THAKOR ELECTRONICS LTD,MUMBAI vs. NATIONAL FACELESS APPEAL CENTRE(NFAC), DELHI

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ITA 1080/MUM/2022Status: DisposedITAT Mumbai05 August 2022AY 2010-116 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that penalty on an estimated addition, especially when the original addition was reduced by the ITAT, is not sustainable. Therefore, the penalty imposed by the AO was directed to be deleted.

What were the facts?

The assessee's income was assessed at a higher amount due to unsubstantiated purchases. The addition for bogus purchases was later reduced by the ITAT to 12.5%. Subsequently, penalty proceedings were initiated under Section 271(1)(c).

What were the issues?

The primary issue was whether penalty under Section 271(1)(c) can be levied on an estimated addition that was reduced by the ITAT. The assessee argued that penalty on estimated additions is not permissible based on coordinate bench decisions.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143(3),Section 147,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES “E”: MUMBAI

Before: SHRI B.R. BASKARAN & SHRI ANIKESH BANERJEE

Hearing: 28.07.2022Pronounced: 05.08.2022

against the order of the Learned Commissioner Income Tax (Appeals), NFAC, Delhi [in short CIT(A)]. Both are identical

2 ITA.No.1079 &1080/Mum./2022 Thakor Electronics Ltd. in nature and having separate orders that were passed u/s 250 of the Income Tax Act, 1961 (in short ‘Act’) both dated 23.03.2022 for assessment years 2009-10 & 2010-11. Both orders are generated from the order of learned Assistant Commissioner of Income Tax, Circle-1, Kalyan (in short “AO”) passed u/s 271(1)(c) of the Act dated 27.03.2018.

1.1 Administrated at outset that the relevant factual back drop as well as the issue involved both the cases are identical. We therefore treat the first appeal in for the assessment year 2009-10 as a lead case.

2.

We advert to the basic relevant facts the assessee is doing business of manufacturing of resistances and operates under the name and style of M/s Thakor Electronics Ltd. had been assessed to the Income Tax by the ld. AO for the assessment years 2009-10. The assessment was completed u/s 143(3) r.w.s 147 of the Act vide order dated 20.03.2015 and assessed the total income of Rs. 1,16,66,550/- as against the return income of Rs.

3 ITA.No.1079 &1080/Mum./2022 Thakor Electronics Ltd.

38,92,511/-. The addition was made on account of unsubstantiated purchases amounting to Rs. 77,73,415/- and Rs. 625/- on account of deduction under chapter VIA of the Act for the assessment year 2009-10. The assessee had then filed an appeal before the Ld. CIT(A) against the addition on account of unsubstantiated purchases amounting to Rs. 77,73,415/- and the disallowance was sustained @ 25%. After giving effect to the same the order was passed dated 03.10.2016 by the ld.AO. The Ld. A.O. proceed the penalty u/s 271(1)(c) of the Act and levy of penalty on concealed income to extent of Rs. 19,43,354/- and penalty was calculated of Rs. 6,66,690/- which is 100% of the tax amount. Aggrieved the assessee filed an appeal before the Ld. CIT(A). In quantum appeal against the order of appellate authority, the ITAT had restricted the quantum addition @ 12.5% of bogus purchase. As a result, the addition had been reduced to Rs. 9,71,677/- accordingly.

The penalty was calculated and levied amounting to Rs. 3,00,247/- u/s 271(1)(c) of the Act.

4 ITA.No.1079 &1080/Mum./2022 Thakor Electronics Ltd.

2.1 The learned counsel of the assessee argued and placed that after the order of the assessing authority u/s 143(3)/147 of the Act, the assessee filed an appeal to Ld. CIT(A) and finally the order was challenged to ITAT. The ITAT has reduced the quantum addition and sustained the addition @ 12.5% of bogus purchase. The order of the ITAT bearing in for the assessment 2009-10 and ITA No. 6484 & 6485/Mum/2016 for the assessment years 2009-10 & 2010-11. The addition was fully on basis of estimated addition on bogus purchase. The learned counsel relied on the order of the Coordinate Bench in the case of M/s S4 Interior vs. ACIT in ITA No. 4422/Mum/2017 dated 26.09.2018 A.Y. 2009-10. As per this order the penalty on estimated addition was deleted.

3.

The ld. DR only relied on the order of the Revenue Authorities. No other contrary view was taken by the ld. DR against the submission of the assessee.

4.

We heard the rival submission and relied on the documents available in the record. The addition was made

5 ITA.No.1079 &1080/Mum./2022 Thakor Electronics Ltd. by the Revenue Authorities on bogus purchase. Later, the addition was reduced by the order of ITAT @ 12.5% of bogus purchase & estimated addition was made. The penalty on estimated addition is contrary view of Coordinate bench discussed above. The ld. DR did not make any strong objection against the assessee’s submission. Here we are directing to delete the penalty amounting to Rs. 3,00,247/- imposed by the A.O. u/s 271(1)(c) of the Act.

5.

In the result, the appeal of the assessee bearing ITA allowed.

Order pronounced in the open Court on 05.08.2022.

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