SANJAY LALCHAND BATTHIJA,MUMBAI vs. INCOME TAX OFFICER WARD-2(4), KALYAN

Brief facts are, the assessee is an individual. For the assessment year under consideration, the assessee filed his return of income on 5th October 2010, declaring total income of ` 7,69,540. The return of income filed by the assessee was initially processed under section 143(1) of the Act. Subsequently, on the basis of information received from the Sales Tax Department, Government of Maharashtra, revealing that purchases worth ` 38,80,265, claimed to have been made by the assessee from four parties are not genuine, as, the concerned parties are providing accommodation bills, the Assessing Officer re–opened the assessment under section 147 of the Act. As alleged by the Assessing Officer, the assessee did not comply with the notice issued under section 148 of the Act. Further, various statutory notices and reminders issued thereafter were also not responded to by the assessee. Accordingly, the Assessing Officer proceeded to complete the assessment under section 147 of the Act to the best of his judgment. Thus, ultimately, the Assessing Officer held the purchases of ` 38,80,265, as non–genuine added back to the income of the assessee. Being aggrieved with such addition, the assessee preferred appeal before the first appellate authority.

The learned Commissioner (Appeals), however, confirmed the addition made by the Assessing Officer. In the meanwhile, on the basis of the addition made on account of non–genuine purchases, the 3 Grasim Bhiwani Textiles Ltd.

The learned Authorised Representative submitted, while deciding the quantum appeal of the assessee vide ITA no.7142/Mum./ 2017, dated 14th May 2018, the Tribunal having found that sales effected by the assessee have not been doubted by the Departmental Authorities, proceeded to estimate profit on the alleged non–genuine purchases. Thus, he submitted, when the disputed addition which now survives is only on the basis of estimation, there cannot be either concealment of income or furnishing of inaccurate particulars of income by the assessee. Therefore, no penalty under section 271(1)(c) can be levied. In support, he relied upon the following decisions:–

We have considered rival submissions and perused material on record. At the outset, we must observe that the penalty under section 271(1)(c) of the Act was imposed on the addition of ` 38,80,265, representing the quantum of alleged non–genuine purchases. However, the Tribunal, while deciding the quantum appeal of the assessee, in the order referred to above, has restricted the addition to 12.5% of the disputed purchases. Therefore, to that extent, the penalty imposed under section 271(1)(c) of the Act has to be revised. Be that as it may, undisputedly, on the basis of information received from the Sales Tax Department, Government of Maharashtra, that certain purchases made by the assessee are not genuine, the Assessing Officer has treated the said purchases to be bogus and added back to the income of the assessee. The subject addition was also confirmed by learned Commissioner (Appeals). However, while considering assessee’s appeal on the issue, the Tribunal having found that the Departmental Authorities have not disputed the sales effected by the assessee and further, the payment in respect of purchases effected were made through banking channel and also the purchases were entered in the stock register, had concluded that the assessee might have purchased the goods from grey market to save VAT and to regularize such purchases has obtained the accommodation bills. Accordingly, to take care of any possibility of leakage of Revenue on 5 Grasim Bhiwani Textiles Ltd.

In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 28.10.2019