Onus is on assessee to demonstrate no commission paid on accommodation entry

Onus was not on Revenue to demonstrate that the assessee paid commission, but on the assessee to demonstrate that he had paid no commission on admitted accommodation entry.

ABCAUS Case Law Citation:
ABCAUS 3672 (2023) (02) ITAT

Important Case Laws relied upon by parties:

In the instant case, the assessee had challenged the order passed by the CIT(A) in inter alia partly confirming addition made by the Assessing Officer (AO) on account on account of alleged commission paid on bogus accommodation entry.

During the course of the scrutiny, the assessee admitted to have received bogus accommodation entry by resorting to bogus sales made and payments received by banking channels in lieu thereof with the purpose of introducing his unaccounted cash.

The assessee submitted that he had no objection to addition being made under section 68 of the Income Tax Act, 1961 (the Act) in respect of the said balance.

Considering the explanation of the assessee the AO treated the credit balance of the party appearing in the books as unexplained cash credit u/s 68 of the Act and added the same to the income of the assessee.

However, the AO noted that in lieu of such accommodation entries, the market practice is to give commission for the same. Finding that the assessee had not disclosed commission paid on this admitted accommodation entries the AO made addition at percentage basis.

The CIT(A) reduced the percentage adopted by the AO by the amount of gross Gross Profit declared on such bogus sale.

Before the Tribunal, the assessee argued against the addition confirmed by the CIT(A) and contended that there was no evidence of payment of any commission by the assessee, and  it was only on the basis of surmises and conjectures, and that in any case, the market rate of commission adopted by the AO  was not substantiated with any evidence or reasoning and was very high and therefore the addition made needed to be deleted.

The Tribunal noted that the assessee had not denied the taking of bogus accommodation entry and had admitted the modus   operandi of transferring cash to the party, raising bogus sales  bills and taking cheques in return.

The Tribunal opined that accommodation entries cannot be provided by anybody free of cost and certain commission is always charged on the same. 

The Tribunal clarified that the onus was  not on the Revenue to  demonstrate that the assessee did actually pay commission, but in fact, it was other way round for the assessee to demonstrate that he had paid no commission in the light of his  own admission to have taken accommodation entry. 

Accordingly, the Tribunal upheld the addition confirmed by the CIT(A) and rejected the ground of appeal.

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