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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI JOGINDER SINGH & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 16.12.2015 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12.
The only issue raised by the assessee is against the confirmation of penalty of Rs.1,61,476/- by Ld. CIT(A) as made by the AO under section 271(1)(c) of the Act.
2 M/s. Neha Home Builders Pvt. Ltd.
The facts in brief are that assessment was framed under section 143(3) of the Act assessing the total income of Rs.22,96,05,946/- by making an addition of Rs.4,86,115/- on account of bogus purchases as against the return of income of Rs.22,91,19,831/-. No appeal was filed against the quantum addition by the assessee. In the assessment order, the penalty proceedings were initiated for concealment/furnishing of inaccurate particulars of income. Thereafter, the AO levied penalty equal to 200% sought to be levied equal to Rs.1,61,476/- under section 271(1)(c) of the Act by holding that assessee concealed its income and furnished inaccurate particulars of income.
In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee by observing and holding as under:
“6. I have examined the submission of the appellant, carefully. The appellant is a builders and developer. The Tax Audit Report does not indicate any stock record maintained of purchases. The Appellant is not a trader where the purchase can be identified with the corresponding sales and closing stock. It is for this reason that Appellant did not file the appeal against the assessment order. The Assessing Officer in the assessment proceeding had clearly asked to furnish evidences to show that the purchases claimed were genuine. The Appellant failed to furnish the necessary details. It also failed to produce parties for confirmation. It is appellant who had claimed the the onus is on it to show that the claim made is genuine. It has not discharged the onus. The Assessing Officer has rightly invoked Explanation ‘1’ of Section 271(1)(c) of the I.T. Act, 1961. There is no proof that the purchases claimed as expenses are genuine. The penalty levied is upheld and Appeal of the Appellant is dismissed.”
The Ld. A.R. vehemently submitted before us that in this case the penalty was imposed on account of bogus purchases qua which the assessee furnished all the bills, vouchers, payment details etc., however, could not produce the parties
3 M/s. Neha Home Builders Pvt. Ltd. before the AO. The Ld. A.R. submitted before the Bench that assessee is a very big builder and developer and during the year total purchases accounted for more than Rs.90 crores against which the assessee has returned a profit of Rs.23 crores. The Ld. A.R. submitted that the assessee has produced before the AO the copies of challans, invoice bills, payment details in support of the purchase of material and receipt thereof at the project site. The Ld. A.R. submitted that the assessee is a big contractor and has to depend on the sub contractors who got the material delivered on respective sites and thereafter submitting the bills in the evening to settle the accounts after submitting all the bills to the assessee. The Ld. A.R. submitted that the AO has not disputed the corresponding consumption of materials in the construction. The Ld. A.R. submitted that in such circumstances the imposition of penalty is not justified where the assessee has something to prove the receipt of materials. The mere imposition of penalty on the basis of suspicion of bogus billing without disputing the corresponding consumption of the material is not sustainable in law. The Ld. A.R. relied on a couple of decisions namely Earthmoving Equipment Service Corporation vs. DCIT in ITA No.6617/Mum/2014 order dated 02.05.2017, CIT v. Reliance Petroproducts (P.) Ltd.” [2010] 322 ITR 158 (SC) and finally prayed that the penalty should be deleted. The Ld. A.R. while taking the alternative plea for the deletion of penalty submitted that the penalty was initiated in a mechanical manner for concealment of income or furnishing of inaccurate particulars of income and similarly a 4 M/s. Neha Home Builders Pvt. Ltd. notice has been issued in a standard format without application of mind. The ld. counsel submitted that one of the two limbs on which penalty was proposed to be levied was not mentioned and similarly the order imposing penalty was passed for concealment of income and furnishing of inaccurate particulars of income which is not permissible under the Act. The ld counsel contended that the penalty order has to be quashed on the ground of failure of the AO to strike off the irrelevant limb is in violation of principle of natural justice as the assessee has not been confronted the reason or limb on which penalty was proposed to be levied.
The Ld. D.R., on the other hand, relied on the order of AO and Ld. CIT(A).
We have heard the rival submissions of both the parties and perused the material on record including the impugned decision. The undisputed facts are that the assessee has availed the bills of bogus purchases qua which it produced the delivery challans, bills, vouchers and payments before the AO but could not produce the parties. In the present case, the assessee has some evidences to prove the purchases and receipt of material and therefore imposition of penalty just on the basis that assessee has not filed quantum of appeal and accepted the addition is not correct ground for doing so and therefore can not be sustained. The case of the assessee is supported by the decision of the co-ordinate bench of the Tribunal in the case of Moreover, the case of the assessee is supported by the decision of the co-ordinate Bench of the 5 M/s. Neha Home Builders Pvt. Ltd. Tribunal in the case of Earthmoving Equipment Service Corporation vs. DCIT in ITA No.6617/Mum/2014 order dated 02.05.2017 wherein the Tribunal held the imposition of penalty under identical facts to be not justified and accordingly deleted the same. The relevant portion is reproduced as under: “7. On merits, Ld. AR has assailed imposition of penalty on various grounds and placed reliance on various judicial pronouncements which we have duly considered. We find that first of all Section 69C could not be applied to the facts of the case as the payments were through banking channels which were duly reflected in the books of accounts and therefore, there was no unexplained expenditure within the meaning of Section 69C incurred by the assessee. Further, we find that the assessee was in possession of purchase invoices and various other documentary evidences qua these purchases. A bare perusal of the purchase invoices reveals that the assessee has purchased consumables etc. from the alleged bogus suppliers, which are connected, at least to some extent, with the business of the assessee. The assessee, during quantum proceedings itself filed revised computation of income after disallowing the alleged bogus purchases by citing the reason that the suppliers were not traceable during assessment proceedings. Nevertheless, the assessee was in possession of vital evidences in his possession to prima facie substantiate his purchases to some extent particularly when the payments were though banking channels. 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. 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. Therefore, by deleting the impugned penalties, we allow assessee's appeal.”
Since the facts of the assessee’s case are materially same, we, therefore, respectfully following the decision of co- ordinate Bench, are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the penalty. Since we have deleted the issue on merit the legal plea taken up by the assessee qua the non striking off the particular limb in the
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 06.08.2018.