The DCIT(OSD)-1, , Circle-4, Ahmedabad V. Maradia Copper Extrusion Pvt. Ltd., Mehsana

ITA 105/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6290 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 29-03-2017
• Assessment Year: 1992-1993
• Appeal Filed On: 10-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Question of law
• Section: 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.105/AHD/2014 %& ' ()'/ ASSTT. YEAR: 1992-1993 DCIT (OSD) - I CIR.4, AHMEDABAD. VS. MARADIA COPPER EXTRUSION P.LTD. BUDASAN, TAL. KADI DIST. MEHSANA. PAN : AABCM 3848 G ( APPLICANT ) ( RESPONENT ) REVENUE BY : SHRI PRASOON KABRA, SR.DR ASSESSEE BY : SHRI PRAKASH D. SHAH, AR / DATE OF HEARING : 29/03/2017 / DATE OF PRONOUNCEMENT: 03/04/2017 67/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST TH E ORDER OF THE LD.CIT(A)-VIII, AHMEDABAD DATED 21.10.2013 PASSED F OR THE ASSTT.YEAR 1992-93. 2. SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT (A) HAS ERRED IN DELETING THE PENALTY OF RS.1,02,80,144/- WHICH WAS IMPOSED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY. AT THE RELEVANT TIME, IT WAS ENGAGED IN M ANUFACTURE OF COPPER AND COPPER ALLOYS. IT HAS FILED ITS RETURN OF INCOME O N 31.12.1992 DECLARING TOTAL ITA NO.105/AHD/2014 2 INCOME AT RS.1,14,126/- THE CASE OF THE ASSESSEE WA S SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSU ED AND SERVED UPON THE ASSESSEE. A SEARCH UNDER SECTION 132 OF THE ACT WA S CONDUCTED IN THE CASE OF THE ASSESSEE, ITS ASSOCIATED CONCERNS AND AT THE RE SIDENTIAL PREMISES OF DIRECTORS ON 23.1.1992. ONE OF THE MATERIALS SEIZE D DURING THE SEARCH WAS A FILE CONTAINING REPORT OF CHEMICAL ANALYSIS. THE C HEMICAL ANALYSIS REPORT WAS PREPARED AFTER TESTING MATERIAL IN LABORATORY OF TH E ASSESSEES FACTORY AT KHADI. THE REPORT CONTAINED ANALYSIS IN A STANDARD PRO FORMA FOR COPPER AND BRASS PRODUCTS. THE CONTAINED DETAILS FOR PERIOD FROM 31 .5.1991 TO 6.1.1992 FOR PRE-SEARCH PERIOD. ON THE BASIS OF THESE DETAILS, THE AO WORKED OUT PRODUCTION OF BRASS PRODUCTS AT 332.9 MT AND COPPER ITEM AT 397.6 MT. THE TOTAL CAME TO 730.5 MT AS AGAINST THIS, BOOKS OF AC COUNTS SHOWED PRODUCTION OF BRASS ITEMS AT 202.1 MTS AND COPPER ITEMS AT 137 .1 MTS. AFTER ANALYSIS OF THE RECORD, THE AO HAS MADE AN ADDITION OF RS.40,23 ,570/- AS UNDISCLOSED INCOME FOR THE PRE-SEARCH PERIOD AND RS.68,11,785 O N ACCOUNT OF UNRECORDED PRODUCTION FOR POST-SEARCH PERIOD. 4. ON APPEAL, BOTH THESE ADDITIONS WERE DELETED BY THE LD.CIT(A). THE REVENUE CAME IN APPEAL BEFORE THE TRIBUNAL, AND THE TRIBUNAL VIDE ORDER IN ITA NO.4097/AHD/1995 ALLOWED THE APPEAL OF THE REVE NUE PARTLY AND CONFIRMED THE ADDITION TO THE EXTENT OF RS.19,39,4 18/- WITH RESPECT TO PRE- SEARCH PERIOD AS AGAINST RS.40,23,570/- ADDED BY TH E AO. SIMILARLY, THE TRIBUNAL HAS CONFIRMED ADDITION OF RS.28,84,854/- W ITH RESPECT TO POST-SEARCH PERIOD AS AGAINST THE ADDITION OF RS.68,11,785/- MA DE BY THE AO. THE AO, THEREAFTER MADE INVESTIGATION OF PURCHASES CLAIMED BY THE ASSESSEE AND TREATED PURCHASES HAVING VALUE OF RS.51,08,219/- AS BOGUS. HE MADE ADDITION OF THIS AMOUNT. THE ADDITION WAS DELETED BY THE CIT(A), BU T WAS RESTORED BY THE TRIBUNAL. THE AO HAS INITIATED PENALTY PROCEEDINGS AND ISSUED NOTICE UNDER ITA NO.105/AHD/2014 3 SECTION 271(1)(C) R.W.S. 274 OF THE INCOME TAX ACT. HE CONSIDERED THE ADDITION OF RS.19,39,418/- PLUS RS.28,84,854/- ADDE D ON ACCOUNT OF SUPPRESSED PROFITS AND ADDITION OF RS.51,08,219/- A DDED ON ACCOUNT OF BOGUS PURCHASES. ACCORDING TO THE AO, THE ASSESSEE HAS F URNISHED INACCURATE PARTICULARS OF RS.99,32,491/-. HE CALCULATED TAX O N THIS ADDITION AT RS.51,40,072/- AND IMPOSED PENALTY AT THE RATE OF 2 00%. THUS, PENALTY OF RS.1,02,80,144/- WAS IMPOSED UPON THE ASSESSEE. 5. DISSATISFIED WITH THE PENALTY, THE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) HAS DELETED TH E PENALTY BY RECORDING THE FOLLOWING FINDING: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE PENALTY ORDER, THE WRITTEN SUBMISSION OF THE APPELLANT AND THE REPORT SUBMITTED BY THE AO DURING THE COURSE OF APPELLATE PROCEEDINGS. THE AO HAS IMPOSED THE PENALTY UNDER SECTION 271(1)(C) ON ACCOUNT OF UNREC ORDED PRODUCTION FOR THE PRE-SEARCH AND POST SEARCH PERIOD; AND ON A CCOUNT OF ADDITIONS MADE FOR BOGUS PURCHASES. THE ADDITIONS WERE MADE A S A RESULT OF SEIZURE OF CERTAIN DOCUMENTS DURING THE COURSE OF S EARCH WHICH WAS CONDUCTED AT THE PREMISES OF THE COMPANY ON 23/01/1 992. FOR THE SAKE OF CONVENIENCE AND CLARITY BOTH THE ISSUES ARE DISC USSED SEPARATELY HERE UNDER. 1. THE FIRST ISSUE ON WHICH THE PENALTY HAS BEEN IM POSED IS THE ADDITION, ON ACCOUNT OF UNRECORDED PRODUCTION. THE ADDITION WAS MADE AS A REPORT OF CHEMICAL ANALYSIS WAS SEIZED DURING THE SEARCH. THE REPORT CONTAINED AN ANALYSIS IN A STANDARD PROFORMA FOR COPPER AND BRASS PRODUCTS/THE DETAILS PERTAIN TO THE PERIOD FR OM 31/05/1991 TO 06/01/1992, THE PRE-SEARCH PERIOD. ON THE BASIS OF THOSE REPORTS THE AO WORKED OUT THE PRODUCTION OF BRASS PRODUCTS AT 332. 9 METRIC TONS AND THAT OF COPPER PRODUCTS OF 397.6 METRIC TONS. THE P RODUCTION AS PER THE BOOKS OF ACCOUNTS WAS 202.1 METRIC TONS FOR BRASS A ND 137.1 METRIC TONS FOR COPPER ITEMS. THE DIFFERENCE WAS ADDED AS AN UNRECORDED PRODUCTION. THE AO ALSO REFERRED TO THE RECEIPT AND DISPATCH REGISTER FOR THE PERIOD FROM DECEMBER 1991 AND JANUARY 1992 AND COMPARED THE SAME WITH THE EXCISE CHALLANS MAINTAINED UNDER THE CENTRAL EXCISE RULE. SINCE THERE WAS DISCREPANCY THE AO REJECTED T HE BOOK RESULTS ITA NO.105/AHD/2014 4 UNDER SECTION 145(3) AND COMPUTED THE UNDISCLOSED P ROFIT EARNED ON THE UNRECORDED PRODUCTION PERTAINING TO SEARCH PERI OD. FOR THE POST SEARCH PERIOD THE AO WORKED OUT THE UN RECORDED PRODUCTION OF BRASS AND COPPER ITEMS BY TAKING THE CHEMICAL ANALYSIS REPORT, OTHER PAPERS PERTAINING TO THE PERIOD FROM JUNE 1991 TO JANUARY 1992, THE AVERAGE MONTHLY PRODUCTION AS SHO WN BY THE SEIZED MATERIAL AND THE PRODUCTION RECORDED IN THE BOOKS O F ACCOUNTS. ON THAT UNRECORDED PRODUCTION THE AO ESTIMATED THE PROFIT F OR THE POST SEARCH PERIOD BY APPLYING THE AVERAGE MONTHLY PROFIT WORKE D OUT ON THE BASIS OF UNRECORDED PRODUCTION OF THE SEARCH PERIOD. THE CIT(A) DELETED THE ADDITIONS ON THE GROUNDS THA T ARE DISCUSSED IN DETAIL IN HIS ORDER. HOWEVER THE MAIN GROUNDS ON WH ICH THE ADDITIONS WERE DELETED WERE THAT THERE WAS NO SEIZURE OF ASSE TS AND THE APPELLANT DISCLOSED AN INCOME OF RS. 1.02 CRORES ON THE SAME. THERE WAS NO EVIDENCE OF SALES OUTSIDE BOOKS OF ACCOUNT. NO STOC K OUTSIDE BOOKS WAS FOUND DURING THE SEARCH, THE PRODUCTION SHOWN AS PE R THE BOOKS TALLIED AS PER THE EXCISE RECORDS, NO TRANSPORT RECEIPT OR EVIDENCE OF ANY SORT WAS FOUND SHOWING DISPATCH OF THE UNRECORDED PRODUC TION AND THE AVERAGE RATE OF SALE OF COPPER WAS WRONGLY TAKEN AT RS. 155 PER KG AS AGAINST THE AVERAGE RATE OF 147 PER KG. SIMILARLY F OR THE POST SEARCH PERIOD THE ADDITION WAS DELETED MAINLY ON THE GROUN DS THAT THERE WAS NO BASIS FOR MAKING ANY PRESUMPTION THAT THE ASSESS EE WOULD HAVE SUPPRESSED THE PRODUCTION AND AFFECTED SERIOUS OUTS IDE BOOKS OF ACCOUNTS, NO EVIDENCE IN RESPECT OF THE FOUR MONTHS PERIOD TO SHOW SUPPRESSED PRODUCTION OR SALES AND THE FACT THAT SI MILAR ADDITION WAS DELETED IN EARLIER YEARS ON THE GROUND THAT THERE W AS NO RECORD OR EVIDENCE FOR THE POST SEARCH PERIOD. BEFORE ITAT THE ORDER OF THE CIT(A) WAS NOT ACCEPTE D HOWEVER THE ADDITION MADE WAS SUBSTANTIALLY REDUCED. THE ADDITI ON MADE FOR SUPPRESSED PROFIT FOR EIGHT MONTHS PERIOD FROM JUNE 1991 TO JANUARY 1992 WAS COMPUTED AT RS.1939418/- AS AGAINST RS.402 3570/- COMPUTED BY THE AO/ THE SUPPRESSED PROFIT FOR THE MONTH OF A PRIL AND MAY 1991 WAS UPHELD AT RS.2884854/- AS AGAINST THE ADDITION OF RS. 681 1785/- MADE BY THE AO. THE ADDITIONS MADE FOR THE SUPPRESS PROFIT FOR THE MONTH OF FEBRUARY AND MARCH 1992 WERE DELETED. THE AO HAS IMPOSED A PENALTY OF CONCEALMENT ON THE ABOVE ADDITIONS WHICH HAS BEEN CONFIRMED BY THE ITAT. HOWEVER, THE FACTS SHOW THAT ITA NO.105/AHD/2014 5 THE ADDITION HAS BEEN MADE ON THE BASIS OF CERTAIN ESTIMATES WHICH HAVE BEEN APPLIED ON THE FIGURES OF PRODUCTION WHIC H WERE AGAIN ESTIMATED ON THE BASIS OF CERTAIN EVIDENCES FOUND D URING THE COURSE OF SEARCH. THERE WAS NO EVIDENCE OF UNRECORDED PRODUCT ION FOR THE POST SEARCH PERIOD. WHATEVER EVIDENCE WAS SEIZED IT WAS RELATED TO POST SEARCH PERIOD. THEREFORE, THE ADDITION WAS BASICALL Y MADE ON THE BASIS OF, FIRST OF ALL ESTIMATING THE PRODUCTION, AND THE N APPLYING AN ESTIMATED PROFIT RATE ON THAT PRODUCTION. THE ADDITION WAS DE LETED BY CIT(A) AND SUBSEQUENTLY THE HONOURABLE ITAT FURTHER REDUCED TH E ADDITION BY A SUBSTANTIAL MARGIN. A PERUSAL OF THE PENALTY ORDER PASSED BY THE AO SHOW THAT NO CONCRETE FACTS, WHICH INDICATE THAT TH E CONCEALMENT OF INCOME HAS BEEN ESTABLISHED, COULD BE POINTED OUT I N THE CONCEALMENT CANNOT BE IMPOSED AS THE ISSUE IS DEBATABLE AND IT HAS NOT BEEN ESTABLISHED BEYOND DOUBT THAT THERE WAS IN FACT ANY CONCEALMENT OF INCOME. THE CIT(A) IN ITS ORDER HAS POINTED OUT THA T THERE WAS NO EVIDENCE REGARDING SALES MADE OUTSIDE BOOKS OF ACCO UNTS FOUND DURING THE SEARCH. IT HAS ALSO BEEN POINTED OUT BY THE APPELLANT THAT A QUESTION OF LAW HAS BEEN ADMITTED BY HONOURABLE GUJARAT HIGH COURT AGAI NST THE ADDITION AND THIS FACT ALSO SHOWS THAT THE ADDITION IS DEBAT ABLE. HE HAS ALSO PLACED ON RECORD A COPY OF THE ORDER OF HONOURABLE HIGH COURT ADMITTING THE QUESTION OF LAW. THEREFORE, ON THE BASIS OF ABOVE MENTIONED FACTS, C IRCUMSTANCES AND DISCUSSION I AM OF THE CONSIDERED OPINION THAT NO P ENALTY OF CONCEALMENT UNDER SECTION 271(1)(C) IS EXIGIBLE ON THE APPELLANT ON THIS ISSUE. THE SAME IS THEREFORE, DIRECTED TO BE DELETE D. 2. THE SECOND ISSUE ON WHICH THE PENALTY HAS BEEN I MPOSED IS REGARDING THE ADDITION MADE FOR BOGUS PURCHASES. TH E FACTS IN BRIEF ARE THAT THE AO NOTED THAT THE APPELLANT PURCHASED BRAS S TUBES FROM ONE CONCERN AT BOMBAY AND THE GOODS WERE TRANSPORTED TH ROUGH SEVERAL TRANSPORTERS. ON FURTHER INVESTIGATION IT WAS FOUND THAT ONE TRANSPORTER GAVE A STATEMENT THAT HE DID NOT TRANSPORT ANY GOOD S SHOWN IN THE LORRY RECEIPTS AND STATED THAT HE RECEIVED A CASH F OR ISSUING LORRY RECEIPTS. IT WAS ACCORDINGLY HELD BY THE AO THAT TH E SUPPLIER AT BOMBAY DID NOT ACTUALLY SUPPLY THE GOODS AND CONCLUDED THA T GOODS WERE NOT TRANSPORTED FROM BOMBAY TO KHADI BUT PAPER ARRANGEM ENT WAS MADE TO SHOW AS IF THEY WERE. ITA NO.105/AHD/2014 6 BEFORE CIT(A) THE ADDITION WAS DELETED ON THE GROU ND THAT THE PURCHASES WERE CONFIRMED BY THE BOMBAY PARTY. HE F URTHER HELD THAT THE APPELLANT HAD GATE PASS DULY ENDORSED BY THE EX CISE AUTHORITIES, THE PAYMENT HAS BEEN MADE THROUGH BANK. THE GOODS PURCH ASES WERE FURTHER PROCESSED AND THE FINAL PRODUCTS HAVE BEEN SOLD BY THE APPELLANT. IT WAS FURTHER HELD IN THE ORDER THAT HA D THE PURCHASES BE NOT MADE THE FINAL PRODUCT COULD NOT HAVE BEEN OBTAINED . BEFORE THE HONOURABLE IT AT THE ORDER OF THE CIT(A) WAS REVERSED AND THAT OF THE AO WAS UPHELD. IT WAS HELD BY THE HONOU RABLE ITAT THAT THE EVIDENCE GIVEN BY THE TRANSPORTER REGARDING ISSUING OF BOGUS RECEIPT WAS MATERIAL AND COULD NOT BE IGNORED. IT WAS HELD THAT THE GENUINENESS OF THE PURCHASES HAD TO BE INDEPENDENTLY PROVED AND NOT MERELY BY INFERENCE. THE AO HAS ACCORDINGLY IMPOSED PENALTY ON THIS ADDI TION. ON EXAMINATION OF ENTIRE FACTS, THE ORDER OF CIT(A) AND THE ORDER OF HONOURABLE ITAT IN THE QUANTUM PROCEEDINGS IT IS SE EN THAT THE FACTS REGARDING PURCHASES FROM BOMBAY COULD NOT BE PROVED EXCEPT FOR THE TRANSPORTATION BILLS. THE ADDITION WAS DELETED BY C IT(A) ON THE GROUND THAT THE OTHER EVIDENCES SUCH AS PRODUCTION, SALE, THE EXCISE RECORDS AND THE FACTS THAT THE PURCHASES AND SALES HAVE NOT BEEN DOUBTED BY THE AO CLEARLY IT INDICATE THAT THE PURCHASES WERE MADE BY THE APPELLANT. THE OBSERVATION OF HONOURABLE ITAT REGARDING THE ONUS ON THE APPELLANT TO PROVE THE TRANSPORTATION IS VERY VALID HOWEVER THE OBSERVATION IS SUFFICIENT TO MAKE THE ADDITION OR D ISALLOWANCE OF PURCHASES BUT THE PENALTY ON THESE FACTS IS NOT JUS TIFIED. THE AO HAS NOT CONCLUSIVELY PROVED THAT THE APPELLANT HAD NOT PURC HASED THESE GOODS BUT MERELY SHOWN IT BY TAKING THE BILLS. THE PURCHA SES WERE EVIDENCED BY EXCISE RECORDS, CORRESPONDING SALES AND THE PROD UCTION REGISTERS. THE AO ALSO HAS NOT POINTED OUT ANY FURTHER FACT TO PROVE THAT THE PURCHASES WERE BOGUS. IN FACT THERE IS NO OTHER FAC T EXCEPT THE STATEMENT OF TRANSPORTER. ON THESE FACTS THE CONCEA LMENT OF INCOME IS NOT CONCLUSIVELY ESTABLISHED. AS POINTED OUT IN THE DISCUSSION ON THE FIRST ISSUE THAT A QUESTION OF LAW HAS BEEN ADMITTED BY HONOURABLE GUJARAT HIGH COURT AGAINST THIS ADDITION ALSO AND THIS FACT ALSO SHOW THAT THE ADDI TION IS DEBATABLE. ITA NO.105/AHD/2014 7 IN VIEW OF THE ABOVE MENTIONED FACTS .AND CIRCUMSTA NCES AND DISCUSSION I AM OF THE CONSIDERED OPINION THAT THE PENALTY OF CONCEALMENT UNDER SECTION 271 (1)(C) IS NOT EXIGIBLE ON THE APPELLANT ON THIS ISSUE. THE SAME IS THEREFORE, DIRECTED TO BE DELETED. TO CONCLUDE THE AO IS DIRECTED TO DELETE THE PENALT Y OF CONCEALMENT ON BOTH THE ISSUES. 6. THE LD.DR RELIED UPON THE ORDER OF THE AO AND C ONTENDED THAT THE AO HAS PROVED ON RECORD THAT THE ASSESSEE HAS SUPPRESS ED ITS PROFIT, AND THEREFORE, RIGHTLY VISITED THE ASSESSEE WITH PENALTY. HE CONT ENDED THAT THE ASSESSEE FAILED TO PROVE ITS PURCHASES AND THEREFORE, EXPEND ITURE CLAIMED ON ACCOUNT OF PURCHASES WAS DISALLOWED TO THE ASSESSEE. 7. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESS EE RAISED TWO FOLD SUBMISSIONS. IN THE FIRST FOLD OF CONTENTIONS, HE S UBMITTED THAT BOTH ADDITIONS MADE BY THE AO WERE DELETED BY THE LD.CIT(A), BUT T HESE WERE RESTORED BY THE TRIBUNAL. THE ASSESSEE HAS CHALLENGED THE ORDER OF THE TRIBUNAL BEFORE THE HONBLE HIGH COURT VIDE TAX APPEAL NO.1612 OF 2010. THE HONBLE HIGH COURT ADMITTED APPEAL OF THE ASSESSEE AND FRAMED QU ESTION OF LAW. HE PLACED ON RECORD COPY OF THE HONBLE HIGH COURTS ORDERS D ATED 24.4.2012 VIDE WHICH THE FOLLOWING QUESTIONS HAVE BEEN ADMITTED FO R CONSIDERATION: THIS APPEAL IS ADMITTED ON THE FOLLOWING SUBSTANT IAL QUESTIONS OF LAW: 1. WHETHER THE TRIBUNAL COMMITTED SUBSTANTIAL ERROR OF LAW IN HOLDING THAT THE ASSESSING OFFICER WAS RIGHT IN PRO JECTING \ BACKWARDS THE SEIZED MATERIALS AND IN ESTIMATING THE UNRECORD ED PRODUCTION FOR TWO MONTHS, VIZ. APRIL AND MAY 1991, PRE-SEARCH PER IOD, FOR DIRECTING ADDITION OF RS.48,24,272/- AS SUPPRESSED PROFIT, ME RELY ON THE BASIS OF ESTIMATION. ITA NO.105/AHD/2014 8 2. WHETHER THE TRIBUNAL COMMITTED SUBSTANTIAL ERROR OF LAW IN HOLDING THAT ADDITION OF RS.51,08,219/- BEING BOGUS PURCHASES WERE RIGHTLY MADE BY THE ASSESSEE. 3. WHETHER THE TRIBUNAL COMMITTED SUBSTANTIAL ERROR OF LAW IN REVERSING THE ORDER OF THE CIT [APPEALS] WITHOUT AN Y DISCUSSION OF FINDING REACHED BY THE SAID AUTHORITY AND FINDING T HE SAME TO BE ERRONEOUS. 8. ON THE STRENGTH OF THIS, HE CONTENDED THAT THE I SSUE IS QUITE DEBATABLE BECAUSE THE LD.CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITION. THE ORDER OF THE LD.CIT(A) HAS BEEN REVE RSED BY THE TRIBUNAL ON THIS ISSUE, BUT AGAIN HONBLE HIGH COURT HAS ADMITT ED THE APPEAL WHICH SUGGESTS THAT QUESTION OF LAW IS INVOLVED. 9. IN HIS NEXT FOLD OF SUBMISSIONS, HE CONTENDED TH AT THE ADDITIONS ARE MADE ON ACCOUNT OF ESTIMATION I.E. DISBELIEVING THE BOOKS OF ACCOUNTS AND OBSERVING THAT THE ASSESSEE MUST HAVE PRODUCED MORE COPPER AND BRASS ALLOY THEN THE ONE REFLECTED IN THE BOOKS. THE AO HAS CAL CULATED SUCH PROFIT AT RS.40,23,570/- WITH RESPECT TO PRE-SEARCG PERIOD A ND RS.68,11,785/- WITH RESPECT TO POST-SEARCH PERIOD. THE LD.CIT(A) DELET ED BOTH THESE ADDITIONS. WHEN THE TRIBUNAL AFFIRMED THESE ADDITIONS, THEN RE DUCED THE QUANTUM TO RS.19,39,418/- QUA PRE-SEARCH PERIOD AS AGAINST RS.40,23,570/- AND RS.28,84,8541/- QUA POST SEARCH PERIOD. THUS, THERE IS CONSIDERABLE R EDUCTION IN THE ESTIMATION OF PROFIT. 10. SIMILARLY, WITH REGARD TO BOGUS PURCHASES, IT W AS CONTENDED BY THE LD.COUNSEL FOR THE ASSESSEE THAT THE SALES HAVE NOT BEEN DISPUTED, MEANING THEREBY, THE ASSESSEE MUST HAVE PURCHASED RAW-MATER IAL. IT COULD NOT SUBSTANTIATE THE PURCHASES OF RAW-MATERIAL. IN OTH ER WORDS, IF PURCHASES CAME FROM A REMAINED TO BE UNPROVED, THEN QUANTITY OF RAW-MATERIAL COULD NOT ITA NO.105/AHD/2014 9 BE DOUBTED AND AT THE MOST PROFIT ELEMENT OF SHOULD BE ADDED. IT IS A DIFFERENT MATTER THAT THE TRIBUNAL HAS DISALLOWED THE TOTAL C LAIM OF PURCHASES. HE FURTHER CONTENDED THAT IN THE CASE OF SISTER CONCER N VIZ. MARDIA COPPER INDUSTRIES FOR ASSTT.YEAR 1992-903, SIMILAR PENALTY AS IMPOSED WHICH WAS DELETED BY THE TRIBUNAL VIDE ITS ORDER DATED 4.5.20 12 PASSED IN ITA NO.2020/AHD/2009. HE PLACED ON RECORD COPY OF THE TRIBUNALS S ORDER. 11. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD. SECTION 271(1)(C) OF THE INCOME TAX ACT, 1 961 HAS DIRECT BEARING ON THE CONTROVERSY. THEREFORE, IT IS PERTINENT TO TAK E NOTE OF THE SECTION. '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B)** ** ** (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 CL AUSE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS 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 O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (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 EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION ITA NO.105/AHD/2014 10 OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O R SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 12. A BARE PERUSAL OF THIS SECTION WOULD REVEAL TH AT 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 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 I 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 ITA NO.105/AHD/2014 11 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 FACTS 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 EXPLANAT ION 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. 13. IN THE LIGHT OF THE ABOVE, IF WE EXAMINE THE FA CTS OF THE PRESENT CASE, THEN IT WOULD REVEAL THAT AS FAR AS ADDITION WITH R ESPECT TO SUPPRESSED PROFIT IS CONCERNED, IT IS AN ESTIMATED ADDITION WHICH WAS SI GNIFICANTLY REDUCED BY THE TRIBUNAL. THIS ISSUE IS A DEBATABLE ISSUE AS THE ADDITION MADE BY THE AO WAS DELETED BY THE LD.CIT(A), AND WHEN THE TRIBUNAL RES TORED THESE ADDITIONS PARTLY, THEN APPEAL OF THE ASSESSEE HAS BEEN ADMITT ED BY THE HONBLE HIGH COURT SUGGESTING THE QUESTION OF LAW IS INVOLVED. IN SUCH TYPE OF ISSUE IT CANNOT BE SAID THAT THE EXPLANATION SUBMITTED BY TH E ASSESSEE IN SUPPORT OF ITS ADDITION AS FALSE, PROVING THE FACT THAT THE ASSESS EE HAS CONCEALED ITS INCOME. SIMILARLY, THE ASSESSEE HAS GIVEN EXPLANATION WITH REGARD TO THE ISSUE OF BOGUS PURCHASES. ITS EXPLANATION WAS ACCEPTED BY THE LD. CIT(A) IN THE QUANTUM APPEAL, BUT SUCH CONCLUSIONS OF THE LD.CIT(A) DID N OT MEET THE APPROVAL OF THE TRIBUNAL. BUT AGAIN, THE HONBLE HIGH COURT HAS AD MITTED QUESTION ON THIS ITA NO.105/AHD/2014 12 ASPECT ALSO. THEREFORE, IT IS ALSO DEBATABLE ISSUE . THE LD.CIT(A) HAS CONSIDERED BOTH THESE ASPECTS IN THE IMPUGNED ORDER AND DELETED THE PENALTY. AFTER GOING THROUGH THE ORDER OF THE LD.CIT(A), WE DO NOT SEE ANY REASON TO INTERFERE IN IT. ACCORDINGLY, THE APPEAL OF THE RE VENUE IS DISMISSED. 14. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 3 RD APRIL, 2017 AT AHMEDABAD. SD/- SD/- ( MANISH BORAD ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER