GLOBAL JEWELLERY PVT. LTD.,MUMBAI vs. DCIT - 9(3)(2), MUMBAI

III. The appellant craves leave to add to, alter, amend and/or delete any of the grounds of appeal Ld. AR submitted before us that the additional grounds of appeal specifically brings out the issues and raised pure question of law. It was submitted that it will bring out error in quantifying penalty and goes to the roots of the matter. The necessary facts required for adjudication of the additional grounds of appeal and for issue of quantification are already on record and hence no new facts are required to be brought on record.

3. On the other hand Ld. DR requested for dismissal of application dated 30.05.18 for admission of additional grounds.

Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties, dismissed the appeal of the assessee. Now before us, the assessee has preferred the present appeal on the grounds mentioned above.

Main Grounds & Additional Grounds No. I to III. 6. Since all the grounds raised by the assessee are inter connected and inter related and relates to challenging the order of Ld. CIT(A) in confirming the penalty made by AO u/s 271(1)(c) of I.T. Act, therefore we thought it fit to dispose of the same by this common order.

7. We have heard Ld. Counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities and judgments cited before us. We find as per the facts of the present case, that assessee filed its return of income for AY 2009-10 on 27.09.11 declaring total loss of Rs. 1,45,85,482/-. Thereafter, the case was selected for scrutiny and an assessment u/s 143(3) of the Act was completed on 20.11.11 thereby determining the total loss of the assessee at Rs. 23,26,900/-, assessee preferred an appeal against the assessment order dated 20.11.2011 which was partly allowed by the Ld. CIT(A) vide order dated 20.08.201, the effect to which was given by the A.O. vide order 17.06.2014 revising the net loss to Rs.1,02,83,619/- Subsequently, the case was re- opened by issuing notice u/s 148 and assessment u/s.143(3) r.w.s. 147 was completed on 28.08.2014 assessing the total loss at Rs. 99,46,961/- after disallowing bogus purchases of Rs.3,36,658/- and penalty proceedings were also initiated for concealment/furnishing inaccurate particulars of income. Thereafter an order u/s.271(1)(c) of the Act was passed on 25.03.2015 levying a penalty of Rs.4,21,792/- on the assessee.

Ld. AR appearing on behalf of the assessee reiterated the same arguments as were raised before Ld. CIT(A) and also relied upon the written submission filed before Ld. CIT(A). It was submitted that the assessee had made genuine purchases from the parties and all the details were provided to AO. However, AO had made additions on the basis of list of suspicious dealers reported on the MAHAVAT website. It was further submitted that the assessee had provided all the necessary documents to prove the genuineness of purchases in the shape of bills, comparable bills, etc and the payment for the purchase of material had also been made by account payee cheques, which was reflected in the books of the assessee. It was further submitted that the assessee had not preferred any appeal against the additions made by AO just to avoid litigation and to buy peace of mind, but by that it does not prove the purchases made by assessee was bogus. Therefore, the penalty u/s 271(1)(c) of the I.T. Act levied by the AO was not sustainable as there was no concealment of particulars or furnishing of inaccurate particulars on behalf of the assessee.

Ld. AR also relied upon the orders passed by Coordinate Bench of Hon’ble ITAT in the case of Earthmoving Equipment Service Corporation Vrs. DCIT, wherein the Hon’ble ITAT in similar circumstances had deleted the penalty, the operative portion is contained in para no. 7 of the order and the same is reproduced below:-

After having gone through the orders passed by the Coordinate Bench of ITAT, we find in this case that during the assessment proceedings, assessee had placed on record all the documents with regard to purchase of the material in the shape of bills, invoices, etc. and had also proved that the payments to the parties were made through account payee cheques. Merely because the suppliers could not be traced at the given address would not automatically lead to a conclusion that there was concealment of income or furnishing of inaccurate particulars by the assessee. The assessee made a claim which was bona fide and the same was coupled with documentary evidences but the same remained inconclusive for want of confirmation from the suppliers. In these circumstances at the most, we can draw an inference that the claim made by the assessee remained ‘unproved’, but not ‘disproved’. Even, nothing was brought on record by the AO to prove that the claim of the assessee was false. This fact still remains under shadow of doubt. Under these circumstances, we doubt whether penalty can be levied as per law contained in the Income Tax Act. In this regard, we take guidance from the judgment of Hon’ble Gujrat High Court in the case of National Textiles Corporation Vrs. CIT 249 ITR 125 (Guj.), wherein it was held that if the assessee gives an explanation which remains ‘unproved’ , but is not ‘disproved’, no penalty is imposable. Identical view was taken by Hon’ble Bombay High Court in the case of CIT Vrs. Upendra Vrs. Mithani (ITA no. 180/Mum/2009). Therefore, overall facts of the case do not justify imposition of penalty on the assessee and therefore, the same deserves to be deleted on merits of the case. All the cited case laws support the view taken by us in the matter.

Ld. AR also relied upon the orders passed by Coordinate Bench of Hon’ble ITAT in the case of Shri DilipShirodkarvrs. ITO, wherein the Hon’ble ITAT in similar circumstances had deleted the penalty, which is contained in para no. 9 of the order and the same is reproduced below:-

The issue involved in the appeal revolves around deletion of penalty under Section 271(1)(c) of the I. T. Act. The Tribunal has concurred withthe view taken by the Commissioner of Income Tax (A). TheCommissioner of Income Tax (A) has rightly taken a view that 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 the 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 view taken by the Tribunal is a reasonable and possible view. The appeal is without any substance. The same is dismissed in limine with no order as to costs.

Thus, in view of facts of this case and aforesaid legal position, we do not find it to be a case of concealment of income or furnishing of inaccurate particulars of income, and thus not fit for levy of penalty. Therefore, penalty levied by the AO is directed to be deleted.

After having gone through the aforementioned judgments passed by respective High Courts and by the Coordinate Bench of Hon’ble ITAT, we find that during the assessment proceedings, assessee had submitted all the documentary evidence and in order to give an explanation which remains unproved, but was not disproved. Therefore, in such circumstances, no penalty was imposable. In this respect, Coordinate Bench of Hon’ble ITAT in the case of Shri Dilip Shirodkar Vrs. ITO (supra) had already decided the case of similar circumstances by referring the identical view taken by Hon'ble Bombay High Court in the case of CIT vs Upendra V. Mithani (ITA No 1860 of 2009 dated 5th August, 2009), wherein it was held that "The issue involved in the appeal revolves around deletion of penalty under Section 271(1)(c) of the I. T. Act. The Tribunal has concurred with the view taken by the Commissioner of Income Tax (A). The Commissioner of Income Tax (A) has rightly taken a view that 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 the 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 view taken by the Tribunal is a reasonable and possible view. The appeal is without any substance. The same is dismissed in limine with no order as to costs."

Therefore, considering the interest of justice and in view of the facts of the present case as well as aforesaid legal proposition, we do not find it to be a case of ‘concealment of income’ or furnishing of ‘inaccurate particulars of income’, and thus not fit for levy of penalty. Therefore, penalty levied by the AO is directed to be deleted. Resultantly, these grounds raised by the assessee are allowed.