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Facts
The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) of the Income Tax Act against the assessee for alleged bogus purchases. The AO made an addition of ₹61,77,214/- on account of these purchases. The CIT(A) restricted the addition to 12.5% and consequently deleted the penalty.
Held
The Tribunal held that the addition was made on an estimated basis. Relying on judicial precedents, it was held that penalty under Section 271(1)(c) is not imposable when additions for bogus purchases are made on an adhoc and estimated basis, especially when the assessee has furnished all available information.
Key Issues
Whether penalty under Section 271(1)(c) is leviable on additions made on account of bogus purchases on an adhoc and estimated basis, especially when the assessee has provided all available information.
Sections Cited
271(1)(c), 145(3), 148, 133(6), 143(3), 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI SUNIL KUMAR SINGH, JM
Assessing Officer against the order passed by the National Faceless Appeal Centre, Delhi [the learned CIT (A)] dated 11th
Following grounds of appeal are raised:-
Whether on the facts and Circumstances of the case and in law, the Ld. CIT (A) has erred in restricting the penalty u/s 271(1)(c) of the 1.T.Act 1961, @ 12. 5% of bogus purchases of Rs 61 ,77,214/- on alleged purchases from 5 parties/entities?
2. "Whether on the facts and Circumstances of the case and in law, the Ld. CIT (A) has erred restricting the penalty levied u/s 271(1)(c) of the I.T. Act, @ 12.5% on bogus purchases of Rs. 61 ,77,214/-, without considering the fact that AO has relied on information from the DGIT(Inv), Mumbai, who in turn had received information from the Sales-Tax Department Maharashtra,an external agency about Bogus Hawala Entry providers, involved in providing accommodation entries on non-genuine purchases and the assessee was found to be one of the beneficiary in taking entries of
3. Whether on the facts and Circumstances of the case and in law, the Ld. CIT (A) has erred restricting the penalty levied u/s 271(1)(c) of the I.T. Act @ 12.5% on alleged purchases of Rs. 61 ,77,214/- without considering the fact that the assessee, when asked to prove the genuineness and creditworthiness of the transactions and parties /suppliers, has neither produced any parties for verification nor submitted vital documents, evidences before AO, which proves that the purchases were non- genuine in nature and the assessee has not purchased any goods from alleged”
The fact shows that the assessee is an individual carrying on the business as a proprietor of Maxheal Food Industries engaged in trading of ferrous and non-ferrous metals. He filed his return of income on 2nd September, 2009, at a total income of ₹7,03,159/-. The return was accepted as it is. However, same was reopened by issue of notice under Section 148 of the Act on 11th March, 2014, on the basis of information received from DGIT, Investigation, Mumbai as Sales Tax Department, Mumbai has found that certain parties are engaged in hawala trading by only providing bills. It was noted that there are five parties from whom the assessee has purchased invoices without supply of goods of ₹61,77,240/-. Reasons were recorded. In the re-assessment proceedings, it was found that assessee has shown purchases of ₹3.65 crores however, these five parties were examined by issue of notice
The learned Assessing Officer also initiated the penalty proceedings under Section 271(1)(c) of the Act for furnishing inaccurate particulars of income leading to concealment of income.
5. Against this assessment order the assessee preferred an appeal before the learned CIT (A), who restricted the addition to the extent of 12.5% instead of 100% by order dated 28th November, 2016. Therefore, the net addition remained of ₹7,72,152/-.
The assessee challenged the penalty order before the learned CIT (A). The learned CIT (A) passed an appellate order on 11th October, 2023, ex-parte as the opportunity given to the assessee on 5 occasions remained unanswered. However, on the merits in paragraph no.3.4, he held that the addition was made on the basis of bogus purchases by the learned Assessing Officer by disallowing 100% of such purchases which was restricted by the learned CIT (A) to the extent of 12.5% and therefore, relying on the decision of the co- ordinate Bench in case of Poonam K Prajapati Vs. ITO, wherein it has been held that penalty under Section 271(1)(c) of the Act is not imposable when the addition on account of bogus purchases is made on adhoc and estimated basis. Accordingly, he directed the learned Assessing Officer to delete the penalty.
The Revenue is aggrieved and is in appeal before us. It is the case of the learned Assessing Officer that the assessee has
Despite notice to the assessee none appeared before us and the notices sent to the address of the assessee returned back by the postal department stating 'not known'. Therefore, the issue is decided on the merits of the case, as per information available on record.
We have carefully considered the contention raised by 010. the learned DR and we find that the addition is made by the learned Assessing Officer to the extent of 100% of the alleged bogus purchases. This alleged bogus purchase are alleged on the basis of information received from Maharashtra Sales Tax Department by DGIT investigation Mumbai which was in turn forwarded to the ld AO wherein five parties were found to be hawala parties providing accommodation bills. When the assessee was questioned, the assessee submitted the copies of the invoices, ledger account of the parties and also shown that payments have been made by account payee cheque to these
Honourable Gujarat High court in RAMESHCHANDRA A SHAH VERSUS ASSTT. CIT, CIRCLE 3 OR HIS SUCCESSOR TAX APPEAL NO. 800 of 2008 dated August 10, 2016, on the question "4. Learned Counsel for the appellant has drawn the attention of this Court to the decision of this Court in the case of Vijay Proteins Ltd. v. Commissioner of Income-tax reported in [2015] 58 taxmann.com 44 (Gujarat) and relevant paragraphs are reproduced as under :-
“Insofar as T.A. No.243/2002 is concerned, the question of law raised therein is already concluded by a decision of this Court rendered in T.A. No.461/2000 & allied matters, as stated herein above. Paras 6 & 6.1 of the said decision are relevant for our purpose, which read thus.
”6. Heard both the parties and gone through the material available on record. In the instant case, we are of the opinion that assessment made is just and proper. The statements made in the affidavits are not based on any record or corroborated with cogent evidence. The presumption raised by the papers which were seized from the custody of the appellant had not been rebutted. Therefore, the issues raised in appeals no. 461 to 464 of 2000 are required to be 6.1 So far as the issue involved in appeals no. 833 to 836 of 2005 is concerned, in view of the decisions cited hereinabove by learned advocate for the appellant we are of the opinion that the penalty has been wrongly imposed under Section 271(1)(c) of the Act. In the case of Krishi Tyre Retreading and Rubber Industries (supra), it has been held that as the addition had been sustained purely on estimate basis and no positive fact or finding had been had been found so as to even make the addition which was a pure guess work, no penalty under section 271(1)(c) of the Act could be said to be leviable on such guess work or estimation. We therefore answer the issue involved in appeals no. 833 to 836 of 2005 in the negative and in favour of the assessee.”
18.1 At this juncture, it would be relevant to refer to a decision of the Apex Court in the case of Asst. Commissioner of Income-tax v. Gebilal Kanhaialal, HUF, [2012] 348 ITR 561 (SC) wherein, it has been held that the only condition which was required to be fulfilled for getting the immunity, after the search proceedings got over, was that the assessee had to pay the tax together with interest in respect of such undisclosed income up to the date of payment. Clause Learned Counsel for the appellant has also placed reliance on the decision of this Court in the case of Vijay Proteins Ltd. v. Commissioner of Income- tax in Income Tax Reference No.139/1996 with Tax Appeal No.243/2002 wherein the question of law was answered in favour of the assessee and against the Revenue and consequently, the penalty imposed was quashed and set aside. It is submitted in the facts of the present case, the order of penalty also imposed upon the assessee may be dismissed.
On the other hand, learned Counsel for the respondent – Department has submitted that in view of the bogus purchases, the order of penalty may be confirmed.
We have heard learned Counsel for the respective parties and perused the records of the case. Taking into consideration the order the Tribunal, the evidence which has surfaced on record as well as the decision of this Court in the case of Vijay Proteins Ltd. v. Commissioner of Income-tax (supra), we are of the view that the issues raised in this Appeal are to be
Thus, respectfully following the orders of the Honourable Gujarat High court and Honourable Rajasthan high court in Commissioner of Income-tax Versus Krishi Tyre Retreading and Rubber Industries - 2014 (2) TMI 21 - RAJASTHAN HIGH COURT , the appellate orders of the ld. CIT (A) deleting the penalty u/s 271 (1) (c) of The Act , are confirmed.
In view of this the order of the learned CIT (A) is confirmed and the appeal of the learned Assessing Officer for all grounds is dismissed.
Order pronounced in the open court on 28.05. 2024.