The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has confirmed the addition as the commission charged by Assessing Officer (AO) was considering the market trend in providing accommodation entries and not on an ad-hoc basis.
The assessee, OPG Securities Pvt. Ltd. was a private limited company incorporated under the Companies Act, 1956, a registered stock broker at National Stock Exchange (NSE) & Bombay Stock Exchange (BSE) and engaged in trading in shares, securities, derivatives, currency, futures & option (F&O), etc., through algorithmic trading, ie, automatic trading through software.
The income of the assessee primarily included income from sale & purchase of securities in its Proprietary Account (PRO account) and brokerage income. The assessee-maintained client account for their dealing in shares, securities, etc, and all the trades were executed/ transacted online on an electronic platform in real time and in the open market on recognized stock exchanges all over India.
A search and seizure operation under Section 132 of the Income Tax Act, 1961 was carried out at the various premises of the assessee and other persons. During the search operation, various documents, e-mails, printouts from the assessee company’s computers and images retrieved from mobile phones and hard disks, pen drive were found and seized, where a laptop was found. The said laptop contained a number o f excel worksheets containing details of various receipts and payments.
The Assessing Officer held that besides the undisclosed income earned out of trading by the assessee , Short Term Capital Gains had been obtained by the assessee from normal accommodation entry operators and has given it back to its clients. In respect of such transactions, the assessee had acted as a facilitator for providing accommodation entry and commission as per prevailing market rate @ 2% o f the amount was therefore taxed by the AO .
The AO held that the letters BKS stands for B . K. Sabarwal who was an entry operator. The revenue also alleged that the other names shown in the table were also entry operators and the scripts traded.
The CIT(A) after considering the entire facts held that these amounts do not form the part o f receipts or payments. considered while determining the peak credit. The CIT(A) invoked the provisions of Section 132(4A) and Section 292C of the Income Tax Act, 1961 while considering the contents of the seized material.
Akshat Jain, argued that since these transactions were also extracted from the laptop, the same ought to have been considered by the revenue authorities as part o f the total receipts and payments. He also argued that the addition has been made on ad-ho c basis and hence liable to be deleted.
Subhra J. Chakraborty, appeared on behalf of the revenue.
The two-member Bench of C. M. Garg, (Judicial Member) B. R. R. Kumar, (Accountant Member) held that the commission charged by the Assessing Officer was not on an ad-hoc basis but taking into consideration the prevailing market trend in providing such accommodation entries.
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