M/S S.K.Naredi & Co., Jamshedpur V. ACIT CENTRAL CIR-, Jamshedpur

ITSSA 72/RAN/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9653 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 16-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: INDERJI T SINGH
• Keywords: Search and seizure; Accommodation entries
• Section: 153A; 131; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI BENCH, RANCHI BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER IT (SS) A NO. 72 - 75 / RAN / 201 6 ASSESSMENT YEARS :2007-08 TO 2010-11 M/S S.K NAREDI &CO. VIRDI NIWAS, M. ROAD, BISTUPUR, JAMSHEDPUR- 831001 [ PAN NO.AAFFS 1613 J ] V/S . ACIT/DCIT CENTRAL CIRCLE-1, OFFICE ROAD,BISTUPUR, JAMSHEDPUR-831001 /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI DEVESH PODDAR, ADVOCATE /BY REVENUE SHRI INDERJIT SINGH CIT-DR /DATE OF HEARING 09-01-2019 /DATE OF PRONOUNCEMENT 15-02-2019 / O R D E R PER BENCH:- THESE FOUR ASSESSEES APPEALS FOR ASSESSMENT YEAR( S) 2007-08 TO 2010-11 ARISE AGAINST THE COMMISSIONER OF INCOME T AX (APPEALS)-3 PATNAS COMMON ORDER DATED 21.10.2016 PASSED IN CASE NOS.40 1-404/CIT(A)- 3/PAT/11-12/ UPHOLDING THE ASSESSING OFFICERS IDEN TICAL ACTION ASSESSING AMOUNTS OF RS.36.78 LAC, RS.68,55,482/-, RS.24,81,0 14/- AND RS.1.80 LAC (ASSESSMENT YEAR-WISE); RESPECTIVELY, INVOLVING PRO CEEDINGS 153A R.W.S.143(3) THE INCOME TAX ACT, 1961; IN SHORT TH E ACT. HEARD BOTH THE PARTIES. CASE FILES PERUSED IT(SS)A NO.72-75/RAN/2016 A.YS. 07-08 TO 10-11 M/S S.K. NAREDI & CO. VS. ACIT/ DCIT CC-1,J SR PAGE 2 2. IT EMERGES AT THE OUTSET THAT ALL THESE FOUR CAS ES HAVE EMANATED FROM THE SEARCH IN QUESTION CONDUCTED ON 02.11.2009 IN C ASE OF M/S S.K. NAREDI & CO. HE HAD GOT RECORDED HIS STATEMENT DATED 25.11.2 009 ADMITTING TO HAVE BEEN ENGAGED IN ENTRY PROVIDING BUSINESS TO VARIOUS PEOPLE. THE ASSESSING OFFICER TOOK NOTE OF THE SAID SEARCH STATEMENT TO A SSESS THE ENTRY BUSINESS TRANSACTIONS INVOLVING 1% INCOME COMPONENT TO MAKE ALL IMPUGNED ADDITION(S) OF IDENTICAL NATURE IN THESE FOUR ASSES SMENT YEARS IN ISSUE. 3. THE ASSESSEE PREFERRED APPEAL(S). IT PLEADED BEF ORE THE CIT(A) DURING THE COURSE OF LOWER APPELLATE PROCEEDINGS THAT THE SAID COMMISSION INCOME OUGHT TO HAVE BEEN ASSESSED IN THE HAND OF ITS PAR TNER ONLY. THESE ASSERTION AT ASSESSEES BEHEST IS VERY MUCH EVIDENT FROM PAGE 10 OF CIT(A)S LOWER APPELLATE ORDER. LEARNED LOWER APPELLATE AUTHORITY HAS DEALT WITH THE SAME IN THE FOLLOWING MANNER:- APPELLATE FINDING AND DECISION: AFTER CONSIDERING THE ASSESSING OFFICER'S FINDING A ND SUBMISSION OF THE APPELLANT, I FIND THAT FOLLOWING FACTS EMERGED: 1. THERE IS NO DISPUTE THAT THE MAIN PARTNER OF THE APPELLANT FIRM SH. S.K. NAREDI HAD ARRANGED ACCOMMODATION ENTRIES BY WAY OF SHARE APPL ICATION MONEY FOR THE COMPANIES RELATED TO SH. BINOD KUMAR SINHA (MADHU K ORAH GROUP) FROM KOLKATA ENTRY OPERATORS. THIS HAS BEEN ADMITTED BY SH. S.K. NAREDI IN HIS SWORN STATEMENT DATED 25.12.2009 U/S 131 OF THE ACT AS WELL AS STAT EMENT DATED 02.11.2009 U/S 132(4) OF THE ACT. THE TRANSACTION OF ACCOMMODATION ENTRY WAS FURTHER CORROBORATED FROM SH B.N. GUPTA OF JAMSHEDPUR IN HIS STATEMENT D ATED 03.11.2009 RECORDED U/S 132(4) OF THE ACT. THE TRANSACTION OF ACCOMMODATION ENTRIES WERE ALSO CORROBORATED FROM THE STATEMENT OF ENTRY OPERATORS. SH MRIDUL BH AUMIK, CHANDRA BHUSHAN JHA, P.K. PARSRAMKA AND V.K. GOENKA ALL KOTKATA BASED PA RTIES IN THEIR STATEMENTS DATED 25.12.2009 RECORDED U/S 131 OF THE ACT. AS PER PROV ISION OF SEC. 132(4) OF THE ACT, THE STATEMENT RECORDED U/S 132(4) CAN BE USED AS EV IDENCE IN THE PROCEEDINGS UNDER IT ACT, 1961 AND THE EVIDENTIARY VALUE OF THE STATE MENT U/S 132(4) HAS BEEN CONFIRMED BY VARIOUS COURT DECISIONS. THUS, THE APP ELLANT'S CONTENTION THAT NO FINDINGS WHATSOEVER REGARDING EARNING OF COMMISSION WERE FOUND DURING THE COURSE OF SEARCH AND SEIZURE ACTION SO AS TO DETERMINE UND ISCLOSED INCOME BY WAY OF COMMISSION, CANNOT BE ACCEPTED. 2. THE APPELLANT HAS RAISED CONTENTION THAT THE IN COME FROM COMMISSION CANNOT BE DETERMINED IN THE CASE OF APPELLANT FIRM AS THE STA TEMENT WAS GIVEN BY SH S.K. NAREDI. IT WAS STRESSED THAT AT THE MOST COMMISSION COULD BE TAXED IN THE HANDS OF SH S.K. NAREDI (IND.) AND NOT THE APPELLANT FIRM. T HIS CONTENTION. OF THE APPELLANT WAS NOT RAISED BEFORE THE AO, AND THEREFORE, NOT ENTERT AINABLE. FURTHER, THE STATEMENT OF SH. S.K. NAREDI INDICATES THAT THE ACCOMMODATION EN TRIES WERE ARRANGED FOR THE COMPANIES FOR WHOM THE APPELLANT FIRM WAS PROVIDING PROFESSIONAL SERVICES. THIS FACT IT(SS)A NO.72-75/RAN/2016 A.YS. 07-08 TO 10-11 M/S S.K. NAREDI & CO. VS. ACIT/ DCIT CC-1,J SR PAGE 3 CORROBORATE THAT THE SERVICE OF ACCOMMODATION ENTRI ES FOR THE CLIENT COMPANIES CANNOT BE TREATED AS SERVICE PROVIDED BY SH. S.K. N AREDI IN HIS INDIVIDUAL CAPACITY. THUS, THIS CONTENTION OF THE APPELLANT IS NOT ACCE PTABLE ON FACTS OF THE CASE ALSO. 3. DURING THE APPELLATE PROCEEDING, THE APPELLANT H AS REFERRED TO THE STATEMENT OF SH. S.K. NAREDI WHEREBY HE HAD MENTIONED THAT OUT OF CO MMISSION CHARGED IN THE RANGE OF 2% TO 4%. 0.25% COMMISSION WAS KEPT BY HIM. BASE D ON THIS STATEMENT, THE APPELLANT CONTENDS THAT COMMISSION THROUGH ACCOMMOD ATION ENTRY CAN BE ESTIMATED @ 0.25% ONLY. FROM THE FINDINGS IN THE ASSESSMENT O RDER. IT IS APPARENT THAT SH S.K. NAREDI OF THE APPELLANT FIRM WAS THE MAIN PERSON WH O HAD COORDINATED IN ARRANGING ACCOMMODATION ENTRIES FOR THE COMPANIES (CLIENTS OF THE APPELLANT FIRM). BUT, IN THE CHAIN OF ACCOMMODATION ENTRIES THE MAIN PARTIES WER E THE KOLKATA BASED COMPANIES WHO HAD MADE AVAILABLE FUNDS BY WAY OF CHEQUE ON RE CEIPT OF CASH. ACCORDINGLY, IT CAN BE REASONABLY ACCEPTED THAT THE APPELLANT FIRM THROUGH SH S.K. NAREDI MUST HAVE PARTED WITH SUBSTANTIAL PORTION OF COMMISSION INCOME TO THE KOLKATA BASED PARTIES. ACCORDINGLY, IT WILL BE REASONABLE IF THE COMMISSION IN THE APPELLANT FIRM IS ESTIMATED @ 1% RATHER THAN 3% TAKEN BY THE AO IN TH E ASSESSMENT ORDER. 4. DURING THE COURSE OF APPELLATE PROCEEDING, THE A PPELLANT HAS DISPUTED THE QUANTUM OF ACCOMMODATION ENTRIES ARRANGED IN VARIOUS FINANCIAL YEARS INVOLVED. THE ISSUE WAS REFERRED TO THE AO FOR VERIFICATION AND IN THE REMA ND REPORT OF THE AO DATED 10.01.2013 DULY FORWARDED BY THE RANGE HEAD, THE RE VISED FIGURE OF ACCOMMODATION ENTRIES FINANCIAL YEAR WISE WERE FURNISHED. ACCORDI NGLY, THE COMMISSION INCOME @ 1% WILL BE ESTIMATED ON THE REVISED FIGURE OF ACCOM MODATION ENTRIES IN EACH ASSESSMENT YEAR AS PER REMAND REPORT OF THE AO. BASED ON THE ABOVE FACTS AND CIRCUMSTANCES, I FIND THAT THE TOTAL ACCOMMODATION ENTRIES ARRANGED FOR THE AY 2007-08 HAS BEEN REVISED TO RS. 11,26,00,000/- AS AGAINST RS.12,26,00,000/- TAKEN IN THE ASSESSMENT ORDER. TH E UNDISCLOSED COMMISSION INCOME FOR THE CURRENT AY @ 1% WILL THUS WORK OUT TO RS.11 ,26,000/-. HENCE, THE ADDITION OF UNDISCLOSED COMMISSION INCOME OF RS.36,78,000/- IS HEREBY REDUCED TO RS.11,26,000/-. 4. THE ASSESSEES ONLY ARGUMENT RAISED DURING THE C OURSE OF HEARING BEFORE US IS THAT THE LOWER AUTHORITIES OUGHT TO HA VE ASSESSED THE IMPUGNED INTEREST INCOME FROM ENTRY BUSINESS IN ITS PARTNER S HANDS. LEARNED CIT-DR ON THE OTHER HAND PLACES STRONG RELIANCE ON LOWER AUTH ORITIES ACTION THAT SHRI S.K. NAREDI HAD ACTED AS ASSESSEES PARTNER ONLY IN REGU LAR COURSE OF HIS BUSINESS AND THEREFORE, BOTH THE ASSESSING OFFICER AS WELL A S CIT(A) HAVE RIGHTLY ASSESSED THE IMPUGNED SUM IN ITS HANDS. MR. SINGH P ARTICULARLY REFERS TO THE CRUCIAL WORD WE STATED TO BE APART OF MR. S.K. NAREDIS DEPOSITIO N. 5. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. THERE IS HARDLY ANY DISPUTE ABOUT THE ASSESSEE TO BE A C HARTERED ACCOUNTANT FIRM REGISTERED AS PER THE ACT OF PARLIAMENT AND GOVERNE D BY THE PROVISIONS OF CHARTERED ACCOUNTANTS REGULATION ACT,1949. WE DO NOT FIND ANY MATERIAL OR IT(SS)A NO.72-75/RAN/2016 A.YS. 07-08 TO 10-11 M/S S.K. NAREDI & CO. VS. ACIT/ DCIT CC-1,J SR PAGE 4 EVEN A SLIGHT INDICATION IN THE RELEVANT SEARCH STA TEMENT (SUPRA) THAT IT WAS THE ASSESSEE-FIRM WHICH WAS EVER ENGAGED IN ENTRY OPERA TION BUSINESS WHILST PERFORMING ITS ROUTINE PROFESSIONAL SERVICES. WE RA THER NOTICE DURING THE COURSE OF HEARING THAT SHRI NAREDI IS A PARTNER / D IRECTOR IN MANY ENTITIES INCLUDING ASSESSEE. IF WE GO BY ABOVE ANALOGY THERE IS NO BASE OF THE LOWER AUTHORITIES ACTION AS TO WHY THE ASSESSEE ONLY WAS CHOSEN TO BE ASSESSED FOR IMPUGNED COMMISSION INCOME AS A BENEFICIARY. WE THE REFORE REVERSE THE LOWER AUTHORITIES ACTION ASSESSING THE INCOME COMP ONENT IN ASSESSEES HANDS WITHOUT ANY MATERIAL ON RECORD FOR THIS PRECI SE REASON ALONE. THE IMPUGNED COMMISSION INCOME ADDITION(S) HEREINABOVE STAND DELETED THEREFORE. 6. THE ASSESSEES FOUR APPEALS ARE ALLOWED. ORDER PRONOUNCED IN ACCORDANCE WITH RULE 34(4) OF THE ITAT RULE BY PUTTING ON NOTICE BOARD ON 15/02/2019 SD/- SD/- ( ) ($% ) (DR. A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) RANCHI, *DKP &- 15 / 02 /2019 RANCHI / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE M/S S.K.NAREDI & CO. VIRDI NIWAS,M. ROA D, BISTUPUR, JAMSHEDPUR-831 001 2. /REVENUE-ACIT, CC-1, OFFICE ROAD, BISTUPUR, JAMSHE DPUR-831001 3. 2 4 / CONCERNED CIT RANCHI 4. 4- / CIT (A) RANCHI 5. 7 %%2, 2, / DR, ITAT, RANCHI 6. = / GUARD FILE. BY ORDER/ , /TRUE COPY/ / 2,