M/s. CHEMPURE, MUMBAI v. ITO 14(3)(1), MUMBAI

ITA 451/MUM/2006 | 1996-1997
Pronouncement Date: 07-05-2010 | Result: Allowed

Appeal Details

RSA Number 45119914 RSA 2006
Bench Mumbai
Appeal Number ITA 451/MUM/2006
Duration Of Justice 4 year(s) 3 month(s) 18 day(s)
Appellant M/s. CHEMPURE, MUMBAI
Respondent ITO 14(3)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 07-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 07-05-2010
Date Of Final Hearing 22-04-2010
Next Hearing Date 22-04-2010
Assessment Year 1996-1997
Appeal Filed On 19-01-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI A.L. GEHLOT ACCOUNTANT MEMBER ITA NOS. 451 452 & 453/M/2006 ASSESSMENT YEARS: 1996-97 1997-98 & 1998-99 M/S CHEMPURE APPELLANT 328 ASHIRWAD INDUSTRIAL ESTATE 3 RD FLOOR BUIDLING NO. 3 RAM MANDIR ROAD GOREGAON (WEST) MUMBAI - 104 VS. INCOME TAX OFFICER RESPONDENT 14(3)(1) EARNEST HOUSE MUMBAI 21. APPELLANT BY : MR. BHUPENDRA SHAH RESPONDENT BY : MR. ANKUR GARG ORDER PER A.L. GEHLOT A.M.: THESE APPEALS FILED BY SAME ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF CIT (A)- XV MUMBAI FOR THE ASSESS MENT YEAR 1996-97 TO 1998-99. SINCE IDENTICAL ISSUES ARE INVO LVED IN THESE APPEALS THEY WERE HEARD TOGETHER AND THEREFORE F OR THE SAKE OF CONVENIENCE A COMMON ORDER IS PASSED. 2. A COMMON GROUND RAISED IN THESE APPEALS IS PERTA INING TO LEVY OF PENALTY U/S 271(1)(C) OF RS. 11 23 080/- FO R AY 1996-97 RS. 21 47 750/- FOR AY 1997-98 AND RS. 3 31 530/- F OR AY 1998-99. ITA NOS. 451 TO 453/M/06 M/S CHEMPURE 2 3. THE LEARNED REPRESENTATIVES OF THE PARTIES SUBMI TTED THAT SINCE THE FACTS IN ALL THE THREE APPEALS ARE COMMON THE FACTS IN AY 1996-97 MAY BE CONSIDERED FOR DECIDING THESE APP EALS. 4. DURING THE ASSESSMENT COURSE OF ASSESSMENT PROCE EDINGS IT WAS NOTICED THAT THE ASSESSEE WAS MAKING BOGUS P URCHASES FROM VARIOUS CONCERNS BELONG TO MR. F.H. RIZVI. THE FOLLOWING SUCH PURCHASES WERE NOTICED FROM THE PARTIES:- NAME AMOUNT ASHIYANA INTERNATIONAL 18 670/- R.K. AGENCIES 10 47 235/- RV CHEM 1 72 590/- WISE PHARMA 3 28 000/- 15 99 295/- ========== 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS ASKED THE ASSESSEE TO PRODUCE THOSE PARTIES BUT THE ASSESSEE FAILED TO DO SO DESPITE REPEAT OPPORTUNITIES WERE G IVEN BY THE AO. THE AO TREATED THE SAID PURCHASES OF RS. 15 99 295/- AS BOGUS PURCHASES FOR AY 1996-97. THE ASSESSEE FILED APPEAL BEFORE THE CIT (A) WHO CONFIRMED THE ADDITION TO T HE EXTENT OF 25% OF TOTAL PURCHASES. THE ORDER OF CIT (A) HAS BE EN CONFIRMED BY THE ITAT. THE AO LEVIED PENALTY U/S 271(1)(C) W HICH HAS BEEN CONFIRMED BY THE CIT(A). THE CIT (A) IN PRINC IPLE CONFIRMED THE PENALTY LEVIED BY THE AO HOWEVER HE DIRECTED THE AO TO RECALCULATE THE MINIMUM PENALTY IN RESPECT OF ADDITION SUSTAINED. 6. THE LEARNED AR SUBMITTED THAT THERE IS NO CONCLU SIVE MATERIAL THAT THE ASSESSEE HAS CONCEALED PARTICULAR S OF ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. IT IS ITA NOS. 451 TO 453/M/06 M/S CHEMPURE 3 SIMPLY A CASE OF ESTIMATION OF GP AND IN SUCH CASES PENALTY U/S 271(1)(C) IS NOT LEVIABLE. HE RELIED UPON FOLLOWIN G DECISIONS:- 1. ATHARVA BUILDERS PVT. LTD. V. ACIT ITA NO. 5900/01/M/05. 2. CIT VS. AARKAY SAREE MUSEUM [1991] 187 ITR 147 (BOM.) 3. RAJAN H. SHINDE VS. DCIT [2006] 103 ITD 360 (PUNE)(TM). 4. ITO VS. PURNIMA DEVI GUPTA [2004] 83 TTJ 586 (JD .) 5. JCIT VS. VXL (INDIA) LTD. [2005] 94 TTJ 513 (ASR .) 6. H.P. STATE FOREST CORPORATION LTD. V. DCIT [2005 ] 93 ITD 442. 7. MANSUKH DASS SONI VS. ACIT [2006] 99 TTJ (JD.) 8 94. 8. SHIV LAL TAK VS. CIT [2001] 251 ITR 373 (RAJ.) 9. CIT VS. METAL PRODUCTS OF INDIA 150 ITR 714 (P& H) 10. HARIGOPAL SINGH VS. CIT [2002] 258 ITR 85 (P&H) 11. ACIT VS. ALLIED CONSTRUCTION [2007] 106 TTJ (DE L) 616 12. SAHYOG SAHAKARI SHRAM SAMVIDA SAMITI LTD. V. AC IT [2007 111 TTJ 340 (LUCKNOW). 7. THE LEARNED DR ON THE OTHER HAND RELIED UPON T HE ORDERS OF THE REVENUE AUTHORITIES AND SUBMITTED THAT THE A SSESSEE MADE PURCHASES THROUGH HAWALA ENTRIES. THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS TO SUPPORT ITS CLAIM OF PURCH ASES. THE LEARNED DR FURTHER SUBMITTED THAT THE ASSESSEE HAS FILED AFFIDAVIT BEFORE THE CIT (A) BUT HE HAS FAILED TO P RODUCE THE PARTIES IN PERSON. THE LEARNED DR SUBMITTED THAT TH AT PENALTY IS LEVIABLE EVEN ON ESTIMATE BASIS. HE RELIED UPON THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. B. A. BALASUBRAMANIAN & BROS. COMPANY 152 ITR 529 (MAD.) THE LEARNED DR HAS ALSO RELIED UPON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. YUSUF ABDU LLA PATEL 208 ITR 202 (BOM.). THE LEARNED DR SUBMITTED THAT I T IS A FIT CASE FOR LEVY OF PENALTY THEREFORE HE PLEADED THA T THE ORDERS OF THE REVENUE AUTHORITIES MAY BE CONFIRMED. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE CRUX OF THE MATTER TO BE EX AMINED IS WHETHER ITA NOS. 451 TO 453/M/06 M/S CHEMPURE 4 PENALTY UNDER SECTION 271(1)(C) READ WITH THE EXPLA NATION-1 OF SECTION 271(1) IS APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. THE PROCEEDINGS UNDER SECTION 271(1)(C) CAN BE INITIATE D ONLY IF THE A.O OR THE FIRST APPELLATE AUTHORITY IS SATISFIED IN THE C OURSE OF ANY PROCEEDINGS UNDER THE ACT THAT ANY PERSON HAS CONCE ALED THE PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME HE MAY DIRECT THAT SUCH PERSON SHALL P AY BY WAY OF PENALTY THE SUM MENTIONED IN SUB-CLAUSE (III) OF CL AUSE (C) OF THE SECTION 271(1)(C) OF THE ACT. THE EXPRESSION USED I N CLAUSE (C) IS HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNIS HED INACCURATE PARTICULARS OF SUCH INCOME. THEREFORE BOTH IN CAS ES OF CONCEALMENT AND INACCURACY THE PHRASE PARTICULARS OF INCOME A RE USED. THE EXPRESSIONS 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEFINED EITHER IN SECTION 271(1)(C) OR ELSEWHERE IN THE ACT . THE MEANING OF WORD PARTICULAR AS NOTED FROM THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT V RELIANCE PETROPRODUCTS PVT. LTD 3 22 ITR158 (SC) READS AS UNDER: - (PAGE 163) AS PER LAW OF LEXICON THE MEANING OF THE WORD PA RTICULAR IS A DETAIL OR DETAILS (IN PLURAL SENSE); THE DETAILS OF A CLAIM OR THE SEPARATE ITEMS OF ACCOUNT . 9. THE MEANING OF THE WORD INACCURATE NOTED FROM THE SAID JUDGMENT READS AS UNDER: - (PAGE 165) IN WEBSTER'S DICTIONARY THE WORD 'INACCURATE' HAS BEEN DEFINED AS:-'NOT ACCURATE NOT EXACT OR CORRECT; NO T ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT COPY OR TRANSCRIPT ITA NOS. 451 TO 453/M/06 M/S CHEMPURE 5 10. THE WORD 'CONCEAL' IS DERIVED FROM THE LATIN CONCELARE WHICH IMPLIES CON+CELARE TO HIDE. WEBSTER IN HIS NEW INTE RNATIONAL DICTIONARY EQUATES ITS MEANING 'TO HIDE OR WITHDRAW FROM OBSER VATION TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WI THHOLD KNOWLEDGE OF'. THE OFFENCE OF CONCEALMENT IS THUS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF T HE INCOME-TAX AUTHORITIES . HERE WE WOULD LIKE REFER SOME OBSERVATIONS OF THE APEX COURT FROM THE JUDGMENT OF CIT V RELIANCE PETROPROD UCTS PVT. LTD 322 ITR158 (SC) READS AS UNDER :-( PAGE 166) 13. IN THIS BEHALF THE OBSERVATIONS OF THIS COURT M ADE IN SREE KRISHNA ETECTRICATS V. STATE OF TAMIL NADU & ANN [( 2009) 23VST 249 (SG)] AS REGARDS THE PENALTY ARE APPOSITE. IN T HE AFOREMENTIONED DECISION WHICH PERTAINED TO THE PENA LTY PROCEEDINGS IN TAMIL NADU GENERAL SALES TAX ACT TH E COURT HAD FOUND THAT THE AUTHORITIES BELOW HAD FOUND THAT THE RE WERE SOME INCORRECT STATEMENTS MADE IN THE RETURN. HOWEVER T HE SAID TRANSACTIONS WERE REFLECTED IN THE ACCOUNTS OF THE ASSESSEE. THIS COURT THEREFORE OBSERVED: 'SO FAR AS THE QUESTION OF PENALTY IS CONCERNED THE ITEMS WHICH WERE NOT INCLUDED IN THE TURNOVER WERE FOUND INCORP ORATED IN THE APPELLANT'S ACCOUNT BOOKS. WHERE CERTAIN ITEMS WHIC H ARE NOT INCLUDED IN THE TURNOVER ARE DISCLOSED IN THE DEALE R'S OWN ACCOUNT BOOKS AND THE ASSESSING AUTHORITIES INCLUDE THESE I TEMS IN THE DEALER'S TURNOVER DISALLOWING THE EXEMPTION PENALT Y CANNOT BE IMPOSED. THE PENALTY LEVIED STANDS SET ASIDE.' 11. IT MAY BE NOTED THAT THESE WORDS CONCEALED PARTICULARS AND INACCURATE ARE WITH REGARD TO INCOME NOT WITH REGARD TO ANY OTHERS. IN THE LIGHT OF ABOVE DISCUSSION WE ARE OF THE VIEW THAT THERE CANNOT BE A STRAIGHT JACKET FORMULA FOR DETECTION O F DEFAULT OF CONCEALMENT OF PARTICULARS OR FURNISHING OF INACCUR ATE PARTICULARS OF INCOME. IT DEPENDS UPON THE FACTS OF EACH CASE. THE REFORE THE ITA NOS. 451 TO 453/M/06 M/S CHEMPURE 6 DECISIONS CITED BY THE LEARNED DR ARE DISTINGUISHAB LE ON FACTS. IN THE CASE OF CIT VS. YUSUF ABDULLA PATEL (SUPRA) IT WAS FOUND BY THE TRIBUNAL THAT THE EXPLANATION GIVEN BY THE ASSESSEE WAS A FALSE EXPLANATION. IN THE CASE OF CIT VS. B.A. BALASUBRAM ANIAN & BROS. (SUPRA) THE ASSESSEE DELIBERATELY SHOWED LOWER INC OME BY CONCEALING PARTICULARS. BUT IN THE CASE UNDER CONSIDERATION TH ERE WAS NO DISPUTE THAT PURCHASES WERE MADE THOUGH THE ASSESSEE FAILE D TO SUBSTANTIATE ITS CLAIM TO THE EXTENT THAT THE PURCHASES WERE MAD E FROM THAT PARTICULAR PARTY. THEREFORE IN THE CASE UNDER CONS IDERATION THE WORD PARTICULARS USED IN THE SECTION 271(1)(C) WOULD E MBRACE THE MEANING OF THE PURCHASES MADE AND NOT THE PARTY FROM WHOM I T WAS MADE. AS STATED ABOVE THAT WORDS CONCEALED PARTICULARS AND INACCURATE ARE WITH REGARD TO INCOME NOT WITH REGARD TO ANY OT HERS. FROM WHICH PARTY THE PURCHASES WERE MADE IS NOT MUCH IMPORTANT WHILE COMPUTING THE INCOME. THE IMPORTANT ASPECT IN COMPU TING INCOME IS PURCHASES. IN THE CASE UNDER CONSIDERATION THE PURC HASES WERE RECORDED REGULARLY IN THE BOOKS OF ACCOUNT ON DAY-T O-DAY BASIS. THE ITAT WHILE DECIDING THE QUANTUM MATTER OBSERVED THA T THE ASSESSEE MUST HAVE MADE PURCHASES FROM THE MARKET FROM UNREG ISTERED DEALERS IN CASH AND DETAILS COULD NOT BE OBTAINED FROM SUCH DEALERS. THE ASSESSEE THEREFORE OBTAINED HAWALA BILLS FROM MR. F.H. RIZWI. THE ITAT FURTHER OBSERVED THAT THE CIT (A) WAS OF THE V IEW THAT IN THESE CIRCUMSTANCES THE ASSESSEE MUST HAVE INFLATED THE P URCHASE BILLS AND ON THAT ACCOUNT THE DISALLOWANCE TO THE EXTENT OF 2 5% WAS FOUND TO BE REASONABLE. THE CASE OF THE AO IN QUANTUM MATTER W AS THAT THE ENTIRE PURCHASES WERE DISALLOWABLE WHEREAS THE APPE LLATE AUTHORITIES FOUND THAT THE ASSESSEE MUST HAVE MADE THE PURCHASE S BUT THE SAME MAY NOT BE FROM MR. F.H. RIZWI. ACTUAL PURCHASES MA DE BY THE ASSESSEE WERE NOT DOUBTED BY THE APPELLATE AUTHORIT IES WHILE DECIDING THE QUANTUM MATTER. HOWEVER CONSIDERING THE CIRCUM STANCES THEY CONFIRMED THE ADDITION TO THE EXTENT OF 25% OF RELE VANT PURCHASE ON THE BASIS OF THE FACTS FIGURES AND PARTICULARS PRO VIDED BY THE ITA NOS. 451 TO 453/M/06 M/S CHEMPURE 7 ASSESSEE. THUS THE MAIN BASIS ON WHICH THE AO LEVI ED PENALTY WAS NOT SUSTAINED BY THE APPELLATE AUTHORITIES. 12. IN ADDITION TO MAIN PROVISIONS OF CONCEALMENT HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FURNISHED IN ACCURATE PARTICULARS OF SUCH INCOME THERE ARE DEEMED TO REP RESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED .THE DEEMED CONCEALMENT IS PROVIDED IN EXPLANATIONS. OFTEN A QUESTION ARISES WHETHER IN CASES WHERE ADDITIONS OR DISALLOWANCES M ADE BY THE ITO THE PENAL PROVISIONS OF SECTION271 (1)(C) WOULD AT TRACT. EXPLANATION 1 TAKES CARE OF THIS SITUATION. THE EXPLANATION TO SE CTION 271(1) OF THE ACT READS AS UNDER:- EXPLANATION 1.-WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FA LSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE (AND FAILS TO PROVE THAT SUCH EXPLANAT ION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM) THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL FO R THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION BE DEEMED TO REP RESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. 13. A CONSPECTUS OF THE EXPLANATION MAKES IT CLEAR THAT THE STATUTE VISUALISED THE ASSESSMENT PROCEEDINGS AND PENALTY P ROCEEDINGS TO BE WHOLLY DISTINCT AND INDEPENDENT OF EACH OTHER. IN E SSENCE THE EXPLANATION IS A RULE OF EVIDENCE. PRESUMPTIONS WHI CH ARE REBUTTABLE IN NATURE ARE AVAILABLE TO BE DRAWN. THE INITIAL BU RDEN OF DISCHARGING THE ONUS OF REBUTTAL IS ON THE ASSESSEE. THE RATION ALE BEHIND THIS VIEW IS THAT THE BASIC FACTS ARE WITHIN THE SPECIAL KNOW LEDGE OF THE ASSESSEE. SECTION 106 OF THE INDIAN EVIDENCE ACT 1 872 GIVES STATUTORY RECOGNITION TO THIS UNIVERSALLY ACCEPTED RULE OF EVIDENCE. THERE IS NO DISCRETION CONFERRED ON THE A SSESSING OFFICER AS ITA NOS. 451 TO 453/M/06 M/S CHEMPURE 8 TO WHETHER HE CAN INVOKE THE EXPLANATION OR NOT. EX PLANATION 1 COMES INTO OPERATION WHEN IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON THERE IS FAILURE TO OFFER AN EXPLANATION OR AN EXPLANATION IS OFFERED WHICH IS F OUND TO BE FALSE BY THE ASSESSING OFFICER OR THE FIRST APPELLATE AUTHOR ITY OR AN EXPLANATION IS OFFERED WHICH IS NOT SUBSTANTIATED. IN SUCH A CASE THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL I NCOME IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICU LARS HAVE BEEN CONCEALED. AS PER THE PROVISION OF EXPLANATION 1 T HE ONUS TO ESTABLISH THAT THE EXPLANATION OFFERED WAS BONA FID E AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF HIS INCOME HAVE BEEN DISCLOSED BY HIM WILL BE ON THE PERSON CH ARGED WITH CONCEALMENT. THE EXPLANATION OF THE ASSESSEE FOR TH E PURPOSE OF AVOIDANCE OF PENALTY MUST BE AN ACCEPTABLE EXPLANAT ION; IT SHOULD NOT BE A FANTASTIC OR FANCIFUL ONE. AS INDICATED ABOVE THE CONSEQUENCE FOLLOWS AS A MATTER OF LAW. THE BURDEN IS ON THE AS SESSEE. IF HE FAILS TO DISCHARGE THAT BURDEN THE PRESUMPTION THAT HE HAD CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF IS AVAILABLE TO BE DRAWN. THE ISSUE RELATING TO BONAFIDE AND FALSE RETURN S IN IMPOSING PENALTY ON THE ASSESSEE UNDER SECTION 43 OF THE MAD HYA PRADESH GENERAL SALES TAX ACT 1958 AND SECTION 9(2) OF TH E CENTRAL SALES TAX ACT 1956 HAVE BEEN EXAMINED BY THE APEX COURT IN T HE CASE OF CEMENT MARKETING CO. OF INDIA LTD. V .ASSISTANT COM MISSIONER OF SALES TAX [1980] 4 TAXMAN 44 (SC) 124 ITR 15 (SC). FACTS IN BRIEF OF THIS CASE WERE THAT THE ASSESSEE-COMPANY EFFECTED CERTAIN TRANSACTIONS OF SALE OF CEMENT IN ACCORDANCE WITH T HE PROVISIONS OF THE CEMENT CONTROL ORDER DURING THE ASSESSMENT PERI OD 1-8-1971 TO 31-7-1972. THE AMOUNT OF FREIGHT INCLUDED IN THE 'F REE ON RAIL DESTINATIONS RAILWAY STATION' WAS PAID BY THE PURCH ASERS AND HENCE THE ASSESSEE DEDUCTED FROM THE PRICE SHOWN IN THE I NVOICES SENT TO THE PURCHASERS. IN THE COURSE OF ITS ASSESSMENT TO SALE S TAX UNDER THE MADHYA PRADESH GENERAL SALES TAX ACT 1958 AND THE CENTRAL SALES TAX ACT 1956 THE ASSESSEE DID NOT INCLUDE THE SAI D AMOUNT OF FREIGHT ITA NOS. 451 TO 453/M/06 M/S CHEMPURE 9 IN ITS TAXABLE TURNOVER ON THE GROUND THAT IT DID N OT FORM PART OF THE SALE PRICE. IN HIS TWO SEPARATE ASSESSMENT ORDERS ONE UNDER THE CENTRAL SALES TAX ACT 1956 AND THE OTHER UNDER TH E MADHYA PRADESH GENERAL SALES TAX ACT 1958 THE ASSISTANT COMMISSI ONER HOWEVER INCLUDED THE SAME IN THE TAXABLE TURNOVER FOR LEVYI NG TAX. HE ALSO IMPOSED HEAVY PENALTY ON ACCOUNT OF THE ASSESSEE'S FAILURE TO DISCLOSE THE SAME IN ITS TAXABLE RETURNS. ON DIRECT APPEAL T O THE SUPREME COURT HELD AS UNDER:-. 5. THE NEXT QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THE ASSISTANT COMMISSIONER WAS RIGHT IN IMPOSING PENALTY ON THE A SSESSEE FOR NOT SHOWING THE AMOUNT OF FREIGHT AS FORMING PART OF THE TAXABLE TU RNOVER IN ITS RETURNS. THE PENALTY WAS IMPOSED UNDER SECTION 43 OF THE MADHYA PRADESH GENERAL SALES TAX ACT 1958 AND SECTION 9(2) OF THE CENTRAL SALES TAX ACT 1956 ON THE GROUND THAT THE ASSESSEE HAD FURNISHED FALSE RETURNS BY NOT INC LUDING THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER DISCLOSED IN THE RETURNS. NOW IT IS DIFFICULT TO SEE HOW THE ASSESSEE COULD BE SAID TO HAVE FILED 'FALSE' RETURN S WHEN WHAT THE ASSESSEE DID NAMELY NOT INCLUDING THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER WAS UNDER A BONA FIDE BELIEF THAT THE AMOUNT OF FREIGHT DID NOT FORM PART OF THE SALE PRICE AND WAS NOT INCLUDIBLE IN THE TAXABLE TURNOVER. THE CON TENTION OF THE ASSESSEE THROUGHOUT WAS THAT ON A PROPER CONSTRUCTION OF THE DEFINITION OF 'SALE PRICE' IN SECTION 2(O) OF THE MADHYA PRADESH GENERAL SALES TA X ACT 1958 AND SECTION 2(H) OF THE CENTRAL SALES TAX ACT 1956 THE AMOUNT OF FREIGHT DID NOT FALL WITHIN THE DEFINITION AND WAS NOT LIABLE TO BE INCLUDED IN THE TAXABLE TURNOVER. THIS WAS THE REASON WHY THE ASSESSEE DID NOT INCLUDE THE AMO UNT OF FREIGHT IN THE TAXABLE TURNOVER IN THE RETURNS FILED BY IT. NOW IT CANNOT BE SAID THAT THIS WAS A FRIVOLOUS CONTENTION TAKEN UP MERELY FOR THE PURPOSE OF AVOID ING LIABILITY TO PAY TAX. IT WAS A HIGHLY ARGUABLE CONTENTION WHICH REQUIRED SERIOUS CONSIDERATION BY THE COURT AND THE BELIEF ENTERTAINED BY THE ASSESSEE THAT IT WAS NOT LIABLE TO INCLUDE THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER COULD NO T BE SAID TO BE MALA FIDE OR UNREASONABLE. WHAT SECTION 43 OF THE MADHYA PRADESH GENERAL SALES TAX ACT 1958 REQUIRES IS THAT THE ASSESSEE SHOULD HAVE FIL ED A 'FALSE' RETURN AND A RETURN CANNOT BE SAID TO BE 'FALSE' UNLESS THERE IS AN ELE MENT OF DELIBERATENESS IN IT. IT IS POSSIBLE THAT EVEN WHERE THE INCORRECTNESS OF THE R ETURN IS CLAIMED TO BE DUE TO WANT OF CARE ON THE PART OF THE ASSESSEE AND THERE IS NO REASONABLE EXPLANATION FORTHCOMING FROM THE ASSESSEE FOR SUCH WANT OF CARE THE COURT MAY IN A GIVEN CASE INFER DELIBERATENESS AND THE RETURN MAY BE LI ABLE TO BE BRANDED AS A FALSE RETURN. BUT WHERE THE ASSESSEE DOES NOT INCLUDE A P ARTICULAR ITEM IN THE TAXABLE TURNOVER UNDER A BONA FIDE BELIEF THAT HE IS NOT LI ABLE SO TO INCLUDE IT IT WOULD NOT BE RIGHT TO CONDEMN THE RETURN AS A 'FALSE' RETURN INVITING IMPOSITION OF PENALTY. THIS VIEW WHICH IS BEING TAKEN BY US IS SUPPORTED B Y THE DECISION OF THIS COURT IN HINDUSTAN STEEL LTD. V. STATE OF ORISSA [1970] 25 S TC 211 WHERE IT HAS BEEN HELD THAT: '...EVEN IF A MINIMUM PENALTY IS PRESCRIBED THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY WHEN THERE IS A ITA NOS. 451 TO 453/M/06 M/S CHEMPURE 10 TECHNICAL OR VENIAL BREACH OF PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE....' IT IS ELEMENTARY THAT SECTION 43 O F THE MADHYA PRADESH GENERAL SALES TAX ACT 1958 PROVIDING FOR IMPOSITION OF PE NALTY IS PENAL IN CHARACTER AND UNLESS THE FILING OF AN INACCURATE RETURN IS ACCOMP ANIED BY A GUILTY MIND THE SECTION CANNOT BE INVOKED FOR IMPOSING PENALTY. IF THE VIEW CANVASSED ON BEHALF OF THE REVENUE WERE ACCEPTED THE RESULT WOULD BE THAT EVEN IF THE ASSESSEE RAISES A BONA FIDE CONTENTION THAT A PARTICULAR ITEM IS NOT LIABLE TO BE INCLUDED IN THE TAXABLE TURNOVER HE WOULD HAVE TO SHOW IT AS FORMI NG PART OF THE TAXABLE TURNOVER IN HIS RETURN AND PAY TAX UPON IT ON PAIN OF BEING HELD LIABLE FOR PENALTY IN CASE HIS CONTENTION IS ULTIMATELY FOUND BY THE COURT TO BE NOT ACCEPTABLE. THAT SURELY COULD NEVER HAVE BEEN INTENDED BY THE LEGISLATURE. 6. WE ARE THEREFORE OF THE VIEW THAT THE ASSESSEE C OULD NOT BE SAID TO HAVE FILED 'FALSE' RETURNS WHEN IT DID NOT INCLUDE THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER SHOWN IN THE RETURNS AND THE ASSISTANT COM MISSIONER WAS NOT JUSTIFIED IN IMPOSING PENALTY ON THE ASSESSEE UNDER SECTION 43 O F THE MADHYA PRADESH GENERAL SALES TAX ACT 1958 AND SECTION 9(2) OF TH E CENTRAL SALES TAX ACT 1956. 7. WE ACCORDINGLY REJECT THE APPEALS INSOFAR AS THE Y ARE DIRECTED AGAINST THE INCLUSION OF THE AMOUNT OF FREIGHT IN THE TAXABLE T URNOVER OF THE ASSESSEE BUT ALLOW THE APPEALS INSOFAR AS THEY RELATE TO IMPOSITION OF PENALTY AND SET ASIDE THE ORDERS PASSED BY THE ASSISTANT COMMISSIONER IMPOSING PENAL TY ON THE ASSESSEE. 14. IF WE APPLY THE ABOVE DISCUSSIONS TO THE FACTS OF THE CASE UNDER CONSIDERATION WE FIND THAT THE ASSESSEE HAD TRIED T O SUBSTANTIATE ITS CLAIM BY FILING AFFIDAVIT AND OTHER MATERIAL IN QUA NTUM MATTER. IN QUANTUM MATTER THE CIT(A) VIDE ORDER SHEET DATED 9 TH JANUARY 2003 ASKED THE ASSESSEE TO PRODUCE MR. RIZVI FOR EXAMINA TION BUT THE ASSESSEE FAILED TO DO SO. THE AO HAS ALSO MENTIONED IN THE REMAND REPORT WHICH WAS REPRODUCED BY THE CIT (A) IN QUAN TUM ORDER IN PARA NO. 7 THAT SUMMONS U/S 131 DATED 11.10.01 ISSUED TO MR. RIZWI BUT THE SAME WAS NOT COMPLIED BY MR. RIZWI. IT WAS SUBM ITTED BY THE AO THAT THE ASSESSEE HAS NOT AVAILED OPPORTUNITY AS HE DID NOT IMPRESS UPON SHRI RIZWI TO ATTEND BEFORE THE AO. THE GRIEV ANCE OF THE REVENUE IS THAT THE ASSESSEE HAS FAILED TO PRODUCE PARTY. I T MAY BE NOTED THAT WHEN THE ASSESSEE FILED COMPLETE DETAILS OF THE PAR TY THE REVENUE AUTHORITIES HAVE AMPLE POWER INCLUDING ISSUE OF SUM MON UNDER SECTION 131 OF THE ACT WHEREAS THE ASSESSEE HAS NO SUCH POWER UNDER ITA NOS. 451 TO 453/M/06 M/S CHEMPURE 11 THE ACT TO BRING THE PARTY PERSONALLY TO PRODUCE B EFORE THE AO. IT APPEARS FROM THE RECORD THAT REVENUE AUTHORITIES DI D NOT EXERCISE SUCH POWER U/S 131. IF WE CONSIDER THE FACTS OF THE CASE UNDER CONSIDERATION FROM THE POINT OF VIEW OF A BUSINESSM AN FOR THAT PURPOSES WE WOULD LIKE TO REFER A GENERAL HUMAN PRO BABILITY/ TENDENCY IN BUSINESS CIRCLE. THAT WHEN TRANSACTIONS WITH A PARTICULAR PARTY ARE OVER THAT PARTY MAY NOT READY TO COOPERAT E IN GIVING INFORMATION WHICH WERE EXACTLY ASKED BY THE AO TO T HE ASSESSEE WHICH WERE TO COLLECT FROM THE PARTY BY THE ASSESSEE. AS STATED ABOVE THAT UNDER THESE CIRCUMSTANCES THE REVENUE AUTHORITIES H AVE AMPLE SUCH POWERS UNDER THE ACT AND IF THEY ARE NOT EXERCISI NG SUCH POWERS THE ASSESSEE CANNOT BE BLAMED FOR CONCEALING PARTICULAR S AND OR FURNISHING INACCURATE PARTICULARS OF INCOME. FURTHE R THE BUSINESS IS MANAGED THROUGH EMPLOYEES /STAFF IN THAT CIRCUMSTAN CES THE ASSESSEE MAY MORE INTERESTED IN COST THEN PARTIES TO WHOM IT WAS PURCHASED. IN RESPECT OF QUANTUM MATTER IF THE ASSESSEE FAILED TO SUBMIT SUCH MATERIAL INFORMATION TO SUBSTANTIATE THEIR CLAIM AD DITION COULD BE SUSTAINED BUT THIS ASPECT OF HUMAN PROBABILITY TEND ENCY OF NON- COOPERATION BY THE PARTIES AFTER BUSINESS TRANSACTI ON IS OVER IS REQUIRED TO BE CONSIDERED WHILE DECIDING BONAFIDE A SPECT OF THE ASSESSEE IN PENALTY MATTER U/S 271(1) (C) OF THE AC T. THE CASE OF THE ASSESSEE FALLS UNDER THE ESSENCE OF PART B OF THE E XPLANATION. THE ASSESSEE OFFERED REASONABLE EXPLANATION. THE AO HAS NOT GIVEN FINDING BASED ON SOME CONTRADICTORY EVIDENCE TO DISAPPROVE THAT EXPLANATION OFFERED BY THE ASSESSEE WHICH THE ASSESSEE IS NOT A BLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FI DE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. PENALTY U/S 271( 1) (C) CANNOT BE LEVIED UNLESS THE CASE IS STRICTLY COVERED BY THE P ROVISIONS OF SECTION 271(1) (C). THERE IS NO FINDING THAT THAT THE ASSE SSEE HAS CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME DISCUSSED ABOVE. UNDER THE CIRCUMSTANCES IT CANNOT BE HELD THAT THE ITA NOS. 451 TO 453/M/06 M/S CHEMPURE 12 AO HAS FOUND THAT THE ASSESSEE HAS CONCEALED PARTIC ULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. 15. IN THE LIGHT OF ABOVE DISCUSSIONS IF WE CONSIDE R THE FACTS OF THE CASE IN TOTALITY AND AFTER CONSIDERING THE QUANTUM ORDERS OF REVENUE AUTHORITIES WE FIND THAT THIS IS NOT A FIT CASE FO R LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. WE HEREBY CANCEL THE PENALTIE S MADE BY THE AO U/S 271(1) (C) IN ALL THE THREE YEARS UNDER CONSIDE RATION. 16. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE ALLOWED. PRONOUNCED ON THIS 7 TH DAY OF MAY 2010 SD/- SD/- (D. MANMOHAN) (A.L. GEHLOT) VICE PRESIDENT ACCOUNTAN T MEMBER DATED: 7 TH MAY 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE B BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI. KV ITA NOS. 451 TO 453/M/06 M/S CHEMPURE 13 S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 22.4.10 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 23.4.10 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER