M/S. UNITED LINER AGENCIES (STEVEDORES), MUMBAI V. THE DY CIT CEN CIR -39, MUMBAI

ITA 652/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0897 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 22-10-2009
• Assessment Year: 1998-1999
• Appeal Filed On: 28-01-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MOHAMED USMAN
• Assessee Lawyers: Y P TRIVEDIUSHA DALAL
• Keywords: Additional evidence; Wrong claim; Corroborative evidences; Retraction
• Section: 271(1)(c); 133A; 27; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 652/M/2008 ASSESSMENT YEAR: 1998-99 M/S.UNITED LINER AGENCIES (STEVEDORES), APPELLANT KAISER-I-HIND BLDG., 4TH FLOOR, CURRIMBHOY RD., BALLARD ESTATE, MUMBAI-400 001. AAAFU1731E VS. DY. COMMISSIONER OF INCOME TAX, RESPONDENT CENT.CIR.-39, ROOM NO.32(1), AAYKAR BHAVAN, M.K.ROAD, MUMBAI-400 020. APPELLANT BY : MR. Y.P. TRIVEDI/USHA DALAL RESPONDENT BY : MR. MOHAMED USMAN ORDER PER A.L. GEHLOT, A.M.: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R OF CIT (A), CENTRAL-VIII, MUMBAI, RELATING TO THE ASSESSME NT YEAR 1998- 99 , DATED 2.11.2007. 2. THE GROUND RAISED IN THE APPEAL IS THAT THE CIT( A) ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS.60,02,488/- IM POSED U/S.271(1)(C) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM IS ENGAGED IN THE BUSINESS OF STEVEDORING. THE BASIC N ATURE OF BUSINESS OF THE ASSESSEE IS LOADING OF GOODS OF VAR IOUS CUSTOMERS INTO THE LINER/SHIPS AND UNLOADING OF CARGO FROM LI NER/SHIPS. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED T HAT THE ASSESSEE HAS PAID A COMMISSION OF RS.1,71,49,967/- TO FOLLOWING 14 CONCERNS:- ITA 652/M/08 UNITED LINER AGENCIES(STEVEDORES) 2 NAME OF THE SISTER CONCERNS AMOUNT (RS) I) M/S J M BAXI & CO 7,09,804 II) M/S EXTRA COVER COMMUNICATION LTD 35,08,699 III) M/S BULK CARGO MOVERS 5,73,870 IV) M/S INDIA CONTAINERS TERMINAL P LTD 12,17,758 V) M/S VARUNA MANAGEMENT SERVICES P LTD 10,06,846 VI) M/S POLY MARBLE MFG CO P LTD 16,70,368 VII) M/S ARYA CELLULAR SERVICES (I) P LTD 27,62,81 6 VIII) M/S MALGHAM BROS 1,55,367 IX) M/S CONTFREIGHT SHIPPING AGENCY (I) P LTD 52,92 ,901 X) M/S THOR SHIPPING AGENCIES P LTD 8,600 XI) M/S TAIPAN CONSTRUCTION P LTD 1,13,060 XII) M/S JALADHI SHIPPING SERVICES (I) P LTD 7 ,042 XIII) M/S ARYA OILFIELD SERVICES P LTD XIV) M/S MOTOROLA ACE COMMUNICATION SERVICES P LTD 34,600 --------------- 1,71,49,967 ============ ALL THESE CONCERNS ARE ASSOCIATE CONCERNS OF THE A SSESSEE. THE COMMISSIONS PAID TO SAID CONCERNS WERE DISALLOWED B Y THE AO. THE MAJOR FACTOR THAT WEIGHED WITH THE AO FOR MAKING TH E DISALLOWANCE IS THE STATEMENT RECORDED DURING THE COURSE OF SURV EY CONDUCTED ON 05-10-2000 AND THEREAFTER OF SHRI S.K. PAREKH, C HIEF FINANCE CONTROLLER, SHRI CYRUS S. COOPAR, CHIEF ACCOUNTS OF FICER OF THE 11TH SISTER CONCERN OF THE ASSESSEE COMPANIES, AND SHRI C.A. ALFENSO, OPERATIONAL MANAGER OF THE ASSESSEE COMPAN Y. THE STATEMENT OF SHRI KRISHNA B. KOTAK, PARTNER, WAS R ECORDED ON 11- 10-2000. ON PERUSAL OF THE STATEMENTS RECORDED, IT IS NOTICED THAT THE ASSESSEE HAS PAID COMMISSION TO THE 14 CONCERNS WITHOUT ANY SERVICES RENDERED BY THEM. 4. THE ASSESSEE FILED APPEAL BEFORE THE CIT (A) AGA INST THE ADDITION MADE BY THE AO. THE CIT (A) CONFIRMED THE ADDITION OBSERVING THAT IN THE CASE OF THE ASSESSEE THERE WE RE NO AGREEMENTS AND NO SUPPORTING EVIDENCE WAS FURNISHED . THE BURDEN OF PROVING THAT THE AMOUNT WAS ACTUALLY LAID OUT OR EXPENDED AS COMMISSION FOR THE PURPOSES OF BUSINESS LAY ON THE ASSESSEE BUT THE ASSESSEE HAS FAILED TO DISCHARGE T HAT BURDEN. ITA 652/M/08 UNITED LINER AGENCIES(STEVEDORES) 3 5. THE ASSESSEE FILED APPEAL BEFORE THE ITAT AGAINS T THE ORDER OF THE CIT(A). THE ITAT, VIDE ITS ORDER DATED 28-04 -2006, HAS CONFIRMED THE ORDER OF CIT(A). THE CIT(A), IN THE I MPUGNED ORDER OF PENALTY, HAS REPRODUCED THE FOLLOWING OBSERVATIO NS OF THE ITAT MADE IN THE QUANTUM APPEAL AT PAGE 3 OF HIS ORDER : 21. THE GROUND 5A AND 5B TO DISALLOWANCE OF COMMIS SION PAID TO VARIOUS SISTER CONCERNS OF RS.1,77,49,967/- . THE DISALLOWANCE HAS BEEN MADE ON THE GROUND THAT NO SE RVICES HAVE BEEN RENDERED BY THE SISTER CONCERNS AND THE S AME HAS BEEN UPHELD BY THE LEARNED CIT(A). THE COUNSEL FOR THE ASSESSEE SHRI Y.P. TRIVEDI STATED THAT THE SAID COM MISSION HAS BEEN CREDITED IN THE PROFIT AND LOSS ACCOUNT OF THE SISTER CONCERNS AND THE SAME HAS BEEN PAID AS PER THE DEBI T NOTES RAISED. ALTERNATIVELY, HE SUBMITTED THAT NO DISALLO WANCE SHOULD BE MADE TO THE EXTENT OF INCOME SHOWN BY THE SISTER CONCERN AND TO THE EXTENT TAXES HAVE BEEN PAID BY T HE SAID PARTIES. ON THE OTHER HAND, LEARNED DR RELIED ON TH E ORDERS OF THE LOWER AUTHORITIES. 22. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE AS SESSEE HAS NOT BEEN ABLE TO PROVE THAT ACTUAL SERVICES HAVE BE EN RENDERED BY THE SISTER CONCERN FOR WHICH THE COMMISSION HAVE BEEN PAID. THE TAXES PAID BY THE SAID SISTER CONCERNS DOES NOT MEAN THAT THE ASSESSEE SHOULD BE ALLOWED THE DEDUCTION WITHOU T ANY EVIDENCE OF SERVICES BEING RENDERED TO THE SAID SIS TER CONCERNS. WE UPHOLD THE DISALLOWANCES MADE BY THE LOWER AUTHO RITIES. AS SUCH GROUND 5A AND 5B ARE DISMISSED. 6. THE AO LEVIED MINIMUM PENALTY OF RS.60,02,488/- U/S.271(1)(C) OF THE ACT OBSERVING THAT IT IS AMPLY CLEAR THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IT S INCOME BY CLAIMING FALSE EXPENSES. THE AO FURTHER NOTED THAT HE WAS SATISFIED THAT THE ASSESSEE HAS CONCEALED PARTICULA RS OF INCOME OF AN AMOUNT OF RS.1,71,49,967/-. THE EXPLANATION OFFE RED BY THE ASSESSEE WAS NOT SUBSTANTIATED. PENALTY LEVIED BY A O HAS BEEN CONFIRMED BY THE CIT(A) AFTER DISCUSSION ON EACH GR OUND OF APPEAL RAISED BEFORE HIM. 7. THE LD. A.R. SUBMITTED THAT IN QUANTUM MATTER, T HE AO, WHILE MAKING ADDITION, HAS HEAVILY RELIED UPON THE STATEMENT OF MR. S.K. PAREKH. THE LD. A.R. SUBMITTED THAT MR. S. K. PAREKH HAS RETRACTED FROM HIS STATEMENT BY FILING AN AFFIDAVIT DATED 12-01- 2002 WHEREIN IT IS CLEARLY STATED THAT THE SURVEY U /S.133A OF THE ITA 652/M/08 UNITED LINER AGENCIES(STEVEDORES) 4 I.T. ACT BEGAN AT 11.00/11.30 A.M. ON 05-10-2000 AN D IT WAS LATE IN THE NIGHT APPROXIMATELY AT 11.00 P.M. WHEN HIS S TATEMENT WAS RECORDED. THE RECORDING OF HIS STATEMENT CONTINUED TILL 5.00 A.M. ON 06-10-2000. IT IS ALSO STATED IN THE AFFIDAVIT T HAT HE WAS SURROUNDED BY VARIOUS TAX OFFICERS. AFTER A VERY TI RING DAY AND THE LATENESS OF THE HOUR WHEN THE RECORDING WAS COMMENC ED HE WAS IN A CONFUSED, NERVOUS AND FEARFUL STATE OF MIND DUE T O THE TAX OFFICIALS WHOSE PRESENCE AS WELL AS THEIR CONDUCT W EIGHED HEAVILY ON HIM. SEVERAL ANSWERS WERE GIVEN DURING THE RECOR DING OF HIS STATEMENT WHICH DO NOT GIVE THE COMPLETE PICTURE OR PUT THE FACTS IN PROPER PERSPECTIVE. THE LEARNED A.R. SUBMITTED T HAT COPY OF HIS STATEMENT HAS BEEN PLACED AT PAGES 13 TO 16 OF THE ASSESSEES PAPER BOOK. ACCORDING TO THE CERTIFICATE GIVEN ON P APER BOOK, THE SAID AFFIDAVIT WAS FURNISHED BEFORE THE AO AS WELL AS THE CIT (A).BUT WE NOTICED THAT NEITHER AO NOR THE CIT (A) HAVE MADE ANY DISCUSSION ON THE AFFIDAVIT. THE LD. A.R. SUBMITTED THAT THE ADDITION ON ACCOUNT OF COMMISSION AS RETAINED ON ES TIMATED BASIS AND ESTIMATE OF EITHER OF INCOME OR EXPENDITURE IS A PURE GUESS WORK DEPENDING ON SUBJECTIVE SATISFACTION OF THE OF FICER AND COULD NOT BE THE BASIS OF LEVYING PENALTY FOR CONCEALMENT . THERE ARE NO MATERIALS ON RECORD WHICH SUGGEST THAT AMOUNT OF CO MMISSION PAID WERE RETURN BACK TO THE ASSESSEE COMPANY. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAS FILED MISC. APPLICA TION BEFORE THE ITAT AS THERE WERE CERTAIN FACTUAL ERRORS IN THE OR DER OF THE ITAT. THE ITAT RELIED UPON THE FINDINGS OF THE LOWER AUTH ORITIES WHO WERE SOLELY GUIDED BY THE STATEMENT OF SHRI S.K. PA REKH, THEN CHIEF ACCOUNTANT/FINANCE MANAGER OF THE ASSESSEE, R ECORDED ON 05-10-2000 U/S.133A OF THE ACT, WHO STATED THAT SER VICES WERE NOT RENDERED BY THE SISTER CONCERNS WITHOUT APPRECIATIN G THE FACT THAT THE SAID STATEMENT WAS RETRACTED BY HIM VIDE HIS AF FIDAVIT MADE ON 12-01-2002. IN THE SAID AFFIDAVIT, IT HAS BEEN SPEC IFICALLY MENTIONED THAT HIS STATEMENT WAS GIVEN AFTER ARDUOU S SURVEY OPERATION LASTING TILL LATE NIGHT, WHEN HE WAS COMP LETELY EXHAUSTED AND HAD BECOME NERVOUS. THE LD. A.R. SUBM ITTED THAT THE MONEY PAID HAD NEVER COME BACK TO THE ASSESSEE. THE PAYMENTS MADE WERE GENUINE PAYMENTS. THE LD. A.R. S UBMITTED ITA 652/M/08 UNITED LINER AGENCIES(STEVEDORES) 5 THAT THE STATEMENT RECORDED AT THE TIME OF SURVEY H AS NO EVIDENTIARY VALUE. THE LD. A.R., IN SUPPORT OF HIS CONTENTION, RELIED UPON THE JUDGEMENT OF KERALA HIGH COURT IN THE CASE OF PAUL MATHEWS & SONS (263 ITR 101). IT IS ALSO THE SUBMIS SION OF THE LD. A.R. THAT THE AO HIMSELF HAS DROPPED PENALTY PROCEE DINGS FOR THE ASST. YEARS 1991-92 TO 1997-98. THE LD. A.R. SUBMIT TED THAT EVERYTHING WAS BEFORE THE AO AND, THEREFORE, PENALT Y PROCEEDINGS U/S. 271(1)(C) WERE NOT APPLICABLE. THE LD. A.R. PL ACED RELIANCE ON THE RECENT JUDGEMENT OF THE SUPREME COURT IN THE CA SE OF RELIANCE PETROPRODUCTS PVT.LTD. 322 ITR 158 (SC) AND ALSO TH E DECISION OF ITAT, MUMBAI BENCH F, IN ITA NOS.4718 & 4719/MUM/ VIDE ORDER DATED 06-04-2010. 8. THE LD. D.R. SUBMITTED THAT THE ADDITION MADE BY THE AO WAS ABOUT PAYMENTS MADE TO SISTER CONCERNS ON ACCOU NT OF COMMISSION. THE LD. D.R. SUBMITTED THAT IT IS IMPOR TANT TO NOTE THAT PAYMENTS WERE TO SISTER CONCERNS OF THE ASSESS EE WHICH IS HAVING COMMON STAFF, COMMON DIRECTORS, COMMON ADMIN ISTRATION, SAME ADDRESS, ETC. THE LD. D.R. SUBMITTED THAT A SU RVEY WAS CONDUCTED WHEREIN THE DEPARTMENT FOUND THAT COMMISS ION TO 14 SISTER CONCERNS WAS PAID, AGAINST WHICH THE ASSESSE E WAS UNABLE TO SHOW THE NATURE OF SERVICES RENDERED BY THEM. TH E LD. D.R. FURTHER SUBMITTED THAT THE TOP EXECUTIVE OFFICERS O F THE ASSESSEE HAD ADMITTED THAT THOSE SISTER CONCERNS COMPANIES E XISTED ONLY ON PAPER AND ACCOMMODATIVE BILLS WERE ISSUED. THE LD. D.R. FURTHER SUBMITTED THAT THE ASSESSEE DID NOT MAKE ANY ATTEMP T TO SHOW THE GENUINENESS OF THE PAYMENTS AT THE TIME OF SURVEY O R AT THE TIME OF ASSESSMENT OR AT THE TIME OF APPELLATE PROCEEDIN GS OR AT THE TIME OF PENALTY PROCEEDINGS. AS REGARDS CROSS EXAMI NATION IN RESPECT OF RETRACTION AFFIDAVIT FILED BY MR. PAREKH , THE LD. D.R. SUBMITTED THAT THE DEPARTMENT DID NOT FIND IT NECES SARY TO CROSS EXAMINE AS THE RETRACTION AFFIDAVIT WAS FILED AFTER THE COMPLETION OF THE ASSESSMENT. THE LD. D.R. RELIED UPON THE ORD ER OF THE CIT(A) AND SUBMITTED THAT THE CIT(A) HAS GIVEN A DETAILED FINDING IN THIS REGARD. IT IS ALSO THE SUBMISSION OF THE LD. D.R. T HAT THE LAW LAID DOWN BY THE SUPREME COURT IN THE CASE OF RELIANCE P ETROPRODUCTS ITA 652/M/08 UNITED LINER AGENCIES(STEVEDORES) 6 PVT.LD. (322 ITR 158) IS NOT APPLICABLE TO THE FACT S OF THE CASE UNDER CONSIDERATION. HENCE, IT IS NOT A CASE WHERE MERELY THERE WAS A DISALLOWANCE OR REJECTION OF THE CLAIM OF THE ASSESSEE. IN THE CASE UNDER CONSIDERATION, THE ASSESSEE HAS MADE A B OGUS CLAIM OF COMMISSION WHICH WAS FOUND AT THE TIME OF SURVEY CO NDUCTED BY THE ASSESSEE. THE LD. D.R., WHILE REFERRING TO EXPL ANATION 1 TO SEC. 271(1)(C), SUBMITTED THAT THE ASSESSEE HAS FAILED T O SUBMIT ANY EXPLANATION. IN FACT, NO EXPLANATION WAS FILED BY T HE ASSESSEE. CONTRARY TO THAT, THE TOP EXECUTIVE ADMINISTRATOR O F THE ASSESSEE ADMITTED REGARDING THE BONUS COMMISSION. THE LD. D. R. SUBMITTED THAT IT IS A FIT CASE FOR PENALTY U/S.271(1)(C). TH E LD. D.R. FURTHER SUBMITTED THAT THE TECHNICAL OBJECTION REGARDING RE CORDING OF STATEMENT OF MR. PAREKH AND OTHERS ALSO DOES NOT HE LP THE ASSESSEE. AS REGARDS THE CONTENTION OF THE LD. A.R. THAT MONEY HAD NOT COME BACK TO THE ASSESSEE, THE LD. D.R. SUBMITT ED THAT THE SAID CONTENTION HAS NO SIGNIFICANCE WHEN THE ASSESS EE MADE A BOGUS CLAIM BY WAY OF BOOK ADJUSTMENT. THE LD. D.R. SUBMITTED THAT DROPPING OF PENALTY PROCEEDINGS FOR EARLIER YE ARS ALSO DOES NOT HELP THE ASSESSEE AS THE SAME WERE DROPPED CONS IDERING THE RELEVANT FACTS. THE CIT(A) HAS DISCUSSED THIS ISSUE IN DETAIL IN HIS ORDER. THE LD. D.R. SUBMITTED THAT THERE IS NO SUBS TANCE IN THE SUBMISSION OF THE LD. A.R., IN RESPECT OF DOUBLE TA XATION AS THE ASSESSEE DID NOT FURNISH ANY RELEVANT CALCULATION. THE LD. D.R., WHILE CONCLUDING HIS ARGUMENTS, SUBMITTED THAT IT I S A FIT CASE FOR LEVY OF PENALTY TO CURB SUCH PRACTICE ADOPTED BY TH E ASSESSEE. 9. WE HAVE HEARD THE LEARNED REPRESENTATI VES OF THE PARTIES, PERUSED THE RECORD AND GONE THROUGH THE DECISIONS C ITED. BEFORE COMING TO THE MAIN ISSUE WE WOULD LIKE DEAL WITH TH E ARGUMENT OF THE LEARNED A/R REGARDING RETRACTION AFFIDAVIT FILE BY MR S K PARIKH. THE CONTENTION OF LEARNED AUTHORISED REPRES ENTATIVE THAT MR S K PARIKH RETRACTED FROM HIS STATEMENT BY FILIN G AN AFFIDAVIT DATED 12TH JANUARY 2002 DOES NOT HELP TO THE ASSES SEE AS THE ASSESSMENT WAS COMPLETED ON MUCH BEFORE THAT DATE O F FILING AFFIDAVIT I.E. ON 30TH MARCH 2001 AND AFFIDAVIT IS DATED 12.1.2002. THE RETRACTION WAS NEITHER DISCUSSED BY THE AO NOR BY ITA 652/M/08 UNITED LINER AGENCIES(STEVEDORES) 7 THE CIT (A) WHILE DECIDING THE QUANTUM MATTER AS WE LL AS THE PENALTY MATTER. FURTHER, THE ASSESSEE DID NOT FILE D ANY PETITION BEFORE US TO ADMIT ADDITIONAL EVIDENCE AS PER RULE 29 OF THE ITAT RULES. SUCH AFFIDAVIT IS SELF-SERVING DOCUMENT, PA RTICULARLY WHEN THE ASSESSING OFFICER HAS GIVEN FULL OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMINE MR PARIKH, WHO IS MAKING RETRACTION B Y AN AFFIDAVIT, THE PARTNER OF THE ASSESSEE DID NOT CHOO SE TO CROSS- EXAMINE. THOUGH THE LEARNED AUTHORISED REPRESENTAT IVE AT THE TIME OF HEARING BEFORE US HAS POINTED OUT THAT THE ASSESSEE HAS FILED MA BEFORE THE ITAT AGAINST THE QUANTUM MATTER POINTING OUT THAT THE SAID AFFIDAVIT HAS NOT BEEN CONSIDERED WHI LE DECIDING THE APPEALS. WE FIND THAT MA HAS BEEN REJECTED BY THE ITAT VIDE MA NO. 89/M/2010 VIDE ORDER DATED 30.04.2010. UNDER TH ESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT S UCH AFFIDAVIT AT THIS STAGE POINTED OUT DOES NOT HELP TO THE ASSESSE E. NOW WE COME TO THE MAIN ISSUE. THE PROCEEDINGS UNDER SECTION 27 1(1) (C) CAN BE INITIATED ONLY IF THE A.O OR THE FIRST APPELLATE AUTHORITY IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER TH E ACT AS PER CLAUSE (C) OF THE SECTION 271(1) THAT ANY PERSON HA S CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME, HE MAY DIRECT THAT SUCH PERSON SHAL L PAY BY WAY OF PENALTY THE SUM MENTIONED IN SUB-CLAUSE (III) OF CLAUSE (C) OF THE SECTION 271(1). THE EXPRESSION USED IN CLAUSE ( C) OF THE SECTION 271(1) IS HAS CONCEALED THE PARTICULARS OF HIS INC OME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THE EXPRESSIONS 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEF INED EITHER IN SECTION 271(1)(C) OR ELSEWHERE IN THE ACT. TWO WORD S ARE IMPORTANT WORDS FOR CONSIDERING A MATTER FOR LEVY OF PENALTY UNDER SECTION 271(1) OF THE ACT . THESE WORDS ARE CONCEAL' AND 'INACCURATE PARTICULARS' THE WORD 'CONCEAL' IS DERIVED FROM THE LATIN CONCELARE WHICH IMPLIES CON+CELARE TO HIDE. WEBSTER IN HIS NE W INTERNATIONAL DICTIONARY EQUATES ITS MEANING 'TO HI DE OR WITHDRAW FROM OBSERVATION, TO COVER OR KEEP FROM SIGHT; TO P REVENT THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OF'. THE OFFENC E OF CONCEALMENT IS THUS A DIRECT ATTEMPT TO HIDE AN ITE M OF INCOME OR ITA 652/M/08 UNITED LINER AGENCIES(STEVEDORES) 8 A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME- TAX AUTHORITIES. IN WEBSTERS DICTIONARY, THE WORD 'INA CCURATE' HAS BEEN DEFINED AS UNDER: 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRAN SCRIPT 9.1 IN ADDITION TO MAIN PROVISIONS OF CONCEAL MENT HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FU RNISHED INACCURATE PARTICULARS OF SUCH INCOME THERE ARE DE EMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED .THE DEEMED CONCEALMENT IS PROVIDED IN EX PLANATIONS. THE PENALTY UNDER THE SAID SECTION IS A CIVIL LIABI LITY. WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTR ACTING THE CIVIL LIABILITY. 9.2 WHILE CONSIDERING AN APPEAL AGAINST AN OR DER MADE UNDER SECTION 271(1)(C) WHAT IS REQUIRED TO BE EXAMINED I S THE RECORD WHICH THE OFFICER IMPOSING THE PENALTY HAD BEFORE H IM AND IF THAT RECORD CAN SUSTAIN THE FINDING THERE HAD BEEN CONCE ALMENT, THAT WOULD BE SUFFICIENT TO SUSTAIN THE PENALTY. THE EXP LANATIONS ADDED TO SECTION 271(1)(C) IN THAT ENTIRETY ALSO IN DICATE THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR CON CEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING RETURNS. IT IS OBVIOUS THAT THE PENAL PROVISIONS WOULD OPERATE WHEN THERE IS CONCEALMENT OF PARTICULARS OF INCOME OR A FAILURE O F DUTY TO DISCLOSE FULLY AND TRULY PARTICULARS OF INCOME, IMP OSED UNDER THE ACT AND THE RULES THERE UNDER. THE DUTY IS ENJOINED UPON A PERSON TO MAKE A CORRECT AND COMPLETE DISCLOSURE OF PARTICULARS OF HIS INCOME AND IT IS ONLY WHEN HE FAILS IN HIS DUTY BY NOT DISCLOSING PARTICULARS OF HIS INCOME OR PART THEREO F, HE CONCEALS THE PARTICULARS OF HIS INCOME. THE DUTY IS ENJOINED UPON HIM TO MAKE A COMPLETE DISCLOSURE OF PARTICULARS OF HIS IN COME AS WELL AS A CORRECT DISCLOSURE. THEREFORE, IF THE DISCLOSURE MADE OF THE PARTICULARS OF INCOME IS INCORRECT, THEN ALSO HE CO MMITS BREACH OF ITA 652/M/08 UNITED LINER AGENCIES(STEVEDORES) 9 HIS DUTY. SUCH DEFAULTS ENTAIL THE PENAL CONSEQUENC ES CONTEMPLATED BY SECTION 271(1) (C). 9.3 IN THE LIGHT OF ABOVE DISCUSSIONS WHETHER U NDER THE FACTS AND CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION P ENALTY UNDER SECTION 271(1) (C) IS LEVIABLE OR NOT? THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF STEVEDORING. THE N ATURE OF BUSINESS OF THE ASSESSEE IS THAT LOADING OF GOODS O F VARIOUS CUSTOMERS INTO THE LINER/SHIPS AND UNLOADING OF CAR GO FROM LINER/SHIPS. THE ASSESSING OFFICER MADE AN ADDITIO N OF RS 1,71,49,967/- RELATED TO 14 TO SISTER CONCERNS. DUR ING THE COURSE OF THE PENDENCY OF THE OF THE ASSESSMENT PROCEEDING S, A SURVEY ACTION U/S 133A OF THE ACT WAS CARRIED OUT ON 05.10 .2000. STATEMENTS OF MR S K PARIKH, CHIEF ACCOUNTANTS AND POWER ATTORNEY HOLDE OF THE PARTNERS; MR C A ALPHONSO & M R CYCRUS COOPER, KEY PERSONS OF THE ASSESSEE COMPANY WERE RE CORDED DURING THE COURSE OF SURVEY U/S 133A WHICH WERE DI SCUSSED BY THE AO IN DETAIL IN THE ASSESSMENT ORDER.THE ADDITI ON MADE BY THE ASSESSING OFFICER HAS BEEN CONFIRMED BY THE CIT (A) WITH THE FINDING THAT THE COMMISSION CLAIM WAS MADE WITHOUT ANY SERVICES RENDERED BY THE RECIPIENT PARTIES. THE COMMISSION WAS PAID ONLY TO REDUCE THE TAXABLE INCOME OF THE ASSESSEE. THE ASSESSEE PREFERRED APPEAL BEFORE THE ITAT.THE ITAT HAS ALSO CONFIRMED THE ADDITION HOLDING THAT THE ASSESSEE HAS NOT BEEN ABL E TO PROVE THAT ACTUAL SERVICES RENDERED BY THE SISTER CONCERNS FOR WHICH THE COMMISSION HAVE BEEN PAID. THE ASSESSING OFFICER L EVIED PENALTY U/S 271(1)(C), THE RELEVANT FINDING OF THE ASSESSIN G OFFICER IS REPRODUCED AS BELOW:- THUS, IT IS AMPLY CLEAR THAT THE ASSESSEE HAD FURN ISHED INACCURATE PARTICULARS OF ITS INCOME BY CLAIMING FA LSE EXPENSES. 12. IN VIEW OF THE FOREGOING DISCUSSIONS, I AM SATI SFIED THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOM E OF AN AMOUNT OF RS 1,71,49,967/-.THE EXPLANATION OFF ERED BY THE ASSESSEE IS NOT SUBSTANTIATED. I AM THEREFORE; SATISFIED THAT IT IS A FIT CASE FOR LEVY OF A PENALTY. TAX S OUGHT TO BE EVADED ON INCOME OF RS 1,71,49,967/- WORKS OUT TO R S 60,02,488/-. THE PENALTY LEVIABLE @ 100% WORKS OUT TO RS ITA 652/M/08 UNITED LINER AGENCIES(STEVEDORES) 10 60,02,488/- WHICH IS MINIMUM AND MAXIMUM PENALTY @ 300% WORKS OUT TO RS 1,80,07,464/-. PENALTY @ 100% OF T AX SOUGHT TO BE EVADED IS LEVIED AT RS 60,02,488/-. 9.4 THE CIT (A) CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER AFTER REJECTED ASSESSEES LEGAL GROUNDS AS WELL AS GROUNDS ON MERITS. BEFORE US, THE LEARNED AUTHORISED REPRES ENTATIVE HAS NOT MUCH ARGUED ON THE LEGAL GROUNDS; THEREFORE, IN THIS REGARD WE CONFIRM THE ORDER OF THE CIT (A). ON MERIT, THE AD MITTED FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED COMMISSION O F RS 1, 71, 49,967/- WHICH WAS PAID TO SISTER CONCERNS WITHOUT SERVICES RENDERED BY THEM. IT IS NOT A CASE WHERE THE ASS ESSEE HAS CLAIMED THE COMMISSION EXPENSES AND ASSESSING OFFIC ER SIMPLY DISALLOWED ON PRESUMPTION BASIS OR MADE ESTIMATION OF DISALLOWANCE OF THE COMMISSION. THE COMMISSION PAYM ENTS WITHOUT SERVICES RENDERED HAS BEEN DETECTED BY THE AO AFTER THOROUGH EXAMINATION BY EXERCISING THE POWERS PROVI DED IN THE ACT. DURING THE COURSE OF PENDENCY OF THE ASSESSMEN T PROCEEDINGS, A SURVEY ACTION U/S 133A WAS CARRIED O UT ON 5TH OCTOBER 2000. STATEMENTS OF MR S K PARIKH, MR C A ALPHONSO & MR CYCRUS COOPER, KEY PERSONS OF THE ASSESSEE COMPA NY WERE RECORDED DURING THE COURSE OF SURVEY. FROM THE STA TEMENTS OF THESE THREE PERSONS, THE ASSESSING OFFICER NOTICED THAT THE COMPANIES AND FIRMS TO WHOM THE ASSESSEE HAS GIVEN COMMISSION ARE NOT AT ALL EQUIPPED TO PROVIDE ANY SERVICE TO T HE ASSESSEE. ALL THE COMPANIES HAVE BEEN FORMED JUST ON PAPER AND TH E ASSESSEE IN MUCH PLANNED ATTEMPT TO REDUCE THE TAXABLE INCOME. THE COMMISSIONS WERE PAID WITHOUT RENDERING ANY SERVICE S. MR PARIKH IN HIS STATEMENT WHILE REPLYING TO QUESTION NO 15 C LEARLY STATED THAT NO SERVICES WERE RENDERED FROM THE SISTER CON CERNS. SINCE ALL THE CONCERNS BELONG TO MR KRISHNA B. KOTAK AND MR N ARESH J. KOTAK., BOOK ENTRIES ARE PASSED BY RAISING CREDIT N OTES IN REPLY TO QUESTION NO 16 IT WAS SAID THE THERE WAS NO AGREEME NTS . THERE IS NO CORRESPONDENCE BETWEEN ASSESSEE AND SISTER CONCE RNS. SIMILARLY MR CYCRUS COOPER, CHIEF ACCOUNTANT OF 11 SISTER CONCERNS IN REPLY TO QUESTION NO 9 STATED THAT NONE OF THE COMPANIES PROVIDED ANY SERVICES TO THE ASSESSEE COM PANY. THEY ITA 652/M/08 UNITED LINER AGENCIES(STEVEDORES) 11 RECEIVED ONLY CREDIT NOTE. THERE ARE NO DOCUMENTS I N SUPPORT OF THE CLAIM. THERE ARE NO CORRESPONDENCES. IN REPLY T O QUESTION 10 MR MR CYCRUS COOPER STATED THAT CHEQUE RECEIVED FRO M ASSESSES COMPANY. THE SAME IS DEPOSITED IN BANK ACCOUNT AND CASH WAS WITHDRAWN. NOT ONLY THIS FACT THAT THE KEY PERSONS HAVE ADMITTED THAT THE COMMISSION ENTRY IS ONLY BOOK ENTRY AS THE COMMISSION WAS SHOWN AGAINST WHICH NO SERVICES WERE RENDERED B Y THE SISTER CONCERNS. THE ASSESSEE DID NOT FURNISH ANY MATERIAL EVIDENCE, NEITHER BEFORE REVENUE AUTHORITIES NOR BEFORE US TO SHOW THAT CLAIM OF THE ASSESSEE A BONAFIDE CLAIM. CONTRARILY, MR KRISHNA B KOTAK, PARTNER OF THE ASSESSEE FIRM WAS GIVEN OPPOR TUNITY ON 11TH AUGUST 2000 TO CROSS-EXAMINATION THE PERSONS WHOSE STATEMENTS WERE RECORDED AT THE TIME OF SURVEY BUT MR KRISHNA B KOTAK DID NOT WANT TO AVAIL THAT OPPORTUNITY AND HE DID NOT C ROSS-EXAMINE. MR KRISHNA B KOTAK ACCEPTED THE CONTENTS OF THE STA TEMENT GIVEN BY THOSE PERSONS. SOME OF THE PARA OF HIS STATEMENT REPRODUCED BY THE CIT(A) IN HIS ORDER AT PAGE 9, FOR THE PUR POSE OF READY REFERENCE, THE RELEVANT PARA REPRODUCED AS UNDER:- DURING THE POST SURVEY INVESTIGATION THE STATEMENT OF SHRI KRISHNA B KOTAK, PARTNER OF THE ASSESSEE FIRM AND O NE OF THE DIRECTOR IN ALL THE ABOVE COMPANIES MENTIONED IN TH E EARLIER PART OF THIS ORDER WAS RECORDED ON OATH, ON 11.10.2 000. AFTER GOING THROUGH THE STATEMENTS OF SHRI S K PARIKH, MR C A ALPHANSO AND MR CYRUS COOPER (RECORDED ON 5.10.2000 ), HE DID NOT SHOW ANY DISAGREEMENT WITH ANY PART OF THE STATEMENTS AND CONFIRMED THE STATEMENTS GIVEN BY TH ESE PERSONS. MR KRISHNA B KOTAK FURTHER CLARIFIED THAT THE ASSESSEE FIRM DO NOT MAKE ANY PAYMENT LIKE COMMISSI ON OR OTHER PAYMENTS BY WHATEVER NAMES CALLED TO ANY OTHE R PARTIES (NOT BEING SISTER CONCERNS OF THE ASSESSEE FIRM) FROM WHICH THE ASSESSEE GETS BUSINESS. HE FURTHER STATE D THAT THESE PARTIES NEVER ASKED FOR ANY SUCH PAYMENTS. 9.5 ON PERUSAL OF IMPUGNED PENALTY ORDER OF CIT (A) FROM PAGE 2 PARA 2.2, AND THE ASSESSMENT ORDER IN PARA 19 PAGE 46 WE NOTICE THAT THE CIT (A) AND AO BOTH HAVE RECORDED A FACT T HAT THE COMMISSION EXPENSES HAVE NOT BEEN DIRECTLY DEBITED TO P&L ACCOUNT BUT SAME WAS FOUND DEBITED AT THE YEAR END TO THE VESSEL ACCOUNT, WHICH THE ASSESSEE HAS OPENED FOR EACH VES SEL. THEY, FURTHER, NOTED THAT IN THE PROFIT & LOSS ACCOUNT TH E ACCOUNT ITA 652/M/08 UNITED LINER AGENCIES(STEVEDORES) 12 CREDITED ON ACCOUNT OF STEVEDORES IS THE NET AMOUNT RECEIVED FROM EACH CLIENT. FROM THESE FACTS OF THE CASE, WE NOTI CED THAT THE ACCOUNTING ENTRIES PASSED BY THE ASSESSEE IN ITS BO OKS OF ACCOUNT ARE NOT IN ACCORDANCE WITH THE PRINCIPLES OF ACCOUN TANCY. AS PER THE ACCOUNTING PRINCIPLES, COMMISSION EXPENSES REQU IRES TO DIRECTLY DEBITED TO COMMISSION ACCOUNT AND IT SHOUL D BE SHOWN IN THE PROFIT & LOSS ACCOUNT ALONG WITH OTHER HEADS OF EXPENDITURES. THUS THERE IS A DIRECT ATTEMPT TO HIDE CORRECT FACT S REGARDING COMMISSION EXPENDITURES FROM THE RETURN OF INCOME F ILED AND FROM THE KNOWLEDGE OF THE INCOME-TAX AUTHORITIES. THE AO EXAMINED THE CONTENTIONS OF THE ASSESSEE THAT THE RECIPIENTS, SI STER CONCERNS WERE OFFERED THE SAID COMMISSION IN THEIR HANDS BY HIGHER RATE OF TAX THAN THE RATE OF TAX WHICH IS TO BE PAID BY THE ASSESSEE COMPANY, IN THE ASSESSMENT ORDER AND FOUND AT PAGE 37 THAT THE EFFECTIVE TAX RATE IN THE HANDS OF THE SISTER CONCE RNS COME TO ONLY 4.73%. IN THE LIGHT OF ABOVE FACTS COUPLE WITH THE FACT THAT THE COMMISSION PAID WITHOUT RENDERING ANY SERVICES, THE ACTION OF THE ASSESSEE COVERED BY MAIN SECTION 271(1) (C). THAT T HE ASSESSEE HAS CONCEALED THE PARTICULARS REGARDING THE COMMISSION WHICH WAS NOT DIRECTLY ACCOUNT FOR IN COMMISSION ACCOUNT AND PR OFIT AND LOSS ACCOUNT .THE PROFIT AND LOSS ACCOUNT IS THE PART O F THE RETURN OF INCOME FILED BY THE ASSESSEE. THE ACCOUNTING ENTRIE S PASSED IN BOOKS OF ACCOUNTS WITH THE INTENTION TO AVOID DIREC T FLASH ON THE COMMISSION PAYMENTS TO SISTER CONCERNS PARTICULARLY WHEN SERVICES WERE NOT RENDER AGAINST COMMISSION PAYMENT S AMOUNT TO CONCEALMENT OF PARTICULARS. THE PARTICULAR OF A COM MISSION FURNISHED BY THE ASSESSEE ARE INACCURATE IN THE SEN SE THAT THE ASSESSEE CLAIMED THE COMMISSION EXPENDITURE AGAINST WHICH NO SERVICES RENDERED. THE COMMISSION EXPENDITURE CLAIM OF THE ASSESSEE IS NOT ACCORDINGLY TRUE CLAIM, NOT ACCURAT E, NOT EXACT OR CORRECT; IT IS AN ERRONEOUS AND IT IS AS AN INACCUR ATE STATEMENT OF THE COMMISSION CLAIM. IT IS NEITHER A CASE OF INTER PRETATION OF ANY PROVISION OF THE STATUTES NOR IT IS CASE OF TWO VIE WS ON THE ISSUE. WE DO NOT FIND FORCE IN THE SUBMISSIONS OF THE LEAR NED AR, THAT IN EARLIER YEARS PENALTY UNDER SECTION 271(1) (C) WERE IMITATED ON THE SIMILAR DISALLOWANCE BUT THE AO HIMSELF HAS DROPS T HOSE ITA 652/M/08 UNITED LINER AGENCIES(STEVEDORES) 13 PENALTIES. WE FIND THAT IN THESE YEARS THE AO DROP THE PENALTY PROCEEDING AS THE ASSESSMENTS WERE QUESTED BY THE I TAT ON THE GROUND THAT NOTICES UNDER SECTION 148 OF THE ACT WE RE NOT IN ACCORDANCE WITH LAW. WHEN THE ASSESSEE FURNISHED IN ACCURATE PARTICULARS OF THE INCOME, SUCH CASE IS SQUARELY CO VERED BY THE PROVISIONS OF SECTION 271(1)(C) AND PENALTY IS ACCO RDINGLY LEVIABLE. IN THE RETURN OF INCOME, IT IS THE CLAIM OF THE ASS ESSEE THAT THE ASSESSEE HAS INCURRED COMMISSION EXPENSES. THE HEAV Y BURDEN IS ON ASSESSEE PARTICULARLY WHEN THE COMMISSIONS WERE PAID TO SISTER CONCERNS. THE ASSESSEE HAS FAILED TO DISCHARGE ITS BURDEN AS NO MATERIALS WERE PRODUCED TO SHOW THAT THE COMMISSION PAID AGAINST THE SERVICES RENDERED. THUS, THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM BOTH IN QUANTUM MATTERS AS W ELL AS IN PENALTY PROCEEDINGS. THE AO HAS EXAMINED THE COMMIS SION PAYMENT IN DETAIL BY EXERCISING HIS POWER PROVIDED IN THE ACT BY EXAMINING BOOKS OF ACCOUNT AT THE TIME OF ASSESSMEN T PROCEEDINGS, BY MAKING SURVEY , BY TAKING STATEMENT S AND OTHER EXAMINATION OF POST SURVEY PROCEEDINGS. THE CLAIM O F COMMISSION EXPENDITURES OF THE ASSESSEE FOUND FALSE. WE FIND S UBSTANCE IN THE SUBMISSIONS OF THE LEARNED DR THAT THE TOP EXECUTIV E OFFICERS OF THE ASSESSEE COMPANY HAD ADMITTED THAT THOSE SISTER CONCERNS COMPANIES EXISTED ONLY ON PAPER AND ACCOMMODATIVE B ILLS WERE ISSUED. HE FURTHER SUBMITTED THAT THE ASSESSEE DID NOT MAKE ANY ATTEMPT TO SHOW THE GENUINENESS OF THE PAYMENTS AT THE TIME OF SURVEY OR AT THE TIME OF ASSESSMENT OR AT THE TIME OF APPELLATE PROCEEDINGS OR AT THE TIME OF PENALTY PROCEEDINGS. THE ASSESSEE HAS FAILED TO SUBMIT ANY MATERIAL BASIS ON WHICH IT CAN BE SAID THAT THE CLAIM OF THE ASSESSEE WAS A BONA FIDE CLAI M. SINCE THE ASSESSEE FAILED TO PROVE THE BONA FIDE OF THE CLAIM THEREFORE THE JUDGMENT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (322 ITR 158) CITED BY THE LEARNED AR IS DISTINGUISHABLE ON FACTS THEREFORE SAME DOES NOT HELP TO THE ASSESSEE. UNDER THE CIR CUMSTANCES, THE CASE OF THE ASSESSEE IS ALSO COVERED BY EXPLANA TION 1 TO SECTION 271(1)(C) OF THE ACT. ONCE THE CASE IS COVE RED BY SECTION 271(1)(C) PENALTY IS LEVIABLE. WE ACCORDINGLY UPHOL D THE ORDER OF THE CIT(A). ITA 652/M/08 UNITED LINER AGENCIES(STEVEDORES) 14 10. IN THE RESULT APPEAL OF THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JULY, 2010. SD/- SD/- (R.V. EASWAR) (A.L. GEHLOT) PRESIDENT ACCOUNTANT MEMBER DATED: 30 TH JULY, 2010. COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, I BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 14.6.10 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 15.6.10 SR.P.S/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.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER