SWARAN NADHAN SALARIA,MUMBAI V. DCIT CENTRAL CIRCLE 1(2), MUMBAI

ITA 1053/MUM/2025

AI Insights

The case involves multiple appeals by the assessee, Swaran Nadhan Salaria, against the penalties imposed by the Deputy Commissioner of Income Tax, Central Circle-1(2), Mumbai, for various assessment years. The penalties were primarily based on disallowances made on estimated bases for salaries, wages, and administrative expenses, as well as for the suo-moto disallowances of interest and excess depreciation claimed in the returns filed under Section 153A of the Income Tax Act, 1961. The Tribunal examined the legal provisions under Sections 271(1)(c) and 270A of the Act, considering the arguments and evidence presented by both the assessee and the revenue.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712668 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2018-2019
• Other Referred Cases: Mak Data P. Ltd vs CIT, Dharmendra Textile Processors vs Union of India, CIT vs Zoom Communication Pvt. Ltd, Smt. Kiran Devi vs ACIT, CIT vs Prasanna Dugar
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIRABHADRA S. MAHAJAN
• Assessee Lawyers: RAKESH JOSHI; REOPENING; REOPENING; REOPENING
• Keywords: Set aside; Transfer pricing; International transaction; Corroborative evidences; Depreciation; Income from undisclosed sources; Document seized; Documents seized; TDS; Search and seizure; Initiation of penalty proceedings; Non-deduction of tax; Bogus
• Section: 148; 143(3); 271(1)(c); 132; 153A; 145; 37(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER) ITA No. 1049, 1050, 1051, 1052, 1053, 1054 & 1055/MUM/2025 Assessment Year: 2014-15, 2015-16, 2016-17, 2017-18, 2018- 19, 2019-2020 & 2020-21 Swaran Nadhan Salaria, Mahek, Salaria Bunglow, A B Nair Road, Juhu, Mumbai-400049. Vs. DCIT-Central Circle1(2), 906, 9th floor, Pratishtha Bhavan, Old CGO Annexe, M.K. Road, Mumbai-400020. PAN NO. AMOPS 4918 D Appellant Respondent Assessee by : Mr. Rakesh Joshi Revenue by : Mr. Virabhadra S. Mahajan, Sr. DR Date of Hearing : 12/06/2025 Date of pronouncement : 30/07/2025 ORDER PER BENCH The captioned appeals by the assessee are directed against separate orders passed by the Ld. Commissioner of Income-tax (Appeals)-47, Mumbai [in short ‘the Ld. CIT(A)’] for assessment years 2014-15 to assessment year 2020-21 respectively in relation to penalty levied by the Assessing Officer. Being identical issue-in- Printed from counselvise.com dispute involved in these appeals, same were heard together and disposed off by way this consolidated order for the sake of convenience. 2. Firstly, we take up the appeal of the assessee for assessment year 2014-15. The grounds raised as under: 1. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries and wages amounting to Rs.14,22,444/ expenses amounting to Rs.2,17,162/ act on estimated basis. 2. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty leviedon suo-moto disallowance of interest of Rs Excess depreciation of Rs.38,02,913/ income 3. Before us, the Ld. Counsel for the assessee filed ground on 04.06.2025 1) The Learned CIT(A) has erred in confirmin the Learned Assessing officer in levying penalty on the addition made in the assessment order, without appreciating the fact that these addition itself are not sustainable in the order passed u/s. 143(3) r.w.s 153A of the Income 3.1 We have heard both the parties o the additional ground. being of purely legal in and not requiring investigation of the fresh facts, therefore, same was admitted for adjudication. ITA No. 1049, 1050, 1051, 1052, 1053, dispute involved in these appeals, same were heard together and disposed off by way this consolidated order for the sake of Firstly, we take up the appeal of the assessee for assessment 15. The grounds raised by the assessee are reproduced On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries and wages amounting to Rs.14,22,444/- & adhoc disallowance of administrative expenses amounting to Rs.2,17,162/- made u/s 37(1) of the act on estimated basis. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty leviedon moto disallowance of interest of Rs.33,94,396/ Excess depreciation of Rs.38,02,913/- in the return of income filed u/s 153A. the Ld. Counsel for the assessee filed ground on 04.06.2025, which is reproduced as under: 1) The Learned CIT(A) has erred in confirming the action of the Learned Assessing officer in levying penalty on the addition made in the assessment order, without appreciating the fact that these addition itself are not sustainable in the order passed u/s. 143(3) r.w.s 153A of the Income Tax Act, 1961. We have heard both the parties on the issue of admissi the additional ground. We find that the issue-in purely legal in nature and goes to the root and not requiring investigation of the fresh facts, therefore, same was admitted for adjudication. Swaran Nadhan Salaria 2 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 dispute involved in these appeals, same were heard together and disposed off by way this consolidated order for the sake of Firstly, we take up the appeal of the assessee for assessment by the assessee are reproduced On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries and wages amounting to administrative made u/s 37(1) of the On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty leviedon .33,94,396/- & in the return of the Ld. Counsel for the assessee filed an additional which is reproduced as under: g the action of the Learned Assessing officer in levying penalty on the addition made in the assessment order, without appreciating the fact that these addition itself are not sustainable in the order passed u/s. 143(3) r.w.s 153A of n the issue of admissibility of in-dispute raised nature and goes to the root of the matter and not requiring investigation of the fresh facts, therefore, same Printed from counselvise.com 4. Briefly stated, facts of the case are that individual, is head of a group namely “ The Trig group is engaged in providing manpower, securities and facility services to various business entities. T original return of income u/s 139(1) of the Act on 28.11.2014 declaring total income at Rs.1,80,57,280/ was selected for scrutiny and Income-tax Act, 1961 (in short ‘the Act’) was completed on 28.12.2016 determining total income at Rs.2,12,77,280/ Subsequently, in view of search and seizure action u/s 132 of the Act carried out in the case of the assessee Act dated 18.12.2020 notice u/s 153A of the Act 24.02.2021 declaring total income at Rs.1,78,56,660/ income varied as compared to income declared in original return of income filed on 28/11/2014) 4.1 During the course of Act, the Assessing Officer observed discrepancies profit and loss account and balance sheet filed with the return under section 153A vis were found in cash and bank balances complexity of transactions and nature of seized documents, reference under section 142(2A) was made for special audit. ITA No. 1049, 1050, 1051, 1052, 1053, Briefly stated, facts of the case are that the asses is head of a group namely “Trig”, based at Chandigarh. roup is engaged in providing manpower, securities and facility services to various business entities. The assessee filed his original return of income u/s 139(1) of the Act on 28.11.2014 declaring total income at Rs.1,80,57,280/-. The return of income selected for scrutiny and the assessment u/s 143(3) of the tax Act, 1961 (in short ‘the Act’) was completed on 28.12.2016 determining total income at Rs.2,12,77,280/ Subsequently, in view of search and seizure action u/s 132 of the in the case of the assessee, notice u/s 153 Act dated 18.12.2020 was issued to the assessee. In response notice u/s 153A of the Act, the assessee filed return of income on 24.02.2021 declaring total income at Rs.1,78,56,660/ as compared to income declared in original return of income filed on 28/11/2014) . course of assessment proceedings u/s 153A of the , the Assessing Officer observed discrepancies/variation profit and loss account and balance sheet filed with the return under section 153A vis-à-vis the original return. Notably, variations were found in cash and bank balances also. Owing to the complexity of transactions and nature of seized documents, reference under section 142(2A) was made for special audit. Swaran Nadhan Salaria 3 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 the assessee, an Trig”, based at Chandigarh. roup is engaged in providing manpower, securities and he assessee filed his original return of income u/s 139(1) of the Act on 28.11.2014 The return of income the assessment u/s 143(3) of the tax Act, 1961 (in short ‘the Act’) was completed on 28.12.2016 determining total income at Rs.2,12,77,280/-. Subsequently, in view of search and seizure action u/s 132 of the notice u/s 153A of the issued to the assessee. In response to , the assessee filed return of income on 24.02.2021 declaring total income at Rs.1,78,56,660/-(i.e. total as compared to income declared in original return of u/s 153A of the /variation in the profit and loss account and balance sheet filed with the return vis the original return. Notably, variations . Owing to the complexity of transactions and nature of seized documents, a reference under section 142(2A) was made for special audit. Printed from counselvise.com 4.2 After considering the report of the special auditor seized document found during the course of Assessing Officer completed assessment u/s 153A of the Act and made disallowance at the rate of 4 percentile of expenses and 10 percentile of administrative expenses on estimate basis and initiated penalty u/s 271(1)(c) of the Act for furnishing inaccurate particulars of the income. 4.3 Further, the Assessing Officer also observed that asses used ‘shell entities’ The Assessing Officer identified expenses related to the shell entities including interest amounting to Rs.33,94,396/ depreciation for addition to fixed asset to the extent of Rs.38,02,913/- which in the return of income filed u/s Officer observed that assessee had made disallowance of the above expenses in the return of income filed in response to notice u/s 153A of the Act and therefore, while determining total income under the assessment of the Act, the AO did not make any separate additions the penalty proceedings u/s 271(1)(c) of the Act inaccurate particulars of the income disallowance also. ITA No. 1049, 1050, 1051, 1052, 1053, fter considering the report of the special auditor seized document found during the course of the search, t completed assessment u/s 153A of the Act and at the rate of 4 percentile of ‘salary and wages and 10 percentile of administrative expenses on estimate basis and initiated penalty u/s 271(1)(c) of the Act for furnishing rate particulars of the income. Assessing Officer also observed that asses for rotation of funds/circuitous transactions. The Assessing Officer identified expenses related to the shell entities including interest amounting to Rs.33,94,396/ n for addition to fixed asset to the extent of which was claimed in the name of the shell entities n the return of income filed u/s 139(1) of the Act. T rved that assessee had made suo above expenses in the return of income filed in response to notice u/s 153A of the Act and therefore, while income under the assessment under did not make any separate additions eedings u/s 271(1)(c) of the Act inaccurate particulars of the income in relation to said Swaran Nadhan Salaria 4 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 fter considering the report of the special auditor and the the search, the completed assessment u/s 153A of the Act and salary and wages’ and 10 percentile of administrative expenses on estimate basis and initiated penalty u/s 271(1)(c) of the Act for furnishing Assessing Officer also observed that assessee for rotation of funds/circuitous transactions. The Assessing Officer identified expenses related to the shell entities including interest amounting to Rs.33,94,396/- and excess n for addition to fixed asset to the extent of the name of the shell entities 139(1) of the Act. The Assessing suo-motu made above expenses in the return of income filed in response to notice u/s 153A of the Act and therefore, while under section 153A did not make any separate additions, but issued eedings u/s 271(1)(c) of the Act for furnishing in relation to said suo-motu Printed from counselvise.com 4.4 As no appeal was preferred by the assessee before the Ld. CIT(A) against the addition/disallowance made by the AO, the Assessing Officer issued show cause notice on 03.11.20222 as why the penalty u/s 271(1)(c) of the Act might not be levied for furnishing inaccurate particulars of the income. 4.5 With regard to the disallowance of ” amounting to Rs.14,22,444/ expenses” amounting to Rs.2,17,162/ the assessee submitted that same was made on e therefore do not satisfy the criteria laid down u/s 271(1)(c) o Act. Regarding the disallowance of interest of Rs,33,94,396/ excess depreciation of Rs.38,02,913/ income was offered in the return of income to avoid litigation on the matter though the expenses disallowed were genui had been properly incurred. It was submitted that as per Explanation 5A of section 271(1)(c) of the Act it was not a fit case for levy of the penalty. 4.6 Those contentions Assessing Officer. The AO obs produce relevant supporting evidence and documents during the assessment as well as special audit proceedings. It was further noted that the disallowances were not arbitrary but based on analysis of books, mode of paym ITA No. 1049, 1050, 1051, 1052, 1053, As no appeal was preferred by the assessee before the Ld. CIT(A) against the addition/disallowance made by the AO, the Assessing Officer issued show cause notice on 03.11.20222 as why the penalty u/s 271(1)(c) of the Act might not be levied for furnishing inaccurate particulars of the income. With regard to the disallowance of “salary and wages 14,22,444/- and disallowance of amounting to Rs.2,17,162/- made u/s 37(1) of the Act, the assessee submitted that same was made on estimate basis and not satisfy the criteria laid down u/s 271(1)(c) o Act. Regarding the disallowance of interest of Rs,33,94,396/ depreciation of Rs.38,02,913/-, it was submitted that said income was offered in the return of income to avoid litigation on the matter though the expenses disallowed were genuine expenses and had been properly incurred. It was submitted that as per Explanation 5A of section 271(1)(c) of the Act it was not a fit case for levy of the penalty. se contentions of the assessee were rejected by the Assessing Officer. The AO observed that the assessee had failed to produce relevant supporting evidence and documents during the assessment as well as special audit proceedings. It was further noted that the disallowances were not arbitrary but based on analysis of books, mode of payments (predominantly in cash), and Swaran Nadhan Salaria 5 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 As no appeal was preferred by the assessee before the Ld. CIT(A) against the addition/disallowance made by the AO, the Assessing Officer issued show cause notice on 03.11.20222 as why the penalty u/s 271(1)(c) of the Act might not be levied for salary and wages expenses and disallowance of “administrative made u/s 37(1) of the Act, stimate basis and not satisfy the criteria laid down u/s 271(1)(c) of the Act. Regarding the disallowance of interest of Rs,33,94,396/- and t was submitted that said income was offered in the return of income to avoid litigation on the ne expenses and had been properly incurred. It was submitted that as per Explanation 5A of section 271(1)(c) of the Act it was not a fit case were rejected by the erved that the assessee had failed to produce relevant supporting evidence and documents during the assessment as well as special audit proceedings. It was further noted that the disallowances were not arbitrary but based on ents (predominantly in cash), and Printed from counselvise.com lack of verifiable evidence. The AO relied on various judicial precedents including 244), MAK Data (38 taxmann.com 448) Communication Pvt. Ltd. (ITA No. 07/2010) the Assessing Officer “5. The arguments made by the assessee vide the above mentioned submission are tenable for the following reasons: (i) During the assessment proceedings, it was found assessee had not fully maintained the requisite details/supporting documents/bills/vouchers etc. authenticate cash expenses claimed against taxable income. Further, during the Special Audit conducted in the case u/s 142(2A) of the Act, the Spec party-wise details (with Name, Address & PAN of the parties), supporting documents etc., to examine correctness & completeness of cash expenses claimed by the assessee. The assessee, however, failed to produce requisite d explanations with regard to the cash payments made by it. ii) The assessee has submitted that since the disallowance of salaries and wages made u/s 37(1) of the Act are on estimate basis and hence no penalty is leviable. In this regard, it is pertinent to note that the facts of the case under consideration are distinguishable and squarely different. The plain reading of the assessment order is indicative of the fact that the disallowances were not made on mere adhoc basis but after carefully consid year and thereafter a percentage of the same was disallowed after due diligence and taking into case.\"It is noteworthy that the disallowance of cash expenses towards salaries & wages hav whereas the disallowance of administrative expenses has been calculated at 10%. Have these disallowances been purely made on estimate basis then the common percentage rate of disallowance would have been made by the AO on the two separate cash expenses instead of d (iii) The assessee has disallowed interest expense of Rs.33,94,396/ ITA No. 1049, 1050, 1051, 1052, 1053, lack of verifiable evidence. The AO relied on various judicial precedents including Dharmendra Textile Processors (295 ITR MAK Data (38 taxmann.com 448) Communication Pvt. Ltd. (ITA No. 07/2010). The releva the Assessing Officer is reproduced as under: The arguments made by the assessee vide the above mentioned submission are duly perused but not found to be tenable for the following reasons: (i) During the assessment proceedings, it was found assessee had not fully maintained the requisite details/supporting documents/bills/vouchers etc. authenticate cash expenses claimed against taxable income. Further, during the Special Audit conducted in the case u/s 142(2A) of the Act, the Special Auditor had also requested for wise details (with Name, Address & PAN of the parties), supporting documents etc., to examine correctness & completeness of cash expenses claimed by the assessee. The assessee, however, failed to produce requisite details & explanations with regard to the cash payments made by it. ii) The assessee has submitted that since the disallowance of salaries and wages made u/s 37(1) of the Act are on estimate basis and hence no penalty is leviable. In this regard, it is inent to note that the facts of the case under consideration are distinguishable and squarely different. The plain reading of the assessment order is indicative of the fact that the disallowances were not made on mere adhoc basis but after carefully considering the cash expenses claimed during the year and thereafter a percentage of the same was disallowed after due diligence and taking into consideration facts of the case.\"It is noteworthy that the disallowance of cash expenses towards salaries & wages have been calculated at 4% whereas the disallowance of administrative expenses has been calculated at 10%. Have these disallowances been purely made on estimate basis then the common percentage rate of disallowance would have been made by the AO on the two parate cash expenses instead of different disallowance rate. The assessee has disallowed interest expense of Rs.33,94,396/- & excess depreciation of Rs.38,02,913/ Swaran Nadhan Salaria 6 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 lack of verifiable evidence. The AO relied on various judicial Dharmendra Textile Processors (295 ITR MAK Data (38 taxmann.com 448), and Zoom The relevant finding The arguments made by the assessee vide the above duly perused but not found to be (i) During the assessment proceedings, it was found that the assessee had not fully maintained the requisite details/supporting documents/bills/vouchers etc. to authenticate cash expenses claimed against taxable income. Further, during the Special Audit conducted in the case u/s ial Auditor had also requested for wise details (with Name, Address & PAN of the parties), supporting documents etc., to examine correctness & completeness of cash expenses claimed by the assessee. The etails & explanations with regard to the cash payments made by it. ii) The assessee has submitted that since the disallowance of salaries and wages made u/s 37(1) of the Act are on estimate basis and hence no penalty is leviable. In this regard, it is inent to note that the facts of the case under consideration are distinguishable and squarely different. The plain reading of the assessment order is indicative of the fact that the disallowances were not made on mere adhoc basis but after ering the cash expenses claimed during the year and thereafter a percentage of the same was disallowed consideration facts of the case.\"It is noteworthy that the disallowance of cash expenses e been calculated at 4% whereas the disallowance of administrative expenses has been calculated at 10%. Have these disallowances been purely made on estimate basis then the common percentage rate of disallowance would have been made by the AO on the two ifferent disallowance rate. The assessee has disallowed interest expense of depreciation of Rs.38,02,913/- in ITR Printed from counselvise.com filed u/s 153A of the Act and had there been no search action, the assessee wo taxation. (iv) Further, during the course of search/post search proceedings as well as was found that, the assessee had used said shell entities for rotation of funds/cir creation of fictitious asset. On perusal of the ledger account extracted from the Tally data, it was found during search action that the assessee company had made payments to certain entities which are found to be shell conduct & affairs of these shell entities had established that these shell entities were floated by the assessee group/under control of the assessee group with a purpose to do circular transactions and create fictitious assets. Thus, the arg of the assessee cannot be accepted (v) To sum up, in the instant case, interest expenses (Rs.33,94,396/ disallowed by the assessee post search, in the return of income filed in response to notice issued Income Tax Act, 1961. The surrendering of this income for taxation after identification of omission on part of the assessee cannot be termed as a \"bonafide disclosure\" and hence is liable for imposition of penalty for under The judgements relied upon by the assessee are not relevant to the present case as the facts are different. (vi) There has been deliberate omission on the part of the assessee and has furnished inaccurate particulars of income for the year under consi which are material to the income were not disclosed in the original return of income filed. (vii) In the judgment delivered in the case of Union of India and Others Vs. Dharmendra Textile Processors and Others (2007) 295 ITR 244 (SC) the Hon'ble Apex Court has reiterated as under: \"...the object behind the enactment of section 271(1)(c) read with the Explanations quoted above indicates that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under the said sections is a civil liability. Wilful concealment is not an essential ingredient for attracting the civil liability as is the case in the matter of prosecution ITA No. 1049, 1050, 1051, 1052, 1053, filed u/s 153A of the Act and had there been no search action, the assessee would not have offered this additional income for Further, during the course of search/post search proceedings as well as during the assessment proceedings, it was found that, the assessee had used said shell entities for rotation of funds/circuitous transactions in order to and creation of fictitious asset. On perusal of the ledger account extracted from the Tally data, it was found during search action that the assessee company had made payments to certain entities which are found to be shell entities. The conduct & affairs of these shell entities had established that these shell entities were floated by the assessee group/under control of the assessee group with a purpose to do circular transactions and create fictitious assets. Thus, the arg of the assessee cannot be accepted (v) To sum up, in the instant case, interest expenses (Rs.33,94,396/-) and extra depreciation (Rs.38,02,913/ disallowed by the assessee post search, in the return of income filed in response to notice issued u/s 153A of the Income Tax Act, 1961. The surrendering of this income for taxation after identification of omission on part of the assessee cannot be termed as a \"bonafide disclosure\" and hence is liable for imposition of penalty for under-reporting of inc The judgements relied upon by the assessee are not relevant to the present case as the facts are different. (vi) There has been deliberate omission on the part of the assessee and has furnished inaccurate particulars of income for the year under consideration and therefore all the facts which are material to the income were not disclosed in the original return of income filed. (vii) In the judgment delivered in the case of Union of India and Others Vs. Dharmendra Textile Processors and Others (2007) 295 ITR 244 (SC) the Hon'ble Apex Court has reiterated as \"...the object behind the enactment of section 271(1)(c) read with the Explanations quoted above indicates that the said section has been enacted to provide for a remedy for loss of The penalty under the said sections is a civil liability. Wilful concealment is not an essential ingredient for attracting the civil liability as is the case in the matter of prosecution Swaran Nadhan Salaria 7 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 filed u/s 153A of the Act and had there been no search action, uld not have offered this additional income for Further, during the course of search/post search during the assessment proceedings, it was found that, the assessee had used said shell entities for cuitous transactions in order to and creation of fictitious asset. On perusal of the ledger account extracted from the Tally data, it was found during search action that the assessee company had made payments to entities. The conduct & affairs of these shell entities had established that these shell entities were floated by the assessee group/under control of the assessee group with a purpose to do circular transactions and create fictitious assets. Thus, the argument (v) To sum up, in the instant case, interest expenses ) and extra depreciation (Rs.38,02,913/-) was disallowed by the assessee post search, in the return of u/s 153A of the Income Tax Act, 1961. The surrendering of this income for taxation after identification of omission on part of the assessee cannot be termed as a \"bonafide disclosure\" and hence is reporting of income. The judgements relied upon by the assessee are not relevant (vi) There has been deliberate omission on the part of the assessee and has furnished inaccurate particulars of income deration and therefore all the facts which are material to the income were not disclosed in the (vii) In the judgment delivered in the case of Union of India and Others Vs. Dharmendra Textile Processors and Others (2007) 295 ITR 244 (SC) the Hon'ble Apex Court has reiterated as \"...the object behind the enactment of section 271(1)(c) read with the Explanations quoted above indicates that the said section has been enacted to provide for a remedy for loss of The penalty under the said sections is a civil liability. Wilful concealment is not an essential ingredient for attracting the civil liability as is the case in the matter of prosecution Printed from counselvise.com under section 276C of the Act. While considering an appeal against an required to be examined is the record which the officer imposing the penalty had before him and if that record can sustain the finding that there had been concealment, that would be sufficient to sustain the pena ...The Explanations added to section 271(1)(c) in their entirety also indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing returns.\" (viii) Further, in the case of MAK Data P. Ltd v Court) the Hon'ble Supreme Court has held that: \"It is the statutory duty of the assessee to declare its true income in the return of income filed by it from year to year and if the assessee had concealed true particulars of income than the assessee is liable for penalty proceedings u/s 271 read with s. 274 of the Act.\" (ix) Further the Delhi High Court in the case of CIT Vs Zoom Communication Pvt. Ltd. vide ITA No. 07/2010 dated 24.05.2010 has held that: \"The Court cannot overlook the fact percentage of the Income Tax Returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bonafide, it would be difficult to say that he would still not be liable to penalty under Section 271(1)(c) of the Act. ITA No.7/2010 Page 14 of 18 If we take the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be liable to imposition of penalty, even if he was not acting bonafide while making a claim of this nature, that would give a license to unscrupulous assessees to make wholly untenable and unsustainable cl making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self- assessment under Section 143(1) of the Act and even if their case is selected for scrutin by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a malafide intention to evade tax otherwise payable by them would get away without ITA No. 1049, 1050, 1051, 1052, 1053, under section 276C of the Act. While considering an appeal order made under section 271(1)(c) what is required to be examined is the record which the officer imposing the penalty had before him and if that record can sustain the finding that there had been concealment, that would be sufficient to sustain the penalty. ...The Explanations added to section 271(1)(c) in their entirety also indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing (viii) Further, in the case of MAK Data P. Ltd vs. CIT (Supreme Court) the Hon'ble Supreme Court has held that: \"It is the statutory duty of the assessee to declare its true income in the return of income filed by it from year to year and if the assessee had concealed true particulars of income than assessee is liable for penalty proceedings u/s 271 read with s. 274 of the Act.\" (ix) Further the Delhi High Court in the case of CIT Vs Zoom Communication Pvt. Ltd. vide ITA No. 07/2010 dated 24.05.2010 has held that:- \"The Court cannot overlook the fact that only a small percentage of the Income Tax Returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not und to be bonafide, it would be difficult to say that he would still not be liable to penalty under Section 271(1)(c) of the Act. ITA No.7/2010 Page 14 of 18 If we take the view that a claim which is wholly untenable in law and has absolutely no on which it could be made, the assessee would not be liable to imposition of penalty, even if he was not acting bonafide while making a claim of this nature, that would give a license to unscrupulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of assessment under Section 143(1) of the Act and even if their case is selected for scrutiny, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a malafide intention to evade tax otherwise payable by them would get away without Swaran Nadhan Salaria 8 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 under section 276C of the Act. While considering an appeal order made under section 271(1)(c) what is required to be examined is the record which the officer imposing the penalty had before him and if that record can sustain the finding that there had been concealment, that ...The Explanations added to section 271(1)(c) in their entirety also indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing s. CIT (Supreme \"It is the statutory duty of the assessee to declare its true income in the return of income filed by it from year to year and if the assessee had concealed true particulars of income than assessee is liable for penalty proceedings u/s 271 read (ix) Further the Delhi High Court in the case of CIT Vs Zoom Communication Pvt. Ltd. vide ITA No. 07/2010 dated that only a small percentage of the Income Tax Returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not und to be bonafide, it would be difficult to say that he would still not be liable to penalty under Section 271(1)(c) of the Act. ITA No.7/2010 Page 14 of 18 If we take the view that a claim which is wholly untenable in law and has absolutely no on which it could be made, the assessee would not be liable to imposition of penalty, even if he was not acting bonafide while making a claim of this nature, that would give a license to unscrupulous assessees to make wholly untenable aims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of assessment under Section 143(1) of the Act and even if y, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a malafide intention to evade tax otherwise payable by them would get away without paying Printed from counselvise.com the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these pena 4.7 Consequently, penalty was levied under section 271(1)(c) at 100% of tax sought to be evaded on ₹30,03,667/-. The CIT(A) confirmed the levy, holding that: (i) , the assessee failed to file any evidence or details justifying the expenses and relied merely on judicial precedents asserting that no penalty can be levied on estimated disallowances (ii) Disallowances were not merely on estimate but were necessitated due to non (iii) reliance on judicial precedents unlike in the cited precedents, the present submissions or records from the assessee whatsoever. (iv) The absence of books, vouchers, and corroborative evidence compelled the Assessing Officer to resort to a conservative estimation of unverifiable expenditure. (v) even the filing of proceedings, and no voluntary compliance was made prior thereto. No appeal had been preferred against the assessment order. (vi) Suo-motu disallowance post bona fide disclosure and Explana ITA No. 1049, 1050, 1051, 1052, 1053, the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in the Act have.” Consequently, penalty was levied under section 271(1)(c) at ought to be evaded on ₹88,36,915/- . The CIT(A) confirmed the levy, holding that: , the assessee failed to file any evidence or details justifying the expenses and relied merely on judicial precedents asserting that no can be levied on estimated disallowances. Disallowances were not merely on estimate but were necessitated due to non-production of records. reliance on judicial precedents was misplaced, noting that unlike in the cited precedents, the present case involved no submissions or records from the assessee whatsoever. The absence of books, vouchers, and corroborative evidence compelled the Assessing Officer to resort to a conservative estimation of unverifiable expenditure. even the filing of return was occasioned only after search proceedings, and no voluntary compliance was made prior thereto. No appeal had been preferred against the assessment order. disallowance post-search cannot be construed as a bona fide disclosure and Explanation 5A was applicable. Swaran Nadhan Salaria 9 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, Consequently, penalty was levied under section 271(1)(c) at -, amounting to . The CIT(A) confirmed the levy, holding that: , the assessee failed to file any evidence or details justifying the expenses and relied merely on judicial precedents asserting that no Disallowances were not merely on estimate but were misplaced, noting that case involved no submissions or records from the assessee whatsoever. The absence of books, vouchers, and corroborative evidence compelled the Assessing Officer to resort to a conservative return was occasioned only after search proceedings, and no voluntary compliance was made prior thereto. No appeal had been preferred against the assessment order. search cannot be construed as a tion 5A was applicable. Printed from counselvise.com 5. As regards the additional ground of the assessee that addition made in order passed u/s 143(3) r.w.s. 153C of the Act not sustainable, we find that assessee in the appellate proceedings and ther of the assessee as to sustainable. The penalty cannot be deleted merely presumption of the assessee unless assessee on the ground of no incriminating material unsustainable by the appellate authorities. Accordingly, the additional ground raised by the assessee is dismissed. 6. As far as regular ground No. 1 penalty levied in respect of salary and wages and administrative expenses is concerned, the assessee has challenged mainly on the ground that penalty levied is on the estimate basis. It is undisputed fact that the Assessing Officer has the salary and wages expenses claimed to have incurred in cash mode. Similarly, disallowance out of administrative expenses has been made @ 10% out of expenses claimed to have been incurred in the cash mode. As far as levy o made on the estimate basis, the Ld. Counsel relied on the decision of the Tribunal in the case of 45 CCH 0363 (Delhi ITA No. 1049, 1050, 1051, 1052, 1053, As regards the additional ground of the assessee that addition made in order passed u/s 143(3) r.w.s. 153C of the Act not sustainable, we find that assessee has not challenged the order in the appellate proceedings and therefore, it is merely presumption as to whether those additions were not likely to be he penalty cannot be deleted merely presumption of the assessee unless addition challenged by the the ground of no incriminating material sustainable by the appellate authorities. Accordingly, the additional ground raised by the assessee is dismissed. As far as regular ground No. 1 of the appeal in relation penalty levied in respect of salary and wages and administrative cerned, the assessee has challenged mainly on the ground that penalty levied is on the estimate basis. It is undisputed fact that the Assessing Officer has levied the penalty @ 4% out of the salary and wages expenses claimed to have incurred in cash mode. Similarly, disallowance out of administrative expenses has been made @ 10% out of expenses claimed to have been incurred in the cash mode. As far as levy of the penalty in respect of addition made on the estimate basis, the Ld. Counsel relied on the decision of the Tribunal in the case of Dr. Kaushal Goes v. Asst. CIT 45 CCH 0363 (Delhi-Trib.) wherein the Tribunal following the Swaran Nadhan Salaria 10 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 As regards the additional ground of the assessee that addition made in order passed u/s 143(3) r.w.s. 153C of the Act itself was not challenged the order efore, it is merely presumption re not likely to be he penalty cannot be deleted merely on the challenged by the the ground of no incriminating material and held to be sustainable by the appellate authorities. Accordingly, the additional ground raised by the assessee is dismissed. in relation to the penalty levied in respect of salary and wages and administrative cerned, the assessee has challenged mainly on the ground that penalty levied is on the estimate basis. It is undisputed levied the penalty @ 4% out of the salary and wages expenses claimed to have incurred in cash mode. Similarly, disallowance out of administrative expenses has been made @ 10% out of expenses claimed to have been incurred in f the penalty in respect of addition made on the estimate basis, the Ld. Counsel relied on the decision Dr. Kaushal Goes v. Asst. CIT (2015) wherein the Tribunal following the Printed from counselvise.com decision of the Co-ordi 31 SOT 23 (Lucknow) deleted the penalty observing as under: “9. Now, the sole question arises for determination in this case is, “as to whether penalty order passed by ACIT is without any jurisdiction, having slips dated 14.06.2004 showing unaccounted income of Rs.4,95,000/ the year 2007 10. Undisputedly, the assessee has reflected the surrendered amount of Rs.4,95,000/ of which assessment order dated 19.12.2008 qua the assessment year 2007 when the unaccounted income of Rs.4,95,000/ pertaining to the Assessment Year 2005 dated 14.06.2004, the A.O. has no jurisdiction to initiate the penalty proceedings on the basis of assessment order dated 19.12.2008 qua the Assessment Year 2007 otherwise the revenue was empowered to reopen the assessment of the assessee qua the Assessment to make an addition of Rs.4,95,000/ year, but the revenue has not preferred to do so. 11. The contention of Ld. D.R. that once the assessee has himself reflected and surrendered the unaccounted income of Rs.4,95,000/ jurisdiction is not available to the assessee, is not tenable for the two reasons: one that there is no estoppels against the statute because when defense is available by virtue of statute to the assessee, th one, he cannot be estopped merely by virtue of the fact that he himself has surrendered the unaccounted income in his income tax return, because the assessee claimed to have surrendered the amount of Rs.4,95,000/ avoid the protracted litigation; Second, when the revenue has statutory power to proceed against the assessee by reopening the assessment of a particular assessment year and then initiating the penalty proceedings, it cannot be al proceed mechanically to invoke the penal provisions. So initiating the penalty proceedings on the basis of void assessment order are not sustainable in the eyes of law. Assessee is well within his right to take this defence of challenging the asse ITA No. 1049, 1050, 1051, 1052, 1053, ordinate Bench in the case of Smt. Surinder Kaur 31 SOT 23 (Lucknow) deleted the penalty observing as under: “9. Now, the sole question arises for determination in this case is, “as to whether penalty order passed by ACIT is without any jurisdiction, having been passed on the basis of bank slips dated 14.06.2004 showing unaccounted income of Rs.4,95,000/-, the said income having been assessed during the year 2007-08.” 10. Undisputedly, the assessee has reflected the surrendered amount of Rs.4,95,000/- in his income tax return on the basis of which assessment order dated 19.12.2008 qua the assessment year 2007-08 has been passed. Undisputedly, when the unaccounted income of Rs.4,95,000/ pertaining to the Assessment Year 2005-06 as per bank slips 6.2004, the A.O. has no jurisdiction to initiate the penalty proceedings on the basis of assessment order dated 19.12.2008 qua the Assessment Year 2007-08. Even otherwise the revenue was empowered to reopen the assessment of the assessee qua the Assessment year 2005 to make an addition of Rs.4,95,000/- pertaining to relevant year, but the revenue has not preferred to do so. 11. The contention of Ld. D.R. that once the assessee has himself reflected and surrendered the unaccounted income of Rs.4,95,000/- in his Income tax return the defense of lack of jurisdiction is not available to the assessee, is not tenable for the two reasons: one that there is no estoppels against the statute because when defense is available by virtue of statute to the assessee, the penalty proceedings being independent one, he cannot be estopped merely by virtue of the fact that he himself has surrendered the unaccounted income in his income tax return, because the assessee claimed to have surrendered the amount of Rs.4,95,000/- to buy peace of mind and to avoid the protracted litigation; Second, when the revenue has statutory power to proceed against the assessee by reopening the assessment of a particular assessment year and then initiating the penalty proceedings, it cannot be allowed to proceed mechanically to invoke the penal provisions. So initiating the penalty proceedings on the basis of void assessment order are not sustainable in the eyes of law. Assessee is well within his right to take this defence of challenging the assessment order even though assessment Swaran Nadhan Salaria 11 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 nate Bench in the case of Smt. Surinder Kaur 31 SOT 23 (Lucknow) deleted the penalty observing as under: “9. Now, the sole question arises for determination in this case is, “as to whether penalty order passed by ACIT is without been passed on the basis of bank slips dated 14.06.2004 showing unaccounted income of , the said income having been assessed during 10. Undisputedly, the assessee has reflected the surrendered income tax return on the basis of which assessment order dated 19.12.2008 qua the 08 has been passed. Undisputedly, when the unaccounted income of Rs.4,95,000/- was 06 as per bank slips 6.2004, the A.O. has no jurisdiction to initiate the penalty proceedings on the basis of assessment order dated 08. Even otherwise the revenue was empowered to reopen the year 2005-06 pertaining to relevant 11. The contention of Ld. D.R. that once the assessee has himself reflected and surrendered the unaccounted income of in his Income tax return the defense of lack of jurisdiction is not available to the assessee, is not tenable for the two reasons: one that there is no estoppels against the statute because when defense is available by virtue of statute e penalty proceedings being independent one, he cannot be estopped merely by virtue of the fact that he himself has surrendered the unaccounted income in his income tax return, because the assessee claimed to have surrendered buy peace of mind and to avoid the protracted litigation; Second, when the revenue has statutory power to proceed against the assessee by reopening the assessment of a particular assessment year and then lowed to proceed mechanically to invoke the penal provisions. So initiating the penalty proceedings on the basis of void assessment order are not sustainable in the eyes of law. Assessee is well within his right to take this defence of ssment order even though assessment Printed from counselvise.com order has not been challenged, at the time of challenging the penalty order. 12. Coordinate Bench in the case entitled ACIT Vs Smt. Surinder Kaur 120 TTJ 618 decided the identical issue in the identical circumstances in applicable to the facts and circumstances of the case. So, when the foundation of addition on unaccounted income of Rs.4,95,000/ sustainable in the eyes of law, the question o penalty qua the said amount, does not arise. 13. In view of what has been discussed, we are of the considered view that the impugned order passed by Ld. CIT(A) confirming the penalty @ 300%, the amount of Rs.4,95,000/ not sustainable in the and the appeal of the assessee is allowed.” 6.1 In the instant case before us, t of ‘salary and wages mentioned by the AO in assessment order in par the assessment order. Relevant part of reproduced in assessment order is “10.2. The assessee, through its various submissions, represented that 90% to the paymen taxable limit. The assessee provided the copy of Salary register for the respective years containing the names of employees, branch details, employee code, month for which salary paid and salary paid amount. Howev register does not 7 contain the PAN / Aadhaar No. of the employees. Hence, the identity of the employees is not sufficiently established. Further, the salary register does not contain the details of date of payment and mode of payment. The details of salary & wages as per ledger account submitted by the assessee are summarized Particulars Payment made through bank ITA No. 1049, 1050, 1051, 1052, 1053, order has not been challenged, at the time of challenging the penalty order. 12. Coordinate Bench in the case entitled ACIT Vs Smt. Surinder Kaur 120 TTJ 618 decided the identical issue in the identical circumstances in favour of the assessee, which is applicable to the facts and circumstances of the case. So, when the foundation of addition on unaccounted income of Rs.4,95,000/-, though not challenged by the assessee, is not sustainable in the eyes of law, the question of imposing penalty qua the said amount, does not arise. 13. In view of what has been discussed, we are of the considered view that the impugned order passed by Ld. CIT(A) confirming the penalty @ 300%, the amount of Rs.4,95,000/ not sustainable in the eyes of law, hence, hereby set aside and the appeal of the assessee is allowed.” In the instant case before us, the basis of making and wages’ and ‘administrative expenses mentioned by the AO in assessment order in para 10.2 to 10.5 of the assessment order. Relevant part of show cause notice assessment order is extracted as under: 10.2. The assessee, through its various submissions, represented that 90% - 95% of the salary/ wages are related to the payments made to guards, which are all below the taxable limit. The assessee provided the copy of Salary register for the respective years containing the names of employees, branch details, employee code, month for which salary paid and salary paid amount. However, the salary register does not 7 contain the PAN / Aadhaar No. of the employees. Hence, the identity of the employees is not sufficiently established. Further, the salary register does not contain the details of date of payment and mode of payment. etails of salary & wages as per ledger account submitted by the assessee are summarized here as under: Particulars FY 2013-14 Payment made through bank 23.87.36,638 Swaran Nadhan Salaria 12 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 order has not been challenged, at the time of challenging the 12. Coordinate Bench in the case entitled ACIT Vs Smt. Surinder Kaur 120 TTJ 618 decided the identical issue in the favour of the assessee, which is applicable to the facts and circumstances of the case. So, when the foundation of addition on unaccounted income of , though not challenged by the assessee, is not f imposing 13. In view of what has been discussed, we are of the considered view that the impugned order passed by Ld. CIT(A) confirming the penalty @ 300%, the amount of Rs.4,95,000/- is eyes of law, hence, hereby set aside he basis of making disallowance administrative expenses’ has been a 10.2 to 10.5 of show cause notice as under: 10.2. The assessee, through its various submissions, 95% of the salary/ wages are related ts made to guards, which are all below the taxable limit. The assessee provided the copy of Salary register for the respective years containing the names of employees, branch details, employee code, month for which er, the salary register does not 7 contain the PAN / Aadhaar No. of the employees. Hence, the identity of the employees is not sufficiently established. Further, the salary register does not contain the details of date of payment and mode of payment. etails of salary & wages as per ledger account submitted Printed from counselvise.com Payment made through cash Payment made through ledger Payment made by TDPL on our Payment made by TGF on our Adjusted through Security Received back through bank Payment made by us on behalf of TFS reversed Adjusted against Security Other reversals Total 10.3. It is found that considerable amount of salary has been paid in cash in each of the years. It is found that the assessee has not maintained party recording cash payment of salary in the books of accounts. It is seen that the assessee has passed a consolidated entry in the books for cash payment of salary to multiple parties. The assessee has not provided the complete details of such employees like address, PAN, Aadhaar No., etc. so as to establish the identity of such empl the salary register does not contain the details of mode of payment. Hence, it is not ascertainable from the salary register whether the salary paid to the respective employees is in cash or through bank. Consequently, the cash s per salary register could not be fully correlated with the cash salaries as per books of accounts. Further, the assessee has not substantiated in detail as to how the salary payments does not attract TDS provisions. In respect of each of the employee and has only provided a generic remark. Further, as regards the source of salaries paid in cash, the assessee has submitted that the same is out of cash withdrawals from bank accounts at various branches. From the salary register provided by the asse assessee company have been deputed at various cities & ITA No. 1049, 1050, 1051, 1052, 1053, Payment made through cash 3,55,61,103 Payment made through ledger 1,16,66,604 Payment made by TDPL on our 2,51,10,298 Payment made by TGF on our Adjusted through Security Received back through bank (7,13,024) Payment made by us on behalf of TFS reversed Adjusted against Security (3,18,75,086) Other reversals (32,12,153) 27,52,74,380 10.3. It is found that considerable amount of salary has been paid in cash in each of the years. It is found that the assessee has not maintained party-wise ledger in the books for recording cash payment of salary in the books of accounts. It the assessee has passed a consolidated entry in the books for cash payment of salary to multiple parties. The assessee has not provided the complete details of such employees like address, PAN, Aadhaar No., etc. so as to establish the identity of such employees. As mentioned above, the salary register does not contain the details of mode of payment. Hence, it is not ascertainable from the salary register whether the salary paid to the respective employees is in cash or through bank. Consequently, the cash salaries as per salary register could not be fully correlated with the cash salaries as per books of accounts. Further, the assessee has not substantiated in detail as to how the salary payments does not attract TDS provisions. In respect of each of the loyee and has only provided a generic remark. Further, as regards the source of salaries paid in cash, the assessee has submitted that the same is out of cash withdrawals from bank accounts at various branches. From the salary register provided by the assessee; it is seen that the employees of the assessee company have been deputed at various cities & Swaran Nadhan Salaria 13 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 10.3. It is found that considerable amount of salary has been paid in cash in each of the years. It is found that the assessee wise ledger in the books for recording cash payment of salary in the books of accounts. It the assessee has passed a consolidated entry in the books for cash payment of salary to multiple parties. The assessee has not provided the complete details of such employees like address, PAN, Aadhaar No., etc. so as to oyees. As mentioned above, the salary register does not contain the details of mode of payment. Hence, it is not ascertainable from the salary register whether the salary paid to the respective employees is alaries as per salary register could not be fully correlated with the cash salaries as per books of accounts. Further, the assessee has not substantiated in detail as to how the salary payments does not attract TDS provisions. In respect of each of the loyee and has only provided a generic remark. Further, as regards the source of salaries paid in cash, the assessee has submitted that the same is out of cash withdrawals from bank accounts at various branches. From the salary register ssee; it is seen that the employees of the assessee company have been deputed at various cities & Printed from counselvise.com towns across India. However, it is found that in certain locations, the assessee does not have any bank accounts and hence, a question arises as to how the as make salary payments through cash in such locations. 10.4. The assessee has further submitted that the guards employed by the assessee are required to give certain amount to the assessee company as security deposits and such security depo to be paid to such employees. Hence, the security deposits collectible from the guards are adjusted from the salary payable to them. Accordingly, the assessee has passed consolidated journal entries in the bo a/c and crediting Security Deposit a/c. However, the assessee has neither given the employee wise details of security deposits and the months for which the salary has been adjusted nor produced any supporting documents in relation to the same. Thus, the assessee has not substantiated the salary expenses adjusted through security deposits with proper details and supporting documents. 10.5. It is also seen that the other entities of the assessee group i.e. M/s. Trig Security & Detective Integrated Facility Management, M/s. Trig Facility Services and M/s. Trig Detective Private Ltd. have made payment of salary on behalf of the assessee. In this regard, the assessee has passed Journal entries in the books by debiting Sa a/c and crediting the Trig group entity as and when the payments are made by the other Trig group entity. However, the assessee has not provided the complete details of such employees like address, PAN, Aadhaar No., etc. so as to establish the identit reference in the Salary register provided by the assessee as to how much payment has been made by the assessee and how much payments are made by the other Trig group entity employee-wise. Accordingly, the assessee completely correlate in detail the salary register with the books of accounts in respect of such on behalf payments of salary made by the other Trig 6.2 The response of the assessee for above show cause notice issued has been reproduced by the AO in para 10.3 of the assessment order. For ready reference same is ITA No. 1049, 1050, 1051, 1052, 1053, towns across India. However, it is found that in certain locations, the assessee does not have any bank accounts and hence, a question arises as to how the assessee managed to make salary payments through cash in such locations. 10.4. The assessee has further submitted that the guards employed by the assessee are required to give certain amount to the assessee company as security deposits and such security deposits are recovered from them through the salary to be paid to such employees. Hence, the security deposits collectible from the guards are adjusted from the salary payable to them. Accordingly, the assessee has passed consolidated journal entries in the books by debiting Salary a/c and crediting Security Deposit a/c. However, the assessee has neither given the employee wise details of security deposits and the months for which the salary has been adjusted nor produced any supporting documents in relation to the same. Thus, the assessee has not substantiated the salary expenses adjusted through security deposits with proper details and supporting documents. 10.5. It is also seen that the other entities of the assessee group i.e. M/s. Trig Security & Detective Services, M/s. Trig Integrated Facility Management, M/s. Trig Facility Services and M/s. Trig Detective Private Ltd. have made payment of salary on behalf of the assessee. In this regard, the assessee has passed Journal entries in the books by debiting Sa a/c and crediting the Trig group entity as and when the payments are made by the other Trig group entity. However, the assessee has not provided the complete details of such employees like address, PAN, Aadhaar No., etc. so as to establish the identity of such employees. Further, there is no reference in the Salary register provided by the assessee as to how much payment has been made by the assessee and how much payments are made by the other Trig group entity wise. Accordingly, the assessee has not been able to completely correlate in detail the salary register with the books of accounts in respect of such on behalf payments of salary made by the other Trig group entities.” The response of the assessee for above show cause notice as been reproduced by the AO in para 10.3 of the assessment order. For ready reference same is extracted Swaran Nadhan Salaria 14 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 towns across India. However, it is found that in certain locations, the assessee does not have any bank accounts and sessee managed to make salary payments through cash in such locations. 10.4. The assessee has further submitted that the guards employed by the assessee are required to give certain amount to the assessee company as security deposits and such sits are recovered from them through the salary to be paid to such employees. Hence, the security deposits collectible from the guards are adjusted from the salary payable to them. Accordingly, the assessee has passed oks by debiting Salary a/c and crediting Security Deposit a/c. However, the assessee has neither given the employee wise details of security deposits and the months for which the salary has been adjusted nor produced any supporting documents in relation to the same. Thus, the assessee has not substantiated the salary expenses adjusted through security deposits with proper 10.5. It is also seen that the other entities of the assessee Services, M/s. Trig Integrated Facility Management, M/s. Trig Facility Services and M/s. Trig Detective Private Ltd. have made payment of salary on behalf of the assessee. In this regard, the assessee has passed Journal entries in the books by debiting Salary a/c and crediting the Trig group entity as and when the payments are made by the other Trig group entity. However, the assessee has not provided the complete details of such employees like address, PAN, Aadhaar No., etc. so as to y of such employees. Further, there is no reference in the Salary register provided by the assessee as to how much payment has been made by the assessee and how much payments are made by the other Trig group entity has not been able to completely correlate in detail the salary register with the books of accounts in respect of such on behalf payments of salary The response of the assessee for above show cause notice as been reproduced by the AO in para 10.3 of the extracted as under: Printed from counselvise.com “10.3. The assessee vide show cause was asked to justify payment of salary and administrative in cash and why a certain percentage of cash sa expenses incurred in cash claimed during the year should not be disallowed for want of necessary details/documents/explanations. The assessee replied as under. \"TRIG Group is one of India's leading security company providin our best endavour to make all salary through the banking channel. There are is unavoidable circumstance under which we are in force to pay salary in cash, few of such situations are: 1. Short Term Event: We IPL, Film Fair Awards, Celebrity Weddings, Exhibitions, Mumbai Marathons, Musical Concerts, ISL, etc., which involves employing guards on daily basis. We have to pay contracted daily wages to these guards in cash. 2. Guard hired at various locations are coming from remote areas like West Bengal, Assam, Orissa, Bihar, Uttar Pradesh, etc. Since, they migrate from one place to another, some of them do not have any valid proof of resid therefore, they cannot open any bank account. Hence, we pay their salaries in cash till there bank account is opened. 3. Cheque bouncing: between receipt of income and expenses incurred such as salaries and wages, total expenses. Salary wages has to be paid regularly on monthly basis while income is received after a gap of 3-4 months. Most of the time we have to avail working capital overdraft facility to pay the salary & wages etc. Some moment guards salary cheque get bounced. Against bouncing of cheques we have to pay cash to guards so they can perform duties without hurdle. 4. The administrative expenses exclusively and wholly incurred for bus industries and we have branches in all over India, we have to pay cash to various officers reimbursement of expenses like business promotion, printing & ITA No. 1049, 1050, 1051, 1052, 1053, 10.3. The assessee vide show cause was asked to justify payment of salary and administrative in cash and why a certain percentage of cash salary expenses and administrative expenses incurred in cash claimed during the year should not be disallowed for want of necessary details/documents/explanations. The assessee replied as \"TRIG Group is one of India's leading security company providing security services all over India and inspite of our best endavour to make all salary through the banking channel. There are is unavoidable circumstance under which we are in force to pay salary in cash, few of such situations are: 1. Short Term Event: We are doing one time event like, IPL, Film Fair Awards, Celebrity Weddings, Exhibitions, Mumbai Marathons, Musical Concerts, ISL, etc., which involves employing guards on daily basis. We have to pay contracted daily wages to these guards in cash. 2. Guard having no bank account: The security guards hired at various locations are coming from remote areas like West Bengal, Assam, Orissa, Bihar, Uttar Pradesh, etc. Since, they migrate from one place to another, some of them do not have any valid proof of residence and therefore, they cannot open any bank account. Hence, we pay their salaries in cash till there bank account is opened. 3. Cheque bouncing:-There is a lag of 3-4 months between receipt of income and expenses incurred such as salaries and wages, which constitutes 80 total expenses. Salary wages has to be paid regularly on monthly basis while income is received after a gap of 4 months. Most of the time we have to avail working capital overdraft facility to pay the salary & wages etc. Some time bank dose not allow overdraft and last moment guards salary cheque get bounced. Against bouncing of cheques we have to pay cash to guards so they can perform duties without hurdle. 4. The administrative expenses exclusively and wholly incurred for business purpose only. As we are in service industries and we have branches in all over India, we have to pay cash to various officers reimbursement of expenses like business promotion, printing & Swaran Nadhan Salaria 15 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 10.3. The assessee vide show cause was asked to justify payment of salary and administrative in cash and why a lary expenses and administrative expenses incurred in cash claimed during the year should not be disallowed for want of necessary details/documents/explanations. The assessee replied as \"TRIG Group is one of India's leading security company g security services all over India and inspite of our best endavour to make all salary through the banking channel. There are is unavoidable circumstance under which we are in force to pay salary are doing one time event like, IPL, Film Fair Awards, Celebrity Weddings, Exhibitions, Mumbai Marathons, Musical Concerts, ISL, etc., which involves employing guards on daily basis. We have to pay contracted daily wages to these guards in cash. having no bank account: The security guards hired at various locations are coming from remote areas like West Bengal, Assam, Orissa, Bihar, Uttar Pradesh, etc. Since, they migrate from one place to another, some ence and therefore, they cannot open any bank account. Hence, we pay their salaries in cash till there bank account is 4 months between receipt of income and expenses incurred such which constitutes 80-90% of total expenses. Salary wages has to be paid regularly on monthly basis while income is received after a gap of 4 months. Most of the time we have to avail working capital overdraft facility to pay the salary & wages etc. time bank dose not allow overdraft and last moment guards salary cheque get bounced. Against bouncing of cheques we have to pay cash to guards so 4. The administrative expenses exclusively and wholly iness purpose only. As we are in service industries and we have branches in all over India, we have to pay cash to various officers reimbursement of expenses like business promotion, printing & Printed from counselvise.com Stationery, Courier charges, fuels etc on day to day basis for submitted documentary proof for the same. Considering the specific circumstances under which the expenses are incurred in cash, we request you not to do any disallowance towards cash expenses incurred in cash as these are reasonable & exclusively incurred for the business purpose\" 6.3 After considering submission of assessee, addition observing as under: “10.4 After considering the submission of the assessee,4% of \"Salary & Wages\" expenses claimed to mode and 10% of \"administrative expenses\" claimed to be incurred in CASH mode, are hereby disallowed on estimated basis u/s. 37(1) of the Act and added to the computation of income. Thus following disallowances of expenses and thereby additions to the computation of income are made in the case of assessee on these issues, as under: (i) Disallowance @ 4% out of \"Salary & Wages\" expenses claimed to be incurred in Cash Mode of Rs.3,55,61,103/ (ii) Disallowance 10 expenses claimed to be incurred in Cash Mode (i.e. 10% of Rs.21,71,622/ 6.4 After careful examination of the show the AO and assessee’s submissions in response to the show cause notice, the AO held that genuineness of the salary and administrative expenses claimed have been incurred in cash mainly for the reason that t registers provided were addresses, dates, and mode of payment large scale organization engaged in supply of manpower, incidence ITA No. 1049, 1050, 1051, 1052, 1053, Stationery, Courier charges, fuels etc on day to day basis for smooth running of business. We have already submitted documentary proof for the same. Considering the specific circumstances under which the expenses are incurred in cash, we request you not to do any disallowance towards cash expenses incurred in cash as these are reasonable & exclusively incurred for the purpose\" considering submission of assessee, as under: “10.4 After considering the submission of the assessee,4% of \"Salary & Wages\" expenses claimed to be incurred in CASH mode and 10% of \"administrative expenses\" claimed to be incurred in CASH mode, are hereby disallowed on estimated basis u/s. 37(1) of the Act and added to the computation of income. Thus following disallowances of expenses and thereby dditions to the computation of income are made in the case of assessee on these issues, as under: (i) Disallowance @ 4% out of \"Salary & Wages\" expenses claimed to be incurred in Cash Mode - Rs.14,22,444/- of Rs.3,55,61,103/-) (ii) Disallowance 10% out of \"administrative Expenses\" expenses claimed to be incurred in Cash Mode -Rs.2,17,162/ Rs.21,71,622/-).” After careful examination of the show cause notice issued by the AO and assessee’s submissions in response to the show cause otice, the AO held that the assessee failed to substantiate the genuineness of the salary and administrative expenses claimed have been incurred in cash mainly for the reason that t were deficient in particulars such as PAN, ses, dates, and mode of payment. But in our opinion in a large scale organization engaged in supply of manpower, incidence Swaran Nadhan Salaria 16 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 Stationery, Courier charges, fuels etc on day to day smooth running of business. We have already Considering the specific circumstances under which the expenses are incurred in cash, we request you not to do any disallowance towards cash expenses incurred in cash as these are reasonable & exclusively incurred for the considering submission of assessee, The AO made “10.4 After considering the submission of the assessee,4% of be incurred in CASH mode and 10% of \"administrative expenses\" claimed to be incurred in CASH mode, are hereby disallowed on estimated basis u/s. 37(1) of the Act and added to the computation of income. Thus following disallowances of expenses and thereby dditions to the computation of income are made in the case of (i) Disallowance @ 4% out of \"Salary & Wages\" expenses - (i.e. 4% % out of \"administrative Expenses\" Rs.2,17,162/- notice issued by the AO and assessee’s submissions in response to the show cause failed to substantiate the genuineness of the salary and administrative expenses claimed to have been incurred in cash mainly for the reason that the salary deficient in particulars such as PAN, Adhar, But in our opinion in a large scale organization engaged in supply of manpower, incidence Printed from counselvise.com of part of expenses without PAN or Adhar normal course of business. claim of adjustments against security deposits and payments made by group concerns remain documentary evidence, is concerned, pointed out any specific incidence and even no disallowanc been made on this account addition in respect of salary and wages and administrative expense has been purely on ad any specific entry of expenses for disallowance, h following the decision above, we hereby cancel ‘salary and wages’ and 7. Further, on the issue of penalty in respect of disallowance of interest of Rs.33,94,396/ of Rs.38,02,930/- also the Ld. CIT(A) upheld the penalty observing as under: “8.3 I have gone through the submissions filed by the appellant and the relevant records. It is an esta and various decisions of the Hon'ble Apex court and other courts have held that suo search action does not absolve the appellant of the penalty provisions. 8.4 The appellant has relied upon the decision of H Chandigarh Tribunal in the case of DCIT Central Circle Chandigarh v Kulwant Singh wherein it was held that penalty should not be levied on suo ITA No. 1049, 1050, 1051, 1052, 1053, of part of expenses without PAN or Adhar No. may be possible in normal course of business. Further, the observation of t claim of adjustments against security deposits and payments made by group concerns remained unverified in the documentary evidence, is concerned, we find that specific incidence and even no disallowanc been made on this account. In view of above, it is evident that in respect of salary and wages and administrative expense has been purely on ad-hoc and estimate basis, without pointing out any specific entry of expenses for disallowance, hence following the decision of coordinate bench of Tribunal referred cancel the penalty in respect of disallowance of and ‘administrative expenses’. Further, on the issue of penalty in respect of disallowance of interest of Rs.33,94,396/- and excess depreciation also the Ld. CIT(A) upheld the penalty observing “8.3 I have gone through the submissions filed by the appellant and the relevant records. It is an established fact and various decisions of the Hon'ble Apex court and other courts have held that suo-moto disclosure in the return after search action does not absolve the appellant of the penalty 8.4 The appellant has relied upon the decision of H Chandigarh Tribunal in the case of DCIT Central Circle Chandigarh v Kulwant Singh wherein it was held that penalty should not be levied on suo-moto income offered in the return Swaran Nadhan Salaria 17 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 may be possible in observation of the AO that claim of adjustments against security deposits and payments made unverified in the absence of we find that the AO has not specific incidence and even no disallowance has it is evident that the in respect of salary and wages and administrative expense hoc and estimate basis, without pointing out ence, respectfully, of coordinate bench of Tribunal referred in respect of disallowance of Further, on the issue of penalty in respect of suo-motu and excess depreciation also the Ld. CIT(A) upheld the penalty observing “8.3 I have gone through the submissions filed by the blished fact and various decisions of the Hon'ble Apex court and other moto disclosure in the return after search action does not absolve the appellant of the penalty 8.4 The appellant has relied upon the decision of Hon'ble Chandigarh Tribunal in the case of DCIT Central Circle-1, Chandigarh v Kulwant Singh wherein it was held that penalty moto income offered in the return Printed from counselvise.com u/s 153A. As per the appellant case of the Apex court decision in Mak Data P Ltd has been discussed and differentiated. 8.5 It is however noted that facts in that case were different. The relevant paras of the order are reproduced as under: \"Applying the similar proposition, even when the Assessing officer is precluded from addition in the absence of any incriminating material found during the search action in the assessment proceedings carried out u/s 153A of the Act in which the original assessment proceedings stood completed and not abated, the Assessing office also precluded from initiate the penalty proceedings u/s 271(1)(c) of the Act in case of already concluded assessment in the absence of any incriminating material found during the search action.\" In the present case seized material is av facts are totally different and not applicable. 8.6 In this regard, reliance is placed on the decision of Hon'ble Supreme Court in the case of MAK Data (P.) Ltd. vs CIT [2013] 38 taxmann.com 448 (SC) which held as under: \"Voluntary disclosure does not release assessee from mischief of penal proceedings under section 271(1)(c).\" 8.7 Further Hon'ble ITAT Delhi in the case of Smt. Kiran Devi Vs ACIT [2009] 125 TTJ 631 (Delhi) held that where certain income was disclosed in return filed under section 153C following search, which income was not disclosed in original return, it was a clear case of concealment of income attracting penalty under section 271(1)(c); in such a case it was unnecessary to invoke Explanation 5 271(1)(c) 8.8 Hon'ble Calcutta High Court in CIT Vs Prasanna Dugar [2015] 59 taxmann.com 99 (Calcutta), while deciding matter related to section 271(1)(c) Expl 5A held that even where subsequent to search, assessee voluntarily disclosed a sum and offered said sum to tax, since said amount was not disclosed in original return, penalty levied urider section 271(1)(c) was justified. Hon'ble Supreme Court has upheld the decision of Hon'ble High Court in the above case. ITA No. 1049, 1050, 1051, 1052, 1053, u/s 153A. As per the appellant case of the Apex court decision Data P Ltd has been discussed and differentiated. 8.5 It is however noted that facts in that case were different. The relevant paras of the order are reproduced as under: \"Applying the similar proposition, even when the Assessing officer is precluded from making any addition in the absence of any incriminating material found during the search action in the assessment proceedings carried out u/s 153A of the Act in which the original assessment proceedings stood completed and not abated, the Assessing officer, in our view, is also precluded from initiate the penalty proceedings u/s 271(1)(c) of the Act in case of already concluded assessment in the absence of any incriminating material found during the search action.\" In the present case seized material is available. Thus, the facts are totally different and not applicable. 8.6 In this regard, reliance is placed on the decision of Hon'ble Supreme Court in the case of MAK Data (P.) Ltd. vs CIT [2013] 38 taxmann.com 448 (SC) which held as under: disclosure does not release assessee from mischief of penal proceedings under section 271(1)(c).\" 8.7 Further Hon'ble ITAT Delhi in the case of Smt. Kiran Devi Vs ACIT [2009] 125 TTJ 631 (Delhi) held that where certain income was disclosed in return filed in response to notice under section 153C following search, which income was not disclosed in original return, it was a clear case of concealment of income attracting penalty under section 271(1)(c); in such a case it was unnecessary to invoke Explanation 5 to section 8.8 Hon'ble Calcutta High Court in CIT Vs Prasanna Dugar [2015] 59 taxmann.com 99 (Calcutta), while deciding matter related to section 271(1)(c) Expl 5A held that even where subsequent to search, assessee voluntarily disclosed a sum nd offered said sum to tax, since said amount was not disclosed in original return, penalty levied urider section 271(1)(c) was justified. Hon'ble Supreme Court has upheld the decision of Hon'ble High Court in the above case. Swaran Nadhan Salaria 18 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 u/s 153A. As per the appellant case of the Apex court decision Data P Ltd has been discussed and differentiated. 8.5 It is however noted that facts in that case were different. The relevant paras of the order are reproduced as under: \"Applying the similar proposition, even when the making any addition in the absence of any incriminating material found during the search action in the assessment proceedings carried out u/s 153A of the Act in which the original assessment proceedings stood completed r, in our view, is also precluded from initiate the penalty proceedings u/s 271(1)(c) of the Act in case of already concluded assessment in the absence of any incriminating ailable. Thus, the 8.6 In this regard, reliance is placed on the decision of Hon'ble Supreme Court in the case of MAK Data (P.) Ltd. vs CIT [2013] disclosure does not release assessee from mischief 8.7 Further Hon'ble ITAT Delhi in the case of Smt. Kiran Devi Vs ACIT [2009] 125 TTJ 631 (Delhi) held that where certain in response to notice under section 153C following search, which income was not disclosed in original return, it was a clear case of concealment of income attracting penalty under section 271(1)(c); in such a to section 8.8 Hon'ble Calcutta High Court in CIT Vs Prasanna Dugar [2015] 59 taxmann.com 99 (Calcutta), while deciding matter related to section 271(1)(c) Expl 5A held that even where subsequent to search, assessee voluntarily disclosed a sum nd offered said sum to tax, since said amount was not disclosed in original return, penalty levied urider section Hon'ble Supreme Court has upheld the decision of Printed from counselvise.com 8.9 The above judgements have income is not disclosed in the original return, it is a clear case of concealment of income attracting penalty under section 271(1)(c). Thus, respectfully following the judgments of various courts the penalty levied by the AO is u ground no. 3 of the appeal 7.1 In respect of depreciation, the Ld. Counsel for the assessee relied on the decision of the ITAT Lucknow Bench in the case of Asst. CIT v. Smt. Surinder Kaur (supra) has been referred. The relevant reproduced as under: “20. Thus, the first requirement for invoking Explanation 5 is that in a valid search, some tangible assets/documents must have been found which would reflect concealed income of the assessee and whi concealed income. It is an admitted position that there has not been any seizure of tangible assets/documents in the search which could be said to be belonging to the assessee. Therefore, it cannot be said that a owner of tangible assets and that such tangible assets have been acquired by her by utilizing her undisclosed income earned before the date of search, and also there is no claim by the assessee that she has acquired any suc income not disclosed before the Department. 21. We, therefore, uphold the order of learned CIT(A) in cancelling the penalty which had been levied by the Assessing Officer on the basis of an apparently invalid assessment order and by invoking face of it, are not applicable, as no tangible asset belonging to assessee has 7.2 We have heard rival submissions of the parties and perused the relevant material on record. The Assessing Office ITA No. 1049, 1050, 1051, 1052, 1053, 8.9 The above judgements have clearly held that in case income is not disclosed in the original return, it is a clear case of concealment of income attracting penalty under section 271(1)(c). Thus, respectfully following the judgments of various courts the penalty levied by the AO is upheld. Accordingly, the ground no. 3 of the appeal is dismissed.” In respect of suo-motu disallowance of interest and depreciation, the Ld. Counsel for the assessee relied on the decision of the ITAT Lucknow Bench in the case of Asst. CIT v. Smt. Surinder Kaur (supra), wherein applicability of the Explanation 5 has been referred. The relevant finding of the Tribunal (supra) is reproduced as under: 20. Thus, the first requirement for invoking Explanation 5 is that in a valid search, some tangible assets/documents must have been found which would reflect concealed income of the assessee and which have become basis for making addition of concealed income. It is an admitted position that there has not been any seizure of tangible assets/documents in the search which could be said to be belonging to the assessee. Therefore, it cannot be said that assessee has been found to be the owner of tangible assets and that such tangible assets have been acquired by her by utilizing her undisclosed income earned before the date of search, and also there is no claim by the assessee that she has acquired any such asset out of income not disclosed before the Department. 21. We, therefore, uphold the order of learned CIT(A) in cancelling the penalty which had been levied by the Assessing Officer on the basis of an apparently invalid assessment order and by invoking the provisions of Explanation 5 which, on the face of it, are not applicable, as no tangible asset belonging to has been seized.” We have heard rival submissions of the parties and perused the relevant material on record. The Assessing Office Swaran Nadhan Salaria 19 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 clearly held that in case income is not disclosed in the original return, it is a clear case of concealment of income attracting penalty under section 271(1)(c). Thus, respectfully following the judgments of various pheld. Accordingly, the disallowance of interest and depreciation, the Ld. Counsel for the assessee relied on the decision of the ITAT Lucknow Bench in the case of Asst. CIT v. Smt. wherein applicability of the Explanation 5 finding of the Tribunal (supra) is 20. Thus, the first requirement for invoking Explanation 5 is that in a valid search, some tangible assets/documents must have been found which would reflect concealed income of the ch have become basis for making addition of concealed income. It is an admitted position that there has not been any seizure of tangible assets/documents in the search which could be said to be belonging to the assessee. Therefore, ssessee has been found to be the owner of tangible assets and that such tangible assets have been acquired by her by utilizing her undisclosed income earned before the date of search, and also there is no claim by h asset out of 21. We, therefore, uphold the order of learned CIT(A) in cancelling the penalty which had been levied by the Assessing Officer on the basis of an apparently invalid assessment order the provisions of Explanation 5 which, on the face of it, are not applicable, as no tangible asset belonging to We have heard rival submissions of the parties and perused the relevant material on record. The Assessing Officer has invoked Printed from counselvise.com Explanation 5A below the section 271(1)© of the Act. For ready reference, said Explanation is reproduced as under: [Explanation 5.-Where in the course of a day of June, 2007], the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income,- (a) for any previous year which has ended before the date of the search, but the return of income for such year has not been furnished bef furnished before the said date, such income has not been declared therein ; or (b) for any previous year which is to end on or after the date of the search, then, notwithstanding that such income is or after the date of the search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income, (1) such income is, or the transactions resulting in such income are recorded, (i) in a case falling under clause (a), before the date of the search; and (ii) in a case falling under clause (b), on or before such date, in the books of account, if any, maintained otherwise disclosed to the 76[Principal Commissioner or] Commissioner] before the said date ; or (2) he, in the course of the search any money, bullion, jewellery or other valuable article or thing found in his posses his control, has been acquired out of his return of income to be furnished before the expiry of time specified in section 139, and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income.] 7.3 From plane reading of invoking explanation 5A , the assessee must be found to be a owner of tangible asset acquired out of the undisclosed income. instant case before us is also the issue in dispute is whether the assessee is found to such tangible assets have been relevant undisclosed income ITA No. 1049, 1050, 1051, 1052, 1053, 5A below the section 271(1)© of the Act. For ready reference, said Explanation is reproduced as under: Where in the course of a 71[search 72 initiated under section 132 day of June, 2007], the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets assessee claims that such assets have been acquired by him by utilising (wholly or in part) his for any previous year which has ended before the date of the search, but the return of income for such year has not been furnished before the said date or, where such return has been furnished before the said date, such income has not been declared therein ; or for any previous year which is to end on or after the date of the search, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of the search, he shall, for the purposes of imposition of a penalty under clause section (1) of this section, be deemed to have concealed the particulars of his income or nished inaccurate particulars of such income, 73[unless,- such income is, or the transactions resulting in such income are recorded, in a case falling under clause (a), before the date of the search; and in a case falling under clause (b), on or before such date, in the books of account, if any, maintained 74 by him for any source of income or such income is otherwise disclosed to the 75[ 76[Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner] before the said date ; or se of the search 74, makes a statement under sub-section (4) of any money, bullion, jewellery or other valuable article or thing found in his posses his control, has been acquired out of his 74income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in 77 , and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income.] From plane reading of above provisions, we find that invoking explanation 5A , the assessee must be found to be a owner of tangible asset acquired out of the undisclosed income. instant case before us is also the issue in dispute is whether the assessee is found to be owner of the tangible assets and whether such tangible assets have been acquired by the assessee using undisclosed income before the date of the search. Swaran Nadhan Salaria 20 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 5A below the section 271(1)© of the Act. For ready section 132 before the 1st day of June, 2007], the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his for any previous year which has ended before the date of the search, but the return of income ore the said date or, where such return has been furnished before the said date, such income has not been declared therein ; or declared by him in any return of income furnished on or after the date of the search, he shall, for the purposes of imposition of a penalty under clause section (1) of this section, be deemed to have concealed the particulars of his income or such income is, or the transactions resulting in such income are recorded,- in a case falling under clause (a), before the date of the search; and by him for any source of income or such income is [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner] before the said date ; or section (4) of section 132 that any money, bullion, jewellery or other valuable article or thing found in his possession or under income which has not been disclosed so far in his 77[***] sub-section (1) of , and also specifies in the statement the manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income.] above provisions, we find that for invoking explanation 5A , the assessee must be found to be a owner of tangible asset acquired out of the undisclosed income. In the instant case before us is also the issue in dispute is whether the be owner of the tangible assets and whether quired by the assessee using the before the date of the search. The Printed from counselvise.com assessee in the return of income filed in response to notice under section 153A of the Act made variation in total income as compared to the original return of income filed. But detail been mentioned by the AO has simply stated that the assessee has withdrawn the expenses on interest and depreciation which were claimed to through shell entities, but nowhere brought on record as how said withdrawal of expenses in the return filed u/s 1 consequence to search action. Under the Assessing Officer has to establish that the made by the assessee valuable article or thing account or the documents found during the course of search and unless this condition is satisfied, the penalt Explanation 5A is not sustainable in law. have not established the fact that the by the assessee was a result of any tangible assets or documents found during the course of disallowance made by the assessee 271(1)(c) of the Act unless the conditions provided under Explanation 5A to section 271(1)(c) of the Act are fulfilled the above, the penalty in respect of interest and the excess depreciation is also cancelled the assessee are allowed. ITA No. 1049, 1050, 1051, 1052, 1053, assessee in the return of income filed in response to notice under the Act made variation in total income as compared to the original return of income filed. But detail of variation has not been mentioned by the AO in impugned assessment order has simply stated that the assessee has withdrawn the expenses on interest and depreciation which were claimed to have through shell entities, but nowhere brought on record as how said withdrawal of expenses in the return filed u/s 1 ce to search action. Under the Explanation 5A, the Assessing Officer has to establish that the suo-motu made by the assessee for any money, bullion, jewellery or other valuable article or thing or income was based on the account or the documents found during the course of search and unless this condition is satisfied, the penalty levied invoking 5A is not sustainable in law. The lower authorities tablished the fact that the suo-motu disallow as a result of any tangible assets or documents found during the course of the search, therefore, the disallowance made by the assessee don’t attract penalty u/s 271(1)(c) of the Act unless the conditions provided under to section 271(1)(c) of the Act are fulfilled the penalty in respect of interest and the excess cancelled. The relevant grounds of the appeal of the assessee are allowed. Swaran Nadhan Salaria 21 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 assessee in the return of income filed in response to notice under the Act made variation in total income as compared variation has not in impugned assessment order. The AO has simply stated that the assessee has withdrawn the expenses on have been incurred through shell entities, but nowhere brought on record as how said withdrawal of expenses in the return filed u/s 153A was as a Explanation 5A, the motu disallowance any money, bullion, jewellery or other based on the books of account or the documents found during the course of search and y levied invoking lower authorities disallowance made as a result of any tangible assets or documents the search, therefore, the suo-moto attract penalty u/s 271(1)(c) of the Act unless the conditions provided under to section 271(1)(c) of the Act are fulfilled. In view of the penalty in respect of interest and the excess The relevant grounds of the appeal of Printed from counselvise.com 8. The grounds in respect reproduced as under: 1. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries and wages amounting to Rs.19,80,695/ expenses amounting to Rs.82,804/ on estimated basis. 2. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty leviedon suo-moto disallowance of depreciation of Rs.62,88,051/ income filed 8.1 The grounds being identical to assessment year 2014 same are allowed mutatis mutandis 8.2 Similarly, the grounds raised in assessment year reproduced as under: 1. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries and wages amounting to Rs.13,50,296/ expenses amounting act on estimated basis. 2. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty leviedon suo-moto disallowance of interest of depreciation of Rs. 1,34,58,867/ income filed 8.3 The issues-in-dispute raised in this appeal grounds raised in assessment year 2014 ITA No. 1049, 1050, 1051, 1052, 1053, The grounds in respect of assessment year 2015 reproduced as under: On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries and wages amounting to Rs.19,80,695/- &adhoc disallowance of administrative expenses amounting to Rs.82,804/- made u/s 37(1) of the act on estimated basis. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty leviedon moto disallowance of interest of Rs.50,90,606/- & Excess depreciation of Rs.62,88,051/- in the return of u/s 153A. The grounds being identical to assessment year 2014 mutatis mutandis. Similarly, the grounds raised in assessment year reproduced as under: On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries and wages amounting to Rs.13,50,296/- &adhoc disallowance of adminis expenses amounting to Rs.1,69,516/- made u/s 37(1) of the act on estimated basis. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty leviedon moto disallowance of interest of Rs.79,26,246/- & Excess depreciation of Rs. 1,34,58,867/- in the return of u/s 153A. dispute raised in this appeal are grounds raised in assessment year 2014-15 and therefore, Swaran Nadhan Salaria 22 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 of assessment year 2015-16 are On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries and wages amounting to allowance of administrative made u/s 37(1) of the act On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty leviedon & Excess in the return of The grounds being identical to assessment year 2014-15, Similarly, the grounds raised in assessment year 2016-17 are On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries and wages amounting to &adhoc disallowance of administrative made u/s 37(1) of the On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty leviedon & Excess in the return of are identical to 15 and therefore, following Printed from counselvise.com our finding in AY 2014 mutatis mutandis. 9. The appeals for assessment year 2017 2020 have been adjudicated by the Ld. CIT(A) through a combined order taking assessment year 2018 take up the assessment year 2018 raised by the assessee are reproduced as under: 1. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries Rs.10,85,164/ expenses amounting to Rs.1,35,137/ act on estimated basis. 2. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in suo-moto disallowance of interest of Rs.44,65,742/ depreciation of Rs.97,75,277/ income filed 9.1 While completing the assessment u/s 153A of the Act, the Assessing Officer made addition disallowance on estimate basis in respect of cash expense incurred on salary, wages and administrative expenses, disallowance u/s 40A(ia) for non amounting to Rs.19,050/ expenses and depreciation expenses incurred through shell companies. Accordingly, in the penalty order passed u/s 270A of the Act, the Assessing Officer held the assessee guilty of under ITA No. 1049, 1050, 1051, 1052, 1053, our finding in AY 2014-15, the grounds raised are The appeals for assessment year 2017-18, 2018 2020 have been adjudicated by the Ld. CIT(A) through a combined order taking assessment year 2018-19 as lead. Accordingly, we also e assessment year 2018-19 as a lead year. The grounds raised by the assessee are reproduced as under: On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries and wages amounting to Rs.10,85,164/- &adhoc disallowance of administrative expenses amounting to Rs.1,35,137/- made u/s 37(1) of the act on estimated basis. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty leviedon moto disallowance of interest of Rs.44,65,742/- & Excess depreciation of Rs.97,75,277/- in the return of u/s 153A. While completing the assessment u/s 153A of the Act, the Assessing Officer made addition on three items disallowance on estimate basis in respect of cash expense incurred es and administrative expenses, disallowance u/s 40A(ia) for non-deduction of tax at source amounting to Rs.19,050/-, thirdly, disallowance expenses and depreciation expenses incurred through shell companies. Accordingly, in the penalty order passed u/s 270A of the Act, the Assessing Officer held the assessee guilty of under Swaran Nadhan Salaria 23 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 the grounds raised are allowed on 18, 2018-19 and 2019- 2020 have been adjudicated by the Ld. CIT(A) through a combined 19 as lead. Accordingly, we also 19 as a lead year. The grounds On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on and wages amounting to disallowance of administrative made u/s 37(1) of the On the facts and circumstances of the case and in law, the confirming the penalty leviedon & Excess in the return of While completing the assessment u/s 153A of the Act, the on three items, firstly, disallowance on estimate basis in respect of cash expense incurred es and administrative expenses, secondly, deduction of tax at source disallowance of interest expenses and depreciation expenses incurred through shell companies. Accordingly, in the penalty order passed u/s 270A of the Act, the Assessing Officer held the assessee guilty of under Printed from counselvise.com reporting of the income. The relevant part of the discus Assessing Officer in the penalty order is reproduced as under: “6. The arguments made by the assessee vide the afore mentioned submission are duly perused but not found to be tenable for the following reasons: (i) During the assessment assessee had not fully maintained the requisite details/supporting documents/bills/vouchers etc. to authenticate cash expenses claimed against taxable income. Further, during the Special Audit conducted in the case u/s 142(2A) of the Act, the Special Auditor had also requested for party-wise details (with Name, Address & PAN of the parties), supporting documents etc., to examine correctness & completeness of cash expenses claimed by the assessee. The assessee, however, fai explanations with regard to the cash payments made by it. (ii) The assessee has submitted that since the disallowance of salaries and wages made u/s 37(1) of the Act are on estimate basis and hence no penalty is leviable. pertinent to note that the facts of the case under consideration are distinguishable and squarely different. The plain reading of the assessment order is indicative of the fact that the disallowances were not made on mere adhoc basis carefully considering the cash expenses claimed during the year and thereafter a percentage of the same was disallowed after due diligence and taking into consideration facts of the case. It is noteworthy that the disallowance of cash expenses towards salaries & wages have been calculated at 4% whereas the disallowance of administrative expenses has been calculated at 10%. Had these disallowances been purely made on estimate basis then the common percentage rate of disallowance would have been ma separate cash expenses instead of different disallowance rate. (iii) It is admitted fact that the disallowance of Rs.85,996/ the AO pertains to non assessee. The assessee has submitted that no leviable by merely making a claim of expenditure. The assessee has also placed reliance on various judicial pronouncements in support of its claim. However, the facts of the instant case are different. It is unbelievable that assessee company which is engaged in providing uniformed guarding ITA No. 1049, 1050, 1051, 1052, 1053, reporting of the income. The relevant part of the discus Assessing Officer in the penalty order is reproduced as under: The arguments made by the assessee vide the afore mentioned submission are duly perused but not found to be tenable for the following reasons: (i) During the assessment proceedings, it was found that the assessee had not fully maintained the requisite details/supporting documents/bills/vouchers etc. to authenticate cash expenses claimed against taxable income. Further, during the Special Audit conducted in the case u/s 2(2A) of the Act, the Special Auditor had also requested for wise details (with Name, Address & PAN of the parties), supporting documents etc., to examine correctness & completeness of cash expenses claimed by the assessee. The assessee, however, failed to produce requisite details & explanations with regard to the cash payments made by it. (ii) The assessee has submitted that since the disallowance of salaries and wages made u/s 37(1) of the Act are on estimate basis and hence no penalty is leviable. In this regard, it is pertinent to note that the facts of the case under consideration are distinguishable and squarely different. The plain reading of the assessment order is indicative of the fact that the disallowances were not made on mere adhoc basis but after carefully considering the cash expenses claimed during the year and thereafter a percentage of the same was disallowed after due diligence and taking into consideration facts of the case. It is noteworthy that the disallowance of cash expenses owards salaries & wages have been calculated at 4% whereas the disallowance of administrative expenses has been calculated at 10%. Had these disallowances been purely made on estimate basis then the common percentage rate of disallowance would have been made by the AO on the two separate cash expenses instead of different disallowance rate. (iii) It is admitted fact that the disallowance of Rs.85,996/ the AO pertains to non-compliance of TDS provisions by the assessee. The assessee has submitted that no penalty is leviable by merely making a claim of expenditure. The assessee has also placed reliance on various judicial pronouncements in support of its claim. However, the facts of the instant case are different. It is unbelievable that assessee hich is engaged in providing uniformed guarding Swaran Nadhan Salaria 24 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 reporting of the income. The relevant part of the discussion of the Assessing Officer in the penalty order is reproduced as under: The arguments made by the assessee vide the afore- mentioned submission are duly perused but not found to be proceedings, it was found that the assessee had not fully maintained the requisite details/supporting documents/bills/vouchers etc. to authenticate cash expenses claimed against taxable income. Further, during the Special Audit conducted in the case u/s 2(2A) of the Act, the Special Auditor had also requested for wise details (with Name, Address & PAN of the parties), supporting documents etc., to examine correctness & completeness of cash expenses claimed by the assessee. The led to produce requisite details & explanations with regard to the cash payments made by it. (ii) The assessee has submitted that since the disallowance of salaries and wages made u/s 37(1) of the Act are on estimate In this regard, it is pertinent to note that the facts of the case under consideration are distinguishable and squarely different. The plain reading of the assessment order is indicative of the fact that the but after carefully considering the cash expenses claimed during the year and thereafter a percentage of the same was disallowed after due diligence and taking into consideration facts of the case. It is noteworthy that the disallowance of cash expenses owards salaries & wages have been calculated at 4% whereas the disallowance of administrative expenses has been calculated at 10%. Had these disallowances been purely made on estimate basis then the common percentage rate of de by the AO on the two separate cash expenses instead of different disallowance rate. (iii) It is admitted fact that the disallowance of Rs.85,996/- by compliance of TDS provisions by the penalty is leviable by merely making a claim of expenditure. The assessee has also placed reliance on various judicial pronouncements in support of its claim. However, the facts of the instant case are different. It is unbelievable that assessee hich is engaged in providing uniformed guarding Printed from counselvise.com services to corporate / government/multinational all over India for many years is unaware both about the industry norms as well as the provisions of income tax with respect to TDS deductions. (iv) The assesse Rs.44,65,742/ filed u/s 153A of the Act.and had there been no search action, the assessee would not have offered this additional income for taxation, (v) Further, during proceedings as well as during the assessment proceedings, it was found that, the assessee had used said shell entities for rotation of funds/circuitous transactions in order to and creation of fictitious asset. On perusal o extracted from the Tally data, it was found during search action that the assessee company had made payments to certain entities which are found to be shell entities. The conduct & affairs of these shell entities had established that these shell entities were floated by the assessee group/under control of the assessee group with a purpose to do circular transactions and create fictitious assets. Thus, the argument of the assessee cannot be accepted. (vi) To sum up, in the instant case, (Rs.44,65,742/ disallowed by the assessee post search, in the return of income filed in response to notice issued u/s 153A of the Income Tax Act, 1961. The surrendering of this income for taxation after identification of omission on part of the assessee cannot be termed as a \"bonafide disclosure\" and hence is liable for imposition of penalty for under (vii) The assessee has shown total income at Rs.48,42,160/ in the original return of income filed by the assessee. However, in the return filed in response to notice u/s 153A of the Act, the total income is declared at Rs.53,99,630/ assessee has shown additional income after the issue of notice u/s 153A of the Act action, the assessee would not have offered this additional income for taxation. (viii) The judgements relied upon by the assessee are not relevant to the prese case as the facts are different. ITA No. 1049, 1050, 1051, 1052, 1053, services to corporate / government/multinational all over India for many years is unaware both about the industry norms as well as the provisions of income tax with respect to TDS (iv) The assessee has disallowed interest expense of Rs.44,65,742/- & excess depreciation of Rs.97,75,277/ filed u/s 153A of the Act.and had there been no search action, the assessee would not have offered this additional income (v) Further, during the course of search/post search proceedings as well as during the assessment proceedings, it was found that, the assessee had used said shell entities for rotation of funds/circuitous transactions in order to and creation of fictitious asset. On perusal of the ledger account extracted from the Tally data, it was found during search action that the assessee company had made payments to certain entities which are found to be shell entities. The conduct & affairs of these shell entities had established that hese shell entities were floated by the assessee group/under control of the assessee group with a purpose to do circular transactions and create fictitious assets. Thus, the argument of the assessee cannot be accepted. (vi) To sum up, in the instant case, interest expenses (Rs.44,65,742/-) and extra depreciation (Rs.97,75,277/ disallowed by the assessee post search, in the return of income filed in response to notice issued u/s 153A of the Income Tax Act, 1961. The surrendering of this income for tion after identification of omission on part of the assessee cannot be termed as a \"bonafide disclosure\" and hence is liable for imposition of penalty for under- reporting of income. The assessee has shown total income at Rs.48,42,160/ nal return of income filed by the assessee. However, in the return filed in response to notice u/s 153A of the Act, the total income is declared at Rs.53,99,630/-. Thus, the assessee has shown additional income after the issue of notice u/s 153A of the Act and had there been no search action, the assessee would not have offered this additional income for taxation. (viii) The judgements relied upon by the assessee are not relevant to the prese case as the facts are different. Swaran Nadhan Salaria 25 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 services to corporate / government/multinational all over India for many years is unaware both about the industry norms as well as the provisions of income tax with respect to TDS e has disallowed interest expense of & excess depreciation of Rs.97,75,277/- in ITR filed u/s 153A of the Act.and had there been no search action, the assessee would not have offered this additional income the course of search/post search proceedings as well as during the assessment proceedings, it was found that, the assessee had used said shell entities for rotation of funds/circuitous transactions in order to and f the ledger account extracted from the Tally data, it was found during search action that the assessee company had made payments to certain entities which are found to be shell entities. The conduct & affairs of these shell entities had established that hese shell entities were floated by the assessee group/under control of the assessee group with a purpose to do circular transactions and create fictitious assets. Thus, the argument interest expenses ) and extra depreciation (Rs.97,75,277/-) was disallowed by the assessee post search, in the return of income filed in response to notice issued u/s 153A of the Income Tax Act, 1961. The surrendering of this income for tion after identification of omission on part of the assessee cannot be termed as a \"bonafide disclosure\" and hence is reporting of income. The assessee has shown total income at Rs.48,42,160/- nal return of income filed by the assessee. However, in the return filed in response to notice u/s 153A of the Act, . Thus, the assessee has shown additional income after the issue of and had there been no search action, the assessee would not have offered this additional (viii) The judgements relied upon by the assessee are not Printed from counselvise.com (ix) Thus, there has been assessee and has under under consideration and therefore all the facts which are material to the income were not disclosed in the return of income 9.2 Thereafter, the Assessing amounting to Rs.34,24,309/ extent of Rs.1,92,72,880/ deleted the penalty in respect of disallowance u/s 40A(ia) of the Act but upheld the penalty in re wages’ and ‘administrative expenses and ‘excess depreciation salary, wages and administrative expenses is reproduced as under: “7.5 Before me, appellant has again submitted that since salary and administrative expenses were disallowed on estimation basis only, penalty cannot be levied. Further, appellant has placed reliance of 270A (6) and submitted that it does not cover following underrepor 1. the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is the material facts to substantiate the explanation offered; 2. the amount of under basis of an estimate, if the accounts are correct and complete to the satisfaction of the Asse Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom; 3. the amount of under basis of an estimate, if the assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of ITA No. 1049, 1050, 1051, 1052, 1053, (ix) Thus, there has been deliberate omission on the part of the assessee and has under-reported the income for the year under consideration and therefore all the facts which are material to the income were not disclosed in the income filed.” Thereafter, the Assessing Officer levied the penalty @ 50% amounting to Rs.34,24,309/- for under reporting income to the 1,92,72,880/-. On further appeal, the Ld. CIT(A) deleted the penalty in respect of disallowance u/s 40A(ia) of the Act but upheld the penalty in respect of disallowance of administrative expenses’ on estimate basis and excess depreciation’. The finding of the ld CIT(A) salary, wages and administrative expenses is reproduced as under: me, appellant has again submitted that since salary and administrative expenses were disallowed on estimation basis only, penalty cannot be levied. Further, appellant has placed reliance of 270A (6) and submitted that it does not cover following underreported incomes: 1. the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered; 2. the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom; 3. the amount of under-reported income determined on th basis of an estimate, if the assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of Swaran Nadhan Salaria 26 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 deliberate omission on the part of the reported the income for the year under consideration and therefore all the facts which are material to the income were not disclosed in the Officer levied the penalty @ 50% rting income to the . On further appeal, the Ld. CIT(A) deleted the penalty in respect of disallowance u/s 40A(ia) of the Act spect of disallowance of ‘salary and on estimate basis and ‘interest’ ld CIT(A) in respect of salary, wages and administrative expenses is reproduced as under: me, appellant has again submitted that since salary and administrative expenses were disallowed on estimation basis only, penalty cannot be levied. Further, appellant has placed reliance of 270A (6) and submitted that it 1. the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered; reported income determined on the basis of an estimate, if the accounts are correct and complete ssing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom; reported income determined on the basis of an estimate, if the assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of Printed from counselvise.com his income and has disclosed all the facts material to the addition or disallowa 4. the amount of under addition made in conformity with the arm's length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, under Chapter X, and, disclosed all the material facts relating to the transaction; and 5. the amount of undisclosed income referred to in section 271AAB. However, in the present case it is important to note that the conditions as per point (b), which is regarding accounts being correct and complete to the satisfaction of AO and point (c) which is regarding disclosure of all facts have not been satisfied by the appellant. During the assessment proceedings, it was found requisite details/ supporting documents/bills/voucher to authenticate cash expenses claimed against taxable income. In the absence of complete submission or documentary evidence there was no other way for the AO t disallowance other than the methodology adopted. It is noted that the figures of 4% and 10% have been taken conservatively by the AO and only to the extent which was not verifiable in the absence of documentary evidence. Further, during the Special Audit conducted in the case u/s. 142(2A) of the Act, the special Auditor had also requested for party supporting documents to examine correctness & completeness of cash expenses claimed by the appellant. The appellant, however, failed to with regard to cash payment made by it. Importantly, these disallowances have not been challenged by the appellant and no further appeal has been filed. During penalty proceedings before the AO again no documents we before me, no details or documents have been furnished in this regard even though a number of opportunities were granted to the assessee. 7.6 Considering the facts of the case and in the light of assesse's submission, I am of the opinion left with no choice but to estimate the income, to the extent which was not verifiable, as complete details were not submitted by the assessee. It is important to note here that whatever details are available with the department are ITA No. 1049, 1050, 1051, 1052, 1053, his income and has disclosed all the facts material to the addition or disallowance; 4. the amount of under-reported income represented by any addition made in conformity with the arm's length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and 5. the amount of undisclosed income referred to in section However, in the present case it is important to note that the conditions as per point (b), which is regarding accounts being correct and complete to the satisfaction of AO and point (c) which is regarding disclosure of all facts have not been satisfied by the appellant. During the assessment proceedings, it was found that the appellant had not maintained the requisite details/ supporting documents/bills/voucher to authenticate cash expenses claimed against taxable income. In the absence of complete submission or documentary evidence there was no other way for the AO to work out disallowance other than the methodology adopted. It is noted that the figures of 4% and 10% have been taken conservatively by the AO and only to the extent which was not verifiable in the absence of documentary evidence. Further, during the ial Audit conducted in the case u/s. 142(2A) of the Act, the special Auditor had also requested for party-wise details, supporting documents to examine correctness & completeness of cash expenses claimed by the appellant. The appellant, however, failed to produce requisite details & explanations with regard to cash payment made by it. Importantly, these disallowances have not been challenged by the appellant and no further appeal has been filed. During penalty proceedings before the AO again no documents were submitted. Even before me, no details or documents have been furnished in this regard even though a number of opportunities were granted to the assessee. 7.6 Considering the facts of the case and in the light of assesse's submission, I am of the opinion that the Ld. AO was left with no choice but to estimate the income, to the extent which was not verifiable, as complete details were not submitted by the assessee. It is important to note here that whatever details are available with the department are Swaran Nadhan Salaria 27 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 his income and has disclosed all the facts material to the reported income represented by any addition made in conformity with the arm's length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed declared the international transaction under Chapter X, and, disclosed all the material facts relating 5. the amount of undisclosed income referred to in section However, in the present case it is important to note that the conditions as per point (b), which is regarding accounts being correct and complete to the satisfaction of AO and point (c) which is regarding disclosure of all facts have not been satisfied by the appellant. During the assessment proceedings, that the appellant had not maintained the requisite details/ supporting documents/bills/voucher to authenticate cash expenses claimed against taxable income. In the absence of complete submission or documentary o work out disallowance other than the methodology adopted. It is noted that the figures of 4% and 10% have been taken conservatively by the AO and only to the extent which was not verifiable in the absence of documentary evidence. Further, during the ial Audit conducted in the case u/s. 142(2A) of the Act, wise details, supporting documents to examine correctness & completeness of cash expenses claimed by the appellant. The appellant, produce requisite details & explanations with regard to cash payment made by it. Importantly, these disallowances have not been challenged by the appellant and no further appeal has been filed. During penalty proceedings re submitted. Even before me, no details or documents have been furnished in this regard even though a number of opportunities were granted to 7.6 Considering the facts of the case and in the light of that the Ld. AO was left with no choice but to estimate the income, to the extent which was not verifiable, as complete details were not submitted by the assessee. It is important to note here that whatever details are available with the department are Printed from counselvise.com available due to search and seizure action. If no search action had been taken by the department, the assesse would not have voluntarily disclosed the income as it had not been filing its return of income. Thus, the action of appellant is clearly deliberate suppression and under reporting of income. Based on above discussion levy of penalty is upheld on this ground. Accordingly, this ground of appeal 9.3 Regarding the penalty in respect of interest of Rs.44,65,742/ and excess depreciation of R the decision of the Hon’ble Supreme Court in the case of Mak Data Pvt. Ltd. v. CIT (supra) reporting of the income observing as under: “9.2 Before me, the appellant has submitt additional income was offered in the return of income out of abundant precaution and to avoid litigation. It has further been submitted that no penalty may be levied as the declaration of additional income has been done suo noted by the AO, during search/post search proceedings and assessment proceedings, it was found that the appellant had used shell entities for rotation of funds/circuitous transactions in order to and creation of fictitious asset. On perusal of the ledger account ext search action, it was found that appellant company had made payments to various shell entities. The appellant had used these shell entities to book inadmissible expenses and to conceal its taxable income. The said in including interest and excess depreciation amounting to Rs 1,42,41,019/ the return of income filed in response to notice issued u/s 153A of the Act. 9.3 I have gone through the submissions f and the relevant records. It is an established fact and various decisions of the Hon'ble Apex court and other courts have held that suo-moto disclosure in the return after search action does not absolve the appellant of the penalty pr 9.4 The appellant has relied upon the decision of Hon'ble Chandigarh Tribunal in the case of DCIT Central Circle Chandigarh v Kulwant Singh wherein it was held that penalty ITA No. 1049, 1050, 1051, 1052, 1053, ailable due to search and seizure action. If no search action had been taken by the department, the assesse would not have voluntarily disclosed the income as it had not been filing its return of income. Thus, the action of appellant is clearly suppression and under reporting of income. Based on above discussion levy of penalty is upheld on this ground. Accordingly, this ground of appeal is dismissed.” Regarding the penalty in respect of interest of Rs.44,65,742/ depreciation of Rs.97,75,277/-, The Ld. CIT(A) relied on the decision of the Hon’ble Supreme Court in the case of Mak Data Pvt. Ltd. v. CIT (supra) and upheld the penalty levied for under reporting of the income observing as under: “9.2 Before me, the appellant has submitted that the additional income was offered in the return of income out of abundant precaution and to avoid litigation. It has further been submitted that no penalty may be levied as the declaration of additional income has been done suo-moto. As e AO, during search/post search proceedings and assessment proceedings, it was found that the appellant had used shell entities for rotation of funds/circuitous transactions in order to and creation of fictitious asset. On perusal of the ledger account extracted from the Tally data found during search action, it was found that appellant company had made payments to various shell entities. The appellant had used these shell entities to book inadmissible expenses and to conceal its taxable income. The said inadmissible expenses including interest and excess depreciation amounting to Rs 1,42,41,019/- were suo-moto disallowed by the appellant in the return of income filed in response to notice issued u/s 153A of the Act. 9.3 I have gone through the submissions filed by the appellant and the relevant records. It is an established fact and various decisions of the Hon'ble Apex court and other courts have held moto disclosure in the return after search action does not absolve the appellant of the penalty provisions. 9.4 The appellant has relied upon the decision of Hon'ble Chandigarh Tribunal in the case of DCIT Central Circle Chandigarh v Kulwant Singh wherein it was held that penalty Swaran Nadhan Salaria 28 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 ailable due to search and seizure action. If no search action had been taken by the department, the assesse would not have voluntarily disclosed the income as it had not been filing its return of income. Thus, the action of appellant is clearly suppression and under reporting of income. Based on above discussion levy of penalty is upheld on this ground. Regarding the penalty in respect of interest of Rs.44,65,742/- The Ld. CIT(A) relied on the decision of the Hon’ble Supreme Court in the case of Mak Data and upheld the penalty levied for under ed that the additional income was offered in the return of income out of abundant precaution and to avoid litigation. It has further been submitted that no penalty may be levied as the moto. As e AO, during search/post search proceedings and assessment proceedings, it was found that the appellant had used shell entities for rotation of funds/circuitous transactions in order to and creation of fictitious asset. On perusal of the racted from the Tally data found during search action, it was found that appellant company had made payments to various shell entities. The appellant had used these shell entities to book inadmissible expenses and to admissible expenses including interest and excess depreciation amounting to Rs moto disallowed by the appellant in the return of income filed in response to notice issued u/s iled by the appellant and the relevant records. It is an established fact and various decisions of the Hon'ble Apex court and other courts have held moto disclosure in the return after search action does 9.4 The appellant has relied upon the decision of Hon'ble Chandigarh Tribunal in the case of DCIT Central Circle-1, Chandigarh v Kulwant Singh wherein it was held that penalty Printed from counselvise.com should not be levied on suo u/s 153A. As per the appellant case of the Apex court decision in Mak Data P Ltd has been discussed and differentiated. 9.5 It is however noted that facts in that case were different. The relevant paras of the order are reproduced as under: \"Applying the similar p officer is precluded from making any addition in the absence of any incriminating material found during the search action in the assessment proceedings carried out u/s 153A of the Act in which the original assessment pro and not abated, the Assessing officer, in our view, is also precluded from initiate the penalty proceedings u/s 271(1)(c) of the Act in case of already concluded assessment in the absence of any incriminating material found during action.\" In the present case seized material is available. Thus, the facts are totally different and not applicable. 9.6 In this regard, reliance is placed on the decision of Hon'ble Supreme Court in the case of MAK Data (P.) Ltd. vs CIT [2013] 38 taxmann.com 448 (SC) which held as under: \"Voluntary disclosure does not release assessee from mischief of penal proceedings under section 271(1)(c).\" 9.7 Further Hon'ble ITAT Delhi in the case of Smt. Kiran Devi Vs ACIT [2009] 125 TTJ 631 (Delhi) held income was disclosed in return filed in response to notice under section 153C following search, which income was not disclosed in original return, it was a clear case of concealment of income attracting penalty under section 271(1)(c); i case it was unnecessary to invoke Explanation 5 to section 271(1)(c) 9.8 Hon'ble Calcutta High Court in CIT Vs Prasanna Dugar [2015] 59 taxmann.com 99 (Calcutta), while deciding matter related to section 271(1)(c) Expl 5A held that even where subsequent to search, assessee voluntarily disclosed a sum and offered said sum to tax, since said amount was not disclosed in original return, penalty levied under section 271(1)(c) was justified. Hon'ble Supreme Court has upheld the decision of Hon'ble High Court in the above case. ITA No. 1049, 1050, 1051, 1052, 1053, should not be levied on suo-moto income offered in the return . As per the appellant case of the Apex court decision in Mak Data P Ltd has been discussed and differentiated. 9.5 It is however noted that facts in that case were different. The relevant paras of the order are reproduced as under: \"Applying the similar proposition, even when the Assessing officer is precluded from making any addition in the absence of any incriminating material found during the search action in the assessment proceedings carried out u/s 153A of the Act in which the original assessment proceedings stood completed and not abated, the Assessing officer, in our view, is also precluded from initiate the penalty proceedings u/s 271(1)(c) of the Act in case of already concluded assessment in the absence of any incriminating material found during the search In the present case seized material is available. Thus, the facts are totally different and not applicable. 9.6 In this regard, reliance is placed on the decision of Hon'ble Supreme Court in the case of MAK Data (P.) Ltd. vs CIT [2013] 38 taxmann.com 448 (SC) which held as under: \"Voluntary disclosure does not release assessee from mischief of penal proceedings under section 271(1)(c).\" 9.7 Further Hon'ble ITAT Delhi in the case of Smt. Kiran Devi Vs ACIT [2009] 125 TTJ 631 (Delhi) held that where certain income was disclosed in return filed in response to notice under section 153C following search, which income was not disclosed in original return, it was a clear case of concealment of income attracting penalty under section 271(1)(c); in such a case it was unnecessary to invoke Explanation 5 to section 9.8 Hon'ble Calcutta High Court in CIT Vs Prasanna Dugar [2015] 59 taxmann.com 99 (Calcutta), while deciding matter related to section 271(1)(c) Expl 5A held that even where equent to search, assessee voluntarily disclosed a sum and offered said sum to tax, since said amount was not disclosed in original return, penalty levied under section 271(1)(c) was justified. Hon'ble Supreme Court has upheld the decision of Hon'ble Court in the above case. Swaran Nadhan Salaria 29 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 moto income offered in the return . As per the appellant case of the Apex court decision in Mak Data P Ltd has been discussed and differentiated. 9.5 It is however noted that facts in that case were different. The relevant paras of the order are reproduced as under: roposition, even when the Assessing officer is precluded from making any addition in the absence of any incriminating material found during the search action in the assessment proceedings carried out u/s 153A of the Act in ceedings stood completed and not abated, the Assessing officer, in our view, is also precluded from initiate the penalty proceedings u/s 271(1)(c) of the Act in case of already concluded assessment in the the search In the present case seized material is available. Thus, the 9.6 In this regard, reliance is placed on the decision of Hon'ble Supreme Court in the case of MAK Data (P.) Ltd. vs CIT [2013] \"Voluntary disclosure does not release assessee from mischief 9.7 Further Hon'ble ITAT Delhi in the case of Smt. Kiran Devi that where certain income was disclosed in return filed in response to notice under section 153C following search, which income was not disclosed in original return, it was a clear case of concealment n such a case it was unnecessary to invoke Explanation 5 to section 9.8 Hon'ble Calcutta High Court in CIT Vs Prasanna Dugar [2015] 59 taxmann.com 99 (Calcutta), while deciding matter related to section 271(1)(c) Expl 5A held that even where equent to search, assessee voluntarily disclosed a sum and offered said sum to tax, since said amount was not disclosed in original return, penalty levied under section Hon'ble Supreme Court has upheld the decision of Hon'ble Printed from counselvise.com 9.9 Although the above judgements are in the context of 271(1)(c), the same are applicable in case of penalty u/s 270 A as the both the penalty provisions are analogous. The AO had clearly initiated the penalty u/s 270A for 'under income' and the final penalty order was also passed for 'under reporting of income and as such the conditions of Section 270A of the Act were fulfilled. Thus respectfully following the judgments of various courts the penalty levied by the AO i upheld. Accordingly, the ground no. 4 of the appeal is dismissed.” 10. We have heard the rival submissions advanced on behalf of the parties and perused the material available on record. The issue for our consideration is the validity of the penalty levied under Section 270A of the Income reporting of income by the assessee. The impugned penalty pertains to two components: (i) disallowance on an estimated basis in respect of salary, wages and administrative expenses; and (ii) suo motu disallowance of interest amounting to excess depreciation of Section 153A of the Act. 10.1 We find that from assessment year 2017 u/s 270A of the Act for under reporting and miss income has been introduced. In the present case, been held to be under penalty has been computed by the Assessing Officer. Under the provisions of section 270A(2) of the Act a person shall be considered to have under reported his income processed under clause (a) of sub ITA No. 1049, 1050, 1051, 1052, 1053, 9.9 Although the above judgements are in the context of 271(1)(c), the same are applicable in case of penalty u/s 270 A as the both the penalty provisions are analogous. The AO had clearly initiated the penalty u/s 270A for 'under reporting of income' and the final penalty order was also passed for 'under reporting of income and as such the conditions of Section 270A of the Act were fulfilled. Thus respectfully following the judgments of various courts the penalty levied by the AO i upheld. Accordingly, the ground no. 4 of the dismissed.” We have heard the rival submissions advanced on behalf of the parties and perused the material available on record. The issue for our consideration is the validity of the penalty levied under Section 270A of the Income-tax Act, 1961, on account of under porting of income by the assessee. The impugned penalty pertains to two components: (i) disallowance on an estimated basis in respect of salary, wages and administrative expenses; and (ii) suo motu disallowance of interest amounting to ₹44,65,742/ ess depreciation of ₹97,75,277/- in the return filed under Section 153A of the Act. We find that from assessment year 2017-18 onward penalty u/s 270A of the Act for under reporting and miss income has been introduced. In the present case, the assessee has held to be under reported his income and accordingly, the penalty has been computed by the Assessing Officer. Under the provisions of section 270A(2) of the Act a person shall be considered to have under reported his income if the income assessed processed under clause (a) of sub-section (1) of section 143 Swaran Nadhan Salaria 30 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 9.9 Although the above judgements are in the context of 271(1)(c), the same are applicable in case of penalty u/s 270 A as the both the penalty provisions are analogous. The AO had reporting of income' and the final penalty order was also passed for 'under reporting of income and as such the conditions of Section 270A of the Act were fulfilled. Thus respectfully following the judgments of various courts the penalty levied by the AO is upheld. Accordingly, the ground no. 4 of the We have heard the rival submissions advanced on behalf of the parties and perused the material available on record. The issue for our consideration is the validity of the penalty levied under tax Act, 1961, on account of under- porting of income by the assessee. The impugned penalty pertains to two components: (i) disallowance on an estimated basis in respect of salary, wages and administrative expenses; and (ii) suo 44,65,742/- and in the return filed under 18 onward penalty u/s 270A of the Act for under reporting and miss-reporting of the assessee has his income and accordingly, the penalty has been computed by the Assessing Officer. Under the provisions of section 270A(2) of the Act a person shall be considered come assessed/ section (1) of section 143 is Printed from counselvise.com greater than the income determined in the return Further, sub-section 6 of section 270A prescribe reported income shall not include relevant section is reproduced as under: (6) The under-reported income, for the purposes of this section, shall not include the following, namely:- (a) the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or or the Commissioner or the Principal Commissioner, that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered; (b) the amount of under accounts are correct and complete to the satisfaction of the Assessing Officer or Joint Commissioner (Appeals) or] the Commissioner the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom; (c) the amount of under assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance; (d) the amount of under with the arm’s length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and (e) the amount of undisclosed income referred to in 10.2 The Ld. Counsel for the assessee referred to the clause (a) of sub-section 6 and submitted that assessee has duly offered explanation in respect of interest and excess depreciation and motu offered income in the return of income filed section 153A of the Act therefore, explanation of the assessee is bona disclosed all the mat offered, therefore, no penalty in respect of inter ITA No. 1049, 1050, 1051, 1052, 1053, greater than the income determined in the return ion 6 of section 270A prescribe reported income shall not include subject to certain cond relevant section is reproduced as under: reported income, for the purposes of this section, shall not include the following, the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or 20[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered; the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom; the amount of under-reported income determined on the basis of an estimate, if t assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance; under-reported income represented by any addition made in conformity with the arm’s length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and the amount of undisclosed income referred to in section 271AAB. The Ld. Counsel for the assessee referred to the clause (a) of section 6 and submitted that assessee has duly offered xplanation in respect of interest and excess depreciation and offered income in the return of income filed section 153A of the Act therefore, according to the assessee, the anation of the assessee is bonafide and the assessee has disclosed all the material fact to substantiate the e therefore, no penalty in respect of inter Swaran Nadhan Salaria 31 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 greater than the income determined in the return of income. ion 6 of section 270A prescribe that under subject to certain conditions. The reported income, for the purposes of this section, shall not include the following, the amount of income in respect of which the assessee offers an explanation and the [the Joint Commissioner (Appeals) or] the Commissioner (Appeals) as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or 21[the (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that reported income determined on the basis of an estimate, if the assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has reported income represented by any addition made in conformity with the arm’s length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material The Ld. Counsel for the assessee referred to the clause (a) of section 6 and submitted that assessee has duly offered xplanation in respect of interest and excess depreciation and suo- offered income in the return of income filed in response to according to the assessee, the fide and the assessee has erial fact to substantiate the explanation therefore, no penalty in respect of interest and excess Printed from counselvise.com depreciation should be levied invoking clause (a) sub section 143 of the Act in respect of estimate in respect to salary and wages and administrative expenses. The Ld. Counsel for the assessee referred to clause (a) of section made purely on the estimate basis been rejected u/s 145 been treated by the Ld. AO and addition has been made on es of the vouchers on the expenses on the part of the assessee. Counsel submitted that the Assessing Officer has himself estimated part of the expenses as genuine and merely estimated the addition for non-maintenance o assessee falls under clause (b) of section 270 leviable due to exclusion carved from the definition of the under reported income. 10.3 We are of the opinion that addition in respect of salary, w and administrative expenses have been made by the Asse Officer on estimate only, d assessee in respect of cash the expenditure was not genuine have disallowed the entire cash expenses but he did not only estimated disallowance of 4% of the salary and wages and 10% on administrative expenses and no basis for such estimation has been provided by the Assessing Officer. In the ci ITA No. 1049, 1050, 1051, 1052, 1053, depreciation should be levied invoking clause (a) sub section 143 of the Act in respect of estimate in respect to salary and wages and administrative expenses. The Ld. Counsel for the assessee referred to clause (a) of section (2) and addition has been made purely on the estimate basis and books of accounts have not been rejected u/s 145(3) of the Act and therefore, accounts have been treated by the Ld. AO as correct and complete to satisfaction and addition has been made on estimate basis from non vouchers on the expenses on the part of the assessee. Counsel submitted that the Assessing Officer has himself estimated part of the expenses as genuine and merely estimated the addition maintenance of the vouchers, therefore, the case of the assessee falls under clause (b) of section 270 and no penalty is ue to exclusion carved from the definition of the under We are of the opinion that addition in respect of salary, w and administrative expenses have been made by the Asse Officer on estimate only, due to lack of vouchers maintained by the assessee in respect of cash. If according to the Assessing Officer, the expenditure was not genuine, then the Assessing Off have disallowed the entire cash expenses but he did not estimated disallowance of 4% of the salary and wages and 10% on administrative expenses and no basis for such estimation has been provided by the Assessing Officer. In the ci Swaran Nadhan Salaria 32 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 depreciation should be levied invoking clause (a) sub-section (1) of section 143 of the Act in respect of estimate in respect to salary and wages and administrative expenses. The Ld. Counsel for the (2) and addition has been and books of accounts have not (3) of the Act and therefore, accounts have correct and complete to satisfaction timate basis from non-production vouchers on the expenses on the part of the assessee. The Ld. Counsel submitted that the Assessing Officer has himself estimated part of the expenses as genuine and merely estimated the addition therefore, the case of the and no penalty is ue to exclusion carved from the definition of the under- We are of the opinion that addition in respect of salary, wages and administrative expenses have been made by the Assessing ue to lack of vouchers maintained by the f according to the Assessing Officer, the Assessing Officer could have disallowed the entire cash expenses but he did not do so and estimated disallowance of 4% of the salary and wages and 10% on administrative expenses and no basis for such estimation has been provided by the Assessing Officer. In the circumstances, Printed from counselvise.com addition being merely on the estimate basis cannot be sustained in view of reasons pari materia the Act and particularly in view of clause of sub 270 of the Act as in the case of the has made disallowance out of accounts have been rejected invoking section 145(3) of the Act regards the penalty levied for interest motu offered by the assessee response to section 153A of the Act, w explained the suo-motu provided all material facts to su explanation being bona 270A of the Act. Accordingly, the penalty levied by the Assessing Officer for under reporting of the income u/s 270A of the Act is hereby deleted. 10.4 The Ld. CIT(A) in assessment year has followed his finding in assessment year 2017 identical facts and circumstances, follow 18, the penalty levied by the Assessing Officer u/s 270A of the Act in assessment year cancelled and relevant grounds are accordingly allowed ITA No. 1049, 1050, 1051, 1052, 1053, addition being merely on the estimate basis cannot be sustained in pari materia with penalty cancelled u/s the Act and particularly in view of clause of sub-section 2 of section 270 of the Act as in the case of the assessee, the Assessing Officer has made disallowance out of cash expenses and no books of accounts have been rejected invoking section 145(3) of the Act regards the penalty levied for interest and excess depreciation offered by the assessee in the return of income filed in n 153A of the Act, we find that the motu variation made in the return of income and provided all material facts to substantiate the explanation. Thus xplanation being bonafide in nature no penalty is leviable u/s 270A of the Act. Accordingly, the penalty levied by the Assessing Officer for under reporting of the income u/s 270A of the Act is CIT(A) in assessment years 2018-19 finding in assessment year 2017 ntical facts and circumstances, following our finding in AY 2017 the penalty levied by the Assessing Officer u/s 270A of the Act in assessment years 2017-18 and 2019-2020 is also hereby d and relevant grounds are accordingly allowed Swaran Nadhan Salaria 33 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 addition being merely on the estimate basis cannot be sustained in cancelled u/s 271(1)(c) of section 2 of section assessee, the Assessing Officer cash expenses and no books of accounts have been rejected invoking section 145(3) of the Act. As and excess depreciation suo in the return of income filed in e find that the assessee has made in the return of income and bstantiate the explanation. Thus fide in nature no penalty is leviable u/s 270A of the Act. Accordingly, the penalty levied by the Assessing Officer for under reporting of the income u/s 270A of the Act is and 2019-2020 finding in assessment year 2017-18. Being ing our finding in AY 2017- the penalty levied by the Assessing Officer u/s 270A of the Act 2020 is also hereby d and relevant grounds are accordingly allowed. Printed from counselvise.com 11. Now, we take up the appeal of the assessee for assessment year 2020-21. The grounds raised by the assessee are reproduced as under: 1. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the initiation of penalty wherein the Assessing Officer has not specified the provision of Section 271AAB of the Income tax Act under which the penalty is levied. 2. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries and wages amounting to Rs.76,70,900/ expenses amounting on estimated basis. 3. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty leviedon suo-moto disallowance of interest of Rs.16,43,363/ depreciation of estimated b 11.1 In the ground No. 1, the assessee has challenged the levy of penalty u/s 271AAB of the Act on the ground that the Assessing Officer has not specified the relevant provisions while levying the penalty. This issue has been adjudicated by the Ld. C observing as under: “7.1 The appellant in this ground has contended that the AO has erred in not mentioning the specific provision of Section 271AAB of the Act for initiation of penalty proceedings in the assessment order. It is noted that the appellant had also raised this contention before the AO during the course of penalty proceedings. The AO in his order has already clarified that the provisions of the 271AAB (1A) of the Act have been correctly ITA No. 1049, 1050, 1051, 1052, 1053, we take up the appeal of the assessee for assessment 21. The grounds raised by the assessee are reproduced On the facts and circumstances of the case and in law, the CIT (A) has erred in confirming the initiation of penalty wherein the Assessing Officer has not specified the provision of Section 271AAB of the Income tax Act under which the penalty On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries and wages amounting to Rs.76,70,900/- &adhoc disallowance of administrative expenses amounting to Rs.3,89,240/- made u/s 37(1) of the act on estimated basis. n the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty leviedon moto disallowance of interest of Rs.16,43,363/ depreciation of Rs.12,97,357/- made u/s 36(1)(iii) of the act on basis. In the ground No. 1, the assessee has challenged the levy of penalty u/s 271AAB of the Act on the ground that the Assessing Officer has not specified the relevant provisions while levying the penalty. This issue has been adjudicated by the Ld. C 7.1 The appellant in this ground has contended that the AO has erred in not mentioning the specific provision of Section 271AAB of the Act for initiation of penalty proceedings in the assessment order. It is noted that the appellant had also raised ntention before the AO during the course of penalty proceedings. The AO in his order has already clarified that the provisions of the 271AAB (1A) of the Act have been correctly Swaran Nadhan Salaria 34 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 we take up the appeal of the assessee for assessment 21. The grounds raised by the assessee are reproduced On the facts and circumstances of the case and in law, the CIT (A) has erred in confirming the initiation of penalty wherein the Assessing Officer has not specified the provision of Section 271AAB of the Income tax Act under which the penalty On the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty levied on adhoc disallowance of salaries and wages amounting to &adhoc disallowance of administrative made u/s 37(1) of the act n the facts and circumstances of the case and in law, the learned CIT (A) has erred in confirming the penalty leviedon moto disallowance of interest of Rs.16,43,363/- & Excess made u/s 36(1)(iii) of the act on In the ground No. 1, the assessee has challenged the levy of penalty u/s 271AAB of the Act on the ground that the Assessing Officer has not specified the relevant provisions while levying the penalty. This issue has been adjudicated by the Ld. CIT(A) 7.1 The appellant in this ground has contended that the AO has erred in not mentioning the specific provision of Section 271AAB of the Act for initiation of penalty proceedings in the assessment order. It is noted that the appellant had also raised ntention before the AO during the course of penalty proceedings. The AO in his order has already clarified that the provisions of the 271AAB (1A) of the Act have been correctly Printed from counselvise.com invoked in this case and only the manner and rates vary between the two parts o 7.2 As per provisions of section 271AAB, penalty is levied on 'undisclosed income of the specified year unlike u/s. 271(1)(c) where penalty can be levied for two different charges. Though penalty u/s.271AAB is levied for singular charge, it levy of penalty at different slabs subjected to conditions prescribed therein. Penalty u/s.271AAB is reproduced in tabular manner as under: 7.3 As can be seen from the above chart the charge u/s 271AAB is singular. Only rates of penalty vary depen either fulfilment/non section by appellant. Therefore, non in the penalty notice u/s 271AAB issued by AO in the present case do not vitiate penalty proceedings. 7.4 Reliance is bench in Rambhajo's vs ACIT, ITA 991/JP/2017 which has adjudicated same issue and held as under: \"On close reading of provisions of Section 271AAB, we find that the primary condition or charge for levy of penalty is the existence of undisclosed income for the specified previous year found during the course of search in the case of assessee. Once the said primary condition or charge is satisfied, for the purposes of quantifying the penalty, the Assessing office satisfaction of ancillary conditions as specified under clause (a), clause (b) or clause (c) to sub Section 271AAB. Merely because the quantum of penalty varies from 10% to 30% subject to compliances with the ancillary c has initiated the penalty under section 271AAB, there is any ambiguity in the charge or there is any lack of application of mind on part of the Assessing 11.2 We have heard rival submissions of the p the relevant materials on record that penalty u/s 271AAB is levied @ 10%, 20% and 30% depending ITA No. 1049, 1050, 1051, 1052, 1053, invoked in this case and only the manner and rates vary between the two parts of the section. 7.2 As per provisions of section 271AAB, penalty is levied on 'undisclosed income of the specified year unlike u/s. 271(1)(c) where penalty can be levied for two different charges. Though penalty u/s.271AAB is levied for singular charge, it levy of penalty at different slabs subjected to conditions prescribed therein. Penalty u/s.271AAB is reproduced in tabular manner as under: 7.3 As can be seen from the above chart the charge u/s 271AAB is singular. Only rates of penalty vary depen either fulfilment/non-fulfilment of conditions laid down in the section by appellant. Therefore, non-specification of subsection in the penalty notice u/s 271AAB issued by AO in the present case do not vitiate penalty proceedings. 7.4 Reliance is placed on the judgment of Hon'ble ITAT, Jaipur bench in Rambhajo's vs ACIT, ITA 991/JP/2017 which has adjudicated same issue and held as under: \"On close reading of provisions of Section 271AAB, we find that the primary condition or charge for levy of alty is the existence of undisclosed income for the specified previous year found during the course of search in the case of assessee. Once the said primary condition or charge is satisfied, for the purposes of quantifying the penalty, the Assessing officer has to examine the satisfaction of ancillary conditions as specified under clause (a), clause (b) or clause (c) to sub- Section 271AAB. Merely because the quantum of penalty varies from 10% to 30% subject to compliances with the ancillary conditions, it cannot be said that where the AO has initiated the penalty under section 271AAB, there is any ambiguity in the charge or there is any lack of application of mind on part of the Assessing We have heard rival submissions of the parties and perused the relevant materials on record. The contention of the assessee is that penalty u/s 271AAB is levied @ 10%, 20% and 30% depending Swaran Nadhan Salaria 35 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 invoked in this case and only the manner and rates vary 7.2 As per provisions of section 271AAB, penalty is levied on 'undisclosed income of the specified year unlike u/s. 271(1)(c) where penalty can be levied for two different charges. Though penalty u/s.271AAB is levied for singular charge, it proposes levy of penalty at different slabs subjected to conditions prescribed therein. Penalty u/s.271AAB is reproduced in 7.3 As can be seen from the above chart the charge u/s 271AAB is singular. Only rates of penalty vary depending upon fulfilment of conditions laid down in the specification of subsection in the penalty notice u/s 271AAB issued by AO in the present placed on the judgment of Hon'ble ITAT, Jaipur bench in Rambhajo's vs ACIT, ITA 991/JP/2017 which has \"On close reading of provisions of Section 271AAB, we find that the primary condition or charge for levy of alty is the existence of undisclosed income for the specified previous year found during the course of search in the case of assessee. Once the said primary condition or charge is satisfied, for the purposes of quantifying the r has to examine the satisfaction of ancillary conditions as specified under -section (1) to Section 271AAB. Merely because the quantum of penalty varies from 10% to 30% subject to compliances with the onditions, it cannot be said that where the AO has initiated the penalty under section 271AAB, there is any ambiguity in the charge or there is any lack of application of mind on part of the Assessing officer.” arties and perused . The contention of the assessee is that penalty u/s 271AAB is levied @ 10%, 20% and 30% depending Printed from counselvise.com on the demonstrations facts of the case. The Ld. Counsel for t that the Assessing Officer was required to specify relevant rate under which penalty was leviable and due to non the same, relying on the decision in the case of Manjunath Cotton which is on the section 271(1)(c) of the Act is applicable over the facts of this case also. However, we do not agree with the contention of the Ld. Counsel for the assessee for the reason that penalty is levied on defined under the said section and rate of the penalty depends on the other conditions which are fulfilled. Therefore, non of rate or suppression vitiate the penalty proceedings. Accordingly, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly uphold the same. 12. The ground No. 2 of the appeal of the assessee relate to levy of penalty on the ad amounting to Rs.76,70,900/ administrative expenses amounting to Rs.3, 37(1) of the Act on estimated basis. The Ld. CIT(A) upheld the penalty in respect of disallowance of salary and wages and administrative expenses in cash mode observing as under : ITA No. 1049, 1050, 1051, 1052, 1053, on the demonstrations of specified conditions applicable over the facts of the case. The Ld. Counsel for the assessee that the Assessing Officer was required to specify relevant rate under which penalty was leviable and due to non- relying on the decision of Hon’ble Karnataka High Court Manjunath Cotton & Ginning Factory which is on the section 271(1)(c) of the Act, but being the facts of this case also. However, we do not agree with the contention of the Ld. Counsel for the assessee for the reason that penalty is levied on charge of undisclosed income defined under the said section and rate of the penalty depends on conditions which are fulfilled. Therefore, non suppression of the same in the penalty notice vitiate the penalty proceedings. Accordingly, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly uphold the same. The ground No. 2 of the appeal of the assessee relate to levy of penalty on the ad-hoc disallowance of salaries and wages amounting to Rs.76,70,900/- and ad-hoc disallowance of administrative expenses amounting to Rs.3,89,240/ 37(1) of the Act on estimated basis. The Ld. CIT(A) upheld the penalty in respect of disallowance of salary and wages and administrative expenses in cash mode observing as under : Swaran Nadhan Salaria 36 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 applicable over the he assessee was of the view that the Assessing Officer was required to specify relevant rate -specification of Hon’ble Karnataka High Court & Ginning Factory(supra), though being pari-materia, the facts of this case also. However, we do not agree with the contention of the Ld. Counsel for the assessee for the charge of undisclosed income defined under the said section and rate of the penalty depends on conditions which are fulfilled. Therefore, non-specification of the same in the penalty notice do not vitiate the penalty proceedings. Accordingly, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and we The ground No. 2 of the appeal of the assessee relate to levy of hoc disallowance of salaries and wages hoc disallowance of 89,240/- made u/s 37(1) of the Act on estimated basis. The Ld. CIT(A) upheld the penalty in respect of disallowance of salary and wages and administrative expenses in cash mode observing as under : Printed from counselvise.com “8.2 During the course of assessment proceedings it was n by the AO that even the returns which had been filed in response to notice u/s. 153A showed wide variation as compared to the original return of income. Variations were also noted in the P& L account, balance sheet, cash and bank balances etc. Since, taken up for special audit u/s 142(2)(A). It is further noted that complete details and information with regard to expenses claimed in cash mode were not submitted at any stage i.e. neither during the search proceedi proceedings and not even during assessment proceedings and thus could not be verified. Thus, the AO disallowed 4% of the salary and wages expenses and 10% of administrative expenses, to the extent which were not verifiable, in t absence of necessary documentary evidences. 8.3 During penalty proceedings, the appellant submitted that since the disallowances in the salary and wages made u/s 37(1) of Act are on estimate basis hence no penalty is leviable. The AO after going through the penalty. 8.4 As discussed in prepares, the appellant had not been able explain the entries during the course of search action. Again, during the course of assessment proceedings, complete details were not filed with audit complete details were not filed. Thus, due to lack to data and any clarification from appellant's end, the AO computed income on the total receipts on estimate basis as no relevant data or substantive records before him. The appellant has not gone into further appeal against the quantum order of the AO. The appellant has not provided any details even before me except filing a note on the matter. 8.5 The AO in his order has observe incurred expenses under the heads 'salary & wages' & 'administrative expenses' in cash mode. The AO has also noted that complete documentary evidences and explanations with regard to such cash expenses was not provided by the appellant. Accordingly, the AO disallowed expenses to the extent which was not verifiable. During the penalty proceedings before the AO, the appellant submitted that it had not gone into ITA No. 1049, 1050, 1051, 1052, 1053, 8.2 During the course of assessment proceedings it was n by the AO that even the returns which had been filed in response to notice u/s. 153A showed wide variation as compared to the original return of income. Variations were also noted in the P& L account, balance sheet, cash and bank balances etc. Since, the books were unreliable, the case was taken up for special audit u/s 142(2)(A). It is further noted that complete details and information with regard to expenses claimed in cash mode were not submitted at any stage i.e. neither during the search proceedings, nor during post search proceedings and not even during assessment proceedings and thus could not be verified. Thus, the AO disallowed 4% of the salary and wages expenses and 10% of administrative expenses, to the extent which were not verifiable, in t absence of necessary documentary evidences. 8.3 During penalty proceedings, the appellant submitted that since the disallowances in the salary and wages made u/s 37(1) of Act are on estimate basis hence no penalty is leviable. The AO after going through the submissions of appellant levied 8.4 As discussed in prepares, the appellant had not been able explain the entries during the course of search action. Again, during the course of assessment proceedings, complete details were not filed with AO. Again, during the course of special audit complete details were not filed. Thus, due to lack to data and any clarification from appellant's end, the AO computed income on the total receipts on estimate basis as no relevant data or substantive records were produced by the appellant before him. The appellant has not gone into further appeal against the quantum order of the AO. The appellant has not provided any details even before me except filing a note on the 8.5 The AO in his order has observed that appellant had incurred expenses under the heads 'salary & wages' & 'administrative expenses' in cash mode. The AO has also noted that complete documentary evidences and explanations with regard to such cash expenses was not provided by the . Accordingly, the AO disallowed expenses to the extent which was not verifiable. During the penalty proceedings before the AO, the appellant submitted that it had not gone into Swaran Nadhan Salaria 37 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 8.2 During the course of assessment proceedings it was noted by the AO that even the returns which had been filed in response to notice u/s. 153A showed wide variation as compared to the original return of income. Variations were also noted in the P& L account, balance sheet, cash and bank the books were unreliable, the case was taken up for special audit u/s 142(2)(A). It is further noted that complete details and information with regard to expenses claimed in cash mode were not submitted at any stage i.e. ngs, nor during post search proceedings and not even during assessment proceedings and thus could not be verified. Thus, the AO disallowed 4% of the salary and wages expenses and 10% of administrative expenses, to the extent which were not verifiable, in the 8.3 During penalty proceedings, the appellant submitted that since the disallowances in the salary and wages made u/s 37(1) of Act are on estimate basis hence no penalty is leviable. the submissions of appellant levied 8.4 As discussed in prepares, the appellant had not been able explain the entries during the course of search action. Again, during the course of assessment proceedings, complete details AO. Again, during the course of special audit complete details were not filed. Thus, due to lack to data and any clarification from appellant's end, the AO computed income on the total receipts on estimate basis as no relevant were produced by the appellant before him. The appellant has not gone into further appeal against the quantum order of the AO. The appellant has not provided any details even before me except filing a note on the d that appellant had incurred expenses under the heads 'salary & wages' & 'administrative expenses' in cash mode. The AO has also noted that complete documentary evidences and explanations with regard to such cash expenses was not provided by the . Accordingly, the AO disallowed expenses to the extent which was not verifiable. During the penalty proceedings before the AO, the appellant submitted that it had not gone into Printed from counselvise.com appeal against the quantum order and that penalty cannot be levied on addition 8.6 Before me, the only contention of the appellant in his submissions, on this ground, is that penalty cannot be levied on additions made on 8.7 Considering the facts of the case and in the light of assessee' submi with no choice but to estimate the income, to the extent which was not verifiable, as complete details were not submitted by the appellant. It is important to note here that whatever details are available wit and seizure action. If no search action had been taken by the department, the assessee would not have voluntarily disclosed the income as it had not been filing its return of income. Thus, the action of appellan income. The ground of the appeal of the appellant is accordingly 12.1 Prior to confirming the penalty on salary and wages and administrative expenses, the Ld. CIT(A) referred section 271AAB and definition of the undisclosed income that the disallowance made by the assessee satisfied the definition of the ‘undisclosed income for penalty u/s 271AAB CIT(A) is reproduced as under: “6.2 I have gone through the submissions of assessee, the assessment order, penalty order and the facts of the case. Under section 271AAB of the Act, penalty is levied where undisclosed inc action u/s 132 of the Act in relation to the specified previous years. As per this section penalty is to be levied only on undisclosed income. The term undisclosed income broadly means income represented either wh money, bullion, jewellery or other valuable article or thing or any entry in the books of account or transactions found during ITA No. 1049, 1050, 1051, 1052, 1053, appeal against the quantum order and that penalty cannot be levied on addition made on estimate basis. 8.6 Before me, the only contention of the appellant in his submissions, on this ground, is that penalty cannot be levied on additions made on estimate basis. 8.7 Considering the facts of the case and in the light of assessee' submission, I am of the opinion that the AO was left with no choice but to estimate the income, to the extent which was not verifiable, as complete details were not submitted by the appellant. It is important to note here that whatever details are available with the department are available due to search and seizure action. If no search action had been taken by the department, the assessee would not have voluntarily disclosed the income as it had not been filing its return of income. Thus, the action of appellant is clearly deliberate suppression of income. The ground of the appeal of the appellant is dismissed.” Prior to confirming the penalty on salary and wages and penses, the Ld. CIT(A) referred to the provisions of section 271AAB and definition of the undisclosed income that the disallowance made by the assessee satisfied the definition undisclosed income’ and therefore, the disallowance penalty u/s 271AAB of the Act. The relevant finding of the Ld. CIT(A) is reproduced as under: 6.2 I have gone through the submissions of assessee, the assessment order, penalty order and the facts of the case. Under section 271AAB of the Act, penalty is levied where undisclosed income is found during the course of a search action u/s 132 of the Act in relation to the specified previous years. As per this section penalty is to be levied only on undisclosed income. The term undisclosed income broadly means income represented either wholly or partly by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or transactions found during Swaran Nadhan Salaria 38 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 appeal against the quantum order and that penalty cannot be 8.6 Before me, the only contention of the appellant in his submissions, on this ground, is that penalty cannot be levied on 8.7 Considering the facts of the case and in the light of ssion, I am of the opinion that the AO was left with no choice but to estimate the income, to the extent which was not verifiable, as complete details were not submitted by the appellant. It is important to note here that whatever details h the department are available due to search and seizure action. If no search action had been taken by the department, the assessee would not have voluntarily disclosed the income as it had not been filing its return of income. Thus, t is clearly deliberate suppression of income. The ground of the appeal of the appellant is Prior to confirming the penalty on salary and wages and to the provisions of section 271AAB and definition of the undisclosed income and held that the disallowance made by the assessee satisfied the definition and therefore, the disallowance is liable . The relevant finding of the Ld. 6.2 I have gone through the submissions of assessee, the assessment order, penalty order and the facts of the case. Under section 271AAB of the Act, penalty is levied where ome is found during the course of a search action u/s 132 of the Act in relation to the specified previous years. As per this section penalty is to be levied only on undisclosed income. The term undisclosed income broadly olly or partly by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or transactions found during Printed from counselvise.com the course of search u/s132 and which has not been recorded on or before the date of search in the books of documents maintained in the normal course. 6.3 On going through the facts and records of the case, I observe that appellant was covered in a search and seizure action u/s 132 of the Act. As noted by the AO, returns were filed in this case which wide variations were noticed as compared to the original return of income filed. Also, there was variation in various other particulars of the P&L account and Balance Sheet. There was variation even in the previous balance sheet filed and the re recently. These variations existed even in cases where the earlier financials filed had been audited. Thus, it was observed that the books of accounts, financ as the subsequent return of income filed, were not reliable and serious doubts existed regarding the correctness of the books of accounts of the appellant group. No details were submitted before the AO to explain the discre course of special audit in the group case complete details were not filed. Thus, due to lack to data and any clarification from appellant's end, the AO computed income on the total receipts on estimate basis as no relevant data o were produced by the appellant before him. The AO finally noted that during the search proceedings, post search proceedings and during assessment proceedings assessee could not explain the cash transactions and other deficiencies. Since the details furnished were incomplete and not verifiable addition was made. 6.4 In the context of section 271AAB of the Act, undisclosed income would be represented by money, bullion, jewellery or other valuable articles or things or an unrecorded entry documents found or a false entry recorded in the books of account. In the case of appellant, it is noted that there was wide variation in the figures of financials as submitted even in cases where audit had been finalized. Thus, the expenses can be treated as false entries as the appellant has not been able to substantiate the same anytime during the search or even later. Thus, in my opinion the AO rightly initiated penalty u/s 271AAB of the Act. ITA No. 1049, 1050, 1051, 1052, 1053, the course of search u/s132 and which has not been recorded on or before the date of search in the books of account or other documents maintained in the normal course. 6.3 On going through the facts and records of the case, I observe that appellant was covered in a search and seizure action u/s 132 of the Act. As noted by the AO, returns were filed in this case based on re-worked unaudited financials in which wide variations were noticed as compared to the original return of income filed. Also, there was variation in various other particulars of the P&L account and Balance Sheet. There was variation even in the cash and bank balances as shown in the previous balance sheet filed and the re- written one filed recently. These variations existed even in cases where the earlier financials filed had been audited. Thus, it was observed that the books of accounts, financials of various entities as well as the subsequent return of income filed, were not reliable and serious doubts existed regarding the correctness of the books of accounts of the appellant group. No details were submitted before the AO to explain the discrepancies. Again, during the course of special audit in the group case complete details were not filed. Thus, due to lack to data and any clarification from appellant's end, the AO computed income on the total receipts on estimate basis as no relevant data or substantive records were produced by the appellant before him. The AO finally noted that during the search proceedings, post search proceedings and during assessment proceedings assessee could not explain the cash transactions and other deficiencies. ce the details furnished were incomplete and not verifiable addition was made. 6.4 In the context of section 271AAB of the Act, undisclosed income would be represented by money, bullion, jewellery or other valuable articles or things or an unrecorded entry documents found or a false entry recorded in the books of account. In the case of appellant, it is noted that there was wide variation in the figures of financials as submitted even in cases where audit had been finalized. Thus, the expenses can treated as false entries as the appellant has not been able to substantiate the same anytime during the search or even later. Thus, in my opinion the AO rightly initiated penalty u/s 271AAB of the Act. Swaran Nadhan Salaria 39 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 the course of search u/s132 and which has not been recorded account or other 6.3 On going through the facts and records of the case, I observe that appellant was covered in a search and seizure action u/s 132 of the Act. As noted by the AO, returns were worked unaudited financials in which wide variations were noticed as compared to the original return of income filed. Also, there was variation in various other particulars of the P&L account and Balance Sheet. There was cash and bank balances as shown in the written one filed recently. These variations existed even in cases where the earlier financials filed had been audited. Thus, it was observed ials of various entities as well as the subsequent return of income filed, were not reliable and serious doubts existed regarding the correctness of the books of accounts of the appellant group. No details were submitted pancies. Again, during the course of special audit in the group case complete details were not filed. Thus, due to lack to data and any clarification from appellant's end, the AO computed income on the total receipts r substantive records were produced by the appellant before him. The AO finally noted that during the search proceedings, post search proceedings and during assessment proceedings assessee could not explain the cash transactions and other deficiencies. ce the details furnished were incomplete and not verifiable 6.4 In the context of section 271AAB of the Act, undisclosed income would be represented by money, bullion, jewellery or other valuable articles or things or an unrecorded entry as per documents found or a false entry recorded in the books of account. In the case of appellant, it is noted that there was wide variation in the figures of financials as submitted even in cases where audit had been finalized. Thus, the expenses can treated as false entries as the appellant has not been able to substantiate the same anytime during the search or even later. Thus, in my opinion the AO rightly initiated penalty u/s Printed from counselvise.com 6.5 Appellant's claim that since these are on estimat penalty cannot be levied is also incorrect. Considering the facts of the case and in the light of assessee' submission, I am of the opinion that the AO was left with no choice but to estimate the income as complete details were not submitted by the either during search proceedings or before the AO or special auditor. Thus, AO after going through details made addition on account of cash expenses to the extent which was not verifiable. It is also important to note here that whatever details are available with the department are available due to search and seizure action u/s 132 of the Act. If no search action had taken place, the assessee would not have voluntarily disclosed the income, as the appellant had not been filing any returns even though it was receiving huge receipts. Thus, the action of appellant is clearly deliberate suppression of income. 6.6 Thus considering the discussion in the pre the opinion that section 271AAB of the Act has correctly been levied in this case. appellant is 12.2 We have heard rival submissions of the parties and perused the relevant materials on record is independent of the addition made by the Assessing Officer in the assessment order and same could be initiated during the assessment proceeding depending on fulfilling of the conditions provided in the section. The pen or 30% to 60% of the undisclosed income year. In the case, it is undisputed that the assessment year under consideration is specified year issue whether the disallow satisfy the definition of the ready reference said Explanation to section 271AAB defining the undisclosed income is reproduced as under: ITA No. 1049, 1050, 1051, 1052, 1053, 6.5 Appellant's claim that since these are on estimat penalty cannot be levied is also incorrect. Considering the facts of the case and in the light of assessee' submission, I am of the opinion that the AO was left with no choice but to estimate the income as complete details were not submitted by the either during search proceedings or before the AO or special auditor. Thus, AO after going through details made addition on account of cash expenses to the extent which was not verifiable. It is also important to note here that whatever details re available with the department are available due to search and seizure action u/s 132 of the Act. If no search action had taken place, the assessee would not have voluntarily disclosed the income, as the appellant had not been filing any returns ugh it was receiving huge receipts. Thus, the action of appellant is clearly deliberate suppression of income. 6.6 Thus considering the discussion in the pre-paras, I am of the opinion that section 271AAB of the Act has correctly been levied in this case. Accordingly, this ground of is dismissed.” We have heard rival submissions of the parties and perused the relevant materials on record. The penalty u/s 271AAB of the Act is independent of the addition made by the Assessing Officer in the assessment order and same could be initiated during the assessment proceeding depending on fulfilling of the conditions provided in the section. The penalty could be levied @ 10% or 20% or 30% to 60% of the undisclosed income for specified previous year. In the case, it is undisputed that the assessment year under consideration is specified year and only dispute is in respect of issue whether the disallowance in respect of which penalty is levied satisfy the definition of the ‘undisclosed income’. Therefore, for ready reference said Explanation to section 271AAB defining the undisclosed income is reproduced as under: Swaran Nadhan Salaria 40 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 6.5 Appellant's claim that since these are on estimate basis penalty cannot be levied is also incorrect. Considering the facts of the case and in the light of assessee' submission, I am of the opinion that the AO was left with no choice but to estimate the income as complete details were not submitted by the assessee either during search proceedings or before the AO or special auditor. Thus, AO after going through details made addition on account of cash expenses to the extent which was not verifiable. It is also important to note here that whatever details re available with the department are available due to search and seizure action u/s 132 of the Act. If no search action had taken place, the assessee would not have voluntarily disclosed the income, as the appellant had not been filing any returns ugh it was receiving huge receipts. Thus, the action of appellant is clearly deliberate suppression of income. paras, I am of the opinion that section 271AAB of the Act has correctly been Accordingly, this ground of We have heard rival submissions of the parties and perused . The penalty u/s 271AAB of the Act is independent of the addition made by the Assessing Officer in the assessment order and same could be initiated during the assessment proceeding depending on fulfilling of the conditions alty could be levied @ 10% or 20% specified previous year. In the case, it is undisputed that the assessment year under dispute is in respect of ance in respect of which penalty is levied . Therefore, for ready reference said Explanation to section 271AAB defining the Printed from counselvise.com [Penalty where search has been 13 271AAB. (1) ………………………. (a) ………………………… (b) ……………………. (c) …………………. 18 [(1A) ……………………… (2) ……………………………. (3) ………………………………. Explanation.-For the purposes of this (a) “specified date” means the due date of furnishing of return of income under sub-section (1) of specified in the notice issued 153A, as the case may be,] for furnishing of return of income expires, as the case may be; (b) “specified previous year” means the previous year (i) which has ended before the date of search, but the date of furnishing the return of income under sub 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or (ii) in which search was conducted; (c) “undisclosed income (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132 (A) not been recorded on or before the date of search in the books of account or other documents maintained in the ITA No. 1049, 1050, 1051, 1052, 1053, Penalty where search has been initiated. (1) ………………………. ………………………… ……………………. ……………………… ……………………………. ………………………………. For the purposes of this section,- “specified date” means the due date of furnishing of return of income section (1) of section 139 or the date on which the period specified in the notice issued 22[under section 148 , as the case may be,] for furnishing of return of income expires, as the case may be; “specified previous year” means the previous year- which has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or in which search was conducted; undisclosed income” means- any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search section 132, which has- not been recorded on or before the date of search in the books of account or other documents maintained in the Swaran Nadhan Salaria 41 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 “specified date” means the due date of furnishing of return of income or the date on which the period section 148 or under section , as the case may be,] for furnishing of return of income expires, as which has ended before the date of search, but the date of section (1) of section for such year has not expired before the date of search and the assessee has not furnished the return of income for the any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search not been recorded on or before the date of search in the books of account or other documents maintained in the Printed from counselvise.com normal course relating to such previous year; or (B) otherwise not been disclosed to the Commissioner or] Chief Commissioner or Commissioner or] Commissioner before the date of search; or (ii) any income wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be fals the search not been conducted.] 12.3 In above definition under sub the form of assets like money, bullion, jewellery or other valuable items or income representing any entry in the books of account which was not found recorded in the books of accounts before the date of the search or otherwise not disclosed to the Pr. Chief Commissioner etc. then, the said income falls in the category of undisclos income. The clause 2 of the section specify by way of entry in respect of expens and would not have been found to so conducted, then said expenses would amount to undisclosed income. 12.4 In the instant case before us, addition has been made by the Assessing Officer in respect of expenses incurred on salary, wages and administrative expenses but voucher of the same were not produced by the assessee during assessment proceedings a ITA No. 1049, 1050, 1051, 1052, 1053, normal course relating to such previous year; or otherwise not been disclosed to the Commissioner or] Chief Commissioner or Commissioner or] Commissioner before the date of search; or any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted.] In above definition under sub-section 1 income represented in the form of assets like money, bullion, jewellery or other valuable income representing any entry in the books of account which was not found recorded in the books of accounts before the date of or otherwise not disclosed to the Pr. Chief Commissioner the said income falls in the category of undisclos income. The clause 2 of the section specify that income represented by way of entry in respect of expenses if same is found to be false and would not have been found to so had said search then said expenses would amount to undisclosed In the instant case before us, addition has been made by the Assessing Officer in respect of expenses incurred on salary, wages and administrative expenses but voucher of the same were not produced by the assessee during assessment proceedings a Swaran Nadhan Salaria 42 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 normal course relating to such previous year; or otherwise not been disclosed to the 23[Principal Chief Commissioner or] Chief Commissioner or 23[Principal Commissioner or] Commissioner before the date of of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is e and would not have been found to be so had section 1 income represented in the form of assets like money, bullion, jewellery or other valuable income representing any entry in the books of account which was not found recorded in the books of accounts before the date of or otherwise not disclosed to the Pr. Chief Commissioner the said income falls in the category of undisclosed income represented es if same is found to be false had said search not then said expenses would amount to undisclosed In the instant case before us, addition has been made by the Assessing Officer in respect of expenses incurred on salary, wages and administrative expenses but voucher of the same were not produced by the assessee during assessment proceedings and Printed from counselvise.com therefore, disallowance on estimated basis in respect of expenses which were incurred in cash has been made by the AO which has not been disputed by the assessee. 12.5 Thus for disallowance of the expenses on the salary, wages and administrative expen undisclosed income, same should be found to be fal not have been found to be so Thus, the two conditions are required to be fulfilled expenses should be found to be fal should be found in the course of the search action. We find that both these conditions are not Assessing Officer has nowhere held the said cash expenditure either bogus or false of verification of the vouchers of the expenses made in cash. second condition is that the fact of expenses being false should emerge in search action. Bu that non availability of vouchers was observed in search action, rather, it appears that fact has been recorded in assessment proceeding. Unless, the conditions specified for disallowance to be in the nature of the undisclosed income specified in section 271AAB are satisfied , no penalty could be levied in respect of disallowance merely for the reason that Assessing Officer has made addition in the assessment order. The ground No. 2 of the appeal of the assessee is accordingly allowed. ITA No. 1049, 1050, 1051, 1052, 1053, therefore, disallowance on estimated basis in respect of expenses which were incurred in cash has been made by the AO which has not been disputed by the assessee. disallowance of the expenses on the salary, wages and administrative expenses falling into the definition of the , same should be found to be fal not have been found to be so if the search had not been conducted. Thus, the two conditions are required to be fulfilled found to be false and secondly should be found in the course of the search action. We find that both these conditions are not satisfied in the instant case. The Assessing Officer has nowhere held the said cash expenditure e but he made disallowance merely for the lack of verification of the vouchers of the expenses made in cash. second condition is that the fact of expenses being false should emerge in search action. But nothing has been brought on record availability of vouchers was observed in search action, rather, it appears that fact has been recorded in assessment Unless, the conditions specified for disallowance to be in the nature of the undisclosed income specified in section 271AAB no penalty could be levied in respect of disallowance merely for the reason that Assessing Officer has made addition in the assessment order. The ground No. 2 of the appeal of the assessee is accordingly allowed. Swaran Nadhan Salaria 43 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 therefore, disallowance on estimated basis in respect of expenses which were incurred in cash has been made by the AO which has disallowance of the expenses on the salary, wages into the definition of the , same should be found to be false and would not been conducted. Thus, the two conditions are required to be fulfilled, firstly, said secondly, said expenses should be found in the course of the search action. We find that in the instant case. The Assessing Officer has nowhere held the said cash expenditure is but he made disallowance merely for the lack of verification of the vouchers of the expenses made in cash. The second condition is that the fact of expenses being false should nothing has been brought on record availability of vouchers was observed in search action, rather, it appears that fact has been recorded in assessment Unless, the conditions specified for disallowance to be in the nature of the undisclosed income specified in section 271AAB no penalty could be levied in respect of disallowance merely for the reason that Assessing Officer has made addition in the assessment order. The ground No. 2 of the appeal of the Printed from counselvise.com 13. The ground No. 3 of the a of the penalty in respect of interest and depreciation expenses disallowed by the Assessing Officer. The relevant finding of the Ld. CIT(A) is reproduced as under : “10.2 In this regard it is noted that the during the search/post search proceedings as well as during the assessment proceedings, it was found that, the appellant had used said shell entities for rotation of funds/circuitous transactions in order to and creation of fictitious asset. During search, from the Tally data it was found that the appellant had made payments to certain entities which were found to be shell entities. It was established that these shell entities were floated by the appellant group to transactions and to create fictitious assets. The interest expense of Rs. 16,43,363/ 12,97,357/- return filed u/s. 139(1) of the Act as well as in the return filed in response to notice issued u/s 153A of the Act. Thus, the AO had disallowed the aforementioned expenses u/s 36(1) (iii) of the Act and also initiated penalty proceedings. During penalty proceedings, it was held that since the appellant had not disclos in its return of income or in books of the accounts, such income/expenses to that extent have remained undisclosed for the year under consideration. 10.3 Before me the appellant has only submitted that since it was on estimate basis the penalty levied. After going through the details, it is clear that these entries were found in the shape of ledgers at the time of search. The same were established to be payments made to shell companies. The appellant had neither disclosed the same in i appellant has not explained the entries and also not disclosed fully in its returns. Further, no appeal has been filed against this addition. Accordingly, I am of the opinion that the AO has correctly levied t this ground of appeal ITA No. 1049, 1050, 1051, 1052, 1053, The ground No. 3 of the appeal of the assessee relates to levy of the penalty in respect of interest and depreciation expenses disallowed by the Assessing Officer. The relevant finding of the Ld. CIT(A) is reproduced as under : 10.2 In this regard it is noted that the during the search/post search proceedings as well as during the assessment proceedings, it was found that, the appellant had used said shell entities for rotation of funds/circuitous transactions in order to and creation of fictitious asset. During search, on perusal of the ledger account extracted from the Tally data it was found that the appellant had made payments to certain entities which were found to be shell entities. It was established that these shell entities were floated by the appellant group to facilitate circular transactions and to create fictitious assets. The interest expense of Rs. 16,43,363/- and excess depreciation of Rs was not disclosed correctly in the original return filed u/s. 139(1) of the Act as well as in the return ed in response to notice issued u/s 153A of the Act. Thus, the AO had disallowed the aforementioned expenses u/s 36(1) (iii) of the Act and also initiated penalty proceedings. During penalty proceedings, it was held that since the appellant had not disclosed the same in its return of income or in books of the accounts, such income/expenses to that extent have remained undisclosed for the year under consideration. 10.3 Before me the appellant has only submitted that since it was on estimate basis the penalty cannot be levied. After going through the details, it is clear that these entries were found in the shape of ledgers at the time of search. The same were established to be payments made to shell companies. The appellant had neither disclosed the same in its original return nor in the 153A return. The appellant has not explained the entries and also not disclosed fully in its returns. Further, no appeal has been filed against this addition. Accordingly, I am of the opinion that the AO has correctly levied the penalty. Accordingly, this ground of appeal is dismissed.” Swaran Nadhan Salaria 44 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 ppeal of the assessee relates to levy of the penalty in respect of interest and depreciation expenses disallowed by the Assessing Officer. The relevant finding of the Ld. 10.2 In this regard it is noted that the during the course of search/post search proceedings as well as during the assessment proceedings, it was found that, the appellant had used said shell entities for rotation of funds/circuitous transactions in order to and creation of fictitious asset. on perusal of the ledger account extracted from the Tally data it was found that the appellant had made payments to certain entities which were found to be shell entities. It was established that these shell entities facilitate circular transactions and to create fictitious assets. The interest and excess depreciation of Rs was not disclosed correctly in the original return filed u/s. 139(1) of the Act as well as in the return ed in response to notice issued u/s 153A of the Act. Thus, the AO had disallowed the aforementioned expenses u/s 36(1) (iii) of the Act and also initiated penalty proceedings. During penalty proceedings, it was ed the same in its return of income or in books of the accounts, such income/expenses to that extent have remained 10.3 Before me the appellant has only submitted that cannot be levied. After going through the details, it is clear that these entries were found in the shape of ledgers at the time of search. The same were established to be payments made to shell companies. The appellant had neither disclosed ts original return nor in the 153A return. The appellant has not explained the entries and also not disclosed fully in its returns. Further, no appeal has been filed against this addition. Accordingly, I am of the opinion he penalty. Accordingly, Printed from counselvise.com 13.1 We have heard rival submissions of the parties and perused the relevant materials on record penalty in respect of disallowance of the expenses on interest u/s 36(1)(iii) of the Act and amounting to Rs.12,97,357/ Rs.16,43,363/- disallowed u/s 36(1)(iii) of the Act find that the same was advances have been held to be therefore, the interest in respect to those loans and advances held to be for non- under section 36(1)(iii) of the Act. There is no finding recorded by the Assessing Officer to definition of the undisclosed income comprising of the entry of the expenses in the books of accounts. Similarly, regarding the depreciation also the Assessing Officer has made no recording for satisfaction of the entry of the expenses Assessing Officer has not brought on record as how issue of the depreciation has been unearthed of clear finding of the facts, penalty levied cannot be sustained. Accordingly, the ground No. 3 of the appeal of the assessee is also allowed. ITA No. 1049, 1050, 1051, 1052, 1053, We have heard rival submissions of the parties and perused the relevant materials on record. The Assessing Officer has levied penalty in respect of disallowance of the expenses on interest s 36(1)(iii) of the Act and suo-motu disallowance of depreciation amounting to Rs.12,97,357/-. As regards the interest of disallowed u/s 36(1)(iii) of the Act is conc was disallowed for the reason that loan advances have been held to be given for non-business purpose and therefore, the interest in respect to those loans and advances -business purpose and accordingly disallowed section 36(1)(iii) of the Act. There is no finding recorded by the Assessing Officer to cover the said disallowance under definition of the undisclosed income comprising of the entry of the expenses in the books of accounts. Similarly, regarding the also the Assessing Officer has made no recording for satisfaction of the entry of the expenses as undisclosed income. The Assessing Officer has not brought on record as how issue of the depreciation has been unearthed during search action of clear finding of the facts, penalty levied cannot be sustained. Accordingly, the ground No. 3 of the appeal of the assessee is also Swaran Nadhan Salaria 45 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 We have heard rival submissions of the parties and perused . The Assessing Officer has levied penalty in respect of disallowance of the expenses on interest made disallowance of depreciation . As regards the interest of is concerned, we disallowed for the reason that loans and business purpose and therefore, the interest in respect to those loans and advances was business purpose and accordingly disallowed section 36(1)(iii) of the Act. There is no finding recorded by cover the said disallowance under the definition of the undisclosed income comprising of the entry of the expenses in the books of accounts. Similarly, regarding the also the Assessing Officer has made no recording for as undisclosed income. The Assessing Officer has not brought on record as how issue of the search action. In absence of clear finding of the facts, penalty levied cannot be sustained. Accordingly, the ground No. 3 of the appeal of the assessee is also Printed from counselvise.com 10.2 In the result all 2020-21 are partly allowed. Order pronounced in the open Court on Sd/ (RAJ KUMAR CHAUHAN JUDICIAL MEMBER Mumbai; Dated: 30/07/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// ITA No. 1049, 1050, 1051, 1052, 1053, In the result all appeals of the assesses from AY 2014 21 are partly allowed. nounced in the open Court on 30 Sd/- (RAJ KUMAR CHAUHAN) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Swaran Nadhan Salaria 46 ITA No. 1049, 1050, 1051, 1052, 1053, 1054/MUM/2025 from AY 2014-15 to AY 30/07/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "