Income Tax Appellate Tribunal - Indore
Manish Kothari, Ujjain vs Ito 1 (1), Ujjain on 11 February, 2021
आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर
IN THE INCOME TAX APPELLATE TRIBUNAL,
INDORE BENCH, INDORE
BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER
AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER
ITA Nos.286 to 289/Ind/2018
Assessment Years: 2008-09 to 2011-12
Income Tax Officer- Shri Vardhman Sakh
1(1), Sahakarita Mydt,
Ujjain 133A, Vikramaditya Cloth
Market, Fazalpura, Ujjain
(Revenue ) (Appellant)
PAN No.AAHAS9046A
Revenue by Shri S.S. Mantri, CIT
Appellant by S/Shri Anil Kumar Goyal, AR for
assessee & Sumit Nema Sr. Adv,
& Gagan Tiwary, Adv as
intervener.
ITA No. 719 to 722/Ind/2017 & 862 to 865/Ind/2018
Assessment Years 2008-09 to 2015-16
Shri Manish Kothari, Income Tax Officer-1(1
A/3 Kamal Villa, Arwind Nagar, Ujjain Ujjain
Vs.
(Appellant ) (Revenue)
PAN No.ADBPK8153A
Revenue by : Shri S.S. Mantri, CIT
Assessee by : S/Shri Sumit Nema, Sr. Adv,
Gagan Tiwary & Piyush
Parasher, Advs
ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019
Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari
Date of Hearing 05.01.2021
Date of Pronouncement 11.02.2021
ORDER
PER MANISH BORAD, AM.
Through ITA No.286 to 289/Ind/2018 Revenue is in appeal for Assessment Years 2008-09 to 2011-12 against the order of Commissioner of Income Tax (Appeals) (in short 'Ld.CIT'], Ujjain dated 24.01.2018 framed in the case of assessee namely Shri Vardhman Sakha Sahakarita Maryadit and through ITA No.719 to 722/Ind/2017, ITA No.862 to 865/Ind/2018 assessee namely Shri Manish Kothari is in appeal for Assessment Years 2008-09 to 2015- 16 against the order of Commissioner of Income Tax (Appeals) (in short 'Ld.CIT'], Ujjain dated 23.10.2017 and 28.08.2018.
2. As the issues raised in these appeals are interrelated they were heard together as per the request of both the parties in appeal before us and are thus being disposed off by this common order for the sake of convenience and brevity.
3. We will first take up the Revenue's appeals vide ITA No.286 to 289/Ind/2018 for Assessment Years 2008-09 to 2011-12 in the case of Shri Vardhman Sakh Sahakarita Maryadit. 2 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari
4. Brief facts of the case as culled out from the records and as narrated by the Sr. Counsel for the assessee who has commonly argued for both the parties namely Shri Vardhman Sakh Sahakarita Maryadit and Shri Manish Kothari are that survey action u/s 133A of the Act was carried out on 29.9.2014 at the registered office of the society at Ujjain. During the survey it was noticed that assessee society is not filing Income Tax Returns and Permanent Account Number was allotted just few months ago. During the survey various bank accounts of the assessee society were examined wherein it was found that cash amount were deposited on various dates and there were corresponding entries of cheque/demand draft issued to various business concerns including companies. The total cash amount deposited during Financial Year 2007-08 to 2014-15 were as follows:-
Assessment Years Amount
2008-09 Rs 9,25,93,228/-
2009-10 Rs 13,90,35,137/-
3
ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari 2010-11 Rs 17,69,03,922 2011-12 Rs 26,21,59,360 2012-13 Rs 41,02,21,964 2013-14 Rs 57,21,56,130 2014-15 Rs 85,55,76,733/-
2015-16 Rs 55,54,32,696/- 5. Statements of the Office bearers were taken to
explain the source of cash and the transactions of cheques being issued. It was submitted that the assessee society give facility to its members/other person by way of providing cheques/Demand Drafts to be issued to various parties on the direction of their members against the cash received from them. For providing such services Rs.100 per lakh is charged as a commission and in case the amount is less than Rs.20,000/-, then minimum Rs.20/- is charged. It was also noticed that for various years details were maintained in computer on excel sheet about the cash received from the members of the society and cheques issued to various suppliers. Statement of the 4 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Presdent Mr. Manish Kothari was also taken during the survey proceedings. It was observed by the survey team that Shri Manish Kothari is the person who is incharge of all these transactions of cash deposits and cheque issued and other office bearers of society work under his directions. Information about the source of cash was asked to which the reply was furnished. This observation of the survey team was reason to believe for the revenue authorities to assess/reassess the escaped income for various Assessment Year 2008-09 to 2015-16.
6. Accordingly notice u/s 148 of the Act was issued on 27.3.20215 which was duly served by affixture on 31.3.2015. No submissions were made in rpely to the notice u/s 148 of the Act. Thereafter notice u/s 142(1) of the Act was issued to Shri R.L.Nagar who is Liquidator of the society. This notice u/s 142(1)of the Act was served on 30.9.2015. Liquidator/ official representative attended the proceedings and filed replies wherein it was again reiterated that the alleged cash deposited in various bank accounts of the society during the Assessment Year 2008- 5 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari 09 to 2014-15 are not in the nature of income but they are the amount received from the members of the society to be deposited in bank and cheques/DD to be issued to the vendors related to the particular member and for this service society charged commission of Rs.100 per lakh and mimimum of Rs.20/- for amount less than Rs.20,000/-. However the Ld. A.O noticed that apart from few of the parties who accepted to have given cash to the society for issuing cheque/DD majority of the persons named in the Excel sheety refused to have given any cash entered into such transaction. Based on this observation it was assumed that the unaccounted cash has been deposited in the bank account of the society on the direction of Shri Manish Kothari. Accordingly protective addition was made in the hands of the society and substantive addition was made in the hands of Manish Kothari (President of the Society) for the unexplained investment u/s 69 of the Act. Against these additions assessee society preferred appeal before Ld. CIT(A) and succeeded, as Ld. CIT(A) was of the view that 6 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari as the substantive additions are confirmed in the hands of Shri Manish Kothari therefore the protective addition made in the hands of the society deserves to be deleted.
7. Though the protective addition was made in the hands of the society for Assessment Year 2008-09 to 2011-12 but revenue has challenged the finding of Ld. CIT(A) deleting the protective addition only for Assessment Year 2008-09 to 2011-12 raising common ground of appeal challenging the action of Ld. CIT(A) deleting the addition for unexplained investment u/s 69 of the Act made by the Ld. A.O for the unexplained cash deposited in the bank account of the society.
8. The summarized grounds of appeals reads as follows:-
(i) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was justified in deleting the addition of Rs.9,23,93,288/-, Rs.13,90,35,137/-, Rs.17,69,03,922/- and Rs.26,21,59,360/- for Assessment Years 2008-09 to 2011-12 respectively on account of unexplained investment u/s 69 of the Income Tax Act.
(ii) The appellant craves leave to add, amend, alter, modify, delete and or withdraw any/all of the above grounds of appeal on or before the final date of hearing 7 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari
9. Ld. Departmental Representative vehemently argued and supported the order of Ld. A.O for the Assessment Years in appeal before us but could not sreply to the question that why the revenue has not challenged the order of Ld. CIT(A) deleting the addition made u/s 69 of the Act for remaining Assessment Years 2012-13 to 2015-
16. Ld. DR also could not controvert the fact that in some of the assessments framed by Ld. A.O in the case of Manish Kothari additions were made by estimating the brokerage income computed @0.1% (Rs.100 per lakh) for the transaction of cash deposited and cheques issued on behalf of the members of the society/other persons who admitted to have taken the service of the society by way of giving cash and getting cheques issues in nameof other parties/supplier.
10. Per contra Ld. Sr. Counsel for the assessee as well as other assessee namely Shri Manish Kothari submitted that the modus operandi of depositing cash in bank accounts of Society assessee and corresponding amount for issue of cheque/DD stands clear from the very 8 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari moment when the statements of the office bearers were recorded and the computrised excel sheets were seized during the course of survey u/s 133A of the Act. Mr. Nitin Saini who is also the co-signatory for issuance of cheques has stated that cash was received from different businessmen of which some of them were members of the society also and on the very same day or within two to three days issued account payee cheques/account payee draft to various persons as per the direction of the members who communicated through the President Mr. Manish Kothari. For providing this facility, service charge of Rs.100 per lakh was collected and the same can be added as income in the hands of the society as service charges but by no canon could the addition for unexplained investment u/s 69 of the Act be made for the total amount of cash deposited in the bank as the same will be totally illogical since there is a corresponding amount paid through banking channel to various persons including private limited companies. He was fair enough to accept that in view of the settled judicial precedence 9 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari the society being a separate legal entity having its Bye- laws, PAN, Bank accounts, the income element in the alleged transaction may be added in the hands of society.
Further he submitted that at the most only the commulative peak balance in all bank accounts for the year could have been added if they exceed the service charges of Rs.100/- per lakh. Ld. Sr. Counsel for the assessee requested that necessary direction may be given to Ld. A.O to compute the commission @Rs.100 per lakh on the alleged transaction of cash deposited/cheque issued and the addition if any required to be made, should be "the cumulative peak balance in all the bank accounts of the society during the year" or "the commission amount calculated @0.1% of total cash deposited in bank accounts during the year", whichever is higher. It was also submitted that the impugned addition cannot stand in the eyes of law since there is no other source of income from business or otherwise to have been earned by the society unearthed by the revenue authorities during survey or post survey which thus 10 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari makes the impugned addition of total cash deposit in bank account completely illogical. Reliance placed on the following decisions:-
(i) CIT V/s Smt. P.K. Noorjahan (1999) 237 ITR 570/103 Taxman 382 (Apex Court).
(ii) S. Venkat Reddy V/s ITO (2016) 76 Taxmann.com 128 (I.T.A.T. Hyderabad)
(iii) Amit Agrawal V/s DCIT (Kolkata I.T.A.T. ITA No.337/Ko/2014 order dated 09.09.2016
(iv) Binod Kumar Jha V/s ITO (Kolkata I.T.A.T. ITA No.577/Ko/2013 order dated 20.11.2015
(v) CIT V/s Tirupati Construction Co (2015) 55 Taxmann.com 308 (Gujarat High Court)
11. We have heard rival contentions and perused the records placed before us and carefully gone through the decisions referred by the Sr. Counsel for the assessee. The revenue has challenged the finding of Ld. CIT(A) deleting the protective addition made in the hands of the assessee society at Rs. Rs.9,23,93,288/-, Rs.13,90,35,137/-, Rs.17,69,03,922/- and Rs.26,21,59,360/- for Assessment Years 2008-09 to 2011-12 respectively which was made by the Ld. A.O on account of unexplained investment u/s 69 of the Act. No plausible reason given by the Ld. Departmental Representative for the 11 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Revenue having not filed appeal against the finding of Ld. CIT(A) deleting similar type of protective additions for Assessment Year 2012-13 to Assessment Year 2015-16. The basis of the impugned addition was the following amount of total cash deposited in various bank accounts of the assessee society :-
Assessment Year Amount (Rs.)
2008-09 9,25,93,228
2009-10 13,90,35,137
2010-11 17,69,03,922
2011-12 26,21,59,360
12. The above details of cash deposited in the bank account of the society were found during the course of survey conducted at the office premises of the society u/s 133A of the Act on 29.9.2014. At the time of initiation of reassessment proceedings by way of issuance of notice u/s 148 of the Act as well as during the course of assessment proceedings u/s 147 r.w.s. 143(3) of the Act liquidator of the society Mr. R.L. Nagar appeared and gave replies. It was submitted that the assessee society is not running any business. 12 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari The alleged transactions are basically the cash received from the members of the society and the corresponding entries of account payee cheques/demand drafts issued are the transfers to various persons on the advice/direction of the members/persons (through the President of Society namely Shri Manish Kothari) who have given cash. For providing this facility, society used to charge nominal amount of Rs.100 per lakh. The society worked through its office bearers who were given the authority to sign the cheques on behalf of the society. Day to day working of banks were carried out by the Manager Mr. Nitin Saini and the President Mr. Manish Kothari used to communicate with the members for the transaction of cash deposits and issue of cheques to various persons.
13. We find that the assessee society is a co-operative society registered under the provisions of Section 4 of Madhya Pradesh Swayatta Sahakarita Adhiniyam, 1994 working since 14.09.2004. The society has its bye laws in order to govern the regulation of the society . The society has the bank account in its name and also has a separate Permanent Account Number. The Section 2(19) of the Income Tax Act defines a co-operative society as "A society 13 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari registered under the Co-operative Societies Act, 1912, or under any other law for the time being in force in any state for the registration of Co-operative societies".
14. That the provision of Madhya Pradesh Swayatta Sahakarita Adhiniyam, 1999 provides the process of registration, its incorporation, byelaws, eligibility of its member, admission of member and other provision which are necessary for establishment of a Co-operative Society under Adhiniyam, 1999 and that the Adhiniyam, 1999 also provides the President and Vice President of Co-operative Society and function, responsibility and power of board.
15. At this juncture it is relevant to reproduce the relevant provisions of Madhya Pradesh Swayatta Sahakarita Adhiniyam, 1999 ;
Section 29. Liability of member A co-operative may be registered with limited or unlimited liability:
Provided tdhat unless and State Government, by a general or special order otherwise directs, the liability of a co-operative of which another co-operative is a member shall be limited.
Explanation: For the purpose of this Sub-Section:-14
ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari
(a) "cooperative with limited liability" means a co-operative in which the liability of its members for the debts of the co-operative is limited by its bye-laws, to such form and extent as they may undertake to contribute to any deficit in the assets of the co-operative, in the event of its being wound up; and
(b) "co-operative with unlimited liability" means a co-operative the members of which are, in the event of its being wound up, jointly and severally liable for and in respect of all its obligations, to contribute to any deficit in the assets of the co-operative.
(2) Where a co-operative by special resolution amends its bye-laws to change the form and extent of liability, of its members it shall give notice thereof together with a copy of the amendment to its members and creditors and any member other than those who voted in favour of the proposed change of liability and any creditor shall, within a period of thirty days from the date of service of notice upon him, have the option of withdrawing his shares, deposits or loans from the co-
operative as the case may be subject to the discharge of his obligations to the co-operative.
(3) member or creditor who fails to exercise the option within the period specified in sub-section (2) shall be deemed to have assented to the change of liability.
(4) An amendment passed under sub-section (2) shall not take effect until-
(a) all claims of the members and creditors of the co-operative who have exercised the option under sub-section (2) have been met in full or otherwise satisfied; and
(b) notice of the amendment of the bye-laws of the co-operative and information of settlement of claims of members and creditors is sent to the Registrar and his acknowledgment is obtained. (5) Subject to the provisions of sub-section(6), the liability of a past member or of the estate of a decased member of a co-operative for the debts of the co-operative as they stood-
(a) in the case of a past member, on the date on which he ceased to be a member; and 15 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari
(b) in the case of a deceased member, on the date of his death; shall continue for a period of two years from such date. (6) Where a co-operative is ordered to be dissolved under any provision of this Act, the liability of a past member or of the estate of a deceased member, who ceased to be a member or died during the period of two years immediately preceding the date of order for dissolution, shall continue until completion of the entire liquidation proceedings, but such liability shall be limited only to the debts of the co-operative as they stood on the date of cessation of his membership or his death, as the case may be.
30. General body. (1) There shall be a general body for every co- operative consisting of all the members of such co-operative. (2) Where the general body of a co-operative decides that the size, spread or types of its membership requires a representative body of delegates for more effective decision making, its bye-laws shall provide for a smaller body called delegate general body elected from the members in the annual general meeting in accordance with the bye-laws to exercise such powers and to discharge such duties of the general body as may be specified in the bye-laws. (3) Unless the context otherwise requires, any reference in this Act to the general body shall apply to the delegate general body where it exists.
(4) Subject to the provisions of this Act and the bye-laws, the ultimate power of a co-operative shall vest in the general body. (5) Any power, function or responsibility, falling within the scope of a co-operative as a corporate body, which has not been specifically entrusted by this Act or the bye-laws, to any authority of the co- operative, amy be dealt with by the general body, on a reference by the board.
31. Functions, responsibilities and powers of general body. (1) The following matters, among such officer matters as are considered necessary by the board, shall be dealt with by the general body at its annual general meeting, namely:-
(a) election, if fallen due, of the directors or delegates;16
ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Explanation : Election of the directors or delegates shall be deemed to have fallen due, if the termof such board or delegate general body comes to an end within a period of three months from the date of the annual general meeting.
(b) consideration of the long term plan and budget, when required;
(c) consideration of the annual operational plan and budget for the current financial year;
(d) consideration of the annual report of activities for the previous financial year;
(e) consideration of audited financial statements of accounts, the auditor's report relating to the previous financial year and compliance report along with the action taken on it;
(f) consideration of the report on deviations, if any, from the approved budget relating to the previous financial year;
(g) disposal of surplus, if any, of previous financial year;
(h) management of deficit, if any, of previous financial year;
(i) creation of specific reserves and other funds;
(j) review of actual utilisation of reserves and other funds;
(k) review of the report on the attendance at meetings by directors;
(l) review of the use of the co-operative's services by the directors;
(m) review of remuneration paid to any director or member of any committee or internal auditor in connection with his duties in that capacity or his attendance at concerned meetings;
(n) review of quantum and percentage of services provided to non- members vis-a-vis services provided to the members;
(o) report of activities and accounts related to member education and director and staff training;
(p) consideration of any other matter which may be brought before the meeting of the general body in accordance with the bye-laws. 17 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari (2) The following matters, among such other matters as considered necessary by the board, or which are specifically assigned to the general body under any other provision of this Act, may be dealt with by the general body at its annual or general meeting, namely:-
(a) amendments of bye-laws;
(b) removal of directors;
(c) membership of the co-operative in [ principal co-operative]:-
(d) partnership with other co-operatives;
(e) amalgamation, division, merger, transfer of assets and liabilities;
(f) dissolution of the co-operative;
(g) consideration of the Registrar's report of inquiry or reasons for the non-completion of the inquiry.
(3) If the bye-laws of a co-operative provide for election of all or more directors on territorial basis, such director shall be elected from the areas, in a meeting of the members of that area in accordance with the provisions of the bye-laws on a date prior to that of annual general meeting. The result thereof shall be affixed on the notice board of the head office of the cooperative and also at the place of the annual general meeting prior to the commencement of the proceedings of the annual general meeting.
34. President and Vice-President of co-operative. (1) There shall be a President and a Vice President in a co-operative to be elected by the board from amongst its directors in accordancewith the provisions of the bye-laws. The term of President and Vice President elected by the board shall be coterminous with the term of the Board. The board shall at the time of election of President and Vice President also elect representative who shall represent it in other co-operative and the representative so elected shall not be withdrawn by the board till the next elections of the board.
(2) Any casual vacancy in the office of the President or Vice President or representative shall be filled in by the board in accordance with the provisions of the bye-laws and the President or Vice President or 18 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari representative so elected shall hold office for the unexplained term of his predecessor.
(3) The Vice President may resign his office at any time by notice in writing to the President and the President may resign his office at any time by notice in writing to the Vice President. (4) The board may by a resolution passed by three-fourth majority of the directors present and voting at a meeting held for the purpose, remove the President or Vice President on any of the grounds mentioned in sub-section (1) of Section 24. Such meeting shall not be presided by the President or Vice President against whom such resolution is to be considered.
(5) The President or Vice President as the case may be, aggrieved by the resolution passed under sub-section (4) may appeal to the Arbitration Council within thirty days from the date of passing of such resolution whose decision thereon shall be final. (6) In the event of the occurrence of any vacancy in the office of the President by reason ofhis death, resignation or removal, or otherwise, the Vice President shall act as President until the date on which a new President elected in accoredance with the provisions of tyhis Act and the bye-laws to fill such vacancy. (7) When the President is unable to discharge his functions owing to absence, illness, or any other cause, the Vice President shall discharge the functions of the President until the date on which the President resumes his duties.
(8) The Vice President shall during and in respect of the period while he is so acting as or discharging the functions of President have all the powers of the President.
35. Functions, responsibilities anti powers of board. - Board shall discharge such functions, perform such duties and responsibilities and exercise such powers as may be specified in the bye-laws and in accordance with the terms, conditions and procedure laid down therein and in particular the board shall have the following powers, functions and duties namely:- 19
ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari
a) to interpret the organisational objectives, to set up specific goals to be achieved towards such objectives, and to make periodic appraisal of operations;
b) to nominate, elect or appoint and remove the Chief Executive;
c) to make provisions for the matters mentioned in Section 44 in respect of the staff of a co-operative;
d) to finalise long-term perspective plan, annual plan and budget, and to direct the affairs of the co-operative in accordance with the plan and budget approved by the general body;
e) to arrange for funds;
f) to authorise acquisition and disposal of immovable property;
g) to frame, approve and amend regulations relating to services, funds, accounts and accountability, and information and reporting systems;
h) to elect President, Vice-President and representative in accordance with the provisions of the bye-laws;
i) to prepare the annual financial statement of accounts;
j) to file returns and information in accordance with the provisions of sub-sections (1) and (2) of Section 52;
k) to convene annual general meeting or special general meeting under. Section 32;
l) to prepare the business policy for co-operative and to conduct the work in accordance with the business policy;
m) to consider the audit report of accounts of the previous financial year and to take action on its recommendations and to submit the compliance report along with the details of action taken before the annual general meeting.
16. As submitted by Sr. Counsel for the assessee that Rule 41 & 42 of bye laws of the assessee society provides for the Powers and Duties role of President and Manager. From perusaul of the same we find that the nomination of President and Vice President is only for functioning of the socity but the main powers are vested with Board of societies. Section 35 of the M.P. Swayatta Sahakarita Adhiniyam , 1994 provides the power and functions of the Board of 20 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari society to nominate the President as well as to remove him from the post. We thus are of the confirmed opinion that the assessee society is a "separate entity" from its members and from its President. For the purpose of Income Tax also the society is a "Separate Legal Entity" different from its members and office bearers. Under the Income Tax Act the Co-operative society is assessed in the status of Association of persons.
17. We further observe that the alleged cash deposits are in the bank accounts which are undisputedly in the name of society and the facts remain that all the alleged transactions of the cash deposit and corresponding entries and cheque issued are through these bank accounts held in the name of the assessee society. So addition, if any which can be made on account of the alleged transactions of cash deposits in bank accounts can only be in the hands of the assessee society and not in hands of any other peron. It is a settled law that the Income Tax Department must tax the right person and the right person alone and the right persons means the person who is liable to be taxed according to law with respect to a particular income. The assessee society is a co- operative society and separate legal ntity and the cash was depsited 21 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari in its bank account. The hidden income in the alleged transactions if to be taxed should be taxed in the hands of assessee society only.
18. Hon'ble Apex Court in the case of ITO V/s Ch. Atchaiah (1996) 218 ITR 239/84 Taxman 630 held that :-
Under the 1961 Act, the Assessing Officer has no option like the one he had under the 1922 Act. He can, and he must, tax the right person and the right person alone. By 'right person' is meant the person who is liable to be taxed, according to law, with respect to a particular income. The expression 'wrong person' is obviously used as the opposite of the expression 'right person'. Merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income. This is so irrespective of the fact as to which course is more beneficial to the revenue. The language of the relevant provisions of the 1961 Act is quite clear and unambiguous. Section 183 shows that where the Parliament intended to provide an option, it provided so expressly. Where a person is taxed wrongfully, he is no doubt, entitled to be relieved of it in accordance with law, but that is a different matter altogether. The person lawfully liable to be taxed can claim no immunity because the Assessing Officer (ITO) has taxed the said income in the hands of another person contrary to law.
A comparison of the provisions of the 1922 Act and the 1961 Act immediately brings out the difference between them. Section 3 of the 1922 Act provided that in respect of the total income of a firm or an AOP the income-tax would be charged either on the firm or the AOP or on the partners of the firm or on the members of the AOP individually. This option was to be exercised by him keeping in view of the interest of the revenue. Whichever course was more advantageous to the revenue, he was entitled 22 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari to follow it. In such a situation, it was generally held that once the ITO opted for one course, the other course was barred to him. But no such option is provided to him under the 1961 Act. Section 4 says that income- tax shall be charged on the total income 'of every person' and the expression 'person' is defined in clause (31) of section 2. The definition merely says that the expression 'person' includes, inter alia, a firm and an AOP or a body of individuals whether incorporated or not. There are no words in the 1961 Act which empower the Assessing Officer to give him an option to tax either the AOP or its members individually or for that matter to tax the firm or its partners individually. If it is the income of the AOP in law, the AOP alone has to be taxed; the members of the AOP cannot be taxed individually in respect of the income of the AOP. Consideration of the interest of revenue has no place in this scheme. When section 4(1) speaks of levy of income tax on the total income of every person, it necessarily means the person who is liable to pay income-tax in respect of that total income according to law. The tax has to be levied on that person, whether an individual, HUF, company, firm, AOP, BOI, a local authority or an artificial juridical person. From this, it follows that if income of B is taxed in the hands of A, A may be legitimately aggrieved but that does not mean that B is exonerated of his liability on that account. B cannot say, when he is sought to be taxed in respect of the total income which is lawfully taxable in his hands, that since the Assessing Officer has taxed the very same income in the hands of A, he himself cannot be taxed with respect to the said total income. This is not only logical but is consistent with the provisions of the Act. Where the Parliament wanted to provide an option, a discretion, to the ITO, it has provided so expressly. Section 183 provides that in the case of an unregistered firm, it is open to the ITO to treat it, and make an assessment on it, as if it were a registered firm, if such a course was more beneficial to the revenue - in the sense that such a course would fetch more tax to the public exchequer.23
ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Section 183 corresponds to section 23(5)(b ) of the 1922 Act. The 1922 Act not only provided an option to the Assessing Officer in the matter of a firm and an AOP under section 3 but also expressly enabled him to assess an unregistered firm as a registered firm, if, by doing so, more tax accrued to the State. The 1961 Act has omitted the first option, while retaining the second.
19. Hon'ble Apex Court referred to above stated judgment subsequently in the case of Maneklal Agrawal V DCIT (2017) 84 Taxmann.com 116(SC) held that :-
Going by the nature of transaction, a clear finding of fact is arrived at by the authorities below that a devise was made by the appellant herein to show lesser income at his hand and because of this reason only he purportedly entered into a lease agreement with his wife, son and daughter-in-law in respect of the aforesaid property of which he is paying by letting them at a very nominal rates and allowing his family members to sub-let the same at a much higher rents. In these circumstances, these findings of fact cannot be interfered with in the present appeals. It has been held by this Court in ITO v Ch. Atchaiah [1996] 218 ITR 239/84 Taxman 630, that the Assessing Authority has a right to tax the "right person". Once it is found that the income in fact belongs to the appellant he was the right person for taxing the said income, it was permissible for the Income Tax Authorities to tax the said income at the hands of the assessee.
20. Similar view was taken in the case of M.V. Valliappan v. CIT [1988] 170 ITR 238/37 Taxman 46 (Mad), Asstt.24
ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari CIT v. Janak P. [2003] 86 ITD 15 (Ahd.), ITO v. K. Venkatesh Dutt [2004] 87 TTJ (Bang.), CIT v. Sriram Jagannath [2001] 250 ITR 689/119 Taxman 581 (Raj.).
21. We therefore in the light of above judgments and in the given facts of the case are of the view that the element of income, if any embedded in the alleged transactions of cash deposited and cheque issued to various concerns consistently/correspondingly from the bank accounts held in the name of the registered co-operative society having its Permanent Account Number and operating under the registered bye-laws, to be taxed under the provisions of Income Tax Act should only be in the hands of the assessee society and not in the name of the office bearers including the President of the Society Shri Manish Kothari (who is also one of the appellant in the captioned appeal before us).
22. As regards the quantum of addition to be sustained in the hands of assessee Society, we find that it remains an uncontroverted fact that right from the moment survey was conducted it was stated at multiple occasions by the persons who were the authorized signatory in the bank accounts held in the name of the society that the society is indulged in the activity and 25 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari accepting cash from different traders/members and in turn issued cheques/Demand Draft from its bank accounts in favour of different suppliers/companies/persons. In lieu of this facility provided to the traders/members, Society used to charge service charge @Rs.100/- per Lakh. Even this fact that the society is charging commission Rs.100 per lakh has been confirmed by various businessman in their statements recorded during the course of survey and also during the post survey proceedings and the details were appearing in the computerized Excel sheet prepared for some of the assessment years. It was confirmed by some of the traders/persons that they have deposited cash in the bank account of the society and against which cheque/Demand Draft were issued by the Societies bank on their request. In the written submissions also screen shots of sample of cash receipt, voucher in the name of the society showing cash received from the persons/members/traders and the screen shots of cheque issued to various business concerns are placed on record. These business concern includes Private Limited Companies also. Our this finding is further corroborated by the fact that during the assessment proceedings for Assessment Years 2012-13 to 2015-16 carried out 26 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari in the case of another assessee who is also in appeal before us i.e. Shri Manish Kothari and in whose hand substantive addition has been confirmed by Ld. CIT(A), Ld. A.O. while examining the issue of deposit of cash of Rs.55.54 crores in the bank account of the society for Assessment Year 2015-16 (Year of survey) bifurcated the details appearing in the computer excel sheet in three categories:-
(i) Parties shown/accepted/admitted transactions with the society totally/partially.
(ii) Parties having transaction not for purpose of deposit with bank account or to say not for purpose of getting cheques issued.
(iii) Parties who have totally/partially denied transactions with the society.
23. In the first category where the parties have admitted the transaction with the society Ld. A.O has reproduced a list of persons through whom transaction of around Rs.6,22,96,066/- was carried out and all these persons have accepted to have taken the services of the society for getting the cheques issued against cash, Ld. A.O has made the addition of Rs.62,296/- only which is 0.1% 27 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari (Rs.100 per lakh) of the total cash deposit by these parties of Rs.6,22,96,066/- observing as follows:-
Thus, the total deposits of Rs.6,22,96,066/- have been admitted by parties mentioned in the list of above during assessement/verification. Some of the parties have already reflected these transactions in their ITR and some of the parties have admitted/accepted transactions as their unrecorded/ undisclosed transactions. In case of acceptance of the amount totaling to Rs.6,22,96,066/- by various parties, commission in respect of these deposits only is added to the income of Shri Manish Kothari substantively and addition of same amount is made protectively in case of Shri Vardhman Sakh Sahakarita Maryadit, Ujjain on the basis of the facts already discussed supra. Commission is taken at Rs.100 per Rs.1,00,000/-, Accordingly amount of Rs.62,296/- is added substantively in the hands of Shri Manish Kothari as undisclosed commission of the year under consideration.
24. Similarly in the case of Shri Manish Kothari for Assessment Year 2014-15 the Ld. A.O has made addition of Rs.1,10,644/- on the transaction value of Rs.11,06,43,811/-, for addition of Rs.48,288/- for Assessment Year 2013-14 on the transaction of cash deposits of Rs.4,82,27,857/- and addition of Rs.44,284/- for Assessment Year 2012-13 on the transaction value of cash deposit of Rs.4,42,84,445/-. This action of the Ld. A.O on the very same set of transaction of cash deposit in bank accounts coupled with the fact that the list of persons mentioned by Ld. A.O in various 28 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari assessment years also carried details of their Permanent Account Number asserts the fact that the assessee society was undulged in providing services for issue of cheques against cash deposits used to charge commission @0.1% of the transaction value.
25. Apart from this modus operandi of assessee society of having its source of income from service charge for providing cheque/drafts in lieu of cash received from the parties, no other source of income has been unearthed by the survey team nor by the Ld.A.O during the course of assessment proceedings. The impugned huge additions seems to be illogical and merely on surmises and conjectures with no supporting evidence. No efforts were made to know about where the encashed cheques were issued. Information were available with the bank authorities. In some cases cheques are issued to private limited companies. One can easily ascertain the relevant information by making enquiry so as to find out the purpose of such transfers, actual transaction happened and whether assessee society was actually carrying out any other business.
26. In view of above, so far as quantum of addition to be sustained in the hands of Society is concerned, one option is to calculate the 29 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari service charge @0.1% (Rs.100/- per lakh) on the total amount of transaction of cash deposited in the bank account for the years under appeal since no other source of income is proved to have been earned by the society. Second option can be that similar type of cases where the assessee is found to be engaged in providing accommodation entries or engaged in providing cheque facility by way of receiving cash and issuing the cheque but complete details of the parties giving cash and received cheque are not given by the assessee or the revenue authorities are unable to gather any information and no other information is found against the assessee ofhaving earned income from such types of transactions then the additions are confirmed to the extent of peak credit/peak balance in the bank accounts. Similar ratio has been laid by the Hon'ble courts and Co-ordinate benches in the judgments/decisions referred by Ld. Sr. Counsel for the assessee.
(i) In the case of S. Venkat Reddy V/s ITO(supra) the Co- ordinate Bench of Hyderbad placed reliance on the Hon'ble Apex Court in the case of P.K. Noorjahan observing as follows:-
7. We have heard the rival contentions and perused the record. In the case of P.K. Noorjahan (supra), the Hon'ble Supreme Court observed that section 68 of the Act imposes burden on the part of the assessee to explain the source of cash deposits but merely because it could not 30 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari be explained the amount cannot automatically be added since the expression "May" used in Section 68 of the Act imposes an obligation on the Assessing Officer to verify as to whether assessee could have earned such huge income in one year. In the instant case, it is not in dispute that the assessee's income either in the earlier year or in subsequent years has never crossed the threshold of Rs. 2 lakhs in which event the Assessing Officer could have kept the same in mind while making the addition. Even while computing the assessment to the best of his judgment, under section 144 of the Act, it is the duty of the Assessing Officer to make an addition on the basis of the available material and circumstances of each case. Judgement is a faculty to decide the matters with wisdom, truly and legally and it should not depend on the arbitrary caprice of an officer. In other words, though an element of guess work is involved in best judgement it should not be a wild one, as held by the Hon'ble Supreme Court in the case of State of Kerala v. Velukutti [1966] 60 ITR 239. In the instant case, the Assessing Officer ought to have taken into consideration the normal turnover of the assessee, the expected profit in each year, based on the earlier year's income declared and accepted in order to estimate the income of the current year; while holding that there was some undisclosed income assessable to tax under section 68 of the Act. The assessee having furnished the bank statement Assessing Officer could have verified and noticed that there were credits and corresponding debits which would give an indication that some amount has been recycled and it is a settled principle that in such cases ordinarily, peak credit is taken into consideration for the purpose of making an addition. On a conspectus of the matter, we are of the view that an addition of peak credit would meet the ends of justice. We, therefore, direct the Assessing Officer accordingly.31
ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari
(ii) The Co-ordinate Bench Kolkata in the case of Amit Agrawal (supra) relied on the decision of Kolkata Tribunal in the case of Shri Binod Kumar Jha V/s ITO ITA No.577/Kol/2013 order dated 20.11.2015 observed as follows:-
6. We have heard the rival contentions and perused the materials available on record. From the foregoing discussion, we find that Authorities Below have treated the entire cash deposits with the bank account of assessee as undisclosed income on the premise that assessee failed to produce the parties to whom the cheques were issued. Authorities Below has also denied the arguments made by assessee that he was engaged in the business of accommodating entries provided to various parties. Now the question before us arise so as to whether the cash deposit in the bank account of assessee amounts to undisclosed income. In the aforesaid facts and circumstances, we find that various courts have held to apply the peak credit theory and in this regard, we rely in the order of Hon'ble Kolkata Tribunal in the case of Binod Kumar Jha Vs. ITO ward 25(2) in ITA 577/kol/2013 date of order 20.11.2015. The relevant extract of the order is reproduced below.
"5. We have heard rival submissions and gone through facts and circumstances of the case. We find from the facts of the case that the assessee has deposited cash amounting to Rs.83,48,16,130/- in six undisclosed bank account maintained with Axis Bank Ltd. The assessee before AO filed working of peak credit in relation tocash deposits made in these six bank accounts and requested the AO to assess the peak credit amounting to Rs.1,01,40,000/-. The assessee claimed to have computed the peak credit of these six bank accounts taking all the deposits and withdrawals. The AO while framing assessment treated the unexplained cash credit/unexplained investment in bank i.e. cash deposits made in these six bank 32 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari accounts and added to the returned income of the assessee in total. The assessee now before us claimed that he is engaged in the business of providing accommodation entries and for this he placed reliance on the statement recorded by the AO u/s. 131 of the Act on 13.12.2011 wherein he explained the modus operandi of his business. The relevant statement reads as under: Binod Kumar Jha, AY 2009-10 Binod Kumar Jha, AY 2009-10 Binod Kumar Jha, AY 2009-10 Binod Kumar Jha, AY 2009-10 In view of the above statement the assessee claimed that he is engaged in the business of providing accommodation entries to various parties on commission basis and this commission has all along been disclosed by him as business income in the returns of income particularly for AYs 2008-09, 2009-10 and 2010-11. Now before us assessee's counsel argued that even peak credit cannot be added in the hands of the assessee only finance commission earned by him @ 0.25% to 0.50% at the best can be assessed. Ld. Counsel for the assessee drew our attention to paper book filed by assessee and particularly pages 1 to 41, wherein extract from bank statement of six undisclosed bank accounts of Axis Bank and calculation showing peak credit after consolidation is enclosed. There is no dispute about the cash deposited in these six bank accounts maintained with Axis Bank Ltd. We find from the above statement recorded by the AO of the assessee particularly Question nos. 14 and 15 that assessee is only a conduit in a big syndicate of accommodation entry providers and he has earned only commission income for providing accommodation entry. The assessee used to receive cash and deposit the same in one of these six bank accounts and issued cheque of the same amount as can be seen from the extracts of bank statements of these six bank accounts filed by assessee in its paper book. On the very date of cash deposit, cheque is issued of the similar amount. This clearly reveals that the assessee is being used for providing accommodation entry only. All the deposits made in these six bank accounts have been transferred to Maple Advisory Services Pvt. Ltd. and in turn Maple Advisory Services Pvt. Ltd. has further transferred this amount to six Private Limited Companies namely, Gokul Distributors, Indigo Commotrade, Jupiter Tradelink, New Era Commotrade, Swift Distributors and Zenith Management and all these private limited companies are having their bank Binod Kumar Jha, AY 2009-10 accounts in the same bank branch. This modus operandi clearly reveals that the assessee is merely an accommodation entry provider and nothing else.
6. In view of the above facts and circumstances, the Ld. Counsel for the assessee relied on the decision of Coordinate bench in the case of ITO vs. Shri Piyush Poddar in ITA No. 1050/Kol/2011 for AY 33 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari 2006-07 dated 07.09.2015, wherein exactly on similar circumstances, the Tribunal has directed the AO to assess the peak credit and by observing held as under:
"10. We have heard the rival submissions and perused the materials available on record. It is seen that the assessee apart from his regular income had a bank account with Central Bank of India which was used by him only for the limited purpose of providing accommodation entries to various parties. Initially the assessee took a stand that he was deriving finance commission @.25% of all the transactions in the accommodation entry business and offered the same to tax., However, he shifted his stand by accepting the peak credit theory before the ld. CIT(A). This is evident from the fact that he had not preferred further appeal before the Tribunal against the ld. CIT(A)'s order. In accordance with the directions of the Hon'ble Calcutta High Court, we had examined the veracity of the claim of peak credit theory made by the assessee in respect of all the transactions in Central Bank of India. It is observed that the assessee had rotated his own funds in Central Bank of India for providing accommodation entries to various parties. It is not disputed that the genuineness of the transaction could not be proved by the assessee by mentioning the names, addresses, PAN, confirmation of the parties to whom the payments were made and from payments were received by the assessee. Hence it is proved that transactions contained in the bank account are not genuine. Once the transactions in the bank account are proved ingenuine then it is an accepted practice of adopting the peak credit theory for the purpose of determination of undisclosed income of the assessee. Hence, reliance placed by the ld. DR in the decision of the Hon'ble Allahabad High Court reported in 276 ITR 38 which rejected the concept of peak credit theory is not applicable to the facts of the instant case. In the case before the Hon'ble Allahabad High Court, the assessee claimed that the credits in the bank account represented genuine loans borrowed and the character of the loan transactions were not disputed and hence their lordships of Allahabad High Court held that the peak credit theory would not be applicable in that case. But in the facts of the instant case, the assessee had clearly owned up the transactions and that he is engaging himself in accommodation entry business with his own funds as well as funds received from parties to whom the accommodation entries are provided by the assessee and the names and addresses of such parties could not be provided by him for want of maintenance of books and details. This goes to prove that the genuineness of the transactions contained in the accommodation entry business as reflected in the said bank account could not be 34 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari proved by the assessee. This is a distinct and crucial factor which distinguishes the decision rendered by the Hon'ble Allahabad High Court in 276 ITR 38 which was heavily relied upon by the Revenue.
11. On perusal of the bank account with Central Bank of India, we are satisfied that the deposits and withdrawals are closely linked with and related to each other on day-to- day basis. It is also observed that the ld. AO had not brought any material or evidence on record to prove that the withdrawals made by the assessee from the said bank account having utilized for making any other investments outside the books or meant for any other purpose other than for accommodation entry business. It is pertinent to look into the decision rendered by the Kolkata Tribunal in the case of Mahesh Kumar Gupta in IT(SS)A. No.11/Kol/2014 dated 0.2.2005 wherein ITAT observed that the claim of the assessee was that the cheque withdrawals were for giving loan for the short period. Held as follows :- Binod Kumar Jha, AY 2009-10 "The AO cannot refuse to grant set off for the withdrawal made by cheque without bringing on record any materials so that the amount withdrawn by cheque cannot have been received back by the assessee and utilized by him in making subsequent deposits by cheque. Taking all this into consideration, we are of the considered opinion that AO should adopt peak credit method to arrive at the undisclosed income of the assessee in the undisclosed bank account No.SB 6664 with the Syndicate bank."
Reference may also be drawn to the decision of the Hon'ble Apex Court in the case of CIT vs Smt. P.K.Noorjehan reported in 237 ITR 570(SC) wherein their lordships have held that mere unsatisfactoriness of the explanation offered by the assessee, does not, and need not, automatically result in deeming the value of investment to be the income of the assessee. That is still a matter within the discretion of the officer and, therefore, of the Tribunal. In other words, the discretion has been conferred on the Income tax Officer u/s 69 of the Act to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case. The Income Tax Officer is not obliged to treat the value of investment as income in every case where the explanation offered by the assessee is found to be unsatisfactory.
12. Hence it would be unreasonable to tax all the deposits in the bank account of the assessee. To this extent, we do not appreciate the action of the ld. AO in taxing the entire credits of 35 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Rs.6,30,89,413/- as undisclosed income of the assessee for A.Y.2006-07. To put this ongoing dispute to rest, in the interest of justice and fair play, we direct the ld. AO to assess the peak credit in this case in respect of both cash as well as cheque transaction contained in the said bank account by verifying the veracity of the figures worked out by the assesse and bring to tax the same. We draw support from the decision rendered by 'C' Bench of Kolkata ITAT in ITA No.2069/Kol/2010 for A.Y.2007-08 dated 23.03.2012 in the case of ITO vs Shri Ganga Prasad Vyas wherein it was held that "We find that the assessee has filed statement of peak credit i.e. deposit and withdrawals from the bank account of SBBJ wherein the peak credit as on 24.01.2007 was at Rs.1,80,247/-. We further find that the money deposited in the bank account was withdrawn either on the same day or on subsequent dates. It is seen that the total addition of the aggregate deposits in the bank account after giving benefit of withdrawals is the peak amount and in that case peak amount is to be added. We find that the assessee has maintained a bank account which is admittedly not disclosed to the revenue and there is no doubt that the deposits in this bank account represents undisclosed income of the assessee to be assessed as undisclosed income but qua only the peak amount. The assessee has filed complete statement of peak deposit and withdrawals which is at Rs.1,87,247/- and before CIT(A). We are of the view that the CIT(A) has rightly directed the AO to restrict the addition to the extent of peak amount and we confirm the same. This issue of revenue's appeal is dismissed."
13. However, we would like to make it clear that this direction to the ld. AO to assess the peak credit in this case should not be construed as a conclusive proof in the hands of the beneficiary in the said bank account for explaining their amounts. Accordingly, this issue is set aside to the file of the ld. AO to complete the assessment in accordance with the directions mentioned hereinabove.
" 7. In view of the above facts and circumstances, we direct the AO to assess the peak credit being a sum of Rs.1,01,40,000/- as computed by assessee on the basis of deposits made in these six bank accounts with Axis Bank Ltd. in lieu of cash deposits added by the AO at Rs.83,48,16,130/-. Accordingly, the AO will verify the peak and will make Binod Kumar Jha, AY 2009-10 addition of the peak amount only. Accordingly, this issue of assessee's appeal is partly allowed for statistical purposes."
From the above, we conclude that assessee has furnished his statement on oath stating that he is engaged in providing 36 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari accommodating entries to various parties and for this act earned nominal amount of commission income. From the perusal of bank statement, we find that cash was deposited and immediately it was transferred to the account of the party leaving negligent amount of balance in the bank account of assessee. In our considered view, we conclude that assessee is engaged in providing accommodated entries to the parties. Had there been the business of the iron and steel of the assessee then the lower authorities should have brought on record the evidence of the business but the ld. DR failed to bring the same. We also find that the cash was immediately withdrawn after the deposit of the cash. This transaction shows that the money does not belong to the assessee. In the absence of any information about the iron & steel business of the assessee, we are accordingly inclined to apply the peak credit theory to tax the undisclosed income of assessee. We reverse the order of Authorities Below. AO is directed accordingly. This ground of assessee is allowed in terms of above.
(iii) Hon'ble Kolkata Tribunal in the case of Shri Binod Kumar Jha v. Income Tax officer, WD-25 (2), Kolkata (ITA No. 577/Kol/2013) vide order dated 20/11/2015 hon'ble Tribunal held that :
In view of the above statement the assessee claimed that he is engaged in the business of providing accommodation entries to various parties on commission basis and this commission has all along been disclosed by him as business income in the returns of income particularly for AYs 2008-09, 2009-10 and 2010-11. Now before us assessee's counsel argued that even peak credit cannot be added in the hands of the assessee only finance commission earned by him @ 0.25% to 0.50% at the best can be assessed. Ld. Counsel for the assessee drew our attention to paper book filed by assessee and particularly pages 1 to 41, wherein extract from bank statement of six undisclosed bank accounts of Axis Bank and calculation 37 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari showing peak credit after consolidation is enclosed. There is no dispute about the cash deposited in these six bank accounts maintained with Axis Bank Ltd. We find from the above statement recorded by the AO of the assessee particularly Question nos. 14 and 15 that assessee is only a conduit in a big syndicate of accommodation entry providers and he has earned only commission income for providing accommodation entry. The assessee used to receive cash and deposit the same in one of these six bank accounts and issued cheque of the same amount as can be seen from the extracts of bank statements of these six bank accounts filed by assessee in its paper book. On the very date of cash deposit, cheque is issued of the similar amount. This clearly reveals that the assessee is being used for providing accommodation entry only. All the deposits made in these six bank accounts have been transferred to Maple Advisory Services Pvt. Ltd. and in turn Maple Advisory Services Pvt. Ltd. has further transferred this amount to six Private Limited Companies namely, Gokul Distributors, Indigo Commotrade, Jupiter Tradelink, New Era Commotrade, Swift Distributors and Zenith Management and all these private limited companies are having their bank accounts in the same bank branch. This modus operandi clearly reveals that the assessee is merely an accommodation entry provider and nothing else.
In view of the above facts and circumstances, the Ld. Counsel for the assessee relied on the decision of Coordinate bench in the case of ITO vs. Shri Piyush Poddar in ITA No. 1050/Kol/2011 for AY 2006- 07 dated 07.09.2015, wherein exactly on similar circumstances, the Tribunal has directed the AO to assess the peak credit
7. In view of the above facts and circumstances, we direct the AO to assess the peak credit being a sum of Rs.1,01,40,000/- as computed 38 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari by assessee on the basis of deposits made in these six bank accounts with Axis Bank Ltd. in lieu of cash deposits added by the AO at Rs.83,48,16,130/-. Accordingly, the AO will verify the peak and will make addition of the peak amount only. Accordingly, this issue of assessee's appeal is partly allowed for statistical purposes.
(iv) Hon'ble Gujarat High Court In the case of Commissioner of Income-tax- III v. Tirupati Construction Co [2015] 55 taxmann.com 308 (Gujarat) Hon'ble High Court held that :
7. At the outset, it is required to be noted that, while appreciating a document, it is required to be considered in its entirety and it cannot be considered in part. In the case on hand, while appreciating the papers / documents, which according to the Assessing Officer, contained accounted and unaccounted transactions on the part of the Respondent-assessee, she not only failed to examine it properly but also failed in assessing the income as per law. Further, though, the AO, herself, had prepared the account of profit and loss in respect of accounted and unaccounted entries, she did not assign any reason, as to why the profit and loss account of unaccounted transactions of the Respondent-assessee cannot be believed to be true. Moreover, the AO also did not take into consideration the explanations tendered by the Respondent-assessee vide letters dated 10.12.2008 and 29.12.2008. Even, the working of the peak based on the seized diary given by the Respondent-assessee for the concerned assessment years was also overlooked by the AO and, here again, no reason was assigned for the same. We are, therefore, of the opinion that the CIT(A) rightly held that it would be just and proper, if, the income from the transactions recorded in the seized diary are determined on 39 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari the basis of highest peak, as increased by the net profit of 5 per cent on the receipts and taxed accordingly, for the relevant assessment years. We do not find that the CIT(A) and ITAT has committed any jurisdictional error in passing the impugned orders"
27. Thus on examining the facts of the instant case in the light of above decisions, we find that the facts are similar so much so that in all these cases the assessees were either engaged in providing accommodation entries to various parties or were not able to explain the source of cash deposit and cheques issued and no other business or other source of income was found to be carried out by these assesee's having nexus to the alleged deposits. Similar is the case of assessee society which being a separate legal entity is not found to be engaged in regular business activities and there are regular cash deposits and corresponding cheque issue in the bank accounts (duly encahsed) held in the name of the assessee society.
Therefore in this situation the revenue authorities can also sustain the addition to the extent of peak balance. The assessee society has provided following working of the yearwise cumulative peak:-
S.No. Asst. Year Yearwise Peak Comulative Peak 1 2008-09 40,75,856 40,75,856 40 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari 2 2009-10 3,47,057 44,22,913 3 2010-11 12,42,542 56,65,455 4 2011-12 11,74,432 68,39,887
28. We therefore in the given facts and circumstances of the case and in view of the decision referred herein above which are squarely applicable in the case of the assessee are of the considered view that firstly the action of Ld. CIT(A) deleting the protective addition made in the hands of the society was not justified since the transactions of cash deposits and cheque issuance were carried out through banking account of the registered co-operative society running for last many years ignoring the fact that the society is a separate legal entity having its Permanent Account Number, secondly Ld. CIT(A) erred in confirming the substantive addition in the hands of the President of the society Mr. Manish Kothari who was merely an office bearer appointed by the Board Members of the society providing honourable services and there is no iota of evidence to show the nexus of the alleged transaction carried out through bank account held in the name of the society with any of the office bearer and thirdly as regard to quantum of addition to be 41 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari confirmed in the hands of the assessee society the same should be higher of the two amounts namely "service charge @Rs.100 per lakh (0.1%) of the alleged cash deposited in the bank account" or "the yearwise peak balance of all the bank accounts of the society". This exercise should be carried out at the end of the Ld. A.O in order to make necessary addition in the hands of th society. In the result common issue raised by the revenue in the case of the assessee society through ITA No.286 to 289/Ind/2018 for Assessment Years 2008-09 to 2011-12 are partly allowed.
29. Now we take up the appeals of the assessee namely Shri Manish Kothari for Assessment Year 2008-09 to 2015-16 vide ITA No.719 to 722/Ind/2017 & 862 to 86/Ind/2019. Though the assessee has raised detailed grounds of appeal challenging the relevant finding of Ld. CIT(A), however they can be summarized in to following effective grounds:-
(i) Challenging the reopening of the completed assessments for Assessment Years 2008-09 to 2015-16;
(ii) Challenging the substantive addition for unexplained investment u/s 69 of the Act made for the alleged cash 42 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari deposits in the bank account of the society namely Shree Vardhman Sakh Skarita Maryadit. The yearwise addition is mentioned below:-
ASST.YEAR AMOUNT 2008-09 9,23,93,228/-) 2015-16 13,90,35,137/- (A.Y. 2009-10) 17,69,03,922/- (A.Y 2010-11) 26,21,59,360/- (A.Y 2011-12) 34,48,78,938 & 2,53,43,026 (37,02,21,964) (A.Y 2012-13) 36,54,12,434 & 15,85,15,839 (52,39,28,273) (2013-14) 65,07,34,968 & 9,42,00,954 (2014-15) 35,16,71,541 & 14,14,62,089 (49,31,33,63) (A.Y 2015-16)
(iii) Additions made on the basis of documents found during the course of survey u/s 133A of the Act at the premises of assessee Shri Manish Kothari.
(iv) Apart from the above the remaining grounds are either consequential in nature relating to interest u/s 234A & 234B of the Act or premature and others are general in nature.
30. As regards the first common issue challenging the reassessment proceedings and the issuance of notice u/s 148 of the 43 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Act commonly raised for all the assessment years 2008-09 to 2015-
16, at the outset Ld. Sr. Counsel for the assesee requested for not pressing this legal ground. Since the legal ground challenging the reopening of the assessment and the legality of issuance of notice u/s 148 of the Act is not pressed the same is dismissed as not pressed.
31. Now we take up second common issue for the substantive addition confirmed in the hands of the assessee for the unexplained investment u/s 69 of the Act made for the alleged cash deposit in the bank account of the society namely Shree Vardhman Sakh Skarita Maryadit of which the assessee is holding the post as President. We observe that the impugned additions of Rs 9,23,93,228/-, Rs. 13,90,35,137/-, Rs. 17,69,03,922/-, Rs.26,21,59,360/-, Rs. 37,02,21,964/- (Rs. 34,05,94,493 & Rs.2,53,43,026/)-, Rs. 52,39,28,273/- (Rs. 36,54,12,434/- & Rs. 15,85,15,839/-), Rs.74,49,35,922/- (Rs.65,07,34,968/- & Rs.9,42,00,954/-) and Rs.49,31,33,630/- (Rs.35,16,71,541/- & Rs.14,14,62,089/-) for Assessment Years 2008-09 to 2015-16 respectively was made by the Ld. A.O to the income of the assessee 44 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari on account of cash deposited in the bank account of the society namely Shree Vardhman Sakh Skarita Maryadit. Protective addition was made in the hands of the society and the substantive addition was made in the hands of the assessee for unexplained investment u/s 69 of the Act.
32. We observe that while adjudicating the revenue's appeal in the case of assessee namely Shree Vardhman Sakh Skarita Maryadit we have already dealt with this issue and have held that firstly the addition if any to be made for the alleged cash deposits in the bank account of the society are to be made only in the hands of the society and not in the hands of the office bearer namely Shri Manish Kothari since the society is a "seperately legal entity" having its Permanent Account Number and working under the registered bye laws since last many years. Secondly we have held that the alleged transactions of cash deposits and corresponding entries of cheque issued were not in the nature of any business activity but it was a mere facilitation services being provided by the society to its members and other persons in lieu of service charge at Rs.100/- per lakh and thirdly the addition for the alleged cash deposits 45 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari should be higher of the two namely peak bank balance during the year or the services charged at Rs.100 per lakh on the alleged cash deposit during each of the year.
33. In view of our above findings we hereby hold that all the additions made on substantive basis in the hands of the assessee u/s 69 of the Act for unexplained cash deposits at Rs 9,23,93,228/- , Rs. 13,90,35,137/-, Rs. 17,69,03,922/-, Rs.26,21,59,360/-, Rs. 37,02,21,964/- (Rs. 34,05,94,493 & Rs.2,53,43,026/)-, Rs. 52,39,28,273/- (Rs. 36,54,12,434/- & Rs. 15,85,15,839/-), Rs.74,49,35,922/- (Rs.65,07,34,968/- & Rs.9,42,00,954/-) and Rs.49,31,33,630/- (Rs.35,16,71,541/- & Rs.14,14,62,089/-) for Assessment Years 2008-09 to 2015-16 respectively deserves to be deleted. We accordingly order so and delete the impugned addition made by Ld. A.O for unaccounted investment made u/s 69 of the Act for Assessment Year 2008-09 to Assessment Year 2015-16 in the hands of assessee namely Manish Kothari. However we would like to make it clear that our this decision of deleting the additions made in the hands of the assessee for Assessment Year 2008-09 to Assessment Year 2015-16 with regard to the alleged cash deposit in 46 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari the bank account held in the name of society shall have no bearing on the additions made by the Ld. A.O but which have not been agitated or challenged by the assessee before Ld. CIT(A) or before us. We accordingly order so and allow this common ground of appeal raised by the assessee for Assessment Years 2008-09 to 2015-16.
34. Now we take up the next common issue which relates to the addition made on the basis of loose paper found during the course of survey at the assessee's premises which was carried out on 29.9.2014. Brief facts relating to this common issue are that there was a survey conducted at the office premises of the society Shree Vardhman Sakh Skarita Maryadit u/s 133A of the Act on 29.9.014. On the very same day of survey u/s 133A of the Act was also conducted at the business premises of Shri Manish Kothari who was holding the post of President of the society Shree Vardhman Sakh Skarita Maryadit. Certain incriminating material was impounded in the form of small note book, BF-2, loose papers BF 5 & 8. The yearwise issues for the respective assessment years are summarised in the following manner;
47 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Assessment Years & Issue Wise Addition :-
Issue Asst.Year Amount Ground No.
Addition on Rs 4,68,00/- Ground No. 3 (AY 2008-
account of Loose 09)
paper (BF-2)
impounded
during survey
Addition on Rs 3,04,27,000/- Ground No.4 (AY 2008-
account of Loose 09)
paper (BF-5)
impounded
during survey
Addition on 19854/- Ground No, 5 (AY 2008-
account of Loose 09)
paper (BF-8)
impounded
during survey
Addition on 5,00,000/- Ground No. 3 (AY 2009-
account 10)
brokerage
/Commission by
making reliance
on statement of
Appellant taken
during Survey
(Dated
29/09/14) and
entries on loose
paper
impounded
during survey
48
ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Addition on 22,57,243/- 3.1 & 3.3 (2010-11) account of 13,21,000/- 3.1 to 3.4(2011-12) brokerage 9,47,645/- 3.1 to 3.4(2012-13) /Commission @ 5,37,559/- 3.1 to 3.4(2013-14) 3 % by making 11,98,853/- 3.1 to 3.4(2014-15) reliance on 4,12,359/- to 3.4(2015-16) statement of Appellant taken during Survey (Dated 29/09/14) and entries on loose paper impounded during survey 2.6 Addition on 2012-13 5,00,000/- In continuation of account of 2013-14 5,00,000/- Ground No. 2.8 declaration 2014-15 5,00,000/- (in all the years) made by the 2015-16 82,01,000/-
Assessee during
survey
proceedings
2.7 Addition on 2012-13 40,13,720/- In continuation of
account of Ground No. 2.8
account of Loose (in all the years)
paper (BF-21)
impounded
during survey
2.8 Addition on 2013-14 13,62,346 /- In continuation of
account of 2014-15 36,14,502/- Ground No. 2.8
unexplained 2015-16 13,80,657/- (In all the years
investment in
residential
house at 36,
Arivind Nagar
35. From perusal of the impugned orders we find that the orders of Ld. CIT(A) for Assessment Year 2012-13 to 2015-16 (ITA No.862 to 865/Ind/2019) are ex-parte and nothing has been held/ obsrved on merits. We therefore are of the considered view that except for 49 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari the two issue firstly reopening of the assessment proceedings which are already not pressed by the assessee for Assessment Year 2008- 09 to Assessment Year 2015-16 and secondly the issue of addition of substantive basis for the unexplained investment u/s 69 of the Act for which we have already held that no addition is called for in the hands of assessee Shri Manish Kothari for Assessment Year 2008-09 to Assessment Year 2015-16 u/s 69 of the Act for the alleged cash deposits in the bank account of society namely Shri Vardhman Sakh Sahakarita Maryadit and the same thus deserves to be deleted. All the remaining issues raised by the assessee in the grounds of appeal for Assessment Year 2012-13 to 2015-16 are restored to Ld. CIT(A) for afresh adjudication after affording proper opportunity of being heard to the assessee and directions are also given to the assessee to not to take uncessary adjournments and should file necssary documents in support of its contention with regard to the impugned additions. In the result appeals of the assessee for Assessment Year 2012-13 to 2015-16 are partly allowed for statastical purposes.
36. Now the effective issues which remains to be adjudicated are as follows:-
50
ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Issue Asst.Year Amount Ground No Addition on account of 2008-09 Rs Ground No. 3 Loose paper (BF-2) 4,68,00/-
impounded during survey
Addition on account of 2008-09 Rs Ground No.4
Loose paper (BF-5) 3,04,27,000/
impounded during survey -
Addition on account of 2008-09 19854/- Ground No, 5
Loose paper (BF-8)
impounded during survey
Addition on account 2009-10 5,00,000/- Ground No. 3
brokerage /Commission by
making reliance on
statement of Appellant
taken during Survey
(Dated 29/09/14) and
entries on loose paper
impounded during survey
Addition on account of 2010-11 22,57,243/- 3.1 & 3.3 (2010-11)
brokerage /Commission @ 13,21,000/-
3 % by making reliance on 2011-12 3.1 to 3.4(2011-12)
statement of Appellant
taken during Survey
(Dated 29/09/14) and
entries on loose paper
impounded during survey
37. Submissions made by Ld. Counsel for the assessee are as under:-
(i) As regards the addition of Rs.4,68,000/- made for Assessment Year 2008-09 on the basis of loose paper BF-2, it was submitted that in this loose paper there is no dates mentioned, therefore the addition made for Assessment Year 2008-09 is not warranted. However on perusal order paper of BF-2 paper book-10, page 2789 to 2798 the dates are falling for 51 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Financial Year 2014-15 relevant to Assessment Year 2015-16. Therefore no addition was called for during Assessment Year 2008-09.
(ii) As regards addition of Rs.3,04,27,000/- made for Assessment Year 2008-09 based on loose paper No.BF-5 impounded during the course of survey it was submitted that page No.1 of BF-5 refers to the dates 28.12.2010, 24.12.2010 and page-4 of BF-5 mentions the date 13.12.2011. Thus the addition was uncalled for Assessment Year 2008-
09. However the transactions mentioned in BF-5 relates to the transactions of purchase and sale of immoveable property carried out through buyers and sellers through the brokers and assessee is one of the three brokers involved in this transaction. The percentage of total brokerage is from2 to 3% and effectively the assessee's share is 0.67% to 1%. So the addition if any to be made in the effective Assessment Year should be for the brokerage of 0.67% to 1% on the transaction appearing in the seized document page 1 & 5 of BF-5.
38. As regards Ground No.3 for Assessment Year 2009-10 relating to addition of Rs.5,00,000/-, Ground No.3.1 & 3.3 for Assessment Year 2010-11 for addition of Rs.22,57,243/- and Ground No. 3.1 to 3.4 for Assessment Year 2011-12 for the amount of Rs.13,21,000/-, it was submitted that the addition were made by the Ld. A.O applying brokerage and commission made on the basis of statement of the appellant taken during the course of survey. However the 52 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari addition made by the Ld. A.O was by way of applying brokerage rate of 3% whereas actual brokerage received by the assessee ranging from 0.67% to 1%. The Ld. Sr. Counsel for the assessee referred to the following written submissions:-
Addition OF Rs 5,00,000/- on account brokerage /Commission in A.Y 2008-09 AND Addition on account brokerage /Commission @ 3% in A.Y 2010-11 to 2015-16 The assessee in this ground of appeal has challenged the addition of Rs. 5,00,000/- A.Y 2008-09 on account of brokerage and for subsequent years rate at which of brokerage /commission is charged i.e. @ 3 and there on addition made in the hands of the Appellant on account of brokerage income.
That the Ld assessing officer has referred page no 1, 6, 18, 21, 24 & 25 of BF-7, Page No 1 to 264 0f BF-8, Page No 241 of BF-14 and Page as found and seized as BF-20 & Page No 89 of BF-21.
The Appellant on the basis of BS-10 and BS-13, prepared a cash book from the period from 01-04-2008 to 31-03-2009, similarly for the period from 01-04-2009 to 31-03-2010 and from 01-04-2010 to 31-03-2011 up- to 2014-15. The Ld assessing officer on the basis of that cash book added the following amount to the income of the assessee.
S.No Asst Cash Received Brokerage Estimated Remarks
Year by Ld AO and added
to the Income of
Appellant
1 2009-10 6611678 5,00,000 On the basis of
statement
53
ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari 2 2010-11 7,52,41,468 22,57,243 @3% of cash received.
3 2011-12 2,29,60,232 13,21, 000 On the basis of statement 4 2012-13 3,15,88,167 9,47,645 @3% of cash received 5 2013-14 1,79,18,634 5,37,559 @3% of cash received 6 2014-15 3,99,61,767 11,98,853 @3% of cash received 7 2015-16 1,37,45,300 4,12,359/- @3% of cash received It is submitted that rate of brokerage /commission i.e. @ 3% taken by the Ld AO is factually incorrect and also unjustified. In commercial transactions the amount of brokerage/commission is also distributed amongst the three brokers:-
One broker represent the seller party One broker represent the buyer party The Appellant, who on behalf of the broker of the buyer negotiate with the broker of the seller.
It is submitted that in the property line, the rate of brokerage was around 2% in general and the same was also distributed amongst the three brokers and therefore the percentage of share of the assessing so calculated comes to 0.667% not at 3% as adopted by the assessing officer in relevant assessment years . Hence, in the appeal in hand the amount of brokerage at the most can be calculated (0.667% of amount received in relevant assessment year).
The assessing officer only on the basis of statement of the assessee added an amount of Rs.5,00,000/- in A.Y 2008-08 to the income of the assessee and same was not justifiable more so when the property brokerage income of the assessee on the basis of actual cash realized and 54 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari transfer through the assessee was to calculated @ 0.667% and the same was included in the regular income of the assessee after reducing the legitimate expenses as claimed by the assessee.
That in view of the above the amount of brokerage at the most can be calculated (0.667% of amount received in relevant assessment year).
39. Without prejudice to the above submissions Ld. Sr. Counsel for the assessee also made following alternate submissions for consideration:-
That in light of the above submission in reference to other additions made by the LD AO and thereafter its ex-party confirmation by the LD CIT (A), it is submitted that there is a grave error in the orders passed by the lower authorities in making and sustaining the above addition. That the orders of lower authorities with respect to other impugned additions suffer from following legal infirmities & perversities :
Non- consideration of submissions of the Assessee in their true perspective;
Non consideration of material & evidence on record;
Non examination of the issues involved in the instant case;
Wrongful additions made in violation of natural justice as no proper opportunity was provided to Appellant to put-forth his submission at the stage of assessment proceedings & Appellate proceedings before CIT (A) 55 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Absence of any concrete basis or logical reasons in evaluating and in not accepting the explanation and evidences offered by the appellant with judicial matrix in support of submission.
No opportunity of cross examination was provided by the Ld AO It is therefore prayed before this Hon'ble Tribunal that other additions made in the assessment years suffers from many infirmities which is liable to be set aside. Further if this Hon'ble Tribunal is of opinion that the wrongful addition as made by the ld. A.O. deserves to be remanded to the Assessing Authority, it may kindly direct the Assessing Authority to pass fresh orders in accordance with law after giving proper opportunity of hearing to the Appellant in remand proceedings.
40. Per contra Ld. Departmental Representative vehemently argued supporting the order of Ld. CIT(A).
41. We have heard rival contentions and perused the records placed before us. Apart from the issues raised by the assessee for Assessment Year 2008-09 to Assessment Year 2012-13 we have already been dealt by us in the preceding paras, the assessee has challenged following additions confirmed by Ld. CIT(A) which were made by the Ld. A.O on the basis of loose papers impounded during the course of survey at the premises of the assessee u/s 133A of the Act:-56
ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Issue Asst.Year Amount Ground Addition on account of 2008-09 Rs 4,68,00/- Ground No. 3 Loose paper (BF-2) impounded during survey Addition on account of 2008-09 Rs Ground No.4 Loose paper (BF-5) 3,04,27,000/-
impounded during
survey
Addition on account of 2008-09 19854/- Ground No, 5
Loose paper (BF-8)
impounded during
survey
Addition on account 2009-10 5,00,000/- Ground No. 3
brokerage /Commission
by making reliance on
statement of Appellant
taken during Survey
(Dated 29/09/14) and
entries on loose paper
impounded during
survey
Addition on account of 2010-11 22,57,243/- 3.1 & 3.3 (2010-11)
brokerage /Commission 13,21,000/-
@ 3 % by making 2011-12 3.1 to 3.4(2011-12)
reliance on statement of
Appellant taken during
Survey (Dated
29/09/14) and entries
on loose paper
impounded during
survey
42. As regards Ground No.5 for Assessment Year 2008-09 for addition of Rs.19,854/- there were no submissions made from the side of assesse and it seems that assessee is not interested to press this ground. We accordingly dismiss Ground No.5 for Assessment 57 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Year 2008-09 as not pressed and confirm the addition of Rs.19,854/-.
43. As regards Ground No.3 for Assessment Year 2008-09 for addition of Rs.4,68,000/- it is claimed before us that in the loose paper No.BF-2 there are certain transactions falling in the Financial Year 2014-15 but the additions has been made during Assessment Year 2008-09. Certainly no addition was called for Assessment Year 2008-09 however since we have already set aside the impugned order of Ld. CIT(A) for Assessment Year 2015-16 for readjudication purpose and to decide the issues on merits this issue of addition based on loose paper BF-2 allegedly made at Rs.4,68,000/- is also set aside to Ld. CIT(A) who shall decide about the additions if any to be made in accordance with law in the hands of the assessee. Thus Ground No.3 for Assessment Year 2008-09 is allowed for statastical purposes.
44. As regards Ground No.4 for Assessment Year 2008-09 relating to addition of Rs.3,04,27,000/- made on the basis of loose paper BF-5 we observe that some dates referred on the page 5 of BF-5 is 20.12.2010 and 24.12.2010 and on page 4 BF-5 date mentioned as 13.12.2011. There is no mention of any date falling in Assessment 58 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari Year 2008-09. Prime faice no addition is called for Assessment Year 2008-09 on the basis of this loose paper. However as regards the quantum of addition is concerned it is claimed before us that the alleged transactiuons are of purchase and sale of property and the assessee being engaged in this business of earning brokerage on such transactions of purchase and sale of immoveable properties the income to be computed should be between 0.67% to 1% as normally there are three brokers in each of such transactions.
45. In the given facts and circumstances of the case we are of the view that this issue also needs to be set aside to the CIT(A) for fresh adjudication. So far as Assessment Year 2008-09 is concerned no addition seems to be called for however in the set aside proceedings Ld. CIT(A) may decide in accordance with law after giving reasonable opportunity of being heard to the assessee to confirm the addition for the relevant assessment year to which the transaction pertains and also decide whether the addition should be made for the amount mentioned in the alleged document or the element of income i.e. brokerage as contended by Ld. Sr. Counsel for the assessee. Ground No.4 for Assessment Year 2008-09 is thus allowed for statastical purposes.59
ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari
46. Now we are left with the common issue of addition on account of brokerage/commission for Assessment Years 2009-10 to 2011-12 for the amount of Rs.5,00,000/-, Rs.22,57,243/- and Rs.13,21,000/-. We observe that the additions were made on the basis of statement given during the course of survey and Ld. A.O applied brokerage of 3% on the transaction appearing in the loose papers. Assessee has contended that his share of income is hardly 0.67% to 1% as there are three brokers namely one to represents the seller, second who represents the buyer and third the appellant who on behalf of the broker and buyer communicates with the broker of the seller. Though there seems merits in the contention of the Sr. Counsel for the assessee but since we have already set aside the similar issue raised in Ground No.4 for Assessment Year 2008- 09 we deemed it proper to set aside this common issue of computation of brokerage/ commission also to Ld. CIT(A) to decide about the final rate of brokerage to be applied which can range anywhere between 0.67% to 3%. Needless to mention that proper opportunity of being heard should be provided to the assessee to present its case. In the result the common issue raised through Ground No.3 for Assessment Year 2009-10, Ground No. 3.1 & 3.3 60 ITA Nos. 286 to 289/Ind/2018 ,719 to 722/Ind/2017 & 862 to 865/Ind/2019 Shri Vardhman Sakh Sahakarita Maryadit & Manish Kothari for Assessment Year 2010-11 and Ground No. 3.1 to 3.4 for Assessment Year 2011-12 are allowed for statastical purposes.
47. The common ground relating to charging of interest u/s 234A & 234B of the Act are consequential in nature which needs no adjudiction. Thus all the appeals of the assessee are partly allowed for statastical purposes.
48. In the result appeal raised by Revenue vide ITA No.286 to 289/Ind/2018 for Assessment Years 2008-09 to 2011-12 are partly allowed and appeal raised by the assessee's vide ITA No.719 to 722/Ind/2017 & 862 to 865/Ind/2019 for Assessment Years 2008- 09 to 2015-16 are partly allowed for statistical purposes.
The order pronounced in the open Court on 11.02.2021.
( KUL BHARAT) (MANISH BORAD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
नांक /Dated : 11 February, 2021
/Dev
Copy to: The Appellant/Respondent/CIT concerned/CIT(A)
concerned/ DR, ITAT, Indore/Guard file.
By Order,
Asstt.Registrar, I.T.A.T., Indore
61