2018 (11) TMI 787 - AT - Income Tax

Rate of commission on the business of providing accommodation entry - assessee company is an entry provider - CIT(A) have applied 0.60% (60 paise to ₹ 1 per ₹ 100) on total credit entries appearing in the bank account - Held that - We are aware of the fact that in case of business of providing accommodation entry, there cannot be a single rate of commission and same vary from case to case and largely depends upon the quantum of entry. We deem just and proper to estimate the average commission @ 0.30% (30 paise to ₹ 1 per ₹ 100) on credit entries appearing in the bank account of the assessee. It is further noted that AO has made double addition to the extent that benefit of netting-off with respect to income already offered by the assessee in the return of income was not allowed. Accordingly, the AO is hereby directed to re-compute the income after allowing benefit of income already declared by the assessee in the return. Charging of interest u/s. 234B and initiating penalty proceedings u/s. 271(1)(c) - Held that - Charging of interest u/s. 234B is consequential in nature, hence, the AO is directed to re-compute the interest chargeable after giving effect of this order. As far as initiation of penalty proceedings u/s. 271(1)(c) is concerned, since no penalty under the said section has yet been levied there is no cause for any grievance on the part of the assessee. Hence, this ground is dismissed as such.

Summary

Issues Involved:
Appeal against orders by Ld. CIT(A) for assessment year 2013-14 regarding addition of commission income, estimation of commission rate, charging of interest under section 234B, and penalty proceedings under section 271(1)(c).

Analysis:

1. Addition of Commission Income:
The appeals were consolidated as the facts were identical. The AO made a lump sum addition of commission income without proper material, which the Ld. CIT(A) upheld. The appellant argued that the addition was based on presumption and guesswork, and the AO did not follow proper procedure. The Tribunal found the appellant to be a conduit company providing accommodation entries. The rate of commission was disputed, with the Tribunal estimating it at 0.30% instead of the 0.60% applied by the lower authorities.

2. Charging of Interest and Penalty Proceedings:
The AO charged interest under section 234B and initiated penalty proceedings under section 271(1)(c). The Tribunal directed the AO to re-compute the interest after adjusting for the revised income calculation. As no penalty had been levied, the ground regarding penalty proceedings was dismissed. The decision in this case was applied to six other similar appeals due to identical facts and findings.

3. Overall Decision:
The Tribunal partly allowed the appeals for statistical purposes, emphasizing the need for fair estimation of commission income and proper application of interest and penalty provisions. The decision was pronounced on 6th November 2018.