DCIT CIRLCE-3, Thane V. SHRI. SURENDRAKUMAR MANGTURAM SHARMA , Thane

ITA 3731/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 0484 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 29-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T S KHALSA
• Keywords: Bogus purchase; Tax effect
• Section: 271(1)(c)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI RAMLAL NEGI (JM) I.T.A. NO. 3731/MUM/2019 (ASSESSMENT YEAR 2011-12) I.T.A. NO. 3732/MUM/2019 (ASSESSMENT YEAR 2011-12 ) DCIT, CIRCLE-3 ROOM NO. 02, 6 TH FLOOR AASHAR I.T. PARK B-WING, WAGLE INDUSTRIAL ESTATE, ROAD NO. 16Z THANE(WEST)-400604. VS. SHRI SURENDRAKUMAR MANGTURAM SHARMA 603, BUILDING NO. 6 FLOWER VALLEY KHOPAT, THANE(W) 400 0601. PAN : AFKPS5043J (APPELLANT) (RESPONDENT) ASSESSEE BY NONE DEPARTMENT BY SHRI T.S. KHALSA DATE OF HEARING 09.03.2021 DATE OF PRONOUNCEMENT 11.03.2021 O R D E R PER SHAMIM YAHYA (AM) :- ITA NO. 3732/MUM/2019 THIS IS AN APPEAL BY THE REVENUE WHEREIN THE REVEN UE IS AGGRIEVED THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [IN SH ORT LEARNED CIT(A)] HAS REDUCED THE ADDITION FOR BOGUS PURCHASE OF RS. 26,3 9,695/- DONE @ 100% BY ASSESSING OFFICER BY SUSTAINING ONLY PART FOR THE A SSESSMENT YEAR 2011-12 VIDE ORDER DATED 28.3.2019. 2. THE ASSESSEE IN THIS CASE IS ENGAGED INTO CONTRA CTUAL WORK-IN-PROGRESS. THE ASSESSMENT WAS REOPENED UPON INFORMATION FROM S ALES TAX DEPARTMENT THAT ASSESSEE HAS MADE PURCHASES FROM BOGUS DEALERS , THE ASSESSING OFFICER MADE 100% ADDITION OF THE BOGUS PURCHASE. THE ASSES SING OFFICER DID NOT EVEN ISSUE NOTICE TO THE ALLEGED BOGUS SUPPLIER. 3. UPON ASSESSEE'S APPEAL LEARNED CIT(A) HAS NOTED THAT THE SALES HAVE NOT BEEN DOUBTED. ACCORDINGLY PLACING RELIANCE UPON SEV ERAL CASE LAWS AND UP ON 2 THE FACTS OF THE CASE HE SUSTAINED PART DISALLOWANC E OUT OF THE BOGUS PURCHASES AS UNDER :- IT IS SEEN A NUMBER OF CASES THAT THE ADDITION HAS BEE N RESTRICTED TO CERTAIN PERCENTAGE OF THE ALLEGED BOGUS PURCHASES. THE APPELL ANT IS INTO CONTRACT WORK AND HAS SHOWN 7.03% OF THE CONTRACT RECEIPTS AS PROFITS. AS THE PERCENTAGE OF PROFIT IS APPARENTLY IS ON LOWER SIDE AN D MAY BE DUE TO SUCH PURCHASES WHICH ARE NOT DULY PROVED. THEREFORE, TO AC COUNT FOR SUCH PURCHASES, AN ADDITIONAL PROFIT OF THE TURNOVER WOULD BE SUFFICIENT. ANOTHER ADDITIONAL 1% PROFIT ON THE TURNOVER WOULD ACCOUNT FOR A LL SUCH PURCHASES AND THE SAME WOULD BE IN LINE WITH THE VARIOUS DECIS IONS ON THIS MATTER. AS A RESULTANT ADDITION OF RS. 5,50,000/-WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY, THE AO IS DIRECTED TO RESTRICT THE ADDITI ON TO RS. 5,50,000/-. 4. AGAINST ABOVE ORDER REVENUE IS IN APPEAL BEFORE THE ITAT. WE HAVE HEARD ID LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORDS. 5. WE FIND THAT ASSESSING OFFICER HAS NOT BOTHERED TO MAKE ANY ENQUIRY OF HIS OWN. ADDITION IS SOLELY MADE UPON SALES TAX DEP ARTMENT INFORMATION. WE FIND THAT IN THIS CASE THE SALES OR ANY OTHER ASPEC T OF THE WORKING HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE D ONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DATED 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED P ERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBT ED. HOWEVER THE FACTS OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS MADE PU RCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GI VES THE ASSESSEE SAVINGS ON ACCOUNT OF NON-PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION IN OUR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE DISALLOWANCE OUT OF THE BOGUS PURCHASE S DONE BY THE LEARNED CIT(A) MEETS THE END OF JUSTICE. ACCORDINGLY WE UPH OLD THE ORDER OF LEARNED CIT(A). 6. IN THE RESULT THIS APPEAL FILED BY THE REVENUE S TANDS DISMISSED. 3 ITA NO. 3731/MUM/2019 7. THIS IS AN APPEALS BY THE REVENUE AGAINST ORDER 'S OF LEARNED CIT(A) DATED 28.3.2019, WHEREIN FOLLOWING PENALTY LEVIED U NDER 271(1)(C) OF THE INCOME TAX ACT HAS BEEN REDUCED AS UNDER :- ASSESSMENT YEAR AMOUNT OF PENALTY 2011-12 RS. 9,11,330/- 8. THE BRIEF FACTS OF THE CASE LEADING TO THE LEVY OF PENALTY ARE THAT THE ASSESSING OFFICER IN THESE CASES MADE DISALLOWANCE OF 100% ON ACCOUNT OF BOGUS PURCHASES SOLELY ON SALES TAX DEPARTMENT INF ORMATION, WITHOUT ANY ENQUIRY OF HIS OWN. ASSESSEE HAS SUPPLIED THE PURCH ASE VOUCHERS AND THE PAYMENT WHERE SHOWN TO HAVE BEEN MADE BY BANKING CH ANNEL. HOWEVER DRAWING ADVERSE INFERENCE FOR THE NONPRODUCTION OF THE SUPPLIERS THE ASSESSING OFFICER DISALLOWED 100 % OF THE BOGUS PURCHASES. HO WEVER THE ASSESSING OFFICER DID NOT DOUBT THE SALES. THE LEARNED CIT(A) PARTLY CONFIRMED THE ADDITION. PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS ALSO LEVIED. LEARNED CIT(A) GRANTED PART RELIEF AS UNDER :- THE AO HAS LEVIED THE PENALTY ON THE QUANTUM ADDITION AT RS. 26,39,695/- ON ACCOUNT OF HAWALA PURCHASES AND THE QUANTUM APPEAL HAS BEEN DECIDED BY THE UNDERSIGNED RESTRICTING THE GROSS PROFIT @ 8. 03% OF THE TOTAL CONTRACT RECEIPTS AND THE SAME IS ACCEPTED BY THE APPELLANT. THE APPELLANT HAS REQUESTED TO RESTRICT THE PENALTY TO THE AMOUNT SUSTAINE D IN THE QUANTUM APPEAL. THE PENALTY IS LEVIABLE ONLY THE AMOUNT WHIC H HAS BEEN SUSTAINED. THEREFORE THE ASSESSING OFFICER IS ACCORDINGLY DIRE CTED TO RESTRICT THE LEVY OF PENALTY TO THE EXTENT OF ADDITION CONFIRMED IN THE APP EAL. 9. AGAINST THIS ORDER REVENUE IS IN APPEAL BEFORE U S. 10. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATI VE AND PERUSED THE RECORDS. AS CLEAR FROM THE FACTS RECORDED ABOVE THE DISALLOWANCE HAS BEEN MADE ON AN ESTIMATED BASIS ON ACCOUNT OF THE NONPRO DUCTION OF SUPPLIERS BEFORE THE ASSESSING OFFICER. THE PURCHASE VOUCHERS WERE DULY PRODUCED AND THE PAYMENTS WERE THROUGH BANKING CHANNEL. IN THESE BACKGROUNDS IN OUR CONSIDERED OPINION ASSESSEE CANNOT BE VISITED WITH THE REGOURS OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. AS A MATTER OF FACT ON MANY OCCASIONS ON 4 SIMILAR CIRCUMSTANCES IN QUANTUM PROCEEDINGS THE DI SALLOWANCE ITSELF HAS BEEN DELETED. IN OUR CONSIDERED OPINION ON THE FACT S AND CIRCUMSTANCES OF THE CASE ASSESSEE CANNOT BE SAID TO HAVE BEEN GUILTY OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THIS REGARD WE DRAW SUPPORT FROM THE DECISION OF A LARGER BENCH OF THE HONOURABLE SUPREM E COURT IN THE CASE OF HINDUSTAN STEELS LTD. STATE OF ORISSA (83 ITR 26) W HERE IN IT WAS HELD THAT THE AUTHORITY MAY NO T LEVY THE PENALTY IF THE CONDUCT OF THE ASSESSEE IS NOT FOUND TO BE CONTUMACIOUS. 11. WE FURTHER NOTE THAT TAX EFFECT IN THIS CASE IS BELOW THE LIMIT FIXED BY CBDT FOR FILING APPEALS BEFORE ITAT. THE REVENUE HA S TRIED TO MAKE OUT A CASE THAT SINCE THE ADDITION WAS MADE PURSUANT TO INFORM ATION FROM SALES TAX DEPARTMENT, THIS PENALTY APPEAL FALLS IN THE EXCEPT ION CARVED OUT IN THE CBDT CIRCULAR REGARDING APPEALS ARISING OUT OF ADDITIONS MADE PURSUANT TO INFORMATION FROM OUTSIDE AGENCIES. WE ARE OF THE OP INION THAT THIS PLEA IS NOT TENABLE INASMUCH AS ONCE REVENUE ACCEPTS THAT PENAL TY IS LEVIED ON OUTSIDE AGENCY INFORMATION THE PENALTY LEVIED WILL HAVE NO LEGS TO STAND. 12. WE ALSO NOTE THAT THIS IS REVENUES APPEAL, HENC E WE CAN ONLY UPHOLD THE ORDER OF LEARNED CIT(A) AND CANNOT GRANT MORE RELIE F THAN THAT GRANTED BY LEARNED CIT(A). 13. IN THE BACKGROUND OF AFORESAID DISCUSSION AND P RECEDENT WE UPHOLD THE ORDER'S OF LEARNED CIT(A) AND DISMISS THE REVENUES APPEAL. 14. IN THE RESULT, BOTH REVENUES 'S APPEALS ARE DIS MISSED. PRONOUNCED IN THE OPEN COURT ON 11.3.2021. SD/- SD/- (RAMLAL NEGI) (SHAMIM YA HYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 11/03/2021 COPY OF THE ORDER FORWARDED TO : 5 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI