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Income Tax Appellate Tribunal, MUMBAI BENCHES “E”, MUMBAI
Before: SHRI SANJAY ARORA (AM) & SHRI RAM LAL NEGI (JM)
This appeal has been filed by the assessee against order dated 30/09/2010 passed by the Ld. CIT(Appeals)-22 Mumbai for the Asst. Year 2004-05, whereby the Ld. CIT(A) dismissed the appeal filed by the assessee against penalty order passed by the A.O u/s 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’).
Brief facts of the case are that the assessee company filed its return of income declaring the total income of Rs. 8,74,870/-. Since the assessee had debited Rs. 47,94,870/- and Rs. 1,14,91,974/-on account of labour charges t o and purchase of raw materials, the AO verified the genuineness of the payments and completed the assessment u/s 143(3) of the Act determining the total income of the assessee at Rs. 62,30,470/-. Aggrieved by the assessment order the assessee filed appeal before the Ld. CIT(A. During the course of appellate proceedings, the assessee produces additional evidence to justify contention. In order to afford fair opportunity to the assessee company, the Ld. CIT(A) forwarded additional evidence to the A.O for further verification. During remand proceedings, payments of labour charges to two parties were found to be genuine. The assesse, however, failed to substantiate transactions with the remaining six parties. Accordingly, the disallowance was calculated at Rs. 44,74,720/-. In quantum appeal the disallowance was confirmed by the Ld. CIT(A) and the ITAT. Consequently, the A.O passed penalty order u/s 271(1)(c) of the Act in respect of the income escaping the assessment to the tune of Rs. 44,74,702/-. The penalty order was further challenged before the Ld. CIT(A). The Ld. CIT(A) following the law laid down by the Hon’ble Supreme Court in Union of India vs. Dharamendra Textile Processor (2008) 306 ITR 277 confirmed the penalty of Rs. 15,66,146/- imposed by the A.O. The assessee is in appeal before the Tribunal against the said impugned order on the following effective ground of appeal:-
The Learned Commissioner of Income Tax(A) erred in confirming the penalty u/s 271(1)(c) of Rs. 15,66,146/- on the ground/s as contained in the Appellate order or otherwise.
Before us, the Ld. Authorised Representative (AR) submitted that the during assessment proceedings One Sh. Santosh Balram Tawde from confirmed that he received Rs. 78,990/- out of Rs. 3,09,930/- paid to Super Electrical Engineering. Address and whereabouts in respect of payment made to Industrial Machinery. The assessee has proved the genuineness of transaction with Sagar Trading Co., Naina Steel Pvt. Ltd., Ambeshwar Trading Co. and Sheetal Enterprises by producing Bank Certificate, Ledger Account and copies of purchase bills along with delivery challan and in some of the cases PAN and confirmation of the parties. Since, the assessee has discharged its burden, question of concealment of income or furnishing of incorrect facts does not arise. Under these circumstances, penalty cannot be levied on the assessee.
The Ld. AR placing reliance on the decision rendered by the ITAT Pune Bench in Dy. CIT vs. Mahadik Bros [2003] 84 ITD 19 (Pune), submitted that in the absence of for imposing penalty u/s 271(1)(c) there should be an element of dishonesty on the part of the assessee which is not there in the present case. Further placing reliance on the cases Laxmi Jewellery vs. CIT 171 ITR 649(AP), ITO vs. Ambica Agencies 50 ITD 31 and CIT vs. J.K. Synthetics Ltd.218 ITR 267 (Del) submitted that the findings of assessment proceedings are not conclusive for imposing penalty u/s 271(1)(c) of the Act. And the assessee may establish its case during penalty proceedings also.
On the other hand the Ld. Departmental Representative (DR) relying on the concurrent findings of the authorities below and the ITAT, submitted since the assessee has failed to establish the genuineness of the transactions in question during assessment proceedings or even during the appellate proceedings, the Ld. CIT(A) has rightly confirmed the penalty levied on the assessee.
We have heard the rival submissions and also perused the documents placed on record. The assessee-company is in the business of rewinding and repairs of electrical motors, was unable to justify its’ claim for expenses (to the tune of Rs.53,55,602/-) on the purchase of raw materials and labour charges, ostensibly sourced from eight parties. The matter in quantum proceedings stands settled by the order by the Tribunal confirming the disallowance to the extent of Rs.44,74,702/-, i.e., in respect of six parties. The reduction in the amount was in the remand proceedings directed by the first appellate authority admitting the additional evidence furnished by the assessee before him. No improvement in its’ case by the assessee was observed by the Revenue in the penalty proceedings, which stood initiated along with, so that the penalty came to be levied finally on the said additional income of Rs.44.75 lacs. The findings by the ld. CIT(A) confirming the levy of penalty are relevant; he on an examination of the facts of the case confirming the transactions as bogus, so that the same are reproduced as under:
‘5. I have gone through the penalty order perused the submissions made and also discussed the case with AR of the appellant. In this case penalty u/s 271(1)(c) has been imposed since the parties from whom purchases are made or to whom labour charges are paid were found not to be genuine. The issue travelled upto the level of Hon’ble ITAT. The ITAT Mumbai vide their order dated 06/08/2010 have upheld the findings of the A.O that the parties were not genuine and sustained the addition. The ITAT is the highest fact finding authority and its decision on facts is final. It has been observed by Hon’ble ITAT that in the case of labour charges paid to Super Electricals, it was not clear from record, as to how the assessee had paid this amount without the same not being shown by Shri Santosh Tawade (who claimed to be from Super Electrical Engineering when appeared before A.O.). The assessee in its books had shown the said amount as outstanding, no machinery and other assets were held by Super Electricals as per balance sheet, no record of wages and labour charges paid was produced by assessee etc. Accordingly the ITAT held that the party was not genuine. In case of Industrial Machinery the Hon’ble ITAT observed that the firm constituted of all the family members of the assessee and it did not show the labour charges receivable from the assessee as income and also it did not show labour charges payable to the labourers as expenses. Accordingly it was held that these were mere entries in the books which were fake. Thus the labour charges claimed to be paid to these parties were held by ITAT as not genuine. While dealing with the payments of purchases, Hon’ble ITAT in the case of Sagar Trading Co. observed that the assessee failed to produce relevant records and evidence to prove the genuineness of transaction and even could not furnish confirmation from the said party and hence it was not genuine. In case of Naina Steel the Hon’ble ITAT have observed that the PAN card given by the assessee in support of its existence was found fake since this number belongs to a person being a salaried employee having a different address. In the case of Ameshwar Trading Co. Hon’ble ITAT observed that the assessee failed to produce records and the party was not found at the place and hence its existence was not genuine. In the case of Sheetal Enterprises the Hon’ble ITAT observed that the summons issued were return unserved, A.O. had made personal enquiry and noted that the said party was not existing address, the assessee failed to produce any evidence for transportation of goods and even PAN card number. Accordingly it was held that the party was not genuine. In view of these facts, the additions made was confirmed by ITAT. Thus on facts there is no dispute that there is an attempt on the part of appellant to claim the expenditure which is not genuine. The appellant claims that the explanations given were verified. However on the facts it may be noted that even pan card given by the appellant were found bogus, deliberate attempt to get the return of income filed by Shri Santosh B. Tawde in Kalyan, to make the transaction genuine has been made, labour charges are being paid but there is no machine or any other assets in the balance sheet to do the job and mere book entries are being made to settled the accounts relating to the accounts of the family members. All these indicate that there is an attempt on the part of appellant to deliberately claim expenses which/actually are not there and hence the case laws relied upon the appellant are not relevant for the facts of the appellants case. In view of this, I am of the considered opinion that the A.O has rightly imposed penalty u/s 271(1)(c) which is upheld. Reliance in this regard is place on the decision on the case of Union of India vs. Dharmendra Textile Processors (2008) 306 ITR 277, wherein Hon’ble Supreme Court in their order dated 29/09/2008 have held that the object behind enacting Section 271(1)(c) read with explanation indicates that the said section has been enacted to provide a remedy for loss of revenue. Penalty u/s 271(1)(c) is a ‘civil liability’. Willful concealment is no essential ingredient for attracting a civil liability as in the matter of prosecution u/s 276C. If record before A.O can sustain that there was concealment that would be sufficient to sustain the penalty. In view of this judgement of Hon’ble Apex Court, which is the law of the land as on date and also on the facts of the case penalty imposed by A.O u/s 271(1)(c) is sustained.’
No infirmity in the said findings has been brought to our notice. No doubt, penalty proceedings and assessment proceedings are two different and distinct proceedings, and the standard of proof required in penalty proceedings is higher than that required in the assessment proceeding. The onus, however, to prove the transactions it claims to have entered into, and its claims per its return of income, is on the assessee. The assessee, whose conduct has been all through elusive, has abysmally failed to prove the genuineness of the transactions, despite being allowed sufficient opportunity for the same. We, therefore, find no reason for interference and, accordingly, decline it. We decide accordingly, upholding the impugned order.
In the result, the assessee’s appeal is dismissed. Order pronounced in the open court on 4th October, 2016