TaxTMI 
TaxTMI 
2020 (6) TMI 304
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.... income calculated at 0.15% without appreciating that the assessee had failed to furnish satisfactory explanation with regard to identity of the parties, source and genuineness of the transactions? 2. Whether on the facts and in the circumstances of the case and in law, Tribunal erred in restricting the addition made by the Assessing Officer to the commission income at 0.15% without considering that the material found during the course of search clearly established that the net commission charged by the assessee varied between 1.5% to 3.6% and that the decision in M/s. Mihir Agencies Pvt. Ltd. relied upon by the First Appellate Authority was clearly distinguishable?" 4. Thus from the above, it is quite evident that the issue involved in the present appeal is restriction of the addition of Rs. 4,78,94,000.00 made by the Assessing Officer on account of unexplained cash credits under Section 68 of the Act to the commission income at the rate of 0.15%. 5. Respondent is an assessee under the Act having the status of resident company (hence also referred to as 'assesee'). Assessee is engaged in the business of providing accommodation entries to entry seekers. A search and sei....
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....espective entities. Following the above, CIT (A) directed the Assessing Officer to adopt only 0.15% of the total deposits as commission in the hands of the assessee and to delete the balance addition. 8. Revenue challenged this order of CIT (A) before the Tribunal. Tribunal vide the order dated 18.11.2016 noted that the same issue arose in the case of M/s. Goldstar Finvest Pvt. Ltd. for the same assessment year i.e., assessment year 2003-04. In M/s. Goldstar Finvest Pvt. Ltd., Tribunal took the view that assessee was only concerned with the commission earned on providing accommodation entries. Commission in that case was assessed at 0.15%. Since assessee was part of the group of entities in respect of which the same view was taken, Tribunal upheld the order passed by the CIT(A) and dismissed the appeal of the Revenue. 9. Hence the present appeal by the Revenue. 10. Mr. Suresh Kumar, learned standing counsel, Revenue has referred to Section 68 of the Act and submits that Assessing Officer was fully justified in adding the cash deposits amounting to Rs. 4,78,94,000.00 to the income of the assessee thus bringing those within the ambit of the tax net as the assessee had failed to di....
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....th bogus bills showing making of speculation profit / loss or short term capital gains / loss etc. It was noticed that there were cash deposits totalling Rs. 4,78,94,000.00 in the bank accounts of the assessee which were not disclosed to the Income Tax Department. 14. During the assessment proceedings, the assessee submitted that it was involved in the business of facilitating and providing accommodation entries to the beneficiaries, details of which were explained during the search action. It was also explained that for such services rendered, assessee used to charge commission and the rate of commission was taken at 0.15%. It was contended that assessee had deposited the cash received from the customers / beneficiaries and issued corresponding cheques to them for which it earned commission. This is the admitted case. Therefore, Section 68 of the Act would not be attracted in such a case because the cash credits did not belong to or formed part of the income of the assessee. 15. However, the Assessing Officer did not accept the contention of the assessee. Taking the view that the cash credits were not satisfactorily explained, the total cash deposits of Rs. 4,78,94,000.00 was ad....
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....le to the present case and following the same, Tribunal affirmed the order of CIT (A). Tribunal further held that assessee and the other entities were part of the group of companies controlled by Mr. Mukesh Choksi and therefore the decision in M/s. Goldstar Finvest Pvt. Ltd. was clearly applicable to the case of the assessee. Since the order of CIT (A) was in conformity with the view taken by the Tribunal in the group concerns of the assessee, the appeal of the Revenue was dismissed. 18. Since Tribunal had relied upon its own decision in the case of M/s. Goldstar Finvest Pvt. Ltd., it would be useful to examine the same. In M/s. Goldstar Finvest Pvt. Ltd. which pertained to assessment year 2003-04, Tribunal noted that the same issue had arisen before it in the assessee's i.e., M/s. Goldstar Finvest Pvt. Ltd., own case for the assessment year 2002-03. In that case, Tribunal had observed that in these type of activities, brokers are only concerned with their commission on the value of transactions. Therefore, Tribunal posed the question to itself as to what would be the reasonable percentage of commission on the total turnover. Tribunal observed that in all similar cases the ave....
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....sessee is not in the opinion of the Assessing Officer satisfactory. In such a situation the sum so credited may be charged to income tax as the income of the assessee of the relevant previous year. But that is not the position here. It has been the consistent stand of the assessee which has been accepted by the First Appellate Authority and affirmed by the Tribunal that the business of the assessee centered around customers / beneficiaries making deposits in cash amounts and in lieu thereof taking cheques from the assessee for amounts slightly lesser than the quantum of deposits, the difference representing the commission realized by the assessee. The cash amounts deposited by the customers i.e., the beneficiaries had been accounted for in the assessment orders of these beneficiaries. Therefore, question of adding such cash credits to the income of the assessee, more so when the assessee was only concerned with the commission earned on providing accommodation entries does not arise. 21. Coming to the percentage of commission, Tribunal had already held 0.1% commission in similar type of transactions to be a reasonable percentage of commission. Therefore Tribunal accepted the percen....