Commission Rate on Accommodation Entries: ITAT Directs AO to Apply 0.15% Instead of 1% [Read Order]

The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) directed the Assessing Officer ( AO ) to apply a 0.15% commission rate for accommodation entries instead of the 1% rate initially used.

Saanvi Developers & Realtors Pvt. Ltd.,appellant - assessee,filed its income tax return for AY 2010-11, declaring ₹26,90,090 as total income. Later, based on credible information, the case was reopened, and a notice under Section 148 was issued. In response, the assessee filed the same income declaration.

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Despite further notices, there was no compliance. As a result, the assessing authority added ₹87,86,590 as undisclosed commission income, calculated at 1% of the accommodation entry value. The assessee appealed to the Commissioner of Income Tax (Appeals)[CIT(A)], who partly allowed the appeal, stating that the 1% estimation was reasonable, considering the director admitted to facilitating accommodation entries.

Aggrieved by the order the assessee appealed before the tribunal.

The assessee's counsel challenged the order, arguing that the AO and CIT(A) wrongly applied a 1% commission rate instead of the accepted 0.10-0.15%. The counsel noted that the A.O. had used an estimated market rate, which was higher. The counsel also pointed out that in AY 2011-12, the CIT(A) had approved a 0.15% commission rate, but this was not considered for the current year. A copy of the 2011-12 order was submitted.

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The two member bench comprising Pradip Kumar Choubey ( Judicial Member ) and Rajesh Kumar ( Accountant Member ) reviewed the case where the assessee declared a total income of Rs. 26,90,090/-. The AO had applied a commission rate of 1.0% for accommodation entries due to lack of response from the assessee. However, the assessee argued that the rate should be 0.15%, which had previously been accepted by the department.

The appellate tribunal referred to an earlier order for AY 2011-12, where the CIT(A) had instructed the AO to apply a 0.15% commission rate, not 1%. It also considered a ruling by the Bombay High Court, which upheld the 0.15% rate as reasonable based on the assessee's declaration.

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Given the admission by the assessee's director about providing accommodation entries for a commission of 0.10% to 0.15%, the tribunal ruled that the commission rate should be 0.15%. The appeal was allowed, and the AO was directed to apply the 0.15% rate.

To Read the full text of the Order CLICK HERE

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