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Income Tax Appellate Tribunal, DELHI BENCH ‘G’ : NEW DELHI
Before: SHRI G.D. AGRAWAL & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
The Appellant, Shri Suresh Aggarwal (hereinafter referred to as ‘the assessee’) by filing the present appeal sought to set aside the impugned order dated 08.03.2010 passed by the Commissioner of Income-tax (Appeals)-XXVII, New Delhi qua the assessment year 2007-08 on the grounds inter alia that :- “1. On the facts and circumstances of the case, the order passed by learned Commissioner of Income Tax (Appeals) CIT(A) is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, the leaned CIT(A) has erred both on facts and in law in confirming the action of the A.O. in arbitrarily estimating the income of the assessee at Rs.34,88,158/- despite the assessee maintaining proper books and accounts.
3. On the facts and circumstances of the case, the leaned CIT(A) has erred both on facts and in law in confirming the addition despite there being no unrecorded transaction on record found during the course of survey. 4. On the facts and circumstances of the case, the leaned CIT(A) has erred both on facts and in law in upholding the following independent additions and disallowances ignoring the fact that the income having been offered at Rs.30,00,000/- subsumes all the other additions and disallowances:- (i) Average of last two years 4,88,158/- (ii) On account of personal use 25,000/- (iii) House hold expenses 1,50,000/- 5. On the facts and circumstances of the case, the leaned CIT(A) has erred both on facts and in law in confirming the addition of Rs.25,000/- on account of personal use. 6. The Appellant craves leave to add, amend or alter any of the grounds of appeal.”
Briefly stated the facts necessary for adjudication of this case are : assessee declared return of income qua Assessment Year 2007-08 of Rs.13,98,780/- which was subjected to scrutiny as the survey under section 133A of the Income-tax Act, 1961 (for short ‘the Act’) carried out at the premises of assessee on 12.02.2007.
Thereafter, notices u/s 143(2) and 142(1) was issued calling upon the assessee to file necessary details along with audit report u/s 44AB. Assessee put in appearance through his Authorized Representative. During the survey proceedings, assessee surrendered Rs.30,00,000/- for the current assessment year with condition that “no penalty proceedings u/s 271(1)(c) of the Act read with Explanation 4 will be initiated”.
AO then proceeded to take the average income of the last 2 years at Rs.4,88,158/- plus Rs.30,00,000/- the amount surrendered during survey proceedings. AO also proceeded for disallowance for violation of section 40(a)(ia) (Rs.7,74,517/-), late payment of ESI (Rs.16,433/-) and PF (Rs.1,47,546/-) as per audit report and computation of income and made the total addition to the tune of Rs.9,38,496/-. AO assessed the total income of the assessee at Rs.47,03,222/- u/s 143 (3) of the Act.
Assessee carried the matter before the ld. CIT (A) by way of filing the appeal who has partly allowed the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. 6. Undisputedly, during compulsory scrutiny and survey proceedings u/s 133A, the assessee has surrendered an amount of Rs.30,00,000/- who has earlier declared his income at Rs.13,98,780/- on the basis of accounts maintained in the ordinary course of business; that during the survey proceedings, no incriminating material has come on record so as to prove any transaction outside the books of account.
Now, the ld. AR for the assessee contended that assessee was forced to submit a letter offering additional income of Rs.30,00,000/- which is not sustainable on the face of the fact that there is no discrepancy in the books of account scrutinized during survey proceedings. Ld. AR further contended that the offer of the assessee to surrender the income of Rs.30,00,000/- was a conditional offer that no penalty proceedings u/s 271(1)(c) will be initiated against the assessee. However, the Revenue has accepted the offer and made the addition of Rs.30,00,000/- as per surrender made by the assessee and also initiated penalty proceedings. The Revenue can either accept the assessee's surrender as a whole or reject it but it cannot accept the surrender in part ignoring the condition attached with it.
To examine the argument addressed by the ld. AR, we would like to reproduce the letter dated 13.03.2007 submitted by the assessee during survey proceedings for ready perusal as under :-
"March 13, 2007 The Deputy Commissioner of Income Tax Department Circle 34(1) New Delhi
Survey u/s 133A dated 12.02.2007 on Sh. Suresh Agarwal Prop. M/s ROYAL APPLIANCES
Sir,
With reference to the above we may submit that during the post survey proceedings, various observations were made by the department and the assessee has replied to all the observation at various occasions through his submissions, As per our records there is no discrepancy in the books of accounts and the records found at the time of survey. However, just to by the peace of mind the assessee is ready to surrender income of Rs.30,00,000/- for the current assessment year with a condition that no penalty proceeding u/s 271 (1)(c) rw explanation 4 will be initiated against the assessee. This surrender is on account of Income calculated from the documents/informations/material impounded by the department under the head stock/loans/etc. etc.
Sincerely Sd/- Counsel of the assessee"
Perusal of the letter referred to above fails to prove the contention of the ld. AR that assessee was coerced to submit the letter offering additional income of Rs.30,00,000/- because the survey took place at the assessee’s business premises on 12.02.2007 whereas the letter was submitted on 13.03.2007 i.e. one month after the survey and as such, this contention of the ld. AR of the assessee is apparently not tenable. So, in these circumstances, there cannot be any question of coercion made by the revenue authorities on the assessee to submit such letter.
However, we do find force in the second contention of the learned counsel that the surrender was conditional i.e., with the condition that no penalty proceedings would be initiated against the assessee. We also agree with the learned counsel that the Revenue can either accept or reject the assessee's surrender in toto and therefore, once the surrender is accepted, then it should be presumed to have been accepted with the condition that no penalty would be levied. However, at present, this argument of the assessee is premature because no penalty has been levied so far by the Revenue u/s 271(1)(c). Therefore, we are of the considered view that the addition of Rs.30,00,000/- on the basis of surrendered amount as per assessee’s letter dated 13.03.2007 is rightly made by the Assessing Officer and affirmed by the ld. CIT (A), hence the same is sustained.
Ld. AR for the assessee further challenged the addition of Rs.4,88,158/- being the average of last two years, Rs.25,000/- on account of personal use and Rs.1,50,000/- on account of household expenses on the ground that this amount was part and parcel of Rs.30,00,000/- and addition thereof cannot be separately made.
So far as addition of Rs.4,88,158/- being the average of last 2 years made by the AO and affirmed by the ld. CIT (A) is concerned, when the AO has worked out the profit of the last 2 years on average basis keeping in view the surrendered income of Rs.30,00,000/-, there is no scope to interfere into the findings returned by the AO and affirmed by the ld. CIT (A). Moreover, the average profit has been computed by the AO on the basis of books of accounts of the assessee stated to have been maintained in the regular course of business. So, the addition of Rs.4,88,158/- is also sustainable.
So far as the question of making addition of Rs.25,000/- and Rs.1,50,000/- on account of personal use and household expenses made by the AO and affirmed by ld. CIT (A) are concerned, when the assessee has already surrendered amount of Rs.30,00,000/- apart from the returned income of Rs.13,98,780/- and average of last 2 years to the tune of Rs.4,88,158/- has already been assessed by the AO, disallowances made by the AO and affirmed by the CIT (A) are not sustainable because they subsumes in the surrendered amount of Rs.30,00,000/-. Moreover, keeping in view the smallness of the amount, we hereby delete amount of Rs.25,000/- and Rs.1,50,000/- on account of personal use and household expenses.
In view of what has been discussed above, we hereby partly allow the appeal filed by the assessee. Order pronounced in open court on this 9th day of November, 2016.