2026 (1) TMI 72 - AT - Income Tax

Alleged purchase-sale transactions treated as unexplained cash credits u/s68: only 10% profit element added; commission addition deleted.

The dominant issue was whether alleged purchase and sale transactions, treated as unexplained cash credits under s. 68, were proved as genuine through ... Unexplained cash credits u/s 68 - Assessee has not provided complete details and documentary evidences to prove the genuineness of the transactions - HELD THAT:- We observed that the assessee has taken theunsubstantiated purchase and sale from the parties verified by the Department. Considering the overall facts on record, for the sake of justice, we are inclined to direct the Assessing Officer to sustain only 10% of the alleged purchase and sale based on the cash credit received by the assessee. It is also observed that even though the assessee has recorded such huge transaction, declared only meagre profit. The proposed addition of 10% of the cash credit will be just and proper profit, they would have earned in this transaction. Further, the alleged commission of 0.50% of the cash credit is uncalled for. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the addition of the full amount received through the alleged accommodation-entry transactions as unexplained cash credits under section 68 was justified on the facts recorded by the authorities. (ii) Whether a separate addition towards alleged commission for obtaining accommodation entries (computed at 0.50% of the amount) was justified. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Sustainability and quantum of addition in respect of alleged accommodation-entry transactions under section 68 Legal framework (as discussed in the judgment): The assessment treated the impugned receipts as unexplained cash credit under section 68 on the footing that the transactions were with 'dummy/paper concerns' and not genuine. Interpretation and reasoning: The Court noted that the transactions were 'unsubstantiated purchase and sale' from parties which were verified by the Department, and that despite recording 'huge transaction', the assessee declared only 'meagre profit'. On an overall consideration of the record and 'for the sake of justice', the Court considered it appropriate not to uphold the entire section 68 addition, but to sustain an estimation representing the profit element that would reasonably arise from such transactions. Conclusion: The Court directed that only 10% of the alleged purchase and sale based on the cash credit be sustained as addition, treating it as 'just and proper profit' that would have been earned from the impugned transactions, instead of sustaining the entire cash-credit addition. Issue (ii): Separate addition for alleged commission at 0.50% of the impugned amount Legal framework (as discussed in the judgment): The assessment made an additional addition by estimating commission at 0.50% of the impugned amount for arranging accommodation entries. Interpretation and reasoning: Having decided to sustain only an estimated profit component (10%) in relation to the impugned transactions, the Court held that an additional commission estimate was not warranted on the facts as appreciated by it. Conclusion: The Court held that the 0.50% commission addition was uncalled for and therefore deleted it, while sustaining only the 10% addition as directed.