DEEPAK FERTILISERS AND PETROCHEMICALS CORORATION LTD, MUMBAI V. ASST CIT CEN CIR 44, MUMBAI

ITA 1672/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2262 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 01-04-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 01-03-2013
• Court: TRIBUNAL
• Department Lawyers: V TRIPATHI
• Assessee Lawyers: H P MAHAJANI
• Section: 133A

Judgement Text

, , D, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI , , , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.1672/MUM/2013 ASSESSMENT YEAR: 2003-04 DEEP AK FERTILISERS AND PETROCHEMICALS CORPORATION LIMITED, 10-B, BAKHTAWAR NARIMAN POINT MUMBAI-400021 / VS. A DDL. CIT RANGE 3(1) AAYKAR BHAVAN, M.K.RD. MUMBAI ( APPELLANT ) ( REVENUE ) P.A. NO . AAACD1388D APPELLANT BY SHRI H.P. MAHAJANI, (AR) REVENUE BY SHRI V. TRIPATHI (SR. DR) / DATE OF HEARING : 05/10/2016 / DATE OF ORDER: 26/10/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - 36, MUMBAI {(IN SHORT CIT(A)}, DATED 19.07.2011 PASSE D AGAINST DEEPAK FERTILIZERS & PETROCHEMICALS 2 PENALTY ORDER OF THE AO DATED 30.06.2011 U/S 271(1) (C) FOR THE ASSESSMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS: BEING AGGRIEVED BY THE ORDER PASSED BY THE CIT (APPEALS)-36, MUMBAI THE APPELLANT SUBMITS THE FOLL OWING GROUNDS OF APPEAL FOR YOUR SYMPATHETIC CONSIDERATIO N. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING ORDER U/ S 271(1)(C) PASSED BY ASST CIT CENTRAL CIRCLE 44 MUMB AI LEVYING PENALTY OF RS. 26.87,196 WITH REFERENCE TO PROCUREMENT COMMISSION OF RS. 7312,100 PAID, AS PER NORMAL TRADE PRACTICE, WHOLLY AND EXCLUSIVELY FOR T HE PURPOSES OF THE BUSINESS CARRIED ON BY THE APPELLAN T. IN PARTICULAR, THE LEARNED CIT(A) FAILED TO APPRECI ATE THAT THE SAID COMMISSION WAS OFFERED TO TAX DURING THE ASSESSMENT PROCEEDINGS SPECIFICALLY WITH THE OBJECT OF AVOIDING PROLONGED LITIGATION AND OF BUYING PEACE A ND ALSO KEEPING IN MIND THE MATERIALITY OF THE AMOUNT INVOL VED AND FURTHER THAT THE DISALLOWANCE WAS MADE SOLELY ON THE BASIS OF SUCH OFFER MADE BY THE APPELLANT. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI H.P. MAHAJANI, , AUTHORISED REPRESENTATIVE (AR ) ON BEHALF OF THE ASSESSEE AND BY SHRI V. TRIPATHI, DEPARTMENT AL REPRESENTATIVE (SR. DR) ON BEHALF OF THE REVENUE. 3. THE SOLITARY ISSUE IN THIS APPEAL IS WITH REGARD TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE REPRESENTATIV E OF BOTH THE SIDES MADE DETAILED ARGUMENTS. LD. COUNSEL OF THE A SSESSEE TOOK US THROUGH THE ORDERS OF THE LOWER AUTHORITIES AND DREW OUR ATTENTION UPON THE FACTS THAT IN THIS CASE THE PENALTY WAS LEVIED BY THE AO ON ACCOUNT OF DISALLOWANCE OF PRO CUREMENT COMMISSION EXPENSES WHICH WAS MADE BY THE AO AS A RESULT OF WITHDRAWAL OF SAID CLAIM BY THE ASSESSEE. HE DRE W OUR ATTENTION UPON THE ORDER OF THE SETTLEMENT COMMISSI ON DATED 02.12.2011 SHOWING THAT THE SIMILAR CLAIM HAD BEEN OFFERED TO DEEPAK FERTILIZERS & PETROCHEMICALS 3 TAX BY THE ASSESSEE DURING ALL OTHER ASSESSMENT YEA RS I.E. 2004-05 TO 2009-10 FOR AN AMOUNT AGGREGATING TO RS.5,13,35,902/- ON ACCOUNT OF DISCREPANCIES IN PRO VING SERVICES RENDERED BY THE AGENT FOR PROCUREMENT OF R AW MATERIAL. HE DREW OUR ATTENTION UPON THE REPLY SUBM ITTED BY THE AO DURING THE COURSE OF PROCEEDINGS AS WELL AS PENALTY PROCEEDINGS TO SHOW THAT THE ASSESSEE HAD VOLUNTARI LY WITHDRAWN THE CLAIM WITHOUT CALLING IT AS NON-GENUI NE EXPENSES. IT WAS SUBMITTED THAT THOUGH THE CLAIM WA S WITHDRAWN AS ASSESSEE WAS NOT ABLE TO PROVE RENDERI NG OF SERVICES BY THE AGENT, BUT THE CLAIM WAS GENUINE OT HERWISE. HE ARGUED THAT MERELY BECAUSE A CLAIM HAS BEEN WITHDRA WN BY THE ASSESSEE AND CONSEQUENTLY THE AO HAD DISALLOWED THE SAME, IT DOES NOT PROVE CONCEALMENT OR FURNISHING O F INACCURATE PARTICULARS OF INCOME, AND THEREFORE PEN ALTY CANNOT BE LEVIED UNDER SUCH CASES. IN SUPPORT OF HIS ARGUM ENTS, HE HAS PLACED RELIANCE UPON FOLLOWING JUDGMENTS: 1. SHRI HAFEEZ S. CONTRACTOR V. ACIT IN ITA NO.6222 AND 6223/MUM/2013 DATED 02.09.2015 2. HERANBA INDUSTRIES LTD. VS. DCIT IN ITA NO.2292/MUM/2013 DATED 08.04.2015 3. CIT V. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) 4. DUSHYANT DEVELOPMENT CORPORATION V. DCIT ITAT MU MBAI DATED 01.02.2013 3.1. PER CONTRA, LD. DR VEHEMENTLY CONTESTED ALL THE ARGUMENTS OF THE LD. COUNSEL AND SUBMITTED THAT COM PLETE FACTS HAVE NOT BEEN NARRATED BY THE LD. COUNSEL OF THE ASSESSEE. IT WAS SUBMITTED THAT IN THIS CASE, ASSES SEE DID NOT DEEPAK FERTILIZERS & PETROCHEMICALS 4 COME UP FOR WITHDRAWAL OF CLAIM VOLUNTARILY. THE AS SESSEE HAD WITHDRAWN THE CLAIM MUCH AFTER DATE OF SEARCH WHEN THE ASSESSMENT PROCEEDINGS HAD BEGAN AFTER THE SEARCH O PERATIONS AND ASSESSEE WAS CORNERED AND THEREFORE, ASSESSEE H AD NO OTHER OPTION BUT TO WITHDRAW THE IMPUGNED CLAIM. IT WAS FURTHER SUBMITTED THAT AT NO POINT OF TIME ASSESSEE CAME UP WITH FURTHER EVIDENCES TO PROVE AND SUBSTANTIATE TH E GENUINENESS OF THE CLAIM. ON THE ONE HAND, THE ASSE SSEE HAD MENTIONED IN ITS REPLY THAT CLAIM WAS GENUINE, BUT SIMULTANEOUSLY ON THE OTHER HAND, THE CLAIM WAS WIT HDRAWN. THUS OVERALL CONDUCT OF THE ASSESSEE WAS FARCE AND SELF CONTRADICTORY. IF THE CLAIM WAS GENUINE, THE ASSESS EE COULD HAVE ADDUCED SOME EVIDENCES IN SUPPORT AND SHOULD H AVE OFFERED SOME INQUIRIES TO PROVE GENUINENESS OF THE CLAIM AND EVEN IF THE RENDERING OF SERVICE WAS NOT POSSIBLE T O BE FULLY SUBSTANTIATED BUT SOME MORE DETAILS COULD HAVE BEEN BROUGHT ON RECORD BY THE ASSESSEE TO JUSTIFY THESE EXPENSES IF THESE WERE GENUINE. 3.2. IT WAS FURTHER SUBMITTED THAT THE WHOLE PATTERN OF THIS CASE REVEALS THAT THESE EXPENSES WAS FICTITIOUS AND THAT IS WHY ASSESSEE HAD WITHDRAWN ITS CLAIM. THE CLAIM MADE IN ALL THE YEARS RUNNING FROM 2004-05 TO 2009-10 WAS WITHDRAWN THROUGH A PETITION FILED BEFORE SETTLEMENT COMMISSI ON. THE WITHDRAWAL OF CLAIM IN THE IMPUGNED YEAR WAS NOT AN ISOLATED ACTION BUT PART OF SERIES OF ACTIONS. HE DISTINGUIS HED ALL THE JUDGMENTS RELIED UPON BY THE LD. COUNSEL ON THE GRO UND THAT WHEREVER SURRENDERED WAS MADE IN THESE CASES THAT W AS VOLUNTARY IN NATURE AND IN SOME CASES REVISED RETUR N WAS ALSO DEEPAK FERTILIZERS & PETROCHEMICALS 5 FILED. FURTHER, OVER-ALL FACTS OF THE CASE AND PATT ERN OF BEHAVIOR OF THE ASSESSEES IN THE CASES RELIED UPON BY THE LE ARNED COUNSEL WERE QUITE DISTINGUISHABLE FROM THE CASE OF THE ASSESSEE BEFORE US. THEREFORE, THE ASSESSEE CANNOT BE GIVEN BENEFIT OF THESE CASES IN THE GIVEN FACTS OF THE CA SE BEFORE US. FURTHER, HE HEAVILY RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MAK DATA PVT. LTD. V. CIT (CIVIL APPEAL NO. 9772 OF 2013) DATED 30 TH OCTOBER 2013 WHEREIN IT WAS HELD BY THE HONBLE SUPREME COURT THAT WHERE SU RRENDER OF INCOME WAS NOT VOLUNTARY AND WAS MADE AFTER LAPS E OF TIME THEN IT CANNOT BE SAID THAT ASSESSEE HAD MADE FULL DISCLOSURE OF ITS INCOME AND THEREFORE UNDER SUCH CIRCUMSTANCE S PENALTY MUST BE LEVIED. 3.3. IN REJOINDER, LD. COUNSEL REITERATED ITS SUBMISSIO NS AND MADE AN ATTEMPT TO DISTINGUISH JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF MAK DATA P. LTD. (SUPRA) AND S UBMITTED THAT ASSESSEE HAD WITHDRAWN THE CLAIM ONLY TO BUY P EACE AND THEREFORE HE REQUESTED FOR DELETING THE PENALTY. 3.4. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWE R AUTHORITIES, DETAILS AND EVIDENCES, COPIES OF JUDGM ENTS PLACED BEFORE US AND ARGUMENTS MADE BY BOTH THE SIDES AS W ELL AS OVER ALL FACTS AND CIRCUMSTANCES OF THE CASE. IT IS NOTED BY US THAT IN THIS CASE THE FACTS ARE NOT AS PLAIN AND SI MPLE AS HAVE BEEN TRIED TO BE EXPLAINED BY THE LD. COUNSEL OF TH E ASSESSEE. THE CHRONOLOGY OF EVENTS IS THAT A SEARCH AND SEIZU RE ACTION U/S 132(1) WAS CARRIED OUT UPON THE ASSESSEE COMPAN Y ON 21.07.2009. SUBSEQUENTLY, INFORMATION WAS RECEIVED BY THE AO FROM THE ADIT (INVESTIGATION), PUNE VIDE LETTER DATED DEEPAK FERTILIZERS & PETROCHEMICALS 6 15.03.2010 INFORMING THAT THE ASSESSEE COMPANY HAD ADMITTED AND OFFERED TO TAX UNDISCLOSED INCOME TO T HE TUNE OF RS.525.62 LAKHS FOR A.YS. 2004-05 TO 2009-10 ON ACC OUNT OF PAYMENT OF PROCUREMENT COMMISSION PAID TO VARIOUS P ARTIES, CONSEQUENT TO THE SEARCH ACTION CARRIED OUT UPON TH E ASSESSEE. ACCORDINGLY, REASONS FOR ESCAPEMENT OF I NCOME IN THE IMPUGNED YEAR WERE RECORDED AND NOTICE U/S148 D ATED 24.03.2010 WAS ISSUED. SUBSEQUENTLY, NOTICES WERE I SSUED U/S 143(2)/142(1) OF THE ACT. IN THESE NOTICES, THE ASS ESSEE WAS ASKED BY THE AO TO SUBMIT FULL DETAILS AND PARTICUL ARS OF ALL THE EXPENSES CLAIMED BY THE ASSESSEE DURING THE IMP UGNED YEAR AND TO SUBSTANTIATE THE SAME WITH REQUISITE EV IDENCES. IT WAS IN RESPONSE TO THESE NOTICES WHEN ASSESSEE FOR THE FIRST TIME FURNISHED BASIC DETAILS OF THE IMPUGNED EXPENS ES VIDE ITS REPLY DATED 14 TH DECEMBER, 2010 AND THEREAFTER, WHEN THE ASSESSEE WAS CORNERED AND WAS NOT ABLE TO SUBSTANTI ATE THE CLAIM OF PROCUREMENT COMMISSIONS, THEN, VIDE ITS LE TTER DATED 27 TH DECEMBER 2010, THE ASSESSEE WITHDREW ITS CLAIM. TH E ASSESSEE HAD UNDOUBTEDLY MENTIONED IN THE SAID LETT ER THAT PAYMENT HAS BEEN MADE BY THE ACCOUNT PAYEE CHEQUE O N WHICH TDS WAS DEDUCTED AND IT WAS ALSO MENTIONED TH AT THOUGH THE CLAIM WAS GENUINE BUT SINCE THE ASSESSEE WAS NOT ABLE TO PROVE THE RENDERING OF SERVICE, THEREFORE T HE ASSESSEE COMPANY HAD WITHDRAWN THE CLAIM. IT HAS ALSO BEEN S UBMITTED THAT THE CLAIM WAS WITHDRAWN TO AVOID LITIGATION AN D TO BUY PEACE. BUT, NO OTHER EVIDENCE WHATSOEVER, EXCEPT FE W SAMPLE INVOICES, WAS FURNISHED BY THE ASSESSEE. THEREFORE, UNDER DEEPAK FERTILIZERS & PETROCHEMICALS 7 THESE CIRCUMSTANCES THE AO DISALLOWED THE CLAIM AND ALSO INITIATED THE PENALTY PROCEEDINGS. 3.5. SUBSEQUENTLY, DURING THE PENALTY PROCEEDINGS, THE ASSESSEE SUBMITTED ITS REPLY DATED 15 TH JUNE, 2011 WHEREIN THE REPLY SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS (BY WHICH THE IMPUGNED CLAIM WAS WITHDR AWN) WAS REPRODUCED AND IT WAS AGAIN REITERATED THAT THE PAYMENT WAS MADE BY THE ACCOUNT PAYEE CHEQUE AND TDS WAS AL SO DEDUCTED. THE ASSESSING OFFICER WAS NOT SATISFIED W ITH THE EXPLANATION OF THE ASSESSEE AND THEREFORE HE LEVIED THE PENALTY. 3.6. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) AND THERE ALSO NO RELIEF WAS GRANTED AND PEN ALTY LEVIED BY THE AO WAS CONFIRMED, AND THAT IS HOW ASSESSEE I S IN APPEAL BEFORE US. 3.7. THE FIRST ISSUE THAT NEEDS TO BE DECIDED BY US IS WHETHER THE WITHDRAWAL OF CLAIM MADE BY THE ASSESSEE WAS VO LUNTARY AND BONA FIDE IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. IF, WE ANALYSE OVERALL CONDUCT OF THE ASSESSEE AND CHRONOLOGY OF EVENTS AS HAVE BEEN NARRATED ABOVE, IT IS NOTED THAT ASSESSEE HAD NOT WITHDRAWN ITS CLAIM VOLUNTARILY. F IRSTLY, THERE WAS HUGE TIME GAP. FURTHER, EVEN WHEN THE REASSESSM ENT PROCEEDINGS WERE INITIATED, IN ITS FIRST REPLY THE ASSESSEE TRIED TO EXPLAIN THE IMPUGNED EXPENSES AND DID NOT COME O UT WITH COMPLETE TRUTH. IT WAS AT THE TIME OF SECOND REPLY FURNISHED VIDE LETTER DATED 27.12.2010, WHEN THE ASSESSEE WAS CORNERED, THEN HE SUBMITTED THAT CLAIM IS BEING WITHDRAWN FOR WANT OF SUFFICIENT DOCUMENTARY EVIDENCE, AS PER STANDARD RE QUIRED BY DEEPAK FERTILIZERS & PETROCHEMICALS 8 THE INCOME TAX DEPARTMENT TOWARDS RENDITION OF THE SERVICES. FURTHER, EVEN IN THE SAID REPLY THE ASSESSEE MERELY SUBMITTED THAT THE CLAIM WAS GENUINE BUT DID NOT SUPPORT IT W ITH FURTHER EVIDENCES, EXCEPT SAMPLE COPIES OF INVOICE OF THE A GENTS. OVER ALL CONDUCT OF THE ASSESSEE DOES NOT INSPIRE CONFID ENCE TO SAY THAT THE CLAIM WAS MADE VOLUNTARILY. THEREFORE, IN OUR VIEW, ASSESSEE CANNOT GET BENEFIT OF THE JUDGMENTS CITED BEFORE US BY ITS COUNSEL WHEREIN IT HAS BEEN HELD THAT IF TAX HA S BEEN OFFERED VOLUNTARILY BY THE ASSESSEE THEN IT SHALL N OT PROVE CONCEALMENT OF INCOME AUTOMATICALLY AND THEREFORE P ENALTY SHOULD NOT BE LEVIED UNDER SUCH CASES. IT IS BECAUS E OF THE REASON THAT FACTS OF THIS CASE ARE PECULIAR AND DIF FERENT FROM THE JUDGMENTS RELIED UPON BY THE LD. COUNSEL. 3.8. THE OTHER ISSUES TO BE DECIDED BY US ARE WHETHER T HE IMPUGNED CLAIM WAS BONAFIDE /GENUINE CLAIM OR A FALSE/FICTITIOUS CLAIM, AND WHETHER IT CAN BE SAID THAT ASSESSEE HAD DISCHARGED ITS ONUS AS ENVISAGED UNDER THE LAW AS PRESCRIBED U/S 271(1)(C) OF THE ACT. WE HAVE PONDER ED OVER THESE ISSUES AS WELL. FIRSTLY, IT IS NOTED THAT WIT HDRAWAL OF CLAIM IN THIS YEAR WAS NOT AN ISOLATED OR SOLITARY ACTION ON THE PART OF THE ASSESSEE. THE PERUSAL OF ABSTRACT OF TH E ORDER OF SETTLEMENT COMMISSION DATED 02.12.2011 REVEALS DIST URBING FACTS. IT IS NOTED THAT HUGE DISCLOSURES UNDER VARI OUS HEADS AGGREGATING TO RS.18,71,19,769/- FOR THE A.YS. 2004 -05 TO 2009-10 WERE MADE BY THE ASSESSEE BEFORE SETTLEMENT COMMISSION. ONE OF THE DISCLOSURES WAS ON ACCOUNT O F PROCUREMENT COMMISSION AGGREGATING TO RS. 5,13,35,9 02/- SPREAD INTO SIX ASSESSMENT YEARS I.E. 2004-05 TO 20 09-10. IT IS DEEPAK FERTILIZERS & PETROCHEMICALS 9 THUS NOTED THAT WITHDRAWAL OF CLAIM WAS NOT IN THIS YEAR ALONE BUT IT HAS BEEN MADE IN ALL THE YEARS. THE IMPUGNED YEAR IS 7 TH YEAR. IT IS NOTED THAT IT HAS BEEN MENTIONED BY THE ASSESSEE IN THE PETITION FILED BEFORE SETTLEMENT COMMISSION AS WELL AS BEFORE US THAT WITHDRAWAL HAS BEEN MADE PRIMARILY D UE TO DIFFICULTY IN ESTABLISHING RENDITION OF SERVICES. I T IS NOT POSSIBLE TO BELIEVE THE EXPLANATION OF THE ASSESSEE THAT WIT H REGARD TO COMMISSION PAID TO ALL THE AGENTS IN ALL THE YEARS, IT WAS DIFFICULT FOR THE ASSESSEE TO PROVE RENDERING OF SE RVICES. THE EXPLANATION OFFERED DOES NOT SEEM TO BE PLAUSIBLE. IT MAY SO HAPPEN IN AN ISOLATED CASE ONCE OR TWICE THAT DUE T O NON- COOPERATION OF AGENTS, THE ASSESSEE MAY NOT BE IN A POSITION TO SUBSTANTIATE RENDITION OF SERVICES TO THE HILT, BUT IT IS UNBELIEVABLE THAT IN ALL THE YEARS ALL THE AGENTS W OULD DISAPPEAR AND WOULD NOT COOPERATE WITH THE ASSESSEE . IT IS CLEAR FROM THE PATTERN OF BEHAVIOR AND CONDUCT OF T HE ASSESSEE THAT THE ASSESSEE HAS BEEN USING THIS EXPENSE HEAD PROCUREMENT COMMISSION AS A CONDUIT TO SIPHON OFF THE FUNDS FROM THE COMPANY BY MAKING BOGUS AND FICTITIOUS CLA IMS. IT IS FURTHER EVIDENT FROM THE HUGE DISCLOSURES MADE BY T HE ASSESSEE BEFORE THE SETTLEMENT COMMISSION THAT ASSE SSEE WAS FOLLOWING THE PRACTICE OF MAKING FICTITIOUS AND BOG US CLAIM UNDER VARIOUS OTHER HEADS ALSO. IT IS FURTHER EVIDE NT FROM THIS FACT THAT EVEN DURING THE COURSE OF PENALTY PROCEED INGS, THOUGH, THE ASSESSEE DID MENTION THAT THE CLAIM WAS GENUINE BUT DID NOT SUPPORT ITS AVERMENT BY FURNISHING ANY RELIABLE EVIDENCES. IT IS NOTED THAT HUGE PAYMENTS WERE MADE WITHOUT THERE BEING ANY WRITTEN AGREEMENT WITH THE AGENTS. NOTHING DEEPAK FERTILIZERS & PETROCHEMICALS 10 HAS BEEN BROUGHT ON RECORD TO SHOW THAT PAYMENT WAS MADE BY CHEQUE AND TDS WAS DEDUCTED UPON THEM. NO CONFIRMATION, INCOME TAX RETURN OR BALANCE SHEET AN D PROFIT AND LOSS ACCOUNT OR ANY OTHER AGREEMENT OR CORRESPO NDENCE, WHATSOEVER, HAS BEEN BROUGHT ON RECORD. NO SINGLE P IECE OF EVIDENCE HAS BEEN BROUGHT (EXCEPT SAMPLE COPIES OF INVOICE) TO SHOW THAT THE CLAIM WAS GENUINE. FURTHER, THE ASSES SEE DID NOT MAKE ANY OFFER BEFORE THE AO TO ASSIST HIM IN M AKING FURTHER INQUIRIES, EVEN DURING THE COURSE OF PENALT Y PROCEEDINGS. IF THE ASSESSEE WAS SURE THAT THE IMPU GNED EXPENSES WERE GENUINE, THEN DEFINITELY SOME MORE EV IDENCES COULD HAVE BEEN PLACED ON RECORD TO ESTABLISH BONA FIDE OF IMPUGNED CLAIM AS WELL AS SITUATION OF THE ASSESSEE . NOTHING OF THIS SORT HAS BEEN DONE BY THE ASSESSEE EITHER DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS OR PENALTY PROCEED INGS BEFORE THE AO OR EVEN BEFORE THE LD. CIT(A) WHILE C ONTESTING THE APPEAL AGAINST THE PENALTY ORDER. BEFORE US ALS O, NO EVIDENCES HAVE BROUGHT ON RECORD. THUS, OVERALL CON DUCT AND BEHAVIOR OF THE ASSESSEE AND PATTERN OF TRANSACTION S PROVES THAT ASSESSEE WAS FOLLOWING PRACTICE OF MAKING BOGU S AND FICTITIOUS CLAIMS IN A REGULAR AND SYSTEMATIZED MAN NER. 3.9. IT IS FURTHER NOTED BY US THAT IN THE PROFIT AND L OSS ACCOUNT ALSO, THE CLAIM OF COMMISSION HAS NOT BEEN MADE CONSPICUOUSLY BY THE ASSESSEE. THE CLAIM OF PROCURE MENT COMMISSION IS NOT VISIBLE IN ANY HEAD OF THE P & L ACCOUNT. ON OUR INQUIRY FROM THE LD. COUNSEL, IT WAS REVEALE D THAT PROCUREMENT COMMISSION HAS BEEN MADE PART OF PURCHA SES DEBITED IN THE P & L A/C. THUS, FROM THIS GESTURE A ND DEEPAK FERTILIZERS & PETROCHEMICALS 11 APPROACH OF THE ASSESSEE IT FURTHER INDICATES THAT COMPLETE FACTS WERE NOT DISCLOSED AND MANNER OF WORKING OF T HE ASSESSEE WHILE FILING ITS INCOME TAX RETURN WAS NOT FULLY TRANSPARENT. WITH A VIEW TO DIG OUT FURTHER FACTS R ELATED TO DISCLOSURE OF INFORMATION BY THE ASSESSEE PERTAININ G TO THIS CLAIM, IT WAS FOUND OUT BY US THAT IN THE ORIGINAL ASSESSMENT ORDER PASSED U/S143(3) DATED 08.02.2006 ALSO THERE IS NO DISCUSSION AT ALL WITH REGARD TO THE IMPUGNED CLAIM VIZ PROCUREMENT COMMISSION. NOTHING HAS BEEN SHOWN TO U S IF ANY QUERY WAS RAISED AND REPLY WAS GIVEN BY THE ASS ESSEE DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S RELATED TO THE SAID CLAIM. IT APPEARS THAT THE IMPUGNED CLA IM REMAINED HIDDEN AS PART OF THE AMOUNT OF PURCHASES DEBITED IN THE P & L ACCOUNT. THUS, IN OUR VIEW, THE CLAIM OF THE ASSESSEE IS NOT BONA FIDE . RATHER IT IS APPARENTLY BOGUS AND FICTITIOUS AND HAS BEEN RIGHTLY TREATED AS SUCH BY THE LOWER AUTHORITIES. 3.10. THE LAST ISSUE THAT COMES TO OUR MIND IS WHETHER T HE ASSESSEE HAD DISCHARGED ITS ONUS UNDER THE LAW AS C ONTAINED IN SECTION 271(1)(C) OF THE ACT. IT PERUSAL OF SECT ION 271(1)(C) REVEALS THAT LAW IN THIS REGARD IS THAT AFTER THE ADDITIONS/DISALLOWANCES ARE MADE IN THE ASSESSMENT ORDER, THE ASSESSEE IS EXPECTED TO OFFER AN EXPLANATION TO SHOW THAT IMPUGNED ADDITION/DISALLOWANCE DOES NOT LEAD TO ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3.11. IN THE CASE BEFORE US THE ONLY EXPLANATION GIVEN B Y THE ASSESSEE WAS THAT THE IMPUGNED CLAIM WAS GENUINE WH ICH HAS BEEN VOLUNTARILY WITHDRAWN DUE TO DIFFICULTY IN EST ABLISHING DEEPAK FERTILIZERS & PETROCHEMICALS 12 RENDITION OF SERVICES. WE HAVE ALREADY HELD IN ABOV E PARAGRAPHS OF OUR ORDER THAT THE WITHDRAWAL OF CLAI M WAS NOT MADE VOLUNTARILY. THE CLAIM WAS GENUINE OR NOT, THA T FACT WAS ONLY IN THE KNOWLEDGE OF ASSESSEE AT THE STAGE OF F ILING OF RETURN, BUT THE LEAST AS WAS EXPECTED FROM THE ASSE SSEE UNDER SUCH CIRCUMSTANCES ESPECIALLY WHERE HUGE DISCLOSURE S HAD BEEN MADE WAS TO AT LEAST COME OUT WITH FULL FACTS AND PUT FORTH ENTIRE MATERIAL ON RECORD SO AS TO SUBSTANTIA TE THE CLAIM IN WHATEVER MANNER IT WAS POSSIBLE AND TO ALSO OFFE R ASSISTANCE TO THE AO FOR FURTHER INQUIRIES SO AS TO PROVE AND ESTABLISH BONA FIDE OF THE ASSESSEE AS DISCUSSED ABOVE IN DETAIL. BUT, NO SUCH ASSISTANCE WAS PROVIDED BY THE ASSESSEE TO THE AO AND NO FURTHER MATERIAL WAS BROUGHT ON RE CORD. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, THE BURDEN ENVISAGED UPON THE ASSESSEE UNDER THE LAW WAS NOT DISCHARGED. FURTHER, TAKING INTO ACCOUNT ALL THE FACTS OF THE CASE, IT I S EVIDENT THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT A PL AUSIBLE EXPLANATION. THE JUDGMENTS RELIED UPON BY THE LD. C OUNSEL ARE CLEARLY DISTINGUISHABLE. IN THESE CASES, IT WAS ESTABLISHED THAT THE WITHDRAWAL OF CLAIM WAS VOLUNTARY, WHICH I S MISSING IN THE FACTS OF THE CASE BEFORE US. 3.12. OUR VIEW FINDS SUPPORT FROM THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF MAK DATA P. LTD. (SUPRA), THE RELEVANT PART OF SAME IS REPRODUCED HEREUNDER FOR T HE SAKE OF READY REFERENCE: 6. WE HAVE HEARD COUNSEL ON EITHER SIDE. WE FULLY CONCUR WITH THE VIEW OF THE HIGH COURT THAT THE TRIBUNAL H AS NOT PROPERLY UNDERSTOOD OR APPRECIATED THE SCOPE OF DEEPAK FERTILIZERS & PETROCHEMICALS 13 EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT, WHIC H READS AS FOLLOWS :- EXPLANATION 1 WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, -- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AN D FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THA T ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL I NCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE P URPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRES ENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 7. THE AO, IN OUR VIEW, SHALL NOT BE CARRIED AWAY B Y THE PLEA OF THE ASSESSEE LIKE VOLUNTARY DISCLOSURE, BUY PEACE, AVOID LITIGATION, AMICABLE SETTLEMENT, ETC. TO EXPLAIN AWAY ITS CONDUCT. THE QUESTION IS WHETHER T HE ASSESSEE HAS OFFERED ANY EXPLANATION FOR CONCEALMEN T OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. EXPLANATION TO SECTION 271(1) RAISES A PRESUMPTION OF CONCEALMENT, WHEN A DIFFERENCE IS NO TICED BY THE AO, BETWEEN REPORTED AND ASSESSED INCOME. TH E BURDEN IS THEN ON THE ASSESSEE TO SHOW OTHERWISE, B Y COGENT AND RELIABLE EVIDENCE. WHEN THE INITIAL ONUS PLACED BY THE EXPLANATION, HAS BEEN DISCHARGED BY HIM, THE ONUS SHIFTS ON THE REVENUE TO SHOW THAT THE AMOUNT IN QU ESTION CONSTITUTED THE INCOME AND NOT OTHERWISE. 8. ASSESSEE HAS ONLY STATED THAT HE HAD SURRENDERED THE ADDITIONAL SUM OF RS.40,74,000/- WITH A VIEW TO AVO ID LITIGATION, BUY PEACE AND TO CHANNELIZE THE ENERGY AND RESOURCES TOWARDS PRODUCTIVE WORK AND TO MAKE AMICA BLE SETTLEMENT WITH THE INCOME TAX DEPARTMENT. STATUTE DOES NOT RECOGNIZE THOSE TYPES OF DEFENCES UNDER THE EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. IT I S TRITE LAW THAT THE VOLUNTARY DISCLOSURE DOES NOT RELEASE THE APPELLANT-ASSESSEE FROM THE MISCHIEF OF PENAL PROCE EDINGS. THE LAW DOES NOT PROVIDE THAT WHEN AN ASSESSEE MAKE S A VOLUNTARY DISCLOSURE OF HIS CONCEALED INCOME, HE HA D TO BE ABSOLVED FROM PENALTY. DEEPAK FERTILIZERS & PETROCHEMICALS 14 9. WE ARE OF THE VIEW THAT THE SURRENDER OF INCOME IN THIS CASE IS NOT VOLUNTARY IN THE SENSE THAT THE OFFER O F SURRENDER WAS MADE IN VIEW OF DETECTION MADE BY THE AO IN THE SEARCH CONDUCTED IN THE SISTER CONCERN OF TH E ASSESSEE. IN THAT SITUATION, IT CANNOT BE SAID THAT THE SURRENDER OF INCOME WAS VOLUNTARY. AO DURING THE CO URSE OF ASSESSMENT PROCEEDINGS HAS NOTICED THAT CERTAIN DOCUMENTS COMPRISING OF SHARE APPLICATION FORMS, BA NK STATEMENTS, MEMORANDUM OF ASSOCIATION OF COMPANIES, AFFIDAVITS, COPIES OF INCOME TAX RETURNS AND ASSESS MENT ORDERS AND BLANK SHARE TRANSFER PAGE 8 8 DEEDS DULY SIGNED, HAVE BEEN IMPOUNDED IN THE COURSE OF SURVEY PROCEEDINGS UNDER SECTION 133A CONDUCTED ON 16.12.2 003, IN THE CASE OF A SISTER CONCERN OF THE ASSESSEE. TH E SURVEY WAS CONDUCTED MORE THAN 10 MONTHS BEFORE THE ASSESS EE FILED ITS RETURN OF INCOME. HAD IT BEEN THE INTENTI ON OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF ITS IN COME, IT WOULD HAVE FILED THE RETURN DECLARING AN INCOME INC LUSIVE OF THE AMOUNT WHICH WAS SURRENDERED LATER DURING TH E COURSE OF THE ASSESSMENT PROCEEDINGS. CONSEQUENTLY, IT IS CLEAR THAT THE ASSESSEE HAD NO INTENTION TO DECLARE ITS TRUE INCOME. IT IS THE STATUTORY DUTY OF THE ASSESSEE TO RECORD ALL ITS TRANSACTIONS IN THE BOOKS OF ACCOUNT, TO EXPLAI N THE SOURCE OF PAYMENTS MADE BY IT AND TO DECLARE ITS TR UE INCOME IN THE RETURN OF INCOME FILED BY IT FROM YEA R TO YEAR. THE AO, IN OUR VIEW, HAS RECORDED A CATEGORICAL FIN DING THAT HE WAS SATISFIED THAT THE ASSESSEE HAD CONCEAL ED TRUE PARTICULARS OF INCOME AND IS LIABLE FOR PENALTY PRO CEEDINGS UNDER SECTION 271 READ WITH SECTION 274 OF THE INCO ME TAX ACT, 1961. 3.13. THUS, IN VIEW OF THE JUDGMENT OF THE HONBLE SUPRE ME COURT AND FACTS AND CIRCUMSTANCES OF THE CASE AS DI SCUSSED ABOVE, WE FIND THAT PENALTY HAS BEEN RIGHTLY LEVIED BY THE AO AND CONFIRMED BY LD. CIT(A) AND THEREFORE ORDER OF LD. CIT(A) IS CONFIRMED. DEEPAK FERTILIZERS & PETROCHEMICALS 15 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH OCTOBER, 2016 SD/- (SANJAY GARG ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER MUMBAI; ' DATED : 26 /10/2016 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. $ %& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. ) ) * ( $ ) / THE CIT, MUMBAI. 4. ) ) * / CIT(A)- , MUMBAI 5. -. ' /0 , ) $ /01 , / DR, ITAT, MUMBAI 6. 2 3 / GUARD FILE. / BY ORDER, ( -$ ' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI