ITO 32 (3)(1), MUMBAI V. RAHUL NARENDRA SHAH, MUMBAI

ITA 6435/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3053 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2021
• 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 expenditure; Accommodation entries
• Section: 271(1)(c); 69C

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. 6435 /MUM./2019 ( ASSESSMENT YEAR : 20 1 1 - 1 2 ) ITA NO. 643 6 /MUM./2019 ( ASSESSMENT YEAR : 20 10 11 ) INCOME TAX OFFICER WARD 32(3)(1), MUMBAI . APPELLANT V/S RAHUL NARENDRA SHAH 77/C, PANCHARATNA APARTMENT S.V. ROAD, BORIVALI, OPP GOKUL HOTEL MUMBAI 400 092 PAN AGGPD6265J . RESPONDENT REVENUE BY : SHRI GURBINDER SINGH ASSESSEE BY : NONE DATE OF HEARING 1 2. 0 5 .202 1 DATE OF ORDER 02.06.2021 O R D E R PER S. RIFAUR RAHMAN, A.M. THE SE APPEAL S HA VE BEEN FILED BY THE REVENUE CHALLENGING TWO SEPARATE ORDERS BOTH DATED 11 TH JULY 2019 , DELETING THE PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) IMPOSING PENALTY OF ` 31,211, FOR THE A.Y. 2011 12 AND ` 7,300, FOR THE A.Y. 2010 11 BY THE ASSESSING OFFICER. 2 RAHUL NARENDRA SHAH 2. WHEN THE APPEAL WAS CALLED FOR HEARING, NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE TO REPRESENT THE CASE . THERE IS NO APPLICATION FOR ADJOURNMENT OF HEARING EITHER. THEREFORE, WE PROCEED TO DISPOSE OFF THE APPEAL EX PARTE QUA THE ASSESSEE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 3. THE ISSUE INVOLVED IN THESE TWO APPEALS IS MATERIALLY IDENTICAL, EXCEPT VARI ATION IN FIGURES , WHICH IS ARISING OUT OF SIMILAR SET OF FACTS AND CIRCUMSTANCES OF THE CASES. AS A MATTER OF CONVENIENCE, THEREFORE, BOTH OF THESE APPEALS ARE BEING DISPOSED BY WAY OF THIS CONSOLIDATED ORDER. 4. THE REVENUE HAS ALSO RAISED A GROUND WITH A R EQUEST THAT THOUGH THE PRESENT APPEALS ARE BELOW THE TAXABLE LIMIT AS PRESCRIBED IN THE CBDT CIRCULAR NO.17/2019, DATED 8 TH AUGUST 2018, HOWEVER, THE REVENUE HAS PRAYED FOR DISPOSING THE APPEALS ON MERIT. CONSEQUENTLY, WE PROCEED TO DISPOSE OFF THESE APPEALS ON MERIT. ITA NO.6435/MUM./2019 ASSESSMENT YEAR 2011 12 5. FACTS IN BRIEF : IN THE PRESENT CASE, THE ASSESSEE IS AN INDIVIDUAL AND IS THE PROPRIETOR OF M/S. SHAH PACKAGING, WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN PLASTIC PRODUCTS. THE ASSESSING OFFICER NOTICED 3 RAHUL NARENDRA SHAH FROM THE PROFIT & LOSS ACCOUNT OF THE PROPRIETARY CONCERN M/S. SHAH PACKAGING, THAT THE ASSESSEE HAS DEBITED PURCHASES OF ` 17,11,85,721. THE ASSESSEE WAS CALLED UPON TO FILE THE DETAILS OF PURCHASES, TIN AND NAME AND ADDRESS OF THE PARTIES FROM WHOM PURCHASES WERE MADE. IN RESPONSE, THE ASSESSEE FILED THE DETAILS AS SOUGHT BY THE ASSESSING OFFICER. MEANWHILE, THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, MUMBAI, REGARDING SUSPICIOUS PARTIES WHO ARE ONLY PROVIDING ACCOMMODATION ENTRIES WITHOUT DOING ACTUAL BUSINESS. THE ASSESSING OFFICER ON GOING THROUGH THE DETAILS SUBMITTED BY THE ASSESSEE FOUND THAT THERE ARE TWO PARTIES AMONG THE LIST OF BOGUS PARTIES FROM WHOM THE ASSESSEE HAS SHOWN PURCHASES. THE TIN NUMBER AND AMOUNT OF TRANSACTION ALONG WITH NAME OF PARTIES ARE GIVEN BELOW: SL. NO. NAME OF THE PARTY TIN AMOUNT ( ` ) 1. M/S. AVION SALES PVT. LTD. 27360675452V 10,16,558 2. M/S. RAMANAND SALES PVT. LTD. 27410703312V 10,05,428 TOTAL: 20,21,986 6. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED TOTAL PURCHASE OF ` 20,21,986 FROM THE ABOVE TWO PARTIES AND THE TIN NUMBERS PROVIDED BY THE ASSESSEE IN THE ABOVE CASES ARE EXACTLY SAME AS IN THE INFORMATION AVAILABLE WITH THE OFFICE. THE ASSESSING OFFICER ALSO OBSERVED THAT THE SALES TAX DEPARTMENT HAS 4 RAHUL NARENDRA SHAH CONDUCTED INDEPEN DENT ENQUIRIES IN EACH OF THE HAWALA PARTIES AND CONCLUSIVELY PROVED THAT THE PARTIES ARE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES ONLY. IN THIS VIEW OF THE MATTER, THE ASSESSING OFFICER HELD THAT THE ASSESSEE DID NOT PURCHASE ANY GOODS FROM THE ABOVE M ENTIONED PARTIES AND ACCORDINGLY THE ENTIRE AMOUNT OF ` 20,21,986, WAS TREATED AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT AND ADDED THE SAME TO THE RETURNED INCOME OF THE ASSESSEE. 7. THE ASSESSEE CARRIED THE MATTER OF ADDITION ON ACCOUNT OF BO GUS PURCHASE UNDER SECTION 69C OF THE ACT BEFORE THE FIRST APPELLATE AUTHORITY. HOWEVER, THE LEARNED COMMISSIONER (APPEALS) HAS RESTRICTED THE ADDITION @ 5% OF SUCH PURCHASES/ACCOMMODATION ENTRIES. CONSEQUENTLY, THE ASSESSING OFFICER INITIATED PENALTY PROC EEDINGS UNDER SECTION 271(1)(C) OF THE ACT LEVYING PENALTY OF ` 31,211. BEING AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL FOR CONTESTING IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 8. THE LEARNED COMMISSIONER (APPEALS) DELETED THE PENALTY SO I MPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE ACT BY FOLLOWING THE DECISIONS OF THE CO ORDINATE BENCH. THE RELEVANT OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS) DELETING THE PENALTY ARE AS FOLLOWS: 5 RAHUL NARENDRA SHAH 6.4.1 . I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSE D MATERIALS AVAILABLE ON RECORD. THE APPELLANT HAS REQUESTED TO DELETE IMPUGNED PENALTY LEVIED U/S 271 (1) (C) OF THE ACT AT RS.31,211/ - . THE MAIN CONTENTIONS OF THE APPELLANT ARE THAT HE HAS NEITHER CONCEALED PARTICU L AR INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME; MERE REJECTIO N APPELLANT'S CLAIM WOULD NOT AUTOMATICALLY LEAD TO LEVY OF PENALTY AND IT SUBMITTED NECESSARY EVIDENCES IN SUPPORT OF ITS CLAIM, BUT THE SAME W AS NOT ACCEPTED BY THE LD. AO AND WHERE THE ADDITION HAS BEEN MAD SUSTAINED ON ESTIMATION BASIS THE PENALTY U/S 271(1)(C) OF THE ACT IS NOT LEVIABLE. IN SUPPORT OF ITS CLAIM THE APPELLANT HAS PLACED RELIANCE ON VA RIOUS JUDICIAL PRECEDENTS AS DETAILED ABOVE. THE CONTENTIONS OF THE APPE LLANT HAVE BEEN CONSIDERED CAREFULLY. THE LD. AO HAD MADE THE ADDITIO N ON ACCOUNT OF B OG US PURCHASES U/S 69C OF THE ACT AT RS.20,21,986/ - . H OWEVER, THE LD. CIT(A) HAS RESTRICT ED THE SAME TO 5% OF SUCH PURCHASE/ ACCOMMODATION ENTRIES. THE FACTS OF THE CASE SUGGEST TH AT THE LD. AO MADE SAID ADDITION ON THE GROUND THAT THE APPELLANT COULD NOT PROVE PURCHASES UNDER CONSIDERATION FROM THE PARTIES CONCERNED. IT IS ALS O AN ADMITTED FACT THAT THE LD. CIT(A) HAS RESTRICTED SAID ADDITION TO 5%, ESTIMATED/AD - HOC BASIS. IN THE C ASE OF M/S . EARTHMOVING EQUIPMENT SER VICE CORPORATION IN ITA NO.6617/2014, THE HON'BLE ITAT , 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 B OGUS PURCHASES, ON THE GROUND THAT THE ASSESSEE MADE A CLAIM WHICH WAS BONAFIDE AND THE SAME WAS COUPLED WITH DOCUMENTARY EVIDENCES BUT THE SAME REMAINED INCONCLUSIVE FOR WANT OF CONFIRMATION FROM THE SUPPLIER AS THEY COULD NOT BE TRACED AT GIVEN ADDRESS. FURT HER, THE HON'BLE ITAT, MU MBAI IN THE CASE OF AJAY LOKNATH LOHIA IN ITA NO.2998/MUM/2017, VIDE ITS ORDER DATED 05.01.2018, HAS D3ELETED THE PENHALTY LEVIED U/S 271(1)(C) OF THE ACT, ON THE DISALLOWANCE/ADDITION MADE @ 25% ON ALLEGED BOGUS PURCHASES MADE FROM HAWALA DEALERS BASED ON THE INFORMATION RECEIVED FROM THE SALES T AX DEPARTMENT AND WHERE THE APPELLANT HAD ACCEPTED SUCH ESTIMATE D ADDITION, AFTER HOLDING THAT THOUGH THE AO HAD ESTIMATED 25% GROSS PROFIT OR ALLEGED BOGUS PURCHASES, NEVER MADE ANY OBS ERVATIONS WITH REGARD TO THE INCORRECTNESS IN DETAILS FILED BY THE ASSESSEE TO PROVE SUCH PURCHASES . 6.4.2 FROM THE ABOVE IT IS EVIDENT THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE SIMILAR AS TO THE FACTS 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 PENALTY U/S 271(1)(C) OF THE ACT. HENCE, THE IMPUGNED PENALTY LEVIED U/S 271(1)(C) AT RS. 31,211/ - IS DELETED. ACCORDINGLY THE GROU ND NOS. 1 TO 3 RAISED IN APPEAL ARE ALLOWED. 6 RAHUL NARENDRA SHAH 9. CONSIDERED THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL AUTHORITIES AND PERUSED THE MATERIAL ON RECORD. AS IT APPEARS, THE ASSESSING OFFICER IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON AD HOC BASIS WITHOUT ADDUCING ANY EVIDENCE ON RECORD FOR CONCEALMENT OF INCOME. P ENALTY 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 INACCURATE PARTICULARS. ACTION OF M AKING ADDI TION 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 COUR TS 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, FOLLOWING CASE LAWS ARE RELIED UPON: - 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 RAHUL NARENDRA SHAH 10. THE LEARNED DEPARTMENTAL AUTHORITIES HAS NOT BROUGHT ANY COGENT MATERIAL TO PROVE OTHERWISE 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 APPEAL RAISED BY TH E REVENUE. 11. IN THE RESULT, REVENUES APPEAL FOR A.Y. 2011 12 IS DISMISSED. ITA NO.6436/MUM./2019 ASSESSMENT YEAR 2010 11 12. THE RELATED FACTS AND CIRCUMSTANCES OF THE ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS MATERIALLY IDENTICAL TO THE ISSUE DECIDED BY US VIDE GROUND NO.1, RAISED BY THE REVENUE IN ITS APPEAL BEING ITA NO. 6465/MUM./2019, VIDE PARA 10 AND 11 ABOVE, WHEREIN WE HAVE UPHELD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) DELETING THE PENALTY UNDER SECTION 271(1)(C) O F THE ACT IMPOSED BY THE ASSESSING 8 RAHUL NARENDRA SHAH OFFICER FOR THE ASSESSMENT YEAR 2011 12. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DECLINE TO INTERFERE WITH THE ORDER PASSED BY THE FIRST APPELLATE AUTHORITY AND DISMISS THE GROUNDS RAISED BY THE REVENUE FOR THIS ASSESS MENT YEAR ALSO . 13. IN THE RESULT, REVENUES APPEAL FOR THE A.Y. 2011 12 IS ALSO DISMISSED. 14. TO SUM UP, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.06.2021 SD/ - PAVAN KUMAR GADALE JUDICIAL MEMBER SD/ - S. RIFAUR RAHMAN ACCOUNTANT MEMBER MUMBAI, DATED: 02.06.2021 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