Nanak Motumal Pherwani Vs ITO (ITAT Surat)
In Nanak Motumal Pherwani vs. ITO, the Income Tax Appellate Tribunal (ITAT) Surat addressed the issue of commission income addition based on bank transactions related to cheque discounting and money transfers. The assessee, Nanak Pherwani, filed a return of income for the 2013-14 assessment year. Following a survey of a related entity, Hari Corporation, run by the assessee’s brother, the Assessing Officer (AO) reopened Pherwani’s case. The AO applied a 1% commission rate on total bank credits, asserting it as the income derived from cheque discounting. Pherwani, however, argued that the commission typically ranged from 0.15% to 0.20% and provided evidence of similar cases where lower commission rates had been accepted.
The ITAT considered both the evidence and prior rulings, including cases where lower commission rates (as low as 0.10%) were accepted for similar transactions. Ultimately, the ITAT found that a 1% commission rate was excessive for the nature of Pherwani’s business. Citing the lack of a uniform standard for such income and aiming for a fair assessment, the Tribunal reduced the commission income addition to 0.50%, deeming it a reasonable reflection of the business activities. The Tribunal also dismissed the assessee’s appeal regarding a separate Rs.1.20 lakh addition under Section 69A due to procedural limitations in the appeal submission.
