Navnidhi Dyg. & Ptg. Mills Pvt.Ltd.,, Dist.Surat v. The Dy.CIT.,Circle-1,, Surat

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER DATE OF HEARING: 11.5.10 DRAFTED ON:11.05.2010 ITA NO.154/AHD/2008 ASSESSMENT YEAR : 2004-2005 NAVNIDHI DYG. & PTG. MILLS PVT. LTD. BLOCK NO.77-B VILL: TATI THAIYA TAL.PALSANA DIST.SURAT. VS. DY. COMMR. OF INCOME TAX CIRCLE-1 AAYAKAR BHAVAN MAJURA GATE SURAT. PAN/GIR NO. : AAACN 7813L (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI R.K.MALPANI C.A. RESPONDENT BY: SHRI DR. JAYANT JAVERI SR. D.R. O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD.CIT(APPEALS)-I SURAT DATED 07.12.2007. 2. THE SOLE GROUND OF THE APPEAL TAKEN BY THE ASSES SEE IS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN SUSTAINING THE PENALTY OF RS.1 15 427/- LEVIED U/S.271(1)(C) O F THE ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS OBSERVED AS UNDER:- 2. IN THE PENALTY ORDER THE AO HAS STATED THAT T HE ASSESSEE IS A PVT. LTD. COMPANY CARRYING ON THE BUS INESS - 2 - OF PRODUCTION OF MAN-MADE FABRICS. FOR THE CURRENT YEAR THE ASSESSEE HAD FILED RETURN OF INCOME ON 31.11.04 SHOWING TOTAL INCOME OF RS.9 78 460/-. THE ASSESSME NT WAS COMPLETED AT A TOTAL INCOME OF RS.13 23 750/- A FTER MAKING AN ADDITION OF RS.3 21 750/- ON ACCOUNT OF B OGUS PURCHASES AND A SUM OF RS.23 5437- ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENDITURE U/S 40A(2)(B). THE AO HAS FURTHER STATED THAT DURING THE ASSESSMENT PROCEEDINGS THE AO HAD NOTICED THAT THE ASSESSEE HA D MADE PURCHASES FROM VARIOUS FIRMS OF ROHIT PANWALA GROUP WHO HAD CONFESSED DURING THE COURSE OF SEARCH THAT HE WAS INDULGING IN ISSUE OF BOGUS SALES BILLS ONLY IN NAME OF VARIOUS CONCERNS OF THE PARTIES. IT WAS ADMITTED BY ROHIT PANWALA IN THE STATEMENT ON OATH AND ALSO BY AFFIDAVIT THAT HE HAD ISSUED BOGUS BILLS IN RESPECT OF COLOUR CHEMICALS AND YARN TO ALL THE CLIENTS IN THE NAME O F M/S POOJA DYECHEM PVT. LTD.. ON THE BASIS OF THESE THE AO HAD ASKED AS TO WHY THESE PURCHASES BE NOT DISALLOW ED. THE DIRECTOR OF THE ASSESSEE COMPANY STATED THAT TH E ASSESSEE COMPANY DOES NOT VERIFY THE NAME OF THE PA RTIES WHOSE NAME IS PRINTED ON THE SALES BILLS AS TO WHET HER HE IS A COLOUR CHEMICAL TRADER OR NOT AND IT WAS ADMIT TED BY HIM THAT THE ASSESSEE COMPANY DOES NOT KNOW AS TO W HO THE ACTUAL SUPPLIER OF THE GOODS WAS. IT WAS ALSO A DMITTED BY THE DIRECTOR SHRI BIHARI TOTALA THAT THE AS SESSEE COMPANY DOES NOT MAINTAIN STOCK REGISTER IN R ESPECT OF THESE PURCHASES AND THAT THE PURCHASE BILLS PAYMENT BY CHEQUES AND ENTRIES MADE ON THE REVERSE OF THE BILL BY THE ASSESSEE COMPANY WAS THE ONLY PROOF . IT WAS POINTED OUT BY THE AO TO THE ASSESSEE THAT IN C ASE OF ACCOMMODATION ENTRIES THE PAYMENT BY CHEQUES IS NO PROOF AT ALL. IT WAS ADMITTED BY ROHIT PANWALA THAT CHEQUES IN FICTITIOUS NAMES LIKE POOJA DYECHEM WAS TAKEN FROM THE ASSESSEE COMPANY FOR ENCASHING THE PROCEED INGS THROUGH BANK ACCOUNT AND THE SAME WAS GIVEN BACK IN CASH TO THE ASSESSEE AFTER TAKING COMMISSION OF RS. 0.25%. EVEN REGARDING THE GENUINENESS OF TRANSACTIONS THE ASSESSEE COMPANY HAD FAILED TO ESTABLISH BEYOND DOU BT THAT THE SAID CHEMICALS WAS IN FACT PURCHASED BY IT . IN ITS OWN WORDS AS ADMITTED BY THE MANAGER NO STOCK REGI STER WAS BEING MAINTAINED BY THE ASSESSEE WHICH HAS - 3 - EFFECTIVELY PREVENTED ANY SCOPE FOR VERIFICATION AS TO WHETHER THE PURCHASES WERE INDEED MADE. IN VIEW OF THESE REASONS THE AO MADE THE DISALLOWANCE OF THE PURCHASES. 3. DURING THE PENALTY PROCEEDINGS THE AO ISSUED SHOW-CAUSE AS TO WHY THE PENALTY BE NOT LEVIED. ACCORDING TO THE AO SAME SUBMISSION HAS BEEN MADE B Y THE ASSESSEE COMPANY AS EARLIER AND THEREFORE THE A O HAS STATED THAT THE ASSESSEE HAS NOT SATISFACTORILY EXP LAINED AS TO WHY THE PENALTY BE NOT LEVIED. THE AO HAS STATED THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE PURCHAS ES. THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT THE PURCHASES WERE INDEED MADE AND ENTERED IN THE STOCK REGISTER. THE PARTY FROM WHOM THE ASSESSEE HAS PURCHASED HAS ADMITTED THAT IT WAS GIVING ONLY ACCOMMODATING BILLS AND THEREFORE IT IS A CLEAR CUT CASE OF INFLATING THE PURCHASES AND THEREBY CONCEALING THE INCOME. THE AO HAS THEREFORE LEVIED A PENALTY FOR CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS. THE AO HAS LEVIED MINIMUM PENALTY OF RS.1 15 427/-. 4. DURING THE APPELLATE PROCEEDINGS THE APPELLANT H AS STATED THAT THE APPEAL WAS NOT FILED BEFORE THE CIT (A) AGAINST THE ASSESSMENT ORDER WHERE THE PURCHASES WE RE DISALLOWED. IT WAS STATED THAT SINCE IT WAS A LOSS CASE THEREFORE THE APPEAL WAS NOT MADE. WITH RESPECT TO THE PENALTY THE APPELLANT REPEATED THE SUBMISSION MADE BEFORE THE AO. THE APPELLANT HAS FURTHER REITERATED THAT THE PURCHASES ARE GENUINE. THE APPELLANT HAS STATED THAT AS PER THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF T. ASHOK PAI [292 ITR 11] PENALTY CAN ONLY BE LEVIED IF THERE IS A DELIBERATE ACT ON THE PART OF THE ASSESSEE TO CONCEAL THE INCOME. IN THIS REGARD THE APPELLANT HAS ALSO RELIED ON THE DECISION OF HON'BL E GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES [249 ITR 125]. 5. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND OBSERVATION OF THE AO. ADMITTEDLY TH E - 4 - PURCHASES HAVE BEEN MADE FROM POOJA DYECHEM WHICH HAPPENED TO BE A CONCERN OF ROHIT PANWALA GROUP WHO HAD ISSUED ONLY BOGUS BILLS FROM ITS COMPANY. DURIN G THE COURSE OF SEARCH AND SEIZURE OPERATION ROHIT PANWAL A HAD ADMITTED IN HIS STATEMENT UNDER OATH THAT ONLY SALE S BILLS HAVE BEEN GIVEN FOR ACCOMMODATION ENTRY TO ALL THE CLIENTS. THE CHEQUE WAS RECEIVED AND DEPOSITED IN T HE BANK ACCOUNT. THE CASH WAS WITHDRAWN AND GIVEN BACK AFTER DEDUCTING COMMISSION. ON ITS PART THE APPELLA NT HAS FAILED TO SHOW THAT THERE WAS A DELIVERY OF COLOUR AND CHEMICALS FROM POOJA DYECHEM TO THE ASSESSEE COMPAN Y. THE APPELLANT HAS ALSO FAILED TO SHOW THAT THE SAID COLOUR AND CHEMICALS WERE RECEIVED AND ENTERED IN THE STOC K REGISTER AT A PARTICULAR SR. NO. THEREFORE IT IS C LEAR THAT THE APPELLANT HAS FAILED TO SHOW THAT THE PURCHASES WERE IN FACT MADE. BY RESORTING TO TAKING ACCOMMODATION ENTRIES THE APPELLANT HAS DELIBERATELY AND CONSCIOU SLY INFLATED ITS PURCHASES AND THEREBY CONCEALED ITS IN COME. THE APPELLANT ALSO CANNOT TAKE THE ARGUMENT THAT SI NCE DYEING AND PRINTING HAS TAKEN PLACE THEREFORE COLO UR CHEMICALS MUST HAVE BEEN PURCHASED AS THE PURCHASES OF COLOUR CHEMICALS IS QUITE LARGE AND THE DISALLOWANC E IS VERY SMALL AND THE APPELLANT HAS NOT BEEN ABLE TO ESTABLISH THROUGH QUANTITATIVE TALLY OF THE STOCK REGISTER THAT THIS COLOUR AND CHEMICALS WAS INDEED PURCHASES AND CONSUMED. HENCE IT IS A CLEAR CUT CASE OF CONSCIOU SLY FURNISHING INACCURATE PARTICULARS AND INFLATING PUR CHASES THEREBY CONCEALING THE INCOME. HENCE THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF T. ASHOK PAI ( SUPRA) AND GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXT ILES (SUPRA) ARE IN FAVOUR OF THE DEPARTMENT AND AGAINST THE APPELLANT. IN THE PRESENT CASE AS DECIDED BY THE GU JARAT HIGH COURT THE APPELLANT HAS NOT ONLY CONCEALED THE REAL INCOME BUT THE CONCEALMENT IS CONSCIOUS AND DELIBER ATE. AS DECIDED BY THE HON'BLE SUPREME COURT IN THE CASE OF T. ASHOK PAI (SUPRA) PENALTY CAN BE LEVIED ONLY IF THE RE IS A DELIBERATE CONCEALMENT AND IN THE PRESENT CASE AS S HOWN ABOVE THERE IS DELIBERATE CONCEALMENT. HENCE THE PE NALTY IS CONFIRMED AND THE GROUNDS OF APPEAL ARE DISMISSE D. 6. IN THE RESULT THE APPEAL IS DISMISSED. - 5 - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE LEARN ED ASSESSING OFFICER DISALLOWED RS.3 21 750/- OUT OF THE PURCHASES CLAIM ED BY THE ASSESSEE AND LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE A CT IN RESPECT OF SUCH DISALLOWANCE AT RS.1 15 427/-. 5. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS) CONFIRMED THE ABOVE LEVY OF PENALTY AND AGGRIEVED B Y THE SAME THE ASSESSEE IS IN APPEAL BEFORE US. 6. WE FIND THAT DISALLOWANCE OF RS.3 21 750/- WAS M ADE BY THE LEARNED ASSESSING OFFICER ON THE BASIS OF THE STATE MENT OF SHRI ROHIT PANWALA RECORDED BY THE DEPARTMENT DURING THE COURS E OF THE SEARCH IN HIS CASE. THE ASSESSEE CLAIMED TO HAVE MADE PURCHAS ES OF RS.3 21 750/- FROM M/S.POOJA DYECHEM PVT. LTD. WHICH IS A GROUP COMPANY OF ROHIT PANWALA GROUP. AS PER THE LEARNED ASSESSING OFFICER ROHIT PANWALA IN HIS STATEMENT RECORDED UNDER SECTION 132(4) STATED THAT FACTIOUS BILL WERE ISSUED BY HIS GROUP COMPANY IN LIEU OF COMMISS ION. ON THE BASIS OF THE ABOVE STATEMENT THE LEARNED ASSESSING OFFICER DISALLOWED THE PURCHASES AND LEVIED PENALTY UNDER SECTION 271(1)(C ). 7. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT ON THE SIMILAR FACTS PURCHASES OF RS.5 31 074/ - WAS ALSO DISALLOWED BY THE LEARNED ASSESSING OFFICER IN THE ASSESSMENT YEAR 2003-04 IN THE CASE OF THE ASSESSEE. ON APPEAL THE LEARNED COMMIS SIONER OF INCOME TAX(APPEALS) VIDE ITS ORDER DATED 21.11.2008 PASSED IN APPEAL NO.CAS- I/227/0708 DELETED THE ENTIRE DISALLOWANCE BY FOLLO WING THE DECISION OF - 6 - THE TRIBUNAL IN THE CASE OF AKRUTI DYG. & PRINTING MILLS PVT. LTD. IN ITA NO.2551/AHD/2006 AND ITA NO.2752/AHD/2006 DATED 26. 10.2007. HE ALSO SUBMITTED THAT DURING THE YEAR UNDER CONSIDERA TION AS THE TAX EFFECT WAS NOT MUCH AND THEREFORE THE ASSESSEE DID NOT FI LE ANY APPEAL AGAINST THE ORDER OF THE LEARNED ASSESSING OFFICER BUT AS T HE SIMILAR DISALLOWANCE WAS DELETED BY THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) IN THE ASSESSMENT YEAR 2003-04 PENALTY UNDER SECTION 271(1 )(C) IS NOT LEVIABLE. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDERS OF THE LOWER AUTHORITIES. 9. WE FIND THAT DISALLOWANCE OF PURCHASE OF RS.5 31 074/- FROM THE SAME PARTY I.E. M/S.POOJA DYECHEM PVT. LTD. WAS ALS O MADE BY THE LEARNED ASSESSING OFFICER IN THE ASSESSMENT YEAR 2 003-04 WHICH WAS FOUND TO BE NOT TENABLE BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN HIS ORDER DATED 28.11.2008 PASSED I N APPEAL NO.CAS- I/2074/07-08 BY FOLLOWING THE ORDER OF THE TRIBUNAL PASSED IN THE CASE OF AKRUTI DYG. & PRINTING MILLS PVT. LTD. IN ITA NO.2 551/AHD/2006 AND ITA NO.2752/AHD/2006 DATED 26.10.2007 WHEREIN IT WAS H ELD AS UNDER:- 20. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDER OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD WE FIND THAT A SEARCH OPERATION WAS CARRIED OUT ON SHRI ROH IT PANWALA AND HIS ASSOCIATES AND OTHER PROCEEDINGS WERE ALSO TAKE N AGAINST THEM WHEREIN SHRI ROHIT PANWALA STATED THAT HE USED TO P ROVIDE ACCOMMODATION/FAKE BILLS AT THE REQUEST OF THE PART IES. ON THE BASIS OF THIS THE LEARNED ASSESSING OFFICER HAS TR EATED THE PURCHASES MADE BY THE ASSESSEE FROM 3 PARTIES WHICH DO NOT INCLUDE ROHIT PANWALA FOR RS.7 21 950/- AS BOGUS. T HE ASSESSEE CLAIMED THAT THE PAYMENTS TO THE PARTIES WERE MADE BY ACCOUNT PAYEE CHEQUES AND AGAINST RECEIPT OF GOODS. WE FIND THAT THE REVENUE HAS BROUGHT NO MATERIAL ON RECORD TO SHOW T HAT THE - 7 - PURCHASES SHOWN BY THE ASSESSEE FROM THE AFORESAID 3 PARTIES WERE NOT GENUINE AND WERE ACCOMMODATION/FAKE BILLS SHOWN BY THE ASSESSEE. NO STATEMENT RECORDED FROM THE ABOVE 3 PARTIES BY THE REVENUE WERE BROUGHT ON RECORD. WE FIND NO MATE RIAL ON THE BASIS OF WHICH IT CAN BE ALLEGED THAT THE ABOVE PA RTIES ADMITTED THAT THE BILLS RAISED BY THEM AGAINST THE ASSESSEE WERE MERELY ACCOMMODATION BILLS. IN THE ABOVE CIRCUMSTANCES THE DISALLOWANCE MADE BY THE REVENUE ON THE BASIS OF SURMISES AND CO NJECTURES WITHOUT ANY POSITIVE MATERIAL ON RECORD. THEREFORE IN OUR CONSIDERED OPINION THE DISALLOWANCE MADE IS UNSUST AINABLE. ACCORDINGLY WE DELETE THE ADDITION MADE AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 10. WE FIND THAT THE FACTS IN THE YEAR UNDER APPEAL ARE SAME AS THE FACTS INVOLVED IN THE ASSESSMENT YEAR 2003-04. THE CONTENTION OF THE ASSESSEE TO THE EFFECT THAT PURCHASES WERE NOT MADE BY IT FROM SHRI ROHIT PANWALA BUT PURCHASES UNDER QUESTION WERE MADE FROM M/S.POOJA DYECHEM PVT. LTD. BY MAKING THE PAYMENT BY CHEQUE A GAINST RECEIPT OF GOODS. NO STATEMENT OF M/S.POOJA DYECHEM PVT. LTD. IS BROUGHT ON RECORD BY THE REVENUE. IN THE STATEMENT OF ROHIT PA NWALA NAME OF THE ASSESSEE WAS NOT MENTIONED. THE ABOVE SUBMISSIONS COULD NOT BE CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTA TIVE. ON THE ABOVE FACTS AND CIRCUMSTANCES IN OUR CONSIDERED VI EW THE REVENUE HAS NOT BROUGHT COGENT MATERIAL ON RECORD TO SHOW THAT PURCHASES FROM M/S.POOJA DYECHEM PVT. LTD. BY THE ASSESSEE WAS IN FACT BOGUS AND THE ASSESSEE RECEIVED CASH BACK FROM THE SAID PARTY. ME RELY BECAUSE THE ASSESSEE HAS NOT FILED AN APPEAL AGAINST THE DISALL OWANCE CANNOT BE READ AGAINST THE ASSESSEE SO AS TO MAKE HIM LIABLE FOR P ENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN VIEW OF THE ABOVE IN OUR CONSIDERED VIEW PENALTY UNDER SECTION 271(1)(C) WAS NOT EXIGIBLE IN THE INS TANT CASE. WE - 8 - THEREFORE DELETE THE PENALTY OF RS.1 15 427/- LEVI ED UNDER SECTION 271(1)(C) OF THE ACT AND ALLOW THE APPEAL OF THE AS SESSEE. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON THIS 14 TH DAY OF MAY 2010 SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; ON THIS 14 TH DAY OF MAY 2010 PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I SURAT. 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 11.05.2010 --------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 12.05.2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 12.05.2010 ----------- -------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 12.05.2010 ---------- --------- JM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 13.05.2010 --------- ----------- 6. KEPT FOR PRONOUNCEMENT ON 14.05.2010 ---------- ---------- 7. FILE SENT TO THE BENCH CLERK 14.05.2010 ------- ------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- -- -------------------