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2018 (3) TMI 667 - AT - Income TaxDisallowance of commission expenses - income from providing accommodation entries - Weightage rate of commission - Held that - CIT(A) has restricted the rate of commission at 2% on the basis of his own knowledge without supporting any documentary evidences or relying on any documentary evidences found during the course of search. This is evident from his finding that no set formula or fixed rate of commission in the business activity of providing accommodation entry was prevalent and it was on the basis of need and practice prevalent in the market . CIT(A) has also not considered the objections of the assessee in respect of the weightage rate of commission of 5.67% computed by the AO. In view of the facts the objections of the assessee that commission expenses were paid for getting purchase bills etc. need to be considered in the light of the documents seized from its premises. We feel it appropriate to restore the issue in dispute to the file of the Commissioner of Income-tax (Appeals) for deciding it afresh - Decided in favour of revenue for statistical purposes.
Issues Involved:
1. Reduction of commission income rate from 5.67% to 2% by the Commissioner of Income Tax (Appeals). 2. Confirmation of addition to the returned income based on estimated commission income. 3. Non-provision for expenses incurred for arranging accommodation entries. 4. Non-reduction of returned income from the estimated addition made by the Assessing Officer. Issue-wise Detailed Analysis: 1. Reduction of Commission Income Rate: The primary issue raised by the Revenue was the reduction of the commission rate from 5.67% to 2% by the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) observed that the assessee did not provide any evidence to support its claim of a lower commission rate of 0.25% to 0.50%. The CIT(A) concluded that the rate of commission prevalent in the market for such activities was around 2%, which was considered reasonable. The Revenue argued that this reduction was not justified as the Assessing Officer (AO) had computed the commission rate based on seized documents indicating a weighted average rate of 5.67%. 2. Confirmation of Addition to Returned Income: The assessee contested the confirmation of an addition of ?40,66,051 to the returned income based on an estimated commission income of 2%. The assessee argued that there was no material on record to support such a higher estimation. The AO had applied a commission rate of 5.67% based on seized documents, while the assessee claimed the rate varied from 0.25% to 0.50%. The CIT(A) eventually restricted the commission rate to 2% and directed the AO to compute the commission accordingly. 3. Non-Provision for Expenses: The assessee contended that the authorities failed to provide for expenses incurred for arranging accommodation entries, such as corresponding purchases. The CIT(A) allowed establishment expenses at the rate of 0.5% but did not consider other expenses claimed by the assessee. The Tribunal noted that the objections regarding commission expenses paid for purchase bills needed to be considered in light of the seized documents. 4. Non-Reduction of Returned Income: The assessee argued that the authorities did not reduce the returned income from the estimated addition made by the AO. The assessee had already declared income in the return, which was not considered while estimating the commission income. The Tribunal acknowledged this contention and highlighted the need for the CIT(A) to consider the declared income in the final computation. Conclusion: The Tribunal found that the CIT(A) had restricted the commission rate to 2% based on personal knowledge without supporting documentary evidence. The Tribunal emphasized the need to consider the objections raised by the assessee and the seized documents. Consequently, the Tribunal restored the issue to the CIT(A) for a fresh decision in accordance with the law, allowing the Revenue's appeal for statistical purposes and dismissing the assessee's cross-objection as infructuous. This decision applied to both assessment years 2008-09 and 2009-10.
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