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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-39, Mumbai [in short CIT(A)], in appeal No. CIT(A)-39/IT-123/2010-11 dated 27.11.2012. The Assessment was framed by the Asst. Commissioner of Income Tax, Centre Circle-34, Mumbai (in short ‘DCIT’) for the A.Y. 2003-04 vide order dated 16.11.2009 under section 143(3) read with section 148 of the Income Tax Act, 1961(hereinafter ‘the Act’). The penalty under dispute was levied by the ACIT, CC-34, Mumbai under section 271(1)(c) of the Act vide order dated 31.05.2010.
2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the levy of penalty under section 271(1)(c) of the Act on the addition made on account of bogus purchases discovered by the revenue during the course of search conducted under section 132 of the Act on group concerns of the assessee and consequently survey conducted under section 133(A) on the business premises of the assessee. For this assessee has raised following grounds:-
“1. (a) The learned Assessing Officer has erred in initiating the penalty proceedings and subsequently levied the penalty under Section 271(1) (c) of the Income Tax Act, 1961 without application of mind in a mechanical manner which was upheld by the learned Commissioner of Income Tax (Appeals).
(b) The learned Commissioner of Income Tax has failed to appreciate the appellants that inspite of voluntarily and unconditional disclosure made by the appellants, the learned CIT (Appeal) has confirmed the penalty levied by the learned Assessing Officer and the learned CIT (Appeal) has failed to appreciate the submissions made by the appellant during the course of appellate proceedings.
(c) The learned Commissioner of Income Tax (Appeals) has failed to consider the submissions made by the appellants during the course of appellate proceedings, and simultaneously jurisdiction of the case was transferred on CIT (Appeals) 41 to CIT (Appeals) 39 and due to transfer of t he order of the Commissioner, partner of appellant has himself along with the authorized representative, Mr. Nilesh Joshi, appeared on each and every day but could not endorse the proceedings sheet by the predecessor of the CIT (Appeals) and the same remained to be incorporated as unattended and to that effect, partner of the appellants as well as authorized representative are at liberty to file affidavit if so required.
(d) The learned Commissioner of Income Tax (Appeals) has already passed the order simultaneously in the case of M/s. ARCHANA IMPEX which was fixed prior to 2 days of the appellants' case and the learned CIT (Appeals) herself has stated that no need is required to vacate the present appeal since the issues are identical and whatever written submissions is recorded are to be duly considered.
The appellants crave leave to add, amend, and alter any of the foregoing grounds of appeal as and when required.”
3. Briefly stated facts are that there was an action under section 132 of the Act on the group concerns of the assessee and a survey under section 133(A) was carried out in the business premises of the assessee. During the course of the search and also the survey, it was discovered that the assessee was indulging in bogus purchases through the modus operandi of getting accommodation bills issued. It was discovered, as a matter of fact that the genuine purchases bills contained the challan numbers of the deliveries made as well as the name of the broker. However, with regard to purchase through accommodation bills, not only there were no corresponding sale bills, at the back the said bills no details regarding delivery or name of the broker was seen. When the assessee was confronted with the said discovery, during the course of survey, he admitted the income on account of bogus purchases at Rs. 5,28,24,789/- as income of the respective years in which these purchases have been booked in the different concerns. But the assessee while filing the revised return of income declared a sum of Rs 44,46,264/- towards bogus purchases as undisclosed income. The penalty proceedings were initiated by the AO under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income. The AO levied the penalty and CIT(A) confirming the same by observing in Para 5.1 and 5.2 as under:-
“5.1 I have considered the facts of the case and the submission is made by the appellant. On facts it can be observed that it is on the basis of the documents discovered during t.ee search/survey, whereby discrepancy was noticed in the manner of maintaining/ making entries in the genuine purchase bills and the accommodation bills, that appellant had to file revised return of income offering additional income. In fact the assessee had no option after the Department had gathered the evidence by way of search/survey. Hence the admission of the assess- 2e by surrendering such concealed income by filing a revised return would be sufficient evidence for the purpose of levy of penalty, as held in Bachumal Uttammal vs. CIT (1992) Tax LR1095(Raj). Further, as held by the Bombay High Court in Radhakrishna Ruia& Anr vs. IA, 143 Taxtion 409 (Bom) the filing of revised return does not absolve the assessee from the liability of penalty arising from concealment in the original return. On the facts of the case, as held by the A.O, it is clear that revised return was prompted by the discovery made during the course of survey in the premises oi the appellant and thus the revised return cannot absolve the assessee of committing concealment in the original return. Reliance are placed in CIT vs. Srinivasa Enterprises (1997) 63 lTD (Bang-Trib), ACIT vs. Goutham Public School (2004) 88 lTD 31 (Visakha-Trib) and ACT vs. Naresh Kumar Agarwal (2003) 81 TTJ (Del-Trib) 560.
5.2 In the light of the above judicial precedents there is also there is no force in the argument that the declaration is conditional. The filing of revised return is a consequential act, which is required to be done after detection of concealment or after furnishing inaccurate particulars of income. The assessee cannot escape from the rigour of the penalty under s. 271(1)(c), even on filing revised return, if it is done consequent to discovery or detection by the Department. Hence, the levy of penalty under s.271(1)(c) in a sum of ₹ 16,32,002/- is hereby confirmed.”
Aggrieved, now assessee is in appeal before Tribunal.
Before us, the learned Counsel for the assessee filed copy of tribunals order in assessee’s own case for AY 2004-05 wherein exactly identical facts, Tribunal deleted the penalty by following the Tribunal’s order in other group cases of M/s Shah Impex vs. ACIT, in for AY 2004-05 vide order dated 02-03-2016, wherein para 4 and 5 reads as under: - “4. We had carefully gone through the order of the Tribunal in case of M/s Jay Fab and Shri Jatin J.Shah, ITA No.2724&2725/M/2010, order dated 16- 12-2015, wherein the Tribunal upheld the action of CIT(A) for deleting penalty after observing as under :-
Rival contentions have been heard and record perused. We had also deliberated on the judicial pronouncements cited at bar by ld. AR and DR during the course of hearing before us. We had also dealt with the judicial pronouncements referred by the AO and the CIT(A) in their respective orders with reference to the factual matrix of the case. From the record, we found that assessee has offered income in the revised return. The income so offered was accepted by the AO without any change. The income so offered in the revised return pertains to purchases which could not be fully explained by the assessee. In the assessment year the AO has accepted the revised return without any analysis or further corroboration or evidence to prove that these purchases were not genuine. Thus, there is an absence of positive evidence of concealment regarding the additional income declared in revised return after survey. The CIT(A) has recorded a categorical finding to the effect that onus to prove the concealment has not been discharged especially if one considers the statement of the partner wherein nowhere it has been questioned or accepted that these purchases are bogus. An independent inquiry which is a must is absent. The action of the Assessing Officer in adding the additional amount while making assessment without any further investigation shows that the conditional offer was accepted. The books of accounts of the assessee were also not rejected nor held to be unreliable. The CIT(A) observed that these purchases needs to be examined in detail and the statement of partner of the assessee firm vide which surrender has been made out no mention of bogus purchases made, it should have been further analysed to prove bogus purchases. As this has not been done concealment has not been proved, therefore, the provision of section 271(1)(c) is not attracted. There is no dispute to the well settled legal proposition that penalty for concealment is not automatic. It is for the AO to prove the concealment, which has not been done in the instant case. Even if in the penalty order the AO has relied upon the findings in the assessment order, thus, no objective material has been brought on record to establish concealment of income. Furthermore, the trading results of the assessee has not been questioned and the Assessing Officer has not anywhere pointed out that correct income has not been declared. Even in respect of concealment of income, unless the concealment is established penalty cannot be levied u/s.271(1)(c) of the Act. Mere surrender made is not a ground for levying penalty because surrender may be a result of various circumstances that need to be examined and investigated into. In the instant case, it is seen, surrender was on account of the fact that discrepancies in certain bills could not be explained. Nowhere the AO has denied the purchases. As per the statement made by the assessee in survey proceedings, no where it was stated that purchases made by assessee are bogus or not genuine. The said amount was voluntarily offered in the revised return which was accepted by the AO. We also found that the amount was offered by the assessee on account of lack of evidence and the trading results of the assessee were not questioned by the AO and in fact sales have also been accepted by the AO. It is very crucial fact that books of account were accepted and the AO has not proved by any independent evidence that the said purchases were bogus and not genuine. The discrepancies in certain bills could not be explained by the assessee in survey proceeding would not amount to concealment or inaccurate filing of particulars within the meaning of section 271(1)(c) of the Act.
The voluntary revised return filed by the assessee was accepted by the AO. The AO has simply accepted the offer made by the assessee and has not made any attempt to further examine or investigate the concerned issue. Merely because the return was filed after intimation u/s 143(1) the same cannot treated as revised return or not filed in time. The Calcutta High Court in the case of Tata Meteliks Ltd v. CIT (368 ITR 643), after following the ratio of Supreme Court in case of CIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd '(291 ITR 500) has held that intimation u/s 143(1)(a) does not constitute Assessment so as to disentitle assessee to file revised return u/s 139(5) of the Act. Similar view is also taken by Punjab and Haryana High Court in the case of Tarsem Kumar V. ITO (256 CTR 116).
Furthermore, in the following decisions a view has been taken that even in case of belated return, pursuant to notice u/s 148, once the AO accepts the return of income and which is brought to tax, no penalty can be levied u/s 271 (1 )(c) of the Act. The words 'in the course of any proceedings under this Act' in section 271 (1) are prefaced by the satisfaction of the Assessing Officer or the Commissioner (Appeals). When a survey is conducted by a survey team, the question of satisfaction of Assessing Officer or the Commissioner (Appeals) or the Commissioner does not arise. One has to keep in mind that it is the Assessing Officer who initiates penalty proceedings and directs the payment of penalty. He cannot record any satisfaction during the course of survey. Decision to initiate penalty proceedings is taken while making assessment order. It is thus obvious that the expression 'in the course of any proceedings under this Act' cannot have the reference to survey proceedings. It necessarily follows that concealment of particulars of income or furnishing of inaccurate particular of income by the assessee has to be in the return filed by him. The assessee can furnish the particulars of income in his return and everything would depend upon the return filed by the assessee. This view gets supported by Explanations 4, 5 and 5A of section 271(1). Obviously no penalty can be imposed unless the conditions stipulated in the said provisions are duly and unambiguously satisfied. Section 271(1)(c) has to be construed strictly. Unless it is found that there is actually a concealment or non- disclosure of the particulars of income, penalty cannot be imposed. There is no such concealment or non-disclosure, as the asseesee had made a complete disclosure in the return and offered the surrendered amount for the purposes of tax.
(i) Muniganga Reddy vs. ACIT, 37 (Taxmann.com 440) (ii)Vipul Life Sciences Ltd Vs. DCIT (Mum) (ITA No.5948 & 5949/Mum/2014) (iii) CIT V. SAS Pharmaceuticals (335 ITR 259)
(iv) Vasavi Shelters Vs. ITO ( & 500/Ban/2012)
The ITAT Mumbai in the case of Bhagat & Co. vs ACIT 101 17] 553 held that conditional surrender of income during the survey with a request not to impose penalty having been accepted by the revenue, no penalty for concealment could be levied especially when there is no other evidence to prove the concealment was brought on record by the revenue. The other judgement is Orient Press Ltd. vs. JCIT 99 Hi (Mumbai) 1091, wherein it was held that penalties could not be sustained for the reason that the circumstances surrounding the surrender of income by the assessee do not establish that there was concealment of income.
We had also carefully gone through the relevant statement given by the partners, which had been reproduced on page 5 of the CIT (A) order clearly indicates that the offer was made by the assessee for want of evidence and to avoid litigation. Nowhere it was stated that the said purchase were not genuine and bogus as alleged by the AO. The assessee had purchased the goods from the supplier and they were unable to issue the bill. The said purchases are reflected in their books of accounts and books of accounts are not rejected by the AO. The sales have not been doubted and in fact the assessee was liable to disclose only gross profit amount and not the entire amount of purchase. ACIT Vs. Ritesh Agarwal, (50 TAxmann.com 9,para 7), however, the assessee has paid taxes on the entire amount disclosed in survey proceedings and further has not capitalised the said amount which they are entitled to do so. The Assessee's offer was subject to the condition of non-levy of penalty and therefore penalty is not called for in view of the decision in case of ACIT vs. Indica Exports 129 TT J 269 (Del).
The case law relied upon by the department in case of Mak Data (P) Ltd 38 Taxmann.com 448 is distinguishable on facts and not applicable to the case of the assessee. As in the case no explanation was offered by the assessee as against which in the case of present assessee an explanation is offered for declaring the additional income, which has not been reflected or dealt by any reliable evidence by the AO. The said decision of Hon'ble Supreme Court distinguished by Madras High Court in the case of CIT vs. M/s Gem Granites (Kamataka).
In view of the above discussion and applying the proposition of law discussed in various judicial pronouncements as narrated above to the facts of the instant case, we do not find any infirmity in the order of CIT(A) for deleting penalty so imposed.
The facts and circumstances in /M/2010 are exactly similar to the facts and circumstances in ITA No.2724/M/2010 discussed above, following the reasoning given hereinabove, we confirm the action of the CIT(A) for deleting the penalty in ITA No.2725/Mum/2010 also.”
As the facts and circumstances during the year under consideration are same, wherein penalty imposed for the alleged bogus purchases found during the course of very same search/survey, respectfully following the order of the Tribunal as quoted above, we direct the AO to delete the penalty so imposed.”
5. As the issue is squarely covered by the Tribunal’s decision in assessee’s own case for AY 2004-05, respectfully following the same, we delete the penalty and allow the appeal of the assessee.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 11-04-2018.