The Budhewal Coop. Sugar Mills Ltd., Ludhiana V. ACIT, Ludhiana

ITA 661/CHANDI/2006

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9774 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-04-2015
• Assessment Year: 1993-1994
• Appeal Filed On: 25-08-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Share purchase agreement; Question of law; Wrong claim
• Section: 131

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI. BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI. T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 661/CHD/2006 ASSESSMENT YEAR: 1993-94 THE BUDHEWAL COOP SUGAR MILLS LTD., VS. THE ACIT, CIRCLE-1, DISTT. LUDHIANA LUDHIANA PAN NO. AAAJT0338G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH AGGARWAL RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 06.04.2015 DATE OF PRONOUNCEMENT : 10.04.2015 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 02.08.2006 PASSED BY THE CIT(A)-1, LUDHIANA. 2. IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED BUT THE ONLY DISPUTE IS REGARDING CONFIRMATION OF LEVY OF PENALTY U/S 271(1 )(C) ON ACCOUNT OF ADDITION MADE AMOUNTING TO RS. 2,53,23,741/- AGAINST DISALLO WANCE OF ADDITIONAL PRICE FOR PURCHASE OF SUGARCANE. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE SO CIETY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SUGAR. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER INSPECTED THE PR EMISES OF THE ASSESSEE U/S 131 AND BOOKS OF ACCOUNT CONSISTING OF GENERAL LEDG ER, DAY BOOK, PROCEDURE BOOK, AUDIT BOOK ETC. WERE TEST CHECKED. DURING INSPECTION, IT WAS NOTICED THAT ASSESSEE HAS MADE AN ENTRY TO THE TUNE OF RS. 2,53,23,741/- IN THE SHARE DEDUCTION ACCOUNT IN GENERAL LEDGER AND CARRIED FO RWARD BALANCE OF RS. 3,58,82,389/- WHICH INCLUDED THE OPENING BALANCE OF RS. 1,03,10,705/- OF 2 PRECEDING YEAR. CORRESPONDING TO THE CREDIT ENTRY O F RS. 2,53,23,741/- IN THE SHARE DEDUCTION ACCOUNT, THE ASSESSEE HAD MADE THE DEBIT ENTRY IN THE SUGARCANE ACCOUNT TO THE TUNE OF RS. 2,53,28,438/- WITH THE N ARRATION TO AMOUNT OF SUGARCANE PURCHASES AT RS. 9/- AND OTHERS. THE DE BIT COMPRISED OF TWO ENTRIES BEING RS. 2,53,23,741/- ON ACCOUNT OF ADDITIONAL PR ICE OF SUGARCANE @ RS. 9/- PER QUINTAL AND RS. 4697.93 IN RESPECT OF BURNT IN CANE PNB 10240-4240. 4. WHEN ASSESSEE WAS ASKED TO EXPLAIN THE ABOVE SIT UATION, IT WAS SUBMITTED THAT SUGARCANE WAS PURCHASED AT AN ADHOC PRICE. THE BOARD OF DIRECTOR IN THE MEETING HELD ON 17.4.1993 DECIDED TO INCREASE THE S UGARCANE PRICE BY RS. 9/- PER QUINTAL WITH THE CONDITION THAT THE SAME BE CREDITE D TO THE SHARE DEDUCTION ACCOUNT. IT WAS FURTHER EXPLAINED THAT SUBSEQUENTLY SHARES WERE ISSUED TO THE MEMBERS IN LIEU TO THE ADDITIONAL CANE PRICE WHICH WAS CREDITED TO THE SHARE DEDUCTION ACCOUNT. HOWEVER, ASSESSING OFFICER DID N OT FIND THESE SUBMISSIONS CORRECT AND MADE ADDITION AMOUNTING TO RS. 2,53,28, 438/-. THE REASONS GIVEN FOR DISALLOWANCE CAN BE SUMMARIZED AS UNDER:- 1.1 THE AO VIDE HIS ASSESSMENT ORDER DATED 22.12. 1994 DISALLOWED THE DEDUCTION TO THE TUNE OF RS.2,53,28,438 ON THE FOLL OWING GROUNDS:- I) THAT THE ASSESSEE HAD BEEN MAKING REGULAR PAYMENT O F SUGARCANE TO VARIOUS FARMERS ON DAY-TO-DAY BASIS. AFTER THE CLOS URE OF THE ACCOUNTING PERIOD RELEVANT TO THE AY: 1993-94, IT WAS REALIZED THAT A SUBSTANTIAL TAXABLE PROFIT HAD BEEN EARNED. TO REDUCE THE TAX L IABILITY A BACK DATED ENTRY WAS MADE IN THE BOOKS OF ACCOUNTS AS ON 31.3. 1993. II) THAT AS ON 31.3,1993 THERE WAS NO SUCH LIABILITY TO PAY THE ENHANCED PRICE OF SUGARCANE, III) THAT ANOTHER SMALL ENTRY OF RS.4697.93 REGARDING BU RNT SUGARCANE HAD BEEN MADE TO CAMOUFLAGE THAT THE EARLIER ENTRY WAS NOT BACK DATED. IV) THAT THE PAYMENT OF ADDITIONAL SUGARCANE PRICE HAD NOT ACTUALLY BEEN MADE TO THE FARMERS. THE ENTIRE AMOUNT HAD BEEN CRE DITED TO THE SHARE DEDUCTION ACCOUNT. 3 V) THAT THE SHARE DEDUCTION ACCOUNT WAS NOT DEBITE D IN ORDER TO MAKE CREDIT ENTRIES IN THE INDIVIDUAL SHARE CAPITAL ACCOUNT OF VARIOUS SHARE HOLDERS OR SUGARCANE SUPPLIERS. VI) THAT THE SHARE HOLDERS OR SUGARCANE SUPPLIERS HAD NOT BEEN INFORMED REGARDING THE CREDIT TO THEIR ACCOUNT TILL THE PASS ING OF THE ASSESSMENT ORDER. VII) THAT IN SOME OF THE FARMER'S ACCOUNT, CREDIT ENTRIES HAVE BEEN MADE AFTER THE ISSUE HAD BEEN RAKED UP BY THE DEPARTMENT ON 21 .11.1994. ACCORDING TO THE AO IT WAS EVIDENT THAT NO CORRESPO NDING ENTRIES WERE MADE IN THE SHARE DEDUCTION ACCOUNT. VIII) THAT ON 5 LH DECEMBER, 1994 THE MANAGING DIRECTOR OF THE SOCIET Y IN HIS STATEMENT HAD INDICATED THE REASONS FOR NON ISSUANC E OF SHARES IN THE NAME OF SUGARCANE SUPPLIERS WAS THAT FORMALITIES HA D TO BE COMPLETED REGARDING THE DETERMINATION OF FULL VALUE OF SHARES , ADDRESSES OF SHARE HOLDERS ETC. THEREFORE, THE ENTRIES COULD NOT BE MA DE AS ON 31.3.1993. IX) THAT TILL THE DATE OF INSPECTION U/S 131 AND E VEN TILL THE DATE OF FINALIZATION OF THE ASSESSMENT PROCEEDINGS, THE ASS ESSES HAD NOT MADE SPECIFIC BOOK ENTRIES AND NO EVIDENCE HAD BEEN PROD UCED FOR THE DISPATCH OF SHARE CERTIFICATES TO THE SHARE HOLDERS/FARMERS. X) THAT THE MAIN PURPOSE OF THE ASSESSEE WAS TO DI VERT THE TAXABLE PROFIT BY MAKING THESE THEORETICAL BOOK ENTRIES. XI) THAT THE LIABILITY, IF ANY, HAD BEEN CRYSTALLIZ ED ONLY AFTER 17.4.93 I.E. AFTER THE CLOSE OF ACCOUNTING PERIOD AND THAT THE ENTRY WAS O NE SIDED ACT ON THE PART OF THE ASSESSES WITHOUT EITHER INFORMING THE SHARE HOL DERS AND WITHOUT PAYING THE SAME TO THEM. XII) THAT THE BOARD OF DIRECTORS PASSED RESOLUTIO N TO ENHANCE THE SUGARCANE PRICE MERELY BECAUSE THE MILL HAD EARNED SUBSTANTIAL PROF IT AND THE ASSESSEE WANTED TO APPLY THE INCOME TOWARD THE ENHANCEMENT O F SHARE CAPITAL AND NOT MAKING ANY PAYMENT TO THE CANE GROWERS. 5. ON THE BASIS OF ABOVE ADDITION, PENALTY PROCEEDI NGS U/S 271(1)(C) OF THE ACT WERE INITIATED. IN RESPONSE TO THE SHOW CAUSE NOTICE IT WAS MAINLY STATED THAT THERE WAS NO INTENTION TO CONCEAL THE PARTICUL ARS OF INCOME. THE MANAGING 4 DIRECTOR HAD NO PERSONAL BENEFIT BY INCREASING THE CANE PRICE. THE MAIN PURPOSE FOR SUCH INCREASE WAS TO GIVE BENEFIT TO THE FARMER S. THE PAYMENT CAN BE MADE DIRECTLY OR THE SAME CAN BE INVESTED BY SUCH FARMER S IN THE FORM OF SHARES. THE DECISION OF THE BOARD WAS LATER ON RATIFIED BY GENE RAL BODY. IN FACT PRICES HAD TO BE INCREASED BECAUSE THE SALE PRICE OF SUGARCANE W AS NOT COMMENSURATE WITH THE COST OF PRODUCTION. THEREAFTER, CONSIDERING THESE S UBMISSIONS IT WAS HELD THAT THE EXPLANATION WAS FALSE BECAUSE OF THE FOLLOWING REASONS:- 1.2.3 THE EXPLANATION OFFERED VIDE WRITTEN REPLI ES AND PERSONAL DISCUSSION IS FALSE. THE REASONS ARE: I) THE BOARD OF DIRECTORS TOOK THE DECISION ON 17.4 .1993 TO INCREASE THE CANE PRICE. THIS DECISION WAS NOT TAKEN FOR THE BENEFIT OF THE CANE GROWERS AS CLAIMED BY THE COUNSEL BUT TO EVADE TAX. HAD THE INTENTION BEEN TO BENEFIT THE CANE GROWERS THEN THEY WOULD HA VE BEEN PAID IN CASH. FURTHER, THEY WOULD HAVE BEEN GIVEN AN OPPORTUNITY TO DECIDE WHETHER TO KEEP THE CASH PAYMENT OR TO GET THE SHARES ALLOTTED IN LIEU OF CASH PAYMENT. THE EXPLANATION IS FURTHER PROVED TO BE FA LSE BY THE BY-LAW OF THE SOCIETY ITSELF. THE RELEVANT BY-LAW PROVIDES ' THE APPLICATION FOR ALLOTMENT OF SHARES SHALL BE MADE TO THE MANAGING D IRECTOR IN THE FORM PRESCRIBED BY THE MILL.' IN THIS CASE THE CANE GROW ERS MADE NO SUCH APPLICATION. THE CANE GROWERS DID NOT EVEN KNOW ABO UT THE INCREASE IN CANE PRICE. NO CREDIT ENTRIES WERE MADE IN THEIR CA PITAL ACCOUNTS TILL THE ISSUE WAS RAKED UP BY THE DEPARTMENT. THE BOARD OF DIRECTORS, HENCE, DID NOT HAVE THE BENEFIT OF THE CANE GROWERS IN THEIR MIND WHILE THEY WERE TAKING THE DECISION TO INCREASE THE CANE PRICE. II) THE FARMERS WERE IN NO WAY BENEFITED. NEITHER T HEY GOT THE PAYMENT IN CASH NOR DID THEIR CAPITAL ACCOUNTS WERE CREDITED. THEY WERE NOT EVEN INFORMED ABOUT THE DECISION. III) THE DECISION TAKEN BY THE BOARD ON 17.4.1993 W AS RATIFIED BY THE GENERAL BODY ON 26.7.1995, MEANING WHEREBY THAT THE CANE GROWERS CAME TO KNOW ABOUT SUCH DECISION AFTER TWO YEARS AN D THREE MONTHS LATER! IV) THE MILL THOUGHT OF BENEFITING THE CANE GROWE RS ONLY IN THE YEARS OF HUGE PROFITS. IT THOUGHT OF BRINGING THE PARITY BET WEEN THE PRICES OF 5 CANE AND THOSE OF WHEAT AND PADDY ONLY IN THE YEARS IN WHICH IT HAD PROFIT V) THE BOARD OF DIRECTORS COULD NOT TAKE SUCH UNIL ATERAL DECISION. IT COULD ONLY RECOMMEND TO THE GENERAL BODY TO DEDU CT THE AMOUNT FROM THE CANE PRICE. THE BOARD OF DIRECTORS COULD NOT IM POSE A CONDITION ON THE CANE GROWERS TO INCREASE THEIR SHARE CAPITAL RATHER THAN GETTING PAYMENT IN CASH. FURTHER THE SHARES COULD BE ISSUE D ONLY IF THE CANE GROWERS APPLIED FOR ISSUANCE OF SHARES. IN THIS CAS E THE BOARD OF DIRECTORS FLOUTED THE BY-LAWS OF ITS OWN MILL. 6. THEREAFTER HE DISCUSSED HIS REASONING FOR LEVY O F PENALTY AND ULTIMATELY LEVIED A PENALTY @ 100% AMOUNTING TO RS. 1,00,62,52 6/-. 7. ON APPEAL BEFORE CIT(A) VARIOUS SUBMISSIONS WERE MADE WHICH H AVE BEEN SUMMARIZED BY LD. CIT(A) IN PARA 2.3 WHICH IS AS UN DER:- I) THAT THE AUTHORIZED SHARE CAPITAL OF THE MILL WAS T O BE INCREASED. WHICH WAS TO BE CONTRIBUTED BY INDIVIDUAL SUGARCANE GROWERS, THE STATE GOVERNMENT, THE FINANCIAL INSTITUTIONS AND THE CENTRAL GOVERNMENT. II) THAT THE APPELLANT IS A SEMI GOVT. ORGANIZATION BEI NG MANAGED BY THE MANAGING DIRECTOR APPOINTED BY THE SECRETARY, DEPTT . OF CO-OPERATION / THE REGISTRAR OF CO-OPERATIVE SOCIETIES OF PUNJAB AND A LL ITS ACCOUNTS ARE IMMACULATELY MAINTAINED BY THE CHIEF ACCOUNTS OFFIC ER. III) THAT SUGARCANE IS A CASH CROP WHEREAS THE COMPETING WHEAT AND PADDY ARE TRADITIONAL CROPS. CASH CROP CANNOT BE RETAINED OR PRESERVED FOR A LONGER PERIOD AS THE OTHER CROPS. IV) THAT IT HAS ALWAYS BEEN CONSIDERED DISADVANTAGEOUS BY THE FARMERS TO GROSS SUGARCANE SINCE ITS CULTIVATION HAS BEEN FAR LESS R EMUNERATIVE. V) THAT THE INCREASE IN THE PRICE OF SUGARCANE HAS NOT BEEN COMMENSURATE WITH THE INCREASE IN THE PRODUCTION COST AND HAS BEEN A LESS IN PROPORTION TO THE OTHER CROPS OF WHEAT AND PADDY. VI) THAT DURING THE CRUSHING SEASON 1992-93 RELEVANT TO THE ASSESSMENT YEAR 1993- 94 THE STATE ADVISORY PRICE (SAP) HAD RAISED PRICE BY RS. 1/- IN THE CASE OF SUGARCANE WHEREAS THE INCREASE IN THE CASE OF WHEAT / PADDY BY RS. 55/- & RS. 50/- PER QUINTAL RESPECTIVELY. VII) THAT FURTHER AS PER THE DIRECTIVES OF IDBI WHILE SA NCTIONING THE LOAN TO THE MILL SHARE CAPITAL OF CAME GROWERS MEMBERS HAD TO BE RAI SED TO RS. 112 LACS MINIMUM WHICH COULD BE POSSIBLE WITH OR FROM VOLUNT ARY CONTRIBUTIONS AN / OR BY DEDUCTING PROPORTIONATELY OUT OF CANE PRICE PAYA BLE TO THE MEMBER GROWERS. 6 VIII) THAT THE DECISION OF THE BOARD OF DIRECTORS TO PAY ADDITIONAL SUGARCANE PRICE AT RS. 9/- PER QUINTAL AND THE MANNER IN WHICH IT WAS TO BE PAID WAS DULY RATIFIED IN THE NEXT GENERAL BODY MEETING OF THE MILLS/SOCIE TY HELD ON 26 TH JULY, 1995 . 8. THE LD. CIT(A) FORWARDED THE SUBMISSIONS TO THE ASSESSING OFFICER TO GIVE HIS COMMENTS VIDE LETTER DATED 21.2.2006. IN THE COMMENTS IT WAS POINTED OUT THAT - I) IF THE PRICE WAS INCREASED TO BRING PARITY WITH OTH ER CROPS LIKE WHEAT, PADDY ETC. TO STOP FARMERS FROM SWITCHI NG OVER TO THOSE CROPS THEN AT LEAST INCREASED PRICE SHOULD HAVE BEEN PAID TO THE FARMERS. II) THE FARMERS WERE NEVER INFORMED REGARDING THE DECIS ION TO INCREASE THE PRICES. III) THE DECISION TO INCREASE THE PRICE WAS NEVER RECTIF IED BY THE GENERAL BODY MEETING TILL 26.7.1995. IV) IF IT WAS FOR THE BENEFIT OF THE FARMERS WHY THE S AME WAS NOT TAKEN AT THE BEGINNING OF THE YEAR RELATING OF THE LOSSES AND PROFITS. IT WAS NOTICED THAT SUCH INCREASE WAS EFFECTED ONLY IN THE YEARS OF PROFITS. V) IN RESPECT OF INCREASE IN SHARE CAPITAL, THE ASSESS ING OFFICER OBJECTED THAT DECISION IN THIS REGARD COULD HAVE BE EN TAKEN BY THE INDIVIDUAL SHARE HOLDER IN THE GENERAL BODY MEETING AND SUCH SHARE HOLDERS WERE REQUIRED TO MAKE AN APP LICATION TO THE MANAGING DIRECTOR BUT NO SUCH APPLICATION WA S MADE. THE ASSESSING OFFICER ALSO MADE VARIOUS REFERENCES TO THE ORDER OF TRIBUNAL CONFIRMING THE ADDITION. THESE COMMENTS WERE FORWARDED TO THE ASSESSEE FOR I TS COUNTER COMMENTS. IN THE COUNTER COMMENTS IT WAS SUBMITTED THAT ADDITION WAS CONFIRMED ON THE WRONG PREMISES THAT LIABILITY ACCRUED AFTER CLOSING OF THE ACCOUNTING PERIOD. THE TRIBUNAL ALSO CONFIRMED THE ADDITION ON THESE P REMISES WHICH IS NOT CORRECT. IT WAS CONTENDED THAT WHAT WAS REQUIRED TO BE SEEN IS WHETHER EXPENDITURE WAS ACTUALLY INCURRED OR NOT AND SAME W AS FOR BUSINESS CONSIDERATION OR NOT. 7 9. THE LD. CIT(A) CONSIDERING ALL THESE ARGUMENT S OBSERVED THAT ASSESSEE HAD FAILED TO SUBSTANTIATE THE REASONS FOR ENHANCED PAYMENTS AND THE EXPLANATION GIVEN WAS NOT BONAFIDE, THEREFORE, LEVY OF PENALTY WAS CONFIRMED. 10. BEFORE US IT WAS SUBMITTED THAT CROP OF THE CAN E IS A CASH CROP BUT COST OF PRODUCTION FOR THE SAME WAS MUCH MORE THAN THE PRICE FIXED BY THE STATE GOVERNMENT. IN THIS BACKGROUND THE FARMERS WE RE SHIFTING FROM GROWING CANE TO OTHER CROPS LIKE WHEAT ETC. TO ENC OURAGE THE CANE CROP, THE GOVERNMENT ENCOURAGES SUGAR INDUSTRIES THROUGH COOP ERATIVE SECTOR. SUCH COOPERATIVES WERE DIRECTED AND ENCOURAGED TO PROVID E RUMINATIVE PRICE TO THE CANE GROWERS. THE ASSESSEE SOCIETY IN THIS BACKGROU ND HAD INCREASED THEIR PRICES DURING THE YEAR BY RS. 9/- PER QUINTAL AND T HE DECISION WAS TAKEN BY THE MANAGEMENT. HOWEVER, THE SAME COULD BE APPROVE D BY THE BOARD ONLY ON 7.4.1993 BUT THIS SHOULD NOT HAVE BEEN DISALLOWED MERELY BECAUSE THE DECISION WAS APPROVED IN THE BOARD MEETING ONLY ON 17.4.1993. 11. IN THIS CASE THE ASSESSEE HAVE MADE FULL DISCLO SURE AND IT CANNOT BE SAID THAT ASSESSEE HAS CONCEALED ANY PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS AND, THEREFORE, LEVY OF PENA LTY WAS NOT JUSTIFIED. IN THIS REGARD, HE RELIED ON THE DECISION OF HON'BLE S UPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD IN 322 ITR 158 (SC). THE LD. COUNSEL HAS ALSO REFERRED TO FEW MORE DECISIONS OF THE TRIBUNALS AND HIGH COURTS WHICH ARE AS UNDER:- 1. ACIT, LUDHIANA VS. HERO CYCLES LTD. ITA NO. 175/08, ASSESSMENT YEAR 2001-02 DATED 09.08.10 2. PAHWA CYCLES P. LTD. VS. ACIT ITA NO. 26/2009 A/Y 2 005-2006 DATED 27.04.2009 (CHD. BENCH) 3. PENALTY ORDER U/S 271(1)(C) PASSED BY CIT-II, LUDHI ANA DATED 10.11.2008 IN THE CASE OF M/S PAHWA CYCLES PVT. LTD 4. CIT VS. E.I. DUPONT INDIA LTD. ITA NO. 418/07 (DELH I HIGH COURT) 5. CIT VS. E.I. DUPONT INDIA LTD. (2009) 308 ITR 14 (S TATUTES) 8 6. CIT VS. BUDHEWAL CO-OPERATIVE SUGAR SOCIETY LTD. (2 008) 6 DTR 31 (P&H) (2009) 312 ITR 92 7. CEMENT MARKETING CO. OF INDIA VS. ACST (1980) 124 I TR 15(SC) 8. CIT VS. MEHTA ENGINEERS LTD. (2008) 300 ITR 308 HON 'BLE HIGH COURT OF PUNJAB & HARYANA 9. ACIT VS. ARISUDANA SPINNING MILLS LTD. (2009) 19 DT R 1(CHD) (TRIB) AFFIRMED IN 326 ITR 429 10. H.P STATE FOREST CORPORATION LTD VS. DCIT (2005)93 ITD 442(CHD) APPROVED IN (2011) 45 IT REPS. 96 (HP) 11. ACIT VS PORRITS AND SPENCER (A) LTD. (2009) 40 IT R EP. 539(DEL)(2008) 22 SOT 281 (DEL) 12. CIT VS. HARYANA WAREHOUSING CORP. (2009) 314 ITR 21 5 (P&H) 12. ON THE OTHER HAND THE LD. DR SUBMITTED THAT ADD ITION MADE IN THE ASSESSMENT HAS BEEN CONFIRMED BY THE TRIBUNAL AGAIN ST WHICH THE ASSESSEE HAD FILED APPEAL BEFORE THE JURISDICTIONAL HIGH COU RT AND THE APPEAL OF THE ASSESSEE WAS ALSO DISMISSED. THE LD. DR REFERRED TO THE VARIOUS OBSERVATIONS MADE BY THE HIGH COURT AND POINTED OUT THAT ULTIMAT ELY HIGH COURT HAS VERY CLEARLY HELD THAT THE CLAIM OF THE EXPENDITURE WAS NOT MADE ON BONAFIDE BASIS. HE ALSO POINTED OUT THAT SUGAR CANE PRICES W ERE INCREASED ONLY IN THE YEARS OF PROFITS AND NOT IN THE YEAR OF LOSSES WHIC H CLEARLY MEANS THAT SAME WAS DONE TO REDUCE THE PROFITS. THE INCREASED PRICE WAS NEVER PAID TO THE FARMERS AND IT WAS ADJUSTED IN THE SHARE CAPITAL AC COUNT WITHOUT ANY APPROVAL FROM THE GENERAL BODY MEETING AND THE FARMERS WERE NEVER INFORMED REGARDING THIS DECISION WHICH CLEARLY SHOWS THAT AS SESSEE HAS MERELY TRIED TO REDUCE ITS PROFITS BY SHOWING INCREASED EXPENDITURE OF SUGAR CANE WHICH HAS NEVER BEEN PAID TO THE FARMERS. HE ALSO STRONGLY RE LIED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V ZOOM COMMUNICATION P. LTD. 327 ITR 510 (DELHI) 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY IN THE LIGHT OF MATERIAL AVAILABLE ON RECORD AS WELL AS JUDGMENTS C ITED BY THE PARTIES. WE FIND THAT WHEN THE MATTER WAS CONSIDERED BY THE HON 'BLE E PUNJAB & HARYANA HIGH COURT WHILE DECIDING THE QUANTUM PROCEEDINGS I N ITA NO. 84 OF 2006 9 VIDE ORDER DATED 16.10.2007, THE HON'BLE HIGH COURT OBSERVED AT PAGES 11 & 12 AS UNDER:- FROM THE PERUSAL OF THE ABOVE, IT WOULD BE NOTICED THAT THE TRIBUNAL AFTER APPRECIATING THE MATERIAL ON RECORD HAS RECORDED TH E FOLLOWING FINDINGS:- A) THAT THE ASSESSEE HAD BEEN FIXING FINAL PRICE AND C REATING ADDITIONAL LIABILITY ON ACCOUNT OF ADDITIONAL SUGARCANE PRICE ONLY IN THOSE ASSESSMENT YEARS WHEN THE ASSESSEE HAD EARNED HUGE PROFITS; B) THAT THE CAPITAL BASE OF THE ASSESSEE HAD BEEN ENHA NCED BY MAKING A PROVISION ON ACCOUNT OF ADDITIONAL SUGARCANE PRICE WITHOUT THERE BEING ANY ACTUAL PAYMENT TO THE SUGARCANE GROWERS; C) THAT THERE WAS NO INFORMATION TO THE SUGARCANE GROW ERS REGARDING INCREASE IN PRICE OF ADDITIONAL CANE PRICE AND ALLO TMENT OF SHARES TO THEM. FURTHER, IN SUCH A SITUATION THERE COULD NOT BE ANY APPLICATION MADE BY THE MEMBERS FOR THE ALLOTMENT OF ADDITIONAL SHARES: D) THE RESOLUTION PASSED IN THE MEETING OF THE BOARD O F DIRECTORS WHICH WAS RATIFIED SUBSEQUENTLY, THE METHOD ADOPTED FOR E NHANCEMENT OF SUGARCANE PRICE WAS WITHOUT ANY CASH PAYMENT AND TH E ENHANCEMENT OF CAPITAL BASE WAS WITHOUT PAYMENT OF TAXES IN RESPECT OF RELATED AMOUNT; AND E) THIS ACTION OF THE ASSESSEE TO ENHANCE THE SUGARCAN E PRICE BY CREDITING THE SAME TO SHARE DEDUCTION ACCOUNT WAS U NILATERAL. THE TRIBUNAL ON THE BASIS OF THE ABOVE FINDINGS HAD CONCLUDED THAT THE ACTION OF THE ASSESSEE WAS NOT BONAFIDE AND THI S DEVICE WAS EMPLOYED TO AVOID PAYMENT OF DUES TO THE EXCHEQUER. THE FINDING S RECORDED BY THE TRIBUNAL ARE FINDINGS OF FACT AND DO NOT GIVE RISE TO ANY QUESTION OF LAW MUCH LESS A SUBSTANTIAL QUESTION OF LAW. WE DRAW SU PPORT FROM THE BINDING PRECEDENT OF A DIVISION BENCH OF THIS COURT IN SHAH ABAD COMPANY- OPERATIVE SUGAR MILLS LTD. V. CIT, [1997] 226 ITR 5 82 IN THAT REGARD. IN VIEW OF THE ABOVE, FINDING NO MERIT IN THIS AP PEAL, THE SAME IS HEREBY DISMISSED. THERE SHALL, HOWEVER, BE NO ORDER AS TO COSTS. 14. THUS, CLEARLY HON'BLE HIGH COURT HAS CONFIRMED THE FINDINGS OF THE TRIBUNAL IN WHICH IT WAS HELD THAT ACTION OF THE AS SESSEE IN CLAIMING THIS EXPENDITURE WAS NOT BONAFIDE. THEREFORE, CLEARLY T HIS CLAIM IS BOGUS JUST TO REDUCE PROFITS. 15. WE HAVE ALREADY REPRODUCED THE REASONS GIVEN IN THE PENALTY ORDER FOR NOT ENTERTAINING THE CONTENTION OF THE ASSESSEE IN THE PENALTY ORDER IT WAS CLEARLY NOTED BY THE ASSESSING OFFICER THAT ASSESSE E HAD INTENTION TO EVADE TAX. IN PARA 1.3.1 IT WAS OBSERVED AS UNDER:- 10 1.3.1 THE CLAUSE 24 A OF BY-LAWS OF THE COOPERATIV E SOCIETY EMPOWERS THE BOARD TO FIX AN INITIAL PRICE FOR SUGARCANE /BE ET IN ACCORDANCE WITH A FORMULA DETERMINED BY THE STATE FEDERATION O F COOPERATIVE SUGAR MILLS IN CONSULTATION WITH THE SUGAR MILL AND THE REGISTRAR AND TO MAKE FINAL PAYMENT AT THE END OF CRUSHING SE ASON. BUT THE WAY THE WHOLE EXERCISE ENVISAGED IN THE CLAUSE 24 A WAS UNDERTAKEN BY THE ASSESSEE FOR THE AY 1993-94 PROVE S THAT THE ASSESSEE HAD THE MENS REA AND THIS EXERCISE WAS WIL LFUL ATTEMPT TO EVADE TAX. THERE WAS A CONSCIOUS EFFORT ON THE PART OF THE ASSESSEE TO GAIN PECUNIARY ADVANTAGE AT THE COST OF EXCHEQUE R. IN THE FOLLOWING PARAS THE EXERCISE IS DISCUSSED IN DETAIL TO BRING ABOUT THE MENS REA ON THE PART OF THE ASSESSEE;.. 16. FURTHER REASONS GIVEN IN PARA 1.2.3 HAVE ALREAD Y BEEN EXTRACTED BY US IN PARA 5 OF THIS ORDER. IT HAS BEEN CLEARLY NOT ED THAT INCREASED PRICES WAS NEVER PAID TO THE FARMERS BUT ADJUSTED IN THE SHARE CAPITAL ACCOUNT. IT IS ALSO NOTED THAT SUCH INCREASE WAS GRANTED IN THE YEARS O F PROFITS. IF ASSESSEE REALLY WANTED TO GIVE BENEFIT TO THE FARMERS, WE FA IL TO UNDERSTAND WHY MONEY WAS NOT PAID TO THE FARMERS. IF MONEY WAS TO BE ADJUSTED IN THE SHARE CAPITAL ACCOUNT THEN CONSENT OF FARMERS SHOULD HAVE BEEN OBTAINED BY WAY OF GENERAL BODY MEETING WHICH WAS NEVER DONE AND THE D ECISION TO CONVERT TO INCREASED PRICE WAS RATIFIED ONLY ON 26.6.1995 THE SE FACTORS CLEARLY SHOWS THAT ASSESSEE HAS MERELY TRIED TO EVADE TAX BY SHOW ING EXTRA EXPENDITURE ON ACCOUNT OF ENHANCE PRICE FOR SUGARCANE. 17. NO DOUBT THE HON'BLE SUPREME COURT IN THE CASE OF CIT V RELIANCE PETROPRODUCTS PVT LTD (SUPRA) HELD THAT IF A DISCLO SURE IS MADE THEN IT CANNOT BE SAID THAT ASSESSEE HAS CONCEALED PARTICULARS OF THE INCOME. HOWEVER, THE HON'BLE DELHI HIGH COURT HAS CLEARLY HELD WHILE DIS TINGUISHING THIS DECISION IN THE CASE OF CIT V ZOOM COMMUNICATION P. LTD (SUPRA) THAT IF THE CLAIM IS OF TOTALLY BOGUS NATURE THEN THE RATIO OF THE DECIS ION OF HON'BLE SUPREME COURT IN THE CASE OF CIT V RELIANCE PETROPRODUCTS PVT LTD (SUPRA) CANNOT BE APPLIED. THE ASSESSEE HAS QUOTED VARIOUS DECISIONS WHICH BASICALLY RELATES TO LEVY OF PENALTY IN CASE OF DISALLOWANCE OF EXPENDIT URE OR WRONG CLAIM OF DEDUCTION. ALL THESE DECISIONS ARE DISTINGUISHABLE ON FACTS BECAUSE THIS IS NOT A CASE OF MERE DISALLOWANCE OF EXPENDITURE OR DISAL LOWANCE OF A PARTICULAR 11 DEDUCTION RATHER IT IS A CASE OF DISALLOWANCE OF BO GUS EXPENDITURE WHICH HAS BEEN CLAIMED JUST TO REDUCE THE PROFITS EARNED BY T HE ASSESSEE. THEREFORE, IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY CONFIRMED THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT AND WE UPHOLD HIS ACTION. 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 10-04-2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 10 TH APRIL, 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR