The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that the Addition of Income based on the statement of the Director without verifying details of payments from Third parties is not permissible.
Shri Samir Tekriwal appeared on behalf of the assessee and Shri P.F.Jain appeared on behalf of the revenue.
The Revenue challenged the order dated 25.03.2015 passed by the Commissioner of Income Tax (Appeals)-12, Ahmedabad, as against the Assessment order passed under section 143(3) of the Income Tax Act, 1961 (‘the Act’) relating to the Assessment Year (A.Y) 2010-11.
The fact of the case is that M/s. Nexus Software Ltd, the assessee claimed to derive income from dealing in various types of software & also trading in shares and securities. Later the assessee does not have any significant software business and it is only engaged in providing accommodation entries. For the Assessment Year 2010-11, the assessee filed its Return of Income on 14.10.2010 declaring a loss of Rs. (-) 66,08,845/-. The assessee has shown income from Short Term Capital Gain on the sale of land of Rs. 10,22,73,500/- and also claimed business loss of Rs. 10,98,37,024/-.
During the assessment proceedings, the assessee submitted seven bank accounts wherein a deposit of Rs. 88,07,50,048/- has been made and a withdrawal of Rs. 88,05,67,045/- was made by the assessee, as an entry provider to various parties. The assessing officer considering the above bank accounts determined the commission income at 0.5% on the withdrawal in the various bank accounts namely Rs. 42,38,673/- as the income of the assessee.
The assessee claimed that the sum of Rs. 3,28,32,402/- was received from M/s. Atmiya Developers Pvt. Ltd. is also forming part of the above banking transaction, wherein the commission amount of 0.5% is determined as a profit of the assessee by the Assessing Officer. Again taxing the same amount of Rs. 3,28,32,402/- as business income of the assessee would amount to double taxation. The Assessing Officer and added the sum of Rs. 3,28,32,402/- as the business income and determined the total assessed income as Rs. 3,04,62,230/- after setting off the losses of Rs. 66,08,845/-.
The CIT(A) observed that the Assessing Officer failed to take any steps calling for the statement of the third parties who were paid the part consideration by the assessee and further deleted the addition on account of business income of Rs. 3,28,32,402/- as the same amount suffered to taxes as entry provider at 0.5% as commission income in the hands of the assessee
While dismissing the appeal filed by revenue, the ITAT bench Ms Annapurna Gupta, Accountant Member and Shri T.R. Senthil Kumar, Judicial Member upheld the findings of the CIT(A) that the assessee is an entry provider only and was involved in accommodation entry business and has been rightly taxed at 0.5% for commission income on the deposits in the bank account which includes the sale consideration of Rs. 3,28,32,402/-.
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