RELIANCE INDUSTRIES LTD, MUMBAI V. ACUT -LTU, MUMBAI

ITA 1641/MUM/2010

• Counselvise Citation: 164119914 RSA 2010
• Duration Of Justice: 3 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 05-02-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 03-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV JAIN
• Assessee Lawyers: ARVIND SONDE
• Keywords: Bogus purchase; Depreciation; Reasonable cause; Wrong claim; Accommodation entries
• Section: 131; 133A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND P.M.JAGTAP (AM) . . , . . , ./I.T.A. NO.1641/MUM/2010 ( / ASSESSMENT YEAR : 2003-04) AND ITA NO.7219 TO 7221/MUM/2011 ( / ASSESSMENT YEARS : 2004-05 TO 2006-07) RELIANCE INDUSTRIES LIMITED, MAKER CHAMBER-IV, 3 RD FLOOR, 222, NARIMAN POINT, MUMBAI-400021 / VS. A SSTT. COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT, 29 TH FLOOR, CENTER NO.1, WORLD TRADE CENTRE, CUFFE PARADE, MUMBAI-400005. ( ' / APPELLANT) .. ( ( ' / RESPONDENT) ' / ASSESSEE BY : SHRI ARVIND SONDE ( ' * /REVENUE BY : SHRI SANJEEV JAIN * - / DATE OF HEARING :12.11.2013 * - /DATE OF PRONOUNCEMENT : 11.12.2013 / O R D E R PER BENCH: THE ASSESSEE HAS FILED THESE APPEALS AGAINST ORDE R OF LD. CIT(A) DATED 14.12.2009 FOR ASSESSMENT YEAR 2003-04 AND THREE S EPARATE ORDERS OF LD. CIT(A) ALL DATED 10.8.2011 FOR ASSESSMENT YEARS 2004-05, 2005 -06 AND 2006-07 DISPUTING THE CONFIRMATION OF LEVY OF PENALTY U/S 271(1)( C) OF T HE INCOME TAX ACT, 1961 (THE ACT) WITH REFERENCE TO DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.32,03,626/- IN ASSESSMENT YEAR 2003-04, RS.56,06,345/- FOR ASSESSMENT YEAR 20 04-05-, RS.42,04,759/- FOR ASSESSMENT YEAR 2005-06 AND RS.31,53,569/- FOR ASSE SSMENT YEAR 2006-07 ON ACCOUNT OF CAPITALIZED VALUE OF STEEL PURCHASED TO THE EX TENT OF RS.2,56,29,005/- OUT OF TOTAL PURCHASES OF RS.8,95,13,277/-. 2. THE RELEVANT FACTS ARE THAT THE ASSESSEE STATED TO HAVE PURCHASED STEEL FROM VARIOUS PARTIES INCLUDING DURGA IRON AND STEEL PV T.LTD (HEREINAFTER IN SHORT REFERRED TO AS DURGA ) AND M/S SURAJBHAN RAJKUMAR PVT LTD. (HEREINAFTER IN SHORT REFERRED TO AS SURAJBHAN) TO THE EXTENT OF RS.8,95,13,277/- FOR S ETTING UP ITS REFINERY AT JAMNAGER. I.T.A. NO.1641/MUM/2010 AND ITA NO.7219 TO 7221/MUM/2011 2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO N OTICED THAT M/S LAXMI EXPORTS, M/S SWATI INTERNATIONAL AND M/S RASHI INTERNATIONAL WERE INVOLVED IN GIVING ACCOMMODATION ENTRIES ONLY WITHOUT SUPPLY OF ANY MA TERIAL TO ITS CUSTOMERS. THE PROPRIETOR OF THESE CONCERNS IS MR.VINAYAK M. KOKA TE (V.M.KOKATE). IN ORDER TO VERIFY CORRECT NATURE OF TRANSACTIONS, SURVEY U/S 133A O F THE ACT WAS CARRIED OUT ON AT THE OFFICE PREMISES OF M/S SWATI INTERNATIONAL. DURING THE COURSE OF SURVEY ACTION, V.M.KOKATE PROPRIETOR OF THESE THREE CONCERNS, ST ATED ON OATH ON 6.1.2005 THAT ALL HIS ABOVE CONCERNS WERE OPENED FOR GIVING ACCOMMODATION ENTRIES ONLY AND NO BUSINESS WAS CONDUCTED. AO HAS STATED THAT THESE THREE CON CERNS OF MR.KOKATE ALLEGEDLY SUPPLIED MATERIAL TO CONCERNS OF SHRI PAWAN KUMAR AGARWAL (SHRI P.K.AGARWAL) NAMELY M/S SURAJBHAN RAJKUMAR PVT. LTD (II) M/S SHREE DURG A IRON AND STEEL PVT. LTD AND (III) M/S SINGHAL BROTHERS ETC. THE AO HAS STATED THAT PU RCHASES TO THE EXTENT OF RS.8,95,13,277/- MADE BY ASSESSEE FROM DURGA AND SURAJBHAN WHO IN TURN HAD PURCHASED GOODS FROM M/S LAXMI EXPORTS ARE NOT G ENUINE.THE AO VIDE QUESTIONNAIRE DATED 11.8.2005 ASKED THE ASSESSEE TO FURNISH DE TAILS AND SUPPORTING DOCUMENTS IN RESPECT OF GENUINENESS OF TRANSACTIONS WITH AFORE SAID GROUP CONCERNS OF SHRI P.K.AGARWAL. AO HAS STATED THAT MEANWHILE INQUIRIE S WERE ALSO CONDUCTED WITH SHRI P.K.AGARWAL GROUP OF CONCERNS TO VERIFY GENUINENESS OF TRANSACTION AND STATEMENTS OF SHRI P.K.AGARWAL WERE RECORDED U/S 133A, ON 6.1.2 005 AND U/S 131 OF THE ACT ON 23.12.2005 AND 27.12.2005. THAT SAID CONCERNS OF SHRI P.K.AGARWAL GROUP OF COMPANIES HAVE SHOWN PURCHASES OF STEEL MATERIAL F ROM M/S LAXMI EXPORTS, WHOSE PROPRIETOR IS SHRI KOKATE. THAT AO MADE INQUIRIE S WITH REGIONAL TRANSPORT OFFICE (RTO) AND TRANSPORTERS TO VERITY THE GENUINENESS OF DELIVERY OF GOODS PURCHASED BY GROUP CONCERNS OF P.K.AGARWAL GROUP OF COMPANIES, AND CONCLUDED THAT NO MATERIAL WAS SUPPLIED TO AFORESAID CONCERNS OF P.K.AGARWAL WHO IN TURN ALLEGEDLY SOLD STEEL MATERIAL TO THE ASSESSEE. HOWEVER, ASSESSEE VIDE L ETTER DATED 30.12.2005 CLAIMED GENUINENESS OF PURCHASES AND ALSO SUBMITTED SUPPOR TING DOCUMENTS SUCH AS PURCHASE INVOICES AND OTHER RELATED DOCUMENTS. THE ASSESSEE CONTENDED THAT PAYMENTS FOR ALLEGED SUPPLY OF GOODS WERE MADE BY ACCOUNT PAYEE CHEQUES IN SETTLEMENT OF PURCHASE BILLS. THE PURCHASES WERE ALSO SUBSTANTI ATED BY THE ASSESSEE BY GOODS RECEIPTS NOTES PREPARED AT ITS FACTORY GIVING PARTI CULARS OF THE GOODS RECEIVED. THE ASSESSEE ALSO STATED THAT ITS VENDOR VIZ DURGA AND SURAJBHAN INTERACTED WITH SHRI HITEN K.DESAI, WHO IN TURN HAD PROCURED MATERIALS FROM T HE OPEN MARKET AND OTHER MANUFACTURERS/PRODUCERS FOR SUPPLYING STEEL TO AS SESSEE. THAT THE TRANSPORTERS ARE SELECTED AND PAYMENTS TO THEM ARE MADE BY VENDORS FOR TRANSPORTING GOODS TO ASSESSEES SITE. THAT IT IS A BUSINESS PRACTICE IN STEEL TRADE TO PROCURE THE REQUISITE I.T.A. NO.1641/MUM/2010 AND ITA NO.7219 TO 7221/MUM/2011 3 MATERIAL FROM MANUFACTURER/OTHER TRADERS IN THE M ARKET AND SUPPLY TO THE PURCHASERS. HENCE THERE IS NO REASON TO STATE THAT PURCHASES HA VE NOT BEEN MADE. ASSESSEE CONTENDED THAT SUBSTANTIAL PART OF THE MATERIAL WH ICH HAD BEEN CONSUMED DURING THE ASSESSMENT YEAR 2003-04 FORMED PART OF CAPITAL WO RK- IN-PROGRESS (WIP) AND IT WAS APPEARING AS PART OF BALANCE-SHEET ITEM. IT IS REL EVANT TO STATE THAT THE ASSESSEE ENCLOSED THE DETAILS OF ASSETS FOR WHICH MATERIAL HAD BEEN UTILIZED, ITS QUANTUM AND ITS VALUE FORMING PART OF PLANT AND MACHINERY AND CLAIM ED DEPRECIATION @25% IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2003-04. THE ASSESSEE CONTENDED THAT MATERIAL HAD BEEN PROPERLY ACCOUNTED FOR IN ITS B OOKS OF ACCOUNT AND ITS TREATMENT WAS RECORDED IN THE ACCOUNTS. THAT OUT OF THE TOT AL PURCHASES OF RS.8,95,13,277/-, A SUM OF RS.256,29,005/- WAS CAPITALIZED IN THE LA TTER HALF OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04 AS PART OF PLANT AN D MACHINERY AND ASSESSEE CLAIMED DEPRECIATION OF RS.32,03,626/-. IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT THE BENEFICIARY OF SUCH PAYMENT IS NON OTHER THAN VEND OR I.E. SUPPLIERS AND VENDORS HAD CONFIRMED HAVING SOLD GOODS TO THE ASSESSEE AND R ECEIVED PAYMENTS AGAINST SUCH PURCHASES. FURTHER, THERE IS NO ALLEGATION BY ANY PARTY TO THE TRANSACTION THAT MONEY HAVE BEEN GIVEN BACK TO THE ASSESSEE. SINCE THE A O DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND TREATED THE TRANSACTION AS NON-GEN UINE, HE DISALLOWED CLAIM OF DEPRECIATION AS CLAIMED BY ASSESSEE. THE ASSESSEE F ILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, WHO IN TURN CONFIRMED THE ACTION OF AO . 3. SIMILARLY, FOR THE ASSESSMENT YEARS 2004-05, 2 005-06 AND 2006-07, THE AO ALSO DISALLOWED THE CLAIM OF DEPRECIATION OF RS.56, 06,345/-, RS.42,04,759/- AND RS.31,53,569/- RESPECTIVELY IN RESPECT OF CAPITALIZ ED VALUE OF CONSTRUCTION MATERIAL OF STEEL TO THE EXTENT OF RS.2,56,29,005/-. THE LD. CIT(A) ALSO CONFIRMED THE ACTION OF AO THAT PURCHASE OF STEEL BY ASSESSEE FROM GROUP CONCERNS OF SHRI P.K.AGARWAL WAS NON GENUINE. 4. IN VIEW OF ABOVE, THE ASSESSING OFFICER INITIAT ED PENALTY PROCEEDINGS U/S 271(1) (C) OF THE ACT AND STATED THAT ASSESSEE FURNISHE D INACCURATE PARTICULARS IN RESPECT OF THE CLAIM OF DEPRECIATION ON THE CAPITALIZED VALUE OF CONSTRUCTION MATERIAL TO THE EXTENT OF RS.2,56,29,005/-. ACCORDINGLY THE ASSESSEE CO NCEALED ITS INCOME TO THE EXTENT OF DEPRECIATION CLAIM OF RS.32,03,626 FOR ASSESSMENT Y EAR 2003-04, RS.56,06,345/- FOR ASSESSMENT YEAR 2004-05-, RS.42,04,759/- FOR ASSESS MENT YEAR 2005-06 AND RS.31,53,569/- FOR ASSESSMENT YEAR 2006-07. AO ST ATED THAT ASSESSEE-COMPANY FILED INACCURATE PARTICULARS OF ITS INCOME COMING WITHI N THE MEANING OF SECTION 271(1)( C ) OF THE ACT READ WITH EXPLANATION (1) THERETO IN RES PECT OF CLAIM OF DEPRECIATION ON STEEL I.T.A. NO.1641/MUM/2010 AND ITA NO.7219 TO 7221/MUM/2011 4 PURCHASED AND HE LEVIED PENALTY AT THE RATE OF 10 0 % OF THE TAX SOUGHT TO BE EVADED U/S 271(1)( C ) OF THE ACT READ WITH EXPLANATION (1 ) THERETO. BEING AGGRIEVED, ASSESSEE FILED APPEALS BEFORE THE FIRST APPELLATE AUTHORITY. 5. THE LD. CIT(A) HAS STATED THAT IN VIEW OF DECI SION OF HONBLE APEX COURT IN THE CASE OF UNION OF INDIA V/S DHARMENDRA TEXTILES PR OCESSOR AND ORS., 306 ITR 277 (SC) THE PENALTY UNDER THE PROVISIONS OF SECTION 271(1)(C) IS A CIVIL LIABILITY AND WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATT RACTING CIVIL LIABILITY AS IN THE CASE OF PROSECUTION U/S 276 OF THE ACT. THE LD. CIT(A) AFTER SUMMARIZING THE FACTS AS STATED IN THE ASSESSMENT ORDERS/IN THE ORDERS OF LD. CIT(A ) IN QUANTUM PROCEEDINGS,HAS STATED THAT THE CLAIM OF ASSESSEE TO HAVE PURCHASED STEE LS FROM DURGA AND SURAJBHAN WAS NOT GENUINE AS THESE COMPANIES HAD IN TURNED SHOWN TO MADE PURCHASES FROM M/S LAXMI EXPORTS, PROPRIETARY CONCERN OF SHRI KOKATE . HE STATED THAT DURGA AND SURAJBHAN WERE JUST A VIA MEDIA OR A LINK IN THE C HAIN. M/S LAXMI EXPORTS HAD NOT SUPPLIED ANY MATERIAL AND THEREFORE THE CLAIM OF SH RI P.K.AGARWAL FOR SUPPLYING MATERIAL TO THE ASSESSEE REMAINED UNSUBSTANTIATED. HE HAS STATED THAT THE ASSESSEE HAS TO PROVE THAT THE EXPLANATION OFFERED BY IT IS BONAFID E THOUGH NOT SUBSTANTIATED. HE HAS STATED THAT AS PER THE FACTS, IT CANNOT BE SAID TH AT THE EXPLANATION OF ASSESSEE IS BONAFIDE. HE HAS STATED THAT THE AO IS NOT REQU IRED TO ESTABLISH MENS-REA OR INTENTION OF THE ASSESSEE. IT IS NOT HIS DUTY/OBL IGATION TO ESTABLISH MALAFIDE OF THE ASSESSEE AS THE ONUS IS ON THE ASSESSEE TO ESTABLIS H INNOCENCE. HE HAS STATED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CONDIT ION FOR IMPOSITION OF LEVY OF PENALTY U/S 271(1)( C ) IS SATISFIED IN RESPECT OF DISALL OWANCE OF DEPRECIATION FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. HENCE, THE ASSESSEE IS IN FURTHER APPEALS BEFORE THE TRIBUNAL. 6. DURING THE COURSE OF HEARING, IT WAS ADMITTED BY LD. AR OF THE ASSESSEE THAT THE TRIBUNAL BY ITS CONSOLIDATED ORDER IN THE QUANTUM APPEALS, DATED 13.9.2013 HAD ALSO CONFIRMED THE ORDERS OF LD. CIT(A) TO DISALLOW THE CLAIM OF DEPRECIATION FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION IN RESPECT OF CAPITALIZED VALUE OF CONSTRUCTION MATERIAL WIP I.E. STEEL TO THE EXTENT OF RS. 2,56, 29,005/-. HOWEVER, THE LD. AR SUBMITTED THAT PENALTY PROCEEDINGS ARE SEPARATE FR OM ASSESSMENT PROCEEDINGS AND MERELY BECAUSE THE ADDITION OR ADJUSTMENT HAVE BEEN MADE WHILE MAKING ASSESSMENT, DOES NOT TANTAMOUNT TO AUTOMATIC LEVY OF PENALTY. HE SUBMITTED THAT CONSIDERATION THAT ARISES IN PENALTY PROCEEDINGS ARE DIFFERENT FROM T HOSE IN ASSESSMENT PROCEEDINGS. LD. AR SUBMITTED THAT AO CONSIDERED NON-GENUINE PURCHA SES OF STEEL MERELY RELYING ON THE I.T.A. NO.1641/MUM/2010 AND ITA NO.7219 TO 7221/MUM/2011 5 STATEMENT OF SHRI KOKATE WITH WHOM THE ASSESSEE HAD NOT ENTERED INTO ANY TRANSACTION. HE SUBMITTED THAT THE ASSESSEE WAS NOT GIVEN ANY O PPORTUNITY TO CROSS-EXAMINE SHRI KOKATE. LD. AR SUBMITTED THAT THE ASSESSEE WAS CON CERNED ONLY WITH SHRI P.K.AGARWAL WHO WAS PROPRIETOR OF DURGA, SURAJBHAN AND SINGHAL BROS. AND SHRI AGARWAL STATED IN HIS STATEMENT THAT HE DEALT WITH ONE SHRI HITEN K.DESAI OF M/S LAXMI EXPORT AND WAS NOT CONCERNED WITH SHRI KOKATE FOR PURCHAS E OF STEEL, SUPPLIED TO THE ASSESSEE. LD. AR SUBMITTED THAT AO DID NOT EXAMI NE SHRI HITEN K DESAI INSPITE OF SPECIFIC REQUEST MADE BY THE ASSESSEE AT THE TIME O F ASSESSMENT PROCEEDINGS. LD. AR SUBMITTED THAT ABOVE FACTS WERE ALSO BROUGHT TO T HE NOTICE OF THE TRIBUNAL AT THE TIME OF QUANTUM PROCEEDINGS AND THE TRIBUNAL AFTER CONS IDERING THE STATEMENT OF SHRI P.K.AGARWAL AS WELL AS SHRI KOKATE CONCLUDED THAT T HE FINDINGS OF THE AO ONLY RAISED DOUBTS AND CREATES SUSPICION FOR TRANSPORTING THE GOODS STATED TO BE PURCHASED FROM GROUP CONCERN OF SHRI P.K.AGARWAL AT THE ASSESSEE S PREMISES. LD. AR SUBMITTED THAT THE TRIBUNAL WHILE CONFIRMING THE ADDITION(S) IN THE QUANTUM PROCEEDINGS ALSO RECORDED IN ITS ORDER PASSED, THAT THE ENTIRE ADDITION HAS BEEN MADE ON THE BASIS OF STATEMENT OF SHRI KOKATE AND NO OPPORTUNITY WAS GIVEN BY DEPARTM ENT TO CROSS-EXAMINE SHRI KOKATE. SHRI KOKATE WAS NOT A PERSON WITH WHOM THE ASSESSEE WAS HAVING ANY DEALING. HE SUBMITTED THAT THE TRIBUNAL WHILE CONFIRMING THE A CTION OF THE LD. CIT(A) HELD THAT SUPPLY OF MATERIAL TO THE ASSESSEE COMPANY REMAINS UNSUBSTANTIATED. HE SUBMITTED THAT THE TRIBUNAL HAS NOT HELD THAT THE PURCHASES WERE NOT PROVED BUT ONLY STATED THAT THEY REMAINED UNPROVED. LD. AR RELYING ON THE DEC ISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S UPENDA V MITHANI IN INCOME TAX APPEAL (L) NO.1860 OF 2009 DATED 5 TH AUGUST, 2009 SUBMITTED THAT THEIR LORDSHIPS HE LD THAT IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASO NABLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE, NO PENALTY CAN BE I MPOSED U/S 271(1)(C ) OF THE ACT. LD AR HAS FURNISHED A COPY OF THE SAID ORDER TO SUBSTA NTIATE HIS SUBMISSIONS. LD. AR FURTHER REFERRED THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S RAMPUR ENGG.LTD (2010) 187 TAXMAN 171 (DELHI) AND SUBMITTE D THAT IF THE CLAIM OF THE ASSESSEE IS DISALLOWED ON THE GROUND THAT THERE WAS NO CORR OBORATIVE EVIDENCE JUSTIFYING THE PAYMENT OF THE AMOUNT FOR GENUINE BUSINESS CAUSE, THE LEVY OF PENALTY U/S 271(1)(C ) IS NOT JUSTIFIED. HE REFERRED PARA 5 OF THE SAID O RDER WHICH READS AS UNDER : 5. WE HAVE EXAMINED THE ORDER OF THE ASSESSING AUTHOR ITY KEEPING IN VIEW THE AFORESAID PRINCIPLE OF LAW IN MIND. FROM THE SAID O RDER, WE FIND THAT THE ASSESSING AUTHORITY DISALLOWED THE AFORESAID EXPENS E BY OBSERVING THAT THERE WAS NO CORROBORATIVE EVIDENCE JUSTIFYING THE PAYMEN T OF THE SAID AMOUNT OF RS. 13 LAKHS FOR GENUINENESS BUSINESS CAUSE. THE ORDER REFLECTS THAT EVIDENCE WHICH WAS SOUGHT TO BE GIVEN BY THE ASSESSEE IN SUPPORT O F THE AFORESAID WAS NOT I.T.A. NO.1641/MUM/2010 AND ITA NO.7219 TO 7221/MUM/2011 6 BELIEVED AND WAS NOT TREATED AS SUFFICIENT EVIDENCE DISCHARGING THE OBLIGATION PLACED UPON THE ASSESSEE AS TO THE GENUINENESS TO T HE TRANSACTION. HOWEVER, THERE IS NOTHING IN THE SAID ORDER TO INDICATE THAT ANY SATISFACTION WAS ALSO RECORDED THAT TRANSACTION IN QUESTION WAS A SHAM TR ANSACTION OR WAS NOT A GENUINE TRANSACTION. NO DOUBT, THE EXPRESSION GENU INENESS OF EXPENSES HAS CREPT IN THE ORDER, BUT, READING THE ENTIRE ORDER W E FIND THAT THE SAME IS IN THE CONTEXT OF THE SUFFICIENT EVIDENCE JUSTIFYING THE S AID EXPENSES AND THERE IS NO PRIMA FACIE SATISFACTION REGARDING FURNISHING OF INACCURATE PA RTICULARS OF SUCH EXPENDITURE. THEREFORE, WE FIND PRE-REQUISITES OF S ECTION 271(1)( C ) ARE MISSING IN THE ASSESSMENT ORDER AND THUS PENALTY PROCEEDINGS C OULD NOT BE INITIATED AGAINST THE ASSESSEE. THE SAME IS THE POSITION REGA RDING OTHER EXPENSES WHICH WERE DISALLOWED. 7. LD. AR ALSO REFERRED THE DECISION OF THE HONBLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CIT V/S H.P.STATE FOREST CORPORATION LTD (2011)202 TAXMAN 422 AND SUBMITTED THAT THEIR LORDSHIPS HAVE CONSIDERED THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT V/S RELIANCE PETROPRODUCT (P). LTD (322 ITR 158) AND HAS HELD THAT MERELY BECAUSE ASSESSEES CLAIM WAS NOT ACCEPTED B Y DEPARTMENT, IT CANNOT BE SAID THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS TO SUCH AN EXTENT THAT PENALTY SHOULD BE IMPOSED UPON IT, PARTICULARLY WHEN IT WAS NOBODY S CASE THAT ASSESSEE FUDGED AMOUNTS, BOOKS OF ACCOUNT OR TRIED TO CREATE FALSE EVIDENCE. LD. AR WITH REFERENCE TO THE DECISION OF THE HONBLE HIMACHAL PRADESH HIGH COURT SUBMITTED THAT THE MATERIAL AT THE SITE OF THE ASSESSEE FOR ITS REFINERY AT JAMNAG AR WAS RECEIVED AND ACCOUNTED FOR IN ITS BOOKS OF ACCOUNT AND THERE IS NO FINDING BY THE DEPARTMENT THAT SAID ENTRY IN THE BOOKS OF ACCOUNT OF ASSESSEE WAS NOT GENUINE. HE SUBMITTED THAT DECISION OF HONBLE HIMACHAL PRADESH APPLY TO THE ASSESSEE AND THEREFO RE LEVY OF PENALTY IS NOT JUSTIFIED MERELY BECAUSE THE CLAIM OF THE ASSESSEE IS NOT ACCEPTED DOES NOT MEAN THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOM E. LD. AR ALSO REFERRED DECISION OF THE MUMBAI BENCH OF TRIBUNAL IN THE CASE OF CHEMPU RE V/S INCOME-TAX OFFICER, 14(3)(1) [2010] 40 SOT 164 (MUM.), AND SUBMITTED T HAT WHEN THE ASSESSEE FAILED TO PRODUCE CONCERNED PERSON AND CONCERNED PERSON DID NOT COMPLY WITH THE NOTICE ISSUED U/S 131 OF THE ACT TO APPEAR BEFORE AO, IT HELD IN PARA 14 OF THE ORDER THAT THE ASSESSEE COULD NOT BE BLAMED FOR CONCEALING PARTIC ULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF CLAI MING BOGUS PURCHASES FROM VARIOUS CONCERNS BELONGING TO THE SAID PERSONS. ACCORDINGL Y, IT WAS HELD THAT PENALTY U/S 271(1)( C ) OF THE ACT COULD NOT BE IMPOSED. 8. FURTHER LD. AR REFERRED THE ORDER OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF M/S HOE LEATHER GARMENTS LTD V/S DCIT IN ITA NO .38/HYD/2007 (AY 1989-90) DATED 13.4.2010 AND SUBMITTED THAT MERELY BECAUSE ADDITIO NS WERE MADE ON ACCOUNT OF I.T.A. NO.1641/MUM/2010 AND ITA NO.7219 TO 7221/MUM/2011 7 UNPROVED CASH DURING THE QUANTUM PROCEEDINGS, THERE MAY BE JUSTIFICATION IN MAKING ADDITION TO THE ASSESSMENT, BUT IT IS HELD THAT TH ERE IS NO JUSTIFICATION TO IMPOSE PENALTY AS THE ADDITIONS IN THE QUANTUM PROCEEDINGS DOES NO T MEAN THAT PENALTY AUTOMATICALLY FOLLOWS. HE SUBMITTED THAT IN THE CASE OF ASSESSEE PENALTY HAS BEEN IMPOSED U/S 271(1)( C ) OF THE ACT MERELY BECAUSE THE ADDITIO NS HAVE BEEN CONFIRMED IN THE QUANTUM PROCEEDINGS. LD. AR FURTHER SUBMITTED THAT SINCE NO OPPORTUNITY OF CROSS- EXAMINATION OF SHRI KOKATE WAS GIVEN, NO RELIANCE ON THE STATEMENT MADE BY HIM COULD BE PLACED TO DRAW AN ADVERSE INFERENCE AND TO LEV Y PENALTY U/S 271(1)( C ) OF THE ACT. HE PLACED RELIANCE ON THE DECISION OF HONBLE ALLAH ABAD HIGH COURT IN THE CASE OF ADDL.CIT V/S RAWALPINDI FLOOR MILLS (P) LTD (1980) 125 ITR 243 (ALL). HE FURTHER SUBMITTED THAT THE ASSESSEE MADE PAYMENTS BY ACCO UNT PAYEE CHEQUES TO SHRI P.K.AGARWALS CONCERNS AND NO EVIDENCE IS THERE T HAT MONEY HAD EVER COME BACK TO THE ASSESSEE FROM THE SAID CONCERNS OF SHRI P.K. AGARWAL. HE SUBMITTED THAT FINDING GIVEN BY LD. CIT(A) IN PARA 11.2 FOR ASSESSMENT YEA R 2003-04 IS NOT CORRECT AS SHRI KOKATE NEVER STATED IN HIS STATEMENT THAT HE GAVE B ACK MONEY TO SHRI P.K.AGARWAL BUT MERELY STATED THAT HE GAVE MONEY TO ONE SHRI MASA AND SHRI MASA WAS NEVER EXAMINED/ CROSS-EXAMINED TO HOLD THAT THE SAID MONE Y WAS RECEIVED BY HIMSELF IN RESPECT OF THE TRANSACTIONS OF SUPPLYING STEEL TO T HE ASSESSEE. HE SUBMITTED THAT LEVY OF PENALTY IS NOT JUSTIFIED PARTICULARLY WHEN THE ASS ESSEE HAS ESTABLISHED GENUINENESS OF PERSON FROM WHOM PURCHASES WERE MADE AND THE PAYMEN T WERE ALSO MADE BY ACCOUNT PAYEE CHEQUES AND FURNISHED THE REQUISITE DETAILS. THE LD. AR REITERATED THAT MERELY BECAUSE THE CLAIM OF THE ASSESSEE REMAINED UNSUBSTA NTIATED, LEVY OF PENALTY IS NOT JUSTIFIED. 9. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F AUTHORITIES BELOW FOR LEVY OF PENALTY IN RESPECT OF DISALLOWANCE OF CLAIM OF DEP RECIATION CLAIMED BY ASSESSEE IN THE ASSESSMENT YEARS UNDER CONSIDERATION. HE SUBMITTED THAT AS PER THE DECISION OF HONBLE APEX COURT IN THE CASE OF DHARMENDRA TEXTILES PROCE SSOR AND ORS.(SUPRA) LEVY OF PENALTY U/S 271(1)( C ) IS A CIVIL LIABILITY. HENCE , NO MENS-REA IS REQUIRED TO LEVY PENALTY U/S 271(1)( C ) OF THE ACT. LD. DR SUBMITTED THAT D URING THE COURSE OF SURVEY PROCEEDINGS SHRI KOKATE ADMITTED THAT HIS CONCERNS WERE PROVIDING ONLY ACCOMMODATION ENTRIES AND DID NOT CARRY ANY BUSINESS. HE SUBMIT TED THAT ALLEGED CONCERNS OF SHRI P.K.AGARWAL PURCHASED STEEL FROM THE CONCERNS OF SHRI KOKATE BUT THE SAID CONCERNS OF SHRI KOKATE WERE NOT GENUINE, AND TRANSACTIONS WERE PAPER TRANSACTIONS AS NO GOODS WERE SUPPLIED BY THE CONCERNS OF SHRI KOKATE TO THE CONCERNS OF SHRI P.K.AGARWAL. THEREFORE, THE SAID TRANSACTIONS WERE NOT GENUINE TRANSACTIONS FOR I.T.A. NO.1641/MUM/2010 AND ITA NO.7219 TO 7221/MUM/2011 8 PURCHASE OF STEEL. HE SUBMITTED THAT WHEN THERE W AS NO ACTUAL PURCHASE OF STEEL BY ASSESSEE, THE CLAIM OF DEPRECIATION IN RESPECT OF C APITALIZATION VALUE WAS BOGUS. HENCE IMPOSITION OF PENALTY IS JUSTIFIED FOR FURNISHING I NACCURATE PARTICULARS OF INCOME. LD. DR SUBMITTED THAT THE HONBLE M.P.HIGH COURT IN THE CA SE OF STEEL INFOTS LTD. V/S CIT [2008] 296 ITR 228(MP) HAS HELD THAT IN CASE OF CO NCEALMENT OF TRUE INCOME CHARGEABLE TO TAX BY MAKING BOGUS CLAIM, LEVY OF PENALTY U/S 271(1)( C ) READ WITH EXPLANATION (1) THERETO IS JUSTIFIED. LD. DR ALS O REFERRED THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE KUTTOOKARAN MACHINE TOOLS V/S ACIT [2009] 313 ITR 413 (KER.) AND SUBMITTED THAT THE LEVY OF PENALTY U/S 271(1)( C ) WAS CONFIRMED ON THE FACTS THAT THE ASSESSEE MADE BOGUS CLAIM OF INVEST MENT ALLOWANCE AND DEPRECIATION IN RESPECT OF MACHINERY WHICH WAS NOT PURCHASED, INSTA LLED OR COMMISSIONED DURING THE RELEVANT PREVIOUS YEAR AND THE CONTENTION OF THE AS SESSEE THAT IT WAS A MISTAKE COMMITTED BY AUDITOR WHO PREPARED THE RETURN WAS NO T ACCEPTED. THE LD. DR ALSO REFERRED THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF KALPAKA BAZAR V/S CIT (2009) 313 ITR 414 AND SUBMITTED THAT WHEN THERE W AS NO ACTUAL PURCHASES AND IT WAS FOUND THAT THERE WAS BOGUS CLAIM OF PURCHASES AND SAID FACT WAS FOUND ONLY WHEN ACCOUNT WAS AUDITED U/S 142(2A) OF THE ACT, IT WAS HELD THAT THE CLAIM OF THE ASSESSEE AMOUNTS TO CONCEALMENT OF INCOME; LEVY OF PENALTY U/S 271 (1) OF THE ACT WAS HELD TO BE JUSTIFIED. LD. DR SUBMITTED THAT ASSESSE E COULD NOT ESTABLISH THAT THERE WERE BONAFIDE REASONS TO CLAIM DEPRECIATION IN RESPECT O F NON-GENUINE PURCHASES IN THE ASSESSMENT YEAR UNDER CONSIDERATION; LD. CIT(A) HAS RIGHTLY CONFIRMED THE ORDERS OF AO TO LEVY PENALTY U/S 271(1)( C ) OF THE ACT. HE SUB MITTED THAT THE ORDERS OF LD. CIT(A) MAY BE CONFIRMED. 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F LD. REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF AUTHORITIES BELOW. WE HA VE ALSO GONE THROUGH THE CASES RELIED UPON BY THE AUTHORITIES BELOW AS WELL AS LD . REPRESENTATIVES OF THE PARTIES (SUPRA). 10.1 WE OBSERVE THAT CRUX OF THE MATTER TO BE CONS IDERED IS AS TO WHETHER THE PENALTY U/S 271(1)( C ) READ WITH EXPLANATION (1) T O SECTION 271(1)( C ) IS APPLICABLE TO THE FACTS OF THE CASE BEFORE US. THE PROCEEDINGS U/S 271(1)(C ) OF THE ACT CAN BE INITIATED ONLY IF THE PERSON HAS CONCEALED THE PART ICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, AS THE EXPRE SSION USED IN CLAUSE ( C ) OF SUB- CLAUSE (III) OF SECTION 271(1) OF THE ACT HAS CONC EALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THEREFORE, IN BOTH CASES OF I.T.A. NO.1641/MUM/2010 AND ITA NO.7219 TO 7221/MUM/2011 9 CONCEALMENT INACCURATE , PHRASE PARTICULARS OF I NCOME IS USED. THERE IS NO DISPUTE THAT THE EXPRESSION HAS CONCEALED PARTICULARS OF INCOME AND HAS FURNISHED INACCURATE PARTICULARS OF INCOME ARE NOT DEFINED EITHER IN SECTION 271(1) ( C ) OR ELSEWHERE IN THE ACT. BUT THE WORD CONCEALED IS DERIVED FROM THE LATIN WORD CONCELARE WHICH IMPLIES TO HIDE. THUS, THE OFF ENCE OF CONCEALMENT IS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR PORTION THERE OF FROM THE DEPARTMENT TO AVOID PAYMENT OF TAX LIABILITY AS PER PROVISIONS OF ACT. FURTHER, IT IS NECESSARY TO EMPHASIZE THAT THE WORD CONCEALED, PARTICULARS AND INAC CURATE ARE WITH REFERENCE TO INCOME AND NOT WITH REGARD TO ANY OTHER THINGS. THE MUMB AI BENCH OF THE TRIBUNAL IN THE CASE OF CHEMPURE (SUPRA) EXAMINED THE MEANING OF ABOVE WORDS 'CONCEALED', 'PARTICULARS' AND 'INACCURATE' AND HAS STATED THAT THERE CANNOT BE A STRAIGHT JACKET FORMULA FOR DETECTION OF DEFAULT OF CONCEALMENT OF PARTICULARS OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT DEPENDS UPON THE FACTS OF EACH CASE. THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCT (P). LTD (SUPRA) HAS HELD THAT A GLANCE AT THIS PROVISION OF SECTION 271(1)(C) WOULD SUGGEST THAT IN ORDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS I NCOME. THERE IS NO DISPUTE TO THE FACT THAT THE CASE BEFORE US IS NOT A CASE OF CONCEALM ENT OF INCOME. THE AUTHORITIES BELOW AS WELL AS LD. DR AT THE TIME OF HEARING SUBMITTED THAT THE ASSESSEE MADE INCORRECT CLAIM OF EXPENDITURE BY WAY OF DEPRECIATION IN RESP ECT OF CAPITALIZED VALUE OF STEEL ALLEGEDLY PURCHASED AND THE PURCHASES WERE NOT GENU INE. THEREFORE, WE HAVE TO CONSIDER THE FACTS OF THE CASE AS TO WHETHER THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME. 10.2 WE OBSERVE, ON PERUSAL OF ASSESSMENT ORDERS AS WELL AS ORDERS OF APPELLATE AUTHORITIES THAT THE ASSESSEE STATED THAT IT MADE PURCHASES OF THE STEEL FOR SETTING UP ITS REFINERY AT JAMNAGAR FROM THE CONCERNS OF SHRI P.K.AGARWAL AND SHRI AGARWAL CONFIRMED IN HIS STATEMENT RECORDED U/S 131 OF T HE ACT THAT HE SUPPLIED STEEL TO THE ASSESSEE AND RECEIVED THE PAYMENT BY ACCOUNT PAYEE CHEQUES. THE ASSESSEE ALSO STATED THAT IT FURNISHED REQUISITE INVOICES EVIDEN CING THE RECEIPT OF MATERIAL HE HAD SUPPLIED. THE LD. AR AT THE TIME OF HEARING OF THE APPEALS REITERATED THE FACT THAT SHRI P.K.AGARWAL IN HIS STATEMENT STATED THAT HE DEALT W ITH ONE SHRI HITEN DESAI AND WAS NOT CONCERNED WITH SHRI KOKATE FOR PURCHASE OF STEEL WHICH WAS SUPPLIED TO THE ASSESSEE. IT IS A FACT THAT IN SPITE OF THE FACT THAT NAME OF SHRI HITEN DESAI WAS STATED BY SHRI P.K.AGARWAL THAT HE WAS DEALING WITH ONLY SHRI HI TEN DESAI IN RESPECT OF PURCHASES UNDER CONSIDERATION, THE DEPARTMENT FOR THE REASON S BEST KNOWN TO IT DID NOT CONSIDER I.T.A. NO.1641/MUM/2010 AND ITA NO.7219 TO 7221/MUM/2011 10 TO EXAMINE SHRI HITEN DESAI IN SPITE OF THE FACT T HAT HIS TELEPHONE NUMBERS AND / HIS PARTICULARS WERE MADE AVAILABLE TO THE AO. WE A LSO OBSERVE THAT THE ASSESSEE FILED DETAILS OF THE ASSETS FOR WHICH MATERIAL HAD BEEN U TILIZED, ITS QUANTUM AND ITS VALUE FORMING PART OF PLANT AND MACHINERY, ON WHICH DEPRE CIATION HAS BEEN CLAIMED, AT THE TIME OF QUANTUM PROCEEDINGS. NOT ONLY THIS, THE LD. DR HAS ALSO NOT DISPUTED THE FACT THAT THE ENTIRE ADDITION HAS BEEN MADE ON THE BASI S OF CIRCUMSTANTIAL EVIDENCES AND THE STATEMENT OF SHRI KOKATE THAT HE WAS PROPRIET OR OF M/S LAXMI EXPORTS, M/S SWATI INTERNATIONAL AND M/S RASHI INTERNATIONAL AND THEY WERE INVOLVED ONLY IN GIVING ACCOMMODATION ENTRIES WITHOUT SUPPLYING ANY MATERI AL TO THE CUSTOMERS BUT THE DEPARTMENT DID NOT ALLOW OPPORTUNITY TO THE ASSES SEE TO CONFRONT SHRI KOKATE. THIS FACT BECOMES IMPORTANT WHEN THE LD. AR ARGUED THA T NEITHER SHRI P.K.AGARWAL NOR THE ASSESSEE WERE HAVING ANY DEALING WITH SHRI KOKATE. IN THIS REGARD, IT IS RELEVANT TO STATE THAT THE HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF RAWALPINDI FLOOR MILLS (P) LTD (SUPRA) HAS HELD THAT STATEMENT RECORDED OF A PER SON COULD NOT BE USED AGAINST ASSESSEE IN ASSESSMENT PROCEEDINGS, MUCH LESS IN PE NALTY PROCEEDINGS, IF NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO CROSS-EXAMINE WITNESSE S. ACCORDINGLY, THE ORDER OF THE TRIBUNAL WAS JUSTIFIED IN CANCELLING THE PENALTY LE VIED U/S 271(1)( C ) OF THE ACT ON THE BASIS OF FINDINGS ARRIVED AT ON THE BASIS OF MATE RIAL COLLECTED AND THE STATEMENT RECORDED OF SOME OF THE CREDITORS WHO HAD ACCEPTED THAT THEY WERE MERE NAME-LENDERS AND, SECONDLY, THAT THE ASSESSEE COULD NOT PROVE TH E GENUINENESS OF LOANS IN ASSESSMENT PROCEEDINGS. WE ARE OF THE CONSIDERED V IEW THAT THE ABOVE DECISION OF HONBLE ALLAHABAD HIGH COURT SQUARELY APPLY TO THE FACTS OF THE CASE OF THE ASSESSEE BEFORE US THAT THE STATEMENT OF A PERSON WHICH WAS RELIED UPON AGAINST ASSESSEE BY THE DEPARTMENT BUT NO OPPORTUNITY TO CROSS-EXAMINE WAS GIVEN TO THE ASSESSEE; THE STATEMENT OF SAID PERSON COULD NOT BE MADE THE BAS IS FOR LEVY OF PENALTY U/S 271(1) (C) OF THE ACT. 10.3 WE HAVE ALREADY OBSERVED THAT THERE CANNOT BE A STRAIGHT JACKET FORMULA TO APPLY THAT THE ASSESSEE HAS FURNISHED ANY INACCURA TE PARTICULARS OF INCOME BUT IT DEPENDS ON THE FACTS OF EACH CASE. WE OBSERVE THAT IN THE QUANTUM PROCEEDINGS, IT HAS BEEN OBSERVED THAT THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE PURCHASE OF MATERIAL FROM SHRI P.K.AGARWAL BUT IT IS A FACT TH AT THE ASSESSEE HAS SET UP ITS REFINERY AT JAMNAGER. THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT PURCHASED MATERIAL. FURTHER, IT WAS POINTED OUT THAT THERE WERE PURCHAS ES AND RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND CORRECTNESS OF THE BO OKS OF ACCOUNTS OF THE ASSESSEE HAVE NOT BEEN REJECTED BY DEPARTMENT ON THE GROUN D THAT THE ASSESSEE HAS MADE I.T.A. NO.1641/MUM/2010 AND ITA NO.7219 TO 7221/MUM/2011 11 BOGUS PURCHASES. THEREFORE, IT COULD BE A CASE TH AT CONCERNS OF SHRI P.K.AGARWAL MIGHT NOT HAVE MADE PURCHASES FROM CONCERNS OF SHRI KOKATE OF THE STEELS BUT FROM SOMEWHERE ELSE AND THEREAFTER WOULD HAVE SUPPLIED T O THE ASSESSEE. IT IS ALSO A FACT THAT SHRI P.K.AGARWAL COULD NOT GIVE DETAILS SAT ISFACTORILY OF PURCHASES MADE BY HIS CONCERNS IN THE STATEMENTS RECORDED BY THE DEPARTME NT U/S 133A ON 6.1.2005 AND U/S 131 OF THE ACT ON 23.12.2005 AND 27.12.2005. IN T HE LIGHT OF THE ABOVE, THE EVIDENCE PRODUCED BY ASSESSEE THAT IT PURCHASED STEELS FROM THE CONCERNS OF SHRI P.K.AGARWAL COULD NOT BE CONSIDERED SUFFICIENT EVIDENCE AND TH E TRIBUNAL WHILE DECIDING THIS ISSUE IN THE QUANTUM PROCEEDINGS HAD STATED IN PARA 13. 7 OF ITS ORDER THAT THE FINDINGS OF THE AO VALIDLY RAISED DOUBT AND CREATES SUSPICION THAT THE INVOICES/BILLS RELIED UPON FOR TRANSPORTING THE GOODS AT THE ASSESSEES PREMISES A RE NOT GENUINE. THE TRIBUNAL ALSO OBSERVED THAT THE ENTIRE ADDITION HAD BEEN MADE O N THE BASIS OF STATEMENT OF SHRI KOKATE AND NO OPPORTUNITY WAS GIVEN BY THE DEPARTM ENT TO CROSS-EXAMINE SHRI KOKATE TO THE ASSESSEE IN SPITE OF THE FACT THAT IT WAS C ONTENDED BEFORE THE AO AS WELL AS APPELLATE AUTHORITY THAT SHRI P.K.AGARWAL, WHO WAS SUPPLIER TO THE ASSESSEE, WAS NOT DEALING WITH SHRI KOKATE. 10.4. THE HONBLE DELHI HIGH COURT IN THE CASE OF RAMPUR ENGG.LTD (SUPRA) HAS HELD THAT IF THE ASSESSEE FURNISHES THE EVIDENCE IN SUP PORT OF CLAIM MADE BY IT BUT THE SAME ARE NOT BELIEVED AND NOT TREATED AS SUFFICIENT EVI DENCE TO DISCHARGE THE OBLIGATION PLACED UPON THE ASSESSEE AS TO THE GENUINENESS OF THE TRANSACTION IT COULD NOT BE SAID THAT THERE IS A PRIMA FACIE SATISFACTION REGARDING FURNISHING OF INACCURATE PA RTICULARS OF THE CLAIM OF EXPENDITURE. ACCORDINGLY PENALTY LEV IED U/S 271(1)( C ) WAS CANCELLED. THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V/S S . SANKARAN (2000) 241 ITR 825(MAD) HAS HELD THAT MERE ADDITION OF INCOME BY DISALLOWING EXPENSES WOULD NOT BE REGARDED AS CONCEALMENT OF INCOME AND THEREFORE LEV Y OF PENALTY U/S 271(1)( C ) OF THE ACT WAS HELD NOT TO BE JUSTIFIED. IN THE CASE OF CIT V/S HARI MACHINES LIMITED (311 ITR 285) (DEL) THE CLAIM OF LOSS MADE BY ASSESSEE, WAS NEGATED BY REVENUE AUTHORITIES AS WELL AS BY THE TRIBUNAL. ON THE BASIS OF ADDITION MADE AND CONFIRMED BY HIGHER AUTHORITIES, AO IMPOSED PENALTY FOR FURNISHED INACC URATE PARTICULARS. APPELLATE AUTHORITY CANCELLED THE PENALTY. THE DELHI HIGH COURT WHIL E DISMISSING THE APPEAL FILED BY THE DEPARTMENT, HELD THAT JUST BECAUSE SOME ADDITIONS H AVE BEEN MADE TO THE TOTAL INCOME OF THE ASSESSEE DURING ASSESSMENT PROCEEDINGS, PEN ALTY COULD NOT BE IMPOSED. 10.5 IN SHORT, IF PENALTY IS IMPOSED ON THE BASIS OF DECISION TAKEN DURING ASSESSMENT OR RE-ASSESSMENT PROCEEDINGS, IT HAS BEEN HELD THA T PENALTY IS IMPOSED FOR INSUFFICIENT AND UNREASONABLE CAUSE. A SIMILAR CASE CAME BEFORE THE HONBLE PUNJAB AND HARYANA I.T.A. NO.1641/MUM/2010 AND ITA NO.7219 TO 7221/MUM/2011 12 HIGH COURT OF CIT V/S MEHTA ENGINEERS LIMITED (20 08) 300 ITR 308 (P&H). ASSESSEE MADE A CLAIM ABOUT THE EXPENDITURE AND THE RETURN MENTIONED, BASED ON WHICH SUCH CLAIM WAS MADE. AO AFTER DISALLOWING THE CLAIM, IM POSED PENALTY U/S 271)(1)( C ) OF THE ACT FOR CONCEALING PARTICULARS OF INCOME. THE FIR ST APPELLATE AUTHORITY CANCELLED THE PENALTY AND TRIBUNAL UPHELD HIS ORDER. IN THE APP EAL FILED BY THE DEPARTMENT, THE HONBLE PUNJAB AND HARYANA HIGH COURT HELD THAT THE ASSESSEE HAD CLAIMED CERTAIN EXPENDITURES INCURRED ON THE BASIS OF A WRITTEN AGR EEMENT. THE COURT WAS OF THE VIEW THAT IN SUCH CASES PENALTY COULD NOT BE IMPOSED U /S 271(1)( C ) OF THE ACT AND TO IMPOSE THE PENALTY ON THE BASIS OF DISALLOWANCE OF AN ITEM OF EXPENDITURE WAS IMPROPER. 10.6 SINCE PENALTY PROCEEDINGS ARE SEPARATE FROM A SSESSMENT PROCEEDINGS, MERELY BECAUSE THE ADDITIONS OR ADJUSTMENT HAVE BEEN MADE IN ASSESSMENT ORDER, DO NOT TANTAMOUNT, AUTOMATIC LEVY OF PENALTY. CONSIDERAT ION THAT ARISE IN PENALTY PROCEEDINGS ARE DIFFERENT THOSE IN ASSESSMENT PROCEEDINGS. WE MAY STATE THAT IF THE ASSESSEE HAD MADE AN EXPLANATION AND IF THE EXPLANATION OF THE ASSESSEE IS NOT ACCEPTED BY AO, THE EXPLANATION GIVEN BY ASSESSEE PER SE DOES NOT BECOM E TO BE A FALSE EXPLANATION. IN THE FACTS OF THE CASE BEFORE US, AS MENTIONED HEREINABO VE THAT THE ASSESSEE GAVE AN EXPLANATION WHICH IS ONLY UNPROVED BUT NOT DISPROVE D I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POS ITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE. THEREFORE, ON THE FACTS AND IN THE CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT LEVY OF PENALTY U/S 271(1)( C ) OF THE ACT IS NOT JUSTIFIED. IN THIS REGARD WE ARE SUPPORTED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF UPENDA V MITHANI (SUPRA), WHEREIN THE HON BLE HIGH COURT DISMISSED THE APPEAL OF THE DEPARTMENT AND CONFIRMED THE ORDER O F THE TRIBUNAL VIDE WHICH THE TRIBUNAL CONFIRMED THE ORDER OF LD. CIT(A) IN CANCE LLING THE PENALTY IMPOSED U/S 271(1)( C ) OF THE ACT . 10.7 THE CASES RELIED UPON BY THE LD. DR IN THE CA SES OF STEEL INFOTS LTD. (SUPRA) AND KUTTOOKARAN MACHINE TOOLS (SUPRA) ARE NOT APPLICABL E TO THE FACTS OF THE PRESENT CASE AS IN THAT CASE THE ASSESSEE MADE BOGUS CLAIM TO EVAD E TAX AND CLAIM WAS ALSO PROVED TO BE BOGUS. ACCORDINGLY, LEVY OF PENALTY WAS HELD TO BE JUSTIFIED. HOWEVER, IN THE CASE BEFORE US, AS MENTIONED HEREINABOVE THE ADDIT ION(S) MADE IN RESPECT OF CLAIM OF THE ASSESSEE FOR DEPRECIATION ON THE CAPITALIZED VA LUE OF STEEL WAS DISALLOWED BECAUSE GENUINENESS OF THE PURCHASE OF STEEL WAS DOUBTED A ND CREATED SUSPICION ON THE BASIS OF FACTS AND CIRCUMSTANCES. HENCE, IT WAS HELD THA T SUPPLY OF MATERIAL TO THE ASSESSEE COMPANY REMAINED UNSUBSTANTIATED AS THE DOCUMENTS PRODUCED WERE NOT TREATED AS SUFFICIENT EVIDENCE. HENCE CLAIM OF ASSESSEE TO PU RCHASE STEEL THROUGH CONCERNS OF SHRI I.T.A. NO.1641/MUM/2010 AND ITA NO.7219 TO 7221/MUM/2011 13 P.K.AGARWAL IS UNPROVED AND NOT ACCEPTED BUT FACTS DO NOT GIVE POSITIVE INFERENCE THAT IT WAS A FALSE CLAIM. IN VIEW OF ABOVE, CASES CITE D BY LD. DR (SUPRA) ARE NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE TO LEVY PE NALTY U/S 271(1)( C ) OF THE ACT. 10.8 IN VIEW OF ABOVE FACTS AND DISCUSSION, WE HOL D THAT LEVY OF PENALTY U/S 271(1) ( C ) OF THE ACT ON THE CLAIM OF DEPRECIATION MADE BY ASSESSEE IN THE ASSESSMENT YEARS UNDER CONSIDERATION IS NOT JUSTIFIED. THEREFORE, W E CANCEL THE PENALTY FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION BY ALLOWING TH E GROUNDS OF APPEAL TAKEN BY ASSESSEE FOR THE ASSESSMENT YEARS 2003-04 TO 2006 -07. 11. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEARS 2003-04 TO 2006-07 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH DEC, 2013 * 1 2 11 TH DEC, 2013 * SD SD ( . . / P.M.JAGTAP) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2 DATED 11/12/2013 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. ( ' / THE RESPONDENT. 3. 5 ( ) / THE CIT(A)- 4. 5 / CIT 5. 6 (8 , - 8 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) - 8 , /ITAT, MUMBAI