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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL
Before: SHRI BEFORE SHRI G.D. AGRAWALG.D. AGRAWALG.D. AGRAWAL & G.D. AGRAWAL & AND & SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARGSHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG
PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP :- PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP This appeal by the assessee for the assessment year 1995-96 is directed against the order of learned CIT(A)-XXI, New Delhi dated 30th September, 2011.
The assessee has raised the following grounds of appeal :-
“1. That the ld.CIT(A) has erred in law as well as on facts in confirming the penalty amounting to Rs.30,43,900/- made by AO on account of addition of unexplained sundry creditor : a) because he failed to appreciate that neither the AO nor CIT(A) had verified the bills in the suitable manner either during the assessment proceeding or during remand proceedings and even during penalty proceeding.
2 ITA-5401/Del/2011 b) because the ld.CIT(A) has failed to appreciate that the AO has not provided opportunity to cross examine at any stage during remand as well as penalty proceedings despite the direction of Hon’ble ITAT. c) because the ld.CIT(A) has failed to appreciate that penalty proceedings are separate proceedings and penalty is not automatic. d) because the ld.CIT(A) has also failed to appreciate that assessee has no reasons to file inaccurate particulars and make bogus purchases as his income was totally exempt u/s 80HHC. e) because the ld.CIT(A) has erred in law as well as on facts in confirming the penalty due to addition of an amount which assessee has already written off in the books of account in the year in which it became bad and declared the same as income in AY 2007-08 and so the same cannot be treated as income in assessment year 1995-96 again. f) because the ld.CIT(A) has failed to appreciate that assessee has filed all the evidence pertaining to purchase which was examined and expenditure was allowed as a deduction while computing under section 80HHC, merely by denying by one person it would not amount to filing any inaccurate particular of income.
2. That the ld.CIT(A) has erred in law as well as on facts in not providing proper opportunity of being heard as he passed the order just on the next day from the date of hearing on which counsel failed to appear despite the request by Counsel Sh. S.N. Prasad, Advocate appeared on 30.09.2011.
It is, therefore, prayed that the penalty made by ld.AO and confirmed by ld.CIT(A) without giving proper opportunity may kindly be deleted.”
At the time of hearing before us, no arguments were advanced with reference to ground No.2. Learned counsel for the assessee as well as learned DR only argued with reference to the merit of the levy
3 ITA-5401/Del/2011 of the penalty levied u/s 271(1)(c) of the Act. Therefore, ground No.2 is treated as not pressed and rejected as such.
The facts relating to ground No.1 are that the assessee has claimed the purchase of goods of the value of `66,15,000/- from M/s Unifoil Enterprises. The bill of purchases was filed before the Assessing Officer but no other evidence regarding the genuineness of the transaction was filed before him. In the original assessment proceedings, the Assessing Officer made enquiries from M/s Unifoil Enterprises and, in reply dated 23rd January, 1998, M/s Unifoil Enterprises informed that it had not made any sales to the assessee. Therefore, the amount was added to the total income of the assessee. On appeal, learned CIT(A) sustained the addition and the assessee filed second appeal before the ITAT. The ITAT, in vide order dated 28th July, 2006, set aside the matter to the file of the Assessing Officer. In the set aside proceedings, the Assessing Officer got enquiry made at Mumbai where the seller i.e. M/s Unifoil Enterprises is located. Statement of Shri Prafful Parikh, proprietor of M/s Unifoil Enterprises was recorded by the Assistant Director of Income-tax (Investigation) on oath on 26th December, 2007. The sale bills furnished by the assessee were shown to him and he was asked to confirm whether the bills were issued by him and whether the sales were made to the assessee in the period 1.4.1994 to 31.3.1995. It was deposed that the answer has already been given in the letter dated 23rd January, 1998. It was reiterated again that no sale had been made to the assessee. On the basis of these facts, the Assessing Officer concluded that the assessee did not make any purchases from M/s Unifoil Enterprises but made purchases from some other party to whom the payment was made in cash. Therefore, the addition was made in respect of unexplained cash u/s 69. On appeal, learned CIT(A) sustained the addition. Therefore, the assessee again filed the appeal
4 ITA-5401/Del/2011 before the ITAT in which assessee raised two grounds, one with regard to the addition of `66.15 lakhs and second, for not granting enhanced deduction u/s 80HHC on account of increase in total income because of the aforesaid addition. The ITAT, vide order dated 14th January, 2011, dismissed the assessee’s appeal. The relevant finding of the ITAT is reproduced herein below for ready reference :-
“The facts are that the assessee showed purchase of goods of the value of `66,15,000/- from M/s Unifoil Enterprises. The bills of purchases were filed before the AO. No other evidence regarding the genuineness of the transaction was filed before him. In the course of original assessment proceedings, the AO made enquiries by summons proceedings and in reply dated 23.1.1998, the creditor informed that it has not made any sale to the assessee. Therefore, the amount was added to the total income of the assessee. As mentioned earlier, the matter was restored to the file of the AO for de-novo examination and assessment. In particular, it was mentioned that there is force in the argument of the ld. Counsel that there could be no sale without the purchase. The assessee had produced the purchase bills and, therefore, a mere letter from the creditor cannot be taken as sacrosanct. Thus, it was held that the facts required further verification. In the course of fresh assessment, the AO got enquiries made at Mumbai where the creditor is located. Statement of Shri Prafful Parikh the proprietor, was recorded by the Assistant Director of Income-tax (Investigation) on oath on 26.12.2007. The sale bills furnished by the assessee were shown to him and he was added to confirm whether the bills were issued by him and whether any sale was made to the assessee in the period 1.4.1994 to 31.3.1995. It was deposed that the answer had already been given in letter dated 23.1.1998. It was reiterated again that no sale had been made to the assessee. On the basis of these facts, the AO concluded that the assessee did not make any purchase from M/s Unifoil Enterprises but made purchases from some other party, to whom the payment was made in cash. Therefore, the addition was made in respect of unexplained cash u/s 69. The ld.CIT(A) modified the findings of the AO. It was mentioned that during the appellate proceedings on being asked regarding the 5 ITA-5401/Del/2011 seizure of one of the consignments by the DRI, value of which was shown at `81,30,200/- but its actual value was put at `40,581/- only. In view of this fact, it was held that the assessee is indulging in over-invoicing of goods. Therefore, the addition of `66,15,000/- was upheld and the deduction was not allowed u/s 80HHC.
5.1 The case of the ld. Counsel is that the revenue should have allowed the assessee an opportunity to cross- examine its witness. The assessee has produced the bills and discharged its onus. The sale by way of export leads to inference that purchases were made. On non- confirmation of the account, the liability has been written off in the assessment year 2007-08. On the other hand, the case of the ld.DR is that the assessee should be substantiated the purchases on its own in view of the statement of the proprietor of M/s Unifoil Enterprises. The huge amount remains unpaid for a period of about 12 years, which leads to an inescapable conclusion that the entry in the books regarding purchase was bogus. He has also suggested that if there is any deficiency in authentification of evidence, it may be cured by remand report. However, the ld. counsel has opposed such a course of action on the ground that the matter is old.
5.2 The question whether the purchases were made or not is essentially a question of fact. The most significant evidence in this regard is that the amount which became due in financial year 1994-95 was not paid by the assessee at all and it was written off in financial year 2006-07. The reason for non-payment is stated to be the supply of inferior quality goods, leading to disputes. No evidence has been filed in this regard. If the goods had actually been supplied, no creditor would silently forego his claim even if it had to be settled for a lesser amount. According to us, the non-payment of the purchase consideration is a strong circumstance regarding non genuineness of the transaction and stands on its own de hors any other evidence. Lack of evidence about dispute further strengthens the conclusion. Thus, even if the statements of the creditor are ignored, significant fact of non-payment and absence of dispute lead to a justifiable conclusion that no payment was due as no sale was made by M/s Unifoil Enterprises to the assessee. In any case, the ld. Counsel does not want us to remand the case for further enquiry. The facts on record, when seen in totality, go against the 6 ITA-5401/Del/2011 case of the assessee. Therefore, we agree with the ld.CIT(A) when he held that no purchase was made from the aforesaid creditor. This automatically leads to a conclusion that either the purchase was made from some other party in cash or the sale amount was inflated. Thus, the amount received by way of foreign exchange was not in respect of sale of goods. Accordingly, it is held that the AO was right in making addition of `66.15 lakhs u/s 69 and denying enhanced deduction u/s 80HHC of the Act.”
The Assessing Officer, vide order dated 22nd March, 2010, levied 5. penalty u/s 271(1)(c) of the Act amounting to `30,43,900/-. On appeal, learned CIT(A), vide order dated 30th September, 2011, sustained the penalty. Hence, this appeal by the assessee.
At the time of hearing before us, learned counsel for the assessee argued at length. At the outset, he stated that the issue is covered in favour of the assessee by the decision of ITAT in the case of Ruchi Developers in ITA No.3348/Ahd/2010. Copy of the order is produced before us. He further stated that the assessee made the sales of the goods purchased from M/s Unifoil Enterprises. The sales have been accepted by the Revenue and, therefore, there cannot be bogus purchases. Unless there is a genuine purchase, there cannot be any resultant sale. He further submitted that no cross examination of the seller was allowed to the assessee and therefore, his statement where he denied to have sold the goods to the assessee cannot be utilized against the assessee. He also stated that the assessee is entitled to deduction u/s 80HHC and therefore, any reduction in purchases would increase 80HHC deduction which was 100% at the relevant time. Thus, there cannot be any concealment of income by way of bogus purchases. He further stated that the purchase consideration was outstanding because of the dispute with the seller due to inferior quality of goods supplied. However, the outstanding amount has been written off in FY 2006-07 and the same has been 7 ITA-5401/Del/2011 offered as income of assessment year 2007-08. Thus, the income has already been declared in another year which has been accepted. He, therefore, submitted that it is not a fit case for levy of penalty u/s 271(1)(c). In support of his contention, he relied upon the following decisions :-
(i) CIT Vs. Reliance Petroproducts Pvt.Ltd. – [2010] 322 ITR 158 (SC). (ii) Chambal Fertilisers & Chemicals Ltd. Vs. ACIT – [2014] 112 DTR (Jp)(Trib) 140. (iii) New Holland Tractors (India) (P.) Ltd. Vs. CIT, Delhi-V – [2015] 275 CTR 291 (Delhi). (iv) Decision of ITAT Ahmedabad Bench in the case of Ruchi Developers Vs. ITO in ITA No.3348/Ahd/2010.
He, therefore, submitted that the penalty levied u/s 271(1)(c) may be cancelled.
Learned DR, on the other hand, stated that the decision of Ruchi Developers (supra) is not applicable because the facts in the said case are altogether different. In the aforesaid case, the purchasers were not available at the given address while in the case of the assessee, the purchaser has denied to have sold the goods to the assessee. Moreover, in the case of the assessee, the payment is not made for the purchases made and ultimately, the assessee wrote back the outstanding amount. He relied upon the decision of ITAT dated 14th January, 2011 and stated that all these arguments were raised by the assessee in quantum proceedings and the ITAT, after considering all these arguments and the facts of the case, dismissed both the grounds of the assessee. He stated that in this case, the purchases were proved to be bogus. Therefore, it is a clear case where inaccurate
8 ITA-5401/Del/2011 particulars of the purchases and income were furnished by the assessee. He also relied upon Explanation (1) clause (B) of Section 271(1)(c). He further relied upon the following decisions :-
(i) CIT Vs. Harparshad and Company Ltd. – [2010] 328 ITR 53 (Delhi). (ii) Mak Data P.Ltd. Vs. CIT – [2013] 358 ITR 593 (SC).
Learned DR, therefore, stated that learned CIT(A) has rightly sustained the penalty. His order may be upheld.
We have carefully considered the arguments of both the sides and perused the material placed before us. The first contention of the learned counsel for the assessee was that the issue is squarely covered in assessee’s favour by the decision of ITAT in the case of Ruchi Developers (supra). We have perused the order of the ITAT in the case of Ruchi Developers (supra) and we find that the facts in the case of the assessee and Ruchi Developers (supra) are different. In the case of Ruchi Developers (supra), the purchases from five parties were in dispute. However, in response to summons issued u/s 133(6) in the case of two parties, the same were returned unserved with the remark “left”. Other parties did not furnish any information. On these facts, the ITAT, though sustained the addition, but, cancelled the penalty. However, in the case under appeal before us, the seller i.e. M/s Unifoil Enterprises has categorically denied to have sold any goods to the assessee by furnishing a letter before the Assessing Officer. Moreover, in the second round of assessment proceedings, the statement of Shri Prafful Parikh, proprietor of M/s Unifoil Enterprises was recorded in which he deposed to have not sold any goods to the assessee. Apart from the denial of the seller, the assessee did not make the payment for the goods purchased. The goods were alleged
9 ITA-5401/Del/2011 to have been purchased during the accounting year relevant to assessment year 1995-96 and for more than twelve years, the payment was not made and ultimately, in the accounting year 2006- 07, the assessee wrote back the outstanding demand. The ITAT, in the quantum appeal, has taken note of these things. Thus, in the case of Ruchi Developers (supra), the assessee was unable to prove the purchases but in the case of the assessee, the claim of purchases has been found to be false/bogus. Therefore, the above decision of the ITAT in the case of Ruchi Developers (supra) would not be applicable to the case of the assessee.
Learned counsel for the assessee has also contended that the goods purchased from M/s Unifoil Enterprises were exported by the assessee and the sales have been accepted by the Revenue. Therefore, the genuineness of purchases cannot be doubted. From the assessment order of set aside proceedings, it is evident that the Assessing Officer himself has mentioned that the assessee did not make any purchase from M/s Unifoil Enterprises but made purchase from some other party to whom the payment was made in cash. Therefore, the addition was made in respect of unexplained cash u/s 69. This finding of the Assessing Officer has been upheld by the ITAT. Therefore, the contention of the learned counsel has no merit. The same has been rightly rejected by the CIT(A).
The next contention of the learned counsel was that due to the addition of `66,15,000/-, the assessee would be entitled to enhanced deduction u/s 80HHC because it is entitled to 100% deduction u/s 80HHC. We find that this argument of the learned counsel has already been considered and rejected by the ITAT in the quantum appeal. In fact, in the quantum appeal, the assessee has raised two grounds. The first ground was against the addition of `66,15,000/- and the other
10 ITA-5401/Del/2011 ground was for claiming higher deduction u/s 80HHC. The ITAT rejected both the grounds. While rejecting the ground of higher deduction u/s 80HHC, the ITAT noticed that the assessee was even inflating the value of exported goods. In paragraph 5 at page 10, the ITAT has noticed that one export consignment of the assessee was seized by the DRI and it was found that the value of consignment was shown at `81,31,200/- but its actual value was only `40,581/-. Therefore, the contention of the learned counsel that it is entitled to higher deduction u/s 80HHC is without any merit and is already stood rejected by the ITAT.
Learned counsel for the assessee has also contended that this income has already been disclosed by the assessee in assessment year 2007-08 and therefore, no penalty can be levied in assessment year 1995-96. That in assessment year 1995-96, the addition is made by the Assessing Officer for unexplained cash u/s 69. It was the case of the Revenue that the assessee did not make any purchases from M/s Unifoil Enterprises but made the purchases in cash from some other party and therefore, for such unexplained cash, the addition was made u/s 69 and was upheld by the ITAT. In assessment year 2006-07, the assessee wrote back the amount claimed to be payable to M/s Unifoil Enterprises. In our opinion, writing back the amount payable to M/s Unifoil Enterprises does not support the case of the assessee at all so far as levy of penalty u/s 271(1)(c) is concerned. On the other hand, it only supports the case of the Revenue that, in fact, no purchase was made from M/s Unifoil Enterprises. It is unconceivable that the assessee made the purchases from any party worth more than `66 lakhs and will not make the payment for more than a decade and other party will not take action for the recovery of the amount. The assessee tried to explain that there was dispute relating to quality of goods supplied by M/s Unifoil Enterprises and therefore, payment was 11 ITA-5401/Del/2011 withheld. No iota of evidence in this regard was furnished by the assessee. In the quantum appeal, the ITAT has already taken note of this contention and has rejected the same with the following finding :-
“The reason for non-payment is stated to be the supply of inferior quality goods, leading to disputes. No evidence has been filed in this regard. If the goods had actually been supplied, no creditor would silently forego his claim even if it had to be settled for a lesser amount. According to us, the non-payment of the purchase consideration is a strong circumstance regarding non-genuineness of the transaction and stands on its own de hors any other evidence. Lack of evidence about dispute further strengthens the conclusion.”
That the purchases were held to be bogus/non-genuine by the Assessing Officer and which has been upheld by the ITAT in quantum proceedings. During financial year 2006-07, the assessee wrote back the amount which was claimed to be payable in respect of bogus purchases. When the purchase itself has been held to be bogus, obviously no amount was payable in respect of such bogus purchase and, therefore, the writing back of such non-existent liability will, in no way, affect the levy of penalty in assessment year 1995-96.
Learned counsel for the assessee has relied upon the decision of Hon’ble Apex Court in the case of Reliance Petroproducts Pvt.Ltd. (supra), in which Hon’ble Apex Court held as under:-
“Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.”
12 ITA-5401/Del/2011
That the facts of the assessee’s case are altogether different. In this case, the details of purchases supplied by the assessee in its return are found to be incorrect, erroneous and false. Therefore, the above decision of Hon’ble Apex Court would not support the case of the assessee.
The learned counsel has also relied upon the decision of ITAT, Jaipur Bench in the case of Chambal Fertilisers & Chemicals Ltd. (supra). In that case, the penalty was levied in respect of the addition to the book profit. Such addition was sustained by the ITAT due to retrospective amendment in the Income-tax Act. On these facts, ITAT cancelled the penalty holding that “The Tribunal upheld the additions keeping in view the retrospective amendment. In these facts and circumstances, the assessee cannot be penalized for claims which were not disallowable by any express provision on the statute book at the relevant time. Besides, all the relevant facts and information were filed along with return of income.” The facts of the assessee’s case are altogether different. Therefore, the above decision of ITAT, Jaipur Bench relied upon by the learned counsel would not be applicable.
The learned counsel has also relied upon the decision of Hon'ble Delhi High Court in the case of New Holland Tractors (India) (P.) Ltd. (supra). In the said case, the assessee, a subsidiary of UK based company, transferred its design engineering technology relating to manufacture of a particular brand of tractor of another Indian company for a period of three years. It was held that the entire amount received under the said agreement was held to be taxable in the relevant year of execution of agreement. However, penalty for concealment was deleted because the assessee had submitted full details with regard to technology transfer agreement and has offered the receipt for taxation in four separate assessment years. Mere fact that entire amount in 13 ITA-5401/Del/2011 question was found to be taxable during the relevant year itself could not be regarded as guilt of concealment of particulars of income. With this remark, the penalty was cancelled by Hon'ble Jurisdictional High Court. However, the facts of the assessee’s case are altogether different. Here, the particulars of the purchases shown by the assessee are found to be incorrect because the purchase from M/s Unifoil Enterprises was held to be non-genuine. In our opinion, on the facts of the present appeal, the decision of Hon'ble Jurisdictional High Court in the case of Harparshad and Company Ltd. (supra) relied upon by the learned DR would be applicable wherein Hon'ble Jurisdictional High Court held as under:-
“That the reasons given by the Tribunal for quashing the penalty proceedings were irrelevant, not germane to the issue and the Tribunal had lost sight of aspects which had been conclusively established in the quantum proceedings. The Tribunal had failed to take note of the fact that part of the claim as commission was allowed to the assessee not because R had rendered any services but because J had rendered services for which it was paid 1 per cent. of the commission by R out of the 3 per cent. received by her. As far as commission to R was concerned, it was accepted by the Tribunal in the quantum proceedings that she did not render any services at all. The assessee had failed to offer any explanation in respect of the addition of Rs.1,83,078 and it could be deemed to have concealed the particulars of income or furnished inaccurate particulars thereof, by virtue of this explanation. The Tribunal was not justified in deleting the penalty imposed by the Income-tax Officer under section 271(1)(c) of the Act.
The findings given in assessment proceedings are relevant and have probative value. Where the assessee produces no fresh evidence or presents any additional or fresh circumstance in penalty proceedings, he would be deemed to have failed to discharge the onus placed on him and the levy of penalty could be justified.
Even if there is no concealment of income or furnishing of inaccurate particulars, but on the basis thereof the claim
14 ITA-5401/Del/2011 which is made is ex facie bogus, it may still attract penalty provision.
The Explanations appended to section 271(1)(c) of the Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The object behind enactment of section 271(1)(c) read with the Explanations indicate that the section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil 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 Act.”
On the facts of the assessee’s case, the ratio of the above decision would be squarely applicable. The assessee has failed to substantiate the purchases made from M/s Unifoil Enterprises. Except the purchase bill, no other evidence could be produced by the assessee in support of such bill. The assessee did not even make the payment for such purchases for a period of twelve years and thereafter, wrote back the amount in its books of account. Thus, in effect, the assessee did not make the payment for purchase of such goods. The seller i.e., M/s Unifoil Enterprises has denied to have sold the goods to the assessee by writing a letter to the Assessing Officer and also in the statement recorded by the Revenue authorities. The ITAT in the quantum proceedings has clearly held that the non- payment of purchase consideration is a strong circumstance regarding non-genuineness of transactions and stands on its own de hors any other evidence. Hon'ble Jurisdictional High Court in the above case held that the findings given in assessment proceedings are relevant and have probative value. Where the assessee produces no fresh evidence or fresh circumstance in penalty proceedings, he would be deemed to have failed to discharge the onus placed upon him and the levy of penalty can be justified. In this case also, the assessee has not 15 ITA-5401/Del/2011 produced any fresh evidence or fresh circumstance so as to prove the genuineness of purchase and, therefore, the finding recorded by the ITAT in quantum proceedings is relevant. Even otherwise, it cannot be believed that anybody would sell the goods worth `66 lakhs and would not pursue for payment thereof. No satisfactory explanation is given by the assessee for not making the payment of goods claimed to have been purchased from M/s Unifoil Enterprises. The only explanation given is that the goods supplied were of inferior quality but no evidence in this regard is produced by the assessee. On the other hand, the assessee claimed that the goods supplied by the assessee were exported by it and, therefore, the genuineness of the purchases cannot be doubted. Once the assessee claimed that the goods supplied by M/s Unifoil Enterprises are exported by it, it itself disproves the assessee’s contention that the goods were of inferior quality. On these facts, the only inference that can be drawn is that no goods were supplied by M/s Unifoil Enterprises because if the goods had actually been supplied, no creditor would forego his claim merely because the other party is disputing the quality of the goods supplied. Considering the totality of the facts of the case, we are of the opinion that the above decision of Hon'ble Jurisdictional High Court is squarely applicable and, respectfully following the same, we uphold the levy of penalty under section 271(1)(c) of the Act.
In the result, the appeal of the assessee is dismissed. Decision pronounced in the open Court on 08.11.2016.