2015 (12) TMI 391 - AT - Income Tax

Appeal partially allowed in commission & cash credit case for AY 2009-10. Section 68 deletion challenged.

The appeal by the Revenue was partly allowed in a case involving commission receipts and unexplained cash credit for Assessment Year 2009-10. The CIT(A) ... Addition in respect of commission - estimate the profit @0.50% of the total turnover - addition made in respect of unexplained cash credit u/s.68 - CIT(A) deleted the addition - Held that:- CIT(A) deleted this addition on the basis that the AO has rejected the books of account and estimated the income of the assessee at 0.52% of the total turnover. Therefore, once the books of account is rejected and the income of the assessee is estimated u/s.68 of the Act, it cannot be made separately of the deposits made in the bank account which is part and parcel of the books of account. We do not agree with this view of the ld.CIT(A) and no finding is given whether such deposits relate to the commission received by the assessee. In the absence of such specific finding, it cannot be presumed that the deposits as made were, in fact, the commission received by the assessee. Therefore, the decision of the ld.CIT(A) on this issue is hereby set aside and the addition made by the AO of ₹ 28,24,000/- is hereby upheld and this issue raised by the Revenue is allowed. - Decided partly in favour of revenue. Issues:1. Deletion of addition of commission receipts and unexplained cash credit by the CIT(A).2. Justification of the CIT(A) in deleting the additions.3. Interpretation of Section 68 of the Income Tax Act regarding unexplained cash credit.Analysis:Issue 1: Deletion of addition of commission receipts and unexplained cash credit by the CIT(A)The case involved an appeal by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals) pertaining to the Assessment Year 2009-10. The Assessing Officer had rejected the books of account and estimated commission receipts at 0.5% of the total turnover, along with adding an unexplained cash credit of Rs. 28,84,000. The CIT(A) partially allowed the appeal, reducing the estimated commission receipts to 0.25% and deleting the addition of Rs. 28,84,000. The Revenue appealed against this decision.Issue 2: Justification of the CIT(A) in deleting the additionsRegarding the deletion of commission receipts, the CIT(A) based the decision on a previous case where a similar issue was decided at 0.25% commission on accommodation entries. The Revenue failed to provide any material challenging this decision before the Tribunal, leading to the upholding of the CIT(A)'s order. However, the deletion of the addition of Rs. 28,84,000 made under Section 68 of the Act was contested by the Revenue. The Assessing Officer had observed discrepancies in the deposits made in the bank account, indicating unexplained cash credits.Issue 3: Interpretation of Section 68 of the Income Tax Act regarding unexplained cash creditThe Assessing Officer invoked Section 68 of the Income Tax Act, which allows charging any sum found credited in the books of an assessee to income tax if no satisfactory explanation is provided. The CIT(A) deleted this addition based on the rejection of books of account and estimation of income under Section 68. However, the Tribunal disagreed, stating that the deposits in the bank account should not be treated separately from the estimated income. Without specific findings linking the deposits to commission received, the addition of Rs. 28,84,000 was upheld.In conclusion, the appeal by the Revenue was partly allowed, with the deletion of commission receipts upheld but the addition of unexplained cash credit reinstated. The Tribunal's decision highlighted the importance of providing satisfactory explanations for income and cash credits as per the provisions of the Income Tax Act.