INCOME TAX OFFICER vs. DEEPAK SHANKAR PANASKAR, NASHIK

आदेश / ORDER

PER VIKAS AWASTHY, JM

These two appeals by the Revenue are directed against the orders of the Commissioner of Income Tax (Appeals)-2, Nashik, deleting addition made in respect of bogus purchases and deleting penalty levied u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on the addition made in respect of bogus purchases.

2 ITA Nos.203 & 204/PUN/2017 A.Y.2010-11

ITA No.203/PUN/2017 by Revenue is directed against the order of

Commissioner of Income Tax(Appeals)-2, Nashik dated 02.11.2016 in

quantum appeal and ITA No.204/PUN/2017 by Revenue is directed against

the order of Commissioner of Income Tax(Appeals)-2, Nashik dated

04.11.2016 deleting penalty levied u/s.271(1)(c) of the Act.

assessee is engaged in manufacturing of electrical equipments and is a

Government Contractor. Information was received from Sales Tax

Department that the assessee is engaged in bogus purchases. Survey action

u/s.133A of the Act was carried out in the case of assessee on 22.08.2013.

During the course of survey, statement of Shri Sagar Shankar Panaskar,

brother of assessee was recorded on oath u/s.131 of the Act, wherein he

admitted that in absence of supporting bills, octroi receipts and transport

receipts etc., genuineness of the purchases made from eight parties

aggregating to Rs.85,98,876/- could not be proved. The Assessing Officer

made addition of entire Rs.85,98,876/- on account of bogus purchases.

Further, the Assessing Officer initiated penalty proceedings u/s.271(1)(c) of

the Act for ‘furnishing inaccurate particulars of income’.

u/s.143(3) of the Act, the assessee filed appeal before the Commissioner of

Income Tax (Appeals). The Commissioner of Income Tax(Appeals) upheld the

purchase of goods from bogus parties. However, the Commissioner of

Income Tax (Appeals) restricted the addition to 10% of the alleged bogus

purchases i.e.8,59,887/- and deleted the remaining addition. Against the

3 ITA Nos.203 & 204/PUN/2017 A.Y.2010-11

findings of the Commissioner of Income Tax (Appeals), the Revenue is in

appeal before the Tribunal by raising following grounds:

“1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-2, Nashik was justified in deleting the addition of Rs.77,38,989/- made by the Assessing Officer on the issue of alleged bogus purchases? 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-2, Nashik was justified in ignoring the facts that the AO had brought on record credible evidence to prove that the purchases are not genuine? 3. The appellant prays leave to add, alter, clarify/amend and or withdraw any grounds of appeal as and when the occasion demands.”

assessee had failed to furnish supporting documents to show trail of goods.

The assessee neither furnished invoices, octroi receipts and transport

receipts nor the assessee was maintaining stock register. Further, the

assessee could not prove genuineness of the suppliers. No confirmations

were filed by the assessee from suppliers of goods. In the statement

recorded u/s.131 of the Act, Shri Sagar Shankar Panaskar, brother of

assessee admitted that the genuineness of the purchases could not be

proved. Thus, the Assessing Officer rightly made addition of entire bogus

purchases. The ld. DR in support of his contentions placed reliance on the

decision of Pune Bench of the Tribunal in the case of Mukeshkumar

Pukhraj Mehta Vs. The Income Tax Officer in ITA No.2026/PUN/2014 for

assessment year 2010-11 decided on 03.11.2015.

assessee vehemently defended the impugned order. The ld. AR of the

assessee submitted that the assessee had made payments for the purchases

of goods held to be bogus purchases through cheque. The Assessing Officer

4 ITA Nos.203 & 204/PUN/2017 A.Y.2010-11

has not been able to show that the amount paid by cheque was immediately

withdrawn by suppliers and were paid back to the assessee. No efforts were

made by the Assessing Officer to find out genuineness of the suppliers and

verify the authenticity of the transactions. The assessee had furnished

copies of VAT challens. Further, the sales made by assessee were not

disputed by the Assessing Officer and books of account were not rejected.

Thus, without purchases there cannot be sales. The ld. AR submitted that

the entire purchases cannot be added as bogus purchases where sales are

not questioned.

and have perused the orders of the Authorities below. The Revenue in

appeal has assailed the findings of Commissioner of Income Tax (Appeals) in

restricting addition made on account of bogus purchases to 10% of the

bogus purchases. It is an undisputed fact that Revenue has accepted the

total turnover of the assessee. The total turnover of the assessee during

impugned period is Rs.1,15,71,310/-, whereas, the alleged bogus purchases

disallowed by the Assessing Officer are Rs.85,98,876/-. Without purchases,

there cannot be sales. The books of account of the assessee have also not

been rejected by the Assessing Officer before making addition of the entire

alleged bogus purchases. Undoubtedly, the primary onus to prove

genuineness of purchase transactions is on the assessee and he should

have in first place furnished cogent evidences to prove the genuineness of

the purchases and suppliers. No confirmations were filed by the assessee

from suppliers. We also observe that at the time of assessment proceedings,

the Assessing Officer has also not exercised his power to summon the

Vendors u/s. 133(6) of the Act. If the assessee had failed to produce

Vendors, the Assessing Officer could have summoned them. Thus, there

5 ITA Nos.203 & 204/PUN/2017 A.Y.2010-11

was lack of effort from both the sides to bring the true colour of purchase

transaction to fore. The Commissioner of Income Tax (Appeals) after

considering entire facts came to the conclusion that it is a case of purchases

from gray market and thereafter, bills have been procured from hawala

operators. In the given facts, the entire purchases cannot be considered as

bogus. At the same time, the assessee cannot be allowed to go scot free for

not proving the genuineness of the purchases. The Co-ordinate Bench of the

Tribunal in the case of M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT in ITA No.

795/PUN/2014 for the assessment year 2010-11 has held that in the cases

of purchases from suspicious dealers, addition of 10% of the bogus

purchases over and above the GP declared by the assessee for the year

should be made. In the instant case, the Commissioner of Income Tax

(Appeals) has restricted the addition to 10% of the alleged bogus purchases.

Hence, the impugned order is modified; the addition is restricted to 10% of

alleged bogus purchases over and above the GP declared by the assessee.

Mehta Vs. The Income Tax Officer (supra.) on which the ld. DR has placed

reliance. In the said case, the assessee had admitted to the addition of

purchases made from the hawala dealers. No supporting documents

substantiating genuineness of purchases were furnished by assessee. In

view of assessee’s admission no further verification was carried out by the

Assessing Officer. Whereas, in the instant case, the assessee had not given

any such concession. We find that the decision cited is distinguishable on

facts and hence, does not support the case of Revenue.

partly allowed in the terms aforesaid.

6 ITA Nos.203 & 204/PUN/2017 A.Y.2010-11

ITA No.204/PUN/2017 Assessment Year 2010-11

Commissioner of Income Tax (Appeals) in deleting penalty of Rs.26,57,053/-

levied u/s.271(1)(c) of the Act.

Income Tax (Appeals) submitted that the penalty has been deleted by the

Commissioner of Income Tax (Appeals) on the ground of ambiguity in

mentioning the charge while levying penalty u/s.271(1)(c) of the Act. The ld.

AR submitted that while initiating penalty u/s.271(1)(c) of the Act, the

Assessing Officer mentioned that the penalty proceedings u/s. u/s.271(1)(c)

of the Act are separately initiated for ‘furnishing inaccurate particulars of

income’, whereas, at the time of levy of penalty, the Assessing Officer levied

penalty for ‘concealment of income’. ‘Furnishing of inaccurate particulars of

income’ and ‘concealment of income’ are two different expressions having

different connotation. Penalty initiated under one limb of section 271(1)(c) of

the Act and levied on another limb would make the penalty order bad in

law. In support of his submissions, the ld. AR placed reliance on the

decision of Hon'ble Bombay High Court in the case of CIT Vs. Samson

Perinchery reported as 392 ITR 4 (Bom.)

Assessing Officer dated 22.07.2015 in levying penalty u/s. 271(1)(c) of the

Act and prayed for reversing the impugned order.

7 ITA Nos.203 & 204/PUN/2017 A.Y.2010-11

of assessment order shows that penalty proceedings u/s.271(1)(c) of the Act

were initiated for ‘furnishing of inaccurate particulars of income’. The

relevant extract of the assessment order whereby penalty proceedings were

initiated reads as under:

“Further, for furnishing of inaccurate particulars of income, penalty proceeding u/s.271(1)(c) of the IT Act is separately initiated.”

A perusal of the order levying penalty dated 22.07.2015 reveals that

though penalty was initiated for ‘furnishing inaccurate particulars of

income’, the Assessing Officer invoked the other limb of section 271(1)(c) of

the Act while levying penalty i.e. ‘concealment of income’. The relevant

extract of the penalty order reads as under:

“5. Considering the tax bracket and the amount of concealment, it is clear that the assessee has intentionally concealed the taxable income which was detected by the department. If the assessee’s case had not been selected for the scrutiny, the correct income would not have been taxed. I am therefore satisfied that the assessee has furnished inaccurate particulars of his income for the A.Y.2010-11 and thus concealed his income as per the provision (c) of sub section (1) of section 271 of the Income Tax Act, 1961.”

u/s.271(1)(c) of the Act clearly shows that there was ambiguity in the mind

of Assessing Officer with regard to charge u/s.271(1)(c) of the Act that is to

be invoked for levy of penalty. It is a well settle law that penalty cannot be

levied on the charge other than the charge for which it was initiated. The

Hon'ble Bombay High Court in the case of in the case CIT Vs. Samson

Perinchery(supra.) has held:

"6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in Ashok Pai v/s. CIT 292 ITR 11 [relied upon in Manjunath Cotton & Ginning Factory (supra)] - wherein

8 ITA Nos.203 & 204/PUN/2017 A.Y.2010-11

it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice."

[Emphasized by us ]

Jurisdictional High Court, we find no reason to interfere with the order of

the Commissioner of Income Tax (Appeals) in deleting penalty levied

u/s.271(1)(c) of the Act. Hence, the impugned order is upheld and appeal of

the Revenue is dismissed being devoid of any merit.

dismissed.

allowed and appeal of the Revenue in ITA No.204/PUN/2017 is dismissed.

Order pronounced on Monday, the 03rd day of June, 2019.

Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 03rd June, 2019 SB

9 ITA Nos.203 & 204/PUN/2017 A.Y.2010-11

आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-2, Nashik. 4. The Pr. CIT-2, Nashik. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.

10 ITA Nos.203 & 204/PUN/2017 A.Y.2010-11

Date 1 Draft dictated on 20.03.2019 Sr.PS/PS 2 Draft placed before author 28.05.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order