Income Tax Appellate Tribunal - Mumbai
Prakash M. Adani, Mumbai vs Dcit Cc 47, Mumbai on 23 August, 2017
आयकर अपील य अ धकरण "C" यायपीठ मब ंु ई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 491 3/Mum/2013 ( नधा रण वष / Assessment Year : 2004-05) आयकर अपील सं./I.T.A. No. 491 4/Mum/2013 ( नधा रण वष / Assessment Year : 2005-06) आयकर अपील सं./I.T.A. No. 492 4/Mum/2013 ( नधा रण वष / Assessment Year : 2006-07) आयकर अपील सं./I.T.A. No. 492 5/Mum/2013 ( नधा रण वष / Assessment Year : 2007-08) आयकर अपील सं./I.T.A. No. 492 6/Mum/2013 ( नधा रण वष / Assessment Year : 2008-09) आयकर अपील सं./I.T.A. No. 491 5/Mum/2013 ( नधा रण वष / Assessment Year : 2009-10) आयकर अपील सं./I.T.A. No. 491 6/Mum/2013 ( नधा रण वष / Assessment Year : 2010-11) Sh. Prakash M. Adani बनाम/ Deputy Commissioner of Room No. 14, 1 s t Floor Income -tax, Ce ntral v.
Gu runanak Building Circle-47 , Room No. 658
6 t h Dr De shmukh Lane Aayakar Bhawan
Mumbai-400002 M K Road,
Mumbai-400020
थायी ले खा सं . /P AN :AJOPA6337K
(अपीलाथ /Appellant) .. ( यथ / Respondent)
आयकर अपील सं./I.T.A. No. 471 2/Mum/2013
2 ITA 4913-4916/Mum/2013,
4924-4926/Mum/2013,
4712-4716/Mum/2013,
4719-4720/Mum/2013
( नधा रण वष / Assessment Year : 2004-05)
आयकर अपील सं./I.T.A. No. 471 3/Mum/2013
( नधा रण वष / Assessment Year : 2005-06)
आयकर अपील सं./I.T.A. No. 471 4/Mum/2013
( नधा रण वष / Assessment Year : 2006-07)
आयकर अपील सं./I.T.A. No. 471 9/Mum/2013
( नधा रण वष / Assessment Year : 2007-08)
आयकर अपील सं./I.T.A. No. 471 5/Mum/2013
( नधा रण वष / Assessment Year : 2008-09)
आयकर अपील सं./I.T.A. No. 471 6/Mum/2013
( नधा रण वष / Assessment Year : 2009-10)
आयकर अपील सं./I.T.A. No. 472 0/Mum/2013
( नधा रण वष / Assessment Year : 2010-11)
Deputy Commissioner of बनाम/ Sh. Prakash M. Adani
Income -tax, Central Circle- Room No. 14, 1 s t Floor
v.
47, Room No. 658 Gu runanak Building
Aayakar Bhawan 6 t h Dr De shmukh Lane
M K Road, Mumbai-400002
Mumbai-400020
थायी ले खा सं . /PAN :A JOPA63 37K
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Assessee by : Shri Mukesh Choksi,CA
Revenue by : Sh. H N Singh, CIT-DR
ु वाई क तार ख / Date of Hearing
सन : 02.08.2017
घोषणा क तार ख /Date of Pronouncement : 23.08.2017 3 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 आदे श / O R D E R PER Bench These are bunch of fourteen appeals being cross appeals filed by the Revenue as well assessee for assessment years 2004-05 to 2010-11 before the Income Tax Appellate Tribunal(hereinafter after called "the tribunal") , and are directed against the common appellate order dated 25th March, 2013 passed by learned Commissioner of Income Tax (Appeals)-38, Mumbai (hereinafter called "the CIT(A)"), for assessment year's 2004-05 to 2010-11.
2. All the appeals raises common issue concerning computation of the income arising from activities of accommodation entries provided by the assessee to various entities and to bring it to tax within the provisions of the Income-tax Act,1961 (Hereinafter called "the Act") , for assessment years 2004-05 to 2010-11.
3. First we shall take up cross appeals for assessment year 2004-05. The assessee's appeal for assessment year 2004-05 is ITA no.4913/Mum/2013 while Revenue's appeal is ITA no. 4712/Mum/2013.
4. The brief facts of the case are that search and seizure operations u/s 132(1) of the 1961 Act were carried out by Revenue at the residence and business premises of M/s Orbit Corporation Limited Group on 11.02.2010 by ADIT(Inv.), Unit -VII(4), Mumbai. During search operations, unaccounted cash/jewellery and incriminating documents were found and accordingly appropriate assets/documents were seized. Based on these seizures during search action u/s 132(1), the Managing Director of the Group concern namely the flagship company M/s Orbit Corporation Limited, Sh. Pujit Ravikiran Aggarwal offered undisclosed income to the tune of Rs. 71,81,90,065/-
4 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 arising out of these seized incriminating material towards bogus purchases, cash transactions based on seized material, unaccounted cash found etc., which was brought to tax by Revenue in the appropriate group companies/individual cases. These facts are narrated in the assessment orders passed by the learned Assessing Officer (hereinafter called "the AO") in asssessee's own cases and are extracted there-from . It was observed by the AO that the assessee is the person who was instrumental in introducing bogus bills in the books of Orbit Group. The assessee admitted that he is engaged in providing accommodation entries vide statement recorded on oath u/s 133A of the 1961 Act before the ADIT(Inv.), Unit No. VII(4),Mumbai on 13-12-2007. The assessee reconfirmed the same before the AO in the statement recorded on oath on 25-04-2011. The assessee has admittedly in his statements confirmed that he has not traded any goods and has only charged commission on the cheque issued by the party and paid back the cash and hence no trading income was earned by the assessee and only commission income was earned . The cases of the assessee were centralized and notices u/s 153C of the 1961 Act were issued by the AO on 09-12-2011 which was duly served on the assessee. In response, the assessee filed return of income on 28-12-2011 for assessment year 2004-05 declaring total income of Rs.1,39,160/-. It was requested by the assessee to treat the said return of income as provisional return of income. The AO rejected the claim of the assessee to treat the return of income as provisional return of income as there are no provision in the 1961 Act which allows to treat return of income as provisional return of income.
The AO asked the assessee to file Profit and Loss Account , bank account copies, and summary of F & O transactions. The assessee did not file any details as called for in by the AO . In the absence of co-operation by the assessee, the AO was left with no choice but to proceed to pass an ex-
5 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 parte assessment order in accordance with provisions of Section 144 of the 1961 Act.
It was observed by the AO that during the course of assessment u/s 148 of the 1961 Act , the then AO after quantifying the issue of bills/payments (based on impounded diaries/documents) recorded the statement of the assessee on oath u/s 131 on 02-12-2011. In this statement recorded on oath, the assessee explained modus operandi of its activities in response to question no 5 wherein it is stated that when any party contacts assessee for bills, he issues bills to them and collect cheques from them which is deposited in assessee's bank account which is withdrawn in cash and given back to the party after deducting his commission in the range of 0.30-0.40%. Similarly for cheque discounting, it was submitted that cash was given in lieu of cheque for which the assessee charged commission in the range of 0.30- 0.40%. It was submitted that no commission was received at the time of issuance of bills but the same was received when cheque received against bills is discounted in the bank. It was submitted that only sale bills which were in the nature of purchase accommodation bills for the opposite parties were issued by the assessee. The assessee reconfirmed the names of various concerns which were used for issuing bogus bills which were stated to be the same concerns which names were given by the assessee to Revenue on 13-12- 2007 at the time of survey u/s 133A conducted by Revenue against the assessee. The assessee also confirmed that bank accounts with ABN Amro Bank, Nariman Point A/c no 1093238, Standard Chartered Bank, Chowpathy and HDFC Bank, Grant Road , Mumbai were used to launder money through these accommodation bills. On being asked by the AO, the assessee declined to give details of bank accounts in the name of various concerns through which bogus bills were issued. The assessee also confirmed that Mr Prabhuram Purohit who is proprietor of Perfect Steel Industries is his employee to whom monthly salary was paid by him and 6 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 confirmed that said proprietary concern Perfect Steel Industries was managed and controlled by the assessee. The assessee also gave bank accounts details which are maintained in his and family name. From the seized annexure A- 15, A-16, A-17 and A-4 which were seized during survey operations u/s 133A from his premises on 13-12-2007 that these are collection books of bills issued and cheques received from various parties. The AO confronted the summary of bills issued and payments received by the assessee for financial year 2005-06, 2006-07 and 2007-08 prepared from Annexure A-15,A-16,A-17 and A-4 , as under to which the assessee submitted that it will be replied for within three days:
F.Y. Bill Issued Payment Received 2005-06 Rs.31,645,356 Rs.3,13,922 2006-07 Rs.205,591,983 Rs.81,182,382 2007-08 Rs.678,568,044 Rs.401,315,687
The assessee confirmed that it was receiving commission on discount of cheques of the rate of 0.30 to 0.40% which is his gross income and it was submitted that expenditure like salary, bank commission , electricity bill, telephone bill and conveyance expenditure are to be deducted further from this gross income to compute taxable income of the assessee.
The AO observed that the assessee did not produce any bank statement and the income was not substantiated by the assessee nor bills issued by the assessee were substantiated by the assessee. Thus, for the year under consideration , the assessee did not co-operated and did not provide any information to the AO such as bank statements, summary of bills issued by the assessee. The AO left with no option estimated the income of the year 7 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 by taking average of income for the next three succeeding years from the issuance of accommodation bills, which comes to Rs. 26,16,464/- which was brought to tax by the AO as income from undisclosed sources for the impugned assessment year vide assessment order dated 30-12-2011 passed by the AO u/s 153C r.w.s. 144 of the 1961 Act.
5. Now we will take up issues for assessment year 2005-06,We have observed that similar facts were there before the AO as were there before the AO for AY 2004-05 and the AO confirmed additions to the tune of Rs.46,62,057/- as income of the assessee for the assessment year 2005-06 based on the average income of the assessee for succeeding three years from the issuance of accommodation bills, vide assessment order dated 30-12-2011 passed by the AO u/s 153C r.w.s. 144 of the 1961 Act.
6. Now we will take up issues for assessment year 2006-07, 2007-08 and 2008-09, The factual matrix for assessment year 2006-07, 2007-08 and 2008-09 is discussed in preceding para's of this order while discussing for AY 2004-05. We have observed that the AO made additions to the income of the assessee to the tune of 1% of aggregate of accommodation bills issued plus payments received by the assessee to the tune of Rs. 3,19,59,278/- for AY 2006-07( Rs. 28,67,74,365/- for AY 2007-08 and Rs. 107,98,83,731/- for AY 2008-09). The assessee claimed that only payment received against bills issued should be taken for computation of commission income. It was observed by the AO that once the bill is issued by the assessee, the beneficiary will take benefit while computing tax liability and shall reflect the said liability in its books of accounts and the assessee is bound to receive its commission income. It is also brought on record by the AO that the assessee did not correlated the payments received with the bills issued and hence income is to be computed on aggregation of bills issued plus payments received by the assessee, It was also observed by the AO that the assessee 8 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 did not submitted the bank statements and hence the bills issued and payment received are taken as estimation from the material impounded at the time of survey on 13-12-2007. The claim of the assessee for bringing to tax 0.30-0.40% of bogus bills issued as well to give credit for expenses incurred were also rejected by the AO , the vide assessment order dated 30- 12-2011 passed by the AO u/s 153C r.w.s. 144/148 of the 1961 Act.
7. Now we will take up issues for assessment year 2009-10 and 2010-11, The background is discussed in preceding para's of this order. The assessee claimed business loss of Rs. 33.45.660/- for assessment year 2009-10 while no details/ basis of computing this loss was submitted before the AO and hence the AO disallowed the same. The assessee did not produced the bank statements nor substantiated his income and the bills issued by the assessee. The AO computed the income for assessment year 2009-10 and AY 2010-11 arising from accommodation entries by estimating the same to be Rs. 46,62,057/- for AY 2009-10 and for AY 2010-11-Rs. 1,83,28,637/- based on estimates of the average income of last three years , vide assessment order dated 30-12-2011 passed by the AO u/s 153C r.w.s. 143(3) of the 1961 Act for AY 2009-10( u/s 144 of the 1961 Act for AY 2010-11).
8. Aggrieved by the assessment orders dated 30-12-2011 passed by the AO for seven assessment years 2004-05 to 2010-11, the assessee filed appeals with learned CIT(A).
9. The said appeals filed by the assessee before learned CIT(A) for seven assessment years 2004-05 to 2010-11 are disposed off by learned CIT(A) vide common appellate order dated 25-03-2013. We will now discuss the findings and observations of learned CIT(A) for all the seven assessment years 2004-05 to 2010-11 which found mentioned in the common appellate order dated 25- 03-2013 passed by learned CIT(A).
9 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 The assessee has raised common grounds before the learned CIT(A) that reasonable time has not been granted by the AO to produce bank statements and other details and hence principles of natural justice was violated. The assessee was given an opportunity again to file all details during appellate proceedings by learned CIT(A) as well during remand proceedings by the AO to produce all bank statements as well other supporting documents to show that the assessee was not involved in the issuance of bogus bills during the impugned assessment year and hence it was held that the grievance of the assessee that principles of natural justice are breached stood satisfied as now adequate opportunity stood granted during appellate and remand proceedings, while adjudicating appeal by learned CIT(A) as held by learned CIT(A) in its appellate order.
During appellate proceedings before learned CIT(A), it was argued by the assessee that in the discounting of cheque business, commission is paid on cheque deposited in bank and cash is given back to party after deducting commission @0.30-0.40% and therefore estimation of income @1% on the bill issued plus cheque received as was done by AO is not justifiable and it was contended that the assessee receives commission only on cheques received and discounted in the bank and the rate of commission is between 0.30- 0.40% and not 1% as is brought to tax by the AO. It was submitted that no books of accounts are maintained except diaries/note books which were impounded by Revenue during survey on 13-12-2007 , wherein on the left side details of bill issued is mentioned while on right side cheque received against the said bill is mentioned. It was further contended that the AO has also not allowed the expenses incurred by the assessee against income of cheque discounting , while the assessee is entitled to claim the said expenses as deduction from income in view of the provisions of Section 30 to 43D of the 1961 Act.
10 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 The assessee stated that business of cheque discounting started from A.Y.2006-07 only and hence there could not be any income from cheque discounting for assessment years 2004-05 and 2005-06 . It was also submitted that business of cheque discounting was discontinued by the assessee from the date of survey u/s 133A conducted by Revenue on 13-12- 2007 against the assessee and hence there cannot be any income of cheque discounting in the previous years relevant to the AY 2009-10 and 2010-11.
The learned CITA(A) asked the assessee to furnish complete details such as names , addresses , PAN, bank account details, telephone numbers and other details of the persons with whom the assessee had conducted business . The assessee was asked to submit the ledgerised accounts in respect of each person/entity with whom business was carried out and to discharge onus of establishing the rate of commission received by the assessee. The learned CIT(A) directed the assessee to submit these details before the AO , and the AO was directed to submit a report in respect of any material on the basis of which such commission income was estimated in AY 2004-05, 2005-06, 2009-10 and 2010-11. The AO was asked to furnish the details of persons who have transacted business with the assessee.
The assessee submitted that it is not maintaining any books of accounts except keeping and maintaining diaries/ note book where the details regarding issuance of bills is recorded on left side and cheque received are noted on the right side and the said note book/diaries were impounded by the Revenue. W.r.t. charges of discounting of cheques it was submitted that it is similar to pay order charges of bank or draft issued by the bank and in similar cases, the other businessmen have reported income to be 0.30-0.40%.
11 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 The AO submitted remand report wherein contents of the assessment order were reproduced by the AO. The assessee on its part in reply to remand report in rejoinder reiterated its submissions before learned CIT(A).
The learned CIT(A) issued enhancement notice to the assessee as to explain why commission income be not assessed at 2% of the gross receipts. The assessee reiterated that the assessee receives cross bearer cheques which are deposited in bank and cash is withdrawn and returned to the party after deducting commission of 0.30-0.40% earned by the assessee. It was submitted that all the bank accounts are in the name of Sh. Prabhuram Purohit and the assessee has never issued any accommodation bills in its name and discounting of cheques varies from 0.30-0.40%.
The AO has also submitted before learned CIT(A) in its second report dated 13-02-2013 that the assessee had a bank account with Standard Chartered Bank A/c No. 22505490249 wherein there were transactions as under , which were found :
F.Y. Total Deposit Total Withdrawal
2003-04 34,93,927 29,54,427
2004-05 2,09,728 2,57,600
2005-06 40,38,366 37,76,665
2006-07 1,31,99,195 1,32,05,023
2007-08 1,68,62,611 1,72,80,960
The AO submitted that the above bank transactions pertains to the issuance of bogus bills and receipt of cheques which were banked in this bank account. The AO also submitted that the assessee has not co-operated and did not furnish the evidences that he was not indulging in bogus bills during 12 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 the financial years 2003-04 and 2004-05. Thus, AO submitted that logical conclusion is to be drawn to make estimation of income from bogus billing activities in respect of other years namely AY 2004-05,2005-06,2009-10 and 2010-11. The assessee in reply submitted that this bank account with Standard Chartered bank bearing number 22505490249 pertains to certain borrowing limits granted to the assessee and the assessee has utilized those limits for purchase and sale of shares. The assessee, however, did not submitted details of transactions in this bank account with supporting documents of share transactions before the authorities below . No corroborative evidences or details are furnished to explain the persons who have issued cheques and the purpose for which cash was withdrawn.
Learned CIT(A) decision for AY 2006-07,2007-08 and 2008-09 The learned CIT(A) observed that perusal of bank statement of Standard Chartered Bank clearly reveals that the assessee deposits cheques which are immediately withdrawn by the assessee in cash after deposit, which is a peculiar feature of accommodation entry provider activities. The learned CIT(A) observed that the assessee was asked to give details of the persons with whom the assessee has transacted such as name, address, PAN , bank details, telephone numbers and other information to identify the parties who have transacted with assessee but the assessee did not furnish the said details. The assessee was also asked to establish the rate of commission received from the persons who have transacted with the assessee , against which the assessee has only stated that the rate is 0.30-0.40% without bringing any evidence on record. It was observed by learned CIT(A) that the assessee has taken a stand that no books of accounts and other requisite details are maintained by him. It was also observed by learned CIT(A) that even in response to enhancement notice to enhance commission to 2% of the 13 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 gross receipts, the assessee has again reiterated that the commission earned was only to the extent of 0.30-0.40%.
It was also observed by learned CIT(A) that the evidences of providing accommodation bills by the assessee to the Orbit Group were considered and the following facts had emerged from the search and seizure proceedings conducted in the case of Orbit Group:
(i) The assessee only issues accommodation bills and no material / services have ever been supplied / rendered.
(ii) The assessee issued accommodation bills in name of various parties namely Perfect Steel Industries, M/s Kiran Sales Corporation, Shiv Shakti Enterprises, Rishab Enterprises, Impex Sales Corporation , Mahalaxmi Traders, Mittals Trading Co., Essar Trading Engg. Co., Vikas Trading & Engg. Co., Sagar Enterprises, Akash Tubes (India), Santosh Metal and Tubes etc controlled by the assessee.
(iii) The assessee had employed Sh Prabhuram B. Purohit in whose name assessee operated an entity called M/s Perfect Steel Industries Similarly, other benami's were used in issuing accommodation sales bills (purchase bills in the hands of beneficiaries) through the aforesaid entities controlled by the assessee.
(iv) The assessee did not maintain any books of accounts , except maintaining bank accounts in the name of family members as well in the names of Benami's at ABN AMRO Bank, Nariman Point Branch, Indus Ind Bank, Nariman Point Branch, Standard Chartered Bank , Chowpatty Branch.
(v) The modus operandi adopted for issue of accommodation bills has been elaborately explained by the assessee in his statement.
14 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 During search and seizure operations , the ledger extracts of purchases made with the entities managed and controlled by the assessee and his statements were confronted by recording a statement from Sh. Pujit Ravikiran Agarwal, Managing Director of Orbit Corporation Limited. Sh. Pujit Ravikiran Agarwal in his statement recorded u/s 132(4) of the 1961 Act on 12-02-2010 could not substantiate such purchases with supporting evidences and offered such purchases as income amounting to Rs.41,35,05,065/- for the financial year 2006-07, 2007-08 and 2008-09. The quantum of bills issued by entities controlled and managed by the assessee and utilized by the entities of the Orbit Group, are detailed as hereunder:
S.No. Name of the entity F.Y. Amount(Rs.)
controlled by Sh.
Parkash M Jain/Adani
1. Vikash Trading & 2006-07 1,50,96,740
Engineering Co.
2. Perfect Steel Industries 2006-07 4,06,77,735
3. Rishab Enterprises 2006-07 2,00,00,000
Sub-total(for F.Y.2006- 7,57,74,670
07)
4. Perfect Steel Industries 2007-08 14,21,09,460
5. Mittal Trading Company 2007-08 7,37,47,475
6. Rishab Enterprises 2007-08 1,20,42,472
7. New Era Enterprises 2007-08 1,31,49,006
8. Shree Yamuna Impex 2007-08 85,10,504
9. Vitrag Enterprises 2007-08 1,25,28,746
10. Om Corporation 2007-08 77,69,109
11. Siddhivinayak 2007-08 87,47,170
15 ITA 4913-4916/Mum/2013,
4924-4926/Mum/2013,
4712-4716/Mum/2013,
4719-4720/Mum/2013
Corporation
Sub-total(for F.Y.2007- 27,83,03,942
08)
12. Rishab Enterprises 2008-09 1,31,00,643
13. Vinayak Metal & Tubes 2008-09 1,73,82,042
Industries
14. New Era Enterprises 2008-09 1,47,64,496
15. Rinku Steel Corporation 2008-09 48,90,882
16. Ashoka Tube Industries 2008-09 92,01,868
Sub-total (for F.Y.2008- 5,93,39,931
09)
18. Siddhivinayak 2009-10 86,522
Corporation
Sub-total(for F.Y.2009- 86,522
10)
Total 41,35,05,065
However, in the return of income filed in response to the notice u/s 153A of the 1961 Act, M/s Orbit Corporation Limited , M/s Orbit Buildcon & Realty Private Limited , M/s Orbit Constructions and Realtors Private Limited and M/s Orbit Shelters Private Limited , had failed to declare the additional income of Rs. 41,35,05,065/- disclosed during the course of search action u/s 132(1) by Mr Pujit Ravikiran Agarwal and hence additions to that effect were made by the AO in their hands vide assessment orders passed by the AO.
It was observed by learned CIT(A), that in the case of Orbit group entities, learned CIT(A) upheld the additions on account of bogus purchases. The 16 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 details of such appeals as decided by learned CIT(A) in the case of Orbit group are specified in page 12 of learned CIT(A) appellate order. The learned CIT(A) refers to similar type entities wherein addition of 2% commission was upheld by him from such illegal activities. The learned CIT(A) , therefore, upheld the additions of commission to the income of the assessee to the tune of 2% of the value of bills issued as the basis for arriving at the net income, detailed as hereunder:
F.Y. A.Y. Bills issued Net Commission
(In Rs.) @2%
(In Rs.)
2005-06 2006-07 3,16,45,356 6,32,907
2006-07 2007-08 20,55,91,983 41,11,839
2007-08 2008-09 67,8568,044 1,35,71,380
AY 2004-05 and 2005-06
The learned CIT(A) observed that it is only for the AY 2006-07, 2007-08 and 2008-09 , the bills have been found during the survey proceedings u/s 133A on 13-12-2007 and the same were quantified so as to arrive at the quantum of bogus bills issued by the assessee. It was observed by learned CIT(A) that such evidences were not unearthed in respect of assessment years 2004-05, 2005-06, 2009-10 and 2010-11 during the investigation proceedings. It was observed that even during assessment proceedings as well remand proceedings , specific evidences have not been brought on record. The learned CIT(A) observed that the only relevant evidence is the bank account of the assessee with Standard Chartered Bank which was opened in FY 2003-04 and closed in FY 2007-08. It was observed that the assessee has failed to explain the nature of transactions in the said bank account and no 17 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 evidence is placed on record to corroborate that the said transactions pertained to purchase and sale of shares by the assessee.Thus keeping in view factual matrix of the case, learned CIT(A) estimated the income of the assessee for assessment year 2004-05 and 2005-06 at Rs.10,00,000/- for each year, as against the estimation of income made by the AO in the assessment orders at Rs. 26,16,464/- and Rs. 46,62,057/- respectively , keeping in view that the assessee is engaged in illegal activities and the income earned thereof is not verifiable.
AY 2009-10 The learned CIT(A) observed that the AO has estimated income at Rs.46,62,057/- for AY 2009-10 . The assessee had contended that he closed the business of cheque discounting and providing accommodation bills during the year 2008. The learned CIT(A) also observed that the bank account with Standard Chartered Bank was also closed during May, 2008. The learned CIT(A) observed from the chart of dealing with Orbit Group( chart in preceding para's of this order) , the aggregate value of the bogus bills supplied were to the tune of Rs,5,93,39,931/- by the entities controlled and managed by the assessee. It was observed by learned CIT(A) that the assessee is not co- operating and hence income is to be computed @2% of Rs. 5,93,39,391/- which worked out to be Rs. 11,86,798/-.
AY 2010-11 The learned CIT(A) observed that the AO made an addition of Rs.1,83,28,637/- by estimating income based on average of addition of last three years i.e. AY 2007-08 to AY 2009-10 , but while computing income the AO added the figures of last three years and not averaged which is not reasonable . It was observed by learned CIT(A) that the assessee has contended that the business was closed in 2008 itself and the bank account with Standard Chartered Bank was also closed in 2008 itself. The learned 18 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 CIT(A) restricted disallowance to Rs. 10,00,000/- keeping in view facts and circumstances of the case.
The learned CIT(A) observed that the assessee has raised a ground of appeal in AY 2009-10 pertaining to denial of F & O loss of Rs.33,45,600/- . The learned CIT(A) observed that the assessee has not produced books of accounts, bank statements , transaction details and evidences as to verify genuineness of the loss . Thus, since the assessee did not discharged the onus, the said loss was not allowed by learned CIT(A).
The learned CIT(A) did not allow the carried forward of loss of Rs. 30,83,557/- for AY 2010-11 as the assesee did not produced books of accounts , bank statements , transaction details and evidences so as to verify the genuineness of the said loss. Thus, since the assessee did not discharged the onus the alleged loss cannot be recognized as held by learned CIT(A).
The said appeals filed by the assessee before learned CIT(A) for seven assessment years 2004-05 to 2010-11 were disposed off by learned CIT(A) vide common appellate order dated 25-03-2013 as set out above.
10. Aggrieved by the appellate order dated 25-03-2013(common order for all the seven AY) passed by learned CIT(A) for assessment years 2004-05 to 2010-11 , both Revenue and assessee are aggrieved and have filed cross appeals before the tribunal.
11. Before the Bench , arguments were raised by both the rival parties supporting their contentions. The learned counsel for the assessee, Mr Mukesh Choksi, CA at the outset stated before the Bench that the assessee is admittedly in the business of providing accommodation entries and discounting of cheques for which income by way of commission is earned. The 19 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 learned counsel for the assessee Sh. Mukesh Choksi, CA stated before the Bench that engaging in providing accommodation/hawala entries wherein bogus bills are issued and no material is physically delivered against such bogus bills, itself is an organized business in which admittedly the assessee is engaged into . It is stated by learned counsel for the assessee Mr Mukesh Choksi, CA before the Bench that the assessee deposits cheques received against bills and cash is withdrawn from the bank on encashment of cheques which is returned to the beneficiaries after deducting commission income earned by the assessee, which is a business of the assessee .On being asked by the Bench, the learned counsel for the assessee Mr Mukesh Choksi, CA submitted that there is no requirement to make entries in the books of accounts by debit to such parties while returning un-accounted cash to such parties after its withdrawal from bank. The learned counsel of the assessee Sh Mukesh Choksi, CA admitted that all such entities and the persons are the benami of the assessee controlled and managed by the assessee. It is stated before the Bench by Mr Mukesh Choksi CA that the assessee is Chartered Accountant who is the man behind all these accommodation/hawala transactions and is benamidar of the various benami entities/persons through whom transactions were routed. It is submitted that the AO made addition of income based on bogus bills issued by the assessee plus payments received against the said bogus bills which led to double additions while the learned CIT(A) has restricted addition to the income computed based on issuance of bogus bills.It was submitted that the AO applied rate of commission @1% while learned CIT(A) applied enhanced rate of commission @2%. It is submitted that income be computed based on realization of cheques after discounting with bank and not based on mere issuance of bills , as the income does not arise at the time of issuance of bogus bills but at time of receipt of cheque against bills. It was submitted that there was an independent search conducted by Revenue against Orbit Group u/s 132(1) of the 1961 Act.It is submitted that for AY 2004-05 and 2005-06 , there was no 20 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 bogus bills issued by the assessee as the business of providing accommodation entries started after the end of these relevant previous years.It was submitted that learned CIT(A) adopted income of commission @2% while the assessee only earned income @0.30-0.40% against bogus bills and also further benefit of relevant expenses incurred by the assessee should also be provided against said income.It was submitted that similarly no income can be brought to tax for AY 2009-10 and 2010-11 as business stood closed after Revenue conducted survey u/s 133A on 13-12-2007. It is submitted that tribunal in large number of cases have adopted rate of commission @0.15% and further allowance of expenses to the tune of 50% was allowed by the tribunal. It is prayed that the same yardsticks may be adopted in these cases also which are similar to those cases. The learned counsel for the assessee drew attention to the following orders of the tribunal:
a) Goldstar Finvest Private Limited v. ACIT in ITA no. 2699/Mum/2013 for AY 2014-15 vide orders dated 30.11.2015
b) Mihir Agencies Private Limited v. DCIT in ITA no. 695/Mum/2015 vide orders dated 27-07-2016( also Mukesh Choksi v. DCIT in ITA no. 996/Mum/2015 vide same consolidated order dated 30.11.2015)
c) Alliance Intermediateries and Network Private Limited v. ACIT in ITA no. 2700-2702/Mum/2013 vide common order dated 24-02-2016
d) Goldstar Finvest Private Limited v. DCIT in ITA No. 6114- 6120/Mum/2012 vide common order dated 01-06-2016
e) Mihir Agencies Private Limited v. DCIT in ITA no. 6435-
6441/Mum/2012 vide common order dated 06-01-2016.
12. The learned CIT-DR on the other hand vehemently argued that the assessee has not co-operated with the authorities below. The assessee did not submitted bank statements and other details of these benami concerns and persons who were admittedly managed and controlled by the assessee as benamidar of these benami's. The documents were impounded during survey 21 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 u/s 133A conducted by Revenue on the assessee on 13-12-2007. The statements were recorded by Revenue of the assessee on oath which is on record. It was also brought on record before the Bench that search operations u/s 132(1) were conducted in the case of Orbit Group on 11-02-2010 who are beneficiaries of the accommodation bills issued by the assessee. It is submitted that the authorities below computed income based on material impounded during survey u/s 133A conducted on 13-12-2007 and material seized during searches u/s 132(1) conducted on Orbit Group on 11-02-2010 and post enquiries to the aforesaid search and surveys, as the assessee did not co-operated with the authorities below. It is submitted that income for AY 2006-07 to 2008-09 were computed based on impounded material during the course of survey proceedings u/s 133A on 13-12-2007 against assessee as well search u/s 132(1) conducted on 11-02-2010 against Orbit Group. It is brought to the notice of the Bench that the AO computed income @1% which was enhanced to 2% of the bogus bills by learned CIT(A). It is brought to the notice of the Bench that the AO aggregated both bogus bills issued plus the payments received while applying rate of commission @1% , while learned CIT(A) computed commission income @2% on bogus bills issued. Our attention was drawn by learned CIT-DR to the orders passed by the authorities below, which are placed in file. Our attention was also drawn by learned CIT DR to the orders of the tribunal wherein additions to the tune of 0.15% was upheld while further deduction of expenses to the tune of 50% was also allowed by the tribunal. The said orders find mentioned in preceding para's of this order. It is submitted that for the AY 2009-10 income is computed based on bogus bills to the tune of Rs. 5.93 crores which was found based on search u/s 132(1) on Orbit Group on 11-02-2010. It is submitted that income for AY 2004-05 , 2006-07 and 2010-11 is estimated keeping in view evidence of business conducted by assessee and keeping in view non-coperative attitude of the assessee. It is also submitted that the appeals of the Revenue be allowed and that of the assessee be dismissed. It is 22 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 submitted that Revenue appeals even if tax effect is low cannot be dismissed as the appellate order of learned CIT(A) is an consolidated and common order for AY 2004-05 to 2010-11 wherein tax effect is more than Rs 10 lacs and hence CBDT circular of December 2015 is not applicable.
13. We have considered rival contentions and perused the material on record including cited case laws by the rival parties. We have observed that the assessee is a Chartered Accountant. The assessee had admitted to be engaged in the activities of issuing sale bills(purchase bill for the beneficiary party) to various beneficiaries without supplying goods physically and cheque discounting in lieu of commission income. It is claimed by the assessee that no material is physically supplied by the assessee against the said sale bills( purchase bills for the beneficiaries) issued by the assessee and the purpose of issuing these alleged bogus bills is to provide accommodation entries to the beneficiaries so that they can claim bogus purchase expenditure in their books of accounts and save on income-tax @30% by inflating expenditure thereby reducing income chargeable to tax, while the assessee in the process is benefitted by way of commission income by issuing these sale bills , as cheques received against these sale bills are deposited in bank and after their encashment by bank through clearing , cash is withdrawn by the assessee from the bank account and returned to the said beneficiaries after deducting assessee's share of commission income. Similar , modus operandi is claimed to be adopted for cheque discounting activities carried on by the assessee wherein cheque enchashed in the bank received from beneficiaries is withdrawn in the form of cash which is returned to the beneficiary after deducting assessee's share of commission income. It is claimed by the assessee that these activities are normal business activities just like any other business in which assessee is engaged into. The assessee has also admitted and claimed that large number of web of benami concerns and entities were created the assessee which were held in the names of various 23 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 benami's of the assessee of whom the assessee is benamidar, which concerns, entities and persons were managed and controlled by the assessee as the assessee is benamidar of these entities, concerns and persons and several transaction of issuing sale bills without physical delivery of goods and cheque discounting activities are carried out through these concerns, entities and persons. The details of these benami concerns, entities and/or person found mentioned in the orders of authorities below, which are admittedly controlled and managed by the assessee. Thus, in nut shell these well planned and organized activities conducted by the assessee through a web of large number of benami concerns,entities and persons admittedly created, managed and controlled by the assessee as benamidar , is an organized scheme of activities undertaken by the assessee by series of accommodation transactions carried out through these web of large number of Benami concerns, entities and persons created, managed and controlled by the assessee as Benamidar with an objective to defraud Revenue, launder black money , wreck and destroy socio-economic fabric of the Indian Economy with a view to create an havoc in the Indian Economy by introduction and circulation of menace of black money in the system. These activities so claimed to be the normal business activity by the assessee which is infact laundering of black money is denounced world over and stringent laws are put in place to curb and control this menace across globe. The assessee was surveyed by Revenue u/s 133A of the 1961 Act on 13-12-2007 wherein incriminating documents were found and impounded by Revenue which contained details of the activities of accommodation entries carried on by the assessee. The statements on oath were recorded by Revenue on 13-12-2007 wherein the assessee has admitted to be engaged in issuing bogus bills in lieu of commission income. There was a search action u/s 132(1) of the 1961 Act against Orbit group on 11-02-2010 wherein the Managing Director of the said group flagship concern Orbit Corporation Limited, Mr Pujit Ravikiran Agarwal admitted to have taken bogus accommodation entries from the benami 24 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 concerns controlled and managed by the assessee. The said Managing Director, Mr Pujit Ravikiran Agarwal surrendered Rs. 41.35,05,065/- and offered the same for taxation as an income while recording statement u/s 132(4) for financial year 2006-07 to 2008-09 on 12-02-2010. The assessee was also sought to be assessed by Revenue by invoking provisions of Section 153C of the 1961 Act. The assessee's statements on oath were also recorded on different occasions wherein the assessee admitted on oath to be engaged in providing accommodation entries in lieu of commissions income. It is writ large from the orders of the authorities below that the assessee did not co- operated with the Revenue at all stages of enquiry, investigation, assessments and also at the stage of adjudication by learned CIT(A) wherein no relevant documents and information such as details of transactions , bank accounts etc of these benami concerns , entities and persons were submitted by the assessee to the authorities , and the Revenue was left in lurch to make additions based on material on record collected during survey u/s 133A on 13-12-2007 against assessee and search action u/s 132(1) on 11-02-2010 against Orbit Group . The assessee did not provide details of transactions conducted by all these benami concerns , entities and persons wherein the assessee is their benamidar nor their bank statements and other details were furnished by the assessee before the authorities below. The books of accounts and other details as sought by the authorities below connected with these benami concerns, entities and persons were not furnished by the assessee despite several opportunities granted to the assessee by authorities below. The claim of the assessee is that it is an organized business wherein benefit of all the expenses incurred in connection with the said organized business of providing bogus bills should be allowed as deduction from income as in the case of normal business which are permitted and allowed by provisions of Section 30 to 43D. The assessee did not furnish any details of transactions conducted by these concerns , entities and persons of whom the assessee is benamidar nor bank statements of these concerns, entities and persons were 25 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 furnished. It is simply denied that no books of accounts were maintained by the assessee of all these benami concerns, entities and persons while only note book/diaries entries were maintained wherein on the left side of the note book/diaries is written as to the bill issued while on the right side it is written cheque realized against the said bill issued by the assessee, which note book/diaries stood impounded by Revenue on 13-12-2007 during the course of survey action u/s 133A. The AO worked out commission income @1% based on billing plus receipt as is reflected in the diaries/ note books impounded in survey proceedings u/s 133A as well information collated during search action u/s 132(1) on 11-02-2010 against Orbit Group, while the learned CIT(A) enhanced the same to 2% based on bogus bills issued by the assessee again worked out based on the said incriminating material found in survey u/s 133A against assessee on 13-12-2007 as wells search action u/s 132(1) of the 1961 Act against Orbit Group on 11-02-2010 . The income of the assessee for AY 2004-05 and 2005-06 was assessed by the AO based on estimation of commission income which in turn was based on average income of next three succeeding years while for AY 2009-10 and 2010-11 , the same was based on average income of last three years, in the absence of impounded/seized material with the Revenue during survey on 13-12-2007 u/s 133A and search u/s 132(1) on 12-02-2010 relevant to those years namely AY 2004-05,2005-06,2009-10 and 2010-11. As the assessee though has chosen a path of non co-operation with Revenue ,the assessee is seeking from the tribunal relief on the grounds that the income of the assessee be assessed @0.15% of the realized cheques against these bills issued by the assessee and further relief to the tune of 50% is sought by the assessee to be allowed as expenses incurred for undertaking these activities of providing accommodation entries which claim is based on large number of decisions of the tribunal placed on record before the Bench which are outlined in preceding para's of this order albeit the assessee has not come forward with any evidences on record to seek such relief but an adhoc relief of 50% 26 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 towards deduction towards expenses is sought for. Or in the alternative it is the claim of the assessee that the assessee has through out admitted that his income from commission is 0.30-0.40% of the bills issued which may be assessed based on actual realization against the bills issued and relief of expenditure incurred for earning the said income be allowed. This declaration of commission income @0.30-0.40% of the bills issued by the assessee is a self confessed declaration of income by the assessee which is not supported by any evidence on record and also claim of expenditure to be deducted is again not based on any evidence /material on record. One thing is clear that it is writ large that the assessee has chosen a path of non co-operation with Revenue as no documents/details/ bank statements/ books of accounts etc were submitted by the assessee before the authorities below and thus it is clear that the assessee has not approached the Court with clean hands and it is well settled proposition of law that Courts will not help those who come to the Court with dirty hands. We have gone through all the tribunal orders relied upon by the assessee and we have observed that there are recent judicial developments which we are going to cite herineafter, and in midst of these judicial developments, these tribunal decisions so referred to by the assessee will not be applicable more-so keeping in view factual matrix of the appeals before us. Reference is drawn to a recent decision of Hon'ble Supreme Court in the case of Binoy Viswam v. UOI reported in (2017) 82 taxmann.com 211(SC) , wherein Lordships have held in no uncertain terms that menace of the black money which is deep rooted in the economy need to be tackled by taking multiple actions at the same time, by holding as under :
"99. Unearthing black money or checking money laundering is to be achieved to whatever extent possible. Various measures can be taken in this behalf. If one of the measures is introduction of Aadhaar into the tax regime, it cannot be denounced only because of the reason that the purpose would not be achieved fully. Such kind of menace, which is deep rooted, needs to be tackled by taking multiple actions and those actions may be initiated at the same time.
27 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 It is the combined effect of these actions which may yield results and each individual action considered in isolation may not be sufficient. Therefore, rationality of a particular measure cannot be challenged on the ground that it has no nexus with the objective to be achieved. Of course, there is a definite objective. For this purpose alone, individual measure cannot be ridiculed. We have already taken note of the recommendations of SIT on black money headed by Justice M.B. Shah. We have also reproduced the measures suggested by the committee headed by Chairman, CBDT on 'Measures to tackle black money in India and Abroad'. They have, in no uncertain terms, suggested that one singular proof of identity of a person for entering into finance/business transactions etc may go a long way in curbing this foul practice."
Reference is also drawn to recent decision of Hon'ble Delhi High Court in the case of CIT v. D.K.Garg in ITA no 115 /2005 , wherein Lordships have held that an accommodation entry provider wanting to avail the benefit of the 'peak credit' has to make a clean breast of all the facts within his knowledge concerning the credit entries in the accounts. He has to explain with sufficient detail the source of all the deposits in his accounts as well as the corresponding destination of all payments from the accounts. The assessee should be able to show that money has been transferred through banking channels from the bank account of creditors to the bank account of the assessee, the identity of the creditors and that the money paid from the accounts of the assessee has returned to the bank accounts of the creditors. The assessee has to discharge the primary onus of disclosure in this regard . Their Lordships held as under:
"15. The present case, however, is of a different nature. Here, we are dealing with an Assessee who does not deny that he is an accommodation entry provider. He, in fact, makes no bones of the fact that he either owned or floated 'paper companies' only for that purpose. He also does not dispute the fact that he has not been able to explain the source of all the deposits in his accounts or the ultimate destination of all the outgo from his accounts.
16. The Assessee's plea that he should be taxed only on a composite 'peak credit' is based entirely on principles of accountancy. He questions
28 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 the logic behind allowing peak credits for some of the credit entries by way of cheques and denying it for the other entries in cash. He also questions the practice of working out separate peak credits for cheque and cash transactions.
17. The premise underlying the concept of peak credit is the squaring up of the deposits in the account with the corresponding payments out of the account to the same person. In Bhaiyalal Shyam Bihari v. CIT (supra), the Allahabad High Court explained that benefit of peak can be given only when the assessee owns up all the cash credits in the books of accounts. It was further held:
"For adjudicating upon the plea of peak credit the factual foundation has to be laid by the assessee. He has to own all cash credit entries in the books of account and only thereafter can the question of peak credit be raised."
18. In that case, it was held that as the amount of cash credits stood in the names of different persons which the Assessee had all along been claiming to be genuine deposits, withdrawals/payments to different persons during the previous years, the Assessee was, therefore, not entitled to claim the benefit of peak credit. Later in CIT v. Vijay Agricultural Industries (supra), it was reiterated that: "The principle of peak credit is not applicable in case where the deposits remained unexplained under Section 68 of the Act. It cannot apply in a case of different depositors where there has been no transaction of deposits and repayment between a particular depositor and the assessee." On the facts of that case it was held that peak credit could be applied only in the case of squared up accounts. In other words, where an Assessee was unable to explain the sources of deposits and the corresponding payments then he would not get the benefit of 'peak credit'.
19. The legal position in respect of an accommodation entry provider seeking the benefit of 'peak credit' appears to have been totally overlooked by the ITAT in the present case. Indeed, if the Assessee as a self-confessed accommodation entry provider wanted to avail the benefit of the 'peak credit', he had to make a clean breast of all the facts within his knowledge concerning the credit entries in the accounts. He has to explain with sufficient detail the source of all the deposits in his accounts as well as the corresponding destination of all payments from the accounts. The Assessee should be able to show that money has been transferred through banking channels from the bank account of creditors to the bank account of the Assessee, the identity of the creditors and that the money paid from the accounts of the Assessee has returned to the bank accounts of the creditors. The Assessee has to discharge the primary onus of disclosure in this regard.
29 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013
20. While the AO in the present case did not question the working out of the peak credit by the Assessee, he, at the same time, insisted that the additions made by him to the returned income of the Assessee should be sustained. The peak credit worked out by the Assessee was on the basis that the principle of peak credit would apply, notwithstanding the failure of the Assessee to explain each of the sources of the deposits and the corresponding destination of the payment without squaring them off. That is not permissible in law as explained by the Allahabad High Court in the aforementioned decisions which, this Court concurs with.
Conclusion
21. As already noted, the ITAT went merely on the basis of accountancy, overlooking the settled legal position that peak credit is not applicable where deposits remain unexplained under Section 68 of the Act. The question of law framed by this Court, is accordingly, answered in the negative i.e. in favour of the Revenue and against the Assessee. The impugned order of ITAT is, accordingly, set aside and the order of the AO is restored to file."
Reference is also drawn to the decision of Hon'ble Calcutta High Court in the case of Rajmandir Estates Private Limited v Pr. CIT (2016) 386 ITR 162(Cal. HC), wherein Lordships has discussed the concept of laundering of black money as follows:
"In a commentary on the Prevention of Money Laundering Act, 2002 by Dr. M. C. Mehanathan published by Lexis Nexis, 2014, the steps of money laundering are described as follows:--
"STEPS OF MONEY-LAUNDERING Although money-laundering often involves a complex series of transactions, it generally includes the following three basic steps:
1. Placement It involves introduction of the proceeds of crime into the financial system. This is accomplished by breaking up large amounts of cash into smaller sums that are then deposited directly into a bank account, or by purchasing monetary instruments, transferring the cash overseas for deposit in banking/financial institutions, use for purchase of high value things such as gold, precious stones, art works etc. and reselling the same through cheques or bank transfers etc.
2. Layering 30 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 This involves formation of complex layers of financial transactions which distance the illicit proceeds from their source and disguise the audit trail. In this process a series of conversions or transactions are involved for moving the funds to places such as offshore financial centres operating in a liberal regulatory regime. Often "front" companies are formed to accomplish this task. These companies obscure the real owners of the money through the bank secrecy laws and attorney-client privilege. The techniques used for the purpose are to lend the proceeds back to the owner as loans, gifts and etc., under invoicing the items exported to the real owner or etc. In some cases, the transfers may be disguised as payments for goods or services, thus giving them a legitimate appearance.
3. Integration This involves investment in the legitimate economy so that the money gets the colour of legitimacy. This is achieved by techniques such as lending the money through "front" companies etc. The money may be invested in real estates, business and etc. The stages at which money-laundering could be easily detected are those where cash enters into the domestic financial system, either formally or informally, where it is sent abroad to be integrated into the financial systems of tax haven countries and where it is repatriated in the form of transfers."
The role of the revenue authorities in tackling the menace of laundering black money was commented by the learned author as follows:--
"It has to be kept in view that India has a problem of black economy, which is unacounted and many a time the holders of black money also launder the black money in order to acquire legitimate assets. Legal or illegal income which evades tax and illegal income that comes within the exempted taxation slab constitute the unreported Gross Domestic Product or black economy. Laundering the black money and laundering proceeds of crime are two different issues, although there is frequent overlap between the two. While laundering black money is to be handled through taxation laws or similar laws, the laundering of proceeds of crime is to be handled through special anti-money- laundering laws."
In the instant appeal's before us for the AY 2004-05 to 2010-11, the assessee has consciously and deliberately chosen the path of non co-operation with the authorities below , wherein no information was provided to the Revenue and the Revenue was left to determine and compute the income based on survey conducted on the assessee u/s 133A of the 1961 Act on 13-12-2007 as well 31 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 search u/s 132(1) conducted on Orbit Group on 11-02-2010 . The plea raised before learned CIT(A) of non adherence to principles of natural justice by the AO while framing assessment order , was a false plea as despite being granted opportunities by learned CIT(A) and AO in remand report proceedings, no information/documents were forthcoming from the assessee. Under these factual matrix of the case which we have discussed in preceding para's of this order, we are now deciding all these appeals with following express directions/observation for compliance by the assessee as well authorities below, in exercise of the powers of wide amplitude vested with us under the provisions of the 1961 Act as being custodian of the 1961 Act to enforce implementation of the provisions and mandate of the 1961 Act, as under:
a) The orders of the authorities below for AY 2004-05 to 2010-11 are directed to be set aside and all the issues in these appeals are restored back to the file of the AO for denovo determination of all the issues connected with assessment afresh on merits in accordance with law. We clarify that it is an open remand and the AO is free to compute income chargeable to tax as per provisions of the 1961 Act.
b) The AO is directed to make coordinated enquiries and investigation to mine relevant data from beneficiaries, banks, suppliers, benami's of the assessee, VAT authorities , Income Tax department own data base, banks of beneficiaries and/or other relevant agencies/persons in order to compute income chargeable to income-tax in accordance with relevant provisions of the 1961 Act as applicable to the assessee, including special provisions as are enshrined in Section 68 to 69D of the 1961 Act. In the midst of technological advancements , we donot foresee difficulties in getting these datas/information mined from the independent sources.
32 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013
c) The assessee is directed to co-operate with the authorities below in de-novo proceedings before the AO to enable AO to compute income as per provisions and mandate of the 1961 Act. The assessee has admitted to be engaged in activities of providing accommodation entries and admitted to be benamidar of several benami concerns, entities and persons controlled and managed by assessee , in whose name benami transactions of providing accommodation entries were carried on by the assessee. The assessee is also directed to file affidavits before AO enumerating complete details of Benami concerns, entities and persons of whom the assessee is benamidar along with complete details of transactions entered into by these benami entities/persons/concerns, their VAT/PAN details, bank details / statements, details such as name, address , PAN etc of Benami's etc.. The assessee is directed to produce all relevant books of accounts and other material connected with the said Benami concerns, entities and persons before the AO for enabling AO to frame assessment and compute income as per provisions of the 1961 Act. In case of non-compliance of our directions, the learned CIT incharge is directed to take appropriate actions in accordance with law against assessee which follows as consequence from non compliance of tribunal orders.
d) The assessee is directed to produce all books of accounts and other details/information concerning these benami concerns and persons through whom the assessee has admitted to have entered into benami transactions of which the assessee is benamidar including explaining sources of making investments in these concerns as own capital for doing these activities which the AO shall examine on 33 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 merits and thereafter bring to tax the same if sources of investments in these concerns by the assessee are not properly/satisfactorily explained .
e) The claim of the assessee to have earned commission income of 0.30-0.40% is a self confessed claim and we do not find any material/evidence on record which could have substantiated this claim of the assessee. The onus and burden of proof is on the assessee to substantiate such claim.
f) The assessee is directed to produce evidences to substantiate receipts which found credited in these benami bank accounts and/or its books of accounts, to establish identity and creditworthiness of the person from whom receipt originated and the genuineness of the transactions, as mandated by provisions of the 1961 Act. The assessee is also directed to co-relate and evidence the payments made out of these receipts in order to get benefit of set-off, as is available in accordance with law.
g) In view of the admitted position by the assessee of indulging in accommodation entry activities involving laundering of black money and benami transactions, the concerned CIT incharge is directed to follow directions of Hon'ble Apex Court in the case of Binoy Viswam(supra) as are reproduced above as it is binding on all authorities in the territory of India. It is well settled that admission is best evidence against maker unless it is vitiated by coercion, undue influence, fraud, misrepresentation , mistake etc. The assessee has admitted to be engaged in issuing bogus accommodation bills and laundering money through returning of cash after withdrawal from banks to the issuer of cheque which is 34 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 stated to be receipted against bogus bills. The reference is drawn to Section 17 and 18 of the Indian Evidence Act,1872 and to decision of Hon'ble Supreme Court in the case of ITO v. Mangat Ram Norata Ram (2011) 336 ITR 624(SC), wherein Lordships held as under:
"Itis trite that admission is best evidence against the maker and it can be inferred from the conduct of the party. Admission implied by conduct is strong evidence against the maker but he is at liberty to prove that such admission was mistaken or untrue."
h) The allowability of VAT dues payable to VAT authorities and other taxes etc are to be allowed as deductions keeping in view provisions of Section 43B of the 1961 Act. The assessee has to bring on record evidences that Section 43B is complied with for which onus and burden of proof is on the assessee.
With above express directions for compliance by the assessee and Revenue, we are setting aside and restoring all the issues arising out of these appeals back to the file of the AO for de-novo determination of all issues on merits in accordance with law to compute income as per provisions and mandate of the 1961 Act. We would like to clarify that it is an open remand and the AO is free to frame de-novo assessment in accordance with law to compute income as per provisions and mandate of the 1961 Act, unhindered by the limitation of additions made in the first round. We have given our above express directions, keeping in view that the tribunal is custodian of the 1961 Act and is the last fact finding authority vested with powers of wide amplitude to enforce implementation of the provisions of the 1961 Act. The AO shall allow assessee to file all necessary and relevant evidences / explanation in support of its contentions in its defense, which shall be admitted by the AO in the interest of justice and decided on merits in accordance with law. Needless to say that proper and adequate opportunity of being heard shall be provided to 35 ITA 4913-4916/Mum/2013, 4924-4926/Mum/2013, 4712-4716/Mum/2013, 4719-4720/Mum/2013 the assessee by the AO in accordance with principles of natural justice in accordance with law , in the set aside de-novo proceedings before the AO. We order accordingly.
14. In the result, appeal of the Assessee and Revenue for assessment years 2004-05 to 2010-11 are all allowed for statistical purpose.
Order pronounced in the open court on 23RD August, 2017. आदे श क घोषणा खल ु े #यायालय म% &दनांकः 23-08-2017 को क गई ।
Sd/- sd/-
(SAKTIJIT DEY) (RAMIT KOCHAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
मंब
ु ई Mumbai; &दनांक Dated
[
आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु9त(अपील) / The CIT(A)- concerned, Mumbai
4. आयकर आयु9त / CIT- Concerned, Mumbai
5. <वभागीय >त>न?ध, आयकर अपील य अ?धकरण, मुंबई / DR, ITAT, Mumbai "C" Bench
6. गाडC फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या<पत >त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai