2020 (7) TMI 364 - AT - Income Tax

Tribunal Upholds Revenue Appeals, Emphasizes Genuine Transactions & Timely Objections

Income Tax Officer Ward–11 (1) (2), Mumbai Versus Realstone Exports Ltd. And (Vice-Versa)

The Tribunal allowed the Revenue's appeals for statistical purposes, setting aside the Commissioner's decision to reduce commission income estimation from ... Estimation of commission income on accommodation entries - As per revenue assessee is merely an entry provider and has not carried out any genuine transaction, the estimation of commission @ 1% of the total turnover is fair and reasonable and the assessee does not deserve any leniency considering the nature of activity carried on by it - HELD THAT:- It is evident, while the Assessing Officer has charged commission @ 1% on both purchase and sale turnover, learned Commissioner (Appeals) has reduced the rate of commission to 0.15% and that too only on one of the transactions i.e., either purchase or sale. Notably, while deciding identical issue in assessee’s own case in assessment year 2010–11, the Tribunal, in the order referred to above, has upheld estimation of commission income @ 1% of the total turnover. However, to be fair to the assessee, the aforesaid decision of the Tribunal was not available before learned Commissioner (Appeals) while deciding the appeals for the impugned assessment years. We set aside the impugned orders of learned Commissioner (Appeals) and restore the issue back to his file for fresh adjudication keeping in view the order passed by the Tribunal in assessee’s own case for the assessment year 2010–11, as referred to above. The assessee must be provided a reasonable opportunity of being heard before deciding the issues. Grounds raised are allowed for statistical purposes. Validity of re–opening of assessment after inordinate delay of 307 days - Filing of cross objections - HELD THAT:- Perusal of the cross objections filed by the assessee would reveal that the grounds raised therein are purely technical in nature challenging the validity of re–opening of assessment under section 147 of the Act as well as rejection of books of account under section 145(3) of the Act. It is evident, before learned Commissioner (Appeals), the assessee had not raised any grounds challenging the validity of re–opening of assessment under section 147 of the Act. On a query from the Bench, learned Counsel appearing for the assessee conceded this fact. Thus, the aforesaid factual position clearly establishes that the cross objections have been filed by the assessee raising such technical issue challenging the validity of re–opening of assessment after inordinate delay of 307 days is only as an after–thought without having any reasonable cause. In view of the aforesaid, we decline to condone the delay in filing the cross objections. Issues involved:- Estimation of commission income on accommodation entries for assessment years 2006-07, 2007-08, and 2011-12.- Delay in filing cross objections by the assessee.Analysis:Estimation of Commission Income:The appeals filed by the Revenue and cross objections by the assessee pertain to separate orders by the Commissioner of Income Tax (Appeals) for the assessment years 2006-07, 2007-08, and 2011-12. The primary issue revolves around the estimation of commission income related to accommodation entries. The Assessing Officer re-opened the assessment under section 147 of the Income Tax Act based on information indicating potential tax evasion. It was revealed that the assessee, engaged in trading goods, was providing accommodation entries without engaging in genuine transactions. The Assessing Officer, after rejecting the books of account, estimated commission income at 1% of both purchase and sale turnover. The Commissioner (Appeals) agreed that genuine transactions were not conducted but reduced the commission rate to 0.15%. The Revenue contended that 1% estimation was fair, citing a previous Tribunal decision. The Tribunal set aside the Commissioner's decision, emphasizing that the assessee was an entry provider, and the transactions were not genuine. The issue was remanded for fresh adjudication, considering the Tribunal's decision in a similar case for the assessment year 2010-11.Delay in Filing Cross Objections:The cross objections filed by the assessee were delayed by 307 days, seeking condonation of the delay. The assessee claimed confusion regarding obtaining a second opinion for filing the objections. However, the Tribunal found the explanation unsatisfactory, noting the absence of supporting affidavits and the technical nature of the objections challenging the assessment reopening. The Tribunal declined to condone the delay, dismissing the cross objections.In conclusion, the Revenue's appeals were allowed for statistical purposes, and the cross objections were dismissed. The Tribunal's decision highlighted the importance of genuine transactions and appropriate commission estimation, while also emphasizing the need for timely and valid objections in legal proceedings.