IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "D" BENCH AHMADABAD
, Û `'
,
Before Shri D.K.Tyagi, Judicial Member and
^ . .×, Û
Shri T.R. Meena, Accountant Member
^ .., ¢
ITA No. 2802/Ahd/2012
Assessm ent Year :1989-90
The Income-tax Officer, V/s . Geera Finance Ltd.
W ard-4(1), Ahmadabad "Anand", Saurashtra Society,
Navjivan Turst Bldg., Off. Paldi, Ahm adabad 380 007
Ashram Road, Ahm adabad.
P AN No. AAACG7562Q
(Appellant) .. (Respondent)
/ By Appellant Shri K. C. Mathews, Sr.D.R.
× /By Respondent Shri Vijay Ranjan, A.R.
/Date of Hearing 18.03.2014
/Date of Pronouncement 27.03.2014
ORDER
PER : Shri T.R.Meena, Accountant Member
This is an appeal at the behest of Revenue which has emanated
from the order of CIT(A)-VIII, Ahmedabad, dated 22.09.2012 for
assessment year 1989-90. The sole ground of Revenue's appeal is
against deleting penalty of Rs.4,91,124/- levied by the Assessing Officer
without appreciating facts that transaction were found bogus and parties
I TA No . 2 80 2 /A h d/ 1 2 A. Y. 1 98 9- 90
Th e I TO v s . G e er a F in an c e Lt d. Page 2
had only issued bills in favour of the assessee. Even the revised return
was filed by the assessee after complete enquiries by the A.O. The
CIT(A) erred in not considering the decision of Hon'ble Delhi High court in
the case of CIT vs. Usha International (348 ITR 485).
2. In this case, the A.O. completed the assessment u/s. 143(3) of the
IT Act on 30.11.1990 and addition on account of bogus trading loss was
made at Rs.7,81,149/- and finally income was determuined of
Rs.8,38,500/- against the net profit of Rs.90,145/-. For this, the ld. A.O.
initiated penalty proceeding u/s. 271(1)(c) for concealment of income and
furnishing inaccurate particulars of income. Before imposing penalty u/s.
271(1)(c), the A.O. gave reasonable opportunity of being heard, which was
availed by the assessee. After considering the assessee's reply, the A.O.
observed that during the course of assessment proceeding u/s. 143(3) of
the IT Act, the books of account from 08.09.1988 to 31.03.1989 were
produced by the assessee. The books of account prior to 01.09.1989
were seized by the Department during the search operation u/s. 132 of the
IT Act from the business premises as well as residence premises of the
assessee. On examination of these books, it was noticed by the A.O. that
the assessee had incurred heavy losses in every transaction of purchase
and correspondences the parties with whom these transactions had been
made were summoned and examined under oath by him. The ld. A.O.
found that:
I TA No . 2 80 2 /A h d/ 1 2 A. Y. 1 98 9- 90
Th e I TO v s . G e er a F in an c e Lt d. Page 3
"Shri Prashant P Vakil, proprietor of A.P. Traders, from whom
majority of these goods had been purchased, revealed that A.P.
Traders dealt in self adhesive stickers only and carried on no other
business. He had himself issued sales bills of Rs.25,99,075/- to Geera
Finance Ltd. but no goods as mentioned in the bills, were supplied. He
had no such goods in his possession and he did not purchase any
such goods from any other party. He stated that he had issued these
bills at the behest of Shri Bharat C. Shah, who was the brother of
Prakash C. Shah, M.D. of the assessee company. He also admitted
that these bills were issued in the months of May & June, 1989, but
were dated January & February,1989. These transactions were not
entered in the books of accounts and even a carbon copy of the same
was not kept. A separate bank account, for these transactions was
opened with Ahmedabad Mercantile Co-op. Bank Ltd., Paldi branch,
where the cheques of the assessee company were deposited. After
clearing, the cash was withdrawn and handed over to Shri Prakash
C.Shah, M.D. of the assessee company. Proof was also submitted
showing that the bank account was opened on 30.5.89 and cheques of
Gcera were deposited from June to October, 1989.
In the case of another such party, Hemani Chemicals Pvt. Ltd.,
Shri Chandravadan M.Shah, Director stated under oath u/s.131 that it
dealt in fire extinguishers and had the agency of Red Commet
Automatic Fire extinguishers. He revealed that he had issued sales
bills to Raj Radhe another group concern, in the month of May, 1989
and against that, payment was made to Geera Finance Ltd. He
admitted that no purchase had been made from Gccra Finance Ltd.
and no sale had been made to Raj Radhe Finance Ltd. This
transaction was done simply to accommodate the assessee and at the
instance of Shri Kaushik C. Shah & Shri Bharat C. Shah, brother of
Shri Prakash C. Shah. He did not see the goods at all. Again he
revealed that while the bills were received in the month of May, 1989,
the dates were of January and February 1989.
I TA No . 2 80 2 /A h d/ 1 2 A. Y. 1 98 9- 90
Th e I TO v s . G e er a F in an c e Lt d. Page 4
Shri Harmit B, Patwa, proprietor of Ridhi Sidhi corporation and
Shri Dixit B. Patwa, proprietor of Nimol Dyechem, Jitendra Chemicals
and J.K. Chemicals were also examined under oath u/s..131 of the
I.T.Act. On collecting additional facts and relevant bills, it emerged that
these entities, together with the assessee's group of companies had
indulged in a network of transaction, which ended up with Rajradhe
Finance Ltd. and Geera Finance Ltd. creating a bogus loss on paper
and the companies of the Patwa group showing a profit. No actual
delivery was effected in any transaction."
The A.O. concluded that assessee was indulged in bogus purchase and
sale transaction to reduce its profit with a view to avoid payment of tax on
the same. The ld. A.O. at the time of assessment gave reasonable
opportunity of being heard after recording the statement, he also
forwarded the copy of statement of Shri Prashant P. Vakil and offered
cross examination of the witness. The assessee was asked to prove the
genuineness of these purchases made from above parties. The assessee
filed revised return on 07.11.1990 declaring the entire bogus loss of
Rs.7,81,149/- as additional income for A.Y. 89-90. The assessee claimed
before the A.O. that offer was made to avoid litigation and to buy peace of
mind and on the condition that no penal action be initiated against it. The
tax and interest was also paid on additional income. The CIT(A) also
confirmed the finding of concealment of income/bogus transaction and
held that. As a result of investigation and the act of the revised income
was purely subsequent to the detection by the A.O. and was in admission
on the part of the assessee to the nature of the bogus transaction. The
I TA No . 2 80 2 /A h d/ 1 2 A. Y. 1 98 9- 90
Th e I TO v s . G e er a F in an c e Lt d. Page 5
Hon'ble ITAT also upheld the addition in ITA No. 998/Ahd/95, dated
19.02.2001 and adding that the A.O. was fully justified in making the
addition. After considering the assessee's reply, he was satisfied that the
assessee had furnished inaccurate particulars as also concealed the
particulars income from the beginning with a deliberate intention to evade
due taxes payable on its income. Thus, he imposed 100% of penalty on
concealed income at Rs.4,92,124/- of the tax sought to be evaded.
3. Being aggrieved by the order of the A.O., the assessee carried the
matter before the CIT(A) who has deleted the penalty by observing as
under:
"4. I have gone through the penalty order and the submission of the
appellant carefully. After duly considering the entire facts and
circumstances and the legal position, I am of the view that levy of
penalty u/s.271(1)(c) of the I.T. Act is not justified in the present case.
First of all, it is notable that the appellant-company had made
purchases from A.P. Traders and Hemani Chemicals P. Ltd. These
purchases are supported by bills issued by the aforesaid parties and
the payments were made by the appellant-company by cheques
through regular banking channels, which are duly credited to the bank
accounts of the aforesaid parties. It is notable that besides the
aforementioned two parties the appellant-company had made
purchases from several other connected parties which are also
supported by vouchers and payments were made through cheques.
Out of these several parties the Assessing Officer recorded the
statements of Shri Prashant P. Vakil, proprietor of A.P. Traders and
Shri Chandravadan M. Shah, director of Hemani Chemicals P. Ltd. The
purchases made from other connected parties were not examined by
the Assessing Officer. The Assessing Officer also allowed opportunity
I TA No . 2 80 2 /A h d/ 1 2 A. Y. 1 98 9- 90
Th e I TO v s . G e er a F in an c e Lt d. Page 6
to the appellant-company to cross-examine the above mentioned two
persons but it did not avail this opportunity and filed a revised return of
income. It may be mentioned that the loss arising from purchases
made from the above two parties amounted to Rs.7,26,125 whereas
the total loss with regard to purchases and sales relating to various
connected parties amounted to Rs.7,81,149. During the course of the
assessment proceedings the Assessing Officer only proposed
disallowance of loss of Rs.7,26,125. However, the appellant-company
surrendered the entire loss of Rs.7,81,149 in the revised return of
income. As mentioned above, it declined to cross-examine the two
persons for the reason that they were close friends of the directors of
the appellant-company and probably they disowned the purchases for
the reason that the same may not have been accounted by them in
their books of account. The appellant-company felt that cross-
examination may result into embarrassment of the aforesaid two
friends of the directors. Therefore, a revised return was filed
surrendering the total loss. It is notable that ail the purchases are
supported by vouchers and the same are duly recorded in the audited
books of account and all the payments have been made by the
appellant-company through regular banking channel.
5. Another important fact to be noted while considering levy of
penalty u/s.271(1)(c) is that for the immediately preceding assessment
year 1988-89, the appellant-company had incurred loss of Rs.5,38,771
in respect of purchases and sales around the same time as in the
present assessment year. The Assessing Officer disallowed the loss
treating the same as bogus loss and further penalty u/s.271(1)(c) of
Rs.3,40,222 was levied. During that year the appellant-company did
not file any revised return of income surrendering the aforesaid loss
and the issue was contested by it in further appeals. It obtained part
relief before the learned CIT(A) who held that wherever the loss arose
from purchases from connected concerns, the same should be
disallowed. While giving effect to this order the Assessing Officer
I TA No . 2 80 2 /A h d/ 1 2 A. Y. 1 98 9- 90
Th e I TO v s . G e er a F in an c e Lt d. Page 7
allowed loss to the extent of Rs.2,14,751 and levied penalty
u/s.271(1)(c) of Rs.3,40,222 as mentioned above. The appellant filed
appeal against levy of penalty and the penalty was deleted by the
learned CIT(A) vide his order dated 31.3.1994. It Is notable that even
the addition sustained by the learned CIT(A) was further contested by
the appellant-company before the ITAT and the ITAT restored the
matter to the Assessing Officer vide order dated 3V3.1999 in ITA No.
5249/1991. The concluding part of the Hon'ble Tribunal's order has
been reproduced in the written submissions of the appellant-company
as mentioned above. The Assessing Officer examined the issue in
consonance with the directions of the Hon'ble ITAT and vide its order
dated 8-3.2002, did not make any disallowance of loss. Thus, almost in
similar circumstances the loss stands alleged for the immediately
preceding assessment year. In the present year the loss stands
disallowed which is entirely for the reason that the appellant itself filed
revised return of income surrendering the entire loss.
6. Considering the entire facts and circumstances mentioned
above, in my considered opinion, there is hardly any case for levy of
penalty ;or concealment of income or for furnishing inaccurate
particulars of income, in t!i3 light of various judicial pronouncements
referred to above. Accordingly, the penalty of Rs.4,92,124 is deleted."
4. Now the Revenue is before us. Ld. Sr. D.R. vehemently relied upon
the order of the A.O. and argued that the assessee has concealed the
income, which has been admitted by it by revising the return when
cornered by the A.O. through investigation on the bogus purchase. The
A.O. recorded the statement of Shri Prashant P. Vakil and Shri
Chandravadan N. Shah on oath u/s. 131 and admitted that they have
simply given the accommodation bill to the assessee. Thus, concealment
of income has been established by the A.O. He further relied upon in case
I TA No . 2 80 2 /A h d/ 1 2 A. Y. 1 98 9- 90
Th e I TO v s . G e er a F in an c e Lt d. Page 8
of CIT vs. Usha International Ltd. [2012] 27 taxmann.com 227 (Delhi),
wherein identical issue was that revised return was filed by it only when it
was detected and Income Tax Authority had collected material on the
basis of which it could be said that the claim of deduction was false or
bogus. Therefore, Hon'ble Delhi High Court confirmed the penalty u/s.
271(1)(C). He further relied in case of CIT vs. Lallubhai Jogibhai Patel
[2004] 134 TAXMAN 381 (Guj.), wherein investment in car was
suppressed by the assessee at Rs.31,000/-. The Hon'ble Gujarat High
Court held that explanation to Section 271(1)(c) attracted. The assessee
could not revert the presumption. Thus, the Tribunal was justified in
confirming the penalty u/s. 271(1)(c). He further relied in case of A.M.
Shah & Co. vs. CIT [2000] 108 TAXMAN 137 (Guj.), wherein serious
discrepancies were found by the A.O. in books of account and excess
sales were shown while purchases were not shown, bogus purchases
were claimed and purchases were not shown in the sales or stock.
Additions were made to gross profits on account of discrepancies. Penalty
u/s. 271(1)(c) held justifiable. Ld. Sr. D.R. also relied upon in recent
decision of Hon'ble Supreme Court in case of MAK Data (P.) Ltd. vs. CIT
[2013] 38 taxmann.com448 (SC), wherein it has been held that where
offer of surrender of certain amount received as share application money
was made by assessee in view of detection made by Assessing Officer in
search conducted in case of assessee's sister concern, said surrender of
I TA No . 2 80 2 /A h d/ 1 2 A. Y. 1 98 9- 90
Th e I TO v s . G e er a F in an c e Lt d. Page 9
income not being voluntary in nature, authorities below were justified in
levying penalty under section 271(1)(c). At the outset, ld. A.R. argued that
assessee suo motu has revised return and did not avail cross examination
of the witness as witnesses were family friends. The assessee had shown
these purchases in the books of account and all payments were made
through account payee cheques. He also has drawn our attention on
statement recorded by the ld. A.O. of above two persons and argued that
there is no basis for imposing penalty u/s. 271(1)(c). He also has drawn
our attention on page nos. 1 & 2, where these purchases have been
shown and case laws relied by the assessee before the ld. CIT(A), which
are squarely applicable at this stage also. He also argued that in
preceding year, the ld. A.O. had accepted the business loss of the same
party. Ld. A.R. requested to confirm the order of the CIT(A).
5. We have heard the rival contentions and perused the material on
record. The A.O. has established that assessee has taken bogus
purchase bill to reduce the tax liability. The A.O. made detailed
investigation on it and when the assessee cornered by the A.O. through
investigation, it revised the return and accepted the loss at Rs.7,81,149/-,
as Hon'ble Supreme Court in case of MAK Data (P.) Ltd. vs. CIT (supra)
has held that the surrender of income not have been voluntary in nature as
detected by the Assessing Officer in search conducted. Therefore,
penalty held justifiable by the Hon'ble Supreme Court. The issue is
I TA No . 2 80 2 /A h d/ 1 2 A. Y. 1 98 9- 90
Th e I TO v s . G e er a F in an c e Lt d. Page 10
identical in this case as assessee has revised his return when witnesses
had admitted having been given accommodation entry to the assessee.
Therefore, we have considered view that ld. CIT(A) was not right in
deleting the penalty. Accordingly, we reverse the order of the CIT(A).
6. In the result, Revenue's appeal is allowed.
This Order pronounced in open Court on 27.03.2014
Sd/- Sd/-
(D.K.Tyagi) (T.R. Meena)
Judicial Member Accountant Member
True Copy
S.K.Sinha
/ Copy of Order Forwarded to:-
1. / Appellant
2. × / Respondent
3. / Concerned CIT
4. - / CIT (A)
5. , , / DR, ITAT, Ahmedabad
6. [ / Guard file.
By order/ ,
/
,
|
