ITO WARD 1 (4), Thane V. M/S LOTUS DYES AND CHEMICALS, Thane

ITA 1298/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4355 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JERALD
• Keywords: Bogus purchase; Corroborative evidences; Accommodation entries
• Section: 271(1)(c); 143(1); 64

Judgement Text

ITA NOS.1298 & 1299/MUM/2019 A.YS. 2009 - 10 & 2010 - 11 INCOME TAX OFFICER, WARD 1(4) VS. M/ S LOTUS DYES AND CHEMICALS 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NOS.1298 & 1299 /MUM/2019 (ASSESSMENT YEARS: 2009 - 10 & 2010 - 11 ) INCOME TAX OFFICER, WARD 1(4) ROOM NO. 11, 6 TH FLOOR, B - WING, WAGLE INDUSTRIAL ESTATE, THANE WEST - 400604 VS. M/S LOTUS DYES AND CHEMICALS SHOP NO.03, THANE SATYAM CHS LTD, PANCHPAKHADI, NEAR NATRAJ SOCIETY G BUILDING, THANE (W) 400602 , PAN AACFL5761B (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI MICHAEL JERALD, D .R RESPONDENT BY: NONE DATE OF HEARING: 26 .10.2020 DATE OF PRONOUNCEMENT: 26 .10.2020 O R D E R PER RAVISH SOOD, JM : THE PRESENT APPEAL S FILED BY THE REVENUE ARE DIRECTED AGAINST T HE RESPECTIVE ORDER S PASSED BY THE CIT(A) - 1 , MUMBAI, DATED 06.12.2018 , WHICH IN TURN ARISES FROM THE ORDER S PASSED BY THE AO UNDER SEC. 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 30.03.2017 FOR A.Y S . 2009 - 10 & 2010 - 11. AS COMMON ISSUES ARE INVOLVED IN THE AFOREMENTIONED APPEALS, THE SAME, THEREFORE , ARE BEING TAKEN UP AND DISPOSED OFF TOGETHER BY WAY OF A CONSOLIDATED ORDER . WE SHALL FIRST TAKE UP THE APPEAL OF THE REVENUE FOR A.Y. 2009 - 10. THE REVENUE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US: ' 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY LEVIED U/S 271(1)(C) WITHOUT PROPERLY APPRECIATING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF MAK DATA PVT. LTD. VS C IT (CIVIL APPEAL NO. 9772 OF 2013 )', THE HON'BLE GUJARAT HIGH COURT'S DECISION IN THE CASE OF N. K. ITA NOS.1298 & 1299/MUM/2019 A.YS. 2009 - 10 & 2010 - 11 INCOME TAX OFFICER, WARD 1(4) VS. M/ S LOTUS DYES AND CHEMICALS 2 PROTEINS LTD, TAX APPEAL NO. 242 OF 2003 DATED 20/06/2016 AGAINST WHICH THE SLP WAS DISMISSED BY THE HON'BLE SUPREME COURT AND ALSO IGNORING THE FACT THAT D EPARTMENT RECEIVED SPECIFIC CREDIBLE INFORMATION IN THIS CASE FROM THE SALES TAX DEPARTMENT OF THE STATE GOVERNMENT OF MAHARASHTRA' IN RESPECT OF NON - GENUINE PURCHASES. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT( A) WAS JUSTIFIED IN DELETING THE PENALTY LEVIED U/S 271(1)(C) WITHOUT APPRECIATING THE FACT THAT THERE WAS A DEFINITE FINDING IN THE ASSESSMENT ORDER IN RESPECT OF BOGUS PURCHASES AND OF FURNISHING INACCURATE PARTICULARS OF INCOME RELATING TO PURCHASES RES ULTING INTO CONCEALMENT OF INCOME. 3. IT IS HUMBLY REQUESTED THAT PRESENT APPEAL IS BEING FILED IN ACCORDANCE WITH THE CBDT'S INSTRUCTION NO. 3/2018 DATED 11/07/2018 AMENDED VIDE LETTER DATED 20.08.20 18 AS PER PARA 10(E) OF THE SAID CIRCULAR. THEREFORE, T HE ORDER OF THE CIT(A) MAY KINDLY BE VACATED AND THAT OF THE AO MAY BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY GROUND OF APPEAL. 2. BRIEFLY STATED, THE ASSESSEE FIRM WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TEXTILE DISPERSE DYES HAD FILED ITS RETURN OF INCOME FOR A.Y. 2009 - 10 ON 29.09.2010 , DECLARING A TOTAL INCOME OF RS. 32,950 / - . RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH U/S 143(1) OF THE ACT. 3. ON THE BASIS OF INFORMATION RECEIVED BY THE A.O FROM THE SALES TAX D EPARTMENT, MAHARASHTRA , THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION ENTRIES IN THE FORM OF PURCHASES FROM CERTAIN BOGUS CONCERNS WHICH WERE IN THE BUSINESS OF PROVIDING BILLS WITHOUT DELI VERY OF GOODS ETC. IN EXCHANGE OF CASH OR COMMISSION BASIS, THE CASE OF THE ASSESSEE WAS REOPENED UNDER SEC.147 OF THE ACT. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES AGGREGAT ING TO RS. 5,23,864 / - F ROM THE FOLLOWING 7 PARTIES: SR. NO. NAME OF THE ENTRY PROVIDER AMOUNT IN THE BILLS TAKEN BY THE ASSESSEE IN 1. JAIN TRADING CORPORATION RS.1,25,320/ - 2. BRIGHT CORPORATION RS. 16,640/ - 3. CENTURIAN SALES CORPORATION RS.1,56,094/ - 4. VICTOR TRADERS RS.1,01,920/ - 5. PRAVESH ENTERPRISES RS. 16,640/ - 6. ATLAS ENTERPRISES RS. 40,040/ - ITA NOS.1298 & 1299/MUM/2019 A.YS. 2009 - 10 & 2010 - 11 INCOME TAX OFFICER, WARD 1(4) VS. M/ S LOTUS DYES AND CHEMICALS 3 7. PADMAVATI TRADING CO. RS. 67,210/ - TOTAL RS.5,23,864/ - IN ORDER TO VERIFY THE GENUINENESS AND VERACITY OF THE AFORESAID PURCHASE TRANSACTIONS, THE A.O ISSUED NOTICES UNDER SEC.133(6) TO THE ABOVEMENTIONED PARTIES, WHICH , HOWEVER, WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES. ACCORDINGLY, THE A.O DIRECTED T HE ASSESSEE TO PRODUCE THE SELLERS FROM WHOM THE IMPUGNED PURCHASES WERE CLAIMED TO HAVE BEEN MADE. HOWEVER, THE ASSESSEE FAILED TO COMPLY WITH THE DIRECTIONS OF THE A.O . BEING OF THE VIEW THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS AND THEREIN PROV E THE GENUINENESS OF THE PURCHASE TRANSACTIONS IN QUESTION ON THE BASIS OF IRREFUTABLE EVIDENCE, THE A.O DISALLOWED THE ENTIRE AMOUNT OF PURCHASES OF RS. 5,23,8 64 / - AND ADDED THE SAME TO THE RETURNED INCOME OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE ASSAI LED THE ASSESSMENT ORDER BEFORE THE CIT(A). THE CIT(A) SCALED DOWN THE DISALLOWANCE OF 100% OF IMPUGNED BOGUS PURCHASES TO 96% AND RESTRICTED THE DISALLOWANCE TO AN AMOUNT OF RS.5,02,909/ - INSTEAD OF RS.5,23,864/ - . 5. THE A.O AFTER RECEIVING THE ORDER PASSED BY THE CIT(A) THEREIN CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY UNDER SEC. 271(1)(C) AS REGARDS THE AFORESAID ADDITION OF RS. 5,02,909 / - SUSTAINED BY THE CIT(A) MAY NOT BE IMPOSED ON IT . AS THE REPLY FILE D BY THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O, THE ASSESSEE WAS THEREFORE SUBJECTED TO PENALTY U/S 271(1)(C) OF RS. 1,55,260 / - . 6. AGGRIEVED, THE ASSESSEE ASSAILED THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C) BEFORE THE CIT(A). OBSERVING, THAT DISALLOWANCE OF PURCHASES CANNOT AUTOMATICALLY JUSTIFY PENALTY U/S 271(1)(C) OF THE ACT, THE CIT(A) VACATED THE PENALTY IMPOSED BY THE A.O. 7. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. WE FIND THA T THE ASSESSEE RESPONDENT DESPITE HAVING BEEN PUT TO NOTICE AS REGARDS THE D ATE OF HEARING OF THE APPEAL HAS ITA NOS.1298 & 1299/MUM/2019 A.YS. 2009 - 10 & 2010 - 11 INCOME TAX OFFICER, WARD 1(4) VS. M/ S LOTUS DYES AND CHEMICALS 4 HOWEVER FAILED TO PUT UP AN APPEARANCE BEFORE US. ACCORDINGLY, BEING LEFT WITH NO OTHER ALTERNATIVE, WE HERE IN PROCEED WITH THE HEARING OF THE APPEAL AS PER RULE 25 OF THE APPELLATE TRIBUNAL RULES, 1963 AFTER HEARING THE APPELLANT REVENUE AND PERUSING THE ORDERS OF THE LOWER AUTHORITIES. IT WAS SUBMITTED BY THE LD. D.R THAT AS THE ASSESSEE HAD ADMITTEDLY MADE BOGU S PURCHASES, TH US , THE A.O HAD RIGHTLY IMPOSED PENALTY UNDER SEC. 271(1)(C). IT WAS AVERRED BY THE LD. D.R THAT THE ORDER OF THE CIT(A) VACATING THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C) MAY BE SET AS IDE AND THAT OF THE A.O BE RESTORED. 8 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD . ADMITTEDLY, IN THE CASE BEFORE US THE A.O HAD STAMPED THE PURCHASES AGGREGATING TO RS. 5,23,864 / - THAT WERE CLAIMED BY THE ASSESSEE TO HAVE BEE N MADE FROM THE AFOREMENTIONED 7 PARTIES, AS BOGUS, FOR THE REASON, THAT THE ASSESSEE HAD FAILED TO PROVE THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS ON THE BASIS OF SUPPORTING EVIDENCE TO THE SATISFACTION OF THE A.O. I N OTHER WORDS, THE A.O HAD DECLINED TO ACCEPT THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDE RATION, FOR THE REASON , THAT THE EVIDENCE PRODUCED BY THE ASSESSEE DID NOT SUBSTANTIATE THE AUTHENTICITY OF THE SAME TO THE HILT. ON APPEAL, THE DISALL OWANCE WAS SCALED DOWN BY THE CIT(A) TO AN AMOUNT OF RS.5,02,909/ - . WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDERATION, AND FIND, THAT THE ADDITION SUSTAINED BY THE CIT(A) IS MERELY BACKED BY AN UNPROVED CLAIM OF THE ASSESSEE, AND NOT A CLAIM W HICH WAS DISPROVED TO THE HILT ON THE BASIS OF IRREFUTABLE DOCUMENTARY EVIDENCE BY THE REVENUE. IN THE BACKDROP OF THE AFORESAID FACTS IT CAN SAFELY BE CONCLUDED THAT THOUGH THE UNPROVED PURCHASES WOULD JUSTIFY AN ADDITION IN THE HANDS OF THE ASSESSEE, HOW EVER, MERELY ON THE SAID STANDALONE BASIS NO PENALTY U/S 271(1)(C) COULD HAVE BEEN VALIDLY IMPOSED. WE FIND THAT OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. UPENDRA V. MITHANI (ITA (L) NO. 1860 OF 2009), DATED 05.08.2009 , WHEREIN IT WAS OBSERVED AS UNDER: - ITA NOS.1298 & 1299/MUM/2019 A.YS. 2009 - 10 & 2010 - 11 INCOME TAX OFFICER, WARD 1(4) VS. M/ S LOTUS DYES AND CHEMICALS 5 THE ISSUE INVOLVED IN THE APPEAL REVOLVES AROUND DELETION OF PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT. THE TRIBUNAL HAS CONCURRED WITH THE VIEW TAKEN BY THE COMMISSIO NER OF INCOME TAX (A). THE COMMISSIONER OF INCOME TAX (A) HAS RIGHTLY TAKEN A VIEW THAT NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPO THESIS THAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE. THE VIEW TAKEN BY THE TRIBUNAL IS A REASONABLE AND POSSIBLE VIEW. THE APPEAL IS WITHOUT ANY SUBSTANCE. THE SAME IS DISMISSED IN LIMINE WITH NO ORDER AS TO COSTS. WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IN THE CASE BEFORE US HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERAC ITY OF THE PURCHASES CLAIMED BY IT TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES BY PLACING ON RECORD EVIDENCE AS WAS CALLED FOR BY THE A.O. BUT THEN , IT IS A MATTER OF FACT BORNE FROM THE RECORDS THAT THE ASSESSEE HAD EVIDENCED THE VERACITY OF THE IMP UGNED PURCHASE TRANSACTIONS BY FURNISHING CERTAIN DOCUMENTS VIZ. INWARD AND OUTWARD DETAILS OF RAW MATERIAL, CONSUMPTION DETAILS, AND ALSO THE RESPECTIVE INVOICES. ALSO, THE ASSESSEE HAD MADE PAYMENTS TO THE SUPPLIERS IN TH E NORMAL COURSE OF ITS BUSINESS. AS THE AUTHENTICITY OF THE AFORESAID MATERIAL HAS NEITHER BEEN DISLODGED N OR DISPROVED BY THE LOWER AUTHORITIES, THEREFORE, THE SAME IN ITSELF WOULD SUFFICE TO TAKE THE CASE OF THE ASSESSEE BEYOND THE REALM OF THE PENAL PROVISIONS CONTEMPLATED UNDER SECTIO N 271(1)(C). OUR AFORESAID VIEW IS FORTIFIED BY THE ORDER OF THE HONBLE SUPREME COURT IN CIT - 2 LUCKNOW VS. U.P STATE BRIDGE CORPORATION LTD. (SLP) (CIVIL) (2018) 97 TAXMAN.COM 279 (SC), WHEREIN THE HONBLE APEX COURT WHILE UPHOLDING THE ORDER OF THE HONB LE HIGH COURT OF ALLAHABAD , HAD OBSERVED , THAT WHERE A CLAIM OF EXPENDIT URE IS NEITHER FOUND INACCURATE NOR COULD BE VIEWED AS CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE, THEN , MERELY BECAUSE THE SAID CLAIM WAS NOT ACCEPTED OR ACCEPTABLE TO THE REVE NUE, BY ITSELF , WOULD NOT ATTRACT PENALTY UNDER SEC. 271(1)(C). NOW, IN THE CA SE BEFORE US, AS THE REVENUE HAS FAILED TO DISPROVE TO THE HILT ON THE BASIS OF CLINCHING EVIDENCE THE AUTHENTICITY OF THE CLAIM OF THE ASSESSEE OF HAVING MADE PURCHASES FROM THE AFOREMENTIONED PARTIES, THEREFORE, MERELY ON THE BASIS OF THE UNPROVED CLAIM OF PURCHASES NO PENALTY UNDER SEC. 271(1)(C) COULD HAVE ITA NOS.1298 & 1299/MUM/2019 A.YS. 2009 - 10 & 2010 - 11 INCOME TAX OFFICER, WARD 1(4) VS. M/ S LOTUS DYES AND CHEMICALS 6 BEEN VALIDLY IMPOSED ON THE ASSESSEE. IN FACT, THE RESTRICTION OF THE DISALLOWANCE OF ENTIRE PURCHASES MADE BY THE A.O TO 96 % OF THE AGGREGATE VALUE O F SUCH PURCHASES BY THE CIT(A) , SPEAKS FOR ITSELF THAT THE DISALLOWANCE SUSTAINED IN THE HANDS OF THE ASSESSEE IS MERELY BACKED BY A PROCESS OF ESTIMATION AND NOT BASED ON ANY CONCRETE EVIDENCE. ACCORDINGLY, A S IN THE CASE BEFORE US NO CLI NCHING MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE WHICH COULD DISPROVE THE AUTHENTICITY OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES, NO PENALTY UNDER SEC.271(1)(C) THUS COULD HAVE BEEN VALIDLY IMPOSED UPON IT . WE THUS NOT BEING ABLE TO FIND ANY INFIRMITY IN THE VIEW TAKEN BY THE CIT(A), UPHOLD THE DELETION OF THE PENALTY U/S 271(1)(C) BY HIM. 9 . THE APPEAL OF THE REVENUE IS DISMISSED . ITA NO.1299/MUM/2019 A.Y. 2010 - 11 10. AS THE FACTS AND THE ISSUE INVOLVED IN THE PRESENT APPEAL REMAINS THE SAME AS WERE THERE BEFORE US IN THE APP EAL OF THE REVENUE IN ITA NO. 1298 /MUM/2019, THEREFORE, OUR ORDER THEREIN PASSED SHALL APPLY MUTATIS MUTANDIS FOR THE PURPOSE OF DISPOSAL OF T HE PRESENT APP EAL OF THE REVENUE IN ITA NO.1299 /MUM/2019. ACCORDINGLY, THE ORDER PASSED BY THE CIT(A) VACATING THE PENALTY U/S 271(1)(C) IS UPHELD. 11. THE APPEAL FILED BY THE REVENUE IS DISMISSED. 12 . RESULTANTLY, THE APPEAL S FILED BY THE REVENUE ARE DISMISSED . ORDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD. SD/ - SD/ - RAJESH KUMAR RAVISH SOOD (ACCOUNTANT MEMBER) ( JUDICIAL MEMBER) MUMBAI, DATE: 26 .10.2020 R. KUMAR ITA NOS.1298 & 1299/MUM/2019 A.YS. 2009 - 10 & 2010 - 11 INCOME TAX OFFICER, WARD 1(4) VS. M/ S LOTUS DYES AND CHEMICALS 7 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI