2022 (10) TMI 346

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....acts of the case, the ld.counsel for the assessee pointed out that the assessment years involved before us are A.Y. 1991-92 and A.Y. 1999-2000 respectively, i.e. very old assessment years, and the reason being that quantum appeals in both these years had travelled upto the ITAT twice, and on both the occasions the appeals had been restored back to the AO for fresh adjudication. The ld.counsel for the assessee pointed out that the issue involved in the quantum appeals related to the assessee's claim of loss on account of embezzlement. It was pointed out that one Shri Ketan B. Thakkar, was accountant of the company and his father Sh. Bhailal Thakkar was auditor of the company since incorporation of the company; that on account of levy of excise duty different units were created and assembled car air conditioners were purchased by the assessee company from these units. One said unit belonged to Shri Ketan Thakkar, in the name of H.K. Enterprise, who was involved in fraudulent activities and had embezzled huge sum of money from the company; modus operandi being issuing bogus sales bills to the assessee-company, who in good faith made payment of the same, which were thereafter withdrawn....

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...." 5. The ld.counsel for the assessee pointed out that during penalty proceedings the assessee had contended that it had not actually received back the amount from H.K. Enterprises at all, and even furnished copy of the bank statement as proof, but the AO had rejected the same and dismissed this contention of the assessee, noting that the bank account of the H.K. Enterprises reflected this issue of cheque. Accordingly, the AO held that to this extent, the assessee had concealed particulars of income by incorrectly claiming loss on account of embezzlement and levied penalty on the same. Our attention was drawn to para 2.1 to 3 of the penalty order containing finding of the AO in this regard while levying penalty on this amount of Rs.40,000/- amounting to Rs.23,000/-. "2.1 The assessee has made claim of loss of Rs.516,480/- due to embezzlement. However, cheque no.21540 of Rs.40,000/- was issued in favour of VAM AIR TEX PVT LTD (asseseee company) on 19/5/1990 by H K Enterprises hence claim of loss of Rs.40,000/- not allowed out of total claim of Rs.5,16,480/-. Since the assessee has furnished inaccurate particulars of income, the penalty proceeding u/s 271(l)(c) of the act ....

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....mentary evidences, such as bank certificate and destination bank statement regarding two cheques of Rs.2,65,000/- and Rs.50,000/- issued in the name of Everest Services. He drew our attention to the finding of the AO in this regard at para 6.11 of the order for Asst.Year 1999-2000 as under: "6.11 In view of the discussion made in forgoing paras, the claim of Rs.22,08,800/- in respect of embezzlement ( albeit in the name of purchases from H.K. Enterprise) was already recorded in books of the account for the F.Y. 1998-99. The loss was incurred due to misappropriation by employee of the company by manipulating books of account, therefore, the loss occurred during normal course of business operations and it was incidental to the business carried out by the assessee. There is no evidence on record to prove that money siphoned off was paid back to the company. Therefore, the claim of loss due to embezzlement is allowed to the extent as mentioned below. Regarding Cheque of Rs.2,65,000/- issued in the name of Everest Services, the assessee has not furnished any documentary evidence such as bank certificate and destination bank statement, hence it is not verifiable. Furthe....

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....re enclosed herewith. Thus this amount is not embezzlement amount. This mistake has been noticed after the assessment order is received. Bank account of both the persons are enclosed alongwith contra account of both the persons. 5. Regarding Rs.265000/- it is stated that this amount does not appear in both the party's accounts. As such this entry appears in the bank account of Vam Airtex Pvt Ltd on 04/04/1998 by cheque no. 379203 Rs.265000/- but this amount does not appear on credit side of any of the sister concerns i. e. i. Everest Services ii. S R Services iii. Nishant Enterprise iv. Neelav Engineers v. Priyam Enterprise Bank account of all the above parties are enclosed. 6. No appeal is filed against this addition because the matter is very old and concluded after a laps of about 18 years. 7. In this penal proceedings evidences are given being separate proceedings from assessment. 8. In view of the above submission no question of levy of penalty u/s.271(1)(c) arises. Kindly drop penal proceedings and oblige." 8. He pointed out that the AO however rejected the explanation of the asse....

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.... and further observed that the assessee could not produce any document in this regard, an adverse inference in terms of section 114 of the Evidence Act should be drawn to the effect that had those documents been produced, the same would have gone against the interest of the assessee. As per Hon'ble Gujarat high court's decision in the case of Jamnadas & Co v CIT (1994) 210 ITR 218, if the assessee who is required to prove that the failure to return the correct income did not arise from any fraud or any gross or willful negligence on its part, fails to prove these elements, the presumption as contemplated by the said explanation can be raised. The assessee company did not furnish any evidence in its support at all despite opportunities being given. Therefore, in the light of explanation section 271 (1) and above mentioned case law the assessee company is liable for penalty u/s 271 (1) (c) of the act for furnishing inaccurate particulars of income." 9. The ld.counsel for the assessee contended that ld.CIT(A) upheld order of the AO holding that the assessee having been allowed substantial claim of loss of embezzlement, this small claim which was not allowed in two years wer....

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....- out of Rs.3,15,000/- denied in A.Y 1999-2000, was a genuine claim. The assessee had pointed out that Revenue's contention of Rs.40,000/- having been returned by the party which had committed fraud on the assessee was not correct since the amount was not reflected in the bank statement of the assessee of that year. The explanation was substantiated with copy of Bank statement of the assessee. This contention of the assessee has not been controverted by the Revenue authorities. The claim of the Revenue is that Rs.40,000/- stands reflected in the bank statement of the party which has claimed to have refunded this amount to the assessee. This one-sided evidence with the Revenue does not prove that the assessee had actually received back this amount more particularly in the light of counter evidence filed by the assessee reflecting non receipt of the said amount in its bank statement. The assesses claim of embezzlement loss of Rs.40,000/-, in these facts and circumstances, cannot be said to have been found to be false and wholly untenable. The assessee therefore, we hold, cannot be charged with having furnished inaccurate particulars or concealed particulars of income with respect to ....