NETEL (INDIA) LIMITED, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-3, THANE

ITA 7319/MUM/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7377 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 22-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T S KHALSA
• Keywords: Bogus purchase
• Section: 271(1)(c); 69C; 143(3); 274; 22; 147

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH MUMB AI BEFORE SHRI MAHAVIR SINGH, VICE- PRESIDENT AND SHRI MANOJ KR. AGGARWAL, ACCOUNTANT MEMBER ITA NO.7319/MUM/2017 (ASSESSMENT YEAR 2009-10) ITA NO.7320/MUM/2017 (ASSESSMENT YEAR 2010-11) NETEL (INDIA) LIMITED, 3 RD FLOOR, LIBERTY BUILDING, SIR VITHALDAS THACKERSEY MARG, MUMBAI-400020 P AN: AABCN8692H VS. THE DCIT, CIRCLE- (3), 6 TH , FLOOR, B WING, ROOM NO.2, ASHAR IT PARK, ROAD NO.16Z, WAGLE ESTATE, MIDC, THANE-(W). APPELLANT RESPONDENT APPELLANT BY : MS. DINKLE HARIA (AR) REVENUE BY : SHRI T. S. KHALSA (SR. DR) DATE OF HEARING : 12.01.2021 DATE OF PRONOUNCEMEN T : 22.01.2021 ORDER PER MAHAVIR SINGH, VP; 1. THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, PUNE [FOR SHORT THE LD. CI T(A)] IN APPEAL NO.CIT(A), PUNE-2/11291//2017-18 DATED 27.10.2017. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-3, THANE FOR THE ASSESSMENT YEAR 2009-10 UNDER SECTION 143(3) READ WITH SEC. 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) VIDE HIS ORDER DATED 27.02.2015. THE PEN ALTY UNDER DISPUTE WAS LEVIED BY DCIT, CIRCLE-3, THANE UNDER SECTION 271(1 )(C) OF THE ACT VIDE ORDER DATED 31.08.2015. ITA NO. 7319& 7320 MUM 2017-NETEL (INDIA) LIMITED. 2 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINS T THE ORDER OF CIT(A) CONFIRMING THE ACTION OF ASSESSING OFFICER IN LEVYI NG THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE FIL ED COPY OF TRIBUNALS ORDER IN QUANTUM APPEAL IN ITA NO. 3807/MUM/2018 VIDE ORD ER DATED 21.08.2019 FOR A.Y. 2009-10, WHEREIN THE TRIBUNAL HAS RESTORED BACK THE MATTER TO THE FILE OF ASSESSING OFFICER IN REGARD TO BOGUS PURCHA SES BY OBSERVING IN PARA- 5 AS UNDER: 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE FILED COPY OF CONSUMPTION REGISTER AND STOCK REGISTER. WHEN ENQUI RED, THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE MATTE R CAN BE RESTORED BACK TO THE FILE OF THE AO FOR LIMITED VERIFICATION WHETHER THE ASSESSEE HAS CONSUMED THE MATERIAL PURCHASED FROM MANI BHADRA SA LES PVT. LTD. AND IN THAT EVENTUALITY, THE ASSESSEE WOULD PROVE THAT THE SE MATERIAL OF PURCHASES WERE CONSUMED OR NOT. ADMITTEDLY, THE ASSESSEE IS A MANUFACTURER OF ANALYTICAL, ENVIRONMENTAL POLLUTION MONITORING INST RUMENTS, WASTE WATER TREATMENT APPLICATIONS, AND SERVICES FOR MONITORING AND CONTROL OF QUALITY OF GASES, LIQUIDS, AIR AND WATER. IF, ASSESSEE MADE PURCHASES FROM OM MANI BHADRA SALES PVT. LTD, HE HAS TO SHOW THAT THE MATE RIAL PURCHASED WERE CONSUMED FROM THE MANUFACTURING OF THE ASSESSEE. IN CASE, THE ASSESSEE PROVES THAT THESE ITEMS ARE CONSUMED, NO DISALLOWAN CE CAN BE MADE. IN TERM OF THE ABOVE, THE MATTER IS RESTORED BACK TO THE FI LE OF THE AO. 4. THE LD. COUNSEL FOR ASSESSEE STATED ONCE THE TRIBUN AL HAS SET-ASIDE THE QUANTUM ORDERS OF ASSESSING OFFICER MAKING ADDITION AND CIT(A) CONFIRMING THE ADDITION OF BOGUS PURCHASES, THE PEN ALTY LEVIED BY ASSESSING ITA NO. 7319& 7320 MUM 2017-NETEL (INDIA) LIMITED. 3 OFFICER AND CONFIRMED BY CIT(A) WILL NOT SURVIVE. H ENCE, HE REQUESTED FOR DELETION OF PENALTY. 5. ON THE OTHER HAND, THE LD. SR. DR AGREED WITH THE P ROPOSITION BUT HE STATED THAT THE ASSESSING OFFICER IS AT LIBERTY TO REINITI ATE THE PENALTY PROCEEDINGS IN CASE DURING THE SET-ASIDE ASSESSMENT PROCEEDINGS , HE COMES TO CONCLUSION OR HE IS OF THE OPINION THAT THIS IS A FIT CASE OF LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT, HE MAY REINITIATE. 6. AFTER HEARING BOTH THE SIDES AND GOING THROUGH THE FACTS OF THIS CASE. WE SET- ASIDE THE ORDERS OF LOWER AUTHORITIES AND OBSERVED THAT IN CASE, THE ASSESSING OFFICER DURING SET-ASIDE ASSESSMENT PROCEEDINGS COM ES TO THE CONCLUSION OR HE BELIEVES THAT THIS IS A FIT CASE FOR LEVY OF PEN ALTY, HE MAY REINITIATE THE PENALTY DURING SET-ASIDE ASSESSMENT PROCEEDINGS. 7. IN TERMS OF THE ABOVE OBSERVATIONS, PRESENT PENALTY PROCEEDINGS ARE DELETED AND APPEAL OF ASSESSEE IS ALLOWED. ITA NO. 7320/MUM/2017 FOR A.Y. 2010-11 8. THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, PUNE [FOR SHORT THE LD. CI T(A)] IN APPEAL NO (NEW):PN/CIT(A)-2/DCIT,CIR-3/THN/348/2017-18 AND AP PEAL NO (OLD):THN/CIT(A)-2/DCIT CIR-3/THN/574/2015-16 ORDER DATED 21.09.2017. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-3 , THANE UNDER SECTION 143(3) READ WITH SEC. 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) FOR THE ASSESSMENT YEAR 2010-11 VIDE HIS ORDER DATED ITA NO. 7319& 7320 MUM 2017-NETEL (INDIA) LIMITED. 4 27.02.2015. THE PENALTY UNDER DISPUTE WAS LEVIED B Y DCIT, CIRCLE-3, THANE UNDER SECTION 271(1)(C) OF THE ACT VIDE ORDER DATED 31.08.2015. 9. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINS T THE ORDER OF CIT(A) CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271(1) (C) OF THE ACT BY THE ASSESSING OFFICER ON ACCOUNT OF UNAPPROVED PURCHASE S. FOR THIS, THE ASSESSEE HAS RAISED THE FIRST ISSUE ON JURISDICTION THAT THE ASSESSING OFFICER HAS INITIATED PENALTY PROCEEDINGS FOR BOTH THE CHAR GES I.E. CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. ASSESSEE HAS CHALLENGED THE ISSUE ON MERITS THAT ON BOGUS PURCHA SES/UNAPPROVED PURCHASES, THE PENALTY UNDER SECTION 271(1)(C) OF T HE ACT CANNOT BE LEVIED, WHERE SALES ARE NOT DOUBTED BY THE ASSESSING OFFICE R. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUNDS: LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT , 1961 OF RS. 1,77,840/- : ON LAW : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A)-2, PUNE {HEREINAFTER REFERRED TO AS THE CIT(A)} ERRED IN CONFIRMING THE PENALTY LEVIED BY THE THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCL E-3, THANE (HEREINAFTER REFERRED TO AS A. 0.) OF RS. 1,77,840/-, WITHOUT AP PRECIATING THAT THE NOTICE U/S. 274 DATED 27TH FEBRUARY, 2015 DID NOT SPECIFY THE CHARG E FOR WHICH THE PENALTY PROCEEDINGS U/S. 271(1)(C) HAD BEEN INITIATED I.E. FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME, HENCE THE PENALTY ORDER U/S. 271(1)(C) IS BAD IN LAW. 2. THE LEARNED CIT(A) FURTHER FAILED TO APPRECIATE THAT THE PENALTY IS LEVIED WITHOUT SPECIFYING THE GROUND IN THE NOTICE, HENCE THE ORDER PASSED BY A.O. IS BAD IN LAW, HENCE PENALTY LIABLE TO BE DELETED. ON MERITS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE PENALTY ORDER OF THE A.O, WITHOUT AP PRECIATING THE FACT: ITA NO. 7319& 7320 MUM 2017-NETEL (INDIA) LIMITED. 5 A) THAT SUFFICIENT EVIDENCES WERE FILED IN SUPPORT OF THE CLAIM OF PURCHASES MADE BY THE APPELLANT BEFORE THE A.O. B) THAT THE A. O. MERELY ALLEGED THAT THE SUPPLIER WAS NOT PRODUCED BY THE APPELLANT AND THE PENALTY LEVIED. C) THAT MERE NON PRODUCTION OF THE SUPPLIER WOULD N OT PROVE THAT THE PURCHASES WERE BOGUS AND INCOME WAS CONCEALED, THUS LEVY OF P ENALTY WAS NOT LEGALLY POSSIBLE ON THAT GROUND ALONE. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THIS CASE. WE NOTED THAT THE ASSES SING OFFICER WHILE FRAMING ASSESSMENT HAS INITIATED THE PENALTY PROCEE DINGS ON BOTH THE CHARGES VIDE PARA-3.6 WHICH READS AS UNDER: 3.6. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES, THE ONLY FAIR CONCLUSION THAT CAN BE REACHED IS THAT THE ASSESSEE WAS A BENE FICIARY OF THE ACCOMMODATION BILLS ISSUED BY THE PARTY MENTIONED W HEREIN, THERE WASN'T ACTUAL DELIVERY/PHYSICAL DELIVERY OF GOODS. AN ACCO MMODATION BILL IS OBTAINED FOR INTRODUCING UNACCOUNTED GOODS INTO THE ACCOUNTED STREAM. THEREFORE, THE ASSESSEE'S CLAIM OF PURCHASES/EXPENS ES AMOUNTING TO RS. 5,75,536/- IS DISALLOWED AND ADDED TO THE TOTAL INC OME OF THE ASSESSEE WITHIN THE MEANING OF SECTION 69C OF THE INCOME TAX ACT, 1 961. PENALTY PROCEEDING U/S 271(1)(C) OF THE I.T. ACT, 1961 ARE INITIATED S EPARATELY FOR THE DEFAULT COMMITTED BY THE ASSESSEE WITHIN THE MEANING OF THI S SECTION FOR CONCEALING THE PARTICULARS OF HIS INCOME OR FURNISHING INACCUR ATE PARTICULARS OF SUCH INCOME. 11. WE NOTED THAT ONCE THE ASSESSING OFFICER HAS INITIA TED THE PENALTY PROCEEDINGS IN BOTH THE CHARGES THAT MEANS HE IS NO T SURE ABOUT WHICH CHARGES, THE ASSESSEE HAS COMMITTED THE DEFAULT. HE NCE, THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. SAMSON PERINCHERY (2017) 88 TAXMAN 413 (BOM ). HENCE, ON THIS COUNT, WE DELETED THE PENALTY. ITA NO. 7319& 7320 MUM 2017-NETEL (INDIA) LIMITED. 6 12. AS REGARDS TO MERITS OF THE CASE, WE NOTED THAT THE ASSESSEE HAS FILED COMPLETE LEDGER ACCOUNT, PURCHASE BILLS, DELIVERY C HALLANS IN RESPECT OF PURCHASE TRANSACTIONS MADE WITH NIMESH STEEL PVT. L TD FOR PURCHASE VALUE OF RS. 5,75,536/- AND ALSO PAYMENT MADE BY ACCOUNT PAYEE CHEQUE. THE ASSESSEE COULD NOT PRODUCE ONLY THE PURCHASE PARTY FOR EXAMINATION OF THE ASSESSING OFFICER AND THE ASSESSING OFFICER LEVIED PENALTY ONLY ON THIS COUNT. WE NOTED THAT THIS CANNOT BE THE REASON FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) BECAUSE THE ASSESSING OFFICER IS UNABLE TO PROVE THE CONCEALMENT OF INCOME IN THIS CASE. HENCE, WE DELET E THE PENALTY AND ALLOWED THE APPEAL OF ASSESSEE. 13. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY 2021. SD/- SD/- MANOJ KR. AGGARWAL MAHAVIR SINGH ACCOUNTANT MEMBER VICE-PRESIDENT MUMBAI, DATE: 22.01.2021 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR B BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST . REGISTRAR ITAT, MUMBA I