Sunita Dyeing Mills Pvt.Ltd., Surat V. The Income tax Officer,Ward-3(4), Surat

ITA 1384/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8693 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-03-2010
• Assessment Year: 1995-1996
• Appeal Filed On: 05-04-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Keywords: Bogus purchase; Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI N.S.SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 15/3/2010 DRAFTED ON: 15/3/2010 ITA NO.1384/AHD/2007 ASSESSMENT YEAR : 1995-96 SUNITA DYEING MILLS PVT.LTD. 315, GIDC PANDESARA DIST. SURAT VS. ITO WARD-3(4) SURAT PAN/GIR NO. : AADCS 3552 P (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI KAMLESH BHATT, A.R. RESPONDENT BY: SHRI C.K. MISHRA, SR. D.R. O R D E R PER SHRI T.K.SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-III, SURAT DATED 19/02/2007 CO NFIRMING THE PENALTY OF RS.1,18,458/- LEVIED BY THE ASSESSING OF FICER U/S.271(1)(C) OF THE I.T. ACT, 1961 FOR ASSESSMENT YEAR 1995-96. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS IN DYEING OF CLOTH ON JOB W ORK BASIS. FOR THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS FILE D ITS RETURN OF INCOME DECLARING NIL INCOME. THE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S.143(3) OF THE I.T. ACT, 1961 ON 30/03/1998 ON A TOTAL INCOME OF RS.35,77,910/-. IN THE ASSESSMENT ORDER, THE ASSE SSING OFFICER MADE THE FOLLOWING TWO ADDITIONS:- ITA NO.1384/AHD /2007 SUNITA DYEING MILLS PVT.LTD. VS. ITO ASST.YEAR 1995-96 - 2 - SL.NO.(S) ON ACCOUNT OF. AMOUNT (RS.) 1. PROCESSING OF CLOTH OUTSIDE THE BOOKS OF ACCOUNT 33,21,516/- 2. CERTAIN BOGUS PURCHASES:- [MUGATLALB.SONS RS.38,816 APARMA SALES & SERVICES RS.9,500 SHREERAM ENG.WORKS RS.1,77,200 KUNAL INDUSTRIES RS. 32,000] R2,57,516/- 3. IN QUANTUM APPEAL, THE ADDITION OF RS.33,21,516/ - MADE ON ACCOUNT OF PROCESSING OF CLOTH OUTSIDE THE BOOKS OF ACCOUNT WAS REDUCED TO RS.3 LACS. HOWEVER, THE OTHER ADDITION OF RS.2, 57,516/- MADE ON ACCOUNT OF NON-EXISTENT OF LIABILITY WAS CONFIRMED. 3.1. SUBSEQUENTLY, THE ASSESSING OFFICER LEVIED A P ENALTY OF RS.1,18,458/- IN RESPECT OF ADDITION OF RS.2,57,516 /- WHICH IS CONFIRMED BY THE TRIBUNAL. 4. ON APPEAL, THE LEARNED CIT(APPEALS) CONFIRMED THE PENALTY LEVIED FOR THE DETAILED REASONS GIVEN IN THE IMPUGN ED ORDER AT PAGE NO.2, WHICH ARE IN THE FOLLOWING TERMS:- I HAVE CONSIDERED THE SUBMISSIONS AND HAVE PERUSED THE GIST OF THE CASE LAWS CITED BY THE LD. AR. MOST OF THE CASE LA WS CITED PERTAINED TO THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT, PRI OR TO INTRODUCTION OF EXPLANATION-1, THE SITUATION HAS DRASTICALLY CHANGE D. THE CONCEPT OF GUILTY MIND OR MENS REA IS NO LONGER A PRE CONDITI ON BUT AN EXPLANATION WHICH IS FOUND TO BE FALSE BY THE AO IS SUFFICIENT TO ATTRACT PENALTY UNDER THE SECTION. IN THE INSTANT CASE THE AO MADE IND EPENDENT INQUIRIES IN RESPECT OF LIABILITIES CLAIMED BY THE APPELLANT AND ALL THE CREDITORS ITA NO.1384/AHD /2007 SUNITA DYEING MILLS PVT.LTD. VS. ITO ASST.YEAR 1995-96 - 3 - DENIED HAVING DONE ANY BUSINESS WITH THE APPELLANT IN RESPECT OF WHICH SUCH LIABILITIES WERE SHOWN. THIS FACT HAS ALSO BE EN DISCUSSED AND CONFIRMED BY THE HIGHEST FACT FINDING BODY, I.E. TH E HON'BLE ITAT WHICH BY THEIR ORDER DATED 31.01.2006 IN ITA NO.897 THAT SINCE THE PARTIES DENIED HAVING DONE ANY WORK FOR THE APPELLANT, THE ADDITION ON THIS ACCOUNT WAS TO BE CONFIRMED. THIS CLEARLY SHOWS TH AT THE EXPLANATION REGARDING THE SAID CREDITORS WAS FOUND TO BE FALSE BY THE AO WHICH IS SUFFICIENT TO COME TO A CONCLUSION THAT THE APPELLA NT FURNISHED INACCURATE PARTICULARS OF ITS INCOME AND THEREFORE EXPLANATION-1 TO SECTION 271(1)(C) WAS CLEARLY ATTRACTED IN ITS CASE . IN VIEW OF THIS, PENALTY U/S.271(1)(C) OF THE IT ACT IS HEREBY CONFI RMED. IN THE RESULT, THE APPEAL IS DISMISSED. 5. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEAL S), THE ASSESSEE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING ON BEHALF OF ASSESSEE, SH RI KAMLESH BHATT, LD. COUNSEL FOR THE ASSESSEE APPEARED AND CONTENTED THAT THE ASSESSING OFFICER LEVIED THE PENALTY IN RESPECT OF ADDITION O F RS.2,57,516/- IN RESPECT OF FOLLOWING ALLEGED BOGUS LIABILITIES WITH OUT GIVING AN OPPORTUNITY TO CROSS-EXAMINE THOSE PARTIES. SL.NO(S) NAME OF PARTIES AMOUNT (RS.) 1. MUGATLAL B.SONS 38,816 2. APARMA SALES & SERVICES 9,500 3. SHREE RAM ENG. WORKS 1,77,200 4. KUNAL INDUSTRIES 32,000 ITA NO.1384/AHD /2007 SUNITA DYEING MILLS PVT.LTD. VS. ITO ASST.YEAR 1995-96 - 4 - 7. THE LD. COUNSEL FOR THE ASSESSEE, FURTHER, SUBMI TTED THAT AFTER GIVING APPEAL EFFECT, THE INCOME FOR THE ASSESSMENT YEAR W ORKS OUT TO NIL BECAUSE THERE IS AN UNABSORBED DEPRECIATION OF RS.1 1,091,358/-. THE LD. COUNSEL FOR THE ASSESSEE ACCORDINGLY SUBMITTED THAT PENALTY OF RS.1,18,458/- LEVIED BY THE ASSESSING OFFICER BE CA NCELLED. 8. SHRI C.K.MISHRA, LEARNED DEPARTMENTAL REPRESENTA TIVE VEHEMENTLY OBJECTED TO THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE. HE POINTED OUT THAT ONUS WAS ON THE ASSE SSEE. THIS ONUS WAS NOT DISCHARGED AS REQUIRED BY EXPLANATION-1 TO SECT ION 271(1)(C) OF THE I.T. ACT, 1961 EITHER DURING THE COURSE OF ASSESSME NT PROCEEDINGS, OR DURING THE COURSE OF PENALTY PROCEEDINGS. THE ASSE SSEE PRODUCED AN IOTA OF EVIDENCE TO PROVE THAT LIABILITY OF RS.2,57,516/ - WAS NOT BOGUS. THERE IS NO EVIDENCE THAT, SUBSEQUENTLY, THE ASSESSEE HAS DISCHARGED THE SAID LIABILITY. UNDER THESE CIRCUMSTANCES, THE LEARNE D CIT(APPEALS) HAS GIVEN COGENT REASON FOR CONFIRMING THE PENALTY, THE REFORE, ORDER OF THE LEARNED CIT(APPEALS) BE UPHELD. 9. WITH REGARD TO ALTERNATIVE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE, THE LEARNED DEPARTMENTAL REPRESENTATIVE S UBMITTED THAT AFTER GIVING APPEAL EFFECT THE INCOME OF THE ASSESSEE IS RS.2,57,516/-. THE ASSESSEE BEING A COMPANY, ITS ENTIRE INCOME AT A FL AT RATE OF 45%. THEREFORE, THERE IS NO SUBSTANCE IN THE ALTERNATIVE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. ITA NO.1384/AHD /2007 SUNITA DYEING MILLS PVT.LTD. VS. ITO ASST.YEAR 1995-96 - 5 - 10. HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT T O NOTE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER FOUND THAT ASSESSEE-COMPANY HAS SHOWN CERTAIN LIABILITIES AMOU NTING TO RS.2,57,516/-, WHICH WAS NOT FOUND GENUINE. THIS ADDITION WAS CONFIRMED BY THE LEARNED CIT(APPEALS) AND BY THE IT AT AHMEDABAD BENCH A VIDE ITS ORDER DATED 31/01/2006. THE R EASON GIVEN BY THE TRIBUNAL ARE CONTAINED IN PARAGRAPH NO.12 AT PAGE N O.13, WHICH READS AS UNDER:- 12. WITH REGARD TO ADDITION OF RS.2,57,516/- AS T HE PARTIES HAVE DENIED OF HAVING DONE ANY WORK FOR THE ASSESSEE, WE FIND THAT LD.CIT(A) WAS JUSTIFIED IN UPHOLDING THE ADDITION T O THAT EXTENT. TO SUMP UP THAT THE ORDER OF CIT(A) WITH REGARD TO ISS UES RAISED BEFORE US BY BOTH THE PARTIES BEING FAIR AND REASON ABLE IS UPHELD AND APPEALS FILED BY BOTH THE PARTIES ARE, THEREFOR E, DISMISSED. 11. IN QUANTUM APPEAL, THE PARTIES TO WHOM THE PAYM ENT IS PURPORTED TO HAVE BEEN MADE HAVE DENIED OF HAVING DONE ANY W ORK FOR THE ASSESSEE. THEREFORE, THE ONUS CAST ON THE ASSESSEE IN PENALTY PROCEEDINGS TO PRODUCE THOSE PARTIES OR ANY EVIDENCE WHICH INDI CATES THAT THOSE PARTIES HAVE ACTUALLY DONE THE WORK FOR THE ASSESSE E. THIS ONUS WAS NOT DISCHARGED BY THE ASSESSEE. ACCORDINGLY, THE CASE OF THE ASSESSEE FALLS WITHIN THE MISCHIEF OF EXPLANATION-1(B) TO SECTION 271(1)(C) OF THE I.T. ACT, 1961. IN THAT CLAUSE, THREE INGREDIENTS ARE REQUIRED TO BE SATISFIED CUMULATIVELY AND SIMULTANEOUSLY. THEY ARE - (I) THE ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE. ITA NO.1384/AHD /2007 SUNITA DYEING MILLS PVT.LTD. VS. ITO ASST.YEAR 1995-96 - 6 - (II) HE FAILS TO PROVE THAT SUCH EXPLANATION IS BON A FIDE, AND (III) THAT ALL THE FACTS RELATING TO THE SAME AND M ATERIAL TO THE COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. 11.1. WHEN WE EXAMINE THE PRESENT CASE, WE FIND TH AT EXPLANATION FURNISHED BY THE ASSESSEE THAT HE HAS INCURRED THE EXPENDITURE WAS NOT FOUND TO BE BONA FIDE. THE ENQUIRIES CARRIED ON B Y THE ASSESSING OFFICER FROM THE PARTIES TO WHOM THE ALLEGED PAYMENT WAS MA DE REVEALED THAT SUCH PARTIES HAVE NOT DONE ANY WORK FOR THE ASSESSE E AND THEY HAVE NOT RECEIVED PAYMENT. THIS FACT WAS ALSO CONFRONTED TO THE ASSESSEE, BUT ASSESSEE WAS NOT ABLE TO PROVE THAT WORK WAS DONE E ITHER BY THOSE PARTIES OR BY OTHER PARTIES AND PAYMENT WAS ACTUALLY MADE B Y THE ASSESSEE TO THOSE PARTIES (OR OTHER PARTIES) AND HAS ACTUALLY G ONE FROM THE COFFERS OF THE ASSESSEE. AS THE FACTS STAND THE EXPLANATION O F THE ASSESSEE THAT HE HAS INCURRED THE EXPENDITURE FOR THE PURPOSE OF AS SESSEES BUSINESS IS NOT SUBSTANTIATED. IN VIEW OF THIS, EXPLANATION-1 (B) IS CLEARLY APPLICABLE AS ALL THE THREE INGREDIENTS ARE SIMULTANEOUSLY AND CUMULATIVELY SATISFIED. AS A RESULT, WE CONFIRM THE ORDER OF THE LEARNED CI T(APPEALS) ON THE LEVY OF THIS PENALTY. 12. COMING TO THE ALTERNATIVE CONTENTION OF THE ASS ESSEE, IN OUR CONSIDERED OPINION, AFTER GIVING APPEAL EFFECT, TH E TEXTILE INCOME OF THE ASSESSEE WORKS OUT THE SUM AS UNDER:- SL.NO(S) PARTICULARS AMOUNT (RS.) 1. TOTAL INCOME AS PER ASSESSMENT ORDER 35,77,910 2. LESS : RELIEF ALLOWED BY LEARNED CIT(APPEALS) OUT OF ADDITION OF RS.33,21,516 30,16,405 DIFFERENCE 5,61,505 ITA NO.1384/AHD /2007 SUNITA DYEING MILLS PVT.LTD. VS. ITO ASST.YEAR 1995-96 - 7 - 12.1. THE TEXTILE INCOME AFTER GIVING APPEAL EFFECT IS ALSO RS.5,61,505/-. THEREFORE, WE DO NOT FIND ANY SUBSTANCE IN THE ALTE RNATIVE CONTENTION MADE BY THE LD. COUNSEL FOR THE ASSESSEE. CONSEQU ENTLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS D ISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 26/03/2010. SD/- SD/- ( N.S. SAINI ) ( T.K.SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 26/03/2010 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-III, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD