Accommodation entries under section 68 were taxed only to the commission element, not as full unexplained cash credits.

Bank deposits treated as accommodation entries rather than genuine cloth-trading receipts were not to be added in full under section 68 of the Income-tax Act, 1961; only the commission element representing the assessee's actual earning was considered taxable. The appellate view accepted estimation of a small percentage on the basis of a comparable case and the Revenue's acceptance of a similar rate in the assessee's later year. On that footing, restriction of the addition to the commission component was upheld and the Revenue's challenge failed.

---

---

Issues: Whether the addition made as unexplained cash credit under section 68 of the Income-tax Act, 1961 was required to be sustained in full or restricted to the commission element on accommodation entries.

Analysis: The assessee's bank deposits were found, on the surrounding facts and statements recorded in the course of proceedings, to represent accommodation entries and not genuine cloth-trading receipts. The appellate authority accepted that the entire deposits could not be taxed as income because only a small percentage would represent the assessee's real earning by way of commission. The estimation was supported by the rate accepted in a comparable case and by the revenue's acceptance of a similar percentage in the assessee's subsequent year.

Conclusion: The restriction of the addition to Rs. 5,67,964/- was upheld and the Revenue's challenge failed.

---