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Facts
The Assessing Officer (AO) made additions of Rs. 1,44,31,006/- for disallowance of bogus purchases and Rs. 5,77,240/- on account of commission, treating them as unexplained under section 69C of the Income Tax Act. The Ld. CIT(A) restricted the disallowance to 15%, which was further enhanced to 20% by the Hon'ble Tribunal. Subsequently, the AO levied a penalty under section 271(1)(c) of the Act.
Held
The Tribunal held that the penalty is unsustainable because the additions were made on an ad-hoc/estimated basis, and the assessee had provided substantial documentation for the purchases. Furthermore, the varying disallowance percentages indicated a lack of certainty regarding the original addition. The Tribunal also clarified that concealment of income and filing inaccurate particulars are distinct and cannot be used interchangeably, and that merely making an incorrect claim does not amount to furnishing inaccurate particulars.
Key Issues
Whether the levy of penalty under section 271(1)(c) of the Income Tax Act is sustainable on additions made on an ad-hoc/estimated basis, especially when substantial documentation was provided by the assessee.
Sections Cited
69C, 271(1)(c), 143(3), 147, 250, 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI OMKARESHWAR CHIDARA
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 29.02.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2009-10.
In the instant case, the Assessing Officer (AO) vide order dated 27.10.2014 u/s 143(3) r.w.s. 147 of the Act ultimately made the additions of Rs.1,44,31,006/- on account of disallowance qua bogus purchases treated as unexplained u/s 69C of the Act, the addition of Rs.5,77,240/- @ 4% of the said alleged bogus purchases of Rs.1,44,31,006/- and the addition/disallowance of Rs.1,44,310/- on account of disallowance of commission paid estimated at 1% of the bogus purchases u/s 69C of the Act. The AO also recorded the satisfaction for initiation of penalty proceedings u/s 271(1)(c) of the Act for concealment of income and filing of inaccurate particulars of income.
The Assessee, being aggrieved, challenged the aforesaid additions before the Ld. CIT(A) by filing first appeal, who by order dated 31.03.2016 restricted the disallowance to the tune of 15% of the alleged bogus purchases which comes to Rs.21,64,651/- only.
The Revenue Department, being aggrieved, challenged the action/decision of the then Ld. CIT(A), before the Hon’ble Tribunal, who vide order dated 30.06.2017 enhanced the addition/disallowance from 15% to 20%, which resulted into sustaining the addition/disallowance to the tune of Rs.36,07,752/- only.
Thereafter, the AO show caused the Assessee “as to why the penalty u/s 271(1)(c) of the Act should not be imposed on the impugned disallowance”. The Assessee before the AO mainly claimed that the addition has been made on the estimation basis and therefore no penalty is leviable. The AO not being impressed by the contention of the Assessee, vide penalty order dated 27.03.2018 ultimately levied the penalty to the tune of Rs.10,82,326/- @ 100% of the tax sought to be evaded on the income of Rs.36,07,752/- for concealment of income and filing of inaccurate particulars of income.
The Assessee, being aggrieved, challenged the levy of penalty before the Ld. Commissioner and mainly emphasized that the Assessee, during the course of quantum proceedings, has duly submitted the following documents in support of purchases made:
Purchase bills and purchase orders 2. Bank statements highlighting the debits 3. Stock statement mentioning the use of material from alleged dealers 4. Comparative gross profit chart 5. ledger accounts of the parties and their confirmation 6. delivery challans 7. Partywise details of purchases with name, bill number, date, amount with cheque number, cheque clearing date, check amount, name of bank 8. stock register showing itemwise opening stock, inward/outward and closing stock.
The AO considered one aspect only that some of the notices u/s 133(6) of the Act issued to the suppliers were returned back. The AO did not make any further enquiry from the banks qua KYC details of the dealers/sellers of goods, which would have proved the existence and genuineness of the dealers, as well as the facts no cash has been received back by the Assessee. The Assessee further claimed that addition has been made on adhoc/estimated addition/disallowance, hence in view of the judicial pronouncements, no penalty can be imposed. The Assessee before the Ld. Commissioner also submitted that even the ITAT has held that sales are not doubted corresponding to the purchases from the alleged parties and that the disallowance of 20% of the purchases has been made simply to meet the ends of justice without holding that the purchases are non genuine/bogus.
The Ld. Commissioner though considered the aforesaid facts/contentions of the Assessee, however, not being satisfied, rejected the same and ultimately affirmed the levy of penalty. The assessee, being aggrieved, is in appeal before us.
Heard the parties and perused the material available on record. The Assessee before us also reiterated the same contention as made before the Ld. Commissioner. On the contrary, the Ld. D.R. refuted the claim of the assessee and vehemently supported the orders passed by the authorities below in making and sustaining the penalty.
Heard the parties and given thoughtful considerations to the peculiar facts and circumstances of the case. We observe that before making addition qua alleged bogus purchases, the AO not only considered the returning back the notices issued u/s 133(6) of the Act to the alleged bogus dealers/suppliers but in fact also considered the information gathered from the Sales Tax Authorities and therefore treated the alleged purchases as bogus and unexplained u/s 69C of the Act. We further observe that the AO made the addition @ 100% on account of alleged bogus purchases, whereas the addition was reduced to 15% of the alleged bogus purchases by the Ld. Commissioner, which was further enhanced to 20% by the Hon’ble Tribunal, which goes to show that there was no certainty qua addition made, on which the penalty has been levied. Therefore, the contention raised by the Ld. Advocate Ms. Dinkle Hariya to the effect that in view of the judicial pronouncements by various courts, penalty is hardly sustainable on adhoc addition, seems to be logical and tenable. It is also important to mention herein that as submitted by the Ld. Advocate that even otherwise the Hon’ble Tribunal in the last para of the order in the quantum appeal has categorically held that the Assessee was a trader and on being asking by the AO, has furnished the necessary details like bills, vouchers, payment through banking channel and the bank statements etc.. Therefore, the facts are distinguishable to the case of N.K. Industries Ltd. vs. DCIT decided by the Hon’ble Gujarat High Court (ITA No.240 decided on 20.06.2016) wherein the purchases were found as bogus. We observe that the co-ordinate Bench of the Tribunal by considering the overall facts and circumstances of the case and taking a broader view for the ends of justice and litigation, restricted the addition to 20% of the disallowance in place of 15% as restricted by the then Ld. CIT(A) against 100% of the addition made by the AO, which also dents the levy of penalty. Therefore, on this reason itself, the penalty is un-sustainable.
Coming to the other aspect of the case, it is not the case of the Revenue that the Assessee in the assessment proceedings has not submitted the relevant document/details as desired by the AO and therefore we are unable to understand that how the charge of concealment of income is attracted in this case, whereas the penalty proceedings have been initiated u/s 271(1)(c) of the Act for both of the limbs i.e. concealment of income and filing of inaccurate particulars of income and resulted into imposing the penalty for both of the limbs. Concealment refers to deliberate act on the part of the Assessee whereas mere omission or negligence would not constitute a deliberate act or suppression or suggesting falls information. The Hon’ble Apex Court in the case of T. Ashok Pai vs. CIT (292 ITR 11) has clearly held that the both the limbs i.e. concealment of income and filing of inaccurate particulars of income carries the different connotation/meaning and cannot be used as substitute to each other. The Hon’ble Apex Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd. [(2010) 322 ITR 158 (SC)] has clearly laid down the dictum “that merely making an incorrect claim does not tantamount to furnishing of inaccurate particulars”. Hence, in our considered view, on this count as well, the penalty is un-sustainable.
On the aforesaid facts and circumstances and analyzations in totality, the penalty under consideration is liable to be deleted, hence the same is deleted.
In the result, the appeal filed by the Assessee stands allowed.
Order pronounced in the open court on 31.07.2024.