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2023 (2) TMI 266 - AT - Income TaxEstimation of income - bogus accommodation entries - Estimation of commission - assessee s claim is that assessee is earning 0.5% commission as against 1.8% taxed by the authorities below - HELD THAT - AO himself has estimated 0.5% rate of commission in some cases. Similarly, ITAT in the case of Adonis Financial Services Pvt. Ltd. 2019 (1) TMI 1266 - ITAT DELHI held 0.50 paise or 0.50% should be taken as the reasonable rate of profit/commission in such clandestine activities. Also see M/S. BHAWANI PORTFOLIO PVT. LTD. 2021 (7) TMI 601 - DELHI HIGH COURT We note that in several cases, ITAT has estimated the earning of commission @ 0.5% in the bogus accommodation entry business. Several ITAT orders have been referred above. It is not the case that any of them has been reversed by Hon ble jurisdictional High Court. Rather we have an example in the case of DCIT vs. Bhawani Portfolio Pvt. Ltd. (supra) wherein Hon ble Delhi High Court has approved the ITAT order of estimating the commission of 0.15% to 0.50% in such cases. Accordingly we direct the AO to estimate the commission in this case @ 0.5% as against 1.80% as made by the authorities below. Appeal of the assessee is partly allowed.
Issues Involved:
1. Whether the Commissioner of Income Tax (Appeals) erred in dismissing the appeal in a cryptic and non-reasoned manner. 2. Whether the Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer despite the evidence produced by the appellant. 3. Whether the assessment order was passed without providing adequate opportunity for being heard. 4. Whether the addition of Rs. 4,68,43,464/- by the Assessing Officer, based on a commission rate of 1.8%, was justified. Issue-wise Detailed Analysis: 1. Cryptic and Non-Reasoned Order by CIT(A): The appellant contended that the Commissioner of Income Tax (Appeals) dismissed their appeal in a cryptic manner without providing a speaking or reasoned order. The Tribunal reviewed the grounds of appeal and noted the appellant's dissatisfaction with the lack of detailed reasoning in the CIT(A)'s order. 2. Confirmation of AO's Action Despite Evidence: The appellant argued that the CIT(A) erred in confirming the Assessing Officer's action despite the evidence provided. The Tribunal considered the appellant's submission that the evidence presented was not adequately considered by the CIT(A). The Tribunal also noted that the appellant did not deny engaging in bogus accommodation entries but contested the rate of commission applied. 3. Adequate Opportunity of Being Heard: The appellant claimed that the assessment order was passed without providing an adequate opportunity for being heard. The Tribunal examined whether the procedural fairness was adhered to by the Assessing Officer during the assessment process. The Tribunal's review included an assessment of whether the appellant was given a fair chance to present their case. 4. Justification of Addition Based on 1.8% Commission Rate: The core issue was the addition of Rs. 4,68,43,464/- based on a commission rate of 1.8%. The Assessing Officer had determined this rate by analyzing the appellant's financials and referencing a search operation involving entry operators. The appellant contended that a more appropriate commission rate would be 0.5%, citing various ITAT decisions and a specific case where the Delhi High Court upheld a 0.5% rate. The Tribunal reviewed precedents and submissions, noting that in similar cases, the ITAT had estimated commission rates ranging from 0.15% to 0.50%. The Tribunal referenced the case of Adonis Financial Services Pvt. Ltd., where the ITAT had set a 0.5% commission rate, a decision upheld by the Delhi High Court in the case of DCIT vs. M/s. Bhawani Portfolio Pvt. Ltd. The Tribunal concluded that a 0.5% commission rate was reasonable and directed the Assessing Officer to apply this rate instead of 1.8%. Conclusion: The Tribunal found merit in the appellant's contention regarding the commission rate and directed the Assessing Officer to estimate the commission at 0.5% instead of 1.8%. The appeal was partly allowed, providing relief to the appellant by reducing the addition based on the revised commission rate. The order was pronounced in the open court on February 6, 2023.
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