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Income Tax Appellate Tribunal, “SMC-II” BENCH, MUMBAI
Before: SRI MAHAVIR SINGH
आयकर अपीलीय अधिकरण “SMC-II”न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “SMC-II” BENCH, MUMBAI श्री महावीर स िंह, उपाध्यक्ष एविं के मक्ष । BEFORE SRI MAHAVIR SINGH, VICE PRESIDENT आयकर अपील िं./ & 1840/Mum/2019 (निर्ाारण वर्ा / Assessment Years 2005-06) Mukesh K. Gaglani The Income Tax Officer, PAN No.AEFPG7132G Ward-33(2)(3), Manish K. Gaglani बिाम/ PAN No.AEDPG7133H 202-E, Shubh Shanti Complex, Vs. M.G. Road, Dahanukarwadi, Kandivali West, Mumbai-400067 (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) अपीलार्थी की ओर े/ Appellant by : None प्रत्यर्थी की ओर े/ Respondent by : Shri Akhtar H. Ansari, DR ुिवाई की तारीख / Date of hearing: 15.06.2020 घोर्णा की तारीख / Date of pronouncement: 15.06.2020 आदेश / O R D E R महावीर स िंह, उपाध्यक्ष / PER MAHAVIR SINGH, VP: These appeals of two different assessees are arising out of the orders of the Commissioner of Income Tax (Appeals)]-45, Mumbai, [in short CIT(A)], in ITA Nos. CIT(A)-45/ITO- 33(2)(3)/ITA-295/2016-17 & CIT(A)-45/ITO-33(2)(3)/ITA- 298/2016-17 even date 10.12.2018. The assessments were framed by the Income Tax Officer-33(2)(3), Mumbai (in short ITA Nos.1839 & 1840/Mum/2019 Mukesh K. Gaglani & Manish K. Gaglani Page | 2 ACIT/ITO/ AO) for the A.Y. 2005-06 vide order even date 30.12.2016 under section 143 rw.s 254 of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The first common issue in these appeals of assessee is as regards to estimation of income by CIT(A) at 3% as against estimated by Assessing Officer as 5% of the credit entries in the bank account of the assessee, the assessee estimated the income at 1%. For this, both the assessee has raised the following ground No.1:-
1. The Appellant prays to delete the excess addition of 2% estimated by the Hon. CIT Appeals over and above declared by the appellant without any contrary material on record.
The appellant prays to delete the excess addition of 2% estimated by the Hon. CIT Appeals over and above declared by the appellant without any contrary material on record.”
This appeal was fixed for hearing for virtual court hearing through the Website of https://itat.webex.com/webappng/sites/ itat/dashboard by putting a notice at ITAT’s Website Notice Board & 1840/Mum/2019 Mukesh K. Gaglani & Manish K. Gaglani Page | 3 but despite that none is present from the assessee’s side. Hence, I heard this appeal as ex-parte and will decide this appeal.
Both the assessees are individual and filed respective retunes of income for assessment 2005-06. The Assessing Officer noted during the course of assessment proceedings in the case of Mukesh K Gaglani that a sum of `1,34,62,424/- and in the case of Manish K Gaglani a sum of `1,25,83,651/- was deposited in the bank account as cash deposit. In the first round of assessment, which was ultimately set aside by ITAT, the Assessing Officer estimated the profit rate at the rate of 15% of the cash entries deposited. The CIT(A) estimated the profit rate at the rate of 5% in the first round. The assessee as well as Department, in first round, filed an appeal before ITAT and ITAT set aside the matter to Assessing Officer denovo and directed the assessee to file evidences to support his claim that he is engaged in the business of accommodation entries. In second round, the Assessing Officer estimated the profit rate at the rate of 5% of the cash deposit in the bank account in both the cases as against declared by assessee at 1%. The CIT(A) directed the Assessing Officer to restrict the estimation at 3% as against estimated by the Assessing Officer at 5% vide Para 4 and 4.1 as under: - “4. Ground No.3 relates to addition of `6,73,121 being 5% profit on the cash deposits in the bank account. There is no & 1840/Mum/2019 Mukesh K. Gaglani & Manish K. Gaglani Page | 4 dispute that the appellant maintained a bank account in which deposits of `1,34,62,424 was found relating to the accommodation entries given by the appellant. As correctly observed by Hon’ble ITAT, the appellant did not file the list of beneficiaries of accommodation entries provided by him during the assessment proceedings. He failed to discharge the onus of providing the entries found in his bank account. During the set aside proceedings also the assessee did not file any details of the persons to whom the entries were given by him. He only filed copy of letter filed earlier wherein he merely stated that he provided entries and earned commission at 1%. This statement cannot be accepted as gospel truth. Any number of oath or statements filed cannot take the place of evidence. By depositing the cash and giving others cheque, the assessee caused huge loss to the revenue, as the beneficiaries brought the said amount into their books without paying tax. Further, the appellant did not give list of beneficiaries of entries provided by him, not filed an iota of evidence to prove that ITA Nos.1839 & 1840/Mum/2019 Mukesh K. Gaglani & Manish K. Gaglani Page | 5 he earned only 1% commission on the entries. In the absence of any supporting evidence it is not possible to accept the same. Any oath/ affidavit statement not supported by the documents is nothing but a self serving recital. Reliance is placed in on the decision of Apex Court in the case of Durga Praad More 82 ITR 540 (SC). Dealing a similar issue, Hon’ble Supreme Court held.
Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed & 1840/Mum/2019 Mukesh K. Gaglani & Manish K. Gaglani Page | 6 by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.
4.1 Therefore, the statement/ letter filed by the assessee stating that he is earning only 1% commission is a self-serving recital and rejected. The CIT(A) in the first round of litigation and the Assessing Officer in the present order have estimated at 5% as profit, which appears to be higher side for a commission on entries. Keeping in view the facts, the profit on the alleged accommodation entries is directed to be estimated at 3% on the total credits in the bank account. The appellant gets part relief. Ground No.3 is partly allowed.” & 1840/Mum/2019 Mukesh K. Gaglani & Manish K. Gaglani Page | 7 Aggrieved, now assessee is in appeal before Tribunal.
I have heard the matter in both the cases by hearing the learned Sr. Departmental Representative and gone through the case records. It is noticed that the assessee even in second round could not file the list of beneficiaries of accommodation entries provided by him during the assessment proceedings or before CIT(A). Even now, the assessee remains absent despite a notice on ITAT website of https://itat.webex.com/webappng/sites/ itat/dashboard by putting a notice at ITAT’s Website Notice Board. Further, admitted fact is that there is cash deposit in the case of Mukesh K Gaglani at `1,34,62,424/- and in case of Manish K Gaglani at `1,25,83,651/-. It is also a fact that the assessee might have carried out the business of providing credit entries to various parties and by entering into dubious transactions, he earns commission. There is no record kept by him, how much commission he has earned and he offered only 1% of the total cash deposits whereas, the Assessing Officer applied the profit rate of commission at the rate of 5% and CIT(A) estimated at 3%. I am of the view that in all probabilities there has to be an estimate as the assessee is unable to give list of beneficiaries, so that, correction commission can be estimated. I am of the view that the profit rate estimated by CIT(A) seems reasonable but still a more reasonable value can be taken and hence, I restrict the disallowance at 2%, I direct the Assessing Officer to compute the income after taking into consideration the profit rate at 2% of the cash credit entries as deposited in the bank & 1840/Mum/2019 Mukesh K. Gaglani & Manish K. Gaglani Page | 8 account, I direct the Assessing Officer accordingly. Both the appeals of this issue are partly allowed.
The second issue in CIT(A) of unexplained cash deposit of ` 4,58,250/- as against added by the Assessing Officer at `6,60,250/-. For this, assessee has raised the following ground No.2: - “2. The Appellant Prays to delete the addition of unexplained cash credits of `660250 u/s 68.”
7. I have heard the learned Sr. Departmental Representative and gone through the facts and circumstances of the case. I noted that the assessee has stated that there are cash withdrawals from banks of `6,68,550/- and cash deposit to the tune of `6,60,250/-. From the order of CIT(A) it seems that the CIT(A) has accepted the part explanation of the assessee and treated the amount of `2,02,000/- and balance amount of ` 4,58,250/- as unexplained. The CIT(A) confirmed this amount vide Para 5.2 as under: - “5.2 The commission income of 3% determined as income of the assessee in para number 4.1 above, amounting to Rs.4,03,873 (includes the income returned 1%by the assessee) is considered available in the hands of the & 1840/Mum/2019 Mukesh K. Gaglani & Manish K. Gaglani Page | 9 assessee during the year. As the assessee had no other income, part of it say 50% is taken as incurred for meeting the expenses for family. Remaining 50% i.e Rs.2,02,000 is considered as available in the hands of the assessee for deposit into bank account. The assessee gets relief of Rs.2,02,000. Now question arises what is the source for the balance Rs.4,58,250 (6,60,250-2,02,000). The assessee himself accepted in his own cash summary prepared that there is a negative cash balance of Rs.32,050, which he wanted offer to tax. However, for the reasons discussed above the assessee could not explain the source for the cash deposited convincingly, particularly in view of the fact that the assessee did not show any personal or family expenditure. Therefore, the addition of Rs.4,58,250 made by the AO is confirmed. Assessee gets part relief. Ground No. 4 is partly allowed.”
8. I am of the view, after hearing the learned Sr. Departmental Representative that the main plea of the assessee that there are cash withdrawals from the bank of `6,68,550/- as against which cash deposit made is `6,60,250/-. This needs ITA Nos.1839 & 1840/Mum/2019 Mukesh K. Gaglani & Manish K. Gaglani Page | 10 verification. As now assessee is not present, I am of the view that let this issue be restored back to the file of the Assessing Officer for re-examination of the issue. Needless to say, that the assessee will file the details of bank withdrawals and will co- relate with the cash deposit made in the bank account. In term of this, this issue is restored back to the file of the Assessing Officer.
The second issue in is as regards to the order of CIT(A) confirming the action of the Assessing Officer in treating the amount of `2,53,290/- as unexplained cash credit. The Assessing Officer made addition of entire cash deposit of `4,30,800/- and in the first round the Tribunal directed the Assessing Officer to examine the cash book and ascertain as from where the cash has been deposited. The assessee submitted chart showing date wise cash withdrawals along with date wise cash deposit in corporation banks. But this chart did not contain the pending cash balance as well as cash explained. Hence, the CIT(A) confirmed the addition of `4,30,800. However, the CIT(A) allowed the benefit of the income determined of commission added at 3% and thereby restricted the addition at `2,53,290/-. Now, before me, the learned Sr. Departmental Representative supported the order of CIT(A) but from the orders of the lower authorities it is clear that only the pending balance and cash explained are not in the chart giving the details of cash withdrawals along with date wise cash deposit in corporation bank. I am of the view, that this needs verification at the level of the Assessing Officer. Hence, ITA Nos.1839 & 1840/Mum/2019 Mukesh K. Gaglani & Manish K. Gaglani Page | 11 the matter is remitted back to his file for fresh verification. Needless to say that the assessee will provide all the details before the Assessing Officer.
The next issue in is as regards to the order of CIT(A) confirming the action of the Assessing Officer in confirming the addition made under section 68 of the Act of loans received from family members amounting to `3,44,875/-. For this, assessee has raised the following ground No.3:-
3. The appellant prays to delete the loan from family members amounting to `3,44,875/- u/s 68.
I have gone through the facts and circumstances of the case after hearing the learned Sr. Departmental Representative, I have also gone through the order of CIT(A) at Para 4 which read as under: - “4. Ground No.3 relates to addition of Rs.6,29,182 being 5% profit on the cash deposits in the bank account. There is no dispute that the appellant maintained a bank account in which deposits of Rs.1,25,83,651 was found relating to the accommodation entries given by the appellant. As correctly observed by Hon'ble ITAT, the appellant did not file the & 1840/Mum/2019 Mukesh K. Gaglani & Manish K. Gaglani Page | 12 list of beneficiaries of accommodation entries provided by him during the assessment proceedings. He failed to discharge the onus of proving the entries found in his bank account. During the set aside proceedings also the assessee did not file any details of the persons to whom the entries were given by him. lie only filed copy of letter filed earlier wherein he merely stated that he provided entries and earned commission at 1%. This statement cannot be accepted as gospel truth. Any number of oath or statements filed cannot take the place of evidence. By depositing the cash and giving others cheque, the assessee caused huge loss to the revenue, as the beneficiaries brought the said amounts into their books without paying tax. Further, the appellant did not give list of beneficiaries of entries provided by him, not filed an iota of evidence to prove that he earned only 1% commission on the entries. In the absence of any supporting evidence it is not possible to accept the same. Any oath/ affidavit statement not supported by document is nothing but a shelf serving recital. Reliance is placed in ITA Nos.1839 & 1840/Mum/2019 Mukesh K. Gaglani & Manish K. Gaglani Page | 13 on the decision of Apex court in the case of Durga Prasad More 82 ITR 540 (SC). Dealing a similar issue, Hon’ble Supreme Court held.
Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that the apparent must be considered real until it is shown that there are reasons to believe that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in deed has to establish the truth of those recitals, otherwise it will be very easy to make self- serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the & 1840/Mum/2019 Mukesh K. Gaglani & Manish K. Gaglani Page | 14 present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.
4.1 Therefore, the statement/ letter filed by the assessee stating that he is earning only 1% commission is a sell-serving recital and rejected. The CIT(A) in the first round of litigation and the A.O. in the present order have estimated at 5% as profit, which appears to be higher side for a commission on entries. Keeping in view the facts, the profit on the alleged accommodation entries is directed to be estimated at 3% on the total credits in the bank account. The appellant gets part relief. Ground No.3 is partly allowed.”