Loading judgment…
Facts
The appeals dealt with additions made by the Assessing Officer (AO) under Section 68 for unexplained cash credits and a commission component. The assessee argued that the bank account through which these entries were routed was managed by a resigned director without the company's knowledge. The AO made additions based on total debits/credits, including the opening balance, and a 1% commission on transactions.
Held
The Tribunal noted that the company could not substantiate claims of being cheated and that the bank account was not reflected in its financial statements. It was held that the assessee was part of an accommodation entry business and should be assessed on the profit element, not the entire credit figure. The commission addition was deleted as per the first appellate authority's order, and the additions for unexplained cash credits were restricted to an estimated profit element of 5%.
Key Issues
Whether the additions for unexplained cash credits and commission income are justified, and if so, whether the assessment should be on the total credit or profit element.
Sections Cited
68, 147, 131, 151
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘F’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI NAVEEN CHANDRA
C.O. No.10/Del/2020 Assessment Year: 2001-02 Income Tax Officer, Vs. M/s. Precision Agencies Pvt. Ward-20(1), Ltd., New Delhi 3/39, Roop Nagar, New Delhi PAN: AAACP5858Q (Appellant) (Respondent/Cross-Objector) With 9039 & 9040/Del/2019 Assessment Years: 2000-01, 2001-02 & 2002-03 M/s. Precision Agencies Vs. Income Tax Officer, Pvt. Ltd., Ward-20(1), 3/39, Roop Nagar, New Delhi New Delhi PAN: AAACP5858Q (Appellant) (Respondent) With Assessee by Sh. Utkarsh Gupta, Adv. Department by Ms. Harpreet Kaur Hansra, Sr. DR Date of hearing 02.02.2026 Date of pronouncement 02.02.2026 ORDER
PER SATBEER SINGH GODARA, JM
The instant batch of five cases pertains to the single assessee herein ‘M/s. Precision Agencies Pvt. Ltd.’. All other remaining details are hereby tabulated as under:
, 9039, 9040, 9274/Del/2019 & C.O. No.10/Del/2020 Sl. Appeal No. Appellant Respondent Order Appealed against No.
1. ITA No. M/s. Income Tax Officer, CIT(A)-XVII, New Delhi’s 9038/Del/2019 Precision Ward-20(1), New order dated 31.01.2013 in for AY: 2000-01 Agencies Pvt Delhi case no. Ltd., New 81/CIT(A)XVII/Del/2007-08 Delhi involving proceedings under Section 143(3)/147 of the Act.
2. ITA No. M/s. Income Tax Officer, CIT(A)-XVII, New Delhi’s 9039/Del/2019 Precision Ward-20(1), New order dated 31.01.2013 in Agencies Pvt Delhi case no. Ltd., New 129/CIT(A)XVII/Del/2008- Delhi 09 involving proceedings under Section 143(3)/147 of the Act.
3. ITA No. M/s. Income Tax Officer, CIT(A)-7, New Delhi’s order 9040/Del/2019 Precision Ward-20(1), New dated 13.09.2019 in case for AY: 2002-03 Agencies Pvt Delhi no. 10269/264/CIIT(A)- Ltd., New 7/Del/2018-19 involving Delhi proceedings under Section 254/143(3)/147 of the Act. 4- Tax M/s. Precision CIT(A)-7, New Delhi’s order 9274/Del/2019 Officer, Agencies Pvt Ltd., dated 13.09.2019 in case And Ward-20(1), New Delhi no. 10268/263/CIT(A)- C.O. No. New Delhi 7/Del/2018-19, involving 10/Del/2020 proceedings under Section for AY: 2001-02 254/147/143(3) of the Act.
Heard both the parties at length. Case files perused.
Both the learned representatives in all these five cases; be it assessee’s/Revenue’s appeal(s), raise identical issue of correctness of the impugned section 68 unexplained cash credits addition as well as the alleged commission payment thereupon @ 1%; added in the corresponding assessments as partly upheld in the CIT(A)’s detailed discussion in the departmental appeal reading as under:
“4. I have carefully considered the order passed by the AO and the submissions made by the appellant.
2 | P a g e , 9039, 9040, 9274/Del/2019 & C.O. No.10/Del/2020 4.1 I have carefully considered the assessment order passed u/s 147/143(3), order of Hon'ble ITAT, New Delhi, assessment order passed u/s 254/147/143(3) and the submissions filed by the Ld. AR. The AO had made additions of Rs. 2,03,25,753/- on account of amounts received and treated as undisclosed income u/s 68 of the Act. Against the total deposits in the bank account through Cheques of Rs. 58,47,622/- and Cash deposits in the same account of Rs. 40,07,000/- in the whole year. It is also noted that the AO had made additions of Rs. 2,03,25,753/- which is the sum total of all debits & Credits in the account including the opening balance in the assessment order passed u/s 254/147/143(3) of the Act. 4.2 It is also noted the fact that Mr. Pradeep Jindal has also resigned from the company on 27.09.2000 and the total deposits both of Cheque & Cash in the account upto this date of resignation is amounted to Rs. 27,99,822/- through cheques & no cash had been deposited. The proof of his resignation is part of submission made by the appellant. 4.3 During the assessment proceedings, the AO made enquiries from the Assessing Officers under whose jurisdiction, the beneficiary companies were lying, to provide the details of additions made in the hands of beneficiaries companies/recipients of accommodation entries were lying, to provide the details of assessee income for the A.Y. 2001-02. Summons u/s 131 of the I.T. Act, 1961were issued to the directors of the beneficiary companies/recipients of accommodation entries. But the AO could not enforce the compliance thereof. 4.4 On the other hand, the AR of the appellant has vehemently argued that the Bank account held with State Bank of India, through which these accommodation entries have been routed, has been managed and controlled by Sh. Pradeep Jindal, which was not in knowledge of the company and has not been part of the financial statements of the company made for the relevant assessment years. The AR of the appellant further contended that the directions issued by the Hon'ble ITAT to the AO has not been followed while passing the order u/s 254/147/143(3) of the Act and in view of the above, the appellant contended that the additions have been wrongly made in its hands and should be deleted. 4.5 I have perused the assessment order and order of Hon'ble ITAT, Delhi and found that the company has not been able to substantiate the fact that there is a cheating on the assessee by Sh. Pradeep Jindal and the bankers as it is very unusual that assessee though claiming to have been cheated by Sh. Pradeep Jindal has neither made any complaint against him or the banker but has constantly pleaded before the authorities that the bank account has been opened by Sh. Pradeep Jindal and also operated by him without the knowledge of the directors as well as the shareholders. Therefore, unless the assessee comes out with the clean hands before the AO, it cannot escape the taxation of the whole amount. Therefore, the amount received by appellant, which has not been added in the hands of beneficiary companies, should be added in the hands of appellant company, since Sh. Pradeep Jindal has been the director of company during the current year up to 27.09.2000 the deposits in the account upto this date be taxable in the hands of the company. The amount deposited in the account 3 | P a g e , 9039, 9040, 9274/Del/2019 & C.O. No.10/Del/2020 till the date of resignation of Shri Pradeep Jindal amounting to Rs. 27,99,822/- should be added in the hands of appellant company. In view of the same, additions made by AO in the assessment order have been restricted to Rs.27,99,822/- The other additions are deleted.
The next Ground of appeal
is 2. The Ld. ITO has erred in law facts and circumstances of case by: c) Making an addition of Rs. 2,03,257/- as income from other sources being commission @1% of Total Transaction in bank. This ground of appeal relating to the addition of Rs.2,03,257/- on account of commission income at 1% of the alleged accommodation entries of Rs.2,03,25,753/- 5.1 The AR of the appellant during the appellate proceedings submitted that the addition on account of commission has been made on the basis of presumption. The AR also relied upon the appellate order passed in the first appellate proceedings in first round wherein the additions on account of commission was deleted based on the statement of Shri Pradeep Jindal reproduced as under:
4 | P a g e , 9039, 9040, 9274/Del/2019 & C.O. No.10/Del/2020 5.2 The first appellate authority during the first round of appeal has deleted the additions on account of commission income based on the sworn statement of Shri Pradeep Jindal, wherein he has clearly acknowledged the receipt of commission. The account opening form called for during the assessment proceedings also indicates that the bank account with SBI, Shakti Nagar Branch was operated by Shri Pradeep Jindal only and the said account was not reflecting in the Profit & Loss Account and Balance Sheet of the appellant company. Considering the facts and circumstances, I am in agreement with the observations made by First Appellate Authority in first round of appeal and therefore, the additions of Rs.2,03,257- on account of commission income calculated at 1% of alleged accommodation entries, is hereby deleted. The other grounds taken in appeal are consequential as such no separate adjudication is required at this stage.
In the result, the appeal is partly allowed.”
Learned counsel further states that the impugned proceedings assumed under section 147 of the Act are not sustainable in law as well since not in compliance to section 147 to 151 of the Act. And also that the tribunal’s earlier remand direction has nowhere been complied with in true later and spirit.
We have given our thoughtful consideration to the assessee’s and the Revenue’s vehement respective submissions. It is reiterated that the Revenue’s endeavour herein is to revive the entire unexplained cash credits addition as well as the alleged commission component thereupon involving figures of Rs. 1,75,25,931/- and Rs.2,03,257/- in its case . That being the case, it could hardly dispute the clinching factual finding that rather than the assessee being the beneficiary of the impugned accommodation entries, itself is 5 | P a g e , 9039, 9040, 9274/Del/2019 & C.O. No.10/Del/2020 only a part of the well-orchestrated accommodation entry business wherein it could only be assessed qua the profit element embedded therein than the entire credits figure.
5. We invited the Revenue’s attention to the CIT(A)’s foregoing detailed discussion in para 4.3 wherein the Assessing Officer had sought to enquire all the relevant facts from the beneficiary companies (supra). We thus deem it appropriate in this factual backdrop that the assessee deserves to be assessed at the estimated profit element @ 5% qua its impugned accommodation entries rather than the entire credits in these peculiar facts. We order accordingly subject to a rider that our instant estimation shall not be treated as a precedent. Necessary computation shall follow as per law. This Revenue’s appeal is dismissed in very terms.
6. Coming to the assessee’s cross objection C.O. No.10/Del/2020, we find that the violation of section 147 to 151 of the Act as well as the tribunal’s first round remand direction (supra); could not be substantiated during the course of hearing before us. Rejected accordingly.
6 | P a g e , 9039, 9040, 9274/Del/2019 & C.O. No.10/Del/2020
Same order to follow in the assessee’s remaining three appeals 9039 & 9040/Del/2019 as well since raising the very identical sole substantive issue. It is made clear that the learned Assessing Officer’s consequential computation shall restrict all these additions of unexplained cash credits and commission component thereupon to that @ 5% only in the foregoing terms. The assessee’s instant three appeals are partly allowed.