2010 (3) TMI 1263 - AT - Income Tax

Tribunal decision: Income addition reduced, appeals dismissed as infructuous. Re-adjudication ordered for payment to bank.

Kulwant Singh Versus Deputy Commissioner of Income Tax

Kulwant Singh Versus Deputy Commissioner of Income Tax - (2010) 134 TTJ 129 (Delhi) Issues Involved:1. Determination of undisclosed income from accommodation-entry business.2. Determination of commission income from draft-discounting business.3. Addition of unexplained investment and interest income.4. Addition relating to payment made to Punjab & Sind Bank.Issue-wise Detailed Analysis:1. Determination of Undisclosed Income from Accommodation-Entry Business:The Assessee contended that the CIT(A) reduced the rate of commission from 4% to 0.75%, but the rate was still on the higher side. The CIT(A) found that the AO misinterpreted the statement of Shri Jagpreet Singh, who mentioned a 4% commission against 'C' Form transactions, not accommodation-entry business. The CIT(A) concluded that the commission in accommodation-entry business typically ranges from 0.5% to 1%, and thus determined the rate at 0.75%. The Tribunal, however, found no incriminating material from the search to support the existence of such business and concluded that the undisclosed income could not be computed based on information from the Sales-tax Department. The Tribunal reduced the rate to 0.65% for the purpose of justice, but ultimately allowed the ground, nullifying the addition.2. Determination of Commission Income from Draft-Discounting Business:The AO computed the income from draft-discounting at 0.5% based on the statement of Shri Jagpreet Singh. The CIT(A) reduced this rate to 0.3%, acknowledging the Assessee's expenses like bank charges, salary, conveyance, and rent. The Tribunal noted that the facts in the case of Inderbeer Singh, where the net income was estimated at 0.1742%, were distinguishable. The Tribunal found that the Assessee had incurred some expenditure on associates and determined the net income at 0.2% of the turnover, partly allowing the ground.3. Addition of Unexplained Investment and Interest Income:The AO added Rs. 51 lakhs as unexplained investment and Rs. 21.50 lakhs as interest income based on seized documents. The CIT(A) upheld this addition, relying on the statement of Shri D.K. Goyal. The Tribunal found that the Assessee's explanation that he acted as a mediator was not substantiated. The Tribunal concluded that the Assessee indeed advanced loans aggregating to Rs. 51 lakhs, out of which Rs. 40 lakhs were explained as borrowed from Shri Sohan Lal, making Rs. 11 lakhs taxable as unexplained advances. The interest income was reduced from Rs. 21.50 lakhs to Rs. 18.05 lakhs, and the addition of Rs. 51,000 was reduced to nil.4. Addition Relating to Payment Made to Punjab & Sind Bank:The AO added Rs. 5,68,988 as payment made to Punjab & Sind Bank, which the Assessee claimed was paid by other individuals. The CIT(A) upheld the addition as the Assessee failed to prove the payments were made by others. The Tribunal restored the matter to the AO for re-adjudication, instructing the Assessee to provide complete addresses of the individuals involved for verification.Separate Judgments Delivered:- The Tribunal dismissed the appeal of the Revenue (ITA No. 304/Del/2005) and the cross-objection (CO. No. 100/Del/2007) as infructuous.- The appeals and cross-objections in the case of R.T. Motors (P) Ltd. were dismissed as infructuous since Shri Kulwant Singh accepted the assessment of the undisclosed income in his hands.Conclusion:- IT(SS)A No. 255/Del/2005 was partly allowed.- IT(SS)A No. 304/Del/2005 was dismissed.- CO. No. 100/Del/2007 was dismissed as infructuous.- IT(SS)A No. 257/Del/2005, IT(SS)A No. 270/Del/2005, and CO. No. 138/Del/2007 were dismissed as infructuous.