IN THE INCOME TAX APPELLATE TRIBUNAL
`H' : NEW DELHI
DELHI BENCH `H
G.D.AGRAWAL, VICE PRESIDENT AND
BEFORE SHRI G.D.AGRAWAL,
YADAV, JUDICIAL MEMBER
SHRI RAJPAL YADAV,
Nos.1057/Del/2011 to 1062/Del/2011
ITA Nos
Years : 1999-
Assessment Years 2004-05
1999-2000 to 2004-
M/s Vishal Iron Works Vs. Assistant Commissioner of
Pvt.Ltd.,
Pvt.Ltd., Income Tax,
C/o Matta & Associates, Circle-17(1),
Circle-
JD-21-
JD-21-C, Pitampura, C.R.Building,
Delhi 110 088. New Delhi.
PAN : AAACV9977E.
(Appellant) (Respondent)
Appellant by : Shri A.K.Matta, CA.
Respondent by : Dr.B.R.R.Kumar, Sr.DR.
ORDER
PER BENCH :
In all these appeals by the assessee, the common ground raised
is against the levy of penalty under Section 271(1)(c) of the Income-tax
Act, 1961 as under:-
Assessment Year Penalty levied
1999-2000 `29,393/-
2000-2001 `2,09,590/-
2001-2002 `6,68,275/-
2002-2003 `11,48,316/-
2003-2004 `12,16,654/-
2004-2005 `5,95,125/-
2. The facts of the case are that a search was conducted under
Section 132 on 30.1.2004 at the premises of the assessee which is
2 ITA-1057 to 1062/Del/2011
managed by Shri Atul Kumar Bansal and Shri Deepak Khandelwal,
being directors of the company. The search revealed that Shri Atul
Kumar Bansal and Shri Deepak Khandelwal were conducting business
in the names of various fictitious concerns besides the assessee and
they were operating number of bank accounts of these various
concerns. During search operation, it was found that there were huge
deposits in bank accounts of the various fictitious concerns. Shri Atul
Kumar Bansal operated these bank accounts. During the course of
search, statement of Shri Atul Kumar Bansal was recorded on
30.01.2004 on oath under Section 132 of the I.T.Act, 1961 and he
categorically deposed that he was controlling and operating bank
accounts of various concerns and that all these concerns were
providing bogus entries. In reality, no actual purchase/sale of goods or
the transfer of goods were made. Statement of Shri Atul Kumar Bansal
was also recorded on various subsequent dates after search such as
10.2.2004, 15.2.2004, 19.2.2004, 4.3.2004, 11.3.2004 etc. to find out
the names of the various concerns for which he was conducting bogus
purchases/sales and the manner of his operations. He disclosed that in
fact they were receiving only nominal commission against bogus
purchase/sale vouchers issued in various names and that the
transactions in various bank accounts in different names were all done
just to earn commission income.
3. The Assessing Officer also accepted that Shri Atul Kumar Bansal
and Shri Deepak Khandelwal were indulging in the business of issuing
accommodation bills and were earning income from commission.
Therefore, income is to be assessed in their hands. However, he held
that so far as the business done by them in the name of the assessee,
i.e., M/s Vishal Iron Works, though the income is being assessed on
substantive basis in the hands of Shri Atul Kumar Bansal and Shri
Deepak Khandelwal to protect the interest of the Revenue, commission
3 ITA-1057 to 1062/Del/2011
income is also being assessed in the hands of the assessee on
protective basis. The relevant finding of the Assessing Officer in
paragraph Nos.9, 10 & 11 of the assessment order for AY 1999-2000 is
reproduced below for ready reference:-
"9. I have considered the explanation rendered by
assessee very carefully. It is noticed that the assessee has
not produced any evidence, whatsoever, in support of the
genuineness and extent of income declared in the return of
income. The assessee has also not furnished any evidence
in support of the extent of the commission reported at
0.20% (20 paise) per lakh or 0.10% (later informed) or
Rs.60,000/- p.m. (as stated in another statement). The
nature and extent of expenses incurred to earn such
commission and its evidence has not been furnished. No
doubt, it is true that the assessee has been getting
commission on all the bogus billings, but the extent of
commission earned, extent of expenditure incurred and net
income liable to be taxed is not verifiable. On these facts
of the case, I am left with no alternative, except to invoke
the provisions of section 145(3) of the I.T.Act, 1961 and
compute income in the manners provided under section
144 of the I.T.Act, 1961.
10. Keeping in view the peculiar facts and circumstances
of the case and part of the evidence gathered during
search as mentioned at page no.24 to 31 and page no.94
to 97 of Annexure A-7 and the assertions made by Shri Atul
Kumar Bansal and Deepak Khandelwal I consider that it
would be reasonable to estimate net income from
commission (after considering expenses liable to be
4 ITA-1057 to 1062/Del/2011
incurred) at 1.5% on the deposits in the various bank
accounts of the assessee company. The total amount of
the transactions/deposits in the bank account of the
assessee company have been detailed in Annexure-C,
which is made part of this order.
11. However, as regards transactions in particular done
in the name of M/s Vishal Iron Works (P) Ltd., though
claimed to be done by Shri Atul Kumar Bansal and Shri
Deepak Khandelwal and accordingly assessed on
substantive basis in their hands, but since the business
was done in the name of the company, to protect interest
of revenue, commission income earned in respect of these
transactions is being assessed in the hands of the
company, on protective basis."
4. The Assessing Officer also levied the penalty under Section
271(1)(c) in the hands of the assessee in respect of such commission
income which is assessed on protective basis. The same is sustained
by the CIT(A). Hence, these appeals by the assessee.
5. At the time of hearing before us, it is stated by the learned
counsel that the income from commission on the accommodation bills
issued by Shri Atul Kumar Bansal and Shri Deepak Khandelwal had
already been assessed on substantive basis in their hands. That both
Shri Bansal and Shri Khandelwal have not disputed that the income is
assessable in their hands but have only disputed the quantum of the
income determined. That in the first round of appeal, the matter
reached to the ITAT and even before the ITAT, Shri Atul Kumar Bansal
disputed the quantum of income determined in his hands and the ITAT,
vide its order dated 28th August, 2009 in ITA Nos.1741 to 1744 and
5 ITA-1057 to 1062/Del/2011
1786/Del/2008, set aside the matter to the file of the Assessing Officer
for redetermination of income. However, the dispute even before the
ITAT was only with regard to the quantum of income to be assessed in
the hands of Shri Atul Kumar Bansal and Shri Deepak Khandelwal.
There was no dispute as to whether the income is to be assessed in
their hands or in the hands of the assessee. That after the set aside,
again the income has been determined in the hands of Shri Atul Kumar
Bansal and Shri Deepak Khandelwal. That in the second round, in
appeal before the CIT(A), the income has partly been reduced by the
CIT(A) but, there is no dispute that income is to be assessed
substantively in the hands of Shri Atul Kumar Bansal/Shri Deepak
Khandelwal. He, therefore, stated that once the income is assessed on
substantive basis in the hands of Shri Atul Kumar Bansal, no income is
assessable in the hands of the assessee even on protective basis and,
therefore, there is no question of levy of penalty under Section
271(1)(c). He alternatively submitted that on protective assessment of
income, there cannot be any penalty under Section 271(1)(c) because,
as per the opinion of the Department also, income is to be assessable
in the hands of Shri Atul Kumar Bansal and not the assessee.
6. The learned DR, on the other hand, relied upon the orders of
authorities below and stated that the question of determination of
income in the hands of Shri Atul Kumar Bansal/Shri Deepak Khandelwal
has not yet become final. Therefore, he submitted that since the
income has been assessed in the hands of the assessee, penalty has
rightly been levied and the same should be sustained.
7. We have carefully considered the arguments of both the sides
and perused the material placed before us. The facts of the case have
already been narrated above in paragraph No.2 from which, it is an
admitted position that Shri Atul Kumar Bansal and Shri Deepak
6 ITA-1057 to 1062/Del/2011
Khandelwal were carrying on the business of issuing accommodation
bills to various parties by using the name of various concerns. Shri
Atul Kumar Bansal in his statement recorded during the course of
search on various dates admitted this fact and also explained the
manner in which business was being conducted by him. In the
assessment order in the case of the assessee which is reproduced in
paragraph No.3 above, the Assessing Officer has also recorded the
finding that income is to be assessed in the hands of Shri Atul Kumar
Bansal and Shri Deepak Khandelwal. We have seen the order of the
appellate authorities produced before us in quantum appeal in the
case of Shri Atul Kumar Bansal wherein he has disputed the quantum
of the commission income determined in his hands. However, he has
not claimed that the income does not belong to him or that it is
assessable in the hands of the concern in whose names the bogus bills
were issued. Moreover, the issue before us is not about the
assessability of income but about the justification for levy of penalty
under Section 271(1)(c). Even as per the Revenue, the income is not
assessable in the hands of the assessee but assessable in the hands of
Shri Atul Kumar Bansal/Shri Deepak Khandelwal. He assessed the
income of the assessee simply to protect the interest of the Revenue,
meaning thereby, that if in the appellate proceedings a view is taken
that the income does not belong to Shri Atul Kumar Bansal/Shri Deepak
Khandelwal, the Department should not be remedy-less to assess the
income in the hands of the concern in whose name the bill was issued.
But, even as per the Revenue, the income does not belong to the
assessee, therefore, on the above facts, the assessee cannot be held
to be guilty of concealment of income for which penalty under Section
271(1)(c) can be levied. The penalty, if any, can be levied in the hands
of the person to whom the income actually belongs and not to the
assessee in whose hands the department assessed the income on
7 ITA-1057 to 1062/Del/2011
protective basis. In view of the above, we cancel the penalty levied
under Section 271(1)(c) in the hands of the assessee for all the years.
8. In the result, all the appeals of the assessee are allowed.
Decision pronounced in the open Court on 13th July, 2012.
Sd/- Sd/-
YADAV)
(RAJPAL YADAV) (G.D.AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 13.07.2012
VK.
Copy forwarded to: -
1. Appellant : M/s Vishal Iron Works Pvt.Ltd.,
C/o Matta & Associates,
JD-21-C, Pitampura,
JD-21-
Delhi 110 088.
2. Respondent : Assistant Commissioner of
Income Tax,
Circle-
Circle-17(1),
C.R.Building,
New Delhi.
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar
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