ITAT upholds addition on bogus transactions at 2% commission rate

The ITAT dismissed the appeals by the assessee for the relevant assessment years, upholding the addition on bogus transactions at a 2% commission rate and supporting the rejection of books of account under section 145(3) based on the nature of the transactions and the assessee's admission of providing accommodation entries.

---

---

Issues involved:
1. Addition on bogus transaction of the assessee @2% instead of 0.01% as admitted by the assessee.
2. Rejection of books of account under section 145(3) of the Income Tax Act.
3. Determination of fair commission rate for providing accommodation entries.

Analysis:
1. Addition on bogus transaction:
The case involved appeals by the assessee against orders of the Commissioner of Income Tax (Appeals) for the relevant assessment years. The Assessing Officer (AO) observed during assessment proceedings that the appellant was involved in providing accommodation entries without proper documentation. The AO rejected the books of account and estimated the net profit at 2% from the bogus transactions, resulting in an addition of Rs. 45,13,854. The Commissioner (Appeals) confirmed this action, upholding the 2% commission rate due to the lack of documentary proof for the claimed 0.01% rate. The ITAT upheld the Commissioner's decision, emphasizing the acceptance by the assessee of engaging in bogus transactions and providing accommodation entries, thus justifying the 2% commission rate.

2. Rejection of books of account:
The rejection of the books of account under section 145(3) was deemed appropriate due to the assessee's admission of being involved in providing accommodation entries. The ITAT supported this rejection based on the clear admission by the assessee, leading to the conclusion that the income attributed to such transactions should not be determined based on the assessee's claims. The tribunal found no fault in the revenue authorities' decision to attribute a 2% commission rate, considering the nature of the transactions and the assessee's admission of providing accommodation entries.

3. Determination of fair commission rate:
The key issue was the determination of a fair commission rate for providing accommodation entries, with the appellant admitting to receiving 0.01% commission but failing to provide documentary evidence. The AO adopted a 2% commission rate based on prevailing market practices, which was upheld by the Commissioner (Appeals) and subsequently by the ITAT. The tribunal found the 2% commission rate to be fair given the circumstances of the case and the assessee's involvement in bogus transactions. The lack of documentary proof for the 0.01% rate led to the rejection of the lower rate in favor of the higher rate determined by the revenue authorities.

In conclusion, the ITAT dismissed the appeals by the assessee for the relevant assessment years, upholding the addition on bogus transactions at a 2% commission rate and supporting the rejection of books of account under section 145(3) based on the nature of the transactions and the assessee's admission of providing accommodation entries.

---