Principal Commissioner Of Income Tax, Jaipur-2, Jaipur v. M/S. G.b. Impex, B

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 149 / 2017 Principal Commissioner of Income Tax, Jaipur-2, Jaipur ----Appellant Versus M/S. G.B. Impex, B-172, Rajendra Marg, Bapu Nagar, Jaipur PAN - ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.D. Mathur for Mr. R.B. MathurFor Respondent(s) : _____________________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Order 08/08/2017 By way of this appeal the appellant has assailed thejudgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal confirming the order of CIT(A). Counsel for the appellant has framed the following question of law:- “Whether on the facts and in the circumstances ofthe case and in law the ITAT has erred in cancellingthe penalty of Rs. 2541578/- levied u/s 271(1)(c) ofthe IT Act 1961 on account of bogus unverifiablepurchases.” In view of the observations made by the Tribunal observingas under:- “3.1. In this regard, we have gone through theassessment order and in respect of unverifiablepurchases, we find that the details of four parties namely, M/s Anupam Exports & Imports, M/s K.S.Exports, M/s Rishab International and M/s RoyalGems & Arts along with their address, PAN, SalesTax Registration No., confirmation, copy of thepurchase bills, mode of payment was submittedduring the course of assessment proceedings. TheAssessing officer has stated that the assessee hasnot been able to prove the genuineness of thepurchases of Rs 3,28,40,664 shown to have beenmade from these four parties. The Assessing officerfurther stated in his order that from the enquiriesmade by the investigating wing, it was found thatthe alleged sellers were not carrying on the genuinebusiness of selling goods and all these facts shownby the assessee in the name of non-existent/noncooperative parties are not genuine andother evidence regarding purchase invoice, sales taxregistration, PAN and making payments by chequesetc are irrelevant with reference to non-existent/non-cooperative parties. The Assessingofficer further stated that the assessee neitherproduced the above sellers parties nor producedbooks of accounts of these sellers parties and eventhe summons issued u/s 131 of the Act werereceived back unserved. Hence, in absence ofverification of purchases, genuineness of thepurchases shown to have been made from theabove alleged sellers have not been proved. TheAssessing officer thereafter following the decision ofthe Hon’ble Gujarat High Court in the case of M/sSanjay oil Cake Industries (supra) disallowed 25%of unverifiable purchases and made a tradingaddition of Rs. 82,10,166/-. 3.7 In this regard, we refer to the decision of theCoordinate Bench in case of M/s Chempure Vs. ITO(supra) where the facts of the case briefly were thatthe AO made addition of Rs. 15,99,255/- by treatingthe entire purchases from 4 parties asbogus/unverifiable. In appeal the CIT(A) reducedthe addition to 20% of purchase & finally ITATreduced it to 12.5% of purchases. On the additionconfirmed AO imposed penalty u/s 271(1)(c) whichwas confirmed by CIT(A). On appeal the Hon’bleITAT deleted the penalty by giving following findingsat Para 11 & Para 14:- “ 11. ....But in the case under consideration, therewas no dispute that purchases were made, thoughthe assessee failed to substantiate its claim to theextent that the purchases were made from thatparticular party. Therefore, in the case underconsideration the word "particulars" used in the s.271(1)(c) would embrace the meaning of thepurchases made and not the party from whom it 11. ....But in the case under consideration, therewas no dispute that purchases were made, thoughthe assessee failed to substantiate its claim to theextent that the purchases were made from thatparticular party. Therefore, in the case underconsideration the word "particulars" used in the s.271(1)(c) would embrace the meaning of thepurchases made and not the party from whom it was made. As stated above that words "concealed","particulars" and "inaccurate" are with regard toincome not with regard to any others. From whichparty the purchases were made is not muchimportant while computing the income. Theimportant aspect in computing income is purchases.In the case under consideration, the purchases wererecorded regularly in the books of account on day today basis. The Tribunal while deciding the quantummatter observed that the assessee must have madepurchases from the market from unregistereddealers in cash and details could not be obtainedfrom such dealers. The assessee, therefore,obtained hawala bills from Mr. F.H. Rizwi, TheTribunal further observed that the CIT(A) was of theview that in these circumstances, the assesseemust have inflated the purchase bills and on thataccount the disallowance to the extent of 25 percent was found to be reasonable. The case of theAO in quantum matter was that the entirepurchases were disallowable whereas the appellateauthorities found that the assessee must have madethe purchases but the same may not be from Mr.F.H. Rizwi. Actual purchases made by the assesseewere not doubted by the appellate authorities whiledeciding the quantum matter. However, consideringthe circumstances, they confirmed the addition tothe extent of 25 per cent of relevant purchase onthe basis of the facts, figures and particularsprovided by the assessee. Thus, the main basis onwhich the AO levied penalty was not sustained bythe appellate authorities.(Emphasis supplied) 14. If we consider the facts of the case underconsideration from the point of view of abusinessman for that purposes we would like torefer a general human probability/tendency inbusiness circle. That when transactions with aparticular party are over that party may not readyto co-operate in giving information which wereexactly asked by the AO to the assessee which wereto collect from the party by the assessee. As statedabove that under these circumstances, the Revenueauthorities have ample such powers under the Actand if they are not exercising such powers, theassessee cannot be blamed for concealingparticulars and/or furnishing inaccurate particularsof income. Further, the business is managedthrough employees/staff in that circumstances, theassessee may more interested in cost then partiesto whom it was purchased. In respect of quantummatter if the assessee failed to submit such materialinformation to substantiate their claim additioncould be sustained but this aspect of humanprobability tendency of non-co-operation by the parties after business transaction is over, is requiredto be considered while deciding bona fide aspect ofthe assessee in penalty matter under s. 271(1)(c)of the Act. The case of the assessee falls under theessence of Part B of the Explanation. The assesseeoffered reasonable explanation. The AO has notgiven finding based on some contradictory evidenceto disapprove that explanation offered by theassessee which the assessee is not able, tosubstantiate and fails to prove that such explanationis bona fide and that all the facts relating to thesame and material to the computation of his totalincome have been disclosed by him. Penalty unders. 271(1)(c) cannot be levied unless the case isstrictly covered by the provisions of s. 271(1)(c). parties after business transaction is over, is requiredto be considered while deciding bona fide aspect ofthe assessee in penalty matter under s. 271(1)(c)of the Act. The case of the assessee falls under theessence of Part B of the Explanation. The assesseeoffered reasonable explanation. The AO has notgiven finding based on some contradictory evidenceto disapprove that explanation offered by theassessee which the assessee is not able, tosubstantiate and fails to prove that such explanationis bona fide and that all the facts relating to thesame and material to the computation of his totalincome have been disclosed by him. Penalty unders. 271(1)(c) cannot be levied unless the case isstrictly covered by the provisions of s. 271(1)(c). 3.9 Further, regarding basis of 15% of theunverifiable purchases as confirmed by theCoordinate Bench, we find that necessary guidancehas been sought from the decision of Sanjay OilCake (supra) and considering facts andcircumstances of the case along with other cases,the Coordinate Bench has confirmed addition of15% of unverifiable purchases following the test ofreasonability. However, we find that there is noevidence on record to suggest that the purchaserate/qty. of various items purchased from allegedunverifiable parties on different dates was lowerthan the rate at which it was purchased from otherparties whose purchases are accepted to beverifiable purchases. Therefore, we agree with thecontention of the ld AR that the addition finallyconfirmed by Hon’ble ITAT at 15% of the allegedunverifiable purchases is on estimation basis andnot on account of any material on record thatassessee has inflated the purchases. Where theaddition has been made on an estimation basis, thedecision of Hon’ble Rajasthan High Court in case ofShiv lal Tak (supra) and Hon’ble Punjab &HaryanaHigh Court in case of Harigopal singh (supra)supports the case of the assessee that penaltycannot be levied in such cases. No contrary decisionhas been brought to our notice by the ld DR.Therefore, respectfully following these decisions,the impunged penalty levied on addition onestimation basis has rightly been deleted by the ldCIT(A).” We see no reason to interfere with the matter. The contention of 375 was never raised therefore, we havenot considered the argument regarding Section 375. Hence, the appeal stands dismissed. (INDERJEET SINGH)J. A.Sharma/142 (K.S.JHAVERI)J.