DILIP C. SHAH,MUMBAI vs. ASST CIT CEN CIR -11, MUMBAI

Per Joginder Singh (Judicial Member) This bunch of seven appeals is by the assessee against the impugned orders all dated 23/04/2014 of the Ld. First Appellate Authority, Mumbai, confirming the levy of penalty of Rs.81,89,43,187/- (AY- 2006-07), Rs.1,11,42,68,085/- (AY- 2007-08), Rs.88,35,33,782/- (AY- 2005-06) Rs.53,20,18,982/- (AY-2004-05), Rs.18,88,62,740/- (AY-2003-04) and Rs.14,01,92,601/- (AY- 2002-03) respectively. imposed u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter the Act).

2.1. We have considered the rival submissions and perused the material available on record. Before adverting further and in view of the submissions from both sides, it is our bounded duty to examine the order of the Tribunal on quantum addition (ITA No.5739 to 5745/Mum/2012) for Assessment Years 2001-02 to 2007-08, order dated 25/09/2017.

“These bunch of appeals filed by two different assessee’s are directed against two common orders passed by the CIT(A)- 37, Mumbai dated 24.07.2012 for the assessment years 2001-02 to 2007-08. Since, the facts are identical and issues are common, these appeals were clubbed, heard together and disposed of by this common order for the sake of convenience. The grounds of appeal raised by the assessee, Shri Dilip Shah are as follows:

1. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in passing a consolidated order for all seven assessment years from 2001-02 to 2007-08, ignoring to 287/Mum/2016 4 Dilip C. Shah the statutory provisions and requirement.

2. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in law and on facts for not passing separate assessment orders for each of the seven assessment years from 2001-02 to 2007-08, ignoring the statutory provisions and requirement.

3. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in law and on facts in inferring and holding that the Appellant was indulged in the business of issuance of bogus bills.

4. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of Rs.35,46,36,038/- on account of alleged sales on protective basis, without considering the facts and circumstances of the case.

5. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in inferring and holding that the appellant earned commission @ 2% on account of services rendered by him, ignoring the prevailing commission rate in the steel market ranging between 0.02% - 0.05%, especially having regard to the fact that the Appellant is a registered broker in the market.

6. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of Rs.70,92,721/- to the income of the Appellant, being Commission earned @ 2% on the bogus sales bills issued during the year to various parties.

7. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in holding that the cash deposits in the bank accounts of the persons other than assessee (third to 287/Mum/2016 5 Dilip C. Shah parties) as undisclosed income of the appellant.

8. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of Rs.7,01,650/- to the income of the Appellant on the basis of the cash deposits in the various bank accounts of the persons other than assessee (third parties), ignoring the fact that the Appellant was merely a commission agent of those persons.

9. The appellant craves leave to add, amend alter or delete the said ground of appeal.

5. During the course of the assessment proceedings, the A.O called upon the assessee to explain credits found in the bank account and sales bills issued to M/s Varun Industries Ltd. In response to show cause notice, the assessee submitted that he is a registered commission agent in the steel market. He along with Shri Atul Sanghvi are engaged in the business of commission agent facilitating sale and purchase between the persons manufacturing steel goods and persons buying steel goods. The assessee further submitted that he charged commission ranging to 287/Mum/2016 8 Dilip C. Shah from 0.05% to 0.15% depending upon the size of the business for which he collected various details from the prospective sellers of goods including their PAN card, sales bills, bank account details, address proof etc. The assessee further submitted that the bank account found during the course of search and sale bills found in various names do not belong to him, but the same were belonging to the entities manufacturing goods which are kept in our in custody for easy facilitation of business, therefore, the same cannot be construed as dummy entities floated by me for facilitating issue of bogus bills.

by the assessee challenging the validity of assessments, as though the A.O has passed a consolidate order, the order passed by the A.O is noticeably separate insofar as the additions / computation of total income are concerned. The CIT(A) referring to the persons of Section 292B of the Act, observed that no assessment made in to 287/Mum/2016 19 Dilip C. Shah pursuance of any of the provisions I.T. Act, shall be invalid or shall be deemed to be invalid merely because on any mistake, defect or omission in such assessment, if the said assessment in substance and in effect is in conformity with or according to the intent and purpose of the Income-tax Act. Admittedly, the ld A.O had issued separate notice u/s 153A for all the years and it was only for the sake of brevity and consolidation of the fact that one single order was passed, though manifestly additions for all the assessment years have been made separately and computation of income for each year has been done separately. Therefore, there is no doubt that the intent and purpose of passing of such an order is, in substance and effect, in conformity with the intent of the I.T. Act and squarely covered u/s 292B of the I.T. Act, even if a hyper technical plea has arisen that there should be a separate order for each year on individual sheets of paper. Accordingly the legal ground raised by the assessee has been dismissed.

17. Insofar as other ground of appeal challenging additions made by the A.O towards sales bills raised in the name of M/s Varun Industries Ltd. and estimation of commission on sales bills, additions towards unexplained bank credits, the CIT(A) for the detailed reasons recorded in this order dated 24-07-2012observed as under:- 2 . 6 . 1 V i d e g r o u n d N o . 3 t h e a p p e l l a n t h a s r a i s e d a n i s s u e regarding an inference drawn by the Ld. A.O. that he indulged in the business of issuance of bogus bills. From the facts of the case, it is apparent that appellant was found in possession of several bank accounts and other related documents of fictitious persons and a large number of sale bills issued to various concerns including those of M/s.Varun Ind. Ltd. were found alongwith a number of cheque books and bank lips. Evidence was also found of tampering of documents such as PAN cards by substitution of names and photographs. In one of such case, same person's photo was used in three different bank accounts in three different names. Thus, it cannot be said that appellant was not indulged in the to 287/Mum/2016 20 Dilip C. Shah business of issuance of boqus bills. By making a mere averment that he was not involved in such activity in spite of a host of such evidence found in his possession would not cut much ice and cannot lead to an inference which the appellant wants the revenue authorities to hold. In view of the above facts there is not even of iota of truth in the pleadings made by the appellant and hence ground No 3 is dismissed. 2.7.1 Ground No.4 relates to making of protective assessment of Ps.35,46,36,038/- on account of sales made to M/s. Varun Inds. Ltd. The only plea which has been made by the appellant is that because a substantive addition has been made in the hands of M/s. Varun Ind. Ltd., the protective assessment in the hands of the appellant, would not survive. It is true that a substantive addition has now been made in the hands M/s Varun Ind. Ltd., but as long as the issue has not attained finality, on facts and in law, it cannot be said that the protective assessment in the hands of the appellant is wrong because the very basis of making a protective assessment is to protect the interest of revenue which even the appellant has not denied. Only if the substantive addition made in the hands of M/s. Varun Ind. Ltd. survives all possible rounds of litigation and attains a finality, would the appellant be documents relieved of its liability. It is a stated position that- documents relating to various bogus bank accounts and dummy accounts alongwith PAN cards and other documents were seized from the appellants premises suggesting that he was engaged in a scam of mammoth proportion in the steel market and therefore, 1 do not find any infirmity in the order of the Ld. A.O. in makinq a protective assessment in the hands of appellant's hands. Hence, for the purpose of deciding this appeal, the addition made by Ld. A.O. is confirmed. Nevertheless, the appellant shall be entitled to a relief if the substantive addition made in the hands of M/s.Varun Inds. Ltd. is confirmed after all rounds of litigation. 2.8.1 Ground Nos. 5 & 6 relate to addition on account of commission 2% on bogus sales made. During the course of search, it was found that the appellant was in to 287/Mum/2016 21 Dilip C. Shah possession of signed cheque books and other related documents such as PAN card etc. of various entities and when he was asked to produce the persons, the appellant was unable to produce them. Although, the appellant is stated to have filed certain confirmations, the Ld. A.O. was not satisfied with the same and he informed the appellant to produce the parties for verification of their existence as well as for carrying on of business relating to the sale bills found from the appellant's possession. As per the original assessment order framed by the Ld. AC. and which appears as an attachment to the impugned Assessment order pending adjudication before me, Ld. A.O. has pointed out that none of the parties except one had filed his/its return of income and therefore nothing turns on the fact that some of the parties were produced before him during the course of original assessment. Ld. A.O. has further pointed out that the parties had not been able to establish with any documentary evidence regarding delivery of manufactured goods to different parties and no books of accounts were produced before him for verification. According to the Ld. A.O., entries in various books of accounts remained unexplained and therefore appellant's version that the various entities/persons were carrying out genuine business activities remained unsubstantiated. 2.8.2 The same facts have been reiterated by the Ld. A.O. during the assessment framed which has been appealed against before me. 2.8.3 The Ld. A.R. in his submission has dealt with ground Nos. 5 to 8 together, as according to him, the some are interlinked. According to him, the appellant is .a commission agent in the metal market where the rate of commission is not fixed and varies between 0.02% to 0.05 %. However, there is no written agreement entered into between commission agent and the clients. Even in the grounds of appeal, the to 287/Mum/2016 22 Dilip C. Shah appellant has mentioned that the prevailing commission rate in the steel market ranges between 0.02% to 0.05%. Thus, there is no denying the fact that the appellant earns commission and the services rendered by him. It is also a matter of fact that during the course of search, the appellant was found in the possession of signed blank cheques, sale bills issued by various dummy companies which went on to prove that the appellant was engaged in issuing bogus bills and therefore it is obvious that the normal rate of commission would not be charged by him to the perspective bill seekers. The persons using these bills would be saving substantial amount of tax by claiming bogus deduction. They would be happy to part with at least 2%, an estimation which cannot be stated to be out of sync with the benefit earned by the bill seekers. Therefore, as far as commission of 2% estimated by the Ld. A.O. is concerned not find any fault with the same and accordingly ground Nos. 5&6 are confirmed. 2.9.1 As regards ground Nos.7 & 8 they are in respect of additions made on account of cash deposits in the bank account of the persons other than the appellant which were found from the possession of the appellant during the course of search along with signed bank cheques, sale bills, PAN cards etc. and which remained unexplained by the appellant despite giving substantial opportunities. Ld.A.0., on the basis of directions issued to him u/s.263 has framed denovo assessment and in doing so he provided adequate opportunities to the appellant for submitting proof of identity, creditworthiness of such persons and the business operations claimed to have been carried out by them alongwith genuineness of the same. During the years under appeal, the bank credits total to Rs.13,88,09,01,411/-, the source of which was to be explained by the appellant to 287/Mum/2016 23 Dilip C. Shah alongwith necessary documents. The appellant submitted before the Ld. A.O that these credits were found in the bank account of persons other than the appellant and hence the credits appearing in those accounts could not be attributed to the appellant's business or profession. He further asserted before the Ld. A.O. that the appellant worked as agents for purchases in respect of some of their seller principals and in order to facilitate the transactions for such principals, especially purchase transactions where prompt and in time payments were of utmost significance, signed cheque books duly signed by third parties were kept with the appellant in confidence. In view of the above facts, it was pleaded that the bank accounts found during the course of search at the appellant's premises were not benami accounts and the signed cheque books were kept only to facilitate smooth trade. 2.9.2 Ld. A.O. was not satisfied with the submissions made and for the following reasons he made the addition in the various assessment years pertaining to the search:

"1. The assessee has not discharged his onus of proving the identity, genuineness and creditworthiness of any of these transactions pertaining to Rs.1388. 09 crores. Assessee representative has simply re//ed on the 1. fact that some parties were produced during the original assessment proceedings or that certain audited annual accounts and cop/es of IT returns have been submitted in some cases. This too however, does not discharge his onus. 2. has merely made his submissions which were made even at the time of the original assessment proceedings and have been rejected there itself. to 287/Mum/2016 24 Dilip C. Shah The purpose of the present proceedings is 3. merely to make fresh assessment only with respect to the deposits in the bank accounts and it is beyond by jurisdiction to comment or delve on the other issues which have already achieved finality so far as this office is concerned.

"1. That in fact Sh. Atul Sanghvi and Sh. Dilip 5hah were the persons who had operated the over hundred bank accounts and different entities.

2. That Shri Dilip Shah and Shri Atul Sanghvi were in fact involved in issuing mere bills in the name of different entities.

3. Shri b/lip Shah and Shri Atul Sanghvi (duo) was fabricating documents like PAN cards signatures etc. to open bank accounts in the name of different persons, who had nothing to do with those transactions, in fact they were mere name lenders or dummies. The duo were handling all the correspondence of the 4. different concerns. 5 The duo were operating the bank accounts and cash withdrawal and other transactions were carried out by the assessee.' dismissed the appeal filed by the assessee. The sum and substance of the observations of the CIT(A), the evidences collected during the course of search, and inquiry conducted during the course of the assessment proceedings undoubtedly prove the fact that the assessee along with Shri Atul Sanghvi are involved in providing accommodation entries in the form of bogus bills to various persons. The CIT(A) further observed to 287/Mum/2016 28 Dilip C. Shah that the statement recorded from the assessee and other associate and the statements Shri P.M. Jobalia, Shri N.V. Neelakantan, and Shri Vinod Kumar Uttamal Shah further supported the findings of the A.O that the assessee is a hawala operator issued bogus bills in the name of dummy/fictitious concerns and operated more than 100 bank accounts various names by fabricating documents like ration card, PAN card, and photograph on individual of these evidence leads to a conclusion that the assessee is a hawala operator issued bogus bills to various beneficiaries and assessment order passed by the A.O treating the total activity as a hawala operator and additions made by the A.O towards estimation of commission on total sales bills, additions towards total sales on protective basis, additions towards unexplained bank credits, additions towards 2% commission on protective basis on total bank credits and additions towards unexplained cash deposits to bank account has been confirmed.

by the assessee.

21. The next issue that came up for our consideration from grounds No. 3 to 7 revolves around one common issue of activity of the assessee and computation of income from such activity. The lower authorities came to the conclusion that the assessee is a hawala operator involved in providing accommodation entries to various parties by issuing bogus purchase bills and engaged in money laundering activities, therefore concluded that the assessee is a hawala operator and income from such activities has to be computed by taking into account of total sum found credited in the bank account of the assessee and also income from estimation of income from such total receipts. The facual matrix of the case which lead to the dispute are that initially a survey operation u/s 133A of the Income Tax Act, 1961 was carried out in the office premises of the assessee, wherein information about three bank lockers were found. Subsequently, the case has been converted into search by issuing warrant u/s 132 and conducted search in the premises of the assessee. During the course of search incriminating documents in the form of more than 100 bank accounts and also information about more than 130 dummy/fictitious concerns incorporated/operated by the assessee to facilitate issue of bogus bills were found. The department also seized sales bills issued to M/s Varun Industries Ltd. in the name of various concerns. Based on all these evidences, coupled with further inquiries conducted during the course of search and during assessment proceedings the AO drawn an undisputed conclusion that the assessee is a hawala operator involved in providing accommodation entries. Therefore to 287/Mum/2016 30 Dilip C. Shah the A.O has concluded the issue by determining the income from such activity by estimating the commission at 2% on total sales bills issued in the name of M/s Varun Industries Ltd. and added 50% of the same in the hands of the assessee and remaining 50% in the hands of Shri Atul Sanghvi. The A.O also added total value of sales which was amounting to Rs.856,64,49,533/- on protective basis to protect the interest of the revenue. Insofar as the total credits appearing in the bank accounts, the A.O has made additions towards total credits found in the bank account after reducing sales bills issued in the name of M/s Varun Industries Ltd. in the hands of the assessee and his partner Shri Atul Sanghvi in the ratio of 50% each.

22. The Ld.AR for the assessee submitted that the Ld.AO was erred in estimating commission on total sale bills issued in the name of M/s Varun Industries Ltd @2% ignoring the fact that the prevailing common rate in the steel market ranging between 0.2% to 0.5% shall be having regard to the fact that the assessee is a registered broker in the market. The Ld.AR referring to the paper book filed, submitted that the assessee is a registered broker in the steel market involved in facilitating business of prospective manufacturer of steel goods to the buyers in the market for which he charges commission. The AO ignoring the fact has concluded that the assessee is a hawala operator engaged in providing accommodation entries and estimated commission income @2% without any basis. Insofar as addition made by the AO towards total sale bills issued in the name of M/s Varun Industries Ltd on protective basis, when a substantive addition made in the hands of M/s Varun Industries Ltd, making an addition on protective basis in the hands of the assessee is incorrect, more so, when the assessee is treated as an hawala operator and income from such activity has been estimated at 2% on total sale bills issued. In this regard, he relied upon the decision of ITAT, Chennai Bench in the case of Parasmal Dangi alias Parasmal Jain 100 TTJ 508.

23. The Ld.DR, on the other hand, strongly supporting the order of the CIT(A) submitted that evidences gathered during the course of to 287/Mum/2016 31 Dilip C. Shah search and post search investigation conducted during the course of assessment proceedings clearly establish the fact that the assessee, a hawala operator, issued bogus purchase bills in the name of various dummy / fictitious concerns and operated more than 100 bank accounts in the names of various persons whether existing or fictitious, therefore, the AO has rightly treated the assessee as a hawala operator and estimated income from such activity and his order should be upheld.

24. We have heard both the parties and perused the material available on record. It is an undisputed fact that incriminating materials found and seized during the course of search clearly indicates that the assessee is engaged in issuing bogus bills in the name of various dummy / fictitious concerns / companies and operated more than 100 bank accounts in different banks in the name of various companies / firms and this fact has not been rebutted by the assessee with any evidences. Though the assessee claims to have involved in the business of commission agent in steel market, the evidences collected during the course of search undisputedly proves the case of the revenue that it is a case of hawala entry operator and issued bogus bills in various entities’ name. The AO has recorded clear fact to the effect that the assessee has issued bogus purchase bills in the name of M/s Varun Industries Ltd and this fact has been accepted by the directors of M/s Varun Industries Ltd in the statement recorded during the course of search and accordingly a substantive addition has been made in the hands of M/s Varun Industries Ltd. This fact was also further supported by the fact that the department had recorded statements from various persons, who had accepted that Shri Dilip Shah and Shri Atul Sanghvi have issued bills in the name of various concerns and operated bank accounts. The statement given by Shri Yashwant Pandya, who is an accountant of the assessee has clearly stated in his statement that under instruction from Shri Atul Sanghvi and Shri Dilip Shah, the bills in respect of various companies were prepared in the office of the assessee and those bills were prepared in the name of various concerns, whose blank to 287/Mum/2016 32 Dilip C. Shah cheques have been found with the assessee during the course of search. The statement of Shri Pradip M Jabalia recorded during the course of survey on 05-02-2007 also leads to an undisputed conclusion that Shri Pradip M Jabalia had given his address for correspondence for some of the accounts being operated by the duo, Shri Atul Sanghvi and Shri Dilip Shah. In his statement, Shri Pradip M Jabalia has confirmed that the letters from the banks were collected by Shri Atul Sanghvi and Shri Dilip Shah. Further, statement of Shri N.V. Neelakantan recorded on 26-02-2007 throws light on the modus operandi of the assessee that he fabricated various documents including address proof, PAN cards and ID proof of various individuals to open bank accounts in different names by fabricating the documents. This fact was confirmed by Shri N.V. Neelakantan, who categorically admitted that the assessee has operated number of bank accounts in the National Co-operative Bank. All these facts lead to a conclusion that the assessee has floated various dummy companies / firms to facilitate issuing of bogus purchase bills and operated bank accounts by fabricating documents. The assessee has not been able to rebut any of the findings recorded by the AO, though he claims that he is a registered broker in the steel market. Therefore, we are of the considered view that the lower authorities were right in concluding that the assessee is engaged in the activity of providing accommodation entries. Hence, we are inclined to uphold the findings of CIT(A) and dismiss the ground raised by the assessee.

25. Coming to the additions made by the AO towards estimation of commission @2% on total sale bills issued in the name of M/s Varun Industries Ltd on substantive basis and addition made towards total sale value on protective basis in the hands of the assessee, the AO has estimated commission @2% on total sale bills issued in the name of M/s Varun Industries Ltd and made additions in the hands of assessee and his partner, Shri Atul Sanghavi @50% each. The AO has estimated 2% commission by taking into account the fact that the assessee has earned substantial income in the to 287/Mum/2016 33 Dilip C. Shah form of commission which is evident from the fact that the assessee has withdrawn substantial amount of cash from the bank. Though assessee claims that commission in the steel market is ranging from 0.02% to 0.05%, but failed to justify the rate of commission with any corroborative evidence in the form of some comparable cases or in the form of written agreements between the parties for charging commission. Under these circumstances, the lower authorities came to the conclusion tht it is fair and reasonable to estimate commission at 2% as assessee’s income from the activity of issuing bogus bills. Before us, the assessee has not been able to rebut the facts recorded by the AO as well as the CIT(A). Though the assessee has relied upon certain decisions of co-ordinate bench, on going through the case laws relied upon by the assesse,e we came to the conclusion that the fact of those cases are entirely different from facts of the case of the assessee; hence, cannot be applied to this case. Therefore, we are of the view that the AO was right in estimating commission @2% on total sale bills issued in the name of M/s Varun Industries Ltd. The CIT(A) after considering the facts has rightly upheld the order of the AO. We do not find any infirmity in the order of the CIT(A). Hence, we are inclined to uphold the order of the CIT(A) and dismiss the ground raised by the assessee.

26. Coming to addition made towards total sale bills issued in the name of M/s Varun Industries Ltd on protective basis. The AO has made additions towards sale bills issued in the name of M/s Varun Industries Ltd on protective basis in the hands of the assessee to protect the interest of the revenue. Assessee claims that once substantial addition has been made in the hands of M/s Varun Industries Ltd, protective addition made in the hands of the assessee cannot survive in the eyes of law. We do not find any merits in the arguments of the assessee for the reason that though substantial addition has been made in the hands of M/s Varun Industries Ltd, the outcome of addition made by the revenue authorities will only be clear once it has been decided in appellate forums. The assessee has not been able to furnish any evidences to 287/Mum/2016 34 Dilip C. Shah with regard to additions made in the hands of M/s Varun Industries Ltd except furnishing an assessment order copy. The fact with regard to nature of dispute and the stages of outcome in appellate forums is not ascertainable at present. Therefore, we are of the considered view that though the Act, does not provide for protective assessments, in the interest of revenue, the AO can make protective additions to protect the interest of the revenue. Therefore, we are of the view that the AO was right in making protective additions towards sale bills issued in the name of M/s Varun Industries Ltd. Nevertheless, the assessee shall be entitled to relief as and when the substantive addition made in the hands of M/s Varun Industries Ltd is confirmed once all rounds of litigation ends. The CIT(A) after considering the relevant facts has rightly upheld additions made by the AO. We do not find any error in the order of the CIT(A); hence, we are inclined to uphold the findings of the CIT(A) and reject ground raised by the assessee.

27. The next issue that came up for our consideration is addition made on account of deposits in the bank account of the persons other than the assessee which were found from the possession of the assessee during the course of search along with signed blank cheques, sale bills, PAN cards, etc. which were remained unexplained by the assessee. The AO made additions towards credits found in the bank account for Rs.1388,09,01,411 on the ground that the assessee has failed to explain the sources of credits found in the bank account with necessary evidence.

28. The facts which lead to the impugned addition are that the assessee along with Shri Atul Sanghvi are found in possession of various documents like blank cheques, sale bills, PAN cards, ration cards, etc. During the course of search, these documents were found and seized. When these documents were confronted to the assessee, the assessee claimed that the documents belong to the firms / companies, who manufacture goods and traded through him. The assessee further contended that the prospective sellers of the goods have kept those documents with the assessee to to 287/Mum/2016 35 Dilip C. Shah facilitate easy movement of sales of their goods which cannot be considered as fabricated documents to operate dummy / fictitious concerns and open bank accounts in various firms / companies’ name. The AO made addition on the ground that the assessee has not discharged his onus of proving the identity and genuineness and creditworthiness of any of these transactions pertaining to Rs.1388.09 crores. The assessee claims that the credits found in the bank accounts of various persons are in fact not belonging to him as some of the parties have appeared before the AO and accepted that the bank accounts are operated by themselves and considered in their income-tax returns filed for the respective assessment years. The assessee further contended that the AO has accepted the fact in the original assessment order passed u/s 143(3) r.w.s. 153A dated 28-12-2011 wherein he has categorically accepted that certain parties have appeared before him and filed confirmation with regard to the bank account found in the possession of the assessee.

29. Having heard both the sides and considered material on record, we find that the assessee has not been able to discharge onus by filing necessary evidence to prove the credits found in the bank account. It is incumbent upon the assessee to explain each and every credit found in the bank accounts and sources of such credits. In this case, the assessee has failed to furnish any evidences to identify credits, genuineness of such credits and creditworthiness of any of the credits found in the bank account. Therefore, we are of the view that the AO was right in treating the sums found credited in the bank accounts as unexplained credits in the hands of the assessee. As regards the claim of the assessee that some of the parties have appeared before the AO and filed their income-tax returns explaining bank accounts found in the possession of the assessee and hence those bank accounts, should be excluded. We do not find any merits in the argument of the assessee for the reason that the evidences gathered during the course of search and further enquiries conducted in the course of post search investigation clearly establishes the fact that the to 287/Mum/2016 36 Dilip C. Shah assessee has operated more than 100 bank accounts in different banks. All evidences gathered during the course of search clearly indicates fabrication of various documents like PAN card, ration card, etc. and photographs of certain individuals to open bank accounts in different banks with the help of one, Shri Pradip M Jabalia, who had categorically admitted in his statement recorded on 08-03-2007 tht correspondence with regard to bank accounts are made by Shri Dilip Shah and Shri Atul Sanghvi. Shri Jabalia, in reply to question No.2 clearly mentioned that he did not know any of the parties and it is only Shri Dilip Shah and Shri Atul Sanghvi, who were collecting the correspondence from his office. Similar statements were also recorded from Shri Vinod Kumar Shah and Shri N.V. Neelakantan on 26-02-2007 ad 21-03-2007 wherein it was confirmed that various accounts were operated / availed by the assessee. All these facts lead to an undisputed fact that the assessee is indulging in providing bogus bills and more so, operated all bank accounts. Therefore, it is on the assessee to explain the credits found in those bank accounts. Further, the assessee has filed details of confirmation filed by some parties along with their I.T. returns filed for the respective assessment years. On perusal of the details, we find that certain parties have filed their income-tax returns after the date of search and the income declared in said returns is meager. Therefore, we are of the view that by filing some I.T. returns of certain parties, the assessee cannot prove the genuineness of credits found in the bank accounts. Therefore, we are of the view that the AO was right in treating credits found in the bank accounts as unexplained income of the assessee.

30. The CIT(A) after considering relevant facts and also relying upon a plethora of judgements including the decision of Apex Court in the case of CIT vs Durgaprasad More 82 ITR 540 (SC) and Sumati Dayal vs CIT 214 ITR 801 (SC) wherein it was held that apparent must be considered real unless it is shown that there are reasons to believe that the apparent is not real and that taxing authorities are entitled to look into surrounding circumstances to to 287/Mum/2016 37 Dilip C. Shah find out the reality and the matter has to be considered by applying the test of human probabilities. The Hon’ble Court also held that it is no doubt true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden to prove that it is not taxable because it falls within the exemption provided by the Act lies on the assessee. Further, the provisions of section 68 of the Act, is clear inasmuch that where any sum is found credited in the books of account of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the AO, is not satisfactory. The assessee could not prove credits found in the bank accounts. Therefore, we are of the view that the CIT(A) has rightly upheld the additions made by the AO towards total credits found in the bank account amounting to Rs.1388.09 crores as unexplained credits in the hands of the assessee. We do not find any error in the order of the CIT(A). Hence, we are inclined to uphold the findings of the CIT(A) and reject the ground raised by the assessee.

31. The next issue that came up for our consideration is addition towards cash deposits to the bank accounts. The AO made additions towards total cash deposits in the bank account amounting to Rs.7,01,650 being 50% share of the assessee on the ground that the assessee has not filed any evidences to prove the identity, genuineness of transaction and creditworthiness of the creditors. The AO has taken total cash deposits for the year and divided into 50% in the hands of the assessee and 50% in the hands of Shri Atul Sanghvi and made additions u/s 68 of the Act. The assessee claims that he has source of income to explain credits found in the bank accounts. Therefore, the AO was not correct in making additions towards cash deposit u/s 68 of the Act.

32. Having heard both the sides and considered material on to 287/Mum/2016 38 Dilip C. Shah record, we find force in the argument of the assessee for the reason that, the AO has made substantial additions towards commission income on total sales made and the source of income in the form of commission is available to explain cash deposits to the bank account. The AO made additions towards commission on one hand and addition towards cash deposit on the other hand without telescoping the source available in the form of estimation of income towards commission. Therefore, we are of the view that there is a merit in the claim of the assessee that telescoping has to be allowed towards cash deposits to the income estimated for the relevant assessment years. Hence, we are of the view that the issue needs to be examined by the AO in the light of the explanation of the assessee and hence, we set aside the issue to the file of the AO for the limited purpose of examining whether the income estimated for the year is in excess of cash deposits found in the bank accounts. If the income is more than the cash deposit, then the AO is directed to telescope the sources available in the form of income to the cash deposits and allow relief accordingly towards addition to cash deposits.

33. The next issue that came up for our consideration for the assessment year 2007-08 is additions towards cash found at the time of search. During the course of search cash to the extent of Rs.47,30,000 has been found and seized. The AO made additions towards cash found at the time of search on the ground that the assessee has agreed for addition and also failed to explain source of cash found at the time of search. The assessee claims that the AO has made addition towards income on estimation basis and also made addition towards cash found without allowing telescoping the sources available in the form of income. We find force in the arguments of the assessee for the reason that if the source available in the form of income, the AO is bound to telescope the sources with cash found at the time of search. Therefore, we are of the view that the issue needs to be examined by the AO in the light of the claim of the assessee and hence, we set aside the issue for the limited purpose of verification of sources ITA No.281 to 287/Mum/2016 39 Dilip C. Shah available in the form of estimation of income with cash found at the time of search. If the source is in excess of cash found during the course of search and if it is not floated to any other assets or not expended elsewhere, then the AO is directed to allow telescoping towards income to the cash found at the time of search and allow relief accordingly.

2.2. We find that in the aforesaid order, while dealing with the quantum addition, the Tribunal considered the factual finding and arguments from both sides and thereafter found that incriminating material was found and seized from Dilip Shah/Atul Sanghvi, during the course of search, clearly indicating that the assessee was engaged in issuing bogus bills in the name of various dummy/fictitious concern and operated more than 100 bank accounts in different banks in the name of such to 287/Mum/2016 40 Dilip C. Shah fictitious concern. Though the assessee claimed to have involved in the business of steel market as a commission agent but the evidences collected during search proved that the assessee was involved as a Hawala operator and used to issue bogus bills in the name of various entities. The Ld. Assessing Officer also recorded a finding that the assessee used to issue bogus purchase bills in the name of M/s Varun Industries and this fact was accepted by the Directors of M/s Varun Industries Ltd. while tendering the statement during search. The statement of other persons were also recorded, wherein, it was found that the assessee used to issue bills in the name of various concerns and operated bank accounts. The statement of Yashwant Pandya, Shri Pradeep M. Jabalia, recorded on 05/02/2007 that Shri Pradeep M. Jabalia has given his address for correspondence for the some of the account being operated by the assessee. The statement of N.V. Neelkantan, recorded on 26/02/2007 throws light upon the modus operandi of the assessee that he fabricated various documents including address proof, PAN and ID proof of various individual to open bank account in different names to 287/Mum/2016 41 Dilip C. Shah by fabricating various documents. There is further finding in the quantum order passed by the Tribunal that the factual finding recorded by the Assessing Officer were never reverted by the assessee. It was concluded that the assessee was providing accommodation entries, therefore, the addition was sustained.

2.3. In view of this order, now we shall deal with the penalty so imposed by the Ld. Assessing Officer and confirmed by the Ld. Commissioner of Income Tax (Appeal).

Before adverting further, it is our bounded duty to analyze section 271(1)(c) of the Act, which is reproduced hereunder:-

per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in the Section 271(1)(c) would embrace the meaning of the details of the claim made. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. In Commissioner of Income Tax, Delhi Vs. Atul Mohan Bindal [2009(9) SCC to 287/Mum/2016 44 Dilip C. Shah 589], where Hon'ble Apex Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. Hon'ble Court referred to another decision of this Court in Union of India Vs. Dharamendra Textile Processors [2008(13) SCC 369], as also, the decision in Union of India Vs.Rajasthan Spg. & Wvg. Mills [2009(13) SCC 448] and reiterated in para 13 that:-

"13. It goes without saying that for applicability of Section 271(1)(c), conditions stated therein must exist."

2.5. Therefore, it is obvious that it must be shown that the conditions under Section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed by the assessee because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. [2007(6) SCC 329], Hon'ble to 287/Mum/2016 45 Dilip C. Shah Court explained the terms "concealment of income" and "furnishing inaccurate particulars". The Court went on to hold therein that in order to attract the penalty under Section 271(1)(c), mens rea was necessary, as according to the Court, the word "inaccurate" signifies a deliberate act or omission on behalf of the assessee. It went on to hold that Clause (iii) of Section 271(1) provided for a discretionary jurisdiction upon the Assessing Authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and to 287/Mum/2016 46 Dilip C. Shah in what manner, the assessee had furnished the particulars of his income. The Court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N.

Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. was upset. In Union of India Vs. Dharamendra Textile Processors (cited supra), after quoting from Section 271 extensively and also considering Section 271(1)(c), the Court came to the conclusion that since Section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing Return, there was no necessity of mens rea. The Court went on to hold that the objective behind enactment of Section 271(1)(c) read with Explanations indicated with the said Section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, willful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under Section 276-C of the Act. The basic reason why decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra) to 287/Mum/2016 47 Dilip C. Shah was overruled by Hon'ble Apex Court in Union of India Vs.

Dharamendra Textile Processors (cited supra), was that according to the Court the effect and difference between Section 271(1)(c) and Section 276-C of the Act was lost sight of in case of Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra). However, it must be pointed out that in Union of India Vs. Dharamendra Textile Processors (cited supra), no fault was found with the reasoning in the decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra), where the Court explained the meaning of the terms "conceal" and inaccurate". It was only the ultimate inference in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra) to the effect that mens rea was an essential ingredient for the penalty under Section 271(1)(c) that the decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra) was overruled. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has to 287/Mum/2016 48 Dilip C. Shah given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as:-

"not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript". We have already seen the meaning of the word "particulars" in the earlier part of this order. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in these cases, there is finding that the details filed by the assessee are incorrect and the assessee knowingly furnished inaccurate particulars of income and was very much aware that he was involved in Hawala entries. In these appeals, the penalty was levied/confirmed on the basis of involvement of the assessee as discussed in the earlier paras of this order. Thus, there is clear cut case of concealment of income/furnishing of inaccurate particular of such income, that being the case, we find no infirmity in imposing/confirming the penalty.

2.6. Considering the provision of the Act and the foregoing discussion, order of the Tribunal on quantum to 287/Mum/2016 49 Dilip C. Shah addition, material facts available on record, and the ratio laid down in following cases, it can be concluded that it was a conscious act of the assessee to hide something from the Department. The ratio laid down in the following the cases, supports the case of the Revenue.

I. CIT vs Satish Medical Agencies 277 ITR 394 (All.) II. Jyoti Laxman Konkar vs CIT 292 ITR 163 (Bom.), III. Deepak Construction Company vs CIT 293 ITR 285(Guj.) IV. CIT vs Mahavir Prasad Bajaj 298 ITR 109(Jhar.) V. D & H Secheron Electrods Pvt. Ltd. Vs CIT 281 ITR 421 (MP.) VI. Shri Nithyakalyani Textiles Ltd. Vs DCIT 282 ITR 154 (Mad.) VII. LMP Precision Engineering Company Ltd. Vs DCIT (330 ITR 93) (Guj.) VIII. CIT vs Deep Chand 336 ITR 292 (P & H) IX. Sethy Industries Corporation vs DCIT 338 ITR 243 (P &H) X. B.Damodar V.B. Jewellers vs JCIT 353 ITR 206 (Karna.) XI. Standard Hind Company vs CIT (2014) 361 ITR 370 (All.) XII. Bajrang Glass Emporium vs CIT (2014) 361 ITR 376 (All.) XIII. Indus Engineering Company vs ACIT (2010) 323 ITR 302 (Bom.), to 287/Mum/2016 50 Dilip C. Shah 2.7. So far as, the decision from Hon'ble Gujarat High Court in the case of Bhailal Manilal Patel ((supra)) is concerned, it is with respect to the issue of imposing penalty until substantive addition is made in the hands of the assessee, in that situation, initiation of penalty proceedings was held to be not permissible and further identically in respect of protective assessment order.

However, in the case of the present assessee, the quantum addition was upheld by the Tribunal vide aforesaid order dated 25/09/2017 that too after having an elaborate discussion. Therefore, this decision from Hon'ble Gujarat High Court may not help the assessee. So far as the decision in the case of M/s Varun Industries Ltd. vs ACIT (ITA No.2779 to 2781/Mum/2012 and to 3860/Mum/2012), order dated 24/07/2017 is concerned may also not help the assessee as the common order passed by the Ld. Commissioner of Income Tax (Appeal) was restored for fresh consideration and allowed for statistical purposes only. However, in the case of the present assessee, the quantum addition has been confirmed. However, in principle, the penalty levied by the to 287/Mum/2016 51 Dilip C. Shah Assessing Officer in respect of additions confirmed by the Tribunal should be sustained. However, by a later development, the co-ordinate Bench of the Tribunal in the case of Varun Industries Ltd., vide order in to 2781/Mum/2012, order dated 24/04/2017, simply set- aside the matter to the file of the Ld. Commissioner of Income Tax (Appeal), to decide the issue afresh after taking into account additions made in the hands of the brokers.

The Ld. Assessing Officer is directed to ascertain the facts as to in whose hands the substantive/protective addition has to be made and then decide the issue of levy of penalty u/s 271(1)(c) of the Act on such additions. In the light of the aforesaid decision of the Tribunal, in the case of Varun Industries Ltd., we are forced to send these penalty appeals to the file of the ld. Assessing Officer to decide in accordance with law as the same will be dependent upon the outcome of the additions to be made in the hands of Varun industries Ltd. or the present assessee or any other related persons. Resultantly, these penalty appeals are also set-aside to the file of the ld. Assessing Officer. to 287/Mum/2016 52 Dilip C. Shah Finally, the appeals of the assessee are allowed for statistical purposes only.

This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 04/05/2018.