2019 (3) TMI 896 - AT - Income Tax

Unexplained cash credit - addition u/s 68 - entry operator - taking total turnover of the entries as an unexplained cash credit - - search operation u/s 132 - assessee was carrying on the activity of providing bogus entries through various entities which were admitted to be controlled and managed by the assessee - HELD THAT - CIT(A) did not commit any error in holding that Assessing Officer was not right in taxing the total turnover of the entries as an unexplained cash credit in the hands of the assessee who is an entry provider and since the beneficiaries are identified the entire amount should be brought to tax in the respective hands of the beneficiaries. Hence the order of the CIT(A) is a well reasoned order and therefore we affirm the findings of the CIT(A) on the deletion of addition - decided against revenue Estimation of commission income @0.80% - We note that the entries provided by the assessee are mix-match of three types of entries as disclosed by the assessee in his statement recorded on 14-04-2012(post search). The rate of commission is not uniform in respect of these three types of entries. Therefore to upheld the addition to the extent of 1.50% is not justified on the facts of the case more particularly when AO has not brought any material on record to justify the addition to this extent. Looking in to the facts of the case and the decisions relied upon Ld. CIT(A) is justified in taking commission rate 0.80%. Therefore we decline to interfere in a such well reasoned finding of CIT(A) hence we uphold the findings of the Ld. CIT(A) on the issue in dispute and accordingly these grounds relating to the determination of rate of commission by the assessee as well as by the department are dismissed. Unexplained cash credit - A.Y. 2012-13 - HELD THAT - CIT(A) has listed out the amount from various bank accounts in para 13 which are found to be the turnover of accommodation entries relating to the entities who have furnished the return of income as well as audited accounts which are relied upon and Ld. CIT(A) has observed that the same cannot be treated as unexplained deposits in the hands of the assessee. After perusing the findings of the Ld. CIT(A) we do not find any infirmity in the findings of Ld. CIT(A) therefore we decline to interfere in the deletion of amount and hence uphold the order of the Ld. CIT(A) on the issue in dispute.

Summary

Issues Involved:
1. Estimation of Commission Income.
2. Addition on Account of Unexplained Credits and Entries.
3. Addition on Account of Unexplained Deposits in Bank Accounts and Cash Found.

Detailed Analysis:

1. Estimation of Commission Income:
The Assessee's appeals for AY 2010-11, 2011-12, and 2012-13 challenged the CIT(A)'s estimation of commission income at 0.80%. The Revenue's appeals contested the deletion of part of the commission income assessed at 1.5% by the AO. The AO had determined the commission income based on the Assessee's admission of receiving brokerage/commission for providing accommodation entries. The CIT(A) reduced the rate from 1.5% to 0.80%, considering judicial precedents where commission rates ranged from 0.20% to 0.80%. The Tribunal upheld the CIT(A)'s decision, finding no material to justify a higher rate and confirming the commission income at 0.80%.

2. Addition on Account of Unexplained Credits and Entries:
The Revenue's appeals for AY 2010-11, 2011-12, and 2012-13 challenged the deletion of additions made by the AO on account of unexplained credits and entries. The AO had added the total turnover of accommodation entries as income, but the CIT(A) deleted these additions, concluding that the Assessee was an accommodation entry provider. The CIT(A) noted that the AO's own findings and statements recorded during the search confirmed the Assessee's role as an entry provider, and the cash deposits in various bank accounts belonged to the beneficiaries. The Tribunal upheld the CIT(A)'s decision, referencing judicial precedents that only commission income should be assessed in the hands of an entry provider, not the entire turnover of entries.

3. Addition on Account of Unexplained Deposits in Bank Accounts and Cash Found:
For AY 2012-13, the AO added Rs. 29,11,56,727 as unexplained deposits in bank accounts and cash found during the search. The CIT(A) granted relief for Rs. 25,95,11,221, finding that the deposits were part of the turnover of accommodation entries and were properly accounted for in the audited financial statements of various entities. The CIT(A) sustained an addition of Rs. 3,16,45,506, where the Assessee failed to produce audited accounts. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the deletion of Rs. 25,95,11,221 and rejecting the Assessee's claim for set-off of the sustained addition against commission income.

Conclusion:
The Tribunal dismissed all the appeals filed by both the Revenue and the Assessee, upholding the CIT(A)'s findings on the estimation of commission income at 0.80%, deletion of additions on account of unexplained credits and entries, and partial relief granted on unexplained deposits in bank accounts and cash found.