Quantum of commission to be charged towards accommodation entries while computing Taxable Income

The Income Tax Appellate Tribunal has ruled on the quantum of commission to be charged for accommodation entries when computing taxable income. The tribunal found that contract receipts and commission income should be treated as separate streams of income, distinct from sale and purchase transactions. Consequently, the Assessing Officer was directed to re-compute the assessee's income by estimating income from these specific streams at 8%.

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI

BEFORE HON’BLE SHRI AMARJIT SINGH, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM (Hearing through Video Conferencing Mode)

I.T.A. No.6959/Mum/2014

Assessment Year: 2010-11

ITO ward – 4(3)(1) R. No. 648, 6th floor Aayakar Bhavan Mumbai-400 020

Appellant

Vs

M/s Tac Technosoft Pvt. Ltd. (Now merged with M/s Novus Tradestar Pvt. Ltd.) Shop No. 8, Crystal Court Building Near Powai Police Station, Chandivali, Andheri (E), Mumbai-400 072

PAN/GIR No. AABCT-4144-L

Respondent

Revenue by:Shri Vijay Kumar Menon– Ld. DR
Assessee by:Shri Mihir Tanna– Ld. AR

Date of Hearing:20/07/2021

Date of Pronouncement:26/07/2021

O R D E R

Aforesaid appeal by revenue for Assessment Year (AY) 2010-11 arises out of the order of learned Commissioner of Income-Tax (Appeals)-18, Mumbai

2. We have carefully heard the rival submissions and perused relevant material on record including documents placed in the paper book. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs.

3. During appellate proceedings, the assessee submitted further details against which a remand report was sought from Ld.AO. The assessee furnished certain other documents during remand proceedings which were in the shape of ledger account of 4 suppliers, copies of bills and payment of proofs etc. The assessee also tabulated turnover and profitability data of past 4 years and submitted that there was drastic increase in turnover which reduced the margins of the assessee. The Ld. AO while supporting the additions, make out a case of enhancement since discrepancy of Rs.3216.78 Lacs were noted.

4. So far as the contract receipts and commission income are concerned, Ld.CIT(A) has merely gone by the fact that the aforesaid receipts would be business income of the assessee keeping in view assessee’s main objects. In the process, Ld. CIT(A) has overlooked the fact that no estimation of income was made by Ld. AO against these transactions and the estimation was only with respect to sale & purchase transactions. These items, as noted by Ld. AO, were separately credited to Profit & Loss Account and hence, constitute separate stream of income for the assessee. Therefore, a separate estimated income against these two items would certainly be required. We make the estimation @8% for both these streams of income. The same would work out to be Rs.25,66,672/- (8% of Rs.54,75,138/- + Rs.2,66,08,263/-). We direct Ld.AO to re-compute assessee’s income in terms of our estimation.

5. The appeal stands partly allowed to the extent indicated in the order. Order pronounced on 26th July 2021

Please find attached the enclosed file for the full judgement