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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
O R D E R
PER PAVAN KUMAR GADALE, JM:
The appeal is filed by the revenue against the order of the Commissioner of Income Tax (Appeals) -9 Mumbai, passed u/s. 271(1)(c) and 250 of the Income Tax Act, 1961. The revenue has raised the following grounds of appeal: M/s. Tania Industries Pvt Ltd., Mumbai “1. Whether on the facts and in the circumstances of the case and in law, the 14. CIT(A) was justified in deleting the penalty of Rs.36,0671- without appreciating that the assessee failed to establish the genuineness of the transactions and therefore the AO was correct in holding the transactions of the assessee with M/s Mihir Sales Pvt. Ltd., M/s Saileela Trading Put. Ltd. and M/s Smartlink Tradex Put. Ltd.?
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the penalty of Rs.36, 067/- without appreciating that Hon'ble M P High Court in the case of Steel Infots Ltd vs C IT (269 ITR 228) has held that in case of concealment of income chargeable to tax by making bogus claim, levy of penalty u Is 271(1)(c) read with Explanation 1 is justified and the decision of Hon'ble Delhi High Court in the case of CIT vs Escorts Finance Ltd (2010) (328 ITR 44) (Del) wherein it is held that in case of a claim made in return of income found to be bogus, it would be treated as a case of concealment or furnishing of inaccurate particulars of income and therefore penalty proceedings would be justified?
3. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was right in deleting the penalty of Rs.36,0671- levied u/s.271(1)(c) of the I. T.Act, 1961 without appreciating the fact that the claims made is not only incorrect in law but is also wholly without any basis and the explanation furnished by the assessee for making such a 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 Communications Put. Ltd., 40 DTR 249 (2010).
4. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of Assessing Officer be restored.
5. The appellant craves leave to amend, alter, delete or add grounds which may be necessary. M/s. Tania Industries Pvt Ltd., Mumbai
2. The Brief facts of the case are that the assessee company is engaged in the business of processor of soyabean and dealing in soya bean, soya oil. The assessee has filed the return of income with total income of Rs2,78,93,385/- for the A.Y 2010-11 on 27.09.2010 and the return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny and the A.O. has issued notice u/s 143(2) and 142(1) of the Act. In compliance the Ld. AR of the assessee appeared from time to time and submitted the details and the case was discussed. The A.O on perusal of the financial statements found that the assessee has received dividend income on investments and has claimed exemption u/s 10 of the Act. The assessee has made suo moto disallowance u/s 14A of the Act. Whereas the A.O. find that the explanations furnished by the assessee in respect of short disallowances is not acceptable and therefore applied Rule 8D(2) of the IT Rules and recalculated the disallowance u/s 14A of the Act r.w.r 8D and after giving the set off of suo moto disallowance of Rs.9805/- The A.O. has restricted the disallowance to Rs 59,504/-.
Further the A.O. has received information from Sale Tax Department, Maharashtra that the assessee has obtained the bogus purchase bills from three parties aggregating to M/s. Tania Industries Pvt Ltd., Mumbai Rs.1,06,110/-and called for the explanations. The assessee has submitted the details, copy of bills issued by the parties and the payment was made by the account payee cheques. But the A.O was not satisfied,as the assessee could not prove the genuineness of the purchase transactions and made addition of Rs.1,06,110/- and assessed the total income of the of Rs. 2,80,59,000/- and passed the order u/s 143(3) of the Act on 01.03.2013. Subsequently, the A.O has initiated penalty proceedings u/s 271(1)(c) of the Act. In the penalty proceedings, the A.O relied on the findings of the assessment proceedings and the submissions of the assessee. But the A.O. was not satisfied with the explanations and dealt with the provisions of Sec. 271(1)(c) of the Act and observed that the assessee has furnished the inaccurate particulars of income and levied a penalty of Rs.36,067/- and passed order u/s 271(1)(c) of the Act.
Aggrieved by the penalty order, the assessee has filed an appeal before the CIT(A).The Ld.CIT(A) in appellate proceedings considered the grounds of appeal
, submissions of the assessee and the findings of the A.O in the penalty proceedings. The CIT(A) has observed that in the assessment proceedings the assessing officer failed to prove that the assessee has furnished inaccurate M/s. Tania Industries Pvt Ltd., Mumbai particulars or concealed the income particulars. The A.O. having accepted the sales cannot draw a adverse inferences. Finally the Ld.CIT(A) has deleted the penalty and observed at page 18 Para 4.2.9 and 4.2.10 of the order, which is read as under;- “4.2.9 The Hon Supreme Court, in the aforementioned judgments, has clearly observed that merely because of addition is made to the income declared by the appellant, penalty u/s 271(1)(c) cannot be imposed. What needs to be seen is that whether the appellants case fit into the main provisions of Sec. 271(1)(c) or under the deeming provision under Explanation
1. In the present case, having considered the factual circumstances and the subsequent events, I am of the considered view that the AO failed to establish that the appellant furnished any inaccurate particulars or concealed the particulars of its income. The presumption of concealment as contained in Explanation 1 to Sec. 271(1)(c) is also not attracted in this case since it is not established by the AO that the explanation furnished by the appellant is false or that he failed to disclose all the particulars material to the computation of income.
4.2.40. In view of the foregoing discussion and looking into the factual matrix of the case I am of considered opinion that this is not a fit case for the imposition of penalty u/s 271(1)(c) for furnishing inaccurate particulars of income. Accordingly, penalty levied by the AO of Rs. 36,067/- is hereby deleted. The grounds of appeal are allowed.”
4. Aggrieved by the order of the CIT(A), the revenue has filed an appeal with the Honble Tribunal. The Ld.DR submitted that the CIT(A) has erred in deleting the penalty, whereas the A.O has received the information M/s. Tania Industries Pvt Ltd., Mumbai that, the assessee has obtained bogus purchase bills and the same could not be overlooked and prayed for allowing the revenue appeal. None appeared on behalf of the assessee.
We heard the Ld.DR submissions and perused the material on record. The sole crux of the disputed issue as envisaged by the Ld.DR that the CIT(A) has erred in deleting the penalty overlooking the facts of bogus purchases. Whereas, the Ld.CIT(A) dealt on the facts and circumstances and observed that the penalty cannot be levied as the A.O. has failed to establish that the assessee had filed inaccurate particulars of income. We find that merely because an addition is made to the income declared by the assessee, penalty u/sec271(1)(c) cannot be imposed for concealment or furnishing of inaccurate particulars of income. We also find that the A.O. has not doubted the sales and made 100% disallowance of bogus purchases. We rely on the ratio of the Honorable Jurisdictional High Court in the case of M/s Nikunj Eximp Enterprises Vs Cit (W.P.No 2860 dated 18-06-2014). Further we find that the tax effect in the present case, is below the monetary limit fixed M/s. Tania Industries Pvt Ltd., Mumbai by the CBDT for filling the appeals. The assessing officer made addition based on the information received from Sales tax department Maharsatra. We are of the opinion that once the revenue/ A.O. accepts that penalty is levied on the basis of information from the outside agency/ department, the penalty is not sustained. The Ld.DR could not controvert the findings of the CIT(A) with any new cogent evidences or information. Accordingly, we are not inclined to interfere with the order of the Ld.CIT(A) who has relied on the judicial decisions and passed a reasoned order and we upheld the same and dismiss the grounds of appeal of the revenue. In the result, the appeal filed by the revenue is dismissed.