Appeal details
Counselvise Citation
[2012] 119 COUNSELVISE.COM (IT) 8651 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 2 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-10-2012
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
G
Next Hearing Date
27-09-2012
Assessment Year
2003-2004
Appeal Filed On
11-07-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER.. I.T.A. NO.5258/MUM/2011. ASSESSMENT YEAR : 2003-04. I.T.A. NO. 5257/MUM/2011 ASSESSMENT YEAR : 2004-05. DY. COMMISSIONER OF INCOME-TAX, M/S GELTEC P. LTD. 10(2), MUMBAI. VS. (FORMERLY KNOWN AS BANNER PHARMACAPS INDIA PVT.LTD .) CAPSULATION PREMISES, 1 ST FLOOR, SIONS TROMBAY ROAD, DEONAR, MUMBAI-88. PAN AAACB1752H APPELLANT. RESPONDENT . APPELLANT BY : SHRI AMA R DEEP. RESPON DENT BY : SHRI D.V. LAKHANI. DATE OF HEARING : 27-09-2012 DATE OF PRONOUNCEMENT : 10-10-2012. O R D E R PER P.M. JAGTAP, A.M. : THESE TWO APPEALS ARE PREFERRED BY THE REVENUE AGA INST TWO SEPARATE ORDERS PASSED BY THE LEARNED CIT(APPEALS)-21, MUMBAI DATED 05-04-2011 AND 06-04- 2011 WHEREBY HE CANCELLED THE PENALTIES OF RS.87,05 ,126/- AND RS.9,98,154/- IMPOSED BY THE AO U/S 271(1)(C). 2 ITA NO.5257/MUM/2011 ITA NO.5258/MUM/2011 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING IN PHARMACEUTICAL. THE RE TURNS OF INCOME FOR THE TWO YEARS UNDER CONSIDERATION WERE FILED BY IT ALONG WI TH TAX AUDIT REPORTS. IT CAME TO THE LIGHT THAT THERE WAS FRAUD/DEFALCATION COMMITTE D BY ONE SHRI S.G.TEREDESAI WHO WAS VICE PRESIDENT, FINANCE OF THE ASSESSEE COM PANY DURING THE PERIOD FROM 2001 TO 2006. KEEPING IN VIEW THIS FACT, A SPECIAL AUDIT U/S 142(2A) WAS ORDERED BY THE AO INITIALLY FOR ASSESSMENT YEAR 2003-04 WIT H THE PERMISSION OF THE CONCERNED CIT (ADMINISTRATION). THE SPECIAL AUDITOR S SUBMITTED THEIR AUDIT REPORT ON THE BASIS OF WHICH VARIOUS ADDITIONS/DISALLOWANC ES WERE MADE BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE FOR ASSESSMENT YEAR 20 03-04 AGGREGATING TO RS.6,22,29,314/-. ON APPEAL, THE LEARNED CIT(APPEAL S) ALLOWED RELIEF OF RS.3,85,41,616/- TO THE ASSESSEE AND SUSTAINED THE ADDITIONS/DISALLOWANCES MADE BY THE AO TO THE EXTENT OF RS.2,36,87,698/-. THE DETAI LS OF THE RELIEF ALLOWED BY THE LEARNED CIT(APPEALS) AND ADDITIONS AND DISALLOWANC ES SUSTAINED BY HIM ARE AS UNDER : DISALLOWANCES HEAD 143(3) R.W.S. 142(2A) RELIEF ALLOWED BY CIT(A) ORDER DT.15- 05-2008 DISALLOWED ACCEPTED BY THE ASSESSEE. ADD:- PURCHASE OF RAW MATERIAL & PACKING MATERIAL 7,506,173 6,875,096 631,077 PURCHASE OF STORES & SPARES 31,956 - 31,956 REPAIRS TO ASSETS 101,324 - 101,324 SUNDRY CREDITORS 14,413,143 14,412,143 1, 000 DISALLOWANCE OF VARIOUS EXPENSES 3,021,579 225,385 2,796,194 NON-GENUINE IMPORTS 19,698,058 16,548,379 3,149,6 79 FOREIGN EXCHANGE FLUCTION LOSS 15,791,980 - 15,791,980 FOREIGN TRAVELLING EXPENDITURE 833,135 382,594 450,541 DISALLOWANCE OF DEPRECIATION ON FIXED ASSETS. 243,690 98,019 143,671 3 ITA NO.5257/MUM/2011 ITA NO.5258/MUM/2011 MISTAKE IN COMPUTATION OF INCOME 588,276 - 588,276 62,229,314 38,541,616 23,687,698 AS A RESULT OF SUSTENANCE OF THE ADDITIONS TO THAT EXTENT BY THE LEARNED CIT(APPEALS) IN THE QUANTUM PROCEEDINGS, PENALTY PR OCEEDINGS U/S 271(1)(C) WERE INITIATED BY THE AO AND SINCE THE EXPLANATION OF TH E ASSESSEE FURNISHED IN RESPONSE TO THE NOTICE ISSUED DURING THE COURSE OF THE SAID PROCEEDINGS WAS NOT FOUND ACCEPTABLE BY HIM, THE AO IMPOSED PENALTY OF RS.87, 05,126/- U/S 271(1)(C) BEING 100% OF THE TAX SOUGHT TO BE EVADED IN RESPECT OF T HE ADDITIONS MADE TO THE TOTAL INCOME OF THE ASSESSEE AS SUSTAINED BY THE LEARNED CIT(APPEALS) IN THE QUANTUM PROCEEDINGS. 3. THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) FOR ASSESSMENT YEAR 2003-04 WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED B EFORE THE LEARNED CIT(APPEALS) AND AFTER CONSIDERING THE ELABORATE SUBMISSIONS MAD E ON BEHALF OF THE ASSESSEE AS WELL AS MATERIAL AVAILABLE ON RECORD, THE LEARNED C IT(APPEALS) CANCELLED THE PENALTY FOR THE FOLLOWING REASONS GIVEN IN HIS IMPU GNED ORDER HOLDING THAT THE CASE OF THE ASSESSEE WAS NOT A FIT CASE TO IMPOSE PENALT Y U/S 271(1)(C): 8. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE. THE AO HAD LEVIED THE PENALTY ON ACCOUNT OF DISALLOWANCES OF VARIOUS ITEMS AS DISCUSSED ABOVE. IT IS IMPORTANT TO NOTE THAT THE AO MADE ADDITIONS/ DISALLOWANCES SOLELY ON THE BASIS OF SPECIAL AUDITORS REMARKS/COMMENTS. THE APPELLANT CLAIMED VARIOUS EXPENSES IN THE P & L ACCOUNT BASED ON THE ENTRIES IN THE BOOKS OF ACCOUNTS. A SPECIAL AUDIT WAS DIRECTED BY THE AO IN THIS CASE U/S 142(2A) OF THE ACT. BEFORE THE SPECIAL AUDITORS THE APPELLANT COULD NOT PRODUCE SUPPORTING VOUCHERS/BILLS/EVIDENCES IN RESPECT OF S UCH CLAIMS/EXPENSES. THEREFORE, THE SPECIAL AUDITORS EXPRESSED THEIR INA BILITY TO COMMENT ON THE GENUINENESS OF THE CLAIM/EXPENSES TO THE EXTENT OF THE BILLS/EVIDENCES WERE NOT PRODUCED. THE REASONS/FACTS/CIRCUMSTANCES FOR N ON PRODUCTION OF SUCH EVIDENCES BY THE APPELLANT BEFORE SPECIAL AUDITORS ARE DISCUSSED IN 4 ITA NO.5257/MUM/2011 ITA NO.5258/MUM/2011 SUBSEQUENT PARA. IT IS ALSO WORTH TO MENTION HERE T HAT DURING POST-SPECIAL AUDIT PERIOD, THE APPELLANT COULD LOCATE/SEARCH THE REMAINING BILLS/VOUCHERS AND WERE PRODUCED BEFORE AO. HOWEVER, THE AO DID NO T ADMIT SUCH BILLS/VOUCHERS ON THE GROUND THAT THE SAME WERE NOT PRODUCED BEFORE SPECIAL AUDITORS. IN MY CONSIDERED VIEW THE AO WAS NOT CORR ECT IN NOT ADMITTING SUCH EVIDENCES. THERE IS NO BAR IN THE ACT THAT IF AN EVIDENCE HAS NOT BEEN PRODUCED BEFORE SPECIAL AUDITOR, THE ASSESSEE WILL BE DEBARRED FROM PRODUCING THE SAME BEFORE AO DURING ASSESSMENT PROC EEDINGS. IN FACT, THE AO IS THE STATUTORY AUTHORITY BEFORE WHOM THE EVIDE NCES ARE REQUIRED TO BE PRODUCED FOR SATISFYING HIM REGARDING THE CORRECTNE SS OF CLAIM MADE IN THE BOOKS OF ACCOUNTS. HOWEVER, DURING APPELLATE PROCEE DINGS, THE CIT(A) DIRECTED THE AO TO ADMIT AND VERIFY SUCH EVIDENCES. MANY OF THE EVIDENCES IN THE FORM OF BILLS/VOUCHERS WERE PRODUCED BY APPE LLANT BEFORE AO DURING REMAND REPORT PROCEEDINGS AND THE ADDITIONS/DISALLO WANCES WERE DELETED BY CIT(A) TO THAT EXTENT. IT IS WORTH TO MENTION HERE THAT THE CIT(A) UPHELD THE ADDITIONS/DISALLOWANCES OF EXPENSES/CLAIM IN RESPEC T OF WHICH THE APPELLANT FAILED TO PRODUCE EVIDENCE EVEN DURING APPELLATE PR OCEEDINGS. THUS, IT WAS A FACT ON RECORD THAT THE APPELLANT WAS MAKING EFFORT S IN COLLECTING THE EVIDENCES AND WAS SUCCESSFUL IN ITS EFFORTS THOUGH FINALLY IT COULD NOT LOCATE SOME OF THE BILLS/VOUCHERS. THE APPELLANT HAS ARGUED THAT IT COULD NOT PRODUCE THE EVIDENCES ON ACCOUNT OF FRAUD COMMITTED BY ITS THE THEN VICE PR ESIDENT, FINANCE, S.G. TEREDESAI. THE FRAUD COMMITTED BY SHRI S.G. TEREDES AI WAS AN ADMITTED FACT. THIS FACT HAS BEEN ACCEPTED BY DEPARTMENT IN ASSESSMENT ORDERS OF VARIOUS YEARS IN CASE OF GROUP COMPANIES. THIS FACT HAS ALSO BEEN CONSIDERED AND ACCEPTED BY ITAT IN THE CASE OF GROUP COMPANY M /S CAPSULATION SERVICES PVT. LTD. A.Y. 2003-04 IN ITA NO. 4762/MUM /2008 ORDER DATED 25.02.2010. IN APPEAL ORDERS OF OTHER GROUP COMPANI ES, IT HAS BEEN MENTIONED THAT THE TOTAL DEFALCATION WAS RS.19.04 C RORE AND THE SAME HAD BEEN ULTIMATELY ACCEPTED IN THE CASE OF GROUP COMPA NIES IN A.Y. 2006-07, AND SUBSEQUENT ASSESSMENT YEARS. THE A.O. IN THE CA SE OF M/S UNIVERSAL MEDICARE LTD. FOR A.Y. 2006-07, CONSIDERED APPELLAN TS CLAIM OF LOSS OF RS.19.04 CRORE ON ACCOUNT OF SAID DEFALCATION AND A LLOWED SUCH CLAIM OF LOSS AT RS.14.04 CRORE HOLDING THAT THE ASSETS TO THE EX TENT OF RS.5 CRORE OF MR. S.G. TEREDESAI HAD BEEN ATTACHED BY POLICE WHICH WI LL BE AVAILABLE TO APPELLANT FOR RECOVERY. IN THE FACTS AND CIRCUMSTAN CES, IT WAS FACT ON RECORD THAT SHRI S.G.TEREDESAI, VICE PRESIDENT, FINANCE CO MMITTED FRAUD IN THE CASE OF ALL GROUP COMPANIES. THUS THERE IS FORCE IN APPE LLANTS SUBMISSION THAT DURING PERIOD OF SPECIAL AUDIT U/S 142(2A) AND THER EAFTER IT COULD NOT 5 ITA NO.5257/MUM/2011 ITA NO.5258/MUM/2011 PRODUCE VARIOUS EVIDENCES AS THE SAME APPEARED TO H AVE BEEN MISPLACED DELIBERATELY OR OTHERWISE BY MR. S.G. TEREDESAI OR HIS ASSOCIATES. THE NEXT QUESTION FOR CONSIDERATION IS WHETHER THE APPELLANTS CLAIM WAS BONAFIDE OR OTHERWISE. THE ASSESSMENT YEAR UNDE R CONSIDERATION IS A.Y. 2003-04 RELEVANT TO PREVIOUS YEAR 2002-03. SHRI S.G .TEREDESAI WAS IN THE SERVICE OF APPELLANT TILL 2006. THE APPELLANT FILED RETURN OF INCOME OF YEAR UNDER CONSIDERATION ON 27.11.2003 ALONG WITH TAX AU DIT REPORT. THIS SHOWS THAT AT THAT POINT OF TIME, THE VOUCHERS/BILLS WERE IN EXISTENCE, SINCE THE AUDITORS VERIFIED THE SAME AND FURNISHED TAX AUDIT REPORT. THE SAID RETURN OF INCOME WAS BASED ON THE ENTRIES MADE IN THE BOOKS O F ACCOUNTS. THEREFORE, THE CLAIM OF EXPENSES ETC. MADE IN RETURN WAS CORRE CTLY MADE UNDER A BONAFIDE BELIEF. MOREOVER, THE CLAIM MADE IN RETURN OF INCOME WAS ALSO BONAFIDE SINCE THE RETURN WAS FILED IN 2003 WHEREAS THE DEFALCATION WAS NOTICED IN F.Y. 2005-06. THE DEFALCATION HAD TAKEN PLACE FROM A.Y. 2001-02 TO 2006-07. THE APPELLANT CAME TO KNOW THE SAID DEF ALCATION WHEN SHRI S.G.TEREDESAI WAS ON LEAVE IN THE MONTH OF JUNE 200 5. IT IS WORTH MENTION HERE THAT THE APPELLANT SUO-MOTO INFORMED TO THE DE PARTMENT IN RESPECT OF DEFALCATION COMMITTED BY THE SAID S.G. TEREDESAI. DURING SPECIAL AUDIT, THE APPELLANT FAILED TO PROD UCE SUPPORTING EVIDENCE BEFORE THE SPECIAL AUDITORS IN RESPECT OF VARIOUS EXPENSES AS MENTIONED IN ABOVE PARAS. THE CLAIM OF SUCH EXPENSE S WAS BASED ON THE ENTRIES MADE ON THE BOOKS OF ACCOUNTS. THE QUESTION FOR CONSIDERATION IS WHETHER NON-PRODUCTION OF BILLS AND VOUCHERS, WHICH WERE ENTERED INTO BOOKS OF ACCOUNTS, AMOUNTS TO CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME. IN MY CONSID ERED VIEW, IN NORMAL CIRCUMSTANCES WHERE THERE IS NO CASE OF EXISTENCE O F SUCH EVIDENCES OR IN CASE OF FALSE CLAIM, NON PRODUCTION OF SUCH EVIDENC ES LEADS TO PRESUMPTION THAT INCOME WAS CONCEALED/INACCURATE PARTICULARS WE RE FILED ON ACCOUNT OF EXCESS CLAIM OF EXPENSES. HOWEVER, IN THE PECULIAR CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION, IT CANNOT BE SAID THAT THE APP ELLANT CONCEALED INCOME OR FILED INACCURATE PARTICULARS OF SUCH INCOME TO THE EXTENT OF EXPENSES IN RESPECT OF WHICH THE EVIDENCES WERE NOT PRODUCED BE FORE SPECIAL AUDITOR OR BEFORE AO. IN THE CASE UNDER CONSIDERATION, THERE W AS JUSTIFICATION FOR NON PRODUCTION OF SUCH EVIDENCES. MANY OF THE BILLS/VOU CHERS WERE NOT PRODUCED BEFORE SPECIAL AUDITORS, BUT IN LATER PROCEEDINGS T HE APPELLANT COULD LOCATE/SEARCH/GENERATE THE SAME AND PRODUCE BEFORE AO DURING REMAND REPORT PROCEEDINGS. IN RESPECT OF SUCH EVIDENCES PR ODUCED LATER, THE DISALLOWANCES/ADDITIONS WERE DELETED BY CIT(A). IN THE EXPENSES MADE IN 6 ITA NO.5257/MUM/2011 ITA NO.5258/MUM/2011 THE BOOKS OF ACCOUNTS/RETURN WERE FALSE. IT WAS ONL Y BECAUSE OF THE DEFALCATION MADE BY SHRI S.G. TEREDESAI, THE APPELL ANT COULD NOT PRODUCE THE SAME BEFORE AO. IN ANY CASE, THE FULL DETAILS OF SU CH EXPENSES I.E. NAME OF THE PARTY, NUMBER & DATE OF INVOICE, PARTICULARLY O F PAYMENTS ETC. WERE ENTERED INTO THE BOOKS OF ACCOUNTS ON THE BASIS SOF WHICH THE INQUIRY/VERIFICATION COULD HAVE BEEN MADE DIRECTLY FROM THE CONCERNED PARTIES. IN THE FACTS AND CIRCUMSTANCES, I AM OF TH E CONSIDERED OPINION THAT THE APPELLANTS CLAIM MADE IN THE BOOKS OF ACCOUNTS /RETURN WERE MADE UNDER A BONAFIDE BELIED. NOW COMING INTO THE INDIVIDUAL ITEMS OF DISALLOWAN CES, THE CIT(A) UPHELD THE DISALLOWANCES IN MOST OF THE CASES FOR T HE REASONS THAT THE APPELLANT COULD NOT PRODUCE EVIDENCES FOR SUCH EXPE NSES EVEN DURING APPELLATE/REMAND REPORT PROCEEDINGS. HOWEVER, ON AC COUNT OF NON PRODUCTION SUCH EVIDENCES, IT COULD NOT BE SAID THA T THE APPELLANTS CLAIM WAS NOT A BONAFIDE ONE SPECIALLY LOOKING INTO THE FACTS OF DEFALCATION MADE BY SHRI S.G.TEREDESAI. SUCH CLAIMS WERE MADE ON THE BA SIS OF ENTRIES MADE IN THE BOOKS OF ACCOUNTS WHEREIN THE FULL PARTICULARS/ DETAILS OF NAME AND ADDRESS OF THE PARTIES, NUMBER AND DATE OF INVOICE, PARTICULARS OF SUBSEQUENT PAYMENTS WERE AVAILABLE ON THE BASIS SOF WHICH THE INQUIRY/VERIFICATION COULD HAVE BEEN MADE BY THE AO DIRECTLY FROM SUCH P ARTIES. THOUGH THE PRIMARY ONUS WAS ON THE APPELLANT FOR PRODUCING THE EVIDENCES/CHALLANS/BILLS, BUT IN A PECULIAR CIRCUMS TANCES OF THE CASE, THE APPELLANT WAS HAVING A JUSTIFIED AND BONAFIDE EXPLA NATION FOR FAILURE TO PRODUCE SUCH EVIDENCES. IN RESPECT OF APPELLANTS C LAIM OF LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION, THE LEGAL POSITION UP TO A.Y. 2002-03, WAS THAT THIS CLAIM WAS ALLOWABLE WHETHER OR NOT THE PAYMENT HAD ACTUALLY BEEN MADE OR NOT. FROM A.Y. 2003-04, THE AMENDMENT WAS MADE A LLOWING SUCH LOSS ON EXCHANGE FLUCTUATION IN THE YEAR OF PAYMENT ONLY. H OWEVER, THE COURTS HAVE HELD THAT SUCH LOSS WAS NOT NOTIONAL AS HELD BY AO AND CIT(A). IN ANY CASE, SUCH CLAIM WAS A ALEGAL CLAIM AND WAS ALSO A DEBATA BLE ISSUE. THE PARTICULARS OF SUCH CLAIMS WERE FULLY DISCLOSED IN THE RETURN O F INCOME/ACCOUNTS. HOWEVER, BEING A LEGAL CLAIM, THE PENALTY PROVISION S WERE NOT ATTRACTED. SIMILARLY, THE DISALLOWANCE OF DEPRECIATION WAS ALS O NOT ATTRACTING PENALTY PROVISIONS. THE MISTAKE OF ADOPTING INCORRECT PROFI T IN THE COMPUTATION OF INCOME WAS APPARENTLY A CLERICAL MISTAKE SINCE THE DETAILS OF SAME WERE AVAILABLE IN THE P & L ACCOUNT ENCLOSED WITH THE RE TURN OF INCOME. THEREFORE, THE SAME WAS A BONAFIDE MISTAKE NOT ATTR ACTING THE PENALTY PROVISIONS. IN RESPECT OF FOREIGN TRAVEL EXPENSES, THE BILLS AND SUPPORTING WERE AVAILABLE BUT, THE ISSUE WAS DEBATABLE ONE AS TO WHETHER THE EXPENSES 7 ITA NO.5257/MUM/2011 ITA NO.5258/MUM/2011 WERE INCURRED FOR THE PURPOSES OF BUSINESS OR NOT. IN RESPECT OF FOREIGN TRAVEL EXPENSES FOR WHICH THE BILLS WERE NOT AVAILABLE, TH E PENALTY COULD NOT BE LEVIED SINCE ALL THE DETAILS OF SUCH EXPENSES WERE OTHERWISE AVAILABLE IN THE BOOKS OF ACCOUNTS. CONSIDERING THE DECISIONS RELIED UPON BY THE APPEL LANT AND ENTIRELY OF THE FACTS AND CIRCUMSTANCES OF THE CASE UNDER CONSI DERATION, IT CANNOT BE CONCLUDED THAT THE APPELLANT CONCEALED THE PARTICUL ARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THE EXPLANAT ION-1 TO SEC.271(1) WAS NOT ATTRACTED SINCE THE APPELLANT OFFERED A DETAILE D AND JUSTIFIABLE EXPLANATION BEFORE THE AO FOR NON PRODUCTION OF EVIDENCES AND T HE APPELLANTS EXPLANATION WAS SUPPORTED BY FACTS ON RECORD. SUCH EXPLANATION WAS BONAFIDE. IT IS WORTH TO MENTION HERE THAT THE DISALLOWANCES CONFIRMED BY CIT(A) WERE ON ACCOUNT OF NON-PRODUCTION OF VOUCHER S/BILLS. IN RESPECT OF SOME OF GENUINE BILLS/VOUCHERS, THE PENALTY COULD N OT BE LEVIED SINCE ALL THE DETAILS OF SUCH VOUCHERS WERE AVAILABLE IN THE BOOK S OF ACCOUNTS. IN RESPECT OF SOME OF THE BOGUS BILLS/VOUCHERS PERTAINING TO D EFALCATION MADE BY SHRI S.G. TEREDESI, THE PENALTY COULD NOT BE LEVIED BECA USE THE A.O. HIMSELF HAS ALLOWED SUCH LOSS ON ACCOUNT OF DEFALCATION. WHEN A LOSS ON ACCOUNT OF DEFALCATION HAS BEEN ALLOWED BY A.O. IN SUBSEQUENT YEAR, PENALTY COULD NOT BE LEVIED ON SUCH LOSS SUFFERED DUE TO DEFALCATION. IT IS ALSO FACT WORTH CONSIDERING THAT THE APPELLANT WAS FILING RETURN FR OM SO MANY YEARS AND PENALTY WAS LEVIED FIRST TIME IN THIS YEAR. THE DEC ISION OF SUPREME COURT IN CASE OF CIT VS. RELIANCE PETRO PRODUCT 322 ITR 158 (SC) IS ALSO WORTH MENTIONING THAT BY MAKING A CLAIM WHICH IS NOT SUST AINABLE IN LAW, THAT BY ITSELF WILL NOT LEAD TO IMPOSITION OF PENALTY U/S 2 71(1)(C). MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM W AS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY U/S. 271(1)(C). 4. FOR THE REASONS GIVEN ABOVE AND KEEPING IN VIEW THE DECISION OF LEARNED CIT(APPEALS)-24, IN THE CASE OF M/S UNIVERSAL MEDIC ARE PVT.LTD. FOR ASSESSMENT YEARS 2003-04 AND 2004-05 CANCELLING THE PENALTIES IMPOSED U/S 271(1)(C) IN THE SIMILAR FACTS AND CIRCUMSTANCES, THE LEARNED CIT(AP PEALS) CANCELLED THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) FOR ASSESSMENT YEAR 2003-04. IN SO FAR AS ASSESSMENT YEAR 2004-05 IS CONCERNED, SIMILAR ADDIT IONS/DISALLOWANCES WERE MADE 8 ITA NO.5257/MUM/2011 ITA NO.5258/MUM/2011 BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE ON TH E BASIS OF REPORT OF SPECIAL AUDITORS AGGREGATING TO RS.40,39,518/- OUT OF WHICH ADDITIONS/DISALLOWANCES TO THE EXTENT OF RS.12,57,205/- AND RS.10,52,079 WERE DELE TED BY LEARNED CIT(APPEALS) AND THE TRIBUNAL RESPECTIVELY IN THE QUANTUM PROCEE DINGS REDUCING THE TOTAL AMOUNT OF ADDITIONS/DISALLOWANCES TO RS.17,30,234/- . THE DETAILS THEREOF ARE AS UNDER : DISALLOWANCES HEAD 143(3) R.W.S. 142(2A) RELIEF ALLOWED BY CIT(A) ORDER DTD. 15.10.2008 RELIEF ALLOWED BY ITAT ORDER DATED 15.10.2008 DISALLOWED ACCEPTED BY APPELLANT. ADD DISALLOWANCE U/S 14A 315,350 152,779 162,571 CONSUMPTION OF RAW MATERIAL 33,206 NOT PRESSED 33,206 GENUINENESS OF STORES & SPARES 112,214 NOT PRESSED 112,214 REPAIRS TO BUILDING 137,996 NOT PRESSED 137,996 FOREIGN EXCHANGE FLUCTUATION 259,500 NOT PRESSED 259,500 WAIVER OF LIABILITY U/S 28(IV) 1,104,426 1,104,426 - EXPENSES BOOKED THROUGH JOURNAL ENTRIES 193,835 NOT PRESSED 193,835 FOREIGN TRAVELLING EXPENSES 549,665 NOT PRESSED 549,665 DISALLOWANCE U/S 40(A)(I) 1,052,079 1,052,079 EXPENSES NOT SUPPORTED WITH EVIDENCE 281,247 NOT PRESSED 281,247 4,039,518 1,257,205 1,052,079 1,730,234 9 ITA NO.5257/MUM/2011 ITA NO.5258/MUM/2011 AS A RESULT OF SUSTENANCE OF THE ADDITIONS/DISALLOW ANCES TO THE EXTENT OF RS.17,30,234/- IN THE QUANTUM PROCEEDINGS, THE AO I NITIATED PENALTY PROCEEDINGS U/S 271(1)(C) AND IMPOSED PENALTY OF RS.9,98,154/- ON THE SAME BASIS AS GIVEN IN ASSESSMENT YEAR 2003-04 IN ASSESSEES OWN CASE. THE SAID PENALTY IMPOSED BY THE AO WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILE D BEFORE THE LEARNED CIT(APPEALS) AND KEEPING IN VIEW THE OUTCOME OF THE QUANTUM PROCEEDINGS AND HIS APPELLATE ORDER FOR ASSESSMENT YEAR 2003-04 WHE REIN THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) IN THE SIMILAR FACTS AND CIRCU MSTANCES WAS CANCELLED BY HIM, THE LEARNED CIT(APPEALS) CANCELLED THE PENALTY IMPO SED BY THE AO FOR ASSESSMENT YEAR 2004-05. AGGRIEVED BY THE ORDERS OF THE LEARNE D CIT(APPEALS) CANCELLING THE PENALTIES IMPOSED BY THE AO FOR ASSESSMENT YEARS 20 03-04 AND 2004-05, THE REVENUE HAS PREFERRED THESE APPEALS BEFORE THE TRIB UNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS POINTED OUT BY THE LEARNED C OUNSEL FOR THE ASSESSEE, PENALTY U/S 271(1)(C) WAS IMPOSED IN THE CASE OF M/S UNIV ERSAL MEDICARE PVT. LTD., AN ASSESSEE BELONGING TO THE SAME GROUP, IN SIMILAR FA CTS AND CIRCUMSTANCES AND THE ORDER OF THE LEARNED CIT(APPEALS) CANCELLING THE SA ID PENALTY WAS CHALLENGED BY THE REVENUE IN AN APPEAL FILED BEFORE THE TRIBUNAL. HE HAS SUBMITTED THAT THE SAID APPEAL HAS BEEN DISMISSED BY THE TRIBUNAL VIDE ITS ORDER DATED 10 TH AUGUST, 2012 PASSED IN ITA NO. 6078/MUM/2010 UPHOLDING THE ORDER OF THE LEARNED CIT(APPEALS) CANCELLING THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) IN THE SIMILAR FACTS AND CIRCUMSTANCES. A COPY OF THE SAID ORDER IS PLACED ON RECORD BEFORE US AND A PERUSAL OF THE SAME SHOWS THAT PENALTY IMP OSED U/S 271(1)(C) IN THE CASE OF M/S UNIVERSAL MEDICARE PVT.LTD. INVOLVING SIMILA R FACTS AND CIRCUMSTANCES HAS 10 ITA NO.5257/MUM/2011 ITA NO.5258/MUM/2011 BEEN HELD TO BE UNSUSTAINABLE BY THE TRIBUNAL FOR T HE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 5 TO 5.2 OF ITS IMPUGNED ORDER : 5. UN-DISPUTED FACTS EMERGING FROM THE MATERIAL AVAIL ABLE CAN BE SUMMARISED AS UNDER: I. ASSESSEE WAS VICTIM OF A FRAUD II. DEFALCATION WAS COMMITTED BY THE SENIOR OFFI CER OF THE COMPANY WITH THE HELP OF HIS SUBORDINATES. III. CRIME WAS DETECTED IN 2005 AND COMPLAINT AGA INST THE EMPLOYEES WAS LODGED BY THE ASSESSEE COMPANY WITH POLICE AUTHORITIES. IV. AS SOON AS THE ASSESSEE CAME TO KNOW ABOUT TH E DEFALCATION, IT INFORMED THE DEPARTMENTAL AUTHORITIES. V. ACCOUNTS OF THE ASSESSEE COMPANY WERE AUDITED AS PER THE PROVISIONS OF SEC. 142 (2A) OF THE ACT. VI. AO HAD ALLOWED DEFALCATION AMOUNTING TO RS. 19 .04 CRORES, WHILE PASSING THE ASSESSMENT ORDER FOR THE A.Y. 2006-07. VII. RETURN OF INCOME FOR THE A.Y. UNDER CONSIDERA TION HAD ALREADY BEEN FILED BY THE ASSESSEE BEFORE THE FRAUD WAS DETECTED. VIII. AO HAD LEVIED PENALTY ON ACCOUNT OF ADDITION S/DISALLOWANCES. IX. FAA DELETED THE PENALTY IMPOSED BY THE AO. X. AO HAS PREFERRED SECOND APPEAL FOR 4 ADDITIONS /DISALLOWANCES OUT OF THE 9 ITEMS. 5.1 CONSIDERING THE ABOVE FACTUAL MATRIX, WE ARE OF TH E OPINION THAT IT IS NOT A FIT CASE FOR IMPOSING PENALTY U/S. 271 (1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS / CONCEALING THE PARTICULARS OF INCOME. PENALTY IS I MPOSED WHERE AN ASSESSEE CONCEALS HIS INCOME, SO THAT IT DOES NOT SUFFER TAXATION. IN TH E CASE UNDER CONSIDERATION, ASSESSEE- COMPANY WAS CHEATED BY ITS EMPLOYEES AND THE AO HAS ADMITTED THE SAID FACT BY ALLOWING DEFALCATION IN SUBSEQUENT AY. IN THESE PECULIAR CI RCUMSTANCES, IF THE ASSESSEE COULD NOT SUPPORT THE CLAIM MADE BY IT, DURING THE ASSESSMENT PROCEEDINGS, IT CANNOT BE HELD THAT IT HAD FILED INACCURATE PARTICULARS. RETURN OF INCOME, FOR THE A.Y.UNDER CONSIDERATION HAD BEEN FILED BEFORE THE FRAUD WAS BE DETECTED. SO, IF WRONG CLA IMS WERE MADE BY THE ASSESSEE-COMPANY, ON THE BASIS OF THE MATERIAL SUPPLIED BY THE EMPLOY EE-CA, PENAL PROVISIONS SHOULD NOT HAVE BEEN INVOKED. LODGING OF A POLICE COMPLAINT AND SU BSEQUENT ARREST OF THE EX-EMPLOYEE OF THE COMPANY PROVE THAT ASSESSEE COMPANY HAD NO ROLE IN FILING INACCURATE PARTICULARS RATHER IT 11 ITA NO.5257/MUM/2011 ITA NO.5258/MUM/2011 WAS A VICTIM OF A FRAUD. PENALTIES UNDER THE ACT A RE IMPOSED FOR SOME OMISSIONS AND COMMISSIONS. IN OUR OPINION, IN THE CASE UNDER CONS IDERATION IT CANNOT HELD THAT THERE WAS ANY OMISSION OR COMMISSION ON PART OF THE ASSESSEE- COMPANY FOR WHICH IT SHOULD HAVE BEEN VISITED BY PENALTY U/S. 271(1)(C) OF THE ACT. 5.2. AFTER DELIBERATING UPON THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT ORDER PASSED BY THE FAA DOE S NOT SUFFER FROM ANY LEGAL INFIRMITY. HE HAS RIGHTLY RELIED UPON THE CASE OF RELIANCE PETRO CHEMICALS (SUPRA).WE ARE OF THE OPINION THAT DELETION OF PENALTY BY HIM IS FULLY JUSTIFIED. DETAILS FILED BY THE ASSESSEE-COMPANY WITH REGARD TO FOUR ITEMS DISCUSSED IN PARA NO.3 WAS RES ULT OF A CRIME COMMITTED UPON THE ASSESSEE-COMPANY. IN THESE CIRCUMSTANCES GROUNDS O F APPEAL FILED BY THE AO STAND REJECTED. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WELL A S ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASE OF M/S UNIVERSAL M EDICARE PVT. LTD. DECIDED BY THE TRIBUNAL, WE RESPECTFULLY FOLLOW THE DECISION RENDE RED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE SAID CASE AND UPHOLD THE IMPUG NED ORDERS OF THE LEARNED CIT(APPEALS) CANCELLING THE PENALTIES IMPOSED BY TH E AO U/S 271(1)(C). 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED ON THIS 10 TH DAY OF OCT. , 2012. SD/- SD/- (VIVEK VARMA) (P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED: 10 TH OCT., 2012. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, G-BENCH. (TRUE COPY) BY ORDER ASSTT. REGISTRAR, WAKODE ITAT, MUMBAI BENCHES, MUMBAI.
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