Bombay HC in the case of Principal Commissioner of Income Tax Versus Alag Securities Pvt. Ltd.

Case Covered:

Principal Commissioner of Income Tax

Versus

Alag Securities Pvt. Ltd.

Facts of the case:

This appeal under Section 260-A of the Income Tax Act, 1961 (briefly ‘the Act’ hereinafter) has been preferred by the Revenue assailing the order dated 18.11.2016 passed by the Income Tax Appellate Tribunal, Mumbai Bench ‘A’, Mumbai (‘Tribunal’ for short) in ITA No.886/Mumbai/2012 for the assessment year 2003-04.

The appeal has been preferred by the Revenue projecting the following questions as substantial questions of law:-

“1. 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 of the Act to commission income calculated at 0.15% without appreciating that the assessee had failed to furnish satisfactory explanation with regard to the identity of the parties, source and genuineness of the transactions?

2. 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?”

Observations of the court:

In so far the decision of the Supreme Court in NRA Iron and Steel Pvt. Ltd. (supra) is concerned, the same is not attracted in the present case in as much as facts of the present case are clearly distinguishable. Unlike the present case, the assessee in NRA Iron and Steel Pvt. Ltd. (supra) claimed the cash credits as its income. However, it was found that the creditors had meagre or nil income which did not justify the investment of such huge sums of money in the assessee. The field inquiry conducted by the Assessing Officer revealed that in several cases the investor companies were non-existent. Thus, it was held that the assessee had failed to discharge the onus which lay on it to establish the identity of the investor companies and the creditworthiness of the investor companies. In such circumstances, the entire transaction was found to be bogus. But as already discussed in the preceding paragraphs, assessee never claimed the cash credits as its income. It admitted its business was to provide accommodation entries. In return for the cash credits, it used to issue cheques to the customers/beneficiaries for slightly lesser amounts, the balance being its commission. Moreover, the cash credits had been accounted for in the respective assessment of the beneficiaries. Therefore, the decision in NRA Iron and Steel Pvt. Ltd. (supra) is clearly distinguishable and not attracted to the facts of the present case.

Judgement of the court:

On a thorough consideration of all relevant aspects, we have no hesitation to hold 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. The appeal is accordingly dismissed. However, there shall be no order as to costs.

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