M/s. Satya Sankalp Developers, Ahmedabad V. The ACIT, Central Circle-4(2), Ahmedabad

ITA 1606/AHD/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1403 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 29-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R R MAKWANA
• Keywords: Bogus purchase; Initiation of penalty proceedings; Set aside
• Section: 271(1)(c); 69C; 274

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD ( CONVENED THROUGH VIRTUAL COURT ) BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 1606/AHD/2018) ( ASSESSMENT YEAR : 2007-08) M/S. SATYA SANKALP DEVELOPERS VARIS V. ISANI 103, 104, 105, 106, 203 ELLISBRIDGE SHOPPING CENTRE, OPP. TOWN HALL, ELLISBRIDGE, AHMEDABAD - 380006 / VS. ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 4(2), AHMEDABAD ./ ./ PAN/GIR NO. : ABEFS0080P ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : HEM CHHAJED, A.R. / RESPONDENT BY : SHRI R. R. MAKWANA, SR.D.R. DATE OF HEARING 24/06/2021 !'# / DATE OF PRONOUNCEMENT 06/07/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-4, AHMEDABAD (CIT(A) IN SHORT), DATED 2 5.05.2018 ARISING IN THE PENALTY ORDER DATED 28.03.2016 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2007-08. ITA NO. 1606/AHD/2018 (M/S. SATYA SANKALP DEVELOPERS VS. ACIT) A.Y. 2007-08 - 2 - 2. AS PER ITS GROUNDS OF APPEAL, THE ASSESSE HAS CH ALLENGED THE IMPOSITION OF PENALTY OF RS.7,60,000/- ON ACCOUNT O F ESTIMATED ADDITIONS TOWARDS BOGUS PURCHASES. 3. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN THE B USINESS OF CONSTRUCTION AND IS PURSUING THE BUSINESS AS DEVELO PERS/ORGANISERS DURING THE FINANCIAL YEAR RELEVANT TO A.Y. 2007-08. THE ASSESSEE FILED RETURN OF INCOME SHOWING TAXABLE INCOME AT RS.10,09 ,820/-. IN THE COURSE OF THE REGULAR ASSESSMENT UNDER S.143(3) OF THE ACT, THE AO MADE AN ADDITION OF RS.1,12,80,256/- ON ACCOUNT OF BOGUS PURCHASES ENTERED IN THE BOOKS TAKING SHELTER OF SECTION 69C OF THE ACT. IN THE QUANTUM APPEAL BEFORE THE CIT(A), AN ESTIMATION OF DISALLOWANCE WAS MADE AT 20% OF THE AFORESAID BOGUS PURCHASES AND CO NSEQUENTLY, THE DISALLOWANCE WAS RESTRICTED TO RS.22,56,051/-. 4. THE REVENUE CHALLENGED THE FIRST APPELLATE ORDER BEFORE THE ITAT IN QUANTUM PROCEEDINGS. THE CO-ORDINATE BENCH OF TRIBUNAL MODIFIED THE ESTIMATION MADE BY THE CIT(A) TO 25% I N PLACE OF 20% TAKING GUIDANCE FROM THE DECISION OF THE HONBLE GU JARAT HIGH COURT IN THE CASE OF VIJAY PROTEINS LTD. 58 TAXMANN.COM 44 (GUJ) AND SANJAY OIL CAKE INDUSTRIES (2009) 316 ITR 274 (GUJ) . THE AFORESAID ESTIMATED DISALLOWANCE ALSO INVITED PENALTY UNDER S .271(1)(C) OF THE ACT @ 100% THEREON. 5. IN THE FIRST APPEAL AGAINST THE PENALTY ORDER, T HE CIT(A) CONFIRMED THE ACTION OF THE AO TOWARDS IMPOSITION O F PENALTY. 6. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE CONTROVER SY INVOLVES IMPOSITION OF PENALTY UNDER S.271(1)(C) OF THE ACT ON DISALLOWANCES ITA NO. 1606/AHD/2018 (M/S. SATYA SANKALP DEVELOPERS VS. ACIT) A.Y. 2007-08 - 3 - CARRIED OUT TOWARDS BOGUS PURCHASES IN THE REALM OF ESTIMATIONS. WE STRAIGHTAWAY NOTE THAT IN ORDER TO ATTRACT PENALTY UNDER S.271(1)(C) OF THE ACT, IT IS NECESSARY THAT THERE MUST BE CONCEAL MENT BY THE ASSESSEE OF PARTICULARS OF ITS INCOME OR FURNISHING OF INACC URATE PARTICULARS OF INCOME PER SE. NEEDLESS TO SAY, BEFORE PENALTY CAN BE IMPOSED, THE ENTIRETY OF CIRCUMSTANCES MUST REASONABLY POINT TO THE CONCLUSION THAT THE DISPUTED AMOUNT REPRESENTS INCOME AND THE ASSES SEE HAS CONCEALED THE PARTICULARS THEREOF OR FURNISHED INACCURATE PAR TICULARS. THE DISALLOWANCE IN THE INSTANT CASE IS ON ESTIMATED BA SIS ON THE PRESUMPTION THAT EXPENDITURE INCURRED IS EXCESSIVE HAVING REGARD TO NATURE AND BUSINESS ACTIVITIES OF ASSESSEE AND ALSO HAVING REGARD TO THE NON-AVAILABILITY OF COGENT EVIDENCES TO SUPPORT PUR CHASES. THE TRIBUNAL IN QUANTUM PROCEEDINGS HAS TAKEN GUIDANCE FROM THE DECISION RENDERED IN VIJAY PROTEINS LTD. (SUPRA) FOR THE PURPOSES OF QUANTIFICATION OF ESTIMATED DISALLOWANCE. THE QUAN TUM ADDITIONS ARE SUSTAINED PURELY ON ESTIMATED BASIS INVOLVING CERTA IN AMOUNT OF GUESS WORK. A CONSPECTUS OF EXPLANATION (1) TO SECTION 2 71(1)(C) OF THE ACT MAKES IT CLEAR THAT THE STATUTE VISUALIZES THE ASSE SSMENT PROCEEDINGS AND PENALTY PROCEEDINGS TO BE WHOLLY DISTINCT AND I NDEPENDENT TO EACH OTHER. WHILE THE REVENUE MAY BE JUSTIFIED IN MAKIN G ESTIMATED DISALLOWANCE IN QUANTUM PROCEEDINGS, SUCH DISALLOWA NCE OF EXPENSES, THAT TOO ON ESTIMATED BASIS, COULD NOT AUTOMATICALL Y FALL WITHIN MISCHIEF OF SECTION 271(1)(C) OF THE ACT. WHILE A CLAIM TOWARDS EXPENDITURE MAY NOT BE FOUND ACCEPTABLE IN QUANTUM PROCEEDINGS, SUCH DISALLOWANCE CANNOT AUTOMATICALLY INVITE RIGOR OUS ACTION BY WAY OF PENALTY. THE HONBLE GUJARAT HIGH COURT HAS AFF IRMED THE VIEW THAT PENALTY CANNOT BE IMPOSED ON SUCH ESTIMATED AD DITIONS IN SOMEWHAT SIMILAR CIRCUMSTANCES IN VIJAY PROTEINS LTD. VS. CIT (2015) 58 TAXMANN.COM 44 (GUJ). 8. NOTICEABLY, THE ASSESSMENT ORDER IN THE QUANTUM PROCEEDINGS HAS BEEN ALTERED BY THE FIRST APPELLATE AUTHORITY IN A SIGNIFICANT WAY. DRASTIC REDUCTION IN QUANTIFICATION OF DISALLOWANCE TOWARDS BOGUS ITA NO. 1606/AHD/2018 (M/S. SATYA SANKALP DEVELOPERS VS. ACIT) A.Y. 2007-08 - 4 - PURCHASES FROM 100% TO 20% WAS CARRIED ON. THUS, T HE EFFICACY OF THE VERY BASIS OF INITIATION OF PENALTY PROCEEDINGS HAS PALED INTO INSIGNIFICANCE, WHEREAS THE AO HAS CONTINUED THE PE NALTY PROCEEDINGS ON THE BASIS OF SAME NOTICE. AS NOTED, SATISFACTI ON OF THE AO FORMING THE BASIS FOR ISSUANCE OF NOTICE STOOD SIGN IFICANTLY MODIFIED IN THE COURSE OF QUANTUM APPELLATE PROCEEDINGS AND THUS COULD NOT BE ACTED UPON. NEEDLESS TO SAY, THE LEVY OF PENALTY U NDER S.271(1)(C) OF THE ACT IS NOT AUTOMATIC AND SIGNIFICANCE OF EXPRES SION MAY IN SECTION 271(1)(C) OF THE ACT GIVING STATUTORY DISCR ETION TO AO CANNOT BE UNDERMINED. THUS, KEEPING IN MIND STARKLY DIFFER ENT PARAMETERS WHICH OPERATE FOR THE PURPOSES OF WEIGHING ON IMPOS ITION OF PENALTY UNDER S.271(1)(C) OF THE ACT, WE FIND CONSIDERABLE MERIT IN THE PLEA OF THE ASSESSEE FOR INAPPLICABILITY OF SECTION 271(1)( C) OF THE ACT IN THE FACTS OF THE CASE. WE ACCORDINGLY SET ASIDE THE IM PUGNED ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY SO I MPOSED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . SD/- SD/- (MADHUMITA ROY) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 06/07/2021 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 06/07/2021