Loading judgment…
Facts
The Revenue Department appealed against the CIT(A)'s order which deleted penalties imposed by the AO. The penalties were levied based on disallowances made in assessment orders for AY 2009-10 and 2012-13.
Held
The Tribunal held that the CIT(A) was correct in deleting the penalties as the additions, which formed the basis for the penalties, were deleted or reduced by the Tribunal itself. Therefore, the penalties were not sustainable.
Key Issues
Whether the penalties imposed by the AO are sustainable when the additions, on which they were based, have been deleted or substantially reduced by the appellate authorities.
Sections Cited
250, 153A, 143(3), 80IC, 115JB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
Per : Narender Kumar Choudhry, Judicial Member:
These appeals have been preferred by the Revenue Department against the order even dated 30.10.2024, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2009-10 & 2012-13.
& ors. M/s. IPCA Laboratories Limited 2. As both the appeals are based on the almost identical facts and issues and the penalties, therefore for the sake of brevity the same were heard together and are being disposed of by this composite order by taking into consideration the facts and circumstances and issues involved in as a lead case and result of the same would be mutatis mutandis applicable to both the appeals under consideration. the Assessing Officer (AO) vide assessment order dated 30.12.2016 u/s 153A r.w.s. 143(3) of the Act has made the certain disallowances as mentioned below in para no. 5 of this order, which have been affirmed by the Ld. Commissioner, vide order dated 31.03.2021.
Therefore the disallowances affirmed, were subjected to levy of penalties by the AO vide penalty order dated 16.03.2022
Subsequently the Hon’ble Tribunal vide composite order in & ors. decided on 08.04.2024, partly deleted/affirmed the disallowances to the extent as detailed below:
Sr. Nature of Amount Amount Remarks No. Addition / confirmed confirmed Disallowance by CIT(A) in by ITAT in quantum quantum proceedings proceedings on which penalty levied
Disallowance on 10,27,691 0 Deleted by ITAT (Para 4.1- deduction of 4.5 of ITAT order pg. no. 7 & profit on sale of 8)- Penalty deleted by CIT(A) empty since quantum deleted. containers claimed u/s 80IC 2. Disallowance on 2,84,75,543 0 Assessee claimed additional account of deprecation in AY 2008-09 additional (put to use for less than 180 depreciation in AY 2008-09) and part of the additional depreciation claimed in AY 2009-10. AO disallowed stating no & ors. M/s. IPCA Laboratories Limited concept to carry forward additional depreciation. Confirmed by CIT(A). ITAT deleted (Para 4.1-4.5 of ITAT order pg. no. 7 & 8) - Penalty deleted by CIT(A) since quantum deleted.
Disallowance on 2,09,60,016 0 Addition deleted by ITAT account of (Para 4.1-4.5 of ITAT order adjustment by pg. no. 7 & 8) - Penalty TP Officer deleted by CIT(A) since quantum deleted.
4. Disallowance of 26,988 12,272 Purchases alleged to be Rs. 24,92,650/- bogus based of sales tax on account of department information. bogus CIT(A) held that material was purchases duly consumed and therefore, estimated the disallowance to 12.5%. Tribunal further restricted estimation to 8%. (Para 9.10 of ITAT order pg. no. 47 & 48 ) - Penalty deleted by CIT(A) since income assessed under MAT as well as on merits holding estimated addition 5. Disallowance on 16,83,900 0 Tribunal deleted the entire account of over addition holding no over invoicing invoicing done by assessee. (Para 8.6 to 8.12 of ITAT order Pg. no. 35) - Penalty deleted by CIT(A) since quantum deleted.
6. Disallowance of 5,97,86,283 0 Loss incurred on account of loss pertaining various trial expenses in to exempt unit respect of unit situated in (Adjustment SEZ area at Pritampur, was made in Book added back to the book profit profits u/s 11 u/s 115JB. ITAT deleted the 5JB) adjustment (Para 5.4 of ITAT order Pg. No. 12) - Penalty deleted by CIT(A) since quantum deleted.
The Ld. Commissioner, by taking into consideration the decision/order dated 08.04.2024 (supra) of the Hon’ble Tribunal in partly deleting/affirming the additions, vide impugned order dated 30.10.2024, deleted the penalties imposed by the AO.
The Revenue Department in respect of the disallowances as mentioned in column nos. 1, 2, 3, 5 & 6 as depicted above, though raised the grounds of appeal challenging the decision of the Ld. & ors. M/s. IPCA Laboratories Limited Commissioner in deleting the penalties referred to above mainly on the reason that an approval for filing appeal before the Hon’ble Bombay High Court, against the decision of the Hon’ble Tribunal on the quantum issues involved therein, have been approved.
Admittedly there is no stay against the order dated 08.04.2024 by the Tribunal referred to above and as on today, as additions mentioned in clause 1, 2, 3, 5 & 6 which were the foundation for imposing the penalties, are not in existence. We further observe that the Ld. Commissioner before deleting the penalties imposed, not only considered the peculiar facts and circumstances of the case in totality, but also considered the decision/findings of the Tribunal in deleting the additions and therefore considering the fact that quantum additions have been deleted, he deleted the penalties imposed. Thus, in our considered view, the decision of the Ld. Commissioner in deleting the penalties imposed on the aforesaid disallowances cannot be faulted with and therefore the decision of the Ld. Commissioner needs no interference.
Coming to the disallowance as mentioned at sl. No.4, which pertains to bogus purchases, we observe that the AO has made the disallowance of Rs.24,92,650/- on account of bogus purchases, which was restricted to the extent of Rs. 26,988/- being profit element @ 12.5%, embedded in the said purchases, by the Ld. Commissioner. The AO therefore on the said addition of Rs. Levied the penalty.
8.1 Thereafter, the Hon’ble Tribunal vide order dated 08.04.2024 referred to above, further reduced the said addition 26,988 {@ 12.5%} of the bogus purchases, to the extent of 17212/- being 8% in lieu of 26,988/- {@12.5%}, as affirmed by the Ld. Commissioner.
8.2 Admittedly, the penalty levied by AO pertains to addition on account of disallowance of bogus purchases, which has been sustained to the extent @ 8 % only by the Tribunal and even otherwise the same is based on the estimation and therefore, the same is un-sustainable and thus we are in concurrence with the Ld. Commissioner and inclined not the interference in the decision of Ld. Commissioner in deleting the penalty imposed on the addition made on account of disallowance on account of bogus purchases as well. Thus, the appeal i.e. filed by the Revenue Department, which is under consideration, stand dismissed.
In view of our judgment in both the appeals under consideration are dismissed on the same footing.
Order pronounced in the open court on 25.03.2025.