BUNIYAD CHEMICALS LTD,MUMBAI vs. DCIT 10(1), MUMBAI

order dated 18.02.2015 of the CIT(A)-22,Mumbai,the Assessing Officer (AO) and the Assessee have filed cross appeals for the above mentioned AY.Assessee - company is engaged in providing accommodation entries to various beneficiaries in consideration of certain percentage of commission on the transaction.It filed its return of income on 17.10. 2007,declaring Nil income.The assessment u/s.143(3) was completed by the AO on 16.12. 2008,determining its income at Rs.9,28,78,990/-.The case was re-opened for assessment u/s. 147 of the Act.The AO completed the assessment u/s.143(3) r.w.s.147 of the Act,on 12/03/ 2014,determining the income of the assessee at Rs.9,91,78,990/-. ITA/2410/Mum/2015. 2.During the course of hearing before us,the assessee did not press second and third grounds of appeal,hence,same stand dismissed as not pressed. 3.Effective ground of appeal (GOA 4-6)deals with addition made on account of unexplained deposits and determining the percentage of income for accommodation entries. Brief Facts of the case are that a search and seizure action under section 132(1) of the Act was conducted in the case of several companies, whose kingpin is identified as one Mukesh Choksi(MC).It was found in the course of search that such entities were providing accommodation entries by way of share trading/ loans, etc.During the course of search proceedings, it was noted that for providing accommodation entries,the entities like the assessee,which were controlled by MC were earning commission income.In view of such modus operandi noted and the statements 2787&2410/M/15(06-07) M/s. Buniyad Chemicals Ltd. of MC,recorded at the time of search, the AO held that the assessee was earning commission ranging from 1.5% to 3.5%.During the appellate proceedings the First Appellate Authority (FAA)restricted the addition @0.37% on account of commission income.

5.We find that in the case of M/s. Alpha Chemie Trade Agencies Private Limited.,one of the sister concern of the assessee,(ITA/6558/Mum/ 2012& other appeals-A.Y.2010-11, dtd.09/ 09/2016 and other AY.s.)the Tribunal has deliberated upon and decided the identical issue. We are reproducing the relevant portion of the order and it reads as under: “These seven appeals are filed by the same assessee pertaining to assessment years 2004-05 to 2010-11 and involve certain common issues. Therefore, they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. 4.At the time of hearing, it was stated by the Ld. Representative for the assessee that the issues raised in the captioned appeals have already been decided by the Tribunal in the cases of the sister concerns of assessee company and in this context, reference has been made to the following decisions:- (i)Goldstar Finvest Pvt. Ltd. & 2699/Mum/2013 order dated 30/11/2015. (ii) M/s. Mihir Agencies Pvt. Ltd., ITA Nos.6114-6120/Mum/2012 order dated 6/1/2016. (iii)Alliance Intermediateries and Network Pvt. Ltd., ITA Nos. 2700,2702&2701/Mum/2013 order dated 24/2/2016. (iv) Mr. Mukesh Choksi ITA Nos.833 -839/Mum/2013 order dated 04/05/2016. XXXXX 6. Before us,the Ld. Representative for the assessee submitted that similar additions were made by the Assessing Officer in the cases of other group concerns also, which were covered by the search action carried out by the Department on 25/11/2009. It is pointed out that in the aforesaid decisions, the Tribunal has accepted the stand of the assessee that commission income was liable to be assessed @0.15% of the total receipts and also the fact that the net income was to be assessed after allowing 50% of the expenses claimed. It was, therefore, contended that following the decisions of the Co-ordinate Benches rendered in the group concerns of Shri Mukesh Choksi referred above under similar circumstances, the assessed income in this case also be directed to be computed accordingly. 7.On the other hand, Ld. Departmental Representative while not disputing the aforesaid precedents, sought to point out that the other cases were assessed on the basis of the surveys conducted, whereas the instant assessee was covered by the search action under section. 132(1) of the Act.

been relied upon by the assessee before us. On perusal of the aforesaid decisions we find that the Tribunal had directed that the income by way of commission from the business of accommodation entries being carried out by Mukesh Choksi group was liable to be assessed at 0.15% instead of 2% applied by the Assessing Officer. In this context, we reproduce hereinafter paras 5 & 6 of the order of the Tribunal in the case of Goldstar Finvest Pvt. Ltd. (supra),wherein earlier precedents have been relied upon and the issue decided accordingly:- 5.We have gone through the orders of lower authorities and the orders of the co- ordinate bench of Tribunal in assessee’s own case and other orders relied upon by the assessee. It is noted by us that identical issue had came up before the Tribunal in assessee’s own case for the assessment year 2002-03. The relevant observations from the Tribunal’s order are reproduced below: "12. Having, carefully examined the various orders in the case of different assessees' it has become amply clear that in these types of activities, brokers are only concerned with their commission on the value of transactions. Now the question comes what would be the reasonable percentage to the commission on the total turnover? The assessee has also made out a case that the customers do not come directly to him and they come through a sub- broker who also charges a particular share of commission. In all the judgments what has been stated is that an average percentage of commission is between 0.15% to 0.25%. In the case of Palresha & Co. and Kiran & Co (surpa), the Tribunal has considered reasonableness of percentage of commission to be earned on turnover was at 0.1%. The assessee himself has offered the percentage of commission at 0.15%, which is more than the percentage of commission considered to be reasonable by the Tribunal in the case of Palresha & Co and Kiran & Co (supra) in similar type of transactions. The theory of Assessing Officer to treat the entire deposit as unexplained cash credits, cannot be accepted in the light of assessment orders in the case of beneficiaries and also in the light of the fact that assessee is only concerned with the commission earned on providing accommodation entries. We, therefore, of the view that since the assessee itself has declared the commission on turnover at 0.15% which is more than the percentage considered to be reasonable by the Tribunal in the case of Palresha & Co and Kiran & Co (supra), the same should be accepted. We, accordingly, accept the commission declared by the assessee and set aside the order of the CIT (A) in this regard."