2024 (11) TMI 427 - AT - Income Tax

Addition of the notional commission expenses - CIT(A) partly allowed and restricted the addition on account of commission expenses @0.25% as compared to 2% adopted by the AO - HELD THAT - We find that the coordinate bench of the Tribunal in a batch of cases pertaining to the assessee s sister concern in Abans Commodities (I) Pvt. Ltd. 2024 (11) TMI 359 - ITAT MUMBAI while deciding a similar issue deleted the addition on account of non-genuine profit/loss in illiquid options and consequently also deleted the notional addition of commission under section 69C. In the absence of any contradictory material on facts and law being brought on record since the issue arising in the present appeal is similar to the issue already considered by the coordinate bench of the Tribunal in a similar factual matrix in the case cited supra, therefore respectfully following the same, the addition on account of commission expenses under section 69C of the Act is deleted. Addition on account of non-genuine purchases - HELD THAT - We find that the coordinate bench of the Tribunal in a batch of cases pertaining to the assessee s sister concern in Abans Commodities (I) Pvt. Ltd. 2024 (11) TMI 359 - ITAT MUMBAI while deciding a similar issue deleted the addition on account of nongenuine purchases.

Issues Involved:

1. Validity of reassessment proceedings under Section 147 of the Income Tax Act.
2. Addition on account of non-genuine profit and commission expenses under Section 69C.
3. Addition on account of non-genuine purchases.
4. Levy of interest under Sections 234B, 234C, and 234D.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147:

The assessee contested the initiation of reassessment proceedings, arguing that the notice under Section 148 was based on incorrect and insufficient grounds. It was highlighted that the original assessment had been completed with all relevant details on record, and there was no new tangible material justifying the reopening. The Tribunal noted that since the additions made on merits were deleted, the legal issues regarding the reassessment proceedings were rendered academic and were kept open, indicating that the Tribunal did not conclusively rule on this aspect but instead focused on the substantive issues.

2. Addition on Account of Non-Genuine Profit and Commission Expenses under Section 69C:

The case involved allegations of non-genuine profit from reversal trades in illiquid stock options, leading to an addition of INR 2,30,63,250. The AO further added commission expenses of INR 11,69,323 based on a presumed commission rate of 2%. The CIT(A) reduced this to 0.25%, resulting in an addition of INR 1,46,172. However, the Tribunal found that the AO's reliance on the Project Falcon report was misplaced, as the assessee's trades were in currency derivatives on the United Stock Exchange, not stock options on the Bombay Stock Exchange. The Tribunal noted that the AO failed to conduct independent inquiries and relied solely on the investigation report. Following a similar case involving the assessee's sister concern, the Tribunal deleted the addition for non-genuine profit and the notional commission under Section 69C, emphasizing the lack of evidence for such transactions being non-genuine.

3. Addition on Account of Non-Genuine Purchases:

For the assessment year 2018-19, the AO disallowed 0.25% of the total purchases from certain entities deemed non-genuine, resulting in an addition of INR 9,42,450. The Tribunal observed that the AO accepted the sales as genuine but questioned the purchases based on information from the DDIT (Investigation). The Tribunal found that the assessee provided sufficient documentation, including purchase invoices, warehouse receipts, and GST returns, to substantiate the genuineness of the purchases. The Tribunal criticized the AO for not conducting independent verification and relying on conjecture. Citing a similar decision in the case of the assessee's sister concern, the Tribunal deleted the addition, underscoring the lack of concrete evidence against the genuineness of the purchases.

4. Levy of Interest under Sections 234B, 234C, and 234D:

The assessee challenged the levy of interest under these sections. However, since the Tribunal allowed the appeals on substantive grounds by deleting the additions, the issues concerning the levy of interest were not specifically addressed, as they would be consequential to the main issues.

Conclusion:

The Tribunal allowed both appeals by the assessee for the assessment years 2015-16 and 2018-19, deleting the additions made on account of non-genuine profit, commission expenses, and non-genuine purchases. The validity of the reassessment proceedings was left open, as the substantive issues were resolved in favor of the assessee.

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