INCOME TAX OFFICER-19(2)(2), , MUMBAI V. MUKESHKUMAR SOMATMALJI DOSHI, MUMBAI

ITA 4459/MUM/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7027 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 21-05-2024
• Assessment Year: 2009-2010
• Appeal Filed On: 07-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Question of law; Set aside
• Section: 147; 148; 271(1)(c); 133(6); 13; 145(3)

Judgement Text

Page | 1 ITA No.4459/Mum/2023 Mukeshkumar Somatmalji Doshi; A.Y. 09-10 IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI SUNIL KUMAR SINGH, JM ITA No. 4459/Mum/2023 (Assess ment Year: 2009-10) Inco me Tax Offic er Ward 19(2)(2) Roo m No.503, Pira mal Cha mb er, Lalgaug, Lower P arel, Mu mbai-400 012 Vs. Mukeshkumar So mat mal ji Doshi, 63/A, 1 st Khu mbh arwada Lane, Bhandari Street, Near Goel Deval, Mu mbai-400 004 (Appellant) (Respondent) PAN No. ABQPD5578B Assessee by : None Revenue by : Shri Rajesh M eshra m, DR Date of hea ring: 22.05.2024 Date of pronouncement : 28.05.2024 O R D E R PER PRASHANT MAHARISHI, AM: 01. ITA No.4459/Mum/2023, is filed by the learned Assessing Officer against the order passed by the National Faceless Appeal Centre, Delhi [the learned CIT (A)] dated 11 th Page | 2 ITA No.4459/Mum/2023 Mukeshkumar Somatmalji Doshi; A.Y. 09-10 October, 2023, wherein the penalty levied under Section 271(1)(c) of the Act by penalty order dated 28 th March, 2018, passed by the Income Tax Officer, Ward 19(2)(3), Mumbai, levying the penalty of ₹2,38,595/- was allowed, penalty was deleted following the order of the co-ordinate Bench in case of Poonam K Prajapati holding that when the addition is made on account of bogus purchases on adhoc estimated basis the penalty cannot survive. Therefore, the learned Assessing Officer is aggrieved with the same and is in appeal before us. 02. Following grounds of appeal are raised:- “1. "Whether on the facts and Circumstances of the case and in law, the Ld. CIT (A) has erred in restricting the penalty u/s 271(1)(c) of the 1.T.Act 1961, @ 12. 5% of bogus purchases of Rs 61 ,77,214/- on alleged purchases from 5 parties/entities?" 2. "Whether on the facts and Circumstances of the case and in law, the Ld. CIT (A) has erred restricting the penalty levied u/s 271(1)(c) of the I.T. Act, @ 12.5% on bogus purchases of Rs. 61 ,77,214/-, without considering the fact that AO has relied on information from the DGIT(Inv), Mumbai, who in turn had received information from the Sales-Tax Department Maharashtra,an external agency about Bogus Hawala Entry providers, involved in providing accommodation entries on non-genuine purchases and the assessee was found to be one of the beneficiary in taking entries of Page | 3 ITA No.4459/Mum/2023 Mukeshkumar Somatmalji Doshi; A.Y. 09-10 alleged purchases from 5 parties amounting to Rs. 61 ,77,214/-? 3. Whether on the facts and Circumstances of the case and in law, the Ld. CIT (A) has erred restricting the penalty levied u/s 271(1)(c) of the I.T. Act @ 12.5% on alleged purchases of Rs. 61 ,77,214/- without considering the fact that the assessee, when asked to prove the genuineness and creditworthiness of the transactions and parties /suppliers, has neither produced any parties for verification nor submitted vital documents, evidences before AO, which proves that the purchases were non- genuine in nature and the assessee has not purchased any goods from alleged” 03. The fact shows that the assessee is an individual carrying on the business as a proprietor of Maxheal Food Industries engaged in trading of ferrous and non-ferrous metals. He filed his return of income on 2 nd September, 2009, at a total income of ₹7,03,159/-. The return was accepted as it is. However, same was reopened by issue of notice under Section 148 of the Act on 11 th March, 2014, on the basis of information received from DGIT, Investigation, Mumbai as Sales Tax Department, Mumbai has found that certain parties are engaged in hawala trading by only providing bills. It was noted that there are five parties from whom the assessee has purchased invoices without supply of goods of ₹61,77,240/-. Reasons were recorded. In the re-assessment proceedings, it was found that assessee has shown purchases of ₹3.65 crores however, these five parties were examined by issue of notice Page | 4 ITA No.4459/Mum/2023 Mukeshkumar Somatmalji Doshi; A.Y. 09-10 under Section 133(6) of the Act, which were returned back by postal authorities with remarks „not known‟. Assessee was asked to establish the genuineness of the purchases along with the supporting evidences and to produce the parties. The assessee could not produce these parties but also failed to furnish any new address. However, he produced the ledger account of the parties, copies of purchase bills, bank statement and therefore, it submitted that the available information is furnished. The learned Assessing Officer issued a show cause notice for rejection of the books of account. The assessee submitted that all available information with him is furnished. The learned Assessing Officer rejected the contention of the assessee and thereafter after considering the several judicial precedents, rejected the books of account of the assessee by invoking the provisions of Section 145(3) of the Act and made a 100% addition of ₹61,77,214/- of purchases from hawala parties. The total income of the assessee was assessed at ₹68,80,373/- by passing an assessment order under Section 143(3) read with section 147 of the Act on 18 th Mach, 2015. 04. The learned Assessing Officer also initiated the penalty proceedings under Section 271(1)(c) of the Act for furnishing inaccurate particulars of income leading to concealment of income. 05. Against this assessment order the assessee preferred an appeal before the learned CIT (A), who restricted the addition to the extent of 12.5% instead of 100% by order dated 28 th November, 2016. Therefore, the net addition remained of ₹7,72,152/-. Page | 5 ITA No.4459/Mum/2023 Mukeshkumar Somatmalji Doshi; A.Y. 09-10 06. On this addition penalty proceedings proceeded. The assessee was issued show cause notice which was replied on 7 th March, 2018, stating that addition as made on estimate basis and the assessee has not concealed any income or has disclosed inaccurate particulars which could lead to levy of penalty under Section 271(1)(c) of the Act. The learned Assessing Officer rejected the contention of the assessee passed the penalty order under Section 271(1)(c) of the Act on 28 th March, 2018, holding that the assessee has furnished inaccurate particulars of income to the extent of ₹7,72,152/- and levied a minimum penalty of ₹2,38,595/-. 07. The assessee challenged the penalty order before the learned CIT (A). The learned CIT (A) passed an appellate order on 11 th October, 2023, ex-parte as the opportunity given to the assessee on 5 occasions remained unanswered. However, on the merits in paragraph no.3.4, he held that the addition was made on the basis of bogus purchases by the learned Assessing Officer by disallowing 100% of such purchases which was restricted by the learned CIT (A) to the extent of 12.5% and therefore, relying on the decision of the co- ordinate Bench in case of Poonam K Prajapati Vs. ITO, wherein it has been held that penalty under Section 271(1)(c) of the Act is not imposable when the addition on account of bogus purchases is made on adhoc and estimated basis. Accordingly, he directed the learned Assessing Officer to delete the penalty. 08. The Revenue is aggrieved and is in appeal before us. It is the case of the learned Assessing Officer that the assessee has Page | 6 ITA No.4459/Mum/2023 Mukeshkumar Somatmalji Doshi; A.Y. 09-10 furnished inaccurate particulars to the extent of bogus purchases of ₹61,77,215/- and addition to the extent of 12.5% is confirmed by the learned Commissioner of Income-tax (Appeals). These additions have been made on the basis of information received from Sales Tax Department Maharashtra by the DGIT investigation Mumbai about hawala entry provider. Thus, purchases are non –genuine and assessee is the beneficiary of that. It is further contested that the assessee has failed to return correct income because of this hawala entries and therefore, the decision of the Hon'ble Supreme Court in case of K P Madhusudan V CIT 295 ITR 99 and the decision of Hon'ble Supreme Court in case of NK Proteins. 09. Despite notice to the assessee none appeared before us and the notices sent to the address of the assessee returned back by the postal department stating 'not known'. Therefore, the issue is decided on the merits of the case, as per information available on record. 010. We have carefully considered the contention raised by the learned DR and we find that the addition is made by the learned Assessing Officer to the extent of 100% of the alleged bogus purchases. This alleged bogus purchase are alleged on the basis of information received from Maharashtra Sales Tax Department by DGIT investigation Mumbai which was in turn forwarded to the ld AO wherein five parties were found to be hawala parties providing accommodation bills. When the assessee was questioned, the assessee submitted the copies of the invoices, ledger account of the parties and also shown that payments have been made by account payee cheque to these Page | 7 ITA No.4459/Mum/2023 Mukeshkumar Somatmalji Doshi; A.Y. 09-10 parties. Admittedly, the learned Assessing Officer issued notices under Section 133(6) of the Act, which was returned as address was "not known" and the assessee failed to provide the new address. But despite this fact, assessee has produced all the information available with him of those parties when he purchased from them. Subsequently, such parties were suspected to be hawala dealers. The learned Assessing Officer made the addition and initiated the penalty proceedings holding that assessee has furnished inaccurate particulars income to the extent of 100% of bogus purchases. The learned CIT (A) restricted the same to the extent of 12.5% of bogus purchase. Neither the learned Assessing Officer nor the assessee challenged the determination of 12.5% of the profit before the higher forum. Therefore, it is apparent that the addition made in the hands of the assessee remains on estimated basis. Though it cannot be the case that whenever addition is made on the estimate basis penalty cannot be levied. However, when the assessee has furnished all the relevant information, what is the information that the assessee has furnished inaccurately is the question. It cannot be said that assessee was in known of things at the time of recording of these purchase that same are bogus and furnished these information which was inaccurate to the learned Assessing Officer. The several decision of the co-ordinate Bench in this case clearly shows that in such case the penalty under Section 271(1)(c) of the Act could not have been levied. Further, the decision of the Hon'ble Supreme Court in case of NK Proteins, the issue was with respect to the addition of 100% of the entire purchases and not of the penalty. It is not disputed Page | 8 ITA No.4459/Mum/2023 Mukeshkumar Somatmalji Doshi; A.Y. 09-10 that now 12.5% of the addition has been accepted by the learned Assessing Officer and Assessee both. Thus, mention of this decision in ground no.5 of the appeal does not help the case of the learned Assessing Officer. Further, the decision of the Hon'ble Supreme Court in case of KP Madhusudan [ Supra] , mentioned in ground no.4 also does not apply to the facts of the case. In that decision, the learned Assessing Officer found that the demand draft and telephonic transfer money received by the assessee were not at all entries in the books of the assessee on the date on which it was purchased. Assessee confessed that as sufficient cash balance was not available on that date, it obtained hand loans from the friends which were to be repaid within short time and therefore, no entries were made in the books of account. In that circumstances, the learned Assessing Officer was justified in levying the penalty. Thus, there was a failure on the part of the assessee to return his correct income was due to fraud. In the present case before us neither there is such allegation nor such finding. The learned CIT (A) has deleted the penalty by following the decision of the co-ordinate Bench on identical facts and circumstances that there is no failure on part of the assessee in submitting whatever details it had to the learned Assessing Officer, therefore, we do not find any reason to sustain the penalty levied of ₹238,595/- under Section 271(1)(c) of the Act. 011. Honourable Gujarat High court in RAMESHCHANDRA A SHAH VERSUS ASSTT. CIT, CIRCLE 3 OR HIS SUCCESSOR TAX APPEAL NO. 800 of 2008 dated August 10, 2016, on the question Page | 9 ITA No.4459/Mum/2023 Mukeshkumar Somatmalji Doshi; A.Y. 09-10 of law " Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal, was right in law in confirming the penalty under Section 271(1)(c) of the Income-tax Act, 1961 in respect of the addition of ₹ 2,09,150/- being 25% of purchases of ₹ 8,36,601" has held that :- "4. Learned Counsel for the appellant has drawn the attention of this Court to the decision of this Court in the case of Vijay Proteins Ltd. v. Commissioner of Income-tax reported in [2015] 58 taxmann.com 44 (Gujarat) and relevant paragraphs are reproduced as under :- “Insofar as T.A. No.243/2002 is concerned, the question of law raised therein is already concluded by a decision of this Court rendered in T.A. No.461/2000 & allied matters, as stated herein above. Paras 6 & 6.1 of the said decision are relevant for our purpose, which read thus. ”6. Heard both the parties and gone through the material available on record. In the instant case, we are of the opinion that assessment made is just and proper. The statements made in the affidavits are not based on any record or corroborated with cogent evidence. The presumption raised by the papers which were seized from the custody of the appellant had not been rebutted. Therefore, the issues raised in appeals no. 461 to 464 of 2000 are required to be Page | 10 ITA No.4459/Mum/2023 Mukeshkumar Somatmalji Doshi; A.Y. 09-10 answered in the affirmative and against the assessee. 6.1 So far as the issue involved in appeals no. 833 to 836 of 2005 is concerned, in view of the decisions cited hereinabove by learned advocate for the appellant we are of the opinion that the penalty has been wrongly imposed under Section 271(1)(c) of the Act. In the case of Krishi Tyre Retreading and Rubber Industries (supra), it has been held that as the addition had been sustained purely on estimate basis and no positive fact or finding had been had been found so as to even make the addition which was a pure guess work, no penalty under section 271(1)(c) of the Act could be said to be leviable on such guess work or estimation. We therefore answer the issue involved in appeals no. 833 to 836 of 2005 in the negative and in favour of the assessee.” 18.1 At this juncture, it would be relevant to refer to a decision of the Apex Court in the case of Asst. Commissioner of Income-tax v. Gebilal Kanhaialal, HUF, [2012] 348 ITR 561 (SC) wherein, it has been held that the only condition which was required to be fulfilled for getting the immunity, after the search proceedings got over, was that the assessee had to pay the tax together with interest in respect of such undisclosed income up to the date of payment. Clause Page | 11 ITA No.4459/Mum/2023 Mukeshkumar Somatmalji Doshi; A.Y. 09-10 (2) did not prescribe the time limit within which the assessee should pay tax on income disclosed in the statement u/s.132(4) and thus, the assessee was entitled to immunity under clause (2) of Explanation 5 to section 271(1)(c).” Learned Counsel for the appellant has also placed reliance on the decision of this Court in the case of Vijay Proteins Ltd. v. Commissioner of Income- tax in Income Tax Reference No.139/1996 with Tax Appeal No.243/2002 wherein the question of law was answered in favour of the assessee and against the Revenue and consequently, the penalty imposed was quashed and set aside. It is submitted in the facts of the present case, the order of penalty also imposed upon the assessee may be dismissed. 5. On the other hand, learned Counsel for the respondent – Department has submitted that in view of the bogus purchases, the order of penalty may be confirmed. 6. We have heard learned Counsel for the respective parties and perused the records of the case. Taking into consideration the order the Tribunal, the evidence which has surfaced on record as well as the decision of this Court in the case of Vijay Proteins Ltd. v. Commissioner of Income-tax (supra), we are of the view that the issues raised in this Appeal are to be Page | 12 ITA No.4459/Mum/2023 Mukeshkumar Somatmalji Doshi; A.Y. 09-10 answered in favour of the assessee and against the Department." 012. Thus, respectfully following the orders of the Honourable Gujarat High court and Honourable Rajasthan high court in Commissioner of Income-tax Versus Krishi Tyre Retreading and Rubber Industries - 2014 (2) TMI 21 - RAJASTHAN HIGH COURT , the appellate orders of the ld. CIT (A) deleting the penalty u/s 271 (1) (c) of The Act , are confirmed. 013. In view of this the order of the learned CIT (A) is confirmed and the appeal of the learned Assessing Officer for all grounds is dismissed. Order pronounced in the open court on 28.05. 2024. Sd/- Sd/- (SUNIL KUMAR SINGH) (PRAS HANT M AHAR ISHI) (JUDIC IAL M EM BER) (ACC OUNTANT MEMB ER) Mumbai, Dated: 28.05. 2024 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Page | 13 ITA No.4459/Mum/2023 Mukeshkumar Somatmalji Doshi; A.Y. 09-10 Income Tax Appellate Tribunal, Mumbai