MUKESH KEDIA HUF,AHMEDABAD vs. PCIT-1, SURAT

Subsequently, the Principal CIT initiated proceedings under section 263 of the Act, by observing that with effect from 01-04-2017, penalty should have been initiated under section 271AAC of the Act, when the additions are made under section 68 of the Act. However, in the instant case, the assessing officer initiated penalty proceedings under section u/s 271(1)(c) of the Act, due to non-application of mind and incorrect Mukesh Kedia-HUF vs. PCIT Asst. Year –2017-18 - 3– application of legal provisions, thereby resulting in a revenue loss of ₹6,10,275/-. Further, the Principal CIT observed that the assessee being the beneficiary of accommodation entry, in the instant facts, should have paid commission for obtaining the aforesaid accommodation entries. However, neither any addition nor any enquiry with respect to such unaccounted payment of commission was made by the assessing officer, which was required to be made and unexplained expenditure under section 69C of the Act on account of commission paid by the assessee to the entry providers (for obtaining the bogus accommodation entries amounting to ₹79 lakhs) should have been added in the hands of the assessee during the impugned assessment proceedings. However, from the case records, it is evident that no such enquiry was made by the assessing officer and no such addition was made by the assessing officer in the hands of the assessee, which renders the assessment order as being erroneous and prejudicial to the interests of the Revenue.

Accordingly, in view of the aforesaid errors pointed out by the Principal CIT in the assessment order, the assessment order was set aside as being erroneous insofar as prejudicial to the interests of Revenue.

Before us, none appeared on behalf of the assessee at the time of hearing. On going to the case records, we are of the considered view that Principal CIT has correctly observed that in the instant case, penalty had been initiated against assessee under incorrect provisions, as they stood at the relevant time and further, no enquiry was made with respect to the commission which should have been paid by the assessee for obtaining bogus accommodation entries amounting to ₹79 lakhs, during the impugned year under consideration. Accordingly, in light of the facts as are coming from the case records, we are of the considered view that Principal CIT has not erred in facts and in law in holding that the present assessment order is erroneous insofar as prejudicial to the interest of the Revenue.

In the result, the appeal of the assessee is dismissed. Order pronounced under proviso to Rule 34 of ITAT Rules, 1963 on 06/05/2025