2016 (10) TMI 538 - HC - Income Tax

Restricting addition of commission earned by assessee @1% by Tribunal as against 5% determined by CIT(A) - assessee was facilitating cash deposits and issuing DD/pay orders etc. - Held that - CIT(Appeals) came to the conclusion that cash did not belong to the assessee but he was merely a commission agent. Since this issue became final, the sole question before the Tribunal was what would be the appropriate rate of commission to be taxed in the hands of the assessee. It is true that the Tribunal has given rather brief reasons for reducing the rate of commission from 5% to 1%. However, in facts of the case, we would not remand the proceedings for insisting on proper reasons to be recorded by the Tribunal. When the question of judging possible commission that the assessee would have earned out of such activity, element of estimation always creeps in. No question of law therefore, arises.

Summary

Issues:
Government's appeal against the Tribunal's order on the commission earned by the assessee at a reduced rate.

Analysis:

Issue 1: Assessment of Commission Earned by the Assessee
The Government filed appeals challenging the Income Tax Appellate Tribunal's order concerning the commission earned by the assessee. The Assessing Officer initially treated cash payments as unaccounted cash credits, considering the entire amount as the assessee's income. However, the CIT(Appeals) concluded that the amount did not belong to the assessee but that the assessee acted as a commission agent. The CIT(Appeals) applied a profit rate of 5% on the turnover and added it to the assessee's income. The department did not appeal against the CIT(Appeals)' decision, accepting it. Subsequently, the Tribunal affirmed the CIT(Appeals)' view but reduced the commission rate to 1% from 5%, deeming 5% as excessive. This reduction prompted the present appeal by the Revenue.

Issue 2: Tribunal's Decision and Justification for Reducing Commission Rate
The Tribunal did not challenge the CIT(Appeals)' decision regarding the nature of the assessee's involvement in the cash transactions. The CIT(Appeals) had determined that the cash did not belong to the assessee but that the assessee acted as a commission agent. Given this conclusion, the Tribunal's task was to determine the appropriate commission rate to be taxed. Although the Tribunal's reasoning for reducing the rate from 5% to 1% was brief, the High Court declined to remand the case for a more detailed rationale. The Court noted that estimating the commission earned involves an element of judgment, and in this context, no legal question arose. Therefore, the Court dismissed the tax appeals, upholding the Tribunal's decision on the commission rate.

In conclusion, the High Court upheld the Tribunal's decision to reduce the commission rate earned by the assessee, emphasizing that the CIT(Appeals)' finding on the nature of the assessee's involvement was crucial. The Court found no legal issue in the Tribunal's estimation of the commission rate, as it involved an element of judgment. The dismissal of the tax appeals signifies the acceptance of the reduced commission rate determined by the Tribunal.