Accommodation entry income is confined to commission, while full bogus sundry creditor additions cannot stand without rejection of books.

Where purchase and sale entries are accepted and the books are not rejected, the full balance of sundry creditors cannot be added as bogus merely on a protective basis. In accommodation entry cases, however, the transactions may still reflect unproved genuineness, so only the real income element is assessable. The commentary adopts commission as the taxable component and treats 0.25% of the transaction value as a reasonable estimate, with the full creditor addition being unsustainable while the limited commission addition is maintainable.

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Issues: Whether the addition made on account of alleged bogus sundry creditors on a protective basis could be sustained, and whether the income should instead be restricted to commission earned from accommodation entries.

Analysis: The Assessing Officer had accepted the sales and purchases recorded in the books and had not rejected the books of account, yet treated the sundry creditors as bogus on a protective basis. The addition of the entire sundry creditors was found unsustainable because the creditors arose from the same purchase transactions whose sales had been accepted. However, the transactions were not proved to be genuine, and the assessee was held to have provided accommodation entries. In such cases, only the commission element embedded in the transactions was assessable, and 0.25% of the transaction value was adopted as a reasonable estimate.

Conclusion: The addition of the full sundry creditors was rightly deleted and the income was correctly restricted to commission at 0.25% of the transaction value.

Final Conclusion: The Revenue's challenge failed because the disallowance could not extend to the entire creditor balance, while the limited commission addition sustained the assessment on the real income from accommodation entries.

Ratio Decidendi: Where purchase and sale transactions are accepted and the books are not rejected, the full amount of sundry creditors cannot be added as bogus merely on a protective basis; in accommodation entry cases, only the commission earned is taxable.

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