ITO 9 (3)(4), MUMBAI V. M/S GLUMEX PHARMACEUTICALS MANUFACTURING PVT LTD, MUMBAI

ITA 6994/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1339 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 14-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Depreciation; Set aside
• Section: 271(1)(c); 143(3); 40(a)(ia); 133(6); 272(1)(c); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VP AND SHRI AMARJIT SINGH, JM / I .T.A. NO . 6994 /MUM/201 9 ( / ASSESSMENT YEAR: 20 09 - 10 ) ITO - 9(3)(4) ROOM NO.471, 4 TH FLOOR, AAYAKAR BHAVAN, CHURCHGATE, MUMBAI - 400020 . / VS. M/S. GLUMEX PHARMACEUTICALS MANUFACTURING PVT. LTD. 401, NIRMAN KUTIR, YARI ROAD, VERSOVA, ANDHERI (W), MUMBAI - 400061. ./ ./ PAN/GIR NO. : AAACG3441L ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 20 / 0 4 /20 2 1 /DATE OF PRONOUNCEMENT: 30 / 06 / 20 21 / O R D E R PER AMARJIT SINGH, JM: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 05 .0 8 .2019 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 16 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 09 - 1 0 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - ' (1) 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN DELETING PENALTY LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. (4) THE APPELLANT PRAYS THAT THE ORDER OF LD. C1T(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . REVENUE BY : SHRI T. S. KHALSA (DR) ASSESSEE BY: NONE ITA NO.6994 /M/201 9 A.Y.20 009 - 10 2 (5) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ' 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIL ED ITS RETURN OF INCOME FOR THE A.Y.2009 - 10 ON 29 .09.20 09 DECLARI NG A TOTAL INCOME OF RS.2,71,330/ - . THE ASSESSMENT WAS COMPLETED ON 25.11.2011 AFTER MAKING DISALLOWANCE U/S 40(A)(IA) OF RS.59,000/ - ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS.3,30,330 / - . THEREAFTER, THE ASSESSMENT WAS REOPENED U/S 147 OF THE ACT IN VIEW OF THE INFORMATION THAT THE ASSESSEE WAS BENEFICIARY OF BOGUS PURCHASE BILLS. THE REOPENED ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 OF THE ACT ON 27.03.2015 AFTER MAKING ADDITION ON ACCOUNT OF PURCHASE MADE FROM M/S APPLAUSE CHEMICALS OF RS.43,490/ - , SUPPRESSED PROFITS OF RS.1,39,136/ - AND DEPRECIATION OF RS.1,45,580/ - ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS.6,58,540/ - . THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO C ONFIRMED THE ADDITIO N TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASE. THE ASSESSEE FILED AN APPEAL BEFORE THE HON,BLE ITAT WHO CONFIRMED THE ADDITION TO THE EXTENT OF 10% OF THE BOGUS PURCHASE. THERE AFTER , THE PENALTY PROCEEDING WAS INITIATED BY ISSUANCE OF NOTICE U/S 271(1)(C) AND AFTER THE REPLY OF THE ASSESSEE, THE PENALTY IN SUM OF RS. 1,07,353/ - . THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO DELETED THE PENALTY BUT THE REVENUE WAS NOT SATISFIED, T HEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEF ORE US. 4 . WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE REVENUE AND HAS GONE THROUGH THE CASE CAREFULLY. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD: - ITA NO.6994 /M/201 9 A.Y.20 009 - 10 3 I HAVE CAREFULLY PERUSED THE ASS ESSMENT ORDER OF THE AO AND THE SUBMISSIONS MADE BY THE AR IN SUPPORT OF HIS ARGUMENTS. AFTER TAKING INTO CONSIDERATION, THE A.O'S FINDINGS AND THE APPELLANT'S ORAL AND WRITTEN SUBMISSIONS MADE DURING THE COURSE OF HEARING AS WELL AS FACTS OF THE CASE, DEC ISION ON VARIOUS GROUNDS ARE ADJUDICATED AS UNDER: GROUND NO. 1 4.1 VIDE THESE GROUNDS, THE APPELLANT HAS AGITATED AGAINST LEVYING PENALTY OF RS. 1,07,353/ - U/S. 271(1)(C) OF THE IT ACT, 1961. THE LD. AO HAS INITIATED THE PENALTY ON THE BASIS OF INFORMATIO N RECEIVED FROM THE SALE TAX DEPARTMENT THAT APPELLANT HAS SHOWN BOGUS PURCHASES AND APPELLANT FAILED TO PRODUCE CHALLAN COPY OF FIXED ASSETS. 4.2 THE APPELLANT HAS CHALLENGED THE ADDITION MADE BY THE AO TOWARDS ESTIMATION OF GROSS PROFIT ON ALLEGED BOGUS PURCHASES AND CIT(A) HAS RESTRICT ADDITION AT 12.5% OF PURCHASES OVER AND ABOVE EXISTING GROSS PROFIT. THEREAFTER, APPELLANT HAS FILED APPEAL BEFORE HON'BLE ITAT AND HON'BLE ITAT HAS REDUCED THE ADDITION UPTO 10% ONLY. THE APPELLANT FURTHER CONTENDED THAT WHEN HE HAS AGREED FOR ESTIMATION OF GROSS PROFIT ON ALLEGED BOGUS PURCHASES, IT WAS ONLY FOR THE PURPOSE OF AVOIDING LITIGATION AT THE STAGE OF APPEAL ITSELF, BUT FACT REMAINS THAT HE HAS FURNISHED COMPLETE EVIDENCES TO PROVE SUCH PURCHASES AND ALSO FILED QUANTITATIVE DETAILS OF PURCHASE AND SALES. 4.3 ALSO, IT IS SEEN THAT THE AO HAS LEVIED PENALTY U/S 271(1)(C) ON THE GROUND THAT THE APPELLANT HAS FAILED TO PROVIDE TRANSPORT/ DELIVERY CHALLAN TO THE SATISFACTION OF THE AO IN RESPECT OF CLAIMING DEPRECIAT ION OF ADDITION TO FIXED ASSET BEING MACHINERY AND COMPUTERS. ACCORDING TO THE LD. AO, THE PURCHASES FROM CERTAIN PARTIES WERE NOT GENUINE WHICH IS EVIDENT FROM THE FACT THAT THE APPELLANT FAILED TO FURNISH COMPLETE DETAILS OF PURCHASES FROM THE ABOVE PART IES AND ALSO NOTICE U/S 133(6) WERE RETURNED BACK BY THE POSTAL AUTHORITY BEING UNSERVED. THEREFORE, LD. AO OPINED THAT IT IS A CLEAR CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME WHICH WARRANTS LEVY OF PENALTY U/S 271(1)(C) AND ACCORDINGLY LEVIED PENALTY UNDER EXPLANATION 1 TO SECTION 271(1)(C). 4.4 DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS FILED RELEVANT DOCUMENTS. THE APPELLANT ALSO SUBMITTED THAT THERE IS NEITHER ITA NO.6994 /M/201 9 A.Y.20 009 - 10 4 CONCEALMENT OF INCOME AS ALL THE DOCUMENTARY EVIDENCING THE GENUINENESS OF THE TRANSACTIONS WERE SUBMITTED TO THE LD. AO NOT THE APPELLANT COMPANY HAS FURNISHED INACCURATE PARTICULARS OF INCOME AS THE APPELLANT COMPANY HAS TRULY DISCLOSE THE PURCHASE TRANSACTION BEFORE THE REVENUE AUTHORITIES. FURTHER, APPELLANT HAS STATED THA T ALL THE PURCHASE INVOICES AND OTHER SUPPORTING DOCUMENTS HAS BEEN FURNISHED BEFORE THE LD. AO. CONSIDERING THESE FACTS I TEND TO AGREE WITH THE APPELLANT'S CONTENTION. 4.5 IN THIS REGARD, RELIANCE IS PLACED ON DECISION OF THE ITAT IN AY 2009 - 10 IN AJAY L OKNATH LOHIA, MUMBAI VS ITO ITA 2998/MUM/2017, MUMBAI WHEREIN IT WAS HELD THAT AP THE AO NEVER DISBELIEVED INFORMATION FILED BY THE APPELLANT, BUT HE PROCEEDED ON THE BASIS OF INFORMATION RECEIVED FROM SALES - TAX DEPARTMENT TO MAKE ADDITIONS. THE AO HAS MAD E SUCH ADDITION ON ADHOC BASIS BY ESTIMATING GROSS PROFIT ON ALLEGED BOGUS PURCHASES. THEREFORE, DISALLOWANCE OF PURCHASES ON ADHOC BASIS DOES NOT TANTAMOUNT TO WILLFUL FURNISHING INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE INCOME - TAX ACT, 1961. 4.6 FURTHER, I WOULD LIKE TO PLACED RELIANCE ON DECISION OF HON'BLE JURISDICTIONAL ITAT IN THE CASE OF DCIT 24(2), MUMBAI VS UNISYNTH CHEMICALS 5967/MUM/2014, HELD THAT: - 'FRONT A PERUSAL OF THE FINDING OF THE OT(A) IN THE IMPUGNE D ORDER IT IS SEEN THAT THE ADDITION OF RS.47,04,960/ - , ON THE BASIS OF WHICH PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS LEVIED BY THE ASSESSING OFFICER, WAS ON ACCOUNT OF UNDISCLOSED INCOME ON ACCOUNT OF BOGUS PURCHASES AND SALES. ON AN APPRECIATION O F THE MATERIAL ON RECORD WE ARE INCLINED TO CONCUR WITH THE VIEW OF THE CIT(A) THAT THE EXPLANATION PUT - FORTH BY THE APPELLANT IN THE PENALTY PROCEEDINGS WAS A PLAUSIBLE ONE, INASMUCH AS, THE CIRCUMSTANCES ON WHICH THE ADDITIONAL INCOME WAS OFFERED WAS BEC AUSE THE DISPUTED PARTIES WITH WHOM THESE TRANSACTIONS WERE MADE WERE NON - COOPERATIVE AND THE APPELLANT HAVING NO CONTROL OVER THOSE PARTIES WAS, THEREFORE, NOT ABLE TO SUBSTANTIATE ITS CLAIM WITH NECESSARY MATERIAL EVIDENCE. THEREFORE, THE APPELLANT WAS CONSTRAINED IN ORDER TO AVOID LENGTHY LITIGATION TO OFFER THE ADDITIONAL INCOME, WHICH WAS ACCEPTED AS SUCH THE ASSESSING OFFICER. THE HON'BLE APEX COURT IN THE CASE OF MAK DATA P. LTD. (2073) 358 ITR 593 (SC) WHILE CONSIDERING THE PROVISIONS OF EXPLANATIO N ITO SECTION 272(1)(C) OF THE ACT OBSERVED THAT ITA NO.6994 /M/201 9 A.Y.20 009 - 10 5 THE GENERAL PRINCIPLES OF LAW IN RESPECT OF PENALTY FOR CONCEALMENT OF INCOME, DOES NOT GRANT THE APPELLANT AUTOMATIC IMMUNITY FROM PENALTY ON ACCOUNT OF SURRENDER OR M/S. UNISYNTH CHEMICALS VOLUNTARY DISCLO SURE OF INCOME. AS PER THE PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT, THE QUESTION IS WHETHER THE ANY EXPLANATION FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. IN THE CASE OWN HAND WE FIND THAT THE REQUIREMENT DOWN BY THE HON'BLE COURT HAS BEEN MET BY THE APPELLANT IN AS MUCH AS, AS OBSERVED THE CITA), THE APPELLANT'S EXPLANATION (SUPRA) WHICH APPEARS PLAUSIBLE AND W1 EXPLANATION, THOUGH BRUSHED BRUSHED ASIDE BY THE ASSESSING OFFICER AS AN AFTERTHOUGHT, HAS BEEN BROUGHT OUT OR FOUND TO BE FALSE IN RESPECT OF FURNISHING OF PARTICULARS. WE, THE REFER UPHOLD THIS VIEW OF THE CITA) AND CONSEQUENTLY UPHOLD HER ORDER DIRECTING ASSESSING OFFICER TO DELETE THE PENALTY LEVIED IN THE CASE ON HAND FOR ASSESSMENT A.Y.2009 - 10 ' IN THE ABOVE CASE OF MIS. UNISYNTH CHEMICALS ALSO APPELLANT OFFERED INCOME BECAUSE NON - CORPORATION OF PARTY AND HIS INABILITY TO PROVE TRANSACTION WITH SUPPORTED DOCUMENTS BUT DOES NOT MEAN THAT THERE IS CONCEALMENT OF INCOME. THEREFORE, HON'BLE ITAT HAS DIRECTED TO DELETE ADDITION OF PENALTY. 4.7 IN RESPECT OF NON - FURNISHING CHALLAN COPY FOR CLAIMING DEPRECIATION, RELIANCE A PLACED ON THE DECISION OF THE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT LTD IN [2010] 322 ITR (SC) WHERE IT WAS HELD TH AT WHEN THE ASSESSEE HAS FURNISHED ALL THE DETA OF THE EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART, PENALTY U/S 271(L)( OF THE ACT WAS NOT ATTRACTED. IT WAS HELD THAT MERELY BECAUSE THE ASSESSEE HAS MADE A CLAI: WHICH WAS NOT ACCEPTED OR ACCEPTABLE TO THE REVENUE, THAT BY ITSELF COULD NOT ATTRACT TI PENALTY U/S 271(1)(C) OF THE ACT. 4.8 ALSO THE HON'BLE DELHI 1 - UGH COURT IN CIT VS. SHERV ANI HOSPITALITIES LTC WHEREIN IT WAS HELD THAT LEVY OF PENALTY IS NOT AN AUTOMATIC CONSEQUENCE WHEN AN ADDITION MADE BY DISALLOWING AN EXPENSE AND MERELY MAKING A CLAIM WHICH IS HELD AS NOT SUSTAINAB UNDER THE LAW SHOULD NOT LEAD TO PENALIZATION, WHERE THE ASSESSEE HAS FURNISHED FULL ITA NO.6994 /M/201 9 A.Y.20 009 - 10 6 DETAILS IN T RETURN ITSELF AND THE CLAIM IS DEBATABLE, REASONABLY PLAUSIBLE OR MAY HAVE BEEN ACCEPTED. 4.9 RESPECTFULLY FOLLOWING THE ABOVE MENTIONED DECISION AND KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS C ASE AS DISCUSSED ABOVE, IT IS HELD THAT HE LEVY OF PENALTY U/S 271(1)(C) IS NOT JUSTIFIED ON THE MERITS OF THE CASE. HENCE, THE APPEAL OF THE APPELLANT ON THIS GROUND IS ALLOWED AND PENALTY OF RS.1,07,353/ - IMPOSED BY THE AO IS DELETED. 5 . ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE NOTICE D THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY ON THE BASIS OF DECISION OF HONBLE ITAT MUMBAI BENCH IN THE CASE OF AJAY LOKNATH LOHIA, MUMBAI VS. ITO BEARING ITA. NO.2998/MUM/2017 AND THE HONBLE ITAT, MUMBA I BENCH IN THE CASE OF DCIT 24(2) VS. UNISYNTH CHEMICAL IN ITA. NO,5967/MUM/2014 AND THE DECISION OF HONBLE APEX COURT IN THE CASE OF REIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR (SC) . MOREOVER, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TE XTILES VS. CIT 2001 164 CTR 2009 (GUJ) HAS HELD THAT THE PENALTY IS NOT LEVIABLE WHEN THE PROFIT WAS ESTIMATED. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE CIT(APPEALS) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERED AT THIS APPELLATE STAGE. 6 . IN THE RESULT, THE APPEAL S FILED BY THE REVENUE ARE HEREBY D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 / 06 / 202 1 SD/ - SD/ - ( PRAMOD KUMAR ) (AMARJIT SINGH) / VICE PRESIDENT /JUDICIAL MEMBER MUMBAI; DATED : 30 / 06 / 2021 VIJAY PAL SINGH (SR. PS) ITA NO.6994 /M/201 9 A.Y.20 009 - 10 7 / 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// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI