Sandeep Intermediates Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-8(1), Ahmedabad

ITA 3335/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50910 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-10-2011
• Assessment Year: 1985-1986
• Appeal Filed On: 17-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SURESH R SHAH
• Keywords: Bogus purchase; Bonafide belief; Retrospective amendment; Initiation of penalty proceedings; Difference of opinion; Reason to believe; Bonafide mistake; Change of opinion
• Section: 69C; 43B; 143(3); 133(6); 144

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' [BEFORE SHRI G D AGARWAL VICE-PRESIDENT] [AND SHRI T K SHARMA - JUDICIAL MEMBER] ITA NOS.3335, 3336 & 3337/AHD/2009 (ASSESSMENT YEARS:-1985-86, 1992-93 & 1993-94) SANDEEP INTERMEDIATES PVT. LTD., 204, H K HOUSE, ASHRAM ROAD, AHMEDABAD V/S THE INCOME-TAX OFFICER, WARD-8(1), AHMEDABAD PAN: AADCS 0458 C [APPELLANT] [RESPONDENT] APPELLANT BY :- SHRI SURESH R SHAH, AR RESPONDENT BY:- SHRI SAMIR TEKRIWAL, SR. DR DATE OF HEARING:- 13-10-2011 DATE OF PRONOUNCEMENT:- 16 -11-2011 O R D E R PER T K SHARMA (JM) :- THESE THREE APPEALS BY ASSESSEE WERE HEARD TOGETHER ON THE SAME DATE AND ARGUED BY COMMO N REPRESENTATIVES, THEREFORE, THESE ARE DECIDED BY TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.3335/AHD/2009 FOR AY 1985-86 :- 2 THIS APPEAL IS AGAINST THE ORDER DATED 29-09-2009 OF THE LEARNED CIT(A) CONFIRMING PENALTY OF RS.75,000/- LE VIED BY THE ASSESSING OFFICER [AO] U/S 271(1)(C) OF THE INCOM E-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] FOR ASSESSME NT YEAR (AY) 1985- 86. 3 BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE I S A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF CHEMICALS AND INTERMEDIATES. FOR THE ASSESSMENT YEAR UNDER APPEAL , IT FILED RETURN OF INCOME SHOWING INCOME OF RS.56,050/-. THE AO FRA MED THE ASSESSMENT U/S 143(3) ON TOTAL INCOME OF RS.4,71,23 0/-. ON APPEAL, THE LEARNED CIT(A) GAVE PARTIAL RELIEF TO THE ASSES SEE ON THE POINT OF 2 ITA NOS.3335 TO 3337/AHD/2009 ADDITION MADE IN RESPECT OF SUPPRESSION OF PRODUCT OF TWO MAJOR PRODUCTS, SPMP AND SPCD. ON FURTHER APPEAL, THE ITA T CONFIRMED THE DECISION OF THE CIT(A) IN RESPECT OF BOTH THE A DDITIONS. HOWEVER, THE TRIBUNAL SET ASIDE THE ORDER ON THE POINTS TO B E DECIDED AFRESH AFTER VERIFICATION, IN RESPECT OF THE FOLLOWING TWO ISSUES:- (I) ADDITION OF RS.27,895/- IN RESPECT OF HOTEL EX PENSES (II) ADDITION U/S 43B OF THE IT ACT. SUBSEQUENTLY, AS PER DIRECTION OF THE TRIBUNAL, THE AO PASSED AN ORDER U/S 143(3) R.W.S. 254 OF THE ACT ON 09-06-200 8 DETERMINING THE TOTAL INCOME AT RS.1,72,250/-, WHEREIN FOLLOWING AD DITIONS WERE MADE:- (I) DISALLOWED IN RESPECT OF SPMP RS.34,695/- (II) DISALLOWED IN RESPECT OF SPMP RS.37,170/- (III) DISALLOWED ENTERTAINMENT EXPENSES RS.13,000/ - (IV) DISALLOWANCE OUT OF CAR EXPENSES RS. 5,000/- (V) DISALLOWANCE U/S 43B OF THE ACT RS.26,338/- --------------- RS.1,72,253/- THEREAFTER, VIDE ORDER DATED 17-09-2008, THE AO LEV IED PENALTY OF RS.75,000/- U/S 271(1)(C) IN RESPECT OF ADDITIONS T O THE EXTENT OF RS.1,62,200/- CONFIRMED TILL ITAT. IN THE PENALTY O RDER, THE AO HAS STATED THAT MAXIMUM PENALTY IMPOSABLE @ 100% OF TAX SOUGHT TO BE EVADED IS RS.73,007/-. AS AGAINST THIS, HE LEVIED P ENALTY OF RS.75,000/- U/S 271(1)(C) OF THE ACT. 4 ON APPEAL, IN THE IMPUGNED ORDER, THE LEARNED CIT (A) HAS CONFIRMED THE PENALTY. AGGRIEVED WITH THE ORDER OF THE LEARNED CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. 5 AT THE TIME OF HEARING BEFORE US, ON BEHALF OF TH E ASSESSEE SHRI SURESH R SHAH APPEARED AND POINTED OUT THAT PE NALTY U/S 271(1)(C) CANNOT BE IMPOSED ON ESTIMATION, ON DEBAT ABLE ISSUES. ON THE OTHER HAND, SHRI SAMIR TEKRIWAL, LEARNED SENIOR DR APPEARED ON 3 ITA NOS.3335 TO 3337/AHD/2009 BEHALF OF THE REVENUE AND VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 6 HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GO NE THROUGH THE ORDER OF THE AUTHORITIES BELOW AS WELL AS THE O RDERS OF THE APPELLATE AUTHORITIES IN THE QUANTUM APPEAL. IT IS PERTINENT TO NOTE THAT THE ADDITIONS / DISALLOWANCES TO THE EXTENT OF RS.1,16,200/- ON WHICH THE AO LEVIED THE PENALTY U/S 271(1)(C) ARE O F ROUTINE / DEBATABLE NATURE. THESE ADDITIONS DO NOT REPRESENT CONCEALED INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF T HE ACT. WE, THEREFORE, CANCEL THE PENALTY OF RS.75,000/- LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. ITA NOS.3336 & 3337/AHD/2009 FOR AYS 1992-93 &1993- 94 :- 7 THESE TWO APPEALS ARE AGAINST A COMMON ORDER DATE D 30-09- 2009 OF THE LEARNED CIT(A) CONFIRMING PENALTY OF RS .12,00,000/- AND RS.8,00,000/- LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. 8 BRIEF FACTS OF THE CASE ARE THAT PENALTY U/S 271( 1)(C) IN RESPECT OF THESE TWO ASSESSMENT YEARS HAS BEEN LEVIED ON TH E BASIS OF ADDITIONS MADE U/S 69C OF THE ACT OF RS.20,72,892/- AND RS.13,70,442/- FOR AYS 1992-93 AND 1993-94 RESPECTI VELY. THESE ADDITIONS HAVE BEEN CONFIRMED BY THE LEARNED CIT(A) . IN RESPONSE TO SHOW CAUSE NOTICE U/S 271(1)(C), THE ASSESSEE CO NTENDED THAT IN AY 1993-94 THERE WERE ALSO CERTAIN DISALLOWANCES OU T OF INTEREST PAYMENT, RENT PAID TO SISTER CONCERN RS.1,56,000/-, OUT OF POWER AND FUEL RS.2,36,063/-, OUT OF COMMISSION RS.1,09,930/- AND RS.72,027/- OUT OF DRUMS & VESSELS PURCHASE. THE A SSESSEE SUBMITTED THAT THE DISALLOWANCE OF GENUINE PURCHASE AS WELL AS THE DISALLOWANCE OF THE BONAFIDE EXPENSES ARE NOT AMOUN TING TO CONCEALMENT OF INCOME, AS THE SAME WERE MADE DUE TO CHANGE OF OPINION IN CONSIDERING AND TREATING GENUINE PURCHAS E AND SUCH CHANGE OF OPINION DID NOT AMOUNT TO CONCEALMENT OF INCOME. 4 ITA NOS.3335 TO 3337/AHD/2009 THEREFORE, THE ASSESSEE CONTENDED THAT THE ASSESSEE HAD NOT CONCEALED THE PARTICULARS OF INCOME AND NO PENALTY SHOULD BE LEVIED. FURTHER, IT WAS SUBMITTED THAT THE A.O. DID NOT MEN TION HIS SATISFACTION WHILE MAKING THE ADDITION U/S. 69 AS W ELL AS DISALLOWANCE OF BONAFIDE EXPENSES AND IN THE ABSENC E OF SUCH SATISFACTION, PENALTY CANNOT BE LEVIED. DURING THE COURSE OF ASST. PROCEEDINGS, IT WAS OBSERVED BY THE A.O. DURING THE VERIFICATION OF AUDIT REPORT AND MONTHLY DETAILS OF PARTY-WISE PURC HASES THAT THE ASSESSEE HAD SHOWN THE PURCHASES OF RAW MATERIAL WO RTH RS.95,36,561/- & RS.1,33,08,789/- OUT OF WHICH RAW MATERIAL OF RS.11,72,892/- AND RS.13,56,378/- PURCHASED FROM RI SHI SALES WAS SHOWN AS SOLD OUT FOR A.YS 1992-93 & 1993-94 RESPEC TIVELY. VERIFICATION OF ORIGINAL BILLS SHOWS OVERWRITING OF THE TYPED BILLS ISSUED BY M/S. RISHI SALES. SOME OF SUCH OVER WRITI NG WAS ILLUSTRATED BY AO IN THE ASSESSMENT ORDER FOR A.Y. 92-93. SIMIL AR DISCREPANCY WAS ALSO FOUND FROM THE PURCHASES MADE FROM ANOTHER PARTY M/S. JINAL CHEM. LTD. THE ASSESSEE WAS, THEREFORE, ASKED BY THE AO TO FURNISH ALL PURCHASE BILLS AS WELL AS EXPLANATION A BOUT WHY ONE BILL WAS TYPE WRITTEN AS ALLIED DYES AND CHEMICAL INDUST RIES AND THE NAME OF SAN CHEM PVT. LTD. WAS REWRITTEN ON THE BIL LS IN RED INK. THE A.O., THEREFORE, OBSERVED THAT THE PURCHASER OF RAW MATERIAL WAS NOT USING RAW MATERIAL ARID NOT ACCOUNTING FOR IN THE BOOKS, BUT AT THE CHOICE OF EITHER OF THE PARTY, THE BILLS WER E ACCOUNTED FOR IRRESPECTIVE OF THE PARTY ACTUALLY USING THE RAW MA TERIAL. AN ENQUIRY U/S. 133(6) OF THE ACT WAS CONDUCTED BY THE A.O. FR OM M/S. RISHI SALES AND M/S. JINAL CHEM PVT. LTD., ASKING THEM TO PRODUCE DETAILS SUCH AS BILL NO., DATE OF BILL, GOODS PURCHASED/SOL D BY THEM, AMOUNT, DATE AND MODE OF PAYMENT. PART DETAILS AND THE EXPL ANATION SUBMITTED BY THESE TWO PARTIES WERE NOT FOUND SATIS FACTORY. THE ISSUE HAS BEEN DISCUSSED IN DETAIL IN THE ASSESSMEN T ORDER AS WELL AS PENALTY ORDER. THE ASSESSEE WAS ASKED BY THE AO TO EXPLAIN AS TO WHY THE BILLS WERE TAMPERED? IN RESPONSE TO WHIC H THE ASSESSEE SUBMITTED THAT IT IS TRUE THAT RECONCILIATION OF CO NTRA A/C. OF M/S. 5 ITA NOS.3335 TO 3337/AHD/2009 RISHI SALES WITH THAT OF APPELLANT'S BOOKS OF ACCOU NT, THERE ARE CERTAIN PURCHASES DEBITED BY ASSESSEE BUT NOT SHOWN BY M/S. RISHI SALES ON ACCOUNT OF THE FACT THAT THE ORIGINAL BILL S WERE ISSUED BY M/S. RISHI SALES IN THE NAME OF ASSESSEE'S SISTER C ONCERN BUT MATERIAL WAS USED BY ASSESSEE, HENCE BILLS WERE COR RECTED BY ASSESSEE ITSELF AND DEBITED IN ITS BOOKS. THE COMPA NY FOLLOWED THE SAME PRACTICE SINCE FINANCIAL YEAR RELEVANT TO A.Y. 1992-93 IN RESPECT OF REWRITING THE NAME OF THE ASSESSEE ON TH E BILLS ISSUED IN THE NAME OF ALLIED DYES AND CHEMICAL INDUSTRIES. TH E A.O. HOWEVER, OBSERVED THAT THE ASSESSEE DID NOT PROVE THE GENUIN ENESS OF THE PURCHASES BY PRODUCING PRIMARY RECORD SUCH AS PRODU CTION REGISTER, EXCISE RECORD I.E. RG-1, GATE PASSES ETC., EVEN THO UGH IT WAS COVERED UNDER EXCISE LAWS AND RULES AND WAS SPECIFI CALLY ASKED TO PRODUCE. THE ASSESSEE ALSO DID NOT SUPPORT WITH EVI DENCES IN THE REPLY AS TO HOW THE FACTS OBSERVED WERE NOT ATTRACT ED TO PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. THEREFORE, T HE AO HELD THAT IT WAS CRYSTAL CLEAR THAT THE ASSESSEE HAD ADOPTED THE MODUS-OPERANDI OF DEBITING THE PURCHASES MADE BY THE SISTER CONCER N IN ITS BOOKS OF ACCOUNT AND THEREBY REDUCING THE PROFIT SO AS TO SU IT THE DESIRED RESULT AND EVADED THE TAX TO THAT EXTENT. ACCORDING LY, PENALTY OF RS.12,00,000/- AS WELL AS RS.8,00,000/- WAS LEVIED U/S. 271(1)(C) OF THE ACT FOR A.Y. 92-93 AND A.Y. 93-94 RESPECTIVELY. . 9 ON APPEAL, IN THE IMPUGNED ORDER, THE LEARNED CIT (A) CONFIRMED THE PENALTY LEVIED BY AO U/S 271(1)(C) FO R BOTH THE ASSESSMENT YEARS FOR DETAILED REASONS CONTAINED IN PARAS 2.2 TO 2.5.9 WHICH READ AS UNDER:- 2.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E A.R. OF THE APPELLANT SUBMITTED THAT (A) THE A.O. INITIATED THE PENALTY PROCEEDINGS IN ASST. ORDER AFTER SATISFYING ABOUT FURNISHING THE I NACCURATE PARTICULARS OF INCOME, HOWEVER, THE A.O. LEVIED THE PENALTY FOR CO NCEALMENT OF INCOME, (B) THE ADDITION MADE U/S. 69C WAS DEDUCTIBLE U/S. 37 OF THE I.T. ACT AND IF THE SAID DEDUCTION U/S. 37 TO BE CONSIDERED, THEN T HERE WAS NO CHANGE IN INCOME/LOSS FINALLY ASSESSED BY THE A.O. (C) THERE WAS AN ACCOUNTING MISTAKE BY THE ACCOUNTANT THAT THE PURCHASE BILL WA S DIRECTLY TAKEN IN ITS 6 ITA NOS.3335 TO 3337/AHD/2009 BOOKS OF ACCOUNT BY ERASING THE NAME OF SISTER CONC ERN AND REWRITING THE NAME OF THE APPELLANT COMPANY AND THIS WAS PURELY A MISTAKE OF ACCOUNTANT AND NOT AMOUNTING TO CONCEALMENT OF INCO ME, (D) THE A.O MENTIONED IN THE ASST. ORDER THAT THERE WERE DEFECT S OR DEFICIENCY IN ACCOUNTS, WHICH WERE NOT AMOUNTING TO CONCEALMENT. THE PURCHASES DEBITED AND RECORDED ONLY IN THE BOOKS OF ACCOUNT O F THE APPELLANT AND NO SUCH PURCHASE BILL DEBITED OR RECORDED IN THE BOOKS OF ACCOUNT OF SUCH SISTER CONCERN AND IF SUCH PURCHASES WOULD HAVE BEE N DEBITED IN THE BOOKS OF BOTH THE CONCERN, THEN ONLY IT WOULD HAVE BEEN AMOUNTING TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, (E) THE A.R. OF THE APPELLANT FURTHER SUBMITTED THAT WHEN THE A. O. HIMSELF WAS NOT SATISFIED SINCE IN PENALTY ORDER, HE USED 'IT CAN B E SAID', HE WAS NOT JUSTIFIED IN LEVYING THE PENALTY AND IN SUPPORT OF HIS CONTENTION, THE A.R. RELIED UPON THE DECISION IN THE CASE OF NEW SORATHI A ENGINEERING CO. VS. CIT (2006) 202 CTR (GUJ) 188, WHEREIN IT WAS HELD T HAT IN ABSENCE OF SPECIFIC FINDING OR CLEAR CUT FINDING, THE PENALT Y LEVIED IS NOT SUSTAINABLE. IN RESPECT OF PENALTY FOR A.Y. 1993-94, THE A.R PLA CED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PR ITHIPAL SINGH, REPORTED IN 245 ITR 670, WHEREIN IT WAS HELD THAT TAX SOUGHT TO BE EVADED MEANS THERE SHOULD BE SOME POSITIVE INCOME AND THE CIT (A ) IN APPELLANT'S CASE FOR A.Y. 1996-97 DELETED THE PENALTY BY FOLLOWING THE ABOVE DECISION OF THE SUPREME COURT. FURTHER, THE APPELLANT CONTENDED THAT IN THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CJT VS. RAM ANLAL C. HATHI (2008) 217 CTR (SC) 105, IT WAS HELD THAT THE DECIS ION IN VIRTUAL SYSTEMS LTD., VS. CIT (2007) 207 CTR (SC) 733 THAT THE AMEN DMENT MADE BY FINANCE ACT, 2002 IN EXPLN. 4 TO 271(L)(C) WAS NOT RETROSPECTIVE AND WAS EFFECTIVE FROM 1ST APRIL, 2003 AND COULD NOT HE APP LIED IN RESPECT OF ANY PERIOD PRIOR TO THE SAID DATE. AS FAR AS THE DEFEC TS OR MISTAKE IN ACCOUNTING, IT WAS SUBMITTED THAT THERE WAS A DEFEC T IN ACCOUNTING, WHICH WAS DUE TO THE FACT THAT THE ACCOUNTANT ADOPTED A S HORT CUT BY ERASING THE NAME OF SISTER CONCERN AND REWRITTEN THE NAME OF TH E APPELLANT ON THE SAID BILL AND THIS WAS NOT THE CASE THAT THE BILLS OF PU RCHASES DEBITED BY SISTER CONCERN IN ITS BOOKS OF ACCOUNT AND APPELLANT HAD A LSO DEBITED IN HIS BOOKS OF ACCOUNTS AND IT WAS RECORDED ONLY IN THE B OOKS OF THE APPELLANT. FURTHER, THERE WAS NO MALAFIDE INTENTION IN CHANGIN G THE NAME AND WHILE AUDITING THE AUDITOR HAD ALSO NOT BROUGHT THIS FACT TO THE NOTICE OF THE APPELLANT AND FOR SUCH AN ACCOUNTING MISTAKE, PENAL TY CANNOT BE LEVIED. IN SUPPORT OF ITS CONTENTION, THE APPELLANT PLACED REL IANCE ON THE DECISION IN THE CASE OF ACIT VS. GURU RAMDAS FRUIT & VEGETABLE AGENCY (1998) 62 TTJ (CHD.)(TM) 203, WHEREIN IT WAS HELD THAT IT WAS ENOUGH FOR THE APPELLANT TO SUFFER TAXATION ON THE IMPUGNED AMOUNT ON ACCOUNT OF THE NEGLIGENCE OF ITS ACCOUNTANT. FOR A.Y. 1993-94, T HE APPELLANT FURTHER SUBMITTED THAT THE FINANCIAL POSITION OF APPELLANT WAS SO BAD THAT HE WAS NOT IN A POSITION TO PAY THE APPEAL FEE OF RS.10,00 0/- IN TRIBUNAL AND IT WAS UNDER THE BONAFIDE BELIEF THAT IN VIEW OF JUDGMENT OF PRITHIPAL SINGH, NO PENALTY U/S. 271(1)(C) SHOULD BE SUSTAINABLE. FURTH ER, AS THERE WAS NO TAX PAYABLE IN THE YEAR UNDER CONSIDERATION, THE APPELL ANT DID NOT PRESS THE QUANTUM APPEAL. ON MERITS OF THE ADDITION, THE APPE LLANT SUBMITTED THAT THE A.O. INVOKED THE PROVISION U/S. 69C OF THE ACT, AS HE HAS FOUND CERTAIN 7 ITA NOS.3335 TO 3337/AHD/2009 BILLS OF PURCHASES WERE NOT IN ITS NAME BUT WERE IN THE NAME OF OUR SISTER CONCERN, BUT SINCE THE APPELLANT WAS FACING ACUTE F INANCIAL CRISIS AND PASSING FROM VERY BAD TIME SINCE THE LAST 5-6 YEARS , THE SUPPLIERS REFUSED TO SEND THE RAW MATERIALS ON CREDIT AND WERE INSIST ING FOR PAYMENT EITHER BY BANK DRAFT OR CASH PAYMENTS; HIGHLY INDEBTED TO BANK AS WELL AS CREDITORS OF THE COMPANY OUR BANK ACCOUNT WAS DECLA RED BY BANK AS NON OPERATIVE AND THERE WERE NO HOPES FOR FINANCE AND I N SUCH CIRCUMSTANCES, APPELLANT MADE ARRANGEMENTS WITH THE SAID TWO SISTE R CONCERNS, I.E. M/S. RISHI SALES AND M/S. JINAL CHEM THAT THEY SUPPLY TH E APPELLANT AS WELL AS TO OUR TWO SUPPLIERS, RAW MATERIALS AND IN TURN THE APPELLANT SUPPLY THEM FINISHED GOODS, I.E. IN SHORT A BARTER SYSTEM WAS I NTRODUCED WITH SUPPLIERS. DURING THE YEAR UNDER CONSIDERATION, WE WERE IN NEE D OF CERTAIN RAW MATERIALS, FOR WHICH ORDER HAS BEEN PLACED WITH THE ABOVE PARTIES, THEY SEND THE GOODS TO THE APPELLANT, BUT IN THEIR SALES BILLS THEY MENTIONED THE NAME OF OUR SISTER CONCERN, ALLIED DYES AND CHEMICA LS AND AS THE ORDERS WERE PLACED BY THE ACCOUNTANT, HE ERASED THE NAME O F SISTER CONCERN FROM BILL ISSUED AND WRITTEN THE NAME OF THE APPELLANT C OMPANY AND THEREAFTER HE PASSED THE ENTRIES DEBITING THE PURCHASE ACCOUNT AND CREDITING THE PARTIES ACCOUNT. IN FACT THE ACCOUNTANT SHOULD HAVE RETURNED THE BILLS TO SUPPLIERS AND ASKED THEM TO RAISE THE BILLS IN THE NAME OF THE APPELLANT OR TO MAKE THE ENTRIES OF PURCHASES IN THE BOOKS OF SI STER CONCERN AND THEREAFTER TO RAISE THE DEBIT NOTE IN THE NAME OF T HE APPELLANT, BUT HE ADOPTED A SHORT CUT, AS NARRATED ABOVE. SINCE THE S AME WAS A BONAFIDE MISTAKE COMMITTED BY THE ACCOUNTANT, THERE SHOULD N OT BE AN ATTEMPT OF WILLFUL ATTEMPT TO DECEIVE OR TO CONCEAL THE INCOME . DURING THE COURSE OF ASST. PROCEEDINGS, IT WAS SUBMITTED THAT THE APPELL ANT PRODUCED THE BOOKS OF ACCOUNT OF ITS SISTER CONCERN AND SHOWN THE A.O. THAT SUCH PURCHASES HAD NOT BEEN RECORDED IN THE BOOKS OF OUR SISTER CO NCERN, BUT ONLY RECORDED IN THE BOOKS OF ACCOUNT OF THE APPELLANT A ND HENCE THIS WAS NOT A CASE OF PURCHASE RECORDED AT TWO PLACES AND THERE W AS NO BOGUS PURCHASE BUT BONAFIDE MISTAKE IN ACCOUNTING THE SAM E. THE APPELLANT PLACING RELIANCE ON CIT VS. CHOLA MANDALAM SECURITI ES LTD. (2008) 215 CTR (MADRAS), FURTHER SUBMITTED THAT IF THE ADDITIO N U/S. 69C WAS MADE FOR UNEXPLAINED EXPENSES, THEN THE APPELLANT WAS ENTITL ED TO DEDUCTION U/S. 37 OF THE SAME AMOUNT OF ADDITION AND THEREFORE, THERE WOULD HAVE BEEN NO CHANGE IN INCOME ASSESSED AND THUS NO PENALTY WOULD HAVE BEEN LEVIED. 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS AS ADVANCED BY THE A.R. OF THE APPELLANT. I AM NOT INC LINED TO ACCEPT ANY OF THE CONTENTION RAISED BY THE APPELLANT WITHOUT ADDU CING PROPER EVIDENCES AND WITHOUT APPRECIATING PROPER LEGAL POSITION EXIS TING IN RESPECT OF DISCHARGE OF ONUS AS WELL AS PENALTY PROVISIONS. TH E ASSESSMENT ORDER PASSED BY A.O. IN RESPECT OF ADDITIONS MADE U/S. 69 C OF THE ACT IS VERY LUCID AND REFLECTING THAT APPELLANT WAS GIVEN ENOUG H OPPORTUNITY TO ADDUCE EVIDENCES TO SUPPORT ITS CONTENTION THAT TAMPERING OF BILLS OF PURCHASES AMOUNTING TO CLAIM OF EXPENDITURE ARE SUPPORTED BY PRIMARY RECORDS OF PRODUCTION, CONSUMPTION AND MOVEMENT OF SUCH STOCK EVIDENCED BY PROPER EXCISE RECORD AND GATE PASSES. NO EVIDENCE FROM THE ACCOUNTANT FOR HIS BONAFIDE MISTAKE WAS SUBMITTED BY APPELLANT BY PRODUCING HIM OR 8 ITA NOS.3335 TO 3337/AHD/2009 FILING HIS AFFIDAVIT. EVEN THE TAX AUDITOR'S REPORT WAS NOT PROPERLY SUPPORTED BY ANNEXURES AS MENTIONED BY THE A.O. IN ASST. ORDE R. THE A.O. ON THE OTHER HAND, MADE INQUIRIES FROM THE SUPPLIER AND BR OUGHT OUT THE DISCREPANCIES TO THE APPELLANT AFTER RECONCILIATION OF CONTRA ACCOUNTS. IT IS AFTER THIS EXERCISE THE APPELLANT CAME WITH THE STO RY OF BONAFIDE MISTAKE BY ACCOUNTANT. THE A.O. IN THE ASST. ORDER VERY APTLY TREATED THE AUDIT REPORT U/S. 44AB AS INADEQUATE AND ALSO APPLIED THE PROVIS IONS OF SECTION 145(2) OF THE ACT. THE APPELLANT ADMITTED THAT SUCH PRACTI CE OF TAMPERING THE BILLS OF PURCHASES FROM TWO PARTIES, I.E. M/S. RISHI SALE S AND M/S. JINAL CHEM PVT. LTD. WAS PREVALENT FOR A LONG PERIOD, I.E. FOR ABOUT TWO YEARS WITHOUT THE KNOWLEDGE OF SUPPLIER PARTIES AS WELL AS WITHOU T HAVING ENOUGH EVIDENCES ABOUT CONSUMPTION OF THE MATERIAL MENTION ED IN THE BILLS. IT IS, THEREFORE, THE A.O. JUSTIFIABLY TREATED THE EXPENDI TURE OF SUCH PURCHASES AS UNEXPLAINED AND MADE ADDITION U/S. 69C OF THE I.T. ACT. EVEN DURING THE PENALTY PROCEEDINGS AND APPELLATE PROCEEDINGS, APPE LLANT FAILED TO SUBMIT ANY EVIDENCE TO SUPPORT ITS CONTENTION EXCEPT REITE RATING THE SUBMISSION MADE BEFORE THE A.O. DURING THE ASSESSMENT PROCEEDI NGS OR MAKING VARIOUS LEGAL CONTENTION. THE LD. CIT (A) AS WELL A S HON'BLE ITAT THEREFORE CONFIRMED SUCH ADDITIONS. THE APPELLANT'S REASON TH AT ON ACCOUNT OF FINANCIAL PROBLEM, APPEAL MADE TO ITAT FOR A.Y. 93- 94 WAS WITHDRAWN WAS NOT SUPPORTED BY EVIDENCES. 2.4 NOW COMING TO VARIOUS LEGAL SUBMISSIONS MADE BY THE APPELLANT ON THE FOLLOWING ISSUES: A) PENALTY PROCEEDINGS INITIATED FOR FURNISHING INA CCURATE PARTICULARS IN ASSESSMENT ORDER BUT IMPOSED FOR CONCEALMENT OF INC OME HENCE THE A.O. IS NOT HAVING PROPER SATISFACTION. B) ADDITIONS MADE U/S. 69C OF THE ACT ARE DEDUCTIBL E U/S. 37 OF THE I.T. ACT AND THIS WILL RESULT INTO NO CHANGE IN ASSESSED INCOME/LOSS. C) BONAFIDE MISTAKE OF ACCOANTANT CANNOT ATTRACT PE NALTY. D) ASSESSED INCOME IS NIL AND, THEREFORE, FOLLOWING THE PRITHIPAL SINGH'S CASE, PENALTY CANNOT BE IMPOSED. 2.5.1 THE DISTINCTION LINE BETWEEN CONCEALING THE INCOME AND FURNISHING INACCURATE PARTICULARS IS VERY THIN. IN THE ABSENCE OF ANY DEFINITION PROVIDED IN THE ACT, ONE HAS TO GO BY TH E INTERPRETATION OF THE LANGUAGE TO HAVE BOTH THESE PHRASES USED IN THIS SE CTION. THIS IS ELABORATED BY THE HON'BLE ORISSA HIGH COURT IN THE CASE OF CIT V. INDIAN METALS & FERRO ALLOYS LTD. (1994) 117 CTR (ORI.) 37 8. IT WAS HELD THAT 'THE EXPRESSIONS HAS CONCEALED THE PARTICULARS OF I NCOME' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NO T BEEN DEFINED EITHER IN SECTION 271(1)(C) OR ELSEWHERE IN THE ACT . ONE THING IS CERTAIN THAT THESE TWO CIRCUMSTANCES ARE NOT IDENTI CAL IN DETAILS 9 ITA NOS.3335 TO 3337/AHD/2009 ALTHOUGH THEY MAY LEAD TO THE SAME EFFECT, NAMELY, KEEPING OFF A CERTAIN PORTION OF INCOME. THE FORMER IS DIRECT AND THE LATTER MAY BE INDIRECT IN ITS EXECUTION. THE WORD 'CONCEAL' IS DE RIVED FROM THE LATIN WORD 'CONCOLARE' WHICH IMPLIES 'TO HIDE'. WEBSTER'S NEW INTERNATIONAL DICTIONARY EQUATES ITS MEANING TO 'HIDE'' OR WITHDR AW FROM OBSERVATION; TO COVER OR KEEP FROM SIGHT; TO PREVEN T THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OF. THE OFFENCE OF CONCEA LMENT IS THUS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTI ON THEREOF FROM THE KNOWLEDGE OF THE INCOME TAX AUTHORITIES. IN FUR NISHING ITS INRETURN OF INCOME, AS ASSESSEE IS REQUIRED TO FURN ISH PARTICULARS AND ACCOUNTANT ON WHICH SUCH RETURNED INCOME HAS BE EN ARRIVED AT. THESE MAY BE PARTICULARS AS PER ITS BOOKS OF ACCOUN T IF IT HAS MAINTAINED THEM, OR ANY OTHER BASIS UPON WHICH IT H AS ARRIVED AT THE RETURNED FIGURE OF INCOME. ANY INACCURACY MADE IN S UCH BOOKS OF ACCOUNT OR OTHERWISE WHICH RESULTS IN KEEPING OFF O R HIDING A PORTION OF ITS INCOME IS PUNISHABLE AS FURNISHING INACCURAT E PARTICULARS OF ITS INCOME.' 2.5.2 IN ANY CASE, THERE ARE VARIOUS JUDGEMENTS WH ICH STRESS THAT PENALTY PROCEEDINGS CAN BE INITIATED BY SIMPLY MENT IONING THE INITIATION AT ASSESSMENT STAGE AND THEREAFTER WHEN THE APPELLANT IS GIVEN NOTICE, IT IS INCUMBENT TO APPELLANT TO EITHER GIVE SATISFACTORY EXPLANATION OR TO SUBSTANTIATE THE CONTENTION IN PENALTY PROVISIONS. IN EITHER OF THE CASE, I.E. FURNISHING INACCURATE PARTICULARS OR CONCEALMENT, T HE PENALTY PROVISIONS ARE SAME AND, THEREFORE, IT WON'T DIFFERENTIATE AS FAR AS LEGISLATURE INTENTION IS CONCERNED FOR IMPOSITION OF PENALTY. THE INITIAT ION IS REQUIRED TO BE DISCERNABLE FROM ASSESSMENT ORDER. . IN ALL THE CAS ES WHERE THERE IS FURNISHING OF INACCURATE PARTICULARS, THERE IS CONC EALMENT OF INCOME, HOWEVER THE CONVERSE IS NOT TRUE. IT IS, THEREFORE, THE LEGISLATURE HAS USED ITS PRUDENCE TO EXPAND THE SCOPE OF PENAL PROVISION S NOT ONLY TO CONCEALMENT BUT ALSO TO FURNISHING IN ACCURATE PART ICULARS AS IT TANTAMOUNTS TO CONCEALMENT OF INCOME. 2.5.3 THE AMENDMENT MADE IN SECTION 271(1)(C) BY T AXATION LAW (AMENDMENT) ACT, 1975 INCORPORATING THE VARIOUS REC OMMENDATION OF THE WANCHOO COMMITTEE CLEARLY INDICATE THE INTENTION OF THE LEGISLATURE ABOUT THE RESPONSIBILITY CAST ON THE ASSESSEE SHOWING TRU E AND FULL DISCLOSURE OF INCOME IN THE FOLLOWING WORDS: 'AS THE NO. OF TAX PAYERS INCREASES, THE TAX ADMINI STRATION HAS OF NECESSITY TO RELY MORE AND MORE ON VOLUNTARY COMPLI ANCE OF TAX LAWS BY THE ASSESSEE. APPROPRIATE PENAL PROVISIONS FORM A NECESSARY COMPLIMENT TO THIS APPROACH AS THEY IMPEL COMPLIANCE WITH THE TAX LAWS BY IMPOSING ADDITIONAL MONETARY B URDEN ON THOSE WHO HAPPEN TO GO ASTRAY EITHER INADVERTENTLY OR BY DESIGN.' 2.5.4 AS FAR AS SATISFACTION OF A.O. IS CONCERNED, THE INTRODUCTION OF SECTION OF SEC. 271 (IB) OF THE ACT APTLY CLARIFY T HE POSITION. THIS IS WELL CONSIDERED AND ELABORATED BY THE DELHI COURT IN A R ECENT JUDGMENT OF A 10 ITA NOS.3335 TO 3337/AHD/2009 UNIT POSITION. HON'BLE DELHI HIGH COURT IN DISPOSIN G A WRIT PETITION IN THE CASE OF M/S. MADHUSHREE GUPTA, BRITISH AIRWAYS PLC VS. UNION OF INDIA AND ANOTHERS (2009)O 317 ITR 107 (DELHI) HELD THAT - A) INTRODUCTION OF SECTION 271 (IB) BY THE FINANCE ACT 2008 WITH RETROSPECTIVE EFFECT FROM 1/4/89 IS NOT VIOLATIVE O F ARTICLE 14 OF THE CONSTITUTION. B) SECTION 271(1)(C) HAS TO BE IN CONSONANCE WITH S ECTION 271 (IB). C) 'PRIMA FACIE' SATISFACTION OF THE A.O. THAT THE CASE MAY DESERVE THE IMPOSITION OF PENALTY SHOULD BE DISCERNABLE FROM TH E ORDER PASSED DURING THE COURSE OF PROCEEDINGS. BUT THE DESCERNABLE FROM THE ORDER ASS ED DURING THE COURSE OF PROCEEDINGS. BUT THE DECISION I.E. FINAL CONCLUSION WILL BE ONLY AFTER HEARING A ASSESSEE. D) AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS , THE ORDER PASSED BY THE A.O., NEED NOT REFLECT SATISFACTION VIS-A-VIS E ACH AND EVERY ITEM OF ADDITION OR DISALLOWANCE IF THE OVERALL SENSE GA THERED FROM THE ORDER IS THAT A FURTHER PROGNOSIS IS CALLED FOR. TH E INTER-RELATION OF ADDITIONS OR DISALLOWANCES, IF ANY, MAY BE UNRAVELL ED ONLY AT THE CONCLUSION OF PENALTY PROCEEDINGS. E) UNDER SECTION 271(1)(C) TO INITIATE PENALTY PROC EEDINGS THE FOLLOWING PRE-REQUISITES SHOULD OBTAIN: (I) THE ASSESSING OFFICER SHOULD BE ''SATISFIED' TH AT: (A) THE ASSESSEE HAS EITHER CONCEALED PARTICULARS O F HIS INCOME; OR (B) FURNISHED INACCURATE PARTICULARS OF HIS INCO ME; OR (C) INFRACTED BOTH (A) AND (B). (II) THIS 'SATISFACTION ' SHOULD BE ARRIVED AT DURING THE COURSE OF 'ANY' PROCEEDINGS. THESE COULD BE ASSESSMENT / REASSESSMENT OR RECTIFICATION PROCEEDINGS, BUT NOT PENALTY PROCEEDINGS, (III) ING REDIENTS CONTAINED IN (I) AND (II) ARE PRESENT A NOTICE TO S HOW CAUSE UNDER SECTION 274 OF THE ACT SHALL ISSUE SETTING OU T THEREIN THE INFRACTION THE ASSESSEE IS SAID TO HAVE COMMITT ED. THE NOTICE UNDER SECTION 274 OF THE ACT CAN BE ISSUED B OTH DURING OR AFTER THE COMPLETION OF ASSESSMENT PROCEE DINGS, BUT THE SATISFACTION OF THE ASSESSING OFFICER THAT THERE HAS BEEN AN INFRACTION OF CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 SHOULD PRECEDE CONCLUSION OF THE PROCEEDINGS PE NDING BEFORE THE ASSESSING OFFICER, (IV) THE ORDER IMPOSI NG PENALTY CAN BE PASSED ONLY AFTER ASSESSMENT PROCEEDINGS ARE COMPLETED. THE TIME FRAME FOR PASSING THE ORDER IS CONTAINED IN SECTION 274 OF THE ACT. DUE COMPLIANCE WOULD BE REQUIRED 11 ITA NOS.3335 TO 3337/AHD/2009 TO BE MADE IN RESPECT OF THE PROVISIONS OF SECTIONS 274 AND 275 OF THE ACT. 2.5.5 THE HON'BLE SUPREME COURT IN THE CASE OF K.P . MADHUSUDHANAN V. CIT (2001) 251 ITR 99 CATEGORICALL Y HELD THAT THE EXPLANATION TO SECTION 271(1)(C) IS A PART OF SECTI ON 271. WHEN THE ITO OR THE AAC ISSUES TO AN ASSESSEE A NOTICE UNDER SECTIO N 271, HE MAKES THE ASSESSEE AWARE THAT THE PROVISIONS THEREOF ARE TO B E USED AGAINST HIM. THESE PROVISIONS INCLUDE THE EXPLANATION. BY REASON OF THE EXPLANATION, WHERE THE TOTAL INCOME RETURNED BY THE ASSESSEE IS LESS THAN 80% OF THE TOTAL INCOME ASSESSED UNDER SECTION 143, 144 OR 147 , REDUCED TO THE EXTENT THEREIN PROVIDED, THE ASSESSEE IS DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS THEREOF, UNLESS HE PROVES THAT THE FAILURE TO RETURN THE CORRECT IN COME DID NOT ARISE FROM ANY FRAUD OR NEGLECT ON HIS PART. THE ASSESSEE IS, THEREFORE, BY VIRTUE OF THE NOTICE UNDER SECTION 271 PUT TO NOTICE THAT IF HE DOES NOT PROVE, IN THE CIRCUMSTANCES STATED IN THE EXPLANATION, THAT HIS F AILURE TO RETURN HIS CORRECT INCOME WAS NOT DUE TO FRAUD OR NEGLECT, HE SHALL BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FUR NISHED INACCURATE PARTICULARS THEREOF, AND, CONSEQUENTLY BE LIABLE TO THE PENALTY PROVIDED BY THAT SECTION. NO EXPRESS INVOCATION OF THE EXPLANAT ION TO SECTION 271 IN THE NOTICE UNDER SECTION 271 IS NECESSARY BEFORE THE PR OVISIONS OF THE EXPLANATION THEREIN ARE APPLIED. 2.5.6 THE APPELLANT'S CONTENTION THAT EXPENDITURE DISALLOWED AND TREATED AS INCOME U/S. 69C OF THE I.T. ACT ARE ALLO WABLE EXPENDITURE U/S. 37 OF THE ACT IS NOT CORRECT FACTUALLY AS WELL AS L EGALLY. SECTION 69C OF THE ACT IS A DEEMING SECTION OVERRULING THE REGULAR SEC TION AND IF CERTAIN CIRCUMSTANCES EXIST, THEN THE ADDITIONS ARE MADE. I F SUCH DISALLOWANCES AND ADDITIONS ARE TO BE ALLOWED U/S. 37 OF THE ACT, IT WILL MAKE SECTION 69C OF THE ACT REDUNDANT WHICH IS NOT THE INTENTION OF THE LEGISLATURE AND NOT THE CORRECT LAW. 2.5.7 THE THEORY OF BONAFIDE MISTAKE OF THE ACCOUN TANT AS CONTENDED BY APPELLANT IS NOT SUPPORTED BY ANY EVID ENCES. FURTHER, CONSIDERING THE FACT THAT FOR A PERIOD OF MORE THA N 2 YEARS, SUCH PRACTICE REMAINED CONTINUED WITHOUT THE KNOWLEDGE OF DIRECTO RS, AUDITORS OF THE APPELLANT AS WELL AS THE SUPPLIER PARTIES, IT CANNO T BE TREATED AS BONAFIDE. THE APPELLANT FAILS TO ADDUCE CREDIBLE EVIDENCES IN THE FORM OF PRIMARY RECORD LIKE PRODUCTION/MOVEMENT REGISTER SO AS TO E MPHASIZE THAT SUCH MATERIAL IN FACT WAS PURCHASED AND UTILIZED. IT IS IN THE ABSENCE OF SUCH EVIDENCES, WHETHER THE SAME IS NOT RECORDED IN APPE LLANT'S SISTER CONCERN'S BOOK OR NOT BECAME IRRELEVANT SINCE THE B ASIC FACT ABOUT ITS UTILIZATION IS ITSELF IN DOUBT. 2.5.8 THE HON'BLE KERALA HIGH COURT IN THE CASE O F CIT VS. GATES FOAM & RUBBER CO., 91 ITR 467 HELD THAT A FALSE INF LATION OF EXPENDITURE OR ANY ITEM DEDUCTIBLE UNDER THE ACT FOR COMPUTING THE INCOME WILL UNDOUBTEDLY AFFECT THE TAXABLE INCOME TO THE DETRIM ENT OF THE REVENUE AND 12 ITA NOS.3335 TO 3337/AHD/2009 TO THE MANIFEST ADVANTAGE OF THE ASSESSEE. THE ITO CANNOT START ON THE PRESUMPTION THAT EVERY ENTRY IN THE ASSESSEE'S ACCO UNTS IS FALSE AND PURSUE ALL POSSIBLE AVENUES FOR ASCERTAINING WHETHE R THE ENTRY IS TRUE. IN THE PRESENT CASE, THE ITO HAD NO REASON TO BELIEVE THAT THE ENTRY IN THE ASSESSEE'S ACCOUNTS RELATING TO THE PAYMENT OF THE COMMISSION TO THE AGENT FIRM WAS SPURIOUS. THE FALSITY OF THE ENTRY W AS UNDOUBTEDLY A MATTER KEPT BACK FROM THE ITO; AND THE REASONING OF THE TR IBUNAL IN THIS RESPECT IS NOT CONVINCING. EVEN ASSUMING THAT THERE WAS NO CON CEALMENT AS SUCH, THERE CAN BE LITTLE DOUBT THAT THE CONDUCT OF THE A SSESSEE, NAMELY, PLACING FOR THE ACCEPTANCE OF THE ITO A BOGUS DEBIT AS GENU INE, WILL CONSTITUTE THE FURNISHING OF INACCURATE PARTICULARS OF THE ASSESSE E'S INCOME SO AS TO ATTRACT S. 271(1)(C). 2.5.9 AS FAR AS APPELLANT'S CONTENTION THAT FOLLO WING THE SUPREME COURT'S JUDGEMENT IN THE CASE OF PRITHIPAL SINGH, T HE PENALTY IS NOT ATTRACTED IS ALSO NOT FOUNDED ON PROPER INTERPRETAT ION AS WELL AS THE LATEST SETTLED JUDICIAL POSITION. THE DECISION BY THE DIVISION BENCH OF HON'BLE SUPRE ME COURT IN THE CASE OF VIRTUAL SOFT SYSTEMS LTD. VS. CIT (007) 159 TAXM AN 155 WAS REFERRED TO THREE JUDGES BENCH OF HON'BLE SUPREME COURT WHERE B OTH THE CASES I.E. VIRTUAL SOFT SYSTEMS LTD. V. CIT (SUPRA) GOLD COIN HEALTH FOOD (P) LTD. (2008) 172 TAXMAN 386(SC) WERE REVIEWED AND IT HAS HELD THAT THE AMENDMENT IN CLAUSE (A) OF EXPLANATION 4 WAS OF CLA RIFICATORY NATURE AND, APPLIES RETROSPECTIVELY. (VIRTUAL SOFT SYSTEM LTD. V. CIT, 289 ITR 83(SC). A COMBINED READING OF THE WANCHOO COMMITTEE'S RECOM MENDATIONS AND THE CIRCULAR NO. 204 DT: JULY 24, 1976 MAKES THE PO SITION CLEAR THAT EXPLANATION 4(9) TO SECTION 271(1)(C) INTENDS TO LE VY THE PENALTY NOT ONLY IN A CASE WHERE AFTER ADDITION OF CONCEALED INCOME, A LOSS IS RETURNED, AFTER ASSESSMENT BECOMES POSITIVE INCOME BUT ALSO IN A CA SE WHERE ADDITION OF CONCEALED INCOME REDUCES THE RETURNED LOSS AND FINA LLY THE ASSESSED INCOME IS ALSO A LOSS OR A MINUS FIGURE. THEREFORE, DURING THE PERIOD BETWEEN 1-4-76 TO 1-4-2003, THE PENALTY WAS LEVIABL E EVEN IN A CASE WHERE ADDITION OF CONCEALED INCOME REDUCES THE RETU RNED LOSS. WHEN THE WORD 'INCOME' IS READY TO INCLUDE LOSSES AS HELD IN CIT VS. HARIPRASAD & CO. (P) LTD., (1975) 99 ITR 118 (SC), IT BECOMES CR YSTAL CLEAR THAT EVEN IN A CASE WHERE ON ACCOUNT OF ADDITION OF CONCEALED IN COME THE RETURNED LOSS STANDS REDUCED AND EVEN IF THE FINAL ASSESSED INCOME IS A LOSS, STILL PENALTY WAS LEVIABLE. CONSIDERING THE FACTUAL AS WELL AS LEGAL POSITION A S DISCUSSED ABOVE, THE IMPOSITION OF PENALTIES BY THE AO ARE FULLY JUSTIFI ED AND THEREFORE, THE SAME ARE CONFIRMED. 13 ITA NOS.3335 TO 3337/AHD/2009 10 AGGRIEVED WITH THE ORDERS OF THE LEARNED CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 11 AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE ASSESSEE, SHRI SURESH R SHAH APPEARED AND REITERATED THE SUBM ISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE POINTED OUT THAT I T WAS BONA FIDE MISTAKE ON THE PART OF THE ACCOUNTANT. BOTH THE DEP ARTMENTAL AUTHORITIES BELOW REJECTED THIS EXPLANATION OF THE ASSESSEE ON DOUBTS AND SUSPICION. HE ACCORDINGLY CONTENDED THAT THE PENALTY LEVIED BY THE AO FOR BOTH THE ASSESSMENT YEARS U/S 271(1)(C) BE CANCELLED. 12 ON THE OTHER HAND, SHRI SAMIR TEKRIWAL, LEARNED SENIOR DR APPEARED ON BEHALF OF THE REVENUE AND POINTED OUT T HAT NO EVIDENCE WHATSOEVER IN SUPPORT OF BONA FIDE MISTAKE ON THE P ART OF THE ACCOUNTANT WERE FURNISHED EITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR IN THE QUANTUM APPEALS. EVEN IN PENA LTY PROCEEDINGS ALSO NO SUCH EVIDENCE WAS FURNISHED BEFORE THE DEPA RTMENTAL AUTHORITIES BELOW. EVEN THE TAX AUDIT REPORT WAS NO T SUPPORTED BY ANY ANNEXURE AS CLEARLY MENTIONED BY THE AO IN THE ASSESSMENT ORDERS. THE LEARNED DR POINTED OUT THAT THE AO MADE INDEPENDENT INQUIRIES FROM THE SUPPLIERS AND BROUGHT OUT THE DI SCREPANCIES AFTER RECONCILIATION OF CONTRA ACCOUNTS. IT IS ONLY AFTER THIS EXERCISE THE ASSESSEE HAD CAME WITH THE STORY OF BONA FIDE MISTA KE BY THE ACCOUNTANT. THE LEARNED DR ALSO RELIED ON THE FINDI NG OF FACT RECORDED BY THE TRIBUNAL IN ITS ORDER DATED 07-06-2 007 IN ITA NOS.3014 AND 3015/AHD/2002 AS WELL AS THE ORDER DAT ED 26-08-2011. 13 RIVAL SUBMISSIONS HAVE BEEN CONSIDERED. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION OF THE ITAT FOR BOTH THE ASSESSMENT YEARS IN QUANTUM APPEALS. IT IS UNBELIEVABLE THAT THE ACCOUNTANT OF THE ASSESSEE HAS COMMITTED ANY BONA FIDE MISTAKE. AS A MATTER FACT, ENTIRE CONDUCT OF THE ASSESSEE IN QUANTUM APPEALS CLEARLY INDICATES T HAT WHATEVER 14 ITA NOS.3335 TO 3337/AHD/2009 MANIPULATIONS HAVE BEEN MADE BY THE ACCOUNTANT, THE SE WERE IN THE KNOWLEDGE OF THE ASSESSEE. THE EXPLANATION OF THE A SSESSEE BY NO STRETCH OF IMAGINATION CAN BE CALLED BONA FIDE. WE ARE, THEREFORE, OF THE VIEW, THAT IN THE IMPUGNED ORDER THE LEARNED CI T(A) HAS GIVEN COGENT REASONS FOR CONFIRMING THE PENALTY OF RS.12 LACS FOR AY 1992- 93 AND RS.8 LACS FOR AY 1993-94. WE, THEREFORE, UPH OLD THE ORDER OF THE LEARNED CIT(A) FOR BOTH THESE ASSESSMENT YEARS. 14 IN THE RESULT, THE APPEAL FOR AY 1985-86 I.E. IT A NO.3335/AHD/2009 IS ALLOWED AND THE APPEALS FOR AYS 1992-93 AND 1993-94 I.E. ITA NOS.3336 & 3337/AHD/2009 ARE DISMI SSED. ORDER PRONOUNCED IN THE COURT TODAY ON 16-11-2011 SD/- SD/- (G D AGARWAL) VICE-PRESIDENT (T K SHARMA) JUDICIAL MEMBER DATE : 16-11-2011 COPY OF THE ORDER FORWARDED TO: 1. SANDEEP INTERMEDIATES PVT. LTD., 204, H K HOUSE, ASHRAM ROAD, AHMEDABAD 2. THE INCOME-TAX OFFICER, WARD-8(1), AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XIV, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-B, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD