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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri Haridas Bhat Department by: Shri A. K. Kardam सुनवाईकीतारीख / Date of Hearing:26.10.2016 घोषणाकीतारीख /Date of Pronouncement: 20.01.2017 आदेश / O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 11.08.2014 passed by the Commissioner of Income Tax (Appeals) - 20, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2010- 11.
The assessee has raised the following grounds:-
.M.15 A.Y. 2010-11 “Ground I
1. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the levy of penalty of Rs.8,10,638/- u/s.271(1)(c) being 100% of the tax sought to be evaded without giving proper opportunity to the appellant.
2. Your appellant prays that the appeal be heard on merits and proper opportunity may be granted to the appellant to represent the case. Ground II
1. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the levy of penalty of Rs.8,10,638/- u/s.271(1)(c) being 100% of the tax sought to be evaded.
2. The learned CIT(A) failed to appreciate that:- a) The assessee has suo moto admitted the disallowance to buy peace to concentrate on business activities. b) The assessee has fully co-operated with the assessment proceedings. c) The assessee paid the taxes due to avoid litigation, buy peace and with a request to grant immunity from penalty.
3. Thus your appellant prays that penalty of Rs.8,10,638/- may please be deleted.
3. The brief facts of the case are that the assessee filed return of income on 28.09.2010 declaring total income to the tune of Rs.1,18,04,147/- after claiming deduction of Rs.45,28,365/- u/s.80IC(3) of the Income Tax Act, 1961 ( in short “the Act”). The return was processed u/s.143(1) of the Act. Thereafter, the case was selected for scrutiny and statutory notices u/s.143(2) and 142(1) of the Act were issued on 26.08.2011 and sent by post to the address mentioned in the return of income filed by the assessee. The notice u/s.143(2) dated 26.08.2011 was return back by the postal authorities on 06.09.2011 with the remark left. Thereafter, notice u/s.143(2) of the Act was served by affixture on 12.09.2011 at the last known address of the ITA No.1443.M.15 A.Y. 2010-11 assessee as per the return of income filed. The affixture report of the ward inspector was also on record. Subsequently, notice u/s.142(1) of the Act dated 04.12.2012 alongwith questionnaire was issued and served upon the assessee’s new address, Unit No.C-2, Model Industrial Estate, Off. Aarey Road, Goregaon (E), Mumbai – 400063. The assessee company was in the business of manufacturing and trading of electro mechanical devices. The assessee company was having a manufacturing unit at Baddi in Himachal Pradesh, the profit of which was claimed as deduction u/s.80IC of the Act. Report in form 10CCB was filed in support of the claim u/s.80IC of the Act. It was the second year of assessee’s claim u/s.80IC of the Act, having commenced operation in Baddi on 06.08.2008. During the assessment an information was received from DGIT (Inv.), Mumbai about the four firms engaged in Hawala entries. The name of the four firms are hereby mentioned below:- S. No. Name of the Parties Amount 1 Ganesh Enterprises 57,693/- 2 Amar Enterprises 9,58,620/- 3 Saradge Enterprises 7,97,063/- 4 Anshu Mercantile Pvt. Ltd. 8,88,750/- Thereafter, by giving an opportunity of being heard the bogus purchases to the tune of Rs.27,02,126/- was added to the income of the assessee. Thereafter, the penalty proceeding was initiated in which the assessee ITA No.1443.M.15 A.Y. 2010-11 submitted the reply dated 30.07.2013 in pursuance of notice dated 12.07.2013 which is reproduced below for ready reference:- “Without prejudice to the claim of expenditure, the assessee wants to concentrate on the business and wants to buy peace by paying the taxes on this discrepancy. Under the circumstances, the assessee hereby admits that the bills from the above mentioned do not represent purchase from these parties and offers the said purchases to be disallowed as expenses and offer to pay the tax. The assesse humbly requests that the discrepancy may kindly be condones and penalty on the same may be deleted.” Thereafter, the penalty to the tune of Rs.8,10,638/- was levied which was confirmed by the CIT(A), therefore, the assessee has filed the present appeal before us. ISSUE NO.I & II:- 4. Under the above said issues, the assessee has challenged the confirmation of the penalty to the tune of Rs.8,10,638/- u/s.271(1)(c) of the Act. The learned representative of the assessee has argued that the assessee wanted to concentrate on the business and wanted to buy the peace by paying the tax on the said discrepancy therefore in the said circumstances, the penalty is not liable to be leviable in the interest of justice specifically in view of the law settled by Hon’ble Supreme Court of India in CIT Vs. Suresh Chandra Mittal (2001) 251 ITR 0009 and decided Hon’ble High Court of Bombay (2013) 86 CCH 0043 AIIHC in case title as Commissioner of Income Tax Vs. Shiv Kumar Jaiswal and decided by Hon’ble Income Tax 4 ITA No.1443.M.15 A.Y. 2010-11 Appellate Tribunal, Mumbai Tribunal (2013) 38 CCH 0017 in and 7219 to 7221/M/2011 in case titled as Reliance Industries Limited Vs. Assistant Commissioner of Income Tax dated 11.12.2013. However, on the other and the learned representative of the department has strongly relied upon the finding of the CIT(A) in question and placed reliance upon the law settled in [2013] 358 ITR 593 (SC) Mak Data P. Ltd. Vs. Commissioner of Income Tax. With due regard to the contentions raised by the learned representative of the parties and perused the record carefully, it came into the notice that the Assessing Officer in the assessment order dated 24.01.2013 added the bogus purchases to the tune of Rs.27,02,126/- as income of the assessee in view of the letter received from DGIT (Inv.), in which the said company was found to be involved in Hawala entries in the finding of the Sales Tax Department, Maharashtra. After the submission of the penalty’s notice dated 30.07.2013, the assessee replied which is reproduced as under:- “Without prejudice to the claim of expenditure, the assessee wants to concentrate on the business and wants to buy peace by paying the taxes on this discrepancy. Under the circumstances, the assessee hereby admits that the bills from the above mentioned do not represent purchase from these parties and offers the said purchases to be disallowed as expenses and offer to pay the tax. The assessee humbly requests that the discrepancy may kindly be condoned and penalty on the same may be deleted.”
ITA No.1443.M.15 A.Y. 2010-11
No doubt this plea has also been taken by the assessee at the time of assessment along with other contention which is also hereby reproduced as under:- “1. With regard to Ganesh Enterprise, the same is a shop near the office of the assessee, and some sundry items are purchased from the same. We are given to understand that the same party has not paid the MVAT and thus has been listed as a defaulter and thus the bills given by him are not valid. However in the case of the assessee, the purchases are made and the same are paid for through the banking channels. Since the items purchased are miscellaneous nature and used mainly in installations the came can not be completely co-related. We submit that the said expenses may kindly be allowed. 2. With regard to other parties we submit that the assessee does installation work in various places on the site of the client. The site materials are procure by the office, but during the installation balance materials like cables, are purchased locally by the site incharge. Proper bills are not collected by the site incharge. In many cases the clients demands to show the bill for purchases. To counter this issues the assessee has made arrangement with the abovementioned parties who give the bills against the said purchases. The said parties are paid by cheque, the cash received back from them is offset against the case ITA No.1443.M.15 A.Y. 2010-11 submits that the expenses are not inflated by this arrangement, only the expenses are matched in the books. During the VAT Audit it was found that the parties have not paid any MVAT and were involved in issuing bogus bills. After the fact was known to the assessee. The MVAT was fully paid for by the assessee against the said purchases. The assessee wants concentrate on the business and wants to buy peace of paying the tax on this discrepancy. Under the circumstances the assessee hereby admits that the bills from abovementioned do not represent purchases from those parties, and offers the said purchases to be disallowed as expenses, and offers to pay the tax. The assessee humbly requests that the discrepancy may kindly be condoned and penalty on the same may be deleted.”
The bogus purchase was added to the income of the assessee on account of the letter dated DGIT(Inv.) in which the Sales Tax authorities has arrived at this conclusion that the said 4 parties were involved in the Hawala transactions. Further assessee submitted that the parties were paid by the cheques and some purchases was of the miscellaneous in nature and used mainly in installation which could not be co-related. Any how the assessee accepted the bogus purchase to buy peace and paid the tax accordingly. Now it is to be seen whether the penalty is liable to be leviable in the said circumstances or not. The law relied by the assessee i.e. Hon’ble Supreme Court of India in CIT Vs. Suresh Chandra Mittal (2001) 251 ITR 0009 ITA No.1443.M.15 A.Y. 2010-11 speaks about the facts that the assessee surrender the additional income by way of revised return after the persistent query by the Assessing Officer. Once the revised return have been regularized by the revenue the explanation of the assessee was that he has declared the additional income to buy peace and to come out of vexed litigation could be treated as bonafide thus the penalty u/s.271(1)(c) was not leviable. Whereas in the instant case the facts are totally different. During the assessment an information was received from DGIT (Inv.), Mumbai about the four firms engaged in Hawala entries. The name of the four firms were Ganesh Enterprises, Amar Enterprises, Saradge Enterprises and Anshu Mercantile Pvt. Ltd. Notice was given to the assessee but there was no proper reply, however, the assessee accepted the bogus purchase to buy peace and paid the tax accordingly. In the said circumstances the said law is not applicable to the facts of the case. Moreover the law relied by the departmental representative speaks that surrender of income on account of investigation to buy the peace is not voluntarily and statute does not recognize these type of defenses under the explanation 1 to section 271(1)(c) of the Act. Admission of bogus purchases leads to the concealment of income and furnishing the inaccurate particulars of income in the return. In case title as Commissioner of Income Tax Vs. Shiv Kumar Jaiswal, the Assessing Officer did not discover any material. No mens rea was found and the relief was granted on the basis of law settled by the Hon’ble Supreme Court of India in CIT Vs. Suresh Chandra Mittal (2001) 251 ITR 0009. The facts are distinguishable from the present case. So far as the law relied by the assessee in case and 7219 to 7221/M/2011 in case titled as Reliance Industries Limited Vs. ITA No.1443.M.15 A.Y. 2010-11