Case Law Details
Case Name : DCIT Vs M/s Sunrise Stock Services P.Ltd. (ITAT Chandigarh)
Appeal Number : ITA No. 694/CHD/2011
Date of Judgement/Order : 12/08/2015
Related Assessment Year :
Brief of the case:
In the case of DCIT Vs. M/s Sunrise Stock Services P.Ltd. Chandigarh bench of ITAT reversed the order of CIT (A) who deleted the penalty made on estimation basis. It was allegation of AO that assessee voluntarily surrendered the addition and statement of the director was recorded. Finally ITAT have held that in the light of the statement of the Director recorded during the course of survey and ledger found against the assessee showing unaccounted commission earned by the assessee, clearly revealed that it is a fit case of levy of the penalty because the assessee has concealed the particulars of income.
Facts of the case:
- Survey was conducted under section 133A of the Act on the business premises of the assessee company on 15.06.2004, during the course of survey assessee disclosed additional income totaling to Rs. 14,25,000/-.
- The books of account of the assessee were seized during the survey operation and later on released as per order of the CIT dated 03.06.2005.
- AO made addition on account of commission earned i.e. 2% on the total turnover which comes to Rs. 66,62,980/-.
- Amount of commission was also added to the income of the assessee. In appeal, the entire addition was deleted by CIT (A).
- In further appeal by the department before ITAT, the addition on account of commission earned was confirmed and part addition was sustained.
- AO observed that in the second appeal, ITAT Chandigarh Bench vide order dated 31.12.2009 with regard to addition made on account of commission earned by assessee, directed to apply rate of 0.75% commission income on estimated basis.
- ITAT upheld addition of Rs. 24,98,616/- out of total addition of Rs. 66,62,980/- made by the Assessing Officer on account of commission.
- As per observation of the AO, assessee is liable for penalty under section 271(1)(c) of the Act and accordingly levied 100% penalty of the taxes.
- AO levied the penalty on account of commission earned by the assessee.
Contention of the assessee:
- Assessee had already made surrender of Rs. 14,25,000/- during survey and the statement of the Director was recorded during survey in which it was clearly stated that commission income @ 0.05% to 0.15% was earned on the transaction so made by the assessee company.
- There was no basis for the AO to make addition on the commission income @ 2% of the total turnover.
- Books of account were impounded during the course of survey which were released later on and no defects in the books of account have been pointed out.
- Additions made by AO was deleted on account of earning of the commission on estimate basis have been deleted by CIT(A).
- It is well settled law that on estimated additions, penalty need not to be imposed.
- No concealment was detected at the time of assessment and that on ultimate finding of the Tribunal, part addition was maintained on account of commission income on estimate basis.
- Reliance was placed upon the decision of the Hon’ble Punjab & Haryana High Court in the case of CIT Vs Sangrur Vanaspati Mills Ltd. 216 CTR 92 and orders of ITAT Chandigarh Bench in the cases of M/s Octave Exports Vs DCIT dated 19.11.2014 and M/s Boparai Metals (P) Ltd. in ITA 1013/CHD/2010 where it was held that that surrender was made during the course of survey subject to no penalty, therefore, no penalty be levied.
- No penalty proceedings were initiated in assessment order.
- 90% of the transactions are of short term nature, cannot be accepted as there is no evidence on record to support the same.
Contention of the revenue:
- Concealed income was detected during the course of survey on which statement of the Director was recorded which is noted in the assessment order as well.
- The Director admitted earning of unaccounted commission income. Therefore, it is not a case of mere estimate of income.
- The unaccounted commission was earned out of issuing bogus share profits.
- Even if assessee, during the course of survey, surrendered the income subject to no penalty, but such statement is no longer relevant in view of the judgement of the Hon’ble Supreme Court in the case of Mac Data Pvt. Ltd. 358 ITR 593 where it was held that the “Concept of voluntary surrender is not applicable to the income tax proceedings and the penalty shall have to be levied even on surrendered income.”
Held by CIT (A):
- AO estimated penalty on estimated basis which is a debatable issue in nature and no penalty is attracted when income is assessed on estimate basis.
- There is no concrete evidence of concealment and hence liable to be deleted.
Held by ITAT:
- In the light of the statement of the Director recorded during the course of survey and ledger found against the assessee showing unaccounted commission earned by the assessee, clearly revealed that it is a fit case of levy of the penalty because the assessee has concealed the particulars of income.
- It may also be noted here that despite survey was conducted on 15.06.2004 and the financial year ended on 31.03.2005, the assessee deliberately did not show the unaccounted income in the original return of income filed.
- CIT(A) was not justified in cancelling the penalty under section 271(1)(c) of the Income Tax Act.