DCIT, CC-4(4), Kolkata, Kolkata V. M/S. Sakhi Trade Link Pvt. Ltd., Kolkata

ITA 2275/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1205 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 29-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S ALLONG YADEN CIT LD
• Assessee Lawyers: A K UPADHYAY LD
• Keywords: Search and seizure; Accommodation entries
• Section: 143(3); 142(1); 131

Judgement Text

1 ITA NO.2275/K/14 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA BEFORE: SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A NO. 2275/KOL/2014 A.Y: 2011-12 D.C.I.T., C.C-4(4), KOLKATA VS. M/S. SAKSHI TRADE LINK PVT. LTD. PAN: AALCS 3353C [APPELLANT] [RESPONDEN T] FOR THE APPELLANT : SHRI SALLONG YADEN, ADDL.C IT, LD.SR.DR FOR THE RESPONDENT : SHRI A.K. UPADHYAY, ADVOCAT E, LD.AR DATE OF HEARING : 29-08-2017 DATE OF PRONOUNCEMENT : 03-11-2017 ORDER SHRI S.S.VISWANETHRA RAVI, JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL-II, K OLKATA DT. 24- 10-2014 FOR THE A.Y 2011-12. 2. THE ONLY ISSUE IS TO BE DECIDED AS TO WHETHER TH E CIT-A JUSTIFIED IN HOLDING THE ESTIMATION OF COMMISSION INCOME @ 0. 26% IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS A COMMISSION AGENT AND FILED ITS RE TURN OF INCOME SHOWING TOTAL INCOME OF RS. 3,18,200/- ON 16-02-201 2. NOTICES U/S. 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPON SE TO SAID NOTICES, THE ASSESSEE APPEARED AND FILED DETAILS. A SEARCH AND SEIZURE OPERATION IN THE CASE OF M/S. ELECTRO STEEL CASTING AND IN THE CASE OF SADBHAV GROUP WAS CONDUCTED, WHEREIN IT WAS ADMITTE D THAT M/S. SILICON REAL ESTATE AND ASSESSEE HAVE MADE ACCOMMOD ATION ENTRY FOR CLAIMING BOGUS COMMISSION AS EXPENSES. LIKEWISE, M /S. MONTECARLO CONSTRUCTION LTD HAS ALSO ADMITTED THAT IT USED TO DO SIPHON-OFF MONEY BY WAY OF BOGUS EXPENDITURE THROUGH ASSESSEE. THE AO WAS 2 ITA NO.2275/K/14 OF THE VIEW THAT BY WAY OF ACCOMMODATION ENTRY THE ASSESSEE COMPANY EARNED COMMISSION @ 0.10% TO 0.15% OF TURNO VER. THE AO SHOW CAUSED THE ASSESSEE AS TO WHY THE SAID AMOUNT SHOULD NOT BE ADDED AS UNDISCLOSED COMMISSION INCOME. HOWEVER, NO DOCUMENTS IN SUPPORT OF COMMISSION RECEIPT WAS PRODUCED BEFORE T HE AO BY THE ASSESSEE. CONSIDERING THE REPLIES OF THE ASSESSEE, HE ADDED AN AMOUNT OF RS. 87,35,940/- FOR PROVIDING ACCOMMODATI ON ENTRY TO THE TOTAL INCOME OF THE ASSESSEE AS UNDISCLOSED COMMISS ION INCOME. 4. IN CHALLENGE BEFORE THE CIT-A THE ASSESSEE CONTE NDED THAT IN THE STATEMENT, THE DIRECTOR OF THE ASSESSEE COMPANY HAS SPECIFICALLY STATED AND ADMITTED THAT FOR PROVIDING THE ACCOMMOD ATION ENTRIES THE MARGIN OF THE ASSESSEE COMPANY WAS 0.10% TO 0.15% A ND THE AO WAS NOT JUSTIFIED IN ASSESSING THE COMMISSION INCOM E @ 0.50% OF GROSS TURNOVER ON THE GROUND THAT THERE WAS NO EVID ENCE THAT THE RATE OF COMMISSION WAS FROM 0.10% TO 0.15%. THE ASS ESSEE ALSO ARGUED THAT THE ACCOMMODATION ENTRIES ARE PROVIDED TO HELP THE BENEFICIARIES TO CLAIM INFLATED EXPENSES. THE BENEF ICIARIES ARE REQUIRED TO DEDUCT TAX ON THE PAYMENTS MADE AGAINST THE ACCOMMODATION BILLS. THEREFORE, THE MARGIN OF THE C OMPANY PROVIDING ACCOMMODATION IS NOT MORE THAN 0.10% TO 0.15%. THE ASSESSEE ALSO CONTENDED THAT THE BENEFICIARIES IF DEDUCTED THE T AX AT HIGHER RATE THAN 0.10% TO 0.15%, THE EXCESS AMOUNT OF TDS HAS T O BE REFUNDED BY THE ASSESSEE COMPANY TO ITS BENEFICIARIES. IN VI EW OF ABOVE, IT WAS PLEADED BY THE ASSESSEE COMPANY THAT THE AO BE DIRE CTED TO RESTRICT THE ADDITION ON ACCOUNT OF UNDISCLOSED COMMISSION I NCOME @ 0.15% IN PLACE OF 0.50% AS ADOPTED BY THE AO. 5. THE CIT-A AFTER CONSIDERING THE ABOVE DIRECTED THE AO TO RECALCULATE THE TOTAL ASSESSED INCOME BY ADOPTING T HE RATE OF COMMISSION @ 0.26% OF TURNOVER AS AGAINST 0.50% BY THE AO. RELEVANT PORTION OF THE CIT-A ORDER IS REPRODUCED HEREIN BELOW FOR BETTER UNDERSTANDING:- 3 ITA NO.2275/K/14 5. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLA NT AND PERUSED THE ASSESSMENT ORDER. IT IS OBSERVED THAT THERE IS NO DISPUTE ON T HE FACT THAT THE ONLY ACTIVITY OF THE APPELLANT COMPANY WAS TO PROVIDE ACCOMMODATION ENTR IES OF SUB-CONTRACT ETC. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAD RECEIV ED INFORMATION FROM THE ACIT, CC-I, AHMEDABAD THAT THE APPELLANT COMPANY HAD PROVIDED A CCOMMODATION ENTRIES TO ONE MLS MONTE CARLO CONSTRUCTION LTD. IN FACT, IN THE COURS E OF ASSESSMENT PROCEEDINGS, THE AO ALSO RECORDED THE STATEMENT OF SHRI SUMIT SHARMA, T HE DIRECTOR OF THE APPELLANT COMPANY AND IN THAT STATEMENT HE ACCEPTED THAT THE APPELLANT COMPANY IS INDULGED IN THE ACTIVITY OF PROVIDING THE ACCOMMODATION ENTRIES . HE ALSO STATED THAT THE MARGIN OF THE APPELLANT COMPANY IN PROVIDING THE BOOK ENTRIES IS FROM 0.10% TO 0.15%. IT IS OBSERVED THAT ON THE BASIS OF INFORMATION RECEIVED FROM AHMEDABAD AS WELL AS THE ADMISSION MADE BY THE DIRECTOR OF THE APPELLANT COM PANY BEFORE THE AO, HE ACCEPTED THAT THE APPELLANT IS ENGAGED IN THE ACTIVITIES OF PROVIDING THE ACCOMMODATION ENTRIES. ON EXAMINATION OF THE PROFIT AND LOSS ACCOUNT, IT I S FOUND BY THE AD THAT THE APPELLANT COMPANY HAD SHOWN NET PROFIT OF RS.2,86,203/- ON TH E TURNOVER OF RS.181,66,01,622/- WHICH COMES TO 0.015%. HENCE, HE WAS OF THE VIEW TH AT THE APPELLANT COMPANY HAS NOT DECLARED PROFIT/COMMISSION INCOME @ 0.10% TO 0.15% AS CLAIMED AND ADMITTED BY THE DIRECTOR OF THE COMPANY IN HIS STATEMENT U/S 131 OF THE ACT. UNDER THE CIRCUMSTANCES, IN THE ABSENCE OF ANY EVIDENCE, THE AO ESTIMATED THE C OMMISSION @ 0.50% OF THE TURNOVER. ON THE OTHER HAND, IT IS CONTENDED BY THE APPELLANT THAT THE COMMISSION INCOME SHOULD HAVE BEEN ESTIMATED BY APPLYING THE R ATE NOT MORE THAN 0.15% BECAUSE THE MARGIN OF THE COMPANY WAS RANGING FROM 0.10% TO 0.15% ONLY AS STATED BEFORE THE AO. DURING THE COURSE OF APPELLATE PROCEEDINGS IT I S OBSERVED BY ME THAT THE SAME AO HAS MADE ASSESSMENT IN ANOTHER CASE NAMED AS M/S SA FECO PROJECTS PVT. LTD. U/S 143(3) OF THE ACT ON 27.03.2013 FOR THE A.Y. 2011-12. IN T HAT CASE ALSO, THE AO HAD RECEIVED INFORMATION FROM THE ACIT, CC-I, AHMEDABAD THAT THE SAID COMPANY WAS PROVIDING ACCOMMODATION ENTRIES TO AHMEDABAD BASED COMPANY M/ S MOTE CARLO CONSTRUCTION LTD. IN THE CASE OF M/S SAFECO PROJECTS PVT. LTD. ALSO, THE AD RECORDED THE STATEMENT OF THE DIRECTOR OF THAT COMPANY U/S 131 OF THE ACT AND IN THAT STATEMENT THE DIRECTOR OF THE COMPANY ADMITTED COMMISSION MARGIN IN PROVIDING THE ACCOMMODATION ENTRIES RANGING FROM 0.10% TO 0.15% OF THE TURNOVER. ON EXAMINATION OF THE PROFIT AND LOSS ACCOUNT OF THAT COMPANY, IT WAS OBSERVED BY THE AO THAT THE NE T PROFIT SHOWN WAS @ 0.26% OF THE GROSS CONTRACT TURNOVER. SINCE, THE NET PROFIT SHOW N @ 0.26% WAS MORE THAN THE 0.10% TO 0.15% ADMITTED BY THE DIRECTOR OF THE M/S SAFECO PROJECTS PVT. LTD., THE AO ACCEPTED THE SAME AND NO FURTHER ESTIMATION ON ACCOUNT OF CO MMISSION INCOME WAS MADE BY HIM. THUS, THE AO ACCEPTED THE COMMISSION @ 0.26% IN THA T CASE. IN THE CASE OF APPELLANT COMPANY, THE FACTS ARE SIM ILAR TO THE FACTS IN THE CASE OF SAFECO PROJECTS PVT. LTD. AND IN THE CASE OF THE APPELLANT COMPANY ALSO INFORMATION WAS RECEIVED BY THE AO THAT THE COMPANY WAS PROVIDI NG ACCOMMODATION ENTRIES OF SUB- CONTRACT TO THE AHMEDABAD BASE COMPANY M/S MONTE CA RLO CONSTRUCTION LTD. IN THE CASE OF APPELLANT COMPANY ALSO THE DIRECTOR ANY STATED B EFORE THE AO THAT MARGIN OF THE COMPANY WAS RANGING FROM 0.10 TO 0.15%. IN THE CAS E OF APPELLANT COMPANY ALSO THE YEAR INVOLVED IS A.Y 2011-12 AS IN THE CASE OF SAFC O PROJECTS PVT. LTD AND THE ASSESSMENT U/S. 143(3) WAS MADE ON 27.03.2014. IN V IEW OF ABOVE, I AM OF THE OPINION THAT IT WOULD BE JUSTIFIABLE TO ESTIMATE THE COMMIS SION INCOME OF THE APPELLANT COMPANY @ 0.26% OF THE TURNOVER. THEREFORE, THE AO IS DIREC TED TO RECALCULATE THE TOTAL ASSESSED INCOME BY ADOPTING THE RATE OF COMMISSION @ 0.26% O F THE TURNOVER. THE GROUND NO. 1 AND 2 ARE PARTLY ALLOWED. 6. THE LD.AR REITERATED HIS SAME SUBMISSIONS AS MAD E BEFORE THE CIT-A. ON THE OTHER HAND, THE LD.DR RELIED ON THE O RDER OF THE AO. 7. HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE COMPANY PROVI DED ACCOMMODATION ENTRIES. WE FIND THAT SHRI SUMIT SHA RMA, ONE OF THE DIRECTOR OF THE ASSESSEE COMPANY IN HIS STATEMENT U /S. 131 OF THE ACT ADMITTED THAT THE ASSESSEE COMPANY INDULGED IN THE ACTIVITY OF 4 ITA NO.2275/K/14 PROVIDING THE ACCOMMODATION ENTRIES. WE FIND THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS IN THE CASE O F SAFECO PROJECTS PVT. LTD IN ITA NO.1948/KOL/2014 FOR THE A.Y: 2010 -11 , SINCE THE NET PROFIT SHOWN @ 0.26% WAS MORE THAN THE 0.10% TO 0.15%, WHICH WAS ADMITTED BY THE DIRECTOR OF M/S. SAFECO P ROJECTS PVT. LTD IN ITS ASSESSMENT AND THE AO ACCEPTED THE SAME. THUS, THE AO ACCEPTED THE COMMISSION @ 0.26%. WE FURTHER FIND THE A.Y I NVOLVED IN THE CASE OF ASSESSEE COMPANY IS 2011-12 AND THE SAME AS IN THE CASE OF SAFECO PROJECTS PVT. LTD AND THE ASSESSMENT U/S. 14 3(3) U/S. 143(3) WAS MADE ON 27.03.2014. IN THE PRESENT CASE, THE AO ESTIMATED THE COMMISSION @ 0.50%, WHICH IS NOT JUSTIFIED IN THE F ACTS AND CIRCUMSTANCES OF THE CASE AND, THEREFORE, THE ORDER OF CIT-A DIRECTING THE AO TO RECALCULATE THE TOTAL ASSESSED INCOME BY ADOPTING THE RATE OF COMMISSION @ 0.26% OF THE TURNOVER IS J USTIFIED. WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE CIT-A AND IS IT IS JUSTIFIED. THEREFORE, THE GROUNDS RAISED BY THE REVENUE ARE DI SMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03- 11-2017 SD/- SD/- P.M. JAGTAP S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 03-11-2017 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT/DEPARTMENT: DCIT, CC-4(4), AAYKAR BHAWAN POORVA, 5 TH FLOOR, 110 SHANTI PALLY, KOLKATA-107. 2 RESPONDENT /ASSESSEE: M/S. SAKSHI TRADE LINK PVT. L TD 81/B, DIAMOND HARBOUR ROAD, KHIDDERPORE, KOLKATA-23. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, SR.PS/H.O.O,ITAT,KOL 5 ITA NO.2275/K/14