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Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI H.S. SIDHU, & SHRI N.K. BILLAIYA
per communication sent by him to the Director of Income tax [Inv] as the said statement was made by him under a mistaken belief of fact/law. The relevant portion of the assessee’s statement read as under:
“As regards the amount of Rs.2.44 crores which are the outstanding balances as on 1.1.1998 noted in the seized 1998 diary in Annexure A- 3 found during the course of search, the assessee has explained in its letter dated 4th Matrch,2013 as well as in its letter dated 31.12.2010 that such iottinss pertain to 1998 and as per law cannot be taxed in assessment year 2011- 12. It has further been explained in the surrender of Rs. 4.00 crores made by the assessee which includes both the cash seized from the assessee on the date of search as also the unaccounted business transactions found recorded in Annexure A-l and A-2. In this regard it is further submitted that your goodself has duly examined seized Annexure A-l and A-2 which consist of unaccounted business transactions and the total of unaccounted sales turnover as per Annexure A-l and A-2 is Rs.2.60 crores which is the total sales turnover. It may be appreciated that sales turnover cannot be the same as taxable income of the assessee. It is respectfully submitted that the assessee has duly surrendered the whole amount of Rs.2.60 crores while filing its return of income and offered to pay tax on the entire amount of Rs.2.60 crores which in fact is the total unaccounted sales turnover and not the profit arising to the assessee out of such unaccounted sales turnover. It is further submitted that if the profit on such unaccounted sales turnover of Rs.2.60 crores is calculated by applying the g.p. rate of 4% then in such a case the profit arising to the assessee on the aforesaid unaccounted sales turnover would only be Rs. 10.40 lacs (4% of Rs.2.60 crores). As against this profit of Rs.lU.40 lacs, the assessee has already included an amount of Rs.2.60 crores in its return of income and has offered the same for taxation inspite of the fact that the profit/income component in the above amount of Rs.2.60 crores is only Rs. 10.40 lacs arising out of such business transactions, then the benefit of telescoping should be allowed to the assessee in respect of excess amount so offered for taxation. In the instant case even if the amount ofRs.2.44 crores which is the outstanding balance as on 1.1.1998 is c onsidg&edfnass ess ment year 2011-12 then also the excess amount of in cq/fielqfffi^^fiy the assessee for taxation out of Rs.2.60 crores duly covers the amount of Rs.2.44 crores outstanding as on 1.1.1998 and therefore, also there is no justification in making further addition of Rs.2.44 crores over and above the amount of Rs.2.60 crores.
This statement of the assessee did not find any favour with the Assessing Officer who was of the firm belief that the entries found in the diary amounting to Rs. 2.44 crores are independent entries and cannot be related with sales transaction which are also independent entries found in the seized documents as per Annexure A -1 and A-2. The Assessing Officer accordingly made addition of Rs. 2.44 cores and completed assessment as under:
Income from Bajaj Company as declared Rs. 15,00,000/- Income from house property as declared Rs. 41,424/- Income from business including the income of 4,OO,000/- offered u/s 132(4) of the Act ii declared by the assessee Rs.4,01,51,012/. Income from other sources as declared Rs. 13,46,051/- Add: undisclosed income as discussed above Rs.2.44.00.000/ Total: - Less deduction under chapter VIA as claimed Total taxable income Rs.6,74,38,487/ - Rs. 1.00.000/- Assessed u/s 143(3) at Rs.6,73,38,487/-. Rs. 6,73,38,487/-
It can be seen from the above that the addition of Rs. 2.44 crores is over and above income of Rs. 4 crores offered u/s 132(4) of the Act as declared in the return of income by the assessee. Subsequently, the Assessing Officer initiated penalty proceedings u/s 271AAA of the Act and levied penalty of Rs. 64.40 lakhs, which was confirmed by the ld. CIT(A).
Having heard the rival submissions, we have carefully perused the orders of the authorities below. In so far as the addition of Rs. 2.44 crores is concerned, which was over and above the declared sum of Rs. 4 crores, the Tribunal in vide order dated 28.06.2018, has held that the sum of Rs. 2.44 crores is part of the sum of Rs. 4 crores and, therefore, no separate addition should be made in respect of this amount. The relevant findings of the Tribunal read as under:
“18. Now coming to Ground No.4, it is not in dispute that the declaration of Rs.2.6 crore by the assessee u/s 132(4) of the Act was on account of sales outside the books. Both the authorities below did not dispute this fact. When the sales are to the tune of Rs.2.6 crore, we find it difficult to understand as to how the entire sales could be brought to tax. It is also an admitted fact that in respect of this assessment year, the GP rate of the assessee's business of trading in chemicals in the name and style of M/s Samit International at 3.74% was accepted by the AO while passing the assessment order. It is, therefore, quite reasonable to apply the same GP rate on the unaccounted sales of Rs.2.6 crores also which comes to Rs.10.40 lacs. After reducing the seized cash of about Rs.1.30 crores, there remains the balance of Rs.2.7 crores out of the surrendered amount along with the return of income filed on 11.1.2013. Out of this Rs.2.7 crores if the income to the tune of Rs.10.40 lacs is adjusted, still their remains Rs.2.49 crore out of which the alleged outstanding balance to be found from the diary of Rs.2.44 crore could be adjusted. After this, there remains no amount to be brought to tax.
The reasons given by the authorities below that these two amounts are surrendered separately, as such, they cannot be telescoped against each other is not sound and cannot be accepted. These two transactions have an intrinsic link as submitted by the learned AR that it is only out of the sale amount the receivable from the persons listed on the leaf relating to 1.1.1998 arise. We accept the same and direct the authorities to telescope Rs.2.44 crores into Rs.2.60 crores in which event nothing over and above the declaration of Rs.4 crore is taxable. We accordingly answer Ground No.4 in favour of the assessee.”
In light of the afore stated findings of the Tribunal, the entire quarrel boils down to the declared sum of Rs. 4 crores which was offered by the assessee in his return of income. A careful perusal of the order u/s 271AAA of the Act would show that the Assessing Officer has considered the amount of Rs. 2.44 crores, over and above the surrendered amount, and has computed the penalty accordingly. Since the issue relating to the sum of Rs. 2.44 crores is now well settled in favour of the assessee, in our considered opinion, the Assessing Officer should now consider the amount of Rs. 4 crores which was offered u/s 132(4) of the Act and honoured in the return of income for levy of penalty u/s 271AAA of the Act. We, accordingly, restore this issue to the file of the Assessing Officer.
The Assessing Officer is directed to consider the levy of penalty u/s 271AAA of the Act on the sum of Rs. 4 crores as per the provisions of law keeping in mind that the said sum was offered for taxation in the statement made u/s 132(4) of the Act and honoured in the return of income. Needless to mention, the Assessing Officer shall give reasonable and sufficient opportunity of being heard to the assessee.
In the result, the appeal of the assessee in is treated as allowed for statistical purposes.
The order is pronounced in the open court on 04.03.2020.