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Income Tax Appellate Tribunal, ‘’ B’’ BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV, & SHRI WASEEM AHMED
आयकर अपीलीय अिधकरण, अहमदाबाद �यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ B’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT, And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 641/AHD/2017 िनधा�रण वष�/Asstt. Year: 2009-2010 & आयकर अपील सं./ITA No. 1311/AHD/2016 िनधा�रण वष�/Asstt. Year: 2010-2011 Mobile Telecommunications Pvt. Ltd., D.C.I.T., C/o. Ambalal M. Shah & Co., Vs. Circle-2(1)(2), Chartered Accountants, Baroda. 108, Bell-e-vista Complex, Race course Chakli circle, Vadodara-390007.
PAN: AACCM2659J
(Applicant) (Respondent) Assessee by : None Revenue by : Shri R.R. Makwana, Sr. D.R
सुनवाई क� तारीख/Date of Hearing : 09/11/2021 घोषणा क� तारीख /Date of Pronouncement: 23/12/2021 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned two appeals have been filed at the instance of the Assessee against the separate orders of the Learned Commissioner of Income Tax (Appeals)- 2, Vadodara, dated 27/01/2017 & 30/03/2016. ITA No.641/Ahd/2017 is arising out of the penalty order passed under s. 271(1)(c) of the Income Tax Act, 1961 (here- in-after referred to as "the Act") relevant to the Assessment Year 2009-2010 and ITA No. 1311/Ahd/2016 is arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 relevant to the Assessment Year 2010-2011.
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ITA No. 1311/Ahd/2016 for A.Y. 2010-11
The assessee has raised the following grounds of appeal:
On the facts and in the circumstances of the case the learned C.l.T.(A) erred in law and on facts in confirming the disallowance made by the A.O. U/S.43B of the Act a sum of Rs.434460/- in respect of service tax payable. In so doing the C.I.T. (A) did not appreciate that the service tax payable come within the purview of section 43B of the Act. Your appellant therefore hereby prays that, in the interest of justice and in proper appreciation of the provisions of section 43B of the act, the disallowance made by the A.O. be deleted.
The Ld.CIT (A) has erred in disallowing in continuing disallowance made by A.O. to Rs. 34,36,143/- from the disallowance made by A.O. out of factory expenses, Service charges ,Travelling and business promotion and Administration and other expenses. In doing so , the Hon.ble CIT (A ) has not consider the need of expenditure and expenses for the same vis a vis business need for such expenditure & therefore it is requested to delete the said addition made by Hon. CIT (A }. 3. The CIT (A) has erred in continuining disallowance of Rs.1,63,98,689 {29,04,314 + 1,34,94,375 ) from the end account of purchases. In doing so, the Hon. CIT (A) has taken a new view of disallowance without proper procedure and opportunity of being heard and made addition u/s 69C and remaining disallowance out of purchases without understanding reconciliation of the same. I, therefore requested to delete the entire addition of Rs. 1,63,98,689 , in the interest of justice to the appellant. 4. On the facts and the circumstances the learned C.I.T.(a) erred on law and on facts in confirming the addition U/s. 14Aof the I.T,Act,1961 of Rs.,324,583/ The learned C.I.T. (A) failed to appreciate the facts that your appellant had enough sources of its own by way of capital, and reserves to make investments. Your appellant therefore in the interest of justice requests hereby to delete the addition.
At the outset, it was noted that the appeal on hand, filed by the assessee, has been listed for hearing on several occasions but most of the time none appeared on behalf of the assessee. It is also pertinent to note that on the previous occasion the appeal of the assessee was dismissed by this tribunal in limine on account of non-appearance of the assessee. But subsequently, on the request of the assessee,
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the order passed by the ITAT was recalled vide order dated 9 April 2019. Subsequent to the recall of the order, the appeal has already been listed for hearing for various time but again the assessee did not appear before us. Thus it appears that the assessee is not serious enough to pursue its appeal. It is the trite law that the assessee after filing the appeal should also be vigilant enough to pursue the same. Thus in the absence of any cooperation from the side of the assessee, we deem it appropriate to adjudicate the issue ex parte to the assessee after hearing the learned DR of the revenue. Accordingly we proceed to adjudicate the issue raised by the assessee.
3.1 The assessee in all the grounds of appeal has challenged the additions made by the AO which were confirmed by the learned CIT (A) on various reasoning. In the present case, the return of income was filed by the assessee declaring an income of Rs. 94,92,409/- only. The case of the assessee was selected under scrutiny and the assessment was framed under section 143(3) of the Act after making various additions as detailed under: i. Service tax payable under section 43B of the Act of Rs. 4,34,460/- ii. Disallowances of certain expense of Rs. 61,60,166/- iii. Disallowances of purchases of Rs. 5,24,91,187/- iv. Disallowances of expenses under section 14A r.w.r. 8D of Rs. 3,24,583/-
3.2 The additions made by the AO were subsequently confirmed by the learned CIT (A) in part by observing as under: Since the Service tax was not paid before the due date of filing of return as per the provisions of Section 43B, the AO made the disallowances. Even during the course of appellate proceedings, the ld.A.R has failed to furnish documentary evidences to prove that the Service Tax payable as on 31.03.2010 was paid before the due date of filing of return. It may also be noted that the appellant had claimed the expenditure on account of Service Tax Payable and since the same was not paid before the due date of filing of return, in my considered view, the disallowance u/s.43B was rightly made by the AO. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 4.2.1 It is noticed that during the course of assessment proceedings, the A.O. has provided various opportunities of being heard but the appellant has filed only part details. Books of A7c and Bills 7 Vouchers were not produced before A.O. for examination. Even during the
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course of appellate proceedings, the appellant has filed only the ledger accounts and no additional evidence to establish the genuineness of expenses has been filed as is evident from the remand report of A.O. Moreover, in the rejoinder, the Id.A.R. has not controverted the findings of AO recorded in remand report. Undisputedly, the appellant has not come forward to produce Bills / vouchers alongwith complete details of expenses before the AO as well during appellate proceedings. The Id.AR has merely submitted that the expenses have been incurred tor the purposes of business and reasonableness has to be judged from the point of view of businessman and not the revenue. Further the genuineness of expenses has been justified on the basis of net profit rate disclosed. I find that the arguments of Id.AR are not fully convincing because when A.O. required the appellant to furnish complete details of expenses and produce the Bills / Vouchers to support the same, it is the duly of the appellant to comply the same. The appellant can not take shelter under better net profit rate etc. Moreover, by not filing complete details and producing evidences, the appellant has avoided verification by AO for its convenience. Therefore, I am of the considered view that a part of expenses mentioned above needs to be disallowed otherwise non-compliance will be a rewarding position. 4.2.2 Undisputed the appellant has claimed service charges of Rs. 10,00,0007- as compared to nil in the last year. No proof of services rendered etc. has been furnished by the appellant and hence entire service charges are to be disallowed. It is also noticed that most of the sales amounting to Rs. 51.68 crores have been made to three parties namely Advance Technologies Ltd, Prama Technologies, and Spectacle Technology Ltd and hence there was no business requirement for Business Promotion expenses Rs. 10,17,071/- as compared to only Rs.14,805/- in last year. Since neither the complete details of Business Promotion expenses has been filed nor the Bills / Vouchers have been produced, I hold that a disallowance of Rs. 10,00,000/- deserves to be made out of these expenses. The balance amount of disallowance of Rs.41,60,166/- {Rs, 61,60,166/- - Rs. 20,00,000/-) has been made by A.O, out of the total balance expenses of Rs.2,87,22,851/- which comes to 14.48%. Considering the totality of facts and circumstances of the case, in my view, a disallowance of 5% of total balance expenses will be quite reasonable to meet the end of justice. The 5% disallowance of balance expenses under consideration come to Rs. 14,36,143/-). Thus, total disallowance of Rs. 34,36,143/- (Rs.20,00,000/- + Rs. 14,36,143/-) is confirmed. Accordingly, Ground No. 3, 4, & 6 are partly allowed.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX I have also gone through the Tax Audit Report and find that the appellant has maintained complete quantitative tally of the opening stock, purchases, sales -& closing stock of Telecom, Electronic Systems, Hardware & Software to the tune of Rs. 52,20,07,554/- (purchases). This fact also goes to prove that purchases to this extent are completely verifiable otherwise there would not have been the sales as disclosed by the appellant company. After excluding the purchases for which complete quantitative tally is available, the balance purchases come to Rs.29,04,314/-. Hence it emerges that the appellant has not maintained quantitative records for purchases of Rs.29,04,314/-only, and therefore, it is not at all verifiable as to whether purchases to the tune of Rs. 29,04,314/- are actually reflected in sales or stock. Bills / Vouchers in respect of these purchases have been also not produced by the appellant. Thus, in my view disallowance of purchases to the tune of Rs. 29,04,314/- is fully justified and hence the same is confirmed. Now coming to the Bills not recorded in purchase accounts, I find that the Invoice No. EMP/Aug-09/017 dt. 16/8/2009 relates to the purchases of softwares from Empower Industries India Ltd for Rs. 62,34,986/- plus out-put VAT @ 4% amounting to Rs. 2,49,399.44 (Total Rs. 64,84,385.44), but the same is not recorded in the ledger A/c of software purchases. This amount does not match even with any of the entries recorded on
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or after the date of purchase. Similarly, Invoice No.EMP/Sep-09/005 dt 15/09/2009 pertains to purchases of softwares from Empower Industries India Ltd for Rs. 67,40,375/- plus output VAT @ 4% amounting to Rs. 2,69,615/- (Total Rs. 70,09,990/-), but the same is again not recorded in the Ledger A/c of software purchase. In fact no purchase of softwares has been recorded in the month of Sept, 2009. This amount of purchase does not also match with any of the entries of software purchases even on subsequent dates. Thus, it is clearly established that the appellant company was engaged in purchase and sale of softwares outside the Books of A/c instead of inflating the purchases of softwares. Since both the above purchases totaling to Rs. 1,34,94,375/- (Rs. 64,84,385/- + Rs. 70,09,990/-) were not recorded in the Books of A/c maintained in regular course of business, I hold that the appellant company has incurred expenses on purchases of Rs.1,34,94,375/- outside the Books of A/c source of which is unexplained and hence addition of Rs. 1,34,94,375/- is confirmed u/s 69C of the Act. Thus, the addition of Rs.1,63,98,689 (Rs.29,04,314/- + Rs.1,34,94,375/-) is upheld on account of bogus and unexplained purchases out of total disallowance of purchases made by AO at Rs.5,24,91,187/-. The AO is accordingly directed to delete the balance amount of disallowance out of the purchases. Ground No.5 thus, stands partly allowed.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 4.4 Although the appellant has not raised any ground against the disallowance made u/s 14A amounting to Rs.3,24,583/-, but vide various written submissions, the Id.AR has objected to the disallowance made. However, it has failed to prove that own funds were utilized for making investment resulting into tax free income. When the Id.AR was required to justify the submission in respect of the disallowance made u/s 14A, he has stated that the appellant had no evidences and hence this ground may be \ treated as not pressed. Accordingly, the submission made by the appellant this regard is rejected and no relief is allowed.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned DR before us vehemently supported the order of the authorities below.
We have heard the DR and perused the materials available on record. In the present case various additions were made by the AO as discussed in the preceding paragraph which were also confirmed by the learned CIT (A) in part. From the preceding discussion, we find that the learned CIT (A) has passed a detailed and reasoned order upholding the assessment order passed by the AO in part. As there was no assistance from the side of the assessee, we do not find any infirmity in the order passed by the learned CIT (A). Accordingly we uphold the same. Hence the grounds of appeal of the assessee are dismissed.
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6.1 In the result, the appeal filed by the assessee is dismissed.
Coming to ITA number 641/AHD/2017, an appeal by the assessee for the assessment year 2009-10
The assessee has raised the following grounds of appeal: On the facts and in the circumstances of the case the learned C.I.T.(A) erred in confirming the act in of invoking the provisions of section 271(1)(c) of the Act, in of invoking the provisions of section 271(1)(c) of the I.T. Act, 1961 and thereby levied penalty of Rs.32,58,000/- The action of the C.I.T.(A) being uncalled for an unwarranted. Your appellant therefore in the interest of justice hereby prays that the penalty levied by the C.I.T. be deleted. The appellant request leave to add to or alter the grounds of appeal at or before the time of hearing of the appeal.
The only issue raised by the assessee is that learned CIT (A) erred in confirming the penalty levied by the AO for ₹ 32,58,000.00 under the provisions of section 271(1)(c) of the Act.
The assessee in the year under consideration filed its return of income dated 30 September 2009 declaring total income of Rs. 44,80,360.00 only. The assessment was framed under section 144 of the Act by making the addition of unexplained cash credit under section 68 of the Act of ₹ 93,67,654.00 and disallowance of the depreciation of Rs. 2,16,027.00 only. The AO in the assessment initiated the penalty proceedings by issuing notice under section 274 read with section 271(1)© of the Act which came to be confirmed at ₹ 32,58,000.00 being 100% of the amount of tax sought to be evaded.
On appeal, the learned CIT (A) confirmed the same by observing as under: I have carefully considered the facts on records and submissions of the Ld. Authorized Representative. The ground of appeal raised pertains to imposition of penalty at Rs.32,58,000-. Undisputedly, the appellant did not make any compliance during the course of assessment proceedings even though the Assessing Officer had allowed various
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opportunities of being heard. Accordingly, the assessment was completed u/s. 144. Considering the level of non compliance on the part of appellant, the CIT(A) in quantum of appeal proceedings did not admit the additional evidences and dismissed the appeal. I find that even in the penalty proceedings, the appellant has not furnished any explanation in respect of unexplained cash credit of Rs.93,67,654/- and claim of depreciation at Rs.2,16,027/- which was disallowed since no evidences were furnished for purchase of fixed assets. The Assessing Officer has invoked the provisions of Explanation-1 below section 271(1) while imposing the penalty. Since the appellant has not furnished any explanation in respect of additions made, in my considered view, the Assessing Officer was fully justified in imposing of penalty in view of the provisions of Explanation-1. 4.1 During the course of appellate proceedings, the Ld. Authorized Representative has heavily relied upon the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Baroda Tin Works (1996) 138 Taxman 507 (Guj.) and argued that legal fiction created u/s. 68 cannot be extended for the purposes of imposition of penalty. I find that after considering the above mentioned decision, the Hon'ble High Court in the case of Usha Fertilizers Vs. CIT (2005) 142 Taxman 414 (Guj.) has upheld penalty u/s. 271(l)(c) in respect of the additions made u/s. 68. The head notes of this case, are reproduced as under:- "Section 271(l)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1975-76 - Assessee-firm had made certain payments on various dates without having sufficient cash balances on those dates - Assessing Officer added such amount as income from undisclosed sources and also levied penalty under section 271(l)(c) which was confirmed by Tribunal - On reference, assessee contended, inter alia, that it had borrowed various sums from different parties and instructed accountant to pass necessary credit entries in books of account, but he failed to do so and that at that time a period of four years had elapsed and assessee did not remember names of persons from whom borrowings had been made - Whether explanation by which an assessee can rebut presumption raised against it has to be one which is not fantastic or unacceptable and it is not law that any and every explanation by assessee must be accepted - Held, yes - Whether explanation of assessee that it had borrowed certain funds and instructed accountant to pass necessary credit entries in its books of account remained a bald averment without establishing that it had issued any such direction and in absence of details regarding names of lenders, amount advanced or even dates when borrowings were made or repaid - Held, yes - Whether, therefore, burden which was cast on assessee remained undischarged and Tribunal was right in upholding penalty levied under section 271(l)(c) - Held, yes" In view of the above, it is clear that Hon'ble jurisdictional High Court has upheld the penalty even if the assessee has filed an explanation in respect of cash credits utilized for various payments, but in the case of appellant no explanation at all has been filed. Hence I hold that additions made by the Assessing Officer and sustained in quantum appellate proceedings have to be considered for imposition of penalty u/s. 271(l)(c) in view of the Explanation-1, The other decisions relied upon by the Ld. Authorized Representative are distinguishable on facts. 4.1.1 In view of the above factual and legal position, thus penalty imposed by the Assessing Officer is confirmed and appellant fails in respect of all the grounds of appeal. 5. In the result, the appeal of the assessee is Dismissed.
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Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned DR before us vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. In the present case the penalty was levied by the AO under section 271(1)(c) of the Act for ₹ 32,58,000.00 which was also confirmed by the learned CIT (A). From the preceding discussion, we find that the learned CIT (A) has passed a detailed and reasoned order upholding the penalty order passed by the AO. As there was no assistance from the side of the assessee at the time of hearing, we do not find any infirmity in the order passed by the learned CIT (A). Accordingly we uphold the same. Hence the ground of appeal of the assessee is dismissed.
13.1 In the result, the appeal filed by the assessee is dismissed.
In the combined result, both the appeals of the assessee are dismissed.
Order pronounced in the Court on 23/12/2021 at Ahmedabad.
Sd/- Sd/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (True Copy)
Ahmedabad; Dated 23/12/2021 Manish