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Judgment
PER BRAJESH KUMAR SINGH, AM,
This appeal by the assessee is directed against the order dated 04.02.2025 of Ld. Commissioner of Income Tax (Appeal), Delhi-31 [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the penalty order dated 27.03.2022 passed under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the ‘the Act’) by the National Faceless Assessment Centre, Delhi (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2011-12.
The ground of appeal filed by the assessee are reproduced as under:
“1.That the Ld. CIT(A) has erred in upholding the order of Ld. Assessing Officer passed u/s 271(1)(c) of the Income Tax Act, 1961 imposing a penalty of Rs. 332,17,50,000/- being passed without jurisdiction, without recording of valid and proper satisfaction and without specifying charges for initiation and imposition of penalty resulting into a void ab inito proceeding.
2.That the Ld. AO has erred while initiating the penalty proceeding u/s 271(1)(c) of the Income Tax Act, 1961 by way of SCN pursuant to passing of assessment order dated 28.12.2017 without specifically stating whether it is for concealment of particulars of income or for furnishing of inaccurate particulars of income, the Ld. CIT(A) has erred in upholding the same.
3.The order of the CIT (A) is confirming the order of the Ld. Assessing Officer is bad in law and contrary to the facts on record.
4.The appellant craves leave to add, alter, amend or vary any of the above grounds during the pendency of the appeal.”
Brief facts of the case: The assessee company filed its return of income on 23.09.2011 declaring loss at Rs. 47,507/-. The return was processed u/s 143(1) of the Act. The case was selected for scrutiny & notice u/s 143(2) of the Act, was issued on 25.09.2012 and duly served upon the assessee. The, assessment was completed on 28.01.2014 accepting the return loss of Rs. 47,507/-. Therefore, the case was re-opened u/s 148 of the Act and the assessment order u/s 144 r.w.s. 147 was passed on 28/12/2017 making an addition of Rs. 1000 crores as income from undisclosed sources.
At the outset, the Ld. Counsel for the assessee submitted that the appeal of the assessee was decided ex-parte by the Ld. CIT(A). Further, it was submitted that the above addition was challenged vide ground no. 4 in the quantum appeal in the case of the assessee, wherein the co-ordinate Bench of the ITAT in ITA No.-6690/Del/2018 vide order dated 24.09.2025 restricted the addition of Rs. 1,000/-crores to consider only percentage of income on the said entries on the ground that the assessee can be considered to be involved in the business of facilitating and providing accommodation entries to the beneficiaries, details of which were examined by SFIO and for such services rendered, assessee may be charging commission. The Co-ordinate Bench further observed that in respect of the impugned credit entries Section 68 of the Act would not be applicable because the cash credits did not belong to or formed part of the income of the assessee and observed that attributing commission income only to such sort of credit entries was upheld by various decisions as referred in the quantum appeal. The Ld. Counsel further submitted that for considering the percentage, the Co-ordinate Bench of the Tribunal has remitted the matter to the file of the AO for fresh adjudication with certain direction. Therefore, it was submitted that this penalty order does not survive and the same may be quashed.
On the other hand, the Ld. CIT(DR) did not dispute the above position and relied upon the order of the authorities below.
We have heard both the parties and perused the material available on record. The relevant extract of the order dated 24.09.2025 of the Tribunal in the case of the assessee in the quantum appeal in ITA No.- 6690/Del/2018 is reproduced as under:
“1.This appeal is preferred by the assessee against the order dated 10.08.2018 of the Commissioner of Income-tax (Appeals)-30, New Delhi (hereinafter referred to as the ld. First Appellate Authority or 'the Ld. FAA' for short) in Appeal No.317/17-18/2980 arising out of the appeal before it against the order dated 28.12.2017 passed u/s 144/147 of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’) by the ACIT, Central Circle-32, New Delhi (hereafter referre4d to as the Ld. AO). ………………………
9.Thus we appreciate the contention of ld. AR that, which was though in the alternate, that at best, the addition that could have been made in the hands of the assessee could have been the percentage of commission income as has been determined in the other cases part of same modus operandi Thus the assessee can be considered to be involved in the business of facilitating and providing accommodation entries to the beneficiaries, details of which were examined by SFIO. Thus for such services rendered, assessee may be charging commission Thus for impugned credit entries Section 68 of the Act would not be because the cash credits did not belong to or formed part of the income of the assessee. Attributing commission income only to such sort of credit entries has been upheld by Hon'ble Bombay High Court in the case of Principal Commissioner of Income-tax-14 v. Alag Securities (P.) Ltd [2020] 117 taxmann.com 292 (Bombay) and the jurisdictional Hon'ble Delhi High Court in Dy. Commissioner Of Income Tax Versus M/S Bhawani Portfolio Pvt. Ltd. ITA 158/2020 (Delhi High Court) wherein it was held that the percentage of commission taken between 0.15% to 0.50% is correct view.
10.Thus the matter deserves to be remitted back to the files of the assessing officer with direction to consider a fresh as to the percentage of commission income only, which is to be added in the hands of the assessee as has been done in other cases after considering the multiple routing. Thus leaving other grounds as academic, the ground no. 4 is allowed partly in favour of assessee and with aforesaid directions the matter is remitted back to the files of assessing officer.
11.The appeal is thus allowed for statistical purposes.”
Thus, it is seen that the Co-ordinate Bench of the Tribunal has held that the quantum addition of Rs. 10,000/- crores was not justified in the given facts of the case and only commission income for facilitating and providing accommodation entries to the beneficiaries can be considered for which the matter was remitted to the file of the AO. Therefore, in view of the facts, the impugned penalty order levying a penalty of Rs. 332,17,50,000/- cannot survive and the same is hereby deleted. Accordingly, ground no. 3 of the appeal is allowed. In view of ground no. 3 of the appeal being allowed, the ground nos. 1 and 2 become academic and are left open in this case.
In the result, appeal of the assessee is allowed.