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2023 (1) TMI 627 - AT - Income TaxReopening of assessment u/s 147 - assessee had taken specific ground that it had not received any notice and the notice u/s 148 of the Act was served upon its Chartered Accountant and not upon the assessee - HELD THAT - We find that the original assessment was framed u/s 143(3) of the Act when a pointed query regarding objection that no notice u/s 148 of the Act was served upon the assessee, was raised by him. Assessee could not point out to any evidence regarding the assessment being framed u/s 147 of the Act except the contents of the Remand Report filed before Ld.CIT(A) - The material placed before us, does not support the claim that the assessment was re-opened under the provision of section 147 of the Act. Even there is no such fact is recorded by the AO in the body of the assessment order. Moreover, the Revenue has also not placed any such material before us. Therefore, Ground raised by the assessee are dismissed since they are not backed by any material evidence. Addition representing 5% of the assessed income of the wife of the assessee without appreciating that no income of the wife could be added in the hands of the assessee - rate of commission applied by the authority below - HELD THAT - So far the decision of CIT(A) for applying 5% of the total addition as income of the assessee is backed by binding precedents. CIT DR could not controvert the finding of Ld.CIT(A) by bringing any other binding precedents to our notice. Therefore, the decision of CIT(A) for estimating commission income cannot be faulted. However, under the identical facts, the Co-ordinate Bench of the Tribunal in various decisions, has taken the rate of earning of commission varying from 0.55% to 1.25%. Therefore, looking to the facts of the present case, it would sub-serve the interest of justice if the rate of earning of commission is adopted at the rate prevalent in the same line of business. Therefore, the addition is restricted to 1.25 % of the total amount. Disallowance of expenditure incurred claimed by the assessee on surmises, conjecture and suspicion - assessee submitted that CIT(A) was justified in granting part relief as the expenditure was incurred for business purposes. The entire expenditure should have been allowed by Ld.CIT(A) - HELD THAT - No details as to number of the companies or operations of the companies are emerging from either the order of assessment or other material on record. In light of the above it is necessary to estimate the disallowance and keeping in view the fact that genuineness of the expenditure has not been disputed, considered it reasonable to sustain disallowance of 20% of the expenditure claimed by the appellant.
Issues Involved:
1. Validity of the reopening of assessment under Section 147 of the Income Tax Act. 2. Addition of Rs. 4,51,930/- representing 5% of the assessed income of the wife of the appellant. 3. Rate of commission applied to determine the income of the assessee. 4. Disallowance of Rs. 77,607/- out of expenditure incurred claimed by the appellant. 5. Addition of Rs. 10,000/- out of deposits in the bank account. 6. Levy of interest under Sections 234A, 234B, and 234C of the Income Tax Act. 7. Various grounds raised by the Revenue against the CIT(A)'s order. Issue-wise Detailed Analysis: 1. Validity of Reopening of Assessment: The assessee argued that the notice under Section 148 was served on the Chartered Accountant and not on the assessee, and no reasons were recorded prior to issuing the notice. The Tribunal found that the assessment was framed under Section 143(3) and not reopened under Section 147 as claimed by the assessee. There was no evidence to support the claim that the assessment was reopened. Therefore, Ground Nos. 1 & 1.1 raised by the assessee were dismissed. 2. Addition of Rs. 4,51,930/-: The CIT(A) noted that the wife of the appellant, Mrs. Rekha Gupta, was unable to explain the source of cash deposits in her bank account, and the appellant was managing the group. The CIT(A) held that Mrs. Rekha Gupta was only another entity of the appellant and applied a 5% commission on the amount assessed as income. The Tribunal found that the CIT(A)'s decision was backed by binding precedents and restricted the addition to 1.25% of the total amount, resulting in an addition of Rs. 1,00,000/-. Thus, Ground Nos. 2, 2.1 & 3 raised by the assessee were partly allowed. 3. Rate of Commission: The CIT(A) applied a 5% commission rate, but the Tribunal, considering various precedents, found that the rate should be 1.25%. Therefore, the addition was restricted to Rs. 1,00,000/-. 4. Disallowance of Rs. 77,607/-: The CIT(A) sustained a disallowance of 20% of the expenditure claimed by the appellant, noting that the expenditure was shared by other companies of the assessee. The Tribunal affirmed the CIT(A)'s finding, and Ground No. 4 raised by the assessee was dismissed. 5. Addition of Rs. 10,000/-: The assessee did not press this ground due to the smallness of the amount. Therefore, Ground No. 5 was dismissed as not pressed. 6. Levy of Interest: The levy of interest under Sections 234A, 234B, and 234C was held to be consequential in nature. Ground No. 6 was accordingly addressed. 7. Revenue's Appeal: The Revenue raised several grounds against the CIT(A)'s order, including the restriction of additions and disallowances. The Tribunal found that the CIT(A)'s decision to treat the transactions as business transactions and compute the commission was backed by judicial precedents. The Tribunal affirmed the CIT(A)'s decision and dismissed Ground Nos. 1, 3, 4, 5, 6, 7 & 8 raised by the Revenue. Ground No. 2, regarding the restriction of disallowance to 20%, was also dismissed, as the facts were identical to the assessee's appeal. Final Result: The appeal of the assessee in ITA No. 2658/Del/2013 was partly allowed, and the appeal of the Revenue in ITA No. 3740/Del/2013 was dismissed.
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