TaxTMI 
TaxTMI 
2012 (9) TMI 558
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.... for all these three years on the basis of information received by him that the commission claimed to have been paid by the assessee company to three companies, viz., M/s Excavators India Pvt. Ltd., M/s Triveni International Products Pvt. Ltd. and M/s Bahari & Company Pvt. Ltd. in the said years was bogus and the amounts paid to the said companies by cheques towards commission had been actually received back by the assessee company in cash. 3. The statement of Mr. M.K. Meattle, Managing Director of the above three companies was recorded u/s. 131 on 8.3.1990 and in his statement Mr. M.K. Meattle informed the Assessing Officer that commission paid to M/s Roger Enterprises Pvt. Ltd. by the three companies were havala entries. Mr. M.K. Meattle informed that the modus operandi was that Mr. Jhunjhunwala used to fill up the paying slip for depositing the cheques issued by M/s Roger Enterprises Pvt. Ltd. in the name of these three companies and M/s Roger Enterprise had accounts in the same branch of the bank. 3.1 Mr. Jhunjhunwala used to take blank cheques signed by Sh. M.K. Meattle fill up the amounts in his own handwriting and withdraw the cash as the cheques were bearer cheques an....
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....njhunwala and held that both the witnesses were witnesses of transaction and were witnesses of fact and rejected the plea of the assessee that Shri Jhunjhunwala was stranger to the transaction. The Hon'ble ITAT held that in the light of provisions of section 33 of the Evidence Act, statement of Shri M.K.Meatlle recorded earlier in the course of assessment proceedings stands as the assessee did not cross examine him despite been provided an opportunity to do so and hence the evidence of Mr. M.K.Meatlle was complete and can be read in and thus the problem lied at the hands of the assessee who had not availed of the opportunity given to it and having not availed of this opportunity was unnecessarily trying to blame the revenue and that the onus of the proof that commission paid was genuine was on the assessee. Merely because payment was made by cheque may persuade the authorities to hold the payment be genuine but in this case the situation is totally reverse as parties to whom the payment made by cheque alleged to have been made has his own story to tell. The evidences placed by the assessee did not demonstrate the nature of services rendered by the three companies and accordingly th....
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....amine both Shri Meattle and Shri Jhunjhunwala and the same request was reiterated vide letter dt. 21.01.2004 but such plea at this stage of proceedings appear to be deliberate attempts of the assessee to delay the proceedings. Thus the AO finally concluded that he is of considered view that the assessee has deliberately made a wrong claim of expenditure by way of bogus commission with an intention of concealing the actual income and levied penalty @120% of the tax sought to be d and levied the penalties as under:- A.Y. Concealed income I.Tax surcharge thereon Min. penalty 100% Penalty levied at 120% 1981-82 2186042 1527497 1527497 1832996 1982-83 4377973 2916824 2916824 3500190 1983-84 1145983 763511 763511 916213 4. Before the Ld. Commissioner of Income Tax (A) assessee made elaborate submissions. Considering the above Ld. Commissioner of Income Tax (A) observed that nowhere in the assessment order the Assessing Officer has recorded his satisfaction for initiation of penalty proceedings u/s. 271(1)(c). Ld. Commissioner of Income Tax (A) further observed that Assessing Officer has primarily and substantially relied upon....
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....the entire facts and therefore such statement without cross examination has no meaning in the eyes of law. Ld. Commissioner of Income Tax (A) further observed that in the set aside proceedings, the Assessing Officer could not produce Mr. Meattle for cross examination by the assessee. The notice sent to Mr. Meattle and Mr. A.K. Jhunjhunwala to appear for cross examination has returned unserved. The examination of Mr. Jhunjhunwala on 27.2.1996 denied by the company was not adequate enough because he is not connected with the companies of Mr. Meattle or the assessee company and therefore the assessee company is apparently correct in saying that without cross examination of Mr. Meattle no purpose would have been served by simply cross examining Mr. A.K. Jhunjhunwala. Ld. Commissioner of Income Tax (A) held that the penalty levied without allowing opportunity to the company for cross examination of both the persons are liable to be cancelled. Ld. Commissioner of Income Tax (A) further relied upon the decision of the Delhi High Court in the case of Sona Electric Company vs. C.I.T. 152 ITR 507. The Ld. Commissioner of Income Tax (A) observed that penalty levied on the basis of bald statem....
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....concealment of income by the assessee company or furnishing of inaccurate particulars of such income by it as rightly held by the Ld. Commissioner of Income Tax (A) and even the Ld. Departmental Representative has not been controvert/ rebut this position clearly evident from the said assessment orders. 5. In the case of Ram Commercial Enterprises (Supra), it was held by the Hon'ble Delhi High Court that a bare breading of provisions of Section 271 and the law laid down by Hon'ble Supreme Court in the case of D.M. Manasvi - 86 ITR 557 makes it clear that the assessing authority has to form its own opinion about the concealment of income by the assessee and also record its satisfaction to this effect before initiating the penalty proceedings. Merely because the penalty proceedings have been initiated, it cannot be assumed that such a satisfaction was arrived at in the absence of the same being spelt out by the order of the assessing authority. In the case of C.I.T. vs. Vikas Promoters Pvt. Ltd. - 277 ITR 337, Hon'ble Delhi High Court, while reiterating the similar view, has further held that the provisions of Section 271(1)(c) being penal in nature must be strictly construed and t....
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....he maters needs to be reconsidered by the Tribunal on merits. Under the circumstance, we set aside the impugned order and remand the matter to the Tribunal for reconsideration on merits. The parties will appear before the Tribunal on 06.10.2008 for Directions. The appeal is disposed of." 7. For the assessment year 1981-82 the Hon'ble High Court has set aside the impugned order of the Tribunal and remanded the matter back to the tribunal for consideration on merits, in view of the retrospective amendment of section 271(1B) as inserted by the Finance Act, 2008 with retrospective effect from 1st April, 1989. 8. For the assessment year 1983-84 also the matter was remanded back to the tribunal by the Delhi High Court vide order dated 28.5.2008. In this case also Hon'ble High Court has noted the insertion of section 271B, the Hon'ble High Court had held that the inserted provision reads as follows:- "(1B) Where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment and the said order contains a direction for initiation of penalty proceedings under clause (c) of sub-section (1), such an order of assessm....
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....d hence penalty levied is not sustainable u/s. 271(1)(c). Ld. Counsel of the assessee relied upon the following catena of case laws in this regard:- - C.I.T. vs. Reliance Petroproducts Pvt. Ltd. : 322 ITR 158 (SC) - C.I.T. vs. The Basi Sugar Mills Co. Ltd. : I.T.A. No. 232/2005 (Delhi High Court) - DCIT vs. Saraya Industries Ltd. : 104 TTJ 231 (Del) (Tribunal) - Sh. Rahul Mehta (I.T.A. No. 14/Del/2010) (Del.) (Tribunal) - Sh. Puneet Sehgal : (I.T.A. No. 2869 to 2873/Del/2008) (Del. (Tribunal) - Bhandari Spinning Mills Ltd. vs. I.T.O. (I.T.A. No. 1109/Bang./2007) (Bangalore) (Tribunal) . - C.I.T. vs. Liquid Investments Ltd. : I.T.A. No. 240/2009 (Del. H.C.) - Rahul Mehta in I.T.A. No. 523/2011 (Del. H.C.) - Smt. Ramila Ratilal Shah vs. ACIT : 60 TTJ 171 (Ahd.) - Rupam Mercantile : 91 ITD 237 (Ah.d) (TM) - DCIT vs. Hero Honda Motors Ltd. : 2698/Del/2010 (Del.) - ACIT vs. Sh. Vijay Kumar Jindal : I.T.A. No. 4237/Del/2009 (Del.) - Nayan Builders & Developers P. Ltd. vs. I.T.O. : I.T.A. No. 2379/Mum/2009 (Mum). - C.I.T. vs. Aretic Investment (P) Limited 190 Taxman 157 (Del. H.C.) - C.I.T. vs. Rahuljee & Co. : 250 I.T.R. 225 (Del. H.C.) - N....
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....er book filed by the assessee contain the detailed correspondence entered into by the company regarding the payment of commission. We further find that payment of commission is supported the bank statement of the company and the payments have been made by the account payee cheques/drafts and duly admitted by the recipients and stamp received have also been filed alongwith necessary documents evidencing of payment of commission. 12.2 Hence, in the background of the aforesaid discussion, we find that assessee company has given documents in support of the commission payments and the payments have been made by account payee cheques also. Revenue has held that penalty is leviable on the basis of two statements given by Sh. Meattle and Mr. Jhunjhunwala. It is apparent that in the penalty proceedings assessee has duly sought opportunity to cross examine those two persons, the same was not provided by the Assessing Officer. Under the circumstances, in our considered opinion, conduct of the assessee is not contumacious enough to warrant the levy of penalty u/s. 271(1)(c). 13. We further find that ld. Counsel's proposition that in cases where cases against the tribunal order has been a....
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....held by the Hon'ble High Court to be involving a substantial question of law, in our considered opinion, the penalty is not exigible under this section. We, therefore, order for the deletion of penalty." 16. Now we examine the present case on the touchstone of the aforesaid decisions. In the present case, we find that Hon'ble High Court in I.T.A. No. 439/2003 vide order dated 27.3.2008 in the quantum proceedings has admitted the assessee's appeal against the order of the tribunal in confirmation of the addition as under:- "After hearing the ld. Counsel of the parties, we admit this appeal and framed the following substantial question of law for consideration. - Whether the Income Tax Appellate Tribunal was correct in law in proceedings in the appeal filed by the assessee in the absence of Mr. Meattle having served or made available for cross examination of the assessee. - Whether the Income Tax Appellate Tribunal was correct in law in placing reliance of section 33 of the Indian Evidence Act while denying the opportunity to the assessee to cross examine Mr. Meattle. 17. From the above, we find that against the above confirmation by the Tribunal in this case in quantu....