ITAT Delhi reduces commission rate from 3% to 0.5%, deletes Rs.7.37 crore protective addition for entry operations

The ITAT Delhi allowed the assessee's appeal regarding cash deposits and commission charges. The tribunal deleted the protective addition of Rs.7.37 crores made for alleged entry operations involving bills without actual business transactions. Following a coordinate bench precedent, the commission rate was reduced from 3% to 0.5%. The tribunal found the issues covered by earlier orders with no material change in facts except the amount involved, resulting in favorable relief for the assessee.

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Issues involved: Assessment u/s 143(3) of the Act, protective addition of bank credits, commission earned, alleged entry operator providing bills without actual transactions.

Assessment u/s 143(3) of the Act: The appeal was filed against the order of the ld. CIT(A)-IV, Kanpur, completing and upholding the assessment u/s 143(3) of the Act at a total income of Rs. 7,60,81,463/- as against the returned income of Rs. 1,14,400/-. Various findings were based on incorrect appreciation of facts and assumptions.

Protective Addition of Bank Credits: The issue involved cash deposits of Rs. 7.37 Crs. in the assessee's bank account and commission earned at 3% on the same amount. The assessee was alleged to be an entry operator without actual business transactions. The amount was added on a protective basis, and information about beneficiaries was passed to the Assessing Officer for substantive assessment.

Commission Earned: The commission of Rs. 22.12 lacs was added on a substantive basis. A Co-ordinate Bench of ITAT adjudicated on both issues, deleting the protective addition and reducing the commission rate from 3% to 0.5%.

Judicial Precedents: The Tribunal referred to various decisions regarding commission rates for entry operators, directing the AO to adopt a commission rate of 0.5% instead of 3%. The Tribunal emphasized that protective additions should not be made without substantive assessments in other hands.

Conclusion: The Tribunal held that the addition made on a protective basis should be deleted, and the commission rate should be reduced to 0.5%. The decision was based on previous rulings and the absence of material changes in the current case. The Tribunal's order from an earlier year was cited for reference, and the appeal of the assessee was allowed, with the operative part of the order pronounced on 14/12/2020.

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