. 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in changing protective addition to substantive addition without issuing any show cause notice or opportunity of being heard to the appellant, which is in violation of section 251(2) of the Income Tax Act, 1961 and in violation of the principles of natural justice. 8. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in confirming the addition made by ld. AO, without providing any opportunity of cross examination, without any corroborative evidence and without providing copy of statements relied upon. 9. The appellant craves to add, alter, classify, reclassify, delete or modify any of the above grounds of appeal and requests to consider each of the above grounds without prejudice to one another. 2. Briefly stated facts of the case that the assessee filed return of income for the year under ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 6 - consideration on 23/09/2015 declaring total income of Rs. 30, 300/-. In the return of income filed, the income was declared from business of import, export and trading of cut and polished and rough diamonds. The assessment for the year under consideration was reopened by way of issue of notice under section 148 of the Act and reassessment was completed after making addition on ‘protective basis’ for commission income treating that the assessee was engaged in providing of accommodation entries and also made addition to cover low gross profit rate declared in trading activity recorded in books of accounts. The Ld. CIT(A) not only upheld these two additions but also enhanced on substantive basis income for commission on sales recorded in books of accounts, which according to him was not considered by the Assessing Officer for calculation of the commission income added in the case of Sh. Bhanwarlal Jain. Aggrieved with finding of the Ld. CIT(A) of upholding reassessment proceedings and upholding addition on merit, the assessee is before the Tribunal by way of raising grounds as reproduced above. ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 7 - 3. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. First of all, we are taking up the grounds raised in respect of merit of the additions. The ground No. 2 , 4 and 5 of the appeal relates to addition of commission income from accommodation entries, which has been made by the Assessing Officer on protective basis. 4. The brief facts qua the issue in dispute are that a search and seizure action under section 132 of the Act was carried out by the Investigation Wing, Mumbai on 03/10/2013 in the case of Sh. Bhanwar Lal Jain Group. During the course of the search action, Sh. Bhanwar Lal Jain admitted the fact of being engaged in the providing accommodation entries of bogus loans/sales/import etc through 70 concerns controlled operated and managed by him. The directors/partners/proprietors of those concerns, which were stated to be employees of Sh. Bhanwarlal Jain also concurred with the statement of Sh. Bhanwarlal Jain. The evidences gathered during the search action also correlated the statements of Sh. Bhanwarlal Jain. Accordingly, the assessing officer in ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 8 - the case of Sh. Bhanwarlal Jain completed the search assessments under section 153A of the Act for the search period from assessment year 2008-09 to assessment year 2014-15 after making addition for commission income received on accommodation entries provided to various beneficiaries on substantive basis. In the hands of the assessee, addition was made on protective basis for the search period from assessment year 2008-09 to assessment year 2014-15. On further appeal by the assessee against the search assessments, the Ld. CIT(A) observed that while quantifying the commission income, various percentile rates were applied by the Assessing Officer on the amount of imports, bogus unsecured loan, bogus purchases etc, whereas no commission was quantified in respect of sales and therefore he accordingly for the search period from AY 2008-09 to AY 2014-15, worked out unaccounted cash commission on local purchases at a percentile of 0.02% and 0.075% on sales. 5. On the basis of the above finding of the Ld. CIT(A), the Assessing Officer reopened the assessment year under consideration i.e. A.Y 2015-16 in the case ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 9 - of the assessee. In the reassessment completed under section 147 on 25/11/2019, the Ld. Assessing Officer, concluded that assessee concern was controlled and managed by Sh. Bhanwarlal Jain and was engaged in providing accommodation entries of loans, purchase sales etc on his behalf. The relevant finding of the Ld. Assessing Officer is reproduced as under: 10. Final Conclusion: It has already been discussed and proved in the earlier assessment year that the Bhanwarlal Jain group is engaged in providing accommodation entry for bogus purchases bogus loans and advances and importing for real importer to various beneficiaries whose names are appearing as respective parties for the said alleged entry in the regular books of accounts of the benami concerns of Bhanwarlal Jain and Rajesh Jain operated, managed and controlled by them. Besides, the assessee is silent about the fact as to why assessee's name is appearing in the list of the benami concerns controlled and managed by Shri Bhanwarial Jain and has also been unable to prove with documentary evidence that it is not in the business of providing accommodation entries and it has no business connection whatsoever with Shri Bhanwarlal Jain, whereas the department on the other hand has conclusively proved that Bhanwarlal Jain is engaged in the accommodation entries through the benami concerns which include the ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 10 - assessee with the help of overwhelming direct and corroborative evidences. In his statement recorded on 12/10/2013, Shri Bhanwarlal Jain has also acknowledged that there is a code for every benami concerns nameLikeIG is the code name for Impex Gems. Similar codes are there for remaining dummy concerns who had given accommodation entries. The Scanned copy of the said sheet duly signed by him is reproduced hereunder for ready reference:- In view of the above discussion, the facts garnered, the finding arrived in the course of search action on Bhanwarlal Jain , post search enquiries and a critical analysis of the audited accounts of the assessee have conclusively proved that the benami concerns of Bhanwarlal Jain and Rajesh Jain have given accommodation entry of loans and advances, sales and import to various beneficiaries and that the assesseeis also one of the associate of shri Bhanwarlal Jain and controlled and managed by Bhanwarlal Jain and his family has given the accommodation entries and earned the commission thereon. The book results, therefore can not relied upon in the instant case and hence rejected in view of the facts as discussed above 6. In para 11 of the assessment order, the Ld. Assessing Officer mentioned various types of accommodation entries provided and in para 12 he has made working of the commission on such accommodation entries. For ready reference such ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 11 - working of commission income is reproduced as under: 12. Working of Commission on various accommodation entries:- As it has been proved beyond doubt that the assessee is not carrying out any genuine business of trading in diamonds but is solely used for giving accommodation entries by Bhanwarlal Jain and Family and assessee is only an associate. It may be pertinent to mention here that there is no denying the fact that assessee has to incur some day to day expenses like stationery, conveyance, office expenses and rent etc for earning the above commission income. As such, it would be just and proper, if a certain percentage of commission income on estimated basis is allowed to the assessee. Accordingly 10% of the commission income is considered as reasonable towards expenses for earning the said undisclosed commission income which would meet the ends of justice. Sr No. Nature of accommodation entry Amount of commission earned discussed above 1 Accommodation of Bogus Unsecured loan (On proportionate basis on Rs 1,62,14,243/- (@2.4% p.a) Rs.3.89.141/ 2 Accommodation of Bogus Purchases (0.075% of Rs.4,83.16,174/-) Rs.36,237/ 3 Accommodation of Bogus Sales (0.075% of Rs.3,42,17,419/-) Rs.25,663/ 4 Total commission Rs.4,51,042/ 5 Less: 10% of total commission RS.45,104/ ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 12 - as discussed above 6 Undisclosed Commission income Rs.4,05,938/ In the instant case, the total undisclosed commission which is required to be added is Rs.4,05,938/-. However, it is observed that the undisclosed commission of Rs.4,05,938/-is added on substantive basis in the case of Shri Bhanwarlal Jain for AY 2015-16. Hence, to protect the interests of Revenue and following pronciples of Natural Justice, Rs.4,05,938/-is hereby adaed in the hands of the assessee on protective basis. Penalty proceedings u/s 271(1)(6) & 27 g2 8 Arts at @N gre initiated separately for filing of inaccurate 7. The Ld. CIT(A) observed that Tribunal in the case of Sh. Bhnawaral Jain for search period i.e AY 2007- 08 to 2014-15 upheld commission income on substantive basis. The relevant observation of the Ld. CIT(A) are reproduced as under: 9. Conclusion- In the light of the above findings of the Hon'ble Tribunal, there remains no doubt that the Assessing Officer has correctly computed commission income earned by the appellant for providing accommodation entrieson behalf of Shri Bhanwarlal M. Jain. In my considered opinion, the rate of 2.4% per annum for accommodation of bogus unsecured loan, 0.075% for accommodation of Bogus purchases and 0.075% for accommodation of Bogus sales is just and cannot be considered as at the higher side. Showing his fairness, the Assessing Officer has allowed 10% of commission income for day. to-day expenses which is quite reasonable. ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 13 - 9.1 The claim of the Appellant that for A.Y. 2007-08 to 2014-15, the CIT(A) has deleted the protective assessment, will not hold good any more after the receipt of the judgment of Hon'ble ITAT in the case of Shri Bhanwarlal M. Jain, where estimation of commission income earned for providing accommodation entries has been upheld. 8. But on the issue whether the protective addition made in the case of the assessee should be deleted or upheld, the Ld. CIT(A) has given the reasoning that the Department has not accepted the percentage estimated by the ITAT (supra), and therefore to keep the issue alive, he confirmed the estimation made by the Assessing Officer. The relevant finding of the Ld CIT(A), is reproduced as under: 9.2 On the issue whether the Assessing Officer has correctly made the addition of commission income in the hands of the Appellant "on protective basis", while substantive addition was made in the hands of Shri Bhanwarlal M. Jain, my observation is as under- 9.2.1 The Hon'ble ITAT, vide the above referred order in the case of Shri Bhanwarlal M. Jain, has given part relief in page no. 30 of the order, in the following manner- No. Nature of Transaction Estimation of the Hon'ble Tribunal in the case of Shri Bhanwarlal M. Jain 1 Import transaction by Shri Bhanwarlal @0.02% ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 14 - M. Jain on behalf of others 2 Accommodation entries of Bogus purchases @0.05% instead of 0.075% 3 Bogus unsecured loan @1% instead of 2.40% 4 Commission of Local purchases Nil against 0.02% 5 Expenses Allowed @25% 92.2 As. informed, Department has not accepted the above percentage estimated by the Hon'ble ITAT and further appeal is being preferred. Therefore, the estimation is not final. Hence, with due respect to the judgment of Hon'ble Tribunal and to keep the issue alive, the undersigned confirms the estimation made by the Assessing Officer, with respect to commission income earned by the appellant on bogus unsecured loan and bogus purchases as well as 10% of commission income for day-to-day expenses as mentioned in the preceding paragraphs, on protective basis. 9.2.3 It is further observed that Commission income earned on Bogus sales does not form part of the Appellate Order of Hon'ble Tribunal. Hence, the estimation of Rs. 25,663/- @ 0.075% on the sales of Rs. 3,42,17,419/- is hereby confirmed on substantive basis. Thus, Ground of Appeal Nos. 3, 4, 5, 7 and 9of the present appeal are dismissed. 9. In our opinion, the reasoning given by the Ld. CIT(A) is against the principle of judicial discipline. The Ld. CIT(A) being a appellate authority is required ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 15 - to follow the judicial precedent available on the issue in dispute. The Ld. CIT(A) has duly mentioned the order of the Tribunal in the case of Sh. Bhanwarlal Jain where the commission income from accommodation entries has been held to be assessed on substantive basis treating the various concern through which accommodation entries were provided as his ‘benami’ concerns. 11. For ready reference, said findings of the Tribunal is reproduced as under: 8.2 It will not be out of place to mention here that Hon'ble ITAT, B Bench, Mumbai, in the combined order dated 06.08.2021 (ITA No. 98-104, 108-114,2669, 3509/M/2018) in the case of Bhanwarlal M. Jain, has extensively examined the modus operandi of Bhanwarlal M. Jain and 70 odd associates. The Appellant is one of the 70 associates, as mentioned in the preceding paragraphs. The relevant findings of the Hon'ble Tribunal are reproduced as below: 4. We have carefully heard the rival submissions, oral as well as written. We have duly appreciated the factual matrix as enumerated by us in the preceding paragraphs. The judicial pronouncements including our own order in Rajendra P. Jain V/s DCIT (ITA Nos.298/Mum/2018 & ors.; order dated 03/05/2019), as cited before us during the course of hearing has been deliberated upon. We proceed to deal with the issues in the following manner. ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 16 - 5. The first and foremost argument taken before us is that the pendrive as found during the course of search proceedings was planted from outside and the admission thereof was taken forcibly in statement of assessee u/s 132(4). The Ld. AR has impressed upon the idea that the search took place on 03/10/2013 whereas the said pen drive was not inventorized for 6 days. It has been submitted that the same could have been seized or inventorized on 04/10/2013 along with the inventory made for credit cards, bank account and jewellery etc. Further, the seizure of the pen drive was not made part of Panchnama annexure, officially drawn on 04/10/2013 and the admission about the same from his son Shri Rajesh Jain was extracted forcibly. 6. Going by the factual matrix as enumerated in preceding paragraphs, we find that the attitude of the assessee during the course of assessment proceedings was totally non- cooperative. In fact, the assessee remained absent during search proceedings for 3 days. The summons were not complied with and no explanation was furnished on incriminating material. Pertinently, voluminous hand written estimation sheets have been found at various premises of the assessee. The sheets have been admitted to be in the hand writing of assessee’s son as well as an employee of the assessee. These sheets contain parallel cash accounts. The entries in the estimated sheets were in the nature of square-off transaction wherein cash received from one party was paid back to another party through Angadiya Account. The pen drive contained calendar year-wise names of beneficiaries, the amount of cash, details of brokerage and commission etc. It also contained complete details of Angadiya Account since 2004 in electronic form. The parallel account maintained on the pen-drive pertained to various concerns, 70 to be precise, being managed and controlled by assessee ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 17 - group. The password of the pen drive was cracked with the help of software programmers. After decrypting the data, print outs were taken and matched with the estimation sheets as well as other data gathered during the course of search action from various premises, disclosed as well as secret. The data was found to be identical. The complete correlation was established between the parallel books of accounts found on the pen drive with books of 70 concerns being managed and controlled by the assessee. It transpired that the daily accounts were first written manually on estimation sheets and thereafter entered into pendrive electronically. So much so, identical pen drive was found from the possession of Shri Rohit Birawat at CST Terminus who was apprehended by the search team while attempting to flee from Mumbai to Rajasthan with incriminating material. 7. All these facts have been admitted not only by the assessee but also by his son as well as trusted employees in various statements as recorded on oath u/s 132(4) at various points of time. The statements were recorded in the presence of independent witnesses. The contents of the statement were said to be duly explained to the assessee at the time of recording thereof. 8. In the backdrop of such clinching and overwhelming evidences, no substance could be found in the plea that the pen-drive did not belong to the assessee or the same was not found from assessee’s premises particularly when the contents of the pen drive completely matched with incriminating material found during the course of search operations. The seizure of the same was duly recorded in the Panchnama which was vouched by independent Panchas. The vital link was established between the pen drive and the estimate sheets as well as ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 18 - the regular books of benami concerns being run by the assessee. Therefore, we do not find any substance in this plea as raised by Ld. AR before us and therefore, we reject the same. 9. So far as the other arguments are concerned, we find that that the assessee was running more than 70 benami concern under name-sake directors / partners /proprietors. These persons were acting as per the direction of the assessee against remuneration. Most of them, in their statement u/s 132(4), made admission of those facts. They also made admission that they assisted / abetted the assessee in the business of providing accommodation entries. Their PAN Cards, IDs, blank signed cheque books etc were found at centralized premises. They were visiting the centralized premises to sign the blank cheque books as per the directions of the assessee. All these persons had superficial knowledge about nature of business being conducted by their respective concerns. Further, most of these persons were residing at premises owned by the assessee group. The books of accounts of all these entities were being maintained at two premises in a centralized manner. The books were found in the same computer and audited by common Auditor. The auditor admitted to have signed the financial statements as per the directions of Shri Lunkaran Parasmal Kothari without verifying the books of accounts. This is further fortified by survey action at BKC, Mumbai wherein more than 30 firms were found to be operating from common premises. All the 70 entities were found to have common features in their respective financial statements. All these factors strongly prove the allegations of the department that all the concerns were being run by the group in a combined manner with a view ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 19 - to provide accommodation entries to various beneficiaries against commission. 10. So far as the retraction of the statement made by the assessee is concerned, we find that the retraction was made after more than 8 months and the same was devoid of any material evidence. The statements were made on oath u/s 132(4) and heavy onus was on assessee to rebut the same with cogent material while retracting the same. However, nothing of that sort as done by the assessee, has been shown before us. Glaring contradictions as well as similarities has been found in the retraction affidavits. As rightly held by lower authorities, the retraction was nothing but mere after-thought and tutored statement to thwart the process of investigation. The retraction was bereft of any material evidence and therefore, the same was to be completely ignored. 11. The aforesaid factual matrix as well as findings would lead to inescapable conclusion that all the 70 entities under consideration were being managed and controlled by the assessee group and therefore, lower authorities were quite justified in estimating commission income earned by the assessee group from all these benami concerns. 12. Accordingly, Ground Nos.1,2,5,6,7 & 8 of the assessee’s appeal stands dismissed. Ground No.12 stand dismissed since we do not find any violation of principle of natural justice during appellate proceedings 12. The Ld. CIT(A) has summarized the factual conclusions in para 8.3 of the impugned order. Ld. CIT(A) has also noted that for the commission income added on protective basis in the case of the assessee ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 20 - for such period from Assessment Year 2007-08 to AY 2014-15 has been deleted by the concerned first appellate authority following the decision of the Tribunal in the case of Sh. Bhanwarlal Jain. Despite fully aware of the fact, the Ld. CIT(A) in the instant case has upheld the addition on the reasoning that the Income-tax department has not accepted the percentage estimated by the Tribunal in the case of Sh. Bhanwarlal Jain, and further appeal has been preferred. The Ld. CIT(A) has ignored that he, being a appellate authority, is required to follow the decision of the higher appellate forum irrespective whether the department has preferred appeal again the same, unless the decision of that appellate forum has been stayed by the higher appellate forum. The Ld CIT(A) cannot confirm an addition on protective basis. He is required to decided the issue either way and cannot proceed with keeping an addition on substantive in one case and protective in other case that too even after a finding of the higher appellate forum i.e. ITAT. We accordingly, reject this approach of the Ld CIT(A) and set aside his finding on the issue on dispute. Respectfully following the finding of the ITAT in the ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 21 - case of Sh. Bhanwarlal Jain (Which has been extracted above), the protective addition made in the case of the assessee in respect of commission income from accommodation entries is deleted. The relevant grounds of the Appeal are accordingly allowed. 13. Ground No.3 of the appeal relates to addition of R. 35, 31,237/- for low gross profit declared by the assessee in trading activity, which is recorded in books of accounts. The Assessing Officer has made addition at the rate of 10.32% on the sales turnover of Rs. 3,42,17,419/- to compensate the low gross profit rate of the assessee. 14. The Assessing Officer held that gross profit shown from business activity recorded in books of accounts was lower as compared to other concerns of the group and therefore, he made addition to the gross profit of the assessee observing as under: 13.3 As mentioned above, the assessee has shown a huge turnover of Rs.3,42,17,419/- However, the assessee has failed to submit the transaction wise details as called for vide notice us 142(1) of the IT Act dated 18/11/2019. As per the earlier details filed by the assessee it is observed that the assessee has shown 18 instances of purchases und 16 instances of sales. Thus, it is obvious ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 22 - that the details in respect of such transactions cannot be voluminous. However, the assessee chose not to submit any detail in this regard. Furthermore, the assessee has also failed to submit any information regarding the corresponding payments made for purchases, the effect of such purchases in the stock maintained, sales made, receipt of sales proceeds and the corresponding effect in the stock register. Thus, the assessee has not submitted any detail in respect of the items of its P&L account including expenses debited. Hence, it is evident that the profit and income as declared by the assessee in its P&L account is not substantiated by supporting documentary evidences and he same is hereby rejected in absence of the details of expenses, stock etc. 15. Before the Ld. CIT(A) assessee claim that it was engaged in the trading activity which is supported by the books of accounts, quantitative tally of the goods submitted in the tax audit report under section 44 AB of the Act . Ld. CIT(A) in para 11.1 of the impugned order has rejected the claim of the assessee of being engaged in the trading activity observing as under: 11.1 In this regard, the undersigned has narrated in the preceding paragraphs that the Hon'ble ITAT in the case of Shri Bhanwarlal M. Jain has given a conclusive finding that the 70 entities are managed, controlled and run by the Shri Bhanwarlal M. Jain and his group in a combined manner with a view to provide accommodation entries to various beneficiaries against commission. It is an undisputed fact that the present Appellant is one of the 70 entities. Hence, the claim of the Appellant that the ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 23 - appellant is a trader and the quantity tally of goods, submitted in the Tax Audit Report u/s 44AB of the Act completely tallies, has no meaning. These are all self- serving documents devoid of truth and genuineness and cannot be relied upon. 16. The Ld. CIT(A), however upheld the gross profit rate addition made by the Assessing Officer in para 11.3 of the impugned order, observing as under: 11.3 I am in full agreement with the findings of the Assessing Officer. When other group concerns of Shri Bhanwarlal M. Jain, claimed to be in the same business of trading in diamonds, in identical circumstances, have shown much higher gross profit, there is no reason for the Appellant to show such small profit, »in the return of income. Hence, the estimation on the basis of comparables is justified. Moreover, the appellant has not found any lacuna in the comparison of results carried out by the AO. Thus, the addition of Rs. 35,31,237/- to the total income of the appellant, is confirmed. As such, the Grounds of appeal No. 8 and 10 of the appellant are dismissed. 17. From the impugned order of the Ld. CIT(A), we find that in one para he is treating the books of accounts and other details of quantitative tally in respect of trading activity as self-serving documents, devoid of truth and genuineness and therefore cannot be relied upon. On the other hand, he is confirming the gross profit rate addition made by the Assessing ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 24 - Officer for the said trading activity. The Ld. CIT(A) cannot give both the finding that assessee was engaged in providing accommodation entry and being simultaneously was engaged in trading activity. We find that tribunal in the case of Sh. Bhawarlal Jain (supra) has given a specific finding that 70 associate concerns of Sh. Bhanwarlal Jain were engaged in providing only accommodation entry and no real business was carried, which was recorded in their books of accounts. The assessee also being one of the concern out of those 70 concerns, the Ld. CIT(A) has correctly rejected the claim of the assessee in para 11.1 that it was engaged in any trading activity. Once it is held, that assessee was not engaged in any trading activity, there is no justification for making any addition for low gross profit rate in such trading activity. The finding of the Ld. CIT(A) in para 11.3 are accordingly set aside. The ground No. 3 and 4 (partly), of the appeal of the assessee are accordingly allowed. 18. The ground No. 6 and 7 are in respect of commission from accommodation entries enhanced by the Ld. CIT(A). The relevant finding of the Ld. CIT(A) in the impugned order is reproduced as under: ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 25 - 9.2.3 It is further observed that Commission income earned on Bogus sales does not form part of the Appellate Order of Hon'ble Tribunal. Hence, the estimation of Rs. 25,663/- @ 0.075% on the sales of Rs. 3,42,17,419/- is hereby confirmed on substantive basis. Thus, Ground of Appeal Nos. 3, 4, 5, 7 and 9 of the present appeal are dismissed. 19. We find that according to the Ld. CIT(A) the bogus sales had not been considered by the Ld. Assessing Officer for computation of commission from accommodation entries. 20. We are of the opinion that when the Tribunal in the case of Sh. Bhanwar Lal Jain (supra) has considered the commission from accommodation entry on substantive basis, any addition if not considered in respect of such commission entry, same can only be made in the hand of Sh. Bhanwarlal Jain. When it is evident that after the finding of the Tribunal in the case of Sh. Bhanwarlal Jian, no addition can be made on protective basis in the case of the assessee, there is no question of further enhancement of said commission income from accommodation entry and that too on substantive basis. The enhancing of such commission income from accommodation entries of ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 26 - bogus sales is without any reasoning and totally unjustified. We reject this action of Ld. CIT(A). 21. The Ld. Counsel before us submitted that Hon’ble Tribunal in the case of Bhanwar Lal Jain, has duly considered the alleged commission on sales, but in absence of any such details before us, we are not adjudicating upon said contention of the Ld. Counsel. 22. The Ld. Counsel further submitted that Ld. CIT(A) has enhanced the commission income without providing any show cause notice to the assessee, which is in violation of the section 251(2) of the Act. The relevant part of the provision is reproduced as under: 251(2). The [Commissioner (Appeals) shall not enhanced an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. 23. In the impugned order there is no mention of any opportunity provided to the assessee by way of issue show cause notice, before making the addition and therefore this addition is unsustainable on the ground of violation provision of section 251(2) of the Act also. ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 27 - 24. Accordingly the ground No. 6 and 7 of the appeal are also allowed. 25. As the appeal of the assessee on merit has been allowed, the grounds challenging the validity of the reassessment and ground No. 8 for not providing opportunity of cross examination, are merely rendered academic and therefore we are not adjudicating upon same. The ground No. 9 of the appeal is only general in nature. Accordingly these grounds i.e. ground No. 1, 8 and 9 of the appeal are dismissed as infructuous. 26. In the result, the appeal of the assessee is allowed. 25. The grounds raised in ITA No.350/Mum/2022 in the case of ‘Look at me Retail P Ltd’ being identical to ground raised in ITA No. 359/Mum/2022 in the case of ‘White stone’ except change of amount, therefore following our finding above, the grounds in the instant appeal are also decided mutatis mutandis. The appeal of the assessee is accordingly allowed. 26. As far as appeals having ITA No.385/Mum/2022 in the case of Millan & Co. ;ITA No. 355/Mum/2022 ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 28 - in the case of Pushpak Gems and ITA No. 313/Mum/2022 in the case of Rare Ddiamonds Private Limited are concerned, only two grounds i.e. ground against upholding protective addition for accommodation entry and in enhancing income from accommodation entries for bogus sales, have been raised before us. As we have already adjudicated on these issues in ITA No. 359/Mum/2022 in the case of ‘White Stone’ above, following our finding supra, these grounds in all three appeals are decided mutatis mutandis. These appeals are accordingly allowed. 27. In the result, all the five appeals of the respective assessees are accordingly allowed. Order pronounced in the open court 27.06.2022 Sd/- Sd/- (KULDIP SINGH) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 27.06.2022 KRK, PS ITA Nos. 313, 350, 355, 359 & 385/Mum/2022 White Stone & Ors., Mumbai . - 29 - /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. !"!#$ आ आ % / The CIT(A) 4. आ आ % ( ) / Concerned CIT 5. ( ) * + + #$, आ #$ , Mumbai / DR, ITAT, Mumbai 6. * -. / / Guard file. ान ु सार/ BY ORDER, ( + //True Copy// उ /सहाय ंजी ार ( Asst. Registrar) य र ी य र!, हम ाबा / ITAT, Mumbai
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