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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI S. RIFAUR RAHMAN & SHRI PAVAN KUMAR GADALE
PER S. RIFAUR RAHMAN, A.M.
These appeals have been filed by the Revenue challenging two separate orders both dated 11th July 2019, deleting the penalty under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act") imposing penalty of ` 31,211, for the A.Y. 2011–12 and ` 7,300, for the A.Y. 2010–11 by the Assessing Officer.
2 Rahul Narendra Shah
When the appeal was called for hearing, no one was present on behalf of the assessee to represent the case. There is no application for adjournment of hearing either. Therefore, we proceed to dispose off the appeal ex–parte qua the assessee after hearing the learned Departmental Representative and on the basis of material available on record.
The issue involved in these two appeals is materially identical, except variation in figures, which is arising out of similar set of facts and circumstances of the cases. As a matter of convenience, therefore, both of these appeals are being disposed by way of this consolidated order.
The Revenue has also raised a ground with a request that though the present appeals are below the taxable limit as prescribed in the CBDT Circular no.17/2019, dated 8th August 2018, however, the Revenue has prayed for disposing the appeals on merit. Consequently, we proceed to dispose off these appeals on merit. ./2019 Assessment Year – 2011–12
Facts in brief:– In the present case, the assessee is an individual and is the proprietor of M/s. Shah Packaging, which is engaged in the business of trading in plastic products. The Assessing Officer noticed
3 Rahul Narendra Shah from the Profit & Loss Account of the proprietary concern M/s. Shah Packaging, that the assessee has debited purchases of ` 17,11,85,721. The assessee was called upon to file the details of purchases, TIN and name and address of the parties from whom purchases were made. In response, the assessee filed the details as sought by the Assessing Officer. Meanwhile, the Assessing Officer received information from the Sales Tax Department, Mumbai, regarding suspicious parties who are only providing accommodation entries without doing actual business. The Assessing Officer on going through the details submitted by the assessee found that there are two parties among the list of bogus parties from whom the assessee has shown purchases. The TIN number and amount of transaction along with name of parties are given below:–
Sl. Name of the Party TIN Amount (`) no. 1. M/s. Avion Sales Pvt. Ltd. 27360675452V 10,16,558 2. M/s. Ramanand Sales Pvt. Ltd. 27410703312V 10,05,428 Total:– 20,21,986
It was observed by the Assessing Officer that the assessee has claimed total purchase of ` 20,21,986 from the above two parties and the TIN numbers provided by the assessee in the above cases are exactly same as in the information available with the office. The Assessing Officer also observed that the Sales Tax Department has 4 Rahul Narendra Shah conducted independent enquiries in each of the hawala parties and conclusively proved that the parties are engaged in the business of providing accommodation entries only. In this view of the matter, the Assessing Officer held that the assessee did not purchase any goods from the above mentioned parties and accordingly the entire amount of ` 20,21,986, was treated as unexplained expenditure under section 69C of the Act and added the same to the returned income of the assessee.
The assessee carried the matter of addition on account of bogus purchase under section 69C of the Act before the first appellate authority. However, the learned Commissioner (Appeals) has restricted the addition @ 5% of such purchases/accommodation entries. Consequently, The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act levying penalty of ` 31,211. Being aggrieved, the assessee is in further appeal for contesting imposition of penalty under section 271(1)(c) of the Act.
The learned Commissioner (Appeals) deleted the penalty so imposed by the Assessing Officer under section 271(1)(c) of the Act by following the decisions of the Co–ordinate Bench. The relevant observations of the learned Commissioner (Appeals) deleting the penalty are as follows:–
5 Rahul Narendra Shah
“6.4.1. I have considered the submissions of the appellant and perused materials available on record. The appellant has requested to delete impugned penalty levied u/s 271 (1) (c) of the Act at Rs.31,211/-. The main contentions of the appellant are that he has neither concealed particular income nor furnished inaccurate particulars of income; mere rejection appellant's claim would not automatically lead to levy of penalty and it submitted necessary evidences in support of its claim, but the same was not accepted by the Ld. AO and where the addition has been mad sustained on estimation basis the penalty u/s 271(1)(c) of the Act is not leviable. In support of its claim the appellant has placed reliance on various judicial precedents as detailed above. The contentions of the appellant have been considered carefully. The Ld. AO had made the addition on account of bogus purchases u/s 69C of the Act at Rs.20,21,986/- . However, the Ld. CIT(A) has restricted the same to 5% of such purchase/ accommodation entries. The facts of the case suggest that the Ld. AO made said addition on the ground that the appellant could not prove purchases under consideration from the parties concerned. It is also an admitted fact that the Ld. CIT(A) has restricted said addition to 5%, estimated/ad-hoc basis. In the case of M/s. Earthmoving Equipment Service Corporation in the Hon'ble ITAT, Mumbai, vide its order dated 02.05.2017 has deleted the penalty levied u/s 271(1)(c) of the Act where the addition u/s 69C of the Act was made on account of bogus purchases, on the ground that the assessee made a claim which was bonafide and the same was coupled with documentary evidences but the same remained inconclusive for want of confirmation from the supplier as they could not be traced at given address. Further, the Hon'ble ITAT, Mumbai in the case of Ajay Loknath Lohia in ITA No.2998/Mum/2017, vide its order dated 05.01.2018, has d3eleted the penhalty levied u/s 271(1)(c) of the Act, on the disallowance/addition made @ 25% on alleged bogus purchases made from hawala dealers based on the information received from the Sales Tax Department and where the appellant had accepted such estimated addition, after holding that though the AO had estimated 25% gross profit or alleged bogus purchases, never made any observations with regard to the incorrectness in details filed by the assessee to prove such purchases. 6.4.2 From the above it is evident that the facts and circumstances of the present case are similar as to the facts adjudicated by the Hon'ble ITAT Mumbai in above referred cases. Respectfully following the same, I am of the considered opinion that this is not a fit case to levy penalty u/s 271(1)(c) of the Act. Hence, the impugned penalty levied u/s 271(1)(c) at Rs. 31,211/- is DELETED. Accordingly the Ground Nos. 1 to 3 raised in appeal are ALLOWED.”
6 Rahul Narendra Shah
Considered the submissions of the learned Departmental Authorities and perused the material on record. As it appears, the Assessing Officer imposed penalty under section 271(1)(c) of the Act on ad–hoc basis without adducing any evidence on record for concealment of income. Penalty under section 271(1)(c) of the Act is liable to be imposed only where the assessee has concealed its particulars of income or furnished inaccurate particulars. Action of making addition on ad–hoc basis does not result into imposition of penalty u/s 271(1)(c) of the Act and hence cannot be termed as either concealment or furnishing of inaccurate particulars of income. We find support from the series of decisions by different High Courts as well the decision of the Co–ordinate Benches of the Tribunal, wherein it was held that when addition is made on estimate basis, penalty is not sustainable in the eyes of law. In support of this contention, following case laws are relied upon:-
i) CIT v/s Norton Electronics Systems (P) Ltd. [2014] 41 taxmann.com 280 (Allahabad HC); ii) ACIT v/s Vision Research Management (P) Ltd., [2015] 63 taxmann.com 8 (Lucknow) (Trib.); iii) Prem Chand v/s ACIT, [2014] 52 taxmann.com 95 (Chandigarh) (Trib.); iv) CIT v/s PHI Seeds India Ltd., [2008] 301 ITR 0013 (Del); and v) Dilip N. Shroff v/s JCIT [2007] 291 ITR 519 (SC).
7 Rahul Narendra Shah The learned Departmental Authorities has not brought any 10. cogent material to prove otherwise warranting interference at the instance of the Revenue. In this view of the matter, we are of the considered view that the learned Commissioner (Appeals) was indeed justified in deleting the penalty, as there was no concealment of income on the part of the assessee have been proved by the Revenue and additions made on estimation by the Assessing Officer do not call for initiation of penalty. Consequently, we uphold the order passed by the learned Commissioner (Appeals) by dismissing the grounds of appeal raised by the Revenue.
In the result, Revenue’s appeal for A.Y. 2011–12 is 11. dismissed.
./2019 Assessment Year – 2010–11
The related facts and circumstances of the issue raised by the Revenue in this appeal is materially identical to the issue decided by us vide ground no.1, raised by the Revenue in its appeal being ITA no. 6465/Mum./2019, vide Para–10 and 11 above, wherein we have upheld the order of the learned Commissioner (Appeals) deleting the penalty under section 271(1)(c) of the Act imposed by the Assessing
8 Rahul Narendra Shah Officer for the assessment year 2011–12. Consistent with the view taken therein, we decline to interfere with the order passed by the first appellate authority and dismiss the grounds raised by the Revenue for this assessment year also.
In the result, Revenue’s appeal for the A.Y. 2011–12 is also dismissed.