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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI AMARJIT SINGH&
PER Ms. MADHUMITA ROY - JM:
The instant appeal filed by the assessee is directed against the order dated 12.12.2018 passed by the Ld. CIT(A)-6, Ahmedabad arising out of the order dated 24.03.2017 passed by the DCIT, Circle-12, Ahmedabad under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for A.Y. 2009-10.
We have heard the parties, and perused the relevant materials available on record.
The short point involved in this particular case as to whether the penalty is leviable when the addition has been made on estimation of Gross Profit (G.P.). The quantum proceeding was a re-opening of assessment under Section 148 of the Act by issuing notice dated 28.03.2013 which was finalized on 28.03.2014 upon making the - 2 - Shri Nilesh Rameshchandra Shah vs.DCIT A.Y. 2009-10 following addition after determining the total income of the assessee at Rs. 1,47,07,690/-: i) Rejection of books of accounts and addition on account of disallowance of bogus purchases – Rs. 1,28,53,148/-. ii) Charging of interest under Section 234A, 23B & 234C of the Act. iii) Penalty under Section 271(1)(c) was also initiated by the Ld. AO.
The said addition was also confirmed by the Ld. CIT(A). However, the Hon’ble ITAT upon considering the case of the assessee restricted the disallowance at 5% on account of bogus purchase amounting to Rs. 6,42,657/-.
On the other hand, the Ld. AO by and under the order dated 24.03.2017 imposed penalty of Rs. 43,68,785/- under Section 271(1)(c) of the Act. However, keeping in view the order passed by the Hon’ble ITAT in quantum appeal, the Ld. CIT(A) in penalty appeal restricted the penalty on addition of Rs. 6,42,657/- as against the penalty levied by the Ld. AO on 1,28,53,148/-.
The assessee has challenged the penalty order before us, on the count, that penalty under Section 271(1)(c) cannot be levied on addition on estimation of G.P. In this regard, we have carefully considered following judgments as relied upon by the Ld. AR passed by the Jurisdictional High Court in the case of ITO vs. Bombaywala Readymade Stores reported in, (2015) taxman 313 (Guj.)(HC) and CIT vs. Whitelene Chemicals reported in, (2013) 32 taxmann.com 192/214 taxman 93(Mag.)(Guj.). We have further considered the judgments passed by the Coordinate Bench in the case of Whiteline Chemicals vs. ITO reported in, (2014) 48 taxmann.com 123 / (2013) 28 ITR (Trib.) 523 (Ahd.), A. K. Patel & Co. (Construction) (P.) Ltd. vs. DCIT reported in, (2011) 15 taxmann.com 380/(2012) 50 SOT 91 (URO) (Ahd.), ACIT, Circle-5, Surat vs. Shivam Projects reported in, (2018) 97 taxmann.com 88 and DCIT vs.
- 3 - Shri Nilesh Rameshchandra Shah vs.DCIT A.Y. 2009-10 Kalindi Rail Nirman Engg. Ltd. reported in, (2012) 21 taxmann.com 24 / 52 SOT 91 (URO) (Delhi).
Considering the above judgments and relying on the ratio laid down therein we hold that when the income was assessed on estimated basis and addition was made on estimation of G.P. no penalty under Section 271(1)(c) could be levied against the assessee for concealment on income. The order impugned is, therefore, not sustainable. Hence, the penalty order is hereby quashed.
In the result, the appeal filed by the assessee is allowed. This Order pronounced in Open Court on 05/10/2021