2019 (5) TMI 428 - AT - Income Tax

Accommodation of bogus transaction - entry operator - notional commission on unsecured loan - incriminating material has been found in the search proceedings and statement has been given under oath u/s 132(4) - presumption of statement made u/s 132(4A) - retraction of statement - HELD THAT - The assessee, in statement on oath u/s 132(4) during search proceedings, categorically admitted to be engaged in providing accommodation entries of varied nature through two name-sake entities without carrying out any actual business activity. The modes-operandi adopted by the assessee has elaborately been enumerated in the impugned order as well as in the statement given by the assessee. The incriminating material in the shape of Annexure A-1 to Annexure A-5 in respect to parallel accounts containing details of cash transactions etc. was found from the possession of the assessee which unequivocally corroborated the aforesaid statement. AR has submitted that the statement was retracted but it is noted that the statement has been retracted after lapse of more than 10 months without any supporting facts to demonstrate that the same was given under any coercion or threat. Presumption of Section 132(4A) stood against the assessee and complete onus to negate the same was on assessee which has remain undischarged. All these factors do not inspire us to accept the submissions of Ld. AR that additions of the two entities were not justified in the hands of the assessee. Therefore, lower authorities, in our considered opinion, were quite right in making the impugned additions in the hands of the assessee, under the given circumstances. Estimation of rate of commission earned by the assessee on providing accommodation entries. - HELD THAT - The chain of the transactions establishes that the assessee has received commission on three accounts viz. commission on import purchases made on behalf of other entities, commission on accommodation local sales bills provided to other entities and commission on entries of loans and advances being provided to certain beneficiaries. The commission on local purchases stated to be made by the two entities, under the circumstances could not be sustained. Nothing has been brought on record to suggest that the assessee has received commission on account of local purchases stated to be made by the two entities. The same is also not supported by the statement made u/s 132(4). Therefore, the addition on account of commission on local purchases, as made by lower authorities, in our opinion, could not be sustained. Therefore, we delete the same. The commission on account of accommodation entries of loans and advances has been estimated @2.4%. However, no material has been brought on record to justify the same. The assessee has also not indicated the same in the statement made u/s 132(4). Therefore, under the given circumstances, we estimate the same @0.5%. Ground No. 3 stand partly allowed. Commission on import has been estimated @0.275% whereas commission on sales has been estimated @0.075%. We estimate the commission on import @0.2% and commission on sales @0.05%. Ground Nos. 5, 7 8 stand partly allowed. Allowance for expenditure - CIT(A) has estimated the expenses as 25% of unaccounted commission. - HELD THAT - The perusal of material on record reveal that the assessee had employed four persons during the year to carry out various transactions. One of the entities was a corporate entity for which additional expenditure has to be incurred to maintain the corporate personality. Keeping in view the same, we enhance the same to 50% of unaccounted commission. The income reflected by M/s Abhayaraj Gems Private Ltd. the proprietor of M/s Rishabh Impex could not be termed as real income and therefore, the credit of the same shall be granted to the assessee. The assessee, in its own return of income, has reflected salary from M/s Abhayaraj Gems Private Ltd. which also, for the same reasons, could not be termed as real income and therefore, the same would stand deleted from the income of the assessee.

Issues Involved:
1. Addition based on statements under pressure.
2. Addition on account of commission on loans.
3. Addition of notional commission on unsecured loans.
4. Addition of notional commission on purchases.
5. Addition of notional commission on imports.
6. Ad-hoc addition of notional interest without rejecting books of accounts.
7. Addition on estimated commission on sales.
8. Addition on account of sale.
9. Allowance of expenses against commission income.
10. Initiation of proceedings under section 274 r.w.s 271 (1) (c).
11. Interest under section 234A, 234B, and 234C.

Detailed Analysis:

1. Addition based on statements under pressure:
The assessee contended that the addition was based on a statement taken under pressure. The tribunal noted that the statement under section 132(4) was given on oath and corroborated by incriminating material found during search proceedings. The retraction of the statement after 10 months without any supporting evidence was not accepted. Therefore, the addition was upheld.

2. Addition on account of commission on loans:
The tribunal found that the assessee admitted to providing accommodation entries through benami concerns. The commission on loans was estimated based on the nature of transactions and the incriminating material found. The addition was justified as it was not solely based on the retracted statement but also on corroborative evidence.

3. Addition of notional commission on unsecured loans:
The commission on unsecured loans was initially estimated at 2.4%. The tribunal reduced this to 0.5% due to the lack of material evidence to justify the higher rate. The addition was partly allowed.

4. Addition of notional commission on purchases:
The commission on local purchases was not supported by any evidence or the statement under section 132(4). Therefore, the tribunal deleted the addition on this ground.

5. Addition of notional commission on imports:
The commission on imports was initially estimated at 0.275%. The tribunal reduced this to 0.2% based on similar cases and the nature of transactions. The addition was partly allowed.

6. Ad-hoc addition of notional interest without rejecting books of accounts:
The tribunal upheld the addition as the assessee failed to provide any evidence to counter the findings of the lower authorities. The addition was justified based on the incriminating material and the presumption under section 132(4A).

7. Addition on estimated commission on sales:
The commission on sales was initially estimated at 0.075%. The tribunal reduced this to 0.05% based on similar cases and the nature of transactions. The addition was partly allowed.

8. Addition on account of sale:
The tribunal upheld the addition but adjusted the rate of commission as mentioned above. The addition was partly allowed.

9. Allowance of expenses against commission income:
The tribunal enhanced the allowable expenditure from 25% to 50% of the unaccounted commission, considering the nature of activities and the operational expenses incurred by the assessee.

10. Initiation of proceedings under section 274 r.w.s 271 (1) (c):
The tribunal did not specifically address this issue in detail, implying that the initiation of proceedings was upheld as justified by the lower authorities.

11. Interest under section 234A, 234B, and 234C:
The tribunal did not specifically address this issue, implying that the interest calculations were upheld as per the provisions of the Income Tax Act.

Conclusion:
The appeals were partly allowed with adjustments to the estimated rates of commission and enhancement of allowable expenses. The tribunal upheld the additions based on corroborative evidence and the statement under section 132(4), while providing relief on certain grounds where the evidence was lacking.

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