ORDER
Vikram Singh Yadav, Accountant Member.- This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-48, Mumbai [‘Ld.CIT(A)’], dated 08-08-2025, pertaining to Assessment Year (AY) 2017-18.
2. Briefly, the facts of the case are that the assessee filed its return of income declaring total income of Rs. 24,68,980/-. Subsequently, the case was selected for scrutiny and notices u/s. 143(2) and 142(1) of the Income Tax Act, 1961 (‘the Act’) were issued calling for necessary information and documentation. The AO stated that the assessee-company is one of the group companies of Shri Shirish C. Shah in whose case, a search u/s. 132 of the Act was carried out in the year 2013, wherein it was found that he was the main person engaged in providing bogus accommodation entries like Long Term Capital Gain, share capital with huge share premium, turnover, loan etc. and he directly/indirectly controlled many companies including the assessee-company and thereafter referring to the sale and purchase transaction shown by the assessee, the AO stated that in the earlier block assessment, the assessee-company was assessed by way of commission income on its total turnover along with new investments made during the year and considering the same, the AO held that for the year under consideration, the assessee-company was not engaged in actual business, but involved in circular transactions and commission income should be assessed on its turnover with non-group parties as well as new investments made during the year. Accordingly, on sales made to nongroup entities (Ms. Jigar Mercentile Pvt. Ltd., and Milap Trading Pvt. Ltd.) amounting to Rs. 61,37,65,621/- and new investments made during the year amounting to Rs. 4,49,64,300/-, commission income was assessed at Rs. 65,87,299/-, being 1% of Rs. 65,87,29,921/- . Further, addition of Rs. 29,44,500/- was made in respect of cash deposits during the demonetization period for the reason that the assessee has not given any correlation between cash withdrawn and cash deposited stating that the assessee-company has not filed any details in respect of cash deposits. Therefore, the cash deposits of Rs. 29,44,500/- was treated as unexplained money of the assessee u/s. 69A of the Act and added to the total income and assessed income was determined at Rs. 1,20,00,780/- as against the returned income of Rs. 24,68,980/-. The assessee thereafter carried the matter in appeal before the Ld.CIT(A), who has since confirmed the findings of the AO and against the said order, the assessee is in appeal before us.
3. During the course of hearing, the Ld.AR submitted that the assessee company during the year under consideration had shown a turnover of Rs. 90,36,25,872/-, which was held to be bogus turnover. Further, the investment made by the company during the year under consideration was also held to be bogus and commission income @1% was assessed by the AO and confirmed by the Ld.CIT(A). Further, our reference was drawn to the trading results of the assessee-company, wherein it has reported Gross Profit of Rs. 65,35,962/. It was submitted that the AO despite holding the turnover of the assessee-company to be bogus has accepted Gross Profit so declared and therefore, the Gross Profit declared by the assessee-company should have been reduced from the total taxable income. In this respect, reliance was placed on the decision of the Co-ordinate Bench of the Tribunal in the case of Dy. CIT v. Empower India Ltd. [IT Appeal No. 3205 (Mum.) of 2019, dated 23-10-2019], wherein the assessee-company has been allowed telescoping of commission income against income declared by the assessee which was followed by the Co-ordinate Bench of the Tribunal in the case of Empower India Ltd. v. Dy. CIT , Central [IT Appeal No. 3646 (Mum) of 2019, dated 18-12-2020]. It was accordingly submitted that the telescoping of gross Profit of Rs. 65,35,962/- declared by the assessee company against the commission income of Rs 65,87,299/- should be allowed to the assessee-company.
4. Further referring to addition on account of cash deposits during demonetization, it was submitted that during the course of assessment proceedings, the assessee-company submitted that it has made cash withdrawals from the bank account during the year under consideration itself which was deposited during the demonetization period and the necessary details of cash withdrawals were duly furnished during the course of assessment proceedings. However, the explanation was rejected by the AO on the pretext of non-correlation between cash withdrawals being established by the assessee-company. It was submitted that the assessee-company has provided date-wise details of cash withdrawals and deposits and the observation of the AO that there is no correlation is wholly based on surmises, presumptions and conjectures without any evidence contrary to the claim of the assessee.
5. It was further submitted that AO while completing the assessment did not allow credit of self-assessment tax paid of Rs. 5,98,200/-. In this regard, our reference was drawn to Form-26AS as part of assessee’s paper book and it was submitted that the self-assessment tax stand duly reflected in Form-26AS and, therefore, the AO may be directed to allow credit of self-assessment tax duly paid by the assessee.
6. Per contra, the Ld.DR is heard, who has relied on the order passed by the AO. It was submitted that no doubt the Tribunal in the assessee’s own cases for earlier years has allowed the telescoping, however, each assessment year is a separate and distinct unit of assessment and benefit of telescoping is very fact and transaction specific and cannot be given as a general principle. It was further submitted that in the present case, the assessee has not demonstrated before the AO or before the Ld.CIT(A), the facts, nature and types of transactions to the last line are same as that of earlier years and principles of telescoping adopted by the Tribunal in those earlier years are thus not applicable to the transactions in the year under consideration. It was accordingly submitted that in the absence of such specific fulfillment of conditions, benefit of telescoping cannot be given to the assessee.
7. Further, regarding cash deposits, it was submitted that the assessee has not been able to establish the nexus between the cash withdrawn and the cash deposited and the assessee has also not been able to explain the source of the cash withdrawals. The contention of the assessee that the cash was withdrawn to safeguard from disputed liabilities is not supported by any evidence. Therefore, the AO has rightly treated the cash deposits as un-explained money u/s. 69A of the Act and the addition of Rs. 29,44,500/- was rightly confirmed by the Ld.CIT(A).
8. Regarding non-grant of self-assessment tax, it was submitted that the matter needs necessary verification and where the Bench so decides, the matter may be remitted to the file of the AO for necessary verification.
9. We have heard the rival contentions and perused the material available on record. The findings of the Assessing officer that the assessee is not engaged in any actual business activity but involved in circular transactions are not in dispute before us. Further, it is also an accepted position that commission income @ 1% should be assessed on the reported turnover along with new investments made during the year. The assessee has reported a turnover of Rs 90,36,25,872 and has reported profits of Rs 22,67,943/- as per books of accounts and basis that, has reported tax profits of Rs 24,68,980/- in its return of income filed for the impugned assessment year 2017-18. The AO while holding the turnover to be bogus has computed commission income @ 1% on reported turnover (figure of Rs 61,37,65,621 has been wrongly taken instead of Rs 90,36,25,872) and new investment of Rs 4,49,64,300/-, however, at the same time, has not allowed telescoping of income of Rs 24,68,980/- already reported on the said turnover. Therefore, we find merit in the contention advanced by the ld AR to allow telescoping of income already offered against the commission income so determined by the AO. Such telescoping of income shall be against the net income already offered (as per books of accounts) in the return of income and not against the gross profit as so claimed by the assessee as there remains no basis to allow the expenses where the whole business transactions have been held to be bogus in nature. Similar position exist for the earlier assessment years where the Coordinate Benches have also taken a similar view to allow telescoping of commission income against income declared as per the books of accounts. The matter is accordingly set-aside to the file of the AO for the limited purposes of re-computing the commission income at the rate of 1% on the reported turnover of Rs 90,36,25,872/- plus fresh investment of Rs 4,49,64,300/- and to allow telescoping of Rs 24,68,980/- as reported in the return of income and bring to tax the net income in the hands of the assessee. The ground of appeal is disposed off accordingly.
10. Now, coming to the matter relating to source of cash deposits during the demonetization period, we find from the perusal of records that the assessee vide its letter dated 19/12/2019 available at APB page 117 has submitted the date-wise withdrawals of cash during the period 27/04/2016 to 8/11/2016 totalling to Rs 32,60,000/- and has submitted that the cash so withdrawn was available as on the date of demonization and out of which, Rs 29,44,500 was available which was deposited with the bank pursuant to the demonization and which is duly supported by the bank statements and the books of accounts. In absence of any adverse material available on record, the explanation so offered by the assessee duly supported by bank statements and books of accounts is found to be reasonable and acceptable and the addition so made amounting to Rs 29,44,500/- is hereby directed to be deleted. In the result, ground of appeal is allowed.
11. Regarding non-grant of credit of self-assessment tax as so reflected in Form 26AS, the AO is directed to allow the same after due verification.
12. In the result, the appeal of the assessee is partly allowed.
