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TMI Blog2008 (7) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... erence that no fault could be found with her. Such is not the case here. In absence of the possibility of correctly computing the income, the authorities will have no alternative but to estimate the income, which is permitted by the statute. In fact, there is no difference in this matter in an assessment made under s. 143(3) or made in the manner provided under s. 144. In this case, such estimate was also put to test and the order of the Tribunal in this case has become final. The penalty has been levied on the basis of the order of the Tribunal. Therefore, we are of the view that on the facts and in the circumstances of the case, penalty could be levied on increase in the undisclosed income even if it was on account of estimation made by the Revenue authorities and the Tribunal. There is a clear finding of the Tribunal that the assessee earned income over and above the income recorded in the books of account. The evidence to this effect was found in search and yet the assessee filed nil return. Therefore, the Revenue authorities were justified in computing the undisclosed income. Obviously, the assessment was made after search and seizure operation and the assessee was aware ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income of the assessee was estimated on the basis of the order of the Tribunal. It was not mandatory on the part of the AO to levy the penalty in case assessed undisclosed income exceeded the returned undisclosed income for the reason that in such a situation, there would be no need for providing any opportunity of being heard to the assessee. The learned CIT(A) came to the conclusion that the undisputed facts are that the turnover was not shown correctly in the return for the block period. The Tribunal also came to the conclusion that income by way of brokerage or commission was not shown correctly and completely by the assessee. Therefore, there was no bona fide reason to delete the penalty. Accordingly, the levy of penalty was confirmed. 3. Before us, the learned counsel for the assessee pointed out that the only addition made in this case was in respect of brokerage or commission income, which was estimated by the AO and the learned CIT(A) at 1.5 per cent, but reduced by the Tribunal to 0.60 per cent of the turnover. The orders of lower authorities show that the only basis for the levy of the penalty was the addition made to the undisclosed income returned by the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed in the return of the block period. If the assessee furnishes a convincing reason, then, the levy of penalty will not be justified. Further, reliance was placed on the order of Kolkata Bench of the Tribunal in the case of Dy. CIT vs. Suresh Kumar (2005) 95 TTJ (Kol) 926 : (2005) 97 ITD 527 (Kol) in which it was held that in view of the fact that since the word "may" is used in the section, the levy of penalty cannot be mechanical. The provisions contained in this section are analogous to the provisions contained in s. 271 (1)(c) and, therefore, the levy of penalty could not be held to be mandatory. Reliance was also placed on the order of the Delhi Bench of the Tribunal in the case of Dhiraj Suri vs. Addl. CIT (2006) 99 TTJ (Del) 525 : (2006) 98 ITD 187 (Del), in which it was inter alia held that since the AO himself admitted that the assessee had co-operated in the completion of block assessment proceedings, the levy of penalty was not justified. Reliance was also placed on the order of Kolkata Bench of the Tribunal in the case of Enfield Industries Ltd. vs. Dy. CIT (2007) 106 TTJ (Kol) 89 : (2007) 107 ITD 1 (Kol). The decision was that since the assessee had co-operated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter that the penalty was levied. The AO has no jurisdiction to rectify the order as his order has merged with the order of the Tribunal, which has become final. Thus, he had no power to rectify the computation of the undisclosed income on the basis of the application filed by the assessee after the passing of the order by the Tribunal. Thus, the application itself is incompetent. Therefore, it was agitated that looking to the facts of the case the lower authorities were justified in levying the penalty. 5. We have considered the facts of the case and rival submissions. Since the order of the Tribunal is the bed-rock for computation of undisclosed income, it would be appropriate if the finding of the Tribunal is reproduced here, contained in paras 15 and 16 from pp. 53, 54 and 55 of the paper book: "15. We have given careful thought to the rival submissions of the parties and examined them in the light of material available on record. We do not find any force in the contention advanced on behalf of the assessee that provisions of Chapter XIVB were wrongly applied in this case as there is no undisclosed income. In fact, as per admission of the assessee, most of the transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or short-term capital gains. However, in the regular bills the rate was shown at 0.35 per cent or 0.5 per cent There is direct evidence of assessee indulging in earning undisclosed income through accommodating/fictitious entries and it is not possible to ignore the seized material. The huge credit in large number of accounts maintained by the assessee dealing more than Rs. 104 crores as also maintenance of several benami accounts described as dummy/feeder/main accounts used to carry on fictitious and ostensible business of share dealing, leave no amount of doubt that the assessee was involved in earning undisclosed income on a very large scale. It is to accept that the assessee did not earn any undisclosed income and that income in its case was to be computed on the basis of books produced by the assessee. We reject the arguments of the assessee." Insofar as the determination of the undisclosed income is concerned, the matter is covered in paras 17 and 18, which are reproduced below: "17. It is true that in the case of Shri Manoj Aggarwal, the Revenue authorities applied rate of 0.5 per cent to estimate the commission received from similar accommodating entries and the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was admittedly much lower ranging between 0.25 per cent to 0.50 per cent Therefore, having regard to the entire gamut of facts, circumstances and material which is available on record, there does not appear to be justifiable reasons to estimate the commission income of the assessee by applying rate of 1.5 per cent of the total turnover. In our view, it would be in the fitness of the things that the income earned by the assessee was of commission/brokerage on the turnover including accommodation entries profit to its clients is computed @ 0.6 per cent on the total turnover of Rs. 1,04,76,94,004 on which there is no dispute. We accordingly direct the AO to compute income on account of commission/brokerage." 5.1 Before proceeding with the legal issues, it may be mentioned that one of the arguments of the learned counsel was that the turnover of the assessee was not determined correctly. In the course of oral hearing before us, it was also stated that the Investigation Wing of the Revenue Department had determined turnover which was lower than the turnover determined by the AO. However, when questioned about any evidence in this behalf, it was fairly stated by the learned counsel tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding with the computation of undisclosed income under Chapter XIV-B. Further, it was held that the assessee was charging commission at different rates varying between 0.35 per cent to 1 per cent, depending upon the type of entry. However, in the regular bills, the rate was shown between 0.3 per cent or 0.5 per cent Therefore, there is a direct evidence against the assessee that he was indulging in earning undisclosed income through the business of providing accommodation or fictitious entries and it is not possible to ignore the seized material. In spite of these evidences found in the course of search and of which there was knowledge, the assessee filed a nil return for the block period. While there could be a dispute between the Revenue and the assessee as to whether the case law under s. 271(1)(c) will be fully applicable under s. 158BFA(2) as the languages employed in the two sections are different, yet, it is cleat that the assessee was in the knowledge of undisclosed income, which was not shown at all in any manner in the return of the block period. Therefore, the facts of this case are different from the facts of the cases reported at (2005) 92 TTJ (Bang) 270 : (2004) 91 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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