Gopal Mathurdas Parikh (IND) Vs ITO (ITAT Ahmedabad)
Accommodation Entry Income Re-Estimated at 1.5%: ITAT Ahmedabad Reduces Addition in Bank Routing Case
The Ahmedabad Bench of the ITAT partly allowed the assessee’s appeals for AYs 2013-14, 2014-15 and 2015-16, holding that where the assessee is merely an accommodation entry provider, only the commission/profit element can be taxed, and not the entire credits or turnover.
The assessee, engaged in trading of cattle feed/maize, was found to have routed large sums through his bank account with Nutan Nagrik Sahakari Bank, primarily involving entities of the Anil Group. The AO treated the transactions as accommodation entries and made an addition at 8% of total turnover (₹59.64 crore). The CIT(A) restricted the addition by taxing 2% of total credits (₹17.41 crore) as commission income.
Before the Tribunal, the assessee did not seriously press the reopening issue but challenged the rate of estimation. The ITAT held that while the accommodation entry nature was undisputed, the 2% rate was on the higher side, considering that:
- debit and credit entries substantially squared off,
- the assessee had already disclosed 0.03% profit, and
- judicial precedents support taxing only a reasonable commission element.
Balancing the facts, the ITAT reduced the estimation to 1.5% of the total accommodation entries (₹17.41 crore) and directed the AO to recompute income accordingly. The same rate was applied mutatis mutandis for AYs 2014-15 and 2015-16.
Accordingly, all three appeals were partly allowed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
