ACIL LTD,NEW DELHI vs. ACIT, CENTRAL CIRCLE-30, NEW DELHI

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ITA 6968/DEL/2017Status: DisposedITAT Delhi06 December 2022AY 2009-104 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the CIT(A) did not find the purchases to be entirely bogus and allowed a net profit rate disallowance, the assessee's conduct was not contumacious to warrant a penalty under Section 271(1)(c).

What were the facts?

The Assessing Officer made an addition for bogus purchases. The CIT(A) reduced the addition by allowing only a net profit ratio disallowance, as payments were made through banking channels. A penalty under Section 271(1)(c) was levied on the reduced addition and sustained by the CIT(A).

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when the addition is reduced to a net profit rate disallowance and the assessee's conduct is not found to be contumacious.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH, ‘A’: NEW DELHI

Before: SHRI SHAMIM YAHYA & SHRI ANUBHAV SHARMA

Hearing: 24.11.2022Pronounced: 06.12.2022

ORDER PER SHAMIM YAHYA, AM,

This appeal by the assessee is directed against the order of Ld. CIT (Appeals)-30, New Delhi, dated 28.09.2017 for the Assessment Year 2009-10.

2.

The grounds of appeal read as under:-

“1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in imposing penalty of Rs.5,98,074/- and that too without assuming jurisdiction as per law and without considering the facts and circumstances of the case.

2. That the Ld. CIT(A) erred in not considering the detailed submissions dated 22.05.2017.

3.

That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in imposing

penalty of Rs.5,98,074/- u/s 271(1 )(c) is bad in law and against the facts and circumstances of the case.” 3. Brief facts of the case leading to the levy of penalty are that in this case the Assessing Officer made addition of Rs.1,64,05,766/- on account of bogus purchases. Upon assessee’s appeal, the Ld. CIT(A) in his appellate order held that the whole amount cannot be added to the income because the payments were made through banking channels. The transactions were found to have been supported bank accounts. He directed the Assessing Officer to apply net profit ratio. As a result of this order, the assessee was granted relief of Rs.1,44,12,186/- and the addition was reduced to Rs.19,93,580/-. On this addition, penalty u/s 271(1)(c) was also levied and the same was sustained by the Ld. CIT(A) for an amount of Rs.5,98,074/-.

5.

Against this order, the assessee is in appeal before us.

6.

We have heard the Ld. DR and perused the record. None appeared on behalf of the assessee despite several notice. Hence, we proceed to adjudicate the issue by hearing the Ld. DR and perusing the records. We note that as against the addition of Rs.1,64,05,766/- on account of bogus purchases. The Ld. CIT(A) held that only net profit rate on this amount is to be disallowed. Hence, Ld. CIT(A) granted a relief of Rs.1,44,12,186/- and the addition was reduced to Rs.19,93,580/-. The Revenue did not file appeal against the huge relief of Rs.1,44,12,186/- granted by the Ld. CIT(A).

7.

As regards the levy of penalty is concerned, penalty u/s 271(1)(c) of the Act is leviable for furnishing of inaccurate particulars of income or concealment of income. On the facts and circumstances of the case present here, Ld. CIT has not found the purchases to be bogus as held by Assessing Officer but has directed to disallow only the net percentage rate. In these circumstances, it cannot be said that assessee deserves to be visited with the rigorous of penal provisions of section 271(1)(c) of the Act. In our considered opinion, the assessee’s conduct is not contumacious in the light of the above order of the Ld. CIT(A) to warrant levy of penalty. This is coupled with the fact that no adjustment/disallowance whatsoever has been considered for the sales as no sales can be done without purchases. In concluding that the assessee need not to be visited with the rigorous of penalty, we find support from the judgment of the Hon’ble Supreme Court in the case of Hindustan Steel Ltd vs State Of Orissa (1972) 83 ITR 26(SC) wherein the proposition laid down was that if the assessee’s conduct is not found to be contumacious, the authority may not levy of penalty. In the background of the aforesaid discussion, we set-aside the order of the Ld. CIT(A) and direct to delete the penalty in this case.

8.

In the result, the appeal of the assessee stands allowed.

Order pronounced in the open court on 06th December, 2022.

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