2023 (11) TMI 843 - AT - Income Tax

Estimation of commission income at 0.60% on accommodation entries - no evidence was furnished to justify the fact that the assessee was indeed carrying on any business - No details of persons from whom monies were received and no details of persons to whom payments were made were furnished by the assessee. Accordingly, the ld. AO concluded that the entire transactions reflected in the said bank statement are mere transactions carried out by the assessee in the capacity of an entry operator - HELD THAT - As the assessee was not able to buttress his arguments by filing cogent documentary evidences even to prove that it is engaged in some business activity and that the credits and debits in the aforesaid bank account are business transactions. In these facts and circumstances, we do not deem it fit to interfere in the order of the ld. CIT(A) upholding the estimation of commission income @ 0.60% on total bank transactions. Accordingly, the addition made by the ld. AO is hereby upheld. Addition to income of TDS u/s 194A on interest income earned - Since no interest income was shown by the assessee in the return of income, this sum was added to total income by the AO while completing the assessment - Even before us, we find that no evidence has been filed by the assessee or by his authorized representative to justify the fact as to whether this interest income has been included in the total turnover. In any case, it is not in dispute that the amounts received from the aforesaid four parties represent interest income only which needs to be assessed separately under the head Income from other sources . Once the receipt represents interest income which has been subjected to deduction of tax at source u/s 194A of the Act by the payers, then it cannot be part of total alleged business receipts as stated by the assessee and the said interest income is to be taxed separately under the head income from other sources which has been rightly done by the lower authorities. Hence, we do not find any infirmity in the action of the lower authorities in this regard. Accordingly, the addition is hereby upheld. Disallowance of excess depreciation - We have already held that the assessee is not carrying on any business. Accordingly, it would not be entitled for depreciation u/s 32 of the Act. In any case, this issue does not arise out of the impugned order of the ld. CIT(A) before us. Hence, ground No. 9 raised by the assessee is dismissed. Assessee had disclosed a sum as returned income under the head Income from business. - Since we have already held that no business is carried on by the assessee and it has been merely providing accommodation entries to various parties to earn commission income thereon, thus, business income voluntarily offered to tax by the assessee should not be brought to tax. Hence, we hold that this sum of Income from business. is available to the assessee for telescoping benefit and the same would be telescoped with the aforesaid additions confirmed hereinabove. AO is hereby directed to give credit of Rs 1,48,380/- while determining the income of the assessee.

Summary

Issues involved:
The issues involved in this case include the proper completion of assessment proceedings, the addition of commission income based on presumption, the challenge to the addition of interest income, the disallowance of excess depreciation, and the chargeability of interest under Section 234B and penalty proceedings under Section 271(1)(c).

Assessment Proceedings:
The appeal arose from the order of the Commissioner of Income-tax (Appeals) against the order passed by the Assessing Officer under section 143(3) of the Income-tax Act, 1961. The appellant contended that the assessment order was perverse due to not following proper law and procedure. The assessing officer made a lump-sum addition of commission income without supporting material, which the CIT(A) upheld. The appellant challenged the assessment process as unconstitutional and arbitrary, claiming lack of proper opportunity. The Tribunal noted the continuous non-appearance of the assessee and proceeded to dispose of the appeal based on available records.

Commission Income Addition:
The assessing officer charged commission income at 0.60% on total bank transactions, amounting to Rs. 12,25,467, based on the presumption that the appellant was an entry operator. The appellant failed to provide evidence to prove business activities, leading to the upholding of the addition by the CIT(A) and the Tribunal. The Tribunal found no grounds to interfere with the CIT(A)'s decision, thus upholding the commission income addition.

Interest Income Addition:
Regarding interest income addition of Rs. 4,03,213, the appellant failed to demonstrate that these receipts were erroneously included in total turnover. As these receipts were interest income subject to TDS, they should be taxed separately under 'Income from other sources.' The Tribunal upheld the lower authorities' decision to include the interest income in the total income, as the appellant provided no evidence to the contrary.

Excess Depreciation Disallowance:
The appellant challenged the disallowance of excess depreciation of Rs. 13,740, which the assessing officer made due to disbelief in the existence of the appellant's business. Since the appellant was found not to be engaged in any business, the claim for depreciation was dismissed. The issue was not raised before the CIT(A) and did not arise from the impugned order, leading to its dismissal by the Tribunal.

Telescoping Benefit and Other Matters:
The appellant voluntarily offered Rs. 1,48,380 as business income, which the Tribunal held should not be taxed as no business activities were proven. This amount was directed to be telescoped with the confirmed additions. The Tribunal dismissed the grounds related to chargeability of interest under Section 234B and penalty proceedings under Section 271(1)(c) as premature. General grounds raised by the appellant were not specifically adjudicated upon.

Conclusion:
The Tribunal partly allowed the appeal, upholding the additions of commission and interest income while dismissing the claim for excess depreciation. The appellant was granted telescoping benefit for the voluntarily offered income, and certain other grounds were dismissed. The decision was pronounced on 26.07.2023.