ITO Vs Javerilal Dalichand Bhansali (ITAT Mumbai)
ITAT Mumbai Upholds Dual Commission Addition on Bogus Purchase and Sale Entries
The Mumbai Bench of the ITAT allowed the Revenue’s appeal for AY 2011-12 and restored the Assessing Officer’s action of taxing commission income at 1% on both bogus purchases and bogus sales arising from accommodation entry transactions.
The assessee had admitted in a statement recorded under section 131 that he was engaged in two activities—genuine trading in iron and steel, and a separate business of issuing accommodation bills without actual delivery of goods. He further admitted charging commission ranging from 0.5% to 1% for providing such accommodation entries. Based on investigation wing findings, the AO quantified bogus purchases of ₹8.31 crore and bogus sales of ₹8.51 crore and added commission income @1% on both sides.
The CIT(A) deleted the addition relating to bogus sales by relying on a coordinate bench decision in the assessee’s own case for AY 2010-11, holding that taxing both purchase and sale commissions would amount to double taxation.
The ITAT reversed the CIT(A)’s relief, holding that:
- The assessee had unequivocally admitted to providing accommodation entries during the year.
- The entire transaction was bogus, executed without actual delivery of goods.
- Commission income arises independently on both purchase and sale legs of accommodation entry transactions.
- The earlier ITAT order for AY 2010-11 was factually distinguishable, as in that year the assessee had not admitted bogus transactions and had furnished confirmations and quantitative details.
Accordingly, the Tribunal held that the AO was justified in taxing commission income @1% on both bogus purchases and bogus sales, set aside the CIT(A)’s order, and allowed the Revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
