2021 (8) TMI 1192 - AT - Income Tax

Commission charged towards accommodation entries provided - CIT(A) restricting the quantum of commission at the rate of 0.6% based on the average of the past four years profits - HELD THAT - Estimation as made by CIT(A) was in accordance with average profits shown in earlier 4 years. Even if the transactions were sham transactions, the estimation, in our considered opinion, was to be on some rational basis. The basis as adopted by Ld. CIT(A) was more rational and plausible one. Therefore, no fault could be found in the said estimation. Estimation of income on contract receipts and commission income - CIT(A) has merely gone by the fact that the aforesaid receipts would be business income of the assessee keeping in view assessee s main objects - he has overlooked the fact that no estimation of income was made by Ld. AO against these transactions and the estimation was only with respect to sale purchase transactions. These items, as noted by Ld. AO, were separately credited to Profit Loss Account and hence, constitute separate stream of income for the assessee - a separate estimated income against these two items would certainly be required. We make the estimation @8% for both these streams of income.

Summary

Issues:
1. Estimation of commission income
2. Enhancement of value of transactions with a specific company
3. Addition of brokerage and commission income
4. Deletion of addition of brokerage and commission income
5. Deletion of addition of contractual income

Estimation of Commission Income:
The appeal by the revenue for Assessment Year 2010-11 involved disputes regarding the quantum of commission charged towards accommodation entries provided by the assessee. The Assessing Officer estimated the commission at 1%, but the CIT(A) restricted it to 0.6% based on the average of past profits. The Tribunal found the CIT(A)'s estimation rational and plausible, aligning with the average profits shown in previous years. The decision was upheld, stating that a rational basis for estimation was followed.

Enhancement of Value of Transactions:
The CIT(A) enhanced the value of transactions with a specific company, deviating from the Assessing Officer's estimation. The Tribunal noted discrepancies in the transactions and upheld the CIT(A)'s decision to enhance the value. The specific company's admitted transactions were higher than what was reflected by the assessee, leading to the enhancement.

Addition of Brokerage and Commission Income:
The Assessing Officer had added brokerage and commission income to the assessee's total income. However, the CIT(A) deleted this addition, stating that these receipts were already credited to the Profit & Loss Account. The Tribunal found that since these items constituted a separate stream of income, a separate estimated income against them was necessary. An estimation of 8% for both streams of income was directed, resulting in a re-computation of the assessee's income.

Deletion of Addition of Contractual Income:
The CIT(A) had deleted the addition of contractual income, considering it part of the main business income of the assessee. The Tribunal disagreed, stating that no estimation of income was made against these transactions by the Assessing Officer. The Tribunal directed a re-computation of the assessee's income, estimating 8% for both commission income and contractual income, leading to a partial allowance of the appeal.

This detailed analysis provides insights into the various issues addressed in the legal judgment, highlighting the Tribunal's findings and decisions on each matter.