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Facts
The assessee allegedly received accommodation entries amounting to Rs.73,03,950/- from bogus entities operated by Shri Vipul Vidur Bhat during Assessment Years 2010-11 & 2011-12. The Assessing Officer, based on a search and seizure operation, added the entire amount as unexplained income under Section 68 of the Income Tax Act.
Held
The Ld. Commissioner and the Tribunal, relying on various judicial precedents including the Bombay High Court, deleted the full addition under Section 68. They concluded that the assessee was a provider of accommodation entries, not the beneficiary of the entire amount, and directed the AO to estimate commission income at 1% of the total debit transactions.
Key Issues
Whether the entire amount of accommodation entries constitutes unexplained income under Section 68, or if only the commission earned on such entries should be added to the assessee's income.
Sections Cited
250, 132, 132(4), 147, 148, 68, 260-A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
Per : Narender Kumar Choudhry, Judicial Member:
These appeals have been preferred by the Assessee against the orders even dated 30.01.2025, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2010-11 & 2011-12.
& 2248/M/2025 Ms. Heena Ashok Joshi 2. Both the appeals are based on the almost identical facts except variation in amounts and also having involved identical issues, therefore for the sake of brevity, the same were heard together and are being disposed of by this composite order, by taking into consideration the facts and circumstances and issues involved in as a lead case and result of the same would be applicable mutatis mutandis to both the appeals under consideration.
3. As per information received from the DDIT, a search & seizure action u/s 132 of the Act was conducted on 05.02.2016 in the case of Shri Vipul Vidur Bhat and his related entities, wherein Shri Vipul Vidur Bhat in his statement made on dated 09.02.2016 u/s 132(4) of the Act, has accepted that he is an entry operator and running various entities/companies for providing various bogus accommodation entries to the various beneficiaries for commission. Further, he has controlled, managed and operated as many as 347 bogus entities, for providing bogus accommodation entries to various beneficiaries for commission.
3.1 During the course of search action, on verification of ledger account of the bogus entities/companies, it was also seen that the Assessee has availed accommodation entries from the bogus entities of Shri Vipul Vidur Bhat Group, during the assessment year under consideration, as detailed by the Assessing Officer (AO) in para no.3.
3.2 Consequently, on the aforesaid information, the case u/s 147 of the Act was reopened u/s 147 of the Act by recording reasons for reopening of the Assessment and issuing notice dated 29.03.2017 u/s 148 of the Act.
& 2248/M/2025 Ms. Heena Ashok Joshi 3.3 Thereafter, various notices were issued to the Assessee, however, the Assessee made no compliance and therefore on the basis of material available on record and the fact that the Assessee has made transactions during the year under consideration in 45 entities, appearing in the list of 347 concerns, as mentioned by Shri Vipul Vidur Bhat in the statement recorded u/s 132(4) of the Act, the AO construed that the Assessee is one of the beneficiaries of accommodation entries provided by Shri Vipul Vidur Bhat and his group entities and thus he ultimately held the transaction of Rs.73,03,950/- being un-explained transaction and added the said amount of Rs.73,03,950/- in the income of the Assessee.
4. The Assessee, being aggrieved, challenged the said addition by filing first appeal before the Ld. Commissioner, who not only considered various judgments of the Tribunal in the cases emanated from the same search and seizure operation and/or based on the statement of Shri Vipul Vidur Bhat, but also while relying on the judgment of Hon’ble Jurisdictional Bombay High Court in the case of Pr. Commissioner of Income Tax-14 Vs. Alung Securities Pvt. Ltd. (ITA No.1512 of 2017 decided on 12th June, 2020), ultimately deleted the addition made by the AO and directed the AO to estimate the commission income of the Assessee @ 1% of the total debit transaction, in the bank account.
5. Therefore, the Revenue Department being aggrieved with the impugned order, has preferred the instant appeal.
We have heard the parties and perused the material available on record. It appears from the impugned order that the Assessee in order to buy peace of mind and to avoid further litigation, requested the Ld. Commissioner for making the addition of income @ 0.10% to 0.15% of commission on the payment side transaction totalling to Rs.30,19,390/- (as per the bank summary submitted) and “Ground No: 1 Sir, first and foremost I would like to state that I am a law abiding citizen, and our sources of income is interest income. However, without prejudice in the above matter and in support of the ground of appeal
No 1 without prejudice in the above matter and just to buy the peace of mind and to avoid the further litigation I would like to further submit as under: -
1. I am enclosing herewith the extract of the copy of the statement of Mr. Vipul Bhatt as Annexure I where in my (Sr.No.135) and other 347 approx. parties were named as one which is/are used by him for accommodation business for commission. The Learned A.O. had erred in adding the Income by treating me as beneficiary whereas it is very much clearly mentioned in the Statement of Mr. Vipul Bhatt (on which the A.O. had relied while making the addition) that he was using my name for accommodation business for commission. In the aforesaid statement one of the party named Mr. Rajul N Trivedi (Sr. No 147) CIT(A)-46 Mumbai had passed orders for 6 years i.e. from A.Y. 2010-11 to Α.Υ. 2015-16 directing the A.O. to make the addition of commission income @0.2% on the debit transactions only made during the relevant years only and delete the entire addition made u/s 68 as unexplained amount. Copy of the aforesaid order for the relevant A.Y. 2010-11 is enclosed herewith as Annexure II for your reference. In addition to above in one other party named Jayvidya M. Bhatt (Sr. No.76) CIT (A) of National Faceless Appeal Centre has very recently passed an order on 28/112022 for A.Y. 2011-12 to make the addition of commission income @1% on the debit transactions only made during the relevant years only and delete the entire addition made u/s 68 as unexplained amount. Copy of the aforesaid order for the relevant A.Y. 2011-12 is enclosed herewith as Annexure III for your reference. The detail of the Bank Summary for the F.Y. 2009-10 evidencing the transactions made during the year is enclosed herewith as Annexure No IV. From the Bank summary it is confirmed that during the F.Y. 2009-10 there is total Receipt transaction is of Rs. 30,25,538/-(28,31,243 + 1,94,295) and Total Payment transaction is of Rs. 30,19,390/- (28,27,390 + 1,92,000)only.
& 2248/M/2025 Ms. Heena Ashok Joshi Hence addition made by the A.O. for Rs.73,03,950/- is totally baseless and A.O. had no proper information for the amount he is adding.
Here I would like to bring to your honor's notice that my name is also given by Mr. Vipul Bhatt in the same category as that of Mr. Rajul N. Trivedi and Jayvidya M. Bhatt i,e entity used for accommodation business for commission and hence same treatment should be given to my case also.
Further in ITA. No:740/AHD/2013 the case of Shri Vijen Jhaveri V/S Income Tax Officer, Ward-5 (2), Surat where in: - The Tribunal opined that:- "Considering the nature of transactions and the acceptance by the assessee being an entry provider, the impugned transactions have to be considered in the light of the acceptance of the assessee. "Don't shoot the messenger. The assessee was earning commission by providing such accommodation bills, the only addition that can be made on the given facts is the commission earned by the assessee by providing such accommodation entries." The Tribunal held that:- "Considering the peculiarity of the facts of the case, addition of the commission @ 0.3% of the accommodation entries should meet the ends of justice."
In the in the case of The Commissioner of Income Tax-III V/S Shri Vardhman Overseas Ltd wherein the Tribunal has held that: - " the applicability of Section 68 was ruled out since no fresh amounts were credited in the accounts of the creditors under consideration during the relevant accounting year. The Tribunal further held that: - "the question whether the liabilities were genuine or not cannot be examined in the assessment proceedings for the year under consideration and such question could be examined only in the year in which the entries were first made in the accounts of the sundry creditors."
Further in the very recent judgment. The Honourable High Court of Mumbai on 12th June, 2020 in the Income Tax Appeal No & 2248/M/2025 Ms. Heena Ashok Joshi 1512 of 2017 in the case of Principal Commissioner of Income Tax-14 V/s Alung Securities Pvt. Ltd. wherein: - The Honourable Mumbai High Court held that :- "We are in agreement with the view taken by the Tribunal. In a case of this nature Section 68 of the Act would not be attracted. Section 68 would come into play when any sum is found credited in the books of the assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by the assessee is not in the opinion of the Assessing Officer satisfactory. In such a situation the sum so credited may be charged to income tax as the income of the assessee of the relevant previous year. But that is not the position here. It has been the consistent stand of the assessee which has been accepted by the First Appellate Authority and affirmed by the Tribunal that the business of the assessee centered around customers/beneficiaries making deposits in cash amounts and in lieu thereof taking cheques from the assessee for amounts slightly lesser than the quantum of deposits, the difference representing the commission realized by the assessee. The cash amounts deposited by the customers i.e., the beneficiaries had been accounted for in the assessment orders of these." "Coming to the percentage of commission, Tribunal had already held 0.10% commission in similar type of transactions to be a reasonable percentage of commission. Therefore, Tribunal accepted the percentage of commission at 0.15% disclosed by the assessee itself. This finding is a plausible one and it cannot be said that the rate of commission was arrived at in an arbitrary manner. The same does not suffer from any error or infirmity to warrant interference, that too, under Section 260-A of the Act."
6. From the above it is very much clear that as per the statement of Mr Vipul Bhatt (based on which the entire additions are made) my name is written one used for accommodation business for commission and not the Beneficiary. Further it is also very much clear from the above situation of ITAT and The Mumbai High Court that while making the addition to my Income only the commission Income that has to be added at reasonable rate, and no addition u/s 68 for the entire amount can be done in my case. The same thing was upheld by ITAT and The Mumbai High Court also in the judgments sighted above. On the basis of the above Judgments Your honor is requested to order for the addition of income for 0.10% to 0.15% of commission on the Payment side transaction total amounting to Rs. & 2248/M/2025 Ms. Heena Ashok Joshi 30,19,390/- (as per the Bank Summary submitted above) and delete the unjust, unlawful addition made by the A.O. u/s 68 of the Income Tax Act for the entire amount amounting to Rs. 73,03,950/- which itself is baseless. Hope Sir you must have gone through all the facts and remove all the unjust addition made by A.O. in the assessment order.”
The Ld. Commissioner considered the peculiar facts and circumstances specific to the effect that the addition was made by the AO on the basis of statement of Shri Vipul Vidur Bhat and the Assessee referred various cases of assessment, arising from the same search in the case of Shri Vipul Vidur Bhat, wherein the appellate authorities have made decisions to assess only the commission on the transacted amount, the Assessee’s written submission and by noting the fact that as per question no.15 in the sworn statement of Shri Vipul Vidur Bhat, the Assessee was at sl. No.135 in the list of the 347 entities/individuals managed Shri Vipul Vidur Bhat to provide accommodation entries to the beneficiaries. It is noted that the Assessee is not the beneficiary of the aforementioned transaction.
7.1 The Ld. Commissioner, thus by taking into consideration the aforesaid facts and decisions of first appellate authorities in similar cases and other judicial precedents, as relied upon by the Assessee, came to conclusion that assessing the commission income at total debit transaction in the bank account of the Assessee, would meet the ends of justice, as the Assessee is not the real owner or beneficiary of the transactions in the bank account. The Ld. Commissioner therefore directed to the AO to estimate the commission income @ 1% of the total debit transactions in the bank account and delete the remaining addition made u/s 68 of the Act.
& 2248/M/2025 Ms. Heena Ashok Joshi 8. We have given thoughtful considerations to the peculiar facts and circumstances of the case and the determinations made by the authorities below and the submissions made by the Ld.DR. Admittedly, the Ld. Commissioner, while deleting the addition made by the AO and directing the AO to estimate the commission income @ 1% of the total debit transactions in the bank account, not only relied upon similar circumstances but also the decisions of the first appellate authorities and the other judicial precedents in the similar cases, as well as the judgment of the Hon’ble Bombay High Court in the case of Pr. Commissioner of Income Tax-14 Vs. Alung Securities Pvt. Ltd. (supra), wherein it has been held as under:
"We are in agreement with the view taken by the Tribunal. In a case of this nature Section 68 of the Act would not be attracted. Section 68 would come into play when any sum is found credited in the books of the assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by the assessee is not in the opinion of the Assessing Officer satisfactory. In such a situation the sum so credited may be charged to income tax as the income of the assessee of the relevant previous year. But that is not the position here. It has been the consistent stand of the assessee which has been accepted by the First Appellate Authority and affirmed by the Tribunal that the business of the assessee centered around customers/beneficiaries making deposits in cash amounts and in lieu thereof taking cheques from the assessee for amounts slightly lesser than the quantum of deposits, the difference representing the commission realized by the assessee. The cash amounts deposited by the customers i.e., the beneficiaries had been accounted for in the assessment orders of these." "Coming to the percentage of commission, Tribunal had already held 0.10% commission in similar type of transactions to be a reasonable percentage of commission. Therefore, Tribunal accepted the percentage of commission at 0.15% disclosed by the assessee itself. This finding is a plausible one and it cannot be said that the rate of commission was arrived at in an arbitrary manner. The same does not suffer from any error or infirmity to warrant interference, that too, under Section 260-A of the Act."
& 2248/M/2025 Ms. Heena Ashok Joshi 9. Thus, on the aforesaid reason, we are unable to find out any perversity, impropriety and/or illegality in the decision of the Ld. Commissioner in deleting the addition and directing the AO for estimating the commission income @ 1% of the total debit transaction in the bank account. Hence the decision of Ld. Commissioner is upheld by dismissing the appeal which is under consideration, filed by the Revenue.
In view of judgment in the is also dismissed.
In the result, both the appeals of the Revenue Department are dismissed.
Order pronounced in the open court on 30.09.2025.