TALENT INFOWAY LTD,MUMBAI vs. DCIT CEN CIR 46, MUMBAI

PER BENCH:

5 and 8 other appels M/s. Talent Infoway Limited 2. The common grievance of the assessee in all the years under consideration pertains to application of net profit rate of 2% on the income on entire bank deposit managed by the agents as against profit rate of 0.03% offered by the assessee.

6 and 8 other appels M/s. Talent Infoway Limited RTGS, etc. The Assessing Officer has brought on record the modus operandi being followed by the companies controlled by Shri Mukesh Choksi, various types of accommodation entries being provided by the group confirmed both by Shri Mukesh Choksi and by his long time employees. In view of the above discussion, the Assessing Officer estimated commission income @ 2% in place of commission income offered by the assessee at 0.03%.

4. By the impugned order, the learned CIT(A) confirmed the action of the Assessing Officer against which the assessee is in further appeal before us.

i) DCIT v/s M/s. Goldstar Finvest Pvt. Ltd., Mum./ 2012, etc., order dated 30.11.2015; ii) M/s. Mihir Agencies Pvt. Ltd. v/s DCIT, ITA no.6435/Mum./ 2012, etc., order dated 6.1.2016; iii) Alliance Intermediateries and Network Pvt. Ltd. v/s ACIT, ITA no.2700/Mum./2013, etc., order dated 24.2.2016; iv) Shri Mukesh M. Choksi v/s DCIT, ITA no.833/Mum./2013, etc., order dated 4.5.2016; v) M/s. Prabha Multitrade Pvt. Ltd. v/s DCIT, ITA no.326/ Mum./2013, order dated 17.8.2016; and vi) DCIT v/s Alag Securities P. Ltd., ITA no.886/Mum./2012, order dated 8.9.2016.

7. On the other hand, the learned Departmental Representative invited our attention to the findings recorded by the learned CIT(A) to the effect that the commission rate of 2% was arrived at after considering the incriminating documents found during the search and the statement recorded under section 132(4) of the Act. Our attention was also invited to the fact that the learned CIT(A) has already considered the decision of the Tribunal referred to by the assessee in support of the proposition that the commission rate should be determined at 0.15%. We have also gone through the order of the learned CIT(A) wherein, the learned CIT(A), vide his order dated 31st August 2012, observed as under:–

15.3 The main contention of the appellant is that the gross income from the total receipts of providing accommodation entries has to be determined at 0.15%, as held in its own group of cases, by the Hon'ble ITAT, Mumbai Bench. Further, appellant has also cited the appellate order passed by the Ld. CIT(A)-37, Mumbai in respect of the search assessments completed u/s. 153C of the Act for the A.Yrs.2002-03 to 2007-08 consequent to the search & seizure action carried out on 28.06.2006. The factual matrix, the issues examined and the ratio of the decisions applied by the Hon'ble Appellate Tribunal are carefully considered. In the orders passed by the Hon'ble Appellate Tribunal, Mumbai Bench in similar cases as well as in appellant's own group of cases, there were no materials found and seized during the search & seizure proceedings which clearly indicated the nature of transactions and the quantum of commission / profits earned by the appellants. Therefore, in cases where there were no specific materials that were unearthed during

8 and 8 other appels M/s. Talent Infoway Limited the search & seizure proceedings, Hon'ble ITAT, Mumbai Bench has determined the commission / profits @ 0.15%. The Ld. CIT(A)-37, Mumbai has followed the said ratio of the decisions, having regard to the fact that no specific materials were relied upon by the A.O in respect of the earlier search assessments completed u/s.153C of the Act. In the light of these facts, the rate of profit / commission determined by the Hon'ble ITAT, Mumbai is not applicable to these appeals. 15.4 In the foregoing paragraphs, the entire factual matrix, the seized materials and the sworn depositions of the director of the appellant company and other witnesses are elaborately brought out. It is evident from the materials brought on record that commission / profit on the transactions carried out by the appellant company varied from 1.5% to 3.6%. Since the seized materials and the sworn statements clearly established that the entries in the books of accounts are not supported by any reliable primary records ; the appellant had indulged in large scale cash transactions and the cheques transacted were essentially meant to create a smoke screen to camouflage the true nature of transactions which are bogus purchases transactions, the books of accounts maintained and the profits declared as per the books of accounts could not be relied upon by the A.O for determining the true incomes of the appellant. Having regard to these facts and circumstances of the case, it is hereby held that A.O is justified in rejecting the books of accounts u/s.145(2) of the Act and estimating the income on the basis of the seized materials and the sworn statements. As already taken into consideration, it is evident from the materials brought on record that commission / profit on the transactions carried out by the appellant company varied from 1.5% to 3.6%. Having regard to the volume of transactions and certain incidental expenses in running such a business of supporting parallel economy, A.O has come to a reasonable conclusion by arriving at the commission / profit 2% of the total receipts. The other earning the incomes by providing accommodation entries is concerned, it is hereby held that the rate of commission / net profit determined @ 2% in the assessment orders has taken into account the alleged expenses. Therefore, there is no justification for allowing further expenses against the net income determined @ 2% of the total receipts. Accordingly, the income assessed are hereby confirmed.”

9. The precise observation of Tribunal in the case of Goldstar Finvest Private Limited dated 01/06/2016 in ITA No.6114-6120/M/2012 was as under:- 4. In all these cases of the Group concerns of Sri Mukesh Chowksi including assessee, the assessments have been made in the wake of search and seizure action under section 132( 1) dated 25.11.2009 carried out in the cases of M/s Mahavir Securities Private Limited; M/s Mihir Agencies P. Ltd; M/s Alliance Intermediaries and Network P Ltd and other Group companies including assessee which was managed by Shri Mukesh Choksi Group and accommodation entries. The that the commission/net that, in the various Tribunal orders, which have been referred to above as well as in the case of the assessee itself, the net profit rate of 0.15% have been accepted. Not only that 50% of the expenses claimed have also accepted, In other words, only balance claim of expenditure of 50% have been confirmed. The relevant observation of the Tribunal in the case of M/s Mihir Agencies Pvt. Ltd reads as under:- "6. After considering the relevant finding given in the impugned orders as well as submission made by the parties, we find that the assessee is one of the group concerns of Mukesh Chokshi Group. A search and seizure action u/ s 132(1) was conducted in the case of the assessee along with the other group companies on 25.11.2009 and on subsequent 10 and 8 other appels M/s. Talent Infoway Limited dates, wherein it was found that all these group companies belonging to Shri Mukesh Chokshi and his family members were involved in accommodation entries for various kinds of activities, has applied a commission income @ 2%. Before the CIT(A), various appellate orders were relied upon which has been noted by the CIT(A) in the impugned order at para 2.1. The Ld. CIT(A) after referring to the various material found at the time of search of Shri Mukesh Chokshi and his employees and the statements wherein various rates of commission charged have been stated ranging from 0.15% to 2% on different kind of accommodation entries. Accordingly, Ld. CIT(A) updated the application of net profit rate of 2% as applied by the AO.

8. As regards the disallowance of business expenses" the Ld. CIT(A) has directed the AO not to allow any expenses against the net income of 2% determined. We find that the Tribunal in the case of Gold Star Finvest Ltd have disallowed only 50% of the business expenses. Accordingly, following the judicial precedence, which is applicable mutatis mutandis in the case of the assessee also, we direct the AO to allow the business expenses to the extent of 50%. Accordingly, ground no.8 is treated as partly allowed.

5. We have gone through the orders of lower authorities and tile orders of the co-ordinate bench of Tribunal in assessee's 11 and 8 other appels M/s. Talent Infoway Limited 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 [or the assessment year 2002-03. The relevant observations from the Tribunal's order were 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 ore 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 has been stated is that an average percentage of commission turnover. 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 ."

6. It is further noticed by us that this stand has been constantly accepted by the Tribunal in various orders, details of which have been given by the ld. Counsel, as mentioned above. We have gone through the orders as enclosed in the paper book filed by the assessee and find that the ld. AR has correctly stated that this issue has been unanimously accepted by the Tribunal in various cases including the case of assessee. Nothing has been brought on record by the Id. DR to distinguish these cases. Therefore, respectfully following the 12 and 8 other appels M/s. Talent Infoway Limited orders of the Tribunal including the order of Tribunal in assessee's own case in the immediately preceding year, we find. that the ld. CIT(A) has rightly deleted the addition, no interference is called for in the order of Id. CIT(A), therefore, the "same is upheld. Grounds No.1 and 2 taken by the Revenue stand dismissed". Thus, following the judicial precedence In cases of various Groups concerns as well as that of assessee decided by the Tribunal, we hold that net profit rate /commission should be taken at 0.15% and the expenditure claimed should be allowed to the extent of 59% from such income. Accordingly, these two issues are decided in favour of the assessee. As regards the other grounds taken, the same have not been argued before us on the ground that they will become purely academic. . Accordingly, the appeal of the assessee is treated as stated in the operating part of the order that similar issues are involved in all the appeals, therefore, this finding will apply mutatis mutandis in all the impugned years. Thus, all the appeals filed by the assessee are treated as allowed.