The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the commission earned from the provision of accommodation entry shall be added to the total income of the assessee.
The assessee filed an original return of income, for the year under consideration declaring a loss of Rs.87,62,265.
Pursuant to the search under Section 132 and the survey under Section 133A of the Income Tax Act at various premises of Shirish C Shah, proceedings under Section 153C of the Income Tax Act were initiated in the case of the assessee.
During the assessment proceedings, s notice under Section 133(6) of the Income Tax Act was issued to some of the parties on the basis of details available in the assessee’s Form 26AS.
During the survey at the premises of the assessee, it was found that there was no business activity carried out by the assessee.
In the assessment proceedings, the assessee was asked to explain the source of funds brought in as fresh capital by the assessee and its further deployment.
The Assessing Officer vide order passed under Section 143(3) read with Section 153C of the Income Tax Act came to the conclusion that the assessee in collaboration with Shirish C Shah brought the share capital through preferential allotment and invested the amount with ultimate beneficiaries in the share capital with huge share premium.
It was further submitted that the assessee has failed to establish the genuineness of the transaction reflected in the profit and loss account and the assessee was engaged in the business of providing accommodation entries to various parties in association with Shirish C Shah.
The Commissioner of Income Tax (Appeal) [CIT(A)] dismissed the ground raised by the assessee and held that the assessee is not doing any actual business and has inflated the purchases by getting bogus accommodation entries from the other entities controlled by Shirish C Shah.
It was further held that the assessee has failed to prove the identity of the parties with whom purchases were made and no supporting documentary evidence was produced by the assessee and the transaction remains unexplained and unconfirmed by the parties.
The assessee placed reliance upon the purchase invoices and stock registers along with a copy of Ledger accounts, wherein the details of payments made for purchases are shown. The assessee is one of the companies which is either associated with or under the direct or indirect control of Shirish C Shah.
Further, during the course of the search and the statements of Shirish C Shah, it was revealed that he had been engaged in providing accommodation entries to various parties through such entities which were directly or indirectly either associated or controlled by him.
The two-member bench comprising of Amarjit Singh (Accountant member) and Sandeep Singh Karhail (Judicial member) held that the assessee was found to be involved in the process of providing accommodation entries at the behest of Shirish C Shah.
Therefore, the Assessing Officer was directed to consider 1% of the total sales declared during the year as net commission in the hands of the assessee for providing accommodation entry.
Thus, the appeal by the assessee was partly allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
