NILESH TEXTILES PVT LTD,THANE vs. ACIT CIRCLE-1, KALYAN

Aforesaid appeal by the assessee for Assessment Year [AY] 2009- 10 contest imposition of penalty u/s 271(1)(c) for Rs.6,12,977/- as levied by Ld. Assessing Officer [AO] vide order dated 28/08/2014 which has been confirmed by the Ld. Commissioner of Income Tax (Appeals)-2, Pune [CIT(A)], vide Appeal No.177/2017-18 dated 04/12/2018.

The Ld. Authorized Representative for Assessee [AR], Ms. Prachi Tambe, drawing attention to quantum assessment order, show-cause notice u/s 274 r.w.s. 271(1)(c) & penalty order advanced arguments to submit that Ld. AO failed to frame specific charge against the assessee while levying the penalty and therefore, the penalty stood initiated on legal grounds in terms of the decision of this Tribunal in Nitin Desai & Sandeep Shirke Associates V/s ACIT (ITA No. 3786/Mum/2018 order dated 17/10/2019). A copy of the order has been placed on record. The Ld. AR further submitted that besides legal infirmities, the penalty ought to have been deleted on merits also. Our attention was drawn to the fact that the penalty was levied on account of addition of alleged bogus purchases despite the fact that the assessee was in possession of primary purchase documents. On the other hand, Ld. DR submitted that quantum additions have been accepted by the assessee and therefore, penalty was to be confirmed. 3.1 Upon careful consideration of material on record, we find that an assessment was framed against the assessee u/s.143(3) r.w.s. 147 vide order dated 11/03/2014. The assessee being resident corporate assessee was stated to be engaged in the business of dying and Nilesh Textiles Private Limited Assessment Year: 2009-10 processing of yarn. The reassessment proceedings were triggered pursuant to receipt of certain information from Sales Tax Department, Maharashtra wherein it was alleged that assessee was involved in making bogus purchases of Rs.19.83 Lacs from an entity namely M/s. Bharat Industrial Corporation. During the course of assessment proceedings, the statement of the assessee’s director was recorded. In the said statement, the purchases were justified by submitting that the assessee was in possession of original purchase bills and the payment to the said supplier was through banking channels. However, since the purchases were not supported / backed by external documents viz. weighing slips, goods receipt notes, transportation receipts etc., Ld. AO chose to reject assessee’s submissions and disallowed these purchases while framing the assessment. The assessee has not contested the quantum additions any further. 3.2 Consequently, penalty proceedings were initiated by Ld.AO in the quantum assessment order by observing as under: - For filing of inaccurate particulars of income leading to concealment of income, penalty proceedings u/s. 271(1)(c) are initiated separately. Accordingly, a show cause notice u/s 274 r.w.s. 271(1)(c) dated 11/03/2014 was issued to the assessee, a copy of which is on record. Upon perusal of the same, it is evident that the particular limb i.e. concealed he particulars of income or furnished inaccurate particulars of income has not been specified. 3.3 During penalty proceedings, the assessee, inter-alia, submitted that there was no clinching evidence regarding concealment. The purchase transactions as well as payment to the supplier was duly recorded in the Nilesh Textiles Private Limited Assessment Year: 2009-10 books of account and mere fact that Sales Tax Department declared the supplier to be a hawala dealer, the same should not be any ground to hold that there was concealment of income by the assessee. 3.4 However the assessee’s submissions could not convince Ld. AO and an opinion was formed that the assessee, without any sufficient and reasonable cause, committed default by furnishing inaccurate particulars of income as defined u/s. 271(1)(c) of the Act. However, in para-6, it was concluded that the amount of Rs.19,83,743/- represented concealed income of the assessee and the same was rightly taxed as such. Upon further appeal, Ld. CIT(A) held that that the assessee was clearly liable for concealment of particulars of income and the Ld. AO was justified in levying the penalty. Aggrieved as aforesaid, the assessee is in further appeal before us.

Upon careful consideration of factual matrix as enumerated in preceding paragraphs, we concur with Ld. AR’s submissions that Ld. AO failed to frame specific charge against the assessee while levying the penalty. The penalty was initiated in quantum assessment order for both the limbs. The show-cause notice also did not specify the applicable limb and finally, in the penalty order, both the limbs have been used inter- changeably. These two limbs, as per settled legal position, carry different meaning / connotation and the failure to frame specific charge would vitiate the penalty proceedings. The cited case law duly supports the legal grounds of the assessee.

Proceeding further, the penalty is not sustainable on merits also since the only basis to make the addition is information of Sales Tax Nilesh Textiles Private Limited Assessment Year: 2009-10 Department and there is no effective investigation by Ld. AO while making the addition. As against this, the assessee was in possession of purchase invoices and the payment to the supplier was through banking channels.

Thus, viewing from any angle, the penalty is not sustainable in law. By deleting the same, we allow the appeal.

The appeal stands allowed in terms of our above order. Order pronounced on 10th September, 2020. Sd/- Sd/- (C.N. Prasad) (Manoj Kumar Aggarwal) �या�यक सद�य / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांक Dated : 10/09/2020 Sr.PS, Jaisy Varghese आदेशकी�ितिलिपअ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड�फाईल / Guard File 6.