TaxTMI 
TaxTMI 
2016 (5) TMI 638
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....record. 3. Common grievance of both assessee and revenue pertains to estimation of rate of commission earned by assessee on the accommodation cheques. 4. We have considered the contentions of ld. DR and gone through the orders of authorities below. Facts in brief are that the assessee's residence as well as office premises were covered by search and seizure action u/s.132 of the Act and at one place survey u/s.133A was also carried out by the investigation wing. During the course of search and survey proceedings various documents, registers, loose papers were found and were also seized/impounded by the Dy. Director of Income Tax (Investigation). The statements of the assessee were recorded on various dates in the course of search and in post search inquiries. During the course of the said search and seizure actions the assessee admitted before the DDIT(Inv) that he was engaged in providing various financial accommodation entries to the needy persons. These accommodation entries included providing speculation profit, artificial long term capital gains providing share application money, providing gifts/donations etc. For this purpose a vast network of various bank accounts were....
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....he amount of cheques issued as well as of the amount of cheques deposited. The modus operandi of the assessee has been explained' by the A.O. in detail in the assessment order for various years and briefly stated the same was that the beneficiaries through penny stock entry providers/middlemen approached the assessee for taking financial accommodation entries for artificial speculation profit, artificial long term capital gains etc. The assessee used to receive the amount from those persons and the same were deposited in the bank accounts from where the cheques were issued to the beneficiaries. Sometimes the amount was transferred from' one bank account to another bank account and thereafter the cheques were issued to the beneficiaries. In sum and substance the assessee was found to be using the bank accounts for the purpose of providing these accommodation entries and in support of these entries he issued / prepared the bills, invoices for sale / purchase of the shares etc. as the case may . be to give colour and show that actual transaction has taken place. 5. By the impugned order, the CIT(A) modified the profit rate after observing as under :- "7.1. I have c....
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...., then out of such 5% the middlemen would pocket normally 2% and remaining amount can be said to be given to the appellant which would be 3%. Thus the appellant's commission income by and large was about 3% for long term capital gains which is also supported by the seized material which contain reference of commission between the range of 1.57% to 3.5%. In this view of the matter, if the seized material is considered then the average rate of commission received is reported at about 3i'o. The statements of middlemen indicate that the appellant's commission was 5i'o minus middlemen commission of about 2%. In the statement recorded u/s.131 on oath before the DDIT, the appellant admitted to have earned commission for providing long term capital gains @2 to 3% subject to the claim of expenses. Considering the totality of the circumstances, various evidences brought on record, the seized material which, contain the rate of commission charged by the appellant, I am of the view that it would be fair and reasonable to adopt the 'rate of commission @3% of the amount of cheques issued or bank deposits' whichever is higher, for the purpose of long term capital gains and....
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....ly, the appellant has not given any bifurcation of the turnover and the cheques issued for the purpose of long term capital gains and for speculation profit etc. It is for the appellant to give such bifurcation and substantiate the same which has not been done in this case. I have no other option but to reject this claim of 50% of expenses. Having regard to facts and circumstances it would be fair and reasonable if the claim of expenses @ 20% of gross$ commission finally determined is upheld. Thus 20'0 of gross commission' (which is upheld in this order @3% in this case are considered as allowable expenses. The appellant would get the part relief accordingly and the amount of income determined to be modified to this extent. This ground is partly allowed. The undisclosed commission income determined on the amount of turnover of cheques issued from the bank accounts of the appellant after effect of this order would be as under (subject to verification of facts and figure by the A.O)." NARENDRA R.SHAH Sl. No. Assessment Year Turnover of cheques issued amount (Rs.) Gross commission @3% of bank deposits or cheuqes issued 20% of gross commission (i.e.0.6%)....