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2023 (6) TMI 484 - AT - Income TaxEstimation of commission income - Providing Accommodation entries - Unexplained deposits/loans - assessee has failed to establish the genuineness and creditworthiness of the bank credit entries - CIT(A) observed that since the assessee is an entry provider the only addition that could be made is the commission charged by the assessee on providing accommodation entries and accordingly sustained partly - HELD THAT - The undisputed fact and categorical finding of the AO show that the assessee is an entry provider. In our considered opinion when a person is engaged in the clandestine activities of providing accommodation entries he only charges commission whereas the cash belongs to the person who is taking the accommodation entry, therefore, there is no error or infirmity in the findings of CIT(A) in sustaining the addition on account of commission earned on providing accommodation entries.
Issues Involved:
The issues involved in this case are: 1. Addition of unexplained deposits/loans by the Assessing Officer. 2. Reliance on inadequate submissions by the assessee by the Commissioner of Income Tax (Appeals). 3. Failure to conduct an independent inquiry by the Commissioner of Income Tax (Appeals) and ignoring relevant case law. 4. Error in the order of the CIT(Appeals) and the appellant's request to amend grounds of appeal. Issue 1: Addition of Unexplained Deposits/Loans During scrutiny assessment proceedings, the assessee failed to explain deposits in the bank account despite multiple opportunities. The Assessing Officer (AO) noted the lack of supporting evidence for credit entries and the failure to establish the genuineness of bank credit entries. Due to the assessee's history of providing accommodation entries, the AO added unexplained cash deposits totaling Rs. 2,32,36,150. Issue 2: Reliance on Inadequate Submissions The assessee challenged the addition before the CIT(A) and explained that a portion of the deposit was from the liquidation of investments brought forward from previous years. The CIT(A) accepted the explanation for Rs. 1,79,50,000 but sustained the addition of Rs. 2,32,361 as commission earned on providing accommodation entries, given the assessee's history as an entry provider. Issue 3: Failure to Conduct Independent Inquiry The Revenue argued that the assessee failed to explain credit entries in the bank account, relying on a High Court decision. The Tribunal noted that the assessee's activities as an entry provider primarily involved charging commission, and the cash belonged to the individuals taking the accommodation entries. Therefore, the CIT(A)'s decision to sustain the addition was upheld. Issue 4: Error in CIT(A) Order The High Court's decision in a similar case supported the Tribunal's findings, emphasizing that the assessee's business centered around providing accommodation entries and charging commission. The Tribunal declined to interfere with the CIT(A)'s decision, dismissing the appeal by Revenue and Cross Objection by the assessee. This judgment highlights the importance of substantiating income sources and the impact of past activities on tax assessments, ultimately upholding the CIT(A)'s decision based on the nature of the assessee's business activities.
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