M/s. General Mechanical Works, Baroda V. The ACIT.,Circle-2(1), Baroda

ITA 1025/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0053 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-10-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 12-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANITA HARDASANI
• Keywords: Bogus purchase; Assessment record
• Section: 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIPKUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA.NO.1025/AHD/2013 / ASSTT. YEAR: 2002-2003 M/S.GENERAL MECHANICAL WORKS 885, GIDC MAKARPURA VADODARA 390 010. PAN : AACFG 0841M VS ACIT, CIR.2(1) VADODARA. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : MS.ANITA HARDASANI, SR.DR / DATE OF HEARING : 18/10/2016 / DATE OF PRONOUNCEMENT: 11 /11/2016 $%/ O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST T HE ORDER OF THE LD.CIT(A)-II, BARODA DATED 31.1.2013 PASSED FOR THE ASSTT.YEAR 2002-03. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.5,11,500/- IMPOSED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. ITA NO.1025/AHD/2013 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 17.10.2002 DECLARING AN INCOME OF RS.1,05,18,050 /-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTI NY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAD MADE PURCH ASES OF RS.14,32,750/- FROM TWO CONCERNS VIZ. M/S.GIRNAR SALES CORPORATION AND SHIV METAL CORPORATION RESPECTIVELY. THE AO HAS OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF M/S.PRAKASH MARBLES ENGIN EERING CO., IT CAME TO THE NOTICE OF THE DEPARTMENT THAT PROPRIETOR OF M/S .GIRNAR CORPORATION, SHRI JABBARSINGH CHAUHAN AND SHRI NAVIN RAVAL, PROPRIETO R OF SHIV METAL CORPORATION WERE INDULGED IN PROVIDING ACCOMMODATIO N BILLS. THEY HAVE FILED THEIR AFFIDAVITS DURING THE ASSESSMENT PROCEE DINGS OF M/S.PRAKASH MARBLES ENGINEERING CO. DEPOSING THEREIN THEY WERE ISSUING ACCOMMODATION BILLS. ON STRENGTH OF THAT INFORMATION, THE AO HAS MADE ADDITION OF RS.14,32,750/-. THE TRIBUNAL HAS RESTRICTED ADDITIO N TO 30% OF THE PURCHASES ON GROUND THAT NET PROFIT INVOLVED IN SUCH BOGUS PU RCHASES COULD NOT BE MORE THAN 30%. THE AO INITIATED PENALTY PROCEEDINGS AN D ULTIMATELY PENALTY OF RS.5,11,500/- HAS BEEN COMPUTED ON THE ADDITION OF RS.14,32,750/-. AFTER GIVING EFFECT TO THE TRIBUNAL ORDER, THIS WOULD BE REDUCED. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 4. IN RESPONSE TO THE NOTICE OF HARING, THE LD.COUN SEL FOR THE ASSESSEE SOUGHT ADJOURNMENT. AFTER CONSIDERING THE SAME, WE DO NOT DEEM IT APPROPRIATE TO GRANT ADJOURNMENT WITHOUT ANY REASON ABLE CAUSE, THEREFORE, WE PROCEED TO DECIDE THE APPEAL EX PARTE QUA THE ASSESSEE. 5. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT THE ASSESSEE HAS MAD E AN ELABORATE SUBMISSIONS ITA NO.1025/AHD/2013 3 BEFORE THE LD.CIT(A). IT IS PERTINENT TO TAKE NOTE OF SUBMISSIONS MADE BY THE ASSESSEE: THE APPELLANT HAS FILED APPEAL AGAINST THE ORDER O F THE AO LEVYING PENALTY OF RS.5,11,500. THE AO HAS LEVIED PENALTY O N THE DISALLOWANCE MADE IN THE PROCEEDINGS U/S. 147 OF THE ACT. THE FA CTS OF THE CASE ARE AS UNDER: A. DURING THE COURSE OF PROCEEDINGS IN THE CASE OF M/S. PRAKASH MARBLES AND ENGINEERING COMPANY IT WAS NOTED THAT P URCHASES MADE FROM M/S. GIRNAR SALES CORPORATION AND M/S. SHIV ME TAL CORPORATION WERE BOGUS, B. THE AO IN THE ASSESSMENT ORDER HAS MENTIONED THAT BOTH THE ABOVE PARTIES THROUGH THEIR RESPECTIVE PRO PRIETOR HAVE CONFIRMED THAT THEY HAVE NOT SUPPLIED ANY MATERIAL AND HAVE ISSUED ONLY ACCOMMODATIVE BILLS. C. THE AO WHILE SCRUTINIZING THE RECORDS NOTED TH AT THE APPELLANT HAD MADE SOME PURCHASES FROM THE ABOVE 2 PARTIES. D. THE AO HAD THEREFORE CALLED FOR THE DETAILS OF THE PURCHASES MADE. THE APPELLANT SUBMITTED THE BILLS AND ALSO STATED T HE USE OF THE MATERIAL. E. IT WAS SUBMITTED THAT THE MATERIAL PURCHASED F ROM THE ABOVE TWO PARTIES WAS USED FOR EXECUTING A CONTRACT OF GMDCLT D. F. THE APPELLANT SUBMITTED THE QUANTITATIVE TALL Y AND ALSO THE DETAILS OF PAYMENTS FROM GMDC LTD. G. IT WAS STATED THAT THE MATERIAL PURCHASED FROM THE ABOVE TWO PARTIES WAS USED IN EXECUTING A CONTRACT FROM GMDC LTD. FOR AKRIMOTA THERMAL POWER STATION AT VILLAGE CHHER, TAL, LAKHPA T, DIST. KUTCHH. H. FURTHER, IT WAS STATED THAT THE APPELLANT HAD MADE PAYMENTS BY CHEQUE AND THE MONEY HAS NOT COME BACK TO THE APPEL LANT. I. HOWEVER, THE AO RELYING THE PAPERS FILED BY M /S. GIRNAR SALES CORPORATION AND M/S. SHIV METAL CORPORATION MADE TH E ADDITION. J. THE ORDER OF THE AO WAS CONFIRMED BY CIT(A). ITA NO.1025/AHD/2013 4 K. AS OF NOW THE APPELLANT HAS PREFERRED AN APPEA L BEFORE THE IT AT, AND WHICH IS PENDING DISPOSAL. WE MOST RESPECTFULLY SUBMIT THAT DESPITE THE ADDITI ON HAS BEEN CONFIRMED BY THE CIT(A) NO PENALTY CAN BE LEVIED. T HE AO HAS USED MATERIAL IN SOME OTHER CASE FOR MAKING ADDITION IN THE CASE OF THE APPELLANT. ON THE PERUSAL OF THE ASSESSMENT ORDER A TTACHED IN THE PAPER BOOK YOUR KIND OFFICE WOULD NOTICE THAT THE AO HAS USED THE ASSESSMENT RECORDS OF M/S. PRAKASH MARBLES AND ENGINEERING COM PANY FOR MAKING ADDITION IN THE CASE OF THE APPELLANT. THERE IS NO DIRECT EVIDENCE FOUND IN THE CASE OF THE APPELLANT. REGARDING THE ISSUE OF BOGUS PURCHASES, IT MAY BE S TATED THAT THE APPELLANT HAS FILED THE BILLS OF PURCHASES FROM M/S . GIRNAR SALES CORPORATION AND FROM M/S. SHIV METAL CORPORATION. T HE APPELLANT DURING THE COURSE OF HEARING ALSO FILED THE QUANTIT ATIVE TALLY SHOWING THE MATERIALS USED. IT WAS STATED THAT THE MATERIAL WAS SUPPLIED AT THE SITE OF 6MDC LTD. FOR FABRICATION CONTRACT GIVEN BY GMDC LTD. IT WAS STATED THAT THE MATERIAL PURCHASED FROM OTHERS AND FROM THE ABOVE TWO PARTIES WAS USED FOR FABRICATION CONTRACT GIVEN BY M/S. GMDC LTD. A. COPIES OF BILLS OF M/S. GIRNAR SALES CORPORATI ON AND M/S. SHIV METAL CORPORATION ARE ATTACHED IN THE PAPER BOOK AT PAGE NOS. 2 TO 7. B. EVIDENCE OF MAKING PAYMENT BY CHEQUE IS ATTACHE D IN THE PAPER BOOK AT PAGE NO. 8. C. QUANTITATIVE TALLY SHOWING THE MATERIAL USED F OR FABRICATION IS ATTACHED IN THE PAPER BOOK AT PAGE NO. 53 TO 54. D. EVIDENCE OF PAYMENTS RECEIVED FROM GMDC LTD. I S ATTACHED IN THE PAPER BOOK AT PAGE NO. 56. E. GMDC LTD. HAS MADE THE PAYMENTS ONLY AFTER VER IFICATION OF THE WORK DONE BY THE APPELLANT. F. IT WAS STATED THAT AS PER THE WORK ORDER OF GM DC THE APPELLANT WAS REQUIRED TO SUPPLY 2400 SQ MTR OF 3.6 MM FOR LIGNIT E AND LIME STORAGE (REFER PAGE 104). ITA NO.1025/AHD/2013 5 G. OUT OF THE ABOVE, TOTAL QUANTITY SUPPLIED WAS 535.350 SQ MTRS WHICH IS EQUAL TO 15.418 MT WHILE THE APPELLANT HAS PURCH ASED TOTAL QUANTITY OF 17.305 MT FROM M/S. GIRNAR SALES CORPORATION AND SAIL. OUT OF THAT 1.887 MT WAS SCRAP AND WASTAGE AND THE TOTAL Q UANTITY OF 535.350 SQ MTR TALLIED WITH THE MATERIAL USED AND SUPPLIED TO GMDC. . H. REGARDING THE PURCHASE OF ELECTRODES FROM M/S. SHIV METAL CORPORATION IT WAS STATED THAT ELECTRODES WERE PURC HASED FROM M/S. SHIV METAL CORPORATION. ELECTRODES ARE MAJOR ITEM OF THE STORES AND IT IS REQUIRED FOR THE PURPOSE OF FABRICATION AND EREC TION OF EVERY JOINT. /. NORMAL CONSUMPTION OF ELECTRODES REMAINS @ 7 % EVERY YEAR. THIS YEAR THE CONSUMPTION OF ELECTRODES COMES TO 7.08% ( PAGE 43) WHICH IS THE SAME. J. IN VIEW OF THE SAME THE PURCHASES FROM M/S. S HIV METAL CORPORATION IS ALSO EXPLAINED. 4. ON THE PERUSAL OF THE ABOVE YOUR KIND OFF ICE WOULD NOTICE THAT THE MATERIAL WAS ACTUALLY PROCURED AND USED BY THE APPELLANT FOR EXECUTING THE CONTRACT OF GMDC LTD. THE PAYMENT HAS BEEN MADE BY CHEQUE AND ALSO THE APPELLANT HAS RECEIVED FURTHER PAYMENT. WE THEREFORE SUBMIT THAT DESPITE THE ADDITION MADE THE PENALTY LEVIED MAY PLEASE BE DELETED. ORDER OF ITAT, AHD 5. IT MAY BE MENTIONED THAT IN SIMILAR TYPE OF CASES THE AO HAD MADE IDENTICAL ADDITION. ONE SUCH CASE IS OF M/S. F IRST INDUSTRIES. THE ITAT, AHD IN THE CASE OF M/S. FIRST INDUSTRIES HAS HELD THAT UNDER SUCH SITUATIONS DISALLOWANCE OF ENTIRE PURCHASES IS NOT CALLED FOR. THE ITAT, AHD VIDE PARA 8 (REFER PAGE 83 TO 85) HAS RESTRICTE D THE ADDITION TO 10 % OF SUCH PURCHASES. IN VIEW OF THE SAME WE SUBMIT THAT PENALTY CANNOT BE LEVIED ON THE ADDITION MADE BY THE AO AND CONFIR MED BY THE CIT(A). WE MAY ALSO LIKE TO PUT ON RECORD THAT THE FACTS IN THE CASE OF M/S. FIRST INDUSTRIES AND IN THE CASE OF THE APPELLANT ARE SIM ILAR. THEREFORE THERE ARE ALL CHANCES THAT SIMILAR VIEW MAY BE TAKEN BY T HE AHMEDABAD TRIBUNAL IN THE CASE OF THE APPELLANT ALSO. 6. IN VIEW OF DIRECT DECISION OF ITAT, AHD O N SIMILAR FACTS, WE SUBMIT THAT PENALTY LEVIED BY THE AO MAY PLEASE BE DELETED. ITA NO.1025/AHD/2013 6 NO MATERIAL SUPPLIED TO THE APPELLANT: 7. THERE IS YET ANOTHER REASON WHY PENALTY C ANNOT BE LEVIED IN THE CASE OF THE APPELLANT. WE HAVE ALREADY MENTIONED THAT THE AO HAS USED MATERIAL COLLECTED IN SOME OTHER CASE FOR MAKI NG THE ADDITION IN THE CASE OF THE APPELLANT. THE AO HAS MADE REFEREN CE TO THE MATERIAL USED IN THE CASE OF M/S. PRAKASH MARBLES AND ENGINE ERING CO. HOWEVER, NO SUCH MATERIAL HAS BEEN GIVEN TO THE APP ELLANT BEFORE MAKING THE ADDITION. NO EVIDENCE HAS BEEN PROVID ED TO THE APPELLANT BEFORE MAKING THE ADDITION. IN FACT THE AO HAS USE D MATERIAL COLLECTED AT THE BACK OF THE APPELLANT FOR MAKING ADDITION. 8. THE AO IN THE ASSESSMENT ORDER HAS MADE R EFERENCE TO THE LETTER DATED 3-2-2005 AND AFFIDAVIT DATED 9-2-2005 (REFER PAGE 67 PARA 7) OF PROPRIETOR OF M/S. GIRNAR SALES CORPORATION AND M/S . SHIV METAL CORPORATION. IT WAS BEEN CONTENDED BY THE AO IN THE LETTER DATED 3-2- 2005 AND AFFIDAVIT DATED 9-2-2005 THE ABOVE TWO PAR TIES HAVE ADMITTED OF PROVIDING ACCOMMODATIVE BILLS. IT HAS ALSO BEEN STATED BY THE AO THAT THE LETTER DATED 3-2-2005 AND AFFIDAVIT DATED 9-2-2005 HAVE BEEN KEPT ON RECORD. HOWEVER, NO SUCH LETTER OR AFFIDA VIT HAS BEEN PROVIDED TO THE APPELLANT. THE LETTER AND THE AFFIDAVIT HAVE BEEN KEPT ON RECORD BUT WITHOUT PARTING WITH THE APPELLANT. DESPITE THE SAID EVIDENCES HAVE BEEN USED AGAINST THE APPELLANT NO SUCH MATERIAL HA S BEEN SUPPLIED TO THE APPELLANT. 9. FURTHER, IT IS NOT KNOWN WHETHER THE NAME OF THE APPELLANT APPEARS IN THE LETTER OR THE AFFIDAVIT FILED BY THE ABOVE TWO PARTIES. THE PENALTY LEVIED IS REQUIRED TO BE DELETED SINCE THE ONLY BASIS OF MAKING THE ADDITION (REFER PAGE 70) IS THE AFFIDAVIT FILED BY THE ABOVE PARTIES WHICH HAS NOT BEEN SUPPLIED TO THE APPELLANT. SINCE THE ADDITION IS MADE WITHOUT THE APPELLANT GETTING PROPER OPPORTUNI TY OF BEING HEARD PENALTY HAS NO LEGS TO STAND. AFFIDAVIT FILED BY PARTNER OF APPELLANT: 10. WE MAY ALSO LIKE TO MENTION THAT THE PARTN ER OF THE APPELLANT FIRM VIDE AFFIDAVIT DATED 15-10-2007 (REFER PAGE 51 -52) HAD CONFIRMED THAT THE PURCHASES MADE FROM M/S. GIRNAR SALES CORP ORATION AND M/S. SHIV METAL CORPORATION HAVE BEEN USED FOR EXECUTING CONTRACT OF GMDC LTD. THIS AFFIDAVIT WAS FILED WITH THE AO HOWE VER, THE AO HAS ITA NO.1025/AHD/2013 7 CHOOSEN TO IGNORE THE SAID AFFIDAVIT. IT MAY BE MEN TIONED THAT AN AFFIDAVIT IS A VALID PIECE OF EVIDENCE AND IS REQUI RED TO BE CONSIDERED WHILE FRAMING THE ASSESSMENT. HOWEVER, THE AO HAS C HOOSEN TO USE THAT PART OF EVIDENCE WHICH IS IN FAVOUR OF THE DEPARTME NT AND IGNORING THE REMAINING PART. 11. WHILE CONCLUDING WE MAY LIKE TO MENTION TH AT THE PENALTY LEVIED BY THE AO IS REQUIRED TO BE DELETED ON THE GROUND: A. THAT NO MATERIAL WAS SUPPLIED TO THE APPELLANT BEFORE MAKING THE ADDITION. B. THAT ON IDENTICAL FACTS THE IT AT, AHD HAS DEL ETED THE ADDITION AND HAS HELD THAT ONLY 10 % OF TOTAL PURCHASES CAN AT T HE MOST BE CONSIDERED TO BE DISALLOWABLE. C. THE APPELLANT HAS PRODUCED ALL THE EVIDENCES T O PROVE THAT THE PURCHASES MADE BY IT ARE GENUINE AND ALSO CONFIRMED THE SAME BY FILING A COUNTER AFFIDAVIT. D. THE ONUS CAST ON THE APPELLANT TO PROVE THAT T HE PURCHASES ARE GENUINE HAS BEEN DISCHARGED BY THE APPELLANT. 12. CONSIDERING THE ABOVE WE REQUEST YOUR KIND OFFICE TO DELETE THE LEVY OF PENALTY. 13. SHOULD YOU REQUIRE ANY FURTHER INFORMATION OR EXPLANATION WE SHALL BE PLEASED TO SUBMIT THE SAME ON HEARING FROM YOUR KIND OFFICE TO DO SO. 6. SECTION 271(1)(C) OF THE ACT HAS A DIRECT BEARIN G ON THE CONTROVERSY WHICH READS AS UNDER: '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE C OMMISSIONER (APPEALS) OR THE CIT IN THE COURSE OF ANY PROCEEDIN GS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B) ** ** ** ITA NO.1025/AHD/2013 8 (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LE SS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL 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 COMM ISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE 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 COMPUTATIO N OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR SUCH PE RSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF TH IS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICU LARS HAVE BEEN CONCEALED.' 7. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS BEFORE THEM SH OULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTION CAN RANGE IN BETWEEN 100 % TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OT HER MOST IMPORTANT FEATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CON CEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE ITA NO.1025/AHD/2013 9 INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUTORY DEEM ING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION-1 TO SECTION 271(1)(C) POSTULATES TWO SITUATIONS; (A) FI RST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCO ME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEAL); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE AS SESSEE FAILS, TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF THE TOTAL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD CO ME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSE E IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FA CTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAV E BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMIN G FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE I NCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. ITA NO.1025/AHD/2013 10 8. IN THE LIGHT OF THE ABOVE, IF WE EXAMINE FACTS O F THE PRESENT CASE, THEN IT WOULD REVEAL THAT EVIDENCE POSSESSED BY THE AO IS A N INFORMATION TRANSMITTED BY THE DEPARTMENT FROM THE ASSESSMENT PROCEEDINGS O F M/S.PRAKASH MARBLES AND ENGINEERING COMPANY. THERE IS NO INDEPENDENT A FFIDAVIT COLLECTED FROM THE PROPRIETOR OF GIRNAR SALES CORPORATION AND M/S. SHIV METAL CORPORATION. THE ASSESSEE WAS NOT PROVIDED MATERIAL COLLECTED IN THE ASSESSMENT PROCEEDINGS OF DIFFERENT ENTITIES. THE ASSESSEE HA S GIVEN COMPLETE DETAILS AS TO HOW IT HAD MADE PAYMENT THROUGH ACCOUNT PAYEE CH EQUE AND HOW IT HAS PROCURED MATERIAL. IF BOTH THESE SET OF EVIDENCES ARE WEIGHED TOGETHER, THEN, SCALE WOULD TILT IN FAVOUR OF THE ASSESSEE, BECAUSE THERE IS NO CROSS- VERIFICATION AT THE END OF THE AO BY CONFRONTING TH E MATERIAL TO THE ASSESSEE WHICH WAS COLLECTED FROM THE PROCEEDINGS OF A THIRD CONCERN. THE AO FAILED TO PROVE THAT BILLS AND OTHER EVIDENCES SUBMITTED B Y THE ASSESSEE ARE FACTUALLY FALSE. THE ADDITION HAS BEEN MADE ON AN ESTIMATE B ASIS. UNDER SIMILAR CIRCUMSTANCES, PENALTY HAS BEEN DELETED BY THE TRIB UNAL IN THE CASE OF KIRTI D. VADALIA VS. ITO. IN THESE CASES ALSO THE PURCHASES WERE MADE FROM M/S.GIRNAR SALES CORPORATION AND M/S.SHIV METAL COR PORATION. PENALTY IMPOSED BY THE AO HAS BEEN DELETED BY THE TRIBUNAL IN THE ABOVE TWO CASES ALSO. RESPECTFULLY FOLLOWING THE ORDERS OF THE CO- ORDINATE BENCH OF THE TRIBUNAL, WE ALLOW THE GROUNDS OF APPEAL AND DELETE IMPUGNED PENALTY. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 11 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- SD/- (PRADIPKUMAR KEDIA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 11/11/2016