SWARAN NADHAN SALARIA,MUMBAI vs. DCIT, CENTRAL CIRCLE 1(2), MUMBAI

PER BENCH

The captioned appeals by the assessee are directed against separate orders passed by the Ld. Commissioner of Income-tax
(Appeals)-47, Mumbai [in short ‘the Ld. CIT(A)’] for assessment years 2014-15 to assessment year 2020-21 respectively in relation to penalty levied by the Assessing Officer. Being identical issue-in- dispute involved in t disposed off by wa convenience.
2. Firstly, we take year 2014-15. The g as under:
1. On the learned adhoc
Rs.14,2
expens act on 2. On the learned suo-mo
Excess income
3. Before us, the L ground on 04.06.202
1) The the Le additio apprec sustain the Inc
3.1 We have heard b the additional groun being of purely legal and not requiring in was admitted for adju
ITA No. 1049

these appeals, same were hear ay this consolidated order fo e up the appeal of the assessee grounds raised by the assessee e facts and circumstances of the case and d CIT (A) has erred in confirming the pena disallowance of salaries and wages a 22,444/- & adhoc disallowance of ad ses amounting to Rs.2,17,162/- made u/s estimated basis.
e facts and circumstances of the case and d CIT (A) has erred in confirming the pen oto disallowance of interest of Rs.33, s depreciation of Rs.38,02,913/- in th e filed u/s 153A.
Ld. Counsel for the assessee file
25, which is reproduced as unde
Learned CIT(A) has erred in confirming earned Assessing officer in levying pen on made in the assessment ord ciating the fact that these addition its nable in the order passed u/s. 143(3) r.
come Tax Act, 1961. both the parties on the issue of nd. We find that the issue-in l in nature and goes to the roo nvestigation of the fresh facts, udication.
Swaran Nadhan Salaria
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rd together and or the sake of for assessment are reproduced d in law, the alty levied on amounting to dministrative s 37(1) of the d in law, the alty leviedon
,94,396/- &
he return of ed an additional er:
the action of nalty on the er, without self are not w.s 153A of f admissibility of n-dispute raised ot of the matter therefore, same

facts of the case are that th of a group namely “Trig”, based ngaged in providing manpower arious business entities. The as ncome u/s 139(1) of the Act me at Rs.1,80,57,280/-. The re rutiny and the assessment u/
961 (in short ‘the Act’) was mining total income at Rs w of search and seizure action he case of the assessee, notice u
20 was issued to the assessee.
the Act, the assessee filed retur ng total income at Rs.1,78,56
mpared to income declared in or 1/2014) .
rse of assessment proceedings u
Officer observed discrepancies/v ount and balance sheet filed w vis-à-vis the original return. Not h and bank balances also.
actions and nature of seized ion 142(2A) was made for specia
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he assessee, an at Chandigarh.
, securities and ssessee filed his on 28.11.2014
eturn of income s 143(3) of the completed on s.2,12,77,280/-.
u/s 132 of the u/s 153A of the In response to rn of income on ,660/-(i.e. total riginal return of u/s 153A of the variation in the with the return tably, variations
Owing to the d documents, a al audit.

ng the report of the special a ound during the course of th mpleted assessment u/s 153A at the rate of 4 percentile of ‘sa rcentile of administrative expen penalty u/s 271(1)(c) of the Ac rs of the income.
Assessing Officer also observed for rotation of funds/circuitou r identified expenses related to t amounting to Rs.33,94,396/
ddition to fixed asset to h was claimed in the name of t ome filed u/s 139(1) of the Act.
hat assessee had made s above expenses in the return of u/s 153A of the Act and t come under the assessment und d not make any separate additi dings u/s 271(1)(c) of the Act rs of the income in relation to Swaran Nadhan Salaria
4
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auditor and the he search, the of the Act and alary and wages’
nses on estimate ct for furnishing d that assessee us transactions.
the shell entities
/- and excess the extent of the shell entities
The Assessing suo-motu made f income filed in therefore, while der section 153A ions, but issued t for furnishing o said suo-motu

was preferred by the assessee addition/disallowance made b ued show cause notice on 03.1
71(1)(c) of the Act might not e particulars of the income.
the disallowance of “salary and 4,22,444/- and disallowance of g to Rs.2,17,162/- made u/s 3
ted that same was made on esti isfy the criteria laid down u/s disallowance of interest of Rs,3
of Rs.38,02,913/-, it was subm n the return of income to avoid xpenses disallowed were genuin incurred. It was submitted ection 271(1)(c) of the Act it wa y.
ions of the assessee were r he AO observed that the assess pporting evidence and docume as special audit proceedings.
allowances were not arbitrary mode of payments (predominantl
Swaran Nadhan Salaria
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before the Ld.
by the AO, the 1.20222 as why t be levied for wages expenses f “administrative
37(1) of the Act, imate basis and 271(1)(c) of the 33,94,396/- and mitted that said litigation on the ne expenses and d that as per as not a fit case rejected by the see had failed to ents during the It was further but based on ly in cash), and lack of verifiable e precedents including
244),
MAK
Data
Communication Pvt the Assessing Officer
“5. The argu mentioned su tenable for the (i) During the assessee h details/suppo authenticate
Further, durin
142(2A) of the party-wise de supporting d completeness assessee, ho explanations ii) The assess salaries and basis and he pertinent to n are distinguis of the asses disallowances carefully cons year and ther after due dili case."It is not towards sala whereas the been calculate made on esti disallowance separate cash
(iii) The ass
Rs.33,94,396
ITA No. 1049

vidence. The AO relied on v g Dharmendra Textile Proces a (38
taxmann.com
448) t. Ltd. (ITA No. 07/2010). The is reproduced as under:
uments made by the assessee vide th ubmission are duly perused but not fou e following reasons:
e assessment proceedings, it was found had not fully maintained the orting documents/bills/vouchers e cash expenses claimed against taxable ng the Special Audit conducted in the c e Act, the Special Auditor had also reque etails (with Name, Address & PAN of the documents etc., to examine correct of cash expenses claimed by the asses owever, failed to produce requisite d with regard to the cash payments made b see has submitted that since the disallow wages made u/s 37(1) of the Act are on ence no penalty is leviable. In this rega note that the facts of the case under cons shable and squarely different. The plain ssment order is indicative of the fact s were not made on mere adhoc basis sidering the cash expenses claimed du reafter a percentage of the same was dis igence and taking into consideration fac teworthy that the disallowance of cash e aries & wages have been calculated disallowance of administrative expen ed at 10%. Have these disallowances bee imate basis then the common percentag would have been made by the AO on h expenses instead of different disallowan sessee has disallowed interest exp
6/- & excess depreciation of Rs.38,02,913
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various judicial ssors (295 ITR
, and Zoom relevant finding he above nd to be that the requisite etc.
to e income.
case u/s ested for parties), tness
&
ssee. The etails &
by it.
wance of estimate ard, it is ideration n reading that the but after uring the sallowed cts of the expenses d at 4%
nses has en purely e rate of the two nce rate.
pense of 3/- in ITR filed u/s 153A the assessee taxation.
(iv) Further, proceedings a was found th rotation of f creation of fic extracted from action that th certain entitie conduct & aff these shell en control of the transactions of the assesse
(v) To sum
(Rs.33,94,396
under:
"...the object with the Exp section has b revenue. The Wilful concea the civil liabi
ITA No. 1049

A of the Act and had there been no searc would not have offered this additional in during the course of search/post as well as during the assessment procee hat, the assessee had used said shell en funds/circuitous transactions in order ctitious asset. On perusal of the ledger m the Tally data, it was found during he assessee company had made paym es which are found to be shell entit ffairs of these shell entities had establis ntities were floated by the assessee grou e assessee group with a purpose to do and create fictitious assets. Thus, the a ee cannot be accepted up, in the instant case, interest e
6/-) and extra depreciation (Rs.38,02,913
by the assessee post search, in the r in response to notice issued u/s 153A
Act, 1961. The surrendering of this inc r identification of omission on part of the a rmed as a "bonafide disclosure" and osition of penalty for under-reporting of in nts relied upon by the assessee are not t case as the facts are different.
as been deliberate omission on the par d has furnished inaccurate particulars of under consideration and therefore all t aterial to the income were not disclose n of income filed.
dgment delivered in the case of Union of In harmendra Textile Processors and Other
(SC) the Hon'ble Apex Court has reite behind the enactment of section 271(1
planations quoted above indicates that been enacted to provide for a remedy fo penalty under the said sections is a civil lment is not an essential ingredient for a ility as is the case in the matter of pro
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ch action, ncome for search edings, it ntities for to and r account g search ments to ties. The hed that up/under o circular argument expenses
3/-) was return of A of the come for assessee hence is ncome.
relevant rt of the of income the facts ed in the ndia and rs (2007) rated as )(c) read the said or loss of l liability.
attracting osecution under section against an required to imposing the sustain the f would be suff
...The Explan also indicate concealment returns."
(viii) Further,
Court) the Hon
"It is the sta income in the if the assesse the assessee with s. 274 of (ix) Further th
Communicatio
24.05.2010 h
"The Court percentage of scrutiny. If th incorrect in la explanation f found to be bo still not be lia
ITA No.7/201
which is wh foundation on be liable to i bonafide whil a license to un and unsustai making them, up for scrutin self- assessm their case is by paying the The conseque of this nature otherwise pay
ITA No. 1049

n 276C of the Act. While considering an order made under section 271(1)(c) be examined is the record which th penalty had before him and if that rec finding that there had been concealme ficient to sustain the penalty.
ations added to section 271(1)(c) in their the element of strict liability on the asse or for giving inaccurate particulars wh in the case of MAK Data P. Ltd vs. CIT ( n'ble Supreme Court has held that:
atutory duty of the assessee to declare return of income filed by it from year to y ee had concealed true particulars of inco is liable for penalty proceedings u/s 2
f the Act."
he Delhi High Court in the case of CIT on Pvt. Ltd. vide ITA No. 07/2010
has held that:- cannot overlook the fact that only of the Income Tax Returns are picked he assessee makes a claim which is aw but is also wholly without any basis furnished by him for making such a clai onafide, it would be difficult to say that h able to penalty under Section 271(1)(c) of 10 Page 14 of 18 If we take the view tha holly untenable in law and has absol n which it could be made, the assessee w mposition of penalty, even if he was no le making a claim of this nature, that wo nscrupulous assessees to make wholly u inable claims without there being any b
, in the hope that their return would not b ny and they would be assessed on the ment under Section 143(1) of the Act and selected for scrutiny, they can get away e tax, which in any case, was payable b ence would be that the persons who mak e, actuated by a malafide intention to ev yable by them would get away withou
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100% of tax sought
₹30,03,667/-. The CI
(i) , the assessee fail expenses and relied m penalty can be levied
(ii) Disallowances necessitated due to n
(iii) reliance on judi unlike in the cited submissions or recor
(iv) The absence of compelled the Asse estimation of unverifi
(v) even the filing proceedings, and no No appeal had been p
(vi)
Suo-motu disallo bona fide disclosure a ITA No. 1049

y payable by them, if their cases are no ny. This would take away the deterren penalty provisions in the Act have.”
penalty was levied under sect to be evaded on ₹88,36,915/-
IT(A) confirmed the levy, holding ed to file any evidence or detai merely on judicial precedents a on estimated disallowances.
were not merely on estim non-production of records.
icial precedents was misplac d precedents, the present ca rds from the assessee whatsoeve books, vouchers, and corrobo essing Officer to resort to iable expenditure.
of return was occasioned on voluntary compliance was mad preferred against the assessmen owance post-search cannot be and Explanation 5A was applica
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ot picked nt effect, ion 271(1)(c) at -, amounting to g that:
ils justifying the asserting that no mate but were ed, noting that se involved no er.
orative evidence a conservative nly after search de prior thereto.
nt order.
construed as a able.

additional ground of the assess ed u/s 143(3) r.w.s. 153C of th find that assessee has not chall eedings and therefore, it is mere o whether those additions were penalty cannot be deleted m assessee unless addition cha und of no incriminating materia the appellate authorities. Ac ised by the assessee is dismisse ar ground No. 1 of the appeal in spect of salary and wages and ed, the assessee has challenged levied is on the estimate basis.
ing Officer has levied the penal es expenses claimed to have in allowance out of administrativ ut of expenses claimed to have b ar as levy of the penalty in res te basis, the Ld. Counsel relied e case of Dr. Kaushal Goes v. A lhi-Trib.) wherein the Tribuna
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ee that addition he Act itself was lenged the order ely presumption not likely to be merely on the allenged by the l and held to be ccordingly, the d.
n relation to the d administrative d mainly on the It is undisputed lty @ 4% out of ncurred in cash ve expenses has been incurred in pect of addition on the decision
Asst. CIT (2015) al following the decision of the Co-ord
31 SOT 23 (Lucknow
“9. Now, the s is, “as to wh any juri icti slips dated
Rs.4,95,000/
the year 2007
10. Undispute amount of Rs of which as assessment y when the pertaining to dated 14.06.2
penalty proce
19.12.2008
otherwise th assessment of to make an a year, but the 11. The cont himself reflec
Rs.4,95,000/
juri iction is the two reaso statute becau to the assess one, he canno himself has s tax return, be the amount o avoid the pro statutory pow the assessme initiating the proceed mec initiating the assessment o
Assessee is challenging t
ITA No. 1049

dinate Bench in the case of Smt w) deleted the penalty observing a sole question arises for determination in t hether penalty order passed by ACIT is ion, having been passed on the basis
14.06.2004 showing unaccounted in -, the said income having been assesse
7-08.”
edly, the assessee has reflected the surr s.4,95,000/- in his income tax return on t ssessment order dated 19.12.2008
year 2007-08 has been passed. Undis unaccounted income of Rs.4,95,000
the Assessment Year 2005-06 as per ba
2004, the A.O. has no juri iction to ini eedings on the basis of assessment ord qua the Assessment Year
2007-08
he revenue was empowered to reop of the assessee qua the Assessment year addition of Rs.4,95,000/- pertaining to revenue has not preferred to do so.
tention of Ld. D.R. that once the asses cted and surrendered the unaccounted in - in his Income tax return the defense o s not available to the assessee, is not ten ons: one that there is no estoppels aga use when defense is available by virtue o see, the penalty proceedings being inde ot be estopped merely by virtue of the fac urrendered the unaccounted income in hi ecause the assessee claimed to have surr of Rs.4,95,000/- to buy peace of mind otracted litigation; Second, when the reve wer to proceed against the assessee by re ent of a particular assessment year a penalty proceedings, it cannot be all chanically to invoke the penal provisi e penalty proceedings on the basis order are not sustainable in the eyes well within his right to take this def the assessment order even though ass
Swaran Nadhan Salaria
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t. Surinder Kaur as under:
this case s without of bank ncome of d during rendered the basis qua the sputedly,
0/- was ank slips itiate the der dated
8. Even pen the 2005-06
relevant ssee has ncome of of lack of nable for ainst the of statute ependent ct that he is income rendered d and to enue has eopening and then lowed to ions. So of void of law.
efence of sessment order has not penalty order
12. Coordina
Surinder Kau identical circu applicable to when the fou
Rs.4,95,000/
sustainable i penalty qua th
13. In view considered vie confirming the not sustainab and the appea
6.1 In the instant ca of ‘salary and wag mentioned by the AO the assessment or reproduced in assess
“10.2. The represented t to the payme taxable limit.
register for t employees, b salary paid register does employees. H sufficiently es contain the d
The details of by the assess
Partic
Paym
ITA No. 1049

t been challenged, at the time of challen r.
ate Bench in the case entitled ACIT ur 120 TTJ 618 decided the identical issu umstances in favour of the assessee, w the facts and circumstances of the c undation of addition on unaccounted in -, though not challenged by the assesse in the eyes of law, the question of i he said amount, does not arise.
of what has been discussed, we are ew that the impugned order passed by L e penalty @ 300%, the amount of Rs.4,95
ble in the eyes of law, hence, hereby s al of the assessee is allowed.”
ase before us, the basis of maki ges’ and ‘administrative expen
O in assessment order in para der. Relevant part of show sment order is extracted as unde assessee, through its various subm that 90% - 95% of the salary/ wages are ents made to guards, which are all be . The assessee provided the copy of the respective years containing the n branch details, employee code, month fo and salary paid amount. However, th not 7 contain the PAN / Aadhaar No Hence, the identity of the employees stablished. Further, the salary register details of date of payment and mode of p f salary & wages as per ledger account s see are summarized here as under:
culars
FY 2013-14
ment made through bank
23.87.36,638
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5,000/- is set aside ing disallowance nses’ has been 10.2 to 10.5 of w cause notice er:
missions, e related elow the f Salary names of or which he salary o. of the s is not does not payment.
ubmitted

Paym
Paym
Paym
Paym
Adjus
Recei
Paym of TFS
Adjus
Other
Total
10.3. It is fou paid in cash i has not ma recording cas is seen that t the books for assessee ha employees lik establish the the salary re payment. He register wheth in cash or th per salary reg salaries as p not substanti does not attr employee and regards the s submitted tha accounts at provided by t assessee com
ITA No. 1049

ment made through cash
3,55,61,103
ment made through ledger
1,16,66,604
ment made by TDPL on our
2,51,10,298
ment made by TGF on our sted through Security ived back through bank
(7,13,024) ment made by us on behalf
FS reversed sted against Security
(3,18,75,086) r reversals
(32,12,153)
27,52,74,380
und that considerable amount of salary h in each of the years. It is found that the a aintained party-wise ledger in the bo sh payment of salary in the books of acc the assessee has passed a consolidated r cash payment of salary to multiple par as not provided the complete details ke address, PAN, Aadhaar No., etc. s identity of such employees. As mentione egister does not contain the details of ence, it is not ascertainable from the her the salary paid to the respective emp rough bank. Consequently, the cash sal gister could not be fully correlated with er books of accounts. Further, the asses iated in detail as to how the salary p ract TDS provisions. In respect of each d has only provided a generic remark. Fu source of salaries paid in cash, the asses at the same is out of cash withdrawals fr various branches. From the salary the assessee; it is seen that the employe mpany have been deputed at various
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has been assessee ooks for counts. It entry in rties. The of such so as to ed above, mode of e salary ployees is laries as the cash ssee has payments h of the urther, as ssee has rom bank register es of the cities &

towns across locations, the hence, a ques make salary p
10.4. The as employed by to the asses security depo to be paid to collectible fro payable to consolidated j a/c and credi has neither deposits and adjusted nor p the same. Thu expenses adj details and su
10.5. It is al group i.e. M/
Integrated Fa and M/s. Tri salary on beh has passed J a/c and cred payments are the assessee employees lik establish the reference in th how much pa much payme employee-wis completely co of accounts in made by the o
6.2 The response o issued has been re assessment order. Fo
ITA No. 1049

s India. However, it is found that in assessee does not have any bank accou stion arises as to how the assessee man payments through cash in such locations.
ssessee has further submitted that the the assessee are required to give certain ssee company as security deposits an osits are recovered from them through th o such employees. Hence, the security om the guards are adjusted from the them. Accordingly, the assessee has journal entries in the books by debiting iting Security Deposit a/c. However, the a given the employee wise details of d the months for which the salary h produced any supporting documents in re us, the assessee has not substantiated th djusted through security deposits with upporting documents.
lso seen that the other entities of the a /s. Trig Security & Detective Services, M acility Management, M/s. Trig Facility ig Detective Private Ltd. have made pay half of the assessee. In this regard, the a Journal entries in the books by debiting diting the Trig group entity as and w e made by the other Trig group entity. H has not provided the complete details ke address, PAN, Aadhaar No., etc. s identity of such employees. Further, the he Salary register provided by the assess ayment has been made by the assessee a ents are made by the other Trig grou se. Accordingly, the assessee has not bee rrelate in detail the salary register with th n respect of such on behalf payments o other Trig group entities.”
of the assessee for above sho eproduced by the AO in par or ready reference same is extrac
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n certain unts and naged to .
e guards n amount nd such he salary deposits e salary passed g Salary assessee security has been elation to he salary h proper assessee
M/s. Trig
Services yment of assessee g Salary when the However, of such so as to ere is no see as to and how up entity en able to he books of salary ow cause notice ra 10.3 of the cted as under:

“10.3. The as payment of s certain percen expenses incu be disal details/docum under.
"TRIG providi our be bankin circum in cash
1. Sho
IPL, Fil
Mumba involve pay co
2. Gua hired a like We etc. Sin of them therefo we pay opened
3. Che betwee as sal total ex on mon
3-4 mo capital
Some momen bounci they ca
4. The incurre industr have to expens
ITA No. 1049

ssessee vide show cause was asked t salary and administrative in cash and ntage of cash salary expenses and admin urred in cash claimed during the year sh lowed for want of ne ments/explanations. The assessee rep
Group is one of India's leading security c ing security services all over India and i est endavour to make all salary thro ng channel.
There are is una mstance under which we are in force to pa h, few of such situations are:
rt Term Event: We are doing one time ev lm Fair Awards, Celebrity Weddings, Exh ai Marathons, Musical Concerts, ISL, etc es employing guards on daily basis. We ntracted daily wages to these guards in c ard having no bank account: The security at various locations are coming from remo est Bengal, Assam, Orissa, Bihar, Uttar P nce, they migrate from one place to anoth m do not have any valid proof of reside ore, they cannot open any bank account y their salaries in cash till there bank ac d.
eque bouncing:-There is a lag of 3-4
en receipt of income and expenses incur laries and wages, which constitutes 80
xpenses. Salary wages has to be paid r nthly basis while income is received after onths. Most of the time we have to avail l overdraft facility to pay the salary & wa time bank dose not allow overdraft a nt guards salary cheque get bounced.
ing of cheques we have to pay cash to gu an perform duties without hurdle.
administrative expenses exclusively and ed for business purpose only. As we are i ries and we have branches in all over In to pay cash to various officers reimburse ses like business promotion, prin
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to justify d why a nistrative hould not ecessary plied as company inspite of ough the avoidable ay salary vent like, hibitions, c., which e have to cash.
y guards ote areas
Pradesh, her, some ence and t. Hence, ccount is months rred such 0-90% of regularly r a gap of working ages etc.
and last
Against uards so d wholly n service ndia, we ement of nting
&

Station basis f submit
Considering expenses are disallowance these are business pur
6.3 After consideri addition observing as “10.4 After co
"Salary & Wa mode and 10
incurred in C basis u/s. 37
income. Thus additions to th assessee on t
(i) Disallowan claimed to be of Rs.3,55,61,
(ii) Disallowa expenses clai
(i.e. 10% of R
6.4 After careful ex the AO and assessee notice, the AO held genuineness of the s have been incurred registers provided we addresses, dates, an large scale organizat
ITA No. 1049

nery, Courier charges, fuels etc on day for smooth running of business. We have tted documentary proof for the same.
the specific circumstances under wh incurred in cash, we request you not to towards cash expenses incurred in reasonable
&
exclusively incurred rpose"
ng submission of assessee, s under:
onsidering the submission of the assess ages" expenses claimed to be incurred
0% of "administrative expenses" claime
CASH mode, are hereby disallowed on e
7(1) of the Act and added to the compu following disallowances of expenses and he computation of income are made in th these issues, as under:
nce @ 4% out of "Salary & Wages" e e incurred in Cash Mode - Rs.14,22,444/
,103/-) ance 10% out of "administrative Ex imed to be incurred in Cash Mode -Rs.2,
Rs.21,71,622/-).”
xamination of the show cause n e’s submissions in response to that the assessee failed to s salary and administrative expen in cash mainly for the reason ere deficient in particulars such nd mode of payment. But in ou ion engaged in supply of manp
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y to day e already hich the o do any cash as for the The AO made see,4% of in CASH ed to be estimated utation of d thereby e case of expenses
- (i.e. 4%
xpenses"
17,162/- notice issued by the show cause substantiate the nses claimed to that the salary h as PAN, Adhar, ur opinion in a power, incidence of part of expenses w normal course of bus claim of adjustments by group concerns documentary evidenc pointed out any spe been made on this a addition in respect o has been purely on a any specific entry of following the decisio above, we hereby ca
‘salary and wages’ an 7. Further, on th disallowance of inter of Rs.38,02,930/- als as under:
“8.3 I have appellant and and various courts have h search action provisions.
8.4 The appe
Chandigarh T
Chandigarh v should not be ITA No. 1049

without PAN or Adhar No. may siness. Further, the observation s against security deposits and s remained unverified in th ce, is concerned, we find that ecific incidence and even no di account. In view of above, it is e f salary and wages and adminis ad-hoc and estimate basis, witho expenses for disallowance, hen on of coordinate bench of Tr ancel the penalty in respect of nd ‘administrative expenses’.
he issue of penalty in respe rest of Rs.33,94,396/- and exce so the Ld. CIT(A) upheld the pe gone through the submissions filed d the relevant records. It is an establis decisions of the Hon'ble Apex court an held that suo-moto disclosure in the retu n does not absolve the appellant of the ellant has relied upon the decision of Tribunal in the case of DCIT Central v Kulwant Singh wherein it was held that e levied on suo-moto income offered in th
Swaran Nadhan Salaria
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y be possible in n of the AO that payments made he absence of the AO has not isallowance has evident that the strative expense out pointing out nce, respectfully, ribunal referred disallowance of ect of suo-motu ess depreciation enalty observing by the shed fact nd other urn after e penalty f Hon'ble
Circle-1, t penalty he return u/s 153A. As in Mak Data P
8.5 It is howe
The relevant p
"Apply
Assess additio found proceed the ori and no also pr
271(1)( assess materia
In the presen facts are total
8.6 In this reg
Supreme Cou
38 taxmann.c
"Voluntary dis of penal proce
8.7 Further H
Vs ACIT [200
income was under section disclosed in o of income attr case it was 271(1)(c)
8.8 Hon'ble C
[2015] 59 tax related to se subsequent to and offered disclosed in 271(1)(c) was Hon'ble Sup
Hon'ble High
ITA No. 1049

s per the appellant case of the Apex court
P Ltd has been discussed and differentiat ever noted that facts in that case were d paras of the order are reproduced as und ing the similar proposition, even w sing officer is precluded from maki on in the absence of any incriminating during the search action in the ass dings carried out u/s 153A of the Act i iginal assessment proceedings stood co ot abated, the Assessing officer, in our recluded from initiate the penalty proceed
(c) of the Act in case of already co sment in the absence of any incri al found during the search action."
nt case seized material is available. T lly different and not applicable.
gard, reliance is placed on the decision of urt in the case of MAK Data (P.) Ltd. vs CI com 448 (SC) which held as under:
sclosure does not release assessee from eedings under section 271(1)(c)."
Hon'ble ITAT Delhi in the case of Smt. Ki
09] 125 TTJ 631 (Delhi) held that where disclosed in return filed in response t n 153C following search, which income original return, it was a clear case of conc racting penalty under section 271(1)(c); in unnecessary to invoke Explanation 5 to Calcutta High Court in CIT Vs Prasann xmann.com 99 (Calcutta), while deciding ection 271(1)(c) Expl 5A held that even o search, assessee voluntarily disclosed said sum to tax, since said amount original return, penalty levied urider justified.
preme Court has upheld the deci h Court in the above case.
Swaran Nadhan Salaria
18
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decision ted.
different.
der:
hen the ing any material sessment in which ompleted view, is dings u/s oncluded iminating
Thus, the f Hon'ble
IT [2013]
mischief iran Devi e certain to notice was not cealment n such a o section na Dugar g matter n where d a sum was not r section ision of 8.9 The abov income is not of concealme
271(1)(c). Thu courts the pen ground no. 3 o
7.1 In respect of depreciation, the Ld.
of the ITAT Luckno
Surinder Kaur (supr has been referred. T reproduced as under “20. Thus, th that in a valid have been fou assessee and concealed inc been any seiz which could b it cannot be owner of tang been acquire earned before the assessee income not dis
21. We, ther cancelling the Officer on the and by invok face of it, are assessee has 7.2 We have heard the relevant material
ITA No. 1049

ve judgements have clearly held that disclosed in the original return, it is a cl ent of income attracting penalty under us, respectfully following the judgments of nalty levied by the AO is upheld. Accordi of the appeal is dismissed.”
f suo-motu disallowance of Counsel for the assessee relied ow Bench in the case of Ass ra), wherein applicability of the The relevant finding of the Trib
:
he first requirement for invoking Explana d search, some tangible assets/documen und which would reflect concealed incom d which have become basis for making ad come. It is an admitted position that there zure of tangible assets/documents in th be said to be belonging to the assessee. T said that assessee has been found to gible assets and that such tangible ass ed by her by utilizing her undisclosed e the date of search, and also there is no e that she has acquired any such asse sclosed before the Department.
refore, uphold the order of learned C e penalty which had been levied by the A e basis of an apparently invalid assessme ing the provisions of Explanation 5 which not applicable, as no tangible asset belo s been seized.”
rival submissions of the parti l on record. The Assessing Offic
Swaran Nadhan Salaria
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in case lear case r section f various ingly, the interest and d on the decision st. CIT v. Smt.
e Explanation 5
bunal (supra) is ation 5 is nts must me of the ddition of e has not he search
Therefore, o be the ets have d income claim by et out of CIT(A) in Assessing ent order h, on the onging to ies and perused cer has invoked

Explanation 5A belo reference, said Expla
[Explanation 5.-Where i day of June, 2007], the other valuable article o assessee claims that suc income,-
(a) for any previous year for such year has not furnished before the sa
(b) for any previous year w then, notwithstanding th or after the date of the s
(c) of sub-section (1) of t furnished inaccurate par
(1) such income is, or the (i) in a case falli
(ii) in a case falli in the books of accoun otherwise disclosed to 76[Principal Commissi
(2) he, in the course of th any money, bullion, jew his control, has been return of income to be section 139, and also derived and pays the ta
7.3 From plane re invoking explanation of tangible asset acq instant case before u assessee is found to such tangible assets relevant undisclosed
ITA No. 1049

ow the section 271(1)© of the nation is reproduced as under:
in the course of a 71[search 72 initiated under se e assessee is found to be the owner of any mon or thing (hereafter in this Explanation referre ch assets have been acquired by him by utilising which has ended before the date of the search, t been furnished before the said date or, wher aid date, such income has not been declared there which is to end on or after the date of the search, hat such income is declared by him in any return search, he shall, for the purposes of imposition o this section, be deemed to have concealed the par rticulars of such income, 73[unless,- transactions resulting in such income are recorde ing under clause (a), before the date of the search ing under clause (b), on or before such date, t, if any, maintained 74 by him for any source of i o the 75[ 76[Principal Chief Commissioner or]
oner or] Commissioner] before the said date ; or he search 74, makes a statement under sub-sectio wellery or other valuable article or thing found in acquired out of his 74income which has not bee furnished before the expiry of time specified in 7
specifies in the statement the manner in which ax, together with interest, if any, in respect of suc ading of above provisions, we
5A , the assessee must be foun quired out of the undisclosed i us is also the issue in dispute o be owner of the tangible asse have been acquired by the ass d income before the date of t
Swaran Nadhan Salaria
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Act. For ready ection 132 before the 1st ney, bullion, jewellery or d to as assets) and the g (wholly or in part) his but the return of income re such return has been ein ; or n of income furnished on of a penalty under clause rticulars of his income or ed,- h; and income or such income is Chief Commissioner or r n (4) of section 132 that n his possession or under n disclosed so far in his
77[***] sub-section (1) of h such income has been ch income.]
e find that for nd to be a owner income. In the e is whether the ets and whether sessee using the the search. The assessee in the retur section 153A of the A to the original return been mentioned by t has simply stated tha interest and deprecia through shell entities withdrawal of expen consequence to sea
Assessing Officer ha made by the assess valuable article or t account or the docu unless this conditio
Explanation 5A is n have not established by the assessee was found during the co disallowance made
271(1)(c) of the A Explanation 5A to se the above, the pen depreciation is also c the assessee are allow
ITA No. 1049

rn of income filed in response
Act made variation in total incom n of income filed. But detail of va he AO in impugned assessmen at the assessee has withdrawn t ation which were claimed to hav s, but nowhere brought on reco nses in the return filed u/s 1
arch action. Under the Expla as to establish that the suo-mo ee for any money, bullion, jew thing or income was based on ments found during the course on is satisfied, the penalty not sustainable in law. The lo d the fact that the suo-motu disa a result of any tangible asset ourse of the search, therefore by the assessee don’t attrac
Act unless the conditions p ction 271(1)(c) of the Act are ful nalty in respect of interest a cancelled. The relevant grounds wed.
Swaran Nadhan Salaria
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1054/MUM/2025
to notice under me as compared ariation has not nt order. The AO the expenses on ve been incurred ord as how said
153A was as a anation 5A, the otu disallowance wellery or other n the books of e of search and levied invoking ower authorities allowance made s or documents e, the suo-moto ct penalty u/s provided under lfilled. In view of and the excess of the appeal of 8. The grounds i reproduced as under 1. On the fact learned CIT (A adhoc disallo
Rs.19,80,695
expenses amo on estimated
2. On the fact learned CIT ( suo-moto disa depreciation income filed
8.1 The grounds b same are allowed mu
8.2 Similarly, the gr reproduced as under 1. On the fact learned CIT (A adhoc disallo
Rs.13,50,296
expenses am act on estima
2. On the fact learned CIT ( suo-moto disa depreciation income filed
8.3 The issues-in-d grounds raised in ass
ITA No. 1049

in respect of assessment yea
:
ts and circumstances of the case and in (A) has erred in confirming the penalty l owance of salaries and wages amou
5/-
&adhoc disallowance of admin ounting to Rs.82,804/- made u/s 37(1) o basis.
ts and circumstances of the case and in (A) has erred in confirming the penalty allowance of interest of Rs.50,90,606/- &
of Rs.62,88,051/- in the ret u/s 153A.
being identical to assessment utatis mutandis.
rounds raised in assessment ye
:
ts and circumstances of the case and in (A) has erred in confirming the penalty l owance of salaries and wages amou
6/-
&adhoc disallowance of admin mounting to Rs.1,69,516/- made u/s 37( ted basis.
ts and circumstances of the case and in (A) has erred in confirming the penalty allowance of interest of Rs.79,26,246/- &
of Rs.
1,34,58,867/- in the re u/s 153A.
dispute raised in this appeal a sessment year 2014-15 and the Swaran Nadhan Salaria
22
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1054/MUM/2025
ar 2015-16 are law, the levied on unting to nistrative of the act law, the leviedon
& Excess turn of year 2014-15, ear 2016-17 are law, the levied on unting to nistrative
(1) of the law, the leviedon
& Excess eturn of are identical to refore, following our finding in AY 2
mutatis mutandis.
9. The appeals for 2020 have been adju order taking assessm take up the assessm raised by the assesse
1. On the fact learned CIT (A adhoc disallo
Rs.10,85,164
expenses am act on estima
2. On the fact learned CIT ( suo-moto disa depreciation income filed
9.1 While completin
Assessing
Officer disallowance on estim on salary, wages disallowance u/s 4
amounting to Rs.1
expenses and depr companies. Accordin the Act, the Assessi
ITA No. 1049

2014-15, the grounds raised assessment year 2017-18, 201
udicated by the Ld. CIT(A) throu ment year 2018-19 as lead. Acco ment year 2018-19 as a lead yea ee are reproduced as under:
ts and circumstances of the case and in (A) has erred in confirming the penalty l owance of salaries and wages amou
4/-
&adhoc disallowance of admin mounting to Rs.1,35,137/- made u/s 37( ted basis.
ts and circumstances of the case and in (A) has erred in confirming the penalty allowance of interest of Rs.44,65,742/- &
of Rs.97,75,277/- in the ret u/s 153A.
ng the assessment u/s 153A made addition on three mate basis in respect of cash ex and administrative expens
40A(ia) for non-deduction of 19,050/-, thirdly, disallowan reciation expenses incurred ngly, in the penalty order passe ing Officer held the assessee
Swaran Nadhan Salaria
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are allowed on 8-19 and 2019- ugh a combined ordingly, we also ar. The grounds law, the levied on unting to nistrative
(1) of the law, the leviedon
& Excess turn of of the Act, the items, firstly, xpense incurred ses, secondly, tax at source nce of interest through shell ed u/s 270A of guilty of under reporting of the inco
Assessing Officer in t
“6. The argu mentioned su tenable for the (i) During the assessee h details/suppo authenticate
Further, durin
142(2A) of the party-wise de supporting d completeness assessee, ho explanations
(ii) The assess salaries and basis and he pertinent to n are distinguis of the asses disallowances carefully cons year and ther after due dili case. It is not towards sala whereas the been calculate made on esti disallowance separate cash
(iii) It is admit the AO perta assessee. Th leviable by assessee ha pronounceme the instant ca company whi
ITA No. 1049

ome. The relevant part of the di the penalty order is reproduced uments made by the assessee vide th ubmission are duly perused but not fou e following reasons:
e assessment proceedings, it was found had not fully maintained the orting documents/bills/vouchers e cash expenses claimed against taxable ng the Special Audit conducted in the c e Act, the Special Auditor had also reque etails (with Name, Address & PAN of the documents etc., to examine correct of cash expenses claimed by the asses owever, failed to produce requisite d with regard to the cash payments made b see has submitted that since the disallow wages made u/s 37(1) of the Act are on ence no penalty is leviable. In this rega note that the facts of the case under cons shable and squarely different. The plain ssment order is indicative of the fact s were not made on mere adhoc basis sidering the cash expenses claimed du reafter a percentage of the same was dis igence and taking into consideration fac teworthy that the disallowance of cash e aries & wages have been calculated disallowance of administrative expen ed at 10%. Had these disallowances bee imate basis then the common percentag would have been made by the AO on h expenses instead of different disallowan tted fact that the disallowance of Rs.85,9
ains to non-compliance of TDS provisions he assessee has submitted that no pe merely making a claim of expenditu as also placed reliance on various nts in support of its claim. However, the ase are different. It is unbelievable that a ich is engaged in providing uniformed g
Swaran Nadhan Salaria
24
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iscussion of the as under:
he afore- nd to be that the requisite etc.
to e income.
case u/s ested for parties), tness
&
ssee. The etails &
by it.
wance of estimate ard, it is ideration n reading that the but after uring the sallowed cts of the expenses d at 4%
nses has en purely e rate of the two nce rate.
996/- by s by the enalty is ure. The judicial e facts of assessee guarding services to co for many yea well as the deductions.
(iv) The ass
Rs.44,65,742
filed u/s 153A the assessee for taxation,
(v) Further, proceedings a was found th rotation of f creation of fic extracted from action that th certain entitie conduct & aff these shell en control of the transactions of the assesse
(vi) To sum
(Rs.44,65,742
disallowed b income filed
Income Tax A taxation after cannot be te liable for impo
(vii) The asse in the original in the return the total inco assessee has notice u/s 15
action, the as income for tax
(viii) The jud relevant to the ITA No. 1049

rporate / government/multinational all ov ars is unaware both about the industry n provisions of income tax with respect sessee has disallowed interest exp
2/- & excess depreciation of Rs.97,75,277
A of the Act.and had there been no searc would not have offered this additiona during the course of search/post as well as during the assessment procee hat, the assessee had used said shell en funds/circuitous transactions in order ctitious asset. On perusal of the ledger m the Tally data, it was found during he assessee company had made paym es which are found to be shell entit ffairs of these shell entities had establis ntities were floated by the assessee grou e assessee group with a purpose to do and create fictitious assets. Thus, the a ee cannot be accepted.
up, in the instant case, interest e
2/-) and extra depreciation (Rs.97,75,27
by the assessee post search, in the r in response to notice issued u/s 153A
Act, 1961. The surrendering of this inc r identification of omission on part of the a rmed as a "bonafide disclosure" and osition of penalty for under- reporting of in essee has shown total income at Rs.48,4
l return of income filed by the assessee. H filed in response to notice u/s 153A of ome is declared at Rs.53,99,630/-. T s shown additional income after the 53A of the Act and had there been no ssessee would not have offered this ad xation.
dgements relied upon by the assessee e prese case as the facts are different.
Swaran Nadhan Salaria
25
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1054/MUM/2025
ver India norms as t to TDS pense of 7/- in ITR ch action, al income search edings, it ntities for to and r account g search ments to ties. The hed that up/under o circular argument expenses
77/-) was return of A of the come for assessee hence is ncome.
42,160/-
However, f the Act,
Thus, the issue of o search dditional are not (ix) Thus, ther assessee and under consid material to return of inc
9.2 Thereafter, the amounting to Rs.34
extent of Rs.1,92,72
deleted the penalty in but upheld the pena wages’ and ‘administr and ‘excess deprecia salary, wages and ad
“7.5 Before salary and estimation ba appellant has does not cove
1. the amoun offers an ex
Commissione
Commissione explanation is the material f
2. the amoun basis of an e to the sati
Commissione
Commissione is such that th
3. the amoun basis of an estimated a l same issue, h
ITA No. 1049

re has been deliberate omission on the pa d has under-reported the income for t deration and therefore all the facts w the income were not disclosed come filed.”
Assessing Officer levied the 4,24,309/- for under reporting
2,880/-. On further appeal, n respect of disallowance u/s 40
alty in respect of disallowance rative expenses’ on estimate bas ation’. The finding of the ld CIT( ministrative expenses is reprodu me, appellant has again submitted th administrative expenses were disallo asis only, penalty cannot be levied.
s placed reliance of 270A (6) and submitte er following underreported incomes:
nt of income in respect of which the a xplanation and the Assessing Officer r (Appeals) or the Commissioner or the r, as the case may be, is satisfied s bona fide and the assessee has disc facts to substantiate the explanation offer nt of under-reported income determined stimate, if the accounts are correct and isfaction of the Assessing
Officer r (Appeals) or the Commissioner or the r, as the case may be, but the method e he income cannot properly be deduced the nt of under-reported income determined estimate, if the assessee has, on h lower amount of addition or disallowanc has included such amount in the compu
Swaran Nadhan Salaria
26
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art of the the year hich are in the penalty @ 50%
income to the the Ld. CIT(A)
0A(ia) of the Act e of ‘salary and sis and ‘interest’
(A) in respect of uced as under:
hat since owed on Further, ed that it assessee r or the Principal that the closed all red; d on the complete or the Principal employed erefrom; d on the his own, ce on the utation of his income a addition or di
4. the amoun addition mad determined by had maintain under section under Chapte to the transac
5. the amoun
271AAB.
However, in conditions as correct and c which is reg satisfied by th it was found requisite det authenticate
In the abse evidence ther disallowance that the figure by the AO an the absence
Special Audit the special Au supporting do of cash expe however, fail with regard t disallowances no further ap before the A before me, no regard even t the assessee.
7.6 Consider assesse's sub left with no c which was submitted by whatever de
ITA No. 1049

and has disclosed all the facts materia isallowance; nt of under-reported income represented de in conformity with the arm's leng y the Transfer Pricing Officer, where the a ned information and documents as pr n 92D, declared the international tra er X, and, disclosed all the material facts ction; and nt of undisclosed income referred to in the present case it is important to note per point (b), which is regarding accoun complete to the satisfaction of AO and garding disclosure of all facts have n he appellant. During the assessment proc d that the appellant had not maintai tails/ supporting documents/bills/vou cash expenses claimed against taxable ence of complete submission or docu re was no other way for the AO to w other than the methodology adopted. It es of 4% and 10% have been taken conse nd only to the extent which was not veri of documentary evidence. Further, du t conducted in the case u/s. 142(2A) of uditor had also requested for party-wise ocuments to examine correctness & comp enses claimed by the appellant. The ap led to produce requisite details & expl to cash payment made by it. Importantl s have not been challenged by the appel ppeal has been filed. During penalty pro
AO again no documents were submitte details or documents have been furnishe though a number of opportunities were gr ring the facts of the case and in the bmission, I am of the opinion that the Ld.
choice but to estimate the income, to th not verifiable, as complete details w y the assessee. It is important to note h etails are available with the departm
Swaran Nadhan Salaria
27
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1054/MUM/2025
al to the d by any gth price assessee rescribed ansaction s relating n section that the nts being point (c) not been ceedings, ined the ucher to e income.
umentary work out is noted ervatively ifiable in uring the f the Act, e details, pleteness appellant, lanations ly, these llant and ceedings ed. Even ed in this ranted to light of AO was he extent were not here that ment are available due had been tak have voluntar its return of deliberate sup on above disc
Accordingly, t
9.3 Regarding the p and excess depreciat the decision of the H
Pvt. Ltd. v. CIT (sup reporting of the incom
“9.2 Before additional inc abundant pre been submit declaration of noted by the assessment p used shell en in order to an ledger accoun search action, payments to these shell e conceal its ta including inte
1,42,41,019/
the return of 153A of the A 9.3 I have gon and the relev decisions of th that suo-moto not absolve th
9.4 The appe
Chandigarh T
Chandigarh v
ITA No. 1049

e to search and seizure action. If no searc ken by the department, the assesse w rily disclosed the income as it had not be income. Thus, the action of appellant is ppression and under reporting of income cussion levy of penalty is upheld on this this ground of appeal is dismissed.”
penalty in respect of interest of tion of Rs.97,75,277/-, The Ld.
Hon’ble Supreme Court in the ca pra) and upheld the penalty l me observing as under:
me, the appellant has submitted t come was offered in the return of incom ecaution and to avoid litigation. It has tted that no penalty may be levied f additional income has been done suo-m
AO, during search/post search proceedi proceedings, it was found that the appel ntities for rotation of funds/circuitous tran nd creation of fictitious asset. On perus nt extracted from the Tally data found
, it was found that appellant company ha various shell entities. The appellant h entities to book inadmissible expenses axable income. The said inadmissible e erest and excess depreciation amountin
- were suo-moto disallowed by the app f income filed in response to notice iss
Act.
ne through the submissions filed by the a ant records. It is an established fact and he Hon'ble Apex court and other courts h o disclosure in the return after search act he appellant of the penalty provisions.
ellant has relied upon the decision of Tribunal in the case of DCIT Central v Kulwant Singh wherein it was held that Swaran Nadhan Salaria
28
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1054/MUM/2025
ch action would not een filing s clearly e. Based s ground.
Rs.44,65,742/-
CIT(A) relied on ase of Mak Data evied for under that the me out of s further as the moto. As ings and llant had nsactions al of the d during ad made had used s and to expenses ng to Rs pellant in sued u/s appellant d various have held tion does f Hon'ble
Circle-1, t penalty should not be u/s 153A. As in Mak Data P
9.5 It is howe
The relevant p
"Applying the officer is prec of any incrimi the assessme which the or and not abat precluded from the Act in c absence of an action."
In the presen facts are total
9.6 In this reg
Supreme Cou
38 taxmann.c
"Voluntary dis of penal proce
9.7 Further H
Vs ACIT [200
income was under section disclosed in o of income attr case it was 271(1)(c)
9.8 Hon'ble C
[2015] 59 tax related to se subsequent to and offered disclosed in 271(1)(c) was Hon'ble Supr
High Court in ITA No. 1049

e levied on suo-moto income offered in th s per the appellant case of the Apex court
P Ltd has been discussed and differentiat ever noted that facts in that case were d paras of the order are reproduced as und e similar proposition, even when the A cluded from making any addition in the inating material found during the search ent proceedings carried out u/s 153A of t riginal assessment proceedings stood co ted, the Assessing officer, in our view, m initiate the penalty proceedings u/s 27
case of already concluded assessmen ny incriminating material found during th nt case seized material is available. T lly different and not applicable.
gard, reliance is placed on the decision of urt in the case of MAK Data (P.) Ltd. vs CI com 448 (SC) which held as under:
sclosure does not release assessee from eedings under section 271(1)(c)."
Hon'ble ITAT Delhi in the case of Smt. Ki
09] 125 TTJ 631 (Delhi) held that where disclosed in return filed in response t n 153C following search, which income original return, it was a clear case of conc racting penalty under section 271(1)(c); in unnecessary to invoke Explanation 5 to Calcutta High Court in CIT Vs Prasann xmann.com 99 (Calcutta), while deciding ection 271(1)(c) Expl 5A held that even o search, assessee voluntarily disclosed said sum to tax, since said amount original return, penalty levied under justified.
reme Court has upheld the decision of the above case.
Swaran Nadhan Salaria
29
9, 1050, 1051, 1052, 1053,
1054/MUM/2025
he return t decision ted.
different.
der:
Assessing absence action in he Act in ompleted
, is also 71(1)(c) of t in the he search
Thus, the f Hon'ble
IT [2013]
mischief iran Devi e certain to notice was not cealment n such a o section na Dugar g matter n where d a sum was not r section f Hon'ble

h the above judgements are in the co same are applicable in case of penalty u/
he penalty provisions are analogous. The ted the penalty u/s 270A for 'under rep the final penalty order was also passed fo ncome and as such the conditions of Secti were fulfilled. Thus respectfully follow f various courts the penalty levied by th ccordingly, the ground no.
4
smissed.”
the rival submissions advanc sed the material available on re n is the validity of the penal
Income-tax Act, 1961, on acc by the assessee. The impugned p
: (i) disallowance on an estim ages and administrative expens of interest amounting to ₹44
of ₹97,75,277/- in the retu
Act.
rom assessment year 2017-18
ct for under reporting and m roduced. In the present case, th der reported his income and a omputed by the Assessing Off
270A(2) of the Act a person sha orted his income if the inc ause (a) of sub-section (1) of Swaran Nadhan Salaria
30
9, 1050, 1051, 1052, 1053,
1054/MUM/2025
ontext of /s 270 A e AO had porting of for 'under ion 270A wing the he AO is of the ced on behalf of ecord. The issue ty levied under count of under- penalty pertains mated basis in ses; and (ii) suo
4,65,742/- and urn filed under onward penalty miss-reporting of he assessee has accordingly, the ficer. Under the all be considered come assessed/
section 143 is greater than the in Further, sub-section reported income shal relevant section is rep
(6) The under-reported income namely:-
(a) the amount of incom
Assessing Officer or or the Commissione that the explanation to substantiate the e
(b) the amount of unde accounts are correct
Joint Commissioner the Principal Commi the income cannot p
(c) the amount of unde assessee has, on his same issue, has in disclosed all the fac
(d) the amount of unde with the arm’s len assessee had maint declared the interna facts relating to the (e) the amount of undis
10.2 The Ld. Counse sub-section 6 and explanation in respec motu offered income section 153A of the explanation of the disclosed all the m offered, therefore, n
ITA No. 1049

ncome determined in the retu n 6 of section 270A prescri ll not include subject to certain produced as under:
e, for the purposes of this section, shall not me in respect of which the assessee offers a r 20[the Joint Commissioner (Appeals) or] the C er or the Principal Commissioner, as the cas n is bona fide and the assessee has disclose explanation offered; er-reported income determined on the basis t and complete to the satisfaction of the Ass r (Appeals) or] the Commissioner (Appeals) o issioner, as the case may be, but the method roperly be deduced therefrom; er-reported income determined on the basis s own, estimated a lower amount of addition ncluded such amount in the computation of ts material to the addition or disallowance; er-reported income represented by any additi ngth price determined by the Transfer Prici tained information and documents as prescrib ational transaction under Chapter X, and, dis transaction; and sclosed income referred to in section 271AAB.
el for the assessee referred to t submitted that assessee ha ct of interest and excess deprec in the return of income filed
Act therefore, according to th assessee is bonafide and the material fact to substantiate t no penalty in respect of inter
Swaran Nadhan Salaria
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urn of income.
ibe that under conditions. The t include the following, an explanation and the Commissioner (Appeals) se may be, is satisfied d all the material facts of an estimate, if the sessing Officer or 21[the or the Commissioner or d employed is such that of an estimate, if the or disallowance on the f his income and has ion made in conformity ing Officer, where the bed under section 92D, sclosed all the material the clause (a) of as duly offered ciation and suo- in response to he assessee, the e assessee has the explanation rest and excess depreciation should section 143 of the Ac wages and adminis assessee referred to made purely on the e been rejected u/s 14
been treated by the and addition has bee of the vouchers on th
Counsel submitted th part of the expenses for non-maintenance assessee falls under leviable due to exclu reported income.
10.3 We are of the op and administrative
Officer on estimate o assessee in respect the expenditure was have disallowed the e only estimated disallo on administrative ex been provided by t
ITA No. 1049

be levied invoking clause (a) su ct in respect of estimate in respe strative expenses. The Ld. C clause (a) of section (2) and ad estimate basis and books of acc
45(3) of the Act and therefore,
Ld. AO as correct and complete en made on estimate basis from he expenses on the part of the as hat the Assessing Officer has hi as genuine and merely estimat e of the vouchers, therefore, t r clause (b) of section 270 and usion carved from the definition pinion that addition in respect expenses have been made by only, due to lack of vouchers ma of cash. If according to the As not genuine, then the Assessin entire cash expenses but he did owance of 4% of the salary and xpenses and no basis for such the Assessing Officer. In the Swaran Nadhan Salaria
32
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ub-section (1) of ect to salary and Counsel for the ddition has been counts have not , accounts have e to satisfaction non-production ssessee. The Ld.
imself estimated ted the addition the case of the d no penalty is n of the under- of salary, wages y the Assessing aintained by the ssessing Officer, ng Officer could d not do so and wages and 10%
estimation has circumstances, addition being merely view of reasons pari the Act and particula
270 of the Act as in has made disallowa accounts have been regards the penalty l motu offered by the response to section 1
explained the suo-mo provided all materia explanation being b
270A of the Act. Acc
Officer for under rep hereby deleted.
10.4 The Ld. CIT(A) has followed his fi identical facts and ci
18, the penalty levied in assessment year cancelled and relevan
ITA No. 1049

y on the estimate basis cannot materia with penalty cancelled arly in view of clause of sub-sect the case of the assessee, the A nce out of cash expenses an rejected invoking section 145(3
levied for interest and excess d e assessee in the return of i
153A of the Act, we find that th otu variation made in the return al facts to substantiate the exp onafide in nature no penalty cordingly, the penalty levied by porting of the income u/s 270
in assessment years 2018-19
inding in assessment year 2
rcumstances, following our find d by the Assessing Officer u/s rs 2017-18 and 2019-2020
nt grounds are accordingly allow
Swaran Nadhan Salaria
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be sustained in u/s 271(1)(c) of tion 2 of section Assessing Officer nd no books of 3) of the Act. As depreciation suo income filed in he assessee has n of income and planation. Thus is leviable u/s y the Assessing
0A of the Act is and 2019-2020
2017-18. Being ding in AY 2017-
270A of the Act is also hereby wed.

up the appeal of the assessee grounds raised by the assessee acts and circumstances of the case an (A) has erred in confirming the initiat
Assessing Officer has not specified th
AAB of the Income tax Act under whic acts and circumstances of the case an (A) has erred in confirming the pen llowance of salaries and wages
0/-
&adhoc disallowance of a mounting to Rs.3,89,240/- made u/s 3
d basis.
acts and circumstances of the case an (A) has erred in confirming the pen sallowance of interest of Rs.16,43,36
of Rs.12,97,357/- made u/s 36(1)(iii basis.
No. 1, the assessee has challen
B of the Act on the ground tha cified the relevant provisions w e has been adjudicated by pellant in this ground has contended n not mentioning the specific provisi the Act for initiation of penalty proce order. It is noted that the appellant ha tion before the AO during the cours
. The AO in his order has already cla f the 271AAB (1A) of the Act have b
Swaran Nadhan Salaria
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for assessment are reproduced nd in law, the tion of penalty he provision of ch the penalty nd in law, the nalty levied on amounting to administrative
37(1) of the act nd in law, the nalty leviedon
63/- & Excess i) of the act on nged the levy of at the Assessing while levying the the Ld. CIT(A) d that the AO ion of Section eedings in the ad also raised rse of penalty arified that the been correctly invoked in between the 7.2 As per p
'undisclosed where penal penalty u/s.
levy of pen prescribed tabular man
7.3 As can
271AAB is s either fulfilm section by ap in the penal case do not v
7.4 Reliance bench in Ra adjudicated
"On cl find t penalt specifi in the or cha penalt satisfa clause
Section varies ancilla has in any a applic
11.2 We have heard the relevant material that penalty u/s 271
ITA No. 1049

this case and only the manner an two parts of the section.
provisions of section 271AAB, penalt d income of the specified year unlike lty can be levied for two different cha
.271AAB is levied for singular charg nalty at different slabs subjected therein. Penalty u/s.271AAB is r nner as under:
be seen from the above chart th singular. Only rates of penalty vary de ment/non-fulfilment of conditions laid appellant. Therefore, non-specification ty notice u/s 271AAB issued by AO vitiate penalty proceedings.
e is placed on the judgment of Hon'ble ambhajo's vs ACIT, ITA 991/JP/201
same issue and held as under:
lose reading of provisions of Section that the primary condition or charg ty is the existence of undisclosed in fied previous year found during the co case of assessee. Once the said prim arge is satisfied, for the purposes of q ty, the Assessing officer has to action of ancillary conditions as sp e (a), clause (b) or clause (c) to sub n 271AAB. Merely because the quant from 10% to 30% subject to complia ary conditions, it cannot be said that nitiated the penalty under section 271
ambiguity in the charge or there is ation of mind on part of the Assessing rival submissions of the parti ls on record. The contention of AAB is levied @ 10%, 20% and Swaran Nadhan Salaria
35
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nd rates vary ty is levied on u/s. 271(1)(c) arges. Though ge, it proposes to conditions reproduced in e charge u/s epending upon d down in the n of subsection in the present e ITAT, Jaipur
17 which has n 271AAB, we ge for levy of ncome for the urse of search mary condition quantifying the examine the pecified under -section (1) to tum of penalty ances with the where the AO
1AAB, there is s any lack of g officer.”
ies and perused f the assessee is 30% depending on the demonstratio facts of the case. The that the Assessing under which penalty the same, relying on in the case of Manju which is on the secti is applicable over th agree with the conten reason that penalty defined under the sa the other conditions of rate or suppressi vitiate the penalty p error in the order of accordingly uphold th
12. The ground No.
penalty on the ad amounting to Rs.
administrative expen
37(1) of the Act on penalty in respect administrative expen
ITA No. 1049

ons of specified conditions app e Ld. Counsel for the assessee
Officer was required to specif y was leviable and due to non the decision of Hon’ble Karnat unath Cotton & Ginning Factory ion 271(1)(c) of the Act, but bei he facts of this case also. Howe ntion of the Ld. Counsel for the y is levied on charge of undi aid section and rate of the pena which are fulfilled. Therefore, n ion of the same in the penalty proceedings. Accordingly, we d the Ld. CIT(A) on the issue in he same.
2 of the appeal of the assessee d-hoc disallowance of salari
76,70,900/- and ad-hoc d nses amounting to Rs.3,89,24
estimated basis. The Ld. CIT of disallowance of salary a nses in cash mode observing as u
Swaran Nadhan Salaria
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licable over the was of the view fy relevant rate
-specification of taka High Court y(supra), though ing pari-materia, ever, we do not assessee for the isclosed income alty depends on non-specification y notice do not do not find any dispute and we relate to levy of es and wages disallowance of 40/- made u/s T(A) upheld the and wages and under :

“8.2 During by the AO response to compared to noted in the balances etc taken up for complete de claimed in c neither durin proceedings thus could n salary and expenses, to absence of n
8.3 During p since the di
37(1) of Act
The AO after the penalty.
8.4 As discu explain the during the c were not fil audit comple and any cla income on th data or sub before him.
against the provided any matter.
8.5 The AO incurred exp
'administrati that complet regard to s appellant. A extent which before the AO
ITA No. 1049

the course of assessment proceedings that even the returns which had o notice u/s. 153A showed wide o the original return of income. Variati e P& L account, balance sheet, ca c. Since, the books were unreliable, r special audit u/s 142(2)(A). It is furth etails and information with regard cash mode were not submitted at a ng the search proceedings, nor durin and not even during assessment pro not be verified. Thus, the AO disallow wages expenses and 10% of a o the extent which were not verif necessary documentary evidences.
penalty proceedings, the appellant s isallowances in the salary and wag are on estimate basis hence no pena r going through the submissions of ap ussed in prepares, the appellant had entries during the course of search course of assessment proceedings, co led with AO. Again, during the cou ete details were not filed. Thus, due t arification from appellant's end, the he total receipts on estimate basis a bstantive records were produced by The appellant has not gone into f quantum order of the AO. The appe y details even before me except filing
O in his order has observed that a xpenses under the heads 'salary ive expenses' in cash mode. The AO h te documentary evidences and expla such cash expenses was not prov
Accordingly, the AO disallowed exp h was not verifiable. During the penalt
O, the appellant submitted that it had Swaran Nadhan Salaria
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s it was noted been filed in variation as ions were also ash and bank the case was her noted that to expenses any stage i.e.
ng post search oceedings and wed 4% of the administrative fiable, in the submitted that ges made u/s alty is leviable.
ppellant levied not been able action. Again, mplete details rse of special to lack to data
AO computed as no relevant the appellant further appeal ellant has not g a note on the appellant had & wages' &
has also noted anations with vided by the penses to the ty proceedings d not gone into appeal again levied on ad
8.6 Before submissions additions ma
8.7 Conside assessee' su with no choi was not ver the appellan are available and seizure department, the income a the action o income. The accordingly
12.1 Prior to confirm administrative expen section 271AAB and that the disallowance of the ‘undisclosed in for penalty u/s 271A
CIT(A) is reproduced
“6.2 I have assessment
Under sectio undisclosed action u/s 1
years. As p undisclosed means inco money, bulli any entry in ITA No. 1049

nst the quantum order and that pena dition made on estimate basis.
me, the only contention of the app s, on this ground, is that penalty canno ade on estimate basis.
ering the facts of the case and in ubmission, I am of the opinion that th ice but to estimate the income, to the rifiable, as complete details were not nt. It is important to note here that wh e with the department are available action. If no search action had been the assessee would not have volunta as it had not been filing its return of of appellant is clearly deliberate s e ground of the appeal of the dismissed.”
ming the penalty on salary a nses, the Ld. CIT(A) referred to t definition of the undisclosed in e made by the assessee satisfie ncome’ and therefore, the disall
AAB of the Act. The relevant fin as under:
gone through the submissions of order, penalty order and the facts on 271AAB of the Act, penalty is income is found during the course
132 of the Act in relation to the spec per this section penalty is to be le income. The term undisclosed inc me represented either wholly or p ion, jewellery or other valuable artic n the books of account or transactions
Swaran Nadhan Salaria
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alty cannot be pellant in his ot be levied on n the light of he AO was left e extent which submitted by hatever details due to search n taken by the arily disclosed income. Thus, uppression of appellant is and wages and the provisions of ncome and held ed the definition lowance is liable nding of the Ld.
assessee, the s of the case.
levied where e of a search cified previous evied only on come broadly partly by any cle or thing or s found during the course of on or before documents m
6.3 On goin observe that action u/s 1
filed in this which wide return of inco particulars o variation eve previous ba recently. Th earlier finan that the book as the subse serious doub accounts of before the A course of sp not filed. Th appellant's e on estimate were produc noted that proceedings could not exp
Since the de addition was 6.4 In the c income wou other valuab documents f account. In wide variatio cases where be treated as substantiate
Thus, in m
271AAB of th
ITA No. 1049

of search u/s132 and which has not b the date of search in the books of ac maintained in the normal course.
ng through the facts and records o t appellant was covered in a search
132 of the Act. As noted by the AO, case based on re-worked unaudited variations were noticed as compared ome filed. Also, there was variation in of the P&L account and Balance She en in the cash and bank balances as alance sheet filed and the re- writ hese variations existed even in cas cials filed had been audited. Thus, it ks of accounts, financials of various e equent return of income filed, were no bts existed regarding the correctness o the appellant group. No details we
AO to explain the discrepancies. Aga ecial audit in the group case complete hus, due to lack to data and any cla end, the AO computed income on the basis as no relevant data or substa ced by the appellant before him. T during the search proceedings, and during assessment proceedin xplain the cash transactions and othe etails furnished were incomplete and s made.
context of section 271AAB of the Act ld be represented by money, bullion ble articles or things or an unrecorded found or a false entry recorded in the case of appellant, it is noted th on in the figures of financials as subm e audit had been finalized. Thus, the s false entries as the appellant has no e the same anytime during the search my opinion the AO rightly initiated he Act.
Swaran Nadhan Salaria
39
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been recorded ccount or other of the case, I h and seizure returns were d financials in to the original n various other et. There was s shown in the tten one filed es where the was observed entities as well ot reliable and of the books of ere submitted ain, during the e details were arification from e total receipts antive records
The AO finally post search ngs assessee er deficiencies.
d not verifiable t, undisclosed n, jewellery or d entry as per the books of hat there was mitted even in expenses can ot been able to h or even later.
penalty u/s 6.5 Appellan penalty cann of the case a opinion that income as co either during auditor. Thu account of verifiable. It are available and seizure taken place, the income, even though appellant is 6.6 Thus co the opinion levied in appellant is 12.2 We have heard the relevant materials is independent of the assessment order assessment proceedi provided in the sectio or 30% to 60% of t year. In the case, it consideration is spe issue whether the dis satisfy the definition ready reference said undisclosed income i
ITA No. 1049

nt's claim that since these are on e not be levied is also incorrect. Conside and in the light of assessee' submissio the AO was left with no choice but to omplete details were not submitted by g search proceedings or before the A us, AO after going through details mad cash expenses to the extent wh is also important to note here that wh e with the department are available action u/s 132 of the Act. If no sear the assessee would not have volunta as the appellant had not been filing h it was receiving huge receipts. Thus clearly deliberate suppression of incom nsidering the discussion in the pre-p that section 271AAB of the Act has this case.
Accordingly, this s dismissed.”
rival submissions of the parti s on record. The penalty u/s 27
e addition made by the Assessin and same could be initiate ing depending on fulfilling of on. The penalty could be levied the undisclosed income for sp is undisputed that the assessm ecified year and only dispute i sallowance in respect of which p n of the ‘undisclosed income’
d Explanation to section 271AA is reproduced as under:
Swaran Nadhan Salaria
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estimate basis ering the facts on, I am of the o estimate the y the assessee
AO or special de addition on hich was not hatever details due to search rch action had arily disclosed g any returns s, the action of me.
paras, I am of correctly been ground of ies and perused
71AAB of the Act ng Officer in the ed during the the conditions d @ 10% or 20%
ecified previous ment year under is in respect of penalty is levied
. Therefore, for AB defining the [Penalty where search
13 271AAB. (1) ……………
(a) ……………………
(b) ……………………
(c) ………………….
18 [(1A) ………………………
(2) ……………………………
(3) ……………………………
Explanation.-For the purp
(a) “specified date”
under sub-secti specified in the 153A, as the ca the case may be (b) “specified previo
(i) which h furnishin
139 for s the asse previous
(ii) in which (c) “undisclosed i
(i) any inco wholly o valuable other doc under se
(A) n b
ITA No. 1049

has been initiated.
…………….
………
….
…
….
…….
poses of this section,-
” means the due date of furnishing o ion (1) of section 139 or the date on e notice issued 22[under section 148
ase may be,] for furnishing of return of e; ous year” means the previous year- has ended before the date of search ng the return of income under sub-se such year has not expired before the essee has not furnished the return year before the date of search; or h search was conducted; ncome” means- ome of the specified previous year r or partly, by any money, bullion, j e article or thing or any entry in the b cuments or transactions found in the ection 132, which has- not been recorded on or before the da books of account or other documents
Swaran Nadhan Salaria
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of return of income n which the period
8 or under section f income expires, as h, but the date of ection (1) of section date of search and of income for the represented, either jewellery or other books of account or course of a search ate of search in the maintained in the n
(B) o
C
C s
(ii) any inco wholly o in the bo normal c found to the searc
12.3 In above definit the form of assets li items or income repre was not found record the search or otherwi etc. then, the said income. The clause 2
by way of entry in re and would not hav conducted, then sa income.
12.4 In the instant c
Assessing Officer in and administrative e produced by the as ITA No. 1049

normal course relating to such previous therwise not been disclosed to the Commissioner or] Chief Commission
Commissioner or] Commissioner bef earch; or ome of the specified previous year r r partly, by any entry in respect of an ooks of account or other documents course relating to the specified previ be false and would not have been f ch not been conducted.]
ion under sub-section 1 income ike money, bullion, jewellery or esenting any entry in the books o ded in the books of accounts be ise not disclosed to the Pr. Chie income falls in the category
2 of the section specify that inco espect of expenses if same is fo ve been found to so had sa aid expenses would amount case before us, addition has be respect of expenses incurred o expenses but voucher of the ssessee during assessment p
Swaran Nadhan Salaria
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s year; or e 23[Principal Chief ner or 23[Principal efore the date of represented, either n expense recorded maintained in the ious year which is found to be so had e represented in r other valuable of account which efore the date of ef Commissioner of undisclosed ome represented ound to be false aid search not to undisclosed en made by the on salary, wages same were not roceedings and therefore, disallowan which were incurred not been disputed by 12.5 Thus for disall and administrative undisclosed income, not have been found
Thus, the two condi expenses should be f should be found in both these condition
Assessing Officer ha either bogus or false of verification of the second condition is emerge in search act that non availability rather, it appears t proceeding. Unless, t in the nature of the u are satisfied , no pen merely for the reason the assessment ord assessee is according
ITA No. 1049

nce on estimated basis in resp in cash has been made by the y the assessee.
lowance of the expenses on th expenses falling into the de same should be found to be f to be so if the search had not b tions are required to be fulfille found to be false and secondly the course of the search actio ns are not satisfied in the ins as nowhere held the said cash but he made disallowance mer vouchers of the expenses mad that the fact of expenses bein tion. But nothing has been bro y of vouchers was observed in that fact has been recorded the conditions specified for dis undisclosed income specified in nalty could be levied in respect n that Assessing Officer has m der. The ground No. 2 of the gly allowed.
Swaran Nadhan Salaria
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pect of expenses e AO which has he salary, wages efinition of the false and would been conducted.
ed, firstly, said y, said expenses n. We find that stant case. The h expenditure is rely for the lack de in cash. The ng false should ought on record n search action, in assessment allowance to be section 271AAB of disallowance made addition in e appeal of the 13. The ground No.
of the penalty in re disallowed by the As CIT(A) is reproduced
“10.2 In this search/post assessment had used sa transactions
During searc from the Ta made payme shell entities were floated transactions expense of R
12,97,357/- return filed u filed in resp
Thus, the expenses u/
penalty proc held that sin in its return income/expe undisclosed f
10.3 Before since it wa levied. After entries were search. The to shell com the same in appellant ha disclosed fu filed against that the AO this ground o
ITA No. 1049

3 of the appeal of the assesse espect of interest and depreci ssessing Officer. The relevant fin as under :
regard it is noted that the during the search proceedings as well as du proceedings, it was found that, the a aid shell entities for rotation of funds/c s in order to and creation of fictitiou ch, on perusal of the ledger account lly data it was found that the appel ents to certain entities which were fou s. It was established that these shel d by the appellant group to facilitate s and to create fictitious assets. The Rs. 16,43,363/- and excess depreciat was not disclosed correctly in the u/s. 139(1) of the Act as well as in t ponse to notice issued u/s 153A of AO had disallowed the aforem
/s 36(1) (iii) of the Act and also ceedings. During penalty proceedings nce the appellant had not disclosed t n of income or in books of the accoun enses to that extent have r for the year under consideration.
me the appellant has only submi s on estimate basis the penalty ca going through the details, it is clear th e found in the shape of ledgers at th same were established to be paymen mpanies. The appellant had neither d its original return nor in the 153A re as not explained the entries and lly in its returns. Further, no appeal t this addition. Accordingly, I am of th has correctly levied the penalty. Acc of appeal is dismissed.”
Swaran Nadhan Salaria
44
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e relates to levy iation expenses nding of the Ld.
course of uring the appellant circuitous us asset.
extracted llant had und to be ll entities e circular e interest tion of Rs e original the return f the Act.
mentioned initiated s, it was the same nts, such remained itted that annot be hat these he time of nts made disclosed eturn. The also not has been he opinion cordingly,

ITA No. 1049

rival submissions of the parti ls on record. The Assessing Of disallowance of the expenses o
Act and suo-motu disallowance
12,97,357/-.
As regards th llowed u/s 36(1)(iii) of the Act is was disallowed for the reason held to be given for non-busine st in respect to those loans and -business purpose and accordi iii) of the Act. There is no find er to cover the said disallowa disclosed income comprising of ooks of accounts. Similarly, e Assessing Officer has made n ntry of the expenses as undisclos as not brought on record as ho n unearthed during search acti he facts, penalty levied canno und No. 3 of the appeal of the Swaran Nadhan Salaria
45
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ies and perused fficer has levied n interest made of depreciation he interest of s concerned, we that loans and ess purpose and d advances was ingly disallowed ing recorded by ance under the the entry of the regarding the no recording for sed income. The ow issue of the ion. In absence ot be sustained.
assessee is also 10.2 In the result all 2020-21 are partly al
Order pronou (RAJ KUMAR C
JUDICIAL M
Mumbai;
Dated: 30/07/2025
Rahul Sharma, Sr. P.S.

Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

////

ITA No. 1049

appeals of the assesses from AY llowed.
unced in the open Court on 30
/-
CHAUHAN)
(OM PRAK
MEMBER
ACCOUNTA ded to :

BY ORDER

(Assistant Re

ITAT, Mu

Swaran Nadhan Salaria
46
9, 1050, 1051, 1052, 1053,
1054/MUM/2025
Y 2014-15 to AY
0/07/2025. KASH KANT)
ANT MEMBER
R, gistrar) umbai