2012 (8) TMI 486 - AT - Income Tax

Addition u/s 68 - assessee has requested either estimate the commission income on such accommodation transactions or tax peak of the cash deposits - Held that - As it is not in dispute that the assessee was providing accommodation entries an admitted fact that the assessee could not produce any of the beneficiaries to whom he was providing accommodation and at the same time the assessee has not discharged the initial onus cast upon him and therefore fails in succeeding in this ground of appeal. As the assessee s has agreed that he has no objection in estimation of profit from hawala business the income of the assessee can be enhanced on the basis of the peak credit statement submitted by the assessee during the course of the appellate proceedings is to be accepted as held in assessee s own case in A.Y. 2002-03 - the entire cash deposit for the year under consideration cannot be added as deemed income of the assessee and at the most the peak deposit in all the bank accounts taken together should be taken for the addition u/s. 68 - restore this issue back to the file of the AO directing to verify the peak deposits of all the bank accounts together - partly in favour of assessee.

Summary

Issues:
1. Confirmation of addition under section 68 of the Income Tax Act.
2. Alternative plea for estimating commission income or tax peak of cash deposits.

Issue 1: Confirmation of addition under section 68 of the Income Tax Act

The appellant raised three grounds of appeal, with the first ground being dismissed as not pressed. The second ground related to the confirmation of an addition of Rs. 4,81,91,421 under section 68 of the Act. The appellant explained that the cash deposits in various bank accounts were not related to his business and were provided by another individual for accommodating transactions. The assessing officer found the appellant to be involved in Hawala transactions and made the addition as the appellant failed to prove the source of the deposited money. The CIT(A) confirmed the addition, stating that the appellant did not provide names of beneficiaries or produce the individual who allegedly provided the cash. The appellant's argument that he was only an accommodator was rejected, and the onus to explain the source of the deposits remained unfulfilled. The Tribunal directed the AO to verify the peak deposits in all bank accounts and make additions based on the peak deposits determined.

Issue 2: Alternative plea for estimating commission income or tax peak of cash deposits

The appellant's alternative plea was to estimate the commission income on accommodation transactions or tax the peak of the cash deposits. The appellant's counsel argued that the appellant lacked the means to deposit such significant amounts and was merely an accommodator for another individual. The Departmental Representative supported the lower authorities' findings, stating that the appellant failed to discharge the initial onus. The Tribunal acknowledged that the cash was deposited in the bank accounts and that the appellant provided accommodation entries. However, as the appellant could not produce the alleged beneficiaries or discharge the initial onus, the Tribunal directed the AO to compute the profit from the Hawala business at 0.5% of the total cash deposited during the year. The Tribunal allowed the appeal for statistical purposes, directing a reassessment based on the peak deposits determined by the AO.

This judgment from the Appellate Tribunal ITAT, Mumbai involved the confirmation of an addition under section 68 of the Income Tax Act and an alternative plea for estimating commission income or taxing the peak of cash deposits. The Tribunal found that the appellant failed to prove the source of the cash deposits and directed the AO to verify and make additions based on the peak deposits. The Tribunal also directed the computation of profit from the Hawala business at a specified rate.