2018 (9) TMI 419 - AT - Income Tax

Assessment u/s 153A - AO estimated commission on the basis of statement of the assessee wherein it was stated that the commission received was Re. 1 per kg - Held that - There is no material determining the commission at Re. 1 per kg., particularly when the assessee has explained the basis of the figure of 0. 50 paise per kg which has not been shown to be incorrect and is also higher than admitted to have been paid by Shri Pawan Dua. A surrender was made by the assessee vide letter dated 24. 6. 2014 on the basis of the entire seized documents and the statement was recorded to said effect u/s 132(4). The amount as surrendered by the assessee stands duly offered and assessed to tax. There is no retraction to the said extent. Accept the claim that in absence of any material or evidence to reject the basis given by the assessee of 0.50 paisa per kg, the addition made by adopting the commission rate of Re. 1 per kg. is untenable and, therefore, liable to be deleted. Violation of principles of natural justice - Addition on account of commission income from MCX dabba trading - Not allowing the assessee to cross examine the witness - Held that - Not allowing the assessee to cross examine the witness by the adjudicating authority, though statements of those witnesses were made the basis of the impugned order, amounted to a serious lapse which makes the order a nullity as it amounted to violation of principles of natural justice. Also in the case of Kishanichand Chellaram v. CIT 1980 (9) TMI 3 - SUPREME COURT it was held that any material collected at the back of the assessee and the assessee not being confronted with the same and no opportunity having been given the assessee to cross-examine, such material cannot be relied upon against the assessee. Addition to be deleted - Decided in favour of assessee Addition on account of unexplained receipts in respect of commission received from Sh. Sushil Kumar - Held that - Income from commission from MCX trading has been declared and assessed separately and having so done, in our opinion there is no material to independently tax the figure of ₹ 10 lacs. There is no material brought on record to state that this sum ₹ 10 lacs was received over and above the figure of commission of MCX trading separately estimated by the revenue. This estimation is done on the basis of pages 1 to 10, 13 and 15 of Annexure A-27 (Exhibit 5 from Flat 1-B Pocket-A, Near Satyawati College, Ashok Vihar, New Delhi and statement of Sh. Sushi Kumar recorded u/s 132(4) of the Act. It is noted that that the assessee, on the said basis and documents, had estimated the commission from MCX trading. Thus, once the said documents have already been considered as part of the estimation of commission, no separate addition is called for. - Decided in favour of assessee

Summary

Issues Involved:
1. Addition of commission income from trading of metals.
2. Addition of commission income from MCX Dabba trading.
3. Addition on account of unexplained receipts of ?10 lacs in respect of commission received.

Detailed Analysis:

1. Addition of Commission Income from Trading of Metals:
The assessee filed the original return of income for AY 2013-14 declaring an income of ?2,20,815. A search and seizure action revealed unaccounted sale and purchase of non-ferrous metals, leading to a notice under section 153A. The assessee declared additional income under "business or profession" in the return filed under section 153A. The Assessing Officer (AO) noted the assessee's involvement in out-of-books transactions and estimated commission income at ?1 per kg, resulting in an addition of ?12,50,356. The CIT (Appeals) upheld this addition based on the assessee's statement. However, the Tribunal found that the assessee had provided a detailed calculation showing a commission rate of 0.50 paise per kg, which was higher than the rate admitted by the payer of the commission. The Tribunal concluded that the addition based on ?1 per kg was untenable and deleted the addition, accepting the assessee's estimation of 0.50 paise per kg.

2. Addition of Commission Income from MCX Dabba Trading:
For the same assessment year, the AO determined commission income from MCX Dabba trading at ?30,00,000 based on a statement from one Shri Gagan Arora, who claimed the commission rate was ?2000 per crore of trade value. The CIT (Appeals) reduced this to ?1500 per crore, resulting in an addition of ?15,00,000. The Tribunal noted that the statement of Shri Gagan Arora was not subject to cross-examination, making it inadmissible. Citing precedents, the Tribunal held that any material collected at the back of the assessee without an opportunity for cross-examination could not be used against the assessee. Consequently, the addition was deleted.

3. Addition on Account of Unexplained Receipts of ?10 Lacs:
For AY 2014-15, the CIT (Appeals) sustained an addition of ?10 lacs based on a statement from Shri Sushil Kumar. The assessee argued that this addition was unwarranted as the commission from MCX trading had already been estimated and taxed. The Tribunal agreed, noting that the statement of Shri Sushil Kumar was recorded without the assessee's opportunity for cross-examination, and no material evidence supported the addition. The Tribunal concluded that the ?10 lacs was not over and above the estimated commission from MCX trading and deleted the addition.

Conclusion:
The Tribunal allowed the appeals for AY 2013-14, 2014-15, and 2015-16, deleting the additions related to the commission income from trading of metals, MCX Dabba trading, and unexplained receipts of ?10 lacs. The judgment emphasized the importance of cross-examination and material evidence in sustaining additions.