ITO 21 (2)(3), MUMBAI V. MOHD.KALEEM MAJEED KHAN, MUMBAI

ITA 6355/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1742 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMAPANI BORA
• Keywords: Bogus purchase; Initiation of penalty proceedings
• Section: 271(1)(c); 133(6); 251; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI VIKAS AWASTHY, JM ITA NO. 6355/MUM/2018 ( ASSESSMENT YEAR: 2009-10) I.T.O.-21(2)(3) MUMBAI. VS. SHRI MOHD. KALEEM MAJEED KHAN, ROOM NO. 3, CHAWL NO. 3, MUNCIPAL CHAWL, UMAR RAJJAB ROAD, OPP. REHMAN MASJID, MORLAND ROAD, MUMBAI-400011. PAN/GIR NO. AACPK 4225 B (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI KUMAR PADMAPANI BORA ASSESSEE BY NONE DATE OF HEARING 03/12/2019 DATE OF PRONOUNCEMENT 09/12/2019 / O R D E R PER: R.C. SHARMA, A.M. THIS IS THE APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LD. CIT(A)-33, MUMBAI DATED 23/08/2018 FOR THE A.Y. 200 9-10 IN THE MATTER OF IMPOSITION OF PENALTY U/S 271(1)(C) OF THE INCOM E TAX ACT, 1961 (IN SHORT, THE ACT). 2. IN THIS APPEAL, THE REVENUE IS AGGRIEVED FOR DEL ETING THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT AMOUNTING TO RS.66 ,916/-. 3. AT THE TIME OF HEARING, NO BODY APPEARED ON BEHA LF OF THE ASSESSEE IN SPITE OF GIVING NOTICE, THEREFORE, THE BENCH DECIDED TO DISPOSE OFF THE APPEAL AFTER HEARING THE LD. DR AS WELL AS CONSIDERING THE MATERIAL PLACED ON RECORD. ITA NO. 6355/MUM/2018 ITO VS MOHD. KALEEM MAJEED KHAN 2 4. IN THIS CASE, WE FOUND THAT THE PENALTY HAS BEEN LEVIED WITH RESPECT TO ADDITION MADE BY THE A.O. ON ACCOUNT OF ALLEGED BOGUS PURCHASES BY COMPUTING PROFIT AT 15%. BY THE IMPUGN ED ORDER, THE LD. CIT(A) DELETED THE PENALTY AFTER OBSERVING AS UNDER : 9. I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIO NS OF THE APPELLANT AND MY FINDINGS ARE AS UNDER. 9.1 IN THE INSTANT CASE, THE AO HAS LEVIED PENALTY OF RS. 66,916/- ON ACCOUNT OF AN AD-HOC ESTIMATED ADDITION AT RATE OF 15% OF ALLEGED BOGUS PURCHASES FROM FOUR PARTIES. THE AO HELD THAT THE APPELLANT FAILED TO PRODUCE THE PARTIES MEANING THEREBY DID N OT DISCHARGE ITS ONUS, HENCE MENS-REA IS PROVED AND WENT ON LEVYING PENALTY. THE APPELLANT HAS SUBMITTED THAT THE A.O. HAS NOT DONE ANY DUE DILIGENCE, NOR DID HE ISSUE ANY NOTICES U/S 133(6) BY CALLING THE PURCHASER PARTY FOR CROSS VERIFICATION. HE HAS ALSO NOT FOLLOWED THE DU E PROCESS OF LAW. THE ASSESSING OFFICER HAS SIMPLY ACTED ON THE LIST PROV IDED BY THE SALES TAX DEPARTMENT CONTAINING NAMES OF VARIOUS PARTIES AND HAS ISSUED NOTICE FOR REOPENING U/S 148 OF THE ACT. DURING THE ASSESS MENT PROCEEDINGS, THE APPELLANT HA CORRECTLY DISCLOSED FACTUAL DETAIL S OF ALL ITS INCOMES AND OUTGOINGS AND THE DISALLOWANCES HAS BEEN DONE ON TH AT BASIS. HENCE, IT IS INCORRECT TO HOLD THAT THE APPELLANT HAS FURNISH ED INACCURATE PARTICULARS OF INCOME BASED ON WHICH THE AO LEVIED PENALTY U/S 271(1)(C) OF THE ACT AMOUNTING TO RS.66,916/-. 9.2 ON CAREFUL PERUSAL OF THE PENALTY ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT, IT IS FOUND THAT ADDITION WAS MADE O N THE BASIS OF INCOME OFFERED BY THE APPELLANT AS UNDISCLOSED INCOME ON A CCOUNT OF BOGUS PURCHASE AND SALES. PENALTY WAS LEVIED BY THE AO ON THIS ADDITION BY CONCLUDING THAT INCOME WAS OFFERED AS UNDISCLOSED I NCOME. BUT CIRCUMSTANCES UNDER WHICH HE OFFERED INCOME SHOULD NOT BE GIVEN AS MUCH IMPORTANCE WHICH ARE REQUIRED BEFORE LEVY OF P ENALTY. IT IS ITA NO. 6355/MUM/2018 ITO VS MOHD. KALEEM MAJEED KHAN 3 CLAIMED THAT THE APPELLANT OFFERED INCOME TO BUY PE ACE OF MIND AND TO AVOID LENGTHY LITIGATIONS, WHICH IS OUT RIGHTLY ACCEPTED BY THE AO. CLAIM NOT SUBSTANTIATE WITH DOCUMENT CANNOT BE LEAD TO INACCURATE PARTICULARS. THEREFORE, THE SAME CANNOT BE SUBJECTE D TO INITIATION OF PENALTY PROCEEDINGS UNDER THE PRETEXT OF CONCEALMEN T OF INCOME OR FURNISHING OF INACCURATE PARTICULARS U/S 271(1)(C). IN MY OPINION, THE ADDITION WAS MADE ON THE PARTICULARS OFFERED BY THE APPELLANT WHICH WAS NOT CONTESTED DID NOT MEAN THAT APPELLANT HAS AGREED FOR THE PENALTY. 9.3 IN THIS CONTEXT, I PLACE RELIANCE ON THE DECIS ION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS JAYARAJ TALKIES(1999) 2 39 ITR 914 (MAD HC) WHEREIN IT IS HELD THAT:- 'THE REVENUE CONTENDS THAT AS THE ASSESSEE-OWNER OF THE THEATRE WHO HAD DERIVED INCOME FROM LEASING THE SAME, HAD A FTER FILING A RETURN CLAIMING DEDUCTION OF A SUM OF RS 4125 AND R S 16348 TOWARDS BUILDING AND MAINTENANCE FURNITURE REPAIRS RESPECTIVELY, HIMSELF VOLUNTEERED TO OFFER THESE SUMS AS PART OF HIS INCOME ON ACCOUNT OF THE DIFFICULTY ENCOUNTERED BY HIM IN SEC URING NECESSARY VOUCHERS AND RECEIPTS. THAT CONDUCT OF THE ASSESSEE ACCORDING TO THE REVENUE WAS BY ITSELF SUFFICIENT TO SHOW THAT T HERE WAS CONCEALMENT.' THE HON'BLE SUPREME COURT IN THE CASE OF SIR SHADIL AL SUGAR AND GENERAL MILLS LTD V. CIT [1987] 168 ITR 705, HAS ALSO POINT ED OUT THAT NOT EVERY CASE OF NONDISCLOSURE WARRANTS IMPOSITION OF PENALT Y AS THE ASSESSEE AY FORGO A DEDUCTION OR OFFER HIGHER SUMS FOR TAXATION FOR A HUNDRED AND ONE DIFFERENT REASONS AND ALL OF THEM CANNOT BE REG ARDED AS REASONS WHICH ARE UNWORTHY.' 9.4 IN THE PRESENT CASE ALSO APPELLANT OFFERED INCO ME BECAUSE OF HIS INABILITY TO ESTABLISH TRANSACTION WITH SUPPORTING DOCUMENTS BUT DOES NOT AUTOMATICALLY MEAN THAT THERE IS CONCEALMENT OF INCOME. I FURTHER RELY ON FOLLOWING DECISIONS FOR MY VIEW THAT PENALT Y CANNOT BE LEVIED ON ADDITION ON AGREED BASIS. ITA NO. 6355/MUM/2018 ITO VS MOHD. KALEEM MAJEED KHAN 4 * CIT VS SURARAJ BHAN (2007) 294 ITR 481 (P&H HC) * CIT VS SURESH CHANDRA MITTALS (2001) 251 ITR 9 (S C) * CIT VS MANJUNATHA COTTON & GINNING FACTORY (KEY H C) * SIR SHADI LAL SUGAR & GENERAL MILLS LTD. VS CIT ( 1987) 168 ITR 705 (SC) 9.5 ON CAREFUL PERUSAL OF THE PENALTY ORDER, THE W RITTEN SUBMISSION OF THE APPELLANT AND RELIED ON VARIOUS CASE LAWS, IT I S FOUND THAT EVEN THE ADDITION WAS MADE BY THE AO ON AN ESTIMATE BASIS. C ONSIDERING THESE FACTS, THE LEVY OF PENALTY OF RS. 66,916/- U/S 271( 1)(C) CANNOT BE JUSTIFIED AND NEEDS TO BE DELETED. HENCE, GROUNDS RAISED IN T HE APPEAL ARE AILOWED. 5. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AND FOUND THAT THE PENALTY WAS LEVIED WITH RESPECT TO E STIMATED ADDITION MADE BY THE A.O. AFTER ESTIMATING PROFIT ON ALLEGED BOGUS PURCHASES. THE SAME WAS DELETED BY THE LD. CIT(A) AFTER CONSID ERING VARIOUS JUDICIAL PRONOUNCEMENTS AND THE LD. CIT(A) HELD THAT NO PENA LTY IS LEVIABLE IN RESPECT OF ADDITION MADE ON AN ESTIMATE BASIS. IN T HE INSTANT CASE, THE ADDITION HAS BEEN MADE BY ESTIMATING PROFIT AT 15% OF THE ALLEGED BOGUS PURCHASES, IN VIEW OF JUDICIAL PRONOUNCEMENTS RELIED ON BY THE LD. CIT(A), WE DO NOT FIND ANY INFIRMITY IN THE ORDER O F THE LD. CIT(A) IN SO FAR AS THE PENALTY HAS BEEN LEVIED WITH RESPECT TO ESTIMATED ADDITION SO MADE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH DECEMBER, 2019. SD/- (VIKAS AWASTHY) SD/- (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 09/12/2019 *RANJAN ITA NO. 6355/MUM/2018 ITO VS MOHD. KALEEM MAJEED KHAN 5 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//