SHRI. AJAY M. SHAH, MUMBAI V. ITO,25 (3) (3), MUMBAI

ITA 5481/MUM/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62236 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 03-04-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 17-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY
• Assessee Lawyers: K SHIVARAM
• Keywords: Bogus purchase

Judgement Text

ITA NO.5481 OF 2007 AJAY M.SHAH, MUMBAI PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL 'H' BENCH, MUMBAI BEFORE SHRI D.K.AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.5481/MUM/2007 (ASSESSMENT YEAR: 2001-02) AJAY M. SHAH VS INCOME TAX OFFICER 25(3)(3) C/401, PANCHAM APARTMENT C-11 PRATYKSHAKHAR BHAVAN HEMU KALANI, ROAD NO.3, BANDRA KURLA COMPLEX, RANIWADI, KANDIVALI (W) BANDRA (EAST) MUMBAI 400067 PAN NO: AAGPS 7256 N MUMBAI 400 051 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K. SHIVARAM RESPONDENT BY: SHRI AJAY, DR DATE OF HEARING: 3/4/2012 DATE OF PRONOUNCEMENT:20/4/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN APPEAL BY ASSESSEE AGAINST SUSTAINING PE NALTY UNDER SECTION 271(1)(C) OF ` .3,61,572/- BY THE CIT (A)-XXV, MUMBAI, IN ORDER DATED 19.02.2007. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE MANUFACTURING BUSINESS OF STAINLESS STEEL CUTLERY AND COOK-N-SERVE SPOONS IN THE NAME OF THE PROPRIETARY CONCERN, M/S KRUPA METALS. DURING THE SCRUTINY ASSE SSMENT ASSESSING OFFICER MADE ADDITION OF ` .10,30,121/- ON ACCOUNT OF PURCHASES MADE BY THE ASSESSEE FROM TWO PARTIES NAM ELY M/S RUSHABH ENTERPRISES AND M/S R.M. ENTERPRISES AS BOG US IN NATURE. THE REASON FOR SUCH AN ADDITION IS THAT WHILE M/S R USHABH ENTERPRISES CATEGORICALLY STATED THAT THEY DID NOT HAVE ANY DEALING EITHER WITH THE ASSESSEE OR ITS CONCERN M/S KRUPA M ETALS DURING THE PERIOD UNDER CONSIDERATION, M/S RM ENTERPRISES DID NOT RESPOND TO THE VERIFICATION EXERCISE UNDERTAKEN BY THE ASSESSI NG OFFICER. CIT (A) ITA NO.5481 OF 2007 AJAY M.SHAH, MUMBAI PAGE 2 OF 4 CONFIRMED THE ABOVE ADDITIONS AFTER OBTAINING THE R EMAND REPORT FROM THE ASSESSING OFFICER. THE SAID ADDITION WAS C ONFIRMED BY THE ITAT AS WELL ON THE REASON THAT THE ASSESSEE DID NO T FURNISH ANY FURTHER EVIDENCES AND MERELY RELIED ON PAYING THROU GH THE BANK AND HAS NOT DISCHARGED THE ONUS. THE ASSESSING OFFI CER LEVIED PENALTY UNDER SECTION 271(1)(C) ON THE SAID TRANSAC TIONS OF ALLEGED BOGUS PURCHASES AND THE CIT (A) AFTER ANALYZING THA T THE ASSESSEE HAD NOT MAINTAINED ANY STOCK REGISTER, NOR FULLY PA ID THE AMOUNTS TO THOSE CONCERNS AGAINST THE PURCHASES, CONFIRMED THE PENALTY. 3. THE LEARNED COUNSEL REFERRING TO THE ORDERS OF ASSE SSING OFFICER AND PAPER BOOK FILED IN THIS REGARD REGARDI NG THE TRANSACTIONS WITH THE SAID ENTERPRISES SUBMITTED TH AT THOSE ENTERPRISES HAVE CONFIRMED THE PURCHASES AND TRANSA CTIONS IN THE COURSE OF ASSESSMENT AND REFERRED TO THE STATEMENT OF ACCOUNT FURNISHED TO THE ASSESSING OFFICER WITH REFERENCE T O THE PURCHASES AND PAYMENTS THROUGH BANK ACCOUNT. IT WAS FURTHER S UBMITTED THAT THE ASSESSEE COULD NOT FURNISH THE RELEVANT PARTIES AS IT IS THE ASSESSING OFFICER WHO TOOK STATEMENTS WHILE ENQUIRI NG AND CROSS EXAMINATION BY THE ASSESSEE WAS NOT ALLOWED. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HIMSELF VERIFI ED FROM THE BANK ABOUT THE PAYMENT DETAILS AND ACCOUNT OPENING FORM ETC., AND THEREFORE, PRIMA FACIE IT INDICATES THAT THE ASSESS EE HAS GENUINELY PURCHASED THE GOODS. IT WAS FURTHER SUBMITTED THAT WITHOUT PURCHASE OF THE SAID GOODS, THERE CANNOT BE SALES A ND THE ASSESSING OFFICER HAS ACCEPTED THE SALES. MOREOVER, EVEN THOU GH THE ASSESSEE HAS NOT MAINTAINED ANY STOCK REGISTER, IT HAS FILED QUANTITATIVE TALLY BEFORE THE AUTHORITIES, BUT THAT WAS NOT ACCEPTED. IT WAS THE SUBMISSION THAT THE PURCHASES FROM THE SAID CONCERN S WERE GENUINE AND JUST BECAUSE THEY ARE NOT PROVED TO THE SATISFA CTION OF THE ASSESSING OFFICER, PENALTY CANNOT BE LEVIED. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER, R ELIED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT (A) TO SUBMIT THAT IT IS NOT MERE DISALLOWANCE OF THE EXPENDITURE CLAIM B UT CLAIM OF ITA NO.5481 OF 2007 AJAY M.SHAH, MUMBAI PAGE 3 OF 4 BOGUS PURCHASES. HE REFERRED TO THE FINDINGS OF AO AND CIT(A) AND ENQUIRIES MADE IN THIS REGARD. 5. BOTH THE PARTIES RELIED ON VARIOUS CASE LAW ON THE ISSUE. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND THE EVI DENCES PLACED ON RECORD, WE ARE OF THE CONSIDERED OPINION THAT THERE IS NO CASE FOR PENALTY U/S 271(1)(C). EVEN THOUGH THE DIS ALLOWANCE WAS SUSTAINED IN THE QUANTUM PROCEEDINGS, THERE CONFIRM ATION ON RECORD THAT ASSESSEE PURCHASED GOODS AND SAID RISHA BH ENTERPRISES AND M/S R.M. ENTERPRISES ARE IN EXISTENCE. THERE IS ALSO CONFIRMATION FROM THE BANK THAT THE CHEQUES ISSUED BY THE ASSESSEE HAD BEEN CLEARED BY THE BANK AND THE PAYER BANK MEN TIONED WAS PRATAPNAGAR COOPERATIVE DEVELOPMENT CREDIT BANK. EV EN THOUGH THE STOCK REGISTER WAS NOT MAINTAINED, A QUANTITATI VE DETAILS MAINTAINED BY ASSESSEE WERE FURNISHED ALONG WITH AU DIT REPORT IN FORM 3CD. THERE IS ALSO CONFIRMATIONS FROM M/S RISH ABH ENTERPRISES AND M/S R.M. ENTERPRISES ABOUT THE STAT EMENT OF ACCOUNTS WHICH WERE FURNISHED BEFORE THE ASSESSING OFFICER. IT IS ALSO ON RECORD THAT CROSS EXAMINATION OF SAID PARTI ES WAS NOT PROVIDED TO THE ASSESSEE AND INSTEAD ASSESSEE WAS A SKED TO PRODUCE THE PARTIES AFTER INQUIRIES WERE MADE BY THE ASSESS ING OFFICER. MAY BE DUE TO LACK OF SUFFICIENT EFFORTS IN PROVING THE GENUINENESS OF THE PURCHASES, THE DISALLOWANCE MADE OUT OF PURCHASES A S BOGUS WAS CONFIRMED BY THE CIT (A) AND ALSO BY THE ITAT. MERE CONFIRMATION OF THE SAID DISALLOWANCE OF PURCHASES CANNOT BE A GROU ND TO LEVY OF PENALTY UNDER SECTION 271(1)(C) UNLESS IT IS PROVED THAT THE ASSESSEE MADE THE CLAIM MALAFIDELY. THERE IS NO DISPUTE WITH REFERENCE TO THE SALES MADE BY THE ASSESSEE AND UNLESS THE STOCK IS TALLIED OR RECEIVED THERE CANNOT BE SALES. CONSIDERING THESE A SPECTS AND ALSO THE FACT THAT THOSE PARTIES HAVE INITIALLY CONFIRME D THE ACCOUNT STATEMENTS AND AS PARTIES WERE IN EXISTENCE, WE ARE OF THE OPINION THAT THERE IS NO CASE FOR LEVYING OF PENALTY UNDER SECTION 271(1)(C). IT IS AN ESTABLISHED LAW THAT MERE DISALLOWANCE OF CLA IM IN THE ASSESSMENT DOES NOT ATTRACT PENALTY. CONSIDERING TH E ABOVE FACTS, ITA NO.5481 OF 2007 AJAY M.SHAH, MUMBAI PAGE 4 OF 4 WE ARE OF THE OPINION THAT THERE IS NO NEED FOR LEV Y OF PENALTY JUST BECAUSE THE PURCHASES SO MADE BY THE ASSESSEE WERE NOT PROVED TO THE SATISFACTION OF THE ASSESSING OFFICER AND STAND DISALLOWED. IN FACT 3CD REPORT DO INDICATE THAT STOCKS RECORDS ARE BEING MAINTAINED SEPARATELY BY THE ASSESSEE AND RECONCIL IATION OF THE QUANTITATIVE DETAILS PLACED IN PAGE 75 AS PER CLAUS E 28(B) OF THE REPORT (ANNEXURES 10 AND 11). THIS INDICATES THAT T HE ASSESSEE DID MAINTAIN PROPER BOOKS OF ACCOUNT WHICH WERE NOT REJ ECTED EITHER. THEREFORE, WE HAVE NO HESITATION IN CANCELLING THE PENALTY. 7. BOTH PARTIES RELIED ON VARIOUS CASE LAW IN SUPPORT OF THEIR CONTENTIONS. WE ARE OF THE OPINION THAT THERE IS NO NEED TO REFER ANY CASE LAW AS ON FACTS THE CASE, ISSUE WAS DECIDED AN D ACCORDINGLY THE PENALTY WAS CANCELLED. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH APRIL, 2012. SD/- SD/- ( D .K.AGARWAL ) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 20 TH APRIL, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, H BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI