INCOME TAX OFFICER 29(3)(1), MUMBAI vs. RAKESH PRABHUDAS DOSHI, MUMBAI

The Ld. DR submitted that the quantum additions of alleged bogus purchases were made upon receipt of incriminating information from Sales Tax Department, which was an external agency. Since the penalty was levied against additions so made, the penalty proceedings would be covered by exception (e) of clause 10 of the circular no. 3 of 2018 as amended on 20/08/2018, which read as under: - 10. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect: - …. (e) Where addition is based on information received from external sources in the nature of law enforcement agencies such as CBI / ED / DRI / SFIO / Directorate General of GST Intelligence (DGGI).

We have carefully heard the arguments advanced by Ld. DR and perused relevant material on record. From the perusal of case records, it emerges that the assessee was assessed u/s 143(3) r.w.s. 147 wherein it was saddled with estimated additions of Rs.12.13 Lacs, being 12.5% of alleged bogus purchases aggregating to Rs.97.10 Lacs stated to be 3 Rakesh Prabhudas Doshi Assessment Year :2009-10 made from 28 entities. The primary reason to make the addition was the fact that the assessee failed to substantiate the purchase transactions and failed to produce any of the suspicious supplier. Accordingly, Ld. AO made estimated addition of 12.5% against these purchases. Consequently, penalty proceedings were initiated in quantum assessment order and the assessee was saddled with impugned penalty u/s 271(1)(c) for Rs.4,25,500/- vide penalty order dated 29/09/2015. Upon further appeal, Ld. CIT(A) deleted the penalty by noting that Ld.AO failed to bring on record anything to prove the fact of furnishing of inaccurate particulars of income within the meaning of Sec. 271(1)(c) by disproving the claim of the assessee. Aggrieved, the revenue is under further appeal before us.

First, we take up the issue of very maintainability of revenue’s appeal. Undoubtedly, the quantum of penalty under dispute is Rs.4,25,500/- and the same is certainly below the threshold limit of Rs.50 Lacs as provided in latest low tax effect Circular No.17/2019 dated 08/08/2019 issued by Central Board of Direct Taxes [CBDT].

The Ld. DR has pleaded that penalty should be construed to be covered by exception clause 10(e) since the same was levied on account of quantum additions which was based upon receipt of information from an external agency i.e. Sales Tax Department. We have considered the said submissions. It is settled legal position that quantum proceedings and penalty proceedings are independent and distinct proceedings and confirmation of additions may not be the sole ground for confirming the penalty. Extending the same logic, unless specific exception is provided in the circular with respect to penalty also, it could 4 Rakesh Prabhudas Doshi Assessment Year :2009-10 not be construed that the penalty was to be treated at par with quantum additions. The clause 10(e) specifically apply only to additions which are based on information received from external sources. The levy of penalty, by no stretch of imagination, could be construed as addition as envisaged by clause 10(e). Therefore, the submissions made by Ld. DR could not be honoured and we decline to accept the same.

Having reached such a conclusion, the appeal is liable to be dismissed in terms of latest low tax effect circular issued by CBDT. The same would obviate the need to delve into the merits of the case and accordingly, we refrain from doing so.

Having said so, a liberty is given to revenue to seek recall of the appeal, if at a later stage, it is found that the matter is covered by any exceptions provided in any of the circular or in case the tax effect as agitated by revenue exceeds the prescribed monetary limit.

Resultantly, the appeal stands dismissed.