Referred Sections:
Section 143 (3) of the income tax act
Section 274 of the income tax act 1961
Section 143 (3) of the act
Section 40A (3) of the income tax act
Section 271 (1) (c) of the income tax act
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "Friday": NEW DELHI
BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
AND
SHRI K.N.CHARY, JUDICIAL MEMBER
ITA No. 265 & 266/Del/2012
(Assessment Year: 2002-03 and 2005-06)
Alfa Bhoj Limited, Vs. ACIT,
4A, Pusa Road, New Delhi Central Circle-3,
PAN: AAACA1066F New Delhi
(Appellant) (Respondent)
Assessee by : Shri K. R. Manjami, Adv
Revenue by: Smti Naina Soin Kapil, Sr. DR
Date of Hearing 30/04/2019
Date of pronouncement 12/07/2019
ORDER
PER PRASHANT MAHARISHI, A. M.
ITA No 265 / Del / 2012 A Y 2002-03
1. This is an appeal filed by the assessee against the order of the ld CIT(A)-I,
New Delhi dated 21.10.2011 for the Assessment Year 2002-03 wherein the
learned CIT capital is confirmed the penalty of INR 6285118/ levied by
the learned assessing officer u/s 271 (1) (C) of the income tax act.
2. The assessee has raised the following grounds of appeal in ITA No.
265/Del/2012 for the Assessment Year 2002-03:-
"1. That the learned Commissioner of Income-tax (Appeals)-II, New Delhi
has erred in confirming the penalty imposed by the ld Assessing Officer
without providing sufficient opportunity to the appellant and without
considering the material available on record.
2. That it is accordingly prayed that the additions confirmed by the
learned Commissioner of Income-tax (Appeals) may kindly be deleted."
3. The brief facts of the case shows that a search was conducted in the case of
the assessee and the assessment was completed u/s 153A read with
section 143 (3) of the income tax act where in various additions were made
in the hands of the appellant. The assessee approached the settlement
commission and had made an admission of INR 3,300,000 on account of
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suppression of sales and receipts. However, the settlement commission
declared the application filed by the appellant as invalid because the
assessee did not pay the taxes on the declared income. The learned CIT A
also confirmed the above addition in the hands of the appellant to the extent
of INR 1 7605370/. Therefore the learned assessing officer found that
assessee is liable for imposition of penalty u/s 271 (1) ( c) for concealment
of income. The learned assessing officer levied the penalty of INR 6
285118/ on concealed income of INR 1 7605370/.
4. The assessee preferred an appeal before the learned CIT A. The learned
CIT A granted several opportunities to the assessee , however the assessee
did not make any representation or made any submission before him and
therefore, he decided the issue on merit and found that since the appellant
has not disclosed this income during the course of search as well as before
the assessing officer but before the settlement commission and also did not
pay the tax on the disclosed income before the settlement commission and
therefore the assessee is not eligible for any immunity for levy of the penalty
and therefore he found that when the assessee has shown that there is a
suppression of sales amounting to INR 3,300,000 the amount was not
disclosed before the search hence it cannot be regarded as a voluntary. In
view of this he upheld the penalty levied by the learned assessing officer of
INR 6 285118/.
5. The assessee is in appeal before us. The only ground that it has raised his
that no sufficient opportunity has been granted by the lower authorities
before the levy of the penalty. He also submitted that the order of the
learned CIT appeal A was contested by the assessee before the coordinate
bench in ITA number 1384/del/2009 in ITA number 1057/del/2009 by
both the parties and therefore as per the order dated 31/8/2018 the
assessee has been granted certain relief and matter has been set aside to
the file of the learned assessing officer for verification of the certain items.
He therefore submitted that the penalty should not have been levied by the
learned assessing officer when the matter is pending before Tribunal.
6. The learned departmental representative vehemently supported the order of
the learned lower authorities and submitted that assessee has remained
completely non cooperative before the lower authorities and therefore there
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is no reason to delete the above penalty. He further stated that the assessee
has disclosed INR 3,300,000 as suppression of sales as per its own
admission therefore on this amount the penalty cannot be deleted at all.
With respect to the other addition, he submitted that the sum of the bogus
share capital of INR 7 805370/ has also been considered by the coordinate
bench and confirmed the same. Wth respect to the bogus unsecured loan
he submitted that the coordinate bench has set aside the issue back to
the file of the learned assessing officer with a direction to re-examine the
same. In view of this he submitted that there is a confirmed addition of INR
3,300,000 on account of suppressed sale and receipts and of INR 7,800,000
on account of bogus share capital, on which the penalty cannot be deleted
as assessee has concealed income.
7. We have carefully considered the rival contention and perused the order of
the lower authorities. With respect to the argument of the learned
authorised representative that there is no sufficient opportunity granted to
the assessee is devoid of any merit. The order of the learned assessing
officer and the order of the learned CIT A shows that during the total
assessment proceedings and the appellate proceedings the assessee has
been given umpteen numbers of opportunities, many summons were issued
but assessee has not complied with them. Before CIT A the assessee was
also given innumerable opportunities of hearing, however, none of them was
availed by this assessee. In view of this, it is apparent that assessee does
not want to represent its case before the lower authorities but at higher
forum would agitate the issue of the penalty, stating that no sufficient
opportunity was granted to the assessee. This is nothing but a ploy to get
the issue set aside to the file of the learned assessing officer and to delay
the process of the justice.
8. We have also seen that the order of the learned CIT A has been contested
by the assessee as well as the revenue before the coordinate bench and the
coordinate bench has pronounced its order dated 31/08/2018 has
confirmed the addition of INR 7 805370/ on account of bogus share capital
as per para number 22 of the order. This issue was further agitated by the
assessee before the honourable Delhi High Court. Honourable Delhi High
Court as per order dated 16/01/2019 (2019) 102 taxmann.com 392 (Delhi)
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has upheld the order of the coordinate bench confirming the addition of
bogus share capital. In view of this, the assessee has concealed income to
the extent of the above sum and penalty has been rightly levied and
confirmed by the lower authorities.
9. With respect to the other sum of suppression of the cash receipt of INR
3,300,000, the above sum was never disclosed by the assessee in the return
of income, therefore it is a concealed income of the assessee and penalty has
been rightly levied by the lower authorities on the sum. Therefore we
confirm the penalty u/s 271 (1) (c) of the income tax act on the above
addition of bogus and capital as well as the suppression of the sales receipt
of INR 3,300,000.
10. With respect to the 3rd addition of INR 6,500,000 the coordinate bench set
aside the whole issue back to the file of the learned assessing officer as per
para number 26 of the order. As the issue has been set aside to the file of
the learned assessing officer for re-examination of the full facts, for the time
being we delete the penalty with a direction to the learned assessing officer,
to re-examine the issue of penalty after making compliance with the
direction of the coordinate bench only. Accordingly, the issue of levy of
penalty on the above sum of INR 6,500,000 is restored back to the file of the
learned assessing officer.
11. In the result appeal filed by the assessee for AY 2002-03 is partly
allowed.
12. Now we come to the appeal filed by the assessee for AY 2005-06.
13. ITA no 266/del/2012 is filed for AY 2005-06 against the order of the
learned Commissioner Of Income Tax (Appeals) I, New Delhi dated
21/10/2011 wherein the penalty levied by the learned the Asst
Commissioner Of Income Tax, Central Circle 13, New Delhi (the learned
AO) u/s 271 (1) (c) read with section 274 of the income tax act 1961 as per
order dated 30/3/2010 of INR 4 698190/ was confirmed.
14. The assessee has raised the following grounds of appeal in ITA No.
266/Del/2012 for the Assessment Year 2005-06:-
"1. That the learned Commissioner of Income-tax (Appeals)-II, New Delhi
has erred in confirming the penalty imposed by the ld Assessing Officer
without providing sufficient opportunity to the appellant and without
considering the material available on record.
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2. That it is accordingly prayed that the additions confirmed by the
learned Commissioner of Income-tax (Appeals) may kindly be deleted."
15. The brief fact shows that assessment u/s 153A read with section 143 (3) of
the act was completed for assessment year 2005 06 and 30/11/2007 at
the total income of INR 3 7898400/. The assessee preferred an appeal
before the learned CIT A- 1 granted the substantial relief to the assessee.
After the grant of the relief the learned CIT A confirmed the disallowance
to the extent of INR 6 883782 with respect to the advance received against
the export of goods. The deferred revenue expenditure of Rs. 2950195/
was claimed by the assessee however same was confirmed by the learned
CIT A. Further sum of INR 1 300000/ was disclosed by the assessee as
suppressed sales in receipts before the settlement commission however
the assessee did not pay the tax thereon and therefore the proceedings
before the settlement commission got abetted on 30/9/2007, the learned
AO made the addition of the above amount. The learned CIT A also
confirmed the above addition as per his order. There was also an issue of
unaccounted sales which was added by the learned assessing officer
however, the learned CIT A disallowed 20% of the unaccounted sales by
applying the provisions of section 40A (3) of the income tax act amounting
to INR 1 705240/. Therefore the learned assessing officer noted that the
assessee has concealed the above income and therefore the penalty of INR 4
698190/ was proposed to be levied. The learned AO granted sufficient
opportunity to the assessee and assessee submitted a written reply on
20/3/2010 submitted that the since the disclosure was made by him
voluntarily before the settlement commission no penalty should be levied.
The assessee also pleaded senior financial constraints. However the learned
AO rejected the contention of the penalty and stated that the disclosure by
the assessee before the settlement commission did not give any immunity
from imposition of penalty as the assessee has failed to deposit the requisite
amount of the tax. He therefore held that assessee has concealed the
income. Accordingly he passed an order u/s 271 (1) ( c) of the act on
30/3/2010 levying the penalty of INR 4 698190 being hundred percent of
tax sought to be evaded on concealed income of INR 1 2839217/.
16. Assessee preferred an appeal before the learned Commissioner of income tax
(appeals). The learned CIT A granted several opportunities as mentioned
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in paragraph number 3 of his order. However the assessee did not avail and
therefore the learned assessing officer giving a detailed reasoning as per
para number 5 14 of his order confirmed the levy of the penalty.
Aggrieved by the order of the learned CIT A assessee preferred an appeal
before us.
17. The learned authorised representative vehemently contested the levy of the
penalty and submitted that assessee has disclosed the sum of INR 1
300000/ before the settlement commission however assessee could not pay
the tax because of the severe financial constraints. He therefore submitted
that the disclosure of the assessee was voluntary and mere failure of
payment of the tax should not result into the penalty for concealment of
income. With respect to the addition made by the learned CIT A u/s 40 A
(3) of the income tax act he submitted that it is the disallowance based on
which the penalty has been levied. He further submitted that mere
disallowance of the above expenditure cannot result into the penalty u/s
271 (1) of the income tax act for concealment of the total income. With
respect to the claim of the deferred revenue expenditure of Rs. 2950195 he
submitted that it is merely disallowance of the expenditure which should
not result into penalty for concealment of income. With respect to the
advanced sales proceeds received from a foreign party he submitted that
assessee could not export the goods to the assessee. He extensively referred
to para number 6 of the order of the learned assessing officer and stated
that out of the total addition of Rs. 8835006/ the learned CIT A has
upheld the disallowance/addition to the extent of only INR 6 883782/. He
stated that assessee has furnished the complete particulars of the above
item. Therefore there is no concealment of income on that account. He
then stated that the assessee has not concealed the income as held by the
learned assessing office.
18. The learned departmental representative vehemently supported the order of
the lower authorities and submitted that assessee has concealed the income
and therefore the penalty has been levied by the learned assessing officer
and confirmed by the learned CIT A. He stated that sufficient opportunity
has been given to the assessee at all the stages however the assessee did not
avail those opportunities and therefore the assessee cannot not lead that no
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proper opportunity has been given. He extensively referred to the order of
the learned assessing officer stating that each and every item has been
considered by the learned assessing officer and proved that there is a
concealment of income by the assessee. In view of this he submitted that
the penalty levied by the learned assessing officer, confirmed by the learned
CIT A should be confirmed.
19. We have carefully considered the rival contention and perused the orders of
the lower authorities. Now we deal with each item on which the penalty has
been levied by the learned assessing officer.
20. The learned assessing officer has considered that assessee has concealed a
sum of INR 1 300000/ as suppressed sales and receipt. The fact resulting
to the above addition shows that the learned assessing officer has made the
above addition because of disclosure made by the assessee before the
settlement commission however, no taxes have been paid and therefore the
proceedings before the settlement commission got abetted on 30/9/2007.
The learned assessing officer made the above addition which was confirmed
by the learned CIT A. As the above sum was disclosed by the assessee
himself before the settlement commission as undisclosed income of the
assessee, we do not find any merit in the argument of the learned
authorised representative that assessee has not concealed the above
income. In view of this the penalty u/s 271 (1) ( c) of the income tax is
confirmed on the above amount and the order of the learned CIT A is
confirmed.
21. With respect to the disallowance u/s 40 A (3) of the income tax act the fact
shows that the learned assessing officer has made an addition of INR 8
526204/ on account of the unexplained investment u/s 69 of the income
tax act whereas the learned CIT A has deleted the above addition.
However, he invoked the provisions of section 40A (3) of the income tax act
1961 stating that based on the seized documents the assessee has
constructed the books of accounts and in those books of accounts assessee
has recorded the above sales in cash. Out of the above cash sales assessee
has incurred expenditure which are in violation of the provisions of section
40A (3) of the income tax act. Therefore the addition of INR 1 705240/ was
made. In the present case the learned assessing officer made the addition
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on account of undisclosed sales whereas the learned CIT A found that the
undisclosed sales has been properly accounted by the assessee in the books
of accounts , however out of those undisclosed sales, certain expenditure in
Cash were made and on those expenditure the provisions of section 40A (3)
of the income tax act was invoked and disallowance was made. Merely
because the expenditure are disallowed the assessee does not make himself
exposed to the provisions of section 271 (1) (c) of the income tax act for
concealment of income. The assessee has disclosed the complete details of
that expenditure in its books of accounts. In view of this, the learned
assessing officer has wrongly levied penalty for concealing the income.
Therefore to that extent on this issue we direct the learned assessing officer
to delete the penalty levied for concealment of income u/s 271 (1) (c) of the
income tax act.
22. With respect to the advances received against the export of goods, the
learned assessing officer made the addition of Rs. 8835006/, however the
learned CIT A on examination of the books of the assessee as well as the
subsequent export made by the assessee has deleted the addition partly.
However with respect to the balance of INR 6 883782/, the assessee has
neither exported those goods or returned the sum to the buyer. The
assessee could not give any explanation even before us that why till date no
export has been made or the advance received has been refunded back. It is
also pertinent to note that the sum was received by the assessee in financial
year 2006 and this matter was heard in financial year 2019. The assessee
also could not show before us or before the lower authority, any efforts
made by the assessee for refunding the above sum. In view of this we have
no hesitation in confirming the penalty levied by the learned assessing
officer and confirmed by the learned CIT A on the above sum.
23. With respect to the claim of the deduction of deferred revenue expenditure
of rrs. 2950195/ the assessee submitted that the above expenditure has
been incurred by the assessee for exploring the future business
opportunities. The learned AO disallowed the above sum u/s 37 of the
income tax act as assessee failed to prove that the expenditure is wholly and
exclusively laid out or expended for the purposes of the business of the
assessee. In absence of any clarity about the purposes for which the
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expenditure has been incurred the above sum was disallowed by the learned
assessing officer. The learned CIT A has also confirmed above
disallowance holding that the above expenditure has no nexus either with
the existing business or any other business venture of the assessee. The
assessee is merely exploring to start new business in South Africa. Thus
these expenditure cannot be allowed as a deduction as incurred
exclusively for the purposes of the business. The learned CIT A also stated
that no material has been produced to suggest that the assessee has
explored some new activity in South Africa, which subsequently aborted for
some reasons. Therefore on the basis of the above facts it is apparent that
the expenditure incurred by the assessee could not be established by the
assessee before the learned lower authorities that those expenditure have
been incurred by the assessee wholly and exclusively for the purposes of
the business. However, the lower authorities have not reached to a
conclusion that assessee has furnished any inaccurate particulars of the
income or has concealed any income on that score. In view of this we are of
the iew that mere disallowance of the expenditure claimed by the assessee
cannot result into concealment of income. In view of this, we reverse the
finding of the lower authorities and direct the learned assessing officer to
delete the penalty levied on this sum.
24. In view of the above findings, the partly allowed the appeal of the assessee
and direct the learned assessing officer to restrict the levy of penalty only on
the addition of INR 1 300000/ being suppressed sales disclosed before the
settlement commission and on INR 6 883782/ being advanced received
against the export of goods.
Order pronounced in the open court on 12/07/2019.
-Sd/- -Sd/-
(K.N.CHARY) (PRASHANT MAHARISHI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 12/07/2019
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
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3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
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