DSM INFOCOM PVT. LTD., MUMBAI V. DCIT - CIRCLE-4(1)(2), MUMBAI

ITA 5807/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0330 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 08-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JOTHI LAKSHMI NAYAK SR
• Keywords: Bogus purchase; Opportunity of cross examination; Accommodation entries
• Section: 271(1)(c); 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MUM BAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.5807/MUM/2018 ( ASSESSMENT YEAR: 2009-10 ) DSM INFOCOM PVT.LTD. GROUND FLOOR SHAILESH BUILDING LINK ROAD, SANTACRUZ (W) MUMBAI-400 054 VS. DCIT, CIRCLE-4(1)(2) MUMBAI PAN/GIR NO. AACCD0460G ( APPELLANT ) .. RESPONDENT ) REVENUE BY SMT. JOTHILAKSHMI NAYAK, SR.AR (DR) ASSESSEE BY NONE DATE OF HEARING 02/12 /2019 DATE OF PRONOUNCEME NT 02 /12 /201 9 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)2, MUMBAI, DATED 08/08/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2009- 10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. O N THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LA W, THE PENALTY ORDER U/S 271(1)(C) DESERVES TO BE CANCELLE D SINCE THE SHOW CAUSE NOTICE U/S 271(1) OF THE ACT DID NOT SPECIFY AS TO WHETHER THE PENALTY WAS PROPOSED FOR CONCEALMENT OF INCOME OR F URNISHING INACCURATE PARTICULARS OF INCOME, WHICH IS FUNDAMENTAL REQUIRE MENT FOR INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY ORDER PA SSED U/S 271(1)(C) OF THE ACT WHEREIN A PENALTY OF RS. 152,622/- HAD BEEN LEVIED ON (HE ITA NO.5807/MUM/2018 DSM INFOCOM PVT.LTD. 2 ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES OF RS. 3,74,191/-, ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DE PARTMENT AND STATEMENT OF THE SUPPLIERS BEFORE THE SALES TAX AUT HORITIES WHICH WERE NEVER CONFRONTED TO THE APPELLANT AND WITHOUT ALLOW ING THE APPELLANT AN OPPORTUNITY OF CROSS EXAMINATION OF THE SAID SUPPL IERS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE E ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY ORDER U/ S 271(1)(C) OF THE ACT WITHOUT CONSIDERING THE CONTENTION OF THE APPELLANT THAT MAKING AN INSUBSTANTAITED CLAIM DOES NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME AND THEREFORE THE PENALTY LEVIED U/S 271( 1)(C) IS INVALID AND NOT AS PER LAW. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY ORDER U /S 271(1)(C) OF THE ACT WITHOUT CONSIDERING THE CONTENTION OF THE APPELLANT THAT PENALTY U/S 271(1)(C) CANNOT BE LEVIED ON AN ADDITION WHICH ITS ELF HAD BEEN MADE ON ESTIMATE BASIS, EVEN THOUGH THE SAID CONTENTION IS SUPPORTED BY VARIOUS JUDICIAL PRONOUNCEMENTS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 29/09/2009, DECL ARING TOTAL INCOME OF RS. 2,38,13,640/-. THE ASSESSMENT WAS COM PLETED U/S 143(3) R.W.S 147 OF THE I.T.ACT, 1961 ON 22/01/2015 , DETERMINING THE TOTAL INCOME OF RS.2,41,87,830/- AFTER MAKING ADDIT ION OF RS.3,74,191/- ON ACCOUNT OF UNVERIFIED PURCHASES. T HEREAFTER, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T.ACT, 1 961 WAS INITIATED AND CALLED UPON THE ASSESSE TO EXPLAIN AS TO WHY PE NALTY FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME SHALL NOT BE LEVIED. IN RESPO NSE, THE ASSESSEE SUBMITTED THAT ALTHOUGH, THE LD. AO HAS MADE ADDITI ONS TOWARDS 12.5% PROFIT ON ALLEGED BOGUS PURCHASES, BUT, FACT REMAINS THAT THE ASSESSEE HAS FILED COMPLETE DETAILS IN ORDER TO PRO VE GENUINENESS OF PURCHASES. THEREFORE, MERELY FOR THE REASONS THAT T HERE IS AN ADDITION TOWARDS ESTIMATED PROFIT ON UNVERIFIED PUR CHASES, THE SAME CANNOT BE CONSIDERED AS FURNISHING INACCURATE PARTI CULARS OF INCOME, WHICH WARRANTS PENALTY U/S 271(1)(C) OF THE I.T.ACT , 1961. THE LD.AO DID NOT CONVINCED WITH THE ARGUMENTS OF THE ASSESSE E AND HENCE, ITA NO.5807/MUM/2018 DSM INFOCOM PVT.LTD. 3 LEVIED PENALTY OF RS.1,52,622/-, WHICH IS 100% OF T AX OUGHT TO BE EVADED U/S 271(1) OF THE I.T.ACT, 1961, ON THE GRO UND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME BY MAKING A FALSE CASE OF DEDUCTION OF EXPENDITURE. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE LD.CIT(A), FOR THE DETAILE D REASONS RECORDED IN HIS APPELLATE ORDER AND ALSO BY FOLLOWING THE DE CISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ZOOM COMM UNICATION PVT.LTD 327 ITR 510, HELD THAT EXPLANATION OFFERED BY THE ASSESEE TO SUBSTANTIATE GENUINENESS OF PURCHASES FROM CERTAIN PARTIES WAS UNSUBSTANTIATED. MOREOVER, THE ASSESSEE COULD NOT E STABLISH THAT ITS EXPLANATION IS BONAFIDE. HENCE, THE CONDITIONS STIP ULATED UNDER THE PROVISION OF SECTION 271(1)(C) OF THE ACT ARE FULFI LLED AND ACCORDINGLY, THERE IS NO ERROR IN THE FINDINGS RECORDED BY THE LD. AO, WHILE LEVYING PENALTY U/S 271(1)(C) OF THE I.T.ACT 1961 A ND ACCORDINGLY, CONFIRMED PENALTY LEVIED BY THE AO. AGGRIEVED BY TH E LD.CIT(A) ORDER, THE ASSESEE IS IN APPEAL BEFORE US. 4. NONE APPEARED FOR THE ASSESEE. WE HAVE HEARD THE LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE T HROUGH ORDERS OF THE AUTHORITIES BELOW. THE LD. AO HAS LEVIED PENALT Y U/S 271(1)(C) OF THE I.T.ACT, 1961, IN RESPECT OF ADDITIONS MADE TOW ARDS 12.5% GROSS PROFIT ON ALLEGED BOGUS PURCHASES, ON THE GROUND TH AT THE ASSESSE COULD NOT ESTABLISH GENUINENESS OF PURCHASES MADE F ROM CERTAIN PARTIES, IN THE BACKDROP OF CLEAR FINDINGS FROM THE SALES TAX DEPARTMENT. IT IS THE CLAIM OF THE ASSESEE BEFORE THE LD. AO THAT IT HAS FURNISHED NECESSARY EVIDENCES IN SUPPORT OF PUR CHASES FROM THE PARTIES, BUT THE LD. AO DID NOT ACCEPT THE EXPLANAT IONS OF THE ITA NO.5807/MUM/2018 DSM INFOCOM PVT.LTD. 4 ASSESSEE, ONLY FOR THE REASONS THAT HE HAD DEFINITE INFORMATION FROM SALES TAX DEPARTMENT AS PER WHICH THE PARTIES WERE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES OF BOGUS PURCHASE B ILLS. EXCEPT THIS, THE LD. AO NEITHER POINTED OUT ANY DISCREPANC IES IN BOOKS OF ACCOUNTS, NOR PROVED THAT THE PURCHASES WERE IN FAC T NON-GENUINE TO MAKE ADDITIONS TOWARDS 12.5% GP ON ALLEGED BOGUS PU RCHASES. THEREFORE, THE SAME CANNOT BE CONSIDERED AS FURNISH ING INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)( C) OF THE I.T.ACT, 1961. 5. HAVING CONSIDERED ARGUMENTS OF THE LD.DR AND ALS O MATERIAL AVAILABLE ON RECORD, WE FIND THAT ALTHOUGH, THE LD. AO HAS MADE ADDITION TOWARDS 12.5% PROFIT ON ALLEGED BOGUS PURC HASES, BUT NEITHER, HE HAS PROVED FURNISHING OF INACCURATE PAR TICULARS OF INCOME, NOR EXPLAINED HOW THE RIGORS OF PENALTY PROVISIONS COULD BE INVOKED IN THE GIVEN FACTS OF THE CASE. WE, FURTHER, NOTED THAT THE ASSESSEE HAS FURNISHED ALL BASIC DETAILS IN SUPPORT OF PURCH ASES. THE ONLY REASON FOR MAKING ADDITIONS IS NON CO-OPERATION OF THE PARTIES IN RESPONSE TO 133(6) NOTICES ISSUED BY THE LD. AO. UN DER THESE FACTS, IT IS DIFFICULT TO ACCEPT, THE FINDINGS OF THE LD. AO THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME, IN RESPECT OF PURCHASES FROM THOSE PARTIES. THEREFORE, WE ARE OF THE CONSIDERED VIEW UNSUBSTANTAITED CLAIM DOES NOT AMOUNT TO FURNI SHING INACCURATE PARTICULARS OF INCOME AND THEREFORE, THE PENALTY LEVIED U/S 271(1)(C) IS UNWARRENTED. HENCE, WE DIRECT THE LD. AO TO DELETE THE PENALTY LEVIED U/S 271(1)( C) OF THE I.T.ACT 1961. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ITA NO.5807/MUM/2018 DSM INFOCOM PVT.LTD. 5 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02 /12 /2019 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEM BER MUMBAI ; DATED 02/12/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//