Rejection of books due to admission of being bogus accommodation entry provider justified – ITAT

Rejection of books due to admission of assessee being bogus accommodation entry provider is quiet correct – ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in sustaining the addition on bogus transaction of the assessee.

ABCAUS Case Law Citation
ABCAUS 3579 (2022) (02) ITAT

A  search  action  u/s  132  of  the Income Tax Act, 1961 (the Act) was  carried  out  in  the  case  of  a Business Group where various  incriminating documents/computer data backup related to  the company wherein the appellant was a Director were seized.

Subsequently, a search action was carried out at the residence of the appellant and a survey u/s 133A was carried out on appellant’s  company. 

During the survey proceedings, statement u/s 133A of employees of the said Business Group were recorded under oath wherein they admitted that purchases of goods, both capital as well as revenue from various parties including the appellant and its business concerns were accommodation entries and they were not supported by bills,  lorry receipts and other supporting documents and without physical delivery of goods.

Statement of the appellant and his employees were also recorded during the search proceedings and it was evident from their statements that the appellant and his concerns were indulged in providing accommodation entries to various parties including the said Group.

According to the Assessing Officer (AO) the appellant was not able to give any cogent explanation as to how the goods were procured and sold to various parties. 

Therefore, the AO rejected the books of account u/s 145(3) of the Act and estimated the net profit at 2% from the bogus transactions of purchases and sales and made an addition.

Upon assessee’s appeal, the CIT(A) confirmed the AO’s action by holding the addition made to the income.

The Tribunal noted that as per assessees own admission, he was engaged in the business of providing accommodation entries. Hence, the entire sales and purchases were accepted to be bogus and the assesssee admitted that he was getting 0.01% as commission.

The Tribunal opined that under the facts of the case, there was no reason why the books of assessee should be accepted. The rejection of the books in the light of clear admission of assessee that he was a bogus accommodation entry provider was quiet correct and there was no infirmity in this regard. 

The ttt stated that the assessee was found to be indulging in bogus accommodation entries, the income attributed to such transactions cannot be determined as per the whims and fancies of the assessee.

The Tribunal opined that on the facts and circumstances of the case, the 2% commission attributed by the revenue authorities was very fair. 

The Tribunal upheld the addition and dismissed the appeal of the assessee.

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