M/S. ALAG SECURITIES PVT LTD, MUMBAI V. THE CIT (a) -22, MUMBAI

MA 319/MUM/2022

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Alag Securities Pvt. Ltd. was involved in providing accommodation entries and hawala transactions, which were uncovered during a search operation. For the assessment year 2004-05, the company admitted to such transactions amounting to approximately \\u20b9 77,335,956. The assessing officer estimated the commission income from these transactions at 2%, a decision upheld by the CIT (A) and the Tribunal in previous appeals. The company filed a Miscellaneous Application arguing that the Tribunal erred in not following the precedent of estimating the commission income at 0.15%, as upheld by the High Court in earlier years. The Tribunal dismissed the application, citing that the facts of the case and the nature of transactions differed significantly from those in the precedents.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300203 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 13-07-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 06-07-2023
• Assessment Year: 2004-2005
• Appeal Filed On: 30-10-2022
• Other Referred Cases: Commissioner of Income-tax (IT-4), Mumbai vs. Reliance Telecom Ltd [2021] 133 taxmann.com 41 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Accommodation entries
• Section: 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND MS. KAVITHA RAJAGOPAL, JM MA No.319/Mum/2022 (Arising out of ITA No.68/Mum/2022 for A.Y. 2004-05) M/s A l ag S ec urit i es Pvt. Lt d. Bl ock H, S hri S adashiv CHS Lt d. 6 th R oad, S ant ac r uz (E as t) Mum bai-400 400 055 Vs. The CIT (A)-22 Room No.513, 5 th Floor, Earnest House, Nariman Point, Mumbai-400 021 (Applicant) (Respondent) PAN No. AAICA0101F Assessee by : Shri A.K. Sharma & Shri Mukesh Choksi, ARs Revenue by : Shri Suresh Gaikwad, DR Date of hearing: 07.07.2023 Date of pronouncement : 14.07.2023 O R D E R PER PRASHANT MAHARISHI, AM: 01. Briefly stated the fact shows that Alag securities Ltd is a company which is used by its directors and one Shri Mukesh Ratilal Chowksey who is also director, in providing accommodation entries and hawala transactions to the various beneficiaries across the country. This information was unearthed during the course of search carried out on Mahasagar Group of cases. For the financial year 2004 – 05, according to the owner admission of the assessee it has provided such accommodation entries and hawala transaction amounting to ₹ 77,335,956. Similarly for Page | 2 MA No.319/Mum/2022 Alag Securities Pvt. Ltd.; A.Y. 2004-05 assessment year 2003 – 04, such hawala transactions were to the tune of 4,78,94,000. The assessee is carrying on this fraudulent activity for the several years. Assessee is portraying it as an accommodation entry provider and therefore according to the assessee he should only be taxed on some percentage basis on turnover of these hawala Entries. For the impugned assessment year i.e. assessment year 2004 – 05, the learned assessing officer estimated the commission income on such hawala entries at the rate of 2%, same was also confirmed by the learned CIT – A and further on appeal before the coordinate bench, the orders of the lower authorities were upheld. Assessee is aggrieved by that order and pointed out that though in previous years the commission income has been estimated at 0.15% of the bogus hawala transactions in the form of various types of accommodation entries, upheld by the coordinate benches and by the honourable High Court for assessment year 2003 – 04, the Tribunal has committed an error in not following the order of honourable High Court and coordinate benches and thus the impugned order of the tribunal for assessment year 2004 – 05 suffers from mistake and should be recalled. 02. Therefore, This Miscellaneous Application is filed by Alag Securities Private Limited for A.Y. 2004-05 wherein the coordinate bench has decided the appeal in ITA No. 68/M/2022 by order dated 30 th June, 2022, dismissing the appeal of the assessee. By that order of the coordinate bench has dismissed assessee’s appeal holding that commission to the extent of 2% estimated by the learned Page | 3 MA No.319/Mum/2022 Alag Securities Pvt. Ltd.; A.Y. 2004-05 assessing officer and confirmed by the learned CIT (A) is a correct estimate on the facts and circumstances of the case. Further the coordinate bench has also held that with respect to the claim of the expenditure of 50% of the total expenditure, as the assessee did not furnish any evidence was not allowed. 03. The Miscellaneous Application preferred by the assessee states that some of the observations of the coordinate bench are incorrect and without appreciating the facts and details already available on record. The assessee is aggrieved that the honorable Bombay High Court in case of the assessee and several coordinate benches have applied the commission income in case of an accommodation entry provider including assessee at the rate of 0.15%, however, the coordinate bench has held that all those decisions are distinguishable and upheld the commission income at the rate of 2%. The main grievance of the assessee is that the honorable Bombay High Court has upheld the estimation of commission income at 0.15% in case of the assessee for earlier years and therefore, not following the decision of the honorable High Court makes the order erroneous. The coordinate bench should also have upheld the estimate of the commission income on the accommodation entries only at the rate of 0.15%. 04. The claim of the assessee is that not following the decision of the honorable High Court where the commission income has been estimated at the rate of 0.15% in the case of the assessee in the earlier year in case of accommodation Page | 4 MA No.319/Mum/2022 Alag Securities Pvt. Ltd.; A.Y. 2004-05 entries provided by the assessee makes the order of the coordinate bench erroneous and requires to be rectified. 05. The learned authorized representative reiterated the submission made in the Miscellaneous Application filed before us. 06. The learned Departmental Representative vehemently stated that this is the case of the accommodation entry provider. The commission income has been estimated by the learned Assessing Officer at the rate of 2% of the accommodation entries and the learned CIT (A) has confirmed the same. In appeal before the coordinate bench commission at the rate of 2% of the accommodation entries have been confirmed. He submitted that coordinate bench has considered the decision of the honorable High Court at paragraph No. 13. In paragraph No. 18 of the decision of the coordinate bench, the coordinate bench once again notices the decision of the honorable High Court and in paragraph No. 19 the coordinate bench has categorically distinguish the decision of the honorable High Court. The coordinate bench has given seven different reasons for upholding the commission income at the rate of 2%. The several coordinate benches decisions are also considered at paragraph no. 20. Further, the decision of the honorable High Court was also mentioned at paragraph number 22. In that paragraph it has been categorically held that there is no information available that what the commission income is charged by assessee and on what type of Page | 5 MA No.319/Mum/2022 Alag Securities Pvt. Ltd.; A.Y. 2004-05 transaction. Therefore, as the facts were altogether different for this year, those judicial precedents were held to be not applicable. In paragraph number 13, coordinate bench has specifically stated that assessee has not shown what type of accommodation entries it has provided, to whom and in what manner and on what date , in what form and at what commission rate. Further, the coordinate bench in paragraph number 24 has listed down five specific types of accommodation entries, the assessee could not show, what is the quantum of each of the accommodation entries provided by it and commission income earned by the assessee. In paragraph number 25, the coordinate bench has specifically referred that the assessee has failed to show any similar transactions are available or produced before the assessee as were mentioned in those orders of the coordinate bench. Accordingly, after great deliberation the coordinate bench has held that the commission income at the rate of 2% is the correct estimate made by the lower authorities. The learned departmental representative further referred paragraph number 18 wherein the appellant company itself has stated that it was earning commission in the range of 1.5% – 3.5% on various kinds of accommodation provided by it. During the course of hearing before the tribunal and before the lower authorities not a single instances were shown by the assessee for this year that it has charged commission on accommodation entries only at the rate of 0.15%. This fact was specifically recorded in paragraph number 28. Therefore, according to the learned Page | 6 MA No.319/Mum/2022 Alag Securities Pvt. Ltd.; A.Y. 2004-05 departmental representative this is an attempt made by the assessee to pressurize the Tribunal to recall its order under the guise of the order of the honorable High Court not followed by it and is an attempt to recall the order for review of the rate of commission income chargeable to tax in the hands of the assessee. Hence this miscellaneous application deserves to be dismissed. The learned authorized representative vehemently referred to the decision of honourable Supreme Court in Commissioner of Income-tax (IT-4), Mumbai vs. Reliance Telecom Ltd [2021] 133 taxmann.com 41 (SC) and therefore strongly objected to this in attempt to review the decision of the coordinate bench. He further submitted that if the error is to be pointed out by the long-term procedure of the arguments, it itself shows that the appellate order does not contain any mistakes which can be rectified under section 254 (2) of the act. 07. During the course of hearing, we have asked the learned authorized representative to produce a single instance of accommodation entry provided by it where it has charged commission income at the rate of 0.15% during the year. The answer of the learned authorized representative was categorical, no. This itself, proves that there is no justification to estimate the commission income at the rate of 0.15% during the year. 08. On careful consideration of the rival contentions and perused the order of the coordinate bench, we find that in the garb of this miscellaneous application, the assessee Page | 7 MA No.319/Mum/2022 Alag Securities Pvt. Ltd.; A.Y. 2004-05 makes an attempt to hide his deeds of providing accommodation entries and to get away from providing accommodation entries to the various beneficiaries. The learned authorized representative failed to give any details about the nature of accommodation entries provided by it but he categorically maintained that assessee is providing accommodation entries which are hawala transaction. The assessee has failed to name a single beneficiary and has gone scot-free in the garb of accommodation entry provider and has also shielded the real beneficiaries for several years. The magnitude of accommodation entries provided by the assessee is startling and astonishing.. He also got the commission income estimated at 0.15%. The assessee was specifically asked during the course of hearing to provide even a single instance for this year that assessee has charged commission income on provision of accommodation entries to the beneficiary only at the commission rate of 0.15%. The assessee has miserably failed. The assessee was also asked that if in any year assessee has any evidence to show that it has charged accommodation entries on such hawala business at the rate of 0.15% of commission, no answer was forthcoming. Therefore the coordinate bench has distinguished the decision of the honorable High Court and other several coordinate benches and upheld the commission income at the rate of 2% of the accommodation entries provided by it. Therefore, when the coordinate bench has applied its mind, distinguished the facts produced before it with the various judicial precedents cited before it, we do not find Page | 8 MA No.319/Mum/2022 Alag Securities Pvt. Ltd.; A.Y. 2004-05 any mistake in the order of the coordinate bench. Further the decision of the honourable Supreme Court in case of Reliance Telecom Ltd (supra) also held that Where Tribunal had passed a detailed order during appellate proceedings said order could not be recalled by Tribunal in exercise of powers under section 254(2) as powers under section 254(2) were only to rectify/correct any mistake apparent from record. Further an error on the face of record must be such an error which, mere looking at the record should strike and it should not require any long-drawn process of reasoning on the points where there may conceivably be two opinions. Therefore we do not find any merit in this Miscellaneous Application. 09. Accordingly, the miscellaneous application filed by the assessee is devoid of any merit and hence dismissed. Order pronounced in the open court on 14.07. 2023. Sd/- Sd/- (KAVITHA RAJAGOPAL) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 14.07. 2023 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, True Copy// Page | 9 MA No.319/Mum/2022 Alag Securities Pvt. Ltd.; A.Y. 2004-05 Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai