2010 (12) TMI 53 - AT - Income Tax

Tax Appeal Tribunal: Partial Success for Taxpayer on Income Additions

Shri Hersh W. Chadha, (Legal heir of Late Sh. W.N. Chadha) Versus DDIT, Circle-1 (1), International Taxation, New Delhi

The Tribunal partly allowed the appeals for AYs 1987-88 and 1988-89, upholding additions on commission income but deleting notional interest income, house ... Deemed income – payment of commission in the matter of bofors’ case – estimation of income – Held that: Keeping in consideration the rival contentions, all the facts, the material available on record, the probable normal human conduct, the surrounding circumstances, the preponderance of probabilities and the legal propositions, we have not hesitation to hold that assessee received the impugned commission as added by AO as his income for AYs 1987-88 and 1988-89. Issues Involved:1. Addition on account of commission for AYs 1987-88 and 1988-89.2. Interest on commission income for AYs 1988-89 to 1999-2000.3. House property additions for all assessment years.4. Business additions/disallowances for AY 1987-88.5. Levy of interest under section 234.Detailed Analysis:1. Addition on Account of Commission for AYs 1987-88 and 1988-89:The main grounds of appeal pertain to the receipt of commission from M/s Bofors, a Swedish company, through M/s Svenska Incorporated Panama, alleged to be a front company of the appellant. The CIT(A) confirmed the additions made by the Assessing Officer (AO) amounting to Rs. 52,60,34,469/- and Rs. 85,31,425/- respectively. The CIT(A) relied on the Swedish National Audit Bureau (SNAB) report and the letter from Mr. Sven Rabmkergar. The SNAB report indicated that considerable amounts were paid to the appellant, who was Bofors' agent in India. The appellant argued that the SNAB report was only a press report and had no evidentiary value. However, the Tribunal found that the SNAB report was an official document, prepared by the Swedish Government at the request of the Government of India, and was thus admissible as evidence. The Tribunal also found that the letter from Mr. Sven Rabmkergar corroborated the receipt of commission by the appellant. The Tribunal concluded that the appellant received the impugned commission and upheld the additions made by the AO.2. Interest on Commission Income for AYs 1988-89 to 1999-2000:The AO added notional interest on the undisclosed commission income, calculated at 5% per annum. The CIT(A) confirmed these additions. However, the Tribunal found that there was no material on record to suggest that the appellant made any investment or earned any interest income. The Tribunal noted that the AO's estimation of 5% deemed interest was not supported by any evidence. Consequently, the Tribunal deleted the additions on account of notional interest income for all the years.3. House Property Additions for All Assessment Years:The AO computed the income from house property at a higher figure by taking the annual value of the property located at E-1, Placimo, Bombay at Rs. 2,59,800 as against the actual rent of Rs. 31,200 received by the appellant. The CIT(A) confirmed these additions. The Tribunal, however, referred to its earlier order in the appellant's own case for AYs 1985-86, 1988-89, 1991-92, and 1996-97, where it had deleted similar additions. Following the same, the Tribunal deleted the additions on account of house property income for all the years.4. Business Additions/Disallowances for AY 1987-88:The AO disallowed various business expenses, including salary to relatives, staff welfare expenses, motor car running expenses, and expenditure on presents to delegates. The CIT(A) confirmed these disallowances. The Tribunal, however, found that the appellant was carrying on a wide-spread business and that similar expenses had been allowed by the Department and the Tribunal in earlier years. The Tribunal allowed the appellant's claims for business expenditure and disallowed the additions made by the AO.5. Levy of Interest under Section 234:The levy of interest under section 234 was held to be consequential in nature.Conclusion:The Tribunal partly allowed the appeals for AYs 1987-88 and 1988-89 and allowed the appeals for all other years. The Tribunal upheld the additions on account of commission income but deleted the additions on account of notional interest income, house property income, and business disallowances. The levy of interest under section 234 was held to be consequential.