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2012 (9) TMI 326 - AT - Income TaxTreatment of TDS amount as actual income of the assessee company - Addition by applying 4% commission on debit and credit entries - the assessee did not conduct land development work for M/s. PACL India Ltd. and PGF Ltd. - CIT deleted the additions - Held that - It is an established proposition of law that result of past years under similar facts is the best guidance for estimating the income, thus under these circumstances the CIT(A) was justified to take assistance of the immediately previous assessment year to estimate the profit of the assessee. There is no dispute that in the assessment year 2007-08 on identical issue arose wherein CIT(A) has deleted the addition made in respect of TDS amount and addition made on account of commission has been restricted to 2.24% of the gross receipt shown in the profit and loss account from M/s. PACL India Ltd. and others. As the revenue has not questioned the first appellate order for the assessment year 2007-08 on an identical issue under similar facts before the Tribunal, thus the CIT(A) has rightly deleted the addition made on account of TDS treating the amount claimed from M/s. PACL India Ltd. and PGF Ltd. as real income of assessee and in restricting the addition made on account of 4% commission on debit and credit entries regarding providing accommodation entries to the said companies to 2.24% of the gross receipt shown in the profit and loss account keeping in view the precedent of last assessment year 2007-08 under similar facts which remained unquestioned by the revenue - in favour of assessee.
Issues:
1. Computation of income based on net rate of 2.24% on gross receipts from specific companies. 2. Deletion of addition made on account of 4% commission on debit and credit entries. 3. Deletion of addition made in respect of TDS amount claimed from specific companies. Analysis: Issue 1: Computation of income based on net rate of 2.24% on gross receipts The revenue challenged the first appellate order, arguing that the CIT(A) erred in directing the Assessing Officer (AO) to compute the income by applying a net rate of 2.24% on gross receipts from specific companies for land development work. The AO had added an amount as commission and questioned the claim of the assessee regarding land development work. However, the CIT(A) referred to past assessments and reduced/deleted the additions based on precedents set in similar cases within the group companies. The Tribunal upheld the CIT(A)'s decision, emphasizing that past years' results under similar circumstances provide the best guidance for estimating income. The Tribunal noted that the CIT(A) rightly considered the precedent of the previous assessment year and upheld the deletion of the addition based on the net rate of 2.24% on gross receipts. Issue 2: Deletion of addition made on account of 4% commission The AO had added an amount as commission on debit and credit entries, suspecting them to be accommodation entries. However, the CIT(A) reduced/deleted this addition by referring to past assessments and similar cases within the group companies. The Tribunal supported the CIT(A)'s decision, stating that the CIT(A) rightly restricted the addition to 2.24% of the gross receipts shown in the profit and loss account from the specific companies, based on past precedents and similar facts from the assessment year 2007-08. Issue 3: Deletion of addition made in respect of TDS amount claimed The AO added an amount regarding TDS claimed from specific companies as the real income of the assessee, alleging non-repayment of TDS amounts. However, the CIT(A) reduced/deleted this addition by considering past assessments and similar cases within the group companies. The Tribunal upheld the CIT(A)'s decision, stating that the CIT(A) rightly deleted the addition made on account of TDS, treating the claimed amount as the real income of the assessee based on precedents from the assessment year 2007-08. In conclusion, the Tribunal dismissed the appeals, upholding the first appellate order based on past precedents and the application of net rates on gross receipts, leading to the deletion or reduction of additions made by the AO. The decision highlighted the importance of consistency and precedent in estimating income under similar circumstances.
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