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TMI Blog2020 (4) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... ans /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, the assessee in principal agreed that he is indulged in giving accommodation entries and no actual business was conducted in the concerns controlled by the assessee and his team. 4. The assessee in his post search statement voluntarily accepted to tax @ 0.03% of the accommodation entries. The AO found the commission @ 0.03% as reasonable and accordingly taxed. As per the above, the taxable amount was determined as per the below statement:- Particulars Amount of addition A.Y. 2010-11 A.Y. 2011-12 A.Y, 2012-13 A.Y 2013-14 A.Y 20M-l> Share application given by companies controlled & managed by group 1188000 226627 220023 109486 37693 -- Loans / Advances given by Companies controlled and managed by group -- -- -- ..... -- -- Share application given to Shirish through various companies and controlled by other operators in Kolkata & self controlled companies 3036000 435919 535665 38183 2200 -- LTCG in different companies 2454000 -- -- -- -- 818000 Share application received from Shirish 1140000 217320 211565 105 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... good office to tax only 1 paise on all the accommodation entries. Q.56 It is observed from the assessment records that for A. Y. 2011-12 you have offered 3 paise as commission income for accommodation entry and accordingly why 3 paise should not be charged on the accommodation entry for share application, long term capital gains, sub-contracts. Please explain Ans. I confirm that copy of assessment order has been read and request to tax commission @ 0.03% of the accommodation entries Q. 57 Do you want to say anything? Ans. Sir, I once again reiterate your good office to charge commission @ 0.03% on the accommodation entries..." As rightly confronted by your honour in Q.56 that Shri Satish Saraf voluntarily offered 3 paisa on accommodation entries and the assessee in reply has confirm that he has read the statement of Satish Saraf. However, the assessee requested to tax commission @ 0.02% of the accommodation entries. It may be noted that a survey action u/s. 133A took place on 26.08.2010 at the business premises of Shri Satish Saraf and in the statement recorded u/s. 131 dated 23.09.201 0, in reply to Q No. 14 Shri Satish Saraf admitted that" on an average of 3 paisa hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, no penalty is leviable u/s.27/(1)(c) of the Act. For this proposition, reliance is placed, on the following decisions:- (i) Harigopal Singh vs. CIT reported in 125 Taxmann 2521258 ITR 85 (P & H). (ii) CIT vs. Smt. K. Meenaksht Kutty 258 ITR 494(Mad). (iii) CIT(A) vs. Valimkbhai H. Pate/ 280 ITR 487(Guj). (iv) CIT(A) vs. Raj Bans Singh 276 ITR 351 (All). (v) CIT vs. Lallubhai Jogibhai Pate/ 261 ITR 216(Guj) (vi) CIT vs. Shivnarayan Jamnalal & Co. 232 ITR 311 (NIP). (vii) Navjivan Oil Mills Vs. CIT[252 ITR 417 (Guj)] (viii) CIT Vs. Ravail Singh & Co. [254 ITR 191 (P&H)] (ix) CIT Vs. Sangrur Vanaspati Mills Ltd. [216 CTR 92 (P&H)] (x) CIT Vs. DM/o/7 Rice Mills [256 ITR 447 (P&H)] Reliance is further placed on the following decisions of various High Courts/ Tribunals wherein, it has been categorically held that penalty cannot be imposed in respect of additions made on the basis, of estimation of profit rate. These decisions are directly applicable to the facts of assesses's case and hence, no penalty could be imposed. (a) CIT vs. V.K.L Mangal Sain 107 ITR 598 (All.) (b) DCIT vs. Madad All Ansari & Co. 69 TTJ 279 (Jd.) (c) ITO V. C, Chhotalal Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that simply because the assessee agreed for addition of undisclosed income subsequent to detection thereof and filed return in response to notice u/s. 148 offering the said amount as additional income, the assessee cannot escape levy of penalty u/s. 271(1)(c). In the said cases cited, it can be observed that even wherein the assessee had duly included the unaccounted income in its return of income but subsequent to the detection, the Hon'ble Courts have held that penalty u/s. 271(1)(c) is leviable. However, in the instant case, despite the admission made by the assessee in the statements on oath recorded in the course of the survey action and the subsequent search action of having earned commission income @ 0.03% of the accommodation entries provided, he filed his return of income u/s. 153A without including the said additional income admitted in course of the survey action and the subsequent search action. In course of the search assessment proceedings u/s 153A, statement on oath of the assessee was again recorded, wherein he once again admitted to have earned unaccounted income @ 0.03% of the accommodation entries provided and agreed that this unaccounted income may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 11% (agreed by the assessee) on the gross receipts has been upheld. Therefore, the contention of the assessee that penalty is not leviable in its case since the unaccounted income has been determined by the AO on estimate basis is rejected. 8. Aggrieved with order of Ld. CIT(A), assessee is in appeal before us. 9. Before us, Ld. AR submitted that AO has estimated the commission income @ 0.03% which was voluntarily disclosed by the assessee in the post search statement and brought to our notice page no. 9 of the paper book. He further submitted that AO cannot levy penalty when the income of the assessee was on estimation. For that purpose, he relied on case laws similar to the submission made before Ld. CIT(A). Further, he submitted that the notice issued u/s 274 of the Act was defective and the copy of the notice placed at page no. 1 of the paper book in which AO has not notified on which limb of the penalty charges, he is proceeding with. For that proposition, he said that the notice issued u/s 274 of the Act is defective and relied upon the following case laws:- i) CIT vrs. Manjunatha Cotton & Ginning Factory reported in359 ITR 565 (Karnataka HC) ii) CIT vrs. Samson Peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, assessee was permitted to inspect the assessed documents and was given photo copies of the desired documents. 12. The Hon'ble Court further observed, which is reproduced below:- 12. We are bound by the ratio of the decision of this court. The number of discrepancies and irregularities listed by the special auditor in his report which are reproduced in the assessment order bear testimony to the fact that the books of account maintained by the assessee were wholly unreliable. If they were so, there can be no sanctity attached to the figure of gross contract receipts of Rs. 20,30,74,024 on which the assessee estimated 3 per cent, as its income. It is true that the Assessing Officer did not enhance the figure of gross receipts but that is not because he gave a clean chit to the books of account allegedly maintained by the assessee; he could not have given a clean chit in the face of the defects, discrepancies and irregularities reported by the special auditor. In order to take care of those discrepancies he resorted to a much higher estimate of the profits by adopting 11 per cent, on the gross contract receipts. He gave due opportunity to the assessee to explain the discre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 252/258 ITR 85 (P &H). (ii) CIT vs. Smt K. Meenakshi Kutty 258 ITR 494(Mad). (Ill) CIT(A) vs. ValimkbhaiH. Patel 280 ITR 487(Guj). (iv) CIT(A) vs. Raj Bans Singh 276 ITR 351 (All). (v) CIT vs. Lallubhai Jogibhai Patel 261 ITR 216(Guj) (vi) CIT vs. Shivnarayan Jamnalal & Co. 232 ITR 311 (MP). (vii) Navjivan Oil Mills Vs, CIT[252 ITR 417 (Guj)J (vlii) CIT Vs. Ravail Singh & Co. [254 ITR 191 (P&H)] (ix) CIT Vs. Sangrur Vanaspati Mills Ltd. [216 CTR 92 (P&H)] (x) CIT Vs. Dhillon Rice Mills [256 ITR 447 (P&H)] Reliance is further placed on the following decisions of various High Courts/ Tribunals wherein, it has been categorically held that penalty cannot be imposed in respect of additions made on the basis of estimation of profit rate. These decisions are directly applicable to the facts of assessee's case and hence, no penalty could be imposed. (a) CIT vs. V.K.L Mangal Sain 107 ITR 598 (All.) (b) DCITvs. Madad All Ansari & Co. 69 TTJ 279 (Jd.) (c) ITO V. C. Chhotalal Textiles Pvt Ltd. 95 TTJ 436 (Mum.) 14. Therefore, by considering the ratios of the above decisions and as held that the penalty cannot be imposed when the income of the assessee is estima ..... X X X X Extracts X X X X X X X X Extracts X X X X
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