ITO Vs Status Vyapaar Pvt Ltd (ITAT Lucknow)
Entry provider can be taxed only on commission, not entire accommodation entries; Section 68 not applicable to Entry Providers for routed funds: ITAT Lucknow
Assessee, a Kolkata-based investment company, was found to be an accommodation entry provider. During AY 2012-13, its bank account reflected credit & debit entries aggregating Rs 9.84 crore. Out of this, Rs 3.50 crore, routed to Mahesh Chndra Agarwal Group, was accepted as explained, since the group had surrendered the same before the Settlement Commission. AO however added the balance Rs 6.34 crore u/s 68 as unexplained cash credits & assessed total income at Rs 6.34 crore.
On appeal, CIT(A) observed that AO himself had concluded that Assessee was merely an entry provider & not the real beneficiary. While accepting that Rs 3.50 crore pertained to Mahesh Chandra Agarwal Group, AO failed to conduct verification of the remaining Rs 6.34 crore beneficiaries, details of whom were available on record. CIT(A) held that treating Assessee as the beneficiary of the entire Rs 6.34 crore was unjustified. Instead, CIT(A) estimated assessee’s income at 1% commission on Rs 6.34 crore (i.e., Rs 6.34 lakh) & directed AO u/s 150 to make enquiries regarding the real beneficiaries of the remaining sums.
