HARIKISHAN P. SUREKA HUF,MUMBAI vs. ITO 32(1)(5), MUMBAI

ITA 7606/MUM/2016Status: DisposedITAT Mumbai24 May 2017AY 2012-134 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found that the estimation of commission income by the Assessing Officer was without basis and lacked proper inquiry. The addition made by the Assessing Officer was directed to be deleted.

What were the facts?

The assessee, a HUF engaged in textile trading, filed its return. The Assessing Officer treated the assessee as a commission agent and estimated 1% commission on substantial purchase transactions, making an addition to income. The CIT(A) upheld this addition.

What were the issues?

Whether the Assessing Officer was justified in estimating commission income without proper inquiry and basis, and whether the addition made was sustainable.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI G.S.PANNUShri Harikishan P. Sureka HUF,

For Appellant: Shri Vimal Punmiya

For Respondent: Shri A.K.Kardam

Hearing: 11/05/2017Pronounced: 24/05/2017

ORDER The captioned appeal filed by the assessee pertaining to assessment year 2012-13 is directed against an order passed by CIT(A)-44, Mumbai dated 25/11/2016, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 30/03/2015.

In this appeal, the only grievance of the assessee is against the action of the CIT(A) in upholding an addition of Rs.39,01,826/- as 1% commission on the transactions of purchases effected from M/s. Belmonte Uniformity and M/s. Belmonte Fancy.

(Assessment Year 2012-13) 3. In brief, the relevant facts are that the assessee HUF is carrying on business in trading of textiles commission agent and other allied activities under the proprietary concern in the name of M/s. Hari Surekha & Co. For the assessment year under consideration, it filed a return of income declaring a total income of Rs.8,24,200/-, which was subject to scrutiny assessment. In the course of assessment proceedings, Assessing Officer noted that assessee had made purchases from M/s. Belmonte Uniformity - Rs.22,49,94,630/- and M/s. Belmonte Fancy – Rs.24,27,84,943/-, both the entities being divisions of M/s. S. Kumars Nationwide. The Assessing Officer required the assessee to submit the evidence of receipt of material from M/s. Belmonte Uniformity and M/s. Belmonte Fancy and, thereafter, the dispatch of material to parties to whom it has been sold. The claim of the assessee was that the transactions were in the course of normal activity carried out by the assessee, where the products are directly delivered by the suppliers of the assessee to the ultimate customers of the assessee as per instructions of the assessee. The Assessing Officer however, did not treat the assessee as a trader and instead concluded that assessee was doing commission agent activity and receiving commission from M/s. Belmonte Uniformity and M/s. Belmonte Fancy. The Assessing Officer proceeded to estimate the commission from the transactions made with the aforesaid two concerns @1%, which worked out to Rs.46,77,796/-, and after reducing the income from business already declared by the assessee, the balance of Rs.39,01,826/- was added to the total income of the assessee. The said addition has also been sustained by the CIT(A).

(Assessment Year 2012-13) 4. Before me, the Ld.Representative for the assessee pointed out that the addition has been made on mere conjectures and surmises in an adhoc manner and, therefore, deserves to be deleted.

On the other hand, the Ld. Departmental Representative has merely reiterated the stand of the Assessing Officer, which I have already noted in earlier paras and the same is not being repeated for the sake of brevity.

Having considered the rival stands, I find no justification for the action of the Assessing Officer to estimate the commission income @1% as against income declared by the assessee in its account books. Notably, the discussion in the assessment order also reveals that Assessing Officer made certain enquiries with M/s. S.Kumars Nationwide, and if, Assessing Officer had any doubt with regard to the level of commission earned by the assessee, an appropriate enquiry could have been put to M/s. S.Kumars Nationwide. So however, such an approach is conspicuous by its absence and, therefore, the estimation made @1% by the Assessing Officer is without any basis and the same is liable to be set-aside. I hold so and the Assessing Officer is directed to delete the addition made by him of Rs.39,01,826/-.

In the result, appeal of the assessee is allowed, as above.

Order pronounced in the open court on 24/05/2017

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