Commission income from synchronized trades upheld at higher estimate after findings of manipulation and artificial volumes.

The ITAT Mumbai held that commission income from large-scale synchronized trades and market manipulation could not be restricted to 1% on the assessee's transaction value. The record showed artificial volumes, share-price manipulation, and SEBI debarment, which made the activity unlike ordinary brokerage and supported a higher commission estimate. On those facts, the appellate authority's reduced rate was found unsupported, and the Assessing Officer's 5% estimation was restored as linked to the clandestine arrangement and transaction pattern.

---

---

Issues: Whether the restriction of commission income to 1% by the first appellate authority was justified, or whether the Assessing Officer's estimation at 5% on the total transaction value should be restored.

Analysis: The assessee's transactions in the relevant scrip and on the commodity exchange were found to be of a large scale and outside the ordinary course of business. The record reflected synchronized trades, creation of artificial volumes, manipulation of share price, and debarment by SEBI. On those facts, the appellate authority's acceptance of a reduced 1% commission rate was held to be unsupported, particularly because the activity was not normal brokerage but a specialized and high-risk manipulation service. The reasoning also accepted that the 5% adopted by the Assessing Officer was linked to the nature of the clandestine arrangement and the transaction pattern.

Conclusion: The 1% estimation was rejected and the Assessing Officer's addition based on 5% commission was restored, in favour of the Revenue.

---