2019 (5) TMI 1498 - AT - Income Tax

Addition u/s 68 - amount was credited in the books of account of the assessee and he failed to discharge the onus cast upon him -HELD THAT - As in the case of Sudhir Kumar Sharma (HUF) vs CIT 2014 (7) TMI 47 - PUNJAB HARYANA HIGH COURT has held that where in respect of huge amount of cash deposited in bank, assessee failed to give list of persons who advanced cash to him along with their confirmations in respect of huge amount of cash deposited in its bank account, the Assessing Officer was justified in adding the said amount to assessee s taxable income u/s 68 of the Act. We find the SLP filed by the assessee against the said order of the Hon'ble High court was dismissed by the Hon'ble Supreme Court 2016 (5) TMI 928 - SC ORDER Hon'ble Delhi High Court in the case of CIT vs. D.K. Garg, 2017 (8) TMI 450 - DELHI HIGH COURT has held that where the assessee, an accommodation entry provider, was unable to explain all sources of deposits and corresponding payments, he would not be entitled to benefit of peak credit. In other words, the entire bank deposits added by the Assessing Officer were confirmed. Therefore, the additional ground raised by the assessee that addition cannot be made u/s 68 of the Act on the basis of the bank statement is rejected. Argument of the assessee that only commission @ 0.5% should be added and not the entire deposits is concerned, we find the Assessing Officer, while making the addition has followed his order for assessment year 2004-05 in assessee s own case. The ld.CIT(A) has upheld the action of the Assessing Officer by following the order of his predecessor in assessee s own case. We find when the matter travelled to the Tribunal, the Tribunal for assessment years 2003-04 and 2004-05 2013 (10) TMI 1522 - ITAT DELHI and 2013 (12) TMI 133 - ITAT DELHI has restored the issue to the file of the Assessing Officer with certain directions. Respectfully following the decision of the Tribunal in assessee s own case for assessment years 2003-04 and 2004-05, we restore the issue to the file of the Assessing Officer for adjudication of the issue afresh in the light of the direction of the Tribunal and in accordance with law, after giving due opportunity of being heard to the assessee. Grounds raised by the assessee are accordingly partly allowed for statistical purposes.

Summary

Issues Involved:
1. Legality of addition under Section 68 of the Income Tax Act based on bank statements.
2. Determination of income from cash deposits in the context of providing accommodation entries.
3. Consistency in the application of tax treatment for similar cases within the same group.
4. Admissibility of additional legal grounds raised by the assessee.

Detailed Analysis:

1. Legality of Addition under Section 68 Based on Bank Statements:
The primary issue was whether the addition of ?18,99,300/- to the assessee's income under Section 68 of the Income Tax Act could be justified based on bank statements. The assessee argued that bank statements do not constitute "books of account," and hence, additions under Section 68 were not applicable. The Tribunal rejected this argument, noting that the assessee was engaged in a business activity, specifically providing accommodation entries. It was held that since the cash deposits were part of the business activity, the bank statements could be used to make additions under Section 68. The Tribunal referenced the Hon'ble Punjab & Haryana High Court's decision in Sudhir Kumar Sharma (HUF) vs. CIT, which supported the addition when the assessee failed to provide a list of persons who advanced cash along with their confirmations.

2. Determination of Income from Cash Deposits:
The assessee contended that only the commission income from providing accommodation entries should be taxed, not the entire cash deposits. The Tribunal noted that the Assessing Officer had followed the precedent set in the assessment year 2004-05, where the entire amount of cash deposits was added as income. However, the Tribunal also acknowledged that in previous years, similar cases within the group had been directed to reassess the commission income at a reasonable rate. Consequently, the Tribunal restored the issue to the Assessing Officer to adjudicate afresh, considering the directions provided in earlier Tribunal orders.

3. Consistency in Tax Treatment for Similar Cases:
The assessee argued that in other cases within the same group managed by Mr. Tarun Goyal, only the commission income was taxed, and not the entire cash deposits. The Tribunal recognized this inconsistency and directed the Assessing Officer to reassess the issue in line with earlier Tribunal decisions, which had adopted a commission rate of 0.5% of the deposits after excluding intra-group entries.

4. Admissibility of Additional Legal Grounds:
The assessee raised an additional ground, arguing that the addition based on bank statements was not permissible under Section 68. The Tribunal admitted this ground, following the decision of the Hon'ble Supreme Court in NTPC Ltd., which allows the admission of purely legal grounds without the need for fresh facts to be investigated. However, after considering the merits, the Tribunal rejected this additional ground, reiterating that bank statements could be used for additions under Section 68 in the context of business activities.

Conclusion:
The Tribunal's judgment addressed all the issues comprehensively. It upheld the legality of additions under Section 68 based on bank statements for business activities, directed the reassessment of income from cash deposits to determine a reasonable commission rate, and ensured consistency in tax treatment for similar cases within the same group. The appeals were partly allowed for statistical purposes, with the decision pronounced in the open court on 22.05.2019.