SANGHVI SWISS REFILLS P. LTD, THANE V. ACIT 8(3), MUMBAI

ITA 2485/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55498 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 26-09-2011
• Assessment Year: 1988-1989
• Appeal Filed On: 17-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ARUN SATHE
• Keywords: Rectification of order; Opportunity of being heard; Retrospective amendment; Difference of opinion; Change of opinion; Revenue expenditure
• Section: 143(3); 32; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, I, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND B.RAMAKOTAIAH (A .M ) ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) SANGHVI SWISS REFILLS PVT.LTD., PLOT NO.A-3, MIRA MIDC, P.O.MIRA, DIST.THANE-401104 PAN:AACCS8696R ASSISTANT COMMISSIONER OF INCOME TAX 8(3) MUMBAI. APPELLANT V/S RESPONDENT DATE OF HEARING : 2 6.9.2011 DATE OF PRONOUNCEMENT : 12.10.2011 APPELLANT BY : SHRI ARUN SATHE RESPONDENT BY : SHRI SUNIL KUMAR SINGH O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 7.1.2009 PASSED BY THE LD.C IT(A) FOR THE ASSESSMENT YEAR 1988-89. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF BAL PEN AND BAL PEN REFILLS. THE AO IN THE IMPUGNED PENALT Y ORDER OBSERVED THAT THE RETURN OF INCOME WAS FILED ON 3 0.6.1988 DECLARING TOTAL LOSS OF RS.NIL. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961(I N SHORT THE ACT) ON 27.3.1991 ASSESSING TOTAL INCOME AT RS.50,72,199/-. HE FURTHER OBSERVED THAT THE ASSES SEE ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 2 PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AGAINST T HE ASSESSMENT ORDER DATED 27.3.1991. THE LD. CIT(A) WHILE PARTLY ALLOWING THE APPEAL OF THE ASSESSEE, VIDE OR DER DATED 13.2.1992 SET ASIDE THE FOLLOWING ADDITIONS/DISALLO WANCES TO THE FILE OF THE AO FOR DECISION ON THE ISSUES AFRES H: 1. UNACCOUNTED SCRAP (PLASTIC) RS.2,07,720/- 2. LOW SELLING RATE OF RESALE OF PLASTIC SCRAP RS. 1,67,717/- 3. PROFIT U/S 41 (1) RS. 3,95,903/- 4. SERVICE CHARGES RS. 2, 15,000/- 5. NON ALLOWANCE OF SALES TAX RS. 51,928/- 6. NON ALLOWANCE OF CLAIM FOR AY 1983-84 RS. 66,430/- PURSUANT TO THE SAID ORDER, THE AO PASSED ORDER U /S 143(3) R.W.S. 250 OF THE ACT, ON 18.3.1994 ASSESSING THE TOTAL INCOME AT RS.9,32,974/- IN WHICH THE AO HAS MADE F OLLOWING ADDITIONS/DISALLOWANCES : 1. ON ACCOUNT OF PLASTIC SCRAP RS.1,56,828/- 2. ON ACCOUNT OF SUPPRESSED SALES OF PLASTIC SCRAP RS. 35,402/- 3. ON ACCOUNT OF SERVICE CHARGES AND TECHNICAL ASSISTANCE TO M/S PRIMCO PVT.LTD. RS. 2, 15,000/- THE ASSESSEE AGAIN PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AGAINST THE ORDER DATED 18.3.1994. THE LD. CIT(A) VIDE ORDER DATED 29.11.1994 PARTLY ALLOWED THE APPE AL OF THE ASSESSEE. THE DEPARTMENT AS WELL AS THE ASSESSEE PR EFERRED APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 15.1.2007 PASSED IN ITA NOS.1661/BOM/95 (REV ENUES ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 3 APPEAL), 3248/BOM/92 (ASSESSEES APPEAL) CONFIRMED THE FOLLOWING ADDITIONS MADE BY THE AO: (I) ON ACCOUNT OF UNACCOUNTED PRODUCTION RS. 53,535/- (II) ON ACCOUNT OF EXCESS SCRAP RS. 35,402/- (III) ON ACCOUNT OF UNDER SALES MADE TO SISTER CONCERNS. RS. 1,69,300/- (IV) ON ACCOUNT OF COST OF BRASS SCRAP RS. 1,83,93 0/- (V) ON ACCOUNT OF PLASTIC SCRAP RS. 1,56,828/- (VI) ON ACCOUNT OF GOODS SOLD AT LESSER PRICE RS. 8,93,648 (SETASIDE) THE AO IN THE IMPUGNED PENALTY ORDER HAS DISCUSSED THE ABOVE ADDITIONS AS UNDER : (I) ON ACCOUNT OF UNACCOUNTED PRODUCTION- RS.53,535/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SEEN THAT THERE WAS EXCESS CONSUMPTION IN RESPECT O F INK AS WELL AS BRASS WIRE AND PLASTIC POWDER. THE ASSES SEE HAS TAKEN THE RATIO OF 16 GROSS PER KG. AS AGAINS T 17 GROSS PER KG AS PER SHRI A.B.DESAIS STATEMENT DA TED 27.9.1986. THE AO WORKED OUT ON THE BASIS OF THE EX CESS INK CONSUMED I.E. 3,311 KGS. AT THE RATE OF 20 GRO SS PER KG. THE REFILLS THAT COULD BE PRODUCED FROM 3311 KGS OF INK WOULD BE 66,220 GROSS. THE AO TREATED 66,220 GROSS REFILLS HAVE BEEN PRODUCED UNACCOUNTED AND TH E VALUE OF THESE REFILLS @ RS.19.56 PER GROSS WORKS O UT TO RS.12,95,623/- AND ADDED TO THE TOTAL INCOME OF T HE ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 4 ASSESSEE. THE LD. CIT(A) RESTRICTED THE ADDITION O N ACCOUNT OF THE UNACCOUNTED PRODUCTION TO THE EXTENT OF RS.53,535/- VIDE ORDER DATED 13.2.1992. THE ASSE SSEE PREFERRED THE APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 15.1.2007 CONFIRMED THE ORDER OF THE LD. CIT(A). (II) ON ACCOUNT OF EXCESS SCRAP-RS.35,402/- THE AO FOUND THAT THERE WAS RESALE OF PLASTIC SCRAP OF 27,003 KGS AT THE AVERAGE RATE OF 13.80 PER KG WHER EAS THE PREVALENT SELLING RATE WAS NOT LESS THAN RS.20 PER KG. THE AO WHILE MAKING THE ADDITION OF RS.1,67,167/- R ELIED ON THE STATEMENT OF SHRI NIKHIL SHROFF. AGAINST TH IS ADDITION MADE BY THE AO, THE ASSESSEE PREFERRED THE APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) VIDE O RDER DATED 13.2.1992 SET ASIDE THE ISSUE TO THE FILE O F THE AO. THE AO, VIDE ORDER DATED 18.3.1994 PASSED U /S 143(3)/251 OF THE ACT MADE THE ADDITION OF RS.35, 402 ON ACCOUNT OF PLASTIC SCRAP. THE ASSESSEE AGAIN PREFERRED THE APPEAL BEFORE THE CIT(A) AGAINST THE ORDER OF THE AO. THE LD. CIT(A) VIDE ORDER DATED 29.11.1994 DIRECTED THE AO TO RECHECK THE WORKING OF THE AVERAGE PRICE. AGAINST THIS DIRECTION, THE ASS ESSEE ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 5 PREFERRED THE APPEAL BEFORE THE TRIBUNAL, THE TRIB UNAL OBSERVED THAT THIS ISSUE HAS ALREADY BEEN DISPOSED OF. (III) ON ACCOUNT OF UNDER SALES MADE TO SISTER CONCERNS RS. 1,69,300/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SEEN THAT THE ASSESSEE HAS MADE SALES OF RS.3770 KGS @ RS.160 TO THE SISTER CONCERN M/S PRIMCO PVT.LTD. TOTALLING TO RS.6,03,200/-. THE AO FURTHER NOTICED THAT IN ALL THE SALES ITEMS THE ASSESSEE HAS SHOWN SOLD TO ITS ANOTHER SISTER CONCERN OF THE SAME QUANTITY I.E. OF RS.3770/- KGS.@ 250/- PER KG TOTALLING TO RS.9,42,5 00/-. THE AO ADDED THE DIFFERENCE OF RS.3,39,300/- TO TH E TOTAL INCOME OF THE ASSESSEE. VIDE ORDER DATED 13.2.1992, THE LD. CIT(A) CONFIRMED THE ADDITION. THE ASSESSEE PREFERRED THE APPEAL BEFORE THE TRIBUNAL , THE TRIBUNAL VIDE ORDER DATED 15.1.2007 RESTRICTED THE ADDITION MADE TO RS.1,69,300/- AND DELETED THE REMAINING ADDITION MADE AT RS.1,70,000/-. (IV) ON ACCOUNT OF COST OF BRASS SCRAP RS. 1,83,930/- THE ORIGINAL ADDITION WAS MADE AT RS.3,04,500/- ON ACCOUNT OF COST OF BRASS SCRAP. HOWEVER, THE LD. CI T(A) CONFIRMED THE ADDITION OF RS.1,83,930/- AND DELETED ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 6 RS.1,20,570/-. THE ASSESSEE AS WELL AS THE DEPARTME NT FILED APPEAL AGAINST THE ORDER OF THE LD. CIT(A) O N THIS ISSUE. THE TRIBUNAL REJECTED THE APPEAL OF BOTH PA RTIES AND THEREBY CONFIRMED THE ADDITION SUSTAINED BY THE LD. CIT(A). (V) ON ACCOUNT OF PLASTIC SCRAP RS. 1,56,828/- THE ORIGINAL ADDITION WAS MADE BY THE AO AT RS.2,07,220/- WHICH WAS SET ASIDE BY LD. CIT(A). AFTERWARDS THE ISSUE WAS DECIDED BY THE AO VIDE ORD ER DATED 18.3.1994 WHEREIN THE AO HAS MADE AN ADDITION OF RS.1,56,828/-. (VI) ON ACCOUNT OF GOODS SOLD AT LESSER PRICE RS. 8,93,648 THE TRIBUNAL SET ASIDE THE ISSUE ON ACCOUNT OF GO ODS SOLD AT LESSER PRICE OF RS.8,93,648/- TO THE FILE OF THE AO. THE TRIBUNAL FURTHER DIRECTED TO TAKE THE ACTU AL FIGURE INTO CONSIDERATION WHILE DISPOSING THE ISSU E AFRESH. HENCE AN AMOUNT OF RS.8,93,648/- IS NOT CONSIDERED FOR LEVY OF PENALTY U/S 271(1)(C ) OF T HE ACT. THE AO FURTHER OBSERVED THAT THE ASSESSEE VIDE THI S OFFICE LETTER NO. ACIT CIRCLE 8(3)/PENALTY/2007-08 DATED 3 1.7.2007 WAS OFFERED ONE MORE OPPORTUNITY OF BEING HEARD AND TO SHOW ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 7 CAUSE WHY AN ORDER IMPOSING A PENALTY SHOULD NOT B E MADE U/S 271(1)(C) OF THE ACT. IN RESPONSE TO THE NOTIC E AND LETTER ISSUED, THE ASSESSEE VIDE LETTER DATED 25.8.2007 R EQUESTED THAT THE PENALTY PROCEEDINGS BE KEPT IN ABEYANCE. THE REQUEST OF THE ASSESSEE DID NOT CONSIDER AS THE O RDER OF THE TRIBUNAL WAS RECEIVED IN THE OFFICE OF THE CIT-8, MUMBAI ON 8.2.2007 HENCE THE PENALTY PROCEEDINGS WAS GETTING BARRED BY LIMITATION ON 31.8.2007. IN VIEW OF THE ABOVE F ACTS, THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS NO EXPL ANATION TO OFFER IN RESPECT OF THE ABOVE DISALLOWANCES WHI CH HAVE BEEN CONFIRMED BY THE APPELLATE AUTHORITIES. THE ONUS WAS ON THE ASSESSEE TO SUBSTANTIATE ITS CLAIM IN RESPEC T OF THESE EXPENSES. THE ASSESSEE FAILED TO DISCHARGE ITS ON US BEFORE THE AO AS WELL AS BEFORE THE APPELLATE AUTHORITIES. EVEN DURING THE COURSE OF THE PENALTY PROCEEDINGS, THE A SSESSEE HAS NOT AVAILED THE OPPORTUNITY OF PROVING ITS CASE . HENCE, THE AO CONSIDERED THAT THIS IS A FIT CASE FOR LEV Y OR PENALTY U/S 271(1)( C ) AND ACCORDINGLY, HE IMPOSED THE PE NALTY OF RS.3,14,470/- VIDE ORDER DATED 31.8.2007 PASSED U/S 271(1) (C) OF THE ACT. 3. ON APPEAL, THE LD. CIT(A), IN HIS FIRST ORDER, OBSERVED THAT IN VIEW OF RECTIFICATION ORDER DATED 16.7.2008 WHICH HAS BEEN PASSED SUBSEQUENT TO THE PENALTY ORDER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL, THE INCOME HAS GONE T O NEGATIVE ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 8 FIGURE I.E.LOSS OF RS.6,470/-, THEREFORE, FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF VIRTUA L SOFT SYSTEMS LTD. V/S CIT (2007) 289 ITR 83 (SC) HE HEL D THAT THE PENALTY IS NOT LEVIABLE AND HENCE DELETED THE S AME. AGAINST THE SAID ORDER, THE REVENUE HAS PREFERRED APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ORDER PASSE D IN I.T.A. NO. 6252/MUM/2008(AY-1988-89) DATED 20.10.2009 OBSERVED THAT SINCE THE APPELLATE AUTHORITY SUO MOT U REVERSED HIS ORDER FOLLOWING THE DECISION IN CIT V/S GOLD COIN HEALTH FOOD P. LTD. (2008) 304 ITR 308(SC), DI SMISSED THE APPEAL AS INFRUCTUOUS. AS MENTIONED ABOVE THE L D. CIT(A) WHILE ISSUING NOTICE U/S 154 OF THE ACT OBSERVED THAT SINCE THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF VIRTUAL SOFT SYSTEMS LTD. (SUPRA) HAS BEEN REVERSE D BY THE HONBLE SUPREME COURT IN GOLD COIN HEALTH FOOD P. LTD. (SUPRA), WHEREIN IT HAS BEEN HELD THAT THE PENALTY EVEN ON LOSS CASES CAN BECOMES LEVIABLE FOR THE PERIOD PRI OR TO ASSESSMENT YEAR 2003-04 ALSO AND SINCE THE DECISIO N OF THE HONBLE SUPREME COURT IS THE LAW OF LAND AND HENCE HE ISSUED NOTICE U/S 154 OF THE ACT TO THE ASSESSEE. IN RESPONSE, THE ASSESSEE OBJECTED TO THE ISSUANCE OF THE NOTICE U/S 154 RELYING ON THE CERTAIN DECISIONS IN THE CASE OF SMRITI PROPERTIES PVT. LTD. V/S SETTLEMENT COMMISSI ON (IT AND WT) AND OTHERS (2005) 278 ITR 274(CAL), T. ASHO K PAI ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 9 V/S CIT (2007) 292 ITR 11 (SC) AND THE DECISION IN THE CASE OF DILIP N. SHROFF V/S JCIT (2007) 291 ITR 519 (SC). HOWEVER, THE LD. CIT(A) WHILE DISTINGUISHING THE D ECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE HELD THAT SINCE THE ADDITIONS HAVE BEEN CONFIRMED BY THE TRIBUNAL , THE AO HAS DISCUSSED ALL THESE ITEMS IN DETAILED IN PENALT Y ORDER GIVING JUSTIFICATION AS TO HOW THESE AMOUNTS TO FUR NISHING INACCURATE PARTICULARS OF INCOME UPHELD THE LEVY OF PENALTY IN VIEW OF THE SUBSEQUENT DECISION OF THE HONBLE SUPR EME COURT IN GOLD COIN HEALTH FOOD P. LTD. (SUPRA) AND DISMISSED THE APPEAL OF THE ASSESSEE. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US TAKING THE FOLLOW ING GROUNDS OF APPEAL : I. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON. CIT(A) ERRED IN RECALLING HIS PREVIOU S APPELLATE ORDER DATED 14.8.2008, U/S 154 OF THE ACT AND THEREAFTER CONFIRMING THE PENALTY U/S 271(1)( C ) O F THE ACT; II. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON. CIT(A) ERRED IN IGNORING THAT EVEN AF TER THE CONFIRMED ADDITIONS, THE APPELLANTS ASSESSED I NCOME RESULTED INTO LOSS AND IN THE CIRCUMSTANCES, NO PEN ALTY COULD BE LEVIED; III. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON. CIT(A) ERRED IN NOT CONSIDERING THE APPELLANTS SUBMISSIONS THAT, ON MERITS ALSO THERE WAS NO PENALTY LEVIABLE U/S 271(1)( C ) OF THE ACT; IV. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON. CIT(A) ERRED IN DETERMINING THE INCO ME ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 10 SOUGHT TO BE EVADED AT RS.5,98,995/- AND CONFIRMI NG THE PENALTY THEREON. 5. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE LD. CIT(A) HAS ERRED IN RECALLING HIS PREVIOUS ORDER DATED 14.8.2008 U/S 154 OF THE A CT AND IN CONFIRMING THE PENALTY IMPOSED U/S 271(1)( C ) WHE N THERE WAS NO SUCH RECTIFIABLE MISTAKE U/S 154 OF THE ACT . HE FURTHER SUBMITS THAT EVEN THE HONBLE SUPREME COURT IN GOLD COIN HEALTH FOOD P. LTD. (SUPRA) OBSERVED THAT THER E WAS DOUBT ABOUT THE CORRECTNESS OF THE JUDGEMENT RENDE RED IN VIRTUAL SOFT SYSTEMS LTD. (SUPRA), THEREFORE, THE R EFERENCE WAS MADE TO A LARGER BENCH. IN THE LIGHT OF THIS, HE SUBMITS THAT WHEN THERE WAS A DOUBT IN THE CORRECTNESS OF THE JUDGMENT IN THE CASE OF VIRTUAL SOFT SYSTEMS LTD. ( SUPRA), THE PROVISIONS OF SECTION 154 ARE NOT APPLICABLE. UNDE R THE PROVISIONS OF SECTION 154, THE RECTIFIABLE MISTAKE WAS A MISTAKE WHICH WAS OBVIOUS AND NOT SOMETHING WHIC H CAN BE ESTABLISHED BY LONG DRAWN PROCESS OF REASONING OR WHERE TWO OPINIONS WERE POSSIBLE. HE FURTHER SUBMITS THA T THE DECISION ON A DEBATABLE POINT OF LAW CANNOT BE TRE ATED AS A MISTAKE APPARENT FROM RECORD AND FOR THIS PROPOSIT ION THE RELIANCE WAS ALSO PLACED ON THE DECISION IN THE CAS E OF MEPCO INDUSTRIES LTD. V/S CIT. (2009) 319 ITR 208(S C). HE, ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 11 THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) U/S 154 IS BAD IN LAW AND LIABLE TO BE CANCELLED. 6. ON MERITS, HE SUBMITS THAT IN VIEW OF HIS WRITTE N SUBMISSIONS FILED BEFORE THE LD. CIT(A) APPEARING A T PAGES 69 TO 77 OF THE ASSESSEES PAPER BOOK, ALL THE ADDI TIONS MADE BY THE AO AND SUSTAINED BY THE TRIBUNAL ARE ON EST IMATE BASIS. HE FURTHER SUBMITS THAT IT IS SETTLED LAW TH AT ON ESTIMATE BASIS PENALTY U/S 271 (1)(C) IS NOT LEVIA BLE, THEREFORE, THE PENALTY IMPOSED BY THE AO AND SUSTA INED BY THE LD. CIT(A) BE DELETED. ON THE ISSUE OF ADDITIO N ON SCRAP, HE SUBMITS THAT THE HONBLE JURISDICTIONAL HIGH CO URT IN THE ASSESSEES OWN CASE IN SANGHVI SWISS REFILLS P. LTD . V/S SMT. ARTI HANDA, ASSISTANT COMMISSIONER OF INCOME-T AX AND ANOTHER (2006) 284 ITR 427 (BOM) HAS OBSERVED THAT IT IS ALSO NOT DISPUTED THAT THE SCRAP COLLECTED DURING T HE MANUFACTURING PROCESS WHENEVER SOLD IN THE SUBSEQU ENT YEARS, HAS BEEN ACCOUNTED FOR AND THE SAME HAS BEE N ACCEPTED BY THE AO. THE LEARNED COUNSEL FOR THE A SSESSEE HAS ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE APEX COURT IN CIT V/S RELIANCE PETROPRODUCTS PVT. L TD. (2010) 322 ITR 158(SC) AND THE DECISION OF THE TRI BUNALS ORDER IN ASSESSEES OWN CASE IN M/S. SANGHVI SWISS REFILLS PVT. LTD. V/S ACIT IN I.T.A. NO. 6659/MUM/2008 (AY- 1987-88) DATED 14.5.2011, WHEREIN THE TRIBUNAL ON THE SIMI LAR FACTS ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 12 AND CIRCUMSTANCES OF THE CASE HAS DELETED THE PENAL TY IMPOSED BY THE AO AND CONFIRMED BY THE LD. CIT(A). HE, THEREFORE, SUBMITS THAT THE PENALTY IMPOSED BY THE AO AND CONFIRMED BY THE LD. CIT(A) BE DELETED. 7. ON THE OTHER HAND, THE LD. DR WHILE RELYING ON T HE ORDER OF THE LD. CIT(A) SUBMITS THAT IN VIEW OF THE DEC ISION OF THE HONBLE APEX COURT IN ACIT V/S SAURASHTRA KUTCH S TOCK EXCHANGE LTD.(2008) 305 ITR 227(SC), THE LD. CIT(A) WAS FULLY JUSTIFIED IN FOLLOWING THE SUBSEQUENT DECISI ON OF THE HONBLE SUPREME COURT IN GOLD COIN HEALTH FOOD P. LTD. (SUPRA) WHEREIN THE EARLIER DECISION OF THE HONBLE SUPREME COURT IN VIRTUAL SOFT SYSTEMS LTD.(SUPRA) HAS BEEN REVERSED. ON MERITS, THE LD. DR WHILE RELYING ON THE ORDER O F THE AO AND LD. CIT(A) FURTHER SUBMITS THAT SINCE THE TRIB UNAL HAS CONFIRMED THE ADDITIONS MADE BY THE AO, THE LD. CI T(A) WAS FULLY JUSTIFIED IN CONFIRMING THE PENALTY IMPOSED BY THE AO. THE RELIANCE WAS ALSO PLACED ON THE DECISION IN CI T V/S ZOOM COMMUNICATION P. LTD. (2010) 327 ITR 510(DEL). HE, THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE A O BE UPHELD. 8. IN THE REJOINDER, THE LEARNED COUNSEL FOR THE AS SESSEE WHILE DISTINGUISHING THE DECISIONS CITED BY THE LEA RNED DR REITERATES HIS EARLIER SUBMISSIONS AND FURTHER SU BMITS THAT IN ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 13 VIEW OF THE DECISION OF THE HONBLE APEX COURT IN R ELIANCE PETROPRODUCTS PVT. LTD.(SUPRA) THE PENALTY IS NOT L EVIABLE AND HENCE THE SAME BE DELETED. 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE AO HAS IMPOSED PENALT Y ON THE BASIS OF ADDITIONS/DISALLOWANCES CONFIRMED BY THE TRIBUNAL. 10. AS REGARD THE LEGAL ISSUE THAT THE LD. CIT(A) CANNOT REVISE HIS OWN ORDER U/S 154 FOLLOWING THE SUBSEQUE NT DECISION OF THE HONBLE SUPREME COURT IN GOLD COIN HEALTH FOOD P. LTD. (SUPRA) WE FIND THAT THERE IS NO DISPU TE THAT THE LD. CIT(A) IN THE ORIGINAL ORDER PASSED BY HIM HA S NOTED THAT AFTER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL, THE INCOME OF THE APPELLANT HAS GONE TO NEGATIVE FIGURE I.E. LOSS OF RS.6,470/-, THEREFORE, HE FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN VIRTUAL SOFT SYSTEMS LTD. (SUPRA) AND DELETED THE PENALTY IMPOSED BY THE AO. HOWEVER, T HE SAID DECISION OF THE HONBLE SUPREME COURT IN VIRTUAL S OFT SYSTEMS LTD. (SUPRA) HAS BEEN OVERRULED BY A BENCH OF THREE JUDGES IN GOLD COIN HEALTH FOOD P. LTD. (SUPRA) WHE REIN THE FULL BENCH WHILE ACCEPTING THE REVENUES CONTENTI ON ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 14 OVERRULED ITS EARLIER DECISION IN VIRTUAL SOFT SYS TEMS LTD. (SUPRA). 11. IN ACIT V/S SAURASHTRA KUTCH STOCK EXCHANGE LTD. (SUPRA), IT HAS BEEN OBSERVED VIDE PLACITUM 40, 41 AND 42 (PAGE 240): THE CORE ISSUE, THEREFORE, IS WHETHER NON-CONSIDER ATION OF A DECISION OF JURISDICTIONAL COURT (IN THIS CAS E A DECISION OF THE HIGH COURT OF GUJARAT) OR OF THE S UPREME COURT CAN BE SAID TO BE A MISTAKE APPARENT FROM TH E RECORD ? IN OUR OPINION, BOTH - THE TRIBUNAL AND T HE HIGH COURTWERE RIGHT IN HOLDING THAT SUCH A MISTAKE CA N BE SAID TO BE A MISTAKE APPARENT FROM THE RECORD WH ICH COULD BE RECTIFIED UNDER SECTION 254(2). A SIMILAR QUESTION CAME UP FOR CONSIDERATION BEFORE THE HIGH COURT OF GUJARAT IN SUHRID GEIGY LTD. V. COMMISSIONER OF SURTAX [1999] 237 ITR 834 . IT WAS HELD BY THE DIVISION BENCH OF THE HIGH COURT THAT IF THE POINT IS COVERED BY A DECISION OF THE JURISDICTIONAL COUR T RENDERED PRIOR OR EVEN SUBSEQUENT TO THE ORDER OF RECTIFICATION, IT COULD BE SAID TO BE A MISTAKE AP PARENT FROM THE RECORD UNDER SECTION 254(2) OF THE ACT AN D COULD BE CORRECTED BY THE TRIBUNAL. IN OUR JUDGMENT, IT IS ALSO WELL-SETTLED THAT A JUD ICIAL DECISION ACTS RETROSPECTIVELY. ACCORDING TO BLACKST ONIAN THEORY, IT IS NOT THE FUNCTION OF THE COURT TO PRON OUNCE A NEW RULE BUT TO MAINTAIN AND EXPOUND THE OLD ONE . IN OTHER WORDS, JUDGES DO NOT MAKE LAW, THEY ONLY DISC OVER OR FIND THE CORRECT LAW. THE LAW HAS ALWAYS BEEN TH E SAME. IF A SUBSEQUENT DECISION ALTERS THE EARLIER O NE, IT (THE LATER DECISION) DOES NOT MAKE NEW LAW. IT ONLY DISCOVERS THE CORRECT PRINCIPLE OF LAW WHICH HAS TO BE APPLIED RETROSPECTIVELY. TO PUT IT DIFFERENTLY, EVE N WHERE AN EARLIER DECISION OF THE COURT OPERATED FOR QUITE SOME TIME, THE DECISION RENDERED LATER ON WOULD HAVE RETROSPECTIVE EFFECT CLARIFYING THE LEGAL POSITION WHICH WAS EARLIER NOT CORRECTLY UNDERSTOOD. ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 15 12. IN MEPCO INDUSTRIES LTD. V/S CIT. (2009) 319 IT R 208(SC) RELIED ON BY THE LEARNED COUNSEL FOR THE A SSESSEE, THE AO HAD TAXED POWER SUBSIDY RECEIVED BY THE ASS ESSEE FOR ITS MANUFACTURING ACTIVITIES. THE ASSESSEE SU CCEEDED IN A REVISION PETITION U/S 264 RELYING UPON THE DECISI ON IN CIT V/S P.J.CHEMICALS LTD. (1994) 210 ITR 830 (SC). WI TH REFERENCE TO THE SUBSEQUENT JUDGMENT OF THE SUPREM E COURT IN SAHNEY STEEL AND PRESS WORKS LTD. V/S CIT [199 7] 228 ITR 253, WHICH RELATED TO A SUBSIDY SCHEME OF THE A.P. GOVERNMENT, THE COMMISSIONER RECTIFIED HIS ORDER PURPORTEDLY U/S 154, WITHDRAWING THE RELIEF WHICH H E HAD EARLIER GRANTED. THE SINGLE JUDGE OF THE HONBLE HI GH COURT ENDORSED THE VALIDITY OF THE RECTIFICATION ORDER, WHICH WAS UPHELD BY THE DIVISION BENCH. THE HONBLE SUPREME COURT ON FURTHER APPEAL FOUND THAT SAHNEY STEEL AND PRES S WORKS LTDS. (SUPRA) WAS DECIDED ON THE SALIENT FEATUR ES OF THE SCHEME COVERED BY THIS CASE. IN A LATER DECISION I N CIT V/S PONNI SUGARS AND CHEMICALS LTD (2008)306 ITR 392 ( SC), AN EXCISE SUBSIDY WAS FOUND TO BE NOT TAXABLE. THE CHARACTER OF THE SUBSIDY WOULD DEPEND UPON THE TER MS OF THE SCHEME. THE RECTIFICATION ORDER IN THIS CASE BASED ON SAHNEY STEEL AND PRESS WORKS LTDS CASE (SUPRA) WAS POINT ED OUT BY THE HONBLE SUPREME COURT AS A CLASSIC ILLUSTRATI ON OF CHANGE OF OPINION. THE HONBLE SUPREME COURT DEAL T WITH A ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 16 NUMBER OF DECISIONS ON THIS POINT AND FOUND THAT RE CTIFICATION SHOULD BE OF A RECTIFIABLE MISTAKE AND NOT WHERE THE EXEMPTION OR OTHERWISE OF THE SUBSIDY DEPENDED UPO N THE TERMS OF THE SCHEME UNDER WHICH SUBSIDY IS GRANTED. TO BE A RECTIFIABLE MISTAKE, IT SHOULD BE APPARENT FROM TH E RECORD AND NOT HAVE TO BE ESTABLISHED BY A LONG DRAWN PROC ESS OF REASONING OR WHERE TWO OPINIONS WERE POSSIBLE. A DE CISION ON A DEBATABLE POINT OF LAW COULD NOT BE TREATED AS A 'MISTAKE APPARENT FROM THE RECORD'. 13. WHEREAS IN THE CASE BEFORE US, THE LD. CIT(A) H AS DECIDED THE APPEAL AND DELETED THE PENALTY BY FOLLO WING THE DECISION OF THE HONBLE SUPREME COURT IN VIRTUAL SO FT SYSTEMS LTD.(SUPRA) WHICH HAS BEEN SUBSEQUENTLY OVE RRULED BY THE LARGER BENCH OF THE HONBLE SUPREME COURT IN GOLD COIN HEALTH FOOD P. LTD. (SUPRA). THEREFORE, THE VE RY BASIS OF THE ORDER PASSED BY THE LD. CIT(A) HAS BEEN REVER SED OR IT DOES NOT EXIST AND HENCE IT COMES UNDER RECTIFIABL E MISTAKE AND DOES NOT HAVE TO BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING. THEREFORE, THE DECISION RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE IS DISTINGUISHABL E AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 14. THAT BEING SO, WE FOLLOWING THE PRINCIPLE LA ID DOWN BY THE HONBLE SUPREME COURT IN SAURASHTRA KUTCH STO CK ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 17 EXCHANGE LTD.(SUPRA), HOLD THAT THE LD. CIT(A) WA S FULLY JUSTIFIED IN PASSING THE ORDER U/S 154 OF THE ACT RELYING ON DECISION OF THE FULL BENCH OF HONBLE SUPREME COUR T IN GOLD COIN HEALTH FOOD P. LTD.(SUPRA). THIS VIEW ALSO FIN DS SUPPORT FROM THE RECENT DECISION OF THE HONBLE PUNJAB AN D HARYANA HIGH COURT IN SHAHBAD CO-OPERATIVE SUGAR MILLS LTD. V/S DCIT (2011) 336 ITR 222 (P&H), WHEREIN IT HAS BEEN HELD THAT THE DECISION CONSISTENT WITH THE RULING DECISI ON OF THE HONBLE SUPREME COURT IS A MATTER, WHICH COULD FA LL UNDER JURISDICTION OF RECTIFICATION AS WELL. IN THIS VIE W OF THE MATTER, WE WHILE UPHOLDING THE ORDER PASSED BY THE LD. CIT( A), TO THIS EXTENT, IN REVISING HIS EARLIER ORDER U/S 154 OF T HE ACT REJECT THE GROUND TAKEN BY THE ASSESSEE. 15. ON MERITS, WE FIND THAT THE UNDISPUTED POSITIO N OF ADDITION/DISALLOWANCE ON WHICH THE AO HAS IMPOSED THE PENALTY IS AS UNDER : S. NO . PARTICULARS OF ADDITIONS AO CIT(A) TRIBUNAL FINAL ADDITION FOR THE PURPOSE OF PENALTY 1 2 3 4 5 6 1 ON ACCOUNT OF UNRECORDED PRODUCTION 12,95,623 53,535 CON- FIRMED THE ORDER OF THE CIT(A) 53,535 ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 18 2 ON ACCOUNT OF PLASTIC SCRAP 1,67,167 IN SETTING ASIDE PROCEED- INGS THE AO HAS REDUCED TO 35,402 - - 35,402 3 ON ACCOUNT OF UNDER SALES MADE TO SISTER CONCERNS 3,39,300 CON- FIRMED SUSTAIN- ED 1,69,300 1,69,300 4 ON ACCOUNT OF C OST OF BRASS SCRAP 3,04,500 1,83,930 CON- FIRMED 1,83,930 5 ON ACCOUNT OF C OST OF PLASTIC SCRAP 2,07,220 IN SETTING ASIDE PROCEEDIN GS, THE AO HAS REDUCED TO 1,56,828 - - 1,56,828 TOTAL 5,98,995 FROM THE ABOVE TABLE, IT IS OBSERVED THAT ALL THE A DDITIONS WHICH WERE MADE BY THE AO ORIGINALLY HAVE BEEN REDU CED EITHER BY THE LD. CIT(A) OR BY THE AO IN THE SET TING ASIDE PROCEEDINGS. THERE IS NO DOUBT THAT ALL THE ADDI TIONS HAVE BEEN MADE ON ESTIMATE BASIS WITHOUT POINTING OUT AN Y MATERIAL TO SHOW THAT THE BOOKS OF ACCOUNTS MAINTA INED BY THE ASSESSEE ARE NOT CORRECT OR COMPLETE OR THE AS SESSEE HAS NOT FOLLOWED THE REGULAR METHOD OF ACCOUNTING. IT IS ALSO NOT THE CASE THE REVENUE THAT THE BONAFIDE EXPLANAT ION GIVEN BY THE ASSESSEE IN RESPECT OF THE ABOVE ADDIT IONS WAS NOT FOUND TO BE CORRECT OR THE SAME HAS NOT BEEN SUBSTANTIATED BY THE ASSESSEE. THE AO HAS MERELY IM POSED ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 19 THE PENALTY ON THE ADDITIONS SUSTAINED BY THE TRIB UNAL. THERE IS NO IOTA OF EVIDENCE TO SHOW AS TO HOW THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME . THE AO HAS FAILED TO DISCHARGE HIS ONUS. 16. IN CIT V/S HARSHVARDHAN CHEMICALS AND MINERAL L TD. (2003) 259 ITR 212 (RAJ) IT HAS BEEN HELD (HEAD NOT E, PAGE 231): HELD, AFFIRMING THE DECISION OF THE APPELLATE TRI BUNAL, THAT NO PENALTY WAS LEVIABLE IN VIEW OF THE FINDING OF THE TRIBUNAL THAT WHEN THE ASSESSEE HAD CLAIMED DEDUCTI ON OF AN AMOUNT THAT WAS DEBATABLE IT COULD NOT BE SAI D THAT THE ASSESSEE HAD CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS FOR EVASION OF TAX, AND, IN VIEW OF THE FINDINGS OF THE TRIBUNAL, NO CASE WAS MADE OUT FOR INTERFERENCE. 17. IN CIT V/S RAJ OVERSEAS (2011) 336 ITR 261 (P&H ) IT HAS BEEN HELD (HEAD NOTE, PAGE 261) HELD, DISMISSING THE APPEAL, THAT IN VIEW OF THE FACTUAL FINDING OF THE TRIBUNAL, IT COULD NOT BE DISPUTED THAT THE ISSUE WAS DEBATABLE AND DEDUCTION CLAIMED BY THE ASSESSEE DID NOT LACK BONAFIDES. PENALTY COULD NOT BE IMPOSED UNDER SECTION 271(1)(C ) 18. IN CIT V/S ZOOM COMMUNICATION P. LTD. (2010) 3 27 ITR 510 (DEL), RELIED ON BY THE LD. DR, THE FACTS O F THE CASE ARE (PAGE 512): 2 THE ASSESSEE-COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF HIRING OF AUDIO AND VIDEO EQUIPMENT, F ILED RETURN DECLARING INCOME OF RS.1,21,49,861. THE CAS E WAS SELECTED FOR SCRUTINY. IT WAS NOTICED DURING ASSESSMENT THAT IN SCHEDULE 9, RELATING TO ADMINIST RATION ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 20 AND OTHER EXPENSES, FORMING PART OF PROFIT AND LOS S ACCOUNT, A SUM OF RS.1,21,49,861 HAD BEEN DEBITED UNDER THE HEAD 'EQUIPMENT WRITTEN OFF'. IT WAS STAT ED BY THE ASSESSEE THAT DUE TO OVERSIGHT, THIS AMOUNT WAS NOT ADDED BACK IN THE COMPUTATION OF INCOME AND THE SA ME OUGHT TO HAVE BEEN ADJUSTED IN THE BLOCK OF ASSETS . THE AFORESAID AMOUNT WAS ADDED BACK TO THE INCOME OF TH E ASSESSEE, WITH ITS CONSENT. IT WAS FURTHER NOTICED THAT ANOTHER SUM OF RS. 1 LAKH HAD BEEN DEBITED UNDER TH E HEAD 'INCOME-TAX PAID', IN THE ABOVE REFERRED TO SCHEDULE RELATING TO ADMINISTRATION AND OTHER EXPEN SES. THE ASSESSEE CLAIMED THAT DUE TO OVERSIGHT, THIS A MOUNT WAS NOT ADDED BACK IN THE COMPUTATION OF INCOME. HENCE, THE ASSESSING OFFICER ADDED THIS AMOUNT ALS O TO THE INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS WER E ALSO INITIATED AGAINST THE ASSESSEE. THE AO IMPOSED THE PENALTY AND THE LD. CIT(A) UPHE LD THE PENALTY IMPOSED BY THE AO. ON FURTHER APPEAL, THE TRIBUNAL DELETED THE PENALTY IMPOSED BY THE AO. ON FURTHER APPEAL, BEFORE THE HONBLE HIGH COURT, THEIR LORDSHIP CONFI RMED THE PENALTY BY HOLDING (HEAD NOTE, PAGE 511) : HELD, THAT ADMITTEDLY, IN VIEW OF THE PROVISIONS CONTAINED IN SECTION 40(A)(II) OF THE ACT, THE AMOU NT OF INCOME-TAX COULD NOT HAVE BEEN CLAIMED AS A DEDUCTI ON WHILE COMPUTING INCOME OF THE ASSESSEE. AS REGARDS THE AMOUNT CLAIMED ON ACCOUNT OF UNUSABLE AND DISCARDED ASSETS, THE TRIBUNAL, WAS ENTIRELY INCORRECT IN TAK ING THE VIEW THAT THE DEDUCTION CLAIMED BY THE ASSESSEE WAS ADMISSIBLE TO IT UNDER SECTION 32(1)(III). CLAUSE ( I) OF SUB-SECTION (1) OF SECTION 32 RELATES TO ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION AND/OR DISTRIBUTI ON OF POWER. ADMITTEDLY, THE ASSESSEE-COMPANY WAS NOT ENGAGED IN GENERATION AND FOR DISTRIBUTION OF POWER , DURING THE RELEVANT YEAR. THUS, THE PROVISIONS, OF CLAUSE (I) OF SUB-SECTION (1) OF SECTION 32 WOULD NOT APPL Y IN RESPECT OF THE ASSETS CLAIMED TO HAVE BECOME UNUSAB LE AND WRITTEN OFF. THEREFORE, THE ASSESSEE HAD NO JUSTIFICATION TO CLAIM THIS AMOUNT OF RS. 13,24,539 AS A REVENUE EXPENDITURE. IN FACT, THE ASSESSEE DID NOT CLAIM, EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 21 COMMISSIONER (APPEALS) THAT SUCH A DEDUCTION WAS PERMISSIBLE UNDER SECTION 32(1)(III). IT WAS ALSO N OT THE CASE OF THE ASSESSEE THAT IT WAS UNDER A BONA FIDE BELIEF THAT THESE TWO AMOUNTS COULD BE CLAIMED AS REVENUE EXPENDITURE. THE ASSESSEE WAS A COMPANY WHICH MUST BE HAVING PROFESSIONAL ASSISTANCE IN COMPUTATION OF ITS INCOME, AND ITS ACCOUNTS WERE COMPULSORILY SUBJECTE D TO AUDIT. THE TRIBUNAL ERRED IN LAW IN DELETING THE PE NALTY IN RESPECT OF THE AMOUNT OF RS. 1 LAKH CLAIMED AS DEDU CTION ON ACCOUNT OF PAYMENT OF INCOME-TAX AND THE AMOUNT OF RS. 13,24,539 DEBITED UNDER THE HEAD 'EQUIPMENT WRI TTEN OFF', IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSE E. 19. WHEREAS THE FACTS OF THE PRESENT CASE ARE ENTI RELY DIFFERENT INASMUCH AS THE ADDITIONS MADE BY THE AO HAVE BEEN SUBSTANTIALLY REDUCED BY THE LD. CIT(A) AND TH E AO IN SETTING ASIDE PROCEEDINGS. THERE IS NO CONSENT B Y THE ASSESSEE FOR THE ADDITIONS MADE BY THE AO. FURTHE R IN THE CASE OF THE ASSESSEE THE ADDITIONS HAVE BEEN MADE ON ESTIMATE BASIS AND IT IS NOT THE CASE OF THE REVEN UE THAT THE ABOVE ADDITIONS MADE ARE NOT DEBATABLE AND THE APPE LLATE AUTHORITIES HAVE CONFIRMED THE ADDITIONS AS SUCH M ADE BY THE AO. FOR THE REASONS AS STATED ABOVE AND KEEPIN G IN VIEW, THE RATIO OF THE DECISION IN THE CASE OF RELI ANCE PETROPRODUCT PVT.LTD (SUPRA), WHEREIN IT HAS BEEN INTERALIA HELD THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NO T ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT , IN OUR OPINION, ATTRACT THE PENALTY UNDER SECTION 271(1)(C ). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE O F EVERY ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 22 RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NO T THE INTENDMENT OF THE LEGISLATURE., THE DECISION RELIED ON BY THE LD. DR IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 20. IN THE CASE ASSESSEES OWN CASE IN I.T.A. NO. 6659/MUM/2008 (AY-1987-88) DATED 14.5.2011 (SUPRA) , THE TRIBUNAL HAS DELETED THE PENALTY ON THE ADDITIONS M ADE ON ACCOUNT OF SERVICE CHARGES OF RS.2,00,000/- AND SC RAP RS.3,56,235/- VIDE FINDING RECORDED IN PARAGRAPHS 1 6 AND 17 OF THE ORDER WHICH ARE REPRODUCED AS UNDER : 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISP UTE TO THE FACT THAT AN AMOUNT OF RS. 2 LAKHS OUT OF THE T OTAL SERVICE CHARGES CLAIMED AT RS.3,70,000 HAS BEEN SUSTAINED BY THE ITAT. SIMILARLY, AN AMOUNT OF RS.3,56,235 HAS BEEN SUSTAINED BY THE TRIBUNAL ON ACCOUNT OF SCRAP. WE FIND THE PENALTY HAS BEEN LEVI ED ON ACCOUNT OF THE ABOVE TWO ADDITIONS. IT IS THE SUBMI SSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE IS CONSISTENTLY FOLLOWING THE METHOD OF ACCOUNTING FOR SCRAP ON SALE BASIS AND THIS FACT IS DULY NOTED BY THE AUDITORS IN THE AUDITORS REPORT. SIMIL ARLY, THE SERVICE CHARGES PAID TO M/S. PPL WAS DISALLOWED MERELY ON THE GROUND THAT PAYMENTS WERE MADE TO TH E LOSS MAKING SISTER CONCERN BY PASSING JOURNAL ENTRI ES AT THE END OF THE FINANCIAL YEAR AND THERE WAS NO DOCUMENTARY EVIDENCE TO PROVE THE GENUINENESS OF TH E TRANSACTIONS. WE FIND THE AUDITORS HAVE MENTIONED I N THE AUDITORS REPORT FOR DIFFERENT YEARS THAT THE ASSESS EE COMPANY HAS ACCOUNTED FOR SCRAP GENERATED ON DISPO SAL ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 23 BASIS AND CLOSING STOCK THERETO AT THE END OF THE Y EAR HAS NOT BEEN ACCOUNTED FOR (PAGE 30 OF THE PAPER BO OK). WE FURTHER FIND MERIT IN THE SUBMISSION OF THE LEAR NED COUNSEL FOR THE ASSESSEE THAT THERE IS NO EVIDENCE WITH THE DEPARTMENT THAT THE ASSESSEE HAD RECEIVED MORE THAN WHAT HAS BEEN STATED BY THE ASSESSEE IN ITS ACCOUNTS. IN OUR OPINION, NON PRODUCTION OF DETAILS ON ACCOUNT OF GENERATION OF SCRAP ETC., MAY INVITE ADD ITION OF THE SAME BUT THE SAME IS NOT SUFFICIENT FOR VISI TING THE PROVISIONS OF PENALTY U/S. 271(1)(C) OF THE ACT, ES PECIALLY WHEN THE DEPARTMENT HAS NO EVIDENCE WHATSOEVER THAT THE ASSESSEE HAS RECEIVED MORE AMOUNT THAN WHAT IS DISCLOSED BY IT. 17. SIMILARLY, AS REGARDS PAYMENT OF SERVICE CHARGE S TO THE SISTER CONCERN WE FIND THE ADDITION MADE BY THE ASSESSING OFFICER WAS PARTLY SUSTAINED BY THE ITAT FOR NON SUBMISSION OF FULL DETAILS. HOWEVER, NON SUBMIS SION OF DETAILS MAY ATTRACT DISALLOWANCE/ADDITION BUT TH E SAME, IN OUR OPINION, WILL NOT ATTRACT THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT ESPECIALLY WHEN SIMILAR A DDITION MADE BY THE ASSESSING OFFICER WAS DELETED BY THE CI T(A) IN THE A.Y. 1986-87 AND ON FURTHER APPEAL THE GROUN D RAISED BY THE REVENUE WAS DISMISSED BY THE TRIBUNAL . IN THIS VIEW OF THE MATTER, WE ARE OF THE CONSIDERED O PINION THAT PENALTY U/S. 271(1)(C) OF THE ACT SHOULD NOT B E LEVIED ON ACCOUNT OF ESTIMATED DISALLOWANCE OF RS. 2 LAKHS ON ACCOUNT OF SERVICE CHARGES AND RS.3,56,235 ON ACCOU NT OF SCRAP FOR THE IMPUGNED ASSESSMENT YEAR. THE GROU NDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 21. IN THE RECENT JUDGMENT OF THE HONBLE APEX COU RT IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158(SC) THEIR LORDSHIPS, AFTER CONSIDERING VARIOUS DECISIONS INCLUDING DILIP N. SHROFF VS. JCIT (2007) 291 ITR 5 19(SC), UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS ( 2008) 306 ITR 277(SC) AND SREE KRISHNA ELECTRICALS VS. ST ATE OF TAMIL NADU (2009) 23 VST 249 (SC) HAVE OBSERVED AND HELD (HEAD NOTE, PAGE 158) : ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 24 A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDL Y, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXP OSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTL Y COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKIN G AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCUR ATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHI NG WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, T HE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DET AILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EX ACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS . WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIE D BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORREC T OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 22. RESPECTFULLY FOLLOWING THE RATIO OF THE ABOVE D ECISIONS AND KEEPING IN VIEW THAT IT IS NOT THE CASE OF THE REVENUE THAT THE EXPLANATION FURNISHED BY THE ASSESSEE BE FORE THE LD. CIT(A) WAS NOT BONAFIDE OR NOT SUBSTANTIATED BY THE ASSESSEE OR THE ADDITIONS MADE BY THE AO ARE NOT ON ESTIMATE BASIS, WE ARE OF THE VIEW THAT THE PENAL TY IMPOSED ITA NO.2485/MUM/2009 (ASSESSMENT YEAR:1988-89) 25 BY THE AO AND SUSTAINED BY THE LD. CIT(A) IS NOT S USTAINABLE IN LAW AND ACCORDINGLY THE SAME IS DELETED. THE GR OUNDS TAKEN BY THE ASSESSEE ARE, THEREFORE, PARTLY ALLOW ED. 23. IN THE RESULT, THE ASSESSEES APPEAL STANDS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH OCT., 2011. SD SD (B.RAMAKOTAIAH) (D. K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 12 TH OCT., 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI