SHUBH MULTITRADE PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER, WARD-11(2)(1), MUMBAI

On further appeal, the CIT(A) confirmed the addition made by the AO ex- parte since the assessee did not respond to the notices issued by the CIT(A).

There is a delay of four days in filing the appeal before the Tribunal. The ld. Authorized Representative (AR) filed an affidavit in this regard. Having heard both the parties and perused the material on record, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore following the Hon’ble Supreme Court decision in the case of Collector, Land Acquisition Vs. MST. Katiji & Ors., (167 ITR 471) (SC) we condone the delay of four days in filing the appeal and admit the appeal for adjudication.

The ld. Authorized Representative (AR) submitted that the assessee during the course of assessment proceeding submitted various details including the statement of account, auditor's report, details of loans and advances, bank statement, etc. which have not been considered by the AO. The ld. AR further submitted that the AO made the addition merely based on the statement recorded from Mr. Ramgopal Garodia without any other evidence to support the alleged accommodation entries. The ld. AR also submitted that Mr. Ramgopal Garodia is not a Director in the assessee company as has been held by the AO and the addition made based on his statement which has no relevance to assessee company is not sustainable.

The ld. Departmental Representative (DR) submitted that the information relied on by the AO has not been elaborated in the assessment order and the CIT(A) has passed ex-parte order without going into the merit. Therefore, the ld. DR prayed that the issue may be remitted back to the lower authorities for proper adjudication.

We heard the parties and perused the material available on record. During the course of search and seizure action under section 132 of the Act statement was recorded under section 131 from one Mr. Ramgopal Garodia who has stated that the assessee company does not carry on any genuine business and that it is engaged in providing accommodation entries. The AO based on the statement held that the assessee has entered into a bogus transaction to the tune of Rs. 1,00,00,000/- and made an addition towards commission on the impugned amount @ 5% i.e. Rs. 5,00,000/-. From the perusal of the assessment order, we notice that the AO has acknowledge the fact that the assessee has submitted certain documents such as the financial statements, auditor's report, details of loans and advances, etc. and that the AO has not recorded any adverse finding with regard to the documents submitted by the assessee. We further notice that the statement recorded from Mr. Ramgopal Garodia which is reproduced in the order of assessment is dated 09.12.2019 and therefore there is merit in the contention that the addition towards commission on the impugned amount could not be made in under year under consideration i.e. AY 2021-22. On perusal of the audited financial statement of the assessee we notice that the assessee has recorded Rs.53,875 as revenue from operations and Rs.32,574 as cost of materials. The ld AR also submitted that the bank statement of the assessee which was submitted before the AO, did not contain any entry pertaining to the alleged accommodation entry. During the course of hearing, it is also brought to our notice that the AO has made a similar addition on the impugned amount of Rs. 10,00,00,000/- during AY 2020-21 also by applying 10% towards commission. Considering the facts and circumstances of the cases, in our considered view that the AO is not correct in making the addition towards commission on the alleged bogus transaction for the reason that – (i) The statement was recorded on 09.12.2019 and the addition is made in different assessment year i.e. in AY 2021-22 (ii) The addition is made without bringing on record any material evidence to show that the assessee has entered into the impugned transaction during the year under consideration. (iii) The AO has not recorded any adverse findings with regard to the various documents submitted by the assessee (iv) The AO has merely relied on the statement recorded from Mr.Ram Gopal Garodia to make the addition. (v) The AO has made addition towards commission on same alleged accommodation entry of Rs.1,00,00,000/- in two different AYs i.e. AY 2020-21 & 2021-22

In view of these discussions we hold that the addition made by the AO towards commission @ 5% on the alleged accommodation entry is not sustainable and liable to be deleted.

In the result, the appeal of the assessee is allowed.