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Facts
The assessee appealed a penalty of Rs. 36,54,627/- levied under section 271(1)(c) for AY 2010-11, relating to alleged bogus purchases aggregating to Rs. 1,18,27,274/-. The assessment was completed ex-parte under sections 144/147 as the assessee did not respond to notices. The CIT(A) confirmed the penalty based on unreturned enquiry notices under section 133(6).
Held
The Tribunal held that the penalty could not be levied as the quantum proceedings were still pending before the CIT(A) for eight years. It further noted that even in an ex-parte order, entire purchases could not be treated as bogus when corresponding sales are accepted, and thus, it was premature to confirm the penalty. Consequently, the penalty levied by the AO was deleted.
Key Issues
Whether penalty u/s 271(1)(c) for alleged bogus purchases can be sustained when quantum proceedings are pending before the CIT(A) and corresponding sales are accepted.
Sections Cited
271(1)(c), 144, 147, 133(6)
AI-generated summary — verify with the full judgment below
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 22/12/2023 passed by CIT(A)-52, Mumbai in relation to the penalty proceedings u/s.271(1)(c) for the A.Y.2010-11.
Shri Pravin Champalal Bokadia 2. The assessee is merely aggrieved by levy of penalty of Rs.36,54,627/- on account of alleged accommodation entry in form of issuing bogus sale / purchase bills and that assessee has taken bogus purchases from four parties for sums aggregating to Rs.1,18,27,274/-.
Here in this case, the return was filed on 30/09/2010 at income of Rs.4,66,526/- for A.Y.2010-11. Later on, on the basis of some information received from Sales Tax department that assessee has taken some bogus purchases from four parties aggregating to Rs.1,18,27,274/- and accordingly, based on this information, addition has been made from the entire purchases.
Since assessee could not respond to the notices, the assessment was completed exparte u/s.144 / 147. Penalty has also been confirmed on the ground that assessee had not responded and accordingly, penalty has been confirmed of furnishing of inaccurate particulars of such income of Rs.36,54,627/-. The same has also been confirmed by the ld. CIT(A) on the ground that enquiry notices sent u/s.133(6) issued by the ld. AO has been returned back.
We have heard both the parties and also perused the relevant facts and material on record. The assessee is an individual engaged in the business of trading in ferrous and non-ferrous metal. Since its account was duly audited and based on audit report return of income was filed. It has been stated that assessee was represented by one Shri Ramesh Doshi, a Shri Pravin Champalal Bokadia practicing tax consultant and he has submitted the requisite details before the ld. AO and had also personally appeared who had then postponed the hearing. An affidavit of Shri Ramesh Doshi has also been filed before us. Further, assessee had also filed a letter before the ld. AO that quantum proceedings are still pending and has not been disposed of. Therefore, the penalty proceedings should be kept in abeyance. However, without waiting for the quantum order, ld. AO has levied the penalty.
Even before the ld. CIT (A) this fact was duly brought to the notice of the ld. CIT(A) which has been noted at page 4 of the impugned order. However, the ld. CIT (A) too has confirmed the penalty without even bothering to look into the fact that quantum appeal is still pending before the ld. CIT(A) since 2016. Now even after 8 years, the quantum proceedings have not been disposed but still, the ld. CIT(A) has passed the penalty order and confirm the penalty. First of all, once the quantum proceedings were pending, the penalty could not have been levied and secondly, even if it is an exparte order by the ld. AO, the entire purchases could not be treated as ‘bogus purchase to disallow the entire purchases, once the corresponding sales have been accepted and there is no dispute regarding the quantity purchased outside the books. Thus, entire purchase cannot be added. At the most it could be the case of suppressed profit for which at the most GP rate could have been applied. Since quantum addition is still subject matter pending before the ld. CIT (A), therefore, it was too premature to confirm the penalty. Accordingly, the penalty levied on such addition is deleted for the Shri Pravin Champalal Bokadia reason that ld. AO cannot levy the penalty on entire bogus purchases when books of accounts have been accepted including the trading results and there is no dispute regarding the quantitative purchases and corresponding quantitative sales and the source of purchases are from the books. Thus, the penalty levied by the ld. AO is deleted.
In the result, appeal of the assessee is allowed.
Order pronounced on 27th November,2024.