ASST CIT 32 (2), MUMBAI V. MANGALSINGH M RATHORE, MUMBAI

ITA 7/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6272 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 01-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Capital asset; Tax effect; Set aside
• Section: 271(1)(c); 69C; 142(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI AMARJIT SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM / I .T.A. NO. 0 7 /MUM/20 20 ( / ASSESSMENT YEAR: 20 10 - 11 ) ACIT - 32(2) 720, 7 TH FLOOR, KAU TILYA BHAVAN, C - 41 TO C - 43, G BLOCK, BKC, BANDRA (E), MUMBAI - 400051. / VS. MANGAL S INGH M. RATHORE B - 1, NEELA APT, SVP ROAD, BORIVALI (W), MUMBAI - 400092. ./ ./ PAN/GIR NO. : AAIPR6967M ( / APPELLANT ) .. ( / RES PONDENT ) / DATE OF HEARING: 14 / 0 7 /20 2 1 /DATE OF PRONOUNCEMENT: 03 /09 / 20 21 / O R D E R PER AMARJI T SINGH, JM: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 31 . 10 .201 9 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 44 MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 10 - 11 IN WHICH THE PENALTY LEVIED BY AO HAS BEEN ORDER TO BE DELETED . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - ' 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX ACT, 1961, OF RS.10,51,123/ - WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE CLAIMED BOGUS PURCHASES IN ITS RETURN OF INCOME THEREBY MAKING HIMSELF LIABLE FOR PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. REVENUE BY : MS. USHA GAIKWAD ( D R) ASSESSEE BY: NONE ITA NO. 07 /M UM /20 20 A.Y.20 10 - 11 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HONBLE ITAT IS REQUESTED TO ENTERTAIN THIS APPEAL THOUGH THE TAX EFFECT IS BELOW THE MONETARY LIMIT PRESCRIBED IN THE CBDT CIRCULAR NO.17/2019 DATED 08.08.2019 R.W. CIRCULAR NO.3/2018 DATED 11.07.2018 AS AMENDED ON 20.08.2018 AS THE CASE FALLS IN THE EXCEPTION PROVIDED I N PARA 10 OF THE SAID CIRCULAR IN AS MUCH AS THE ADDITION IS BASED ON INFORMATION RECEIVED FROM EXTERNAL SOURCES IN THE NATURE OF LAW ENFORCEMENT AGENCIES NAMELY SALES TAX AUTHORITIES. 3. THE APPEAL PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROU NDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 12 . 10 .20 10 DECLARIN G A TOTAL INCOME TO THE TUNE OF RS. 1,22,99,431 / - FOR THE A.Y.2010 - 11 . THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY. NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE CASE OF THE ASSESSEE WAS REOPENED ON THE BASIS OF THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, MAHARASHTRA IN WHICH IT WAS CONVEYED THAT THE ASSESSEE HAS TAKEN THE BOGUS PURCHASE ENTRY OF RS. 28,029,936/ - FROM THE FOLLOWING PARTIES.: - VAT NAME OF THE PARTY AMOUNT 27140326567V SARAOGI SYNDICATE 117 71134 27930114236V KARAN ENTERPRISES 2766877 27370565400V SUNRISE ENTERPRISES 846893 27340553631V SHRUTI SALES CORPORATION 2552432 27310642839V MITAL ENTERPRISE 384517 27190661917V MADHAV TRADING CO. 1670776 ITA NO. 07 /M UM /20 20 A.Y.20 10 - 11 3 27030265566V AMAR ENTERPRISES 1010582 275 40680106V ANSHU MERCANTILE PVT. LTD. 1129675 27450680107V DHIREN MERCANTILE PVT. LTD. 1247408 27770112384V NIMESH TRADING CO. 2887819 2700557604V RAKESH ENTERPRISES 2765624 27300350341V SHAKTI TRADING CO 2666219 27330145897V SHREEJI ENTERPRISES 124986 2 27840584105V TISHA ENTERPRISES 2774118 TOTAL 28029936 THE NOTICE WAS GIVEN AND AFTER THE REPLY OF THE ASSESSEE, THE AO RAISED THE ADDITION TO THE EXTENT OF RS. 28,029,936/ - I.E 100% OF BOGUS PURCHASE. THE INCOME OF THE ASSESSEE WAS ASSESSED TO THE TU NE OF RS.4,55,72,900/ - . THE PENALTY PROCEEDING WAS INITIATED. THE NOTICE WAS GIVEN AND AFTER THE REPLY OF THE ASSESSEE, THE AO LEVIED THE PENALTY TO THE TUNE OF RS.10,51,123/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO DELETED T HE PENALTY , THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. THE PRESENT CASE IS IN CONNECTION WITH THE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASE WHICH WAS RESTRICTED TO THE EXTENT OF 12.5% IN APPEAL BEFORE THE CIT(A). SUBSEQUENTLY, THE PENALTY WAS INITIATED AND AO LEVIED THE PENALTY TO THE TUNE OF RS. 10,51,123/ - WHICH WAS DELETED BY CIT(A) IN VIEW OF THE ORDER DATED 31.10.2019 UNDER CHALL ENGED. BEFORE GOING FURTHER, WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 6.4.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE MATERIALS AVAILABLE ON RECORD THE APPELLANT HAS REQUESTED TO DELETE ITA NO. 07 /M UM /20 20 A.Y.20 10 - 11 4 THE IMPUGNED PE NALTY LEVIED U/S 271(1)(C) OF THE ACT AT RS.10,51,123/ - THE MAIN CONTENTIONS OF THE APPELLANT ARE THAT IT HAS NEITHER CONCEALED PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME MERE REJECTION OF APPELLANTS CLAIM WOULD NOT AUTOMATICALLY LEAD TO LEVY O1 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 U/S 271(1 }(C) OF THE ACT IS NOT LEVIABLE IN SUPPORT OF ITS CLAIM 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 2 80,29,936/ - T HE LD CIT(A) HAD ALLOWED THE APPEAL OF THE APPELLANT ON THIS ISSUE HOWEVER, THE HON'BLE ITAT HAS HELD THAT THE PROFIT ELEMENT INVOLVED IN SUCH PURCHASES MAY BE ESTIMATED @ 12.5% AND HENCE RESTRICTED THE ADDITION @ 12.5% OF SUCH BOGUS/SUSPICIOUS PURCHASES THE FADS OF THE CASE SUGGEST THAT THE LCF AO HAD MADE SAID ADDITION ON THE GROUND THAT THE APPELLANT COULD NOT PROVE THE PURCHASES UNDER CONSIDERATION FROM [HE PARTIES CONCERNED. IT IS ALSO AN ADMITTED FACT THAT THE LD. CIT(A) HAD ALLOWED THE APPEAL ON TH IS ISSUE ANO 1 THE HON'BLE ITAT HAS RESTRICTED SAID ADDITION LO 12 5%. ON ESTI MA RED/AD - HOC BASIS IN THE CASE OF M/S EARTHMOVING EQUIPMENT SERVICE CORPORATION IN ITA NO. 6617/2014 ARE HONBLE ITAT MUMBAI VIDE ITS ORDER DATED 02 05.2017 HAS DELETED THE PEN ALTY 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 BUT THE SAME RENAMED IN CONCLUSIVE FOR WAN! OF CONFIRMATION FROM THE SUPPLIERS AS THEY COULD NOT BE TRACED AT GIVEN ADDRESS FURTHER THE HON'BLE ITAT MUMBAI IN THE CASE OF AJAY LOKNATH LOHIA IN ITA NO. 2998/MUM/20L7. VIDE ITS ORDE R DATED 05.10.2018 HAS DELETED T HE PENALTY LEVIED U /S 271(1)(C) OF THE ACT. ON THE DISALLOWANCE/ADD - ON MADE @25% ON ITA NO. 07 /M UM /20 20 A.Y.20 10 - 11 5 ALLEGED BOGUS PURCHASES MADE FROM HAWALA DEALERS BASED ON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT AND WHERE THE APPELLANT HAD ACCEPTED SUCH ESTIMATED ADDITION, AFTER HOLDING TH AT THOUGH THE AO HAD ESTIMATED 25% GROSS PROFIT ON ALLEGED BOGUS PURCHASES NEVER MADE ANY OBSERVATIONS WITH REGARD TO THE INCORRECTNESS M DETAILS FILED BY THE ASSESSES TO PROVE SUCH PURCHASES 6.4.2 FROM THE ABOVE IT FS EVIDENT THAT THE FACTS AND CIRCUMSTAN CES 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 27L(1)(C) AT RS.10,51,123/ - DELETED, ACCORDINGLY, THE GROUND WO 1 RAISED IN APPEAR IS ALLOWED. 5. ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE NOTICED THAT THE CIT(A) HAS RELIED UPON THE DECISION OF THE HONBLE ITAT IN T HE CASE OF M/S. EARTHMOVING EQIPMENT SERVICE CORPORATION IN ITA. NO.6617/2014 & IN THE CASE OF AJAY LOKNATH LOHIA IN ITA. NO.2998/MUM/2017. UNDOUBTEDLY, IT IS SPECIFICALLY HELD THAT NO PENALTY IS LIABLE TO BE SUSTAINABLE WHERE THE PROFIT WAS ESTIMATED ON T HE ESTIMATION BASIS. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HARIGOPAL SINGH VS. CIT (2002) 258 ITR 85 (P & H) , CIT VS. AERO TRADERS PVT. LTD ., 322 ITR 316 (DEL) & CIT VS. SUBHASH TRADING CO., 221 ITR 110 (GUJ.) TAKING INTO ACCOUNT OF ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, WE UPHELD THE FINDING OF THE CIT(A) O N THIS ISSUE AND DISMISS THE APPEAL OF THE REVENUE. ITA NO. 07 /M UM /20 20 A.Y.20 10 - 11 6 6 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03 / 09 / 202 1 SD/ - SD/ - ( MANOJ KUMAR AGGARWAL ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 03 / 09 / 2021 VIJAY PAL SINGH ( SR. P.S. ) / 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