ASSISTANT COMMISSIONER OF INCOME TAX-5(1)(2), MUMBAI V. M/S. FANCY DIAMONDS INDIA PRIVATE LIMITED, MUMBAI

MA 61/MUM/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3878 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-06-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 07-03-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Search and seizure; Tax effect
• Section: 271(1)(c); 254(2)

Judgement Text

आयकर अपीलीय अिधकरण मुंबई पीठ “एफ”, मुंबई ŵी िवकास अव̾थी, Ɋाियक सद˟ एंव ŵी एस įरफौर रहमान, लेखा सद˟ के समƗ IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER एम.ए.सं.61/मुं/2022 इन.आ.अ.सं.5384/मुं/2019(िन.व.2013-14) M.A. NO.61/MUM/2022 in ITA No. 5384/MUM/2019 (A.Y.2013-14) DCIT-5(1)(1), Room No. 568, 5 th Floor, Aayakar Bhavan, M.K. Road, Mumbai-400020. ...... ᮧाथᭅक/Applicant बनाम Vs. M/s Fancy Diamonds India Pvt. Ltd., 111, Prasad Chambers, Tata Road No.2, Opera House, Mumbai-400004 PAN: AAACF3325J ..... ᮧितवादी/Respondent आ.अ.सं.5384/मुं/2019(िन.व.2013-14) ITA No. 5384/MUM/2019 (A.Y.2013-14) ACIT-5(1)(2), Room No. 568, 5 th Floor, Aayakar Bhavan, M.K. Road, Mumbai-400020. ...... ᮧाथᭅक/Applicant बनाम Vs. M/s Fancy Diamonds India Pvt. Ltd., 111, Prasad Chambers, Tata Road No.2, Opera House, Mumbai-400004 PAN: AAACF3325J ..... ᮧितवादी/Respondent 2 एम.ए.सं. 61/मुं/2022 & आ.अ.सं.5384/मुं/2019 (िन.व.2013-14) M.A. NO.61/MUM/2022 & ITA No. 5384/Mum/2019 (A.Y.2013-14) ᮧाथᭅक/अपीलाथᱮ ᳇ारा/ Applicant/Appellant by : Sh. Manish Ajudiya ᮧितवादी ᳇ारा/Respondent by : Sh. Himanshu Gandhi सुनवाई कᳱ ितिथ/ Date of hearing : 17/06/2022 घोषणा कᳱ ितिथ/ Date of pronouncement : 17/06/2022 आदेश/ ORDER PER VIKAS AWASTHY, J.M: This Miscellaneous Applications (MA) has been filed by the Department under section 254(2) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The Department is seeking rectification in the order of Tribunal dated 19.04.2021 whereby appeal of the Revenue was dismissed on account of low tax effect. 2. Sh. Manish Ajudiya representing the Department submitted that although the tax effect involved in the appeal by the Revenue is less than the monetary limit specified in CBDT Circular No. 17/2019 dated 08.08.2019 but the appeal by the Revenue falls under exceptions provided in para 10(f) of CBDT letter dated 20.08.2018. The ld. Departmental Representative (DR) submitted that the Department has launched prosecution against the assessee in Court of Additional Chief Metropolitan Magistrate, Mumbai. The ld. Authorized Representative (AR) furnished copy of the criminal complaint filed in the Court of Additional Chief Metropolitan Magistrate, Mumbai. 3. Per contra, Sh. Himanshu Gandhi appearing on behalf of the assessee vehemently opposed the M.A. The ld. AR submitted that the chronology of events would show that on the date of filing of the appeal by the Department before the Tribunal, no prosecution was filed. It was only after the filing of the appeal before the Tribunal that a criminal complaint was filed in the Court of Metropolitan Magistrate. The ld. AR asserted that as per exception in para- 10(f), the prosecution filed by the Department should be pending in the Court 3 एम.ए.सं. 61/मुं/2022 & आ.अ.सं.5384/मुं/2019 (िन.व.2013-14) M.A. NO.61/MUM/2022 & ITA No. 5384/Mum/2019 (A.Y.2013-14) at the time of filing of the appeal. Therefore, the present M.A. is without merit and liable to be dismissed. 4. We have heard the submissions made by rival sides and have considered the exceptions provided in CBDT communiqué dated 20.08.2018. Taking note of the same, we are of the considered view that though tax effect involved in appeal of the Revenue is less than the monetary limit prescribed by CBDT Circular No. 3/2018 (supra) for filing of the appeal before the Tribunal, however, the instant appeal falls under exception as specified in para-10(f) of CBDT letter dated 20.08.2018. The Department has filed prosecution against the assessee before Metropolitan Magistrate, Mumbai, hence, the appeal is covered by exception as specified in para-10(f). This fact was not brought to the notice of Bench at the time of hearing of the appeal. In the light of new fact brought on record, the order dated 19.04.2021 is recalled and the appeal is restored to its original number. 5. In the result, M.A. filed by the Revenue is allowed. ITA No. 5384/Mum/2019 (AY-2013-14 6. With the consent of both the sides, the appeal of the Revenue against the order of CIT(A)-10, Mumbai dated 10.05.2019 for the A.Y. 2013-14 deleting penalty levied under section 271(1)(c) of the Act is taken up for hearing. 7. The ld. DR submitted that the assessee is engaged in export of Diamond Studied Jewellery. During the period relevant to A.Y. under appeal, the assessee had obtained bogus purchase bills amounting to Rs. 5,87,40,062/- from various parties engaged in providing bogus purchase bills. All the bogus parties from whom the assessee had obtained bogus purchase bills belonged to Bhanwarlal Jain Group. During the course of search and seizure action in the 4 एम.ए.सं. 61/मुं/2022 & आ.अ.सं.5384/मुं/2019 (िन.व.2013-14) M.A. NO.61/MUM/2022 & ITA No. 5384/Mum/2019 (A.Y.2013-14) case of Bhanwarlal Jain Group, Bhanwarlal Jain in statement recorded during search action admitted that he had floated various concerns which are only providing bogus entries and are not actively involved in any other business. The assessee during the assessment proceedings failed to discharge its onus in proving genuineness of the purchases and the dealers. Consequently, the AO made estimated addition of 12.5% of bogus purchases and penalty under section 271(1)(c) of the Act on the aforesaid addition was also initiated. Thereafter, the AO vide order dated 22.11.2018 levied penalty of Rs. 1,36,130/- on the addition confirmed by the Tribunal. The CIT(A) has deleted the penalty levied under section 271(1)(c) of the Act, hence, the present appeal. The ld. DR submitted that the CIT(A) has erred in deleting penalty without taking note of the fact that the assessee has indulged in obtaining bogus purchase bills and thereby suppressing profits. The ld. DR prayed for reversing the findings of CIT(A) and upholding levy of penalty. 8. On the other hand, ld. AR of the assessee vehemently defended the impugned order, whereby, penalty levied under section 271(1)(c) of the Act was deleted by the CIT(A). The ld. AR submitted that during assessment proceedings, addition on account of alleged bogus purchases was made merely on estimation @ 12.5% of bogus purchases. The matter travelled up to the Tribunal. In appeal filed by the Revenue, the Tribunal confirmed disallowance of bogus purchases @ 6%. The Tribunal again confirmed the addition merely on estimations. It is a settled legal position that no penalty can be levied on estimated addition. The ld. AR prayed for dismissing the appeal of Revenue and upholding the impugned order. 9. We have heard the submissions made by rival sides and have examined the orders of the authorities below. Undisputedly, the additions made on 5 एम.ए.सं. 61/मुं/2022 & आ.अ.सं.5384/मुं/2019 (िन.व.2013-14) M.A. NO.61/MUM/2022 & ITA No. 5384/Mum/2019 (A.Y.2013-14) account of bogus purchases were partially confirmed by the Tribunal. The assessee failed to discharge its onus in proving genuineness of the purchases and dealers. During assessment proceedings, the addition was made on estimation @ 12.5%. In first appeal, the addition was restricted to 3% and on further appeal to the Tribunal by the Revenue, the addition was enhanced to 6%. The entire addition right from assessment stage to the Tribunal was merely on estimations. There is no definite finding on the quantum of concealment of income. It is an accepted legal position that penalty under section 271(1)(c) of the Act levied on additions made merely on estimations is unsustainable. 10. The Hon'ble Rajasthan High Court in the case of CIT vs. Krishi Tyre Retreading and Rubber Industries reported as 360 ITR 580 has held that where addition is made purely on estimate basis, no penalty u/s. 271(1)(c) of the Act is leviable. Similar view has been expressed by Ho’ble Punjab & Haryana High Court in the case of CIT vs. Sangrur Vanaspati Mills Ltd. reported as 303 ITR 53. The Hon’ble High Court approving the order of Tribunal held that when the addition has been made on the basis of estimate and not on any concrete evidence of concealment, penalty u/s. 271(1)(c) of the Act is not leviable. The Hon'ble Gujarat High Court in the case of CIT vs. Subhash Trading Co. Ltd. reported as 221 ITR 110 has taken a similar view in respect of penalty levied u/s. 271(1)(c) of the Act on estimated additions. There are catena of decisions by different High Courts and various Benches of the Tribunal wherein penalty levied u/s. 271(1)(c) of the Act on estimated addition has been held to be unsustainable. 6 एम.ए.सं. 61/मुं/2022 & आ.अ.सं.5384/मुं/2019 (िन.व.2013-14) M.A. NO.61/MUM/2022 & ITA No. 5384/Mum/2019 (A.Y.2013-14) 11. In the result, the impugned order is upheld and the appeal of Revenue is dismissed. Order pronounced in the open court on Friday, the 17 th day of June, 2022. Sd/- Sd/- (S.RIFAUR RAHMAN) (VIKAS AWASTHY) लेखा सद᭭य / ACCOUNTANT MEMBER ᭠याियक सद᭭य / JUDICIAL MEMBER मुंबई/Mumbai, ᳰदनांक/Dated: 17/06/2022 SK, Sr.PS ᮧितिलिप अᮕेिषतCopy of the Order forwarded to : 1. अपीलाथᱮ/The Appellant , 2. ᮧितवादी/ The Respondent. 3. आयकर आयुᲦ(अ)/ The CIT(A)- 4. आयकर आयुᲦ CIT 5. िवभागीय ᮧितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 6. गाडᭅ फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai