Neeraj Nahar, Jaipur vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 640/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2007-08

Shri Neeraj Nahar cuke The ITO 2621, MSB Ka Rasta Vs. Ward- 2(21 Johri Bazar, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAYPN 3258 P vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rajeev Sogani, C.A. jktLo dh vksj ls@ Revenue by : Smt. Neena Jeph, JCIT

lquokbZ dh rkjh[k@ Date of Hearing : 28/04/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 29/05/2015

vkns'k@ ORDER

PER R.P. TOLANI, JM

This is an appeal filed by the assessee against the order of the ld.

CIT(A)-I, Jaipur dated 23-02-2012 for the assessment year 2007-08. The

gist of grounds raised is as under:

Ld. CIT(A) erred in law and on facts in:-

i. in confirming the rejection of books of account; ii. in confirming the action of the AO in estimating the commission income at 0.50%;

iii in not allowing the deduction for expenditures on the estimate income

iv) in holding the assessee to be an entry provider.

2 ITA No. 640/JP/2012 Shri Neeraj Nahar vs. ITO Ward- 2 (1), Jaipur

2.1 Brief facts of the case are that the AO received information from

the DDIT (Inv.), Mumbai about the suspicious transactions in the bank

accounts of the assessee indicating huge cash deposits and withdrawals

connected with complex set of inter accounts transfers without any

business rationale. The information furnished revealed that the assessee

had connections with four concerns i.e. M/s. U.M. Exports, M/s. Aashi

Gems (Assessee), M/s. L.G. Diamonds and M/s. S.P. Enterprises. During

the course of assessment proceedings, the assessee failed to produce stock

register, ledger, cash book, journal and sales bills. The AO issued

summons u/s 131 of the Act to the concerned persons of these concerns.

One of the persons Shri Mahesh P Mehta confirmed that he was not doing

any purchase and sale of diamonds but along with other business

associates he indulged in activities of providing accommodation of bogus

bills and transacted through different banks. After issuing the bogus

invoice, cheque was deposited in the bank and cash was immediately

withdrawn. AO analysed assessee's bank statements which tallied with

the entries of Shri Mahesh P Mehta. Ld AO gave an opportunity to the

assessee to rebut the evidence gathered in this behalf, however assessee

could not give satisfactory reply. The assessee alternatively pleaded that

he may be treated as an entry provider and his estimated commission 3 ITA No. 640/JP/2012 Shri Neeraj Nahar vs. ITO Ward- 2 (1), Jaipur

income may be accepted at 0.10%. The AO holding him as entry provider

aggregated them to tune of Rs. 23,52,45,617/-, however rate of

commission earned was held at 0.50% as assessee could not substantiate

his claim of 0.10%; the net income from entry operations was taken at

Rs. 11,76,228/-.

2.2 Aggrieved, the assessee preferred first appeal before the ld. CIT(A)

where none appeared. The ld. CIT(A) after considering the material

available on record partly allowed the appeal of the assessee by observing

as under:-

''The assessee filed an appeal on 28-01-2010. Thereafter, the case was fixed four times by issuing notices u/s 250 from 10-05-2012 to 22-02-2012. I fact, the last notice was served by the Notice Server of the concerned AO on 10-02-2012. However, nobody attended on 22-02-2012. It is pertinent to note that the appellant has not made any compliance to the notices issued u/s 250, over a span of two years. Given the facts of the case and the enquiries conducted by the AO and evidence brought on record, the case is being decided on merits, in the absence of the appellant to represent his case in spite of repeated opportunities.

Given the substantial evidence gathered by the AO as discussed in his assessment order, his decision to treat the appellant an entry provider is confirmed. The estimation of commission income at Rs.0.50 per hundred rupees for providing accommodation entry is also upheld. However, the AO is directed to give a set off of the income shown by the assessee of Rs. 1,33,510/-. Therefore, the impugned addition is confirmed to the extent of Rs. 10,42,718/- (Rs. 11,76,228 - Rs. 1,33,510)/-'' 4 ITA No. 640/JP/2012 Shri Neeraj Nahar vs. ITO Ward- 2 (1), Jaipur

2.3 Aggrieved by the order of the ld. CIT(A), the assessee is now

before us. The ld. Counsel for the assessee reiterated the facts and

contends that

(i) estimation of commission at 0.50% is not justified as in such type of accommodation entry business the average rate of commission is 0.10% the adoption of estimate of 0.50% is excessive and arbitrary.

(ii) A assessee had produced its books of account which have been arbitrarily rejected.

(iii) For doing this business some expenditure ought to have been allowed against income earned. \

(iv)There was no material on the basis of which it can be held that the assessee was an entry provider.

(v) To support its contention, the ld. AR of the assessee placed reliance in the case of Gold Star Finvest (P) Ltd. vs. ITO , Ward- 10(1)(1), Mumbai (2013) 33 Taxmann.com 129 (Mumbai- Tribunal).

2.4 The ld. DR vehemently contends that the assessee has been very

selective in making disclosure and compliance to play a hide and seek

game, which is apparent from AO's order.

(i) Before AO, no books of accounts have been produced.

(ii) No effective rebuttal was offered on 131 statement of Shri Mahesh P Mehta clearly implicating the assessee as entry operator. 5 ITA No. 640/JP/2012

Shri Neeraj Nahar vs. ITO Ward- 2 (1), Jaipur

(iii) During the course of assessment proceedings, the assessee himself offered to be treated as accommodation entry provider with an unsubstantiated proposition to adopt commission rate at 0.10%. His main objection is to the percentage of net income applied by the AO @ 0.50%.

(iv) The assessee did not appear before the ld. CIT(A) and has curiously not raised any ground to challenge deciding the appeal ex-parte.

(v) The estimation of income depends on the best judgment of the assessing authority. The estimation of income generally will not be interfered by appellate authority unless it is demonstrated that the same is arbitrary or capricious. In this case, the assessee did not give any data to support his contention that only 0.10% commission should be taxable. In absence of any comparative data, the lower authorities cannot be found fault with about their estimate @ 0.50%.

(vi) About the expenditure the assessee himself has nowhere indicated in the assessment proceedings that expenditure should be allowed besides in issuing bogus bills, there is no justifiable reason for incurring any expenditure. Assessee neither claimed the name of any accomplice or maintaining a regular office to carry out such dubious transactions.

The ld. DR further contends that the ld. CIT(A) has given an apparently

wrong direction to allow set off of the income of Rs. 1,33,510/- alleged to

be shown by the assessee. This direction is mistakenly mentioned

inasmuch as the AO has only adopted the commission income of Rs. 6 ITA No. 640/JP/2012

Shri Neeraj Nahar vs. ITO Ward- 2 (1), Jaipur

11,76,228/- and not added the said amount of Rs. 1,33,510/-. As a final

fact finding body hon'ble ITAT has to ensure that due tax is collected on

the proper income.

2.5 We have heard the rival contentions and perused the material

available on record. As the facts emerge, the AO was in possession of

adverse information about the assessee who did not produce proper books

of account before the AO. Therefore, rejection of books of accounts has

been rightly upheld. The assessee failed to establish that the estimation of

income by authorities below @ 0.50% of net commission income is

arbitrary or capricious as he has not offered any data to take a different

view on the estimate. Similarly, the estimation being on net income

commission, there is no question of allowing any expenditure. The

assessee himself accepted to be treated as an accommodation entry

provider, consequently we see no infirmity in the orders of the lower

authorities which are upheld.

2.6 We also find merit in the contention that apparently AO did not add

income of Rs. 1,33,510/- in the commission income. Therefore, the

direction in this behalf cannot be verified at this level more so when the

assessee did not appear before the ld. CIT(A). In view thereof, to ensure

proper computation and verification, we are inclined to set this limited

issue back to the file of the AO to calculate the income in accordance 7 ITA No. 640/JP/2012 Shri Neeraj Nahar vs. ITO Ward- 2 (1), Jaipur

with record. Hence, the appeal of the assessee is technically partly

allowed for statistical purposes.

3.0 In the result, the appeal of the assessee is partly allowed for

statistical purposes.

Order pronounced in the open court on 29/05/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 29/05/ 2015 *Mishra

vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Shri Neeraj Nahar, Jaipur

2. izR;FkhZ@ The Respondent- The ITO, Ward- 2 (1), Jaipur

3. vk;dj vk;qDr¼vihy ) @ CIT(A)

4. vk;dj vk;qDr@ CIT

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No.640/JP/2012)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@ Assistant. Registrar