Ramesh Kumar Bagri Vs ITO (ITAT Delhi)
No 100% Tax on Accommodation Entries – Entry Provider’s Commission Not Entire Credits – ITAT Delhi Cuts Rate from 0.5% to 0.4%
The controversy revolved around treatment of large sums credited in Assessee’s bank accounts totaling Rs. 55,17,27,090/- in AY 2013-14 & consequential entries in subsequent years. AO had assessed entire credits as unexplained in absence of proper compliance, later treating Assessee as accommodation entry provider.
CIT(A) noted that though AO had initially added entire credits, in remand proceedings AO himself reported that Assessee’s conduct resembled an entry operator facilitating transactions for others. AO proposed estimation of commission income at 5% of turnover. However, CIT(A) after referring to judicial precedents including Sanjay Kumar Choudhary (HUF) Vs ACIT, PCIT Vs Alag Securities, Mukesh Choksi Vs ACIT & others, held that commission income rates in such cases ranged between 0.15% to 0.8%. Considering facts, CIT(A) sustained addition by estimating Assessee’s income at 0.5% of turnover.
On further appeal, Tribunal observed that records reflected continuous credits & debits in bank accounts without evidence of genuine business. Tribunal upheld principle that Assessee was only an accommodation entry provider. However, Tribunal considered it appropriate to grant marginal relief in rate of estimation. While sustaining finding that only commission element was taxable, Tribunal reduced estimation rate from 0.5% to 0.4% of turnover. Tribunal clarified that this reduction was based on peculiar facts of the case & would not act as a precedent. Accordingly, Tribunal partly allowed Assessee’s appeals, directing AO to recompute income by applying 0.4% on corresponding credits.
