ASST CIT CIRCLE-9 (3)(1), MUMBAI vs. M/S FIRE FLOAT (I) PVT LTD., MUMBAI

O R D E R PER C.N. PRASAD (JM)

2 ITA.NO. 7018/MUM/2019 (A.Y: 2008-09) M/s. Fire Float (I) Pvt. Ltd., 2. Briefly stated the facts are that, assessee engaged in the business of “Fire fighting equipment erection-consultancy” filed return of income on 15.09.2008 declaring income of ₹.4,33,636/- for the A.Y: 2008-10. The return was processed u/s.143(1) of the Act accepting the return. Subsequently, assessment was reopened u/s. 147 of the Act and re-assessment was completed u/s.143(3) r.w.s 147 of the Act on 09.03.2015 determining the income at ₹.37,42,560/-. While completing the reassessment the Assessing Officer treated purchases of ₹.33,08,928/- made from various dealers as non-genuine on the basis of the information received from Sales Tax Department, Mumbai that assessee has received accommodation entries from various dealers without making any purchases but made purchases only in gray market. The Assessing Officer treated such purchases as non-genuine as the assessee could not produce any delivery challan to prove that the delivery of goods has been actually received by the assessee from the alleged suppliers. However, the Assessing Officer treated entire alleged bogus purchases as non-genuine and brought to tax an amount of ₹.33,08,928/- for the A.Y.2008-09. On further appeal, Ld.CIT(A) confirmed the addition in the A.Y. 2008-09 and gave relief of the same amount in the A.Y:2009-10, appreciating the fact that assessee has suomoto offered the 3 ITA.NO. 7018/MUM/2019 (A.Y: 2008-09) M/s. Fire Float (I) Pvt. Ltd., amounts as additional income considering the submissions of the assessee restricted the addition to 12.5% of the purchases. Subsequently, Assessing Officer initiated penalty proceedings and levied penalty of ₹.11,24,704/- u/s. 271(1)(c) of the Act for the A.Y.2008-09, stating that the assessee has furnished inaccurate particulars of its income and concealed its income within the meaning of section 271(1)(c) r.w. Explanation 1 of the Act. On appeal the Ld.CIT(A) deleted the penalty levied by the Assessing Officer. Against this order of the Ld.CIT(A), revenue is in appeal before us.

4 ITA.NO. 7018/MUM/2019 (A.Y: 2008-09) M/s. Fire Float (I) Pvt. Ltd., and deleted the penalty levied u/s. 271(1)(c) of the Act made by the Assessing Officer observing as under: - “6.1.1. Vide these grounds, the appellant has agitated against levying penalty of Rs. 11,24,704/-u/s. 271(1)(c) of the IT Act, 1961. The Ld. AO has initiated the penalty on the basis of information received from the sale tax department that appellant has shown bogus purchases.

6.1.2. The appellant has challenged the addition made by the AO towards estimation of gross profit on alleged bogus purchases and CIT(A) has uphold addition made by the Ld. AO in the assessment order. The appellant further contended that in the immediate next AY whole amount of purchase was written back of both the disputed purchase parties, amounting to Rs. 33,08,928/- as per provision of sec 41(1) of the Act by crediting the same in the profit and loss account for previous year ending on 31.03.2009. According to the appellant, this resulted in double addition i.e. First by itself and second by the Ld. AO through reopening the assessment u/s. 148 of the I.T. Act. After considering all the above scenario by the CIT(A) vide their order dated 29.12.2016, confirmed the addition in the A.Y. 2008-09 and gave relief of the same amount in the AY 2009-10, appreciating the fact that appellant has suo-moto offered the impugned amount as additional income. Also, appellant has stated that fact remains that it has furnished complete evidences to prove such purchases and also filed quantitative details of purchase and sales. 6.1.3. Also, it is seen that the AO has levied penalty u/s 271(l)(c) on the ground that the appellant failed to offer any explanation to the satisfaction of the AO in respect of estimation of gross profit on alleged bogus purchases in the light of facts gathered during the course of assessment proceedings coupled with report of sales-tax department. According to the AO, the purchases from certain parties were not genuine which is evident from the fact that the appellant failed to furnish complete details of purchases from the above parties. Therefore, Ld. AO opined that it is a clear case of furnishing of inaccurate particulars of income which warrants levy of penalty u/s 271(1)(c) and accordingly levied penalty under Explanation 1 to section 6.1.4. During the appellate proceedings, the appellant has filed relevant documents. The appellant also submitted that there is neither concealment of income as all the documentary evidencing the genuineness of the transactions were submitted to the Ld. AO

5 ITA.NO. 7018/MUM/2019 (A.Y: 2008-09) M/s. Fire Float (I) Pvt. Ltd., not the appellant company has furnished inaccurate particulars of income as the appellant company has truly disclose the purchase transaction before the Revenue authorities. Considering these facts I tend to agree with the appellant's contention.

6.1.5. In this regard Reliance is placed on decision of the ITAT in AY 2009-10 in Ajay Loknath Lohia, Mumbai vs Ito ITA 2998/MUM/2017, Mumbai wherein it was held that the AO never disbelieved information filed by the appellant, but he proceeded on the basis of information received from sales-tax department to make additions. The AO has made such addition on adhoc basis by estimating gross profit on alleged bogus purchases. Therefore, disallowance of purchases on adhoc basis does not tantamount to willful furnishing inaccurate particulars of income within the meaning of section 271(1)(c) of the Income-tax Act, 1961.

6.1.6. Respectfully following the above mentioned decision and keeping in view the facts and circumstances of the appellant's case as discussed above, it is held that the levy of penalty u/s. 271(1)(c) is not justified on the merits of the case. Hence, the appeal of the appellant on this ground is allowed and penalty of Rs. 11,24,704/-. imposed by the A.O. is deleted.”