Ibkey Plastics Pvt. Ltd., Baroda V. The DCIT, Circle-1(2), Baroda

ITA 2491/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9172 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 13-02-2017
• Assessment Year: 2001-2002
• Appeal Filed On: 23-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Depreciation; Wrong claim
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 271(1)(c); 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 142(1); 205; 195; 201; 191; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER IBKEY PLASTIC PVT. LTD. 42/261, NEW ELLORA PARK, RACE COURSE, BARODA - 390007 PAN: AAACI 4176L (APPELLANT) VS THE DCIT, CIRCLE - 1(2), BARODA (RESPONDENT) REVENUE BY : S H RI SITARAM MEENA , SR. D . R. ASSESSEE BY: S H RI M.K. PATEL , A.R. DATE OF HEARING : 13 - 02 - 2 017 DATE OF PRONOUNCEMENT : 20 - 02 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THESE TWO ASSESSEE S APPEAL S FOR A.Y. 2000 - 01 & 2001 - 02 , AR ISE FROM ORDER OF THE CIT(A) - I, BARODA DATED 01 - 07 - 2013 IN APPEAL NOS. CAB/I - 14/2011 - 12 & CAB/I - 13/2011 - 12; RESPECTIVELY , IN PROCEEDINGS UNDER SECTION 271(1 ) (C) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO S . 2461 & 2491 / A HD/20 13 A Y 200 0 - 01 & 2001 - 02 I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 2 2. TH E ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - ITA NO. 2461/AHD/2013 : - 1. THE LEARNED CIT (APPEALS) ERRED IN HOLDING THAT THE ADDITIONS WERE NOT CONFIRMED BY HIS PREDECESSORS IN HIS OFFICE ON ESTIMATED BASIS. 2. THE LEARNED CIT (APPEALS) ERRED IN HOLDING THAT THE APPELLANT COMPANY HAD CONCEALED THE PARTICULARS OF INCOME. 3. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING PENALTY U/S 271(1 )(C) OF RS.3,65,590/ - . ITA NO. 2491/AHD/2013 : - 1. THE LEARNED CIT (APPEALS) ERRED IN HOLDING THAT THE ADDITIONS WERE NOT CONFIRMED BY HIS PREDECESSORS IN HIS OFFICE ON ESTIMATED BASIS. 2. THE LEARNED CIT (APPEALS) ERRED IN HOLDING THAT THE APPELLANT COMPANY HAD CONCEALED THE PARTICULARS OF INCOME. 3. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING PENA LTY U/S 271(1 )(C) OF RS.2,92,270 / - . 3. BOTH THESE APPEALS FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2000 - 01 AND 2001 - 02 INVOLVE SIMILAR FACTS SO WE TAKE THE FACTS OF ITA NO. 2461/AHD/2013 AS THE LEAD CASE AND DECI DE BOTH THE APPEALS A CCORDINGLY . ALL THESE THREE GROUNDS OF APPEALS A RE INTERCONNECTED SO THEY ARE DECIDED TOGETHER AS UNDER: - I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 3 4. IN THIS CASE, THE ASSESSING HAS FILED RETURN OF INCOME DECLARING INCOME OF RS. NIL ON 3 1 ST NOVEMBER, 2000. THERE AFTER A NOTICE UNDER SECTION 148 OF THE ACT WA S ISSUED ON 12/07/2006 TO WHICH THE ASSESSEE HAS NOT RESPONDED. THE FACTS OF THE CASE THAT I N FORMATION WAS RECEIVED FROM THE PREVENTIVE SECTION OF THE CENTRAL EXCISE AND C USTOM S , BARODA STATING THAT THE ASSESSEE COMPANY HAD AVAILED CENVAT CREDIT OF AGGREGATING TO RS. 50 , 31 , 380/ - DURING THE ASSESSMENT YEAR 2000 - 01 AND 2001 - 02 ON THE BASIS OF FABR ICATED AND BOGUS INVOICES OF PURCHASE S HDPE/LDP E/LLDPE AND POLYPROPYLENE G RANULES ALLEGEDLY SUPPLIED BY M/S J.K. ENTERPRISES HAVING ITS OFFICE AT BARODA. THE EXCISE AUTHORITY HAS MADE INVESTIGATION IN RESPECT OF C LAIM OF PURCHASES AMOUNTING TO RS. 3,19,55 ,308/ - O F RAW MATERIAL AND CARRIED FORWARD CLOSING STOCK OF RS. 1,48,20,574 RESPECTIVELY IN THE CASE OF ASSESSEE. THE INVESTIGATION MADE BY THE EXCISE AUTHORITY REVEALED THAT THE SAID BOGUS PURCHASES WE RE MADE WITH FAKE DOCUMENTS LEADING TO THE FRAUDU LENT CLAIM OF CENVAT TO THE TUNE OF RS. 50 LACS BY THE ASSESSEE . IN VIEW OF THIS, ASSESSING OFFICER HAD ISSUED SHOW CAUSE NOTICE U/S. 148 OF THE ACT ON 12 TH JULY, 2012. THE ASSESSING OFFICER STATED THAT ASSESSEE HAS NOT MADE ANY COMPLIANCE TO THE NOTIC E ISSUED U/S. 148. THEREAFTER, THE ASSESSING OFFICER HAD COMPLETED THE ASSESSMENT PROCEEDINGS U/S. 144 R.W. 147 OF THE ACT BECAUSE OF NON - COMPLIANCE MADE BY THE ASSESSEE. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSEE HAS NOT COMPLIED WITH THE LETTER AND SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER FROM TIME TO TIME. THE ASSESSEE HA D NOT MADE COMPLETE COMPLIANCE AND ONLY STATED DURING THE COURSE OF ASSESSMENT PROCEEDING BY ITS I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 4 LETTERS DATED 29TH SEPTEMBER 200 7 THAT THE ASSESSEE COMPANY HA S BEEN CLOSED SINCE LAST MORE THAN FIVE YEARS AND THEIR BANK HAS SERVED THEM SECURITIZATION NOTICE AND HAS TAKEN OVER THE PROCESSION OF THEIR PREMISES. IT WAS FURTHER STATED BY THE ASSESSEE IN THAT LETTER THAT SINCE THE BANKER HAS TAKEN OVER THE PROCESSION OF THEIR PREMISES SO THEY HAVE NO RECORD AVAILABLE WITH THEM . THE ASSESSEE OFFICER HAD DISALLOWED THE CLAIM OF BOGUS PURCHASES TO THE TUNE OF RS. 184,36,443/ - . THE RELEVANT OBSERVATION OF THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEED INGS ARE REPRODUCED AS UNDER: - '5. IN THE CASE OF THE APPELLANT COMPANY, THE COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, VADODARA - II HAD CONDUCTED INQUIRY AND IT WAS REVEALED THAT THE ASSESSEE COMPANY HAD CLAIMED CENVAT CREDIT OF RS. 50,31, 380/ - ON PURCHASE S FROM ONE M/S. J.K. ENTERPRISES, BARODA. INVESTIGATION FURTHER REVEALED THAT THE PURCHASE CLAIM MADE .BY THE ASSESSEE WAS BOGUS. THE AMOUNT OF PURCHASES FROM M/S. J.K. ENTERPRISES BARODA DURING THE YEAR UNDER CONSIDERATION IS RS. 1,84,36,443/ - . THEREAFTER THE COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, VADODARA - II VIDE HIS ORDER NO. F.NO.V.CH. 39(15)15/OA/AC/PREV./03 DATED 30/11/2004 HAS HELD THAT THE ASSESSEE COMPANY HAD TAKEN MODVAT CREDIT AMOUNTING TO RS. 50,31, 380/ - ON THE BASIS OF 71 INVOICES ISSUED BY M/S. J.K. ENTERPRISES, AS DETAILED IN ANNEXURE - I TO THE SHOW CAUSE NOTICE, IN A WRONG AND FRAUDULENT MANNER WHICH IS OTHERWISE IS NOT ADMISSIBLE TO THE ASSESSEE COMPANY. 6. THE RELEVANT PORTIONS OF THE ORDER OF THE COMMISSIONER OF CENTRAL EXCISE & CUSTOM S, VADODARA - II BEARING NO. F.NO. V.CH.39(15)15/OA/AC/PREV./03 DATED 30/11/2004 ARE EXTRACTED HEREIN BELOW : - '5.1. THE ALLEGATION THAT THE CREDIT AMOUNT TO RS. 5031380/ - WAS TAKEN BY IBKEY AGAINST 71 INVOICES ISSUED BY M/S. J.K. ENTERPRISES AS DEBITED IN A NNEXURE - I TO THE SHOW CAUSE NOTICE, WITHOUT ACTUALLY RECEIVING ANY MATERIAL COVERED UNDER THESE INVOICES AND THAT, AS I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 5 SUCH, THESE INVOICES WERE JUST DUMMY INVOICES ISSUED BY JKE IS BASED ON THE FOLLOWING EVIDENCE. (I) STATEMENT DATED 20 - 12 - 2000 OF SHRI MUKESH D PATEL, AUTHORISED SIGNATORY OF IBKEY RECORDED U/S 14 OF THE CENTRAL EXCISE ACT, 1944 WHEREIN HE HAS STATED THAT HE WAS LOOKING AFTER THE EXCISE MATTERS AND DAY TO DAY FUNCTIONS OF THE COMPANY THAT HE HAD MADE FAKE ENTRIES FOR THE GOODS VIZ. HDPE/L DPE/LLDPE AND POLYPROPYLENE GRANULES SHOWN TO HAVE BEEN RECEIVED UNDER INVOICES ISSUED BY JKE AND HAD ALSO MADE VARIOUS FAKE ENTRIES IN THE RG - 23 A PT.II. IF TO AVAIL BENEFIT OF CENVAT CREDIT, UNDER THOSE INVOICES THAT HE WAS COMPELLED BY SHRI V TRIVEDI, DIRECTOR OF IBKEY TO MAKE ENTRIES FOR FAKE TRANSACTIONS FOR RECEIPT OF PLASTIC GRANULES IN RG - 23A PT. L AND RG - 23 PT. II WHICH ACTUALLY WERE NEVER RECEIVED IN THE FACTORY PREMISES BUT ONLY INVOICES WERE HANDED OVER TO HIM THAT NOT ONLY THE RECEIPT, SALES O F THE CENVATED INPUTS SHOWN TO RPP AND RIP WERE ALSO BOGUS AS ONLY INVOICES HAD BEEN SENT AND NOMATERIAL HAD BEEN DISPATCHED UNDER THOSE INVOICES TO RPP AND RIP, THAT THE VEHICLE NUMBERS MENTIONED IN THE SAID INVOICES HAD BEEN FALSELY WRITTEN BY THIS HAD B EEN DONE TO ENABLE THE CONSIGNEES TO AVAIL WRONG MODVAT/CENVAT CREDIT. (II) LETTER DATED 1 - 12 - 2000 FROM REGIONAL TRANSPORT OFFICE, VADODARA MENTIONING THE DETAILS OF VARIOUS VEHICLES WHOSE NUMBERS WERE APPEARING ON THE INVOICES ISSUED BY JKE FOR SALE OF HDPE/LDPE/LLDPE/PP GRANULES TO IBKEY. OUT OF 24 VEHICLES, MENTIONED IN THIS LETTER, TWO WERE OUT OF 24 VEHICLES, MENTIONED IN THIS LETTER, TWO WERE TANKERS ARE NINE VEHICLES WERE THREE WHEELER TEMPO/AUTO RIKSHAW WHICH WERE NOT CAPABLE OF CARRYING THE GOOD S WHICH WERE CLAIMED TO HAVE BEEN TRANSPORTED. (II) STATEMENT DATED 1 - 12 - 2000 OF SHRI HIMATLAL JAGJIVANDAS GANDHI OWNER OF TRUCK NO. GTB 6798, STATEMENT DATED 4 - 12 - 2000 OF SHRI NATVARBHAI JAGJIVANDAS GANDHI, OWNER OF TRUCK NO. GTB 6128, STATEMENT DATED 5 - 12 - 2000 OF SHRI BAKULBHAI LALUBHAI BARIA, OWNER OF TATA TEMPO NO. GJ 6 T 3824 AND LETTER DATED 4 - 12 - 2000 AND 7 - 12 - 2000 RECEIVED FROM M/S. BHOOMI CARGO MOVERS, HARNI, VADODARA WHEREIN THEY HAVE STATED THAT THEY HAVE NEVER TRANSPORTED ANY GOODS FROM THE PR EMISES OF JKE TO IBKEY, JAMBUSAR. (IV) STATEMENT DATED 2 - 1 - 2001 OF SHRI KEVAL V TRIVEDI RECORDED UNDER SECTION 14 OF THE CENTRAL EXCISE ACT, 1944 WHEREIN ON BEING CONFRONTED WITH THE ABOVE MENTIONED WHEREIN ON BEING CONFRONTED I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 6 WITH THE ABOVE MENTIONED RTO 'S LETTER AND THE STATEMENTS OF OWNERS OF VARIOUS TRUCKS HE STATED THAT IBKEY HAD NOT RECEIVED ANY GOODS UNDER THE 71 INVOICES ISSUED BY JKE AS DETAILED IN ANNEXURE - 1 TO HIS STATEMENTS THAT NO MATERIAL HAD BEEN DISPATCHED FROM THE GODOWN OF JKE TO THEIR FA CTORY AT VILLAGE - ANKHI AND AS SUCH THEY HAD NOT RECEIVED ANY MATERIAL THAT ARRANGEMENT HAD BEEN MADE MERELY TO PASS ON THE MODVAT CREDIT THAT THE SAID MODVAT CREDIT TAKEN ON THE BASIS OF THE INVOICES ISSUED BY JKE WAS PASSED ON TO RPP AND RIP BY RAISING IN VOICES IN THEIR NAME AS MENTIONED IN THEIR NAME AS MENTIONED IN ANNEXURE - II TO HIS STATEMENT THAT NO GOODS AS MENTIONED IN THE INVOICES AS DETAILS IN ANNEXURE - II WERE DISPATCHED TO RPP AND RIP AND ONLY MODVAT CREDIT WAS PASSED ON TO THEM THAT HE HAS BEEN S HOWN THE STATEMENT DATED 20 - 11 - 2000 OF SHRI MUKESH D PATEL, AUTHORIZED SIGNATORY OF IBKEY AND HE HAS GONE THROUGH THE SAME AND THAT HE A GREES WITH THE CONTENTS OF THE STATEMENT IN TOTO WITHOUT ANY RESERVATION. (V) FURTHER STATEMENT DATED 27 - 2 - 2001 OF SH RI KEVAL V TRIVEDI, RECORDED UNDER SECTION 14 OF THE CENTRAL EXCISE ACT, 1944 WHEREIN HE STATED THAT HE HAS GONE THROUGH THE CONTENTS OF THE STATEMENT DATED 24 - 2 - 2001 OF SHRI VIPINBHAI V PATEL GODOWN IN CHARGE OF JKE AND THAT NOTWITHSTANDING THE CLAIM OF S HRI VIPINBHAI V PATEL THAT THE MATERIAL COVERED THE 71 INVOICES ISSUED BY JKE TO IBKEY HAD ACTUALLY BEEN DISPATCHED, THE FACT IS THAT NO GOODS HAD BEEN RECEIVED IN HIS FACTORY AT VILLAGE - ANKHI. (VI) STATEMENT DATED 13/2/2001 OF THE SHRI VINODKUMAR CHATU RVEDI, AUTHORIZED SIGNATORY OF RPP RECORDED U/S 14 OF THE CENTRAL EXCISE ACT, 1944 WHEREIN HE STATED THAT NO GOODS HAD BEEN RECEIVED UNDER THE INVOICES ISSUED BY IBKEY AS DETAILED IN ANNEXURE - A TO HIS STATEMENT BUT STILL THE CENVAT CREDIT AMOUNTING TO RS. 8065'IB/ - HAD BEEN TAKEN BY HIM ON THE BASIS OF THOSE INVOICES, THAT THE WRONGLY TAKEN CENVAT CREDIT HAS BEEN REVERSED IN THEIR RG 23D ACCOUNT AND THAT THE NECESSARY ENDORSEMENTS HAD BEEN MADE ON EACH OF THOSE INVOICES TO THE EFFECT THAT NO MODVAT CREDIT W OULD BE PASSED ON. (VII) STATEMENT DATED 5 - 3 - 2001 OF SHRI PANKAJ NATWARLAL BHAVSAR, PROP. OF RIP, RAOPURA VADODARA RECORDED UNDER SECTION 14 OF THE CENTRAL EXCISE ACT, 1944 WHEREIN HE HAS STATED THAT HIS FIRM IS NOT REGISTERED WITH CENTRAL EXCISE DEPARTME NT AS A REGISTERED DEALER, THAT THEY HAD RECEIVED ONLY THE INVOICES HAD BEEN RECEIVE D AS IT I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 7 WAS MERE PAPER TRANSACTION, THAT SINCE THEY ARE NOT A REGISTERED DEALER, THEY HAVE NOT TAKEN ANY CENVAT CREDIT ON THE BASIS OF THOSE INVOICES AND THERE WOULD BE NO QUESTION OF PASSING ON THE SAME TO OTHERS. 7. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE PURCHASES REFLECTED IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY FOR THE AY 2001 - 02 IS NOT GENUINE, AND ACCORDINGLY THE TOTAL INCOME OF THE ASSESSEE COMPANY FOR THE A.Y. 2001 - 02 IS COMPUTED ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD WHICH ARE DISCUSSED AS UNDER: 8. DISALLOWANCE OF BO G US PURCHASES - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS NOTICED FROM THE P ROFIT AND LOSS ACCOUNT THAT THE ASSESSEE HAS CLAIMED PURCHASES OF RS. 3,19,55,308/ - OF RAW MATERIAL AND CARRIED FORWARD CLOSING STOCK OF RS. I,84,20 F 574/ - UNDER THE HEAD INVENTORIES. THE ASSESSEE WAS SPECIFICALLY REQUESTED TO FURNISH VIDE NOTICE U/S 142(1) AT POINT NO.3(C) TO FURNISH THE DETAILS OF PURCHASES CLAIMED IN THE PROFIT AND LOSS ACCOUNT. AS MENTIONED ABOVE THE ASSESSEE COMPANY HAS BEEN AFFORDED SUFFICIENT OPPORTUNITY TO FURNISH THE DETAILS/INFORMATION, BUT IT HAS FAILED TO FURNISH ANY DETAIL AS CA LLED FOR TILL DATE. IN ABSENCE OF ANY REPLY FROM THE ASSESSEE, THE PURCHASES CLAIMED UNDER THE HEAD INVENTORIES AT RS. 1,84,20,574/ - BY THE ASSESSEE REMAIN UNVERIFIABLE. HENCE THE PURCHASES AS CLAIMED BY TH E ASSESSEE D URING THE YEAR UNDER CONSIDERATION ARE A/SO NOT VERIFIABLE IN THE ABSENCE OF ANY SUBMISSION OF THE ASSESSEE. IN VIEW OF THE ABOVE FACTS, IT IS CLEAR THAT THE ASSESSEE HAS FAILED TO PROVE THE CORRECTNESS AND GENUINENESS OF THE PURCHASES REFLECTED IN THE PROFIT & LOSS ACCOUNT. ACCORDINGLY, IN V IEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE DISCUSSED AND RELIED UPON BY THE BY THE COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, VADO DARA - II IN THE ORDER BEARING NO. F.NO. V.CH.39(15)15/OA/AC/PREV./03 .DATED 30.11.2004 EXTRACTED AS ABOVE, AN ADDITION OF RS . 1,84,20,574/ - IS MADE TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF BOGUS PURCHASES CLAIMED BY THE ASSESSE E. PENALTY PROCEEDINGS U/S 271(1 )(C) ARE INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS AND MAKING A BOGUS CLAIM OF PURCHASES.' I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 8 5. THE LD. CIT(A) HAD CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER FROM RS. 18434,443/ - TO RS. 15,59,506/ - . THEREAFTER , THE ASSESSING OFFICER H AD ISSUED SHOW CAUSE NOTICE FOR IMPOSITION OF PENALTY U/S. 271(1)(C) R.W.S 271(4) OF THE ACT. IN RESPONSE TO SHOW CAUSE NOTICE THE ASSESSEE HAS FURNISHED THE FOLLOWING SUBMISSION AT THE TIME OF PENALTY PROCEEDINGS BEFORE THE ASSESSING OFFICER : - 'IN THIS REGARD, IT IS SUBMITTED THAT THE COMPANY HAD FILED RETURN OF INCOME ON 31.10.2000 DECLARING TOTAL LOSS OF RS. NIL. ASSESSMENT U/S 144 WAS COMPLETED ON 14/12/2007 ON A TOTAL INCOME OF RS. 75,52,235/ - . THE ADDITIONS MADE IN THE ASSESSMENT ORDER ON WHICH PENALTY U/S 271(L)(C) HAS BEEN INITIATED ARE AS UNDER: DISALLOWANCE ON BOGUS PURCHASES - RS. 1,84,20,574/ - THE COM PANY HAD PREFERRED AN APPEAL BEFORE THE HONOURABLE CIT (APPEALS) WHO VIDE HIS ORDER DATED 26.03.2010 PARTLY ALLOWED THE APPEAL. THE FINDINGS OF THE HONOURABLE CIT (APPEALS) ARE AS UNDER: 'UNDER SUCH A SCENARIO ONE HAS TO ESTIMATE THE INCOME OF THE APPELLAN T FOR THE INSTANT ASSESSMENT YEAR. IN CURRENT ASSESSMENT YEAR, WHICH WAS THE YEAR OF MANIPULATION, THE APPELLANT HAD DECLARED NET PROFIT OF RS. 526262/ - AND LOSS OF RS. 20.02 LAKHS IN THE AY 1999 - 2000. THEREFORE, THE PART RESULTS CANNOT PROVIDE ANY INDICAT OR FOR ADOPTING A NET PROFIT RATE. DURING APPELLATE PROCEEDINGS, IT IS FAIRLY ADMITTED BY THE AR OF THE APPELLANT THAT THE GROSS PROFIT OF SIMILAR INDUSTRY IS IN THE REGION OF 18 - 20% AND THE NET PROFIT IS 4 - 6%. ADOPTING A NET PROFIT RATE OF 5% TO THE SALES OF RS. 1,89,91,523/ - THE NET INCOME IS ESTIMATED AT RS. 9,49,577/ - (A8991523 X 0.05). THUS THE INCOME IN THE CASE OF THE COMPANY HAS BEEN ESTIMATED AT RS. 9,49,577/ - . THE HONOURABLE COMMISSIONER OF INCOME TAX (APPEALS) OF THE VIEW THAT PAST RESULTS OF THE COMPANY CANNOT PROVIDE ANY INDICATOR FOR ADOPTING A NET PROFIT RATE AND HE THEREFORE PROCEEDED TO ESTIMATE THE INCOME AT RS. 9,49,577/ - . IT WOULD BE PERTINENT TO STATE HERE THAT EVEN AFTER THE ADDITIONS CONFIRMED BY THE HONOURABLE CIT (APPEALS) THE INCOME IN THE I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 9 CASE OF THE COMPANY WOULD BE RE. NIL AFTER CARRY FORWARD OF UNABSORBED LOSSES AND DEPRECIATION (REFER TO THE APPLICATION U/S 154 DATED 17.3.2011, COPY OF WHICH IS ENCLOSED HEREWITH). CONSIDERING THE FACT THAT THERE IS NO INCOME IN THE CASE OF THE C OMPANY OR THE ASSESSED INCOME WOULD BE NIL IT IS SUBMITTED THAT PENALTY U/S 271(1)(C) BE NOT LEVIED. WITHOUT PREJUDICE TO THE ABOVE IT IS SUBMITTED THAT PENALTY PROCEEDINGS ARE SEPARATE FROM ASSESSMENT PROCEEDINGS AND THE FINDINGS IN THE ASSESSMENT PROCEED INGS CANNOT BE MADE A BASIS FOR LEVY OF PENALTY. IT MAY BE SUBMITTED THAT THERE IS NO IOTA OF EVIDENCE IN THE POSSESSION OF THE DEPARTMENT TO ESTABLISH, THAT THE COMPANY HAD EFFECTED TURNOVER OF RS. 1,89,91,523/ - . THE MERE FACT THAT CERTAIN BOOK ENTRIES WE RE MADE BY THE COMPANY IT CANNOT BE SAID THAT THE COMPANY HAS EFFECTED SALES OUTSIDE THE BOOKS OF ACCOUNT. IN VIEW OF THE AFORESAID FACTS IT IS SUBMITTED THAT THE ENTIRE ADDITION SUSTAINED BY THE HONOURABLE CIT (APPEALS) IS ON ESTIMATED BASIS AND THEREFORE PENALTY U/S 271(1)(C) CANNOT BE LEVIED. FOR THIS PURPOSE RELIANCE IS PLACED ON THE FOLLOWING DECISIONS IN THE CASE OF - ( I) CIT VSAERO TRADERS PVT. LTD. 322 ITR 316 (II) CIT VS MODI INDUSTRIAL CORPORATION 195 TAXMAN (III) HARIGOPAL SINGH V S. CIT 258 ITR 0085 (IV) BHAGYODAYA GROUP CO - OPERATIVE COTTON SALE & GINNING & PRESSING SOCIETY LTD. VS. ASST. CIT 127 TTJ 001. (V) HARMS/I B SHAH VS ITO 126 TTJ 283 (VI) CIT VS M.M. RICE MILLS 253 ITR 17 (VII) CIT VS. RAVAIL SINGH & CO. 254 ITR 191 (VIII) CITVS.AJAISINGH&CO.253ITR630 (IX) CIT VS DHILLON RICE MILLS 256 ITR 447 (X) CIT VS. RAJBAHADUR SINGH 273 ITR 351 (XI) CIT VS METAL PRODUCT OF INDIA 150 ITR 714 (XII) SUDARSHAN SILKS & SAREES VS. CIT 300 ITR 205 (X III) CIT VS SHIVNARAYAN JAMNALAL & CO. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES IT IS SUBMITTED THAT PENALTY PROCEEDINGS MAY KINDLY BE DROPPED ON THE ADDITIONS HAVE BEE N SUSTAINED ON ESTIMATED BASIS. I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 10 5.1 THE ASSESSING OFFICER HAS NOT ACCEPTED TH E EXPLANATION OF THE ASSESSEE AND LEVIED PENAL TY OF RS. 3 , 65 , 587/ - U/S. 271(1) (C ) OF THE ACT. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE LD. CIT(A) HAS SUSTAINED THE PENALTY LEVIED BY THE ASSESSI NG OFFICER BY OBSERVING AS UNDER: - 12. WITH REGARD TO GROUNDS OF APPEAL OF THE APPELLANT AS REPRODUCED IN EARLIER PARAGRAPH IT IS MENTIONED THAT THE PENALTY ORDER U/S 271(1 )(C) OF THE APPELLANT AS WELL AS THE ABOVE ENTIRE SUBMISSION OF THE APPELLANT HAVE BEEN CONSIDERED. WITH REGARD TO ISSUE REGARDING LEVY OF PENALTY U/S 271(1) (C) OF THE ACT, SOME OF THE ASPECTS OF THE CASE OF THE APPELLANT HAVE TO BE CONSIDERED. THE INQUIRIES CONDUCTED BY THE PREVENTIVE SECTION OF THE CENTRAL EXCISE AND CUSTOM, BARODA AT THE FACTORY PREMISE OF THE APPELLANT REVEALED THAT THE APPELLANT COMPANY HAD AVAILED OF CENVAT CREDIT AMOUNTING TO RS. 50,31,380/ - DURING THE FINANCIAL YEARS RELEVANT TO AY 2000 - 01 AND 2001 - 02 ON THE BASIS OF FABRICATED AND FAKE INVOICES OF PURCHASES OF HO PE / LDPE /LLDEP ETC. ALLEGEDLY SUPPLIED BY ONE M/S JK ENTERPRISES. THE AMOUNT OF PURCHASE INVOLVED FOR THE RELEVANT YEARS IN QUESTION WERE TO THE TUNE OF RS.1,84,36,443/ - AND RS. 48,87,444/ - . CONCERTED INVESTIGATION MADE BY THE EXCISE AUTHORITY COVERING A LL ASPECTS OF THE SAID PURCHASES LED TO FRAUDULENT CLAIM OF CENVAT TO THE TUNE OF RS.50 LACS BY THE APPELLANT AND THE SAME ALSO REVEALED THAT THE PURCHASES WERE BOGUS AND THE APPELLANT COMPANY WIT H THE HELP OF FAKE DOCUMENTS RELATING TO THE PURCHASES HAD A VAILED OF CENVAT CREDIT. AS REGARDS INCOME TO IMPLICATION, IT CAN BE SEEN THAT THE APPELLANT HAD REFLECTED THE PURCHASES IN THE ACCOUNTS FOR THE YEAR ENDED 31 - 03 - 2001 CLAIMING THE SAID BOGUS PURCHASES TO THE TUNE OF RS.1,84,36,443/ - . BASED ON THIS FACT, C ASE OF THE APPELLANT WAS REOPENED BY THE AO U/S 147 OF THE IT ACT. NOW THE PLEA OF THE APPELLANT'S AR AS MADE IN THE SUBMISSION DATED 28 - 06 - 2013 AS REPRODUCED IN EARLIER PARAGRAPHS .OF THIS APPEAL ORDER IS THAT MERELY BECAUSE THE ADDITION HAS BEEN CONFIRME D BY THE CIT(A) ON ESTIMATED BASIS CANNOT BE A BASIS FOR LEVY OF PENALTY. IN SUPPORT OF THIS PLEA, THE AR OF THE APPELLANT HAS RELIED UPON DECISIONS OF VARIOUS HON'BLE COURTS. BUT IN THE FACT AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT IT CANNOT BE SAID THAT IT IS A MERE CASE OF CONFIRMING THE ADDITION ON ESTIMATED BASIS. IN THIS I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 11 REGARD THE OBSERVATION OF THE LD. CIT(A) - 1 BARDOA AS MADE IN HIS APPEAL ORDER NO.CAB(A)/V/312/09 - 10 DATED 26 - 03 - 2010 AS PASSED FOR AY 2001 - 02 IS VERY IMPORTANT AND THE SAME IS R EPRODUCED HERE UNDER FOR REFERENCE: - '5.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE SUBMISSION OF THE APPELLANT, THE ASSESSMENT ORDER AND THE REMAND REPORT. THE CENTRAL EXCISE OFFICIAL HAD VISITED THE APPELLANT PREMISES ON 23 - 11 - 2000 AND HAD F OUND BOGUS PURCHASES OF RS. 1,84,20,574/ - FOR AY 2000 - 01 AND RS.48,87,444/ - FOR AY 2001 - 02 ALLEGEDLY FROM M/S. J.K. ENTERPRISES. THE CLOSING STOCK AS ON 31 - 03 - 2000 WAS SHOWN AS RS. 1 , 84,20,574/ - AND IN THE OPENING STOCK AS ON 01 - 04 - 2000 UNDER THE HEAD 'PUR CHASE' THE APPELLANT HAD REVERSED THE ENTRY AS - 1,83,94,170/ - (IT IS NOT CLEAR AS TO HOW OPENING STOCK FOR AY 2001 - 02 AND CLOSING STOCK OF 2000 - 01 COULD BE DIFFERENT). THE APPELLANT HAD SHOWN SALES OF RS. 18,76,532/ - IN THE TRADING ACCOUNT WHEREAS APPARENT LY THERE WAS NO RAW MATERIAL TO PROCESS OR MANUFACTURE. IN OTHER WORDS, THERE IS NO CORRESPONDING PURCHASES AND THUS ALL THE EXPENSES SUCH AS ON POWER OF RS.14,71,939/ - APPEARS TO BE BOGUS. THE SECOND SCENARIO IS THAT THERE WERE UNDISCLOSED PURCHASES WHICH WERE PROCESSED AND SOLD DURING THE YEAR. CONSIDERING THE BACKGR OUND OF THE APPELLANT THAT IT HAD IND ULGED IN MALPRACTICES SUCH AS INCORPORATING BOGUS PURCHASES IN THE ACCOUNTS TO PASS ON CENVAT BENEFITS, THE PROCESSING EXPENSES AND THE OTHER ENTRIES IN TH E ACCOUNTS OF THE APPELLANT ARE TOTALLY UNRELIABLE. 5.2.2.UNDER SUCH SCENARIO ONE HAS TO ESTIMATE THE INCOME OF THE APPELLANT FOR THE INSTANT ASSESSMENT YEAR. IN PAST THE APPELLANT HAD DECLARED NET PROFIT OF RS.5,26,262/ - FOR AY 2000 - 01, WHICH WAS THE YEAR OF MANIPULATION AND LOSS OF RS.20.02 LAKHS IN AY 1999 - 2000. THEREFORE/ THE PAST RESULTS CANNOT PROVIDE ANY INDICATOR FOR ADOPTING A NEW PROFIT RATE'. 12.1 THOUGH ABOVE OBSERVATION OF LD. CIT(A) IS IN RESPECT OF AY 2001 - 02 IN THE CASE OF APPELLANT, BUT TH E FACTS INVOLVED IN ITS CASE FOR AY 2000 - 2001 I.E. THE YEAR FOR CONSIDERATION ARE IDENTICAL. THE ABOVE OBSERVATION OF LD. CIT(A) CLEARLY SHOWS THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT WERE NOT RELIABLE AND ALSO CONSIDERING THE FACT THAT IT WAS INDULGED IN MAL PRACTICES SUCH AS INCORPORATING BOGUS PURCHASES IN THE ACCOUNTS TO PASS ON CENVAT BENEFITS, THE PROCESSING EXPENSES AND THE OTHER ENTRIES IN THE ACCOUNTS WERE TOTALLY UNRELIABLE AND IN SUCH A SCENARIO, THE LD. CIT(A) WAS LEFT WITH NO OPTION , BUT TO ESTIMATE THE INCOME OF THE APPELLANT FOR THE YEAR I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 12 UNDER CONSIDERATION. THE APPELLANT HAD SHOWN SALES IN THE TRADING ACCOUNT WHEREAS APPARENTLY THERE WAS NO RAW - MATERIAL TO PROCESS OR TO MANUFACTURE. THERE WAS NO CORRESPONDING PURCHASES AND THUS, ALL THE E XPENSES WERE APPEARING TO BE BOGUS. AS PER THE LD. CIT(A) THE SECOND SCENARIO WAS THAT THERE WAS UNDISCLOSED PURCHASES WHICH WERE PROCESSED AND SHOWN DURING THE YEAR. AS PER THE LD. CIT(A) CONSIDERING THE BACKGROUND OF THE APPELLANT THAT IT HAD INDULGED IN MALPRACTICES SUCH AS INCORPORATING BOGUS PURCHASES IN THE ACCOUNT TO PASS ON CENVAT BENEFITS, THE PROCESSING EXPENSES AND THE OTHER ENTRIES IN THE ACCOUNTS OF THE APPELLANT WERE TOTALLY UNRELIABLE. AS PER THE LD. CIT(A) UNDER SUCH SCENARIO ONE HAD TO ESTI MATE THE INCOME OF THE APPEL LANT FOR THE INSTANT ASSESSMENT Y EAR. THESE FACTS SHOW THAT THE BOOK RESULT I.E. THE PROFIT FOR THE YEAR UNDER CONSIDERATION WAS NOT CORRECTLY DISCLOSED BY THE APPELLANT AS ITS BOOKS OF ACCOUNTS WAS NOT RELIABLE AT ALL. THUS, IT CAN BE SAID THAT THE LD. CIT(A) MERELY CONFIRMED THE ADDITION ON ESTIMATED BASIS. THE ABOVE FACTS CLEARLY ESTABLISH THAT THE APPELLANT HAD CONCEALED PARTICULARS OF INCOME IN ITS CASE AND THEREFORE THE PENALTY OF RS.3,65,590/ - HAS CORRECTLY BEEN LEVIED BY THE AO. IN VIEW OF THIS, THE PENALTY OF RS. 3,65,590/ - AS LEVIED BY THE AO U/S 271(1 )(C) OF THE ACT IS HEREBY CONFIRMED . 6. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LEARNED COUNSEL HAS CONTENDED THAT THE LD. CIT(A) HAS ERRED IN SUSTAININ G THE PENALTY LEVIED BY THE ASSESSING OFFICER ON ESTIMATED BASIS. H E ALSO FURNISHED THE PAPER BOOK WHICH CONTAIN S THE DETAIL OF WRITTEN SUBMISSION MADE BY THE ASSESSE E BEFORE THE LOWER AUTHORITIES. ON OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE CONTENDED THAT PENALTY WAS LEVIED BECAUSE OF CONCEALMENT OF INCOME DETECTED ON ACCOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE AND HE STRONGLY SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE F IND THAT IN THIS CASE THE PENALTY WAS LEVIED ON THE BASIS I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 13 OF ADDITION MADE ON SPECIFIC ISSUE PERTAINING TO BOGUS PURCHASES MADE BY THE ASSESSEE. WE FIND THAT THE SUBSTANTIVE ADDITION MADE IN THIS CASE WAS NOT ON ESTIMATED BASIS BUT WAS MADE SPECIFICALLY O N THE INDULGENCE OF MAL - PRACTICES AND BOGUS PURCHASES COMMITTED BY THE ASSESSEE . WE DO NOT INCLINED WITH THE SUBMISSION OF THE ASSESSEE THAT THE PENALTY WAS LEVIED ON THE ESTIMATED ADDITIONS . THE ASSESSEE FAILED TO SUBSTANTIATE AND JUSTIFY ITS EXPLANATION AS PER THE OBLIGATION CAST UPON IT BY THE EXPLANATION 1 OF SECTION 271(1)(C) OF THE ACT REPRODUCED AS UNDER: - '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 A N EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE [ASSESSING] OFFICER OR THE [COMMISSIONER (APPEALS)] [OR THE [PRINCIPAL COMMISSIONER OR] COMMISSIONER] TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE [AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM], THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB - SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED.' 7.1 K EEPING IN VIEW THE CONCRETE FINDINGS AS ELABORATED SUPRA WHICH ELUCIDATE TH AT ASSESSEE WAS INDEED INDULGED IN BOGUS PURCHASES AND AVAILED THE CENVAT BENEFIT FRAUDULENTLY. THIS ESTIMATION WAS NOT MA DE ON THE BASIS OF UNVERIFIABLE TRANSA C TIONS BUT THE EST I MATION OF INCOME WAS BAS ED O N SPECIFIC TRANSACTIONS CARRIED OUT FRAUDUL ENTLY AND PROVED AS BOGUS WITH SUPPORTING MATERIAL EVIDENCES FOUND IN THE CASE OF ASSESSEE. THESE FACTS CLEARLY I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 14 ESTABLIS H THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF IN INCOME , THEREFORE, I N VIEW OF THE ABOVE MENTIONED FACTS AND FINDINGS, WE D IS INCLINE TO INTERFERE IN THE FINDINGS OF TH E LD. CIT(A). 8. IN THE RESULT , THE APPEAL OF THE ASSESEE IS DISMISSED. ITA NO. 2491/AHD/2013 : - 9 . AS THE ITA NO. 2461/AHD/2013 FOR ASSESSMENT YEAR 2000 - 01 IS DISMISSED, ITA NO. 2491/AHD/2013 IS ALSO DISMISSED AS THE FACT S FOR ASSESSMENT YEAR 2001 - 02 ARE THE SAME. 10 . IN THE COMBINED RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 20 - 02 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMB ER ACCOUNTANT MEMBER AHMEDABAD : DATED 20 /02 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. I.T.A NO S . 2461 & 2491 /AHD/20 13 A.Y. 2000 - 0 1 & 2001 - 02 PAGE NO IBKEY PLASTIC PVT. LTD VS. DCIT 15 BY ORDER/ , / ,