2019 (11) TMI 394

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....the penalty of Rs. 16,00,000/- u/s 271(1)(c) of the Income Tax Act, 1961. 3. Under the facts and circumstances of the case the learned CIT (A) has erred in relying on the surrender of the income which was only for purchase of peace. 4. The assessee craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing." 2. The assessee is a private limited company and engaged in the business of manufacturing and trading of gold/studded jewellery as well as precious and semi precious stones. The assessee filed its return of income on 22nd October, 2014 declaring total income of Rs. 1,00,36,810/-. There was a survey under section 133A conducted on 20th September, 2016 in the case of the assessee. During the course of survey proceedings, the Director of the assessee company in his statement recorded surrendered an amount of Rs. 47,18,937/- on account of bogus claim of commission payment. Subsequently, the assessee filed a revised computation declaring the income on account of surrender made during the survey proceedings. The AO has completed the assessment under section 143(3) of the IT Act on 15.11.2016 determining the tota....

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....t the payment was made through cross account payee cheques after deduction of TDS and the recipient has shown the commission income without claiming any deduction in the Income Tax Return. Therefore, when the payment of commission was real and against the rendering of services by various persons then it cannot be treated as concealment of income or furnishing of inaccurate particulars of income even if the assessee has made the surrender of the said amount. The ld. A/R has then referred to the reply filed by the assessee to the show cause notice issued under section 274 and reiterated its contention and explained the circumstances under which the surrender was made and thus pleaded that it was a genuine transaction of payment of commission against the services rendered by the persons. The payment was made through account payee cheques and subjected to TDS. Further, the assessee has also shown its intention to prove the genuineness of commission payment and to produce the parties during the penalty proceedings. Hence, the ld. A/R has submitted that when the penalty proceedings are distinct and separate from the assessment proceedings, then the AO ought to have conducted the enqui....

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....dings surrendered the respective amounts on account of bogus commission payment for the assessment years 2011-12 to 2016-17. Though the AO has stated in the assessment order that during the course of survey proceedings certain incriminating material was found, however, as regards the surrender made on account of alleged bogus commission, there was no such reference either made during the course of statement recorded by the Survey team or by the AO in the assessment order. The general statement of the AO is that various incriminating loose papers/documents were found and impounded. In the absence of any reference of any specific material or document disclosing the bogus claim of commission, the said general statement of the AO would not help the case of the revenue to hold that the surrender was based on some incriminating material. The assessee has filed the statement of its Director recorded during the survey at pages 7 to 17 of the paper book. The relevant question on this issue was asked under question no. 20 and in answer to that the assessee has offered the amount on account of bogus commission. It is pertinent to note that the Survey team has asked the assessee by confronting....

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....persons have offered the commission income to tax in their returns of income. The assessee also produced the confirmations of these persons along with the returns of income before the AO in the penalty proceedings. Once the assessee has brought all relevant evidences on record to show that the commission paid by the assessee which was surrendered as bogus was not actually bogus but a genuine payment, then the AO instead of going by the surrender made by the assessee ought to have conducted an enquiry to verify the correctness of the documentary evidences filed by the assessee and genuineness of the claim. Since the assessee surrendered this amount and paid the tax, therefore, the explanation of the assessee is relevant only to the limited extent of considering the same as reasonable and bonafide explanation under section 273B of the IT Act. Even otherwise, when the surrender is not based on any incriminating material but it is only based on the statement recorded during the survey, therefore, the evidentiary value of the statement recorded under section 133A in the absence of corroborating evidence cannot be a conclusive basis for holding the assessee liable for the penalty proceed....