RELIABLE METAL INDUSTRIES,MUMBAI vs. DCIT -25(3), MUMBAI

O R D E R

PER AMARJIT SINGH, JM:

Being aggrieved by the orders of the Deputy Commissioner of Income Tax- 25 (3) Mumbai, and learned Commissioner of Income-tax (Appeal) - 37, Mumbai this appeal petition is filed on the following amongst other A.Y. 2011-12 grounds of appeal, which it is prayed may be considered without prejudice to one another.

1. On the facts, and in circumstances of the case, and in law, the Assessing Officer erred in imposing penalty under section 271 (1) (c) of the Income-tax Act 1961 without appreciating that the notice initiating penalty under section 274 read with section 271 (1) (c) was bad in law.

2. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income- tax (Appeal) erred in partly upholding action of the Assessing Officer in imposing penalty under section 271(1) (c) of the Income-tax Act 1961 amounting to RS. 54.070 being 100% of tax sought to be evaded on alleged concealed income on account of disallowing purchases on estimated basis amounting to RS. 174,987 without appreciating that the addition of alleged non-genuine purchases was made on a difference of opinion; and there was neither concealment of income nor filing of inaccurate of income, as the Appellant had furnished all material particulars in support of its claim of purchases further supported by the order of MVAT Department accepting the same purchases which the Assessing Officer treated as non- genuine.

3. Your Appellant craves leave to add to, amend, alter, modify, and / or delete any of the above grounds of appeal at or before final disposal of appeal." The brief facts of the case are that the assessee filed its return of 3. income on 14.09.2011 declaring total income to the tune of Rs.25,02,573/-. Thereafter the case of the assessee was reopened upon the information received from the Sales Tax Authorities in which it was conveyed that the assessee has taken the bogus purchase entries from M/s. Dhanera Metals in sum of Rs.11,39,606/- and from M/s. Prime Steel Impex in sum of Rs.2,85,948/-. The total bogus entries was in sum of Rs.14,25,554/-. Thereafter, the case of the assessee was ITA. No.5351/M/2018 A.Y. 2011-12 reopened. Notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. After the reply of the assessee 12.275% of the bogus purchase was added to the income of the assessee. The total addition was of Rs.1,74,987/-. The total income of the assessee was assessed to the tune of Rs.26,77,560/-. The penalty proceeding was initiated and after the reply of the assessee, the penalty to the tune of Rs.1,74,987/- was levied. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who dismissed the appeal of the assessee, therefore, the assessee has filed the present appeal before us.

5. We have heard the rival submissions and have perused the material available on record. We find that the assessment was reopened on the basis of the information received from the DGIT (Investigation) that during the impugned assessment year, the assessee made purchases from the dealers, who were shown as hawala dealers in the website of the Sales tax Department of State of Maharashtra. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has made purchases amounting to ` 23,19,151/- from four parties viz. Nisha Enterprise, Dhanera Metal Corporation, Manish Industrial Corporation and Shidhsila Tradelinks Private Ltd. The Assessing Officer, on the basis of the gross profit percentage, disallowed 12.5% out of the total purchases made from the four such hawala dealers. Admittedly, the addition was made on estimation basis. The Co-ordinate Bench of the Ahmedabad Tribunal in the case of Ruchi Developers vs. ITO (supra), and the Mumbai Bench in the case of Earthmoving Equipment Service Corporation (supra), has taken a view that when a assessee made a bona fide claim coupled with documentary evidence but the same remained inconclusive for want of confirmation from the suppliers and the Assessing Officer has not made further inquiry to verify the correctness of the confirmation, the imposition of penalty is not justifiable. Thus, respectfully following the decisions of the co-ordinate Benches of this Tribunal, we find that the penalty made on estimated disallowance is not sustainable. As a result, the penalty levied is set aside and the appeal of the assessee is allowed.