M/S.L A S A , MUMBAI V. ACIT 19(3), MUMBAI

ITA 5992/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 3983 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 18-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MICHEL JERALD
• Assessee Lawyers: AJAY C GOSALIA
• Keywords: Bogus purchase; Business income; Business expenditure; Reasonable cause
• Section: 271(1)(c); 48; 13; 37; 56

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI MAHAVIR PRASAD, JM & SHRI S . RIFAUR RAHMAN, AM ./ I.T.A. NO . 5992 / MUM/ 2018 ( / ASSESSMENT YEAR: 2010 - 11 ) M/S LASA 43, LYDIA, HILL ROAD, OPP ELCO MARKET BANDRA (WEST), MUMBAI - 400 002 / VS. A CIT 1 9 (3), ROOM NO. 301, 3 RD FLOOR, PIRAMAL CHAMBERS, MUMBAI - 400 012 ./ ./ PAN NO. AA CFL 6401 E ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHR I AJAY C. GOSALIA, AR / RESPONDENTBY : SHRI S. MICHEL JERALD, DR / DATE OF HEARING : 04.11 .201 9 / DATE OF PRONOUNCEMENT : 07.11.2019 / O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMIS S IONER OF INCOME TAX - 48 IN SHORT REFERRED AS LD. CIT (A) , MUMBAI, DATED 30.07.18 FOR A SSESSMENT YEAR (IN SHORT A Y ) 2010 - 11 . 2 I.T.A. NO. 5992 /MUM/201 8 M/S LASA 2 . T HE BRIEF FACTS OF THE C ASE ARE THAT THE RETURN OF INCOME WAS F ILED BY THE ASSESSEE FOR AY 2010 - 11 ON 25.09.10 DECLARING TOTAL INCOME OF RS. NIL. DURING THE ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE HAS DECLARED INTEREST EXPENDITURE IN ITS PROFIT AND LOSS ACCOUNT AND FURTHER NOTICE THAT ASSESSEE HAS BORROWED FUNDS FRO M BANKS AND NBFCS AND SUCH BORROWED FUNDS WERE GIVEN TO ASSOCIATE ENTERPRISES M/S CHOICE CENTRE DEPT STORE PVT. LTD. TO THE EXTENT OF RS. 1,53,25,631/ - AND INCURRED INTEREST EXPENDITURE OF RS. 18,81,256.91/ - . WHEN THE ASSESSEE WAS ASKED TO SUBSTANTIATE, A SSESSEE SUBMITTED THAT THE ABOVE LOANS WERE ADVANCED TO ASSOCIATE ENTERPRISES FROM THE AMOUNTS BORROWED FROM INDIA BULLS AND ASSESSEE COULD NOT RECOVER ANY INTEREST ON SUCH LOAN. ACCORDINGLY, AO DISALLOWED THE ABOVE INTEREST AS NOT RELATING TO BUSINESS. FU RTHER AO RECEIVED INFORMATION FROM SALES TAX DEPARTMENT, MAHARASHTRA AND ACCORDINGLY, THERE WERE TWO PARTIES WHO WERE ENGAGED IN HAWALA ENTRIES FROM WHOM ASSESSEE HAS PURCHASED TO THE EXTENT OF RS. 28,670/ - . SINCE ASSESSEE COULD NOT SUBSTANTIATE THE ABOVE PURCHASES NOR SUBMITTED ANY PARTIES, ACCORDINGLY AO DISALLOWED 3 I.T.A. NO. 5992 /MUM/201 8 M/S LASA THE PURCHASES. SUBSEQUENTLY, ASSESSEE ACCEPTED THE ABOVE ASSESSMENT ORDER AND DID NOT PREFER ANY APPEAL BEFORE APPELLATE AUTHORITIES . SUBSEQUENTLY, AO INITIATED PENALTY PROCEEDINGS U/S 271(1)( C) OF THE ACT. THE REPLY FILED BY ASSESSEE HAS BEEN DULY CONSIDERED AFTER CONSIDERING THE REPLY OF THE ASSESSEE, IT IS OBSERVED THAT ARGUMENT FORWARDED BY THE ASSESSEE TO EXPLAIN THAT NO INACCURATE DETAILS WERE FURNISHED, ARE. NOT FOUND ACCEPTABLE. AS DISCUSSED IN PARAJ4 OF THE ORDER PASSED U/S. 143(3 ) THE ASSESSEE HAD ADVANCED RS 1,36, 01,304/ - TO M/S, CHOICE CENTRE DEPT STORE P. LTD. OUT OF INTEREST BEARING FUNDS WITHOUT CHARGING A NY INTEREST AND HAD INCURRED INT EREST OF RS. 18,89, 256/ - ON FUNDS SO ADVA NCE. THE ASSESSEE ACCEPTED THE ADDITION AND NO APPEAL WAS FILED AGAINST THE ADDITION. SINCE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING ASSESSEE WAS REQUIRED TO TREAT INTEREST AS INCOME. IT CANNOT BE SAID THAT DUE TO BAD CONDITION INTEREST WAS NO T PAID TO ASSESSEE. AND IF INTEREST, IS NOT RECEIVED IT SHOULD HAVE DISALLOWED INTEREST ATTRIBUTABLE TO FUND USED FOR INTER EST FREE LOANS AS ONLY THOSE EXPENSES WHICH ARE INCURRED WHOLLY ARID EXCLUSIVELY FOR BUSINESS ARE AL LOWABLE U/ S 37 OF THE ACT. T HESE FACTS WERE KNOWN TO THE ASSESSEE . SIMILARLY ADDITI ON OF 28,670/ - WAS 4 I.T.A. NO. 5992 /MUM/201 8 M/S LASA MADE BY DISALLOWING PURCH ASE DEBITED IN ACCOUNT BY TAKING HAWALA ENTRY AS DIS CUSSED IN PARA. 6 OF THE ORDER. IT IS KNOWN FACT THAT SALES TAX DEPARTMENT FOUND OUT SEVERAL ENTITIES, WHICH W ERE GIVING BOGUS PURCHASE BILLS. ASSESSEE ALSO HAD CLAIMED CERTAIN EXPENSES THROUGH SUCH ENTITIES. BY NOT FILING APPEAL, IT IS ACCEPTED, I AM THEREFORE, SATISFIED THAT THE ASSESSES H AD F URNISHED INACCURATE PART ICULARS OF INCOME FOR WHICH IT IS LIABLE FOR P ENALTY U/S 271(1 )(C) OF THE ACT. ACCORDINGLY, PENALTY WAS LEVIED AT RS. 6 LAKHS U/S 271(1)(C) OF THE ACT. 3 . AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND FILED BEFORE HIM A DETAIL SUBMISSION, WHICH IS REPRODUCED BELOW: - 1. THE APPELLANT IS IN THE BUSINESS OF RETAIL TRADING OF GARMENTS AND ACCESSORIES. 2. AS THE APPELLANT'S GROUP CONCERN CHOICE CENTRE DEPARTMENTAL STORE PVT LTD(CCDS) WAS IN NEED OF FUNDS IT DECIDED TO LEND IT TO CCDS BY BORROWING FUNDS FROM OUTSIDE. 5 I.T.A. NO. 5992 /MUM/201 8 M/S LASA 3. SINCE APPELLANT WOULD HAVE TO PAY INTEREST ON ITS BORROWING, IT WAS AGREED WITH CCDS THAT CCDS - WOULD REIMBURSE THE ACTUAL INTEREST PAYABLE BY APPELLANT. 4. THE APPELLANT THUS BORROWED FUNDS FROM INDIABULLS AND LENT IT TO CCDS. 5. SIN CE THE APPELLANT HAD NEVER IN THE PAST CARRIED OUT FINANCING ACTIVITIES, AND AS IT WAS NOT ITS BUSINESS ACTIVITY.IT DECIDED TO FOLLOW CASH SYSTEM OF ACCOUNTING FOR INTEREST RECEIPTS AND PAYMENTS ON THIS ACTIVITY. 6. LOAN GRANTED BY INDIABULLS WAS TO BE REPAID IN 120 EQUAL MONTHLY INSTALLMENTS(EMI) WHICH INCLUDED BOTH PRINCIPAL AND INTEREST. 7. SINCE THE EMIS INCLUDED INTEREST PAYMENT OF RS 18,89,257, IT WAS ACCOUNTED AS EXPENDITURE AND DEBITED TO PROFIT & LOSS A/C. HOWEVER AS THE APPELLANT DID NOT REC EIVE ANY INTEREST DURING THE YEAR FROM CCDS INTERCUT RECEIPTS COULD NOT BE CREDITED TO PROFIT & LOSS 1/C. 8. THE APPELLANT SUBMITS THAT NO PENALTY CAN BE IMPOSED ON DISALLOWANCE OF INTEREST OF RS 18,89,257 FOR THE FOLLOWING REASONS : 6 I.T.A. NO. 5992 /MUM/201 8 M/S LASA A. MERELY BEC AUSE THE APPELLANT DID NOT FILE APPEAL AGAINST DISALLOWANCE OF INTEREST DUE TO THERE BEING HUGE LOSS OF RS 1,73,26,789 FOR THE YEAR AND HUGE BROUGHT FORWARD LOSSES OF RS 70,33,252 OF EARLIER YEARS IT WOULD NOT MEAN THAT THE APPELLANT HAD ACCEPTED THE DISAL LOWANCE. B. INTEREST RECEIPT AND PAYMENT FROM FINANCING ACTIVITIES IS CHARGEABLE U/S 56 UNDER THE HEAD OF INCOME FROM OTHER SOURCES FOR WHICH IT FOLLOWED CASH SYSTEM OF ACCOUNTING. C. IT IS ENGAGED ONLY IN THE BUSINESS OF TRADING AND NOT IN BUSINESS OF FINAN CING AS CAN BE SEEN FROM CLAUSE OF ITS TAX AUDIT REPORT AND HENCE IT WAS NOT OBLIGED TO FOLLOW MERCANTILE SYSTEM OF ACCOUNTING FOR ACCOUNTING OF INTEREST ON ITS FINANCING ACTIVITIES AS IN THE CASE OF ITS BUSINESS. D. MERELY BECAUSE THE APPELLANT ERRONEOUSLY DID NOT SHOW INTEREST PAID TO INDIABULLS SEPARATELY UNDER THE HEAD 'INCOME FROM OTHER SOURCES' WOULD NOT MEAN THAT THE APPELLANT WAS OBLIGED TO FOLLOW MERCANTILE SYSTEM OF ACCOUNTING ALSO FOR INTEREST. E. EVEN IF THE INTEREST PAYM ENT TO INDIABULLS WOULD HAVE BEEN SHOWN UNDER THE HEAD 'INCOME FROM OTHER 7 I.T.A. NO. 5992 /MUM/201 8 M/S LASA SOURCES' THE SAME WOULD BE ENTITLED TO SETOFF U/SS 70 &71 AND HENCE TOTAL INCOME / LOSS WOULD HAVE REMAINED SAME. THUS THE DISALLOWANCE OF INTEREST ITSELF WAS NOT JUSTIFIED AND THERE FORE IT CANNOT BE SAID THAT THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME. F. NO PENALTY CAN BE IMPOSED BECAUSE OF SUCH IMPROPER DISALLOWANCE OF INTEREST. G. WITHOUT PREJUDICE TO THE FOREGOING, THE APPELLANT SUBMITS THAT NO PEN ALTY CAN BE IMPOSED MERELY FOR REJECTION OF CLAIM OF EXPENSES BY THE ID DCIT. ON THIS PROPOSITION THE APPELLANT RELIES UPON THE DECISION REPORTED IN (2010) 322ITR 158 (SC) IN THE CASE OF CIT V/S RELIANCE PETROPIODUCTS (P) LTD. H. WITHOUT PREJUDICE TO T HE FOREGOING, THE APPELLANT SUBMITS THAT IN VIEW OF HUGE LOSS OF RS 1,73,26,789 FOR THE YEAR AND BROUGHT FORWARD LOSSES FROM EARLIER YEAR OF RS 70,33,252 THERE WAS NO QUESTION OF ANY MALA FIDE INTENTION IN CLAIMING THE SAID INTEREST AS BUSINESS EXPENSES. I . WITHOUT PREJUDICE TO THE FOREGOING, THE APPELLANT SUBMITS THAT THIS BEING THE FIRST YEAR OF ITS FINANCING ACTIVITIES AND TH ERE BEING HUGE LOSSES AS AFORESAI D THE 8 I.T.A. NO. 5992 /MUM/201 8 M/S LASA APPELLANT HAD REASONABLE CAUSE FOR FAILURE, IF ANY, TO DISCLOSE INTEREST PAYMENT UNDER THE H EAD 'INCOME FROM OTHER SOURCES ' AND HENCE THE IMPOSITION OF PENALTY BY THE ID 1TO ON THIS GROUND MAY BE DELETED. 9. THE APPELLANT SUBMITS THAT NO PENALTY CAN ALSO BE IMPOSED ON ADDITION OF RS 28,670 ON ACCOUNT OF ALLEGED BOGUS PURCHASES FOR THE FOLLOWI NG REASONS: - A. THE HUGE LOSS FOR THE YEAR OF RS 1,73,26,789 ITSELF DISPLACES THE ALLEGATION OF BOGUS PURCHASES OF SUCH A SMALL SUM OF RS 28,670. B. WITHOUT PREJUDICE TO THE FOREGOING, THE APPELLANT SUBMITS THAT MERELY BECAUSE THE APPELLANT DID NOT FILE APPEAL AGAINST DISALLOWANCE OF PURCHASE DUE TO THERE BEING HUGE LOSS OF RS 1,73,26,789 FOR THE YEAR AND HUGE BROUGHT FORWARD LOSSES OF RS 70,33,252 OF EARLIER YEARS, IT WOULD NOT MEAN THAT THE APPELLANT HAD ACCEPTED THE ADDITION OF ALLEGED BOGUS PURC HASES. C. THUS THE APPELLANT SUBMITS THAT MERELY FOR DISALLOWANCE OF PURCHASES, IT CANNOT BE SAID THAT IT HAD FILED INACCURATE PARTICULARS OF INCOME JUSTIFYING IMPOSITION OF PENALTY ON THIS GROUND. 10. THE APPELLANT SUBMITS THAT A MERE STATEMENT IN P ENALTY ORDER THAT THE ID ACIT HAD OBTAINED PRIOR 9 I.T.A. NO. 5992 /MUM/201 8 M/S LASA APPROVAL OF JCIT WOULD NOT PROVE THAT HE HAD OBTAINED PRIOR APPROVAL WITHOUT WHICH NO PENALTY CAN BE IMPOSED UPON THE APPELLANT. FURTHER, THE APPELLANT SUBMITS THAT MERELY BECAUSE THE DATE OF APPROVAL AND TH E DATE OF PENALTY ORDER ARE SAME WOULD NOT MEAN THAT APPROVAL WAS OBTAINED PRIOR TO PASSING OF PENALTY ORDER. ON THIS PROPOSITION THE APPELLANT RELIES UPON THE ORDER OF MUMBAI TRIBUNAL IN 1TA 8720/BOM / 95 DT 23/12/2002. 11. THE APPELLANT THUS RESPECTFULLY SUBMITS THAT THE PENALTY OF RS 6,00, 000 / - LEVIED UPON IT BE DELETED AND / OR SUITABLY REDUCED.' 4. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, LD. CIT(A) CONFIRMED THE PENALTY ORDER AND DISMISSED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF LD. CIT (A) , ASSESSEE PREFERRED THE APPEAL BEFORE US ON THE GROUND MENTIONED HEREIN BELOW: - 1. PENALTY U/S 271 (1) (C); 10 I.T.A. NO. 5992 /MUM/201 8 M/S LASA A) THE ID. CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS 6,00,000 U/S 271(L)(C)OF THE IT ACT, 1961 ( THE ACT) BY THE ID. ACIT. B) SHE ERRED IN HOLDING THAT: I) IT IS NOT CORRECT TO SAY THAT THERE WAS NO RECEIPT OF INCOME BY ASSESSEE ; II) EXPLANATION 1 TO S. 271(L)(C) WAS CLEARLY ATTRACTED AS THE EXPLANATION GIVEN BY THE APPELLANT WAS NOT BONAFIDE ; III) THE EXCESSIVE CLAIM OF EXPENSE AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME ; IV) THE APPELLANT'S ARGUMENT THAT PRIOR APPROVAL OF JCIT CANNOT BE VERIFIED IS FRIVOLOUS AND A MERE SUSPICION. C) SHE FAILED TO APPRECIATE THAT: - I) ALL THE FACTS RELATING TO DEDUCTION OF INTEREST PAYMENT WERE DISCLOSED BY THE APPELLANT; II) MERE REJECTION OF CLAIM OF DEDUCTION OF INTEREST DID NOT MEAN THAT APPELLANT HAD FILED INACCURATE PARTICULARS OF INCOME; 11 I.T.A. NO. 5992 /MUM/201 8 M/S LASA III) THE APPELLANT WAS NOT REQUI RED TO FOLLOW MERCANTILE SYSTEM OF ACCOUNTING FOR INTEREST INCOME AS THE ACIT HIMSELF HAD ADMITTED THAT APPELLANT WAS NOT CARRYING ON BUSINESS OF FINANCING ; IV) AS THIS WAS ITS FIRST YEAR OF UNDERTAKING FINANCING ACTIVITIES, THE APPELLANT HAD REASONA BLE CAUSE IN CLAIMING INTEREST AS DEDUCTION UNDER THE HEAD BUSINESS INCOME INSTEAD OF UNDER THE HEAD OTHER SOURCES; V) MERELY BECAUSE THE APPELLANT HAD NOT DISPUTED ADDITIONS BY FILING QUANTUM APPEAL OR THAT IT HAD NOT SHOWN FINANCING ACTIVITIES SEPAR ATELY DID NOT MEAN THAT IT HAD ADMITTED HAVING FURNISHED INACCURATE PARTICULARS OF INCOME; VI) THE APPELLANT HAD NO MALA FIDE INTENTION IN CLAIMING INTEREST EXPENSES SINCE EVEN WITHOUT CLAIMING THE SAME, IT HAD HUGE LOSSES AND NO DETRIMENT WAS CAUSED TO THE REVENUE BY CLAIMING ITS DEDUCTION; VII) PRIOR APPROVAL OF JCIT COULD NOT BE ASSUMED TO HAVE BEEN OBTAINED BY THE ID ACIT BEFORE IMPOSING PENALTY. D) THE ID CIT (A) THEREFORE OUGHT TO HAVE DELETED THE PENALTY IMPOSED UPON THE APPELLANT. 12 I.T.A. NO. 5992 /MUM/201 8 M/S LASA 2. EAC H OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO ONE ANOTHER. 3. THE APPELLANT CRAVE S LEAVE TO ADD TO, ALTER, VARY, MODIFY, DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 6 . BEFORE US, LD. A R SUBMITTED THAT AO HAS DISALLOWED THE INTEREST EXPENDITURE ON WHICH ASSESSEE HAS ADVANCED MONEY TO ITS ASSOCIATE COMPANY AND INCURRED EXPENDITURE. SINCE ASSESSEE COULD NOT RECOVER THE INTEREST EXPENDITURE WHICH WAS ADVANCED TO THE ASSOCIATE ENTERPRISES DURING THIS YEAR, AO HAS DISALLOWED THE INTEREST EXPENDITURE. FURTHER A SSESSEE HAS NOT PREFERRED ANY APPEAL BEFORE APPELLATE AUTHORITIES, IT DOES NOT MEAN THAT ASSESSEE HAS ACCEPTED THAT IT IS FURNISHING OF INACCURATE PARTICULARS. FURTHER H E SUBMITTED THAT AO SOLELY RELIED ON THE FACT THAT ASSESSEE HAS NOT GONE ON APPEAL, ACC ORDINGLY HE SATISFIED HIMSELF THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS. FURTHER, HE BROUGHT TO OUR NOTICE THAT FINDINGS OF LD. CIT(A) AT PARA NO. 5, HE SUBMITTED THAT LD. CIT(A) HAS DISMISSED THE GROUNDS RAISED BY THE ASSESSEE BY RELYING UPON THE DECISION IN THE CASE OF DHARMENDRA TEXTILE 13 I.T.A. NO. 5992 /MUM/201 8 M/S LASA PROCESSORS, WHEREIN IT WAS HELD THAT WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING SEVERAL LIABILITIES, HE SUBMITTED THAT THE DECISION WAS IN THE MATTER OF PROSECUTION U/S 276 OF THE ACT, NOT ON PENALTY. HOWEVER, LD. CIT(A) OBSERVED THAT IT IS ENOUGH THAT AO HAS SATISFIED THAT ANY PERSON HAS CON CEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. BUT AO NOT ONLY SATISFIED HIMSELF BUT ALSO TO DEMONSTRATE THAT ASSESSEE HAS CONCEALED PARTICULARS OF INCOME. FURTHER HE SUBMITTED THAT ASSESSEE HAS ALREADY IS IN HUGE LOSS AND BY MAKING INACCURATE PARTICULARS OF INCOME, ASSESSEE DOES NOT MAKE ANY BENEFIT. LD. CIT(A) FURTHER RELIED ON THE CASE OF K. P. MADHUSUDHANAN VRS. CIT AND CI T VRS. GOLD COIN HEALTH FOOD PVT. LTD. LD. AR SUBMITTED THAT EVEN THOUGH IN THE PRESENT CASE, ASSESSEE IS HAVING HUGE LOSS, BUT STILL AO HAS TO BROUGHT ON RECORD WHETHER ASSESSEE HAS REALLY FURNISHED INACCURATE PARTICULARS OF INCOME. HE BR OUGHT TO OUR NOTI CE ANNEXURE - 4 OF FORM - 3 CD IN WHICH THE AUDITOR HAS CLEARLY BROUGHT ON RECORD THAT TRANSACTION WITH RELATED PERSONS. 14 I.T.A. NO. 5992 /MUM/201 8 M/S LASA 7 . WITH REGARD TO ADDITION ON BOGUS PURCHASES, LD. AR SUBMITTED THAT THE ADDITION MADE BY THE AO IS MATERIALLY LESS COMPARE TO TOTAL PURCHASES MADE BY THE ASSESSEE. ASSESSEE COULD NOT BROUGHT THE SUPPLIER CONSIDERING THE INSIGNIFICANCE OF THE PURCHASES AND ALSO THE SUPPLIERS ARE NOT TRACEABLE. IT ITSELF CANNOT BE CONSIDERED AS FURNISHING OF INACCURATE PARTICULARS AND PRAYED THAT PENALTY MAY BE DELETED. 8 . CONSIDERING THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD, WE NOTICE FROM THE RECORDS THAT ASSESSEE HAS BORROWED FUNDS FROM INDIABULLS AND ADVANCE TO ITS ASSOCIATE ENTERPRISES IN WHICH ONE OF THE DIRECTOR IS RELATED TO THE PARTNER IN THIS FIRM. THE ASSESSEE ADVANCE D THIS MONEY, BUT COULD NOT REALIZE ANY INTEREST DURING THIS YEAR NOR BROUGHT ON RECORD ANYTHING RECEIVED SUBSEQUENTLY. NO DOUBT THE INTEREST EXP ENDITURE PROPORTIONATE TO THE FUND ADVANCED TO THE ASSOCIATE ENTERPRISES IS NOT RELATING TO THE BUSINESS CARRIED ON BY THE ASSESSEE. ONLY REASON, LD. AR BROUGHT TO OUR NOTICE THAT ASSESSEE IS ON KEEPING A PORTION OF THE BUILDING FOR 15 I.T.A. NO. 5992 /MUM/201 8 M/S LASA WHICH ASSESSEE IS NOT P AYING ANY RENTAL NOR PAI D ANY ADVANCE TOWARDS THE OCCUPIED PROPERTY. 9 . ON CAREFUL CONSIDERATION OF THE INFORMATION AVAILABLE ON RECORD, WE NOTICE THAT AO HAS INITIATED PENALTY PROCEEDINGS HEAVILY RELYING ON THE FACT THAT ASSESSEE HAS NOT GONE ON APPEAL FOR THE DISALLOWANCE OF INTEREST AND BOGUS PURCHASES, BUT IT MAY BE REASONABLE GROUND TO MAKE DISALLOWANCE. HOWEVER, IN ORDER TO LEVY PENALTY, AO HAS TO BRING ON RECORD THAT ASSESSEE HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS OF INCOME. HOWEVER, WE NOTICE THAT TO MAKE ADDITION , THE RELEVANT INFORMATION WERE VERY MUCH AVAILABLE ON RECORD AS SUBMITTED BY THE ASSESSEE. THE ASSESSEE INTEND TO ADVANCE THE FUNDS TO THE ASSOCIATE CONCERN WITHOUT CHARGING INTEREST IS ONE OF THE DECISION OF THE ASSESSEE. SINC E THE BENEFICIARY IS ASSOCIATE ENTERPRISES AND IT IS NOT ANYWAY BROUGHT ON RECORD BY THE AO THAT ASSESSEE HAS SUBMITTED INACCURATE PARTICULARS IN ORDER TO C LAIM THE BENEFIT . SINCE ALL THE INFORMATION WERE VERY MUCH AVAILABLE ON RECORD 16 I.T.A. NO. 5992 /MUM/201 8 M/S LASA AND ACCORDINGLY, AO H AS MADE DISALLOWANCE AND ASSESSEE HAS ACCEPTED THE MISTAKE APPARENT ON RECORD . WE DO NOT SEE ANY REASON THAT THIS IS A FIT CASE FOR PENALTY. 10 . WITH REGARD TO BOGUS PURCHASE, WE NOTICE THAT AO HAS DISALLOWED THE PURCHASE MERELY RELYING ON THE INFORMATION FROM THE SALES TAX DEPARTMENT AND HAS NOT MADE ANY INDEPENDENT INQUIRY, BUT HE HAS ASKED THE ASSESSEE TO PROVE THE GENUINENESS OF PURCHASES WHICH ASSESSEE HAS FAILED TO BRING ANY SUPPLIER BEFORE AO. CONSIDERING THE QUANTUM OF DISALLOWANCE OF PURCHASE AND THE TOTAL PURCHASES MADE BY THE ASSESSEE, THE INSIGNIFICANCE OF THE PURCHASES MADE FROM UNSUBSTANTIATED SUPPLIERS DOES NOT GIVE A CLEAR PICTURE TH AT ASSESSEE HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS, THEREFORE CONSIDERING OUR ABOVE OBSERVATION, WE DO NOT SEE THAT ASSESSEES CASE IS FIT CASE FOR PENALTY. WITH REGARD TO CASE LAWS RELIED UPON BY LD. CIT(A) IS DISTINGUISHABLE ON FACTS OF THE CA SE OF ASSESEE. THEREFORE, THE PENALTY LEVIED BY 17 I.T.A. NO. 5992 /MUM/201 8 M/S LASA AO IS DELETED. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 1 1 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH NOV 20 19 . SD/ - SD/ - ( MAHAVIR PRASAD ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 07 .11 .201 9 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI