ACIT , CIRCLE - 32 (3), MUMBAI V. RAVIKIRAN ENTERPRISES, MUMBAI

ITA 6430/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3072 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 07-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURBINDER SINGH
• Keywords: Bogus purchase; Unexplained investment
• Section: 271(1)(c); 69C; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI S. RIFA UR RAHMAN, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER IT A NO. 6430 /MUM./2019 ( ASSESSMENT YEAR : 20 11 12 ) ASSTT . COMMISSIONER OF INCOME TAX CIRCLE 3 2(3) , MUMBAI . APPELLANT V/S RAVIKIRAN ENTERPRISES 1/A, GANESH APARTMENT CHOGLE NAGAR, S. SAVARPADA DAHISAR (E), MUMBAI 400 068 PAN AAHFR1882J . RESPONDENT REVENUE BY : SHRI GURBINDER SINGH ASS ESSEE BY : SHRI MAYUR KISNADWALA DATE OF HEARING 12 . 0 5 .202 1 DATE OF ORDER 10.06.2021 O R D E R PER S. RIFAUR RAHMAN, A.M. T HE CAPTIONED APPEAL HAS BEEN FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER DATED 26 TH JULY 2019, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 44, MUMBAI, DELETING PENALTY OF ` 3,15,000, IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) BY THE ASSESSING OFFICER PERTAINING TO THE ASSESSMENT YEAR 201 1 1 2 . 2. THE REVENUE H AS ALSO RAISED A GROUND WITH A REQUEST THAT THOUGH 2 RAKESH JITENDRA KUMAR SHAH THE PRESENT APPEAL IS BELOW THE TAXABLE LIMIT AS PRESCRIBED IN THE CBDT CIRCULAR NO.17/2019, DATED 8 TH AUGUST 2019 , HOWEVER, THE REVENUE HAS PRAYED FOR DISPOSING THE PRESENT APPEAL ON MERIT. CONSEQUENTLY, WITH THE CONSENT OF THE LEARNED COUNSEL FOR THE ASSESSEE, WE PROCEED TO DISPOSE OFF THE REVENUES APPEAL ON MERIT. 3. IN THE PRESENT CASE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. IT FILED RETURN OF INCOME ON 25 TH AUGUST 2011, DECL ARING TOTAL INCOME AT ` 6,47,93,146. THE ASSESSMENT WAS COMPLETED ON 3 RD MARCH 2014, DETERMINING TOTAL INCOME OF ` 6,74,32,940, AFTER MAKING ADDITION OF ` 26,39,791, ON ACCOUNT OF UNEXPLAINED INVESTMENT UNDER SECTION 69C OF THE ACT. THIS WAS DONE BY THE AS SESSING OFFICER ON THE BASIS OF INFORMATION RECEIVED FROM THE MAHARASHTRA SALES TAX DEPARTMENT THAT THE ASSESSEE HAS MADE TRANSACTIONS WITH FEW PARTIES NOTIFIED AS SUSPICIOUS DEALERS WHO HAVE NOT SUPPLIED ANY ACTUAL GOODS AND HAVE ISSUED ACCOMMODATION ENTR IES ONLY. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS . THE ASSESSEE BEING AGGRIEVED BY THE ADDITION OF ` 26,39,791, ON ACCOUNT OF UNEXPLAINED INVESTMENT UNDER SECTION 69C OF THE ACT , WENT IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN THE LEARNED COMMISSIONER (APPEALS) PARTLY ALLOW ED THE CLAIM OF THE ASSESSEE HELD THAT THE SALES HAVE NOT BEEN DOUBTED THEN THERE WAS NO QUESTION TO DOUBT THE PURCHASES ALONE AND THE ADDITION SHOULD HAVE BEEN MADE 3 RAKESH JITENDRA KUMAR SHAH ONLY TO THE EXTENT OF GROSS PROFIT. THE LEA RNED COMMISSIONER (APPEALS) HELD THAT THE ASSESSEE HAS SHOWN A GROSS PROFIT RATE OF 38.5% AND THUS 38.5% OF ` 26,39,791 COMES TO ` 10,16,320, WHICH WOULD BE TAKEN AS PROFIT OF THE ASSESSEE ON PURCHASES THAT ARE NOT FULLY AND PROPERLY EXPLAINED. THE ASSESSE ES CLAIM ON ACCOUNT OF UNEXPLAINED INVESTMENT UNDER SECTION 69C OF THE ACT WAS PARTLY ALLOWED. CONSEQUENTLY, THE ASSESSING OFFICER PROCEEDED WITH THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND HE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE DURING THE PENALTY PROCEEDINGS. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE AS THE ASSESSEE HAD COMMITTED DEFAULT WITH THE MEANING OF EXPLANATION 1 TO PROVISIONS OF SECTION 271(1)(C) OF THE ACT AND IS THUS LIABLE T O BE PENALIZED AS PER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER LEVIED PENALTY OF ` 3,15,000 UNDER SECTION 271(1)(C) OF THE ACT. BEING AGGRIEVED BY THE PENALTY ORDER SO PASSED BY THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. T HE LEARNED COMMISSIONER (APPEALS) DELETED THE PENALTY OF ` 3,15,000, IMPOSED UNDER SECTION 271(1)(C) OF THE ACT BY THE ASSESSING OFFICER. THE RELEVANT OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS) I S REPRODUCED BELOW FOR THE SAKE OF BREVITY: 4 RAKESH JITENDRA KUMAR SHAH 7.4 DECISION - 7.4.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE APPELLANT HAS REQUESTED TO DELETE THE IMPUGNED PENALTY LEVIED U/S 271 (1 )(E) OF THE ACT AT RS. 3,15,000/ - . THE MAIN CONTENTIONS OF THE APPELLANT ARE THAT IT HAS NEITHER CONCEALED PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME; MERE REJECTION OF APPELLANT'S CLAIM WOULD NOT AUTOMATICALLY LEAD TO LEVY OF PENALTY AND IT HAD SUBMITTED NECESSARY EVIDENCES IN SUPPORT OF ITS CLAIM, BUT THE SAME WAS NOT ACCEPTED BY THE LD. AO AND WHERE THE ADDITION HAS BEEN MADE OR SUSTAINED ON ESTIMATION BASIS THE PENALTY V / S 271(1)(C) OF THE ACT IS NOT LEVIABLE. IN SUPPORT OF ITS CL AIM THE APPELLANT HAS PLACED RELIANCE ON VARIOUS JUDICIAL PRECEDENTS AS DETAILED ABOVE. THE CONTENTIONS OF THE APPELLANT HAVE BEEN CONSIDERED CAREFULLY. THE LD. AO HAD MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES AT RS.26,39,791/ - . HOWEVER, THE LD. CLT( A) HAS RESTRICTED THE SAME TO 38.5% OF SUCH PURCHASES/ A CCOMMODATION ENTRIES. THE FACTS OF THE CASE SUGGEST THAT THE LD. AO HAD MADE SAID ADDITION ON THE GROUND THAT THE APPELLANT COULD NOT PROVE THE PURCHASES UNDER CONSIDERATION FROM THE PARTIES CONCERNE D. IT IS ALSO AN ADMITTED FACT THAT THE LD. CLT(A) HAS RESTRICTED SAID ADDITION TO 38.5%, ON ESTIMATED/AD - HOC BASIS. IN THE CASE OF M/S EARTHMOVING EQUIPMENT SERVICE CORPORATION IN ITA NO.6617/2014, THE HON'BLE IT AT MUMBAI VIDE ITS ORDER DATED 02.05.2017 HAS DELETED THE PENALTY LEVIED U/S 271 (1 )(C) OF THE ACT, WHERE THE ADDITION U/S 69C OF THE ACT WAS MADE ON ACCOUNT OF BOGUS PURCHASES, ON THE GROUND THAT THE ASSESSEE MADE A CLAIM WHICH WAS BONAFIDE AND THE SAME WAS COUPLED WITH DOCUMENTARY EVIDENCES BU T THE SAME REMAINED INCONCLUSIVE FOR WANT OF CONFIRMATION FROM THE SUPPLIERS AS THEY COULD NOT BE TRACED AT GIVEN ADDRESS. FURTHER, THE HON'BLE IT AT, MUMBAI IN THE CASE OF AJAY LOKNATH LOHIA IN ITA NO. 2998/MUM/2017, VIDE ITS ORDER DATED 05.10.2018 HAS D ELETED THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT, ON THE D ISALLOWANCE/ADDITION MADE @ 25% ON ALLEGED BOGUS PURCHASES MADE FROM HAWALA DEALERS BASED ON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT AND WHERE THE APPELLANT HAD ACCEPTED SUCH ESTIM ATED ADDITION, AFTER HOLDING THAT THOUGH THE AO HAD ESTIMATED 25% GROSS PROFIT ON ALLEGED BOGUS PURCHASES, NEVER MADE ANY OBSERVATIONS WITH REGARD TO THE INCORRECTNESS IN DETAILS FILED BY THE ASSESSEE TO PROVE SUCH PURCHASES. 7.4.2 FROM THE ABOVE IT IS EV IDENT THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE SIMILAR AS TO THE FACTS 5 RAKESH JITENDRA KUMAR SHAH ADJUDICATED BY THE HON'BLE ITAT MUMBAI IN ABOVE REFERRED CASES. RESPECTFULLY FOLLOWING THE SAME, I AM OF THE CONSIDERED OPINION THAT THIS IS NOT A FIT CASE TO LEVY PENAL TY U/S 271 ( 1 ) (C) OF THE ACT. HENCE, THE IMPUGNED PENALTY LEVIED U/S 271 ( 1 ) (C) AT RS. 3,15,000/ - IS DELETED. ACCORDINGLY THE GROUND NOS. 2 AND 3 RAISED IN APPEAL ARE ALLOWED . 5. THE REVENUE BEING AGGRIEVED BY THE AFORESAID ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS), IS IN APPEAL BEFORE THE TRIBUNAL. 6. CONSIDERED THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL AUTHORITIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON AD HOC DISALLOWANCE UNDER SECTION 69C OF THE ACT WITHOUT ADDUCING ANY EVIDENCE ON RECORD FOR CONCEALMENT OF INCOME. PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS LIABLE TO BE IMPOSED ONLY WHERE THE ASSESSEE HAS CONCEALED ITS PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS. ACTION OF MAKING ADDITION ON AD HOC BASIS DOES NOT RESULT INTO IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT AND HENCE CANNOT BE TERMED AS EITHER CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE FIND SUPPORT FROM THE SERIES OF DECISIONS BY DIFFERENT HIGH COURTS AS WELL THE DECISION OF THE CO ORDINATE BENCHES OF THE TRIBUNAL, WHEREIN IT WAS HELD THAT WHEN ADDITION IS MADE ON ESTIMATE BASIS, PENALTY IS NOT SUSTAINABLE IN THE EYES OF LAW. IN SUPPORT OF THIS CONTENTION, F OLLOWING CASE LAW ARE RELIED UPON: - 6 RAKESH JITENDRA KUMAR SHAH I) CIT V/S NORTO N ELECTRONICS SYSTEMS (P) LTD. [2014] 41 TAXMANN.COM 280 (ALLAHABAD HC); II) ACIT V/S VISION RESEARCH MANAGEMENT (P) LTD., [2015] 63 TAXMANN.COM 8 (LUCKNOW) (TRIB.); III) PREM CHAND V/S ACIT, [2014] 52 TAXMANN.COM 95 (CHANDIGARH) (TRIB.); IV) CIT V/S PHI SEEDS INDIA LTD., [2008] 301 ITR 0013 (DEL); AND V) DILIP N. SHROFF V/S JCIT [2007] 291 ITR 519 (SC). 7. THE LEARNED DEPARTMENTAL AUTHORITIES HAS NOT BROUGHT ANY COGENT MATERIAL TO PROVE OTH ERWISE WARRANTING INTERFERENCE AT THE INSTANCE OF THE REVENUE. IN THIS VIEW OF THE MATTER, WE ARE OF THE CONSIDERED VIEW THAT THE LEARNED COMMISSIONER (APPEALS) WAS INDEED JUSTIFIED IN DELETING THE PENALTY, AS THERE WAS NO CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE HAVE BEEN PROVED BY THE REVENUE AND ADDITIONS MADE ON ESTIMATION BY THE ASSESSING OFFICER DO NOT CALL FOR INITIATION OF PENALTY. CONSEQUENTLY, WE UPHOLD THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) BY DISMISSING THE GROUNDS OF AP PEAL RAISED BY THE REVENUE. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.06.2021 SD/ - PAVAN KUMAR GADALE JUDICIAL MEMBER SD/ - S. RIFAUR RAHMAN ACCOUNTANT MEMBER MUMBAI, DATED: 10.06.2021 7 RAKESH JITENDRA KUMAR SHAH COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI