Tangible information and corroborative evidence can sustain reassessment and estimated commission on bank credits linked to accommodation entries

Reassessment under Sections 147 and 148 of the Income-tax Act, 1961 may be sustained where specific information about substantial bank deposits is supported by statutory enquiries, including verification under Section 133(6) and statements recorded under Sections 132(4) and 131(1A). The material must connect accounts standing in the assessee's name with accommodation-entry operations, while the assessee must identify any jurisdictional or procedural defect. Where the assessee fails to rebut corroborative evidence or explain the transactions, commission income may be estimated on total bank credits; the stated analysis treats an estimate of 0.05% as reasonable, particularly where non-cooperation results in assessment under Section 144.

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Issues: (i) whether reassessment initiated on the basis of information regarding large bank deposits and notice issued under the reassessment provisions was valid; (ii) whether addition of commission income at 0.05% of total bank credits, on the footing that the assessee's bank accounts were used for providing accommodation entries, was justified.

Issue (i): whether reassessment initiated on the basis of information regarding large bank deposits and notice issued under the reassessment provisions was valid.

Analysis: The material on record showed specific information of substantial deposits in bank accounts standing in the assessee's name. Independent enquiries, including verification through Section 133(6) of the Income-tax Act, 1961, and statements recorded under Sections 132(4) and 131(1A) of the Income-tax Act, 1961, connected those accounts with routing of accommodation entries. No material was produced to establish any procedural defect or jurisdictional infirmity in the initiation of proceedings under Section 147 of the Income-tax Act, 1961 and issuance of notice under Section 148 of the Income-tax Act, 1961. The reassessment was found to be based on tangible information and in accordance with the statutory framework.

Conclusion: The challenge to the validity of reassessment failed; the issue was decided against the assessee and in favour of the Revenue.

Issue (ii): whether addition of commission income at 0.05% of total bank credits, on the footing that the assessee's bank accounts were used for providing accommodation entries, was justified.

Analysis: The bank accounts stood in the assessee's name and were found to have been used for routing accommodation entries. The record contained corroborative material from enquiry and statements showing the modus operandi. Although the assessee claimed lack of involvement, no cogent evidence was furnished to disown the transactions or rebut the Revenue's findings. In the absence of satisfactory explanation and in view of the non-cooperation leading to assessment under Section 144 of the Income-tax Act, 1961, estimation of commission income at 0.05% of the total credits was accepted as reasonable.

Conclusion: The addition of commission income at 0.05% of the total bank credits was upheld; the issue was decided against the assessee and in favour of the Revenue.

Final Conclusion: The reassessment based on credible information of accommodation entry operations and the consequential estimation of commission income on the routed bank credits were both sustained, and no interference with the appellate order was warranted.

Ratio Decidendi: Where bank accounts standing in the assessee's name are shown through tangible information, statutory enquiry, and corroborative statements to have been used for routing accommodation entries, and the assessee fails to rebut the material or establish any jurisdictional defect, reassessment is valid and estimation of commission income on the bank credits is legally sustainable.

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