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TMI Blog2017 (12) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... g identical, for the sake of brevity, we refer to that involved in A.Y. 2009- 10. Briefly stated, the facts of the case are that the assessee company belongs to Kanakia Group of cases, where a search and seizure action u/s. 132(1) of the Act was carried out on 29.03.2011. During the course of search, it was gathered that the assessee was debiting bogus purchases to the books of account. This fact was accepted by the Managing Director of the assessee company Shri Rasesh Kanakia, in his statement recorded on oath u/s. 132(4) on 30.03.2011. He further surrendered a total amount of Rs. 39.42 crores in the group as a whole, on account of bogus purchases out of which an amount of Rs. 17.05 was admitted in the hands of the assessee company, as under: Assessment Year Bogus purchases (Rs. ) 2007-08 1,90,216 2008-09 1,98,90,319 2009-10 8,74,81,769 2010-11 4,45,37,474 2011-12 1,84,48,431 TOTAL 1 7,05,48,209 The assessment u/s.143(3) read with Sec. 53A of the Act was completed vide order dated 28/3/2013 in each of the assessment year, in which the Assessing Officer reduced the respective amount of bogus purchases for the year, out of the closing work-in-progress and, as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, which were subsequently reversed in A.Y. 2011 -2012. 5. On appeal, the CIT(A) elaborately considered the submissions of the assessee. He referred to Explanation 5A to section 271(1)(c) and found that assessee's case to be falling under the same. In this regard the observations of the learned CIT(A) are as under: I have considered the arguments of the assessee. It is to be noted that the appellant's case is covered by Explanation 5A to Sec.271 (1) of the Act. Explanation 5A has been introduced by the Finance Act, 2009, with retrospective effect from 1/6/2007, as per which the levy of penalty in the cases where search was carried out u/s.132(1) of the Act after 1/6/2007, will be governed by this Explanation 1 Sec.271(1)(c) of the Act. These are special provisions for levy of penalty in search cases and have been made operative with retrospective effect. For clarity, the provisions of Explanation 5A to Sec.271 (1) of the Act are reproduced as under :- "Explanation 5A. - Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of - (i) any money, bullion, jewellery or other valuable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of search the assessee was found to be owner of income (undisclosed) amounting to Rs. 17,05,48,209/- based on the entries of bogus purchases in the books of account. The respective years to which the said income represented were clearly admitted during the course of search and the same were surrendered. Therefore, the learned CIT(A) held that the assessee was deemed to be liable for penalty u/s. 271(1)(c) to the extent of income represented by bogus purchases booked for the year. The learned CIT(A) further observed as under: "10. Thus, during the course of search, the appellant company was found to be the owner of income (undisclosed) of Rs. 17,05,48,209/- based on the entries of bogus purchases in its books of account. Further, Shri Rasesh Kanakia, Managing Director of the appellant company, claimed/admitted that out of the above income of Rs. 17,05,48,209/-, an amount of Rs. 8,74,81,769/- represents the income of the appellant company for the year under consideration. He also surrendered such income. Therefore, as per Explanation 5A to Sec.271 (1) of the Act, the appellant is deemed to have concealed the particulars of its income or furnished inaccurate particulars of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income or income in respect of which inaccurate particulars have been furnished is there, then the AO can very well compute the penalty leviable u/s. 271(1)(c), by working out the tax payable by the assessee on such income. Explanation 5A has been introduced in order to enable the Assessing Officer to levy penalty for concealment or furnishing of inaccurate particulars of income in cases where a search action u/s.132(l) was initiated (after 1/6/2007). Therefore, these provisions are special provisions brought on the statute by the Legislature, with an intention to punish assessees in special cases. It cannot be the intention of the Legislature that penalty should not be levied on an assessee, if there was no difference in the amount of tax payable as per the return of income and as per the assessment order, in spite of the fact that the assessee has concealed the particulars or furnished inaccurate particulars of his income within the meaning of Sec.271(1)(c) of the Act. Such a proposition would defeat the very purpose behind the introduction of Sec.271(1)(c) and Explanation 5A, in particular. It is important to note here that even in cases where the assessment results in reduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Accordingly, the levy of penalty of Rs. 2,70,31,866/- u/s.271(l)(c) on the appellant, vide order dated 25/9/2013, is upheld and the grounds taken by the assessee are rejected. On similar ground the penalty was levied and confirmed for A.Ys 2007-08, 2008-09 and 2010-11 also. 7. The learned CIT(A) further distinguished that assessee's reliance on the decision of this Tribunal in the case of CIT vs. Nalwa Sons Investment Ltd.(327 ITR 543). He observed that in that case the assessment has been completed under MAT provision whereas, in the present case was done under normal provision and not under the MAT provisions of section 115JB. Therefore, he found the facts distinguishable. Further he observed that the present case is covered under Explanation 5A to section 271(1)(c) and the Managing Director of the assessee company, in his statement on oath, has explained the modus operandi in debiting the bogus purchases and generating huge cash. Accordingly, the learned CIT(A) confirmed the levy of penalty. Aggrieved, against this order, the assessee is in appeal before us. 8. The assessee has also raised additional ground of appeal as mentioned above. 9. We have heard both the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that having booked bogus purchases, the assessee has admittedly furnished inaccurate particulars of income and the penalty u/s. 271(1)(c) is clearly exigible. He further submitted that the decision of Delhi High Court in the case of Nalwa Sons Investments P Ltd. (supra), relied upon by the learned counsel for the assessee, was not applicable in the facts of the present case as that decision was rendered in the case where assessment was done u/s. 115JB. Hence, the learned counsel pleaded that the said decision does not apply to the case of the assessee. The learned DR further submitted that the CIT(A) is quiet correct in his finding and the penalty levied was justified. 11. We have carefully considered the submissions and perused the record. 12. We find that it is undisputed that the assessee has booked bogus purchases thereby inflating work-in-progress. Hence, it is clear that the assessee was owner of undisclosed income during the year. It was because of the system of accounting followed by the assessee being percentage completion method, that there was no change in the figure of income offered in the year. However, the resultant impact of bogus purchases resulting in bogus inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the first day of June 2007. In the course of search, assessee has been found and has clearly accepted to have booked bogus purchases and, thus, admitted inflation of expense resulting in assessee being actually owner of the income to that extent. Even if the assessee subsequently discloses the income in any return of income furnished afterwards has been specified to be of no consequence. Hence subsequent disclosure or nondisclosure of income in any return of income furnished subsequently has been specifically referred to be of no consequence. Thus as per a specific provision of explanation 5A assessee has been found to be owner of undisclosed income by furnishing inaccurate particulars of income, based upon entry of bogus purchases in its books of account. 13. When the assessee has been found to have indulged in furnishing of inaccurate particulars of income penalty under section 271(1)(c) is leviable up to the extent of three times of the amount of tax sought to be evaded by reason of such furnishing of inaccurate particulars of such income. In the present case, the amount of income which the assessee is seeking to evade is clearly and unambiguously represented by the bogus p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , i.e., for furnishing of inaccurate particulars of income or for concealment of income. The ld. Departmental Representative further submitted that the assessee has not filed this additional ground even before the ITAT in its appeal and that it is now that the assessee raising this ground which does not deserve to be admitted. The ld. Counsel of the assessee in this regard has submitted that the original ground raised by the assessee duly covers this aspect and this additional ground has been raised only by way of abundant precaution. 16. We have carefully considered the submissions. We find that the aforesaid ground was never taken up by the assessee at any stage either before the Assessing Officer during the penalty proceedings nor before the ld. Commissioner of Income Tax (Appeals). Even before the ITAT, the appeal was filed on 23.4.2015 and this additional ground has been raised only on 15.9.2017. In between, the matter was once fully heard by the Tribunal, but was released for fresh hearing on 03.4.2017 due to transfer of one of the Members comprising the Bench who had heard the case. In the original ground, the assessee has only contended that the ld. Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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