ASHOK KUMAR TYAGI V. ACIT CIRCLE 28 NEW DELHI

ITA/760/2023

AI Insights

The case involves Ashok Kumar Tyagi, the appellant, contesting the taxability of commission income recognized by the Income Tax Department. The primary legal contention revolved around the computation of commission income at a rate of 1.4%, which the appellant argued was incorrectly assessed. The Income Tax Appellate Tribunal had earlier reduced this rate to 1% after acknowledging certain expenses related to earning this income. The High Court of Delhi, upon reviewing the matter, found no substantial question of law that warranted further examination, leading to the dismissal of the appeals.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 756184 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 20-08-2024
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: YOJIT PAREEK
• Assessee Lawyers: MD
• Keywords: Accommodation entries; Assessment years; Commission income; Evidentiary value; Taxable income
• Section: 271(1)(c); 132; 132-A

Judgement Text

"ITA 760/2023 & 761/2023 Page 1 of 6 $~16&17 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 760/2023 & CM APPL. 12129/2024 (Submitting Addl. Document) ASHOK KUMAR TYAGI .....Appellant Through: Md. Zunaid, Adv. versus ACIT CIRCLE 28 NEW DELHI .....Respondent Through: Mr. Yojit Pareek, JSC. 17 + ITA 761/2023 & CM APPL. 12128/2024 (Submitting Addl. Document) ASHOK KUMAR TYAGI .....Appellant Through: Md. Zunaid, Adv. versus ACIT CIRCLE 28 NEW DELHI .....Respondent Through: Mr. Yojit Pareek, JSC. CORAM: HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE RAVINDER DUDEJA O R D E R % 20.08.2024 1. Pursuant to the liberty granted by us on the previous occasion, learned counsel for the appellant has placed the following revised questions of law proposed for our consideration in these appeals and which are extracted hereinbelow: “1. Whether the Appellate Tribunal (Delhi) below correctly decided the issue of commission without any observation concerning the ground no. 5 which was taken by the Appellant before the Tribunal for deletion of entire commission of 1.4%. 2. Whether the Appellate Tribunal (Delhi) failed to appreciate the fact that the documents seized under 132 and 132(A) of the Income Tax Act, 1961 have to have some Evidenciary value qua the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 22/08/2024 at 12:19:49 ITA 760/2023 & 761/2023 Page 2 of 6 Appellant (assessee herein) for the purpose of having a reason to the believe that the said document is having nexus with Appellant’s (Assessee) income. 3. Whether the Appellate Tribunal (Delhi) below had gone wrong in determining and deciding the question of fact in dispute without conducting any examination and scrutiny of the documents and material on record of the lower authorities as the inference and conclusion was derived without appreciating the true facts leading to an order bad in law and against the facts of the case. 4. Whether the Tribunal below acted in contradiction to law while deciding the issue of commission, without even considering any of the documents so considered by the Lower Authorities while deciding & determining issue of commission. 5. Whether the Tribunal below acted in contradiction to law to have inferred and concluded certain issues of commission without going in to the true facts of the case and without appreciating the documents on record.” 2. On both the appeals, the solitary ground which was essentially pressed was with respect to the computation of commission income which was liable to be recognised as taxable in the hands of the appellants. 3. From the order of the Commissioner of Income Tax (Appeals)1, we note that insofar as commission income is concerned, the said authority had taken note of the copious findings of fact which had come to be rendered by the Assessing Officer2 in previous years. For instance and insofar as Assessment Year3 2012-13 is concerned, the AO had found as follows: “2012-13 13. During the year under consideration, the assessee, in his return of income has shown income from salary, profit and gains from business, and income from other sources. 14 Vide questionnaire dated 05.03.2015 the assessee was confronted with the fact that the enquiries made by the department revealed that the companies from whom the share capital/share 1 CIT(A) 2 AO 3 AY This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 22/08/2024 at 12:19:49 ITA 760/2023 & 761/2023 Page 3 of 6 premium is shown to have been received by M/s Garden View Foods Pvt. Ltd., M/s Nihantri Realtors Pvt. Ltd. and Geemed Promoters Pvt. Ltd. during the financial years 2010-11 and 2011- 12 had no financial parameters to invest such huge amounts in these companies because the directors of those companies are neither traceable nor have they complied to the summons issued to them and further that the conduct of bank accounts of these companies establishes the fact that these are mere paper companies formed only to provide entries to other companies/entities. From this, it transpires that the money shown to have been received from the said non-est companies by your companies M/s Garden View Foods Pvt. Ltd., M/s Nihantri Realtors Pvt. Ltd. and Geemed Promoters Pvt. Ltd. during the financial years 2010-11 and 2011-12 as share capital/share premium also remains unexplained and this also shows that these three companies are also entry operators formed for the purpose of providing entries to other companies. Since the assessee is the Director in these three companies, based on the calculation of commission appearing on page 66 to 68 of Annexure A-3 seized from assessee's Noida residence where commission @ 1.4% is shown to have been received by him, he was asked to explain why commission on the same rate of 1.4% should be charged on the amounts shown to have been received by these companies as share capital/share premium from the non-est companies. The assessee vide above questionnaire was also required to explain as to why commission @ 1.4% on the share capital/share premium appearing in the case of M/s Sara Fund & Show Biz and M/s Pixel Engineering should not be assessee in his hands on similar basis. The assessee has not filed any reply in this regard also. The assessee has not filed any reply in this regard. In view of these facts commission @ 1.4% is being charged on the total amount of Rs.16,44, 10,000/- which works out to Rs.23,01,740/- for the assessment year 2011-12 and on total amount of Rs.34,84,00,000/- which works out to Rs.48,77,600/- for the assessment year 2012-13 and the same will be assessed in the hands of the assessee as his commission income for providing entries of the above said amounts during the relevant assessment year. The company wise and year wise commission income of the assessee has been calculated as under: S. No. Name of the company FY 2010-11 relevant to AY 2011-12 (Amount in rupees) FY 2011-12 relevant to AY 2012-13 (Amt. in Rupees) 1. Garden View Foods Pvt. Ltd. 1.47 crores 14.27 crores 2. Nihantri Realtors -- 16.64 crores This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 22/08/2024 at 12:19:49 ITA 760/2023 & 761/2023 Page 4 of 6 Pvt. Ltd. 3. Geemed Promoters Pvt. Ltd. 9.90 crores -- 4. Sara Fund & Show Biz 2,33,00,000 1,05,50,000 5. Pixel Engineering Pvt. Ltd. 2,74,10,000 2,58,00,000 Total 16,44,10,000 34,84,00,000 Commission @ 1.4% 23,01,740 48,77,600 15. Vide this office letter dated 05. 03.2015 the assessee was required to explain the document appearing as page No. 66, 67 & 68 of Annexure A-3 (party M-6) and the entries appearing in the said age. The relevant portion of this letter is reproduced as under: \"Your attention is invited to page No. 66, 67 and 68 of annexure A- 3 found and seized from your Noida premises. Vide this office letter dated 12.12.2014 ou were required to explain the entries in these documents. You have not filed any reply. With a view to affording you another opportunity you are once again requested to explain the entries on these pages. Your attention is also invited to the increase in share capital/share premium in the assessment years 2011-12 and 2012-13 in the case of M/s Sara Fund & Show Biz' and M/s Pixel Engineering Pvt. Ltd., Garden View Foods Pvt. Ltd., Nihantri Realtors Pvt. Ltd. and Geemed Promoters Pvt. Ltd. of Rs.2,33,00,000/- and Rs.1,05,50,000/- (Sara Fund & Show Biz.), of Rs. 2,74,10, 000/- and Rs. 2,58,00, 000/- (Pixel Engg .... ), of Rs.1.47 crore and Rs.14.27 crore (Garden View Foods Pvt. Ltd.), of Rs. 16.64 crore (Nihantri Realtors Pvt. Ltd. and Rs. 9. 90 crore (Geemed Prtomoters Pvt. Ltd.) respectively. The enquiries conducted during search and post search investigation reveal that parties from whom this share capital/share premium is shown to have been received are either non-est or have no financial position to advance such huge amounts as share capital/share premium and therefore the above companies have also been formed for the purposes of providing accommodation entries. You are requested to explain as to why, on the basis of page No. 66 seized from your same premises which contains figure of 1.4% as commission on transactions of Rs.27,92,95,0001-, the commission @ 1. 4% should not be charged on the total amounts of share capital/share premium of all these companies and assessed as commission income in your hands in the assessment year 2011-12 and 2012-13. Your reply to the above queries should reach this office by 11.03.2015 failing which commission @ 1.4% will be charged on the above said share capital/share premium of M/s Sara Fund & Show Biz and M/s Pixel Engineering Pvt. Ltd. and will be assessed in your hands during the assessment years 2011-12 and 2012-13.\" This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 22/08/2024 at 12:19:49 ITA 760/2023 & 761/2023 Page 5 of 6 15.1 The assessee has not filed any reply. Therefore, the above figure of Rs. 48, 77, 600/- is being treated as the commission and is being assessed in the hands of the assessee as his commission income. Since the assessee has concealed his income by filing inaccurate particulars, I am satisfied that the provisions of section 271(1)(c) of the Act are attracted in this case and therefore penalty proceedings will be initiated on this count.\" 4. Similar findings were rendered for AY 2013-14, wherein the CIT(A) ultimately and while examining the issue of commission income had come to the following conclusions: “6.3 I have considered the findings recorded by the ld. AO as per the assessment order, the submissions made by the ld. AR and the facts of the case on record. A perusal of the assessment order reveals that the companies from whom the share capital/share premium is shown to have been received by companies of the appellant viz. Garden View Foods Pvt. Ltd, Nihantri Realtors P. Ltd and Geemed Promoters Pvt. Ltd, Sara Fund & Show Biz P. Ltd. and Pixel Engineering Pvt. Ltd. (in the Financial Years2010- 2011 and 2011-2012) had no financial capacity to invest. Page nos. 66 to 68 of Annx. A-3 seized show receipt of Commission @ 1.4% from these companies. Further, the Directors of these companies were not traceable. The appellant was specifically asked to explain as to why commission @ 1.4% on the share capital appearing in the case of M/s Sara Fund & Show Biz and Pixel Engineering should not be taxed in his hands on the basis of the above. The appellant despite having been specifically asked vide questionnaire dated 05.03.2015, did not file any reply. Resultantly, the AO brought to tax the commission income of Rs. 23,01,740/-@ 1.4% on the entries of Rs.16,44,10,000/- provided by the companies of the appellant for the Assessment Year 2011-12 and an addition of Rs.48,77,60/- @ 1.4% on the entries totalling to Rs.34,84,00,000/- for the Assessment Year 2012-13. 6.4 In addition to the above, the AO had also asked the appellant to explain the contents of page nos. 66,67,68 of Ann. A-3 which showed various parties to have taken accommodation entries totalling to Rs.27,92,95,000/- on which commission @ 1.4% worked out to 39,10,000/-. Since, the appellant had failed to file explanation to this effect, ld. AO brought to tax this sum of Rs.39,10,000/- as unaccounted income being the commission received on the accommodation entries provided for the Assessment Year 2011-12. 6.5 Qua the addition made by the AO on account of Commission income for the Assessment Year 2013-14, it is seen that the AO has specifically placed reliance on the document seized during the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 22/08/2024 at 12:19:49 ITA 760/2023 & 761/2023 Page 6 of 6 course of search showing charging of some amount on the entries provided. The contents of this document have neither been disowned nor have they been denied 'as not representing the correct picture'. Even in the appeal, no attempt has been made to show as to how the addition made by the AO was not correct. In so far as the argument that in the case of MGC Estate P. Ltd, the addition made on account of capital received from the two companies of the appellant have been deleted holding them to be genuine is concerned, it is held that the same is not relevant to the issue when the addition is based on the documents seized. Under the circumstances, the arguments/submissions of the appellant are not tenable.” 5. It was the aforesaid findings which ultimately came up for consideration before the Income Tax Appellate Tribunal4. The Tribunal has upon a holistic examination of the issues which were canvassed, ultimately held as follows: “Commission Income: 12. The ld. CIT(A) confirmed addition made on commission income @ 1.4% on a gross basis. Before us, it was pleaded that no provision for expenses incurred for earning such income has not been given by the revenue. It cannot be said that the assessee incurred absolutely no expenses for earning such income. Hence, keeping in view, the sub-commission payments and other expenses, we determine 1% as the net commission income earned. The assessee gets relief of 0.4% on the commission income determined.” It has thus accorded relief to the assessee to the extent noticed above. 6. Bearing in mind the aforesaid, we find that the appeals fail to raise any substantial question of law. 7. They shall, consequently, stand dismissed. YASHWANT VARMA, J. RAVINDER DUDEJA, J. AUGUST 20, 2024/kk 4 Tribunal This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 22/08/2024 at 12:19:49 "