2020 (12) TMI 1035 - AT - Income Tax

Benefit of telescoping the commission income with the income declared in the return - assessee had pleaded before the ld. CIT(A) by conceding and accepting that it earned commission income on bogus entries but further pleaded that the said commission income should have been restricted only to transactions with outside companies and not to transactions with group companies controlled by Shri Shirish C Shah - HELD THAT - In view of the decision of this Tribunal for A.Y.2011-12 where the benefit of telescoping is granted, we direct the ld. AO to allow telescoping of commission income against income declared in the books of accounts for all the assessment years. DR agreed that this issue already is decided in favour of the assessee. Increase in investment - HELD THAT - As assessee company vide its written submissions before the ld. CIT(A) had submitted that amount of increase in investment for the aforesaid two years had been wrongly computed by the ld. AO and there is no increase in investment at all. On the contrary, there is only decrease in investments. The assessee filed some chart before us to drive home the point that there is effectively only decrease in investments in both the years. In the interest of justice and fairplay, we deem it fit and appropriate that the aforesaid chart on investments filed by the assessee requires to be revisited by the ld AO and we deem it fit to remand this issue to the file of ld. AO for denovo adjudication

Summary

Issues involved:
Appeals against the order of the Commissioner of Income Tax (Appeals) regarding assessment u/s.143(3) r.w.s. 153C of the Income Tax Act, 1961 for multiple assessment years. Dispute over entitlement to benefit of telescoping commission income with declared income. Discrepancy in computation of commission income by the Assessing Officer. Rejection of benefit of telescoping by Commissioner of Income Tax (Appeals).

Detailed Analysis:

Issue 1: Entitlement to benefit of telescoping commission income with declared income
The assessee pressed ground Nos. 5 & 6 for A.Yrs. 2008-09 to 2013-14 and ground Nos. 4 & 5 for A.Y. 2014-15, seeking the benefit of telescoping commission income with the income declared in the return. The Assessing Officer added commission income based on certain observations. The Commissioner of Income Tax (Appeals) restricted the commission income computation to transactions with outside companies only, upholding the rate of commission at 1%. However, the Commissioner rejected the plea for telescoping, stating that income recognized in the books cannot automatically benefit from telescoping without establishing it's exclusively from commission income. The Tribunal, considering a similar case for A.Y.2011-12, allowed telescoping and granted relief to the assessee. The Tribunal directed the Assessing Officer to allow telescoping for all assessment years.

Issue 2: Discrepancy in computation of commission income
The Assessing Officer computed commission income based on certain transactions and observations. The Commissioner of Income Tax (Appeals) upheld the rate of commission but rejected the benefit of telescoping. The assessee argued vehemently against this rejection, providing detailed rebuttals to each observation made by the Commissioner. The Tribunal found merit in the assessee's arguments, especially considering the previous decision in a similar case, and directed the Assessing Officer to allow telescoping for all assessment years.

Issue 3: Dispute over increase in investments computation
For A.Y. 2013-14 and 2014-15, the Assessing Officer computed commission income based on the increase in investments. The assessee contended that there was no increase in investments but rather a decrease. Detailed charts were submitted to support this claim. The Tribunal, in the interest of justice, remanded this issue to the Assessing Officer for a fresh adjudication in accordance with the law.

Conclusion:
The Tribunal partly allowed the appeals for all years, granting the benefit of telescoping commission income with declared income and remanding the issue of investment computation for further review. The decision was pronounced on 18/12/2020.