SUMITOMO CHEMICAL INDIA P. LTD, MUMBAI V. JCIT (OSD) RG 3(3), MUMBAI

ITA 6222/MUM/2009

• Counselvise Citation: 622219914 RSA 2009
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 11-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 01-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: PORUS KAKAMANISH KANTH
• Keywords: Opportunity of being heard; Wrong claim; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.6222/MUM/2009 (ASSESSMENT YEAR: 2003-04) SUMITOMO CHEMICAL INDIA PRIVATE LIMITED, 7 TH FLOOR, MOTI MAHAL, 195 J TATA ROAD, CHURCHGATE, MUMBAI -400 020 ....... APPELLANT VS JOINT COMMISSIONER OF INCOME TAX (OSD) RANGE-3(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ..... RESPONDENT PAN: AAECS 3750 L APPELLANT BY: SHRI. PORUS KAKA/MANISH KANTH RESPONDENT BY: SHRI C.G.K. NAIR DATE OF HEARING: 11.08.2011 DATE OF PRONOUNCEMENT: 28.10.2011 O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A) 32, MUMBAI DATED 23.07.2009 FOR THE A.Y. 2003-04. THE ISSUE WHICH ARISES FROM GROUNDS TAKEN FROM THE ASSESSEE IS WHETHER THE LD. CIT (A) IS JUSTIFIED IN CONFIRMING THE PENALTY LEVIED BY THE A.O. U/S.271(1)(C). 2. THE FACTS PERTAINING TO THE ISSUE ARE AS UNDER. THE ASSESSEE- COMPANY IS ENGAGED IN THE MANUFACTURING AND TRADING OF CHEMICALS / INSECTICIDES. THE ASSESSEE FILED THE RETURN OF INC OME DECLARING THE TOTAL INCOME AT ` 12,47,24,505/-. THE RETURN FILED BY THE ASSESSEE ITA 6222/MUM/2009 SUMITOMO CHEMICAL INDIA PRIVATE LIMITED 2 WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLE TED U/S.143(3) OF THE ACT. 3. IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS CLAIMED THE COMMISSION PAYMENT OF ` 51,70,764/- TO M/S. KARAMCHAND APPLIANCES PVT. LTD. (IN SHORT M/S. KAP LTD.). THE ASSESSEE STATED BEFORE THE A.O. THAT THE SAID COMMISSION WAS PAID T O M/S. KAP LTD. FOR SALES OF THE COMPANYS PRODUCTS TO ICON HOUSEHO LD PRODUCTS LTD. (IN SHORT ICON), KNIGHT QUEEN INDUSTRIAL PVT. LTD & FUMAKILLA. THE COMMISSION WAS SAID TO HAVE BEEN PAID @ 4.55% OF TH E SALES OF THE SPECIFIED PRODUCTS. AS M/S. KAP LTD. WAS AT NEW DE LHI, THE A.O. ISSUED THE COMMISSION U/S.131(1)(D) OF THE I.T. ACT BY APPOINTING DDI (INV.), UNIT-III, NEW DELHI TO MAKE ENQUIRE INTO TH E COMMISSION PAYMENTS CLAIMED TO HAVE BEEN MADE TO M/S. KAP LTD. . THE DDI (INV.), NEW DELHI ISSUED SUMMONS TO M/S. KAP LTD. T O ENQUIRE INTO THE CLAIM OF THE COMMISSION PAYMENT BY ASSESSEE AND THE SAID COMPANY VIDE THEIR LETTER DATED 9.3.2006 STATED THAT THEY H AVE NOT RECEIVED ANY COMMISSION FROM THE ASSESSEE-COMPANY. AS NOTED BY THE A.O., TH EY ALSO STATED THAT, THEY HAVE NOT MARKETED ANY GOODS OF THE ASSESSE COMPANY. AT THE SAME TIME THE SAID COMPANY HAS ALS O STATED THAT THOUGH THEY HAVE NO TRANSACTION WITH THE ASSESSEE-C OMPANY BUT THEIR TRANSACTIONS ARE WITH M/S. SC ENVIRO AGRO INDIA PVT . LTD. (IN SHORT M/S. S C ENVIRO) WHICH WAS AN ASSOCIATE CONCERN OF THE ASSESSEE. THE A.O. CONFRONTED THE ASSESSEE-COMPANY WITH THE R EPORT OF THE DDI (INVESTIGATION), NEW DELHI AND THE ASSESSEE FILED H IS DETAIL REPLY DATED 14.3.2006. THE ASSESSEE STATED THAT M/S. S C ENVIR O AND THE ASSESSEE ARE SUBSIDIARIES OF SUMITOMO CHEMICAL COMP ANY LIMITED, JAPAN. AS PER THE AGREEMENT BETWEEN THE ASSESSEE A ND SC ENVIRO, THE SAID COMPANY HAS TO MANUFACTURED/PRODUCE GOODS AND THE GOODS WERE TO BE MARKETED BY THE ASSESSEE. IN THE ASSESS MENT YEARS 2002- 03 & 2003-04, DUE TO COMMERCIAL EXIGENCIES, M/S. SC ENVIRO MADE DIRECT SALES TO M/S. KAP LTD. AND ACCOUNTED THE SAI D SALES IN ITS BOOKS OF ACCOUNT. FROM THE A.Y. 2004-05 ONWARDS TH E ASSESSEE HAD ITA 6222/MUM/2009 SUMITOMO CHEMICAL INDIA PRIVATE LIMITED 3 MADE SALES TO M/S. KAP LTD. DIRECTLY. IN RESPECT O F THE SALES MADE TO M/S. KAP LTD., M/S. SC ENVIRO AGREED DISCOUNT AS PE R THE NORMAL TRADE PRACTICE. M/S. KAP LTD. REQUESTED FOR ADDITIO NAL DISCOUNT/ COMMISSION WHICH WAS AGREED AT RS 51,70,764/-. IN F ACT, M/S. SC ENVIRO WAS SUPPOSED TO ISSUE CREDIT NOTE TO M/S. KA P LTD., OF THE SAID AMOUNT BUT INADVERTENTLY CREDIT NOTE WAS ISSUED BY THE ASSESS EE DURING THE FINANCIAL YEAR RELEVANT TO THE A.Y. 2002 -03. THE ASSESSEE ADJUSTED THE AMOUNT OF CREDIT NOTE IN THE ACCOUNT O F M/S. SC ENVIRO IN THE A.Y. 2003-04. IN SUM & SUBSTANCE, THE ASSES SEE STATED BEFORE THE A.O. THAT AS SC ENVIRO AND THE ASSESSEE WERE AS SOCIATED CONCERNS ALSO HAVING CLOSE BUSINESS RELATIONSHIPS AND INADVE RTENTLY ASSESSEE ISSUED CREDIT NOTE IN RESPECT OF THE ADDITIONAL DIS COUNT/COMMISSION TO M/S. KAP LTD. AND THE SAID AMOUNT WAS ADJUSTED IN T HE SUBSEQUENT YEAR. THE A.O. WAS NOT IMPRESSED WITH THE EXPLANAT ION OF THE ASSESSEE. IN HIS OPINION THE ASSESSEE ONLY CAME FO RWARD TO AGREE FOR DISALLOWANCE OF SAID AMOUNT WHEN THE MATTER WAS INV ESTIGATED BY THE DDI(INVESTIGATION), NEW DELHI. 4. THE A.O. INITIATED PENALTY PROCEEDINGS U/S.271( 1)(C) ON THE SAID AMOUNT. IT WAS FURTHER NOTICED BY THE A.O. THAT TH E ASSESSEE HAS CLAIMED THE DEDUCTION TOWARDS BAD DEBTS WRITTEN OFF OF RS 31,09,032/- . THE A.O. SOUGHT THE EXPLANATION OF THE ASSESSEE. THE ASSESSEE FILED THE REPLY TO THE A.O. STATING THAT IT HAD TAKEN OVE R SUN-UP BOTANICS PVT. LTD. FROM AVENTIS CROP SCIENCE INDIA LTD. IN M AY 2001. THE ASSESSEE SOLD THE GOODS TO THE CUSTOMERS REGULARLY AND MADE PAYMENTS TILL 1 ST FEBRUARY 2002 TILL WHEN THE CUSTOMERS CLEARS THE O LD DUES AND PART OF THE BALANCE DUE TOWARDS SUBSEQUENT SALES MADE BY THE ASSESSEE FROM CUSTOMER DID NOT MAKE THE PAYMENT AFTER 1 ST FEBRUARY 2002 WHEN THE ASSESSEE WRITTEN OFF THE BAL ANCE AMOUNT OUTSTANDING. THE A.O. WAS OF THE VIEW THAT BURDEN WAS ON THE ASSESSEE TO PROVE THAT THEY HAD NO EXPECTATIONS OF THE RECOVERY AND IT WAS THE RESPONSIBILITY OF THE ASSESSEE TO GET THE P ROPER INFORMATION OF THE DEBTOR WHEREBY DEBT WOULD NOT BE BAD. THE A.O. , THEREFORE, ITA 6222/MUM/2009 SUMITOMO CHEMICAL INDIA PRIVATE LIMITED 4 DISALLOWED THE AMOUNT OF ` 31,09,022/- MADE THE ADDITION INTO THE TOTAL INCOME AND SIMULTANEOUSLY INITIATED THE PENAL TY PROCEEDINGS U/S.271(1)(C) OF THE ACT. THE A.O. LEVIED THE PENA LTY U/S.271(1)(C) OF THE INCOME-TAX ACT ON THE CLAIM OF THE COMMISSION P AYMENT OF ` 51,70,764/- AS WELL AS THE BAD DEBT WRITTEN OFF OF ` 31,09,022/- VIDE ORDER DATED 25.3.2008 ON THE REASON THAT THE ASSESS EE HAS FILED THE INACCURATE PARTICULARS OF INCOME AND THE PENALTY WA S LEVIED AT RS 30,43,000/-. THE ASSESSEE CHALLENGED THE PENALTY OR DER BEFORE THE LD. CIT (A). THE LD. CIT (A) DELETED THE PENALTY IN RE SPECT OF THE ADDITION OF ` 31,03,022/- WHICH WAS TOWARDS THE BAD DEBT WRITTEN OFF, BUT SUSTAINED THE PENALTY ON THE AMOUNT OF RS 51,70,764 /- CONFIRMING THE ACTION OF THE A.O. THE OPERATIVE PARTS OF THE REAS ONS GIVEN BY THE LD. CIT (A) ARE AS UNDER:- 6. I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT AS WELL AS THE CASE. SO FAR AS PENALTY IN RESPECT O F CLAIM OF BAD DEBTS WRITTEN-OFF DISALLOWED BY THE A.O. IS CON CERNED, HONBLE TRIBUNAL HAVE DELETED THE SAID ADDITION IN THE CASE OF THE APPELLANT VIDE THEIR ORDER DATED 12/03/09. T HEREFORE NO PENALTY IS IMPOSABLE IN RESPECT OF THE AMOUNT OF ` 31,09,022/- ORIGINALLY DISALLOWED BY THE A.O. SO FA R AS THE ADDITION IN RESPECT OF THE WRONG CLAIM OF COMMISSIO N OF RS.51,70,764/- IS CONCERNED, FOLLOWING FACTS ARE RE LEVANT TO ASCERTAIN WHETHER THE APPELLANT HAD INTENTIONALLY CONCEALED ITS INCOME AND / OR HAD FURNISHED INACCUR ATE PARTICULARS OF INCOME. I) INITIALLY, ON AN ENQUIRY MADE BY THE A.O VIDE LE TTER DATED 29/07/05 THE APPELLANT SUBMITTED VARIOUS DETAILS THROUGH HIS LETTER DATED 11/01/06. IN THIS LETTER THE APPEL LANT FURNISHED A COPY OF LEDGER ACCOUNT AND COMPLETE ADD RESS OF M/S KARAMCHAND APPLIANCE PVT LTD. IT WAS ALSO STATE D IN THIS LETTER THAT COMMISSION OF RS.51,70,764/- HAS BEEN PAID ON SALES OF THE COMPANYS PRODUCT THROUGH THE SAID ITA 6222/MUM/2009 SUMITOMO CHEMICAL INDIA PRIVATE LIMITED 5 PARTY TO THREE COMPANIES. IN THE LEDGER ACCOUNT OF M/S KAPL THE SAID AMOUNT OF COMMISSION WAS DULY REFLECT ED TO HAVE BEEN PAID. HOWEVER THE APPELLANT NEITHER ADMIT TED THAT THE CLAIM OF COMMISSION WAS WRONG NOR THE SAME WAS WITHDRAWN BY THE APPELLANT AT THIS STAGE. II) THEREAFTER VIDE LETTER DATED 06/02/06 THE A.O. REQUIRED FURTHER INFORMATION IN RESPECT OF PAYMENT OF COMMIS SION TO M/S. KAPL AS WELL AS M/S SUMITOMO CORPORATION INDIA PVT. LTD. THE A.O. REQUIRED THE DETAILS OF EFFORTS MADE BY THESE COMPANIES TO MARKET GOODS OF THE APPELLANT, DETAILS OF PURCHASES MADE BY THEM FROM THE APPELLANT, VALUE OF ORDERS PROCESSED IN RESPECT OF THESE PARTIES AS WEL L AS DISCOUNTS OFFERED BY THE APPELLANT ETC. III) IN RESPONSE TO ABOVE LETTER OF THE A.O., THE A PPELLANT FURNISHED LETTER DATED 14/02/06 GIVING DETAILS IN R ESPECT OF SUMITOMO CORPORATION INDIA PVT. LTD. HOWEVER NO REP LY IN RESPECT OF M/S KAPL WAS FURNISHED. NEITHER THE WRON G CLAIM OF COMMISSION WAS WITHDRAWN. IV) YET ANOTHER LETTER DATED 24/02/06 WAS FILED BY THE APPELLANT BEFORE THE A.O. IN WHICH VARIOUS CLARIFIC ATIONS WERE GIVEN AND DETAILS WERE FURNISHED. HOWEVER IN RESPECT OF WRONG CLAIM OF COMMISSION TO KAPL, NEITHER ANY D ETAILS WERE GIVEN NOR THE CLAIM WAS WITHDRAWN. V) AN ENQUIRY WAS CARRIED OUT BY DDIT (INV.) UNIT-I II, NEW DELHI ON A REFERENCE MADE BY THE A.O. TO ENQUIRE AB OUT THE COMMISSION RECEIVED BY M/S KAPL FROM THE APPELLANT. M/S KAPL, VIDE THEIR LETTER DATED 09/03/06 ADDRESSED TO DDIT(INV.), UNIT-ILL, DELHI DENIED THAT THEY HAVE R ECEIVED ANY COMMISSION FROM THE APPELLANT. ITA 6222/MUM/2009 SUMITOMO CHEMICAL INDIA PRIVATE LIMITED 6 VI) IMMEDIATELY THEREAFTER VIDE LETTER DATED 14/03/ 06, THE APPELLANT STATED THAT CREDIT NOTE WAS ISSUED BY THE ASSESSEE DURING THE CURRENT YEAR TO M/S KAPL. HOWEV ER THIS CREDIT NOTE WAS ADJUSTED FROM THE PAYMENTS DUE TO THE SISTER CONCERN M/S S.C. ENVIRO AGRO INDIA PVT (S.C. ENVIRO) THROUGH THEIR LEDGER ACCOUNT DURING THE CURRENT YEA R. IT WAS THUS STATED BY THE APPELLANT THAT THIS ACCOUNTING E RROR WAS DISCOVERED AFTER THE DETAILED SCRUTINY. HOWEVER INS PITE OF DETECTION OF THIS ERROR THE APPELLANT STILL DID NOT WITHDRAW THE WRONG CLAIM OF COMMISSION AS PER THIS LETTER. I NSTEAD THE APPELLANT CLAIMED THAT SHOULD YOU PROPOSE TO M AKE ANY ADDITIONS/DISALLOWANCES, PLEASE GRANT US AN OPPORTUNITY OF BEING HEARD BEFORE MAKING SUCH AN ADJUSTMENT. VII) AFTER RECEIPT OF REPORT FROM DDIT(INV.), UNIT- III REGARDING DENIAL OF RECEIPT OF COMMISSION BY M/S KAPL, VIDE THEIR LETTER DATED 09/03/06 THE A.O. ISSUED A SHOW CAUSE NOTICE VIDE LETTER DATED 20/03/06 TO THE APPELLANT VIII) IN RESPONSE TO THE ABOVE LETTER OF THE A.O., THE APPELLANT FURNISHED REPLY ON 27/03/06 AND ADMITTED THE MISTAK E IN RESPECT OF CLAIM OF DEDUCTION FOR COMMISSION OF RS.51,70,764/-. 7. FROM THE ABOVE FACTUAL DETAILS IT IS QUITE EVIDE NT THAT THE APPELLANT HAD MADE WRONG CLAIM OF DEDUCTION IN RESP ECT OF COMMISSION INTENTIONALLY AND INSPITE OF A NUMBER OF OPPORTUNITIES GIVEN TO THE APPELLANT BY THE A.O. THE SAID CLAIM W AS NOT WITHDRAWN SUO-MOTO. IT WAS ONLY AFTER THE ENQUIRIES WERE CARRIED OUT AT DELHI FROM M/S KAPL WHO, ON 09/03/06 DENIED HAVING RECEIVED ANY COMMISSION THAT THE APPELLANT FOR THE FIRST TIME ITA 6222/MUM/2009 SUMITOMO CHEMICAL INDIA PRIVATE LIMITED 7 ADMITTED THAT AN ERROR HAS OCCURRED IN ACCOUNTING V IDE LETTER DATED 14/03/06. STILL HOWEVER THE WRONG CLAIM OF CO MMISSION WAS NOT WITHDRAWN BY THE APPELLANT. THE A.O. WAS TH EREFORE COMPELLED TO ISSUE A SHOW CAUSE NOTICE TO THE APPEL LANT THEREAFTER ON 20/03/06 IN RESPONSE TO WHICH THE APPELLANT STAT ED THAT THE CLAIM OF DEDUCTION WAS AN INADVERTENT MISTAKE. IT IS THUS VERY CLEAR THAT WRONG CLAIM OF DEDUCTION OF COMMISSION W AS MADE BY THE APPELLANT AND THE SAME WAS NOT EVEN WITHDRAWN S UO-MOTO TILL THE DEPARTMENT DETECTED AND PROVED IT THROUGH ENQUI RIES AT DELHI. THE APPELLANT THUS HAD EVERY INTENTION TO EVADE TAX . IN MY VIEW THEREFORE PENALTY U/S.271(1 )(C) IS VERY MUCH ATTRA CTED IN THE CASE OF THE APPELLANT IN RESPECT OF THE WRONG CLAIM OF C OMMISSION TO THE EXTENT OF RS.51,70,764/-. HENCE I UPHOLD THE PENALT Y IMPOSED BY THE A.O. IN RESPECT OF THE SAID AMOUNT OF RS.51,70, 764/- WHICH SHALL BE WORKED OUT BY THE A.O. THE PENALTY IN RESP ECT OF ADDITION OF RS.31,03,022/-IS HERE BY DELETED. 5. NOW THE ASSESSEE IS IN APPEAL RAISING THE GRIEVA NCE IN RESPECT OF THE PENALTY SUSTAINED BY THE LD. CIT (A) ON THE WRO NG CLAIM OF COMMISSION/DISCOUNT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. WE HAVE ALSO TOOK INTO CONSIDERATION A LL THE PRECEDENTS RELIED ON BY THE LD. COUNSEL. THE ASSESSEE HAS FIL ED THE REPLY TO THE SHOW CAUSE NOTICE ISSUED BY THE A.O. U/S.271(1)(C) OF THE ACT ON 17.3.2008 (ANNEXURE-18). IN THE SAID REPLY, THE AS SESSEE TRIED TO JUSTIFY THAT THE CLAIM OF THE DEDUCTION/COMMISSION MADE WAS UNDER BONA FIDE MISTAKE AND AS SOON AS THE ASSESSEE REALISED THE S ITUATION, THE MISTAKE WAS CORRECTED AND CLAIM WAS WITHDRAWN. THE ASSESSEE HAS FILED THE COPY OF THE REPLY FILED BY M/S. KAP L TD. DATED 9.3.2006 (ANNEXURE-17) TO THE DIRECTOR INCOME-TAX (INV.), UN IT-III, NEW DELHI IN RESPONSE TO THE SUMMONS ISSUED U/S.131 OF THE ACT. ON PERUSAL OF THE REPLY FILED BY M/S. KAP LTD. WE FIND THAT THE S AID COMPANY IS IN ITA 6222/MUM/2009 SUMITOMO CHEMICAL INDIA PRIVATE LIMITED 8 THE MANUFACTURING OF MOSQUITO REPELLENT AND LIQUID REFILLS AND APPARATUS UNDER THE BRAND NAME (ALL OUT). THEY A LSO TRADE IN MATS AND COILS, WHICH ARE MANUFACTURED FOR THEM BY THE T HIRD PARTY MANUFACTURERS, NAMELY ICON HOUSEHOLD PRODUCT PRIVAT E LIMITED. M/S. KAP LTD. PURCHASES MATERIAL FOR THE MANUFACTURING O F ALL OUT REFILLS MAINLY FROM THE ASSESSEE AND M/S. S C ENVIRO. AS PE R THE REPLY FILED BY M/S. KAP LTD. TO THE DDI(INVESTIGATION,) THE THI RD PARTY MANUFACTURERS OF THE SAID COMPANY PURCHASED SOME CH EMICALS FROM THE ASSESSEE AND ITS ASSOCIATE CONCERN FOR MANUFACT URING OF MATS AND COILS FOR M/S. KAP LTD. M/S. KAP LTD. HAS GIVEN PO INT-WISE REPLY TO THE QUERIES RAISED BY THE DDI (INV), NEW DELHI. PO INT NO.1 IS IN RESPECT OF THE BASIC INFORMATION OF THE SAID COMPANY AND WH ERE THE SAID COMPANY IS ASSESSED. POINT NO.2 IS DIRECTLY ON THE ISSUE OF COMMISSION PAYMENT. IT IS STATED THAT AS PER THE R EPLY GIVEN BY M/S. KAP LTD IT IS ADMITTED THAT THEY BUY THE MATERIALS AND CHEMICALS FROM THE ASSESSEE AND ALSO FROM SC ENVIRO. THE THIRD PA RTY MANUFACTURERS OF THE SAID COMPANY ALSO PURCHASE THE CHEMICALS FRO M THE ASSESSEE AND M/S. S C ENVIRO FOR THE PRODUCTION OF MATS AND COILS. IT IS SATED IN REPLY THAT DUE TO LARGE VOLUME OF PURCHASES, M/S . KAP LTD. HAS NEGOTIATED FOR THE SPECIAL RATES FOR THE ASSESSEE A ND ITS ASSOCIATE COMPANY AND THE ASSESSEES ASSOCIATE COMPANY ALLOWE D THE DISCOUNT TO M/S. KAP LTD. ON THE PURCHASES MADE BY THE THIRD PARTY MANUFACTURES THROUGH THE CREDIT NOTES. THE OTHER P OINTS IN OUR OPINION ARE NOT RELEVANT, SAVE QUERY NO. 13. IN THE SAME REPLY, POINT NO.13 IS VERY MUCH IMPORTANT AS TO THE QUERIES RAIS ED BY THE DDI (INV) IN RESPECT OF THE BUSINESS RELATIONSHIP OF M/S. KAP LTD. WITH THE ASSESSE AND IT IS STATED THAT IN THE FINANCIAL YEAR 2001-02, SUMITOMO CHEMICAL(ASSESSEE) HAS ISSUED ONE CREDIT NOTE TOWA RDS THE PURCHASES OF CHEMICALS BY ICON WHICH IS A THIRD PARTY MANUFAC TURER FOR M/S. KAP LTD. AND THE SAID CREDIT NOTE WAS TRANSFERRED TO TH E ACCOUNT OF M/S. S C ENVIRO IN THE NEXT YEAR I.E. FINANCIAL YEAR 2002- 03 ON THE ADVISE OF THE ASSESSEE. M/S. KAPL ALSO FURNISHED COPIES OF T HE CREDIT NOTES ITA 6222/MUM/2009 SUMITOMO CHEMICAL INDIA PRIVATE LIMITED 9 ISSUED BY SC ENVIRO TO THE SAID COMPANY AND ALSO CO PY OF THE ASSESSEES STATEMENT OF ACCOUNT IN THE SAID COMPANY . 7. WE FIND THAT THERE IS A DEBIT OPENING BALANCE IN THE ACCOUNT OF M/S. KAP LTD. OF ` 51,70,763.70 AND THE SAME IS REVERSED ON 31.3.2003 BY PASSING JOURNAL ENTRY TO THE ACCOUNT O F THE SC ENVIRO. AS PER THE COPY OF ACCOUNT OF SC ENVIRO (ANNEXURE D) WITH THE REPLY FILED BY M/S. KAP LTD., WE FIND THAT THE SAID ACCOU NT IS PROPERLY REFLECTED AS PER REQUEST MADE BY ASSESSEE. AS PER THE EVIDENCE BEFORE US WE FIND THAT M/S. KAP LTD. WAS PURCHASING THE RA W MATERIAL I.E. CHEMICALS AND OTHER MATERIAL FOR THE ASSESSEE AS WE LL AS SC ENVIRO. WE FURTHER FIND THAT MATERIAL IS SOLD BY SC ENVIRO TO M/S. KAP LTD. WE FURTHER FIND THAT THE THIRD PARTY MANUFACTURER O F M/S. KAP LTD. WERE ALSO PURCHASING THE CHEMICALS FOR THE MANUFACT URING OF THE MATS AND COILS FROM THE ASSESSEE AND SC ENVIRO AND ON TH E SALES MADE TO THE THIRD PARTY MANUFACTURERS, ADDITIONAL DISCOUNT WAS AGREED BY ASSESSEE AND M/S. SC ENVIRO AS BOTH THE COMPANIES A RE HAVING CLOSE BUSINESS CONNECTIONS. IT APPEARS THAT THE EVEN IF THE MATERIAL IS SUPPLIED BY SC ENVIRO, THE CREDIT NOTE WAS ISSUED B Y THE ASSESSEE TO M/S. KAP LTD. 8. AS PER THE COPY OF THE STATEMENT OF ACCOUNT FILE D BY M/S. KAP LTD. TO THE DDI (INV.), NEW DELHI; (ANNEX-17) WE FI ND THAT THE CREDIT NOTE WAS ISSUED BY THE ASSESSEE IN THE FINANCIAL YE AR 2001-02 (A.Y. 2002-03) FOR THE PURCHASE OF THE CHEMICALS BY M/S. ICON, THIRD PARTY MANUFACTURER OF M/S. KAP LTD. WE FURTHER FIND THAT THE ASSESSEE REQUESTED M/S. KAP LTD. TO ADJUST THE AMOUNT OF ` 51,70,763/- AGAINST M/S. SC ENVIRO, XEROX COPY OF THE LETTER DT 02.01.03 BEING ANNEXURE B FURNISHED BY M/S. KAP LTD. TO THE DDI ( INV) IS FILED IN THE COMPILATION AT SERIAL NO.17. AS PER THE REQUEST OF THE ASSESSE, M/S. KAP LTD. PASSED THE REQUISITE JOURNAL ENTRY AND ADJ USTED THE AMOUNT AGAINST M/S. SC ENVIRO ON 31.3.2003. WE FIND THAT THE ASSESSEE HAD ONLY ONE TRANSACTION WITH M/S. KAP LTD. IN THE FINA NCIAL YEAR 2002-03 ITA 6222/MUM/2009 SUMITOMO CHEMICAL INDIA PRIVATE LIMITED 10 RELEVANT TO A.Y. 2003-04 AND AS PER THE BOOKS OF AC COUNT OF M/S. KAP LTD., THE ASSESSEES ACCOUNT WAS MADE NIL AS ON 3 1.3.2003. 9. NOW, LET US EXAMINE THE REPLY GIVEN BY THE ASSES SEE TO THE A.O. VIDE LETTER DATED 11.1.2006 (XEROX COPY AT SR. NO.7 IN THE COMPILATION), WHEREIN, IT IS STATED IN THE REPLY TO THE QUERY OF THE A.O. BY THE ASSESSEE THAT COMMISSION OF ` 51,70,764/- WAS PAID ON SALES OF COMPANYS PRODUCTS TO ICON, KNIGHT QUEEN INDUSTRIAL PVT. LTD. AND FUMA KILLA. THE COMMISSION WAS PAID @ 4.55% OF THE SALES OF THE SPECIFIED PRODUCTS. THE ASSESSEE HAS ALSO FILED CO PY OF THE LEDGER ACCOUNT IN ITS BOOK OF ACCOUNT SHOWING THE ACCOUNTS POSITION OF M/S. KAP LTD. AS ON 31.3.2003 (ANNX. 7 OF THE COMPILATIO N). AS PER THE COPY OF THE LEDGER ACCOUNT OF SC ENVIRO, ACCOUNT IS DEBITED AND AMOUNT IS TRANSFERRED TO COMMISSION CHARGES A/C. IT IS CERTAINLY DUBIOUS ENTRY. AS PER THE LETTER OF THE ASSESSEE T O M/S. KAP LTD. THE AMOUNT SHOULD HAVE BEEN TRANSFERRED TO SC ENVIRO TH EN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE THE AMOUNT OF THE KAP LT D. SHOULD HAVE BEEN DEBITED AND NOT THE COMMISSION CHARGES ACCOUNT . MOREOVER, AS PER DOCUMENTARY EVIDENCE BEFORE US SAID CREDIT NOTE WAS ISSUED IN IMMEDIATE PRECEDING YEAR I.E. A.Y. 2002-03. WE FU RTHER FIND THAT AS PER THE REPLY FILED BY THE ASSESSEE DURING ASSESSME NT PROCEEDING TO THE A.O. ON THIS ISSUE, ASSESSEE CATEGORICALLY CONTENDED THAT IT HAS PAID COMMISSION TO M/S. KAP LTD. THOUGH AFTER INVESTIGATION BY DDI(INV), DELHI ASSESSEE WITHDREW SAID CLAIM. THOUG H LD. COUNSEL ARGUED THAT IT WAS A BONA FIDE MISTAKE BUT IN OUR CONSIDERED VIEW, THE WAY THE ASSESSEE REPLIED TO THE A.O. AND ALSO PASSE D THE CONSEQUENTIAL JOURNAL ENTRIES IN THE BOOKS OF ACCOU NT, GIVING COLOUR TO SAID AMOUNT AS COMMISSION SUGGESTS THAT IT IS A C ONSCIOUS ACT OF THE ASSESSEE TO TAKE THE BENEFIT BY FALSELY CLAIMING TH E COMMISSION CHARGES WHICH WERE NEVER PAYABLE OR PAID TO M/S KAP LTD. 10. THE ASSESSEE HAS RELIED ON THE FOLLOWING PRECED ENTS:- ITA 6222/MUM/2009 SUMITOMO CHEMICAL INDIA PRIVATE LIMITED 11 I) CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. -322 I TR 158 (SC) II) MOHANLAL V. NAKUM VS. CIT - 255 ITR 649 (BOM) III) CIT VS. PARDEEP KUMAR -246 ITR 94 (J&K) IV) CIT VS. ASK ENTERPRISES -230 ITR 48 (BOM) V) CIT VS. SANTHOSH TEXTILES -228 ITR 221 (KER.) VI) CIT VS. SHAIKH HASSAN HOTELS - 178 TAXMAN 313 VII) CIT VS. SIDHARTHA ENTERPRISES -322 ITR 80 11. WE HAVE GIVEN OUR ANXIOUS CONSIDERATION TO THE PRECEDENTS RELIED UPON BY ASSESSEE. THERE SHOULD NOT BE ANY Q UARREL ON THE PROPOSITION THAT IF THERE IS A BONA FIDE MISTAKE AND IF THE SAME IS CORRECTED SUBSEQUENTLY THAT CANNOT SAID TO BE A CON SCIOUS ACT ON THE PART OF THE ASSESSEE AS AN ATTEMPT TO EVADE THE TAX . IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) THE HONBL E SUPREME COURT, CONCURRING WITH THE INTERPRETATION GIVEN IN THE CAS E OF DILIP N. SHAROFF VS. JT. CIT 291 ITR 519 (SC) TO THE TERMS - CONCEA LED AND INACCURATE; HELD THAT INACCURATE MEANS NOT ACCORD ING TO THE TRUTH. IN THE CASE OF DILIP N. SHAROFF (SUPRA) IT IS HELD THAT THERE SHOULD BE DELIBERATE ACT OR OMISSION ON THE PART OF THE ASSES SEE AND SUCH DELIBERATE ACT MUST BE EITHER FOR THE PURPOSE OF CO NCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. AS PER TH E EVIDENCE BEFORE US IN THIS CASE, WE HAVE TO DRAW THE INFERENCE THAT IT WAS A DELIBERATE OR CONSCIOUS ATTEMPT ON THE PART OF THE ASSESSEE TO MA NIPULATE THE BOOK RESULT BY PASSING THE FALSE ENTRY OF COMMISSION PA YMENT TO EVADE THE TAX. ADMITTEDLY, AS PER THE REPLY FILED BY THE ASS ESSEE TO THE A.O. IT WAS CONTENDED THAT THE ASSESSEE HAS PAID THE COMMIS SION TO M/S. KAP LTD. AND ONLY AFTER INVESTIGATION WAS STARTED B Y THE A.O. THROUGH DDI (INVT), NEW DELHI, ASSESSEE CAME FORWARD CLAIMI NG INNOCENCE AND STATED IT WAS A BONA FIDE MISTAKE. ALL THE CASE LAWS RELIED ON BY THE ASSESSEE ARE NOT HELPFUL BECAUSE IN MOST OF THE CAS ES, THERE WAS, IN FACT, A BONA FIDE MISTAKE. WHETHER A PARTICULAR ACT OR OMISSION IS A BONA FIDE MISTAKE OR NOT THAT HAS TO BE GATHERED FROM THE EV IDENCE ON RECORD. WE ARE, THEREFORE, OF THE OPINION THAT THI S IS A FIT CASE WHERE ITA 6222/MUM/2009 SUMITOMO CHEMICAL INDIA PRIVATE LIMITED 12 THE A.O. HAS RIGHTLY LEVIED THE PENALTY. WE FIND N O REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) AND ACCORDINGLY, SAME IS CONFIRMED. 12. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF .. OCTOBER 2011. SD/- SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE : .. OCTOBER, 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)- XXXIII, MUMBAI. 4) THE CIT-3, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 8TH OCTOBER 2011. FIT FOR PUBLICATION (AM) (JM) SD/- SD/- ( R.S. SYAL ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE : 28TH OCTOBER, 2011 ITA 6222/MUM/2009 SUMITOMO CHEMICAL INDIA PRIVATE LIMITED 13 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 17.10.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 20.10.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER