SHRI DURGAPRASAD SARDA, Nagpur V. A,C.I.T CENT CIR. 1(13, Nagpur

ITA 526/NAG/2016

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0066 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 04-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP HEDAOO
• Keywords: Search and seizure; Opportunity of being heard; Additional evidence
• Section: 131; 271(1)(c); 139; 153A; 13; 153

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA No. 526/Nag/2016 Assessment Year: 2006-07 ITA No. 527/Nag/2016 Assessment Year: 2007-08 ITA No. 528/Nag/2016 Assessment Year: 2008-09 ITA No. 529/Nag/2016 Assessment Year: 2009-10 ITA No. 530/Nag/2016 Assessment Year: 2010-11 & ITA No. 63/Nag/2018 Assessment Year: 2011-12 Shri DurgaprasadSarda, SP/2/301 SpringleApptt., Raj Nagar, Nagpur – 440033 Vs. Asstt. Commissioner of Income Tax, Central Circle – 1(1), AayakarBhawan, Nagpur - 440001 PAN : ADEPS5103K (Appellant) (Respondent) Appellant by Shri Hitesh P. Shah (CA) Respondent by Shri Pradeep Hedaoo (CIT DR) Date of hearing 26.10.2021 Date of pronouncement 18.01.2022 2 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 ORDER PER BENCH: These appeals by the assessee are directed against separate orders passed by the ld. Commissioner of Income-tax (Appeals)-3, Nagpur [in short the Ld. CIT(A)] for assessment year 2006-07 to 2011-12 respectively. As issue in dispute involved in these appeals being identical, same were heard together and disposed off by way of this consolidated order for convenience and avoid repetition of the facts. 2. In the appeals identical grounds have been taken challenging the addition confirmed by the ld. CIT(A). For brevity the grounds raised in AY 2006- 07 are reproduced as under: 1. “The order passed by the Hon‟ble CIT(A) confirming the order passed by the A.O. is illegal, invalid and bad in law. 2. The Hon‟ble CIT(A) erred in upholding and confirming, the addition made by the A.O. of the Rs. 4,12,855/- as a undisclosed income as commission received. 3. The Hon‟ble CIT(A) erred in upholding and confirming, the addition made by the A.O. of Rs. 10,93,236/- as a undisclosed income as commission received. 4. The income determined at Rs. 16,91,173/- is unjustified, unwarranted and excessive. 3 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 5. The Hon‟ble CIT(A) erred in dismissing the plea of the assessee that the assessment made was without giving proper opportunity of being heard. 6. The Hon‟ble CIT(A) erred in confirming charging interest u/s 234A, 234B. 234C and initiating penalty u/s 271(1)(c) and 271(1)(b) of the I.T. Act, 1961. 7. Any other ground may be taken at the time of hearing.” 3. Brief facts of the case are that the assessee is a Chartered Accountant (CA) by profession and was also claimed to be a retainer for ‘Mukesh Gupta Coal group’. The assessee filed regular return of income for assessment years involved i.e. from assessment year 2006-07 to 2011-12 and declared income from profession in those regular returns of income filed. 4. In the case of the assessee, a search and seizure operation under section 132 of the Income-tax Act, 1961 (in short the Act) was carried out on 15/09/2009 along with cases of M/s Sunil Hitech group etc. In view of search carried out at the premises of the assessee, separate notices under section 153A of the Act were issued for all relevant assessment years from 2006-07 to 2011-12. During search proceedings at the premises of the assessee, documents of dealing with M/s Sunil Hichtech Group, and other groups were found. The assessee accepted the transactions with ‘M/s Sunil Hitech Group’ as bogus subcontract bills issued/accommodation entry transaction and also accepted earning of commission on those transactions. In view of the seized papers and statement on oath, the assessee declared total income of ₹ 56 lakh 4 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 as undisclosed commission income from such transactions, being ₹ 6 lakh from ‘M/s Sunil Hitech Group’ and Rs. 50 lakh, received as commission from other groups and same was claimed to be invested in M/s Bhoomika minerals Private Limited as share capital. The year-wise income declared in regular returns and income filed in returns in response to section 153A is reproduced as under: assessment year returned income under section 139 Returned income under section 153A Net undisclosed income AY 2006-07 1,85,082/- 1,85,082/- NIL AY 2007-08 2,24,350/- 2,24,350/- NIL AY 2008-09 3,17,290/- 3,17,290/- NIL AY 2009-10 No return 56,00,000/- 56,00,000/- AY 2010-11 6,63,616 --- 2,50,000/- (unexplained cash) AY 2011-12 5,71,903 NA --- 5. The Assessing Officer during assessment proceeding highlighted that the assessee was engaged in issuing accommodation entry bills for expenses and also for circular trading for arranging letter of credit and bill discounting (LCBD) for various companies of different groups including M/s Sunil Hitech Group, M/s Gupta Coal Group of Mr. Mukesh Gupta, M/s Linkson Group etc. and earned commission @ 1.4% on the total transactions. The Assessing Officer worked out the amount of commission on the basis of transaction reflected in bank account of persons i.e. firms through which accommodation entries were provided. The Assessing Officer has alleged that the assessee had floated various proprietary concerns /firms in the name of his associates, 5 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 servants and their relatives, other friends etc. The Assessing Officer has summarized the factual observations made during the course of the search at the premises of the assessee as well as other groups as under:’ “Shri Sarda had floated various concerns in the name of his relatives and persons of no-means. These persons were selected from his ordinary employees (like drivers (Baban Yadav), servants (Ravi Yadav), petty shop keepers, workers etc.) or their relatives. These persons being of no-means agreed to lend their names for small amounts of Rs. 500 to Rs. 10000. The concerns were floated in the name of faceless persons. For eg. Ajay Trade Link is the proprietary concern of Shri Ajay Yadav (a relative of assessee‟s servant Shri Ravi Yadav), S.N. Coals and Coke is a concern of Ravi Yadav (a servant of the assessee) and PR Traders is a concern of Rajesh Dass, who is an associate of the assessee. Signatures of these people were obtained on blank documents to open bank accounts, and to obtain PAN and TIN for these concerns. Signatures of these people were obtained on blank cheque books, I-T return forms. Moneys were circulated from one bank account to another for the purposes of providing accommodation entries to various parties like Gupta Coal group, using the blank signed cheques of different persons. The bills were issued to the desiring parties/clients from the concerns floated by Sarda to facilitate booking of expenses (as in case of Sunil Hitech Ltd.) andarranging L.C. limits on these bills (as in Gupta coal group). 6 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 Commission was charged by the assessee for arranging these transactions varying, the percentage of commission being dependent on the nature of transactions. 7. Various incriminating documents were seized from the premises of the assessee during search and seizure operations, including blank signed cheques of different persons (including those mentioned in the list below), blank signed I-T return forms of some of these persons and their concerns, blank signed/unsigned bill books/ payment vouchers/cash memos of the concerns like Ajay Trade Links, 5S.N. Coals and , P.R. Traders, Lambakaran Commercial Pvt. Ltd., Vignesh Mines Pvt. Ltd., M.B. Mines Pvt. Ltd. and many other such concerns. The assessee had also floated concerns/companies like Shri Salasar Trading Company and Seema Investments (in the name of his wife Smt. SeemaSarda), Lambodar Commercial Pvt. Ltd., Pawanputra Mining Pvt. Ltd., Pawansut Commercials P.Ltd., Bhoomika Minerals P. Ltd. etc. in his name or in the name of his relatives. On spot verifications by the-Department no actual business activity of any sort was found to be done by any of these concerns. No godowns etc. of these concerns were found. It is also worthy to mention here that a search operation on the concerns viz. Ajay Trade Links, S.N.Coals and Coke and P.R. Traders was also conducted by the Sales Tax Dept. (Inv), Nagpur and the transactions of these concerns were found to be managed by the assessee himself. 6. Based on documents found in the course of the search, the assessee admitted of issuing bogus bill to M/s Sunil Hitech Group, (Sunil Hightech Engineering Limited (SHEL) through the concerns floated by him for sub contract work and declared the same in AY 2009-10. The Assessing Officer in 7 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 the assessment order for AY 2006-07 has mentioned detail of seized records in the form of six diaries found from the residence and office premises of the assessee. The Ld. Assessing Officer has also reproduced relevant part of the statements given by following persons to highlight that those persons were for namesake as proprietor of those concerns, whereas actual control lied with assessee: (i) Sh. Ashwini Yadav (ii) Sh. Baban Makhanlal Yadav (iii) Sh. Ganesh Prasadlal Bihari Shukla (iv) Sh. Mahendra Ramkrishna Bokade (v) Sh. Ravi S Mohod (vi) Sh. Ravindra Hariram Kharperde (vii) Sh. Sachin B Agarkar (viii) Sh. Sainath Suresh Kayarwar (ix) Sh. Santosh Saikulal Morya (x) Sh. Shirish B. Agarkar 7. The Assessing Officer has mentioned that the statements of above persons were shown to the assessee during recording of his statement under section 131 of the Act on 08/10/2009. According to the Assessing Officer, the assessee accepted the statement of above persons. However, in his submission dated 29/12/2011, the assessee stated that statements of third parties were not binding on him and he sought their cross-examination. The Assessing Officer has also mentioned the fact of inquiries carried out by the Deputy 8 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 Commissioner of Sales Tax, Nagpur Division in respect of the entities floated by the assessee. The Assessing Officer has also reproduced the bank account No. of all the firms/ concerns allegedly floated by the assessee and computed value of total bank transactions at ₹ 832,23,58,607/-. 8. The Assessing Officer in assessment order for AY 2006-07 (from para 12 to 12.2) has mentioned modus operandi of earning commission income from circular trading for arranging letter of credit from banks. In para 13 to 14.2, the Assessing Officer has assessed commission income of ₹ 4,12,855/- at the rate of 1.4% from accommodation entry bills of ₹ 2,94,89,612/- issued through M/s PR traders i.e. proprietary concern of Mr Rajesh Dass. In para 15, the Assessing Officer has determined commission income of ₹ 10,93,236/- for bills issued of ₹ 7,80,80,322/- by other concerns after applying rate of commission of 1.4%. In this manner in assessment year 2006-07, the Assessing Officer made addition of ₹ 15, 06, 091/-. 9. In AY 2007-08 , the Assessing Officer made addition of ₹ 16,80,000/- ; ₹ 29,45,129 and ₹. 29,56,155/-. The addition of ₹ 16,80,000/- has been made for commission income earned for accommodation entry bills issued to Mukesh Gupta Coal group as against claim of assessee of receipt only of retainership fee. The addition of ₹ 29, 45, 149/-has been made for commission income earned on accommodation entry bills issued for arranging letter of credit from banks for various groups. The addition of ₹ 29,56,155/- has been made for 9 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 commission earned on arranging cheques against cash i.e. money-laundering for various parties. 10. Similar kind of additions have been made in other assessment years before us. 11. The Ld. CIT(A) upheld the finding of the Assessing Officer in all the relevant assessment years. 12. Before us, the Ld. Counsel of the assessee, referred to application filed for admitting additional evidences in terms of Rule 29 of ITAT Rules, 1963 for all the assessment years involved in appeals before us and submitted that certain relevant documents could not be filed during assessment/first Appellate Proceedings , therefore, now the assessee wishes to file those documents as additional evidence for doing justice in the matter. The assessee has filed common affidavit for all the AYs justifying admitting of additional evidence. The relevant content of the affidavit are reproduced as under: “I, Durga Prasad Sarda, aged 58 years, residing at SPII/301, Springdale Apartment, Rajnagar. Nagpur-440001, do hereby solemnly affirm and declare as under: „That I am assessed to Income Tax under PAN ADEPSS103K and that I have been regularly filing my Income Tax Returns since last 40 years. : That I was working as a retainer with Shri MukeshGupta of Gupta Group, Nagpur from 1 st April 2005 to 31 st March 2008. That I was looking after their Finance matters at that point of time. That in April 2008, M/s. Gupta Coal had asked me to help them in reducing their profits by carrying out circular transactions for them. The 10 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 said transactions included providing share capital with premium, providing letter of credit discounting facilities, providing contractors for raising expense invoices, etc. Since I was in their retainership and I also needed some amount to pay off the loans taken for my own residence in March 2008, I agreed to the said arrangement. That as I needed more money, I had introduced total of 16 persons out of my close relatives, employees and their relatives, to work as contractors or “ Thekedars” for Sunil Hightech. I was given a commission of 0.25% only for making the whole of the arrangements. Out of the said gross commission, I was required to meet the necessary expenses, government taxes including Income Tax, VAT, Professional Tax etc. Hence the net amount that remained with me was only 0.14%. The said working can be appreciated from seized paper 20 of Annexure B-3. That I had also done circular transactions from April 2008 to March 2011, for Gupta Group, Linkson Group, and Y. P. Mehta Group only, whereas Thekedari transactions for M/s. Sunil Hightech Engineering Limited, Baidyanath Group and Essel Infra Projects only. That there was simultaneous search action on M/s, Sunil Hightech Engineering Limited (SHEL) and residence of Mr. Rajesh Dass and at my office as well as residence on 15/09/2009 and certain documents were seized from my premises. That I had declared commission income of Rs. 6 lakhs and Investment in Bhoomika Minerals P. Ltd. of Rs.50 Lakhs as my income and after finding it sufficient against the assets held by me, the search party, had closed their search action. That I had clearly mentioned in my statement on oath that I had done the transactions only for these6 groups and that I had earned gross commission of 0.25% only . However, during the assessment proceedings, the Ld. A.O. has made additions on the basis of some of the bank account numbers, which were found from my premises event though I had not done any transactions with the said parties and except the said bank account 11 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 numbers no other incriminating documents showing transactions with the said parties was found during the exhaustive search action. That the AO had all the powers to summon all the said parties and verify the said fact directly with them. However, the AO has blindly considered the transactions in their bank accounts, as done by me and has added income out of such transactions to my income. That I have obtained the confirmation from majority of the said parties stating that they have not done any transactions with me or my associates and the same are produced as additional evidences before the Hon. ITAT. Further, even though the percentage sign was not mentioned on the seized paper 53 of Annex.B-3, and only figures 1.41, 1.331/2, were mentioned on the said seized paper, the Ld. AO has assumed and "presumed that I used to receive commission of 1.41% on all transactions. That the Gupta Group and SHEL Group, were searched during that period only and that Linkson Group was searched in 2011. Further, all the said groups were centralized and that the SHEL up and Linkson Group were assessed b the same AO. Hence the AO could have easily verified the actual income received by me from these groups. That the AO had considered, Contractor, Mr. Mahendra Bokde, as my associate and has considered the turnover of his 3 companies as my income, However, vide his affidavit, My, Mahendra Bokde, has solemnly declared that he only was responsible for the turnover of his 3 companies and income of the said 3 companies have already been assessed in his hands. That his assessment order and Affidavits are submitted as additional evidences. That the seized papers clearly established that the total transactions with SHEL Group. done by me, were to the tune of Rs.14.08 Crores only in 2 years and the same AO, who has assessed my income, has accepted total undisclosed income of Rs.47.36 Crores in _the case of SHEL for Asst. Year 2009-10. The order of SHEL is also submitted as additional evidence. Similarly, the incomes of the other _ groups that were centralised. have been ~ determined by the AO. 12 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 That in the case of M/s. Bhoomika Minerals, after 31°° March 2011, the amount receivable from debtors were not received and hence the amount payable to creditors, could _ not be paid and ultimately the said amounts were written off as adjusted against each other. The „ournal entries passed in the books of Bhoomika Minerals, are submitted as additional evidence to prove the fact that no commission was received by me or M/s. Bhoomika Minerals. after 31 st March 2011. The valuation report of Authorised valuer of Department, showing jewellery found during search to the tune of Rs.8.68 lakhs is submitted as additional evidence. That the Balance Sheet for all the years that are submitted in the paper book and the valuation report have been accepted by the AO, without any reservations. That inspite of the said fact, the AO has determined my total income at Rs.20.16,86,241/for six years even though no such corresponding undisclosed immovable properties, investments, cash or any other assets were found during the exhaustive search operation. That as regards submissions of additional evidences, before Hon. IT AT for the first time, I state I had always worked on retainership and used to attend to Finance and other related matters. I had never attended before the Income e Tax Authorities and therefore I had CA. Kailash Jogani and Adv. Mukesh Agarwal to represent my case. Since majority of the papers were seized by the department. I was not able to substantiate my actual income earned corresponding to the actual assets found during search and my counsels did not guide me further in the matter. Thereafter, I appointed CA. Hitesh P. Shah, to represent me and he made me aware to the fact that when I am not having substantial evidences to prove my income, could prove the same through circumstantial evidences. In view of the above, I have gathered the above evidences and are now submitted as additional evidences with a request that the same may please be accepted under Rule 29 of ITAT Rules as I could not submit the same to the Ld. AO and Hon. CIT(A), d due to the above circumstances beyond my control. 13 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 This solemn declaration is made to establish the fact that the AO has made huge additions to my income, without proper findings of any corresponding assets.” 13. The assessee has reproduced a list of additional evidence which is reproduced as under: “(a) Ledger Account of „Adjustment A/c' showing writing-off of all the closing balances alongwith the name of parties in the books of Bhoomika Minerals Pvt. Ltd. ( page 122 to 125) (b) The copies of papers seized during search referreds to in Assessment Order. (c) The copies of Affidavit from the following parties certifying that they have not entered into any transactions for any of the financial years with the Appellant (page 126 to 132) (i) Pradip Kumar Bihani Director of M/s. Zany Share Trading Pvt. Ltd. (page 133) (ii) Arun Behera Director of M/s. AIM Merchants Pvt. Ltd. (page 133a) (iii) Vimlesh Kumar Singh Director of M/S. Jasmine Commerce Pvt. Ltd. (page 134) (iv) Raj Kumar Sarda Director of M/S. Akashdeep Commercial Pvt. Ltd. (page 135) (v) Pankaj Kandoi Director of M/S. Afflatus Software Pvt. Ltd. (page 136) (vi) Jai Prakash Kandoi Director of M/S. Mahak Textiles Pvt. Ltd. (page 137) (vii) Jai Prakash Kandoi Director of M/S. Gloszon Alloys and Castings Pvt. Ltd. (page 138) (viii) Yogesh Khandelwal Director of M/S. Minutex Processors Pvt. Ltd.( page 139) (ix) R I Patil Director of M/S. Indi Infra and Elements Pvt. Ltd. (page 139A & 139B) 14 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 (x) Kailash Sharma Director of M/S. Four Pillars Communications Pvt. Ltd. (page 139C & 139D) (d) The copies of Valuation Report of Gold Ornaments owned by Mrs. Sarda and Mr. 140 to 142 Sarda amounting to Rs.8,66,045/as on the date of Search. (page 140 to 142) (e) The Copies of Assessment Order of Mahendra Bokde alongwith the copy of his Affidavit Dated 01/09/2018 declaring that he had not done any transaction with Mukesh Gupta.(page 143 to 149) (f) The Copy of Reiteration Statement through Affidavit Dated 06/11/2012 of Mr. 150 to 152 Mahendra Bokde in Hindi alongwith Its translation in English, stating that he was responsible for the transactions done by his Three Companies.(page 150 to 152) (g) The copy of Assessment Order in the case of M/s Sunil Hitech Engineering Ltd. showing addition of Rs. 47 and Odd crores for the Assessment Year 2009-10. (page 153 to 163) 14. The Ld. Counsel of the assessee submitted that those additional evidences should be admitted and additions made in relevant years might be restored back to the Assessing officer for deciding afresh in the light of those additional evidences. 15. The Ld. DR on the other hand, objected for admissibility of the additional evidence and submitted that the assessee was already allowed sufficient opportunity by the lower authorities. He submitted that the assessee was not prevented from producing those documents before the lower authorities. 16. We have heard submission of the parties on the issue of the admissibility of additional evidences. The assessee has submitted that he has gathered documents and evidences which were not available during assessment 15 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 proceeding and therefore same need to be admitted and sent to the Assessing officer for examining. The additional evidences include statement of different persons, bank statement of whom have been made basis for determining commission income in the case of the assessee. All those evidences are having vital impact on determining income of the assessee for relevant assessment years and therefore in the interest of substantial justice, we feel it appropriate to admit those evidences as additional evidence. We accordingly set aside the order of the lower authorities for AY 2006-07 to AY 2011-12 and restore the issue of determining undisclosed income in the case of the assessee to the file of the Ld. Assessing Officer, afresh. The assessee is directed to cooperate with authorities for filing the information and evidences required for determining the true income in the case. The Assessing Officer, may carry out inquiries, which he deem fit in the circumstances including cross-examination of the persons whose affidavit have been filed by the assessee. It is needless to mention that adequate opportunity of being heard should be provided to the assessee. 17. In the result, all the appeals involved are allowed for statistical purposes. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (SANDEEP GOSAIN) JUDICIAL MEMBER (OM PRAKASH KANT) ACCOUNTANT MEMBER Nagpur; Dated: 18.01.2022 16 ITA No. 526-530/Nag/2016 & 63/Nag/2018 Assessment Years: 2006-07 to 2011-12 AK, PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Nagpur 6. Guard file. BY ORDER, //True Copy// (Sr. PS/PS) ITAT, Nagpur