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Facts
The AO made an addition of Rs. 1,25,803/- on account of commission received by the assessee for client code modification. The CIT(A) deleted this addition due to lack of evidence. The Revenue appealed this deletion.
Held
The Tribunal observed that the addition made by the AO was not based on any evidence, but solely on a spot verification of brokers. The inquiry report did not indict the assessee for engaging in such modifications or receiving commission. Therefore, the CIT(A)'s order was confirmed, and the Revenue's appeal was dismissed.
Key Issues
Whether the CIT(A) was justified in deleting the addition made by the AO on account of commission received for client code modification without sufficient evidence?
Sections Cited
143(3), 250
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI RAHUL CHAUDHARY, JM & SHRI OMKARESHWAR CHIDARA, AM
This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi [for short ' the CIT(A)] for the AY 2018-19.
The Ld. AO in this case made an addition of Rs. 1,25,803/- towards commission reserved on Client Code Modification (CCM) and the Ld. CIT(A) has deleted the addition.
Aggrieved by the order of Ld. CIT(A), the Revenue filed an appeal with the following grounds :
Muktaben Govindbhai Kakadia “1." Whether on the facts and circumstances of the case and in law, Ld. CIT(A) is right in deleting the addition of Rs. 1,25,803/-on account of commission paid to brokers even when Ld. CIT(A) himself agreed with the conclusion drawn by AO that assessee has taken part in Client Code Modification which is "Organized Evasion of Tax ?" 2. "Whether on the facts and circumstances of the case and in law, Ld. CIT(A) is right in deleting the addition of Rs. 1,25,803/- an account of commission paid to brokers even when it was certain that commission has been paid by the assessee for taking part in CCM. More so, when brokers involved in CCM transactions has admitted to charging commissions ranging from 0.5% to 2% for facilitating these modifications." 3. "Whether on the facts and in the circumstances of the case and in law, the order of the Ld. CIT(A) is perverse in not arriving at a reasonable percentage of commission to be disallowed when he disagreed to the percentage adopted by the AO?"
The tax effect involved in this case is Rs. 37,750/-, which is below the prescribed limit mentioned in the CBDT's Circular F.No.279/Misc. 142/2007-IT.J(Pt) amended vide No. 09/2024 dated. 17.09.2024. However, the appeal is being filed before the Hon'ble ITAT, as this case also falls under one of the exceptions specified in the CBDT's Circular No.05/2024 Dated 15.03.2024, wherein it is stated that in cases involving Organized Tax Evasion", in such cases the decision to file appeal/SLP shall be taken on merit without regard to the tax effect and the monetary limit.”
4. The Revenue is of the opinion that appeal can be filed to ITAT despite the monetary limits mentioned in CBDT Circular are less than the prescribed amount because the case comes under “organised tax evasion”, an exempt category, as mentioned in statement of facts/grounds of appeal
5. In brief, the Ld. AO made an addition of Rs. 1,25,803/- (received 3% of commission received on the overall transaction of Rs. 41,93,459/-). The Ld. CIT(A) deleted this addition because there is no evidence with the Department that the appellant received this commission while making client code modification.
6. On the date of hearing before ITAT, none represented the assessee whereas the Revenue is represented by Ld. DR. The Ld. DR relied on the order of Ld. AO and Grounds of Appeal.
Muktaben Govindbhai Kakadia 7. After hearing the Ld. DR and perusing the order of Ld. AO, Ld. CIT(A) and grounds of appeal filed by Revenue, it is observed that the addition relating to commission received by appellant for doing client code modification was not based on any evidence and the same is on the basis of spot verification of few cases of brokers by DDI (I & CI) Unit-I(1) Mumbai. Nowhere, the enquiry report indicted this assessee was also indulging in such client code modification nor any evidence was found that the assessee received any commission. In view of the same, the order of Ld. CIT (A) is confirmed and the appeal of Revenue is set aside.
8. The appeal of Revenue is Dismissed. Order pronounced in the open court on 13-08-2025.