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Facts
The case involves appeals concerning accommodation entry providers and companies used to route these entries. A search action revealed that Pradeep Kumar Jindal was an accommodation entry provider and admitted to earning commission income. The revenue authorities made additions to income for both Jindal and the companies he created.
Held
The Tribunal held that while Jindal admitted to being an accommodation entry provider, the commission income should be restricted to 1% and 4% for accommodation entries and long-term capital gains, respectively. Additions related to unexplained credits and commission in the hands of the pass-through companies were deleted as they were found to be not genuine and the income was taxed in the hands of the primary provider.
Key Issues
Whether additions made on account of commission income from accommodation entries and unexplained credits in pass-through entities are justified, and if so, to what extent.
Sections Cited
132(4), 153A
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Income Tax Appellate Tribunal, DELHI BENCHES “F”, NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SMT. ANNAPURNA GUPTA
We have noted from the order sheet entries that all these appeals were consolidated for hearing together and the Ld. DR pointed out that the issues involved in these appeals of different assessees was inter-related. Therefore all the appeals were taken up for hearing.
None appeared on behalf of the assessee. On the previous occasion when the appeal came up for hearing, i.e 13-12-2025, the assessee remained unrepresented and the Bench recorded the fact that for the last three years, none was appearing on behalf & 13 Ors. [Pradeep Kumar Jindal & Ors.] - 3 – of the assessee or applications seeking adjournment was filed through different Advocates and Chartered Accountants. Noting that it was an old appeal, the Bench granted one last opportunity of hearing and adjourned the matter to 26-03-25, categorically noting that no further adjournment would be granted. Today, when the matter came up for hearing, again an application for seeking adjournment was filed. The same was rejected and all the appeals proceeded to be heard with the assistance of Ld.DR and the materials available on record.
A perusal of the orders in all the cases before us reveal that one of the assessee before us, Sh. Pradeep Kumar Jindal, had been subjected to search action u/s.132(4) of the Act, during the course of which several incriminating material were found revealing that he was an accommodation entry provider, to which fact he admitted also in his statement recorded u/s.132(4) of the Act and offered to tax commission income earned from his activity of providing accommodation entry. The modus operandi revealed that cash was received from persons seeking entry which was deposited in bank account of several bogus companies created by the accommodation entry provider and after routing the money through several layers, the money ultimately reached the real beneficiaries either in the form of share capital or long term capital gains. Accordingly, commission income in the hands of Pradeep Jindal was taxed @2.5% on accommodation entries provided and a rate of 6% applied for commission earned on accommodation entries provided by way of long term capital gain. Addition on account of jewellery found during search or on the basis of certain & 13 Ors. [Pradeep Kumar Jindal & Ors.] - 4 – documents found was also made in the concerned Assessment Years. The Ld. CIT(A), in the case of Pradeep Kumar Jindal allowed the assessee the set off of expenses incurred for earning this commission income, @10% of the income so computed. Thus, reducing the rate of commission income to 2.25% and 5.4%; respectively on the accommodation entries provided. The other additions were however confirmed.
The other entities before us are the companies created by Sh. Pradeep Kumar Jindal for routing the accommodation entries to the ultimate beneficiaries. The AO had subjected the entire credits in the bank account of these entities to tax since the source of the same remained unexplained and had also subjected to tax commission income for providing accommodation entries. The Ld. CIT(A), however, noted that the facts on record clearly revealed the ultimate beneficiaries of the amounts credited in their bank accounts, and noting the fact that these entities were admittedly merely routers of the accommodation entries, therefore the entire addition made on account of credits in their bank accounts was deleted. Further since entire commission income earned on the accommodation entries provided by Pradeep Kumar Jindal was taxed in his hands, the addition made on account of commission in the hands of these entities was also deleted by the Ld. CIT(A).
As a consequence, in the case of Pradeep Kumar Jindal, the assessee has come up in appeal before us, while in the case of other entities/ assessees it is the Revenue which has come up in appeal before us.
& 13 Ors. [Pradeep Kumar Jindal & Ors.] - 5 – 7. In the case of Pradeep Kumar Jindal, the assessee has come up in appeal for A.Ys. 2010-11 to 2015-16. The issue raised being identical for all the years relating to the confirmation of addition made on account of commission income earned by the assessee by applying rate of 2.25% and 5.4% of accommodation entries and long term capital gain accommodation entries respectively, provided by the assessee. Since, the assessee himself had admitted to have been an accommodation entry provider, there is no case for deleting the addition made on account of commission earned from the same. However, in the interest of justice and in all fairness, we consider it fit to restrict the commission income earned on accommodation entries to 1% and 4% on the accommodation entry provided on long term capital gains. We have noted that addition has also been confirmed on account of jewellery found during search or certain other documents revealing assets owned by the assessee, source of which, remained unexplained. With respect to the same, we direct telescoping the said addition against the addition confirmed on account of commission and long term capital gain as directed above. The assessee, we have noted, also raised legal grounds before us, but, in the absence of any assistance, we find no merit in the legal ground raised
. We have noted that the Ld. CIT(A) has given a categorical finding that the assessment framed in the present case u/s.153A of the Act is in accordance with the law interpreted by the Jurisdictional High Court in the case of CIT vs Kabul Chawla 380 ITR 573(Delhi), noting that incriminating material was found in the present case by way of the admission of the assessee itself of being an accommodation entry provider which was duly corroborated with evidences also &
13. Ors. [Pradeep Kumar Jindal & Ors.] - 6 – found during search conducted on him. Therefore, as far as validity of the assessment framed is concerned u/s.153A of the Act, we see no reason to differ with the Ld. CIT(A).
All the six appeals pertaining to Shri Pradeep Kumar Jindal, in accordingly, are partly allowed as above.
With respect to the other appeals all filed by the Department in the case of other assessees, the Ld. DR pointed out that all these entities were admittedly pass through companies created by the accommodation entry provider Shri Pradeep Kumar Jindal and the addition made by the AO in their hands was in relation to the credits in their bank accounts which had remained unexplained, which was deleted by the Ld. CIT(A) noting the fact that the bank accounts of these entities itself revealed the ultimate beneficiaries and since, they were admittedly only pass through entities, there was no case at all for making addition of the credits in their bank accounts in their hands. Further, he pointed out that the AO had also made addition on account of commission allegedly earned by these entities for providing accommodation entry which the Ld. CIT(A) deleted noting the fact that he had held the commission income to be taxable entirely in the hands of the accommodation entry provider Shri Pradeep Kumar Jindal.
We see no infirmity in the order of the Ld. CIT(A), since it is not disputed that all the entities were mere pass through entities of Shri Pradeep Kumar Jindal for providing accommodation entry. The credits in their banks account were noted to be transferred to the ultimate beneficiaries, which were & 13 Ors. [Pradeep Kumar Jindal & Ors.] - 7 – identifiable by the banking entries itself and, therefore, in the light of these facts, which have remained undisputed before us, the Ld. CIT(A), we hold, has rightly deleted the addition made on account of credits in the bank account of the assessee. Also, the commission income added in the hands of all the entities, we note, has rightly been deleted by the Ld. CIT(A) since the said income has been taxed entirely in the hands of Shri Pradeep Kumar Jindal and which has ben confirmed by us in the order passed above in the case of Sh.Pradeep Jindal.
In the light of the same, all the appeals filed by the Revenue are dismissed.
In the combined result, all the assessee’s appeals are partly allowed and all the Revenue’s appeals are dismissed.
This Order pronounced on 11/06/2025