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Facts
The assessee company, engaged in fabric trading, failed to provide details for reassessment proceedings for AY 2008-09, 2013-14, and 2014-15, leading to best judgment assessments by the AO. The CIT(A) partly upheld these additions, including those for share application money and commission income.
Held
The Tribunal dismissed the ground related to share application money due to lack of evidence. The commission income addition was remanded to the AO for fresh consideration based on a High Court ruling, with directions for the assessee to provide documentary evidence. Cash deposits were upheld due to unexplained sources.
Key Issues
Whether the reassessment proceedings and additions made by the AO and upheld by the CIT(A) are valid when the assessee failed to provide adequate evidence and cooperation. Whether the findings on share application money and commission income are sustainable.
Sections Cited
148, 145(3), 144, 68, 143(2), 142(1), 250, 133(6)
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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: AND SMT. RENU JAUHRI, AM
(Assessment Year: 2014-15) UGC Text and Build Private Limited Income Tax Officer – 11(1)(1), 301, Standford Plaza, New Link Road, Mumbai Vs. Andheri (W), Mumbai – 400053. PAN/GIR No. AACCR7662L (Appellant) : (Respondent) Assessee by : None : Shri Vivek Perampura (CIT-DR) Respondent by : 12.08.2025 Date of Hearing Date of Pronouncement : 13.08.2025 O R D E R Per Bench: These are captioned appeals filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) Delhi (‘ld. CIT(A)’ for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2008-09, 2013-14 and 2014-15.
As the facts are identical, we hereby pass a consolidated order by taking A.Y. 2008-09 as a lead case. ITA No. 1922/Mum/2025; (Assessment Year: 2008-09) 3. The assessee has raised the following grounds of appeal:
& Ors. (A.Y. 2008-09, 2013-14 & 2014-15) UGC Text and Build Private Limited 1. On facts and circumstances of the case and in law, the learned C.I.T.(A) erred in confirming the act of the AO in issuing the notice u/s. 148 in absence of fresh tangible material, without independent application of judicial mind and without having reason to believe that income had escaped assessment, thereby reassessment order is bad in law.
2. On facts and circumstances of the case and in law, learned C.I.T.(A) erred in confirming the act of the AO in rejecting books of accounts u/s 145(3) and passing the best judgment assessment ex-parte u/s.144 on ignoring the submissions filed on record and without considering the bonafide reasons and compelling circumstances precluding the appellant to participate in assessment.
On facts and circumstances of the case and in law, learned C.I.T.(A) erred in confirming the act of the AO in making the addition u/s 68 of Rs.8,69,000/- in respect of Share application money received during the year.
4. On facts and circumstances of the case and in law, learned C.I.T. (A) erred in confirming the act of the AO in holding the appellant as a mere entry provider not carrying genuine business activities and thereafter estimating the suppressed commission income of Rs.23,79,240/- @ 1% of alleged non-genuine purchase of Rs.11,85,42,962/ and alleged non-genuine sales of Rs. 11,93,81,087/-.
None appeared for and on behalf of the assessee when these appeals were called out for hearing, nor any adjournment application stands received. It was observed from the order sheet entries on the file that there has been no representation whatsoever by the assessee on several hearings. We therefore proceed to decide this appeal by hearing the ld. DR for the revenue and on perusal of the materials available on record.
Brief facts of the case are that the assessee is a private limited company and engaged in the business of trading in fabrics. The assessee had filed its return of income dated 30.09.2008, declaring total income at Rs. 1,89,100/- and the same was processed u/s. 143(1) of the Act on 09.08.2009. The assessee’s case was reopened vide notice u/s. 148 dated 25.03.2015 and further, Notices u/s. 143(2) and 142(1) of the Act were duly issued and served upon the assessee. Pursuant to the information received from the DCIT, Central Circle-4(3), Mumbai, the ld. AO observed that the assessee company had involved in providing accommodation entries for which it received estimated & Ors. (A.Y. 2008-09, 2013-14 & 2014-15) UGC Text and Build Private Limited commission @1% and the assessee has made purchase of Rs. 11,85,42,962/- and sales of Rs. 11,93,81,087/- and estimated commission @ 1% amounting to Rs. 23,79,240/- for the impugned year. As the assessee failed to furnish the complete details/information as required vide statutory notices issued by the ld. AO, in spite of several opportunities, the ld. AO passed the assessment order u/s. 144 of the Act, dated 21.03.2016, being the best judgment assessment, determining total income at Rs. 53,97,624/- after making an addition of Rs. 8,69,000/- u/s. 68 of the Act on account of share application money, Rs. 23,79,240/- towards commission income and Rs. 21,49,384/- towards interest income.
Aggrieved the assessee was in appeal before the first appellate authority, who vide order dated 22.01.2025 had partly allowed the grounds of appeal
s raised by the assessee by confirming the addition on account of share application money amounting to Rs. 23,79,240/- and commission income amounting to Rs. 23,79,240/- and partly allowing the interest income of Rs. 21,49,384/- on the ground that the interest income of Rs. 4,85,685/- has already been disclosed in the return of income of the assessee and directed the ld. AO to examine the financials of the assessee and find out the actual interest income earned during the year under consideration.
7. The assessee is in appeal before us, challenging the order of the ld. CIT(A).
8. The ld. DR stated that the assessee was habitually being non-compliant before the lower authorities, where the ld. AO has passed an ex parte order in all these appeals and even before the first appellate authority, the assessee has failed to furnish any documentary evidences in support of its claim. The ld. DR prayed that all these appeals be dismissed.
& Ors. (A.Y. 2008-09, 2013-14 & 2014-15) UGC Text and Build Private Limited 9. We have heard the ld. DR and perused the materials available on record. It is observed that the assessee has challenged the additions made by the ld. A.O. before the first appellate authority on account of share application money, commission income and interest income before whom the assessee submitted that the reason for non-submission of the documents was not intentional and was because of the non-cooperation by the previous management of the company being the reason for not furnishing the relevant documents before the ld. AO. The assessee further filed an application for admission of additional evidence under Rule 46A(1)(c) of the Income Tax Rules, 1962 pertaining to the issue of share application money which was rejected by the ld. CIT(A) for the reason that the assessee has submitted only the ledger confirmation without details of subscribers to the share capital and share premium, bank statement, share valuation by cash flow method, PAN, ITR details, financial statements, etc. of the subscribers. Before us, the assessee has not filed any of the details to substantiate its claim and therefore we do not find any infirmity in the order of the ld. CIT(A) in rejecting the assessee’s contention. For this reason, we deem it fit to dismiss ground no. 3 raised by the assessee.
In the result, the ground no. 3 raised by the assessee is hereby dismissed.
Further, pertaining to the addition on estimated commission, the assessee submitted that the gross margin in textile industry would be 0.35% to 0.50% of the sales and that the net margin of 1% applied by the ld. AO on both sales and purchase without giving any deduction on the expenses and further that the statement of Shri Ritesh Padamchand Bhurad (CA) admitted to 0.05% of the commission was not considered by the ld. AO.
& Ors. (A.Y. 2008-09, 2013-14 & 2014-15) UGC Text and Build Private Limited The ld. CIT(A) had also rejected the assessee’s contention on the ground that the assessee has failed to furnish any documentary evidence such as the invoice copy for sale and purchase, transportation or delivery challan and also the fact that the notice u/s. 133(6) issued by the ld. AO was not responded and was returned unserved to all the parties. Further, the ld. CIT(A) held that the assessee has not debited the expenditure under the head ‘Transportation and Handling charges’ and ‘loading and unloading’ expenses, corroborating the fact that the assessee has not carried out any actual purchase or sale transaction and had merely entered into bogus transaction for which both the lower authorities have estimated 1% commission on the total purchase and sale transactions.
Before us, the assessee has neither appeared nor filed any documentary evidence by way of additional evidence to corroborate its claim that these are genuine transaction. Pertinently, the decision of the Hon'ble Jurisdictional High Court in the case of Principal Commissioner of Income-tax vs. Buniyad Chemicals Ltd. [2025] 172 taxmann.com 462 (Bombay)/[2025] 304 Taxman 560 (Bombay)[17-03-2025] has held that when it is an admitted case of accommodation entry where the assessee has failed to disclose the identity of beneficiaries, then the credits appearing in the bank account of the assessee are to be assessed u/s. 68 of the Act and when beneficiaries are identified by the assessee, only then the rate of commission would be applicable.
In the present case in hand, we do not find any such details provided by the assessee neither before us nor before the lower authorities. Though, the revenue is not in appeal challenging the rate of commission levied by the ld. AO and upheld by the ld. CIT(A), & Ors. (A.Y. 2008-09, 2013-14 & 2014-15) UGC Text and Build Private Limited the assessee has challenged the adoption of 1% rate, and hence, we are of the opinion that the recent decision of the Hon'ble Jurisdictional High Court which was not before the ld. CIT(A) while deciding the issue in hand has to be followed in the present case which is on identical facts. We are therefore of the view that the said issue is to be remanded back to the ld. AO to decide afresh on the basis of the proposition laid down by the Hon'ble Jurisdictional High Court in the case of Buniyad Chemicals (supra). The assessee is also directed to substantiate the rate of commission by cogent documentary evidences before the ld. AO and is also directed to strictly comply with the proceeding before the ld. AO.
In the result, the ground no. 4 raised by the assessee is hereby allowed for statistical purpose.
In the result, the appeal filed by the assessee in is hereby partly allowed for statistical purpose.
(Assessment Year. 2013-14) 16. Ground no. 2 of pertains to cash deposit made by the assessee amounting to Rs. 10,78,000/- were the ld. AO made an addition on the impugned amount as undisclosed income of the assessee which was then upheld by the ld. CIT(A), for the reason that the assessee has failed to explain the source of the said cash deposits made in its bank account maintained with HDFC Bank.
Before us, the assessee has not furnished any documentary evidences to establish the source of the said deposit and in failure of the same, we deem it fit to uphold the order & Ors. (A.Y. 2008-09, 2013-14 & 2014-15) UGC Text and Build Private Limited of lower authorities. As there is no infirmity in the order of ld. CIT(A), ground no. 2 raised by the assessee is hereby dismissed.
In the result, ground no. 2 raised by the assessee is hereby dismissed.
Ground no. 3 pertains to the commission income amounting to Rs. 1,20,15,939/- @1% of purchase amounting to Rs. 59,87,23,106/- and sales of Rs. 60,28,70,882/- alleged to be bogus transaction.
The finding given in ground no. 4 of will apply mutatis mutandis to this ground also.
In the result, the ground no. 3 raised by the assessee is hereby allowed for statistical purpose. 22. In the result, the appeal filed by the assessee in is hereby partly allowed for statistical purpose.
(Assessment Year: 2014-15) 23. Ground no. 2 pertains to the commission income of Rs. 84,73,075/- at 1% of the gross transaction of Rs. 84,73,07,552/- alleged to be bogus transaction.
The finding given in ground no. 4 of will apply mutatis mutandis to this ground also.
In the result, the ground no. 2 in is hereby allowed for statistical purpose.
As there was no arguments on the legal ground raised
by the assessee, the same is not adjudicated and are hereby dismissed in all these appeals. & Ors. (A.Y. 2008-09, 2013-14 & 2014-15) UGC Text and Build Private Limited
27. In the result, the appeal filed by the assessee in is hereby partly allowed for statistical purpose.
28. In the result, all these appeals filed by the assessee are hereby partly allowed for statistical purpose. Order pronounced in the open court on 13.08.2025 Sd/- Sd/- (RENU JAUHRI) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 13.08.2025 Karishma J. Pawar (Stenographer) Copy of the Order forwarded to: