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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
This appeal filed by the assessee is arising out of the penalty order passed by Commissioner of Income Tax (Appeals)-50, Mumbai [in short CIT(A)], dated 27.09.2017. The Assessment was framed by the Asst. Commissioner of Income Tax, Circle-8(2), Mumbai (in short ACIT/ITO/ AO) for the A.Y. 2007-08 vide order dated 17.03.2015 under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in this appeal of assessee is against the order of CIT(A) levying the penalty under section 271(1)(c) of the Act on the amount sought to be evaded amounting to ₹ 95,63,253/-. For this assessee has raised the following three grounds: - “1. On the facts and in circumstances of the case, and in law, the Learned Commissioner of Income tax (Appeals)-50, Mumbai, erred in levying the penalty under section 271(1)(c) of the Income Tax Act, 1961 of ₹ 28,68,975/- by wrongly holding:
I) that since the enhancement was made after making show cause to the appellant and pointing out all defects as well as incorrect particulars furnished by the assessee before the Department, I am of the opinion that penalty proceedings u/s. 271(1)(c) of the Act, was rightly initiated and in view of the facts mentioned above as well as all the judicial pronouncements it is held that the assessee has sought to evade tax on Rs. 95,63,253/- and therefore, it is a fit case it impose penalty u/s. 271(1)(c) of the I.T. Act, 1961 and accordingly, I impose minimum penalty of Rs. 28,68,975/- as I am satisfied that the appellant has deliberately concealed /furnished inaccurate particulars of its income"
On the facts and in circumstances of the case, and in law, the Learned Commissioner of Income tax (Appeals)-50, has failed in considering:
i) That penalty proceedings initiated by his predecessor is void as in the order under section 250 enhancing the income by Rs. 95,63,253/-, it has been held that the appellant has deemed to have furnished inaccurate particulars of income of Rs. 95,63,253/-as per explanation 1 to section 271(1)(c) and therefore penalty proceedings u/s. 271(1)(c) is initiated separately and in the notice u/s. 274 rws 271(l)(c) dated 29.03.2017 served on the assessee, the said notice charges the assessee with concealed its income to the tune of and therefore it is not clear whether penalty has been levied for furnishing inaccurate particulars or for concealment of income and he has also not mentioned in his order the particulars which he has found to be inaccurate.
II) If penalty has been initiated for concealment, the specific act of concealment has not been brought to notice.
III) Various judgments submitted on this issue.
Without prejudice to above, the appellant submits that the Learned CIT(A) has failed to consider that the enhancement has been wrongly made as his predecessor passing the order for enhancement has not considered the facts of the matter in its correct perspective by ignoring the quantitative details and other evidences filed to prove and lead the authenticity of purchases."
3. At the outset, the learned Counsel for the assessee stated that the originally the AO made disallowance at the rate of 12.5% being gross profit of the bogus purchases. Accordingly, the AO estimated the gross profit of the bogus purchases and made the addition of ₹ 13,70,094/- being 12.5% of the alleged bogus purchases. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) made enhancement of the bogus purchases and directed the AO to add the balance amount of bogus purchases of ₹ 95,63,253/-. According to the learned Counsel, the CIT(A) directed the AO to add the entire bogus purchases. Aggrieved, assessee preferred the appeal before ITAT and ITAT vide its order in for AY 2007-08 vide order dated 18.10.2017 deleted the enhancement of income made by CIT(A) and directed the AO to sustain the addition at the rate of 12.5% being GP of the Bogus purchases. For this Tribunal discuss the entire issue in Para 2 to 5 as under: - “2. I heard the parties and perused the record. The assessee is engaged in the business of trading in steel. The Revenue carried out survey operation u/s. 133A of the Act and it was noticed that the assessee has made bogus purchases from Siddhivinayak Steel to the tune of ` 109.60 lakhs. During the course of assessment proceedings, the assessee contended that the purchases made from Siddhivinayak Steel are genuine. In support of the same the assessee furnished copies of the purchase bills, ledger account of supplier, details of payments made to the supplier. The Assessing Officer did not agree with the contentions of the assessee and accordingly he estimated profit on alleged bogus purchases at 12.5% and added the same to the total income of the assessee.
3. Before the learned CIT(A), the assessee furnished copy of tax audit report wherein, details of quantity were given. However, the assessee could not produce stock register before the learned CIT(A). The learned CIT(A) also noticed that the assessee has furnished copy of only two purchase invoices. The learned CIT(A) noticed that the quantity details given in tax audit report did not contain details relating to “MS pipe”, which item was purchased from M/s. Siddhivinayak Steel. Even though the assessee submitted that the details relating to MS pipe have been included under the heading “”Seamless Pipes”, the learned CIT(A) did not accept the same. Accordingly, the learned CIT(A) took the view that the profit of 12.5% estimated by the Assessing Officer is not correct and accordingly took the view that entire purchase of ` 109.60 lakhs should be disallowed. Accordingly, he enhanced income of the assessee by disallowing entire amount of purchase made from Siddhivinayak Steel. Aggrieved by the order passed by the learned CIT(A) the assessee has filed this appeal before the Tribunal.
I heard the parties and perused the record. The Ld A.R submitted that the assessee has reconciled the purchases and sales and hence the AO had estimated the profit from the alleged bogus purchases at 12.50%. He submitted that the assessee had given sample of purchase invoices and the Ld CIT(A) has presumed that the assessee could not furnish copies of other invoices. He submitted that the Tax audit report contains quantity details, which has been collated from stock register. Hence non-production of stock register should not have been considered by Ld CIT(A) as an issue to take adverse decision. On the contrary, the Ld D.R supported the order passed by Ld CIT(A).
5. Having heard rival submissions, I am of the view that there is merit in the contentions of Ld A.R. Since the quantity details have been reconciled and since it has also been certified by the tax auditor, in my view, there is no necessity to disallow entire amount of alleged bogus purchases. I notice that the AO had estimated the profit element embedded in the bogus purchases at 12.50% and in my view, it appears to be reasonable. Accordingly I set aside the order passed by Ld CIT(A) on this issue and direct the AO to sustain addition to the extent of 12.50% of the value of purchases.” 4. In view of the above facts and circumstances, now the learned Counsel for the assessee stated that the Tribunal has deleted the addition whatever was enhanced by CIT(A). Hence, the penalty levied by CIT(A) on enhancement vide order dated 27.07.2017 will not survive as the quantum addition has been deleted by the Tribunal. The penalty imposed by CIT(A) was ₹ 28,68,970/-. When these facts were confronted to the learned Sr. Departmental Representative, he could not controvert the above factual findings.
After hearing the rival contentions and going through the facts of the case, we are of the view that once the quantum is deleted by the Tribunal, the penalty levied by CIT(A) on enhanced income will not survive. Hence. We delete the penalty and allow the appeal of the assessee.
In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 07.05.2019.