2017 (5) TMI 725 - AT - Income Tax

Search u/s 132 - undisclosed commission income - clandestine activities / accommodation entries - Held that - There is a finding supported by document seized during the searches conducted by Revenue u/s 132(1) wherein it is mentioned that commission ranging from 1.5%- 2.45% on transaction value is paid on accommodation entries . The assessee has admitted to be involved in these clandestine activities. The assessee may be a part of the chain of persons who are beneficiary of these clandestine activities but since the document is seized from the assessee, the assessee has to demonstrate that the entire income as is reflected in the seized document marked as 101 is brought to tax albeit in the hands of other persons who were part of common conspiracy in these clandestine activities and the entire income suffered taxation. No such cogent material and evidences has been brought on record by the assessee. Mere statement recorded of Sh. Tejas J Shah u/s 131 is not sufficient as it is merely material obtained during search, while the document seized during the search speaks loudly of commission to the tune of 1.5% to 2.45% being paid on these accommodation entries. In-any case , learned CIT(A) has factored for expenses to be allowed for meeting various expenses which are likely to had been incurred by the assessee in undertaking these clandestine activities of being facilitator of accommodation entries. We donot find any infirmity in the appellate order of the learned CIT(A) which we are inclined to affirm/sustain. The assessee fails in this appeal.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of the search warrant issued under Section 132(1) of the Income Tax Act.
3. Estimation of undisclosed commission income.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee's appeal was delayed by 167 days due to serious medical illness of his father. The assessee provided an affidavit and medical records as evidence. The Tribunal, considering the genuine and bona fide reasons, condoned the delay and admitted the appeals for adjudication on merits.

2. Validity of the Search Warrant:
The assessee did not press this ground during the hearing. Consequently, the Tribunal dismissed this ground as not pressed.

3. Estimation of Undisclosed Commission Income:
The assessee, a Chartered Accountant, was searched under Section 132 of the Income Tax Act. During the search, the assessee admitted to receiving cash and providing RTGS/cheque entries in the guise of share capital and share premium from fictitious companies. The assessee claimed to have earned a commission of 0.1% for these transactions. However, seized documents indicated a commission ranging from 1.5% to 2.45%.

The Assessing Officer (AO) issued a show-cause notice proposing an average commission rate of 2% on the transaction value. The assessee contested this, arguing that his commission was only 0.1% and that the higher rates represented gross brokerage shared among multiple brokers.

The AO rejected the assessee's contention due to a lack of documentary evidence and added an income of ?17,41,600 based on a 2% commission rate. The Commissioner of Income Tax (Appeals) [CIT(A)] reduced the commission rate to 1%, considering the expenses incurred by the assessee and the market trend in such transactions.

The Tribunal upheld the CIT(A)'s decision, noting that the assessee admitted to being part of the chain facilitating accommodation entries and that the seized documents supported the commission rates between 1.5% and 2.45%. The Tribunal emphasized the need to discourage such clandestine activities that harm the economy and upheld the addition of commission income at 1% of the transaction value.

Conclusion:
The Tribunal dismissed the appeals for the assessment years 2009-10, 2010-11, and 2011-12, affirming the CIT(A)'s order to estimate the undisclosed commission income at 1% of the transaction value.

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