Vikas Chordia, Surat V. Income Tax Officer, Wd-2(3)(8), Surat

ITA 289/SRT/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6956 (ITAT-SURAT)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 15-05-2024
• Assessment Year: 2007-2008
• Appeal Filed On: 15-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries
• Section: 148; 271(1)(c); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JIDICIAL MEMBER & SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.289/SRT/2024 Assessment Year: (2007-08) (Hybrid Hearing) Vikas Chordia 103, Devsagar Apts, Dalagiya Street, Mahidharpura, Surat- 395002 Vs. Income Tax Officer, Ward-2(3)(8), Surat, Aaykar Bhavan, Majura Gate, Surat-3950001 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AASPC 8559 J (अपीलाथŎ/Appellant) (ŮȑथŎ /Respondent) िनधाŊįरती की ओर से /Appellant by Shri Prakash Jhunjhunwala, CA िनधाŊįरती की ओर से /Respondent by Shri J.K.Chandnani, Sr. DR अपील पंजीकरण/Appeal instituted on 16.03.2024 सुनवाई की तारीख /Date of Hearing 16.05.2024 घोषणा की तारीख /Date of Pronouncement 29.05.2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order of the Learned Commissioner of Income Tax(Appeals)-11, Ahmedabad (in short, “CIT(A)” u/s 271(1)(c) of the Income-tax Act, 1961 (in short, “the Act”) dated 26.02.2024 for assessment year 2007-08. Grounds of appeal raised by the assessee are as under:- “1.0 On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the levy of penalty u/s 271(1)(c), though notice u/s 274 had been issued in mechanical manner without intimating the charge as to whether 2 ITA No.289/SRT/2024 AY.07-08 Vikas Chordia the penalty is proposed to be levied for ‘Concealment of income’ or “furnishing inaccurate particulars of income”. 2.0 On facts and circumstances of the case and in law, CIT(A) erred in confirming the levy of penalty u/s 271(1)(c). though the initiation of penalty had been made in assessment order for dual charge of ‘Concealment of income’ and “furnishing inaccurate particulars of income”. 3.0 On facts and circumstances of the case and in law, Ld.CIT(A) erred in confirming the penalty u/s 271(1)(c) of Rs.22,80,490/- in respect of addition sustained on estimation basis of Rs.67,75,076/- @ 5% on disputed purchase of Rs.13.55 crores. 4.0 The Ld. CIT(A), before confirming the penalty u/s 271(1)(c), ought to have considered the bona fide explanation of the appellant, being; a) The penalty cannot be levied on income determined on estimation basis, since Ld.AO had made the addition @ 100% of disputed purchase, whereas Ld. CIT(A) had sustained the addition @ 5% on total sales and Hon’ble ITAT had sustained the addition @ 5% of disputed purchases; b) There is complete disclosure of all material facts on record, since the disputed purchase of traded goods had been recorded in audited books of accounts and exhaustive documentary documents to justify the genuineness of purchase had been filed on record; c) The payment is made through banking channel out of proven source. The appellant craves leave to add, amend, alter and/or withdraw any of the grounds of appeal at the time of hearing.” 2. Facts in brief are that assessee is engaged in the business of trading in diamonds, bullion and related goods. The assessee filed his return of income for A.Y 2007-08 declaring total income at Rs.3,46,513/- on 22.10.2007. Subsequently information was received from DGIT(Inv.), Mumbai vide letter dated 07.03.2014 that accommodation entries of bogus purchases, sales, unsecured loan, share capital etc., were given by Shri Praveen Jain group of Mumbai, a leading entry provider to various beneficiaries. It has also given 3 ITA No.289/SRT/2024 AY.07-08 Vikas Chordia accommodation entries of bogus purchases to assessee during AY 2007-08 from M/s Kunal Gems of Rs.8,99,99,946/-, M/s Mohit International of Rs.1,75,01,601/-, M/s Natasha Enterprises of Rs.2,30,00,009/- and M/s New Planet Trading Co. Pvt. Ltd. of Rs.49,99,980/-. Shri Praveen Jain, in his statement recorded u/s 132(4) of the Act, admitted that he manages and controls the business affairs of all the concerns where his employees are also shown as directors, partners and proprietors. The AO by taking the view that income of Rs.13,55,01,536/- has escaped assessment in the hands of assessee for the year under consideration, reopened the case and notice u/s 148 was issued on 26.03.2014. The assessee in his written submission stated that entire sales are genuine; that sufficient opportunities were not given to prove the genuineness of these transactions; that transactions were made through banking channel; that tax audit report mention the verification of the sale and purchase register, and that Shri Pravin Jain had retracted his statement. The assessee relied on several case laws of the Hon’ble Courts and ITAT in support of his claim. The AO held that the assessee has taken the impugned sum of Rs.13,55,01,536/- in his books of accounts as purchases for the year under consideration, which, in fact, are bogus. Accordingly, 4 ITA No.289/SRT/2024 AY.07-08 Vikas Chordia Rs.13,55,01,536/- was added to the total income of assesse. Penalty proceedings u/s 271(1)(c) of the Act were separately initiated. 3. Aggrieved by this order of AO, assessee filed appeal before Ld.CIT(A). The Ld.CIT(A) partly allowed appeal of assessee and upheld the net profit of assesse @ 5%. The AO, thereafter, heard the assessee and levied penalty u/s 271(1)(c) of the Act on the addition confirmed by the Ld.CIT(A), which was Rs.3,45,42,417/-. The addition was subsequently restricted to 5% of the bogus purchase of Rs.13,55,01,536/- by the ITAT. In the result, addition of Rs.67,75,076/- only survived. The Ld.CIT(A) has directed AO to levy penalty on addition of Rs.67,05,076/-, which has been confirmed by ITAT. Being aggrieved, assessee has filed present appeal before the Tribunal against the remaining penalty amount. 4. The Ld. AR for the assessee has strongly argued against the penalty imposed by AO which was partly confirmed by the Ld.CIT(A). He has filed paper book containing 75 pages. The Ld. AR submitted that no penalty can be imposed on addition based on estimation. He stated that AO had added @ 100% of the alleged bogus purchases which was reduced to 5% of net profit by the Ld.CIT(A). Subsequently, the addition was restricted to 5% of the bogus purchases by the Tribunal. The AO has levied penalty on the addition sustained by the Ld.CIT(A). 5 ITA No.289/SRT/2024 AY.07-08 Vikas Chordia However, the Ld.CIT(A) has restricted penalty on the addition to the extent sustained by the Tribunal. Therefore, the penalty was levied on estimated addition. Such penalties based on estimated addition is not liable to be sustained as held by this Co-ordinate Bench in the case of Yogendra Raj U Singhvi vs. ITO in ITA No.459/SRT/2023 dated 19.10.2023 and Deepak Banwarilal Agarwal vs. ITO in ITA No.827/SRT/2023 dated 27.02.2024. 5. On the other hand, Learned Senior-DR for the Revenue supported the order of lower authorities. He stated that the Ld.CIT(A) has rightly sustained the penalty on the addition which was confirmed by the Tribunal, which is the last fact-finding authority and, therefore, the addition to the extent sustained by the Tribunal is concealed income of the assessee and penalty has been rightly levied on such concealment of income. 6. We have heard both the parties and perused the materials on record. We have also gone through the decisions relied upon by the Ld.AR of the assessee. Undisputedly, the addition made on account of bogus purchases was partially confirmed by the Ld.CIT(A), which was subsequently reduced by the Tribunal. Initially, the AO added 100% of the disputed purchase, which was reduced to 5% of the total turnover by the Ld.CIT(A). On further appeal, the Tribunal further reduced it to 6 ITA No.289/SRT/2024 AY.07-08 Vikas Chordia 5% of the bogus purchase. In other words, AO made addition of Rs.13,55,01,536/- which was restricted to Rs.3,45,42,417/- by the Ld. CIT(A). It was further restricted to Rs.67,75,076/- by the ITAT. 7. It is, therefore, clear that the entire addition right from the assessment stage to the Tribunal was based merely on estimation and there is no definite finding on the quantum of concealment of income by the assessee. It is accepted legal position that penalty/s 271(1)(c) of the Act levied on additions made purely on estimation is not sustainable. Such a view has been taken by the Hon’ble jurisdictional High Court in the case of CIT vs. Subhas Trading Co. (1996) 86 Taxman 30 (Guj), Navjivan Oil Mills vs. CIT (2002) 124 Taxman 392 (Guj), CIT vs. Valimkbhai H. Patel (2006) 280 ITR 487 (Guj.). Similar view has also been taken by other Hon’ble High Courts in CIT vs. Krishi Tyre Retreading and Rubber Industries, 360 ITR 580 (Raj) and CIT vs. Sangur Vansapati Mills Ltd., 303 ITR 53 (P&H). The Co-ordinate Bench of this Tribunal in cases of Yogendra Raj U Singhvi (supra) and Deepak Banwarilal Agarwal (supra) has also deleted such penalties. Respectfully following the precedents cited supra, we hold that penalty u/s 271(1)(c) of the Act is not sustainable in the present case. Accordingly, the decision of Ld.CIT(A) is upheld and appeal of the 7 ITA No.289/SRT/2024 AY.07-08 Vikas Chordia assessee is partly allowed. The AO is directed to recompute the penalty. 8. In the result, appeal filed by the assessee is partly allowed. Order is pronounced on 29/05/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER स ू रत/Surat Ǒदनांक/ Date: 29/05/2024 DKP Outsourcing Sr.P.S Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat