2021 (12) TMI 501 - AT - Income Tax

Determination of income - determining the commission income - Addition on the basis of rough notings in seized papers - HELD THAT - Since the Tribunal has taken a view in the other entities cases to that of present assessee s case, in present appeal also the commission has to be determined at 0.50% as the assessee herein also is part of Tarun Goyal Group as there is no material brought on record by the DR as to the grounds raised in Revenue s appeal. Thus, the issue is identical in the present assessee s case as well and no distinguishing facts were pointed out by the Ld. DR at the time of hearing. Hence, appeal of the assessee is allowed.

Summary

Issues:
Appeal against CIT(A) order upholding determination of commission income, rate of commission calculation, consideration of transfer entries between group companies, reliance on rough notings for commission rate, comparison with other cases in the group, legality of orders passed by AO and CIT(A).

Analysis:

1. Upholding of Commission Income Determination:
The appeal was filed against the CIT(A) order upholding the determination of commission income at ?53,91,000, which was higher than the original assessment. The appellant argued that the Hon'ble ITAT had set aside the original order and the commission income should not have been increased in the remand proceedings. The Assessing Officer had calculated the commission income at 2.25% based on debit entries, including transfer entries to other group companies. However, the appellant contended that these transfer entries were not considered in the original assessment and should have been excluded as per the directions of the ITAT.

2. Rate of Commission Calculation:
The CIT(A) upheld the commission income calculated at 2.25%, disregarding the directions of the ITAT to consider precedence in determining the rate. The appellant argued that the rate should have been determined based on the evidence submitted before the AO and CIT(A), considering the precedence available in similar cases within the group. The issue of relying on rough notings in seized papers for the commission rate calculation was also raised, with the appellant contending that these notings were not specific to commission rates and should not have been relied upon.

3. Consideration of Transfer Entries Between Group Companies:
The appellant highlighted that the CIT(A) erred in upholding the determination of commission income without excluding transfer entries between group companies, which were not considered in the original assessment. The appellant argued that these entries should have been excluded based on the ITAT's directions in a previous order.

4. Comparison with Other Cases in the Group:
The appellant pointed out that in other cases within the group, the AO had determined commission income at a lower rate of 2% in remand proceedings, as opposed to the 2.25% determined in the original assessment. This discrepancy in treatment within the group raised concerns about the consistency and fairness of the assessments.

5. Legality of Orders Passed by AO and CIT(A):
Lastly, the appellant challenged the legality of the orders passed by the AO and CIT(A), arguing that they were bad in law and should be quashed. The appellant sought relief based on the decisions of the ITAT and the High Court in similar cases within the group, where a lower rate of commission was upheld.

In conclusion, the ITAT allowed the appeal of the assessee, holding that the commission should be determined at 0.50% based on the decisions in other cases within the group. The Tribunal emphasized the need for consistency and fairness in determining commission income in such cases and dismissed the arguments raised by the Revenue. The judgment highlighted the importance of considering precedence and factual specifics in determining commission rates for accommodation entries provided by entities within a group.