HOE Leather Graments Ltd.,, Hyderabad v. DCIT, Hyderabad

ITA 38/HYD/2007 | misc
Pronouncement Date: 13-04-2010 | Result: Allowed

Appeal Details

RSA Number 3822514 RSA 2007
Assessee PAN AAACH5504P
Bench Hyderabad
Appeal Number ITA 38/HYD/2007
Duration Of Justice 3 year(s) 3 month(s) 7 day(s)
Appellant HOE Leather Graments Ltd.,, Hyderabad
Respondent DCIT, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 13-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 13-04-2010
Date Of Final Hearing 29-03-2010
Next Hearing Date 29-03-2010
Assessment Year misc
Appeal Filed On 05-01-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B' HYDERABAD BEFORE SHRI G.C.GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMEBR ITA NO.38/HYD/07 : ASSTT. Y EAR 1989-90 M/S. HOE LEATHER GARMENTS LTD. HYDERABAD. ( PAN AAACH 5504 P ) V/S. DY.. COMMISSIONER OF INCOME TAX CIRCLE 2(2) HYDERABAD . (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.V.ANJANEYULU RESPONDENT BY : SMT. NIVEDITA BISWAS O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF THE CIT(A) III HYDERABAD CONFIRMING PENALTY OF RS.15 00 000 LEVIED UNDER S.271(1)(C) OF THE INCOME-TAX ACT 1961 FOR THE ASSESSMENT YEAR 1989-90. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE COMPAN Y IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF FI NISHED LEATHER. FOR THE ASSESSMENT YEAR 1989-90 ASSESSEE FILED RETURN DISCL OSING AN INCOME OF RS.4 37 738 UNDER THE PROVISIONS OF S.115J. THOUGH THE RETURN WAS INITIALLY PROCESSED UNDER S.143(1)(A) IN TH E SCRUTINY ASSESSMENT THAT ENSUED ASSESSMENT WAS COMPLETED UNDER S.143(3 ) OF THE ACT ON 26.3.1992 ON A TOTAL INCOME OF RS.23 15 595 UNDER THE REGULAR PROVISIONS OF THE ACT AFTER MAKING CERTAIN AD DITIONS AND ITA NO.38/HYD/07 M/S. HOE LEATHER GARMENTS LTD. HYD. 2 DISALLOWANCES WHICH INCLUDE AN ADDITION OF RS.25 88 026 MADE ON ACCOUNT OF BOGUS CASH PURCHASES. WHILE THE CIT(A) ON APPEA L AGAINST THE SAID ORIGINAL ASSESSMENT DELETING THE DISPUTED ADD ITION WHICH LED TO THE IMPUGNED PENALTY AND PARTLY ALLOWED THE APP EAL OF THE ASSESSEE WHEN THE REVENUE CARRIED THE MATTER IN FURTHER APPEAL THE TRIBUNAL SET ASIDE THE MATTER TO THE FILE OF THE ASSESSI NG OFFICER WITH CERTAIN DIRECTIONS TO REFRAME THE ASSESSMENT VIDE ORDER D ATED 17.6.2002. IN THE FRESH ASSESSMENT ORDER DATED 18.3.200 4 MADE IN PURSUANCE OF THE DIRECTIONS OF THE TRIBUNAL THE ASSESSING OFFICER REPEATED ONCE AGAIN THE ADDITIONS MADE EARLIER AND CO MPLETED THE ASSESSMENT ON A REVISED TAXABLE INCOME OF RS.23 15 595 VI DE ORDER OF ASSESSMENT DATED 18.3.2004 PASSED UNDER S.143(3) READ W ITH S.251 OF THE ACT. WHILE THUS COMPLETING THE ASSESSMENT ONCE AGAIN THE ASSESSING OFFICER INITIATED THE PROCEEDINGS FOR LEVY OF PE NALTY FOR CONCEALMENT UNDER S.271(1)(C) OF THE ACT. CONSEQUENT U PON RECEIPT OF THE ORDER OF THE CIT(A) IN QUANTUM PROCEEDINGS W HEREBY THE ADDITIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORD ER DATED 18.3.2004 WERE CONFIRMED THE ASSESSING OFFICER ISSUED FURTHER NOTICES DATED 21.3.2005 AND 29.7.2005 IN THE PENALTY PROCEEDINGS. 3. IN THE IMPUGNED PENALTY ORDER DATED 20.3.2006 THE ASSESSING OFFICER SUMMARIZED THE FACTS RELEVANT TO THE ADD ITION OF RS.25 88 026 MADE ON ACCOUNT OF BOGUS CASH PURCHASES WITH REFERENCE TO WHICH IMPUGNED PENALTY OF RS.15 00 000 WA S LEVIED IN THE FOLLOWING MANNER- '..DURING THE ACCOUNTING YEAR RELEVANT TO THE ASS T. YEAR 1989-90 THE ASSESSEE MADE PURCHASES OF RS.5 19 47 851/- OUT OF WHICH CASH PURCHASES WERE CLAIMED TO BE OF RS.2 25 84 154/-. OUT OF THIS THE ASSESSEE ACCOUN TED FOR CASH PURCHASES TO THE EXTENT OF RS.25 88 026/- ON THE LA ST DAY OF ITA NO.38/HYD/07 M/S. HOE LEATHER GARMENTS LTD. HYD. 3 THE ACCOUNTING YEAR. WHEN THIS WAS BROUGHT TO THE N OTICE OF THE ASSESSEE IN THE INITIAL ASSESSMENT PROCEEDINGS THE ASSESSEE STATED THAT THE AMOUNTS WERE GIVEN TO THE ON THE PU RCHASE MANAGER AS PURCHASE ADVANCES AND THE ACCOUNT WAS F INALLY SETTLED ON THE LAST DAY OF ACCOUNTING YEAR BY DEBIT ING THE PURCHASES ACCOUNT. IN ORDER TO VERIFY THESE PURCHA SES THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE THEN CALLED FOR AND IT WAS FOUND THAT THERE WERE SEVERAL INTERPOLATIONS AN D CORRECTIONS IN THE BOOKS OF ACCOUNTS ON VARIOUS DAT ES. IN THE PROCESS OF VERIFICATION OF GENUINENESS OF THESE CAS H PURCHASES THE ASSESSEE WAS ASKED TO FURNISH COMPLETE DETAILS OF ADDRESSES OF SELLERS ON 13.2.92. IN RESPONSE TO TH IS LETTER THE ASSESSEE THROUGH HIS LETTER DT.5.3.92 STATED THAT C ASH ADVANCES WERE GIVEN TO MR.SHAFEEQ AHMED PURCHASE MANAGER WH O BUYS THE RAW-MATERIAL ON BEHALF OF THE COMPANY FROM THE SLAUGHTERHOUSE. IT WAS ALSO STATED THAT AS AND WHE N THE PURCHASES WERE EFFECTED EITHER FROM THE BUTCHERS OR FROM BROKERS THE SAME WERE ENTERED IN BOOKS OF ACCOUNTS . IN THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFIC ER HAD SPECIFICALLY INSISTED ON PRODUCING THE RELEVANT RAW -MATERIAL RECEIPT REGISTER/STOCK REGISTER TO VERIFY THE PURCH ASE AND RECEIPT OF THESE M ATERIALS. HOWEVER THE ASSESSEE PLEADED NON-AVAILABILITY OF THESE REGISTERS DUE TO PAUCITY OF TIME. ON 28.2.92 THE ASSESSING OFFICER ALONGWITH THE INSPE CTORS VISITED THE FACTORY PREMISES OF THE ASSESSEE AND IT WAS FOU ND THAT THE ASSESSEE WAS MAINTAINING A FULL PROOF VERIFIABLE S YSTEM OF ACCOUNTING REFLECTING RECEIPTS OF RAW-MATERIALS CO NSUMABLES AND CHEMICALS. FROM THIS SYSTEM OF ACCOUNTING THE INWARD AND OUTWARD MOVEMENT OF ALL THE PURCHASES COULD BE TRAC ED. HOWEVER IN SPITE OF GIVING REPEATED REMINDERS ASKI NG HIM TO PRODUCE THE INWARD REGISTER REFLECTING THE RECEIPT OF CASH PURCHASES THE SAME WAS NOT PRODUCED FOR VERIFICATI ON OF THE ASSESSING OFFICER. MOREOVER AS PER THE ASSESSEE'S STATEMENT MR.SHERIF AHMED PURCHASE MANAGER WAS GIVEN ADVANC ES REGULARLY FOR PURCHASE OF RAW MATERIAL. HOWEVER FR OM LEDGER PAGE NO221 WHICH IS AN ADVANCE AMOUNT OF MR.SHAFEEQ AHMED IT IS OBSERVED THAT THIS AMOUNT WAS WRITTEN AT ONE STAGE ON THE 1ST DAY OF ACCOUNTING YEAR AND THE OTHER ENTRIES WE RE WRITTEN ON DAY-TO-DAY BASIS. HENCE THE CLAIM OF THE ASSES SEE THAT THE ADVANCES WERE GIVEN OVER A PERIOD OF TIME PROVED TO BE FALSE AND MISLEADING. FURTHER SEVERAL INTERPOLATIONS AND CORRECTIONS W ERE MADE IN THE CASH BOOK IN ORDER TO CREATE EVIDENCE T HAT PURCHASE ADVANCES WERE GIVEN FROM TIME TO TIM E. FOR ITA NO.38/HYD/07 M/S. HOE LEATHER GARMENTS LTD. HYD. 4 EXAMPLE ON APRIL 30TH RS.1 20 000/- WERE STATED TO HAVE BEEN GIVEN AS AN ADVANCE. THE SAID ENTRY WAS INSERTED I N CASH BOOK ON PAGE NO.89. THE CASH BALANCE CARRIED OVER TO TH E NEXT PAGE WAS ALSO CORRECTED. THE CASH BALANCE CARRIED FORWA RD ORIGINALLY WAS RS.5 47 827/- AGAINST THE CORRECTED FIGURE OF RS.4 27 827/-. THE NEXT ADVANCE WAS MADE TO MR.SHAFEEQ AHMED ON MAY 21ST. THE RELEVANT ENTRY WAS INSERTED ON PAG E 149 WITH THE SAME PEN AND HAND WRITING OF THAT OF EARLIER EN TRY MADE ON APRIL 30TH. HERE ALSO THE CARRIED FORWARD FIGURES WERE CORRECTED. SIMILAR CORRECTIONS AND INTERPOLATIONS WERE ALSO MADE WITH REFERENCE TO THE SO-CALLED ADVANCES GIVEN ON THE FOLLOWING DATES: DATE OF ADVANCE AM OUNT CASH FOLIO NO. 30.05.88 1 10 000 157 06.06.88 80 000 175 14.06.88 1 70 000 203 09.02.89 2 35 000 399 13.02.89 1 20 000 413 21.02.89 4 10 000 439 ALL THESE CORRECTIONS AND INTERPOLATIONS WERE MADE IN THE BOOKS OF ACCOUNTS TO SHOW THAT ADVANCES WERE MADE T O THE PURCHASE MANAGER. FROM THE ABOVE DISCREPANCIES IT IS EXPLICIT THAT THE ASSESSEE MADE SYSTEMATIC ATTEMPT TO INCREA SE THE PURCHASES IN ORDER TO REDUCE THE PROFITS. HOWEVER THE FACT IS THAT THESE PURCHASES WERE NOTHING BUT MERE ENTRIES MADE ON THE LAST DAY OF THE ACCOUNTING YEAR TO AVOID TAX L IABILITY. IN ADDITION TO AFORE SAID DISCREPANCIES MENTIONED ABOVE RELATING TO THE LOCAL PURCHASES SOME PURCHASE WERE SAID TO HAVE BEEN MADE FROM OUT STATION PARTIES ALSO NAMELY M/S. MOHD. DASTAGIR AND SONS 133 BHAVANIPET PUNE AM OUNTING TO RS.3 98 912/- AND FROM M/S. ANISA REHMAN AND SONS KALYAN AMOUNTING TO RS.4 06 690/-. LETTERS ADDRESSED TO BOTH THE PARTIES WERE NOT RESPONDED EVEN THOUGH THE RECEIPT OF THE LETTERS WERE ACKNOWLEDGED BY THE PARTIES. FURTHER THE PURCHASES SAID TO HAVE BEEN MADE FROM M/S. ANISA REHMAN & SONS WERE AS UNDER- 1. BILL NO.33 DT.22.05.88 : RS.1 10 880 ITA NO.38/HYD/07 M/S. HOE LEATHER GARMENTS LTD. HYD. 5 2. BILL NO.36 DT. 01.06.88 : RS.1 66 560 3. BILL NO.34 DT.16.06.88 : RS.1 89 250 FROM THE ABOVE DETAILS IT IS EVIDENT THAT THE BILL NO. GIVEN TO THE PURCHASES MADE ON 01.06.88 WAS NO.36. ACCOR DINGLY THE PURCHASES MADE ON 16.6.88 SHOULD HAVE THE NO.37 OR SUBSEQUENT NUMBERS. BUT IT CANNOT BE THE NUMBER PR IOR TO NO.36. IN THE INSTANT CASE THE BILL NO. GIVEN IS 34 WHICH EVIDENCES THE MANIPULATIONS MADE. OUT OF THE TOTAL CASH PURCHASES OF RS.25 88 026/- PURCHASES TO THE EXTENT OF RS.8 26 265/- WERE CLAIM ED TO HAVE BEEN PURCHASED BY MR.JAFFER HASAN DIRECTOR OF THE COMPANY. IN THE LEDGER ACCOUNT OF MR.JAFFAR HASAN LF NO.467 IT IS REFLECTED THAT THE CASH ADVANCES GIVEN TO HIM WERE ONLY RS.4 26 365/-. WHEREAS AS PER THE DETAILS FILED B Y THE ASSESSEE DT. NIL RECEIVED ON 10.1.92 THE PURCHASES MADE BY MR.JAFFAR HASAN WERE TO THE TUNE OF RS.8 26 265/-. IN CONCLUSION AGAINST THE ADVANCES GIVEN BY THE COMPA NY OF RS.4 26 365/- THE DIRECTOR MADE PURCHASES TO THE T UNE OF RS.8 26 265/-. THIS OBVIOUSLY LEADS TO CONCLUSION THAT THERE WAS NOT ENOUGH OF CASH BALANCE AND THE DIRECTOR MUS T HAVE BROUGHT THE MONEY OUTSIDE THE BOOKS OF ACCOUNTS IN ORDER TO ACCOUNT FOR THE PURCHASES TO THE TUNE OF RS.8 26 26 5/-. ' 4. IN THE LIGHT OF THE ABOVE THE ASSESSING OFFICER NO TED THAT THE ASSESSEE MADE A DELIBERATE AND SYSTEMATIC ATTEMPT TO INFLATE THE PURCHASES TO REDUCE THE TAXABLE PROFITS. HE ALSO NOTED T HAT THE SELLERS HAVE NOT CONFIRMED THE SALES MADE BY THEM TO THE ASSESSEE AND THE ASSESSEE ALSO COULD NEITHER PRODUCE ANY EVIDENCE TO SHOW THA T THE MATERIALS WERE ACTUALLY PURCHASED AND RECEIVED AND FOR THAT MATTER CHOSE NOT TO PRODUCE THE RELEVANT RAW MATERIAL RECEIPTS REGISTER. THE ASSESSING OFFICER FURTHER NOTED THAT EVEN DURING THE RE- ASSESSMENT PROCEEDINGS THAT ENSUED IN PURSUANCE OF THE ORDER OF TH E TRIBUNAL ASSESSEE COULD NOT ADDUCE ANY FRESH EVIDENCE WHICH GOES AGAIN ST THE CONCLUSIONS ARRIVED AT IN THE ORIGINAL ASSESSMENT PROCEEDIN GS AND DID NOT PRODUCE THE RELEVANT BOOKS OF ACCOUNTS SUCH AS THE STOCK BOOK AND INWARD REGISTER DESPITE SEVERAL OPPORTUNITIES GIVE N. EXAMINING THE EXPLANATION OF THE ASSESSEE IN RESPONSE TO THE PENALT Y NOTICES IN ITA NO.38/HYD/07 M/S. HOE LEATHER GARMENTS LTD. HYD. 6 THE LIGHT OF THE ABOVE FACTUAL BACK GROUND THE ASSESSIN G OFFICER OBSERVING THAT THE ASSESSEE HAS NOT SUBMITTED ANY EXPLANAT ION ON THE ISSUES RAISED IN THE ASSESSMENT ORDER AND THE DISCREPANCIES PO INTED OUT CLEARLY SUPPORT THE ACTS CONCEALMENT OF INCOME AND FUR NISHING OF INACCURATE PARTICULARS THEREOF BY THE ASSESSEE LEVIED THE IMPUGNED PENALTY OF RS.15 00 000 VIDE ORDER OF PENALTY DATED 20.3.2006 PASSED UNDER S.271(1)(C) OF THE ACT. 5. ON APPEAL BEFORE THE CIT(A) THE ASSESSEE CONTENDED INTER-ALIA THAT IN THE ORIGINAL QUANTUM PROCEEDINGS THE CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER THOUGH WHEN THE SAID ORDER OF THE CIT(A) WAS SET ASIDE BY THE TRIBUNAL IN THE RE- ASSESSMENT PROCEEDINGS THAT ENSUED IN PURSUANCE OF THE ORDE R OF THE TRIBUNAL THE SAID ADDITION WAS REPEATED AND THE SAME STOOD CONFIRMED AND AS SUCH THIS IS NOT A FIT CASE FOR LEVY OF PENALTY FOR CONCEALMENT. REJECTING THE VARIOUS CONTENTIONS OF THE A SSESSEE AGAINST THE PENALTY IMPOSED AND OBSERVING THAT IT I S A FIT CASE WHERE PENALTY IS JUSTIFIED IN TERMS OF EXPLANATION-1 TO THE PROVISIONS OF S.271(1)(C) OF THE ACT UPHELD THE PENALTY LEVIED BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE CIT(A) ASSESSEE PREFERRED THIS SECOND APPEAL BEFORE THIS TRIBUNAL. 6. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATING TH E CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES SUBMITTE D THAT MERELY6 BECAUSE AN ADDITION HAS BEEN CONFIRMED BY THE CIT(A) IN THE QUANTUM PROCEEDINGS PENALTY CANNOT AUTOMATICALLY FOLLOWS IN AS MUCH AS PENALTY PROCEEDINGS ARE SEPARATE AND INDEPENDENT OF TH E QUANTUM PROCEEDINGS AND AS SUCH FACTS HAVE TO BE CONSIDERED INDEPE NDENTLY IN THE PENALTY PROCEEDINGS. IT IS ALSO FURTHER SUBMITTED THAT THE VERY ITA NO.38/HYD/07 M/S. HOE LEATHER GARMENTS LTD. HYD. 7 SAME ADDITION WHICH LED TO THE IMPUGNED PENALTY HAS B EEN DELETED BY THE CIT(A) IN THE ORIGINAL QUANTUM PROCEEDINGS THOUG H THE SAME WAS CONFIRMED BY THE CIT(A) ON APPEAL AGAINST THE RE-ASSESSME NT MADE IN PURSUANCE OF THE ORDER OF THE TRIBUNAL AND AS SUCH THER E WAS DIVERGENT OPINIONS EXPRESSED BY TWO APPELLATE AUTHORIT IES IN RELATION TO ONE AND THE SAME ADDITION AND EXAMINING THE VERY SAME SET OF FACTS OF THE CASE. THAT BEING SO THE ISSUE RELATING TO THE ADD ITION IS A DEBATABLE ONE ON WHICH TWO VIEWS ARE POSSIBLE AND THERE FORE THE IMPUGNED PENALTY IS NOT JUSTIFIED. HE FURTHER SUBMI TTED THAT DOCUMENTARY EVIDENCE SUCH AS BOOKS OF ACCOUNT PURCHASE BILLS VOUCHERS CONFIRMATION LETTERS STOCK REGISTERS AND WAY BIL LS WERE FURNISHED FROM TIME TO TIME SINCE THE ORIGINAL ASSESSMENT PROCEEDINGS TO SHOW THAT THE PURCHASES ARE GENUINE. WITHOUT CONSIDER ING THE SAME THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN LEVYI NG/CONFIRMING THE IMPUGNED PENALTY FOR CONCEALMENT. HE ALSO SUBMITTED TH AT THE ASSESSEE HAS FURNISHED ALL THE MATERIAL EVIDENCE IN SUPPOR T OF THE CASH PURCHASES AND AS SUCH THE CIT(A) WAS NOT JUSTIFIED IN H OLDING THAT THE ASSESSING OFFICER PROVIDED THE MATERIAL GATHERE D TO THE ASSESSEE AND THAT THE ASSESSEE FAILED TO GIVE EXPLANATION. THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY RELYING ON THE EARLIER O RDER OF THE CIT(A) IN QUANTUM PROCEEDINGS DATED 6.11.1992 AND SUBM ITTED THAT THE ASSESSEE HAS FURNISHED EXHAUSTIVE DETAILS AND THE APP ELLATE AUTHORITY SATISFIED HIMSELF WITH ALL THESE DOCUMENTS FURN ISHED IN SUPPORT OF THE PURCHASES AND ALLOWED THE APPEAL IN VIE W OF THE FACT THAT THE ENTIRE PURCHASES OF RAW-HIDES AND SKINS ARE COVE RED BY RULE 6DD(F)(I) OF THE I.T. RULES 1962; AND IN THE COURSE O F APPELLATE PROCEEDINGS AGAINST THE REFRAMED ASSESSMENT INVITED THE ATTENTION OF THE CIT(A) TO THE SUBMISSIONS AND FINDINGS IN THE EARLIE R APPELLATE PROCEEDINGS BEFORE THE CIT(A). IT IS ALSO SUBMITTED THA T THE ASSESSEE ITA NO.38/HYD/07 M/S. HOE LEATHER GARMENTS LTD. HYD. 8 HAD A FULL PROOF VERIFIABLE SYSTEM FO ACCOUNTING OF VA RIOUS RECEIPTS SUCH AS RAW SKINS CONSUMABLES AND CHEMICALS AND IS ALSO MAINT AINING SYSTEM OF ACCOUNTING FROM PLACE TO PLACE FROM INWARD GATE TO STORES AND THERE IS AN INWARD REGISTER WITH REGARD TO PURCHASE S OF RAW- MATERIALS AND THERE ARE GATE PASSES FOR DISPATCHES WHICH A RE BEING MAINTAINED REGULARLY BY THE ASSESSEE AND THE SAME WAS EXA MINED AND VERIFIED BY THE AUTHORITIES FROM TIME TO TIME STILL THE CIT(A) HAS CONFIRMED THE ADDITION MADE IN THE RE-ASSESSMENT MERELY ON ACCOUNT OF ASSESSEE'S FAILURE TO FURNISH STOCK REGISTER. THE FAILU RE OF THE ASSESSEE TO FILE STOCK REGISTER IS ONLY DUE TO LAPSE OF T IME AND AS SUCH CONFIRMATION OF ADDITION ITSELF IS NOT JUSTIFIED. ELAB ORATE WRITTEN SUBMISSIONS WERE ALSO FILED BY THE LEARNED COUNSEL FOR TH E ASSESSEE REITERATING THESE CONTENTIONS AND ALSO FURNISHED GIST OF THE RATIO LAID DOWN IN THE FOLLOWING DECISIONS UPON WHICH RELIANCE IS P LACED IN SUPPORT OF THE CONTENTIONS URGED. (1) CIT V/S. MATA PRASAD (278UITR 354)- ALL. (2) DILIP N.SHROFF V/S. JCIT(291 ITR 519)-SC (3) CIT V/S. AJAIB SINGH AND CO. (253 ITR 630) P&H (4) STAR INTERNATIONAL (P)LTD. V/S. ACIT (116 ITD 408)- LUCK (5) GUJARAT CREDIT CORPORATION LTD. V/.S. ACIT(113 ITD 133)-AHD.(SB) (6) SHETTY G.D. V/S. ITO(112 ITR 103) (7) NEMCHAND JAIN & SONS V/S. DCIT (33 DTR (KOL)((TRIB )178) (8) CIT VS. CPL TANNERY(318 ITR 179)-CAL 7. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND STRONGLY SUPPORTING THE IMPUGNED ORDERS OF THE LOWER A UTHORITIES SUBMITTED THAT IT IS A FIT CASE FOR LEVY OF PENALTY FO R CONCEALMENT. HE SUBMITTED THAT IN THE APPELLATE PROCEEDINGS AGAINST T HE RE-ASSESSMENT MADE BY THE ASSESSING OFFICER IN PURSUANCE OF THE ORDER OF THE TRIBUNAL THE CIT(A) AS WELL AS THE TRIBUNAL CONFIRME D THE ADDITION ITA NO.38/HYD/07 M/S. HOE LEATHER GARMENTS LTD. HYD. 9 REPEATED BY THE ASSESSING OFFICER ON ACCOUNT OF UNPROVED CA SH PURCHASES. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IMPUGNED PENALTY O F RS.15 00 000 UNDER S.271(1)(C) OF THE ACT HAS BEEN LEVIED WITH RE FERENCE TO THE ADDITION OF RS.25 88 026 MADE ON ACCOUNT OF UNPROVED CA SH PURCHASES. FOR LEVYING OF PENALTY U/S 271(1)( C) OF TH E IT ACT IT IS TO BE FOUND THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR AS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT IS T HUS NECESSARY THAT BEFORE PENALTY IS LEVIED U/S 271(1) ( C) OF THE ACT A CLEAR CUT FINDINGS MUST BE RECORDED IN THE PENALTY ORDER THAT THE ASSESSEE HAD BEEN GUILTY OF CONCEALMENT OR FURNISHING INACCU RATE PARTICULARS. THIS BEING A PENAL PROVISION THE ONUS CLE ARLY LIES UPON THE DEPARTMENT TO BRING ON RECORD THE GUILT OF THE A SSESSEE. WHENEVER INCOME RETURNED BY THE ASSESSEE IS ENHANCED BY TH E ASSESSING OFFICER THE PENAL PROVISION IS NOT AUTOMATICALLY ATTRACTED. THE PENAL PROVISION IS APPLICABLE ONLY IF THE ENHANCEME NT IS ON ACCOUNT OF SOME INCOME WITH THE ASSESSEE IS FOUND TO HAVE EARNED A ND CONCEALED. THE PURPOSE OF THIS SECTION IS TO PROVIDE A DETERRENT AGAINST RECURRENCE OF DEFAULT ON THE PART OF THE ASSESSEE . THE SECTION IS PENAL IN THE SENSE THAT ITS CONSEQUENCES ARE INTENDED TO BE AN EFFECTIVE DETERRENT WHICH IN PART A STOP TO PRACTICES WH ICH THE LEGISLATURE CONSIDERS TO BE AGAINST PUBLIC INTEREST. TH ERE IS A HEAVY BURDEN ON THE DEPARTMENT TO PROVE THAT ASSESSEE CONCEALE D THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS. IT WOULD BE PERFECTLY LEGITIMATE TO SAY THAT THE MERE FACT THAT TH E EXPLANATION OF THE ASSESSEE IS FALSE DOES NOT NECESSARILY GIVE RAISE TO THE I NFERENCE THAT THE DISPUTED AMOUNT REPRESENTS INCOME. IT CANNOT B E SAID THAT ITA NO.38/HYD/07 M/S. HOE LEATHER GARMENTS LTD. HYD. 10 THE FINDINGS IN THE ASSESSMENT PROCEEDINGS FOR DETERMINING OR COMPUTING THE TAX IS CONCLUSIVE. IN THE PRESENT CASE AP ART FROM THE NON ACCEPTANCE EXPLANATION GIVEN BY THE ASSESSEE BY ASSESSING OFFICER THERE WERE VARIOUS MATERIALS ASSESSEE BROUGHT ON RECORD TO PROVE THE GENUINENESS OF THE PURCHASES. THOUGH THE ASSESSEE NOT PRODUCED THE STOCK INWARD REGISTER OR STOCK REGISTERS IT WAS ADMITTED FACT THAT THE ASSESSEE FURNISHED ALL DOCUMENTARY EVIDENCE TO PROVE THE PURCHASE LIKE BILLS VOUCHERS AS WELL AS IDENTITY OF T HE PARTIES WAY BILLS LORRY NOS. C-FORMS. THESE ASPECTS ARE NOT DOUBTE D BY THE ASSESSING OFFICER. THE INWARD REGISTER/STOCK REGISTER WERE NOT PRODUCED DUE TO LAPSE OF TIME. FURTHER THE ASSESSEE EXP LAINED THE CASH ADVANCE WAS MADE BY SHRI SHAFEEQ AHMED TO BUTCHERS F OR PURCHASE OF THE RAW SKINS AND THE ACCOUNTS WERE FINALIZED AND JOURNAL ENTRIES ARE PASSED AFTER SETTLING THE ADVANCES. MOST OF CA SH PURCHASES WERE ON ACCOUNT OF PURCHASE OF RAW SKINS FOR WHICH PROVI SIONS OF RULE 6DD (F) IS APPLICABLE. IN OUR OPINION THERE WAS NO COGENT MATERIAL FOR HOLDING THAT THE AMOUNT IN QUESTION WAS REALLY BE ASSES SEES INCOME WHICH THE ASSESSEE HAS CONCEALED. THE ASSESSING OFFICER HAS TRE ATED THE IMPUGNED AMOUNT AS INCOME OF THE ASSESSEE AND LEVIED PENALTY ON THE SOLE REASON THAT ASSESSEES BOOKS OF ACCOUNT HAD NOT BEE N PROPERLY MAINTAINED AND HE HAS NOT DISCOVERED ANY SPECI FIC AMOUNT OF CONCEALED INCOME. THERE IS NO POSITIVE MATERIAL BROUGHT ON RECORD IN THE COURSE OF PENALTY PROCEEDINGS ON THE BASIS OF WHICH IT COULD BE HELD THAT THE IMPUGNED AMOUNT TREATED BY ASSESSING OFFI CER AS INCOME OF THE ASSESSEE WAS REALLY THE INCOME OF THE ASSESSEE AND SECON DLY THERE IS NO EVIDENCE THAT THE ASSESSEE HAS CONCEALED OR FUR NISHED INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAS HONESTLY P RODUCED THE RELEVANT MATERIALS AND EVIDENCE AVAILABLE WITH IT TO PROVE THE CORRECTNESS OF THE BOOKS OF ACCOUNTS. THE ASSESSING OFFICER NO T ITA NO.38/HYD/07 M/S. HOE LEATHER GARMENTS LTD. HYD. 11 ACCEPTED THE GENUINENESS OF THE TRANSACTIONS SINCE THE ASSESSIN G OFFICER WANTED INWARD REGISTER AND STOCK REGISTERS AND THE ASSESSING OFFICER NOT DISCOVERED ANY POSITIVE MATERIAL OF INFLATI NG OF PURCHASES. THERE WERE CERTAIN INSERTION OF ENTRIES IN THE CASH BOOK AND ALSO CORRECTION IN THE CASH BALANCE MADE BY THE ASSESSEE IN ITS BO OKS OF ACCOUNTS AND ACCORDING TO ASSESSING OFFICER THESE ARE BOOKS O F ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE. THIS FINDING IS ENOUGH TO MAKE ADDITIONS IN THE ASSESSMENT PROCEEDINGS BUT THAT ITSE LF IS NOT ENOUGH TO SUSTAIN THE PENALTY. IT IS TO BE TRUE THAT EVEN IN CASES OF ESTIMATION OR IN CASE OF BEST JUDGEMENT PENALTY IS LEVIA BLE. BUT THERE SHOULD BE FINDING HAS TO BE RECORDED THAT THE DIFFERE NCE IN THE INCOME RETURN AND THE INCOME ASSESSED IS DUE TO THE FRAUD OR GRO SS OR WILLFUL NEGLECT ON THE PART OF THE ASSESSEE. IN THE INSTANT CASE THE LOWER AUTHORITIES HAVE NOT RECORDED ANY SUCH FINDINGS. THE B OOKS OF ACCOUNTS OF THE ASSESSEE NOT WHOLLY AMENABLE TO VERIFICATI ON. THAT AT BEST CAN ONLY LEAD TO INFERENCE THAT THE RESULT SHOWN BY THE ASSESSEE ARE INCONCLUSIVE. BUT THAT IS FAR FROM SAYING THAT TH ERE IS ANY FRAUD OR GROSS OR WILLFUL NEGLECT ON THE PART OF THE ASSESSEE. THE RE MAY BE JUSTIFICATION FOR MAKING ADDITION TO THE ASSESSMENT; THER E WAS NO JUSTIFICATION FOR IMPOSING PENALTY BECAUSE THE DEPARTME NT HAD NOT ESTABLISHED THAT WHAT WAS ADDED BY THEM IN THE ASSESSMENT REPRESENTED THE INCOME OF THE ASSESSEE. THE PENALTY O RDER SHOULD BE SELF-CONTAINED ONE THE FINDINGS THAT THERE HAS BEEN CON CEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME RECORDED IN THE ASSESSMENT PROCEEDINGS CANNOT AUTOMATICALLY TRANSFERRED TO T HE PENALTY ORDER AND THE CONCEALMENT OR FURNISHING OF INA CCURATE PARTICULARS AS SPECIFICALLY REQUIRED TO BE RECORDED IN TH E PENALTY ORDER. FAILURE IN THIS REGARD VITIATES THE VALIDITY OF THE P ENALTY ORDER ITSELF. FINDINGS IN THE ASSESSMENT PROCEEDINGS ARE NOT CONCLUSIVE. THE ITA NO.38/HYD/07 M/S. HOE LEATHER GARMENTS LTD. HYD. 12 FINDINGS IN THE ASSESSMENT ORDER WERE ONLY A PIECE OF EVI DENCE WHICH CAN BE RELIED UPON IN THE PENALTY PROCEEDINGS BUT THER E SHOULD BE INDEPENDENT FINDINGS IN THE PENALTY ORDER. IN THIS P RESENT CASE THE ASSESSING OFFICER NOT BROUGHT ON RECORD NOTHING MORE THAN FINDINGS RECORD IN THE ASSESSMENT ORDER AS SUCH NO INDEPENDENT FI NDINGS IN THE PENALTY ORDER REGARDING THE CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. ACCORDINGLY WE ARE INCL INED TO DELETE THE PENALTY. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON : 13.4.2010 SD/- SD/- (G.C.GUPTA) (CHANDRA POOJARI) VICE PRESIDENT ACCOUNTANT MEMBER DT/- 13 TH APRIL 2010. COPY FORWARDED TO: 1. M/S. HOE LEATHER GARMENTS LTD. C/O. M/S. ANJANEYULU & CO 30 BHAGYA LAKSHMI NAGAR KAVADIGUDA HYDERABAD 500 080. 2. ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE 2(2) HYDERAB AD. 3. COMMISSIONER OF INCOME-TAX (APPEALS) III HYDERABAD. 4. COMMISSIONER OF INCOME-TAX-II HYDERABAD 5 THE DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD. B.V.S.