ITAT directs AO to Focus only on Determining Commission on Accommodation Entry in Revision Proceedings, Not beyond [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) ruled limiting the scope of revision proceedings under Section 263 of the Income Tax Act, directing the Assessing Officer ( AO ) to focus solely on determining the commission paid on an accommodation entry of Rs. 92,00,000.

Vimal Jagdishprasad Agarwal, the assessee filed income tax returns for the assessment year 2014-15. During the assessment process, the Assessing Officer ( AO ) found that Rs. 92,00,000 constituted an accommodation entry received by the assessee, based on internal information from the Income Tax Department.

Eventually,  the AO included this amount as an addition to the assessee's taxable income under the category of accommodation entries. The Principal Commissioner of Income Tax ( PCIT ) initiated proceedings under Section 263 of the Income Tax Act, alleging that the AO’s assessment order was erroneous and prejudicial to the Revenue's interest.

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The Principal Commissioner of Income Tax ( PCIT ) stated that the AO failed to include the commission percentage paid to the entry operator which typically ranges from 1% to 3% of the entry amount.

The PCIT directed the AO to freshly assess the matter to determine the commission paid by the assessee broadly. Aggrieved by the PCIT order, the assessee appealed before the ITAT.

The assessee argued that since the quantum addition of Rs. 92,00,000 was already made and was pending before CIT(A), any revision power exercised by the PCIT should only cover the quantum of commission paid.

The two-member bench comprising BRR Kumar (Vice President) and TR Senthil Kumar (Judicial Member) acknowledged the potential commission amount as ranging from Rs. 92,000 to Rs. 2,76,000, limiting the scope of reassessment to this extent.

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The tribunal partially allowed the appeal by restricting the revision under Section 263 solely to the calculation of commission paid and not beyond. The tribunal directed the AO to reassess the matter only focusing on determining the commission paid on accumulating entry.

To Read the full text of the Order CLICK HERE

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