Anand Kumar Sharma, Howrah V. DCIT,CC-2(1),Kolkata, Kolkata

ITSSA 171/KOL/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8255 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-03-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 29-01-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 16-10-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Question of law; Accommodation entries; Capital Gains
• Section: 69; 132; 133A; 153A; 250; 153C

Judgement Text

| आयकर अपीलीय अिधकरण ᭠यायपीठ, कोलकाता | IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE DR. MANISH BORAD, HON’BLE ACCOUNTANT MEMBER & SHRI ANIKESH BANERJEE, HON’BLE JUDICIAL MEMBER I.T(SS)A. Nos. 169 to 172/Kol/2023 Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma 50/21, Shree Arvind Road Salkia Howrah - 711106 [PAN: AVMPS0367F] Vs Deputy Commissioner of Income Tax, Central Circle – 2(1), Kolkata अपीलाथᱮ/ (Appellant) ᮧ᭜ यथᱮ/ (Respondent) Assessee by : Shri Sushil Kumar Pransukha, FCA Revenue by : Shri Rakesh Kumar Das, CIT, D/R सुनवाई कᳱ तारीख/Date of Hearing : 30/01/2024 घोषणा कᳱ तारीख /Date of Pronouncement: 14/03/2024 आदेश/O R D E R PER BENCH : The above captioned appeals are directed at the instance of the assessee against the separate orders of the learned Commissioner of Income Tax (Appeals) - 20, Kolkata, (hereinafter the “ld. CIT(A)”) even dt. 24/08/2023, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Years 2010-11 to 2014-15. 2. The assessee has raised the following grounds of appeal:- IT(SS)A No. 169/Kol/2023; Assessment Year 2010-11:- “1. That under the facts and circumstances of the case, the Ld. CIT(A) erred in confirming the addition made by the AO by estimating the commission income earned by the assessee at the rate of 0.60% on the accommodation entry amounting to Rs.42.2 Crore provided by him and thereby making addition of Rs.25,32,000/- as against the 2 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma commission income of Rs.6,33,000/- at the rate of 0.15% offered by the assessee. The addition amounting to Rs.18,99,000/- is, therefore, unjustified and needs to be deleted. 2. The assessee craves leave to add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing.” IT(SS)A No. 170/Kol/2023; Assessment Year 2011-12 :- “1. That under the facts and circumstances of the case, the Ld. CIT(A) erred in confirming the addition made by the AO by estimating the commission income earned by the assessee at the rate of 0.60% on the accommodation entry amounting to Rs.1721.77 Crore provided by him and thereby making addition of Rs.10,33,06,200/- as against the commission income of Rs.2,58,26,550/- at the rate of 0.15% offered by the assessee. The addition amounting to Rs.7,74,79,650/- is, therefore, unjustified and needs to be deleted. 2. The assessee craves leave to add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing.” IT(SS)A No. 171/Kol/2023; Assessment Year 2012-13 :- “1. That under the facts and circumstances of the case, the Ld. CIT(A) erred in confirming the addition made by the AO by estimating the commission income earned by the assessee at the rate of 0.60% on the accommodation entry amounting to Rs.883..57 Crore provided by him and thereby making addition of Rs.5,30,14,200/- as against the commission income of Rs.1,32,53,550/- at the rate of 0.15% offered by the assessee. The addition amounting to Rs.3,97,60,650/- is, therefore, unjustified and needs to be deleted. 2. The assessee craves leave to add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing.” 3 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma The assessee has also raised the following additional grounds of appeal in IT(SS)A No. 171/Kol/2023; Assessment Year 2012-13, which reads as under:- “(i) Assessing officer made addition of Rs 7,79,88,144/- u/s 69 in the hands of assesse which are sum total of bank balances of 11 entities whose premises were searched on 25.4.11 in spite of the fact all bank accounts were disclosed and recorded in books of account of 11 entities and CIT(A) failed to take note of this in the appellate order in spite of specific grounds taken before him. (ii) Ld CIT(A) failed in appreciating that bank balances of 11 entities do not belong to assesse and in any case if it was so , action could have been taken u/s 153C against the appellant. (iii) Ld CIT(A) has failed to appreciate that AO's action of charging .60p on all the transaction amount is without any corroborative evidence to justify the huge amount of commission income as against .10p-.15p admitted by assesse u/s 132(4) which is also supported by admitted commission income of Rs 6.25 cr. (iv) That in any case without prejudice bank balances of 11 different entities amounting to Rs 7,79,88,144 can not be doubly taxed as they represent commission income only which have been already offered as commission income in different assessment years.” IT(SS)A No. 172/Kol/2023; Assessment Year 2013-14 :- “1. That under the facts and circumstances of the case, the Ld. CIT(A) erred in confirming the addition made by the AO by estimating the commission income earned by the assessee at the rate of 0.60% on the accommodation entry amounting to Rs.1442..38 Crore provided by him and thereby making addition of Rs.8,65,42,800/- as against the commission income of Rs.2,16,35,700/- at the rate of 0.15% offered by the assessee. The addition amounting to Rs.6,49,07,100/- is, therefore, unjustified and needs to be deleted. 4 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma 2. The assessee craves leave to add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing.” 3. As the issues arising in I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14, are mostly common except for variance in quantum, the same were heard together and are being disposed off by way of this common order. 4. The first common issue for our consideration is estimation of commission income on the turnover of accommodation entry business carried out by the assessee. Facts in brief are that the assessee is an individual and subjected to search u/s 132 as well as survey u/s 133A of the Act on 02/07/2013. Assessment years 2010-11 to 2013-14 which are under consideration before us were part of the search proceedings and the assessment proceedings were carried out u/s 153A/143(3) of the Act. Admittedly, the assessee is in the business of providing accommodation entry and earns commission income from providing such accommodation entries. This fact has not been disputed by the revenue authorities. The assessee provides accommodation entries broadly of three categories, namely, sale of companies/sale of shares, turnover entry and loan entry. During the course of such proceedings various details were found which have been consolidated and tabulated and the total amount of turnover of the accommodation entry carried out by the assessee has been arrived at. The ld. Assessing Officer based on the previous search carried out on 23/02/2006, wherein also the assessee agreed to have been engaged in the entry providing business and commission rate of 0.60% was applied, took the same rate of commission and applied it on the turnover carried out by the assessee for providing accommodation entries and made 5 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma addition in the hands of the assessee after reducing the rate of commission income disclosed by the assessee in its income tax return. The assessee challenged the addition for commission income as well as the wrong calculation of total turnover carried out by the assessee. When the details were called for by the ld. CIT(A), he found that the total volume of the turnover taken up by the ld. Assessing Officer spreading over for Assessment Year 2010-11 to 2013-14 has been wrongly taken at Rs.7646.78 Crores whereas the correct volume of turnover is Rs.4082.92 Crores (Assessment Year 2010-11 -Rs.42.2 Crore, Assessment Year 2011-12 - Rs.1721.77 Crore, Assessment Year 2012-13 - Rs.883..57 Crore, Assessment Year 2013-14 - Rs.1442.38 Crore). 4.1. The ld. CIT(A) came to this finding on the basis of the remand report received from the ld. Assessing Officer. However, the rate of commission income @ 0.60% was confirmed even when the assessee made detailed submission that the commission earned by him is not exceeding 0.15% and on that basis itself the assessee has admitted undisclosed income of Rs.6.25 Crores. 5. Aggrieved the assessee is now in appeal before this Tribunal challenging the rate of commission confirmed by the ld. CIT(A). 6. The ld. Counsel for the assessee submitted that there is no evidence found during the course of search which could prove that the assessee earned 0.60% commission. The assessee has suo moto accepted that he is engaged in the business of providing accommodation entries and also disclosed commission income of Rs.6.25 Crores calculated @ 0.15% of the total turnover executed through the assessee. It was further submitted that the assessee has 6 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma not retracted from his statement. He also submitted that the rate of commission depends on the scale of business which varies from year to year. He submitted that subsequently in another search in the year 2019, while assessing the commission income in the case of assessee for Assessment Year 2014-15, the ld. Assessing Officer has himself taken the rate of 1/3 rd of 0.10%. He submitted that the commission income was earned @ 0.10% but it was shared by 3 persons since the transactions were huge and assessee along with two other entry providers completed the transaction. He further, referring to the judgement of the Hon’ble Bombay High Court in the case of Pr. Commissioner Of Income Tax-14 vs M/S Goldstar Finvest Pvt. Ltd. in INCOME TAX APPEAL NO.1729 OF 2016, judgment dt. 1 st April, 2019, submitted that the Hon’ble Court confirmed the finding of Hon’ble Tribunal accepting the commission income from carrying out similar type of business @ 0.15%. He thus prayed that the estimation of commission income should be restricted to @0.15%. 6.1. On the other hand, the ld. D/R vehemently argued supporting the orders of the lower authorities and submitted that the assessee has himself accepted the rate of commission @0.60% in the past and since the nature of business is same and assessee had not disclosed the commission income in its regular income tax returns, on the undisclosed transaction, the ld. Assessing Officer has fairly estimated the commission income @ 0.60%. 7. We have heard rival contentions and perused the material placed before us. The issue for our consideration is as to whether the ld. CIT(A) was justified in confirming the action of the Assessing Officer of estimating commission income @ 0.60% on the turnover of 7 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma accommodation entries provided by the assessee without considering the statement of the assessee that the commission income earned by him is not more than 0.15%. 7.1. We notice that the assessee had offered Rs.6.25 Crores as undisclosed income from commission earned from providing accommodation entries spread over various assessment years which were subjected to assessment proceedings in consequence to the search action carried out u/s 132 of the Act on 02/07/2013. Undisputedly there is no reference to any incriminating material which can indicate that the assessee is charging 0.60% as commission for providing accommodation entries. The basis taken up by the ld. Assessing Officer is the rate of commission income applied for estimating the income of assessee for assessment years which were assessed in consequence to earlier search carried out on the assessee on 23/03/2006. In the assessment u/s 153A of the Act, completed on 31/12/2007, commission income was estimated at 0.60%. We notice that the assessment order referred by the ld. Assessing Officer was completed on 31/12/2007 and almost after 7 years, the assessment proceedings in question have taken place. It is also not in dispute that the magnitude of the accommodation entry providing business has also increased manifold. It is an established fact that if the turnover increases, the rate of profit, which in this case is commission, declines. The ld. Counsel for the assessee referred to the finding of the ld. Assessing Officer referring to the previous search carried out on 23/03/2006 has pleaded that there were another search in 2019 and the revenue authorities have themselves accepted the commission income for Assessment Year 2014-15 on same transactions of huge 8 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma volume at 0.03% i.e., 1/3 rd of 0.1% as the assessee along with two other commission agents were involved in carrying out the accommodation entries. 7.1.1. We further notice that the Hon’ble Bombay High Court in the case of M/S Goldstar Finvest Pvt. Ltd. (supra), dealing with the similar issue of estimation of income of entry provider confirmed the view of the Tribunal estimating the rate of commission income @0.15%. The relevant finding of the Hon’ble Court is reproduced below:- “2. It is undisputed that under similar circumstances a similar question in case of another assessee in similar business came up for consideration in Income Tax Appeal No.54/17 and connected Appeals. Revenue's Appeals were dismissed on 25/03/2019 making following observations; "3. The Assessing Officer adopted the rate of commission of 2% on the total turnover, which order the CIT (A) confirmed. In further Appeal by the Assessee, the Tribunal reduced the rate of commission to 0.15%. The Tribunal referred to its own decision in case of the Assessee's sister concern and held that the appropriate rate of commission should be 0.15% which is also admitted by the Assessee during search. 4. In our opinion, the entire issue is based on facts. The estimation of the rate of commission of the Assesee would always be subject-matter of some guesswork. No precise formula could be applied. 3/3 07-ITXA-1729-16.odt The Tribunal having taken into consideration the relevant factors, has arrived at a certain percentage of commission that any such kind of activities could be expected to be derived from. This does not give rise to any substantial question of law. 5. The Revenue also disputes the expenditure allowed by the Tribunal on such activities. Here also, for the same reasons cited above, in our opinion, no question of law arises. 6. In the result, the Appeals are dismissed." 3. We are conscious that unlike in case No.54/17 and connected Appeals, in the present case, the Assessing Officer had added the entire sum not limiting to the commission charged. However, CIT (A) had applied the percentage of commission deleting the rest of the additions. 4. In the result, Income Tax Appeal is dismissed.” 9 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma 7.2. Similar rate of commission of 0.15% was held to be reasonable by Hon’ble Bombay High Court in the case of Pr. CIT vs Alag Securities Pvt Ltd. vide ITA No. 1512 of 2017 dated June 12, 2020, wherein the Hon’ble Bombay High Court held that “in case of an assessee engaged in providing ‘accommodation entries’, the entire deposits cannot be assessed as unexplained cash credits. Only the commission (0.15%) earned in providing the accommodation entries can be assessed as income”. 8. From perusal of the above judgment we notice that in the case of the other persons, carrying out similar type of activities of providing accommodation entries, 0.15% has been accepted as a reasonable rate of commission income. Before us also, in the past, the assessee’s commission income has been assessed @ 0.60% but in subsequent assessment years @ 0.03%. We, therefore, taking into consideration, the settled judicial precedents, the commission income assessed in the hands of the assessee in the past as well as in the future, find it reasonable to estimate the commission income @0.16% as against 0.60% estimated by the ld. CIT(A). Accordingly, the common issues raised in the grounds of appeal for estimation of commission income for Assessment Year 2010-11 to 2013-14, are partly allowed. 9. The second issue for our consideration specifically raised for Assessment Year 2012-13, is regarding addition of Rs.7,79,88,144/- which is made in the hands of the assessee on account of closing bank balance of 11 entities allegedly controlled by the assessee. The assessee has raised this ground by way of additional grounds. 10. Facts in brief are that during the course of search conducted on 26/04/2011, in the warrant of authorization issued by DIT(Inv.), 10 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma Kolkata, in respect of 11 concerns tabulated in a chart at page 18 of the assessment order, 7 of the accounts were held by Private Limited Companies where the credit bank balance was Rs.5,71,87,384/- and 4 accounts were held by sole proprietorship concerns having total bank balance of Rs.2,08,00,760/-. When the assessee was confronted with these bank statements, he accepted that all the bank accounts of the companies/proprietorship concerns are managed by him and money seized from these bank accounts are to be utilized against the present/future tax liabilities. While carrying out the assessment proceedings of the 7 out of 11 concerns which are limited companies, the assessing authorities have completed their assessments stating that declared source of income is not accepted and liabilities and assets as on 31/03/2012 are to be taken as Nil. Similar was the action taken in the case of 4 sole proprietorship concern and finally while concluding the assessment, total amount of bank balance of 11 concerns were added in the hands of the assessee has undisclosed assets. 11. The assessee challenged the addition made u/s 69 of the Act before the ld. CIT(A) raising the following grounds:- “2. That in the facts and circumstances of the case, the Learned Assessing Officer has erred in treating aggregate bank balance/seized amount of Rs. 5,71,87,384/- seized from seven bank accounts of seven companies as undisclosed investment of the appellant u/s 69 of the Act. 3. Without prejudice to the above and in the facts and circumstances of the case, the Ld. Assessing Officer has erred in treating aggregate bank balance of Rs. 5,71,87,384/- mentioned above as income of A.Y. 2012-13, when by his own findings, the said bank balances should be added in the year of introduction, i.e., A.Y. 2011-12. 4. That in the facts and circumstances of the case, the Ld. Assessing Officer has erred in treating aggregate bank balance/seized amount of Rs. 11 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma 2,08,00,760/-seized from four proprietorship concerns as undisclosed investment of the appellant u/s 69 of the Act. 5. Without prejudice to the above and in the facts and circumstances of the case, the Ld. Assessing Officer has erred in treating entire amount of Rs. 2,08,00,760/- as income of the appellant. 6. Without prejudice to the above and in the facts and circumstances of the case, the Ld. Assessing Officer has erred in treating entire amount of Rs.2,08,00,760/- as income of the instant year.” Though the assessee has raised the above grounds, but the same have not been adjudicated by the ld. CIT(A) as there is no discussion about this issue. 12. Before us the ld. Counsel for the assessee has filed written submissions in respect of this Ground, which reads as under:- “SECOND ISSUE: FACTS : There was search on 26.4.11 at Lakshmi vilas bank where following 11 enities controlled by assesse was having bank accounts .Search warrant and Panchnama was in the name of 11 entities . These entities are as under and having bank balance indicated against on 30.5.11 SI no Name of account holder amount Rs 1. Bengal Traders 1,50,06,421.10 2. Meghna Fashion 1, 65,019 3. Raj kumar power products 9,391.47 4. VNG Plywood suppliers Pvt ltd 17,462,94 5. Ralliwolf Real estate pvt ltd 38,682,06 6. Abhiruchi minerals suppliers pvt Ltd 2,96,61,119.94 7. Crystal cloth Merchants pvt ltd 45,34,861.18 8. SRB Agricultural pvt ltd 25,02,459.68 9. Shree Laxmi traders 56,19,928.82 10. Snow white Agro trading pvt ltd 1,02, 73,396.43 11. Qwality Jewel box pvt ltd 1,01,59,222.78 TOTAL 7,79,88,142.85 These bank balances were seized . Apart from no other action was taken . Nothing was found . No statement was recorded either by assesse Anand kumar sharma or any of 11 entities . 12 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma Merely because these entities are managed by Assesse , In assessment proceedings of assesse u/s 153A/143(3) for assessment proceedings of AY 12-13 bank balance of Rs 7,79,88,142 .85 was added to income u/s 69 . In this respect it is submitted that 1. There are two different searches in respect of two different sets of assesses one on 26.4.11 in respect of 11 entities and second search on 2.7.13 in respect of Anand kumar sharma who is appellant in this case. There are two different search warrants and Panchnama . 2. AO has invoked section 69 to add bank balances of 11 entities in the hands of Assesse. Section 69 can be invoked only when assesse has made investment in a previous year preceding to assessment year and such investment is not recorded in the books of accounts . First of all it is submitted that these are not investment made by assesse but these are merely bank balances of 11 entities controlled by assesse that too recoded in the books of account and reflected in the respective return of income of 11 entities. Addition can be made u/s 69 only when it is investment and not recorded in books of account. These are jurisdictional facts which must exist before invoking section 69. These are bank balances of 11 entities obviously not investment of assesse hence making addition is not warranted. 3. Search u/s 132 is undertaken to unearth undisclosed income which has already been admitted in the form of undisclosed commission income so, therefore , bank balance per se can not be income of the assesse specially when these are disclosed in the hands of 11 entities . 4. It is further submitted that transactions recorded in bank account can be subject to scrutiny by AO to justify the return of income but cannot by itself be treated as undisclosed income . As far as transactions are concerned, they are already considered for calculating commission income so therefore bank balance can not be again taken as income. In this regard it is pertinent to mention that in assessment proceedings u/s 153A/143(3) of 11 entities no addition has been made in respect of any transaction whether in regard to transactions or bank balance. Extract of assessment order in case of one of the entities namely SRB Agricultural pvt ltd for A.Y 2012-13 is as under. Similar order has been passed in all 11 entities. "4.2 As regards the income of the assesse, it is reiterated that the alleged company is a legal fiction and it did not have any business activity. Hence, its declared source of income not accepted and income for the assessment year 2012-13 taken as NIL. As regards the capital, 13 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma including share premium and investments allegedly made, reliance is placed on the discussions made in the relevant paragraphs of this order and on this basis of observations made therein, the share capital, share premium as well as investment of the assesse company as on 31.3.2012 is taken as NIL " From above it is clear that AO has himself taken liability and investment as NIL , therefore, there is no question of treating the bank balance as income that too in the hands of assesse Anand kumar sharma. Further, AO in the case of assesse Anand kumar sharma has mentioned as under Ms evident from the assessment orders, these companies (11 entities) have been held to only paper company and entire share capital /premium and investments of these companies are merely circular transactions without any actual business. Hence r the assessment orders of these companies have been passed by treating entire asset and liabilities as nil. However, base capital is required for circulation of funds which have been introduced by Anand kumar sharma through Jamakharchi companies which is represented by bank balance of these companies and the bank balances have been seized during the course of search on these companies on 26.4.2011." Above paragraph itself shows that bank balances are base capital for accommodation entries. Therefore bank balance can not be added as income itself specially when accommodation entries have been considered for commission income. More over AO treated asset and liabilities as NIL. Then How the bank balance can survive for addition that too in the hands of another assesse. 6. It shall be also pertinent to mention that 11 entities have given their consent letter to deptt to appropriate their tax liabilities and remaining amount can be used for appropriating the tax liabilities of Anand sharma. This itself show that funds of companies and Anand sharma are separate and distinct. Hence fund balance of companies can not be added as income of the assesse. Case laws : 1. For mandatory existence of jurisdictional facts Guwahati ITAT ITA/126/2020 Gold stone and ITA/ 21/2021 Fortuna vanijyaRaza textiles Supreme court AIR 1973 SC 1362 D N SINGH Supreme court 150 taxman.com 301 2. Statement a valuable evidence 70 taxmann.com 234 14 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma (Kerala) 3. No incriminating material Supreme court Abhisar buildwell” 13. On the other hand, the ld. D/R submitted that the assessee has himself accepted that the business of all 11 concerns as referred in the assessment order for Assessment Year 2012-13 are managed and controlled by the assessee and, therefore, the bank balance appearing at the close of the year are certainly the assets of the assessee which have been rightly subjected to tax. 14. We have heard rival contentions and perused the material placed before us. The assessee has raised the ground against the addition made u/s 69 of the Act at Rs.7,79,88,142.85/- which was made by the Assessing Officer on account of bank balance of 11 entities which were searched on 26/04/2011. The bank balances were appearing in the regular books maintained by all the 11 concerns which included 7 private limited companies and 4 sole proprietorship concerns. The assessee during the course of search accepted that all the transactions carried out in the 11 concerns are managed and controlled by him. Based on this statement of the assessee, total of the bank balances appearing in the bank accounts held by the 11 concerns as on 30/05/2011 were treated as undisclosed income of the assessee. While framing the assessment for Assessment Year 2012-13 ld. Assessing Officer has added the alleged sum as unexplained investment. 14.1. Before us the ld. Counsel for the assessee contended that on the one hand, the revenue authorities while concluding the assessments of the 11 concerns have observed that assets and liabilities of these 15 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma concerns are Nil and on the other hand, the bank balance have been added in the hands of the assessee. It has been further submitted before us by the ld. Counsel for the assessee that the assessee is admittedly an entry provider and for past many years is engaged in this business. While carrying out such business the only source of income is commission income which sometime has been estimated as 0.6%, sometime at 0.03% and as held by us in the preceding paras, we have estimated the commission @ 0.16%. It thus, means that the funds which are utilised for rotating in the line of business of providing accommodation entries are owned by someone else and merely bank transfers are being made through such concerns which are used as conduit. There are hardly any physical assets in such concern nor any actual business of trading and manufacturing but merely funds are rotated. The modus operandi for such accommodation entry providers are to raise capital through bogus share capital/share premium/bogus unsecured loans/bogus sales and then utilizes these funds for making investments in the equity of other concerns/loans/ given to other concerns/bogus purchases. Therefore, the funds involved in such accommodation entry providing business are of other concerns/persons and the proper nexus is never established. So far as the case in hand is concerned, admittedly assessee is accepted to have managed and controlled the affairs of the 11 concerns. 14.2. We notice that the alleged addition of Rs.7,79,88,142.85/- is only on account of the bank balances appearing in the bank statement as on 30/05/2011, which were owned by the following concerns:- 1. Bengal Traders 1,50,06,421.10 2. Meghna Fashion 1, 65,019 16 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma 3. Raj kumar power products 9,391.47 4. VNG Plywood suppliers Pvt ltd 17,462,94 5. Ralliwolf Real estate pvt ltd 38,682,06 6. Abhiruchi minerals suppliers pvt Ltd 2,96,61,119.94 7. Crystal cloth Merchants pvt ltd 45,34,861.18 8. SRB Agricultural pvt ltd 25,02,459.68 9. Shree Laxmi traders 56,19,928.82 10. Snow white Agro trading pvt ltd 1,02,73,396.43 11. Qwality Jewel box pvt ltd 1,01,59,222.78 TOTAL 7,79,88,142.85 15. We notice that during the course of search, the assessee has accepted to have been managing and controlling the affairs of all these 11 concerns. It is also not in dispute that the assessee is an accommodation entry provider and revenue authorities have accepted time and again that the above stated 11 concerns were also part of the entry providing business. The interesting part here is that out of the 11 concerns, 7 are private limited companies which have been duly registered under the Ministry of Corporate Affairs and certainly they have equity share capital held by some persons which prima facie are not connected to the assessee. When the assessment proceedings of these 11 concerns were going on, it is claimed before us that these concerns have given in writing to the revenue authorities that if there is any tax liability against them, the same should be adjusted against the bank balances as on 30/05/2011. However, while concluding the assessment proceedings, no addition has been made in the hands of the any of the 11 concerns. For instance, one of the concerns named, Qwality Jewel Box Pvt Ltd., it has been regularly filing the income tax return and was have been a bank account with Laxmi Vilas Banks. In the assessment order framed u/s 153A/143(3) of the Act, the ld. 17 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma Assessing Officer referred to the statement of Mr. Anand Kumar Sharma accepting to having controlling and managing the affairs of this company observed that the actual amount of income has to be assessed in the hands of Mr. Anand Kumar Sharma. Further in para 4.2. of the assessment order, the ld. Assessing Officer stated that as regards the income of the assessee company it is reiterated that the alleged company is nothing but a legal fiction and it did not have any business activity. Hence, its declared the source of income is not accepted and income for Assessment Year 2011-12 is taken as Nil. As regards the capital, including share premium for investments, if any, reliance is placed on the discussion made in the relevant paragraphs of this order and on the basis of observations made therein, the share capital, share premium as well as the investment of the assessee company as on 31/03/2011 is taken as Nil. Similar is the observation of the Assessing Officer in case of all the remaining 10 concerns. Reference of the assessment order given in the case of Qwality Jewel Box Pvt Ltd., for Assessment Year 2011-12. However, even for Assessment Year 2012-13, in case of one of the concerns out of the 11 concerns, namely, SRB Agricultural Pvt. Ltd., similar observation has been made by the Assessing Officer treating assets and liabilities as NIL. It, therefore, shows that the assets and liabilities of all the 11 concerns have been treated as Nil. Now, so far as the issue in hand is concerned, revenue authorities have picked up one of the item i.e., the bank balance of these 11 concerns and added it in the hands of the assessee. Undisputedly, assessee has accepted to be an entry provider and has used these concerns for his entry providing business but he carries out these transactions for earning commission income. It is a known fact that such entry providers are not having any regular 18 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma business activity and they only earn commission which is calculated on the turnover carried out through them which may be in the shape of share capital, capital gains, unsecured loans or purchases etc. They enter into such transactions on behalf of the other business concerns who are benefitted from such accommodation entries. Such business concerns which are benefitted they only provide the funds to the entry providers for bringing them back into their official business system. The entry provider is not using his own funds for carrying out these activities. 15.1 Now, the question before us is that, whether the bank balances appearing in the bank accounts of the alleged 11 concerns as on 30/05/2011 is actually the undisclosed investment of the assessee. The 11 entities which are engaged in entry providing business for earning commission referred to above are maintaining regular books of accounts and financial statement are duly audited (mandatory for the private limited companies). The source of bank balance has not been discussed in any of the assessment order of the 11 concerns and directly the revenue authorities have come to the conclusion that assets and liabilities are Nil. However, when the entries are made in the books, for every debit, there is a corresponding credit also. The source of bank balance must be some funds received by the respective concerns from some sources. We can understand with the help of an example:- One of the concerns is A and it is a private limited company. During the year, it received the funds in the form of share capital companies. So, the funds were transferred from the share applicants to the bank account of concern A. Now entries in the books will be appearing as bank balance debit and share capital and share 19 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma premium credit. The revenue authorities have already presumed that such business concerns which are engaged in the accommodation entry providing business do not carry out any regular business activity. So, the funds received from the share applicants from its own source have come into the bank account of the concern ‘A’. Now, for adding the bank balance in the hands of a person ‘B’, who has accepted to have controlled the affairs of concern ‘A’, then along with the assets, the liabilities will also be taken over by the person ‘B’. One cannot pick up the asset side and leave the liability side. If the revenue authorities have considered the assets and liabilities as Nil then the assets include bank balance also and if bank balance are treated as income then set off of the liabilities also needs to be given. The theory adopted by the revenue authorities is only one sided because they have only taken the bank balances as the basis and merely on the statement that the assessee is managing and controlling the affairs of the 11 concerns, they have presumed that the bank balances are undisclosed investment of the assessee. Such action of the revenue authorities cannot be held to be justified considering the present set of facts. 16. The assessee has already admitted the commission income and has offered it to tax on year to year basis which he has earned from carrying out the accommodation entry providing business including the turnover of various concerns controlled and managed by him. The alleged undisclosed investment are the entries which are appearing in the regular books of account and do not fall in the category of unrecorded entries. Revenue authorities have themselves found them to be recorded in the books and they have examined the books, then 20 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma there must have been source of such investments. However, once they have accepted the assets and liabilities as Nil, the bank balance are also to be treated as Nil as they have also confirmed the part of the assets. 16.1. Though we have held that since the revenue authorities have treated the assets and liabilities of the 11 concerns as Nil, the bank balance also being part of the assets, deserves to be treated as Nil. But undisputedly it is a part of the entry providing business of the 11 concerns, allegedly owned, controlled and managed by the assessee as part of the entry providing business. Further we notice that the turnover of accommodation entries routed by the assessee and the concerns controlled by it have already been added up and commission income on such turnover has been estimated and the rate of such commission income has been held by us @0.16%. Now, the alleged sum of Rs.7,79,88,144.85/- which is the total of bank balance of 11 concerns as on 30/05/2011 is also the part of accommodation entry providing business. The assessee has failed to prove that the alleged sum has been considered by the ld. Assessing Officer in the total turnover of accommodation entry providing business. We, therefore, considering that against the alleged sum of bank balances, there has to be some funds received from other sources by the 11 concerns and, therefore, the total of receipt of the funds and the bank balance totals to Rs.15,59,76,290/- (Rs.7,79,88,144.85/- X 2). Now, treating it to be the turnover, the income at the most can be calculated @0.16% i.e., Rs. 2,49,562/- being the commission income which is required to be added in the hands of the assessee as against the alleged addition u/s 69 of the Act. We accordingly, set aside the finding of the lower 21 I.T(SS)A. Nos. 169 to 172/Kol/2023; Assessment Years: 2010-11 to 2013-14 Anand Kumar Sharma authorities and partly allow the Grounds raised by the assessee sustaining the addition at Rs.2,49,562/-. Accordingly, the additional ground raised by the assessee for Assessment Year 2012-13 is partly allowed. 17. Remaining grounds being general and consequential in nature, need no adjudication. 18. In the result, appeals of the assessee are partly allowed. Order pronounced in the Court on 14 th March, 2024 at Kolkata. Sd/- Sd/- (ANIKESH BANERJEE) (DR. MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Kolkata, Dated 14/03/2024 *SC SrPs आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent 3. संबंिधत आयकर आयुᲦ / Concerned Pr. CIT 4. आयकर आयुᲦ)अपील (/ The CIT(A)- 5. िवभागीय ᮧितिनिध ,आयकर अपीलीय अिधकरण, कोलकाता/DR,ITAT, Kolkata, 6. गाडᭅ फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Kolkata