Protective addition and estimated commission fail where bank credits arise from genuine business transactions, not accommodation entries.

Protective addition under section 68 for alleged accommodation entries was held unsustainable where audited books, bills, vouchers, bank records and ledger details showed genuine livestock sales, the transactions were cross-verified, and no corresponding substantive addition was made in the purchaser's assessment. On that factual basis, the receipts could not be treated as unexplained credits, and the related protective addition was deleted. The consequential ad hoc commission addition at 1% of bank credits also failed because it depended entirely on the rejected accommodation-entry allegation and lacked an independent factual basis. The commentary states that both additions were rightly deleted.

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Issues: (i) Whether the protective addition made in the assessee's hands under section 68 with reference to bank credits allegedly representing accommodation entries could survive when the underlying transactions with the purchaser were found to be genuine and no substantive addition was made in the purchaser's hands. (ii) Whether the ad hoc addition of commission at 1% of the total credits/deposits in the assessee's bank accounts was justified on the footing that the assessee had provided accommodation entries.

Issue (i): Whether the protective addition made in the assessee's hands under section 68 with reference to bank credits allegedly representing accommodation entries could survive when the underlying transactions with the purchaser were found to be genuine and no substantive addition was made in the purchaser's hands.

Analysis: The assessee produced audited books, bills, vouchers, bank records and ledger details showing supply of livestock to the purchaser. The transactions were cross-verified, the sales were accepted, and the purchaser's assessment did not result in a corresponding substantive addition on the alleged accommodation-entry issue. The material on record supported genuine business dealings, and the basis for treating the receipts as unexplained credits was not sustained.

Conclusion: The protective addition was not sustainable and was rightly deleted.

Issue (ii): Whether the ad hoc addition of commission at 1% of the total credits/deposits in the assessee's bank accounts was justified on the footing that the assessee had provided accommodation entries.

Analysis: The commission addition was entirely consequential to the finding that the assessee had allegedly facilitated accommodation entries. Once the underlying premise failed and the transactions were held to be genuine business transactions, there was no independent basis to estimate commission income at 1% of total credits. No comparative or factual foundation supported the estimate.

Conclusion: The commission addition was unsustainable and was rightly deleted.

Final Conclusion: The revenue's challenge failed because the disputed receipts were held to arise from genuine business transactions, and both the protective addition and the consequential commission addition were deleted.

Ratio Decidendi: A protective addition cannot stand in the absence of a sustainable substantive basis, and a consequential commission addition cannot survive once the underlying allegation of accommodation entries is rejected on facts and evidence.

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