DCIT CIR 4, THANE V. NARYAN KUTTY KARAPPAN KUZHIEL, PALGHAR

ITA 188/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7570 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 13-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Bogus purchase; Opportunity of being heard; Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.188/M/2016 ASSESSMENT YEAR: 2009-10 DY. COMMISSIONER OF INCOME TAX, CIRCLE 4, ROOM NO.2, A WING, 6 TH FLOOR, ASHAR IT PARK, ROAD NO.16Z, WAGLE INDL. ESTATE, THANE (W)-400 602 VS. SHRI NARAYAN KUTTY KARAPPAN KUZHIEL, A-201, SHAKTI VARSHA, NEAR HOLY FAMILY SCHOOL, VASAI EAST, PALGHAR 401 205 PAN: AECPK8363G (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI DEVENDRA JAIN, A.R. REVENUE BY : SHRI SUMAN KUMAR, D.R. DATE OF HEARING : 24.01.2018 DATE OF PRONOUNCEMENT : 16.04.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 20.10.2015 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) CONFIRMING THE IMPOSITION OF P ENALTY [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009-10. 2. THE ONLY GROUND RAISED BY THE REVENUE IS AGAINST THE DELETION OF PENALTY OF RS.32,06,453/- WHICH WAS WRON GLY STATED IN THE GROUND AS RS.93,56,985/- BY LD. CIT(A) AS LEVIED BY THE AO UNDER SECTION 271(1)(C) OF THE ACT WITHOU T ITA NO.188/M/2016 SHRI NARAYAN KUTTY KARAPPAN KUZHIEL 2 APPRECIATING THE PROVISIONS OF EXPLANATION-1 TO SEC TION 271(1)(C) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN WAS FILED BY THE ASSESSEE ON 27.09.09 DECLARING TOTAL INCOME AT RS.45,23,920/-. THEREAFTER, THE CASE WAS SELECTED F OR SCRUTINY AND ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R .W.S. 147 OF THE ACT ON 31.10.13 ASSESSING THE TOTAL INCOM E AT RS.1,39,57,440/- THEREBY MAKING ADDITIONS TO THE TUN E OF RS.94,33,521/- ON ACCOUNT OF BOGUS PURCHASES FROM S OME PARTIES. THE ASSESSEE HIMSELF, DURING THE COURSE OF ASSESSMENT PROCEEDINGS AFTER A QUERY FROM THE AO TO PROVE THE PURCHASES, EXPRESSED HIS INABILITY TO PRODUCE T HE CONFIRMATIONS FROM THE SAID PARTIES AND OFFERED THE AMOUNT FOR TAXATION TO BUY A PEACE OF MIND AND TO COOPERATE WI TH THE DEPARTMENT. THE ASSESSEE DID NOT FILE ANY APPEAL AG AINST THE ASSESSMENT ORDER AND THUS THE ASSESSMENT SO FRAMED ATTAINED FINALITY. THE AO WHILE FRAMING THE ASSESSMENT, INIT IATED THE PENALTY PROCEEDING BY OBSERVING AS UNDER: 6. THE UNDERSIGNED IS SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME TO THE TUNE OF RS.94,33,521/- AND HENCE LIABLE FOR PENAL PROCEEDINGS U/S 271(1)(C) R.W.S. 274 OF THE ACT. P ENAL PROCEEDINGS U/S 271(1)(C) R.W.S. 274 OF THE ACT ARE INITIATED SEPARATELY ON T HIS POINT. THEREAFTER, SHOW CAUSE NOTICE WAS ISSUED ON 07.04.14 TO THE ASSESSEE TO EXPLAIN AS TO WHY THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT SHOULD NOT BE INITIATED FOR FU RNISHING OF INACCURATE PARTICULARS OF INCOME WHICH WAS REPLIED BY THE ASSESSEE BY FILING DETAILED REPLY WHICH STANDS INC ORPORATED BY THE AO IN THE PENALTY ORDER IN PARA 2. FINALLY, TH E AO WAS NOT ITA NO.188/M/2016 SHRI NARAYAN KUTTY KARAPPAN KUZHIEL 3 SATISFIED WITH THE CONTENTIONS OF THE ASSESSEE AND IMPOSED PENALTY EQUAL TO 100% OF THE TAX SOUGHT TO BE EVADE D WHICH COMES TO RS.32,67,453/- BY OBSERVING AND HOLDING AS U NDER: 4. THE UNDERSIGNED IS SATISFIED THAT THE ASSESSEE HAS CONCEALED HIS INCOME TO THE TUNE OF RS.94,33,521/- BY SHOWING UNEXPLAINED P URCHASES AND IS LIABLE TO PAY PENALTY U/S 271(1)(C) OF THE ACT. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DELET ED THE PENALTY BY OBSERVING THAT ASSESSEE FILED BEFORE THE AO ALL THE DETAILS OF PURCHASES INCLUDING SUPPORTING EVIDENCES EXCEPT THAT THE ASSESSEE COULD NOT PRODUCE THE CONFIRMATIO NS AND PARTIES FOR CROSS VERIFICATION AS THE PARTIES WERE ABSCONDING OWING TO NON PAYMENT OF SALES TAX AFTER THEY WERE D ECLARED AS SUSPICIOUS DEALER BY THE SALES TAX DEPARTMENTS AND RELIED ON VARIOUS DECISIONS IN SUPPORT OF HIS CONCLUSION. 5. THE LD. D.R. VEHEMENTLY SUBMITTED BEFORE US THAT T HE ASSESSEE WAS UNDOUBTEDLY RESORTED TO AVAILING THE E NTRIES OF BOGUS PURCHASES TO THE TUNE OF RS.94,33,521/- FROM VA RIOUS PARTIES WHICH WERE DECLARED AS SUSPICIOUS DEALERS B Y THE GOVERNMENT OF MAHARASHTRA. THE MERE ADMISSION ON THE PART OF THE ASSESSEE TO SURRENDER THE SAID AMOUNT OF PUR PORTED BOGUS PURCHASES FOR TAXATION DURING THE COURSE OF A SSESSMENT PROCEEDINGS PROVED THAT ASSESSEE HAS RESORTED TO AV AILING THE ENTRIES OF BOGUS PURCHASES FROM HAWALA DEALERS WITH OUT BUYING ANY ACTUAL MATERIAL AND THUS CONCEALED THE I NCOME. THE LD. D.R. HEAVILY RELIED ON THE ORDER OF AO BY SUB MITTING THAT IT WAS A FIT CASE FOR IMPOSITION OF PENALTY IN VIEW OF EXPLANATION -1 TO SECTION 271(1)(C) OF THE ACT. FIN ALLY, THE LD. ITA NO.188/M/2016 SHRI NARAYAN KUTTY KARAPPAN KUZHIEL 4 D.R. SUBMITTED THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF AO BE RESTORED. 6. THE LD. A.R. PER CONTRA SUBMITTED BEFORE US THAT THE ORDER PASSED BY THE AO WAS TOTALLY WRONG AND AGAINS T THE PROVISION OF LAW AND RELIED ON A SERIES OF DECISION S IN SUPPORT OF HIS CONTENTIONS. THE LD. A.R. SUBMITTED THAT THE AO WHILE INITIATING THE PENALTY PROCEEDINGS IN THE ASSESSMEN T ORDER STATED THAT THE ASSESSEE HAS FURNISHED INACCURATE P ARTICULARS OF INCOME TO THE TUNE OF RS.94,33,521/- AND THE SHOW C AUSE NOTICE WAS ALSO ISSUED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AS APPARENT FROM THE SECOND PARA ON PAGE NO.2 OF THE PENALTY ORDER WHEREAS FINALLY THE PENALTY WAS I MPOSED FOR CONCEALMENT OF INCOME TO THE TUNE OF RS.94,33,521/- B Y SHOWING UNEXPLAINED PURCHASES. THE LD. A.R. SUBMITTED THAT IT IS NOT PERMISSIBLE UNDER LAW TO INITIATE PENALTY ON THE ONE OF TWO LIMBS AND ULTIMATELY LEVIED THE SAME ON ANOTHER LIMB. IN ANOTHER WORDS THE LD. A.R. SUBMITTED THAT THE AO INIT IATED THE PENALTY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME WHEREAS IMPOSED PENALTY FOR CONCEALMENT OF INCOME W HICH IS A CLEAR-CUT VIOLATION OF THE PRINCIPLE OF NATURAL J USTICE. EVEN OTHERWISE ON MERIT THE ASSESSEE HAS VERY STRONG CAS E AS IT WAS A CASE OF BOGUS PURCHASES IN WHICH THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN ORDER TO BU Y PEACE OF MIND AND TO AVOID PROTRACTED LITIGATION, OFFERED TH E AMOUNT OF BOGUS PURCHASES TO TAX. THE LD. A.R. SUBMITTED THAT THE AO HAS NOT DOUBTED THE SALES AND ACCEPTED THE BOOKS OF THE ITA NO.188/M/2016 SHRI NARAYAN KUTTY KARAPPAN KUZHIEL 5 ASSESSEE. UNDER THESE CIRCUMSTANCES, THE ORDER OF L D. CIT(A) NEEDS TO BE AFFIRMED ON BOTH LEGAL AND FACTUAL ASPE CTS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE WAS FOUND TO BE A BENEFICIARY OF HAWALA ENTRIES AMOUNTING TO RS.94,33,521/- FROM VARIOUS PART IES QUA WHICH THE ASSESSEE COULD NOT FILE CONFIRMATIONS NOR THE PARTIES WERE PRODUCED FOR CROSS EXAMINATION/VERIFICATION BE FORE THE AO AND ULTIMATELY ASSESSEE OFFERED THE SAID AMOUNT TO TAX IN THE ASSESSMENT PROCEEDINGS AND CONSEQUENTLY NO QUAN TUM APPEAL WAS FILED. NOW THE AO IN THE ASSESSMENT ORDE R INITIATED PENALTY PROCEEDINGS FOR FURNISHING THE IN ACCURATE PARTICULARS OF INCOME WHEREAS THE PENALTY WAS ULTIM ATELY IMPOSED FOR CONCEALMENT OF INCOME. IN OUR CONSIDERE D VIEW, THERE WAS NO APPLICATION OF MIND ON THE PART OF AO IN THE MATTER OF INITIATION AND IMPOSITION OF PENALTY. TH E ASSESSEE CANNOT BE PUNISHED BY WAY OF LEVYING PENALTY WITHOU T AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD ON THE CHARGE ON WHICH THE PENALTY IS PROPOSED TO BE LEVIED. UND ER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT O RDER PASSED BY THE AO IS BLATANTLY WRONG FOR THE REASON THAT PENALTY WAS INITIATED FOR INACCURATE PARTICULARS OF INCOME WHEREAS IT WAS FINALLY IMPOSED FOR CONCEALMENT OF I NCOME. EVEN ON MERIT, THE LD. CIT(A) HAS PASSED VERY REASO NED ORDER WHICH IN OUR OPINION DOES NOT REQUIRE ANY INFERENCE FROM OUR SIDE AND ACCORDINGLY WE ARE INCLINED TO AFFIRM THE SAME. ITA NO.188/M/2016 SHRI NARAYAN KUTTY KARAPPAN KUZHIEL 6 8. THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.04.2018. SD/- SD/- (JOGINDER SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 16.04.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.