ITAT Restricts Taxable Commission Income from Alleged Accommodation Entries to 0.15% of Total Entries:

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has partly allowed the appeal filed by Sumit Aggarwal for Assessment Year 2018-19 and directed the Assessing Officer (AO) to restrict the taxable commission income from alleged accommodation entries to 0.15% of the total entries.

The assessee, proprietor of Shree Shyam Enterprises, was engaged in trading scrap iron. The assessee had filed his income tax return (ITR) declaring total income of Rs 12.23 lakh. The Assessing Officer subsequently reopened the assessment after an alleged STR report indicated unexplained credits of Rs 24.73 crore in the assessee's accounts.

The Assessing Officer (AO) treated the transactions as accommodation entries and made an addition of Rs 1.48 crore, calculated as commission income at 3% of the transactions. The assessee being aggrieved with the addition challenged the same before the ITAT, contending that 3% was excessive and unsupported by judicial precedents.

The assessee relied on the ITAT Delhi decision in Shri Ram Prakash Bhatia, where the commission on accommodation entries was estimated at 0.15%. He also cited an ITAT Kolkata ruling in Odyssey Securities Pvt. Ltd., which had considered 0.10% commission reasonable in similar circumstances.

The tribunal had noted that "the statement of the assessee recorded u/s 131(1A), the bank accounts operated by him which are in his own name and which are in the name of others. Keeping in view, the entirety of the accommodation entries, we do not hesitate to hold that the assessee was found to be providing accommodation entries, that being the case, the assessee was involved only to earn commission income in these transactions."

However, the Tribunal held that only the commission earned from such transactions was taxable. Relying on an earlier decision of co-ordinate bench in the case of Shri Ram Prakash Bhatia (supra), the tribunal directed the AO to estimate commission at 0.15% of the alleged accommodation entries. Accordingly, the appeal was partly allowed, substantially reducing the addition originally made at 3%.