2023 (12) TMI 871 - AT - Income Tax

Assessee's income from marble trading facilitation taxed as commission not gross profit

ITAT Jaipur upheld CIT(A)'s decision that assessee's income should be taxed as commission rather than gross profit from marble trading. Assessee operated ... Reopening of assessment - commission income on the turnover of amount in the bank account which was used to facilitate for the marble traders of Kishangarh - either the assessee is the owner of the money found deposited in her bank accounts as claimed or the assessee is merely a facilitator and earns commission income - HELD THAT:- Even though there was direction of the bench the revenue has not placed on record the report or the records of the investigation wing. Therefore, we believe that the assessee has already provided the information which she possessed and revenue (Investigation wing) was satisfied with the information submitted by the assessee. It is not disputed that the assessment was reopened to tax the commission income on the transactions facilitated by the appellant for the marble traders of Kishangarh. This aspect of the reasons recorded by the revenue has not been controverted. Therefore, considering the decision of the apex court in the case of Sun Engineering [1992 (9) TMI 1 - SUPREME COURT] while assessing the income of the assessee reasons recorded are to be considered. CIT(A) while deciding the appeal of the assessee has dealt with the two-remand report of the assessing officer on of March 2015 and another of August 2015. The non disputed facts emergeis that the assessee admitted that bank accounts were opened, wherein different parties at different places deposited the money, in turn at Kishangarh, the money was withdrawn and after charging commission, which was ranging from Rs. 100 to Rs. 300 per lac and the remaining amount was given back to the persons as advised by the depositors. CIT(A) noted that the assessee reminded that the ld. AO himself agreed to these facts in the first half of the assessment order that the money was deposited by different Marble Traders were given back to them after withdrawing from the bank. CIT(A) noted that there is no basis to swing in the position from taxing commission on the transaction facilitated by the appellant to estimating gross profit as marble trader. CIT(A) also noted that none of the corroborative factors that were inquired into through remand report proceeding support such imaginary action of the ld. AO. In the remand report the ld. AO admit that the assessee neither have any establishment nor infrastructure to conduct business of marble trading. Considering the above aspect of the matter the swing from charging commission to charge the GP as marble trader has no basis and are contrary to the facts already on record. Considering all these aspects of the case discussed here in above we find no infirmity in the finding of facts that the income of the assessee be taxed on commission, however, as regards the ld. CIT(A) contention of allowing 25 % from the commission income estimated has no basis or proof that has been argued by the ld. AR of the assessee and therefore, we see no reason to consider the claim of the 25 % as allowable and therefore, the same is not be considered as expenses in the absence of any details or evidence. Issues Involved:1. Whether the CIT(A) was right in modifying the G.P. addition made by the A.O. and assessing only net commission income.2. Whether the CIT(A) was justified in not appreciating that the assessee failed to produce depositors and beneficiaries.3. Whether the CIT(A) was correct in not appreciating that the assessee was engaged in marble trading and the deposits represented sale proceeds.Summary of Judgment:1. Modification of G.P. Addition:The CIT(A) modified the G.P. addition made by the A.O. by holding that only net commission income of Rs. 225 per Rs. 1 lac could be taxed on the bank deposits. This decision was based on the lack of specific findings on the ownership of the deposits made in the bank accounts. The CIT(A) noted that the assessee acted as a facility provider for marble traders, earning a commission for facilitating cash deposits and withdrawals for these traders. The CIT(A) relied on the remand report, which confirmed that the assessee had no establishment, infrastructure, or registration necessary for conducting marble trading, thus supporting the conclusion that the assessee was not a marble trader but a commission agent.2. Failure to Produce Depositors and Beneficiaries:The CIT(A) acknowledged that the assessee failed to produce the depositors and beneficiaries or provide their names and addresses. However, the CIT(A) found that this failure did not justify treating the entire deposits as the assessee's own trading receipts. The CIT(A) emphasized that the assessment was reopened to tax commission income, not trading income. The CIT(A) also noted that the assessee had provided details of marble traders to the Investigation Wing, which was not disputed by the revenue.3. Engagement in Marble Trading:The CIT(A) rejected the A.O.'s conclusion that the assessee was engaged in marble trading. The CIT(A) pointed out that the assessee had no sales tax registration, excise registration, or power connection, and did not maintain any books of accounts, purchase and sales accounts, or show any debtors and creditors. These facts indicated that the assessee did not have the means to conduct marble trading. The CIT(A) concluded that the assessee was only earning commission income and not engaged in marble trading. This conclusion was supported by the remand report, which confirmed the absence of any infrastructure for marble trading.High Court's Direction:The High Court quashed the ITAT's order and directed the ITAT to decide the matter based on the material available on record, without being influenced by the High Court's order. The High Court instructed the ITAT to consider all issues raised before it and to provide an opportunity for both parties to submit necessary explanations and documents.ITAT's Final Decision:The ITAT, after considering the material on record and the submissions of both parties, upheld the CIT(A)'s decision to tax only the commission income. The ITAT noted that the revenue did not provide any additional evidence to counter the CIT(A)'s findings. The ITAT also emphasized that the assessment was reopened to tax commission income, and there was no basis to treat the deposits as trading receipts. The ITAT found that the assessee acted as a facility provider, earning commission for facilitating cash deposits and withdrawals for marble traders. The ITAT, however, disallowed the 25% expenses claimed by the assessee from the commission income due to lack of supporting evidence.Conclusion:The appeals of the revenue were partly allowed, with the ITAT upholding the CIT(A)'s decision to tax only the commission income but disallowing the 25% expenses claimed by the assessee. The ITAT's decision applied mutatis mutandis to all similar appeals.