2013 (5) TMI 273 - AT - Income Tax

Penalty u/s 271(1)(c) - commission income on the bogus/accommodation entries computed @ 0.50% on the value of bogus transactions was added - Held that - The assessee is a chartered accountant and it has been conclusively established that he was running various concerns/companies for providing bogus/accommodation entries also admitted by the assessee himself in the statement recorded. The various companies floated by the assessee were used for providing accommodation entries. It is established beyond any doubt that he was engaged in providing bogus/ accommodation entries. Further the order made by the AO clearly shows that AO has recorded satisfaction for initiating penalty u/s 271(1)(c) thus argument of assessee becomes irrelevant in view of the provisions of section 271(1B) wherein the order containing direction for initiating of penalty shall be sufficient to constitute satisfaction of the AO for initiating penalty. Further, assessee s plea that penalty cannot be levied on estimated income has no merits as the estimation of taxable income by way of estimate is one of the established method for computing income as assessee had not disclosed a full fact, therefore, the Assessing Officer, in such a situation, has no alternate but to estimate the income. Against assessee.

Summary

Issues:
- Upholding penalty u/s 271(1)(c) of the Income-tax Act, 1961 levied by the Assessing Officer.

Analysis:
The judgment involved five appeals filed by the assessee challenging the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 by the Assessing Officer. The grounds of appeal raised common issues related to the correctness and justification of the penalty upheld by the CIT (Appeals). The primary contention was that the penalty was unjustified as the assessee was not directly involved in the alleged accommodation entry business conducted through various companies. The assessee argued that separate legal entities were responsible for the transactions, and the income was assessed in both the assessee's hands and the companies' hands, leading to dual assessment. The ITAT had previously sustained the addition of commission income on the bogus entries in the hands of the assessee, emphasizing the need to tax the income in one hand only. The assessee contended that the agreement to assess the income in their hands was to avoid double taxation and settle the matter, not an admission of earning such income.

The assessee's representative argued that the penalty under section 271(1)(c) could only be imposed for concealment or furnishing inaccurate particulars of income, neither of which applied in this case. It was highlighted that the penalty notice and order did not specify the default for which the penalty was initiated. The representative also challenged the estimation of income without proper justification and relied on a precedent to argue against penalty imposition when books of account are rejected. On the contrary, the Department's representative supported the lower authorities' orders, emphasizing the conclusive establishment of commission income from providing bogus entries by the assessee. The Department contended that the assessee's acceptance of taxing the income in their hands indicated concealment and furnishing inaccurate particulars of income, justifying the penalty under section 271(1)(c).

The ITAT considered the facts, case laws, and arguments presented by both parties. It noted the conclusive evidence of the assessee's involvement in providing bogus entries through various companies, as admitted by the assessee. The ITAT upheld the assessment of commission income in the assessee's hands and rejected the argument that penalty could not be levied on estimated income. It emphasized that estimating income was a valid method when full facts were not disclosed, and the assessment by estimate was legally sound. Referring to relevant case law, the ITAT concluded that the Department had sufficiently proven the concealment of income and furnishing inaccurate particulars, warranting the penalty under section 271(1)(c). The ITAT upheld the CIT (A)'s order, dismissing all appeals filed by the assessee.

In conclusion, the judgment affirmed the penalty imposed under section 271(1)(c) on the assessee for concealing income and furnishing inaccurate particulars related to commission income earned from providing bogus entries, despite the assessee's arguments against dual assessment and estimation of income.