BHAWARLAL TARACHANDJI JAIN,MUMBAI vs. COMMISSIONER OF INCOME TAX (APPEAL), MUMBAI

P a g e | 1 ITA No.1729 & 1730/Mum/2023 Bhawarlal Tarachandji Jain Vs., CIT (A) IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA Nos.1729 & 1730/Mum/2023 (A.YS. 2010-11 & 2011-12)

Bhawarlal Tarachandji Vs. ITO Ward 17(1)(2) Jain, 201 Mahavir Sadan, Mumbai Balaram Street Grant Road, Mumbai – 400007 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AACPJ7408D Appellant .. Respondent

Appellant by : Rashesh P Patel Respondent by : Ashok Kumar Ambastha Date of Hearing 09.08.2023 Date of Pronouncement 17.08.2023 आदेश / O R D E R Per Amarjit Singh (AM): Both these appeals filed by the assessee are directed against the different orders of ld. CIT(A) NFAC, for assessment years 2010-11 & 2011-12. Since both these appeals are based on common issue of levying penalty u/s 271(1)(c) for concealment of particulars of income on similar facts, therefore, for the sake of convenience both these appeals are adjudicated together by taking ITA No. 1729/Mum/2023 as a lead case and its finding will be applied mutatis mutandis to the other appeal. All the ground no. 1 to 8 are interconnected, therefore all these ground of appeal are adjudicated together as follows.

P a g e | 2 ITA No.1729 & 1730/Mum/2023 Bhawarlal Tarachandji Jain Vs., CIT (A) ITA No. 1729/Mum/2023 “1. The Order passed by the Ld. CIT(A) is opposed to law and contrary to the facts and circumstances of the case and is therefore unsustainable 2. On the facts and in the circumstances of the case and in law, the learned A.O. is not justified in levying penalty of Rs.73,950/- u/s 271(c) on account of disallowance of bogus purchases of Rs.664,789/- being 12.5% of total purchases of Rs. 53,18,312/- (which was reduced by CIT(A) to 8%) from different suppliers treated as purchases from Hawala Dealer, while there was no such Hawala Purchases 3. We would like to place our reliance in the decision of the co-ordinate bench in ITA No.5384/Mum/2019 in the case of ACIT vs. M/s. Fancy Diamonds India Pvt. Ltd. vide order dated 17.06 2022, which has held that in case where the addition is made on estimated basis, the penalty u/s. 271(1)(c) of the Act is not leviable 4. The Tribunal has relied on the decision of the Hon'ble Rajasthan High Court in the case of CIT vs. Krishi Tyre Retreading and Rubber Industries reported as 360 ITR 580, the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT vs. San grur Vanaspati Mills Ltd. reported as 303 ITR 53 and Hon'ble Gujarat High Court in the case of CIT vs. Subhash Trading Co. Ltd. reported as 221 ITR 110. It is observed that all the above mentioned decisions have reiterated the proposition that the penalty u/s 271(1)(c) of the Act cannot be levied in case where the addition is made on estimated basis 5. On the facts and in the circumstances of the case and in law, the learned AO failed to appreciate that there is neither concealment of particulars of income nor furnishing of inaccurate particulars of income. Therefore penalty imposed under section 271(1) (c) is bad in law. 6. The Ld. CIT(A) mentioned that the appellant was involved in hawala transaction and just produced accommodation bills without actual delivery is not valid in case of the appellant. 7 The Ld. CIT(A) confirmed the adhoc disallowance to the extent of 8% of total purchases which is not justifiable as there is no basis for such calculation 8. The AO erred in ignoring the facts that addition is made only on estimated basis on account of difference in gross margins earned from sale against purchases from party alleged to be non-genuine An addition which is made purely on an estimate basis, it cannot be said there is concealment of income. 9. The appellant seeks your leave to add, alter, amend or delete any of the grounds urged, at the time of hearing.”

P a g e | 3 ITA No.1729 & 1730/Mum/2023 Bhawarlal Tarachandji Jain Vs., CIT (A) u/s 271(4)(c) on addition of Rs.664,789/- being 12.5% of total purchases of Rs.53,18,312/- (which was reduced by ld. CIT(A) to 8%) from different suppliers treating as purchases made from hawala parties. 3. Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has sustained the penalty levied by the AO. 4. During the course of appellate proceedings before us the ld. Counsel submitted that payment to suppliers has been made by the account payee cheques and the purchased goods has been sold to different customers which tally with the quantity of detail maintained. The ld. Counsel further submitted that assesse has made genuine purchases from suppliers who has not filed MVAT return on the basis of which they have been treated by the sales tax department as hawala dealers. The ld. Counsel further contended that just on the basis of information obtained from sales tax department AO made the estimated addition without proving that assesse has made any ingenuine purchases. The ld. Counsel also submitted that penalty levied under above circumstances on estimated basis is not justified. On the other hand, the ld. D.R supported the order of lower authorities. 5. Heard both the sides and perused the material on record. The assessing officer vide order u/s 143(3) had made addition of Rs.664,789/- being 12% of total purchases of Rs.53,18,312/- made from different suppliers by treating as purchases made from hawala dealer on the basis of information received from the sale tax department. The ld. CIT(A) has reduced addition to 8% of such purchases made from different suppliers. During the course of assessment proceeding the assessee has submitted the relevant supporting details i.e delivery challan, purchase invoices quantity wise statement, corresponding sale invoices and bank statement to prove the

P a g e | 4 ITA No.1729 & 1730/Mum/2023 Bhawarlal Tarachandji Jain Vs., CIT (A) genuineness of the transactions. The assesse has also submitted the relevant evidences of making corresponding sale against the purchases made by the assessee. However, the assessing officer on estimated basis has made the impugned addition on the ground that assessee has made purchase from other supplier at lower price without contrary disproving the relevant supporting evidences furnished by the assesse. In the light of the above facts we consider that assessing officer has determined the addition on estimated basis which is not sufficient to establish that assessee has actually concealed the particulars of income. We have considered the decision of Hon’ble Bombay High Court in the case of CIT Vs. Yusuf Abdullah Patel (1994) 15 taxman.com 614 wherein held determination of income of assesse on certain estimate was not sufficient to support that assessee had concealed his income. In view of the above facts and finding we consider that in the case of the assessee the impugned penalty merely levied on addition made on the basis of estimated profit is not justified, therefore, we are not inclined with the decision of ld. CIT(A), accordingly, the ground no. 1 to 8 of the appeal of the assessee are allowed.

ITA No. 1730/Mum/2023

P a g e | 5 ITA No.1729 & 1730/Mum/2023 Bhawarlal Tarachandji Jain Vs., CIT (A) 7. In the result, both the appeals of the assesse are allowed. Order pronounced in the open court on 17.08.2023 Sd/- Sd/- (Aby T Varkey) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 17.08.2023 Rohit: PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file.

सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.