2023 (12) TMI 101 - AT - Income Tax

Association of the assessee with his employer in the bogus business activity - Addition being 1% of total credit amount in the bank accounts of the appellant not operated by him - AO has held that the employer of the assessee was running several proprietary concern through the connivance of the assessee and all the bank accounts were handled by his employer - Counsel contended that assessee has already shown the impugned commission and incentives received by the assessee from his employer for associating with his employer in his bogus business thus further addition made on estimation basis in the hands of the assessee is not justified. HELD THAT - After considering the above facts and findings of the assessing officer we consider it is appropriate to restrict the addition to the extent of .05% of the gross total of since actually the business was run and controlled by the employer of the assessee and assessee had already shown the commission income received from the employer in the return filed. Unexplained cash credit u/s 68 - assessee explained that all these accounts were controlled and operated by his employer and he was just working as a benami person on the direction of his employer - HELD THAT - AO accepted that assessee was not directly and fully involved in the running of two proprietary concern and the assessee was just acting as a benami person of his employer and the proprietary concern and bank accounts were controlled by his employer. Therefore we consider because of association of the assessee in the bogus business activity of his employer addition of 15% of such cash deposit would be appropriate. Therefore this ground of appeal of the assessee is partly allowed.

Summary

Issues involved:
The judgment involves appeals filed by the assessee against the order of NFAC for assessment years 2011-12 and 2012-13, addressing issues related to additions made to the income of the appellant based on bank account operations not directly handled by him.

Issue 1 - Grounds 1, 2, and 3:
The appellant contested the addition of Rs. 765,553 to his income, representing 1% of total credit amount in bank accounts not operated by him, arguing that he was merely a conduit for his employer and should not be taxed for income earned through transactions not directly handled by him. The assessing officer estimated the income based on the gross sales amount, attributing it to the appellant's association with his employer in the business activity.

Issue 2 - Grounds 1 & 2 (ITA No. 1870/Mum/2023):
Similar to Issue 1, the appellant challenged the addition made to his income in this appeal as well, with the Tribunal restricting the addition to 0.05% of the gross amount considering the appellant's role as a benami person for his employer.

Issue 3 - Ground 4:
The assessing officer added Rs. 4,50,000 as unexplained cash credit in the appellant's income, relating to cash deposits in bank accounts controlled by his employer. The Tribunal acknowledged the appellant's limited involvement in the concerned proprietary concerns and reduced the addition to Rs. 2,25,000, considering his association with the employer's business activities.

In summary, the Tribunal partly allowed the appeals, adjusting the additions made to the appellant's income based on his role as a conduit for his employer and his limited involvement in the business operations controlled by the employer.