2019 (1) TMI 1266 - AT - Income Tax

Computations of profit - reasonable rate of profit/commission in such clandestine activities - Notings found in the loose sheets - reliance on statement recorded under oath u/s 132(4) - Held that - As decided in CBI Vs. V.S. Shukla 1998 (3) TMI 675 - SUPREME COURT Notings found in the loose sheets would not do any good to the Revenue. The assessee has claimed 25 paise or 0.25% on the strength of the statement of kingpin Shri Tarun Goyal, who in his statement recorded under oath u/s 132(4) of the Income tax Act, 1961 has categorically stated that the rate of commission charged on accommodation entries provided through various companies was 0.25%. The statement of Shri Tarun Goyal recorded u/s 132(4) of the Act can be a good piece of evidence in the case of Shri Tarun Goyal only. The assessee also relied heavily on various decisions of the co-ordinate bench wherein the Tribunal has adopted rate ranging from 0.15 paise to 0.50 paise i.e 0.15% to 0.50%. In such illegal activities, there cannot be any precedence and the rate varies from facts of each case. To put an end to the litigation and in the interest of justice and fair play, in our considered opinion, 0.50 paise or 0.50% should be taken as the reasonable rate of profit/commission in such clandestine activities. We, accordingly, direct the Assessing Officers to adopt 0.50% or 0.50 paise and compute the profit accordingly. We are of the opinion that there cannot be any profit element in intra-group transactions. Direct the AO to consider the transactions with outside parties only and then compute the profit. Thus, the common ground in the case of the appellants is partly allowed.

Summary

Issues:
Multiple appeals against separate orders for different Assessment Years involving determination of rate of commission in clandestine activities and charging of interest under relevant provisions of the law.

Analysis:
The appeals were filed against the orders of the first appellate authority for respective Assessment Years. The facts in issue were deemed identical across all appeals, leading to the consideration of only one appeal for argument purposes. The Tribunal decided to dispose of all appeals through a common order for convenience. The appeals were divided into those against Assessing Officers in Delhi Charges and Noida Charge, with differing rounds of litigation. The Tribunal had previously directed the Assessing Officer to reconsider the rate of commission based on the material and precedence. The Assessing Officers adopted varying rates of commission based on rough notings, leading to a dispute over the alleged commission earned from providing accommodation entries.

The Tribunal acknowledged the appellants' engagement in illegal activities of providing accommodation entries and emphasized the lack of precedence in such cases. Despite loose sheets indicating commission rates, their evidentiary value was questioned. The Tribunal cited the Hon'ble Supreme Court's stance on the trustworthiness of entries in determining liability. The Tribunal also considered the statement of a key individual regarding the commission rate charged for accommodation entries. Relying on previous decisions, the Tribunal determined 0.50% as a reasonable rate of profit/commission in such clandestine activities.

Furthermore, the Tribunal directed the Assessing Officers to exclude profit elements in intra-group transactions and compute profits only from transactions with outside parties. The appeals were partly allowed on common grounds, and the Assessing Officer was instructed to charge interest under relevant provisions of the law. In conclusion, all the appeals were disposed of, and the order was pronounced on 23.01.2019.