2017 (11) TMI 803 - AT - Income Tax

Addition of unexplained income from undisclosed sources - Held that - Here in this case, as stated above, the addition has been made by the AO on the protective basis on the ground that entire deposits should be added in the hands of Shri Sanjay Kumar Garg. We find that the Tribunal in the case of Shri Sanjay Kumar Garg had applied 0.20% on total deposits appearing in all the bank accounts of all the bogus entities including that of the assessee also. Once in the case of Shri Sanjay Kumar Garg, where substantive addition was made by estimating the commission income from the accommodation entry @ 0.20%, then there is no basis for sustaining the protective addition of entire cash deposits of ₹ 5,56,85,000/- in the hands of the assessee. Therefore, following the Tribunal order, we do not find any merit in the ground No. 1 raised by the revenue and the same is dismissed. Applying of commission rate of 0.20% on the entire cash deposit - Held that - As the assessee was provided the accommodation entry through his bank account for which he was also getting certain commission from Shri Sanjay Kumar Garg and since rate of commission for accommodation entry has been determined and estimated @ 0.20% in the case of Shri Sanjay Kumar Garg, then same rate of commission will be applied in the case of the assessee also and therefore we do not find any infirmity in the order of the Ld. CIT(A) while confirming the rate of commission of 0.20% on the total deposits and accordingly ground No.1 as raised by the assessee is dismissed. Separate addition on account of commission which has been partly allowed by the Ld. CIT(A) - No reason to sustain the further commission income, because, once we have held that assessee s commission on the entire cash deposits which is part of total turnover is to be taken @ 0.20%, then there is no requirement for making separate addition again on commission for giving accommodation entry. Accordingly, we delete the entire addition of commission of ₹ 15,07,884/-. Ground No. 2 of the revenue is dismissed. No penalty u/s 271(1)(c) is leviable, because in the quantum proceedings, we have directed that the addition of cash deposits on protective basis cannot be added and only addition sustained is with regard to 0.20% by way of commission on such cash deposits in the hands of the both assessees. Accordingly, the revenue s appeals are dismissed.

Summary

Issues Involved:
1. Treatment of commission on cash deposits.
2. Deletion of addition on account of unexplained income from undisclosed sources.
3. Deletion of addition on account of accommodation charges.
4. Levy of penalty under Section 271(1)(c).

Detailed Analysis:

1. Treatment of commission on cash deposits:
The primary issue was whether the commission rate applied to cash deposits should be 0.20% or another rate. The assessee contested the application of a 0.20% commission rate on cash deposits of ?5,56,85,000, arguing that the CIT(A) erred in applying this rate based on the ITAT Order in the case of Sanjay Kumar Garg. The CIT(A) had sustained a commission of ?6,03,153 against the facts of the ITAT Order. The Tribunal upheld the CIT(A)'s decision to apply a 0.20% commission rate, referencing the precedent set in the case of Sanjay Kumar Garg, where a similar rate was applied for accommodation entries.

2. Deletion of addition on account of unexplained income from undisclosed sources:
The revenue challenged the deletion of ?5,56,85,000 added as unexplained income from undisclosed sources. The AO had made this addition on a protective basis in the hands of the assessee, with a substantive addition in the hands of Sanjay Kumar Garg. The CIT(A) followed the ITAT's decision in Sanjay Kumar Garg's case, which treated such deposits as turnover for accommodation entry business and applied a 0.20% commission rate. The Tribunal found no merit in the revenue's ground and dismissed it, confirming that only the commission income should be considered, not the entire cash deposits.

3. Deletion of addition on account of accommodation charges:
The revenue also contested the deletion of ?9,04,731 on account of accommodation charges. The CIT(A) had reduced the addition for commission on accommodation entries from 0.5% to 0.20%, resulting in a relief of ?9,04,731. The Tribunal upheld the CIT(A)'s decision, stating that once the commission rate is determined at 0.20%, no further addition for accommodation charges is warranted.

4. Levy of penalty under Section 271(1)(c):
Both the revenue and the assessee appealed against the levy of penalty under Section 271(1)(c). The CIT(A) had directed the AO to levy a penalty on the sustained commission of 0.20%, while the revenue sought a penalty on the entire cash deposits and the deleted part of the commission. The Tribunal dismissed the revenue's appeal, holding that no penalty is leviable since the addition of cash deposits on a protective basis was not sustained. The Tribunal also deleted the penalty on the sustained commission income, reasoning that the addition was purely on an estimate basis and there was no direct evidence of concealment or furnishing inaccurate particulars of income by the assessees. Additionally, the income after the addition would fall below the taxable limit, further negating the need for a penalty.

Conclusion:
The Tribunal upheld the CIT(A)'s application of a 0.20% commission rate on cash deposits, dismissed the revenue's grounds for unexplained income and accommodation charges, and deleted the penalties under Section 271(1)(c), providing relief to the assessees. The consolidated order addressed similar issues across multiple appeals, ensuring consistency in the treatment of accommodation entries and related penalties.