KAUSHIK PRAVINCHANDRA GOHEL,BHAVNAGAR vs. THE ASSESSING OFFICER, WARD-1(2), BHAVNAGAR

These appeals have been filed by the same Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre, (in short “NFAC”), Delhi vide orders dated 25.07.2023 passed for A.Ys. 2015-16, 2016-17 & 2017-18. Since common facts and issues for consideration are involved for the impugned years under consideration, all appeals are taken up together.

The assessee has raised the grounds of appeal:- 2.

(A.Y. 2015-16) “1. The learned CIT(A) erred in law and on facts in dismissing the appeal ex- parte, which is, after having regard to the relevant facts of the case, clearly violative of the principles of natural justice, thus unconstitutional in nature, apart also from being contrary to the provisions of the Act, as interpreted by judiciaries at various levels. to 694/Ahd/2023 Kaushik Pravinchandra Gohel vs. Assessing Officer Asst.Years– 2015-16 to 2017-18 - 2 - 2. The learned CIT(A) erred in law and on facts in confirming the action of the AO in invoking the provisions of section 147 of the Act.

3. The learned CIT(A) erred in law as well as on facts in confirming the action of the AO in not complying with the ratio of various binding judgments in their true letter and spirit, thus clearly violating even the constitutional provisions.

4. The learned CIT(A) erred in law and on facts in confirming the action of the AO in making addition of Rs.28,67,73,656/- (consisting of a sum of Rs.6,86,57,800/- as unexplained cash credit and the balance sum of Rs.21,81,15,856/- as unexplained investment, as originally mentioned in the body of the reassessment order) to the returned income by invoking the provisions of section 69 / 69A read with section 115BBE of the Act.”

We shall take A.Y. 2015-16 as the lead assessment year and our observation for this year shall apply to other assessment years as well.

3. The brief facts of the case are that the assessee had filed return of income of Rs. 2,80,860/- for A.Y. 2015-16. As per information available with the Department, the assessee had deposited cash aggregating to Rs. 6,86,57,800/- and other credits amounting to Rs. 21,81,15,856/- during Assessment Year 2015-16 in his account with Renukamata Multi State Co- operative Urban Credit Society Ltd. (Renuka Mata Society), which inter alia was doing the business of banking and other finances. Accordingly, in order to examine the source of cash deposits and other credit entries, the Assessing Officer reopened the case by issuing notice under Section 148 of the Act on 30.03.2021. The Assessing Officer issued various show-cause notices, however, the same were not complied with by the assessee. Accordingly, since the assessee did not cause appearance despite issuance of several notices of hearing, the Assessing Officer completed the assessment ex-parte under Section 144 of the Act by making addition of cash deposits / credits in the account totaling to Rs. 28,70,54,516/-, under Section 69A and 69 of the Act, in absence of any details or explanation given by the assessee. to 694/Ahd/2023 Kaushik Pravinchandra Gohel vs. Assessing Officer Asst.Years– 2015-16 to 2017-18 - 3 - 4. The assessee filed appeal before Ld. CIT(A) against the additions made by the Assessing Officer. Before the Ld. CIT(A), the assessee challenged issuance of notice under Section 148 of the Act, however, the Ld. CIT(A) was of the considered view that in the instant case, firstly, the assessee has not brought on record any cogent material to suggest that notices under Section 143(2) / 142(1) were not issued within stipulated time. Secondly, the Ld. CIT(A) held that the notices were issued after taking due approval from competent authority, well within time, prior to reopening the assessment of the assessee and accordingly, the Assessing Officer had taken all legal steps before initiating action in terms of Sections 147 / 148 of the Act. Accordingly, the Ld. CIT(A) dismissed the challenge of the assessee with respect to issuance of notice under Section 148 of the Act.

5. Before us, vide Ground Nos. 2 & 3, the assessee has challenged the action of the Assessing Officer in invoking the provision of Section 147 of the Act. On the basis of facts placed on record, we observe that the assessee has not disputed that all the necessary approvals / legal steps for initiating proceedings under Sections 147 / 148 of the Act were duly taken by the Assessing Officer prior to initiation of reassessment proceedings. Secondly, on facts which are on record before us, the assessee had not filed it’s return of income for the impugned assessment year. However, from the information available on record, the Assessing Officer came to know that there were cash deposits / other credits in the bank account held by the assessee with Renuka Mata amounting to Rs. 28.70 crores approximately during the impugned year under consideration. However, despite such substantial deposits / credits in the bank account of the assessee, the assessee had not filed any return of income for the impugned assessment year. Accordingly, looking into the instant facts, to 694/Ahd/2023 Kaushik Pravinchandra Gohel vs. Assessing Officer Asst.Years– 2015-16 to 2017-18 - 4 - we are of the considered view that there is no infirmity in the order of Ld. CIT(A) while holding that it is a fit case for reopening the assessment of the assessee under Sections 147 / 148 of the Act, looking into the assessee’s set of facts.

Ground No.4:- CIT(A) erred in confirming additions of Rs. 28,67,73,656/-

8. In appeal, the Ld. CIT(A) confirmed the additions with the following observations:-

“7.9 That a bare perusal of the aforesaid deeming sections therein reveals that an addition under the said statutory provision can be made where the assessee is found to be the owner of a bank account in which the credits were recorded outside the to 694/Ahd/2023 Kaushik Pravinchandra Gohel vs. Assessing Officer Asst.Years– 2015-16 to 2017-18 - 5 - regular books of account maintained for any previous year. Thus, the very sine qua non for making of an addition under Section 69A pre supposes a credit of the aforesaid amount in the 'bank account' held for the previous year. This is the settled position of law that a statutory provision has to be strictly construed and interpreted as per its plain literal interpretation, and no word howsoever meaningful it may so appear can be allowed to be read into a statutory provision in the garb of giving effect to the underlying intent of the legislature. The only submission made by the appellant is that his account was misused by certain persons/employees of Bhavnagar Brach of Renukamata Multi State Urban Co-operative Credit Society Ltd. However, the quantum of cash deposits and other credits in the account of assessee would clearly show that the assessee willingly and knowingly participated in managing his account. The assessee is making only self-serving statements without any cogent evidence and is completely silent as to what prevented him to approach the legal authorities and file an official compliant of fraud against the so-called persons who misused his account. Not even an FIR seems to have been filed by the assessee in this regard. The assessee is also making an argument that the transactions in his account clearly left behind verifiable trails for facilitating the identities of the real beneficiaries and the AO ought to have identified the beneficiaries. The conception of assessee appears to be misplaced in the sense that the onus is on the assessee to furnish acceptable explanation for the credits in his account and not on the AO to prove otherwise. 7.10 Having considered entire facts of the case, and the case laws cited above, it is apparent that the appellant has completely failed to offer any explanation either before the AO during assessment proceedings or before me during appellate proceedings, despite affording sufficient number of opportunities and hence, I find no infirmity in the order of AO. Accordingly, the addition made of Rs. 28,70,54,51 6/- is confirmed. Accordingly, this ground of appeal is dismissed.”

9. The assessee is in appeal before us against the aforesaid additions confirmed by Ld. CIT(A) in the hands of the assessee. Before us, the Counsel for the assessee submitted that the assessee is a person of little means and is only a name lender in the entire scheme of things. The Counsel for the assessee submitted that the assessee allowed the Renukamata Society to open the bank account in the name of the assessee, since the assessee was approached by the Manager of Bhavnagar Branch of Renumata Society Bank, who had told the assessee that if the assessee allowed the Renukamata Society to open / operate a bank account in the name of the assessee with Renukamata Society, this would entitle the assessee to avail financial assistance in the form of loans for future as and when the same is required and applied for. Further, to 694/Ahd/2023 Kaushik Pravinchandra Gohel vs. Assessing Officer Asst.Years– 2015-16 to 2017-18 - 6 - the assessee was assured that the assessee would also be suitably compensated for such assistance provided to the Renukamata Bank. Accordingly, it was on the basis of these assurances that the assessee kept on signing blank forms, cheques, other documents, papers etc. which were produced before him from time to time. Accordingly, the Counsel for the assessee submitted that though the assessee allowed the Renukamata Bank to open and operate bank account in his name, the assessee has not deposited any money in the bank accounts maintained with Renukamata Society and neither has the assessee withdrawn any amount from these banks. Further, the Counsel for the assessee submitted that the assessee also did not have any knowledge as to what type of transactions were being carried out through these bank accounts, from time to time. Further, the Counsel for the assessee submitted that whenever there were any changes in the incumbent Manager of Renukamata in the Bhavnagar Branch, the assessee was generally called and asked to open a new bank account. The Counsel for the assessee submitted that the assessee was given to understand that since the incumbent Branch Manager is required to fulfill it’s target of opening new bank accounts, this exercise of opening new bank account in the name of the assessee was required to be carried out. Accordingly, in order to maintain cordial relations with the new Branch Managers, the assessee used to sign whatever documents / papers etc. which were being produced before him in this regard. In all these cases the assessee used to sign blank cheque books and deliver the same to the incumbent Branch Manager as directed. Accordingly, the Counsel for the assessee submitted that though apparently benami and accommodation transactions were carried out by utilizing the above referred accounts open in the name of the assessee, the assessee neither deposited any money in the said accounts and neither did the assessee withdraw any money from the said account. Accordingly, it was ITA Nos.690 to 694/Ahd/2023 Kaushik Pravinchandra Gohel vs. Assessing Officer Asst.Years– 2015-16 to 2017-18 - 7 - grossly incorrect on part of the Assessing Officer and Ld. CIT(A) to hold that the entire amount of bank deposits / credit made in the bank accounts for the impugned assessment years could be added in the hands of the assessee. This is especially in light of the fact that the assessee was not the real beneficiary of the amounts which were being deposited and later withdrawn in the bank accounts held by the assessee with Renukamata Society Bank Ltd. In support of the above arguments, the Counsel for the assessee filed before us order passed by ITAT Mumbai Bench in the case of Renukamat Multi State Cooperative Urban Credit Society Ltd. vs. ACIT (in & 4002/Mum/2019), from which it is evident that Renukamata Society Bank has been regularly and for past several years engaged in the business of providing accommodation entries, by opening bank accounts in the names of people with meagre income, by luring them into opening bank accounts with Renukamata Society. Accordingly, it was submitted that the assessee was only a name lender and he was not the real beneficiary of such income. Further the Counsel for the assessee placed reliance on the case of Chintan Niketan Bhandari vs. DCIT (in IT(SS)A Nos. 495 to 500 & 1604/Ahd/2019) in support of the contention that only a reasonable percentage, if any, should be added in the hands of the assessee and the entire amount cannot be added as the income of the assessee.

“A search &Seizure action u/s 132 of the IT Act, 1961was carried out in case of the assessee M/s. Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. (in short Society/SRMSCS) (PAN: AADAS7782D) on 26.05.2017 and subsequently the case was centralized with this charge. During the search, it was found that the huge money was deposited in the bank accounts maintained in the society and during the course of assessment proceedings the society could not explain the source for the same. The main allegations against the society leading to search action are as under: i. The society has allowed huge cash deposits in the account of its account holders whose creditworthiness is doubtful. ii. Pre-search, post search and assessment stage inquiry in respect of account holders, in whose accounts substantial cash deposits were made, most were either untraceable or person of very no/low means. Modus Operandi found during the Search & Assessment proceedings: As per the enquiries conducted by the Investigation Wing and by this office, the modus operandi is that various accounts were opened in the co-operative society. Huge cash deposits were made at home branch of the customer of SRMUCS as well as other branches (remote) branches of SRMUCS. Credits into the account-holders' of SRMUCS were made by following modes: (a) Cash deposit made at home branch of customers' accounts maintained with SRMUCS. to 694/Ahd/2023 Kaushik Pravinchandra Gohel vs. Assessing Officer Asst.Years– 2015-16 to 2017-18 - 10 - (b) Cash deposit made at other than home branch of customers' accounts maintained with SRMUCS (Remote). (c) By transfer from other customers of SRMUCS. (d) By transfer from customer of SRMUCS/ other parties having accounts at Public/ Private sector banks. The amounts so credited were withdrawn by the depositors through following modes: (a) Cash withdrawn from home branch of customers' accounts maintained with SRMUCS. (b) Cash withdrawn from other than home branches of customers' accounts maintained with SRMUCS (Remote), (c ) Cash withdrawal by other customers of SRMUCS. (d.) On transfer to customers of SRMUCS/ other parties having accounts at Public/ Private sector banks online/ RTGS/ NEFT , which were later transferred to other accounts or withdrawn as cash. (iii) Money so transferred were used for following purposes: (a) Remitting money abroad with improper/falsified documentation in the garb of imports. (b) Payment of customs duty. (c) Purchase of the bullion or other purchases. (d) Transfer to other parties online/ RTGS/ NEFT (e) Withdrawn by the beneficiaries.

4. Details of your assessee:

to 694/Ahd/2023 Kaushik Pravinchandra Gohel vs. Assessing Officer Asst.Years– 2015-16 to 2017-18 - 11 - Details as provided in the enclosed excel sheet contains Name (surname first) and PAN of the assessees along with their account numbers of account held by them in the Society. Financial Year-wise credits have been provided in lakh rupees. It may kindly be noted that majority of the deposits are in cash only.

5. As per the ITBA based PAN query, the PAN jurisdiction of the assessee lies with your charge and accordingly the information is shared with a request to make further investigation to verify the credit-worthiness in the above-mentioned account along with source of credit entries and to take necessary remedial action at your end. Provisions under Prohibition of Benami Property Transactions Act, 1988 may also be kept in mind while taking suitable action.

6. While taking remedial actions, kindly take note of following points: (i) Most of the depositors are Non-filers. (ii) Even in cases where ITRs are filed, these amounts of deposits are not reflected in the ITRs.”

“6. The finds of the search action so far are being listed down as under: a) Shri Renukamata Multi State Cooperative Urban Credit Society Limited has huge cash deposits made in the accounts of its customers in last five years. Primafacie, most of the cash deposit is unaccounted and is in the names of the individuals of small or shell companies/entities. The cash so accepted is then deposited by the employees of the Society in the various bank accounts of society (list annexed), and then transferred out as RTGS/NEI'T in accordance with rho instructions of the customers, who bring the cash to the society. In the statement of branch manager of Ahmadabad of the society, he has mentioned few accounts which are being operated on behalf of the employer of account holder. b) The society has also issued Demand Drafts to various walk-in customers in their branches by splitting the cash received to below Rs. 50,000/- in each instance and without taking any KYC details on record. The investigation carried so far shows that Demand Drafts of substantial amount have been issued by the society, after splitting the amount in such a way that each Demand Draft value is less than Rs.50,000/-. c) From the analysis of cash deposits and withdrawals, it is seen that substantial amounts of withdrawals made are against deposits made in cash at different branches of the society without proper documentation of identity of persons to 694/Ahd/2023 Kaushik Pravinchandra Gohel vs. Assessing Officer Asst.Years– 2015-16 to 2017-18 - 12 - depositing and withdrawing the cash. Therefore, society is working on the basis of typical Angadia model without maintaining proper documentation. d) During the post search investigation, it is seen mat cash deposits made in the accounts holders of Mumbai branch is subsequently transferred to the bank accounts of shell entities. The funds are subsequently being remitted abroad by these shell entities, for prima facie bogus imports. From the investigations done here, it is seen that the account holders, in whose account cash deposits of more than Rs. 10 Crore was made and which was subsequently transferred via RTGS/NBFT to the shell entities, are either persons of low means who simply lent their identity details (id proof, signature) to unknown persons or are not traceable. The investigations with respect to shell entities revealed that proprietors of these entities have also lent their identities and ore not into any genuine business activity. These bank accounts were operated by persons whose identity is yet not established. The, details of these shell entities along with amount transferred from the society are being tabulated as under:

Name of entity Amount transferred from accounts with Mumbai branch of society Azure Enterprise Prop. Neeraj Rajkumar Singh 139.63 Cr. Fine Touch Impex Prop. Dhannanjay Nikam 73.6 Cr. Iconic Enterprises Prop. Siddharth Keshav 54.2 Cr. Gaikwad Seabird Enterprises Prop. Vinayak Ranjan 53.52 Cr. Thakre Zillion Enterprises Prop. Shaikh Mukaram 16.27 Cr. Iqbal Om Enterprises Prop. Ravi Ashok Prajapati 9.7 Cr. Grafik Traders Prop. Saniket C. Nanavare 4.16 Cr. Sai Impex Prop. Harkut Harinarayan Dhanjay 9.38 Cr. Jolly Collections Prop. N. N. Raut 5.18 Cr. Nishica Impex Pvt. Ltd. 15.2 Cr. Globus Corporation Prop. Harkut Harinarayan 3.12 Cr. Dhanjay Irfan Trading Company Prop. Irfan Shaikh 2.54 Cr. R C International Prop. Chetan Vinod Thakkar 6.33 Cr. Riya Enterprises Prop. Nitin Pradeep Gaurav 1.85 Cr. e) At Ahmadabad branches of society, specific instances of non-proper maintenance of account opening forms and KYC documents are found. It is also seen that society has accepted cash of amount Rs. 85 lacs in demonetized currency after 08.11.2016 at the Ahmadabad brunch at the instruction of Yogesh Bhalerao. Also, Dashraihbhai C Khant, Assistant Branch Manager at Bapunagar branch, Ahmadabad has given the details of benami accounts being operated from the branch (please refer the reply to Q. 31 in statement of Dashrathhhai C. Khant). f) Dashrathbhai C. Khant, Assistant Branch Manager at Bapunagar branch, Ahmedabad has given the details of benami accounts being operated from the to 694/Ahd/2023 Kaushik Pravinchandra Gohel vs. Assessing Officer Asst.Years– 2015-16 to 2017-18 - 13 - branch. He has also stated that he is aware of these benami accounts because on few occasions when cash is not available in the branch account holders of such accounts tell him to talk to their employers with respect to cash transactions. The details of such benami accounts are provided by him in reply to Question No 31 in his statement.”

“47. Be that as it may, the contents of the report shows that the Ld. DDIT(I&CI) had observed that these account holders were depositing large sums of cash on different dates in the accounts held by them with the assessee society, which was in turn being routed to different firms by way of RTGS who were the ultimate beneficiaries of these deposits and had failed to disclose the same in their respective tax returns. The Ld. DDIT(I&CI) observed that by taking advantage of the absence of reporting liabilities, these societies were being used as a conduit for money laundering. It is therefore noted that, it was not the case of the DDIT(I&CI) that these cash deposits belonged to the assessee or represented its unaccounted monies. Rather, according to the DDIT(I&CI), certain individuals were using the accounts held by members in the assessee society to route their unaccounted monies and the beneficiaries in relation thereto is also noted to have been identified by the DDIT(I&CI). In fact, one of the ten persons viz., Mr. R.A. Shah from whom enquiries were made had admitted that he had not disclosed his account in his tax return and accordingly revised his return of income and paid taxes thereon. On these facts, we are unable to countenance the action of Ld. CIT(A) seeking to justify the additions by way of unexplained monies being made u/s 68 of the Act in the hands of the assessee society, based on this spot verification report which does not incriminate the assessee qua the cash deposits made by these depositors qua these relevant AYs in these appeals.

“Thus, considering the totality of facts and the circumstances of the instant case vis- a-vis considering the settled legal position, it appears that there is direct nexus/live link between the material coming to the notice of the Assessing Officer and that for formation of his belief that there has been escapement of the income of the assessee from assessment in the year under consideration because of his failure to disclose fully and truly all material facts as from the inquiry/investigation by the Investigation Wing, some tangible material was found to substantiate the fact that the assessee was the provider of accommodation entries and that, the income from commission, ranging from 0.5 per cent to 1 per cent was not disclosed in return and thereby, the income chargeable to tax had escaped assessment for the year under consideration. As emerges from the record, the petitioner has filed Rol for the assessment year 2012-13 disclosing income of Rs. 1.42,694 despite showing a huge turnover of Rs. 24,10,82,501 in the audited books of account. Further, a detailed investigation is carried out by the Investigation Wing and the outcome of the same prima facie substantiates the case of the department. Thus, formation of belief by the Assessing Officer that the income chargeable to tax has escaped assessment, based upon material derived during inquiry/investigation, appears to be justified. Thus, the petition failed and dismissed.”

“3. The moot issue involves assessment of cash deposits found in the bank account of the assessee of Rs.7.37 Crs. and commission earned at the rate of 3% on the said amount of Rs.7.37 Crs. to the tune of Rs.22.12 lacs. The assessee has been alleged to be an entry operator providing bills of purchase & sales without any actual business transactions. to 694/Ahd/2023 Kaushik Pravinchandra Gohel vs. Assessing Officer Asst.Years– 2015-16 to 2017-18 - 16 -

“8.2 Now coming to the instant facts, we observe that the assessee has been running several concerns in the name of himself and in the name of other persons who are engaged in the activities of taking cheques and cash and deposited the same in their bank accounts. The assessee’s contention is that he is merely acted as a commission agent and hence only the commission amount should be subject to tax in its hands. However, the Department has observed that the assessee could not produce that complete details of beneficiaries with their names, complete addresses, PAN and other details of transactions. In the instant case, there are approximately more than 7000 beneficiaries and only in the case of 116 beneficiaries, the PAN has been identified. For 2752 entries, PAN has not been identified. For balance entries, only part details are available. If the assessee is submitting that he is liable to be taxed only on the commission income so earned, then the onus is on the assessee to provide the basis as to how such commission income has been arrived at and list of beneficiaries and other details so that whether the correct amount of “commission income” has been offered to tax may be verified by the Department. The Department cannot be expected to find out the details of all beneficiaries itself and cannot accept whatever income or expenses are offered/claimed by the assessee, without the assessee providing any methodology of arriving at the same along-with supporting evidence viz. details of beneficiaries, details of middlemen, basis of arriving at commission etc. In the instant facts, the assessee has submitted that he was operating through middlemen and does not know the name of to 694/Ahd/2023 Kaushik Pravinchandra Gohel vs. Assessing Officer Asst.Years– 2015-16 to 2017-18 - 17 - beneficiaries in most of cases. However, most times, even the middlemen could not be contacted by the Department, since notices could not be served upon them as they were not available. Accordingly, in absence of details forthcoming from the assessee, a reasonable percentage may be arrived at, in the instant facts to arrive at the “commission” income earned by the assessee. In our view, looking into the totality of facts, it would be reasonable to take 0.25% of total deposits in the bank accounts owned/ operated by the assessee (₹ 295,56,30,168 for assessment year 2017-18), as commission income of the assessee for the assessment year under consideration.”

“7.4 Now coming to the instant facts, we observe that the assessee has submitted that it has earned commission income, however, no details regarding the commission income earned by the assessee was furnished to the Department during the course of assessment or appellate proceedings. As held in the judicial precedents highlighted above, if the assessee is submitting that he is liable to be taxed only on the commission income so earned, then the onus is on the assessee to provide the basis as to how such commission income has been arrived at and also to provide list of beneficiaries and other details so that whether the correct amount of “commission income” has been offered to tax may be verified by the Department. However, the assessee has not maintained any books of accounts, has not maintained cash book and bank book, he has not submitted any details of parties from whom the commission income has been earned, the assessee has not given any supporting documents to corroborate the correct rate at which commission income may be computed and the assessee has also not provided details/ list of parties who have made deposits to the tune of ₹ 158 crores in the bank accounts held by the assessee. The assessee has not come up with any details to substantiate its stand that the commission income may be restricted to 0.1% to 0.15%. Accordingly, looking into the instant facts, in the interests of justice, it would be reasonable to restrict the net commission income @0.25% of the total deposits in the bank account held by the assessee. In the result, ground number 1 of the assessee’s appeal is partly allowed.”