TaxTMI 
TaxTMI 
2016 (6) TMI 519
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....010 on Shri Vishesh Gupta and Shri Rakesh Gupta. Based on the search notice u/s 153A of the Income Tax Act was issued to the assessee on 11.04.2011. In response to that assessee submitted a letter dated 30.05.2012 stating that return filed u/s 139 showing income of Rs. 66081/- may be treated as return filed in response to notice u/s 153A of the act. 5. During the course of search, it was found that the assessee is engaged in providing accommodation entries through bogus purchase bills from the firms owned and controlled by the assessee. In the statement u/s 132 the assessee admitted this fact. The assessee is operating the business of accommodation entry in close association with another entry providers by the name of Shri Vaivab Jain and Shri Navneet Jain. Therefore, it is an undisputed fact that the appellant is one of the entry providers of the group. Statement on 26.04.2010 of the appellant was recorded wherein he has stated that he is charging 25 paisa to 75 paisa for per Rs. hundred as commission for providing accommodation entries. In answer to Question No. 13 of that statement assessee further submitted that other persons are also charging commission at Rs. 0.25 to Rs. 0.7....
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....tal profit earned on accommodation entries and granted the same as deduction. The net addition made by the AO for AY 2007-08 was Rs. 8841307/-, for AY 2008-09 Rs. 15507517/- and for AY 2009-10 Rs. 5374146/-. Against this addition assessee preferred before ld CIT(A). Before the ld CIT(A) assessee submitted that the commission is ranging between 0.25% to 0.75% only. Assessee reiterated the same submission which were raised before the ld. AO that while determining the commission he did not include the effect of VAT and CST. It was also contended that the assessee has purchased the goods on the fictitious bills when sale bill is issued as accommodation entries. It was submitted that the assessee has never issued accommodative sales bill without obtaining accommodative purchase bill of the same material and therefore ld AO should have given the effect of VAT and CST involved in the transactions which is required to be paid. For this it was submitted that assessee has produced the purchase register and bank book. Therefore it was submitted that commission income cannot exceed the rates stated by the assessee. In support of the above submission assessee submitted two decisions wherein it ....
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....hrough many brokers. He opened various bank accounts of those proprietary firms. On issue of the bogus bills, cheques are received from the parties which was deposited in the bank accounts of the propertory firm and subsequently cheques were issued in the name of another concern controlled by one Shri Vaivab Jain who was engaged in issuing bogus bills without actual delivery of goods for showing purchase of goods sold by the assessee controlled firms. This cheque was deposited in the bank account of those parties. Subsequently equivalent amount of cash was withdrawn and paid to the original party who had taken the bogus purchase bills. From the cash withdrawn the commission amount is deducted. During the course of search on Sh. Vishesh Gupta and Sh. Rakesh Gupta (assessee) were found to be controlling 11 such entities. In their statement they submitted that they have earned the commission @ 0.25% to 0.75%. in their statement dated 26.04.2010 of Sh. Rakesh Gupta in answer to Q. NO.13 it is mentioned that other parties are also charging the commission on accommodation entries @0.25% to 0.75%. and therefore he is also charging the commission in the same range. Further statement record....
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....een that before applying the percentage of commission at the rate of 5.67% on the total transactions of accommodation entries provided by the appellant, the Assessing Officer issued a showcause notice dated 12.03.2013. In response to the same, the letter dated 18.03.2013 filed by the appellant was not accepted by the Assessing Officer. On perusal of the said reply dated 18.03.2013, I find that the appellant did not furnish any documentary evidence to substantiate that the rate of commission charged by him at 0.25% to 0.50% and as claimed by him was correct and that the percentage of commission worked out by the Assessing Officer on the basis of the seized documents in the individual cases given in the chart incorporated in the order was incorrect and exorbitant. There is no set formula or fixed rate of commission while conducting such transactions in providing accommodation entries. .Such business/activity is based on the practices prevalent in the market and on the basis of needy. There are several people who are engaged in the activity of providing accommodation entries, and would normally charge 2% as commission on the amount that is transacted in providing such accommodation en....
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....ubmit the reply along with the explanation of all these entries, he has worked out detailed working of some of those entries as provided in the annexure which indicates that the department has picked up from the seized material, only those portion of bill 'payment made in part, from which the requisite VAT/CST and commission was deducted and the percentage was worked out on that portion only, while the balance payment of the same bill was duly returned to party in full without any deduction from them, which were ignored by passed by the department. Further the department has also ignored to consider facts that out of VAT/CST retained from sales invoices, assesssee has paid full/ almost all amount of VAT/CST on purchase bills so as to retained gross margin comes 0.25 to 0.50 per 100 because for giving the output of VAT to client who had taken the sale bills input of VAT must required le. through Purchase Bills and the assessee had made all the purchases from outside and payments were made through bank only. For these facts we have already submitted the purchase ledger and bank book. Assessee has never provided the sale bills without taking the purchase bills. This is also clear ....
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....hat evidences relied upon should be in toto i.e. in full and not in part Hence as seized documents contains payment of purchase made and amount retained as commission on such purchases by the issuing party. The same fact should not be ignored by working out commission income earned on such transactions. Hence, it is hereby prayed that such higher rate of commission income taken, without any reasonable basis to be deleted and the contention of the assessee to be accepted by determining commission income, before regular establishment expenses, ranging between 0.25%-0.50%." d. Ld CIT(A) further held that the Assessing Officer has adopted exorbitant rate which are incorrect for the commission income on accommodation entries. e. He further held that there is no set formula or fixed rate of commission in accommodation entries and such rates are varying based on the practices and the need. 10. Firstly we do not find any infirmity in the order of ld CIT(A) in estimating the commission income of the assessee @ 2% and our reasons are enumerated hereinafter. While working out the commission rate by the ld Assessing Officer it was submitted that the difference in the amount of accommodatio....