NARMADA COMMODITIES TRADING PVT. LTD.,KOLKATA vs. ITO, WARD-6(3), KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
Per Rajesh Kumar, AM:
Theseare appeals preferred by the assessee against the orders of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 08.07.2024 for the AYs 2011-12 and 2011-12. ITA No. 1975/KOL/2024 for A.Y. 2010-11
02. The common issue raised in the grounds nos.1,2 & 3 are against the confirmation of addition of ₹35,41,517/- by the ld. CIT (A) as made by the ld. AO on account of unexplained cash credit u/s 68 of the Income-tax Act, 1961 (the Act) in respect of undisclosed bank account while the issue raised in ground no.4 is without prejudice ground and is against the order of ld. CIT (A) not restricting the addition to the ITA Nos. 1975 & 1976/KOL/2024
Narmada Commodities Trading Pvt. Ltd.; A.Y. 2010-11 & 11-12
commission at the rate of 0.20% per ₹100 instead of entire deposit being addition u/s 68 of the Act.
03. The facts in brief are that the assessee filed the return of income on 08.10.2010, declaring total income at ₹1,22,035/-, which was duly processed u/s 143(1) of the Act. Thereafter the ld. AO received information from DDIT (Investigation), Unit 2(3) Kolkata that STR in respect of account no.147119 with standard chartered bank, NS road branch and account no.024193 with Kotak Mahindra bank, Dalhousie
Branch were having cash deposits inward local transfers from certain parties and thereafter, subsequent transfer to other beneficiaries and these accounts were not disclosed by the assessee. Accordingly, the case of the assessee was reopened u/s 147 r.ws. 148 of the Act by issuing notice on 31.01.2013. In compliance the assessee stated vide letter dated 25.02.2013, that the return filed on 08.10.2010, may kindly treated as return filed in compliance to the notice issued u/s 148 of the Act. Thereafter, the statutory notices were issued along with questionnaires which were replied by the assessee’s counsel from time to time. It was submitted before the ld. AO that the assessee is engaged in trading in commodities and accordingly produced the books of account along with bank statements and other evidences which were examined by the ld. AO. The ld. AO on examination of the books of accounts and other evidences in the form of contract notes, bank statements observed that there were deposits in undisclosed bank account in account no.147119 with standard chartered bank NS road Branch which aggregated to Rs. 1,49,29,027, whereas in account no.024913, Kotak Mahindra Bank, Dalhousie Branch, the total deposits were Rs. 50,000/-. The ld. AO noted that the deposits were in the form of cash as well as cheque deposits and accordingly, the assessee was asked to explain the same failing which why same
ITA Nos. 1975 & 1976/KOL/2024
Narmada Commodities Trading Pvt. Ltd.; A.Y. 2010-11 & 11-12
should not be added to the total income of the assessee as undisclosed cash credit u/s 68 of the Act. In compliance the assessee filed the submission along with the bank accounts, bills, vouchers and contract notes and other details account. The ld. AO thereafter taking into account the written submissions and the records produced by the assessee came to the conclusion that peak deposit/credit on single date on 26.03.2010, in the undisclosed bank accounts was ₹35,41,517/- and the same was added to the income of the assessee of treating the same as unexplained cash credit.
04. In the appellate proceedings, the ld. CIT (A) confirmed the order of the ld. AO after taking into account the submission of the assessee by observing as under:-
“4. I have carefully examined the assessment order, the grounds of appeal and the written submission of the appellant in the case. From the assessment order and as admitted by the appellant, the appellant was involved in a dubious business of Jama-Kharch and acting as an intermediary in providing bogus commodity trading profits to many beneficiaries who were willing to convert their undisclosed cash into disclosed cheques by showing bogus intra-day commodity profits. It is also a fact on record that the appellant had not disclosed the impugned bank accounts to the department. Accordingly, the assessing officer on enquiry, issued a show cause notice to the appellant as to why the entire deposits in the bank accounts should not be treated as undisclosed cash credit under section 68 of the Income Tax Act. Inresponse to the same the appellant having explained with the modus operandi of its business of giving accommodation entries to those assessee who wants to convert their undisclosed cash into bogus profit in their books offered before the assessing officer the peak of credits on the closing balance of the day to be assessed as undisclosed income. Accordingly, the assessing officer proceeded to assess the peak deposits or peak credit of the undisclosed bank accounts in a single day transaction on 26/03/2010 amounting to Rs.35,41,517 as undisclosed cash credit under section 68 of the Income Tax Act.
5. The appellant before this authority argued that on providing the above accommodation entries to the beneficiaries the appellant earned a commission at the rate of 0.20 per Rs.100 of the cheque issued and the deposits made in the undisclosed bank accounts do not represent its income they are merely transfer of cash belonging to the beneficiaries to their bank accounts through assessee’s bank account in the form of bogus intra-day profit provided to them by the assessee.
ITA Nos. 1975 & 1976/KOL/2024
Narmada Commodities Trading Pvt. Ltd.; A.Y. 2010-11 & 11-12
The appellant further argued that the assessing officer was not justified in rejecting the appellant's explanation without verifying the same and the assessing officer was duty bound to verify the correctness of the explanation. In response to the AO's observation that no confirmation was filed from the parties, the appellant submitted that none of the parties would confirm to have taken accommodation entries from the appellant and it was for the AO to verify from the bank statement the true source of deposits especially when the assessee had furnished to all the details pertaining to the beneficiaries. 7. I have carefully considered the above argument of the appellant along with the case laws cited in the submission and note that none of the cases are applicable to the appellant case in as much as the appellant was indulged in a dubious activity of providing accommodation entries to those who wanted to convert their undisclosed cash into bogus profit on commodity trading. Having explained the above modus operandi, the appellant itself offered before the assessing officer to offer the peak credit for taxation during the assessment proceedings. Accordingly, the assessing officer proceeded to assess the same as undisclosed cash credit under section 68 of the Income Tax Act. Further on the admission of the appellant itself it is clear that it was difficult for the assessing officer to get the confirmation of the transaction from the parties who benefited out of these transactions and accordingly I do not find any omission on the part of the assessing officer to make any further enquiry as alleged by the appellant to disprove its case. 8. In the above facts and circumstances, I do not find any merit in the appellant argument against the addition made and accordingly I confirm the addition made by the assessing officer by considering the peak credit as proposed by the appellant. Accordingly, the ground no.2 is dismissed.” 05. After hearing the rival contentions and perusing the materials available on record, we find that undisputedly the assessee is engaged in the business of trading in commodities and was thereby providing accommodation entries to various beneficiaries. We have perused the evidences before us, wherein there is no doubt about the business of the assessee. Now, question before us is how the income to be estimated and assessed qua deposits made in the undisclosed bank accounts by the assessee. After examination of the bank accounts along with assessment order, we find that the ld. AO has taken peak credit on a single day i.e. on 26.03.2010, which in no way is a reasonable mechanism to estimate the income on such deposits. Since, it is undisputed that assessee is a broker in commodity stock ITA Nos. 1975 & 1976/KOL/2024 Narmada Commodities Trading Pvt. Ltd.; A.Y. 2010-11 & 11-12
exchange and has been providing services accordingly, in commodity transactions and charging commission at the rate of 2% as brokerage.
It is also undisputed that the assessee has not disclosed these bank accounts in the return filed during the year. There is also no dispute as to the fact that money received / deposited in the bank accounts in cash and cheques cheques were already transferred to the beneficiaries, immediately and all these entries are supported with the contract notes, copies of which is available at page nos.32 to 58
on sample basis. Therefore, considering the factual matrix of the case and the rate of commission at which the assessee carries on business of broking in commodity exchange, we are of the view that it would be reasonable if the assessee deposits in undisclosed the bank accounts are brought to tax by applying the commission of 0.2% on the amount of total deposits which the commission charged by the assessee in the normal course of business on commodity stock exchange.
Accordingly, we set aside the order of ld. CIT (A) and direct the ld. AO to make the addition at the rate of 0.2% of the total deposits i.e. Rs.
1,45,79,027/- which is aggregate deposit in both the undisclosed bank account. As a result, the addition to the tune of ₹ 29,158/- is sustained and ₹35,12,359/- directed to be deleted. The appeal of the assessee is party allowed.
ITA No.1976/KOL/2024 for A.Y. 2011-12
06. The issue raised in this appeal is similar as decided by in ITA No.
1975/KOL/2024 for A.Y. 2010-11, wherein we have directed the ld.
AO to make an addition at the rate of 0.2% on the total deposits in the undisclosed bank accounts. Accordingly, our decision in the above
ITA would apply mutatis mutandis to this appeal in ITA
No.1976/KOL/2024 as well. Accordingly we set aside the order of ld.
ITA Nos. 1975 & 1976/KOL/2024
Narmada Commodities Trading Pvt. Ltd.; A.Y. 2010-11 & 11-12
CIT (A) and direct the ld. AO to make the addition of ₹ 95,304/-
(0.2%x Rs. 4,76,52,126/=) and ₹71,60,280/- is to be deleted. The appeal of the assessee is partly allowed.
07. In the result, both the appeals of the assesseeare partly allowed.
Order pronounced in the open court on 15.01.2025. (PRADIP KUMAR CHOUBEY)
(RAJESH KUMAR)
(JUDICIAL MEMBER)
(ACCOUNTANT MEMBER)
Kolkata, Dated: 15.01.2025
Sudip Sarkar, Sr.PS
Copy of the Order forwarded to :
The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER,//
Sr. Private Secretary/ Asst.