SH. HIMANSHU VERMA,DELHI vs. DCIT, NEW DELHI

are being disposed of by this common order for the sake of convenience, by first dealing with the facts of Revenue’s (AY 2010-11) and the decision thereof will apply mutatis mutandis in other Revenue appeals i.e. in ITA No. 1753 & 1754/Del/2015 (AY 2011-12 & 2012-13) being identical facts and circumstances. However, grounds of all the Revenue Appeals and Assessee Appeals are reproduced hereunder:- (AY 2010-11) (ASSESSEE’S APPEAL)

1. The Ld. CIT(A) has erred on facts and in law in estimating the commission income of the appellant @0.80% of the amount of Rs. 83,71,29,511/- amounting to Rs. 66,97,036/-.

2. The appellant craves for liberty to add fresh ground(s) of appeal and also to amend, alter, modify any of the grounds of appeal. (AY 2011-12) (ASSESSEE’S APPEAL)

1. The Ld. CIT(A) has erred on facts and in law in estimating the commission income of the appellant @0.80% of the amount of Rs. 213,01,14,122/- amounting to Rs. 1,70,40,912/-.

2. The appellant craves for liberty to add fresh ground(s) of appeal and also to amend, alter, modify any of the grounds of appeal. (AY 2012-13) (ASSESSEE’S APPEAL)

1. The Ld. CIT(A) has erred on facts and in law in estimating the commission income of the appellant @0.80% of the amount of Rs. 632,73,87,632/- amounting to Rs. 9,49,10,815/-.

2. The Ld. CIT(A) has erred on facts in law in confirming addition of Rs. 3,16,45,606/- out of the seized cash / pay orders and has further erred in not setting off this income assessed on the basis of seized assets against the estimated commission income of Rs. 9,49,10,815/-. 3. The appellant craves for liberty to add fresh ground(s) of appeal and also to amend, alter, modify any of the grounds of appeal.

(AY 2010-11) (REVENUE’S APPEAL)

1. The Ld. CIT(A) has erred in law and on facts as well in deleting the addition of Rs. 83,71,29,511/- out of total addition of Rs. 213,01,14,122/- on account of unexplained credits and entries without examining and adjudicating upon on merits of the cases.

2. The Ld. CIT(A) has erred in law and on facts as well in allowing relief to the assessee amounting to Rs. 83,71,29,511/- without appreciating the fact that the assessee has failed to discharge his onus of explaining the cash credits found recorded in his books / banks accounts. 3. The Ld. CIT(A) has erred in law and on facts as well in deleting the addition of Rs. 35,29,485/- out of total addition of Rs. 1,02,26,521/- on account of commission income @1.5% without examining and adjudicating upon on merits of the cases. 4. a) The order of the CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal. (AY 2010-11) (REVENUE’S APPEAL)

1. The Ld. CIT(A) has erred in law and on facts as well in deleting the addition of Rs. 195,01,14,122/- out of total addition of Rs. 213,01,14,122/- on account of unexplained credits and entries without examining and adjudicating upon on merits of the cases.

2. The Ld. CIT(A) has erred in law and on facts as well in allowing relief to the assessee amounting to Rs. 195,01,14,122/- without appreciating the fact that the assessee has failed to discharge his onus of explaining the cash credits found recorded in his books / banks accounts. 3. The Ld. CIT(A) has erred in law and on facts as well in deleting the addition of Rs. 1,49,10,798/- out of total addition of Rs. 3,19,51,711/- on account of commission income @1.5% without examining and adjudicating upon on merits of the cases. 4. a) The order of the CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal. (AY 2010-11) (REVENUE’S APPEAL)

1. The Ld. CIT(A) has erred in law and on facts as well in deleting the addition of Rs. 599,94,54,170/- out of total addition of Rs. 632,73,87,632/- on account of unexplained credits and entries without examining and adjudicating upon on merits of the cases.

2. The Ld. CIT(A) has erred in law and on facts as well in allowing relief to the assessee amounting to Rs. 5,99,94,54,170/- without appreciating the fact that the assessee has failed to discharge his onus of explaining the cash credits found recorded in his books / banks accounts.

3. The Ld. CIT(A) has erred in law and on facts as well in deleting the addition of Rs. 25,95,11,221/- out of total addition of Rs. 29,11,56,727/- unexplained deposits in bank entries and cash found without examining and adjudicating upon merits of the cases.

4. The Ld. CIT(A) has erred in law and on facts as well in deleting the addition of Rs. 4,42,91,715/- out of total addition of Rs. 9,49,10,815/- on account of commission income @1.5% without examining and adjudicating upon on merits of the cases. 5. a) The order of the CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any / all of the grounds of appeal

before or during the course of the hearing of the appeal.

2. The brief facts of the case are that a search operation u/s. 132 of the Income Tax Act, 1961 (in short “Act”) was conducted at the premises of the assessee on 29- 03-2012. From the documents found and seized, AO noticed that the assessee was involved in providing bogus entries. According to the AO, it was admitted by the assessee in the statements recorded on oath during the course of search on 29-03- 2012 and post search on 14-04-2012 that he is engaged in the activity of providing accommodation entries. The assessee in the statements recorded on 29-03-2012 has admitted that he has received brokerage/commission. During the course of search a laptop was also seized. It was noticed by the AO that the assessee was carrying on the activity of providing bogus entries through various entities which were admitted to be controlled and managed by the assessee. At pages 5 to 10 of the assessment order, the AO has listed such 88 entities their PAN Nos and addresses are also given.

The AO has also re-produced the details of 203 bank accounts of such entities at pages 10 to 17 of the assessment order.

2.1 The admission on the part of the assessee that he is engaged in the activity of providing accommodation entries and that several entities are being controlled and managed by him, as recorded in the statement made on 29-03-2012, is through questions No. 8 and 14 which have been reproduced at pages 18 to 20 of the assessment order. The AO has also reproduced the tele-screen-shots of the list of these entities on pages 21 to 30 of the assessment order. The AO has also taken note of the signed and unsigned cheques at pages 31 to 45 of the assessment order and also the bank statements of these entities at pages 45 to 51 of the assessment order.

The AO has also referred to the statements of 15 persons recorded in pursuance of commission issued to them u/s 131(A) and after referring to all these documents, the AO has culled out following conclusions:- i) Books of accounts of various companies was found in Tally program in the laptop of Shri Himanshu Verma, lying in this premise; ii) Signed/unsigned/blank cheques of different companies managed and controlled by Shri Himanshu Verma were found from this premise (List of such cheques is furnished in page no. 80 to 96 of this report); iii) Documents mentioning receipt of cash from various persons and arrangement of routing the same through various group entities of Shri Himanshu Verma were found and seized from this premise, as discussed in subsequent para, iv) Laptop of Shri verma found from this premise also contained Id and other details of various dummy directors/partners/proprietors. v) Details of bank accounts maintained by various entities of Shri verma were found mentioned in a diary, as discussed in subsequent para, vi) Himanshu Verma himself used to sign for the benami/dummy directors/partners/proprietors on cheques etc. 2.2 Thereafter, the AO has referred to the details of seized documents and also the seizure of a sum of Rs. 28,59,79,727/- and also cash found of a sum of Rs. 51,77,000/- and in this manner the AO determined the total of accommodation entries provided by the assessee in these three financial years as follow;-

Financial Year 2009-10 2010-11 2011-12 Rs. 68.17 crore Rs. 213 crore Rs. 632.47 crore 2.3 The AO further noticed that there were cash deposits in the bank accounts aggregating to Rs. 235,96,03,074/-. The financial year wise bifurcation is as under:-

Financial Year 2009-10 2010-11 2011-12 Rs. 83,71,29,511 Rs. 85,38,93,689 Rs. 66,85,79,874 Total Rs. 235,96,03,074/- 2.4 The AO has also recorded the statement of the assessee which has also been re- produced in the assessment order at pages 65 to 74 and list of the companies is given in the statement at pages 75 to 76 and list of partnership firms at pages 77 to 79. The AO also issued show cause notice to the assessee seeking explanation as to why the cash mentioned above should not be added to the income of the assessee u/s 68 of the Act. The assessee furnished reply dated 28-03-2014 which is also re-produced in the assessment order at pages 90 to 97. The assessee claimed expenses incurred by him for formation of companies, legal filing documents, audit charges, bank charges totaling to Rs. 43,30,402/- in respect of 68 companies incorporated by him. The AO after rejecting the submission of the assessee, has made the addition in A.Y. 2010-11 at a sum of Rs. 83,71,29,511/- on account of unexplained credits and commission income of Rs. 1,02,26,521/- @1.5% of the cash element of Rs. 68,17,68,100/- and thus, the income of the assessee has been assessed at a sum of Rs. 847,33,56,030/-.

In A.Y. 2011-12 similar additions have been made by the AO at a sum of Rs. 198,20,65,830/-(accommodation entries of Rs. 213,01,14,122/- plus commission of Rs. 3,19,51,711/- (-) amount owned up by the persons to whom these entries were provided of a sum of Rs. 18,00,00,000/-) and in A.Y. 2012-13 income has been assessed at Rs. 599,94,55,170/- i.e. (Rs. 632,73,87,632/- on account of unexplained credits and entries plus unexplained deposits in bank account Rs.29,11,56,727/- plus commission income Rs.9,49,10,815/- minus amount owned up Rs. 71,40,00,000/-) thus total additions aggregating to Rs. 599,94,55,174/-. Against the aforesaid additions, the assessee appealed before the Ld. CIT(A) in respect of all the three 6 years, who vide his respective impugned orders has deleted the additions in respect of accommodation entries provided by the assessee and also partly deleted the commission which was determined by the AO @1.5% and which has been reduced to 0.80% in respect of assessment years 2010-11 & 2011-12. However, in respect of A.Y. 2012-13 with respect to addition of Rs. 29,11,56,727/-, Ld. CIT(A) has given a relief of 25,95,11,221/- and addition of Rs.3,16,45,506/- has been sustained and AO was directed to re-compute the commission income of the assessee at Rs. 5,06,19,100/- as against Rs. 9,49,10,815/-. It is germane to mention here that Ld. CIT(A) while deciding the appeal of the assessee for the assessment year 2010-11, has taken in to consideration the submission of the assessee regarding non-providing sufficient opportunity by the AO and this issue has been decided by Ld. CIT(A) has per observation in para 7 as follow:-

“7. I have gone through the assessment order carefully and also the written submissions and case laws relied upon by the appellant and considered them. I have also called for the assessment record and perused it wherever necessary. On perusal of the assessment order it is seen that there was sufficient correspondence pertaining to the queries raised by the Assessing Officer and replies furnished by the appellant. However, I find that in the entire assessment order the Assessing Officer relied on the material found and seized and also on the statements of the appellant and statements of the dummy directors and proprietors and made out a case that the appellant is an accommodation entry operator. This fact has also been admitted by the appellant himself that he provided accommodation entries to various beneficiaries through the entities controlled and managed by him. Therefore, the fact that the appellant is an accommodation entry operator is not in dispute. The appellant also did not dispute this conclusion of the Assessing Officer as most of the statements of the appellant which were quoted by the Assessing Officer in the assessment order unambiguously indicate that the appellant was an accommodation entry provider. The appellant also did not furnish any evidence contrary to this understanding and conclusion during the appeal proceedings. I therefore, have no hesitation in holding the appellant to be an accommodation entry operator. However, in the later part of the assessment order, without giving any reasons or without affording an opportunity to the appellant to put forth his case the Assessing Officer made an addition to the income of the appellant as unexplained credits and entries without quoting any specific provision of law under which such addition was made. The Assessing Officer also did not issue any show cause notice enumerating the reasons with corroborative and supporting evidence in his possession as to why he proposed to make an addition of Rs.84 73,56,032/-. Natural justice is a technical terminology for rule against bias and the right to a fair hearing, and a "duty to act fairly". The principles of natural justice concern procedural fairness and ensure a fair decision is reached by an objective decision maker Reference is made the three common law rules in relation to natural justice or procedural fairness which are a) The Hearing Rule b) The Bias Rule c) The Evidence Rule. The third rule is that an administrative decision must be based upon logical prod or evidence material. The Assessing Officer as an investigator and decision maker did not base this addition of Rs.84,73,56,032/- clearly pointing out to the evidence on which the inference or determination is based. In the written submissions, the appellant relied on various judicial pronouncements in support of this ground that the appellant was not given a fair and just opportunity. The opportunity of being heard provided by the Assessing Officer was inconsistent as in the later part of the assessment order, I find that the Assessing Officer concluded the assessment totally taking a different view contrary to the admission and material on record. No corroborative or supporting evidence is brought on record by the Assessing Officer indicating that the deposits made in the intermediary companies, managed and controlled by the appellant and which were provided to the beneficiaries actually belonged to the appellant only for treating the same as income of the appellant. The appellant was cooperative and provided all the information pertaining to his business operation, paper entities, details of the beneficiaries, commission received etc. However, having accepted that the appellant is an entry operator, the Assessing Officer was unreasonable and unjustified to make an addition of 8

Rs.84,73,56,032/- as income of the appellant. Therefore, there is merit in the ground raised by the appellant for not providing sufficient opportunity to explain his version to impeach or negate the opinion/view harnessed by the Assessing Officer.”

2.5 While deleting the addition in respect of accommodation entries the observation of CIT(A) after considering the submission of the assessee are reproduced as under:-

“10. I have gone through the assessment order carefully, written submissions of the appellant and citations of the case laws relied upon by the Assessing Officer in support of the addition made, and by the appellant in support of his contentions, as well, and considered them. These grounds of appeal are a mix of arguments and grounds leading to the main ground or grievance that the appellant should not or cannot be held to be assessable to the entire estimated turnover of Rs.84,73,56,032/- of the entry business. On perusal of the assessment order and material on record, I agree with the appellant's contention in this aspect for the following reasons mentioned in the para below:

10.1 On the basis of the material found and seized, details provided and enquiries made during the post search and assessment proceedings, the Assessing Officer concluded that the appellant was doing the business of providing bogus accommodation entries in the shape of share application money, loans, capital gain and that he was managing and controlling a number of companies/firms/sole proprietorship concerns and a number of bank accounts in the name of these entities in different banks. The Assessing Officer in the assessment order had detailed the modus operandi of the appellant adopted for providing accommodation entries and held him to be an accommodation entry operator. In support of this fact, the Assessing Officer incorporated the relevant portion of the statement recorded of the appellant in the course of the search proceedings, post search proceedings and also during the assessment proceedings. Based on the facts, the Assessing Officer made the following observations in the assessment order: a) It was also stated by the Assessing Officer that the appellant received a brokerage/commission from the beneficiaries from 1 to 1.50% for providing such accommodation entries. b) During the search operation on 29.3.2012, the laptop of the appellant was seized and marked as Annexure A-37. A clone copy of the hard disk was made and on verification of the same, it revealed that the appellant received a brokerage/commission at 1 to 1.50%. c) The Assessing Officer incorporated the list of all such entities which were accepted as controlled and managed by the appellant at page nos. 5,6,7,8,9 and 10 of the assessment order. d) The Assessing Officer also incorporated a table containing 203 bank accounts with the details of the bank account, bank branch and the name of the entity holding those bank accounts which were utilized for providing accommodation entries. e) In the assessment order the Assessing Officer also elaborated in detail the management and control exercised by the appellant and his partner in the name of directors, partners, and sole proprietors. In support of the same, a number of cheque books containing blank and signed and unsigned cheques of various entities, copies of bank statement of various banks, details of bank transactions related to different entities were found and seized and incorporated such information in the assessment order. f) The Assessing Officer listed the names of 15 persons who were dummy directors, partners, proprietors of various entities managed and controlled by the appellant. The statements of 15 persons was also recorded u/s 131(1A) of the I T Act. To drive home a point, the Assessing Officer also incorporated the relevant portion of the statement recorded of one of the persons mentioned here. It was accepted by all of them that documents were endorsed at the instance of the appellant for which they were paid a small amount. g) The Assessing Officer also relied on some important documents found and seized from the appellant's premises like Annexure A-27 which a 2011 diary, Annexure A-30, a diary titled "Celebrate Purple", Annexure A-32, a diary depicting the details of the bank account of various entities managed by the appellant in Axis Bank, DCB Bank etc. h) Surrender of Rs. 18 crores made by 7 beneficiaries in Chandigarh, out of the total turnover of Rs.213,01,14,122/- and accepted by theAssessing Officer while computing the income of the appellant for the year 2011-12.

10.1.1 From the above it is evident that on the basis of the seized material and details provided by the appellant, the Assessing Officer concluded the appellant to be an "accommodation entry operator". The appellant also did not furnish any material contrary to the above, either in the assessment proceedings or during the appeal proceedings to impeach the finding given by the Assessing Officer. When there is no dispute from the Assessing Officer or from the appellant that the appellant is involved in the business of providing accommodation entries to beneficiaries, the volume or turnover of such entities cannot be held to be the income of the operator. As a necessary corollary to it, the source of cash deposited in various bank accounts has to be from the beneficiaries.

10.1.2 In the assessment order, the Assessing Officer repeatedly stated that the money actually belonged to the beneficiaries. On the contrary, the Assessing Officer in the entire assessment order never said or even intended to say that the amount of Rs.83,71,29,511/- actually belonged to the appellant nor there was any evidence to this effect with him.

10.1.3 On perusal of the assessment order, I also find that the Assessing Officer gave reference to the amount of Rs. 18 crores and Rs. 71.40 crores surrendered by the seven beneficiaries during the assessment years 2011-12 and 2012-13, where in such amounts were reduced from the total entries in their final computation, meaning thereby that he accepted that such credits/deposits in his intermediaries/conduits per belonged to the beneficiaries. On the basis of the same, logical analogy and principles applied the appellant is not assessable to the sum of Rs. 83,71,29,511/-.

10.1.4 There is no provision in the Income Tax Act where the turnover can be considered as the income of the appellant. The Assessing Officer's effort to tax it u/s 68 is devoid of any merit as the sum of Rs.83,71,29,511/- is not a cash credit in the books of account of the appellant or the books of the entities controlled or managed by the appellant as per the observation of the Assessing Officer himself.

10.1.5 The provision relating to cash credit was provided for the first time in the I T Act, 1961 as there was no corresponding provision in the I T Act, 1922. For the purpose of better comprehension, the section may be divided into the following parts:

"i) Where any sum is credited in the books of account of the appellant/assessee ii) Maintained for any previous year iii) Assessee offers no explanation about a) the source and b) the nature iv) The explanation offered by him is not in the opinion of the Assessing Officer satisfactory v) The sum so credited may be charged to income tax vi) As the income of the assessee of that year, in relation to which is so found to have credited."

The catch words in this section are "Any sum found credited" and "in the books of accounts of the assessee". In the assessment order, the Assessing Officer stated that the appellant did not produce the cash book to explain the source and availability of cash deposited on various dates in the bank. The Assessing Officer also observed that the onus in on the appellant to prove satisfactorily the source and nature of the cash received which the appellant did not discharge, in proving the cash deposits in its bank account.

10.1.6 From the above observation and discussion of the Assessing Officer two aspects are evident regarding the facts of the case. One, that cash book is a part of the books of accounts maintained by the appellant which was not produced by the appellant. Therefore, the Assessing Officer did not get a chance find any sum credited in the books of account of the appellant and it was a probability or a surmise. Secondly, the appellant did not prove satisfactorily the source and nature of cash received and deposited in bank account. Now, in these circumstances what is to be seen is whether the provisions of section 68 of the I.T. Act, 1961 is whether applicable in the case of the appellant who is in the business of providing accommodation entries to beneficiaries. 10.1.7 Section 34 of Evidence Act, 1872 provides that entries in the books of account, regularly kept in course of business are relevant whenever they refer to a matter into which the court has to enquire, but such statements shall not be sufficient evidence to charge any person with liability. The entries totaling to Rs.83,71,29,511/- was found on the basis of the seized material, details provided by the appellant, but not found recorded in the books of accounts of the appellant. In the assessment order the Assessing Officer categorically stated that the appellant did not maintain books of accounts of such entities and therefore no bills, vouchers or any other documents relating to such accounts were produced. As per section 2(12A) of the I T Act, 1961 Books includes ledgers, day book, or written data, disc tape, electronic magnetite data storage device. In the instant case, on the basis of the facts brought on record by the Assessing Officer, there are no books of accounts maintained by the appellant but some diaries were found and seized where information pertaining to different bank accounts was maintained by the appellant for routing funds through various entities controlled and managed by him. Therefore, there is no question of Rs.83,71,29,511/- found credited in the books of accounts of the appellant. 10.1.8 Section 68, when is applicable? Section 68 is applicable when the appellant's explanation with respect to the cash credit is rejected as being unsatisfactory and also where the appellant does not render any explanation. The Assessing Officer while accepting the fact that the appellant is an entry operator in the assessment order, suddenly made a u-turn towards the end of the assessment order without citing any reason, or without giving any opportunity or quoting a specific provision of law rejected the claim of the appellant that cash was received from the beneficiary companies in lieu of loan/capital gain money on the ground that he did not disclose the name, addresses, PAN of the alleged beneficiaries. It may not be out of place to mention that in the assessment order itself, the Assessing Officer based on the perusal of seized material, details provided and bank statements, tabulated a detailed account of entire operation giving the names of complete intermediaries utilized by him for providing accommodation entries, list of the beneficiaries to whom he provided such entries, names of these beneficiaries who surrendered the entry amount sought from the appellant, names of the entities of the appellant's group from beneficiaries sought entries along with amount and financial year etc. When the Assessing Officer himself brought on record the names of the beneficiaries who sought entries from the entities controlled and managed by the appellant, there is no question of taxing the appellant regarding such amounts taken by the beneficiaries as unexplained cash credits in his hands. It is fair 14 and the Assessing Officer is duty bound to state or bring on record some material contrary as to how he formed his opinion that the explanation of the appellant was unsatisfactory. Where the appellant is taxed for something that does not belong to him, the responsibility of the Assessing Officer assumes more a cautious seriousness as his findings, facts, material on record must be such that it support the claim of the department. There should be nexus between conclusion of facts arrived by him and primary facts upon which such conclusion is based. In the instant case, no adverse material was brought on record by the Assessing Officer to state that the total credits transferred from the entities to the beneficiaries enumerated in the tabular form and incorporated in the order dated 31.03.2014 belonged to the appellant. The appellant did not declare income under the head business but had shown income from other sources. It is also illogical to make an addition of the entire turnover in the hands of the appellant as the Assessing Officer himself admitted in the order itself that Rs.83,71,29,511/- was not a cash credit found recorded in the books of accounts of the appellant or the books of the entities controlled or managed by the appellant but it was the turnover. 10.1.9 There is a definite contradiction in the action of the Assessing Officer. On one hand he admitted or accepted that the appellant is an accommodation entry operator and charged commission at the rate of 1% to 1.50% on providing such entries, and to bring to tax the amount so taken by the beneficiaries in their respective hands, and on the other hand he made the addition of Rs.83,71,29,511/- in the hands of the appellant. Having accepted the appellant to be an entry provider, the Assessing Officer was without reason to presume illogically that the appellant had deposited his own cash to the tune of Rs. 83,71,29,511/- which was used to issue cheques to the beneficiaries. Further, the disclosure/surrender made by the Chandigarh based seven beneficiary companies against the cheques received from the appellant further strengthens the case of the appellant as an entry provider and cash deposited in the bank accounts of different entities (which the Assessing Officer tabulated 15 on page 64 of the assessment order amounting to Rs.235,96,03,074) for different years for issuing cheques do not belong to him, but moneys of the beneficiaries to whom cheques were issued (list of beneficiaries tabulated by the Assessing Officer on pages 107-- 20 of the order who received cheques from the appellant's group entities). Therefore, taxation of this sum amounting to Rs. 83,71,29,511/- should be made in the hands of the beneficiaries, as it occurred in the case of disclosure made by seven beneficiary companies which was correct and consistent with the facts and circumstances of the case. The effort of the Assessing Officer to tax this sum of Rs. 83,71,29,511/- in the hands of the appellant is not only detrimental but against the interest of the revenue as the beneficiaries may try to take the benefit of this contradictory approach of the Assessing Officer. If the contradiction is estimated, there is possibility in succeeding to bring to tax the beneficiaries who are identified and listed out in the assessment order.

10.1.10 Facts emerging from the assessment order undisputedly indicate that it is incorrect on the part of the Assessing Officer to allege that the appellant did not provide him with the trail of events leading to beneficiaries. It is very obvious that the Assessing Officer was in possession of entire information including tally accounts, bank statements, names of entities used as intermediaries, names of the beneficiaries etc which he himself culled out every specific and precise information and incorporated the scanned copies in the assessment order. The appellant relied on the following cases of in support of his claim as an entry operator: i) Sh. Sanjay Kumar Garg ii) Sh. S. K. Gupta 10.1.11 However, the Assessing Officer rejected the aforesaid submission made by the appellant on the ground that he did not furnish the name, address, PANs of the beneficiaries similar to the case of Sh. S. K. Gupta where complete trail of events leading to beneficiaries was given to the Hon'ble Settlement Commission. I have perused the order of the Hon'ble Settlement Commission, and found that even in the case of the Sh. S.K. Gupta also, it was stated that he dealt with the mediators and not directly with the beneficiaries and hence their PANs and addresses were not known to him. In the case of the appellant, also a similar exercise was made and the Assessing Officer was in possession of the list of beneficiaries along with the amount transferred as entries and the he was duty bound to tax the beneficiaries in accordance with law in all fairness to the facts on record.

10.1.12 The AR of appellant in his submissions relied on the judicial ratio of various case laws where a person was held to be an accommodation entry operator on similar and identical facts like in the case of the appellant and income was assessed that represented premium/brokerage/commission which was charged on providing such entries but not on the cash deposits made in different entities utilized by intermediaries/conduits to the final destination of the beneficiary accounts. Reference is made to the case of Manoj Aggarwal Vs DCIT (2008) 117 (Del) (SB) 145 and Hon'ble Special Bench of ITAT Mumbai in the case of M/s Gold Star Finvest (P) Ltd. Vs ITO for preposition that in the case of the entry providers the income to be assessed would be only the premium/brokerage/commission received by them and not the cash deposits in their hands Reference is also made to the case of Sh. Abhay Chand Bardia and Sh. SK Jain settled by the Hon'ble income Tax Settlement Commission, Principal Bench, New Delhi where also only the brokerage income was assessed and not the cash deposit appearing in their handsinterestingly, both the appellant and the Assessing Officer referred to the case of Sh. S. K. Gupta. Even though the facts of the appellant's case are identical to that of the facts of the case relied upon by the Assessing Officer, yet he rejected the appellant's submissions.

10.1.13 The cases referred by the Assessing Officer in the assessment order has no relevance here as the facts of the 17 present case do not fit into the provisions laid down in section 68 of the I T Act, 1961.

10.1.14 In view of the aforesaid detailed discussion, I do not agree with the decision of the Assessing Officer regarding taxing the total turnover of entries amounting to Rs.83,71,29,511/- as unexplained cash credit after accepting the appellant to be the entry operator. Since the beneficiaries are identified, the amounts of Rs. 83,71,29,511/-should be brought to tax in their respective hands. Accordingly, the addition of Rs.83,71,29,511/- made by the Assessing Officer as unexplained cash credits is hereby deleted.

2.6 Further, while deleting the addition partly in respect of commission, the observations of Ld. CIT(A) read as under:-

“13. I have gone through the assessment order and written submissions and considered to them. I have also perused the citations of the case laws referred by the AR. From the material on record, there is no dispute regarding the appellant being an entry operator who provided accommodation entries to various beneficiaries through various intermediary companies acting as conduits to transfer money to the beneficiaries by way of cheque in lieu of cash. The appellant also brought on record the modus operandi executed by him through these intermediaries controlled and managed by him. In the trail, from beginning to the end, the transactions had many variants and amounts were paid for services rendered. This aspect finds strength from the fact that 23 persons who are dummy directors, proprietors etc. accepted that small amounts were paid by the appellant for executing the transactions and endorsing the documents. 13.1 In the written submissions, the AR of the appellant stated that huge cost was incurred to carry out the transactions, and that transactions which were in the nature of volume and where no cash was involved commission paid was even less than 0.01% in many cases. He also contended that the volume of the business worked out by the Assessing

Officer and the estimation of commission income at 1.50% by the Assessing Officer was on higher side. 13.1.2 The Assessing Officer did not allow expenditure incurred by the appellant towards the entire operation and made an addition of 1.50% on such entries provided. However, it is a fact that the appellant would have incurred expenses on account of audit fee, ROC and other statutory obligations to be fulfilled with regard to intermediaries which are controlled and managed by him, apart from the payments made to dummy directors, proprietors, individuals etc as mentioned in above para. The Assessing Officer did not take into account these expenses and applied 1.5% on an estimate basis as commission income and made an addition to the income of the appellant. An estimation has to be based on some concrete material in hand or on the basis of any comparable case having identical facts. 13.1.3 The AR of the appellant also relied on the ratio of the following judicial decisions where commission income was determined on similar facts of the case: a) Manoj Aggarwal (2008) 113 ITD 377 (Del) b) Sh. S. K. Gupta u/s 245D(4) of the I T Act, 1961 by the Hon'ble Settlement Commission. c) Sanjay Kumar Garg Vs ACIT (2011) 12 Taxman.com 294 (Delhi) d) Sanjay Rastogi Vs ACIT to 168/De1/2010.

In all the above cases only commission income net of expenses have been assessed. The AR of the appellant also tabulated the estimated rate of commission on the basis of the above judicial decisions as under:-

Authority Name of the assessee Rate of Commission deciding the matter Special Bench of Sh. Manoj Aggarwal 0.35 % ITAT, New Delhi. Income Tax Sh. S.K. Gupta 0.80 % Settlement Commission, Principle Bench, New Delhi

ITAT, New Delhi Sh. Sanjay Kumar Garg 0.20% ITAT, New Delhi Sh Sanjay Rastogi 0.50%

13.1.4 On perusal of this issue, I find that there was no evidence in the seized material to assess the income of the appellant at 1.5% of the total entries as commission income. As the AR of the appellant admitted that such kind of transactions are complex and involves huge amounts for layering the intermediaries, expenditure, commission income at the rate of 1.5% net is on the higher side. It is also an admitted fact in such business that the commission on entries varies and is not consistent or same to all of them. Keeping in view, the nature of the business of an entry operation and relying on the various judicial pronouncements in the similar cases as that of the appellant, I estimate the net commission income at 0.80% net. The commission income of the appellant therefore is calculated at 0.80% on Rs. 83,71,29,511/- which comes to Rs.66,97,036/-. Accordingly, the Assessing Officer is directed to recomputed the income of the appellant at Rs.66,97,036/- as against Rs.1,02,26,521/- determined by the Assessing Officer. This ground of appeal is partly allowed.

2.7 Further while deleting the addition in respect of deposits in A.Y 2012-13, the observations of Ld.CIT(A) in order for A.Y. 2012-13 are as under:-

“13. I have gone through the written submissions, assessment order, appraisal report prepared by the Investigation Wing with regard to the seizure made and considered the material on record. I have also called for the assessment record and perused the same. In the instant case, it is seen that a search was conducted u/s 132 of the I.T. Act, on 29.3.2012 and in the course of the search proceedings, the authorized officers found out about the various bank accounts maintained in the name of various entities allegedly controlled from the premises that was searched. A restraint order was issued in the name of the bank accounts of various entities and an amount of Rs.29,11,56,727/- was found, and out of the same an amount of Rs.29,09,62,065/- was seized. This amount also included an amount of Rs.50,00,000/- cash seized from the premises of C-44, 1st Floor Shardapuri, Ramesh Nagar, New Delhi made in the hands of the appellant. The breakup of seizure amounting to Rs.29,09,62,065/- made by way of pay orders from various bank accounts are given as under (from the appraisal report):

S. No.Action Address of the Cash Found/Rs. Cash seized/Rs Jewellery Jewellery u/s 132 premises found seized

In the hands of Sh. Himanshu Verma, C- 132 44, 1st Floor, Shardapuri, Ramesh Nagar, New Delhi

3. 5,22,380/- 5,22,380/- Nil Nil Bank A/c no.911020012187169 o f M / s O m e x p r o Enterprises Pvt. Ltd., 132 Axis Bank Branch, Ashok Viha r, New De lh i

8. 49,79,952/- 49,79,952/- Nil Nil

Bank A/c no. 910020044140742, of M/s SMR Estate Pvt. 132 Ltd. Axis Bank Branch, Ashok Vihar, New Delhi

10. 132 Bank A/c no. 2,16,65,277/- 2,16,65,277/- Nil Nil 911020040774470, of M/s Lakshmi Narayan Fabrics Pvt Ltd., Axis Bank Branch, Ashok Vihar, New Delhi

Bank A/c no. 910020027729096, of M/s Shri Hari Clothing 132 Pvt. Ltd. Axis Bank Branch, Ashok Vihar, New Delhi

Bank A/c no. 910020037604833, of 132 A/s Silco Fabrics, Axis Bank Branch, Ashok Vihar New Delhi

18. 31,88,315/- 31,88,315/- Nil Nil Bank A/c no. 911020022894064, of M/s So! Exim Pvt Ltd, 132 Axis Bank Branch, Ashok Vihar, New Delhi

27. 132 1,00,07,000/- 1,00,07,000/- Nil Nil Bank A/c no. 909020045782521, of M / s G r e e n v i s i o n Construction Pvt. Ltd. Axis Bank Branch, Ash o k Vi ha r, New Delhi

Bank A/c no. 911020003787336, of M/s Citylife Promoters Pvt. Ltd. Axis Bank Branch, Ashok Vihar, New Delhi

Bank A/c no. 911020014450241, of M/s Hope Realtech Pvt. Ltd. Axis Bank Branch, Ashok Vihar, New Delhi

Bank A/c no.093202500000435 , of M/s Wonder Enterprises Development Credit Bank, Kondli Branch, New Delhi

Bank A/c no. 09320200000392, of M/s jai Vaishno Real EstateDevelopment Credit Branch, New Delhi

Bank A/c no. 09320200000462, of M/s Sarswati Fabrics Development Credit Bank, Kondli Branch, New Delhi

29,11,56,727 29,09,62,065 Nil Nil Total

13.1 On perusal of the assessment order and record, I find that the Assessing Officer did not discuss anything with regard to the addition made amounting to Rs.29,11,56,727/-. I also find that in the course of the assessment proceedings, the appellant submitted the audited balance sheet of various entities from whose bank accounts the seizure was made and also the return of income filed by them respectively. On perusal of the same, I find that the amount of seizure made by the Department was shown in their respective financial statements, but the Assessing Officer did not verify or even enquire the source of such deposits found in their bank accounts. It is pertinent to mention here that a large part of the seizure was made from the bank accounts of various entities and according to the Assessing Officer no cash deposit was found in these accounts. From the seizure made, it is evident that the deposits in his accounts did not originate from the cash deposits.

13.1.2 In the course of the appeal proceedings, the AR of the appellant contended that a large volume of transactions was on account of rotation/turnover etc. It was also stated that in several of these cases, the money belonged to the external parties who got trapped in the action conducted by the department on these bank accounts. To demonstrate the same, the appellant illustrated the transactions of M/s Commercial Engineers & body builders Co. Ltd. (CEEBCO) where an amount of Rs.10 crores was received from the above concern to be returned back after undertaking certain circular transactions but could not be so returned on account of seizure of the same by the Department. To substantiate the same, the appellant placed on record a correspondence between the said concern and the Assessing Officer regarding the claim of the amount above mentioned by companies. Similarly, it was stated that in the case of M/s Ujjawal Micro Finance (P) Ltd. an amount of Rs.

13 crores was circulated between 17.3.2012, 29.3.2012. For M/s Ujjawal Rural Services Ltd., rotational entries as much as Rs. 10 crores were stated to be carried out on 28.3.2012 and 29.3.2012. For M/s Dhampur Engineering Ltd. rotational entries of Rs. 2 crores were stated to be made between 26.3.2012 and 27.03.2012. To substantiate such transactions, a detailed compilation with respect to these samples of circular transactions was submitted by the AR of the appellant with his submissions as Annexure no.

13.1.3 A fact that emerged from the material on record is that the Assessing Officer neither provided a reasonable opportunity to the appellant to explain the source of funds found in the bank accounts of various entities nor carried out any due diligence himself before concluding that the sums deposited in the bank account were unexplained. After examining the audited financial statements submitted by the appellant, he did not give any adverse finding that the amounts seized from the respective bank accounts which were shown on the assets side of the balance sheet was unexplained. He also did not bring any material on record to give a finding that the amount actually belonged to the appellant. Having accepted the appellant to be an entry operator, the Assessing Officer should have examined and verified these bank accounts of various entities to establish the name of the beneficiary of such amount and correlate the same with the list of beneficiaries identified or to bring on record new beneficiaries. In all, the amounts found and seized from the bank accounts represented the part of the entries or turnover, as is evident from the tally accounts found in the laptop of the appellant, a snap shot of which the Assessing Officer incorporated in the order. The Assessing Officer also incorporated a table in the assessment order giving the name of the entity, account number, bank branch were cash was deposited. Therefore, in my opinion in view of the above discussion they said seizure amounting to Rs.28,59,62,065/- (Rs.29,09,62,065 — Rs. 50,00,000/-) cannot be assessed as income of the appellant on account of unexplained cash deposits but turnover/entries.

13.1.4 However, in the course of the appeal proceedings, in response to a query raised the AR of the appellant admitted that in the following cases the audited accounts were not produced before the Assessing Officer. S. NO. Name Amount

1 Silko Fabrics Rs. 81,506.93/- 2 Gulmohar Fabrics Rs.301,000/- 3 A V Trading Co. Rs. 9,349,000.00/- 4 Pushkar Enterprises Rs.3,545,000.00/- 5 New Style Fabrics Rs. 1,532,000.00/- 6 Saraswati Fabrics Rs.1,528,000.00/- 7 S V Enterprises Rs.948,000.00/- 8 Jai Vaishno Real Estate Rs.1,525,000.00/- 9 Star City Enterprises Rs.1,531,000.00/- 10 Wonder Enterprises Rs.1,530,000.00/- 11 Life Time Trading Co. Rs.1,531,000.00/- 12 Girdhari Industries Rs.1,536,000.00/- 13 Lotus Trading Co. Rs.1,531,000.00/- 14 Total Rs.2,64,68,506/-

From the above, it is evident that the sum of Rs.29,11,56,727/- (actual seizure made of Rs.29,09,62,065/-) is the one against which there is no cash deposit in the relevant entity's accounts and where audited accounts were submitted. Therefore, out of the sum of Rs.29,09,62,065/- which was seized by the Department and brought to tax by the Assessing Officer as unexplained cash, an amount of Rs.50,00,000/- seized in cash in the hands of the appellant and a total sum of Rs.2,64,68,506/- deposited in the bank accounts of the entities listed above from where seizure by way of pay orders was made is considered as unexplained. Therefore, the addition of Rs.3,16,45,506/- (Rs.50,00,000 + Rs.2,64,68,506/-) is confirmed out of Rs.29,11,56,727/- (actual seizure made of Rs.29,09,62,065/-) and direct the Assessing Officer to pass a consequential order accordingly. This ground is partly allowed.”

3. Ld. CIT(DR), Ms. Puja Jindal, has submitted that Ld. CIT(A) has erred in law as much in fact in deleting the addition in respect of accommodation entries provided by the assessee through various entities, the details of which were found during the course of search conducted on the assessee. She submitted that the assessee has been found to be engaged in providing the accommodation entries and this fact has been admitted by the assessee in the statements recorded on 29-03-2012 at the time of search and also post search on 14-04-2012. Referring to the assessment order she pointed out that the AO has listed 88 entities which were being managed and controlled by the Himanshu Verma only. She also pointed out to the list of bank accounts of such entities which are 203 bank accounts. She submitted that these entities were managed and controlled in the name of Dummy Directors/partners/proprietors by Himanshu Verman only which fact was admitted by Himanshu Verma in his statement recorded on 29-03-2012 at the time of search. She pointed out to the several questions and answers out of statements described by the AO in the assessment order. She also submitted that the laptop also contained all the details of the entities which were being managed and controlled by the assessee, their bank accounts etc. She also pointed out to the search material which was in the shape of unsigned and undated cheques etc. which have also been listed out in the assessment order. She also pointed to several bank statements impounded during the course of search. She also pointed to the examination of 15 of such dummy directors/partners/proprietors which were recorded u/s 143(1)A. referring to all these material she submitted that it has been brought on record that assessee had acted as entry provider. She therefore, submitted that the AO was correct in taking the gross amount of entries provided by the assessee as the income of the assessee. She also submitted that there was evidence on record, according to which the assessee has earned the commission from 1% to 1.50%. Therefore, she contended that the AO was right in assessing the commission at the rate of 1.5%. She submitted that CIT(A) has committed a wrong in reducing the quantum of commission from 1.50% to 0.80%.

She submitted that the issue of commission is subject matter of appeal in respect of all the 3 years impugned in the present appeal. Apart from these 2 issue one more issue is involved in A.Y. 2012-13 that on the basis of impounded documents the AO has added a sum of Rs. 29,11,56,727/- as unexplained deposits in bank accounts and cash found during the search. In this regard she pointed out to the observation of AO from pages 54 to 63 wherein the AO has added s sum of Rs. 28,59,79,727/- on account of sum deposited in the bank accounts which was also siezed and cash of Rs. 51.77 lakh found at the premises of the assessee out of which Rs. 50,00,000/- was seized and thus the addition was made by the AO of a sum of Rs. 29,11,56,727/-.

She further submitted that Ld. CIT(A) has wrongly granted the relief to the extent of Rs. 25,95,11,221/- on the ground that the assessee has been able to explain the cash deposit to this extent. Thus, she submitted that in all the three appeals the department is agitating the deletion of addition made on account of providing the accommodation entries and deletion of the commission to the extent of @0.70% and in addition of that in respect of A.Y. 2012-13 the department is agitating the deletion of Rs. 25,95,11,221/- out of total addition on this account of Rs. 29,11,56,727/-.

Thus, she pleaded that the relief granted by CIT(A) on all these issues should be set aside and the additions made by the AO should be restored.

4. On the other hand, Sh. Vivek Bansal, Ld. Counsel for the assessee stated that the assessee admittedly is an accommodation entry provider. He submitted that Ld. CIT(A), on the basis of several observations of the AO in the assessment order and from the material impounded during the search has drawn a conclusion that it is established that the assessee is an accommodation entry provider and AO himself has admitted such fact. Ld. Counsel submitted that in the case of accommodation entry provider, only commission can be assessed and this has so been held in several decisions which have been relied upon by the assessee before CIT(A) which are reproduced as under:-

Decision of Income Tax Settlement commission in the case of Shri. S.K. Gupta Vs ACIT order us/ 245 D (4) of the Act. Copy of this order has been filed in the paper book at pages 226 to 255. The relevant observations were pointed out on para 27 and 28 at pages 250 to 251.

absence of any verification of nature of expenses, and their allowability the expenses incurred by the applicant in earning the commission has to be estimated. 28. on the basis of facts on record, we estimate the expenses incurred by the applicant in earning commission @20% of the gross commission received. On the basis the expenditure is working out to Rs. 27,50,682 on commission of Rs. 1,37,56,410. After reducing the said expenditure incurred from the gross commission, the income of the applicant is settled at Rs. 1,10,02,728/- 4.1 Ld. Counsel for the assessee further made a reference to the decision of ITAT in the case of Sh. Sanjay Kumar Garg Vs ACIT which is dated 28-01-2011 in and other appeals. Copy of this order has been furnished at pages 256 to 294 of the paper book and the relevant observation pointed out from this decision are re-produced below:-

“62. We have heard both the parties and gone through the material available on record. During the course of survey operations, statement of the assessee was recorded wherein it has been categorically admitted that no purchase and sale activities are undertaken in the names of firms. The assessee was using the firms for the purpose of providing sale bills for which he was collecting commission. The assessee was depositing cash in the bank accounts of the dummy firms as well as his own firms through which he was carrying out accommodation entry business. At the time of survey no evidence was found to suggest that the assessee was engaged in real commission business. No other source of income was also found. It is also the case of assessing officer that the assessee was carrying on business of entry provider. The assessments were reopened for this purpose only. The ld. CIT (Appeals) has given a finding of fact that the assessee was engaged in the business of providing accommodation entries and, therefore, the amounts deposited in the account of dummy concerns was to be treated as total receipts on which commission was to be determined. Therefore, we are in agreement with the view of the ld. CIT (A) that only commission can be determined on the deposits made in the bank accounts of the dummy concerns. Therefore, we do not find any infirmity in the order passed by the ld. CIT (A) that the amount deposited in the account of dummy concerns cannot be treated as income of the assessee. Therefore, the ld. CIT (A), in our considered opinion, is justified in treating the cash 38 1502 & 3531 to 3534 (Del) of 2009 AND I.T.A. Nos. 1797, 1798 & 3707 to 3710 (Del) of 2009 deposited in various bank accounts controlled and operated by the assessee as the turnover of the accommodation entry business and commission income has to be estimated thereon. 4.2 Ld. Counsel for the assessee also referred to the decision of ITAT in the case of Sanjay Rastogi Vs ACIT in to 168/Del/2010, copy of this order is placed as Annexure-8 from pages 296 to 300, relevant observation in para 2 are re- produced below:-

“2. The brief facts of the case are as under. The assessee is a Chartered Accountant. A survey operation u/s 133A(1) was carried out at the premises of the assessee where incriminating documents were found showing that assessee was engaged in giving bogus/accommodation entries. These accommodation/bogus entries were provided through various concerns run and controlled by assessee. The income of the assessee was reassessed and commission income on the bogus/accommodation entries computed @ 0.50% on the value of bogus transactions was added. The addition was partly sustained by the CIT (A) @ 0.40% of the value of bogus entries. The addition was finally upheld by the ITAT @ 0.50% of the total value of bogus entries given by the various concerns run for this by the assessee. The ITAT in its order dated 12.11.2008 has sustained the addition in the hands of the assessee by holding as under :- "8. We have heard both the sides. As the facts emerge the transaction in question have not been denied by the assessee. At the same time, a valid argument is made that the department is taxing the same commission in the hands of the assessee as well as in the hands of respective companies. We find the proposition of Ld. Counsel of the assessee as reasonable in nature inasmuch as the income as a matter of principle has to be taxed in one hand. In view thereof, we find merit in the assessee's proposition and held that the rate of 0.50% should be applied in the hands of the assessee for estimating income as done by the AO and we give a direction that the turnover for which the assessee is assessed the same amount of commission shall not be assessed in the hands of any of the company floated by the assessee. Ld. DR has expressed his no objection to this proposition. In view thereof, we dispose of the cross appeals on these directions." 4.3 In addition to the above cases relied upon before CIT(A), Ld. Counsel has also placed reliance on the following decisions.

“Decision of E Bench of ITAT, New Delhi in the case of M/s Omni Farms Pvt.Ltd., Vs. Deputy Commissioner of Deputy Commissioner of Income Tax in dated 28-01-2015, where in referring to the decision of settlement commission referred to as above the ITAT has deleted the addition in the case of conduit company which was found to be an accommodation entry provider.

“17. Thus, there is an order of the Settlement Commission as well as the Additional Commissioner of Income Tax under Section 144A holding that Shri S.K. Gupta was providing accommodation entries, he used various companies as conduit for providing the accommodation entries, cash was received through mediators from the persons who wanted to avail the accommodation entries, such cash was deposited in the bank account of the conduit companies and thereafter, cheque of the similar amount was being issued to the beneficiaries (i.e. the person who wanted to avail the accommodation entry) within a day or so. The Assessing Officer himself in the assessment order has accepted these facts. Considering the totality of these facts and the logical consequences of the order of the Settlement Commission as well as of Additional CIT under Section 144A, we have no hesitation to ITA- 3477/D/2013 & 8 others 19 hold that the addition under Section 68 cannot be made in the case of the conduit companies. Therefore, we delete the addition made under Section 68 in the case of all the nine companies, which are admittedly conduit companies of Shri S.K. Gupta. 18. In the result, all the appeals of the assessees are allowed. Decision pronounced in the open Court on 28th January, 2015”

4.4 Ld. Counsel for the assessee also relied upon the decision of Hon’ble Delhi High

Court in the case of Pr Commissioner Of Income Tax Vs Vijay Conductors India Pvt.

Ltd in ITA 683/2015decision dated 29-09-2015 wherein the observation of Hon’ble

Delhi High Court in prara 8 are as under:-

4.5 Thus, it was contended by the Ld. Counsel for the assessee that no addition can be made in the hands of accommodation entry provider of the value of the accommodation entry provided by him. So far as it relates to assessability of 0.80% of commission and its excessiveness, Ld. Counsel for the assessee placed reliance on the submissions made before Ld. CIT(A) which have been reproduced in the above part of this order. Referring to the submissions, it was further contended by the Ld. Counsel for the assessee that the quantum of commission assessed should be further reduced. So far as it relates to set off of the sustenance of part addition of Rs. 3,16,45,506/- upheld on account of unexplained deposits in the bank account of the assessee, out of total addition of Rs. 29,11,56,727/- made in respect of A.Y. 2012-13, it was submitted by Ld. Counsel of the assessee that the said addition may be set off against the addition of commission upheld by CIT(A).

5. We have carefully considered the rival submissions in the light of material placed before us. We find that Ld. CIT(A) while deciding the appeals has also called for the assessment records and has rendered a finding that the assessee in response to several quarries raised by the AO had furnished the replies. Referring to the observation of AO in the assessment order, it is observed by Ld. CIT(A) that the entire case of AO is that the assessee is an accommodation entry operator and such fact was also admitted by the assessee himself. The assessee has admitted that he is engaged in the activity of providing accommodation entries to various beneficiaries through the entities controlled and managed by him. Thus, Ld. CIT(A) has concluded that the assessee is an entry operator which cannot be disputed. Ld. CIT(A) has also referred to the relevant portion of the statements of the assessee to conclude that the assessee is an accommodation entry provider. It is in this view of the situation she has held that the assessee is an accommodation entry operator. The AO has also re- produced post search statement of the assessee which is recorded on 14-04-2012 wherein the assessee in answering to question No. 9 has stated that he was receiving cheques and RTGS from the company in the shape of loans etc. which were deposited in different companies account which were maintained by him. He also stated that the cash was also being received which was deposited in the bank account of firms, proprietary concerns managed and controlled by him. Similarly, he has also stated that he was receiving cheques and RTGS from companies against the sale, which were being deposited in different bank accounts of the firms and companies managed and controlled by him. Further, the AO has also referred to the statement of the assessee recorded on 29-03-2012, wherein in response to question No. 10, it was stated by the assessee that whenever any company/concern wishes to take accommodation entries from him through various CAs operating in this field, the cash was received from them to give the entries through cheques from any of the entities controlled by him on which commission is received in the range of 0.75% to 1.75%. In answer to question No. 12, it was also stated that he was receiving such commission in cash. Further, the fact of receiving commission has also been confirmed through the evidence found in the shape of laptop of the assessee which was seized and marked as annexure A-37, which according to AO as per observation in his assessment order, has revealed that assessee was receiving brokerage/commission at the rate of 1% to 1.50%. The AO has also listed out 88 entities in the assessment order which are managed and controlled by the assessee. The AO has also listed out 203 bank accounts of these entities through which such accommodation entries have been provided by the assessee. All these fact establish beyond doubt that the assessee has been acting only as a conduit to provide accommodation entries to the beneficiaries which are identifiable through the bank accounts of the entities controlled and managed by the assessee for providing accommodation entries. No material has been brought on record by the AO to show that any money owned by the assessee was utilized to provide the accommodation entries. In this view of the situation we are of the considered opinion that Ld. CIT(A) did not commit any error while rendering the findings that the assessee was an accommodation entry operator. Further, Ld. CIT(A) has also recorded a contradiction in the action of the AO on the ground that while the AO is making addition of commission in the hands of the assessee for providing such entries then, again he is adding the entire entries in the case of the assessee and by making such addition the AO has illogically presumed that the assessee had deposited his own cash while providing the entries to the beneficiaries. In respect of the disclosure/surrender made by seven Chandigarh based beneficiaries, the AO himself has granted the benefit. Further, Ld. CIT(A), while arriving at the conclusion that the assessee is an entry provider and the cash deposited in bank accounts of different entities (which the AO has tabulated on page 64 of the assessment order amounting to Rs. 235,96,03,074) for different years for issueing cheques do not belong to the assessee but moneys of the beneficiaries to whom cheques were issued (list of such beneficiaries is tabulated by the AO on pages 107-120 of the assessment order) who received the cheques from the assessee’s group entities. Ld. CIT(A) has also observed that it is incorrect on the part of AO to allege that the assessee did not provide him with the trail of events leading to the beneficiaries as the AO was in possession of entire information including tally accounts, bank statements, names of entities used as intermediaries, names of the beneficiaries etc. from which the AO himself has culled out every specific and precise information and incorporated the scanned copies in the assessment order. Ld. CIT(A) has also found that the case law relied upon by assessee in the cases of Sanjay Kumar Garg Vs. ACIT (2011) 12 taxmann.com 294 (Del) and S.K. Gupta order U/S 245D(4) of the Act, Manoj Aggarwal Vs DCIT (2008)

113 ITD 377 (Del)(SB) and M/s Goldstar Finvest (P) Ltd. Vs. ITO Vs ITO supports the case of the assessee that in the case of entry provider the income to be assessed would be only the premium/ brokerage/ commission received by him and not the cash deposited in their hands. We have also gone through these decisions relied upon by Ld. CIT(A) in his impugned order, wherein it was held that in the case of assessee who is the entry provider, addition could not be made in respect of entries but only of commission. In addition to the decision relied upon before CIT(A) Ld. AR has also placed reliance upon following decisions which also confirm the aforementioned view:-

A. M/s Omni Farms Pvt.Ltd., Vs. Deputy Commissioner of Deputy Commissioner of Income Tax in dated 28-01- 2015

This is consolidated order of ITAT dated 28-01-2015 in respect of nine assessees. The issue before Tribunal was that whether addition equal to entry provided by an entry provider can be made in the hands of such entities. The ITAT after referring to several decisions has come to the conclusion that no such addition can be sustained in the hands of the entry provider. The relevant paras are re-produced below:-

“17. Thus, there is an order of the Settlement Commission as well as the Additional Commissioner of Income Tax under Section 144A holding that Shri S.K. Gupta was providing accommodation entries, he used various companies as conduit for providing the accommodation entries, cash was received through mediators from the persons who wanted to avail the accommodation entries, such cash was deposited in the bank account of the conduit companies and thereafter, cheque of the similar amount was being issued to the beneficiaries (i.e. the person who wanted to avail the accommodation entry) within a day or so. The Assessing Officer himself in the assessment order has accepted these facts. Considering the totality of these facts and the logical consequences of the order of the Settlement Commission as well as of Additional CIT under Section 144A, we have no hesitation to ITA-3477/D/2013 & 8 others 19 hold that the addition under Section 68 cannot be made in the case of the conduit companies. Therefore, we delete the addition made under Section 68 in the case of all the nine companies, which are admittedly conduit companies of Shri S.K. Gupta.

B. PR COMMISSIONER OF INCOME TAX vs VIJAY CONDUCTORS INDIA PVT. LTD in ITA 683/2015 dated 29-09-2015

Hon’ble Delhi High Court in the case of Pr. Commissioner of Income Tax Vs Vijay Conductors India Pvt. Ltd vide order dated 29-09-2016 has held the order of ITAT ob observation in para 8 as under:-

8. It is not in dispute that the Respondent Assessees are the conduit entities and not the beneficiaries. Consequently, the order of the ITAT deleting the addition under Section 68 of the Act in their hands does not suffer from any legal infirmity. 41 5.1 In the background of the aforesaid discussions and respectfully following the precedents, as aforesaid, we are of the considered view that Ld. CIT(A) did not commit any error in holding that Assessing Officer was not right in taxing the total turnover of the entries as an unexplained cash credit in the hands of the assessee, who is an entry provider and since the beneficiaries are identified, the entire amount should be brought to tax in the respective hands of the beneficiaries. Hence, the order of the Ld. CIT(A) is a well reasoned order and, therefore, we affirm the findings of the Ld. CIT(A) on the deletion of addition of Rs. 83,71,29,511/-, Rs. 195,01,14,122/- and Rs. 599,94,54,170/- in respect of Assessment years 2010-11, 2011-12 and 2012- 13 respectively and accordingly the grounds pertaining to this addition in all these assessment years in all the 03 appeals filed by the Revenue are dismissed.

6. As regards other issue relating to rate of commission in the hands of the assessee which has been held to be an entry operator. We find that the AO has estimated such commission 1.5% of the entries provided by the assessee to different entities. The assessee has agitated this addition before CIT(A) and reliance was placed on the following decisions to contend that the addition to the extent of 1.5% as commission is excessive:-

Authority deciding the matter Name of the assessee Rate of Commission

Special Bench of ITAT, New Delhi Sh. Manoj Aggarwal 0.35%

Income Tax Settlement Commission, Sh. S.K. Gupta 0.80% Principle Bench, New Delhi ITAT, New Delhi Sh. Sanjay Kumar Garg 0.20%

ITAT, New Delhi Sh. Sanjay Rastogi 0.50% 6.1 Ld. CIT(A) after considering submissions of the assessee, has concluded that addition of commission to the extent of 0.80% is justified and accordingly she has sustained the addition to the extent of 0.80%. The assessee in his appeals is agitating the assessment of commission at 0.80% and against that the department in its appeal is agitating the deletion remaining part of the commission i.e. 0.70%.

6.2 We have heard both the parties and perused the records. We note that the entries provided by the assessee are mix-match of three types of entries as disclosed by the assessee in his statement recorded on 14-04-2012(post search). The rate of commission is not uniform in respect of these three types of entries. Therefore, to upheld the addition to the extent of 1.50% is not justified on the facts of the case more particularly when AO has not brought any material on record to justify the addition to this extent. In our opinion, looking in to the facts of the case and the decisions relied upon, Ld. CIT(A) is justified in taking commission rate 0.80%.

Therefore, we decline to interfere in a such well reasoned finding of Ld. CIT(A), hence, we uphold the findings of the Ld. CIT(A) on the issue in dispute and accordingly these grounds relating to the determination of rate of commission by the assessee as well as by the department are dismissed.

6.3 In view of above observations, the Ground-3 in respect of A.Y. 2010-11 and 2011-12 and Ground-4 of appeal for A.Y. 2012-13 in Revenue’s Appeals are dismissed and Ground-1 of assessees appeal for all the three years are dismissed.

7. As regards Ground-3 of Departmental Appeal in respect of A.Y. 2012-13, we have noticed that Ld. CIT(A) has discussed these issues in paras 11 to 13 of the impugned order. Ld. CIT(A) has reproduced the submission made by the assessee before her which can been seen in para 12 and these submission are also reproduced in the above part of this order. Ld. CIT(A) has rendered the decision in para 13. She has noted the fact that the subject matter of balance in the bank account was on account of pay-orders, the details of which have been given in the table described in para 13 of the impugned order. The assessee also furnished the copy of returns filed by such concerns along with balance sheets etc., which are part of the replies submitted by the assessee before Ld. CIT(A) and documents in this regard are filed at pages 50 to 130. The basis of relief granted by the Ld. CIT(A) is that the assessee has been able to produce not only the copy of acknowledgment of return filed by those concern but also the audited balance sheet of these concern. It was also noticed by Ld. CIT(A) that the deposit in those accounts also belong to external parties and the balance were also claimed by them for example the reference is made to the Ceebco, Ujjwal Micro finance Pvt. Ltd., M/s Ujjwal Rral Services Ltd. and M/s Dhanpur Engineering Ltd. from where it was noticed that several crores of Rupees were circular transaction and these were not cash deposit but were properly accounted for in the accounts of those entities for which the audited financial statements were also submitted to the assessing officer. The details of these entries have been culled out in Annexure-3 submitted before Ld. CIT(A) at pages 138 of the paper book and the details that these entries were properly accounted for was also submitted. Reference in this regard can be made to the documents enclosed in the paper books from pages 131 to 141. Further, Ld. CIT(A) has also listed out the seized amount of Rs. 29,09,62,065/- which is seized from bank accounts and has observed that this cannot be assessed as income of the assessee on account of unexplained cash deposits as the same was turnover/entries. The balance amount remaining for which the assessee could not submit the audit reports and details which are listed out in para 13.1.4 is total to Rs. 2,64,68,506/- + Rs. 50,00,000/- cash has been sustained to a sum of Rs. 3,16,45,506/-. The department in its appeal is agitating the deletion of a sum of Rs. 25,952,11,221/- and assessee in his appeal is seeking set off of the said amount of Rs. 3,16,45,506/- against the commission income.

8. We have heard both the parties and perused the material referred to before us and also submitted the paper book which consists submissions made before CIT(A). Through the submissions made before AO and CIT(A), the assessee has been able to explain that the amount added by the AO of a sum of Rs. 29,11,56,727/- was not on account of unexplained credit in the bank accounts. Ld. CIT(A) has listed out the amount from various bank accounts in para 13 which are found to be the turnover of accommodation entries relating to the entities who have furnished the return of income as well as audited accounts which are relied upon and Ld. CIT(A) has observed that the same cannot be treated as unexplained deposits in the hands of the assessee. After perusing the findings of the Ld. CIT(A), we do not find any infirmity in the findings of Ld. CIT(A), therefore we decline to interfere in the deletion of amount of Rs. 25,95,11,221/- and hence, uphold the order of the Ld. CIT(A) on the issue in dispute.

9. As regards the claim of the assessee regarding set off of the remaining addition of Rs. 3,16,45,506/- against the commission income, we find no merits in such claim of the assessee. Therefore. This ground of the assessee is also dismissed.

Order pronounced on 15/03/2019.