Income Tax Appellate Tribunal - Rajkot
Vijay Proteins Ltd. vs Assistant Commissioner Of Income Tax on 27 February, 2002
Equivalent citations: (2003)80TTJ(RAJKOT)215
ORDER
Rajpal Yadav, J.M.
1. The assessee is in appeal before us against the order of the learned CIT(A), dt. 8th March, 1999, by which the learned CIT(A) confirmed the levy of penalty amounting to Rs. 29,51,174 under Section 271(1)(c) of the IT Act, 1961, for asst. yr. 1991-92.
2. The brief facts of the case are that return of income declaring total income at Rs. 2,99,270 was filed on 30th Dec., 1991. The learned AO held inquiry and framed the assessment order under Section 143(3) and thereby determined total income at Rs. 1,28,22,500. Since the additions have been made on due detection of concealed income, the assessee has furnished inaccurate particulars of such income which was detected during the assessment proceedings, the penalty proceedings under Section 271(l)(c) r/w Expln. 1 were initiated during the assessment proceeding.
3. The assessee is a public limited company incorporated under the provisions of the Companies Act on 24th March, 1986. The said company had taken over the entire running business of the erstwhile dissolved firm of M/s. Vijay Oil Mills w.e.f. 1st April, 1990, along with its assets and liabilities. The company is engaged in the business of producing edible oils. As per para. 3 of the assessment order, the assessee-company carried out the following production activities during the year under consideration :
(1) Groundnut seeds from groundnut.
(2) Groundnut oil and oil cake from groundnut seeds.
(3) Solvent extraction groundnut oil from groundnut oil cake.
(4) Rapeseed oil and oil cake from rapeseed.
(5) Solvent extracted rapeseed oil from rapeseed oil cake.
(6) Soya-bean oil and oil cake from soya-bean.
(7) Solvent extracted soya-bean oil from soya-bean oil cake.
While framing the assessment order, the learned Asstt. CIT had made the following additions :
(a) Addition of Rs. 39,25,071 towards suppressed oil production, comprising of :
Rs.
(i) low oil recovery in respect of rapeseeds purchased from outside Gujarat State 1,89,982
(ii) low oil recovery in respect of rapeseeds purchased from within the State of Gujarat 37,35,089 Total 39,25,071
(b) Addition of Rs. 3,19,618 towards introduction of oil cake.
(c) Addition of Rs. 7,03,826 towards payment on account of bogus purchases.
(d) Addition of Rs. 17,99,788 towards credit balances in respect of bogus purchases.
(e) Addition of Rs. 5,02,752 being Kharajat expenses in respect of bogus purchases.
4. Aggrieved with the assessment order, the assessee went in appeal before the CIT(A). The learned CIT(A), inter alia, deleted/confirmed the various additions as per details mentioned below :
(a) deleted the addition of Rs. 1,89,982 ;
(b) reduced the additions of Rs. 37,35,089 and Rs. 3,19,618 [shown in (a)(ii) and
(b) above] to Rs. 30,00,000, and
(c) upheld the additions of Rs. 70,03,826, Rs. 17,99,788 and Rs. 5,02,752 [shown in 3(c), (d) and (e) above].
5. Dissatisfied with this, the assessee as well as the Revenue filed appeals before the Tribunal bearing Nos. 5898/1994 and 423/1994, respectively. The Hon'ble Tribunal has partly allowed the appeal of the assessee and dismissed that of the Revenue. The Tribunal has sustained the additions of Rs. 30,00,000 on account of low yield in production and Rs. 27,02,752 on account of purchases from the alleged non-genuine sources. Since the AO was of the opinion that the assessee has furnished inaccurate particulars and concealed particulars of its income, issued show-cause notice under Section 271(1)(c) r/w Section 274 on 26th Feb., 1996, and 16th April, 1996, and sought explanation of the assessee why penalty may not be imposed upon it. The assessee submitted a detailed reply vide letter, dt. 24th Feb., 1996. The copy of the letter is available at pp. 1 to 3 of the paper book. The learned AO took note of the detailed submissions made by the assessee and reproduced them at page Nos. 5 to 8 of the penalty order.
6. The learned Asstt. CIT after considering the detailed submissions of the assessee recorded a finding that the assessee had furnished inaccurate particulars and concealed particulars of the income. Hence, it is liable to be fastened with the penalty as imposable under Section 271(1)(c)(iii). The learned AO before imposing the penalty, considered the factual position in detail and produced the relevant finding of the Tribunal in his order.
7. Dissatisfied with the imposition of penalty, the assessee carried the matter in appeal before the learned CIT(A). The assessee reiterated its contention before the learned first appellate authority. It was contended that the assessee-company maintains elaborate day-to-day stage-wise, quantitative record and no defects have been observed in these records. The yield is within the range certified by various associations. The difference between the out of Gujarat State purchases and local purchases is due to price difference. It was further contended that when the yield in OGS purchases have been accepted, there is no justification for not accepting the yield in local purchases. The assessee submitted before the learned CIT(A) that the explanation offered by the assessee-company may not have been found satisfactory for the purpose of additions but the same has not been found to be false either. Hence, keeping in view the penalty proceedings as of quasi-criminal in nature, the finding of the assessment proceedings have no bearing over imposing the penalty. The learned CIT(A) considered the submissions of the assessee in detail. However, he has not agreed with the submissions made by the assessee and dismissed the appeal. The learned first appellate authority has also taken a note of the finding of facts recorded by the Tribunal before dismissing the appeal. Hence, the assessee is in appeal before us.
8. The learned counsel while impugning the findings of the Revenue authorities below have taken us through the orders of the Tribunal in ITA No. 5898/1994 as well as through the order of the learned Revenue authorities below. He reiterated his contention as were raised before the AO as well as before the first appellate authority. He has taken us through the detailed submissions made before the Asstt. CIT reproduced in this. The learned counsel for the assessee have made a gist of his submissions as placed on record at pp. 5 and 6 of the paper book and we reproduce the gist of his submissions as under:
"Written submissions (1) The penalty has been levied in respect of the following two additions :
(a) Addition of Rs. 30,00,000 on account of alleged low yield in production of rapeseed oil.
(b) Addition of Rs. 27,02,752 on account of purchases from alleged non-genuine sources.
(2) A detailed submission was made to AO vide a letter dt. 22nd Jan., 1996. A copy of the said letter is enclosed herewith which is self-explanatory. The gist of submissions made in the letter is as under:
(A) Addition on account of low yield :
(a) The addition is incorrect in law and the Tribunal has not only granted reference to High Court but also stayed the recovery of demand till the reference is decided by the High Court.
(b) The assessee-company, has maintained elaborate day-to-day stage-wise quantitative records and no defects have been observed in these records.
(c) There is not a single instance of out-of-book purchases or sales.
(d) The yield obtained is within the range certified by various associations.
(e) The yield on OGS purchase has been accepted. The difference is between OGS purchase and local purchase is due to price difference.
(f) Financial results of the assessee have not been found to be unsatisfactory. The books of accounts are audited.
(g) There is no furnishing of inaccurate particulars.
(h) The addition has been made only on an estimated basis.
(i) There is no finding as regards any concealment.
(j) The detailed explanation offered by assessee-company may not have been found satisfactory but has not been found to be false.
(k) The whole basis of addition has undergone a change. The Tribunal has considered the yield in the preceding year and in the succeeding year and has confirmed the addition on this basis which is quite different with which the AO has made the addition.
(D) Addition on account of purchases :
(a) The Tribunal has granted reference and has stayed the recovery of demand.
(b) In asst, yr. 1992-93, Tribunal has set aside entire addition.
(c) In asst. yrs., 1993-94 and 1994-95, the CIT(A) have set aside the entire addition.
(d) It was shown that the price paid for the purchase of cakes from all non-. genuine sources are compared with price paid for genuine purchase. Therefore, the lump sum disallowance of 25 per cent is without basis. This argument of appellant having been accepted in the succeeding year, there is no basis for levy of penalty in the year under appeal."
9. While controverting the argument of the learned counsel for the assessee, the learned Departmental Representative relied upon the orders of the Revenue authorities below and submitted that the learned Asstt. CIT has elaborately discussed the evidence pertaining to addition of bogus purchases from 33 bogus suppliers. He submitted that the penalty has rightly been imposed by the AO. Since the assessee has not disclosed the true and complete particulars of its income, it made concealment. Hence the penalty orders deserve to be upheld.
10. Before deciding the issue in dispute it is necessary to take note of relevant provisions. Hence, Section 271(l)(c) along with the Expln. 1 is being reproduced here below :
"271(1) If the AO or the CIT(A) in the course of any proceedings under this Act, is satisfied that any person :
(a) x x x x x
(b) x x x x x
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,--
(i) [Omitted]
(ii) in the case referred to Clause (b), in addition to any tax payable by him, a sum of ten thousand rupees for each such failure;
(iii) in the cases referred to in Clause (c), in addition to any tax payable by him, a sum which shall not be less than but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income.
Explanation 1. : Where in respect of any facts material to the computation of the total income of any person under this Act, (A) such person fails to offer an explanation or offers an explanation which is found by the AO or the CIT(A) to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income 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."
From the perusal of the above provision, it is clear that the proceedings shall be initiated under Section 271(l)(c) of the IT Act, only if the ITO or the AAC, is satisfied in the course of any proceedings under the Act that any person has concealed the particulars of his income or has furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty the sum mentioned in Sub-clause (iii) of Clause (c). The expression used in Clause (c) is "has concealed the particulars of his income" or "furnished inaccurate particulars of such income". Therefore, both in cases of concealment and inaccuracy, the phrase "particulars of income" is used. It will be noted that as regards concealment the expression in Clause (c) is "has concealed the particulars of his income" and not "has concealed his income". It is obvious that the penal provisions would operate when there is a failure of duty to disclose fully and truly particulars of income, imposed under the Act and the rules thereunder. The duty is enjoined upon a person to make a correct and complete disclosure of his income and it is only when he fails in his duty by not disclosing his income or part thereof, he conceals the particulars of his income. The duty is enjoined upon him to make a complete disclosure of his income as well as correct disclosure. Therefore, if the disclosure made of the particulars of income is incorrect, then also be commits breach of his duty. Such defaults entail the penal consequences contemplated by Section 271(l)(c)(iii) of the Act.
11. Under Section 139(1) of the Act as it stood at the relevant time, it was inter alia, provided that every person, if his total income in respect of which he is assessable under the Act during the previous year, exceeded the maximum amount which was not chargeable to income-tax, shall furnish a return of his income in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. It was, therefore, obligatory on a person whose total income exceeded the maximum amount which was not chargeable to income-tax, to furnish a return of his income, during the "previous year", in the prescribed form. Such return is required to be verified in the prescribed manner. Mot only is he obliged to furnish return of his income, meaning thereby to disclose fully and truly all his income, but he is also required to set forth "other particulars" as may be prescribed, The word "prescribed" as defined by Section 2(33) of the Act, means, "prescribed by the rules under the Act". The forms are accordingly prescribed by the rules framed under the Act. Section 140 of the Act lays down as to by whom such return can be signed and verified.
12. Rule 12 of the Rules framed under the Act prescribed the forms in which the return of income is required to be furnished. The return is required to be verified in the manner indicated in the form. By such verification the assessee declared to the best of his knowledge and belief that the information given in the return and the annexures and statements accompanying it was correct and complete and that of the amount of total income and other particulars shown therein were truly stated and related to the previous year relevant to the assessment year in question. It was also to be stated therein on solemn declaration that no other income accrued or arose or was received by the assessee and that there was no other income including income of any other person in respect of which the assessee was chargeable to tax under the Act. It will also be noted from the contents of the prescribed form of the return of income that the assessee is required to give various particulars of income under different heads.
13. In the case of the assessee, the return was required to be filed in Form No. 1 and as per the provisions, as well as the notes available in the end of form the assessee was required to state complete and true particulars of its income. At the end of the form the prescribed verification was required to be made, inter alia, to the effect that the information given in the return and the annexures and the statement accompanying it were correct and complete and that the amount of total income and other particulars shown were truly stated and related to the previous year relevant to the assessment year.
14. Now, if we look at the facts of the present case, then it will reveal that the assessee claimed deduction of the expenditure amounting to Rs. 93,06,320 pertaining to purchase of raw material. It is settled law that the onus lies on the assessee to prove the genuineness of any expenditure, which is claimed as deduction in computing its taxable income. The assessee has purchased oil cakes from the 33 parties, AO has held these parties as bogus one. Sufficient time was given to the assessee to prove the purchases as genuine. Not only the AO even by the Tribunal while hearing the appeal vide order, dt. 20th July, 1995, the Tribunal gave the final opportunity to the assessee to produce before the AO all the suppliers, transporters, etc. in support of its claim to show the purchase as genuine one. In para 16.3 the Tribunal has taken note of the details of the transactions and the reply of the suppliers from whom the assessee claimed to have purchased the raw material. The contents of reply sent by the suppliers as reproduced in para 16.3 of the Tribunal order, are to this effect:
(a) M/s Balaji Oil Mills, Chittorgarh, in response to letter issued under Section 133(6) replied that their factory is closed since last 15 years and no business was done by them in their name. They have also denied having made any transactions with the assessee.
(b) M/s Charbhuja Oil Mills, Siddhpur, have also stated in their reply to the AO that no such sales were made by them during the year 1991 and three years before or in the later years. They further stated that they never had any business relations with the assessee.
(c) M/s Mahesh Oil Industries, Shahpura, sent a communication to the AO stating that their firm closed the business five years back and no transactions took place during the period from 1st April, 1990, to 31st March, 1991. They also categorically stated that they have no dealings with M/s Vijay Proteins/Vijay Solvent Extraction Industries, Junagadh.
(d) Nakoda Oil Industries, Dungla, in their reply to the AO have stated that anything done by the assessee in the name of their firm is absolutely wrong. They have not made any sales or purchases from M/s Vijay Proteins Ltd., Junagadh, during the period from 1st April, 1990, to 31st March, 1991.
15. On the basis of the detailed discussion, the Tribunal has recorded a specific finding that the purchases by the assessee from 33 parties are not genuine transactions. The Tribunal further recorded that although 33 parties are bogus parties the sale invoice claimed to have been issued by them are fictitious one. The ultimate finding of fact recorded by the Tribunal in para. 16.13 is being reproduced herebelow :
"16.13. In view of the aforesaid facts, material and evidence, existing on records, we are of the considered opinion that the transactions in respect of oil cakes shown as purchases by the assessee from these 33 parties are not genuine transactions. It is reasonably clear and glaringly obvious that all those 33 parties are bogus parties, the sales invoices claimed to have been issued by them are fictitious ones and the bank account in the name of M/s Pooja Traders was opened and operated mainly with a view to accommodation these fictitious transactions carried out by the assessee in respect of oil cakes shown as purchased from such bogus suppliers. The findings given by the AO that the sales invoices in question, vouchers for freight payments in respect of purchases in question are fictitious ones are absolutely justified on the facts and circumstances of the present case."
On the basis of the above finding the Tribunal has applied provisions of Sub-section (2) of Section 145 and rejected the books of accounts and made additions as indicated in Para. 5 of this order. The contention of the learned counsel with regard to non-genuine purchases in asst. yr. 1992-93 that the Tribunal has set aside the entire addition in asst. yrs. 1993-94 and 1994-95 and CIT(A) has set aside the entire addition, has no bearing on the decision of this penalty matter. The granting of reference and staying of recovery of demand have also no bearing on the question, whether the penalty is required to be levied or not.
16. The Tribunal had confirmed the addition of Rs. 30,00,000 on account of lower yield deliberately shown by the assessee. The learned CIT(A) as well as the AO have reproduced the finding of the Tribunal with regard to addition on account of low yield in their orders at para. 4 and para. 10.2 respectively. The Tribunal has considered the contentions of the assessee in detail before making the addition under this head. The learned counsel, for the assessee while impugning the levy of penalty on account of this addition submitted that the detailed explanation offered by the assessee-company may not have been found satisfactory, but has not been found to be false. Hence, on the basis of the additions penalty ought to have not been levied. To us such a proposition, as has been propounded by the learned counsel in his argument, is not acceptable in law. It may be noticed that as per rule of evidence, there is distinction between set of facts "not proved" and facts disproved and facts proved. Benefit of the principle that mere non-satisfactory nature of explanation furnished cannot amount to proof of falsity of explanation furnished and applied in case the fact-finding authority reaches to a stage where it can only conclude that the fact alleged is not proved, which would result that except rejection of the explanation furnished by the assessee, there is no material to sustain the plea of concealment. However, in the present case, there is an ample evidence on record to prove that appellant had claimed deduction of Rs. 93,06,320 pertaining to purchase of raw material from bogus parties or suppliers. This fact has been duly proved on record and being the assessee within the ambit of phrase of furnishing wrong particulars of income. In the present case, there is no (sic) material to sustain the plea of concealment. In the present case, it has been conclusively recorded by the Revenue authorities that the assessee is not maintaining proper books of accounts, its books of accounts does not depict true picture. The books of accounts have been rejected on account of their non-reliability. The Tribunal has highlighted the claim of purchases made by the assessee. How the assessee resorted to claim for bogus purchases with a view to reduce the income earned, all these things have been done by the assessee consciously. The learned first appellate authority in para. 8 of his order specifically observed that the additions have been confirmed by the Tribunal on the basis of evidence gathered at the time of assessment that the assessee has inflated the purchase price, to suppress its income liable to tax. The contention of the assessee that the basis of additions have been changed, the AO made the addition on different basis whereas the Tribunal confirmed the additions on different basis has been rejected by the CIT(A) on the ground that the addition is in respect of the same issue, there may be some variation but ultimately the addition was after rejecting the books of accounts. The issue is one that the assessee has suppressed the yield.
17. Hence, after taking into consideration all the facts and circumstances of the case, we are of the opinion that the assessee has concealed particulars of its income and liable to be visited with the penalty. The Revenue authorities have "rightly imposed the penalty. No interference is called for in the findings recorded by the Revenue authorities below.
18. In the result, the appeal of the assessee is dismissed.