Commission income on accommodation entries restricted to a reasonable estimate, with profit rate fixed at 0.35% on cash deposits.

Income from cheque discounting and accommodation entry activity is taxable only to the extent of the commission or profit element embedded in the cash movement, not as the full turnover. On the facts, the assessee ed that the bank deposits arose from such entry operations, and the Tribunal held that a reasonable estimation was warranted. Applying the record and cited precedents, it fixed the profit rate at 0.35% of the cash deposits instead of the higher rate adopted by the Assessing Officer, granting partial relief by reducing the estimated income.

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Issues: Whether the commission or profit element on cash deposits arising from cheque discounting and accommodation entry activity should be estimated at 0.35% or at the higher rate adopted by the Assessing Officer.

Analysis: The assessee accepted that the bank deposits related to accommodation entry operations involving receipt of cheques and corresponding cash movement. In such cases, the taxable income is confined to the commission or profit element embedded in the transactions. Considering the record and the judicial precedents referred to, the Tribunal found that an estimated profit rate of 0.35% would reasonably reflect the assessee's earnings from the activity.

Conclusion: The commission or profit was directed to be determined at 0.35% of the cash deposits of Rs. 17,53,885, in place of the higher estimation.

Final Conclusion: The assessee obtained partial relief by reduction of the estimated profit rate applied to the disputed bank deposits.

Ratio Decidendi: Where income is derived from cheque discounting and accommodation entry activity, only the commission or profit element embedded in the turnover is taxable and may be determined by reasonable estimation on the facts of the case.

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