INCOME TAX OFFICER-22(2)(6), MUMBAI, MUMBAI vs. KIRTIKUMAR PUNAMCHAND SHAH, MUMBAI

This is an appeal by the revenue against the order dated 17.07.2019 of learned Commissioner of Income Tax (Appeals)–33, Mumbai deleting the penalty imposed of Rs.4,58,000/- under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2009-10.

When the appeal was called for hearing no one was present for the assessee. However, considering the nature of dispute, we proceed to dispose of the appeal ex-parte qua the assessee after hearing the learned Departmental Representative and based on material on record. 3. Briefly the facts are, the assessee is an individual and is a trader in all kinds of paper and paperboards. For the assessment year under dispute, the assessee filed his return of income on 30.09.2009 declaring total income of Rs. Assessment Year: 2009-10 2,61,840/-. Assessment in case of the assessee was originally completed vide order dated 22.12.2011 passed under section 143(3) of the Income Tax Act 1961, determining the total income at Rs. 2,73,270/-. Subsequent to completion of assessment, as aforesaid, The Assessing Officer (AO) received information from the Sales tax department, Govt. of Maharashtra through DGIT (Inv.), Mumbai that the assessee is a beneficiary of accommodation entries by way of bogus purchase bills to the extent of Rs. 1,18,37,967/- provided by certain entities identified as hawala operators. On the basis of such information, the Assessing Officer reopened the assessment under section 147 of the Act and ultimately completed the assessment by disallowing an amount of Rs. 14,79,746/-, being 12.5% of the alleged non-genuine purchases of Rs. 1,18,37,967/-. As it appears, the assessee accepted the aforesaid disallowance. Be that as it may, on the basis of the aforesaid disallowance made, the AO initiated proceedings for imposition of penalty under section 271(1)(c) of the Act alleging furnishing of inaccurate particulars of income and concealment of income. Ultimately, the AO passed the order imposing penalty of Rs. 4,58,000/- under section 271(1)(c) of the Act. While considering assessee’s appeal against the penalty order so passed, learned Commissioner (Appeals) deleted the penalty imposed. 4. We have considered the submissions of learned Departmental Representative and perused the material on record. It is evident, based on certain information received from the Sales tax department, Govt. of Maharashtra, the AO not only reopened the assessment in case of the assessee but ultimately held certain purchases to be non genuine. However, instead of disallowing the entire purchases, the AO disallowed only the profit element embedded in such purchases by estimating at 12.5%. The aforesaid decision of the AO clearly indicates that he had no doubt that the goods in question, in fact, were purchases by the assessee. The only doubt he had is with regard to the source of such purchases. For this reason alone, he has made an addition purely on estimate basis. It is further evident, the assessee had furnished certain documentary evidences to prove the purchases including the Assessment Year: 2009-10 quantitative tally of purchases and sales. Further, payments towards purchases were made through banking channel. In these circumstances, it cannot be alleged that the assessee either has furnished inaccurate particulars of income or has concealment his income. More so, when the addition on the basis of which penalty under section 271(1)(c) of the Act was imposed has been made purely on estimate basis. In view of the aforesaid, we do not find any infirmity in the order of learned Commissioner (Appeals). 5. Having held so, we may further add that the tax effect on the amount disputed by the revenue in the present appeal is below the monetary limit of Rs. 50 lacs. Hence, as per Circular No. 17 of 2019 dated 8th August 2019 issued by the Central Board of Direct Taxes (CBDT), the appeal is not maintainable. In our view, the present appeal would not be protected by any of the exceptions provided to the aforesaid circular as the penalty proceeding is completely independent of assessment proceedings. Hence, it cannot be said that it is based on any information received from external agencies. Therefore, for this reason also the appeal is liable to be dismissed. Accordingly, we do so. 6. In the result, appeal filed by the revenue is dismissed. Order pronounced in the open court on 2nd June, 2021. (M. BALAGANESH) JUDICIAL MEMBER