Income Tax Appellate Tribunal - Mumbai
Asian Electronics Ltd, Mumbai vs Dcit 3(1), Mumbai on 23 June, 2017
1
ITA 3330/Mum/2019
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "F", MUMBAI
Before Shri D.T. Garasia (JUDICIAL MEMBER)
AND
Shri G Manjunatha (ACCOUNTANT MEMBER)
ITA No.3330/Mum /2015
(Assessment year 2008-09 )
Asian Electronics Ltd vs Dy. CIT 3(1), Mumbai
Paramghar, Malviya Road
Opp Vile Parle Post Office
Vile Parle (E), Mumbai-57
PAN : AABCA0832C
APPELLANT RESPONDENT
Appellant by None
Respondent by Ms. Pooja Swaroop
Date of hearing 14-06-2017
Date of pronouncement 06-2017
ORDER
Per G Manjunatha, AM :
This appeal filed by the assessee is directed against order of the Commissioner of Income Tax (Appeals) -8, Mumbai dated 18/06/2013 and it pertains to the Asst. Year 2008-09.
2. Brief facts of the case are that the assessee company filed its return of income for the A.Y. 2008-09, declaring total income of Rs. Nil. The assessment was completed u/s 143(3), on 31-03-2010 determining the total income at Rs. 35,58,90,700/-. During the course of assessment, the A.O. had issued notices u/s 133(6) to 24 parties on test check basis to furnish details of sales made to the assessee. In response, 21 parties have furnished details and three parties did not furnish any details. The A.O. asked the assessee to reconcile the details filed by the suppliers with its books and also file confirmation from 3 parties from whom 2 ITA 3330/Mum/2019 information was not received. The A.O., after reconciliation of confirmations received from parties, arrived at a difference in purchases due to discrepancies in certain parties account. Since, the assessee failed to explain difference in purchases, made additions of Rs. 3,91,84,975/- as unexplained expenditure. The assessee carried the matter in appeal before the CIT(A). The CIT(A), vide his order dated 14-7-2011, based on the remand report restricted additions to Rs. 1,80,58,998/-. Thereafter, the A.O. initiated penalty proceedings u/s 271(1)(c) for concealment of particulars of income and furnishing inaccurate particulars of income. In the penalty proceedings, the A.O. observed that the assessee has furnished inaccurate particulars which results in to concealment of income on account of discrepancies in purchases. Therefore, he opined that it is fit case for levy of penalty and hence, levied penalty of Rs. 61,38,253/- which is 100% of tax sought to be evaded u/s 271(1)(c) of the Act.
3. Aggrieved by the order of the A.O. imposing penalty, the assessee has preferred appeal before the CIT(A). Before the CIT(A), the assessee has filed written submissions to contest imposition of penalty u/s 271(1)(c) by stating that there is no concealment of particulars of income or furnishing inaccurate particulars of income, as the difference in purchases in few parties account is on account of timing difference in accounting purchases which is natural part of accounting, more particularly, when invoices are issued at the fag end of accounting period. The assessee further submitted that in case of Rajdeep, the invoices are issued in the month of February and March 2007, whereas as in the books of the assessee, the same were accounted in next financial year. Similarly in the case of S K Steel Corp where the bill was raised by the party in Feb 2007 and it was accounted in April 2007. These discrepancies were explained with necessary evidences of invoices and delivery challan. The A.O. ignored all details and concluded that the assessee has furnished inaccurate particulars and concealed particulars of income. The CIT(A), after considering relevant explanation of the assessee and also relied upon certain judicial precedents observed that the assessee has failed to explain the difference in purchases with evidences. The CIT(A) further observed that there is difference of Rs. 179,35,208/- which include sales shown in suppliers books which were less than 3 ITA 3330/Mum/2019 purchase reflected in the assessee books and Rs. 1,23,790/- represents purchases shown in assessee's books which is lower than the sales accounted in suppliers books. In view of above clear facts, the assessee has furnished inaccurate particulars and concealed particulars of income in terms of Explanation 1 to section 271(1)(c) which attracts penalty, therefore, the A.O. was rightly imposed penalty of Rs. 61,38,253/-. Aggrieved by the order of the CIT(A), the assessee in in appeal before us.
4. None appeared for the assessee. We have heard ld. D.R. and perused materials available on record. The facts with regard to discrepancies in two suppliers account to the extent of Rs. 1,80,58,998/- is not disputed. The assessee claims to have explained the reasons for difference in purchases. According to the assessee, timing difference in accounting is the main reason for discrepancies noticed by the A.O., which has been explained with invoices and delivery challans. The assessee further explained that in the case of Rajdeep, the party has raised invoice in the month of February and March 2007, whereas it was accounted in April 2007. Similar is in the case of S.K. Steel Corp, where the party has raised invoice in the month of February 2007, whereas it was accounted in the month of April 2007. These facts have been clearly explained to the A.O. with necessary evidences.
5. We do not find any merits in the submission of the assessee. The lower authorities brought out clear facts to the effect that there is difference in purchases from two parties, which was not explained by the assessee with necessary evidences. Though, assessee claims to have explained the difference and which is on account of timing difference in accounting of purchase bills, fails to prove its claim with supporting documents. On the contrary, the A.O. as well as the CIT(A), had given categorical finding that the assessee failed to explain the difference in purchases. The provisions of Explanation 1 to section 271(1)(c) of the Act, is very clear. Once, there is difference in returned income and assessed income and the assessee fails to explain difference to the satisfaction of the A.O. or the CIT(A), or offers an explanation which is found to be false by the A.O. or CIT(A), or such person offers an explanation which he is not able to substantiate and also fails to prove that such explanation is bonafide, then, the amount added or disallowed in . \ I) I..
4ITA 3330/Mum/2019 computing the total income of such person, as a result thereof shall, for the purpose of clause (c) of this sub section be deemed to represent the income in respect of which particulars have been concealed. In this case, no doubt there is difference in purchases. The assessee fails to offer an explanation to the satisfaction of the A.O. The CIT(A), after considering explanation of the assessee and also analysis of certain judicial precedents including the decision of Hon'ble Supreme Court, in the case of Union of India vs. Dharmendra Textiles Processors (2008) 13 SCC 369, confirmed penalty levied u/s 271(1)(c) by observing as under:-
"5.Ground No. 1, 2 & 3The above grounds are taken together as they address a common issue. I find from the record that the AO during the course of assessment proceedings had issued notices u/s. 133(6) to 24 parties on test- check basis. He had provided copies of replies received from the suppliers to the assessee. He had requested the assessee to reconcile the sales shown by such suppliers to the assessee with the purchases in its books of accounts. Also, in respect of parties from whom no reply was received, the assessee was asked to prove the genuineness of purchases by obtaining the confirmations and other necessary evidence. The confirmations were received in respect of 21 parties and no confirmations were received in respect of balance 3 parties. Having considered the above, due to discrepancies, the AO made an addition of Rs. 3,91,84,975/-. In appeal, the CIT(A) restricted the above disallowance to Rs. 1,80,58,998/-. It comprises of Rs. 1,79,35,208/- which include the sales shown in suppliers books which are less than the purchases reflected in the assessee's books and Rs. 1,23,790/- in respect of purchases shown in the assessee's books which are lower than the sales reflected in supplier's books.
In view of the above it is clear that in terms of Explanation 1 to section 271(1)(c), the appellant company has furnished inaccurate particulars of income and concealed its income to the extent of Rs. 1,80,58,998/-.
The Hon'ble Supreme Court in a case reported in Union of India V. Dharamendra Textile Processors [2007] 15 SCC 109, held that the basic scheme for imposition of penalty u/s.271(1)(c) of the I.T. Act, section 1 1AC of the Central Excise Act, 1944, and rule 96ZQ(5) of the Central Excise Rules, 1944 is common. The Hon'ble Supreme Court noted the conflict of opinion between the two judgments reported in Dilip N. Shroff v, Jt.CIT [2007] 291 ITR 519 (SC) on the one hand and on the other hand, Chairman, S E BI v. Sh rira m Mutua l Fund 5 ITA 3330/Mum/2019 repo rted in [2006 ] 5 S CC 3 61. Af te r considering these two cases and explanation given in section 271(1)(c) of the I.T. Act, the Hon'ble Supreme Court referred the matter to the Hon'ble Chief Justice to be adjudicated by a larger Bench. It has been held that the object behind the section read with Explanation indicates that it has been enacted to provide for a remedy for loss of revenue. The penalty under the section is civil liability. Wilful concealment is not an essential ingredient for attracting the civil liability as is the case in the matter of prosecution u/s.276C of the Act what has to be seen as to whether the officer has recorded a finding with regard to concealment.
In a three-judge Bench of the Hon'ble Supreme Court, Union of India v. Dharamendra Textile Processors [2008] 13 SCC 369 (while adjudicating reference), held that the Explanations added to section 271(1)(c) in entirety also indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing returns.
In CIT v. Atul Mohan Bindal [2009] 317 ITR 1 (SC), their Lordships held that mens rea is not necessary for imposing penalty u/s.271 (1)(c) of the Act since it is a civil liability. The provision imposes strict liability on the assessee for concealment of income. It has further been held that if the AO is satisfied that the person has concealed the particulars of his income or furnished inaccurate particulars of such income, such person may be directed to pay penalty.
A penalty order should contain reasons for its conclusion. That does not mean, that there should be new evidence, which was not part of regular assessment. Where the assessment order itself contains facts, which justifies an inference of concealment, the penalty order is sustainable. It was so decided in Raj Kumar Chaurasia v. CIT (2007) 288 ITR 329 (All).
The amendment to Explanation 4 to section 271(1)(c) w.e.f. 1St April, 1976 came up before the Supreme Court as to whether it would be treated as clarificatory, so as to have retrospective effect. It was decided that it has to be construed as clarificatory, so as to make the provision applicable even where there is no positive income and that it should have retrospective effect. It has been held so in the case of CIT vs Gold Coin Health Food (P) Ltd. (2008) 304 JTR 308 (SC).
In view of the above factual scenario and position of law, the minimum penalty of Rs. 61,38,253/- levied by the AO u/s. 271(1)(c) is confirmed."
6ITA 3330/Mum/2019
6. In this view of the matter, we are of the view that the assessee has furnished inaccurate particulars and concealed particulars of income which attracts penalty u/s 271(1)(c) of the Act. The CIT(A) has rightly confirmed penalty levied by the A.O. We do not find any reason to interfere with the CIT(A) order. Hence, we are inclined to uphold the CIT(A)'s order and dismiss appeal filed by the assessee.
7. In the result, appeal filed by the assessee is dismissed.
Order pronounced in the open court on 23rd June, 2017.
Sd/- sd/-
(D.T. Garasia) (G Manjunatha)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dt : 23rd June, 2017
Copy to :
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
/True copy/ By order
Asstt. Registrar, ITAT, Mumbai