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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI RAM LAL NEGI, JM
सुनवाई क� तार�ख /Date of Hearing : 08/02/2018 घोषणा क� तार�ख /Date of Pronouncement : 13/04/2018 आदेश / O R D E R Per Shamim Yahya, Accountant Member,:
This appeal by the revenue is directed against order of learned CIT(A)-1, Thane, dated 20/07/2015 and pertains to assessment year 2009-10 2. The grounds of appeal read as under:- 1. " Whether on the facts and in the circumstances of the case, and in law, the Hon'ble CIT(A) erred in deleting the penalty u/s. 271(1)(c) without appreciating the fact that the assessee firm had furnished inaccurate particulars of income in its original return filed by claiming admittedly bogus purchases".
Maharashtra Steel Fabricators and Electors 2. Whether on the facts and in the circumstances of the case, and in law the Hon'ble CIT(A) erred in deleting the penalty u/s. 271(1)(c) by considering the return filed by the assessee in response to notice u/s. 148 as suo moto revised return offering the bogus purchase despite the fact that the department was in possession of the information and the bogus purchase of the assessee had already come to light /exposed.
3. The order of the CIT(A) may be vacated and that of the Assessing Officer may be restored.”
Brief facts of the case leading to the levy of penalty in this case is that assessee is engaged in the business of construction of footbridges and carrying out other civil works for railways. The return of income declaring an income of Rs. 42,61,478/- was filed on 20/09/2010. The AO received information from the Sales Tax Authorities that the assessee was a beneficiary of the Hawala transactions. The AO, therefore, issued notice u/s 148 dated 27/05/2013. The assessee filed its revised return of income on 27/06/2013 in which the amount of the 'bogus purchases' amounting to Rs.63,71,559/- was offered for taxation. The AO passed assessment order u/s 143(3) r.w.s. 147 on 30/09/2013 by adding the additional income surrendered by the assessee. Penalty proceedings u/s 271(l)(c) were also initiated. Now the AO vide order dated 19/03/2014 has imposed penalty u/s 271(1)(c) amounting to Rs. 19,68,812/- being 100% of the tax
Maharashtra Steel Fabricators and Electors sought to be evaded.
The AO issued notice u/s 274 r.w.s. 271(l)(c) asking the assessee to explain why penalty u/s 271(1)(c) should not be imposed in its case. The assessee submitted before the AO that it was a civil contractor for railways constructing footbridges and currying out other civil work. A major part of the material used was steel which was purchased through brokers. Goods were received partly through transport and partly through own vehicles. The payment to the suppliers was made through a/c payee cheques. This practice had been going on for several years. It was only during the course of assessment proceedings, that the assessee came to know that the parties who had supplied bills to it were not genuine parties. It was submitted that the purchases had in fact been made and the materials were consumed in the construction work but the broker had obtained bills from some non-genuine parties without the assessee's knowledge and by keeping the assessee in the dark. As it was not possible for the assessee to produce the parties from whom purchases had been made after a gap of about four years, the assessee with an idea of buying peace of mind and to avoid litigation offered the amount of all such transactions for taxation by filing revised return of income. The assessee also referred to the following decisions - a. Hindustan Steel limited v/s State of Orissa (SC),
Maharashtra Steel Fabricators and Electors b. CIT v/s Sureshchand Mittal, order dated 20.07.1999, c. Sir Shadilal Sugar and General Mills Ltd. v/s CIT [1987] 168 ITR 705.
5 The AO did not accept the assessee's explanation and imposed penalty u/s 271(1)(c) by observing that enquiries and investigation of the Sales Tax Department clearly revealed the racket involving Hawala dealers and beneficiaries. Further, the AO observed that the revised return filed by the assessee was filed after receiving notice u/s 148 was not a voluntary act on the part of the assessee.
Assessee made elaborate submissions before the learned CIT(A). Considering the assessee submissions learned CIT(A) deleted the penalty holding as under:-
“9. I have carefully considered the appellant's submissions, the observations of the AO in the assessment order and the penalty order, the facts of the case and various decisions relied upon by the appellant. The appellant was beneficiary of certain Hawala transactions as per information received by the AO from the Sales Tax Authorities. After the AO issued notice u/s 148 to the appellant, the appellant revised its return of income by including the amount of Hawala transactions in the return of income. The AO passed the assessment order at the same amount which was offered for taxation by the appellant. Subsequently, the AO imposed penalty u/s 271(1)(c) primarily for the reason that the investigation of the Sales Tax Authorities had revealed the nature of the Hawala transactions i.e. only paper transactions without there being any actual sale or purchase of goods. Secondly, while imposing penalty, the AO observed that the revised return filed by the appellant was not a voluntary act but the revised return was filed only after concealment had Maharashtra Steel Fabricators and Electors been detected by the AO. In this regard, it is seen that at the time of issuing the notice u/s 148, the AO only had information from the Sales Tax Department regarding certain Hawala transactions in respect of which the appellant was a beneficiary. Subsequently, when the appellant included the amount of these Hawala transactions in his revised return of income, the AO assessed the appellant's income at the same amount which was offered for taxation without bringing on record any evidence as a result of his inquiries or investigation to show that the appellant had furnished any inaccurate particulars of its income or had concealed any income.
10. The appellate authorities have in similar cases either deleted whole of the addition or have sustained the addition only partly i.e. only to the extent of 12.5% or 25%. Five such instances have been referred to by the appellant, as reproduced in preceding paragraphs, wherein the jurisdictional ITAT under similar circumstances has deleted the whole of the addition on account of such bogus purchases. In the appellant's case, the appellant itself surrendered the whole of the amount involved in such transactions by filing the revised return of income before furnishing of any inaccurate particulars of income or any concealment of income had been established in its case on the basis of any inquiries or investigation. In the following cases, ITAT Mumbai has deleted the penalty u/s 271(1)(c) on more or less similar facts - a. Vipul Life Sciences Limited vs. DCIT in and 5949/MUM/2014 - A survey was carried out in this case wherein assessee surrendered an amount of Rs.34,73,047/- on account of peak of' the bogus purchases of about Rs.3.18 crores. The assessee surrendered this amount in the return filed in response to notice u/s 148. Penalty was imposed u/s 148. Penalty was imposed u/s 271(1)(c) which was confirmed by the CIT(A). The ITAT deleted the same by holding that there was neither any concealment nor any inaccurate particulars had been filed. b. Chenipure v/s ITO (2010) 40 SOT 164 (MUM) - In this case, it was noticed that the assessee was recording bogus purchases. The AO asked the assessee to produce the Maharashtra Steel Fabricators and Electors
supplier parties which the assessee failed to do. The AO made addition of the amount of the bogus purchases. The CIT-(A) and the ITAT sustained the addition partly. Penalty u/s 27](1)(c) was imposed which was deleted by the ITAT by holding that penalty could not be imposed for failure of the assessee to produce concerned parties before the AO when the department had the power to issue summons u/s 1 3 1 and the assessee did not have any such power and when the revenue authorities did not exercise any such power. In view of the detailed facts of the case as discussed above and relying upon the decisions of the jurisdictional ITAT as discussed above, it is held that the AO was not justified in imposing penalty in this case u/s 271(1)(c) as this is neither a case of concealment of income, nor a case of furnishing of inaccurate particulars of income. Therefore, the penalty imposed by the AO, in this case u/s 271(1)(c), amounting to Rs.19,68,812/- is directed to be deleted.”
Against above order revenue is in appeal before us.
We have heard both the counsel and perused the records. We find that in this case assessing officer had received information from the sales tax Department that assessee was recipient of purchase bills from hawala traders. When notice for reopening was issued to the assessee, it revised its return of income. The returned income was accepted by the assessing officer and the income was assessed as filed in the revised return of income. The assessing officer did not make any enquiry of his own, either in the assessment proceeding on in the penalty proceeding regarding the actual nature of the transaction. The sole basis for levy of penalty was that assessee has revised the return of income upon receipt of reopening notice from the assessing officer.
In this factual background we find that assessee has revised its return of income upon receipt of reopening notice. Assessee in its submission has duly submitted that assessee was not aware
Maharashtra Steel Fabricators and Electors that the suppliers have given bills from hawala traders. It was duly submitted that goods have actually been received and the work done. We note that the sales in this case has not been doubted. It is settled law that when sales are not doubted hundred percent disallowance on the plank of bogus purchase cannot be done. This exposition comes from the Hon’ble jurisdictional High Court in the case of Nikunj eximp enterprises. Just because assessee has filed a revised return of income and added the purchases as income, it can be presumed that there has been any concealment of income or furnishing of inaccurate particulars of income. This is more so when no enquiry whatsoever was made by the assessing officer himself in the assessment proceedings or in the penalty proceedings. We duly note that Hon’ble high courts and ITAT in a catena of cases have disapproved hundred percent addition in similar situation. Hence in our considered opinion in these facts of the assessee cannot be visited with the rigours of penalty under section 271(1)(c) of the Act.
Accordingly in the background of aforesaid discussion and precedent we do not find any infirmity in the order of learned CIT-A accordingly we uphold the same. In the result this appeal by the revenue stands dismissed.
Order pronounced in the open court on 13/04/2018