PARADIGM BUSINESS VENTURES,MOHALI vs. DEPUTY COMMISSIONER OF INCOME TAX, CC-1, CHANDIGARH

From the facts, it clearly emerges that the surrender has been made by the assessee vide letter dated 12-08-2016. On that date, the return of income for AY 2016-17 was not filed by the assessee. Further, FY 2016-17 was still in progress and barely 5 months had progressed for that year. To make up for the incriminating material, the assessee undertook to enhance its income disclosed in ITR for AY 2015-16 by an amount of Rs.4.375 Crores in aggregate which was to be spread over in AYs 2016-17 and 2017-18. The enhancement was to be made by Rs.1 Crores in AY 2016-17 and by Rs.3.375 Crores in AY 2017-18. This amount was stated to be inclusive of normal income emanating from regular transactions.The assessee finally returned income of Rs.104.35 Lacs for AY 2016-17 and Rs.329.85 Lacs for AY 2017- 18and substantially honored its commitment. The regular income for AY 2016-17 was Rs.59.87 Lacs and the assessee has credited additional Rs.42 Lacs so as to fulfil its commitment. Quite clearly, the surrender made by the assessee at least for AY 2017-18 was merely on projections and therefore, there is no basis to make further addition of Rs.7.66 Lacs by Ld. AO. Therefore, we delete the same and allow the appeal of the assessee.

In for AY 2017-18, the assessee is aggrieved by levy of consequential penalty of 60% of Rs.7.66 Lacs u/s 271AAB. Since quantum addition has been deleted by us, this penalty would not survive. We order so.

In for AY 2016-17, the assessee is aggrieved by levy of penalty of 20% on additional income of Rs.42 Lacs u/s 271AAB(1). For this year, the assessee agreed to disclose income of Rs.1 Crores. The regular books reflected income of Rs.59.87 Lacs. To honor the commitment, the assessee credited additional income of Rs.42 Lacs to its Profit & Loss Account and returned income of Rs.104.35 Lacs which was accepted by Ld. AO. However, Ld. AO has levied penalty of 20% against Rs.42 Lacs on the allegation that the said amount was not part of regular income earned by the assessee during the business. The Ld. CIT(A) confirmed the same primarily on the ground that there was no plausible explanation regarding nature and source of cash deposit. Aggrieved, the assessee is in further appeal before us.

It could be seen that the assessee has computed regular income of Rs.59.87 Lacs and to honor its commitment, it has credited additional income of Rs.42 Lacs to its profit & loss account. The sole basis of the same is surrender letter dated 12-08-2016 and the same is not based on unearthing of any undisclosed asset etc. which could be added u/s 68 to 69D. The addition is purely on the basis of undertaking given by the assessee. In our opinion, existence of undisclosed income is sine qua non to invoke the impugned penalty provisions. The undisclosed income is to be represented by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search u/s 132 which is not recorded in the regular books or the same should be in the form of any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted. We find that these ingredients are missing in the facts of the present case before us. Therefore, the impugned penalty is liable to be deleted. We order so.