S. 68 : Cash credits – Failure to furnish source , identity of parties and genuineness of transaction -Shell companies – A racket of illegal business of providing accommodation entries -Accommodation entry provider -Credit appearing in the bank account -Books of account -Data appearing in 2 CDs are extracted by the investigating wing from books of account- Statement on oath- Order of the Tribunal is reversed – Order of CIT(A) is affirmed – The Court also directed the Institute of Chartered Accountant of India to take disciplinary action, initiate proceedings under Prevention of Money Laundering Act, 2002, launch prosecution under Income-tax Act, and also directed the CCIT to conduct an enquiry and fix the responsibility against the officer responsible for the for not giving effect to the order of CIT(A). Court also directed the Registry of the High Court is to forward copy of the order to Disciplinary Committee of the Institute of Chartered Accountants of India, National Financial Reporting Authority, The Commissioner of Police-Economic Offence Wing, Mumbai, Enforcement Director under PMLA Act, The Chief Commissioner of Income-tax, Mumbai Ministry of Corporate Affairs. [S. 2(12A), 44AB, 69, 131, 132(4), 279, Chartered Accountant’s Act, 1949. Indian Penal Code/BNS, 2023]
The assessee company is in the business of providing accommodation entries on commission basis . The assessee has admitted that they are in “ a racket of illegal business of providing accommodation entries” In the assessment proceedings the director of the assessee company Mr. Mukesh Choksi, on oath has admitted that the company is providing accommodation entries . The Assessing Officer made addition under Section 68 of the Act amounting to Rs.10,73,52,553/- under the head Income from other sources. The said addition was made on the ground that the credits appearing in the disclosed and undisclosed bank accounts of the respondent-assessee are unexplained, and since no details or explanation regarding the identity, source and genuineness of such deposits were submitted, the same were treated as unexplained cash credits. On appeal the CIT(A) confirmed the addition of 0.37% as against 0.15% offered by the assessee. On appeal the Tribunal reduced the addition from 0.37% to 0.15%. On appeal by Revenue the Court held that the Respondent assesseee can not contend that they will not give details of beneficiaries, but at the same time, credits cannot be assessed in its hands. Court observed that how the revenue can find out to whom the credits belong to unearth unaccounted income. The respondent-assessee cannot act as a shield for beneficiaries by making such a submission and at the same time refuse to pay taxes for the unexplained amounts in its bank accounts. Court observed that “we will be failing in our duty as a Court of law if we do not comment on the accommodation entry provider, Mr. Mukesh Choksi through his web of shell companies and various admissions made by the counsel for the respondent-assessee. It is also important to note that Mr. Mukesh Choksi, director of the respondent-assessee in his answer to question No.14 of the statement has admitted that he was a practicing Chartered Accountant but has surrendered the Certificate of Practice (COP) in 1993 and thereafter is only engaged in the business of providing accommodation entries. He has also stated that search action has been taken against him/his companies more than once”. The Court allowed the appeal of the Revenue and affirmed the order of the CIT(A) . The Court directed the Institute of Chartered Accountant of India to take disciplinary action, the appropriate authority to initiate proceedings under Prevention of Money Laundering Act, 2002, Prosecution under Income-tax Act, directed the CCIT to conduct an enquiry and fix the responsibility against the officer responsible for the same for not giving effect to the order of CIT(A). Court also directed the Registry of the High Court to forward copy of the order to Disciplinary Committee of the Institute of Chartered Accountants of India; National Financial Reporting Authority; The Commissioner of Police-Economic Offence Wing, Mumbai; Enforcement Director under PMLA Act; The Chief Commissioner of Income-tax, Mumbai Ministry of Corporate Affairs. (ITA 1796 of 2018 dt. 17-3-2025) (AY. 2009-10)
PCIT v. Buniyad Chemicals Ltd. (Bom)(HC) www.itatonline.org.
(Coram : Hon’ble Shri Justice M.S. Sonak & Hon’ble Shri Justice Jitendra Jain)