ITO 28(3)(4), MUMBAI V. VIPUL P SHAH, MUMBAI

ITA 4437/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 4522 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 28-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Question of law
• Section: 271(1)(c); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI AMARJIT SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL , AM / I .T.A. NO.4437 /MUM/201 9 ( / ASSESSMENT YEAR: 20 10 - 11 ) ITO - 28(3)(4) ROOM NO.320, 3 RD FLOOR, 6 TH TOWER, VASHI RAILWAY STATION COMPLEX VASHI, NAVI MUMBAI - 4000703. / VS. SHRI VIPUL P. SHAH SHOP NO. A - 1, INDUSTRIAL HOUSE, SECTOR - 21, TURBHE NAVI MUMBAI - 400705. ./ ./ PAN/GIR NO. : AACPS5220L ( / A PPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 17/ 1 2 /20 20 /DATE OF PRONOUNCEMENT: 09 / 0 2 / 20 21 / O R D E R PER AMARJIT SINGH, JM: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 30 . 0 4 .201 9 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 26 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 1 0 - 1 1 IN WHICH THE PENALTY LEVIED BY THE AO HAS BEEN ORDERED TO BE DELETED. 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - ' (1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN DELETING THE PENALTY OF RS.62 ,802/ - LEVIED U/S 271(1)(C) OF THE ACT AS THE PENALTY WAS LEVIED ON QUANTUM ADDITIONS MADE ON ACCOUNT OF BOGUS PURCHASES, REVENUE BY : MS. USHA GAIKWAD (DR) ASSESSEE BY: NONE ITA NO. 4437 /M/201 9 A.Y.20 10 - 11 2 WITHOUT APPRECIATING THAT THE ONUS WAS ON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF SUCH PURCHASES BY PRODUCING SUCH PARTIES BEFORE THE ASSESSING OFFICER AND THE ASSESSEE FAILED TO DISCHARGE HIS ONUS'? (2) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN HOLDING THAT THE AO HAS ESTIMATED THE INCOME WITHOUT APPRECIATING THAT THE A.O. HAS LEVIED PENALTY. ONLY AFTER VERIFYING THE FACT THAT THE ASSESSEE EVADED THE TAXES ON QUANTUM OF ADDITIONS MADE ON ACCOUNT OF BOGUS PURCHASES AND THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF SUCH PURCHASES'? (3) 'WHETHER ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN HOLDING THAT ASSESSEE HAS NEITHER CONCEALED THE PARTICULARS OF INCOME NOR HAS IT FURNISHED INACCURATE PARTICULARS OF INCOME, THERE BEING ARE NO FINDINGS OF THE A.O. THAT THE DETAILS FURNISHE D BY THE ASSESSEE IN HIS RETURN ARE FOUND TO BE INACCURATE OR ERRONEOUS OR FALSE, WITHOUT APPRECIATING THE FACT THAT BY RESORTING TO BOGUS PURCHASES / ACCOMMODATION ENTRY, THE ASSESSEE MADE AN ATTEMPT TO REDUCE THE PROFITABILITY AND THEREBY ATTEMPTED TO AV OID TAXES, WHICH IN ITSELF PROVES BEYOND DOUBT THAT ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME'? (4) THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT (A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. (5) THE APPELLAN T CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ' ITA NO. 4437 /M/201 9 A.Y.20 10 - 11 3 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 11 - 10 - 201 0 DECLARI NG A TOTAL INCOME OF RS.5,39,070. THEREAFTER THE CASE OF THE ASS ESSEE WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT IN WHICH IT WAS CONVEYED THAT THE ASSESSE E HAS TAKEN THE BOGUS PURC HASE ENTRY FROM THE FOLLOWING EIGHT PARTIES : - S. NO. TIN NAME OF THE PARTY AMOUNTS 1 27900588728V BALAJI TRADING 2,88,797 2 27140610389V DAKSHA ENTERPRISES 8,840 3 27250554020V SHEETAL TRADING CO. 57,299 4 27710642619V G.R. TRADE LINK 94,994 5 27820645517V V. M. UDYOG 2,01,647 6 27870658730V PAYAL ENTERPRISE 2,21,020 7 27710551730V MR CORPORATION 1,93,795 8 27720714054V KUMAR ENTERPRISES 2,569 9 27390623201V SHAH ENTERPRISE 5,57,006 THEREAFTER, THE NOTICES WERE GIVEN AND AFTER THE REPLY OF THE ASSESSE, THE AO RAISED THE ADDITION TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASE IN SUM OF RS. 16,25,967/ - . THE PENALTY PROCEEDING WAS INITIATED AND AFTER THE NOTICE, THE PENALTY IN SUM OF RS.62,802/ - WAS LEVIED. FEE LING A GGRIEVED, THE ASSESSEE FILED THE PRESENT APPEAL BEFORE THE CIT(APPEALS) DELETED THE ADDITION. TH E REVENUE WAS NOT SATISFIED , THEREFORE, FILED THE PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE DEPARTMENT AND HAS GONE THROUGH THE CASE FILED CAREFULLY . BEFORE GOING ITA NO. 4437 /M/201 9 A.Y.20 10 - 11 4 FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT ( A) ON RECORD : - 6.3 THE AO HAD BASICALLY ESTIMATED THE PROFIT ON ALLEGED BOGUS PURCHASES BEING 12.5% OF NON - GENUINE PURCHASE AND PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED BY THE AO ON SUCH ESTIMATED PROFIT. THERE IS A PLETHORA OF COURT DECISIONS WHICH SAY THAT WHERE ADDITIONS ARE MADE ON ESTIMATION, NO PENALTY U/S 271(1)(C) IS LEVIABLE, THERE BEING NO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE PRESENT CASE, THE PURCHASE HAD BEEN DULY SHOWN BY THE APPE LLANT IN ITS BOOKS OF ACCOUNTS BUT IT COULD NOT PRODUCE THE PARTLY FROM WHOM THE PURCHASE HAD BEEN MADE. IT IS NOT THE CASE OF THE AO THAT THE IMPUGNED PURCHASES HAVE BEEN PROVED TO BE BOGUS CONCLUSIVELY AND THERE WERE NO CORRESPONDING SALES. IN A RECENT C ASE BEFORE THE ALLAHABAD HIGH COURT IN THE CASE OF NARESHCHAND AGARWAL VS. CIT 357 ITR 0514 (ALL), IT HAS BEEN HELD THAT '12. IN THE INSTANT CASE, NOTHING WAS CONCEALED BY THE ASSESSEE. IT WAS THE A. 0. WHO HAS REJECTED THE BOOKS OF ACCOUNT IN THE SECOND R OUND AND APPLIED THE 8 PERCENT NET PROFIT RATE PRESCRIBED TINDER SECTION 44 AD. IN THE INSTANT CASE, THE TURNOVER IS MORE THAN 40 LACS, SO SECTION 44 AD IS NOT APPLICABLE, NONETHELESS THE A. 0. HAS INSPIRED WITH THE PROVISION OF SECTION 44 AD AND MADE THE ADDITION BY ESTIMATING THE NET PROFIT RATE AT 8 PERCENT. REJECTION OF THE BOOKS OF ACCOUNT ALLOWED THE A. 0. TO MAKE THE ADDITION ON ESTIMATE BASIS. WHEN THE ADDITION IS MADE ON ESTIMATE BASIS, NO PENALTY UNDER SECTION 271 (1)(C) OF THE INCOME TAX ACT, CAN BE IMPOSED AS PER THE RATIO LAID DOWN IN THE CASE OF CL. T VS. ARJUNPRASADAJIT KUMAR, (2008) 214 CTR (ALL) 355, WHERE IT WAS OBSERVED THAT: 'APPEAL (HIGH COURT)SUBSTANTIAL QUESTION OF LAW PENALTY UNDER SECTION 271 (L)(C CIT (A) DELETED PENALTY UNDER SECTI ON 271(1)(C) ON THE GROUND THAT THERE BEING NOTHING ON RECORD THAT ASSESSES'S EXPLANATION LACKED BONE TIDES, PENALTY UNDER SECTION 271(1)(C) COULD NOT BE IMPOSED ON THE BASIS OF ESTIMATING SALES AND MAKING ADDITION BY APPLYING NET PROFIT RATE SAME WAS RIGH TLY SUSTAINED BY TRIBUNAL AND NO SUBSTANTIAL QUESTION OF LAW ARISES' ITA NO. 4437 /M/201 9 A.Y.20 10 - 11 5 6.4 ON THE SIMILAR SET OF FACTS, THE HONBLE ITAT, MUMBAI HAS DELETED PENALTY U/S 271(1)(C) OF THE ACT IN ITA. NO.5586/M/2015 DATED 16.01.2017 IN THE CASE OF DCIT CIR 4(2)(2) VS. M/S. MAN OHARMANAK ALLOYS P. LTD. ON THE SAME LINES, THE HON'BLE ITAT, MUMBAI IN ITA NO. 7519/MUM/2013DATED 08.07.2015 IN THE CASE OF M/S. YASHRAJ FILMS P. LTD. VS. THE A.C.I.T.CENTRAL CIRCLE 29,MUMBAI HAS DELETED THE PENALTY IFS, 271(1)(C) OF THE ACT LEVIED ON ADD ITION MADE ONESTIMATION BASIS. LIKEWISE, THE HON'BLE ITAT, MUMBAI IN 'TA NO.. 93/MUM/2011 DATED10.04.2015 IN THE CASE OF DM - 14(2) VS. M/S. RISHABHIMPEXGULABDAS& CO. DELETED THEPENALTY U/S. 271(1)(C) OF THE ACT LEVIED ON ADDITION MADE ON ESTIMATION BASIS. FURTHER, IN A RECENT DECISION OF DELHI ITAT IN THE CASE OF SHRUTI FASTNERS LTD. VS. DCIT (2017) 49 CCH 0183 DEL TRIB AND ITAT MUMBAI IN THE CASE OF RAKESHKUMAR M. GUPTA VS. ILT0(2017) 49 CCH 0066 MUM TRIB, IT HAS BEEN HELD THAT WHERE INCOME HAS BEEN ESTIMA TED, THE APPELLANT CANNOT BE SAID TO HAVE CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME AND THEREFORE, PENALTY U/S 271(1)(C) WAS NOT LEVIABLE. 6.5 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING T HE PRECEDENTS, AS ABOVE AND THOSE RELIED UPON BY THE APPELLANT, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT HAS NOT CONCEALED THE PARTICULARS OF INCOME AND NOR HAS IT FURNISHED INACCURATE PARTICULARS OF INCOME, THERE BEING ARE NO FINDINGS OF THE AO THAT THE DETAILS FURNISHED BY THE APPELLANT N HIS RETURN ARE FOUND TO BE INACCURATE OR ERRONEOUS OF FALSE. ACCORDINGLY, I DELETE THE PENALTY OF RS.62,802/ - LEVIED BY THE AO U/S 271(1)(C) OF THE ACT AND THE GROUNDS OF APPEAL ARE ALLOWED. 5 . ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE FIND THAT THE CIT(APPEALS) HAS DELETED THE PENALTY ON THE BASIS OF THIS FACT WHEN THE PROFIT WAS ESTIMATED THEN NO PENALTY WAS LEVIABLE. THE CIT(A) HAS RELIED UPON THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF NARESH C H AND AGRWAL VS. CIT 357 ITR 0514 (ALL) AND THE DECISION OF THE HONBLE ITAT, ITA NO. 4437 /M/201 9 A.Y.20 10 - 11 6 MUMBAI IN THE CASE OF DCIT CIR 4(2)(2) VS. M/S. MANOHARMANAK ALLOYS PVT. LTD. IN ITA. NO.5586/MUM/2015 DATED 16.01.2017AND THE DECISION OF HONBLE ITAT DELHI BENCH IN THE CASE OF SHRUTI FASTNERS LTD. VS. DCIT (2017) 49 CCH 0183 DEL TRIB AND ITAT MUMBAI IN THE CASE OF RAKESHKUMAR M. GUPTA VS. ITO (2017) 49 CCH 0066 MUM TRIB. MOREOVER, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS. CIT 2001 164 CTR 2009 (GUJ) HAS HELD THAT THE PENALTY IS NOT LEVIABLE WHEN THE PROFIT HAS BEEN ESTIMATED ON ESTIMATION BASIS. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE CIT(APPEALS) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND C ORRECTLY WHICH IS NOT LIABLE TO BE INTERFERED AT THIS APPELLATE STAGE . 6 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 / 0 2 / 202 1 SD/ - SD/ - ( MANOJ KUMAR AGGARWAL ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 09 / 0 2 / 202 1 VIJAY PAL SINGH (SR. PS) ITA NO. 4437 /M/201 9 A.Y.20 10 - 11 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLA NT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, / /TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI