RAKESHKUMAR AGARWAL,MUMBAI vs. ASST CIT 24(1), MUMBAI

The captioned appeal by Assessee for Assessment Year [AY] 2010-11 assails the order of Ld. Commissioner of Income Tax (Appeals)-42 [CIT(A)], Mumbai dated 15/09/2016 qua confirmation of penalty u/s 271(1)(c) for Rs.2,66,241/-. 2.1 Facts leading to the same are that the assessee being resident individual engaged as builder was assessed for impugned AY u/s 143(3) on 08/03/2013 at Rs.7,66,68,580/- as against returned income of Rs.7,47,25,768/- e-filed by the assessee on 04/10/2010. 2.2 During assessment proceedings, it was noted that the assessee made purchases of Rs.8,61,622/- from an entity namely Sachi Mercantile Private Limited, to whom notice sent u/s 133(6) remained un- served and the physical inquiry by the inspector at the given address revealed that no such party was available at the given address. It was noted that the said party was listed as suspicious dealer as per the website information of the Sales Tax Department, Maharashtra. The assessee submitted that it purchased steel from the said party which was consumed in the construction work and the payments were though banking channels and therefore, the purchases were genuine. However, not convinced, Ld. AO disallowed the same, being bogus purchases. 2.3 Consequently, penalty proceedings were initiated in the quantum assessment order and the assessee has been saddled with impugned penalty for furnishing of inaccurate particulars of income u/s 271(1)(C)

The Ld. Counsel for Assessee [AR] drew attention to the documents placed in the paper book and contended that the assessee purchases steel during April, 2009 from the said alleged bogus supplier who was a corporate entity duly registered under the Companies Act on 16/04/2007. The purchases made by assessee were supported by delivery challans and payments were through banking channels. The material purchased by the assessee was used in the construction of first floor of Building No.3 whose occupation certificate was granted on 16/06/2009. There was no other purchase of steel for the said construction activity and the building could not be completed without consumption to material. Therefore, the transactions were genuine duly supported by documentary evidences. Nevertheless, the assessee accepted the additions since it could not provide confirmation from the said party at the time of assessment and the physical inquiry revealed that the said party was not available at the given address. However, the same was possible considering the long time gap between the purchases made by the assessee and inquiries conducted by the department at the time of assessment. Therefore, merely because the additions has been accepted, the same do not entail impugned penalty as supported by the judgment of Hon’ble Apex Court rendered in CIT Vs Reliance Petroproducts Pvt Ltd [322 ITA 158].

We have heard the rival contentions and perused relevant material on record. Undisputedly, the assessee is in possession of purchase invoices which are supported by delivery challans and the payments are through banking channels. The purchases were made from a corporate entity duly registered under law. The assessee has purchased steel from the said party which is a raw material for construction activity carried out by the assessee. It is also a fact that there is considerable time gap between purchases made by the assessee and inquiries conducted by the inspector at the premises of the supplier. The totality of above facts tilts the balance of convenience in assessee’s favor since it not a case that the claim of the assessee was not bona fide or the assessee could not furnish any explanation to substantiate his claim. Therefore, finding assessee’s explanation a plausible one, we are inclined to delete the impugned penalty.

Resultantly, the assessee’s appeal stands allowed. Order pronounced in the open court on 04th October, 2017.