SKY DECOR,MUMBAI vs. ITO 16(3)(4),

This appeal by the Assessee is arising out of the order of Commissioner of Income Tax (Appeals)-30, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-30/19(3)(3)/331/2014-15, dated 18-11-2015. The Assessments were framed by the Income Tax Officer, Ward-16(3)(4), Mumbai (in short ITO or AO) for the assessment year 2011-12 vide order dated 12-03-2014 under section 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’). The penalty was levied by ITO, ward-16(3)(4) Mumbai under section 271(1)(c) of the Act vide order dated 26-09-2014.

SKY décor (AY: 11-12) 3. Briefly stated facts are that assessee is engaged in the business of interior decorator and during the course of assessment proceedings, the AO noticed that the assessee has claimed purchases at ₹ 1,32,00,862/-. During verification, AO found that the assessee has also made purchases from one party namely M/s Eleven Impex amounting to ₹ 1,41,225/-. The AO further noticed that he has received information from DGIT investigation Mumbai, who in turn received information from Sales Tax Department Maharashtra regarding issue of hawala bills or accommodation entries by several parties in Mumbai and the party M/s Eleven Impex is one of them. The assessee before AO produced complete details of bills and vouchers of purchases, payment by cheques and the fact that the assessee has consumed the material purchased but the AO treated this purchase as unexplained expenditure/ unproved purchase amounting to ₹ 1,41,225/- from the above party. This was not challenged due to smallness of the amount. The AO initiated the penalty proceedings under section 271(1)(c) of the Act and levied the penalty amounting to ₹ 44,000/-. Aggrieved assessee preferred the appeal before CIT(A), who also confirmed the penalty. Aggrieved, assessee is in second appeal before Tribunal.

“6. We heard the rival contention and going through the facts and circumstances of the case, the above narrated facts are not in dispute. It is a fact that the assessee has made purchase and produced sales and purchase bills. Admittedly, the SKY décor (AY: 11-12) assessee has made payment to these parties by account payee cheque. Admittedly, these parties are register with sales tax department and sales tax department has treated these parties as Hawala entry operators. We find from the case record that the AO has never try to examine these parties or could not counter that the purchase made from these parties are bogus for the reason that the assessee produced complete bills and vouchers including travel challan for purchase of these items. Even payments are made by account payee cheques which are not negated by the Revenue. In such circumstance, whether penalty levied on agreed basis can be sustained. First of all, the assessee filed explanation before the AO during assessment proceedings and even during penalty proceedings, which has not been controverted or negated by Revenue. In such circumstances, we are of the view that the CIT(A) has rightly deleted the penalty and we confirm the same. This appeal of Revenue is dismissed.”

In the result, the appeal of assessee is allowed. 6.

Order pronounced in the open court on 27-10-2017.