INCOME TAX OFFICER-17(2)(1), MUMBAI V. BHAVIN VINOD SHAH, MUMBAI

ITA 249/MUM/2023

AI Insights

The case involves appeals by the Income Tax Officer against the decision of the Commissioner of Income Tax (Appeals), which had deleted penalties imposed on Shri Bhavin Vinod Shah for the assessment years 2010-11 and 2011-12. The penalties were originally levied following additions made by the Assessing Officer, which were based on the premise that purchases recorded in the assessee's books were from non-genuine sources. The Tribunal noted that the additions were made on an estimated basis and that there was no definitive finding that the bills for the purchases were bogus. The Tribunal referenced a similar case, Shri Ajay Loknath Lohia, where it was held that mere estimation of income does not constitute furnishing of inaccurate particulars under section 271(1)(c).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301128 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-04-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 24-01-2023
• Other Referred Cases: Shri Ajay Loknath Lohia, I.T.A. No. 2998/Mum/2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 147; 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “B”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA Nos.250 & 249/M/2023 Assessment Years: 2010-11 & 2011-12 Income Tax Officer- 17(2)(1), Room No.104, 1 st Floor, Kautilya Bhavan, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051 Vs. Shri Bhavin Vinod Shah, Flat No.61, ‘A’Wing, Heera Panna Building, Bulabhai Desai Road, Haji Ali, Mumbai – 400 026 PAN: AFZPS2315E (Appellant) (Respondent) Present for: Assessee by : Shri Bharat B. Chovatia, C.A. Revenue by : Shri Parsoon Kabra, Sr. A.R. Date of Hearing : 03 . 04 . 2023 Date of Pronouncement : 20 . 04 . 2023 O R D E R Per Bench: The Income Tax Officer-17(2)(1), Mumbai (hereinafter referred to as the Revenue) by filing aforesaid appeals sought to set aside the impugned orders both dated 02.12.2022 passed by the National Faceless Appeal Centre (NFAC) the Commissioner of Income Tax (Appeals), Mumbai [hereinafter referred to as the CIT(A)] deleting the penalty of Rs.1,49,090/- & Rs.1,02,370/- under section 271(1)(c) of the Income Tax Act, 1961 (for short ‘the ITA Nos.250 & 249/M/2023 Shri Bhavin Vinod Shah 2 Act’) for A.Y. 2010-11 & 2011-12 respectively on the identically worded grounds inter-alia that (grounds from 2010-11 have been taken for the sake of brevity): “1. Whether on the facts and in the circumstances of the case the Ld.CIT(A) has erred in deleting the penalty levied by the AO u/s 271(1)(c) without appreciating that the penalty was levied in respect of quantum addition confirmed by Hon'ble ITAT on account of purchases from parties debited in the books of account which proved bogus on the basis of information received from external sources in the nature of law enforcement agencies and other facts and material on record wherein the onus was on the assessee to establish the genuineness of such purchases by production of such parties before the assessing officer and the assessee failed to discharge his onus. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting penalty merely because the addition was confirmed on estimated basis, though the estimation was necessitated because the books of account were proved false as purchases from bogus parties were debited therein. 3. The appellant craves leave to amend or to alter any ground or add a new ground, which may be necessary. 4. The copy of the CIT (A), NFAC order was uploaded on ITBA dated 02/12/2022. The last date for filing appeal is 31/012023.” 2. Briefly stated facts necessary for consideration and adjudication of the issues at hand are : on the basis of assessment framed by the Assessing Officer (AO) under section 143(3) read with section 147 of the Act by making addition of Rs.38,59,841/- and Rs.26,59,760/- for A.Y. 2010-11 & 2011-12 respectively on account of non genuine purchases to the extent of 100% of gross profit, which was confirmed by the Ld. CIT(A), however, the same was restricted by the Tribunal to 12.5% of the alleged non genuine purchases, penalty proceedings have been initiated by the AO under section 271(1)(c) of the Act. Declining the contentions raised by the assessee, the AO proceeded to levy the penalty of Rs.1,49,090/- & Rs.1,02,370/- @ 100% tax sought to be evaded. ITA Nos.250 & 249/M/2023 Shri Bhavin Vinod Shah 3 3. The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has deleted the penalty by accepting the appeals. Feeling aggrieved with the impugned orders passed by the Ld. CIT(A) the Revenue has come up before the Tribunal by way of filing present appeals. 4. We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto. 5. Undisputedly entire addition in this case was made by the AO as well as the Ld. CIT(A) on the basis of guess work and estimation merely on the basis of some alleged information received from the Sales tax Department that the assessee has taken bogus purchase bills without having taken any delivery of goods, without applying their mind. It is also not in dispute that the AO has not examined the books of account of the assessee nor has reached the definite conclusion that the bills for purchasing the goods relied upon by the assessee are bogus but simply made the addition on the basis of information received by the Directorate General of Income Tax (Investigation) [DGIT(Inv.)] from Sales Tax Department of Maharashtra. It is also not in dispute that during the second round of appeal the Tribunal has restricted the addition again on the basis of estimation to 12.5% of the alleged bogus purchases. 6. In the backdrop of the aforesaid undisputed facts when we examine the mandate of provisions contained under section ITA Nos.250 & 249/M/2023 Shri Bhavin Vinod Shah 4 271(1)(c) of the Act the Assessing Authority must have reached the definite conclusion on the basis of independent enquiry that such and such bills were found non genuine/bogus and the assessee has thereby furnished inaccurate particulars of income during the assessment proceedings to conceal his income but no such findings have come on record. In these circumstances penalty levied by the AO is not sustainable in the eyes of law. Co-ordinate Bench of Tribunal in case of Shri Ajay Loknath Lohia, I.T.A. No. 2998/Mum/2017 for the AY 2009-10 vide order dated 05.10.2018 has decided the identical issue levying the penalty under section 271(1)(c) of the Act in case of bogus purchases, in favour of the assessee by returning following findings: “Having heard both sides, we find merit in the arguments of the assessee for the reason that although the AO has estimated 25% gross profit on alleged bogus purchases, never made any observations with regard to the incorrectness in details filed by the assessee to prove such purchases. The AO never disbelieved information filed by the assessee, but the proceeded on the basis of information received from sales-tax department to make additions. The AO has made such addition on ad hoc basis by estimating gross profit on alleged bogus purchases. From these facts, it is very clear that the AO failed to make a case of deliberate attempt by the assessee to furnish inaccurate particulars of income. Therefore, we are of the considered view that mere ITA 2998/Mum/2017 disallowance of purchases on ad hoc basis does not tantamount to wilful furnishing inaccurate particulars of income within the meaning of section 271(1)(c) of the Income Tax Act, 1961. Hence, we are of the considered view that the AO was erred in levying penalty u/s. 271(1)(c) of the Act. Accordingly we direct the AO to delete penalty levied u/s. 271(1)(c) of the Act.” 7. Moreover, the Ld. CIT(A) has also rightly taken note of the fact that in the impugned order that the AO has recorded the satisfaction for imposing penalty for concealment of particulars of income whereas he has levied the penalty for furnishing inaccurate particulars of income which goes to prove that the AO was not aware at the time of recording satisfaction as well as at the time of ITA Nos.250 & 249/M/2023 Shri Bhavin Vinod Shah 5 levying the penalty as to which of the limb of section 271(1)(c) of the Act is to be invoked i.e. as to whether the assessee has concealed the particulars of income or has furnished inaccurate particulars of income. 8. In view of what has been discussed above, we find no illegality or perversity in the impugned orders passed by the Ld. CIT(A) deleting the penalty levied by the AO under section 271(1)(c) of the Act. Hence, aforesaid appeals filed by the Revenue are hereby dismissed. Order pronounced in the open court on 20.04.2023. Sd/- Sd/- (GAGAN GOYAL) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 20.04.2023. * 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 Order Dy/Asstt. Registrar, ITAT, Mumbai.