THE DCIT.,CENT.CIRCLE-1(2),, AHMEDABAD vs. SHRI PRADIP SUDHAKARBHAI BIREWAR, AHMEDABAD

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ITSSA 4/AHD/2019Status: DisposedITAT Ahmedabad12 May 2023AY 2012-1311 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the CIT(A) was correct in deleting the addition of Rs. 26,37,500/-. The AO wrongly treated the offered commission income as 'money' under section 69A and incorrectly denied set-off of losses. The Tribunal noted that section 115BE is effective from 01.04.2017 and not applicable retrospectively to AY 2010-11. The Revenue could not produce any contra view. Consequently, the Revenue's ground on this issue was dismissed. Regarding the protective addition of Rs. 3,38,00,000/-, the Tribunal confirmed the CIT(A)'s deletion. It was acknowledged that the assessee was a facilitator earning only commission income and not the owner of the transactions. The assessee also confirmed not being involved in cash receipt/payment. Therefore, making additions of the total transaction amount on a protective basis was deemed unjustifiable. The Revenue's ground was dismissed. On the issue of unaccounted commission receipts, the Tribunal confirmed the CIT(A)'s finding that after analyzing seized material and removing duplication, the commission income was determined at Rs. 17,63,203/-. The CIT(A) had directed the AO to consider the additional commission income offered by the assessee and allow set-off of losses. The Revenue could not show any contrary view, and thus, this ground was also dismissed. The remaining general grounds were also dismissed.

What were the facts?

The appeals by the Revenue challenge orders of the CIT(A) for Assessment Years 2010-11 to 2015-16. The assessee, an individual engaged in share trading, was searched on 04.12.2014 as part of an investigation into accommodation entry providers. Documents seized from Shri Shirish C. Shah implicated the assessee as a beneficiary. The assessee had filed original returns declaring losses and claiming nil assessed income. Following the search, notices under section 153A were issued. The assessee filed returns declaring nil income after setting off losses and unabsorbed depreciation, but also offered additional income. The Assessing Officer (AO) made additions, treating offered income as unexplained money under section 69A and denying set-off of losses, and also made additions for unaccounted commission receipts.

What were the issues?

1. Whether the CIT(A) erred in deleting the addition of Rs. 26,37,500/- made by the AO on account of undisclosed commission income, which the AO treated as unexplained money under section 69A and denied set-off of losses by invoking section 115BE(2)? - Assessee's contention: The AO's decision to disallow the set-off of business loss against commission income is incorrect. The assessee is justified in claiming current year's loss against any income under any head. Provisions of section 115BE(2) are not applicable retrospectively to the assessment year 2010-11. - Revenue's contention: Not recorded. 2. Whether the CIT(A) erred in deleting the protective addition of Rs. 3,38,00,000/- made by the AO on account of unexplained money under section 69A? - Assessee's contention: Additions cannot be made based on documents found at a third party's premises, which are not in the assessee's handwriting or signed by the assessee. The assessee was merely a facilitator earning commission income. - Revenue's contention: Not recorded. 3. Whether the CIT(A) erred in confirming the addition of Rs. 17,63,203/- on account of unaccounted commission receipts and deleting the remaining amount out of the total addition of Rs. 81,60,365/- made by the AO?

Which sections of the Income-tax Act were involved?

Section 143(3),Section 153A(1)(b),Section 69A,Section 115BE(2),Section 131,Section 139

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH

Before: Smt. Annapurna Gupta & Shri T.R. Senthil Kumar

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member

IT(SS)A Nos: 02 to 06/Ahd/2019 Assessment Years: 2010-11 to 2015-16

The DCIT, Shri Pradip Vs Central Circle-1(2), Sudhakarbhai Birewar, Ahmedabad A-2/52 Arjun Tower, C.P. Nagar, Ghatlodia, Ahmedabad (Appellant) PAN: AAGJPB2106P (Respondent) Assessee Represented: Shri Sunil Talati, A.R. Revenue Represented: Shri Vijay Kumar Jaiswal, CIT-D.R. Date of hearing : 15-02-2023 Date of pronouncement : 12-05-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

These five appeals are filed by the Revenue as against separate orders dated 04.10.2018 passed by the Commissioner of Income Tax (Appeals)-11, Ahmedabad arising out of the assessment orders passed under section 143(3) r.w.s. 153A(1)(b) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years (A.Ys) 2010-11 to 2015-16. Since common issues/grounds are involved in all these appeals, the same are

I.T(SS.A Nos. 02 to 06/Ahd/2019 A.Ys. 2010-11 to 2015-16 Page No 2 DCIT vs. Shri Pradeep Sudhkarbhai Birewar

disposed of by this common order. IT(SS)A No. 02/Ahd/2019 for Assessment Year 2010-11 is taken up as the lead case.

2.

The brief facts of the case is that the assesse is an individual engaged in Share Trading Business. There was search action in cases of Accommodation Entry Provider Group of Ahmedabad on 04.12.2014 and the assessee also one among the searched person. The main person searched was Shri Shirish C. Shah of Mumbai wherein in his premises contain documents were found and seized relating to accommodation entries given by Shirish C. Shah against cash paid by the beneficiaries and the assessee herein is one among them. The assessee had filed original Return of Income declaring business losses, brought forward losses, unabsorbed depreciation and ultimately claiming Nil assessed income for the Assessment Years 2010-11 to 2015-16.

3.

Pursuant to the search action, the assessee was issued notice u/s. 153A dated 21.07.2015 directing the assessee to file the Return of Income within 30 days of the service of notice. Since the seized documents from Shirish C. Shah was not provided to the assessee, he filed the Return of Income only on 17.11.2016 declaring Nil income after set off of losses and unabsorbed depreciation by declaring additional income as follows:

Assessment Income as per Original Return Additional Return u/s 153A Year Income Offered 2010-11 Loss- 28,34,863 2,637,500 Loss -1,97,363

I.T(SS.A Nos. 02 to 06/Ahd/2019 A.Ys. 2010-11 to 2015-16 Page No 3 DCIT vs. Shri Pradeep Sudhkarbhai Birewar

2011-12 Income -7,02, 984; Income - 18,15,484 Set-off against Loss of AY 2008-09 Set-off against loss of AY 1,112,5000 2008-09 2012-13 Income -2,44,305; Income -21,47,555 Set -off Set-off against loss of AY against loss AY 2008-09, 1,903,250 2008-09 2009-10 2014-15 Income - 12,38,794; Income- 12,38,794 Set-off Set-off against loss of 2008- No Income against loss of AY 2009-10, 09, 2009-10 offered 2010-11 and unabsorbed depreciation of AY 2010-11 Final Income 5,49,110 2015-16 Income - 6,46,953 - -

4.

The Ld. A.O. made various disallowances and the issues before us are discussed as follows:

(a) Issue no. 1, undisclosed commission income

During the course of assessment proceedings, the Assessing Officer found that the assessee indulged in helping others in taking/giving accommodation entries and thereby earning brokerage income for such accommodation entries. During the course of search action at the premises of Shri Shirish C. Shah (hereinafter referred as Mr. SCS) of Mumbai, certain documents were found and seized which contain details of one time entries given by Mr. SCS against cash paid by the beneficiaries through the assessee. The Assessing Officer calculated commission income of the assessee at Rs. 3,49,210/- for the Assessment Year 2010-11. However the assessee disclosed an additional income on commission receipt of Rs. 26,37,500/- as undisclosed income for the Assessment Year 2010- 11 and adjusted the same against the business loss of Rs.

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28,34,863/-. Thus resulting in a net loss of Rs. 1,97,363/-. However the Assessing Officer considered the additional income of Rs. 26,37,500/- offered by the assessee as unexplained money u/s. 69A of the Act and invoking section 115BE denied set off of loses and made addition.

(b) Issue no. 2, unexplained money u/s. 69A made as a protective assessment.

During the search action and the premises of Shri Shirish C. Shah (SCS) and the assessee, some documents were found which contain details of accommodation entries provided by him through the assessee. Against such entries, cash was received by SCS through the assessee and a total cash received for the Assessment Year 2010-11 was Rs. 3.28 crores. The A.O. made additions on substantive basis in the hands of six beneficiaries, but proportionate income on protective basis in the hands of the assessee.

(c) Issue no. 3, unaccounted commission receipts.

During the course of search, a sheet containing working of the transactions of commission received in Annexure A/1 & A/2 was seized from the assessee premises. The Assessing Officer held that the assessee had commission income of Rs. 81,60,365/- as per various pages relevant to the Assessment Year 2010-11. However the assessee has not declared in Return, hence added as the income of the assessee and demanded tax thereon.

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5.

Aggrieved against the same, the assessee filed appeals before Ld. Commissioner of Income Tax (Appeals)-11, Ahmedabad. The Ld. CIT(A) deleted the additions by observing as follows:

(i) Issue no. 1, undisclosed commission income “…The AO calculated commission of the appellant at Rs.3,49,210/- for this year and further stated that the appellant had disclosed income of Rs.26,37,500/- as undisclosed commission income for the year under consideration, thus no additions are to be made but the appellant has adjusted the undisclosed commission income offered against the current year business loss, thus, the AO considered Rs 26,37,500/- as unexplained money u/s 69A of the Act and made the additions. The appellant contended that AO's decision is wrong as disallowance of business loss is not as per the provisions of the Act. The appellant is justified in claiming current year's loss against any income under any other head of income and the AO did not find any defect in the claim of business loss, hence, it cannot be added u/s 69A of the Act. The appellant further contended that even if the AO applied provisions of section 115 BE(2), which are effective since 1.4.2017 and not retrospectively, these additions are not justified. With these contentions, the appellant requested that additions may be deleted. Facts of the case have been considered in totality. The AO is not justified in making additions u/s. 69A of the Act considering commission income as 'money', as mentioned under section 69A of the Act. Moreover, the provisions of section 115BE(2), if the AO wants to invoke, these are applicable since 1.4.2017 and not retrospectively, hence, additions made by the AO are not found sustainable as per the provisions of the Act, thus, these are deleted. This ground of appeal is allowed.” (ii) Issue no. 2, unexplained money u/s. 69A made as a protective assessment. “…The AO stated that additions on substantive basis for this amount are made in the hands of six beneficiaries, but additions are made on protective basis in the hands of the appellant. The appellant contended that the documents upon which additions have been made are not found at his premises, not written by him & not signed by him. The documents were found at the premises of third party Le. Shri Shirish C. Shah. Thus, additions cannot be made in the hands of the appellant on the basis of document found from third party which is not in his handwriting & not signed by him. The appellant cited several case laws in support of this contention, as mentioned in the submission reproduced above. The appellant also contended that he was merely facilitator between two parties and earned only commission income. Facts have been considered carefully. There is no doubt that the appellant was indulged in arranging

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client for Shirish Shah and for this, he was getting only commission income. In such situation, making additions of total transaction amount in the hands of the appellant, even on protective basis, is not justified. In this case, it is clear that the appellant was only a broker and he is not owner of the transactions. The brokerage income has already been considered by the AO. The appellant stated during the course of search while giving statement u/s 132(4) of the Act in reply to Q No.32 & 47 on 5.12.2014 that he was only arranging meeting of clients with Shirish Shah and after that they used to decide transfer of cash. He was not involved in cash receipt/payment at all. He confirmed these facts while answering Q. No.5 of the statement recorded on 12.1.2014 u/s 131 of the Act by the DDIT(Inv). It is clearly stated in these statements that he was not involved in cash transfer from client to Shirish Shah. There is no doubt about the role of the appellant that he was mediator and earned only brokerage income out of these transactions. Thus, protective additions of total transaction amount in the hands of the appellant is not justified. Keeping in view the factual & legal position discussed above, protective additions made by the AO are deleted. This ground of appeal is allowed.” (iii) Issue no. 3, unaccounted commission receipts. “…The appellant submitted detailed chart in support of this contention showing commission income from the loose papers and transactions pertaining to this year. The facts of the case have been considered with reference to the seized documents. It is fact that the AO has considered total transaction value as income of the appellant in some case, whereas, in some cases commission income only, was considered. Similarly, the appellant in the calculation submitted considered commission income on some transactions, whereas, in some cases, considered commission on commission income, thus, the AO & the appellant, both are partly correct & partly incorrect. It is clearly written in the chart prepared & reproduced by the AO showing about the nature of transactions. Wherever bill amount is written, it is correct to consider that amount as transaction value and only commission income should be added. In the cases, where commission with rate of commission is written, it is correct to consider the same as commission income of the appellant for the year in which the income pertain. As this document has been found from the premises of the appellant himself, presumption of section 292C is applicable against the appellant. Moreover, the appellant disclosed unaccounted income earned as commission on these transactions to the extent of Rs.35 lakh during recording of statement u/s 131 of the Act in post search enquiries. The appellant could not prove the contents of these papers otherwise with better evidences. With these findings, commission income of the appellant for the year under consideration is determined as under:- Sr. Details of seized paper Bill/commission amount Income of the appellant

1 Page No. 30-32 of A/1 28,03,859/- Commission income @ (Bill amount) 2% = 56,730/-

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2 Page No. 70-75 of A/1 14,39,267/- Commission income'' @ (Bill amount) 2% = 28,800/- 3 Page No. 56-57 of A/1 18,64,6607/ It is commission income (commission amount) but covered by income of Rs. 20, 96,250/- considered in AY 2011-12 as it is duplication & pages are in continuous. 4 Page No. 44-52 of A/2 19,24,000/- it is commission income (commission) but covered by income of Rs. 20, 96,250/- considered in AY 2011- 12 as it is duplication & pages are in continuous. 5 Page No. 42 of A/2 1,34,568/- 1,34,568/- (Full amount (commission) is income) 6 Page No.35-36 of A/2 15,43,105/ 15,43,105/-(Full amount Commission) is income) Total Income of the 17,63,203/- appellant Thus on the basis of seized papers, income of the appellant for the year under consideration is determined at Rs 17,63,203/ But the appellant will be allowed credit of Rs 26,37,500/- which he has shown in the return of income filed and the same has been considered in paras above. The appellant is also eligible to claim of loss, if any, as per provisions of the Act. This ground of appeal is partly allowed. Additions to the extent of Rs.17,63,203/-are confirmed & remaining are deleted. This confirmed additions may be reduced further by the AO, if the appellant had any carried forward or current year loss, which he is eligible to set off against this income as per the provisions of the Act.”

6.

Aggrieved against the same, the Revenue is in appeal before us raising the following Grounds of Appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.26,37,500/- made by the AO u/s 69A of the Act on account of undisclosed commission income. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.3,28,00,000/- made by the Assessing Officer on account of unexplained money u/s.69A of the Act on protective basis. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in confirming the addition to the extent of Rs.17,63,203/- and deleting the remaining amount of

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Rs.63,97,162/- out of total addition of Rs.81,60,365/- made by the AO on account of unaccounted receipt. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 7. Heard rival arguments and perused the materials available on record and the Paper Books filed by the Revenue and the assessee. Regarding first issue deleting the addition of Rs. 26,37,500/- made by the A.O. u/s. 69 of the Act on account of undisclosed commission income. This the additional income offered by the assessee as per his commission receipt as undisclosed income and the same is set off of against the business loss of Rs. 28,34,863/- claimed by the assessee. The Assessing Officer denied the set off of losses on the ground that the additional income of Rs. 26,37,500/- offered by the assessee as unexplained money u/s. 69A of the Act and also invoking provisions of Section 115BE(2) of the Act. The Ld. CIT(A) has considered the above in detail and held that the provisions of section 115BE with effect from 01.04.2017 only and the assessment year involved herein being 2010-11, the provisions of section 115BE will be applicable and furthermore, the additional income from commission income cannot be treated as “Money”. Thus the Ld. CIT(A) held that the Assessing Officer is not justified in making addition u/s. 69A of the Act and also denying the benefit of set off of losses invoking provisions of section 115BE of the Act.

7.1 The Ld. D.R. appearing for the Revenue could not produce before us any contra view on the facts of the case. In the absence of the same, we have no hesitation in confirming the order passed by

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Ld. CIT(A). Further the assessee filed the original Return u/s. 139 claiming the very same loss of Rs. 28,34,863/-. Thus the ground no. 1 raised by the Revenue is devoid of merit and the same is dismissed.

8.

Regarding second issue, unexplained money u/s. 69A made as a protective assessment in the hands of the assessee. It is an admitted fact by the Assessing Officer, the assessee was indulged in arranging clients for Shirish C. Shah and for this, the assessee getting only his commission income. In the above transactions, he is not the owner of the transaction, but getting his commission as brokerage of the transaction. Thus the assessee pursuant to the search, declared additional income for each assessment years. Further the assessee was not involved in cash receipt/payment on the above transactions. This has been confirmed while answering to question no. 5 in the statement recorded on 12.01.2014, u/s. 131 of the Act before DDIT(Inv.). In the above circumstances making addition of total transactions amount of Rs. 3,38,00,000/- in the hands of the assessee on protective basis is unjustifiable. Therefore we have no hesitation in confirming the order of Ld. CIT(A) who deleted the protective addition of Rs. 3,38,00,000/- made by the A.O. in the hands of the assessee. Thus the ground raised by the Revenue is devoid of merit and the same is dismissed.

9.

Regarding third issue, unaccounted commission receipts, the assessee submitted detailed chart showing commission income from the loose papers seized by the Revenue. There were discrepancies both by the assessee and the Assessing Officer in

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calculating on ‘commission income in some transactions’ and whereas in some cases ‘commission on commission income’. Thus after analyzing the seized material namely Annexure A/1 & A/2. The Ld. CIT(A) determined the commission income at Rs. 17,63,203/- namely 2% as commission income and also deleting duplication of the entries. The Ld. CIT(A) directed the A.O. to take into account, the additional commission income of Rs. 26,37,500/- offered by the assessee as additional income and also allow set off of losses. Thus the ld. CIT(A) confirmed the addition of commission income to the extent of Rs. 17,63,203/- and balance to be deleted.

9.1. The Ld. D.R. could not show any contrary view which was arrived by the Ld. CIT(A). Therefore, we have no hesitation in confirming the order passed by the Ld. CIT(A). Thus the ground no. 3 raised by the Revenue is hereby dismissed.

10.

The remaining ground nos. 4 & 5 are general in nature which does not require adjudication and the same are consequently dismissed.

11.

In the result, the appeal filed by the Revenue are devoid of merits and the same are hereby dismissed.

IT(SS)A No. 03 to 6/Ahd/2019 for Assessment Years 2011-12 to 2015-16.

12.

The Grounds of appeal raised by the Revenue in all these appeals are identical in nature except change in figures. Thus the findings we have arrived in IT(SS)A No. 02/Ahd/2019 will be

I.T(SS.A Nos. 02 to 06/Ahd/2019 A.Ys. 2010-11 to 2015-16 Page No 11 DCIT vs. Shri Pradeep Sudhkarbhai Birewar

squarely applicable for the other Assessment Years 2011-12 to 2015-16. Thus the same are also hereby dismissed.

13.

In the result, all the five appeals filed by the Revenue are hereby dismissed.

Order pronounced in the open court on 12-05-2023

(ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 12/05/2023 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद

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