SHARMILA JAIN, Jaipur V. ITO, Jaipur

ITA 237/JPR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1833 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 11-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P P MEENA
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA MKW0 VTQZU YKY LSUH ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & DR. ARJUN LAL SAI NI, AM VK;DJ VIHY LA- @ ITA NO. 237/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2007-08 SMT. SHARMILA JAIN, JAIPUR VS. ITO WARD-06(1), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO: ADJPJ 5988 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI RAJEEV SOGANI (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI P.P. MEENA (J.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 08/11/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 08/01/2018 ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 28.12.2015 OF CIT (A), JAIPUR ARISING FROM PENALTY ORDER PASSED U/S 271(1)(C) OF THE I.T.ACT FOR ASSESSMENT YEAR 2007-0 8. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY TO THE EXTENT OF RS. 1,23,127/- UNDER SECTION 271(1)(C) OF THE INCOM E TAX ACT, 1961. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJU STIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEAS E BE GRANTED BY QUASHING THE PENALTY AMOUNTING TO RS. 1,23,127/- IMPOSED UNDER SECTION 271(1)(C). 2. THE ASSESSEE CRAVES HER RIGHT TO ADD, AMEND OR A LTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. ITA NO. 237/JP/2016 SMT. SHARMILA JAIN, JAIPUR V ITO 2 2. THE ASSESSEE IS PROPRIETOR OF M/S SILVER INN ENG AGED IN THE BUSINESS OF MANUFACTURING OF GOLD & SILVER JEWELLER Y AS WELL AS HANDICRAFTS ITEMS. WHILE COMPLETING THE ASSESSMENT U/S 143(3) ON 24 TH DECEMBER, 2009, THE ASSESSING OFFICER MADE IN ADDIT ION EQUIVALENT 25% OF UNVERIFIABLE PURCHASES MADE FROM CERTAIN PAR TIES AMOUNTING TO RS. 6,64,112/-. THE MATTER IN THE QUANTUM PROCEEDIN GS WAS CARRIED TO THIS TRIBUNAL AND THIS TRIBUNAL VIDE ITS ORDER DATE D 22 ND OCTOBER, 2014 RESTRICTED THE ADDITION TO 15% OF THE UNVERIFIABLE PURCHASES AS AGAINST 25% DISALLOWANCE MADE BY THE AO. IN THE MEANTIME, T HE ASSESSING OFFICER HAS LEVIED THE PENALTY U/S 271(1)(C) VIDE I TS ORDER DATED 22 ND MARCH, 2013. 3. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEF ORE CIT(A). THE LD. CIT(A) THOUGH CONFIRMED THE LEVY OF PENALTY HOW EVER, THE ORDER WAS MODIFIED TO EXTENT AS THE RELIEF GRANTED BY THIS TR IBUNAL IN THE QUANTUM PROCEEDINGS. 4. AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE HA S FILED THE PRESENT APPEAL BEFORE US. 5. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT TH E PENALTY LEVIED U/S 271(1)(C) IS BASED ON THE ADDITION MADE BY THE AO ON ESTIMATION BASIS WITHOUT GIVING A FINDING THAT THE ASSESSEE HA S ACTUALLY INFLATED THE CLAIM OF PURCHASE. THUS, THE AR HAS CONTENDED THAT NO PENALTY CAN BE LEVIED WHEN THE INCOME OF THE ASSESSEE WAS ASSESSED AN ESTIMATE BASIS. HE HAS RELIED UPON A DECISION OF HONBLE JUR ISDICTIONAL HIGH COURT IN CASE OF CIT VS. MAHENDRA SINGH KHEDLA [2012] 252 CTR (RAJ.) 453 (RAJ HC). ITA NO. 237/JP/2016 SMT. SHARMILA JAIN, JAIPUR V ITO 3 6. ON THE OTHER HAND, LD. D/R SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT DISALLOWANCE HAS BEEN CONF IRMED THIS TRIBUNAL TO THE EXTENT OF 15% OF UNVERIFIABLE PURCHASES AND THE SAME HAS ATTAINED THE FINALITY. THEREFORE, THE CASE OF THE ASSESSEE FALLS IN THE AMBIT OF SECTION 271(1)(C). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE AD DITION IN QUESTION WAS MADE BY THE AO @ 25% OF UNVERIFIABLE PURCHASES WHILE COMPLETING THE ASSESSMENT U/S 143(3). THERE IS NO DEFINITE FIN DING BY THE AO THAT THE ASSESSEE HAS INFLATED THE PURCHASE TO THE EXTEN T OF 25% BUT IT WAS ONLY ESTIMATION OF THE AO TO MAKE ADDITION WHICH WA S SUBSEQUENTLY RESTRICTED BY THIS TRIBUNAL TO 15% OF UNVERIFIABLE PURCHASE. THUS EVEN THE ADDITION IN QUANTUM PROCEEDINGS ATTAINED THE FI NALITY IT IS NOT BASED ON THE FINDING THAT THE ASSESSEE HAS INFLATED THE P URCHASES AND SUPPRESSED THE INCOME OR CLAIM OF THE ASSESSEE WAS ABSOLUTELY BOGUS. THE AO HAS ONLY DOUBTED THE PURCHASES FROM CERTAIN PARTIES AND MADE THE ADDITION ONLY TO THE EXTENT OF 25% OF PURCHASES MADE FROM SUCH PARTIES INSTEAD OF DISALLOWING ENTIRE PURCHASES FRO M THOSE PARTIES. WHEN THE AO HAS NOT GIVEN ANY FINDING OF BOGUS PURCHASES THEN THE DISALLOWANCE MADE BY THE AO IS ONLY BASED ON ESTIMA TION WHICH WAS RESTRICTED BY THIS TRIBUNAL AS REASONABLE ESTIMATED . ACCORDINGLY, THE ITA NO. 237/JP/2016 SMT. SHARMILA JAIN, JAIPUR V ITO 4 ISSUE OF LEVY OF PENALTY U/S 271(1)(C) OF SUCH ADDI TION IS NOW COVERED BY THE DECISION OF HONBLE JURISDICTION HIGH COURT IN CASE OF CIT VS. MAHENDRA SINGH KHEDLA(SUPRA). THE HONBLE HIGH COUR T WHILE CONSIDERING THE ISSUE OF LEVY OF PENALTY ARISING FR OM THE ADDITION BASED ON ESTIMATION IN PARA 6 TO 8 AS UNDER:- 6. WE HAVE CONSIDERED THE SUBMISSIONS OF LEARNED COUN SEL FOR APPELLANT AND EXAMINED THE REASONS ASSIGNED BY APPELLATE AUTHORIT Y AS WELL AS APPELLATE TRIBUNAL FOR SETTING ASIDE THE PENALTY ORDER. 7. THE APPELLATE AUTHORITY AS WELL AS THE APPELLATE T RIBUNAL BOTH CONSIDERED THE MATTER IN DETAIL AND BY SPEAKING ORDER SET ASIDE TH E PENALTY LEVIED BY ASSESSING OFFICER, IN THE FACTS AND CIRCUMSTANCES O F THE PRESENT CASE. THE RELEVANT PORTION OF PARA 7 OF ORDER OF THE TRIBUNAL IS REPRODUCED AS UNDER:- 'PARA 7. .....THE ENQUIRY CONDUCTED BY THE AO MAY L EAD TO ARRIVE AT THE FINDINGS AS TO WHETHER THE PARTICULARS DISCLOSED AR E TRUTHFUL OR FALSE OR NOT PROVED TO BE SATISFACTORY. IN THE FIRST CASE IT WOU LD BE A POSITIVE CASE OF NO CONCEALMENT, IN SECOND CASE IT WOULD BE A POSITIVE CASE OF CONCEALMENT AND IN THIRD CASE BENEFIT OF DOUBT WILL GO IN FAVOUR OF TH E ASSESSEE. THE CASE OF THE ASSESSEE FALLS WITHIN THIRD CATEGORY WHERE THE ALLE GED FACT OF INTRODUCTION OF CAPITAL IS FOUND TO BE NOT PROVED SATISFACTORILY. T HEREFORE, IT IS NOT A CASE OF POSITIVE CONCEALMENT AND BENEFIT OF DOUBT GOES IN F AVOUR OF THE ASSESSEE. THERE IS NO DISPUTE THAT TRADING ADDITION WAS MADE ON THE BASIS OF ESTIMATION BECAUSE THE RESULTS SHOWN BY THE ASSESSEE WAS NOT F OUND SATISFACTORY BY THE AO. WHERE AN ESTIMATED ADDITION WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF ON THE PA RT OF THE ASSESSEE TO THE EXTENT OF AMOUNT IN DIFFERENCE SHOWN BY THE ASSESSE E AND ESTIMATED BY THE DEPARTMENT DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF THE CASE. .. UNDER THESE CIRCUMSTANCES WHEN IN THE PRESENT CASE THERE WAS NO POSITIVE EVIDENCE BEYOND DOUBT REGARDING ESTIMATED TRADING A DDITION THAT THE AMOUNT IN DIFFERENCE BETWEEN THE RESULT SHOWN BY THE ASSESSEE AND THAT ESTIMATED BY THE AO WAS RESULTANT OF CONCEALMENT OF PARTICULARS OF I NCOME OR FURNISHING INACCURATE PARTICULARS THEREOF ON THE PART OF THE A SSESSEE, PENALTY UNDER SECTION 271 (1) (C) OF THE ACT CANNOT BE LEVIED. THE AO HAD REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE TRADING ADDITION ON THE B ASIS THAT THE ASSESSEE HAD NOT MAINTAINED SITE-WISE ACCOUNT, NO HEAD-WISE DETA ILS OF CLAIMED PURCHASES WERE FURNISHED, NO SEPARATE HEAD OF EXPENSES WAS MA INTAINED, WORK IN PROGRESS WAS NOT DECLARED, SOME WAGES WERE SHOWN OU TSTANDING WITHOUT COMPLETE DETAILS OF CREDITORS, STOCK REGISTER WAS N OT MAINTAINED AND MISC. ITA NO. 237/JP/2016 SMT. SHARMILA JAIN, JAIPUR V ITO 5 EXPENSES ON WATER TRANSPORTATION ETC. WERE NOT VERI FIABLE AND PURCHASE VOUCHERS OF SAND, STEEL, BAJRI ETC. WERE SELF MADE ETC. ASSESSEE EXPLAINED REASONS FOR THE ABOVE DEFECTS WHICH WERE NOT ACCEPT ED BY THE AO AS NOT FOUND SATISFACTORY. THE AO ACCORDINGLY MADE ESTIMATION. T HE CIRCUMSTANCES SUGGEST THAT IT MAY BE JUST AND PROPER CASE OF MAKING ESTIM ATED TRADING ADDITION BUT AN INFERENCE THEREFROM CANNOT BE DRAWN BEYOND DOUBT ES PECIALLY KEEPING IN MIND THE NATURE OF WORK IN NOT MAINTAINING THOSE BOOKS A ND DETAILS SUPPORTED WITH PROPER VOUCHERS ETC. THAT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF ON THE PA RT OF THE ASSESSEE TO ATTRACT THE PENAL PROVISIONS. IN VIEW OF ABOVE DISCUSSION A ND KEEPING IN MIND THE FACT AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF TH E VIEW THAT THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE PENALTY IN ABSENCE OF POSITIVE EVIDENCE WITH THE DEPARTMENT THAT THERE WAS CONCEALMENT OF PARTICULAR S OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF ON THE PART OF THE A SSESSEE TOWARDS THE ADDITION IN QUESTION. THE FIRST APPELLATE ORDER ON THE ISSUE IS THUS UPHELD.' 8. THE ABOVE FINDING OF THE TRIBUNAL MAKES IT CLEAR T HAT ADDITIONS MADE BY THE ASSESSING OFFICER WERE BASED ON ESTIMATION ONLY. A FACT OR ALLEGATION BASED ON ESTIMATION CANNOT BE SAID TO BE CORRECT ONLY, IT CA N BE INCORRECT ALSO. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, PENALTY WAS WRONGLY LEVIED BY THE ASSESSING OFFICER. THE BASIS FOR LEVY ING PENALTY IN THE PRESENT CASE IS ONLY ESTIMATION, WHICH IS PURELY A QUESTION OF FACT AND THERE IS A CONCURRENT FINDING OF FACT RECORDED BY FIRST APPELL ATE AUTHORITY AS WELL AS THE APPELLATE TRIBUNAL BOTH. 8. IN THE FACTS AND CIRCUMSTANCES AS DISCUSSED ABOV E AS WELL AS RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURI SDICTION HIGH COURT IN CASE OF CIT VS. MAHENDRA SINGH KHEDLA (SUPRA) WE DE LETE THE PENALTY LEVIED U/S 271(1)(C). THE APPEAL OF THE ASSESSEE IS ALLOWED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/01/2018 SD/- SD/- (DR. ARJUN LAL SAINI) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR ITA NO. 237/JP/2016 SMT. SHARMILA JAIN, JAIPUR V ITO 6 DATED:- 08/01/2018. * GANESH KUMAR. COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SMT. SHARMILA JAIN, JAIPUR 2. THE RESPONDENT- ITO, WARD 6(1), JAIPUR 3. CIT 4. CIT(A) 5. DR, ITAT, JAIPUR. 6. GUARD FILE {ITA NO. 237/JP/2016} BY ORDER, ASST. REGISTRAR