ITO, WARD-31(2)(1), MUMBAI vs. SHARDA VINOD BHATIA, MUMBAI

"Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty levied on addition made on account of bogus purchases without appreciating the fact that the genuineness of the Shri Sharda Vinod Bhatia, Mumbai. purchases was not proved in absence of requisite submission by the assessee?"

"Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty levied without appreciating the fact that the authenticity of bills produced by the assessee is not proved as the assessee failed to produce the parties during the assessment proceedings and none of the parties had made any submissions?" 3"The appellant craves leave to amend or alter or add a new ground which may be necessary."

The Brief facts of the case are that, the assessee is engaged in the business of manufacturing and supply of PVC doors. The assessee has not filed the return of income for the A.Y 2009-10.The Assessing Officer(A.O) has received the information from the Sales Tax Department that the assessee has obtained bogus purchase bills from various parties aggregating to Rs. 44,53,110/- and is a beneficiary. The AO has reason to believe that the income has escaped assessment and issued notice u/s 148 of the Act. Subsequently the notice u/s 143(2) and 142(1) of the Act were issued. In compliance to notice, the Ld. AR of the assessee appeared from time to time and submitted the information and the case was discussed. Whereas the AO has dealt on the details and has issued notice Shri Sharda Vinod Bhatia, Mumbai. U/sec142(1) of the Act to produce the parties along with the evidences of purchases bills, ledger accounts, quantitative details and proof of delivery of goods to examine the genuineness of the transactions. Whereas the assessee has filed the details in support of the claim of purchases on the various dates. But the AO was not satisfied with the explanations and information and relied on the judicial decisions and has estimated the profit element / GP rate@ 12.5% of unapproved purchases of Rs.44,53,110/-which worked out to Rs. 5,56,700/- and made an addition and assessed the total income of Rs. 9,96,060/- and passed the order u/s 143(3)(ii) r.w.s 147 of the Act dated 05.03.2015. 3. Subsequently, the AO has initiated the penalty proceedings u/s 271(1)(c) of the Act. In the course of penalty proceedings it was brought to the knowledge of the Assessing officer that the assessee has filed an appeal with the CIT(A) on quantum addition of bogus purchases estimated @12.5%. The CIT(A) has confirmed the action of the AO and dismissed the assessee appeal. Whereas the AO has considered these facts and find that the explanations of the Shri Sharda Vinod Bhatia, Mumbai. assessee are not satisfactory and dealt on the details and findings of the scrutiny assessment and levied a penalty of Rs. 1,67,010/- and passed the order u/s 271(1)(c) r.w.s 274 of the Act dated 29.03.2018. 4. Aggrieved by the penalty order, the assessee has filed an appeal with the CIT(A), the CIT(A) has considered the grounds of appeal, findings of the A.O and the submissions of the assessee and observed that the A.O has made addition of bogus purchases in the assessment U/sec143(3) r.w.s Sec147 of the Act. Further, the Ld. CIT(A) find that the A.O has relied on the judicial decisions and has estimated the GP rate@ 12.5% of unapproved purchases of Rs. 44,53,110/- which worked out to Rs. 5,56,700/- But the A.O has levied the penalty u/sec 271(1)(c) of the Act on the estimated income. The CIT(A) dealt on the provisions of Sec. 271(1)(c) of the Act and relied on the Hon’ble High Court and Hon’ble Tribunal decisions and observed that penalty cannot be levied on estimated income and directed the A.O to delete the penalty and allowed the assessee’s appeal. Shri Sharda Vinod Bhatia, Mumbai. Aggrieved by the order of the CIT(A),the revenue has filed an appeal with the Hon’ble Tribunal.

At the time of hearing, the Ld. DR submitted that the CIT(A) has erred in deleting the penalty, whereas the A.O has received the information that, the assessee has obtained bogus purchase bills and the same could not be overlooked and prayed for allowing the revenue appeal. Contra, the Ld. AR supported the order of the CIT(A).

We heard the rival submissions and perused the material on record. The sole crux of the disputed issue as envisaged by the Ld.DR that the CIT(A) has erred in deleting the penalty overlooking the transactions of bogus purchases. Whereas, the Ld.CIT(A) considering the facts and circumstances observed that the penalty cannot be levied on estimated income. We are of the opinion that when the addition is on estimated basis, penalty u/s 271(1)(c) of the Act cannot be levied on such adhoc estimated income. The disallowance of purchases on ad-hoc basis does not tantamount to furnishing inaccurate particulars of income under the provisions of Section 271(1) (c) of the Act. The Assessing officer Shri Sharda Vinod Bhatia, Mumbai. has not doubted the sales and made disallowance of bogus purchases and we rely on the ratio of the Honorable Juri ictional High Court in the case of M/s Nikunj Eximp Enterprises Vs Cit (W.P.No 2860 dated 18-06-2014). The Ld. DR could not controvert the findings of the CIT(A) with any new cogent evidences or information to take different view. Accordingly, we are not inclined to interfere with the order of the Ld.CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue.

In the result, the appeal filed by the revenue is dismissed.

The PCIT DR, ITAT, Mumbai

Guard File

Shri Sharda Vinod Bhatia, Mumbai. आदेशानुसार/ BY ORDER, स"ािपत "ित ////