ITO - 32(2)(3), MUMBAI vs. MADHU BANWARILAL AGARWAL, MUMBAI

Briefly the facts are, the assessee is an individual engaged in the business of trading in non ferrous metals. Based on information received from Sales-tax department, the assessing officer reopened the assessment for the impugned 2 ITAs 1568 & 1569/Mum/2020 assessment years under section 147 of the Act. The reason for which the assessments were reopened are, certain purchases made by the assessee during the relevant assessment years were non genuine, as, the concerned selling dealers have been identified as hawala operators providing accommodation bills. In course of assessment proceedings, the assessing officer called upon the assessee to prove the genuineness of the purchases. Though the assessee furnished certain documentary evidences to prove the purchases; however, the assessing officer was unconvinced. Ultimately, he treated the purchases as non genuine. However, considering the fact that corresponding sales have been effected, the assessing officer estimated the gross profit at 10.16% in assessment year 2009-10 and made a net disallowance of Rs.19,71,745/-. Whereas, in assessment year 2011-12 he disallowed Rs.23,32,180/-, being, 12.5% of the alleged non genuine purchases. The disallowance made by the assessing officer was sustained by the learned Commissioner (Appeals). Based on the disallowance sustained by learned Commissioner (Appeals), the assessing officer initiated proceedings for imposition of penalty under section 271(1)(c) of the Act alleging furnishing of inaccurate particulars of income and ultimately passed orders imposing penalty of Rs.6,33,990/- in assessment year 2009-10 and Rs.9,56,730/- in assessment year 2011-12. Against the penalty orders so passed, the assessee preferred appeals before learned (Appeals). After considering the submissions of the assessee in the context of facts and materials on record, learned Commissioner (Appeals) deleted the penalty imposed in both the assessment years.

We have considered rival submissions and perused materials on record. It is evident, though the assessing officer, based on certain information received 3 ITAs 1568 & 1569/Mum/2020 from the Sales-tax department has treated certain purchases made in the relevant assessment years as non genuine; however, he had no doubt that goods representing such purchases, indeed, were available with the assessee. For this reason alone, instead of disallowing the entire purchases, the assessing officer has restricted the disallowance to the profit element embedded in such purchases, that too, purely on estimate basis. Inability of the assessee to prove the source of purchases could be for various reasons. However, that itself cannot be a factor to conclude that the assessee has committed any offence under section 271(1)(c) of the Act. In any case of the matter, additions based on which penalty under section 271(1)(c) of the Act has been imposed, were made purely on estimate basis. That being the factual position, we fully agree with the decision of learned Commissioner (Appeals) in deleting the penalty imposed under section 271(1)(c) of the Act. Grounds are dismissed.

In the result, appeals are dismissed. Order pronounced on 04/10/2021. Sd/- sd/- (RAJESH KUMAR) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dt : 04/10/2021 Pavanan 4 ITAs 1568 & 1569/Mum/2020 Copy to : 1. Appellant 2. Respondent 3. The CIT concerned 4. The CIT(A) 5. The DR, ITAT, Mumbai 6. Guard File /True copy/ By Order