Cash deposited in name of various proprietorship concerns involving in bogus business activities: ITAT directs to restrict addition to extent of 0.05% of gross total [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai bench, while directing to restrict the addition to the extent of 0.05% of gross total, observed that cash deposited in the name of various proprietorship concerns involved in bogus business activities. The assessee, Rajendra Gokuldas Parekh, credited a total amount of Rs. 765,55,253/- in the bank account in the name of various proprietorship concerns. The assessee also received contracts of Rs. 5,75,000/- from two contract awarding parties as per ITD system.

However, the assessee did not file a return of income; the assessment was reopened by issuing a notice u/s 148 of the Act due to information received from the ADIT (Investigation). After considering the submission of the assessee, the assessing officer observed that all transactions made through the proprietary concern of the assessee might be controlled by his employer, Shri Hitesh G. Shah. However, the assessing officer was of the view that the assessee, being acquainted with the business model of his employer, made an addition of Rs. 765,553/- on an estimated basis as 1% of the total gross sale to the total income of the assessee.

Aggrieved, the assessee filed a further appeal before the CIT(A), who dismissed the appeal. Thereafter, the assessee filed a second appeal before the tribunal. During the proceedings, Bharat Kanaba, Counsel for the assessee, argued that the assessee was acting on behalf of his employer, Mr. Hitesh G. Shah, without any actual dealing in goods and services.

The assessee submitted that he had neither signed any contract nor signed any bills to the parties who had made payments in the bank account for bogus contracts and sales. Furthermore, he was employed as a dummy or a benami person by Shri Hitesh G. Shah, and the bank accounts, though open in the name of the assessee, were operated by Hitesh G. Shah. Ajay Singh, Counsel for Revenue, submitted that the employer of the assessee, Mr. Hitesh G. Shah, was running several proprietary concerns through the connivance of the assessee, and all the bank accounts were handled by his employer.

However, because of the association of the assessee with his employer in the bogus business activity, the AO estimated 1% of the total gross amount to the amount of Rs. 76,553/- as incentives in the hands of the assessee. After reviewing the facts and records, the two-member bench of Amarjit Singh (Accountant Member) and Kuldip Singh (Judicial Member) restricted the addition to the extent of 0.05% of the gross total of Rs. 76,55,523/- because actually, the business was run and controlled by the employer of the assessee, and the assessee had already shown the commission income received from the employer in the return filed

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