AI Insights
The case involves appeals by the Revenue against the orders of the Commissioner of Income Tax (Appeals) which had deleted the additions made by the Assessing Officer on account of commission expenses and peak credit in the hands of M/s. Jalaram Finvest Ltd. and Shri Dahyabhai I. Thakkar. The Tribunal examined the nature of the business conducted by the assessee, which involved cheque discounting, and the corresponding commission paid to various parties. The Tribunal noted that the assessee had provided sufficient evidence to substantiate the genuineness of the commission expenses, including PAN details, TDS deductions, and bank statements. Furthermore, the Tribunal observed that the Revenue had not brought any incriminating material to substantiate the allegations of undisclosed income or benami transactions.
Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 114200 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 year(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
30-05-2023
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
12-04-2023
Assessment Year
2012-2013
Appeal Filed On
03-05-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The DCIT, Central Circle-1(1), Ahmedabad (Appellant) Vs M/s. Jalaram Finvest Ltd. 168, 3 rd Floor, Kalupur Sindhi, Commercial Market Kabutar Khana, Chokha Bazar, Ahmedabad PAN: AAACM8004B (Respondent) The DCIT, Central Circle-1(1), Ahmedabad (Appellant) Vs Shri Dahyabhai I. Thakkar, 68, Shivalik Bunglows, Nr. Madhur Hall, Satellite, Ahmedabad PAN: ABIPT1432G (Respondent) Assessee Represented: Shri S. N. Soparkar, Sr. Adv.& Shri Parin Shah, A.R. Revenue Represented: Shri Sudhendu Das, CIT-DR IT(SSA Nos. 127 to 129/Ahd/2018 Assessment Years: 2011-12 to 2013-14 IT(SSA No. 139/Ahd/2018 Assessment Year: 2008-09 I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 2 Date of hearing : 13-04-2023 Date of pronouncement : 31-05-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- These three appeals are filed by the Revenue as against separate appellate orders dated 07-03-2018 & 08-03-2018 passed by the Commissioner of Income Tax (Appeals)-11, Ahmedabad arising out of the assessment orders passed under section 143(3) r.w.s. 153A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years (A.Ys) 2011-12 to 2013- 14. 2. Since identical Grounds of Appeal are raised by the Revenue (except change in figures) and common issues are involved in all these appeals, the same are disposed of by this common order. For better understanding, IT(SS)A No. 127/Ahd/2018 relating to Assessment Year 2011-12 is taken as the lead case. 3. The brief facts of the case is that the assessee is registered Non- Banking Financial Company engaged in the business of cheque discounting and the earning commission income therefrom. The assessee started the above business during the Financial Year 2010-11. The modus operandi of cheque discounting business of the assessee is that the persons (majority are smaller shroffs) having in their possession crossed cheques/duly signed form of transfer of funds through RTGS/NEFT of different third parties approached, the assessee company and hands over such I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 3 cheques/duly signed form of transfer of funds for depositing/crediting into the bank accounts of the assessee company. Against such deposits/credits, the said persons (smaller shroffs) give details of parties/instructions to the assessee company to issue cheques RTGS/NEFT/DDs in the name and/or sometimes cash. The assessee company after deducting its service charges/commission, issues cheques/RTGS/NEFT/DDs of such lesser amount in the name of such third parties. In the case of requirement of cash payment, the assessee company further discounts the cheques with other shroffs and instruct the party to obtain the cash payment from such shroffs. Thus the assessee company prepares the vouchers called as “discount voucher” in which it mentions the name of the party who came with cheques, details of cheques given by the said party, details of parties in whose name cheques have been issued /cash given and commission charged on such discounting. The assessee company used to issue cheques RTGS/NEFT/DDs only after the credit of funds of the third parties. Thus the assessee company does not require higher amount of capital to be employed for its business/cheques discounting activities. The assessee was showing commission of Rs. 50 per lakh for the above activities. 4. There was a search action u/s. 132 of the Act was carried out in Dahyabhai Thakkar group of cases on 16.01.2014. The assessee company is also covered under the search action. However during the course of search, no incriminating materials were found by the Revenue. The cash found during the course of search were properly explained by the assessee company and therefore the same were I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 4 not seized by the Revenue. The assessee was issued notices u/s. 153A dated 23.01.2015 to file the Return of Income. The assessee replied to treat the original Return of Income filed on 12.11.2011 admitting an income of Rs. 18,24,280/- to be the Return of Income in response to the above notices issued u/s. 153A of the Act. (i) Issue No. 1- Commission- Business Promotion Expenses: 4.1. During the course of search assessment proceedings, the assessee submitted, the commission income received by the assessee on cheques discounting in Ahmedabad Branch and Mumbai Branch as follows: Ahmedabad Mumbai Year Clg Amount Comm Payment Clg Amount Comm Payment 2010-11 17272042189 5823418.26 12607481682 9459416764 8449587.69 8050163503 2011-12 31709060775 11480851.73 22750259508 18120426945 9148647.58 14289090361 2012-13 29547773307 11149220 20603146075 15280597136 12118571.26 12846183367 2013-14 15878981623 6431356.63 11517475895.00 11666116324 13022741.69 11102796497 Total 94407857894 34884846.62 67478363160 54526557169 42739548.22 46288233729 Average Rate 51.69782577 Average Rate 92.33350417 4.2. On verification of the above, the assessee claimed majority expenses shown in the heading sales promotion expenses/business promotion expenses, commission expenses to various parties (smaller shroffs) as follows: AY Under head Amount (in Rs.) 2011-12 sales promotion 6778335 2012-13 business promotion 9021500 I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 5 2013-14 business promotion 10337555 2014-15 business promotion 9260000 Total 35397390 4.3. In order to verify the genuineness of the above expenses claimed by the assessee company, the Ld. A.O. issued summons u/s. 131 dated 26.02.2016 to various parties. Though summons were served, but no reply were filed by the third parties (smaller shroffs). The assessee further replied that as against summons issued to 72 parties, only in case of 17 parties the summons were returned unserved. Thus the identity and existence of the 55 parties were not in doubt. Mere non-filing of reply by such parties cannot be the base for any adverse inference as held by the Jurisdictional High Court in favour of the assessee. The assessee duly entered the commission amount in its books of account with details of name, address, PAN, Commission paid and amount of TDS deducted. The assessee also submitted confirmation from the third parties with contra account. Return of Income filed by various parties was produced before the A.O. However the Assessing Officer not satisfied with the explanation offered by the assessee and thereby disallowed the commission expenditure of Rs. 67,78,335/- in the hands of the assessee. (ii) Issue No. 2 - Addition on account of peak credit: 5. Shri Dahyabhai Thakkar director of the assessee company is in the business of cheque discounting and providing accommodation entries. He gives cheques / RTGS against cash and vice-versa. He makes cash payment to any person immediately upon receipt of I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 6 cheque. To fund this cash outflow, the only logical source is the cheque receipt from the entry seeker. But in many cases, it is seen that the bank accounts of Shri Dahyalal Thakkar and his concerns including the assessee company show huge balances. This clearly shows that corresponding cash payment of equivalent amount has already been made. Thus, any positive balance in the bank account simply means that cash to the extent of such positive balance has been funded by Shri Dahyalal Thakkar (director of the assessee company) out of his unaccounted cash sources. Hence a show cause notice was issued, the assessee was requested to furnish cash book cheques deposit account etc, and why not the peak credit of the bank account during any day of the year should not be added as the total income of the assessee. 5.1. The assessee replied that it is not in dispute that the funds deposited and withdrawn in the various bank accounts of the assessee company is only for cheques discounting business. In other words, the amount deposited and withdrawn did not belong to the assessee company. The same were been cross verified by the AO, while calling for the various information/data from the bankers of the assessee company. Thus estimation of income and peak theory both amounts to double taxation, as its amounts to tax the income as well as its application, which is not permissible under the law. Further the Revenue has not brought on record neither any assets, the source of which remains unexplained nor any seized material/records which establishes the suppression of income in the case of the assessee company and therefore any estimation of income not supported by corresponding assets is I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 7 nothing but to tax notional and hypothetical income, which is not permissible under the law. 5.2. However the above explanation of the assesse was not accepted, the Ld. A.O. determined the peak credit balance in the bank accounts of the assessee as unaccounted capital for the respective financial year as follows: Financial Years Date of peak credit balance in bank accounts Peak credit balance on that date Unaccounted capital for the financial year 2010-11 15-01-2011 14,51,98,434 14,51,98,434 2011-12 27-03-2012 23,05,93,728 8,49,15,715 2012-13 23-02-2013 26,15,05,625 3,09,11,897 2013-14 22-02-2014 19,48,73,015 Nil 6. Aggrieved against the additions, the assessee filed an appeal before the Commissioner of Income Tax (Appeals.). The Ld. CIT(A) partially deleted the additions on account of Sales Promotion Expenses and deleted the additions on account of Peak Credit observing as follows: Issue No. 1- Commission- Business Promotion Expenses: “.....5.1 The appellant contended that commission of Rs.67,77,200/- was paid to 26 persons during the year under consideration and details of all these persons were filed before the AO. TDS at the rate of 10% was made on such payments. All these persons are having PAN and confirmation from all of these 26 people were filed before the AO. All these persons are regularly assessed to income-tax and except one person i.e. Shrutiben Sanjaybhai Kothari, copy of ITRS of all these persons are filed before the AO. The appellant also stated that out of 26 persons, copy of bank account of 16 people were filed before the AO which shows the receipt of the amount paid by the appellant. With these contentions, the appellant contended that onus cast upon the assessee has already been discharged with enough evidences, therefore, additions made by the AO may be deleted. I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 8 5.2 Facts of the case as mentioned in the assessment order, submissions of the appellant and statements recorded during the course of search have been gone through carefully. It has been stated by Shri Dahyabhai Thakkar and Shri Pankaj Thakkar in their statements that they get work through small shroffs and for that purpose, they have to pay commission to these persons. The appellant filed confirmation from all these 26 persons before the AO. All these persons are having PAN and regularly assessed to income-tax. TDS at the rate of 10% was deducted and deposited with the government. Except one person, the appellant filed copy of ITR of all these persons. Out of these 26 persons, the appellant has filed copy of bank account of 16 people showing receipt of commission income from the appellant. All these payments were made by regular banking channels and there is no evidence to show that cash was paid/received by the appellant from these persons. There is no such findings in the assessment order about the same. These facts clearly proved that the appellant has discharged its onus to prove the genuineness of the expenditure. However, the appellant could not submit confirmation in respect of Rajendrakumar D. Agrawal, could not produce ITR of Shrutiben Sanjaybhai Kothari and Rajendrakumar D. Agrawal and bank statement of 10 persons as mentioned in the chart submitted by the appellant in the paper book Therefore, it is reasonable to disallow 5% of the expenditure incurred by the appellant as the appellant could not discharge full onus in respect of persons as mentioned above. Thus, the additions of Rs.3,38,860/- i.e. 5% of Rs.67,77,200/- are confirmed and remaining additions of Rs.64,38,340/- are deleted. This ground of appeal is partly allowed. Issue No. 2 - Addition on account of peak credit: 6.1. The appellant contended that it is engaged in the business of cheque discounting and only earned gross commission has been shown in the regular books of accounts and book results have been accepted by the AO. The books of accounts of the appellant have not been rejected by the AO which prove that the inward remittance i.e. fund deposited in the bank accounts are for cheque discounting The appellant also contended that during the course of search upon group concerns, the AO made additions by taking peak of the bank accounts and in some cases the AO did not make any additions on this ground. The appellant cited case of Pankaj Thakkar, HUF which is engaged in the identical activities, however, the AO did not make the additions by taking peak of the bank accounts in that case This shows that the stand taken by the AO is contradictory. The appellant also contended that all these bank accounts are disclosed in the books of accounts and there is no cash deposit found Additions by taking peak of the bank accounts cannot be made if there is no cash deposits in the bank account. As all these transactions are through cheques/RTGS/NEFT, all the beneficiaries of these transactions are identifiable. All the details of these beneficiaries are filed before the AO during the course of assessment proceedings. The appellant also I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 9 contended that during the course of search proceedings, not a single incriminating document was found which shows undisclosed income in the case of the appellant. With these contentions the appellant requested that the additions made by the AO may be deleted 6.2 Facts of the case, assessment order and submissions of the appellant has been carefully considered. It is found that the additions made by the AO by taking peak of these accounts is not found justified for the reason that all these bank accounts are disclosed to the department and income from these bank accounts had been taxed in the hands of the individual owners. Additions by taking peak of the bank accounts can be made when there is cash deposit and withdrawals and beneficiaries are not identifiable. But in these cases, there is no cash deposits have been found. All the credit entries in all these bank accounts are only through cheques/RTGS/NEFT. There was no documents found during the course of search or survey which indicates any deposits in cash in any form. The appellant has been found engaged purely in cheque discounting activities related to shroff business and there is no finding of the AO on the basis of any documentary evidence which prove that the appellant was involved in providing accommodation entries. As all these transactions in all these bank accounts are through cheques/RTGS/NEFT, the beneficiary of these transactions are identifiable and the appellant has submitted all necessary evidence during the course of assessment proceedings in 20 spiral books. In the assessment order, there is no finding that any entry of any of these bank accounts is found unidentifiable. It is also fact that additions in the hands of the appellant have been made by taking peak of the bank account, whereas, no such additions were made in several other group persons. This show the contradictory stand taken by the AO. Keeping in view the above discussion, it is found that the additions made by the AO by taking peak of these bank accounts are not justified. Hence, this deserves to be deleted. The appellant's case has been further found covered by the decision of Hon'ble High Court of Gujarat, Ahmedabad in the case of Shree Sidhnath Enterprise vis. ACIT (2016) 71 Taxmann.com 55. It is found that the facts of the appellant's case are even on stronger footing than the case decided by the Hon'ble High Court of Gujarat, Ahmedabad in the case of Shree Sidhnath Enterprise (supra). With these discussions and the binding judgment of Hon’ble High Court of Gujarat, Ahmedabad, the additions made by the AO on this issue are deleted. This ground of appeal is allowed.” 7. Aggrieved against the appellate orders, the Revenue is in appeal before us raising the following Grounds of Appeal: (1) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing relief to assessee of Rs. 64,38,340/- an issue of sales promotion expenses without appreciating that entities from the list submitted by assessee had not appeared before assessing officer u/s 131 of 1.T. Act', the names submitted by assessee were different from names I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 10 of shroffs/ intermediaries who approached assessee for cheque- discounting and seized vouchers of commission did not reflect names submitted by assessee (2) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing relief to assessee of Rs. 64,38,340/- on issue of sales promotion expenses without appreciating that mere deduction of Tax at Source does not make the transactions genuine the payment made to them was not proved for the purpose of business of assessee and the names were mostly of family members/HUFS which did not match with those of shroffs/intermediaries named in seized vouchers: (3) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.14,51,90,434/- without appreciating that the seized material and the statements recorded u/s 132(4) and 131(1A) showed that assessee carried out activities of providing accommodation entries under the garb of 'cheque discounting' by giving cheque in- lieu of cash and vice-versa & hence the entire credits in accounts were liable to be taxed in hands of assessee in absence of identification of all beneficiaries of bank entries by assessee. (4) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing appeal of assessee on the issue of addition in his hands of peak credits of Rs. 14,51,98,434/- without appreciating that even if the bank entries of beneficiaries in case of accommodation entry provider have been identified, the peak credit is to be added as held in D.K. Garg [2017] 84 taxmann.com 257 (Delhi). (5) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have dismissed appeal of assessee on the issue of addition in his hands of peak credits of Rs. 14,51,98,434/- based upon evidences found from & statements recorded in searches in case of beneficiaries e.g. Amrapali Group, B.D. Patel. (6) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. (7) It is, therefore, prayed that the order of the Ld. CIT (A) be set aside and that of the A.O. be restored to the above extent. 8. The Ld. CIT-DR Shri Sudhendu Das appearing for the Revenue in support of its Ground Nos. 1 & 2 (Issue No. 1- Commission- Business Promotion Expenses) submitted that the Ld. CIT(A) erred in allowing business sales promotion expenses of Rs. 64,38,340/- without appreciating that the persons who received the commission I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 11 had not appeared before the Assessing Officer in response to the notices issued u/s. 131, the names submitted by the assessee were different from the names of Shroffs/intermediaries who approached the assessee for cheque discounting business. Similarly, seized vouchers of commission did not reflect the names as submitted by the assessee. Just because TDS is being made on the above commission income does not make the transaction genuine. Further the names shown by the assessee were mostly of family members/HUFs which did not match with those of shroffs/intermediaries named in the seized vouchers. Thus the partial relief given by the Ld. CIT(A) is not correct in law and the entire disallowance made by the Assessing Officer is to be sustained. 9. Per contra, the Ld. Senior Counsel Shri S.N. Soparkar appearing for the assessee submitted before us three volumes of Paper Books running to 1525 pages. The Ld. Senior Counsel drawn our attention to page no. 970 of the Paper Book which contained the reply filed by the assessee in response to the show cause notice issued u/s. 142(1) of the Act, wherein the assessee produced summary chart of persons to whom commission is paid, name, address, PAN, commission paid and amounts of TDS. The assessee also produced confirmation of the parties along with contra account before the Ld. A.O as Annexure-1. Further our attention was drawn to Page No. 1361 of the Paper Book, wherein statement also shows commission income earned from the parties, whose reference has been given vis-a-vis, the commission paid by the assessee company which mentions the short (code) name of the I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 12 parties and also further statement showing full name and address of the said parties along with contact number as Annexure-2. Though the above details have been furnished before the Ld. A.O., he has not made any verification of the parties, but made addition in the hands of the assessee. The Ld. Senior Counsel further submitted that there were no cash deposits in the above accounts. All banking transactions are correspondingly reflected in the books of accounts maintained by the assessee and audited by qualified Chartered Accountants. 9.1. Further Ld. Senior Counsel drawn our attention to the Jurisdictional High Court judgment in the case of Shree Sidhnath Enterprise Vs. ACIT reported in [2016] 71 taxmann.com 55 (Guj.) wherein it is held that where business of the assessee was to receive cash and issue cheques in lieu of commission. In absence of any material to show that cash travelled back to the assessee, cash amount would not be undisclosed income of the assessee. Resultantly, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment. Therefore the re-assessment is bad in law. 9.2. Similarly, the Bombay High Court High Court in the case of PCIT vs. Alag Securities (P.) Ltd. reported in [2020] 117 taxmann.com 292 (Bom.) wherein the Hon’ble High Court held that where assessee accepted cash from customers/beneficiaries and in lieu thereof issued them cheques of slightly lower amount after charging its commission, wherein provisions of section 68 were not applicable and the entire amount of cash received from I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 13 customers/beneficiaries would not be added to assessee’s total income. 9.3. Thus the Ld. Senior Counsel Shri S.N. Soparkar submitted the disallowance made by the Assessing Officer is not justifiable, when the assessee has discharged its onus and proved the genuineness of the expenditure. Thus the Ground raised by the Revenue is liable to be dismissed. 10. We have given our thoughtful consideration and perused the materials available on record and voluminous Paper Books filed by the assessee. It is an admitted fact by the A.O. that the assessee is engaged in the business of check discounting. The contention of the assessee is that the parties to whom commission has been paid are very much existing parties, regularly assessed to tax and the assessee has deducted TDS on such payments, filed copies of ITR and confirmation from some parties, which was not accepted by the A.O. On verification of Annexure A-1, the A.O. found that the parties are mainly family members-HUF or lady members. Out of 72 parties where summons have been issued, 17 cases were returned unserved. The remaining parties also did not provide the full required details, therefore the A.O. disallowed the commission expenses and added to the total income of the assessee. 10.1. However the A.O. failed to consider that there was no cash deposits made in the bank accounts of the assessee. The bank accounts were credited with cheques/RTGS and thereafter travelled by way of cheques/RTGS to third parties on the instructions of the Shroff’s/intermediaries. Even during the course of search in the I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 14 business premises of the assessee at Mumbai Office, cash of Rs. 2,10,410/- was found but the same was not seized by the department on the explanations offered by the assessee. Similarly, in the case of the Ahmedabad Office, cash of Rs. 18,09,900/- was found. Out of that Rs. 17,50,000/- was seized by the department on the disclosure made by Pankaj Thakkar in his individual capacity, however no addition is made by the Assessing Officer in the hand of the assessee company. 10.2. We see on record that in response to the 153A notices issued by the A.O., the assessee offered the same income as filed by the assessee in the original Return of Income filed u/s. 139(1) of the Act. Further the A.O. has not made any addition on account of assets found or seized during the course search, survey proceedings nor any assets have been brought on record from any materials seized during the course of search/survey proceedings. Thus the above facts clearly justifies that the additions made by the A.O. represents only notional and hypothetical income and are not based on Principle of Real Income Theory. This the above Shroffs business has been considered by the Jurisdictional High Court in the case of Shree Sidhnath Enterprise (cited supra) wherein the Hon’ble High Court held that that it is not the case of the revenue that the beneficiary after encashing such amount had returned the same to the assessee nor has any material been unearthed in this regard. It is the business of the assessee to receive cash and issue cheques in lieu thereof for which the assessee charges its commission. In the above circumstances and in the absence of any material to show that the cash in respect of which the cheque had I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 15 been issued travelled back to the petitioner, one fails to understand as to how such amount may be said to be the undisclosed income of the petitioner. Therefore in the opinion of the High Court, the Assessing Officer could not have formed the belief that the income chargeable to tax has escaped assessment and thereby quashed the reassessment proceedings. The relevant portion of the judgment reads as follows: “....14. It may be noted that in the affidavit-in-reply filed by the respondent, it is the case of the respondent that the petitioner is engaged in the business of cheque discounting and shroff. The firm charges commission for cheque discounting facility provided to its customers. The firm receives cash from the beneficiary and gives cheque in lieu thereof. The cheque is drawn in favour of the beneficiary. For arranging this transaction, the firm charges commission. Reference has been made in the reply to instances where the petitioner has received cash from parties and has issued cheques in lieu thereof which were deposited by such parties in its account and the cheques were cleared at Rajkot. Based on this, the Assessing Officer had stated that she had reason to believe that income chargeable to tax has escaped assessment on account of the failure on the part of the petitioner to disclose fully and truly all material facts. Thus, while it is the case of the respondent that it is the business of the petitioner to accept cash and issue cheques in lieu thereof, it is also the case of the respondent on the basis of the instances cited in the affidavit, that the cash deposits received by the petitioner are in the nature of undisclosed income, despite it being the specific case of the respondent that the petitioner had issued cheques in lieu of cash received by it which had been encashed by the concerned party by depositing the same in its bank account. It may be noted that it is not the case of the respondent that the beneficiary after encashing such amount had returned the same to the petitioner nor has any material been unearthed in this regard. Insofar as the petitioner is considered, as stated in the affidavit-in-reply, it is its business to receive cash and issue cheques in lieu thereof for which it charges commission. Under the circumstances, in the absence of any material to show that the cash in respect of which the cheque had been issued travelled back to the petitioner, one fails to understand as to how such amount may be said to be the undisclosed income of the petitioner. Under the circumstances, on the facts as recorded in the reasons as well as in the affidavit- in-reply, in the opinion of this court, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment.” I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 16 10.3. Similarly Bombay High Court in the case of Alag Securities (P.) Ltd. held as follows: “....20. We are in agreement with the view taken by the Tribunal. In a case of this nature Section 68 of the Act would not be attracted. Section 68 would come into play when any sum is found credited in the books of the assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by the assessee is not in the opinion of the Assessing Officer satisfactory. In such a situation the sum so credited may be charged to income tax as the income of the assessee of the relevant previous year. But that is not the position here. It has been the consistent stand of the assessee which has been accepted by the First Appellate Authority and affirmed by the Tribunal that the business of the assessee centered around customers/beneficiaries making deposits in cash amounts and in lieu thereof taking cheques from the assessee for amounts slightly lesser than the quantum of deposits, the difference representing the commission realized by the assessee. The cash amounts deposited by the customers i.e., the beneficiaries had been accounted for in the assessment orders of these beneficiaries. Therefore, question of adding such cash credits to the income of the assessee, more so when the assessee was only concerned with the commission earned on providing accommodation entries does not arise. 21. Coming to the percentage of commission, Tribunal had already held 0.1% commission in similar type of transactions to be a reasonable percentage of commission. Therefore Tribunal accepted the percentage of commission at 0.15% disclosed by the assessee itself. This finding is a plausible one and it cannot be said that the rate of commission was arrived at in an arbitrary manner. The same does not suffer from any error or infirmity to warrant interference, that too, under section 260A of the Act.” 10.4. Thus by going through the above judgments, we note that the Hon’ble High Courts even in case of cash deposits made into the bank accounts of the assessee and thereafter issued cheques in lieu, thereof, it was held that the provisions of Section 68 would not be applicable. Whereas in the assessee’s case are in a better footing namely deposits were made in the bank accounts by cheques/RTGS/NEFT. All the beneficiary of these transactions are identifiable and appropriate TDS is also made by the assessee. Further the assessee have been found engaged in purely in cheque I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 17 discounting activities related to Shroffs business and there is no finding by the A.O. based on any documentary evidences that the assessee is involved in providing accommodation entries. Therefore we have no hesitation in confirming the order of Ld. CIT(A) who sustained the addition of Rs. 3,38,860/- being 5% of the commission income as not proved and deleting the remaining balance of Rs. 64,38,340/-. Thus the ground nos. 1 & 2 raised by the Revenue are devoid of merits and the same are dismissed. 11. The Ld. CIT-DR in support of ground nos. 3 to 5 (issue no 2, addition on account of peak credit) submitted that the Ld. CIT(A) erred in deleting the peak credit of Rs. 14,51,98,434/-. The Ld. D.R. submitted that the CIT(A) failed to consider the statements recorded of the Director of the assessee company namely Dhiraj S Patel and Ashok A Thakkar and Dahyalal Thakkar. Therefore the A.O. was correct in estimating the unaccounted capital deployed by the assessee in the bank account by making peak credit as the addition is therefore be restored. 12. Per contra, the Ld. Senior Counsel submitted that it is undisputed by the Assessing Officer that the assessee is engaged in the Shorff business of cheque discounting and only earned gross commission income which is recorded in the books of accounts. The A.O. has not rejected the audited books of accounts. Similar group of cases were search action is done, the concerned A.O. did not make any addition on taking peak credit of the bank accounts of the Pankaj Thakkar HUF who is engaged in similar Shroffs business. More particularly, the Assessing Officer is not correct in I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 18 invoking peak credit when there is no cash deposit in the bank accounts of the assessee. There is no incriminating document found which shows that undisclosed income in the case of the assessee. Therefore the Ld. CIT(A) is correct in deleting the peak credit additions made in the hands of the assessee, which does not require any interference. Thus the grounds raised by the Revenue are liable to be dismissed. 13. We have given our thoughtful consideration and perused the materials available on record. We do not find any infirmity in the order passed by the Ld. CIT(A) and the Ld. CIT-DR could not produce before us that there were cash deposits made in the bank accounts of the assessee which warranted to invoke Peak Credit Theory. It is also observed by Ld. CIT(A) that on similar search action in the case of other assessees, the Assessing Officer has not adopted peak credit of their bank accounts. Therefore the findings arrived by Ld. CIT(A) does not require any interference. Thus the ground nos. 3 to 5 are liable to be dismissed. 14. Ground nos. 6 & 7 are general prayer in nature. On account of dismissal of ground nos. 1 to 5, no separate adjudication required for the above ground nos. 6 & 7. Thus the same dismissed. 15. In the result, the appeal filed by the Revenue is hereby dismissed. IT(SS)A No. 128 & 129/Ahd/2018 relating to Assessment Years 2012-13 & 2013-14 I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 19 16. The facts, issues and even Grounds of Appeal in these appeals are identical except change figures/disallowances. Respectfully following the ratio of the judgment in IT(SS)A No. 127/Ahd/2018 for the Assessment Year 2011-12, the same is applicable mutatis mutandis to the present Assessment Years 2012-13 & 2013-14. Therefore the grounds raised by the Revenue are hereby dismissed. 17. Thus the appeal filed by the Revenue in IT(SS)A Nos. 128 & 129/Ahd/2018 are also dismissed. IT(SS)A No. 139/Ahd/2018 relating to Assessment Year 2008- 09 in the case of Shri Dahyabhai I. Thakkar: 18. The Grounds of Appeal raised by the Revenue reads as under: (1) On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition made in hands of assessee to the extent of Rs. 68,11,907/- on account of commission of benami entities without appreciating that the persons who were mere name-lenders were persons of no means, had no license from regulators to operate so-called 'cheque discounting' business and had admittedly been employees of Jalaram Finvest Ltd (which was controlled by assessee along with his nephew Pankaj Thakkar as per his own admission under oath dated 19/02/2014 & other dates). (2) On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition made in hands of assessee to the extent of Rs. 68,11,907/- on account of commission of benami entities without appreciating that the basis of benami activities is to enjoy the use of assets without registered ownership and hence it was not imperative that any corresponding assets had to be traced in the name of assessee. (3) On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition made in hands of assessee to the extent of Rs. 68,11,907/- on account of commission of benami entities without appreciating that none of these entities maintained books of accounts, had opened most of their bank accounts in Gujarat Mercantile Cooperative bank (GMCB) of which assessee is managing director for the past two years and had been director earlier for six years and that KYC documents of bank accounts at GMCB proved that introducers were relatives and other entities controlled by assessee. I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 20 (4) On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition made in hands of assessee to the extent of Rs. 68,11,907/- on account of commission of benami entities without appreciating that name-lenders of these accounts were not even aware about which address they had given for opening of these accounts at GMCB and did not even remember how many and which bank accounts they had in their names. (5) On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition made in hands of assessee to the extent of Rs. 68,11,907/- on account of commission of benami entities without appreciating that none of the statements recorded under oath and referred to assessment order were ever retracted. (6) On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in allowing appeal of assessee on issue of benami entities without appreciating that assessee had himself submitted & explained various vouchers pertaining to his controlled entities e.g. Shree Hari Enterprise (which were also seized from premises of Jalaram Finvest Ltd at 29/3, Kabutarkhana, Kalupur, Ahmedabad) and these vouchers contained names of persons, details of RTGS/Cheques etc for the accommodation entries, and that these vouchers could not have been produced and explained by assessee if he were not the controlling person behind such entities. (7) On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition of Rs.6,45,20,232/- without appreciating that the seized material and the statements recorded u/s 132(4) and 131(1A) showed that assessee carried out activities of providing accommodation entries under the garb of 'cheque discounting by giving cheque in lieu of cash and vice-versa & hence the entire credits in accounts were liable to be taxed in hands of assessee in absence of identification of bank entries by assessee. (8) On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in allowing appeal of the assessee on the issue of addition in his hands of peak credit of Rs. 6,45,20,232/- without appreciating that even if the bank entries of beneficiaries in case accommodation entry provider have been identified, the peak credit is to be added as held in D.K. Garg [2017] 84 taxmann.com 257 (Delhi). (9) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. (10) It is, therefore, prayed that the order of the Ld. CIT (A) be set aside and that of the A.O. be restored to the above extent. I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 21 19. In this appeal, the assessee is the Director of M/s. Jalaram Finvest Ltd. The additions made are on account of commission expenses of Rs. 68,11,907/- and peak credit of Rs. 6,45,20,232/-, which are similar to that of the company. Thus the conclusion that we arrived in IT(SS)A No. 127/Ahd/2018 are squarely applicable to the present case also, when there is no change in facts. 20. That apart Additional findings of the Revenue in Ground Nos. 4, 5 & 6 are that the commission earned by the assessee from benami entities. On this count, the findings of the Ld. CIT(A) are as follows: “...5.2 The facts of the case, assessment order and submission of the appellant have been carefully considered. It is a fact that the various concerns mentioned by the AO in the assessment order have been found working from the same building but from different premises. Some of the concerns are owned by employees of Jalaram Finvest Ltd. The appellant has not been found owner of any concerns. No one has been found as employee of the appellant. During the course of search, not a single document was found which contain any details to show that the appellant is owner of these concerns. The bank accounts of these concerns were opened in the name of owner of these concerns and they have been found maintaining these bank accounts regularly. These persons are regularly filing income tax returns and these have been accepted for years by the department. Even after the search & survey proceedings, the owner of these concerns have filed return of income with the department and their own name showing the business of these concerns in their names. The ADIT(Inv) recorded statement of six persons and all these persons have admitted on oath that they are the owner of these concerns shown in their names and affidavits were filed before the AO. It is also a fact that no unaccounted income or unexplained investment was found or seized during the course of search & survey in the name of the appellant or these concerns. Even after considering all these concerns as appellant's concerns, the AO estimated the commission income of all these concerns in the hands of the appellant. Whereas income of all these concerns have been returned by the respective owners of these concerns in their return of income. The addition is made only by estimating higher rate of commission income. These facts prove beyond doubt that the appellant is not the owner of any of these concerns, therefore, findings of the AO that the appellant is owner of these concerns, is not justified and hence, it is overruled. The Hon'ble Supreme Court in the case of Bhim Singh vs Kan I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 22 Singh reported in AIR 1980 SC 727 summarized the principles governing the determination of the question whether a transfer is a benami transaction or not as under- 1. The burden of showing that a transfer is a benami transaction lies on the person who asserts that it is such a transaction; 2. If it is proved that the purchase money came from a person other than the person in whose favour the property is transferred, the purchase is prima facie assumed to be for the benefit of the person who supplied the purchase money, unless there is evidence to the contrary, 3. The true character of the transaction is governed by the intention of the person who has contributed the purchase money, and 4. The question as to what the intention was has to be decided on the basis of the surrounding circumstances, the relationship of the parties, the motives governing their action in bringing about the transaction and their subsequent conduct, etc. In the case of Jaydayal Poddar V. Mst. Bibi Hazra AIT 1974 Supreme Court 171 it was held that "it is well settled that the burden of proving that a particular sale is benami and the apparent purchaser is not the real owner, always rest on the persons asserting it to be so. This burden has to br strictly discharged by adducing legal evidence of definite character which would either directly prove the fact of benami or establish circumstances unerringly and reasonably raising an inference of that fact. The essence of a benami is the intention of the party or parties concerned, and not unoften such intention is shrouded in a thick veil which cannot be easily pierced through. But such difficulties do not relieve the person asserting the transaction to be benami of any part of-- the serious onus that rests on him, nor justify the acceptance of mere conjectures or surmises, as a substitute for proof.... Though the question, whether a particular sale is benami or not, is largely one of fact, and for determining this question, no absolute formulae or acid test, uniformly applicable in all situation, can be laid down, yet in weighing the probabilities and for gathering the relevant indications, the courts are usually guided by these circumstances: (1) the source from which the purchase money came; (2) the nature possession of the property, after the purchase; (3) motive, if any, for giving the transaction a benami colour; (4) the position of the parties and the relationship, if any, between the claimant and the alleged benamidar; (S) the custody of the title deeds after the sale, and (6) the conduct of the parties concerned in dealing with the property after the sale. The above indications are not exhaustive and their efficacy varies according to the facts of each case. Nevertheless No. 1. Viz, the source whence the purchase money came, is by far the most important test for determining whether the sale standing in the name of one person, is in reality for the benefit of another "P. 172) I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 23 The Hon'ble High Court of Gujarat, Ahmedabad in the case of CIT v. Chandrakumar Jethmal Kochar(2015)230 Taxman78(Guj.)(High Court) held as under: "S. 143(3): Assessment-Additions to income-Benami transactions- Statement on oath-retraction Addition merely on the basis of statement was held to be not justified. [S. 132, 132(4)] During search conducted at assessee's business premises, his statement was recorded under section 132(4) wherein he admitted that few benami Concerns were being run by assessee in name of his employees, thereafter, during assessment proceeding, he retracted from said admission contending that it was made at mid night under pressure and coercion. Assessing Officer, however, made addition on basis of disclosure made by assessee in statement recorded under section 132(4).Tribunal deleted the addition. On appeal by revenue, dismissing the appeal the court held that; merely on basis of admission that few benami concerns were being run by assessee, assessee could not be subjected to such addition when despite retraction revenue could not furnish any corroborative evidence in support of such admission." In the case of ITO v. Ghanshyambhai R. Thakkar [1996] 88 Taxman 65(AHD) (MAG.) it has been held as under:- "Section 143 of the Income-tax Act, 1961-Assessment-Benami transactions Assessment Year 1988-89-Based on material collected during survey under section 133(1A) and statement of -- assessee recorded under section 131, Assessing officer concluded that proprietary business named Rupa' which was earlier carried on by firm in which assessee was partner, was in name of assessee on paper only and it really belonged to her husband and hence assessed income of 'Rupa', in hands of her husband on substantive basis and completed assessment of assessee on protective basis- Whether, where there was no material on record to show that partnership firm right from assessment years 1982-83 to 1985-86 had been benami of assessee's husband or that she had been a partner as benamidar of her husband or that she had made investment in firm for and on behalf of her husband, and there was no such material to show benami nature of business when she became its proprietor, mere fact that business was being conducted from same premises in which her husband was carrying on his independent business and she was helping her in conduct of business of Rupa' would not prove that assessee was not owner of said business- Held, yes - Whether, therefore, clubbing of income of business named 'Rupa' in hands of assessee's husband was not justified and should be assessed in hands of assessee on substantive basis- Held, yes. Whether, when "Rupa' became proprietary business of assessee during assessment years 1986-87 and 1987-88 and she had been accordingly assessed and certificates from industries department and sales tax department I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 24 proved that assessee was proprietor of 'Rupa', impugned order of AO was unjustified- Held, yes" 5.3 Keeping in view the factual discussion that the owner of these concerns have admitted that they are doing business of cheque discounting in their names and in the statement recorded on oath they stated that they are maintaining these accounts, filing their income tax returns showing the income of commission of these transactions in the return of income, acceptance of these returns by the department for years together and no monetary benefit has been found in the name of the appellant, it is justified to hold that these are not benami concerns of the appellant and the AO was not justified in holding the same. On going through the several case laws of Hon'ble Supreme Court and Hon'ble High Court of Gujarat, Ahmedabad, the appellant's case is clearly covered and even on stronger footing than these case laws. Therefore, considering all these concerns in the name of the appellant by the AO is not found legally justified and the findings of the AO is over- ruled. This ground of appeal is allowed.” 21. The Ld. D.R. appearing for the Revenue could not place on record any contra facts of the findings of the Ld. CIT(A). When all the concerns have filed their Return of Income and assessed to tax, the question of invoking Benami provision in not justifiable. Therefore we have no hesitation in confirming the order passed by the Ld. CIT(A). Thus the present appeal filed by the Revenue is hereby dismissed. 22. In the result, the appeal filed by the Revenue in IT(SS)A No. 139/Ahd/2018 is here dismissed. Order pronounced in the open court on 31-05-2023 Sd/- SD/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 31/05/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- I.T.(SS)A Nos. 127 to 129/Ahd/2018 A.Ys. 2011-12 to 2013-14 Page No DCIT Vs. M/s. Jalaram Finvest Ltd. & Ors. 25 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद
