2021 (12) TMI 1212 - AT - Income Tax

Tribunal dismisses Revenue's appeal on Section 68 deposits, upholds CIT(A)'s decision.

The Tribunal dismissed the Revenue's appeal, affirming that the AO's addition of the entire deposits under Section 68 was not justified. The Tribunal ... Addition u/s 68 - Estimation of rate of commission - CIT(A) observed that in the interest of Justice and revenue to tax the assessee by adopting the brokerage rate on various bogus transactions at 0.75% is proper - HELD THAT:- The assessee is an accommodation entry provider and his real income is only towards the commission/brokerages, we are of the considered opinion that the estimate shall be reasonable having regard to the business conducted by the assessee. In the case of JRD stockbrokers [2008 (7) TMI 449 - ITAT DELHI-C] it was held to be appropriate at 0.6% whereas in the case of Adonis financial services private limited it was held to be at 0.5%. Inasmuch as the assessee accepted the commission at 0.6% by not preferring any appeal against the impugned order, we are not inclined to disturb the findings of the Ld. CIT(A) in this matter to the effect that the commission at 0.6% is appropriate. On this premise, we uphold the findings of the Ld. CIT(A) and find the grounds of appeal of the Revenue is devoid of any merits. Accordingly, the appeal of the Revenue is liable to be dismissed. Issues Involved:1. Determination of the rate of commission for accommodation entries.2. Justification for addition under Section 68 of the Income Tax Act.3. Validity of the assessment proceedings and adherence to Tribunal and High Court directions.Detailed Analysis:1. Determination of the Rate of Commission for Accommodation Entries:The primary issue revolves around the appropriate rate of commission that the assessee, a stock and share broker, should be taxed on for providing accommodation entries. The assessee claimed a rate of 0.25%, whereas the Assessing Officer (AO) estimated it at 3%, and the CIT(A) initially fixed it at 0.75%. The Tribunal remanded the case for a fresh determination, directing the AO to examine the concerned parties to ascertain the exact rate of commission. The High Court upheld this remand, emphasizing that adverse inference could be drawn if the assessee failed to prove the 0.25% rate.2. Justification for Addition under Section 68 of the Income Tax Act:Upon remand, the AO added the entire amount of Rs. 19,89,26,581/- to the assessee's income under Section 68, citing unexplained cash credits. However, the CIT(A) found that the AO did not bring any material to establish that the deposits were not accommodation entries but the assessee’s unaccounted money. The CIT(A) concluded that the assessee was engaged in providing accommodation entries and thus restricted the addition to Rs. 11,93,559/- based on a 0.60% commission rate, following the Tribunal's decision in a similar case (JRD Stockbrokers Pvt. Ltd. vs. ACIT).3. Validity of the Assessment Proceedings and Adherence to Tribunal and High Court Directions:The Tribunal and High Court had directed that if the assessee failed to prove the exact rate of commission, the addition should be made under Section 68 but restricted to Rs. 59.70 Lacs. The Revenue's appeal contended that the entire deposits should be added under Section 68. However, the Tribunal clarified that the AO misunderstood the directions, which were confined to determining the rate of commission and not treating the entire deposits as unexplained income. The Tribunal upheld the CIT(A)'s decision that the AO was not justified in adding the entire deposits and confirmed the commission rate at 0.60%, as the assessee did not appeal against this rate.Conclusion:The Tribunal dismissed the Revenue's appeal, affirming that the AO's addition of the entire deposits under Section 68 was not justified. The Tribunal upheld the CIT(A)'s decision to restrict the addition to Rs. 11,93,559/- based on a 0.60% commission rate, aligning with the directions from the High Court and the Tribunal's previous order. The Tribunal emphasized that the entire dispute was confined to the rate of commission and not the treatment of entire deposits as unexplained income.