DCIT-3(3)(2), MUMBAI vs. TPI INDIA LTD, MUMBAI

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.

For the aforesaid reasons, we hold that no substantial questions of law arises in this appeal. Consequently, this appeal is dismissed.”