DCIT-14(2)(2), MUMBAI vs. M/S. PATKON CONSTRUCTION (I) PVT. LTD., MUMBAI

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ITA 5320/MUM/2019Status: DisposedITAT Mumbai03 March 2021AY 2010-115 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the appeal filed by the revenue was not maintainable as the tax effect was below the threshold limit specified in the CBDT circular. The exception in the circular for external agency information applied to additions, not penalties.

What were the facts?

The Assessing Officer (AO) added 12.5% of alleged bogus purchases to the assessee's income and initiated penalty proceedings. The CIT(A) deleted the penalty, holding that penalty was not liable to be imposed merely on rejection of explanation without rejecting books of account.

What were the issues?

Whether the revenue's appeal against the deletion of penalty is maintainable given the tax effect and the applicability of CBDT circular exceptions.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI

Before: SHRI M.BALAGANESH & SHRI RAVISH SOOD

For Respondent: Ms. Shreekala Pardeshi, D.R
Hearing: 02/03/2021Pronounced: 03/03/2021

ORDER PER RAVISH SOOD, J.M: The present appeal filed by the revenue is directed against the order passed by the CIT(A)-22, Mumbai, dated 14.06.2019, which in turn arises from the order passed by the A.O under Sec. 271(1)(c) of the Income Tax Act, 1961 (for short „Act‟), dated 28.06.2011. The revenue has assailed the impugned order on the following grounds of appeal before us: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty imposed in respect of addition on account of bogus purchases, to the extent of 12.5% of such purchases, in spite of the fact that the assessee had not contested the quantum addition before appellate authorities which amounted to acceptance of furnishing inaccurate particulars of income.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the factual position nowhere leads to concealment of income or furnishing inaccurate particulars of income, in spite of the fact that the claim of purchases from the stated suppliers remained to be established which amounted to suppression of income by way of reduced gross profit & resultant taxable income.

2 The DCIT-14(2)(2) Vs. M/s Patkon Construction (I) Pvt. Ltd.

3. The appellant craves leave to add, amend vary, omit or substitute any of the aforesaid grounds of appeal

at any time before or at the time of hearing of appeal.

4. The appellant prays that the order of CIT(A)-22, Mumbai on the above ground be set aside and that of the Assessing Officer be restored."

2.

Briefly stated, the assessee company which is engaged in the business of construction had filed its return of income for A.Y. 2010-11 on 30.09.2010, declaring a total income of Rs.20,03,620/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, on the basis of information received from the Investigation wing, Mumbai, that the assessee as a beneficiary had obtained accommodation entries of purchases, its case was reopened by the A.O under Sec. 147 of the Act. During the course of the assessment proceedings it was observed by the A.O that the assessee had claimed to have made purchases aggregating to Rs.22,98,918/- from the following tainted parties:

Sr. No. Name of the party Amount (Rs.) 1. Dhruv Sales Corporation 1,98,281 2. Om Corporation 50,600 3. Naman Enterprises 1,84,269 4. Shantinath Corporation 28,800 5. Bhavani Trade Link 7,14,569 6. Ramdev Trading 1,16,480 7. Shubhlaxmi Sales Corp. 21,676 8. Navdeep Trading Corpn. 1,82,483 9. Savita International 33,311 10. Darshan Sales Corporation 5,13,818 11. Moksh Trading Company 1,49,012 12. Mahavir Enterprises 1,05,619 Total 22,98,918 As the assessee failed to substantiate the genuineness and veracity of the aforesaid purchase transactions, the A.O, after taking cognizance of the fact that the sales corresponding to the impugned purchases had been accounted by the assessee in its books of account, therein held a conviction that the assessee had made the impugned purchases not from the aforementioned hawala parties but from the open/grey market. Observing, that the assessee would had procured the goods from the open/grey market at a discounted value as against that booked in its books of account, the A.O added 12.5% of the value of the impugned purchases of Rs.22,98,918/- and made an addition of Rs.2,87,365/-. At the time of culminating the assessment the A.O also initiated penalty proceedings under Sec.271(1)(c) of the Act.

3 The DCIT-14(2)(2) Vs. M/s Patkon Construction (I) Pvt. Ltd.

3.

After the culmination of the assessment proceedings, the A.O vide his order passed under Sec. 271(1)(c), dated 28.06.2018 imposed a penalty for furnishing of inaccurate particulars of income of amounting to Rs.88,796/- under Sec. 271(1)(c) of the Act.

4.

Aggrieved, the assessee assailed the penalty imposed by the A.O under Sec. 271(1)(c) in appeal before the CIT(A). Observing, that the A.O had at no stage rejected the books of account of the assessee, the CIT(A) was of the view that merely on the count of rejection of the explanation of the assessee penalty under Sec. 271(1)(c) was not liable to be imposed. Accordingly, the CIT(A) vacated the penalty imposed by the A.O under Sec. 271(1)(c) of the Act. 5. The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. As the assessee respondent despite having been put to notice about the hearing of the appeal had failed to put up an appearance before us, we, thus, as per Rule 25 of the Appellate Tribunal Rules, 1962 proceed with and dispose off the appeal after hearing the appellant revenue and perusing the orders of the lower authorities. On a perusal of the records, we find that the assessee had been saddled with a penalty under Sec. 271(1)(c) of Rs.88,796/- by the A.O which was thereafter quashed by the CIT(A). 6. Aggrieved, the revenue has assailed the order of the CIT(A) vacating the penalty imposed by the A.O under Sec. 271(1)(c) in appeal before us. Admittedly, the quantum of penalty imposed by the A.O u/s 271(1)(c) under dispute is Rs.88,796/-, which is substantially below the threshold limit of Rs.50 lac as had been provided in the latest CBDT circular No. 17/2019, dated 08.08.2019, that contemplates the tax effect for filing of the appeals by the revenue. However, it is the claim of the ld. D.R that as the present appeal is covered by the exception carved out in clause 10(e) of the CBDT Circular No. 3 of 2018 (as amended on 20.08.2018) thus, the appeal filed by the revenue is maintainable.

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