AURO GOLD JEWELLERY P.LTD, MUMBAI V. DCIT CEN CIR 5(2), MUMBAI

ITA 828/MUM/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9056 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 06-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S MICHAEL JERALD
• Assessee Lawyers: REEPAL TRALSHAWALA
• Keywords: Unexplained expenditure; Search and seizure; Opportunity of cross examination; Initiation of penalty proceedings
• Section: 271(1)(c); 143(3); 133A; 153A; 115JB; 274; 13; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO. 828 / MUM . /201 7 ( ASSESSMENT YEAR : 20 06 07 ) ITA NO. 829 /MUM. /2017 ( ASSESSMENT YEAR : 2008 09 ) ITA NO. 830 /MUM. /2017 ( ASSESSMENT YEAR : 2009 10 ) AURO GOLD JEWELLERY PVT. LTD. UNIT NO.2, CAMA INDUSTRIAL ESTATE SUN MILL COMPOUND, LOWER PAREL (W) MUMBAI 400 013 PAN:AACCA3860H . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 5(2), MUMBAI . RESPONDENT ASSESSEE BY : MS. REEPA L TRALSHAWALA REVENUE BY : SHRI S. MICHAEL JERALD DATE OF HEARING 15.10.2019 DATE OF ORDER 10.01.2020 O R D E R PER SAKTIJIT DEY. J.M. THE AFORESAID APPEALS HAVE BEEN FILED BY THE SAME ASSESSEE CHALLENGING THREE SEPARATE ORDERS , ALL DATED 30 TH SEPTEMBER 2016, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 53 , MUMBAI, CONFIRMING IMPOSITION OF PENALTY UNDER SECTION S 271(1)(C) 2 AURO GOLD JEWELLERY PVT. LTD. AND 271AAA OF THE INCOME TAX ACT, 1961 (FOR SHORT 'T HE ACT' ) FOR THE ASSESSMENT YEAR S 2006 07, 2008 09 AND 2009 10. ITA NO.828/MUM./2017 ASSESSMENT YEAR 2006 07 2. THIS APPEAL IS AGAINST IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 3. BRIEF FACTS ARE, THE ASSESSEE , A RESIDENT COMPANY , IS ENGAGED IN MANUFACTURING AND TRADING OF GOLD JEWE L LERY AND BULLION. FOR CARRYING OUT THE AFORESAID ACTIVITIES, THE ASSESSEE HAS SET UP TWO UNITS IN MUMB AI AND TWO EXPORT ORIENTED UNIT S IN SACHIN SPECIAL ECONOMIC ZONE (SEZ), SURAT. IN ADDITION, THE ASSE SSEE ALSO HAS TWO RETAIL OUTLET S . A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE ACT WAS CONDUCTED IN ASSESSEES CASE ON 25 TH SEPTEMBER 2008. PURSUANT TO SUCH SEARCH AND SEIZURE ACTION, PROCEEDING UNDER SECTION 153A OF THE ACT WAS INITIATED. IN RE SPONSE TO THE NOTICE ISSUED UNDER SECTION 153A OF THE ACT, THE ASSESSEE FILED ITS RETURN OF INCOME ON 26 TH MAY 2009, DECLARING LOSS OF ` 31,77,157. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER MADE VARIOUS ADDITIONS , INCLUDING , ADDITION ON ACCOUN T OF DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 10A OF THE ACT. SINCE , THE SUBJECT MATTER OF IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS ON THE BASIS OF THE DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 10A OF THE ACT, WE WILL DISCUS S FACTS RELATING TO 3 AURO GOLD JEWELLERY PVT. LTD. THIS ISSUE ONLY. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 10A OF THE ACT IN RESPECT OF THE PROFIT EARNED FROM ITS UNIT S LOCATED IN THE SEZ , PROCEEDED TO VERI FY THE AUTHENTICITY OF ASSESSEES CLAIM. HE OBSERVED , IN COURSE OF SURVEY CONDUCTED UNDER SECTION 133A OF THE ACT IN THE SEZ UNIT S , IT WAS FOUND THAT MOST OF THE TIME THE UNITS REMAINED CLOSED. THE PLANT AND MACHINERIES ARE RUSTED AND NOT FUNCTIONING. THERE WAS NO TRACE OF ANY MANUFACTURING ACTIVITIES. THERE WAS NO PERMANENT EMPLOYEE IN THESE UNITS. HE OBSERVED , THE MACHINERIES WHICH ARE IN GOOD CONDITION ARE ALSO NOT CAPABLE OF HUGE PRODUCTION OF SUCH HIGH VALUE ADDITION IN THE TIME FRAME AVAILABLE. PO WER CONSUMPTION WAS ALSO NOT SUFFICIENT TO SUPPORT THE HUGE PRODUCTION SHOWN. THUS, ON THE BASIS OF THE AFORESAID ANALYSIS OF THE FACT S , HE OBSERVED THAT THE PROFIT SHOWN FROM THE SEZ UNITS AGAINST WHICH THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 10A OF THE ACT IS NOT CORRECT. REFERRING TO A QUOTATION GIVEN BY ANOTHER ENTITY ENGAGED IN SIMILAR ACTIVITY, THE ASSESSING OFFICER OBSERVED THAT MAKING CHARGES FOR COINS ARE AT 0.074% OF THE GOLD VALUE , WHEREAS , THE ASSESSEE HAS REPORTED MAKING CHARGES OF 9% TO 14%. THUS, THE ASSESSING OFFICER OBSERVED THAT HIGH PROFIT MARGIN SHOWN FROM THE SEZ UNIT IS NOT CORRECT AND ACCORDINGLY HE DISALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT. THE ASSESSEE CHALLENGED THE AFORESAID 4 AURO GOLD JEWELLERY PVT. LTD. DECISION OF THE ASSE SSING OFFICER BEFORE LEARNED COMMISSIONER (APPEALS). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LEARNED COMMISSIONER (APPEALS) , THOUGH , IN PRINCIPLE HELD THAT THE ASSESSEE HAS CARRIED ON GENUINE MANUFACTURING AND EXPORT ACTIVITIES FROM ITS SEZ UNIT S , HENCE, ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 10A OF THE ACT. HOWEVER, HE DOUBTED THE ALLOCATION OF EXPENDITURE BETWEEN SEZ AND NON SEZ UNITS AS PER ASSESSEES ACCOUNT S . THEREFORE, HE WAS OF THE VIEW THAT THE ASSESSEE HAS ALLOCATED MORE EXPENDITURE T O NON SEZ UNITS COMPARED TO SEZ UNIT S . ACCORDINGLY, HE ALLOCATED EXPENDITURE TO SEZ AND NON SEZ UNIT ON THE BASIS OF THEIR RESPECTIVE TURNOVER. DUE TO SUCH RE ALLOCATION OF EXPENDITURE BY LEARNED COMMISSIONER (APPEALS), THE INCOME OF THE ASSESSEE GOT ENHAN CED FROM THE RETURNED INCOME. ON THE BASIS OF ADDITIONS SUSTAINED BY LEARNED COMMISSIONER (APPEALS) ON ACCOUNT OF DEDUCTION CLAIMED UNDER SECTION 10A OF THE ACT, THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE UNDER SECTION 274 R/W SECTION 271(1)(C) OF THE ACT CALLING UPON THE ASSESSEE TO EXPLAIN WHY PENALTY SHOULD NOT BE IMPOSED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THOUGH, THE ASSESSEE OBJECTED TO THE INITIATION OF PENALTY PROCEEDINGS, HOWEVER, THE ASSESSING OFFICER REJECTING THE EXPLANATION OF THE ASSESSEE PASSED AN ORDER IMPOSING PENALTY OF ` 19,31,604, UNDER SECTION 271(1)(C) OF THE ACT. THOUGH, THE ASSESSEE CHALLENGED THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT 5 AURO GOLD JEWELLERY PVT. LTD. BEFORE THE FIRST APPELLATE AUTHORITY, HOWEVER, LEARNED COMMISSION ER (APPEALS) UPHELD THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER. 4. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSING OFFICER HAS DISALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS NOT CARRIED OUT ANY MANUFACTURING AND EXPORT ACTIVITY. WHEREAS, LEARNED COMMISSIONER (APPEALS) HAS ALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT , THOUGH , HE HAS REDUCED THE QUANTUM OF SUCH DEDUCTION BY RE ALLOCATING EXPENDITURE TO SEZ AND NON SEZ UNIT S . HE SUBMITTED , THE REASONING ON THE BASIS OF WHICH LEARNED COMMISSIONER (APPEALS) SUSTAINED PART DISALLOWANCE UNDER SECTION 10A OF THE ACT IS ALTOGETHER DIFFERENT FROM THE REASONING ON WHICH THE ASSESSING OFFICER HAS DISALLOWED ASSESSEES CL AIM OF DEDUCTION UNDER SECTION 10A OF THE ACT. HE SUBMITTED , WITH REGARD TO THE DISALLOWANCE MADE BY LEARNED COMMISSIONER (APPEALS) UNDER SECTION 10A OF THE ACT , NO SATISFACTION HAS BEEN RECORDED FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C ) OF THE ACT EITHER BY THE ASSESSING OFFICER OR BY LEARNED COMMISSIONER (APPEALS). THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER IMPOSING PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS WITHOUT JURISDICTION. WITHOUT PREJUDICE TO THE AFORESAID SUBMISSI ONS, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , NEITHER DURING THE SEARCH AND SEIZURE OPERATION NOR AT ANY OTHER TIME ANY INCRIMINATING 6 AURO GOLD JEWELLERY PVT. LTD. MATERIAL WAS RECOVERED WHICH COULD ESTABLISH THAT THE ASSESSEE IS NOT CARRYING OUT ITS MANUFACTURING AND EXPORT AC TIVITY FROM THE SEZ UNIT S . HE SUBMITTED , THOUGH THE ASSESSING OFFICER HAS DISALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT, HOWEVER, LEARNED COMMISSIONER (APPEALS) HAVING FACTUALLY FOUND THAT THE ASSESSEE HAS CARRIED ON MANUFACTURING A ND EXPORT ACTIVITIES FROM ITS SEZ UNITS HAS PARTLY ALLOWED DEDUCTION UNDER SECTION 10A OF THE ACT. HE SUBMITTED , THE PART DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 10A OF THE ACT WAS ONLY DUE TO RE ALLOCATION OF EXPENDITURE BETWEEN THE SEZ AND NON SE Z UNIT S PURELY ON THE BASIS OF TURNOVER. DRAWING OUR ATTENTION TO THE ORDER OF THE LEARNED COMMISSIONER (APPEALS), HE SUBMITTED , THERE IS NO FINDING BY LEARNED COMMISSIONER (APPEALS) THAT A PARTICULAR EXPENDITURE OF SEZ UNIT WAS ALLOCATED TO NON SEZ UNITS. DRAWING OUR ATTENTION TO THE BIFURCATION OF EXPENDITURE ALLOCATED TO SEZ AND NON SEZ UNIT S AT PAGE 520 TO 525 OF THE PAPER BOOK , THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , NO SPECIFIC DISCREPANCY HAS BEEN POINTED OUT BY LEARNED COMMISSIONER (APPEALS) IN THE BIFURCATION OF EXPENDITURE. HE SUBMITTED , LEARNED COMMISSIONER (APPEALS) HAS ALLOCATED EXPENDITURE BETWEEN SEZ AND NON SEZ UNIT S ON A PRESUMPTIVE BASIS BY TAKING INTO CONSIDERATION THEIR RESPECTIVE TURNOVER. THUS, THE DISALLOWANCE OF A PART OF DEDUCTION CLAIMED UNDER SECTION 10A OF THE ACT IS PURELY ON ESTIMATE BASIS. HE SUBMITTED , THE 7 AURO GOLD JEWELLERY PVT. LTD. ASSESSEE HAS FURNISHED FULL PARTICULA RS OF NOT ONLY THE DEDUCTION CLAIMED BUT ALL OTHER MATERIALS REL ATING TO SUCH CLAIM . THEREFORE, IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ALLEGING FURNISHING OF INACCURATE PARTICULARS OF INCOME IS TOTALLY UNJUSTIFIED. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THE ASSESSING OFFICER WHILE DISALLOWING ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT IN THE ASSESSMENT ORDER HAS INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THEREF ORE, ASSESSEES CONTENTION THAT PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT HAS NOT BEEN INITIATED IN THE ASSESSMENT ORDER IS WITHOUT ANY BASIS. AS REGARDS THE MERITS OF THE ISSUE, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMIT TED , UNDISPUTEDLY, A PART OF THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 10A OF THE ACT HAS BEEN FOUND TO BE UNACCEPTABLE. THEREFORE, TO THAT EXTENT, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME JUSTIFYING IMPOSITION OF PENALTY UNDER SECTION 271(1)(C). 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS REGARDS THE ISSUE RAISED IN GROUNDS NO.2.1 AND 2.2, ON A PERUSAL OF THE ASSESSMENT ORDER IT IS VERY MUCH CLEAR THAT THE ASSESSING OFFICER WHILE DISALLOWING ASS ESSEES CLAIM UNDER SECTION 10A OF THE ACT HAS INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER 8 AURO GOLD JEWELLERY PVT. LTD. SECTION 271(1)(C) OF THE ACT. THE DISALLOWANCE OF DEDUCTION UNDER SECTION 10A OF THE ACT WAS MADE BY THE ASSESSING OFFICER ON VARIOUS ALLEGATIONS. THOUGH, LEARNED COMMISSIONER (APPEALS) HAS HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 10A OF THE ACT, HOWEVER, HE HAS DISALLOWED PART OF DEDUCTION CLAIMED UNDER SECTION 10A OF THE ACT ON THE BASIS OF HIS OWN REASONING. THEREFORE, THE ISSUE ULTIM ATELY BOILS DOWN TO THE DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 10A OF THE ACT FOR WHICH THE ASSESSING OFFICER HAS ALREADY INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THAT BEING THE CASE, THE ARGUMENT OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSING OFFICER HAS NOT INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT ON THE BASIS OF THE SPECIFIC REASONING OF LEARNED COMMISSIONER (APPEALS) ON WHICH A PART DISALLOWANCE UNDER SECTION 10A OF THE ACT WAS MADE, IN OUR VIEW, IS HYPER TECHNICAL AND SUPERFLUOUS. THEREFORE, IT DOES NOT MERIT CONSIDERATION. 7. AS REGARDS GROUND NOS. 3.1 AND 3.2, I T IS EVIDENT, WHILE THE ASSESSING OFFICER HAS DISALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT IN ITS ENTIRETY ON THE ALLEGATION THAT THE ASSESSEE HAS NOT CARRIED OUT ANY MANUFACTURING AND EXPORT ACTIVITY FROM THE SEZ UNITS, LEARNED COMMISSIONER (APPEALS) HAS NOT ACCEPTED THE AFORESAID VIEW OF THE ASSESSING OFFICER. AFTER VERIFYING THE FACT S 9 AURO GOLD JEWELLERY PVT. LTD. AND MATERIAL ON RECORD, LEARNED COMMISSIONER (APPEALS) WAS SATISFIED THAT THE ASSESSEE HAS , IN FACT , CARRIED OUT MANUFACTURING AND EXPORT ACTIVITIES FROM ITS SEZ UNIT S . THEREFORE, IN PRINCIPLE, HE HAS AGREED THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTI ON UNDER SECTION 10A OF THE ACT. HOWEVER, AFTER LOOKING AT THE EXPENDITURE S ALLOCATED TO THE SEZ AND NON SEZ UNIT S , LEARNED COMMISSIONER (APPEALS) WAS OF THE VIEW THAT THE ASSESSEE HAS ALLOCATED MORE EXPENDITURE TO THE NON SEZ UNIT S COMPAR ED TO SEZ U NITS. THEREFORE, HE HAS RE ALLOCATED THE EXPENDITURE BETWEEN THE SEZ AND NON SEZ WHICH RESULTED IN PART DISALLOWANCE OF ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT. ON A PERUSAL OF THE ORDER PASSED BY LEARNED COMMISSIONER (APP EALS) I N THE QUANTUM PROCEEDING, IT IS NOTICED THAT DURING THE APPELLATE PROCEEDINGS LEARNED COMMISSIONER (APPEALS) HAD DIRECTED THE ASSESSEE TO ALLOCATE EXPENDITURE BETWEEN SEZ AND NON SEZ UNIT S ON THE BASIS OF THEIR RESPECTIVE TURNOVER. WHEN THE ASSESSEE FILED SUCH BIFURCATI ON OF EXPENDITURE AT THE DIRECTIONS OF LEARNED COMMISSIONER (APPEALS), HE CONCLUDED THAT THE EXPENDITURE HAS TO BE DISTRIBUTED PROPORTIONATELY BETWEEN THE SEZ AND NON SEZ UNITS ON THE BASIS OF TOTAL TURNOVER. THUS, AS COULD BE SEEN FROM THE FACTS ON RECORD , THE PART DISALLOWANCE OUT OF DEDUCTION CLAIMED UNDER SECTION 10A OF THE ACT WAS ON A PRESUMPTIVE/ ESTIMATE BASIS. FROM THE OBSERVATIONS OF LEARNED COMMISSIONER (APPEALS), IT IS VERY MUCH CLEAR THAT THE 10 AURO GOLD JEWELLERY PVT. LTD. ALLEGATION OF THE ASSESSING OFFICER THAT NO MANUFACTU RING ACTIVITY WAS CARRIED ON B Y THE ASSESSEE WAS FOUND TO BE BASELESS AS LEARNED COMMISSIONER (APPEALS) HAS SPECIFICALLY STATED THAT THE ASSESSEE FURNISHED CLEARANCE FROM THE CUSTOMS AND CENTRAL EXCISE DEPARTMENT , BILLS OF ESTABLISHMENT, PROPER INVOICES, FOREIGN REMITTANCE THROUGH BANKING CHANNELS WITH THE APPROVAL OF THE RESERVE BANK OF INDIA AND MACHINERIES INSTALLED IN THE SEZ UNIT. HE HAS ALSO SPECIFICALLY RECORDED A FINDING OF FACT THAT NO INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED TO DISPROVE ASSE SSEES CLAIM THAT IT WAS CARRYING ON MANUFACTURING AND EXPORT ACTIVITIES FROM THE SEZ UNIT. THUS, THE FACTS NARRATED ABOVE CLE ARLY INDICATE THAT THE ADDITION/ DISALLOWANCE SUSTAINED BY LEARNED COMMISSIONER (APPEALS) ON ACCOUNT OF DEDUCTION CLAIMED UNDER SEC TION 10A OF THE ACT IS NOT DUE TO ANY INACCURATE PARTICULARS FURNISHED BY THE ASSESSEE BUT ON A PURELY PRESUMPTIVE BASIS. THAT BEING THE CASE, IN OUR CONSIDERED OPINION, THE ASSESSEE CANNOT BE ACCUSED OF FURNISHING INACCURATE PARTICULARS OF INCOME SO AS TO BE VISITED WITH PENALTY UNDER SECTION 271(1)(C) OF THE ACT. MOREOVER, IN THE COURSE OF HEARING, IT WAS BROUGHT TO OUR NOTICE BY LEARNED AUTHORISED REPRESENTATIVE THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES, LEARNED COMMISSIONER (APPEALS) HAS DELETED THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT IN THE ASSESSMENT YEAR 2005 06. THUS, CONSIDERING THE OVER ALL FACTS AND CIRCUMSTANCES 11 AURO GOLD JEWELLERY PVT. LTD. OF THE CASE, WE ARE OF THE VIEW THAT THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT AMOUNTING TO ` 19,31,604, D ESERVES TO BE DELETED. ACCORDINGLY, WE DO SO. CONSEQUENTLY, GROUNDS NO.2.1 AND 2.2 ARE DISMISSED, WHEREAS GROUNDS NO.3.1 AND 3.2 ARE ALLOWED. 8. GROUND NO.1.1, HAS NOT BEEN PRESSED, HENCE, DISMISSED. 9. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ITA NO.82 9 /MUM. /2017 ASSESSEE YEAR 200 8 09 10. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED IMPOSITION OF PENALTY AMOUNTING TO ` 5,64,690, UNDER SECTION 271(1)(C) OF THE ACT. 11. GROUNDS NO.1.1, IS NOT PRESSED, HENCE, DISMISSED. 12. GROUNDS NO.2.1, 2.2, 3.1 AND 3.2, ARE IDENTICAL TO SIMILARLY NUMBERED GROUNDS RAISED IN ITA NO.828/MUM./2017. THE FACTS ON THE BASIS OF WHICH PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS IMPOSED ARE ALSO IDENTICAL TO THE FACTS INVOLVED IN ITA NO.828/MUM. /2017. THEREFORE, OUR D ECISION IN ITA NO.828/MUM./2017 WILL APPLY MUTATIS MUTANDIS TO THIS APPEAL. FOLLOWING THE SAME, WE DISMISS THE GROUNDS NO.2.1 AND 2.2, WHEREAS , GROUNDS NO.3.1 AND 3.2 ARE ALLOWED. 13. IN THE RESULT, APPEAL IS PARTLY ALLOWED. 12 AURO GOLD JEWELLERY PVT. LTD. ITA NO.8 30 / MUM./2017 ASSESSEE YEAR 20 09 10 14. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED PENALTY IMPOSED UNDER SECTION 271AAA OF THE ACT AMOUNTING TO ` 7,45,042. 15. GROUND NO.1.1 IS NOT PRESSED, HENCE, DISMISSED. 16. THE FACTS RELATING TO THE ISSUES RAISED IN THE REST OF THE GROUNDS ARE, F OR THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE FILED ITS RETURN OF INCOME ON 13 TH SEPTEMBER 2010, DECLARING TOTAL INCOME OF ` 6,63,60,987, UNDER THE NORMAL PROVISIONS AND BOOK PROFIT OF ` 6,68,84,409, UNDER SECTION 115JB OF THE ACT. WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT, THE ASSESSING OFFICER MADE VARIOUS ADDITION S WHICH RESULTED IN DETERMINATION OF TOTAL INCOME AT ` 63,99,61,340. THE ADDITIONS MADE BY THE A .O. ARE AS UNDER: I) ADDITION ON ACCOUNT OF LABOUR CHARGES ` 38,11,78,904 II) ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE ` 70,05,000 III) ADDITION ON ACCOUNT OF EXCESS STOCK ` 16,44,14,449 IV) ADDITION ON ACCOUNT OF SALARY PAID IN CASH ` 10,02,000 V) ADDITION ON ACCOUNT OF CASH PAYMENT MADE TOWARDS PROPERTY ` 2,00,00,000 AGAINST THE ASSESSMENT ORDER SO PASSED, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 13 AURO GOLD JEWELLERY PVT. LTD. 17. WHILE DISPOSING OFF ASSESSEES APPEAL , LEARNED COMMISSIONER (APPEALS) DELETED THE ADDITION MADE IN RESPECT OF LABOUR CHARGES WHILE CONFIRMING THE OTHER ADDITION S . AGAINST THE SAID ORDER OF LEARNED COMMISSIONER (APPEALS), THE ASSESSEE WENT IN FURTHER APPEAL BEFORE THE TRIBUNAL. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE TRIBUNAL ALLOWED FURTHER RELIEF TO THE ASSESSEE. HOWEVER, THE TRIBUNAL SUSTAINED ADDITIONS , EITHER PARTIALLY OR FULLY , UNDER THE FOLLOWING HEADS: UNEXPLAINED EXPENDITURE ` 42,05,000 SALARY PAID IN CASH ` 10,02,000 18. AS REGARDS EXCESS STOCK OF GOLD JEWELLERY AND BULLION, THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO MAKE THE ADDITION APPLYING THE GROSS PROFIT RATE. ON THE BASIS OF ADDITION S SUSTAINED BY THE TRIBUNAL, THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE REQUIRING IT TO EXPLAIN AS TO WHY PENALTY UNDER SECTION 271AAA OF THE ACT SHOULD NOT BE IMPOSED. THOUGH , THE ASSESSEE FILED ITS EXPLANATION OBJECTING TO THE INITIATION OF PENALTY PROCEEDINGS ON VARIOUS GROUNDS, HOWEVER, THE ASSESSING OFFICER PASSED AN ORDER DATED 20 TH AUGUST 2 015, IMPOSING PENALTY OF ` . 7,45,042, UNDER SECTION 271AAA OF THE ACT. THOUGH, THE ASSESSEE FILED AN APPEAL CHALLENGING 14 AURO GOLD JEWELLERY PVT. LTD. THE IMPOSITION OF PENALTY, HOWEVER, LEARNED COMMISSIONER (APPEALS) UPHELD THE IMPOSITION OF PENALTY UNDER SECTION 271AAA OF THE A CT. 19. IN GROUND NO.2.1 AND 3.1, THE ASSESSEE HAS CHALLENGED THE PENALTY ORDER PASSED UNDER SECTION 271AAA OF THE ACT BY RAISING CERTAIN LEGAL ISSUES. IT IS THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT IN THE ASSESSMENT ORDER, THE ASSESSING O FFICER HAS NOT INITIATED PROCEEDINGS U/ S 271AAA OF THE ACT IN RESPECT OF ADDITION MADE TOWARDS UNEXPLAINED EXPENDITURE AND EXCESS STOCK. THUS, HE SUBMITTED THAT WITHOUT INITIATING PENALTY PROCEEDINGS IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER CANNOT PA SS AN ORDER UNDER SECTION 271AAA OF THE ACT IMPOSING PENALTY IN RESPECT OF THESE TWO ADDITIONS. FURTHER, HE SUBMITTED , IN THE ABSENCE OF ANY UNDISCLOSED INCOME IN THE SPECIFIED PREVIOUS YEAR, THE ASSESSING OFFICER COULD NOT HAVE IMPOSED PENALTY UNDER SECTI ON 271AAA OF THE ACT. AS REGARDS THE MERITS OF THE ISSUE, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE WAS MADE BY TREATING THE PURCHASES MADE BY THE ASSESSEE FROM A PARTICULAR PARTY AS BOGUS. HE SUBMI TTED , WHILE COMPLETING THE ASSESSMENT AT THE HANDS OF THE SELLER THE ASSESSING OFFICER HAS ACCEPTED THE SAID TRANSACTION. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE ASSESSMENT ORDER PASSED IN CASE OF JAGDISH D. MEGHWAL, PROPRIETOR M/S. MANAV JEWELERS, F OR THE ASSESSMENT YEAR 2006 07. FURTHER, HE SUBMITTED , THE ADDITION MADE IS 15 AURO GOLD JEWELLERY PVT. LTD. ALSO ON ESTIMATE BASIS CONSIDERING THE FACT THAT THE ASSESSEE HAS PURCHASED THE GOODS CANNOT BE DISPUTED OR DENIED SINCE CORRESPONDING SALES HAVE BEEN EFFECTED. AS REGARDS SALARY P AID IN CASH, LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ADDITION HAS BEEN MADE PURELY RELYING UPON THE STATEMENT OF CERTAIN THIRD PARTIES WITHOUT CONFRONTING THEM TO THE ASSESSEE. HE SUBMITTED , EVEN THE ASSESSEE WAS NOT ALLOWED AN Y OPPORTUNITY TO CRO SS EXAMINE THE PARTIES WHOSE STATEMENTS WERE RELI ED UPON FOR MAKING THE ADDITIONS . FURTHER, HE SUBMITTED , THOUGH , SIMILAR ADDITIONS WERE MADE IN PRECEDING ASSESSMENT YEARS, HOWEVER, NO PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WAS INITIATED. AS REGARDS THE ADDITION MADE ON ACCOUNT OF STOCK DISCREPANCY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , ULT IMATELY THE TRIBUNAL HAS DIRECTED TO RESTRICT THE ADDITION TO GROSS PROFIT RATE. THUS, NO PENALTY CAN BE IMPOSED AS ULTIMATELY THE ADDITION IS ON ESTIMATE BASIS. 20. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE OBSERVATIONS OF THE ASSESSIN G OFFICER AND LEARNED COMMISSIONER (APPEALS). 21. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS REGARDS THE LEGAL ISSUE RAISED IN GROUND NO.2.1 AND 3.1, WHILE COMPLETING THE ASSESSMENT , IN THE PENULTIMA TE PARAGRAPH OF THE 16 AURO GOLD JEWELLERY PVT. LTD. ASSESSM ENT ORDER THE ASSESSING OFFICER HAS INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271AAA OF THE ACT. THEREFORE , THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT NO SEPARATE PENALTY PROCEEDING HAS BEEN INITIATED AGAINST CERTAIN A DDITION S IS WITHOUT ANY BASIS. AS REGARDS THE CLAIM OF THE ASSESSEE THAT PROCEEDINGS UNDER SECTION 271AAA , CAN BE INITIATED ONLY IF THERE IS UNDISCLOSED INCOME IN THE SPECIFIED PREVIOUS YEAR, ON GOING THROUGH THE FACTS ON RECORD IT IS VERY MUCH EVIDENT THA T THE ASSESSING OFFICER HAS MADE ADDITIONS UNDER VARIOUS HEADS ON ACCOUNT OF UNDISCLOSED INCOME. FURTHER, LEARNED COMMISSIONER (APPEALS) WHILE DEALING WITH THE AFORESAID ASPECT HAS PASSED A VERY WELL REASONED ORDER NEGATING ASSESSEES CLAIM. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DECISION OF LEARNED COMMISSIONER (APPEALS) ON THE ISSUE . THEREFORE, WE DO NOT FIND ANY MERIT IN THE GROUNDS NO.2.1 AND 3.1. 22. AS REGARDS THE GROUNDS RAISED ON MERITS, IT IS EVIDENT FROM THE FACTS ON RECORD, THE ASSESSING OFFICER HAD MADE A HUGE ADDITION OF ` 57,36, 00,353/ UNDER VARIOUS HEADS. HOWEVER, AFTER THE DECISIONS OF LEARNED COMMISSIONER (APPEALS) AND THE TRIBUNAL , THE TO TAL ADDITION CAME DOWN TO ` 74,50,420. AS DISCUSSED EARLIER, THE ADDITIONS ON THE BASIS OF WHICH PENALTY UNDER SECTION 271AAA OF THE ACT WAS IMPOSED WERE ON ACCOUNT OF UNEXPLAINED EXPENDITURE , EXCESS STOCK AND SALARY PAID IN CASH. AS REGARDS THE ADDITION M ADE ON ACCOUNT OF UNEXPLAINED 17 AURO GOLD JEWELLERY PVT. LTD. EXPENDITURE , NO DOUBT , AS AGAINST THE ADDITION OF ` 70,05,000 MADE BY THE ASSESSING OFFICER THE TRIBUNAL HAS RESTRICTED IT TO ` 42,05,000. HOWEVER, ON A PERUSAL OF THE ORDER PASSED BY THE DEPARTMENTAL AUTHORITIES AS WELL AS TH E ORDER OF THE TRIBUNAL IN ITA NO. 7256/MUM./2011 &ORS., DATED 13 TH FEBRUA RY 2015, THE FACTS WHICH EMERGE ARE , THE ASSESSEE CLAIMED TO HAVE ENTERED INTO PURCHASE AND SALE TRANSACTION WITH CERTAIN ENTITIES CREATED IN THE NAME OF FORMER EMPLOYEES. DURING THE SEARCH CONDUCTED ON THE BASIS OF PREMISES OF M/S. MANAV JEWELERS, IT WAS FOUND THAT N O PURCHASE AND SALE TRANSACTION WAS CARRIED OUT BY THE SAID ENTITY. IN FACT, THE PROPRIETOR OF THE SAID CONCERN ALSO ACCEPTED THIS FACT IN THE STATEMENT RECORDED FROM HIM . THOUGH, THE ASSESSEE BEFORE LEARNED COMMISSIONER (APPEALS) AND ALSO BEFORE THE TRIBUNAL MADE AN ATTEMPT TO IMPRESS UPON THE FACT THAT THE TRANSACTION WITH M/S. MANAV JEWELERS, IS GENUINE, HOWEVER, NONE OF THE APPELLATE AUTHORITIES FOUND THE CLAIM OF THE ASSESSEE ACCEPTABLE. IN FACT, THE TRIBUNAL WHILE DEALING WITH THE ISSUE HAS HELD THAT THE EVIDENCE ON RECORD IS SUFFICIENT TO HOLD THAT THE ENTITY WITH WHOM THE ASSESSEE HAS ENTERED INTO SUCH TRANSACTION IS A PAPER ENTITY CREATED BY THE ASSESSEE TO INFLATE THE TURNOVER. THE TRIBUNAL ALSO HELD THAT THE ASSESSEE HAS MISERABLY FAILED TO PROVE THAT THE TRANSACTION WITH SUCH ENTITIES IS GENUINE. IN VIEW OF SUCH CONCURRENT FINDING OF FACT BY THE APPELLATE AUTHORITIES INCLUDING T HE 18 AURO GOLD JEWELLERY PVT. LTD. TRIBUNAL , ASSESSEES CLAIM THAT THE TRANSACTION WITH M/S. MANAV JEWELERS, CANNOT BE ACCEPTED. ON A PERUSAL OF THE ASSESSMENT ORDER PASSED IN CASE OF PROPRIETOR OF M/S. MANAV JEWELERS, WE ARE CONVINCED THAT THE ASS ESSING OFFICER HAS NOT ACCEPTED THE TRAN SACTION TO BE GENUINE. MERELY BECAUSE THE SAID ENTITY H AS FILED A RETURN OF INCOME SHOWING CERTAIN INCOME , THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER ON THAT BASIS. HOWEVER, THE ASSESSMENT ORDER SO PASSED CANNOT GRANT AUTHENTICITY TO THE ACTIVIT Y CARRIED ON BY THE SAID ENTITY WITH THE ASSESSEE. THEREFORE, TO THAT EXTENT, WE ARE OF THE VIEW THAT IMPOSITION OF PENALTY UNDER SECTION 271AAA OF THE ACT IN RESPECT OF ADDITION OF ` . 42,05,000, HAS TO BE SUSTAINED. HOWEVER, AS REGARDS THE ADDITIONS MADE ON ACCOUNT OF EXCESS STOCK AND SALARY PAID IN CASH , ON A PERUSAL OF THE MATERIAL ON RECORD, WE FIND THAT AS REGARDS THE EXCESS STOCK THE TRIBUNAL HAS FOUND THAT THE DIFFERENCE IS NOT HUGE, HENCE, HAS DIRECTED FOR ADDITION OF GROSS PROFIT RATE. SIMILARLY, A S REGARDS THE SALARY PAID IN CASH, THE ADDITION HAS BEEN MADE PURELY ON THE BASIS OF STATEM ENT RECORDED FROM THIRD PARTIES WITHOUT CONFRONTING THEM TO THE ASSESSEE OR ALLOWING THE ASSESSEE AN OPPORTUNITY OF CROSS EXAMINATION. FURTHER, IT IS NOTICED THAT TH OUGH IDENTICAL ADDITION WAS MADE BY THE ASSESSING OFFICER IN ASSESSMENT YEAR S 2005 06, 2006 07 AND 2008 09, HOWEVER, PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WAS NOT INITIATED AGAINST SUCH ADDITION S THOUGH PENALTY 19 AURO GOLD JEWELLERY PVT. LTD. UNDER THE SAID PROVISIONS WA S IMPOSED ON SOME OTHER ADDITION S. THUS, AFTER CONSIDERING OVER ALL FACTS AND CIRCUMSTANCES OF THE CASE, WE DIRECT THE ASSESSING OFFICER TO IMPOSE PENALTY U /S 271AAA OF THE ACT , ONLY ON THE AMOUNT OF ` 42,05,000, AND DELETE THE BALANCE PENALTY. THUS, GROUND NO.4.1, IS DISMISSED AND GROUNDS NO.4.2, 4.3 AND 4.4 ARE ALLOWED. 23. IN THE RESULT, APPEAL IS PARTLY ALLOWED. 24. TO SUM UP, ALL THE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 10.01.2020 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 10.01.2020 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI