TMI Blog2015 (3) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee admitted, in the course of search proceedings under Section 132(4) of the Act, that the said amount also included sums forming part of the turnover on account of providing accommodation entries. Now, that radically changed the complexion of the nature of declaration made and certainly formed the basis for materials discovered during the course of proceedings. Furthermore, having regard to this admission, the AO, most importantly, was entitled to determine: having regard to the nature of commission originally declared, whether that was in line with the new activity disclosed. It is a matter of record - noted by the CIT(A) in the quantum proceedings that the commission ranged upto 1%. Having regard to the conspectus of circumstances, therefore, the AO determined the commission to be 1.5% on the said total turnover; the ITAT decreased it. Nonetheless, the important fact is that the determination in the course of block assessment order was based upon a material discovered, i.e. in the form of statement made by the assessee under Section 132(4) of the Act; that radically changed the character of the income originally declared. Consequently, the estimation directed by the ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act ), the assessee had admitted that the said sum of ₹ 1,04,76,94,004/- was actually not entirely based on share transactions but was also based on accommodation entries. The assessee had stated in the returns that the commission received on the share transactions ranged between 0.25% and 0.5%. The CIT(A), however, found that there was material suggestive of receipt of commission of upto 1% even on the share transactions. In these circumstances, the estimated income added back by the AO on the basis of his assessment of the true income (on the business activity of providing accommodation entries which the assessee was engaged in) was to the extent of 1.5% of the total turnover indicated. 3. The ITAT, in the appeal preferred by the assessee, upheld the substantive decisions of the AO and the CIT(A) [in IT(SS)A No.54/Del/2004 dated 30.11.2004]. However, the ITAT directed rejection of the 1.5% turnover of commission attributed by the AO - and upheld by the CIT(A) in the following terms: 10. As far as application of rate of 1.5% to the turnover was concerned, the learned CIT(A) referred to seized documents - pages 6 to 8 of Annexure A-40 and pages 1 to 16 of Annexure A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the total turnover of ₹ 1,04,76,94,004/- on which there is no dispute. We accordingly direct the AO to compute income on count of commission/brokerage. 4. The AO had, in the meanwhile initiated penalty proceedings under Section 158BFA(2) of the Act which culminated in the order dated 29.06.2005. The AO directed payment of ₹ 15,34,375/-. The assessee s appeal to the CIT(A) was not successful. In the meanwhile, it is worth mentioning that the assessee had not appealed against the ITAT s order finally determining the income @ 0.6% of ₹ 1,04,76,94,004/-. Therefore, the matter became final. In these circumstances, when the ITAT was approached in the present round of issue of penalty, it rejected the assessee s contentions. 5. Learned counsel for the assessee urges that the ITAT fell into error. It was submitted that the trigger for a penal action under Section 158BFA(2) is if in the course of a search, some material is found. Placing emphasis on Section 158BB, especially, the phrase, undisclosed income found , learned counsel submitted that the pre-condition for imposition of penalty under Section 158BFA(2) is that the undisclosed income determined by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o give reduction of amounts calculated on reasonable basis on account of their opening capital as on 1st April, 1995 from the unaccounted money-lending business prior to block period out of the undisclosed income determined in their hands. The learned Tribunal has rightly held that the addition is result of estimation of the opening capital involved prior to the block period and in the block assessments while computing the undisclosed income for the block period, capital possessed by the assessees prior to the block period as revealed from the ledger and the material seized during the search could not be treated as undisclosed income of the first assessment year in the block period. Thus, in view of the concurrent finding of fact arrived at by the two appellate authorities, as aforesaid, in our considered opinion, no substantial question of law arises for consideration of this Court in these appeals. In the result, the appeals fail, the same are hereby dismissed. No order as to costs. 6. The same High Court later in Giriraj (supra) echoed the same view as follows: 9................................A fact or allegation based on estimation, cannot be said to be correct only, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aran (supra) emphasised occur in a separate part of the Income Tax Act. Chapter XIV-B entitled Special procedure for assessment of search cases nowhere indicates that an estimation of income tax logically based upon inference drawn in the case of block assessment procedure is per se excludable from the ambit of the penal provision. The plain text of the enactment says that the AO has the discretion to levy penalty, which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under clause (c) of section 158BC . In the present instance, there is no doubt at all that the AO did determine the undisclosed income; that it was based upon estimation or an inference is a matter of detail. The plain text of the enactment admits no room for doubt that all manners of determination of income, per se might call for action at the discretion of the AO. As to whether the AO has properly exercised discretion in a particular matter or otherwise can certainly be subject to further scrutiny. The plain text of enactment, however, does not admit of the interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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