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Income Tax Appellate Tribunal, “SMC-II” BENCH,
आदेश / O R D E R महावीर स िंह, उपाध्यक्ष / PER MAHAVIR SINGH, VP: This appeal by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-8, Mumbai in Appeal No. CIT(A)-8/IT-470/2015-16 dated 25.01.2019. The Penalty was levied by DCIT, Circle 3(3)(1), Mumbai under section 271(1)(c) of the Act of the Act vide order dated nil.
TPI India Ltd. Page | 2 2. The only issue in this appeal of Revenue is against the order of CIT(A) deleting the levy of penalty under section 271(1)(c) of the Act of the Act for furnishing of inaccurate particulars of income and concealment of particulars of income on the issue of disallowance of bogus purchases by applying the profit rate. For this Revenue has raised the following two grounds: - “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the penalty of `39,120/- levied under section 271(1)(c) of the Act of the I.T. Act 1961 without appreciating that the assessee had understated its income by furnishing inaccurate particulars of its income and concealed particulars of income, which were deleted during the course of assessment proceedings only and hence, provisions f section 271(1)(c) is clearly attracted in this case?
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the penalty of `39,120/- levied under section 271(1)(c) of the Act of the I.T. Act, 1961 without appreciating that the claims made is not only incorrect in law but is also wholly without any basis and the explanation furnished by it for making such a TPI India Ltd. Page | 3 claim is not found to be bona fide triggering Explanation 1 to section 271(1)(c) of the I.T. Act, 1961. As held by Hon’ble Delhi High court in the case of Zoom Communication Pvt. Ltd. 40 DTR 249 (2010)?.”
At the outset, it is noticed that the amount involved is ₹39,120/- Which is the penalty levied by the Assessing Officer on estimated addition and further it is below the prescribed limit of circular issued by Central Board of Direct Taxes which authorize Revenue not to file the appeal below the tax effect of ₹50 lacs vide circular No. 17/2019 dated 08.08.2019.
Further on merits it is seen that the disallowance made by the Assessing Officer on estimate basis of bogus purchases and further disallowance of depreciation on the purchase of bogus assets. We noted that the Assessing Officer levied the penalty under section 271(1)(c) of the Act but assessee explained that the purchase of goods was made from the above parties and for this, the complete purchase bills, payment made through account payee cheques for the purchase of these goods from various parties and included the details of stock register wherein these goods are entered into were produced before the Assessing Officer during the course of assessment proceedings and even during the penalty proceedings. The only premise by the Assessing Officer during the course of assessment proceedings and during penalty proceedings for making addition on profit rate basis and levying the penalty on the same amount TPI India Ltd. Page | 4 is that the assessee could not discharge its onus by producing the transport receipts or weigh bridge challan, which prove that the goods were transported to the assessee’s premises. But in any case it is to be seen that these disallowance of bogus purchase is made by Assessing Officer just on the estimate basis and while going through the penalty order, we could not find anything recorded by the Assessing Officer that there is actual concealment of income by the assessee. Merely suspicion or doubt cannot be the basis for levying penalty under section 271(1)(c) of the Act of the Act either for concealment of particulars of income or for furnishing of inaccurate particulars of income as the case may be. Furthermore, once there is no reason to disbelieve the sales made by the assessee and particularly when part of material is recorded in stock, it cannot be justified that the estimation made by the Assessing Officer warrants penalty under section 271(1)(c) of the Act. It can be a case of addition or disallowance of bogus purchases on estimate basis but it cannot be a case of levy of penalty for concealment of income under section 271(1)(c) of the Act in the given facts and circumstances of the case. Hence, in the present case the entire purchase totaling to ₹89,044/- are treated as bogus purchases and addition is only to the extent of disallowance of depreciation at the rate of 60% on the fixed asset of ₹62,500/- as ₹37,560/-. Thereby, the total addition on account of bogus purchases and disallowance of deprecation of bogus purchases comes to ₹1,26,604/-. Here, in the case of bogus purchase, we are reminded the decision of Hon’ble Bombay High Court in the TPI India Ltd. Page | 5 case of PCIT vs. Goa coastal resorts and recreation Pvt. Ltd. Vide order dated 11.11.19, wherein it is held as under: - “5. We have carefully examined the record as well as duly considered the rival contentions. Both the Commissioner (Appeals) as well as the ITAT have categorically held that in the present case, there is no record of satisfaction by the Assessing Officer that there was any concealment of income or that any inaccurate particulars were furnished by the assessee. This being a sine qua non for initiation of penalty proceedings, in the absence of such petition, the two authorities have quite correctly ordered the dropping of penalty proceedings against the petitioner.
Besides, we note that the Division Bench of this Court in Samson(supra) as well as in New Era Sova Mine(supra) has held that the notice which is issued to the assessee must indicate whether the Assessing Officer is satisfied that the case of the assessee involves concealment of particulars of income or furnishing of inaccurate particulars of income or both, TPI India Ltd. Page | 6 with clarity. If the notice is issued in the printed form, then, the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine(supra), the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in matter of initiation of penalty proceedings.
In the present case, as well if the notice dated 30/09/16 (at page 33) is perused, it is apparent that the relevant portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned order are quite consistent by the law laid down in the case of Samson Perinchery and New Era Sova Mine(supra) and therefore, warrant no interference.
TPI India Ltd. Page | 7 8. The contention based upon MAK Data (P.) Ltd.(supra) also does not appeal to us in the peculiar facts of the present case. The notice in the present case is itself is defective and further, there is no finding or satisfaction recorded in relation to concealment or furnishing of inaccurate particulars.
For the aforesaid reasons, we hold that no substantial questions of law arises in this appeal. Consequently, this appeal is dismissed.”
As there is estimation of income on the bogus purchases, 5. we are of the view that the CIT(A) has rightly deleted the penalty. No doubt the CIT(A) has entirely drawn on different findings for deleting the penalty relying on an old case law of Hon’ble Supreme Court in the case of B.A. Balasubramaniam & Bros. Co. by observing in Para 3.1.2 to 3.1.4 as under: - “3.1.2 I have given my careful consideration to the rival submissions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position. The issue inn quantum proceedings involve some purchases amounting to ` 89,044/- TPI India Ltd. Page | 8 from one Vigneshwara Enterprises which was found to be a bogus transaction / an accommodation entry. The AO had also disallowed depreciation claimed of Rs 37,560/- on the assets claimed to be purchased from the said party. The penalty now has been levied in respect of the same addition, albeit at a minimum level.
3.1.3 The appellant has contended that they did not go for an appeal against the quantum order, as it is a BIFR company, having huge unabsorbed business losses of Rs 37.41 crores and UAD loss of Rs 777 crores. That, had they gone in for appeal, they would surely have won, as their facts are very strong. They further contend that when there is a turnover of around Rs 15 crores, why should they be indulging in bogus purchases.
3.1.4 I find that the Hon'ble SC has in the case of B A Balasubramaniam & Bros. Co, 116 Taxmann 842, has held that the presumption of concealment sticks only when there is a difference of more than 20% between returned income and TPI India Ltd. Page | 9 assessed income. Then, the explanation to section 271(1(c) comes into play. Then, the burden shifts to the appellant to discharge the onus of innocence. That being not the situation here, the presumption of concealment does not stick. It is also a trite law that assessment and penalty proceedings are different. That, the penalty proceedings do not automatically follow from the assessment proceedings, that too, when the difference is less than 20%. I also agree with the contention of the appellant company that they are already having huge Of business and UAD losses and, therefore, there is no motivation to conceal income or file inaccurate particulars. The appellant has also stated that the calculation done of penalty imposable, as done by the AO, is not correct. Keeping in view the entire facts and circumstances of the case, therefore, in my considered view, no penalty is leviable in this case. Accordingly, the grounds are being allowed. Penalty imposed is deleted.”