MANOHAR SHAMBU SUVARNA, MUMBAI V. ITO WARD- 31(2)(3), MUMBAI

ITA 5932/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5936 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 15-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKTAR H ANSARI
• Assessee Lawyers: NEHA PARANJ P
• Keywords: Bogus purchase; Principle of natural justice; Set aside
• Section: 271(1)(c); 250; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 5932 & 5933/MUM/2018 ( ASSESSMENT YEARS: 2010-11 & 2011-12 ) MANOHAR SHAMBU SUVARNA, 3, SURESH BHAVAN, CHINCHOLI BUNDER ROAD, MALAD (W), MUMBAI 400064. / VS. ITO WARD 31(2)(3) MUMBAI. ./ ./ PAN/GIR NO. : ABEPS0736L ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SMT NEHA PARANJ P, AR / RESPONDENT BY : SHRI AKTAR H. ANSARI, SR. DR / DATE OF HEARING 17/09/2020 !'# / DATE OF PRONOUNCEMENT 29/09/2020 / O R D E R PER PAVAN KUMAR GADALE - JM: THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE COMMON ORDER OF THE LD.CIT(A)-42, MUMBAI, PASSED U/S 271(1)(C) AND 250 OF THE INCOME TAX ACT, 1961.THE ISSUES IN THESE APPEALS ARE IDENTICAL AND SIMILAR, HENCE ARE CLUBBED, HEARD AN D CONSOLIDATED ORDER IS PASSED. FOR THE SAKE OF ITA NO . 5932 & 5933/MUM/2018 MANOHAR SHAMBU SUVARNA, MUMBAI . - 2 - CONVENIENCE, WE SHALL TAKE UP THE ITA NO. 5932/MUM/2018 FOR THE A.Y 2010-11.THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) FAILED TO CONSIDER THAT ALL THE NOTI CES WERE SENT TO APPELLANT AN OLD ADDRESS OF THE APPELL ANT ALTHOUGH THE NEW ADDRESS WAS KNOWN TO A.O, WHICH IS PROVEN BY THE FACT THAT THE ORDERS AND DEMAND NOTIC ES FOR THE EARLIER YEAR I.E. FOR 2009-10 WAS SENT TO H IM ON NEW ADDRESS. 2. THE LD. CIT(A) ALSO FAILED TO CONSIDER THAT THE IMP UGNED ORDER IS PASSED IN CONTRAVENTION OF PRINCIPAL OF NA TURAL JUSTICE. 3. THE LD. CIT(A) FAILED TO CONSIDER THAT THE LD. A.O HAS ILLEGALLY REOPENED THE CASE OF THE APPELLANT WITHOU T VERIFYING THE VERACITY OF ALLEGED INFORMATION, SINC E PENALTY PROCEEDING IS INDEPENDENT OF ASSESSMENT PROCEEDING. 4. THE LD. CIT(A) ALSO FAILED TO CONSIDER THAT THE IMP UGNED ORDER IS ILLEGAL IN VIEW OF DOCTRINE OF RES-JUDICA TA SINCE IN THE EARLIER A.Y 2009-10, ON THE IDENTICAL FACTS THE A.O HAD NOT DISALLOWED THE ENTIRE ALLEGED BOGUS PURCHASES. 5. THE LD. CIT(A) ALSO ERRED IN NOT CONSIDERING THAT T HE A.O HAS MADE ADDITION OF THE ENTIRE PURCHASE AMOUNTING TO RS. 6,31,655/- FOR A.Y 2010-11 WHILE SALES FOR THOSE YEARS WERE NOT DOUBTED. 6. WITHOUT PREJUDICE TO ABOVE THE LD. CIT(A) FAILED TO CONSIDER THAT THE BILLS MAY BE BOGUS SINCE THE CORRESPONDING SALES ARE REFLECTED. 7. THE LD CIT(A) ALSO FAILED TO CONSIDER THAT THE A.O HAS MADE WRONG ADDITIONS TO THE RETURNED INCOME OF THE APPELLANT SINCE ISSUE INVOLVED THEREIN IS COVERED B Y ITA NO . 5932 & 5933/MUM/2018 MANOHAR SHAMBU SUVARNA, MUMBAI . - 3 - VARIOUS HIGH COURTS, TRIBUNALS AND A.O BY HOLDING T HAT ENTIRE ALLEGED PURCHASES CANNOT BE DISALLOWED AND ADDITION ON ACCOUNT THEREON BE RESTRICTED TO CERTAI N PERCENTAGE OF GROSS PROFIT (GP) ON SUCH PURCHASES. 8. IT IS THEREFORE PRAYED THAT THE HONBLE MEMBERS MAY BE PLEASED TO CANCEL THE IMPUGNED PENALTY ORDER FOR TH E A.Y 2010-11 OR IN ALTERNATIVE THE HONBLE MEMBERS M AY BE PLEASED TO PASS ANY SUCH OTHER ORDER OR ORDERS I N FAVOUR OF THE APPELLANT IN THE INTEREST OF JUSTICE. 2. THE ASSESSEE HAS FILED THE RETURN OF INCOME FO R THE A.Y 2010-11 ON 13.12.2010 WITH TOTAL INCOME OF RS. 5,41,830/-.SUBSEQUENTLY, THE A.O BASED ON THE INFORMATION RECEIVED FROM DGIT(INV)MUMBAI FOUND THAT THE ASSESSEE HAS OBTAINED ACCOMMODATION ENTRIE S FROM HAWALA OPERATORS, WHO ARE INVOLVED IN PROVIDI NG THE BOGUS PURCHASE BILLS WITHOUT ACTUALLY DELIVERY OF GOODS. THEREFORE, THE A.O INITIATED REASSESSMENT PROCEEDING U/SEC148 OF THE ACT. IN THE F.Y 2009-10 THE ASSESSEE HAS OBTAINED THE BILLS FROM M/S DISA ENTERPRISES OF RS.6,31,655/-.SINCE, THE ASSESSEE CO ULD NOT SUBSTANTIATE THE PURCHASES WITH EXPLANATIONS, T HE LD.A.O MADE ADDITION OF RS. 6,31,655/- AND ASSESSED THE TOTAL INCOME OF RS. 11,73,490/- AND PASSED U/S 143 R.W.S 147 OF THE ACT, SUBSEQUENTLY, THE A.O INITIATED PENALTY U/S 271(1)(C) OF THE ACT. THE A.O IN ITA NO . 5932 & 5933/MUM/2018 MANOHAR SHAMBU SUVARNA, MUMBAI . - 4 - THE PENALTY PROCEEDINGS OBSERVED THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE GENUINENESS OF THE PURCHASES TO THE EXTENT OF RS. 6,31,665/- AND SHOW CAUSE NOTICE WAS ISSUED ON 03.08.2016. NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY EXPLANATIONS WERE FURNISHED. THE A.O IS OF THE VIEW THAT THE ASSESSEE HAS NO SATISFACTORY EXPLANATIONS TO OFFER AND LEVIED PENALTY OF RS. 1,95,183/- AND PASS ED ORDER U/S 271(1)(C) OF THE ACT ON 29.09.2016. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE HAS F ILED AN APPEAL WITH THE CIT(A). THE LD. AR IN THE APPEL LATE PROCEEDINGS MADE DETAILED EXPLANATIONS FOR NONE APPEARANCE OF THE ASSESSEE AS THE ADDRESS OF THE ASSESSEE IS NOT CORRECTLY UPDATED. THE A.O HAS NOT PROVIDED ADEQUATE OPPORTUNITY OF HEARING TO SUBSTANTIATE THE CASE TO FILE THE EXPLANATIONS. THE CONTENTIONS OF THE LD.AR ARE THAT THE ASSESSMENT WA S MADE BASED ON THE INFORMATION AND NO INDEPENDENT ENQUIRY WAS CONDUCTED BY THE A.O. THEREFORE, THE LEVY OF PENALTY U/S 271(1)(C)IS BAD IN LAW. BUT THE CIT(A) HAS CONFIRMED THE PENALTY AND DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE TRIBUNAL. ITA NO . 5932 & 5933/MUM/2018 MANOHAR SHAMBU SUVARNA, MUMBAI . - 5 - 3.AT THE TIME OF HEARING, THE LD. AR SUBMITTED THAT THE CIT(A) HAS ERRED IN DISMISSING THE ASSESSEES APPEAL AND HAS NOT CONSIDERED THE FACT, THAT THE ASSESSEE HAS NOT RECEIVED THE NOTICES SENT IN THE PENALTY PROCEEDINGS AND WHEREAS THE NEW ADDRESS WAS UPDATED WITH THE A.O. THE CIT(A) HAS ACCEPTED THE ACTION OF THE A.O IN REOPENING OF THE ASSESSMENT WITHOUT VERIFYING THE ALLEGED INFORMATION. THE PURCHASE BILLS WERE TREATED AS BOGUS BUT THE A.O HA S NOT DOUBTED THE SALES. FURTHER, THE LD.AR SUBMITTE D THAT IN THE QUANTUM APPEAL, THE LD. CIT(A) HAS RESTRICTED THE ADDITION ON ACCOUNT OF BOGUS PURCHAS ES BY ESTIMATING @12.5% OF BOGUS PURCHASES AS INCOME OF THE ASSESSEE AND WAS ACCEPTED. THEREFORE THE LE VY OF PENALTY ON THE ESTIMATED INCOME CANNOT BE SUSTAINED AND PRAYED FOR ALLOWING THE APPEAL. 4. CONTRA, LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE CRUX OF THE DISPUTED I SSUE ITA NO . 5932 & 5933/MUM/2018 MANOHAR SHAMBU SUVARNA, MUMBAI . - 6 - AS ENVISAGED BY THE LD. AR IS WITH RESPECT TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT BY THE A.O BASED ON THE ORDER OF THE A.O UNDER 143 R.W.S 147 OF THE ACT . THE LD. AR HAS EMPHASIZED THAT AGAINST THE ADDITION OF BOGUS PURCHASES, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE APPELLATE AUTHORITIES. THE LD. CI T(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASES AND WAS ACCEPTED AND THE PENALTY CANNOT BE LEVIED ON ESTIMATED INCOME. WE FOUND STRENGTH IN THE SUBMISSIONS OF THE LD. AR. TH E A.O HAS MADE TOTAL DISALLOWANCE OF BOGUS PURCHASES BUT ACCEPTED THE SALES IN THE BOOKS OF ACCOUNTS AND THE LDCIT(A) HAS ESTIMATED THE INCOME OF THE ASSESS EE ON PURCHASES. WE ARE OF THE OPINION THAT WHERE THE ADDITION IS SUSTAINED ON THE ESTIMATED BASIS, NO PENALTY U/S 271(1)(C) OF THE ACT CAN BE LEVIED ON T HE ESTIMATED INCOME. ACCORDINGLY, WE, CONSIDERING THE FACTS AND PRINCIPLES OF NATURAL JUSTICE SET ASIDE T HE ORDER OF THE CIT(A) CONFIRMING THE PENALTY AND DIRE CT THE A.O TO DELETE THE PENALTY AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. ITA NO . 5932 & 5933/MUM/2018 MANOHAR SHAMBU SUVARNA, MUMBAI . - 7 - 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 5933/MUM/2018, A.Y 2011-12. 7. IN THIS ASSESSMENT YEAR, THE FACTS ARE SIMILAR A ND IDENTICAL TO THE EARLIER YEAR. WE HAVE DEALT IN THE ABOVE PARAGRAPHS IN ASSESSEES CASE FOR THE A.Y 200 9- 10. HENCE THE DECISION RENDERED WOULD APPLY MUTATIS MUTANDIS FOR THIS CASE ALSO. ACCORDINGLY, WE SET AS IDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OF FICER TO DELETE THE PENALTY AND ALLOW THE GROUNDS OF APP EAL THE ASSESSEE. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.09.2020 SD/- SD/- (SHAMIM YAHYA) (PAVAN KUMAR GADALE ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 29/09/2020 ITA NO . 5932 & 5933/MUM/2018 MANOHAR SHAMBU SUVARNA, MUMBAI . - 8 - KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 / GUARD FILE. / BY ORDER, , / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' #, / ITAT, MUMBAI