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Facts
The assessee, engaged in trading iron and steel, filed its return for AY 2012-13. A subsequent search in a related party's premises revealed that the assessee had provided accommodation entries (invoices without actual goods) on a commission basis.
Held
The Tribunal held that the assessee had indeed facilitated accommodation entries. However, it reduced the estimated commission income from 2% to 1% and restored the matter to the CIT(A) for fresh adjudication after providing the assessee an opportunity to be heard and furnish evidence.
Key Issues
Whether the assessee provided accommodation entries and if the reassessment proceedings and additions were validly made, considering principles of natural justice and opportunity of cross-examination.
Sections Cited
147, 148, 143(3), 131, 132(4), 250(4), 250(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SMT. BEENA PILLAI, JM & SHRI ARUN KHODPIA, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI, JM AND SHRI ARUN KHODPIA, AM to 59/Mum/2025 (Assessment Years: 2012-13 to 2017-18) Manohar Manak Alloys Private Central Circle 3(2), Mumbai Limited 2nd Floor, Apsara Cinema Building, Vs. Dr. D. B. Marg, Grant Road, East, Grant Road, S.O. Mumbai - 400007 PAN/GIR No. AAACM2688K (Appellant) : (Respondent) Assessee by : Shri Rajkumar Singh (Virtually Present) Respondent by : Shri Annavarn Kasuri, SR. AR Date of Hearing : 03.09.2025 Date of Pronouncement : 11.09.2025 O R D E R Per Arun Khodpia, AM:
The captioned appeals filed by the assessee are directed against the orders of Commissioner of Income Tax (Appeals), CIT (A) 51, Mumbai (in short ‘ld. CIT(A)’), passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act'), dated 04.11.2024, for the Assessment Year (in short ‘A.Y.’) 2012-13 and dated 05.11.2024 for A.Y. 2013-14 to 2017-18, which in turn arises from the assessment orders u/s. 143(3) of the Act passed by Deputy Commissioner of Income Tax, Circle-2(3)(1), Mumbai, dated 30.12.2019.
& Ors. (A.Y. 2012-13 to 2017-18) Manohar Manak Alloys Pvt. Ltd.
Since the issue involved herein, in all the aforesaid appeals are identical in nature, having similar facts and circumstances and pertains to the same assessee, the same, therefore, are taken up for hearing together, and are being disposed off under this common order. has been taken up as the lead case, wherein our observations and decision shall apply mutatis mutandis to remaining appeals.
ITA No. 54/Mum/2025, A.Y. 2012-13
The grounds of appeal
raised by the assessee in the lead matter i.e., are extracted as under.
1. That on fact and circumstances of the case and in law the Id. CIT (Appeal) has erred in upholding the validity of reassessment proceeding initiated under section 147 of the Income Tax Act, 1961 by the Id. Assessing Officer merely on change of opinion and borrowed satisfaction to reopen the already concluded assessment earlier u/s.143(3) of the Act thus, appellant prays that impugned reassessment proceeding initiated by issue of notice u/s.148 dated 29-03-2019 and consequent reassessment order passed u/s.143(3) r.w.s.147 being bad in law and without jurisdiction may kindly be quashed && set aside.
2. That on facts of the case and in law the Id. C.I.T. (Appeals) has erred in sustaining the part 1% addition to the extent of Rs.21,58,822/- out of the total 2% wrong addition made by ld. Assessing Officer at Rs.43,17,645/- on the alleged accommodation sales of Rs 21,58,82,240/-. Appellant prays that part 1% addition retained by Id. C.I.T. (Appeals) at Rs.21,58,822/ being also wrong on facts and bad in law hence may kindly be deleted. (Tax Effect Rs.7,00,430/-) 3. That both the above appeal ground raised hereinabove are independent ground and without prejudice to each other.
& Ors. (A.Y. 2012-13 to 2017-18) Manohar Manak Alloys Pvt. Ltd. 4. That appellant craves the leave to amend, alter, substitute any of the above appeal ground and or to raise new or additional grounds of appeal at the time of hearing.”
Brief facts of the case as emanating from records are that the assessee is engaged in the business of trading/import of iron and steel material like pipes, scrape, HR Quads, etc. The return of income for Assessment Year 2012-13 was filed on 22.09.2012, declaring income of Rs. 4,33,95,000/-. The case thereafter was selected for scrutiny, notice u/s. 143(2) was issued and assessment has been completed u/s. 143(3), determining the assessed income at Rs. 465,32,240. Subsequently, a search action was conducted in the case of M/s. Viraj Profiles Ltd on 13.07.2017. The invoices of the assessee were seized in the premises of M/s. Viraj Profiles Ltd and certain discrepancies were noted by the Investigating Authorities. Thereafter, enquiries conducted in the case of assessee u/s. 131 of the Act and statement of concerned persons were recorded. On verification of purchases of the assessee, it is observed that the assessee claimed to have supplied scrap to M/s. Viraj Profiles Ltd, whereas during the search in the premises of M/s. Viraj Profiles, it is established that the assessee is involved in providing accommodation entries to the said concerned on commission basis without actual delivery of any material. Based on aforesaid findings, the case of assessee was selected for reassessment u/s. 148 and a notice came to be issued on 29.03.2019. For reopening, the reasons were recorded as reproduced in the assessment order, the same are extracted hereunder for the sake of completeness and facts:
& Ors. (A.Y. 2012-13 to 2017-18) Manohar Manak Alloys Pvt. Ltd. “A search action was conducted in the case of M/s Viraj Profiles Ltd on 13/07/2017. Information has been received that inquiries were conducted in the case of M/s Manohar Manak Alloys Pvt. Ltd as part of the search proceedings, u/s 131 of the I.T. Act on 11/09/2017. Shri Manohar Kanungo is the Director of M/s. Manohar Manak Alloys Pvt. Ltd. which is engaged in the business of trading/import of iron and steel material like pipes, scrap, HR Quads etc as per his statement During the course of inquiry proceedings, statement of the Director Shri. Manohar Kanungo was recorded. It was found that there were many discrepancies in the invoices issued by his company. The Director was unable to explain the discrepancies as is evident from the statement recorded. From the statement it is also found that the assessee company has provided sales invoices to M/s Samnik General Trading Co. Ltd. The Directors of M/s Samnik General Trading Co. Ltd. have admitted in their statements that they have never received/ delivered any material and they have only provided sale invoices on receipt of commission. These factors lead to suspicion over the genuineness of the transactions shown by M/s Manohar Manak Alloys Pvt. Ltd. It prima facie proves that the assessee company has only provided accommodation entries to M/s Samnik General Trading Co. On perusal of the impounded material (invoices) it is observed that weighment slips are not there, out of state vehicles have allegedly shipped the material which is against all transport regulations which further proves that the transactions are bogus and Invoices have been provided without actually providing goods. The purchases made by M/s Viraj Profiles from M/s Manohar Manak Alloys Pvt. Ltd as per the books of the Assessee company are as follows: A.Y. Amt. in Rs. 2012-13 2,34,28,199 2013-14 13,58,54,454 2014-15 10,83,38,857 10,30,38,316 2015-16 2016-17 91,21,426 21,69,92,826 2017-18 2018-19 18,38,87,538 Total 78,06,61,616 & Ors. (A.Y. 2012-13 to 2017-18) Manohar Manak Alloys Pvt. Ltd.
The statement of Shri Manohar Kanungo, Director of M/s. Manohar Manak Alloys Pvt. Ltd. recorded on 11.09.2017 u/s. 131 of the Income tax Act, 1961 was confronted with Shri Neeraj Raja Kochhar, in his statement recorded u/s. 131 of the Income-tax Act, 1961 on 05.10.2017. In his statement he has stated that it is the prerogative of the purchase party how they transport material and further stated that his purchases from M/s. Manohar Monak Alloys Pvt. Ltd. were genuine, but, he could not give any supporting/explanation for his claim that the purchases from M/s. Manohar Manak Alloys Pvt. Ltd. are genuine, given the anomalies and defects pointed out earlier. Shri. P. Nandkumar, Sr. Manager(Purchase) of M/s Viraj Profiles Ltd has also admitted in his statement recorded u/s 132(4) of the Act, that accommodation entries were obtained by M/s Viraj Profiles Ltd from M/s Manchar Manok Alloys Pvt. Ltd. and 5 other parties. Since these bogus entries are provided on commission balis, the amount of commission is to be quantified and brought to tax. Other transactions entered into by the assessee also need to be examined as no real business was conducted by the assessee. The commission is generally taken at 5% of the total turnover. In the present case the turnover is Rs. 78,06,61,616/- Accordingly the commission would be 3,90,33,080/- From the above, it is clear that M/s Manohar Manak Alloys Pvt. Ltd has provided bogus accommodation entries to M/s Viraj Profiles Ltd. It is also probable that other transactions made by this assessee are also bogus. The Assessee has provided the accommodation entries to M/s Samnik General Trading Co. Pvt. Ltd. On verification of impounded documents viz sales invoices, delivery challans, it is clear that these ore accommodation entries. The accommodation entries are provided against commission. Considering that commission in such transactions are approximately 5% on the value, in the present case 5% of Rs. 2,34,28,199/- would work out to Rs. 11,71,410/- which is the amount of income escaping tax. There is, therefore, reason to believe that the income to that extent has escaped assessment. I am satisfied that the income chargeable to tax above Rs. 1 lakh has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. The assessee has, therefore, failed to disclose true and complete particulars of income for the year under consideration Le. A.Υ. 2012-13 and this is a fit case for the issuance of notice u/s 148 of the IT Act, 1961 for the above AY.”
In response to the notice u/s. 148, the assessee e-filed its return on 16.04.2019, declaring a total income of Rs. 4,33,95,000. Subsequently, the statutory notices u/s. 143(2) and 142(3) calling relevant details were issued. In response to the & Ors. (A.Y. 2012-13 to 2017-18) Manohar Manak Alloys Pvt. Ltd. notices, assessee was represented through its authorized representatives and necessary details were furnished from time to time. After going through the submissions of the assessee and the statements recorded of Shri Chandrasekhar G. Nair u/s. 132(4) of the Act during the search/survey proceedings in the case of M/s. Viraj Profiles Ltd., to establish that the assessee company was involved in issuing of bogus bills on commission basis. The statement of Mr. P. Nandkumar, Purchase Manager of M/s. Viraj Profiles Ltd., were also relied upon.
During the search proceedings, the statement of Shri Manohar Kanungo, Director of M/s. Manohar Manak Alloys Pvt. Ltd. i.e., the assessee in present case, was also recorded u/s. 131 of the Act on 11.09.2007, wherein Mr. Kanungo was unable to explain various discrepancies found in the invoices issued by the assessee company. The statement of Mr. Kanungo thereafter was confronted with Shri Neeraj Raja Kochar by recording his statement u/s. 131 on 5.10.2017, wherein he has stated that it is the prerogative of the purchase party how they transport material and further stated that his purchases from M/s. Manohar Manak Alloys Pvt. Ltd. were genuine, but, he could not give any supporting/explanation for his claim that the purchases from M/s. Manohar Manak Alloys Pvt. Ltd. are genuine, therefore, the ld. AO observed anomalies and defects in the statements offered by the parties. Accordingly, the ld. AO concluded that on the basis of facts and findings gathered during the search action & Ors. (A.Y. 2012-13 to 2017-18) Manohar Manak Alloys Pvt. Ltd. on M/s. Viraj Profile Ltd., it is clear that the assessee has facilitated in providing accommodation entries in the form of sales on commission basis to the said entity. The Ld. AO thereafter had discussed and analyzed about the invoices of the assessee, sales to other concerns who in turn have sold the same to M/s. Viraj Profiles Ltd. and have concluded that the assessee has earned 2% commission on alleged sales as assessee's undisclosed commission income under the head Income from Other Source for the year under consideration and accordingly, an addition of Rs. .43,17,645/- (2% of Rs. 21,58,82,240/-) was made.
Aggrieved by the aforesaid additions, the assessee preferred an appeal before the Ld. CIT(A), who though have principally concurred the findings of Ld. AO, had reduced the rate of commission from 2% to 1% treating the same on higher side considering the rate of commission prevalent in the same line of business, accordingly, had partly allowed the appeal of the assessee.
Being dissatisfied with the aforesaid decision by the Ld. CIT(A), the assessee preferred the appeals before us for our consideration.
At the very outset of the hearing Ld. Counsel of the assessee Iin short Ld. AR) drew our attention to the impugned order of Ld. CIT(A), wherein on merits the findings of Ld. CIT(A) were as under:
7.3 Decision:
& Ors. (A.Y. 2012-13 to 2017-18) Manohar Manak Alloys Pvt. Ltd. 7.3.1 From perusal of the written statement of the appellant it is seen that the appellant is primarily disputing the action of the AO for the following reasons: (i) No specific defect has been pointed out by the AO in the evidences in support of the sales made to Viraj Profiles Ltd and M/s Samnik General Trading Co Pvt Ltd by the appellant. (ii) The addition of commission has been made solely on the basis of a statement of third party which has admitted to procuring only invoices from some parties without any actual procurement of goods. The said statement was general and was later retracted by the person. (iii) No shred of direct evidence was found during the course of search & seizure action at the premises. (iv) The AO has relied upon the provisions of Motor Vehicle Act to hold that the transaction is not genuine but no penalty has been imposed under the said Act for any violation. (v) Excise Department has accepted the purchases made by Viraj Profiles Ltd. 7.3.2 Each of the argument of the appellant has been considered but is not found to be tenable. The appellant has given detailed submission and multitude of case laws to explain that the action of the AO in treating the appellant as accommodation entry provider is not correct. However, the most important fact in the instant case is that the beneficiary itself has accepted that the transactions done with the appellant were merely for the purpose of obtaining invoices without any procurement of any material. It must be mentioned here that the admission by the beneficiary is in no way selfserving and helpful to it as the ultimate tax liability will fall on the beneficiary. As regards the argument of the appellant that the said person had later retracted his statement, the same is another issue altogether which is relevant in the case of the beneficiary. The fact that the beneficiary has admitted to receiving accommodation entry invoices from the appellant in the statement is sufficient. Any retraction and its validity are another matter altogether to be discussed in the case of the beneficiary. As regards the other contention of the appellant that no direct evidences could be found regarding the ingenuinety of these transactions during the course of search & seizure action, it may be pointed out that the business of accommodation entries works in a manner that it is perfect in terms of bills, invoices and other documents and there can never be situation wherein direct evidence of any kind can be found. The evidences are mostly circumstantial and in the current instance the fact that the beneficiary himself has admitted to receiving accommodation entry from the appellant, inspite of the fact that it causes him great prejudice, is sufficient. Further the argument of the appellant that no penalty has been levied on it on account of violation of other laws or that the Excise Department have confirmed the validity of the purchases made by Viraj Profiles Ltd, I am not inclined to accept the same as these are mere after thought. Accordingly, the argument of the appellant that the transactions it ahs done with M/s Viraj profiles Ltd and M/s Samnik General Trading Co Pvt Ltd are genuine is not accepted and the action of the AO in treating them as accommodation entries and estimating a commission in the hands of the appellant is upheld. 7.3.3 As regards the quantum of commission income estimated, the AO has estimated an income @ 2% of the value of accommodation entries provided. It is however seen that in this line of business the commission rate is normally pegged @1% of the value of entry. Even the person who has admitted to have received accommodation entry from the appellant has admitted that the commission was between 1 to 2%. I therefore reduce & Ors. (A.Y. 2012-13 to 2017-18) Manohar Manak Alloys Pvt. Ltd. the estimation of commission income on account of providing of accommodation entry to 1% as against 2% taken by the AO. Thus, the addition of the AO is restricted to Rs. 21,58,822/- and the balance amount of Rs. 21,58,823/- is deleted. This ground of appeal is partly allowed.
10. Referring to the assessee’s submission before the ld. CIT(A), the ld. AR drew our attention to para 7.2.3 of the order of the ld. CIT(A), wherein the assessee has categorically stated that the cross examination was not provided to the assessee despite written request, further no corroborative evidence or akin nature of supporting the alleged estimated commission has been found and supplied to the assessee. Before us, it is submitted by the ld. AR that in the case of assessee except solely relying on the general admissions made in the statement recorded of the searched person which has also been retracted by them without any cross- examination. The ld. AO has completed the assessment, the same shows violation of principle of natural justice. Accordingly, the decision of ld. CIT(A) in the impugned order was found to be prejudiced without considering the assessee’s contentions. Also, the material evidence was not provided to the assessee so as the assessee would be in position to furnish necessary submissions before the first appellate authority to appreciate the issue in light of proper facts and to decide the same in accordance with provisions of Section 250(4) and 250(6) of the Act. Regarding validity of reopening assessment also, ld. AR submitted that the facts were not properly appreciated by the ld. CIT(A) as the reopening was totally based on borrowed satisfaction and change of opinion.
& Ors. (A.Y. 2012-13 to 2017-18) Manohar Manak Alloys Pvt. Ltd.
Per contra, ld. Senior DR representing the revenue submitted that as per para 5.2 of the assessment order, the copies of the statement recorded during the course of survey/search operation were duly provided to the assessee. Therefore, the allegation of the Counsel of assessee that requisite documents were not provided to them is a false assertion and the same should not be considered. Regarding cross-examination, ld. Senior DR submitted that the assessment was completed at the fag-end of the year when the matter was getting time-barred. Therefore, the ld. AO has no time to permit for such requests. Accordingly, ld. Senior DR strongly relied upon the orders of the revenue authorities and have submitted to uphold the same.
We have considered the rival submissions, perused the material available on record and case laws relied upon by the parties. On perusal of the orders of the revenue authorities and the submission of assessee, it is emanating that the assessee was not provided with the opportunity to cross examine the concerned persons whose statements were relied upon by the revenue authorities to make the additions in the hands of assessee. Further, the documents or evidence which are the genesis of additions as relied upon for imposing the same should have been provided to the assessee for his rebuttal which in the present case found to be missing at the end of the revenue authorities. After considering the overall factum of the matter, we find it appropriate to restore these matters back to the & Ors. (A.Y. 2012-13 to 2017-18) Manohar Manak Alloys Pvt. Ltd. files of ld. CIT(A) for reconsideration with the liberty to assessee to furnish all the necessary evidence, submissions and contentions before the ld. CIT(A), so as to defend its case.
In sum and substance, the matter is restored back to the file of the ld. CIT(A) for fresh adjudication after providing reasonable opportunity of being heard to the assessee. The assessee is directed to assist proactively during the set aside appellate proceeding, failing which the ld. CIT(A) would be at liberty to pass an appropriate order in accordance and mandate of law. of the assessee stands allowed for the statistical purposes.
Since the remaining appeal i.e., to 59/Mum/2025 with similar grounds, facts and circumstances stands at same parity, therefore, our decision in should apply mutatis mutandis to the remaining appeals also. Accordingly, ITA No. 55 to 59/Mum/2025 are also set aside to the file of ld. CIT(A), with identical directions as indicate herein above.
& Ors. (A.Y. 2012-13 to 2017-18) Manohar Manak Alloys Pvt. Ltd.
In combine result, all the captioned appeals i.e., to 59/Mum/2025 are allowed for statistical purpose in terms of our aforesaid observations. Order pronounced in the open court on 11.09.2025