CIPLA LIMITED, MUMBAI V. DCIT, CENTRAL CIRCLE 2, MUMBAI

ITA 1272/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6387 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-10-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 25-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K SINHA
• Assessee Lawyers: D P BAPAT; D R JAI N
• Keywords: Business income
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI R.S. SYAL, A.M. AND SHRI V. DURGA RAO, J.M. ITA NOS. 1272, 1273, & 1274/M/2009 ASSESSMENT YEARS: 2001-02, 2002-03 & 2003-04 M/S. CIPLA LTD., APPELLANT MUMBAI CENTRAL, MUMBAI 400 008 (PAN AAACC1450B) VS. DY. COMMISSIONER OF INCOME-TAX, RESPONDENT CENTRAL CIRCLE 2, CGO BUILDING, M.K. MARG, MUMBAI 400 020 APPELLANT BY : MR. D.P. BAPAT & D.R. JAIN RESPONDENT BY : MR. A.K. SINHA . O R D E R PER V. DURGA RAO, J.M.: THESE APPEALS FILED BY ONE ASSESSEE ARE DIRECTED A GAINST THE ORDERS OF CIT(A)-CENTRAL - 1, MUMBAI, FOR THE ASSE SSMENT YEARS 2001- 02, 2002-03, AND 2003-04. SINCE COMMON ISSUE IS INV OLVED IN THESE APPEALS, THEY ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. A COMMON GROUND RAISED IN THESE APPEALS ARE IN R ESPECT OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSMENTS IN THIS CASE FOR THE RELEVANT YEARS HAD BEEN ORIGINALL Y COMPLETED UNDER SECTION 143(3). SUBSEQUENTLY THE AO RECEIVED INFORM ATION FROM CENTRAL BOARD OF DIRECT TAXES VIDE LETTER F.NO.414/ 1117/2005-IT(INV- ITA NO. 1272 TO 1274/M/10 CIPLA LTD. 2 I) DATED 18.11.2005 REGARDING ILLICIT PAYMENT MADE BY VARIOUS SUPPLIERS AS ELABORATELY REPORTED IN THE VOLCKER CO MMITTEE REPORT. THE REPORT GAVE DETAILED ACCOUNT OF MANIPULATION OF OIL FOR FOOD PROGRAMME SPONSORED BY UNITED NATIONS (UN) ON HUMANITARIAN CO NSIDERATION, BY SADDHAM HUSSAIN REGIME IN IRAQ. THE KICKBACK POLICY AS PER THE REPORT BEGAN IN MID 1999 WHEN IRAQ STARTED CHARGING TRANSPORTATION FEES WHICH WAS NOT APPROVED BY THE UNITED NATIONS A ND SUCH FEES WERE PAID DIRECTLY TO IRAQI CONTROLLED BANK ACCOUNT OR FRONT COMPANIES OUTSIDE THE IRAQ WHICH DID NOT COME INTO ESCROW ACC OUNTS WHICH HAD BEEN MAINTAINED FOR OIL TRANSACTIONS UNDER THE PROG RAMME. THE REPORT POINTED OUT THAT BY MID 2000 IRAQ HAD STARTED A BRO ADED POLICY TO IMPOSE GENERALLY 10% KICKBACK REQUIREMENT ON ALL HU MANITARIAN CONTRACTS. THIS WAS TERMED AS AFTER SALE SERVICE F EE (ASSF). THE PROVISION FOR ASSF WAS OFTEN INCORPORATED INTO CONT RACT AS THE BASIS TO INFLATE PRICES OF OIL AND TO PERMIT CONTRACTORS TO RECOVER FROM THE UNITED NATIONS ESCROW ACCOUNTS, AMOUNTS THEY HAD PA ID SECRETLY TO IRAQ IN THE FORM OF KICKBACK. THE INFORMATION RECEI VED FROM CBDT BASED ON VOLCKER COMMITTEE REPORT, THE ASSESSEE HAS MADE ASSF PAYMENT OF ` .4,78,198 FOR THE ASST. YEAR 2001-02, ` 11,57,478 FOR THE ASST. YEAR 2002-03, ` 19,53,800 FOR THE ASST. YEAR 2003-04. 4. THE ASSESSEE ALSO SUBMITTED THAT THERE WAS NO EV IDENCE AT ALL THAT THE ASSESSEE WAS INVOLVED IN MAKING SUCH PAYME NTS TO THE THEN IRAQ REGIME. IT WAS POINTED OUT THAT THE ASSESSEE H AD AN AGENCY AGREEMENT DATED 1.4.2001 WITH AN AGENT BASED IN UAE FOR PROMOTION OF EXPORTS IN THE MIDDLE EAST TERRITORY INCLUDING I RAQ AND THE EXPORTS WERE EFFECTED THROUGH A GENUINE COMMERCIAL AGREEMEN T. THE ASSESSEE HAD USED THE SERVICES OF THIS AGENT EVEN PRIOR TO E NTRY INTO THESE FORMAL AGREEMENT. THE ASSESSEE ACCORDINGLY URGED TH AT NO ADDITION COULD BE MADE IN THE ASSESSMENT FOR THE RELEVANT YE ARS. 5. THE AO HOWEVER DID NOT ACCEPT THE EXPLANATION O F THE ASSESSEE. IT WAS OBSERVED BY HIM THAT THE VOLCKER COMMITTEE W AS AN INDEPENDENT COMMITTEE APPOINTED BY UN WHICH HAD GIV EN A CATEGORICAL FINDING WITH THE LIST OF SPECIFIC TRANSACTIONS AND SPECIFIC AMOUNT WITH ITA NO. 1272 TO 1274/M/10 CIPLA LTD. 3 REFERENCE TO WHICH ASSF HAD BEEN PAID WHICH WERE PA TENTLY ILLEGAL. THE ASSESSEE HAD ALSO SUBMITTED THAT THE OC NO.1002 237 IN CASE OF A.Y.2001-02 HAD NOT BEEN EXECUTED BY THE ASSESSEE N OR ANY COMMISSION HAD BEEN DEBITED BUT THE SAME WERE REJEC TED BY THE AO ON THE GROUND THAT THE PAYMENT OF US$ 3087 AS ASSF WAS ESTABLISHED BY DOCUMENTS AND THEREFORE SAME WAS REQUIRED TO BE CONSIDERED FOR ASSESSMENT EVEN IF THE SAME PERTAINED TO SOME DIFFE RENT TRANSACTION. THE AO ACCORDINGLY MADE ADDITIONS OF RS.4,78,198/-; RS.11,57,478/-; AND RS.19,53,800/- IN THE ASSESSMENT FOR ASSESSMENT YEARS 2001-02 TO 2003-04. ON APPEAL, THE CIT(A) CONFIRMED THE ACT ION OF THE ASSESSING OFFICER. 6. THE ASSESSEE CARRIED THE MATTER BEFORE THE ITAT AND THE ITAT CONFIRMED THE ORDER OF CIT(A) BY HOLDING THAT THE C LAIM OF SUCH EXPENDITURE WHICH WAS TO FACILITATE ILLEGAL PAYMENT CAN ALSO BE NOT ALLOWED IN VIEW OF THE EXPLANATION TO SECTION 37(1) AS PER WHICH EXPENDITURE INCURRED FOR ANY PURPOSE WHICH IS AN OF FENCE OR WHICH IS PROHIBITED BY LAW CANNOT BE ALLOWED AS DEDUCTION. 7. TO DECIDE THESE APPEALS, WE REFER THE FACTS FROM THE ASSESSMENT YEAR 2001-02. THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) FOR CLAIMING EXPENSES WHICH WERE FOR MAKING ILLEGAL PAY MENTS. THEREFORE, A SHOW CAUSE NOTICE U/S 274 R.W.S. 271(1)(C) WAS IS SUED TO THE ASSESSEE. THE EXPLANATIONS WERE SUBMITTED BY THE VI DE LETTER DT. 14/3/2008, WHEREIN IT WAS SUBMITTED AS UNDER:- 1. FIRST, OUR SUBMISSION IS THAT THE DISALLOWANCE O F THE ALLEGED ILLEGAL PAYMENT IS BASED ON THE VOLCKER COMMITTEE R EPORT. IN THIS REPORT, IT IS CLEARLY MENTIONED THAT THE FINDING OF KICKBACKS IN THE COURSE OF OIL FOR FOOD PROGRAM DOES NOT NECESSARILY IMPLICATE OR INDICT THE SUPPLIERS OF GOODS OF THE IRAQ GOVERNMEN T. 2. IN OTHER WORDS, THERE IS NO FINDING WHATEVER THA T WE HAVE MADE ANY ILLEGAL PAYMENTS IN THE COURSE OF OR IN OR DER TO EFFECTUATE THE SALES TO THE IRAQ GOVERNMENT. 3. NEXT, NO DEDUCTION HAS BEEN CLAIMED BY US WHATSO EVER IN RESPECT OF SUCH ALLEGED KICKBACKS. OUR ACCOUNTS DO NOT REFLECT ANY SUCH PAYMENTS. IN OTHER WORDS, IT IS OUR SUBMIS SION THAT THE DISALLOWANCE MADE IN THE ASSESSMENT IS OF SUCH AMO UNTS WHICH ITA NO. 1272 TO 1274/M/10 CIPLA LTD. 4 WERE NOT CLAIMED BY US AS DEDUCTION IN THE COMPUTAT ION OF BUSINESS INCOME. 4. WE HAVE FURTHER DEMONSTRATED THAT THE ONLY SELLI NG EXPENSES INCURRED BY US ARE BY WAY OF COMMISSION TO THE AGEN T WITH WHOM WE HAVE DEALT WITH IN THE COURSE OF BUSINESS TRANSA CTIONS EVEN BEFORE THE SALES WERE EFFECTED UNDER THE OIL-FOR-FO OD PROGRAM. WE HAVE FURTHER ESTABLISHED THAT WE HAVE MADE THE COMM ISSION PAYMENTS TO THE AGENT FOR THE SERVICES RENDERED TO US. WE HAVE FURNISHED DOCUMENTARY EVIDENCE IN THIS BEHALF. 5. THE LEARNED CIT(A) HAS OBSERVED THAT THE VOLCKER COMMITTEE HAS INDICTED OUR INVOLVEMENT IN THE KICKBACK PAYMEN TS. THIS FINDING OF THE CIT(A) IS CLEARLY INCONSISTENT WITH THE FINDING OF THE VOLCKER COMMITTEE ITSELF. 8. THE ASSESSEE FURTHER SUBMITTED THAT IT SHOULD NOT B E PENALIZED U/S 271(1)(C) FOR THE FOLLOWING REASONS:- A) WE HAVE SUBMITTED OUR EXPLANATION IN RESPECT OF THE ISSUE ARISING FROM VOLCKER COMMITTEE REPORT. B) OUR EXPLANATION IS BASED ON THE FINDING OF THE V OLCKER COMMITTEE ITSELF THAT THE SELLERS OF GOODS TO THE I RAQ GOVERNMENT ARE NOT NECESSARILY INVOLVED OR INDICTED IN THE KICKBACK PAYMENTS. C) THERE IS NO EVIDENCE OF ANY EXPENDITURE INCURRED BY US TOWARDS THE ALLEGED KICKBACK PAYMENTS. D) THERE IS ALSO NO EVIDENCE OF ANY CLAIM HAVING BE EN MADE BY US FOR THE ALLEGED KICKBACKS. E) THE FINDING OF THE CIT(A) IS INCONSISTENT WITH T HE FINDINGS OF VOLCKER COMMITTEE ITSELF. F) WE HAVE DEMONSTRATED AND SUBSTANTIATED THAT THE ONLY SELLING EXPENSES INCURRED BY US ARE BY WAY OF COMMI SSION TO OUR AGENT FOR THE COMMERCIAL SERVICES RENDERED T O US. 9. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE AO WAS OF THE VIEW THAT THERE IS NO MERIT IN THE SUBMISSIO NS AS WELL AS REASONS OF THE ASSESSEE, THEREFORE, THE AO LEVIED P ENALTY U/S 271(1)(C) BY OBSERVING AS UNDER:- THE ASSESSEE COMPANY IS MERELY IN DENIAL MODE DESPI TE THE SPECIFIC TRANSACTIONS POINTED OUT BY THE VOLCKER CO MMITTEE. THE ASSESSEE HAS NOT DENIED THAT THESE TRANSACTIONS, AS IDENTIFIED VIDE OC NOS., WERE RELATED TO THE GOODS SUPPLIED BY THEM. THE ASSESSEE IS TRYING TO TAKE SHELTER UNDER THE COMMIS SION PAID BY THE AGENTS WHICH ARE STATED TO DEFRAY INCIDENTAL EX PENSES. HOWEVER, A PERUSAL OF THE CONTRACT AGREEMENT REVEAL S THAT THE CONTENTIONS OF THE ASSESSEE COMPANY ARE FRIVOLOUS A ND WITHOUT ANY BASIS. BESIDES EVEN AS PER THE CONTRACTS REVEAL THAT THE PRINCIPAL I.E. THE ASSESSEE COMPANY WAS TO RECEIVE THE PAYMENTS ITA NO. 1272 TO 1274/M/10 CIPLA LTD. 5 DIRECTLY FROM THE CUSTOMERS. AGENT WAS SPECIFICALLY FORBIDDEN TO MAKE COLLECTION OR SETTLEMENT DIRECTLY. THE AGENT W AS HAVING ITS COMMISSION ONLY. THE AGREEMENT FURTHER STATES THAT ALL THE CONTRACTS WILL BE EXECUTED AND ENTERED INTO DIRECTL Y BY THE PRINCIPAL AND AGENT SHALL HAVE NO AUTHORITY TO DEAL WITH THE CUSTOMERS. OBVIOUS THESE TERMS OF REFERENCE IN THE CONTRACT AGREEMENTS RULE OUT THE ROLE OF AGENTS IN MAKING SE TTLEMENTS OR PAYMENTS AND ANY KICKBACK ON THEIR ACCOUNT. SINCE T HE PAYMENTS IN THE NAME OF ASSF IS AN ESTABLISHED FACT AS BROUG HT OUT BY THE VOLCKER COMMITTEE WHICH IS BASED ON AUTHENTIC DOCUM ENTS OF VARIOUS MINISTRIES OF GOVT. OF IRAG, BANKING INSTIT UTIONS ETC. THEREFORE, THE PAYMENTS IN THE NAME OF ASSF HAVE BE EN RECEIVED AND IT IS THE ASSESSEE COMPANY AND NOT THE AGENT HA S MADE THE PAYMENTS. MOREOVER, THE PRINCIPAL IS LIABLE FOR THE ACTS FOR ITS AGENTS EVEN IF NO SPECIFICALLY MENTIONED IN THE CON TRACT, AS IT IS A VICARIOUS LIABILITY OF THE PRINCIPAL. HENCE, THE CO MPANY CANNOT PLEAD IGNORANCE BY DENYING OR SHIFTING THE ILLEGAL ACTS/PAYMENTS TO ITS AGENTS. THEREFORE, I AM CONVINCED THAT THIS IS A FIT CASE F OR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT FOR CONCEALMENT OF INCOME BY FURNISHING OF INACCURATE PARTICULARS BY CLAIMING EXPENSES BY C LAIMING THE SAME AS COMMISSION EXPENSES, WHICH IT HAD KNOWN TO BE FOR ILLEGAL PAYMENTS. THE ASSESSEE COMPANY SUPPLIED GOO DS TO IRAG UNDER THE UN SCHEME, WHEREIN THE AGENTS HAD NO ROLE TO PAY. THE ASSESSEE COMPANY HAD CONTENDED THAT ONLY SELLING EX PENSES INCURRED BY THEM WERE BY WAY OF COMMISSION. THE ASS ESSEE COMPANY HAS FAILED TO EXPLAIN THAT WHY WOULD THE AG ENT PAY ASSF FROM HIS OWN POCKET, WHEN HE HAS NO SAY IN THE DEAL OR TRANSACTION. IT IS ALSO CLEAR THAT THE AGENT HAD NO SAY IN THE MATTER OF THESE TRANSACTIONS, WHICH WERE UNDER THE SUPERVISION OF UN AND THE PAYMENTS WERE MADE BY THE UN. THEREFORE, THE EXPLANATION GIVEN BY THE ASSESSEE COMPANY IS NOT BO NAFIDE MUCH LESS TO SAY ABOUT THEIR DENIAL, DESPITE OVERWHELMIN G EVIDENCE OF ILLEGAL PAYMENTS AS KICK BACKS, AS BROUGHT OUT BY I NDEPENDENT AND IMPARTIAL COMMITTEE APPOINTED BY THE UNITED NAT IONS. HENCE, I HOLD THAT THE ASSESSEE HAS COMMITTED A DEF AULT AS ENVISAGED UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT BY CLAIMING EXPENSES TO THE EXTENT OF RS. 478,198/-, W HICH WERE ON ACCOUNT OF ILLEGAL KICKBACK PAYMENTS MADE AS PAYMEN T OF ASSF, AGAINST THE PROVISIONS OF THE OIL FOR FOOD PROGRAMM E OF THE UNITED NATION. THEREFORE, THE TAX ON THE AMOUNT SOU GHT TO BE EVADED COMES TO RS. 1,89,200/-, WHICH IS A MINIMUM PENALTY LEVIED. 10. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) THE ASS ESSEE CONTENDED THAT THE VOLCKER COMMITTEE HAS NOT INDICTED THE ASS ESSEE COMPANY, ITA NO. 1272 TO 1274/M/10 CIPLA LTD. 6 HENCE, THE FINDING OF THE AO ARE IN CONSISTENT WITH THE EVIDENCE AND THE RECORDS AND AS SUCH NO PENALTY IS LEVIABLE ON T HE ASSESSEE COMPANY. AFTER CONSIDERING THE SUBMISSIONS OF THE A SSESSEE, THE CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO BY HO LDING THAT I AM OF THE CONSIDERED VIEW THAT THE APPELLANT HAS INVOLVED IN MAKING KICKBACK PAYMENTS IN THE FORM OF ASSF WHICH HAVE BEEN TERMED AS ILLEGAL AND AGAINST THE UNITED NATIONS POLICY AND ALSO AGAINST THE INTERNATIONAL LAW AND THEREBY THE APPELLANT HAS COMMITTED DEFAULT OF CONCEALMENT OF INCOME IN TERMS OF SECTION 271(1)(C) BY FURNISHING OF INACCURATE PARTICULARS AND CLAIMING EXPENSES WHICH WERE KNOWN AS ILLEGAL PAYMENTS. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE TRIBUNAL. 11. THE A.R. OF THE ASSESSEE HAS CONTENDED BEFORE U S THAT THE VOLCKER COMMITTEE HAS NOT GIVEN ANY SPECIFIC FINDIN G WHICH INDICTS THE ASSESSEE COMPANY. THE LEARNED AR SUBMITTED THA T THERE IS NEITHER ANY FINDING NOR ANY EVIDENCE WHICH IS MENTI ONED IN THE COMMITTEES REPORT THAT THE ASSESSEE HAS MADE ANY I LLEGAL PAYMENTS. AS REGARDS THE ALLEGATIONS MADE BY THE AO THAT THE ASSESSEE HAD FAILED TO EXPLAIN AS TO WHY AGENTS MAKE ILLEGAL PA YMENTS ON BEHALF OF THE ASSESSEE, THE LEARNED AR SUBMITTED THAT IT DID NOT ADMIT AT ANY TIME THAT THE AGENT HAD MADE THE ILLEGAL PAYMENTS. THE LEARNED AR SUBMITTED THAT THE FINDINGS OF THE AO ARE INCONSIST ENT WITH THE EVIDENCE AND THE RECORDS, THEREFORE, THE PENALTY LE VIED BY THE AO MAY BE CANCELLED. 12. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE PAYMENTS TO THE IRAQ GOVERNMENT WHICH IS N OT AN OFFENCE IN INDIA. THEREFORE PENALTY CANNOT BE LEVIED. THE LEARNED COUNSEL FOR THE ASS ESSEE RELIED IN THE CASE OF ACIT VS. VIP INDUSTRIES 122 TTJ (MUM)289 FOR THE PROPOSITION THAT THE CONFIRMATION OF THE ADDITION BY THE TRIBUNAL IN QUANTUM PROCEEDINGS CANNOT MEAN THAT THE PENALTY AUTOMATICA LLY CONFIRMED. THE DECISION RELIED UPON BY THE LEARNED COUNSEL HAS NO APPLICATION TO THE FACTS OF THE CASE ON HAND. ITA NO. 1272 TO 1274/M/10 CIPLA LTD. 7 HE FURTHER RELIED UPON THE DECISION OF SHIVLAL TAK VS. CIT 251 ITR 373 (RAJ). THE ABOVE CASE RELATING TO INVO KING OF EXPLN. 1 TO SECTION 271(1)(C) OF THE ACT. THEREFORE IT IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS 322 ITR 158 (SC) . THIS DECISION OF THE HONBLE SUPREME COURT IS NOT A PPLICABLE TO THE FACTS OF THE CASE FOR THE REASON THAT THE DETAILS S UBMITTED BY THE ASSESSEE ARE NOT CORRECT. THE LEARNED AR RELIED ON THE DECISIO N IN THE CASE OF DHEERAJ LAL MANGAL SHAH VS. ITO (2010) 125 ITD 313 (AHMD) ( TM) FOR THE PROPOSITION THAT PENALTY PROCEEDINGS ARE DIFFERENT FROM ASSESSMENT PROCEEDINGS AND THE ASSESSEE IS ENTITLED TO RENDER FRESH EXPLANATION. THE FACTS OF THE PRESENT CASE IS ENTIRELY DIFFERENT FROM THE ABOVE CASE AND THEREFORE IT IS NOT APPLICABLE TO THE CASE ON H AND. 13. ON THE OTHER HAND, THE LEARNED DR, ON THE OTHER HAND, HAS RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 14. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD. THE ADMITTED FACT IS THAT THE V OLCKER COMMITTEE IN ITS SUMMARY OF REPORT HAS CLEARLY MENTIONED THAT IT HAS SEGREGATED ILLICIT PAYMENT MADE IN CONNECTION WITH THE OIL AND HUMANITARIAN CONTRACTS UNDER THE PROGRAMMES. OIL SURCHARGES WERE PAID IN CONNECTION WITH THE CONTRACTS AND HUMANITARIAN KICK BACKS WERE PAID. THE TABLE CLEARLY IDENTIFY THAT HOW MUCH WAS PAID T O THE GOVT. OF IRAQ WITH RESPECT TO PARTICULAR PROGRAMME CONTRACTS AND THE PRINCIPLE BASIS FOR THIS ILLICIT PAYMENT DATA IS THE INFORMAT ION RECEIVED FROM VARIOUS MINISTRIES OF GOVERNMENT OF IRAQ AS WELL AS DATA RETRIEVED FROM NUMEROUS BANKING INSTITUTIONS AND IN SOME CASE S FROM THE COMPANY CONTRACTORS THEMSELVES. WE FIND THAT THE CO MMITTEE IN ITS REPORT HAS CLEARLY INDICATED THE ASSESSEE COMPANY W ITH REGARD TO THE TRANSACTIONS CARRIED OUT BY IT IN SUPPLY OF GOODS T O THE GOVT. OF IRAQ ITA NO. 1272 TO 1274/M/10 CIPLA LTD. 8 AND THE KICKBACKS IN THE FORM OF ASSF WERE PAID WHI CH HAS BEEN TERMED AS ILLICT PAYMENTS. THE ASSESSEE ALSO NOT DE NIED THE SUPPLY OF GOODS WITH RESPECT OF THE TRANSACTIONS AS MENTIONED IN THE VOLCKER COMMITTEE REPORT. THE ASSESSEE IS ONLY DENYING TO H AVE MADE ANY KICKBACK PAYMENTS. BUT SINCE THERE IS A CLEAR INDIC TION BY THE VOLCKER COMMITTEE IN ITS REPORT ABOUT THE INVOLVEMENT OF TH E ASSESSEE COMPANY WHICH IS BASED ON VARIOUS GOVT. DOCUMENTS A ND TAKING INTO ACCOUNT THE DATA FROM BANKING INSTITUTIONS. THE ITA T IN THE QUANTUM PROCEEDINGS CONFIRMED THE DISALLOWANCE MADE BY THE REVENUE AUTHORITIES ON THE FACTUAL ASPECTS AS THE THERE HAS BEEN CLEAR CUT INDICTION OF THE ASSESSEE COMPANY BY THE VOLCKER CO MMITTEE FOR MAKING ILLICIT PAYMENTS WHICH WERE FURTHER AUTHENTI CATED BY VARIOUS DOCUMENTS/INFORMATIONS RECEIVED FROM MINISTRIES OF GOVT. OF IRAQ AND THE INFORMATION RETRIEVED FROM VARIOUS BANKING INST ITUTIONS THERE IS NO SCOPE FOR GOING AGAINST SUCH FINDING UNLESS THER E IS A EVIDENCE WHICH CONTROVERTS SUCH FINDING. IN THIS CASE, THE A SSESSEE HAS PAID ASSF PAYMENTS TO IRAQ GOVERNMENT THROUGH HIS AGENT AND THE SAME IS CLAIMED IN ITS RETURN OF INCOME AS COMMISSION PAYME NT AND CLAIMED AS EXPENDITURE. THEREFORE, THE ASSESSEE HAS NOT ST ATED CORRECT FACTS BEFORE THE A.O. AND CLAIMED THE COMMISSION AMOUNT A S AN EXPENDITURE AND COMMITTED THE CONCEALMENT. IT IS P ERTINENT TO NOTE THAT WHETHER THE PAYMENT DIRECTLY MADE BY THE ASSES SEE OR THROUGH HIS AGENT, IS IMMATERIAL. THE ONLY ISSUE FOR CONSID ERATION TO INVOKE SECTION 271(1)(C) IS WHETHER THE ASSESSEE HAS CONCE ALED THE INCOME OR NOT ? IT IS A FACT THAT THE ASSESSEE HAS CONCEALED THE ASSF PAYMENT WHICH IS AS STATED HEREIN ABOVE. IT IS ALSO IMMATE RIAL THAT WHETHER THE ILLEGAL PAYMENT MADE BY THE ASSESSEE TO THE IRA Q GOVERNMENT AMOUNTING TO OFFENCE OR NOT TO INVOKE SECTION 271(1 )(C). THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE AO HAS RIGHTLY LEVIED PENALTY U/S 271(1)(C) OF THE ACT ON THE GROUND THAT THE ASSESSE E COMMITTED DEFAULT OF CONCEALMENT OF INCOME BY FURNISHING OF INACCURAT E PARTICULARS AND CLAIMING EXPENSES WHICH WERE KNOWN ILLEGAL PAYMENTS . THEREFORE, WE ITA NO. 1272 TO 1274/M/10 CIPLA LTD. 9 UPHOLD THE ORDER OF CIT(A) IN CONFIRMING THE PENALT Y LEVIED BY THE AO IN THE YEARS UNDER CONSIDERATION. 15. SINCE THE FACTS IN ASSESSMENT YEAR 2002-03 & 20 03-04 ARE MATERIALLY IDENTICAL TO THAT OF ASSESSMENT YEAR 200 1-02, WE RESPECTFULLY FOLLOW THE CONCLUSIONS DRAWN THEREIN A ND IN THE LIGHT OF THAT WE UPHOLD THE ORDERS OF THE CIT(A) IN ASSESSME NT YEAR 2002-03 AND & 2003-04 ALSO IN CONFIRMING THE PENALTIES LEVI ED BY THE AO IN THOSE YEARS. 16. IN THE RESULT, THE THREE APPEALS UNDER CONSIDER ATION ARE DISMISSED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF NOVEMBER, 2010. SD/- SD/- (R.S. SYAL) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 26 TH NOVEMBER, 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, C BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. *GPR ITA NO. 1272 TO 1274/M/10 CIPLA LTD. 10 S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 16/11/10 SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR 18/11/10 SR.P.S. 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. 6. KEPT FOR PRONOUNCEMENT ON 26/11/10 SR. P.S. 7. FILE SENT TO THE BENCH CLERK 26/11/10 SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER