A division bench of the Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the Assessing Officer was rightly disallowed deduction claim since their involved sham transaction under the garb of donation.
The assessee is carrying his business through sales commission agents for procuring orders and other business-related activities. The assessee paid commission to various agents who rendered service for procuring orders, collection, etc.
The Assessing Officer disallowed the entire payments by holding that the same is bogus. On the first appeal by the assessee, the CIT(Appeals) restricted the disallowance to 50%, i.e. Rs. 1,44,556/-. The assessee claimed that the rate of commission paid to other agents, which was allowed by the CIT(Appeals) is on par with the commission paid to the assessee’s son.
The Tribunal noted the fact that the transaction ultimately ended in refunding the money to the assessee through banking channel after reducing the commission to the extent of 5% shows that the money has come back to the assessee.
“This is the transaction arranged in such a way that the accommodation entries were made at several entities level and ultimately the money came back to the assessee. Herbicure Healthcare Bio-Herbal Research Foundation of Kolkata involved in the fraudulent and sham transactions, providing accommodation entries and claiming a bogus weighted deduction to the extent of 175%. The antecedents of the recipient were unearthed by the Department during the course of survey operation. The material available on record clearly establishes that the so-called donation ultimately received back by the assessee after reducing the commission. Therefore, the CIT(Appeals) in a very reasoned order found that the assessee involved in the sham transaction under the garb of donation. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed,” the Tribunal said.
Subscribe Taxscan Premium to view the Judgment
