TMI Blog2020 (4) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... /Mum/2017 - - - Dated:- 5-2-2020 - Shri Pawan Singh, JM And Shri S. Rifaur Rahman, AM For the Appellant : Shri A. K. Ghosh, AR For the Respondent : Shri V. Vinod Kumar, DR ORDER PER S. RIFAUR RAHMAN (ACCOUNTANT MEMBER): The present three (3) Appeals have been filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals)-51, Mumbai, in short Ld. CIT(A) dated 10.08.2017 for AY 2010-11, 2012-13 2013-14 respectively. 2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed of by this consolidated order. Firstly, we are taking ITA No. 6567/Mum/2017 for AY 2010-11 filed by the assessee. 3. The brief facts of the case are that a search and seizure operation u/s 132 of the Act was carried out on assessee s group company on 01.10.13 based on the information received from Investigation Wing, Gujarat. In the search proceedings, it was found that assessee indulged in giving accommodation entries in the form of loans /advances given by companies controlled and managed by assessee. In the statement recorded on oath u/s 132(4) of the Act on 01.10.13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 166656 821025 5. Considering the above, the taxable income of the assessee, was determined at ₹ 8,79,922 as commission for providing accommodation entries and accordingly brought to tax. Subsequently, penalty proceeding u/s 271(1)(c) of the Act was initiated on concealment of income. In response, AR of the assessee submitted the following submissions:- In this respect, it is submitted that a search and seizure action was conducted in the case of Satish Saraf Group on 01.10.2013. Satish Saraf Group comprises of Shri Satish Saraf himself, Shri Shri Rajeev Jhunjhunwala, Shri Rahul Jhunjhunwala and Shri Vishal Bhuwania. During the course of search, in the statement recorded u/s. 132(4) on 01.10.2013, Shri Satish Saraf has stated and accepted that he has acted as an intermediary for arranging accommodation entries between two parties. He also stated the varied rate of commission earned on different type of accommodation entries arranged by the group. In the post search proceedings, Shri Satish Saraf in his statement recorded has voluntarily accepted to tax @ 0.03% of the accommodation entries arranged by him. Further, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FY 2010-11 on which I agree to. pay taxes on schedule . Therefore, in the return of income filed u/s. 139, Shri Satish Saraf has offered 3 paisa as commission income for accommodation entries for the AY 2011-12. Accordingly, the total commission @ 3 paisa amounting to ₹ 16,25,000/- was offered as gross commission as against the same Shri Satish Saraf had claimed expenditure of ₹ 4 25,000/- and net commission income of ₹ 12,00,000/- was offered to tax for the AY 2011-12. It may be noted that the entire transactions upto the date of survey was considered in the hands of Satish Saraf The Ld. AO passed assessment order u/s. 143(3) on 18.06.2013 and he has accepted the gross commission income @ 3 paisa amounting to ₹ 16,25,000/- in the case Shri Satish Saraf. However, the AO disallowed expenditure of ₹ 1,00,000/- out of expenditure of ₹ 4,25,000/- claimed by Shri Satish Saraf. In the assessment order, your honour has also admitted that Shri Satish Saraf in his post search statement has voluntarily accepted to tax @ 0.03% of the accommodation entries and a/so stated that the statement of the assessee to tax 0.02% is considered and found to be una ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 6. Considering the above, AO rejected the contentions of the assessee and levied the minimum penalty of ₹ 2,30,930/- u/s 271(1)(c) of the Act. 7. Aggrieved with the above, assessee preferred an appeal before Ld. CIT(A) and made before him an elaborate submission including issue of defective notice u/s 274 of the Act. After considering the submission of the assessee, Ld. CIT(A) dismissed the appeal of the assessee and also dismissed the issue of defective notice u/s 274 of the Act. Ld. CIT(A) dismissed the grounds with the following observations:- 8.1.1 In the submissions made during appellate proceedings, the assessee has contended that the action of the AO of levying penalty u/s. 271(1)(c) is incorrect primarily for the following reasons :- i) He had voluntarily agreed for addition of his unaccounted income of ₹ 8,89,9227- at the rate of 0.03% on the accommodation entries provided. ii) The additions made by the AO are on estimate basis being 0,03% on the total accommodation entries provided by him. iii) The AO while issuing the notice has not struck off the redundant words in the show cause notice issued u/s. 274 and therefore, as per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid unaccounted income to his total income only after being thoroughly investigated and confronted at various stages viz. Survey action, search action and assessment proceedings. Thus, the claim of the assessee that he had voluntarily accepted the inclusion of the said amount to its total income is not acceptable. 8.1.3 The facts of the case of the assessee are quite similar to the cases decided by the Hon'ble Supreme Court in the cases of Mak Data (P) Ltd (38 Taxman.com 448) and K P Madhusudanan (118 Taxman 224) wherein the assessees had come forward with an offer of undisclosed income in course of the assessment proceedings on being confronted with adverse evidences, however, the levy of penalty on the undisclosed income offered was upheld. Therefore, the contention of the assessee that it had voluntarily offered the said undisclosed income and therefore penalty is not leviable, is rejected. Whether penalty is leviable even in cases where accounted income has been estimated: 8.1.4 It has further been contended by the assessee that the additions had been made by the AO on estimate basis and therefore, penalty u/s. 271(1)(c) cannot be levied. From the sequence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Trib.) iv) CIT vrs. SSA s Emerald Meadows (ITA No. 380 of 2015) (SC). 10. On the other hand, Ld DR submitted that no doubt the income offered by the assessee is voluntary. However, the assessee has come forward to accept the estimated income only due to proceeding u/s 132 of the Act. He objected to the submission of Ld. AR that penalty cannot be levied on estimation of income and he relied on case laws on which Ld. CIT(A) has heavily relied upon, in which Hon ble Delhi High Court in the case of Kalindi Rail Nirman Engg. Ltd. 51 taxman.com 523 (Del) and with regard to defective notice u/s 274 of the Act, he relied upon the findings of Ld. CIT(A) at page no. 15 of the order. 11. Considered the rival submissions and material placed on record. We notice that assessee has disclosed the commission income earned from accommodation entries provided by him which varies from transaction to transaction between @ 0.02% to 0.05% and assessee came forward voluntarily offered 0.02% as commission income. AO has estimated the same @ 0.03% and assessee has agreed the same and paid the relevant tax as applicable. Subsequently, AO initiated penalty proceedings and penalty was levied 100% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted but these opportunities were not availed of by the assessee. He also has recorded in the assessment order that the assessee was permitted to inspect the seized documents and was given photocopies of the desired documents (paragraph 7). This is not denied by the assessee. In these circumstances, the mere fact that the estimate was reduced by the Tribunal to 8 per cent, would in no way take away the guilt of the assessee or explain its failure to prove that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on its part. It appears to us that the assessee was taking a chance-sitting on the fence-despite the fact that there was a search towards the close of the relevant accounting year in the course of which incriminating documents were found. It appears to us that the intention of the assessee was to take a risk and disclose a lesser income than what it actually earned and rely upon the minor variations in the rate of profits adopted by the taxing authorities and the Tribunal as a defence in the penalty proceedings. The plea-accepted by the Tribunal-that the assessee agreed to be assessed at 11 per cent, of the gross receipts only ..... X X X X Extracts X X X X X X X X Extracts X X X X
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