Benami assessee's addition reduced from 1% to 0.05% of bank credit for employer's bogus activities

ITAT Mumbai held that where assessee acted as benami for employer's bogus business activities, addition of 1% of total bank credit was excessive. Since employer controlled all operations and assessee already declared commission income from employer, addition was restricted to 0.05% of gross total. For unexplained cash credits under section 68, where assessee functioned as benami with employer controlling proprietary concerns and bank accounts, addition was limited to 15% of cash deposits rather than treating entire amount as unexplained credit. Appeal partly allowed.

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Issues involved:
The judgment involves appeals filed by the assessee against the order of NFAC for assessment years 2011-12 and 2012-13, addressing issues related to additions made to the income of the appellant based on bank account operations not directly handled by him.

Issue 1 - Grounds 1, 2, and 3:
The appellant contested the addition of Rs. 765,553 to his income, representing 1% of total credit amount in bank accounts not operated by him, arguing that he was merely a conduit for his employer and should not be taxed for income earned through transactions not directly handled by him. The assessing officer estimated the income based on the gross sales amount, attributing it to the appellant's association with his employer in the business activity.

Issue 2 - Grounds 1 & 2 (ITA No. 1870/Mum/2023):
Similar to Issue 1, the appellant challenged the addition made to his income in this appeal as well, with the Tribunal restricting the addition to 0.05% of the gross amount considering the appellant's role as a benami person for his employer.

Issue 3 - Ground 4:
The assessing officer added Rs. 4,50,000 as unexplained cash credit in the appellant's income, relating to cash deposits in bank accounts controlled by his employer. The Tribunal acknowledged the appellant's limited involvement in the concerned proprietary concerns and reduced the addition to Rs. 2,25,000, considering his association with the employer's business activities.

In summary, the Tribunal partly allowed the appeals, adjusting the additions made to the appellant's income based on his role as a conduit for his employer and his limited involvement in the business operations controlled by the employer.

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