Malbros Investments Ltd., New Delhi V. DCIT, New Delhi

ITA 5087/DEL/2011

• Counselvise Citation: 508720114 RSA 2011
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 17-01-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 15-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: AJAY VOHRA SHRI GAURAV JAIN; PINKY KAPOOR CAS
• Keywords: Speculation loss; Avoidance of tax; Onus to prove
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI. BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL I.T.A. NOS. 5087 & 5088 (DEL)/2011 ASSESSMENT YEARS: 2001-02 & 2002-03 MALBROS INVESTMENTS LTD. DEPUTY COMMISSIONER OF (NOW KNOWN AS EICHER MOTORS LTD.), INCOM E-TAX, CIRCLE 11(1), 3 RD FLOOR, SELECT CITY WALK, VS. NEW DELHI. A-3, DISTRICT CENTRE, SAKET, NEW DELHI-110017. PAN: AAACM4360L (APPLICANT) (RESPONDENT) APPELLANT BY : SHRI AJAY VOHRA, ADVOCATE, SH RI GAURAV JAIN & MS. PINKY KAPOOR, C.AS RESPONDENT BY: SHRI R.S. NE GI, SR. D.R. DATE OF HEARIN G: 17.01.2012 DATE OF PRONOUN CEMENT: 25.01.2012. ORDER PER K.G. BANSAL : A.M BOTH THESE APPEALS WERE ARGUED IN A CONSOLIDATED MANNER BY THE LD. COUNSEL FOR THE ASSESSEE AND THE LD. SENIOR D.R. AS A COMMON ISSUE IS INVOLVED. IT IS THE CASE OF BOTH THE PARTIES TH AT THE FACTS OF TWO YEARS ARE IDENTICAL AND THE COMMON QUESTION IS REGARDING THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE GROUND TAKEN BY THE AS SESSEE IN THE APPEAL FOR ASSESSMENT YEAR 2001-02 IS THAT THE LD. CIT(APP EALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE PENALTY OF RS. 5,10,286/- LEVIED BY THE AO U/S ITA NOS. 5087&5088(DEL)/2011 2 271(1)(C). THE GROUND IN THE APPEAL FOR ASSESSME NT YEAR 2002-03 IS THAT THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE PENA LTY OF RS. 4,28,400/- LEVIED BY THE AO UNDER THE AFORESAID PROVISION. IN THE GROUND IT IS CLARIFIED THAT THE LD. CIT(APPEALS) WRONGLY MENTIO NED THE AMOUNT FOR THIS YEAR ALSO AT RS. 5,10,986/-. THE APPEALS WERE AR GUED WITH REFERENCE TO THE FACTS FOR ASSESSMENT YEAR 2001-02. THEREFORE, WE WILL BE DESCRIBING THE FACTS OF THIS YEAR WHILE DISPOSING OF BOTH THE P ENALTIES. 2. THE FACTS ARE THAT THE RETURN DECLARING LOSS OF RS. 32,87,247/- WAS FILED ON 29.10.2001. THE ASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUING NOTICE U/S 143(2). IT WAS FOUND THAT TH E ASSESSEE-COMPANY IS ENGAGED IN INVESTMENT BUSINESS. COMING TO THE SP ECIFIC ISSUE WHICH LED TO THE LEVY OF PENALTY, THE ASSESSEE WAS REQUIRED T O FURNISH THE DETAILS OF CONSULTANCY EXPENDITURE. THE DETAILS WERE FILE D. THE DETAILS SHOWED THAT AN EXPENDITURE OF RS. 12.92 LAKH WAS INCUR RED UNDER THIS HEAD AS THE AMOUNT PAID TO SHRI SANDILYA. IT WAS SUBMITTED THAT THE AMOUNT HAS BEEN PAID TO HIM FOR LIAISON WORK WITH INTERNAL AND EX TERNAL AUDITORS, GETTING THE ACCOUNTS AUDITED AND RENDERING SECRETARIAL AND LEGAL SERVICES IN THE MATTERS OF COMPANY LAW. HOWEVER, THE ASSESSEE WAS NOT ABLE TO FILE THE INVOICE OR THE BILL. OPPORTUNITY WAS ALSO GRANTED TO PRODUCE SHRI ITA NOS. 5087&5088(DEL)/2011 3 SANDILYA FOR VERIFICATION OF THE EXPENDITURE. HE WAS NOT PRODUCED FOR THIS PURPOSE. IN THESE CIRCUMSTANCES, IT HAS BE EN HELD THAT SINCE IT HAS NOT BEEN PROVED THAT THE EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS, IT IS NOT DEDUCTIBLE IN COMPUTING THE B USINESS INCOME. IT WAS ALSO MENTIONED THAT THE ASSESSEE HAS NOT CARRIE D OUT ANY BUSINESS ACTIVITY IN THIS YEAR, WHICH INVOLVES DEVOTING OF CONSTAN T ATTENTION, LABOUR AND TIME. ALTHOUGH THE CONCEPT IS WIDE BUT IT FUND AMENTALLY INVOLVES THE IDEA OF CONTINUOUS EXERCISE OF ACTIVITIES. THE REFORE, THE EXPENDITURE IS OTHERWISE ALSO NOT ADMISSIBLE WHEN SEEN IN THE CONTEXT OF THE PROVISION CONTAINED IN SECTIONS 14A AND 28. FINALLY, THE TOTAL INCOME OF THE ASSESSEE HAS BEEN COMPUTED AT RS. 36,09,430/- IN T HE ASSESSMENT ORDER DATED 30.09.2003. A NOTE WAS ALSO RECORDED THAT THE DISCUSSION AND THE ADDITION WARRANT INITIATION OF PENALTY U/S 271( 1)(C). 2.1 THE PENALTY PROCEEDINGS INITIATED AS AFORESAI D WERE COMPLETED ON 25.02.2009 BY LEVYING THE PENALTY OF RS. 5,10,986 /-, BEING THE MINIMUM PENALTY LEVIABLE UNDER THE PROVISION. THE AO REF ERRED TO THE STAND OF THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS THAT THE A MOUNT WAS PAID FOR CONSULTANCY SERVICES. HOWEVER, NO EVIDENCE WHATS OEVER COULD BE PRODUCED IN RESPECT OF RENDERING OF SERVICES. T HEREFORE, THE AMOUNT WAS ITA NOS. 5087&5088(DEL)/2011 4 DISALLOWED IN COMPUTING THE TOTAL INCOME. THIS I SSUE WAS SUBJECT MATTER OF APPEAL UP TO THE LEVEL OF THE APPELLATE TRIBUNAL, WHICH CONFIRMED THE ACTION OF THE AO. THE CASE OF THE ASSESSEE IN TH E PENALTY PROCEEDINGS IS THAT SHRI SANDILYA IS AN EXPERT PROFESSIONAL HAV ING VERY LONG EXPERIENCE. IT APPEARS THAT THE ASSESSEE HAD DEDUCTED TAX AT SOURCE FROM PAYMENT MADE TO SHRI SANDILYA IN RESPECT OF WHICH A CERTI FICATE WAS ISSUED TO HIM. A COPY OF THIS CERTIFICATE WAS ALSO PRODUCED IN P ENALTY PROCEEDINGS. THE AO CONSIDERED THE EVIDENCE AND THE SUBMISSIONS. HOWEVER, HE DID NOT AGREE WITH THE ASSESSEE. IT IS MENTIONED THAT TH E ASSESSEE COULD NOT PRODUCE ANY AGREEMENT FOR RENDERING OF CONSULTANCY SERVICES . THE PAYMENT IS STATED TO BE MADE ON A MUTUALLY AGREE D BASIS. THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE THAT SHRI SANDILYA ACTUALLY RENDERED ANY SERVICE TO THE ASSESSEE. IN THIS CONTEXT HE AGA IN REFERRED TO HIS FINDING IN THE ASSESSMENT ORDER THAT NO BUSINESS ACTIVITY H AD BEEN CARRIED OUT IN THIS YEAR WHICH NECESSITATED THE AVAILMENT OF THE CONSUL TANCY SERVICES. THEREFORE, IT HAS BEEN CONCLUDED THAT THE AMOUNT HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT IN ORDER TO AVOID PAYMEN T OF TAX. THE PROVISION CONTAINED IN EXPLANATION-1 TO SECTION 271(1)(C) HA S ALSO BEEN INVOKED AND IT IS HELD THAT THE PROVISION IS APPLICABLE TO TH E FACTS. THEREFORE, IT IS FOR THE ASSESSEE TO FURNISH EXPLANATION AND TO SUBSTANTIATE THE EXPLANATION, FAILING ITA NOS. 5087&5088(DEL)/2011 5 WHICH THE ADDITION OR DISALLOWANCE MADE IS DEE MED TO BE THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. THE CASE OF THE ASSESSEE FALLS UNDER THIS PROVISION. THEREFORE , AS MENTIONED EARLIER, PENALTY OF RS. 5,10,986/- HAS BEEN IMPOSED. 3. THE LEVY WAS AGITATED BEFORE THE LD. CIT(APPEA LS). THE ASSESSEE TOOK UP THREE GROUNDS BEFORE HIM BUT THE MAIN GROUN D WAS THAT THE AO GROSSLY ERRED ON FACTS AND IN LAW IN LEVYING THE PENALTY OF RS. 5,10,986/-. IT WAS SUBMITTED THAT SHRI SANDILYA HAD RENDERED SERVICES IN THE AREA OF LIAISON WITH STATUTORY, INTERNAL AND TAX AUDITOR S, THE AUDIT OF THE ACCOUNTS UNDER THE COMPANIES ACT, TAX MATTERS, SECRETARIA L AND LEGAL SERVICES AND FILING OF RETURNS AS PER THE COMPANIES ACT. HE ALSO RENDERED OTHER LEGAL SERVICES AND HELPED THE COMPANY IN FORMULATION OF BUSINESS STRATEGY. HE IS A GRADUATE FROM IIM, AHEMDABAD, AND HAS EXTENSIV E EXPERIENCE IN THESE AREAS. AN AGREEMENT WAS ENTERED INTO WITH HIM ON 14.200 (AS PER PAPER BOOK THE AGREEMENT IS DATED 5.4.2001). THE ASS ESSEE-COMPANY HAD NOT ENGAGED THE SERVICES OF ANY EMPLOYEE AND, THEREFO RE, ALL THE AFORESAID FUNCTIONS REQUIRED SERVICES OF SOME PERSON. SUCH SERVICES WERE AVAILED OF BY APPOINTMENT OF SHRI SANDILYA. SINCE THE SERVI CES RENDERED BY HIM WERE IN THE NATURE OF LIAISON AND SUPERVISION, I T WAS NOT POSSIBLE TO ITA NOS. 5087&5088(DEL)/2011 6 DOCUMENT THE RENDERING OF SERVICES. HE IS NOT RE LATED TO THE ASSESSEE IN ANY MANNER. THE PAYMENT HAS BEEN MADE TO HIM BY W AY OF ACCOUNT PAYEE CHEQUES. THE AO HAS NOT RECORDED ANY FINDING THAT THE MONEY HAS BEEN RETURNED TO THE ASSESSEE BY SHRI SANDILYA, OR T HE TRANSACTION IS SHAM OR BOGUS. HE HAS RETURNED THIS AMOUNT IN HIS INCOME- TAX RETURN AND THE ASSESSEE HAD ALSO DEDUCTED TAX AT SOURCE FROM TH E PAYMENT MADE TO HIM. COMING TO THE FINDING THAT NO SERVICE HAD BEEN REN DERED BY HIM AS NO BUSINESS WAS CONDUCTED BY THE ASSESSEE, IT WAS SU BMITTED THAT NO CORE BUSINESS ACTIVITY WAS PERFORMED IN THIS YEAR. HO WEVER, THIS DOES NOT MEAN THAT BUSINESS WAS NOT CARRIED OUT. THE MANAGEM ENT WAS WAITING FOR RIGHT TIME TO MAKE NEW INVESTMENTS, MONITORING EXI STING INVESTMENTS FOR REALIZATION ETC. THIS CONSTITUTES BUSINESS ACT IVITY ALTHOUGH NO INCOME WAS EARNED. THE LD. CIT(APPEALS) CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE HER. SHE REFERRED TO TH E PROVISION CONTAINED IN EXPLANATION 1(B) OF SECTION 271(1)(C). THIS PRO VISION CASTS A BURDEN TO OFFER EXPLANATION ON THE ASSESSEE AND TO SUBSTA NTIATE THE EXPLANATION. IF THESE THINGS ARE NOT DONE, THE AMOUNT ADDED OR DISALLOWED IS DEEMED TO BE THE INCOME IN RESPECT OF WHICH PARTICULARS OF HAVE BEEN CONCEALED. RELYING ON THIS PROVISION AND VARIOUS CASES, T HE LEVY OF PENALTY HAS BEEN CONFIRMED. ITA NOS. 5087&5088(DEL)/2011 7 3.1 AT THIS STAGE, WE MAY ALSO DEAL WITH TH E DECISION OF THE TRIBUNAL IN QUANTUM APPEAL IN WHICH THE DISALLOWANCE HAD BE EN UPHELD. IN THE CONSOLIDATED ORDER DATED 30.05.2008 PASSED FOR ASSESSMENT YEARS 2001- 02, 2002-03 AND 2003-04, IT HAS BEEN MENTIONED THA T THE CASE OF THE ASSESSEE IS BASED ON THE AGREEMENT DATED 03.04.2 000 AND CONFIRMATION LETTER OF SHRI SANDILYA REGARDING RECEIPT OF CON SULTANCY FEE OF RS. 12.92 LAKH. THERE IS NO EVIDENCE REGARDING RENDERING OF ACTUAL SERVICE EXCEPT MAKING VERBAL SUBMISSIONS OF THE NATURE OF SERV ICES RENDERED BY HIM. THE AGREEMENT IS EFFECTIVE FOR ASSESSMENT YEAR 2000-01, BUT IT DOES NOT SPECIFY ANY PARTICULAR AMOUNT, WHICH HAS TO BE DECIDED AS MUTUALLY AGREED UPON AT A LATER DATE. THE FIRST PAYMEN T OF RS. 10.00 LAKH HAS BEEN MADE ON 01.04.2000 EVEN PRIOR TO 03.04.2000 WHEN THE AGREEMENT WAS ENTERED INTO. THE BALANCE AMOUNT OF RS. 2.92 LAK H WAS PAID ON 01.10.2000. THE BASIS OF QUANTIFICATION OF THE AMO UNT HAS NOT BEEN EXPLAINED. IT IS FURTHER MENTIONED THAT NO BUS INESS ACTIVITY HAS BEEN CARRIED OUT IN THIS YEAR. THE INVESTMENT IN SHAR ES CONTINUES TO BE AS IT WAS IN THE EARLIER YEAR. THE BURDEN TO PROVE THAT TH E EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS IS ON THE ASSESSEE AND THE EXISTENCE OF THE AGREEMENT AND PAYMENT DO NOT DISCHARGE TH IS BURDEN. THEREFORE, ITA NOS. 5087&5088(DEL)/2011 8 THE DISALLOWANCE HAS BEEN UPHELD. FOR READY R EFERENCE, THE CONCLUDING PARAGRAPH NOS. 38 AND 39 OF THE DECISION ARE REPR ODUCED BELOW:- 38. THE ASSESSEE HAS GIVEN EMPHASIS UPON THE SE RVICE AGREEMENT DATED 3 RD APRIL, 2000 AND CONFIRMATION LETTER OF SHRI S. SANDILYA CONFIRMING THE RECEIPT OF A SUM OF RS. 12.92 LAKH AS CONSULTANCY FEE. NO EVIDENCES OR DETAIL S WERE FILED OR FURNISHED SHOWING SHRI SANDILYA RENDERING ANY S ERVICES TO THE ASSESSEE COMPANY DURING THE YEAR EXCEPT MAKI NG A VERBAL SUBMISSION AS TO THE NATURE OF WORKS ALLEG EDLY DONE BY MR. SANDILYA. THE SERVICE AGREEMENT IS DATED 3 RD APRIL, 2000 EFFECTIVE FOR THE FINANCIAL YEAR 2000-01. THE AMOUNT OF CONSULTANCY CHARGES PAYABLE TO MR. SANDILYA IS NOT MENTIONED IN THE AGREEMENT KEEPING IT OPEN TO BE MUTUALL Y DECIDED LATER ON. THE FIRST PAYMENT OF RS. 10,00,000/- BE ING CONSULTANCY CHARGES WERE PAID ON 1.4.2000 ALLEGED LY FOR THE PERIOD APRIL, 2000 AS MENTIONED IN THE TDS CERT IFICATE ISSUED BY THE ASSESSEE COMPANY. THE TAX OF RS. 57,500/ - WAS DEDUCTED AND WAS THEN PAID TO THE GOVERNMENT ACCOUN T ON 5.4.2000. WE FAIL TO UNDERSTAND THE BASIS OR THE CRITERIA ON WHICH A PAYMENT OF RS. 10,00,000/- WAS EVEN MADE O N 1.4.2000 BEFORE ENTERING INTO AGREEMENT DATED 3.4.2000. THE REST AMOUNT OF RS. 2,92,000/- WAS FURTHER PAID ON 1.10.2000 DURING THE YEAR. THE BASIS TO QUANTIFY THE AMOUNT PAID ON TWO DATES IS NOT EXPLAINED. 39. FURTHER, THE ASSESSEE HAS FAILED TO PRODUCE ANY ADEQUATE EVIDENCES SHOWING THAT MR. SANDILYA WAS ACTUALLY RENDERING SERVICES TO THE ASSESSEE. THE ASSESSE E COMPANY HAS EARNED ONLY DIVIDEND INCOME ON INVESTMENT IN SHA RES PURCHASED IN EARLIER YEAR. NO BUSINESS ACTIVITY HAS BEEN SPECIFICALLY CARRIED OUT IN THIS YEAR. THE INV ESTMENTS IN SHARES WERE MADE IN EARLIER YEARS. THE CIT(AP PEALS) HAS APPRECIATED THE FACTS OF THE CASE AND LEGAL POS ITION IN THEIR RIGHT AND CORRECT PERSPECTIVE. THE CIT(A) HAS GI VEN SOUND REASONS AND BASIS IN CONFIRMING THE DISALLOWA NCE OF CONSULTANCY CHARGES. IT IS WELL SETTLED THAT THE BURDEN TO PROVE AND ESTABLISH THAT THE EXPENDITURES WERE INCURRED FOR THE PURPOSE OF BUSINESS IS ON THE ASSESSEE, AND MERE ITA NOS. 5087&5088(DEL)/2011 9 EXISTENCE OF AN AGREEMENT AND PAYMENT IN THAT BE HALF IS NOT SUFFICIENT TO DISCHARGE THE SAID BURDEN AS SO RIG HTLY OBSERVED BY THE CIT(A) WITH REFERENCE TO THE DECIDED CAS ES REFERRED TO IN HIS ORDER. IN THE PRESENT CASE, THE ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE ITS BURDEN BY PRODUCING OR SHOWI NG ANY PROPER EVIDENCES OF SERVICES BEING RENDERED BY S HRI SANDILYA TO THE ASSESSEE DURING THE RELEVANT YEAR UNDER C ONSIDERATION. WE, THEREFORE, UPHOLD THE CIT(A)S ORDER ON THIS ISSUE. 4. BEFORE US, IT HAS BEEN SUBMITTED THAT THE ASSES SEE IS AN INVESTMENT COMPANY OF EICHER GROUP. IT IS WHOLLY OWNED BY EICHER LTD. IT HOLDS THE SHARES OF GROUP COMPANIES AND OTHER COMPANIES BY WAY OF LONG-TERM INVESTMENTS. IT ALSO HOLDS BONDS OF INDUSTRIAL FINANCE CORPORATION OF INDIA AS SHORT-TERM INVESTMENT. THE AGGREGATE VALUE OF THE INVESTMENTS AS ON 31.03.2001 AMOUNTS TO ABOUT RS. 3.00 CRORE. 4.1 THE ISSUE REGARDING DISALLOWANCE OF CONSULTAN CY CHARGES PAID TO SHRI SANDILYA TRAVELED TO THE TRIBUNAL, WHICH DE CIDED THE MATTER IN FAVOUR OF THE REVENUE. THE PAYMENT WAS MADE IN PURSUANC E OF THE AGREEMENT DATED 05.04.2001, A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK ON PAGE NOS. 82 AND 83. THE FOLLOWING SERVICES ARE CONTEMPLATED IN THE AGREEMENT:- (I) TO GIVE SPECIALIZED ADVICE ON FORMATION AND IM PLEMENTATION OF BUSINESS STRATEGY OF THE COMPANY FROM TIME TO TIME . ITA NOS. 5087&5088(DEL)/2011 10 (II) TO LIAISE WITH GOVERNMENT OFFICIALS AND DEPARTME NTS FOR GETTING VARIOUS APPROVALS ETC. (III) TO REPRESENT THE COMPANY IN VARIOUS BUSINESS CHAMBE RS, CONFEDERATIONS ETC. (IV) TO GIVE SPECIALIZED ADVICE ON ANY OTHER ISSUES THAT MAY BE REQUIRED FROM TIME TO TIME. (V) TO COORDINATE WITH STATUTORY AND TAX AUDITORS, FI NALIZATION OF ACCOUNTS, PROVIDING SECRETARIAL, LEGAL AND TAXATI ON SERVICES AND FILING OF REQUISITE RETURNS UNDER THE COMPANIES A CT. 4.2 THE ASSESSEE-COMPANY HAS NOT EMPLOYED ANY STA FF. THUS, NO EXPENDITURE HAS BEEN DEBITED AS SALARY OR WAGES. THEREFORE, SERVICES OF A QUALIFIED PERSON WERE REQUIRED TO MEET VARIOUS STATUTORY REQUIREMENTS. SHRI SANDILYA IS AN IIM GRADUATE WITH EXPERIENC E OF 31 YEARS. HE IS ALSO GROUP CHAIRMAN OF EICHER GROUP OF COMPANIES. HIS SERVICES WERE ENGAGED FOR OVERSEEING INVESTMENT DECISIONS AND MAKING VARIOUS STATUTORY ITA NOS. 5087&5088(DEL)/2011 11 COMPLIANCES. TAX HAS BEEN DEDUCTED FROM THE PA YMENT MADE TO HIM AS REQUIRED UNDER THE LAW AND THE AMOUNT HAS BEEN RE TURNED BY HIM IN HIS TAX-RETURN. PROOF OF PAYMENT TO HIM HAS ALSO BEEN FILED BY WAY OF A CONFIRMATION LETTER DATED 03.03.2003, PLACED IN THE PAPER BOOK ON PAGE NO. 85, WHICH CONFIRMS THE RECEIPT AND FURNISHES HIS PAN. REFERENCES HAVE BEEN MADE TO THE REPLIES FURNISHED TO THE AO AND T HE LD. CIT(APPEALS), WHICH HAVE BEEN SUMMARIZED BY US EARLIER. 4.3 COMING TO THE ARGUMENTS, IT IS SUBMITTED THAT T HE ASSESSEE HAD RETURNED LOSS AND AFTER TAKING INTO ACCOUNT THE ORDER OF THE TRIBUNAL, THE ASSESSED INCOME IS STILL LOSS. THEREFORE, NO M OTIVE CAN BE ATTRIBUTED TO THE ASSESSEE REGARDING AVOIDANCE OF TAX. ALTHO UGH THE TRIBUNAL HAS DISALLOWED THE PAYMENT, IT DOES NOT LEAD TO THE INFERENCE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAD MADE FULL DISCLOSURE IN THE ACCOUNT ABOUT TH E PAYMENT. THE PROFIT & LOSS ACCOUNT SHOWS PAYMENT OF CONSULTANCY CHAR GES OF RS. 13.51 LAKH. THE ACCOUNT HAS BEEN PLACED ON PAGE NO. 99 OF T HE PAPER BOOK. THE ASSESSEE HAD FURNISHED EXPLANATION BEFORE THE AO A ND THE LD. CIT(APPEALS). THIS EXPLANATION HAS ALSO BEEN SUM MARIZED BY US. IT IS VEHEMENTLY ARGUED THAT IN VIEW OF THE AGREEMENT, DEDUCTION OF TAX AT ITA NOS. 5087&5088(DEL)/2011 12 SOURCE AND CONFIRMATION, THE EXPLANATION CANNOT BE SAID TO BE FALSE. THE PAYMENT HAS ACTUALLY BEEN MADE TO SHRI SANDILYA. THEREFORE, THE EXPLANATION IS BONA-FIDE. THUS, THE PROVISION CON TAINED IN EXPLANATION-1 TO SECTION 271(1)(C) GOES AGAINST THE LEVY OF PENA LTY. 4.4 IN REPLY, THE LD. SENIOR DR SUBMITTED THAT TH E REAL ISSUE IS AS TO WHETHER SHRI SANDILYA HAS ACTUALLY RENDERED ANY SERVICE TO THE ASSESSEE. THE TRIBUNAL HAS HELD THAT THE ASSESSEE HAS FAIL ED TO PROVE THAT ANY SERVICE WAS ACTUALLY RENDERED BY HIM AND, THEREFO RE, DISALLOWED THE CLAIM OF THE ASSESSEE. THERE ARE SURROUNDING CIRCUMSTA NCES WHICH SHOW THAT THE PAYMENT HAS NOT BEEN MADE FOR ANY GENUINE RENDER ING OF SERVICES. THE FIRST PAYMENT OF RS. 10.00 LAKH HAS BEEN MADE EVE N PRIOR TO FORMATION OF THE AGREEMENT ON 05.04.2001. NO EXPLANATION EXIS TS FOR SUCH A CONDUCT. THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS IN THIS YEAR. THEREFORE, THERE WAS NO NEED TO ENGAGE THE SERVICES OF A HIG HLY QUALIFIED PERSON. EVEN AFTER HIS EMPLOYMENT, THERE HAS BEEN NO CHAN GE IN THE INVESTMENTS. THEREFORE, IT IS ARGUED THAT THE CASE OF THE ASS ESSEE IS SQUARELY COVERED UNDER CLAUSE (B) OF EXPLANATION-1. ACCORDINGLY, I T IS VEHEMENTLY ARGUED THAT THE LEVY OF PENALTY IS JUSTIFIED ON THE FA CTS OF THE CASE. ITA NOS. 5087&5088(DEL)/2011 13 4.5 IN THE REJOINDER, IT HAS BEEN ARGUED THAT THE CIRCUMSTANCES ARE IN FAVOUR OF HOLDING THAT THE PROVISION CONTAINED IN SECTION 271(1) AND THE AFORESAID EXPLANATION-1 SUPPORT THE CASE OF THE ASSESSEE. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSIONS MADE BEFORE US. THE FACTS ARE THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 12.92 LAKH TO THE PROFIT AND LOSS ACCOUNT AS CONSULTAN CY CHARGES. NO BILL OR VOUCHER OR ANY OTHER EVIDENCE WAS FILED IN THE COU RSE OF ASSESSMENT PROCEEDINGS, HOWEVER, SUBMISSIONS WERE MADE THAT THE AMOUNT HAS BEEN PAID FOR LIAISONING WORK ETC. THE AO DISALLOWED THE PAYMENT ON VARIOUS GROUNDS WHICH HAVE ALREADY BEEN DISCUSSED BY US. IN THE PENALTY PROCEEDINGS, IT WAS FURTHER SUBMITTED THAT THE PA YMENT HAS BEEN MADE FOR RENDERING SERVICES IN VARIOUS AREAS SUCH AS LIAISO NING WITH AUDITORS TO A PERSON WHO IS A HIGHLY QUALIFIED AND EXPERIENCE D PROFESSIONAL. TAX WAS DEDUCTED AT SOURCE FROM THE PAYMENT. IT WAS ASSE RTED THAT THE PAYMENT WAS MADE IN THE COURSE OF BUSINESS. THE AO DID NOT ACCEPT THE AFORESAID EXPLANATION IN ABSENCE OF SPECIFIC EVIDENCE FOR RENDERING OF SERVICES AND EVEN THE AGREEMENT. THIS MEANS THAT THE AGREEM ENT WAS NOT FILED EVEN DURING THE PENALTY PROCEEDINGS. BEFORE THE LD. CIT (APPEALS), IT WAS ALSO SUBMITTED THAT NO DOCUMENTARY EVIDENCE COULD BE MAINTAINED LOOKING TO ITA NOS. 5087&5088(DEL)/2011 14 THE NATURE OF SERVICES RENDERED BY SHRI SANDILYA. THE AGREEMENT ENTERED INTO WITH HIM WAS FILED AT THIS STAGE OF PROCEED INGS. THEREAFTER, LEGAL SUBMISSIONS WERE MADE THAT THE ASSESSEE WAS WAI TING FOR OPPORTUNE TIME TO REALIZE OLD INVESTMENTS, MAKE NEW INVESTMENT S ETC., THEREFORE, SERVICES OF SHRI SANDILYA WERE NECESSARY. THE QUE STION IS-WHETHER, IN THESE FACTS THE ASSESSEE IS LIABLE TO BE PENALIZED OR NOT? 6. AT THIS STAGE, WE MAY DISCUSS VARIOUS DECID ED CASES RELIED UPON BY THE RIVAL PARTIES AND BRIEFLY EXAMINE THEIR IM PACT ON THE CASE. IN THE CASE OF CIT VS. ARETIC INVESTMENT PVT. LTD., (20 10) 190 TAXMAN 157 (DEL), THE AO HAD TREATED SHARE-TRADING LOSS OF RS. 1,63,83,650/- AS SPECULATIVE LOSS UNDER THE EXPLANATION TO SECTIO N 73. THE ASSESSEE AGREED TO THE AMOUNT BEING TREATED AS SPECULATIVE LOSS. THE AO ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) AND THEREAFTER IMPOSED A PENALTY OF RS. 63,16,710/-. THE PENALTY WAS DEL ETED BY THE CIT(APPEALS) AND HIS ORDER WAS CONFIRMED BY THE TRIBUNAL. IT CAME TO THE CONCLUSION THAT HAVING REGARD TO THE LOSS SUFFERED BY THE ASSESSEE AND THE NATURE OF ACTIVITY OF ITS BUSINESS, THE ASSESSEE-COMPANY WA S UNDER A BELIEF THAT THE TRANSACTIONS FORM A PART OF ITS BUSINESS. THEREFO RE, MERE TREATING THE LOSS AS SPECULATIVE LOSS DOES NOT AUTOMATICALLY RES ULTS IN INFERENCE OF ITA NOS. 5087&5088(DEL)/2011 15 CONCEALMENT. THE HONBLE COURT HELD THAT PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE DISTINCT AND INDEPEN DENT OF EACH OTHER. ALTHOUGH THE FINDINGS GIVEN IN THE ASSESSMENT OR DER WILL HAVE A BEARING ON THE PENALTY PROCEEDINGS, BUT SUCH FINDINGS ARE NOT DECISIVE AND DETERMINATIVE. THIS CASE WAS RELIED UPON FOR T HE LIMITED PROPOSITION THAT PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE DISTINCT PROCEEDINGS. WE ARE OF THE VIEW THAT NO EXCEPTI ON CAN BE TAKEN TO THIS PROPOSITION. 6.1 IN THE CASE OF CIT VS. RELIANCE PETROPRODUCT S (P) LTD., (2010) 322 ITR 158 (SC), THE QUESTION BEFORE THE HONBLE C OURT WAS-WHETHER, THE APPELLATE TRIBUNAL IS RIGHT IN LAW AND ON FACTS IN CONFIRMING THE ORDER PASSED BY THE COMMISSIONER (APPEALS) CANCELLING THE PENALTY LEVIED U/S 271(1)(C) AMOUNTING TO RS. 11,37,949/- BY THE AO IN RESPECT OF THE ADDITION, WHICH STOOD CONFIRMED? THE AO HAD MADE ADDITI ON IN RESPECT OF INTEREST EXPENDITURE AND INITIATED PENALTY PROCEE DINGS U/S 271(1)(C) OF THE ACT. THE INTEREST WAS PAID IN RESPECT OF SHARE S PURCHASED BY THE ASSESSEE ON WHICH NO DIVIDEND WAS RECEIVED. THE DISALLOWAN CE WAS MADE BY INVOKING THE PROVISION CONTAINED IN SECTION 14A. IN THE PENALTY PROCEEDINGS, IT WAS SUBMITTED THAT MERE DISALLOWANCE OF A CLA IM COULD NOT BE THE SOLE ITA NOS. 5087&5088(DEL)/2011 16 BASIS FOR LEVYING PENALTY. IN THE ASSESSMENT F OR 2000-01, THE COMMISSIONER (APPEALS) HAD DELETED SIMILAR DISALL OWANCE MADE BY THE AO AND THE TRIBUNAL HAD CONFIRMED THE ORDER OF TH E CIT(APPEALS). THE HONBLE COURT INTER-ALIA CONSIDERED THE DECISIO N IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS, (2009) 317 ITR 1, RAJASTHAN SPINNING & WEAVING MILLS, (2009) 13 SCC 448 (SC) , AND DILIP N. SHROFF VS. JOINT CIT, (2007) 291 ITR 519 (SC). THE CAS E OF THE REVENUE WAS THAT DIVIDEND INCOME HAD NOT FORMED PART OF THE TOTAL INCOME, THEREFORE, THE AO REACHED THE CORRECT CONCLUSION THAT EXCE SSIVE DEDUCTION HAD BEEN CLAIMED KNOWING THAT IT WAS INCORRECT. THE HONB LE COURT DID NOT AGREE WITH THIS SUBMISSION. IT IS MENTIONED THAT THE A SSESSEE HAD FURNISHED ALL DETAILS, WHICH WERE NOT FOUND TO BE INACCURATE. IN SUCH A SITUATION, IT IS UP TO THE ASSESSING AUTHORITY TO ACCEPT THE CLAIM O R NOT. HOWEVER, MERE NON- ACCEPTANCE WILL NOT ATTRACT PENALTY U/S 271(1)(C) . WE ARE OF THE VIEW THAT THE FACTS OF THIS CASE ARE DISTINGUISHABLE. THE ASSESSEE HAD NOT DISALLOWED THE EXPENDITURE INCURRED IN CONNECTION WITH EARNING THE DIVIDEND INCOME. THE AO COMPUTED THIS EXPENDITURE AND DI SALLOWED THE SAME. THE CLAIM OF THE ASSESSEE HAD BEEN ACCEPTED IN PAS T UP TO THE LEVEL OF TRIBUNAL, WHICH IS NOT THE CASE HERE. THE CASE I NVOLVED ASCERTAINMENT OF EXPENDITURE RELATABLE TO EARNING OF THE DIVIDEND I NCOME. THERE COULD BE A ITA NOS. 5087&5088(DEL)/2011 17 VALID DISPUTE IN COMPUTING THE APPROPRIATE AMOUNT. THERE COULD ALSO BE A DISPUTE OF INTERPRETATION OF SECTION 14A. HOWEVE R, IN THIS CASE THE QUESTION IS AS TO WHETHER THE PAYMENT TO SHRI SANDI LYA HAS ANY CONNECTION WITH THE BUSINESS AT ALL OR NOT. 6.2 IN THE CASE OF CIT VS. DEEKSHA HOLIDAYS LTD. , (2010) 186 TAXMAN 183 (DEL), THE AO INTER-ALIA MADE THREE ADDITION S/DISALLOWANCES-(I) RS. 1,47,901/- ON ACCOUNT OF SHORT-TERM CAPITAL GAINS O N SALE OF CARS; (II) RS. 6,86,436/- DISALLOWED FROM PROFESSIONAL DEVELOPME NT EXPENSES; AND (III) RS. 12,26,000/- DISALLOWED FROM ADVERTISEMENT EXP ENSES. HE ALSO LEVIED PENALTY U/S 271(1)(C), WHICH WAS UPHELD BY THE CI T(APPEALS). HOWEVER, THE TRIBUNAL SET ASIDE THE PENALTY ORDER ON THE G ROUND THAT IT WAS NOT A CASE OF CONCEALMENT OF INCOME OR FURNISHING INACC URATE PARTICULARS OF INCOME. THE HONBLE COURT CONSIDERED THE NATURE OF ADDITION/DISALLOWANCE UNDER EACH HEAD. IT HAS BEEN MENTIONED THAT THE ADDITION OF RS. 1,47,901/- HAD BEEN ACCEPTED BY THE ASSESSEE AS A MISTAKE. A SUM OF RS. 3.00 LAKH WAS DISALLOWED AS THE EXPENDITURE WAS INCURRED F OR EARNING TAX-FREE INCOME. THE AO HAD ALSO NOT RECORDED ANY FINDIN G IN THE ASSESSMENT ORDER THAT THE ASSESSEE EITHER CONCEALED INCOME O R FURNISHED INACCURATE PARTICULARS OF INCOME. FURTHER, EXPENSES WERE DI SALLOWED ON THE GROUND ITA NOS. 5087&5088(DEL)/2011 18 THAT THEY WERE NOT INCURRED FOR THE PURPOSE OF BUSINESS OR THEY HAVE BEEN CLAIMED AGAINST INCOME WHICH IS NOT LIABLE TO BE TAXED. THE PENALTY HAS BEEN LEVIED ON THE GROUND THAT THE ADDITIONS HAVE BEEN ACCEPTED. IT HAS BEEN HELD THAT ASSESSMENT AND PENALTY PROCEEDIN GS ARE INDEPENDENT OF EACH OTHER. IT IS FURTHER HELD THAT THE PENALTY IN RESPECT OF NON-DISCLOSURE OF SHORT-TERM CAPITAL GAINS COULD NOT HAVE BEEN L EVIED AS IT WAS A GENUINE MISTAKE, WHICH WAS ACCEPTED SOON AFTER IT WAS POI NTED OUT TO THE ASSESSEE. THEREFORE, CONCEALMENT OF INCOME HAS NOT BEEN PROV ED IN THE LIGHT OF THE DECISION IN THE CASE OF CIT VS. SURESH CHAND MITT AL, (2001) 251 ITR 9. IT HAS ALSO BEEN HELD THAT PENALTY IN RESPECT OF AMOU NTS DISALLOWED HAS BEEN LEVIED MERELY ON THE GROUND THAT THE ADDITIONS HA VE BEEN ACCEPTED AND APPEAL HAS NOT BEEN FILED AGAINST THE ASSESSMENT O RDER. SINCE NO INDEPENDENT ENQUIRY WAS MADE IN PENALTY PROCEEDINGS , THE DEPARTMENT HAS NOT DEMONSTRATED THAT THE ASSESSEE HAD CONCEALE D INCOME. WE ARE OF THE VIEW THAT THE FACTS OF THIS CASE ARE ALSO DIST INGUISHABLE. IN SO FAR AS ADDITION IS CONCERNED, THE RATIO IN THE CASE OF SURESH CHAND MITTAL (SUPRA) HAS BEEN FOLLOWED. NO ADDITION OF ANY INCOME HAS BEEN MADE IN THIS CASE. AS FAR AS DISALLOWANCES ARE CONCERNED, NOTHIN G FURTHER HAD BEEN BROUGHT ON RECORD IN THE COURSE OF PENALTY PROCEE DINGS. IN THIS CASE, INDEPENDENT HEARING WAS MADE IN PENALTY PROCEEDINGS . THE ASSESSEE ALSO ITA NOS. 5087&5088(DEL)/2011 19 FILED THE AGREEMENT WITH SHRI SANDILYA. AFTER CO NSIDERING THE WHOLE MATERIAL, IT WAS RECORDED THAT THE ASSESSEE IS LIABLE TO BE PENALIZED AS THE BURDEN CAST ON IT UNDER EXPLANATION-1 HAS NOT BEEN DISCHARGED. THE ASSESSEE HAD NOT ACCEPTED THE ADDITION AND THE MA TTER HAD TRAVELED UP TO THE TRIBUNAL. THESE DEVELOPMENTS HAVE ALSO BEEN T AKEN INTO ACCOUNT BY THE LOWER AUTHORITIES. 6.3 COMING TO THE DECISIONS RELIED UPON BY THE LD . SENIOR DR, IN THE CASE OF UNION OF INDIA & OTHERS VS. DHARMENDRA TEXTILE PROCESSORS & OTHERS, (2008) 306 ITR 277 (SC), IT HAS BEEN HELD THAT PROCEEDINGS UNDER SECTIONS 276C AND 271(1)(C) ARE DIFFERENT IN NAT URE. IN THE CASE OF PENALTY, THE WHOLE MATTER HAS TO BE DECIDED AS PE R STATUTORY LANGUAGE WHICH INCLUDES THE EXPLANATION TO SECTION 271(1 )(C) ALSO. THE LEVY IS CIVIL IN NATURE AND, THEREFORE, WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT. THE RATIO OF THE CASE IS THAT THE PROCEDURE TO BE ADOPTED FOR LEVY OF PENALTY IS PROVIDED IN THE SECTION ITSELF. IT IS FOR THE ASSESSEE TO TENDER EXPLANATION AND THEREAFTER FOR THE ASSESSING OFFI CER TO EXAMINE AS TO WHETHER SUCH EXPLANATION IS BONA FIDE OR NOT. THUS, ARGUMENTS REGARDING LACK OF BONA FIDE ARE NOT MATERIAL IN DECIDING T HE APPEALS. FURTHER, THE ARGUMENT THAT NO TAX IS PAYABLE ON FINALLY ASSE SSED INCOME IS NOT MATERIAL ITA NOS. 5087&5088(DEL)/2011 20 IN VIEW OF THIS DECISION. THE ARGUMENT ALSO LOOS ES WEIGHT IN VIEW OF EXPLANATION-4 TO SECTION 271(1)(C). 6.4 THE QUESTION BEFORE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION (P) LTD., (2010) 327 ITR 5 10, WAS-WHETHER, THE ITAT ERRED IN DELETING THE PENALTY IN RESPECT OF TWO SUMS AMOUNTING TO RS. 4.74 LAKH IMPOSED BY THE AO UNDER SECTION 271(1)(C) OF THE ACT? IN THIS CASE, THE CLAIMS OF THE ASSESSEE REGARDING DEDUCTION OF INCOME-TAX AND LOSS ON SALE OF ASSETS WERE DISALLOWED. T HE EXPLANATION OF THE ASSESSEE WAS THAT THIS HAPPENED DUE TO OVER SIGHT. THE TRIBUNAL DELETED THE PENALTY BY MENTIONING THAT NOBODY WOULD CLAIM D EDUCTION OF INCOME-TAX TO EVADE PAYMENT OF TAX. IT ACCEPTED THE CONTENT ION THAT THE ERROR OCCURRED DUE TO OVERSIGHT AND THERE WAS A BONA FIDE MIST AKE. THE HONBLE COURT REVERSED THIS FINDING. IN DOING SO, THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. (SUPRA) WAS ALSO CONSIDERED. IT HAS BEEN ME NTIONED THAT MERE SUBMITTING A CLAIM, WHICH IS INCORRECT IN LAW, WOU LD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF INCOME. BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE HAS TO BE BONA FIDE. IF SUCH A CLAIM IS MALA FIDE, EXPLANATION-1 WOULD COME INTO PLAY. ON THE FAC TS, IT WAS HELD A GENERAL PROPOSITION THAT A PERSON WOULD NEVER CLAIM INC OME-TAX TO AVOID ITA NOS. 5087&5088(DEL)/2011 21 PAYMENT OF TAX CANNOT BE ACCEPTED. THE ASSESSE E HAS NOT EXPLAINED THE CIRCUMSTANCES IN WHICH THE MISTAKE WAS COMMITTED. THEREFORE, THE EXPLANATION IS NOT BONA FIDE. 6.5 THE LD. COUNSEL SUBMITTED THAT THE CASE OF DH ARMENDRA TEXTILE PROCESSORS (SUPRA) WAS CONSIDERED IN THE CASE OF UNION OF INDIA VS. RAJASTHAN SPINNING & WEAVING MILLS, (2009) 8 SCALE 231, IN WHICH IT IS MENTIONED THAT THIS DECISION IS REFERRED TO IN A LMOST ALL CASES OF PENALTY AS IF IT LAYS DOWN THAT WHENEVER AN ADDITION IS M ADE, THE PENALTY WOULD BECOME AUTOMATICALLY LEVIABLE AND THAT THE AUTHOR ITY HAS NO DISCRETION IN THE MATTER. THERE IS NO REASON TO UNDERSTAND O R READ THE DECISION IN THIS MANNER. THIS VERY DECISION WAS CONSIDERED BY DEL HI HIGH COURT IN THE CASE OF CIT VS. SHYAM TEX INTERNATIONAL LTD. IN I TA NO. 321/2010 DATED 06.08.2010, A COPY OF WHICH HAS BEEN PLACED ON R ECORD. IN PARAGRAPH NO. 5, IT HAS BEEN MENTIONED THAT IN THE OPINION OF T HE COURT, THIS DECISION LAYS DOWN THAT MENS REA IS NOT ESSENTIAL FOR IMPOSING PENALTY FOR BREACH OF CIVIL OBLIGATION. HOWEVER, MERELY MAKING A CLAIM , WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME. ITA NOS. 5087&5088(DEL)/2011 22 7. WHEN WE CONSIDER THE FACTS OF THE CASE IN THE LIGHT OF AFORESAID DECISIONS, IT WILL BE SEEN THAT THE ASSESSEE C LAIMED PAYMENT OF PROFESSIONAL CHARGES IN TWO YEARS. THE EXPENDIT URE IN BOTH THE YEARS IS SUBSTANTIAL COMPARED TO OTHER EXPENSES DEBITED IN PROFIT AND LOSS ACCOUNT. THE OTHER EXPENSES APART FROM INTEREST ARE RAT HER NOMINAL, BEING AUDITORS REMUNERATION, RATES AND TAXES AND MISCE LLANEOUS, AGGREGATING TO ABOUT RS. 22,000/- IN ASSESSMENT YEAR 2001-02. THE MAJOR EXPENDITURE IS IN RESPECT OF INTEREST OF RS. 19.14 LAKH. IN RES PECT OF PROFESSIONAL CHARGES, ADMITTEDLY THERE IS NO EVIDENCE TO PROVE THAT TH EY WERE INCURRED FOR THE PURPOSE OF BUSINESS. THE OSTENSIBLE REASON IS THAT LOOKING TO THE NATURE OF SERVICES, NO DOCUMENTATION COULD BE MADE IN RESPEC T OF SERVICES RENDERED BY SHRI SANDILYA. WE DO NOT FIND ANY SUBSTANCE IN THIS PART OF THE ARGUMENT. FURTHER, NO BASIS HAS BEEN PROVIDED F OR COMPUTING THE PAYMENT EITHER IN THIS OR IN THE NEXT YEAR. THIS HAS TO BE SEEN IN THE CONTEXT OF THE FACT THAT NO BUSINESS HAS BEEN CONDUCTED IN THESE TWO YEARS AND THERE IS NO CHANGE IN THE INVESTMENTS ALSO. EVEN AFTER CONFIRMATION OF THE DISALLOWANCE BY THE TRIBUNAL, THE ASSESSEE COULD N OT BRING ANY EVIDENCE ON RECORD IN RESPECT OF AVAILMENT OF ANY SERVICE FROM SHRI SANDILYA. IT HAS NOT SHOWN ANY EAGERNESS EVEN IN THE FACE O F POSSIBLE LEVY OF PENALTY TO FILE AFFIDAVIT OR PRODUCE SHRI SANDILYA TO EXP LAIN THE NATURE OF SERVICES ITA NOS. 5087&5088(DEL)/2011 23 RENDERED BY HIM. THEREFORE, MERE SHOWING THE EXP ENDITURE UNDER A SEPARATE HEAD CONSULTANCY CHARGES DOES NOT LE AD TO INFERENCE THAT ALL THE FACTS WERE DISCLOSED. ULTIMATELY WHEN THE AGREEMENT WAS FILED, A CURIOUS FACT WAS NOTICED THAT A SUM OF RS.10.0 0 LAKH HAD ALREADY BEEN PAID TO HIM. THEREFORE, WE TEND TO AGREE WITH T HE LD. DR THAT THE PAYMENT HAS NO NEXUS WHATSOEVER WITH THE BUSINESS OF THE ASSESSEE AND THAT THE EXPLANATION FURNISHED BY THE ASSESSEE IS NOT BON A FIDE. ACCORDINGLY, THE LEVY OF PENALTY IS UPHELD. . 8. THE FACTS OF ASSESSMENT YEAR 2002-03 ARE ADM ITTEDLY IDENTICAL WITH THE FACTS OF THIS YEAR. THEREFORE, THE LEVY OF P ENALTY FOR THIS YEAR IS ALSO UPHELD. 9. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. SD/- SD/- (RAJPAL YADAV) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA ITA NOS. 5087&5088(DEL)/2011 24 COPY OF THE ORDER FORWARDED TO:- MALBROS INVESTMENTS LTD. (NOW EICHER MOTORS LTD.), NEW DELHI. DCIT, CIRCLE 11(1), NEW DELHI. CIT(A) CIT, THE D.R., ITAT, NEW DELHI. ASSISTANT REGISTRAR.