SMC INDU (JV), MUMBAI V. ASST CIT 18(2), MUMBAI

ITA 4454/MUM/2016

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7237 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 27-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI N.K. PRADHAN , HON'BLE ACCOUNTANT MEMBER ITA NO. 4454 / MUM/201 6 (A.Y: 2009 - 10 ) M/S. SMC INDU (JV) SHOP NO. 9, GROUND KAMANA CHS LTD., BUILDING NO. 1, PRABHADEVI, MUMBAI 400 028 PAN: ABLFS 6305 A V. ACIT 18(2) 5 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400 012 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NEELKANTH KHANDELWAL DEPARTMENT BY : SHRI MANOJ KUMAR SINGH DATE OF HEARING : 09.08.2018 DATE OF PRONOUNCEMENT : 28 .09 .2018 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE L EARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 33, MUMBAI DATED 23.03.2016 FOR THE ASSESSMENT YEAR 2009 - 10 IN SUSTAINING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. 2. BRIEFLY STATED THE FACTS ARE THAT, THE PENALTY WAS LEVIED ON THE ADDITION MADE T OWARDS BOGUS PURCHASES BY THE ASSESSING OFFICER. WHILE COMPLETING THE ASSESSMENT T HE ASSESSING OFFICER ESTIMATED THE PROFIT 2 ITA NO.4454/MUM/2016 (A.Y: 2009 - 10) M/S. SMC INDU (JV) ELEMENT IN THE PURCHASES @ 25% OF TOTAL PURCHASES AND MADE ADDITION. ASSESSEE DID NOT PREFER ANY APPEAL AND ACCEPTED THE DISALLOWA NCE. 3. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS AND LEVIED PENALTY U/S. 271(1)(C) OF THE ACT ON THE DISALLOWANCE MADE AND THE LD . CIT(A) SUSTAINED THE PENALTY. 4. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION /DISALLOWANCE WAS MA DE ONLY ON ESTIMATION BASIS, RESTRICTING THE BOGUS PURCHASES TO 25% AS THE ASSESSEE COULD NOT FURNISH CERTAIN CONFIRMATIONS FROM THE PARTIES . THERE IS NEITHER CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS, THEREFORE NO PENALTY IS ATTRACTE D. HE PLACED RELIANCE ON THE ORDER OF THE COORDINATE BENCH IN THE CASE OF SHRI DEEPAK GOGRI V. ITO IN ITA.NO. 1396/ MUM /2017 DATED 23.11.2017 AND DCIT V. MANOHAR MANAK, ALLOYS PVT. L TD. I N ITA NO. 5586/ MUM / 2015 DATED 16.01.2017. 5. LD. DR STRONGLY PLACED RELIANCE ON THE ORDER OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS A SETTLED POSITION OF LAW THAT PENALTY CANNOT BE LEVIED WHEN AN ESTIMATION IS MADE. IN THIS CASE AN ADHOC ESTIMATION W AS MADE BY THE ASSESSING OFFICER RESTRICTING THE PROFIT ELEMENT IN THE 3 ITA NO.4454/MUM/2016 (A.Y: 2009 - 10) M/S. SMC INDU (JV) PURCHASES TO 25%. ON IDENTICAL SITUATIONS THE COORDINATE BENCH IN THE CASE OF SHRI DEEPAK GOGRI V. ITO (SUPRA) HELD THAT NO PENALTY IS LEVIABLE OBSERVING AS UNDER: - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN SO FAR AS THE PENALTY LEVIED ON ESTIMATION OF PROFIT ELEMENT ON PURCHASES IS CONCERNED, WE ARE OF THE VIEW THAT ASSESSING OFFICER HAD MADE ONLY ADHOC ESTIMATION OF PROFIT ON CERTAIN PU RCHASES TREATED AS UNEXPLAINED EXPENDITURE. ASSESSING OFFICER DID NOT DOUBT THE SALES MADE BY THE ASSESSEE FROM OUT OF SUCH PURCHASES. ASSESSING OFFICER BASED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SETH [356 ITR 451] ESTIMATED THE PROFIT ELEMENT IN SUCH PURCHASES AT 12.5% AND BY REDUCING THE GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE. IN THE CIRCUMSTANCES, WE HOLD THAT THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS AS THE PROFIT ELEM ENT WAS DETERMINED BY WAY OF ADHOC ESTIMATION. COMING TO THE INTEREST, THE ASSESSEE FURNISHED COMPLETE DETAILS IN THE RETURN OF INCOME AND MADE A CLAIM AND SIMPLY BECAUSE THE CLAIM IS DENIED AND CANNOT LEAD TO FURNISHING OF INACCURATE PARTICULARS OR CONCE ALMENT OF INCOME. NO ALLEGATION BY ASSESSING OFFICER THAT THE ASSESSEE FAILED TO DISCLOSE THE PARTICULARS RELATING TO ITS CLAIM IN THE RETURN OF INCOME. THUS WE HOLD THAT THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME . THUS WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. 7. SIMILARLY, IN THE CASE OF DCIT V. MANOHAR MANAK, ALLOYS PVT. L TD (SUPRA) THE COORDINATE BENCH HELD AS UNDER: - 9. WE HAVE HEARD THE RIVAL PARTIES AND CAREFULLY CONSIDERED MATERIAL PLACED BEFORE US INCLUDING THE ORDER OF THE AUTHORITIES BELOW. WE FIND FROM THE ASSESSMENT ORDER THAT THE AO HAS MADE AN ADDITION OF RS.45,76,587/ - BEING 5% ON TOTAL PURCHASES ON ESTIMATED B ASIS IN ORDER TO BRING THE BOGUS PURCHASES O TAX ON THE BASIS OF INFORMATION RECEIVED FROM THE THIRD PARTY I.E. STATE SALES TAX DEPARTMENT AND DDIT(INV) V(I), MUMBAI WHICH WAS NOT CHALLENGED BY THE ASSESSEE BEFORE THE FAA AND ATTAINED FINALITY. TH EREAFTER THE AO LEVIED PENALTY U/S 271(1)( C ) OF THE ACT ON THE GROUND THAT THE ASSESSEE DID NOT CHALLENGE THE ASSESSMENT ORDER AND ACCEPTED ADDITIONS SO MADE THEREBY ACCEPTING THE CONCEALMENT OF INCOME . WE FIND FROM THE RECORD THAT THE ADDITIONS AS MADE BY THE AO WAS A PURE ESTIMATE AND NOTHING CONCRETE AS TO BOGUS PURCHASES WERE BROUGHT ON RECORDS BY THE AO BY MAKING ANY FURTHER ENQUIRIES OR INVESTIGATION. IN OUR VIEW THE PENALTY CAN NOT BE IMPOSED WHERE THE ADDITIONS ARE MADE ON ESTIMATE BASIS. T HE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF DEEPAK POPATLAL GALA, IN ITA NO. 5920/M/13 AND VIDE ORDER DATED 27.3.2015, IT HAS HELD AS UNDER:- 10. THE NEXT ISSUE RELATES TO DISALLOWANCE MADE OUT OF PURCHASES AND ASSESSED U/S 69C OF THE ACT. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE TOTAL PURCHASE EXPENDITURE CLAIMED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS RS.7,36,27,555/ - . THE AO NOTICED THAT THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA HAS LISTED OUT NAMES OF 4 ITA NO.4454/MUM/2016 (A.Y: 2009 - 10) M/S. SMC INDU (JV) CERTAIN DEALERS, WHO WERE ALLEGED TO HAVE BEEN PROVIDING ACCOMMODATION ENTRIES WITHOUT DOING ACTUAL BUSINESS. THE AO NOTICED THAT THE ASSESSEE MADE PURCHASES TO THE TUNE OF RS.38.69 LAKHS FROM TWO PARTIES NAMED M/S UMIYA SALES AGENCY PVT LTD AND M/S MERCURY ENTERPRISES, WHOSE NAMES FOUND PLACE IN THE LIST PROVIDED BY THE SALES TAX DEPARTMENT. THE AO PLACED FULL RELIANCE ON THE ENQUIRIES CONDUCTED BY SALES TAX D EPARTMENT IN RESPECT OF THE PARTIES, REFERRED ABOVE. ACCORDINGLY, THE AO TOOK THE VIEW THAT THE PURCHASES TO THE TUNE OF RS.38.69 LAKHS HAVE TO BE TREATED AS UNEXPLAINED EXPENDITURE. ACCORDINGLY, HE ASSESSED THE SAME U/S 69C OF THE ACT. 11. THE LD. CIT(A ) DELETED THE ADDITION AND HENCE THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 12. THE LD. DR STRONGLY PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 13. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT THE ADDITIONS MADE IN THE CASE OF SOME OTHER ASSE SSES ON IDENTICAL REASONS HAVE BEEN DELETED BY THE CO - ORDINATE BENCHES OF THE TRIBUNAL IN THE FOLLOWING CASES : A) RAMESH KUMAR AND CO V/S ACIT IN ITA NO.2959/MUM/2014 (AY - 2010 - 11) DATED 28.11.2014; B) DCIT V/S SHRI RAJEEV G KALATHIL IN ITA NO.6727/MUM/2012 (AY - 2009 - 10) DATED 20.8.2014; AND C) SHRI GANPATRAJ A SANGHAVI V/S ACIT IN ITA NO. 2826/MUM/2013 (AY - 2009 - 10) DATED 5.11.2014 IN ALL THE ABOVE SAID CASES, THE CO - ORDINATE BENCHES OF THE T RIBUNAL HAS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION ON THE BASIS OF STATEMENTS GIVEN BY THE THIRD PARTIES BEFORE THE SALES TAX DEPARTMENT, WITHOUT CONDUCTING ANY OTHER INVESTIGATION. IN THE INSTANT CASE ALSO, THE ASSESSING OFFICER HAS MAD E THE IMPUGNED ADDITION ON THE BASIS OF STATEMENTS GIVEN BY THE PARTIES BEFORE THE SALES TAX DEPARTMENT. WE NOTICE THAT THE LD.CIT(A) HAS TAKEN NOTE OF THE FACT THAT NO SALES COULD BE EFFECTED WITHOUT PURCHASES. HE HAS FURTHER PLACED RELIANCE ON THE DECISI ON RENDERED BY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. M.K. BROTHERS (163 ITR 249). HE HAS FURTHER RELIED UPON THE DECISION RENDERED BY THE TRIBUNAL IN THE CAE OF ITO VS. PREMANAND (2008)(25 SOT 11)(JODH), WHEREIN IT HAS BEEN HELD THAT WHERE THE AO HAS MADE ADDITION MERELY ON THE BASIS OF OBSERVATIONS MADE BY THE SALES TAX DEPT AND HAS NOT CONDUCTED ANY INDEPENDENT ENQUIRIES FOR MAKING THE ADDITION ESPECIALLY IN A CASE WHERE THE ASSESSEE HAS DISCHARGED ITS PRIMARY ONUS OF ITA. NO.5920/MUM/2013 AND 6203/MUM/2013 7 SHOWING BOOKS OF ACCOUNT, PAYMENT BY WAY OF ACCOUNT PAYEE CHEQUE AND PRODUCING VOUCHERS FOR SALE OF GOODS, SUCH AN ADDITION COULD NOT BE SUSTAINED. THE LD CIT(A) HAS ALSO APPRECIATED THE CONTENTIONS OF THE ASSESSEE THAT HE WAS NOT PROVIDED WITH AN OPPORTUNITY TO CROSS EXAMINE THE SELLERS, WHICH IS REQUIRED TO BE GIVEN AS PER THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF PONKUNNAM TRADERS (83 ITR 508 & 102 ITR 366). ACCORDINGLY, THE LD CIT(A) HAS DELETED THE IMPUGNED ADDITION. ON A CAREFUL PERUSAL OF 5 ITA NO.4454/MUM/2016 (A.Y: 2009 - 10) M/S. SMC INDU (JV) THE DECISION RENDERED BY LD CIT(A) WOULD SHOW THAT THE FIRST APPELLATE AUTHORITY HAS ANALYSED THE ISSUE IN ALL ANGLES AND APPLIED THE RATIO LAID DOWN BY THE HIGH COURTS AND TRIBUNALS IN DECIDING THIS ISSUE. HENCE, WE DO NOT FIND ANY RE ASON TO INTERFERE WITH HIS ORDER ON THIS ISSUE. WE ALSO FIND THAT IN THE FOLLOWING CASES THE TRIBUNAL HAS TAKEN S IMILAR VIEW IN SOME OF THE CASE THAT ON THE BASIS OF THIRD PARTY EVIDENCE, ADDITION MADE BY THE AO CANNOT BE HELD AS GOOD LAW AND DELETED T HE ADDITION WHICH ARE AS UNDER: - A) RAMESH KUMAR AND CO V/S ACIT IN ITA NO.2959/MUM/2014 (AY - 2010 - 11) DATED 28.11.2014; B) DCIT V/S SHRI RAJEEV G KALATHIL IN ITA NO.6727/MUM/2012 (AY - 2009 - 10) DATED 20.8.2014; AND C) SHRI GANPATRAJ A SANGHAVI V/S ACIT IN ITA NO. 2826/MUM/2013 (AY - 2009 - 10) DATED 5.11.2014 10. IN ALL THE ABOVE SAID CASES, THE CO - ORDINATE BENCHES OF THE TRIBUNAL HAS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION ON THE BASIS OF STATEMENTS GIVEN BY THE THIRD PARTIES BEFOR E THE SALES TAX DEPARTMENT, WITHOUT CONDUCTING ANY OTHER INVESTIGATION. IN THE INSTANT CASE ALSO, THE ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITION ON THE BASIS OF STATEMENTS GIVEN BY THE PARTIES BEFORE THE SALES TAX DEPARTMENT. CONSIDERING THE FACTS AS DISCUSSED HEREINABOVE, WE ARE OF THE CONSIDERED OPINION THAT IN VIEW OF THE RATIO IN THE VARIOUS DECISIONS AS ABOVE PENALTY CANNOT BE SUSTAINED. IT IS ALSO A SETTLED LEGAL POSITION OF LAW THAT PENALTY CANNOT BE LEVIED WHEREIN THE ASSESSMENT IS MADE ON ESTIMATION BASIS. ACCORDINGLY, WE ARE INCLINED TO UPHOLD THE ORDER PASSED BY THE LD.CIT(A) BY DISMISSING THE APPEAL OF THE REVENUE. 8. FACTS BEING IDENTICAL, FOLLOWING THE SAME WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED U/S.271(1)(C) OF THE ACT. 9. IN THE RESULT, APP EAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 28 TH SEPTEMBER , 2018 SD/ - SD/ - ( N.K. PRADHAN ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 28 / 0 9 / 2018 GIRIDHAR , S R. PS 6 ITA NO.4454/MUM/2016 (A.Y: 2009 - 10) M/S. SMC INDU (JV) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM