ITO, JAMSHEDPUR vs. M/S KHOSLA STEEL INDUSTRIES PT. LTD, JAMSHEDPUR

आदेश /O R D E R PER BENCH:- These four assessee’s appeals for assessment year(s) 2007-08 to 2010-11 arise against the Commissioner of Income Tax (Appeals)-3 Patna’s common order dated 21.10.2016 passed in case Nos.401-404/CIT(A)- 3/PAT/11-12/ upholding the Assessing Officer’s identical action assessing amounts of Rs.36.78 lac, Rs.68,55,482/-, Rs.24,81,014/- and Rs.1.80 lac (assessment year-wise); respectively, involving proceedings 153A r.w.s.143(3) the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case files perused

IT(SS)A No.72-75/Ran/2016 A.Ys. 07-08 to 10-11 M/s S.K. Naredi & Co. Vs. ACIT/ DCIT CC-1,JSR Page 2 2. It emerges at the outset that all these four cases have emanated from the search in question conducted on 02.11.2009 in case of M/s S.K. Naredi & Co. He had got recorded his statement dated 25.11.2009 admitting to have been engaged in entry providing business to various people. The Assessing Officer took note of the said search statement to assess the entry business transactions involving 1% income component to make all impugned addition(s) of identical nature in these four assessment years in issue. 3. The assessee preferred appeal(s). It pleaded before the CIT(A) during the course of lower appellate proceedings that the said commission income ought to have been assessed in the hand of its partner only. These assertion at assessee’s behest is very much evident from page 10 of CIT(A)’s lower appellate order. Learned lower appellate authority has dealt with the same in the following manner:- “Appellate finding and decision: After considering the Assessing Officer's finding and submission of the appellant, I find that following facts emerged: 1. There is no dispute that the main partner of the appellant firm Sh. S.K. Naredi had arranged accommodation entries by way of share application money for the companies related to Sh. Binod Kumar Sinha (Madhu Korah group) from Kolkata entry operators. This has been admitted by Sh. S.K. Naredi in his sworn statement dated 25.12.2009 u/s 131 of the Act as well as statement dated 02.11.2009 u/s 132(4) of the Act. The transaction of accommodation entry was further corroborated from Sh B.N. Gupta of Jamshedpur in his statement dated 03.11.2009 recorded u/s 132(4) of the Act. The transaction of accommodation entries were also corroborated from the statement of entry operators. Sh Mridul Bhaumik, Chandra Bhushan Jha, P.K. Parsramka and V.K. Goenka all Kotkata based parties in their statements dated 25.12.2009 recorded u/s 131 of the Act. As per provision of sec. 132(4) of the Act, the statement recorded u/s 132(4) can be used as evidence in the proceedings under IT Act, 1961 and the evidentiary value of the statement u/s 132(4) has been confirmed by various court decisions. Thus, the appellant's contention that no findings whatsoever regarding earning of commission were found during the course of search and seizure action so as to determine undisclosed income by way of commission, cannot be accepted. 2. The appellant has raised contention that the income from commission cannot be determined in the case of appellant firm as the statement was given by Sh S.K. Naredi. It was stressed that at the most commission could be taxed in the hands of Sh S.K. Naredi (Ind.) and not the appellant firm. This contention. of the appellant was not raised before the AO, and therefore, not entertainable. Further, the statement of Sh. S.K. Naredi indicates that the accommodation entries were arranged for the companies for whom the appellant firm was providing professional services. This fact

IT(SS)A No.72-75/Ran/2016 A.Ys. 07-08 to 10-11 M/s S.K. Naredi & Co. Vs. ACIT/ DCIT CC-1,JSR Page 3 corroborate that the service of accommodation entries for the client companies cannot be treated as service provided by Sh. S.K. Naredi in his individual capacity. Thus, this contention of the appellant is not acceptable on facts of the case also. 3. During the appellate proceeding, the appellant has referred to the statement of Sh. S.K. Naredi whereby he had mentioned that out of commission charged in the range of 2% to 4%. 0.25% commission was kept by him. Based on this statement, the appellant contends that commission through accommodation entry can be estimated @ 0.25% only. From the findings in the assessment order. It is apparent that Sh S.K. Naredi of the appellant firm was the main person who had coordinated in arranging accommodation entries for the companies (clients of the appellant firm). But, in the chain of accommodation entries the main parties were the Kolkata based companies who had made available funds by way of cheque on receipt of cash. Accordingly, it can be reasonably accepted that the appellant firm through Sh S.K. Naredi must have parted with substantial portion of commission income to the Kolkata based parties. Accordingly, it will be reasonable if the commission in the appellant firm is estimated @ 1% rather than 3% taken by the AO in the assessment order. 4. During the course of appellate proceeding, the appellant has disputed the quantum of accommodation entries arranged in various financial years involved. The issue was referred to the AO for verification and in the remand report of the AO dated 10.01.2013 duly forwarded by the Range Head, the revised figure of accommodation entries financial year wise were furnished. Accordingly, the commission income @ 1% will be estimated on the revised figure of accommodation entries in each assessment year as per remand report of the AO. Based on the above facts and circumstances, I find that the total accommodation entries arranged for the AY 2007-08 has been revised to Rs.11,26,00,000/- as against Rs.12,26,00,000/- taken in the assessment order. The undisclosed commission income for the current AY @ 1% will thus work out to Rs.11,26,000/-. Hence, the addition of undisclosed commission income of Rs.36,78,000/- is hereby reduced to Rs.11,26,000/-.” 4. The assessee’s only argument raised during the course of hearing before us is that the lower authorities ought to have assessed the impugned interest income from entry business in its partner’s hands. Learned CIT-DR on the other hand places strong reliance on lower authorities action that Shri S.K. Naredi had acted as assessee’s partner only in regular course of his business and therefore, both the Assessing Officer as well as CIT(A) have rightly assessed the impugned sum in its hands. Mr. Singh particularly refers to the crucial word “we” stated to be apart of Mr. S.K. Naredi’s deposition. 5. We have given our thoughtful consideration to rival contentions. There is hardly any dispute about the assessee to be a “Chartered Accountant” firm registered as per the Act of Parliament and governed by the provisions of “Chartered Accountants Regulation Act,1949”. We do not find any material or

IT(SS)A No.72-75/Ran/2016 A.Ys. 07-08 to 10-11 M/s S.K. Naredi & Co. Vs. ACIT/ DCIT CC-1,JSR Page 4 even a slight indication in the relevant search statement (supra) that it was the assessee-firm which was ever engaged in entry operation business whilst performing its routine professional services. We rather notice during the course of hearing that Shri Naredi is a partner / director in many entities including assessee. If we go by above analogy there is no base of the lower authorities’ action as to why the assessee only was chosen to be assessed for impugned commission income as a beneficiary. We therefore reverse the lower authorities’ action assessing the income component in assessee’s hands without any material on record for this precise reason alone. The impugned commission income addition(s) hereinabove stand deleted therefore. 6. The assessee’s four appeals are allowed. Order pronounced in accordance with Rule 34(4) of the ITAT Rule by putting on Notice Board on 15/02/2019 Sd/- Sd/- (लेखा सद�य) ($या%यक सद�य) (Dr. A.L. Saini) (S.S.Godara) (Accountant Member) (Judicial Member) Ranchi, *Dkp &दनांकः- 15/02/2019 Ranchi । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक /Assessee –M/s S.K.Naredi & Co. Virdi Niwas,M. Road, Bistupur, Jamshedpur-831001 2. राज�व /Revenue-ACIT, CC-1, Office Road, Bistupur, Jamshedpur-831001 3. संबं2धत आयकर आयु4त / Concerned CIT Ranchi 4. आयकर आयु4त- अपील / CIT (A) Ranchi 5. 7वभागीय �%त%न2ध, आयकर अपील�य अ2धकरण, / DR, ITAT, Ranchi 6. गाड= फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ2धकरण, रांची