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Additions made on account of accommodation entries are unsustainable where based solely on loose sheets found during Search proceedings: HC

2019-TIOL-1685-HC-DEL-IT

IN THE HIGH COURT OF DELHI

ITA Nos. 680/681/683/685/2019

PRINCIPAL COMMISSIONER OF INCOME TAX-3

Vs

DU SECURITIES PVT LTD

S Muralidhar & Talwant Singh, JJ

Dated: July 23, 2019

Appellant Rep by: Mr Ruchir Bhatia, Adv.
Respondent Rep by: None

Income tax – accommodation entry – rate of commission – loose sheets

THE Revenue Department preferred the present appeal challenging the action of ITAT in reducing the percentage of commission on the accommodation entries provided allegedly by the Assessee from 2.25 % to 0.5%.

On appeal, the HC held that,

Whether additions on account of accommodation entries must not be based on loose sheets which are seized during the course of search – YES: HC

++ a perusal of the order of ITAT shows that this is a second round of litigation. The ITAT has explained how the fixing of percentage at 2.25% by the AO was based on noting of some loose sheets which were seized during a search operation. The reliability of these notings are themselves in dispute. Be that as it may, the ITAT has on a consideration of the entire facts and circumstances and considering that different rates are charged in different transactions formed the view that 0.5% should be taken as a reasonable rate of profit/commissioner in such activities. This Court fails to appreciate how the said order of the ITAT gives rise to any substantial question of law.

Revenue’s appeal dismissed

JUDGEMENT

1. These appeals have been filed by the Revenue against the common order dated 23rd January, 2019 passed by the ITAT in ITA Nos. 487/Del/2015, 489/Del/2015, 485/Del/2015 & 486/Del/2015 for the Assessment Years 2007-2008, 2009-2010, 2005-2006 & 2006-2007 respectively. The short question sought to be urged by the Revenue is whether the ITAT has arbitrarily reduced the percentage of commission on the accommodation entries provided allegedly by the Assessee from 2.25 % to 0.5%.

2. A perusal of the impugned order of the ITAT shows that this is a second round of litigation. The ITAT has explained how the fixing of the percentage at 2.25% by the Assessing Officer was based on noting of some loose sheets which were seized during a search operation. The reliability of these notings are themselves in dispute.

3. Be that as it may, the ITAT has on a consideration of the entire facts and circumstances and considering that different rates are charged in different transactions formed the view that 0.5% should be taken as a reasonable rate of profit/commissioner in such activities.

4. This Court fails to appreciate how the said order of the ITAT gives rise to any substantial question of law. Moreover, this is the second round of litigation and it has to end at some point. The Court sees no reason to interfere with the impugned order of the ITAT.

5. The appeals are dismissed.

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