IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE SHRI SANJAY ARORA (AM) AND SHRI RAM LAL NEGI (JM) ITA No 8488/MUM/2010 Assessment Year: 2004-05 Sainy Heavy Elect & Engg. Co. ITO, Range 10(2)(4), Pvt. Ltd., Aayakar Bhavan, 14-B, Kurla Industrial Estate, Mumbai- 400 020. N.S.S.Road, Narayan Nagar, Vs. Ghatkopar (W), Mumbai- 400 086. PAN:- AAACS5654B (Appellant) (Respondent) Appellant by : Shri. Hari S. Raheja Respondent by : Shri. Ravinder Sindhu Date of Hearing: 24/05/2016 Date of Pronouncement: 04/10/2016 ORDER PER RAM LAL NEGI, JM This appeal has been filed by assessee against order dated 30/09/2010 passed by Ld. CIT(Appeals)-22 Mumbai for Asst. Year 2004-05, whereby Ld. CIT(A) dismissed appeal filed by assessee against penalty order passed by A.O u/s 271(1)(c) of Income Tax Act, 1961 (in short Act ). 2. Brief facts of case are that assessee company filed its return of income declaring total income of Rs. 8,74,870/-. Since assessee had debited Rs. 47,94,870/- and Rs. 1,14,91,974/-on account of labour charges t o and purchase of raw materials, AO verified genuineness of payments and completed assessment u/s 143(3) of Act determining 2 ITA No 8488/MUM/2010 Assessment Year: 2004-05 total income of assessee at Rs. 62,30,470/-. Aggrieved by assessment order assessee filed appeal before Ld. CIT(A. During course of appellate proceedings, assessee produces additional evidence to justify contention. In order to afford fair opportunity to assessee company, Ld. CIT(A) forwarded additional evidence to A.O for further verification. During remand proceedings, payments of labour charges to two parties were found to be genuine. assesse, however, failed to substantiate transactions with remaining six parties. Accordingly, disallowance was calculated at Rs. 44,74,720/-. In quantum appeal disallowance was confirmed by Ld. CIT(A) and ITAT. Consequently, A.O passed penalty order u/s 271(1)(c) of Act in respect of income escaping assessment to tune of Rs. 44,74,702/-. penalty order was further challenged before Ld. CIT(A). Ld. CIT(A) following law laid down by Hon ble Supreme Court in Union of India vs. Dharamendra Textile Processor (2008) 306 ITR 277 confirmed penalty of Rs. 15,66,146/- imposed by A.O. assessee is in appeal before Tribunal against said impugned order on following effective ground of appeal:- 1. Learned Commissioner of Income Tax(A) erred in confirming penalty u/s 271(1)(c) of Rs. 15,66,146/- on ground/s as contained in Appellate order or otherwise. 3. Before us, Ld. Authorised Representative (AR) submitted that during assessment proceedings One Sh. Santosh Balram Tawde from confirmed that he received Rs. 78,990/- out of Rs. 3,09,930/- paid to Super Electrical Engineering. Address and whereabouts in respect of payment made to Industrial Machinery. assessee has proved genuineness of transaction with Sagar Trading Co., Naina Steel Pvt. Ltd., Ambeshwar Trading Co. and Sheetal Enterprises by producing Bank Certificate, Ledger Account and copies of purchase bills along with delivery challan and in some of cases PAN and confirmation of parties. Since, assessee has discharged its burden, question of concealment of income or furnishing of incorrect facts does not arise. Under these circumstances, penalty cannot be levied on assessee. 3 ITA No 8488/MUM/2010 Assessment Year: 2004-05 Ld. AR placing reliance on decision rendered by ITAT Pune Bench in Dy. CIT vs. Mahadik Bros [2003] 84 ITD 19 (Pune), submitted that in absence of for imposing penalty u/s 271(1)(c) there should be element of dishonesty on part of assessee which is not there in present case. Further placing reliance on cases Laxmi Jewellery vs. CIT 171 ITR 649(AP), ITO vs. Ambica Agencies 50 ITD 31 and CIT vs. J.K. Synthetics Ltd.218 ITR 267 (Del) submitted that findings of assessment proceedings are not conclusive for imposing penalty u/s 271(1)(c) of Act. And assessee may establish its case during penalty proceedings also. 4. On other hand Ld. Departmental Representative (DR) relying on concurrent findings of authorities below and ITAT, submitted since assessee has failed to establish genuineness of transactions in question during assessment proceedings or even during appellate proceedings, Ld. CIT(A) has rightly confirmed penalty levied on assessee. 5. We have heard rival submissions and also perused documents placed on record. assessee-company is in business of rewinding and repairs of electrical motors, was unable to justify its claim for expenses (to tune of Rs.53,55,602/-) on purchase of raw materials and labour charges, ostensibly sourced from eight parties. matter in quantum proceedings stands settled by order by Tribunal confirming disallowance to extent of Rs.44,74,702/-, i.e., in respect of six parties. reduction in amount was in remand proceedings directed by first appellate authority admitting additional evidence furnished by assessee before him. No improvement in its case by assessee was observed by Revenue in penalty proceedings, which stood initiated along with, so that penalty came to be levied finally on said additional income of Rs.44.75 lacs. findings by ld. CIT(A) confirming levy of penalty are relevant; he on 4 ITA No 8488/MUM/2010 Assessment Year: 2004-05 examination of facts of case confirming transactions as bogus, so that same are reproduced as under: 5. I have gone through penalty order perused submissions made and also discussed case with AR of appellant. In this case penalty u/s 271(1)(c) has been imposed since parties from whom purchases are made or to whom labour charges are paid were found not to be genuine. issue travelled upto level of Hon ble ITAT. ITAT Mumbai vide their order dated 06/08/2010 have upheld findings of A.O that parties were not genuine and sustained addition. ITAT is highest fact finding authority and its decision on facts is final. It has been observed by Hon ble ITAT that in case of labour charges paid to Super Electricals, it was not clear from record, as to how assessee had paid this amount without same not being shown by Shri Santosh Tawade (who claimed to be from Super Electrical Engineering when appeared before A.O.). assessee in its books had shown said amount as outstanding, no machinery and other assets were held by Super Electricals as per balance sheet, no record of wages and labour charges paid was produced by assessee etc. Accordingly ITAT held that party was not genuine. In case of Industrial Machinery Hon ble ITAT observed that firm constituted of all family members of assessee and it did not show labour charges receivable from assessee as income and also it did not show labour charges payable to labourers as expenses. Accordingly it was held that these were mere entries in books which were fake. Thus labour charges claimed to be paid to these parties were held by ITAT as not genuine. While dealing with payments of purchases, Hon ble ITAT in case of Sagar Trading Co. observed that assessee failed to produce relevant records and evidence to prove genuineness of transaction and even could not furnish confirmation from said party and hence it was not genuine. In case of Naina Steel Hon ble ITAT have observed that PAN card given by assessee in support of its existence was found fake since this number belongs to person being salaried employee having different address. In case of Ameshwar Trading Co. Hon ble ITAT observed that assessee failed to produce records and party was not found at place and hence its existence was not genuine. In case of Sheetal Enterprises Hon ble ITAT observed that summons issued were return unserved, A.O. had made personal enquiry and noted that said party was not existing address, assessee failed to produce any evidence for transportation of goods and even PAN card number. Accordingly it was held that party was not genuine. In view of these facts, 5 ITA No 8488/MUM/2010 Assessment Year: 2004-05 additions made was confirmed by ITAT. Thus on facts there is no dispute that there is attempt on part of appellant to claim expenditure which is not genuine. appellant claims that explanations given were verified. However on facts it may be noted that even pan card given by appellant were found bogus, deliberate attempt to get return of income filed by Shri Santosh B. Tawde in Kalyan, to make transaction genuine has been made, labour charges are being paid but there is no machine or any other assets in balance sheet to do job and mere book entries are being made to settled accounts relating to accounts of family members. All these indicate that there is attempt on part of appellant to deliberately claim expenses which/actually are not there and hence case laws relied upon appellant are not relevant for facts of appellants case. In view of this, I am of considered opinion that A.O has rightly imposed penalty u/s 271(1)(c) which is upheld. Reliance in this regard is place on decision on case of Union of India vs. Dharmendra Textile Processors (2008) 306 ITR 277, wherein Hon ble Supreme Court in their order dated 29/09/2008 have held that object behind enacting Section 271(1)(c) read with explanation indicates that said section has been enacted to provide remedy for loss of revenue. Penalty u/s 271(1)(c) is civil liability . Willful concealment is no essential ingredient for attracting civil liability as in matter of prosecution u/s 276C. If record before A.O can sustain that there was concealment that would be sufficient to sustain penalty. In view of this judgement of Hon ble Apex Court, which is law of land as on date and also on facts of case penalty imposed by A.O u/s 271(1)(c) is sustained. No infirmity in said findings has been brought to our notice. No doubt, penalty proceedings and assessment proceedings are two different and distinct proceedings, and standard of proof required in penalty proceedings is higher than that required in assessment proceeding. onus, however, to prove transactions it claims to have entered into, and its claims per its return of income, is on assessee. assessee, whose conduct has been all through elusive, has abysmally failed to prove genuineness of transactions, despite being allowed sufficient opportunity for same. We, therefore, find no reason for interference and, accordingly, decline it. We decide accordingly, upholding impugned order. 6 ITA No 8488/MUM/2010 Assessment Year: 2004-05 6. In result, assessee s appeal is dismissed. Order pronounced in open court on 4th October, 2016 Sd/- Sd/- (SANJAY ARORA) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated:04/10/2016 /Copy of Order forwarded to : 1.The Appellant 2. Respondent. 3. CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) , ITAT, Mumbai Pramila Sainy Heavy Elect & Engg. Co. Pvt. Ltd. v. ITO, Range 10(2)(4), Mumbai