JAGMANDRI FINVEST PVT LTD ,MUMBAI vs. INCOME TAX OFFICER, WARD 9(2)(1), MUMBAI

Per Sandeep Singh Karhail, Judicial Member:

The present appeal has been filed by the assessee challenging the

impugned order dated 27/09/2022 passed under section 250 of the Income

Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax

(Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the

assessment year 2009-10.

ITA No.2934/Mum/2024 Jadmandri Finvest Pvt. Ltd.

“Ground No 1 - On the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding the fact that AO did not apply his independent mind in recording reasons for re- opening and has merely acted on the instructions issued by ADIT (Inv) - Unit 7(4), Mumbai to make additions.

Ground No 2-On the facts and circumstances of the case and in law, the learned CIT(A) failed to appreciate that approval accorded under Section 151 of the Act is mechanical in nature by simply stating "Yes, I am satisfied" rendering the re- assessment proceedings void- ab-initio.

Ground No 3 - On the facts and circumstances of the case and in law, the learned CIT(A) erred in making disallowance under Section 68 of the Income-tax Act, 1961 ('the Act") amounting to INR 4,59,39,969.

3.1 On the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding the fact that while making additions under Section 68 of the Act, debit entries are also required to be considered as highlighted in the judgement of CIT v. Abdul Haseeb, Prop M.S.J.B. Silk [2014] 51 taxmann.com 48/[2015] 228 Taxman 471 (Mag.)(All.)

3.2 On the facts and circumstances of the case and in law, the learned CIT(A) failed to appreciate that bank statement is not books of the assessee as envisaged in the ruling of CIT v. Bhaichand H. Gandhi [1983] 141 ITR 67 (Bom.)

Ground No 4- On the facts and circumstances of the case and in law, the learned CIT(A) failed to appreciate that the assessee is an accommodation entry provider and hence the judgement of PCIT v. Alag Securities Pvt Ltd (ITA. 1512/2017) passed by the jurisdictional Hon'ble Bombay High Court, is squarely applicable and only 0.15% of INR 4,59,39,969 should be added back to income.”

the assessee has filed the affidavit sworn by the Director of the assessee

ITA No.2934/Mum/2024 Jadmandri Finvest Pvt. Ltd.

company, Shri Ramesh Dharamchand Agarwal, on 25/05/2024 seeking

condonation of delay in filing the present appeal. In the said affidavit, the

Director submitted that the impugned order passed by the learned CIT(A)

was never served to the assessee at any point in time by email. It is

further submitted that on 03/05/2024, its Chartered Accountant noticed

the order issued by the learned CIT(A) on 27/09/2022 and advised the

Director to prefer an appeal against the same. It is submitted that the

company has no means to discharge its liability and is facing a stringency

of funds and a liquidity crisis. In the affidavit, the Director submitted that

he has not been keeping well since October 2022 and is bedridden at the

advice of the medical experts. During the hearing, the learned AR

submitted that the aforesaid Director expired on 03/06/2024, and in this

regard furnished the death certificate issued by the Municipal Corporation.

condonation of delay fall within the parameters for grant of condonation

laid down by the Hon’ble Supreme Court in the case of Collector Land

Acquisition, Anantnag Vs. MST Katiji and others: 1987 SCR (2) 387. It is

well established that rules of procedure are handmaid of justice. When

substantial justice and technical considerations are pitted against each

other, the cause of substantial justice deserves to be preferred. In the

present case, the assessee did not stand to benefit from the late filing of

the appeal. In view of the above and having perused the affidavit, we are

ITA No.2934/Mum/2024 Jadmandri Finvest Pvt. Ltd.

of the considered view that there exists sufficient cause for not filing the

present appeal within the limitation period and therefore, we condone the

delay in filing the appeal by the assessee and we proceed to decide the

appeal on merits.

AR”) wishes to argue grounds no. 3 and 4 raised in the assessee’s appeal,

which pertains to the addition made under section 68 of the Act.

year under consideration, the assessee filed its return of income on

30/09/2009 declaring a total income of Rs.1,72,039. The return filed by

the assessee was processed under section 143(1) of the Act.

Subsequently, on the basis of the information received from the

Investigation Wing, Mumbai, reassessment proceedings under section 147

were initiated and notice under section 148 of the Act was issued on

31/03/2016. Subsequently, notice under section 142(1) of the Act was

issued and served on the assessee. In response thereto, the assessee

filed its objections against the reopening of the assessment, which were

disposed off by the Assessing Officer (“AO”). Thereafter, statutory notices

under section 143(2) as well as section 142(1) of the Act were issued to

the assessee. However, there was no compliance on behalf of the

assessee. Even the notice under section 274 r/w section 271(1)(b) of the

Act was also issued to the assessee for non-compliance with the statutory

ITA No.2934/Mum/2024 Jadmandri Finvest Pvt. Ltd.

notices. However, in spite of various statutory notices issued, the assessee

failed to comply with the same. Therefore, the AO had no option but to

proceed to complete the assessment ex parte under section 144 r/w

section 147 of the Act. Vide order dated 30/12/2016 passed under section

144 r/w section 147 of the Act, the AO treated the entire cash deposits

amounting to Rs.4,59,39,969 as unexplained cash credit and added the

same to the total income of the assessee under section 68 of the Act.

by the assessee, as the assessee failed to submit any written submission

or documentary evidence in support of its claim despite multiple

opportunities. Being aggrieved, the assessee is in appeal before us.

material available on record. In the present case, admittedly the assessee

is an accommodation entry provider. During the hearing, the learned AR

also confirmed this fact. Further, the assessee has failed to prove the

source of the cash deposits in itsbank account. The assessee has also

failed to produce any of the creditors or provide details regarding their

identity and whereabouts before the lower authorities despite multiple

opportunities. The assessee has also not produced any confirmation

regarding the alleged cash transaction. During the hearing, the learned AR

relied upon the decision of the Hon’ble Jurisdictional High Court in PCIT vs

Alag Securities Private Limited, [2020] 117 taxmann.com 292 (Bom.),

ITA No.2934/Mum/2024 Jadmandri Finvest Pvt. Ltd.

wherein the Hon’ble High Court, after noting that the cash amounts

deposited by the customers had been accounted for in the assessment

orders of these customers, upheld the consideration of 0.15% of the

commission as income of the taxpayer. However, in the present case, the

assessee could neither produce any of the beneficiaries nor produce any

confirmation letter in support of the transaction.

provided any details regarding the amount of commission charged by it.

The aforesaid decision is not in a context similar to the present case. As in

the case cited supra before the Hon’ble Jurisdictional High Court, the cash

deposits were already accounted for in the assessment orders of the

beneficiaries. Though it can be accepted that in the case of

accommodation entry provider, only commission can be considered as the

taxable income, however, the rate of commission considered justifiable in

other cases cannot be readily accepted in the present case, particularly

when the assessee neither could prove the identity of the person from

where the cash has been received nor could provide whereabouts of the

beneficiaries to whom the money was transferred. In the absence of any

material in support of such claim and in view of aforesaid findings, we

deem it appropriate to direct the AO to consider 0.25% as the net profit

rate/commission from the alleged accommodation entry transaction and

to compute the taxable income accordingly. With the above directions, the

ITA No.2934/Mum/2024 Jadmandri Finvest Pvt. Ltd.

impugned order is set aside and grounds no.3 and 4 raised by the

assessee are partly allowed.

during the hearing. Accordingly, the said grounds are dismissed as not

pressed.

Sd/- Sd/- (Renu Jauhri) (Sandeep Singh Karhail) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date : 3rd September, 2024.

SA

Copy to : 1) The Appellant 2) The Respondent 3) The CIT(A) concerned 4) The CIT concerned 5) The D.R, “SMC” Bench, Mumbai

By Order

(Assistant Registrar) Income Tax Appellate Tribunal, Mumbai