Income Tax Appellate Tribunal - Delhi
Acit, Cc 4, vs Anil Singh Verma, on 28 March, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'A', NEW DELHI
BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER
AND
SH. O.P. KANT, ACCOUNTANT MEMBER
IT(SS)A No.237/Del/2006
Block Period: 01.04.1995 to 07.03.2002
Sh. Anil Singh Verma, Vs. DCIT,
5/2860, Chuna Mandi, Pahar Central Circle-4, New Delhi
Ganj, New Delhi
PAN : AADPY4501C
(Appellant) (Respondent)
And
IT(SS)A No.19/Del/2007
Block Period: 01.04.1995 to 07.03.2002
ACIT, Vs. Sh. Anil Singh Verma,
Central Circle-4, New Delhi 5/2860, Chuna Mandi,
Pahar Ganj, New Delhi
PAN : AADPY4501C
(Appellant) (Respondent)
Assessee by Sh. S.K. Tandon, CA
Department by Smt. Aparna Karan, CIT(DR)
Date of hearing 01.02.2018
Date of pronouncement 28.03.2018
ORDER
PER O.P. KANT, A.M.:
These cross appeals by the assessee and the Revenue are directed against order dated 29/09/2006 passed by the Ld. Commissioner of Income-tax (Appeals)-XIX, New Delhi for the block period from 01/04/1995 to 07/03/2002. The appeal of the assessee having IT(SS)A No. 237/Del/2006 was heard and 2 decided by the Tribunal on 31/03/2008, however, on the Miscellaneous Application filed by both the parties, the said order was recalled by the Tribunal vide order dated 22/06/2012. As both appeals have been emanated from the same impugned order, these were heard together and disposed of by way of this consolidated order.
2. The grounds of appeal raised by the Revenue are reproduced as under:
"On the facts in law and in the circumstances of the case, the Ld. CIT(A) has erred in:
1. Reducing the addition on account of undisclosed income from commission from Rs.78,85,570/- to Rs.25,56,175/-.
2. Deleting the addition of Rs.1,50,000/- made by the A.O. on account of undisclosed income being unexplained cash found from the residence of the assessee during the course of search."
2.1 Similarly, the grounds of appeal raised by the assessee are reproduced as under:
1. The addition sustained is bad in law and against the facts of the case.
2. The Ld. CIT(A) has erred to sustain addition of imaginary income of Rs.25,56,175/- as income of the appellant based on notional, unsubstantiated facts and imaginations, therefore, the addition be deleted.
3. The CIT(A) has not judicially applied the provisions of Chapter XIV-B of the Income Tax Act, 1961 and rules and procedures to sustain such addition of Rs.25,56,175/- therefore, the addition be deleted.
4. The CIT(A) has erred to sustain addition of Rs.468850/-
being 1% of net cash deposit.
5. The CIT(A) has erred to consider the amount of Rs.245000/-
as income which was already included in the amount of Rs.2556175/- as well returned in original return filed u/s
139. 3
6. The CIT(A) has erred to sustain addition without considering the statements of the appellant recorded in toto.
7. Without prejudice, no addition can be sustained on funds involved for a period before Oct./Nov., 2000.
8. The CIT(A) erred to taken cognizance of facts and evidences put forth by the appellant which was fatal to the assessment, therefore, addition be deleted.
9. The statement recorded of other persons and not confronted to the assessee and used adversely is in admissible evidence.
10. The addition was against the principle of natural justice.
The above grounds of appeal are without prejudice to each other. The appellant craves leave to add, amend, forego or delete any of the grounds at the time of hearing."
3. Briefly stated facts of the case are that the assessee is a Chartered Accountant and during the period under consideration, he was proprietor of a firm, namely, M/s Anil Raghuvanshi and Associate. He was also partner in M/s. G. C. Sharda and Co. and director in various other companies.
3.1 A search u/s 132 the Income Tax Act, 1961 (in short 'the Act') was conducted on 07/03/2002 at the premises of the assessee. During the course of search, a document, which is inventorised as page No. 10 of Annexure A-1, was seized from the premises of the assessee, which showed working of commission income ranging from 2% to 3.5%. The extract of said working is reproduced as under for ready reference:
Mr. A S Verma, Pusa Road, Ciift (Noida) 3.0 lac @ 2.5% 7,500 Gift (Bhatia Ji) 2 lac @ 2.5% 5,000 Cash Entry 3.00 (Sharda Ji) @2% 6,000 Matrix Audit Fees 2 year @ 5000 each yr. 1,000 Matrix Income Tax Order 3(3) 1,500 Rachit Income Tax Order 3(3) 2,500 ROC Paper Anisul Hasan 1,000 4 Jaju Paper Change 2,000 Gift Sharda Ji 1.01 lac @ 2.5% 2,500 Shri Jagannath PAN CARD 400 Mr. A S Verma Gift 1 lac @2.5% 2,500 Gift 5+5+1 Bhatra Ji @ 3.5% (P.O Charge 550) 74.000 1,05,950 For - G S PANDEY & ASSOCIATES"
3.2 In the course of search action, statement of the assessee was recorded by the Authorized Officer under section 132(4) of the Act. During the statement, the assessee was informed about allegation against him of providing accommodation entries to certain beneficiaries by way of depositing cash in certain bank accounts and then routing it through a chain of intermediary bank accounts, ultimately to reach the final beneficiaries. The assessee was shown certain bank accounts maintained with Nai Sarak branch of Oriental bank of Commerce, along with the names of persons, who operated the account as well as name of the introducers of those bank accounts. These bank accounts were alleged to have been used in the accommodation entry operation business of the assessee. Details of these bank accounts i.e. the account number in the name in which these accounts were held etc., have been mentioned by the Assessing Officer at page 2 of the assessment order, which is reproduced as under for ready reference:
S. Account Name & Address of Name of Introducer
No. No. Account Holder Operator
1. 71, OBC, M/s. PAS Food Products M.K. Jha, CA-3106
Nai Pvt. Ltd., 5/2860, Director Sh. R.B.
Sarak, Chuna Mandi, Maheshwari
Delhi Paharganj. Operator Sh. Priset (India)
M.K. Jha, 5/303, Pusa Pvt. Ltd.,
5
Road, K. Bagh Delhi. 5/2860,
Director :Sh. S.P. Chuna
Sharma, R-91, Sector - Mandi,
IX, Noida Paharganj.
2. 88,OBC, Kadambini Hire S.C. CA-Priset
Nai Sarak Purchase Ltd., 5, Pusa Agnihotri, (India) Pvt.
Road, New Delhi. Director Ltd., F/2860,
Director: Sh. S.C. Chuna
Agnihotri, C-1478A, Mandi,
Kanchanjungs Paharganj.
Apartments, Sector-53,
Noida, R.P. Kaushik,
128, Akash Darshan,
Mayur Vihar, New Delhi.
R.P, Maheshwari, B-
1/539, Janakpuri, New
Delhi
3. 104,OBC M/s. Chandra Rakesh CA-31076,
Nai Sarak Advertising Pvt. Ltd., Chandra Priset (India)
302, Crown Plaza, Singh, Pvt. Ltd.,
25/14, East Patel Director 5/2860,
Nagar, New Delhi Chuna
Mandi,
Paharganj.
4 113,OBC, M/s. Sumangal R.P. A/c -071,
Nai Sarak Commercials Ltd., Kaushik PAS Food
5/2860, Chuna Mandi, Products, (P)
Paharganj, New Delhi Ltd., 5/2860,
Chuna
Mandi,
Paharganj.
5. 135, M/s Shree Jagannath B.K. Prasad CA-113,
OBC, Nai Securities (P) Ltd., and N.S. Sumangal
Sarak 5/2860, Chuna Mandi, Chauhan Commercials
Paharganj Directors Ltd.
6. 138,OBC, M/s. Antriksh Land Sajjan CA-113, M/s.
Nai Sarak Promoters(P) Ltd., 210, Singh Sumangal
Ajesh Chambers, 16/3, Commercials
Karol Bagh, New Delhi Ltd.
7. 139, M/s. Sarin Sons Sales R.P. CA-71, PAS
OBC, Nai Ltd., 310, Ajesh Kaushik Foods
Sarak Chambers, 16/3, Karol U.C. Gupta Products Pvt.
Bagh Ltd.
8. 142 Hans Lactoes Ltd., M.K. Jha 113,
1649, Main Bazar, Sumangal
Pahar Ganj, New Delhi Commercials
Ltd.
6
9. 221 M/s. Jaswant Foods (P) Anil Singh CA-113, R.P.
Ltd., 11/5 B, Flat No. Verma Kaushik
713, Pusa Road, N.
Delhi
10. 229 Samta Land Builders Sinesh 071, PAS
Pvt. Ltd., 5/34, Pusa Chand Foods Pvt.
Road, New Delhi Agnihotri Ltd.
11. 518 M/s. Lal Constructions Sajjan C.C. 14,
(P) Ltd., 302, Crown Singh, Jaswant
Plaza, 25/14, Eas Patel Director International
Nagar, New Delhi (P) Ltd.
3.3 The assessee was asked to confirm, whether these accounts
had been used for the purpose of entry business. In response, the assessee stated that he had used those bank accounts of the companies through the operators and introducers mentioned against them for the purpose of depositing cash and giving cheque entries to the ultimate beneficiaries and in the process, he had earned a commission of around 1% on an average over the amount of entries given to the beneficiaries. The assessee also stated that he used to receive the commission after completion of paperwork and after handing over the cheque to the beneficiaries. The paperwork included filing of share application forms for share application money, covering letter indicating the amount of loans and advances and rate of interest in case of advances and unsecured loans, photo copies of Income-tax Returns etc. The assessee specifically mentioned that he had not given any entry for capital gains.
3.4 In view of search proceedings, notice under section 158BC of the Act was issued on 07/04/2003 and in response to that notice, the assessee filed return of income on 20/06/2003 for the block period from 1/4/1995 to 07/03/2002, declaring nil 7 undisclosed income. The assessment proceedings were commenced by way of issue of notice under section 143(2) and 142(1) of the Act.
3.5 During the course of assessment proceedings, the attention of the assessee was drawn to the reply given in response to question No. 12 as mentioned above and the working of commission made at page 10 of Annexure A-1 of seized document and the assessee was asked to explain as why the net commission from the entry business should not be estimated at 1.5% of the total transactions carried through the said bank accounts, consisting of cash deposits, clearing deposits and transfer deposits having amounts as the details given below:
1. Cash deposits Rs.18,78,91,000
2. Clearing deposits Rs.20,20,30,000
3. Transfer deposits Rs.23,02,90,000 Total Rs.62,02,11,000 3.6 In response to the show cause issued by the Assessing Officer, the assessee vide letter dated 19/03/2004 replied as in under:
"1. That at the time of search, the undersigned was suffering from mental strain due to the brain haemorage of my uncle. I cannot sleep during the whole night of 06.03.2002 being in the hospital. When I came back from the hospital, I was shown certain entries written on a paper brought by the officers to whom I admitted as some of the entries were in my knowledge. I never knew that such huge transactions were done in the last 5-6 years. The fact that I came into contact with these companies only in Oct./Nov. 2000 was also brought in the notice of the officials of the department 8 which was duly recorded in my statement dated 23.4.2002 (See Answer to 0-3) 2 ...............................................................
3. That it was also explained earlier that the companies in question were being operated by Sh. R.P. Kaushik, an advocate and resident of 128. Akash Darshan, Mayur Vihar, Phase-1, Delhi in Nov. 2000, when all of sudden, he lost his mental state of mind and disappeared, the employees approached me to settle the pending entries. I helped them in documentation and settlement of accounts and charged nominal charges from the parties depending upon the amount of transactions.
4 ..............................................................
5. That one paper seized is showing working by Sh. G.S. Pandey, Chartered Accountants. This paper was sent to me by Sh. G.S. Pandey to settle a dispute between two friends known to me and their names are already mentioned therein. I understand that you will appreciate the gesture by one friend to settle the dispute to avoid my misunderstanding.'"
3.7 The Assessing Officer then asked the assessee to produce Sh. R P Kaushik and Sh. GS Pandey to substantiate the claim made in the submissions, however, the assessee failed to produce either Sh. RP Kaushik or any other documentary evidence to substantiate the claim made in letter dated 19/03/2004. The Assessing Officer recorded statement of Sri G.S. Pandey, wherein he replied that the seized document being page No. 10 of Annexure A-1, was a proposed bill given to the assessee in respect of certain services given to him. The Assessing Officer also recorded statements of Sh. Sharda and Sh. Praveen Bhatia, whose names appeared in the seized documents. It was claimed 9 by the assessee that the above seized document was sent to him by Sri G.S. Pandey to settle a dispute between those 2 friends known to him, however, the Assessing Officer did not find any dispute pending between those persons as claimed by the assessee. The Assessing Officer therefore rejected the claim of the assessee made in his letter dated 19/03/2004.
3.8 According to the Assessing Officer, in the statement recorded under section 132 (4) on oath at the time of search on 07/03/2002 , the assessee in response to question No. 12 had clearly accepted that he had been providing entry to certain beneficiaries by way of depositing cash in certain bank accounts and then routing it through a series of intermediary bank accounts and finally to the accounts of such beneficiaries. The Assessing Officer further observed that in reply to question No. 17, the assessee gave even names of few beneficiaries, who had taken entries in their books of accounts. The Assessing Officer also noted that the assessee had not retracted from the statement given earlier. According to him, the seized paper being page No. 10 of Annexure A-1, supported the stand of the Revenue that the assessee was charging commission for various services. Accordingly, the Assessing Officer rejected the explanation given by the assessee and estimated the net commission after excluding expenses, at the rate of 1.5% of the total transactions. While computing, the total transactions carried out by the assessee, the Assessing Officer excluded the interbank transfer deposits out of the transfer deposits. He computed the commission at the rate of 1.5% of the total deposits in 14 bank accounts i.e. cash deposits of Rs.18,78,91,000/-, clearing deposits of Rs.20,20,30,000/-and 10 transfer deposit of Rs.13,28,62,000/-, which came to Rs.78,41,745/-, and assessed the same as undisclosed income for the block period.
3.9 During the course of search, jewellery worth Rs. 3.07 lakhs and cash of Rs. 1.69 lakh had also been found. The jewellery found was treated by the Assessing Officer as explained however , out of the cash found of Rs. 1.69 lakhs, the Assessing Officer treated the cash of Rs. 1.50 lacks as an explained and accordingly added to the undisclosed income of the assessee. 3.10 The assessee preferred appeal against the order of the Assessing Officer and contended that it was engaged in providing consultancy in the capacity of chartered accountant and there is no direct relation to the so-called entry providing business. 3.11 The assessee reiterated before the ld. CIT(A) that he had already stated in a statement dated 07/03/2002 on page No. 8 that Mr.R.P. Kaushik was the person responsible and he came into contact with the assessee when he lost his mental balance and he is missing for last one and half year. The assessee further submitted that in statement dated 23/04/2002, he stated that he started giving consultancy to the employees of Mr. R.P. Kaushik for the work that was pending on the part of Mr R.P. Kaushik in around Nov. 2000, only on humanitarian grounds on decided fees. The assessee also referred to the assessment order in the case of Sri N. S. Chauhan, in which the AO admitted that he had been appointed director by Sh. R.P. Kaushik and name of the assessee was never mentioned, which showed that Mr. R.P. Kaushik was the key person.
113.12 The assessee also challenged both the amount of deposits in banks as well as the commendation entry fee of 1.5% adopted by the Assessing Officer. The assessee contended that the person/ companies which are under separate assessment, need to be excluded. The assessee prepared a reconsideration statement of the transaction in the bank accounts after obtaining the copy of bank accounts from the Assessing Officer.
3.13 The submission of the assessee before the Ld. CIT(A) reconciling the quantum of bank deposits are summarized as under:
i. The gross amount of total transfer deposits are Rs.24,29,05,000/-as against the amount of Rs.23,02,90,000/-worked out by the Assessing Officer. ii. Amount of transfer deposits excluding the companies which were being separately assessed comes to Rs.16,37,47,000/- iii. After excluding interbank transfer deposits, the amount of non-inter-account transfer deposits comes to Rs.2,00,73,000/-only instead of Rs.13,28,62,000/- worked out by the Assessing Officer.
iv. After excluding the companies, which were under separate assessment, the total cash deposit was worked out to Rs.17,33,07,000/-
v. The cash deposits to the extent of cash withdrawal should be excluded as the same have been rooted through the inter-account as cash of inter-account transfer deposits. Total cash withdrawals of Rs.12,64,22,000/-was worked out in respect of companies other than under separate assessment.12
vi. No reconciliation statement was prepared in respect of clearing deposits, as the assessee pointed out that cheques worth Rs.1,33,70,427/- had been returned and, thus, the balance clearing deposits was only Rs.18,86,59,573/- vii. Total deposits computed by the assessee in the manner aforesaid in the reconciliation Statement was worked out to Rs.38,20,79,573/-.
3.14 The submissions of the assessee were forwarded by the Ld. CIT(A) to the Assessing Officer for his comment. The Assessing Officer in remand report submitted that no additional evidence have been filed by the assessee. The Assessing Officer did not give any adverse comment on the reconciliation prepared by the assessee and only stated that the matter may be decided on merit.
3.15 The Ld. CIT(A) after considering entire material on record and explanation of the assessee, rejected the plea of the assessee that he had nothing to do with 14 bank accounts due to the reason that one of the bank account was in the name of the assessee's own proprietary concern. The Ld. CIT(A) also observed that the assessee in his statement at the time of search stated that he was providing entries and this statement had not been retracted till date. Therefore, he concluded that the assessee was in the business of providing accommodation entries. The Ld. CIT(A) rejected the claim of the assessee that quantum of commission should be decided only on the basis of cash deposits in various bank accounts, due to failure on the part of the assessee in explaining clearing deposits. As regard 13 transfer entries in various bank accounts, he accepted the inter-
bank transfers deposits already excluded by the Assessing Officers himself. Accordingly, he held that quantum of total entries provided by the assessee would be worked out on the basis of cash deposits, transfer deposits (non-interbank) and clearing deposits subject to reconciliation of these deposits and reduction on account of cash withdrawals.
3.16 The Ld. CIT(A) accepted the reconciliation statement of deposits submitted by the assessee and excluded the deposits appearing in bank accounts of following four entities:
1. M/s Sumangal Commercial Limited
2. M/s Shanti Pesticide Private Limited
3. M/s Jaswant Food Private Limited
4. M/s Anil Raghuvanshi and associate 3.17 He also accepted the contention of the assessee that cash withdrawal of Rs.12,64,22,000/- from bank accounts should be excluded. In this manner, he computed total deposits of Rs.25,56,17,573/-. He also accepted the average commission fee of 1% earned as fee for providing accommodation entry and computed the undisclosed income to Rs.25,56,175/-. 3.18 The finding of the Ld. CIT(A) determining quantum of the undisclosed income is reproduced as under:
"8.6 Having gone through the modus operandi of the provision of accommodation entries, it is obvious that the beneficiaries give cash to obtain the accommodation entries and the 'entry' provider either gets the transfer or clearing deposits in a particular bank account, from which the entry needs to be provided. These transfers are either from the other accounts of the entry provider or from dummy persons so that the entry does not appear to be provided out of the cash deposits 14 in the same bank account. In lieu of the clearing and transfer deposits, withdrawal of cash has to be made from bank to ultimately nullify the effect of cash deposit transaction in a particular bank account. Keeping in view this modus operandi of providing accommodation entries,I am of the view that to the extent cash has been withdrawn; the same cannot be the money of the beneficiaries but would only represent the internal adjustment of various accounts. Accordingly, there is strong force in the submission of the appellant that the quantum of cash withdrawals is to be excluded for arriving at the total quantum of entries provided by the appellant.
8.7 The appellant has made a claim that the correct quantum should be decided only on the basis of cash deposits in various bank accounts. However, I am not convinced by this claim on behalf of the appellant, since the appellant could not substantiate and explain the clearing deposits in the 14 bank accounts in the name of various concerns. In this view of the matter, the quantum of clearing deposits cannot be ignored for arriving at the quantum of entries provided by the appellant. As regards the Transfer Entries in various bank accounts, the inter-bank transfers have to be excluded, as has been done by the AO himself. It is accordingly held that the quantum of total entries provided by the appellant would be worked out on the basis of the cash deposits, transfer deposits (non inter-bank) and clearing deposits, subject to the reconciliation of these deposits and the reduction on account of cash withdrawals.
8.8 As regards the cash deposits in various bank accounts, the total quantum as per the order of the AO is Rs 18.78,91,000/-. However, as per the reconciliation statement submitted by the appellant the correct amount is a higher figure of Rs. 19,32,91,000/-. Out of the 14 bank accounts, there are 4 concerns in the names of M/s Sumangal Commercial Ltd., M/s Shanti Pesticide Pvt. Ltd., M/s Jaswant Food Pvt. Ltd. and M/s Anil Raghuwanshi & Associate, which have separately been assessed under the block assessment provisions of the Act. I find merit in the claim of the appellant that the cash deposits in these 4 15 accounts should not be considered for arriving at the quantum of entries provided by the appellant. After excluding the cash deposits in the above 4 accounts, the balance cash deposits work out to Rs.17,33,07,000/-. This amount shall be considered for the purposes of computing the commission income earned by the appellant.
8.9 Coming to the transfer deposits, I find that the AO has adopted the gross figure of Rs 23,02,90,000/-. However, the correct figure as per the reconciliation statement submitted by the appellant is Rs 24,29,05,000/-. As discussed above, the transfer deposits of Rs 5,90,85,000/- in respect of the 4 concerns whose assessments have been separately completed are being excluded from the total quantum. The AO has not correctly deducted the quantum of inter-bank transfer deposits, which as per the reconciliation statement submitted by the appellant is at Rs 16,37,47,000/-. Accordingly, the net amount of transfer deposits would work out to only Rs 2,00,73,000/-, which is considered for the determination of the commission income earned by the appellant.
8.10 As regards the clearing deposits, the AO has adopted a figure of Rs 20,20,30,000/-. However, I find merit in the claim of the appellant as per the reconciliation statement that cheques amounting to Rs 1,33,70,427/- were returned; the balance amount accordingly works out to Rs 18,86,59,573/- which will be considered for working out the commission earned by the appellant.
8.11 To sum up, the total quantum of deposits would be as under:
Cash deposits as discussed above Rs. 17,33,07,000/- Transfer deposits as discussed above Rs. 2,00,73,000/-
Clearing deposits Rs. 18,86,59,573/-
Total Rs.38,20,39,573/-
Less: cash withdrawals as discussed above (-) Rs 12,64,22,000/-
Balance Rs 25,56,17,573/-
8.12 Accordingly, it is held that the total quantum of deposits which are to be considered for computing the commission 16 income earned by the appellant is Rs 25,56,17,573/-. The AO has adopted the commission percentage of 1.5% on. the quantum of deposits. However, I find course of search that he earned commission only @ 1%. As regards the reference by the AO to page no. 10 of annexure A-1, the appellant has explained that this bill concerned Shri G.S. Pandey, Shri Sharda and Shri Bhatia and that the appellant was stranger to this bill. On perusal of the said document, I find force in the contention of the appellant that this document appears to be in the nature of proposed disputed bill, not concerning the appellant. Based on the above facts, it is held that the commission earned by the appellant should be worked out by applying the net percentage of 1%. Accordingly, the income of the appellant @ 1% on the total deposits of Rs 25,56,17,573/- would work out to Rs 25,56,175/-. The undisclosed income on this account is accordingly held at Rs 25,56,17,5^-4/- in place of the income of Rs 78,41,745/- computed by the AO. The appellant has, however, submitted before me that the income to the extent of Rs 2,45,000/- has already been reported in the returns of income, which is claimed to be excludible. The AO is directed to verify this contention of the appellant and allow appropriate relief on this account as per law. This ground of appeal is accordingly treated to be partly allowed.
3.19 The Ld. CIT(A) also deleted the addition of unexplained cash of Rs.1,50,000/-holding that cash had been collected from family members for paying bills of Sh. Mahendra Singh, uncle of the assessee, who was being treated for brain haemorrhage at Kailash hospital Noida.
3.20 Aggrieved with the above finding of the Ld. CIT(A), both the Revenue and the assessee are in appeal before the Tribunal raising the grounds as reproduced above.
4. The ground No. 1 of the appeal of Revenue and all the ground of the appeal of the assessee, relate to undisclosed 17 income determined on the basis of deposits reflected in bank accounts.
4.1 The Ld. Counsel of the assessee filed a paper book containing pages 1 to 94 and submitted that allegation on the assessee are that he was involved in accommodation entry business, which the assessee has denied throughout during the course of search on two dates i.e. 07/03/2002 and 23/04/2002. According to the Ld. counsel, the Income Tax Department could not unearth a single piece of paper, document, diary, books of accounts or any other electronic media records relating to cash deposits in 14 bank accounts or any paper related to those companies from the premises of the assessee. The Ld. counsel further submitted that addition has been made simply on the guesswork basis that amount of credit side of bank accounts might have been issued as accommodation entry. According to the Ld. counsel, both the Assessing Officer and the Ld. CIT(A) did not bother to collate the figures of amount of cheques issued to beneficiary by way of debit to bank account as it was not a case of section 68 but addition of undisclosed income as commission received. He also submitted that the assessment order did not have any figure of amount given to beneficiaries and their names. The Ld. counsel submitted that the assessing authority is not conferred with powers to make estimation of income de- hors the material in possession.
4.1.1 The Ld. Counsel referred to reply of the assessee in response to question No. 12 of the statement recorded under section 132(4) of the act on 07/03/2002, wherein the assessee admitted to have used the bank accounts shown to him for the 18 purpose of giving accommodation entries to various beneficiaries and receipt of commission for completion of paperwork and handing over cheques to the beneficiaries. The Ld. Counsel submitted that such a statement on a stand-alone basis without reference to any material discovered during search and seizure operations would not empower the Assessing Officer to make the block assessment merely because any admission was made by the assessee during search operation. In support of the proposition, the Ld. Counsel relied on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Harjeev Agrawal reported in 241 taxmen 0199(Delhi) and order of the Tribunal in the case of Best Infrastructure (India) Private Limited in ITA No. 1698 to 1701/Del/2014 and 1753/Del/2014 for assessment year 2005- 06 to 2009-10 respectively.
4.1.2 The Ld. Counsel further referred to page 44 of the paper book and submitted that the page 10 of Annexure A-1 seized from the premises of the assessee has been relied upon by the Assessing Officer for computing the rate of commission for providing accommodation entries. According to the Ld. Counsel, this paper is a proforma invoice/proposed bill, which was sent to the assessee by Sh. GS Pandey, CA to settle a dispute between two friends, namely, Mr. GC Sharda and Mr. Praveen Bhatia. The Ld. Counsel further submitted that these two persons and Sh. GS Pandey stated before the Assessing Officer that it was simply a proposal and it was not settled and no transaction was completed. According to the Ld. Counsel, it was as a measure of gesture by one friend to settle the dispute to avoid any misunderstanding between friends. Thus, the Ld. counsel 19 submitted percentage rates recorded in the said paper cannot be relied for deciding that the assessee was engaged in providing accommodation entries.
4.1.3 The Ld. Counsel further submitted that at the time of search, the assessee was suffering from mental strain due to brain haemorrhage of his uncle and he was shown certain entries written on a paper brought by the officers of the Income- Tax Department, to which he admitted as some of the entries were in his knowledge and he never knew that such huge transactions were done in last 5 to 6 years. According to the Ld. counsel the statement dated 07/03/2002 was not voluntary and retracted subsequently in a statement dated 07/03/2002 and by way of affidavit and letter dated 19/03/2004 as reproduced by the Assessing Officer in the assessment order. The Ld. counsel in support of the proposition that no addition could have been made on the basis of self-incriminating statement in absence of any corroborative material, relied on the decision of the Hon'ble Gujarat High Court in the case of Kailash Manharlal Chokshi Vs. CIT 238 IT 411(Guj).
4.1.4 The Ld. counsel further submitted that the assessee came into contact with these companies only in the month of October/November, 2000 and this fact was also stated by the assessee in a statement recorded on 23/04/2002 under section 132(4) of the Act. The Ld. counsel submitted that companies in question were being operated by Sri R P Kaushik, an Advocate, he lost his mental state of mind and disappeared and his employees approached the assessee to settle the pending entries and the assessee helped them in documentation and settlement 20 of accounts against nominal charges from the parties depending upon the amount of transaction. Thus, according to the Ld. Counsel, the assessee was connected with these companies only for last one and half year.
4.1.5 The Ld. counsel further submitted that assessee was associated with only two entities out of the fourteen entities mentioned by the Assessing Officer to have been utilized in the business of providing accommodation entries. According to him the one entity i.e. M/s Anil Raghuvanshi and associate , is a proprietary firm of the assessee and the second entity is M/s Jaswant foods (P) Ltd (earlier name Jaswant International Private Limited) , in which the assessee is director. The Ld. counsel submitted that other than these two entities, the assessee was not associated with the remaining entities in any manner either as Director or shareholder or authorized signatory or introducer of the bank account etc. the Ld. counsel also submitted that those companies are assessed separately and the Assessing Officer has not carried out any investigation from the companies named in the assessment order or summoned at any stage. The Ld. counsel submitted that in absence of any connection of the assessee with these companies or any record/document seized/recovered from the premises of the assessee, the assessee cannot be held responsible for providing accommodation entries through these companies.
4.1.6 The Ld. Counsel also referred to the order of the Tribunal in the case of M/s Elite promoters Private Limited in IT(SS)A No. 128/Del/2007 for the block period from 01/04/1995 to 22/08/2001 and submitted that the Tribunal has deleted the 21 addition made in the hands of M/s Elite Promoter Private Limited for receipt of alleged accommodation entry from entities of Sri A.S. Verma (i.e. the assessee). According to the Ld. Counsel, the assessee i.e. Sh. A.S. Verma appeared before the Assessing Officer in the case of M/s Elite promoters Private Limited and filed an affidavit wherein he denied of having received any cash from the parties against the accommodation entry allegedly given by him through his concerns by cheques. The Ld. counsel further said that the Tribunal in the above decision held that there was no evidence found during the course of such to show that any cash was paid by M/s Elight promoters Private Limited of equivalent amounts against the cheques received from A.S. Verma group concerns. Accordingly, the Ld. counsel submitted that no addition could have been made in hands of the assessee of commission for providing accommodation entries.
4.2 The Ld. CIT(DR), on the other hand, submitted that the statement given by the assessee under section 132(4) of the Act on 07/03/2002 is voluntarily statement without any pressure or any coercion. She filed before us a copy of Panchnama of search proceedings dated 07/03/2002 along with the annexures and copy of statement of the assessee dated 07/03/2002 recorded under section 132(4) of the Act. She submitted that the assessee himself has recorded the statement in his handwriting and this fact alone substantiate that the statement was voluntarily without any pressure or coercion. According to her, the assessee is a Chartered Accountant and not an illiterate person, who may not be aware sometime of the meaning of sentence written. She 22 also referred to various pages of the statement and submitted that statement was recorded in presence of two witnesses, which were known to the assessee and brought by him from his neighbourhood. The assessee has not produced those witnesses for cross-examination by the Assessing Officer in support of its claim that a statement recorded was under mental pressure, and thus existence of any pressure or coercion on the assessee has not been established and was ruled out. She further submitted that in a statement recorded under section 132(4) of the Act on 23/04/2002, the assessee was asked as why he did not produce his relative or employees engaged in the business of providing accommodation entries, for verification and cross examination, the assessee stated that those persons left his employment and did not turn-up after the date of search. According to the Ld. CIT(DR), the assessee even in his statement dated 23/04/2002 did not deny of having engaged in providing accommodation entry.
4.2.1 The Ld. CIT(DR) further submitted that addition has not only been made on the basis of statement of the assessee on stand-alone basis, but the document seized at page 10 of Annexure A-1 from the premises of the assessee, clearly reflect that the assessee was engaged in providing/receiving the accommodation entries against certain percentage of commission. She submitted that the assessee could not substantiate his claim with evidences that the said document came to him for settlement of a dispute between two friends. She further submitted that the assessee did not produce those two persons before the Assessing Officer. She also submitted that the Assessing Officer summoned 23 the persons and recorded the statement and in their statements they did not say anything regarding existence of any dispute between them. According to the Ld. CIT(DR), the assessee has failed to substantiate its claim that the document was not related to accommodation entry business of the assessee. In view of the submission, Ld. CIT(DR) submitted that the ratio of the decision of the Hon'ble High Court in the case of Harjeev Agrawal(supra) and decision of the Tribunal in the case of Best Infrastructure Private Limited(supra) would not apply in the instant case. The Ld. CIT(DR), on the other hand, relied on the decision of the Hon'ble Supreme Court in the case of Video Master Vs. JCIT, 2015 66 taxmann.com 361 (SC) wherein it is held that when any addition on account of undisclosed income is based on the statement of partners of assessee firm, it could not be said that the addition was based on no evidence. Further, she also relied on following decisions:
1. Bhagirath Aggarwal Vs. CIT, Delhi High Court, 2013, 31 taxman.com 274
2. Raj Hans Towers (P) Ltd. Vs. CIT, Delhi High Court, 2015, 56 taxmann.com 67
3. PCIT Vs. Avinash Kumar Setia, Delhi High Court, 2017, 81 taxmann.com 476
4. M/s. Pebble Investment and Finance Ltd. Vs. Income Tax Officer, Supreme Court, 2017, 2017-TOIL-238-SC-IT 4.2.2 On the argument of the Ld. AR that addition has been made on estimation or on guesswork, the Ld. CIT(DR) submitted that the assessee has received deposits and after routing the 24 money through 2-3 channels, it has been given to the ultimate beneficiary and thus it was the onus on the assessee to explain flow of money in transaction of each and every beneficiary. Due to non-cooperation on the part of the assessee, the only alternative left before the Assessing Officer for computing the commission from business of accommodation entries, was to take deposits, which are appearing as credits in bank accounts as basis for computing commission income of the assessee. She submitted that the Assessing Officer has already excluded the inter-transfer deposits and the net deposits received externally has only been taken for computing the commission income. 4.2.3 The Ld. CIT(DR) drawn our attention towards question No. 15 of statement of the assessee dated 07/03/2002 and submitted that all those companies have been floated in the name of his employees or relatives and the assessee accepted of utilizing those companies for the business of providing accommodation entries by him, thus, onus was upon the assessee to produce them before the Assessing Officer, however the assessee failed to produce them and discharge his onus. 4.2.4 On the argument of the Ld. counsel only two companies are associated with the assessee and other companies are assessed separately, the Ld. CIT(DR) submitted that in those companies transactions as recorded in books of accounts are only reflected and would have been assessed accordingly as filed.
Whereas, the assessee has earned commission on providing entries of those transactions and that commission is income in the hands of the assessee and, therefore, the assessee only is 25 liable to be assessed in respect of commission on the accommodation entries provided through those entities. 4.2.5 On the issue of addition deleted by the Tribunal in the case of M/s Elite Promoters Private Limited (supra), the Ld. CIT(DR) submitted that the Tribunal in said case has deleted addition for not providing cross-examination of Sh. A.S. Verma, which has been held as a violation of principles of injustice and no factual finding has been given by the Tribunal.
4.2.6 In view of the arguments made, the Ld. CIT(DR) submitted that in view of non-cooperation by the assessee, the Assessing Officer has rightly computed the commission income from business of providing accommodation entries by the assessee at the rate of 1.5% of the deposits in 14 bank accounts except inter-bank transfer deposits.
4.3 In rejoinder, the Ld. counsel of the assessee submitted that the assessee has been provided a complete copy of statement dated 07/03/2002 by the Income-tax Department for the first- time during the hearing before the Tribunal, thus, additions relying on the statement, have been made in violation of natural justice, and need to be deleted.
4.4 We have heard the rival submissions and perused the relevant material on record including the impugned order and paper book filed by the parties. In the rejoinder, the Ld. counsel raised the issue of violation of natural Justice. The Ld. counsel submitted that a complete copy of the statement dated 07/03/2002 recorded under section 132(4) of the Act was not provided to the assessee either in proceedings before the Assessing Officer or in proceeding before the Ld. CIT(A). Actually, 26 the statement dated 07/03/2002 is the main foundation of the Assessing Officer holding the assessee as engaged in business of providing accommodation entries against certain percentage of commission charged. It was pointed out by the Bench to the Ld. counsel that even in subsequent statement 23/04/2002 recorded under section 132(4) also there is a mention of a statement dated 07/03/2002 and even in show-cause sent by the Assessing Officer, there is mention of the statement dated 07/03/2002. The Ld. counsel was asked to submit a copy of application or request made by the assessee or his Authorized Representative either before the Assessing Officer or before the Ld. CIT(A) seeking a copy of statement dated 07/03/2002, however, the Ld. counsel failed in producing any such application/request of the assessee. 4.4.1 Further, we find that the ld. CIT(A) has reproduced the submission of the assessee made before him on page 6 of the impugned order. On perusal of para 6 of that submission, we find that the assessee has made reference of page No. 8 of the statement dated 07/03/2002. The relevant paragraph is reproduced as under:
"6. The assessee has already stated in his statement dated 07.03.2002, page No.8, that Mr. RP Kaushik, the person responsible, came in contract with the assessee when he lost his mental balance and he is missing for last one and half year and statement dated 23.04.2002 that the assessee started giving consultancy to the employees of Mr. RP Kaushik for the work that was pending on the part of Mr. RP Kaushik and only around Nov, 2000. As a proof we have filed the discharge slip of Mr. RP Kaushik from Delhi Psychiatry Center, which confirms his mental disbalance."27
4.4.2 In our view, it is not possible for the assessee to make reference to page No.8 of the statement dated 07.03.2002, without having a complete copy of the statement dated 07/03/2002.
4.4.3 In view of the above facts, we are of the opinion that claim of the Ld. counsel that a complete copy of statement dated 07/03/2002 was not provided to the assessee, is baseless and not correct. Accordingly, we reject the contention of the Ld. counsel that addition has been made in violation of the principles of natural Justice.
4.4.4 Before us, the Ld. counsel contested that no addition can be made solely on the basis of a statement recorded under section 132 (4) of the Act. In support of the contention, the Ld. counsel has relied on the decision of the Hon'ble Delhi High Court in the case of Harjeev Agrawal (supra). The Hon'ble High Court in para 17 and 18 of the decision, held that undisclosed income in block assessment is to be computed only on the basis of evidence found as a result of search and/or other information as is available with the Assessing Officer which is relatable to such evidence. Further, whether the statement recorded under section 132(4) would constitute evidence found as a result of such, the Hon'ble High Court in para 19 and 20 observed as under:
"19. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132 (4) of the Act would by itself be sufficient to assess the income, as disclosed by the 28 Assessee in its statement, under the Provisions of Chapter XIV-B of the Act.
20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search"
would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatabie to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation.
4.4.5 The Tribunal in the case of Best Infrastructure Private Limited (supra) has relied on the above observation of the Hon'ble High Court.
4.4.6 In the case of Video Master (supra) relied upon by the Ld. CIT(DR), the partner of the assessee firm admitted of undisclosed income related to firm. The Hon'ble Supreme Court in the case held that there were evidence in the form of statement of the partner himself and other corroborating material was also on record and, thus, addition upheld on the basis of statement of the partner of the firm was justified.
4.4.7 In the case of Bhagirath Agrawal (supra) relied upon by the Ld. CIT(DR) also the addition was sustained by the Tribunal on the basis of the statement of the assessee. The assessee 29 challenged the finding of the Tribunal before the Hon'ble jurisdictional High Court raising following question of law:
" Whether the ITAT was justified in law in reversing the decision of CIT(A) and sustaining the addition of Rs.1,75,00,000 made solely on the basis of statements recorded at the time of search and as modified vide subsequent letter dated 09.01.2006 in the absence of any evidence including corroborative evidence discovered during the course of search?"
4.4.8 In the case, the Tribunal rejected the retraction of the statement made by the assessee as the confession by the assessee deprived the Revenue from making further enquiries in the matter. The relevant paragraph of the decision of the Hon'ble High Court mentioning above facts is reproduced as under:
"9. The Tribunal examined the two statements made by the respondent assessee u/s 132 (4) of the said Act as also the said letter dated 09.01.2006. The main question raised by the assessee before the Tribunal was whether the statements, whereby the surrender was made, were sufficient for making the addition or not. The Tribunal, in this regard, held that as a general rule of practice it was unsafe to rely on a retracted confession and judicial as well as quasi-judicial authorities ought to look for corroborative evidence. But, the Tribunal held that this was not a case of a retracted confession. The Tribunal noted as a fact that the appellant/assessee had not retracted the assessment but that he had, in his letter dated 09.01.2006, confirmed the earlier statements but, this time,with a qualification that the samewould be pending verification of the seized documents. The Tribunal also noted that there was no allegation of any threat or intimation having been meted out by the revenue authorities. The Tribunal further expressed its opinion that there could not have been coercion on the part of the revenue authorities in as much as the first declaration was made on 10- 11.11.2005 and the next declaration was made on 21.11.2005 and there was a gap of 10 days in between. This also makes it clear that the declarations made by the respondent assessee were only after the appellant/assessee had thought over the same over a span of ten days. Even in the declaration made on 21.11.2005 the appellant/assessee did not disclaim the earlier declaration/admission made on 10-11.11.2005. It is on the basis of these observations that the Tribunal concluded that the statements 30 of the appellant/assessee cannot be regarded ' as a retracted statements.
10. The Tribunal also observed that because the assessee had made the aforesaid surrender, the revenue had refrained from making any further enquiries into the matter. It was, therefore, not open to the appellant/assessee to retract from the earlier statement at the time of adjudication. It is for these reasons that the Tribunal held that the Commissioner of Income Tax (Appeals) had committed an error in deleting the addition made on the basis of the statement given by the assessee and, consequently, the Tribunal set aside the order of the CIT (Appeals) and restored that of the Assessing Officer."
4.4.9 In decision dated 22/01/2013, the Hon'ble High Court after hearing the Ld. counsel of parties said that in case of retraction of statement, onus lies on the maker of the statement to establish the mistake in the statement. The Hon'ble High Court held that voluntary statement under section 132(4) of the act as one of good piece of evidence. The relevant finding of the Hon'ble High Court is reproduced as under:
11. Before us the learned counsel for the appellant contended that the statement made by an assess could always be subsequently retracted. He further submitted that it was open to the person who made an admission to show that the admission was incorrect. For this proposition he placed reliance on a Division Bench decision of this Court titled Ester IndustriesLtd. Vs. Commissioner of Income-tax: (2009) 316 ITR 0260. However, that case was not one of search and seizure u/s 132 of the said Act. Furthermore, in the present case no material has been produced by the appellant/assessee to show that the admission made by him was incorrect in any way. On the other hand, it is the assessee who is insisting that it is for the department to corroborate the statement of admission made by him and until and unless the department corroborates the same, the statement cannot be relied upon. We are afraid that is not the correct position of law. The admission' once made can certainly be retracted, if the circumstances permit, and it can also be shown to have been made under some mistake or to be otherwise incorrect. But, the onus would be on the maker of that admission. In this case it is the appellant/assessee who has admitted and surrendered a sum of Rs.1.75 crores as his undisclosed income. It was incumbent upon him to show that he had made a mistake in making 31 that admission and that the said admission was incorrect. He had access to all the documents which has been seized in as much as the copies had been supplied to him. However, he did not produce anything to establish that the admission was incorrect in any way. That being the position, the appellant/assessee cannot resile from his earlier statement made on 10-11.11.2005 and 21.11.2005.
12. The learned counsel for the appellant/assessee also referred to the Supreme Court decision in the case of Pullangode Rubber Products Co.Ltd. Vs. State of Kerala: (1973) 91 ITR 18 SC for the proposition that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It was contended that it was open to the person who made the statement to show that it was incorrect. There cannot be any doubt about this position in law, but, in the present case the appellant/assessee has not produced any material to show that the admissions made by him were incorrect. The statements recorded u/s 132 (4) of the said Act are clearly relevant and admissible and they can be used as evidence. In fact, once there is a clear admission, voluntarily made, on the part of the assessee, that would constitute a good piece of evidence at the hands of the Revenue.
(Emphasis supplied externally by us) 4.5 Thus, in above decision, the Hon'ble jurisdiction High Court has rejected the argument of the assessee that the Department is required to corroborate the statement made under section 132 (4) of the Act. The Hon'ble High Court has held that the admission can be retracted, if it is given under some mistake or the statement was not correct, but then onus is on the maker of the admission to establish that the decision given by the Hon'ble Delhi High Court in the case of Bhagirath Agrawal (supra) being a decision prior to the decision in the case of Harjeev Agrawal(supra).
4.6 In the light of above decisions, we are now examining the facts of the instant case. In view of the submissions and arguments of the parties, first issue which arises before us is that 32 whether any incriminating document was found from the premises related to accommodation entry business or the addition has been made solely on the statement of the assessee dated 07/03/2002 on stand-alone basis.
4.7 The statement dated 07/03/2002 of the assessee recorded under section 132 (4) of the Act is the main basis of the additions made. This statement was recorded in the handwriting of the assessee itself. In question No. 10 and 11 of the statement, the assessee was asked about the allegation of providing accommodation entry and using certain persons as operator of bank accounts, and in response he accepted the above allegations. In question No. 12, the assessee was shown a list of bank accounts, operators, Internet users used for depositing cash and giving entries through cheques and the assessee was asked to confirm in his own handwriting the bank accounts along with operators and introducer, which had been used by the assessee for the purpose. In response, the assessee mentioned details of bank accounts, their holder, operators and introducer. The assessee also explained the modus operandi of the business of providing accommodation entry. The relevant part of the statement is reproduced under:
"I have used the above accounts of the companies through the operators and introducers mentioned against them for the purpose of depositing cash and consequently giving cheques entries to the ultimate beneficiaries. In the process I have earned a commission of around 1% (one percent) on an average over the amount of entries given to the beneficiaries. I used to receive this commission after completion of paper work and handing over of cheques to 33 the beneficiaries. The paper work included filling of share application forms (for share application money), Advances and unsecured loans & covering letter indicating the amount of loan and advance and rate of interest applicable, if any). Photo copy of IT returns were also provided to them. I have not given any entry for capital gains."
4.8 The assessee also explained source of deposits in bank accounts in response to question No. 13 and 14 of the statement, which are reproduced as under:
"Q.13. Please explain and give details of persons who were shown as having given share application entries, loans and advance entries to the ultimate beneficiaries and the source of such persons for giving the above entries?
Ans. The persons used for giving such entries are those mentioned under the head "name and address of account holders" in my answer to Q. No. 12. The source of these companies for giving entries is rotated amongst these companies themselves. I accept that sources of funds of these companies are not genuine and if compared, the entries will not be reconciled between them. In fact the source of all the entries to the beneficiaries is deposits made in cash in bank accounts of the above companies.
Q. 14. What was the source of these cash deposits and how did you use to receive the same for depositing them in the above Bank A/cs.?
Ans. The cash used to come from the beneficiaries who used to approach us through common acquaintances. I used to handover the cash to the persons mentioned under the head "name of operator" in my answer to Q. No. 12. These persons used to take the cash to one of the bank accounts mentioned above and deposit therein. However it 34 is possible that these persons may also have filled in the deposit slips for companies which they were not operating i.e. the depositing activities of these persons were mixed. These operators used to fill in the cheques and give it to the beneficiaries at my instructions."
4.9 Further, in question No. 15, the assessee explained relationship with the bank account operators. Few persons, who operated the bank account were employee of the assessee and others were relative of the assessee. The relevant part of the statement is reproduced as under:
"Q.15 Were some of these operators your employee also? Give details of these operators.
Ans. Mr. M. K. Jha was my employee for five years and has left me six months back. However I shall rest of the period he was working independently in the business of giving entries with us. He has moved to Etawah U.P. I shall try to produce him before the department. Sh. R.P. Kaushik was working independently in the business of giving entries and he got associated with me in the course of this very business. In the later stages he lost his mental balance and infect he is missing for the last one & half year. However I accept that the entries given through Sumangal Commercials Ltd. and Sarin Sons Sales Ltd by him were at my behest and instructions. I would also like to clarify that he may have provided some entries independent of me, which I have to deal in now because the parties (beneficiaries) get back to me for quarries in his absence. We kept on continuing the business of entry giving through these companies even after his absence for this we used the signed blank cheques which were lying with us.
Rakesh Chandra Singh also used to work independently and became associated to us through Sh. R.P. Kaushik. He reside in Agra. B.K. Prasad is my employee and I shall produce him before the department. N.S. Chauhan is our former employee and both of them had worked for me in giving entries also. I shall try to produce him. V.C. Gupta used to work for 35 R.P. Kaushik, Sajjan Singh is our employer and I shall produce him before the department.
Q No. 16. In answer to Q No. 12, you have not identified the following companies:-
1) Delhi Sipping Co.5/2860, Chuna Mandi, Pahar Ganj, Delhi
2) Nabna Paper Mills Ltd. 5/2389, Chlra Shahaji Chawri Bazar, Delhi
3) M/s. Shant Pesticides Inds. B, 1649, Main Bazar, Pahar Ganj, Delhi Please explain your connection with these companies?
Ans. Regarding Shant Pesticides Industries (P) Ltd, this company is delt in by my elder brother Sh. Narendra Singh. He has nothing to do with my business of giving entries and whatever entries may have been given through this account, must have been given at my behest without his involvement and it is my responsibility to account for them. He would only have signed the cheques in good faith on me.
Regarding Delhi Iron Supply Co., it was opened from our premise at Chuna Mandi and introduced by us at the request of one of my friends Sh. Praveen Bhatia, B4/148A, Safdarjang Enclave, ,New Delhi. Ph-6160650. I have not used this account ever for the purposes of entries. Sh. Praveen Bhatia is responsible for explaining this account. The operator of this account Sh. Rajeev Singh is a different person and not my brother & can't recollect any this about Nobha Paher Mills Ltd.
4.10 Further, in question No. 17, the assessee was asked to explain the name and details of beneficiaries, which he also provided. The question No. 17 and reply of the assessee is also reproduced as under:
36"Q.17 We are now showing you Bank statements of the companies, which have been used for depositing cash and giving cheques to the ultimate beneficiaries. Please go through them and identify the transactions which are not genuine and have nearly been given as cheque entries to the ultimate beneficiaries. Please also give name and address of these beneficiaries and then form in which these entries were given.
Ans. On going through accounts no 113, OBC Nai Sadak, of Sumangal Commercial Ltd the following cheque entries have been given against cash received from the beneficiaries.
SL NO. DATE CHEQUE NO. AMOUNT
15/3/2000 534922 Mamta Aggarwal
1 1000000
16/3/2000 534924 -do-
2 1000000
3 21/03/2000 534926 -do-
2100000
4 24/03/2000 534920 1500000 -do-
5 02/02/2000 534901 Germine Stock
1000000
Brokers u-
10/02/2000 534905 -do-
6 1000000
7 18/02/2000 534909 900000 -do-
24/02/2000 534913 -do-
8 800000
9 26/02/2000 534914 -do-
1000000
01/03/2000 534915 -do-
10 1000000
03/03/2000 534919 -do-
11 1100000
09/03/2000 534918 -do-
12 2000000
13 28/03/2000 534923 -do-
1000000
Germine Stock Brokers is a concern based in Ahmadabad owned by Sh. Madhav Saran Aggarwal, Mamta Aggarwal is his wife, entries given to Genmine Stock Brokers Pvt Ltd is in the form of share application money where as those given to 37 Mamta Aggarwal are Loans and Advances. The source of their entries for Sumangal Commercial Ltd is from other companies as per Q.12 used for entry purposes and the ultimate sauce is cash deposits in one of the said companies. The sources of cash was cash received by me from Sh. Madhav Saran Aggarwal who used to come from Ahemedabad as well as his brother Sh. Bhagavan Das Aggarwal who used to come from Mathura. The cash deposit slips must have been filled in by R.P. Kaushik or one of the operators mentioned in Q.12. The cheques would also be in their hand writing.
On going through A/c No. 135, OBC, Nai Sarak of Jagannath Securities Pvt Ltd. following cheque entries have been given against the cash received from the beneficiaries.
SL NO. DATE CHEQUE NO. AMOUNT
13/03/2000 537101 2500000 M/s Modi Kem (P)
1
Ltd.
13/03/2000 537110 2500000 M/s Elite
2
Promoters (P) Ltd. s
3 13/03/2000 537108 2500000 -do-
4 18/03/2000 537112 2500000 -do-
5 23/03/2000 537106 2500000 Poonam Promoters
& Developers (P)
Ltd.
M/s. Modiehem (P) Ltd is a concern of Dr. B.K. Modi. His office is in Hemkunt tower, Nehra place N. Delhi. This amount has gone in form of Loan. This cheque was issued against the cash of equivalent amount given to me by Mr. Ved channa who is C.A. (17, basement somdutt chambers II, Bhikaji Kama Place N. Delhi). He requested me to issue a cheque of 25,00,000/-( Rs. Twenty five lacs only) against this cash in favour of Modi Chem. (P) Ltd.
Elite Promoters Pvt Ltd and Poonam Promoters & Developers Pvt Ltd are concerns of Mr. D.N. Taneja and these entries have been given in the form of share Application money. These cheques were issued to the above Companies at the behest of Mr. D.N. Taneja against the the cash given by him to me.38
The Paying slips for cash deposits and cheques issued as mentioned above out of the bank account of Jagannath Securities Pvt Ltd must have been filled in by one or more operators mentioned in Q No.12.
Following more accounts have been used forgiving cheque entries against cash received.
M/s. Chandra Advertising (P) Ltd. (A/c No. 104) S.No Date Cheque No Amount 7.03.2000 514930 2500000 Ms. Elite Promoters p
1. ltd 11.03.2000 514931 2500000 Do
2.
3. 15.03.2000 514933 2500000 Do
4. 23.03.2000 514936 1500000 Do
5. 28.03.2000 514936 1500000 Do M/s. Antriksh land Promoters (p) ltd (A/c No.138) S.No Date Cheque No Amount 22.03.2000 423900 1500000 M/s. Elite 1 constructions 23.03.2000 534802 2500000 Uniworth
2. constructions
3. 24.03.2000 534803 2500000 Elite construction P Ltd
4. 26.09.2000 534814 Elite Construction P 2000000 ltd M/s. Lal construction (P) Ltd (A/C No. 518) 09.03.2000 459498 2500000 Ellite Promoters P ltd
1. 11.03.2000 459497 2500000 Do
2. 39
3. 14.03.2000 459499 2500000 Do
4. 23.03.2000 459500 2500000 Do
5. 28.03.2000 539402 1500000 do Elite Promoters Pvt Ltd, Elite construction (P) Ltd and Uniworth Construction Pvt Ltd are concerns of Sh. D.N. Taneja and these entries have been given in the form of share application money. These cheques were issued to the above companies at the behest of Sh. D.N Taneja Against the each given by him to me.
The paying slips for cash deposits and cheques issued out of the above three bank accounts must have been filled in by one or more operators mention Q. 12. This cash was also deposited by these operators only at my instructions.
4.11 In response to question No.18, the assessee replied the rate of average commission of 1% and sought further time for computing the exact figure of commission. It is manifested from the above statement that the assessee not only confirmed the utilization of the bank accounts in the business of providing accommodation entry but also provided the list of beneficiaries at his own.
4.12 We find that along with the statement of the assessee dated 07/03/2002, the Assessing Officer has relied on page 10 of Annexure A-1 seized from the premises of the assessee to hold that the assessee was engaged in the business of providing accommodation entry. During the course of statement in search proceedings in question No. 20, the Authorized Officer asked the assessee to explain the entries mentioned therein and in 40 response, the assessee admitted that it is a bill raised by GS Pandey and associate but sought some more time to explain the entries therein. The Assessing Officer in show cause dated 11/03/2004 issues to the assessee, mentioned that the calculations made on the said paper shows the rate of commission at 2% and 2.5% to 3.5% pertaining to cash entries and gift entries. In response, the assessee submitted that said paper shows working by Sh. GS Panday, CA and the said paper was sent to him by Sh. GS Panday to settle a dispute between two friends (Sh. Sharda and Sh. Praveen Bhatia) known to him. In the assessments proceedings, statement of Sh. GS Pandey was recorded, a copy of which is available on page 47-48 of assesee's paper book. In the statement recorded on oath, Sh. GS Panday replied that, both the assessee and he, belongs to same place and known since 1990. Regarding the page 10 of Annexure A-1 found from the premises of the assessee, he said that the paper was a proposed bill given to the assessee, where certain services were given to him. Detail of the said document has already been reproduced by us in para 3.1 of this order. Name of 'Shardaji' and 'Bhatia ji' is clearly mentioned against service of gift and cash entry. It is evident that one of service include providing cash entry and rate of commission has been recorded as 2%. The Assessing Officer also recorded statement of the so-called friends of the assessee i.e. Sh. Sharda and Sh. Praveen Bhatia. The statement of Sh. Sharda is available on pages 45 to 46 of the paperbook and statement of Sh Bhatia is available on pages 49 to 50 of the paper book. In the statement recorded, these 2 persons did not say anything about existence of any dispute between them as 41 against claim of the assessee of settlement of dispute between these two friends.
4.13 In our opinion, the assessee has failed to substantiate its claim of existence of dispute between the persons mentioned in the document. In the said paper, it is mentioned that cash entry has been provided to Sh. Sharda. She GS Panday, who issued this proposed bill has also admitted the fact of rendering services to the assessee. Evidently, the services include the services of providing cash entry also. In the statement recorded on the date of Search also, in response to question no. 16 , the assessee stated that bank account in the name of "Delhi Iron Supply Company" was opened from his premises at Chuna Mandi and introduced at the request of Sh. Praveen Bhatia. The name of Bhatiaji is also appearing in the said document seized from the premise of the assessee, against gift.
4.14 In view of above, it is evident that the fact of providing accommodation entry against a certain commission admitted by the assessee in the statement dated 07/03/2002 get corroborated with document seized from his premises. In such circumstances, the contention of the Ld. counsel that addition has been made only on the statement dated 7/3/2002 on a stand-alone basis is rejected and accordingly the ratio of the Hon'ble Delhi High Court in the case of Harjeev Agrawal (supra) and Hon'ble Gujarat High Court in the case of Kailash Manharlal Chokshi (supra) is not applicable over the facts of the instant case. The statement of the assessee admitting accommodation entry business as well as the statement accepting the business 42 through various bank statement, which were shown to the assessee, are definitely the material/information available with Assessing Officer, which are relatable to evidence found during the search showing entry operation business. Thus, the argument of the Ld. counsel that statement cannot be used against the assessee, is rejected.
4.15 As held in the case of Bhagirtah Agreawal (supra) The assessee can retract the admission made, if the circumstances permit, and the assessee demonstrate that admission was made under some mistake or otherwise incorrect. But, the onus would be on the maker of that admission. The appellant/assessee has to produce material to show that the admissions made by him was under some mistake or incorrect.
4.16 In the instant case, the assessee is a chartered accountant, and in the statement dated 07/03/2002 , he has written replies in his own handwriting admitting of having engaged in the business of providing accommodation entry. He also confirmed the entities through which business of providing accommodation entry was carried out, out of the list shown to him by the Authorised Officer. This statement was recorded in presence of two witnesses. The assessee himself has also written at the end of the statement that it was voluntarily without any pressure or coercion. Further, in subsequent statement dated 23/04/2002, also the assessee has nowhere denied of having engaged in the business of providing accommodation entries. He was particularly asked to produce the persons associated with him in the business of providing accommodation entry and he replied that he would 43 make efforts and produce all those persons before the Department. During assessment proceedings, the Assessing Officer issued show cause on 03/03/2004 on the basis of the admission dated 07/03/2002 of the assessee and asked the assessee to produce name and address of the beneficiaries who had channelled their unaccounted money through bank accounts of fourteen entities. The Assessing Officer provided detail of cash deposits, clearing deposits and transfer deposits in all these 14 bank accounts. In response, the assessee submitted that he was not directly involved in the affairs of those companies and acted on behalf of Sh. R.P. Kaushik, who suddenly disappeared in the year 2000 and when approached by the staff of Sri RP Kaushik, the assessee helped them in maintaining records/accounts. In our opinion, it was not sufficient merely to give a submission without any supporting evidence. The assessee was required to produce Sh. R.P. Kaushik and discharge his onus to substantiate as who was actually running this syndicate of providing accommodation entry. But the assessee has squarely failed in discharging his onus.
4.17 Further, in letter dated 19/03/2004 filed before the Assessing Officer, the assessee first time claimed that the statement dated 07/03/2002 was not voluntary and it was under
mental strain due to brain haemorrhage of his uncle. The assessee submitted that when it came back from the hospital, he was shown certain entries written on the paper brought by the officers, to which he admitted as some of the entries were in his knowledge and he never knew that such huge transactions were 44 done in last 5-6 years. We note that during the statement dated 07/03/2002 or in subsequent statement dated 23/04/2002 or in submission in response to show cause notice dated 03/03/2004, the assessee nowhere mention the fact that he was under mental strain while giving statement on 07/03/2002. In our opinion, this retraction of a statement dated 07/03/2002 on the ground that it was under mental strain is not corroborated by evidences. The assessee has not produced any documentary evidence that the witnesses present during the admission also expressed existence of any such pressure. Further, the assessee explained the accomplice i.e. person associated in the business of providing entries along with names of beneficiaries and the amount of entries given to them, thus, the micro details with which the assessee explained his involvement in the business of providing accommodation entry, it can't be said that statement given was under any pressure. The assessee has filed an affidavit in the assessment proceedings of one of the beneficiary i.e Elight Promoters Pvt. Ltd, a copy of which has been filed before us at page 64 to 65 of the paper book. In the affidavit, the assessee has shifted responsibility of accepting cash and providing accommodation entry onto Sh. R P Kaushik, which is evident from para 18 of the affidavit, reproduced as under:
"18. That I never received cash from the parties with respect to cheques issued. Also the physical transaction of cash or/and cheques was not made in my presence or knowledge. As explained, I used to make book entries and advise to the staff members of Mr. R.P. Kaushik. But subsequently, I understood the modus operandi. It was like this ...........the beneficiaries used to deposit the cash in the account advised by the directors. The beneficiaries 45 collect the cheques in advance and as and when the amount is credited in the account of the companies, the cheques are deposited in the bank of the beneficiaries for realization."
4.18 Thus, in our opinion, the assessee has failed to produce any material to substantiate his claim that a statement recorded on 07/03/2002 was not voluntary and made under pressure or coercion. In such circumstances, as held by the Hon'ble Delhi High Court in the case of Sh. Bhagirath Agrawal (supra), the statements of the assessee recorded u/s 132 (4) of the said Act on 07/03/2002 admitting of engaged in providing accommodation entry are clearly relevant and admissible and they can be used as evidence.
4.19 With regard to the contention that the statement dated 23/04/2002, the assessee said of having came into contact with Sh. RP Kaushik in the year 2000 and that too for providing consultancy to his clients, the assessee has not discharged his onus either by filing confirmation from Sh. R.P. Kaushik or producing Sh. RP Kaushik along with necessary evidence to establish his claim and accordingly this claim of the assessee cannot be accepted in absence of supporting evidences. Thus the alternative contention of the assessee that addition for providing accommodation entry should only be restricted for last one and half years, is also rejected.
5. Now the question before us is that whether the cash deposits appearing in all the bank accounts should be considered for addition in the hands of the assessee. The Ld. counsel before 46 us submitted alternatively that only bank accounts in the name of proprietary concern of the assessee and the company in which the assessee is director i.e. Jaswant Foods P Ltd., should only be considered for computing the quantum of accommodation entry provided. The Ld. CIT(A), however, excluded bank accounts of four entities for computing the quantum of accommodation entry provided by the assessee. In our opinion, the argument of the assessee to consider the quantum of deposits appearing in the bank account in the name of proprietary concern and M/s Jaswant Foods Private Limited, cannot be accepted. Similarly, the finding of the Ld. CIT(A) on the dispute also cannot be accepted. In the instant case the bank accounts of 14 entities have been utilised by the assessee for providing accommodation entries. Either the cash or cheque has been deposited in one of the bank account and after routing through bank accounts of 2 or 3 entities, the cheque has been issued to the beneficiary. The transaction of accepting cash or cheque and further giving check to the beneficiaries have been given shape of legitimacy and accordingly entered in the books of accounts of those entities. But, the commission earned on providing those accommodation entries has been enjoyed by the assessee and which is not appearing in the books of accounts of those entities, and the assessee only is the squarely liable for addition of the said commission income in his hands. No details of income declared or assessed in those entities has been produced before us and, therefore, we cannot accept the claim of the assessee that the commission income earned from the business of providing accommodation entry has already been assessed in the hands of 47 those entities. Accordingly, we reject the contention of the Ld. counsel of the assessee as well as the finding of the Ld. CIT(A) on the issue in dispute and direct the Assessing Officer to consider all the 14 bank accounts of entities for considering the quantum of accommodation entries provided by the assessee.
6. One more question which has been raised by the Ld. Council of the assessee that the amount of cheque issued to the beneficiaries should only be considered for computing the quantum of accommodation entry provided rather than the deposits appearing in the bank accounts. We find that the Assessing Officer in the show cause notice dated 03/03/2004 asked the assessee to provide the name & address of beneficiaries and quantum of accommodation entry provided to them, but no such details was provided by the assessee. In our opinion in absence of such details, the Assessing Officer was justified in taking deposits in bank accounts which included cash deposits, transfer deposits and clearing deposits. We also note that the Assessing Officer himself has excluded transfer of cheque from one bank account to another bank account among these 14 bank accounts. Thus the net deposits appearing in these bank accounts also represent the quantum of accommodation entry provided to beneficiaries, and accordingly we justify the action of the Assessing Officer in considering the cash deposits, transfer( other than interbank) deposits and clearing deposits for considering the quantum of accommodation entries provided.
7. The assessee has given reconciled figure of various deposits in 14 bank accounts before the Ld. CIT(A) as under:
48 cash deposits Rs. 19,32,91,000/-
Transfer Deposits Rs. 24,29,05,000/-
Less: Inter bank Rs. 16,34,47,000/-
Transfer
Net transfer Rs. 7,94,58,000/-
deposits
Clearing deposits Rs.20,20,30,000/-
Less: clearing Rs. 1,33,70,427/-
returned
Net clearing Rs. 18,86,59,573/-
deposits
Total deposits Rs.46,14,08,573/-
8. The above figures of deposits were not verified by the Assessing Officer, despite enough opportunities provided by the Ld. CIT(A). However in the interest of justice and bringing correct facts on record, we direct the Assessing Officer to verify about reconciled amount of cash deposits submitted by the assessee and compute the quantum of accommodation entries provided by the assessee, accordingly .
9. Further the Ld. CIT(A) has excluded the cash withdrawal from the amount of cash deposits for considering the quantum of accommodation entries, on the reasoning that in lieu of clearing and transfer deposits withdrawal of cash is to be made from bank to ultimately nullify the effect of cash deposit transaction in a particular bank account. The Ld CIT(A) has accepted this general submission of the assessee without verification of facts of the case of the assessee. The arguments of the assessee, maybe convincing 49 but same has to be testified in the facts of the assessee, which the Ld. CIT(A) has not done. Thus, this issue need verification at the end of the Assessing Officers. Accordingly, we direct the Assessing Officer to verify the contention of the assessee and exclude amount of cash withdrawal out of the quantum of accommodation entry provided accordingly.
10. Now the next issue is what should be the rate of the commission in the case of the accommodation entry business of the assessee. The Assessing Officer applied rate of 1.5%. According to the Assessing Officer rate of 2 to 3.5 % was apparently mentioned in the seach document in the business of providing entries. The Assessing Officer allowed expenses against the said rate and arrived at net rate of commission of 1.5%. The ld. CIT(A) on the other hand applied rate of 1% on the ground that document appears to be in the nature proposed disputed bill. We find that the assessee in statement dated 07/03/2002 under section 132(4) of the Act also admitted of average rate of 1% on the accommodation entries provided by him. In view of the admission of the assessee himself, we do not find any error in the finding of the Ld. CIT(A) in restricting the rate of commission to 1%.
10.1 In view of the above findings, we direct the Assessing Officer to compute the net quantum of the accommodation entries provided after verifying the reconciled figure of cash deposits , transfer deposits and clearing deposits appearing in all 14 bank accounts submitted by the assessee and considering excluding of cash withdrawal and then apply the rate of 1% commission over the net quantum of accommodation entries provided by the 50 assessee and compute the undisclosed income from the business of providing accommodation entries. We direct the assessee also to produce all the necessary documents for carrying out the verification process as mentioned above by the Assessing Officer. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. Accordingly, relevant grounds of appeal of the assessee as well as ground No.1 of the appeal of the Revenue are allowed for statistical purposes.
11. In ground No. 2, the Revenue has agitated amount of Rs.1.5 lakhs deleted by the ld. CIT(A), which was held by the Assessing Officer as cash found from the residence of the assessee. It was submitted by the assessee that cash was collected from the relatives, which was to be utilized for medical expenses of his uncle, who was admitted in KAILASH hospital, Noida. 11.1 The Ld. DR relied on the order of the Assessing Officer whereas the Ld. counsel of the assessee relied on the order of the Ld. CIT(A).
11.2 We have heard the rival submission of both parties and perused material on record. We find that the Ld. CIT(A) admitted the additional evidence in the form of medical bills of his uncle and after considering that cash had been collected from family members for paying the medical bill of his uncle, he deleted the addition. In our opinion, the finding of the Ld. CIT(A) is well reasoned. Simultaneously, we find that even if we do not consider the submission of the assessee, still when applying the rule of telescoping of the cash found of Rs. 1.50 lakh against the income from providing accommodation entries, no addition for unexplained cash is warranted in the case of the assessee.
51Accordingly, we do not find any error in the finding of the Ld. CIT(A) on the issue in dispute and the ground No. 2 of the appeal of the Revenue is dismissed.
12. In the result, the appeal of the Revenue and the assessee are allowed partly for statistical purposes.
The decision is pronounced in the open court on 28th March., 2018.
Sd/- Sd/-
(AMIT SHUKLA) (O.P. KANT)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 28th March, 2018.
RK/-(D.T.D)
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi