DCIT - 5(1)(1), MUMBAI V. GOENKA DIAMONDS & JEWELS LIMITED, MUMBAI

ITA 3496/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 8522 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 22-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHARTI SINGH
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 271(1)(c); 201; 13; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G , MUMBAI BEFORE S HRI SHAMIM YAHYA (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 3496 /MUM/2018 ASSESSMENT Y EAR: 2010 - 11 THE DY. CIT - 5(1)(1), ROOM NO. 568, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 VS. M/S GOENKA DIAMONDS & JEWELS LTD., 1305, PANCHRATNA, OPERA HOUSE, MUMBAI - 400004 PAN: AAACG7934Q (APPELLANT) (RESPONDENT) REVENUE BY : BHARTI SINGH ( DR ) ASSESSEE BY : DHARMESH SHAH ( AR ) DATE OF HEARING: 16/12 /201 9 DATE OF PRONOUNCEMENT: 31 / 12 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 27.03.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 10 (FOR SHORT THE CIT(A) , MUMBAI , FOR THE ASSESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT(A) HAS ALLOWED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE PENALTY ORDER PASSED U/S 271 (1) (C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE T HAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF TRADING AND MANUFACTURING OF PRECIOUS & SEMI PRECIOUS STONES, DIAMONDS & STUDDED GOLD JEWELLERY, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERING DECLARING TOTAL INCOME AT RS. 5 , 90,76, 69 0/ - THE RETURN WAS PROCESSED U/S 143 ( 1 ) OF THE ACT . SUBSEQUENTLY, THE CASE WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INVESTIGATION) THAT THE APPELLANT COMPANY HAD OBTAINED ACCOMMODATION ENTRIES FROM CERTAIN HAWALA OPERATORS, WHO USED TO ISSUE 2 ITA NO. 3496 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 BOGUS SALE/PURCHASE BILLS WITHOUT MAKING ACTUAL DELIVERY OF GOODS. ACCORDINGLY, AFTER HEARING THE ASSESSEE, THE AO DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 85,42,44,460/ - BY MAKING ADDITION OF RS. 30,7 1,82,168/ - ON ACCOUNT OF UNDISCLOSED PROFIT EMBEDDED IN THE SAID TRANSACTION. THEREAFTER, THE AO INI TIATED PROCEEDINGS U/S 271 (1) (C) OF THE ACT FOR FURNISHING INACCURATE PARTICULAR OF INCOME AND LEVIED PENALTY OF RS. 40,93,534/ - . 3 . THE REVENUE HAS CHA LLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUND S : - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN DELETING THE PENALTY U/S 271 (1) (C) OF THE INCOME TAX ACT, 1961 OF RS. 40,9 3,534/ - LEVIED BY THE ASSESSING OFFICER. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES SOF THE CASE, THE LD. CIT (A) FAILED TO APPRECIATE THAT THE ASSESSEE HAS CONCEALED THE TRUE PARTICULARS OF HIS INCOME BY TAKING ACCOMMODATION PURCHASES ENTRIES AMOUN TING TO RS. 10,94,84,984/ - FROM HAWALA OPERATOR. 3. THE LD. CIT (A) ERRED IN HOLDING THAT THERE IS NO MATERIAL TO SUSTAIN THE PLEA OF CONCEALMENT WHILE IGNORING THE EXPLICIT ADMISSION MADE BY THE DIRECTOR OF THE SUPPLIER COMPANY M/S KOTSONS IMPEX PVT. LT D. U/S 14 OF THE MAHARASHTRA VALUE ADDED ACT, 2002 THAT M/S KOTSONS IMPEX PVT. LTD. HAD NO REAL BUSINESS AND WAS ACTUALLY INVOLVED IN GIVING MERE ACCOMMODATION ENTRIES ON PAYMENT OF COMMISSION. 4. BEFORE US, THE LD. DR SUBMITTED THAT SINCE THE ASSESSEE HAS CONCEALED ITS INCOME ON THE BASIS OF BOGUS BILLS OBTAINED FROM HAWALA PARTY WITHOUT RECEIVING ANY GOODS, THE AO HAS RIGHTLY IMPOSED PENALTY U/S 271 (1) (C) OF THE ACT. SINCE, THE ACTION OF THE AO WAS IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, THE L D. CIT (A) OUGHT TO HAVE CONFIRMED THE PENALTY LEVIED BY THE AO. THE LD. DR ACCORDINGLY SUBMITTED THAT THE IMPUGNED ORDER MAY BE SET ASIDE AND THE ORDER PASSED BY THE AO MAY BE UPHELD. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE RELYING ON THE ORDER PASSED BY THE LD. CIT (A) SUBMITTED THAT SINCE THE ADDITION WAS MADE ON ESTIMATION BASIS , THE LD. CIT (A) HAS RIGHTLY DELETED THE PENALTY LEVIED BY THE 3 ITA NO. 3496 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 AO U/S 271 (1) (C) OF THE ACT. THE LD. COUNSEL FURTHER SUBMITTED THE ORDER PASSED BY THE LD CIT(A ) IS BASED ON THE SETTLED PRINCIPLES OF LAW, THERE REFORE, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT (A) TO INTERFERE WITH. 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE AUTHORITIES BELOW. ADMITTEDLY, THE AO HAS LEVIED PENALTY ON THE BASIS OF ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES ON AD - HOC BASIS. THE ADDITION WAS RESTRICTED TO A CERTAIN IN THE FIRST AND THE SECOND APPEAL BY THE CONCERNED AUTHORITIES. NOW THE QUE STION ARISES AS TO WHETHER PENALTY U/S 271 (1) (C) OF THE ACT CAN BE LEVIED ON THE BASIS OF ADDITION MADE ON ESTIMATION BASIS ? THE LD. CIT (A) HAS DECIDED THIS QUESTION IN NEGATIVE HOLDING THAT PENALTY CANNOT BE LEVIED IN SUCH CASES . THE FINDINGS OF THE LD . CIT (A) READ AS UNDER: - 5.3.6 IN THE PRESENT CASE, THE ASSESSMENT IS BASED ON THE INFORMATION RECEIVED FROM DGIT (INV.), MUMBAI THAT THE ASSESSEE HAS MADE BOGUS PURCHASES OF INFORMATION WAS RECEIVED FROM DGIT (INV.), MUMBAI THAT THE ASSESSEE HAS MADE BOGUS PURCHASE OF RS. 10,94,84,984/ - FROM M/S KATSONS IMPEX P. LTD. THE APPELLANT HAD SUBMITTED VARIOUS DETAILS OF THE PURCHASES EFFECTED FROM THE SELLER OF GOODS WHICH INCLUDED PURCHASES INVOICES RECEIVED FROM THE PARTY, CONFIRMATION AS RECEIVED FROM TH E PARTY AND THE PAYMENTS MADE BY ACCOUNT PAYEE CHEQUES WHICH STOOD DEBITED IN THE BANK ACCOUNT OF THE APPELLANT COMPANY AND CREDITED TO BANK ACCOUNT OF THE SELLER PARTY, HOWEVER, THE AO HAS REJECTED THE CLAIM OF THE APPELLANT FOR THE REASON THAT THE ASSES SEE COULD NOT PRODUCE THE AFORESAID PARTY BEFORE THE AO FOR VERIFICATION. APART FROM THE FACT THAT THE ASSESSING OFFICER DISBELIEVED THE ASSESSEES EXPLANATION FOR THE REASON THAT THE ASSESSEE COULD NOT PRODUCE THE AFORESAID PARTY BEFORE THE AO FOR VERIFI CATION, THERE IS NO OTHER MATERIAL TO SHOW THAT THE PARTICULARS DISCLOSED BY THE APPELLANT ARE NOT FRUTHFUL. THE ASSESSEE WAS IN POSSESSION OF VITAL EVIDENCE TO PRIMA FACIE SUBSTANTIATE HIS PURCHASES TO SOME EXTENT. AFTER CONSIDERING THE EXPLANATION GIVEN BY THE APPELLANT THE CIT (APPEAL) AS WELL AS THE HONBLE ITAT HAVE RESTRICTED THE ADDITION TO THE EXTENT OF CERTAIN PERCENTAGES AND THUS ACKNOWLEDGED THAT THE PURCHASES ARE GENUINE THOUGH PURCHASES WERE NOT MADE FROM THE ALLEGED BOGUS. THUS, THE 4 ITA NO. 3496 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 GENUINENE SS OF PURCHASES ARE NOT IN DOUBT , ONLY THE OF THE INVOICES ISSUED BY THE SUPPLIERS ARE NOT GENUINE. THE APPELLANT HAS EXPLAINED THAT IT IS FOLLOWING THE PRACTICE OF MAKING PURCHASE THROUGH MARKET BROKERS/ MIDDLEMAN WHEREIN THEY GET DELIVERY OF GOODS AT THE IR BUSINESS PREMISES BEING VALUABLE COSTLY ITEMS, THE GOODS ARE SUPPLIED STRICTLY BY HAND DELIVERY. SH. KOTHARI, IN HIS STATEMENT, THOUGH CATEGORICALLY ACCEPTED THAT THE SALES SUPPOSED TO HAVE BEEN MADE BY HIM WERE BOGUS, HE HAS NOT MENTIONED THE NAME OF T HE APPELLANT SPECIFICALLY. THE ASSESSEE HAS OFFERED AN EXPLANATION, WHICH COULD NOT BE TERMED AS NOT BONA FIDE AND THE SAME WAS COUPLED WITH DOCUMENTARY EVIDENCE, HOWEVER THE SAME REMAINED INCONCLUSIVE FOR THE REASON THAT THE APPELLANT COULD NOT PRODUCE TH E SUPPLIER FOR VERIFICATION OF PURCHASES. THUS, IN THIS CASE IT CAN ONLY BE CONCLUDED THAT THE FACT ALLEGED IS NOT PROVED AND THAT EXCEPT FOR REJECTION OF THE EXPLANATION FURNISHED BY THE ASSESSEE, THERE IS NO MATERIAL TO SUSTAIN THE PLEA OF CONCEALMENT. 6. THEREFORE, IN MY VIEW THE PENALTY UNDER SECTION 271 (1) (C) OF THE ACT DESERVES TO BE DELETED. 7 . UNDER SECTION 271(1)(C) OF THE ACT, AO HAS POWER TO IMPOSE PENALTY ON AN ASSESSEE FOR CONCEALING ITS PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF SUCH INCOME. AS PER THE SETTLED LAW, PROCEEDING FOR IMPOSITION OF PENALTY AND ASSESSMENT ARE TWO SEPARATE AND DISTINCT PROCEEDINGS AND THE FINDINGS RECORDED BY THE AUTHORITIES BELOW OR THE APPELLATE AUTHORITIES INCLUDING THE ITAT IN QUANTUM APPE AL CANNOT BE SAID TO BE THE CONCLUSIVE FACTOR IN THE PENALTY PROCEEDING. IN OTHER WORDS, ADDITION OF CERTAIN AMOUNT IN QUANTUM APPEAL DOES NOT IPSO FACTO MAKES AN ASSESSEE LIABLE FOR PENALTY U/S 271(1)(C) OF THE ACT. IN THE PRESENT CASE , THE AO MADE ADDITI ONS ON ESTIMATION BASIS FOR THE REASON THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF TRANSACTION BY ADDUCING COGENT AND CONVINCING EVIDENCE. SINCE, THE ADDITION IS ON AD - HOC BASIS, IT CANNOT BE CONCLUDED THAT THE ASSESSEE HAS CONCEALED THE PARTI CULARS OF ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME WITHIN THE MEANING OF SECTION 271 (1) (C) OF THE ACT. THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI AJAY LOKNATH LOHIA ITA NO. 2998/MUM/2017 FOR 5 ITA NO. 3496 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 THE AY 2009 - 10, HAS HELD THA T DISALLOWANCE OF PURCHASES ON AD - HOC BASIS DOES NOT TANTAMOUNT TO WILLFUL FURNISHING INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271 (1) (C) OF THE ACT. THE FINDINGS OF THE COORDINATE BENCH READS AS UNDER: - 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 PURC HASES. 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 WILLFUL 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 THE PENALTY LEVIED U/S 271 (1) (C) OF THE ACT. 8 . IN PRESENT CASE , THE REVENUE HAS CHALLENGED THE ORDERS OF THE LD. CIT(A) DELETING THE PENALTY LEVIED U/S 271 (1) (C) OF THE ACT ON THE BASIS OF ADDITION M ADE BY THE AO ON ESTIMATION/AD - HOC BASIS HOLDING THAT ASSESSEES HAVE OBTAINED BOGUS PURCHASE BILLS FROM HAWALA PARTIES, THEREFORE FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. IN THE CASE OF AJAY LOKNATH LOHIA S (SUPRA), T HE COORDINATE BENCH H A S DELETED THE PENALTY LEVIED U/S 271 (1) (C) OF THE ACT HAVING SIMILAR SET OF FACTS . SIMILARLY, IN THE CASE OF SUSHIL CHATURBHUJ RAHEJA ITA NO. 1375, 1376 AND 1377/MUM/2017 FOR THE AY 2011 - 12, 2012 - 13 AND 2010 - 11 RESPECTIVELY, THE COORDINATE BENCH HAS DELE TED THE PENALTY LEVIED U/S 271 (1) (C) OF THE ACT, ON THE BASIS OF ADDITION MADE ON AD - HOC BASIS. SINCE, THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS OF THE CASES DISCUSSED ABOVE AND THE ISSUES INVOLVED ARE IDENTICAL, WE RESPECTFULLY 6 ITA NO. 3496 / MUM/2018 ASSESSMENT YEAR: 2010 - 1 1 FOLLOWING THE DECISION S OF THE COORDINATE BENCHES DISCUSSED ABOVE, UPHOLD THE ORDER OF THE LD. CIT (A) AND DISMISS THE REVENUE S APPEAL. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2010 - 2011 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN CO URT ON 31 ST . DECEMBER , 2019 . SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 31 / 12 / 201 9 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / T HE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI