2012 (10) TMI 398 - AT - Income Tax

Rejection of books u/s 145 Accommodation entries/bills Whether books were rejected u/s 145 merely on the basis of, if one of the director of assessee company is engaged in providing accommodation bills - AO concluded that the assessee is also engaged in the business of providing accommodation bills - The AO estimated the commission/brokerage/consideration from providing the accommodation bills/entries @1% (net of expenses) on the total turnover Held that - Only because of such person in his statement has accepted of providing accommodation bills cannot ipso facto make the assessee company also to be engaged in the same kind of business. There is no reference of the name of the assessee company in the statement given by such person & document there from. As we have held that commission income is not assessable in the hands of the assessee, its return as per account is accepted and the addition made with respect to commission is deleted. Appeal decides in favour of assessee.

Summary

Issues:
- Assessment based on providing accommodation bills/entries
- Validity of assessment without cogent material evidence
- Consideration of statement by Shri Pravin Kumar Jain
- Treatment of commission income in assessment

Analysis:
1. Assessment based on providing accommodation bills/entries:
- The appeals involved two separate orders of Ld. CIT(A) for assessment year 2008-09, both pertaining to the issue of whether the assessees were engaged in providing accommodation bills/entries or conducting normal trading business. The AO estimated commission from providing accommodation bills and made assessments based on this premise.

2. Validity of assessment without cogent material evidence:
- The AO's assessment was primarily based on the statement of Shri Pravin Kumar Jain, who admitted to providing accommodation bills to various parties. However, the assessees denied involvement in such activities. The AO rejected the books of account and estimated commission without substantial evidence.

3. Consideration of statement by Shri Pravin Kumar Jain:
- The Tribunal noted that Shri Pravin Kumar Jain's statement did not mention the assessees, who were legal entities distinct from him. The absence of any reference to the assessees in Jain's statement raised doubts about the validity of the assessment linking them to accommodation bill transactions.

4. Treatment of commission income in assessment:
- The Tribunal found that the AO failed to provide concrete evidence linking the assessees to accommodation bill activities. Despite issuing notices and examining transactions, no incriminating material was found. The Tribunal concluded that the assessment was unfounded and based on irrelevant facts, leading to the deletion of the commission income addition.

5. Conclusion:
- The Tribunal allowed the appeals, emphasizing that the assessment lacked substantial evidence connecting the assessees to accommodation bill transactions. The absence of incriminating material and the distinct legal status of the assessees led to the rejection of the commission income addition, thereby accepting the assessees' returned income and deleting the additional ground raised.

By carefully analyzing the facts, statements, and legal principles, the Tribunal overturned the assessments, highlighting the importance of cogent evidence and adherence to procedural fairness in tax assessments.