M/S MANISHA CONSTRUCTION COMPNAY,MUMBAI vs. ASST. CIT, CIRCLE-26 (1), MUMBAI

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ITA 2570/MUM/2022Status: DisposedITAT Mumbai14 December 2022AY 2011-123 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 a penalty under Section 271(1)(c) cannot be levied on an addition that is sustained solely on an estimated basis. Therefore, the penalty imposed was deleted.

What were the facts?

The assessee's appeal concerns a penalty levied under Section 271(1)(c) for assessment year 2011-12. The penalty was based on an addition for bogus purchases, which was ultimately sustained on an estimated profit basis by the CIT(A).

What were the issues?

Whether penalty under Section 271(1)(c) can be imposed on an addition sustained on an estimated basis.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘SMC‘ BENCH MUMBAI

Before: SHRI ABY T VARKEY & SHRI M.BALAGANESH

For Respondent: Shri. Vaibhav Jain
Hearing: 13/12/2022Pronounced: 14/12/2022

Assessee by None Revenue by Shri. Vaibhav Jain Date of Hearing 13/12/2022 Date of Pronouncement 14/12/2022 O R D E R PER M.BALAGANESH (A.M.) : This appeal in Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC for short), [hereinafter referred to as ld. CIT(A)] in Appeal No. ITBA/NFAC/S/250/2022-23/1044966831(1) dated 26.08.2022 against the assessment order passed by the learned Income Tax 2 M/S. MANISHA CONSTRUCTION COMPANY LTD Officer, National Faceless Assessment Circle, Delhi [hereinafter referred to as ld. AO] under section under section 271(1)(c) of the Income Tax Act, 1961 [hereinafter referred to as the ‘Act’] on 30.12.2021 for the Assessment Year (A.Y.) 2011-12.

2.

The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the levy of penalty u/s 271(1)(c ) of the Act in respect of addition sustained in respect of bogus purchases on an estimated basis.

3.

None appeared on behalf of the assessee.

4.

We have heard the ld. DR and perused the materials available on record. We find that the assessee had made some purchases from some tainted parties and the ld. AO had resorted to make disallow the entire purchases made from such tainted parties in the sum of Rs 9,78,780/- in the assessment. The ld. CIT(A) in quantum proceedings observed that since the sales made out of disputed purchases had not been doubted by the revenue, only the profit element embedded in the value of disputed purchases could be brought to tax. Accordingly, the ld. CIT(A) estimated such profit percentage to be at 12.5% and directed the ld. AO to re-determine the income of the assessee accordingly. Pursuant to this, the ld. AO levied penalty u/s 271(1)(c ) of the Act in the sum of Rs 37,805/- on the sustained addition made on account of bogus purchases on an estimated basis. The ld. CIT(A) upheld the levy of penalty despite the fact that the addition has been ultimately sustained only on an estimated basis by estimating the profit percentage embedded in the disputed purchases. The law is now very well settled that there cannot be any concealment penalty on an estimated addition. Hence we have no hesitation in directing the ld. AO to delete the penalty in the sum of Rs 37,805/- in the instant case. Accordingly, the ground raised by the assessee is allowed.

3 M/S. MANISHA CONSTRUCTION COMPANY LTD 5. In the result, the appeal of the assessee is allowed. Order pronounced on 14/12/2022 by way of proper mentioning in the notice board.

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