M/S. SPONTTENEOUS CHEM PVT. LTD., ,MUMBAI-400003 vs. INCOME TAX OFFICER-8(2)(3), MUMBAI

This appeal in A.Y.2009-10 arises out of the order by the ld. Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC) in appeal No.CIT(A), Mumbai – 14/10029/2019-20 dated 25/03/2022 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as Act).

The only effective 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 made on account of bogus purchases on an estimated basis.

None appeared on behalf of the assessee. We have heard the ld. DR and perused the materials available on record. It is not in dispute that assessee had made certain purchases from six parties totalling to Rs.1,51,26,291/- whose names have been treated as tainted dealers by the Sales Tax department of Government of Maharashtra. The assessee is engaged in the business of trading in chemicals. The ld. AO during the course of quantum assessment proceedings had observed that assessee had submitted the details of entire purchases and had duly entered in the stock register and also furnished the details of further corresponding sales thereof. Since assessee could not prove the veracity of the purchases beyond reasonable doubt, the ld. AO proceeded to bring to tax only the profit element embedded in the value of such disputed purchases. This profit element was estimated by the ld. AO at 12.5% and addition was made in the assessment. This action of the ld. AO was upheld by the ld. CIT(A). Subsequently, penalty u/s.271(1)(c) of the Act was levied by the ld. AO on the addition sustained by the ld. CIT(A). This levy of penalty also was upheld by the ld. CIT(A).

In the result, appeal of the assessee is allowed.