ACIT 28 (2), MUMBAI V. M/S REDSTAR, MUMBAI

ITA 6461/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3073 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 10-10-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GURBINDER SINGH
• Assessee Lawyers: RADHA HALBE
• Keywords: Bogus purchase; Question of law; Wrong claim
• Section: 271(1)(c); 44AD; 69C; 143(3)

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. 6461 /MUM./2019 ( ASSESSMENT YEAR : 20 10 1 1 ) ASSTT . COMMISSIONER OF INCOME TAX CIRCLE 28 (2), MUMBAI . APPELLANT V/S M/S. REDSTAR , SHOP NO.9 HERMESE CENTRE, SECTOR - 17 VASHI, NAVI MUMBAI 400 703 PAN AAEFR7124A . RESPONDENT REVENUE BY : SHRI GURBINDER SINGH ASSESSEE BY : MS. RADHA HALBE DATE OF HEARING 1 2 . 0 5 .202 1 DATE OF ORDER 10.06.2021 O R D E R PER S. RIFAUR RAHMAN, A.M. THE CAPTIONED APPEAL BY THE REVENUE CHALLENGING THE IMPUGNED ORDER DATED 17 TH JU LY 2019 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 26, MUMBAI, DIRECTING THE ASSESSING OFFICER TO DELET E THE PENALTY OF ` 2,22,860 , IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 20 10 11 . 2 M/S. REDSTAR 2. BRIEF FACTS ARE, THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS FILED ITS RETURN OF INCOME ON 14 TH OCTOBER 2010, DECLARING TOTAL INCOME OF ` 26,07,300. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT DETERMINING TOTAL INCOME AT ` 51,31,980. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD MADE PURCHASES TO THE EXTENT OF ` 34,944 FROM M/S. AMI TRADERS AND ` 27,98,877, FROM M/S. R.K. TRADERS, WHOSE NAMES APPEAR ON THE WEBSITE OF SALES TAX DEPARTMENT IN THE LIST OF SUSPICIOUS DEALERS WHEREIN THE PARTIES ARE MARKED AS HAWALA DEALERS WHO ARE MERELY ISSUING BILLS TO VARIOUS PARTIES WITHOUT ACTUALL PURCHASE AND SALE OF GOODS HAVING TAKEN PLACE. THE ASSESSING OFFICER ALSO RECEIVED INFORMATION FROM THE DGIT (INV.), MUMBAI, WHEREIN IT WAS SEEN THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THE CONCERNS WHOSE NAME IS APPEARING IN THE LIST OF SUSPICIOUS DEALERS AS PER SALES TAX DEPARTMENT. THEREAFTER, T HE CASE WAS RE OPENED UNDER SECTION 143(3) R/W 147 OF THE ACT DETERMINING TOTAL INCOME AT ` 55,03,420, THEREBY MAKING ADDITION UNDER SECTION 69C OF THE ACT AT ` 3,71,437, ON ACCOUNT OF BO GUS PURCHASE MADE BY THE ASSESSEE. THE ASSESSEE HAS NOT CONTESTED THE QUANTUM ADDITION OF ` 3,71,437, MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASE. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND, THEREFORE, IMPOSED PENALTY OF ` 2,22,860, UNDER SECTION 3 M/S. REDSTAR 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). THE ASSESSEE BEING AGGRIEVED BY THE ISSUANCE OF PENALTY ORDER DATED 29 TH JULY 2016, PASSED BY THE ASSESSING OFFICER , FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY . 3. THE LEARNED COMMISSIONER (APPEALS) DELETED THE PENALTY SO IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE ACT BY FOL LOWING THE DECISIONS OF THE HONBLE KARNATAKA HIGH COURT IN NARESH CHAND AGARWAL V/S CIT, 357 ITR 514 (ALL.) . THE RELEVANT OBSERVATIONS OF THE HONBLE ALLAHABAD HIGH COURT DELETING THE PENALTY ARE AS FOLLOWS: 6. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE APPELLANTS SUBMISSIONS. 6.1 THE EFFECTIVE GROUND OF THE APPEAL IS AGAINST LEVY OF PENALTY OF RS. 2,22,560/ - U/S 271(1) ( C) OF THE ACT. THE A O HAD ADDED THE 12.5% OF THE BOGUS PURCHASES A T RS. 3,71 ,437 / - TO THE TOTAL INCOME OF THE ASSESSEE. THE APPELLANT DID NOT CONTEST THE ORDER OF THE A 0. SUBSEQUENTLY, THE A.O. PASSED THE PENALTY ORDER U/S 271 (1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND ALSO FOR CONCEALING T HE PARTICULARS OF INCOME BY WAY OF BOGUS CLAIM OF EXPENDITURE, LEVYING A MINIMUM LEVIABLE PENA L TY OF RS. 2,22,860 / - BEING 200 % OF THE TAX SOUGHT TO BE EVADED. 6.2 THE AO HAD ADDED 12.5% BOGUS PURCHASES AND SUBSEQUENTLY LEVIED PENALTY U/S 271(1)(C) OF THE ACT. THERE ARE A PLETHORA OF COURT DECISIONS WHICH SAY THAT WHERE ADDITIONS ARE MADE ON ESTIMATION, NO PENALTY U/S 271(1)(C) IS LEVIABLE, THERE BEING NO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE PRESENT CASE, THE PURCHASE HAD BEEN DULY SH OWN BY THE APPELLANT IN ITS BOOKS OF ACCOUNTS BUT IT COULD NOT PRODUCE THE PARTY FROM WHOM THE PURCHASE HAD BEEN MADE.YLT IS NOT THE CASE O F THE AO THAT THE IMPUGNED PURCHASES HAVE BEEN PROVED TO BE BOGUS CONCLUSIVELY AND THERE WERE NO 4 M/S. REDSTAR CORRESPONDING SALES, IN A RECENT CASE BEFORE THE ALLAHABAD HIGH COURT IN THE CASE OF NARESHCHAND AGARWAL VS. CIT, 357 IT R 0514 (ALL), IT HAS BEEN HELD THAT: 12. IN THE INSTANT CASE, NOTHING WAS CONCEALED BY THE ASSESSEE. IT WAS THE A.O. WHO HAS REJECTED THE BOOKS OF ACCOUNT IN THE SECOND ROUND AND APPLIED THE 8% NET PROFIT RATE PRESCRIBED UNDER SECTION 44 AD. IN THE INSTANT CASE, THE TURNOVER IS MORE THAN 40 LACS, SO SECTION 44AD IS NOT APPLICABLE, NONETHELESS THE A.O. HAS INSPIRED WITH THE PROVISION OF SECTION 44AD A ND MADE THE ADDITION BY ESTIMATING THE NET PROFIT RATE @ 8%. REJECTION OF THE BOOKS OF ACCOUNT ALLOWED THE A.O. TO MAKE THE ADDITION ON ESTIMATE BASIS. WHEN THE ADDITION IS MADE ON ESTIMATE BASIS, NO PENALTY UNDER SECTION 271 (1)(C) OF THE INCOME TAX ACT, CAN BE IMPOSED AS PER THE RATIO LAID DOWN IN THE CASE OF CIT V. ARJUN PRASAD AJIT KUMAR [I.T. APPEAL NO.13 OF 1999, DATED 3 - 1 - 2008], WHERE IT WAS OBSERVED THAT: 'APPEAL (HIGH COURT) - SUBSTANTIAL QUESTION OF LAW - PENALTY UNDER SECTION 271(1)(C) CIT (A) DELET ED PENALTY UNDER SECTION 271(1)(C) ON THE GROUND THAT THERE BEING NOTHING ON RECORD THAT ASSESSEE'S EXPLANATION LACKED BONA FIDES, PENALTY UNDER SECTION 271(1)(C) COULD NOT BE IMPOSED ON THE BASIS OF ESTIMATING SALES AND MAKING ADDITION BY APPLYING NET PRO FIT RATE - SAME WAS RIGHTLY SUSTAINED BY TRIBUNAL AND NO SUBSTANTIAL QUESTION OF LAW ARISES' ON THE SIMILAR SET OF FACTS THE HONBLE ITAT, MUMBAI, HAS DELETED PENALTY U/S 271(1)(C) OF THE ACT IN ITA NO.5586/MUM./2015, DATED 16.01.2017 IN THE CASE OF DCIT, C IR. 4(2)(2) V/S M/S. MANOHAR MANAK ALLOYS PVT. LTD. ON THE SAME LINES, THE HON'BLE ITAT, MUMBAI IN ITA NO. 75191MUM / 2013 DATED 08.07.2015 IN THE CASE OF MLS. YASHRAJ FILMS P. LTD. VS. THE A.C.I.T. CENTRAL CIRCLE 29, MUMBAI HAS DELETED THE PENALTY U/S. 271(1)(C) OF THE ACT L EVIED A N ADDITION MADE ON ESTIMATION BASIS. LIKEWISE, THE HON'BLE ITAT, MUMBAI IN ITA NO.931MUML2011 DATED 10.04.2015 IN THE CASE OF DCIT 14(2) VS. MLS.RISHABH LMPEX GULABDAS & CO. DELETED THE PENAL TY U/S. 271 (1)(C) OF THE ACT LEVIED ON ADDITION MADE ON ESTIMATION BASIS. FURTHER, IN A RECENT DECISION OF DELHI ITAT IN THE CASE OF SHRUTI FASTNERS LTD. VS. DCIT (2017) 49 CCH 0183 DEL TRIB AND ITAT MUMBAI IN THE CASE OF REKESHRNMER M. GUPTA VS.ITO(2017 ) 49 C HH 0066 MUM TRIB, IT HAS BEEN HELD THAT WHERE INCOME HAS BEEN 5 M/S. REDSTAR ESTIMATED, THE APPELLANT CANNOT BE SAID TO HAVE CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME AND THEREFORE. PENALTY U/S 271 (1 )(C) WAS NOT LEVIABLE. 6.4 I N THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOL L OWING THE PRECEDENTS, AS ABOVE AND THOSE RELIED UPON BY THE APPELLANT, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT HAS NOT CONCEALED THE PARTICULARS OF INCOME AND NOR HAS IT FURNISH ED INACCURATE PARTICULARS OF INCOME, THERE BEING ARE NO FINDINGS OF THE .A.O THAT THE' DETAILS FURNISHED BY THE APPELLANT IN HIS RETURN ARE FOUND TO BE INACCURATE OR ERRONEOUS OR FALSE. ACCORDINGLY, I DELETE THE PENALTY OF RS. 2,22,860 / - LEVIED BY THE AO U/ S 271(1)(C) OF THE ACT AND THE GROUND S OF APPEAL ARE 'ALLOWED'. 4. THE REVENUE BEING AGGRIEVED BY THE AFORESAID ORDER OF THE LEARNED COMMISSIONER (APPEALS) FILED APPEAL BEFORE THE TRIBUNAL . 5. CONSIDERED THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL AUTHORITIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS NOT CONTESTED THE QUANTUM ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASE UNDER SECTION 69C OF THE ACT. IT IS NOW WELL SETTLED THAT BECAUSE THE ASSESSEE HAS N OT CONTESTED THE QUANTUM ADDITION MADE BY THE ASSESSING OFFICER, THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN THE EYES OF LAW. WE ALSO FIND T HE ASSESSING OFFICER IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON ESTIMATION 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 6 M/S. REDSTAR HAS CONCEALED ITS PARTICUL ARS OF INCOME OR FURNISHED INACCURATE PARTICULARS. ACTION OF M AKING 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, 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 RE SEARCH 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). 6. EVEN T HE 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 DIRECTING THE ASSESSING OFFICER TO DELET E THE PENALTY, AS THERE WAS NO CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE HAVE 7 M/S. REDSTAR BEEN PROVED BY THE REVENUE AND ADDIT IONS 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 THE REVENUE. 7. IN THE RESULT, REVENUES APPE AL 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 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