2017 (5) TMI 1623 - AT - Income Tax

Estimation of commission income - Reducing the estimated addition from 4% to 0.15% - bogus bills/accommodation entries - Held that - We find that the assessee had not co-operated with AO during the assessment proceedings, that it was providing accomodation entries, that the AO estimated commission income of the assessee at 4% of the total deposits, that the FAA reduced the commission income and estimated the same at 0.15% of the aggregate of value of accommodation entries. The estimate made by AO was on higher side and had no basis. We would like to refer to the case of Gold Star Invest P. Ltd. (2008 (3) TMI 687 - ITAT MUMBAI), wherein under identical circumstances the Tribunal had estimated the commission income of the assessee @ 0.15 % of the aggregate value of the bogus bills/accommodation entries.

Summary

Issues: Appeal against reducing estimated addition from 4% to 0.15%.

Detailed Analysis:

1. Background: The assessee, engaged in manufacturing and sale of crystal and handmade artistic glasses, challenged the CIT(A)'s order reducing the estimated addition from 4% to 0.15% for the assessment years in question.

2. AO's Findings: The AO, based on available material, held that beneficiaries would pay about 5% of the bill amount, with 4% going to the issuer of bogus bills. The AO treated all credits in the assessee's bank account as receipts against bogus bills, resulting in substantial income assessments for the relevant years.

3. First Appellate Authority (FAA): The assessee contended that the individual involved was not authorized to carry out transactions on its behalf. The FAA, after reviewing bank documents, noted the authorization of the individual by the company and estimated income at 0.15% of the value of accommodation entries, citing a relevant case precedent.

4. Appellate Tribunal's Decision: During the hearing, the DR supported the AO's order, while the AR referenced a specific case and a judgment. The Tribunal found the AO's estimate of 4% commission income to be unsubstantiated and excessive. Referring to a precedent case, the Tribunal agreed with the FAA's 0.15% estimation, highlighting the reasonableness of the percentage based on industry standards.

5. Judgment: Citing the precedent case extensively, the Tribunal upheld the FAA's decision, deeming the AO's estimate as baseless. Confirming the FAA's order, the Tribunal dismissed the AO's appeal for the relevant assessment years, emphasizing consistency with prior rulings.

6. Final Decision: The Tribunal dismissed the AO's appeal for the assessment years, maintaining the FAA's estimation of income at 0.15% and emphasizing adherence to established legal principles and precedents.

This detailed analysis outlines the progression of the case, highlighting key arguments, findings, and the Tribunal's final decision based on legal reasoning and precedent cases.