2016 (5) TMI 1408 - AT - Income Tax

Estimation of net profit rate of 2% made by the AO as against 0.15% offered by the assessee on the gross receipts - Held that - On the perusal of the impugned orders and on similar other decisions as relied before us we find that the Tribunal has upheld the net profit rate of 0.15%. Thus consistent with the view taken in various similar matters we also uphold the rate of commission / net profit rate from such activity at 0.15%. Accordingly this issue is decided in favour of the assessee.

Summary

Issues:
Estimation of net profit rate at 2% by AO against 0.15% offered by assessee on 'gross receipts'.

Analysis:
The appeals were filed by the assessee against a common order passed by CIT(A) for the assessment years 2004-05 to 2010-11. The main issue was the estimation of the net profit rate at 2% by the Assessing Officer (AO) as opposed to the 0.15% offered by the assessee on the gross receipts. The assessee argued that similar issues had been accepted at 0.15% in group concerns before the Tribunal. The Departmental Representative (DR) also acknowledged that the rate of commission had been decided in various cases by the Tribunal.

A search and seizure action was conducted in the group companies owned by the assessee, revealing involvement in accommodation entries and money laundering. The AO found that the commission income ranged between 1.5% to 3.5% and estimated the net profit rate at 2%, while the assessee contended it was 0.15%. Despite providing decisions where 0.15% commission rate was accepted for group companies, the CIT(A) upheld the AO's estimate.

Upon reviewing the Tribunal's findings in similar cases, including M/s Mihir Agencies Pvt Ltd, which upheld the net profit rate at 0.15%, the ITAT decided in favor of the assessee, consistent with previous judicial precedents. As no arguments were presented on other grounds of appeal, they were not adjudicated upon. Therefore, the appeal of the assessee was partly allowed, and all appeals with similar issues were treated as partly allowed.

In conclusion, the ITAT upheld the net profit rate at 0.15% based on judicial precedents and decisions in similar matters, ruling in favor of the assessee. The judgment was pronounced on 4th May 2016.