Taxpayer Only Account Opener, Acted as Conduit for Third Party Funds: ITAT Limits Income Tax Liability to 0.5% Commission [Read Order]

The Income Tax Appellant Tribunal (“ITAT”), Surat Bench, recently limited income tax liability for the account opener, a conduit for third party funds. The taxpayer’s income tax liability was limited to 0.5% Commission.

The appellant, Jigar Thakorbhai Dave, is a non-filer and had maintained initially that the bank account was misused by Mayur Barwaliya, Proprietor of Shree Impex, and that all monies came from Shree Impex and were withdrawn by him. He further provided these entire details of the bank account but the counsel for the department objected that bank account belongs to the assessee-appellant. Due to this reason, the deposits were added to the income of the assessee.

Also Read:LTCG to be Computed from Taxpayer’s First Year as Property Holder: ITAT Notes Error in Indexation Year [Read Order]

The counsel for the appellant contented that the Assessing Officer(“AO”) had erred in making addition of INR 5,79,000 on account of cash deposited in bank account. The CIT(A) made an addition of INR 2,28,62,770 on account of credits through cheques/RTGS/Clearing etc. This amount was treated as alleged unexplained cash.

The tribunal noted the submissions by the assessee to the Investigation Wing, where he had said that he had merely acted as account opener and the facts clearly show that the amounts were withdrawn by Shri Mayur Barwaliya, the main beneficiary. ITAT observed that the credits had come through Shree Impex and have been withdrawn in cash. The pattern of deposits and withdrawals further add to the appellant’s position in the bank account as a conduit.

Also Read:Income Tax Filings Jump to Rs. 9.2 Crore; Non-Corporate Tax Collections Surge

The tribunal further observed that since the assessee had facilitated the use of his account and permitted this use, commission income @ 0.5% of the total turnover routed is required to be estimated and brought to tax. The bench, consisting of Dr. B. R. R. Kumar (Vice-President) and Suchita Kamble (Judicial Member), partly allowed the appeal by the assessee, mutatis mutandis.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates