ACIT Vs Darshanam Life Space Pvt.Ltd. (ITAT Ahmedabad)
Conclusion: Where AO had estimated value of accommodation entries devoid of any documentary evidences or material, the same could not be sustained. Since in the case of the assessee the payment of Rs.6,43,406/- was considered as accommodation entries and it was noticed that assessee had not reconciled this payment with outstanding amount of Rs.7,91,406/- as per invoice raised for labour charges, therefore, the disallowance was restricted to the extent of Rs.6,43,406/-.
Held: AO had received information from ACIT, Ahmedabad who had assessed the case of Shri Jaymesh Rami under section 153A regarding providing of accommodation entries. AO had issued show-cause notice to assessee stating that Shri Jaymesh Rami had received commission of Rs.6,43,406/- from the assessee-company. Therefore, he had reopened the case after recording reason under section148. AO held that 15% of the total amount of accommodation entries of Rs.25,73,62,400 to the amount of Rs.3,86,04,360/- and added to the total income of assessee. It was held that AO has estimated value of accommodation entries devoid of any documentary evidences or material and hence, the same could not be sustained. Consequently, the addition made on this account by disallowing 15% of such estimated accommodation entries again on adhoc basis also deserves to be deleted. CIT(A) had restricted the addition to the extent of Rs.7,91,406/- on the basis of invoice placed on record in respect of labour charges for soil filling from M/s.Rami Brothers. However, on perusal of the bill, it was noticed that this bill was raised on 07/03/2011 pertaining to FY 2010-11 which clearly demonstrated that this expenditure was not claimed during the year under consideration. However, it was noticed that in his finding CIT(A) had concluded that AO had considered the amount credited in the bank account of Shri Rami as value of accommodation entries. Since in the case of the assessee the payment of Rs.6,43,406/- was considered as accommodation entries and it was noticed that assessee had not reconciled this payment with outstanding amount of Rs.7,91,406/- as per invoice raised for labour charges, therefore, the disallowance was restricted to the extent of Rs.6,43,406/-.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeals have been filed at the instance of the Revenue and Assessee respectively against the appellate order of the Commissioner of Income Tax(Appeals)-1, Ahmedabad [CIT(A) in short] dated 30/07/2018 arising in the assessment order passed under s.143(3) r.w.s.147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) dated 29/12/2016 relevant to Assessment Year (AY) 2012-13.
2. Since the issues are inter-connected, both the appeals were heard together and are being disposed of by this consolidated order for the sake of convenience.
3. First, we take up the Revenue’s appeal, i.e. ITA No.2040/Ahd/2018 for AY 2012-13. The Revenue has raised the following grounds of appeal:-
1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs.3,86,04,360/- which was made on account of estimation of accommodation entries at Rs.25,73,62,400/- and thereafter restricting the addition to 15% of such estimate amounting to Rs.3,86,04,360/-, without appreciating the findings that the assessee has accepted to have make payment of Rs.6,43,406/- to Mr. Rami and Mr.Rami has also accepted payment for accommodation entries from various parties.
2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) failed to appreciate that the decision of the AO is based on binding decision of Hon’ble Gujarat High Court in the case of M/s. Vijay Protien Ltd. vs. CIT 58 com 344 [2015] as well as the decisions of Hon’ble jurisdictional ITAT in the cases of Pavankumar M. Sanghvi v. ITO Ward-5(1), Baroda and in the case of ACIT, Circle-4, Surat vs. Sunday Exports Ltd.
3. The facts in brief are that the assessee-company has filed its return of income on 30/09/2012 declaring total income at Rs.3,96,91,870/-. Assessment u/s.143(3) of the Act was finalized on 24/03/2015 and total income was determined on Rs.55,61,49,800/- which was reduced to Rs.4,54,35,860/- after giving appeal effect. Subsequently, the Assessing Officer has received information from ACIT, Central Circle-2(4), Ahmedabad who has assessed the case of Shri Jaymesh Rami, Director of Aayurshi Infraprojects Pvt.Ltd. u/s.153A regarding providing of Accommodation entries. The Affidavit of Shri Jayesh Rami was also received by the Assessing Officer, wherein he had admitted that he was engaged in the business of entry providing on charging of commission at Rs.0.25 to 0.35 per 100 rupees. The Assessing Officer observed that the assessee has paid a sum of Rs.6,43,406/- to Shri Jaymesh Rami during the year under consideration. Therefore, the Assessing Officer has reopened the case after recording reason u/s.148 of the Act on 18/06/2015. A notice u/s.143(2) of the Act was issued on 13/06/2006. During the course of assessment proceedings, the Assessing Officer has issued show-cause notice dated 26/09/2016 to the assessee briefly stating that Shri Jaymesh Rami has received commission of Rs.6,43,406/- from the assessee-company. It was further pointed out that the assessee had shown this amount in the name of M/s.Rami Brothers in whose bank account this amount was credited, while PAN of Shri Jaymesh Rami was mentioned along with the name of M/s.Rami Brothers. In the show-cause notice, the Assessing Officer has computed an amount of Rs.25,73,62,400/-(6,43,406*100/0.25) being inflated expenditure and asked the assessee by the same should not be added to its total income. In response to the show-cause notice, the assessee has explained vide letter dated 04/10/2016 that it has not entered into any transaction with M/s.Aayurshi Infraprojects Pvt.Ltd as per its books of accounts which were produced for verification. It was also submitted that assessee-company has actually availed the services of site leveling/soil filling from M/s.Rami Brothers during the Financial Year 2010-11 and also enclosed the copy of invoice. The assessee has also explained that for availing these services, it has made payment of Rs.6,43,406/- during the year under consideration. It is further explained that assessee-company was not aware of any business of providing accommodation entries by Shri Rami.
4.1. The assessee has also requested the Assessing Officer to furnish the following particulars.
1) The details of entries alleged to have been provided.
2) The copy of statement recorded by the authorities concerning the assessee.
3) Copy of Affidavit.
4) Any other communication made in this regard.
However, vide letter dated 14/10/2016, the Assessing Officer has supplied only the following documents.
1) The copy of statement of Shri.Jaymesh R.Rami
2) The copy of Affidavit of Shri Jaymesh R.Rami.
However, the assessee was allowed to make inspection of the record received from ACIT, Central Circle-2(4), Ahmedabad. Thereafter, the assessee has made submission of 28/10/2016 stating that it has not entered any transaction of obtaining accommodation entries as alleged on the basis of the statement of Shri Jaymesh Rami furnished to the assessee vide letter dated 14/10/2016. It was also explained that in the Affidavit Shri Jaymesh Rami has stated of providing accommodation entries to several parties but in the list of parties name of the assessee was not reflected. Even in the Affidavit also, nothing was mentioned about transaction with the assessee-company. However, the assessee-company had transaction amounting to Rs.6,43,406/- with M/s.Rami Brothers in the FY 2010-11 and that transaction had nothing to do with Shri Jaymesh Rami. However, the Assessing Officer has not agreed with the explanation and objection made by the assessee-company. The Assessing Officer stated that assessee has accepted the fact that it has paid an amount of Rs.6,43,406/- to Shri Jaymesh Rami and Shri Rami has accepted that he has received some amounts from various parties for providing of accommodation entries and details provided by Shri Jaymesh Rami included the details in respect of the assessee. Therefore, Assessing Officer was of the view that Shri Jaymesh Rami has provided accommodation entries to the assessee. Consequently, the Assessing Officer has held that 15% of the total amount of accommodation entries computed by the Assessing Officer to be disallowed. Therefore, Assessing Officer has computed at 15% of the total accommodation entries of Rs.25,73,62,400/- to the amount of Rs.3,86,04,360/- and added to the total income of the assessee.
5. Aggrieved assessee has filed appeal before the Ld.CIT(A) against the order of the Assessing Officer in making addition of Rs.3,86,04,360/-.
6. The Ld.CIT(A) has restricted the addition to the extent of Rs.7,91,406/- only and the relevant portion of the order of the Ld.CIT(A) is reproduced hereunder:
“4.2. Ground No.1 and 2 originally raised in the appeal memo are pertaining to estimation of value of accommodation entries at Rs.25,73,62,400/- and then 15% disallowance thereof resulting into addition of Rs.3,86,04,360/-. As is evident from the statement of Shri Jaymeshbhai R Rami recorded by the ACIT, Central Circle-2(4), Ahmedabad on 20.03.2015 during the course of the assessment proceedings in the case of M/s. Aayurshi Infraprojects Pvt. Ltd., he was director in 5 companies for monthly income of Rs.5,000/- to Rs.6,000/- as mentioned below:
