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2018 (4) TMI 1120 - AT - Income TaxAddition On account of commission income on providing accommodation entries - rates of commission charges - Appellant has failed to file evidence that VAT charged @4% from the beneficiaries on accommodation bills were actually refunded to the beneficiaries or deposited with the trade tax department - Held that - Beneficiaries claimed these expenses as deduction while computing their income and also claimed VAT as set off while filing their income tax and VAT returns. Beneficiaries in turn paid cash to the assessee over and above the Bill VAT amount his commission too. According to seized documents, the assessee is found charging commission income from 1.50 % to 3.85 %. The seized documents indicating commission rates are for a limited period. Assessee has minimum commission rates of 1.50% and also maximum amount of Commission is 3.85%. Rates of commission also varies as per the period in which the bogus bills are required. Rates are generally higher in the last months of closing of the year. No infirmity in the order of the ld CIT(A) in confirming the addition adopting rates of commission @ 2% and VAT @ 4 % totaling to 6 % . Further, the assessee has not shown any payment of VAT charged by him from the parties to whom the accommodation entries were provided, therefore the sum of 4 % VAT along with the commission of 2 % is chargeable to tax as income of the assessee. It is apparent that if assessee provides the bogus bill of ₹ 100/- then assessee charges 4% VAT thereon and receives the consideration of ₹ 104/-. The assessee is required to pay ₹ 4 to the state govt towards the VAT collected by him. During the course of search, no such evidences were found where the assessee has paid VAT to the state govt and no evidences have been produced during the assessment proceedings. No infirmity in the order of the lower authorities in not allowing the credit for VAT. To justify the addition of commission income for accommodation entry @6% the ld Assessing Officer and ld CIT (A) has correctly assumed the rate of 2% commission for providing bogus purchase bills and 4% for the VAT. In view of this we reject the ground of the assessee for granting deduction of VAT from his income. We also find no reason to reduce the commission income from 2%. With respect to the claim of the assessee that there is an expenditure also involved in these business and therefore, the commission income is required to be computed only at 0.76% also deserves to be rejected. The assessee has not shown any proof of such expenditure and no such proof were found in search proceedings. It was also not shown that what kind of expenditure assessee was incurring and to whom he was paying such expenditure. We confirm the order of the ld CIT(A) in confirming the addition on account of commission income on providing accommodation entries. In view of this, we reject ground No. 2 of the appeal of the assessee. Unexplained investment - Held that - No reason to disagree with the order of the lower authorities and the order of the ld CIT(A) where the reasons given were adequate to confirm this addition. in the result ground No. 3 of the appeal of the assessee is dismissed. Unexplained investment in the immovable properties - Held that - The seized papers during the course of search which are incorporated by the AO in his assessment order clearly shows about the investment made by the assessee in the immovable properties. In view of this we do not find any reason to interfere in the order of the lower authorities and confirm the order of the ld CIT(A) in confirming the addition on account of unexplained investment in immovable properties by the assessee. In the result ground of the appeal of the assessee is dismissed.
Issues Involved:
1. Taxation of accommodation entry provider. 2. Confirmation of additions by CIT(A). 3. Unexplained investments. Issue-wise Detailed Analysis: 1. Taxation of Accommodation Entry Provider: The assessee was involved in providing accommodation entries through bogus purchase bills from various firms and entities controlled by him. The modus operandi included issuing paper sales bills without delivery of goods, depositing cheques received from beneficiaries into bank accounts, and withdrawing cash to return to beneficiaries after deducting a commission. The total accommodation entries provided amounted to ?980 Crores over six years. The Assessing Officer (AO) determined the turnover from these entries and applied a commission rate of 6% (2% commission and 4% VAT) to compute the income, allowing a 0.5% deduction for establishment expenses. 2. Confirmation of Additions by CIT(A): The CIT(A) confirmed the AO's findings, stating that the assessee failed to provide any documentary evidence to rebut the quantum of turnover or to show that VAT charged from beneficiaries was refunded or deposited with the trade tax department. The CIT(A) upheld the commission rate of 2% and the addition of 4% VAT, resulting in a total commission rate of 6%. The CIT(A) also noted that the assessee declared an income of ?5,82,642/- in his return, which should be reduced from the total addition, providing a relief of ?5,82,642/-. 3. Unexplained Investments: The AO made additions on account of unexplained investments in various companies and properties. The assessee failed to provide satisfactory explanations or documentary evidence for these investments. The CIT(A) upheld these additions, noting that the assessee did not controvert the AO's findings. Specific investments included shares in Ansh Exim Pvt. Ltd., Myra Exim Pvt. Ltd., and Myra Fashion Pvt. Ltd., and properties in Manesar, Gurgaon, and Dhir Khera. Detailed Findings: Taxation of Accommodation Entry Provider: - The AO recorded statements from the assessee and other involved parties, confirming the bogus nature of the transactions. - The AO calculated the total turnover from accommodation entries at ?980 Crores for FY 2004-05 to 2010-11. - The AO applied a commission rate of 6%, comprising 2% commission and 4% VAT, and allowed a 0.5% deduction for expenses. - The CIT(A) confirmed the AO's findings, stating the assessee failed to provide evidence to rebut the turnover or show VAT refunds/deposits. Confirmation of Additions by CIT(A): - The CIT(A) upheld the AO's determination of the commission rate and VAT addition. - The CIT(A) provided a relief of ?5,82,642/- from the total addition, as this amount was already declared by the assessee. - The CIT(A) noted that the assessee's failure to provide evidence justified the AO's findings. Unexplained Investments: - The AO identified unexplained investments in shares and properties, totaling significant amounts. - The CIT(A) confirmed these additions, noting the lack of satisfactory explanations or evidence from the assessee. - Specific investments included shares in Ansh Exim Pvt. Ltd., Myra Exim Pvt. Ltd., and Myra Fashion Pvt. Ltd., and properties in Manesar, Gurgaon, and Dhir Khera. Conclusion: The appeals filed by the assessee were dismissed, confirming the AO and CIT(A)'s findings on the taxation of accommodation entries, commission rates, VAT additions, and unexplained investments. The judgment emphasized the lack of evidence provided by the assessee to rebut the findings and the comprehensive nature of the AO's investigation into the bogus transactions.
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