SHRAVAN KUMAR MOHTA,FARIDABAD vs. ITO, WARD-2(3), FARIDABAD

This appeal is filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals), Faridabad [hereinafter referred to CIT (Appeals)] dated 29.04.2019 in sustaining the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 (the Act) for the assessment year 2008-09. 1

In spite of issue of notice none appeared on behalf of the assessee nor any adjournment was sought. From the record placed before me it is observed that the notice sent through Speed Post fixing the date of hearing on 13.10.2021 was served on the assessee and assessee did not present on that date. Notices were also issued thereafter fixing the date of hearing on several dates but the assessee could not present. The notice issued fixing the date of hearing on 18.04.2022 returned un-served by postal authorities with the remark “Left”. Therefore, this appeal is disposed of on hearing the ld. DR.

The ld. DR submits that while completing the assessment the Assessing Officer required the assessee to prove the genuineness of purchases made from M/s. Maa Durga Trading Company. However, the assessee could not prove the genuineness of the purchases made. The Assessing Officer treated the said purchases as un-proved. However, the Assessing Officer estimated the profit element from such purchases @ 30% and brought to tax an amount of Rs.45,70,500/-. The ld. DR submits that on appeal by the assessee the ld. CIT (Appeals) estimated the profit element from the purchases at 12.5% as against 30% made by the Assessing Officer. The ld. DR submits that the Assessing Officer levied penalty of Rs.6,47,297/- for concealment of particulars of income as the assessee could not prove the genuineness of the purchases made by the assessee. The ld. CIT (Appeals) sustained the penalty.

On hearing the ld. DR and perusing the orders of the authorities below it is noticed that while completing the assessment the Assessing Officer treated purchases made by the assessee from M/s. Maa Durga Trading Company as not genuine.

It is settled position of law that penalty can not be levied when an ad-hoc estimation is made. In the case of Shri Deepak Gogri Vs. ITO, the Mumbai Bench of the Tribunal in ITA. 1396/Mum/2017 dated 23.11.2017 held that no penalty is leviable on estimate of profit element on alleged non-genuine purchases while completing the assessment. Similar view has been taken in the case of DCIT Vs. Manohar Manak Pvt. Ltd. in ITA. 5586/Mum/2015 dated 16.01.2017.

The Hon’ble Punjab & Haryana High Court in the case of Hari Gopal Singh Vs. CIT [258 ITR 85] held that when an income is assessed on estimate basis on turnover there is no concealment of income or furnishing of inaccurate particulars by the assessee. Similar view has been taken by the Hon’ble Delhi High Court in the case of CIT Vs. Aero Traders Pvt. Ltd. [322 ITR 316] wherein the Hon’ble High Court affirmed the order of the Tribunal in holding that estimated rate of profit applied on the turnover of the assessee does not amount to concealment or furnishing inaccurate particulars.

In the case on hand, the Assessing Officer and the ld. CIT (Appeals) has only estimated the profit element on the non- genuine purchases without there being any conclusive proof of concealment of income or furnishing inaccurate particulars of such income. Thus, respectfully following the above said decisions the Assessing Officer is directed to delete the penalty levied under Section 271(1)(c) of the Act for the assessment year under consideration. Grounds raised by the assessee are allowed.

In the result, appeal of the assessee is allowed.