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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
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.
The brief facts of the case as emanating from records are: The
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’.
Aggrieved against the assessment order dated 30.01.2015 passed
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.”
Shri Pankaj Garg representing the Department submitted that the
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.
On the other hand, Shri Sanket Joshi appearing on behalf of the
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.
We have heard the submissions made by representatives of rival sides
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.
We have considered the decision in the case of Mukeshkumar Pukhraj
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.
In the result, appeal of the Revenue in ITA No.203/PUN/2017 is
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
This appeal by the Revenue is directed against the order of
Commissioner of Income Tax (Appeals) in deleting penalty of Rs.26,57,053/-
levied u/s.271(1)(c) of the Act.
The ld. AR of the assessee defending the order of Commissioner of
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.)
On the other hand, the ld. DR vehemently defended the order of
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
Both sides heard. Orders of the Authorities below perused. A perusal
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.”
The manner in which penalty has been levied by the Assessing Officer
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 ]
Thus, in view of the facts of the case and the decision of Hon'ble
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.
In the result, appeal of the Revenue in ITA No.204/PUN/2017 is
dismissed.
To sum up, appeal of the Revenue in ITA No.203/PUN/2017 is partly
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