ASIT P DESAI, MUMBAI V. ITO 25(2)(1), THANE

ITA 3599/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4758 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARKAMAL SOHI
• Assessee Lawyers: D C SABOO
• Keywords: Bogus purchase; Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 3599/MUM/2017 (ASSESSMENT YEAR: 2009-10) APPELLANT BY: SHRI D.C. SABOO & SHRI SHYAM SABOO RESPONDENT BY: MS. HARKAMAL SOHI DATE OF HEARING: 10.10.2018 DATE OF PRONOUNCEMENT: 29.10.2018 O R D E R PER RAJESH KUMAR, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-37, MUMBAI DATED 02.03.2017 AND IT RELATES T O A.Y. 2009-10. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE VARIOU S GROUND OF APPEAL IS AGAINST THE CONFIRMATION OF PENALTY BY TH E CIT(A) OF ` 83,978/- AS IMPOSED BY THE AO UNDER SECTION 271(1)(C) OF THE IN COME TAX ACT, 1961 (HEREINAFTER 'THE ACT'). 3. AT THE OUTSET THE LEARNED A.R. SUBMITTED BEFORE TH E BENCH THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE AND THEREFORE THE SAME SHOULD BE ALLOWED. THE LEARNED A.R. SUBMITTED THAT THE AO HAS ADDED 25% OF THE BOGUS PU RCHASES TO THE ASSESSEE , WHICH WAS CONFIRMED BY THE CIT(A) IN THE APPELLATE PROCEEDINGS. THE LEARNED A.R. SUBMITTED THAT SINCE THIS IS A CAS E OF ADDITION ON ESTIMATION OF INCOME, THEREFORE PENALTY IS NOT LEVI ABLE. IN DEFENCE OF HIS SHRI ASIT P. DESAI 506-B WING 225 NARIMAN ROAD VILE PARLE (E) MUMBAI 400057 VS. INCOME TAX OFFICER - 25(2)(1) ROOM NO. 703, C-12 7TH FLOOR, BANDRA-KURLA, COMPLEX, MUMBAI 400051 PAN AABPD2828E APPELLANT RESPONDENT ITA NO. 3599/MUM/2017 SHRI ASIT P. DESAI 2 ARGUMENTS, THE LEARNED A.R. RELIED ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. AERO TRADERS (P) LTD. (2010) 322 ITR 316 AND THE DECISION OF THE HON'BLE P&H HIGH COURT IN THE CASE OF HARIGOPAL SINGH VS. CIT (2002) 258 ITR 85. THE HON'BLE DELHI HIGH COURT HAS CONFIRMED THE DECISION OF THE TRIBUNAL WHEREIN THE TRIBUNAL HAS H ELD THAT IN THE CASE OF ADDITION BASED UPON GUESS WORK CANNOT BE SUBJECT MA TTER OF CONCEALMENT OF INCOME FOR THE IMPOSITION OF PENALTY. THE HON'BLE P &H HIGH COURT HAS HELD THAT WHERE THE INCOME OF THE ASSESSEE IS ASSESSED O N ESTIMATION BASIS PENALTY UNDER SECTION 271(1)(C) IS NOT ATTRACTED. T HE LEARNED A.R. CHALLENGED IMPOSITION OF PENALTY ON LEGAL ISSUE. THE LEARNED A .R. POINTED OUT THAT IN THE ASSESSMENT ORDER THE AO HAS INITIATED PENALTY PROCE EDINGS FOR CONCEALMENT OF INCOME ON PAGE 8 OF ASSESSMENT ORDER WHEREAS IN THE PENALTY ORDER PENALTY WAS FINALLY IMPOSED FOR FURNISHING INACCURA TE PARTICULARS OF INCOME AS STATED IN PARA 7 OF THE PENALTY ORDER. THE LEARN ED A.R. SUBMITTED THAT INITIATION OF PENALTY ON ONE OF THE TWO CHARGES, I. E. CONCEALMENT OF INCOME AND FINALLY THE IMPOSITION WAS ON OTHER CHARGE, I.E . FURNISHING OF INACCURATE PARTICULARS OF INCOME IS NOT PERMISSIBLE UNDER THE ACT. BESIDES THE LEARNED A.R. ALSO DREW OUR ATTENTION TO THE NOTICE ISSUED U NDER SECTION 271(1)(C) OF THE ACT, WHICH IS FILED AT PAGE 9 OF THE PAPER BOOK WHICH THE AO HAS ISSUED IN THE STANDARD FORMAT WITHOUT STRIKING OUT THE IRR ELEVANT PART OF THE TWO LIMBS OR SPECIFY THE ONE OFTHE TWO LIMB ON WHICH TH E PENALTY IS IMPOSED WHICH SHOWS THE NON APPLICATION OF MIND BY THE AO. TO DEFEND HIS ARGUMENT THE LEARNED A.R. RELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SAMSON PERINCHERY , INCOME TAX APPEAL NO. 1154 OF 2014 AND PRAYED THAT IN VIEW OF THE RAT IO LAID DOWN BY THE HON'BLE HIGH COURT THAT THE PENALTY SHOULD BE DELE TED ON ACCOUNT OF NON APPLICATION OF MIND BY THE AO. 4. THE LEARNED D.R., ON THE OTHER HAND, RELIED ON THE ORDERS OF AUTHORITIES BELOW BY SUBMITTING THAT THE PENALTY HA S BEEN RIGHTLY LEVIED. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE REC ORD, WE FIND THAT IN THE PRESENT CASE THE INCOME IS CALCULATED BY APP LYING PERCENTAGE ON BOGUS PURCHASES AND THE AO IMPOSED PENALTY ONLY ON THE SAID ADDITION. ITA NO. 3599/MUM/2017 SHRI ASIT P. DESAI 3 WE OBSERVE THAT PENALTY CANNOT BE IMPOSED IN THE CA SE WHERE INCOME IS ESTIMATED OR ADDITION IS MADE ON GUESS WORK. THE CA SE OF THE ASSESSEE IS SUPPORTED BY THE DECISION OF THE HON'BLE P&H HIGH C OURT IN THE CASE OF HARIGOPAL SINGH WHEREIN IT HAS BEEN HELD THAT PENAL TY IS NOT IMPOSED UNDER SECTION 271(1)(C) OF THE ACT IN THE CASE OF A SSESSMENT OF INCOME OF ESTIMATION BASIS. THEREFORE ON THIS COUNT ALONE THE PENALTY AS IMPOSED BY THE AO CANNOT BE SUSTAINED. ON THE SECOND PLEA OF T HE ASSESSEE, I.E. THE AO HAS INITIATED PENALTY PROCEEDINGS FOR CONCEALMEN T OF INCOME WHEREAS IT WAS FINALLY IMPOSED FOR FURNISHING OF INACCURATE PA RTICULARS AND THAT THE NOTICE ISSUED IN THE STANDARD FORMAT IS ALSO A CASE OF NON APPLICATION OF MIND BY THE AO AS THE PRINCIPLE OF NATURAL JUSTICE HAS NOT BEEN APPLIED BY THE ACTION OF THE AO. IN THIS CASE THE ASSESSEE IS NOT GIVEN OPPORTUNITY AS ON WHICH LIMB THE PENALTY IS BEING IMPOSED, THEREFO RE THE ASSESSEE COULD NOT BE HEARD ON THE PARTICULAR CHARGE ON WHICH THE PENALTY WAS IMPOSED. THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE SAMSON PERINCHERY (SU PRA) WHEREIN IT HAS BEEN HELD THAT WHERE THE AO HAS INITIATED PENALTY O N ONE LIMB AND IMPOSED PENALTY ON THE OTHER LIMB SHOWS NON APPLICA TION OF MIND BY THE AO. SIMILARLY NOT STRIKING OUT OF THE REDUNDANT LIM B OF THE NOTICE, I.E. NOT MENTIONING WHETHER THE PENALTY IS FOR CONCEALMENT O F INCOME OF FURNISHING OF INACCURATE PARTICULARS OF INCOME SHOWS NON APPLI CATION MIND ON THE PART OF AO AND IN THAT CASE THE PENALTY HAS TO BE D ELETED. WE, THEREFORE, OF THE CONSIDERED VIEW THAT THE ORDER OF PENALTY IS BA D IN LAW FOR THE REASONS AS DISCUSSED HEREINABOVE AND ACCORDINGLY DIRECT THE AO TO DELETE SAME BY SETTING ASIDE THE ORDER OF THE CIT(A). 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH OCTOBER, 2018. SD/ - SD/ - (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 29 TH OCTOBER, 2018 ITA NO. 3599/MUM/2017 SHRI ASIT P. DESAI 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -37, MUMBAI 4. THE CIT - 25, MUMBAI 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.