TaxTMI 
TaxTMI 
2011 (1) TMI 475
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....ears, instrument transformers, air circuit breakers, LT Switchboards etc., after being processed on 11.2.2003 u/s 143(1) of the Income-tax Act, 1961 [hereinafter referred to as the "Act"] was selected for scrutiny with the service of a notice u/s 143(2) of the Act, on 22.10.2003.During the course of assessment proceedings the Assessing officer[AO in short] noticed that an amount of Rs. 4,25,000/- was paid to M/s Shashi Sales & Marketing Pvt. Ltd., Delhi for conducting seminar and conferences to promote the products of the assessee company. Though the payments were made by account payee drafts, to a query by the AO, the assessee did not furnish the details such as nature of seminar, venue, topics, participants etc. Enquiries were made by the Assessing Officer through the Additional Director of Income-tax (Investigation), New Delhi, who vide his letter dated 5.1.2005 informed that in his statement recorded on 5.1.2005, Shri Surender Pal Singh, one of the director of M/s Shashi Sales & Marketing Pvt. Ltd. categorically stated that they were not really in any business but were engaged in giving entries to the needy persons by accepting cash from the customers and issuing cheques for ac....
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.... either through cash or demand drafts or cheques, I hold that the claim of expenses of Rs. 4,25,000/- incurred by the assessee is bogus, accordingly, the addition made by the A.O. is confirmed. As regarding not granting of opportunity for cross-examination of Shri Surendra Pal Singh, Director of M/s. Shashi Sales and Marketing Pvt. Ltd., is concerned, I would like to observe that (there is no specific ground of this nature made by the appellant in the grounds of appeal, but then also, I would like to comment on the issue.) It has been held in the cases of state of J&K v. Bakshi Ghulam Mohd. AIR 1967 (SC) 122,131 and Nath International Sales v. UOI, AIR 1992 Del. 295, 302 that the right of hearing does not include a right to cross-examine. The right to cross examine must depend upon the circumstances of each case and also on the statute concerned. Further, the right to cross-examination is not an absolute right. The question whether the assessee is entitled to cross-examination is a question which may largely depend on the facts and circumstances of the case (Shyam Lai Biri Merchant v. UOI (1993) 68 ELT 548, 551 (All.)). It has also been laid down in K. Thomas v. State of Kerala ....
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.... the corporate world, and are undertaken generally in hotels, as they have in place the necessary wherewithal for the purpose, providing all the necessary infrastructural facilities, viz., local conveyance, residential facilities, conference halls equipped with audio/video gadgets, communication/computing facilities, dining/banquet halls, etc. also, so that the engagement of an outside agency for the purpose is even otherwise not consistent with the practice, or understandable from the stand-point of business prudence or commercial expediency. In fact, it claims to have received substantial orders from Delhi Vidyut Board during the year and a substantial chunk of its business (representing 20% to 25% of its turnover) is with it's own parent concern, M/s Jyoti Ltd., and which it contends to be supplying it with drawings, etc., so that no such organized business meetings were required for at least for its said two principal customers. 4.3 The Revenue has sufficiently impugned the assessee's claim. Non allowance of opportunity for cross-examination, that it argues, also, we find as of no moment in the facts of the case, with it leading no evidence in support of its claim, and which....
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.... conducting conferences, given that there is no structure thereon, leave alone proper infrastructural facilities, which organizing of such a business meeting necessarily entails, besides the boarding and lodging of the out-station participants, etc., are questions/aspects we find as totally unaddressed by it, even as the answer thereto provide the basis on which its claim rests. Still further, how and why no conference could actually be held even as the assessee would only, reasonably speaking, enter into such an arrangement where the holding of such conference(s) is not only eminent, but also visualized as a recurring feature, so that it shall not have to undergo the process of hiring a suitable property every time a conference is to be held. Also, even if, considering that it had contemplated, envisaging a regular user of the said property for the purpose, constructing a structure thereon, it would only have entered into a long-term agreement, as also proceeded to take requisite steps for the purpose. The claim, howsoever viewed, appears ungenuine. It is its genuineness that the Revenue assails, so that the claim of the ld. AR that the same has not been doubted by it is misplaced....
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.... documentary or material evidence is taken, as base for addition cannot by itself form the base of levy of penalty. As mentioned earlier penalty proceedings being quasi criminal in nature conclusive evidence is needed to prove the fact. Since the statement of the director is not supported by any material evidence and again not cross examined suffers from lack of authenticity to become evidence for the levy of penalty. In our submission therefore to levy penalty in this case on the present facts would be totally wrong incorrect and unjustified. If is therefore prayed that penalty initiated be dropped." 2.2 As regards levy of penalty in respect of disallowance of rent, the assessee submitted that "Your assessee had taken open land at Vadodara on lease from Shri Rahul R Amin. The rent on the same is disallowed only because the land could not be put to use. Now, it so happens in business that you take some premises or land on lease with a view to gainfully utilize the same. But for some reasons beyond your control and not anticipated earlier the premises cannot be gainfully employed as envisaged. The claim of the expenditure however cannot become non-genuine. It is therefore humb....
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....hunk of its business with its own associate concern viz M/s Jyoti Ltd. and Delhi Vidyut Board. No organized seminars were required for the business with these principal customers. (ix) Generally when such a seminar is arranged, photographs are taken. If at all such seminar was arranged, the assessee could have shown the same in support of its claim of expenses. (x) Since the matter was thoroughly probed by the Investigation Wing of the Department therefore, there is no scope for drawing any other inference. (xi) It is also not believable why the payee reacted in such a way having accepted the payment from the assessee. The assessee could not establish the nature and the basis of the misunderstanding which led it to assume a position contrary to the documentary proof in the form of statement of Shri Surender Pal Singh. (xii) The assessee has not furnished the details of services actually rendered by the said firm. (xiii) Also against the evidence collected by the assessing officer through the Addl DIT(lnv), New Delhi, establishing that the said transaction was merely an accommodation entry, the assessee did not produce any material to co....
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....as paid for the purpose of holding seminars by the company. The Assessing Officer was therefore, justified in levying penalty u/s. 271(1)(c) of the Income tax Act. The same is therefore, confirmed." 4.1 As regards levy of penalty in respect of addition of Rs. 1,80,000/- on account of rent, the learned CIT(A) upheld the levy of penalty with the following observations:- "3.3. I have considered the penalty order and the submissions of the Authorized Representative. The highest fact finding Authority has found the claim of the appellant to be ungenuine. The Assessing Officer was therefore, justified in levying penalty u/s. 271(1)(c) of the Income tax Act on this addition also. The same is therefore, confirmed." 5. The assessee is now in appeal before us against the aforesaid findings of the learned CIT(A). The ld. AR while carrying us through the findings of the ITAT in the quantum appeal contended that at the time of preparation of return, payment for the seminar expenses was made by account payee cheque and the subsequent statement of director of M/s Shashi Sales & Marketing Pvt. Ltd. was never tested by cross examination. As regards levy of penalty in relation to disallowan....
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....on the part of the assessee as envisaged in sec. 271(1)(c) of the Act and whether it is a fit case to impose the penalty by invoking the said provisions. The provisions of section 271(1)(c) of the Act stipulate that if the Assessing Officer or the CIT(Appeals) or the Commissioner, in the course of proceedings under this Act, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars thereof, he may direct that such person shall pay by way of penalty a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by a reason of the concealment of particulars of his income. Explanation 1 to section 271(1)(c) of the Act mentions that where in respect of any facts material to the computation of the total income of any person under the Act, such person fails to offer an explanation or offers an explanation which is found by the AO or the CIT (Appeals) or the Commissioner to be false, or 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....