ITO-12(3)(2), MUMBAI, MUMBAI V. M/s. KEDAR JANANI CHEMPLAST PVT. LTD., MUMBAI

ITA 6105/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3454 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 27-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURBINDER SINGH
• Assessee Lawyers: BHARAT R DALAL
• Keywords: Bogus purchase; Reason to believe; Set aside
• Section: 271(1)(c); 143(3); 142(1); 133(6); 143(1); 250; 143(2); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NOS. 6105 & 6106/MUM/2019 (A.YS: 2011-12 & 2010-11) ITO - 12(3)(2) ROOM NO. 145, 1 ST FLOOR, AAYAKAR BHAVAN, MUMBAI. VS. M/S. K EDAR JANANI CHEMPLAST PVT LTD., D-111, RAJESH APARTMENT, CHANDVARKAR LANE, BORIVALI(W), MUMBAI. ./ ./ PAN/GIR NO. : AABCK1818J APPELLANT .. RESPONDENT APPELLANT BY : SHRI GURBINDER SINGH, DR RESPONDENT BY : SHRI BHARAT R DALAL, AR DATE OF HEARING 10 .0 3 .2021 DATE OF PRONOUNCEMENT 11 .0 3 .2021 / O R D E R PER BENCH: THESE TWO APPEALS ARE FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) 20, MUMBAI, PASSED U/S. 271(1)(C) AND 250 OF THE INCOME TAX ACT, 1961. M/S KHANVILKAR PLASTICISER PVT, MUMBAI - 2 - SINCE THE ISSUES IN THESE APPEALS ARE IDENTICAL AND SIMILAR, HENCE THE APPEALS ARE CLUBBED AND HEARD AN D COMMON CONSOLIDATED ORDER IS PASSED. FOR THE SAKE O F CONVENIENCE, WE SHALL TAKE UP THE APPEAL ITA NO. 6106/MUM/2019 FOR THE A.Y 2010-11 AND THE FACTS NARRATED THEREIN. THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL. 1 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE 14. CIT (A) ERRED IN DELETING THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX ACT, 1961, OF RS.4,06,404/-- WITHOUT APPRECIATING T HE FACTS THAT THE ASSESSEE CLAIMED BOGUS PURCHASES IN ITS RETURN OF INCOME AND THUS FURNISHED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961'. 2 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE ITAT IS REQUESTED TO ENTERTAIN THIS APPEAL THOUGH THE TAX E FFECT IS BELOW THE MONETARY LIMIT PRESCRIBED IN THE CBDTS CIRCULAR NO. 17/2019 DATED 08.08.2019 READ WITH CIRCULAR NO.3/2018 DATED 11.07 .2018 AS AMENDED ON 20.08.2018 AS THE CASE FALLS IN THE EXCE PTION PROVIDED IN PARA 10(E) OF THE SAID INSTRUCTION IN AS MUCH AS TH E ADDITION IS BASED ON INFORMATION RECEIVED FROM EXTERNAL SOURCES IN TH E NATURE OF LAW ENFORCEMENT AGENCIES, NAMELY, SALES TAX AUTHORITIES '. 3 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED'. 4 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY'. M/S KHANVILKAR PLASTICISER PVT, MUMBAI - 3 - 2. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS O F MANUFACTURING OF INDUSTRIAL CHEMICALS AND FILED THE RETURN OF INCOME FOR THE A.Y 2010-11 ON 28.09.2010 DISCLOSING THE TOTAL INCOME OF RS. 5,81,330/- AND T HE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE AC T. SUBSEQUENTLY, THE A.O RECEIVED INFORMATION FROM SALES TAX DEPARTMENT AND THE OFFICE OF THE DGIT (I NV) WING, MUMBAI THAT THE ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS FROM SEVEN BOGUS PURCHASE PARTIES AGGREGATING TO RS. 52,60,888/-. THEREFORE, THE A.O HAS REASON TO BELIEVE THAT, THE INCOME HAS ESCAPED ASSESSMENT AND ISSUED NOTICE U/S 148 OF THE ACT. SUBSEQUENTLY, THE NOTICE U/S 143(2) AND 142(1) WERE ISSUED. IN COMPLIANCE THE LD.AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND SUBMITTED THE DETAIL S. THE A.O CONSIDERED THE MATERIAL ON RECORD AND OBSERVED THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE TRANSACTION OF PURCHASES. FURTH ER THE A.O HAS ISSUED NOTICE U/S 133(6) OF THE ACT ON THE PARTIES, TO CROSS VERIFY THE CLAIM OF THE ASSESSEE. BUT THE SAID NOTICES WERE RETURNED US-SERVED BY THE POS TAL AUTHORITIES WITH A REMARK NOT KNOWN AND LEFT. M/S KHANVILKAR PLASTICISER PVT, MUMBAI - 4 - HENCE, THE A.O DEALT ON THE DISPUTED ISSUE OF BOGUS PURCHASES AND MADE ADDITION BY ESTIMATION THE INCOME @ 25% OF THE BOGUS PURCHASES WHICH WORKED OUT TO RS. 13,15,222/- AND ASSESSED THE TOTAL INCOM E OF RS. 18,96,540/- AND PASSED THE ORDER U/S 143(3) R.W.S 147 OF THE ACT ON 24.11.2017. SUBSEQUENTLY, T HE A.O INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. THE A.O RELIED ON THE FINDINGS IN THE SCRUTIN Y ASSESSMENT AND THE SUBMISSIONS MADE BY THE ASSESSEE IN THE COURSE OF HEARING. ON PERUSAL OF TH E FACTS AND EXPLANATIONS, THE A.O WAS NOT SATISFIED W ITH THE REPLY AS THE ASSESSEE HAS INDULGED IN OBTAINING THE BOGUS PURCHASE BILLS FROM HAWALA OPERATORS AND THEREFORE LEVIED PENALTY OF RS.26,508/-AND PASSED ORDER U/S 271(1)(C) OF THE ACT DATED 29.06.2018. 3. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE CIT(A), THE CIT(A) CONSIDE RED THE GROUNDS OF APPEAL, FINDINGS OF THE A.O AND THE SUBMISSIONS OF THE ASSESSEE AND OBSERVED THAT THE A.O HAS ESTIMATED THE GROSS PROFIT/INCOME @ 25% OF THE BOGUS PURCHASES IN THE SCRUTINY ASSESSMENT U/SEC143(3) R.W.S SEC147 OF THE ACT AND FURTHER TH E M/S KHANVILKAR PLASTICISER PVT, MUMBAI - 5 - A.O HAS LEVIED THE PENALTY U/SEC 271(1)(C) OF THE A CT ON ESTIMATED INCOME. THE CIT(A) DEALT ON THE PROVISIONS OF SEC. 271(1)(C) AND RELIED ON THE COORDINATE BENCH OF HONBLE TRIBUNAL AND THE HONBL E HIGH COURT DECISIONS AND OBSERVED THAT NO PENALTY CAN BE LEVIED ON ESTIMATED INCOME AND DIRECTED THE A.O TO DELETE THE PENALTY AND ALLOWED THE ASSESSEE S APPEAL. AGGRIEVED BY THE ORDER OF THE CIT(A),THE REVENUE HAS FILED AN APPEAL WITH THE HONBLE TRIBUN AL. 4. AT THE TIME OF HEARING, THE LD. DR SUBMITTED THA T THE CIT(A) ERRED IN DELETING THE PENALTY, WHEREAS T HE A.O HAS RECEIVED THE INFORMATION THAT THE ASSESSEE HAS OBTAINED BOGUS PURCHASE BILLS AND THE SAME COULD NOT BE OVERLOOKED AND PRAYED FOR ALLOWING THE REVENUE S APPEAL. 5. CONTRA, THE LD.AR SUPPORTED THE ORDER OF THE CIT (A) AND EMPHASIZED THAT THE LD.CIT(A) HAS PASSED THE ORDER, CONSIDERING THE FACTS AND PROVISIONS OF LAW AND PRAYED FOR DISMISSAL OF THE REVENUE APPEAL. 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE CRUX OF THE DISPUTED ISSUE AS ENVISAGED BY THE LD. DR THAT THE CIT(A) HA S M/S KHANVILKAR PLASTICISER PVT, MUMBAI - 6 - ERRED IN DELETING THE PENALTY OVERLOOKING THE FACTS . WHEREAS, THE LD.AR EMPHASIZED THAT THE CIT(A) HAS RIGHTLY DELETED THE PENALTY CONSIDERING THE FACTS A ND CIRCUMSTANCES THAT THE PENALTY CANNOT BE LEVIED ON ESTIMATED INCOME. WE FIND THE SUBMISSIONS OF THE LD . AR ARE REALISTIC. ON THE PERUSAL OF THE ASSESSMENT ORDER; WE FIND THAT THE A.O HAS ESTIMATED INCOME/ GROSS PROFIT ON BOGUS PURCHASES. WE ARE OF THE OPINION THAT WHEN THE ADDITION IS MADE ON ESTIMATED BASIS, PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE LEVIED ON SUCH ADHOC ESTIMATED INCOME. THE LD.DR COULD NOT CONTROVERT THE FINDINGS OF THE CIT(A) WIT H ANY NEW COGENT EVIDENCES OR INFORMATION. ACCORDINGLY, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AND UPHELD THE SAME AND FIN D THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE INFRUCTUOUS AND ARE DISMISSED. ITA NO. 6107/MUM/2019, A.Y 2011-12 7. AS THE FACTS AND CIRCUMSTANCES IN THIS APPEAL AR E IDENTICAL TO ITA NO. 6108/MUM/2019 FOR A.Y. 2010- 11, THE DECISION RENDERED IN ABOVE PARAGRAPHS WOULD M/S KHANVILKAR PLASTICISER PVT, MUMBAI - 7 - APPLY MUTATIS MUTANDIS FOR THIS CASE ALSO. ACCORDINGLY, GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.03.2021 SD-/ SD/- (MANOJ KUMAR AGGARWAL) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 11.03.2021 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. %-./0 / GUARD FILE. / BY ORDER, '& //TRUE COPY// 1. ( ASST. REGISTRAR) ITAT, MUMBA I