Lucky Bajoria, Ahmedabad V. The ITO, Ward-6(1)(4), Ahmedabad

ITA 345/AHD/2021

AI Insights

The case involves two appeals: one by the assessee, Lucky Bajoria, and the other by the Revenue, against the order of the National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2016-17. The primary contention revolves around the rate of commission income assessed by the AO and contested by the assessee, who argued for a lower commission rate based on his business of cheque discounting. The CIT(Appeals) had reduced the commission rate from 8% to 1%, which the assessee further contested. The Department appealed against the CIT(Appeals)' decision to lower the commission rate. The Tribunal, after considering the submissions and lack of detailed evidence from the assessee, decided to compute the commission income at 0.25% and dismissed the Department's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131338 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 28-02-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 22-12-2021
• Other Referred Cases: Geetaben Dineshchandra Gupta v. ITO, PCIT v. Alag Securities (P.) Ltd, Manoj Kumar Jain v. DCIT, Chintan Niketan Bhandari v. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect; Set aside
• Section: 68; 250; 44AB

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Lu cky Bajoria, D-6, Rajdeep Park, Meera Cine ma Char Rasta, Maninagar, Ah me dabad PAN: BPPP B64 21R (Appellant) Vs The ITO, Ward-6(1)(4), Ah med abad (Resp ondent) Th e ITO, Ward-6(1 )(1), Ah medabad (Appellant) Vs Luck y Bajoria, D-6, Rajd eep Park, Meera Cin ema Char Rasta, Man in agar, Ah med abad PAN: BPPP B6 421R (Resp ondent) Asses see b y : Shri Vartik Cho ks hi, A. R. & Shri Biren Shah, A. R. Revenue by : Shri Vijay Kumar J aisw al, CIT-D. R . & Shri Atul Pandey , S r. D. R. Date of hearing : 01-03 -2 023 Date of pronouncement : 19-04 -2 023 ITA No. 345 /Ahd/2021 Assessment Year 2016-17 ITA No. 94 /Ahd/2022 Assessment Year 2016-17 I.T.A No. 345/Ahd/2021 & 94/Ahd/2022 A.Y. 2016-17 Page No. Lucky Bajoria vs. ITO & ITO vs. Lucky Bajoria 2 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- These two appeals filed the Assessee and the Revenue are against the order of the National Faceless Appeal Centre (NFAC), Delhi, in proceeding u/s. 250 of the Act, vide order dated 26/11/2021, passed for assessment year 2016-17. 2. The assessee has taken the following grounds of appeal: Grounds of Appeal Tax effect relating to each Ground of appeal 1. On the facts and in the circumstances of the case of the appellant, the Ld. CIT (A) has erred in not appreciating the submissions before him and giving directions to the AO to estimate commission at 1% as against the commission income of 0.05% as explained before him. 'He ought to have held that the commission income would not be more that 0.05% of the deposits. Rs.52,74,144/- 2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in upholding addition of Rs.3,21,730 made by the AO on account of cash deposit in the bank account. Having regard to facts of the case, the said addition ought to have been deleted. Rs.1,1 1,344/- 3. The appellant craves leave to add, alter, amend and/or to raise any ground as occasion may arise before the Hon'ble ITAT either during the course of the appellate hearing N.A. Total tax effect (including surcharge @ 12% and education cess @3%) Rs.53,85,488/- I.T.A No. 345/Ahd/2021 & 94/Ahd/2022 A.Y. 2016-17 Page No. Lucky Bajoria vs. ITO & ITO vs. Lucky Bajoria 3 3. The Department has taken the following grounds of appeal: Grounds of Appeal Tax effect relating to each Ground of appeal (see note below) 1. The CIT(A) has erred in law and on facts in deleting the commission income of Rs. l1,07,61,000/- by adopting commission rate @ 1% instead of 8% without properly appreciating the facts of the case and the material brought on record. Rs.3,83,32,167/- 2. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 3. It is therefore prayed that the order of the Ld.CIT(A) may be set aside and that of the order of the Assessing Officer be restored. Total tax effect (see note below) Rs.3,83,32,167/- We shall first take up the assessee’s appeal Ground Number 1: Ld. CIT(Appeals) erred in holding that the assessee has earned commission income @ 1% of total receipts in bank account 4. The brief facts of the case are that the assessee filed return of income for assessment year 2006-17 declaring total income of 4,55,650/-. During the course of assessment, the Assessing officer observed that there are voluminous financial transactions in the bank accounts held by the assessee. I.T.A No. 345/Ahd/2021 & 94/Ahd/2022 A.Y. 2016-17 Page No. Lucky Bajoria vs. ITO & ITO vs. Lucky Bajoria 4 The assessing Officer observed that during the year under consideration, the total deposits in the bank accounts held by the assessee amounted to 157.98 crores. During the course of assessment, the assessee submitted that it is engaged in the business of earning commission income by carrying the business of cheque discounting and during the year under consideration, the assessee earned commission @0.05% on the aforesaid deposits of 157.98 crores. Therefore, the assessee earned commission of 7,89,900/- on total deposits of 157.98 crores @0.05% and against the same, the assessee incurred expenses to the tune of 3,34,250/- and hence the net commission earned by the assessee during the year was 4,55,650/ - which was offered to tax under the head “income from other sources” in the return of income filed by the assessee. Further, the assessee submitted that it is not maintaining any books of accounts and is also not maintaining any cash book or bank book etc. During the course of assessment, the assessee was asked to submit details of cheque discounting business and to provide names and addresses and amount of commission earned in respect of transactions appearing in the bank accounts held by the assessee. However, the assessee was unable to provide any details regarding the commission earned on the deposits made in the bank accounts of the assessee. Accordingly, in absence of any details forthcoming from the assessee, the AO estimated the commission income of the assessee @8% of the total credits/ deposits in the bank accounts held by the assessee under section 44AB of the Act. Accordingly, the AO held that a sum of 12,65,84,000/- was the commission income of the assessee on the total turnover of 158 crores computed @8% of the credits appearing in the bank accounts held by the assessee. I.T.A No. 345/Ahd/2021 & 94/Ahd/2022 A.Y. 2016-17 Page No. Lucky Bajoria vs. ITO & ITO vs. Lucky Bajoria 5 5. In appeal before Ld. CIT(Appeals), the assessee submitted that the AO has not brought anything on record, including comparable evidences to prove that the commission income earned by the assessee is @8%. Further, the assessee placed reliance on several judicial precedents in support of the contention that a reasonable percentage of commission may be taken, looking into the facts of the case. However, the Ld. CIT(Appeals) observed that despite several opportunities being given by the assessing officer to the assessee to explain these transactions, the assessee has only submitted that he has earned commission at the rate of 0.05% without any supporting evidence. Accordingly, since the assessee has not maintained any books of accounts and in absence of any details whatsoever forthcoming from the assessee, the AO was left with no other option but to estimate the commission income. On the issue of appropriate percentage to be taken to calculate the commission income earned by the assessee, the Ld. CIT(Appeals) held that looking at the decisions rendered by various authorities, the appropriate rate of commission may be taken as 1% on such accommodation entries and directed the assessing officer to re-compute the income accordingly. 6. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) restricting the addition to 1% of the total credits appearing in the bank account of the assessee. Before us, the counsel for the assessee primarily reiterated the submissions made before the Ld. CIT(Appeals) and the AO to the effect that the assessee is earning commission @ 50/- per lakh and accordingly the percentage adopted by I.T.A No. 345/Ahd/2021 & 94/Ahd/2022 A.Y. 2016-17 Page No. Lucky Bajoria vs. ITO & ITO vs. Lucky Bajoria 6 the Ld. CIT(Appeals) is highly excessive looking into the facts of the instant case. The counsel for the assessee has placed reliance on several judicial precedents in support of his contention that a rate of 0.1% to 0.15% may be adopted as commission in absence of details forthcoming from the assessee. In response, DR submitted that during the year under consideration, there were total deposits amounting to 158 crores approximately in the bank accounts held by the assessee. The assessee has given no details as to from whom such huge deposits have been received and who are the parties from whom such commission income has been received. The assessee has not maintained any books of accounts in respect of the aforesaid commission income, the assessee has provided no details of parties from whom commission income have been received, the assessee has not maintained any bank book and cash book and the assessee has not been able to give any basis whatsoever as to why the commission income should be computed @ 50/- per lakh, in the facts of the assessee’s case. Accordingly, there is no infirmity in the order of Ld. Assessing Officer in holding that a sum of Rs. 12.65 crores was the commission income earned by the assessee. 7. We have heard the rival contentions and perused the material on record. We observe that in the instant facts, despite ample opportunities, the assessee has not been able to furnish any details of parties from whom such deposits have been received, the modus operandi as to how commission income is earned by the assessee, the details of the parties from whom commission income has been received and has simply relied on judicial precedents in support of his contention that the commission income should be restricted to 0.1% to 0.15% of the total deposits/ credits in the bank I.T.A No. 345/Ahd/2021 & 94/Ahd/2022 A.Y. 2016-17 Page No. Lucky Bajoria vs. ITO & ITO vs. Lucky Bajoria 7 account. Further, we observe that the assessee is not maintaining any books of accounts and has no supporting documents/evidence to prove that he is earning commission income and if so, at what rate the same is being earned. No such details were also submitted during the course of appellate proceedings before Ld. CIT(Appeals). In the case of Geetaben Dineshchandra Gupta v. ITO 129 taxmann.com 346 (Gujarat), the Gujarat High Court made the following observations: Thus, considering the totality of facts and the circumstances of the instant case vis-a-vis considering the settled legal position, it appears that there is direct nexus/live link between the material coming to the notice of the Assessing Officer and that for formation of his belief that there has been escapement of the income of the assessee from assessment in the year under consideration because of his failure to disclose fully and truly all material facts as from the inquiry/investigation by the Investigation Wing, some tangible material was found to substantiate the fact that the assessee was the provider of accommodation entries and that, the income from commission, ranging from 0.5 per cent to 1 per cent was not disclosed in return and thereby, the income chargeable to tax had escaped assessment for the year under consideration. As emerges from the record, the petitioner has filed Rol for the assessment year 2012-13 disclosing income of Rs. 1.42,694 despite showing a huge turnover of Rs. 24,10,82,501 in the audited books of account. Further, a detailed investigation is carried out by the Investigation Wing and the outcome of the same prima facie substantiates the case of the I.T.A No. 345/Ahd/2021 & 94/Ahd/2022 A.Y. 2016-17 Page No. Lucky Bajoria vs. ITO & ITO vs. Lucky Bajoria 8 department. Thus, formation of belief by the Assessing Officer that the income chargeable to tax has escaped assessment, based upon material derived during inquiry/investigation, appears to be justified. Thus, the petition failed and dismissed. 7.1 In the case of PCIT v. Alag Securities (P.) Ltd117 taxmann.com 292 (Bombay), the High Court held that 0.15% rate of commission offered to tax by the assessee was a reasonable rate in facts of the assessee’s case . 7.2 In the case of Manoj Kumar Jain v. DCIT ITA No. 554/Del/2017, the Delhi ITAT held that commission of 0.5% to be reasonable considering the facts of the case. While passing the order, the ITAT observed as under: 3. The moot issue involves assessment of cash deposits found in the bank account of the assessee of Rs.7.37 Crs. and commission earned at the rate of 3% on the said amount of Rs.7.37 Crs. to the tune of Rs.22.12 lacs. The assessee has been alleged to be an entry operator providing bills of purchase & sales without any actual business transactions. 4. The amount of Rs.7.37 Crs. has been added on protective basis and information regarding the beneficiaries was passed on to the Assessing Officer having jurisdiction over the beneficiaries for substantive assessment. The commission of Rs.22.12 lacs has been added on substantive basis. 5. The Co-ordinate Bench of ITAT in ITA No.3561/Del/2015 vide order dated 22.05.2020 has adjudicated on both the issues. The I.T.A No. 345/Ahd/2021 & 94/Ahd/2022 A.Y. 2016-17 Page No. Lucky Bajoria vs. ITO & ITO vs. Lucky Bajoria 9 addition being protective in nature has been deleted by the order of the Tribunal. The commission charged @3% has been brought down to 0.5%. 6. Since, the issues stands squarely covered by the earlier order of the Tribunal in the absence of any material change and the facts of the case except the amount involved, we hereby hold as under: a) The addition made on protective basis is directed to be deleted b) The commission to be charged @0.5% 7.3 In the case of Chintan Niketan Bhandari v. DCIT IT(SS)A Nos. 495, 496, 497, 498, 499, 500 & 1604/Ahd/2019, the jurisdictional Ahmedabad ITAT vide order dated 29-11-2022 held that since the assessee failed to provide complete details regarding the commission income, the commission income may be computed @ 0.25% in the hands of the assessee. While passing the order, the ITAT made the following observations: 8.2 Now coming to the instant facts, we observe that the assessee has been running several concerns in the name of himself and in the name of other persons who are engaged in the activities of taking cheques and cash and deposited the same in their bank accounts. The assessee’s contention is that he is merely acted as a commission agent and hence only the commission amount should be subject to tax in its hands. However, the Department has observed that the assessee could not produce that complete details of beneficiaries with their names, complete addresses, PAN and other details of transactions. In the I.T.A No. 345/Ahd/2021 & 94/Ahd/2022 A.Y. 2016-17 Page No. Lucky Bajoria vs. ITO & ITO vs. Lucky Bajoria 10 instant case, there are approximately more than 7000 beneficiaries and only in the case of 116 beneficiaries, the PAN has been identified. For 2752 entries, PAN has not been identified. For balance entries, only part details are available. If the assessee is submitting that he is liable to be taxed only on the commission income so earned, then the onus is on the assessee to provide the basis as to how such commission income has been arrived at and list of beneficiaries and other details so that whether the correct amount of “commission income” has been offered to tax may be verified by the Department. The Department cannot be expected to find out the details of all beneficiaries itself and cannot accept whatever income or expenses are offered/claimed by the assessee, without the assessee providing any methodology of arriving at the same along-with supporting evidence viz. details of beneficiaries, details of middlemen, basis of arriving at commission etc. In the instant facts, the assessee has submitted that he was operating through middlemen and does not know the name of beneficiaries in most of cases. However, most times, even the middlemen could not be contacted by the Department, since notices could not be served upon them as they were not available. Accordingly, in absence of details forthcoming from the assessee, a reasonable percentage may be arrived at, in the instant facts to arrive at the “commission” income earned by the assessee. In our view, looking into the totality of facts, it would be reasonable to take 0.25% of total deposits in the bank accounts owned/ operated by the assessee ( 295,56,30,168 for assessment year 2017-18), as I.T.A No. 345/Ahd/2021 & 94/Ahd/2022 A.Y. 2016-17 Page No. Lucky Bajoria vs. ITO & ITO vs. Lucky Bajoria 11 commission income of the assessee for the assessment year under consideration. 7.4 Now coming to the instant facts, we observe that the assessee has submitted that it has earned commission income, however, no details regarding the commission income earned by the assessee was furnished to the Department during the course of assessment or appellate proceedings. As held in the judicial precedents highlighted above, if the assessee is submitting that he is liable to be taxed only on the commission income so earned, then the onus is on the assessee to provide the basis as to how such commission income has been arrived at and also to provide list of beneficiaries and other details so that whether the correct amount of “commission income” has been offered to tax may be verified by the Department. However, the assessee has not maintained any books of accounts, has not maintained cash book and bank book, he has not submitted any details of parties from whom the commission income has been earned, the assessee has not given any supporting documents to corroborate the correct rate at which commission income may be computed and the assessee has also not provided details/ list of parties who have made deposits to the tune of 158 crores in the bank accounts held by the assessee. The assessee has not come up with any details to substantiate its stand that the commission income may be restricted to 0.1% to 0.15%. Accordingly, looking into the instant facts, in the interests of justice, it would be reasonable to restrict the net commission income @0.25% of the total deposits in the bank account held by the assessee. In the result, ground number 1 of the assessee’s appeal is partly allowed. I.T.A No. 345/Ahd/2021 & 94/Ahd/2022 A.Y. 2016-17 Page No. Lucky Bajoria vs. ITO & ITO vs. Lucky Bajoria 12 8. In the result, ground number 1 of the assessee’s appeal is partly allowed. Ground number 2: Ld. CIT(Appeals) has erred in upholding addition of 3,21,730/ - made by the AO on account of cash deposit in the bank account 9. The brief facts in relation to this ground of appeal are that during the course of assessment proceedings, the AO observed that assessee had made total cash deposits of 3,21,730/ - in one of the bank accounts held by the assessee. However, the assessee was unable to explain the source of such cash deposits. Accordingly, the AO added the aforesaid amount as unexplained income under section 68 of the Act in the hands of assessee. In appeal, Ld. CIT(Appeals) upheld addition made by the AO. 10. Before us, the submission of the counsel for the assessee is that the assessee has already declared income of 4,55,650/- in the return of income as income from other sources. Accordingly, if commission income is being added separately to the income of the assessee, the aforesaid receipts of 3,21,730/- may be considered as part of income of 4,55,650/-declared by the assessee in it’s return of income. In response, DR relied upon the observations made by Ld. CIT(Appeals) and AO in their respective orders. 11. We have heard the rival contentions and perused the material on record. In our considered view, we find force in the argument of the assessee that if the commission income has been separately determined on a I.T.A No. 345/Ahd/2021 & 94/Ahd/2022 A.Y. 2016-17 Page No. Lucky Bajoria vs. ITO & ITO vs. Lucky Bajoria 13 percentage basis of the cash deposits appearing in the account of the assessee, then the aforesaid deposit of 3,21,730/ - may be considered as part of income of 4,55,650/- declared by the assessee in it’s return of income. Accordingly, this addition is hereby directed to be deleted. 12. In the result, ground number 2 of the assessee’s appeal is allowed. Now we shall take up the Department’s appeal. 13. At the outset, we observe that the Department’s appeal is time-barred by 74 days. However, we also observed that date of communication of the order of the Ld. CIT(Appeals) has been mentioned as 30-11-2021 and accordingly, the appeal has been filed by the Department during the Covid pandemic period. Accordingly, the delay in filing appeal by the Department is hereby being condoned. 14. The Department has taken primarily one ground of appeal, which is to the effect that Ld. CIT(Appeals) has erred in restricting the computation of the rate of commission @1% of the total deposits instead of 8% as computed by the AO. However, in light of the observations made by us in the assessee’s appeal in which we have restricted the addition made by the Ld. CIT(Appeals) and directed that the commission income may be computed @0.25% of the deposits, we are hereby dismissing the appeal of the Department. 15. In the result, appeal of the Department is dismissed. I.T.A No. 345/Ahd/2021 & 94/Ahd/2022 A.Y. 2016-17 Page No. Lucky Bajoria vs. ITO & ITO vs. Lucky Bajoria 14 16. In the combined result, the appeal of the assessee is partly allowed and the appeal of the Department is dismissed Order pronounced in the open court on 19-04-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 19/04/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद