D B M GEOTECHNICS & CONSTRUCTIONS P.LTD, MUMBAI V. ASST CIT CEN CIR 8(4), MUMBAI

ITA 4312/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0353 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 26-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Bogus purchase; Revenue expenditure; Capital expenditure
• Section: 271(1)(c); 143(3); 143(1); 13; 147

Judgement Text

P A G E | 1 ITA NO S . 4312 TO 4315/MUM/2018 A.Y S 2008 - 09, 09 - 10, 10 - 11, 11 - 12 M/S. DBM GEOTECHNICS & CONSTRUCTIONS P. LTD. VS. ACIT IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI G. MANJUNATHA , ACCOUNTAN T MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 4312 /MUM/2018 (ASSESSMENT YEAR: 20 08 - 09 ) ITA NO. 4313 /MUM/2018 (ASSESSMENT YEAR: 2009 - 10) ITA NO. 4314 /MUM/2018 (ASSESSMENT YEAR: 2010 - 11) ITA NO. 4315 /MUM/2018 (ASSESSMENT YEAR: 2011 - 12) M/S. DBM GEOTECHNICS & CONSTRUTIONS PVT. LTD. B - 301, 3 RD FL., CENTAUR HOTEL, SHANTI NAGAR INDUSTRIAL ESTATE, VAKOLA, SANTACRUZ (W),MUMBAI - 400 055. VS. A CIT, C ENTRAL CIRCLE 8(4), 6 TH F LOOR . , ROOM NO. 658, AAYKAR BHAVAN, M.K ROAD, MUMBAI - 400 020. PAN A A ACD2593G (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SUBODH RATNA PARKHI, AR RESPONDENT BY: SMT. JOTHI LAKSHMI NAYAK DATE OF HEARING: 10.12 .2019 DATE OF PRONOUNCEMENT: 13 .12.2019 O R D E R PER RAVISH SOOD, JM THE P RESENT APPEAL S FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDER S PASSED BY THE CIT(A) - 50 , MUMBAI, DATED 2 7.04.2018 , WHICH IN TURN ARISES FROM THE RESPECTIVE ORDER S PASSED BY THE ASSESSING OFFICER ( HEREINAFTER REFERRED TO AS A . O) UNDER SEC. 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 28/03/2015 FOR THE ABOVE MENTIONED ASSESSMENT YEARS . AS CERTAIN C OMMON ISSUES ARE INVOLVED IN THE CAPTIONED APPEALS, THEREFORE, THE SAME ARE BEING TAKEN UP AND DISPOSED OFF TOGETHER BY WAY OF A CONSOLIDATED ORDER. W E SHALL FIRST ADVERT TO THE APPEAL FILED BY THE ASSESSEE FOR THE A.Y 2008 - 09 IN ITA P A G E | 2 ITA NO S . 4312 TO 4315/MUM/2018 A.Y S 2008 - 09, 09 - 10, 10 - 11, 11 - 12 M/S. DBM GEOTECHNICS & CONSTRUCTIONS P. LTD. VS. ACIT NO.4312/MUM/2018 . THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUND OF APPEAL BEFORE US : - 1. THE HON. CIT(A) ERRED IN CONFIRMING PENALTY OF RS. 2,18,720/ - LEVIED U/S. 271(1) ( C) OF THE I. TAX ACT, 1961, IN RESPECT OF ADDITION MADE BY DISALLOWING @ 12.50% OF THE DISPUTED PURCHASES. THE PENALTY OF RS. 2,18,720/ - LEVIED U/S. 271(1) ( C) OF THE I. TAX ACT BEING NOT WARRANTED BY FACTS AND IN LAW MAY PLEASE BE CANCELLED. 2. BRIEFLY STATED, THE ASSESSEE COMPANY , WHICH IS ENGAGED IN GEOTECHNICAL INVESTIGATION, HAD FILED ITS RETURN OF INCOME FOR A.Y 20 08 - 09 ON 28 - 09 - 2008 , DECLARING ITS TOTAL INCOME AT RS. 3,31,78,990/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH U/S 143(1) OF THE INCOME - TAX ACT, 1961 (IN SHORT, THE ACT) . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS RE - OPENED U/S. 147 OF THE ACT. I NFORMATION WAS RECEIVED BY THE A . O FROM THE INVESTIGATION WING OF THE INCOME - TAX DEPARTMENT THAT THE ASSESSEE AS A BENE FICIARY HAD OBTAINED CERTAIN ACCOMMODATION BILLS WITHOUT ACTUAL RECEIPT OF GOODS FROM CERTAIN HAW A LA DEALERS /ACCOMMODATION ENTRY PROVIDERS . ON THE BASIS OF AFORESAID INFORMATION, THE A . O IN THE COURSE OF THE ASSESSMENT PROCEEDINGS CALLED UPON THE ASSESSE E TO SUBSTANTIATE THE PURCHASE S AGGREGATING TO AN AMOUNT OF RS. 56,56,182/ - WHICH WERE CLAIMED TO HAVE BEEN MADE FROM THE FOLLOWING TWO TAINTED PARTIES: - SL. NO. NAME OF THE PARTY AMOUNT 1 DEEPALI ENTERPRISE 2935543 2 SIDDHIVINAYAK TRADING CO. 2720639 TOTAL 56,56,182 3. IN ORDER TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE AFORESAID PURCHASE TRANSACTIONS, THE A.O DIRECTED THE ASSESSEE TO FURNISH SUPPORTING DOCUMENTS VIZ. COPIES OF PURCHASE ORDER S , INVOICES, PAYMENT DETAILS, DETAILS OF RECEIPT AND TRANSPORTATION I.E L . R/R . R RECEIPT S , VEHICLE NO S ., GATE PASS RECORDS, OCTROI RECEIPTS, GRN, DELIVERY CHALLANS, WEIGHMENT SLIPS AND DETAILS OF UTILISATION OF THE ALLEGED PURCHASES. IN REPLY, IT WAS THE CLA IM OF THE ASSESSEE THAT THE IMPUGNED PURCHASES WERE SUPPORTED BY BILLS, DELIVERY CHALLANS, WEIGHBRIDGE RECEIPT S , MATERIAL RECEIPT NOTES ETC. ALSO, THE ASSESSEE IN ITS ATTEMPT TO SUBSTANTIATE THE AUTHENTICITY OF THE IMPUGNED PURCHASE TRANSACTIONS HAD DRAWN SUPPORT FROM THE FACT THAT THE PAYMENT OF THE PURCHASE CONSIDERATION TO THE AFOREMENTIONED PARTIES WERE MADE THROUGH BANKING CHANNEL. THE A . O, HOWEVER, AFTER DELI BERATING ON THE AFORESAID CLAIM OF THE ASSESSEE WAS NOT PERSUADED TO ACCEPT THE SAME. OBSERVIN G, THAT THE ASSESSEE HAD FAIL ED TO FURNISH THE P A G E | 3 ITA NO S . 4312 TO 4315/MUM/2018 A.Y S 2008 - 09, 09 - 10, 10 - 11, 11 - 12 M/S. DBM GEOTECHNICS & CONSTRUCTIONS P. LTD. VS. ACIT CONFIRMATION OF THE AFORESAID PARTIES FROM WHOM GOODS WERE CLAIMED TO HAVE BEEN PURCHASE D , AND ALSO COULD NOT SUBSTANTIATE THE AUTHENTICITY OF PURCHASE TRANSACTION S , THE A . O CHARACTERISED THE SAME AS BOGUS PURCHASE TRANSACTION S AND MADE AN ADDITION OF RS. 7,07,023/ - I.E @ 12.5% OF THE AGGREGATE VALUE OF THE IMPUGNED PURCHASE OF RS.56,56,182/ - IN THE HANDS OF THE ASSESSEE. THE ASSESSEE ACCEPTED THE ASSESSMENT ORDER PASSED U/S. 143 R.W.S 147 , DATED 28.09.2015 AND DID NOT ASSAIL THE SAME ANY FURTHER IN APPEAL BEFORE THE CIT(A), AS A RESULT WHEREOF THE SAME ATTAINED FINALITY. 4. THE A . O AFTER THE CULMINATION OF THE ASSESSMENT PROCEEDINGS CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY U/ S. 271(1)(C) MAY NOT BE IMPOSED ON IT IN RESPECT OF THE AFORESAID ADDITION OF RS. 7,07,023/ - MADE ON ACCOUNT OF BOGUS PURCHASE TRANSACTION S . AS THE REPLY OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O, T HEREFORE, HE IMPOSED A PENALTY OF RS. 2,18,720/ - U/S 271(1)(C) OF THE ACT . AGGRIEVED, THE ASSESSEE ASSAILED THE PENALTY ORDER IN APPEAL BEFORE THE CIT(A). AS THE CIT(A) WAS NOT PERSUADED TO SUBSCRIBE TO THE CONTENTIONS ADVANCED BY THE ASSESSEE, THEREFORE, HE UPHELD THE PENALTY IMPOSED BY THE A . O AND DIS MISSED THE APPEAL. 5. THE ASSESSEE BEING AGGRIEVED WITH THE IMPUGNED ORDER OF THE LD. CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LEARNED AUTHORISED REPRESENTATIVE (IN SHORT, THE A . R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING SUBMITTED , THAT AS THE ADDITION TOWARDS THE IMPUGNED PURCHASES WAS MADE ON AN ESTIMAT E BASIS AND WAS NOT BACKED BY ANY CONCRETE MATERIAL EVIDENCING THAT THE ASSESSEE HAD ENTERED INTO ANY BOGUS PURCHASE TRANSACTIONS , THEREFORE, NO PENALTY U/S. 271(1) (C) WAS LIABLE TO BE IMPOSED . 6 . PER CONTRA , THE LEARNED DEPARTMENTAL REPRESENTATIVE (IN SHORT, D . R) RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. IT WAS AVERRED BY THE LD. D . R , THAT AS THE ASSESSEE HAD BOOKED BOGUS PURCHASES, THEREFORE, THE LOWER AUTHORITIES HAD RIGHTLY IMPOSED/SUSTAINED THE PENALTY U/S. 271(1)(C) OF THE ACT. IT WAS SUBMITTED BY THE LD. D . R THAT AS THE APPEAL OF ASSESSEE WAS DEVOID OF ANY MERIT , THEREFORE, THE SAME MAY BE DISMISSED. 7 . WE HAVE HEARD THE AUTHORISED REPRESENTATIVES OF B OTH THE PARTIES , PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD , AS WELL AS THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THEM . ADMITTEDLY, THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE P A G E | 4 ITA NO S . 4312 TO 4315/MUM/2018 A.Y S 2008 - 09, 09 - 10, 10 - 11, 11 - 12 M/S. DBM GEOTECHNICS & CONSTRUCTIONS P. LTD. VS. ACIT GENUINENESS AND VERACITY OF PURCHASES AGGREGATING TO RS. 56,56,182/ - , WHICH WERE CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED TWO PARTIES. AT THE SAME TIME, WE FIND THAT THE ASSESSEE HAD FURNISHED CERTAIN DOCUME NTARY EVIDENCE IN ITS ATTEMPT TO SUBSTANTIATE THE AUTHENTICITY OF THE AFORESAID PURCHASE TRANSACTION S. AS THE DOCUMENTS FURNISHED BY THE ASSESSEE IN ORDER TO FORTIFY ITS CLAIM OF HAVING MADE GENUINE PURCHASES FROM THE AFOREMENTIONED PARTIES WAS NOT FOUND T O THE SATISFACTION OF THE A . O, THEREFORE, HE HAD STAMPED AND CHARACTERISED THE IMPUGNED PURCHASE TRANSACTION S AS BOGUS PURCHASE TRANSACTION S . ON A PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND , THAT THE ADDITION/DISALLOWANCE OF RS.7,07,023/ - I.E @ 12.5% OF THE AGGREGATE VALUE OF THE IMPUGNED PURCHASES OF RS. 56,56,182/ - WAS MADE/SUSTAINED BY THE LOWER AUTHORITIES ON THE BASIS OF AN ESTIMATION . IN FACT, WE FIND THAT AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE TO THE HILT ON THE BASIS OF IRREFUTABLE DOCUMENTARY EVIDENCE THAT IT HAD MADE GENUINE PURCHASE OF GOODS FROM THE AFOREMENTIONED TWO PARTIES, THEREFORE, THE LOWER AUTHORITIES HAD PROCEED ED WITH THE ASSUMPTION THAT THE ASSESSEE HAD PROCURED THE GOODS NOT FROM AFOREMENTIONED PARTIES BUT AT A DISCO UNTED VALUE FROM THE OPEN/GR E Y MARKET . ON THE BASIS OF THE AFOREMENTIONED OBSERVATIONS, THE LOWER AUTHORITIES HAD MADE/SUSTAINED THE IMPUGNED ADDITION TO THE EXTENT OF AN ESTIMATED PROFIT OF 12.5% OF THE AGGREGATE VALUE OF THE IMPUGNED PURCHASES WHICH THE ASSESSEE WAS ASSUMED TO HAVE GENERATED BY MAKING SUCH PURCHASES AT A DISCOUNTED VALUE FROM THE UNDISCLOSED SOURCES OPERATING IN THE OPEN/GREY MARKET. ACCORDINGLY, THE ADDITIONS SUSTAINED BY THE CIT(A) AS REGARDS THE AFORESAID IMPUGNED PURCHASE IS MERELY BACKED BY A PROCESS OF ESTIMATION AND NOT BASED ON ANY CONCRETE EVIDENCE DISPROVING THE GENUINENESS OF THE SAME . ALTHOUGH , THE ASSESSEE HAD NOT BEEN ABLE TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASE TRANSACTION S TO THE SATISFACTION OF THE A . O , HOWEVER, WE ALSO CANNOT REMAIN OBLIVIOUS OF THE FACT THAT CERTAIN DOCUMENTARY EVIDENCE IN SUPPORT OF THE GENUINENESS OF THE IMPUGNED PURCHASES WERE FURNISHED BY THE ASSESSEE IN THE COURSE OF THE PROCEEDINGS BEFORE THE LOWER AUTHORITIES. IN OUR CONSIDER ED VIEW, IN THE ABSENCE OF SUFFICIENT DOCUMENTARY EVIDENCE SUBSTANTIATING THE GENUINENESS OF THE PURCHASE TRANSACTION TO THE HILT, IT COULD THOUGH SAFELY BE CONCLUDED THAT THE ASSESSEE HAD PURCHASED THE GOODS AT A DISCOUNTED VALUE FROM THE UNDISCLOSED SOUR CES OPERATING IN THE UNORGANISED OPEN/GREY MARKET, HOWEVER, THE SAID ASSUMPTION SHORN OF ANY CORROBORATIVE MATERIAL ON A STANDALONE BASIS CANNOT JUSTIFY IMPOSITION OF PENALTY U/S. 271(1)(C) P A G E | 5 ITA NO S . 4312 TO 4315/MUM/2018 A.Y S 2008 - 09, 09 - 10, 10 - 11, 11 - 12 M/S. DBM GEOTECHNICS & CONSTRUCTIONS P. LTD. VS. ACIT ON THE ASSESSEE. ACCORDINGLY, WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE SADDLING OF THE PENALTY U/S 271(1)(C) ON THE ASSESSEE BY THE LOWER AUTHORITIES. OUR AFORESAID VIEW IS SUPPORTED BY THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UPENDRA V. MITHANI [ITA (L) NO. 1860 OF 2009, DT 05.08.2009] . IN THE AFORESAID CASE, IT WAS OBSERVED BY THE HONBLE HIGH COURT THAT NO PENALTY CAN BE IMPOSED U/S. 271(1) (C) , IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS W ITH THE HYPOTHESIS THAT IT DOES. IT WAS FURTHER OBSERVED, THAT IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED I.E IT IS NOT ACCEPTED BUT NOT DISPROVED , AND THE CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THA T THE ASSESSE S CASE IS FALSE, THEN NO PENALTY U/S. 271(1)(C) OF THE ACT CAN JUSTIFIABLY BE IMPOSED. ACCORDINGLY, ON THE BASIS OF OUR AFORESAID OBSERVATIONS, NOT FINDING FAVOUR WITH THE VIEW TAKEN BY THE LOWER AUTHORITIES, WE QUASH THE IMPUGNED PENALTY OF RS. 2,18,720/ - IMPOSED U/S. 271(1)(C) BY THE A . O AND THEREAFTER SUSTAINED BY THE LD. CIT(A) . 8 . THE APPEAL FOR A.Y 2008 - 09 IN ITA NO.4312/MUM/2018 IS ALLOWED IN TERMS OF OUR AFORE SAID OBSERVATIONS. ITA NO. 4313/MUM/2018 A.Y 2009 - 10 9 . NOW, WE SHALL ADVERT TO THE APPEAL FILED BY THE ASSESSEE FOR A.Y 200 9 - 10 IN ITA NO. 4313/MUM/2018. THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US : - 1. THE HON. CIT(A) ERRED IN CONFIRMING PENALTY OF RS. 12,73,830/ - LEVIED U/S. 271(1) ( C) OF THE I. TAX ACT, 1961, IN RESPECT OF ADDITION MADE BY DISALLOWING @ 12.50% OF THE DISPUTED PURCHASES. THE PENALTY OF RS. 12,73,830/ - LEVIED U/S. 271(1)(C) OF THE I. TAX ACT BEING NOT WARRANTED BY FACTS AND IN LAW MAY PLEASE BE CANCELLED. 1 0 . BRIEFLY STATED, THE ASSESSEE COMPANY HAD E - FILED ITS RETURN OF INCOME FOR A.Y 2009 - 10 ON 25 - 09 - 2008 , DECLARING ITS TOTAL INCOME AT RS. 6,04,33,795/ - . ORIGINAL ASSESSMENT WAS FRAMED BY THE A . O U/S.143(3) OF THE ACT , VIDE HIS ORDER DATED 15 - 12 - 2011, WHEREIN HE HAD INTER ALIA MADE CERTAIN ADDITIONS VIZ. (I). DISALLOWANCE OF EXPENDITURE INCURRED B Y THE ASSESSEE ON INCREASE IN SHARE CAPITAL : RS. 16,97,144/ - ; AND (II). DISALLOWANCE OF WRIT ING OFF OF SUNDRY ADVANCES TO EMPLOYEES : RS. 5,56,103/ - . P A G E | 6 ITA NO S . 4312 TO 4315/MUM/2018 A.Y S 2008 - 09, 09 - 10, 10 - 11, 11 - 12 M/S. DBM GEOTECHNICS & CONSTRUCTIONS P. LTD. VS. ACIT 1 1 . ON APPEAL, THE CIT(A) DELETED THE ADDITION OF RS. 7,12,944/ - ( OUT OF RS. 16,97,144/ - ) PERTAINING TO EXPENSES WHICH WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN INCURRED IN RELATION TO INCREASE OF ITS SHARE CAPITAL . HOWEVER, THE DISALLOWANCE OF WRIT ING OFF OF SUNDRY ADVANCES OF R S. 5,56,103/ - WAS SUSTAINED BY THE CIT(A) . 1 2 . ON THE BASIS OF INFORMATION RECEIVED BY THE A .O FROM THE SALES TAX AUTHORITIES (THROUGH THE INVESTIGATION WING OF THE INCOME - TAX DEPARTMENT ) THAT THE ASSESSEE AS A BENEFICIARY HAD OBTAINED CERTAIN ACCOMMODATION BILLS WITHOUT ACTUAL RECEIPT OF GOODS FROM 1 9 HAW A LA PARTIES (DETAILS OF WHICH ARE AVAILABLE AT P AGES 2 - 3 OF THE ASSESSMENT ORDER , DT. 28.09.2015 FOR THE ASSESSMENT YEAR 2009 - 10) , THE CASE OF THE ASSESSEE WAS REOPENED U/S. 147 OF THE ACT . IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE A . O THAT THE ASSESSEE HAD CLAIMED TO HAVE BEEN MADE PURCHASES AGGREGATING TO RS. 2,06,58,616/ - FROM THE AFORE SAID 19 TAINTED PARTIES . ON THE BASIS OF THE AFORESAID INFORMATION, THE A . O IN THE COURSE OF THE ASSESSMENT PROCEEDINGS CALLED UPON THE ASSESSE E TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASE S AGGREGATING TO AN AMOUNT OF RS. 2,06,58,616/ WHICH WERE CLAIMED TO HAVE BEEN MADE FROM THE AFORESAID TAINTED PARTIES. AS THE ASSESSEE FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE AFORESAID IMPUGNED PURCHASES, THEREFORE, THE AO TREATING THE SAME AS BOGUS PURCHASES DISALLOWED 12.5% OF THE AGGREGATE VALUE OF THE SAME AND MADE AN ADDITION OF RS. 25,82,327/ - TO THE TOTAL INCOME OF THE ASSESSEE. SUBSEQUENTLY, THE A . O VIDE HIS PENALTY ORDER P ASSED U/S. 271(1)(C) IMPOSED A PENALTY OF RS. 12,73,830/ - FOR THE A.Y 2009 - 10 ON THE ASSESSEE , BOTH AS REGARDS THE ADDITIONS /DISALLOWANCES, WHICH WERE MADE IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AS WELL IN THE RE - ASSESSMENT FRAMED BY HIM VIZ. ( I) DIS ALLOWANCE OF EXPENSES RELATING TO INCREASE IN SHARE CAPITAL OF RS. 9,84,200/ - ; ( II) DISALLOWANCE OF SUNDRY ADVANCES TO EMPLOYEES WRITTEN OFF BY THE ASSESSEE : RS. 5,56,103 / - ; AND ( III) ADDITION/DISALLOWANCES OF BOGUS PURCHASES : RS. 25,82,327/ - . 1 3 . AGGRIEVED, THE ASSESSEE ASSAILED THE PENALTY IMPOSED BY THE A.O U/S 271(1)(C) IN APPEAL BEFORE THE CIT(A) . AS THE CIT(A) DID NOT FIND FAVOUR WITH THE CONTENTIONS ADVANCED BY THE ASSESSEE, THEREFORE, HE UPHELD THE VIEW TAKEN BY THE A . O AND DISMISSED THE APP EAL. P A G E | 7 ITA NO S . 4312 TO 4315/MUM/2018 A.Y S 2008 - 09, 09 - 10, 10 - 11, 11 - 12 M/S. DBM GEOTECHNICS & CONSTRUCTIONS P. LTD. VS. ACIT 1 4 . THE ASSESSEE BEING AGGRIEVED WITH THE IMPUGNED ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. 1 5 . AS THE FACTS AND THE ISSUE PERTAINING TO THE IMPOSITION OF PENALTY U/S. 271(1)(C) IN RESPECT OF THE ADDITION OF RS. 25,82,327/ - THAT WAS MADE BY THE A . O IN THE COURSE OF RE - ASSESSMENT PROCEEDINGS [I.E 12.5% OF THE IMPUGNED PURCHASES OF RS. 2,06,58,616/ - ] DURING THE YEAR UNDER CONSIDERATION REMAINS THE SAME AS WERE THERE BEFORE US IN THE CASE OF THE ASSESSEE FOR THE IMME DIATELY PRECEDING YEAR VIZ. A.Y 2008 - 09, IN ITA NO. 4312/MUM/2018, THEREFORE, OUR ORDER THEREIN PASSED WHILE DISPOSING OFF THE SAID APPEAL OF THE ASSESSEE FOR A.Y 2008 - 09 IN ITA NO. ITA NO. 4312/MUM/2018 SHALL TO THE SAID EXTENT APPLY MUTATIS MUTANDIS IN CONTEXT OF THE ISSUE UNDER CONSIDERATION FOR DISPOSAL OF THE PRESENT APPEAL . ACCORDINGLY, THE PENALTY OF RS.12,73,830/ - IMPOSED BY THE A . O U/S. 271(1)(C) , WHICH THEREAFTER HAD BEEN SUSTAINED BY THE CIT(A) IN RESPECT OF ADDITION OF RS. 25,82,327/ - ON AC COUNT OF IMPUGNED BOGUS PURCHASE TRANSACTIONS IS DELETED. 1 6 . NOW, WE SHALL ADVERT TO THE IMPOSITION OF PENALTY U/S. 271(1)(C) IN RESPECT OF DISALLOWANCE OF EXPENSES RELATING TO INCREASE IN SHARE CAPITAL AMOUNTING TO RS. 9 , 84 , 200/ - , TO THE EXTENT THE SAME HAD BEEN SUSTAINED BY THE CIT(A) WHILE DISPOSING OFF THE QUANTUM APPEAL OF THE ASSESSEE . ADMITTEDLY, AS OBSERVED BY THE CIT(A), THE AFORESAID EXPENSES WERE NOT ALLOWABLE AS A REVENUE EXPENDITURE PURSUANT TO THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF BROOK E B OND (I NDIA ) LTD VS. CIT (1997) 91 ITR 21 (SC ) . IN THE AFORESAID CASE, IT WAS HELD BY THE HONBLE APEX COURT THAT THOUGH THE INCREASE I N THE SHARE CAPITAL RESULTS IN EXPANSION OF THE CAPITAL BASE OF THE COMPANY AND WOULD HELP IN THE BUSINES S OF THE COMPANY AS WELL AS IN ITS PROFIT MAKING, HOWEVER, THE EXPENDITURE INCURRED IN THE SAID CONNECTION BEING DIRECTLY RELATABLE TO THE CAPITAL BASE OF THE COMPANY WOULD THUS RETAIN THE CHARACTER AS THAT OF A CAPITAL EXPENDITURE. IN OUR CONSIDERED VIEW , THE AFORESAID CLAIM OF THE EXPENDITURE OF RS. 9,42,000/ - INCURRED IN RELATION TO INCREASE IN SHARE CAPITAL, AS A REVENUE EXPENDITURE BY THE ASSESSEE IS INADMISSIBLE IN LAW . H OWEVER, MERELY ON THE SAID STANDALONE BASIS , THE ASSESSEE COULD NOT HAVE BEEN SUB JECTED TO IMPOSITION OF PENALTY U/S. 271(1) (C) OF THE ACT. IN FACT, WE FIND THAT THE ASSESSEE HAD FURNISHED ALL THE DETAILS P A G E | 8 ITA NO S . 4312 TO 4315/MUM/2018 A.Y S 2008 - 09, 09 - 10, 10 - 11, 11 - 12 M/S. DBM GEOTECHNICS & CONSTRUCTIONS P. LTD. VS. ACIT IN RESPECT OF ITS AFORESAID CLAIM OF EXPENDITURE IN ITS RETURN OF INCOME . WE ARE OF A ST R ONG CONVICTION THAT MERELY BECAUSE THAT TH E ASSESSE S CLAIM OF THE EXPENSES INCURRED FOR INCREASE IN SHARE CAPITAL AS A REVENUE EXPENDITURE, WAS NOT ACCEPTED BY THE REVENUE , THE SAME SOLELY ON THE SAID BASIS WOULD NOT JUSTIFY IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. OUR AFORESAID VIEW IS SU PPORTED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELI ANCE PETROPRODUCTS (P) LTD (2010) 322 ITR 158(SC) . AS SUCH, WE VACATE THE PENALTY IMPOSED BY THE A . O AS REGARDS THE DISALLOWANCE OF EXPENSES INCURRED BY THE ASSESSEE COMPANY IN RELATION TO INCREASE IN ITS SHARE CAPITAL . 1 7 . W E SHALL NOW ADVERT TO THE IMPOSITION OF PENALTY U/S. 271(1)(C) AS REGARDS THE DISALLOWANCE OF THE ASSESSES CLAIM OF WRIT ING OFF OF THE ADVANCES GIVEN TO ITS STAFF MEMBERS, WHICH WAS CLAIMED BY THE ASSESSEE AS A REVENUE EXPENDITURE. IN OUR CONSIDERED VIEW, A MERE DISALLOWANCE OF THE AFORESAID CLAIM OF THE ASSESSEE ON A STANDALONE BASIS CANNOT JUSTIFY IMPOSITION OF PENALTY UNDER SEC. 271(1)(C) ON THE ASSESSEE. ON A PERUSAL OF THE RECORDS, WE FIND THAT THERE WAS A COMPLETE DISCLOSURE OF FACTS BY THE ASSESSEE IN RESPECT OF ITS AFORESAID CLAIM OF EXPENSES IN ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. IT IS NOT THE CASE OF THE REVENUE THAT THE AFORESAID WRITING OFF OF THE ADVANCES GIVEN BY THE ASSESSEE TO ITS STAFF MEMBERS, IS FOUND TO BE FACTUALLY INCORRECT/FALSE. ON A SIMPLICITER DISLODGING OR NON - ACCEPTANCE OF THE AFORESAID CLAIM OF THE ASSESSEE, IN OUR CONSIDERED VIEW WOULD THOUGH JUSTIFY AN ADDITI ON/DISALLOWANCE IN THE HANDS OF THE ASSESSEE, HOWEVER, THE SAME ON THE SAID STANDALONE BASIS CANNOT JUSTIFY SADDLING THE ASSESSEE WITH PENALTY U/S 271(1)(C) OF THE ACT. OUR AFORESAID VIEW IS FORTIFIED BY THE AFORESAID DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS P.LTD (SUPRA). ACCORDINGLY, WE DELETE THE IMPUGNED PENALTY AS LEVIED BY THE AO U/S. 271(1)(C) AND SUSTAINED BY THE CIT(A) IN RESPECT OF DISALLOWANCE OF THE WRIT ING OFF THE ADVANCES GIVEN BY THE ASSESSEE TO ITS STAFF MEMBERS. 1 8 . ON THE BASIS OF OUR AFORESAID OBSERVATIONS THE PENALTY IMPOSED BY THE AO U/S. 271(1)( C) OF THE ACT IS VACATED. 19 . THE APPEAL OF THE ASSESSEE FOR A.Y 2009 - 10, IN ITA NO. 4313/MUM/2018 IS ALLOWED. ITA NO. 4314/MUM/2018 P A G E | 9 ITA NO S . 4312 TO 4315/MUM/2018 A.Y S 2008 - 09, 09 - 10, 10 - 11, 11 - 12 M/S. DBM GEOTECHNICS & CONSTRUCTIONS P. LTD. VS. ACIT A.Y 2010 - 11 : 2 0 . NOW, WE SHALL ADVERT TO THE APPEAL FILED BY THE ASSESSEE FOR THE A.Y 2010 - 11 , IN ITA NO. 4314/MUM/2018 . THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US : - 1. THE HON. CIT(A) ERRED IN CONFIRMING PENALTY OF RS.7,91,030/ - LEVIED U/S. 271(1) ( C) OF THE I. TAX ACT, 1961, IN RESPECT OF ADDITION MADE BY DISALLOWING @ 12.50% OF THE DISPUTED PURCHASES. THE PENALTY OF RS.7,91,030/ - LEVIED U/S. 271(1)(C) OF THE I.TAX ACT BEING NOT WARRANTED BY FACTS AND IN LAW MAY PL EASE BE CANCELLED. 2 1 . BRIEFLY STATED, THE ASSESSEE COMPANY HAD E - FILED ITS RETURN OF INCOME FOR A.Y 2010 - 11 ON 24 - 09 - 2010 , DECLARING A TOTAL INCOME OF RS. 9,29,88,304/ - . ORIGINAL ASSESSMENT WAS FRAMED BY THE A.O, VIDE HIS ORDER PASSED U/S. 143(3) , DATED 24.09.2010 AT RS.9,64,26,970/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS REOPENED U/S. 147 OF THE ACT. I NFORMATION WAS RECEIVED BY THE A . O FROM THE INVESTIGATION WING OF THE INCOME - TAX DEPARTMENT THAT THE ASSESSEE AS A BENEFICIARY HAD OBTAINED CE RTAIN ACCOMMODATION BILLS WITHOUT ACTUAL RECEIPT OF GOODS FROM CERTAIN HAW A LA DEALERS. ON THE BASIS OF THE AFORESAID INFORMATION, THE A . O IN THE COURSE OF THE ASSESSMENT PROCEEDINGS CALLED UPON THE ASSESSEE TO SUBSTANTIATE THE PURCHASE S AGGREGATING TO AN A MOUNT OF RS. 2,28,79,775/ - WHICH WERE CLAIMED TO HAVE BEEN MADE FROM 7 TAINTED PARTIES (D ETAILS OF WHICH ARE AVAILABLE AT PAGE 2 OF THE ASSESSMENT ORDER PASSED U/S. 143(3)/147 OF THE ACT , DT. 28 - 09 - 2015 ) . AS THE ASSESSEE FAILED TO SUBSTANTIATE THE AUTHENTICITY OF THE AFORESAID PURCHASES WHICH WERE CLAIMED TO HAVE BEEN MADE FROM THE AFORESAID TAINTED PARTIES , TO THE SATISFACTION OF THE AO, THEREFORE, THE A . O TREA TING THE SAME AS BOGUS PURCHASE TRANSACTIONS D ISALLOWED 12.5% OF THE IMPUGNED PURCHASES OF RS. 2,28,79,775/ - AND MADE A CONSEQUENTIAL ADDITION OF RS. 28,59,972/ - TO THE TOTAL INCOME OF THE ASSESSEE. SUBSEQUENTLY, THE A . O VIDE HIS PENALTY ORDER PASSED U/S. 271(1)(C) IMPOSED PENALTY OF RS. 7,91,030/ - FO R A.Y 2010 - 11 IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF THE ADDITION/DISALLOWANCE THAT WAS MADE IN RESPECT OF THE IMPUGNED BOGUS PURCHASES. AGGRIEVED, THE ASSESSEE ASSAILED THE PENALTY ORDER IN APPEAL BEFORE THE LD. CIT(A) . AS THE CIT(A) DID NOT FIND FAVO UR WITH THE CONTENTIONS ADVANCED BY THE ASSESSEE, THEREFORE , HE UPHELD THE PENALTY IMPOSED BY THE A.O U/S 271(1)(C) AND DISMISSED THE APPEAL. THE ASSESSEE BEING AGGRIEVED WITH THE IMPUGNED ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. WE FIND THAT AS THE FACTS AND THE ISSUE INVOLVED IN THE PRESENT APPEAL AS REGARDS THE LEVY OF PENALTY U/S. 271(1)(C) IN RESPECT OF ADDITION/DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES DURING THE UNDER CONSIDERATION REMAINS P A G E | 10 ITA NO S . 4312 TO 4315/MUM/2018 A.Y S 2008 - 09, 09 - 10, 10 - 11, 11 - 12 M/S. DBM GEOTECHNICS & CONSTRUCTIONS P. LTD. VS. ACIT THE SAME AS WAS THERE BEFORE US IN THE APPEAL OF THE ASSESSEE FOR A.Y 2008 - 09 IN ITA NO. 4312/MUM/2018 , THEREFORE, OUR ORDER THEREIN PASSED ITA NO. 4312/MUM/2018 FOR A.Y 2008 - 09 , SHALL APPLY MUTATIS MUTANDIS IN CONTEXT OF THE ISSUE UNDER CONSIDERATION. ACCORDINGLY, THE PENALTY OF RS.7, 91,030/ - IMPOSED BY THE A . O U/S. 271(1)(C) , WHICH THEREAFTER HAD BEEN SUSTAINED BY THE CIT(A) IN RESPECT OF ADDITION OF RS. 28,59,972/ - MADE ON ACCOUNT OF BOGUS PURCHASES IS VACATED. 2 2 . THE APPEAL OF THE ASSESSEE FOR A.Y 2010 - 11, IN ITA NO. 4314/MUM/201 8 IS ALLOWED. ITA NO. 4315/MUM/2018 A.Y 2011 - 12 : 2 3 . NOW, WE SHALL ADVERT TO THE APPEAL FILED BY THE ASSESSEE FOR A.Y 2011 - 12 IN ITA NO. 431 5 /MUM/2018. THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US : - 1. THE HON. CIT(A) ERRED IN CONFIRMING PENALTY OF RS. 3,33,190/ - LEVIED U/S. 271(1) ( C) OF THE I. TAX ACT, 1961, IN RESPECT OF : (A) ADDITION OF RS. 3,96,752/ - MADE BY DISALLOWING @ 12% OF THE DISPUTED PURCHASES AND (B) HOLDING THE EXPENSES OF RS. 7,13,871/ - INCURRED FOR INCREASE OF SHARE CAPITAL TO BE NOT ALLOWABLE AS REVENUE EXPENDITURE. THE PENALTY OF RS. 3,33,190/ - LEVIED U/S. 271(1) (C) OF THE I. TAX ACT BEING NOT WARRANTED BY FACTS AND IN LAW MAY PLEASE BE CANCELLED. 2 4 . BRIEFLY STATED, THE ASSESSEE COMPANY HAD E - FILED ITS RETURN OF INCOME FOR A.Y 2011 - 12 ON 30 - 09 - 2011 , DECLARING A TOTAL INCOME OF RS. 26,78,30,547/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT . I NFORMATION WAS RECEIVED BY THE A.O FROM THE SALES TAX DEPARTMENT , AS PER WHICH, IT WAS CONVEYED THAT THE ASSESSEE AS A BENEFICIARY HAD DURING THE YEAR UNDER CONSIDERATION OBTAINED ACCOMMODATION BILLS FROM CERTAIN HAW A LA DEALERS . IN THE COURSE OF ASSESSMENT PROCEEDINGS , IT WAS OBSE RVED BY THE A . O THAT THE ASSESSEE HAD MADE PURCHASES AGGREGATING TO RS. 33,06,274/ - FROM TWO TAINTED PARTIES . IN ORDER TO VERIFY THE GENUINENESS OF THE IMPUGNED PURCHASE TRANSACTIONS, THE A . O IN THE COURSE OF THE ASSESSMENT PROCEEDINGS CALLED UPON THE ASSE SSEE TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASE S AGGREGATING TO AN AMOUNT OF RS. 33,06,274/ - WHICH WERE CLAIMED TO HAVE BEEN MADE FROM THE AFORESAID TWO TAINTED PARTIES. AS THE ASSESSEE FAILED TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASE TRANSACTI ONS ON THE BASIS OF SUPPORTING DOCUMENTARY EVIDENCE, TO THE SATISFACTION OF P A G E | 11 ITA NO S . 4312 TO 4315/MUM/2018 A.Y S 2008 - 09, 09 - 10, 10 - 11, 11 - 12 M/S. DBM GEOTECHNICS & CONSTRUCTIONS P. LTD. VS. ACIT THE A.O, THEREFORE, HE CHARACTERISED THE SAME AS BOGUS PURCHASES AND ADDED THE AGGREGATE VALUE OF THE IMPUGNED PURCHASES OF RS. 33,06,274/ - TO THE TOTAL INCOME OF THE ASSESSEE. ALS O, THOUGH THE ASSESSEE COMPANY IN ITS AUDIT REPORT HAD CATEGORICALLY STATED THAT THE EXPENSES OF RS. 7,13,87 1 / - WHICH WERE INCURRED TOWARDS RAISING OF FRESH SHARE CAPITAL WAS A CAPITAL EXPENDITURE, HOWEVER, IT HAD FAILED TO DISALLOW THE SAME IN ITS COM PUTATION OF INCOME. IN THE BACKDROP OF THE AFORESAID FACT, THE A.O WHILE FRAMING THE ASSESSMENT HAD ALSO DISALLOWED THE AFORESAID EXPENDITURE OF RS.7,13,871/ - . 2 5 . AGGRIEVED, THE ASSESSEE ASSAILED THE ASSESSMENT IN APPEAL BEFORE THE CIT(A). A FTER DELIBERATING AT LENGTH ON THE ISSUE UNDER CONSIDERATION, THE CIT(A) RESTRICTED THE ADDITION AS REGARDS THE IMPUGNED BOGUS PURCHASE S TO THE EXTENT OF 12% OF THE AGGREGATE VALUE OF SUCH PURCHASES AND ACCORDINGLY SUSTAINED AN ADDITION OF RS. 3,96,752/ - . HOWEV ER, THE DISALLOWANCE OF THE CLAIM OF EXPENSES OF RS. 7,13,871/ - WHICH WERE INCURRED BY THE ASSESSEE COMPANY TOWARDS RAISING OF FRESH SHARE CAPITAL WAS SUSTAINED BY THE SAID FIRST APPELLATE AUTHORITY. 2 6 . THE A . O AFTER RECEIVING THE ORDER OF THE CIT(A) CA LLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY IN RESPECT OF THE ADDITION S SUSTAINED BY THE FIRST APPELLATE AUTHORITY MAY NOT BE IMPOSED ON IT . AS THE REPLY FILED BY THE ASSESSEE DID NOT FIND FAVOUR WITH THE A . O, THEREFORE, HE IMPOSED A PENALTY OF RS. 3,33,190/ - U/S. 271(1)( C) OF THE ACT. 2 7 . AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). HOWEVER, THE CIT(A) DID NOT FIND FAVOUR WITH THE CONTENTIONS ADVANCED BY THE ASSESSEE AND UPHELD THE IMPUGNED PENALTY IMPOSED BY THE A . O U/S. 271(1)(C) OF THE ACT . 2 8 . THE ASSESSEE BEING AGGRIEVED WITH THE ORDER PASSED BY THE LD. CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. WE FIND THAT AS THE ISSUE S INVOLVED PERTAINING TO LEVY OF PENALTY U/S. 271(1)(C) IN RESPECT OF ADDITIONS/ DISALLOWANCES MADE BY THE A.O DURING THE YEAR UNDER CONSIDERATION VIZ. ( I) ADDITION/ DISALLOWANCE OF UNPROVED/BOGUS PURCHASE S ( II) DISALLOWANCE OF EXPENSES INCURRED ON ISSUE OF SHARE CAPITAL REMAIN S THE SAME AS WERE THERE BEFORE US IN THE ASSESSES APPEAL F OR A.Y 2009 - 10 IN ITA NO. 4313/MUM/2018, THEREFORE, OUR ORDER THEREIN PASSED WHILE DISPOSING OFF THE SAID APPEAL OF THE ASSESSEE SHALL APPLY MUTATIS MUTANDIS FOR DISPOSAL OF THE PRESENT APPEAL OF THE ASSESSEE FOR A.Y 2011 - 12 IN ITA NO. 4315/MUM/2018 . P A G E | 12 ITA NO S . 4312 TO 4315/MUM/2018 A.Y S 2008 - 09, 09 - 10, 10 - 11, 11 - 12 M/S. DBM GEOTECHNICS & CONSTRUCTIONS P. LTD. VS. ACIT ACCOR DINGLY, THE PENALTY OF RS. 3,33,190/ - IMPOSED BY THE A . O U/S. 271(1)(C) AND SUSTAINED BY THE CIT(A) IN RESPECT OF THE AFORESAID ADDITIONS/DISALLOWANCES VIZ. (I). ADDITION /DISALLOWANCE ON ACCOUNT OF IMPUGNED BOGUS PURCHASES : RS. 3,96,752/ - ; AND (II). DISALLOWANCE OF EXPENSES INCURRED BY THE ASSESSEE TOWARDS INCREASE IN SHARE CAPITAL : RS. 7,13,871/ - ARE DELETED. 2 9 . THE APPEAL OF THE ASSESSEE FOR A.Y 2011 - 12, IN ITA NO. 4315/MUM/2018 IS ALLOWED. 30 . RESULTANTLY, ALL THE APPEAL S FILED BY THE ASSESSEE FOR A.YS 2008 - 09, 2009 - 10, 2010 - 11 AND 2011 - 12 IN ITA NOS. 4312 TO 4315/MUM2018, RESPECTIVELY, ARE ALLOWED IN TERMS OF AFORESAID OBSERVATION S . ORDER PRONO UNCED IN THE OPEN COURT ON 13 . 1 2 .2019 SD/ - SD/ - ( G. MANJUNATHA ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 13 .12 .2019 **PP, S PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI