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Income Tax Appellate Tribunal, DELHI BENCH ‘B’ NEW DELHI
Before: SHRI H.S. SIDHU & SHRI L.P. SAHU
ORDER
Per L.P. Sahu, Accountant Member:
This appeal is directed by Revenue against the order dated 28.05.2013 passed by ld. CIT(A)-XIII, New Delhi, challenging the deletion of penalty amounting to Rs.22,99,380/- imposed by the Assessing Officer u/s. 271(1)(c) of the IT Act, 1961 for the assessment year 2007-08.
Briefly stated, the facts of the case are that the assessee is engaged in the trading business electronic components. The assessment of the assessee was completed u/s. 143(3) at an income of Rs.3,71,48,560/- as against returned income of Rs.8,96,782/-, thereby disallowing a sum of Rs.3,62,49,274/- as bogus transactions of purchases shown by the assessee from nine parties, as the alleged sellers were not traceable. The assessee challenged the order passed u/s. 143(3) in appeal before the ld. CIT(A) and filed various documentary evidence to substantiate the identity of the alleged suppliers, having TIN No., Sales Tax assessments, PAN, ration card, passport, driving license etc. The ld. CIT(A) after considering the submissions of the assessee and the remand report called from the AO, held that merely because the parties were not traceable, the entire purchases could not be treated as bogus purchases, as the assessee had established the identity of the suppliers and suppliers were making substantial supplies not only to the assessee but also to various other customers of their own. Ultimately, it was held that the purchases made by the assessee were genuine. Accordingly, the addition of Rs.3,62,49,274/- made by the AO on account of bogus purchases was deleted.
The ld. CIT(A), however, disallowed the loss of Rs.55,53,994/- claimed by assessee on sales of some of the unbranded items out of the purchases made from these nine parties and Rs. 12,77,202/- was added as additional income of the assessee, applying the estimated gross profit rate of 4.25% on the declared sales of Rs.3,00,51,810/-. He, therefore, made overall addition of Rs.68,31,195/- (Rs.55,35,994 + Rs.12,77,202) on estimated basis and on different reason. This order of the ld. CIT(A) stood confirmed by ITAT vide order dated 21.11.2014. The Assessing Officer, consequently, imposed penalty of Rs. 22,99,380/- on adhoc addition made by the ld. CIT(A) alleging that the assessee had furnished inaccurate particulars of income. The penalty so imposed by the AO stood deleted by the ld. first appellate authority vide impugned order. It is this order, which is assailed by the Revenue in this appeal before us.
During the course of hearing, the ld. DR argued that the ld. CIT(A) is not justified in deleting the penalty imposed by the Assessing Officer for valid reasons. He submitted that the assessee had furnished inaccurate particulars, which resulted into addition and consequential penalty imposed by the Assessing Authority. He, therefore, relied on the penalty order.
The ld. AR, on the other hand, vehemently contented that once the addition of Rs.3,62,49,274/-, made by the AO, on the basis of which he could record his satisfaction of furnishing inaccurate particulars of income, stood deleted by the ld. CIT(A), the original basis of initiation of penalty proceedings stood collapsed and the AO had no jurisdiction to impose penalty on that basis. It was submitted that the Assessing Officer is not competent to impose penalty on the basis of a finding in the appeal and also the AO could not impose penalty in relation to an item of enhancement made by the first appellate authority. For this proposition, reliance is placed on the following decisions: (i). CIT vs. Shadiram Balmukand (1972) 84 ITR 183 (All.) (ii). CIT vs. Dwarka Prasad Subhash Chandra (1974) 94 ITR 154 (All) (iii). CIT vs. Ananda Bazar Patrika P. Ltd. (1979) 116 ITR 416(Cal.) He further submitted that all the particulars were furnished before the AO and the disallowance of loss was made by the ld. CIT(A) only on estimation of gross profit rate, on which divergent view can be taken. This does not constitute furnishing of inaccurate particulars by the assessee. He submitted that, therefore, the ld. CIT(A) has rightly held that there was neither any concealment of facts nor furnishing of inaccurate particulars by assessee. Reliance is placed on the decision in the case of CIT v. Navinchandra & Co. (222 Taxman 156 and New Holland Tractors (India) Pvt. Ltd. vs. CIT in and 255/2003 (Delhi H.C.) and CIT vs. Aero Traders Pvt. Ltd., (2010) 322 ITR 316.
We have considered the rival submissions, perused the orders of the authorities below and the case laws cited by the assessee and we find no incongruity in the order of the ld. CIT(A). It is notable that the satisfaction recorded by the Assessing Officer on the basis of addition made on account of bogus purchases stood collapsed at the first appellate stage itself in the quantum appeal. The penalty proceedings initiated in the present case are based on the addition made by the ld. CIT(A), that too by estimating the gross profit rate of assessee on the declared sales, which in itself does not confer jurisdiction on the AO to impose penalty for furnishing inaccurate particulars of income. For this proposition, we are supported by the decisions of Hon’ble Allahabad High Court in the cases of CIT vs. Shadiram Balmukand (supra) and CIT vs. Dwarka Prasad Subash Chand(supra) wherein it has been held that the Assessing Officer was seized of the assessment proceedings and it was not during the assessment proceedings that the addition made was discovered. It was also held that the Assessing Officer has no jurisdiction to impose penalty in relation to an item of enhancement made by the first appellate authority. Therefore, in our considered opinion, once the original basis for initiation of penalty proceedings was altered or modified by the first appellate authority, the Assessing Officer has no jurisdiction thereafter to proceed on the basis of the findings of the first appellate authority in view of the decision of Hon’ble Calcutta High Court in the case of CIT vs. Ananda Bazar Patrika P. Ltd. (supra). In the present case, it is not in dispute that the ld. CIT(A) deleted the addition of Rs.3,62,49,274/- made by AO on account of alleged bogus purchase. Besides, the addition made on the basis of estimation of gross profit rate does not warrant to hold that the assessee has furnished inaccurate particulars of income as held in plethora of decisions, relied upon by the ld. CIT(A) in the impugned order. The ld. DR could not adduce any contrary decision on the issue. In view of this discussion, we do not find any justification to interfere with the impugned order deleting penalty. The appeal of the Revenue has, therefore, no merit and is liable to be dismissed.