2023 (7) TMI 1558 - AT - Income Tax

Tribunal Partially Allows Revenue Appeal: Upholds Cash Credit Deletion, Adds 0.47% Commission on Accommodation Entries for 2012-16.

The ACIT, Central Circle-26, New Delhi Versus M/s. Holeon Traders Pvt. Ltd. And (Vice-Versa)

The Appellate Tribunal upheld the deletion of the protective addition of unexplained cash credits, rejecting the revenue's appeal on this issue. However, ... Unexplained cash credits u/s 68 protective and substantive additions made by AO - HELD THAT:- As following the order of Tribunal in the case of Shri Anand Kumar Jain [2023 (5) TMI 1186 - ITAT DELHI] deletion of protective addition on account of unexplained cash credits is upheld and ground no. 1 of revenue is dismissed for AY 2012-13. Assessee being a conduit concern, would have earned commission income for the transactions - As per explanation and submissions of assessee, whole claim of expenses made in the P&L accounts towards earning of commission income shall be allowed and the net rate of commission earned by the assessee i.e., @0.47% of total turnover of accommodation entries after elimination of circular transaction is required to be add as income of assessee from commission. AO is therefore directed to give effect to the above order. Accordingly, ground no. 2 of revenue is allowed reversing the first appellate order. The Appellate Tribunal considered the appeals filed by the revenue and cross objections of the assessee against the order of the CIT(A)-29 New Delhi for the assessment years 2012-13 to 2016-17. The main issues revolved around the deletion of protective and substantive additions made by the Assessing Officer (AO) concerning unexplained cash credits and commission income. The revenue contended that the additions were justified, while the assessee argued that the additions were unwarranted.1. The first issue pertained to the deletion of a protective addition of Rs. 54,64,44,954 made by the AO on account of unexplained cash credits. The revenue argued that the assessee failed to satisfy the conditions under Section 68 of the Income Tax Act, 1961, regarding the nature and source of credit entries. The assessee, on the other hand, relied on a previous ITAT Delhi decision in a similar case to support the deletion of the protective addition.2. The second issue concerned the deletion of a substantive addition of Rs. 13,66,112 made by the AO, relating to commission income. The revenue contended that the assessee, being a conduit concern, would have earned commission income for the transactions. The assessee argued that once the beneficiaries and accommodation entry providers were identified, no further additions should be made.The Tribunal upheld the deletion of the protective addition on account of unexplained cash credits based on the precedent set in a previous case. However, in the case of commission income, the Tribunal reversed the CIT(A)'s decision and directed the addition of commission income at the rate of 0.47% of the turnover of accommodation entries after eliminating circular transactions.The Tribunal emphasized that the determination of expenses and commission earned was based on specific material found during a search and seizure operation, and the percentage of commission earned may vary in different cases. Therefore, the net rate of commission earned by the assessee was fixed at 0.47% of the turnover of accommodation entries.In conclusion, the Tribunal dismissed the revenue's appeal regarding the protective addition but allowed the appeal concerning commission income additions. The Tribunal's decision for the assessment year 2012-13 was extended mutatis mutandis to the remaining four appeals for the assessment years 2013-14 to 2016-17. The cross objections of the assessee for all five years were dismissed as not pressed.In summary, the Tribunal upheld the deletion of the protective addition of unexplained cash credits but allowed the addition of commission income at the rate of 0.47% of the turnover of accommodation entries. The appeals of the revenue were partly allowed, and the cross objections of the assessee were dismissed.