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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI G.D. AGRAWAL & SHRI BHAVNESH SAINI
ORDER PER SHRI BHAVNESH SAINI, J.M.
This appeal by assessee has been directed against the order of Ld. CIT (Appeals)-30, New Delhi dated 27.11.2015 for AY 2003- 04.
Briefly the facts of the case are that a search and seizure operation u/s 132 of the Income Tax Act was carried out at the business premises at 13/34, WEA, 4th Floor, Arya Samaj Road, Karol Bagh, New Delhi of ‘Tarun Goyal Group’ on 15.09.2008. During the search and seizure operation at business premises of Shri Tarun Goyal, certain documents belonging to the assessee company were found and seized. Pursuant to this, assessment proceedings were initiated by issue of notice u/s 153C of the Act and assessment was completed on 20.12.2010 u/s 153C of the Act at an income of Rs. 4,31,270/- by making an addition of Rs. 4,81,500/- on account of unexplained commission and cash credits. The AO noted modus operandi of Shri Tarun Goyal who has floated a number of private limited companies and firms for providing accommodation entries. The Directors of these companies were his employees, who worked in his office as peons, clerks, receptionist, etc. All the documents including blank cheques were got signed from these employees on the direction of Shri Tarun Goyal. Shri Tarun Goyal in his statement recorded during the course of search admitted to have provided accommodation entries to various parties. The AO noted the fact in detail in the assessment order. The AO held that the assessee has charged commission at different rates. For the purpose of calculating commission income of the assessee, the rate of commission was taken at 2.25% on the basis of the seized material. The AO considered the account of assessee and balance sheet as on 31.03.2003 and observed that assessee company had made investment in unquoted shares of different companies. The amount of investment was Rs. 14,00,000/- in the year under consideration. The AO held that investment shown outside group companies were accommodation entries and added income of Rs. 31,500/- by applying rate of commission @ 2.25%. The CIT(A) vide order dated 01.06.2012 confirmed the additions made by the AO. The ITAT vide its consolidated order dated 18.10.2013 for assessment years 2003-04 to 2008-09 in to 4634/Del/2012 has set aside the assessment order passed u/s 153C of the Act and restored back the matter to the file of AO for fresh adjudication in accordance with law. The Tribunal directed that assessment order for each company has to be passed separately. The credit appearing in the books of each assessee has to be explained by that assessee. The identity, creditworthiness and genuineness of the creditor have to be proved by that particular assessee and if the same is not proved, addition may be made u/s 68 of the Act. The AO was further directed that he shall after examination of evidence submitted by the assessee, consider all the cases together and restrict the addition u/s 68 of the Act to only peak unexplained credit in each case after eliminating circular transaction. The taxation of same amount multiple times due to chain of transactions involved layering are to be eliminated. For determining the percentage of commission, the material on record and precedence available is to be considered.
The AO in view of the directions of the Tribunal taken up the matter afresh and noted that Tribunal has put the burden of proof on the assessee. The assessee was asked to submit details and source of bank deposits and to substantiate the transactions. The AO noted that assessee was asked to furnish fund flow chart relating to accommodation entry operation and to demonstrate the unbroken chain of transactions relating to accommodation entries. The assessee submitted the transaction details in bank account only in respect of companies which are under assessment in this charge. The details in respect of intervening assessment years which were not under assessment, were not filed. No details of fund flow in the accounts of the other group companies were filed. Thus, the assessee was unable to demonstrate the unbroken chain of transactions right from the receipts of cash, subsequent layering of funds in the group companies and the transfer of money to ultimate beneficiaries. The assessee also failed to identify the accounts in which first transaction in the series of transactions was made. The assessee also failed to identify the accounts through which the first time deposits were routed subsequently before finally issuing accommodation entries. Thus, the assessee failed to explain anything before AO. The AO, therefore, noted that assessee failed to provide any details on above issues. Therefore, directions of the ITAT with regard to peak credit would not be applicable to assessee. The AO considering the investment of assessee for a sum of Rs. 14 lakhs directed to apply commission @ 2% on accommodation entry provided by the assessee and made addition of Rs. 28,000/-. The AO also considered the issue of cash credit and noted that assessee failed to explain unexplained cash deposits in the bank accounts. The Tribunal directed to restrict the addition only to peak unexplained credit but assessee failed to provide any details as per directions of the Tribunal. Therefore, the AO feeling no alternative but to make addition of Rs. 4,50,000/- against the assessee. The Ld.CIT(A) dismissed the appeal of assessee.
We have heard Ld. Representatives of both the parties and perused the material on record.
On ground nos. 1 to 4 assessee challenged the orders of the authorities below in computing the commission income by applying profit rate of 2% for commission income. Ld. Counsel for assessee submitted that ITAT Delhi ‘B’ Bench in group appeals (86 appeals) vide order dated 23.01.2019 decided the similar issue in which five appeals of the assessee have also been decided for AY 2004-05 to AY 2008-09 and the Tribunal directed to apply profit rate of 0.50% to compute the reasonable commission in the matter. Copy of the order is filed on record. Ld. DR did not dispute the same. In view of the above, we are of the view since in the case of the assessee in subsequent years as referred to above and in the case of group assessees the Tribunal has considered 0.50% as reasonable rate of profit/commission and directed the AO to adopt the same figure for computing the profit on account of commission, we following the same order set aside the orders of the authorities below and direct the AO to adopt profit rate of 0.50% instead of 2% for estimating the commission income accordingly. These grounds of appeal of the assessee are allowed partly.
6. On ground nos. 5 to 10, assessee challenged the addition of Rs. 4,50,000/- on account of unexplained deposit in the bank account of assessee. Ld. Counsel for assessee submitted that since group was engaged in providing accommodation entries and cash received and deposited in bank account was part of the business of assessee, therefore, no separate addition can be made. In alternate contention, he has submitted that since the AO has determined commission income on all deposit entries, therefore, on this addition also commission income may be estimated and suggested that peak addition could be made only for Rs. 2,00,000/-. On the other hand, Ld. DR submitted that assessee failed to comply with directions of the Tribunal earlier, therefore, no interference is called for in the matter.
7. We have considered the rival submission and do not find any justification to interfere with the orders of the authorities below. The ITAT in first round of proceedings directed that credit appearing in the books of each assessee has to be explained by that assessee. The assessee shall have to prove the identity, creditworthiness and genuineness of the transaction. In case same is not proved, addition may be made u/s 68 of the Act. It was also directed that the AO after examining the evidence submitted by assessee consider the issue and restrict the addition u/s 68 of the Act to only peak unexplained credit in each case after eliminating circular transaction. The directions of the ITAT are very specific and burden was upon the assessee to prove its case as per the directions of the ITAT. However, assessee failed to explain anything before the authorities below. The assessee was not able to explain any of the bank entries contained in the bank account of the assessee. The assessee thus, failed to prove its case before the AO. The conditions of section 68 have not been met by the assessee. Even for making addition on account of peak credit the assessee did not comply with the directions of the Tribunal. Therefore, there is no question of making addition on account of commission as against addition made u/s 68 of the Act. It is well settled law that in set aside proceedings, authorities below are bound to decide the issue in the light of decision of the appellate authority. No new issue can be considered in set aside proceedings. In our view, the authorities below have rightly followed the directions of the ITAT issued in first round of proceedings. Assessee cannot take a new plea to challenge the addition u/s 68 of the Act when the first order of the Tribunal has reached finality. Since there is a cash credit appearing in the books/bank account of the assessee, therefore, burden was upon the assessee to explain the same to the satisfaction of the AO as per directions of the Tribunal. Even before us Ld. Counsel for assessee was not able to demonstrate as to how the peak addition could be made in the case of the assessee. We, therefore, do not find any justification to interfere with the orders of the authorities below. Addition of Rs. 4,50,000/- is confirmed. These grounds are, therefore, dismissed.
In the result, the appeal of assessee is partly allowed.
Order pronounced in the open Court.