2021 (4) TMI 538 - AT - Income Tax

Undisclosed income - Voluntary disclosure of the assessee about the undisclosed income - year of taxability - assessee has made disclosure on his individual capacity and stated that transactions of payment of cash and making such investment was made by him in the financial year 2009-10 relevant to the Asstt.Year 2010-11, and therefore, the assessee had rightly included the said disclosure amount in the return for the Asstt.Year 2010-11, which was as per the statement made under section 132(4) - HELD THAT - Except voluntary disclosure of the assessee about the undisclosed income, there is nothing with the department to establish that the undisclosed income declared by the assessee pertained to the year 2009-10. CIT(A) recorded a finding that enquires have been conducted in the case of only seven companies, which together contributed a share capital of ₹ 12 crores and the AO straight away assumed and concluded that entire share capital of ₹ 20.50 crores subscribed by 16 entities has been provided by the appellant; and even amongst the seven companies in respect of TPL Finance, the AO has found cash deposit of ₹ 50.00 lakhs whereas the company has subscribed to an amount of ₹ 3.00 crores, but no inquiry has been conducted by the AO about the balance amount of ₹ 2.50 crores; nor any statement of the directors/principal officers of this company was record. This being the factual position, the action of the AO is highly disputable and no merit to stand. The basis for the impugned addition is merely the statement of the assessee and nothing else. The mere investment in the share capital made in the Asstt.Year 2009-10, ipso facto does not suggest that the assessee had income in that year, in the absence of any concrete material evidence to prove accordingly. Even otherwise also ultimately the impugned amount has suffered tax in the Asstt.Year 2010-11 and even the AO has not given credit of amount of taxation in the Asstt.Year 2010-11, while assessing the amount in the Asstt.Year 2009-10, it amounts to double taxation. Considering all these aspects, and after going through the well reasoned order of the ld.CIT(A) on this issue, we do not find any merit in the ground of appeal of the Revenue challenging deletion of addition Addition on account of brokerage and commission income earned from undisclosed income - HELD THAT - After going through the record, we find that the impugned brokerage and commission income was allegedly incurred by the assessee on the undisclosed income of ₹ 20.50 crores. However, since the said undisclosed income disclosed by the assessee has been deleted by the ld.CIT(A) and confirmed by the ITAT as per the discussion hereinabove, the impugned addition of ₹ 41.00 lakhs for the Asstt.Year 2009-10 has no leg to stand, and the same is accordingly cancelled. This ground of appeal of the Revenue is dismissed. Addition on account of brokerage expenses incurred by the assessee for introduction of share capital/premium - assessee alternatively pleaded that instead of 1% as estimated by the ld.CIT(A), a reasonable rate of brokerage be restricted to 0.5%. - .AO has made addition of ₹ 41.00 lakhs assuming that the assessee has incurred expenditure of 2% to 4% for the purpose of obtaining entry of introduction of share capital - HELD THAT - We find that both the authorities below calculated the brokerage commission on some assumption without any basis. It may be noted that no incriminating material was found during the course of search pertaining to brokerage stated to be paid by the assessee. The authorities below mentioned in their impugned order that as per the prevailing market practice, the range of commission/brokerage would be in the range of 2% to 4%, but there is no such instance mentioned at the end of the authorities to corroborate the same. The only material with the Revenue authorities is that of the statement of entry operators confirming that they have received brokerage/commission at the rate of 0.25% to 0.5% from the assessee, which fact has not been doubted by the authorities. Though the ld.CIT(A) has to some extent justified to restrict the impugned disallowance, but he has not given due weightage to the only evidence available on record in form of statement of entry operators has not been considered logically. Therefore, we incline to give further relief to the assessee by restricting addition at 0.5% of the share capital/premium introduced by the assessee. Accordingly, impugned addition is hereby restricted to 0.5% i.e. assessee would get further relief of ₹ 10,50,000/-, in other words, addition now stand confirmed at ₹ 10,50,000/-

Issues Involved:
1. Delay in filing the appeal by the assessee.
2. Assessment of undisclosed income for the assessment years 2009-10 and 2010-11.
3. Estimation of commission/brokerage expenses for arranging accommodation entries.

Detailed Analysis:

1. Delay in Filing the Appeal by the Assessee:
The assessee's appeal was delayed by 40 days. The delay was attributed to the assessee undergoing coronary artery bypass surgery shortly after receiving the order. The Tribunal, after reviewing the affidavit and medical certificate, was satisfied with the explanation and condoned the delay, allowing the appeal to be heard on its merits.

2. Assessment of Undisclosed Income:
The case involved a search under section 132 of the Income Tax Act, 1961, in the B.R. Metal group, where the assessee, a director, was found to have undisclosed income. A notice under section 153A was issued, and the assessee filed returns for the assessment years 2009-10 and 2010-11. The main issue was the introduction of fresh share capital in M/s. B.R. Metal & Alloys P. Ltd. at a premium, which the assessee admitted as undisclosed income. The AO assessed this income in the assessment year 2009-10, while the assessee declared it in the assessment year 2010-11.

The CIT(A) deleted the addition for the assessment year 2009-10, holding that the income was already offered for taxation in the assessment year 2010-11, and taxes were paid. The Tribunal upheld this decision, emphasizing that the AO cannot selectively accept parts of the assessee's statement. The Tribunal found no concrete evidence from the AO to prove that the undisclosed income pertained to the assessment year 2009-10. The Tribunal also noted that taxing the same amount in both years would result in double taxation.

3. Estimation of Commission/Brokerage Expenses:
The AO estimated a commission of 2% for arranging accommodation entries, which was reduced to 1% by the CIT(A). The assessee argued that the commission should be 0.5%, as stated by the entry operators. The Tribunal found that the authorities estimated the commission without any concrete basis and noted that the only evidence available was the statement of entry operators confirming a commission rate of 0.25% to 0.5%. Consequently, the Tribunal restricted the addition to 0.5% of the share capital/premium introduced by the assessee, providing further relief to the assessee.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal, confirming the addition at 0.5% of the share capital/premium introduced. The order was pronounced on 12th April 2021 at Ahmedabad.

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