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2016 (11) TMI 1061 - ITAT MUMBAI

2016 (11) TMI 1061 - ITAT MUMBAI - TMI - Penalty u/s 271(1)(c) - income estimation - addition made after estimating the income of the assessee by way of net commission @ 6% to 7%. Held that:- Once it is a matter of estimation and the final income sustained after estimation of net profit is very near to the estimate of commission income shown by the assessee, then under these facts and circumstances, it cannot be held that any penalty can be levied under section 271(1)(c) either for concealment o .....

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ITA No.:2646/Mum/2015, ITA No.:2649/Mum/2015 - Dated:- 29-9-2016 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER For The Appellant : Shri Vimal Punamiya, Shri Niraj Punamiya For The Respondent : Shri C S Sharma ORDER PER AMIT SHUKLA, J.M.: The aforesaid appeals have been filed by the assessee against common order dated, 22.01.2015 passed by ld. CIT(Appeals)-29, Mumbai in relation to the penalty proceedings under section 271(1)(c) for the assessment years 2002 .....

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r section 133A, it was found that, he along with his other family members through various concerns are engaged in issuing accommodation sales bills. The assessee s family consists of following persons, who were running following business concerns:- Name Relation Business Concerns Rakesh Kumar Gupta Father M/s Manoj Mill Hema Gupta Mother M/s Shree Rama Sales & Synthetics Mohit Gupta Seld M/s Aastha Silk Industries Nilesh Gupta Brother M/s Dev Vani Industries Rakesh Kumar Gupta HUF Father HUF .....

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e was that, he has only earning 1% of gross profit as a commission for issuing accommodation bills and the net profit from such commission income was around 0.42%, whereas, the Assessing Officer has estimated net profit @ 7% and thereafter giving benefit of expenditure for earning this income to the extent of 5%, the balance net profit rate of approximately 6.35% was confirmed. 5. In the first appeal, the Ld. CIT(A) confirmed the said addition and matter had travelled up to the stage of the Trib .....

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on of the Hon ble Tribunal, whereby, substantial relief on account of net profit rate has been given, no penalty can be levied. The effect of the Tribunal order and the computation of additional tax liability have been worked out by the Ld. Counsel in the following manner: COMPUTATIN OF ADDITIONAL TAX LIABILITY (In Rs.) AY 2002-03 AY 2003-04 AY 2004-05 AY 2008-09 Appellant Income Tax Cess 90,602 7,120 143,490 18,098 173,248 23,650 473 228,759 19,752 593 Hon ble ITAT Income Tax Cess 225,964 34,19 .....

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ere cannot be a case for levy of penalty, either for concealment of income or for furnishing of inaccurate particulars. In support, he relied upon catena of decisions and also to be put forth various proposition that on such fact no penalty can be levied. 8. On the other hand, Ld. DR submitted that, the assessee has been found to be involved in providing accommodation entry and net profit rate on commission income earned on such activities have been found to be incorrect. Therefore, penalty has .....

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0.6% after observing and holding as under: We find that it is not case of turnover and tax thereon but regarding estimation of commission on such business of accommodation entries and tax thereon. Regarding rate of commission adopted by Assessing Officer at 6%, Ld. Authorized Representative submitted that it was very abnormal and cannot happen in case of accommodation business. Further, the rate of presumptive profit referred by the CIT(A) could not be considered in case of accommodation busines .....

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as under:- "49. The next issue arises for estimation of commission income. In the statement the assessee at the time of survey under section 133A had stated that he charged 25p as commission for providing accommodation entries and out of that 25p he paid lop to others in whose name bank accounts were maintained and 5p was spent on expenses incurred in relation such business and hence, net commission earned was 1O paise i.e., 0.10 per cent. The Ld. CIT (A) had taken the commission at 1 per c .....

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w the issue arises as to whether the commission should be estimated at the rate of .01 per cent or 1.75 per cent or 1 per cent. The Id. CIT (A) for arriving at the rate of commission earned has relied on rate of commission normally charged in case of real estate transactions. In real estate transactions the broker has to identify/ the suitable butler/ purchaser, inspection of property, visit of interested parties, negotiations of rates, registration of sale deeds etc. whereas in case of bogus en .....

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transactions are not comparable. Therefore, the comparison of commission earned on a real estate transaction, which in fact takes place and commission on transaction which does not at all occur, are not comparable. In accommodation entries the transaction does not take place and, therefore, commission will be certainly lower than the commission in the case of real estate or real transactions. Moreover, neither the Ld. CIT(A) nor the Assessing Officer had given any comparable case wherein commiss .....

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it could be said that the assessee had passed on. 1 per cent commission to the persons in whose names the bank accounts were maintained. In the absence of any evidence having brought on record, we are unable to agree with the assessee that the assessee had passed on commission of lop to the persons in whose names dummy concerns were floated. However, in the business of entry provider certain expenditure has to be incurred which has been stated to be 5p during the course of survey. Therefore, cr .....

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rider of allowability of certain expense against same. Hence, the rate of 6% adopted by Assessing Officer was highly one. Hence, the commission income was to be taken @ 0.6% of sales turnover. Similar view has also been taken by the jurisdictional Mumbai Tribunal in case of Gold Star Finvest (P.) Ltd Vs. ITO [2013] 33 taxmann.com 129bal Trib.), wherein Tribunal held as under: 12. Having carefully examined the various Orders in the case of different assessees' it has become amply clear that .....

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the cases of Pairesha & Co. (supra) and Kiran & Co. (supra), the Tribunal has considered reasonableness of percentage of commission to be earned on turnover was at . 1 %. The assessee himself has offered the percentage of commission at 0.15%, which is more than the percentage of commission considered to be reasonable by the Tribunal in the cases of Pairesha & Co. (supra) and Kiran & Co. (supra), in similar type of transactions. The theory of the Assessing Officer to treat the ent .....

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