M/S. ASHISHKUMAR ANKITKUMAR & CO.,AHMEDABAD vs. THE ACIT.,CENT.,CIRCLE-2(2),, AHMEDABAD

The present two appeals are directed at the instance of the assessee against two separate orders of the learned CIT(A)-III, Ahmedabad dated 18.04.2011 and 18.02.2013 passed for Assessment Year 2009-10. emerges out of proceedings under Section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”); whereas Section 271AAA of the Act.

The brief facts of the case are that a survey under Section 133A of the Income-tax Act was carried out at the business premises of M/s. Ashish Kumar Ankit Kumar & Co., situated at 1st Floor, 311, Kucha Ghasi Ram, Fateh Puri, Chandani Chowk, Delhi. During the course of survey, a sum of Rs.27.57 lakhs was recovered from the business premises. As the assessee was unable to explain the cash found/recovered; therefore, the survey was converted into search under Section 132(1) of the Act. It emerges out from the record that initially the assessee took the stand that this sum of Rs.27.57 lakhs was of some clients who have given to the assessee for Angadiya services. Later on, the assessee changed the stand and offered it as a commission income. The Assessing Officer, apart from this, further estimated commission income of Rs.25 lakhs and determined the taxable income of the assessee at Rs.53,89,840/-.

On appeal, learned CIT(A) partly upheld the order of the Assessing Officer. The findings of the learned CIT(A) read as under:- “5. I do not agree fully with the AR of the appellant. For the purpose of working out the daily turnover, monthly turnover or the turnover for 207 days as shown in the above mentioned table, the appellant has included the seized cash is amount of Rs. 27.50 Lacs as the commission income. This is not correct. When the partner of the appellant was asked to state as to which party the cash of Rs. 27.50 Lacs belonged to, he could not state their names. Even subsequently the name of the concerned parties was not given by the appellant as it would have adversely affected the business of the appellant. Therefore, the appellant owned up the cash belonging to its clients and agreed to pay the taxes thereon in order to buy the peace of mind. The amount of Rs.27.50 Lacs cannot be therefore treated as the commission income of the appellant. If this amount is excluded, then the turnover of the appellant on the basis of the seized documents can be worked out as under: It may be mentioned that during the course of search some documents were found which indicated the total turnover of the appellant for three dates namely on 2/12/2008 total turnover of Rs. 20,69,950/-, on 3/12/2008 total turnover Rs. 61,56,350/- and on 4/12/2008 total turnover of Rs. 43,35,460/-. In other words, the average turnover for the three days was Rs.41,87,253/-. If & 1169/Ahd/2013 Ashishkumar Ankitkumar & Co Vs. ACIT AY : 2009-10 3

Learned Counsel for the assessee, at the very outset, contended that though Rs. 27.50 lakhs was not initially admitted by the assessee as commission income; but later on it was considered as a commission income and offered for taxation. There is no justifiable reason at the end of the learned CIT(A) to exclude this amount from the total income of the assessee representing commission income. The learned CIT(A) has determined Rs.25 lakhs as estimated commission income; thereafter debited the expenditure and confirmed addition of Rs.18,20,407/-, but set off of Rs.27.50 lakhs disclosed by the assessee has not been given. On the other hand, learned Departmental Representative contended that the amount of Rs.27.50 lakhs is a separate amount and it cannot be treated as commission income.

We have duly considered the rival contentions and gone through the record carefully. A perusal of the order of learned CIT(A) would indicate that learned First Appellate Authority has estimated the commission income of the assessee for 207 days. The working of 207 days has been & 1169/Ahd/2013 Ashishkumar Ankitkumar & Co Vs. ACIT AY : 2009-10 4 taken by the learned CIT(A) from the day when the assessee-firm came into existence by execution of the partnership deed. It came into existence on 7th May 2008 and ended on 4th December 2008. The average turnover which has been worked out by the learned CIT(A) is based on the turnover of three days, i.e. immediately prior to the survey. To our mind, the commission income of the assessee was to be estimated for the period during which the firm remained in existence for the relevant accounting year, i.e. for the number of days relating to Assessment Year 2009-10 it remained into existence. Its existence has been worked out for 207 days. Once, after taking into consideration the turnover, the commission income has been worked out at a sum of Rs.25 lakhs, then how the commission income already accounted for by the firm at Rs.27.50 lakhs could not be set off. We could appreciate the case of the Revenue, if after taking into the average commission income for three days, the learned CIT(A) worked out the commission income of 207 days at Rs.27.50 lakhs plus Rs.25 lakhs. In that situation, the stand of the Revenue not to give set off of Rs.27.50 lakhs could be justified. But in the present situation, the only method which could be adopted is to work out total commission income for 207 days by whatever method, then debit that commission income from the amount already disclosed by the assessee plus expenditure and the remaining will be taxable. The disclosure made by the assessee at Rs.27.50 lakhs is more the ultimate estimated income worked out by the learned CIT(A); therefore, no further addition is required. Accordingly, the addition of Rs.18,20,407/- is deleted and the appeal of the assessee is partly allowed.

Now we take up . This appeal of the assessee is directed against the order of the learned CIT(A)-III, Ahmedabad dated 18.02.2013 for Assessment Year 2009-10. & 1169/Ahd/2013 Ashishkumar Ankitkumar & Co Vs. ACIT AY : 2009-10 5

The solitary grievance of the assessee is that learned CIT(A) has erred in confirming the penalty of Rs.4,57,041/- which was imposed by the Assessing Officer under Section 271AAA(2)(ii) of the Act.

The penalty under Section 271AAA(2)(ii) has been imposed qua the addition of Rs.27,50,000/- and Rs.18,20,407/-. In other words, the total amount considered for computing the penalty is Rs.45,70,407/- and 10% of this amount has been calculated as penalty imposable upon the assessee under Section 271AAA of the Act. In this way, learned Assessing Officer has imposed the penalty of Rs.4,57,041/-. Appeal to the learned CIT(A) did not bring any relief to the assessee.

With the assistance of the learned representatives, we have gone through the record carefully. Section 271AAA has a direct bearing on the controversy; therefore, it is pertinent to take note of this section which reads as under:-

A perusal of sub-section (2) of section 271AAA would indicate that an assessee could be absolved from the levy of penalty if the conditions enumerated in sub-section (2) are being fulfilled by the assessee. The conditions enumerated in sub-section (2) are that penalty under Section 271AAA would not be leviable upon assessee if the assessee, during the course of search, has admitted the undisclosed income; specified the manner in which such income has been derived; substantiated the manner in which the undisclosed income was derived and paid the taxes together with interest, if any, in respect of the undisclosed income. As submitted by the assessee, it has not firstly admitted the cash recovered during the course & 1169/Ahd/2013 Ashishkumar Ankitkumar & Co Vs. ACIT AY : 2009-10 7 of search at Rs.27.50 lakhs. Therefore, it does not fulfill the conditions enumerated in sub-section (2) of Section 271AAA of the Act. Even copy of the statement recorded under Section 132(4) has not been placed before us. Therefore, after going through the record, we are of the view that the assessee failed to fulfill the conditions of Section 271AAA. It, therefore, deserves to be visited with penalty. However, the penalty is to be restricted qua 10% of the additions we have confirmed. In other words, the penalty was calculated on the following amounts:-

In the result, both the appeals of the assessee are partly allowed.