2020 (4) TMI 114 - AT - Income Tax

Addition of commission income - estimation commission income of the assessee for 207 days - set off with the income already disclosed by the assessee - Method to work out total commission income - HELD THAT - Once, after taking into consideration the turnover, the commission income has been worked out at a sum of ₹ 25 lakhs, then how the commission income already accounted for by the firm at ₹ 27.50 lakhs could not be set off. We could appreciate the case of the Revenue, if after taking into the average commission income for three days, the learned CIT(A) worked out the commission income of 207 days at ₹ 27.50 lakhs plus ₹ 25 lakhs. In that situation, the stand of the Revenue not to give set off of ₹ 27.50 lakhs could be justified. But in the present situation, the only method which could be adopted is to work out total commission income for 207 days by whatever method, then debit that commission income from the amount already disclosed by the assessee plus expenditure and the remaining will be taxable. The disclosure made by the assessee at ₹ 27.50 lakhs is more the ultimate estimated income worked out by the learned CIT(A); therefore, no further addition is required. Accordingly, the addition of ₹ 18,20,407/- is deleted and the appeal of the assessee is partly allowed. Penalty u/s 271AAA - survey u/s 133A - HELD THAT - The assessee failed to fulfill the conditions of Section 271AAA. It, therefore, deserves to be visited with penalty. However, the penalty is to be restricted qua 10% of the additions we have confirmed. We have already deleted ₹ 18,20,407/-; therefore, 10% of this is to be excluded. The penalty is, therefore, restricted to ₹ 2,75,000/-, instead of ₹ 4,57,041/- imposed by the Assessing Officer.

Summary

Issues:
1. Appeal against addition of income in assessment.
2. Appeal against penalty imposed under Section 271AAA.

Issue 1: Appeal against addition of income in assessment

The case involved two appeals by the assessee against orders of the CIT(A) for Assessment Year 2009-10. The first appeal, ITA No. 1708/Ahd/2011, challenged the addition of ?18,20,407. The background was a survey under Section 133A where cash was recovered from the business premises. The Assessing Officer estimated commission income, leading to a taxable income determination. The CIT(A) partly upheld the addition, considering turnover calculations and commission income. The assessee argued for set off of disclosed income against estimated income. The tribunal found the CIT(A)'s method flawed, as the disclosed income exceeded the estimated income. Consequently, the addition of ?18,20,407 was deleted, partially allowing the appeal.

Issue 2: Appeal against penalty imposed under Section 271AAA

The second appeal, ITA No. 1169/Ahd/2013, contested a penalty of ?4,57,041 imposed under Section 271AAA(2)(ii). The penalty was based on undisclosed income amounts. Section 271AAA allows penalty waiver if conditions are met, including admitting undisclosed income during search. The assessee failed to fulfill these conditions, leading to penalty imposition. However, the tribunal restricted the penalty to 10% of confirmed additions, resulting in a reduced penalty of ?2,75,000. Ultimately, the appeal against the penalty was partly allowed.

In conclusion, the tribunal partially allowed both appeals, ruling in favor of the assessee regarding the addition of income in assessment and reducing the penalty imposed under Section 271AAA. The judgments provided detailed analyses of the issues involved, considering legal provisions and factual circumstances to reach reasoned decisions.