ACIT 13 (3)(2), MUMBAI V. M/S VAKO SALES PVT LTD., MUMBAI

ITA 6253/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3918 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 03-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Cost of acquisition; Tax effect
• Section: 271(1)(c)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 6253/MUM/2019 (ASSESSMENT YEAR 2009-10) I.T.A. NO. 6254/MUM/2019 (ASSESSMENT YEAR 2010-11) ACIT-13(3)(2) ROOM NO. 229/219 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. M/S. VAKO SALES PVT. LTD. GROUND FLOOR, KRDN TRUST ESTATES, OFF AAREY ROAD, GOREGAON EAST MUMBAI-400 063. PAN : AACCV0100D (APPELLANT) (RESPONDENT) ASSESSEE BY NONE DEPARTMENT BY MS. USHA GAIKWAD DATE OF HEARING 27.05.2021 DATE OF PRONOUNCEMENT 02.06.2021 O R D E R PER SHAMIM YAHYA (AM) :- THESE ARE APPEALS BY THE REVENUE AGAINST RESPECTIVE ORDERS OF LEARNED CIT(A) WHEREIN FOLLOWING PENALTY UNDER SECTION 271 (1)(C) HAS BEEN DELETED :- ASSESSMENT YEAR AMOUNT OF PENALTY (RS.) 2009-10 6,00,000 2010-11 5,00,000 2. BRIEF FACTS OF THE CASE LEADING TO THE LEVY OF P ENALTY ARE THAT THE ASSESSING OFFICER IN THESE CASES MADE DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES. ASSESSEE HAS SUPPLIED THE PURCHASE VOUCH ERS AND THE PAYMENT WHERE SHOWN TO HAVE BEEN MADE BY BANKING CHANNEL. H OWEVER DRAWING ADVERSE INFERENCE FOR THE NON-PRODUCTION OF THE SUP PLIERS THE ASSESSING OFFICER MADE THE DISALLOWANCE. HE DID NOT DOUBT THE SALES. THE LEARNED CIT(A) RESTRICTED THE DISALLOWANCE TO 12%. PENALTY UNDER S ECTION 271(1)(C) OF THE ACT WAS ALSO LEVIED. LD CIT(A) DELETED THE PENALTY HOLD ING AS UNDER :- I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISS IONS MADE BY THE APPELLANT. CRUX OF THE MATTER IS THAT THE AO MADE AN ADDITION OF RS. 16,54,800/- IN RESPECT OF BOGUS PURCHASES IN RESPECT OF A PARTY WHO WAS NOT M/S. VAKO SALES PVT. LTD. 2 AVAILABLE FOR 'VERIFICATION. THE APPELLANT WENT IN APPE AL AND THE CIT(A), MUMBAI WHO EXAMINED THE ISSUE AND ACCEPTED APPELLAN T'S SUBMISSIONS THAT PURCHASES WERE MADE AND GOODS RECEIVED WHICH WERE U TILIZED FOR THE MANUFACTURE OF FINAL PRODUCTS AND HENCE RESTRICTED T HE ADDITIONS OF RS. 16,54,800/- REPRESENTING 12% OF THE PURCHASES. THE AO REVIVED THE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT AND ISSUED A S HOW CAUSE NOTICE TO THE APPELLANT AND APPELLANT SUBMITTED THAT, THE ONLY ISSUE IN THE CASE WAS THAT OF THE IDENTITY OF THE SELLERS OF THESE GOODS TO THE AP PELLANT FROM WHOM PURCHASES OF RS. 1,21,35,196/- WERE MADE AND THE GR OSS AND NET PROFIT PERCENTAGES FROM YEAR TO YEAR HAD INCREASED OVER THE LAST 10 YEARS. PRIMA FACIE, IT APPEARS FROM THE RECORDS AS WELL AS CIT(A)' S ORDERS FOR AY.2009-10, 2010-11 AND 2011-12 THAT, ONLY ISSUE IS THAT OF THE PRIC E PAID EITHER IN CASH OR BY A BEARER CHEQUE FOR THE PURCHASES EFFECTED BY THE APPELLANT DURING THE YEAR. THE CIT(A) HAS ALSO MENTIONED THAT DUE TO NON VERIFICATION OF THE IDENTITY OF THE SELLER OF GOODS, THE APPELLANT MAY HAV E SAVED ON VAT WHICH WAS 4% PLUS EXTRA PROFITS WHICH MAY HAVE BEE EMBEDDED THE PRICE PER UNIT CLAIMED IN THE PURCHASES AND HENCE ESTIMATED THE PRO FITS SAVED AT 12% OF THE COST OF PURCHASES DEBITED TO THE P&L ACCOUNT. THUS PURCHASES WERE NOT IN DOUBT BUT THE QUANTUM OF PRICE PAID FOR THE SAME WAS I DOUBT AND ESTIMATED AT 12% OF THE PURCHASE COST. THUS MENS REA I N THE CASE OF THE APPELLANT WAS NOT ESTABLISHED AND HENCE SECTION 271(1) (C) OF THE ACT WERE NOT PROVED BEYOND DOUBT AND HENCE LEVY OF PENALTY U/S.2 71(1)(C) OF THE ACT WAS NOT JUSTIFIED IN THE APPELLANT'S CASE. IN SHORT, APPE LLANT'S APPEAL IS ALLOWED. 3. AGAINST THIS ORDER REVENUE IS IN APPEAL BEFORE U S. 4. WE HAVE HEARD LD DR AND PERUSED THE RECORDS. AS CLEAR FROM THE FACTS RECORDED ABOVE THE DISALLOWANCE HAS BEEN SUSTAINED ON AN ESTIMATED BASIS ON ACCOUNT OF THE NONPRODUCTION OF SUPPLIERS BEFORE TH E ASSESSING OFFICER. THE PURCHASE VOUCHERS WERE DULY PRODUCED AND THE PAYMEN TS WERE THROUGH BANKING CHANNEL. IN THESE BACKGROUNDS IN OUR CONSID ERED OPINION ASSESSEE CANNOT BE VISITED WITH THE RIG OURS OF PENALTY UNDE R SECTION 271(1)(C) OF THE ACT. AS A MATTER OF FACT ON MANY OCCASIONS ON SIMILAR CI RCUMSTANCES IN QUANTUM PROCEEDINGS THE DISALLOWANCE ITSELF HAS BEEN DELETE D. IN OUR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE ASSESSEE CANNOT BE SAID TO HAVE BEEN GUILTY OF CONCEALMENT OR FURNISHING OF INACCUR ATE PARTICULARS OF INCOME. IN THIS REGARD WE DRAW SUPPORT FROM THE DECISION OF A LARGER BENCH OF THE HONOURABLE SUPREME COURT IN THE CASE OF HINDUSTAN S TEEL LTD. VS. STATE OF ORISSA (83 ITR 26) WHERE IN IT WAS HELD THAT THE A UTHORITY MAY NO T LEVY THE PENALTY IF THE CONDUCT OF THE ASSESSEE IS NOT FOUND TO BE CONTUMACIOUS. M/S. VAKO SALES PVT. LTD. 3 5. WE FURTHER NOTE THAT TAX EFFECT IN THIS CASE IS BELOW THE LIMIT FIXED BY CBDT FOR FILING APPEALS BEFORE ITAT. THE REVENUE HA S TRIED TO MAKE OUT A CASE THAT SINCE THE ADDITION WAS MADE PURSUANT TO INFORM ATION FROM SALES TAX DEPARTMENT, THIS PENALTY APPEAL FALLS IN THE EXCEPT ION CARVED OUT IN THE CBDT CIRCULAR REGARDING APPEALS ARISING OUT OF ADDITIONS MADE PURSUANT TO INFORMATION FROM OUTSIDE AGENCIES. WE ARE OF THE OP INION THAT THIS PLEA IS NOT TENABLE INASMUCH AS ONCE REVENUE ACCEPTS THAT PENAL TY IS LEVIED ON OUTSIDE AGENCY INFORMATION, THE PENALTY LEVIED WILL HAVE NO LEGS TO STAND. 6. IN THE BACKGROUND OF AFORESAID DISCUSSION AND PR ECEDENT WE UPHOLD THE ORDER'S OF LD CITA AND DELETE THE LEVY OF PENALTY. 7. IN THE RESULT, BOTH THE APPEALS BY REVENUE ARE D ISMISSED. PRONOUNCED IN THE OPEN COURT ON 2.6.2021. SD/- SD/- (AMARJIT SINGH) (SHAMIM Y AHYA) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI; DATED : 02/06/2021 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI