MIHIR AGENCIES P. LTD,MUMBAI vs. ACIT (OSD-1) CEN RG 7, MUMBAI

The present appeal has been preferred by the assessee against the order dated 30.01.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2002-03.

During the course of hearing, at the outset, the Ld. A.R. has submitted that similar issue had arisen in group concerns of the assessee before the Tribunal wherein the rate of commission has 2 M/s. Mihir Agencies P. Ltd. been accepted at 0.15%. The list of some of the ITAT decisions filed before us is as under: (i) M/s Goldstar Finvest P Ltd-ITAs 887 and 2699/M/2013, order dated 30.11.2015;

Ld. D.R. also admitted that, the issue of rate of commission has been decided by the Tribunal in various cases.

Brief facts qua the issue involved is that, a search and seizure action under section 132(1) was conducted in the Group companies owned and floated by assessee, M/s. Mihir Agencies Pvt. Ltd. on 25.11.2009. The assessee was also covered under the same search and consequently assessments under section 143(3) r.w.s. 153C of the Act were completed. The Assessing Officer (hereinafter referred to as the AO) in the assessment order has noted that, during the course of the search and seizure action, it was found that the assessee and the Group companies of the assessee were engaged in the business of accommodation entries and laundering of black money. The managing director Mr. Mukesh Choksi himself was the mastermind behind formation of all these companies. Various other details and modus operandi have been noted by him along with the 3 M/s. Mihir Agencies P. Ltd. statement on oath of the assessee and the seized documents. Thus, on the basis of his detail discussions and material on record, the AO held that, the assessee and the Group companies run by him were receiving commission income from for all these activities. Such a commission income was ranging between 1.5% to 3.5%. The AO accordingly rejected the books of account of the assessee and estimated the net profit rate of the commission @ 2%, which according to the assessee was 0.15%.

Before the CIT(A), the assessee filed various decisions passed by the CIT(A) in Group companies, wherein, 0.15% of the commission rate has been accepted. However, the Ld. CIT(A) did not accept the assessee’s contention and confirmed the estimate made by the AO.

On the perusal of the impugned orders and the finding of the Tribunal in the case of M/s Mihir Agencies Pvt Ltd (supra) and on similar other decisions as relied before us, we find that the Tribunal has upheld the net profit rate of 0.15%. The relevant observation of the Tribunal in the case of M/s Mihir Agencies Pvt. Ltd is reproduced hereunder:- “7. We find that in the case of Gold Star Finvest Ltd, which is a sister concern of the assessee, on similar facts for the assessment year 2003-04 and 2004-05, the Tribunal after referring to various decisions have upheld the percentage of commission on net profit @ 0.15% which was quite consistent with the statement recorded at the time of search. Accordingly, following the judicial precedence in the case of the assessee’s sister concern (supra), we uphold the rate of commission / rate of net profit from such activities at 0.15%. Accordingly, ground no. 4, 5 as raised by the assessee are allowed”.

During the course of hearing, the Ld. A.R. submitted that regarding expenses to the tune of Rs.10,550/- claimed by the assessee was adjudicated by the Ld. CIT(A) and the Ld. CIT(A) has allowed Rs.2,110/- out of Rs.10,550/- of total expenses. Hence, the appeal was partly allowed.

We have heard the rival contentions of both the parties. The assessee has stated before us that 50% of the expenses should be allowed. We find that the Ld. CIT(A) has allowed 20% of the expenses on estimated basis and the addition remains of Rs.8,440/-. Hence, we further allow 25% of expenses which comes to Rs.2,637/-.

In the result, appeal of the assessee is partly allowed.