M/s. SANJEEV WOOLLEN MILLS, MUMBAI V. ITO Wd. - 12(2)(1), MUMBAI

ITA 5082/MUM/2006

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8608 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 21-10-2010
• Assessment Year: 1991-1992
• Appeal Filed On: 26-09-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: S P GOYAL
• Keywords: Unexplained cash credit; Business income; Opportunity of being heard; Bonafide belief; Period of limitation; Question of law; Reassessment proceedings
• Section: 143(3); 80HHC; 68; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI BEFORE SHRI. D.K. AGARWAL (J.M.) AND SHRI T.R. SOOD ( A.M.) ITA NO.5082/MUM/2006 ASSESSMENT YEAR : 1991-1992 SANJEEV WOOLLEN MILLS 109, CHURCHGATE CHAMBERS, 5, NEW MARINE LINES, MUMBAI 400 020. PAN : AAAFS3380D VS. THE I.T.O. WD.-12(2)(1) AAYAKAR BHAVAN, M.K. RD. MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.P. GOYAL RESPONDENT BY : SHRI S.K. SINGH O R D E R PER D.K. AGARWAL, J.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 31.08.2006 PASSED BY THE LD CIT(A) FOR THE AS SESSMENT YEAR 1991- 92 CONFIRMING THE PENALTY OF ` 16,32,960/- IMPOSED BY THE ASSESSING OFFICER U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 ( THE ACT). 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE FIRM IS ENGAGED IN THE BUSINESS OF EXPORT OUT OF INDIA FILE D RETURN OF INCOME DECLARING NIL INCOME AFTER CLAIMING DEDUCTION OF 10 0% EXPORT PROFITS WHICH WAS DULY AUDITED AND CERTIFIED BY A CHARTERED ACCOUNTANT. THE RETURN WAS PROCESSED U/S.143(1)(A) OF THE ACT AND S UBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY. THE ORIGINAL ASSESSMENT WAS COMPLETED ON 08.03.1994 U/S.143(3) WHEREIN THE ASSESSING OFFICER INTERALIA MADE AN ADDITION OF ` 4,53,46,524/- U/S.69B OF THE ACT TOWARDS UNDER INV OICING OF IMPORTED GOODS, CONSEQUENT TO THE EVIDENCE FOUND OU T DURING THE SEARCH ON 14.10.1993 AT THE BUSINESS PREMISES OF THE ASSES SEE AND ITS SISTER ITA NO.5082/MUM/2006 A.Y.: 1991-1992 2 CONCERNS. IN ADDITION TO ABOVE THE ASSESSING OFF ICER ALSO INCLUDED INTEREST OF ` 2,71,256/- SHOWN BY THE ASSESSEE IN THE TRADING AC COUNT AND ALSO ` 81,00,000/- TOWARDS FORWARD CONTRACT RECEIPTS FOR THE PURPOSE OF TOTAL TURNOVER. IN DOING SO, THE 80HHC DEDUCTION WAS RE-WORKED OUT BY TAKING GROSS PROFIT OF THE YEAR AT ` 3,34,31,874/- AND THE TOTAL TURNOVER AT ` 3,18,99,279/- (THE SALES SHOWN BY THE ASSESSEE WAS AT ` 2,38,67,589/- WHEREAS THE EXPORT TURN OVER CONSIDERED BY THE ASSE SSING OFFICER IN THE ORDER WAS AT ` 2,35,27,522). IN DOING SO THE ASSESSEES CLAIM OF EXEMPTION OF 100% ` 3,34,31,874/- WAS RESTRICTED TO ` 2,46,57,897/-. THE ASSESSEE CONTESTED THIS BEFORE THE LEARNED CIT( A). THE LEARNED CIT(A), VIDE ORDER DATED 30.03.1995 SET ASIDE THE O RDER TO BE MADE DE NOVO, PARTICULARLY ON ACCOUNT OF ADDITION OF ` 4,53,46,524/-. REASSESSMENT ORDER WAS PASSED ON 28.02.1997 ON A TO TAL INCOME AT ` 87,73,976/- WITHOUT MAKING ANY ADDITION FOR UNEXPLA INED INVESTMENT OR UNDER INVOICING MADE EARLIER. HOWEVER, IN THAT ORD ER THE A.O. HAD AGAIN TAKEN THE INTEREST INCOME AND FORWARD CONTRACT INCO ME AS PART OF TOTAL TURNOVER. THIS ISSUE OF TAKING INTEREST INCOME AND FORWARD CONTRACT INCOME AS TOTAL TURNOVER HAD ARISEN IN A.Y. 1990-91 VIDE THE ORDER OF THE LEARNED CIT(A) UNDER SECTION 263 FOR A.Y. 1990-91. SINCE THE FACTS ARE SIMILAR, THE A.O. HAD TAKEN THESE TWO RECEIPTS AS P ART OF TRADING RECEIPTS AND THEREFORE INCLUDED IN THE TOTAL TURNOVER, THERE BY MODIFYING THE CLAIM UNDER SECTION 80HHC AS WAS DONE IN THE ORIGINAL ASS ESSMENT. IN THE APPEAL BEFORE THE LEARNED CIT(A), CENTRAL IV, MUMBA I, THE LEARNED CIT(A) NOTICED THE NATURE OF FORWARD CONTRACT AMOUNT OF ` 81,00,000/- AND ASKED FOR DETAILS OF THE SAME FROM THE ASSESSEE. TH E ASSESSEE HAD FILED VARIOUS DETAILS. THE LEARNED CIT(A), AFTER CONSID ERING THE EVIDENCE FILED BY THE ASSESSEE, DIRECTED THE A.O. TO EXAMINE WHETHER THE INCOME REALLY PERTAINS TO THE SALE OF IMPORT LICENCE OR WHETHER T HE INCOME IS ASSESSABLE UNDER THE HEAD OTHER SOURCE OR WHETHER THE INCOME IS OF SPECULATIVE NATURE AND WHETHER THE SAID INCOME HAS A NEXUS WITH THE EXPORT BUSINESS OF THE ASSESSEE OR NOT . IT WAS ALSO POINTED OUT THAT IT WOULD NOT BE OUT OF PLACE TO MENTION THAT THE TRANSACTIONS ENTERED IN T HE LEDGER PERTAIN TO ITA NO.5082/MUM/2006 A.Y.: 1991-1992 3 YARN WHEREAS THE IMPORT LICENCES ARE FOR IMPORT OF SYNTHETIC WASTE. IT REQUIRED TO BE ASCERTAINED WHETHER THE INCOME OF ` 81,00,000/- WAS ON ACCOUNT OF LOCAL TRADING AND NOT EXPORTS. ACCORDING LY, THE LEARNED CIT(A), CENTRAL IV HAS SET ASIDE THE ASSESSMENT TO BE DONE AFRESH AFTER CARRYING OUT THE DETAILED ENQUIRY AS DIRECTED IN THE ORDER. THE 80HHC DEDUCTION WAS ALSO TO BE REWORKED OUT ON THE BASIS OF THE FAC TS OBTAINED AND GATHERED AFTER DETAILED ENQUIRY. 3. DURING THE COURSE OF PRESENT ASSESSMENT IT AS INTER-ALIA OBSERVED BY THE ASSESSING OFFICER THA T ON PERUSAL OF PAGE NO.398 OF THE SEIZED LEDGER THE ASSESSING OFFICER N OTED THAT THE ASSESSEE HAS TREATED THE FORWARD CONTRACT INCOME ` 81,00,000/- AS BUSINESS INCOME FOR THE PURPOSE OF CLAIMING DEDUCTION U/S.80 HHC OF THE ACT. HOWEVER, THE ASSESSING OFFICER AFTER CONSIDERING TH E ASSESSEES SUBMISSIONS TREATED THE SAME AS CASH CREDIT U/S.68 OF THE ACT UNDER THE HEAD INCOME FROM OTHER SOURCES NOT ELIGIBLE FOR DED UCTION U/S.80HHC OF THE ACT AND ACCORDINGLY COMPLETED THE ASSESSMENT ON INCOME AT ` 87,28,815/- VIDE ORDER DATED 12.03.2001 PASSED U/S. 143(3) R.W.S. 250 OF THE ACT. ON APPEAL, THE LD CIT(A) VIDE HIS ORDER DATED 23.03.2004 CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 4. IN THE PRESENT ASSESSMENT ORDER THE ASSESSING OF FICER HAS ALSO INITIATED PENALTY PROCEEDING U/S.271(1)(C) OF THE A CT. THEREFORE, ON RECEIPT OF THE ORDER OF THE LEARNED CIT(A) DATED 23 .03.2004, THE ASSESSING OFFICER ISSUED LETTER DATED 06.03.2006 TO THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY U/S.271(1)(C) SHOULD NOT BE IMPOSED. IN RESPONSE, THE ASSESSEE VIDE LETTER DATED 08.03.2006 REQUESTED TO STAY THE PENALTY PROCEEDING DUE TO PENDENCY OF APPEAL BE FORE THE TRIBUNAL. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT AFTER THE AMENDMENT IN SECTION 275 BY THE FINANCE ACT, 2002, THE TIME L IMIT OF IMPOSITION OF PENALTY IS RESTRICTED TO ONE YEAR FROM THE END OF T HE FINANCIAL YEAR IN ITA NO.5082/MUM/2006 A.Y.: 1991-1992 4 WHICH THE ORDER OF THE CIT(A) IS RECEIVED BY THE CO NCERNED CIT OR CCIT IF THE ASSESSMENT IS SUBJECT MATTER OF APPEAL. HENCE HE DID NOT ACCEPT THE ASSESSEES REQUEST TO STAY THE PENALTY PROCEEDING. THE ASSESSING OFFICER FURTHER OBSERVED THAT IN THIS CASE CASH CRE DIT WAS FOUND IN THE DOCUMENTS/BOOKS AND IN ASSESSEES POSSESSION AND AS SESSEE HAS NOT OFFERED ANY SATISFACTORY EXPLANATION. THE PRIMARY ONUS LIES ON THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF AMOUNT C REDITED IN ITS BOOKS/DOCUMENTS. SINCE THE ASSESSEE HAS FAILED T O DISCHARGE THE ONUS AS PER PROVISIONS OF SECTION 68, THE ASSESSING OFFI CER AFTER RELYING ON CERTAIN DECISIONS AND KEEPING IN VIEW THE PROVISO T O EXPLANATION 1 TO SECTION 271(1)(C) HELD THAT THE ASSESSEE HAD COMMIT TED THE DEFAULT IN FURNISHING INACCURATE PARTICULAR OF INCOME BY SHOWI NG FORWARD CONTRACT FORFITTED AND CLAIMING THE SAME AS DEDUCTION U/S.80 HHC OF ` 81,00,000/- AND ACCORDINGLY HE IMPOSED MINIMUM PENALTY OF ` 16,32,960/- VIDE ORDER DATED 30.03.2006 PASSED U/S.271(1)(C) OF THE ACT. ON APPEAL, THE LD CIT(A) WHILE OBSERVING THAT THE APPELLANT DID NOT F ILE ANY WRITTEN SUBMISSION ON MERIT OF THE CASE EXCEPT REQUEST TO K EEP THE PENALTY PROCEEDING PENDING AS THE QUANTUM APPEAL IS STILL P ENDING BEFORE THE TRIBUNAL, HELD THAT SINCE THE ASSESSMENT ORDER PASS ED BY THE ASSESSING OFFICER HAS BEEN CONFIRMED BY THE LD CIT(A) THEREFO RE, APPELLANT IS LIABLE TO PENALTY AND ACCORDINGLY HE CONFIRMED THE PENALTY IMPOSED BY THE ASSESSING OFFICER. 5. BEING AGGRIEVED BY THE ORDER OF THE LD CIT(A), T HE ASSESSEE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUNDS OF APPEAL . THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT AL LEGED EVADED AMOUNT OF ` 81,00,000/- IS SUBJECT MATTER APPEAL FILED U/S.253 , WHICH IS PENDING BEFORE HONBLE ITAT AT THE TIME OF PASSI NG ORDER AND OUGHT TO HAVE KEPT DECISION OF APPEAL PENDING TILL THE DI SPOSAL OF APPEAL. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE ASSESSEE S SUBMISSION TO KEEP APPELLATE PROCEEDINGS PENDING TILL THE DECISIO N OF ITAT IN APPEAL FILED U/S.253 OF THE I.T. ACT AND THEREFORE ORDER PA SSED BY HIM IS MALAFIDE. ITA NO.5082/MUM/2006 A.Y.: 1991-1992 5 THE LEARNED CIT(A) SEEMS TO WAS IN HURRY OR UNDER T HE PRESUME OR ANY OTHER REASONS TO PASS THE ORDER AS LEARNED CIT( A) HIMSELF HAS SHOWN INABILITY TO KEEP THE APPEAL IN ABEYANCE AS H IGH DEMAND OF ` 16.33 LACS IS INVOLVED. THE APPELLANT CRAVES LEAVE TO MAKE ADDITION, ALTERN ATION IN GROUNDS OF APPEAL. 6. AT THE TIME OF HEARING THE SHRI S.P. GOYAL, PAR TNER OF THE FIRM SUBMITS THAT HE HAS ALSO SUBMITTED FOLLOWING ADDITI ONAL GROUND : 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW A ND FACTS IN IMPOSING THE PENALTY ON 30.03.2006 AFTER THE ORDER OF THE CIT(A) DATED 23.03.2004 I.E. AFTER ABOUT 2 YEARS WHEREAS P ER PROVISION OF SECTION 275(1) THE PENALTY IS TO BE IMPOSED WITHIN 6 MONTHS. THEREFORE THE PENALTY ORDER IS BAD IN LAW BEING TIM E BARRED. 2. THE ASSESSMENT WAS ALSO DONE IN 143(1)(A) WHICH IS EVIDENT THAT THERE WAS NO INACCURATE PARTICULARS OR CONCEAL MENT. 3. THE PENALTY SHOULD BE DROPPED WITH EXEMPLARY CO ST ON THE ASSESSING OFFICER, MR. ANAND NAGRALE WHO SUPPOSED TO KNOW THE PROVISION OF INCOME TAX ACT. HE HAS IMPOSED THE PE NALTY WITH BIAS MIND AND UNDER CERTAIN MOTIVE TO HARASS THE ASSESSE E. THE PENALTY CANNOT BE IMPOSED AFTER 6 MONTHS PERIOD PRESCRIBED U/S.275(1) OF INCOME TAX ACT, 1961. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR MODIFY ALL OR ANY GROUNDS AT THE TIME OF HEARING. 7. AT THE TIME OF HEARING SHRI S.P. GOYAL FOR THE A DMISSION OF ADDITIONAL GROUNDS OF APPEAL SUBMITS THAT THE RETUR N OF INCOME FILED ALONG WITH BALANCE SHEET HAS BEEN DULY ACCEPTED U/S .143(1)(A) AS MENTIONED UNDER ASSESSMENT ORDER DATED 08.03.1994 B Y THE INCOME TAX OFFICER, WARD 13(1), MUMBAI (COPY IS APPEARING ON ASSESSEES PAPER BOOK PAGE NO.23 TO 28). HE FURTHER SUBMITS THAT N O PENALTY IS APPLICABLE WHERE RETURN IS ACCEPTED AND ORDER PASSED U/S.143(1 )(A). IN THIS ORDER U/S.143(1)(A) IT IS EVIDENT THAT THERE IS NO INACCU RATE PARTICULAR OR CONCEALMENT IN THE SUBJECT ASSESSMENT YEAR 1991-92 IN THE RETURN FILED BY THE ASSESSEE, THEREFORE QUESTION OF ANY PENALTY DOES NOT ARISE. HE FURTHER SUBMITS THAT IN FACT THE PENALTY IS IMPOSED AFTER 2 YEARS FROM THE ITA NO.5082/MUM/2006 A.Y.: 1991-1992 6 CIT(A)S ORDER AS AGAINST 6 MONTHS TIME LIMIT PROVI DED U/S.275(1) OF THE I.T. ACT, AS THE ASSESSEE FILED CRIMINAL AND CIVIL CASES HAVING NO.623/98 AGAINST THE DEPARTMENT WHICH IS PENDING BEFORE THE HONBLE HIGH COURT OF DELHI AT NEW DELHI. HE FURTHER SUBMITS THAT THE PE NALTY ORDER WAS PASSED ON 30.03.2006 AGAINST CIT(A) ORDER DATED 23.03.2004 , THEREFORE ORDER IS BARRED BY LIMITATION AS PROVIDED U/S.275(1) OF THE ACT. THE RELIANCE WAS ALSO PLACED ON THE FOLLOWING CASES. (I) CIT(TDS) VS. IKEA TRADING HONG KONG LTD. (2009) 179 TAXMAN 309 (DELHI), HIGH COURT OF DELHI, (II) NARESH KUMAR GUPTA VS. ITO - (2009) 20 DTR (DE L) (TRIB.) 565 (III) MOTILAL VISHWASKARMA HUF VS. ITO (2008) 40-B BCAJ PAGE 520 IN ITA NO.7055/MUM/2007 FOR ASSESSMENT YEAR 2003-04 ORDER DATED 27.08.2007. 8. ON MERIT HE SUBMITS THAT THE ASSESSING OFFICER W ORKED OUT DEDUCTION U/S.80HHC INCORRECTLY VIDE ORDER DATED 12 .03.2001, EVEN CONTRARY TO EARLIER ASSESSMENT YEAR 1990-91 WHEREAS THE 80HHC PROVISION REMAINS THE SAME DURING ASSESSMENT YEARS 1990-91 AND 1991- 92. HOWEVER, THERE WAS A CHANGE FROM ASSESSMENT YE AR 1992-93 IN THE PROVISION OF 80HHC REGARDING WORKING OF PROFIT OF I MPORT ENTITLEMENTS [SALE OF LICENCES TO BE CONSIDERED AS BUSINESS PROF IT 90%]. HE FURTHER SUBMITS THAT FORFEITED ADVANCES DURING THE TRANSACT ION OF BUSINESS ARE ALWAYS ACCEPTED IN PAST AS PER OUR STANDARD ACCOUNT ING SYSTEM. FORFEITED ADVANCE DURING BUSINESS TRANSACTION CANNO T BE SAID TURNOVER UNDER ANY LAW OR PRACTICE. TURNOVER AS PER CONSIST ENTLY METHOD FOLLOWED BY THE ASSESSEE IS ONLY OF GOODS DELIVERED AGAINST SALES BILL/INVOICE OR CASH MEMO & ENTRY IN BOOKS OF ACCOUNT UNDER THE HEA D OF TRADING ACCOUNT. HE FURTHER SUBMITTED THAT THE ASSESSING O FFICER TREATED THE INCOME OF LICENCES AS NON BUSINESS INCOME BUT THE S AME HAS BEEN REVERSED BY THE ITAT VIDE ORDER DATED 18.06.2010 AC CEPTED THE SAID INCOME AS BUSINESS INCOME. UNDER THE CIRCUMSTANCE S QUESTION OF INACCURATE PARTICULARS OR CONCEALMENT DOES NOT ARIS E. THE RELIANCE WAS ALSO PLACED ON THE DECISION OF THE TRIBUNAL FOR THE IMPUGNED ASSESSMENT YEAR ORDER DATED 18.06.2010 APPEARING AT PAGE NO.29 TO 54 OF THE PAPER ITA NO.5082/MUM/2006 A.Y.: 1991-1992 7 BOOK. HE FURTHER SUBMITS THAT PENALTY HAS NOT BEE N IMPOSED ON THE BASIS OF TOTAL TURNOVER BUT ONLY TREATED THE INCOME AS INCOME OTHER THAN BUSINESS INCOME WHICH HAS BEEN REVERSED TREATING TH E SAID BUSINESS AS BUSINESS INCOME BY THE ITAT (SUPRA). THE RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158 (SC). HE THEREFORE, SUBMITS THAT THE PENALTY IMPOSED BY THE ASSESSING OFFICER A ND SUSTAINED BY THE LD CIT(A) BE DELETED. 9. ON THE OTHER HAND LD DR WHILE SERIOUSLY OBJECTIN G TO THE ADMISSION OF ADDITIONAL GROUNDS OF APPEAL SUBMITS THAT IN VIE W OF THE RATIO OF THE DECISION IN INDIAN STEEL AND WIRE PRODUCTS LTD. VS. CIT (1994) 208 ITR 740 (CAL) AND U.K. PAINTS (INDIA) LTD. VS. DCIT 66 ITD 450 (DEL), THE ADDITIONAL GROUNDS DO NOT ARISE FROM THE ORDER OF L D CIT(A) THEREFORE, THE SAME SHOULD NOT BE ADMITTED OR IN ALTERNATIVE THE I SSUE MAY BE SET ASIDE TO THE FILE OF THE LD CIT(A) TO DECIDE THE SAME AFR ESH. ON MERIT, HE SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE PE NALTY ORDER AND IN THE ORDER OF THE LD CIT(A), THE ORDER PASSED BY THE LD CIT(A) IN CONFIRMING THE PENALTY BE UPHELD. 10. 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. ON THE ADMISSION OF ADDITIONAL GR OUND WE FIND THAT THE ASSESSING OFFICER ON THE ISSUE OF LIMITATION HAS OB SERVED AND HELD AT PAGE 3 OF THE IMPUGNED PENALTY ORDER AS UNDER: AFTER THE AMENDMENT IN SECTION 275 IN THE FINANCE ACT , 2002, THE TIME LIMIT OF IMPOSITION OF PENALTY IS RESTRICTED TO ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE CIT(A) IS RECEIVED BY THE CONCERNED CIT OR CCIT IF THE ASSESSMENT IS SUBJECT MATTER OF APPEAL. HENCE, THE ASSESSEE APPLICATION ON THIS GROUND IS N OT ACCEPTED. 11. FROM THE READING OF THE ABOVE WE FIND THAT THE FACTS RELATING TO THE ISSUE OF LIMITATION FOR IMPOSING PENALTY RAISED BY THE ASSESSEE THROUGH ITA NO.5082/MUM/2006 A.Y.: 1991-1992 8 ADDITIONAL GROUNDS OF APPEAL ARE ON RECORD AND THE LEGAL ISSUE RAISED BY THE ASSESSEE ON THE LIMITATION GOES TO THE ROOT OF THE MATTER, THEREFORE, KEEPING IN VIEW THE RATIO OF DECISION OF THE HONBL E SUPREME COURT IN NATIONAL THERMAL POWER CO. LTD. VS. CIT [1998] 229 ITR 383 (SC) WHEREIN IT HAS BEEN HELD THAT THE TRIBUNAL HAD JURISDICTION TO EXAMINE A QUESTION OF LAW WHICH AROSE FROM THE FACTS AS FOUND BY THE I NCOME TAX AUTHORITIES AND HAVING A BEARING ON THE TAX LIABILITY OF THE AS SESSEE, WE ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. 12. IN INDIAN STEEL AND WIRE PRODUCTS LTD. SUPRA, R ELIED ON BY THE LD DR IT HAS BEEN HELD THAT SUCH ADDITIONAL PLEA WHICH AL TOGETHER CHANGES THE COMPLEXION OF THE CASE AS ORIGINALLY BROUGHT BEFORE THE CIT(A) AND THE TRIBUNAL IN SECOND APPEAL IS NOT PERMISSIBLE TO BE RAISED AT THE STAGE OF HEARING. 13. IN U.K. PAINTS (INDIA) LTD. SUPRA, RELIED ON BY THE LEARNED DR IT HAS BEEN HELD THAT AN ADDITIONAL PLEA WHICH ALTOGETHER CHANGES THE COMPLEXION OF THE APPEAL CANNOT BE ALLOWED TO BE RA ISED. DEDUCTION U/S.80HHC BEING THE SUBJECT MATTER OF APPEAL ADDITI ONAL GROUND THAT THE ASSESSMENT U/S.143(3) WAS A NALITY COULD NOT BE ADM ITTED. 14. WHEREAS IN THE CASE BEFORE US THE ASSESSING OFF ICER HAS DULY CONSIDERED THE LIMITATION ISSUE, (SUPRA) AND BOTH T HE DECISIONS ARE PRIOR TO THE LAW LAID DOWN BY THE HONBLE APEX COURT IN NATI ONAL THERMAL POWER CO. LTD. (SUPRA), THEREFORE, BOTH THE DECISIONS ARE DISTINGUISHABLE AND NOT APPLICABLE IS THE FACTS OF THE PRESENT CASE. 15. BEFORE WE PROCEED FURTHER, WE NEED TO NOTICE TH E RELEVANT PROVISIONS OF SECTION 275 (1)(A) AND ITS PROVISO, S O MUCH AS ARE RELEVANT, READ AS UNDER: 275.(1) NO ORDER IMPOSING A PENALTY UNDER THIS CHA PTER SHALL BE PASSED ITA NO.5082/MUM/2006 A.Y.: 1991-1992 9 (A) IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHE R ORDER IS THE SUBJECT MATTER OF AN APPEAL TO THE COMMISSIONER (APP EALS U/S.246 [OR SECTION 246A] OR AN APPEAL TO THE APPELLATE TRIBUNAL U/S.253, AFTER THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDIN GS, IN THE COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED, OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE THE APPELLATE TRIBUNAL IS RECEIVED BY THE CHIEF COMMISSI ONER OR COMMISSIONER, WHICHEVER PERIOD EXPIRES LATER; PROVIDED THAT IN CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT-MATTER OF AN APPEAL TO THE COMMISSIO NER (APPEALS) U/S.246 OR SECTION 246A, AND THE COMMISSIONER (APPEAL S) PASSES THE ORDER ON OR AFTER THE 1 ST DAY OF JUNE, 2003 DISPOSING OF SUCH APPEAL, AN ORDER IMPOSING PENALTY SHALL BE PASSED BEFORE TH E EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COU RSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE C OMPLETED, OR WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHIC H THE ORDER OF THE COMMISSIONER (APPEALS ) IS RECEIVED BY THE CHIEF CO MMISSIONER OR COMMISSIONER, WHICHEVER IS LATER; 16. THE FOLLOWING PORTION OF DEPARTMENTAL CIRCULAR NO.7 OF 2003, DATED 05.09.2003 ELUCIDATES THE ABOVE PROVISION OF LAW AS UNDER: 80. AMENDMENT OF THE SECTION 275 RELATING TO TIME L IMIT FOR IMPOSING OF PENALTY.-80.1 UNDER THE EXISTING PRO VISIONS CONTAINED IN CLAUSE (A) OF SUB-SECTION (1) OF THE SECTION 275, N O ORDER IMPOSING A PENALTY SHALL BE PASSED, IN A CASE WHERE THE RELEVA NT ASSESSMENT OR OTHER ORDER IS THE SUBJECT-MATTER OF AN APPEAL TO T HE COMMISSIONER (APPEALS), OR TO THE APPELLATE TRIBUNAL AFTER THE EXP IRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHI CH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPL ETED OR WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS), OR, AS THE CASE MAY BE, THE APPELLATE TRIBUNAL IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER, WHICHEVER PERIOD EXPIRES LATER. 80.2 THE FINANCE ACT, 2003, HAS INSERTED A PROVISO I N THE SAID CLAUSE SO AS TO PROVIDE THAT IN A CASES WHERE THE R ELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT-MATTER OF AN APPEAL T O THE COMMISSIONER (APPEALS) U/S.246 OR SECTION 246A OF THE I.T. ACT, AN D THE COMMISSIONER (APPEALS) PASSES THE ORDER ON OR AFTER THE 1 ST JUNE, 2003, IN SUCH APPEAL, AN ORDER IMPOSING PENALTY SHA LL BE PASSED BEFORE THE EXPIRY OF THE FINANCIAL YEAR IN WHICH TH E PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HA S BEEN INITIATED, ARE COMPLETED OR WITHIN ONE YEAR FROM THE END OF THE FI NANCIAL YEAR IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) IS RE CEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER, WHICHEVER IS LA TER. ITA NO.5082/MUM/2006 A.Y.: 1991-1992 10 17. THE RELEVANT PROVISIONS HAVE ALSO BEEN EXPLAINE D BY THE BOARD VIDE CIRCULAR NO.1 OF 2007, DATED 27.04.2007 : (2007) 29 0 ITR (ST.) 73 AS UNDER: RATIONALISATION OF THE PROVISIONS OF SECTION 275 RE GARDING BAR OF LIMITATION FOR IMPOSING PENALTIES-22.1 THE EXISTI NG PROVISIONS OF SUB- SECTION (1) OF SECTION 275 PROVIDE THE TIME LIMITAT ION FOR IMPOSING PENALTY UNDER CHAPTER XXI OF THE INCOME TAX ACT, 196 1, AS UNDER:- (I) . . . . (II) IN A CASE WHERE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT MATTER OF AN APPEAL TO THE COMMISSIONER (APPEALS) U/S.246 OR SECTION 246A, AND THE COMMISSION ER (APPEALS) PASSES THE ORDER ON OR AFTER 1 ST JUNE, 2003, DISPOSING OF SUCH APPEAL, AN ORDER IMPOSING PENALTY SHALL BE PASSED BEFORE THE EXPIRY OF THE FINANCIAL YEAR I N WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPL ETED, OR WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER, WHICHEVER I S LATER; (III) . . . . THUS, FROM THE ABOVE IT IS CLEAR THAT IN A CASE WHE RE LEARNED CIT(A) PASSES THE ORDER ON OR AFTER 01.06.2003, IN SUCH AP PEAL, AND ORDER IMPOSING PENALTY SHALL BE PASSED BEFORE THE EXPIRY OF FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTI ON FOR IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED OR WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE CIT (A) IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER WHICHEVER IS LAT ER. 18. IN IKEA TRADING HONG KONG LTD (SUPRA) RELIED ON BY THE ASSESSEE, WE FIND THAT, IN THAT CASE THE SHOW CAUSE NOTICE FO R IMPOSITION OF PENALTY U/S.271C WAS ISSUED ON 26.06.1999. ON 24.01.2000, THE ASSESSING OFFICER ISSUED A LETTER TO THE ASSESSEE GRANTING FU RTHER OPPORTUNITY OF BEING HEARD IN RESPECT OF PENALTY SOUGHT TO IMPOSE ON IT. IN RESPONSE IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE MORE THAN 6 MONTHS HAD ITA NO.5082/MUM/2006 A.Y.: 1991-1992 11 ALREADY ELAPSED FROM THE ISSUANCE OF SHOW CAUSE NOT ICE, THEREFORE, IN VIEW OF THE PERIOD OF LIMITATION SET DOWN IN SECTIO N 275(1)(C), THE PENALTY IS NOT LEVIABLE. HOWEVER, THE ASSESSING OFFICER KE EPING IN VIEW THAT THE ORDERS U/S.201(1)/201(1A) HAD NOT YET BEEN PASSED T HEREFORE, THE PERIOD OF LIMITATION, WHICH WOULD BEGIN ON THE CULMINATION OR COMPLETION OF THE FORMER PROCEEDINGS HAD NOT YET BEGIN TO RUN, HENCE HE IMPOSED THE PENALTY UPON THE ASSESSEE U/S.271C. ON APPEAL THE COMMISSIONER (APPEAL) ACCEPTED THE PLEA OF THE ASSESSEE ON THE P OINT OF LIMITATION AND SET ASIDE THE PENALTY ORDER. ON FURTHER APPEAL, TH E TRIBUNAL UPHELD THE ORDER THE COMMISSIONER (APPEAL). ON FURTHER APPEAL BY THE REVENUE BEFORE THE HONBLE HIGH COURT IT HAS BEEN HELD BY T HEIR LORDSHIPS AS UNDER (HEAD NOTES): CLEARLY, THE INSTANT CASE WOULD FALL IN THE THIRD CATEGORY OF CASES WHERE THE INITIATION OF ACTION FOR IMPOSITION OF PE NALTY IS NOT IN THE COURSE OF SOME PROCEEDINGS. THUS, THE FIRST PART O F SECTION 275(1)(C) WOULD HAVE NO APPLICATION AND IT WAS ONLY THE PERIO D OF LIMITATION PRESCRIBED IN THE SECOND PART WHICH WOULD APPLY AND SINCE ONLY ONE PERIOD OF LIMITATION, WOULD BE APPLICABLE, THE EXPR ESSION WHICHEVER PERIOD EXPIRES LATER WOULD HAVE TO BE READ AS THAT VERY PERIOD OF LIMITATION. THAT BEING THE POSITION, THE PERIOD O F LIMITATION FOR PASSING THE PENALTY ORDER EXPIRED ON 31.12.1999 BEI NG SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE PENALTY PROC EEDING WAS INITIATED BY ISSUANCE OF THE SHOW-CAUSE NOTICE DATE D 26.06.1999. THE PENALTY ORDER WAS PASSED ON 16.03.2000. THAT W AS CLEARLY BEYOND THE TIME PRESCRIBED U/S.275(1)(C). THEREFORE, THE TRIBUNAL WAS CORRECT IN LAW IN DELET ING THE PENALTY IMPOSED BY THE ASSESSING OFFICER U/S.271C. THE APP EALS FILED BY THE REVENUE WERE LIABLE TO BE DISMISSED. 19. IN MOTILAL VISHWAKARMA HUF, RELIED ON BY THE AS SESSEE, SHOW CAUSE NOTICE FOR IMPOSITION OF THE PENALTY U/S.271B WAS I SSUED AND SERVED IN JUNE, 2005 AND ORDER IMPOSING PENALTY WAS PASSED ON 27.02.2006. IT HAS BEEN HELD BY THE TRIBUNAL THAT THE PENALTY ORDE R HAS BEEN PASSED AFTER THE EXPIRY OF SIX MONTHS FROM THE END OF JUNE , 2005 HENCE BARRED BY LIMITATION. ITA NO.5082/MUM/2006 A.Y.: 1991-1992 12 20. WHEREAS IN THE CASE BEFORE US THE INITIATION OF ACTION FOR IMPOSITION OF PENALTY IS NOT AN INDEPENDENT ACTION BUT THE SAM E HAS BEEN INITIATED IN THE COURSE OF ASSESSMENT PROCEEDING. THE LIMITAT ION OF WHICH HAS BEEN PROVIDED UNDER THE PROVISO TO SECTION 275(1)(A) OF THE ACT. FURTHER, IT IS NOT THE CASE OF THE ASSESSEE THAT HIS CASE FALLS UN DER THE PROVISION OF SECTION 275(1)(C) OF THE ACT, THEREFORE, THE ABOVE DECISIONS RELIED ON BY THE ASSESSEE ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 21. IN SHRI NARESHKUMAR GUPTA, RELIED ON BY THE ASS ESSEE THE QUANTUM APPEAL OF THE ASSESSEE WAS DISMISSED BY THE CIT(A) BEING BARRED BY THE LIMITATION. THUS, THE ONLY ISSUE WAS WHETHER IT C AN BE SAID THAT THE ASSESSMENT ORDER WAS SUBJECT MATTER OF APPEAL BEFOR E THE CIT(A). IT HAS BEEN HELD BY THE TRIBUNAL THAT UNLESS A VALID APPEA L IS FILED BEFORE THE CIT(A), IT CANNOT BE SAID THAT THE ASSESSMENT ORDER WAS SUBJECT MATTER OF APPEAL. THEREFORE THE ASSESSING OFFICER HAVING IN ITIATED PENALTY PROCEEDING ON 31.01.2003, ORDER IMPOSING PENALTY U/ S.271(1)(C) OF THE ACT COULD HAVE BEEN PASSED WITHIN 6 MONTHS THEREOF OR BEFORE 31.03.2004 AS PER SECTION 275(1)(C), HENCE PENALTY ORDER PASSE D BY THE ASSESSING OFFICER ON 24.03.2005 WAS BARRED BY THE LIMITATION. 22. WHEREAS IN THE CASE BEFORE US THE FACTS ARE ENT IRELY DIFFERENT INASMUCH AS THE PENALTY HAS BEEN IMPOSED WITHIN THE LIMITATION AS PROVIDED UNDER THE PROVISO TO SECTION 275(1)(A) OF THE ACT, AFTER THE ORDER PASSED BY THE LD CIT(A) IN QUANTUM PROCEEDING. THE REFORE, THE DECISION RELIED ON BY THE ASSESSEE IS DISTINGUISHABLE AND NO T APPLICABLE TO THE FACTS OF THE PRESENT CASE. 23. IN VIEW OF THE ABOVE AND IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE ORDER DATED 23.03.2004 PASSED BY THE LD CI T(A) IN QUANTUM APPEAL HAS BEEN RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER PRIOR TO THE FINANCIAL YEAR 2005-06, AND KEEPING IN VIEW THAT IN THE ITA NO.5082/MUM/2006 A.Y.: 1991-1992 13 QUANTUM APPEAL THE TRIBUNAL HAS PASSED ORDER ON 18. 06.2010, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE ASSESSING OFF ICER IS WELL WITHIN THE TIME AS PROVIDED UNDER THE PROVISO OF SECTION 275(1 )(A) OF THE ACT AND ACCORDINGLY THE ADDITIONAL GROUNDS RAISED BY ASSESS EE ARE REJECTED. 24. ON MERITS, WE FIND THAT THE TRIBUNAL IN THE ASS ESSEES OWN CASE IN QUANTUM APPEAL HAS DEALT WITH THE ISSUE IN DETAIL O N WHICH THE ASSESSING OFFICER HAS IMPOSED PENALTY. THE RELEVANT PARA OF THE TRIBUNAL ORDER DATED 18.06.2010 ARE REPRODUCED AS UNDER: 15. AS BRIEFLY MENTIONED IN THE FACTS OF THE CASE, THE CIT HAS TAKEN THE ISSUE UNDER SECTION 263 IN EARLIER YEAR A ND INCLUDED THE INTEREST INCOME AND FORWARD SALE CONTRACT AMOUNT AS PART OF TRADING RECEIPTS. THERE WAS NO DOUBT THAT ASSESSEES FORWAR D CONTRACT FORFEITED AMOUNT SHOWN AT ` 81,00,000/- WAS NOT OUT OF BUSINESS INCOME EITHER IN THE FIRST ASSESSMENT ORDER OR IN T HE REASSESSMENT ORDER. THE ONLY ISSUE WHICH WAS CONTESTED BEFORE TH E CIT OTHER THAN THE UNDER INVOICING WAS WITH REFERENCE TO TREATING THE INTEREST INCOME AND FORWARD CONTRACT RECEIPTS AS PART OF TOTAL TURN OVER, THEREBY RESTRICTING DEDUCTION UNDER SECTION 80HHC. ONLY DUR ING THE SECOND APPELLATE PROCEEDINGS CONSEQUENT TO THE ORDER PASSE D BY THE CIT(A) IN ANOTHER GROUP CONCERN WHERE ADDITION OF ` 1,27,000/- RECEIVED AS FORWARD CONTRACT ADVANCE AS UNEXPLAINED CASH CREDIT WAS UPHELD, THE CIT(A) ENQUIRED ABOUT ` 81,00,000/- RECEIPT DURING THE YEAR AND ASKED FOR VARIOUS CLARIFICATIONS AND RESTORED THE M ATTER BACK TO THE A.O. FOR FURTHER ENQUIRIES. 16. IT IS A FACT THAT THE ASSESSEE HAS SHOWN THESE ADVANCES IN THE MONTH OF APRIL, 1990 IN THE BOOKS OF ACCOUNTS AN D AT THE TIME OF CLOSURE OF ACCOUNTS THESE RECEIPTS WERE FORFEITED A ND SHOWN AS INCOME IN THE P & L ACCOUNT. THE ASSESSEE ALSO INCLUDED TH E ABOVE ` 81,00,000/- AS PART OF BUSINESS INCOME AND THE A.O. HAS NOT DISPUTED THE TREATMENT GIVEN BY THE ASSESSEE IN THE ASSESSME NT ORDER PASSED ORIGINALLY AND ALSO IN THE REASSESSMENT PROCEEDINGS WHEN THE MATTER WAS FIRST RESTORED BACK TO THE A.O. TO EXAMINE THE I SSUE OF UNDER INVOICING OF PURCHASES. IN THE SECOND REASSESSMENT PROCEEDINGS THE A.O. INQUIRED FROM THE TWO BROKERS AVAILABLE AND THE REPORTS INDICATE THAT THE TWO BROKERS HAVE CONFIRMED THAT THEY HAVE ARRANGED PARTIES TO THE ASSESSEE. IT IS THE DDIT AT LUDHIANA AS WELL AS THE A.O. WHO DID NOT ACCEPT ASSESSEES CONTENTION AS THE RELEVANT PA RTIES WERE NOT IDENTIFIED OR TRACEABLE. IT IS THE CONTENTION OF TH E ASSESSEE THAT ALL THE ENTRIES WERE ARISING OUT OF THE BOOKS OF ACCOUNT. I T HAS RECEIVED THE ADVANCE AT THE RELEVANT POINT OF TIME FOR SALE OF I MPORT LICENCES WHICH IT HAD AS THERE WAS NO RESTRICTION IN RECEIVING THE ADVANCE FOR IMPORT OF GOODS AND FURTHER THE ASSESSEE IN FACT DID IMPOR T SYNTHETIC WASTE SUBSEQUENTLY AND SINCE THE PREMIUM IN THE MARKET HA S FALLEN DUE TO ITA NO.5082/MUM/2006 A.Y.: 1991-1992 14 LIBERALIZATION AT THAT POINT OF TIME THOSE PARTIES DID NOT HONOUR THE COMMITMENT, HENCE THE ASSESSEE HAS FORFEITED THE AM OUNT AT THE END OF THE YEAR. EVEN IN THE SEARCH PROCEEDINGS ASSESSE ES LEDGER ACCOUNTS WHICH DULY REFLECTED THE TRANSACTIONS, WER E ONLY SEIZED AND THERE IS NO INCRIMINATING MATERIAL TO INDICATE THAT THE RECEIPTS WERE CASH RECEIPTS OF THE ASSESSEE. IT WAS FURTHER CONTE NDED THAT THE ISSUE IN THE SISTER CONCERN WAS CONFIRMED BECAUSE THE ASS ESSEE COULD NOT FURNISH EVIDENCES BUT IN THIS CASE THE ASSESSEE FUR NISHED THE DETAILS AND THE TWO BROKERS, WHO WERE AVAILABLE WERE ENQUIR ED AND SO THOSE FINDINGS ARE NOT RELEVANT IN THE PRESENT ASSESSEES CASE. 17. ASSESSEE HAD FURNISHED VOLUMINOUS DOCUMENTS WITH REFERENCE TO ITS CORRESPONDENCE WITH VARIOUS AUTHOR ITIES, ORDERS OF THE A.O. AND CIT(A), CUSTOMS AUTHORITIES, HIGH COURT IN V ARIOUS PROCEEDINGS AND ALSO VARIOUS STATEMENTS, LEDGER COP IES, STATEMENTS OF BROKERS, COPIES OF THE ENQUIRY REPORT AS PART OF TH E PAPER BOOK. 18. AFTER VERIFYING ALL THE DETAILS THE ISSUE BOILS DOWN TO TWO ASPECTS: (1) WHETHER THE INCOME OF ` 81,00,000/- SHOWN BY THE ASSESSEE IS TO BE TREATED AS INCOME FROM OTHER SOUR CES OR BUSINESS INCOME AND IF SO, (2) WHETHER THE SAME IS TO BE INC LUDED AS PART OF TURNOVER FOR THE PURPOSE OF ARRIVING AT THE DEDUCTI ON UNDER SECTION 80HHC. THIS IN NUTSHELL IS THE ISSUE IN GROUND NO. 1. WHETHER THE AMOUNT IS BUSINESS INCOME OR NOT. 19. AS POINTED OUT EARLIER THE A.O. HAS NO DOUBT ABO UT THE TREATMENT OF FORWARD CONTRACT RECEIPTS AS PART OF B USINESS INCOME ORIGINALLY. THE ONLY ISSUE WAS THAT THE ASSESSING OF FICER HAS TREATED IT AS PART OF TOTAL TURNOVER SO THAT THE DEDUCTION GOT REDUCED IN VIEW OF THE INCREASE IN TOTAL TURNOVER THAN THE EXPORT TURN OVER. THE CIT(A), WHILE SETTING ASIDE FOR THE SECOND TIME HAS GIVEN C LEAR DIRECTION FOR EXAMINING THE ISSUE BUT THE A.O. TREATED THE ENTIRE AMOUNT AS INCOME FROM OTHER SOURCES CONSEQUENT TO NON-FURNISHING OF THE PARTIES FROM WHOM THE AMOUNTS WERE ORIGINALLY RECEIVED. 20. IN OUR VIEW THERE IS NO NEED FOR TREATING ADVAN CES FORFEITED AS CASH CREDITS. THE ASSESSEE HAS SHOWN THESE TRANS ACTIONS IN THE BOOKS OF ACCOUNT IN APRIL 1990 AS ADVANCE RECEIVED T OWARDS SALE OF LICENCES AND PROCESSING OF YARN WITH THE LEGEND: DUTY FREE IMPORT LICENCE PREMIUM SETTLED FOR ` 45/- PER KG. FOR IMPORT OF SYNTHETIC WASTAE ` 5/- PER KG. ADVANCE BALANCE BY 30/06/1990. IF YARN TO BE CONVERTED ` 5/- PER KG. EXTRA 90% YIELD, BUT CHARGES FOR 100%. 21. THE ASSESSEE ALSO FURNISHED ADDRESSES OF THE TH REE BROKERS WHO ARRANGED THE PARTIES WITH THE DETAILS AND ON EX AMINATION OF THE LEDGER ACCOUNTS INDICATE THAT THE NAMES OF THE BROK ERS WERE ALSO AVAILABLE AS PART OF THE RECORD IN THE LEDGER ACCOU NT ITSELF. THE RELEVANT LEDGER EXTRACTS ARE PLACED IN PAGES 159 TO 176 AND IN ALL THE PAGES DATE-WISE RECEIPTS WITH THE NAME OF THE BROKE RS WAS AVAILABLE. OUT OF THE 3 BROKERS, ONE PERSON WAS NOT AVAILABLE IN INDIA BUT THE OTHER 2 BROKERS HAVE APPEARED BEFORE THE DDIT AND C ONFIRMED THE ITA NO.5082/MUM/2006 A.Y.: 1991-1992 15 TRANSACTIONS. EVEN THOUGH THE NAMES OF THE PARTIES WERE GIVEN IN THE LEDGER ACCOUNT THEY WERE NOT AVAILABLE FOR VERIFICA TION AT SUBSEQUENT POINT OF TIME. IT IS THE CONTENTION OF THE ASSESSEE THAT HE HAS DISCHARGED THE PRIMARY DUTY OF MAKING AVAILABLE BRO KERS TO CONFIRM THE TRANSACTIONS AND THESE TRANSACTIONS WERE RECORD ED IN THE BOOKS OF ACCOUNT. 22. SINCE SUBSTANTIAL TIME HAS LAPSED IN THE MEAN TI ME AND AS THE SEARCH ALSO DID NOT YIELD ANY INCRIMINATING EVI DENCE THAT THE ASSESSEE WAS HAVING ITS INCOME OUTSIDE THE BOOKS OF ACCOUNT, AS FAR AS THIS ASSESSEE IS CONCERNED, THE ACTION OF THE A.O . IN ORIGINALLY ACCEPTING THE FORWARD CONTRACT FORFEITED AMOUNT AS INCOME FROM THE BUSINESS SEEMS APPROPRIATE. EVEN THOUGH THE A.O. TRI ED TO TREAT IT AS UNEXPLAINED CASH CREDIT NOW, WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTION 68 CANNOT BE INVOKED WHEN THE ASSESSEE H AS ACCOUNTED FOR THIS ADVANCE FOR IMPORT OF SYNTHETIC WASTE, AS A TR ADING RECEIPT AND ALSO REFLECTED AS INCOME IN P & L ACCOUNT. EVEN THE CIT IN EARLIER YEAR UNDER SECTION 263 ALSO HAS ACCEPTED THE SIMILAR TRA NSACTIONS AS PART OF TRADING RECEIPTS. ACCORDINGLY, WE ARE OF THE OPINION THAT AMOUNT OF ` 81,00,000/- IS TO BE TREATED AS PART OF BUSINESS IN COME. WHETHER IT IS TO BE INCLUDED IN THE TOTAL TURNOVER OR NOT. 23. THE OTHER ISSUE TO BE DECIDED IS WHETHER THIS A MOUNT CAN BE CONSIDERED FOR INCLUDING IN TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC. AS SEEN FROM THE ORDERS OF THE A.O. IN THE FIST AND SECOND ASSESSMENT ORDERS, THE A.O. HAS TREATED T HE SAME AS PART OF TOTAL TURNOVER OF THE BUSINESS. THE ASSESSEE, HO WEVER, HAS EXPLAINED THAT IT CANNOT BE PART OF TOTAL TURNOVER. TOTAL TURNOVER IS NOT DEFINED IN THE ACT EXCEPT STATING THAT IT SHALL NOT INCLUDE FREIGHT OR INSURANCE ATTRIBUTABLE TO THE TRANSPORT OF GOODS OR MERCHANDISE BEYOND THE CUSTOM STATION VIDE (BA) OF EXPLANATION TO THE SECTION 80HHC. THIS IS CONSIDERED BY ACCOUNTING CONVENTION S AND BY WAY OF JUDICIAL PRONOUNCEMENTS. IN THE CASE OF CIT VS. LA XMI MACHINE WORKS 290 ITR 667 (SUPREME COURT) THE HONBLE SUPREME COUR T HAS CONSIDERED THE TOTAL TURNOVER AND HELD THAT SALES TAX AND EXCISE DUTY DO NOT HAVE ANY ELEMENT OF TURNOVER WHICH IS THE PO SITION EVEN IN THE CASE OF RENT, COMMISSION, INTEREST ETC., HENCE, THE SE DO NOT FORM PART OF TOTAL TURNOVER. THIS WAS ELABORATED AS UNDER : THE OBJECT OF THE LEGISLATURE IN ENACTING SECTION 80HHC WAS TO CONFER A BENEFIT ON PROFITS ACCRUING WITH RE FERENCE TO EXPORT TURNOVER. JUST AS COMMISSION RECEIVED BY AN ASSESSEE IS RELATABLE TO EXPORTS AND YET IT CANNOT FORM PART OF TURNOVER, EXCISE DUTY AND SALES TAX ALSO CANNOT FORM PART OF THE TURNOVER FOR THE PURPOSE OF SECT ION 80HHC. JUST AS INTEREST, COMMISSION ETC., DO NOT EM ANATE FROM THE TURNOVER SO ALSO EXCISE DUTY AND SALES T AX DO NOT EMANATE FROM SUCH TURNOVER. SINCE EXCISE DUTY AN D SALES TAX DO NOT INVOLVE ANY SUCH TURNOVER, SUCH TA XES HAVE TO BE EXCLUDED. 24. THE SAME PRINCIPLES ARE REITERATED BY THE APEX COURT IN THE CASE OF CIT VS. CATAPHARMA (INDIA) P. LTD. 292 ITR 641 (SUPREME ITA NO.5082/MUM/2006 A.Y.: 1991-1992 16 COURT). THE OTHER LEADING JUDGEMENT ON THIS ISSUE IS THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF K. RAVINDR ANATHAN NAIR VS. CIT 295 ITR 228 (SUPREME COURT) WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT PROCESSING CHARGES, WHICH ARE PART OF GROSS TOTAL INCOME, FORM AN ITEM OF INDEPENDENT INCOME LIKE RENT, COMMISSION, BROKERAGE, ETC., AND, THEREFORE, 90 PER CENT, OF THE PROCESSING CHARGES HAS ALSO TO BE REDUCED FR OM THE GROSS TOTAL INCOME TO ARRIVE AT THE BUSINESS PROFIT S AND, THEREFORE, IT HAS ALSO TO BE INCLUDED IN THE TOTAL TURNOVER IN THE FORMULA FOR ARRIVING AT THE BUSINESS PROFITS IN TERMS OF CLAUSE (BAA) OF THE EXPLANATION TO SECTION 80HHC (3). 24. EVENTHOUGH THE SAID JUDGMENT WAS GIVEN IN THE C ONTEXT OF PROVISIONS OF 80HHC APPLICABLE FOR A.Y. 1993-94, THE PRINCIPLES ESTABLISHED ARE EQUALLY APPLICABLE FOR THE A.Y. 1991 -92. IN THE LIGHT OF THE ABOVE JUDICIAL PRONOUNCEMENTS ONE HAS TO EXAMIN E WHETHER THE AMOUNT OF ` 81,00,000/- RECEIVED BY THE ASSESSEE HAS AN ELEMEN T OF TURNOVER OR NOT. AS STATED ABOVE, THE BOOKS OF ACCOU NT ITSELF INDICATES THAT THE ASSESSEE HAS RECEIVED ADVANCE AT ` 5 PER KG FOR IMPORT OF SYNTHETIC WASTE AND CONVERSION TO YARN. AS SEEN FRO M THE STATEMENT RECORDED FROM THE BROKERS, IT IS THE YARN WHICH WAS INTENDED TO BE PURCHASED BY VARIOUS PEOPLE AND THE ASSESSEE WAS HA VING LICENCE FOR IMPORT OF SYNTHETIC WASTE AND CANNOT IMPORT YARN AS SUCH, IN VIEW OF THE DIFFERENT CUSTOMS DUTY RATES. THE ASSESSEE HAS UNDERTAKEN TO COVERT THE SYNTHETIC WASTE TO YARN FOR ` 5/- PER K.G. WITH YIELD OF 90% BUT CHARGES FOR 100%. THIS INDICATES THAT THE ASSES SEE HAS UNDERTAKEN THE IMPORT OF SYNTHETIC WASTE AND IT WAS NOT AN OUTRIGHT SALE OF LICENCE AVAILABLE WITH THE ASSESSEE. AS SEEN FROM THE PAPER BOOK FILED ALSO, THE ASSESSEE DID IMPORT SYNTHETIC WASTE SUBSEQUENTLY AND VARIOUS CUSTOMS PROCEEDINGS HAVE BEEN UNDERTAKE N INCLUDING THE CONTEMPT PROCEEDINGS, VIDE ORDER OF THE HON'BLE SUP REME COURT IN PAGE NO. 479 (PAPER BOOK) IN CIVIL APPEAL NO. 2706 O F 1998. VIDE PAGE 2 OF THE ORDER THE DETAILS OF BILLS OF ENTRY B EARING NO. 102619 DATED 29.01.101, NO. 102815 DATED 15.02.1991, NO. 1 92878 DATED 20.02.1991 AND NO. 103166 DATED 19.03.1991 WERE AVA ILABLE. THE BILLS OF ENTRIES WERE IN RESPECT OF SYNTHETIC WASTE IMPORTED BY THE ASSESSEE. THESE, HOWEVER, WERE SUBJECT MATTER OF CU STOMS PROCEEDINGS AND ULTIMATELY THE MATTER WENT UP TO TH E HON'BLE SUPREME COURT BUT THIS INDICATES THAT THE ASSESSEE H AS IMPORTED SYNTHETIC WASTE ON ITS OWN, MAY BE AS PART OF ITS B USINESS IN EXPORT SALE OR DELIVERY AFTER CONVERSION TO YARN AND THIS ACTIVITY INDICATES THAT THE AMOUNTS RECEIVED WERE NOT TOWARDS OUTRIGHT SALE OF LICENCES. IF THE LICENCES WERE SOLD OUTRIGHT, THE ASSESSEE WOULD HAV E RECEIVED PREMIUM WHICH CAN TAKEN AS PROFIT WHEREAS IN THIS C ASE, THE ASSESSEE HAS RECEIVED ONLY ADVANCE FOR IMPORT OF SYNTHETIC M ATERIAL AND SUBSEQUENT CONVERSION TO YARN AT ` 5/- PER K.G. THIS INDICATES THAT THIS ACTIVITY WAS NOT RELATED TO THE EXPORT ACTIVITY. IT IS TRUE THAT THE IMPORT LICENCES WERE OUT OF THE EXPORTS MADE BY THE ASSESS EE BUT THESE IMPORT LICENCES WERE NOT SOLD AS SUCH. SINCE THE IMP ORT OF SYNTHETIC WASTE AND CONVERSION TO YARN IS A SEPARATE ACTIVITY OF THE ASSESSEE, NATURALLY THE RECEIPTS OUT OF SUCH ACTIVITY ARE TO BE CONSIDERED FOR ITA NO.5082/MUM/2006 A.Y.: 1991-1992 17 TURNOVER PURPOSES. ACCORDINGLY, WE ARE OF THE OPINION THAT THE AMOUNTS FORFEITED BY THE ASSESSEE AT ` `` ` 81,00,000/- IS TO BE TREATED AS PART OF TOTAL TURNOVER . OUR VIEW ALSO GET SUPPORT BY THE P & L ACCOUNT FILED BY THE ASSESSEE IN WHICH THE ASS ESSEE HAD SHOWN SALES ( ` 23867589) AND CASH INCENTIVES ( ` 36,26,437) WHILE WORKING OUT THE GROSS PROFIT WHEREAS THE PROFIT ON SALE OF LICENCES ( ` 2,66,728) AND FORWARD CONTRACT FORFEITURE ( ` 81,00,000) ARE SHOWN SEPARATELY IN THE ACCOUNT. THE PROFIT ON SALE OF LICENCES ARE EXC LUDED BY THE PROVISIONS OF THE ACT TO BE PART OF TOTAL TURNOVER. THEREFORE THE A.O. HAS NOT CONSIDERED THEM AS PART OF TOTAL TURNOVER A ND WHEN IT WAS CONSIDERED IN EARLIER YEARS, THESE ARE DIRECTED TO BE EXCLUDED. CONSEQUENTLY THE PROFIT ON SALE OF LICENCE SHOWN SE PARATELY BY THE ASSESSEE IN THE P & L ACCOUNT CANNOT FORM PART OF T OTAL TURNOVER WHEREAS THE AMOUNT SHOWN AS FORWARD CONTRACT FORFEI TURE BEING UNRELATED TO EXPORT ACTIVITY HAS TO BE PART O F TOTAL TURNOVER AND ACCORDINGLY, WE DIRECT THE A.O. TO TRE AT THAT AS PART OF THE TOTAL TURNOVER AND REWORK OUT THE DEDUC TION UNDER SECTION 80HHC. NEEDLESS TO SAY THAT THE AMOUNT FORFEITED HAS TO B E CONSIDERED AS PROFIT OF THE BUSINESS. GROUND IS CON SIDERED PARTLY ALLOWED. (EMPHASIS SUPPLIED) 25. FROM THE ABOVE IT IS VERY CLEAR THAT THE ASSESS EE HAS DISCLOSED ALL THE MATERIAL FACTS IN ITS AUDITED ACCOUNTS AND RETU RN OF INCOME INASMUCH AS HE TREATED ` 81,00,000/- AS BUSINESS INCOME AND THE SAME WAS UP HELD BY THE TRIBUNAL AS BUSINESS INCOME. THEREFORE, TH E VERY BASIS FOR IMPOSITION OF PENALTY THAT THE SAID ADDITION OF ` 81,00,000/- IS ADDITION U/S.68 DOES NOT SURVIVE. AS REGARDS THE CLAIM OF DEDUCTION U/S.80HHC ON THE SAID AMOUNT WE FIND THAT THE TRIBUNAL HAS HE LD THAT THE AMOUNT SHOWN AS FORWARD CONTRACT FORFEITURE BEING UNRELATE D TO EXPORT ACTIVITY HAS TO BE PART OF TOTAL TURNOVER AND ACCORDINGLY DI RECTED THE ASSESSING OFFICER TO TREAT THAT THE PART OF THE TURNOVER AND RE-WORKOUT THE REDUCTION U/S.80HHC. THUS IT IS A MATTER OF DIFFERENCE OF OP INION AND IT IS NOT THE CASE OF REVENUE THAT THE CLAIM OF DEDUCTION U/S.80H HC MADE BY THE ASSESSEE IS NOT ALLOWABLE AT ALL. 26. IN ORDER TO APPLY THE PROVISIONS OF SEC.271(1)( C), THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASS ESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. ITA NO.5082/MUM/2006 A.Y.: 1991-1992 18 27. IN A RECENT JUDGMENT OF THE HONBLE APEX COURT IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158(SC) THEI R LORDSHIPS, AFTER CONSIDERING VARIOUS DECISIONS INCLUDING DILIP N. SH ROFF VS. JCIT (2007) 291 ITR 519(SC) AND UNION OF INDIA VS. DHARAMENDRA TEXT ILE PROCESSORS (2008) 306 ITR 277(SC) HAVE OBSERVED AND HELD (PAGE 158 HEAD NOTES) AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY I T, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURAT E PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MA DE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCO RRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING IN ACCURATE PARTICULARS IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT C LAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY TH E ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSE E CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS AR E FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS 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 INCORRECT OR ERRONEOUS O R 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 REGARDI NG THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNO T AMOUNT TO FURNISHING INACCURATE PARTICULARS 28. IN CIT VS. M/S. SIDHARTHA ENTERPRISES, LUDHIANA (2010) 322 ITR 80 (P&H)., THEIR LORDSHIPS WHILE DISTINGUISHING THE DE CISION IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (2008) 306 ITR 2 77(SC) HAVE HELD (HEADNOTE) :- HELD, DISMISSING THE APPEAL, THAT PENALTY ORDER U NDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, WAS IMPOSED O NLY WHEN THERE WAS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A ME RE MISTAKE. THE FINDING HAD BEEN RECORDED ON THE FACTS THAT THE FUR NISHING OF INACCURATE PARTICULARS WAS SIMPLY A MISTAKE AND NOT A DELIBERATE ITA NO.5082/MUM/2006 A.Y.: 1991-1992 19 ATTEMPT TO EVADE TAX. THE VIEW TAKEN BY THE TRIBUN AL COULD NOT BE HELD TO BE PERVERSE. 29. RECENTLY IN CIT VS. ARISUDANA SPINNING MILLS LT D. (2010) 326 ITR 429 (P&H) IT HAS BEEN HELD (HEADNOTE) : HELD, DISMISSING THE APPEAL, THAT WHEN THE RETURNS OF INCOME WERE FILED, THE ISSUE WITH REGARD TO ENTITLEMENT OF DEDU CTION UNDER SECTION 80-IA ON THE PROFITS DERIVED FROM TRADING TURNOVER, I.E. TRADING IN RAW WOOL AND KNITTED CLOTH WAS DEBATABLE AND THIS ISSUE WAS LATER SETTLED BY THE JUDGMENT OF THIS COURT IN LIBERTY INDIA VS. CIT (2007) 293 ITR 520 (P&H) UPHELD BY THE SUPREME COURT IN LIBERTY IN DIA VS. CIT (2009) 317 ITR 218. THEREFORE, THE TRIBUNAL HAS RI GHTLY COME TO THE CONCLUSION THAT THE ASSESSEE DID NOT DELIBERATELY O R CONSCIOUSLY CONCEAL THE TRUE PARTICULARS OF INCOME NOR FURNISHE D INACCURATE PARTICULARS OF INCOME. THE DELETION OF PENALTY WAS JUSTIFIED. 30. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS AND KEEPING IN VIEW THAT IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT FILED THE COMPLETE PARTICULARS OF THE CLAIM OR THE CLAIM MADE BY THE ASSESSEE WAS FOUND TO BE FALSE OR UNTRUE BASED ON NO MATERIAL OR BONAFIDE BELIEF WE ARE OF THE VIEW THAT THERE IS NO CONCEALMENT ON THE PAR T OF THE ASSESSEE WHICH MAY CALL FOR LEVY OF PENALTY U/S.271(1)(C) OF THE ACT . ACCORDINGLY THE PENALTY IMPOSED BY THE ASSESSING OFFICER AND CO NFIRMED BY THE LD. CIT(A) IS DELETED. THE GROUNDS TAKEN BY THE ASSESSE E ARE THEREFORE ALLOWED. 31. IN THE RESULT, ASSESSEE'S APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 4 TH DAY OF FEBRUARY, 2011. SD/- (T.R. SOOD) (ACCOUNTANT MEMBER) SD/- (D.K. AGARWAL) (JUDICIAL MEMBER) MUMBAI, DATED 4 TH FEBRUARY, 2011. JANHAVI ITA NO.5082/MUM/2006 A.Y.: 1991-1992 20 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- , MUMB AI 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH , MUM BAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI