ITO, NEW DELHI vs. M/S. DWARKA IMPEX PVT. LTD., NEW DELHI

“1. Ld Commissioner of Income-Tax (Appeals) erred in law and on facts of the case in holding that the jurisdiction of the assessing officer while passing the fresh order pursuant to the order of the IT AT was restricted to determination of commission income as against the addition made in the original order of assessment when the ITAT has set aside the assessment to the file of the AO for fresh assessment in terms of directions contained in para 23 of its order and in accordance with law.

“1. That the CIT(A) erred in upholding the addition made by Assessing Officer of Rs.2,27,79,793/- on account of commission income calculated @ 2.25% on total of all credit entries in the bank account, without correctly appreciating the facts of the case and also without properly appreciating and following the order and direction of Hon'ble ITAT vide its order dated 18.10.2013.

2. That the CIT(A) failed to appreciate that the appellant company is part of Tarun Goyal Group and, therefore, all inter- group entries in the bank account ought to have been excluded as per the direction of Hon'ble ITAT. Further, all the entries which had been explained by the appellant should also have been excluded and only in respect of balance entries, commission income could be considered.

3. That the CIT(A) also erred in upholding the commission income @ 2.25% disregarding the direction of Hon'ble ITAT to apply the rate considering the precedence in this regard, for which necessary evidence had also been provided before CIT(A).

4. That the CIT(A) also erred in observing in the order that the appellant had only submitted a tabular chart giving summary of credit entries alongwith affidavit of directors without adducing necessary details and relevant documentary evidences in respect of credit entries. The appellant was willing to submit documentary evidences in support of all bank entries. It was only on the suggestion of CIT(A) that same were not submitted. The CIT(A) had expressed his view that it would not be possible for him to examine the voluminous record and, therefore, same could be submitted before Assessing Officer, pursuant to his directions.”

“1. That the CIT(A) erred in upholding the order of the Assessing Officer determining the commission income @ 2% on the amount representing the entries given to outside parties without correctly appreciating the facts of the case and following the directions of Hon'ble ITAT vide its order dated 18.10.2013.

2. That the CIT (A) erred in upholding the commission income @ 2% disregarding the directions of Hon'ble ITAT to apply the rate considering the precedence available in this regard, for which necessary evidence had been duly submitted before the CIT(A).

3. That the CIT(A) erred in taking a view that precedence available in the form of appellate / assessment orders in other cases could not be considered for the purpose of taking the rate of commission inspite of the fact that the Hon'ble Tribunal had directed to determine the rate of commission taking into consideration the precedence available in this regard.

4. That the CIT(A) also erred in upholding the order of Assessing Officer determining commission @ 2% on the basis of rough notings in seized papers without appreciating that the notings under reference could not be relied upon as neither same were specifically in regard to rate of commission nor details were corroborated with other material and in any case the rates mentioned therein for a small amount could not be applied in all the cases of the Group for determining the rate of commission on total amount of accommodation entries and the notings under reference were also not relevant to all the assessment years.”

7 TO 1569/Del./2017 ITA No.2436 TO 2440/Del./2017 ITA No.484/Del./2015 ITA No.6516/Del./2015 ITA No.6710/Del./2016 “1. That the CIT(A) erred in upholding the addition made by Assessing Officer on account of commission income calculated @ 2.25% on total of all credit entries in the bank account, without correctly appreciating the facts of the case and also without properly appreciating and following the order and direction of Hon'ble ITAT vide its order dated 18.10.2013.

2. That the CIT(A) failed to appreciate that the appellant company is part of Tarun Goyal Group and, therefore, all inter- group entries in the bank account ought to have been excluded as per the direction of Hon'ble ITA T. Further, all the entries which had been explained by the appellant should also have been excluded and only in respect of balance entries, commission income could be considered.

3. That the CIT(A) also erred in upholding the commission Income @ 2.25% disregarding the direction of Hon'ble ITAT to apply the rate considering the precedence in this regard, for which necessary evidence had also been provided before CIT(A).

4. That the CIT(A) also erred in observing in the order that the appellant had only submitted a tabular chart giving summary of credit entries alongwith affidavit of directors without adducing necessary details and relevant documentary evidences in respect of credit entries. He failed to appreciate that the appellant submitted a chart giving nature of each of the credit entries and the details so given have been duly supported by the affidavit of the Director and, accordingly, the appellant had discharged its obligation submitting of supporting documentary evidence in respect of each of the credit entries would have been quite voluminous and, accordingly, neither it was warranted to submit the same nor, CIT(A) had specifically required the appellant company to submit supporting documents in respect of each of the entries. Therefore, he could not take a view that the appellant had not discharged its burden of explaining the nature of credit entries in its books of account.”

(i) Furnish the copy of ITR, balance sheet, tax audit report, computation of income, all annexures and notes of accounts; (ii) Furnish the copy of all statements of Tarun Goyal recorded on oath during the course of search and seizure operation as well as post operation period, if any. (iii) The Hon’ble ITAT has set aside the issue to A.O. to examine the chain of transactions, they layering indulged by assessee, the calculation of peak unexplained credit etc. and to prove each credit in the books of each assessee. In this respect burden of proof lies on you to prove each and every credited and debited entry from its origin. Hence, you are requested to submit details of transactions/chain of entries (each and every credit and debit) of different parties from its origin.”

13.02.2015, AO noticed that in the assessee’s bank account, amount of Rs.1,64,01,670/-, Rs.93,51,252/-, Rs.36,00,386/-, Rs.3,01,56,000/- & Rs.50,00,000/- for assessment years 2004-05, 2005-06, 2006-07, 2007-08 & 2008-09 respectively remained unverifiable/unexplained cash credit and added to the income of the assessee under section 68 of the Act and thereby made addition thereof to the income of the assessee. AO also made addition of Rs.2,08,125/-, Rs.1,56,373/-, Rs.58,500/-, Rs.2,47,500/- & Rs.56,250/- for assessment years 2004-05, 2005-06, 2006-07, 2007-08 & 2008-09 respectively on account of commission charged as per original assessment order @ 2.25% on the basis of Annexure A-12 page 13.

“as to whether in the second round of litigation pursuant to the remand made by the Tribunal, AO is empowered to make further addition on account of credit entries appearing in the bank statement under section 68 of the Act which was not the subject matter of the first round of litigation?”

16. Perusal of original assessment orders qua AYs 2004-05 to 2008-09, available at pages 38 to 97 of the paper book, goes to prove that the only addition made by the AO is on account of commission income @ 2.25% on accommodation entries provided by the assessee company and no addition under section 68 of the Act is there. From the copy of Form No.36 filed before the Tribunal in all the appeals for AYs 2004-05 to 2008-09 in the first round of appeal available at pages 33 to 37, it is again proved that no ground as to the addition made under section 68 of the Act has been raised by the assessee. Similarly, appeals before the ld. CIT (A) as well as the Tribunal were qua issue of commission income only. So, it is proved on record that AO in the remand proceedings has made fresh investigation and proceeded to make the addition under section 68 of the Act.

Hon’ble Punjab and Haryana High Court in Kartar Singh vs. CIT – (1978) 111 ITR 184 (P&H).

“6. In the case of Hukumchand Mills Ltd. v. CIT reported in [1967] 63 ITR 232 this court has held that under section 33(4) of the Income-tax Act, 1922 (equivalent to section 254(1) of the 1961 Act), the Tribunal was not authorized to take back the benefit granted to the assessee by the Assessing Officer. The Tribunal has no power to enhance the assessment. Applying the ratio of the said judgment to the present case, we are of the view that, in this case, the Assessing Officer had granted depreciation in respect of 42,000 bottles out of the total number of bottles (5,46,000). By reason of the impugned judgment, that benefit is sought to be taken away by the Department, which is not permissible in law. This is the infirmity in the impugned judgment of the High Court and the Tribunal.

7. There is one more aspect which needs to be mentioned. According to the impugned judgments of the High Court and the Tribunal, the transaction dated February 15, 1991, was a financial transaction and not a lease. If depreciation is to be granted for 42,000 bottles under the transaction dated February 15, 1991, then it cannot be said that 42,000 bottles came within the lease dated February 15, 1991, and the balance came within the so-called financial arrangement. In the circumstances, we hold that the benefit of depreciation given to the assessee by the Assessing Officer in respect of 42,000 bottles out of 5,46,000 bottles cannot be withdrawn by the Department and to that extent alone the assessee succeeds in this civil appeal. Lastly, as stated above, in this case the Commissioner of Income-tax (Appeals) had remitted the matter to the Assessing Officer who on remand came to the conclusion that all 5,46,000 bottles stood sold before March 31, 1991. This finding of fact has become final. It has not been challenged. Hence, the Department has erred in disallowing the depreciation of Rs. 18,04,572.”

Surat Electricity Co. Ltd. – (2011) 337 ITR 271 (Guj.) decided the identical issue in favour of the assessee by returning following findings :-

“Thus, this Court in the above quoted decision has held that the set aside of assessment made by the appellate authority is always in accordance with the directions given by the appellate authority for making a fresh assessment. But, the most material part of the provision is the opening portion which stipulates "In an appeal against an order of assessment". In other words, the entire gamut of powers which are available to the appellate authority is governed within the four corners of the subject-matter of appeal. The subject-matter of appeal is the assessment of income which forms part of the order of assessment in light of the return of income filed by an assessee. Examining the facts of the present case in the light of the aforesaid decision, it is apparent that the AO was required to make a fresh assessment in accordance with the directions given by the CIT(A) and could not have travelled beyond the same. The impugned order of the Tribunal is, therefore, in consonance with the aforesaid decision of this High Court and does not warrant any interference.”

“18. Ground No 11 is in respect of request for enhancement to CIT(A) to enhance the income of the assessee by Rs. 59,70,000/- on account of shortage of binola bags. The DR submitted that CIT(A) should have enhance income on account to binola bags. The counsel submitted that this issue was never subject matter of appeal before ITAT hence CIT (A) has rightly refused to entertain the fresh issue raised by AO in remand proceedings. After hearing both the parties we are of the view that the CIT(A) is right in holding that what was not the issue before ITAT

14 TO 1569/Del./2017 ITA No.2436 TO 2440/Del./2017 ITA No.484/Del./2015 ITA No.6516/Del./2015 ITA No.6710/Del./2016 cannot be raised by the AO in remand proceedings. The ground no 11 is dismissed.”

“14. The ld. counsel for the assessee also relied heavily on various decisions of the co-ordinate bench wherein the Tribunal has adopted rate ranging from 0.15 paise to 0.50 paise i.e 0.15% to 0.50%.

15 TO 1569/Del./2017 ITA No.2436 TO 2440/Del./2017 ITA No.484/Del./2015 ITA No.6516/Del./2015 ITA No.6710/Del./2016 15. As mentioned elsewhere, in such illegal activities, there cannot be any precedence and the rate varies from facts of each case.

Ltd. by the ld. CIT (A). This issue is also decided in favour of the assessee by following the decision rendered by Tribunal vide order dated 23.01.2019 (supra) and the AO is directed to adopt the decision of Group cases of Tarun Goyal (supra) and computed the profit accordingly in these cases also.

Geefcee Finance Ltd., which are of Noida charge, is as to whether determination of commission income with reference to the entries given outside the group. It is the case of the assessee that the AO has calculated the commission income @ 2.25% on the total of all credit entries in the bank account without appreciating the fact that all the entries have been duly explained by the assessee and inter- group entries were to be excluded. Perusal of remand order dated 18.10.2013 passed by the Tribunal was required to exclude the inter-group entries in the bank account in order to calculate the commission income. So, the AO is directed to exclude all inter- group entries in the bank account as per directions of the Tribunal and then calculate the commission income @ 0.50%.

Consequently, this issue in the case of Bhawani Portfolio Pvt. Ltd. and Geefcee Finance Ltd. is determined in favour of assessee for statistical purposes.