Shri Sanjay Rastogi, New Delhi V. ACIT, New Delhi

ITA 165/DEL/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2690 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 01-04-2013
• Assessment Year: 2000-2001
• Appeal Filed On: 12-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIJAY B VASANTA
• Keywords: Initiation of penalty proceedings; Accommodation entries
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) SHRI U.B.S. BEDI, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NOS.164 TO 168/DEL./2010 (ASSESSMENT YEARS : 1999-00 TO 2003-04) SHRI SANJAY RASTOGI, VS. ACIT, CIRCLE 37 (1), 108, DUA BUSINESS CENTRE, NEW DELHI. DA 4, VIKAS MARG, SHAKARPUR, DELHI 110 092. (PAN : AAKPR5328L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, ADVOCATE REVENUE BY : SHRI VIJAY B. VASANTA, DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : ALL THESE FIVE APPEALS FILED BY THE ASSESSEE EMANA TE FROM THE FIVE ORDERS OF CIT (APPEALS)-XXVIII, NEW DELHI DATED 30. 10.2009. IN ALL THESE APPEALS, THE ISSUE INVOLVED IS UPHOLDING THE PENALT Y U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 LEVIED BY THE ASSESSING OFFICE R. THE GROUNDS OF APPEAL ARE COMMON AND READ AS UNDER :- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS INCORRECT AND UNJUSTIFIED IN DISMISSING THE APPEAL OF THE ASSESSEE. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT (A) WAS INCORRECT AND UNJUSTIFIED IN HOLDING TH AT THE PENALTY U/S 271(1)(C) HAS BEEN RIGHTLY LEVIED BY THE AO. ITA NOS.164 TO 168/DEL./2010 2 (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT (A) WAS INCORRECT AND UNJUSTIFIED IN HOLDING TH AT EXPLANATION (1) TO SECTION 271(1)(C) IS APPLICABLE IN THE CASE OF THE ASSESSEE. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS INCORRECT AND UNJUSTIFIED IN HOLDING TH AT ONCE AN ASSESSMENT HAS BEEN DONE BY ESTIMATING THE INCOME OR OTHERWISE THE ASSESSED INCOME MUST BE HELD TO BE THE INCOME OF THE ASSESSEE AND L IABLE FOR 271 (1)(C) PENALTY. (5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT (A) WAS INCORRECT AND UNJUSTIFIED IN APPRECIATI NG THE FULL FACTS OF THE CASE IN AS MUCH AS THE ASSESSEE HAS NEVER CARRIED O UT ANY ACCOMMODATION ENTRY BUSINESS IN HIS OWN INDIVIDUAL CAPACITY AND A CCOMMODATION ENTRY BUSINESS WAS CARRIED OUT BY VARIOUS COMPANIES AND T HE REVENUE ITSELF HAS ASSESSED THE SAME INCOME IN THE HANDS OF SUCH COMPA NIES. (6) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT (A) ERRED IN NOT APPRECIATING THAT ASSESSMENT O F SUCH COMMISSION INCOME IN ONE HAND WAS DONE WITH A VIEW TO SETTLE T HE ISSUE TO BUY PEACE. (7) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT (A) ERRED IN APPRECIATING THAT SUCH AN EXERCISE OF SETTLING THE ISSUE BEFORE THE HON'BLE ITAT DURING THE COURSE OF ARGUME NTS DOES NOT AMOUNT TO APPLICATION OF EXPLANATION (1) TO SECTION 271 (1 )(C) AND THERE IS NO SATISFACTION OF THE AO WHICH IS NECESSARY FOR 271 ( 1)(C). (8) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT (A) ERRED IN NOT APPRECIATING THE DUAL ASSESSME NT BY THE REVENUE ITSELF OF THE SAME INCOME IN TWO HANDS. (9) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT (A) ERRED IN APPRECIATING THAT THE REVENUE ITSE LF IS NOT CERTAIN REGARDING THE TAXABILITY OF SUCH INCOME IN WHOSE HANDS SINCE THE REVENUE HAS ASSESSED THE SAME INCOME IN VARIOUS HANDS. 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER. THE ASSESSEE IS A CHARTERED ACCOUNTANT. A SURVEY OPERATION U/S 133A(1) WAS CARRIED OUT AT THE PREMISES OF THE ASSE SSEE WHERE INCRIMINATING DOCUMENTS WERE FOUND SHOWING THAT ASSESSEE WAS ENGA GED IN GIVING BOGUS/ACCOMMODATION ENTRIES. THESE ACCOMMODATION/B OGUS ENTRIES WERE ITA NOS.164 TO 168/DEL./2010 3 PROVIDED THROUGH VARIOUS CONCERNS RUN AND CONTROLLE D BY ASSESSEE. THE INCOME OF THE ASSESSEE WAS REASSESSED AND COMMISSIO N INCOME ON THE BOGUS/ACCOMMODATION ENTRIES COMPUTED @ 0.50% ON THE VALUE OF BOGUS TRANSACTIONS WAS ADDED. THE ADDITION WAS PARTLY SU STAINED BY THE CIT (A) @ 0.40% OF THE VALUE OF BOGUS ENTRIES. THE ADDITION WAS FINALLY UPHELD BY THE ITAT @ 0.50% OF THE TOTAL VALUE OF BOGUS ENTRIES GI VEN BY THE VARIOUS CONCERNS RUN FOR THIS BY THE ASSESSEE. THE ITAT I N ITS ORDER DATED 12.11.2008 HAS SUSTAINED THE ADDITION IN THE HANDS OF THE ASSESSEE BY HOLDING AS UNDER :- 8. WE HAVE HEARD BOTH THE SIDES. AS THE FACTS EMER GE THE TRANSACTION IN QUESTION HAVE NOT BEEN DENIED BY THE ASSESSEE. AT T HE SAME TIME, A VALID ARGUMENT IS MADE THAT THE DEPARTMENT IS TAXING THE SAME COMMISSION IN THE HANDS OF THE ASSESSEE AS WELL AS IN THE HANDS OF RE SPECTIVE COMPANIES. WE FIND THE PROPOSITION OF LD. COUNSEL OF THE ASSESSEE AS REASONABLE IN NATURE INASMUCH AS THE INCOME AS A MATTER OF PRINCIPLE HAS TO BE TAXED IN ONE HAND. IN VIEW THEREOF, WE FIND MERIT IN THE ASSESSE E'S PROPOSITION AND HELD THAT THE RATE OF 0.50% SHOULD BE APPLIED IN THE HAN DS OF THE ASSESSEE FOR ESTIMATING INCOME AS DONE BY THE AO AND WE GIVE A D IRECTION THAT THE TURNOVER FOR WHICH THE ASSESSEE IS ASSESSED THE SAM E AMOUNT OF COMMISSION SHALL NOT BE ASSESSED IN THE HANDS OF ANY OF THE CO MPANY FLOATED BY THE ASSESSEE. LD. DR HAS EXPRESSED HIS NO OBJECTION TO THIS PROPOSITION. IN VIEW THEREOF, WE DISPOSE OF THE CROSS APPEALS ON THESE D IRECTIONS. 3. WHILE PLEADING ON BEHALF OF THE ASSESSEE LD. AR SUBMITTED THAT NO DOUBT, THE ASSESSEE WAS ENGAGED IN PROVIDING ACCOMM ODATION ENTRIES TO VARIOUS NEEDY PERSONS REQUIRING SHARE CAPITAL, SALE S AND PURCHASE BILLS, ETC. ETC. THROUGH THE COMPANIES BUT ALL THESE COMPANIES WERE PRIVATE LIMITED AND WERE SEPARATELY ASSESSED TO TAX IN THEIR PERSONAL C APACITY. THESE COMPANIES WERE ALSO HAVING PAN NUMBERS AND THESE WERE DULY IN CORPORATE COMPANIES ITA NOS.164 TO 168/DEL./2010 4 WITH THE REGISTRAR OF COMPANIES. THESE COMPANIES W ERE ENJOYING SEPARATE INDEPENDENT STATUS AS PER THE INCOME-TAX ACT, 1961. THE DIRECTORS OF THESE COMPANIES WERE ALSO DIFFERENT AND WERE NOT RELATED TO THE ASSESSEE. THESE COMPANIES WERE SEPARATELY ASSESSED AND THE ASSESSEE WAS ALSO ASSESSED FOR THE COMMISSION INCOME DERIVED BY GIVING THE BOGUS ACCOM MODATION ENTRIES. THUS, THERE WAS ASSESSMENT OF THE INCOME IN TWO HAN DS ONE IN THE HANDS OF THE ASSESSEE AND THE OTHER IN THE HANDS OF THE COMP ANIES WHICH WERE SEPARATE LEGAL ENTITIES. THE COMPANIES ARE ARTIFICIAL JURIS DICTIONAL PERSONS, THEREFORE, ASSESSEE CANNOT BE HELD TO BE RESPONSIBLE FOR THE A LL WRONG-DOINGS BY THESE COMPANIES AND PENALTY CANNOT BE LEVIED ON THE ASSES SEE. THE ASSESSEE HAS AGREED TO ASSESSEE THE INCOME OF COMMISSION FOR PRO VIDING THE BOGUS ACCOMMODATION ENTRIES IN ITS OWN HAND WITH A VIEW T O SETTLE THE MATTER. THE ASSESSEE AGREED FOR THE ASSESSMENT ON THE ESTIMATED INCOME @ 0.50% OF THE TOTAL ACCOMMODATION ENTRIES SO THAT THE INCOME IS N OT TAXED TWICE. FURTHER THERE WAS NO SATISFACTION DISCERNIBLE FROM THE ASSE SSMENT ORDER INITIATED FOR THE PENALTY U/S 271(1)(C). LD. AR FURTHER SUBMITTE D THAT WHAT TO SPEAK OF PENALTY, THE ASSESSEE IS NOT LIABLE TO ASSESS INCOM E IN HIS HANDS AS THE ASSESSEE HAS NOT EARNED ANY SUCH INCOME. THE INCOME WAS EAR NED BY THE COMPANIES. IT WAS ONLY TO SETTLE THE ISSUE AND BUY THE PEACE, THE ASSESSEE HAS AGREED BEFORE THE ITAT FOR THE ASSESSMENT OF INCOME IN HIS HANDS. THE ITAT ORDER DOES NOT SUGGEST THAT ANY SUCH INCOME HAS BEEN EARN ED BY THE ASSESSEE. THE ITA NOS.164 TO 168/DEL./2010 5 INCOME WAS ONLY ESTIMATED AND THIS EXERCISE WAS DON E TO SETTLE THE ISSUE. LD. AR SUBMITTED THAT THE PENALTY U/S 271(1)(C) CAN BE LEVIED ONLY FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAS DONE NONE. EVEN THE PENALTY NOTIC E DOES NOT SPEAK FOR WHICH DEFAULT THE PENALTY WAS INITIATED. THE PENAL TY ORDER ALSO DOES NOT SPEAK ABOUT THIS FACT. FURTHER THE LD. AR SUBMITTED THAT PENALTY U/S 271(1)(C) WAS LEVIED ON THE ESTIMATED ADDITION. LD. AR ALSO SUBM ITTED THAT NO MATERIAL WAS BROUGHT ON RECORD TO JUSTIFY THE ESTIMATE OF INCOME . HE RELIED ON THE DECISION OF HON'BLE LUCKNOW ITAT IN THE CASE OF SAHYOG SAHKA RI SHYAAM SAMVIDA LTD. - 111 TTJ 540 FOR THE PROPOSITION THAT MERELY BOOKS OF ACCOUNT REJECTED THEN IT CANNOT BE A CASE FOR LEVY OF PENALTY. 4, ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER CLEARLY RECORDS THE SATISFACTION FOR INITIATION OF PENALTY U/S 271( 1)(C). FROM THE ORDER ITSELF, THE SATISFACTION FOR INITIATION OF PENALTY IS DISCE RNIBLE. THE READING OF THE WHOLE ORDER ITSELF SHOWS THAT SATISFACTION WAS EXIS TED AND WAS RECORDED WHILE MAKING THE ASSESSMENT. LD. DR ALSO SUBMITTED THAT AS PER PROVISIONS OF SECTION 271(1B) EVEN WHEN THE ORDER CONTAINS DIRECT ION FOR INITIATION OF PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271, SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL BE DEE MED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATIO N OF PENALTY PROCEEDINGS ITA NOS.164 TO 168/DEL./2010 6 UNDER THE CLAUSE (C). HE FURTHER SUBMITTED THAT TH E ARGUMENT OF THE ASSESSEE THAT NO PENALTY CAN BE LEVIED ON THE ESTIMATED INCO ME IS ALSO MISPLACED. THE ASSESSMENT BY WAY OF AN ESTIMATE IS ONE OF THE ESTA BLISHED METHOD OF COMPUTING INCOME. WHERE ASSESSEE DOES NOT DISCLOSE THE FULL FACTS AND THERE IS NO ALTERNATE BUT TO ESTIMATE THE INCOME. THEREF ORE, THIS CONTENTION OF THE ASSESSEE IS ALSO NO HELP. FOR THIS, LD. DR RELIED ON VARIOUS DECISIONS OF HIGH COURT AS MENTIONED IN THE ORDER OF THE CIT (A). LD . DR FINALLY SUBMITTED THAT INCOME FROM COMMISSION FOR PROVIDING BOGUS ENTRIES HAS BEEN CONCLUSIVELY ESTABLISHED AND THE INCOME HAS BEEN ASSESSED IN THE HANDS OF THE ASSESSEE. THE ASSESSEE HIMSELF HAS ACCEPTED THE INCOME TO BE TAXED IN HIS OWN HANDS. THE TRIBUNAL HAS SIMPLY STATED THAT THE INCOME SHOU LD NOT BE TAXED TWICE. ONCE THE FACTS REGARDING COMMISSION INCOME FOR PROV IDING BOGUS/ACCOMMODATION ENTRIES HAS BEEN CONCLUSIVELY E STABLISHED IN THE HANDS OF THE ASSESSEE THEN THE ASSESSEE HAS DEFINITELY FI LED INACCURATE PARTICULARS OF INCOME AND CONCEALED THEM. THE FINAL FACT FINDING AUTHORITY, ITAT, HAS CONCLUSIVELY ADDED THE INCOME IN THE ASSESSEES HAN DS. HE FINALLY RELIED ON THE ORDER OF THE AUTHORITIES BELOW AND PLEADED THAT EXPLANATION 1 TO SECTION 271(1)(C) IS CLEARLY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. HE PLEADED TO SUSTAIN THE ORDER OF THE CIT (A). 5. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND AL SO CONSIDERED THE FACTS OF THE CASE AND THE CASE LAWS RELIED UPON. THE ASS ESSEE IS A CHARTERED ITA NOS.164 TO 168/DEL./2010 7 ACCOUNTANT AND IT HAS BEEN CONCLUSIVELY ESTABLISHED THAT HE WAS RUNNING VARIOUS CONCERNS/COMPANIES FOR PROVIDING BOGUS/ACCO MMODATION ENTRIES. THIS FACT HAS ALSO BEEN ADMITTED BY THE ASSESSEE HI MSELF IN THE STATEMENT RECORDED. THE VARIOUS COMPANIES FLOATED BY THE ASS ESSEE WERE USED FOR PROVIDING ACCOMMODATION ENTRIES. IT IS ESTABLISHED BEYOND ANY DOUBT THAT HE WAS ENGAGED IN PROVIDING BOGUS/ACCOMMODATION ENTRIE S. THE ITAT IN ITS ORDER DATED 12.11.2008 HAS CONCLUSIVELY ADDED THE I NCOME @ 0.50% ON THE VALUE OF THE BOGUS/ACCOMMODATION ENTRIES IN THE HAN DS OF ASSESSEE. THUS, ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF IN COME AND HAD CONCEALED THE INCOME EARNED ON THE PROVIDING OF BOGUS/ACCOMMODATI ON ENTRIES. FURTHER THE ORDER MADE BY THE ASSESSING OFFICER CLEARLY SHOWS T HAT ASSESSING OFFICER HAS RECORDED SATISFACTION FOR INITIATING PENALTY U/S 27 1(1)(C). MOREOVER, THIS ARGUMENT OF ASSESSEE BECOMES IRRELEVANT IN VIEW OF THE PROVISIONS OF SECTION 271(1B) OF THE INCOME-TAX ACT, 1961 WHEREIN THE ORD ER CONTAINING DIRECTION FOR INITIATING OF PENALTY SHALL BE SUFFICIENT TO CO NSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATING PENALTY. THEREFOR E, THIS ASPECT OF ASSESSEES PLEADINGS HAS NO MERITS. THE INCOME HAS BEEN FINAL LY ESTIMATED @ 0.50% OF THE TOTAL VALUE OF BOGUS/ACCOMMODATION TRANSACTIONS ENTERED INTO BY THE ASSESSEE. IT HAS BEEN CONCLUSIVELY SETTLED BY THE DECISION OF ITAT. FURTHER, ASSESSEES PLEA THAT PENALTY CANNOT BE LEVIED ON ES TIMATED INCOME HAS NO MERITS. THE ESTIMATION OF TAXABLE INCOME BY WAY OF ESTIMATE IS ONE OF THE ITA NOS.164 TO 168/DEL./2010 8 ESTABLISHED METHOD FOR COMPUTING INCOME. IN THIS C ASE, ASSESSEE HAD NOT DISCLOSED A FULL FACT, THEREFORE, THE ASSESSING OFF ICER, IN SUCH A SITUATION, HAS NO ALTERNATE BUT TO ESTIMATE THE INCOME. THE ESTIM ATION OF INCOME HAS BEEN UPHELD BY THE ITAT. ASSESSMENT BY ESTIMATE IS ONE OF THE KNOWN PROCESS IN THE TAXATION LAW. WHERE THE ASSESSEE CONCEALS RELE VANT MATERIAL/EVIDENCES THEN THE REVENUE HAS NO ALTERNATE BUT TO MAKE A BES T JUDGMENT BY ESTIMATE. THE ASSESSMENT BY WAY OF ESTIMATE OF INCOME IS AS M UCH LEGAL AS ANY OTHER ASSESSMENT. HON'BLE ALLAHABAD HIGH COURT IN THE CA SE OF ITO VS. R.K. BROS. REPORTED IN 87 ITD 649 (ALL.) HAS HELD THAT LEVY OF PENALTY U/S 271(1)(C) DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF EACH CA SE AND PENALTY CAN BE LEVIED WHERE THE INCOME HAS BEEN ESTIMATED. IN THI S CASE, THE DEPARTMENT HAS PROVED BEYOND ANY DOUBT THAT ASSESSEE WAS ENGAGED I N PROVIDING BOGUS/ACCOMMODATION ENTRY, WAS EARNING THE INCOME B Y WAY OF COMMISSION ON THESE TRANSACTIONS AND SUCH INCOME HAS NOT BEEN DISCLOSED IN THE RETURN OF INCOME IN THE RELEVANT ASSESSMENT YEARS. THE ASSES SEE HAS ADMITTED THIS FACT BEFORE THE INCOME-TAX AUTHORITIES IN THE STATEMENTS . THEREFORE, IN OUR CONSIDERED VIEW, THE DEPARTMENT HAS PROVED THAT ASS ESSEE HAS NOT DISCLOSED ALL PARTICULARS OF INCOME IN THE RETURN OF INCOME FILED PRIOR TO THE SURVEY OF ACTION CARRIED OUT AT THE PREMISES OF THE ASSESSEE. THE ASSESSEE WAS RUNNING THE SHOW THROUGH VARIOUS CONCERNS CONTROLLED BY HIM FOR PROVIDING BOGUS/ACCOMMODATION ENTRIES AND THE INCOME EARNED O N THESE TRANSACTIONS ITA NOS.164 TO 168/DEL./2010 9 WAS HIS INDIVIDUAL INCOME WHICH HAS BEEN CONCLUSIVE LY HELD IN THE ORDER MADE BY HON'BLE ITAT. THE ASSESSEE HAS ALSO ADMIT TED SUCH FACTS. THE TAXABILITY OF THE COMMISSION INCOME HAS BEEN CONCLU SIVELY UPHELD IN THE HANDS OF THE ASSESSEE IN HIS PERSONAL CAPACITY. IN THESE FACTS AND CIRCUMSTANCES, WE ARE IN AGREEMENT WITH THE CIT (A) THAT THE PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C) ARE APPLICABLE. WE HOLD THAT ASSESSEE HAS CONCEALED HIS INCOME AND FURNISHED INACCURATE PARTI CULARS OF INCOME. ASSESSEE IS LIABLE TO PENALTY U/S 271(1)(C) OF THE ACT. ASSESSEE HAD DELIBERATELY FILED INACCURATE PARTICULARS OF INCOME IN THE RETURN OF INCOME FILED PRIOR TO SURVEY ACTION AT THE PREMISES OF ASS ESSEE. IN VIEW OF THIS FACTUAL MATRIX, WE UPHOLD THE ORDER OF THE CIT (A) AND DISM ISS ALL APPEALS OF ASSESSEE. 6. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSE SSEE STAND DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF APRIL, 2013. SD/- SD/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 30 TH DAY OF APRIL, 2013 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.