AI Drafter 
TaxTMI 
TaxTMI 
2020 (4) TMI 525
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....giving accommodation entries in the form of loans /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 compani....
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....in as to why commission @ 0.5% should not be charged on the said accommodation entries? Ans. Sir, I confirm that I have arranged for accommodation entries for which commission @ 0.025% to @ 0.05% was earned and hence request your 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 ....
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....ropped the penalty proceedings initiated u/s 271(1)(c). It is submitted that since the assesses has voluntarily accepted to tax @ 0.02% of the accommodation entries and your honour has also estimated the commission income @ 0.03% in the assessment order passed u/s. 143(3) r.w.s 153A of 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 c....
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....l Verma Vs. Union of India (All) 230 ITR 855 and M.N. Rajaraman Vs. ACIT (ITAT, Chennai) 119 ITD 362 that if the department has incriminating material with regard to the undisclosed income, the disclosure made by the assessee cannot be considered to be voluntary. Further, in the cases of P.C. Joseph & Bros. Vs. CIT (Ker) 240 ITR 818, CIT vs, Rakesh Suri (All) 331 ITR 458 and CIT vs. Sushma Devi Agarwal (ITAT, Kol-TM) 67 DTR 430, it has been held 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 accommo....
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....estimated but it is only the profit earned from providing of accommodation entries, which has been estimated @ 0.03%. Therefore, the benefit of non levy of penalty cannot be extended to the assessee. In support of this view, reliance is placed on the decision of the Hon'ble Delhi High Court in the case of Kalindi Rail Nirman Enqq. Ltd. 51 taxmann. com 523 (Delhi) wherein levy of penalty on the additions made by estimating the income of the assessee by applying rate 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....
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....n turnkey projects and several discrepancies were noted in special audit conducted u/s 142(2A) of the Act. The Hon'ble Court noticed that the books of account maintained by the assessee were wholly not reliable and assessee has estimated the income at 3%, whereas AO has estimated the income @ 11% on the gross contract receipt and gave due opportunity to the assessee to explain the discrepancy and also to show why the profit rate of 11% cannot be adopted. But, these opportunities were not availed by the assessee. 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 ....
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....e chance sitting on the fence i.e. assessee took a risk and disclosed lesser income than what is actually earned. Whereas in the given case, that is not the issue but assessee has completely gave the information which is agreeable to the AO and cooperated to complete the assessment with real income. Accordingly, AO made reasonable estimation on the profit. Therefore, the case law relied by the Ld. CIT(A) is distinguishable, whereas assessee relies on following case law:- (i) Harigopal Singh vs. CIT reported in 125 Taxmann 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 vario....