HAREN B. SHAH (KARTA OF HUF),MUMBAI vs. ITO- 14(3)(1), MUMBAI

ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-29, Mumbai and arises out of penalty imposed u/s 271(1)(c) of the Income Tax Act 1961, (the ‘Act’). 2. The ground raised by the assessee in this appeal is against the order of the Ld. CIT(A) confirming the penalty of Rs.3,39,386/- levied by the AO u/s 271(1)(c).

3. Briefly stated the facts of the case are that the assessee filed its return of income for the AY 2011-12 on 28.09.2011 declaring total income of Rs.6,61,720/-. Then the Assessing Officer (AO) received Haren B. Shah Sales Tax Department that the assessee is a beneficiary of hawala transactions done by dealers. The AO arrived at the following findings: “I have gone through the specific working. I find that so far as assessee’s argument of taxing only the net margin of 2.5% is concerned, I agree on this point. But, the assessee has further went on claiming the normal business expenses of Rs.4,00,000/- from Rs.15,85,004/-, [2.5% of Rs.6,34,00,168/-]. This doesn’t seem to be sound and hence not acceptable by me in view of the fact that basically carrying out an activity of being hawala dealer doesn’t require spending, as nothing is required to be expended on manpower, infrastructure, advertisement, salesmanship, publicity, business promotions etc. and whatever expending is required is mainly that on obtaining purchase invoices, which is already given credit for, while arriving at the net margin on 2.5%. Thus, the revised working is necessitated which is as under: A. Sales Rs.6,34,00,168/- B. 4.5% of Rs.6,34,00,168/- Rs.28,53,007/- C. Less: 2% to be shell out for arranging purchases bill Rs.12,68,003/- D. Net Margin left as assessee’s income Rs.15,85,004/- Thus, a sum of Rs.15,85,004/- is being brought to tax as assessee’s income from carrying out hawala business under the head of income, “Income from other sources”.

4. Then the AO levied a minimum penalty of Rs.3,39,386/- u/s 271(1)(c) on income sought to be evaded of Rs.15,85,004/-.

5. Aggrieved by the penalty order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) observed that the assessee itself admitted for concealment of income and agreed for the addition. Therefore, the Ld. CIT(A) upheld the penalty of Rs.3,39,386/- levied by the AO and dismissed the appeal filed by the assessee.