2023 (8) TMI 74 - AT - Income Tax

Addition on account of cash credits on loss of sale (LTCL) u/s 68 and unexplained deposits u/s 68 - Categoric case of the AO is that the assessee is one of the persons who had provided accommodation entries to M/s. Navjeevan Charitable Trust through various parties - CUT(A) computing Commission @ 3% by considering single layer for commission - HELD THAT - When we examine the entries of credit recorded in the account of the assessee there is clear round tripping of the amount deposited in his account which cannot be considered as loan by any stretch of imagination because credited amount is repaid to the other parties within days, the assessee being an accommodation entry providers. Otherwise in case of a loan the amount is ordinarily not returned to the creditor within few days. These facts got duly proved from the assessment order passed in case of Shri Rashmikant K. Jhaveri wherein he has admitted that he has paid commission @ 0.25% to the assessee. These findings have been recorded in the assessment order of Shri Rashmikant K. Jhaveri available and the AO has accepted this contention. We are of the considered view that when it is proved on record that as per entries recorded in the bank account of the assessee maintained with Jammu Kashmir Bank and Axis Bank the assessee retained 3% which fact is also admitted by trustee of M/s. Navjeevan Charitable Trust there is no question of accepting the contention of the assessee that commission should be reduced to 0.25%. Assessee failed to prove on record that it has retained only 0.25% and transferred the remaining amount to other persons. There is not an iota of this fact on record. It is nowhere case of the assessee that he has paid the balance amount in cash or otherwise to the other three persons involved in the business of providing accommodation entries. We are unable to agree with the contentions raised by the Ld. D.R. for the Revenue that the addition @ 100% be made and at the same time we are also unable to agree with the contentions raised by the assessee that addition on account of commission qua accommodation entries on the amount be reduced from 3% to 0.25%. CIT(A) has passed a well reasoned order based on the facts proved on record, so finding no illegality or perversity in the impugned order passed by the Ld. CIT(A) there is no reason to interfere into the impugned findings returned by the Ld. CIT(A). So ground No. 3 of assessee s appeal is hereby dismissed and at the same time grounds No. 1 2 of Revenue s appeal are also dismissed.

Summary

Issues Involved:
1. Jurisdiction under Section 153C.
2. Incriminating Material and Natural Justice.
3. Computation of Commission.
4. Deletion of Addition by CIT(A).

Summary:

Jurisdiction under Section 153C:
The assessee challenged the jurisdiction of the A.O. under Section 153C, arguing that no seized material belonged to the appellant. The CIT(A) upheld the A.O.'s jurisdiction. During the hearing, these grounds were not pressed by the assessee and were determined against the assessee.

Incriminating Material and Natural Justice:
The assessee argued that the assessment under Section 153C was passed without incriminating material, jurisdiction, and without granting an opportunity to be heard. The assessee also claimed that the order was based on routine approval under Section 153D and violated natural justice by not providing a copy of the recorded statement and satisfaction note. These grounds were not pressed during the hearing and were determined against the assessee.

Computation of Commission:
The assessee contested the computation of commission at 3% on Rs. 4,20,93,787, arguing for multiple layers of commission. The CIT(A) computed the commission at 3% of the total deposits. The Tribunal upheld the CIT(A)'s computation, dismissing the assessee's contention to reduce the commission to 0.25%.

Deletion of Addition by CIT(A):
The Revenue appealed against the deletion of Rs. 4,35,93,787 by the CIT(A), who had actually deleted only Rs. 15,00,000 and confirmed Rs. 4,20,93,787 as accommodation entries with a 3% commission addition. The Tribunal upheld the CIT(A)'s decision, finding no illegality or perversity in the order.

Conclusion:
Both the assessee's and Revenue's appeals were dismissed. The Tribunal confirmed the CIT(A)'s findings, including the deletion of Rs. 15,00,000 and the addition of 3% commission on Rs. 4,20,93,787. The decision was pronounced in open court on 25.05.2023.