2022 (10) TMI 475 - AT - Income Tax

Commission for providing accommodation entries - Rate of commission - addition has been made in the hands of assessee on protective basis, whereas, substantive addition has been made in the case of Bhanwarlal Jain Group - HELD THAT - Substantive addition confirmed in the hands of Bhanwarlal Jain Group would ipso facto make protective addition unsustainable. Merely for the reason that the rate of commission determined by the Tribunal at lower rate is not acceptable to Revenue would not give the Revenue key for protracted litigation in the case of assessee wherein the additions were made only on protective basis. A perusal of the impugned order clearly shows that the intention of the Revenue is to keep the issue alive, although on merits the additions in the hands of assessee does not survive. Assessee appeal allowed.

Summary

Issues involved: Addition of undisclosed commission income on protective basis in assessment years 2008-09 and 2009-10.

Analysis:
1. Addition of undisclosed commission income: The appeals were against the order of the Commissioner of Income Tax (Appeals) regarding the addition of undisclosed commission income on a protective basis. The representative for the assessee argued that since the Tribunal had confirmed the substantive addition in the hands of another group, the protective addition in the assessee's hands should be deleted. On the contrary, the Department's representative defended the addition, stating that while the Tribunal upheld the addition in the other group's case, it reduced the rate of commission, leading to an appeal by the Department. The Department contended that the addition in the assessee's case should be limited to the difference between the Tribunal's confirmed addition and the percentage of commission applied by the Assessing Officer. The Tribunal confirmed the addition on commission for providing accommodation entries in the other group's case, with specific rates for different transactions. The Tribunal found that since the substantive addition in the other group's case would render the protective addition in the assessee's case unsustainable, keeping the issue alive for the Revenue's benefit was not justified. Consequently, the Tribunal allowed the assessee's appeal for the respective assessment years, setting aside the impugned order.

2. Rate of commission determination: The Tribunal's decision on the rate of commission for various transactions in the other group's case played a significant role in the arguments presented by both parties. The Department's disagreement with the Tribunal's determination of lower commission rates led to the appeal before the High Court. The Tribunal's detailed tabulation of the rates for different transactions underscored the importance of the rate of commission in the overall dispute. The Tribunal's observation that the intention of the Revenue was to prolong the litigation by keeping the issue alive, despite the lack of merit in the additions made in the assessee's case, highlighted the strategic aspect of the dispute resolution. Ultimately, the Tribunal's analysis of the rate of commission and its impact on the overall addition of undisclosed income was crucial in deciding the fate of the appeals.

3. Decision and outcome: After hearing both sides and examining the orders of the authorities below, the Tribunal concluded that the sole issue revolved around the addition of commission for providing accommodation entries. The Tribunal's finding that the substantive addition in the other group's case invalidated the protective addition in the assessee's case formed the basis for allowing the assessee's appeal. By setting aside the impugned order and allowing the appeals for the assessment years in question, the Tribunal provided a clear decision on the matter, emphasizing the lack of merit in sustaining the additions in the assessee's hands. The detailed analysis of the rate of commission, the Tribunal's observations on the Revenue's intentions, and the ultimate decision to allow the appeals showcased a comprehensive approach to resolving the issues raised in the appeals.