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2017 (3) TMI 686 - AT - Income TaxRate for estimating the commission - Issuance of bogus bills - CIT(A) has treated total turnover reflected in different bank accounts as handled by the assessee on the basis of circumstantial evidence - Held that - The assessee in his reply has only confirmed about transactions in Mehsana Nagrik Sahakari Bank Ltd. Papers were also found to this effect at his premises. Other bank accounts have been connected with the assessee only on assumption basis. It may be a case that person like assessee might have been carried out such transactions on behalf of Vishal Traders at Ahmedabad and other cities where these banks are located. There is no conclusive proof with the Department exhibiting the fact that transactions in all other banks were also routed through the assessee or he has deposited the cheques received from the alleged purchaser, withdrew the cash on the selfcheque issued by Vishal trades and handed over these cheques to Shri Dharmendra Pandya. Therefore, we are of the view that commission income in the hands of the assessee is to be assessed qua the turnover available in Mehsana Nagrik Sahakari Bank Ltd. In Asstt.Year 2007-08 no transactions have been carried out in this bank account. Therefore, there should not be any addition in that year. We allow the appeal of the assessee and delete addition. As far as other two years are concerned, we find that transactions are there in the Mehsana Nagrik Sahakari Bank Ltd. Commission rate adopted by the AO at 2% is reasonable rate in this type of activity. The ld.CIT(A) ought to have not reduced it to 1%. Therefore, we allow both the appeals of the Revenue and hold that whatever turnover is to be confirmed, rate for estimating the commission income will be at 2% (two percent). For Asstt.Year 2008-09 and 2009-10 we direct the AO to take the turnover available in Mehsana Nagrik Sahakari Bank Ltd. i.e. turnover of ₹ 2,04,23,897/- in Asstt.Year 2008-09 and ₹ 37,48,108/- in Asstt.Year 2009-10. The total turnover is to be computed at ₹ 2,41,72,005/-. The income of the assessee from these activities is to be worked out at 2% (two percent) of this turnover. This income will be in addition to any other income disclosed by the assessee in both the years. The ld.counsel for the assessee has agreed for the rate of 2% (two percent) as well as estimation of income at 2% (two percent) of the alleged turnover in addition to the income disclosed by the assessee. We have specifically confronted the ld.counsel for the assessee to this effect and he did not raise any objection. In this way, all these appeals are allowed.
Issues Involved:
1. Legitimacy of commission income from Vishal Traders. 2. Validity of the assessment of commission income at a specific rate. 3. Calculation of turnover and estimation of commission income. 4. Dispute over the handling of transactions in various bank accounts. Analysis: Issue 1: Legitimacy of Commission Income from Vishal Traders The assessee was engaged in the business of supplying foodgrains on a commission basis and also acted as a canvassing agent. During a survey under section 133A of the Income Tax Act, it was revealed that Vishal Traders was issuing bogus bills. The assessee admitted to working as a commission agent for Vishal Traders, receiving cheques, depositing them, and withdrawing cash to hand over to Shri Madanlal L. Shah. The assessee did not dispute this modus operandi or the earning of commission income in this clandestine manner. Issue 2: Validity of the Assessment of Commission Income at a Specific Rate The Assessing Officer (AO) calculated the commission income at 2% of the total deposits made in the bank accounts of Vishal Traders, resulting in an addition of ?67,79,780/- for the Assessment Year (AY) 2008-09. The Commissioner of Income Tax (Appeals) [CIT(A)] reduced the estimation of income from 2% to 1% for AY 2008-09 and 2009-10 but confirmed the 2% rate for AY 2007-08. The assessee challenged the computation of turnover and the estimation of income, while the Department challenged the reduction of the rate from 2% to 1%. Issue 3: Calculation of Turnover and Estimation of Commission Income The AO tabulated the turnover of Vishal Traders from different bank accounts and concluded that the total deposits represented bogus sales. The CIT(A) confirmed the AO's findings but reduced the commission rate to 1% for AY 2008-09 and 2009-10. The Tribunal found that the assessee admitted to handling transactions only in the Mehsana Nagrik Sahakari Bank Ltd. and not in other banks. Therefore, the commission income should be assessed based on the turnover in the Mehsana Nagrik Sahakari Bank Ltd. for the relevant years. Issue 4: Dispute Over Handling of Transactions in Various Bank Accounts The assessee argued that he only handled transactions in the Mehsana Nagrik Sahakari Bank Ltd. and not in other banks. The CIT(A) and AO assumed the assessee's involvement in all transactions of Vishal Traders based on circumstantial evidence. However, the Tribunal found no conclusive proof that the assessee handled transactions in other banks and thus limited the assessment to the Mehsana Nagrik Sahakari Bank Ltd. account. Conclusion: The Tribunal concluded that the commission income should only be assessed based on the turnover in the Mehsana Nagrik Sahakari Bank Ltd. The rate of 2% for estimating the commission income was deemed reasonable. Consequently, the appeals of the Revenue were allowed, and the appeals of the assessee were allowed to the extent of limiting the turnover to the Mehsana Nagrik Sahakari Bank Ltd. account. The Tribunal directed the AO to compute the income at 2% of the turnover in this specific bank account for AY 2008-09 and 2009-10, amounting to ?2,04,23,897/- and ?37,48,108/- respectively. All appeals were allowed, and the order was pronounced on 15th March 2017 in Ahmedabad.
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