KAMAL JAYANTILAL ZAVERI,SURAT vs. INCOME TAX OFFICER, WARD-1(3)(7), SURAT

Since the issue involved in all these appeals are common and identical except variance of amount, therefore these appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. The facts as well as grounds of appeal

The grounds of appeal raised by the assessee in “lead” case in ITA No.543/SRT/2023 for A.Y. 2011-12 are as follows: “1. On the facts and in the circumstances of the case as well as in law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Office in re-opening the assessment u/s 147 of the Act and issuing notice u/s 148 of the Income Tax Act. 2. On the facts and in the circumstances of the case as well as in law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.10,06,251/- on account of alleged estimation of commission income. 3. On the facts and in the circumstances of the case as well as in law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in making addition of Rs.2,47,004/- on account of difference in interest income between interest as per Form 26AS details and interest income shown in ROI treated as alleged undisclosed interest income from alleged accommodation loan entries of loans to various parties. 4. It is therefore prayed that the above addition may please be deleted as learned members of the Tribunal may deem it proper. 5. Assessee craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.”

Learned Counsel for the assessee did not argue Ground No.1, regarding re-opening of assessment u/s 147/148 of the Act. Therefore, Ground No.1 raised by the assessee is dismissed as not pressed/ not argued. Similarly, Ground No.1 raised by assessee in other appeals, (ITA No.544-547/SRT/2023) are also dismissed, as not pressed.

Ground No.2 raised by the assessee relates to addition of Rs.10,06,251/- on account of alleged estimation of commission income.

Succinctly, the factual panorama of the case is that assessee before us is an Individual and filed his return of income on 17.03.2012, declaring total income at Rs.2,02,100/-. The assessee was subjected to survey u/s 133A of the Act which was carried in the premises of the assessee on 24.03.2015. As per the information with the Investigation Wing, Ahmedabad, the assessee was the entry provider through his Proprietary Concerns, M/s Radhika Enterprise and M/s Rishit Corporation. During the course of survey, it was found that the assessee was providing bogus bills of purchase / sales and accommodation loan entries on commission basis. As the assessee was not maintaining regular books of accounts, the inventory of bank accounts was prepared as found in the premises which included the bank accounts of the assessee, his prop. Concerns, his family members, relatives and some non-descript persons. In his statement u/s 131 of the Act, the assessee, in reply to Q.No.3 and 5, confessed that he is engaged in providing all types of bogus / fabricated, sale bills, purchase bills, job work bills and the accommodation loan entries. The assessee also explained the modus operandi of his work which involves receiving account payee cheques in the name of various concerns. The cheques when realised would be transferred into another concern the amount will be returned to the parties after deducting commission of 0.5%. The assessee has also given the list of 44 concerns// entries through which the assessee operated his business of providing accommodation entries. Out of these 44 concerns, 32 concerns were his prop. concerns and balance of 12 concerns were the prop. concerns of other discrete persons. The list of these 44 entities / concerns has been reproduced by the assessing officer on page 3 and 4 of the assessment order. In reply to Q No.16 in the statement, the assessee had stated that his business of providing accommodation entries was being carried on by him for last 3 to 4 years and had provided total bogus bills of approximately Rs.200 Crores. The assessee filed the

Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before Ld.CIT(A), who has dismissed the appeal of assessee on account of technical grounds of re-opening of assessment u/s 147 of the Act. However, on merit, ld CIT(A) allowed the appeal of the assessee partly observing as follows:

Aggrieved by the order of Ld. CIT(A), the assessee is in further appeal before this Tribunal.

Shri P.M. Jagasheth, Learned Counsel for the assessee, in respect of ground No.2, argued in brief stating that Assessing Officer made addition @ 0.5% of the total purchases/sales/loans of Rs.25,15,62,886/- to the tune of Rs.12,57,814/- (0.50% of Rs.25,15,62,886/-), however, on appeal, by the assessee, the ld CIT(A) allowed deduction on account of estimated expenditure @ 20% of gross commission at Rs.2,51,563/- (20% of

Shri P.M. Jagasheth, Learned Counsel for the assessee, in respect of ground No.3, pleaded that addition of Rs.2,47,004/- on account of difference in interest income between interest as per Form 26AS and interest income shown in the Return of Income, treated as alleged undisclosed interest income from alleged accommodation loan entries of loans to various parties, which is not acceptable. Since the alleged accommodation loan was treated as bogus and assessing officer made estimation addition, hence addition of Rs.2,47,004/- on account of difference in interest income, is tantamount to double addition, hence the same may be deleted.

On the other hand, ld DR from the Revenue, (in respect of ground No.2) submitted that deduction on account of estimated expenditure @ 20% of gross commission, should not be increased to 50%, as the estimated expenditure @ 20% of gross commission, is sufficient to cover the expenditure incurred by the assessee to earn commission.

In respect of ground No.3, ld DR stated that addition of Rs.2,47,004/- on account of difference in interest income between interest as per Form 26AS and interest income shown in the Return of Income, should be sustained in the hands of the assessee, as it is not tantamount to double addition.

I have heard both the sides and gone through the relevant material on record. I note that, (vide table, para No.11.7 of the assessment order) assessee has not been given set off against the amount mentioned in column ‘F’ in the table, for the amount mentioned in column ‘D’ and ‘E’ respectively and Assessing Officer has computed the balance irreconcilable amount, which is wrong. Therefore, assessee is entitled to claim enhanced estimated expenditure from 20% to 50%. Hence, I find merit in the submissions of the ld Counsel to the effect that deduction on account of estimated expenditure @ 20% of the gross commission, should be increased to @ 50% of the gross commission. Therefore, I direct the assessing officer to allow estimated expenditure @ 50% of the gross commission. Therefore, ground No.2 raised by the assessee is allowed partly.

Since I have adjudicated the issue in ground No.2 by taking lead case in ITA No. No.543/SRT/2023, for assessment year 2011-12, accordingly, my observations made in ITA No. No.543/SRT/2023, for assessment year 2011-12, shall apply mutatis mutandis to the other appeals of Assessee namely, in ITA Nos.544, 545,546 and 547/SRT/ 2023, (in respect of ground No.2) also.

Coming to ground No.3, I find merit in the propositions canvassed by ld Counsel of the assessee that addition of Rs.2,47,004/- on account of difference in interest income between interest as per Form 26AS and interest income shown in the Return of Income, treated as alleged undisclosed interest income from alleged accommodation loan entries of loans to various parties, which is not acceptable. Since the alleged accommodation loan was treated as bogus and assessing officer made

In the result, ground No.3 raised by the assessee is allowed.

Since I have adjudicated the issue in ground No.3 by taking lead case in ITA No. No.543/SRT/2023, for assessment year 2011-12, accordingly, my observations made in ITA No. No.543/SRT/2023, for assessment year 2011-12, shall apply mutatis mutandis to the other appeals of Assessee namely, in ITA Nos.544, 545,546 and 547/SRT/ 2023, (in respect of ground No.3) also.

In the combined result, assessee`s appeals (ITA No. No.543, 544, 545,546 and 547/SRT/ 2023, are partly allowed in above terms. A copy of the instant common order be placed in the respective case file(s). Order is pronounced in the open court on 29/12/2023.