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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY
Date of hearing 02-02-2021 Date of Pronouncement /02/2021 O R D E R
Per Saktijit Dey, JM
This is an appeal by the revenue against the order dated 29-05-2019 of learned Commissioner of Income Tax (Appeals)-37Mumbai deleting penalty imposed under section 271(1)(c) of the Income Tax Act, 1961for the assessment year 2010-11.
Briefly the facts are, the assessee is an individual and is engaged in the business of trading in gift items. For the assessment year under dispute assessee
2 ITA 4920/Mum/2019 filed his return of income on 13-09-2010 declaring total income of Rs.2,75,663/-. The return of income was initially processed under section 143(1) of the Act. Subsequently, on the basis of information received from the sales-tax department through the Investigation Wing that the assessee is a beneficiary of accommodation bills provided for purchases of Rs.24,70,500/-, the Assessing Officer reopened the assessment u/s 147 of the Act. In course of the assessment proceedings, he called upon the assessee to prove the disputed purchases by producing various documentary evidences including stock register. Further, the assessing officer also directed the assessee to produce the parties from whom purchases were claimed to have been made. Though, the assessee furnished some documentary evidences to prove the purchases; however, the assessing officer was not satisfied. Therefore, holding the purchases as bogus, he rejected the books of account and thereafter proceeded to estimate the profit element embedded in alleged non genuine purchases at 15%. Thus, he disallowed an amount of Rs.37,05,575/-. The assessee contested the aforesaid disallowance before the first appellate authority. Learned first appellate authority, after considering the submissions of the assessee, restricted the disallowance to 12.5% of non-genuine purchases. On further appeal by the assessee, the Tribunal reduced the disallowance to 5% of the non-genuine purchases. However, on the basis of disallowance sustained by learned Commissioner (Appeals) which worked out to Rs.3,08,812/-, the Assessing Officer proceeded to initiate penalty proceedings under section 271(1)(c) of the Act alleging concealment of income and ultimately passed an order imposing penalty of Rs.69,700/-. Against the penalty order so passed, assessee preferred appeal before learned Commissioner (Appeals). Being of the view that the addition on the basis of which penalty has 3 ITA 4920/Mum/2019 been imposed is on purely estimate basis and, that too, because of failure of assessee to establish the identity of the supplier, learned Commissioner (Appeals) deleted the penalty. Being aggrieved, revenue is in appeal.
The learned Departmental Representative submitted, when the assessee was unable to prove the source of purchases made, penalty under section 271(1)(c) of the Act can be imposed even on estimated addition. In support of such contention, she relied upon a decision of the Hon’ble Madras High Court in the case of CIT vs Mahavir Mirror Industries Pvt Ltd, 353 ITR 553 (Mad).
The learned Counsel for the assessee submitted, only because the assessee was unable to produce the person from whom purchases were made, the Assessing Officer has disbelieved the source of purchase.However, she submitted, the fact that the assessee has purchased the goods has not been disputed by the Assessing Officer. Therefore, ultimately, he has added only the profit element embedded in the purchases by estimating at 15% which was reduced to 12.5% by learned Commissioner (Appeals) and further reduced to 5% by the Tribunal. He submitted, in course of assessment proceedings, the assessee had furnished all documentary evidences including delivery challans,sale invoices, payment made through banking channel, proof of receipt of payment by the selling dealer etc.She submitted, only because of some suspicion and doubt entertained by the Assessing Officer, addition has been made on estimate basis. Therefore, there being neither any concealment of income nor furnishing of inaccurate particulars of income, no penalty can be levied on such estimated addition. In support of her contention, the learned Authorised Representative also relied upon certain judicial precedents.
4 ITA 4920/Mum/2019
I have considered rival submissions in the light of decisions relied upon and perused materials on record. It is evident on record, in course of assessment proceedings, the assessee had furnished various documentary evidences, such as, purchase invoices, sale invoices, details of purchase with corresponding sales, delivery challans, bank statement showing payment made to selling dealers through cheque, certificate issued by the bank showing receipt of payment by the selling dealers, etc. Thus, these documents to a great extent prove that the assessee had purchased the goods. Merely because the assessee was unable to produce the selling dealer or the notices issued under section 133(6) of the Act was not received by the concerned party, the Assessing Officer has concluded that the source of purchases could not be established. However, the fact that the assessee had purchased the goods has not been doubted by him. Therefore, he has disallowed only the profit element embedded in such purchases by estimating it 15%, which subsequently got reduced to 5% by the Tribunal. Interestingly, the Assessing Officer has imposed penalty on the disallowance sustained by learned Commissioner (Appeals) at 12.5% completely ignoring the fact that it has further been reduced to 5% by the Tribunal. Be that as it may, the facts on record clearly indicate that the assessee has been able to establish that goods have been purchased, though, there may be some doubt regarding the source of purchases. For this reason alone, addition has been made purely on estimate basis by three different authorities by adopting different percentage of profit. Thus, the aforesaid facts would establish that the assessee cannot be accused of concealing his income. The decision relied upon by the learned Departmental Representative being factually distinguishable, would not apply. That being the case, I agree with 5 ITA 4920/Mum/2019