RAMESH KUMAR BAGRI,GURUGRAM vs. ITO WARD 2(1), FARIDABAD

3. Learned counsel vehemently argues in this factual backdrop that both the lower authorities have erred in law and on facts in not only treating the assessee/appellant as accommodation entry provider but also assessing his entire credits at an exorbitant rate of 0.5% in question. The Revenue places strong reliance on the 2 | P a g e CIT(A)’s lower appellate discussion partly upholding the impugned addition under challenge in above terms.

1. Ground No. 2 Ground number 2 is the material ground which stems from the action of the AO in adding the credit entries appearing in assessee's books as he found them unsubstantiated, more so on account of the fact that no compliances were made at any point of time during the assessment proceedings by the appellant which could aid him to make a more meaningful assessment of total income. In fact, for want of any other information, the AO was not missing in reason in making the addition of the entire credit entries of Rs. 55,17,27,091 as arising from undisclosed sources. It is only during the appellate proceedings that the appellant has submitted any evidences at all. The submission consisted of written arguments, copies of ledger, bank statements, copies of VAT returns etc. and a copy of the information report lodged with the police regarding loss of documents related to the appellant's proprietorship firm on 23.11.2017. The submissions of the appellant were forwarded to the Assessing Officer for further enquiry and comments which has already been discussed in the preceding paras.

3 | P a g e It must be mentioned that the remand report received from the AO is not a passive document. In fact, the AO went through the submissions, and made enquiries with the parties listed therein in order to ascertain the veracity of the appellant's claims. The pertinent findings from the Remand Report are as follows 1. There are no details provided by the appellant regarding purchases made amounting to Rs. 6,63,98,125 2. One of the parties, M/s Gayatri Udyog, stated to be a supplier of the appellant, stated in its response to notice u/s 133(6) that it had made purchases from the buyer, thus standing in absolute contrast to the stand of the assessee.

4. Regarding the sell side, Unitech Ltd acknowledged merely that they used to buy steel from the assessee but the ledger did not match with the one provided by the assessee.

6. The AO has also regarded the Police report about loss of documents filed with incredulity and commented that it is not an FIR but just a report. I agree with the observation of the AO as the report does not mention the date on which the report was filed.

I have gone through the submissions made by the appellant, the evidences adduced to his defense and the findings of the enquiry during the remand proceedings. The paucity of material documents amplify the conclusion that the assessee is in fact an entry provider. Even if one assumes that the documents were lost, it is inconceivable that the appellant did not have any access to other supporting documents like way bills, stock register, payment advice etc. The capital base of the assessee is indeed meagre when compared to the turnover. The bank accounts reflect the classic pattern of money and money out. Thus in view of the above the averments of the appellant as being a genuine enterprise do not hold much credence. Furthermore, there was a letter from the DDIT (Inv) Faridabad to the AO during the year 2020-21 in which it was shared that the assessee was an entry provider. The investigation wing was in possession of information relating to the assessee's bank account and the transactions there in and their analysis pointed to the fact that there was no actual business whatsoever being carried out by the assessee. Hence, I agree with the view of the AO that the Assessee is merely an entry operator. PA Now, the AO, in his remand report has come to the conclusion that considering all the facts, and holding the assessee to be an entry provider, instead of all the credits, only the commission that he may have earned on the transactions should be treated as his income. I agree with AO's perspective. However, the AO has proposed to estimate the commission income at 5% of the total entries. Estimation of commission income is at best, an estimation and there are several judgments on this issue. The following are a couple of cases in which the rate of commission was directly or indirectly discussed Citation Name of the case Bench Rate 136 taxmann.com 151 Sanjay Kuamr Choudhary ITAT Surat 0.2-0.5 (HUF) Vs ACIT 117 taxmann.com 292 PCIT Vs Alag Securities Mumbai 0.15 117 taxmann.com 396 Uday Shankar Mahwar vs Kolkata 0.3-0.8 ACIT 103 taxmann.com 25 Mukesh Choksi Vs ACIT Mumbai 0.15 82 taxmann.com 344 DCIT Vs Sagarmal Nahta Kolkata 0.2-0.55 It can be seen that the rate varies from 0.15 at the lowest to 0.8 at the highest. In general, the rates for loans carry higher rates and those for the bogus bills etc carry the lower rates. In view of the above, I believe that a rate of 0.5% of the turnover shall be a fair indicator of the appellant's income. The AO nis directed to estimate the income at 0.5% of the turnover. Thus the appeal of the assessee on ground no. 2 is partly allowed.” 5 | P a g e

5. It is sufficiently clear that what all the assessee’s accounts have witnessed is a continuous flow of credits and debits wherein he has been found to be a mere accommodation entry provider on account of his failure in filing the supportive evidence claiming any genuine business activity. We thus see no reason to interfere with the learned CIT(A) detailed discussion holding the assessee to be an accommodation entry provider in principle. The assessee fails in his first and foremost argument in very terms therefore.