The DCIT, Circle-3(1), Baroda V. M/s/ Amar Mining Company, Baroda

ITA 1032/AHD/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2828 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 1998-1999
• Appeal Filed On: 26-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APOORVA BHARADWAJ
• Assessee Lawyers: S N SOPARKAR
• Keywords: Bogus purchase; Initiation of penalty proceedings; Difference of opinion; Onus to prove; Reassessment proceedings
• Section: 143(3); 2

Judgement Text

ITA NO.1032/AHD/2016 ASSESSMENT YEAR: 1998-99 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT AND MS. MADHUMITA ROY, JUDICIAL MEMBER ITA NO.1032/AHD/2016 ASSESSMENT YEAR: 1998-99 DY. COMMISSIONER OF INCOME TAX, VS. M/S. AMAR MININ G COMPANY, CIRCLE 3(1), BARODA. 3, SONALI SOCIETY, WATER TANK ROAD, KARELIBAUG, BARODA 390 018. [PAN AACFM 7177 L] (APPELLANT) (RESPONDENT) APPELLANT BY : APOORVA BHARADWAJ, SR. D.R. RESPONDENT BY : SHRI S.N. SOPARKAR & SHRI PARIN SHAH, AR DATE OF HEARING : 24.07.2018 DATE OF PRONOUNCEMENT : 22.10.2018 O R D E R PER MADHUMITA ROY, JUDICIAL MEMBER: THE INSTANT APPEAL HAS BEEN FILED BY THE REVENUE BE FORE US AGAINST THE ORDER DATED 16.12.2015 PASSED BY THE LEARNED CIT(A)-4, VA DODARA ARISING OUT OF THE ORDER DATED 08.03.2014 PASSED BY THE DCIT, CIRCLE 5, BA RODA UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. BASICALLY THE REVENUE HAS COME UP IN APPEAL CHAL LENGING THE ORDER OF DELETION OF PENALTY OF RS.23,99,366/-IMPOSED UNDER SECTION 2 71(1)(C) OF THE ACT AGAINST BOGUS PURCHASE. FURTHER THAT THE REVENUE HAS ALLEGED THA T THE LD. CIT(A) WHILE PASSING THE ORDER OF DELETION HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAS WILFULLY INFLATED ITS PURCHASES TO EVADE TAXES, WHICH WAS PROVED AS B OGUS TWICE, I.E. ONCE IN THE ORIGINAL ASSESSMENT AND IN THE SUBSEQUENT ASSESSMEN T PROCEEDINGS IN TERMS OF THE DIRECTION PASSED BY THE HONBLE ITAT UNDER SECTION 254 OF THE ACT AS WELL. THE REVENUE HAS ALLEGED THAT THE ABOVE FACT ATTRACTS PR OVISIONS OF SECTION 271(1)(C) OF THE ACT AS THE MENS REA OF THE ASSESSEE HAS BEEN ESTABLISHED ON RECORD. T HE BRIEF FACTS LEADING TO THE CASE IS THAT THE APPELLANT FIRM HAS FILED ITS RETURN OF INCOME FOR THE A.Y. ITA NO.1032/AHD/2016 ASSESSMENT YEAR: 1998-99 PAGE 2 OF 11 1998-99 ON 30.10.1998 DECLARING TOTAL INCOME AT RS. 81,74,060/-. ON 08.03.2001 ADDITION OF RS.68,55,330/- WAS MADE ON ACCOUNT OF BOGUS PURCHASE WHILE COMPLETING THE ORIGINAL ASSESSMENT PROCEEDINGS UNDER SECTION 1 43(3) BY THE ASSESSING OFFICER. APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) WHO IN TURN DELETED SUCH ADDITION BY AND UNDER AN ORDER DATED 17.03.2001. I N APPEAL PREFERRED BY THE REVENUE, THE HONBLE ITAT WAS PLEASED TO SET ASIDE THE MATTE R TO THE FILE OF THE ASSESSING OFFICER WITH THE FOLLOWING DIRECTIONS :- I) MAKE NECESSARY FURTHER INQUIRIES FROM THE (A) C ONCERNED BANK AUTHORITIES OR OTHERWISE IN RESPECT OF PERSON MAKING WITHDRAWAL S IN CASH AND (B) SALES TAX AUTHORITIES, IN RESPECT OF GENUINENESS OF TRANSACTIONS IN PURCHASE; AND II) ALLOW ANOTHER OPPORTUNITY TO THE TAXPAYER TO (A ) FURNISH THE ACTUAL WORKING OF GP ON ACCOUNT OF TRADING AND MANUFACTURI NG OF RUBBLE, AND KAPCHI GRIT ETC. AND ITS IMPACT ON THE PROFITABILIT Y OF THE YEAR UNDER CONSIDERATION VIS--VIS PRECEDING YEARS, IN THE LIG HT OF BOOKS OF ACCOUNTS AND OTHER RECORDS CLAIMED TO HAVE BEEN MAINTAINED B Y THE TAX PAYER (B) TO PRODUCE PROPRIETORS OF THE FIVE FIRMS IN SUPPORT OF GENUINENESS OF THE PURCHASES. 3. PURSUANT TO THE SAID ORDER PASSED BY THE HONBLE ITAT, THE ASSESSING OFFICER AGAIN PASSED AN ORDER OF ADDITION TO THE TUNE OF RS .68,55,330/- OF BOGUS PURCHASES UNDER SECTION 143(3) READ WITH SECTION 254 OF THE A CT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS OBLIGATION DURING THE REASSESSMENT PROCEEDINGS SINCE THE ASSESSEE FIRM HA S NOT BEEN ABLE TO PRODUCE THE PARTIES FROM WHOM PURCHASES WERE MADE DURING THE F. Y. 1997-98 RELATES TO A.Y. 1998-99. THE APPEAL PREFERRED BY THE ASSESSEE AGAI NST THE SAID ORDER WAS DISMISSED BY THE LD. CIT(A) ON 03.12.2012. ON THE OTHER HAND , THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND APPE AL WAS PREFERRED THEREOF BY THE ASSESSEE BEFORE THE LD. CIT(A) WHO IN TURN DELETED THE SAID IMPOSITION OF PENALTY VIDE ORDER DATED 08.03.2014 AND HENCE THE INSTANT APPEAL BY THE REVENUE BEFORE US. 4. AT THE TIME OF HEARING OF THE INSTANT APPEAL, TH E DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUED IN SUPPORT OF THE CASE. HE SUBMI TTED BEFORE US THAT IN THE QUANTUM PROCEEDINGS THE BOGUS PURCHASE WAS FOUND TO BE PROVED AND CLAIM OF THE ASSESSEE WAS REJECTED BY THE LD. ASSESSING OFFICER WHICH WAS ULTIMATELY CONFIRMED BY THE LD. CIT(A). HE FURTHER CONTENDED THAT THE ASSE SSEE FAILED TO PROVE GENUINENESS OF HIS CLAIM. LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER PASSED BY THE LD. ITA NO.1032/AHD/2016 ASSESSMENT YEAR: 1998-99 PAGE 3 OF 11 ASSESSING OFFICER IMPOSING PENALTY AGAINST THE ASSE SSEE ON THE GROUND OF CONCEALMENT OF INCOME BY IT. 5. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE, ON THE OTHER HAND, SUBMITTED BEFORE US THAT AT THE FIRST ROUND OF LITI GATION, ADDITION WAS MADE BY THE ASSESSING OFFICER ON THE ALLEGED BOGUS PURCHASE AGA INST THE ASSESSEE. THE SAID ADDITION WAS DELETED BY THE LD. CIT(A). IN FACT, T HE LD. ITAT, ON THE PREMISE OF DIFFERENCE OF OPINION, SENT DOWN THE MATTER TO THE ASSESSING OFFICER FOR READJUDICATION OF THE ISSUE. HE FURTHER SUBMITTED BEFORE US THAT THERE WAS NO CONCLUSIVE EVIDENCE WHICH SHOWS THAT THERE IS A CONCEALMENT OF INCOME B Y THE ASSESSEE OR THAT THERE IS A FINDING THAT THE ASSESSEES EXPLANATION IS FALSE OR A MENS REA ON THE PART OF THE ASSESSEE. HE THUS RELIED UPON THE ORDER PASSED BY THE FIRST APPELLATE AUTHORITY. 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES APPEAR ING FOR THE PARTIES AND PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. WHILE MAKING THE ADDITION IN THE QUANTUM PROCEEDINGS THE LD. ASSESSING OFFICER OBSER VED THAT THE ASSESSEE HAS SHOWN PURCHASES FROM PARTIES WHICH DO NOT EXIST AND IN OR DER TO INFLATE THE EXPENSES THE PROCEDURE HAS BEEN ADOPTED BY THE ASSESSEE. HE FUR THER OBSERVED INTER ALIA THAT THE ASSESSEE COULD NEITHER DISCHARGE ITS OBLIGATION AT THE TIME OF ASSESSMENT NOR EVEN DURING THE REASSESSMENT. WHILE IMPOSING THE PENALT Y UPON BEING SATISFIED, THE LD. ASSESSING OFFICER OBSERVED AS FOLLOWS :- FURTHER, THE LEARNED C.I.T. (A)-V, BARODA, IN HIS ABOVE REFERRED ORDER DT. 03.12.2012 HAS OBSERVED THAT THE FACT OF PURCHASE OF THIS SURPLUS MATERIAL HAS TO BE ESTABLISHED BY THE APPELLANT BY PRODUCING NECESSARY EVIDENCES. THE APPELLANT HAS FAILED MISERABLY IN PROVING THIS CLAIM. THERE IS NEITHER ANY EVIDENCE OF TRANSPORTATION OF MATERIAL NOR THE SELLERS ARE IN EXISTENCE. ALL PAYMENTS MADE BY THE APPELLANT HAVE BEEN WITHDR AWN IN CASH BY A SINGLE PERSON WHICH IS DIFFERENT FROM SO CALLED SEL LERS. THE APPELLANT HAS FAILED TO PRODUCE THE PARTIES FROM WHICH THE SO CAL LED PURCHASES HAVE BEEN MADE AND ENQUIRIES CONDUCTED BY THE A.O. -SUGG EST THAT EXISTENCE OF THESE PARTIES IS DOUBTFUL. THE APPELLANT HAS ALS O FAILED TO PROVE THE BONAFIDE OF DETAILS SUBMITTED BY IT IN RESPECT OF T HESE PARTIES. NO EVIDENCE REGARDING TRANSPORTATION ETC. HAVE BEEN PR ODUCED EITHER. THE APPELLANT HAS ALSO FAILED TO GIVE ANY REASONS FOR D ECLINE IN GROSS PROFIT WITH NECESSARY EVIDENCES. 6. WITHOUT PREJUDICE TO THE ABOVE, FURTHER PENALTY IS LEVIABLE IN VIEW OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE I.T. ACT ALSO. THE EXPLANATION 1 TO SECTION 271(1)(C) OF THE I.T. ACT IS REPRODUCED AS UNDER: ITA NO.1032/AHD/2016 ASSESSMENT YEAR: 1998-99 PAGE 4 OF 11 EXPLANATION 1 - WHETHER IN RESPECT OF ANY FACTS MAT ERIAL 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 COMMISSI ONER (APPEALS) TO BE FALSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. WITH THE ENACTMENT OF THE AFORESAID EXPLANATION, ME NS REA HAD NOT BEEN PROVED BY THE DEPARTMENT BUT THE ASSESSEE HAD TO PR OVE THAT THERE WAS NO CONCEALMENT, AS SETTLED IN THE CASE OF CIT VS. MUSS ADILAL RAMBHAROSE, 165 ITR, 14, 20 (SC); CIT VS. K.R. SADYAPPAN, 185 ITR 4 9 (SC), CIT (ADDL.) VS. JEEVAN LAL SHAH, 205 ITR 244 (SC), B.A. BALASURBRAM ANIAM AND BROTHERS CO. VS. CIT 236 ITR 977, 978 (SC) AND KP MADHUSUDHAN VS . CIT, 251 ITR 99 (SC). RELIANCE IS ALSO PLACED ON THE RECENT DECISION OF S UPREME COURT IN THE CASE OF M/S. DHARMENDRA TEXTILE PROCESSORS LTD., 306 ITR 27 7 (SC), WHEREIN IT HAS BEEN HELD THAT 'THE EXPLANATIONS APPENDED TO SECTIO N 271(1)(C) OF THE INCOME TAX ACT, 1961 INDICATE THE ELEMENT OF STRICT LIABIL ITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WH ILE FILING THE RETURN. THE OBJECTIONS BEHIND THE ENACTMENT OF SECTION 271(1)(C ) READ WITH EXPLANATIONS INDICATES THAT THE SECTION HAS BEEN ENACTED TO PROV IDE A REMEDY FOR LOSS OF REVENUE. THE PENALTY UNDER THE PROVISIONS IS A CIVI L LIABILITY. WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276 C. FURTHER RELIANCE IS PLACED IN THE DECISION OF HONOU RABLE HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ZOOM COMMUNI CATION (P) LTD. IN I.T. APPEAL NO.07 OF 2010 DT. MAY 24, 2010, WHEREIN THE PROVISION OF SECTION 271(1)(C) HAS BEEN DEALT WITH AS UNDER: SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961-PENAL TY FOR CONCEALMENT OF INCOME - WHETHER SO LONG AS ASSESSEE HAS NOT CON CEALED ANY MATERIAL FACT OR ANY FACTUAL INFORMATION GIVEN BY HIM HAS NOT BEE N FOUND TO BE INCORRECT, HE WILL NOT BE LIABLE TO IMPOSITION OF PENALTY UNDER S ECTION 271(1) (C), EVEN IF CLAIM MADE BY HIM IS UNSUSTAINABLE IN LOW, PROVIDED THAT HE EITHER SUBSTANTIATES EXPLANATION OR EXPLANATION, EVEN IF NOT SUBSTANTIAT ED IS FOUND TO BE BONAFIDE - HELD YES. WHETHER IF ASSESSEE MAKES A CLAIM WHICH I S NOT ONLY INCORRECT IN LAW, BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND EXPLANATIO N FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONAFIDE, EX PLANATION 1 TO SECTION 271(1)(C) WOULD COME INTO PLAY AND ASSESSEE WOULD B E LIABLE TO PENALTY - HELD YES. THE HONOURABLE HIGH COURT OF DELHI HAS FURTHER HELD THAT : 'IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH IS INCORRECT IN LAW, WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF INCOME OF THE ASSESSEE, B UT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONAFIDE . IF THE CLAIM BESIDES BEING INCORRECT, IN LAW IS MALAFIDE, THE EXPLANATIO N 1 TO SECTION 271(1) (C) WOULD COME INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSESSEE. ITA NO.1032/AHD/2016 ASSESSMENT YEAR: 1998-99 PAGE 5 OF 11 9. FROM THE SEQUENCE OF THE EVENTS NARRATED ABOVE I T IS CRYSTAL CLEAR THAT AT THE TIME OF REASSESSMENT PROCEEDINGS AND THE PENALT Y PROCEEDINGS, THE ASSESSEE COULD NOT PROVE THAT THERE WAS NO FURNISHI NG OF INACCURATE PARTICULARS OF INCOME. IN THIS CASE, THE ASSESSEE'S NOT ONLY FA ILED TO ESTABLISH GENUINENESS OF TRANSACTION RELATING TO PURCHASES, BUT ALSO FAIL ED TO SUBMIT EXPLANATION FOR NON INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C ) OF THE IT. ACT. IT HAS BEEN CLEARLY ESTABLISHED THAT THE ASSESSEE HAD RESORTED TO BOGUS PURCHASES TO INFLATE ITS EXPENSES WITH A VIEW TO SHOW LOW PROFIT AND TO EVADE TAX LIABILITY THEREON. HENCE IT IS CLEARLY ESTABLISHED THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS F OF INCOME, THEREBY LIABLE FOR PENALTY U/S. 271(1)( C). 10. CONSIDERING THE ABOVE FACTS AS DISCUSSED ABOVE, THE ISSUES IS SUMMARIZED AS UNDER: DISALLOWANCE OF BOGUS PURCHASES RS.68,55,330/- 11. I AM SATISFIED THAT THE ASSESSEE HAS TRIED TO EVADE TAX BY FURNISHING INACCURATE PARTICULARS OF INCOME LEADING TO CONCEAL MENT OF INCOME TO THE TUNE OF RS.68,55,330/-. THE ASSESSEE IS, THEREFORE, LIAB LE FOR PENALTY U/S. 271(1)(C) OF THE ACT. THE AMOUNT OF PENALTY TO BE LEVIED ON CONC EALMENT OF INCOME RS.68,55,330/-. 7. IN APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE SUB MITTED THE WRITTEN NOTES WITH THE DETAILS OF PARTIES WITH WHOM THE FIRM HAD EFFEC TED PURCHASES SUPPORTED BY CORRESPONDING EVIDENCES IN RESPECT OF PAYMENTS ALON G WITH BANK STATEMENTS, PURCHASE BILLS, STATEMENT OF ACCOUNTS SHOWING DEBIT AND RECEIPT OF MATERIALS ETC. IN THE FOLLOWING MANNER :- 1) M/S R.K. TRADERS: I) THE PROPRIETOR OF R.K. TRADERS IS MR. KIRIT R SHAH II) THE RUBBLE WAS SOLD TO THE APPELLANT FIRM III) THE ABOVE FIRM HAD RAISED BILLS FOR THE SALE OF MATERIAL BETWEEN APRIL, 97 TO MARCH 98 IV) THE PAYMENTS WERE MADE BY CROSSED ACCOUNT PAYE E CHEQUES V) THE ACCOUNT WAS FINALLY SETTLED ON 30.03.99 VI) COMPLETE EVIDENCES IN RESPECT OF PAYMENTS ALON G WITH COPY OF BANK STATEMENT EVIDENCING PAYMENTS MADE THROUGH PROPER BANKING CHANNELS WAS VERIFIED DURING ASSESSMENT PROCEEDINGS AND AVAI LABLE ON RECORD. VII) COMPLETE RECORD OF PURCHASE BILLS AND STATE MENT OF ACCOUNT SHOWING DATES OF RECEIPT OF MATERIAL IN THE FORM OF DELIVER Y CUM INVOICE ARE MADE AVAILABLE AND WERE VERIFIED DURING ASSESSMENT PROCE EDINGS BY THE AO. 2. M/S ASHIRWAD CORPORATION I) THE PROPRIETOR OF ASHIRWAD CORPORATION IS MR. K IRITKUMAR R SHAH II) THE RUBBLE WAS SOLD TO THE APPELLANT FIRM ITA NO.1032/AHD/2016 ASSESSMENT YEAR: 1998-99 PAGE 6 OF 11 III) THE ABOVE FIRM HAD RAISED BILLS FOR THE SALE O F MATERIAL BETWEEN APRIL, 97 TO MARCH 98 IV) THE PAYMENTS WERE MADE BY CROSSED ACC OUNT PAYEE CHEQUES V) THE ACCOUNT WAS FINALLY SETTLED ON 30.03.9 9 VI) COMPLETE EVIDENCES IN RESPECT OF PAYMENTS ALONG WITH COPY OF BANK STATEMENT EVIDENCING PAYMENTS MADE THROUGH PROPER BANKING CHANNELS WAS VERIFIED DURING ASSESSMENT PROCEEDINGS AND AVAILABLE ON RECORD. VII) COMPLETE RECORD OF PURCHASE BILLS AND STATEMEN T OF ACCOUNT SHOWING DATES OF RECEIPT OF MATERIAL IN THE FORM OF DELIVER Y CUM INVOICE ARE MADE AVAILABLE AND WERE VERIFIED DURING ASSESSMENT PROCE EDINGS BY THE AO. 3. M/S BHAGYALAXMI TRADING CO. I) THE PROPRIETOR OF BHAGYALAXMI TRADING CO. IS MR . PATEL MAGAN SHANKERBHAI II) THE RUBBLE WAS SOLD TO THE APPELLANT FIR M AND WAS DELIVERED AT SITE III) THE FIRM HAD RAISED BILLS FOR THE SALE OF MATERIAL BETWEEN APRIL, 97 TO MARCH 98 IV) THE PAYMENTS WERE MADE BY CROSSED ACCOUNT PAYEE CHEQUES V) THE ACCOUNT WAS FINALLY SETTLED ON 30.03.99 VI) COMPLETE EVIDENCES IN RESPECT OF PAYMENTS ALONG WITH COPY OF BANK STATEMENT EVIDENCING PAYMENTS MADE THROUGH PROPER B ANKING CHANNELS WERE VERIFIED DURING ASSESSMENT PROCEEDINGS AND AVA ILABLE ON RECORD. VII) COMPLETE RECORD OF PURCHASE BILLS AND STATE MENT OF ACCOUNT SHOWING DATES OF RECEIPT OF MATERIAL IN THE FORM OF DELIVER Y CUM INVOICE ARE MADE AVAILABLE AND WERE VERIFIED DURING ASSESSMENT PROCE EDINGS BY THE AO. 4. M/S SHALIN CORPORATION: I) THE PROPRIETOR AFFIRM IS MR. PATEL RAMANBHAI BHA GWANBHAI II) THE RUBBLE WAS SOLD TO THE APPELLANT FIRM III) THE ABOVE FIRM HAD RAISED BILLS FOR THE SALE O F MATERIAL BETWEEN APRIL, 97 TO MARCH 98 IV) THE PAYMENTS WERE MADE BY CROSSED ACCOU NT PAYEE CHEQUES V) THE ACCOUNT WAS FINALLY SETTLED ON 30.03.9 9 VI) COMPLETE EVIDENCES IN RESPECT OF PAYMENTS ALO NG WITH COPY OF BANK STATEMENT EVIDENCING PAYMENTS MADE THROUGH PROPER BANKING CHANNELS WAS VERIFIED DURING ASSESSMENT PROCEEDINGS AND AVAI LABLE ON RECORD, VII) COMPLETE RECORD OF PURCHASE BILLS AND STATE MENT OF ACCOUNT SHOWING DATES OF RECEIPT OF MATERIAL IN THE FORM OF DELIVER Y CUM INVOICE ARE MADE AVAILABLE AND WERE VERIFIED DURING ASSESSMENT PROCE EDINGS BY THE AO. 5) M/S BHARAT SALES CORPORATION I) THE PROPRIETOR OF BHARAT SALES CORPORATION IS KI RIT R SHAH. II) THE RUBBLE WAS SOLD TO THE APPELLANT FIR M AND WAS DELIVERED AT SITE. III) THE ABOVE FIRM HAD RAISED BILLS FOR THE SALE OF MATERIAL ITA NO.1032/AHD/2016 ASSESSMENT YEAR: 1998-99 PAGE 7 OF 11 BETWEEN APRIL, 97 TO MARCH 98 IV) THE PAYMENTS WERE MADE BY CROSSED ACCO UNT PAYEE CHEQUES V) THE ACCOUNT WAS FINALLY SETTLED ON 30.03.99 VI) COMPLETE EVIDENCES IN RESPECT OF PAYMENTS ALO NG WITH COPY OF BANK STATEMENT EVIDENCING PAYMENTS MADE THROUGH PROP ER BANKING CHANNELS WAS VERIFIED DURING ASSESSMENT PROCEEDINGS AND AVAILABLE ON RECORD. VII) COMPLETE RECORD OF PURCHASE BILLS AND STATE MENT OF ACCOUNT SHOWING DATES OF RECEIPT OF MATERIAL IN THE FORM OF DELIVER Y CUM INVOICE ARE MADE AVAILABLE AND WERE VERIFIED DURING ASSESSMENT PROCE EDINGS. COPIES OF BILLS ETC. WERE FILED DURING THE COURSE O F ASSESSMENT AND REASSESSMENT PROCEEDINGS. THE APPELLANT FIRM HAD EF FECTED PAYMENTS TOWARDS THESE PURCHASES BY CROSSED ACCOUNT PAYEE CHEQUES AN D THIS FACT WAS ALSO SUBMITTED BEFORE THE LEARNED ASSESSING OFFICER DURI NG THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND REASSESSMENT PROCEEDINGS . MERELY BECAUSE THE APPELLANT COULD NOT PRODUCE THE PROPRIETOR OF THE FIRM AS THE MATTER WAS VERY OLD AND THE APPELLANT FIRM DID NOT HAVE ANY BUSINESS RELATION WITH THESE PROPRIETORS CANNOT BE MADE A BASIS FOR L EVY OF PENALTY. 8. THE CASE MADE OUT BY THE ASSESSEE BEFORE THE FIR ST APPELLATE AUTHORITY IS THIS THAT THE DETAILS OF PURCHASE WERE DULY FURNISHED BY THE ASSESSEE DURING BOTH THE ASSESSMENT AND THE REASSESSMENT PROCEEDINGS. PAYME NTS FOR THOSE PURCHASES WERE MADE TO THE PARTIES BY THE ASSESSEE FIRM BY CROSSED ACCOUNT PAYEE CHEQUES, FACTS OF WHICH WERE ALSO DULY PLACED BEFORE THE LD. ASSESSIN G OFFICER DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND REASSESSMENT PR OCEEDINGS TOO. ADMITTEDLY THE MATTER IS VERY OLD AND THE ASSESSEE DOES NOT HAVE A NY BUSINESS RELATIONSHIP WITH THE PROPRIETORS. MERELY BECAUSE THE ASSESSEE FAILED TO PRODUCE THE PROPRIETOR OF THE FIRM THE SAME CANNOT BE MADE A BASIS FOR LEVYING OF PENA LTY. UPON CONSIDERING THE ORDER OF ASSESSMENT, THE PENALTY ORDER PASSED BY THE ASSE SSING OFFICER, THE WRITTEN SUBMISSIONS PREFERRED BY THE ASSESSEE IN SUPPORT OF HIS CASE AND THE JUDGEMENT RELIED UPON BY THE ASSESSEE, THE LD. CIT(A) OBSERVE D AS FOLLOWS :- 3.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE LEAR NED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFIC ER. I HAVE ALSO GONE THROUGH THE ORDER PASSED BY LD. CIT (A) DATED 27.03 .2002 IN RESPECT OF ORIGINAL ASSESSMENT PROCEEDINGS AND ORDER DATED 03.12.2012 P ASSED IN ASSESSMENT PROCEEDINGS MADE U/S 143 (3) R.W.S. 254. I HAVE AL SO GONE THROUGH THE DETAILED ORDER PASSED BY THE HON'BLE TRIBUNAL, AHMEDABAD. IT IS AN UNDISPUTED FACT THAT THE APPELLANT HAD SHOWN PURCHASE FROM VARIOUS PARTI ES AND PAYMENTS TO THEM WERE MADE BY CROSSED ACCOUNT PAYEE CHEQUES. IT IS A LSO SEEN THAT THE ITA NO.1032/AHD/2016 ASSESSMENT YEAR: 1998-99 PAGE 8 OF 11 APPELLANT HAD SOLD THESE MATERIAL TO VARIOUS PARTIE S AND HAD DISCLOSED SALES IN THE PROFIT & LOSS ACCOUNT. THE LEARNED COUNSEL FOR THE APPELLANT SUBMITTED THA T THE APPEAL FILED BY THE APPELLANT FIRM IS PENDING BEFORE THE HON'BLE TR IBUNAL, AHMEDABAD FOR ADJUDICATION. THE FINDINGS IN THE ASSESSMENT ORDER HAVE ALSO BEEN REVIEWED BY ME. THE MAIN CONTENTION OF THE COUNSEL FOR THE APPE LLANT FIRM IS THAT MERELY BECAUSE THE APPELLANT FIRM COULD NOT SUBSTANTIATE T HE PURCHASES DESPITE VARIOUS EVIDENCES FILED BY IT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS CANNOT BE MADE A GROUND FOR LEVY OF PEN ALTY. IT IS SUBMITTED THAT THE PROVISIONS OF SECTION 271(1)(C) ARE APPLICABLE IN A CASE WHERE THE APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE WITH EVIDENCES TH E EXPENSES INCURRED BY IT. IN THE INSTANT CASE THE APPELLANT HAD SUBMITTED ALL THE EVIDENCES AVAILABLE WITH IT AND THESE EVIDENCES HAS NOT BEEN FOUND TO BE INC ORRECT OR FRAUDULENT BY BOTH THE ASSESSING OFFICER OR BY THE CIT (APPEALS). HERE, IT IS PERTINENT TO REFER TO THE SPECIFIC DIRE CTIONS OF HON'BLE ITAT SETTING ASIDE THE MATTER TO THE ASSESSING OFFICER F OR FRESH CONSIDERATION IN VIEW OF FOLLOWING DIRECTIONS :- (I) MAKE NECESSARY FURTHER INQUIRIES FROM THE (A) C ONCERNED BANK AUTHORITIES OR OTHERWISE IN RESPECT OF PERSON MAKING WITHDRAWAL S IN CASH AND (B) SALES TAX AUTHORITIES, IN RESPECT OF GENUINENESS OF TRANSACTIONS IN PURCHASE; AND II) ALLOW ANOTHER OPPORTUNITY TO THE TAXPAYER TO (A ) FURNISH THE ACTUAL WORKING OF GP ON ACCOUNT OF TRADING AND MANUFACTURI NG OF RUBBLE, AND KAPCHI GRIT ETC. AND ITS IMPACT ON THE PROFITABILIT Y OF THE YEAR UNDER CONSIDERATION VIS-AVIS PRECEDING YEARS, IN THE LIGH T OF BOOKS OF ACCOUNTS AND OTHER RECORDS CLAIMED TO HAVE BEEN SUPPORT OF G ENUINENESS OF THE PURCHASES. 3.4. IT WAS NOT DIFFICULT TO LOCATE THE 3 PROPRIET ORS OF FIVE CONCERNS NAMELY KIRITKUMAR R SHAH, PATEL MAGAN SHANKERBHAI PATEL AN D RAMANBHAI BHAGWANBHAI FROM THE ITD APPLICATION/PAN DATABASE O F THE DEPARTMENT WHICH WAS AVAILABLE WITH THE ASSESSING OFFICER. THIS HAS NOT BEEN DONE. ENQUIRIES DONE FROM BANK ARE ALSO NOT CONCLUSIVE AS ASSESSING OFFICER HIMSELF HAS ADMITTED IN PARA 8 OF HIS ORDER THAT NOTICE U/S 133 (6) WAS ISSUED TO THE MANAGER OF SEVALIA URBAN COOPERATIVE BANK IN ORDER TO GARNE R THE INFORMATION REGARDING THE FIVE PARTIES. HE WAS REQUESTED TO PROVIDE THE A CCOUNT NO. OF THESE PARTIES W.E.F. F.Y. 1997-98 AND TO FURNISH THE DETAILS ABOU T THE PERSONS WHO HAD WITHDRAWN THE AMOUNTS IN CASH. THESE QUERIES WERE I N COMPLIANCE TO THE DIRECTIONS OF HON'BLE ITAT AND GENUINE ATTEMPT WAS MADE BY THE ASSESSING OFFICER TO ASCERTAIN FULL FACTS FROM THE BANK. HOWE VER, THE MANAGER OF THE BANK COULD NOT FURNISH ANY DETAIL WHICH COULD BE USED AS EVIDENCE AGAINST THE ASSESSEE SO FAR AS PENALTY ARE CONCERNED. SIMILARLY, ASSESSING OFFICER ATTEMPTED TO CONDUCT E NQUIRY FROM THE SALES TAX DEPTT., BUT THE REPORT OF THE INSPECTOR MENTION ED IN THE LAST LINES OF PARA 8 IS NOT FORTHCOMING FROM THE ASSESSMENT AS WELL AS P ENALTY ORDER. HOWEVER, IN ITA NO.1032/AHD/2016 ASSESSMENT YEAR: 1998-99 PAGE 9 OF 11 PARA 9 OF THE ASSESSMENT ORDER, ASSESSING OFFICER H AS MENTIONED THAT THE LOCAL SALES TAX OFFICER SHOWED HIS INABILITY TO FURNISH T HE REQUIRED DETAILS AS THE SALES TAX REGISTRATION NOS. ARE VERY OLD AND ARE NO MORE OPERATIONAL. LETTER WAS ALSO ISSUED BY THE ASSESSING OFFICER TO THE ASS TT. COMMISSIONER OF SALES TAX, GODHRA TO COLLECT INFORMATION ABOUT ONE PARTY M/S BHAGYA LAXMI TRADING CO., BUT FROM THERE TOO, NO CONCRETE INFORMATION WA S MADE AVAILABLE TO THE ASSESSING OFFICER. 3.5. THUS, THE DIRECTIONS OF THE TRIBUNAL CONTAINE D IN PARA(I) ABOVE WERE COMPLIED BY THE ASSESSING OFFICER BUT HE COULD NOT GATHER ANY CONCLUSIVE OR CONCRETE EVIDENCE AGAINST THE ASSESSEE. SO FAR AS D IRECTIONS IN PARA (II) REGARDING FURNISHING THE ACTUAL WORKING OF GP ON AC COUNT OF TRADING AND MANUFACTURING OF RUBBLE, AND KAPCHI GRIT ETC. AND I TS IMPACT ON THE PROFITABILITY OF THE YEAR UNDER CONSIDERATION VIS-A-VIS PRECEDING YE ARS, IN THE LIGHT OF BOOKS OF ACCOUNTS AND OTHER RECORDS ARE CONCERNED, IN THE OP INION OF THE ASSESSING OFFICER, THE APPELLANT HAS NOT BEEN ABLE TO SUBSTAN TIATE FULLY THE REASONS FOR SHORTFALL IN GP FROM 17.67% IN EARLIER YEAR TO 8.37 % THIS YEAR. THIS ASPECT WAS DEALT WITH GREAT DETAIL BY THE LD.CIT(A) IN FIRST R OUND OF LITIGATION ON THE BASIS OF MONTH WISE QUANTITATIVE DETAILS OF RUBBLE EXCAVATED FROM THE MINES, RUBBLE PURCHASED, RUBBLE CONSUMED, PRODUCTION AND YIELD GI VEN IN PARA 3.3 OF HIS ORDER. THIS WAS ALSO COMPARED WITH THE MONTH WISE Q UANTITATIVE DETAILS OF CRUSHED STONE VIZ. OP. STOCK, PRODUCTION, SALES, CL . STOCK AND SALES(IN RS.). LD. CIT(A) IN LAST FEW LINES OF PARA 3.12 OF HIS ORDER OBSERVED AS UNDER :- 'ONCE THE QUANTITATIVE DETAILS IN THE FORM OF YIELD , PRODUCTION AND SALES ARE ACCEPTED BY THE ASSESSING OFFICER, IT WOULD BE INCORRECT TO HOLD THAT THE PURCHASES WERE BOGUS. EVEN THE G.P. AFTER STAR TING MANUFACTURING ACTIVITIES OF KAPACHI AND GRIT RANGES BETWEEN 6 TO 8% AND IN SUBSEQUENT YEARS THE APPELLANT HAS DISCLOSED GP RATE RANGING B ETWEEN 6-8%. IN VIEW OF THIS, THE ADDITION MADE IS ALSO NOT JUSTIFI ED ON THIS SCORE. THE AO WAS NOT JUSTIFIED IN TREATING THE PURCHASE BOGUS. T HE ADDITION MADE BY THE AO OF RS.68,55,330/-IS THEREFORE, DELETED.' THUS, IN THE ASSESSMENT ORDER MADE U/S 143 (3) R.W. S. 254, THE MAIN REASONS THAT REMAINED FOR MAKING ADDITION ON ACCOUN T OF BOGUS PURCHASES WERE :- (I) NON PRODUCTION OF THE FIVE PARTIES BY THE APPE LLANT BEFORE THE ASSESSING OFFICER FOR EXAMINATION AND (II) ESTIMATION OF G.P. IN ABSENCE OF NON FURNISHI NG OF G.P. BY THE ASSESSEE SEPARATELY FOR SALE OF RUBBLE AND GRIT 3.6. IN MY CONSIDERED OPINION, ASSESSING OFFICER H AS RIGHTLY MADE ADDITION IN ABSENCE OF COMPLETE DETAILS WHICH WERE TO BE FILED BY THE APPELLANT AS PER THE SPECIFIC DIRECTIONS OF HON'BLE ITAT. THESE ADDITION S ARE REPETITION OF ORIGINAL ASSESSMENT. WHEN THE MATTER WAS AGITATED BY THE ASS ESSEE BEFORE LD.CIT(A), HE HAD UPHELD THE SAME MAINLY RELYING UPON THE FACT THAT THERE ARE INCONSISTENCY IN THE ACCOUNT OPENING FORMS OF THE F IVE PARTIES FROM WHOM THE ALLEGED PURCHASES WERE MADE BY THE ASSESSEE AMOUNTI NG TO RS.68,55,330/- (PARA 4.1(E),(F) & (G) OF THE ORDER). SECONDLY, APP ELLANT COULD NOT PRODUCE THE ITA NO.1032/AHD/2016 ASSESSMENT YEAR: 1998-99 PAGE 10 OF 11 FIVE PARTIES BEFORE THE ASSESSING OFFICER FOR EXAMI NATION (PARA 4.1(H) OF THE ORDER) AND THIRDLY, ON THE BASIS OF LACK OF EVIDENC E OF TRANSPORTATION OF MATERIAL PURCHASED BY THE ASSESSEE FROM THESE FIVE PARTIES A S WELL AS LACK OF CORRELATION BETWEEN ROYALTY PAID BY THE APPELLANT AND THE RUBBL E EXCAVATION SHOWN BY THE APPELLANT. LD. CIT(A) HAS OBSERVED THAT CONSIDERING THE AMOUNT OF ROYALTY PAID BY THE APPELLANT IT COULD HAVE EXCAVATED 12870 M 3 OF RUBBLE INSTEAD OF PRODUCTION OF 87165 M 3 SHOWN BY THE APPELLANT. CONSIDERING THESE FACTS, FURTHER ILLEGAL EXCAVATION OF 71873.51 CUBIC METERS (QUANTITY CLAIMED TO BE PURCHASED BY THE APPELLANT) CANNOT BE TOTALLY RULED OUT. I AGREE WITH LD. AUTHORIZED REPRESENTATIVE THAT THESE EVIDENCES MAY BE SUFFICIENT TO MAKE ADDITIONS IN ASSESSMENT BUT CANNOT BECOME THE BASIS FOR LEVYING PENALTY U/S 271(L)(C) OF THE ACT. THE COUNSEL FOR THE APPELLANT HAS FURTHER SUBMITTED THAT MERELY BECAUSE THE MATTER WAS OLD AND THE ASSESSEE FIRM COULD NOT PRODUCE THESE FACTS, CAN AT BEST BE MADE A GROUND FOR MAKIN G ADDITION HOWEVER, THE SAME CANNOT BE MADE A GROUND FOR LEVY OF PENALTY. H E REFERRED TO THE DECISION OF THE OF HON'BLE MADRAS HIGH COURT IN THE CASE OF S. HASTIMAL VS. CIT [1963] 49 ITR 273 (MADRAS) ON BURDEN OF PROOF BE USEFULLY REFERRED TO:- 'AFTER THE LAPSE OF A DECADE, AN ASSESSEE SHOULD NO T BE PLACED UPON THE RACK AND CALLED UPON TO EXPLAIN NOT MERELY THE ORIG IN AND SOURCE OF A CAPITAL CONTRIBUTION BUT THE ORIGIN OF ORIGIN AND S OURCE OF SOURCE AS WELL. THE DIFFICULTY ON THE PART OF ANY ASSESSEE TO EXPLA IN A TRANSACTION WHICH STOOD PLACE BEFORE A DECADE HAS TO BE BORNE IN MIND BY THE DEPARTMENT AND SHOULD UNDER NO CIRCUMSTANCES BE UNDER ESTIMATE D OR TAKEN ADVANTAGE OF BY THEM'. HE ALSO SUBMITTED THAT PENALTY PROCEEDINGS ARE SEPA RATE FROM ASSESSMENT PROCEEDINGS AND THE FINDINGS IN THE ASSE SSMENT PROCEEDINGS CANNOT BE MADE A GROUND FOR LEVY OF PENALTY. HE REL IED ON THE FOLLOWING DECISIONS: I) ANANTHARAM VEERASINGHAIAH & CO. VS. CIT 123 IT R 457 II) KHODAY ESWARSA & SONS 83 ITR 369 III) DILIP N SHROFF VS. JT. CIT 228 291 ITR 519 3.7. LD. AUTHORIZED REPRESENTATIVE HAS FURTHER SUBM ITTED THAT THE MERE FACT THAT THE APPELLANT HAD NOT BEEN ABLE TO PRODUCE THESE PA RTIES CANNOT BE MADE A GROUND FOR LEVY OF PENALTY.' HE ALSO SUBMITTED THAT WITHOUT THESE PURCHASES, THE ASSESSEE FIRM COULD NOT HAVE EFFECTED SALES AND HE FURTHER SUBMITTED THAT THERE WAS A DIFFERENCE OF OPINION BETWEEN THE COMMISSIONE RS OF INCOME TAX (APPEALS) ONE OF WHOM ALLOWED THE APPEAL AT THE TIM E OF ORIGINAL ASSESSMENT PROCEEDINGS AND THE OTHER CIT(A) CONFIRMED THE ADDI TION IN HIS ORDER DATED 05.01.2012. HE, THEREFORE, SUBMITTED THAT WHEN THE DECISIONS OF THE LD. CIT(A) ITSELF WERE DIFFERENT FROM EACH OTHER AND THE FINDI NGS WERE BASED ON THE MERE FACT THAT THE APPELLANT HAD NOT BE ABLE TO PRODUCE THESE PARTIES AFTER A PERIOD OF DECADE CANNOT BE MADE A GROUND FOR LEVY OF PENALTY. 9. HE THUS DELETED THE PENALTY LEVIED UNDER SECTION 271(1)(C) PARTICULARLY ON THE FINDING THAT NO CONCLUSIVE OR CLINCHING EVIDENCE OF CONCEALMENT HAS BEEN FOUND BY THE ITA NO.1032/AHD/2016 ASSESSMENT YEAR: 1998-99 PAGE 11 OF 11 ASSESSING OFFICER. NEITHER THE ASSESSING OFFICER H AS BEEN ABLE TO DEMONSTRATE THAT THE ASSESSEE HAS GIVEN A FALSE OR CONCOCTED EXPLANA TION IN SUPPORT OF HIS CASE. THE MENS REA OR GUILTY MIND ON THE PART OF THE ASSESSEE HAS IN FACT NOT BEEN PROVED/REFLECTED IN THE ORDER IMPOSING PENALTY MADE BY THE ASSESSING OFFICER. MERELY BECAUSE THE ASSESSEE COULD NOT PRODUCE THE PURCHASE RS/PROPRIETORS THE IMPOSITION OF PENALTY AGAINST THE ASSESSEE ON THIS GROUND CANNOT BE SAID TO BE JUSTIFIED AS RIGHTLY OBSERVED BY THE FIRST APPELLATE AUTHORITY PARTICULA RLY WHEN THE ASSESSING OFFICER COULD GET THE DETAILS FROM THE BANKS/SALES TAX DEPARTMENT . THEREFORE, IN THE ABSENCE OF CONCLUSIVE OR CLINCHING EVIDENCE OF CONCEALMENT OR MENS REA ON THE PART OF THE ASSESSEE AS DISCUSSED ABOVE, THE PENALTY CANNOT BE LEVIED AGAINST THE ASSESSEE AND THUS WE FIND NO INFIRMITY IN THE ORDER OF DELETION OF PENALTY AS MADE BY THE LD. CIT(A). WE FIND NO REASON TO INTERFERE WITH THE SAME. THUS , THE APPEAL PREFERRED BY THE REVENUE HAS NO LEGS TO STAND UPON AND THUS DISMISSE D. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF OCTOBER, 2018. SD/- SD/- PRAMOD KUMAR MS. MADHUMITA ROY (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, THE 22 ND DAY OF OCTOBER, 2018 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER UE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD