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Facts
The Revenue appealed against the CIT(A)'s order deleting an addition of Rs. 64,47,880/-. The addition was made on account of unexplained income, alleging the assessee availed accommodation entries from a group managed by Shri Vipul V. Bhatt.
Held
The Tribunal found that the CIT(A) misdirected himself by treating the assessee as one of the concerns controlled by Shri Vipul V. Bhatt, while the AO identified the assessee as a beneficiary of accommodation entries. The Tribunal set aside the CIT(A)'s order and restored the matter to the AO.
Key Issues
Whether the CIT(A) was justified in deleting the addition made by the AO concerning accommodation entries, and if the assessee was a beneficiary or a conduit.
Sections Cited
69, 132, 148, 144, 68, 46A
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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
ORDER PER OM PRAKASH KANT, AM
This appeal by the Revenue is directed against order dated 30.01.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2010-11, raising following grounds:
1. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 64,47,880/- made by the u/s. 69 of the act on account of un- explained income by ignoring the fact that the assessee was one of the beneficiaries for obtaining accommodation entries one of the beneficiaries for obtaining accommodation entries one of the beneficiaries for obtaining accommodation entries and was also acted as a conduit for providing entries in the and was also acted as a conduit for providing entries in the and was also acted as a conduit for providing entries in the form of commission of bogus purchases made from t form of commission of bogus purchases made from the hawala he hawala traders, which are managed and controlled by Shri. Vipul V traders, which are managed and controlled by Shri. Vipul V traders, which are managed and controlled by Shri. Vipul V Bhatt ?"
2. Whether on the facts and circumstances of the case and in 2. Whether on the facts and circumstances of the case and in 2. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. law, the ld. CIT(A) has erred in deleting the addition of Rs. law, the ld. CIT(A) has erred in deleting the addition of Rs. 64,47,880/ made by the u/s. 69 of the act on account of 64,47,880/ made by the u/s. 69 of the act on account of 64,47,880/ made by the u/s. 69 of the act on account of un- explained income, without appreciating the fact the addition explained income, without appreciating the fact the addition explained income, without appreciating the fact the addition was was was made made made by by by the the the AO, AO, AO, on on on the the the basis basis basis of of of creditable creditable creditable information/report of DGIT(Inv.), Mumbai, post search & seizure information/report of DGIT(Inv.), Mumbai, post search & seizure information/report of DGIT(Inv.), Mumbai, post search & seizure action on Shri. Vipul Bhatt V. Bhatt, an entry provider, who has action on Shri. Vipul Bhatt V. Bhatt, an entry provider, who has action on Shri. Vipul Bhatt V. Bhatt, an entry provider, who has admitted in his admitted in his statement on oath of managed and controlled statement on oath of managed and controlled almost 347 bogus operators and was involved in the business almost 347 bogus operators and was involved in the business almost 347 bogus operators and was involved in the business of providing accommodations entries of bogus purchases and of providing accommodations entries of bogus purchases and of providing accommodations entries of bogus purchases and assessee was found to be one of the beneficiaries of obtaining assessee was found to be one of the beneficiaries of obtaining assessee was found to be one of the beneficiaries of obtaining as well as providing accommod as well as providing accommodation entries to beneficiaries ? ation entries to beneficiaries ? 3." Whether on the facts and circumstances of the case and in 3." Whether on the facts and circumstances of the case and in 3." Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. law, the ld. CIT(A) has erred in deleting the addition of Rs. law, the ld. CIT(A) has erred in deleting the addition of Rs. 64,47,880/-made by the u/s. 69 of the act on account of un made by the u/s. 69 of the act on account of un made by the u/s. 69 of the act on account of un- explained income without appreciating th explained income without appreciating that during the re at during the re- assessment assessment assessment proceedings proceedings proceedings despite despite despite of of of providing providing providing various various various opportunities, the assessee has failed to proved that he was not opportunities, the assessee has failed to proved that he was not opportunities, the assessee has failed to proved that he was not a beneficiary of alleged transactions, nor has provided any a beneficiary of alleged transactions, nor has provided any a beneficiary of alleged transactions, nor has provided any explanation or evidences which proves that he was used as explanation or evidences which proves that he was used as explanation or evidences which proves that he was used as only conduit by the Shri. Vipul V Bhatt, in such transactions?" conduit by the Shri. Vipul V Bhatt, in such transactions?" conduit by the Shri. Vipul V Bhatt, in such transactions?" 4. "Whether on the facts and circumstances of the case and in 4. "Whether on the facts and circumstances of the case and in 4. "Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is right in deleting the addition of Rs. law, the ld. CIT(A) is right in deleting the addition of Rs. law, the ld. CIT(A) is right in deleting the addition of Rs. 47,88,350/- and directed to estimate the commission income at and directed to estimate the commission income at and directed to estimate the commission income at 1% of the total debit transaction in the bank account, is total debit transaction in the bank account, is total debit transaction in the bank account, is attributable to the assessee on account of acting as conduit in attributable to the assessee on account of acting as conduit in attributable to the assessee on account of acting as conduit in the business of providing accommodation entries of bogus the business of providing accommodation entries of bogus the business of providing accommodation entries of bogus purchases ? 5. The tax effect involved in this case is Rs. 14,79,600/ 5. The tax effect involved in this case is Rs. 14,79,600/ 5. The tax effect involved in this case is Rs. 14,79,600/- which is below the prescribed limit mentioned by the CBDT's latest he prescribed limit mentioned by the CBDT's latest he prescribed limit mentioned by the CBDT's latest Circular No. 09/2024 Dated. 17.09.2024. However, this appeal Circular No. 09/2024 Dated. 17.09.2024. However, this appeal Circular No. 09/2024 Dated. 17.09.2024. However, this appeal is being filed as it is covered under the exception provided in is being filed as it is covered under the exception provided in is being filed as it is covered under the exception provided in para. 3.1 (h) of the board Instruction No. 279/Misc. 142/2007 para. 3.1 (h) of the board Instruction No. 279/Misc. 142/2007 para. 3.1 (h) of the board Instruction No. 279/Misc. 142/2007- ITJ(Pt), Circular ITJ(Pt), Circular No. 5/2024 Dated. 15.03.2024,, wherein it is No. 5/2024 Dated. 15.03.2024,, wherein it is stated that in cases involving "Organized Tax Evasion" stated that in cases involving "Organized Tax Evasion" stated that in cases involving "Organized Tax Evasion" including cases of accommodation entry of bogus purchases, including cases of accommodation entry of bogus purchases, including cases of accommodation entry of bogus purchases, the decision to file appeal/SLP shall be taken on merit without the decision to file appeal/SLP shall be taken on merit without the decision to file appeal/SLP shall be taken on merit without regard to the tax effect and the regard to the tax effect and the monetary limit..
At the outset, it is observed that despite issuance of notice, At the outset, it is observed that despite issuance of notice, At the outset, it is observed that despite issuance of notice, none appeared on behalf of the assessee nor was any application none appeared on behalf of the assessee nor was any application none appeared on behalf of the assessee nor was any application moved seeking adjournment of the proceedings. Upon perusal of the moved seeking adjournment of the proceedings. Upon perusal of the moved seeking adjournment of the proceedings. Upon perusal of the record, it transpires that the notice issue record, it transpires that the notice issued for hearing dated d for hearing dated 14.05.2025 was returned unserved by the postal authorities with 14.05.2025 was returned unserved by the postal authorities with 14.05.2025 was returned unserved by the postal authorities with the endorsement “party refused”. In view of the aforesaid the endorsement “party refused”. In view of the aforesaid the endorsement “party refused”. In view of the aforesaid circumstances, this Bench was of the considered view that the circumstances, this Bench was of the considered view that the circumstances, this Bench was of the considered view that the assessee was not interested in prosecuting the matter. Accordingly, assessee was not interested in prosecuting the matte assessee was not interested in prosecuting the matte the appeal was proceeded ex the appeal was proceeded ex-parte qua the assessee and heard on parte qua the assessee and heard on merits after due consideration of the submissions advanced by the merits after due consideration of the submissions advanced by the merits after due consideration of the submissions advanced by the learned Departmental Representative (Ld. DR). learned Departmental Representative (Ld. DR).
The brief facts giving rise to the present dispute are that t The brief facts giving rise to the present dispute are that t The brief facts giving rise to the present dispute are that the assessee had filed its return of income on 02.09.2011, declaring assessee had filed its return of income on 02.09.2011, declaring assessee had filed its return of income on 02.09.2011, declaring total income of ₹2,14,950/ 2,14,950/-. Based on specific information received . Based on specific information received from the office of the Deputy Director of Income from the office of the Deputy Director of Income-tax (Investigation), tax (Investigation), Unit-7, Mumbai, indicating that the assessee had a 7, Mumbai, indicating that the assessee had a 7, Mumbai, indicating that the assessee had availed of accommodation entries from a group of concerns allegedly managed accommodation entries from a group of concerns allegedly managed accommodation entries from a group of concerns allegedly managed and controlled by one Shri Vipul V. Bhatt on which a search was and controlled by one Shri Vipul V. Bhatt on which a search was and controlled by one Shri Vipul V. Bhatt on which a search was carried out under Section 132 of the Income carried out under Section 132 of the Income-tax Act, 1961 (for tax Act, 1961 (for short, “the Act”). On the basis of such information, the Assessing short, “the Act”). On the basis of such information, t short, “the Act”). On the basis of such information, t Officer recorded reasons to believe that income chargeable to tax Officer recorded reasons to believe that income chargeable to tax Officer recorded reasons to believe that income chargeable to tax had escaped assessment and consequently issued notice under had escaped assessment and consequently issued notice under had escaped assessment and consequently issued notice under Section 148 of the Act on 30.03.2017 to reopen the assessment. Section 148 of the Act on 30.03.2017 to reopen the assessment. Section 148 of the Act on 30.03.2017 to reopen the assessment. During the course of reassessment proceedings, several statutory During the course of reassessment proceedings, several During the course of reassessment proceedings, several notices were issued to the assessee. However, there was no notices were issued to the assessee. However, there was no notices were issued to the assessee. However, there was no compliance on the part of the assessee. The Assessing Officer, compliance on the part of the assessee. The Assessing Officer, compliance on the part of the assessee. The Assessing Officer, having noted that the assessee had received accommodation entries having noted that the assessee had received accommodation entries having noted that the assessee had received accommodation entries aggregating to ₹64,47,880/ 64,47,880/- during the relevant previous during the relevant previous year, proceeded to complete the assessment under Section 144 of the Act, proceeded to complete the assessment under Section 144 of the Act, proceeded to complete the assessment under Section 144 of the Act, treating the said amount as unexplained income. treating the said amount as unexplained income.
3.1 In the appeal preferred before the Ld. CIT(A), the assessee In the appeal preferred before the Ld. CIT(A), the assessee In the appeal preferred before the Ld. CIT(A), the assessee placed reliance on the sworn statement of Shri Vipul V. Bhatt and placed reliance on the sworn statement of Shri Vipul V. Bhatt and placed reliance on the sworn statement of Shri Vipul V. Bhatt and submitted that his name was misused for accommodation entry tted that his name was misused for accommodation entry tted that his name was misused for accommodation entry purposes and that he had merely received commission for allowing purposes and that he had merely received commission for allowing purposes and that he had merely received commission for allowing such entries. The assessee also placed reliance upon certain such entries. The assessee also placed reliance upon certain such entries. The assessee also placed reliance upon certain appellate orders passed in the cases of other similarly placed appellate orders passed in the cases of other similarly placed appellate orders passed in the cases of other similarly placed parties, such as Mr. Rajul M. Trivedi, wherein the Ld. CIT(A) h as Mr. Rajul M. Trivedi, wherein the Ld. CIT(A)-46, h as Mr. Rajul M. Trivedi, wherein the Ld. CIT(A) Mumbai had deleted the entire addition made under Section 68 of Mumbai had deleted the entire addition made under Section 68 of Mumbai had deleted the entire addition made under Section 68 of the Act and instead directed the Assessing Officer to assess only the the Act and instead directed the Assessing Officer to assess only the the Act and instead directed the Assessing Officer to assess only the commission income @ 0.21% of the debit side transactions recorded commission income @ 0.21% of the debit side transactions recorded commission income @ 0.21% of the debit side transactions recorded in the bank accounts of those entities. the bank accounts of those entities.
3.2 After considering the submissions and materials placed before After considering the submissions and materials placed before After considering the submissions and materials placed before him, the Ld. CIT(A) took note of the fact that the appellant was one him, the Ld. CIT(A) took note of the fact that the appellant was one him, the Ld. CIT(A) took note of the fact that the appellant was one among the 347 persons named in the sworn statement of Shri Vipul among the 347 persons named in the sworn statement of Shri Vipul among the 347 persons named in the sworn statement of Shri Vipul Vidur Bhatt (specifically at Serial No. 129 in response to Question fically at Serial No. 129 in response to Question fically at Serial No. 129 in response to Question No. 15) and held that the assessee was not the real beneficiary of No. 15) and held that the assessee was not the real beneficiary of No. 15) and held that the assessee was not the real beneficiary of the said transactions. Relying on similar decisions in other cases, the said transactions. Relying on similar decisions in other cases, the said transactions. Relying on similar decisions in other cases, the Ld. CIT(A) concluded that an estimation of commission income the Ld. CIT(A) concluded that an estimation of commission income the Ld. CIT(A) concluded that an estimation of commission income @ 1% of the total debit transactions would meet the ends of justice f the total debit transactions would meet the ends of justice f the total debit transactions would meet the ends of justice and accordingly deleted the addition of and accordingly deleted the addition of ₹64,47,880/ 64,47,880/- made by the Assessing Officer. The relevant finding of the ld CIT(A) is reproduced Assessing Officer. The relevant finding of the ld CIT(A) is reproduced Assessing Officer. The relevant finding of the ld CIT(A) is reproduced as under:
“5. I have carefully considered the assessment order, the grounds 5. I have carefully considered the assessment order, the grounds 5. I have carefully considered the assessment order, the grounds of appeal and other relevant material on record. It is noted from of appeal and other relevant material on record. It is noted from of appeal and other relevant material on record. It is noted from the records that the assessment challenged in appeal is an ex the records that the assessment challenged in appeal is an ex the records that the assessment challenged in appeal is an ex- parte order under section 144 of the Act. parte order under section 144 of the Act. The appellant, in th The appellant, in the written submission, argued that the e written submission, argued that the assessing officer erred in treating him as a beneficiary. Further assessing officer erred in treating him as a beneficiary. Further assessing officer erred in treating him as a beneficiary. Further relying on the statement of Shri. Vipul Bhatt, which was used as relying on the statement of Shri. Vipul Bhatt, which was used as relying on the statement of Shri. Vipul Bhatt, which was used as the basis for the additions, it was contended that his name was the basis for the additions, it was contended that his name was the basis for the additions, it was contended that his name was used for accommodation used for accommodation business for a commission. The appellant business for a commission. The appellant also referenced cases of assessment arising from the search in the also referenced cases of assessment arising from the search in the also referenced cases of assessment arising from the search in the case of Vipul Bhatt, wherein the appellate authorities have made case of Vipul Bhatt, wherein the appellate authorities have made case of Vipul Bhatt, wherein the appellate authorities have made decisions to assess only the commission on the transacted decisions to assess only the commission on the transacted decisions to assess only the commission on the transacted amounts. I have carefully I have carefully considered the appellant's written submission and considered the appellant's written submission and noted that the appellant (refer S.No.129 of the list of entities per noted that the appellant (refer S.No.129 of the list of entities per noted that the appellant (refer S.No.129 of the list of entities per Q.15 of the Sworn statement of Vipul Vidur Bhatt) was one of the Q.15 of the Sworn statement of Vipul Vidur Bhatt) was one of the Q.15 of the Sworn statement of Vipul Vidur Bhatt) was one of the 347 individuals managed by Shri Vipul Vidur Bhatt to provide 347 individuals managed by Shri Vipul Vidur Bhatt to provide 347 individuals managed by Shri Vipul Vidur Bhatt to provide accommodation entries to the beneficiaries. It is noted that the ion entries to the beneficiaries. It is noted that the ion entries to the beneficiaries. It is noted that the appellant is not the beneficiary of the mentioned transactions. appellant is not the beneficiary of the mentioned transactions. appellant is not the beneficiary of the mentioned transactions. Accordingly, taking into consideration the decision of first Accordingly, taking into consideration the decision of first Accordingly, taking into consideration the decision of first appellate authorities in similar cases and the other judicial appellate authorities in similar cases and the other judicial appellate authorities in similar cases and the other judicial precedents rel precedents relied upon by the appellant, I am of the considered ied upon by the appellant, I am of the considered view that assessing the commission income at 1% of the total debit view that assessing the commission income at 1% of the total debit view that assessing the commission income at 1% of the total debit transaction in the bank account of the appellant would meet the transaction in the bank account of the appellant would meet the transaction in the bank account of the appellant would meet the ends of justice, as the appellant is not the real owner or ends of justice, as the appellant is not the real owner or ends of justice, as the appellant is not the real owner or beneficiary of t beneficiary of the transactions in the bank account. Therefore, the he transactions in the bank account. Therefore, the addition made by the assessing officer is deleted, and the addition made by the assessing officer is deleted, and the addition made by the assessing officer is deleted, and the assessing officer is directed to estimate the commission income of assessing officer is directed to estimate the commission income of assessing officer is directed to estimate the commission income of the the the appellant appellant appellant at at at 1% 1% 1% of of of the the the total total total debit debit debit transaction transaction transaction in in in the bank account. account.”
4. Before us, the Ld. DR vehemently contended that the fore us, the Ld. DR vehemently contended that the fore us, the Ld. DR vehemently contended that the Assessing Officer had clearly identified the assessee as a beneficiary Assessing Officer had clearly identified the assessee as a beneficiary Assessing Officer had clearly identified the assessee as a beneficiary of accommodation entries received from 47 parties out of the total of accommodation entries received from 47 parties out of the total of accommodation entries received from 47 parties out of the total 347 concerns controlled by Shri Vipul V. Bhatt. It was submitted 347 concerns controlled by Shri Vipul V. Bhatt. It was submitted 347 concerns controlled by Shri Vipul V. Bhatt. It was submitted that the findings of the Ld. CIT(A) are contrary to the record and, t the findings of the Ld. CIT(A) are contrary to the record and, t the findings of the Ld. CIT(A) are contrary to the record and, more importantly, that the statement of Shri Vipul V. Bhatt and more importantly, that the statement of Shri Vipul V. Bhatt and more importantly, that the statement of Shri Vipul V. Bhatt and other material were filed for the first time before the Ld. CIT(A), other material were filed for the first time before the Ld. CIT(A), other material were filed for the first time before the Ld. CIT(A), without being confronted to the Assessing Officer, thus violating the without being confronted to the Assessing Officer, thus vio without being confronted to the Assessing Officer, thus vio principles of natural justice and Rule 46A of the Income-tax Rules, principles of natural justice and Rule 46A of the Income principles of natural justice and Rule 46A of the Income 1962.
5. Upon careful consideration of the rival contentions and Upon careful consideration of the rival contentions and Upon careful consideration of the rival contentions and material available on record, we find considerable merit in the material available on record, we find considerable merit in the material available on record, we find considerable merit in the submissions advanced by the Ld. DR. It appears t submissions advanced by the Ld. DR. It appears that the Ld. CIT(A) hat the Ld. CIT(A) has misdirected himself in treating the assessee as one of the has misdirected himself in treating the assessee as one of the has misdirected himself in treating the assessee as one of the concerns controlled by Shri Vipul V. Bhatt, whereas the Assessing concerns controlled by Shri Vipul V. Bhatt, whereas the Assessing concerns controlled by Shri Vipul V. Bhatt, whereas the Assessing Officer had specifically identified the assessee as a beneficiary of Officer had specifically identified the assessee as a beneficiary of Officer had specifically identified the assessee as a beneficiary of accommodation entries issued by such en accommodation entries issued by such entities. The reliance placed tities. The reliance placed by the Ld. CIT(A) on comparable cases without proper verification of by the Ld. CIT(A) on comparable cases without proper verification of by the Ld. CIT(A) on comparable cases without proper verification of the factual matrix of the present case, in our considered view, is the factual matrix of the present case, in our considered view, is the factual matrix of the present case, in our considered view, is misplaced.
5.1In the circumstances, we are of the considered view that the 5.1In the circumstances, we are of the considered view that the 5.1In the circumstances, we are of the considered view that the impugned order of the Ld. CIT(A) cannot be sustained in law. We, the Ld. CIT(A) cannot be sustained in law. We, the Ld. CIT(A) cannot be sustained in law. We, therefore, set aside the said findings and restore the matter to the therefore, set aside the said findings and restore the matter to the therefore, set aside the said findings and restore the matter to the file of the Assessing Officer with a direction to the assessee to file of the Assessing Officer with a direction to the assessee to file of the Assessing Officer with a direction to the assessee to furnish all relevant documentary evidence to substantiate his claim furnish all relevant documentary evidence to substantiate his claim furnish all relevant documentary evidence to substantiate his claim that the transactions were genuine and not in the nature of the transactions were genuine and not in the nature of the transactions were genuine and not in the nature of accommodation entries. The Assessing Officer shall consider the accommodation entries. The Assessing Officer shall consider the accommodation entries. The Assessing Officer shall consider the same in accordance with law and after affording the assessee a same in accordance with law and after affording the assessee a same in accordance with law and after affording the assessee a reasonable opportunity of being heard. reasonable opportunity of being heard.
5.2 In the result, the grounds of a In the result, the grounds of appeal of the assessee are allowed ppeal of the assessee are allowed for statistical purposes. for statistical purposes.
In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes. statistical purposes.