TMI Blog2005 (6) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... Trading Co., Hoshiarpur but no genuine purchases from these two parties have been made. The Assessing Officer noticed certain facts regarding these bills being fictitious are discussed party-wise as under:- (1) M/s. Surya Enterprises, Damtal- The summons under section 131 issued to this party returned unserved with the postal remarks that no such firm exists. Thereafter summons were again issued at the asking of Shri V.B. Aggarwal, counsel for the assessee Dasti for service upon the party. The summons were issued on 3-3-2000 but on the date ie. 8-3-2000, no one attended the proceedings. It was not clarified as to why nobody attended the proceedings despite issue of summons. On the bills, number of trucks has been mentioned which allegedly transported wheat from Damtal to Hoshiarpur. The owners of the trucks were contacted and they have given in writing that they had never transported wheat for M/s. Surya Enterprises from Damtal to Hoshiarpur during the period, relevant to the assessment year under appeal. The Assessing Officer found that there is mention of assessee's own three trucks on the said bills but in the drivers' account of these trucks, there is no mention that any of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is fictitious and contradictory with the copy of account duly confirmed. It was submitted that without prejudice to the above submissions, it is submitted that there is no involvement of any partner of the firm and there may be employees of the assessee firm who were in the absence of the partners making/indulging in committing fraud with the firm for which the partners are making independent enquiries. 5. The Assessing Officer considering the reply of the assessee was of the view that the extensive enquiries were made in this case which proved that the purchases are bogus and fictitious. The Assessing Officer also observed that the reply of the assessee clearly proves that the assessee admitted indirectly the default but attributed it to the employees. The statement of Shri Kamal Kishore, clerk of the assessee firm was recorded under section 131 of the Income-tax Act and he in his statement admitted that partners of the assessee firm were busy in launching their new venture at Ludhiana and in their absence he used to make the purchases as well as sales. He has further stated that the sometimes some parties sold the goods but they did not issue any voucher and the vouchers deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty on the basis of the discussions with your honour which is due to the negligence of the employees of the assessee only. The penalty levied be minimum on the tax payable by the assessee firm and after taking into consideration the replies filed in the course of the assessment proceedings. The assessee has agreed for the levy of penalty to buy peace of mind". 6. The Assessing Officer considering the reply of the assessee had imposed the penalty under section 271(1)(c) of the Income-tax Act vide order dated 31-3-2000. 7. The penalty order was challenged before the CIT(A) and the appeal was instituted on 8-1-2001. Shri V.B. Aggarwal, C.A. submitted before the CIT(A) that the addition has been made without appreciating the facts of the case. He has submitted that all the purchases and sales are verifiable. No addition is possible on the basis of consumption of electricity, since the assessee maintained regular books of account and the stock register, purchases and sales are verifiable. Once the verification of manufacturing account is possible, no addition could be made on the basis of the irrelevant facts. The learned counsel for the assessee relied upon the order of the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon M/s. Surya Enterprises has served the notice upon the said party. He has further submitted that if the said party did not appear then the Assessing Officer should have taken further recourse for summoning of the party for confirmation of the purchases. As regards M/s. Ambika Trading Co., he has submitted that Shri Romesh Kumar Dhir Proprietor has made a contradictory statement to that, the copy of account duly confirmed by him. He has also referred to the reply of the assessee filed on dated 22-3-2000 referred to above in this order. He has also referred to the reply dated 30-3-2000 filed before the Assessing Officer at the penalty stage and submitted that in this reply dated 30-3-2000 in para 3, the assessee agreed for levy of the minimum penalty on the basis of discussion with the Assessing Officer. The main point of discussion with the Assessing Officer was that no penalty shall be levied on the addition made in the trading account as all the evidence required was filed by the assessee and moreover the trading addition was mainly made on agreed basis. In respect of the disallowance out of the expenses claimed the assessee had agreed for the levy of penalty to buy peace of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Mysore High Court in the matter of D. Halappa Sons v. CIT [1974] 95 ITR 542 order of the ITAT, Amritsar Bench in the case of Ramesh Chander Kundra v. ITO 5 TLR 342 and decision of the ITAT, Ahmedabad Bench in the case of Patel Oil Mills v. ITO [1990] 35 ITD 451. 9. The learned counsel for the assessee argued that the CIT(A) should have decided the appeals of the assessee on merits and further submitted that the decision of the Hon'ble Punajb and Haryana High Court in the matter of Banta Singh Kartar Singh v. CIT [1980] 125 ITR 239 as relied upon by the CIT(A) is not applicable in view of the above decisions and particularly when the Hon'ble High Court has not considered its earlier decision in the case of Chhat Mull Aggarwal. 10. However, the learned counsel for the assessee has fairly submitted that the earlier decision of the Hon'ble Punjab and Haryana High Court in the case of Chhat Mull Aggarwal was not approved and dissented from by the Hon'ble Bombay High Court in the matter of Ramesh Chandra Co. v. CIT [1987] 168 ITR 375. The learned counsel for the assessee on relying upon the decision of the Hon'ble Supreme Court in the case of A.R. Antulay v. R.S. Nayak [1988] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, the learned D.R. submitted that the assessee agreed to the addition on quantum as well as the penalty. The learned D.R. further submitted that the assessment order was available with the assessee prior to the issue of the penalty notice. Therefore, if the assessee was satisfied that it has not made any admission with regard to the quantum addition then appeal on merits could have been filed but the assessee did not file any appeal before the CIT(A) on quantum, which shows that the assessee was guilty of concealment of income and filing inaccurate particulars of income. The learned D.R. further submitted that the Assessing Officer issued show-cause notice to the assessee before imposing the penalty but no appeal on merits was filed and the counsel for the assessee agreed to the imposition of penalty. Therefore, the assessee is not aggrieved by the order of the Assessing Officer and as such the appeal before the CIT(A) was not maintainable. The learned D.R. further pointed out that though the penalty order was passed on 31-3-2000 but the appeal before the CIT(A) was instituted on 8-1-2001 which shows that the assessee agreed to the penalty but later on realising the consequences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer can impose penalty against the assessee if he was satisfied that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. Explanation (1) to the above section 271(1)(c) put a burden upon the assessee to explain the facts and material and provides that if the assessee fails to offer an explanation of offers an explanation which is found by the Assessing Officer to be false then the amount added or disallowed in computing the total income in respect of such person as a result thereof shall, for the purposes of clause (c) of this sub-section be deemed to represent the income in respect of which particulars have been concealed. 15. The facts of the above case clearly shows that the Assessing Officer at the assessment stage made enquiries with regard to the purchase made by the assessee from two of the parties namely, M/s. Surya Enterprises and M/s. Ambika Trading Co. In the case of M/s. Surya Enterprises, summons returned unserved as the postal authorities informed that such parties did not exist at the addresses. The summons given to the assessee Dasti, according to the reply of the assessee, served upon the concerned part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld clearly prove that the Assessing Officer was satisfied that the assessee has concealed the particulars of his income and has furnished inaccurate particulars of such income. The Assessing Officer initiated the penalty on such facts and issued show-cause notice to the assessee. The assessee instead of explaining the issue on merits filed reply dated 30-3-2000 before the Assessing Officer at the penalty stage and agreed for levy of the penalty. The reply is reproduced in this order. Therefore, it is clear that the assessee not only at the quantum proceedings has admitted the concealed income but also admitted at the stage of penalty and has agreed to the addition as well as penalty. The reply of the assessee at the penalty stage is very specific with regard to the admission of the fact of bogus purchases. The assessee did not file any reply on merits rebutting the evidence collected by the Assessing Officer. The assessee has, therefore, failed to offer an explanation before the Assessing Officer in respect of the facts material to the computation of total income, therefore, same deemed to represent the income in respect of which particulars have been concealed. Therefore, the Expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings in the assessment order have probative value at the penalty stage. The assessee was given show-cause notice at the penalty stage, therefore, if at all the assessee was of the view that the addition is unjustified, should have explained the issue on merits instead of admitting concealment of income and filing of inaccurate particulars. No reply whatsoever was filed before the Assessing Officer to explain the issue on merits, which would clearly show that the assessee has failed to offer any explanation before the Assessing Officer. In such circumstances, the Assessing Officer was justified in drawing adverse inference against the assessee in accordance with the law and Explanation (1) to section 271(1)(c) of the Income-tax Act. The Assessing Officer has given sufficient opportunity of hearing to the assessee but the assessee did not seek any time from the Assessing Officer to rebut the material collected by the Assessing Officer. Therefore, merely penalty was levied on 31-3-2000 is not enough to conclude that no sufficient opportunity is given to the assessee. The learned counsel for the assessee by referring to the reply filed before the CIT(A) submitted that the assessee agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses has nothing to do with the issue of bogus purchases. Therefore, we reject this contention of the learned counsel for the assessee in this regard. 18. The Assessing Officer in the assessment order has specifically recorded his satisfaction with regard to initiating-penalty proceedings for furnishing inaccurate particulars of income. Therefore, the findings of the Assessing Officer in the assessment order and satisfaction recorded in the end of the assessment order would clearly prove that t he Assessing Officer was satisfied with regard to the concealment of particulars of income and filing inaccurate particulars of income by the assessee and as such we do not find any infirmity in the order of the Assessing Officer initiating penalty proceedings against the assessee and as such the decision relied upon by the learned counsel for the assessee in the matter of Munish Iron Stores and Ram Commercial Enterprises Ltd. are clearly distinguishable and are not applicable to this case. 19. The Hon'ble Punjab and Haryana High Court in the matter of Chhat Mull Aggarwal held that "There is no provision in the Income-tax Act whereby the remedy of appeal against the order of the ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Haryana High Court, therefore, on such facts observed that it was on the agreement of the assessee, which agreement mentioned the figure as well as the rate of penalty, and on the basis thereof that the amount of penalty in question was imposed, held that the Tribunal rightly placed reliance upon the decision of the Bombay High Court in the case of Jivatlal Purtapshi for the proposition that the order based on agreement cannot give rise to grievances and the same cannot be agitated in the appeal. For these reasons reference, in question, was decided in favour of the Revenue and against the assessee. 21. The aforesaid decision of the Hon'ble Punjab and Haryana High Court in the matter of Chhat Mull Aggarwal was dissented from by the Hon'ble Bombay High Court in the matter of Ramesh Chandra Co. in which it was held that the assessment on the basis of the admission by the assessee. The appeal against the assessment not maintainable. It was held in this case that if the assessee has made a statement on the facts, he could have no grievance against the taxing authority taxing the same in accordance with the statement. If they have no grievance, he can file no appeal. The Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concealment and as the Tribunal on a consideration of the entire matter had found that there was no concealment as such by the assessee it could not be said that the Tribunal's finding was perverse or legally wrong and, therefore, there was no point for reference. (2) In the case of Padgilwar Bros, it was held that even though there is admission that there was some concealment of income, yet before penalty is imposed the assessee will be entitled to say that there has been failure on the part of the ITO to follow up the requirement of law and the assessee is entitled to substantiate this contention. (3) In the decision of D. Halappa Sons, none of the authorities had stated that the assessee has consciously concealed the particulars of its income. No penalty could be imposed merely on the concession of the assessee or his representative. (4) In the decision of Ramesh Chander Kundra, the Appellate Tribunal held that the appeal lies before the AAC against an agreed assessment where the assessee agrees before the ITO under erroneous view or under some misunderstanding. (5) In the order of Patel Oil Mills, the Appellate Tribunal held that where the onus shifted upon the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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