2022 (8) TMI 262 - AT - Income Tax

Addition u/s 68 - Estimation of commission on accommodation entries - assessee has failed to prove the source of the cash deposits in her bank account - HELD THAT - In the present case, the assessee could neither produce any of the beneficiaries nor could produce any confirmation letter in support of the transaction. It has not been disputed that the assessee s husband is also an accommodation entry provider. The Revenue could not bring anything on record to deny the statement of the assessee that her bank accounts were operated by her husband. Though, it can be accepted that in case of accommodation entry provider only commission can be considered as the taxable income, however, the rate of commission considered justifiable in other cases cannot be readily accepted in the present case, particularly when the assessee neither could prove the identity of the person from where the cash has been received nor could provide whereabouts of the beneficiaries to whom the money was transferred through cheque/RTGS. As noted above, in proceedings before the learned CIT(A), the assessee agreed that it has earned commission of 0.15% to 0.25%. In absence of any material in support of such claim and in view of aforesaid findings, we deem it appropriate to direct the Assessing Officer to consider 0.25% as net profit rate/commission from the alleged accommodation entry transaction and to compute the taxable income accordingly. As during the course of hearing, learned AR has also prayed that expenditure to an extent of 50% be allowed by placing reliance on the aforesaid decisions rendered by coordinate bench of the Tribunal. However, in the present case, it is evident that the assessee nowhere provided the details of expenditure incurred for earning the commission income from accommodation entry transaction. It is only now in the appellate proceedings before us, claim has been made to allow expenditure to an extent of 50%, without filing any supporting details, by placing reliance on decisions rendered in case of some other assessee. Thus, in view of the above, we do not agree with the submissions of the assessee in this regard. Thus, as a result, grounds No. 1 4 raised in assessee s appeal are partly allowed.

Summary

Issues:
Challenge to impugned order under section 250 of the Income Tax Act for the assessment year 2014-15. Addition of Rs. 2,97,35,000 under section 68 of the Act. Appeal against dismissal of appeal by learned Commissioner of Income Tax (Appeals). Levying interest under sections 234B and 234C of the Act. Application seeking admission of additional ground of appeal.

Analysis:
The appeal challenges the order under section 250 of the Income Tax Act for the assessment year 2014-15. The primary issue revolves around the addition of Rs. 2,97,35,000 under section 68 of the Act. The assessee failed to prove the source of cash deposits in her bank account, claiming her husband handled the accounts. However, no evidence of the transactions' legitimacy was provided, leading to the addition by the Assessing Officer. The appeal before the learned CIT(A) contended these were accommodation entries, earning the assessee a commission. The appeal was dismissed, prompting the current appeal.

During the hearing, the Authorized Representative argued for considering a commission on net profit for accommodation entries. The Departmental Representative supported the lower authorities' decisions. The tribunal analyzed the lack of evidence regarding the cash deposits' source and beneficiaries. The assessee's claim of being an accommodation entry provider earning a commission was considered, but without supporting evidence, a net profit rate of 0.25% was determined for taxation purposes.

The appeal also addressed the allowance of expenditure, with the AR requesting 50% expenditure be considered. However, as no expenditure details were provided, this request was not accepted. Ground No. 5 regarding the levy of interest under sections 234B and 234C was allowed for statistical purposes. An additional ground of appeal, arguing that transactions were conducted by the assessee's husband and should not be included in her income, was dismissed due to lack of supporting evidence.

In conclusion, the appeal was partly allowed for statistical purposes, with the tribunal directing the Assessing Officer to compute the taxable income based on a net profit rate of 0.25% for the alleged accommodation entry transactions. The additional ground of appeal was dismissed, and the levy of interest under sections 234B and 234C was allowed for statistical purposes.