ITAT gives telescoping benefit to assessee who was providing only accommodation entries

ITAT gives telescoping benefit of business income declared when the assessee was only an entry operator and addition was made for commission income

In a recent judgment , the Income Tax Appellate Tribunal has directed AO to give benefit of telescoping for the business income declared when the assessee was only an entry operator and addition was made for commission income

ABCAUS Case Law Citation:
ABCAUS 3783 (2023) (07) ITAT

In the instant case, the assessee had challenged the order passed by the Commissioner of Income-tax (Appeals) in confirming various additions made by the Assessing Officer (AO) to the income by order passed u/s 143(3) of the Income Tax Act, 1961 (the Act).

The assessee filed its return of income declaring business income. The case of the assessee was selected for income tax scrutiny.  

Before the AO, the assessee pleaded that it was carrying on business activity. But, no evidence whatsoever was furnished by the assessee before the AO to justify the fact that the assessee was indeed carrying on any business.

Accordingly, the AO rejected the plea of the assessee that it is conducting any business. On examination of the bank statements of the assessee the AO found that total credits in the bank was more than twenty crores and the same figure was represented in the debit side also during the year.

The AO concluded that since monies were credited in the bank account of the assessee and immediately thereafter, the same were paid to some parties, which proved that the assessee was merely an entry operator doing transactions of receipt of monies and issuance of monies on behalf of third parties.

No details of persons from whom monies were received and no details of persons to whom payments were made were furnished by the assessee.

Accordingly, the AO concluded that the entire transactions reflected in the said bank statement are mere transactions carried out by the assessee in the capacity of an entry operator.

Hence, the AO charged only the commission income on those accommodation entries in the hands of the assessee. This commission income was estimated at 0.60% and an addition was made in the assessment.

This action of the AO was upheld by the CIT(A) as no evidences could be furnished to buttress the arguments of the assessee.

Before the Tribunal also, the assessee was not able to buttress his arguments by filing cogent documentary evidences even to prove that it is engaged in some business activity and that the credits and debits in the aforesaid bank account are business transactions.

Accordingly, the ITAT declined to interfere in the order of the CIT(A) upholding the estimation of commission income @ 0.60% on total bank transactions.

The Tribunal opined that since it had already upheld that no business was carried on by the assessee and it had been merely providing accommodation entries to various parties to earn commission income thereon, thus, business income voluntarily offered to tax by the assessee should not be brought to tax.

Accordingly. The Tribunal held that amount of business income declared was available to the assessee for telescoping benefit and the same would be telescoped with the various other additions confirmed.

The AO was directed to give credit of the amount of the business income declared while determining the income of the assessee.

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