MAN EQUIPMENT CO. P.LTD,MUMBAI vs. DCIT CEN CIR 37, MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER & SMT. RENU JAUHRI, ACCOUNTANT MEMBER ITA No. 5144/MUM/2015 (A.Y. 2008-09) M/s. Man Equipment Co. v/s. DCIT, Central Circle-37 Pvt. Ltd. बनाम Mumbai 69, SVP Road, Dongri, Mumbai-400009 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACM9716E Appellant/अपीलार्थी .. Respondent/प्रतिवादी

Appellant by : None Respondent by : Shri. B. Laxmi Kanth Date of Hearing 28.10.2024 Date of Pronouncement 25.11.2024 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai-53 [hereinafter referred to as “CIT(A)”] dated 24.07.2015 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2008-09.

P a g e | 2 ITA No. 5144/Mum/2015 A.Y. 2008-09 Man Equipment Co. P. Ltd. additional income of Rs. 1 crore declared by the appellant in its return filed in response to notice u/s. 153A of the Act. 2. The appellant prays that the penalty in respect of additional income confirmed by the Hon Le CIT-A to the extent of Rs. 33,99,000/- may be deleted. Ground 2: General 3. The Appellant reserves the right to add, alter or amend any ground or grounds of appeal on or before the hearing. 3. The brief facts of the case are that the assessee filed its original return declaring income of Rs. 42,28,031/- on 30.09.2008 for AY 2008-09. A search and seizure action u/s 132 of the Act was conducted on 13.02.2009 in Rangara Group of cases including the assessee. After the search, a notice u/s 153A dated 13.08.2009 was issued to the assessee in response to which it filed return declaring income of Rs. 1,42,28,031/- on 26.01.2019, an additional income of Rs. 1,00,00,000/- had been declared by the assessee in its statement recorded u/s 132(4) in the course of the search. Accordingly, the assessee declared additional income of Rs. 1,00,00,000/- in its return filed in response to the notice u/s 153A of the Act. The assessment order u/s 143(3) r.w.s. 153A was passed by the AO on 29.12.2010 assessing the total income at Rs. 1,48,28,031/- and penalty proceedings u/s 271(1)(c) were also initiated for the concealment of income. During the appellate proceedings, the assessee contended that the additional income of Rs. 1,00,00,000/- had been declared to avoid penalty and litigation and to buy peace of mind. Accordingly, there is neither concealment of income nor detection of undisclosed income during the course of assessment proceedings. However, Ld. AO invoked the provisions of Explanation 5A below

P a g e | 3 ITA No. 5144/Mum/2015 A.Y. 2008-09 Man Equipment Co. P. Ltd. section 271(1)(c) of the Act and imposed the minimum penalty of Rs. 33,99,000/- vide order dated 07.03.2014. 4. Aggrieved with the order of the Ld. AO, the assessee filed an appeal before Ld. CIT(A). Ld. CIT(A) vide his order dated 24.07.2015 confirmed imposition of the penalty with the following observations: 4.3.1 to 4.3.5 “4.3.1 I have considered the submissions of the appellant and perused the materials available on record. At the outset, it is proposed to consider the settled legal position on the issue of levy of penalty u/s.271(1)(c) of the Act. In the first place, it deserves to be noted that mens rea is no longer an essential ingredient for the levy of penalty u/s 271(1)(c) as held by the Hon'ble Apex Court in Union of India & ors. v. Dharamendra Textile Processors & ors. 306 ITR 277 (SC). It has been held that the objective behind enactment of Section 271(1)(c) is to provide remedy for loss of revenue and that such a penalty is a civil rather than a quasi-criminal liability and, therefore, wilful or conscious concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution u/s 276C of the Act. Therefore, there is no onus on the revenue to establish mens rea on part of the appellant and, accordingly, its plea to this effect [based on the ratio of Sir Shadilal Sugar & General Mills Ltd. 168 ITR 705 (SC) is found to be devoid of merit and hence rejected. Secondly, it has been held in a series of decisions that the evidence gathered at the stage of assessment proceedings is prima facie material in penalty proceedings and that so long as the assessee has not adduced any evidence to disprove or rebut the said prima facie materials at the stage of penalty proceedings, those can be acted upon and a finding of concealment can be based thereon. As the appellant in the present case has not led any fresh evidence to disprove the case of the A.O. at the penalty stage, the findings recorded at the time of assessment would be relevant to the levy of penalty. Thirdly, it is trite law that voluntary disclosure does not release the assessee from the mischief of penal proceedings. It has been held that the Assessing Officer shall not be carried away by the plea of the assessee like 'voluntary disclosure', 'buy peace’ avoid litigation’ icable settlement etc. to explain away his conduct. It has also been held that the statute does not recognize those types of defences under Explanation 1 to Section 271(1)(c) of the Act. (Mak Data P. Ltd. v. CIT 358 ITR 593 (SC)] 4.3.2 Fourthly, as heid in CIT v. Kristina & Co. 120 FIR 144 (Mad.), where the assessee himself has admitted that the amount represented his own income, no further evidence would be necessary to show that it was the amount which represented his income and that it had been concealed in the return. While delivering Its judgment in the said case, the Hon'ble Madras High Court relied on the judicial precedents reported in 76 ITR 696 (SC) and 112 ITR 1048 (Bom). Thus, in the instant case, the appellant itself having declared additional income of Rs.1 crore in its return of income, no enquiry was required to be conducted or no rebuttal was required to be made by the A.0. in this regard. Moreover, it deserves to be noted that additional income of Rs.1 crore was admitted by Shri Amin Rangara only after he was confronted with incriminating evidences of having procured accommodation entries with a view to artificially inflating the figures of sales and purchases of Group

P a g e | 4 ITA No. 5144/Mum/2015 A.Y. 2008-09 Man Equipment Co. P. Ltd. concerns including the appellant and other glaring discrepancies in accounts including negative cash balance of Rs.2.14 crores and unexplained credit of Rs.91 lakhs in the suspense account unearthed during the course of search. 4.3.3 It is a matter of record that admission of undisclosed income of Rs. 1 crore was made by the appellant/Shri Amin Rangara in his statement recorded u/s.132(4) In the course of search. There is nothing on record to show that the said admission was made before the Investigation Wing under any threat duress, coercion or undue influence. Neither at the time of assessment nor at the penalty stage did the appellant claim that the aforesaid admission was made under any mistake of fact or law. It is a matter of record that the appellant has not repudiated or retracted from the aforesaid admission on any ground whatsoever before the A.O. In other words, the confessional statement of the appellant/Shri Amin Rangara was not made in thin air but was backed by concrete evidences seized during the course of search. From perusal of the assessment order, these evidences by way of seized materials, sworn statements of accommodation entry providers and admission of Shri Amin Rangara etc. and the inferences therefrom drawn by the A.O. can be summarized as under:- Pages 3 to 17 of Annexure A-1 to Panchnama dated 14.02.2009 contain F.Y.- wise details of cheques and corresponding receipt of cash. For F.Y. 2007-08, the cumulative total amount comes to Rs.28,01,100/- which was admitted by Mr. Amin Rangara to be outside the books of account. Page 17 contains account of amounts aggregating to Rs. 1.72 crores paid by Mr. Kirit Radia incash to Mr. Amin Rangara out of which amounts totalling Rs.1.52 crores were received back from Mr. Amin Rangara. In his statement u/s.131 recorded on 16.02.2009 before the Investigation Wing. Mr. Amin Kangara admitted that the amounts mentioned on Page 17 taken by him from his Finance Manager, Mr. Kirit Radia were out of the cash flow generated from accommodation entries taken by various entities of the Group including the appellant. The modus operandi of artificially inflating the turnover of the applian familiar and usual. The appellant used to make payment for these bogus purchases through cheques and receive cash back from the party to whom the cheque against bogus purchases was issued. This cash was then being deposited in the bank account in the garb of cash sales. Thus, the same amount was being rolled over more than once, thereby resulting in artificial inflation of turnover of the company. The appellant was found to have obtained accommodation entries for purchases to the tune of Rs.7,54,69,347/ out of total purchases of Rs.36.82 crores during F.Y.2007-08. Similarly, out of total turnover of Rs.37.06 crores for the said F.Y, cash sales amounted to Rs.18,16,25,700/-. However, no bilis showing cash sales were found either in physical form or even in the computer. This led the A.0. to infer that a substantial part of the appellant's business was bogus. The fact that the disclosure made by the appellant during the course of search was fully accepted as well as incorporated in its returns of income filed u/s.153A confirmed the above inference. 4.3.4 It deserves to be noted that Explanation 5A to Section 271(1)(c) is squarely applicable in the present case. It is a matter of record that the search operation was conducted at the premises of the appellant on 13.02.2009. In the course of said search, the appellant has been found to be the owner of income based on the entries in the books of accounts or other documents, statements etc. and it has admitted that such

P a g e | 5 ITA No. 5144/Mum/2015 A.Y. 2008-09 Man Equipment Co. P. Ltd. documents etc. represent its income for the previous year under appeal (viz. F.Y.2007-08) which had ended before the date of search. It is an undisputed fact that the return of income for such previous year had been furnished before the date of search on 30.09.2008 showing total income of Rs.42,28,031/. The appellant filed its return of income for the A.Y. under consideration in response to notice u/s.153A on 26.11.2009 declaring total income of Rs.1,42,28,031/- including additional income of Rs.1 crore under the head 'Other Income. In view of the above position, the legal fiction enacted in Explanation SA will come into play and the appellant will be deemed to have concealed the particulars of its income or furnished inaccurate particulars of such income for the of imposition of penalty u/s 271(1)(c) of the Act, notwithstanding that such additional income of Rs.1 crore was declared by it in its return of income furnished after the date of search. What is material is not that the income returned u/s 153A was accepted by the A.O. without making any additions but that the original return filed by the appellant on 30.09.2008 before the date of search did not reflect its true and correct Income. In this connection, reliance is placed on the unreported decision of Hon'ble ITAT, Chandigarh Bench dated 31.10.2012 in the case of Shri Rajnish Vohra v. DCIT [ITA No.516/CHD/2012] wherein the penalty levied by the Assessing Officer on the assessee on similar facts u/s.271(1)(c) r.w. Explanation 5A was upheld. 4.3.5 In light of the above discussion, I am of the considered view that the A.O. was correct in Invoking the provisions of Explanation 5A to Section 271(1)(c) in respect of the additional income of Rs.1 crore shown by the appellant in its return of income filed in response to notice u/s.153A after the date of search. Under these circumstances, I do not find any error or infirmity in the action of the A10 in levying penalty of Rs.33,99,000/ on the appellant u/s:271(1)(c) of the Act which is accordingly confirmed. Grounds bearing Nos.1 to 5 taken up by the appellant are dismissed.” 5. On the date fixed for hearing none appeared on behalf of the assessee. However, Ld. DR has relied on the orders of the lower authorities and argued that it is fit case for imposition of penalty. It is noticed that this case is pending since long and has been fixed several times but no compliance is being made by the assessee. We, therefore, proceed to decide the matter as per the material available before us. Admittedly, the assessee declared additional income in its return filed in response to the notice u/s 153A of the Act, this amount was declared in the statement recorded during the course of search u/s 132(4) of the Act by the assessee/Shri Ameen Rangara. After the assessee was confronted

P a g e | 6 ITA No. 5144/Mum/2015 A.Y. 2008-09 Man Equipment Co. P. Ltd. with incriminating evidences regarding the accommodation entries procured as well as other discrepancies in the accounts including negative cash balance of Rs. 2.14 crore and unexplained credit of Rs. 91,00,000/- in the suspense account found during the course of search he declared additional income in respect of these discrepancies. Thereafter, in its return of income assessee included above said declaration of additional income of Rs. 1,00,00,000/- under the head “other income”. Ld. AO observed that provisions of Explanation 5A of section 271(1)(c) of the Act are clearly applicable in the case of the assessee, relevant portion of which is reproduced below: “Explanation 5A.- Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of- (i) any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for any previous year; or (it) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of search and,- (a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein; or (b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income.” 6. In view of facts of the case as well as specific provisions regarding deemed concealment contends in explanation 5A reproduced hereinbefore, we hold that the penalty u/s 271(1)(c) has been rightly imposed by the Ld. AO and confirmed

P a g e | 7 ITA No. 5144/Mum/2015 A.Y. 2008-09 Man Equipment Co. P. Ltd. in the first appeal. We, therefore, find no reason to interfere with the order of the Ld. CIT(A). 7. In the result, the appeal filed by the assessee is dismissed.

Order pronounced in the open court on 25.11.2024.

Sd/- Sd/- NARENDER KUMAR CHOUDHRY RENU JAUHRI (न्यातयक सदस्य/JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER)

Place: म ुंबई/Mumbai दिनाुंक /Date 25.11..2024 अननकेत स ुंह राजपूत/ स्टेनो आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file.

सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अतिकरण/ ITAT, Bench, Mumbai.