ITO-19(2)(4), MUMBAI, MUMBAI vs. NARENDRA K RAWAL(HUF), MUMBAI

This appeal by revenue is directed against the order of Ld. CIT(A)-51, Mumbai dated 14.10.2024 for assessment year (AY) 2010-11. The revenue has raised following grounds of appeal:

Brief facts of the case are that case of assessee was reopened on the basis of information received from DDIT (Inv.), Unit-7(4), Mumbai. IN the information, it was informed that a search action was carried out on 05.02.2016 in case of Vipul Vidur Bhatt and his related entities. During the search action, it was revealed that Vipul Vidur Bhatt was indulging in providing accommodation entries in the name of various entities managed by him or his person. Statement of Vipul Vidur Bhatt was recorded wherein he has accepted that he is directed in various entities / companies and also appointed dummy director. He accepted that he was operating 347 bogus entities which were operated by him for providing bogus accommodation entries. On the basis of such information, case of assessee was reopened.

Aggrieved by the order of ld. CIT(A), the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee filed detail written submission. In the submission, the assessee stated that during the search action on Vipul Vidur Bhatt, his statement was recorded and in response to specific question, he disclosed the name of assessee as one of his conduit. The assessee also submitted that in case of similar other persons, in Jayvidya M Bhatt and Rajul N Trivedi, the ld. CIT(A) have held that those persons were mere conduit and liable for addition of commission income and not of entire accommodation entries provided by them. The assessee specifically relied on question no. 15 of DDIT to Vipul Vidur Bhatt wherein the assessee was identified as a conduit.

The ld. CIT(A) on considering the submission of assessee held that action of assessing officer in treating the assessee as a beneficiary against a conduit as admitted by Vipul Vidur Bhatt in his statement is the basis of making entire addition. The ld. CIT(A) after considering the submissions of assessee and the report of investigation wing prepared in case of Vipul Bhatt. considered 1.00 % of aggregate of accommodation entry as a reasonable income and thereby restricted the addition to the extent of Rs. 46,768/- against the total addition of Rs. 46,76,800/- thereby deleted the addition of Rs. 46,30,032/-. Aggrieved by the order of ld. CIT(A), the revenue has filed present appeal before Tribunal.

I have heard the submission of learned Senior Departmental Representative (ld. Sr. DR) for the revenue submits that assessing officer made addition of various entries availed by assessee from Vipul Vidur Bhatt. The assessee is a beneficiary of such accommodation entry. The assessee has not explained the nature of such entries. The ld. CIT(A) allow relief to the assessee merely on the basis of submission of assessee without allowing opportunity to the assessing officer.

On the other hand, the ld. AR of the assessee submits that during the search action, statement of Vipul Vidur Bhatt was recorded. In his statement he in categorically stated that assessee is one of the conduit which was used to provide accommodation entries. Thus, the assessee was a part of Vipul Vidur Bhatt providing entries and not the beneficiary. In the income tax proceeding, only income component on the transaction can be taxed being profit on such transaction and not the entire transaction. Admittedly, the assessee was a part of syndicate of Vipul Vidur Bhatt, therefore, only a reasonable percentage of income can be added, which the ld. CIT(A) as reasonably consider at 1.00%. Thus, the order of ld. CIT(A) may be confirmed. In alternative submission, the ld. AR submits that on similar transaction in case of Amisha Sudhir Bhatt, the SMC bench of Mumbai Tribunal in & 6314/M/2024 dated 10.06.2025, on similar appeal by revenue consider 5.00% of the alleged accommodation entry as reasonable and directed the assessing officer accordingly. Copy of decision of SMC Bench in Amisha Sudhir Bhatt is filed.

At the time of conclusion of submissions of both the parties, I directed both the learned representative to file the list of various entities of Vipul Vidur Bhatt and his statement if any. In compliance of my direction, the ld. Sr. DR for the revenue as well as ld AR of the assessee filed the list of 347 various entities allegedly managed by Vipul Vidur Bhatt on record.

I have considered the rival submissions of both the parties, order of lower authorities and the material placed before me. I find that assessing officer while making addition of Rs. 46,76,800/- has not specified the nature of transaction whether it was in the form of sales of any goods or against purchase of any material or in the name of loan secured or unsecured. The assessing officer simply in the reasons recorded mentioned that assessee availed accommodation entry from Vipul Vidur Bhatt. It is also an admitted fact that during assessment, the assessee except filing return of income has not filing any explanation to substantiate or explain the transaction. I find that before ld. CIT(A), the assessee relied on the statement of Vipul Vidur Bhatt.

At the time of hearing I specifically called the statement of Vipul Bhatt, which if filed on record. On perusal of statement of Vipul Vidur Bhatt and the list of various entities, which is part of a statement, I find that the name of assessee appeared at serial no. 228. Vipul Vidur Bhatt in his statement specifically stated that he was using this entity (assessee/ Narendra Kumar Rawal-HUF) for providing bogus accommodation entries to various beneficiaries, control of entire activities of income tax related the matter, accounting matter, bank account transaction and share transaction etc. of assessee was managed for bogus accommodation entries. I find that at the time of recording statement no specific question was asked by Authorised Officer about the nature of specific entry whether in the form of sale, purchase or loan or share application etc. Thus, from the record of revenue it is an admitted fact that assessee-HUF is also a part of a conduit of Vipul Vidur Bhatt and cannot be treated independently. I find that even before ld. CIT(A), the assessee has not explained the nature of transaction. The assessee is a conduit of Vipul Bhatt and entire transaction cannot be added his income. Similarly, making addition @ 1.00 % of transaction of commission income is not justified unless the nature of transaction is explained. Thus following the decision of SMC Bench in Amisha Sudhir Bhatt (supra), the order of ld. CIT(A) is modified and the reasonable percentage of income of assessee is estimated @ 5.00 % in place of 1.00% as estimated by ld. CIT(A). Thus, the revenue is allowed part relief. In the result, the grounds of appeal raised by the revenue are partly allowed.

In the result, the appeal of the revenue is partly allowed.