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TMI Blog2014 (5) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... early proves that all these transactions were out of books and the Tribunal, after considering the connected case of Vora Group, where three percent commission was assessed, assessed only two percent – it cannot be said to be merely on the basis of estimated/adhoc basis but after considering the overall facts and circumstances of various searches in the group and after appreciation of evidence on record - the penalty envisaged under sub-section (2) of Section 158 BFA, is entirely on different background as compared to one that can be imposed under Section 271(1)(c) of the Act - the AO has not committed any error in imposing such penalty or the Tribunal in confirming the same – the order of the Tribunal is upheld as no substantial question of law arises for consideration – Decided against Assessee. - ITA No.5/2014 - - - Dated:- 12-2-2014 - MR. AJAY RASTOGI AND MR. J.K. RANKA, JJ. Mr. Prakul Khurana on behalf of Mr. Sanjay Jhanwar, Advocate, for the appellant JUDGEMENT Per: J K Ranka: 1. This appeal u/s 260-A of the Income Tax Act, 1961 (for short, IT Act ) has been preferred by the appellant-assessee against the order of the Income Tax Appellate Tribunal (for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommon among them is adulteration of petrol. Due to quota allocation system these chemicals command a premium in the market and are mostly sold at such high rate than the procurement price which are usually in cash and not recorded in the books of account. As the allotted chemicals are sold in cash by the quota holders instead of utilizing them for manufacturing process, certain bogus buyers of manufactured items, which in fact are not produced at all are required to be shown in record. Actually no manufacturing or distillation is done but invoices of bogus sale showing sale of manufactured item or by product of Naphtha are made. For this purpose the concern of Vora group use to give accommodation entry for purchase of chemicals from such parties by issuing bogus purchase bills. 4. Modus operandi followed by Vora group was to receive cash from various parties and the same were deposited in bank accounts maintained in the name of various fictitious, non-existing paper concerns. Thereafter, cheques/DD/Pay orders were issued either directly from the said account or after transferring the deposited amount to another account held by Vora family only. 5. The core issue before the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O on various occasions from M/s. Apex Metchem (P) Ltd. account. 6. In view of the above, though it is a fact that bank account was maintained by M/s. Apex Metchem (P) Ltd., however, Thakkar family cannot be absolved in respect of its role of operating the aforesaid bank account. 7. The role of assessee in the entire trading in name of M/s. Apex Metchem (P) Ltd. is of not passive but as an active agent. Apex Metchem (P) Ltd. the assessee has accepted unaccounted earning of brokerage/ commission on sales so affected. 8. The ITAT in the quantum proceedings, as aforesaid, after considering all the facts and the findings, upheld addition at the rate of 2% as commission on account of the said accommodation entries while in the connected case of Vora Group, who had also been providing similar accommodation entries, computed commission at the rate of 3%. In the penalty proceedings, the AO, on the basis of the said addition having been sustained by the ITAT, accordingly imposed penalty on Rs.5,06,496/- u/s 158 BFA (2) amounting to Rs.3,03,898/- at the rate of 60% as prescribed in the said section. It was observed by the AO that it was own admission of the appellant-assessee that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest and penalty in certain cases (1) Where the return of total income including undisclosed income for the block period, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of January, 1997 as required by a notice under clause (a) of section 158BC, is furnished after the expiry of the period specified in such notice, or is not furnished, the assessee shall be liable to pay simple interest at the rate of 1[one per cent] of the tax on undisclosed income, determined under clause (c) of section 158BC, for every month or part of a month comprised in the period commencing on the day of immediately following the expiry of the time specified in the notice, and (a) where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return ; or (b) where no return has been furnished, on the date of completion of assessment under clause(c) of section 158BC. (2) The Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under this Chapter, may direct that a person shall pay by way of pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een mentioned in the case of Mr. Mayur M Thakkar and it will be reasonable and justifiable to make assessment to make additions in the hands of the present appellant @ 2% of the total turnover of the transactions of Rs.2,53,24,314/- which is an amount of turnover which is in the form of deposits in the bank account. It is also important to mention that in case these deposits are considered or this bank account is considered to have been operated and transactions having been regularly carried out by the assessee company and Mr. Mayur M. Thakkar is not beneficiary of these account the whole of the deposits in the form of premium @85.7% cannot be taxed in the hands of the assessee company. It is only peak credit which could be taxed alternatively but since we have held the assessee company has only given accommodation entry and the actual business has been carried out by Mr. Mayur M Thakkar who has used these accounts and blank letter heads for his benefit and therefore no income accrues and arises in the hands of the present assessee company. This alternate submission may not be applicable though our finding is very clear on the said submission also. Thus ground no.8 of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a result of search operation u/s 132 of the Act and therefore, this addition is nothing but the undisclosed income of the assessee which was not disclosed or recorded in the books of account of the assessee. The assessee has accepted the addition as sustained by the Tribunal. Therefore, there is no dispute that the addition of income to the extent of Rs.5,06,696/- is nothing but undisclosed income detected during the course of search and seizure action. Therefore, the penalty levied u/s 158BFA(2) is justified. 18. On perusal of above section 158 BFA(2), it provides that the AO can levy penalty in a sum 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 undisclosed income determined by the AO under clause (c) of Sec. 158 BC of the IT Act. The first proviso to subsection 2 of Section 158 BFA, however, provides that no order imposing penalty shall be made if the conditions (i) to (iv) , quoted herein above, are satisfied. In essence, no penalty would be imposed, if the assessee furnishes return of income, pays or offers tax by way of adjustment of such income, produces evidence of tax havin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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