Assessee escapes Section 68 addition after proving transaction genuineness with complete bank details and evidence

Calcutta HC upheld ITAT's decision setting aside addition under Section 68. Assessee disclosed complete details of bank accounts, cheques issued, and cash received from accommodation entry recipients. AO treated assessee as accommodation entry provider and determined income at 2% brokerage on cash deposits of Rs. 166.59 crores rather than treating cash deposits as unexplained income. Since AO accepted the source and nature of cash deposits and computed income as commission, Section 68 was held inapplicable. Addition under Section 68 was unsustainable as assessee discharged initial onus by providing cogent evidence of transaction genuineness.

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Issues Involved:
1. Justification of the Tribunal's reliance on the case of Praveen Kumar Agarwal.
2. Deletion of the addition of Rs. 3,33,18,027 by the Income-tax Appellate Tribunal.
3. Deletion of the addition of Rs. 166.59 crores under Section 68 of the Income-tax Act, 1961.
4. Substitution of income based on peak credit by the Tribunal.

Summary:

1. Justification of the Tribunal's reliance on the case of Praveen Kumar Agarwal:
The Tribunal followed its decision in the case of Praveen Kumar Agarwal, who was the principal broker, determining the income by way of commission at 2% for accommodation entries. The Tribunal applied the peak balance principle in the case of Praveen Kumar Agarwal and extended the same to the respondent/assessee, who was a sub-broker.

2. Deletion of the addition of Rs. 3,33,18,027 by the Income-tax Appellate Tribunal:
The assessing officer determined the income of the respondent/assessee at Rs. 3,33,18,027, being brokerage/commission at 2% on cash deposits of Rs. 166.59 crores. The Tribunal, however, determined the income at Rs. 4,07,17,055 by applying the peak credit principle. The Tribunal's decision was based on the concurrent findings of the assessing officer, CIT(A), and ITAT that the respondent/assessee earned brokerage/commission at 2% on cash deposits.

3. Deletion of the addition of Rs. 166.59 crores under Section 68 of the Income-tax Act, 1961:
The assessing officer added Rs. 166.59 crores as unexplained cash credit. The Tribunal found that the respondent/assessee disclosed complete details of bank accounts, cheques issued, and cash received, which were not disputed by the department. The Tribunal held that Section 68 was uninvokable as the source of cash deposits was disclosed, and the income was determined as brokerage/commission on accommodation entries.

4. Substitution of income based on peak credit by the Tribunal:
The Tribunal applied the peak credit principle, determining the income at Rs. 4,07,17,055, which included brokerage. This was based on the daily summary of cash for the period provided by the respondent/assessee. The Tribunal's decision was consistent with its order in the case of the principal broker, Praveen Kumar Agarwal, and was not interfered with by the High Court.

Conclusion:
The High Court dismissed the appeal, answering all substantial questions of law in favor of the assessee and against the revenue, thereby upholding the Tribunal's decision.

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