ITO WARD 25(2)(4), Mumbai V. SHRI. JAI PRAVIN GANDHI , Mumbai

ITA 4997/MUM/2019

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 8415 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 31-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: MUM ASSESSMENT YEAR S
• Keywords: Bogus purchase; Accommodation entries; Tax effect
• Section: 271(1)(c); 143(3); 201; 13; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H , MUMBAI BEFORE SHRI SHAMIM YAHYA ( AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 5040/MUM/2019 ASSESSMENT Y EAR: 2008 - 09 THE ASSISTANT COMMISSIONER OF INCOME TAX 25(2), ROOM NO. 220, 2 ND FLOOR, KAUTILYA BH AVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 51 VS. SHRI ANAND BABULAL MEHTA, 301, AALAP NEHRU ROAD, VILE PARLE (E), MUMBAI - 400057 PAN : AARPM2652F (APPELLANT) (RESPONDENT) ITA NO. 4997/MUM/2019 ASSESSMENT YEAR: 2009 - 10 THE ITO WD - 25(2)(4 ), ROOM NO. 218, KAUTILYA BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 VS. SHRI JAI PRAVIN GANDHI, 19, NANDANVAN, DR. ANSARI ROAD, VILE PARLE (W), MUMBAI - 400056 PAN : AEQPG3807H (APPELLANT) (RESPONDENT) ITA NO. 4962/MUM/2019 ASSESSM ENT YEAR: 2009 - 10 THE ITO WD - 25(2)(1), ROOM NO. 216, 2 ND FLOOR, KAUTILYA BHAVAN, G - BLOCK, BKC, BANDRA (E), MUMBAI - 400051 VS. SHRI CHANDRAKANT T. GORADIA, 502, RUBY TERRACE, DADABHAI X ROAD NO. 3, VILE PARLE W, MUMBAI - 400056 PAN : AEIPG6213 P (APPELLANT) (RESPONDENT) ITA NO. 4921/MUM/2019 ASSESSMENT YEAR: 2009 - 10 THE INCOME TAX OFFICER - 25(3)(4), ROOM NO. 236 , 2 ND FLOOR, KAUTILYA BHAVAN, NEAR VIDESH BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 VS. M/S SVPNH STEEL SERVICES , B - 26, HASTIRAJ, BAPUBHAI VASHI ROAD, VILE PARLE (W), MUMBAI - 400056 PAN : A ABFS2247J (APPELLANT) (RESPONDENT) 2 ITA NO S . 5040, 4997, 4962, 4921, 5041, 5034, 5038, 5039 & 4996/ MUM/2019 ASSESSMENT YEAR S : 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 ITA NO. 5041/MUM/2019 ASSESSMENT YEAR: 20 09 - 10 THE ACIT 25(2), ROOM NO. 220, 2 ND FLOOR, KAUTILYA BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 VS. M/S DYNAMIC ENGINEERS, 1, RAJHANS, NARIMAN ROAD, VILE PARLE (E), MUMBAI - 400057 PAN : AAFFD5202N ITA NO. 5034/MUM/2019 ASSESSMENT YEAR: 20 10 - 11 THE INCOME TAX OFFICER 25(1)(2), ROOM NO. 204, 2 ND FLOOR KAUTILYA BHAVAN, G - BLOCK, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 VS. SHARDA VINOD BHATIA, 201, MODEL TOWN, MAHESH ASHISH UNITS CHS LTD., OFF J.P. ROAD, 4 BUNGLOWS, ANDHERI (W), MUMBAI - 400053 PAN : AGHPB 6897P ITA NO. 5038/MUM/2019 ASSESSMENT YEAR: 20 10 - 1 1 ITA NO. 5039/MUM/2019 ASSESSMENT YEAR: 20 11 - 12 THE ACIT - 25(2), ROOM NO. 220, 2 ND FLOOR KAUTILYA BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 VS. M/S AMAR CONSTRUCTION CORPORATION, 6, CHUNAWALA BUILDING, DIXIT ROAD, VILE PARLE (E), MUMB AI - 400057 PAN : AAEFA1093P ITA NO. 4996/MUM/2019 ASSESSMENT YEAR: 20 11 - 12 THE ACIT - 25(2), ROOM NO. 220, 2 ND FLOOR KAUTILYA BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 VS. GRAFICA FLEXTRONICA , SHOP NO. 3, SAURABH CHS, SHAHJI RAJE MAR G, VILE PARLE (E), MUMBAI - 400057 PAN : AAAFG4064A 3 ITA NO S . 5040, 4997, 4962, 4921, 5041, 5034, 5038, 5039 & 4996/ MUM/2019 ASSESSMENT YEAR S : 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 REVENUE BY : SHRI PANKAJ KUMAR (DR ) ASSESSEE BY : NONE DATE OF HEARING: 05/12 /201 9 DATE OF PRONOUNCEMENT: 13 / 12 /201 9 / O R D E R PER R AM LAL NEGI THE CAPTIONED APPEALS HAVE BEEN FILED BY THE REVENUE PERTAINING TO THE ASSESSMENT YEARS 2008 - 09, 2009 - 10, 2010 - 11 AND 2011 - 12 AGAINST THE ORDERS PASSED BY THE RESPECTIVE CIT(A)S, WHEREBY THE CIT (A)S HAVE ALLOWED THE APPEALS FILED BY THE ASSESSEES AGAINST THE PENALTY ORDERS PASSED BY THE AOS U/S 271 (1) (C) OF THE ACT AND DELETED THE PENALT IES LEVIED BY THE AO. SINCE, THE ISSUE S INVOLVED IN ALL THE APPEALS ARE COMMON, THESE APPEALS WERE CLUBBED, HEARD TOGETHER AND ARE BEING DISPOSED O F BY THIS COMMON AND CONSOLIDATED ORDER FOR THE SAKE OF BREVITY AND CONVENIENCE . 2. THESE APPEALS WERE FIXED FOR HEARING ON 0 2 .12.2019 . ON THE SAID DATE, WHEN THE CASE WAS CALLED OUT FOR HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE. HENCE, THESE CASE S WERE ADJOURNED TO 03.12.2019. ON 03.12.2019 AGAIN NONE APPEARED ON BEHALF OF THE ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THOUGH THE TAX EFFECT IN THESE CASES ARE BELOW THE LIMIT PRESCRIBED BY THE CBDT FOR FILING APPEAL BEFORE TH E ITAT, HOWEVER, SINCE THE ADDITIONS IN THE QUANTUM APPEALS HAVE BEEN MADE ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, MAHARASHTRA , T HE PENALTY LEVIED IN THESE CASES ALSO FALL WITHIN THE EXCEPTIONS CARVED OUT IN THE CIRCULAR. HENCE, THE LD. DR SUBMITTED THAT THE DEPARTMENT WANTS TO ARGUE THESE CASES ON MERITS. ACCORDINGLY, THE SE CASE S W ERE ADJOURNED TO 0 5 .12.2019. ON THE SAID DATE, NONE APPEARED ON BEHALF OF THE ASSESSEES. HENCE, KEEPING IN VIEW THE SMALL ISSUE INVOLVED IN THESE CASE S, WE DECIDED TO PROCEED WITH AND DISPOSED OF THESE APPEALS ON THE BASIS OF MATERIAL ON RECORD AFTER HEARING THE LD. DR. 4 ITA NO S . 5040, 4997, 4962, 4921, 5041, 5034, 5038, 5039 & 4996/ MUM/2019 ASSESSMENT YEAR S : 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 3. BEFORE US, THE LD. DR SUBMITTED THAT IN THESE CASES THE ASSESSEE OBTAINED BOGUS PURCHASE BILLS FROM HAWALA DEALERS, WHO USED TO ISS UE BOGUS BILLS/ENTRIES IN ORDER TO INFLATE THE PURCHASES ON COMMISSION BASIS. THE ASSESSEES IN THESE CASES HAVE OBTAINED BOGUS BILLS FROM THE HAWALA PARTIES AFORESAID . AFTER HEARING THE ASSESSEES, IN SOME OF T HE CASES, AO MADE ADDITION OF THE TOTAL AMOUNT OF BOGUS PURCHASES AND IN REMAINING CASES MADE ADDITION OF 12.5%. IN THE F IRST APPEAL , THE LD. CIT(A) RESTRICTED THE ADDITION TO 12.5% AND IN FURTHER APPEAL, THE ITAT EITHER CONFIRMED THE ADDITION TO 12.5% OR RESTRICTED UP TO 2 %. IN THE LIGHT OF THE AFORES AID FACTS, T HE LD. DR SUBMITTED THAT SINCE THE AO HAS INITIATED PENALTIES ON THE BASIS OF THE ADDITIONS MADE BY THE AO , CONFIRMED/RESTRICTED BY THE LD. CIT(A)/ ITAT, THE LD. CIT (A) OUGHT TO HAVE CONFIRMED THE PENALTIES LEVIED BY THE AO. 4. WE HAVE HEA RD THE LD. DR AND PERUSED THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE AUTHORITIES BELOW. THE DETAILS OF ADDITIONS MADE BY THE AO, CONFIRMED/RESTRICTED BY THE APPELLATE AUTHORITIES ARE AS UNDER: - SR. NO. ITA NO. % OF ADDITION MADE BY THE AO ADDITION CONFIRMED BY THE CIT (A) ADDITION CONFIRMED BY THE ITAT 1. 5040/MUM/2019 100% 12.5% _ 2. 4997/MUM/2019 12% 12% 8% 3. 4962/MUM/2019 12.5% 12.5% 10% 4. 4921/MUM/2019 12.5% 12% 2% 5. 5041/MUM/2019 100% 12.5% 12.5% 6. 5034/MUM/2019 12 .5% _ _ 7. 5038/MUM/2019 100% 12.5% 12.5% 8. 5039/MUM/2019 100% 12.5% 12.5% 9. 4996/MUM/2019 100% 12.5% 12.5% 5. UNDER SECTION 271(1)(C) OF THE ACT, AO HAS POWER TO IMPOSE PENALTY ON AN ASSESSEE FOR CONCEALING ITS PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME . AS PER THE SETTLED LAW, PROCEEDING FOR IMPOSITION OF 5 ITA NO S . 5040, 4997, 4962, 4921, 5041, 5034, 5038, 5039 & 4996/ MUM/2019 ASSESSMENT YEAR S : 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 PENALTY AND ASSESSMENT ARE TWO SEPARATE AND DISTINCT PROCEEDINGS AND THE FINDINGS RECORDED BY THE AUTHORITIES BELOW OR THE APPELLATE AUTHORITIES INCLUDING THE ITAT IN QUANTUM APPEAL CANNOT BE SAID TO BE THE CONCLUSIVE FACTOR IN THE PENALTY PROCEEDING. IN OTHER WORDS, ADDITION OF CERTAIN AMOUNT IN QUANTUM APPEAL DOES NOT IPSO FACTO MAKE S AN ASSESSEE LIA BLE FOR PENALTY U/S 271(1)(C) OF THE ACT . ADMITTEDLY, IN ALL THE S E CASES, THE AO HAS MADE ADDITIONS ON ESTIMATION BASIS FOR THE REASON THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF TRANSACTION BY ADDUCING COGENT AND CONVINCING EVIDENCE. SINCE, THE ADDITION IS ON AD - HOC BASIS, IT CANNOT BE CONCLUDED THAT THE A SSESSEE HAVE CONCEALED THEIR PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME WITHIN THE MEANING OF SECTION 271 (1) (C) OF THE ACT. THE COORDINATE BENCH OF THE TRIBUNAL I N THE CASE OF SHRI AJAY LOKNATH LOHIA ITA NO. 2998/MUM/2017 FO R THE AY 2009 - 10, HAS HELD THAT DISALLOWANCE OF PURCHASES ON AD - HOC BASIS DOES NOT TANTAMOUNT TO WILLFUL FURNISHING INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271 (1) (C) OF THE ACT. THE FINDINGS OF THE COORDINATE BENCH READS AS UNDER: - HAVING HEARD BOTH SIDES, WE FIND MERIT IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT ALTHOUGH THE AO HAS ESTIMATED 25% GROSS PROFIT ON ALLEGED BOGUS PURCHASES, NEVER MADE ANY OBSERVATIONS WITH REGARD TO THE INCORRECTNESS IN DETAILS FILED BY THE A SSESSEE TO PROVE SUCH PURCHASES. THE AO NEVER DISBELIEVED INFORMATION FILED BY THE ASSESSEE, BUT THE PROCEEDED ON THE BASIS OF INFORMATION RECEIVED FROM SALES - TAX DEPARTMENT TO MAKE ADDITIONS. THE AO HAS MADE SUCH ADDITION ON AD HOC BASIS BY ESTIMATING GRO SS PROFIT ON ALLEGED BOGUS PURCHASES. FROM THESE FACTS, IT IS VERY CLEAR THAT THE AO FAILED TO MAKE A CASE OF DELIBERATE ATTEMPT BY THE ASSESSEE TO FURNISH INACCURATE PARTICULARS OF INCOME. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT MERE ITA 2998/MUM/20 17 DISALLOWANCE OF PURCHASES ON AD HOC BASIS DOES NOT TANTAMOUNT TO WILLFUL FURNISHING INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271 (1) (C) OF THE INCOME TAX ACT, 1961. HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS ERRED IN LEV YING PENALTY 6 ITA NO S . 5040, 4997, 4962, 4921, 5041, 5034, 5038, 5039 & 4996/ MUM/2019 ASSESSMENT YEAR S : 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 U/S 271 (1) (C) OF THE ACT. ACCORDINGLY WE DIRECT THE AO TO DELETE THE PENALTY LEVIED U/S 271 (1) (C) OF THE ACT. 6. SIMILARLY, IN THE CASE OF SUSHIL CHATURBHUJ RAHEJA ITA NO. 1375, 1376 AND 1377/MUM/2017 FOR THE AY 2011 - 12 , 2012 - 13 AND 201 0 - 11 RESPECTIVELY, THE COORDINATE BENCH HAS DELETED THE PENALTY LEVIED U/S 271 (1) (C) OF THE ACT, ON THE BASIS OF ADDITION MADE ON AD - HOC BASIS. THE OPERATIVE PART OF THE CASE READS AS UNDER: - 3. WE HAVE HEARD LD AR OF THE ASSESSEE AND DR FOR REVENUE A ND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LEARNED AR OF THE ASSESSEE ARGUED THAT THE ASSESSEE HAS NEITHER CONCEALED THE INCOME NOR FURNISHED INACCURATE PARTICULARS THEREOF. THE ASSESSEE FURNISHED COMPLETE DETAIL OF HIS PURCHASES TO SUBSTANTIATE HIS EXPENSES INCURRED ON ACCOUNT OF PURCHASES DURING THE RELEVANT ASSESSMENT YEAR. THE ASSESSING OFFICER MADE THE ADDITION ONLY ON THE ESTIMATION BASIS ON ACCOUNT OF THE ALLEGED BOGUS PURCHASES. IT WAS ARGUED THAT NO PENALTY IS LEVIABLE ON THE ADDITION MADE ON THE BASIS OF ESTIMATION/AD HOC BASIS. IN SUPPORT OF THE SUBMISSION THE LD AR OF THE ASSESSEE RELIED UPON THE FOLLOWING DECISION; (I) CIT VERSUS RAVAIL SINGH & COMPANY 254 ITR 191(P&H), (II) HARIGOPAL VS CIT 258 ITR 85 (P&H HC), (III) ITO VS BOMBAYWALA READYMADE STORE[2015]230TAXMAN 313(GUJ H C), (IV) NARESH CHAND AGGARWAL VERSUS CIT 357 ITR 515 (ALL HC), (V) DCIT VERSUS MANOHAR MANAK ITA 5586/MUMBAI/2015, (VI) YASHRAJ FILMS PVT LTD VERSUS ACIT ITA 7519/MUMBAI/ 2013, (VII) SARVESH MERCANTILE PRIVATE LTD VS ACIT ITA 6040/M/ 2013 AND (VIII) DCIT VERSUS RISABH IMPEX ITA 93/MUMBAI 2011. 4. ON THE OTHER HAND THE LEARNED AND AR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. IT WAS ARGUED THAT THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT MADE THE FULL - FLEDGED ENQUIRY ABOUT THE RACKET OF HAWALA DEALERS WHO WERE 7 ITA NO S . 5040, 4997, 4962, 4921, 5041, 5034, 5038, 5039 & 4996/ MUM/2019 ASSESSMENT YEAR S : 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 INVOLVED IN PROVIDING ACCOMMODATION ENTRIES WITH OF SALE AND PURCHASE OF THE MATERIAL. THE ASSESSEE WAS ONE OF SUCH BENEFICIARY WHO AVAILED ACCOMMODATION ENTRY FOR INFLATING THE PRO FIT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE PERUSAL OF ASSESSMENT ORDER REVEALS THAT THE ASSESSING OFFICER, WHILE PASSING THE ASSESSMENT ORDER UNDER SECTION 143(3) RWS 147, MADE THE ADDITION ON THE BASIS OF ESTIMATION. THE ASSESSING OFFICER MADE ADDITION @ 25% OF THE ALLEGED BOGUS PURCHASES. THE REVENUE HAS NOT DISPUTED THAT ADDITIONS WERE MADE MERELY ON THE BASIS OF ESTIMATION. IT IS SETTLED LAW THAT NO PENALTIES IS LEVIABLE UND ER SECTION 271(1)(C) FOR AD HOC /ESTIMATED ADDITIONS. SIMILAR VIEW HAS BEEN TAKEN IN THE VARIOUS DECISIONS CITED BY LEARNED AR FOR THE ASSESSEE. ACCORDINGLY, WE ARE OF THE OPINION THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY. IN THE RESULT THE GROUNDS O F APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 7. IN ALL THE AFORESAID CASES, THE REVENUE HAS CHALLENGED THE ORDERS OF THE LD. CIT(A) DELETING THE PENALTY LEVIED U/S 271 (1) (C) OF THE ACT ON THE BASIS OF ADDITION MADE BY THE AO ON ESTIMATION/AD - HOC BASIS HO LDING THAT ASSESSEES HAVE OBTAINED BOGUS PURCHASE BILLS FROM HAWALA PARTIES, THEREFORE FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. SINCE, THE COORDINATE BENCH ES HAVE DELETED THE PENALTY LEVIED U/S 271 (1) (C) OF THE ACT IN THE CASES HAVING SIM ILAR SET OF FACTS IN THE AFORESAID CASES, WE RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH ES UPHOLD THE ORDERS OF THE LD. CIT (A)S AND DISMISS ALL THE APPEALS FILED BY THE REVENUE. IN THE RESULT, THE CAPTIONED APPEAL S FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DECEMBER , 2019 . SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUN TANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 13 / 12 / 2019 ALINDRA, PS 8 ITA NO S . 5040, 4997, 4962, 4921, 5041, 5034, 5038, 5039 & 4996/ MUM/2019 ASSESSMENT YEAR S : 2008 - 09, 2009 - 10, 2010 - 11 & 2011 - 12 / 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 . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI