INCOME TAX ACT, 1961

Section 68

Income from undisclosed source - Addition under section 68 - Unexplained cash credit - Assessee engaged in providing accommodation entries

The assessee was issued notice under section 153C of the Act as an offshoot of the said search action. A statement was recorded from Shri Dilip Jayantilal Shah during the course of search on 4-2-2011 wherein it was found that assessee company had transactions with JIK Industries Ltd. Shri Dilip Jayantilal Shah had mentioned in his statement that, he being an accommodation entry provider, had resorted to issue various bogus bills to various parties through his various entities and one such entity was Khyati Sales Agency Pvt. Ltd., i.e. the assessee herein. Assessee-company was engaged in the business of providing accommodation entries. That there were credits to the tune of Rs. 2,19,20,333 in the bank account of the assessee company, on which only commission income @4% was originally added by the AO in the assessment framed under section 153C of the Act. Later, this assessment was sought to be revised under section 263 of the Act by the Pr. CIT directing the learned AO to add 100% of the credits in the bank account as income of the assessee. Held: Only commission income @0.15% could be added in the hands of the assessee on the total accommodation entries provided by it on the total credits available in the bank account being the accommodation entries for the respective assessment years.

Relied:Pr. CIT v. Alag Securities Pvt. Ltd. (Formerly known as Mahasagar Securities and Richmond Securities Pvt. Ltd.) ITA No.1512 of 2017 dated 12-6-2020 : 2020 TaxPub(DT) 2493 (Bom-HC), Pr. CIT v. Goldstar Finvest Pvt. Ltd. [ITA No.1729 of 2016 dated 1-4-2019], Pr. CIT v. Mihir Agencies Pvt. Ltd. [ITA Nos. 71,74,94,100,119 and 133 of 2017 dated 25-3-2019], Khyati Sales Agency Pvt. Ltd. v. Dy. CIT [M.A. Nos.22 to 25/M/2020 [Arising out of ITA Nos. 7105/Mum/2017, 7106/M/2017, 7107/M/2017 & 7108/M/2017), dt. 24-7-2020], Khyati Sales Agency Pvt. Ltd. v. Dy. CIT 2019 TaxPub(DT) 4060 (Mum-Trib) and Dy. CIT v. Chaitali Sales Agency Private Limited ITA No.4909/Mum/2016 for assessment year 2010-11 dated 5-9-2018.