ITO WARD 1 (4), KALYAN V. M/S SOLAR RESINS PVT. LTD, Thane

ITA 1303/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2718 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 07-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHERA RAM
• Keywords: Bogus purchase; Accommodation entries
• Section: 271(1)(c); 143(3); 201; 13; 147; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , HON'BLE ACCOUNTANT MEMBER ITA NO S . 1302 & 1303 /MUM/201 9 (A.Y S : 201 0 - 11 & 2011 - 12 ) INCOME TAX OFFICER 1(4) 1 ST FLOOR, MOHAN PLAZA WAYLE NAGAR, KHADAKPADA KALYAN (W), MUMBAI 421 301 V. M/S. SOLAR RESINS PVT. LTD., D - 38, MIDC PHASE II DOMBIVALI(E), THANE MUMBAI 421 204 PAN: AABCA6218L (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI B H ERARAM DATE OF HEARING : 04 .03.2020 DATE OF PRONOUNCEMENT : 13 .03 . 2020 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 2 , MUMBAI [HEREINAFTE R IN SHORT LD.CIT(A)] DATED 06.12.2018 FOR THE ASSESSMENT YEAR S 20 1 0 - 11 AND 2011 - 12 . 2. IN BOTH THESE APPEALS REVENUE HAS RAISED THE FOLLOWING IDENTICAL GROUNDS : - 2 ITA NOS. 1302 & 1303/MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) M/S. SOLAR RESINS PVT. LTD., 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE PENALTY BY NOT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE ALLEGED BOGUS PURCHASES FROM THE HAWALA PARTIES DURING THE COURSE OF ASSESSMENT AS WELL AS PENALTY PROCEEDINGS, 2. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE PENALTY BY NOT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT PRODUCE THE ALLEGED BOGUS PARTIES FOR VERIFICATION OF GENUINENESS OF TRANSACTION DURING ASSESSMENT PROCEEDINGS A S WELL AS PENALTY PROCEEDINGS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE PENALTY BY NOT APPRECIATING THE FACT THAT THERE WAS CLEAR INTENTION ON THE PART OF THE ASSESSEE TO REDUCE THE TAXABLE I NCOME BY CLAIMING PURCHASES FROM NON - GENUINE PARTIES. 4. IT IS RESPECTFULLY SUBMITTED THAT THE PENALTY WAS LEVIED FOR THE ADDITIONS MADE ON THE BASIS OF INFORMATION RECEIVED FROM LAW ENFORCEMENT AGENCY OF THE STATE GOVERNMENT OF MAHARASHTRA I.E. SALE TAX D EPARTMENT. 5. 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 20.08.2018 AS PER PARA 10(E) OF THE SAID CIRCULAR. THEREFORE, THE ORDER OF THE CIT(A) MA Y BE VACATED & THAT OF THE ASSESSING OFFICER MAY BE RESTORED 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY GROUND OF APPEAL. 3. BRIEFLY STATED THE FACTS ARE THAT, ASSESSEE A FIRM ENGAGED IN THE BUSINESS OF CHEMICAL MANUFACTURING FILED RETURN OF INCOME ON 12.10.2010 & 28.09.2011 DECLARING INCOME OF . 3,71,090 / - & . 10,32,266 FOR THE A.Y. 2010 - 11 AND 2011 - 12 RESPECTIVELY . ASSESSMENT S WERE REOPENED U/S. 147 OF THE ACT AND REASSESSMENT WAS COMPLETED ON 30.12.2013 U/S. 143(3) R.W.S 147 OF THE ACT DETERMINING THE INCOME AT . 7,58,376 / - AND .11,62,522/ - FOR THE A.Y. 2010 - 11 AND 2011 - 12 3 ITA NOS. 1302 & 1303/MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) M/S. SOLAR RESINS PVT. LTD., RESPECTIVELY . WHILE COMPLETING THE REASSESSMENT THE ASSESSING OFFICER TREATED PURCHASES OF . 3,87,286 / - AND .1,30,252/ - FOR THE A.Y. 2010 - 11 AND 2011 - 12 RESPECTIVELY, MADE FROM VARIOUS DEALERS AS NON - GENUINE ON THE BASIS OF THE INFORMATION RECEIVED FROM SALES TAX DEPARTMENT , MUMBAI THAT ASSESSEE HAS RECEIVE D ACCOMMODATION ENTRIES FROM THOSE PARTIES WITHOUT MAKING ANY PURCHASES BUT MADE PURCHASES ONLY IN GRAY MARKET. THE ASSESSING OFFICER TREATED SUCH PURCHASES FROM VARIOUS PARTIES AS NON - GENUINE AS THE ASSESSEE COULD NOT PRODUCE THE PARTIES AND ALSO COULD NOT ESTABLISH THE MOVEMENT OF GOODS. THUS, THE ASSESSING OFFICER TREATED ENTIRE PURCHASES OF .3,87,286/ - AND .1,30,252/ - AS NON - GENUINE AND BROUGHT TO TAX. THE ASSESSING OFFICER INITIATED PENALTY PROC EEDINGS AND LEVIED PENALTY U/S. 271(1)(C) OF THE ACT STATING THAT WITHOUT ANY SUFFICIENT AND REAS ONABLE CAUSE THE ASSESSEE HAS COMMITTED DEFAULT BY FURNISHING INACCURATE PARTICULARS OF ITS INCOME AS DEFINED U/S. 271(1)(C) OF THE ACT AND AN AMOUNT OF . 3,87,286 / - AND .1,30,252/ - FOR THE A.Y. 2010 - 11 AND 2011 - 12 RESPECTIVELY, REPRESENTS THE CONCEALED I NCOME OF THE ASSESSEE WITHIN THE MEANING OF PROVISION TO SECTION 271(1)(C) OF THE ACT. ON APPEAL THE LD.CIT(A) DELETED THE PENALTY . AGAINST THIS ORDER OF THE LD.CIT(A), REVENUE IS IN APPEAL BEFORE US. 4 ITA NOS. 1302 & 1303/MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) M/S. SOLAR RESINS PVT. LTD., 4. INSPITE OF ISSUE OF NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT BY THE ASSESSEE. THEREFORE, WE PROCEED TO DISPOSE OFF THESE APPEALS ON HEARING THE LD. DR ON MERITS. 5. LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 6. HEARD LD.DR AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE PENALTY WAS LEVIED BY THE ASSESSING OFFICER ON THE DISALLOWANCE OF PURCHASES MADE BY THE ASSESSEE FROM VARIOUS PARTIES, TREATING THEM AS NON - GENUINE. ASSESSING OFFICER WHILE COMPLE TING THE ASSESSMENTS WAS OF THE VIEW THAT THE ASSESSEE MADE PURCHASES IN THE GRAY MARKET AND OBTAINED ONLY ACCOMMODATION ENTRIES FROM VARIOUS PARTIES AND THEREFORE HE HAS DISALLOWED THE PURCHASES AS THE ASSESSEE COULD NOT FILED CONFIRMATIONS FROM THE PARTI ES. MERE DISALLOWANCE OF EXPENSES WOULD NOT ATTRACT THE PENALTY AUTOMATICALLY. LD.CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS THE AVERMENTS IN THE PENALTY ORDER, DELETED THE PENALTY WITH THE FOLLOWING OBSERVATIONS: - 5. I HAVE CAREFULL Y CONSIDERED THE FACTS OF THE CASE, FINDINGS OF THE AO AND MATERIAL PLACED ON RECORD. IT IS OBSERVED THAT THERE IS A NORMAL TENDENCY TO SUBJECT AN ASSESSEE TO PENALTY U/S 271(1)(C) IN ALL CASES WHERE THE ASSESSEE REFRAINS TO FILE AN APPEAL PURSUANT TO AN A SSESSMENT ORDER, WITH A HOPE TO END THE NIGHTMARE WHICH BEGAN WITH SELECTION OF CASE FOR SCRUTINY BY ACCEPTING THE GENERAL ADDITIONS IN ASSESSMENT ORDER. PENALTY IS STRAIGHTAWAY LEVIED MERELY BECAUSE NO APPEAL BEEN FILED AGAINST THE QUANTUM ORDER. THE HON' BLE SUPREME COURT IN THE CASE OF SIR SHADILAL SUGAR MILLS (168 ITR 7051) HELD THAT THERE MAY BE A HUNDRED AND ONE REASONS FOR NOT PROTESTING 5 ITA NOS. 1302 & 1303/MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) M/S. SOLAR RESINS PVT. LTD., AND AGREEING TO AN ADDITION BUT THAT DOES NOT FOLLOW TO THE CONCLUSION THAT THE AMOUNT AGREED TO BE ADDED WAS CONCE ALED INCOME. THE HON'BLE KARNATAKA HIGH COURT IN CASE OF CIT V. MANJUNATHA COTTON & GINNING FACTORY (2013 35 TAXMANN.COM 250) CATEGORICALLY HELD THAT: - ' ....THE VERY FACT THAT THE ASSESSEE AGREED TO PAY TAX AND DID NOT CHALLENGE THE ASSESSMENT ORDER, CANNO T BE CONSTRUED AS MALA FIDE.' 6 . THE SUPREME COURT HAS RECENTLY REITERATED THE LAW IN CASE OF DILIP N. SHROFF V. JT. CIT [2007] 291 ITR 519 BY HOLDING IN PARA 62 THAT FINDING IN ASSESSMENT PROCEEDINGS CANNOT AUTOMATICALLY ADOPTED IN PENALTY PROCEEDINGS AND THE AUTHORITIES HAVE TO CONSIDER THE MATTER AFRESH FROM DIFFERENT ANGLE. 7 . IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS (P) LTD. (2010) 322 ITR 158 (SC) IT WAS HELD AS UNDER: 'WE DO NOT AGREE, AS THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDI TURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSE SSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDER SECTION 271(1)(C). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RET URN WHERE THE CLAIM MADE IS NOT ACCEPTED BY ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE'. 8 . THE LEVY OF PENALT Y IS MERELY ON DISALLOWANCES OF PURCHASES A ND NOT FINDING OF CONCEALMENT OF ANY PARTICULAR OR MALA - FIDE INTENTION TO REDUCE TAXABLE INCOMES. ADDITIONS MADE ON ACCOUNT OF DISALLOWANCES OF PURCHASES AS BOGUS AUTOMATICALLY CANNOT JUSTIFY THE PENALTIES LEVIED U/S 271(1)(C) OF THE ACT. ACCORDINGLY, THE PENALTIES OF RS. 1,19,671/ - AND RS. 40,249/ - IMPOSED U/S 271(1)(C) OF THE IT. ACT, BY THE AO, IN AY 2010 - 11 & 2011 - 12, RESPECTIVELY, ARE HEREBY DELETED AND THE GROUNDS OF APPEAL, RAISED AS ABOVE, FOR BOTH THE YEARS , ARE ALLOWED. 7. ON A READING OF THE OBSERVATIONS AND FINDINGS OF THE LD.CIT(A) WE DO NOT FIND ANY VALID REASON TO DISTURB THE FINDINGS OF THE LD.CIT(A) IN 6 ITA NOS. 1302 & 1303/MUM/2019 (A.YS: 2010 - 11 & 2011 - 12) M/S. SOLAR RESINS PVT. LTD., DELETING THE PENALT Y LEVIED U/S. 271(1)(C) OF THE ACT ON DISALLOWANCE OF PURCHASES AS MERE DISALLOWANCE WILL NOT ATTRACT PENALTY AND WHEN THERE IS COMPLETE DISCLOSURE OF EXPENSES IN THE BOOKS BY THE ASSESSEE . GROUNDS RAISED BY THE REVENUE ARE REJECTED. 8. IN THE R ESULT, APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 13 TH MARCH , 2020 SD/ - SD/ - ( S. RIFAUR RAHMAN) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 13 / 0 3 / 2020 GIRIDHAR , S R. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM