SHRI ANIL KUMAR BANSAL,NEW DELHI vs. DCIT, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘A’, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER & 591/Del/2017 Assessment Years: 2007-08 & 2012-13 Vs. DCIT, Sh. Anil Kumar Bansal, S-524, Central Circle -31, Room No. 208, Shakarpur, New Jhandewalan Extn., New Delhi Delhi PAN : AAFPB2542K (Appellant) (Respondent) Appellant by Sh. Ruches Sinha, Adv. Respondent by Smt. Aparna Karan, CIT(DR) Date of hearing 13.09.2017 Date of pronouncement 25.10.2017 ORDER PER O.P. KANT, A.M.:

These two appeals by the assessee are directed against two separate orders dated 18/11/2006 of the Commissioner of Income-tax (Appeals)-30, New Delhi [in short ‘the CIT-(A)’] for assessment years 2007-08 and 2012-13 respectively. Identical issues are involved in both these appeals and, therefore, these appeals were heard together and disposed off by way of this consolidated order.

2. That the order of the CIT(A) is being assailed of being perverse, as the same is passed without considering the submissions of the Appellant, taking a holistic view of the matter and the ratio's of various case laws which have been relied by the Appellant. 3. That the CIT (A) has erred in law and on facts in confirming the addition of Rs.1,26,28,85,990/- on account of entries allegedly appearing in Annexure A-l, treating the same to be unexplained income of the Appellant. 4. That the CIT (A) has erred in law and on facts in confirming the addition of 30,00,000/- on account of entries allegedly appearing in Annexure A-4, treating the same to be unexplained income of the Appellant. 5. The Appellant craves leaves to add, alter or modify the aforesaid ground and craves leaves to file additional grounds. 6. The aforesaid grounds are taken without prejudice to each other.

2.3 The facts in brief of the case are that the assessee is a Chartered Accountant by profession and a survey action under section 133A of the Income-tax Act, 1961 (in short ‘the Act’) was carried out on 11/04/2011 at the premises of the assessee located at 208, S-524, Vikas Marg, Shakarpur, Delhi. In survey proceedings, certain pocket diaries and lose papers were found and impounded. In the diaries transactions relating to cash received and paid in the name of different persons were found to be recorded in code word or abbreviated form. In statement recorded during the survey proceedings on 11/04/2011, the assessee did not disclose the modus operandi of the transactions recorded in pocket diaries, however, during the statement recorded under section 131 of the Act before the DDIT, Investigation, New Delhi on 20/05/2011, he admitted the fact that he might have arranged accommodation entries for the persons whose names were appearing in the pocket diaries. The assessee also admitted that the digits mentioned against the code-names are in lakhs of Rupees. The assessee did not provide name and address of the persons whose names were written in the code-word. The assessee stated that the client coming to his office for taking funds never provided exact name and address. 2.4 The assessee filed return of income for the assessment year under consideration on 30/03/2013 declaring total income of his Rs.1,79,600/-. In the return of income filed, assessee did not disclose any commission income on account of providing or arranging accommodation entries on commission basis. The case was selected for scrutiny and notice under section 143(2) of the Act was issued and served upon the assessee. 2.5 The Assessing Officer has noted in the assessment order that copy of the impounded Annexures were duly provided to the assessee. During assessment proceedings, the Assessing Officer issued notice under section 142(1) dated 08/01/2014 requesting the assessee to submit page-wise explanation of the transactions reflected in various pages of the Annexure A-1 to A-3 and A-4 to A-6 and A-7 and furnish evidence as to whether the income arising out of entries contained in the seized material has been incorporated in the regular books of accounts. The assessee did not furnish any explanation and submitted that explanation would be submitted on next date because copies of those documents were missing. The assessee did not furnish any explanation for almost 11 months, then the Assessing Officer issued one more notice under section 142(1) dated 27/11/2014, asking, queries similar to what were asked in notice dated 08/01/2014. The assessee responded that no such pages exits for which explanation could be given. The Assessing Officer followed the principle of natural Justice and allowed a final opportunity vide notice under section 142(1) dated 11/03/2015 requesting the assessee to furnish the requisite information. In the notice, the Assessing Officer mentioned the aggregate of the entries appearing in the diaries at Rs.126,28,55,990/-. This notice was served upon the assessee on 12/03/2015, however, according to the Assessing Officer, no compliance was made. In view of the non-compliance, the Assessing Officer taking into consideration the statement of the assessee dated 20/05/2011 held the amount of Rs.126,28,85,900/- as entries/transactions appearing in the impounded diaries A1 to A-3, as unexplained income of the assessee. 2.6 Further, the Assessing Officer referred to page 68 of the Annexure A4 which contained entries of Rs.30,00,000/- in the name of Sh. Rambabu Gupta, Sh Nirmal Gupta, and Ms. Kalpana Gupta of Rs.10,00,000/- each. In view of the failure of the assessee to explain the said entries, the Assessing Officer treated the same as unexplained income of the assessee. 2.7 Aggrieved, the assessee filed appeal before the Ld. CIT-(A) and made detailed submissions, which has been reproduced by the Ld. CIT(A) in the impugned order. The submissions of the assessee were summarized by the Ld. CIT-(A), which are extracted as under:

“(v) In the appellate proceedings, AR has stated that the A.O. has not correctly determined the total of undisclosed entries/ transactions recorded in the impounded diaries, for the following reasons:- (a) The AO has not considered the “+” and signs, while calculating the amount of addition. It was duly stated at the time of recording of statement that, “+” denotes incoming of funds and denotes outgoing of funds. However, A.O. has wrongly made additions by adding “+” , as well as signs. (b) There are calculation errors in Annexure-1, where the A.O. has added the figures brought forward and carried forward twice and the same is leading to cascading effect. (c) For Annexure A-l, tax can be charged only at entry or exit level, since in order to give genuine color to an entry for alleged transaction, the same is routed via various layers, however commission is charged at one point of time only. (d) Annexure A-4 is a rough working for advising these 3 persons for investment purposes, wherein assessee has recorded figure of Rs. 10,00,000/- each in the name of Ram Babu Gupta, Om Prakash Gupta and Nirmal Gupta and these are not the actual transactions. (e) The assessee is into the business of accommodation entries, therefore whole of the amount cannot be treated as unexplained income of the assessee and only commission income can be charged in the hands of assessee. (f) In the 2 statements recorded, the assessee has submitted that, he was facilitating entries for earning commission @ 0.10% on the amount of entries provided and therefore, this rate should be accepted. In view of the above, AR has filed the analysis and calculation of the entries in Annexure 1-A and same is filed in the paper book page no. 74 to 89. As per the appellant the total unrecorded entries come to Rs.9,62,03,619/-.”

2.8 The Ld. CIT-(A) summarized the facts of the case and after analyzing the submission of the assessee, dismissed the grounds of the appeal. The relevant finding of the Ld. CIT-(A) is reproduced as under:

“From the above, following facts emerged: � The appellant is a Chartered Accountant and in the Return of Income for any of the assessment year, including A.Y. 2012-13, or subsequently, no commission income has been disclosed, on account of providing alleged accommodation entries on commission basis, � The transactions in the diaries relating to cash received and paid, are in the name of different persons, � Cash transactions of Rs. 30,00,000/-, as per Annexure-A4, relating to 3 persons remained unexplained. On perusal of loose paper, it is clear that cash has been received/paid by the appellant against some sale/purchase of property, which is not recorded in the regular books of account of the appellant. In either case of purchase or sale of property, the transactions remained unexplained, which is the unexplained income of the appellant, � In the diary, all the payments received are considered as cash credits on a particular date mentioned in the diary and the payments have been considered as unexplained investment u/s 69 of the Act, and � The appellant was allowed adequate opportunities to represent the case in the assessment proceedings by the A.O. From the above, it is clear that appellant failed to substantiate its claim of providing accommodation entries to different clients before the A.O. as well as in the appellate proceedings. In the diaries, the amounts received and given, on different dates are clearly different transactions, which are clearly noted for each date and appellant failed to substantiate that payments are made, out of that receipts noted on that date. It is also clear that no such income from commission on account of providing alleged accommodation entries, has been disclosed in the return of income for any of the assessment years.

From the above, it is clear that the A.O. has not accepted but observed that assessee appears to have been providing accommodation entry on which commission @ 4.5% and 3.5% have been charged. However, in the statement and submission of the appellant, same has been claimed to have been charged @ 0.10, but no such alleged income from commission has been shown by the appellant suo moto in the return of income nor during the assessment proceedings. It is also clear that in the assessment proceedings no explanation and details were furnished for such claim and same is the position in the appellate proceedings. Therefore, it is clear that the appellant failed to substantiate its claim, since no such income has been shown by the appellant in the return of income nor any computation was provided to quantify such alleged commission. Regarding the arguments of the appellant that A.O. has not considered the payments i.e figures in the diary and only '+' figures have been considered. In the diary, all the payments received are considered as cash credits on a particular date mentioned in the diary and appellant failed to explain the source and therefore, same have been considered as unexplained cash credits u/s 68 of the Act. Similarly on the same date, the payments have been considered as unexplained investment u/s 69 of the Act. As the appellant has failed to disclose the income from these transactions in the Return of income and also failed to substantiate that the payments have been made from the cash receipts on a particular date, therefore, there is no question of exclusion of such alleged payments from the total additions made by the A.O. It is also clear that the transactions in the diaries relating to cash credits, remained unexplained as per provision of Sec.68 of the Act. Further, the transactions in the diaries relating to payments also remained unexplained as per provision of Sec.69 of the Act and also failed to substantiate that these payments are made, out of the receipts of cash. The expenses noted in the diary for house construction, are not proved that same have been incurred out of the income, which has already suffered tax and therefore, all these transactions are unexplained expenses u/s 69C of the Act. In view of the above, I am of the considered opinion that the objections raised by the appellant through above submissions, are not correct and therefore, arguments of the appellant, are hereby rejected. In these facts and circumstances, I do not find any infirmity in the findings of the A.O. and therefore, both the additions made by the A.O., are confirmed. Accordingly, ground no. 1 to 6, are hereby dismissed.”

2.9 Aggrieved with the finding of the Ld. CIT-(A), the assessee is in appeal before the Tribunal, raising the grounds as reproduced above.

Q 10. I am showing you Page No. 3 of Annexure A-2 which is having some name codes in with date and some digits against the code name. What does it stands? A 10. These are transactions made through different persons which are recommended by different people of my friends circle. The digits against the code means are in fact such as on 13/09/2010 AKR5 stands for 5 lacs. The + stands for incoming of the funds and – stands for outgoing of the funds.

3.8 Before us, the learned counsel of assessee stated that the assessee had explained all the entries and transaction before the Assessing Officer. 3.9 We do not agree with the above contention of the Ld. counsel. During the statement recorded by the DDIT (Investigation), the assessee only explained that digit of amount mentioned represented lakhs of rupees and symbol “+” represented incoming of fund and symbol “-” represented outgoing of funds. No name and address or any other information was provided by the assessee in respect of claim of the profession of providing accommodation entries. Non-corporation of the assessee in proceedings before the DDIT as well as proceedings before the Assessing Officer is evident from the following facts:

(i) the statement of the assessee was recorded by the DDIT on 20/05/2011. In the statement, the DDIT, in question No. 11, question No. 16 and question No. 21, asked the assessee to explain the name and address of the persons recorded in coded form, but the assessee simply avoided to answer. The reply of the assessee in response to those questions is reproduced as under:

Q. 21 Please give the addresses of above persons? A. 21 I don’t know as the client never gives the exact name of the person who is coming in our office for giving or taking the fund. They only talk in the terms of the codes given to the person who is visiting office.

(ii) the Assessing Officer issued notice under section 142 (1) of the Act on 08/01/2014, in which he asked the assessee to explain the entries/transactions appearing on pages 78, 67 and 18 of small pocket diaries (Annexure A-1 to A-3), pages 109, 199 and 159 of loose papers annexed as Annexure A-4 to A-6 and Annexure A-7 (hard disc). This notice under section 142(1) of the Act is available on page 95 to 97 of the assessee’s paper book. The Assessing Officer has noted in the assessment order the response of the assessee, according to which, the assessee explained that all these pages of the relevant annexure and hard disk would be explained on the next date because copies of those documents were missing then. The assessee has not shown any documentary evidences that subsequently, he explained those documents to the Assessing Officer.

(iii) Pages 98 of the paper book is a copy of summon dated 30/01/2014 issued by the Assessing Officer to the assessee for appearing before him on 03/02/2014 and produce bank statement and books of accounts for the relevant period . The assessee has not shown on any evidence that it had complied the said summon issued by the Assessing Officer, (iv) Page-99 of the paper book is a notice under section 142(1) of the Act dated 27/11/2014 asking the assessee to furnish the information/documents as per questionnaire dated 08/01/2014 and produce books of accounts containing ledgers, cash book etc. on 08/12/2014. The assessee has not shown any evidence that he complied the above notice issued by the Assessing Officer, (v) Page 100 of the paper book is a notice under section 142(1) dated 30/01/2015 asking the assessee to produce information/documents/books of account as called for vide notice under section 142(1) dated 08/01/2014 and summon under section 131 dated 30/01/2014, on or before 10/02/2015. In response to the said notice, the assessee furnished a reply on 19/02/2015, in which particularly with reference to the entries in pages of the pocket diaries and loose papers inventorised, it was stated that no such pages exist for which explanation could be given, (vi) the Assessing Officer issued a final show cause notice on 11/03/2015 quantifying the unexplained income appearing in the entries/transactions recorded in pocket diaries and loose papers. This notice was served on the assessee on 12/03/2015. The Assessing Officer in para-4.1 of the assessment order has mentioned that on the date fixed for hearing none attended on behalf of the assessee nor and written communication in this regard had been received in the receipt counter of his office. The Ld. counsel of the assessee has stated before us that the assessee filed a letter dated 15/03/2015 before the Assessing Officer. But fact of receipt of such letter has been denied by the Assessing Officer in the impugned assessment order. The assessee has also filed a copy of said letter which is available on pages 105 to 121 of the paper book. On perusal, we do not find any acknowledgement of the letter by the office of the Assessing Officer. In this letter the assessee has worked out the peak balance of the transaction at Rs.3,71,03,764/- and computed the commission at the rate of 0.1%, which amounted to Rs.37,104/-. In absence of any acknowledgement by the Assessing Officer of the said letter, the contention that the assessee explained the entries before the Assessing Officer is rejected. 3.10 In view of the above conduct of the assessee of avoiding various notices and summons issued by the Assessing Officer, clearly establish that there was no failure on the part of the Assessing Officer in providing the opportunity of explaining the entries/transactions appearing in pages impounded from the premises of the assessee. Had the assessee co- operated the proceedings and provided the name and addresses of the persons claimed to have availed accommodation entry through him, the Revenue would have got opportunity and taken action against those persons within the limitation period of six years provided in the Act, by way of reopening their assessments. 3.11 Before the learned CIT-(A), the assessee made part efforts as far as quantum of addition is concerned. The assessee contended that he was engaged in arranging accommodation entry through other accommodation entry providers and earning only commission on the services provided and, therefore, only commission at the rate of 0.1% should only be taxed in its hand. 3.12 But we find that assessee has not provided any details, name and address of the persons for whom it has arranged accommodation entries. The assessee also did not provide the name and addresses of the persons from whom it arranged accommodation entries. Before us, also assessee has not provided any detail of the accommodation entry seekers or accommodation entry givers. Further, even mere providing name and address also may not be sufficient to discharge his burden. In terms of section 68 of the Act, in respect of claim of incoming funds, the assessee is required to explain nature and source of the fund. Though the assessee has explained the nature of the funds, however, the source of the fund has not been explained. 3.13 Thus, the contention of the Ld. counsel of the assessee that only commission income from the entries/transactions recorded should be assessed in the hands of the assessee, is rejected. 3.14 Another contention, which was raised by the Ld. counsel without prejudice to the contention of the commission income, is that only one side, either incoming fund or outgoing fund should only be assessed in the hands of the assessee and not both. This contention of the learned counsel is somewhat convincing. If the Assessing Officer has made addition for the incoming fund recorded in the entries/transactions, than fund is available for explaining the outgoing of fund and no addition for outgoing fund could have been made under section 69A of the Act as unexplained investments. The Assessing Officer was required to make a date wise fund flows statement for the entire relevant period and examine whether the incoming fund was sufficient enough to explain the outgoing of funds. If at any point of time no incoming fund is available, to explain the outgoing of fund, in that case addition could have been possible to make as unexplained investment under section 69A of the Act, otherwise the only addition could have been made was for total incoming of fund under section 68 of the Act. Though we understand that assessee has not cooperated and avoided the proceedings before the Assessing Officer, still it is the duty of the first appellate authority to assess the income as per the provisions of the Act. We are of the considered opinion that even in the situation of the failure of the assessee to explain the name and address of the persons from whom the funds received and to whom the funds given, additions cannot be sustained both for incoming of funds and outgoing of the funds. The contention of the assessee that cheque numbers and daily opening balances appearing in the diaries/lose papers have also been added, need to be examined thoroughly. In the interest of substantial Justice, we feel it appropriate to restore the matter to the file of the Assessing Officer for quantification of the additions in the case of the assessee in view of our observations made above. The assessee shall be afforded reasonable opportunity of being heard. Accordingly, grounds related to the addition of Rs.126,28,85,990/- are allowed partly for statistical purposes.

4. On the issue of addition of Rs. 30 lakh, the assessee has not discharged its onus laid down under section 68 of the Act of explaining the nature and source of the entries either before the lower authorities or before us. The assessee has not furnished any confirmation from the parties as well as not provided there complete addresses. In view of the failure of the assessee to discharge its onus, we do not find any error in the finding of the learned CIT-(A) in confirming the additions, accordingly we uphold the same and dismiss the ground No. 4 of the appeal.

ITA No. 590/Del/2017 for AY 2007-08 6. Now, we take up appeal in for assessment year 2007-08. The grounds raised by the assessee are reproduced as under:

“1. That in view of the facts and circumstances of the case the order passed by the CIT(A) and the assessment order is illegal, bad in law and without jurisdiction.

2. That the order of the CIT(A) is being assailed of being perverse, as the same is passed without considering the submissions of the Appellant, taking a holistic view of the matter and the ratio's of various case laws which have been relied by the Appellant.

3. That the CIT(A) has erred in law confirming the initiation of the reassessment proceedings initiated U/s 147/148 of the Act without considering that in this case the reassessment order have not been passed as per the dictum laid down by the Hon'ble Supreme Court in case of GKN Driveshaft.

5. That the CIT(A) has erred in law and on facts in confirming the addition of 1,50,18,37,419/- on account of entries allegedly appearing in Annexure A-2 and Annexure A-3, treating the same to be unexplained income of the Appellant.

7. That the CIT (A) has erred in law and on facts in confirming the addition of Rs.54,77,836/- on account of entries allegedly appearing in Annexure A-4, treating the same to be unexplained income of the Appellant.

8. The Appellant craves leaves to add, alter or modify the aforesaid ground and craves leaves to file additional grounds.

9. The aforesaid grounds are taken without prejudice to each other.”