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Income Tax Appellate Tribunal, “A” Bench, Mumbai
O R D E R Per Shamim Yahya (AM) :-
These are appeals by the assessee directed against a common order of learned CIT-A dated 16.7.2019, wherein following penalty levied under 271(1)(c) of the Act has been sustained :- Assessment year Amount of penalty 2008-09 10,43,087/- 2009-10 9,52,177/-
Brief facts of the case leading to the levy of penalty are that the assessing officer in these cases made disallowance of 3.89% y being the gross profit rate on account of his ad hoc estimate of 20% purchases being bogus purchases. The order of the assessing officer in this regard for assessment year 2008-09 may be referred as under :-
“During the assessment proceeding, the assessee was asked to submit the details such P & L A/c, balance sheet and Bank statement for the whole year. The same were submitted. After verification of the bank statement, it is found that there are frequent cash transaction and transfer thereof to different account. Further, the assessee was asked to submit the details of frequent transfer of money in his bank accounts located in Bombay, Kanpur,
2 Anwar Abdul Haq Qureshi
Kolkata and Hapur. The assessee submitted the bank statements of various accounts in these cities. From the copy of the bank account, the receipts on account of exports were verified and turnover was ascertained. The assessee submitted that they transfer money to their bank account located in Kanpur, Kolkata, etc. were made to finance the purchases of raw meat for onward transportation to Bombay and export thereafter. The assessee was asked to submit the purchase bills and other supporting documents such as address, pan , name of the parties from whom the purchases were made before the undersigned for verification. In response to the same, the AR submitted a list of person from whom the purchases were made with signature and thumbs impression. A matching of the signature was performed to ascertain the genuineness of the parties, however, the same could not be done because of incompleteness of data submitted by the assessee. The AR expressed inability to prove the genuineness of the purchases or to produce the parties before the undersigned for verification. The AR has not discharged the onus that lies upon him to justify his claim. In order to safeguard the interest of revenue as much as 20% of the purchases is treated as bogus and added back to the total income of the assessee at the gross profit margin for the year which is 3.89%.
Receipts(1) Turnover(2) 20% Difference of 3. 89% of Col. 3 receipts and Turnover(3)
48,05,87,697 26,54,77,785 4,30,21,982 16,73,555
With the discussion in above para, the total addition made on account of bogus purchase is Rs.16,73,555/- and the same is added back to the total income of the assessee. Penalty proceeding u/s 271(l)(c) of the IT Act is initiated separately for concealment of income. [Addition:Rs.l6,73,555/-].”
Upon the aforesaid addition penalty under section 271(1)(c) of the Act has been levied and confirmed by learned CIT(A).
Against the above order assessee is in appeals before us.
We have heard the learned departmental representative. None appeared on behalf of the assessee despite notice.
Upon careful consideration we note that Assessee has supplied the purchase vouchers and all the relevant details. However drawing adverse inference for the nonproduction of the suppliers the assessing officer treated 20% of the purchase as bogus of the bogus purchases. No case has been made out that he has issued any notice himself to the alleged bogus supplier. The 3 Anwar Abdul Haq Qureshi assessing officer has not bothered to point of the specific deficiencies and the quantum of purchase vouchers involved in this regard. Upon the said 20% adhoc bogus purchase he has disallowed gross profit ratio of 3.89%. However the assessing officer did not doubt the sales. The learned CIT-A confirmed the addition. Penalty under section 271(1)(c) of the Act was also levied.
As clear from the facts recorded above the disallowance has been made on an estimated basis on account of the nonproduction of suppliers before the assessing officer. The purchase vouchers were duly produced. No notice to the alleged bogus supplier has been issued by the Assessing Officer. In these backgrounds in our considered opinion assessee cannot be visited with the regours of penalty under section 271(1)(c) of the Act. As a matter of fact on many occasions on similar circumstances in quantum proceedings the disallowance itself has been deleted, on the touchstone of Honourable jurisdictional High Court decision in the case of Nikunj Eximp Enterprises Pvt. Ltd. (372 ITR 619). In our considered opinion on the facts and circumstances of the case assessee cannot be said to have been guilty of concealment or furnishing of inaccurate particulars of income. In this regard we draw support from the decision of a larger bench of the honourable Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa (83 ITR 26), where in it was held that the authority may no t levy the penalty if the conduct of the assessee is not found to be contumacious.
In the background of aforesaid discussion and precedent we set aside the order's of Ld CITA and delete the levy of penalty.
In the result, both assessee’s appeals are allowed.