ITO 33 (1)(2), MUMBAI vs. BHAVESH KANTILAL SHETH, MUMBAI

This is an appeal by the revenue against the order dated 16.03.2018 of learned Commissioner of Income Tax (Appeals)–45, Mumbai deleting the penalty imposed of Rs. 85,794/- under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2011-12.

Briefly the facts are, the assessee is an individual stated to be engaged in the business of dealing in pharmaceuticals, raw material, chemical etc. For the assessment year under dispute, the assessee filed his return of income on 16.09.2011 declaring income of Rs. 8,77,317/-. In course of assessment proceedings, the Assessing Officer (AO) noticed that as per information received from Sales tax department, Govt. of Maharashtra, purchases worth Rs. 22,21,202/- claimed to have been made from three parties during the year are non genuine as the concerned parties have been identified as hawala operators providing accommodation bills. Though, the assessee submitted certain Assessment Year: 2011-12 documentary evidences to substantiate his claim that purchases made are genuine, however, the AO was not convinced. Ultimately, he treated the disputed purchases as non genuine and disallowed them. The assessee contested the aforesaid disallowance before learned Commissioner (Appeals). After considering the submissions of the assessee in the context of facts and material on record, learned Commissioner (Appeals) restricted the disallowance to 12.5% of the alleged non genuine purchases. However, on the basis of disallowance sustained by learned Commissioner (Appeals), the Assessing Officer initiated proceeding for imposition of penalty under section 271(1)(c) of the Act and ultimately passed an order imposing penalty of Rs. 85,794/- alleging furnishing of inaccurate particulars of income. Against the penalty order so passed, assessee preferred an appeal before learned Commissioner (Appeals). Being convinced with the submissions of the assessee, learned Commissioner (Appeals) deleted the penalty imposed. 3. We have considered rival submissions and perused the material on record. A perusal of the impugned assessment order would make it clear that the Assessing Officer while disallowing the purchases has primarily relied upon the information received from the Sales tax department, Govt. of Maharashtra. The Assessing Officer on his own has not made thorough enquiry to ascertain the genuineness of the purchases except issuing notice under section 133(6) of the Act. It is further evident, while deciding assessee’s appeal in the quantum proceedings, learned Commissioner (Appeals), taking note of the fact that the doubt is only with regard to source of purchases and not the purchase itself, has restricted the disallowance to the profit element embedded in such purchases by estimating at 12.5%. Thus, as could be seen from the aforesaid facts, the addition on the basis of which penalty under section 271(1)(c) of the Act has been imposed is by entertaining doubt and suspicion with regard to the source of purchases, therefore, the estimated addition has been made. It is also a fact on record that the assessee had furnished certain documentary evidences to prove the purchases. Moreover, the payment for such purchases was made through banking channel. That being the case, in our considered Assessment Year: 2011-12 view, learned Commissioner (Appeals) was justified in deleting the penalty imposed under section 271(1)(c) of the Act as the addition is on the basis of an estimate and there are no concrete evidences that the assessee has furnished inaccurate particulars of income and concealed his income. Accordingly, we uphold the decisions of learned Commissioner (Appeals) by dismissing the grounds. 4. There is one more aspect to this appeal. Admittedly, 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. 5. In the result, appeal filed by the revenue is dismissed. Order pronounced in the open court on 2nd June, 2021. (M. BALAGANESH) JUDICIAL MEMBER