QUEEN MERCHANDISE PRIVATE LTD,SURAT vs. DCIT CENTRAL CIRCLE 5(2), MUMBAI
Income Tax Appellate Tribunal, Mumbai “D” Bench, Mumbai.
Before: Shri Pawan Singh (JM) & Shri Omkareshwar Chidara (AM) Queen Merchandise Pvt. Ltd. Office No. 102, 1st Floor S.Y. No. 1105-1107, Tulsi Building, Mahidharpura Somnath Mahadev ni Sheri Surat, Gujarat-395 003. Vs. DCIT, CC-5(2) Room No. 427 Kautilya Bhavan C-41 to C-43, G Block, BCK, Bandra Mumbai-400 051. PAN : AAACQ4048F Appellant
Per Omkareshwar Chidara (AM) :-
In this appeal, the appellant company has filed an appeal with the following grounds of appeal :-
1. On the facts and in the circumstances of the case and in law, the Ld.
CIT(A) erred in relying on the reopen of Investigation Wing and statement of third party, without having any tangible material in support of the same.
2. On the facts and in the circumstances of the case and in law, the Ld.
CIT(A) erred in confirming the rejection of books of accounts under section 145(3) of the I.T. Act, 1961. 3. On the facts and in the circumstances of the case and in law, the Ld.
CIT(A) erred in confirming the validity of assessment proceedings u/s.
143(3) despite books of accounts are rejected u/s.145(3) and income computed on estimate basis of commission and thus the order passed u/s. 143(3) is bad in law and required to be quashed.
4. On the facts and in the circumstances of the case and in law, the Ld.
CIT(A) erred in confirming the addition of estimated commission income of Rs. 20,24,200/- being 0.5% of total purchases and sales.
5. On the facts and in the circumstances of the case and in law, the Ld.
CIT(A) erred in confirming the addition of estimated commission income of Rs. 1,08,48,993/- being 3% of total loans and advances.
6. Without prejudice Ground No. 1 to 5 above. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the commission income on entire purchases, sales and loan and advances
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transactions without excluding the group transactions and allowing deduction of expenses for earning such commission income.
7. Without prejudice Ground No. 1 to 5 above. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to consider that the rate of commission adopted by department is very high and excessive.
8. On the facts and in the circumstances of the case and in law, the Ld.
CIT(A) erred in confirming the action of Ld. AO in charging interest under section 234B of the I.T. Act, 1961. 9. On the facts and in the circumstances of the case and in law, the Ld.
CIT(A) erred in confirming the action of Ld. AO in initiating penalty proceedings under section 270A and 271AAD of the I.T. Act. Appellant crave leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date of hearing.
10. On the facts and in the circumstances of the case and in law, the Ld.
CIT(A) erred in passing ex-parte order and dismissing all grounds of appeal only based on assessment order.
11. On the facts and in the circumstances of the case and in law, the Ld.
CIT(A) erred in treating the appellant as entry provider without considering the fact that the appellant is genuine diamond trader and all the transaction in books of accounts are genuine and there is no corroborative evidence that the appellant is entry provider.
From the assessment order, it is observed that the Ld. AO had extensively dealt with the accommodation entries provided by Tax Auditor Mr. Sameer Chowdhary, CA to various companies of ARC group who are in to the diamond trade. A search was conducted on ARC group of companies and several diaries/loose sheets were found and seized. But the seized material appears to be for a period of 2 months and little. This tax Auditor has further admitted that he has provided accommodation entries to ARC group to the extent of Rs. 100 crore and received commission of approximately 100 lakh. The assessment order has dealt with 26 group companies controlled by Tax Auditor who had been giving accommodation entries relating to purchases and sales and loans to this ARC group. Based on the seized material, the Ld. AO concluded that there are no actual purchases and sales and various loans. As all these are only accommodation entries, the Ld. AO rejected the averments of appellant company and estimated the income at 3% of total loan transactions and 0.5% of total sales and purchases appearing in the books of account of appellant company, as the same is commission charges prevailing in the market for providing
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accommodation entries. Thus, an addition of Rs. 1.28 crore was made by Ld.
AO while completing the assessment.
Aggrieved by the additions made by Ld. AO an appeal was filed by the appellant company. The Ld. CIT(A) has reproduced the substance of assessment order and confirmed the additions made by Ld. AO.
Not satisfied with the orders of Ld. AO and Ld. CIT(A), the appellant company filed an appeal before ITAT with the grounds of appeal mentioned in page No. 1 of this order.
The Ld. AR of the appellant company has submitted before the Bench that in similar circumstances, the Coordinate Bench in the case of Aadinath Merchandise (P) Ltd. (ITA no. 2935/Mum/2025 A.Y. 2021-22 dated 16.6.2025) has remanded the matter to Ld. CIT(A). In that case, the matter was remanded to Ld. CIT(A) because the earlier CA Shri Manish Pipapan could not attend the proceedings on account of personal difficulties and subsequently case was assigned by appellant to the Ld. AR. This Aadinath Merchandise (P) Ltd., is one of the group company utilized by the Tax Auditor to provide accommodation entries to ARC group. As the matter was remitted to Ld. CIT(A) in group company in similar circumstances, the issue is remitted to Ld. CIT(A) in this case. The Ld. CIT(A) is directed to pass the order on all grounds of appeal raised before him after giving an opportunity to the appellant company, instead of dismissing the appeal based on principles of natural justice like right to cross examination. With these observations, the appeal is remanded to Ld. CIT(A).
The appeal of appellant is allowed for statistical purposes. Order pronounced in the open Court on 25/09/2025. (PAWAN SINGH) ACCOUNTANT MEMBER
Queen Merchandise Pvt. Ltd.
Copy of the Order forwarded to :
The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.
BY ORDER,
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