SAMRIDHI DEALERS PRIVATE LIMTED,MUMBAI vs. DY. CIT CENTRAL CIRCLE 6(3), MUMBAI

Since the issues involved in these appeals are identical and pertain to the same assessee, they have been clubbed together, heard together, and a consolidated order is being passed. For the sake of convenience, firstly, we shall take up ITA No. 2308/Mum/2026 for AY 2012-13. The assessee has raised the following ground:

The solitary ground raised by the assessee relates to challenging the order of the Learned CIT(A) confirming the penalty levied by the AO under section 271(1)(c) of the Income Tax Act on account of concealment of income.

We have heard the learned counsels for both the parties and perused the material placed on record, the judgments relied upon by the parties, and the orders passed by the Revenue Authorities.

From the records, we notice that the AO had made additions aggregating to Rs. 51,22,250/- on account of “on-money” payments made by the assessee during different assessment years, namely AYs 2011-12, 2012-13 and 2013-14, on the basis of data found in a pen drive during the course of survey proceedings at the premises of M/s Nish Developers. Pursuant thereto, a survey was also conducted at the premises of the assessee, and thereafter the assessment was completed by making the aforesaid additions.

The assessment order was challenged before the Learned CIT(A) and thereafter before the ITAT. The ITAT restored the matter to the file of the AO for fresh consideration. Consequently, the AO passed the consequential order making the additions, which were again challenged before the Learned CIT(A). Thereafter, no further appeal was filed against the quantum additions and, accordingly, the additions attained finality.

As regards the facts leading to the imposition of penalty, we notice that the penalty was levied on the basis of the additions made in the quantum proceedings on account of “on-money” payments made by the assessee in connection with the booking of flats with M/s Nish Developers Private Limited.

The aforesaid addition was made on the basis of the material found during the course of search and seizure action under section 132 of the Income Tax Act conducted on 04.04.2014 at the residential premises of Sanjay Jain and survey proceedings under section 133A conducted at the office premises of the assessee.

The statement of Sanjay Jain was recorded, wherein he stated that all the financial matters were being handled by his uncle, Shri Gulab Chand Jain. Accordingly, the statement of Shri Gulab Chand Jain, Director of M/s Samriddhi Dealers Private Limited, was also recorded under section 131 of the Income Tax Act. Further, on the basis of the statements of key employees of M/s Nish Developers Private Limited and the incriminating documents, including the pen drive and other documents seized during the course of the search and seizure proceedings, the additions were made.

On the basis of the aforesaid additions, the AO initiated penalty proceedings under section 271(1)(c) of the Income Tax Act and imposed penalty upon the assessee.

The sole argument advanced by the assessee before us is that the additions were based on estimation and, therefore, no penalty under section 271(1)(c) was leviable. However, after carefully examining the facts of the present case, we find that the additions had attained finality and were not based on estimation. Rather, the additions were based on incriminating material found during the course of search and survey proceedings and the statements recorded from the key persons. The statements were also corroborated by the data contained in the pen drive and other incriminating material found during the course of the search proceedings.

In our considered view, the quantum additions were not made on account of any disallowance of expenses appearing in the Profit & Loss Account. Rather, the additions were made on account of “on-money” payments which were not recorded in the books of account. The said aspect was also considered by the coordinate Bench of the ITAT in the assessee’s quantum appeal, as referred to in paragraph 7.3 of the order of the coordinate Bench.

The Tribunal had set aside the matter to the file of the AO for the purpose of quantifying the “on-money” payment. Pursuant thereto, the AO quantified the “on-money” payment at Rs. 7,37,092/- for AY 2012-13. During the appellate proceedings, the assessee could not furnish any satisfactory explanation as to why the said “on-money” payment was not disclosed and was not reflected in the books of account. No material has been brought on record before us to demonstrate that the non-disclosure was on account of any bona fide or inadvertent error.

We are also of the view that the aforesaid “on-money” payments would not have come to light but for the search and survey proceedings conducted by the Department. In the facts and circumstances of the present case, therefore, we find that the penalty proceedings were validly initiated and that the AO was justified in imposing penalty under section 271(1)(c) of the Income Tax Act.

However, the learned AR submitted before us that the quantum additions had subsequently been reduced and, accordingly, the penalty should also be reduced proportionately. The details of the quantum additions and the corresponding penalty, before and after reduction, are as under:

Considering the fact that the quantum additions have subsequently been reduced, we are in agreement with the contention of the learned AR that the penalty is also required to be reduced proportionately.

Accordingly, while upholding the levy of penalty under section 271(1)(c) in principle, we restrict the penalty to the extent of the tax sought to be evaded on the reduced quantum additions. Thus, the penalty is sustained at Rs. 5,54,390/- for AY 2011-12, Rs. 1,00,147/- for AY 2012-13 and Rs. 41,409/- for AY 2013-14, aggregating to Rs. 6,95,946/-.

Accordingly, the ground raised by the assessee is partly allowed.

In the result appeal filed by the assessee stands partly allowed.

As the facts in these appeals are similar to those in ITA No. 2308/Mum/2026, therefore, the findings and decision rendered in the above paragraphs shall apply mutatis mutandis.