The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench restricted the disallowance to the accommodation entries.
The assessee-company, Darshanam Life Space Pvt. Ltd has filed its return of income declaring total income at Rs.3,96,91,870. Assessment was finalized and total income was determined at Rs. 55,61,49,800 which was reduced to Rs.4,54,35,860/- after giving an appeal effect.
Subsequently, the Assessing Officer has received information from ACIT, Central Circle-2(4), Ahmedabad who has assessed the case of Shri Jaymesh Rami, Director of Aayurshi Infraprojects Pvt.Ltd. under section 153A regarding providing of accommodation entries.
The Assessing Officer observed that the assessee has paid a sum of Rs.6,43,406 to Shri Jaymesh Rami during the year under consideration. Therefore, the Assessing Officer has reopened the case after recording reason under section148 of the Act. A notice under section 143(2) of the Act was issued.
The Assessing Officer has held that 15% of the total amount of accommodation entries computed by the Assessing Officer to be disallowed. Therefore, the Assessing Officer has computed 15% of the total accommodation entries of Rs.25,73,62,400 to the amount of Rs.3,86,04,360/- and added to the total income of the assessee.
The aggrieved assessee has filed an appeal before the CIT(A) against the order of the Assessing Officer in making the addition of Rs.3,86,04,360. The CIT(A) has restricted the addition to the extent of Rs.7,91,406 only.
The issue raised by the revenue was that the CIT(A) erred in deleting the addition of Rs.3,86,04,360 which was made on account of estimation of accommodation entries at Rs.25,73,62,400 and thereafter restricting the addition to 15% of such estimate amounting to Rs.3,86,04,360, without appreciating the findings that the assessee has accepted to have made payment of Rs.6,43,406 to Mr. Rami and Mr.Rami have also accepted payment for accommodation entries from various parties.
The coram of Mahavir Prasad and Amarjit Singh noted that CIT(A) has restricted the addition to the extent of Rs.7,91,406/- on the basis of invoice placed on record in respect of labour charges for soil filling from M/s.Rami Brothers. However, on perusal of the bill, it is noticed that this bill was raised on 07/03/2011 pertaining to FY 2010-11 which clearly demonstrates that this expenditure was not claimed during the year under consideration.
The ITAT further observed that it is noticed that in his finding the CIT(A) has concluded that AO of the Central Circle-2(4), Ahmedabad has considered the amount credited in the bank account of Shri Rami as the value of accommodation entries. Since in the case of the assessee the payment of Rs.6,43,406/- was considered as accommodation entries and it is noticed that the assessee has not reconciled this payment with an outstanding amount of Rs.7,91,406/- as per the invoice raised for labour charges
Therefore, the Tribunal restricted the disallowance to the extent of Rs.6,43,406/-.