Saheli Synthetics Pvt. Ltd., Surat V. The Income tax Officer, Ward-4(2), Surat

ITA 584/AHD/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8781 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-03-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 08-03-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained investment; Reasonable cause; Onus to prove
• Section: 69C; 143(3); 92B; 69; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING:10/03/2010 DRAFTED ON: 10/03/20 10 ITA NO.584/AHD/2006 & 1174/AHD/2006 ASSESSMENT YEAR : 2002-2003 SAHELI SYNTHETICS PVT. LTD. PLOT NO.274/2, GIDC, PANDESARA, SURAT. VS. THE INCOME TAX OFFICER, WARD-4(2), AYAKAR BHAWAN, SURAT. PAN/GIR NO. :AADCS 3521 L (APPELLANT) .. (RESPONDENT) ITA NO.692/AHD/2006 & 1336/AHD/2006 ASSESSMENT YEAR : 2002-2003 THE INCOME TAX OFFICER, WARD-4(2), ROOM NO.315, AYAKAR BHAWAN, MAJURA GATE, SURAT. VS. SAHELI SYNTHETICS PVT. LTD. PLOT NO.274/2, GIDC, PANDESARA, SURAT. PAN/GIR NO. :AADCS 3521 L (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI S.N.SOPARKAR A.R. RESPONDENT BY: SHRI C.K. MISHRA D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- III, SURAT DATED 15.12.2005 CONFIRMING THE ADDITION MADE BY THE AO AND THE ORDER OF THE CIT(A) DATED 24.02.2006 CONFIR MING LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 2. IN THE ASSESSEES APPEAL, THE GROUNDS OF THE APP EAL RELATING TO THE ADDITIONS TO THE INCOME OF THE ASSESSEE ARE AS UNDER:- 1. THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS, IN CONFIRMING THE ADDITION OF RS.24,06,517/- ON ACCOUNT OF DIFFERENCE IN QUANTITY OF IMPORTED GOODS ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 2 - DETECTED BY EXCISE AUTHORITY. THE LEARNED CIT(A) SO UGHT TO HAVE DELETED THE IMPUGNED ADDITION. 2. THE LEARNED CIT(A) AS WELL AS LEARNED ASSESSING OFFICER HAS ERRED IN NOT CONSIDERING VARIOUS FACT SUBMISSION, EXPLANATION AND CLARIFICATION AS GIVEN BY APPELLANT. BOTH LOWER AUTHORITY HAVE ERRED IN NOT APPRECIATING FACTS AND LAW IN THE PROPER PERSPECTIV E; 3. THE LEARNED CIT(APPEALS) HAS NOT APPRECIATED THA T PAYMENT OF EXCESS GOODS HAS NOT BEEN MADE TO SUPPLI ED. 4. THE LEARNED CIT(APPEALS) HAS NOT APPRECIATED THA T DUTY PAID ON EXCESS GOODS HAVE BEEN PAID UNDER PROT EST AND SAME FACT HAS BEEN DISCLOSED ON FACE OF NOTES T O BALANCE SHEET BY AUDITOR. 3. IN THE REVENUES APPEAL, THE GROUNDS OF THE APPEAL RELATING TO THE ADDITIONS TO THE INCOME OF THE ASSESSEE ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A)-III, SURAT HAS ERRED IN D IRECTING THE ASSESSING OFFICER TO VERIFY THE CONTENTION OF T HE APPELLANT WITH REGARD TO VALUATION OF IMPORTED FABR ICS AND RECOMPUTE THE ADDITION TO BE MADE ON ACCOUNT OF UNACCOUNTED INVESTMENT IN THE PURCHASE OF EXCESS UNDECLARED FABRICS NOT RECORDED IN THE BOOKS OF ACC OUNTS IGNORING THE FACTS AND FINDING RECORDED IN THE ORDE R OF CUSTOM AUTHORITY DATED 5.5.2003. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A)-III, SURAT FAILED TO CON SIDER THE BIFURCATION OF TOTAL IMPORTED FABRICS OF 162473 L M TS. VALUED AT RS.1,59,91,470/- I.E. 83868 L. MTS. + 786 05 L. MTS. VALUED AT 82,54,742/- + RS.77,36,728/- AS MISDECLARED QUANTITY AND DECLARED QUANTITY DETERMIN ED BY THE CUSTOMS AUTHORITY VIDE ORDER NO.S/10-02/2002/SI IB/& DRI/SR4/INV-26/2001/6552, DATED 5.05.2003. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A)-III, SURAT FAILED TO CON SIDER THE FACT THAT THE VALUE OF 83868 L.MTS. OF UNDECLARED F ABRICS WAS RS.82,54,742/- ON WHICH THE CUSTOM DUTY OF RS.42,31,027/- WAS CHARGED FOR VIOLATION OF PROVISI ONS OF CUSTOMS ACT WHICH HAS BEEN UPHELD BY THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL AS NOT CO NTESTED BY THE ASSESSEE. ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 3 - 4. SINCE, THE FACTS AND ISSUES INVOLVED IN THE ASSE SSEES AND REVENUES APPEAL ARE COMMON, THEY ARE BEING DISPOSE D OFF TOGETHER AS UNDER:- 5. THE CIT(A) HAS DECIDED THIS ISSUE AS UNDER:- 3. THE APPELLANT IS AGGRIEVED AGAINST THE ADDITION OF RS.82,54,742/- ON ACCOUNT OF UNRECORDED IMPORTED GO ODS DETECTED IN EXCESS OF THAT DECLARED IN THE BILL OF ENTRY BY THE CUSTOMS & EXCISE DEPARTMENT. 4. THE ASSESSEE IS A 100% EOU ENGAGED IN THE BUSINE SS OF MANUFACTURING AND SALE OF ART SILK GREY CLOTH. RETU RN DECLARING TOTAL INCOME OF RS.26,42,790/- WAS TILED ON 29.10.2 002. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE I MPORTED TWO CONTAINERS OF 100% POLYSTER MINK PEACH FABRICS OF KOREAN ORIGIN THROUGH KANDLA PORT FROM M/S.AHMEDBHAI OF YA QOOB HAMDAN TRADING CO., DUBAI, WHICH WERE INTERCEPTED B Y THE CUSTOMS & EXCISE DEPARTMENT ON 19/20.08.2001. DURIN G THE COURSE OF INVESTIGATION, EXCESS QUANTITY OF 83,868 METERS WAS FOUND, THE DETAILS OF WHICH ARE TABULATED AT PARA 4 ON PAGE 2 OF THE ASSESSMENT ORDER. IT WAS ADMITTED BY ONE OF THE DIRECTORS OF THE COMPANY, IN HIS STATEMENT RECORDED BY THE SAID DEPARTMENT, THAT THE SUPPLIER HAD CONVEYED ON TELEPHONE TO HIM THAT HE WAS SUPPLYING EXCESS QUANT ITY OF GOODS THAN THAT DECLARED IN THE INVOICE NO.ESO 1 YHT/032/2000-01 DATED 17.05.2001. HE COULD NOT, HOW EVER, EXPLAIN WHY SUCH EXCESS QUANTITY WAS SENT BY THE SA ID DUBAI COMPANY. DURING THE COURSE OF THE SAID SEARCH PROCE EDINGS, ONE OF THE DIRECTORS, SHRI RATANKUMAR GOYAL, ADMITT ED THE OFFENCE UNDER THE CUSTOMS ACT AND, VIDE HIS STATEME NT DATED 07.11.2001, INTER ALIA STATED THAT HE HAD PAID CUST OMS DUTY OF RS.42,31,027/- ON THE EXCESS QUANTITY OF FABRICS FOUND IN THESE CONTAINERS. IT WAS FURTHER STATED BY HIM THAT THE EXCESS QUANTITY WAS RECEIVED DUE TO MISTAKE OF THE PACKING DEPARTMENT OF THE SUPPLIER AND THAT HE HAD REQUESTE D FOR PERMISSION TO RE-EXPORT THE SAME. ON VERIFICATION O F THE BOOKS OF ACCOUNT, IT WAS NOTICED BY THE AO THAT THE ASSES SEE HAD NOT ACCOUNTED FOR THE SAID EXCESS QUANTITY OF GOODS , WHICH HAD BEEN VALUED AT RS.82,54,742/- BY THE CUSTOMS AUTHORITIES. ACCORDING TO THE AO, THE ASSESSEE-COMP ANY HAD KNOWINGLY TRIED TO SMUGGLE INTO INDIA ILLEGALLY THE AFORESAID EXCESS QUANTITY OF GOODS AND HAD VOLUNTARILY PAID T HE CUSTOMS DUTY THEREON AND THAT THE AFORESAID ACTIONS OF THE ASSESSEE CONFIRMED THAT THE EXCESS GOODS SMUGGLED I NTO INDIA AND SEIZED BY THE GOVERNMENT WERE OWNED BY TH E ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 4 - COMPANY. THE ASSESSEE WAS REQUIRED BY THE AO TO EXP LAIN WHY THE AMOUNT OF RS.82,54,742/- SHOULD NOT BE ADDE D TO ITS TOTAL INCOME UNDER SEC.69B OF THE ACT. 5. IT WAS CONTENDED BY THE ASSESSEE THAT IT HAD CLE ARLY DENIED TO HAVE EXPORTED THE EXCESS QUANTITY AND FURTHER SU BMITTED THAT IT WAS A MISTAKE ON THE PART OF THE SUPPLIER. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT THE CUSTOMS DUTY OF RS.42,31,027/- HAD BEEN PAID UNDER PROTEST AND SHO WN IN THE BOOKS AS 'RECEIVABLE' BUT THE SAID AMOUNT HAD N OT BEEN CLAIMED AS AN EXPENDITURE. 6. THE AFORESAID CONTENTIONS OF THE ASSESSEE WERE N OT ACCEPTED BY THE AO. ACCORDING TO THE AO, IN THE STA TEMENT RECORDED DURING THE COURSE OF SEARCH PROCEEDINGS BY THE CUSTOMS & EXCISE AUTHORITIES ON 22.08.2001, SHRI RATANKUMAR GOYAL HAD STATED THAT HE WAS TELEPHONICA LLY INFORMED BY THE SUPPLIER THAT HE HAS SUPPLYING GOOD S IN EXCESS OF THAT DECLARED IN THE BILL OF ENTRY DATED 17.05.2001. THE CONTENTION OF THE ASSESSEE THAT THE EXCESS QUAN TITY WAS LOADED IN THE CONTAINER DUE TO MISTAKE OF THE PACKI NG DEPARTMENT OF THE SUPPLIER WAS HELD BY THE AO TO BE NOT GENUINE AND AN AFTERTHOUGHT WHEN THE ALLEGED CONTAI NERS WERE INTERCEPTED AND CAUGHT BY THE CUSTOMS & EXCISE DEPARTMENT. IN THE OPINION OF THE AO, HAD THE CONTA INERS NOT BEEN CAUGHT, THE ASSESSEE WOULD HAVE SMUGGLED THE E XCESS QUANTITY ILLEGALLY AND WOULD HAVE EVADED THE DUTIES AND TAXES PAYABLE THEREON. THE FURTHER CONTENTION OF THE ASSE SSEE THAT IT HAD DISOWNED THE EXCESS QUANTITY WAS ALSO NOT AC CEPTED BY THE AO IN VIEW OF THE FACT THAT THE ASSESSEE HAD IT SELF PAID THE CUSTOMS DUTY THEREON AND HAD REQUESTED FOR RE-EXPOR T OR RELEASE OF THESE GOODS. AS THE ASSESSEE HAD NOT ACC OUNTED FOR THE SAID EXCESS QUANTITY OF GOODS IN ITS BOOKS OF A CCOUNT, EVEN THOUGH THE CUSTOMS DUTY OF RS.42.31 LACS HAD B EEN PAID THEREON BY THE ASSESSEE, AN ADDITION OF RS.82, 54,742/- WAS MADE BY THE AO UNDER SEC.69B OF THE ACT ON ACCO UNT OF UNRECORDED IMPORT OF THE EXCESS QUANTITY OF GOODS N OT DISCLOSED IN THE BOOKS OF ACCOUNTS. 7. IT IS CONTENDED BY THE LD. AR THAT THE APPELLANT HAD NEVER ACCEPTED THE ALLEGATION OF THE CUSTOMS & EXCISE DEP ARTMENT AND HAD DENIED ANY KNOWLEDGE REGARDING IMPORT OF TH E EXCESS QUANTITY. IT IS SUBMITTED BY HIM THAT THE DIRECTOR OF THE COMPANY HAD DEPOSED IN HIS STATEMENT THAT, AS CLARI FIED BY SHRI AHMEDBHAI ON TELEPHONE, THE SAID QUANTITY WAS DUE TO MISTAKE ON THE PART OF THE PACKING DEPARTMENT OF TH E SAID SUPPLIER AND THAT THE APPELLANT SHOULD NOT BE HELD RESPONSIBLE FOR THE SAME. IT IS FURTHER SUBMITTED BY HIM THAT THE DIRECTOR ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 5 - OF THE COMPANY HAD SPECIFICALLY DISOWNED THE ALLEGE D EXCESS QUANTITY OF POLYSTER FABRICS, WHICH THEY HAD NEITHE R ORDERED NOR HAD FILED DOCUMENTS FOR CLEARANCE OF THE SAME. IT IS ALSO SUBMITTED THAT THE APPELLANT HAD GIVEN A WRITTEN RE QUEST FOR RELEASE OR RE-EXPORT OF SUCH EXCESS FABRICS. ACCORD ING TO THE LD. AR, THE OWNERSHIP OF THE APPELLANT OVER THE AFO RESAID EXCESS GOODS IS NOT PROVED AND THERE IS NO EVIDENCE TO PROVE THAT THE APPELLANT HAD MADE ANY PAYMENT TO THE SUPP LIER FOR IMPORTING THE EXCESS QUANTITY. THE LD. AR ALSO CONT ENDED THAT, UNLESS THE CONTRARY IS PROVED REGARDING THE E XCESS QUANTITY OF IMPORT BY THE APPELLANT OR THE ALLEGATI ON IS CONFIRMED BY THE TRIBUNAL, THE ADDITION MADE BY THE AO IS VAGUE AND BASELESS AND DESERVES TO BE DELETED. 8. DURING THE INSTANT APPEAL PROCEEDINGS, THE LD. A R WAS REQUESTED TO FILE DETAILS IN REGARD TO THE PROCEEDI NGS WITH THE CUSTOMS & EXCISE AUTHORITIES, INCLUDING COPIES OF T HE STATEMENTS OF DIRECTORS, ORDERS OF THE CONCERNED AD JUDICATION AND APPELLATE AUTHORITIES, ETC. THE REQUISITE DETAI LS WERE SUBMITTED VIDE LETTER DATED 04.10.2005 OF THE LD. A R ALONG WITH FURTHER WRITTEN SUBMISSIONS IN THE CASE. A COP Y OF THE ORDER OF THE HON'BLE CUSTOMS, EXCISE AND SERVICE TA X APPELLATE TRIBUNAL DATED 18/19.07.2005 WAS ALSO FUR NISHED BY THE LD. AUTHORISED REPRESENTATIVE. 9. IN HIS FURTHER SUBMISSIONS, THE CONTENTIONS RAIS ED DURING THE ASSESSMENT PROCEEDINGS HAVE BEEN REITERATED BY THE LD. AR. IT IS FURTHER CONTENDED THAT THE HON'BLE APPELL ATE TRIBUNAL HAS GRANTED CERTAIN RELIEFS TO THE APPELLANT AGAINS T THE PENALTY IMPOSED BY THE CUSTOMS & EXCISE AUTHORITIES AND THAT A SECOND APPEAL BEFORE THE HON'BLE GUJARAT HIGH COU RT HAD ALSO BEEN FILED BY THE APPELLANT REQUESTING FOR FUR THER RELIEF AND RE-EXPORT OF THE EXCESS GOODS IMPORTED. THE LD. AR HAS ALSO RAISED VARIOUS CONTENTIONS ON THE LEGAL ASPECT S OF SECTION 69B OF THE ACT. ACCORDING TO HIM, THE APPELLANT HAD NOT MADE ANY INVESTMENT, EXCEPT FOR PAYMENT OF CUSTOMS DUTY ON THE UNDECLARED EXCESS FABRICS, WHICH HAD BEEN PROPERLY DISCLOSED IN THE BOOKS OF ACCOUNTS UNDER THE HEAD 'OTHER ADVA NCES' AND HAD ALSO BEEN EXPLAINED AT NOTE NO.8 OF THE NOTES F ORMING PART OF THE ACCOUNTS. IT IS FURTHER CONTENDED THAT THE APPELLANT HAS NOT MADE ANY PAYMENT' TO THE SUPPLIER TILL DATE , EVEN IN RESPECT OF THE QUANTITY OF FABRICS DECLARED IN THE BILL OF ENTRY, AND THAT NO EVIDENCE REGARDING MAKING OF PAYMENT TO THE SUPPLIER OF THE SO CALLED UNACCOUNTED FABRICS HAD B EEN FOUND. IT IS ARGUED BY HIM THAT, AS THE APPELLANT HAD NOT EXPENDED ANY AMOUNT FOR PURCHASE OF THE SO CALLED UNACCOUNTE D FABRICS, THERE CANNOT BE ANY RECORD OF THE SAME IN ITS BOOKS OF ACCOUNTS. IT IS ALSO ARGUED THAT THE BURDEN IS ON T HE REVENUE ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 6 - TO PROVE THAT THE AMOUNT EXPENDED FOR PURCHASE EXCE EDED THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT. IT IS FURTHER ARGUED THAT THE APPELLANT HAD OFFERED AN EXPLANATIO N THAT IT HAS NOT ORDERED/IMPORTED THE EXCESS FABRICS AND HAD ALSO GIVEN THE NAME OF THE SUPPLIER, WHO SUPPLIED THE EX CESS FABRICS. IT IS ALSO ARGUED THAT THE PROVISIONS OF S ECTION 69B ARE APPLICABLE TO CAPITAL INVESTMENTS IN BULLION, JEWEL LERY AND OTHER VALUABLE ARTICLES LIKE SHARES, LAND, ETC. ACC ORDING TO THE LD. A.R., THE ADDITION MADE MERELY ON THE BASIS OF THE STATEMENT MADE BEFORE THE CUSTOMS AND EXCISE AUTHOR ITIES REGARDING SUPPRESSION OF THE UNEXPLAINED INVESTMENT IS NOT JUSTIFIED UNDER SECTION 69B OF THE ACT. IT IS CONTE NDED BY HIM THAT NO INDEPENDENT INVESTIGATION WAS MADE BY THE A O REGARDING THE PURCHASE OF FABRICS AND PAYMENT HAVIN G BEEN MADE FOR THE SAME NOR IS ANY EVIDENCE AVAILABLE TO PROVE THAT THE PAYMENTS MADE FOR THE PURCHASES WERE GENERATED OUT OF THE BOOKS. 10. IT IS FURTHER SUBMITTED THAT CREDIT FACILITY OF 120 DAYS FROM THE SUPPLIER WAS AVAILABLE TO THE APPELLANT. ACCORD ING TO HIM, NO ASSESSEE WOULD SUPPRESS THE EXPENSES INCURRED ON PURCHASES AS THESE EXPENSES ARE DEDUCTIBLE AND ARE DEBITED TO THE PROFIT & LOSS ACCOUNT. IT IS FURTHER CONTEND ED BY HIM THAT EVEN ASSUMING THAT THE EXCESS UNDECLARED FABRI CS WERE FOUND IN THE POSSESSION/OWNERSHIP OF THE APPELLANT, THE CREDIT ENTRY WAS REQUIRED MATCHED WITH THE DEBIT ENTRY, I. E., IF PURCHASES WERE ENTERED IN THE BOOKS, THEN THE SAME WAS TO BE MATCHED WITH CREDIT ENTRY OF SALE OR CLOSING STO CK, AND ONLY THE DIFFERENCE BETWEEN SUCH CREDIT AND DEBIT VAS TO BE TAXED. THE LD. AR ALSO CONTENDED THAT THE APPELLANT HAS GO T RELIEF IN THE PENALTIES LEVIED ON THE COMPANY AS WELL AS ON T HE DIRECTOR BY THE CUSTOMS & EXCISE AUTHORITIES IN THE SECOND A PPEAL FILED BEFORE THE HON'BLE APPELLATE TRIBUNAL. IT IS ARGUE D BY HIM THAT THE APPELLANT COULD NOT BE PENALIZED UNDER THE INCOME- TAX ACT FOR THE OFFENCE COMMITTED UNDER THE CUSTOMS ACT. 11. THE LD. AR HAS FURTHER CONTENDED THAT THE AO HA S ERRED IN TAKING THE VALUE OF THE EXCESS UNDECLARED GOODS ON THE BASIS OF THE FINDINGS AND VALUATION ARRIVED AT BY T HE CUSTOMS & EXCISE AUTHORITIES FOR MAKING THE ADDITION UNDER SEC.69B IN THE CASE. IT IS SUBMITTED BY HIM THAT THE CUSTOMS & EXCISE AUTHORITIES HAVE TAKEN THE LANDED COST OF THE EXCES S UNDECLARED FABRICS AT RS.24,06,517/- FOR THE PURPOS E OF CALCULATING THE CUSTOMS DUTY, PENALTY, ETC. THEREON . IT IS FURTHER SUBMITTED THAT THE TOTAL CUSTOMS DUTY ON TH E SAID EXCESS FABRICS HAS BEEN COMPUTED AT RS.42,18,320/- (I.E. BASIC CUSTOMS DUTY OF RS.30,82,149/- + C.V.D. OF RS.8,78,186/- + SPECIAL DUTY OF RS.2,54,674/- + CES S OF ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 7 - RS.3,311/-). IT IS ARGUED BY HIM THAT THE VALUE/ASS ESSABLE VALUE OF THE EXCESS UNDECLARED FABRICS HAS BEEN TAK EN BY THE CUSTOMS & EXCISE AUTHORITIES FOR THE PURPOSE OF CAL CULATING THE CUSTOMS DUTY, ETC. THEREON AT RS.24,06,517/- ON LY AND NOT AT RS.82,54,742/-, AS HAS BEEN ADOPTED BY THE A O FOR MAKING THE IMPUGNED ADDITION. IT IS ALSO SUBMITTED BY HIM THAT THE MARKET VALUE OF THE AFORESAID EXCESS UNDEC LARED FABRICS HAS BEEN CALCULATED BY THE CUSTOMS & EXCISE AUTHORITIES AFTER INCLUDING THE CUSTOMS DUTIES AND AN ASSUMED PROFIT OF RS.16,29,905/- LIKELY TO BE EARNE D ON THE SALE OF THE EXCESS FABRICS, THEREBY COMPUTING THE T OTAL MARKET VALUE OF THE SAID EXCESS FABRIC AT RS.82,54,742/- ( I.E. RS.24,06,517/- + RS.42,18,320/- + RS.16,29,905/-). ACCORDING TO THE LD. AR, IF ANY ADDITION IS TO BE M ADE, THE SAME SHOULD BE BASED ON THE VALUE OF THE EXCESS FAB RICS AT THE LANDED COST OF RS.24,06,517/- COMPUTED BY THE C USTOMS AUTHORITIES, WHICH MAY HAVE TO BE PAID BY THE APPEL LANT TO THE SUPPLIER, AND NOT AT RS.82,54,742/-, WHICH INCL UDES THE CUSTOMS DUTY OF RS.42,31,027/- AND THE ASSUMED PROF IT OF RS.16,29,905/-. IT IS ALSO ARGUED BY HIM THAT THE C OST OF FABRICS OF RS.24,06,517/- SHOULD BE TAKEN AS CLOSIN G STOCK AS THE SAME HAS NOT BEEN SOLD AND IS LYING WITH THE CU STOMS & EXCISE AUTHORITIES AND THAT NO AMOUNT WOULD CONSEQU ENTLY BE LEFT TO BE ADDED TO THE TOTAL INCOME DECLARED BY TH E APPELLANT. 12. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE SUBMISSIONS BY THE LD. AR. THE FACT THAT EXCESS QUA NTITY OF FABRICS, OVER AND ABOVE THAT DECLARED IN THE BILL O F IMPORT, WAS FOUND IN THE CONTAINERS IMPORTED BY THE APPELLA NT FROM DUBAI IS NOT IN DISPUTE. THE FURTHER FACT THAT CUST OMS DUTY ON THE SAID EXCESS FABRIC IMPORTED ILLEGALLY WAS PAID BY THE APPELLANT IS ALSO NOT IN DISPUTE. PENALTIES LEVIABL E FOR SUCH ILLEGAL IMPORT OF FABRICS UNDER THE CUSTOMS ACT WER E IMPOSED ON THE APPELLANT AS WELL AS THE DIRECTOR BY THE CUS TOMS AUTHORITIES, WHICH WERE ALSO CONFIRMED BY THE FIRST APPELLATE/ ADJUDICATION AUTHORITIES OF THE CUSTOMS DEPARTMENT. ON PERUSAL OF THE ORDER OF THE HON'BLE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH DATED 18/19.07.2005, IT IS SEEN THAT PARTIAL RELIEF HAS B EEN GRANTED TO THE APPELLANT AND THE DIRECTOR IN REGARD TO THE AFORESAID PENALTIES LEVIED BY THE CUSTOMS AUTHORITIES IN AS M UCH AS THE CUSTOMS DUTY OF RS.42,31,027/- HAS BEEN UPHELD AS N OT CONTESTED BY THE APPELLANT, THE PENALTY OF RS.15,00 ,000/- LEVIED ON THE APPELLANT HAS BEEN REDUCED TO RS.7,50 ,000/-, THE CONFISCATION OF THE NON-DECLARED GOODS IMPORTED HAS BEEN UPHELD BUT THE REDEMPTION FINE HAS BEEN REDUCED FRO M RS. 20,00,000/- TO RS.7,50,000/-, THE CONFISCATION OF T HE DECLARED FABRICS HAS ALSO BEEN UPHELD BUT THE REDEMPTION FIN E HAS BEEN ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 8 - REDUCED TO RS.5,00,000/- WHILE THE PERSONAL PENALTY LEVIED ON SHRI RATANKUMAR GOYAL HAS BEEN REDUCED FROM RS.5,00 ,000/- TO RS.2,00,000/-. IN THE AFORESAID DECISION OF THE HON'BLE APPELLATE TRIBUNAL, THE FOLLOWING FACTS ARE NOTED : - (I) THAT THE APPELLANT ACCEPTED THE AFORESAID EX CESS QUANTITY OF GOODS IMPORTED BUT DEPOSED THAT IT WAS NOT AWARE OF THE EXCESS QUANTITY OF FABRICS IN THE CONTAINER, WHICH ONLY THE MANAGING DIRECTOR COULD EXPLAIN. (II) THAT THE STATEMENT OF THE M.D., SHRI RATANKU MAR GOYAL, WAS RECORDED ON 22.08.2001 AND ALSO SUBSEQUENTLY, W HO ACCEPTED AND ADMITTED THE FACT OF HAVING IMPORTED T HE EXCESS FABRICS AND ALSO PAID THE DIFFERENTIAL DUTY OF RS.4 2,31,027/-. (III) THAT SHRI RATANKUMAR GOYAL HAD CLEARLY ADMIT TED IN HIS STATEMENTS THAT HE WAS AWARE OF THE EXCESS QUANTITY LOADED IN THE CONTAINERS, AS PER HIS TELEPHONIC TALK WITH THE SUPPLIER. IN SPITE OF THAT THE SAID EXCESS QUANTITY WAS NOT D ECLARED. (IV) THAT THE APPELLANT HAS ADMITTED TO MIS-DECLARA TION OF THE QUANTITY RESULTING IN MISUSE OF THE BENEFIT AVAILAB LE TO A 100% EOU. (V) THAT, IN THE INSTANT CASE, THE FACT OF MIS-DE CLARATION WAS ESTABLISHED AND IT WAS ONLY THEREAFTER THAT THE APP ELLANT PAID THE DUTY TO GET THE RELEASE OF THE FABRICS. (VI) THAT THE APPELLANT HAVE NOT CONTESTED THEIR LIABILITY TO CONFISCATION, (VII) THAT SHRI RATANKUMAR GOYAL WAS THE PERSON ACT IVELY INVOLVED IN IMPORTATION OF THE EXCESS QUANTITY AND WAS AWARE OF THE SAID FACT. THAT HE HAD ALSO DEPOSED IN HIS STATEMENT THAT HE WAS AWARE OF THE FACT THAT IT IS AN OFFENCE UNDER THE CUSTOMS ACT. 13. IN THEIR AFORESAID ORDER, IT HAS BEEN OBSERVED BY THE HON'BLE APPELLATE TRIBUNAL THAT 'THE INTENTION ON T HE PART OF THE APPELLANT TO EVADE CAN BE INFERRED WITHOUT ANY HESITATION FROM THE FACT THAT THERE WAS MIS-DECLARATION IN THE QUANTITY OF THE FABRICS, WHICH FACT ALSO STANDS ACCEPTED BY THE SHRI RATAN GOYAL. IN SUCH A SITUATION, THEY ARE REQUIRED TO BE MET WITH PENALTY AND CANNOT BE ALLOWED TO GO SCOT-FREE ON TH E MERE GROUND THAT, ON BEING POINTED OUT, THEY DEPOSITED T HE DUTY' 14. IN THE AFORESAID FACTS OF THE CASE, THE DENIAL OF THE APPELLANT REGARDING OWNERSHIP OF THE EXCESS IMPORTE D FABRICS CANNOT BE ACCEPTED. THE APPELLANT CANNOT BE PERMITT ED TO TAKE ONE STAND BEFORE ONE GOVERNMENT DEPARTMENT AND ANOTHER STAND BEFORE THE INCOME-TAX DEPARTMENT, ESP ECIALLY IN A CASE IN WHICH THE ATTEMPT TO EVADE LAWFUL TAXE S HAS BEEN ESTABLISHED. THE VARIOUS ARGUMENTS RAISED BY THE AP PELLANT REGARDING DISOWNING THE EXCESS FABRIC IMPORTED, MIS TAKE OF THE SUPPLIER, ETC., THEREFORE, HAVE NOT MERIT. THE FACT THAT THE ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 9 - DIRECTOR, SHRI RATANKUMAR GOYAL, WAS FULLY AWARE AN D KNOWLEDGEABLE ABOUT THE EXCESS GOODS LOADED IN THE CONTAINERS BY THE SUPPLIER IS AMPLY BORNE OUT FROM THE RECORDS. THE FURTHER PLEAS RAISED BY THE APPELLANT THAT IT HAD NEITHER ORDERED FOR SUCH EXCESS GOODS NOR HAD FILED DOCUMENTS FOR CLEARANCE OF SUCH GOODS AND THAT NO P AYMENT HAD BEEN MADE BY IT TO THE SUPPLIER FOR IMPORTING T HE EXCESS QUANTITY OF GOODS CANNOT, THEREFORE, BE ENTERTAINED AT THIS STAGE IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE ALREADY NOTED BY THE HON'BLE CUSTOMS, EXCISE & SERV ICE TAX APPELLATE TRIBUNAL. IT IS EVIDENT IN THIS CASE THAT FABRICS IN EXCESS OF THAT DECLARED BY THE APPELLANT HAD BEEN I MPORTED. SINCE THE AFORESAID EXCESS IMPORTS WERE ILLEGAL, TH E APPELLANT COULD OBVIOUSLY NOT HAVE FILED CLEARANCE DOCUMENTS BEFORE THE CUSTOMS AUTHORITIES FOR THE SAME. AS THE APPELLANT HAD TRIED TO ILLEGALLY IMPORT EXCESS GOODS, THE PREPONDERANCE OF PROBABILITIES WOULD INDICATE THAT PAYMENT FOR SUCH ILLEGAL IMPORTS WOULD ALSO HAVE BEEN MADE THROUGH ILLEGAL C HANNELS. THE CONTENTION OF THE APPELLANT THAT IT HAS NOT MAD E PAYMENT TO THE SUPPLIER FOR THE AFORESAID GOODS IS HARD TO BELIEVE. IN GENERAL MARKET PRACTICE, ESPECIALLY IN FOREIGN MARK ETS, NO SUPPLIER WOULD WAIT FOR SUCH PROLONGED PERIOD OF TI ME, I.E. FORM 19/20.08.2001 TILL DATE, FOR PAYMENT OF GOODS SUPPLIED BY THEM. THE AFORESAID FACTS LEAD TO THE REASONABLE INFERENCE THAT PAYMENT FOR THE GOODS MUST HAVE BEEN MADE BY T HE APPELLANT OUTSIDE THE BOOKS OF ACCOUNTS, THE DETAIL S IN REGARD TO WHICH WOULD ONLY BE IN THE EXCLUSIVE KNOWLEDGE O F THE APPELLANT. 15. THE FURTHER ARGUMENT RAISED BY THE APPELLANT, I N THEIR LETTER DATED 11.04.2005 THAT, UNLESS THE CONTRARY I S PROVED REGARDING THE EXCESS QUANTITY OF IMPORT BY THE APPE LLANT OR THE ALLEGATION IS CONFIRMED BY THE TRIBUNAL, THE AD DITION MADE BY THE AO IS VAGUE AND BASELESS ALSO GOES AGAINST T HE APPELLANT IN VIEW OF THE FINDINGS OF THE HON'BLE AP PELLATE TRIBUNAL ALREADY DISCUSSED ABOVE. THE FACTS THAT CE RTAIN RELIEFS HAVE BEEN GRANTED BY THE HON'BLE APPELLATE TRIBUNAL IN THE PENALTIES IMPOSED BY THE CUSTOMS AUTHORITIES AN D THAT A SECOND APPEAL HAS BEEN FILED BY THE APPELLANT BEFOR E THE HON'BLE GUJARAT HIGH COURT HAVE NO BEARING ON THE I SSUE UNDER CONSIDERATION, VIZ., THE EXISTENCE OF UNEXPLA INED INVESTMENTS FOR THE IMPORT OF THE AFORESAID EXCESS FABRICS, WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. TH E CONTENTION OF THE APPELLANT THAT THE PAYMENT OF CUS TOMS DUTY ON THE SAID EXCESS GOODS IMPORTED HAD BEEN DISCLOSE D IN THE BOOKS OF ACCOUNT ALSO HAS NO BEARING ON THE ISSUE U NDER CONSIDERATION. FOR REASONS DISCUSSED ABOVE, THE VAR IOUS LEGAL CONTENTIONS RAISED BY THE APPELLANT IN REGARD TO TH E ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 10 - APPLICABILITY OF THE PROVISIONS OF SECTION 69B OF T HE ACT FALL TO THE GROUND IN THE FACTS OF THIS CASE. THE FACT REGA RDING IMPORT OF EXCESS GOODS BY THE APPELLANT STANDS DULY ESTABL ISHED AND AS THE SAID PURCHASES WERE NOT RECORDED IN THE BOOK S OF THE APPELLANT, IT IS CLEAR THAT PAYMENT THEREFORE, MUST ALSO HAVE BEEN MADE BY THE APPELLANT OUTSIDE ITS BOOKS OF ACC OUNTS. THE SAID PURCHASES ARE, THEREFORE, REQUIRED TO BE T REATED AS UNEXPLAINED INVESTMENTS DURING THE FINANCIAL YEAR U NDER CONSIDERATION. THE DISTINCTION ATTEMPTED TO BE DRAW N BY THE APPELLANT BETWEEN THE PROVISIONS OF SECTION 69/69B OF THE ACT IS ALSO NOT MATERIAL. IT IS A WELL SETTLED PRINCIPL E OF LAW THAT ANY MISTAKE, DEFECT OR OMISSION IN ANY RETURN, ASSE SSMENT, ETC. SHALL NOT BECOME INVALID, IF SUCH RETURN, ASSE SSMENT, ETC. IS IN SUBSTANCE AND IN EFFECT IN CONFORMITY WITH AN D ACCORDING TO THE INTENT AND PURPOSE OF THE ACT. THE AFORESAID PRINCIPLE OF LAW IS DULY EMBODIED IN THE PROVISIONS OF SECTION 2 92B OF THE ACT. THUS, THE MERE FACT THAT SECTION 69B OF THE AC T HAS BEEN REFERRED TO BY THE AO WHILE MAKING THE AFORESAID AD DITION INSTEAD OF SECTION 69 OF THE ACT DOES NOT IN ANY MA NNER INVALIDATE THE ADDITION SO MADE. 16. THE FURTHER CONTENTION OF THE APPELLANT THAT TH E ADDITION HAS BEEN MADE ON THE BASIS OF THE PROCEEDINGS UNDER THE CUSTOMS ACT AND THAT NO INDEPENDENT INVESTIGATION W AS CARRIED OUT BY THE AO IN THE MATTER IS ALSO NOT COR RECT. THE ACTION TAKEN BY THE CUSTOMS AUTHORITIES AND THE PEN ALTIES IMPOSED ON THE APPELLANT UNDER THE CUSTOMS ACT ARE DIFFERENT AND DISTINCT FROM THE ADDITION MADE BY THE AO UNDER THE INCOME-TAX ACT. WHEREAS THE VARIOUS PENALTIES HAVE BEEN IMPOSED BY THE CUSTOMS AUTHORITIES FOR VIOLATION OF THE CUSTOMS ACT BY ILLEGAL IMPORT OF EXCESS GOODS OVER ABOVE THAT DECLARED BY THE APPELLANT IN THE BILL OF ENTRY, IN THE INSTANT CASE THE ADDITION HAS BEEN MADE BY THE AO ON ACCOUN T OF UNEXPLAINED INVESTMENTS ON SUCH EXCESS GOODS IMPORT ED, WHICH WERE NOT RECORDED IN THE BOOKS OF THE APPELLA NT. IT IS, THEREFORE, NOT A CASE WHERE THE APPELLANT HAS BEEN PENALIZED UNDER THE INCOME-TAX ACT FOR AN OFFENCE COMMITTED U NDER THE CUSTOMS ACT, AS HAS BEEN CONTENDED BY THE APPELLANT . IN THIS CONTEXT, IT IS NOTEWORTHY TO MENTION THAT, IN SPITE OF THE FACT THAT THE APPELLANT WAS FULLY AWARE OF THE EXCESS GO ODS IMPORTED BY THEM IN AUGUST, 2001, WHICH WERE ALSO A CCEPTED AND ADMITTED BEFORE THE CUSTOMS AUTHORITIES, THE SA ME WERE NOT RECORDED IN ITS BOOKS FOR THE YEAR ENDING 31.03 .2002. THE ARGUMENT OF THE APPELLANT THAT NO ASSESSEE WOULD SU PPRESS THE EXPENSES INCURRED ON PURCHASES AS THESE ARE DEB ITABLE TO THE PROFIT & LOSS ACCOUNT AND THAT SUCH DEBIT ENTRI ES ARE REQUIRED TO BE MATCHED WITH THE CREDIT ENTRIES OF S ALE/CLOSING STOCK IS EVIDENTLY UNACCEPTABLE IN THE AFORESAID FA CTS AND ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 11 - CIRCUMSTANCES OF THE CASE. IF, AS HAS BEEN OBSERVED BY THE HON'BLE APPELLATE TRIBUNAL, THE INTENTION ON THE PA RT OF THE APPELLANT WAS TO EVADE TAX/DUTY, THE EXCESS NON-DEC LARED QUANTITY COULD HAVE BEEN DIVERTED TO THE DOMESTIC M ARKET OUTSIDE THE BOOKS OF ACCOUNT. IN THAT CASE, NEITHER THE PURCHASES NOR THE SALES/STOCK WOULD BE ROUTED THROU GH THE BOOKS OF ACCOUNT. 17. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCE S OF THE CASE AND FOR REASONS ALREADY DISCUSSED IN DETAIL AB OVE, THE ACTION OF THE AO IN MAKING THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASE OF EXCESS IMPORT ED FABRICS NOT RECORDED IN THE BOOKS OF ACCOUNT WAS JU STIFIED AND IS CONFIRMED IN PRINCIPLE. 18. COMING TO THE ISSUE OF VALUATION OF THE EXCESS UNDECLARED GOODS, THE CONTENTIONS OF THE APPELLANT THAT THE AD DITION TO BE MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PU RCHASE OF EXCESS IMPORTED FABRICS SHOULD BE BASED ON THE L ANDED COST OF SUCH IMPORTS, BEING THE AMOUNT THAT WOULD HAVE B EEN PAID BY IT ON SUCH IMPORTS, IS ACCEPTABLE IN PRINCIPLE. AS THE PAYMENT FOR CUSTOMS DUTY IS RECORDED IN THE BOOKS O F- APPELLANT AND AS THE SAID EXCESS UNDECLARED GOODS H AVE NEITHER BEEN RETURNED TO THE APPELLANT NOR HAVE BEE N SOLD BY IT, THE ADDITION TO BE MADE ON ACCOUNT OF UNEXPLAIN ED INVESTMENT IN THE PURCHASE OF EXCESS UNDECLARED GOO DS IS REQUIRED TO BE MADE ON THE BASIS OF THE IMPORT VALU E OF SUCH FABRIC, WHICH WOULD HAVE BEEN PAID BY THE APPELLANT OUTSIDE THE BOOKS OF ACCOUNT. THE AO IS, THEREFORE, DIRECTE D TO VERIFY THE CONTENTION OF THE APPELLANT IN THIS REGARD AND RECOMPUTE THE ADDITION TO BE MADE ON ACCOUNT OF UNACCOUNTED INVESTMENT IN THE PURCHASE OF THE EXCESS UNDECLARED FABRICS, WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT, ON THE BASIS OF THE ACTUAL IMPORT VALUE OF SUCH GOODS, AFTER NEC ESSARY VERIFICATION OF THE RELEVANT DOCUMENTS. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE HAS IMPORTED EXCESS QUANTITY OF 83,868 METERS OF 100% POLYESTER MINK PE ACH FABRIC OF KOREAN ORIGIN WITHOUT MAKING DISCLOSURE AS REQUIRED BY THE LAW AND WITHOUT MAKING PAYMENT CUSTOMS DUTY THEREON. THEREF ORE, THE CUSTOMS OFFICIALS LEVIED DUTY AND PENALTY AS PER TH E RELEVANT ACT. THE CUSTOMS DUTY PAID WAS ACCOUNTED FOR BY THE ASSESSEE IN ITS BOOKS OF ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 12 - ACCOUNT AND WAS NOT CLAIMED AS DEDUCTION BY THE ASS ESSEE BUT WAS SHOWN AS RECEIVABLE IN THE BALANCE SHEET. THE EXPLA NATION OF THE ASSESSEE BEFORE THE AO WAS THAT THE EXCESS QUANTITY WAS DISPATCHED BY THE SUPPLIERS BECAUSE OF THE MISTAKE ON THE PART OF THE PACKAGING AND DISPATCH DEPARTMENT OF THE SUPPLIER AND THE ASS ESSEE HAS NEITHER ORDERED FOR THIS EXCESS QUANTITY NOR MADE ANY PAYME NT TO THE SUPPLIER. HOWEVER, THE AO DID NOT AGREE WITH THE AB OVE SUBMISSIONS OF THE ASSESSEE MAINLY ON THE GROUND THAT IN A STAT EMENT BEFORE THE CUSTOMS OFFICER SHRI RATANKUMAR GOYEL DIRECTOR OF T HE COMPANY ACCEPTED THAT IT WAS WITHIN HIS KNOWLEDGE THAT EXCE SS QUANTITY WAS DISPATCHED TO IT BY THE SUPPLIER COMPANY. ON THE AB OVE FACTS AND CIRCUMSTANCES, THE AO BY TAKING THE VALUE OF THE EX CESS QUANTITY AS THE VALUE ON WHICH CUSTOM DUTY WAS CHARGED I.E. RS. 82,45,742/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. ON AP PEAL, THE CIT(A) ALSO AGREED WITH THE VIEW OF THE AO THAT IT CAN BE ASSUMED THAT PAYMENT IN RESPECT OF EXCESS QUANTITY WAS MADE BY T HE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT BUT IN HIS OPINION SUC H PAYMENT COULD BE ESTIMATED AT THE ACTUAL IMPORT VALUE OF THE GOODS A ND THEREFORE, MODIFIED THE ORDER OF THE AO TO THIS EXTENT I.E. HE DIRECTED THE AO TO TREAT THE ACTUAL LANDED COST OF THE IMPORTED FABRIC ONLY AS INCOME OF THE ASSESSEE IN PLACE OF RS.82,45,742/-. 7. THE AR OF THE ASSESSEE SUBMITTED THAT THE EXCESS QUANTITY OF STOCK WAS RECEIVED BECAUSE OF MISTAKE OF SUPPLIER A ND THE ASSESSEE WAS NOT THE OWNER OF THE EXCESS GOODS AND THE ASSES SEE HAS NOT MADE ANY PAYMENT TO THE SUPPLIER IN RESPECT OF SUCH EXCE SS GOODS. HE ALSO SUBMITTED THAT APPLICATION HAS BEEN FILED BEFORE TH E HONBLE GUJARAT HIGH COURT FOR PERMISSION FOR RE-EXPORT OF THE EXCE SS GOODS. THE AR CONTENDED THAT ON THE ABOVE FACTS AND CIRCUMSTANCES , THE REVENUE WAS NOT JUSTIFIED IN MAKING THE ADDITION UNDER SECT ION 69 OR 69B ONLY ON ASSUMPTION AND PRESUMPTION WHEN NO MATERIAL COUL D BE BROUGHT ON RECORD TO SHOW THAT ANY PAYMENT WAS ACTUALLY MADE B Y THE ASSESSEE ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 13 - TO THE SUPPLIER ON ACCOUNT OF EXCESS GOODS. HE PLAC ED RELIANCE ON THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF THE LOK PRAKASHAN LTD. VS. JCIT, AHMEDABAD IN ITA 1394/A/20 01 ORDER DATED 9.10.2009 FOR HIS ABOVE SUBMISSIONS. 8. ON THE OTHER HAND, LEARNED DR SUPPORTED THE ORDE R OF THE AO AND CONTENDED THAT THE LEARNED CIT(A) WAS NOT JUSTI FIED IN DIRECTING THE AO TO ADOPT THE ACTUAL LANDED COST OF GOODS FOR MAKING ADDITION IN PLACE OF RS.82,54,742/- MADE BY THE AO ON THE BASIS OF THE VALUE WHICH WAS ADOPTED BY THE CUSTOMS AUTHORITY FOR IMPO SING CUSTOM DUTY. IT IS OBSERVED THAT IN THE CASE OF THE LOK PR AKASHAN LTD. (SUPRA) IT WAS HELD THAT :- 9. IT MAY BE NOTICED THAT THE BASIS OF THE ADDITIO N IS THE ESTIMATED AMOUNT OF EXPENDITURE INCURRED BY THE ASS ESSEE ON REPAIRS OF THE MACHINERY WHICH WAS NOT DEBITED TO T HE BOOKS OF ACCOUNT OF THE ASSESSEE. THE QUESTION IS WHETHER SE CTION 69C CAN BE INVOKED IN THESE CIRCUMSTANCES. THE SECTION REQUIRES IT AS A CONDITION FOR THE ADDITION THAT THE ASSESSEE HAS INCURRED ANY EXPENDITURE WHICH EXPRESSION CAN ONLY REFER TO THE ACTUAL EXPENDITURE FOUND TO HAVE BEEN INCURRED BY THE ASSE SSEE. IT EXCLUDES ANY ESTIMATED AMOUNT OF EXPENDITURE WHICH THE ASSESSEE IS SUPPOSED TO HAVE INCURRED AND NOT DEBIT ED IN THE BOOKS OF ACCOUNT, HOWEVER REASONABLE THE ESTIMATE M AY BE. 9. IN VIEW OF THE ABOVE, IN OUR CONSIDERED OPINION, ADDITION UNDER SECTION 69, 69B OR 69C CAN BE MADE IN RESPECT OF ACTUAL PAYMENT MADE BY THE ASSESSEE AND NOR RECORDED IN TH E BOOKS OF ACCOUNT ONLY AND NOT ON THE BASIS OF ANY ESTIMATED PAYMENTS WHICH THE ASSESSEE MIGHT HAVE MADE. 10. FURTHER, THE ASSESSEE HAS ALSO BROUGHT NO MATER IAL TO SHOW THAT NO PAYMENT ON ACCOUNT OF EXCESS STOCK WAS MADE BY IT AND THE EXPORTER IS STILL ASKING THE ASSESSEE TO EITHER RETURN THE GOODS OR TO MAKE THE PAYMENT IN RESPECT OF EXCESS G OODS. IN THE ABOVE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, IT SHALL BE IN THE INTEREST OF JUSTICE TO RESTORE THE ISSUE BACK T O THE FILE OF THE ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 14 - AO FOR ADJUDICATION AFRESH AFTER VERIFYING ALL THE RELEVANT FACTS IN LIGHT OF THE PRINCIPLES LAID DOWN IN THE CASE OF TH E LOK PRAKASHAN LTD. (SUPRA). WE THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND ORDER ACCORDINGLY. THUS, THE APPEAL OF THE ASSESSEE AS WELL AS THAT OF THE REVENUE BOTH ARE AL LOWED FOR STATISTICAL PURPOSES. 11. THE APPEALS IN ITA NOS.1174/AHD/2006 AND 1336/A HD/2006 ARE THE CROSS APPEALS FILED THE ASSESSEE AND REVENU E AGAINST THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND THE GROUNDS ARE TAKEN ARE AS UNDER:- ASSESSEES APPEAL 1. THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS, IN CONFIRMING THE PENALTY TO THE EXTENT OF RS.859125/- ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME AND FOR CONCEALING PARTICULAR S OF INCOME. 2. THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING VARIOUS FACT SUBMISSION, EXPLANATION AND CLARIFICAT ION AS GIVEN BY APPELLANT. BOTH LOWER AUTHORITY HAVE ERRED IN NOT APPRECIATING FACTS AND LAW IN THE PROPER PERSPECTIV E; 3. THE LEARNED CIT(APPEALS) HAS NOT APPRECIATED THA T PAYMENT OF EXCESS GOODS HAS NOT BEEN MADE TO SUPPLI ER; AND THEREFORE, THERE IS NO CONCEALMENT OF INCOME. 4. THE LEARNED CIT(APPEALS) HAS NOT APPRECIATED THA T DUTY PAID ON EXCESS GOODS HAVE BEEN PAID UNDER PROT EST AND SAME FACT HAS BEEN DISCLOSED ON FACE OF NOTES T O BALANCE SHEET BY AUDITOR. 5. THE LEARNED CIT(APPEALS) OUGHT TO HAVE DELETED T HE TOTAL PENALTY OF RS.29,46,943/- IN STEAD OF PARTIAL DELETION OF RS.20,87,818/-(29,46,943-8,59,125); REVENUES APPEAL . 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A)-III, SURAT HAS ERRED IN D IRECTING THE ASSESSING OFFICER TO VERIFY THE CONTENTION OF T HE APPELLANT WITH REGARD TO VALUATION OF IMPORTED FABR ICS AND RECOMPUTE THE ADDITION TO BE MADE ON ACCOUNT OF UNACCOUNTED INVESTMENT IN THE PURCHASE OF EXCESS UNDECLARED FABRICS NOT RECORDED IN THE BOOKS OF ACC OUNTS ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 15 - IGNORING THE FACTS AND FINDING RECORDED IN THE ORDE R OF CUSTOM AUTHORITY DATED 5.5.2003. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A)-III, SURAT FAILED TO CON SIDER THE BIFURCATION OF TOTAL IMPORTED FABRICS OF 162473 L M TS. VALUED AT RS.1,59,91,470/- I.E. 83868 L. MTS. + 786 05 L. MTS. VALUED AT 82,54,742/- + RS.77,36,728/- AS MIS- DECLARED QUANTITY AND DECLARED QUANTITY DETERMINED BY THE CUSTOMS AUTHORITY VIDE ORDER NO.S/10-02/2002/SIIB/& DRI/SR4/INV-26/2001/6552, DATED 5.05.2003. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A)-III, SURAT FAILED TO CON SIDER THE FACT THAT THE VALUE OF 83868 L.MTS. OF UNDECLARED F ABRICS WAS RS.82,54,742/- ON WHICH THE CUSTOM DUTY OF RS.42,31,027/- WAS CHARGED FOR VIOLATION OF PROVISI ONS OF CUSTOMS ACT WHICH HAS BEEN UPHELD BY THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL AS NOT CO NTESTED BY THE ASSESSEE. 12. SINCE, THE FACTS AND ISSUES INVOLVED IN THE ASS ESSEES AND REVENUES APPEAL ARE COMMON, THEY ARE BEING DISPOSE D OFF TOGETHER AS UNDER:- 13. THE CIT(A) HAS DECIDED THE ISSUE AS UNDER:- THIS APPEAL HAS BEEN FILED AGAINST THE ORDER U/S 2 71(L)(C) OF THE ACT PASSED BY THE I.T.O., WARD-4(2), SURAT ON 3 0.08.2005 IMPOSING A PENALTY OF RS. 29,46,943/-. 2. SHRI R. K. SETHIA, CA, ATTENDED ON BEHALF OF THE APPELLANT AND FILED WRITTEN, SUBMISSIONS, WHICH ARE PLACED ON RECORD. 3. RETURN DECLARING TOTAL INCOME AT RS.26,42,790/- WAS FILED ON 29.10.02. ASSESSMENT IN THE CASE WAS COMPLETED U /S 143(3) OF THE ACT ON 17.02.2005, DETERMINING THE TO TAL INCOME AT RS.1,08,97,530/-. THE ASSESSEE IS A 100% EXPORT ORIENTED UNIT, ENGAGED IN THE BUSINESS OF MANUFACTU RING AND SALE OF ART SILK GREY CLOTH. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD IMPORTED TWO CONTAI NERS OF 100% POLYESTER MINK PEACH FABRICS OF KOREAN ORIGIN THROUGH KANDIA PORT FROM M/S. AHMEDBHAI OF YAKOOBBHAI HAMDA N TRADING CO., DUBAI. THE SAID CONTAINERS WERE INTERC EPTED BY THE CUSTOMS & EXCISE DEPARTMENT ON 19/20.08.2001 AN D WERE FOUND TO CONTAIN EXCESS QUANTITY OF 83,8688 MT S. OF CLOTH, VALUED AT RS.82,54,742/-, WHICH WAS SEIZED B Y THE ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 16 - CENTRAL CUSTOMS & EXCISE AUTHORITIES. THE DIRECTOR OF THE COMPANY, SHRI RATANKUMAR GOYAL, ADMITTED THE OFFENC E UNDER THE CUSTOMS ACT IN HIS STATEMENT RECORDED BY THE AU THORITIES ON 07.11.01 AND CUSTOMS DUTY OF RS.42,31,027/- WAS PAID BY THE ASSESSEE COMPANY ON THE EXCESS QUANTITY OF FABR IC FOUND IN THE SAID CONTAINERS. DURING THE ASSESSMENT PROCE EDINGS, IT WAS NOTED BY THE AO THAT THE APPELLANT HAD NOT ACCO UNTED FOR THE SAID EXCESS QUANTITY OF FABRICS WORTH RS.82,54, 742/- IN ITS BOOKS OF ACCOUNTS. IT WAS SUBMITTED BY THE APPELLAN T THAT IT WAS A MISTAKE ON THE PART OF THE SUPPLIER AND THAT THE CUSTOMS DUTY OF RS.42,31,027/- HAD BEEN PAID UNDER PROTEST, WHICH WAS SHOWN IN THE BOOKS AS RECEIVABLE AND NOT AS AN EXPENDITURE. IT WAS FURTHER SUBMITTED BY THE ASSESS EE THAT THE OWNERSHIP OF THE GOODS VESTED WITH THE DUBAI PA RTY. THE CONTENTIONS OF THE APPELLANT WERE NOT ACCEPTED BY T HE AO FOR THE REASONS DISCUSSED IN DETAIL IN THE RELEVANT ASS ESSMENT ORDER AND THE UNRECORDED TRANSACTION OF RS.82,54,74 2/-, REPRESENTING THE EXCESS QUANTITY OF GOODS IMPORTED, WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S.69B O F THE ACT. PENALTY PROCEEDINGS WERE INITIATED BY THE AO U/S 27 1(1)(C ) OF THE ACT. 4. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY T HE AO, THE SUBMISSIONS MADE DURING THE COURSE OF THE ASSESSMEN T PROCEEDINGS WERE REITERATED BY THE ASSESSEE. THE CO NTENTIONS OF DIE ASSESSEE WERE NOT ACCEPTED BY THE AO FOR REA SONS DISCUSSED AT PARAS 7, 8 & 9 (ON PAGES 4 TO 7) OF TH E IMPUGNED PENALTY ORDER. IT WAS HELD BY THE AO THAT THE ASSES SEE HAD NOT OFFERED ANY SATISFACTORY EXPLANATION AND THAT I T HAD CONCEALED THE PARTICULARS OF ITS INCOME AMOUNTING T O RS.82,54,742/-. A. MINIMUM PENALTY OF RS.29,46,943/ - WAS ACCORDINGLY LEVIED BY THE AO U/S 271(1)(C)OF THE AC T 5. BEFORE ME, THE LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE AO DURING THE PENALTY PROCEEDINGS AND BE FORE ME DURING THE COURSE OF THE APPEAL FILED AGAINST THE Q UANTUM ADDITION MADE IN THE CASE. THE APPEAL FILED AGAINST THE QUANTUM ADDITION MADE IN THE CASE HAS ALREADY BEEN DECIDED VIDE MY ORDER DATED 15.12.2005 IN APP. NO. CAS-III/ 129/04- 05, WHEREIN ALL THE FACTS OF THE CASE AND THE CONTE NTIONS RAISED BY THE APPELLANT HAVE BEEN DISCUSSED IN DETA IL. IN BRIEF, IT IS CONTENDED BY THE LD. AR THAT THE CUSTOM DUTY OF RS. 42,31,027/- HAD BEEN PAID BY THE APPELLANT UNDER PR OTEST AND THAT THE SAME HAD BEEN SHOWN UNDER THE HEAD 'OTHER ADVANCES'. IT IS FURTHER CONTENDED THAT THE PROVISI ONS OF SECTION 69B OF ACT ARE NOT APPLICABLE TO PURCHASE O F TRADED GOODS, AS TRADED GOODS ARE DEBITED WHEN PURCHASED A ND CREDITED WHEN SOLD AND, IF NOT SOLD, ARE SHOWN AS C LOSING ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 17 - STOCK. ACCORDING TO HIM, ONLY THE NET RESULT IS PRO FIT, I.E., THE DIFFERENCE BETWEEN PURCHASE AND SALE PRICE, WHICH I S TO BE TAXED AND THAT THE TOTAL AMOUNT OF ASSUMED PURCHASE PRICE IS NOT TO BE ADDED AND TAXED. IT IS ALSO CONTENDED THA T NO FABRIC HAS BEEN RECEIVED BY THE APPELLANT NOR HAS ANY PAYM ENT, OR ENTRY IN RESPECT THEREOF, BEEN MADE DURING THE YEAR UNDER CONSIDERATION BY THE APPELLANT COMPANY. IT IS ARGUE D BY HIM THAT THE ADDITION MADE BY THE AO U/S 69B OF THE ACT , MERELY ON THE BASIS OF THE STATEMENT MADE BEFORE THE EXCIS E/CUSTOM AUTHORITIES, WAS NOT JUSTIFIED AS NO EVIDENCE WAS A VAILABLE IN RESPECT OF ANY PAYMENT MADE OUTSIDE THE BOOKS OF AC COUNTS BY THE APPELLANT AND THAT THE APPELLANT HAD NOT CON CEALED ANY INCOME WHATSOEVER. IN SUPPORT OF HIS CONTENTIONS, R ELIANCE HAS BEEN PLACED BY THE LD. AR ON SEVERAL DECISIONS MENTIONED IN THE WRITTEN SUBMISSIONS. 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E AND THE SUBMISSIONS MADE BY THE LD. AR. IN MY ORDER DATED 15.12.2005 (SUPRA), AFTER CAREFUL CONSIDERATION OF THE FACTS OF THE CASE AND THE AFORESAID SUBMISSIONS OF THE APPEL LANT, THE QUANTUM ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PURCHASE OF EXCESS IMPORTED FABRI CS HAS BEEN UPHELD AND CONFIRMED IN PRINCIPLE FOR REASONS DISCUSSED AT PARAS 12 TO 16 OF MY AFORESAID ORDER, THE RELEVA NT EXTRACTS OF WHICH ARC REPRODUCED BELOW; - 12........THE FACT THAT EXCESS QUANTITY OF FABRICS , OVER AND ABOVE THAT DECLARED IN THE BILL OF IMPORT, WAS FOUND IN THE CONTAINERS IMPORTED BY THE APPELLANT FROM DU BAI IS NOT IN DISPUTE. THE FURTHER FACT THAT CUSTOMS DU TY ON THE SAID EXCESS FABRIC IMPORTED ILLEGALLY WAS PAID BY THE APPELLANT IS ALSO NOT IN DISPUTE. PENALTIES LEVIABL E FOR SUCH ILLEGAL IMPORT OF FABRICS UNDER THE CUSTOMS AC T WERE IMPOSED ON THE APPELLANT AS WELL AS THE DIRECT OR BY THE CUSTOMS AUTHORITIES, WHICH WERE ALSO CONFIRM ED BY THE FIRST APPELLATE/ADJUDICATION AUTHORITIES OF THE CUSTOMS DEPARTMENT. ON PERUSAL OF THE ORDER OF T HE HON'BLE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH DATED 18/19.07.2005, IT IS SEEN THAT PARTIAL RELIEF HAS BEEN GRANTED TO THE APPELLANT AND THE DIRECTOR IN REGARD TO THE AFORESA ID PENALTIES LEVIED BY THE CUSTOMS AUTHORITIES IN AS M UCH AS THE CUSTOMS DUTY OF RS.42,31,027/- HAS BEEN UPHE LD AS NOT CONTESTED BY THE APPELLANT, THE PENALTY OF RS.15,00,000/- LEVIED ON THE APPELLANT HAS BEEN REDUCED TO RS.7,50,000/-, THE CONFISCATION OF THE N ON- DECLARED GOODS IMPORTED HAS BEEN UPHELD BUT THE REDEMPTION FINE HAS BEEN REDUCED FROM RS.20,00,000/ - TO RS.7,50,000/-, THE CONFISCATION OF THE DECLARED ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 18 - FABRICS HAS ALSO BEEN UPHELD BUT THE REDEMPTION FIN E HAS BEEN REDUCED TO RS.5,00,000/- WHILE THE PERSONA L PENALTY LEVIED ON SHRI RATANKUMAR GOYAL HAS BEEN REDUCED FROM RS.5,00,000/- TO RS.2,00,000/-. I N THE AFORESAID DECISION OF THE HON'BLE APPELLATE TRIBUNA L, THE FOLLOWING FACTS ARE NOTED:- (I) THAT THE APPELLANT ACCEPTED THE AFORESAID EXCESS QUANTITY OF GOADS IMPORTED BUT DEPOSED THAT IT WAS NOT AWARE OF THE EXCESS QUANTITY OF FABRICS IN THE CONTAINER, WHICH ONLY THE MANAGING DIRECTOR COULD EXPLAIN. (II) THAT THE STATEMENT OF THE M.D., SHRI RATANKUMAR GOYAL, WAS RECORDED ON 22.08.2001 AND ALSO SUBSEQUENTLY, WHO ACCEPTED AND ADMITTED THE FACT OF HAVING IMPORTED THE EXCESS FABRICS AND ALSO PAID THE DIFFERENTIAL DUTYOFRS.42,31,027/-, (III) THAT SHRI RATANKUMAR GOYAL HAD CLEARLY ADMITTED IN HIS STATEMENTS THAT HE WAS AWARE OF THE EXCESS QUANTITY LOADED IN THE CONTAINERS, AS PER HIS TELEPHONIC TALK WITH THE SUPPLIER. IN SPITE OF THAT THE SAID EXCESS QUANTITY WAS NOT DECLARED. (IV) THAT THE APPELLANT HAS ADMITTED TO MIS- DECLARATION OF THE QUANTITY RESULTING IN MISUSE OF THE BENEFIT AVAILABLE TO A 100% EOU. (V) THAT, IN THE INSTANT CASE, THE FACT OF MIS- DECLARATION WAS ESTABLISHED AND IT WAS ONLY THEREAFTER THAT THE APPELLANT PAID THE DUTY TO GET THE RELEASE OF THE FABRICS. (VI) THAT THE APPELLANT HAW NOT CONTESTED THEIR LIABILITY TO CONFISCATION, (VII) THAT SHRI RATANKUMAR GOYAL WAS THE PERSON ACTIVELY INVOLVED IN IMPORTATION OF THE EXCESS QUANTITY AND WAS AWARE OF THE, SAID FACT. THAT HE HAD ALSO DEPOSED IN HIS STATEMENT THAT HE WAS AWARE OF THE FACT THAT IT IS AN OFFENCE UNDER THE CUSTOMS ACT. 13. IN THEIR AFORESAID ORDER, IT HAS BEEN OBSERVED BY THE HON'BLE APPELLATE TRIBUNAL THAT 'THE INTENTION ON THE PART OF THE APPELLANT TO EVADE CAN BE INFERRED WITHOUT ANY HESITATION FROM THE FACT THAT THERE WAS MIS-DECLARATION IN THE QUANTITY OF THE FABRICS, WHICH FACT ALSO STANDS ACCEPTED BY THE SHRI RATAN GOYAL. IN SUCH A SITUATION, THEY ARE REQUIRED TO BE MET WITH PENALTY AND CANNOT BE ALLOWED TO GO SCOT-FREE ON TH E MERE GROUND THAT, ON BEING POINTED OUT, THEY DEPOSITED T HE DUTY' ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 19 - 14. IN THE AFORESAID FACTS OF THE CASE, THE DENIAL OF THE APPELLANT REGARDING OWNERSHIP OF THE EXCESS IMPORTE D FABRICS CANNOT BE ACCEPTED. THE APPELLANT CANNOT BE PERMITT ED TO TAKE ONE STAND BEFORE ONE GOVERNMENT DEPARTMENT AND ANOTHER STAND BEFORE THE INCOME-TAX DEPARTMENT, ESP ECIALLY IN A CASE IN WHICH THE ATTEMPT TO EVADE LAWFUL TAXE S HAS BEEN ESTABLISHED. THE VARIOUS ARGUMENTS RAISED BY THE AP PELLANT REGARDING DISOWNING THE EXCESS FABRIC IMPORTED, MIS TAKE OF THE SUPPLIER, ETC., THEREFORE, HAVE NOT MERIT. THE FACT THAT THE DIRECTOR, SHRI RATANKUMAR GOYAL, WAS FULLY AWARE AN D KNOWLEDGEABLE ABOUT THE EXCESS GOODS LOADED IN THE CONTAINERS BY THE SUPPLIER IS AMPLY BORNE OUT FROM THE RECORDS. THE FURTHER PLEAS RAISED BY THE APPELLANT THAT IT HAD NEITHER ORDERED FOR SUCH EXCESS GOODS NOR HAD FILED DOCUMENTS FOR CLEARANCE OF SUCH GOODS AND THAT NO P AYMENT HAD BEEN MADE BY IT TO THE SUPPLIER FOR IMPORTING T HE EXCESS QUANTITY OF GOODS CANNOT, THEREFORE, BE ENTERTAINED AT THIS STAGE IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE ALREADY NOTED BY THE HON'BLE CUSTOMS, EXCISE & SERV ICE TAX APPELLATE TRIBUNAL. IT IS EVIDENT IN THIS CASE THAT FABRICS IN EXCESS OF THAT DECLARED BY THE APPELLANT HAD BEEN I MPORTED. SINCE THE AFORESAID EXCESS IMPORTS WERE ILLEGAL, TH E APPELLANT COULD OBVIOUSLY NOT HAVE FILED CLEARANCE DOCUMENTS BEFORE THE CUSTOMS AUTHORITIES FOR THE SAME. AS THE APPELLANT HAD TRIED TO ILLEGALLY IMPORT EXCESS GOODS, THE PREPONDERANCE OF PROBABILITIES WOULD INDICATE THAT PAYMENT FOR SUCH ILLEGAL IMPORTS WOULD ALSO HAVE BEEN MADE THROUGH ILLEGAL C HANNELS. THE CONTENTION OF THE APPELLANT THAT IT HAS NOT MAD E PAYMENT TO THE SUPPLIER FOR THE AFORESAID GOODS IS HARD TO BELIEVE. IN GENERAL MARKET PRACTICE, ESPECIALLY IN FOREIGN MARK ETS, NO SUPPLIER WOULD WAIT FOR SUCH PROLONGED PERIOD OF TI ME, I.E. FORM 19/20.08.2001 TILL DATE, FOR PAYMENT OF FOR TH E GOODS SUPPLIED BY THEM. THE AFORESAID FACTS LEAD TO THE R EASONABLE INFERENCE THAT PAYMENT FOR THE GOODS MUST HAVE BEEN MADE BY THE APPELLANT OUTSIDE UTE BOOKS OF ACCOUNTS, THE DETAILS IN REGARD TO WHICH WOULD ONLY BE IN THE EXCLUSIVE KNOW LEDGE OF THE APPELLANT. 15. THE FURTHER ARGUMENT RAISED BY THE APPELLANT, I N THEIR LETTER DATED 11.04.2005 THAT, UNLESS THE CONTRARY I S PROVED REGARDING THE EXCESS QUANTITY OF IMPORT BY THE APPE LLANT OR THE ALLEGATION IS CONFIRMED BY THE TRIBUNAL, THE AD DITION MADE BY THE AO IS VAGUE AND BASELESS ALSO GOES AGAINST T HE APPELLANT, IN VIEW OF THE FINDINGS OF THE HON'BLE A PPELLATE TRIBUNAL ALREADY DISCUSSED ABOVE. THE FACTS THAT CE RTAIN RELIEFS HAVE BEEN GRANTED BY THE HON'BLE APPELLATE TRIBUNAL IN THE PENALTIES IMPOSED BY THE CUSTOMS AUTHORITIES AN D THAT A SECOND APPEAL HAS BEEN FILED BY THE APPELLANT BEFOR E THE ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 20 - HON'BLE GUJARAT HIGH COURT HAVE NO BEARING ON THE I SSUE UNDER CONSIDERATION, VIZ., THE EXISTENCE OF UNEXPLA INED INVESTMENTS FOR THE IMPORT OF THE AFORESAID EXCESS FABRICS, WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. TH E CONTENTION OF THE APPELLANT THAT THE PAYMENT OF CUS TOMS DUTY ON THE SAID EXCESS GOODS IMPORTED HAD BEEN DISCLOSE D IN THE BOOKS OF ACCOUNT ALSO HAS NO BEARING ON THE ISSUE U NDER CONSIDERATION. FOR REASONS DISCUSSED ABOVE, THE VAR IOUS LEGAL CONTENTIONS RAISED BY THE APPELLANT IN REGARD TO TH E APPLICABILITY OF THE PROVISIONS OF SECTION 69B OF T HE ACT FALL TO THE GROUND IN THE FACTS OF THIS CASE. AS THE FACT R EGARDING IMPORT OF EXCESS GOODS BY THE, APPELLANT STANDS DUL Y ESTABLISHED AND AS THE SAID PURCHASES WERE NOT RECO RDED IN THE BOOKS OF THE APPELLANT, IT IS DEAR THAT PAYMENT THEREFORE, MUST ALSO HAVE BEEN MADE BY THE APPELLANT OUTSIDE I TS BOOKS OF ACCOUNTS. THE SAID PURCHASES ARE, THEREFORE, REQ UIRED TO BE TREATED AS UNEXPLAINED INVESTMENTS DURING THE FINAN CIAL YEAR UNDER CONSIDERATION. THE DISTINCTION ATTEMPTED TO B E DRAWN BY THE APPELLANT BETWEEN THE PROVISIONS OF SECTION 69/69B OF THE ACT IS ALSO NOT MATERIAL. IT IS A WELL SETTLED PRINCIPLE OF LAW THAT ANY MISTAKE, DEFECT OR OMISSION IN ANY RETURN, ASSESSMENT, ETC. SHALL NOT BECOME INVALID, IF SUCH RETURN, ASSESSMENT, ETC. IS IN SUBSTANCE AND IN EFFECT IN C ONFORMITY WITH AND ACCORDING TO THE INTENT AND PURPOSE OF THE ACT. THE AFORESAID PRINCIPLE OF LAW IS DULY EMBODIED IN DUL Y EMBODIED IN THE PROVISIONS OF SECTION 292B OF THE ACT. THUS, THE MERE FACT THAT SECTION 69B OF THE ACT HAS BEEN REFERRED TO BY THE AO WHILE MAKING THE AFORESAID ADDITION INSTEAD OF S ECTION 69 OF THE ACT DOES NOT IN ANY MANNER INVALIDATE THE AD DITION SO MADE. 16. THE FURTHER CONTENTION OF THE APPELLANT THAT TH E ADDITION HAS BEEN MADE ON THE BASIS OF THE PROCEEDINGS UNDER THE CUSTOMS ACT AND THAT NO INDEPENDENT INVESTIGATION W AS CARRIED OUT BY THE AO IN THE MATTER IS ALSO NOT COR RECT. THE ACTION TAKEN BY THE CUSTOMS AUTHORITIES AND THE PEN ALTIES IMPOSED ON THE APPELLANT UNDER THE CUSTOMS ACT ARE DIFFERENT AND DISTINCT FROM THE ADDITION MADE BY THE AO UNDER THE INCOME-TAX ACT. WHEREAS THE VARIOUS PENALTIES HAVE BEEN IMPOSED BY THE CUSTOMS AUTHORITIES FOR VIOLATION OF THE CUSTOMS ACT BY ILLEGAL IMPORT OF EXCESS GOODS OVER ABOVE THAT DECLARED BY THE APPELLANT IN THE BILL OF ENTRY, IN THE INSTANT CASE THE ADDITION HAS BEEN MADE BY THE AO ON ACCOUN T OF UNEXPLAINED INVESTMENTS ON SUCH EXCESS GOODS IMPORT ED, WHICH WERE NOT RECORDED IN THE BOOKS OF THE APPELLA NT. IT IS, THEREFORE, NOT A CASE WHERE THE APPELLANT HAS BEEN PENALIZED UNDER THE INCOME-TAX ACT FOR AN OFFENCE COMMITTED U NDER THE CUSTOMS ACT, AS HAS BEEN CONTENDED BY THE APPELLANT . IN THIS ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 21 - CONTEXT, IT IS NOTEWORTHY TO MENTION THAT, IN SPITE OF THE FACT THAT THE APPELLANT WAS FULLY AWARE OF THE EXCESS GO ODS IMPORTED BY THEM IN AUGUST, 2001, WHICH WERE ALSO A CCEPTED AND ADMITTED BEFORE THE CUSTOMS AUTHORITIES, THE SA ME WERE NOT RECORDED IN ITS BOOKS FOR THE YEAR ENDING 31.03 .2002. THE ARGUMENT OF THE APPELLANT THAT NO ASSESSEE WOULD SU PPRESS THE EXPENSES INCURRED ON PURCHASES AS THESE ARE DEB ITABLE TO THE PROFIT & LOSS ACCOUNT AND THAT SUCH DEBIT ENTRI ES ARC REQUIRED TO BE MATCHED WITH THE CREDIT ENTRIES OF S ALE/CLOSING STOCK IS EVIDENTLY UNACCEPTABLE IN THE AFORESAID FA CTS AND CIRCUMSTANCES OF THE CASE. IF. AS HAS BEEN OBSERVED BY THE HON'BLE APPELLATE TRIBUNAL, THE INTENTION ON (LIE P ART OF THE APPELLANT WAS TO EVADE TAX/DUTY, THE EXCESS NON-DEC LARED QUANTITY COULD HAVE BEEN DIVERTED TO THE DOMESTIC M ARKET OUTSIDE THE BOOKS OF ACCOUNT. IN THAT CASE, NEITHER THE PURCHASES NOR THE SALES/STOCK WOULD BE ROUTED THROU GH THE BOOKS OF ACCOUNT. ' 7. FOR REASONS DISCUSSED AT PARA 18 MY AFORESAID OR DER DATED 15.12.2005 (SUPRA) IN THE QUANTUM APPEAL FILED BY T HE APPELLANT, THE QUANTUM ADDITION MADE BY THE AO HAS, HOWEVER, BEEN RESTRICTED TO THE ACTUAL PURCHASE VAL UE OF THE EXCESS FABRICS IMPORTED, WHICH WERE NOT FOUND RECOR DED IN THE BOOKS OF ACCOUNT. 8. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CA SE DISCUSSED ABOVE, IT IS SEEN THAT THE FACTUM REGARDI NG CONCEALMENT OF INCOME IN REGARD TO THE UNEXPLAINED PURCHASE OF THE EXCESS IMPORTED FABRICS, WHICH WERE NOT RECO RDED IN THE BOOKS OF ACCOUNT, IS ESTABLISHED BEYOND ANY DOU BT IN THIS CASE. DURING THE COURSE OF THE INSTANT APPEAL PROCE EDINGS ALSO, THE APPELLANT HAS BEEN UNABLE TO LEAD ANY FUR THER EVIDENCE, BEYOND WHAT WAS SUBMITTED BEFORE ME IN TH E QUANTUM APPEAL IN THE CASE, TO SUBSTANTIATE ITS CON TENTIONS OR TO FURNISH ANY SATISFACTORY AND REASONABLE CAUSE IN REGARD TO THE DEFAULT COMMITTED BY IT IN TERMS OF THE PROVISI ONS OF SEC 271(1)(C) OF THE ACT. THE BURDEN OF PROOF IN MIS-RE GARD, WHICH CLEARLY FELL UPON THE APPELLANT, HAS THUS NOT BEEN DISCHARGED. IT HAS BEEN HELD BY THE COURTS THAT A ' REASONABLE CAUSE' CAN BE REASONABLY SAID TO BE A CAUSE WHICH P REVENTS A MAN OF AVERAGE INTELLIGENCE AND ORDINARY PRUDENCE, ACTING UNDER NORMAL CIRCUMSTANCES, WITHOUT NEGLIGENCE OR I NACTION OR WANT OF BONAFIDES. IN THE INSTANT CASE, THE APPE LLANT HAS BEEN UNABLE TO SHOW THAT THE EXPLANATION OFFERED BY IT WAS A BONAFIDE ONE AND THAT ALL MATERIAL FACTS HAD BEEN T RULY AND FULLY DISCLOSED BY IT. THE AFORESAID FACTS OF THE C ASE, WHICH CAME TO LIGHT ONLY CONSEQUENT TO THE INTERCEPTION O F THE CONTAINERS BY THE CUSTOMS DEPARTMENT, WERE EVIDENTL Y WITHIN ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 22 - THE EXCLUSIVE KNOWLEDGE OF THE APPELLANT THE DEFAUL T COMMITTED BY THE APPELLANT IN REGARD TO THE ILLEGAL IMPORT OF THE FABRICS HAS ALSO BEEN ADMITTED BY THE APPELLANT AND THE FINES/PENALTIES IN THIS REGARD HAVE BEEN PAID. THE FACT THAT PAYMENT FOR THE SAID EXCESS IMPORTED FABRICS WAS MA DE BY THE APPELLANT OUTSIDE THE BOOKS OF ACCOUNT IS UNDOU BTEDLY ESTABLISHED IN THE FACTS OF THE CASE, AS ALREADY DI SCUSSED ABOVE. IT IS ALSO AMPLY EVIDENT THAT THE APPELLANT WAS FULLY AWARE OF THE AFORESAID EXPENDITURE INCURRED BY IT, THE SOURCE IN RESPECT OF WHICH HAS NOT BEEN EXPLAINED. THE CAS E LAWS RELIED ON BY THE LD. AR WOULD, THEREFORE, BE INAPPL ICABLE IN THE FACTS OF THE INSTANT CASE. THE CONTUMACIOUS CON DUCT AND DELIBERATE INTENT IN CONCEALMENT OF ITS INCOME IS, THEREFORE, CLEARLY ESTABLISHED IN THE CASE, THEREBY ATTRACTING THE PENAL PROVISIONS OF SEC 271(1)(C) OF THE ACT. IN THE ABOV E VIEW OF THE MATTER, THE ACTION OF THE AO IN IMPOSING A PENA LTY U/S 271(1)(C) OF THE ACT IS, THEREFORE, JUSTIFIED AND I S UPHELD IN PRINCIPLE. THE AO IS, HOWEVER, DIRECTED TO RECOMPUT E THE AMOUNT OF PENALTY LEVIABLE IN THE CASE AFTER GIVING APPEAL EFFECT TO MY ORDER DATED 15.12.2005 (SUPRA) IN THE QUANTUM APPEAL FILED BY THE APPELLANT, WHEREVER THE QUANTUM ADDITION IN RESPECT OF THE UNRECORDED PURCHASES HAS BEEN RES TRICTED TO THE ACTUAL PURCHASE VALUE OF THE EXCESS FABRICS IMP ORTED. 12. IN RESULT, THE APPEAL IS TREATED AS PARTLY ALL OWED. 14. IN VIEW OF OUR ABOVE FINDING IN THE QUANTUM APP EAL, THE CROSS APPEAL IN RELATION TO THE LEVY OF PENALTY UNDER SEC TION 271(1)(C) ARE ALSO SET ASIDE AND RESTORED TO THE FILE OF THE AO F OR ADJUDICATION AFRESH IN LIGHT OF THE OUTCOME OF THE FRESH ASSESSMENT WHI CH IS TO BE MADE BY HIM IN PURSUANCE TO OUR ORDER ABOVE IN QUANTUM APPE AL. THEREFORE, THESE APPEALS ARE ALSO ALLOWED FOR STATISTICAL PURP OSES. 15. IN THE RESULT, ALL THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 19/03/2010. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCO UNTANT MEMBER AHMEDABAD; DATED 19/03/2010 PARAS# ITA NO. 584, 692, 1174, 1336 /AHD/2006 - 23 - COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS) 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD