TaxTMI 
TaxTMI 
2026 (5) TMI 309
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....nd the facts are being narrated accordingly. The decision shall apply mutatis mutandis to the connected appeal. Common Factual Background 2. The record reveals that original returns of income were filed under section 139(1) and assessments were completed under section 143(3). Subsequently, based on information received through the risk management strategy of the Department, which emanated from search and investigation proceedings conducted in the case of Oneworld Group on 06.11.2019, it was noticed that certain entities controlled and managed by Shri Rajesh Gunwantrai Mehta were engaged in providing accommodation entries in the nature of bogus purchases, sales and financial transactions without actual movement of goods or rendering of services. During the course of search proceedings, statement of Shri Rajesh Mehta was recorded on oath, wherein he admitted that the entities controlled by him were engaged in providing accommodation entries and that commission income was earned for facilitating such transactions. It was further stated that such entries were provided to various beneficiaries and the same were not backed by genuine business activities. 3. Based on the aforesai....
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....ssessee's had under-reported income in consequence of misreporting within the meaning of section 270A(9). Accordingly, penalty proceedings were initiated and penalty orders under section 270A were passed. 6. During penalty proceedings, the assessee's submitted that the additions were based on estimation of commission income and there was no direct evidence of actual receipt of such income. It was contended that the transactions were duly recorded in books, all primary facts were disclosed, and no case of misreporting as envisaged under section 270A(9) was made out. It was further contended that penalty cannot be levied on additions made on estimated basis and that the disclosure in return filed under section 148 was made to avoid litigation. 7. The Assessing Officer rejected the explanations and held that the assessee's had suppressed true income and recorded transactions in a manner that concealed the real nature thereof. The Assessing Officer thus concluded that the case falls within the ambit of "misreporting of income" and levied penalty under section 270A. 8. Before the learned CIT(A), the assessee's reiterated that the additions were based on estimation and that no c....
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....oncrete evidence of accommodation entries unearthed through Investigation Wing enquiries. 2. The learned CIT(A) erred in holding that the addition made by the Assessing Officer represented "estimated income" covered by Section 270A(6)(b), even though the addition was based on specific, verifiable and conclusive evidence of bogus loan entries, and not on any ad-hoc or estimation basis. 3. The learned CIT(A) failed to appreciate that Section 270A(6)(b) is applicable only where income is estimated due to absence of proper records or rejection of books, and not where false entries, bogus transactions or accommodation entries are detected based on definite information and inquiry. 4. The CIT(A) ignored the fact that the assessee had misreported income within the meaning of Section 270A(9) by recording false entries of bogus loans, suppressing true facts, and failing to record the actual commission expenditure embedded in such entry-providing transactions. 5. The learned CIT(A) erred in ignoring that the assessee's disclosure of income in the return filed u/s 148 was not voluntary, but was made only after detection by the Department, thereby constituti....
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..... 6. The learned CIT(A) failed to appreciate that penalty u/s 270A is mandatory for misreporting of income, and the statutory scheme does not grant discretion to the appellate authority to extend immunity contrary to the provisions of Section 270A(6) & 270A(9). 7. The order of the CIT(A) is perverse and contrary to the settled legal position, and therefore the penalty u/s 270A as levied by the Assessing Officer deserves to be restored. 8. The appellant craves leave to add, modify, alter or delete any ground of appeal at the time of hearing. 11. During the course of hearing, the Ld. Authorised Representative (AR) for the assessee reiterated the factual matrix as borne out from the orders of the lower authorities and submitted that the entire addition forming the basis of penalty proceedings emanates from the estimation made by the Assessing Officer in the order passed under section 148A(d) of the Act. It was submitted that pursuant to issuance of notice under section 148, the assessee filed return of income offering additional income computed at 5% of the impugned transactions, strictly in line with the estimation made by the Assessing Officer in the or....
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.... as a mere estimate but as income admitted by the assessee. It was argued that once the assessee has accepted the income in the return filed under section 148, the same constitutes under-reported income, particularly when such disclosure has been made only after detection by the Department. 15. It was thus contended that the exception carved out under section 270A(6) is not applicable in the present case, as the conditions prescribed therein are not satisfied. According to the Ld. DR, the learned CIT(A) has erred in treating the addition as falling within the exclusion clause, ignoring the fact that the disclosure was not voluntary but was a consequence of proceedings initiated under section 148A. 16. The Ld. DR, therefore, submitted that the Assessing Officer has rightly treated the case as one of under-reporting in consequence of misreporting and levied penalty under section 270A, and the order of the learned CIT(A) deleting the penalty deserves to be reversed. 17. We have considered the rival submissions and perused the material available on record. The short controversy before us is whether, on the facts of the present case, penalty under section 270A of the Act could ....
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....rk of section 270A. Sub-section (6) specifically excludes certain categories of income from the ambit of "under-reported income". Clause (b) and clause (c) thereof, as reproduced in the impugned order, provide that where the addition is determined on the basis of estimate, such income shall not be regarded as under-reported income, subject to fulfillment of prescribed conditions. 22. In the present case, the addition is admittedly based on estimation. There is no material on record to establish the exact quantum of commission paid or received. Even the Assessing Officer, in the order under section 148A(d), has applied a flat rate of 5% without bringing any independent evidence on record. Therefore, the case squarely falls within the exclusion contemplated under section 270A(6). 23. Once the income itself is excluded from the definition of "under-reported income", the further question of treating such income as under-reported income in consequence of misreporting does not arise. 24. The contention of the learned DR that the assessee had agreed to the addition and therefore the same constitutes misreporting cannot be accepted. The offering of income by the assessee was subse....