2016 (11) TMI 1061

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....nder section 271(1)(c) for the assessment years 2002-03, 2003-04, 2004-05 and 2008-09. 2. The facts relating to levy of penalty are identical in all the years, which is mainly on account of estimation of net profit rate of commission income. The penalty levied for the various assessment years are as under:- Assessment year Penalty (Amt) Rs. 2002-03 6,91,449 2003-04 7,03,687 2004-05 12,20,646 2008-09 11,34,086   3. The brief facts qua the issue relating to levy of penalty are that, assessee is a trader in fabrics, however, at the time of survey under section 133A, it was found that, he along with his other family members through various concerns are engaged in issuing accommodation sales bills. The....

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....t of expenditure for earning this income to the extent of 5%, the balance net profit rate of approximately 6.35% was confirmed. 5. In the first appeal, the Ld. CIT(A) confirmed the said addition and matter had travelled up to the stage of the Tribunal. The Tribunal sent back the matter to the file of the CIT(A). In the set aside proceedings, the Ld. CIT(A) after calling for the remand report again confirmed the said estimation made by the Assessing Officer. 6. Now, in the second round of appeal before the Tribunal, the net profit rate of commission has been reduced to 0.6% of the turnover and 5% of net expenditure as allowed by the Assessing Officer was retained. 7. Before us, the Ld. Counsel submitted that, now in the wake of the ....

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....hat, the assessee has been found to be involved in providing accommodation entry and net profit rate on commission income earned on such activities have been found to be incorrect. Therefore, penalty has rightly been levied and confirmed by the CIT(A). However, he submitted that, in the light of the Tribunal decision, the quantum of penalty can be scaled down. 9. After hearing both the parties and on perusal of the impugned order as well as the material placed on record, we find that the addition in all the years have been made after estimating the income of the assessee by way of net commission @ 6% to 7%. Now, the Tribunal in assessee's own case has reduced the net profit rate of commission @ 0.6% after observing and holding as under: ....

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.... the Assessing Officer for which no evidence during the course of survey was found. The Ld. CIT(A) has also noted that there was no clear standard rate of commission for accommodation activities. According to him the people who are engaged in this type of business would not charge less than 1 per cent on the bill amount as done in the case of brokerage on real estate business. He further observed that the rate of 1 per cent commission is very reasonable. Now the issue arises as to whether the commission should be estimated at the rate of .01 per cent or 1.75 per cent or 1 per cent. The Id. CIT (A) for arriving at the rate of commission earned has relied on rate of commission normally charged in case of real estate transactions. In real esta....

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....ng the course of survey proceedings has to be given credence. The assessee has floated the bogus concerns and has controlled the accounts. During the course of survey, no material was found on the basis of which it could be said that the assessee had passed on. 1 per cent commission to the persons in whose names the bank accounts were maintained. In the absence of any evidence having brought on record, we are unable to agree with the assessee that the assessee had passed on commission of lop to the persons in whose names dummy concerns were floated. However, in the business of entry provider certain expenditure has to be incurred which has been stated to be 5p during the course of survey. Therefore, credit of 5p out of 25p received as commi....

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.... (supra) and Kiran & Co. (supra), the Tribunal has considered reasonableness of percentage of commission to be earned on turnover was at . 1 %. The assessee himself has offered the percentage of commission at 0.15%, which is more than the percentage of commission considered to be reasonable by the Tribunal in the cases of Pairesha & Co. (supra) and Kiran & Co. (supra), in similar type of transactions. The theory of the Assessing Officer to treat the entire deposit as "unexplained cash credits, cannot be accepted in the light of assessment orders in the case of beneficiaries and also in the light of the fact that assessee is only concern with the commission earned on providing accommodation entries. We, therefore, of the view that since the ....