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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, JM & SHRI GAGAN GOYAL, AM
Samachar Marg, Fort, Road, Marine Lines, Mumbai-400001. Mumbai-400020. स्थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAMFP4284F (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Assessee by: Shri Prateek Jain Revenue by: Shri R. A. Dhyani (Sr. AR) सुनवाई की तारीख / Date of Hearing: 11/05/2022 घोषणा की तारीख /Date of Pronouncement: 30/05/2022 आदेश / O R D E R PER ABY T. VARKEY, (JM): 149/Mum/2021 are cross appeals preferred by the revenue and the assessee respectively for AY.2012- 13 against the order of the Ld CIT(A)-47, Mumbai dated 13.11.2020 and & ITA. No. 150/Mum/2021 are cross appeals preferred by the revenue and the assessee respectively for A.Y.2013- 14; and since both the parties agreed that the issues are identical and the facts/law are also similar, therefore, decision in the lead case i.e. [ITA. No. 134/Mum/2021 & 149/Mum/2021] M/s. Poonam Shanti Developers will be followed in the other cross appeals also.
The main grievance of the revenue in A.Y.2012-13 is against the action of the Ld. CIT(A) deleting partly the penalty of Rs.84,76,498/- levied u/s 271(1)(c) by AO taking note of the quantum addition made on account of bogus loans, interest on bogus loans, & 149/Mum/2021 135 & 150/Mum/2021 A.Y. 2012-13 & 2013-14 M/s. Poonam Shanti Developers & Poonam Mega Developers commission paid on bogus loans and bogus purchases whereas by preferring the cross appeals the assessee has preferred the grounds of appeal
against the action of the Ld. CIT(A) confirming/restricting the penalty to the extent of 12.5% of the bogus purchases [Rs 6,77,745/- ]u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter ‘Act’).
3. The brief facts of the case as noted by the Ld. CIT(A) is that the appellant is a partnership firm and was engaged in real estate development construction for the year under consideration. Consequent to a search action conducted on Bhanwarlal Jain Group, it was alleged that the assessee Group i.e. Poonam Group is one of the beneficiary of the accommodation entries in the form of unsecured loan. Accordingly, a survey action u/s 133A of the Act was carried out on 16/10/2014 on M/s. Poonam Group of entities to which the assessee belongs. Finally, assessment order was passed by the AO u/s 143(3) of the Act, wherein quantum addition on account of unsecured loans, commission expenses, disallowance on account of interest and certain disallowance of purchase alleged to be bogus to the tune of Rs 2,28,65,515/- were made by the AO in the quantum assessment orders. 3.1 Thereafter, aggrieved by the above referred quantum assessment orders, the assessee filed the appeal before the CIT(A) who gave no relief to the assessee and dismissed its appeal. The assessee aggrieved & 149/Mum/2021 135 & 150/Mum/2021 A.Y. 2012-13 & 2013-14 M/s. Poonam Shanti Developers & Poonam Mega Developers by the quantum assessment further filed an appeal before this Tribunal.
3.2 Meanwhile, AO passed the penalty order in the assessee’s case and the other assesse’s group. The Penalty was levied on the addition/disallowance made by the AO in the Original quantum assessment order passed u/s 143(3) of the Act. The summary of the additions and penalty levied thereon is as under:-
Nature of Addition/Disallowance A.Y.2012-13 Alleged Bogus Unsecured Loan 1,90,00,000 Interest on Unsecured Loan 3,87,252 Commission on Unsecured Loan 1,29,000 Alleged Bogus Purchases 54,21,960 Total 2,49,38,212 Penalty levied on above as per the Penalty 84,76,498 order u/s 271(1)(c) of the Act
Aggrieved by the penalty levied by the AO, the assessee preferred an appeal before the Ld. CIT(A) who took note of the fact in his impugned order that the Tribunal in the quantum assessment has given partial relief to the assessee by deleting the addition made by the AO in respect of unsecured loan interest, commissions for securing loan, which has been alleged to be accommodation entries. (Refer Tribunal order dated 03.05.2019 (ITA. Nos. 2687 to 2694 & & 149/Mum/2021 135 & 150/Mum/2021 A.Y. 2012-13 & 2013-14 M/s. Poonam Shanti Developers & Poonam Mega Developers 3226 to 3229/Mum/2019). Therefore, the CIT(A) has deleted the penalty levied in respect of the addition made on this score since the Tribunal has deleted the quantum addition on the issue of bogus unsecured loans, interest & commission to secure it, which action of the Ld. CIT(A) does not required any interference from our side. Therefore, we confirm the impugned order of Ld. CIT(A) on the principle that when the foundation goes, the super-structure falls so the revenue grounds assailing this action of the Ld. CIT(A) stands dismissed.
Coming to the penalty levied in respect of bogus purchases, it is noted that the Tribunal in respect of the quantum addition made by lower authorities has restricted the additions to 12.5% (profit element) on the bogus purchases. Based on the said decision of the Tribunal, the Ld. CIT(A) taking note that the Tribunal has confirmed addition to the extent of Rs.6,77,745/-, the Ld. CIT(A) confirmed penalty u/s 271(C) @ 100% on the additions of Rs.6,77,745/- (in respect of bogus purchases) and directed the AO to work out of the penalty accordingly as per law. Against the aforesaid action of the Ld. CIT(A), the assessee as well as revenue is in appeal (cross appeal) before us.
We have heard both the parties and perused the record. We have already held that since the quantum additions in respect of bogus un-secured loans, interest on it, commission to secure it, have been deleted by the Tribunal. So, the Ld. CIT(A) has rightly deleted the & 149/Mum/2021 135 & 150/Mum/2021 A.Y. 2012-13 & 2013-14 M/s. Poonam Shanti Developers & Poonam Mega Developers penalty levied on it u/s 271(1)(c) of the Act which action we confirm. Therefore, the revenue appeal against the action of the Ld. CIT(A) on these issues stands dismissed.
Coming to the action of the Ld. CIT(A) sustaining the penalty @ 100% on the addition of Rs.6,77,745/- (12.5%) of the bogus purchases as confirmed/restricted by the Tribunal is concerned, we note that the Ld CIT(A) has restricted the penalty @ 100% on the additions of Rs.6,77,745/- (in respect of bogus purchases), because Tribunal while giving relief to the assessee in respect of quantum assessment, has restricted the addition to 12.5% (profit element) on the bogus purchases. Based on such an action of the Tribunal in quantum appeal, the Ld. CIT(A) has confirmed penalty @ 100% on the additions of Rs.6,77,745/- and directed the AO to work out of the penalty accordingly as per law. However, we find that no penalty would be leviable u/s 271(1)(c) of the Act since the quantum addition sustained by this Tribunal was based on the estimation basis i.e. @ 12.5% on the value of in-genuine purchases. We note that this Tribunal in the case of M/s. Pabal Housing Pvt. Ltd. in & 151/Mum/2021 for A.Y.2013-14 vide order dated 23.12.2021 deleted the penalty u/s 271(1)(c) of the Act, wherein such addition was made u/s 271(1)(c) of the Act was on account of bogus purchases on estimation basis. On the same ratio, we direct the AO to delete the penalty u/s 271(1)(c) of the Act. & 149/Mum/2021 135 & 150/Mum/2021 A.Y. 2012-13 & 2013-14 M/s. Poonam Shanti Developers & Poonam Mega Developers Accordingly, the grounds raised by the assessee are allowed and the grounds raised by the revenue are dismissed. Therefore, the appeals of revenue 134/Mum/2021 & 135/Mum/2021 stands dismissed and assessee appeals (ITA. No. 149 & 150/Mum/2021) are allowed on the same principles mutatis mutandis.