M/s Parisons Roller Flour Mills P.Ltd, Calicut V. ACIT, Calicut

ITA 131/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58312 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 06-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 19-02-2010
• Court: TRIBUNAL
• Department Lawyers: R SIVAKUMAR
• Assessee Lawyers: A S NARAYANAMOORTHY
• Keywords: Bogus purchase; Business income; Search and seizure
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NOS. 125 TO 131/COCH/2010 ASSESSMENT YEARS : 1998-99 TO 2004-05 PARISONS ROLLER FLOUR MILLS (P) LTD., CHEROOTY ROAD, CALICUT-32. [PAN: AACCP 1589L] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-II, CALICUT (APPELLANT) ( RESPONDENT) ASSESSEE BY SHRI A.S.NARAYANAMOORTHY, CA REVENUE BY SHRI R.SIVAKUMAR, JR. DR DATE OF HEARING 06/03/2012 DATE OF PRONOUNCEMENT 9/03/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: ALL THESE APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE COMMON ORDER DATED 04-11-2009 PASSED BY THE LD. CIT(A)-I, KOCHI AND THEY RELATE TO THE ASSESSMENT YEARS 1998-99 TO 2004-05. 2. THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT BY THE ASSESSING OFFICER FOR ALL THESE YEARS, HAVING BEEN CONFIRMED BY THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. SINCE THE ISSUE URGED IN ALL THESE APPEALS IS IDENT ICAL IN NATURE AND IS ARISING OUT OF THE IDENTICAL SET OF FACTS, THEY WERE HEARD TOGETHER AN D ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. I.T.A. NOS. 125 -131/COCH/2010 2 3. IN THE PENALTY PROCEEDINGS, THE ASSESSING OFFICE R LEVIED A PENALTY U/S. 27(1)(C) IN ALL THE YEARS UNDER CONSIDERATION AS GIVE BELOW:- A.Y. 1998-99 RS. 3,20,320/- A.Y. 1999-00 RS. 8,72,940/- A.Y. 2000-01 RS.11,28,300/- A.Y. 2001-02 RS.10,95,367/- A.Y. 2002-03 RS.11,86,005/- A.Y. 2003-04 RS. 8,22,511/- A.Y. 2004-05 RS. 9,94,141/- 4. THE FACTS WHICH LED TO THE LEVY OF PENALTY ARE S TATED IN BRIEF. THE ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE A ND SALE OF WHEAT PRODUCTS. THE DEPARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATION S U/S. 132 OF THE ACT IN THE HANDS OF THE COMPANY AND ITS DIRECTORS ON 08-01-2004. PRIOR TO THE SEARCH, THE ASSESSMENTS RELATING TO THE ASSESSMENT YEAR 1998-99 TO 2000-01 HAD BEEN COMPLETED U/S. 143(3) OF THE ACT. FOR THE ASSESSMENT YEARS 2001-02 AND 2002-03, NOTICE U/S. 143(2) HAD BEEN ISSUED AND THE ASSESSMENTS WERE PENDING. CONSEQUENT TO THE SEARCH OPERATIONS, ALL THOSE PENDING ASSESSMENTS GOT ABATED. THE ASSESSMENTS OF ALL THE YEARS UNDER CONSIDERATION WERE COMPLETED U/S. 153A OF THE ACT. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE DID NOT MAINTAIN PROPER R ECORDS FOR ACCOUNTING THE QUANTITY DETAILS INCLUDING PRODUCTION LOSSES ON A DAY TO DAY BASIS. THE WASTAGE DECLARED BY THE ASSESSEE WAS FOUND TO BE IN EXCESS AND THE SAME HAS RESULTED IN CONCEALMENT OF INCOME. IT WAS ALSO NOTICE THAT THE ASSESSEE DID NOT MAINTA IN STOCK RECORDS IN RESPECT OF THE EMPTY GUNNY BAGS PURCHASED AND USED BY IT. IN VIEW OF THE ABOVE DISCREPANCIES, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKING ADDITION TOWARDS VALUE OF EXCESS WASTAGE CLAIMED AND ALSO INCOME FROM THE SALE OF EMPTY GUNN Y BAGS. THE ASSESSEE CHALLENGED THESE ADDITIONS BEFORE THE LD. CIT(A) AND GOT RELIE F. HOWEVER, IN THE APPEAL FILED BY THE REVENUE CHALLENGING THE ORDER OF THE LD. CIT(A), TH E TRIBUNAL REVERSED THE ORDER OF THE LD. CIT(A) AND CONFIRMED THE ADDITIONS. THE ASSESS EE CARRIED THE MATTER IN APPEAL BEFORE THE HONBLE HIGH COURT AND IT IS CLAIMED THAT IT HA S GOT PARTIAL RELIEF, WHICH FACT WE WILL DISCUSS LATER. I.T.A. NOS. 125 -131/COCH/2010 3 5. ON RECEIPT OF ORDER OF THE TRIBUNAL, THE AO INITIATED PENALTY PROCEEDING AND LEVIDED PENALTIES U/S 271(1)(C) OF THE ACT, WHICH WAS ALSO CONFIRMED BY LD CIT(A). HENCE THE ASSESSEE IS IN APPEAL BEFORE US IN ALL THESE YEARS. 6. ACCORDING TO LD A.R, BOTH THE ADDITIONS CONF IRMED BY THE TRIBUNAL ARE ESTIMATED ADDITIONS AND HENCE THERE IS NO SCOPE FOR LEVYING P ENALTY U/S 271(1)(C) OF THE ACT. HE FURTHER SUBMITTED THAT THE DEPARTMENT DID NOT UNEAR TH ANY INCRIMINATING MATERIALS SUGGESTING SUPPRESSION OF INCOME. HE FURTHER SUBMI TTED THAT THE PRODUCTION PROCESS CARRIED ON BY THE ASSESSEE IS CONTINUOUS PROCESS AND HENCE IT WILL NOT BE POSSIBLE TO MAINTAIN QUANTITY RECORD IN BETWEEN THE PROCESSES. THE WASTAGE LOSS DECLARED BY THE ASSESSEE WAS WELL WITHIN THE LIMIT OF INDUSTRIAL AV ERAGE. BY PLACING RELIANCE ON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE O F CIT VS. P.K.NARAYANAN (238 ITR 905), THE LD A.R SUBMITTED THAT THE PRESUMPTION OF CONCEALMENT OF INCOME WITH REGARD TO THE ADDITIONS MADE IN THE ASSESSMENT PROCEEDINGS CA N BE REBUTTED. HE FURTHER SUBMITTED THAT THE PENALTY CANNOT BE LEVIED IF TWO VIEWS ARE POSSIBLE AND WHEN NO CLEAR AND DEFINITE INFERENCE CAN BE DRAWN. IN SUPPORT OF THE SAID SUB MISSION, HE PLACED RELIANCE ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF DURGA KAMAL RICE MILLS VS. CIT (265 ITR 25). HE SUBMITTED THAT THE AO HAS ONLY ES TIMATED THE WASTAGE CLAIM OF THE ASSESSEE AND THE SAME HAS BEEN MODIFIED BY THE HON BLE KERALA HIGH COURT. LD A.R DREW OUR ATTENTION THAT THE OVERALL WASTAGE PERCENT AGE WAS FIXED AT 2% BY THE HONBLE JURISDICTIONAL HIGH COURT. 7. ON THE CONTRARY, THE LD D.R SUBMITTED THAT T HE ASSESSEE HAS CONCEALED ITS INCOME AND HENCE PENALTY IS EXIGIBLE IN THE INSTANT CASES. HE SUBMITTED THAT THE CASE FOR IMPOSITION OF PENALTY IS REINFORCED BY THE FACT THA T THE HONBLE HIGH COURT HAS CONFIRMED THE ADDITION ON ACCOUNT OF WASTAGE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND C AREFULLY PERUSED THE RECORD. THE BACK GROUND RELATING TO WASTAGE CLAIM IS NARRATED BY THE AO IN THE PENALTY ORDER AS UNDER:- I.T.A. NOS. 125 -131/COCH/2010 4 4. THE MANUFACTURING PROCESS OF WHEAT CONSISTS OF THREE STAGES, VIZ. CLEANING, CONDITIONING AND MILLING. IN THE CLEANIN G PROCESS, THE PHYSICAL IMPURITIES LIKE DIRT, CHAFF, SMALL STONES ETC. ALON GWITH WHEAT DUST, SMALL PIECES OF WHEAT GRAINS AND BROKEN WHEAT ARE REMOVED. THIS CLEANING LOSS, WHICH IS NORMALLY CALLED REFRACTION LOSS RANGES FROM 2% TO 3% OF THE INPUT WEIGHT OF WHEAT, DEPENDING ON THE QUALITY OF WHEAT. THE RE FRACTION LOSS IS COLLECTED IN GUNNY BAGS WHICH ARE IMMEDIATELY WEIGHED AND DAILY RECORD OF THE SAME IS KEPT. THIS REFRACTION LOSS IS SOLD AS CATTLE FEED , BIRD FEED OR EVEN FOR CONSUMPTION OF THE POOR. THE CONDITIONING PROCESS IS A PROCESS OF ADDITION OF WATER TO THE CLEAN WHEAT WITH THE OBJECT OF PHYSIC AL CONDITIONING OF THE WHEAT GRAINS THAT WOULD PERMIT VARIOUS MILLING OPERATIONS TO BE PERFORMED WITH MAXIMUM EFFICIENCY. IT ALSO INVOLVES ADJUSTMENT OF THE MOISTURE CONTENT OF THE GRAIN BY A CONTROLLED HEATING, PROCESS. THE E XTENT OF WATER ADDED RANGES FROM 2.5% TO 4% OF THE WEIGHT OF CLEANED WHEAT AFTE R REFRACTION DEPENDING ON THE QUALITY OF WHEAT IN REGARD TO THE MOISTURE C ONTENT. THE MOIST WHEAT IS ALLOWED TO SETTLE FOR ABOUT 24 HOURS DEPENDING ON T HE REQUIRED MOISTURE CONTENT AND HARDNESS OF THE WHEAT GRAINS. IN THE M ILLING PROCESS, THE MOIST WHEAT IS GROUND TO FINAL PRODUCTS LIKE MAIDA, SOOJI , ATTA, BRAN AND FLAKES. DURING THE PROCESSES OF CONDITIONING AND MILLING, T HE WHEAT GRAINS GAIN IN WEIGHT DUE TO THE ADDITION OF WATER. HOWEVER, IN T HE MILLING PROCESS THERE WOULD BE SOME LOSS IN WEIGHT DUE TO LOSS OF VISIBLE AND INVISIBLE PARTICLES. SUCH LOSSES ARE, HOWEVER, VERY SMALL AND NOT MORE T HAN 0.5% WEIGHT OF THE WHEAT. IN THE CASE OF THE ASSESSEE, THE COMPANY H AS NOT BEEN MAINTAINING DAILY RECORD OF REFRACTION LOSS. 9. IT IS A SETTLED PROPOSITION OF LAW THAT THE ADDITIONS MADE IN THE ASSESSMENT PROCEEDING HAS TO BE EXAMINED AFRESH IN THE PENALTY PROCEEDING. HOWEVER, A PRESUMPTION ABOUT CONCEALMENT IS PLACED UPON THE AS SESSEE UNDER EXPLANATION 1 TO SEC. 271, WHICH READS AS UNDER:- EXPLANATION 1 WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDE R 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 COMMISSIONER TO BE FALSE, 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 AND MATERI AL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, I.T.A. NOS. 125 -131/COCH/2010 5 THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING TH E TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PUR POSES OF CLAUSE (C) OF THIS SUB- SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 10. NOW WE SHALL EXAMINE THE EXPLANATION OFFERE D BY THE ASSESSEE. FROM THE PENALTY ORDER, WE NOTICE THAT THE ASSESSEE HAS FILED A REPL Y ON 28.7.08. THE RELEVANT OBSERVATIONS OF THE AO ARE EXTRACTED BELOW:- THE SUM AND SUBSTANCE OF THE DEFENCE RAISED BY THE ASSESSEE IS THAT THE ADDITIONS ON ACCOUNT OF EXCESS WASTAGE WAS MADE BY THE DEPARTMENT ON AN ESTIMATED BASIS ONY AND NOTHING CO NCRETE WAS FOUND BY THE DEPARTMENT EITHER IN THE COURSE OF SEARCH OR AFTER THE SEARCH AND THAT THERE WAS NO WILFUL CONCEALMENT OF FACTS OR FI LING OF INACCURATE PARTICULARS BY THE ASSESSEE. THE ASSESSEES REPLY WAS SILENT WITH REGARD TO THE ADDITIONS MADE IN RESPECT OF GUNNY BAGS. DURING THE COURSE OF ARGUMENTS, THE LD A.R SUBMITTE D THAT THE ASSESSEE DISCHARGED THE BURDEN PLACED UPON IT UNDER EXPLANATION 1 TO SEC. 2 71. HOWEVER, ON A CAREFUL READING OF THE EXPLANATION FURNISHED BY THE ASSESSEE, WE FIND THAT THE SAID EXPLANATION IS GENERAL IN NATURE, I.E. THAT THE ASSESSEE HAS FAILED TO EXPLAI N THE ADDITIONS BY MAKING REFERENCE TO THE FACTS PERTAINING TO IT. DURING THE COURSE OF ARGUME NTS, THE LD A.R CARRIED US THROUGH THE INDUSTRY AVERAGE, THE LOSS DETAILS IN OTHER SISTER CONCERNS ETC. HOWEVER, THESE EXPLANATIONS WERE NOT FURNISHED BEFORE THE AO AND F URTHER THEY ARE STILL IN GENERAL IN NATURE. HENCE WE ARE OF THE VIEW THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE OBLIGATION PLACED UPON IT UNDER EXPLANATION 1 CITED SUPRA. 11. NOW LET US EXAMINE, WHETHER THE ADDITION RE LATING TO EXCESS WASTAGE IS MERE AN ESTIMATED ADDITION NOT EXIGIBLE FOR PENALTY. ON A CAREFUL PERUSAL OF THE RELEVANT ASSESSMENT ORDER, WE NOTICE THAT THE AO HAS CORROBO RATED THE CONCEALMENT OF INCOME IN THE FORM OF EXCESS WASTAGE WITH SOME MATERIAL. THE RELEVANT OBSERVATIONS ARE EXTRACTED BELOW:- THE EXCESS WASTAGE SHOWN ON 180.756 MT AT THE AVER AGE RATE OF RS. 7,789 PER MT WOULD WORK TO RS. 14,07,908, WHI CH IS BROUGHT TO TAX AS SUPPRESSION OF PRODUCTION AND CO NCEALMENT OF INCOME BY THE ASSESSEE. THERE WERE EVIDENCES O F UNACCOUNTED I.T.A. NOS. 125 -131/COCH/2010 6 SALE IN THE FORM OF LARGE NUMBER OF MISSING SERIAL NUMBERS ON SALES PRINTED AS ESTIMATES IN THE ASSESSEES COMP UTER AT THE CORPORATE OFFICE OF THE ASSESSEE GROUP. SHRI NK M OHAMMED ALI, MG. DIRECTOR OF ALL THE COMPANIES OF THE GROUP INCLUDING THE ASSESSEE COMPANY COULD NOT GIVE ANY SATISFACTORILY EXPLANATION ON SUCH MISSING SERIAL NUMBERS ON ESTIMATES IN TH E BOOKS OF ACCOUNT OF ANY OF THE CONCERN OF THE GROUP. THE DE TAILS OF MISSING SERIAL NUMBERS ON ESTIMATES CANNOT HOWEVER BE LINKED TO ANY PARTICULAR CONCERN. IT IS ALSO SEEN THAT SUPPR ESSION OF PRODUCTION BY CLAIMING BOGUS WASTAGE IS RELATABLE P ARTLY TO BOGUS PURCHASES AND PARTLY TO UNACCOUNTED SALES. THESE OBSERVATIONS OF THE AO SHOW THAT THERE WAS CO NCEALMENT OF INCOME AND THE ASSESSEE HAS FAILED TO REBUT THE ABOVE SAID OBSERVA TIONS. IN THE ABSENCE OF PROPER MATERIALS, THE AO WAS CONSTRAINED TO ESTIMATE THE Q UANTUM OF CONCEALMENT. THUS, IT IS NOT THE CASE OF MERE ESTIMATE WITH OUT ANY BASIS, A S CONTENDED BY THE ASSESSEE, BUT A CASE OF ESTIMATION OF INCOME, CONCEALMENT OF WHICH GOT C ORROBORATED. IN OUR VIEW, IT IS ALSO NOT A CASE, WHERE TWO VIEWS ARE POSSIBLE. 12. WE HAVE GONE THROUGH THE ORDER OF LD CIT(A) . FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF HIS ORDER. I HAVE CAREFULLY CONSIDERED THE RELEVANT FACTS AN D PROVISIONS OF LAW WITH REGARD TO THE ISSUE INVOLVED. I FIND THAT THE ISSU E OF WASTAGE IS INVOLVED IN ALL THE ASSESSMENT YEARS AND ISSUE OF GUNNY BAGS IS ALS O INVOLVED IN ALL ASSESSMENT YEARS EXCEPT A.Y. 2004-05. THE ASSESSING OFFICER H AS IMPOSED PENALTY BY REFERRING TO THE OBSERVATIONS IN THE ASSESSMENT ORD ER AND OBSERVATIONS OF THE HONBLE ITAT WHEREIN THE ADDITIONS HAVE BEEN CONFIR MED. THE HONBLE ITAT HAS DISCUSSED THE ISSUES IN DETAIL IN THE ORDE R. IT IS SEEN THAT THE ASSESSEE WAS NOT MAINTAINING THE REQUISITE DAY TO DAY RECORDS TO ESTABLISH THE WASTAGE CLAIMED BY IT. THIS WAS CONFIRMED BY SHRI FAROOQ AHMED, OFFICE ASSISTANT OF THE APPELLANT, IN HIS STATEMENT. IT I S EXCLUSIVELY IN THE DOMAIN OF THE APPELLANT TO HAVE MAINTAINED THE SPECIFIC RECOR DS TO ESTABLISH THE GENUINE NATURE OF HUGE CLAIM OF WASTAGE IN ALMOST ALL THE A SSESSMENT YEARS AND, THEREFORE, THE ONUS OF ESTABLISHING GENUINENESS OF CLAIM OF WASTAGE WAS SOLELY ON THE APPELLANT. THE HONBLE ITAT HAS RIGHTLY OBS ERVED THAT THE FLOOR LEVEL RECORDS MAINTAINED BY THE APPELLANT WERE NOT SUFFIC IENT TO ESTABLISH THAT THE QUANTITATIVE PARTICULARS FURNISHED BY THE APPELLANT WERE BEYOND QUESTION. IT WAS DURING THE COURSE OF SEARCH ACTION THAT IT WAS DISCOVERED THAT FLOOR LEVEL RECORDS OF THE APPELLANT WERE NOT FLAWLESS. THE AP PELLANT OUGHT TO HAVE MAINTAINED METICULOUS RECORDS FOR MOVEMENT OF STOCK FROM TIME TO TIME, AND, AT EVERY STAGE, LOSS OR GAIN IN QUANTITY OUGHT TO H AVE BEEN RECORDED ON DAY TO I.T.A. NOS. 125 -131/COCH/2010 7 DAY BASIS. IN FACT, INSTEAD OF MAINTAINING SUCH ME TICULOUS RECORDS, WHICH WAS ESSENTIAL FOR THE APPELLANT, THE APPELLANT MAINTAIN ED RECORDS IN A ROUTINE MANNER AND APPROXIMATIONS AND ESTIMATIONS HAVE BEEN DONE BY THE APPELLANT ITSELF. MAINTENANCE OF RECORDS IN SUCH A DEFECTIVE MANNER BY THE APPELLANT CANNOT BE FOR ANY OTHER REASON BUT WITH A MOTIVE TO CLAIM EXCESS WASTAGE AND THIS VIEW HAS TO BE TAKEN UNLESS AND OTHERWISE DISP ROVED BY THE APPELLANT. IT IS A MATTER OF FACT THAT BY MAINTAINING RECORDS IN SUCH A MANNER IT WAS THE APPELLANT WHO WAS TO GAIN AND THEREFORE, INTENT AND MOTIVE FOR THE SAME IS QUITE APPARENT. THE CASE OF THE APPELLANT IS THERE FORE, INTENT AND MOTIVE FOR THE SAME IS QUITE APPARENT. THE CASE OF THE APPELL ANT IS THEREFORE SQUARELY COVERED BY EXPLANATION 1 TO 271(1)(C) OF THE I.T. A CT AS HAS BEEN RIGHTLY POINTED OUT BY THE ASSESSING OFFICER. 8.1. THE LEARNED COUNSEL FOR THE APPELLANT HAS REL IED UPON A NUMBER OF CASES WHEREIN IT HAS BEEN HELD THAT ADDITION MADE ON ESTI MATE BASIS WOULD NOT ATTRACT PENALTY U/S. 271(1)(C). THESE DECISIONS AR E BASICALLY REFERRING TO MERE ESTIMATES WHEREIN THE ASSESSEES WERE MAINTAINING A REASONABLE RECORD WHICH WAS NOT THE CASE OF THE APPELLANT, AS HAS BEEN RIGH TLY OBSERVED BY THE HONBLE ITAT. ON THE CONTRARY, I FIND THAT THE DECISION OF THE HONBLE SUPREME COURT (SUPRA) 291 ITR 518 RELIED UPON BY THE LEARNED COUN SEL FOR THE APPELLANT JUSTIFIES THE IMPOSITION OF PENALTY IN THE APPELLAN TS CASE. THE CASE OF THE APPELLANT JUSTIFIES THE IMPOSITION OF PENALTY IN TH E APPELLANTS CASE. THE CASE OF THE APPELLANT WAS NOT OF MERE NEGLIGENCE BUT A D ELIBERATE ACT TO KEEP DEFECTIVE RECORDS AND CLAIM WASTAGE ON ESTIMATE BAS IS. THE APPROACH OF THE ASSESSING OFFICER IN THE MATTER IS FAIR AND OBJECTI VE AS REQUIRED IN THE ABOVE DECISION OF THE APEX COURT. THE RECORDS MAINTAINED BY THE APPELLANT WERE DELIBERATELY KEPT DEFECTIVE IS APPARENT FROM THE FA CT THAT AT NO POINT OF TIME, THE APPELLANT SHOWED GAIN ARISING FROM THE CONDITIO NING PROCESS WHEREIN WATER IS ADDED TO THE CLEANED WHEAT TO RAISE THE MO ISTURE AND SOFTEN THE HARDNESS OF WHEAT. ANOTHER DECISION OF THE HONBLE SUPREME CODURT (SUPRA) IN 292 ITR 11 RELIED UPON BY THE LEARNED COUNSEL FO R THE APPELLANT WAS ALSO OF NOT MUCH HELP TO THE APPELLANT FOR THE REASONS STAT ED ABOVE AND FROM THE FACT THAT ALL MATERIAL FACTS RELATING TO THE PROCESS OF MANUFACTURING AND THE COMPUTATION OF INCOME DERIVED BY THE APPELLANT FROM THE SAME ARE NOT DISCLOSED TRUTHFULLY BY THE APPELLANT AND THERE WAS NO SATISFACTORY EXPLANATION FOR THE SAME. THE CASE OF THE APPELLAN T WAS OF GROSS NEGLIGENCE AND DELIBERATE ACT OF MAINTAINING DEFECTIVE RECORDS AND IN MOST OF THE ASSESSMENT YEARS BUSINESS INCOME SHOWN BY THE APPEL LANT WAS LESS THAN 80% OF BUSINESS INCOME DETERMINED AFTER THE ADDITIONS. I, THEREFORE, FIND THAT THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE LEARNED COUNSEL FOR THE APPELLANT WERE NOT APPLICABLE IN THE CASE OF THE APPELLANT. IN PREFERENCE TO THE SAME, THE FOLLOWING JUDICIAL PRONOUNCEMENTS JUSTIFIED IMP OSITION OF PENALTY IN THE APPELLANTS CASE: I.T.A. NOS. 125 -131/COCH/2010 8 1. CIT VS. SWARUP COLD STORAGE & GENERAL MILLS (198 2) 136 ITR 435 (ALL.) - HELD THAT EVEN IF THE DIFFERENCE BETWEEN THE INCOME RETURNED AND THAT ASSESSMENT HAS BEEN MADE DUE TO AN ESTIMATE, THE AP PLICABILITY OF THE EXPLANATION WILL NOT BE EFFECTED. 2. ADDL. CIT VS. SOUTH GOBINDPUR COLLIERY CO. (197 9) 119 ITR 472 (PART) HELD THAT EVEN WHERE INCOME IS ESTIMATED AND BECAUS E OF ADDITIONS MADE INCOME RETURNED FALLS BELOW 80 PER CENT OF INCOME A SSESSED, EXPLANATION IS APPLICABLE. 3. ADDL. CIT VS. LAKSHMI COLD STORAGE CO. LTD. (1 984) 146 ITR 492 (ALL.) HELD THAT EVEN WHERE ADDITIONS HAD BEEN MADE TO THE RETURNED INCOME ON THE BASIS OF ESTIMATE, THE EXPLANATION IS ATTRACTED AND THE PENALTY IS LEVIABLE. 4. ADDL. CIT VS. D.D. LAMBA & CO. (1981) 128 ITR 564 (ALL.) HELD THAT PENALTY IS LEVIABLE UNDER EXPLANATION TO SEC. 271(1 )(C) EVEN WHERE ASSESSMENT IS MADE ON ESTIMATE BASIS. 5. CIT VS. BEHRULAL SHRIKISHAN (1984) 145 ITR 805 (M.P.) DEPARTMENT MADE A SUBSTANTIAL ADDITION TO THE INCOME RETURNED BY THE ASSESSEE. THE COURT HELD THAT AFTER THE INSERTION OF THE EXPLANAT ION. THE ONUS LIES ON THE ASSESSEE TO PROVE THAT THERE WAS NO CONCEALMENT OF INCOME. 6. CIT VS. STANDARD MERCANTILE CO. (1987) 166 ITR 39 (PAT.) HELD THAT IT WAS NOT CORRECT TO SAY AS A BROAD PROPOSITION THAT WHERE ASSESSEES INCOME HAD BEEN ENHANCED ON ESTIMATE MADE BY THE ASSESSING OFFICER, PENALTY CAN NEVER BE IMPOSED FOR CONCEALMENT OF INCOME. 7. CIT VS. E.V.RAJAN (1985) 151 ITR 189 (MAD.) H ELD THAT MERELY BECAUSE ADDITION SUSTAINED WAS ON THE BASIS OF AN ESTIMATE IT COULD NOT BE SAID THAT SEC. 271(1)(C) WOULD NOT BE ATTRACTED. 8. CIT VS. WARASAT HUSSAIN (1998) 171 ITR 405 (PAT .) HELD THAT WHERE THE ASSESSEE CONCEALS RELEVANT MATERIAL/EVIDENCE, THE REVENUE HAS NO OPTION BUT TO MAKE A BEST JUDGMENT BY ESTIMATE. AN ASSESSMENT BY ESTIMATE IS AS MUCH LEGAL AS ANY OTHER AND THE FIGURE ASSESSED MUST BE HELD TO BE THE INCOME OF THE ASSESSEE. HENCE, PENALTY COULD BE IMPOSED EVEN IN C ASE OF ASSESSMENT BY ESTIMATE. 9. CHATER SAIN VS. CIT (2005) 277 ITR 68 (A LL.) HELD THAT THE ASSESSING OFFICER HAD DETERMINED THE TAXABLE INCOME OF THE AS SESSEE MAKING AN ADDITION TO GROSS PROFIT RETURNED IN RESPECT OF BUS INESS CARRIED ON BY HIM. I.T.A. NOS. 125 -131/COCH/2010 9 RETURNED INCOME WAS LESS THAN 80 PER CENT OF ASSESS ED INCOME AS FINALLY DETERMINED BY THE TRIBUNAL. EXPLANATION TO S. 271(1)(C) OF THE ACT WAS APPLICAB LE AND, THEREFORE, THE INFERENCE THAT THE ASSESSEE HAD CONCEALED THE PART ICULARS OF HIS INCOME HAD RIGHTLY BEEN DRAWN BY THE TRIBUNAL. IMPOSITION OF PENALTY WAS HELD TO BE VALID. 10. THE HONBLE SUPREME COURT IN THE CASE OF B.A . BALASUBRAMANIAM & BROS. CO. VS. CIT 236 ITR 977 ALSO GAVE A FINDING T HAT WHEN INCOME SHOWN BY THE ASSESSEE WAS LESS THAN 80 PER CENT OF THE A SSESSED INCOME, THE PENALTY U/S. 271(1)(C) WAS LEVIABLE. BURDEN IN SUCH A CASE WAS ON THE ASSESSEE TO PROVE THAT THERE WAS NO CONCEALMENT OF INCOME. 11. THE HONBLE SUPREME COURT IN THE CASE OF ADD L. CIT VS. JEEVAL LAL SAH (1994) 205 ITR 244 (SC) CLEARLY HELD THAT PRESUMPTI ON OF CONCEALMENT REMAINED UNLESS ASSESSEE DISCHARGES BURDEN OF PROO F THAT FAILURE TO RETURN CORRECT INCOME DID NOT ARISE FRAUD OR GROSS OR WILF UL NEGLECT. 12. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SMT. VEERAWALI (1976) 104 ITR 679 (ORI.) HELD THAT THE ASSESSEE D ID NOT MAINTAIN PROPER ACCOUNTS. THE IONCOME ASSESSED WAS HIGHER THAN THE RETURNED INCOME. LEVY OF PENALTY WAS HELD TO BE JUSTIFIED. IN VIEW OF THE DISCUSSIONS MADE IN THE EARLIER PARA GRAPHS, WE AGREE WITH THE VIEW TAKEN BY LD CIT(A). HOWEVER, IT WAS SUBMITTED THAT THE H ONBLE JURISDICTIONAL HIGH COURT HAS MODIFIED THE ORDER OF ITAT IN THE QUANTUM APPEALS. HENCE, THE WORKING OF QUANTUM OF PENALTY REQUIRES TO BE MODIFIED IN TUNE WITH THE DE CISION RENDERED BY HONBLE JURISDICTIONAL HIGH COURT. THE COPY OF ORDER OF TH E HIGH COURT PLACED BEFORE US WAS NOT RELATED TO THE ASSESSEE HEREIN, BUT TO A CONCERN NA MED YENKEY ROLLER FLOUR MILLS. THE LD A.R SUBMITTED THAT THE HIGH COURT HAS PASSED IDE NTICAL ORDERS IN THE HANDS OF THE ASSESSEE ALSO. 13. IN VIEW OF THE ABOVE, WE MODIFY THE IMPUGNE D ORDER OF LD CIT(A) AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO REWO RK THE QUANTUM OF PENALTY IN TERMS OF THE ORDERS OF HONBLE JURISDICTIONAL HIGH COURT IN THE HANDS OF THE ASSESSEE, IF THE SAME WAS PRODUCED BEFORE THE AO. IF THERE IS NO SUCH OR DER OF HIGH COURT, THE PENALTY LEVIED SHALL STAND AS IT IS. I.T.A. NOS. 125 -131/COCH/2010 10 14. SINCE THE ASSESSEE DID NOT OFFER ANY EXPLAN ATION WITH REGARD TO THE ADDITION RELATING TO THE SALE OF GUNNY BAGS, THE PENALTY LEVIED ON TH E SAID INCOME IS CONFIRMED. 15. IN THE RESULT, ALL THE APPEALS FILED BY THE ASS ESSEE ARE TREATED AS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 9-03-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 9TH MARCH, 2012 GJ COPY TO: 1. PARISONS ROLLER FLOUR MILLS (P) LTD., CHEROOTY R OAD, CALICUT-32. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRA L CIRCLE-II, CALICUT. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI.. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE . BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN