2016 (12) TMI 1546

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....f the Income Tax Act, 1961 (hereinafter 'the Act'). 2. The only issue in these cross appeal of Revenue and assessee is as regards to the order of CIT(A) restricting the disallowance at 2% of net commission of assessee out of a total receipts shown by the assessee being sales made to Sharp Products Private Ltd. amounting to Rs. 3.11 crore. 3. Briefly stated facts are that a search action u/s. 132 of the Act was carried out on 25/11/09 in the case of Mahasagar Group of Companies, known as Alag Securities, were engaged in fraudulent billing activities in the business of providing bogus speculation/profit loss, short term/long term gain/loss commodities profit/loss on commodity trading. During search, it was noticed that the assessee was enga....

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....ingly, the AO added Rs. 3.11 Cr to the total income of the assessee as undisclosed sales. Aggrieved, assessee preferred appeal before CIT(A). 5. The CIT(A) restricted the addition @ 2% of net commission and deleted the balance addition by observing in Para 5.18 to 5.20 as under: - "5.18. In view of the above, Ld.AR has submitted that as the Ld. AO has himself treated the appellant as belonging to Mukesh Choksi Group in whose case commission income of 0.15% has been upheld by the Hon'ble Tribunal in various cases, even in this case addition which could at best be made is the commission on the alleged undisclosed sales of Rs. 3,11,00,000/-. The Ld. AR further stated that identical issues were raised in the case of Mukesh Choksi and his ....

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....ant group's premises on 25111/2009.The operative part of Ld. AO's order for A.Y. 2010-11 is as under: 27. The Hon'ble ITAT in its order delivered in the cases of assessee's group as discussed above has taken the rate of commission earned (c)0.15% as declared by the assessee himself, since on those appeals the issue of percentage of commission earned was not before the Hon'ble ITAT as the additions were made u/s. 68 of the Act. In the assessment order neither the reasonability of commission charged nor the evidences relating to chargeability of commission were discussed. During the course of present search action i.e. on 25111109 enough evidences have been found, which establishes that the assessee group is earning comm....

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....ome at much higher rate ranging between 1.5% and 3.6% depending upon the various kinds of entries provided to different beneficiaries as it is not possible to segregate the volume for different kind of entities. I therefore, considered it fair and reasonable to apply the rate of net commission @2%. 5.20. As the Ld. AO has himself treated the appellant as one of the hawala operators of Mukesh Choksi Group and thereby estimated the net commission of assessee at 2% of the total receipts shown in the bank accounts, there is no justification to make an addition of the entire sale to M/s. Shaf Broadcast Pvt. Ltd. It is therefore, directed that net commission @ of 2% maybe estimated by the Ld. AO and the balance addition may be deleted. Accordin....