AI Drafter 
TaxTMI 
TaxTMI 
2024 (12) TMI 422
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....ns of section 271(1)(c)/271AAB of the Act, where the income is assessed on the basis of material seized in search & seizure action carried out u/s 132 of the Act and further such addition is buoyed by the declaration on oath u/s 131 of the Act. 3. Since the facts and solitary issue delt in these bunch of appeals are similar, connected and interwoven, on the request of rival parties these appeals for the sake of brevity are heard together for being disposed-off by this common and consolidate order. 4. Briefly stated common facts born out of case records and common rival submission are that; 4.1 The respondent assessee is a private 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....
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....e AY's were made u/s 69C of the Act representing the proportion of unexplained sub-contact expenditure out of the above total unexplained sub-contracting expenditure worked out in the course of search year and consequential assessments by order dt. 21/06/2021 were framed by the Ld. AO u/s 153A r.w.s. 143(3) of the Act whereby taxable income of the assessee company was assessed at variance at Rs. 7,93,80,294/- & Rs. 5,59,25,787/- respectively. These aforestated additions and the assessments also informed to have not been agitated further in appeal by the respondent assessee. 4.4 Heeding that aforesaid 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 Rs. 2,43,78,000/- taxed u/s 69C of the A....
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....xx/- for undisclosed income of the specified year. 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and in facts by deleting penalty levied u/s 271AAB of the Act by holding that the admission of additional income offered by the appellant was not based on any asset, entry in books of account or transaction found in the course of search proceedings, whereas the provision of 271AAB are applicable on admission of undisclosed income irrespective of whether the same is based on any asset, entry in the books of account or transaction found in the course of search proceedings. 6. During the course of physical 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.....
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....concreteness in establishing either of the limb of concealment or furnishing inaccurate particulars, and therefore was rightly deleted by the Ld. CIT(A) on the basis of ratio laid down in 'Sir Shadilal Sugar & General Mills Ltd.' (supra). 10. Adverting to the copy of submission made before the Ld. CIT(A) dt. 04/10/2023, the Ld. AR further submitted that, the assessee in addition to the forestated judicial precedents also placed its reliance on the decision of Hon'ble Delhi High Court in the case of 'CIT Vs SAS Pharmaceuticals' [2011, 244 CTR 51 (Del)] which also iterated similar ratio holding that penalty is impermissible where income is brought to tax on surrender by the assessee. 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 surrend....
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....sessment years, the respondent assessee was called upon to furnish full details alongwith copies of contract entered & confirmation letters from the respective sub-contractors. In response thereto the respondent assessee baldly stated that, (a) these sub-contracting transactions have been routed through Profit & Loss Account (b) payments to respective sub-contractors were made through banking channel, hence they were genuine in nature. The respondent assessee however expressed its inability to produce full details including copies of sub-contracts and confirmation from the respective sub-contractors which could have effectively testified the veracity & genuineness of sub-contracting & its expenditure. We further found that, 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 obligati....
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.... bogus. Set of facts in the present cases and findings of the Ld. AO being not indifferent from 'Sir Shadilal Sugar and General Mills' (supra) therefore, the impugned adjudication perfunctory based thereupon has no legs to stand, therefore set-side. 12.5 Admittedly, the inability of the respondent assessee to substantiate the veracity & genuineness of sub-contract & related expenditure incurred continued till date and therefore respondents claim that 'to buy-peace-of-mind' it had surrendered the same an ad-hoc basis does not recuse the action from the rigors of penal provision. It is abundantly clear that in view of the Explanation to Section 271(1)(c), the burden of proving that it is a case of 'surrendered/offered/agreed addition' on facts coupled 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 ....
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.... account of voluntary surrender or surrender of income or otherwise. 15. 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. 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 req....