SHRI ABDUL KAYYUM KHAN,MUMBAI vs. ITO, WARD 1(1), KALYAN, MUMBAI

This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi dated 19.10.2022 for the assessment year 2009-10 upholding the penalty levied by AO u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter “the Act”).

None appeared for the assessee. The main grievance of the assessee is against the action of the Ld. CIT(A) upholding the penalty levied by AO u/s 271(1)(c) of the Act of Rs.2,75,626/-. 3. Brief facts as noted by the AO is that the assessee had declared total income of Rs.4,88,830/-. Later based on information from the Sales Tax Department, Maharashtra that certain entry providers are indulging in providing bogus purchase bills in lieu of commission; and since assessee’s name figured in the list of beneficiaries, the case of A.Y. 2009-10 Abdul Kayyam Khan the assessee was reopened; and the AO took note of the fact that the assessee has taken bogus bills from six (6) entry providers to the tune of Rs.53,24,228/-; and since non-appeared before the AO during the re-assessment proceedings, the AO added the entire amount of Rs.53,24,228/- u/s 144/147 of the Act dated 12.03.2014. On appeal, the Ld. CIT(A) restricted the disallowance to the extent of Rs.7,98,635/- i.e. 15% of Rs.53,24,228/-. Thereafter, the AO initiated the penalty proceedings u/s 271(1)(c) of the Act and levied penalty for furnishing inaccurate particulars of income of Rs.2,75,626/-. On appeal, before the Ld. CIT(A)/NFAC, the same was confirmed. Aggrieved, the assessee is before us. 4. We note that the AO in the re-assessment order had added the entire bogus purchase to the tune of Rs.53,24,228/- without disturbing the sales shown by the assessee. Therefore, the Ld. CIT(A) in the quantum assessment restricted the same at 15% of undisclosed purchases i.e. Rs.53,24,228/- i.e. 7,98,635/-(profit embedded in the bogus sale). Thereafter, the penalty proceeding u/s 271(1)(c) of the Act was initiated and the AO levied penalty of Rs.2,75,626/- for furnishing inaccurate particulars of income u/s 271(1)(c) of the Act. We cannot countenance this action of the AO/Ld. CIT(A) for the simple reason that estimated addition of 15% of Rs.53,24,228/- cannot be brought in the charge of furnishing concealment of income. Therefore, on the estimated addition, no penalty u/s 271(1)(c) of the Act ought to have been levied on the facts as discussed. Therefore, we delete the penalty levied which has been confirmed by the Ld. CIT(A). A.Y. 2009-10 Abdul Kayyam Khan 7. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 27/02/2023.