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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, JM & SHRI RAJESH KUMAR, AM
O R D E R
PER RAJESH KUMAR, AM :
This appeal by the assessee is directed against the order dated 13.11.2014 of Commissioner of Income Tax (Appeals)-25, Mumbai {(hereinafter called as the CIT(A)} for assessment year 2009-10.
At the outset, the ld.AR submitted before us that ground no.1,4 and 5 are not pressed. Therefore, the same are dismissed as not pressed.
The remaining effective grounds of appeal are ground no.2 and 3 which are against the enhancement of the income at the rate of 1.50% on total 2 cash credit in the banks by the ld. CIT(A) as against the 1.00% applied by the AO.
Facts relating to the issue are that the assessee filed return of income on 14.10.2009 declaring total income of Rs.1,09,080/-. The AO received information from ITO-Ward 8(4), Surat, Gujarat vide letter dated 5.1.2012 that the assessee proprietor of M/s Darshan Trading Co., M/s Ratan Enterprises and M/s Jayesh Corporation has entered into bogus and hawala transactions with Shri Saurabh Jain who has been into the business of providing hawala/accommodation entries without doing any actual business. Thereafter the AO reopened the assessment by issuing notice under section 148 on 19.1.2012 and service was effected through affixture at the assessee’s premises. Thereafter the notices u/s 143(2) and 142(1) of the Act were also issued and served through affixtures at the assessee’s premises. On the date of hearing neither the assessee nor his authorized representative appeared before the AO to attend the hearing and finally, the AO had to frame the assessment ex-partee u/s 144 r.w.s. 147 of the Act assessing he income of the assessee at Rs.1,83,74,770/-by making an additions of Rs. 1,82,65,691/- being 1% of total cash credit in the all the bank accounts of the assessee and his proprietary concerns M/s Darshan Trading Co., M/s Ratan Enterprises and M/s Jayesh Corporation which were Rs.1,82,65,69,168/- representing total accommodation entries issued by the assessee by relying on the decision of the Tribunal in the case of P C Mundra V/s ACIT (80 TTJ(JP) 945).
3 5. Aggrieved by the order of the AO, the assessee preferred an appeal before the first appellate authority who enhanced the assessment by estimating the income of the assessee at the rate of 1.50% of the total cash credit of Rs. Rs.1,82,65,69,168/- as calculated by the AO after considering the submissions of the assessee filed during the course of appellate proceedings by observing and holding as under : “In view of the above, I find that the AO did not give any logical conclusion in arriving at 1% instead of 1.5% as decided in the case law relied upon by him. If AO relied on this particular decision, he should follow and adopt the net profit @ 1.5% instead of 1% only. In this connection, a show cause notice u/s 251 (1 )(a) dated 31.10.2014 was issued to the appellant as to why the difference of 0.5% .i.e. Rs.91,34,654/-of the total income should not be enhanced as net income of the appellant. The AR of the appellant appeared in response to the show cause notice on 10.11.2014 and objected to the proposed enhancement. But the verbal objection without any documentary evidence/case laws to support his objections not acceptable.
I have considered the case law relied upon by the AO, and observed that the estimate made by the AO is not on the higher side and arbitrary as challenged and objected by the appellant. Indeed I find the estimate of the AO is to be enhanced to another 0.5% so as to commensurate the rate of 1.5% as adopted by the Hon'ble ITAT in the case of P.C. Mundra Vs ACIT(supra). The IT A T has held that net profit @1.5% is reasonable in the case of billing business. The AO has not given any valid reason to deviate from the rate adopted by the Hon,ble ITAT which case was relied upon by him. The AO himself has concluded that the rate at prevailing market practice as in most of the cases of hawala operators, the charging of commission on the sum of transactions between @ 0.5% to 2.5% only. In view of the decision followed by the AO and the huge credits in the various banks of the appellant for which no proper explanation was offered by the appellant regarding the sources of those transactions, the rate of net profit adopted by the AO has to be enhanced accordingly. Moreover, the total cash credits and the bank accounts were also not disclosed to the 4 department. There is no an iota of evidence or material produced/ furnished by the appellant during the appellate proceedings to show and justify that the appellant has bill discounting business and the rate of commission is less than 1 %. After considering the totality of the case, I am of the considered opinion that the estimate made by the AO adopting @ 1 % of the total cash credit needs be enhanced by @0.5% which will come to @1.5% at parity in the case of P.C Mundra V/s ACIT. The net profit @ 1.5% is considered to be very reasonable and not arbitrary. Therefore net income comes to Rs.2,73,98,537/-i.e., an enhancement of Rs.91,32,846/- i.e.,(182,65,691/- +Rs.91,32,846). Therefore, this ground of appeal is dismissed.”
The ld. AR submitted before the Bench that the ld.CIT(A) has enhanced the assessment by estimating the income at 1.5% of the total cash credit entries in the book pass books/statements of the assessee and his proprietary concerns. The ld. AR submitted that total cash credit entries as calculated by the AO at Rs. 1,82,65,69,168/- was not correct as the AO also included the various cheques/RTGS returned unpaid and inter-bank transfers in the various bank accounts of the assessee and his proprietary concerns which was substantiated and proved by filing the bank statements of various banks and prayed that the income be estimated by taking GP rate 0.25 on the total cash credit entries after excluding cheques/RTGS returned unpaid and interbank transfers in the bank accounts of the assessee. In defence of his arguments , the ld.AR referred and relied on the decision of Co-ordinate Bench of the Tribunal in the case of Ramesh Kumar Jain V/s ACIT I and 3513/Mum/2013 (AY-2004-05 and 2005-06) dated 22.4.2015 wherein the net commission income has been estimated at 0.10%.
5 7. On the contrary, the ld. DR relied heavily on the order of authorities below and submitted that the assessee was not co-operative throughout the assessment proceedings and the AO has to rely on the documents and material available with him and estimated the income at the rate of 1% which was enhanced by the FAA to 1.5% by the ld.CIT(A) and the decision relied upon by the AO in the case of P.C Mundra (supra) was not applied correctly which was correctly applied by enhancing the assessment and in view of these facts requested that the decision taken by the FAA should be upheld and confirmed.
We have carefully considered the rival contentions and perused the material placed before us including the orders of authorities below and case law relied upon by the parties. We find that the assessee was non- cooperative throughout the assessment proceedings by not attending/appearing before the AO on the date of hearing nor did he furnish the documentary evidences/details as required by the AO. Therefore the AO has no option but to proceed ex-pare and frame the assessment on the basis of information available on record accordingly framing assessment by estimating the income of the assessee at !% of total credit appearing in the banks of the assessee which was further enhanced by the FAA in the appellate proceedings to 1.5% . During the course of hearing the ld.AR took us through the bank statements of the assessee and his proprietary concerns of Rajkot Nagrik Sahakari Bank, Axis Bank etc of and pointed out various anomalies and mistakes in the arriving at total 6 credits in the various banks on the basis of which the income of the assessee was estimated. We find that there are several cheque /RTGS entries of returned cheques/RTGS and interbank transfers in the assessee’s bank accounts which were also included in the total credits which according to us is not correct and need to be excluded for the reasons that there can not be any income on unpaid or returned cheques/RTGS/inter bank transfers in assessee’s banks. In our view the income of the assessee has to be calculated on the basis of correct amount of credits appearing in the bank accounts which required to be verified and ascertained at the level of AO. We would like to mention that all this has happened due non cooperation by the assessee during the assessment proceedings. We therefore consider it fit and proper to restore the issue back to the file of the AO to make the assessment afresh as per law and facts after providing reasonable opportunity of hearing to the assessee to present his case. The assesssee is also to cooperate in the assessment proceedings and to file all the documents and information may be required by the AO to determine the income of the assessee.