Sanjay Kumar Drolia Vs ITO (ITAT Kolkata)
One Commission, Two Tax Demands? ITAT Says: Verify First – No Double Taxation
Assessee, an individual, had originally filed his return of income declaring ₹9.11 lakh. Later, based on information from the Investigation Wing, the Assessing Officer alleged that Assessee was involved in providing accommodation entries such as bogus billing, bogus share capital & unsecured loans to various beneficiaries in exchange for commission @ 0.50% during earlier years. On this basis, AO reopened the assessment u/s 148.
Assessee complied with notices u/s 142(1) & 143(2), filed details, & importantly, asked AO for a copy of reasons recorded for reopening, but AO did not provide it. Instead, AO issued a show-cause notice proposing to add 0.50% of ₹43.91 crore as commission income. Assessee replied that he was not carrying out any trading or accommodation entry activity in his personal capacity during the relevant year. He clarified that any such statement or admission was made only in his capacity as Director of M/s Silverpoint Infratech Ltd., which is a separate legal entity, & not in his individual capacity.
Assessee further argued that if at all any commission income was earned, it belonged to Silverpoint Infratech Ltd. & that company had already offered it to tax. AO acknowledged that Assessee had submitted the Profit & Loss account & Balance Sheet of the said company, but still concluded that Assessee had not proved that the commission was included in the company’s income. Accordingly, AO added ₹21,95,975 as commission income in the hands of the individual. CIT(A) confirmed the addition without adequately appreciating this key factual distinction between the individual & the company.
Before ITAT, Assessee again contended that the same income has already been offered to tax by Silverpoint Infratech Ltd., & taxing it again in his personal assessment would result in double taxation. This time, Assessee produced the company’s return of income & financial statements, which were not filed before AO earlier. Recognizing this, Tribunal noted that AO himself had mentioned in the assessment order that Assessee claimed the commission belonged to the company. Since new documentary evidence has now been produced to support that claim, Tribunal held that the matter cannot be concluded without proper verification.
