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TMI Blog2024 (12) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... or otherwise. Glaringly, the sum surrender to pay tax on the sum of sub-contracting expenditure sprung out upon respondents failure to prove veracity genuineness which came to light solely on account of search action. Therefore, it is not a case wherein a disclosure was voluntarily made; indeed, it was out of search action. Otherwise, bogus expenditure claimed earlier could have continued to hold field of deduction. In any case, so-called voluntary disclosure/surrender of sub-contract expenditure claimed earlier by furnishing inaccurate particulars of income cannot alter the consequences in the light of decision of the Hon ble Apex Court in the similar facts and circumstances in view of former judicial precedents, irrespective of the fact as to how much of such bogus/sham sub-contact/expenditure has actually been brough to tax in the course of assessment by the Ld. AO, as the same is subject matter of revision under the provisions of law. Given section 274 provides that, no order imposing a penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. The requirement of section 274 of the Act since shown complied and remained u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate limited company incorporated under the Companies Act was engaged in construction of water reservoirs, roads, bridges, dams, thermal power projects, townships, industrial corporate buildings etc. The assessee is a part of Mulay group of companies, whereon a search action u/s 132 of the Act was carried out on 21/08/2018 covering the assessee as well. During said search action, certain documents/materials were seized which revealed to the Revenue that, the assessee booked/claimed subcontract expenditure without there being any sub-contracts awarded to certain sub-contractors. When these sub-contracting expenditure/transactions were confronted to the assessee for establishing their veracity genuineness, the assessee expressed its inability on oath and accepted to surrender/offer 12% of such sub-contracting expenditure as its undisclosed income. 4.2 For the search year i.e. AY 2019-20 the assessee company filed its return declaring total income of ₹ 2,22,45,900/- wherein the aforestated 12% of total unexplained sub-contracting expenditure was surrendered to tax in addition to regular income taxable under the provisions of law. The said return was selected for scrutiny u/s 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid quantum orders remained unchallenged and in absence of any record suggesting further appeals thereagainst by the assessee, Ld. AO concocted the acceptance of quantum and initiated consequential penalty proceedings separately by notice u/s 274 r.w.s. 271(1)(c) of the Act for AY 2013-14 2014-2015 in relation to unexplained sub-contract expenditure brought to tax u/s 69C of the Act. 4.5 On the other hand, for the search year a notice u/s 274 r.w.s. 271AAB of the Act was issued in relation to amount of unexplained sub-contract expenditure of ₹ 2,43,78,000/- taxed u/s 69C of the Act, alongwith unexplained sundry creditors of ₹ 3,57,81,700/- offered to tax by the assessee u/s 41(1) of the Act and other two additions made by the Ld. AO while culminating the regular assessment viz; disallowance u/s 36(1)(va) of the Act and disallowance of interest on TDS/TCS etc. 4.6 The assessee s submission against proposed penalty proceedings did fail to inspire any confidence to the Ld. AO, in the event the penalty proceedings in relation to AY 2013-14 2014-15 were culminated u/s 271(1)(c) of the Act by imposing a penalty equal to 100% of tax on amount of unexplained subcontract expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al hearing, rival parties Ld. counsels took us through the relevant facts of the case and bullet point of controversies involved herein and conversely claimed that, respective order of imposition of penalty and first appellate orders deleting the penalty deserves to be upheld leaving other jettison. 7. To drive home the Revenue s contention the Ld. DR Mr Desai at the very kickoff challenged the validity of impugned orders passed which solitarily founded its decision by placing reliance on Sir Shadilal Sugar General Mills Ltd. Vs CIT [1987, 168 ITR 705 (SC)]. In view of the Revenue the ratio therein is inapplicable to the facts and circumstances of present cases. It is the twofold submission of the Ld. DR that; firstly, the addition on account of unexplained sub-contracting expenditure made in the respective years were exclusively based on seized documents/material unearthed during the search. And secondly the case laws relied by the assessee in first appellate proceeding on the basis of which relief given were completely misapplied/misplaced as the reliance placed does not represent the settled position of law. Entrusting culmination of assessment in the light of seized material, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The sum substance of oral arguments and written submission referred in the course of hearing of respondent assessee is twofold viz; (a) the details of expense payments relating to all identified sub-contractor/contracts were already available on record and disclosed in the audited financial statements, (b) owning to inability of assessee to produce copies of contracts confirmation from the respective sub-contracting parties. Thus, the percentage of total sub-contracting value/expenditure surrender was since based on estimation, therefore taxing such unexplained expenditure do not attracting any penal provisions under the Act. To fortify this proposition the assessee spotlighted Ld. co-ordinate benches decisions rendered in Mun Gems Vs ACIT [2023, 155 taxmann.com 1], Rajesh H Shinde Vs DCIT [2006, 103 ITD 360(Pune)] and the decision of Hon ble Gujarat High Court in the case of CIT Vs Whitelene Chemicals [2014, 360 ITR 385 (Guj)] 11. We have heard the rival contentions of both the parties; and subject to the provisions of rule 18 of Income Tax Appellate Tribunal Rules, 1963 [from now ITAT-Rules ] perused the material placed on records and duly considered the facts of the case in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, in answering question of 27 (supra) the assessee playfully excused from providing key documents on twofold reasons viz; (a) records sought to produce relates to very old period (b) due to paucity of time confirmation from the parties were not possible. Its worthy to note here that, the relevant period of sub-contract expenditure which remained unexplained till date was falling well within the stipulated period for which the respondent assessee was under obligation to maintained its books of accounts and documents under the provision of the Act. Insofar as the paucity of time is concerned, on a specific query by the bench, the respondent submitted in the open court that, neither before culmination of assessment nor first appellate proceedings the sought details/documents were submitted by the assessee to prove effectively on record that sub-contract/expenditure were indeed do not suffer from genuineness. It is not out of place to state here that, the respondent assessee is also indifferent in the present proceedings. In view thereof, former both the claims/excuses of the respondent in our considered were deceptive. 12.3 The conjoint reading of records clear suggest that, the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upled with the bonafied was on the assessee. The KP Madhusudan (supra) decision gives an important test for such cases and requires that it would depend how the assessee has discharged burden of proving its bonafides. In the present case, it is therefore not sufficient that the assessee surrendered/agreed addition of unexplained subcontracting expenditure without any material but it failed to urge, prove or substantiate that the surrender was without material. The assessee stopped after the surrender for addition, therefore risk of applying of the fiction under Explanation as to deemed concealment would always attract, which in turn empowered the tax authorities for initiating the imposing the penalty set forth u/s 271(1)(c) of the Act. The respondent has only stated that, it has declared the additional sum as its income with a view to avoid litigation and to buy a peace and to make amicable settlement with the income tax department. The surrender or surrender of income in these cases was not voluntary in the sense that the surrender was made when the Ld. AO doubted the veracity genuineness of sub-contracts its related expenditure and treated them as sham bogus. In such a situation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... precedents, irrespective of the fact as to how much of such bogus/sham sub-contact/expenditure has actually been brough to tax in the course of assessment by the Ld. AO, as the same is subject matter of revision under the provisions of law. 16. Given section 274 provides that, no order imposing a penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. The requirement of section 274 of the Act since shown complied and remained undisputed, and the penal provisions being a civil liability calling no act of or ingredient for wilful concealment as laid by Hon ble Supreme Court vide 25 in the case of UOI Vs Dharmendra Textile Processors reported in 306 ITR 277 (SC), the penalty imposed u/s 271AAB also deserves to be sustained on similar observation. Nothing contrary has been shown to us in the present facts which would warrant diversion from the view fortified by the Hon ble Supreme Court in K P Madhusudan Vs CIT MAK Data Pvt Ltd Vs CIT (Supra). Apropos, in view of the aforesaid discussion and former judicial precedents (supra) the impugned orders of Ld. CIT(A) for AY 2013-14 2014-15 are set-aside in its entirety and for AY 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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