ITAT Confirms Addition of 1% Commission on Hawala / Bogus Turnover

INCOME TAX APPELLATE TRIBUNAL, “E” BENCH, MUMBAI

BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER

ITA no. 8932/Mum./2010 – Assessment Year : 1996-97)

ITA no. 8933/Mum./2010-Assessment Year : 1997-98)

ITA no. 5853/Mum./2012 – Assessment Year: 1998-99)

M/s. Saroj Anil Steel P. Ltd.

V/s.

Income Tax Officer Ward-3(4)

Date of Order – 04.04.2014

ORDER

The aforesaid appeals have been preferred by the assessee challenging the impugned order dated 15^th September 2010, for the assessment year 1996-97 and 1997-98 and order dated 16^th July 2012, for the assessment year 1998-99 respectively, passed by the learned Commissioner (Appeals)-I, Thane, for the quantum of assessment passed under section 143(3) r/w section 254 of the Income Tax Act, 1961 (for short “the Act”). The appeals for the assessment year 1996­97 and 1997-98 were heard on 10^th March 2014 and the appeal for the assessment year 1998-99 was heard on 11^th March 2014.

2. Since all these appeals pertain to the same assessee involving common issues, except variation in figures, arising out of identical set of facts and circumstances, therefore, as a matter of convenience, these appeals are being disposed of by way of this consolidated order. However, in order to understand the implication, it would be necessary to take note of the facts of one appeal. We are, accordingly, narrating the facts, as they appear in the appeal in ITA no. 8932/Mum./2010, for assessment year 1996-97.

3. The sole issue involved, which is common in all the years under appeal, is determination of correct hawala income in the hands of the assessee. For the sake of ready reference, the grounds raised by the assessee in the assessment year 1996-97, are reproduced herein below:-

“(a) The Assessing Officer as well as Commissioner of Income tax (Appeal) has failed to determine the correctly the hawala Income. The appellant has issued Bills i.e. Sales Bills to the commercial world i.e. the needy persons. Who has paid the appellant the Hawala Commission.

(b) The Appellant Tribunal has given clear direction to compute Hawala Income and one can not earn Income from own concerns or Sister concerns or groups concerns and transaction of such concerns and or groups be excluded from the turnover.

(c) The AO as well as CIT(A) ought to determine turnover as the transactions with commercial world on which appellant has earned Income.

(d) The AO ought to have reduced the transaction with the sister concerns group concerns transactions which are done to inflate sale for obtaining bank facilities on which no commission is earned.

(e) The AO as well as CIT (A) ought to have considered the submission, an affidavits and various documentary proof filed with the AO as well as to the CIT (A) that the appellant has not earned any commission Income from Sister or Group concerns.

2)(a) The AO eared in Law as well as facts and circumstances of case by assessing the Income of Rs. 15,40,950/- on basis of total Turnover at the rate of 1% of Total Turnover of Rs. 15,40,95,400/-.

(b) Appellant had earned Commission Income on bills issued to outside party. Income from this activity can be computed on the basis of sales made to outsider to whom, bills are issued for earning nominal commission. Therefore those bills on which Income is earned will be taken as turnover or Bills amounts be taken for a turnover and all the office running expenses should be allowed from Income computed on above turnover i.e. 1 % of commercial Hawala turnover.

(c) In this type of business, Income can be earned on commercial turnover i.e. sales made to third party (other than Sister Concerns). Therefore Income should be computed accordingly. The sister Concern transaction on which no commission was earned so such transaction should be reduced from total turnover as follows: –