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Facts
The assessee, Rakesh H. Mehta HUF, engaged in steel trading, was involved in a search operation. During the search, incriminating materials were found, suggesting the assessee provided accommodation entries and bogus purchase bills to BVG India Ltd. for commission. The assessee failed to provide supporting documents for these transactions.
Held
The Tribunal held that the assessee was involved in providing accommodation entries and bogus purchase bills, and the addition made by the Assessing Officer on account of commission was justified. The assessee's plea regarding the lack of opportunity for cross-examination was dismissed.
Key Issues
Whether the assessee provided accommodation entries and bogus purchase bills to BVG India Ltd. for commission, and if the addition made by the AO was justified. Whether the assessee was denied the opportunity for cross-examination.
Sections Cited
132, 142(1), 250, 153D, 132(4)
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Income Tax Appellate Tribunal, PUNE BENCHES “B”, PUNE
Before: DR.MANISH BORAD & SHRI VINAY BHAMORE
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned three appeals pertaining to the Assessment Years 2018-19 and 2019-20 at the instance of assessee are directed against the composite order dated 21.06.2024 passed by CIT(A), Pune-11 u/s.250 of the Income-tax Act, 1961 (in short ‘the Act’) which inturn are arising out of the respective Assessment orders.
When the appeals were called for, none appeared on behalf of the assessee despite due service of notice of hearing. On the previous two occasions also, assessee remained unrepresented. We therefore proceed to dispose of these appeals with the able assistance from the ld. Departmental Representative exparte qua the assessee. to 1733/PUN/2024 Rakesh H. Mehta HUF
Since the issues raised by the assessee are common for all the three years under appeal, we proceed to dispose of these appeals by way of this consolidated order for the sake of convenience.
At the outset, we find the assessee has filed two appeals for the A.Y. 2019-20 and the same are numbered as respectively. Form No.36, grounds of appeal and the figures of addition are also same. The assessment order is also one and the same. Therefore, we dismiss one of the appeal, namely as ‘Infructuous’.
5. Now we proceed to take up the appeal for A.Y. 2018-19. Facts of the case in brief are that the assessee is a HUF engaged in the business of Trading of Steel. Income of Rs.35,38,720/- was declared in the return filed for the A.Y. 2018-19 on 01.10.2018. A search and seizure action u/s.132 of the Act was conducted in the BVG Group of cases on 06.11.2019 in which the assessee was also covered and certain incriminating materials were impounded. Statutory notices were issued to the asssessee to which the assessee made compliance. Based on the seized material and information furnished by the assessee, the Assessing Officer noticed that the assessee made sale of Rs.12,85,36,639/- to M/s. BVG India Ltd. Ld. AO vide notice u/s.142(1) of the Act requested the assessee to submit all purchase/sale bills, delivery challans making the transactions with M/s. BVG India Ltd., ledger account of all parties with whom the assessee made purchases, transport bills etc. explaining the procedure involved in the business along with details of documents. In absence of any submissions made by the assessee to 1733/PUN/2024 Rakesh H. Mehta HUF to substantiate the genuineness of the transactions with supporting documents, ld. AO opined that the assessee made bogus entries by way of sales. Therefore, he estimated the commission @1% of the alleged sales made by the assesssee and made addition of the said sum which worked out to Rs.12,85,366/-.
6. Aggrieved assessee preferred appeal before the ld.CIT(A) contending that the ld. AO erred in making the alleged addition as the assessment has attained finality as on the date of search and no incriminating material in relation to commission income was seized. It was further contended that ld. AO has not provided the copy of statements given by Mr.Madhuchandra Kalaskar, AGM Finance with M/s. BVG India Ltd. u/s.132(4) of the Act. Assessee was not given proper opportunity of being heard. However, ld.CIT(A) rejecting the contentions made by the assessee upheld the addition made by the Assessing Officer.
7. So far as A.Y. 2019-20 is concerned, ld. AO made addition of Rs.1,45,419/- on account of commission income being 1% on the alleged bogus purchases shown by the assessee at Rs.1,45,41,902/-. The ld.CIT(A) confirmed the addition made by the AO as the facts and circumstances for both the A.yrs. 2018-19 and 2019-20 are similar. The ld.CIT(A) has given his findings at para Nos. 11 to 16 of the impugned order.
8. Now the assessee is in appeals before the Tribunal challenging the impugned order.
We have heard the ld. Departmental Representative and perused the record placed before us. In sofar as the assessment year 2018-19 is concerned, we find the ld.CIT(A) has affirmed the action of the Assessing Officer by observing as under : to 1733/PUN/2024 Rakesh H. Mehta HUF “Findings 6. I have considered the facts of the case and the submission made by the appellant. As discussed earlier in this order, the search on the appellant was conducted as a part of BVG group. During the search at the residence of Shri Madhuchandra Kalaskar who was working as Assistant General Manager (Finance) with M/s BVG India Limited, his mobile phone was seized and print out of WhatsApp conversations of his mobile (IMEI 1:869430045490215, ΙΜΕΙ 2: 869430045490207) were taken and seized. These WhatsApp conversations are with various persons such as the Chairman of BVG India and other persons including Shri Rakesh Mehta. Chats with these persons were in coded language which was confronted with Shri Kalaskar and he explained that the chats are related to cash payments made at various locations on the instructions of the Chairman of M/s BVG India Limited. When asked about the methodology of these cash transactions, Shri Kalaskar stated that the assessee company is using services of brokers. He stated that money through banking channels is transferred to the bank account of the party as told by these brokers and thereafter the cash is arranged by these brokers at the desired location. As admitted by Shri Madhu Kalaskar, Shri Rakesh Mehta was one of these brokers who used to issue bogus purchase bills to BVG India in lieu of Commission. The amount received as sale consideration through banking channel used to be returned in cash to BVG India, by Shri Mehta.
It may be further mentioned that during the search operation on the assessee, Shri Rakesh Mehta was asked by the Authorised Officer to produce the ledger account of all parties from whom he has purchased goods which have been sold to M/s BVG India Ltd, along with corresponding purchase bills, delivery challans, weight bridge receipts, transport bill payment made, etc. However, these documents could not be produced by Shri Rakesh Mehta. He further mentioned that the same got destroyed in flood.
Shri Rakesh Mehta had claimed to have purchased goods from M/s Mahavir Steel, Nagpur whose premise was also covered u/s 132 of the Act and the proprietor of M/s Mahavir Steels, Shri Bhavesh C. Gandhi admitted that he has provided accommodation entries in the form of bogus bills and did not transport any material whatsoever.
9. The above facts clearly suggest that the fact that the appellant had provided accommodation entries to BVG India in the form of bogus purchase bills, was discovered during the search only. Therefore, it cannot be said that the addition was not based on incriminating material discovered during the search. Accordingly, the ground no. 1 raised by the appellant is DISMISSED.
10. The grounds no. 2, 3 and 4 raised by the appellant are regarding the addition of Rs. 12,85,366/- made by the assessing officer on account of commission earned on bogus purchase bills provided to M/s BVG India Limited. In this regard, the appellant has submitted that during the assessment proceedings, it filed various details such as copies of ledger to 1733/PUN/2024 Rakesh H. Mehta HUF account of purchases made, sales made, copies of sales invoices on sample basis, item- wise sales register, copies of GST returns, copies of bank statement, etc, which conclusively prove that it is carrying genuine trading activities. However, the assessing officer ignored these documents and held that it had provided bogus bills to M/s BVG India Limited, solely on the basis of statement of Shri Madhuchandra Kalaskar. The appellant has also contended that no opportunity of cross- examination of Shri Madhuchandra Kalaskar was provided by the assessing officer.
Findings 11. I have considered the facts of the case and the submissions filed by the appellant. In this connection, it may be stated that it is not the claim of the appellant that he requested the assessing officer to allow cross- examination of Shri Madhuchandra Kalaskar but the AO did not allow the same. The appellant has not submitted any document/letter suggesting that any request of cross-examination was made before the assessing officer. It is a settled legal position that after foregoing its right of cross-examination at the stage of assessment proceedings, the appellant now cannot take this plea at this stage that it was not provided the opportunity of cross-examination. This position has been upheld by Hon'ble High Court of Calcutta in the case of Hindustan Tobacco Company vs CIT 211 Taxman 11(Cal.). The relevant portion of the said decision is reproduced as under:-
If the assessee felt that cross-examining of any person was necessary for establishing its case it was incumbent upon the assessee to make such prayer before the Assessing officer during the assessment proceeding. If a party fails to avail of the opportunity to cross-examine a person at the appropriate stage in the proceeding, the said party would be precluded from raising such issue at a later stage of the proceeding. Therefore, the belated claim of the assessee at the appellate stage that it was denied the opportunity of cross-examining witnesses in the assessment proceeding is wholly untenable in law.
Plea of violation of natural justice taken at the appellate stage appears to be belated and clearly an afterthought. It appears that no prejudice had been suffered by the appellant assessee in the manner the proceeding was conducted by the Assessing Officer and the assessee was not aggrieved at that stage. Only when the assessment order went against it, the assessee conveniently raised such belated plea of denial of opportunity of fair hearing and breach of principles of natural justice.
(Emphasis supplied) Regarding the claim of supporting documents furnished during the assessment proceedings, it is seen that the appellant had furnished following documents:- i Copy of ledger account for sales made during the year. ii. Copy of ledger account for purchases made during the year. iii. Copy of ledger account of BVG India Limited. to 1733/PUN/2024 Rakesh H. Mehta HUF iv. Copies of some of purchase and sales invoices along-with Weigh- bridge slips.
A perusal of these documents suggests that none of the purchase/sale invoice or weigh-bridge slip pertain to alleged sales made to M/s BVG India Limited.
13. Till date, the appellant has not furnished the details of entities from whom purchases were made which are claimed to have been sold to M/s BVG India Limited. Neither any supporting document with regards to sales made to BVG India has been filed. On the other hand, M/s BVG India Limited has accepted that bank account of the appellant was used to transfer money through banking channels in the garb of purchases and the cash was received back from the appellant.
It may also be mentioned that while completing the assessment in the case of BVG India Ltd., the A.O. had held that the purchases claimed to have been made from the appellant during the year under consideration were not genuine and accordingly the said purchases were disallowed by holding the same as bogus purchases. The A.O. has also held that the amount paid by BVG India Ltd. to the appellant as sale consideration was received back in the form of cash which was utilized by M/s. BVG India Ltd. elsewhere. It may also be mentioned that the appeal filed by M/s. BVG India Ltd. has been adjudicated upon by the undersigned wherein the findings of the A.O. that the purchases made from the appellant assessee were bogus, has been upheld by me. It may be stated that although BVG India Ltd. has got relief from Hon'ble ITAT, however the relief was granted on technical ground by observing that the approval u/s. 153D of the Act was not proper. The Hon'ble Tribunal has not given any finding that the purchases claimed to have been made by M/s. BVG India Ltd. from the appellant are genuine. In view of these facts, my factual findings while deciding the appeal of M/s. BVG India Ltd. has not been reversed by the Hon'ble ITAT. In view of these facts, it is held that the sales shown to have been made to M/s. BVG India Ltd. during the year under consideration are nothing but accommodation entries. Accordingly, the action of the A.O. that the appellant is engaged in the activities of providing accommodation entries is upheld.
The A.O. has held that over and above the profit shown in the P&L account, the appellant must have earned some commission on account of bogus bills provided to M/s. BVG India Ltd. The A.O. has estimated the said commission @ 1% of the amount of accommodation entries, which appears to be fair. Accordingly, the addition of Rs. 12,85,366/- made by the assessing officer is upheld.
To sum up, the findings of the A.O. that the appellant is engaged in providing accommodation entries and has provided bogus purchase bills to the extent of Rs.12,85,36,639/- to M/s. BVG India Ltd. is upheld. Further, the addition of Rs.12,85,366/- made by the A.O. on account of commission received by the appellant from M/s. BVG India Ltd. is also upheld. The grounds no. 2, 3 and 4 are accordingly DISMISSED.” to 1733/PUN/2024 Rakesh H. Mehta HUF
From the perusal of the above finding, we find that the assessee used the services of brokers and has indulged in issuing bogus purchases bills to BVG India in lieu of commission. The assessee has not produced the purchase bills, delivery challans, weigh bridge receipts, transport bill payments etc. before the authorities. The ledger accounts of sales/purchases produced by the assessee does not relate to the alleged sales made to M/s. BVG India Limited. The assessee has not produced the details from whom the assessee has purchased the goods. The modus operandi was also analysed by the authorities below based on the statement given by Mr.Madhuchandra Kalaskar, AGM u/s.132(4) while arriving at the conclusion that the assessee was involved in providing accommodation entries for the commission. The assessee failed to prove the genuineness of the purchases made. Therefore, in the facts and circumstances of the case, we hold that the order passed by the ld.CIT(A) does not suffer from any infirmity in affirming the addition made bythe Assessing Officer. We hold and order accordingly.
So far as the appeal for A.Y. 2019-20, the ld.CIT(A) has basically relied on his decision for A.Y. 2018-19 in confirming the action of the Assessing Officer by holding as under :
20. The grounds no. 1, 2 and 3 for A.Y. 2019-20 are similar to the ground no. 2, 3 and 4 raised by the appellant for A.Y. 2018-19. The facts and circumstances for both the years are similar, therefore following my decision for A.Y. 2018-19, the findings of the A.O. that the appellant is engaged in providing accommodation entries and has provided bogus purchase bills to the extent of Rs.1,45,41,902/- to M/s. BVG India Ltd. is upheld. Further, the addition of Rs. 1,45,419/- made by the A.O. on account of commission received by the appellant from M/s. BVG India Ltd. is also upheld. The grounds no. 1, 2 and 3 are accordingly DISMISSED. to 1733/PUN/2024 Rakesh H. Mehta HUF 12. Since the facts and circumstances for the A.Y. 2019-20 are similar to that of A.Y. 2018-19 as evident from the impugned order, our decision upholding the order of the ld.CIT(A) for A.Y. 2018-19 will equally hold good for the A.Y. 2019-20 as well.
In the result, all the three appeals of the assessee are dismissed.
Order pronounced on this 13th day of February, 2025.