2014 (5) TMI 191 - AT - Income Tax

Deletion made on account of commission income for arranging bogus bills - Estimation of commission income Proper evidences not adduced Rejection of book results Section 145 not invoked Held that - The assessee was in the activity of arranging bogus bills for certain parties, and he has also admitted the fact - CIT(A) has given a finding that the assessee has introduced Shri Dharmendra Pandya, proprietor of Vishal Traders to various parties - the assessee was in the business of earning commission income and the assessee must have earned commission from M/s.Vishal Traders also but, no incriminating material was found even after the conduct of the search operation at the premises of the assessee in the form of bills or bank account, or property documents or investment in movable and immovable properties, either on his own name or in the name of any his family members, and once the Department could not place any material on record, even after the completion of search operation, suggesting any movable or immovable assets of the assessee, then, the addition should be restricted Decided against Revenue.

Summary

Issues:
- Addition of commission income for arranging bogus bills
- Estimation of commission income without evidence
- Rejection of book results without invoking section 145 of the Act

Analysis:
1. Addition of Commission Income for Arranging Bogus Bills:
The appeals by the Revenue and counter-objections by the assessee were directed against the CIT(A)'s order. The Revenue contended that the CIT(A) erred in deleting the addition of commission income for arranging bogus bills. The CIT-DR argued that the assessee was involved in arranging bogus bills, supported by evidence from a search at Vishal Traders. The AO estimated commission income at 2% of the bill amount, while the CIT(A) restricted it to 1%. However, the Tribunal found that the assessee was indeed involved in arranging bogus bills, but no incriminating material was found during the search operation. Considering this, the Tribunal restricted the addition to a certain amount for each assessment year, dismissing the Revenue's appeal and partly allowing the assessee's counter-objections.

2. Estimation of Commission Income Without Evidence:
The COs. of the assessee argued that the AO estimated commission income without any evidence and that the CIT(A) erred in rejecting the book results without invoking section 145 of the Act. However, the Tribunal found that while the assessee was involved in earning commission income from arranging bogus bills, no concrete evidence was found during the search to support the estimated income. Therefore, the Tribunal restricted the addition based on the lack of incriminating material found during the search operation, ultimately partly allowing the counter-objections of the assessee.

3. Rejection of Book Results Without Invoking Section 145 of the Act:
The COs. of the assessee further contended that the AO and CIT(A) erred in rejecting the book results without invoking section 145 of the Act. The Tribunal acknowledged the lack of concrete evidence found during the search operation, which led to the decision to restrict the addition of income. While the Tribunal recognized the assessee's involvement in arranging bogus bills, the absence of incriminating material post-search operation influenced the decision to limit the addition. Consequently, the Tribunal dismissed the Revenue's appeals and partly allowed the counter-objections raised by the assessee.

In conclusion, the Tribunal upheld the decision to restrict the addition of commission income for arranging bogus bills due to the absence of incriminating material found post-search operation, ultimately dismissing the Revenue's appeals and partly allowing the counter-objections raised by the assessee.