THE ITO, WARD-9(3), NOW WARD-3(3)(3), SURAT vs. M/S. NAMAN V. YAGNIK, HUF, SURAT

82 -24 314ar3rylaily3fearur 4zyrto, TT IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT sf.vH af,741f4THqF4arureftat.

Cross appeals filed by the assessee and Revenue are directed against the orders of Id: Commissioner of Income Tax (Appeals)-3, Surat, dated 25.05.2015 for the assessment year 2011-12. IANo_2LP[Ahd[2oLSL Appeal by Assessee 2. Ground No.1 against re3jection of books and account u/s.145(3) of the Act is not pressed before US, hence, same is treated as dismissed as not pressed: 3. Ground No.2 against sustaining addition of Rs.1 9,23,491 / - being 2% of q3 gross receipts as income from other sources and Ground No.1 and 2 of Revenue appeal is against to reduction of rate of commission from 10% to 2%/. 3.1 A search u/s.132 of the Act in the case of PACL India Ltd: Revealed that the assessee has provided accommodation entries to the tune of Rs.12,00,02,100/- to M/sPACL India Ltd: The assessee has also admitted in his statement u/s.131 that he had provided accommodation entries on commission basis @ 0.45%/. The AO, however, estimated said commission 10% of Rs.1 2 crores, and made addition of Rs.1,20,00,210/- as against the commission income declared @ 0.4%/ at Rs.4,76,545 / - in the return of income: 3.3 The assessee carried matter before CITIA), claiming that estimation of commission @1 0% is excessive and the assessee had actually done the contract 3 ITA Nos.2119 & 2286/AHD/2015 for A.Ys: 2011-12 work, and returned income at Rs.4,76,545 / - is in respect of labour contract: that there is no dispute that the entire amount of However, CIT(A) observed Rs.1 2 crores, represent the accommodation entreis on which only commission is which according to assessee should be at 0.45%/.The assessee has earned, relied on decision in the case of Gold Star Finvest (P) Ltd VS: ITO 57 SOT 409 (Mum:) where commission @0.1 5% on business dealing in shares was considered as reasonable: Similarly, in Deepak Kumar Mistry (ITA No.2253/AHD/2010 dated 31.02.2013) commission @0.25% was considered as reasonable: However, the CIT(A) observed that these case laws are distinguishable on facts of the case of assessee: The CIT(A) observed that the benefit derived for accommodation entry to M/sPACL India Ltd is on account of tax providing avoidance, hence, benefit derived would be 30% of Rs.12,00,02,100 / - Therefore, estimation @1 O% by the AO would be 1 /3rd of said benefit, which is higher side and cannot be considered as reasonable estimate, similarly, on estimate @0.45% by the assessee translate to only 1.5%/ of the tax benefit derived which is two low to justify the nature of activities and risk taken by the Accordingly, the CIT(A) has estimated the commission @2% of assessee: Rsl.1 2,00,02,100 /- which worked out to Rs24,00,042/- and translates to 6.7% of the tax benefit derived by the M/sPACL India Ltd. 3.4 Being aggrieved, the assessee as well as Revenue filed this appeal before US. The Id.Counsel for assessee submitted that the Tribunal has 0.15%/ commission as reasonable in the case of Ms.Gold Star considered Finvest (P) Ltd vs. ITO (57 SOT 409) and at 0.25% in Deepak Kumar Mistry (ITA 4 ITA Nos.2119 & 2286/AHD/2015 for A.Ys: 2011-12 dated 31.02.2013): Hence , average percentage f No.2253/AHD/2010 commission in these two decision may be considered as approved as reasonable: 3.5 Per contra, the Id: Sr.DR, submitted that the assessee has provided accommodation entries to M/sPACL India Ltd, who has cheated the public at large, this is not only a case of tax avoidance, but also indulging in illegal activities, hence, 1 O% commission on such accommodation entries, estimated by the AO may be upheld. "enertiro , 3.6 We have considered facts, heard rival submissions and perused the material on record: It is not in dispute between parties that the assessee had provided accommodation entries amounting to Rs.1 2,00,02,100/- m/s PACL Ltd. We also find merit in the finding of the Id.CIT(A) that by providing the accommodation entries, the assessee has derived benefit by 30% of said accommodation entries. By considering these aspects, the Id.CIT(A) has estimated commission receipt @2% of such accommodation entries, which to US reasonable considering the facts of the case. Moreover , accordingly reliance placed by Id.Counsel on aforesaid two decisions is not applicable to present case: In case of Gold Star Finvest (P) Ltd (supra), commission @0.1 5%/ was considered reasonable, as the case pertained to business dealings in shares and securities: Similarly, in the case of Shri Deepak Kumar Mistry (supra) the commission payment rate @0.25% was found recorded in impounded material: 5 ITA Nos.= 2119 & 2286/AHD/2015 for A.Ys: 2011-12 ratio same cannot be applied to present case. Hence , their on In such circumstances, on careful consideration, we do not find any infirmity in the order of Id.CIT(A): Accordingly, same is upheld, Ex-consequnti, appeal of assessee as well as of Revenue, is therefore, dismissed: of assessee and Revenue in ITA No. 2119 & In the result, appeal 286/Ahd/2015 are dismissed. 7144o, The order pronounced in the open court on 12.01.2018 (O.P.MEENA) du44F ACCOUNTANT MEMBER - (CM.GARG) 7if4+ 44F4 / JUDICIAL MEMBER HRa Surat; faaia Dated I 2th January, 2018 Gangadhar Hc w@ftJpI/Copy of the_Order is forwardedto 1. 3d)ctreff The Appellant; 2 Tcreff The Respondent; 3 H14*r 3raa(artid) The CIT(A)- Valsad, Surat; 4 @au1af4 4fafafel, 3N4 34ial 3f83701, guj DR, ITAT, Surat; JITS WTSct Guard file_ 3TaR1TTHTI BY ORDER, oa/w)ir afrea flt Hfad Sr.Private Secretary 3TAR 35dly 3feraruT, TTT ITAT, Surat #1r etelt # TF Fcd Rraie, %td , Frufa 9a / /l / 39a