No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: SHRI R.C. SHARMA (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the assessee against the order dated 02.03.2016 passed by the Commissioner of Income Tax (Appeals) (for short ‘the CIT (A)’)-37, Mumbai, for the assessment year 2010-11, whereby the Ld. CIT (A) has dismissed the appeal filed by the assessee against penalty order passed u/s 271 (1)(c) of the Income Tax Act, 1961 (for short ‘the Act’).
2. Brief facts of the case are that the return filed by the appellant/assessee for the assessment year under consideration was completed u/s 143 (3) by the AO determining the total income at Rs. 76,12,291/- after making addition of Rs. 10,27,676/- on account of bogus purchases. In the first appeal, Ld. CIT (A) confirmed the addition. The AO initiated proceedings u/s 271 (1) (c) of the Act for furnishing inaccurate particulars of income. In response to notice u/s 274 read with section 271 2 Assessment Year: 2010-11
(1) (c), the authorized representative of the assessee contended that the goods were actually purchased and were consumed in various projects, the payments were purchases were made through account payees cheques and the assessee has furnished all the required details, therefore, the assessee is not liable for penalty u/s 271 (1) (c) of the Act. However, the AO rejected the contention of the assessee and imposed penalty of Rs. 3,17,552/- under the aforesaid section for furnishing inaccurate particulars of income. The assessee challenged the penalty order passed by the AO before the CIT (A). However, the Ld. CIT (A) confirmed the penalty imposed by the AO. The assessee is in appeal against the said order.
3. The assessee has challenged the impugned order passed by the Ld. CIT (A) on the following effective grounds:-
“Levy of penalty u/s 271 (1)(c) on account of addition on bogus purchases of Rs. 3,17,552/-. The Ld. Commissioner of Income Tax (Appeals) erred in imposing penalty on account of addition made on bogus purchases.
The levy of penalty is wrong looking to the fact of the case and deserves to be deleted.”
4. Since, there is a delay of 36 days in filing the present appeal, the assessee filed the present appeal along with the application for condonation of delay of 36 days. The Ld. counsel for the assessee submitted that the delay is on account of genuine and reasonable cause and due to the circumstances beyond control. The Ld. counsel further submitted that Mr. Rajesh Shah, who was looking after the tax matters was suffering from some bone and skin related disease. The order of Ld. CIT (A) was received on 23..06.2016 , however, on that date Sh. Rajesh 3 Assessment Year: 2010-11 Shah had gone to Hoobli, Karnatka in connection with his treatment. Sh. Shah return from Karnataka in the first week of July, 2016 and thereafter he completed the necessary procedure for filing the appeal and submitted the same. The Ld. counsel further submitted that the delay was caused due to unavailability of the partner who was looking after the affairs of the firm and well-versed with the related matters. The Ld. counsel relying on the judgment of the Hon’ble Supreme Court in the case of Collector of Land Acquisition vs. Mst. Katiji and Ors. 167 ITR 471, Balakrishnana V.M. Krishnan (1998) 7 SCC 123 and other judgments of various High Courts, submitted that the delay may be condoned and the assessee may be allowed to argue the case on merits.
On the other hand, the Ld. Departmental Representative (DR) opposed the application for condonation of delay contending that the assessee has failed to establish the reasonable cause which prevented it from filing the appeal within the limitation period. 6. We have heard the rival submissions and also perused the material on record including the cases relied upon by the Ld. counsel for the assessee. From the facts and circumstances mentioned in the affidavit and submissions made by the Ld. counsel it can be inferred that the assessee had a reasonable cause for not filing the appeal within the limitation period. In Collector of Land Acquisition vs. Mst. Katiji and Ors (supra), the Hon’ble Supreme Court has laid down the following principles:- “1. Ordinarily a litigant does not stand to benefit by lodging an appeal late.
Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest 4 Assessment Year: 2010-11 that can happen is that a cause would be decided on merits after hearing the parties.
"Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner.
When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.
5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk.
It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.”
Following the aforesaid principles of law laid down by the Hon’ble Supreme Court, we allow the application of the assessee for condonation of delay in the interest of justice and condone the delay of 36 days in filing the present appeal. We accordingly allowed the Ld. Counsel for the assessee to argue the appeal on merits.
Before us, the Ld. counsel for the assessee submitted that the penalty u/s 271 (1) (c) can be levied only when there is concealment of the particulars of income by the assessee or the assessee furnishes inaccurate particulars of income. In the present case, assessee has furnished all the required details and there is no concealment or inaccurate particulars furnished by the assessee. The assessee did not challenge the assessment 5 Assessment Year: 2010-11 order to buy peace of mind and avoid litigation. AO has made addition without making any detailed enquiry into the matter. As per the settled law, proceedings u/s 271 (1) (c) of the Act are quasi judicial in nature and burden is on the revenue to establish that the assessee has consciously concealed the particulars of income or deliberately furnished inaccurate particulars. The Ld. counsel for the assessee relied on the following cases in support of his contention: 1. “Decision of Hon’ble Bombay High Court in the case of CIT v. Samson Perinchery [392 ITR 4]. 2. Order of Hon’ble Mumbai Tribunal in the cse of Mrs. Indrani Sunil Pillai v. ACIT [ITA No. 1339/Mum/2016] dated 19.01.2018 for A.Y. 2010-11. 3. Order of Hon’ble Mumbai Tribunal in the case of the Manjri Stud Farm Pvt. Ltd. v. ACIT [ITA No. 883/Mum/2014] dated 15.09.2017 for A.Y. 2006-07. 4. Decision of Hon’ble Ahmedabad Tribunal in the case of DCIT v. Gujarat State Fertilizer And Chemicals Ltd. [ 1 ITR (Trib) 361]. 5. Decision of Hon’ble Indore Tribunal in the case of DCIT v. Nepa Ltd. [ 167 TT] 124]. 6. Order of Hon’ble Mumbai Tribunal in the case of Tristar Intech (P) Ltd. v. ACIT [ITA No. 1457/Del/2010] dated 07.09.2015 for A.Y. 2006-07. 7. Order of Hon’ble Mumbai Tribunal in the case of Rakesh Kumar Agarwal v. ACIT [ITA No. 7633/Mum/2016] dated 04.10.2017 for A.Y. 2010-11. 8. Order of Hon’ble Mumbai Tribunal in the case of ACIT v. Balaji Construction [ITA No. 217/Mum/2015] dated 15.02.2017 for A.Y. 2009-10 9. Decision of Hon’ble Bombay High Court in the case of CIT v. Upendra V. Mithani [ITA (L) No. 1860 of 2009] dated 05.08.2009”
6 Assessment Year: 2010-11
On the other hand, the Ld. DR relying on the order passed by the Ld. CIT (A) submitted that since the assessee has not filed any appeal against the addition made by the AO, the assessee is liable for penalty u/s 271 (1) (c) of the Act for furnishing inaccurate particulars of income. The Ld. counsel further submitted that since the order passed by the Ld. CIT (A) in quantum appeal has become final and absolute, there is no merit in the contention of the assessee.
We have heard the rival submissions and also perused the material on record in the light of the rival submissions. We have also perused cases relied upon by the authorities below and the Ld. Counsel for the assessee. As per the settled law, the assessment proceedings and proceedings u/s 271 (1) (c) of the Act are different and independent proceedings and the standard of proof required in both the proceedings are different. Hence, the confirmation of addition made by the AO by the appellate authority does not ipso facto make the assessee liable for penalty u/s 271 (1) (c) of the Act. In the present case, since the Ld. CIT (A) has confirmed the addition made by the AO on estimation basis by rejecting the evidence relied on by the assessee, penalty u/s 271(1)(c) is not justified.
In a similar matter, the coordinate Bench in the case of ACIT-33 (1) vs. M/s Balaji Construction 2015 A.Y. 2009-10, has upheld the findings of the Ld. CIT (A) vide which the Ld. CIT (A) has deleted the penalty imposed by the AO u/s 271 (1) (c) of the Act on the ground that the assessee has failed to produce the suppliers of goods for verification. The findings of the coordinate Bench read as under:-
“7 We have carefully examined the findings recorded by the Ld. CIT (A). With the assistance of the parties, it was noted by us that assessee had filed ample evidences to discharge its primary onus. Our attention was drawn upon the invoice as well as delivery 7 Assessment Year: 2010-11 challans issued by the supplier establishing delivery of the goods purchased by the assessee. Our attention was also drawn upon the weighment slip wherein particulars of the vehicle number and weight of the material purchased was mentioned. Our attention was also drawn upon Quality Inspection Report issued by M/s Bhagwati Steel Cast Ltd., wherein chemical composition and mechanical properties purchased by assessee are narrated. This report not only contained particulars about the quality of product conformed to the Standard Rolling and Mass Tolerances but also confirmed the fact that the material was supplied to the assessee. Our attention was also drawn upon the bank statement establishing that payment was made by cheque. We have also been shown confirmed copy of account issued by the supplier to the assessee, wherein complete entries of transactions done by the assessee with the said supplier were mentioned. These evidences establish that assessee had successfully discharged its primary onus in support of his claim. However, the AO had made the addition on the ground that assessee was not able to produce the said supplier and as per the website of the Sales Tax Department, the name of the said supplier is placed in the list of hawala dealers. In our opinion, the basis adopted by the Assessing Officer for making addition or disallowance may or may not be justified as far as legality of the addition made in the quantum proceedings is concerned, but for levy of penalty these basis are indeed insufficient and not tenable in the eyes of Law. It is well established law that parameters for making the addition/disallowances are a different from levy of the penalty u/s 271 (1)(c) of the Act. There may be cases where claim of the assessee may remain unproved during the course of assessment proceedings for want of substantiation, but for the purpose of levy of penalty the AO is required to ‘disprove’ the claim of assessee. The AO must show that the claim of the assessee is bogus or false. In the facts of this as were brought before us, in our opinion, the claim of the assessee was not proved as bogus or false. The AO levied the penalty merely on the basis of his allegations which were unsupported with any cogent mataerial or evidences. We find that in the facts as have been brought out before us, the case of the assessee should not have been visited with levy of penalty. The assessee brought on record all the primary evidences as could have been adduced by the him, but AO did not place on record even a single piece of evidence to controvert or negate the evidences brought on record by the assessee. Thus, the 8 Assessment Year: 2010-11 peculiar facts of this case do not permit the AO to levy penalty on the assessee. We also find support from the judgment of Hon’ble Gujarat High Court in the case of National Textiles vs. CIT 249 ITR 125 (Guj), wherein after analyzing fundamental aspects of jurisprudence with respect to levy of penalty as envisaged in section 271 (1)(c), it was observed as under:- “The provisions of s. 68 permitting the AO to treat unexplained cash credit as income are enabling provisions for making certain additions, where there is failure by the assessee to give an explanation or where the explanation is not to the satisfaction of the AO. However, the addition made on this count would not automatically justify imposition of penalty under s. 271 (1)(c) by recourse only to Explanation 1 below s. 271(1)(c). In order to justify the levy of penalty, two factors must co-exist, (i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee’s income. It is not enough for the purpose of penalty that the amount has been assessed as income, and (ii) the circumstances must show that there was animus i.e. conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. The Explanation has no bearing on factor No. 1 but it has bearing only on factor No.
2. The Explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If an assessee gives an explanation which is unproved but not disproved i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee’s case is false, the Explanation cannot help the Department because there will be no material to show that the amount in question was the income of the assessee. Alternatively, treating the above, where the circumstances do not lead to the reasonable and positive inference that the assessee’s explanation is false, the assessee must be held to have proved that there was no mens rea or guilty mind on his part. Even in this view of the matter, the Explanation alone cannot justify levy of penalty. Absence of proof acceptable to the Department cannot be equated with fraud or willful default. As there is no 9 Assessment Year: 2010-11 material difference between the original Explanation 1 and to harmonise it with basic principles of justice and fairness , as in the case of original Explanation. On the state of accounts and evidence in the quantum proceedings, the Department was justified in treating the cash credit as income of the assessee but merely on that basis by recourse to Explanation 1, penalty under s. 271 (1)(c) could not have been imposed without the Department making any other effort to come to a conclusion that the cash credits could in no circumstances would have been amounts received as temporary loans from various parties. The assessee in the quantum proceedings failed to produce the accountant but the Department also in penalty proceedings made no effort to summon him. Applying the test (ii) discussed above, therefore, it was a case where there was no circumstances to lead to a reasonable and positive inference that the assessee’s case- that the cash credits were arranged as temporary loans, was false. The facts and circumstances are equally consistent with the hypothesis that it could have been sundry loans in small amounts obtained from different parties. Therefore, even taking recourse to Explanation 1, same circumstances or state of evidence on which the cash credit were treated as income, could not by themselves justify imposition of penalty without anything more on record produced by the assessee or the Department.
Therefore, keeping in view the peculiar facts and circumstances of this case and legal position as discussed above, we find that penalty has been rightly deleted by Ld. CIT (A). No interference is called for in her order and therefore, same is upheld.”
Similarly , the coordinate Bench in the case of Rakesh Kumar Agarwal vs. ACIT, for the A.Y. 2010-11 has deleted the penalty imposed u/s 271 (1) (c) of the Act under the similar set off facts, vide decision dated 04.10.2017. The operative part of the decision of the coordinate Bench reads as under:- “5. We have heard the rival contentions and perused relevant material on record. Undisputedly, the assessee is in possession of purchase invoices which are supported by delivery 10 Assessment Year: 2010-11 challans and the payments are through banking channels. The purchases were made from a corporate entity duly registered under law. The assessee has purchased steel from the said party which is a raw material for construction activity carried out by the assessee. It is also a fact that there is considerable time gap between purchases made by the assessee and inquires conducted by the inspector at the premises of the supplier. The totality of above facts tilts the balance of convenience in assessee’s favour since it not a case that the claim of the assessee was not bona fide or the assessee could not furnish any explanation to substantiate his claim. Therefore, finding assessee’s explanation a plausible one, we are inclined to delete the impugned penalty.”
The facts and the issue involved in the present case are similar to the facts and issues involved in the cases decided by the coordinate Benches, discussed above. Since, the coordinate Benches have decided the identical issue in favour of the assessee and deleted the penalty, we respectfully following the decision of coordinate Benches, allow the appeal of the assessee and set aside the findings of the Ld. CIT (A). Accordingly, we direct the AO to delete the penalty confirmed by the Ld. CIT (A). In the result, appeal filed by the assessee for assessment year 2010- 2011 is allowed.