2013 (8) TMI 950 - AT - Income Tax

Profit charged on accommodation entries transactions - Held that - As the facts emerge, the assessee has filed his returns of income u/s 153A on the basis of audited statements which are found to be bogus and unreliable. Therefore, the income offered by the assessee in such returns becomes assessee s own offer. Apropos assessee s business, it has not been disputed that the assessee was actually engaged in providing accommodation entries and not in real business transactions. The findings of assessing officer and CIT(A) that assessee could not substantiate his claim about accommodation entries and assessment of profit @ 0.5%. Assessee has not been able to substantiate the rate of income from accommodation entries except making a general assertion that the profit charged on accommodation entries transactions is generally 0.5%. The providing of accommodation entries amounts to running a parallel economy and is a sort of money laundering, which is against public policy. Therefore, assessee in any case cannot get any deduction for any estimated expenses in this behalf. Since assessee could not substantiate the rate of providing accommodation entries, the assessing officer is well within his rights to estimate the income of the assessee. This estimate in ordinary circumstances cannot be interfered with unless the assessee makes out a case of arbitrariness and unreasonable estimate, which has not been established. The estimate as arrived at by assessing officer @ 2% and confirmed by CIT(A) is reasonable and cannot be called arbitrary.

Summary

Issues Involved:
- Condonation of delay in filing appeals due to a family emergency.
- Estimation of undisclosed income by assessing officer.
- Substantiation of income from accommodation entries.
- Reasonableness of estimating income at 2% on accommodation turnover.
- Allegation of double addition of income.

Analysis:

Condonation of Delay:
The appeals were filed after the due date, with the assessee seeking condonation of delay due to the critical illness and subsequent demise of a family member. The Tribunal accepted the plea, considering the circumstances, and condoned the delay in filing the appeals.

Estimation of Undisclosed Income:
The assessing officer estimated undisclosed income for multiple assessment years based on the findings of search and seizure operations. The officer concluded that the assessee failed to provide documentary evidence, leading to discrepancies in the accounts. The additions were made based on a percentage of net income from accommodation entries, considering the nature of business conducted by the assessee.

Substantiation of Income from Accommodation Entries:
The CIT(A) upheld the assessing officer's order, stating that the assessee failed to substantiate the income surrendered in different assessment years. The CIT(A) rejected contentions regarding expenses and upheld the addition of undisclosed income from accommodation entry business, emphasizing the lack of evidence provided by the assessee.

Reasonableness of Estimating Income at 2%:
The assessee contended that the income was estimated at 2% of turnover, while a lower percentage was claimed by Shri S.K. Gupta. The Tribunal upheld the assessing officer's estimation, considering the nature of the transactions and lack of evidence provided by the assessee to support a different rate of income.

Allegation of Double Addition of Income:
The Tribunal dismissed the claim of double addition of income, stating that the assessee's own offer of income in the P&L account was based on unreliable audited statements. The Tribunal found that the assessing officer's estimation of income at 2% on accommodation turnover was reasonable and not arbitrary, leading to the dismissal of all appeals filed by the assessee.

In conclusion, the Tribunal upheld the assessing officer's estimation of undisclosed income at 2% on accommodation turnover, considering the lack of substantiation by the assessee and the nature of the transactions involved. The appeals were dismissed based on the findings and reasoning provided by the assessing officer and the CIT(A).