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PER OM PRAKASH KANT, AM PER OM PRAKASH KANT, AM These three appeals by the assessee are directed against three These three appeals by the assessee are directed against three These three appeals by the assessee are directed against three separate orders dated 26/08/2019, 20/06/2018 and 26/08/2019 separate orders dated 26/08/2019, 20/06/2018 and 26/08/2019 separate orders dated 26/08/2019, 20/06/2018 and 26/08/2019 passed by the Ld. Ld. Commissioner of Income-tax(Appeals) tax(Appeals)-48, Mumbai [in short ‘the Ld. CIT(A) the Ld. CIT(A)’] for assessment years 2013 ] for assessment years 2013-14, 2014-15 and 2015-16 respectively. As common grounds permeating 16 respectively. As common grounds permeating 16 respectively. As common grounds permeating from the same set of the facts have been raised in these appeals, from the same set of the facts have been raised in these appeals, from the same set of the facts have been raised in these appeals, therefore, these appeals were heard together and dispose therefore, these appeals were heard together and dispose therefore, these appeals were heard together and disposed off by way of this consolidated order for convenience and avoid way of this consolidated order for convenience and avoid way of this consolidated order for convenience and avoid repetition of facts. Despite notifying neither anyone appeared nor any Despite notifying neither anyone appeared nor any Despite notifying neither anyone appeared nor any adjournment application was filed on behalf of the assessee. On adjournment application was filed on behalf of the assessee. On adjournment application was filed on behalf of the assessee. On earlier occasions i.e. 24.01.2022, 21.02.2022 & earlier occasions i.e. 24.01.2022, 21.02.2022 & 19.05.2022 also none 19.05.2022 also none attended and matter was adjourned on written request filed. attended and matter was adjourned on written request filed. attended and matter was adjourned on written request filed. Further, on 24.05.2022, the Authorized Representative of the Further, on 24.05.2022, the Authorized Representative of the Further, on 24.05.2022, the Authorized Representative of the assessee was present and on assessee was present and on whose request, the matter was posted request, the matter was posted
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 3 & 7162/M/2019 on 13.06.2022. On 13.06.2022 also none attended, on 13.06.2022. On 13.06.2022 also none attended, and therefore, the and therefore, the matter was adjourned to 15.06.2022. But still no compliance was matter was adjourned to 15.06.2022. But still no compliance was matter was adjourned to 15.06.2022. But still no compliance was made. In the circumstances, we were of the opinion that the made. In the circumstances, we were of the opinion that the made. In the circumstances, we were of the opinion that the assessee is not interested in prosecuting the appeal. Thus same was assessee is not interested in prosecuting the appeal. Thus same was assessee is not interested in prosecuting the appeal. Thus same was heard ex-parte qua the assessee, after heari qua the assessee, after hearing arguments of the Ld. ng arguments of the Ld. DR and taking into consideration written submission of the assessee DR and taking into consideration written submission of the assessee DR and taking into consideration written submission of the assessee available on record. Assessment Year: 2013 2013-14 2. We first take the appeal of the assessee for AY 2013-14. The We first take the appeal of the assessee for AY 2013 We first take the appeal of the assessee for AY 2013 grounds raised in assessment grounds raised in assessment year 2013-14 are reproduced as 14 are reproduced as under:
1. The Ld. CIT(A) erred in upholding the addition made by Ld. AO The Ld. CIT(A) erred in upholding the addition made by Ld. AO The Ld. CIT(A) erred in upholding the addition made by Ld. AO estimating business income at estimating business income at ₹68,94,265/- rejecting the books rejecting the books of account. of account.
The Ld. CIT(A) erred in upholding the addition made by the Ld. The Ld. CIT(A) erred in upholding the addition made by the Ld. The Ld. CIT(A) erred in upholding the addition made by the Ld. AO of ₹ ₹235,00,000/- as cash credit u/s 68 of the Act. as cash credit u/s 68 of the Act. 3. The Ld. CIT(A) erred in not allowing set off of losses to be The Ld. CIT(A) erred in not allowing set off of losses to be The Ld. CIT(A) erred in not allowing set off of losses to be carried forward. carried forward.
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 4 & 7162/M/2019
Briefly stated facts of the case are that the assessee filed return stated facts of the case are that the assessee filed return stated facts of the case are that the assessee filed return of income for the year under consideration on 27/09/2013 of income for the year under consideration on 27/09/2013 of income for the year under consideration on 27/09/2013 declaring Nil income income, claiming loss of current year of claiming loss of current year of ₹10,57,574/- for carry forward.
3.1 In the case of the assessee a survey action under section 133A In the case of the assessee a survey action under section 133A In the case of the assessee a survey action under section 133A of the Income Tax Act Income Tax Act, 1961 (in short ‘the Act’) was carried out by was carried out by the Investigation Wing Investigation Wing of the Income-tax Department ax Department Mumbai on19.03.2015 alongwith 19.03.2015 alongwith search action at the premises of the search action at the premises of the ‘Luxora’ group. During the course of the survey During the course of the survey, statement of the statement of the director of the company director of the company ‘Sh Kirtikumar Tarachand Doshi Kirtikumar Tarachand Doshi’ was recorded and he was asked to furnish details of all purchase and was asked to furnish details of all purchase and was asked to furnish details of all purchase and sales transactions with sales transactions with ‘Mirah Dekor P. Ltd.’ and other and other ‘Mirah Group’ entities. He admitted that all the transactions with admitted that all the transactions with admitted that all the transactions with ‘M/s Mirah Group’ were without taking or giving any physical delivery of goods were without taking or giving any physical delivery of goods were without taking or giving any physical delivery of goods or services. He further stated that such accommodation entries were rvices. He further stated that such accommodation entries were rvices. He further stated that such accommodation entries were also provided to M/s Mirah Group also provided to M/s Mirah Group, through other concerns through other concerns
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 5 & 7162/M/2019 controlled and operated by him such as M/s Symcom, M/s Ecospace controlled and operated by him such as M/s Symcom, M/s Ecospace controlled and operated by him such as M/s Symcom, M/s Ecospace etc. During survey action survey action, the director Sh. Kiritkumar Tarachand Sh. Kiritkumar Tarachand Doshi was also asked regarding unsecured loans as also asked regarding unsecured loans as also asked regarding unsecured loans from certain entries recorded in the books of accounts of the assessee company. entries recorded in the books of accounts of the assessee company. entries recorded in the books of accounts of the assessee company.
3.2 Based on the information received of survey action from the Based on the information received of survey action from the Based on the information received of survey action from the Investigation Wing, Mumbai, the , Mumbai, the Assessing Officer Assessing Officer reopened the assessment after recording reasons to believe that income escape nt after recording reasons to believe that income escape nt after recording reasons to believe that income escaped assessment. In the assessment completed under section 147 of the assessment. In the assessment completed under section 147 of the assessment. In the assessment completed under section 147 of the Act on 20/12/2017, the on 20/12/2017, the Assessing Officer made t made two additions. Firstly, the addition was made for earning commission income Firstly, the addition was made for earning commission income Firstly, the addition was made for earning commission income of ₹68,94,265/- from providing accommodation entries, which was from providing accommodation entries, which was from providing accommodation entries, which was estimated at the rate of the 5% on sales recorded in books of at the rate of the 5% on sales recorded in books of at the rate of the 5% on sales recorded in books of accounts of ₹13,78,85, 13,78,85,318/-. Secondly, the addition was made in Secondly, the addition was made in respect of loans recorded in books of accounts from four parties respect of loans recorded in books of accounts from four parties respect of loans recorded in books of accounts from four parties namely, M/s Karishma diamonds private limited ( shma diamonds private limited ( shma diamonds private limited (₹25,00,000/-); M/s Parshwnath Gems P. Ltd. ( M/s Parshwnath Gems P. Ltd. (₹35,00,000/-) Marine Gems P Ltd ) Marine Gems P Ltd
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 6 & 7162/M/2019 (₹1,50,00,000/-) M/s Keshria ) M/s Keshria Diamonds P. Ltd. (₹25,00,000/-), holding the same as unexplained cash credit in terms of section 68 holding the same as unexplained cash credit in terms of section 68 holding the same as unexplained cash credit in terms of section 68 of the Act. Before the Ld. CIT(A), the assessee did not press ground . Before the Ld. CIT(A), the assessee did not press ground . Before the Ld. CIT(A), the assessee did not press ground challenging reopening of the assessment and therefore same was challenging reopening of the assessment and therefore same was challenging reopening of the assessment and therefore same was dismissed by the Ld. CIT(A). dismissed by the Ld. CIT(A). But on merit of the addition also, the n merit of the addition also, the Ld. CIT(A) dismissed the grounds of the assessee. Ld. CIT(A) dismissed the grounds of the assessee. Ld. CIT(A) dismissed the grounds of the assessee. Aggrieved, the assessee is in appeal before the n appeal before the Tribunal raising the ground as raising the ground as reproduced above.
Ground No. 1 of the appeal of the appeal relates to rejection of books of relates to rejection of books of accounts and addition of accounts and addition of ₹68,94,265/- to the gross profit. to the gross profit.
The Assessing Officer Assessing Officer observed that assessee failed to produce observed that assessee failed to produce bills vouchers etc. for verification hers etc. for verification. He further noted that . He further noted that the Director Sh Kirtikumar Tarachand Doshi Kirtikumar Tarachand Doshi stated during survey proceedings during survey proceedings that purchase and sale transaction with M/s Mirah décor Group that purchase and sale transaction with M/s Mirah décor Group that purchase and sale transaction with M/s Mirah décor Group were without physical delivery sical delivery and in the nature of accommodation and in the nature of accommodation entry transactions. In view of tho transactions. In view of those facts, the Assessing Officer the Assessing Officer
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 7 & 7162/M/2019 rejected the books of accounts and estimated addition at the rate of rejected the books of accounts and estimated addition at the rate of rejected the books of accounts and estimated addition at the rate of the 5% on sales of the 5% on sales of ₹13,78,85,318/- which was worked out to which was worked out to ₹68,94,265/-. The Ld. CIT(A) upheld the addition holding that profit . The Ld. CIT(A) upheld the addition holding that profit . The Ld. CIT(A) upheld the addition holding that profit embedded embedded embedded in in in bogus bogus bogus transactions transactions transactions in in in the the the form form form of of of brokerage/commission was over and above the normal profit brokerage/commission was over and above the normal profit brokerage/commission was over and above the normal profit declared by the assessee. declared by the assessee.
Before us in written submission filed, in written submission filed, the Ld. Ld. counsel of the assessee has submitted that during the year there was no assessee has submitted that during the year there was no assessee has submitted that during the year there was no transaction with ‘Mirah Group Mirah Group’ including M/s Mirah décor including M/s Mirah décor Private Limited and therefore and therefore lower authorities are not justified in rejecting authorities are not justified in rejecting books of accounts merely on the reason that said books books of accounts merely on the reason that said books books of accounts merely on the reason that said books of accounts were not produced before the were not produced before the Assessing Officer. Accordingly . Accordingly, he submitted that the assessee may be provided one more opportunity submitted that the assessee may be provided one more opportunity submitted that the assessee may be provided one more opportunity to produce books of accounts for verifying that there was no to produce books of accounts for verifying that there was no to produce books of accounts for verifying that there was no transaction with M/s Mirah Group and issue in dispute transaction with M/s Mirah Group and issue in dispute transaction with M/s Mirah Group and issue in dispute might be restored to the file of the restored to the file of the Ld. Assessing Officer.
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 8 & 7162/M/2019 6.1 Without prejudice to the objection to th Without prejudice to the objection to the rejection of books of e rejection of books of account, he further submitted that in assessment year 2014 e further submitted that in assessment year 2014 e further submitted that in assessment year 2014-15, the assessment order of which was framed earlier to the present assessment order of which was framed earlier to the present assessment order of which was framed earlier to the present assessment order, the addition ssessment order, the addition for brokerage/commission for brokerage/commission was made at the rate of two percent of the sales, whereas in the present two percent of the sales, whereas in the present two percent of the sales, whereas in the present assessment year addition has been made at assessment year addition has been made at the rate of the rate of 5%, which is arbitrary and without reference to past records. He further without reference to past records. He further without reference to past records. He further submitted that assessee has already shown a gross profit of ubmitted that assessee has already shown a gross profit of ubmitted that assessee has already shown a gross profit of ₹1,47,12,015/-, which is in excess of 5% and therefore making , which is in excess of 5% and therefore making , which is in excess of 5% and therefore making further addition estimating gross profit rate of 5%, amounts to further addition estimating gross profit rate of 5%, amounts to further addition estimating gross profit rate of 5%, amounts to double taxation and hence also the addition need to be deleted. double taxation and hence also the addition need to be deleted. double taxation and hence also the addition need to be deleted.
The Ld. DR on the other hand on the other hand submitted that in t submitted that in the absence of books of accounts, bills and vouchers and other documents to , bills and vouchers and other documents to , bills and vouchers and other documents to support the book results, the support the book results, the lower authorities are justified in authorities are justified in sustaining the addition. sustaining the addition.
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 9 & 7162/M/2019
We have heard submission of the We have heard submission of the Ld. DR on Ld. DR on the issue-in- dispute and perused the relevant material on record dispute and perused the relevant material on record dispute and perused the relevant material on record including written submission on behalf of the assessee. written submission on behalf of the assessee. The books of accounts The books of accounts of the assessee have been rejected mainly in absence of books of of the assessee have been rejected mainly in absence of books of of the assessee have been rejected mainly in absence of books of accounts, bills vouchers et accounts, bills vouchers etc. produced before the Assessing Officer Assessing Officer and on the allegation of accommodation entry transactions carried and on the allegation of accommodation entry transactions carried and on the allegation of accommodation entry transactions carried out with M/s Mirah Décor group entities. Before us out with M/s Mirah Décor group entities. Before us, the assessee has the assessee has submitted that during the year under consideration there was no submitted that during the year under consideration there was no submitted that during the year under consideration there was no transaction with M/s Mirah Group enti transaction with M/s Mirah Group entities. This fact ties. This fact of vital importance, has not been verified by the has not been verified by the Assessing Officer Assessing Officer in absence of books of accounts and absence of books of accounts and bills and vouchers bills and vouchers etc. produced by the assessee. Now before us see. Now before us, in written submissions, in written submissions, the assessee has expressed willingness to produ has expressed willingness to produce books of accounts, bills ce books of accounts, bills vouchers etc. for verification by the for verification by the Assessing Officer Assessing Officer. In view of the facts and circumstances above and in the interest of the substantial facts and circumstances above and in the interest of the substantial facts and circumstances above and in the interest of the substantial justice, we feel it appropriate to restore the issue ppropriate to restore the issue-in in-dispute to the Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 10 & 7162/M/2019 file of the Assessing Officer ssing Officer for deciding afresh. The ground No. one fresh. The ground No. one of the appeal is accordingly allowed for statistical purposes. of the appeal is accordingly allowed for statistical purposes. of the appeal is accordingly allowed for statistical purposes.
The ground No. The ground No. 2 of the appeal relates to addition of of the appeal relates to addition of ₹2,35,00,000/- in respect of loans, which have been held as cash in respect of loans, which have been held as cash in respect of loans, which have been held as cash credit under section 68 of the tion 68 of the Act.
The Assessing Officer Assessing Officer observed loans received of observed loans received of ₹25,00,000/- from M/s Karishma diamonds private limited from M/s Karishma diamonds private limited (in short “Karishma”) (in short “Karishma”), ₹35,00,000/- from M/s Parasnath from M/s Parasnath Gems private limited private limited (in short “Paraswnath”), ₹1,50,00, 1,50,00,000/- from M/s Marine from M/s Marine Gems Private Limited (in short Marine) in short Marine) and ₹25,00,000/- from M/s Keshria from M/s Keshria Diamonds Private Limited Diamonds Private Limited (in short “Keshriya”). He also noted that . He also noted that during survey proceedings, the di during survey proceedings, the director of the assessee company rector of the assessee company, Sh Kirtikumar Doshi was asked Kirtikumar Doshi was asked to justify the nature and source of those to justify the nature and source of those loan transactions but the assessee failed to substantiate and provide loan transactions but the assessee failed to substantiate and provide loan transactions but the assessee failed to substantiate and provide any details of the directors of those companies or any other contact any details of the directors of those companies or any other contact any details of the directors of those companies or any other contact of those persons. Sh of those persons. Sh Kirtikumar stated that he did not remember Kirtikumar stated that he did not remember
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 11 & 7162/M/2019 either the name of the directors or contact person from whom the name of the directors or contact person from whom the name of the directors or contact person from whom the loans were received and he was also not aware about the business received and he was also not aware about the business received and he was also not aware about the business activity of those parties from activity of those parties from whom loans were received. In view of received. In view of the above observations, the the above observations, the Assessing Officer issued notice under issued notice under section 133(6) to the parties. to the parties. In response, the parties file parties filed replies affirming the giving of loans to the assessee, giving of loans to the assessee, however, the however, the Assessing Officer was not satisfied with the creditworthiness of those parties. was not satisfied with the creditworthiness of those parties. was not satisfied with the creditworthiness of those parties.
10.1 The Ld. Assessing Officer Assessing Officer in respect of the loans from M/s e loans from M/s Karishma Diamonds Private Limited Diamonds Private Limited and M/s Paraswnath and M/s Paraswnath Gems Private Limited, has referred to the statement of Sh Gautam , has referred to the statement of Sh Gautam , has referred to the statement of Sh Gautam Bhanwarlal Jain, wherein he in his statement recorded under section Jain, wherein he in his statement recorded under section Jain, wherein he in his statement recorded under section 131 of the Act stated that these two entities stated that these two entities i.e. M/s Karishma & M/s i.e. M/s Karishma & M/s Parasnath were controlled and operated by him and the entries were controlled and operated by him and the entries were controlled and operated by him and the entries recorded in their books of accounts are all bogus entries and no books of accounts are all bogus entries and no books of accounts are all bogus entries and no business activity was carried by tho ness activity was carried by those two entities. Regarding loan from M/s Marine, the , the Assessing Officer has referred to the has referred to the Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 12 & 7162/M/2019 statement of the director director ‘Sh Pramod Kumar Ranka Sh Pramod Kumar Ranka’, wherein he admitted that the entity admitted that the entity ‘M/s Marine’ was controlled and operated was controlled and operated by him and used for providing accommodation entries. I by him and used for providing accommodation entries. I by him and used for providing accommodation entries. In respect of loan from ‘M/s Kesharia Kesharia’, the Assessing Officer referred to statement referred to statement of director Sh Vijay Narendra Kothari of director Sh Vijay Narendra Kothari, wherein he also admitted wherein he also admitted that entity was controlled controlled and operated by him and was used for operated by him and was used for providing accommodation entry. accommodation entry.
10.2 In view of above above statements, the Assessing Officer Assessing Officer was of the view that directors and the persons who controlled the companies, view that directors and the persons who controlled the companies, view that directors and the persons who controlled the companies, have admitted the fact that no real activity was conducted by those have admitted the fact that no real activity was conducted by those have admitted the fact that no real activity was conducted by those companies and companies and they were in the business of providing companies and they were in the business of providing they were in the business of providing accommodation entries only. The accommodation entries only. The Assessing Officer Assessing Officer also observed that director of the assessee also admitted that no real activity was that director of the assessee also admitted that no real activity was that director of the assessee also admitted that no real activity was carried out by the assessee company and all prices of goods were carried out by the assessee company and all prices of goods were carried out by the assessee company and all prices of goods were decided as per the convenience of the other party with whom the decided as per the convenience of the other party with whom the decided as per the convenience of the other party with whom the assessee was transacted. assessee was transacted.
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 13 & 7162/M/2019 10.3 The Assessing Office Assessing Officer noted that during survey action also the noted that during survey action also the Director of assessee- -company failed to provide any details about failed to provide any details about those companies except se companies except the statement that loans were received by loans were received by cheque and interest at the rate of 11% was paid. and interest at the rate of 11% was paid. The Assessing and interest at the rate of 11% was paid. Officer relied on the decision of the Hon’ble Supreme Court in the e decision of the Hon’ble Supreme Court in the e decision of the Hon’ble Supreme Court in the case of Kachwala Gems Gems P. Ltd. Vs JCIT (2006) 206 CTR 585(SC) Vs JCIT (2006) 206 CTR 585(SC) wherein it is held that payment by account payee cheque is not wherein it is held that payment by account payee cheque is not wherein it is held that payment by account payee cheque is not sufficient to establish the genuineness of the purchases. He further sufficient to establish the genuineness of the purchases. He further sufficient to establish the genuineness of the purchases. He further referred to of the decision of the Hon’ble referred to of the decision of the Hon’ble High Court High Court in the case of CIT Vs Prashant (p) (1994) 121CTR 20 (Cal.) CIT Vs Prashant (p) (1994) 121CTR 20 (Cal.) wherein wherein it is held that even payment by account payee cheque is not sacrosanct and it that even payment by account payee cheque is not sacrosanct and it that even payment by account payee cheque is not sacrosanct and it would not make otherwise nongenuine transactions as genuine. would not make otherwise nongenuine transactions as genuine. would not make otherwise nongenuine transactions as genuine.
10.4 In view of above observations, the In view of above observations, the Ld. Assessing Officer Assessing Officer held that assessee failed to establish (i that assessee failed to establish (i) identity of the loan provider he loan provider (ii) creditworthiness of loan providers and (iii) genuineness of the creditworthiness of loan providers and (iii) genuineness of the creditworthiness of loan providers and (iii) genuineness of the Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 14 & 7162/M/2019 transactions, and therefore he held those loans as unexplained cash s, and therefore he held those loans as unexplained cash s, and therefore he held those loans as unexplained cash credit in terms of section 68 of the credit in terms of section 68 of the Act.
Before the Ld. CIT(A) the assessee Before the Ld. CIT(A) the assessee submitted that additi submitted that additions were made relying on the third were made relying on the third-party statement and no reasonable party statement and no reasonable opportunity was given to the assessee opportunity was given to the assessee to produce necessary to produce necessary documents. The assessee f . The assessee filed affidavits of the director of iled affidavits of the director of Paraswanath and Karishma, however Paraswanath and Karishma, however same were not admitted by not admitted by the Ld. CIT(A) in terms of CIT(A) in terms of Rule 46A of Income Tax Rules Income Tax Rules, 1962. The Ld. CIT(A) rejected the retraction statement Ld. CIT(A) rejected the retraction statements given by the directors given by the directors of Paraswnath and Karishma. The assessee also filed copies of of Paraswnath and Karishma. The assessee also filed copies of of Paraswnath and Karishma. The assessee also filed copies of information, bank statement and acknowledgement of information, bank statement and acknowledgement of information, bank statement and acknowledgement of Income-tax return in respect of the parties to support its rn in respect of the parties to support its onus under section 68 under section 68 of the Act.
11.1 Ld. CIT(A) however was of the view that assessee failed to Ld. CIT(A) however was of the view that assessee failed to Ld. CIT(A) however was of the view that assessee failed to satisfactorily explain the nature and source of the credit in his books satisfactorily explain the nature and source of the credit in his books satisfactorily explain the nature and source of the credit in his books
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 15 & 7162/M/2019 of accounts and therefore sustain of accounts and therefore sustained the addition made by the the addition made by the Assessing Officer.
We have heard submission of the We have heard submission of the Ld. DR and perused the and perused the relevant material on record relevant material on record including written submission of the including written submission of the assessee. As per rule 46 . As per rule 46A of the Income-tax Rules, 1962, 1962, in following circumstances, additional evi ditional evidence produced by the assessee c dence produced by the assessee could be admitted:
a. where the where the Assessing Officer has refused to admit the has refused to admit the evidences b. where the assessee was prevented by the sufficient cause where the assessee was prevented by the sufficient cause where the assessee was prevented by the sufficient cause from producing the evidences which were called upon by from producing the evidences which were called upon by from producing the evidences which were called upon by the Assessing Offic Assessing Officer c. where the assessee was prevented by the sufficient cause the assessee was prevented by the sufficient cause the assessee was prevented by the sufficient cause from producing the evidence which are relevant to the from producing the evidence which are relevant to the from producing the evidence which are relevant to the ground of the appeal ground of the appeal
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 16 & 7162/M/2019 d. where Assessing Officer Assessing Officer has passed the order without has passed the order without giving sufficient opportunity to the assessee to adduce giving sufficient opportunity to the assessee to adduce giving sufficient opportunity to the assessee to adduce evidences relevant to the ground of the appeal levant to the ground of the appeal
From the written submissions filed by the assessee before us, From the written submissions filed by the assessee before us, From the written submissions filed by the assessee before us, we have noticed that the assessee filed a letter before the Ld. CIT(A) we have noticed that the assessee filed a letter before the Ld. CIT(A) we have noticed that the assessee filed a letter before the Ld. CIT(A) wherein the assessee had requested for filing additional evidences, wherein the assessee had requested for filing additional evidences, wherein the assessee had requested for filing additional evidences, because those evidences could not be filed before the As those evidences could not be filed before the Assessing those evidences could not be filed before the As Officer. The letter of the assessee filed before the Ld. CIT(A) on The letter of the assessee filed before the Ld. CIT(A) on The letter of the assessee filed before the Ld. CIT(A) on 07/08/2019 is available on page 18 of the paperbook. The relevant 07/08/2019 is available on page 18 of the paperbook. The relevant 07/08/2019 is available on page 18 of the paperbook. The relevant part of the said letter is reproduced as under: part of the said letter is reproduced as under:
“In connection with the above assessment year, the appellant has fi In connection with the above assessment year, the appellant has filed In connection with the above assessment year, the appellant has fi an appeal as well as made submission before your Honour. Documents an appeal as well as made submission before your Honour. Documents an appeal as well as made submission before your Honour. Documents mentioned in page no. 24 to 39 and page no. 56 to 123 are being mentioned in page no. 24 to 39 and page no. 56 to 123 are being mentioned in page no. 24 to 39 and page no. 56 to 123 are being produced afresh which were not furnished during the course of produced afresh which were not furnished during the course of produced afresh which were not furnished during the course of assessment proceedings. The assessing officer called for th assessment proceedings. The assessing officer called for th assessment proceedings. The assessing officer called for the information in the month of September,2017 pertaining to the information in the month of September,2017 pertaining to the information in the month of September,2017 pertaining to the purchases and sales as well as confirmation in relation to unsecured purchases and sales as well as confirmation in relation to unsecured purchases and sales as well as confirmation in relation to unsecured loans appearing in the balance sheet. Since the details could not be loans appearing in the balance sheet. Since the details could not be loans appearing in the balance sheet. Since the details could not be collated earlier, the appellant could gather them only collated earlier, the appellant could gather them only in the month of in the month of December, 2017. Due to complexities involved in gathering December, 2017. Due to complexities involved in gathering December, 2017. Due to complexities involved in gathering
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 17 & 7162/M/2019 information from the lenders who were already busy with their information from the lenders who were already busy with their information from the lenders who were already busy with their assessment proceedings, the appellant could not lay his hands for the assessment proceedings, the appellant could not lay his hands for the assessment proceedings, the appellant could not lay his hands for the information at earlier instance. However, when the information at earlier instance. However, when the papers were ready papers were ready for submission and the appellant approached the Assessing Officer, the for submission and the appellant approached the Assessing Officer, the for submission and the appellant approached the Assessing Officer, the appellant was informed that the assessment is framed and the appellant was informed that the assessment is framed and the appellant was informed that the assessment is framed and the submissions will not be entertained. In view of these facts clause (a) submissions will not be entertained. In view of these facts clause (a) submissions will not be entertained. In view of these facts clause (a) and clause (d). In the interest of and clause (d). In the interest of natural justice, we earnestly request natural justice, we earnestly request your Honour kindly to admit the additional evidence and oblige. We your Honour kindly to admit the additional evidence and oblige. We your Honour kindly to admit the additional evidence and oblige. We have already furnished two sets of submission which enables your have already furnished two sets of submission which enables your have already furnished two sets of submission which enables your Goodselves to forward the same to the Assessing Officer for remand Goodselves to forward the same to the Assessing Officer for remand Goodselves to forward the same to the Assessing Officer for remand report. We underta report. We undertake to appear before the Assessing Officer for ke to appear before the Assessing Officer for producing all the necessary details if any called by him. Hope your producing all the necessary details if any called by him. Hope your producing all the necessary details if any called by him. Hope your Honour will please do the needful and admit the case for adjudication Honour will please do the needful and admit the case for adjudication Honour will please do the needful and admit the case for adjudication and oblige.” 13.1 We find that in the case of M/s Sunrise Associate in We find that in the case of M/s Sunrise Associate in find that in the case of M/s Sunrise Associate in 244 & 245/Mum/2022 for AY 2013 244 & 245/Mum/2022 for AY 2013-14 & 2014-15, the Co 15, the Co-ordinate Bench, in view of retraction traction of statement by Sh. Gautam Bhanwarlal statement by Sh. Gautam Bhanwarlal Jain, has restored the matter of addition u/s 68 of the Act, back to Jain, has restored the matter of addition u/s 68 of the Act, back to Jain, has restored the matter of addition u/s 68 of the Act, back to the Assessing Officer for re the Assessing Officer for re-examination.
The Ld. DR could not controvert that there was limited time could not controvert that there was limited time could not controvert that there was limited time frame in which the assessee was asked to provide the information frame in which the assessee was asked to provide the information frame in which the assessee was asked to provide the information and before the assessee could file the said information and before the assessee could file the said information and before the assessee could file the said information, the Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 18 & 7162/M/2019 assessment order was passed on 22/12/2017. In our opinion, the assessment order was passed on 22/12/2017. In our opinion, the assessment order was passed on 22/12/2017. In our opinion, the assessee fulfils the circumstances under fils the circumstances under Rule 46A(1)( 46A(1)(d) i.e. no sufficient opportunity sufficient opportunity, therefore additional evidences are eligible for therefore additional evidences are eligible for admission. Since in respect of the ground No. admission. Since in respect of the ground No. 1 of the appeal, we of the appeal, we have already restored the issue have already restored the issue-in-dispute to the file of the the file of the Assessing Officer and therefore and therefore, for avoiding multiplicity for avoiding multiplicity of simultaneous proceedings proceedings, instead of restoring the matter to the restoring the matter to the file of Ld. CIT(A), we feel it appropriate to restore Ld. CIT(A), we feel it appropriate to restore the issue also to the issue also to the file of the Assessing Officer Assessing Officer for deciding afresh after verification of er verification of the additional evidences an the additional evidences and examination of the parties, which will examination of the parties, which will be produced by the assessee. The ground of the appeal of the be produced by the assessee. The ground of the appeal of the be produced by the assessee. The ground of the appeal of the assessee is accordingly allowed for statistical purposes. assessee is accordingly allowed for statistical purposes. assessee is accordingly allowed for statistical purposes.
Ground No. 3 of the appeals is No. 3 of the appeals is in respect of not allowing set off in respect of not allowing set off of the carry forward losses against the income determined after forward losses against the income determined after forward losses against the income determined after making additions. Since we have already restored both the issue of making additions. Since we have already restored both the issue of making additions. Since we have already restored both the issue of additions to the file of the additions to the file of the Assessing Officer and therefore set off of and therefore set off of Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 19 & 7162/M/2019 the issue of the carry carry forward losses will arise after deciding the forward losses will arise after deciding the issue afresh by the Assessing Officer Assessing Officer, and therefore at present this , and therefore at present this issue is only of academic academic nature and therefore we are dismissing, and therefore we are dismissing, the ground No. 3 of the appeal as No. 3 of the appeal as infructuous.
ITA No. 4634/MUM/2018 Assessment Year: 2014 2014-15 16. The grounds raised by the assessee for assessment year 2014 The grounds raised by the assessee for assessment year 2014- The grounds raised by the assessee for assessment year 2014 15 are reproduced as under: are reproduced as under:
The Ld. Commissioner of Income Tax (Appeals) erred in not The Ld. Commissioner of Income Tax (Appeals) erred in not The Ld. Commissioner of Income Tax (Appeals) erred in not considering the submissions made in relation to retraction of considering the submissions made in relation to retraction of considering the submissions made in relation to retraction of statements recorded in the case of Mr. Pramod Kumar Ranka and statements recorded in the case of Mr. Pramod Kumar Ranka and Mr. Cautam Jain which has a bearing on deciding the income or Mr. Cautam Jain which has a bearing on deciding the income or Mr. Cautam Jain which has a bearing on deciding the income or otherwise in the hands of the appellant. otherwise in the hands of the appellant.
2. The Ld. Commissioner of Income Tax (Appeals) erred in upholding The Ld. Commissioner of Income Tax (Appeals) erred in upholding The Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs. 1.00.00.000/- under section 68 of the Income Tax the addition of Rs. 1.00.00.000/ n 68 of the Income Tax Act. 3. The Ld. Commissioner of Income Tax (Appeals) erred in upholding The Ld. Commissioner of Income Tax (Appeals) erred in upholding The Ld. Commissioner of Income Tax (Appeals) erred in upholding the additions of Rs. 36,63,718/- as brokerage income in addition to the additions of Rs. 36,63,718/ as brokerage income in addition to the income already offered by the appellant at about 5.12% as gross the income already offered by the appellant at about 5.12% as gross the income already offered by the appellant at about 5.12% as gross profit. 4. The Ld. Commission The Ld. Commissioner of Income Tax (Appeals) erred in upholding er of Income Tax (Appeals) erred in upholding the additions of interest expenses of Rs. 16,78,356/- the additions of interest expenses of Rs. 16,78,356/
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 20 & 7162/M/2019
5. The Ld. Commissioner of Income Tax (Appeals) erred in upholding The Ld. Commissioner of Income Tax (Appeals) erred in upholding The Ld. Commissioner of Income Tax (Appeals) erred in upholding the additions of interest expenses of Rs. 6,07,472/-. the additions of interest expenses of Rs. 6,07,472/ 17. Now we take up Ground No. 3 of th Now we take up Ground No. 3 of the assessee for assessment e assessee for assessment year 2014-15 for adjudication for adjudication.
The brief facts qua, the issue The brief facts qua, the issue-in-dispute are that the Assessing dispute are that the Assessing Officer in view of fact Officer in view of fact of issuing accommodation entry bills to issuing accommodation entry bills to to M/s Mirah Group during the year under consideration, the Assess during the year under consideration, the Assessing during the year under consideration, the Assess Officer rejected books of accounts of the assessee and Officer rejected books of accounts of the assessee and Officer rejected books of accounts of the assessee and assessed commission/brokerage @ 2% on the sales of commission/brokerage @ 2% on the sales of ₹ ₹18,31,85,888/- recorded in books of accounts. The addition for brokerage was recorded in books of accounts. The addition for brokerage was recorded in books of accounts. The addition for brokerage was worked out to ₹36,63,718/ 36,63,718/-. The Ld. CIT(A) upheld the estimation of . The Ld. CIT(A) upheld the estimation of the brokerage income on the test of human probability and the brokerage income on the test of human probability and the brokerage income on the test of human probability and circumstantial evidences following decision of the Hon’ble Supreme circumstantial evidences following decision of the Hon’ble Supreme circumstantial evidences following decision of the Hon’ble Supreme Court in the case of Meenaxi Mills Ltd. 63 ITR 609 Meenaxi Mills Ltd. 63 ITR 609 Meenaxi Mills Ltd. 63 ITR 609 and McDowell & Co. 154 ITR 148. & Co. 154 ITR 148. Before us, in the written submission filed, the us, in the written submission filed, the Ld. Counsel of the assessee submitted that assessee has also Ld. Counsel of the assessee submitted that assessee has also Ld. Counsel of the assessee submitted that assessee has also declared gross profit of declared gross profit of ₹1,21,56,097/- from the business activity from the business activity
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 21 & 7162/M/2019 recorded in the books of accounts recorded in the books of accounts at the gross profit rate the gross profit rate of 5.12%. According to his submission, when the assessee has also declared submission, when the assessee has also declared submission, when the assessee has also declared gross profit @ 5% on the business activity recorded in books of gross profit @ 5% on the business activity recorded in books of gross profit @ 5% on the business activity recorded in books of account which the Assessing Officer has treated as activity of account which the Assessing Officer has treated as activity of account which the Assessing Officer has treated as activity of providing accommodation entry and therefore, the Assessing Officer providing accommodation entry and therefore, the Assessing Officer providing accommodation entry and therefore, the Assessing Officer is not justified ed ed in in in making making making separate separate separate addition addition addition for for for commission/brokerage @ 2% in addition to income already commission/brokerage @ 2% in addition to income already commission/brokerage @ 2% in addition to income already declared by the assessee from said business activity. declared by the assessee from said business activity. declared by the assessee from said business activity.
On the other hand, the Ld. DR relied he other hand, the Ld. DR relied on the order of the lower on the order of the lower authorities.
We have heard submission heard submission of the Ld. DR and of the Ld. DR and perused the relevant material on record including the order of the lower relevant material on record including the order of the lower relevant material on record including the order of the lower authorities. It is undisputed that the assessee has declared gross authorities. It is undisputed that the assessee has declared gross authorities. It is undisputed that the assessee has declared gross profit @ 5.12% on the transactions recorded in the books of profit @ 5.12% on the transactions recorded in the books of profit @ 5.12% on the transactions recorded in the books of account. The Ld. Assessing Officer has account. The Ld. Assessing Officer has treated those very treated those very transactions related to M/s transactions related to M/s M/s Mirah Group as transaction of as transaction of Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 22 & 7162/M/2019 providing accommodation entry without any real business but has providing accommodation entry without any real business but has providing accommodation entry without any real business but has not excluded the income offered by the assessee from said not excluded the income offered by the assessee from said not excluded the income offered by the assessee from said transactions of business. The Assessing Officer has transactions of business. The Assessing Officer has separately made separately made addition @ 2% on the very same transaction on which the Assessing addition @ 2% on the very same transaction on which the Assessing addition @ 2% on the very same transaction on which the Assessing Officer has declared gross profit rate of 5.12%. In our opinion, a Officer has declared gross profit rate of 5.12%. In our opinion, a Officer has declared gross profit rate of 5.12%. In our opinion, a separate addition for the brokerage or commission is not req separate addition for the brokerage or commission is not req separate addition for the brokerage or commission is not required in the facts of the case in the facts of the case. The commission or brokerage commission or brokerage @ 2% can be considered as generated from accommodation entry transactions considered as generated from accommodation entry transactions considered as generated from accommodation entry transactions, which subsumes in the gross profit @ 5.12% already declared by the in the gross profit @ 5.12% already declared by the in the gross profit @ 5.12% already declared by the assessee. The only difference assessee. The only difference is of characterization of the source of characterization of the source of the income which acc the income which according to the Assessing Officer is from the Assessing Officer is from the issuing accommodation entry bills whereas according to the issuing accommodation entry bills whereas according to the issuing accommodation entry bills whereas according to the assessee profit has been earned from business activity recorded in assessee profit has been earned from business activity recorded in assessee profit has been earned from business activity recorded in books of account. Thus lower authorities are not justified in making Thus lower authorities are not justified in making Thus lower authorities are not justified in making addition over and above the income @ 5.12% offered by the above the income @ 5.12% offered by the above the income @ 5.12% offered by the assessee from business transaction. assessee from business transaction. In view of the above discussion, In view of the above discussion,
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 23 & 7162/M/2019 we set aside the order of the lower authorities on the issue we set aside the order of the lower authorities on the issue we set aside the order of the lower authorities on the issue-in- dispute that allow the ground raised by the assessee. dispute that allow the ground raised by the assessee. dispute that allow the ground raised by the assessee.
Ground No. 1, 2, 4 and Ground No. 1, 2, 4 and 5 relates to loans received by the 5 relates to loans received by the assessee during the year under consideration and interest in respect assessee during the year under consideration and interest in respect assessee during the year under consideration and interest in respect of loans received during the year of loans received during the year/interest in respect of loan in interest in respect of loan in earlier years. In Ground No. 2, the addition of earlier years. In Ground No. 2, the addition of ₹1.00 crores received 1.00 crores received as loan from M/s Marine Gems P Ltd. has been added as unexplained Marine Gems P Ltd. has been added as unexplained Marine Gems P Ltd. has been added as unexplained cash credit in terms of section 68 of the Act. In ground No. 3, the cash credit in terms of section 68 of the Act. In ground No. 3, the cash credit in terms of section 68 of the Act. In ground No. 3, the interest, in respect of loans received from M/s Marine Gems P Ltd interest, in respect of loans received from M/s Marine Gems P Ltd interest, in respect of loans received from M/s Marine Gems P Ltd amounting to ₹16,78,356/ 16,78,356/- has been disputed. In ground No. 5, has been disputed. In ground No. 5, interest of ₹6,07,472/ 6,07,472/- credited in respect of loans received from credited in respect of loans received from M/s Parshwnath Gems P. Ltd. and M/s Parshwnath Gems P. Ltd. and Karishma Diamonds Private Karishma Diamonds Private Limited has been added has been added by the Assessing Officer u/s 68 of the Act by the Assessing Officer u/s 68 of the Act which have been disputed by the assessee. which have been disputed by the assessee.
We find that the issue We find that the issue-in-dispute of treating loan received from pute of treating loan received from parties namely M/s M/s Marine Gems P Ltd, M/s Parshwnath Gems parties namely M/s M/s Marine Gems P Ltd, M/s Parshwnath Gems parties namely M/s M/s Marine Gems P Ltd, M/s Parshwnath Gems
Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 24 & 7162/M/2019 P. Ltd., Karishma Diamonds Private Limited Karishma Diamonds Private Limited has already been has already been restored to the file of restored to the file of the Assessing Officer for deciding afresh in the Assessing Officer for deciding afresh in assessment year 2014 assessment year 2014-15. Therefore, accordingly, following our efore, accordingly, following our finding in assessment year 2013 finding in assessment year 2013-14, these grounds No. 1, 2, 4 & 5 s No. 1, 2, 4 & 5 of the appeal of the assessee are also restored to the file of the the appeal of the assessee are also restored to the file of the the appeal of the assessee are also restored to the file of the Assessing Officer for deciding afresh following our direction in Assessing Officer for deciding afresh following our direction in Assessing Officer for deciding afresh following our direction in assessment year 2013 assessment year 2013-14. These grounds of appeal are accordingly These grounds of appeal are accordingly allowed for statistical purposes. allowed for statistical purposes.
ITA No. 7162/MUM/2019 Assessment Year: 2015 2015-16 23. Now we take up the appeal of the asse Now we take up the appeal of the assessee for assessment year ssee for assessment year 2015-16. The ground No. 1 relates to rejection of books of accounts . The ground No. 1 relates to rejection of books of accounts . The ground No. 1 relates to rejection of books of accounts and making of estimated of and making of estimated of addition of ₹79,51,707/ 79,51,707/- in the year under consideration. The Assessing Officer . The Assessing Officer has estimated income has estimated income from brokerage for issuing accommodation entry bills @ 5% of the from brokerage for issuing accommodation entry bills @ 5% of the from brokerage for issuing accommodation entry bills @ 5% of the total sales. In written submission, the Ld. Counsel tal sales. In written submission, the Ld. Counsel of the assessee has submitted that during the year gross profit rate declared is of has submitted that during the year gross profit rate declared is of has submitted that during the year gross profit rate declared is of Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 25 & 7162/M/2019 6.97%, which is much higher than the brokerage/commission much higher than the brokerage/commission much higher than the brokerage/commission income estimated by the Assessing Officer by the Assessing Officer i.e. 5%. i.e. 5%. The identical issue has already been decided by us in assessment year 2014 issue has already been decided by us in assessment year 2014 issue has already been decided by us in assessment year 2014-15, therefore, following our fin therefore, following our finding in assessment year 2014 ding in assessment year 2014-15, the addition for brokerage/commission on accommodation entry bills addition for brokerage/commission on accommodation entry bills addition for brokerage/commission on accommodation entry bills on the basis of transactions for which the assessee has alread on the basis of transactions for which the assessee has alread on the basis of transactions for which the assessee has already reported gross profit @ 6.97% reported gross profit @ 6.97%, we hold that brokerage/commission we hold that brokerage/commission income is subsumed in subsumed in gross profit declared by the assessee and gross profit declared by the assessee and therefore no separate therefore no separate addition for commission/brokerage is addition for commission/brokerage is required. The ground No. 1 raised by the assessee is allowed. required. The ground No. 1 raised by the assessee is allowed. required. The ground No. 1 raised by the assessee is allowed.
The ground No. 2 of the appeal relates to addition The ground No. 2 of the appeal relates to addition of The ground No. 2 of the appeal relates to addition ₹17,18,44,093/- in terms of section 68 of the Act treating the loans in terms of section 68 of the Act treating the loans in terms of section 68 of the Act treating the loans as unexplained cash credit. The issue in dispute in the year under as unexplained cash credit. The issue in dispute in the year under as unexplained cash credit. The issue in dispute in the year under consideration is identical to the issue of the cash credit in consideration is identical to the issue of the cash credit in consideration is identical to the issue of the cash credit in assessment year 2013 essment year 2013-14 and therefore, following our fin 14 and therefore, following our finding in assessment year 2013 assessment year 2013-14, the ground No. 2 of the appeal of the ground No. 2 of the appeal of the Sarvesh Mercantile Pvt. Ltd. Sarvesh Mercantile Pvt. Ltd. 26 & 7162/M/2019 assessee is also allowed for statistical purposes with the direction assessee is also allowed for statistical purposes with the direction assessee is also allowed for statistical purposes with the direction to the Assessing Officer for deciding afresh following our dire the Assessing Officer for deciding afresh following our dire the Assessing Officer for deciding afresh following our direction in assessment year 2013 assessment year 2013-14.
In the result, the three appeals filed by the assessee are In the result, the three appeals filed by the assessee are In the result, the three appeals filed by the assessee are allowed partly for statistical allowed partly for statistical purposes.