ASST CIT CC 43, MUMBAI vs. WASHIGTON SOFTWARE LTD, PUNE

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ITA 5311/MUM/2014Status: DisposedITAT Mumbai10 December 2015AY 2010-114 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, stating that the AO's estimation of 5% commission was based on bald statements without supporting material. The sworn statement of the director admitting 1% commission was considered credible.

What were the facts?

The assessee company was found to be issuing bogus bills for commission. The Assessing Officer (AO) estimated income at 5% of turnover, while the assessee admitted to 1% commission. The Commissioner of Income Tax (Appeals) reduced the estimated income to 1% of turnover.

What were the issues?

Whether the AO was justified in estimating commission income at 5% of turnover without sufficient material, and whether the CIT(A) was correct in reducing it to 1% based on the assessee's admission.

Which sections of the Income-tax Act were involved?

Section 148,Section 153C,Section 131

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

Before: S/SHRI B.R.BASKARAN & SHRI SANDEEP GOSAIN

Hearing: 10.12.2015Pronounced: 10.12.2015

आयकर अपीऱीय अधिकरण, म ुंबई न्यायपीठ “जी” म ुंबई IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI सर्वश्री बी.आर.बास्करन, ऱेखा सदस्य एवं संदीप गोसाई, न्याययक सदस्य के सभऺ BEFORE S/SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER आयकर अपीऱ सं./I.T.A. No.932/Mum/2014, ITAs No.5306 to 5308/Mum/2014 and ITAs No. 5310 to 5312/Mum/2014 (निर्धारण वर्ा / Assessment Year : 2004-05, 2005-06 to 2007-08 & 2009-10 to 2011-12) बिधम/ M/s Washington Software Asstt. Commissioner of Income Tax-Central Circle -43, Ltd., Vs. Room No.659, 6th floor, 3rd floor,L-5, Mantri Park, Aayakar Bhavan, Near Tejas Soc, Kothrud, M K Road, Pune-411028 Mumbai-400020 स्थायी ऱेखा सं./ PAN : (अपीऱाथी /Appellant) .. (प्रत्यथी / Respondent) स्थामी रेखा सं./जीआइआय सं./PAN. :AACCS3502Q अपीऱाथी की ओर से / Revenue by : Ms.Anu Krisha Aggarwal प्रत्यथी की ओर से/Assessee by : Shri Prakash Jotwani सुनवाई की तारीख / Date of Hearing :10.12.2015 घोषणा की तारीख /Date of Pronouncement :10.12.2015 O R D E R PER BENCH:-

The revenue has filed these appeals challenging the orders passed by Ld CIT(A)-38, Mumbai and they relate to the assessment years 2004-05 to 2007-08 and 2009-10 to 2011-12, wherein the Ld CIT(A) had reduced the income estimated by the assessing officer from 5% of the turnover to 1% of the turnover in all the above said years.

2 & 6 others appeals 2. We heard the parties and perused the record. The assessee company is engaged in the business of software development. The revenue carried out search and seizure operations in the hands of a person named Shri Parag Mehta on 22.3.2011 and during the course of search several transactions pertaining to the assessee were found out. From the said documents it was noticed that the assessee herein was indulging in issuing bogus bills. It was noticed that the assessee has not filed return of income for AY 2004-05 and hence the assessment of the said year was reopened by issuing notice u/s 148 of the Act. Other years assessments were reopened u/s 153C of the Act. The assessee filed returns of income of all the years declaring NIL income. During the course of assessment proceedings, the assessee did not furnish the details that were called for by the assessing officer. The AO noticed that the DDIT (Inv.) has recorded a statement from the Chairman of the assessee company named Shri Sanjay D Sonawani u/s 131 of the Act on 12.04.2011, wherein he had admitted that the bills relating to non-genuine sales were issued by charging a commission @ 1% of the bill value. The AO prima facie agreed that the assessee has issued bills on receipt of commission, but he did not accept that the commission was charged @ 1%. The assessing officer, however, observed that the market enquiries made by him revealed that the rate of commission involved in such kind of transactions is not less than 5%. The AO also took the view that the assessee has helped the other persons to save tax @ 33% and hence the rate of commission could not be 1%. Accordingly he proceeded to compute the income by estimating the rate of commission @ 5% of the turnover and accordingly determined the total income of the assessee for all the years under consideration. The Ld.CIT(A), however, took the view that the assessing officer had estimated the rate of commission @ 5% on the basis of suspicion, surmises and conjectures, without bringing any material on record. He further noted that the assessee has admitted commission 3 & 6 others appeals income @ 1% only and accordingly directed the assessing officer to compute the income by adopting the rate of commission @ 1%. Aggrieved by the decision of Ld CIT(A), the revenue has filed these appeals before us.

3.

The Ld D.R submitted that the assessee did not cooperate with the assessing officer and hence the AO was constrained to pass the orders to the best of his judgment. Further the AO has made market enquiries and accordingly estimated the commission income at 5%. The Ld D.R further submitted that the assessee has helped other persons to save tax @ 33% and hence the commission could not be at 1%. On the contrary, the Ld A.R submitted that the director, in the sworn statement, has admitted that the rate of commission was 1% only. The Ld A.R further submitted that the assessing officer has not brought any material on record to show that the rate of commission for issuing non-genuine bills was 5%.

4.

Having heard rival contentions, we are of the view that the orders passed by Ld CIT(A) do not call for any interference. Though the assessing officer has stated that the market enquiries revealed that the rate of commission was 5%, we notice that the same was bald statement unsupported by any material. Further, the assessing officer has drawn inference by presuming that the assessee has helped others to save tax @ 33%, which is also not supported by any material. As submitted by Ld A.R, the basis of the assessments of all the years is the basis of sworn statement given by the director of the assessee company, wherein he had admitted that the rate of commission was 1% only, since the fact that the assessee is issuing accommodation bills is accepted by the AO. Hence, we are of the view that the assessing officer should have brought on record some credible material to show that the rate of commission stated by the director was not correct. Hence, we are of the view that there is no reason to suspect the statement of the director that the rate of

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