Income Tax Act – Section 271 (l)(c) - Appeal is filed by the assessee against the order of the CIT(A), CIT(A) has dismissed the appeal of the assessee ex parte against the order of AO levying a penalty u/s 271 (l)(c) for the impugned assessment year for the reason of non - prosecution by the assessee - On the basis of the information received from the sales tax department it was found that the assessee had obtained bogus purchase bills from hawala parties where assessee failed to prove with supporting documentary evidences that material was actually delivered to the assessee – HELD - the CIT(A) has dismissed the appeal for non-prosecution. Such powers are not vested in the first appellate authority. Therefore the decision is required to be given on the merits of the issues raised in the grounds of appeal. It is also true that despite opportunities granted by CIT (A) assessee has not remain present. The assessee should remain present before CIT (A) or make any submission within 90 days of the order, CIT(A) may decide the issue on the merits of the case thereafter. Accordingly, appeal of the assessee is allowed for statistical purposes.

 

2021-VIL-109-ITAT-MUM

 

IN THE INCOME TAX APPELLATE TRIBUNAL

C-BENCH, MUMBAI

 

I.T.A. NO 1190/MUM/2020 A.Y. 2010-11

 

DATE OF HEARING: 15.12.2021

DATE OF PRONOUNCEMENT: 23.12.2021

 

M/S CITY LOUNGE RETAIL (INDIA) PVT LTD

 

Vs

 

THE INCOME TAX OFFICER, 15(1) (3)

 

APPELLANT REPRESENTED BY: NONE

RESPONDENT REPRESENTED BY: SHRI ASHISH KUMAR

 

BEFORE

MS. SUCHITRA RAGHUNATH RAMBLE (JM)

SHRI PRASHANT MAHARISHI (AM)

 

ORDER

 

01. This appeal is filed by the assessee against the order of the Commissioner of income tax appeals - 24, Mumbai dated 4/ 12/2019 for assessment year 2010 - 11, by this order, the learned CIT - A has dismissed the appeal of the assessee ex parte against the order of the learned income tax Officer 15 (1) (3) Mumbai levying a penalty u/s 271 (l)(c) for the impugned assessment year amounting to ₹. 286,550/- for the reason of non prosecution by the assessee.

 

02. The only grievance of the assessee is that the levy of penalty is confirmed by the learned CIT - A without giving adequate opportunity of hearing despite the fact that quantum appeal against the addition of ₹3,136,727/- was disputed and pending before him.

 

03. Brief facts of the case shows that assessee is a company engaged in the business of manufacturing and trading of ready-made garments. It filed its return of income on 15/10/2010 declaring loss of ₹496,326. Thereafter certain information was received and the case of the assessee was reopened by issue of notice u/s 148 of the act which culminated into an assessment u/s 144 read with Section 147 of the income tax act by the learned assessing officer by order dated 17/3/2016 where the total income of the assessee was determined at ₹ 2,640,400/-.

 

04. The learned assessing officer during the course of assessment proceedings observed that assessee has debited purchase of ₹ 927,339 from different parties considered to be hawala dealers. On the basis of the information received from the sales tax department it was found that the appellant had obtained bogus purchase bills totalling to ₹ 927,339 from those hawala parties where assessee failed to prove with supporting documentary evidences that material was actually delivered to the assessee. Assessee also failed to file evidences of deliveries to establish that the material was consumed for the purpose of the business by the assessee. Assessee also could not furnish the confirmation from those parties. Therefore that addition was made the learned assessing officer. He further initiated the penalty proceedings by issue of notice u/s 271 (1) (c) of the act.

 

05. Assessee submitted its explanation but the learned assessing officer was not satisfied with the explanation and therefore levied a penalty of ₹ 286,550/-.

 

06. Against this order of the penalty the assessee preferred an appeal before the learned CIT - A wherein the appeal of the assessee was dismissed for non prosecution applying the decision of the coordinate bench in case of Multiplan India private limited 38 ITD 320 (1991) (Delhi).

 

07. Therefore assessee is aggrieved with that order and has preferred this appeal before us.

 

08. Before us, despite notice, none appeared on behalf of the assessee. On earlier two occasions also none appeared on behalf of the assessee. Therefore the issue is decided on the merits of the case as per facts available on record.

 

09. The learned departmental representative vehemently supported the order of the lower authorities. He submitted that assessment has been framed u/s 144 of the income tax act, during the penalty proceedings also only a letter was submitted before the assessing officer and none remain present. Even before the learned CIT - A the assessee did not care to present and even before the tribunal assessee is not present despite issue of notices, therefore there is no infirmity in the order of the learned CIT - A in dismissing the appeal of the assessee for non prosecution.

 

10. We have carefully considered contentions of the learned departmental representative and also perused the orders of the lower authorities. In the present case the assessment u/s 144 read with Section 147 of the act was passed on 17/3/2016 determining the total income of the assessee at ₹ 2,640,400 by making an addition of ₹ 927,339/- on account of bogus/inflated purchases and further disallowance of expenses u/s 37 of the income tax act was made of ₹ 2,209,388/-. Thus the total addition/disallowance was made in the hands of the assessee of ₹ 3,136,727/-. At the time of passing of the assessment order the learned assessing officer initiated the penalty proceedings u/s 271 (1) (c) of the act for furnishing of inaccurate particulars of income and for concealing the taxable income in respect of bogus/inflated purchases made. Assessee preferred appeal before the learned CIT (A) 21, Mumbai against the assessment order which was also dismissed by the learned CIT - A for non prosecution. However, with respect to the penalty notice, subsequently the assessee filed reply on 05/2/2019 stating that the purchases made by the assessee company were genuine and there were no reason to bring bogus purchases in the books as there was already a loss incurred by the assessee. The assessee further stated that the payment to all the parties was made by an account payee cheque against valid invoices of parties who have valid sales tax/VAT/TIN number at the time of purchases. The learned assessing officer rejected the contention of the assessee stating that the assessee has not brought on any material on record to establish the genuineness of the transaction except stating that the payment have been made by an account payee cheque. He thereafter held that he is fully satisfied that the assessee company has concealed income by furnishing inaccurate particulars of income within the meaning of Section 271 (1) (c) of the income tax act. Therefore he levied a penalty of ₹286, 548/-. Apparently, the penalty levied cannot be sustained as the learned assessing officer has recorded a satisfaction of twin charges in the assessment order as well as has levied penalty for twin offences. However the learned CIT - A has dismissed the appeal of the assessee for non prosecution and not on merits. According to the provisions of Section 250 (6) the learned Commissioner of income tax is obliged to state the points for determination and the decision thereon on the reasons for the decision. In the present case the learned CIT - A has dismissed the appeal for non prosecution. Such powers are not vested in the first appellate authority. Therefore the decision is required to be given on the merits of the issues raised in the grounds of appeal. In the present case, the appeal is disposed of for non prosecution. It is also true that despite opportunities granted by the learned CIT - A assessee has not remain present. In view of this, we direct the assessee to remain present before the learned CIT - A or make any submission within 90 days of this order, the learned CIT -A may decide the issue on the merits of the case thereafter. Accordingly, ground number 1 of the appeal of the assessee is allowed with above direction. Accordingly, appeal of the assessee is allowed for statistical purposes.

 

Order pronounced in the open court on 23 December 2021.

 

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