ACIT 12(2)(2), Mumbai V. M/S HARISONS STEELS LTD., Mumbai

ITA 3979/MUM/2019

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 9045 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 04-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURBINDER SINGH
• Keywords: Bogus purchase; Question of law; Initiation of penalty proceedings; Difference of opinion; Onus to prove; Set aside
• Section: 271(1)(c); 143(3); 142(1); 143(1); 274; 143(2); 44AB; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO. 3979/MUM/2019 ( ASSESSMENT YEARS: 2011-12 ) ACIT 12(2)(2) RM. NO. 262/145, 1 ST FLOOR AAYAKAR BHAVAN, MUMBAI / VS. M/S. HARISONS STEELS LTD., PLOT NO. SURVEY GUT NO. 194, NEHROLI TALUKA WADA, THANE 421312. ./ ./ PAN/GIR NO. : AAACH8891D ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI GURBINDER SINGH, DR / RESPONDENT BY : NONE / DATE OF HEARING 30/12/2020 !'# / DATE OF PRONOUNCEMENT 30/12/2020 / O R D E R PER PAVAN KUMAR GADALE - JM: THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) -20, MUMBAI, PASSED U/S. 271(1)(C) OF THE INCOME TAX ACT , 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF STEE L. THE BOOKS OF ACCOUNTS ARE AUDITED U/S 44AB OF THE ITA NO . 3919 /MUM/2019 M/S HARISONS STEEL LTD, MUMBAI. - 2 - ACT. THE RETURN OF INCOME WAS FILED ON 30.09.2011 WITH TOTAL INCOME OF RS. 5,47,74,130/- AND THE RETU RN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT. THE ASSESSMENT WAS REOPENED BASED ON THE INFORMATION RECEIVED FROM DGIT (INVESTIGATION WING) THAT THE ASSESSEE COMPANY HAS INDULGED IN OBTAINING THE BOGUS PURCHASE BILLS AND ACCOUNTED IN THE FINANCIA L STATEMENTS. THEREFORE, THE A.O HAS REASON TO BELIE VE THAT THE INCOME HAS ESCAPED ASSESSMENT AND ISSUED NOTICE U/S 148 OF THE ACT. SUBSEQUENTLY, THE NOTIC E U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. THE A .O HAS PROVIDED THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT TO THE ASSESSEE. THE A.O HAS CALLED FOR THE INFORMATION IN RESPECT OF BOGUS PURCHASES A ND CONFIRMATION FROM THE PARTIES. SINCE THE A.O WAS NO T SATISFIED WITH THE INFORMATION AND MADE ADDITION OF ALLEGED BOGUS PURCHASES OF RS. 42,40,288/- PASSED ORDER U/S 143(3) R.W.S 147 OF THE ACT DATED 29.11.2013 DETERMINING TOTAL INCOME OF RS. 5,90,14,420/-. AGGRIEVED BY THE ASSESSMENT ORDER TH E ASSESSEE HAS FILED AN APPEAL WITH THE CIT(A), WHERE AS, THE CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESS EE ITA NO . 3919 /MUM/2019 M/S HARISONS STEEL LTD, MUMBAI. - 3 - AND RESTRICTED THE ADDITION TO 12.5% OF THE ALLEGED BOGUS PURCHASES AND PARTLY ALLOWED THE APPEAL. WHEREAS, THE A.O HAS INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT IN RESPECT OF CLAIM OF BOGUS PURCHASE MADE BY THE ASSESSEE. THE A.O FOUND THAT THE CIT(A) HAS SUSTAINED THE ADDITI ON AT 12.5% OF THE BOGUS PURCHASES AND IN SPITE OF OPPORTUNITIES PROVIDED TO THE ASSESSEE NO REPLY WAS FILED. FINALLY A.O. LEVIED THE PENALTY U/S 271(1)(C ) OF THE ACT RS.1,69,293/- FOR FURNISHING INACCURATE PARTICULARS AND PASSED ORDER ON 29.03.2017. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE LD.CIT(A), WHEREAS THE LD. CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE DECISION OF THE HONBLE HIGH COURT OF PUNJAB AND HARYANA AND HAS DIRECTED THE A.O TO DELETE THE PENALTY AS THE INCOME IS ASSESSED ON THE ESTIMATED BASIS AND ALLOWED THE APPEAL. AGGRIEVED BY THE ORDER, THE REVENUE HAS FILED AN APPEAL WITH THE TRIBUNAL. 3. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F THE ASSESSEE. WE HEARD THE SUBMISSIONS OF THE LD. D R ITA NO . 3919 /MUM/2019 M/S HARISONS STEEL LTD, MUMBAI. - 4 - THE GRIEVANCE OF THE REVENUE IS THAT, THE CIT(A) HA S ERRED IN DELETING THE PENALTY IRRESPECTIVE OF THE F ACT THAT THE ASSESSEE HAS CLAIMED BOGUS EXPENDITURE IN THE RETURN OF INCOME AND THE ASSESSMENT WAS REOPENED BASED ON THE INFORMATION RECEIVED FROM DGIT (INVESTIGATION WING). THEREFORE, THE ORDER OF THE CIT(A) BE SET ASIDE AND ALLOW THE REVENUE APPEAL. 4. WE HEARD THE SUBMISSIONS OF THE LD. DR AND PERUSED THE MATERIAL ON RECORD AS NONE APPEARED ON BEHALF OF THE ASSESSEE. THE SOLE DISPUTED ISSUE ENVISAGED BY THE LD. DR THAT THE CIT(A) ERRED IN DELETING THE PENALTY OVERLOOKING THE FACTS THAT THE ASSESSEE HAS CLAIMED BOGUS PURCHASES IN THE BOOKS O F ACCOUNTS AND ALSO THE INFORMATION RECEIVED FROM EXTERNAL SOURCES IS THE EXCEPTION TO THE MONITORY LIMIT PRESCRIBED UNDER CBDT INSTRUCTION NO. 3/2018 DATED 11.7.2018 AS AMENDED ON 20.08.2018. WE FIND THE LD.CIT(A) HAS CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND RELIED ON THE DECISION OF HARIGOPAL SINGH VS.CIT (2002) 258 ITR 85 (P&H) REFERRED AT PA GE 3 PARA 5 TO 5.2 OF THE ORDER AS UNDER: 5. DECISIONS ON GROUND OF APPEAL NO.1 ITA NO . 3919 /MUM/2019 M/S HARISONS STEEL LTD, MUMBAI. - 5 - 5.1 I HAVE CONSIDERED THE RIVAL CONTENTIONS. I FI ND FROM THE ORDER OF THE CIT(A) THAT THE SUM OF RS. 5,09,65 0/- IN RESPECT OF WHICH THE PENALTY WAS IMPOSED BASED ON ESTIMATE. THE SAID SUM WAS ESTIMATED @ 12.5% OF TH E PURCHASES TREATED AS BOGUS. I FIND THAT THE A.O FA ILED TO BRING ANY CONCRETE EVIDENCE TO PROVE THAT THE SUM O F RS. 5,09,650/- ACTUALLY REPRESENTED INCOME IN RESPECT O F WHICH INACCURATE PARTICULARS HAD BEEN FURNISHED BY THE APPELLANT. I FIND THAT THE FACTS IN THE CASE CITED BY THE APPELLANT IS SIMILAR TO THE FACTS OF THE APPELLANT CASE. IN THAT CASE, THE QUESTION OF LAW BEFORE THE HONBLE C OURT WAS WHETHER PENALTY IS ATTRACTED UNDER SECTION 271( 1)(C) OF THE ACT WHERE INCOME IS ASSESSED PURELY ON ESTIM ATE BASIS AND ADDITIONS ARE MADE IN THE DECLARED INCOME ON THAT BASIS. IN THAT CASE, THE HONBLE HIGH COURT O F PUNJAB & HARYANA HELD AS UNDER: 4. IN ORDER TO ATTRACT CLAUSE (C) OF SECTION 271(1) OF THE ACT, IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASSESSEE OF THE PARTICULARS OF HIS INCOME OR IF HE FURNISHES INACCURATE PARTICULARS OF SUCH INCOME. WH AT IS TO BE SEEN IS WHETHER THE ASSESSEE IN THE PRESENT C ASE HAD CONCEALED HIS INCOME AS HELD BY THE ASSESSING OFFICER AND THE TRIBUNAL. HE HAD NOT MAINTAINED ANY ACCOUNTS AND HE FILED HIS RETURN OF INCOME ON ESTIM ATE BASIS. THE ASSESSING OFFICER DID NOT AGREE WITH THE ESTIMATE OF THE ASSESSEE AND BROUGHT HIS INCOME TO TAX BY INCREASING IT TO RS. 2,07,500. THIS, TOO, WAS ON ES TIMATE BASIS. THE TRIBUNAL AGREED THAT THE INCOME OF THE ASSESSEE HAD TO BE ASSESSED ON AN ESTIMATE OF THE TURNOVER BUT WAS OF THE VIEW THAT THE ESTIMATE AS M ADE BY THE ASSESSING OFFICER WAS HIGHLY EXCESSIVE AND I T FIXED THE TOTAL INCOME OF THE ASSESSEE AT RS. 1,50,000 FO R THE YEAR UNDER APPEAL. IT IS, THUS, CLEAR THAT THERE WA S A DIFFERENCE OF OPINION AS REGARDS THE ESTIMATE OF TH E INCOME OF THE ASSESSEE. SINCE THE ASSESSING OFFICER AND ITA NO . 3919 /MUM/2019 M/S HARISONS STEEL LTD, MUMBAI. - 6 - THE TRIBUNAL ADOPTED DIFFERENT ESTIMATES IN ASSESSI NG THE INCOME OF THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE HAD 'CONCEALED THE PARTICULARS OF HIS INCO ME' SO AS TO ATTRACT CLAUSE (C) OF SECTION 271(1) OF THE ACT. THERE IS NOT EVEN AN IOTA OF EVIDENCE ON THE RECORD TO SH OW THAT THE INCOME OF THE ASSESSEE DURING THE YEAR UNDER AP PEAL WAS MORE THAN THE INCOME RETURNED BY HIM. ADDITIONS IN HIS INCOME WERE MADE, AS ALREADY OBSERVED, ON ESTIM ATE BASIS AND THAT BY ITSELF DOES NOT LEAD TO THE CONCL USION THAT THE ASSESSEE EITHER CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THERE HAS TO BE A POSITIVE ACT OF CONCEALME NT ON HIS PART AND THE ONUS TO PROVE THIS IS ON THE DEPAR TMENT. WE ARE ALSO OF THE CONSIDERED VIEW THAT THE TRIBUNA L GROSSLY ERRED IN LAW IN RELYING ON EXPLANATION 1(B) TO SECTION 271(1)(C) OF THE ACT TO RAISE A PRESUMPTION AGAINST THE ASSESSEE. THE ASSESSEE HAD JUSTIFIED HI S ESTIMATE OF INCOME ON THE BASIS OF HOUSEHOLD EXPEND ITURE AND OTHER INVESTMENTS MADE DURING THE RELEVANT PERI OD. IT IS NOT THE CASE OF THE REVENUE THAT HE HAD, IN FACT , INCURRED EXPENDITURE IN EXCESS OF WHAT HE HAD STATE D. IN THIS VIEW OF THE MATTER, IT CANNOT BE SAID THAT THE EXPLANATION FURNISHED BY THE ASSESSEE HAD NOT BEEN SUBSTANTIATED OR THAT HE HAD FAILED TO PROVE THAT S UCH EXPLANATION WAS NOT BONA FIDE. 5.2 IN VIEW OF DECISION OF ABOVE, THE PENALTY IMPO SED IS NOT SUSTAINABLE. THE A.OS RELIANCE ON THE DECISIO N OF THE HONBLE APEX COURT IN THE CASE OF MAK DATA PVT LTD. , VS. CIT (SUPRA) IS MISPLACED BECAUSE IN THIS CASE THE DISALLOWANCE / ADDITION WAS NOT BASED ON ANY CONCRE TE EVIDENCE. ACCORDINGLY, I DIRECT THE A.O TO DELETE THE PENALTY OF RS. 1,69,293/-. IN THE RESULT, GROUND O F APPEAL NO. 1 IS ALLOWED. ITA NO . 3919 /MUM/2019 M/S HARISONS STEEL LTD, MUMBAI. - 7 - 5. WE CONSIDERING THE OBSERVATIONS OF THE LD.CIT(A) FIND THAT, THE PENALTY U/S 271(1)(C) OF THE ACT CAN NOT BE SUSTAINED WHEN THE INCOME HAS BEEN ESTIMATED. WE SUPPORT OUR VIEW RELYING ON THE DECISION OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY, [2013] 359 ITR 0565 (KAR). IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY , KARNATAKA HIGH COURT HAS LAID DOWN THE FOLLOWING PRINCIPLES FOR LEVY OF PENALTY UNDER SECTION 271(1) (C) OF THE INCOME TAX ACT, 1961 :- (A) PENALTY UNDER SECTION 271(L)(C) IS A CIVIL LIAB ILITY. (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. (C) WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIE NT FOR ATTRACTING CIVIL LIABILITY. (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 2 71(L)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTH ORITY OR REVISIONAL AUTHORITY. (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(L)(C), AT L EAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNI BLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUT E CONCEALMENT BECAUSE OF DEEMING PROVISION. (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDIN GS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFI CER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CO NTAINED IN SECTION 1(B). ITA NO . 3919 /MUM/2019 M/S HARISONS STEEL LTD, MUMBAI. - 8 - (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMI SSIONER. (I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. (K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TA X AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PE NALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT I S ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILI TY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT O RDER. (L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOS ING PENALTY COULD BE PASSED. (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL F ACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOT AL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMP OSED. (N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PR OCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFAC TION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APP ELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. (P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(L)(C), I.E., W HETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORREC T PARTICULARS OF INCOME (Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIRE MENT OF LAW. ITA NO . 3919 /MUM/2019 M/S HARISONS STEEL LTD, MUMBAI. - 9 - (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUST ICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. (S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE A SSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENA LTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEP ENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS INSOFAR AS CONCEALMENT OF INCOME AND FURNISHING OF INCOR RECT PARTICULARS WOULD NOT OPERATE AS RES JUDICATA IN T HE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LE VIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE A SSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE P ENALTY PROCEEDINGS. 6. WE ARE OF THE SUBSTANTIVE OPINION THAT, THE PENALTY U/S 271(1)(C) CANNOT BE LEVIED WHEN THE INCOME HAS BEEN ESTIMATED. THE LD. DR COULD NOT CONTROVERT THE OBSERVATIONS OF THE LD.CIT(A) WITH A NY COGENT EVIDENCE EXCEPT RELYING ON THE A.OS ORDER. ACCORDINGLY, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) WHO RELIED ON THE JUDICIAL DECISIONS AND PASSED A REASONED ORDER IN DIRECTING THE ASSESSING OFFICER TO DELETE THE PENALTY. HENCE, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. ITA NO . 3919 /MUM/2019 M/S HARISONS STEEL LTD, MUMBAI. - 10 - 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.12.2020 SD/- SD/- (MANOJ KUMAR AGGARWAL) (PAVAN KUMAR GADALE ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30/12/2020 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER, , / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' #, / ITAT, MUMBAI