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2016 (12) TMI 57 - ITAT DELHI

2016 (12) TMI 57 - ITAT DELHI - TMI - Levy of penalty under section 271(1)(c) - addition of unexplained sundry creditor - bogus purchases - Held that:- The assessee has failed to substantiate the purchases made from M/s Unifoil Enterprises. Except the purchase bill, no other evidence could be produced by the assessee in support of such bill. The assessee did not even make the payment for such purchases for a period of twelve years and thereafter, wrote back the amount in its books of account. Th .....

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Also it cannot be believed that anybody would sell the goods worth ₹ 66 lakhs and would not pursue for payment thereof. No satisfactory explanation is given by the assessee for not making the payment of goods claimed to have been purchased from M/s Unifoil Enterprises. The only explanation given is that the goods supplied were of inferior quality but no evidence in this regard is produced by the assessee. On the other hand, the assessee claimed that the goods supplied by the assessee wer .....

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is disputing the quality of the goods supplied. Thus we uphold the levy of penalty under section 271(1)(c) of the Act. - Decided against assessee. - ITA No.5401/Del/2011 - Dated:- 8-11-2016 - SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER For The Appellant : Shri Rajiv Saxena, Advocate. For The Respondent : Shri Umesh Chandra Dubey, Senior DR. ORDER PER G.D. AGRAWAL, VP :- This appeal by the assessee for the assessment year 1995-96 is directed against the order o .....

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ing penalty proceeding. b) because the ld.CIT(A) has failed to appreciate that the AO has not provided opportunity to cross examine at any stage during remand as well as penalty proceedings despite the direction of Hon ble ITAT. c) because the ld.CIT(A) has failed to appreciate that penalty proceedings are separate proceedings and penalty is not automatic. d) because the ld.CIT(A) has also failed to appreciate that assessee has no reasons to file inaccurate particulars and make bogus purchases a .....

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h was examined and expenditure was allowed as a deduction while computing under section 80HHC, merely by denying by one person it would not amount to filing any inaccurate particular of income. 2. That the ld.CIT(A) has erred in law as well as on facts in not providing proper opportunity of being heard as he passed the order just on the next day from the date of hearing on which counsel failed to appear despite the request by Counsel Sh. S.N. Prasad, Advocate appeared on 30.09.2011. It is, there .....

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ssessee has claimed the purchase of goods of the value of ₹ 66,15,000/- from M/s Unifoil Enterprises. The bill of purchases was filed before the Assessing Officer but no other evidence regarding the genuineness of the transaction was filed before him. In the original assessment proceedings, the Assessing Officer made enquiries from M/s Unifoil Enterprises and, in reply dated 23rd January, 1998, M/s Unifoil Enterprises informed that it had not made any sales to the assessee. Therefore, the .....

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orded by the Assistant Director of Income-tax (Investigation) on oath on 26th December, 2007. The sale bills furnished by the assessee were shown to him and he was asked to confirm whether the bills were issued by him and whether the sales were made to the assessee in the period 1.4.1994 to 31.3.1995. It was deposed that the answer has already been given in the letter dated 23rd January, 1998. It was reiterated again that no sale had been made to the assessee. On the basis of these facts, the As .....

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tion u/s 80HHC on account of increase in total income because of the aforesaid addition. The ITAT, vide order dated 14th January, 2011, dismissed the assessee s appeal. The relevant finding of the ITAT is reproduced herein below for ready reference :- The facts are that the assessee showed purchase of goods of the value of ₹ 66,15,000/- from M/s Unifoil Enterprises. The bills of purchases were filed before the AO. No other evidence regarding the genuineness of the transaction was filed bef .....

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ut the purchase. The assessee had produced the purchase bills and, therefore, a mere letter from the creditor cannot be taken as sacrosanct. Thus, it was held that the facts required further verification. In the course of fresh assessment, the AO got enquiries made at Mumbai where the creditor is located. Statement of Shri Prafful Parikh the proprietor, was recorded by the Assistant Director of Income-tax (Investigation) on oath on 26.12.2007. The sale bills furnished by the assessee were shown .....

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h. Therefore, the addition was made in respect of unexplained cash u/s 69. The ld.CIT(A) modified the findings of the AO. It was mentioned that during the appellate proceedings on being asked regarding the seizure of one of the consignments by the DRI, value of which was shown at ₹ 81,30,200/- but its actual value was put at ₹ 40,581/- only. In view of this fact, it was held that the assessee is indulging in over-invoicing of goods. Therefore, the addition of ₹ 66,15,000/- was .....

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the purchases on its own in view of the statement of the proprietor of M/s Unifoil Enterprises. The huge amount remains unpaid for a period of about 12 years, which leads to an inescapable conclusion that the entry in the books regarding purchase was bogus. He has also suggested that if there is any deficiency in authentification of evidence, it may be cured by remand report. However, the ld. counsel has opposed such a course of action on the ground that the matter is old. 5.2 The question whet .....

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it had to be settled for a lesser amount. According to us, the non-payment of the purchase consideration is a strong circumstance regarding non genuineness of the transaction and stands on its own de hors any other evidence. Lack of evidence about dispute further strengthens the conclusion. Thus, even if the statements of the creditor are ignored, significant fact of non-payment and absence of dispute lead to a justifiable conclusion that no payment was due as no sale was made by M/s Unifoil En .....

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in respect of sale of goods. Accordingly, it is held that the AO was right in making addition of ₹ 66.15 lakhs u/s 69 and denying enhanced deduction u/s 80HHC of the Act. 5. The Assessing Officer, vide order dated 22nd March, 2010, levied penalty u/s 271(1)(c) of the Act amounting to ₹ 30,43,900/-. On appeal, learned CIT(A), vide order dated 30th September, 2011, sustained the penalty. Hence, this appeal by the assessee. 6. At the time of hearing before us, learned counsel for the as .....

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her submitted that no cross examination of the seller was allowed to the assessee and therefore, his statement where he denied to have sold the goods to the assessee cannot be utilized against the assessee. He also stated that the assessee is entitled to deduction u/s 80HHC and therefore, any reduction in purchases would increase 80HHC deduction which was 100% at the relevant time. Thus, there cannot be any concealment of income by way of bogus purchases. He further stated that the purchase cons .....

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iance Petroproducts Pvt.Ltd. - [2010] 322 ITR 158 (SC). (ii) Chambal Fertilisers & Chemicals Ltd. Vs. ACIT - [2014] 112 DTR (Jp)(Trib) 140. (iii) New Holland Tractors (India) (P.) Ltd. Vs. CIT, Delhi-V - [2015] 275 CTR 291 (Delhi). (iv) Decision of ITAT Ahmedabad Bench in the case of Ruchi Developers Vs. ITO in ITA No.3348/Ahd/2010. He, therefore, submitted that the penalty levied u/s 271(1)(c) may be cancelled. 7. Learned DR, on the other hand, stated that the decision of Ruchi Developers ( .....

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arguments were raised by the assessee in quantum proceedings and the ITAT, after considering all these arguments and the facts of the case, dismissed both the grounds of the assessee. He stated that in this case, the purchases were proved to be bogus. Therefore, it is a clear case where inaccurate particulars of the purchases and income were furnished by the assessee. He also relied upon Explanation (1) clause (B) of Section 271(1)(c). He further relied upon the following decisions :- (i) CIT V .....

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i Developers (supra). We have perused the order of the ITAT in the case of Ruchi Developers (supra) and we find that the facts in the case of the assessee and Ruchi Developers (supra) are different. In the case of Ruchi Developers (supra), the purchases from five parties were in dispute. However, in response to summons issued u/s 133(6) in the case of two parties, the same were returned unserved with the remark left . Other parties did not furnish any information. On these facts, the ITAT, thoug .....

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r, the assessee did not make the payment for the goods purchased. The goods were alleged to have been purchased during the accounting year relevant to assessment year 1995-96 and for more than twelve years, the payment was not made and ultimately, in the accounting year 2006- 07, the assessee wrote back the outstanding demand. The ITAT, in the quantum appeal, has taken note of these things. Thus, in the case of Ruchi Developers (supra), the assessee was unable to prove the purchases but in the c .....

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proceedings, it is evident that the Assessing Officer himself has mentioned that the assessee did not make any purchase from M/s Unifoil Enterprises but made purchase from some other party to whom the payment was made in cash. Therefore, the addition was made in respect of unexplained cash u/s 69. This finding of the Assessing Officer has been upheld by the ITAT. Therefore, the contention of the learned counsel has no merit. The same has been rightly rejected by the CIT(A). 11. The next contenti .....

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eduction u/s 80HHC. The ITAT rejected both the grounds. While rejecting the ground of higher deduction u/s 80HHC, the ITAT noticed that the assessee was even inflating the value of exported goods. In paragraph 5 at page 10, the ITAT has noticed that one export consignment of the assessee was seized by the DRI and it was found that the value of consignment was shown at ₹ 81,31,200/- but its actual value was only ₹ 40,581/-. Therefore, the contention of the learned counsel that it is e .....

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m M/s Unifoil Enterprises but made the purchases in cash from some other party and therefore, for such unexplained cash, the addition was made u/s 69 and was upheld by the ITAT. In assessment year 2006-07, the assessee wrote back the amount claimed to be payable to M/s Unifoil Enterprises. In our opinion, writing back the amount payable to M/s Unifoil Enterprises does not support the case of the assessee at all so far as levy of penalty u/s 271(1)(c) is concerned. On the other hand, it only supp .....

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this regard was furnished by the assessee. In the quantum appeal, the ITAT has already taken note of this contention and has rejected the same with the following finding :- The reason for non-payment is stated to be the supply of inferior quality goods, leading to disputes. No evidence has been filed in this regard. If the goods had actually been supplied, no creditor would silently forego his claim even if it had to be settled for a lesser amount. According to us, the non-payment of the purchas .....

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has been held to be bogus, obviously no amount was payable in respect of such bogus purchase and, therefore, the writing back of such non-existent liability will, in no way, affect the levy of penalty in assessment year 1995-96. 14. Learned counsel for the assessee has relied upon the decision of Hon ble Apex Court in the case of Reliance Petroproducts Pvt.Ltd. (supra), in which Hon ble Apex Court held as under:- Where there is no finding that any details supplied by the assessee in its return .....

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s return are found to be incorrect, erroneous and false. Therefore, the above decision of Hon ble Apex Court would not support the case of the assessee. 16. The learned counsel has also relied upon the decision of ITAT, Jaipur Bench in the case of Chambal Fertilisers & Chemicals Ltd. (supra). In that case, the penalty was levied in respect of the addition to the book profit. Such addition was sustained by the ITAT due to retrospective amendment in the Income-tax Act. On these facts, ITAT can .....

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e learned counsel would not be applicable. 17. The learned counsel has also relied upon the decision of Hon'ble Delhi High Court in the case of New Holland Tractors (India) (P.) Ltd. (supra). In the said case, the assessee, a subsidiary of UK based company, transferred its design engineering technology relating to manufacture of a particular brand of tractor of another Indian company for a period of three years. It was held that the entire amount received under the said agreement was held to .....

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e Jurisdictional High Court. However, the facts of the assessee s case are altogether different. Here, the particulars of the purchases shown by the assessee are found to be incorrect because the purchase from M/s Unifoil Enterprises was held to be non-genuine. In our opinion, on the facts of the present appeal, the decision of Hon'ble Jurisdictional High Court in the case of Harparshad and Company Ltd. (supra) relied upon by the learned DR would be applicable wherein Hon'ble Jurisdictio .....

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n by R out of the 3 per cent. received by her. As far as commission to R was concerned, it was accepted by the Tribunal in the quantum proceedings that she did not render any services at all. The assessee had failed to offer any explanation in respect of the addition of ₹ 1,83,078 and it could be deemed to have concealed the particulars of income or furnished inaccurate particulars thereof, by virtue of this explanation. The Tribunal was not justified in deleting the penalty imposed by the .....

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made is ex facie bogus, it may still attract penalty provision. The Explanations appended to section 271(1)(c) of the Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The object behind enactment of section 271(1)(c) read with the Explanations indicate that the section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Willful concealment .....

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period of twelve years and thereafter, wrote back the amount in its books of account. Thus, in effect, the assessee did not make the payment for purchase of such goods. The seller i.e., M/s Unifoil Enterprises has denied to have sold the goods to the assessee by writing a letter to the Assessing Officer and also in the statement recorded by the Revenue authorities. The ITAT in the quantum proceedings has clearly held that the nonpayment of purchase consideration is a strong circumstance regardi .....

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