The DCIT(OSD)Range-1, Ahmedabad V. Drill Road Machinery Pvt.Ltd., Ahmedabad

ITA 3369/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 72891 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 21-01-2014
• Assessment Year: 1997-1998
• Appeal Filed On: 21-12-2010
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Bogus purchase; Question of law
• Section: 133(6); 131

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER IT(SS) NO. 3369/AHD/2010 ASSESSMENT YEAR 1997-98 DCIT(OSD), RANGE-1 AHMEDABAD VS DRILL ROAD MACHINE PVT. LTD. AHMEDABAD. PAN: AABCD9282D (APPELLANT) (RESPONDENT) REVENUE BY : SH. P.L. KUREEL, SR. D.R. ASSESSEE(S) BY : SH. S.N. SOPARKAR WITH SMT. URVASHI SHODHAN, AR / // / DATE OF HEARING : 21/01/2014 !' / DATE OF PRONOUNCEMENT : 24/01/2014 #$ #$ #$ #$/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-VI, AHMEDABAD DATED 05.10.2010. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL OF THE RE VENUE IS THAT THE LD. CIT(A) ERRED IN FACTS AND ON LAW IN DELETING THE PE NALTY OF RS 11,78,752/- LEVIED U/S 271(1)(C) FOR FURNISHING INA CCURATE PARTICULARS ON ACCOUNT OF BOGUS PURCHASE EXPENSES. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED PURCHASE OF RS 27,54,990/- FROM FIVE PARTIES ITA NO.3369/AHD/2010 DCIT(OSD), R-1, AHD VS. DRILL ROAD MACHINERY PVT. L TD. FOR A.Y. 1997-98 - 2 - NAMELY M/S DHARA ENTERPRISES, M/S BALA STEEL, M/S S UMAN TRADING CO., M/S JAYMIN STEEL AND M/S. PARTH TRADERS. 4. THE ASSESSING OFFICER CALLED FOR INFORMATION FRO M THE SAID SUPPLIERS OF THE ASSESSEE U/S 133(6) OF THE ACT AND THE PARTIES VIDE THEIR WRITTEN SUBMISSION DATED 27.03.2000 STATED THAT THEY HAVE N OT ACTUALLY SOLD ANY GOODS TO THE COMPANY. THEY HAVE MERELY ISSUED SALE BILLS TO THE COMPANY. ON RECEIPT OF THE CHEQUES TOWARDS THE SAL E, THE SAME WAS DEPOSITED IN BANK ACCOUNTS AND THEY ONLY RETAINED % OF THE AMOUNT AS THEIR COMMISSION AND THE BALANCE AMOUNT WAS RETURNE D IN CASH TO THE ASSESSEE COMPANY. THEY CATEGORICALLY STATED THAT A CTUALLY NO GOODS WERE EVER SUPPLIED TO THE ASSESSEE. SALES TAX NUMB ERS GIVEN ON THEIR BILLS ARE EITHER NOT CORRECT OR THE SAME HAS BEEN C ANCELLED SUBSEQUENTLY. THEREFORE, THE ASSESSING OFFICER MADE ADDITION OF T HE AFORESAID AMOUNT TO THE INCOME OF THE ASSESSEE. 5. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION. WHILE DOING SO, HE OBSERVED THAT THE ADDITION MADE BY THE ASSESSING OF FICER IN RESPECT OF THE ALLEGED BOGUS PURCHASES WERE MADE IN HASTE WITH OUT ESTABLISHING THAT THE ASSESSEE COULD HAVE PRODUCED THE MATERIALS WITHOUT SUCH PURCHASES FOR WHICH THE ASSESSEE HAS REALIZED SALE PRICE OF RS 1,30,75,391/-. NATURALLY, IT CANNOT BE A CASE THAT THE ASSESSEE HAS NOT AT ALL RECEIVED ANY GOODS FROM THE ABOVE PARTIES. HE OBSERVED THAT AS HAS BEEN HELD IN THE CASE OF RASIKLAL K. PARIKH AND COM PANY, AHMEDABAD A BENCH OF THE TRIBUNAL IN ITA NO. 1654, 1486 AND 1794/AHD/1985 ORDER DATED 18.05.1994 FOR ASSESSMENT YEARS 1981-82 , 1982-83 AND 1983-84 THAT SUSPICIONS DO OCCUR IN SUCH CASES WHER E THE SUPPLIERS DENY TO HAVE MADE ANY SALES TO THE PARTY CONCERNED. BUT THE FACT REMAINS THAT THE ASSESSEE HAS IN THIS CASE ENTERED PURCHASE IN T HE STOCK REGISTER AND SHOWN CONSUMPTION OF SUCH RAW MATERIALS FOR PRODUCT ION AND THE ITA NO.3369/AHD/2010 DCIT(OSD), R-1, AHD VS. DRILL ROAD MACHINERY PVT. L TD. FOR A.Y. 1997-98 - 3 - REMAINING RAW MATERIALS HAVE BEEN SHOWN AS CLOSING STOCK. THE ASSESSEE HAS ALSO SHOWN THE SALES TO THE SALES TAX DEPARTMENT. IT IS NOT THE CASE THAT THE ASSESSEE HAS ONLY DEBITED BOGUS P URCHASES AND CREDITED BOGUS SALES. HE ALSO OBSERVED THAT DURING THE COUR SE OF APPEAL HEARING, HE HAD INQUIRED FROM THE ASSESSEE ABOUT THE INCREAS E IN THE COST OF RAW MATERIALS AS COMPARED TO EARLIER YEARS AND IT WAS F OUND THAT THE AVERAGE PRICE WAS FROM RS 19.50 TO RS 20.00 PER KG WHEREAS IN THE PRESENT YEAR IT HAS BEEN INCREASED TO RS 21.00 TO RS 22.50. THE LD. CIT(A) OPINED THAT IN THE GIVEN CIRCUMSTANCES, THE FALL IN GROSS PROFIT COULD NOT BE THE GROUND FOR MAKING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES. THE LD. CIT(A) ALSO NOTED THAT MAY BE MARKET CONDITIONS WER E SUCH THAT THE REAL SUPPLIERS OF THE GOODS WERE NOT IN A POSITION TO SU PPLY BILLS ACCOMPANYING THE GOODS. ON THE OTHER HAND, THERE W ERE PARTIES READY TO OBLIGE THE ASSESSEE WITH BILLS CORRESPONDING TO THE PURCHASE MADE BY THE ASSESSEE FROM THE GRAY MARKET. THIS WOULD IN TURN LEAD TO THE UNDISPUTED FACT THAT THE ASSESSEE HAD SPENT THE MON EY FOR THE PURCHASES AND JUST TO MAKE THE RECORDS STRAIGHT, THE BILLS WE RE OBTAINED AND CERTAIN COMMISSION WAS PAID TO THEM. ALTHOUGH THE ASSESSEE HAD CHALLENGED THE FINDINGS OF THE ASSESSING OFFICER THAT THE PURC HASES WERE NOT BOGUS, HE WAS OF THE VIEW THAT THESE PURCHASES WERE ONLY N AME LENDERS, WHO OBLIGED THE ASSESSEE WITH DESIRED AMOUNT OF BILLS C ORRESPONDING WITH THE PURCHASE MADE FROM THE GRAY MARKET. HE FURTHER OBS ERVED THAT THE QUESTION THAT ARISES AS TO WHY THE ASSESSEE WOULD R ESORT TO PURCHASES FROM GRAY MARKET. THE CIT(A) OPINED THAT IT WAS WI TH A VIEW TO PAY LESSER PRICE FOR THE MERCHANDISE WHICH OTHERWISE WO ULD BE AVAILABLE IN THE GENUINE MARKET. HE OPINED THAT THE ENTIRE PURC HASES COULD NOT BE DISALLOWED BECAUSE THE ASSESSEE HAD TO INCUR EXPENS ES FOR PURCHASING THE GOODS FOR HIS PRODUCTION. HE ALSO OBSERVED THA T IT WAS UNDISPUTED FACT THAT THE ASSESSEE HAD SPENT MONEY FOR CLEARING THE RAW MATERIALS, BUT MAYBE THE ROUTE IS A BIT CIRCUITOUS. ACCORDING LY, HE HELD THAT ITA NO.3369/AHD/2010 DCIT(OSD), R-1, AHD VS. DRILL ROAD MACHINERY PVT. L TD. FOR A.Y. 1997-98 - 4 - RESORTING TO THE PURCHASES FROM THE GRAY MARKET, TH E ASSESSEE HAD SAVED SOME MONEY BUT HE CLAIMED HIGHER AMOUNT OF PURCHASE AMOUNT IN THE BOOKS. IN HIS VIEW, THE ASSESSEE MUST HAVE SAVED A ROUND 3% IN THE GIVEN LINE OF BUSINESS OF THE ASSESSEE. HE, THEREF ORE, HELD THAT IT WOULD NOT BE PROPER THAT 3% OF THE ALLEGED BOGUS PURCHASE S SHOULD ONLY BE ADDED AS PROFITS TO THE INCOME OF THE APPELLANT AND THE COMMISSION PAID TO THE SEVEN PARTIES SHOULD BE REDUCED FROM SUCH PR OFITS. HE OBSERVED THAT 3% OF THE ALLEGED PURCHASES OF RS 27,41,185/- WOULD COME TO RS 82,235/-, % OF SUCH PURCHASES IS RS 13,706/- AND THE BALANCE AMOUNT LIABLE FOR ADDITION WAS RS 68,529/-. ACCORDINGLY, HE SUSTAINED ADDITION FOR RS 68,529/- AND ALLOWED RELIEF OF RS 26,72,656/ - TO THE ASSESSEE. 6. BEING AGGRIEVED BY THE SAID ORDER OF THE LD. CIT (A), THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL. 7. THE TRIBUNAL REVERSED THE ORDER OF THE CIT(A) AN D RESTORED BACK THE ORDER OF THE ASSESSING OFFICER. THE TRIBUNAL IN ITA NO. 1823/AHD/2000 ORDER DATED 30.12.2005 HELD AS UNDER: 'AFTER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE WE FIND THAT THE FACTS RECORDED BY THE ASSESSING OFFICER THAT AFTER DEDUCT ING % COMMISSION BY THE SUPPLIER, THEY HAD RETURNED BACK THE AMOUNT TO THE ASSESSEE COMPANY. THESE TWO FACTS HAVE NOT BEEN CONTROVERTED BY THE ASSESSE E NEITHER BEFORE THE ASSESSING OFFICER, NOR BEFORE THE CIT(A) NOR BEFORE US. WE DO NOT FIND SUBSTANCE IN THE SUBMISSION OF THE ID. AR THAT THE ASSESSING OFFICER HAS NOT SUPPLIED THE STATEMENT OF SUPPLIERS RECORDED U/S 13 1 AND INFORMATION COLLECTED U/S 133(6) AS THE ASSESSEE HAS NEVER OBJE CTED IN THIS REGARD BEFORE ASSESSING OFFICER AND CIT(A), FROM THE FACTS OF THE CASE WE NOTICED THAT THE PURCHASE AMOUNT ACCOUNTED FOR IN THE BOOKS OF ACCOU NT BUT THE AMOUNT OF THAT PURCHASES WERE RETURNED BACK TO THE ASSESSEE BY THE SUPPLIERS AFTER DEDUCTING % COMMISSION. IN OTHER WORDS, THE MONEY HAS RETUR NED BACK TO THE ITA NO.3369/AHD/2010 DCIT(OSD), R-1, AHD VS. DRILL ROAD MACHINERY PVT. L TD. FOR A.Y. 1997-98 - 5 - ASSESSEE. IT IS NOT A CASE WHERE PURCHASES HAVE ACC OUNTED FOR AND SUPPLIER WAS NOT TRACEABLE OR NOT AVAILABLE AT THE ADDRESS G IVEN BY THE ASSESSEE. THIS IS A CASE WHERE THE AMOUNT HAS RECEIVED BACK TO THE ASSESSEE FROM THE SUPPLIERS OF WHICH EXPENDITURE ON ACCOUNT OF PURCHA SES ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. UNDER THE CIRCUMSTANCES, WE ARE O F THE CONSIDERED VIEW THAT WHATEVER AMOUNT RECEIVED TO THE ASSESSEE TO TH AT EXTENT ADDITION IS WARRANTED. WE ACCORDINGLY SET-ASIDE THE ORDER OF CI T(A) AND RESTORE THAT OF THE ASSESSING OFFICER. HOWEVER, FOR THE PURPOSE OF CALCULATION OF THE AMOUNT OF ADDITION AS HELD ABOVE THAT THE AMOUNT RECEIVED BACK TO THE ASSESSEE TO THAT EXTENT ADDITION IS WARRANTED IT MEANS THE AMOUNT OF PURCHASE AFTER DEDUCTING % WILL BE THE AMOUNT OF ADDITION. WE ACCORDINGLY CONFIRM THE ADDITION OF RS. 27,27,479/-' 8. THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/S 271(1)(C) OF THE ACT TO THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY SHOULD NOT BE LEVIED ON ACCOUNT OF BOGUS PURCHASES. THE ASSESSING OFFICER AFTER CONSI DERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSING OFFICER CA LLED FOR INFORMATION U/S 133(6) FROM THE FIVE PARTIES WHO SUBMITTED THAT THE Y HAD MERELY ISSUED SALE BILLS TO THE COMPANY AND HAS NOT SUPPLIED ANY GOODS TO THE ASSESSEE. THEY ALSO SUBMITTED THAT ON RECEIPT OF CHEQUES TOWARDS S ALE BILLS THEY RETURNED THE AMOUNT IN CASH TO THE ASSESSEE AFTER RETAINING % OF THE AMOUNT AS THEIR COMMISSION. THE ASSESSING OFFICER FURTHER NOTED TH AT THE ADDITION MADE WAS SUSTAINED BY THE TRIBUNAL IN FURTHER APPEAL FILED B Y THE REVENUE AGAINST ORDER OF THE CIT(A). HE, THEREFORE, HELD THAT THE ASSESS EE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME IN CONCEALMENT OF TRUE IN COME AND WAS LIABLE TO PENALTY AND LEVIED MINIMUM PENALTY OF 100% OF THE A MOUNT OF THE TAX SOUGHT TO BE EVADED WHICH WORKED OUT TO RS 11,78,752/-. 9. THE LD. CIT(A) DELETED THE LEVY OF PENALTY ON TH E GROUND THAT AGAINST THE ORDER OF THE TRIBUNAL, THE ASSESSEE PREFERRED APPEA L TO THE HONBLE GUJARAT HIGH COURT WHO ADMITTED THE ASSESSEES APPEAL BY AN ORDER DATED 11.12.2006 BY ADMITTING FOLLOWING SUBSTANTIAL QUESTIONS OF LAW : ITA NO.3369/AHD/2010 DCIT(OSD), R-1, AHD VS. DRILL ROAD MACHINERY PVT. L TD. FOR A.Y. 1997-98 - 6 - (I) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE INCOME TAX APPELLATE TRIBUNAL WAS RIGHT IN LAW IN DISALLOW ING THE PURCHASE EXPENDITURE AMOUNTING TO RS 26,72,656/- BY TREATING THE SAME AS BOGUS WHEN ADMITTEDLY CORRESPONDING SALES AGAINST T HESE VERY PURCHASES HAVE BEEN OFFERED AND ACCEPTED FOR TAX? (II) WHETHER, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE INCOME TAX APPELLATE TRIBUNAL WAS RIGHT IN LAW IN NOT GRAN TING DEDUCTION FOR PURCHASE EXPENDITURE AT ALL WHEN MATERIAL IS PURCHA SED FROM ONE AND BILL IS OBTAINED FROM ANOTHER? 10. HE OBSERVED THAT THE ABOVE QUESTIONS ADMITTED B Y THE HONBLE HIGH COURT ARE DIRECTLY LINKED TO THE ADDITION ON WHICH PENALTY WA S LEVIED BY THE ASSESSING OFFICER. HE NOTED THAT THE ASSESSEE HAS RELIED ON A THIRD MEMBER DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF RUPAM MERCANTILE LTD. VS. DCIT 91 ITD 237 WHEREIN IT WAS HELD THAT IN A C ASE WHERE HIGH COURT HAS ADMITTED APPEAL AGAINST DISALLOWANCE FINDING A SUBS TANTIAL QUESTION OF LAW INVOLVED IN THE MATTER, THE CLAIM OF THE ASSESSEE F OR DEDUCTION CANNOT BE TREATED AS MALA FIDE OR FRIVOLOUS. HE OBSERVED THA T IN THE CASE OF THE ASSESSEE ALSO, HONBLE GUJARAT HIGH COURT HAS ADMITTED VERY SAME ISSUE ON WHICH THE ADDITION HAS BEEN MADE AS SUBSTANTIAL QUESTION ON L AW AND THEREFORE, THE CLAIM OF THE ASSESSEE CANNOT BE SAID TO BE FRIVOLOUS OR M ALA AND DELETED THE PENALTY LEVIED OF RS 11,78,752/- BY THE ASSESSING OFFICER U /S 271(1)(C) OF THE ACT. 11. THE LD. DR CHALLENGING THE ORDER OF THE CIT(A) FILED BEFORE US A COPY OF THE ORDER OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRAKASH VYAS IN TAX APPEAL NO. 606 OF 2010, ORDER DATED 15.11.20 11 AND SUBMITTED THAT THE HONBLE HIGH COURT AT PARA 11 OF THE SAID ORDER HAS HELD THAT WE ARE OF THE OPINION THAT THE TRIBUNAL ERRED IN DELETING THE PEN ALTY ON THE SOLE GROUND THAT APPEAL AGAINST ADDITION WAS ADMITTED BY THE HIGH CO URT. THE HIGH COURT FURTHER OBSERVED THAT ADMISSION OF TAX APPEAL BY TH E HIGH COURT IN MAJORITY CASES IS EX-PARTE, AND WITHOUT REGARDING EVEN PRIMA FACIE REASONS, WHETHER EX- PARTE OR BI-PARTE HEARING UNLESS SOME OTHER INTENTI ON CLEARLY EMERGES FROM THE ITA NO.3369/AHD/2010 DCIT(OSD), R-1, AHD VS. DRILL ROAD MACHINERY PVT. L TD. FOR A.Y. 1997-98 - 7 - ORDER ADMISSION OF A TAX APPEAL BY THE HIGH COURT O NLY INDICATES THE COURTS OPINION THAT THE ISSUE PRESENTED BEFORE IT REQUIRED FURTHER CONSIDERATION. IT IS AN INDICATION OF THE OPINION OF THE HIGH COURT THAT THERE IS A PRIMA FACIE CASE MADE OUT AND QUESTIONS ARE REQUIRED TO BE DECIDED A FTER ADMISSION. MERE ADMISSION OF AN APPEAL BY THE HIGH COURT CANNOT WIT HOUT THERE BEING ANYTHING FURTHER BE AN INDICATION THAT THE ISSUE IS DEBATABL E ONE SO AS TO DELETE THE PENALTY U/S 271(1)(C) OF THE ACT EVEN IF THERE ARE INDEPENDENT GROUNDS AND REASONS TO BELIEVE THAT THE ASSESSEES CASE IS FULL Y COVERED UNDER THE RULES ENVISAGED IN THE SAID CLAUSE (C) OF SUBSECTION (1) OF SECTION 271 OF THE ACT. IN OTHER WORDS, UNLESS THERE IS ANY INDICATION IN T HE ORDER OF ADMISSION PASSED BY THE HIGH COURT, SIMPLY BECAUSE A TAX APPEAL IS A DMITTED WOULD NOT GIVE RISE TO THE PRESUMPTION THAT THE ISSUE IS DEBATABLE AND THEREFORE, PENALTY SHOULD BE DELETED. THE LD. DR THEREFORE SUBMITTED THAT THE ORDER OF THE CIT(A) WAS AGAINST THE DECISION OF THE JURISDICTION AL HIGH COURT AS THE PENALTY LEVIED BY THE ASSESSING OFFICER WAS DELETED BY HIM ONLY ON THE GROUND THAT QUANTUM APPEAL FILED BY THE ASSESSEE HA S BEEN ADMITTED BY THE HONBLE HIGH COURT AND SUBSTANTIAL QUESTION OF LAW HAS BEEN FORMULATED ON IT AND THEREFORE, THE ISSUE WAS NOT FRIVOLOUS OR MALA FIDE. 12. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE S UBMITTED THAT HE IS NOT SUPPORTING THE ORDER OF THE CIT(A) ON THE GROUND TH AT QUANTUM APPEAL OF THE ASSESSEE WAS ADMITTED BY THE HONBLE HIGH COURT, TH EREFORE THE PENALTY WAS LIABLE TO BE DISMISSED. HE SUBMITTED THAT ON MERIT S OF THE CASE, LD. CIT(A) IN THE QUANTUM APPEAL HAS GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE HAS MAINTAINED STOCK REGISTER WHEREIN THE PURCHASES ARE ENTERED AND CONSUMPTION IS SHOWN OF PURCHASES OF RAW MATERIAL FOR PRODUCTIO N AND THE REMAINING RAW MATERIALS HAVE BEEN SHOWN AS CLOSING STOCK. THE AS SESSEE HAS SHOWN THE SALES TO THE SALES TAX DEPARTMENT. IT WAS NOT A CASE THA T THE ASSESSEE HAS DEBITED BOGUS PURCHASES AND CREDITED BOGUS SALES. THE CIT( A) HAS ALSO GIVEN A FINDING THAT THE AVERAGE PRICE PAID IN THE IMMEDIAT ELY PRECEDING ASSESSMENT YEAR WAS RS 19.50 TO RS 20 PER KG WHEREAS IN THE PR ESENT YEAR OF APPEAL, IT INCREASED TO RS 21 TO RS 22.50 PER KG AND IN THE GI VEN CIRCUMSTANCES, THE FALL ITA NO.3369/AHD/2010 DCIT(OSD), R-1, AHD VS. DRILL ROAD MACHINERY PVT. L TD. FOR A.Y. 1997-98 - 8 - IN THE GROSS PROFIT COULD NOT BE A GROUND FOR MAKIN G THE ADDITION ON ACCOUNT OF BOGUS PURCHASES. LD. CIT(A) HAS ALSO EXPLAINED THE CIRCUMSTANCES AND THE REASONS FOR OBTAINING THE BILLS FROM THE SAID PARTI ES. LD. CIT(A) HAS STATED THAT THE ASSESSEE MADE PURCHASES AT A LOWER PRICE F ROM THE GRAY MARKET AND TO SHOW THE PURCHASES IN THE BOOKS OF ACCOUNT, OBTAINE D THE BILLS FROM THE SAID PARTIES. THE AMOUNT RECEIVED BACK IN CASH AGAINST THE CHEQUES PAID TO THESE PARTIES FOR BILLS WAS UTILIZED FOR MAKING PAYMENT O F THE PURCHASES MADE BY THE ASSESSEE AND THEREFORE, HE OPINED THAT IT WAS NOT J USTIFIED TO MAKE ADDITION FOR THE ENTIRE AMOUNT OF PURCHASES AS IN THE ASSESSEES LINE OF BUSINESS, IN THE GIVEN CIRCUMSTANCES, THE ASSESSEE COULD HAVE SAVED AROUND 3% OF THE PURCHASES ONLY, BY ADOPTING SUCH MEANS, AND THEREFO RE, HE RESTRICTED THE ADDITION TO 3% OF THE PURCHASES MINUS % OF THE CO MMISSION PAID TO THE PARTIES FOR OBTAINING THE BILLS AND THEREBY SUSTAIN ED ADDITION OF RS 68,529/-. HE, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT (A) DELETING THE LEVY OF PENALTY OF RS 11,78,752/- SHOULD BE CONFIRMED AND T HE APPEAL OF THE REVENUE SHOULD BE DISMISSED. 13. WE HAVE HEARD THE RIVAL SUBMISSION, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN THE INSTANT CASE, PENALTY U/S 271(1)(C) LEVIED OF RS 11,78,752/- BY THE ASSESSING OFFICER WAS DELETED BY THE LD. CIT(A) BY FOLLOWING THE ORDER OF THE TRIBUN AL IN THE CASE RUPAM MERCANTILE LTD. (SUPRA) WHERE IT WAS HELD THAT WHER E THE HONBLE HIGH COURT HAS ADMITTED APPEAL AGAINST DISALLOWANCE FINDING A SUBSTANTIAL QUESTION OF LAW INVOLVED IN THE MATTER, THE CLAIM OF THE ASSESSEE F OR DEDUCTION CANNOT BE TREATED AS MALA FIDE OR FRIVOLOUS SO AS TO MAKE HIM LIABLE FOR PENALTY U/S 271(1)(C) OF THE ACT. 14. BEING AGGRIEVED BY THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 15. THE LD. DR POINTED OUT THE RECENT DECISION OF T HE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRAKASH VYAS IN TAX APPEAL N O. 606 OF 2010, ORDER DATED 15.11.2011 WHEREIN HONBLE HIGH COURT HAS HEL D AS UNDER: ITA NO.3369/AHD/2010 DCIT(OSD), R-1, AHD VS. DRILL ROAD MACHINERY PVT. L TD. FOR A.Y. 1997-98 - 9 - 11. WE ARE OF THE OPINION THAT THE TRIBUNAL ERRED IN DELETING THE PENALTY ON THIS SOLE GROUND. ADMISSION OF A TAX APP EAL BY THE HIGH COURT, IN MAJORITY CASES, IS EX-PARTE AND WITHOUT R ECORDING EVEN PRIMA FACIE REASONS. WHETHER EX-PARTE OR AFTER BY-PARTE H EARING, UNLESS SOME OTHER INTENTION CLEARLY EMERGES FROM THE ORDER ITSE LF, ADMISSION OF A TAX APPEAL BY THE HIGH COURT ONLY INDICATES THE COU RT'S OPINION THAT THE ISSUE PRESENTED BEFORE IT REQUIRED FURTHER CONS IDERATION. IT IS AN INDICATION OF THE OPINION OF THE HIGH COURT THAT TH ERE IS A PRIMA FACIE CASE MADE OUT AND QUESTIONS ARE REQUIRED TO BE DECI DED AFTER ADMISSION. MERE ADMISSION OF AN APPEAL BY THE HIGH COURT CANNOT WITHOUT THERE BEING ANYTHING FURTHER, BE AN INDICAT ION THAT THE ISSUE IS DEBATABLE ONE SO AS TO DELETE THE PENALTY UNDER SEC TION 271(L)(C) OF THE ACT EVEN IF THERE ARE INDEPENDENT GROUNDS AND REASO NS TO BELIEVE THAT THE ASSESSEE'S CASE WOULD FALL UNDER THE MISCHIEF E NVISAGED IN THE SAID CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 OF THE ACT. IN OTHER WORDS, UNLESS THERE IS ANY INDICATION IN THE ORDER OF ADMI SSION PASSED BY THE HIGH COURT SIMPLY BECAUSE THE TAX APPEAL IS ADMITTE D, WOULD GIVE RISE TO THE PRESUMPTION THAT THE ISSUE IS DEBATABLE AND THAT THEREFORE, PENALTY SHOULD BE DELETED. 12 THIS IS NOT TO SUGGEST THAT NO SUCH INTENTION C AN BE GATHERED FROM THE ORDER OF COURT EVEN IF SO EXPRESSED EITHER EXPLICITLY OR IN IMPLIED TERMS. THIS IS ALSO NOT TO SUGGEST THAT IN NO CASE, ADMISSION OF A TAX APPEAL WOULD BE A RELEVANT FACTOR FOR THE PUR POSE OF DECIDING VALIDITY OF A PENALTY ORDER. THIS IS ONLY TO PUT TH E RECORD STRAIGHT INSOFAR AS THE OPINION THAT THE TRIBUNAL AS EXPRESS ED IN THE PRESENT IMPUGNED ORDER VIZ. THAT UPON MERE ADMISSION OF A T AX APPEAL ON QUANTUM ADDITIONS, IS AN INDICATION THAT THE ISSUE IS DEBATABLE ONE AND THAT THEREFORE, PENALTY SHOULD AUTOMATICALLY BE DEL ETED WITHOUT ANY FURTHER REASONS OR GROUNDS EMERGING FROM THE RECORD . 13. THIS IS PRECISELY WHAT HAS BEEN DONE BY THE TR IBUNAL IN THE PRESENT CASE. ORDER OF THE TRIBUNAL, THEREFORE, CAN NOT BE SUSTAINED. QUESTION FRAMED IS ANSWERED IN FAVOUR OF THE REVENU E AND AGAINST THE ITA NO.3369/AHD/2010 DCIT(OSD), R-1, AHD VS. DRILL ROAD MACHINERY PVT. L TD. FOR A.Y. 1997-98 - 10 - ASSESSEE. ORDER OF THE TRIBUNAL IS REVERSED. SINCE APPARENTLY THE ASSESSEE HAD RAISED OTHER CONTENTIONS ALSO IN SUPPO RT OF THE APPEAL BEFORE TRIBUNAL, THE PROCEEDINGS ARE REMANDED BEFOR E THE TRIBUNAL FOR FRESH CONSIDERATION AND DISPOSAL IN ACCORDANCE WITH LAW. TAX APPEAL IS DISPOSED OF ACCORDINGLY. 16. IN VIEW OF THE ABOVE RECENT DECISION OF THE HON BLE GUJARAT HIGH COURT, WE FIND THAT THE ORDER OF THE LD. CIT(A) DELETING THE PENALTY ONLY ON THE GROUND THAT SUBSTANTIAL QUESTION OF LAW HAS BEEN FRAMED BY THE HONBLE HIGH COURT IN THE QUANTUM APPEAL IS NOT SUSTAINABLE. 17. FURTHER, WE FIND FROM THE ORDER OF THE LD. CIT( A) THAT THE ASSESSEE CHALLENGED THE LEVY OF PENALTY ON OTHER GROUNDS ALSO AND THE S AME WAS NOT DECIDED BY THE LD. CIT(A) IN VIEW OF ITS ABOVE FINDING. IN THE CI RCUMSTANCES, WE RESTORE THE ISSUE OF LEVY OF PENALTY U/S 271(1)(C) BACK TO THE FILE OF THE LD. CIT(A) FOR ADJUDICATION ON OTHER GROUNDS AFTER ALLOWING BOTH T HE PARTIES REASONABLE OPPORTUNITY OF HEARING. THUS, THE GROUNDS OF APPEA L OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. 18. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 24 TH JANUARY, 2014 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 24/01/2014 GHANSHYAM MAURYA GHANSHYAM MAURYA GHANSHYAM MAURYA GHANSHYAM MAURYA, SR. P , SR. P , SR. P , SR. P. .. .S SS S. .. . ITA NO.3369/AHD/2010 DCIT(OSD), R-1, AHD VS. DRILL ROAD MACHINERY PVT. L TD. FOR A.Y. 1997-98 - 11 - TRUE COPY #$ %& '#&' #$ %& '#&' #$ %& '#&' #$ %& '#&'/ COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. %*() / THE RESPONDENT. 3. ++ , / CONCERNED CIT 4. ,() / THE CIT(A)-III, AHMEDABAD 5. &/0 % , , / DR, ITAT, AHMEDABAD 6. 012 3 / GUARD FILE. #$ #$ #$ #$ / BY ORDER, 4 44 4/ // / +5 +5 +5 +5 ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD