Case Law Details
Shri Bansilal Bagri Vs DCIT (ITAT Chennai)
This is the transaction arranged in such a way that the accommodation entries were made at several entities level and ultimately the money came back to the assessee. Herbicure Healthcare Bio-Herbal Research Foundation of Kolkata involved in the fraudulent and sham transactions, providing accommodation entries and claiming a bogus weighted deduction to the extent of 175%. The antecedents of the recipient were unearthed by the Department during the course of survey operation. The material available on record clearly establishes that the so-called donation ultimately received back by the assessee after reducing the commission. Therefore, the CIT(Appeals) in a very reasoned order found that the assessee involved in the sham transaction under the garb of donation. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
FULL TEXT OF THE ITAT JUDGEMENT
Both the appeals of the assessee are directed against the respective orders of the Commissioner of Income Tax (Appeals) – 12, Chennai, dated 28.12.2017 and pertain to assessment years 2012-13 and 2013-14. Since common issues arise for consideration in both the appeals, we heard these appeals together and disposing the same by this common order.
2. The first issue arises for consideration is disallowance of Rs. 1,44,556/- under Section 37 of the Income-tax Act, 1961 (in short ‘the Act’).
3. Shri N. Vijay Kumar, the Ld. representative for the assessee, submitted that the assessee met with an accident and suffering head injury for the last several years. According to the Ld. representative, the assessee is carrying out his business through sales commission agents for procuring orders and other business related activities. The assessee paid commission to various agents who rendered service for procuring orders, collection, etc. According to the Ld. representative, the Assessing Officer disallowed the entire payments. In respect of the assessee’s son Shri Navneet Bagdi, the assessee has paid a sum of Rs.2,89,112/-. The Assessing Officer, however, disallowed the entire payment. On appeal by the assessee, according to the Ld. representative, the CIT(Appeals) restricted the disallowance to 50%, i.e. Rs.1,44,556/-. According to the Ld. representative, the rate of commission paid to other agents, which was allowed by the CIT(Appeals) is on par with the commission paid to the assessee’s son. According to the Ld. representative, when the CIT(Appeals) has not disallowed any payment with regard to other commission agents, merely because one of the agents was the son of the assessee, there cannot be any disallowance.
4. On the contrary, Shri AR.V. Sreenivasan, the Ld. Departmental Representative, submitted that the CIT(Appeals) allowed the commission in respect of other persons except the assessee’s son Shri Navneet Bagdi. According to the Ld. D.R., the CIT(Appeals) allowed 50% of the commission to be paid in the case of assessee’s son, therefore, there may not be any grievance for the assessee.
5. Having heard the Ld. representative for the assessee and the Ld. D.R., this Tribunal finds that when the rate of commission paid to other agents was on par with the rate paid to the assessee’s son, merely because Shri Navneet Bagdi appears to be the assessee’s son, the CIT(Appeals) is not justified in restricting the payment to 50%. Moreover, it is not the case of the Revenue that Shri Navneet Bagdi has not rendered any service. In those circumstances, the CIT(Appeals) ought to have allowed the claim of the assessee in toto. Therefore, the order of the CIT(Appeals) in respect of commission payment to Shri Navneet Bagdi is modified and the Assessing Officer is directed to allow the entire payment of 2,89,112/-.
6. Now coming to the disallowance of 3,50,000/- under Section 35(1)(ii) of the Act.
7. Shri N. Vijay Kumar, the Ld. representative for the assessee submitted that the assessee made donations to the institutions through banking channel. Therefore, according to the Ld. representative, the CIT(Appeals) is not justified in disallowing the donations under Section 35(1)(ii) of the Act.
8. On the contrary, Shri AR.V. Sreenivasan, the Ld. D.R. submitted that the assessee has made donation to one Herbicure Healthcare Bio-Herbal Research Foundation of Kolkata. According to the Ld. D.R., the Assessing Officer found that it is a bogus transaction and the accommodation entry was completely controlled and managed by one Shri Kishan Bhawasingka. The bogus entry with regard to donation was made for getting commission of 5%. According to the Ld. D.R., the assessee-firm knows very well the activities of the trust. The Ld. D.R. further submitted that the donations were made in a systematic manner by transferring the funds through banking channel to the bogus parties. According to the Ld. D.R., both the parties to the transaction gave colour of genuineness in the books of account. After several transfers, the assessee would get the amount after reducing the commission charges. After explaining the entire transaction, according to the Ld. D.R., the CIT(Appeals) found that the assessee has involved in sham transactions of getting accommodation entries under the garb of donations, therefore, he confirmed the disallowance made by the Assessing Officer.
9. Having heard the Ld. representative for the assessee and the Ld. D.R., this Tribunal finds that there is no merit in the appeal of the assessee. The very fact that the transaction ultimately ended in refunding the money to the assessee through banking channel after reducing the commission to the extent of 5% shows that the money has come back to the assessee. This is the transaction arranged in such a way that the accommodation entries were made at several entities level and ultimately the money came back to the assessee. Herbicure Healthcare Bio-Herbal Research Foundation of Kolkata involved in the fraudulent and sham transactions, providing accommodation entries and claiming bogus weighted deduction to the extent of 175%. The antecedents of the recipient were unearthed by the Department during the course of survey operation. The material available on record clearly establishes that the so-called donation ultimately received back by the assessee after reducing the commission. Therefore, the CIT(Appeals) in a very reasoned order found that the assessee involved in the sham transaction under the garb of donation. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
10. In the result, both the appeals filed by the assessee are partly allowed.
Order pronounced in the court on 10th May, 2019 at Chennai.
