TMI Blog2015 (4) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure or disallowance of a particular deduction rather it is a case of disallowance of bogus expenditure which has been claimed just to reduce the profits earned by the 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. Appeal of the assessee is dismissed. - ITA No. 661/Chd/2006 - - - Dated:- 10-4-2015 - Bhavnesh Saini (Judicial Member) And T. R. Sood (Accountant Member) For the Appellant : Subhash Aggarwal For the Respondent : Manjit Singh ORDER T. R. Sood (Accountant Member) 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 ₹ 2,53,23,741/- against disallowance of additional price for purchase of sugarcane. 3. The brief facts of the case are that assessee Society is engaged in the business of manufacturing of sugar. During the course of assessment proceedings, the Assessing Officer inspected the premises of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmers. The entire amount had been credited to the share deduction account. v) That the share deduction account was not debited 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 passing 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 corresponding entries were made in the share deduction account. viii) That on 5 lh December, 1994 the Managing Director of the Society in his statement had indicated the reasons for non issuance of shares in the name of sugarcane suppliers was that formalities had to be completed regarding the determination of full value of shares, addresses of share holders etc. Therefore, the entries could not be made as on 31.3.1993. ix) That till the date of inspection u/s 131 and even till the date of finalization of the assessment proceedings, the assesses had not made specific book entri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not even know about the increase in cane price. No credit entries were made in their capital 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 they 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 was ratified by the General Body on 26.7.1995, meaning whereby that the cane growers came to know about such decision after two years and three months later! iv) The Mill thought of benefiting the cane growers only in the years of huge profits. It thought of bringing the parity between the prices of 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 unilateral decision. It could only recommend to the General Body to deduct the amount from the cane price. The Board of Directors could not impose a condition on the cane growers to increase their share capital rather tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 other crops like wheat, paddy etc. to stop farmers from switching over to those crops then at least increased price should have been paid to the farmers. ii) The farmers were never informed regarding the decision to increase the prices. iii) The decision to increase the price was never rectified by the general body meeting till 26.7.1995. iv) If it was for the benefit of the farmers why the same 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 Assessing Officer objected that decision in this regard could have been taken by the individual share holder in the general body meeting and such share holders were required to make an application to the Managing Director but no such application was made. The Assessing Officer also made various references to the order of Tribunal confirming the addition. These comments were forwarded to the assessee for it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Co-operative Sugar Society Ltd. (2008) 6 DTR 31 (P H) (2009) 312 ITR 92 7. Cement Marketing Co. Of India vs. ACST (1980) 124 ITR 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 DTR 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 Rep. 539(Del)(2008) 22 SOT 281 (Del) 12. CIT vs. Haryana Warehousing Corp. (2009) 314 ITR 215 (P H) 12. On the other hand the Ld. DR submitted that addition made in the assessment has been confirmed by the Tribunal against which the assessee had filed appeal before the jurisdictional High Court 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 ultimately 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 were increased only in the years of profits and not in the year of losses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uer. The findings 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 support from the binding precedent of a Division Bench of this Court in Shahabad Companyoperative Sugar Mills Ltd. v. CIT, [1997] 226 ITR 582 in that regard. In view of the above, finding no merit in this appeal, 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 assessee in claiming this expenditure was not bonafide. Therefore, clearly this 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 assessee had intention to evade tax. In para 1.3.1 it was observed as under:- 1.3.1 The clause 24 A of By-laws of the Cooperative Society empowers the Board to fix an initial price for sugarcane/beet in accordance with a formula determined by the State Federation of Cooperative Sugar Mills in cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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