M/s. Patel Madhavlal Maganlal & Co., Surat V. Assistant Commissioner of Income Tax, CC-2, Surat

ITA 491/SRT/2023

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The case involves two appeals by different assessees, M/s Patel Madhavlal Maganlal & Co. and Patel Natverlal Chinubhai & Co., against the orders of the Commissioner of Income Tax (Appeals)-4, Surat, for the Assessment Year 2018-19. The appeals were consolidated due to common facts and issues. The main contention revolved around the assessment of commission income on cash transfers, where the Assessing Officer applied a higher rate per lac compared to what the assessees had declared. The tribunal considered previous similar cases and decisions, leading to a decision to allow the appeals partly by directing the application of a consistent lower rate for commission income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302174 (ITAT-SURAT)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 17-09-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 17-07-2023
• Other Referred Cases: Pradeep Kumar Sharma Vs DCIT, ITO Vs Deepak Vithaldas Suchak
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Opportunity of cross examination; Rule of consistency
• Section: 147; 131; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 491/SRT/2023 (AY: 2018-19) (Virtual hearing) M/s Patel Madhavlal Maganlal & Co., 3/139, Parsi Sheri Navapura, Surat-395003. PAN: AADFP 2740 F Vs. Assistant Commissioner of Income Tax, Central Circle-2, Surat. APPELLANT RESPONDEDNT ITA No. 447/SRT/2023 (AY: 2018-19) Patel Natverlal Chinubhai & Co., 5/1228, Haripura Bhavaniwad, Surat-395003 (Gujarat) PAN:AADFP 5995 Q Vs. Assistant Commissioner of Income Tax, Central Circle-2, Surat. APPELLANT RESPONDEDNT Department by Shri Vinod Kumar, Sr.DR Assessee by Shri Nitin Gheewala, C.A. Date of Institution of Appeals 18/07/2023 & 03/07/2023 Date of hearing 18/09/2023 Date of pronouncement 18/09/2023 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals by the two different assessees, though on similar set of facts, are directed against the separate orders of the learned Commissioner of Income Tax (Appeals)-4, Surat [in short ‘ld. CIT(A)] dated 25/05/2023 and 04/05/2023 for the Assessment Year (AY) 2018-19. In both these appeals, the assessee has raised certain common grounds of appeal. Certain facts in both the appeals are ITA 471 & 447/SRT/2023 M/s Patel Madhavlal Maganlal & Co. Vs ACIT & 1 Anr 2 common, therefore, with the consent of parties, both these appeals were clubbed, heard together and are being decided by this consolidated order to avoid the conflicting decision. For appreciation of facts, the appeal in ITA No. 491/Srt/2023 is treated as a “lead case”. In this appeal, the assessee has raised following grounds of appeal: “1. Assessment order passed by the assessing Officer is against the principle of natural justice as (i) copy of the statements on the basis of which the addition is made is not furnished to the appellant and (ii) appellant is not granted an opportunity of cross examination of person on the basis of whose statement addition is made. 2. In facts and circumstances of the case, CIT(A) should have held that assessing officer erred in making addition of courier charges in respect transaction with M/s Ratnakala group. 3. In the facts and in the circumstances of the appellant’s case, CIT(A) has erred in applying rate of Rs. 200/- per Rs. 1 lac as against rate of Rs. 100 per Rs. 1 lac. 4. In law and in the facts and circumstances of the appellant’s case, appellant reserves its right to add, alter, amend, withdraw any grounds of appeal.” 2. At the outset of hearing, the learned Authorised Representative (ld. AR) of the assessee submits that he is not pressing grounds No. 1 and 2 of the appeal. The learned Senior Departmental Representative (ld. Sr. DR) for the revenue has raised no objection, if the ld. AR of the assessee is not pressing grounds No. 1 and 2 of the appeal. Considering the submission of ld. AR of the assessee, grounds No. 1 and 2 of the appeal are dismissed as not pressed. ITA 471 & 447/SRT/2023 M/s Patel Madhavlal Maganlal & Co. Vs ACIT & 1 Anr 3 3. Ground No. 3 of the appeal relates to restricting the addition by applying rate of Rs. 200 per one lac against the rate of Rs. 100 per one lac as courier charges, offered by the assessee in their computation of income. The ld. AR of the assessee submits that the assessee is a partnership firm, engaged in the business of courier and carting agent (Aangadiya firm). The assessee filed its return of income for the impugned assessment year on 25/09/2018 declaring income of Rs. 2,30,28,330/-. The case of assessee was reopened under Section 147 of the Income Tax Act, 1961 (in short, the Act) on 30/03/2022. The Assessing Officer during the assessment issued various notices and sought information or explanation regarding various courier services and the commission earned by the assessee on such transactions. The Assessing Officer applied rate of Rs. 500 per one lac on account of transaction of cash transfer, against the commission earned and offered by the assessee on transfer of cash @ Rs. 100 per one lac. The Assessing Officer made estimated addition of Rs. 10,71,910/- on the basis of applying rate of@ Rs. 500 per one lac. However, on appeal before the ld. CIT(A), the ld. CIT(A) restricted such addition @ Rs. 200 per one lac and sustained the addition to the extent of Rs. 4,28,764/-. The ld. AR of the assessee submits that in assessee’s own case for A.Y. 2018-19 or for other assessment years in IT(SS)A No. 48 & 50/Srt/2022, IT(SS)A No. ITA 471 & 447/SRT/2023 M/s Patel Madhavlal Maganlal & Co. Vs ACIT & 1 Anr 4 45/Srt/2022 and ITA No. 184 and 202/Srt/2022 for the A.Y. 2018-19 to 2020-21 upheld the similar addition to the extent of Rs. 100 per one lac as the commission income of cash transfer. The ld. AR of the assessee filed copy of decision of Tribunal in A.Y. 2019-20 which was followed in A.Y. 2020-21. 4. On the other hand, the ld. CIT-DR for the revenue supported the order of ld. CIT(A). The ld SR DR for the revenue prayed to sustain the order of ld CIT(A). 5. We have considered the rival submissions of both the parties. We have also gone through the order of Tribunal in assessee’s own case for A.Y. 2019-20 and 2020-21. We find that on similar set of facts in assessee’s own case for A.Y. 2019-20, the combination of this Bench passed the following order: “24. We have considered the submissions of both the parties and have gone through the orders of lower authorities carefully. The Assessing Officer made addition of Rs. 29,73,77,640/- by taking a view that during the statement of Ashok Bhai Pate, recorded under section 131 on 13.04.2019, he stated that page No. 3 and 4 of Annexure-A-1 contains certain details of commission expenses earned, the amount transferred and pertains to Surat office of their firm for March, 2019. No date is mentioned on the pages, thus, the assessing officer presumed that it is pertain to the date of search i.e. 11.04.2019. The assessing officer also took his view that commission details on the date of search represent the commission income for half day only. Based on entries written on page No. 3 and 4 of Annexure A-1, the commission income comes to Rs. 1,41,070/- and the cash transfer is Rs. 7.69 crores. ITA 471 & 447/SRT/2023 M/s Patel Madhavlal Maganlal & Co. Vs ACIT & 1 Anr 5 The said commission income is of Surat office for half day only. The Assessing Officer during the assessment, noted that the assessee has offered commission income in the return of income of Rs. 2.48 crores. The Assessing Officer on the basis of statement of employee worked out the commission for whole of the year by excluding Sundays. The Assessing Officer estimated the commission income of all the branches and the assessee at Rs. 10,29,488/-per day and by excluding 52 Sundays, the Assessing Officer multiplied the income by 313 days and worked out the total commission income at Rs. 32,22,29,841/- and after granting set off commission income declared at Rs. 2,48,52,181/- worked out the difference of Rs. 29,73,77,600/-. 25. We find that before the ld. CIT(A), the assessee filed detailed written submission explaining the entire facts. The ld. CIT(A) after considering the contents of assessment order, submission of the assessee, upheld the addition to the extent of Rs. 21,55,608/- by taking a view that the addition made by the assessing officer is not based on incriminating material. Page No. 1 and 2 contains the details of 32 transactions for about 15 days and total amount of Khap (transfer of cash) is Rs. 96,41,640/-, during the said period and considering the commission income at Rs. 200/- per lacs, the commission is estimated to Rs. 19,292/-. Considering this amount of commission, which is outside the book of the amount for a fortnight (15 days), the entire year’s income is estimated at Rs. 4,62,768/-. Such tabulated excel sheets were made as exhibit-1 of his order. The ld. CIT(A) further noted that on page 3 and 4 there are details of 476 transactions for the month of March, 2019, in this sheet, the amount of commission has been specified. Total amount in March, 2019 was transferred is Rs. 7.65 crores and amount of commission is Rs. 1,41,070/-. Considering the fact that commission is earned outside the books of account for a month, the entire year income was estimated/worked out at Rs. 16,92,840/- (1,41,070 x 12). Such details were also made a part of order by the ld. CIT(A) as Exhibit- II. Thus, on the basis of his working, the ld. CIT(A) upheld the addition ITA 471 & 447/SRT/2023 M/s Patel Madhavlal Maganlal & Co. Vs ACIT & 1 Anr 6 to the extent of Rs. 21,55,608/- (4,62,768 +16,92,840) thereby granted relief to the assessee. Before us, the ld. AR of the assessee vehemently argued that as per the trade practice, the commission earned by assessee is at Rs. 100/- per lac which has been offered in the return of income. We find that addition made by Assessing Officer is not based on incriminating material. The addition was made on hypothetical and presumption basis. The ld. CIT(A) is also on the basis of details mentioned in Exhibit-II presumed that the assessee earned commission @ Rs. 200/- per one lacs, without bringing any adverse material on record. No specific question is raised by the ld. CIT(A) while considering the commission income @ Rs. 200/- as a transfer charges for per lacs amount. 26. We find that Delhi Tribunal in Pradeep Kumar Sharma Vs DCIT (supra) held that where assessing officer made addition to the income of the assessee on the basis of certain material found and seized during search conducted upon a colleague of assessee and his wife showing that assessee had received illegal commission of certain amount, since no incriminating material was found during search conducted upon the assessee and further, even such incriminating material on the basis of which said addition was made did not disclose name of assessee or material as to how assessee was connected with the seized material, such impugned addition was not justified. 27. We further find that combination of this bench in ITO Vs Deepak Vithaldas Suchak in ITA No. 361/Srt/2018 dated 30.07.2021, in a case of assessee who were engaged in cheque discounting business, the assessing officer made addition of entire bank deposits, however on appeal the ld CIT(A) the assessee took plea that in earlier year they have offered commission income on similar business @ Rs. 30/- to 40/- per lacs, which was accepted by assessing officer. The ld CIT(A) on considering their plea restricted the addition @ Rs. 50/- per lacs. On further appeal before Tribunal, the commission income was increased to Rs.75/- per lacs. ITA 471 & 447/SRT/2023 M/s Patel Madhavlal Maganlal & Co. Vs ACIT & 1 Anr 7 28. We find that addition of commission income sustained by ld CIT(A) is not purely based on the incriminating material, rather based on his exercised assumed on presumption that a uniform commissions was earned. We find that the assessee has categorically pleaded that they are charging commissions @ 100/- per lacs transferred/ transported from one place to other place and has shown such commission in their regular books of accounts. Such books of accounts of the assessee is not rejected. Thus, we do not find any justification for addition sustained by the ld CIT(A). As recorded above that in case of ITO Vs Deepak Vithaldas Suchak (supra), we have made addition @ 100/- per lacs on cheque discounting business against their plea of Rs. 30 to 40/- per lacs, therefore we find that the assessee has reasonably offered the income in their profit and loss account @ Rs. 100/- per one lacs as commissions income. Hence, the assessing officer is directed to delete the entire additions sustained by ld CIT(A). In the result, ground No. 2 is allowed. 29. In view of the aforesaid discussion, ground No. 2 to 8 in appeal of revenue is dismissed and the ground No. 2 in assessees appeal is partly allowed.” 6. we find that similar order was followed in A.Y. 2020-21. Considering the fact that in assessee’s own case, almost on similar set of facts, similar commission earned on transfer of cash was restricted to Rs. 100 per one lac, therefore, following the principle of consistency, the Assessing Officer is directed to work out the commission income @ Rs. 100 per one lac. In the result, ground of assessee’s appeal is partly allowed. 6. In the result, this appeal of assessee is partly allowed. ITA No. 447/Srt/2023 for the A.Y. 2018-19 ITA 471 & 447/SRT/2023 M/s Patel Madhavlal Maganlal & Co. Vs ACIT & 1 Anr 8 7. We find that in this appeal, the assessee has raised similar ground of appeal. The ld. AR of the assessee during the hearing of appeal, not pressed ground No. 1 and 2, therefore, grounds No. 1 and 2 of the appeal are dismissed being not pressed. So far as ground No. 3 is concerned, we find that this ground of appeal is identical as raised in ITA No. 491/St/2023 for A.Y. 2018-19, which we have partly allowed. Therefore, keeping in view the principle of consistency on similar set of facts, this appeal of assessee is also partly allowed with similar direction. In the result, ground of assessee’s appeal is partly allowed. 8. In the result, both these appeals of assessee are partly allowed. Order pronounced on 18/09/2023, in open Court. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 18/09/2023 *Ranjan Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By Order Sr. Private Secretary, ITAT Surat