2021 (7) TMI 601 - HC - Income Tax

Unexplained credit in the bank accounts - AO treating all the credit entries appearing in the bank accounts as income for the purpose of estimating commission income at the rate of 2.25% - HELD THAT - This Court finds that the Tribunal in the impugned orders has upheld the appellant s contention that the respondent used to provide accommodation entries upon charging commission. Tribunal has held that just because some loose sheets had been found stating that percentage of commission was 1.69% to 2.5% in some transactions, it cannot be presumed that for all transactions the respondent had earned a similar rate of commission. Further relying upon past decisions by a number of Coordinate Benches of the Tribunal adopting a commission rate ranging from 0.15% to 0.50%, in similar matters, the Tribunal passed the impugned order. This Court is of the view that none of the aforesaid findings are so perverse that they warrant an interference in appeal jurisdiction under Section 260A - This Court is also of the view that the Tribunal, being the last fact finding authority, was entitled to guess work and arrive at a ballpark rate of commission. Consequently, no substantial question of law arises in the present appeals. Accordingly, the appeals along with pending applications are dismissed.

Summary

Issues:
Challenge to assessment orders by the Income Tax Appellate Tribunal (ITAT) regarding credit entries in bank accounts treated as accommodation entry transactions.

Analysis:
The appellant challenged the orders dated 23rd January, 2019 passed by the ITAT in ITA No. 6351 of 2016 and ITA No. 6350 of 2016. The appellant argued that the assessment orders established that the credit entries in the respondent-Assessee's bank accounts were treated as accommodation entry transactions due to the lack of satisfactory explanations and confirmations. The CIT(A) upheld the assessment orders, stating that the Assessee failed to prove the nature and source of each credit entry, justifying the treatment of all credit entries as income for estimating commission income at 2.25%. However, the ITAT partially allowed the appeals, setting aside the assessment and CIT(A) orders, stating that no fixed rate could be applied in such illegal activities and that there could be no profit element in inter-group transactions.

The appellant emphasized that the respondent had admitted to providing accommodation entries and failed to establish the nature and source of credit entries in the bank accounts. The ITAT's error, according to the appellant, was in not recognizing this failure and justifying the treatment of all credit entries, including inter-group transactions, as income for estimating commission income at 2.25%. The High Court noted that the Tribunal acknowledged the provision of accommodation entries by the respondent but held that the percentage of commission varied in different transactions, citing loose sheets indicating commission rates ranging from 1.69% to 2.5%. The Tribunal, based on past decisions, adopted commission rates ranging from 0.15% to 0.50% in similar cases.

The High Court found that the Tribunal's findings were not so unreasonable as to warrant interference under Section 260A of the Income Tax Act, 1961. The Court held that the Tribunal, as the final fact-finding authority, was entitled to estimate a commission rate and engage in guesswork. Consequently, the Court dismissed the appeals, stating that no substantial question of law arose. The order was directed to be uploaded on the website and forwarded to the appellant's counsel via email.