Case Law Details
Little Star Commodities Pvt. Limited Vs ITO (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT) of Kolkata dealt with an appeal filed by Little Star Commodities Pvt. Ltd. against a penalty imposed under Section 271(1)(c) of the Income Tax Act for the assessment year 2012-13. The penalty of Rs. 1,99,911 was levied following a dispute over the assessee’s declared commission income. Initially, the company disclosed Rs. 1,34,000 as commission income, calculated at a 0.05% commission rate for providing accommodation entries. However, the Assessing Officer (AO) deemed this rate too low and estimated the commission income at 1%, leading to an addition of Rs. 6,46,955 and the initiation of penalty proceedings. The CIT (Appeals) upheld the penalty, prompting the company to approach ITAT.
Upon reviewing the case, ITAT found that the AO’s revision of the commission rate from 0.05% to 1% was based on estimation rather than any concrete evidence or scientific method. Since the income addition was purely an estimation and not based on substantial proof, ITAT concluded that the penalty imposed was unjustified. Consequently, ITAT ruled in favor of the assessee and deleted the penalty, emphasizing that penalties should not be imposed in cases of mere difference of opinion or estimation. The appeal was thus allowed, providing relief to Little Star Commodities Pvt. Ltd.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal is directed at the instance of assessee against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 27th January, 2024 passed for Assessment Year 20 12-13.
2. The solitary grievance of the assessee is that ld. CIT(Appeals) has erred in confirming the penalty amounting to Rs. 1,99,911/- levied under section 271(1)(c) of the Income Tax Act.
3. Brief facts of the case are that the assessee has filed its return of income on 04.09.2012. The assessee had disclosed a commission income of Rs. 1,34,000/-. It has been alleged by the ld. Assessing Officer that the assessee had provided accommodation entry and from that activity shown commission @ 0.05%, i.e. half percent. The ld. Assessing Officer was of the view that half-percent of the commission is on the lower side and, therefore, he estimated the commission @0.10%, in other words @ 1%. The ld. Assessing Officer in this way determined the alleged commission income of the assessee at Rs.7,80,955/-. The ld. Assessing Officer has initiated the penalty proceeding against the assessee under section 271(1)(c) of the Income Tax Act, on the addition of Rs.6,46,955/-, alleged commission income. He imposed a penalty of Rs.1,99,91 1/-, which is equivalent to 100% of tax sought to be evaded by the assessee.
4. Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee.
5. With the assistance of ld. Representatives, we have gone through the record carefully. Though earning of alleged commission income by providing accommodation entry in itself is a doubtful activity, but ld. Assessing Officer has not doubted this activity. He has accepted the alleged commission income of the assessee in providing accommodation entry of huge sum of Rs.78.9 crores. He only made changes that instead of half percent, it should be 1% of commission income. The assessee should have earned in this activity. To our mind, the income of the assessee has been revised on an estimate basis, which is based on difference of opinion without any scientific method. Therefore, on such an issue the ld. Assessing Officer as well as by the ld. CIT(Appeals) should have not been visited the assessee with penalty. Accordingly, we allow this appeal of the assessee and delete the penalty.
6. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 20/08/2024.
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