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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: SHRI RAJENDRA (AM) & SHRI RAM LAL NEGI (JM)
PER BENCH These appeals have been preferred by the assessee against common order dt. 31/10/2014 passed by the Ld. CIT(Appeals)-38, Mumbai, for the Asst. years 2004-05 to 2009-10. Since all these appeals pertain to the same assessee for the different assessment years, the same were clubbed and heard together and are being disposed of by this common order for the sake of convenience.
In all these appeals the assessee has raised the common ground of appeal
that the Ld. CIT(A) has erred in law and in fact in confirming the order passed by the A.O u/s 271(1)(c) of the Income Tax Act, 1961(in short ‘the Act’). Since, the only issue raised by the assessee in all the six appeals is that the Ld. CIT(A) has erred in confirming the penalty imposed by the AO u/s 271(1)(c) of the Act, we are discussing the facts of the appeal pertaining to A.Y. 2004-05 as the lead case.
3. Brief facts of the case are that the assessee is one of the concerns, floated and run by Mukesh Choksi. Search and seizure operations u/s 132 of the Act were conducted on 25/11/2009 in the case of Mahasagar Securities P. Ltd. now known as M/s Alagh Securities P. Ltd. and its group companies, at the residential premises of the Directors of the Company and the Auditor of the group companies. During the course of search, it was found that the group companies were in the practice of providing accommodation entries in cases involving trading, speculation profits, short term and long term capital gains or losses, commodity trading, derivative profit or loss, share application money, bogus invoices for purchases and sales etc.
During the assessment proceeding, this fact also came to notice that the assessee earned commission in the range of 1.5% to 3.5% on various kinds of accommodation entries provided by it. The A.O relying upon the statement of agents and employees of Mukesh Chokshi and one of the directors of the group companies, estimated net commission of the assessee @ 2% of the total receipts shown in the bank accounts and added the same to the income of the assessee. The assessee challenged the estimate of commission before the Ld. CIT(A) and urged that the commission should be taken @ 0.15% in view of the order of the Tribunal. However, the Ld. CIT(A) confirmed the order of the A.O., holding that the facts and circumstances on the basis of which the ITAT had determined the commission income @ 0.15% were not similar to the facts of the present case. In second appeal, the Co-ordinate Bench of the Tribunal, following its earlier orders, directed the A.O to restrict the estimate @ 0.15% of the turnover.
Accordingly, penalty proceedings were initiated against the assessee u/s 271(1)(c) of the Act and after hearing the assessee, the AO imposed penalty of Rs. 22,43,000/-. The assessee challenged the impugned penalty order before the Ld. CIT(A). The Ld. CIT(A) confirmed the penalty imposed by the A.O u/s 271(1)(c) of the Act. The assessee has challenged the impugned order passed by the Ld CIT(A).
Before us, the Ld. Counsel for the assessee submitted that the facts and circumstances of the assessee’s case is identical to the facts and circumstances of the case of M/s Mihir Agencies Pvt. Ltd. and the case of Mr. Mukesh Choksi. That in the case of M/s Mihir Agencies Pvt. Ltd.(ITA No. 695/Mum/2015 for the A.Y. 2004-05) and (Mr. Mukesh Choksi in for the A.Y. 2005-06) the Tribunal has allowed the appeal of the assessee and deleted the penalty imposed u/s 271(1)(c) of the Act.
On the other hand the Ld. DR relying upon the concurrent findings of the authorities below, submitted that since each and every case is required to be decided on its own merit, the Ld. CIT(A) has rightly confirmed the penalty levied by the AO. Therefore, there is no merit in the assessee’s appeal.
We notice that in M/s Mihir Agencies P. Ltd. vs. DCIT in ITA 996/M/2015 for the A.Y. 2004-05 and Mr. Mukesh Choksi vs. DCIT in ITA 996/M/2015 for the A.Y. 2005-06, the Co-ordinate Bench has decided the identical issue in favour of the assessee holding as under:-
“6. We have heard the rival submissions and produce the material before us. We find that case under consideration an action u/s.132 of the Act was carried out covering all the group entities including the assessee under consideration, that it was found group concerns were engaged in providing accommodation bills/hawala entries, that the assessee did not dispute the said fact, that the AO estimated the income from the accommodation entries @ 2% of the total transactions appearing in the bank accounts of the assessee, that the then FAA confirmed the quantum addition made by the AO, that in the case under consideration the Tribunal had held that commission income should be taken at the rate of 0.15% (ITA /6435/Mum/2012 –AY-2004-05 and other six appeals dt.6.1.16). The undisputed fact is that there is difference of opinion as to how much income should be estimated for the hawala entries-the AO estimated at a particular percentage, whereas the assessee had shown the income at a different percent. The addition made by the AO and confirmed by the FAA in quantum addition may or may not be. But, levying penalty on the basis of an estimated addition could not be held to be justified. No authority is required to be cited that penalty and assessment proceedings are separate and distinct proceedings and the quantum proceedings should not result in automatic levy of concealment penalty. It is a case of estimation of income by the AO and the assessee.
Here we would like to discuss two cases. One of them is Aero Traders P. LTD.(322 ITR 316).In that case the assessee-company had filed its return of income for the year 1997-98 on a notice u/s.148 of the Act, 1961declaring a loss of Rs. 83, 64, 468/-.The assessee had, in the return attached a note stating that it was impossible for it to substantiate its claim of loss by way of any evidence as the relevant records were seized and were with the police authorities. The AO after being unable to obtain copies of the seized documents, based his assessment order on the limited documents provided and rejected the book results declared by the assessee. He estimated the income of the assessee at Rs.61,00,000/-.He also initiated penalty proceedings separately. The FAA estimated the total income of the assessee at Rs. 1,02,980/-.The Tribunal confirmed this order. The AO observed that the profit was estimated after rejection of books of account due to certain discrepancies and imposed a penalty on the assessee of Rs. 36,41,003/-, on the ground that it was a clear case of furnishing inaccurate particulars of income. The FAA deleted the penalty holding that the addition made by the AO on the basis of estimated profit could not be a subject-matter of penalty for concealment of income. The Tribunal confirmed this order. On appeal, the AO dismissed the appeal and held that the finding arrived at by the Tribunal did not warrant interference as it was purely a finding of fact. In the case of Durga Kamal Rice Mills (265 ITR 25)the Hon’ble Calcutta High Court has held as under:
“When two views are possible and when no clear and definite inference can be drawn, in a penalty proceeding, penalty cannot be imposed…….In quantum proceedings, a particular provision might be attracted for addition to the income of the assessee. But when it comes to the question of imposition of penalty, then independent of the finding arrived at in the quantum proceedings, the authority has to find conclusively that the assessee owns the concealed amount.”
Considering the fact that Tribunal has adopted a particular rate for estimating the income of the assessee for the year under consideration, we hold that the FAA was not justified in confirming the order passed by the AO u/s. 271(1)(c) of the Act. Therefore, reversing his order, we decide the effective ground of appeal in favour of the assessee.”
7. In our considered view, the facts and circumstances of the present case and the issue involved are identical to the facts and circumstances of the cases and issue involved in the above referred cases. Since, the Co-ordinate Bench has already decided the identical issue in favour of the assessee, we respectfully follow the decision dated 27.7.2016 rendered in the case M/s Mihir Agencies Pvt. Ltd. and Mukesh Choksi (supra) and allow the sole ground of the present appeal of the assessee.
8. Since, the facts and circumstances of the case and the issue involved in the remaining cases are identical to appeal No 7564/MUM/14 for the AY 2004-05 aforesaid, except the amounts of penalty and since we have decided the identical issue in favour of the assessee in the said case, we allow the remaining appeals, i.e., for the A Y 2005-06, ITA No7567/MUM/2014 for A Y2006-07, ITA No. 7568/MUM/2014 for A Y 2007-08, A Y 2008-09 and ITA No 7570/MUM/2014 for the A Y 2009-10 of the assessee accordingly.
In the result, all the six appeals filed by the assessee for the A.Y’s 2004-05 to 2009-10 are allowed.
Order pronounced in the open court 24th August, 2016.