DCIT Vs SNW Smith Consultants Pvt. Ltd (ITAT Delhi)
Delhi Tribunal dealt with Revenue’s appeals against relief granted by CIT(A) in commission income estimation for A.Ys. 2012-13, 2015-16 & 2016-17.
Assessees were part of Adam Smith Group (ASG), engaged in discounting of bills & letters of credit. A search u/s 132 was conducted on 28.11.2017. Seized documents & LC Billing & Discounting (LCBD) software indicated that ASG was suppressing commission income, with gross commission estimated by AO at 1.28% of hundi amounts. AO made additions accordingly, alleging that substantial commission remained unbooked.
On appeal, CIT(A) examined the seized data, remand report & also considered the order of ITSC in the flagship company Adam Smith Associates Pvt. Ltd. (ASAPL). It was noted that ITSC itself had rejected the 1.28% rate & directed adoption of 0.25% gross commission with 30% NP margin, i.e. 0.075% effective. CIT(A) held that Assessees being smaller entities, linked to ASAPL, could not be subjected to arbitrary higher rate. Accordingly, additions were scaled down substantially.
Revenue contended before Tribunal that CIT(A) wrongly relied on ITSC order of ASAPL & reduced commission arbitrarily. It pressed that seized materials indicated under-reporting & therefore AO’s estimate should be restored.
Tribunal, however, upheld CIT(A)’s findings. It held that:
- In absence of specific incriminating material relating to Assessees, additions could not be sustained, following Kabul Chawla (Del HC) & Abhisar Buildwell (SC).
- AO had simply extrapolated group data without showing direct nexus to the present entities.
- CIT(A)’s adoption of ITSC-guided commission rate was reasonable & consistent with group settlement.
Accordingly, Tribunal dismissed Revenue’s appeals for all years, confirming relief granted by CIT(A)
