ITAT Restricts Commission Income to 0.15% for Accommodation Entry Provider, Deletes S. 68 Additions [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that where an assessee is found to be merely an accommodation entry provider, the entire bank credits cannot be brought to tax under Section 68 of the Income Tax Act, 1961 and only the commission income earned from such activities is liable to be assessed. Accordingly, the Tribunal directed the Assessing Officer to compute commission income at the rate of 0.15% on total credit entries, thereby allowing a batch of appeals partly.

The appeals were filed by Ram Prakash Bhatia for assessment years 2011-12 to 2015-16, challenging orders on revisionary proceedings under Section 263 of the Act. During a survery conducted at his premises, he admitted to being engaged in the business of providing bogus bills and accommodation entries through various bank accounts. Such bank accounts were operational in his own name as well as in the names of other entities managed by him.

Subsequently, the Principal Commissioner of Income Tax exercised revisionary jurisdiction under Section 263 and directed the Assessing Officer to recompute commission income and examine unexplained credits. In the consequential order passed, the Assessing Officer made additions not only towards commission on debit and credit entries, but also treated the entire bank credits as unexplained income under Section 68.

The additions were confirmed by the Commissioner of Income Tax (Appeals), prompting the assessee to present his case before the Tribunal. The assessee contended that identical issues had already been examined in earlier years by coordinate Benches, holding that he was an accommodation entry operator and capping the commission income at the rate of 0.15% on credit entries.

The Tribunal, comprising Sudhir Kumar (Judicial Member) and Manish Agarwal (Accountant Member), observed that once it is accepted that the bank transactions pertained to providing accommodation entries, the same could not be treated as unexplained income. The Bench noted that coordinate Benches in the assessee’s own case for earlier assessment years had already restricted additions to commission income at the rate of 0.15%.

The Tribunal further held that treating accommodation entry-related credits as unexplained under Section 68 would be contrary to settled judicial precedent in the assessee’s own case.

Accordingly, the Tribunal directed the computation of commission income at the rate of 0.15% on total credit entries in all bank accounts. It was further directed that all additions be deleted. As a result, all the appeals were partly allowed.

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