2016 (9) TMI 1384 - AT - Income Tax

Penalty levied u/s 271(1)(c) - estimation of income from the accommodation entries - Search and seizure under section 132(1) was conducted in the case of several companies, whose kingpin is identified as one Mr. Mukesh Choksi - Revenue had noted that for providing accommodation entries, the entries like the assessee, which were controlled by Mr. Mukesh Choksi were earning commission income - Held that - In an identical facts and circumstances in the case of M/s. Kaycee Shares Broking Pvt. Ltd., the coordinate Bench deleted the penalty by following the decision in the case of M/s. Mihir Agencies Pvt. Ltd 2016 (7) TMI 1343 - ITAT MUMBAI Respectfully following the aforesaid decision, we delete the penalty levied under section 271(1)(c) in these cases, as the facts and circumstances being identical, as the commission income assessable in the hands of the assessee has been on estimate basis, no penalty is attracted on the additions/disallowances made on estimate basis. - Decided in favour of assessee.

Summary

Issues:
Assessment years 2007-08 to 2010-11 - Common issues

Analysis:
1. Grounds of Appeal: The appellant raised multiple grounds of appeal challenging the order passed by the Assessing Officer and confirmed by the CIT(A). The grounds included issues related to the order confirmation, lack of hearing opportunity, validity of satisfaction for issuing notice under section 153C of the Income Tax Act, additions made under the Act, income computation, disallowance of business expenses, and interest levied under sections 234B and 234C of the Act.

2. Background and Search Action: A search and seizure action was conducted, revealing that entities controlled by Mr. Mukesh Choksi provided accommodation entries through share trading/loans. The appellant's assessment for the year 2009-10 was made under section 143(3) r.w.s. 153C, resulting in an assessed income of ?8,18,870. The Assessing Officer estimated the net commission income at 2% based on the total receipts in the bank account, a decision upheld by the CIT(A).

3. Arguments and Precedents: The appellant argued that similar additions made in other group concerns were assessed at a lower rate, citing precedents where the commission income was assessed at 0.15% of total receipts after allowing for expenses. The Departmental Representative highlighted the search action distinction between the appellant and other cases.

4. Tribunal's Decision: The Tribunal reviewed previous decisions related to commission income assessment in similar cases and directed the Assessing Officer to compute the commission income at 0.15% instead of 2%, following the precedents. The Tribunal emphasized the reasonableness of the percentage of commission income and the allowance of claimed expenses.

5. Outcome and Directions: The Tribunal set aside the CIT(A) order and instructed the Assessing Officer to recompute the total income in line with the precedents, ensuring the appellant is given a fair opportunity to be heard. The decision for the assessment year 2009-10 was allowed, and it was noted that the same decision would apply to other assessment years with similar circumstances.

6. Conclusion: The Tribunal's decision focused on ensuring fairness in income computation, considering precedents and reasonableness in assessing commission income. The case highlighted the importance of consistency in applying legal principles across related cases and providing appellants with a proper opportunity to present their case.