DY CIT 1 (3)(1), MUMBAI V. M/S SVD RESINS AND PLASTICS PVT LTD., MUMBAI

ITA 76/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9745 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 03-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR MENON
• Keywords: Corroborative evidences; Tax effect; Reason to believe
• Section: 147; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. 76/MUM/2020 ASSESSMENT Y EAR: 2009 - 10 & ITA NO. 77 /MUM/2019 ASSESSMENT Y EAR: 2010 - 11 DY. COMMISSIONER OF INCOME TAX (1)(3)(1), ROOM NO. 540, 5 TH FLOOR, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI - 400020 VS. M/S SVD RESINS AND PLASTIC PVT. LTD., 223, 1 ST FLOOR, ASHOKA SHOPPING CENTRE, G.T. HOSPITAL COMPLEX, L.T. MARG, MUMBAI - 400001 PAN: AAACS7908L (APPELLANT) (RESPONDENT) REVENUE BY : SHRI VIJAY KUMAR MENON (DR) ASSESSEE BY : SHRI PRAKASH JHUNJHUNWALA (AR) DATE OF HEARING : 24/06 /202 1 DATE OF PRONOU NCEMENT: 20 / 0 7 /202 1 O R D E R PER SAKTIJIT DEY, JM CAPTIONED APPEALS BY T HE REVENUE ARE AGAINST A COMMON ORDER DATED 26.06.2019 OF LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) - 3 , MUMBAI DELETING THE PENALTY IMPOSED UNDER SECTION 271(1) (C) OF THE INCOME TAX ACT , 1961 FOR THE A SSESSMENT YEAR S 2009 - 10 AND 2010 - 11. 2 . BRIEFLY TH E FACTS ARE, THE ASSESSEE, A RESIDENT COMPANY , IS STATED TO BE A STOCKIEST OF RESINS AND C HEMICALS PURCHASED FROM VARIOUS MANUFACTURER , TRADER S , BROKERS OF LOCAL MARKET AND DISPATCHES SUCH GOODS TO ITS WAREHO USING AT BHIWANDI. THE ASSESSEE IS ALSO STATED TO BE CONDUCING EXCLUSIVE TRADING ACTIVITY. FOR THE ASSESSMENT YEAR S UNDER DISPUTE, THE ASSESSEE HAD FILED ITS RETURNS OF INCOME UNDER SECTION 139 (1) OF THE ACT. SUBSEQUE NTLY, HAVING 2 ITA NO S . 76 & 77 / MUM/2020 ASSESSMENT YEAR S : 20 09 - 1 0 & 2010 - 11 REASON TO BELIEVE THAT CERTAIN PURCHASES CLAIM ED TO HAVE BEEN MADE BY THE ASSESSEE DURING THE RELEVANT YEARS ARE NON GENUINE , THE ASSESSING OFFICER (AO) REOPEN ED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IN COURSE OF ASSESSMENT PROCEEDINGS, THE AO CALLED UPON THE ASSESSEE TO PROVE PURCHASES MADE FROM CERTAIN PARTIES THROUGH SUPPORTING EVIDENCE. IN COMPLIANCE TO THE QUERY RAISED, ASSESSEE FURNISHED SOME SUPPORTING DETAILS. HOWEVER, THE AO WAS NOT FULLY SATISFIED WITH THE DOCUMENTARY EVIDENCE S FURNISHED BY THE ASSESSEE. THUS, HE ULTIMATELY TREATED PURCHASES WORTH RS. 1,34,25,500/ - AND RS. 93,46,750/ - IN ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 RESPECTIVELY , AS NON - GENUINE AND ADDED BACK TO THE INCOME OF THE ASSESSEE. ASSESSEE CONTESTED THE AFORESAI D ADDITION S BEFORE LEARNED COMMISSIONER (APPEALS). PARTLY ACCEPTING THE SUBMISSIONS OF THE ASSESSEE, LEARNED COMMISSIONER (APPEALS) RESTRICTED THE DISALLOWANCE TO 7.76% IN ASSESSMENT YEAR 2009 - 10 AND 7. 54% IN ASSESSMENT YEAR 2010 - 11. AGAINST T HE AFORESAID DECISION OF THE LEARNED COMMISSIONER (APPEALS), BOTH THE ASSESSEE AND REVENUE WENT IN A PPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL WHILE DISMISSING THE APPEALS O F THE ASSESSEE GRANTED PARTIAL RELIEF TO THE REVENUE BY RESTRICTING THE DISALLOWANCE TO 12.5% OF TH E ALLEGED NON - GENUINE PURCHASED IN BOTH THE ASSESSMENT YEARS UNDER DISPUTE. BASED ON THE DISALLOWANCE/ADDITION SUSTAINED BY THE TRIBUNAL, THE AO INITIATED PROCEEDI NG FOR IMPOSITION OF PENALTY UNDER SECTION 271(1) (C) OF THE ACT AND ULTIMATELY PASSED ORDERS IMPOSING PENALTY OF RS. 5,18,560/ - AND RS. 3,61,018/ - IN ASSESSMENT YEAR S 2009 - 10 AND 2010 - 11 RESPECTIVELY. W HILE DECIDING AS SESSEES APPEALS CHALLENGING IMPOSITION OF PENALTY, LEARNED COMMISSIONER (APPEALS) DELETED THE PENALTY IMPOSED. 3 . AT THE VERY OUT SET, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE APPEALS FILED BY THE REVENUE ARE NOT MAINTAINABLE DU E TO LOW TAX EFFECT. AS REGARDS THE MERITS, HE STRONGLY RELIED UPON THE OBSERVATIONS OF LEARNED COMMISSIONER (APPEALS). 4. AS REGARDS THE NON - M AINTAINABILITY OF THE AP PEALS DUE TO LOW TAX EFFECT, LEARNED DEPARTMENTAL REPRESENTATIV E DREW OUR ATTENTION TO GROUND N O. 3 AND EXCEPTION S PROVIDED IN PARA GRAPH 10 (E) OF CBDT CIRCULAR NO. 2/2018 DATED 3 ITA NO S . 76 & 77 / MUM/2020 ASSESSMENT YEAR S : 20 09 - 1 0 & 2010 - 11 11.07.2018. AS FAR AS MERIT OF THE ISSUE IS CONCERNED, LEARNED D EPARTMENTAL R EPRESENTATIVE RELIED UPON THE OBSERVATION S OF THE AO. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON R ECORD. AS COULD BE SEEN FROM RECORD , BASED ON CERTAIN INFORMATION AVAILABLE ON RECORD, THE AO HAD TREATED CERT AIN PURCHASES AS NON - GENUINE AND ADDED BACK TO THE INCOME O F THE ASSESSEE. HOWEVER, LEARNED COMMISSIONER (APPEALS) HAS RESTRICTED THE DISALLOWANCE TO THE PROFIT ELEMENT EMBEDDED IN THE ALLEGED - NON GENUINE PURCHASES, WHICH GOT FURTHER ENHANCED BY THE TRIBUN AL. THUS, ULTIMATELY , THE ADDITIONS LEADING TO THE IMPOSITION OF PENALTY WERE MADE ON ESTIMATE BASIS. IT IS FURTHER EVIDENT FROM THE ASSESSMENT ORDER , IN R ESPONSE TO THE NOTICE ISSUED UNDER SECTION 133 (6) OF THE ACT , SOME OF THE SELLING DEALERS RES PONDED A ND FURNISHED THE DETAILS OF SALES MADE BY THEM. THUS, THE ADMITTED FACTUAL POSITION IS , SOME OF THE DEALERS ALLEGED TO BE NON - GENUINE HAVE CONFIRMED THE TRANSACTIONS WITH THE ASSESSEE. THUS, FROM THESE FACTS, NEITHER CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTI CULARS OF INCOME IS PROVED. THEREFORE , IN SUCH SCENARIO, NO PENALTY UNDER SECTION 271(1) (C) OF THE ACT COULD HAVE BEEN IMPOSED. 6. EVEN , OTHERWISE ALSO, THE PRESENT APPEALS OF THE REVENUE ARE NOT MAINTAINABLE DUE TO LOW TAX EFFECT. UNDISP UTEDLY, THE Q UANTUM IN DISPUTE IN BOTH THE APPEALS IS MUCH LESS THAN THE MONETARY LIMIT OF RS. 50 LACS AS PER CBDT CIRCULAR NO. 17/2019 DATED 08.08.2019 . I T IS THE CASE OF THE REVENUE THAT THE APPEALS ARE PROTECTED UNDER PARA GRAPH 10(E) OF CBDT CIRCULAR NO . 2/2018 DATED 11.07.2018. HOWEVER, A CAREFUL READING OF THE RELEVANT CLAUSE OF THE CIRCULAR MAKES IT CLEAR THAT IT IS ONLY APPLICABLE TO THE ADDITIONS MADE BASED ON INFORMATION RECEIVED FROM EXTERNAL SOURCES LIKE LAW ENFORCEMENT AGENCIES I N THE CATEGORY O F CBI, DRI ETC. PRESENTLY, WE DEALING WITH PROCEEDIN G FOR IMPOSITION OF PENALTY UNDER SECTION 271(1) (C) OF THE ACT WHICH IS INDEPENDENT FROM THE ASSESSMENT PROCEEDINGS. THEREFORE, IT CANNOT BE SAID THAT THE PENALTY IMPOSED IS BASED ON INFORMATION RECEIVED FROM EXTERNAL SOURCES AS CONTEMPLAT ED UNDER PARA GRAPH 10(E) OF THE FORETASTED CIRCULAR. THAT BEING THE CASE, THE PRESENT APPEALS ARE NOT MAINTAINABLE DUE TO LOW TAX EFFECT 4 ITA NO S . 76 & 77 / MUM/2020 ASSESSMENT YEAR S : 20 09 - 1 0 & 2010 - 11 AS WELL. IN VIEW OF THE AFORESAID , WE UPHOLD THE ORDER OF LEARNED COMMISSIONER (APPE ALS) WHILE DISMISSING THE GROUNDS RAISED. 7 . IN THE RESULT, APPEAL S ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JULY , 2021 . SD/ - SD/ - ( RAJESH KUMAR ) ACCOUNTANT MEMBER (SAKTIJIT DEY) JU DICIAL MEMBER MUMBAI ; DATED: 20 / 07 /2021 ALINDRA, PS / 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