SANJAYBHAI DAMJIBHAI GOLAKIYA,SURAT V. ITO, WARD-3(3)(1), SURAT

ITA 951/SRT/2024

AI Insights

The case revolves around a penalty imposed on Sanjaybhai Damjibhai Golakiya by the Assessing Officer (AO) under section 271(1)(c) of the Income-tax Act, 1961, for alleged furnishing of inaccurate particulars of income. The penalty was based on the addition of Rs.21,49,998, which was initially added to the income as bogus purchases. However, the Commissioner of Income-tax (Appeals) later restricted this addition to 5% on an estimation basis. The Tribunal, referencing several precedents, concluded that penalties cannot be levied on estimated additions, thus allowing the appeal and setting aside the penalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314163 (ITAT-SURAT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Other Referred Cases: CIT vs. Subhash Trading Co., CIT vs. Whitelene Chemicals, Deepak Banwarial Agarwal vs. ITO, M/s Opulent Jewels Pvt. Ltd. vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JAIN
• Assessee Lawyers: P. M. JAGASHETH
• Keywords: Condonation of delay; Set aside; Bogus purchase; Search and seizure; Accommodation entries; Bogus
• Section: 143(3); 271(1)(c); 132

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.951/SRT/2024 Assessment Year: (2013-14) (Hybrid hearing) Sanjaybhai Damjibhai Golakiya, D-74, Vithalnagar Society, Hirabaug, Varachha Road, Surat - 395006 Vs. The Assessment Unit, Income-tax Department, Jurisdictional AO: The ITO, Ward – 3(3)(1), Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No: ALOPG2048R (अपीलाथŎ/Appellant) (ŮȑथŎ /Respondent) Appellant by Shri P. M. Jagasheth, CA Respondent by Shri Mukesh Jain, Sr. DR Date of Hearing 18/03/2025 Date of Pronouncement 06/05/2025 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), dated 15.02.2024 by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘CIT(A)’] for the Assessment Year (AY) 2013-14, which in turn arising out of penalty order u/s 271(1)(c) of the Act, dated 17.01.2022. 2. Grounds of appeal raised by the assessee are as under: “1. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the assessing officer in levying Penalty of Rs.21,757/- u/s 271(1)(c) of the I.T. Act, 1961. 2. It is therefore prayed that the above penalty may please be deleted as learned members of the tribunal may deem it proper. 2 ITA No.951/SRT/2024/AY.2013-14 Sanjay Damjibhai Golakiya 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 3. The appeal filed by assessee is barred by 147 days in terms of provisions of Section 253(3) of the Act. The assessee has filed an affidavit giving reasons for delay in filing of appeal before the Tribunal. In the affidavit, it has been stated that the appellant filed appeal u/s 253(1) of the Act on 09.09.2024, vide ITA No.951/SRT/2024, against the order dated 15.02.2024, which was uploaded on the Income-tax e-filing portal. Though the appeal should be required to file within 60 days from the date of communication of the order, but it could not be filed in time because the assessee was unaware of online proceedings. The notices of hearing were issued to the e-mail Id, i.e., ‘[e-mail]’ and ‘[e-mail]’ instead of e-mail Id of ‘[e-mail]’, which was mentioned in Form 35. Due to the non- response to the notice of hearing, the CIT(A) was passed an ex-parte order and uploaded the same in online portal on 16.03.2024. The learned Authorized Representative (ld. AR) of the assessee checked the e-filing portal and found that the notice of hearing notices was issued to incorrect email addresses. After downloading the order of CIT(A), he filed an appeal on 09.09.2024 before this Tribunal. Hence, the delay of 147 days in filing the appeal has occurred. The appellant submitted that the delay in filling appeal is neither intentional nor deliberate. It was due to circumstances beyond the control of the appellant. The ld. AR has requested to condone the delay in filing the appeal. 3 ITA No.951/SRT/2024/AY.2013-14 Sanjay Damjibhai Golakiya 4. On the other hand, learned Senior Departmental Representative (ld. Sr. DR) for the revenue opposed the prayer for condonation of delay. He submitted that the assessee was negligent, inactive and not diligent. 5. We have heard both the parties on this preliminary issue of delay in filing appeal. In the affidavit, it is submitted that the notices and the order were issued on the wrong e-mail id. Further, the earlier counsel did not inform the appellant about the order of CIT(A) about fate of appeal due to which, the delay of 147 days has occurred in filing appeal before the Tribunal. We find that assessee was not negligent but due to absence of legal advice of earlier tax consultant, there was delay in filing the present appeal. The delay in filing the appeal was not deliberate and intentional on the part of assessee. Moreover, the assessee is not going to be benefitted by filling appeal belatedly. It is now fairly settled that when technical consideration and cause of substantial justice are pitted against each other, the cause of substantial justice may be preferred. Hence, the reasons given in the affidavit for condonation of delay are reasonable and the same would constitute sufficient cause for the delay in filing this appeal. We, therefore, condone the delay and admit the appeal for hearing. 6. The facts of the case in brief are that against returned income of Rs.4,96,230/-, the Assessing Officer (in short, ‘AO’) assessed the total income at Rs.26,46,230/- by making addition of Rs.21,49,998/- on account of bogus purchases. The AO also initiated penalty proceedings u/s 271(1)(c) of the Act 4 ITA No.951/SRT/2024/AY.2013-14 Sanjay Damjibhai Golakiya for furnishing inaccurate particulars of income. The AO has disallowed the entire purchases from M/s Sun Diam, one of the concerns of Rajendra Jain Group, who were found to have provided accommodation entries by way of bogus purchases and sales to various parties. It was so established due to a search and seizure operation conducted u/s 132 of the Act on 03.10.2013 on the concerns of Shri Rajendra Jain group, Shri Dharmichand Jain group and Shri Sanjay Chaudhary group. On appeal, the CIT(A) restricted the addition to the extent of 5% of the impugned purchases. Accordingly, the addition of Rs.1,07,500/- was sustained by the CIT(A). During the penalty proceedings, the assessee submitted that the AO failed to bring any evidence on record that the above amount represents bogus purchases. All payments for the said purchases were done through account payee cheques only. The AO has accepted genuineness of sales but, on the other hand, disallowed purchases made from the impugned party. The CIT(A) restricted addition to 5% of total purchases only on estimation basis. Hence, there is not case of furnishing inaccurate particulars of income. The AO did not accept such explanation and proceeded to levy the penalty because the CIT(A) had partly confirmed the addition made by the AO. He levied minimum penalty of Rs.21,750/- u/s 271(1)(c) of the Act, being 100% of tax sought to be evaded. 7. Aggrieved by the order of AO, the assessee filed appeal before CIT(A) where appellant raised three grounds including validity of the notice issued u/s 274 r.w.s. 271(1)(c) of the Act and merit of the penalty imposed by the AO. The 5 ITA No.951/SRT/2024/AY.2013-14 Sanjay Damjibhai Golakiya CIT(A) issued three notices which were not responded to by the assessee. Hence, he dismissed the appeal by observing that no corroborative submissions were filed in respect of grounds of appeal. The appeal was also dismissed by him for non-prosecution. 8. Aggrieved by the order of CIT(A), the assessee filed the present appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee submitted that in case of the appellant, the assessment order u/s 143(3) r.w.s. 147 of the Act was passed on 17.11.2016, wherein the entire purchase from M/s Sun Diam, one of the concerns of Shri Rajendra Jain group was treated as bogus and was added to the total income. In appeal, the CIT(A) restricted the said addition to 5% of the impugned purchase. The ld. AR of the assessee submitted that the addition was restricted to 5% of purchase by the CIT(A) on estimation basis. He submitted that it is now fairly well settled that in Income-tax proceedings, no penalty is leviable on addition made on estimated addition. Therefore, the penalty levied by the AO is liable to be deleted. The ld. AR relied upon the decisions in cases of (i) CIT vs. Subhash Trading Co., (1996) 221 ITR 110 (Guj.), (ii) CIT vs. Whitelene Chemicals, 32 taxmann.com 192 (Guj.), (iii) Deepak Banwarial Agarwal vs. ITO, ITA No.827/SRT/2023 (Surat – Trib.) and (iv) M/s Opulent Jewels Pvt. Ltd., ITA No.1584/AHD/2012/SRT, dated 15.11.2018. 9. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported the orders of lower authorities. He 6 ITA No.951/SRT/2024/AY.2013-14 Sanjay Damjibhai Golakiya submitted that the case of revenue right from the beginning is that the assessee has shown bogus purchases and thus, furnished inaccurate particulars of income. The stand of revenue is upheld by the CIT(A) in restricting the addition to the extent of 5% of bogus purchases. Therefore, the penalty u/s 271(1)(c) of the Act should be upheld qua the addition upheld in the quantum appellate proceedings. 10. We have heard both the parties and perused the materials available on record. We have also deliberated upon the decisions relied upon by the ld. AR. Though the revenue has raised three grounds of appeal, the only effective ground is levy of penalty of Rs.21,757/- u/s 271(1)(c) of the Act. The assessment order was passed on 17.11.2016 u/s 143(3) r.w.s. 147 of the Act by disallowing the entire purchases of Rs.21,49,998/- from M/s Sun Diam, one of the concerns of Shri Rajendra Jain group. The disallowance was restricted to 5% of the impugned purchase by the CIT(A). Thus, it is clear that the addition was sustained on estimation basis. The penalty u/s 271(1)(c) of the Act has been levied on the estimated addition sustained by the CIT(A). The ld. AR has argued that the Hon’ble jurisdictional High Court in cases of Subhash Trading Co. (supra) has held that penalty u/s 271(1)(c) of the Act could not be levied where addition was on estimated basis. The Co-ordinate Bench of ITAT, Surat in cases of Yogendra Raj U Sanghvi, in ITA No.459/SRT/2021, dated 19.10.2023, Deepak Banwarilal Agarwal, in ITA No.827/SRT/2023, dated 27.02.2024 and DCIT vs. M/s Opulent Jewels Pvt. Ltd., in ITA No. 1855/AHD/2010/SRT, dated 7 ITA No.951/SRT/2024/AY.2013-14 Sanjay Damjibhai Golakiya 15.11.2018, has also held that no penalty is leviable on estimated addition. The ITAT, Mumbai in case of Mun Gems vs. ACIT, 155 taxmann.com 1, has also held that where AO treated entire purchase as bogus based on findings of Investigation Wing and levied penalty u/s 271(1)(c), since payment of purchase had been made through account payee cheques and there was corresponding sales, ad hoc GP rate applied on alleged bogus purchases to factor in suppression of alleged gross profit could not be basis of levying penalty for furnishing of inaccurate particulars of income or concealing particulars of income. Since the facts are similar, following the above decisions, the order of CIT(A) is set aside and grounds of appellant are allowed. 11. In the result, appeal of the appellant is allowed. Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 06/05/2025 Sd/- Sd/- (SANJAY GARG) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 06/05/2025 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat "