Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “G” BENCH
Before: SHRIPAVANKUMARGADALE,JUDICIALMEMBER & SHRI AMARJIT SINGH
IN THE INCOME TAX APPELLATE TRIBUNAL, “G” BENCH MUMBAI BEFORE SHRIPAVANKUMARGADALE,JUDICIALMEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.3206/MUM/2015 (A. Y.:2007-08)
M/s. Phoenix Vs. Dy. Commissioner of International Freight Income Tax, Range-2(1) Services Pvt. Ltd. (Now Mumbai-400050 known as C.H. Robinson International (India) Pvt. Ltd.) Excom House 7, Saki Vihar Road, Andheri (East) Mumbai-400072 Pan No.AABCE0443R Appellant Respondent
Appellant by None Respondent by Smt. Sonia Kumar Sr. AR
Date of Hearing 29.09.2022 Date of 14.10.2022 Pronouncement
ORDER PER PAVAN KUMAR GADALE, JM: The assessee has filed the appeal against the order of Commissioner of Income Tax Appeal(CIT(A))-4 Mumbai
2 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
passed under Section 271(1)(c) and 250 of the Income Tax Act, 1961 (hereinafter in short “the Act”).
The assessee has raised the following grounds of appeal.
Ground No. I: Validity of penalty order:
On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the Deputy Commissioner of Income Tax, Circle - 2(1), Mumbai ("the AO") of initiating penalty proceedings and consequently passing order imposing penalty under section 271(l)(c) of the Act.
The Appellant prays that the action of the lower authorities of imposing penalty under section 271(l) (c) of the Act be treated as unjustified, unwarranted and the penalty proceedings as also the order be treated as invalid, illegal and bad in law.
Without prejudice to above ground
Ground No. II: Levy of penalty u/s. 271(l) (c):
On the facts and in the circumstances of the case and in law, the CIT(A) erred in partly confirming the
3 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
action of the AO of levying penalty under section 271(l)(c) of the Act of Rs. 12,37,641/-, being 100 percent of tax sought to be evaded, on the alleged ground that, the Appellant had consciously and deliberately furnished inaccurate particulars thereof.
The Appellant prays that the action of the lower authorities be deleted. Ground No. III: General
The appellant craves leave to add to, alter, amend and/or vary all or any of the foregoing grounds of appeal either before or at the time of hearing.
The assessee company has filed the appeal with the Hon’ble Tribunal in the year 2015 and subsequently, the case was posted for hearing over a period of time and none appeared after 04.03.2020 and even today i.e.29- 09-2012 none appeared, on considering the facts and the action of the assessee in non appearance on dates of hearing. The presumption is that after filling the appeal, the assessee is not inclined/ interested to prosecute the appeal. Accordingly, we
4 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
heard the Ld. DR submissions and considered the material information available on record.
The brief facts of the case, that the assessee company is engaged in freight services. The assessee has filed the return of income for the A.Y. 2007-08 on 30.07.2010 disclosing a total income of Rs.1,57,47,056/- The case was reopened based on the search action U/sec132 of the Act on Mr.Sandeep Satani who is engaged in providing accommodation entries through his associates/ concerns and the assessee is one of the beneficiary. The Assessing officer (AO) after recording the reasons that the fraudulent transactions of accommodation entries were reported by investigating wing and has reason to believe that the income has escaped the Assesseement and issued notice under Section 148 of the Act. In reply, the assessee has filed a letter to treat the revised return of income filed earlier as due compliance. Subsequently, the assessee was also provided reasons for reopening assessment and further, the AO has issued notice under Section 142(1) of the Act and the learned AR of the assessee has attended the proceedings and submitted the details explaining the transactions and the assessee has filed the details of commission disallowance. Whereas, the AO found that
5 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
the assessee has debited Brokerage & Commission expense of Rs.50,17,486/- in the profit and loss account. Since, the assessee has not provided the complete details, the AO has made an addition of Rs.30,75,000/- towards commission expenses and similarly made addition of Rs.6,01,889/- in commission expenses were the PAN is not provided and assessed the total income of Rs.1,91,73,444/-and passed the order under Section 143(3) r.w.s. 147 of the Act dated 13.07.2010.
Subsequently, the A.O has initiated the penalty proceedings under Section 271(1) (c) and notice under Section 274 r.w.s. 271(1)(c) of the Act was issued. The assessee has filed the reply on 14.02.2013 explaining the facts and submitted the confirmation, name and address of the parties were the commission is paid. Whereas, the AO was not satisfied with the explanations and dealt on the provisions of Section 271(1) (c) of the Act and judicial decisions and levied a penalty of Rs.25,00000/- and passed the order under Section 271(1)(c) of the Act dated 25.03.2013.
6 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
Aggrieved by the penalty order, the assessee has filed an appeal with the CIT(A). Whereas, the CIT(A) has considered the grounds of appeal, submissions of the assessee, findings of the AO in reassessment proceedings and dealt on the various facets and judicial decisions and has restricted the penalty levied to the extent of Rs.12,37,641/- and partly allowed the assessee appeal. 6. Aggrieved by the CIT(A) order, the assessee has filed an appeal with the Tribunal. Since, none appeared on behalf of the assessee the learned DR has made the submissions on the findings of the Lower Authorities and supported the order of the CIT(A). 7. We heard the learned DR submissions and perused the materials on record. The learned DR submitted that, the CIT(A) has granted the relief considering the various transactions, factors and the judicial decisions. We find that, the assessee has challenged the levy of penalty sustained to the extent of Rs.12,37,641/- and on perusal of the facts no additional information was filed by the assesseee challenging the penalty.At this juncture, we considered it appropriate to refer to the findings of the CIT(A) at Page 43 Para 5.2 of the order read as under:
7 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
5.2. I have carefully and dispassionately considered the facts and circumstances of the case, statement of facts, written submissions and the, argument made by the Ld. A.R. before the undersigned. It is not disputed that the appellant had obtained accommodation entry in respect of bogus commission expenses of Rs.30,75,000/- from one, Mr. Sandeep Satani, who controlled two concerns, namely, M/s.Nischal Corporate Services Pvt. Ltd. and M/s. Indravarun Sales Agencies; Pvt. Ltd. An action u/s.132 of the Act was carried out in the premises of the said Mr. Sandeep Satani by the investigation wing of the I.T. Department. The said Mr. Satani confessed that he was not engaged in any real business and that he had been providing accommodation entries through M/s. Nischai Corporate Services Pvt. Ltd. and M/s. Indravarun Sales Agency Pvt. Ltd., controlled by him. On the basis of specific information received from the Investigation Wing, the A.O. had issued u/s.148 of the Act on 07.01.2010 which was duly served upon the appellant on 08.01.2010. Copy of reasons was also provided to the appellant on 05.05.2010. Further, notices were also issued on 07.01.2010 and 12.07.2010. In response to such notices, the appellant vide letter dated 27.10.2010, revised its return of income upwards by offering corresponding bogus commission expenses of Rs.30,75,000/- to tax. Whereas, the A.O. further noticed
8 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
during assessment proceedings that addresses and PANs of certain other commission payees were also not furnished by the appellant during reassessment proceedings. Further commission expenses of Rs.6,01,889/- have been debited by the appellant in its P&L Account for F.Y.2006-07 in names of such payees, whose addresses and PANs had not been provided by the appellant to the department during assessment proceeding or penalty proceedings. On the facts and in the circumstances the case and for the reasons discussed in the relevant reassessment order dated 30.07.2010, the A.O. disallowed such unsubstantiated and unverified commission expenses of Rs.36,76,889/- (Rs.30,75,000 + Rs.6,01,889) to the total income of the appellant. He also issued penalty notice u/s.271 (l) (c) r.w. Explanation I along with the relevant reassessment order dated 30.07.2010. Id. CIT(A) has observed that there were valid reasons for issuance of notice, u/s.148 of the Act and for reopening the assessment u/s.147 of the Act. He, therefore, upheld issuance of notice u/s.148 of the Act and also confirmed reassessment u/s.147 of the Act. He held that the appellant himself had admitted payment of Rs.30,75,00/- was bogus and obtained through hawala entry provider, Mr, Sandeep Satani, whose premises were searched by the department u/s.132 of the Act and who had confessed before the department that he had
9 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
provided accommodation entries to various persons, including inter-alia, the present appeal. As a matter of fact, after the searches conducted in the premises of the hawala entry provider, the said Mr. Sandeep Satani and his confession given to the department and subsequent to the service of notice u/s.148 of the Act, the appellant has decided to furnish the correct particulars of its income-by withdrawing the claim bogus commission of Rs.30,75,000/- allegedly paid to the bogus concerns of the said hawala entry provider, Mr. Sandeep Satani. He, therefore, offered such bogus commission of Rs.30,75,000/- for disallowance in its revised return of income. Whereas the appellant could not file all details relating to the remaining payments of brokerage and commission and, therefore, the claim relating to the same could not be substantiated before the A.O., neither during reassessment proceedings nor during penalty proceedings. My learned predecessor has justified and confirmed the disallowance of Rs.36,76,889/- made by the A.O. in the reassessment order dated 30.07.2010. He has dismissed corresponding Grounds of Appeal No. I to V of the appeal filed by the appellant against the reassessment order.
5.3. The Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd [2010] 322 ITR 158
10 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
(SC)has held that the assessee is liable to pay penalty u/s.271(l) (c) if he has furnished inaccurate particulars of income in his Income Tax Return. Hon'ble Supreme Court has held that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability of penalty u/s. 271(l) (c) would arise.
5.4. It may be noted that only a small percentage of the income tax returns corporate tax returns are picked up for scrutiny by the A.O's. If the assessees make a claim which is not only incorrect in law, but is also unsubstantiated and the explanation furnished by the assessees for making such a claim is not satisfactory, it would be difficult to say that they would still not be liable to penalty under section 271(l)(c) of the Act, which is a civil liability. If one takes the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, such assessees would not be liable for imposition of penalty, even if furnishing incorrect claim of income or claiming excessive deductions, that would give a free hand to such assesses to make untenable end unsustainable claims without there being basis, in the hope that 95% returns of income
11 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
would not be picked up for scrutiny and they would be assessed on the basis of their self-assessment under section 143(1) of the Act and even if their cases are selected for scrutiny, they can get away with merely paying the normal tax, which in any case, was payable by them. The consequences would be that such persons, who make irregular and excessive claims of this nature, actuated by and with a zeal to avoid civil liability would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. On the other hand, majority of good tax payers and law abiding tax payers of this country would be treated unequally and would be discriminated. Such inequity would take away the deterrent effect, for which these penalty provisions have been enacted in the Act.
5.5. Secondly, Falsehood in accounts can take either of the two forms: either an item of receipt may be suppressed fraudulently, or, an item of expenditure may be falsely (or in an exaggerated amount) claimed. Both types attempt to reduce the taxable income. Both types amount to concealment of the particulars of one's income as well as furnishing of inaccurate particulars of income. Penalty may be imposed for either or both such attempts [CIT v. India Sea Foods, (1976) IPS ITR 708 (Ker); Nagin Chand Shiv Sahai v. CIT (1938) 6 ITR 534
12 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
(Lah): CIT v. Gates Foam & Rubber Co. (1973) 91 ITR 467 (Ker)]. In this case, the appellant has claimed rental income by letting out its owned property and had also claimed various expenditure against the rent income received by it.
5.6. The Ld. A.R. vehemently argued that it is not a case of concealment of income nor furnishing of inaccurate particulars of income. He relied on certain case laws and made a proposition that in such circumstances, there was no intension to conceal the particulars of income and the A.O. has not proved mens-rea in this case. I do not agree with the view that penalty u/s. 271(l) (c) of the Act requires the AO to prove mens -rea. 5.7. Penalty u/s.271(l) (c) of the Act is attracted where in the course or any proceedings under the Act, the Assessing Officer or the first appellate authority is satisfied that any person has concealed the particulars of his income or has furnished inaccurate particulars of such income. Furnishing inaccurate particulars and concealing the particulars of income are two different things. The words "Furnishing inaccurate particulars of income" referred to the particulars which were furnished by an assessee of his income and the requirement of concealment of his income is that the said income has not been declared at all or is not even recorded in the books
13 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
of accounts or in a particular case, the concealment of the particulars of income may be from the return furnished. No doubt, the facts of a particular case may attract both the offences and in some cases, there can be overlapping of the two offences. In this case, the appellant has furnished inaccurate particulars of income and concealed its income.
5.8. Hon'ble Supreme Court, Three Member Bench, decided in the case of K.PMadhusudhanan Vs CIT (20O1) 251 ITR 99 (SC) as below: (a) Explanation - 1 below Section 271(1) being integral part of Section 271 (1) (c) can be used even where it was not invoked in the show cause notice u/s.274 r.w.s,271(1) (c). Thus, the contrary decision of the Mumbai High Court in the case of CITVs P.M. Shah (1993) 204 ITR 462 (Bom) stands overruled.
(b) After introduction of the Explanation, the decision in the case of Sir Shadilal Sugar and General Mills Ltd, CIT Vs 168 ITR 705 (SC), no more holds good and hence, the fact that the assessee had agreed for the addition is no more relevant. The Explanation was introduced to meet such situations only. Moreover, after the introduction of the Explanation, the revenue has not to prove mens rea on the part of the assessee.
14 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
(c) No express invocation of the Explanation to section 271 (1) (c) in the notice 271 (1) (c) is necessary for applying the provisions of the said Explanation. Therefore, in this case, the Revenue had discharged its onus and it did not have to prove mens rea in this case.
5.9. Hon'ble Supreme Court Three Members Bench in the case of Union of India & Ors. Vs Dharmendra Textile Processors reported in (2003) 306 ITR 277 ruled that the object behind enactment of Section 271(l)(c) read with Explanation indicate the said section has been enacted to provide for a remedy for loss of revenue, penalty u/s.271(l)(c) is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability. The explanations appended to section 271(l) (c) entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. It was further observed that the judgment in Dilip N. Shroff's case had not considered the effect and relevance of section 276C of the IT. Act, Object behind enactment of section 271(l) (c) read with Explanations indicates that the said section has been enacted to provide for a remedy for loss of revenue. Hon'ble Apex Court ruled that the penalty under that provision is a civil
15 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
liability. Willful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276C of the IT. Act. In the Union Budget of 1996-97, Section UAC of the Central Excise Act, 1944 was introduced. It has made the position clear that there 1-5 no scope for any discretion. The Hon'ble Supreme Court had referred to a catena of decisions which held that mens reais not an essential element to impose penalty for breach of civil applications. Some of these decisions of Hon'ble Apex Court are referred to as under.
(a) Director of Enforcement vs. MCTMCorpn (P)Ltd : {SCCpp. 478 and480-81): It was held that breach of civil application which attract penalty u/s. 23 (1) (a) would immediately attract the levy of penalty 11/5.23, irrespective of the fact that whether the contravention was made by the defaulter with any guilty intention or not.
(b) J. K. Industries Ltd. Vs Chief Inspector of Factories & Boilers. (SCC 692, para 42): It was held that the offences under the Act was not a part of general penal law but arise from the breach of a duty provided in a special beneficial social defense legislation
16 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
which creates absolute or strict liability without proof of any mens rea.
(c) R. S. Joshi Vs Ajit Mills Ltd. (SCC p. 110, para 19): In this case, Hon'ble Apex Court rejected the notion that a penalty or a punishment cannot be cast in the form of an absolute or no-fault liability but must be preceded by mens rea. It was declared that the classical view that "no mens, no crime”has long ago been eroded and several laws in India and abroad, especially regarding economic crimes and Departmental Penalties, have created several punishments even where the offences have been defined to exclude mens rea.
(d) Gujarat Travancore Agency Vs CIT (SCC p. 55, para. 4): In this case, Hon'ble Apex Court held that in the case of proceedings u/s.271 (1) (a), the intention of the legislature as to emphasize the /act of loss of revenue and to provide a remedy for such loss, an element of coercion is present in the penalty. Hon'ble Apex Court ruled that there is nothing in section 271 (1) (a) which requires that mens rea must be proved before penalty can be levied.
17 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
(e) Swedish Match AB Vs SEBI (SCC p. 671. para 113): Hon'ble Apex Court held that only in the criminal proceedings initiated against the appellant's, existence of mens rea on the part of the appellant will come up for consideration. Mens rea is not an essential element for imposing penalty for breach of civil applications or liabilities.
5.10 Hon'ble Supreme Court in the said case of Dharmendra Textile Processors (supra) decided that Dilip N. Shroff case (supra] was not correctly decided but Chariman SBBI Vs. Shriram Mutual Fund & Another (Supra) analyzed the legal position in the correct perspective. It was held that the explanation appended to section 271(l)(c) of the Act entirely indicate element of strict liability on the assessee for concealment was for giving inaccurate particulars while filing the return. Object behind enactment of section 271(l) (c) r.w. Explanation indicate that the said section has been enacted to provide for a remedy for loss of revenue. Penalty under that provision is a civil liability. Willful concealment is not an essential ingredient for attracting civil law.
18 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
5.11. Hon'ble Punjab & Haryana High Court in the case of Prempal Gandhi vs. CIT reported in (2010) 231 CTR (P&H) 100 has held that assesses having disclosed higher income after receiving notice under s. 148, there was no voluntary surrender of income but a clear cut case of concealment attracting penalty u/s. 271 (1) (a). It could not be held that the assessees wanted to buy peace of mind and there was no evidence of concealment, which called for penalty. This is not a case where penalty has been imposed only because assessee disclosed higher income voluntarily but a case of clear concealment where the assessee having found no other way out, was forced to surrender undisclosed income. Penalty was therefore rightly levied for concealment.
5.12 Hon'ble Allahabad High Court in the case of CIT vs. Rakesh Suri (2O10) 233 CTR (All) 184 has held that the assessee has not furnished the required information called for and tried to prolong the case before the AO. Disclosure was not voluntary but under compulsion when being cornered by the Revenue. Assessee had deliberately concealed income and disclosure being not voluntary and bona fide, Tribunal was not justified in cancelling the penalty. Hon'ble High Court upheld the penalty. Similarly, in the case of P. Rajaswamy, Raja Jewellery vs. CJT (2010) 323 ITR 527 (Ker), assessee
19 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
having declared concealed income only after detection by the Department, minimum penalty levied under s. 271(1.)(c) could not be interfered with.
5.13. In MAK Data P. Ltd. vs. Commissioner of Income Tax(2013) 358 ITR 593 (SC), the documents comprising share application forms etc. were impounded during survey u/s 133A in case of assessee's sister concern. The assessee surrendered Rs.40.74 lakhs. AO bought surrendered amount to tax and imposed penalty u/s 271(l) (c) for concealment and furnishing inaccurate particulars of income. Hon'ble Supreme Court held, AO shall not be carried away by plea of assessee like voluntary disclosure, buy peace, avoid litigation, etc. to explain its conduct. Explanation to Section 271(1) raises presumption of concealment when difference is noticed by AO between reported and assessed income. Initial burden is on assessee to show cogent and reliable evidence. Voluntary disclosure does not release assessee from mischief of penal proceedings.
5.14. Hon'ble Jurisdictional High Court in the case of Sanghvi SwissRefills (P) Ltd. vs. AC1T & Anr. reported in (2013)255 CTK (Bom) 261 has held That where the fact finding authorities had arrived at the finding that the assessee had filed inaccurate particulars
20 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
regarding its income by showing inaccurate expenses, clear case of concealment of income is made out for imposition of penalty under section 271(l) (c).
5.15. In the light of the above facts and circumstances of the case and the legal scenario discussed above, I am of the considered opinion that the penalty under section 271 (1) (c) of the Act is justifiable in this case and since it is not the rarest of the rare case, therefore, only minimum penalty u/s. 271 (1) (c) r.w.s. 274 of the Act read with Explanation 1 below 271 (1) (c) of the Act is sustainable. The appellant gets a relief of Rs.12,62,359/- (Rs.25,00,000-Rs.12,37,641) in this appeal.
5.16. Having regard to the facts and circumstances of the case and in the light of the various judicial decisions discussed in the preceding paragraphs, the minimum penalty of Rs.12,37,641/- u/s. 271 (1) (c) levied by the AO is Confirmed. Corresponding grounds of appeal are partly allowed. 6. In the result, the appeal is partly allowed.
We considering the facts and circumstances find that since there was no compliance by the assessee and there is no fresh material filed by the assessee other than information filed before the CIT(A)
21 M/s Phoenix International Freight Services Pvt Ltd. ITA No.3206/MUM/2015
challenging the levy of penalty and further on perusal of findings of the CIT(A), we do not find any infirmity in the order of the CIT(A) and up hold the same and dismiss the grounds of appeal of the assessee.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open court on 14th day of, October 2022.
Sd/- Sd/- (AMARJIT SINGH) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 14/10/2022 M. Sonavane Copy of the Order forwarded to: 1. The Appellant, 2. The Respondent 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER, (Dy./Asstt.Registrar)ITAT, Mumbai