MACHINFABRIK ,MUMBAI vs. INCOME TAX (APPEALS), INCOME TAX DEPARTMENT , MUMBAI

As there was no representation on behalf of the assessee, we hereby proceed to hear the learned Departmental Representative (ld. DR for short) for the Revenue and on perusal of the available materials on record.

The solitary issue involved in these appeals are the penalty levied u/s. 271(1)(c) of the Act. As the issues involved in these two appeals are similar, we hereby pass a consolidated order in both these appeals by taking as a lead case.

The brief facts of the case are that the assessee filed its return of income for the impugned year on 13.10.2010, declaring total income at Rs.33,37,290/- and the return was processed u/s. 143(1) of the Act. The assessee’s case was selected for scrutiny and the assessment order u/s. 143(3) of the Act dated 04.03.2013 was passed, determining the total income at Rs.50,25,640/-. Subsequent to this, the assessee’s case was reopened u/s. 147 of the Act for the reason that as per the information received from the DGIT(Inv.) that the assessee was one of the beneficiary of accommodation entries from hawala parties by way of bogus purchase bills. The assessment order dated 30.11.2015 was passed u/s. 143(3) r.w.s. 147 of the Act, whereby the A.O. determined the total income at Rs.51,73,854/- by making an addition of Rs.1,48,214/- on bogus purchases u/s. 69C of the Act. The penalty proceeding was initiated u/s. 271(1)(c) of the Act and penalty order dated 13.05.2016 was passed u/s. 271(1)(c) of the Act where a penalty of Rs.46,000/- was levied for furnishing inaccurate particulars of income in respect of addition of Rs.1,48,214/- was made by the A.O.

Aggrieved by the said order, the assessee was in appeal before the ld. CIT(A) who confirmed the said penalty levied by the A.O.

Further aggrieved the assessee is in appeal before us.

The ld. DR for the revenue contended that the assessee has failed to contradict the information received from the Maharashtra Sales Tax Department pertaining to the fact that the assessee was a beneficiary of bogus bills. The ld. DR further stated that the assessee has not challenged the assessment order and has brought our notice to the documentary evidences to prove the genuinety of the purchases made by the assessee.

We have heard the ld. DR and perused the materials available on record. It is evident from the written submission made by the assessee that the assessee firm had made purchases from M/s. Arihant Steel, amounting to Rs.11,85,715/- which company was alleged to be a hawala dealer as per the information from the Sales Tax Department.

Upon consideration of the above facts, we are of the view that the impugned addition made by the A.O. was on the basis of the estimation calculated @ 12.5% on the bogus purchase alleged to be made by the assessee from M/s. Arihant Steel supposed to be hawala party as per the Sales Tax Department. This is an undisputed fact which has been agreed by the Revenue. It is evident that various courts have held that the penalty cannot be levied in cases where the addition has been made on estimated basis. By considering the decisions cited by the assessee, it is further justified that this proposition is a settled principle of law. The decisions relied upon by the ld. DR will not hold the case of the Revenue in the present scenario. Hence, by respectfully following the Act in assessee’s case. Hence, the penalty levied u/s. 271(1)(c) is hereby quashed.

As the facts are identical, the above observation in will apply mutatis mutandis to this appeal also.

In the result, both the appeals filed by the assessee are allowed.