Case Law Details
Saanvi Developers & Realtors Pvt. Ltd. Vs ITO (ITAT Kolkata)
ITAT Kolkata held that undisclosed commission income on accommodation entries to be added @0.15% instead of 1%. Accordingly, AO directed to compute the rate the commission @0.15% and not 1%.
Facts- On the basis of credible information, the case of the assessee was selected for reassessment and notice u/s 148 was issued. In compliance with the notice u/s 148 the assessee filed return of income declaring total income of Rs. 26,90,090/-. Again notices along with requisitions were issued to the assessee, but there was not compliance as a result of which, the undisclosed commission income on such accommodation entries @1.0% as per prevailing market rate worked out to Rs. 87,86590/- and the same is added back to the total income of the assessee as undisclosed commission income.
CIT(A) partly allowed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that the assessee has filed return of income declaring total income of Rs. 26,90,090/-. The AO on account of non-response from the assessee has held that undisclosed commission income on such accommodation entries @ 1.0% as per the prevailing market rate. The main contention of the assessee is that it should be 0.15% which was already accepted by the department. We have gone through the order passed by the NFAC for AY 2011-112 against the same assessee and fined that in the said assessment year the Ld. CIT(A) has directed the AO to take the percentage @ 0.15% and not @ 1% as admitted by him. Thus, we are in this view that rate of commission should be 0.15% and not @ 1%., Accordingly the case of assessee is allowed and the AO is directed to compute the rate the commission @0.15% and not 1%.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is the appeal preferred by the assessee against order of Commissioner of Income Tax (Appeal)-NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)] dated 26.07.2023 for AY 2010-11.
2. At the outset, the Ld. Counsel for the assessee submitted that there was a delay of 71 days in filing the appeal. The ld. Counsel for the assessee filed an Affidavit which is reproduced as under:
3. Going over the affidavit and the principle led down by the apex court in a catena of decision that a case should be decided on merit not on technical issue, the delay is here by condoned.
4. Brief facts of the case of the assessee are that the assessee being a private limited company filed return of income for AY 2010-11 declaring total income at Rs. 26,90,090/-. Subsequently, on the basis of credible information, the case was selected for reassessment and notice u/s 148 was issued. In compliance with the notice u/s 148 the assessee filed return of income declaring total income of Rs. 26,90,090/-. Again notices along with requisitions were issued to the assessee, but there was not compliance as a result of which, the undisclosed commission income on such accommodation entries @1.0% as per prevailing market rate worked out to Rs. 87,86590/- and the same is added back to the total income of the assessee as undisclosed commission income.
4. The assessee challenged the impugned order before the Ld. CIT(A) wherein the appeal of the assessee has been partly allowed by observing that the estimation of 1% to be quite reasonable especially when the director of the assessee company has himself admitted to the fact that only accommodation entries are passed by the assessee.
Being aggrieved and dissatisfied the assessee preferred the appeal.
5. The Ld. Counsel of the assessee challenges the impugned order, thereby submitting that the Ld. A.O. and CIT(A) erred in computing the rate of commission @1% in stead of 0.10-0.15% of turn over ignoring the reality that the same has already been accepted by the Investigation Wing on the statement given by the director. The Ld. Counsel further submits that the statement given by the director before the Investigation Wing was accepted by the AO while the commission as calculated by the then AO is completed based on estimation and added much higher rate as per the prevailing market rate. The Ld. Counsel by citing the order of the Ld. CIT(A) u/s 250 of the Act, passed against the same assessee for AY 2011-12 submitted that the Ld. CIT(A) directed the AO to take the commission 0.15% and not @ 1% but the Ld. CIT(A) did not consider the case of the assessee for year under consideration i.e illegal and liable to be set aside. The ld. Counsel for the assessee filed a copy of Ld. CIT(A) order for AY 2011-12.
6. On the contrary to that the Ld. D.R supports the impugned order.
7. We have gone through the case of the assessee and find that the assessee has filed return of income declaring total income of Rs. 26,90,090/-. The AO on account of non-response from the assessee has held that undisclosed commission income on such accommodation entries @ 1.0% as per the prevailing market rate. The main contention of the assessee is that it should be 0.15% which was already accepted by the department. We have gone through the order passed by the NFAC for AY 2011-112 against the same assessee and fined that in the said assessment year the Ld. CIT(A) has directed the AO to take the percentage @ 0.15% and not @ 1% as admitted by him. The operative portion of the said order is thus:
8. I have also gone through the judgment passed by the Hon’ble Bombay High court in the case of PCIT vs Alag Securities Pvt. Ltd placed by the assessee where in the order passed by the ITAT Mumbai Bench “A” was upheld by observing thus-“Tribunal held that the action of the Assessing Officer in treating the entire deposits as unexplained cash credits could not be accepted in the light of the assessement orders in the case of the beneficiaries and also in the light of the facts that the assessee was only concerned with the commission earned on providing accommodation entries. Therefore, the tribunal took the view that since the assessee had itself declared the commission on turnover at 0.15% which was more than percentage considered to be reasonable by the tribunal, the same should be accepted.
9. In the present case Mr. Sumit Sharma, Director of the appellant company has admitted to have been providing accommodation entries in lieu of admitted commission@ 0.10% to 0.15% of the turnover. The statement given by the Director has been accepted by the A.O.
10. Going over the facts of the case, order passed by the CIT (A) in the A.Y.11-12, we are in this view that rate of commission should be 0.15% and not @ 1%., Accordingly the case of assessee is allowed and the AO is directed to compute the rate the commission @0.15% and not 1%.
In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 31st December, 2024
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