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Facts
A search and seizure was conducted, and the assessee was found to be proprietor of multiple entities providing bogus invoices for sales and purchases to the "One World Group". The assessee admitted these entities were bogus and no actual transactions occurred. An assessment order was passed under Section 144 of the Act.
Held
The Tribunal noted that the appeal was filed with a delay of 15 days, which was condoned considering the assessee's financial constraints and the legal precedent. The Tribunal restored the appeals to the Assessing Officer for further investigation based on the findings of a coordinate bench on identical facts for other assessment years.
Key Issues
Whether the assessment order passed under Section 153A r.w.s. 144 of the Income-tax Act is valid when no incriminating materials were found during the search? Whether the rejection of books of accounts and estimation of income is justified?
Sections Cited
153A, 144, 132, 142(1), 145(3)
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Income Tax Appellate Tribunal, “D” BENCH MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI GIRISH AGRAWAL
O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of Ld. CIT(A)-50, Mumbai, vide order no. ITBA/APL/S/250/2023- 24/1056627446(1), dated 28.09.2023 passed against the assessment order by the Deputy Commissioner of Income Tax, Central Circle – 8(2), Mumbai, u/s. 153A r.w.s. 144 of the Income-tax Act (hereinafter referred to as the “Act”), dated 30.09.2021 for Assessment Year 2018- 19.
Grounds taken by the assessee are reproduced as under: “1. On the facts and in the circumstances of the case, the Appellant submits that he was prevented by the circumstances beyond his control to reply to the Rahul Chandrakant Jhaveri., AY 2018-19 various notices issued and upload responses for the submission during the assessment proceedings and appeal proceedings. The Appellant submits that an opportunity of being heard be given as a matter of natural justice.
2. On the facts and in the circumstances of the case the Appellant submits that the Hon'ble Commissioner of Income Tax (Appeals) erred in upholding the Assessment Order passed u/s 153A r.w.s. 144 at the Income Tax Act, 1961 passed by the Learned Assessing Officer which is non abated on the date of search ie. 06.11.2019, in view of the facts that no incriminating materials were found during the search carried out u/s 132 at the residence of Appellant and therefore, the Appellant submits that it is bad in law. The Appellant submits that the Assessment Order passed u/s 153 A r.w.s. 144 at the Income Tax Act, 1961 be quashed.
3. On the facts and in the circumstances of the case the Appellant submits that the Hon'ble Commissioner of Income Tax (Appeals) erred in upholding the action of the Learned Assessing Officer of rejecting the books of accounts u/s 145(3) and making the estimated addition of Rs. 67,78,65,033/- being 5% of Rs. 13,55,73,00,667/- i.e. aggregate of debit transactions and credit transactions of the bank statement as accommodation entries without considering the statement of the Appellant recorded during the course of search and reproduced by the Learned Assessing Officer in the assessment order. The Appellant submits that books of accounts should be accepted and the addition of Rs. 67,78,65,033/- made on estimation be deleted.”
A search and seizure under Section 132 of the Act was carried out on 6th November 2019, at One World Group entities. The residence of the assessee was also searched. Subsequently, the case of the assessee was centralized with Dy. Commissioner of Income Tax, Central Circle 7(2), Mumbai. Notice under Section 153A of the Act was issued on 24th December 2020. Assessee did not file any return of income in response to that notice. Subsequently, notice under Section 142(1) of the Act was also issued to the assessee since return was not filed. This notice was also not complied with. Thereafter, the learned Assessing Officer issued a show cause notice to proceed with Section 144 of the Act as the assessee had failed to make any compliance with the statutory notices. Thus, the assessee was completely non- cooperative during the assessment proceedings.
Rahul Chandrakant Jhaveri., AY 2018-19
Brief fact of the case are that information was received from GST authorities that One World Group along with other companies formed cartel of companies whereby bogus sales and purchase invoices without actual supply of goods were issued. The whole activity was carried out by one Shri Urvil Jani, Director of One World Group of companies. In the statement of several persons, the above facts were admitted. Mr. Urmil Janihas also accepted the above fact.
Assessee is found to be proprietor of 8 different entities which is engaged in providing bogus invoices. This activity was found to be carried out from A.Y. 2015-16 to A.Y. 2019- 20, thus includes the impugned assessment year. These entities were operating from the house of the assessee. During the course of search, statement of the assessee was also recorded, wherein he categorically admitted that all his proprietary concerns were actually bogus entities, and no actual transactions were carried out between his concerns and One World Group. It is also found that assessee is also involved in advancing loan to the One World Group of companies. The learned Assessing Officer found that a total turnover of purchase and sales, the commission income earned by the assessee is 5% of the total turnover. Accordingly, on total transaction of Rs.1355.73 Crores, commission was determined at Rs. 67,78,65,033/-. The assessment order under Section 144 of the Act was passed on 30th September 2021.
Assessee challenged the same before the learned CIT (A). Before learned CIT (A), eight opportunities were given to the assessee; however, none of them were availed. Therefore, the learned CIT (A) dismissed the appeal holding that assessee is not availing the opportunities of hearing and thus, he concurred with the findings of Rahul Chandrakant Jhaveri., AY 2018-19 the learned Assessing Officer and dismissed the appeal of the assessee.
At the inception, we find that the present appeal is delayed by 15 days.
Assessee has filed an affidavit stating that he met with huge demand of approximately Rs. 525 crores and was unable to appoint any proper tax consultant and was also not able to meet his daily routine expenses as, he did not have any business activity, in absence of any source of income, he could not hire a consultant. Due to these constraints, a minor delay has occurred in filing of the above appeal. We find that the assessee has given this cause for the delay.
The learned CIT Departmental Representative objected to the admission of the appeal.
Shri Rashmikant Modi, CA stated that the delay in filing of the appeal is because of sufficient reasons and therefore, appeal of the assessee should be admitted.
We have carefully considered the contention and the reasons filed in delay in filing of the appeal. We find that the delay caused in the filing of this appeal is 15 days. There is sufficient reason also that the assessee is met with the huge demand of Rs. 525 crores and is an accommodation entry provider who has given the bills to the One World Group. It is also apparent that assessee was running several proprietary concerns by giving bogus bills to only One entity i.e. One World Group. From the assessment order also, it is apparent that he does not have any source of income except earning out from these
Rahul Chandrakant Jhaveri., AY 2018-19 accommodation entries. Even otherwise, nobody benefited by filing an appeal belatedly. Therefore, we find that there is sufficient cause for delay of 15 days in the filing of appeal.
It is held by the Honourable Supreme court in 2023 INSC 885 Sheo Raj Singh (Deceased) through L.Rs. and Ors. vs. Union of India (UOI) and Ors. (09.10.2023 - SC): MANU/SC/1098/2023 that condonation of delay being a discretionary power available to courts, exercise of discretion must necessarily depend upon the sufficiency of the cause shown and the degree of acceptability of the explanation, the length of delay being immaterial. The law of limitation was founded on public policy, and that some lapse on the part of a litigant, by itself, would not be sufficient to deny condonation of delay as the same could cause miscarriage of justice. The expression sufficient cause is elastic enough for courts to do substantial justice. Further, when substantial justice and technical considerations are pitted against one another, the former would prevail. It is upon the court to consider the sufficiency of cause shown for the delay, and the length of delay is not always decisive while exercising discretion in such matters if the delay is properly explained. Further, the merits of a claim were also to be considered when deciding such applications for condonation of delay. Such an exercise of discretion does, at times, call for a liberal and justice-oriented approach by the Courts. Accordingly, we admit the appeal of the assessee by condoning the delay.
On the merits of the case, the learned Authorized Representative submitted that all these additions have been made ex-parte and therefore, assessee was not in a position to attend hearing either before the learned Assessing Officer or before the learned CIT (A). He
Rahul Chandrakant Jhaveri., AY 2018-19 submits that such non representation is because of the huge demand on the assessee and search matters. If an opportunity is given to the assessee, he will definitely avail the same.
We note that on identical set of facts, appeal of the assessee for Assessment Year 2015-16, 2016-17, 2017-18 and 2019-20 came up before the Coordinate Bench of ITAT, Mumbai in to 4512 & 4514/Mum/2023 for which order was pronounced on 31.05.2024. It is this year Assessment Year 2018-19 before us which did not form part of the said order, since the first appellate order was passed at a later date. Since the issues involved are common on identical set of facts, arising out of the search conducted in the case of the assessee and the matter has already been dealt with by the Coordinate Bench for above stated Assessment Years in assessee’s own case, we, following the rule of consistency, apply the observations and findings of the Coordinate Bench in the present case before us, mutatis mutandis. The relevant observations and findings of the Coordinate Bench in the aforesaid order are extracted below: “We have carefully considered the rival contentions and perused the orders of the lower authorities. The facts gathered from the assessment orders; it is apparent that. a. Mr. Rahul Chandrakant Jhaveri is an accommodation entry provider, running several proprietary concerns for issuing bogus bills and sales and purchases to One World Group of companies. b. The bogus invoices of the sale and purchase without actual delivery of goods are alleged to have been given to the beneficiary One World Group entities which are owned and managed by Shri Urvil Jani. c. Though assessee is stated to have earned consideration of ₹1,600 crores, per transaction of ₹1 crores paid to him by Shri Urvil Jani d. Mr. Jani has also made a statement before the GST authorities accepting that he has inflated the turnover of the group companies without an actual supply of any goods or services. It is also specifically stated that there is a GST element in each of the invoices of purchase and sales. e. The GST authorities also arrested Mr. Jani.
Rahul Chandrakant Jhaveri., AY 2018-19 f. The assessee is also a person who supported Mr. Jani in such an activity by forming several proprietary ship concerns. All these books of accounts, bank statements operation of bank accounts, legal compliances with respect to all these proprietary concerns were carried out by Mr. Jani as stated by the assessee. g. Thus, it is clear that all these proprietary concerns were mere paper entities, and no actual transactions were carried out between the assessee and one world group entities but merely for the benefit of one world group entities these transactions were carried out. Naturally Mr.Jani who is also operating one world group also confirmed this fact. h. Thus, it is clear that the real beneficiary in all these transactions are one world group entities and assessee is also a conduit in helping to carry out all these GST frauds etc. it is also a fact that implications are not only on GST but also on income tax and other fiscal statutes. i. It is also a fact that the assessee did not remain present before any of the lower authorities with the sole intention of preventing the income tax authorities in further investigating the issue. This could also be the sole intention of saving the beneficiaries. j. Huge commission income is estimated by the learned assessing officer at the rate of 5% of bogus purchases and bogus sales. In fact, this commission income is paid by the beneficiaries, therefore the income tax impact of this entries and assessment is also required to be taken care of in the hands of the beneficiaries.
We cannot close our eyes to such nefarious financial activities and therefore, do not hesitate to restore all these appeals before the learned assessing officer for further investigation in whatever manner the learned AO desires. In fact, which is the request of the learned DR which is not opposed by the learned AR but even learned AR has also requested for an opportunity to present the case of the assessee. Further, merely because the assessee says that he is an accommodation entry provider, it cannot be believed, unless the assessee names the beneficiary with cogent evidence. Necessarily, the bills issued by the assessee of purchases and bills received of the sales are to be investigated further about the beneficiaries.
Accordingly we restore all these appeals filed by the assessee to the file of The Jurisdictional Assessing officer (JAO) i.e. the deputy Commissioner of income tax, Central Circle - 8 (2) Mumbai, with a direction to carry out all necessary investigation in this matter and thereafter determine the income of the assessee after finding out the beneficiaries, and then decide the income earned by the assessee from such an activity. The assessee is directed to remain present with all his arguments and evidence which he would like to make to help his case within 90 days from the date of receipt of this order. The failure of the assessee to not avail this opportunity will also empower the assessing officer to decide the issue in accordance with the law. Needless to say, the learned assessing officer must follow the principles of natural justice therefore no prejudice should be caused to the assessee.
In the result, all these appeals are allowed in accordance with the above direction.”
Rahul Chandrakant Jhaveri., AY 2018-19
Thus, following the above, present appeal of the assessee is restored to the file of Jurisdictional Assessing Officer (JAO), in terms of the direction as stated above. Accordingly, appeal of the assessee is allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes. Order is pronounced in the open court on 31 July, 2024