M/s Noble Share Trading Pvt. Ltd., Ludhiana V. ITO, Ludhiana

ITA 721/CHANDI/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80908 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-08-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 05-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Depreciation; Accommodation entries
• Section: 143(3); 133A; 133(6); 147; 68; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 721/CHD/2011 ASSESSMENT YEAR : 2002-03 M/S NOBLE SHARE TRADING PVT.LTD., VS THE INCOM E TAX OFFICER, C/O M/S ADINATH TEXTILES LTD., WARD VI( 2), VILLAGE BHOLAPUR, LUDHIANA. P.O. SAHABANA, CHANDIGARH ROAD, LUDHIANA. PAN : AAACN5475D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI MAHAVIR SINGH DATE OF HEARING : 26.08.2014 DATE OF PRONOUNCEMENT : 17.09.2014 O R D E R PER SUSHMA CHOWLA, JM THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, LUD HIANA DATED 13.05.2011 RELATING TO ASSESSMENT YEAR 2002-03 AGAI NST THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX AC T, 1961 (IN SHORT 'THE ACT'). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE LD. CIT(A) - II, LUDHIANA HAS ERRED IN DISMISSING THE APPEAL AND CONFIRMING THE PENALTY OF RS. 14,99,400/- LEVIE D BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C ) OF THE INCOME TAX ACT, 1961. 2. THAT PENALTY U/S 271(1)(C ) HAS BEEN CONFIRMED B Y THE LD. CIT(A) - II, LUDHIANA AGAINST THE FACTS AND CIRCUMS TANCES OF THE CASE. 3. THAT DETAILED SUBMISSIONS FILED DURING THE COUR SE OF HEARING MENTIONING VARIOUS CASE LAWS HAS NOT BEEN CONSIDERE D BY THE LD. CIT(A) PROPERLY WHILE DISMISSING THE APPEAL. 2 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AT RS. 14,99,400/-. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD RECEIVED SHARE CAPITAL FROM VARIOUS ENTITIES AND THE ASSESSI NG OFFICER RECEIVED INFORMATION FROM THE ADDL. DIRECTOR OF INC OME TAX (INVESTIGATION) UNIT-VII, NEW DELHI REGARDING BOGUS ACCOMMODATION ENTRIES TAKEN BY THE ASSESSEE COMPANY. THE SAID IN FORMATION WAS RECEIVED PURSUANT TO SURVEY CONDUCTED UNDER SECTION 133A OF THE ACT ON THE OFFICE PREMISES OF SHRI SANJAY RASTOGI A T SHAKKAR PUR, DELHI ON 04.03.2003. DURING THE COURSE OF SURVEY, IT WAS ADMITTED BY THE SAID PERSONS THAT HE WAS ENGAGED IN GIVING A CCOMMODATION ENTRIES. SHRI SANJAY RASTOGI ALSO GAVE A LIST OF C OMPANIES WHICH WERE INVOLVED IN BOGUS ENTRIES, AND FURTHER HAD GIV EN A LIST OF COMPANIES WHO HAD TAKEN OR FROM WHOSE ACCOUNTS THE ENTRIES WERE OPERATED. ONE SUCH COMPANY WAS THE ASSESSEE BEFORE US I.E. M/S NOBLE SHARE TRADING PVT. LTD. SHRI SANJAY RASTOGI ALSO EXPLAINED THE MODUS-OPERANDI THAT THE COMPANIES SEEKING ENTRI ES GAVE CHEQUES IN THE NAMES OF THE COMPANIES OF SHRI SANJAY RASTOG I AND AFTER RECEIPT OF THOSE CHEQUES, CASH WAS TAKEN OUT FROM T HE BANK. THE ASSESSING OFFICER IN VIEW OF THE INFORMATION RECEIV ED, INITIATED PROCEEDINGS UNDER SECTION 147 OF THE ACT BY RECORDI NG REASONS FOR RE-OPENING THE ASSESSMENT. IT WAS RECORDED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD OBTAINED ACCOMMODATIO N ENTRIES FROM M/S CHINAR AGENCIES PVT. LTD., SHAKKAR PUR, DELHI B Y WAY OF TWO CHEQUES I.E. CHEQUE DATED 18.05.2001 FOR RS. 7,50,0 00/- AND CHEQUE DATED 25.06.2001 FOR RS.2,50,000/-. THE AMOUNT REC EIVED ON ACCOUNT OF ACCOMMODATION ENTRIES WAS INVESTED IN TH E EQUITY OF 3 GROUP COMPANY M/S SHREYANS INDUSTRIES LTD. THE ASS ESSING OFFICER FURTHER NOTED THAT FRESH CAPITAL OF RS. 42 LACS WA S INTRODUCED IN THE ACCOUNT BOOKS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WHICH IN-TURN WAS INVESTED IN THE EQUITY OF M/S SHR EYANS INDUSTRIES LTD. THE ASSESSING OFFICER WAS OF THE VIEW THAT TH E AMOUNT TOTALING RS. 42 LACS WERE ACCOMMODATION ENTRIES. THE ASSESS EE WAS SHOW CAUSED TO EXPLAIN THE SAME. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FURTHER FOUND THAT IN ADDITION TO THE TWO ENTRIES OF ACCOMMODATION RECEIVED FROM M/S CHINAR AGENCIES PVT . LTD., THERE WERE SIX MORE ENTRIES WHICH WERE RECEIVED THROUGH COMPANIES/INDIVIDUALS/HUFS WHICH WERE RELATED TO SH RI SANJAY RASTOGI AND SHRI ASHWANI UPPAL, AN ASSOCIATE OF SHR I SANJAY RASTOGI. FURTHER ENQUIRIES WERE MADE BY THE ASSESS EE AND INFORMATION WAS ALSO CALLED UNDER SECTION 133(6) OF THE ACT FROM VARIOUS PARTIES AND THEREAFTER, ADDITION OF RS. 42 LACS WAS MADE IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF THE TOTAL S HARE APPLICATION MONEY INTRODUCED IN THE FINANCIAL YEAR 2001-02. TH E SAID ADDITION WAS CONFIRMED BY THE ASSESSING OFFICER AND THEREAFT ER BY THE TRIBUNAL IN ITA NO. 1117/CHD/2008 RELATING TO ASSES SMENT YEAR 2002-03 VIDE ORDER DATED 26.03.2012. MEANWHILE, TH E ASSESSING OFFICER COMPLETED THE PENALTY PROCEEDINGS INITIATED AGAINST THE ASSESSEE AND HELD THE ASSESSEE TO HAVE SHOWN INACCU RATE PARTICULARS OF INCOME AND LEVIED PENALTY UNDER SECTION 271(1)(C ) OF THE ACT AT RS. 14,99,400/-. 5. THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRM ED LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ASS ESSEE IS IN APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 4 6. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE ASSESSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS WERE INDEPE NDENT PROCEEDINGS AND MERELY BECAUSE ADDITION HAD BEEN MA DE IN THE HANDS OF THE ASSESSEE, WOULD NOT JUSTIFY LEVY OF PE NALTY UNDER SECTION 271(1)(C) OF THE ACT. IT WAS FURTHER POINT ED OUT BY THE LD.AR FOR THE ASSESSEE THAT THE ASSESSING OFFICER HAD LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE P REMISE THAT SHRI SANJAY RASTOGI HAD ADMITTED IN HIS STATEMENT THAT T HE ACCOMMODATION ENTRIES WERE PROVIDED TO THE VARIOUS PARTIES. IT WAS STRESSED BY THE LD. AR FOR THE ASSESSEE THAT FROM T HE STATEMENT OF SHRI SANJAY RASTOGI, IT WAS CLEAR THAT THE NAME OF THE ASSESSEE COMPANY HAD NOT BEEN MENTIONED ANYWHERE. IT WAS FU RTHER POINTED OUT BY THE LD. AR FOR THE ASSESSEE THAT EVEN NO NAM E OF M/S CHINAR AGENCIES PVT. LTD. WAS MENTIONED IN THE STATEMENT O F SHRI SANJAY RASTOGI. FURTHER, M/S CHINAR AGENCIES PVT. LTD. HAD IN ITS BALANCE SHEET DECLARED THE INVESTMENT AS SHARE APPLICATION MONEY IN CONCERNS AS ON 31.03.2002 AND THE ASSESSMENT FOR TH E ASSESSMENT YEAR 2002-03 WAS FRAMED ON 24.03.2005. EVEN THOUGH THERE WAS SURVEY ON 17.04.2003 ON SHRI SANJAY RASTOGI, NO ADV ERSE VIEW HAS BEEN TAKEN BY THE ASSESSING OFFICER WHILE COMPLETIN G THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT IN RESPE CT OF THE INVESTMENTS MADE BY M/S CHINAR AGENCIES PVT. LTD. I N ASSESSEE'S COMPANY. FURTHER SHARES HAVE BEEN ALLOTTED TO THE SAID COMPANY AND THE EVIDENCES IN RESPECT THEREOF WERE FURNISHED BO TH BEFORE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (A PPEALS). IT WAS FURTHER POINTED OUT BY THE LD. AR FOR THE ASSES SEE THAT THERE IS NO FINDING BY THE ASSESSING OFFICER OR THE COMMISSI ONER OF INCOME TAX (APPEALS) THAT SUCH PERSONS WERE NOT REGISTERED SHAREHOLDERS IN ASSESSEE'S COMPANY. 5 7. ANOTHER OBJECTION RAISED BY THE LD. AR FOR THE A SSESSEE WAS THAT NO RELIANCE COULD BE PLACED ON THE STATEMENT R ECORDED AT THE BACK OF THE ASSESSEE AS NO CROSS-EXAMINATION OF SHR I SANJAY RASTOGI WAS ALLOWED TO THE ASSESSEE. 8. THE LD. AR FOR THE ASSESSEE PLACED RELIANCE ON M /S RAJDEEP BUILDERS V/S ACIT, CIRCLE SHIMLA ITA 666/CHD/2010 D ATED 27.04.2012 & NATIONAL TEXTILES VS CIT 249 ITR 125 ( GUJ). THE LD. AR FOR THE ASSESSEE STRESSED THAT WHERE THE ASSESSE E HAS AN EXPLANATION, THE QUESTION IS WHETHER THE EXPLANATIO N IS BONAFIDE OR NOT. THE ADDITION IN THE HANDS OF THE ASSESSEE WAS MADE ON THE BASIS OF CIRCUMSTANTIAL EVIDENCES BUT THE SAME COULD NOT BE THE BASIS FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT . FURTHER, THE EXPLANATION OF THE ASSESSEE HAS NOT BEEN FOUND TO B E NOT BONAFIDE AND HENCE, NO MERIT IN THE LEVY OF PENALTY. 9. THE LD. DR FOR THE REVENUE POINTED OUT THAT LD. AR FOR THE ASSESSEE HAS ELABORATED UPON THE QUANTUM ADDITION WHEREAS THE TRIBUNAL IN THE CONCLUDING PARA HAS HELD IT TO BE A CASE OF PROFESSIONAL ENTRY PROVIDER AND IF IT IS A CASE OF PROFESSIONAL ENTRY PROVIDER, THEN IT IS THE FITTEST CASE FOR LEVY OF P ENALTY. IN THE PRESENT CASE, THERE IS A CUMULATIVE SATISFACTION BY ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) THAT THERE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THE EXPLANA TION GIVEN BY THE ASSESSEE IS FALSE. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS AGAI NST THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. PENALT Y FOR CONCEALMENT UNDER SECTION 271(1)(C) OF THE ACT IS LEVIABLE WHER E THE ASSESSEE HAS 6 EITHER CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. HOWEVER, IN ALL CASES WHERE ADDITION HAS B EEN MADE IN THE HANDS OF THE ASSESSEE, THE LEVY OF PENALTY UNDER SE CTION 271(1)(C) OF THE ACT IS NOT AUTOMATIC AS THE PROVISION ITSELF PR OVIDES AN OPPORTUNITY TO BE GIVEN TO THE ASSESSEE TO EXPLAIN ITS STAND AS TO WHETHER PENALTY FOR CONCEALMENT IS TO BE LEVIED IN THE CASE OR NOT. BOTH ASSESSMENT AND PENALTY PROCEEDINGS ARE INDEPEN DENT PROCEEDINGS AND ARE TO BE CONDUCTED SEPARATELY. 11. THE HON'BLE SUPREME COURT IN DHARMENDRA TEXTILE S & PROCESSORS CASE (SUPRA), OBSERVED THAT THE PENALTY U/S 271 (1) (C) OF THE ACT IS A CIVIL LIABILITY. HOWEVER, WHERE THE LIABILITY IS PENAL I N NATURE THOUGH BEING CIVIL LIABILITY AND THERE IS NO REQUIREMENT OF ESTA BLISHING THE MENS REA OF THE INTENTION OF THE ASSESSEE IN CASES WHERE THE AS SESSEE IS FOUND TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF INCOME. HOWEVER, WHERE THE INFORMATION FURNISHE D BY THE ASSESSEE IN THE RETURN OF INCOME TO THE BEST OF KNOWLEDGE OF TH E ASSESSEE IS CORRECT AND COMPLETE, IT CANNOT BE SAID THAT THE ONUS ON TH E ASSESSEE HAS NOT BEEN DISCHARGED TO PROVE ITS BONAFIDES. WHERE ANY ADDITI ON TO, OR DISALLOWANCE FROM, HAD BEEN MADE TO THE RETURNED INCOME, IT PER SE CANNOT BE THE FOUNDATION OF PENALTY UNDER SECTION 271 (1)(C) OF THE ACT AS FINDINGS IN THE ASSESSMENT ORDER CANNOT BE TAKEN A CONCLUSIVE P ROOF OF CONCEALMENT FOR THE PURPOSE OF LEVY OF PENALTY UNDER SECTION 27 1 (1)(C) OF THE ACT. UNDER THE EXPLANATION 1 TO SECTION 271 (1), THE ON US IS UPON THE ASSESSEE TO ESTABLISH THE BONAFIDES OF HIS CLAIM AND WHERE T HE ASSESSEE DISCHARGES ITS ONUS OF PROVING HIS CLAIM TO BE BONAFIDELY MADE , THE COURTS HAVE HELD THAT THERE IS NO MERIT IN LEVY OF PENALTY UNDER SEC TION 271(1)(C) OF THE ACT. 7 12. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. SIDHARTHA ENTERPRISES [(2010) 228 CTR (P&H) 579 ] HELD THAT THE JUDGMENT OF THE HON'BLE SUPREME COURT IN DHARMENDRA TEXTILE (SUPRA) CANNOT BE READ AS LAYING DOWN THAT EVERY CASE WHERE PARTICULARS OF IN COME ARE INACCURATE, PENALTY MUST FOLLOW. WHAT HAS BEEN LAID DOWN IS TH AT QUALITATIVE DIFFERENCE BETWEEN CRIMINAL LIABILITY UNDER SECTION 276C AND PENALTY UNDER S. 271(1)(C) HAD TO BE KEPT IN MIND AND APPR OACH ADOPTED TO THE TRIAL OF A CRIMINAL CASE NEED NOT BE ADOPTED WHILE CONSIDERING THE LEVY OF PENALTY. EVEN SO, CONCEPT OF PENALTY HAS NOT UNDE RGONE CHANGE BY VIRTUE OF THE SAID JUDGMENT. PENALTY IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A MERE MISTAKE. THIS BEING THE POSITION, THE FINDING HAVING BEEN RECORDED ON FACTS THAT THE FURN ISHING OF INACCURATE PARTICULARS WAS SIMPLY A MISTAKE AND NOT A DELIBER ATE ATTEMPT TO EVADE TAX, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE HELD TO BE PERVERSE. 13. THE HON'BLE SUPREME COURT OF INDIA IN CIT, AHEM DABAD VS. RELIANCE PETROPRODUCTS PVT. LTD (SUPRA) WHILE REFE RRING TO THE WORD PARTICULARS IN INACCURATE PARTICULARS OF INCOME, OBSERVED, A S PER LAW LEXICON, THE MEANING OF WORD PARTICULAR IS A DE TAIL OR DETAILS, THE DETAILS OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACC OUNT. THEREFORE, THE WORD PARTICULARS USED IN SECTION 271 (1)(C) WOUL D EMBRACE THE MEANING OF THE DETAILS OF THE CLAIM MADE. IT WAS FURTHER HELD AS UNDER:- WE HAVE ALREADY SEEN THE MEANING OF THE WORD PARTICULARS IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEAN THE DETAIL S SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. WE MU ST HASTEN TO ADD HERE THAT IN THE CASE, THERE IS NO FINDING T HAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF 8 THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO INACCURATE PARTICULARS . (UNDERLINED SUPPLIED BY US) 14. THE HON'BLE SUPREME COURT IN CIT, AHEMDABAD VS. RELIANCE PETROPRODUCTS PVT LTD (SUPRA) FURTHER NOTED THAT IN THE FACTS OF THE CASE BEFORE IT, THERE WERE NO FINDINGS THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN OF INCOME WERE NOT INCORRECT OR ERRON EOUS OR FALSE NOR ANY STATEMENT MADE OR ANY DETAILS SUPPLIED WAS FOUND TO BE FACTUALLY INCORRECT. THE COURT THUS HELD THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, ATTRACT PENA LTY UNDER SECTION 271 (1)(C) OF THE ACT. IT WAS ALSO LAID DOWN BY THE COURT THAT THE INTENDMENT OF THE LEGISLATURE IS NOT TO LEVY PENALTY U/S 271 ( 1)(C) OF THE ACT IN CASE OF EVERY NON ACCEPTANCE OF CLAIM MADE BY THE ASSESS EE IN THE RETURN OF INCOME. 15. THE HON'BLE SUPREME COURT IN CIT VS RELIANCE PE TROPRODUCTS P.LTD. (SUPRA) FURTHER HELD AS UNDER : READING THE WORDS 'INACCURATE' AND 'PARTICULARS' IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEO US. IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSE SSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH N OT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER S. 271(L)(C). A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NO T ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT ATTRACT THE PENAL TY UNDER S. 271(L)(C). IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN C ASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY AO FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER S. 271(L)(C). THAT IS CLE ARLY NOT THE INTENDMENT OF THE LEGISLATURE. THE TRIBUNAL, AS WELL AS, THE C IT(A) AND THE HIGH COURT HAVE CORRECTLY REACHED THIS CONCLUSION.SREE KRISHNA ELECTRICALS VS. STATE OF TAMIL NADU & ANR. (2009) 23 VST 249 (S C) APPLIED; RELIANCE PETROPRODUCTS (P) LTD. (JUDGMENT DT. 23RD OCT., 2007 OF THE GUJARAT HIGH COURT IN TAX APPEAL NO. 1149 OF 2007) AFFIRMED. 9 16. THE HON'BLE HIMACHAL PRADESH HIGH COURT IN CIT VS H.P. STATE FOREST CORPORATION LTD. (SUPRA) HELD AS UNDER : WE ARE OF THE CONSIDERED VIEW THAT THE LATEST JUDG EMENT OF THE APEX COURT IN RELIANCE PETRO PRODUCTS CASE (SUPRA) SQUA RELY COVERS THE PRESENT CASE ALSO. THE APEX COURT IN THIS JUDGMENT HAS CLEARLY HELD THAT THE WORD 'INACCURATE' AS USED IN THE ACT WOULD MEAN SOMETHING WHICH IS NOT ACCURATE, NOT EXACT OR NOT CORRECT. SOMETHING W HICH IS UNTRUE IS INACCURATE. THE SAME FACTS CAN BE GIVEN TWO INTERPR ETATIONS. IF THE INTERPRETATION GIVEN IS PLAUSIBLE THOUGH NOT ACCE PTED BY THE ASSESSING AUTHORITY IT CANNOT BE SAID THAT THE STATEMENT OF PARTICULARS IS SO INACCURATE OR ERRONEOUS AS TO INVITE IMPOSITION OF PENALTY. TRUE IT IS THAT MENS REA IS NOT REQUIRED TO BE PROVED. WHEN ME NS REA IS PROVED IT SHOWS THAT THE PERSON HAD AN INTENTION OF EVADING P AYMENT OF TAX BY ILLEGAL MEANS. MERELY BECAUSE A WRONG INTERPRETATIO N TO THE SAME SET OF FACTS IS GIVEN WOULD NOT, IN OUR OPINION, MEAN THAT THE ASSESSEE IS LIABLE TO PAY PENALTY ALSO. WE MUST REMEMBER THAT PENALTY IS BY ITS VERY NATURE PENAL AND SOMEBODY IS BEING PUNISHED FOR AN ACT WHI CH IS UNJUSTIFIED. THE ASSESSEE IN THE PRESENT CASE HAS ALREADY BEEN B URDENED WITH TAX AND INTEREST ON THE AMOUNT ADDED TO HIS INCOME. THE MOO T QUESTION IS WHETHER THE ASSESSEE SHOULD BE MADE LIABLE TO PAY P ENALTY. 22. THE APEX COURT IN RELIANCE PETRO PRODUCTS' CASE (SU PRA) HAS CLEARLY LAID DOWN THAT MERELY BECAUSE THE ASSESSEE MAKES A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, WILL NOT AMOUNT TO FURNISHING I NACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IN THE PRESEN T CASE, AS POINTED OUT ABOVE, THE ASSESSEE WAS DEDUCTING THE AMOUNT OF RS. 2,12,18,295 ON ACCOUNT OF DETERIORATION OF OLD STOCK. THIS WAS BEI NG DONE ON ESTIMATION ON THE BASIS OF THE REPORTS MADE BY VARIOUS OFFICER S OF THE CORPORATION. THIS ESTIMATION WAS NOT ACCEPTED MAINLY ON THE GROU ND THAT THE REPORTS WERE MADE AND RESOLUTION PASSED BY THE BOARD AFTER THE ASSESSMENT YEAR WAS OVER AND THEREFORE THEY COULD NOT BE GIVEN RETR OSPECTIVE BENEFIT. IT HAS NOT BEEN FOUND THAT THE CLAIM OF THE ASSESSEE T HAT THE WOOD HAD ROTTED AND DETERIORATED IS FALSE. IT IS NOBODY'S CA SE THAT THE ASSESSEE FUDGED THE AMOUNTS, THE BOOKS OF ACCOUNTS OR TRIED TO CREATE FALSE EVIDENCE. THE CLAIM MADE BY THE ASSESSEE MAY NOT HA VE BEEN ACCEPTED BY THE REVENUE BUT IT CANNOT BE SAID THAT THE ASSES SEE FURNISHED INACCURATE PARTICULARS TO SUCH AN EXTENT THAT PENAL TY SHOULD BE IMPOSED UPON IT. THERE DOES NOT APPEAR TO BE FALSEHOOD IN T HE ACCOUNTS THOUGH THE SYSTEM OF CALCULATING THE DEPRECIATION MAY HAVE BEEN IMPROPER. WE ALSO CANNOT LOSE SIGHT OF THE FACT THAT ASSESSEE IS A GOVERNMENT CORPORATION. ITS ACCOUNTS ARE DULY AUDITED AND EVEN THE CAG HAS GONE THROUGH AND APPROVED THE ACCOUNTS OF THE CORPORATIO N. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT MERELY BECAU SE THE ASSESSEE HAD CLAIMED DEPRECIATION WHICH CLAIM WAS NOT ACCEPTED B Y THE REVENUE THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT PENALT Y UNDER S. 271(L)(C) OF THE ACT. 17. THE HON'BLE GUJRAT HIGH COURT IN NATIONAL TEXTI LES VS CIT 249 ITR 125 (GUJ) HELD AS UNDER : THE PROVISIONS OF S. 68 PERMITTING THE AO TO TREAT UNEXPLAINED CASH CREDIT AS INCOME ARE ENABLING PROVISIONS FOR MAKING CERTAI N ADDITIONS, WHERE 10 THERE IS FAILURE BY THE ASSESSEE TO GIVE AN EXPLANA TION OR WHERE THE EXPLANATION IS NOT TO THE SATISFACTION OF THE AO. H OWEVER, THE ADDITION MADE ON THIS COUNT WOULD NOT AUTOMATICALLY JUSTIFY IMPOS ITION OF PENALTY UNDER S. 271(L)(C) BY RECOURSE ONLY TO EXPLN. 1 BELOW S. 271 (L)(C). IN ORDER TO JUSTIFY THE LEVY OF PENALTY, TWO FACTORS MUST CO-EXIST, (I) THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO THE REASONABLE CONCLUSION THAT THE AMOUNT DOES REPRESENT THE ASSESSEE'S INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSE D AS INCOME, AND (II) THE CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMUS I .E., CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PART ICULARS ON THE PART OF THE ASSESSEE. THE EXPLANATION HAS NO BEARING ON FAC TOR NO. 1 BUT IT HAS BEARING ONLY ON FACTOR NO. 2. THE EXPLANATION DOES NOT MAKE THE ASSESSMENT ORDER CONCLUSIVE EVIDENCE THAT THE AMOUN T ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE. NO PENALTY CAN BE 'IMPO SED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOT HESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYP OTHESIS THAT IT DOES. IF AN ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED I.E., IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE'S CASE IS FALS E, THE EXPLANATION CANNOT HELP THE DEPARTMENT BECAUSE THERE WILL BE NO MATERI AL TO SHOW THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE. ALTERNATIVELY, TREATING THE EXPLANATION AS DEALING WITH BOTH THE INGREDIENT S (I) AND (II) ABOVE, WHERE THE CIRCUMSTANCES DO NOT LEAD TO THE REASONAB LE AND POSITIVE INFERENCE THAT THE ASSESSEE'S EXPLANATION IS FALSE, THE ASSESSEE MUST BE HELD TO HAVE PROVED THAT THERE WAS NO MENS REA OR GUILTY MIND ON HIS PART. EVEN IN THIS VIEW OF THE MATTER, THE EXPLANATION ALONE C ANNOT JUSTIFY LEVY OF PENALTY. ABSENCE OF PROOF ACCEPTABLE TO THE DEPARTM ENT CANNOT BE EQUATED WITH FRAUD OR WILFUL DEFAULT. AS THERE IS NO MATERI AL DIFFERENCE BETWEEN THE ORIGINAL EXPLN. 1 AND EXPLN. 1 AS SUBSTITUTED, IT H AS TO BE SO CONSTRUED AS TO HARMONISE IT WITH BASIC PRINCIPLES OF JUSTICE AND F AIRNESS, AS IN THE CASE OF ORIGINAL EXPLANATION. ON THE STATE OF ACCOUNTS AND EVIDENCE IN THE QUANTUM C-PROCEEDINGS, THE DEPARTMENT WAS JUSTIFIED IN TREA TING THE CASH CREDIT AS INCOME OF THE ASSESSEE BUT MERELY ON THAT BASIS BY RECOURSE TO EXPLN. 1, PENALTY UNDER S. 271(L)(C) COULD NOT HAVE BEEN IMPO SED WITHOUT THE DEPARTMENT MAKING ANY OTHER EFFORT TO COME TO A CON CLUSION THAT THE CASH CREDITS COULD IN NO CIRCUMSTANCES WOULD HAVE BEEN A MOUNTS RECEIVED AS TEMPORARY LOANS FROM VARIOUS PARTIES. THE ASSESSEE IN THE QUANTUM PROCEEDINGS FAILED TO PRODUCE THE ACCOUNTANT BUT TH E DEPARTMENT ALSO IN PENALTY PROCEEDINGS MADE NO EFFORT TO SUMMON HIM. A PPLYING THE TEST (II) DISCUSSED ABOVE, THEREFORE, IT WAS A CASE WHERE THE RE WAS NO CIRCUMSTANCE TO LEAD TO A REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE'S CASETHAT THE CASH CREDITS WERE ARRANGED AS TEMPORARY LOANS, WAS FALSE. THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOT HESIS THAT IT COULD HAVE BEEN SUNDRY LOANS IN SMALL AMOUNTS OBTAINED FROM DI FFERENT PARTIES. THEREFORE, EVEN TAKING RECOURSE TO EXPLN. 1, SAME C IRCUMSTANCES OR STATE OF EVIDENCE ON WHICH THE CASH CREDIT WERE TREATED AS I NCOME, COULD NOT BY THEMSELVES JUSTIFY IMPOSITION OF PENALTY WITHOUT AN YTHING MORE ON RECORD PRODUCED BY THE ASSESSEE OR THE DEPARTMENT. 18. NOW COMING TO THE FACTS OF THE PRESENT CASE. T HE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD FURNISHED RETURN O F INCOME DECLARING NIL INCOME WHICH WAS PROCESSED UNDER SE CTION 143(1A) OF THE ACT. SUBSEQUENTLY, INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER FROM THE ADDL. CIT (INVESTIGATION ), UNIT VII, NEW DELHI REGARDING ACCOMMODATION ENTRIES PROCURED BY T HE ASSESSEE. 11 ON THE BASIS OF THE SAID INFORMATION, THE RE-ASSESS MENT PROCEEDINGS UNDER SECTION 147/148 OF THE ACT WERE STARTED AGAIN ST THE ASSESSEE AND AN ADDITION OF RS. 42 LACS WAS MADE IN RESPECT OF SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE TREATING THE SAID TRANSACTION AS ACCOMMODATION ENTRIES. THE ORDER PA SSED BY THE ASSESSING OFFICER WAS UPHELD BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND THEREAFTER BY THE TRIBUNAL IN ITA NO. 1117/CHD/2008 RELATING TO ASSESSMENT YEAR 2002-03 ORDER DATED 26. 03.2012. THE TRIBUNAL VIDE PARA 15 HAD GIVEN A FINDING THAT, A CAREFUL PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT FINDINGS OF THE A O ARE BASED ON CIRCUMSTANTIAL EVIDENCE, HAVING REGARD TO THE SIMIL AR ADDRESS OF ENTITIES AND INDIVIDUAL/HUF, WHO CONTRIBUTED TO THE SHARE CA PITAL OF THE ASSESSEE COMPANY. THE LD. 'DR' ALSO REFERRED TO THE MODUS-O PERENDI AS WELL AS STATEMENT OF SHRI SANJAY RASTOGI. IN THE ASSESSMEN T ORDER, AT PAGE 4, THE AO HAS FURNISHED A CHART OF TAXABLE ENTITIES, WHO C ONTRIBUTED TO THE SHARE CAPITAL OF THE ASSESSEE. 19. THE TRIBUNAL VIDE PARA 16 CONSIDERED THE FINDIN GS OF THE ASSESSING OFFICER REGARDING THE TRANSACTION I.E. TH E EXISTENCE OF THE ENTITIES AND THE TRAIL OF MONEY AND OBSERVED AS UND ER : 16. ON THE BASIS OF SIMILAR ADDRESS, AS IS EVIDENT FROM THE PERUSAL OF THE ABOVE CHART, AS ALSO PROVIDED IN THE ASSESSMENT ORDER AS WELL AS ORDER OF THE LD. CIT(A) , AO CONSTRUED THAT THESE ENTITIES BELONG TO SHRI SANJAY RASTOGI AND ASHWANI UPPAL. A PERUSAL OF THE CHART REVEALS THAT SHRI ASHWANI UPPAL HAS CONTRIBUTED TOWARDS SHARE CAPITAL OF THE ASSESSEE COMPANY AS IN THE CAPACITY OF INDIVIDUAL A ND ALSO AS HUF. LD. 'DR' ISSUED CERTAIN LETTERS TO SUCH ENTIT LES, WHICH WERE RECEIVED BACK WITH THE POSTAL REMARKS LEFT. SUBSEQUENTLY, INSPECTOR WAS DEPUTED TO MAKE CERTAIN ENQUIRIES REGARDING WHEREABOUTS OF SUCH ENTITLES AN D INDIVIDUAL, AND, HE REPORTED THAT NO WHEREABOUTS OF SUCH PERSONS AND COMPANIES WERE AVAILABLE AT THE GIVEN A DDRESS. ACCORDINGLY, THE AO PRESUMED THAT SUCH ENTITIES ARE NOT GENUINE COMPANIES AND NOT DOING ANY BUSINESS. IT I S PERTINENT TO MENTION HERE THAT REVENUE INVESTIGATIO N WING OF THE REVENUE CONDUCTED SURVEY U/S 133A OF THE ACT AN D 12 FURNISHED RELEVANT INFORMATION TO THE AO. THE AO HA S NOT BROUGHT ON RECORD ANY EVIDENCE, FOUND IN THE COURSE OF SUCH SURVEY WHICH CREDIBLE DEMONSTRATES SPECIFIC DETAILS OF RECEIPT OF CASH DEPOSIT IN PARTICULAR BANK AND ISSUANCE OF CHEQUE TO THE ASSESSEE COMPANY, AS CAPITAL CONTRIBUTION. HOW EVER, THE AO MADE THE ADDITION U/S 68 OF THE ACT, BY OBSERVIN G THAT THE SHARE APPLICATION MONEY BELONG TO THE APPELLANT ASS ESSEE AND THE COMPANIES WERE USED AS A CONDUIT TO RE-ROUTE TH E MONEY BACK TO ITS BOOKS OF ACCOUNT, IN THE GARB OF MONEY. THE AO IS OF THE OPINION THAT THE SHARE APPLICATION MONEY BEL ONG TO THE ASSESSEE COMPANY, WHICH WAS INTRODUCED IN ITS BOOKS OF ACCOUNT IN THE SHAPE OF SHARE CAPITAL CONTRIBUTION BY VARIOUS COMPANIES AND INDIVIDUALS. 20. VIDE PARA 19, THE TRIBUNAL ALSO NOTED THAT THE ASSESSING OFFICER HAD MENTIONED THAT ALL THE CHEQUES HAVING DIFFERENT BANK ACCOUNTS WERE SIGNED BY ONLY ONE PERSON I.E. SHRI ASHWANI UP PAL AND THE CONTENTION OF THE ASSESSEE THAT SHRI SANJAY RASTOGI HAD NO CONCERN, WAS HELD TO BE WRONG AND NOT ACCEPTABLE. THE CONTE NTION OF THE ASSESSEE THAT THE CONCERNS WHO HAD GIVEN THE MONEY HAVE BEEN ASSESSED TO TAX, WAS ALSO CONSIDERED IN PARA 21 OF THE ORDER OF THE TRIBUNAL AND AFTER CONSIDERING THE RATIO OF THE DEC ISIONS RELIED UPON BY THE ASSESSEE, IT WAS HELD THAT THE CASE OF THE A SSESSEE WAS OF THE PROFESSIONAL ENTRY PROVIDER AND THE TRANSACTIONS IN QUESTION WERE NOT GENUINE. THUS, THE CUMULATIVE SATISFACTION OF THE I NGREDIENTS OF SECTION 68 OF THE ACT REMAIN UNSATISFIED. IN VIEW THEREOF, THE APPEAL OF THE ASSESSEE WAS DISMISSED BY THE TRIBUNAL. 21. IN THE ABOVESAID CIRCUMSTANCES, WHERE COMPLETE EVIDENCE WAS CONSIDERED AT LENGTH AND ENQUIRIES WERE MADE AT DIF FERENT LEVELS BY THE ASSESSING OFFICER AND THE CONCLUSION WAS AGAINST TH E ASSESSMENT THAT IT WAS A CASE OF PROFESSIONAL ENTRY PROVIDER, MEREL Y BECAUSE THE SAID PARTIES WHO ALLEGEDLY ADVANCED AMOUNTS TO THE ASSES SEE HAD RECORDED THE TRANSACTIONS IN THEIR BOOKS OF ACCOUNT, DOES NO T ESTABLISH THE CLAIM OF THE ASSESSEE THAT IT HAD EVENTUALLY EXPLAINED TH E ENTRIES IN ITS BOOKS OF ACCOUNT. 13 22. THE HON'BLE SUPREME COURT IN CIT VS RELIANCE PE TRO PRODUCTS LTD. AND THE HON'BLE HIMACHAL PRADESH HIGH COURT IN CIT VS HP STATE FOREST CORPORATION LTD. WHILE REFERRING TO THE RATI O LAID DOWN IN RELIANCE PETRO PRODUCTS LTD. (SUPRA) HAD OBSERVED T HAT THE APEX COURT IN THE JUDGEMENT HAD CLEARLY HELD THAT THE WORD IN ACCURATE AS USED IN THE ACT WOULD MEAN SOMETHING WHICH IS NOT ACCURATE, NOT EXACT OR NOT CORRECT. IT WAS FURTHER HELD THAT, SOMETHING WHICH IS UNTRUE IS INACCURATE. WHILE ADDRESSING THE ISSUE OF LEVY OF PENALTY, THE HON'BLE HIMACHAL PRADESH HIGH COURT FURTHER HELD TH AT WHERE INTERPRETATION GIVEN IS PLAUSIBLE, THOUGH NOT ACCEP TED BY THE ASSESSING OFFICER, IT COULD NOT BE HELD THAT THE STATEMENTS O F PARTICULARS WERE SO INACCURATE OR ERRONEOUS AS TO INVITE IMPOSITION OF PENALTY. 23. IN THE PRESENT SET OF FACTS ADDITION HAS BEEN M ADE IN THE HANDS OF THE ASSESSEE, AFTER MAKING DUE AND DILIGENT ENQU IRIES WHERE THE TRANSACTION IN QUESTION WAS HELD TO BE NOT GENUINE AND IT WAS HELD TO BE A CASE OF PROFESSIONAL ENTRY PROVIDER. THE EVIDE NCES COLLECTED BY THE ASSESSING OFFICER AND THE STATEMENT OF SHRI SAN JAY RASTOGI RECORDED, WHO HAD CLEARLY STATED THAT HE WAS GIVING ENTRIES TO VARIOUS CONCERNS INCLUDING THE ASSESSEE AND THE ASSESSEE WA S FOUND TO HAVE RECEIVED THE AMOUNT THROUGH FIVE CONCERNS HAVING SI MILAR ADDRESS, WHICH ADMITTEDLY WERE BEING RUN BY THE SAME PERSON I.E. SHRI SANJAY RASTOGI AND SHRI ASHWANI UPPAL, ESTABLISHED THE CAS E OF REVENUE. IN THE ABOVESAID FACTS AND CIRCUMSTANCES, WHERE THE CO MPLETE CHAIN OF TRANSACTIONS HAD BEEN ESTABLISHED BY THE INVESTIGAT ING AUTHORITY AND IT HAS BEEN ESTABLISHED THAT THE ASSESSEE WAS A PROFES SIONAL ENTRY PROVIDER AND ADDITION HAVING BEEN MADE IN THE HANDS OF THE ASSESSEE THUS, ATTRACT THE LEVY OF PENALTY UNDER SECTION 271 (1)(C) OF THE ACT. IT IS NOT A CASE OF A BONAFIDE EXPLANATION BEING GIVEN BY THE ASSESSEE 14 WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT BUT F INDING OF FACT BY THE ASSESSING OFFICER/COMMISSIONER OF INCOME TAX (A PPEALS) AND THE ORDER OF THE TRIBUNAL ESTABLISHES DELIBERATE ATTEMP T TO EVADE TAX BY WAY OF INTRODUCTION OF CASH CREDITS AND THE ASSESSE E HAVING FURNISHED INACCURATE PARTICULARS OF INCOME MAKES IT LIABLE TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. UPHOLDING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), GROUNDS OF AP PEAL RAISED BY THE ASSESSEE ARE DISMISSED. 24. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER,2014. SD/- SD/- ( T.R.SOOD) (S USHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17 TH SEPTEMBER,2014 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR ITAT/CHD