ITAT Upholds Taxation of Only Commission Income in Accommodation Entry Cases; Rejects Revenue’s Appeal

The Income Tax Appellate Tribunal (ITAT), Delhi, dismissed four appeals filed by the revenue against the CIT(A)’s order of taxing the commission income at 0.5% of the credit entries in the case of an accommodation entry provider.

The case of the assessee, Ramesh Kumar Bagri, was reopened under section 147 of the Income Tax Act based on the NMS data extracted from the ITBA system. As per this data, the assessee allegedly received large value credits of Rs 42,56,68,844 in his bank account during the financial year 2014-15. The assessee had not filed his income tax return for the relevant assessment year.

The Income Tax authority issued several communications, such as a notice under section 142(1), a questionnaire seeking some information, and another notice under section 142(1) of the Income Tax Act. However, despite giving multiple opportunities, the assessee did not submit any explanations or file any documents. Therefore, the assessing officer treated the entire amount as unexplained investments under section 69 of the Income Tax Act, taxing it under section 115BBE of the Income Tax Act.

The assessee approached the CIT(A) and submitted explanations and additional proofs. The CIT(A), after analysing the remand report, concluded that the assessee was an entry provider. However, the CIT held that only the actual income (commission) should be taxed instead of the entire credit. It estimated the income at 0.5% of the total credits, based on an earlier decision. Accordingly, partial relief was granted to the assessee.

The Revenue challenged this decision before the ITAT, arguing that the commission should be taxed at higher rates between 2% and 5% and that the entire credit should be treated as unexplained.

The assessee relied on the tribunal’s decision in its own case for the previous year, where the ITAT had reduced the accommodation entry turnover to be assessed at 0.4% rather than 0.5%. Following this decision, the Tribunal held that the same rate should apply in the present years as well.

Therefore, the ITAT dismissed all four appeals filed by the Revenue and directed the AO to assess the accommodation entry turnover at 0.4%.