2014 (9) TMI 56 - HC - Income Tax

Application u/s 154 Rectification of order - Reconsideration of turnover Held that - The assessee through this application u/s 154 before the AO sought reconsidering and re-determining the turnover, which was confirmed by the Tribunal on which there being no dispute which has already attained finality as income has been computed and reduction has been ordered by Tribunal by computing commission/brokerage @ 0.6% on the turnover determined and question of change in turnover has not been raised before CIT(A) or before Tribunal in earlier proceedings by way of any permissible mode and the action of the assessee to seek interference in already settled issue up to ITAT level is not permissible u/s 154. The Tribunal has observed that the figure represents genuine as well as fictitious turnover - This was the basis on which the entire appellate proceedings were heard and decided - there is merit in the submission of the Revenue, which was accepted by the Tribunal that the subject matter of appeal at that time included in its ambit the question of turnover involved and the observations of the Tribunal cannot be read in isolation, but meaningfully without indulging in semantics - what the assessee wants and seeks, by way of rectification, is re-examination of entire bank accounts and re-computation of the turnover - the assessee wants enquiry on whether or not the assessee had received commission even when cheques had bounced or whether commission was paid on the transactions which had been made through the stock exchange - the Tribunal made it clear that 0.6% rate of commission would apply to the entire transaction of ₹ 104.76 crores including the transactions which were genuine, i.e. the transactions which were recorded in the stock exchange - this cannot be undertaken in exercise of power u/s 154 - the order passed by the Tribunal rejecting the application u/s 154 cannot be interfered Decided against Assessee.

Issues Involved:
1. Legitimacy of the search and seizure under Section 132 of the Income Tax Act, 1961.
2. Assessment of undisclosed income and commission rate.
3. Applicability and interpretation of Chapter XIV-B.
4. Validity of the turnover computation.
5. Applicability of Section 154 for rectification of mistakes.

Detailed Analysis:

1. Legitimacy of the Search and Seizure:
The assessee, a Chartered Accountant, was subjected to a search on 24th November 2000 under Section 132 of the Income Tax Act, 1961, for providing accommodation entries in the form of share loss or gain by issuing bills for shares without actual sale and purchase. The transactions recorded were mere accommodation entries, indicating money laundering activities.

2. Assessment of Undisclosed Income and Commission Rate:
The Assessing Officer, in the assessment order dated 27th November 2002, concluded that the assessee earned a commission at 1.5% on a turnover of Rs. 1,04,76,94,004, resulting in an undisclosed income of Rs. 1.57 crores. The Commissioner of Income Tax (Appeals) upheld this finding but rejected the assessee's contention that the commission rate was excessive compared to similar cases where it was computed at 0.5%.

The Tribunal, in its order dated 30th November 2004, acknowledged the material on record and confirmed the application of Chapter XIV-B, highlighting that the transactions were fictitious and meant to provide accommodation entries. The Tribunal found direct evidence of the assessee indulging in earning undisclosed income through accommodation entries, with substantial credits of Rs. 104 crores in multiple accounts, including benami accounts. The Tribunal ultimately directed the commission/brokerage to be computed at 0.6% on the total turnover.

3. Applicability and Interpretation of Chapter XIV-B:
The Tribunal justified the application of Chapter XIV-B, noting that the assessee's books did not reflect the true nature of the business and that the assessee was conducting business outside the books. The Tribunal emphasized that the seized documents indicated varying commission rates, and the substantial credits in numerous accounts demonstrated the scale of undisclosed income.

4. Validity of the Turnover Computation:
The assessee filed applications under Section 154, arguing that the turnover should be reduced by excluding certain entries such as funds transferred between accounts, SEBI margin credits, and dishonoured cheques. The Assessing Officer rejected these applications, stating there was no apparent mistake from the record and the issue was debatable, thus outside the scope of Section 154.

The Tribunal dismissed the appeal, noting that the turnover figure of Rs. 104.76 crores was confirmed in the order dated 30th November 2004 and had attained finality. The Tribunal emphasized that the turnover included both genuine and fictitious transactions, and the assessee had accepted this figure during the original proceedings.

5. Applicability of Section 154 for Rectification of Mistakes:
The Tribunal elucidated that Section 154 allows rectification of a "mistake apparent from the record," which must be obvious and not dependent on elaborate arguments or investigation. The Tribunal observed that the assessee's request for re-examination of bank accounts and re-computation of turnover involved detailed scrutiny, which could not be undertaken under Section 154. The Tribunal upheld the rejection of the rectification applications, concluding that the issues raised were beyond the scope of Section 154.

Conclusion:
The appeal was dismissed, affirming the Tribunal's decision that the commission/brokerage should be computed at 0.6% on the turnover of Rs. 104.76 crores. The Tribunal's order rejecting the rectification applications under Section 154 was upheld, as the issues raised required detailed examination and were not apparent mistakes from the record.

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