New Edge Shares & Securities Pvt. Ltd. Vs ITO (ITAT Delhi)
In a recent ruling ITAT Delhi partly allowed the appeal of the assessee and modified the order passed by the AO is modified to restrict the unaccounted income by applying 0.3% of the total credits received during the year.
Assessee being a Private Limited Company, was engaged in the business of trading of shares of listed and unlisted companies on commission basis. The assessee did not file return of income for Assessment Year 2011- 12 as name of the assessee has been struck off from record of Registrar of Company w.e.f 13.03.20 12. In a search & seizure operation, AO of the assessee was intimated that the assessee is one of the beneficiaries who has taken accommodation entries of an amount of INR 98,20,055/- from the entities of the above searched persons. Reassessment proceedings were initiated after issuing notice u/s 148 dt. 26.03.2018. Finally, assessement was completed ex-parte at Rs. 1,41, 50,800/- by making following additions (i) Rs. 98,20,000/- u/s 68 and (ii) Rs.43,30,800/- estimating the business income @8% on the basis of credit submission in the bank account.
On appeal before CIT (A) additions were confirmed.
Before ITAT assessee raised various grounds challenging the assessment on legal aspect non-service of notice u/s 148 and completing assessment without complying with legal requirements of the provisions of section 147/148/151 of the IT Act. It was also submitted that the reason recorded clearly shows that the searched persons have been found in the business of providing accommodation entries to various beneficiaries through cheques/DD/RTGS/NEFT In lieu of cash through various dummy and paper companies controlled by them. The reason recorded are based on correct facts as in such cases, no cash is received from the appellant company but the cash is received from beneficiary to whom from the help of appellant, the accommodation entry lends up in the accounts of beneficiaries. It is a case where the transaction is done on some nominal commission and there is no justification to treat the amount to the extent of Rs.98,20,000/- as credits which are required to be explained. It is therefore a case where funds get transmitted to other entities as soon as these are provided to assessee and it will be fair and reasonable that a nominal income by way of commission be assessed in the hands of appellant. He argued that, as assessee is merely a pass-through entity and engaged in assistance of with the providing accommodation entries hence best option is to estimate income of such transactions by taking nominal income by way of facilitation commission income which in AY 2012-13 has been taken on 0.3 % on credit entries by AO himself. He further argued that he is ready to withdraw other legal grounds of appeal if assessment be modified to income argued above.
