ACIT 13 (3)(1), MUMBAI vs ROYAL PLASTIC INDUSTRIES PVT. LTD., MUMBAI

Income Tax Appellate Tribunal, “D”, BENCH MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI G. MANJUNATHA

Hearing: 02/12/2019

Date of Hearing 02/12/2019 Date of Pronouncement 02 /12/2019 आदेश / O R D E R आदेश आदेश आदेश PER G.MANJUNATHA (A.M):

This appeal filed by the revenue is directed against, the order of the Commissioner of Income Tax (Appeals)–21, Mumbai, dated 26/06/2018 and it pertains to Assessment Year 2010-11.

The revenue has raised the following grounds of appeal:-

1. On the facts and circumstances of the case and in law the CIT(A) has erred in deleting the penalty levied without appreciating the fact that the assesee has failed to prove the genuineness of transactions of the purchase.

2. The appellant prays that the order of the Ld.CIT(A) on the above ground be set aside the that of the Assessing Officer be restored.

Royal Plastic Industries Pvt.Ltd.

The brief facts of the case are that the assessee company is engaged in the business of manufacturing and trading of varius types of Rubber goods, filed its return of income for AY 2010-11 on 18/09/2010, declaring total income of Rs. 1,63,24,225/-. The assessment was completed u/s 143(3) r.w.s 147 of the I.T.Act, 1961 on 21/10/2015, determining the total income of Rs.1,76,31,487/- after making addition of Rs.13,07,262/- on account of unverified purchases. Thereafter, penalty proceedings u/s 271(1)(c) of the I.T.Act, 1961 was initiated and called upon the assesse to explain as to why penalty for concealment of particulars of income or furnishing inaccurate particulars of income shall not be levied. In response, the assessee submitted that although, the Ld. AO has made additions towards 12.5% profit on alleged bogus purchases, but, fact remains that the assessee has filed complete details in order to prove genuineness of purchases. Therefore, merely for the reasons that there is an addition towards estimated profit on unverified purchases, the same cannot be considered as furnishing inaccurate particulars of income, which warrants penalty u/s 271(1)(c) of the I.T.Act, 1961. The Ld.AO did not convinced with the arguments of the assessee and hence, levied penalty of Rs.4,03,944/-, which is 100% of tax ought to be evaded u/s 271(1)© of the I.T.Act, 1961, on the ground that the assessee has furnished inaccurate particulars of income by making a false case of deduction of expenditure.

The assessee carried the matter in appeal before the first appellate authority. The Ld.CIT(A), for the detailed reasons recorded in his appellate order, deleted penalty levied u/s 271(1)( c) of the Act, on the ground that when addition is made on adhoc estimation of profit on unverified purchase, it cannot be said that the assessee

Royal Plastic Industries Pvt.Ltd. has concealed particulars of income within the meaning of section 271(1)( c) of the Act. Aggrieved by the Ld.CIT(A) order, the assesee is in appeal before us.

None appeared for the assesee. We have heard the Ld. DR, perused the material available on record and gone through orders of the authorities below. The Ld. AO has levied penalty u/s 271(1)(c) of the I.T.Act, 1961, in respect of additions made towards 12.5% gross profit on alleged bogus purchases, on the ground that the assesse could not establish genuineness of purchases made from certain parties, in the backdrop of clear findings from the Sales Tax Department. It is the claim of the assesee before the Ld. AO that it has furnished necessary evidences in support of purchases from the parties, but the Ld. AO did not accept the explanations of the assessee, only for the reasons that he had definite information from Sales Tax Department as per which the parties were involved in providing accommodation entries of bogus purchase bills. Except this, the Ld. AO neither pointed out any discrepancies in books of accounts, nor proved that the purchases were in fact non-genuine to make additions towards 12.5% GP on alleged bogus purchases. Therefore, the same cannot be considered as furnishing inaccurate particulars of income within the meaning of section 271(1)( c) of the I.T.Act, 1961.

Having considered arguments of the Ld.DR and also material available on record, we find that although, the Ld. AO has made addition towards 12.5% profit on alleged bogus purchases, but neither, he has proved furnishing of inaccurate particulars of income, nor explained how the rigors of penalty provisions could be invoked

Royal Plastic Industries Pvt.Ltd. in the given facts of the case. We, further, noted that the assessee has furnished all basic details in support of purchases. The only reason for making additions is non co-operation of the parties in response to 133(6) notices issued by the Ld. AO. Under these facts, it is difficult to accept, the findings of the Ld. AO that the assessee has furnished inaccurate particulars of income, in respect of purchases from those parties. Therefore, we are of the considered view unsubstantaited claim does not amount to furnishing inaccurate particulars of income and therefore, the penalty levied u/s 271(1)(c) is unwarrented. The ld. CIT(A) after considering relevant facts has rightly deleted penalty levied u/s 271(1)( c) of the Act. We do not find any infirmity in findings of ld. CIT(A) and hence, we are inclined to uphold order of the ld. CIT(A) and direct the Ld. AO to delete penalty levied u/s 271(1)( c) of the I.T.Act 1961.

In the result, appeal filed by the revenue is dismissed. Order pronounced in the open court on this 02 /12/2019

ACIT 13 (3)(1), MUMBAI vs. ROYAL PLASTIC INDUSTRIES PVT. LTD., MUMBAI