2022 (9) TMI 1372 - AT - Income Tax

Bogus Short Term Capital Gain on sale of land - HELD THAT - Remand Report received from the AO simply confirmed about the payments made by the assessee to the land owners as well as third parties by the assessee. AO has not taken any steps to verify the above details either from the 5 land owners or the remaining 10 third parties it is being suffered taxed in the respective hands. AO attempted to tax the entire consideration in the hands of the assessee, which is negativated by the CIT(A) after considering the facts in detail. Therefore we do not find any infirmity in the findings of the ld. CIT(A) that the assessee is an entry provider only and was involved in accommodation entry business and has been rightly taxed at 0.5% for commission income on the deposits in the bank account which includes the sale consideration and directed to delete the above addition on account of business income. Thus the Grounds raised by the Revenue devoid of merits and the same is hereby rejected. Appeal filed by the Revenue is hereby dismissed.

Issues involved:
1. Interpretation of tax laws regarding the nature of income from sale proceeds of land.
2. Assessment of business income and commission charges in the context of accommodation entries.
3. Evaluation of the findings of the Assessing Officer and the Commissioner of Income Tax (Appeals).
4. Determination of tax liability and double taxation concerns.

Issue 1: Interpretation of tax laws regarding the nature of income from sale proceeds of land

The appeal involved a dispute over the tax treatment of the consideration received by the assessee as a Confirming Party in a land transaction. The Revenue contended that the sum should be taxed as revenue receipt due to the nature of the transaction. The Ld. CIT/DR supported this view, emphasizing the business income aspect. In contrast, the Ld. Counsel for the assessee argued that the consideration had already been offered as revenue income and subjected to tax as commission charges. The Ld. A.R. presented evidence from the sales ledger and other accounts to support the assessee's position. The Tribunal observed that the amount in question had been accounted for as income and taxed accordingly, rejecting the Revenue's claim for double taxation.

Issue 2: Assessment of business income and commission charges in the context of accommodation entries

The case involved an assessment of the assessee's business activities related to providing accommodation entries. The Assessing Officer had determined a commission income of 0.5% on certain bank transactions, including a specific sum received from M/s. Atmiya Developers Pvt. Ltd. The assessee contended that this amount was part of the overall business income and should not be subject to additional taxation. The Ld. CIT(A) reviewed the details and concluded that the assessee's role was that of an entry provider, justifying the deletion of the addition on account of business income. The Tribunal upheld this decision, emphasizing that the assessee's income had been appropriately taxed at the commission rate, and there was no justification for further taxation.

Issue 3: Evaluation of the findings of the Assessing Officer and the Commissioner of Income Tax (Appeals)

The appellate proceedings involved a detailed examination of the Assessing Officer's assessment and the subsequent decision of the Ld. CIT(A). The Ld. A.O.'s remand report highlighted certain statements made by the director of the assessee company regarding the nature of the transactions. The Ld. CIT(A) considered these statements, along with other submissions, and concluded that the assessee's activities aligned with being an entry provider. The Tribunal reviewed these findings and determined that the deletion of the addition on account of business income was justified based on the evidence and explanations provided during the proceedings.

Issue 4: Determination of tax liability and double taxation concerns

One of the key aspects of the case was the concern raised by the Revenue regarding potential double taxation of the sum received by the assessee. The Tribunal carefully analyzed the transactions, the nature of income, and the tax treatment applied. It was established that the amount in question had been appropriately accounted for and taxed as commission income. The Tribunal dismissed the Revenue's claim for additional taxation, emphasizing that the assessee had fulfilled its tax obligations concerning the sum received and that subjecting it to further taxation would amount to double taxation, which was not warranted.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, affirming the decision of the Ld. CIT(A) regarding the tax treatment of the income received by the assessee. The judgment underscored the importance of accurate tax assessment, avoidance of double taxation, and the need for thorough evaluation of business activities in compliance with tax laws.

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