ITAT Deletes Penalty against Balaji Motion Pictures [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai bench, on last week, deleted income tax penalty against the Balaji Motion Pictures, one of the leading film production and distribution company in India.

In the instant case, the department conducted a search on the business premises of the assessee-Company and alleged that they had inflated their purchases by getting accommodation entries from bogus parties. The Revenue made an addition for alleged bogus purchases made by the assessee from M/s. Somu Textile Pvt. Ltd. on the ground that the alleged purchases were bogus purchases and merely accommodation entries wherein only bills were issued by the said party without supplying any material physically.

The said concern Somu Textile Private Limited was registered at the residential address of the said Mr. Jagdish Mundra, Director of Somu Textile Private Limited. As per the AO, the assessee was not able to bring on record any evidence to demonstrate the genuineness of the transaction for the alleged purchases, and hence the A.O brought to tax by making an addition of a sum of Rs. 2,16,441/- as bogus purchases being unexplained expenses/accommodation entries, wherein the income assessed was a loss of Rs.9,16,18,762/- as against a returned loss of Rs. 9,18,35,203/-

The penalty proceedings u/s 271(1) (c) were initiated by the AO for the furnishing of inaccurate particulars of income leading to concealment of income. The Director of Somu Textiles Private Limited Sh. Jagdish C Mundra in his statement recorded on oath u/s 132(4) admitted before Revenue that his concerns were engaged in providing accommodation entries of bogus purchases without supplying any material.

The plausible and bonafide explanation offered by the assessee was that the smallness of the amount being the addition and the assessee submitted that it chose not to file an appeal before appellate forums to avoid further litigation and the quantum addition made based on the disclosure made by a third party namely Shri. Jagdish Mundra.

Deleting the penalty proceedings, Joginder Singh judicial member, and Ramit Kochar, accountant member observed that the department failed to show any positive material to prove that the assessee has furnished inaccurate particulars of income or concealed the particulars of income.

“In the instant case, the sole reliance of the Revenue is based on an incriminating statement recorded of a third person namely Sh. Jagdish Mundra recorded on oath u/s 132(4) at the back of the assessee albeit he was also searched simultaneously along with assessee on 30-04-2013, which statement dated 13-05-2013 was never confronted to the assessee nor the said statement had stood the test of cross-examination by the assessee.”

“There is no such voluntary disclosure made by the assessee company w.r.t. bogus purchases during the course of search u/s 132(1), while the same was made by another Group concern namely Balaji Telefilms Limited. Thus, in our considered view, the penalty as levied by the Revenue u/s 271(1)(c) of the 1961 Act in the instant case cannot be sustained as the explanation offered by the assessee keeping in view peculiar facts of the case as also keeping in view smallness of the amount vis-a-vis returned loss is a bonafide explanation,” the bench said.