Section 68 of the Income Tax Act, 1961 — Cash Credit — Addition of cash credits to the income of the assessee, more so when the assessee was only concerned with the commission earned on providing accommodation entries does not arise.[2020] 54 ITCD 060 (BOM)
Facts: Being aggrieved of the order of Tribunal, Revenue went on appeal before High Court and raised the question of law that "Whether on the facts and in the circumstances of the case and in law, Tribunal erred in restricting the addition of Rs. 4,78,94,000.00/- made by the Assessing Officer on account of unexplained cash credits under Section 68 to commission income calculated at 0.15% without appreciating that the assessee had failed to furnish satisfactory explanation with regard to identity of the parties, source and genuineness of the transactions" and "Whether on the facts and in the circumstances of the case and in law, Tribunal erred in restricting the addition made by the Assessing Officer to the commission income at 0.15% without considering that the material found during the course of search clearly established that the net commission charged by the assessee varied between 1.5% to 3.6% and that the decision in M/s. Mihir Agencies Pvt. Ltd. relied upon by the First Appellate Authority was clearly distinguishable?”
Held that in a case of this nature Section 68 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 beneficiaries. Therefore, question of adding such cash credits to the income of the assessee, more so when the assessee was only concerned with the commission earned on providing accommodation entries does not arise. Coming to the percentage of commission, Tribunal had already held 0.1% 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. On a thorough consideration of all relevant aspects, it was held that the impugned order of the Tribunal does not suffer from any error or infirmity to warrant interference and no substantial question of law arises therefrom. There is no merit in the appeal.