YOGESH SHARMA,KOLKATA vs. ITO, WARD 48(3), KOLKATA, KOLKATA

The main grievance of the assessee is against the action of the Ld. CIT(A) in upholding the addition of Rs.2,80,77,500/- as unexplained cash credit on account of cash deposit found in the assessee’s Syndicate Bank Account.

Brief facts of the case are that the AO on CIB information that the assessee has deposited a total of Rs.2,80,77,500/- in cash in his bank account in the capacity of his proprietorship concern M/s. Tirupati Supplier called for the bank statement of the relevant bank account and examined the same and according to the AO it tallied with the CIB information. On being served a notice by the AO, the Ld. AR of the assessee appeared and filed one bank statement of Syndicate Bank and thereafter the AO issued notice u/s. 131 of the Act and took the statement of the assessee and as per the AO in his deposition the assessee answered that he earned salary income, business income and other income from Yogesh Sharma, AY 2012-13 other sources and that in the relevant assessment year he was appointed as supervising executive in the office of the M/s. Ashika Stock Broking on a salary of Rs. 15,000/- per month. Before the AO the assessee in his first statement submitted that he was in the business of trading of sarees under the trade name of M/s. Tirupati Suppliers whose main business was purchase and sales of sarees and had no particular seller as such. He also revealed before the AO that he had only fixed deposit at HDFC Bank amounting to Rs.60,000/- and had no shares, mutual funds etc. Thereafter, according to AO, the assessee submitted a letter on 02.02.2015 wherein he submitted that M/s. Tirupati Supplier was in fact controlled and operated by Mr. Pankaj Baid, PAN-AGWPB7807N and whose address was furnished to AO and it was brought to the notice of AO that Mr. Pankaj Baid was a friend of his late father and that the bank accounts (IDBI & HDFC) in question were opened in the name of M/s. Tirupati Supplier, as a proprietorship concern of the assessee. It was also brought to the notice of AO that modus-operandi was that after Mr. Pankaj Baid opened the bank accounts in assessee name, Mr. Baid got the cheque books pertaining to these bank account signed from the assessee through his father. According to the assessee, the purpose of Mr. Pankaj Baid getting these bank accounts opened in his name was with the objective of providing accommodation entries to various parties. And for using his bank account for providing accommodation entries, Mr. Baid gave a commission @.05% on the deposit made in the bank account to his father. Thereafter, he also provided the name of some companies to whom cheque has been issued by him after the cash was deposited in his account. He even attached the copy of the master data as per the MCA along with his letter to the AO. Thereafter, he requested the AO to treat the amounts deposited in his bank account as accommodation entries and tax only the commission @ .05% which the assessee earned on the total deposit. Thereafter, the AO issued 131 notice on Shri Pankaj Baid who appeared before the AO and denied having any connection with the assessee. So, the AO concluded that the money deposited in the bank account was the undisclosed money of the assessee and thereafter made the addition of Rs.2.80 cr. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the same. Aggrieved, the assessee is before us.

We note that the status of the assessee as an employee of M/s. Ashika Stock Broking for the year under consideration and was drawing a salary of Rs. 15000/- per month has not been found false. The assessee has submitted before the AO that he has acted as per the instruction of Mr. Pankaj Baid who introduced him to the Banks (IDBI Bank, Brabourne Road, HDFC Bank P/34, India Exchange Place) and the bank accounts were operated in the name of M/s. Tirupati Suppliers at the behest of Shri Pankaj Baid who was an accommodation entry operator, who gave assessee commmission @ 0.5% of the cash deposit for issuing cheques from his bank account and since we note that there is no balance in his bank accounts worth mentioning which fact only points to one direction that is the cash deposited in his account has immediately transferred to companies [beneficiaries] cannot be the income of the assessee from his undisclosed source. The assessee’s bank account has been misutilised by his late father’s friend Mr. Baid who routed the cash through assessee’s bank account to beneficiaries which fact is evident from a perusal of the bank statement and remand report of AO. In such a scenario, rather than finding out the real beneficiary in the whole modus operandi, the AO failed to collect any material or at least could not expose any falsity in the averments submitted by the assessee u/s. 131 of the Act. In such circumstances making huge addition in assessee’s hand of the entire deposit of cash in his bank account which admittedly has got out of his bank account to some other beneficiary or layers through which the real beneficiary gets the ultimate benefit cannot be countenanced. And it is a fact that the department will not be able to recover the tax also from person of no means. Only if the real beneficiary is traced out the department will be Yogesh Sharma, AY 2012-13 able to recover the tax due to the State. We note that the AO in the remand report given to Ld. CIT(A) has clearly brought out the name of Private Ltd. companies to whom the assessee had issued cheque after the cash was deposited in his accounts after instruction from Shri Baid. From a perusal of the remand report of AO we note that assessee had issued cheques to the following companies :

So from a perusal of the above remand report, it is evident that AO was aware that the cash which was deposited in assessee’s bank account was going by RTGS to companies named in the remand report. In such a scenario, taking into account, the facts and circumstances and the case especially the fact that assessee was an employee of a Private Ltd. Company and drew only Rs.15,000/- per month and had only Rs.60,000/- as Fixed Deposit, cannot be saddled with the money which has been deposited in cash in his accounts and transferred immediately thereafter by cheque/RTGS to bank account of beneficiaries and when assessee has come forward and admitted that his bank account was operated at the behest of Mr. Baid whose self serving statement was believed by AO without carrying out Yogesh Sharma, AY 2012-13 any enquiry to bring out the real beneficiary of the accommodation entry cannot be countenanced and when AO was aware that the money has moved out of the assessee’s bank account the only inference that can be drawn is that assessee was only a name lender of these bank account for which 0.5% of commission assessee got can be only treated as his income and So taking into consideration the overall facts and circumstances of the case, for the interest of justice and fair-play, we are inclined to delete the addition as ordered by the AO/Ld. CIT(A). However, the assessee’s bank account since used for deposit and transfer of cash is an activity for which a commission of 0.5% was earned, needs to be computed as the income of the assessee and for that income, the assessee has to be assessed to tax. With the aforesaid direction, we partially allow the appeal of the assessee.

In the result, the appeal by the assessee is allowed. Order pronounced in the open court on 30th November, 2018. Sd/- Sd/- (M. Balaganesh) (A. T. Varkey) Accountant Member Judicial Member