ITO WARD 1(2), Thane V. SMT. MANIBEN MANSHI BAUVA, Thane

ITA 1998/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5367 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 04-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOMNATH WAJALE
• Keywords: Bogus purchase; Bonafide belief; Tax effect
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, M UMBAI BEFORE SHRI SHAMIM YAHYA, AM ITA NO. 1998/MUM/2019 (ASSESSMENT YEAR: 2010-11) ITO WARD 1(2), R. NO. 24, B WING, 6 TH FLOOR, ASHAR I. T. PARK, WAGLE ESTATE ROAD NO.16Z, THANE 400 604 VS. SMT. MANIBEN MANSHI BAUVA 703/704, A WING, OM GURU DUTT CHS LTD., BEHIND JANAM HOSPITAL, JOSHIWADA, THANE-400 601 PAN/GIR NO. AAAPB 8795 M ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI SOMNATH WAJALE RESPONDENT BY : NONE DATE OF HEARING : 06.10.2020 DATE OF PRONOUNCEMENT : 06.10.2020 O R D E R PER SHAMIM YAHYA, A. M.: THIS IS AN APPEAL WHERE THE REVENUE IS AGGRIEVED TH AT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-1, THANE, (LD.CIT(A) FOR S HORT) HAS ERRED IN DELETING THE PENALTY LEVIED U/S. 271(1)(C) OF THE INCOME TAX ACT , 1961 (THE ACT' FOR SHORT) AMOUNTING TO RS.84,440/- BY ORDER DATED 16.01.2019. 2. BRIEF FACTS OF THE CASE ARE THAT PURSUANT TO THE INFORMATION FROM THE SALES TAX DEPARTMENT, THE ASSESSMENT WAS REOPENED. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (A.O. FOR SHORT) MADE THE DISALLOWANCE OF 12.5% OF THE PURCHA SES AMOUNTING TO RS.21,86,039/-AND PENALTY U/S. 271(1)(C) AMOUNTING TO RS.84,440/- WAS ALSO LEVIED. 2 ITA NO 1998/MUM/2019 ITO VS. SMT. MANIBEN MANSHI BAUVA 4. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) DELET ED THE PENALTY BY OBSERVING AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FI NDINGS OF THE AO, SUBMISSION OF THE AR AND MATERIAL PLACED ON RECORD. IT IS OBSE RVED THAT THERE IS A NORMAL TENDENCY TO SUBJECT AN ASSESSES TO PENALTY U/S 271(1)(C) IN ALL CASES WHERE THE ASSESSEE REFRAINS TO FILE AN APPEAL PURSUANT TO AN ASSESSMENT ORDER, WITH A H OPE TO END THE NIGHTMARE WHICH BEGAN WITH SELECTION OF CASE FOR SCRUTINY BY ACCEPTING TH E GENERAL ADDITIONS IN ASSESSMENT ORDER. PENALTY IS STRAIGHTAWAY LEVIED MERELY BECAUSE NO AP PEAL HAS BEEN FILED AGAINST THE QUANTUM ORDER. THE HON'BLE SUPREME COURT IN THE CAS E OF SIR SHADILAL SUGAR MILLS (168 ITR 7051) HELD THAT THERE MAY BE A HUNDRED AND ONE REASONS FOR NOT PROTESTING AND AGREEING TO AN ADDITION BUT THAT DOES NOT FOLLOW TO THE CONCLUSION THAT THE AMOUNT AGREED TO BE ADDED WAS CONCEALED INCOME. THE HON'BLE KARNA TAKA HIGH COURT IN CASE OF CIT V. MANJUNATHA COTTON & GINNING FACTORY (2013 35 TAXMAN N.COM 250) CATEGORICALLY HELD THAT:- '....THE VERY FACT THAT THE ASSESSEE AGREED TO PAY TAX AND D ID NOT CHALLENGE THE ASSESSMENT ORDER, CANNOT BE CONSTRUED AS MALA FIDE. ' 5.1 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 F INDING IN ASSESSMENT PROCEEDINGS CANNOT AUTOMATICALLY ADOPTED IN PENALTY PROCEEDINGS AND THE AUTHORITIES HAVE TO CONSIDER THE MATTER AFRESH FROM DIFFERENT ANGLE. MOREOVER, I N THE CASE OF AJAY LOKNATH LOHIA, ORDER DATED 5.10.2018, MUMBAI ITAT HAS ADDRESSED TH AT WHEN AO HAD ESTIMATED COST GP ON ALLEGED PURCHASES, SUCH DISALLOWANCE DOES NOT TANTAMOUNT TO WILLFUL FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271 (1)(C) OF THE INCOME TAX ACT, 1961. 5.2 IN THE CASE OF ETCO PROFILES PVT. LTD. VS. ACI T, IN ITA NO. 5351/MUM/2012, HON'BLE MUMBAI ITAT HAD HELD THAT: '...THE AO HAS DISALLOWED 20% OF PURCHASES ONLY ON PRESUMPTIONS WITHOUT ESTABLISHING FULLY THAT THE ASSESSES HAS MADE PURCH ASES FROM GREY MARKET. EVEN, IF IT IS ASSUMED FOR A MOMENT THAT THE ASSESSEE MIGHT HAVE PURCHASED GOODS FROM GREY MARKET, IT WAS NOT ESTABLISHED THAT THE AMOUNT OF PURCHASES WAS LESS THAN THAT RECORDED IN THE BOOKS OF ACCOUNT. UNDER THESE SET OF FACTS, IT HAS TO BE HELD THAT THE IMPUGNED ADDITION HAS BEEN MADE ONLY ON ES TIMATED BASIS THAT TOO ON PRESUMPTIONS ONLY. HENCE, BY FOLLOWING THE DECISION RENDERED BY THE TRIBUNAL IN THE ASSESSEE'S SISTER CONCERN'S CASE (SUPRA), WE HO LD THAT THE IMPUGNED PENALTY IS LIABLE TO DELETED. ' 5.3 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 EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT O F INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RE TURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM W AS 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 C ONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY ASSESSING OFFICER 3 ITA NO 1998/MUM/2019 ITO VS. SMT. MANIBEN MANSHI BAUVA FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UN DER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE'. 5.4 THE LEVY OF PENALTY IS MERELY ON DISALLOWANCE OF PURCHASES AND NOT FINDING OF CONCEALMENT OF ANY PARTICULAR OR MALA-FIDE INTENTIO N TO REDUCE TAXABLE INCOME. ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF PURCHASES AS BOG US AUTOMATICALLY CANNOT JUSTIFY THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. ACCORDINGL Y, THE PENALTY OF RS.84,440/- IMPOSED U/S. 271(1)(C) OF THE I. T. ACT, BY THE A.O. IS HER EBY DELETED AND THE GROUND OF APPEAL, RAISED AS ABOVE, IS ALLOWED. 5. AGAINST THE ORDER, THE REVENUE IS IN APPEAL BEFO RE THE ITAT. 6. NONE APPEARED FOR AND ON BEHALF OF THE ASSESSEE DESPITE NOTICE SENT. HENCE, I PROCEEDED TO ADJUDICATE THE ISSUE BY HEARING THE LD . DEPARTMENTAL REPRESENTATIVE AND PERUSING THE MATERIAL AVAILABLE ON RECORD. I FIND T HE ADDITION ON ACCOUNT OF BOGUS PURCHASES HAS BEEN DONE ON ESTIMATED BASIS. THE LD. CIT(A) IS CORRECT IN HOLDING THAT THE PENALTY U/S. 271(1)(C) OF THE ACT IN THIS CASE IS N OT SUSTAINABLE. I FURTHER NOTE THAT THE CONDUCT OF THE ASSESSEE IN THIS CASE CANNOT BE CONS IDERED, BE CONTUMACIOUS TO WARRANT LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. THIS PRO POSITION IS SUPPORTED BY THE DECISION OF HON'BLE SUPREME COURT RENDERED BY A LARGER BENCH CO MPRISING OF THREE OF THEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA [1972] 83 ITR 26 (SC) WHEREIN IT WAS HELD AS UNDER: 'AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDINGS, AND PENALTY WILL NOT OR DINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LA W OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATI ON IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSI DERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCR IBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE.' 4 ITA NO 1998/MUM/2019 ITO VS. SMT. MANIBEN MANSHI BAUVA 7. MOREOVER, IT IS ALSO NOTED THAT THE TAX EFFECT I N THIS CASE IS BELOW THE LIMIT OF RS.50 LACS FIXED BY CBDT VIDE CIRCULAR NO. 17/2019 VIDE O RDER DATED 08.08.2015. 8. THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) TRIED TO MENTION THAT SINCE THE ADDITION IS BASED UPON THE INFORMATION FROM SAL ES TAX AUTHORITY, AN OUTSIDE AGENCY, THE PENALTY CAN ALSO CONSIDERED TO BE SO BASED AND HENCE WOULD FALL UNDER THE EXEMPTION CARVED OUT IN THE SAID CBDT CIRCULAR. I AM NOT CONV INCED BY THE ARGUMENT. ONCE THE REVENUE CONCEDES THAT THE PENALTY HAS BEEN LEVIED B ASED UPON OUTSIDE AGENCY INFORMATION, THE PENALTY WOULD HAVE NO LEGS TO STAN D. BE AS IT MAY, I UPHOLD THE ORDER OF LD. CIT(A) IN DELETING THE PENALTY. 9. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD ON 06.10 .2020. SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI; DATED : 06.10.2020 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI