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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI PAVAN KUMAR GADALE, JM
These are two appeals of two different assessee i.e. shri Bhupendra Singh Karnawat & M/s Sankhala Exports Pvt. Ltd for A.Y. 2015-16 involving similar facts, arguments of the parties are also similar, therefore, both these appeals are decided by this common order.
The appeal in is filed by the assessee Mr. Bhupendra Singh Karnawat against the appellate order passed by the learned Commissioner of Income-tax (Appeals)-47, Mumbai, [ The ld CIT (A)] dated 30th December, 2021, wherein the appeal filed by the assessee against the assessment order dated 25th November, 2019, passed under Section 143(3) read with section 147 of the Income-tax Act, 1961 (the Act) by the Asst. Commissioner of Income Tax, Central Circle 1(3), Mumbai (the learned AO) was dismissed.
Assessee is aggrieved with that appellate order and has preferred the appeal raising following grounds of appeal:-
“1. On the facts and circumstances of the case and in law the Ld.CIT(A) erred in not considering that the assumption of jurisdiction by the Ld. Assessing Officer is bad in law as the conditions laid down under the Act for initiating reassessment proceedings u/s. 147 of the Act have not been fulfilled.
2. On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in confirming the addition of alleged commission income arising out of alleged bogus unsecured loans, bogus purchases and bogus sales amounting to ₹ 13,20,771/- on protective basis without appreciating the fact that the same amount has been substantively added in the case of Shri Bhawarlal Jain, thereby making the same addition in the hands of two assessees leading to double taxation.
3. On the facts and circumstances of the case and in law the Ld.CIT(A) erred in confirming addition of ₹ 3,23,94,235/- (being 7.48% of ₹ 43,30,78,008/-), on estimation basis, by treating genuine turnover of the appellant as bogus sales.
4.On the facts and circumstances of the case and law the Ld.CIT(A) erred in confirming the addition of alleged bogus unsecured loans, bogus sales and bogus purchases and also
5. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming addition of alleged commission income arising out of alleged bogus unsecured loans, bogus sales and bogus purchases, without appreciating the fact that for the very same assessee for previous assessment years, being A.Y. 2008-09 to A.Y. 2014-15, the Ld.CIT(A) has deleted the protective addition of alleged commission income, thereby not following the principal of consistency.
6. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in changing protective addition of commission income on alleged bogus sales to substantive addition on the incorrect presumption that the same was not considered in the order of the Hon’ble ITAT in the case of Shri Bhanwarlal Jain.
7.On the facts and in the circumstances of the case and in law, the Ld.CIT (A) erred in changing protective addition to substantive addition without issuing any show cause notice or opportunity of being heard to the appellant, which is in violation of section 251(2) of the Income Tax Act, 1961 and in violation of the principles of natural justice.
on the facts and in the circumstances of the case and in law, the Ld.CIT (A) erred in confirming the addition made by ld.AO, without providing any opportunity of cross examination, without any corroborative evidence and without providing copy of statements relied upon.”
By this appeal, the learned CIT (A) has confirmed the reopening of the assessment and upheld the action of the learned Assessing Officer in confirming the addition of ₹13,20,771/- of commission on Bogus Accommodation entries provided as conduit of one Mr. Bhanwarlal Jain, an accommodation entry provider, made by the learned Assessing Officer partly
The facts of the case are as under:-
i. The assessee is an individual who filed his return of income on 25th September, 2015, declaring total income of ₹58,700/-. ii. The case of the assessee was reopened by issue of notice under Section 148 of the Income-tax Act, 1961 (the Act) dated 5th September, 2018.
The reasons for reopening are that search was carried on 3rd iii. October, 2003 in case of Bhavarlal Jain Group. Mr. Bhavarlal Jain admitted in his statement under Section 132(4) of the Act on 11th October, 2013 that he is engaged in providing accommodation entries to other beneficiaries in the form of bogus loans, sales and import and export, through 70 concerns and operated and managed by him through directors, partners and proprietors who are actually employees of Mr. Bhavarlal Jain. The assessee is one of such persons. Accordingly, the case of the assessee was reopened. iv. In response to the notice under Section 148 of the Act, the assessee filed his return of income on 28th October, 2018 declaring the same income which was shown in original ROI.
The reasons recorded were supplied to the assessee on 29th v. August, 2019. The assessee objected to reopening of the assessment vide communication dated 3rd October, 2019, which were disposed off on 5th October, 2019. Further, statutory notices were issued. vi. On the basis of the search and information collected therein, a show cause notice issued to the assessee on 16th October, 2019. Assessee did not comply with the statutory notices and vii. Further, gross profit was also added in the hands of the assessee estimating gross profit percentage of 7.48% and accordingly, ₹3,23,94,235/- was also added. viii. Accordingly, against the returned income of ₹58,700/- total income was determined at ₹3,37,73,706/- by assessment order dated 25th November, 2019.
The assessee preferred the appeal, which was disposed off by appellate order dated 30th December, 2021. Appellant made detailed written submissions which are reproduced by the learned CIT (A) at appeal order page no.6 . The learned CIT (A) confirmed the reopening of the assessment vide Para no.7 of his order.
On merits of the case, the learned CIT (A) noted that the learned Assessing Officer has made addition of commission income of accommodation entries on protective basis. The additions on substantive basis has been made in the hands of Mr. Bhavarlal Jain. The learned CIT (A) noted that ITAT vide order dated 6th August, 2021 has decided the case of Mr. Bhavarlal Jain, wherein the addition was confirmed in the hands of Mr. Bhavarlal Jain. The decision of the co-ordinate Bench was not accepted by the Revenue and further appeal was preferred. Therefore, estimation was not final.
Further, the gross profit addition of ₹3,23,94,235/- at the rate of 7.8% on sales of ₹43,30,78,008/- was also confirmed. Against this appellate order assessee is in appeal before us.
At the time of hearing, the assessee moved an application for adjournment stating that the impugned additions in this appeal are partly protective addition in the hands of the appellant made by the learned Assessing Officer and the substantive addition is made in the hands of another assessee Mr. Bhavarlal Jain. It was stated that appeal of Mr. Bhavarlal Jain is still pending before the learned CIT (A)-47, Mumbai. He submitted that therefore this appeal should be kept in abeyance till the appeal of Mr. Bhavarlal Jain is decided by the learned CIT (A)-47, Mumbai.
The learned Departmental Representative also reiterated that the learned CIT (A) has confirmed the addition of commission on accommodation entries of bogus unsecured loan and bogus purchases in the hands of the assessee on protective basis. Further, commission income of bogus sales is confirmed in the hands of the assessee on substantive basis. The addition on substantive basis is pending before the ld CIT (A)in case of Mr Bhanwarlal jain.
We have carefully considered the rival contentions and perused the orders of the lower authorities. The fact clearly shows that assessee is one of the persons who acted as conduit of Mr. Bhavarlal Jain, this has been clearly mentioned in the assessment order. Thus, it is clear that operations of the assessee be it earning commission on accommodation entries of bogus unsecured loans, bogus purchases or bogus sales is run actually by Mr Bhanwarlal jain. The learned Assessing Officer has made an addition of ₹13,20,771/- in the hands of the assessee on protective basis. In the hands of Mr. Bhavarlal Jain, the addition is made on substantive basis. The learned CIT
Further, with respect to the reopening of the assessment, we find no infirmity in the order of the lower authorities in upholding the action of the learned Assessing Officer. Thus, ground no.1 is dismissed.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
In A.Y. 2015-16 Sankhala Exports Pvt. Ltd
The facts and circumstances of this case are identical to the facts of the case in ITA No. 307/Mum/2022. In this case, the learned Assessing Officer has passed the assessment order under Section 143 read with section 147 of the Income-tax Act, 1961 (the Act) on 19th December, 2019, by making addition of commission income on protective basis of ₹13,83,893/-. The addition on account of gross profit of ₹59,18,120/- and further, unexplained cash credit amounting to ₹4,73,73,337/- against the total income return by the assessee at a loss of ₹10,62,926/-. The learned CIT (A) has confirmed the reopening of the assessment, however, the commission income on bogus unsecured loan and bogus purchases was confirmed in the hands of the assessee on protective basis and commission income on bogus sales of ₹38,804/- on substantive basis. With respect to the gross profit addition of ₹59,18,920/- was also made in the hands of the assessee despite the fact that the assessee is a company being operated by Mr. Bhavarlal Jain. Further, the addition of ₹4,73,73,337/- challenged before him as per ground no.11 of the appeal are not at all disposed off by the learned CIT (A). Therefore, for the reasons given by us in we also set aside all the grounds of appeal except the reopening of the assessment back to the file of the learned CIT (A) with similar direction.
Accordingly, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 31.01.2023.